As filed with the Securities and Exchange Commission on July 30, 1999
Registration No. 333-69703
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2 to
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SENIOR HOUSING PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
400 Centre Street
Newton, Massachusetts 02458
(617) 796-8350
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
David J. Hegarty, President
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
(617) 796-8350
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Alexander A. Notopoulos, Jr., Esq.
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 338-2800
Approximate date of commencement of proposed sale to the public: The
securities will be distributed as soon as practicable after the effective date
of this Registration Statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Additional Proposed
Title of Each Class of Amount Being Maximum Price Proposed Maximum Amount of
Securities Being Registered Registered(1) Per Security (2) Aggregate Price Registration Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares of Beneficial Interest, $0.01 par
value per share................................ 1,000,000 $24.00 $24,000,000 $6,672
<FN>
(1) The Registrant originally registered 13 million shares and paid a registration fee of $72,280. The
Registrant is registering an additional one million shares.
(2) Based on an estimated maximum price per share of $24 pursuant to Rule 457(a) of the Securities Act of 1933,
as amended.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
<PAGE>
The information contained in this prospectus is not complete and may be changed.
No one may buy or sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary prospectus dated July 30, 1999
PROSPECTUS
HRPT PROPERTIES TRUST
SPIN-OFF OF SENIOR HOUSING PROPERTIES TRUST
THROUGH DISTRIBUTION OF 13,190,763 COMMON SHARES
To the Shareholders of HRPT Properties Trust:
On or shortly after _____________, 1999, we will distribute to you shares
of our subsidiary, Senior Housing Properties Trust, as a special distribution.
You will receive one share of Senior Housing for every 10 shares of HRPT you own
on ______, 1999, the record date for the spin-off.
We own a diversified portfolio of 149 office buildings that cost $2.3
billion and 93 senior housing properties that cost $770 million. We believe that
there are attractive investment opportunities available in both office buildings
and senior housing properties. By distributing the Senior Housing shares to our
shareholders we will create two separately focused companies which we believe
can take better advantage of their respective growth opportunities and may be
more attractive to investors than a combined company. Our board of trustees has
unanimously approved the spin-off as being in the best interests of our
shareholders.
Senior Housing's shares will be separately listed on the New York Stock
Exchange under the symbol "SNH." HRPT's shares will continue to trade on the New
York Stock Exchange under the symbol "HRP." The spin-off of Senior Housing's
shares will be the first public distribution of those shares. Accordingly, we
can provide no assurance to you as to what their market price may be.
This prospectus includes a description of the spin-off, as well as
information about HRPT and Senior Housing after the spin-off. You should read it
carefully, especially the section entitled "Risk Factors" that begins on page 13
which describes various risks associated with your ownership of Senior Housing
shares, including:
o There is no established share price for Senior Housing shares and they
may trade for less than fair value.
o Some of Senior Housing's tenants have experienced problems which may
impair their abilities to pay rent.
o Some of Senior Housing's properties are subject to burdensome
regulations.
o Senior Housing's ability to grow will depend upon access to capital
which is not assured.
o Senior Housing's investment advisor may have an incentive to recommend
investments to raise fees.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Senior Housing common shares or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
We are furnishing this prospectus to provide information to HRPT
shareholders who will receive Senior Housing shares in the spin-off. This
prospectus is not intended as a solicitation to buy or sell any securities of
HRPT or Senior Housing. On behalf of HRPT, we thank you for your continued
support. On behalf of Senior Housing, we welcome you as a new shareholder.
Sincerely,
John A. Mannix David J. Hegarty
President-Elect of President of Senior
HRPT Properties Trust Housing Properties Trust
The date of this prospectus is ___________, 1999
<PAGE>
HRPT PROPERTIES TRUST
[Photograph of Office Buildings] [Photograph of Office Buildings]
Bridgepoint Square (5 Buildings) Cedar-Sinai Medical Office
Austin, TX Towers and garages (4 buildings)
452,294 Square Feet, Built 1995-1997 Los Angeles, CA
Major Tenants: 330,715 Square Feet, Built 1978-79
Motorola, Inc. Major Tenant:
IBM Corporation Cedars-Sinai Medical Center
Southwestern Bell
[Photograph of Office Building]
Mellon Bank Center
Philadelphia, PA
1,258,560 Square Feet, Built 1990
Major Tenant:
Mellon Bank
[Photograph of Office Building] [Photograph of Office Building]
Herald Square Putnam Place (2 Buildings)
Washington, D.C. Quincy/Braintree, MA
187,832 Square Feet, Built 1991 222,726 Square Feet, Built 1986-88
Major Tenant: InterAmerican Bank Major Tenants:
Putnam Investments, Inc.
GMAC
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE SPIN-OFF
Q: How many shares of Senior Housing will I receive?
A: In the spin-off we will distribute to you one share of Senior Housing for
every 10 shares of HRPT you own.
Q: What is Senior Housing Properties Trust?
A: Senior Housing is currently a wholly owned REIT subsidiary of HRPT. It owns
93 senior housing properties that cost $770 million. Senior Housing's
largest investment is $326 million in 14 senior living communities leased
to Marriott International, Inc. until 2013.
Q: What are Senior Housing shares worth?
A: The value of the Senior Housing shares you receive will be determined by
their trading price after the spin-off. We do not know what the trading
price will be and we can provide no assurances as to value.
Q: What will HRPT do after the spin-off?
A: HRPT currently owns 149 office buildings that cost $2.3 billion. After the
spin-off, HRPT's principal business will be buying, owning and leasing
office buildings.
Q: What will Senior Housing do after the spin-off?
A: Senior Housing will own and lease its portfolio of senior housing
properties. It has arranged a bank credit facility, some of which may be
used to purchase new senior housing properties.
Q: How will distributions change?
A: We do not expect any change in your combined distribution rate. Currently
HRPT's annual distribution is $1.52 per share. After the spin-off HRPT's
annual distribution will be $1.28 per share, and Senior Housing's annual
distribution will be $2.40 per share. Because you will receive one Senior
Housing share for every 10 HRPT shares you own, your total distributions
will be unchanged as a result of the spin-off.
Q: Why did HRPT decide to spin-off Senior Housing?
A: Many REIT investors seem to prefer to invest in companies which focus on
only one type of property. We hope that the spin-off will increase the
market value of your combined investment and improve access to growth
capital for HRPT to invest in office buildings and for Senior Housing to
invest in senior housing properties.
Q: Will my shares continue to be listed on the New York Stock Exchange?
A: HRPT's shares will continue to be listed on the NYSE under the symbol
"HRP." Senior Housing's shares also will be listed on the NYSE under the
symbol "SNH."
Q: What are the tax consequences to me of the spin-off?
A: The Senior Housing shares you receive will be treated for tax purposes like
all other distributions you receive from HRPT. The taxable value of this
distribution will be determined by the trading price of Senior Housing
shares at the time of the spin-off.
Q: What do I have to do to receive my Senior Housing shares?
A: No action by you is required. You do not need to pay any money or surrender
your HRPT shares to receive Senior Housing shares. The number of HRPT
shares you own will not change. If your HRPT shares are held in a brokerage
account, your Senior Housing shares will be credited to that account. If
your HRPT shares are held in certificated form, a certificate representing
your Senior Housing shares will be mailed to you. No cash distributions
will be paid and fractional shares will be issued as necessary.
Q: Where can I get more information?
A: You should read this prospectus carefully. You can also call (877)
ASK-HRPT.
3
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C>
SUMMARY..................................................................................................................7
The Companies.......................................................................................................7
Risk Factors........................................................................................................8
HRPT Growth Strategy................................................................................................9
Senior Housing Growth Strategy.....................................................................................11
Distributions......................................................................................................11
Principal Places of Business.......................................................................................11
Summary Pro Forma Consolidated Financial Information...............................................................12
RISK FACTORS............................................................................................................13
No Established Share Price.........................................................................................13
Possible Tenant Defaults...........................................................................................13
Properties Subject to Burdensome Regulations.......................................................................13
Failure of Growth Strategy.........................................................................................14
Conflicts of Interest..............................................................................................14
Dominant Shareholder...............................................................................................14
Benefits to Related Parties........................................................................................14
Ownership Limitations and Anti-Takeover Provisions.................................................................15
Liabilities of Real Estate Ownership...............................................................................15
THE SPIN-OFF............................................................................................................16
Key Dates..........................................................................................................16
Distribution Agent.................................................................................................16
Listing and Trading of Senior Housing Shares.......................................................................16
Background and Reasons for the Spin-Off............................................................................16
Manner of Effecting the Spin-Off...................................................................................17
The Transaction Agreement..........................................................................................17
INFORMATION ABOUT HRPT PROPERTIES TRUST AFTER THE SPIN-OFF..............................................................19
HRPT Investments...................................................................................................19
Commercial Office Buildings....................................................................................19
Government Office Buildings....................................................................................19
Medical and Biotechnology Buildings............................................................................19
Equity Investment in Hospitality Properties Trust..............................................................19
Equity Investment in Senior Housing Properties Trust...........................................................20
Pending Acquisitions...........................................................................................20
Development Activities.........................................................................................20
Location of HRPT Office Buildings..................................................................................21
HRPT Tenants.......................................................................................................22
U.S. Government................................................................................................22
Investment Grade Tenants.......................................................................................22
Other Public Company Tenants...................................................................................23
Other Tenants..................................................................................................23
HRPT Lease Expirations.............................................................................................24
HRPT Management....................................................................................................25
Additional Information About HRPT..................................................................................26
INFORMATION ABOUT SENIOR HOUSING PROPERTIES TRUST.......................................................................27
General............................................................................................................27
Growth Strategy....................................................................................................27
4
<PAGE>
Page
History and Management.............................................................................................27
Senior Housing Real Estate Market..................................................................................28
Types of Properties................................................................................................29
Government Regulations and Rate Setting............................................................................30
Competition........................................................................................................32
SENIOR HOUSING DISTRIBUTION POLICY......................................................................................34
SENIOR HOUSING PROPERTIES...............................................................................................36
SENIOR HOUSING TENANTS..................................................................................................40
Marriott International, Inc........................................................................................40
Integrated Health Services, Inc....................................................................................41
Mariner Post-Acute Network, Inc....................................................................................41
Brookdale Living Communities, Inc..................................................................................42
Genesis Health Ventures, Inc.......................................................................................42
Privately Owned Tenants............................................................................................42
SENIOR HOUSING LEASES...................................................................................................44
Lease Terms........................................................................................................45
SENIOR HOUSING SELECTED HISTORICAL FINANCIAL INFORMATION................................................................47
SENIOR HOUSING SELECTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION....................................................48
SENIOR HOUSING MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................................................................48
Pro Forma Results of Operations....................................................................................48
Historical Results of Operations...................................................................................49
Liquidity and Capital Resources....................................................................................49
Year 2000..........................................................................................................50
Quantitative and Qualitative Disclosures About Market Risk.........................................................51
SENIOR HOUSING MANAGEMENT...............................................................................................52
Senior Housing Trustees and Executive Officers.....................................................................52
Committees of the Board of Trustees................................................................................53
Compensation of the Trustees and Officers..........................................................................53
Incentive Share Award Plan.........................................................................................53
Limitation of Liability and Indemnification........................................................................54
Reit Management and the Advisory Agreement.........................................................................54
Related Party Transactions.........................................................................................56
LEGAL PROCEEDINGS.......................................................................................................57
SENIOR HOUSING POLICIES.................................................................................................57
Investment Policies................................................................................................57
Disposition Policies...............................................................................................58
Financing Policies.................................................................................................58
Conflict of Interest Policies......................................................................................59
Policies with Respect to Other Activities..........................................................................60
5
<PAGE>
Page
MATERIAL PROVISIONS OF MARYLAND LAW AND OF
SENIOR HOUSING'S DECLARATION OF TRUST AND BYLAWS........................................................................61
Trustees...........................................................................................................61
Advance Notice of Trustee Nominations and New Business.............................................................61
Meetings of Shareholders...........................................................................................62
Liability and Indemnification of Trustees and Officers.............................................................62
Shareholder Liability..............................................................................................63
Maryland Asset Requirements........................................................................................63
Transactions with Affiliates.......................................................................................63
Voting by Shareholders.............................................................................................63
Restrictions on Transfer of Shares.................................................................................63
Business Combinations..............................................................................................65
Control Share Acquisitions.........................................................................................66
Amendment to the Declaration of Trust, Dissolution and Mergers.....................................................67
Anti-takeover Effects of Maryland Law and of the Declaration of Trust and Bylaws...................................67
DESCRIPTION OF SENIOR HOUSING SECURITIES................................................................................68
General............................................................................................................68
Common Shares......................................................................................................68
SENIOR HOUSING PRINCIPAL SHAREHOLDERS...................................................................................69
FEDERAL INCOME TAX AND ERISA CONSEQUENCES...............................................................................69
General............................................................................................................69
Federal Income Tax Consequences of the Spin-Off to Our Shareholders................................................71
Federal Income Tax Consequences of the Spin-Off to HRPT............................................................74
Federal Income Taxation of Senior Housing and its Shareholders.....................................................77
Backup Withholding and Information Reporting.......................................................................88
Other Tax Consequences.............................................................................................89
ERISA Consequences for Senior Housing and its Shareholders.........................................................90
LEGAL MATTERS...........................................................................................................92
EXPERTS.................................................................................................................92
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.....................................................................................92
FORWARD LOOKING STATEMENTS..............................................................................................92
WHERE YOU CAN FIND ADDITIONAL INFORMATION...............................................................................92
INDEX TO FINANCIAL STATEMENTS..........................................................................................F-1
</TABLE>
6
<PAGE>
SUMMARY
This summary highlights some information contained elsewhere in this
prospectus. This summary may not contain all the information about the spin-off
which may be important to you. To better understand the spin-off you should
carefully review this entire document. References in this prospectus to "we,"
"us," "our" or "HRPT" mean HRPT Properties Trust and its subsidiaries.
References to "Senior Housing" mean Senior Housing Properties Trust and its
subsidiaries. Unless otherwise indicated, the information presented in this
prospectus reflects events which have occurred or will have occurred by the
effective date of the registration statement of which this prospectus is a part
and assumes that none of HRPT's subordinated convertible debentures are
converted into HRPT shares before the spin-off.
THE COMPANIES
We are a real estate investment trust, a REIT, which owns a diversified
portfolio of 149 office buildings costing $2.3 billion and 93 senior housing
properties costing $770 million. We also own four million shares of Hospitality
Properties Trust, another NYSE-listed REIT which invests in hotels that we
founded in 1995. Our current book capitalization includes $1.8 billion of equity
and $1.1 billion of debt. Our current distribution rate is $1.52 per share per
year, payable $0.38 per share per quarter.
HRPT Before the Spin-Off
[Graphic Omitted - Flow Chart
149 office buildings, $2.3 billion cost
93 senior housing properties, $770 million cost
4 million shares of Hospitality Properties Trust
-- Distributions: $1.52/share per annum
-- 131.9 million shares outstanding
-- $917 million senior debt outstanding plus $205 million
subordinated debt]
Our subsidiary, Senior Housing, owns all of our senior housing properties.
Senior Housing is also a REIT. We own all 26 million Senior Housing shares
outstanding and Senior Housing owes us $200 million. We will distribute 13.2
million of our Senior Housing shares to our shareholders on the basis of one
Senior Housing share for every 10 HRPT shares held. Senior Housing has entered a
new bank credit facility for $350 million; it will borrow $200 million under
this facility and pay its debt to us; and $150 million will be available for new
investments by Senior Housing. After the spin-off we will establish a new annual
distribution rate of $1.28 per HRPT share, payable $0.32 per share per quarter;
and Senior Housing will establish a new annual distribution rate of $2.40 per
share, payable $0.60 per share per quarter.
HRPT After the Spin-Off
[Graphic Omitted - Flow Chart
149 office buildings, $2.3 billion cost
4 million shares of Hospitality Properties Trust
12.8 million shares of Senior Housing
-- Distributions: $1.28/share per annum
-- 131.9 million shares outstanding
-- $717 million senior debt outstanding plus $205 million
subordinated debt]
Senior Housing After the Spin-Off
[Graphic Omitted - Flow Chart
93 senior housing properties, $770 million cost
-- Distributions: $2.40/share per annum
-- 26 million shares outstanding
-- $200 million debt outstanding]
7
<PAGE>
RISK FACTORS
Your ownership of Senior Housing shares will involve risks, including the
following:
o No Established Share Price. There is no established share price for
Senior Housing shares. The Senior Housing shares will be traded on the
NYSE but we do not know the price at which they will trade. Senior
Housing shares may trade for less than their fair value.
o Possible Tenant Defaults. Several of Senior Housing's tenants have
recently reported significant losses, particularly Mariner Post-Acute
Network, Inc., Integrated Health Services, Inc. and Genesis Health
Ventures, Inc. One of our smaller tenants has recently filed for
reorganization under Chapter 11 of the Bankruptcy Code. If these
tenants fail to pay rent, Senior Housing may be unable to pay its cash
distributions to shareholders or to carry out its business plan.
o Properties Subject to Burdensome Regulations. Some of Senior Housing's
properties are highly regulated. Approximately 57% of the tenant
revenues at Senior Housing's properties are paid by Medicare and
Medicaid. Changes in these regulations or in the amounts of payments
available under Medicare and Medicaid programs may restrict Senior
Housing's tenants' ability to pay rent.
o Failure of Growth Strategy. Senior Housing's growth strategy depends
upon its ability to raise additional capital and to invest in new
properties. No assurance can be provided that capital will be
available at reasonable costs or that Senior Housing will be able to
purchase and lease additional properties.
o Conflicts of Interest. Senior Housing's managing trustees, Barry M.
Portnoy and Gerard M. Martin, own its investment advisor, Reit
Management & Research, Inc. Senior Housing pays Reit Management based
in part on the amount of investments. Reit Management and Messrs.
Portnoy and Martin might have an incentive to cause Senior Housing to
acquire assets in order to raise advisory fees.
o Dominant Shareholder. Upon completion of the spin-off, HRPT will own
49% of Senior Housing's outstanding shares. This ownership will enable
HRPT to have a significant influence over Senior Housing shareholder
decisions.
o Benefits to Related Parties. The completion of the spin-off will
result in benefits to related parties. For example, when HRPT's
properties were transferred to Senior Housing, Senior Housing agreed
to pay $200 million to HRPT. After the spin-off Senior Housing will
borrow $200 million to pay this debt.
o Ownership Limitations and Anti-Takeover Provisions. Other than HRPT,
shareholders are prohibited from owning more than 9.8% of Senior
Housing. Senior Housing's declaration of trust and bylaws contain
other provisions that inhibit a change of control. Because of these
limitations Senior Housing shareholders may be unable to realize a
change of control premium for their shares.
o Liabilities of Real Estate Ownership. Senior Housing's business will
be subject to risks associated with real estate ownership, including
the need for regular maintenance and repairs, the need for capital
expenditures and possible environmental hazards.
8
<PAGE>
HRPT GROWTH STRATEGY
After the spin-off, we will be principally focused upon managing and
growing our office building investments. Most of our investments are in
multi-tenant commercial office buildings. We sometimes invest in office
buildings leased to medical providers and government agencies because these
types of tenants often are willing to sign long term leases and have a history
of regular renewals. We prefer to invest in central business districts because
there are usually barriers to new development in those locations. We believe
this strategy adds stability to our portfolio and increases the long term
appreciation potential of our properties.
HRPT Office Investments
Types of Tenants
[Graphic Omitted - Pie Chart
Commercial Office
Tenants $1.423 million 62%
Medical and
Biotechnology
Tenants $417 million 18%
U.S. Goverment $447 million 20%]
CBD vs. Suburban
[Graphic Omitted - Pie Chart
Central Business
Districts $1.474 million 64%
Suburban Areas $813 million 36%]
Our 149 office buildings are located in 27 states and the District of
Columbia. Five market areas contain two-thirds of our office portfolio:
<TABLE>
<CAPTION>
HRPT Geographic Diversification
Market Area No. of Buildings Investment Square Feet
- ----------- ---------------- ---------- -----------
(000s)
<S> <C> <C> <C> <C> <C>
Philadelphia, PA 17 $529,478 (23%) 3,540,894 (22%)
Austin, TX 21 267,093 (12%) 2,355,469 (14%)
Washington, DC 15 402,981 (18%) 2,136,335 (13%)
Boston, MA 30 191,889 ( 8%) 1,602,974 (10%)
Southern CA 17 250,246 (11%) 1,125,250 ( 7%)
Other markets 49 644,845 (28%) 5,583,527 (34%)
--- ---------- ----- ---------- ----
Total 149 $2,286,532 (100%) 16,344,449 (100%)
=== ========== ===== ========== =====
</TABLE>
9
<PAGE>
Two criteria have historically guided our management and acquisitions of
office buildings and are likely to do so in the future. First, we prefer to
lease to high credit quality tenants. Approximately 55% of our office rents are
paid by tenants who are investment grade rated, including 20% from the U.S.
Government. An additional 8% of our office rents come from publicly owned
companies which are not investment grade rated; and many of our remaining
tenants are generally considered "investment quality" tenants such as law,
accounting and other professional service firms. Second, we generally prefer to
lease office buildings for longer rather than shorter terms. Only 22% of our
leases expire in the next three years. Almost half of our leases have remaining
terms of seven or more years.
HRPT Office Tenant Credit Quality
(by percentage of rent)
[Graphic Omitted - Pie Chart
Investment Grade 55%
Private Tenants 37%
Other Public Companies 8%]
HRPT Office Lease Expirations
(by percentage of rent)
[Graphic Omitted - Pie Chart
Over 10 years 27%
7-9 years 22%
4-6 years 29%
3 years or less 22%]
At this time we have no plans to undertake speculative development, but we
are exploring some build-to-suit opportunities on land which we own. Generally,
we have only acquired development sites as ancillary property incident to our
purchases of developed income producing properties. We estimate the total
development potential of land which we own or are negotiating to acquire at
approximately 2.9 million square feet of office space.
10
<PAGE>
SENIOR HOUSING GROWTH STRATEGY
Senior Housing's 93 properties are leased to nine tenants. Ninety-seven
percent of Senior Housing's investments are leased to subsidiaries of public
companies which have guaranteed the lease obligations. The leases for 91 of
these properties extend to at least 2005. Senior Housing's largest tenant is
Marriott International, Inc. The following chart shows Senior Housing properties
leased to tenants by historical investment at cost and current lease
expirations.
Senior Housing Investments
o $770 million total assets [Graphic Omitted - Pie Chart
o 42% leased to Marriott Marriott International 42%
14 Properties
o 97% leased to public $326 million
companies Lease expires 2013
o leases for 99% expire Brookdale Living Communities 13%
in 2005 or after 4 Properties
$102 million
Lease expires 2019
Mariner Post-Acute Network 11%
26 Properties
$86 million
Lease expires 2013
Integrated Health Services 9%
Lease No. 1
31 Properties
$66 million
Lease expires 2010
Integrated Health Services 20%
Lease No. 2
11 Properties
$152 million
Lease expires 2006
Genesis Health Ventures 2%
1 Property
$13 million
Lease expires 2005
Other Operators 3%
6 Properties
$25 million
Leases expire 2001-2005]
The aging of the U.S. population, the increasing percentage of women who
work away from home, the high divorce rate and societal mobility are demographic
facts which tend to increase demand for specialized senior housing properties.
Senior Housing hopes to profit from this increasing demand by buying properties
specially designed to meet the needs of aged residents. Senior Housing expects
that its leases will require rents which exceed its cost of capital and which
increase as the properties' gross revenues increase.
A new Medicare rate setting program that is now being implemented has had
negative impacts upon the financial performance of several of Senior Housing's
tenants. Senior Housing believes that these tenants will pay their lease
obligations, or, if they do not do so, that Senior Housing may be able to re-let
most of these properties to new tenants who will pay comparable rents. In the
future, Senior Housing intends to focus new investments in properties which are
not dependent upon government payment programs. At the same time, however,
Senior Housing believes that the new, lower Medicare rates have reduced the
prices of many nursing homes to levels which may present attractive long term
investment opportunities.
DISTRIBUTIONS
After the spin-off, HRPT's new distribution rate will be $1.28 per share
per year, payable $0.32 per share per quarter. Senior Housing's distribution
rate will be $2.40 per share per year, payable $0.60 per share per quarter. Cash
distributions will be payable at these rates effective for the quarter ended
September 30, 1999. We expect that, on an annualized basis, approximately 17% of
HRPT's new distributions and 15% of Senior Housing's distributions will
constitute returns of capital.
PRINCIPAL PLACES OF BUSINESS
HRPT and Senior Housing maintain their principal places of business at 400
Centre Street, Newton, MA 02458. HRPT's phone number is (617) 332-3990. Senior
Housing's phone number is (617) 796-8350.
11
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table presents the pro forma impact of the spin-off on HRPT's
income statement and balance sheet and the pro forma income statement and
balance sheet of Senior Housing as a separate company. The Senior Housing
statements include pro rata allocations of interest and general and
administrative expenses for historical periods. In the opinion of management,
the methods of allocation are reasonable. It is impossible to estimate all
operating costs that Senior Housing would incur as a separate company. For
additional information about the amounts appearing in this table, see the
Unaudited Pro Forma Consolidated Financial Statements and notes thereto on pages
F-2 through F-13.
<TABLE>
<CAPTION>
As of and for the three months ended March 31, 1999
(unaudited, amounts in 000s, except per share data)
---------------------------------------------------------------
HRPT Senior Housing
------------------------------------------ ------------------
Spin-Off
Income Statements Historical Adjustments Pro Forma Pro Forma
- ----------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Rental income $ 101,313 $ (21,226) $ 80,087 $ 21,226
Interest and other income 3,090 (1,442) 1,648 1,442
----------- ----------- ----------- -----------
Total revenues 104,403 (22,668) 81,735 22,668
----------- ----------- ----------- -----------
Operating expense 24,006 -- 24,006 --
Interest expense 19,437 (2,800) 16,637 3,375
Depreciation and amortization 18,831 (5,607) 13,224 5,607
General and administrative 4,841 (1,114) 3,727 1,114
----------- ----------- ----------- -----------
Total expenses 67,115 (9,521) 57,594 10,096
----------- ----------- ----------- -----------
Income before equity in earnings of
Hospitality Properties and Senior Housing 37,288 (13,147) 24,141 12,572
Equity in earnings of Hospitality Properties 2,008 -- 2,008 --
Equity in earnings of Senior Housing -- 6,198 6,198 --
----------- ----------- ----------- -----------
Net income (1) $ 39,296 $(6,949) $ 32,347 $ 12,572
=========== =========== =========== ===========
Average basic shares outstanding 131,660 131,660 26,000
=========== =========== ===========
Average diluted shares outstanding 143,041 143,041 26,000
=========== =========== ===========
Per share data:
Basic and diluted income (1) $ 0.30 $ 0.25 $ 0.48
=========== =========== ===========
Distributions $ 0.38 $ 0.32 $ 0.60
=========== =========== ===========
Balance Sheets
Real estate investments $ 2,865,374 $ (732,393) $ 2,132,981 $ 732,393
Accumulated depreciation (167,501) 100,223 (67,278) (100,223)
----------- ----------- ----------- -----------
2,697,873 (632,170) 2,065,703 632,170
Real estate mortgages 125,827 (37,733) 88,094 37,733
Investment in Hospitality Properties 109,842 -- 109,842 --
Investment in Senior Housing -- 215,017 215,017 --
Cash and equivalents 32,575 (11,167) 21,408 1,167
Other assets 84,568 (8,831) 75,737 8,831
----------- ----------- ----------- -----------
$ 3,050,685 $ (474,884) $ 2,575,801 $ 679,901
=========== =========== =========== ===========
Bank credit facility $ -- $ -- $ -- $ 200,000
Senior notes payable 892,476 (200,000) 692,476 --
Mortgage notes payable 24,611 -- 24,611 --
Convertible subordinated debentures 204,863 -- 204,863 --
Other liabilities 103,084 (43,761) 59,323 43,761
Shareholders' equity 1,825,651 (231,123) 1,594,528 436,140
----------- ----------- ----------- -----------
$ 3,050,685 $ (474,884) $ 2,575,801 $ 679,901
=========== =========== =========== ===========
<FN>
(1) Excludes an HRPT gain on sale of properties of $8.3 million or $0.06 per share for the quarter ended March 31,
1999.
</FN>
</TABLE>
12
<PAGE>
RISK FACTORS
Your ownership of Senior Housing shares will involve various risks,
including the following:
No Established Share Price
There is no established share price for Senior Housing shares. The
distribution of Senior Housing shares is not being underwritten by an investment
bank or otherwise. The Senior Housing shares will be traded on the NYSE but we
do not know the price at which they will trade. We do not know if an active
market for Senior Housing shares will develop. Accordingly, Senior Housing
shares' trading price may not reflect their fair value.
Possible Tenant Defaults
Some of Senior Housing's tenants have recently reported significant losses.
Mariner Post-Acute Network, Inc. reported a loss of $78.8 million for the
quarter ended March 31, 1999. Integrated Health Services, Inc. reported a loss
of $6.6 million for the quarter ended March 31, 1999. Genesis Health Ventures,
Inc. reported a loss of $6.8 million for the quarter ended March 31, 1999. One
of Senior Housing's smaller tenants, The Frontier Group, a privately held
company, filed on July 14, 1999, for reorganization under Chapter 11 of the
Bankruptcy Code. If these tenants fail to pay rent, Senior Housing may be unable
to pay its cash distributions to shareholders or to carry out its business plan.
Because leases for multiple properties to an affiliated group of tenants are
subject to cross default at the election of Senior Housing, a lease default
affecting one property owned by Senior Housing may result in multiple defaults
for material amounts of rent.
Properties Subject to Burdensome Regulations
Some of Senior Housing's properties are considered healthcare facilities
and investing in healthcare facilities involves risks:
o Complex Regulations. Detailed specifications for the physical
characteristics of healthcare properties are mandated by various
governmental authorities. Changes in these regulations may require major
capital expenditures. Because Senior Housing's healthcare properties are
triple net leased to tenants, Senior Housing has only limited control over
the maintenance of its properties. Senior Housing regularly monitors
compliance by its tenants with applicable healthcare regulations. Although
Senior Housing has in the past periodically become aware that some tenants
may not have been in full compliance with these regulations, Senior Housing
believes that its properties are at present substantially in compliance
with applicable healthcare regulations. Senior Housing's triple net leases
require its tenants to comply with applicable regulations affecting its
properties. Nevertheless, if its tenants fail to perform these obligations,
Senior Housing may be required to do so in order to maintain the value of
its investments.
o Dependence on Government Programs. Approximately 57% of the tenant revenues
at Senior Housing's properties are paid by Medicare and Medicaid. The
Medicare program recently implemented a prospective payment system for
skilled nursing facilities, which replaces cost-based reimbursements. The
Medicare prospective payment system is being gradually implemented over a
three-year period which began on July 1, 1998, and has already had a
negative impact upon the income of many nursing homes. Many state Medicaid
programs have implemented similar prospective payment systems. The Balanced
Budget Act of 1997 changed federal law so that states have greater
flexibility in establishing Medicaid payment rates. Whenever Medicare or
Medicaid rates are reduced, Senior Housing's tenants' ability to pay rent
could be jeopardized.
o Special Purpose Buildings. Senior Housing's properties were specifically
designed for senior housing. If these properties cannot be operated as
senior housing facilities, finding alternative uses for these properties
may be difficult and costly.
13
<PAGE>
Failure of Growth Strategy
As a REIT, Senior Housing is required to distribute 95% of its taxable
income and cannot fund capital needs with income from operations. Senior
Housing's growth strategy requires that it raise additional capital to invest in
new properties. Senior Housing's ability to raise capital in the future will
depend not only upon its performance but also upon capital market conditions
which are beyond its control. Moreover, there are several other REITs and
finance companies that now aggressively compete to purchase and lease senior
housing properties. Accordingly, Senior Housing's growth strategy may not
succeed.
Conflicts of Interest
Conflicts of interest have arisen and will continue to arise in Senior
Housing's business, including the following:
o Barry M. Portnoy and Gerard M. Martin, who are Senior Housing's managing
trustees, own Reit Management, its investment advisor. Reit Management has
approximately 180 employees and has experience acquiring and managing
properties for two other publicly owned REITs. Senior Housing believes that
the depth of management talent available to it through its advisory
contract with Reit Management will provide Senior Housing with a
competitive advantage and that the fees payable to Reit Management are
commercially reasonable. Nonetheless, Senior Housing did not negotiate its
advisory agreement at arms' length. The advisory fee paid to Reit
Management will be based in part upon the amount of new investments made by
Senior Housing. This fee structure might encourage Reit Management to
advocate acquisitions when doing so is not in the best interests of Senior
Housing.
o In addition to serving as Senior Housing's managing trustees, Messrs.
Portnoy and Martin are managing trustees of HRPT and Hospitality
Properties. They also have business interests separate from these other
REITs. Similarly, Reit Management also acts as the investment advisor to
HRPT and Hospitality Properties and has other business interests. These
various business activities will compete for management time.
Dominant Shareholder
Upon completion of the spin-off, HRPT will own 49% of Senior Housing's
outstanding shares. Accordingly, HRPT will have a significant influence over
Senior Housing shareholder decisions. This influence may result in decisions
that may not serve the best interests of Senior Housing's other shareholders.
Benefits to Related Parties
The completion of the spin-off will result in substantial benefits to
related parties, including the following:
o When HRPT transferred its properties to Senior Housing, Senior Housing
became indebted to HRPT for $200 million. After the spin-off, Senior
Housing will borrow $200 million under its bank credit facility and pay
this debt to HRPT. HRPT will not be liable for any of Senior Housing's
debt.
o Upon completion of the spin-off, Reit Management will become Senior
Housing's investment advisor. The pro forma annual advisory fee that Senior
Housing will pay to Reit Management from the completion of the spin-off
through December 31, 1999, the initial term of the agreement, will be
$____, or $3.9 million on an annualized basis. HRPT's advisory fees to Reit
Management will be reduced by the same amount.
o HRPT currently owns 26 million of Senior Housing's shares. Upon completion
of the spin-off, HRPT will distribute 13.2 million of these shares to its
shareholders and will retain 12.8 million shares. By retaining these
shares, HRPT will be able to participate in Senior Housing's future success
through distributions and any appreciation in Senior Housing's share price.
14
<PAGE>
Ownership Limitations and Anti-Takeover Provisions
Senior Housing's declaration of trust prohibits any shareholder other than
HRPT, Reit Management and their affiliates from owning more than 9.8% of its
outstanding common shares. This provision of the declaration of trust may help
Senior Housing comply with REIT tax requirements. This provision will also
inhibit a change of control of Senior Housing. Its declaration of trust and
bylaws contain other provisions that may increase the difficulty of acquiring
control of Senior Housing by means of a tender offer, open market purchases, a
proxy fight or otherwise, if the acquisition is not approved by Senior Housing's
board of trustees. These other anti-takeover provisions include the following:
o a staggered board of trustees with three separate classes;
o the two-thirds majority shareholder vote required for removal of
trustees;
o the availability of additional shares that the board of trustees may
authorize and issue on terms that it determines;
o advance notice procedures with respect to nominations of trustees and
shareholder proposals; and
o the facts that only the board of trustees may call shareholder
meetings and that shareholders are not entitled to act without a
meeting.
For all of these reasons, Senior Housing's shareholders may be unable to realize
a change of control premium for their shares.
Liabilities of Real Estate Ownership
Senior Housing's business will be subject to the following material risks
associated with real estate acquisitions and ownership:
o casualty losses, some of which may be uninsured;
o lease expirations which are not renewed or for properties which can
only be relet at lower rents;
o costs relating to maintenance and repair, and the need to make capital
expenditures due to changes in governmental regulations, including the
Americans with Disabilities Act; and
o environmental hazards created by tenants or abutters for which Senior
Housing may be liable.
15
<PAGE>
THE SPIN-OFF
Key Dates
Dates Activity
August __, 1999 Prospectus Mailing Date. The date the registration statement
of which this prospectus is a part is declared effective by
the SEC. We will mail this prospectus to you on or about
this date.
August __, 1999 Record Date. HRPT shareholders of record on this date will
receive one Senior Housing share for every 10 HRPT shares
owned. We expect that a "when issued" market on the NYSE for
Senior Housing shares may begin two business days before the
record date. If a "when issued" market develops for Senior
Housing shares, HRPT shares will begin to trade "when
issued/ex distribution."
August __, 1999 Distribution Date. We expect to deliver 13.2 million shares
of Senior Housing to the distribution agent on this date,
and the spin-off will be completed. If you hold HRPT shares
in a brokerage account, your Senior Housing shares will be
credited to your account. If you hold HRPT shares in
certificated form, a certificate representing your Senior
Housing shares will be mailed to you; the mailing process is
expected to take about 30 days. If a "when issued" and "when
issued/ex distribution" market has developed for Senior
Housing and HRPT shares, respectively, it will cease on this
date; and thereafter those shares will trade in the regular
way.
Distribution Agent
The distribution agent for the spin-off is State Street Bank and Trust
Company, c/o Boston EquiServe, P.O. Box 8200, Boston, Massachusetts 02266-8200;
telephone (800) 426-5523.
Listing and Trading of Senior Housing Shares
Senior Housing shares have been approved for listing on the NYSE. We expect
that trading on a "when issued" basis may commence on or about August _, 1999.
There is not currently a public market for Senior Housing shares. Prices at
which the Senior Housing shares may trade cannot be predicted. Until and unless
an orderly market for Senior Housing shares develops, the prices at which
trading in the shares occurs may fluctuate significantly. The prices at which
Senior Housing shares trade may be influenced by many factors, including, among
others, the depth and liquidity of the market which develops, investor
perception of Senior Housing's business and growth prospects, the market for
REIT shares generally, Senior Housing's distribution policy and general market
conditions.
Background and Reasons for the Spin-Off
HRPT was founded in 1986 to invest in senior housing real estate. For the
past few years, however, most of our investments have been in commercial office
buildings. In 1998 we concluded that a renewed emphasis on senior housing
properties was appropriate. We believe there are attractive investment
opportunities now available in both commercial office buildings and senior
housing. Also in 1998, we became convinced that many REIT investors prefer to
invest in companies that are focused upon one type of property rather than
diversified companies.
In December 1998, we determined to divide HRPT into two separate public
companies, one focused upon office buildings and one focused upon senior
housing. Our original plan was to distribute one share of Senior
16
<PAGE>
Housing to our shareholders for every 10 shares of HRPT owned and to
simultaneously complete an initial public offering of an additional 11 million
shares of Senior Housing. Recently, we abandoned our plans for an initial public
offering of Senior Housing shares. Nonetheless, we continue to believe that two
separate companies, one focused upon office buildings and one focused upon
senior housing properties, may be able to take better advantage of their
respective growth opportunities. For this reason, in July 1999 we determined to
proceed with this spin-off. Because we are not selling any shares of Senior
Housing at this time, HRPT will retain a larger percentage ownership of Senior
Housing than it had planned to retain in December 1998. Our board of trustees
has unanimously approved the spin-off as being in the best interests of our
shareholders.
Manner of Effecting the Spin-Off
In order to effect the spin-off, we and Senior Housing have taken and
expect to take various actions, including the following:
o In December 1998 we organized Senior Housing as a Maryland REIT which
is 100% owned by HRPT. At the time it was organized, Senior Housing had
26.4 million shares outstanding. Since that time some of these shares
have been cancelled and there are now 26 million shares outstanding.
o In June and July 1999 we transferred title to 93 senior housing
investments to other 100% owned REIT subsidiaries of HRPT. These senior
housing subsidiaries were newly created and all their assets and
liabilities relate to these 93 investments.
o In July 1999 Senior Housing accepted a commitment for a new bank credit
facility for up to $350 million. This line of credit will be effective
upon completion of the spin-off.
o Prior to the date of this prospectus, HRPT transferred 100% of the
ownership of its senior housing subsidiaries to Senior Housing. In
consideration of these transfers, Senior Housing and one of its
subsidiaries agreed to pay $200 million to HRPT. On the date the
spin-off is completed 13.2 million shares of Senior Housing will be
distributed to HRPT shareholders.
o Shortly after completion of the spin-off, Senior Housing will borrow
$200 million under its bank credit facility and pay its formation debt
to HRPT. HRPT intends to use this $200 million to prepay senior debt.
The Transaction Agreement
In order to evidence the actions necessary to effect the spin-off and to
govern their relations after the spin-off, HRPT and Senior Housing entered a
transaction agreement on August __, 1999. The form of this transaction agreement
has been filed with the SEC as an exhibit to the registration statement of which
this prospectus is a part. If you want more information about the actions which
have been and will be taken to effect the spin-off or about the agreements
between HRPT and Senior Housing concerning their future relations, you should
read the entire transaction agreement. The provisions of the transaction
agreement are summarized as follows:
o Interest on the $200 million formation debt from Senior Housing and its
subsidiary to HRPT is charged at the same rate as HRPT's weighted
average cost of debt. On July 21, 1999, this interest rate was 7.3% per
annum.
o The formation debt will be due and payable by Senior Housing to HRPT
within 10 days after the spin-off. If the formation debt is not timely
paid Senior Housing will be required to secure this debt.
o On the spin-off date, HRPT will make an additional capital contribution
to Senior Housing, in cash, of $1 million, plus $169,500 times the
number of days from and including July 1, 1999, to and excluding the
spin-off date.
17
<PAGE>
o HRPT will indemnify Senior Housing with respect to any liability
relating to any property transferred to Senior Housing which arises
from litigation pending at the time of the spin-off.
o Senior Housing will indemnify HRPT from any liability relating to any
property transferred by HRPT to Senior Housing which arises after the
spin-off.
o HRPT and Senior Housing have agreed not to compete with each other.
Specifically, so long as: (a) HRPT remains a more than 10% shareholder
of Senior Housing; (b) HRPT and Senior Housing engage the same
investment advisor; or (c) HRPT and Senior Housing have one or more
common managing trustees; then
-- HRPT will not invest in properties involving Senior Housing without
the prior consent of Senior Housing's independent trustees;
-- Senior Housing will not invest in office buildings, including
medical office buildings or clinical laboratory buildings, without the
prior approval of HRPT's independent trustees; and
-- If a particular investment involves both senior housing and office
components the character of the investment will be determined by
building area, excluding common areas, unless the boards of trustees of
both Senior Housing and HRPT otherwise agree at that time. Also, these
non-competition provisions will not apply to any investments held by
HRPT at the time of the spin-off.
o HRPT and Senior Housing will cooperate to enforce the ownership
limitations in their respective declarations of trust as may be
appropriate to continue their tax status as REITs and otherwise.
o HRPT and Senior Housing will cooperate to file future tax returns
including appropriate allocations of taxable income, expenses and other
tax attributes.
o HRPT will not sell any of its retained 12.8 million Senior Housing
shares for a period of at least one year following the spin-off without
the consent of Senior Housing's independent trustees.
o HRPT will pay all expenses of the spin-off including the costs of
distributing Senior Housing shares to its shareholders, legal and
accounting charges, SEC filing fees, NYSE listing fees and the up-front
costs of establishing Senior Housing's bank credit facility.
18
<PAGE>
INFORMATION ABOUT HRPT PROPERTIES TRUST AFTER THE SPIN-OFF
HRPT is a REIT that acquires, owns and leases office buildings. After the
spin-off we will own 149 office buildings which had an original cost of $2.3
billion. Of these, 69 are commercial office buildings which had an original cost
of over $1.4 billion, 28 are buildings leased to the U.S. Government which had
an original cost of $447 million and 52 are medical office and biotechnology
buildings which had an original cost of $417 million. We will also own 4 million
shares of Hospitality Properties and 12.8 million shares of Senior Housing.
HRPT Investments
Commercial Office Buildings. Over $1.4 billion of our total investments in
office buildings are in multi-tenant commercial buildings. We believe that
current business trends have created favorable investment opportunities for
commercial office properties: some institutional investors have begun disposing
of their direct ownership of properties and investing in more liquid real estate
securities; purchasers of distressed properties in the early 1990s are now
divesting their improved assets; and many businesses are selling their owned
real estate to invest proceeds in core activities. Moreover, unlike many REITs
that buy commercial office buildings, our focus is to acquire stabilized office
buildings with long term leases to strong credit tenants rather than buildings
that might afford turnaround potential because of vacancies or short term
leases.
Government Office Buildings. Over $400 million of our investments in office
buildings are in buildings majority leased to the U.S. Government. Most U.S.
Government office space requirements are managed by the General Services
Administration, the GSA. Most large GSA leases are for initial terms of 10 to 20
years plus renewal options for an additional 5 to 20 years. Many GSA leases
permit the Government to terminate by notice given any time after a so-called
"firm term." The weighted average remaining firm term for our Government tenants
is approximately six years. From 1980 to September 1996, the amount of space
leased by the GSA increased from 139 million square feet to 146 million square
feet. We believe that the GSA's demand for leased space will continue to be
strong as a result of federal budget pressure to limit capital expenditures and
the need to use funds available for capital expenditures to modernize GSA-owned
buildings, over half of which exceed 50 years of age. Based upon the
Government's investments in tenant improvements to our properties, the high cost
of relocation and the stability of the missions and space requirements of the
Government agencies that occupy our properties, we believe that there is a high
probability of GSA lease renewals for our properties through their renewal
options, and in many cases beyond those periods. Moreover, because of the
locations of many of these Government leased buildings and the high standards to
which they have been built, we may be able to lease most of these buildings to
commercial users at comparable or higher rents in the event the Government
terminates or fails to renew any of these leases.
Medical and Biotechnology Buildings. Over $400 million of our investments
in office buildings are leased to medical providers and to companies engaged in
biotech research and development. The largest of our multi-tenant medical office
buildings is the Cedars Sinai Medical Towers in Los Angeles, California, which
includes 330,715 square feet leased to 115 separate medical practice groups.
This property includes two garages with parking for over 1,600 cars and is
attached by a footbridge to Cedars Sinai Medical Center, one of the largest
hospitals in the western United States. It is our experience that most medical
tenants regularly renew leases at locations which are convenient for the
physicians and their patients. For example, the Cedars Sinai Medical Towers'
current occupancy is almost 100% and, during the early 1990s when many Southern
California office properties suffered occupancy declines, the occupancy at this
property was never below 91%. Similarly, we currently own several biotech
properties in the areas of San Diego, California and Boston, Massachusetts. The
tenants at these buildings have often invested large amounts in leasehold
improvements which would make their relocation difficult and expensive.
Accordingly, it is our expectation that these tenants will regularly renew
expiring leases.
Equity Investment in Hospitality Properties Trust. We have invested $100
million in 4 million common shares of Hospitality Properties, which constitute
7.1% of the total Hospitality Properties common shares outstanding. Hospitality
Properties is a REIT in the business of owning hotels and leasing them to hotel
operating companies. We organized Hospitality Properties in February 1995 as an
outgrowth of our
19
<PAGE>
relationship with Host Marriott Corporation and Marriott International, Inc.,
which arose from our previous investment in retirement communities leased to
Marriott International. Since August 1995, Hospitality Properties has
successfully completed several public offerings of shares and on July 21, 1999,
had a total market capitalization of $2 billion. Hospitality Properties
currently owns or has commitments to purchase 210 hotels, which are located in
35 states and contain 28,451 rooms. We receive distributions on our Hospitality
Properties shares at the current annual rate of $2.76 per share. Our financial
reports include our share of Hospitality Properties' operating results using the
equity method of accounting. Hospitality Properties shares are listed on the
NYSE, and on July 21, 1999 the last reported sale price for Hospitality
Properties common shares was $27.63 per share.
Equity Investment in Senior Housing Properties Trust. After the spin-off
HRPT will retain 12.8 million shares of Senior Housing, which will constitute
49% of the total Senior Housing shares outstanding. Senior Housing is expected
to pay distributions at an initial annual rate of $2.40 per share. HRPT's
financial reports will include Senior Housing operating results using the equity
method of accounting. HRPT does not intend to invest additional money in Senior
Housing, and as Senior Housing grows its investments and issues additional
shares to raise capital we expect that HRPT's ownership percentage of Senior
Housing will decline. We have agreed not to sell these shares, without the
consent of Senior Housing's independent trustees, for a period of one year
following the spin-off transaction. Thereafter, depending upon market
conditions, HRPT may sell these shares to raise capital to invest in additional
office buildings.
Pending Acquisitions. As of July 21, 1999 we had entered into purchase
agreements to acquire 16 additional office properties for $134.8 million. We
expect to buy these properties during the remainder of 1999, subject to the
satisfactory completion of our diligence. In the normal course of our business
we regularly evaluate opportunities to acquire properties. We currently have
several investment opportunities under consideration. We may acquire additional
office buildings involving material amounts in the future.
Development Activities. HRPT regularly has several million dollars worth of
construction activity underway. Most of this work is tenant fit out, repairs,
maintenance and redevelopment types of construction activities. We believe that
we have the capacity to develop commercial office buildings, but to date we have
not done any speculative development. We currently own a large tract of land in
Austin, Texas which is appropriate for office building development and we are
negotiating to buy another tract of land in the area of Pittsburgh,
Pennsylvania's new airport. Also, several of the office buildings we own have
sufficient adjacent land for new office development. The two large sites and all
of the development sites we own are ancillary investments to existing, fully
developed office buildings. We are currently exploring the possibility of doing
build-to-suit developments on some of our developable land. We estimate that
land we own or which we are negotiating to acquire can support development of
approximately 2.9 million square feet of new office space.
20
<PAGE>
Location of HRPT Office Buildings
We own 149 office buildings located in 27 states and the District of
Columbia.
[Graphic Omitted - Map of United States showing location of HRPT office
buildings by state]
<TABLE>
<CAPTION>
No. of Investment No. of Investment
State Buildings (000s) State Buildings (000s)
----- --------- ------ ----- --------- ------
<S> <C> <C> <C> <C> <C>
Alaska 1 $1,000 New Hampshire 1 $22,147
Arizona 5 33,194 New Jersey 4 29,947
California 18 254,173 New Mexico 2 11,079
Colorado 2 22,130 New York 8 234,270
Connecticut 2 14,326 Ohio 1 15,275
Delaware 2 58,646 Oklahoma 1 24,762
District of Columbia 5 207,644 Pennsylvania 17 548,403
Florida 4 11,589 Rhode Island 1 8,010
Georgia 1 2,984 Tennessee 1 22,287
Kansas 1 5,949 Texas 24 291,874
Maryland 7 158,135 Virginia 4 53,884
Massachusetts 29 169,742 Washington 2 21,388
Minnesota 3 40,703 West Virginia 1 4,898
Missouri 1 7,776 Wyoming 1 10,317
----------- --------------
Total 149 $2,286,532
=========== ==============
</TABLE>
21
<PAGE>
We intentionally diversify our office investments geographically. At the
same time, we attempt to acquire multiple properties in selected markets to
promote economic efficiencies. The geographic areas of the United States which
constitute five percent or more of our total office investments are as follows:
Market Area No. of Buildings Investment Square Feet
- ----------- ---------------- ---------- -----------
(000s)
Philadelphia, PA 17 $529,478 (23%) 3,540,894 (22%)
Austin, TX 21 267,093 (12%) 2,355,469 (14%)
Washington, DC 15 402,981 (18%) 2,136,335 (13%)
Boston, MA 30 191,889 ( 8%) 1,602,974 (10%)
Southern CA 17 250,246 (11%) 1,125,250 ( 7%)
HRPT Tenants
HRPT prefers to lease its properties to strong credit tenants. Our largest
tenant is the U.S. Government. Fifty-five percent of our office rent is derived
from companies whose senior unsecured obligations are rated investment grade.
Over 8% of our office rent comes from other public companies that are not rated
investment grade but for whom credit evaluation information is readily
available. Other than the U.S. Government, no single tenant is responsible for
more than 5% of our office rent.
Percentage of
Tenant Annual Office Rent(1) Office Rent
- ------ --------------------- -----------
(000s)
U.S. Government........................ $67,770 20.3%
Other investment grade tenants......... 115,524 34.7
Other publicly owned tenants........... 27,844 8.4
-------- -----
Subtotal investment grade and
publicly owned tenants............. 211,138 63.4
Other tenants.......................... 122,068 36.6
-------- -----
Total.................................. $333,206 100.0%
======== =====
(1) Annual office rent represents May 1999 rent annualized. About 70% of our
office rent is gross rent; 9% of our office rent is net rent; most of our
Government leases require modified gross rent. Accordingly, the rent shown
in this table is not necessarily indicative of contributions to our net
operating income.
U.S. Government. Most of our U.S. Government leases are undertaken by the
GSA and assigned to other Government agencies including the U.S. Department of
Agriculture, Army Corps of Engineers, Internal Revenue Service, Department of
Veterans Affairs, Bureau of Land Management, Department of Energy, Drug
Enforcement Agency, Department of Housing and Urban Development, Department of
Defense, National Institute of Standards and Technology, Department of Justice,
Food and Drug Administration and various other agencies of the U.S. Government.
All of these leases are general obligations of the U.S. Government.
Investment Grade Tenants. We lease office space to the following additional
investment grade companies or their subsidiaries: Aetna Inc., AT&T Corp., Bell
Atlantic Corporation, Bristol-Myers Squibb Company, CBS Corporation, Capital
Cities Media, Inc., The Charles Schwab Corporation, Chase Corporation, Cigna
Corporation, Citigroup Inc., Computer Sciences Corporation, Dow Jones & Company,
Inc., Eastman Kodak
22
<PAGE>
Company, Federal Express, Fidelity Investments, FMC Corporation, Ford Motor
Company, General Electric Capital, General Motors Acceptance Corp., The Goldman
Sachs Group, Inc., HEALTHSOUTH Corporation, Hoechst AG, International Business
Machines Corporation, Laidlaw, Inc., Legg Mason, Inc., Liberty Mutual Insurance,
The Limited, Inc., Marsh & McLennan Companies, Inc., Mellon Bank Corporation,
Merck & Co., Inc., MCI WorldCom, Inc., Merrill Lynch & Co., Inc., Mobile
Corporation, Morgan Stanley Dean Witter & Co., Motorola, Inc., Nestle S.A., New
York Life Insurance Company, Northern Telecom Ltd., NYNEX Corporation, Oracle
Corp., PepsiCo, Inc., Pitney Bowes, Inc., PNC Bank Corp., Raytheon Company, The
Reynolds and Reynolds Company, SBC Communications, Inc., Siemans Energy &
Automation, SmithKline Beecham plc, Solectron Corporation, Staples, Inc.,
Statoil Energy, Inc., United Healthcare Corporation, USF&G Corporation, Sprint
Corporation and Wells Fargo & Company.
Some of our properties are leased to not-for-profit entities that are
investment grade rated: two medical office buildings in Boston, Massachusetts
are principally leased to affiliates of Boston's Beth Israel Deaconess Medical
Center and Boston's Children's Medical Center; and Cedars Sinai Medical Center,
a not-for-profit hospital based in Los Angeles, is the largest tenant in two
medical office buildings and garages which we own that are attached to that
hospital.
Other Public Company Tenants. We also lease to the following publicly owned
tenants or their subsidiaries: Advanced Micro Devices, Inc., The Advest Group,
Inc., Alliance Pharmaceutical Corp., America West Holdings Corporation, Cisco
Systems, Inc., Columbia/HCA Healthcare Corporation, Corvas International, Inc.,
CytoTherapeutics, Inc., Danka Business Systems plc, Focal, Inc., General
Dynamics Corporation, Grubb & Ellis Company, In Focus Systems, Inc., L-3
Communications Corporation, Laboratory Corp. of America Holdings, Manpower Inc.,
MedPartners, Inc., National Instruments Corporation, NCO Group, Inc., Neurocrine
Biosciences Inc., Nextel Communications, Inc., Ohio Casualty Corporation,
Omnicare, Inc., Owens & Minor, Inc., Paychex, Inc., PSW Technologies, Inc.,
Silicon Graphics, Inc., Smiths Industries plc, Steelcase, Inc., Sun
Microsystems, Inc., Unilab Corporation and Winstar Communications, Inc. Some of
these public companies are generally considered strong credit tenants but do not
have credit ratings because they do not have outstanding debt.
Other Tenants. HRPT's other tenants include over 500 privately owned
businesses. Many of these tenants are law firms, accounting firms and other
professional service businesses which are not publicly owned or investment grade
rated, but which are often considered investment quality in the real estate
industry.
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<PAGE>
HRPT Lease Expirations
HRPT generally prefers to enter into longer term leases with periodic rent
adjustments rather than short term or fixed rate leases. The following table
sets forth the percentage of our annual office rent and occupied square feet
represented by leases that expire in the years indicated.
<TABLE>
<CAPTION>
Annual Office Percentage of
Rent(1) Percentage of Occupied Occupied
Year (000s) Office Rent Square Feet(2) Square Feet
---- ---- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1999 $ 9,964 3.0% 327,405 2.1%
2000 21,049 6.3% 847,068 5.4%
2001 40,829 12.3% 1,603,239 10.1%
2002 24,276 7.3% 988,448 6.2%
2003 40,485 12.2% 1,630,370 10.3%
2004 30,815 9.2% 1,278,915 8.1%
2005 30,078 9.0% 1,539,818 9.7%
2006 21,739 6.5% 951,665 6.0%
2007 22,237 6.7% 1,407,060 8.9%
2008 7,373 2.2% 307,123 1.9%
2009 and thereafter 84,361 25.3% 4,947,408 31.3%
--------- ----- ---------- -----
Totals $333,206 100.0% 15,828,519 100.0%
========= ===== ========== =====
<FN>
(1) Annual office rent represents May 1999 rent annualized. About 70% of our office rent
is gross rent; 9% of our office rent is net rent; most of our Government leases
require modified gross rent. Accordingly, the rent shown in this table is not
necessarily indicative of contributions to our net operating income.
(2) Represents square feet occupied as of May 31, 1999. This 15.8 million square feet of
occupied space accounts for 97% of our total office space available for rent.
</FN>
</TABLE>
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HRPT Management
After the spin-off, the trustees and executive officers of HRPT will be as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Barry M. Portnoy................... 53 Managing Trustee (term will expire in 2002)
Gerard M. Martin................... 64 Managing Trustee (term will expire in 2000)
Rev. Justinian Manning, C.P........ 73 Independent Trustee (term will expire in 2000)
Patrick F. Donelan................. 57 Independent Trustee (term will expire in 2001)
Vacancy............................ Independent Trustee (term will expire in 2002)
John A. Mannix..................... 43 President and Chief Operating Officer
John Popeo......................... 39 Treasurer, Chief Financial Officer and Secretary
David M. Lepore.................... 38 Senior Vice President
</TABLE>
Barry M. Portnoy has been a managing trustee of both HRPT and Hospitality
Properties since their organization in 1986 and 1995, respectively. Mr. Portnoy
is also a Director and 50% owner of Reit Management. Mr. Portnoy has been
actively involved in real estate and real estate finance activities as an
attorney, investor and manager for over 20 years. Mr. Portnoy was a partner in
the law firm of Sullivan & Worcester LLP, Boston, Massachusetts from 1978
through March 31, 1997, and he served as Chairman of that firm from 1994 through
March 1997.
Gerard M. Martin has been a managing trustee of both HRPT and Hospitality
Properties since their organization in 1986 and 1995, respectively. Mr. Martin
is also a Director and 50% owner of Reit Management. Mr. Martin has been active
in the real estate and senior housing industries as a developer, owner and
manager for approximately 30 years. During the past five years, Mr. Martin's
principal employment has been as a managing trustee of HRPT and Hospitality
Properties.
The Reverend Justinian Manning, C.P. has been, since September 1990, the
pastor of St. Gabriel's parish in Brighton, Massachusetts. He is also on the
Board of Directors of Charlesview, a low and moderate income housing program. He
is past Treasurer and a former Director of St. Paul's Benevolent, Educational
and Missionary Institute, a New Jersey corporation, which oversees foundations
in various states and the Institute's Overseas Missions. He was formerly on the
Board of Directors of St. Paul's Monastery Manor in Pittsburgh, Pennsylvania, a
congregate housing facility. He belonged to the Provincial Council of the
Passionist Provincialate and is the former Director of Consolidation for the
Community.
Patrick F. Donelan has been since 1998 a Director of Dresdner Kleinwort
Benson, and since 1996 an Executive Vice President of Dresdner Kleinwort Benson
North America LLC, a New York based bank, which is a subsidiary of Dresdner Bank
AG of Germany. Prior to 1996 Mr. Donelan was Chairman of Kleinwort Benson North
America, Inc., a subsidiary of Kleinwort Benson Ltd. of England, which was
acquired by Dresdner Bank AG in 1995.
Vacancy. Currently our third independent trustee is Dr. Bruce Gans. Upon
completion of this spin-off Dr. Gans will resign from HRPT and be elected an
independent trustee of Senior Housing. We intend to elect a third independent
trustee after Dr. Gans resigns, but we have not yet selected anyone to fill this
position.
John A. Mannix will become our President and Chief Operating Officer upon
completion of the spin-off. Mr. Mannix has served as our Executive Vice
President since May 1998. Mr. Mannix has been a Vice President of our investment
advisor, Reit Management, and its affiliates since 1989. Mr. Mannix is a member
of the Urban Land Institute.
John Popeo will become our Treasurer, Chief Financial Officer and Secretary
upon completion of the spin-off. Mr. Popeo has been the Treasurer and Chief
Financial Officer of Reit Management since 1997. Prior to 1997, he was employed
by The Beacon Companies from 1988 through 1992 and as Vice President and
Controller from 1996 through 1997. From 1992 through 1996 he was employed by
First Winthrop Corp. as
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<PAGE>
Vice President and Controller. Mr. Popeo has held various positions in the real
estate industry from 1985 through 1988, prior to which he was employed by the
public accounting firm of Laventhol and Horwath. Mr. Popeo is a certified public
accountant.
David M. Lepore is our Senior Vice President. Mr. Lepore is responsible for
building operations, leasing and acquisition diligence for our properties. Mr.
Lepore has been employed in various capacities by our investment advisor, Reit
Management, since 1992. Prior to 1992 he was employed by The Beacon Companies.
Mr. Lepore is a member of Building Owners and Managers Association and is a
certified Real Property Administrator.
Additional Information About HRPT
If you would like more information about HRPT than is included in this
prospectus, you should study the public information which we have filed with the
SEC.
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<PAGE>
INFORMATION ABOUT SENIOR HOUSING PROPERTIES TRUST
General
Senior Housing is a REIT organized under Maryland law to acquire, own and
lease senior apartments, congregate communities, assisted living properties and
nursing homes. Senior Housing owns 93 properties which have 13,571 units and are
leased to nine different tenants.
Growth Strategy
The population of the United States is aging. Senior Housing believes that
this demographic fact will increase the demand for existing senior apartments,
congregate communities, assisted living properties and nursing homes and
encourage development of new properties. Senior Housing's basic business plan is
to profit from the increasing demand in two ways. First, Senior Housing intends
to purchase additional properties and lease them at initial rents that are
greater than its costs of acquisition capital. Second, Senior Housing intends to
structure leases that provide for periodic rental increases based in part upon
gross operating revenue increases at its properties.
A primary purpose of the spin-off is to form a new REIT with a strong core
of senior housing real estate and a management team dedicated to take advantage
of present market conditions. To facilitate these efforts two senior officers of
Senior Housing's investment advisor will devote substantially all of their
business time to growing Senior Housing's business. David J. Hegarty is
currently the President and Chief Operating Officer of both Reit Management and
HRPT. Ajay Saini is currently a Vice President of Reit Management and Treasurer
and Chief Financial Officer of HRPT. Upon completion of the spin-off, Messrs.
Hegarty and Saini will resign their positions at HRPT and assume similar
positions at Senior Housing. Other personnel of Reit Management including Senior
Housing's managing trustees, Messrs. Portnoy and Martin, will also devote a
significant part of their time to assist in Senior Housing's growth efforts.
Senior Housing believes that current market conditions make a focus on
senior housing investments appropriate at this time for the following reasons:
o A large number of new properties developed by start up assisted living
companies during the past few years have been completed and are now
available for investment with limited start up risks.
o The current shortage of debt and equity capital for real estate
investments associated with healthcare has reduced the financing
options available to all senior housing property owners and limited the
amount of new development activities being undertaken.
o The combination of the foregoing circumstances has made prices of
senior housing properties, especially nursing homes, more attractive
than they have been during the past three years.
Senior Housing will use bank loans initially to fund its acquisitions.
Periodically, Senior Housing will repay the bank loans with long term debt or
equity issuances. For more information about Senior Housing's bank credit
facility, see "Senior Housing Policies -- Financing Policies" on page 58 of this
prospectus.
History and Management
Senior Housing is currently a 100% owned subsidiary of HRPT. There are 26
million shares of Senior Housing outstanding. As part of the spin-off HRPT will
distribute 13.2 million Senior Housing shares to HRPT's shareholders on the
basis of one Senior Housing share for every 10 HRPT shares owned on the record
date of August ___, 1999. After the spin-off Senior Housing will be a separate
public company, 51% owned by the public and 49% owned by HRPT, and Senior
Housing's shares will trade on the NYSE. For more information about the
formation of Senior Housing, see "The Spin-Off" on page 16 of this prospectus.
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<PAGE>
Senior Housing's operations will be conducted by its investment advisor.
The investment advisor has approximately 180 full time employees, including a
headquarters management staff, four regional offices and other personnel located
throughout the United States. Based upon 13 years of investing and managing
senior housing real estate through HRPT and four years of operating Hospitality
Properties, Reit Management and its principals have experience in managing REITs
to produce increasing distributions and have extensive contacts in the senior
housing industry. Senior Housing believes that this experience and these
contacts will allow Senior Housing to keep abreast of industry developments and
learn of business opportunities as they occur.
The principals of Reit Management, Barry M. Portnoy and Gerard M. Martin,
founded HRPT in 1986 as a public company with $63 million invested in seven
healthcare properties leased to two tenants. Since 1986, under the direction of
Messrs. Portnoy and Martin and other personnel of Reit Management, HRPT has made
50 consecutive quarterly distributions and has increased its distribution rate
13 times. In 1995 Reit Management organized Hospitality Properties, a REIT that
invests in hotel properties. At its initial public offering in August 1995,
Hospitality Properties had $329 million invested in 37 hotels leased to one
tenant. Since it was founded in 1995, Hospitality Properties has raised
approximately $2 billion of capital, paid 15 consecutive quarterly distributions
and increased its distribution rate ten times. You should note that the past
success of Reit Management and its affiliate in managing HRPT and Hospitality
Properties is not necessarily indicative of what Senior Housing's performance
will be. In particular, HRPT and Hospitality Properties have operated in market
conditions which are substantially different from the market conditions in which
Senior Housing will operate.
Senior Housing Real Estate Market
Demand Growth. Senior Housing believes that three important demographic
trends will increase demand for senior apartments, congregate communities,
assisted living properties and nursing homes for the foreseeable future:
o First, the U.S. Census Bureau has projected that the U.S. population over
age 85 will increase from 3.1 million in 1990, to 4.3 million in 2000, to
5.7 million in 2010 and to 6.5 million in 2020. As people age they have an
increasing need for the type of assistance with daily living activities
that is provided in senior apartments, congregate communities, assisted
living properties and nursing homes. This is because old age is usually
accompanied by various physical disabilities and because the aging process
sometimes is accompanied by Alzheimer's disease and other forms of dementia
that require specialized, secure housing.
o Second, societal changes during the past 35 years in the U.S. have made
senior housing more often required than in historical periods. The
increasing percentage of women working away from their homes, the high
divorce rate and societal mobility have all combined to make traditional
arrangements of family care for aging relatives less available. These
social trends show no sign of reversal in the foreseeable future.
o Third, economic factors appear to encourage demand for specialized senior
housing properties. Although some people extol the benefits of homemaker
services and home healthcare, it is generally more economically efficient
to congregate the elderly in properties with specialized services than to
bring those services to diverse locations. Similarly, the cost containment
pressure to reduce lengths of stay for the elderly in high cost specialized
properties such as hospitals has increased the need for intermediate care
properties.
Payment Issues. Since the introduction of the Medicare and Medicaid
programs in the late 1960s, governments have become the principal payment source
for senior housing properties in which healthcare services are provided, such as
nursing homes. In the past few years a number of federal and state laws have
been enacted to reduce the growth of Medicare and Medicaid expenditures. These
laws have made it less profitable to own and operate senior housing properties
in which healthcare services are provided.
Senior Housing believes that the net effect of the increasing demand for
senior housing properties and the payment limitations in the Medicare and
Medicaid programs may make it increasingly profitable to own and
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<PAGE>
operate senior housing properties which are able to attract residents who use
private resources to pay occupancy costs and increasingly less profitable to own
and operate senior housing properties which depend upon the Medicare and
Medicaid programs.
Types of Properties
Senior Housing expects to invest in properties which offer four types of
senior housing accommodations, including some properties that combine more than
one type in a single building or campus.
Senior Apartments. Senior apartments are marketed to residents who are
generally capable of caring for themselves. Residence is generally restricted on
the basis of age. Purpose built properties may have special function rooms,
concierge services, high levels of security and centralized call buttons for
emergency use. Tenants at these properties who need healthcare or assistance
with the activities of daily living are expected to contract independently for
those services with homemakers or home healthcare companies. According to a 1997
study by PricewaterhouseCoopers LLP, charges paid by residents in senior
apartments typically range from $600 to $1,200 per month. At the senior
apartments that Senior Housing owns which are leased to Integrated Health
Services, the average charge in 1998 was $630 per month.
Congregate Communities. Congregate communities also provide a high level of
privacy to residents and require residents to be capable of relatively high
degrees of independence. Unlike a senior apartment property, a congregate
community usually bundles several services as part of a regular monthly
charge--for example, one or two meals per day in a central dining room, weekly
maid service or a social director. Additional services are generally available
from staff employees on a fee-for-service charge basis. In some congregate
communities, separate parts of the property are dedicated to assisted living or
nursing services. According to the 1997 PricewaterhouseCoopers LLP study,
charges at congregate communities typically range from $1,400 to $2,000 per
month. Luxury properties of this type similar to those that Senior Housing owns
and leases to Marriott and Brookdale often charge rates up to $6,000 per month.
Assisted Living Properties. Assisted living properties are typically
comprised of one bedroom suites which include private bathrooms and efficiency
kitchens. Services provided usually include three meals per day in a central
dining room, daily housekeeping, laundry, medical reminders and 24 hour
availability of assistance with the activities of daily living such as dressing
and bathing. Professional nursing and healthcare services are usually available
at the facility on call or at regularly scheduled times. Since the early 1990s
there has been an explosive growth in the number of small public companies
developing purpose built assisted living properties. Many of those properties
have recently been completed and are now fully occupied and appropriate
investments for Senior Housing. According to the 1997 PricewaterhouseCoopers LLP
study, residents in assisted living properties typically pay $2,400 to $3,000
per month. Luxury properties in this category such as those which Senior Housing
owns and leases to Marriott often charge as much as $3,400 per month.
Nursing Homes. Nursing homes generally provide extensive nursing and
healthcare services similar to those available in hospitals, without the high
costs associated with operating theaters, emergency rooms or intensive care
units. A typical purpose built nursing home includes mostly two-bed rooms with a
separate toilet in each room and shared dining and bathing facilities. Some
private rooms are often available for those residents who can afford to pay
higher rates or for patients whose medical conditions require segregation.
Nursing homes are generally staffed by licensed nursing professionals 24 hours
per day. According to the 1997 PricewaterhouseCoopers LLP study, charges at
nursing homes typically are $2,800 to $4,000 per month. At the nursing homes
that Senior Housing owns and leases to Mariner Post-Acute Health Network and
Integrated Health Services, the average charge in 1998 was $3,900 per month.
During the past few years nursing home owners and operators have faced two
significant business challenges. First, the rapid expansion of the assisted
living industry which started in the early 1990s has attracted a number of
residents away from nursing homes. This was especially significant because the
residents who elected assisted living facilities had often previously been the
most profitable residents in the nursing homes--residents who required a lesser
amount of care and who were able to pay higher private rates rather
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<PAGE>
than government rates. According to a 1998 study by SMG Marketing Group, Inc.,
the average occupancy of U.S. nursing homes declined from 93% in 1994 to about
88% in 1997.
The second major challenge arose as a result of Medicare and Medicaid cost
containment laws beginning in 1994, particularly 1997 federal legislation that
required the Medicare program to implement a prospective payment program for
various subacute services provided in skilled nursing homes. Implementation of
this Medicare prospective payment program began on July 1, 1998. Prior to the
prospective payment program Medicare paid nursing home operators based upon
audited costs for services provided. The prospective payment system sets
Medicare rates based upon government estimated costs of treating specified
medical conditions. Although it is possible that a nursing home may increase its
profit if it is able to provide quality services at below average costs, Senior
Housing believes that the effect of the new Medicare rate setting methodology
will be to reduce the profitability of Medicare services in nursing homes. This
belief is based on similar Medicare changes that were implemented for hospitals
during the 1980s. Several of Senior Housing's tenants have recently reported
significant operating losses, particularly Mariner Post-Acute Network, Inc.,
Integrated Health Services, Inc. and Genesis Health Ventures, Inc.
Starting in 1995 HRPT formed the opinion that the market value of nursing
home properties did not adequately reflect the negative impact of then current
and emerging market conditions. For this reason beginning in 1996 HRPT began to
limit its nursing home purchases and to dispose of nursing home properties which
were dependent upon subacute services paid by Medicare. Senior Housing now
believes that the market is in the process of taking account of these factors
and adjusting the prices of nursing home properties. Senior Housing also
believes that the demographic factors described above combined with the adjusted
pricing levels may make nursing home properties attractive investments at this
time. Senior Housing expects to focus its future assisted living and nursing
home investments in facilities that have a high percentage of non-government
revenues. When Senior Housing invests in assisted-living properties and nursing
homes that are dependent upon government revenues it will attempt to set the
purchase prices and rents at levels which are securely covered by existing and
projected cash flows from its tenants' operations.
Government Regulations and Rate Setting
Senior Apartments. Generally, government programs do not pay for housing in
senior apartments. Rents are paid from the residents' private resources.
Accordingly, the government regulations that apply to these types of properties
are generally limited to zoning, building and fire codes, Americans with
Disabilities Act requirements and other life safety type regulations applicable
to residential real estate. Government rent subsidies and government assisted
development financing for low income senior housing are exceptions to these
general statements. The development and operation of subsidized senior housing
properties are subject to numerous governmental regulations. While it is
possible that Senior Housing may purchase and lease some subsidized senior
apartment properties, it does not expect these investments to be a major part of
its future business, and today it owns no properties where rent subsidies are
applicable.
Congregate Communities. Senior Housing understands that generally
government benefits are not available to congregate communities and the resident
charges in these properties are paid from private resources. However, a number
of Federal Supplemental Security Income program benefits pay housing costs for
elderly or disabled residents to live in these types of residential facilities.
The Social Security Act requires states to certify that they will establish and
enforce standards for any category of group living arrangement in which a
significant number of supplemental security income residents reside or are
likely to reside. Categories of living arrangements which may be subject to
these state standards include congregate facilities and assisted living
properties. Because congregate communities usually offer common dining
facilities, in many locations they are required to obtain licenses applicable to
food service establishments in addition to complying with land use and life
safety requirements. In many states, congregate communities are licensed by
state health departments, social service agencies, or offices on aging with
jurisdiction over group residential facilities for seniors. To the extent that
congregate communities maintain units in which assisted living or nursing
services are provided, these units are subject to applicable state regulations.
In some states, insurance or consumer
30
<PAGE>
protection agencies regulate congregate communities in which residents pay
entrance fees or prepay other costs.
Assisted Living. According to the National Academy for State Health Policy,
by early 1999, 32 states provided Medicaid payments for residents in some
assisted living properties under waivers granted by the Health Care Finance
Administration of the U.S. Department of Health and Human Services or under
Medicaid state plans and three other states are planning to do so. Because rates
paid to assisted living property operators are lower than rates paid to nursing
home operators some states use this waiver program as a means of lowering the
cost of services for residents who may not need the higher intensity of medical
care provided in nursing homes. States that administer Medicaid programs for
assisted living facilities are responsible for monitoring the services at and
physical conditions of the participating properties. Different states apply
different standards in these matters, but generally Senior Housing believes
these monitoring processes are similar to the concerned states' inspection
processes for nursing homes.
Because of the large number of states using Medicaid to purchase services
at assisted living properties, it is not surprising that a majority of states
have adopted licensing standards applicable to assisted living facilities.
According to a 1998 study by the National Academy for State Health Policy, 33
states had taken steps to implement assisted living policies as of June 1998,
and 11 others had instituted processes to study the issue. According to the
National Conference of State Legislatures, 32 states planned to consider
legislation related to assisted living during 1999. State regulatory models
vary; there is no national consensus on a definition of assisted living, and no
uniform approach by the states to regulating assisted living facilities. Some
state licensing standards apply to assisted living facilities whether or not
they accept Medicaid funding. Moreover, the 1998 National Academy for State
Health Policy study referenced above found that several states require
certificates of need from state health planning authorities before new assisted
living properties may be developed. Also, the study found that three states have
adopted moratoria on the development of new assisted living facilities. Based on
Senior Housing's analysis of current economic and regulatory trends, it believes
that assisted living properties that become dependent upon Medicaid payments for
a majority of their revenues will decline in value because Medicaid rates will
fail to keep up with increasing costs. For the same reason, Senior Housing also
believes that assisted living properties located in states that adopt
certificate of need requirements or otherwise restrict the development of new
assisted living properties will increase in value because these limitations upon
development will help ensure higher occupancy and higher non-governmental rates.
Accordingly, Senior Housing intends to focus new investments in assisted living
properties that are not overly dependent upon governmental revenues and that are
in areas where there are barriers to competition created by certificate of need
laws or otherwise.
One federal government study was recently completed and another is
currently underway to provide background information and make recommendations
regarding the regulation of, and the possibility of increased governmental
funding for, the assisted living industry. In April 1999, the General Accounting
Office issued a report to the Senate Special Committee on Aging and the
Committee held hearings on consumer protection and quality of care issues in
assisted living facilities. The GAO studied assisted living facilities in four
states and found a variety of residential settings serving a wide range of
resident health and care needs. The GAO found that providers often give
consumers insufficient information to determine whether a particular facility
can meet their needs and that state licensing and oversight approaches vary
widely. The GAO anticipates that as the states increase the use of Medicaid to
pay for assisted living, federal financing will likewise grow, and these trends
will focus more public attention on the place of assisted living in the
continuum of long-term care and upon state standards and compliance approaches.
The second study is being conducted by the Department of Health and Human
Services' Assistant Secretary for Planning and Evaluation and is expected to
touch upon all aspects of the assisted living industry including quality of care
and financing. The 1998 National Academy for State Health Policy study
referenced above and an April 1999 report on a national survey of assisted
living facilities are part of this second study, which is expected to be
completed during 1999. Senior Housing cannot predict whether these studies will
result in governmental policy changes or new legislation, or what impact any
changes may have. Based upon its analysis of current economic and regulatory
trends, Senior Housing does not believe that the federal government is likely to
have a material impact upon the current regulatory environment in which the
assisted living industry operates unless it also undertakes
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<PAGE>
expanded funding obligations; and Senior Housing does not believe a materially
increased financial commitment from the federal government is presently likely.
However, it does anticipate that assisted living facilities will increasingly be
licensed and regulated by the various states, and that with the absence of
federal standards, the states' policies will continue to vary widely.
Nursing Homes. About 67% of all nursing home revenues in 1997 came from
government Medicare and Medicaid programs. Nursing homes are also among the most
highly regulated businesses in the country. The federal and state governments
regularly monitor the quality of care provided at nursing homes and regularly
inspect the physical condition of nursing home properties. These periodic
inspections and occasional changes in life safety and physical plant
requirements sometimes require nursing home owners to spend money for capital
improvements. These mandated capital improvements have in the past usually
resulted in Medicare and Medicaid rate adjustments, albeit on the basis of
amortization of expenditures over extended useful lives of the improvements.
However, under the new Medicare payment system capital costs are part of the
prospective rate and will not be facility specific. Other recent legislative and
regulatory actions with respect to state Medicaid rates and the Medicare
prospective payment system which began being phased in during 1998 are limiting
the reimbursement levels for some nursing home and other eldercare services. At
the same time federal enforcement and oversight of nursing homes is increasing,
thereby making licensing and certification of these facilities more rigorous.
These actions have adversely affected the revenues and increased the expenses of
many nursing home operators, including several of Senior Housing's tenants.
The federal Health Care Financing Administration, HCFA, has begun to
implement an initiative to increase the effectiveness of Medicare/Medicaid
nursing facility survey and enforcement activities. HCFA's initiative follows
its July 1998 report to Congress on the effectiveness of the survey and
enforcement system, several March 1999 reports by HCFA's Office of Inspector
General concerning quality of care in nursing homes, a July 1998 General
Accounting Office investigation which found inadequate care in a significant
proportion of California nursing homes, a March 1999 GAO report which
recommended that HCFA and the states strengthen their compliance and enforcement
practices to better ensure that nursing homes provide adequate care, and July
1998 and March 1999 hearings by the Senate Special Committee on Aging on these
issues. HCFA plans to focus survey and enforcement efforts at nursing homes with
repeat violations of Medicare/Medicaid standards, including chain-operated
facilities with patterns of noncompliance. HCFA also plans to require state
agencies to use enforcement sanctions and remedies more promptly and effectively
when substandard care is identified. HCFA is increasing its oversight of state
survey agencies. In addition HCFA has adopted new regulations expanding federal
and state authority to impose civil money penalties in instances of
noncompliance. Medicare/Medicaid survey results for each nursing home are being
posted on the internet. Federal efforts to target fraud and abuse by Medicare
and Medicaid providers have also increased. An adverse determination concerning
any tenant's license or eligibility for Medicare or Medicaid reimbursement could
restrict its ability to pay rent.
Most states also limit the number of nursing homes by requiring developers
to obtain certificates of need before new facilities may be built. Even in those
states such as California and Texas that have eliminated certificate of need
laws, the state health authorities usually have retained other means of limiting
new nursing home development. Examples of these other means are the use of
licensing laws or limitations upon participation in the state Medicaid program.
Senior Housing believes that these governmental limitations generally make
nursing home properties more valuable by extending their useful lives and
limiting competition.
Competition
Several REITs which own apartments have focused some of their investments
on senior apartments. In addition, there are several publicly owned REITs that
today focus upon investing in healthcare real estate. Also, some asset based
finance companies and banks have marketing programs to provide sale leaseback
and mortgage financing for these types of properties. Some of these competitors
have resources that are greater than those which Senior Housing has and some
have a lower cost of capital. For example, Pacific Gulf Properties, Inc. is an
established REIT with $876 million in total assets that develops and owns senior
housing properties. Healthcare Property Investors, Inc., with assets of $1.4
billion, and Nationwide Health Properties,
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<PAGE>
Inc., with assets of $1.4 billion, both emphasize investments in assisted living
properties and both have good access to debt capital because of their investment
grade ratings. Also, GMAC, a finance affiliate of General Motors Corporation,
has a group of personnel that focus upon making nursing home mortgage loans.
Nonetheless, Senior Housing believes that it will be able to successfully
compete for new investments for at least five reasons:
First, Senior Housing will commence business with a large and diversified
portfolio of properties that are subject to long term leases.
Second, unlike most of its competitors, Senior Housing will be exclusively
focused on senior housing properties. Senior Housing does not intend to invest
in medical office buildings or any properties which do not benefit from the
projected aging of the American population.
Third, current market conditions have created an opportunity for a new
market entrant to invest in senior housing properties. A large number of
recently developed properties are currently available for purchase. Concerns
about the new Medicare prospective payment system have limited capital for new
development and have reduced financing alternatives available to some of Senior
Housing's competitors and prospective tenants. These same concerns have caused
nursing homes to be revalued so that purchase prices and rents can be set at
levels which are well covered by current and projected property operations.
Fourth, Senior Housing's proposed methods of doing business are intended to
be attractive to prospective sellers and tenants. Senior Housing intends to do
business with sellers and tenants who are unaffiliated with it and to retain the
financial flexibility to work with tenants to meet their business requirements.
Some of Senior Housing's REIT competitors are under common control with large
tenants which compete with other prospective tenants. This fact often makes
sellers and tenants reluctant to disclose to their competitors the operating
information necessary for a successful transaction. Some of the finance
companies that target healthcare property investments and some healthcare REITs
that emphasize mortgage lending depend upon the asset backed bond markets for
funding. Asset backed financing has historically afforded borrowers and tenants
limited flexibility to adjust mortgage or lease terms to accommodate changes in
the tenants' businesses during long term leases. Although Senior Housing may
borrow on a secured basis, it expects to retain title to all of its property
investments in order to be able to work with tenants to meet their business
requirements.
Finally, and perhaps most importantly, Senior Housing's management team has
experience and contacts in the senior housing real estate market based upon
their 13 year history of acquiring and managing senior housing investments
through HRPT.
33
<PAGE>
SENIOR HOUSING DISTRIBUTION POLICY
After completion of the spin-off, Senior Housing intends to make regular
quarterly distributions to shareholders. The initial distribution for the
quarter ended September 30, 1999 will be $0.60 per share. Senior Housing intends
to maintain this rate for one year following the spin-off unless its operating
results differ materially from what it now expects. Senior Housing expects that
this distribution rate will exceed its minimum distribution requirement to
maintain REIT status and will exceed its earnings. Distributions in excess of
earnings represent return of capital for federal income tax purposes. Assuming
that its distribution rate remains unchanged for the next year, and that its
earnings for this period are as estimated in the table below, Senior Housing
estimates that approximately 15% of its annual distributions in its first year
of operations will be a return of capital. The percent of annual distributions
which will be a return of capital for tax purposes will vary from tax year to
tax year. Under current law, distributions in excess of earnings which are a
return of capital are not taxable but these amounts reduce a shareholder's basis
in his shares, and, accordingly, increase taxable gains when shares are sold.
For a more detailed discussion of the tax consequences of Senior Housing's
distributions, see "Federal Income Tax and ERISA Consequences" beginning on page
69 of this prospectus.
The initial distribution rate was set based upon Senior Housing's estimate
of the cash available for distribution and FFO it believes it will realize from
its existing properties during the year following the spin-off. All future
distributions will be set by its board of trustees. When deciding the amount of
future distributions Senior Housing expects its board of trustees will primarily
consider the actual cash available for distribution and FFO realized and
projections of future cash available for distribution and FFO. However, in
making these decisions the board may consider capital requirements, the legal
requirements that REITs distribute at least 95% of net taxable earnings and
other factors the board deems relevant from time to time. The amounts of future
cash available for distribution, FFO and distributions are not now known or
knowable and they cannot be assured.
The following table sets forth Senior Housing's calculation of estimated
earnings, FFO and cash available for distribution for the twelve months
following the spin-off. In making these estimates Senior Housing has started its
calculation with historical audited operating results and made adjustments to
reflect known events which have occurred and events which it expects to occur at
or shortly after the completion of the spin-off. In this calculation no effect
is shown from changes in working capital, i.e., changes in current assets or
current liabilities, because these changes are not expected to be material.
Similarly, except for the $200 million to be borrowed under Senior Housing's
bank credit facility, no effect is shown from possible future financing or
investing activities because these activities cannot now be estimated. In
considering this table you should recognize that FFO and cash available for
distribution may not be as good a measure of operating performance as earnings
determined according to generally accepted accounting principles, or GAAP.
Similarly, FFO and cash available for distribution are not intended to
substitute for cash flow determined according to GAAP. Cash available for
distribution and FFO are presented because Senior Housing believes they will be
a basis used by investors to compare Senior Housing's operating results with
those of other REITs, because they were used to set the initial distribution
rate and because Senior Housing expects they will be important considerations
used by Senior Housing's board of trustees to determine future distributions.
34
<PAGE>
<TABLE>
<CAPTION>
Calculation of Estimated Earnings, FFO and Cash Available
for Distribution for the Twelve Months following the Spin-Off
(000s except per share amounts and percentages)
Pro Forma
---------
<S> <C>
Net income for the year ended December 31, 1998 $53,254
Plus: net income for the three months ended March 31, 1999 12,572
Less: net income for the three months ended March 31, 1998 (12,873)
--------
Net income for the 12 months ended March 31, 1999 52,953
Plus adjusted real estate depreciation for the 12 months following completion of the
spin-off (1) 19,480
--------
FFO for the 12 months following completion of the spin-off (2) 72,433
Net effect of non-cash rents (3) (3,076)
--------
Estimated cash flow from operating activities for the 12 months following completion of
the spin-off (4) $69,357
=======
Estimated cash available for distribution for the 12 months following completion of the spin-off $69,357
=======
Estimated cash distributions for the 12 months following completion of the spin-off (5) $62,400
=======
Initial annual distribution per share (5) $2.40
=======
Percentage of distributions in excess of estimated pro forma net income for the 12 months
following completion of the spin-off, i.e., return of capital 15.1%
=======
Distribution payout ratio of estimated cash available for distribution for the 12 months following
completion of the spin-off (6) 90.0%
=======
- ------------------
<FN>
(1) Pro forma real estate depreciation for the year ended December 31, 1998, of $18.5 million plus pro forma
real estate depreciation for the three months ended March 31, 1999, of $5.6 million minus pro forma real
estate depreciation for the three months ended March 31, 1998, of $4.6 million.
(2) Funds from operations or "FFO," as defined in the white paper on funds from operations which was approved
by the Board of Governors of NAREIT in March 1995, is net income computed in accordance with GAAP, before
gains or losses from sales of properties and extraordinary items, plus depreciation and amortization and
after adjustment for unconsolidated partnerships and joint ventures. Senior Housing considers FFO to be
an appropriate measure of performance for an equity REIT, along with cash flow from operating activities,
financing activities and investing activities, because it provides investors with an indication of an
equity REIT's ability to incur and service debt, make capital expenditures, pay distributions and fund
other cash needs. Senior Housing computes FFO in accordance with the standards established by NAREIT
which may not be comparable to FFO reported by other REITs that do not define the term in accordance with
the current NAREIT definition or that interpret the current NAREIT definition differently. FFO does not
represent cash generated by operating activities in accordance with GAAP and should not be considered as
an alternative to net income, determined in accordance with GAAP, as an indication of financial
performance or the cash flow from operating activities, determined in accordance with GAAP, as a measure
of liquidity.
(3) Represents the difference between annual rental revenue calculated in accordance with GAAP and cash
amounts currently being paid by tenants.
(4) For purposes of this presentation there are assumed to be no significant sources or uses of cash for
investing and financing activities for the 12 months following completion of the spin-off.
(5) Based on a total of 26 million shares to be outstanding after the spin-off and assuming no additional
shares are issued and that the distribution rate remains unchanged.
(6) The distribution payout ratio of estimated pro forma FFO for the 12 months following completion of the
spin-off will be 86.1%.
</FN>
</TABLE>
35
<PAGE>
SENIOR HOUSING PROPERTIES
Senior Housing has investments totaling $770 million in 93 properties
located in 26 states:
[Graphic Omitted - Map of United States showing location of Senior Housing
properties by state]
<TABLE>
<CAPTION>
No. of Investment No. of Investment
State Properties (000s) State Properties (000s)
----- ---------- ------ ----- ---------- ------
<S> <C> <C> <C> <C> <C>
Arizona 6 $42,861 Missouri 2 $3,788
California 8 53,879 Nebraska 10 10,685
Colorado 8 34,348 New Jersey 1 13,007
Connecticut 6 53,762 New York 1 10,700
Florida 5 131,990 North Carolina 3 6,389
Georgia 4 12,308 Ohio 1 3,445
Illinois 2 98,742 Pennsylvania 1 15,598
Iowa 6 8,207 South Dakota 3 7,589
Kansas 1 1,320 Texas 1 12,410
Louisiana 1 18,940 Virginia 3 57,666
Maryland 1 33,080 Washington 2 19,542
Massachusetts 4 69,562 Wisconsin 8 33,904
Michigan 2 9,159 Wyoming 3 7,245
----- ---------
Total 93 $770,126
===== =========
</TABLE>
36
<PAGE>
The following table presents information about the 93 properties that
Senior Housing owns, grouped by tenant:
<TABLE>
<CAPTION>
Percent of
Revenues
from Sources
Annual other than Historical
Built/ Units/ Facility Medicare/ Investment
Location Property Type Renovated(1) Beds Occupancy(2) Revenues (2) Medicaid (2) at Cost (3)
-------- ------------- ----------- ------ ------------ ------------ ------------- -----------
(000s) (000s)
<S> <C> <C> <C> <C> <C> <C> <C>
Marriott International, Inc.
Scottsdale, AZ Assisted Living 1990 148 94% $5,135 100% $9,926
Sun City, AZ Assisted Living 1990 148 81% 3,697 100% 11,916
Laguna Hills, CA Congregate Care 1991 402 95% 14,334 97% 31,791
Boca Raton, FL Congregate Care 1999 347 84% 16,643 91% 44,836
Deerfield Beach, FL Congregate Care 1986 288 96% 7,371 100% 16,935
Fort Myers, FL Congregate Care 1987 463 96% 12,386 85% 23,905
Palm Harbor, FL Congregate Care 1992 319 95% 10,038 88% 33,863
Port St. Lucie, FL Assisted Living 1993 128 88% 4,758 86% 12,451
Arlington Heights, IL Congregate Care 1986 363 96% 13,491 95% 36,742
Silver Spring, MD Congregate Care 1992 351 92% 12,841 94% 33,080
Bellaire, TX Assisted Living 1991 145 94% 5,711 96% 12,410
Arlington, VA Congregate Care 1992 419 97% 12,353 99% 18,889
Charlottesville, VA Congregate Care 1991 315 94% 10,652 95% 29,829
Virginia Beach, VA Assisted Living 1990 114 100% 3,392 100% 8,948
------- ---------- ----------
3,950 93% 132,802 94% 325,521
Brookdale Living Communities, Inc.
Mesa, AZ Congregate Care 1985 185 96% 3,855 100% 14,800
Chicago, IL Congregate Care 1990 341 100% 11,359 100% 62,000
Brighton, NY Congregate Care 1988 103 80% 2,323 100% 10,700
Spokane, WA Congregate Care 1993 200 95% 3,828 100% 14,350
------- ---------- ----------
829 95% 21,365 100% 101,850
Mariner Post-Acute Network, Inc.
Phoenix, AZ Nursing Home 1984 127 87% 4,462 21% 3,185
Yuma, AZ Nursing Home 1984 128 86% 5,647 20% 2,326
Yuma, AZ Congregate Care 1984 65 61% 487 91% 708
Fresno, CA Nursing Home 1985 180 94% 7,723 7% 3,503
Lancaster, CA Nursing Home 1994 99 95% 4,234 32% 3,488
Newport Beach, CA Nursing Home 1994 167 84% 8,382 24% 4,128
Stockton, CA Nursing Home 1991 122 89% 6,580 26% 3,136
Tarzana, CA Nursing Home 1969 192 87% 8,715 23% 3,060
Thousand Oaks, CA Nursing Home 1970 124 97% 6,321 23% 3,454
Van Nuys, CA Nursing Home 1984 58 96% 2,389 27% 1,319
Lakewood, CO Nursing Home 1985 175 71% 6,153 23% 4,721
Littleton, CO Nursing Home 1965 230 85% 9,549 19% 5,576
Concord, NC Nursing Home 1990 110 92% 4,724 17% 2,216
Wilson, NC Nursing Home 1990 119 90% 4,358 27% 2,402
Winston-Salem, NC Nursing Home 1990 80 89% 3,290 50% 1,771
Huron, SD Nursing Home 1977 163 93% 5,279 29% 3,256
Huron, SD Congregate Care 1968 59 100% 678 100% 1,014
Sioux Falls, SD Nursing Home 1979 139 85% 4,112 14% 3,319
Brookfield, WI Nursing Home 1995 226 96% 12,573 20% 12,697
37
<PAGE>
<CAPTION>
Percent of
Revenues
from Sources
Annual other than Historical
Built/ Units/ Facility Medicare/ Investment
Location Property Type Renovated(1) Beds Occupancy(2) Revenues (2) Medicaid (2) at Cost (3)
-------- ------------- ----------- ------ ------------ ------------ ------------- -----------
(000s) (000s)
<S> <C> <C> <C> <C> <C> <C> <C>
Clintonville, WI Nursing Home 1965 78 74% $2,710 24% $1,761
Clintonville, WI Nursing Home 1969 109 83% 5,995 10% 1,747
Madison, WI Nursing Home 1987 73 66% 3,511 27% 1,887
Milwaukee, WI Nursing Home 1983 215 63% 5,823 13% 5,043
Milwaukee, WI Nursing Home 1997 102 60% 3,067 6% 1,601
Pewaukee, WI Nursing Home 1969 237 81% 8,180 18% 3,416
Waukesha, WI Nursing Home 1995 105 97% 5,447 27% 5,752
------- ---------- ----------
3,482 85% 140,389 22% 86,486
Integrated Health Services, Inc. (Lease No. 1)
Canon City, CO(4) Nursing Home/ 1984 157 73% 3,179 58% 6,520
Senior Apartments
Colorado Springs, CO Nursing Home 1996 132 65% 4,169 25% 5,481
Delta, CO Nursing Home 1978 100 64% 3,780 26% 3,737
Grand Junction, CO Nursing Home 1986 120 68% 3,582 26% 4,408
Grand Junction, CO Nursing Home 1995 82 95% 4,141 29% 3,905
College Park, GA Nursing Home 1985 100 95% 2,988 1% 3,025
Dublin, GA Nursing Home 1968 130 98% 3,699 6% 4,504
Glenwood, GA Nursing Home 1972 62 86% 1,827 9% 1,742
Marietta, GA Nursing Home 1973 109 93% 3,758 10% 3,037
Clarinda, IA Nursing Home 1968 117 64% 2,660 37% 1,823
Council Bluffs, IA Nursing Home 1963 62 96% 2,265 18% 1,217
Mediapolis, IA Nursing Home 1973 62 83% 2,357 43% 2,121
Pacific Junction, IA Nursing Home 1978 12 100% 665 0% 343
Winterset, IA (4) Nursing Home/ 1995 118 82% 2,710 63% 2,703
Senior Apartments
Ellinwood, KS Nursing Home 1972 59 81% 1,577 53% 1,320
Tarkio, MO Nursing Home 1996 95 65% 2,031 30% 2,455
Ainsworth, NE (5) Nursing Home 1995 50 89% 1,717 38% 448
Ashland, NE (5) Nursing Home 1996 101 88% 3,916 45% 1,863
Blue Hill, NE (5) Nursing Home 1996 81 53% 1,506 42% 1,127
Edgar, NE (5) Nursing Home 1995 54 85% 1,523 34% 139
Grand Island, NE Nursing Home 1996 80 71% 2,204 75% 1,934
Gretna, NE (5) Nursing Home 1995 62 86% 2,168 45% 946
Lyons, NE (5) Nursing Home 1974 84 72% 2,049 43% 816
Milford, NE (5) Nursing Home 1970 66 67% 1,881 35% 910
Sutherland, NE (5) Nursing Home 1995 62 85% 2,049 30% 1,278
Waverly, NE (5) Nursing Home 1995 50 86% 1,919 67% 1,224
Laramie, WY Nursing Home 1986 144 69% 4,595 29% 4,022
Worland, WY (4) Nursing Home/ 1996 99 87% 3,300 33% 3,223
Senior Apartments
------- ---------- ----------
2,450 78% 74,215 33% 66,271
38
<PAGE>
<CAPTION>
Percent of
Revenues
from Sources
Annual other than Historical
Built/ Units/ Facility Medicare/ Investment
Location Property Type Renovated(1) Beds Occupancy(2) Revenues (2) Medicaid (2) at Cost (3)
-------- ------------- ----------- ------ ------------ ------------ ------------- -----------
(000s) (000s)
<S> <C> <C> <C> <C> <C> <C> <C>
Integrated Health Services, Inc. (Lease No. 2)
Cheshire, CT (6) Nursing Home 1971 210 93% $8,912 25% $9,459
Waterbury, CT (6) Nursing Home 1974 180 92% 9,326 25% 10,941
New Haven, CT (6) Nursing Home 1971 195 91% 9,226 28% 17,870
Slidell, LA (7) Nursing Home 1989 118 69% 7,451 17% 18,940
Middleboro, MA Nursing Home 1987 124 93% 7,005 9% 17,523
Worcester, MA Nursing Home 1990 173 95% 11,409 2% 18,769
Boston, MA Nursing Home 1985 201 57% 10,740 4% 24,978
Hyannis, MA Nursing Home 1982 142 79% 6,100 10% 8,292
Howell, MI (7) Nursing Home 1985 189 67% 11,948 11% 4,969
Farmington, MI (7) Nursing Home 1991 153 88% 14,418 18% 4,190
Canonsburg, PA Nursing Home 1990 140 89% 12,124 32% 15,598
------- ---------- ----------
1,825 83% 108,659 17% 151,529
Genesis Health Ventures, Inc.
Burlington, NJ Nursing Home 1994 150 96% 9,428 32% 13,007
------- ---------- ----------
150 96% 9,428 32% 13,007
Private Company Tenants
St. Joseph, MO Nursing Home 1976 120 61% 2,884 20% 1,333
Seattle, WA Nursing Home 1964 103 62% 4,677 14% 5,192
Waterford, CT Nursing Home 1989 148 78% 6,671 1% 5,253
Killingly, CT Nursing Home 1989 190 94% 11,611 15% 6,060
Willimantic, CT Nursing Home 1989 124 95% 8,131 16% 4,179
Grove City, OH Nursing Home 1965 200 87% 8,299 23% 3,445
------- ---------- ----------
885 82% 42,273 15% 25,462
------- ---------- ----------
Total Portfolio 13,571 86% $529,131 43% $770,126
======= ========== ==========
- --------------
<FN>
(1) The dates presented are the later of the date of original construction or the date of substantial renovation as
evidenced by capital expenditures in excess of 20% of HRPT's historical investment.
(2) The occupancy and operating information presented in this table is based upon the most recent quarterly information
available to Senior Housing from these tenants. The annual facility revenues are this quarterly data multiplied by four.
(3) Represents HRPT's historical costs before depreciation.
(4) Two properties are located at each of these locations.
(5) These properties are mortgage investments. HRPT had nominal price purchase options for all these mortgaged properties
which have been assigned to Senior Housing.
(6) These three properties are managed by Integrated Health. Under this management agreement, Integrated has guaranteed the
rent for these properties and that rent obligation is subject to cross default with other obligations under Integrated's
Lease No. 2.
(7) These properties are mortgage investments. The mortgage collateral secures all Integrated's obligations under Lease No.
2 and the mortgages are subject to cross default with Integrated's other obligations under this lease.
</FN>
</TABLE>
39
<PAGE>
SENIOR HOUSING TENANTS
Senior Housing's financial condition depends, in part, upon the financial
condition of its tenants. Senior Housing's largest tenant is Marriott.
Ninety-six percent of Senior Housing's rent is paid by public companies. If you
want more information about any of Senior Housing's publicly owned tenants you
should study the public information which they have filed with the SEC. The
following charts show Senior Housing's mix of tenants on the basis of annual
rent:
By Annual Rent
--------------
o $91 million total annual rent
[Graphic Omitted - Pie Chart
o 96% of rent comes from
public companies Marriott International 34%
$30.9 million
o 34% of rent comes from
Marriott Brookdale Living Communities 12%
$11.1 million
o leases for 99% expire
in 2005 or after Mariner Post-Acute Network 18%
$16.7 million
Integrated Health Services 10%
Lease No. 1
$8.8 million
Integrated Health Services 20%
Lease No. 2
$18.1 million
Genesis Health Ventures 2%
$1.4 million
Other Operators 4%
$3.5 million]
Marriott International, Inc.
Marriott is a NYSE listed company. Marriott's major businesses are
developing, operating and managing hotels, senior housing properties and
time-share resorts. Senior Housing currently owns 14 congregate communities and
assisted living properties with 3,950 units that are leased to subsidiaries of
Marriott. The annual rent under this lease is $30.9 million, which is 34% of
Senior Housing's total annual rent. Marriott International, Inc. has guaranteed
all of these lease obligations to Senior Housing.
The following table presents summary financial information of Marriott from
its Annual Report on Form 10- K for the year ended January 1, 1999, and
Quarterly Report on Form 10-Q for the quarter ended March 26, 1999.
Summary Financial Information of Marriott International, Inc.
(in millions)
As of or for the
As of or for the year ended 12 weeks ended
----------------------------------- --------------------------
January 3, January 2, January 1, March 27, March 26,
1997 1998 1999 1998 1999
---------- ---------- ---------- --------- ---------
Sales $5,738 $7,236 $7,968 $1,715 $1,895
Net income 270 324 390 89 100
Total assets 5,161 6,233 6,452
Debt 422 1,267 1,266
40
<PAGE>
Integrated Health Services, Inc.
Integrated is a NYSE listed company. Integrated's major businesses are
operating nursing homes and providing home healthcare services. Senior Housing
currently owns 27 nursing homes and three senior apartments with 3,205 units
that are leased to subsidiaries of Integrated. In addition, Senior Housing has
mortgage investments secured by 12 nursing homes with 1,070 units. Annual rent
of $22.8 million and interest of $4.1 million total to $26.9 million, or 30% of
Senior Housing's total annual revenues. These 42 properties are divided into two
pools, and the obligations under the leases and mortgages within each pool are
subject to cross default and collateralization covenants with all other
properties in the same pool. Integrated has guaranteed all of these lease and
mortgage obligations to Senior Housing.
The following table presents summary financial information of Integrated
from its Annual Report on Form 10-K for the year ended December 31, 1998, and
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
<TABLE>
<CAPTION>
Summary Financial Information of Integrated Health Services, Inc.
(in millions)
As of or for the
As of or for the year ended three months ended
December 31, March 31,
--------------------------------------- ------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $1,204 $1,403 $2,972 $762 $620
Earnings (loss) from
continuing operations 111 36 232 66 (5)
Net earnings (loss) 46 (34) (68) 38 (7)
Total assets 5,002 5,393 5,341
Debt 3,185 3,366 3,397
</TABLE>
Mariner Post-Acute Network, Inc.
Mariner is a NYSE listed company. Mariner's principal business is operating
nursing homes. Senior Housing currently owns 24 nursing homes and two congregate
communities with 3,482 units that are leased to subsidiaries of Mariner. The
annual rent under this lease is $16.7 million, which is 18% of Senior Housing's
total annual rent. Mariner has guaranteed all of these lease obligations to
Senior Housing.
The following table presents summary financial information of Mariner from
its Annual Report on Form 10- K for the year ended September 30, 1998, and
Quarterly Report on Form 10-Q for the period ended March 31, 1999.
<TABLE>
<CAPTION>
Summary Financial Information of Mariner Post-Acute Network, Inc.
(in millions)
As of or for the
As of or for the year ended six months ended
September 30, March 31,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net revenue $1,114 $1,140 $2,036 $909 $1,287
Net income (loss) 43 44 (210) (45) (118)
Total assets 874 3,037 2,983
Debt 253 1,978 830
</TABLE>
41
<PAGE>
Brookdale Living Communities, Inc.
Brookdale is a Nasdaq listed company. Brookdale's principal business is
operating senior housing and congregate communities. Senior Housing currently
owns four congregate communities with 829 units that are leased to a subsidiary
of Brookdale. The annual rent under this lease is $11.1 million, which is 12% of
Senior Housing's total annual rent. Brookdale has guaranteed all of these lease
obligations to Senior Housing.
The following table presents summary financial information of Brookdale
from its Annual Report on Form 10-K for the year ended December 31, 1998, and
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
Summary Financial Information of Brookdale Living Communities, Inc.
(in 000s)
As of or for the
As of or for the year ended three months ended
December 31, March 31,
--------------------------- -------------------------
1997(1) 1998 1998 1999
------- ---- ---- ----
Total revenue $30,237 $77,701 $16,898 $25,517
Net income (loss) 445 6,654 1,111 2,757
Total assets 183,169 244,633 265,620
Debt 95,881 92,570 92,489
(1) Total revenue and net income are for the period from May 7, 1997
(inception) through December 31, 1997.
Genesis Health Ventures, Inc.
Genesis is a NYSE listed company. Genesis' major businesses are operating
nursing homes, congregate communities and assisted living properties. Senior
Housing currently owns one nursing home with 150 units that is leased to a
subsidiary of Genesis. The annual rent under this lease is $1.4 million, which
is 2% of Senior Housing's total annual rent.
In its most recent Annual Report on Form 10-K Genesis reported total net
revenue, net loss, total assets and debt as of or for the year ended September
30, 1998, of $1.4 billion, $24.2 million, $2.6 billion and $1.4 billion,
respectively. In its most recent Quarterly Report on Form 10-Q, Genesis reported
total net revenue, net income, total assets and debt as of or for the six months
ended March 31, 1999, of $944 million, $2.8 million, $2.7 billion and $1.5
billion, respectively.
Privately Owned Tenants
In addition to the publicly owned tenants described above, Senior Housing
currently leases six nursing homes with 885 beds to four separate private
company tenants. These leases require total annual rent of $3.5 million. None of
these private companies has significant net worth or significant other business
activities.
Four of Senior Housing's properties leased to two of these private tenants
were originally leased to Sun Healthcare Group, Inc. These properties have been
subleased and the new tenants have assumed direct responsibility for these
leases. Sun has also remained obligated under the leases. In its most recent
Annual Report on Form 10-K Sun reported total net revenue, net loss, total
assets and debt as of or for the year ended December 31, 1998, of $3.1 billion,
$754 million, $2.5 billion and $1.1 billion, respectively. In its most recent
Quarterly Report on Form 10-Q, Sun reported total net revenue, net loss, total
assets and debt as of or for the three months ended March 31, 1999, of $673
million, $113 million, $2.4 billion and $1.0 billion, respectively.
42
<PAGE>
On July 14, 1999, one of Senior Housing's private company tenants, The
Frontier Group, filed for reorganization under Chapter 11 of the Bankruptcy
Code. Frontier leases three nursing homes from Senior Housing for total rent of
$2.1 million per year. Sun Healthcare is also obligated under this lease. Based
upon the 1998 year end information available to Senior Housing, two of these
nursing homes produced operating income in excess of their allocated rent, and
one facility with occupancy of only 78% had no operating income. Senior Housing
is preparing to collect its rent from Frontier or Sun and, if necessary, to
operate these properties for its own account until these properties are leased
to a substitute tenant.
43
<PAGE>
<TABLE>
<CAPTION>
SENIOR HOUSING LEASES
The following table presents information about Senior Housing's leases
(dollars in thousands except guarantee information):
Integrated Integrated Private
Marriott Brookdale Mariner Lease No. 1 Lease No. 2 Genesis Companies Total
-------- --------- ------- ----------- ----------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of 14 4 26 31 11 1 6 93
properties
Number of 3,950 829 3,482 2,450 1,825 150 885 13,571
beds/units
Located in no. 7 4 6 7 5 1 4 26
of states
Historical $325,521 $101,850 $86,486 $66,271 $151,529 $13,007 $25,462 $770,126
investment
Tenant Subsidiaries Subsidiary of Subsidiaries Subsidiaries Subsidiaries Subsidiary Four private Nine
of Marriott Brookdale of Mariner of Integrated of Integrated of Genesis companies tenants
Current annual $30,894 $11,074 $16,716 $8,826 $18,085 $1,444 $3,489 $90,528
rent
Rent increase 4.5% of 10% of CPI based CPI based 3% of $13 per Various
formula increase in increases increases increases increases in annum
gross in gross gross revenues increase
revenues revenues starting in
starting in 2000
1999
Current lease 2013 2019 2013 2010 2006 2005 2001, 2003, 2001-2019
expiration 2005
Renewal options All or none; All or none; All or none; All or none; All or none; All or none; Various
4 for 5 2 for 25 2 for 10 2 for 13 2 for 10 2 for 10
years each years each years each years each years each years each
and 1 for 5
years
Cross default Yes Yes Yes Yes Yes N/A N/A
provision
Subordinated Yes Yes Yes Yes Yes Yes Yes
management fee
Guarantees Public Public Public Public Public A multi- Various
company company company company company property affiliates of
parent has parent has parent has parent has parent has parent the private
guaranteed guaranteed guaranteed guaranteed guaranteed company of company
the lease. the lease. the lease. the lease. the lease. the tenant tenants have
In addition, has provided
there is a guaranteed guarantees.
$15 million the lease. In addition,
security In addition, Sun
deposit and a there is a Healthcare is
pledge of $235,000 obligated on
other assets. security four of these
deposit. leases.
</TABLE>
44
<PAGE>
Lease Terms
All of Senior Housing's leases are so called "triple net" leases which
require the tenants to maintain Senior Housing's properties during the lease
terms and to indemnify it for liability which may arise by reason of its
ownership of the properties. The following is a summary of material terms of
Senior Housing's leases in addition to the terms set forth in the foregoing
chart. Senior Housing's material leases have been filed with the SEC as exhibits
to its registration statement on Form S-11 of which this prospectus is a part.
If you want more information about these leases you should review these
documents.
Cross Default. Whenever Senior Housing leases more than one property to a
single tenant or a group of affiliated tenants all those leases are cross
defaulted. There are two lease combinations with Integrated. The obligations for
all of the properties under each of the lease combinations are subject to cross
default, but the two lease combinations are themselves not subject to cross
default. Integrated has guaranteed both lease combinations.
All or None Renewal Options. Whenever Senior Housing leases more than one
property to a single tenant or a group of affiliated tenants, lease renewal
options may only be exercised on an all or none basis. This means that a tenant
or group of affiliated tenants cannot decide to exercise renewal options for
strong performing properties unless it also renews the leases for all other
leased properties. The two Integrated lease combinations may be separately
renewed for all properties in each combination of leases.
Maintenance and Alterations. All of Senior Housing's tenants are required
to maintain, at their expense, the leased properties in good order and repair,
including structural and nonstructural maintenance. Except in the case of
properties leased to Marriott, capital alterations and additions to any leased
property which exceed a threshold amount of aggregate cost may only be made with
Senior Housing's prior consent. Any alterations or improvements made to any
leased property during the terms of the leases become Senior Housing's property,
subject to Senior Housing's obligation to pay to the tenants unamortized costs
at lease termination. At the end of the leases, Senior Housing's tenants are
required to surrender their leased properties in substantially the same
condition as existed on the commencement dates of the leases, subject to any
permitted alterations and subject to ordinary wear and tear.
Assignment. Senior Housing's consent is generally required for any
assignment or sublease of its properties. In the event of a subletting, the
initial tenant remains liable under the lease and all guarantees and other
security remain in place.
Environmental Matters. Senior Housing's tenants are required, at their
expense, to remove and dispose of any hazardous substance at the leased
properties in compliance with all applicable environmental laws and regulations
and to pay any costs Senior Housing incurs in connection with removal and
disposal. Each tenant has indemnified Senior Housing for any claims asserted as
a result of the presence of hazardous substances at any property and from a
violation or alleged violation of any applicable environmental law or
regulation.
Indemnification and Insurance. Each tenant has agreed to indemnify Senior
Housing from all claims arising from Senior Housing's ownership or their use of
its properties. Each tenant is required to maintain insurance on Senior
Housing's properties covering:
o comprehensive general liability for damage to property or bodily injury
arising out of the ownership, use, occupancy or maintenance of the
properties;
o commercial property "all risk" liability for damage to improvements,
merchandise, trade fixtures, furnishings, equipment and personal
property;
o workers' compensation liability;
o business interruption loss;
45
<PAGE>
o in some cases, medical malpractice; and
o other losses customarily insured by businesses similar to the business
conducted at Senior Housing's properties.
The leases require that Senior Housing be named as an additional insured under
these policies.
Damage, Destruction or Condemnation. In the event any of Senior Housing's
properties is damaged by fire, or other casualty or is taken for a public use,
Senior Housing receives all insurance or taking proceeds and its tenants are
required to pay any difference between the amount of proceeds and the historical
investment by Senior Housing or HRPT in the affected property. In the event of
material destruction or condemnation, some tenants have a right to purchase the
affected property for amounts at least equal to Senior Housing's or HRPT's
historical investment in the property.
Events of Default. Events of default under Senior Housing's leases include
the following:
o the failure of the tenant to pay rent when due;
o the failure of the tenant to perform key terms, covenants or
conditions of its lease and the continuance thereof for a specified
period after written notice;
o the occurrence of events of insolvency with respect to the tenant;
o the failure of the tenant to maintain required insurance coverages; or
o the revocation of any material license necessary for the tenant's
operation of Senior Housing's property.
Remedies. Upon the occurrence of any event of default, Senior Housing may:
o terminate the affected lease and accelerate the rent;
o terminate the tenant's rights to the affected property, relet the
property and recover from the tenant the difference between the amount
of rent which would have been due under the applicable lease and the
rent received under the reletting; and
o make any payment or perform any act required to be performed by the
tenant under its lease.
The defaulting tenant is obligated to reimburse Senior Housing for all payments
made and all costs and expenses incurred in connection with any exercise of the
foregoing remedies.
Ground Lease Terms. The land underlying two of Senior Housing's properties
is leased. Senior Housing's leases require its tenants to pay and perform all
obligations arising under these ground leases. These ground leases terminate on
2086 and 2079. The annual rents payable under the ground leases in 1998 totaled
$138,100. If Senior Housing's tenants fail to pay the applicable ground rent,
Senior Housing may have to do so in order to protect its investment in these
properties.
46
<PAGE>
SENIOR HOUSING SELECTED HISTORICAL FINANCIAL INFORMATION
The following table presents selected historical financial information and
other data for the properties owned by Senior Housing. This financial data has
been derived from HRPT's historical financial statements for the years ended
December 31, 1994 through 1998, and the unaudited historical financial
statements for the three-month periods ended March 31, 1998 and 1999. Per share
data has not been presented because Senior Housing was not a publicly held
company during the periods presented. Senior Housing is currently a 100% owned
subsidiary of HRPT, and none of its properties are encumbered by debt. The
following table includes pro rata allocations of interest expense and general
and administrative expenses for historical periods. In the opinion of Senior
Housing's management, the methods used for allocating interest and general and
administrative expenses are reasonable. However, it is impossible to estimate
all operating costs that Senior Housing would have incurred as a separate public
company. Accordingly, the net income and funds from operations shown are not
necessarily indicative of results that Senior Housing will realize as a separate
company. Additionally, year to year comparisons are impacted by property
acquisitions during the historical periods. For more information see HRPT's
Senior Housing Properties Combined Historical Financial Statements and notes
thereto appearing on pages F-14 to F-21.
<TABLE>
<CAPTION>
(000s except property data)
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ----
(unaudited) (unaudited) (unaudited) (unaudited)
Operating Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $ 46,429 $ 62,586 $ 66,202 $ 78,463 $ 82,542 $ 20,052 $ 21,226
Interest and other income 1,554 4,018 4,240 5,708 5,764 1,444 1,442
--------- --------- --------- --------- --------- --------- ---------
Total revenues 47,983 66,604 70,442 84,171 88,306 21,496 22,668
--------- --------- --------- --------- --------- --------- ---------
Interest 5,430 16,937 14,719 16,958 19,293 4,705 4,976
Depreciation 9,711 14,748 15,383 17,826 18,297 4,553 5,607
General and administrative 2,691 3,857 3,899 4,664 4,480 1,104 1,114
--------- --------- --------- --------- --------- --------- ---------
Total expenses 17,832 35,542 34,001 39,448 42,070 10,362 11,697
--------- --------- --------- --------- --------- --------- ---------
Net income $ 30,151 $ 31,062 $ 36,441 $ 44,723 $ 46,236 $ 11,134 $ 10,971
========= ========= ========= ========= ========= ========= =========
Net income
Other Data:
Number of properties at end of period 68 76 83 88 93 88 93
Cash flow from operating activities $ 44,150 $ 48,331 $ 51,308 $ 91,094 $ 60,236 $ 17,057 $ 17,835
Cash flow from investing activities (319,704) (39,301) (105,566) (19,663) 306 66 93
Cash flow from financing activities 275,554 (9,030) 54,258 (71,431) (60,403) (17,123) (17,900)
Funds from operations (1) 39,862 45,810 51,824 62,549 64,533 15,687 16,578
<CAPTION>
As of December 31, As of March 31,
-------------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ ------
Balance Sheet Data: (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Total real estate investments (before
depreciation) $ 579,633 $ 624,738 $ 730,304 $ 759,121 $ 770,219 $ 759,055 $ 770,126
Total assets (after depreciation) 556,668 587,701 679,201 692,586 686,296 686,226 678,901
- ------------
<FN>
(1) Funds from operations or "FFO," as defined in the white paper on funds from operations which was approved by the Board of
Governors of NAREIT in March 1995, is net income computed in accordance with GAAP, before gains or losses from sales of properties
and extraordinary items, plus depreciation and amortization and after adjustment for unconsolidated partnerships and joint
ventures. Senior Housing considers FFO to be an appropriate measure of performance for an equity REIT, along with cash flow from
operating activities, financing activities and investing activities, because it provides investors with an indication of an equity
REIT's ability to incur and service debt, make capital expenditures, pay distributions and fund other cash needs. Senior Housing
computes FFO in accordance with the standards established by NAREIT which may not be comparable to FFO reported by other REITs
that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition
differently. FFO does not represent cash generated by operating activities in accordance with GAAP and should not be considered as
an alternative to net income, determined in accordance with GAAP, as an indication of financial performance or the cash flow from
operating activities, determined in accordance with GAAP, as a measure of liquidity.
</FN>
</TABLE>
47
<PAGE>
SENIOR HOUSING SELECTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected pro forma financial information for
Senior Housing for the year ended December 31, 1998, and the three months ended
March 31, 1999, to reflect the effects of the spin-off. For more information see
the Unaudited Pro Forma Consolidated Financial Statements appearing on pages F-8
through F-13.
Year Ended Three Months
December 31, Ended March 31,
1998 1999
-------------- ---------------
(unaudited) (unaudited)
Operating Data: (000s except per share data)
Revenues:
Rental income $84,003 $21,226
Interest and other income 5,764 1,442
------- -------
Total revenues 89,767 22,668
------- -------
Expenses:
Interest 13,500 3,375
Depreciation 18,490 5,607
General and administrative 4,523 1,114
------- -------
Total expenses 36,513 10,096
------- -------
Net income $53,254 $12,572
======= =======
Earnings per share $ 2.05 $ 0.48
======= =======
As of
March 31, 1999
---------------
(unaudited)
(000s)
Balance Sheet Data:
Total real estate investments (before depreciation) $770,126
Total assets (after depreciation) 679,901
Bank credit facility 200,000
SENIOR HOUSING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion presents an analysis of the results of operations
of the properties owned by Senior Housing for the years ended December 31, 1996,
1997 and 1998, the three month periods ended March 31, 1998 and 1999, and the
pro forma results of operations of Senior Housing for the year ended December
31, 1998, and the three months ended March 31, 1999.
Pro Forma Results of Operations
Three Months Ended March 31, 1999. For the pro forma three months ended
March 31, 1999, giving effect to the spin-off and the related transactions,
revenues would have been $22.7 million, total expenses would have been $10.1
million and net income would have been $12.6 million or $0.48 per share.
Compared to historical results total expenses and interest expense decreased by
$1.6 million. Interest expense decreased due to lower interest expense from pro
forma borrowings of $200 million under Senior Housing's bank credit facility
compared to the allocated portion of historical allocated interest expense
incurred by HRPT.
On a pro forma basis for the three months ended March 31, 1999, funds from
operations would have been $18.2 million. The pro forma average shares
outstanding would have been 26 million.
48
<PAGE>
Year Ended December 31, 1998. For the pro forma year ended December 31,
1998, giving effect to the spin-off and the related transactions, revenues would
have been $89.8 million, total expenses would have been $36.5 million and net
income would have been $53.3 million or $2.05 per share. Compared to historical
results, total revenue increased by $1.5 million and total expenses decreased by
$5.6 million. Revenue increased due to rent generated from the acquisition of
five properties in 1998. Total expenses decreased primarily because of reduced
interest expense of $5.8 million. Interest expense decreased due to lower
interest expense from pro forma borrowings of $200 million under Senior
Housing's bank credit facility compared to allocated historical interest expense
incurred by HRPT.
On a pro forma basis for the year ended December 31, 1998, funds from
operations would have been $71.7 million. The pro forma average shares
outstanding would have been 26 million.
Historical Results of Operations
Three Months Ended March 31, 1999, compared to 1998. For the three months
ended March 31, 1999, compared to the three months ended March 31, 1998, total
revenues increased by $1.2 million, total expenses increased by $1.3 million and
net income decreased by $163,000. Total revenues increased due to rent generated
from the acquisition of five properties subsequent to March 31, 1998. Total
expenses increased primarily because of higher depreciation of $1.1 million due
to property acquisitions and higher allocated interest expense as a result of
increased borrowings by HRPT.
Funds from operations increased by $891,000 for the three months ended
March 31, 1999, compared to the prior period due to income from five properties
acquired subsequent to March 31, 1998.
Year Ended December 31, 1998, compared to 1997. For the year ended December
31, 1998, compared to the year ended December 31, 1997, total revenues increased
by $4.1 million, total expenses increased by $2.6 million and net income
increased by $1.5 million. Total revenues increased due to rent generated from
the acquisition of five properties during 1998 and the full year impact of the
rent generated from five properties acquired during 1997. Total expenses
increased primarily because of higher allocated interest expense of $2.3
million, which resulted from increased borrowings by HRPT.
Funds from operations increased by $2.0 million for the year ended December
31, 1998, compared to the prior period due to income from five properties
acquired during 1998 and the full year impact of income from five properties
acquired during 1997.
Year Ended December 31, 1997, compared to 1996. For the year ended December
31, 1997, compared to the year ended December 31, 1996, total revenues increased
by $13.7 million, total expenses increased by $5.4 million and net income
increased by $8.3 million. Total revenues increased due to rent generated from
the acquisition of five properties during 1997 and the full year impact of the
rent generated from seven properties acquired during 1996. Total expenses
increased primarily because of higher allocated interest expense of $2.2
million, which resulted from increased borrowings by HRPT, and higher
depreciation expense of $2.4 million due to property acquisitions.
Funds from operations increased by $10.7 million for the year ended
December 31, 1997, compared to the prior period due to the income from the
acquisition of five properties during 1997 and the full year impact of income
from seven properties during 1996.
Liquidity and Capital Resources
Senior Housing expects cash transferred to it by HRPT prior to the spin-off
and rent which it receives from its tenants on a periodic basis will be
sufficient to meet its working capital needs for operating expenses, including
interest on borrowings on its bank credit facility, and to make regular
quarterly distributions, including the first distribution of $0.60 per share for
the quarter ended September 30, 1999.
49
<PAGE>
Senior Housing has accepted a commitment for a $350 million, three-year,
interest only bank credit facility. This bank credit facility will be secured by
first mortgages on 18 of Senior Housing's properties. The interest rate will be
LIBOR plus a premium. The bank credit facility will be available for
acquisitions, working capital and for general business purposes. Senior Housing
will have the ability to repay and redraw amounts under this bank credit
facility until its maturity. Senior Housing's bank credit facility documentation
will have customary representations, warranties, covenants and event of default
provisions. Included among these covenants will be a limitation on Senior
Housing's total debt to no more than 60% of its total capital. After the
spin-off Senior Housing will borrow $200 million under this bank credit facility
to pay the formation debt to HRPT and will have $150 million available for
acquisitions, working capital and general business purposes.
Total assets decreased by $7.4 million from $686.3 million as of December
31, 1998, to $678.9 million as of March 31, 1999. The decrease is primarily due
to depreciation on real estate properties.
After completion of the spin-off, Senior Housing intends to acquire
additional senior housing properties. These purchases will be initially funded
with excess working capital, if any, generated by Senior Housing and proceeds of
borrowings under the bank credit facility. After properties are acquired, bank
credit facility borrowings may be repaid with long term debt or equity capital.
After completion of the spin-off, Senior Housing expects to have: $200 million
of debt outstanding; book equity of $436.1 million; and total real estate
assets, at historical cost, of $770 million. In these circumstances, Senior
Housing believes that it will have sufficient access to capital markets to meet
its growth objectives and refinance its debt as needed. Of course, however,
access to growth capital will depend upon numerous facts, including some beyond
Senior Housing's control; and Senior Housing can provide no assurance that it
will be able to raise additional capital in sufficient amounts, or at
appropriate costs, to fund future growth or to repay debt.
Inflation. Inflation might have both positive and negative impacts upon
Senior Housing's business. Inflation might cause the value of Senior Housing's
real estate investments to increase. Similarly, in an inflationary environment,
the percentage rents which Senior Housing receives based upon CPI increases or
as a percentage of its tenants' revenues should increase and rent yields Senior
Housing could charge for new investments would likely increase. Offsetting these
benefits, inflation might cause the costs Senior Housing pays for equity and
debt capital to increase. To mitigate the adverse impact of increased costs of
debt capital in the event of material inflation Senior Housing may purchase
interest rate cap contracts whenever it has a large amount of floating rate debt
outstanding and it believes material interest rate increases are likely to
occur. On balance, Senior Housing does not believe that the modest inflation
which it expects may occur in the U.S. economy during the next few years will
have any material effect on its business.
Deflation. Deflation would have business consequences to Senior Housing
which are the inverse of the impact of inflation. If new construction costs
decline, the value of Senior Housing's existing real estate investments may
decline. The value of Senior Housing's long term minimum rent leases might
increase but some tenants might have trouble paying Senior Housing's rent in a
deflationary environment, and the amounts of its percentage rent increases might
decline or disappear. Deflation might lower Senior Housing's costs of debt
capital; however, deflation's impact on Senior Housing's cost of equity capital
is uncertain. Senior Housing does not believe that the U.S. economy is likely to
experience serious deflation in the foreseeable future. Senior Housing believes
that modest deflation would have no effect upon its business and serious
deflation would have a negative effect upon its business.
Year 2000
The in-house computer systems environment is limited to software and
hardware developed by third parties and installed, operated and monitored by
Senior Housing's investment advisor, Reit Management. All of the computer
systems, which are limited to financial reporting and accounting systems, were
installed within the last two years. Reit Management has obtained confirmations
from most of its vendors and believes these systems are year 2000 compliant. All
costs associated with Senior Housing's computer systems are borne by Reit
Management.
50
<PAGE>
All of Senior Housing's properties are leased on a triple net basis and are
not managed by Senior Housing. Ninety-seven percent of Senior Housing's tenants
are operated by public companies which have filed reports containing year 2000
preparedness information with the SEC. The leases require the tenants to conduct
the daily operations of the properties and the scope of the tenants'
responsibility includes ensuring preparedness for the year 2000. Because of its
leases, the only actions that Senior Housing can take with respect to its
properties are to inquire of its tenants, monitor its tenants' SEC filings and
evaluate their year 2000 preparedness plans for all systems, including financial
and nonfinancial systems such as elevators, heating and ventilation and life
safety systems. The majority of Senior Housing's tenants have responded in
writing to Senior Housing's inquiries regarding their preparedness for issues
related to the year 2000. Based on these responses and tenant public disclosures
which Senior Housing has reviewed, Senior Housing believes that its tenants are
in the process of studying their systems and the systems for their vendors,
suppliers and service providers to ensure preparedness. Current levels of
preparedness are varied and include partially completed inventory and assessment
of potential risks, testing, implementation of plans for remediation and
reprogramming. While Senior Housing believes that the efforts of its tenants
described in their responses and in their public filings will be adequate to
address year 2000 concerns, there can be no guarantee that all tenant operations
and those of their vendors and payors, including federal and state Medicare and
Medicaid systems, will be year 2000 compliant on a timely basis and will not
have a material effect on Senior Housing.
If Senior Housing's efforts and the efforts of its vendors, customers and
tenants, and their customers and vendors to prepare for the year 2000 were
ineffective, the operation of Senior Housing's properties could be subject to
significant adverse effects, including, but not limited to, loss of business and
growth opportunities, reduced revenues and increased expenses which might cause
operating losses to its tenants. Continued or severe operating losses may cause
one or more of Senior Housing's tenants to default on their leases. Numerous
lease defaults could jeopardize Senior Housing's ability to maintain its
financial results of operations, meet its financial, operating and capital
obligations and timely pay its distributions to shareholders.
In particular, the worst case scenario which Senior Housing can envision at
this time is that some of its tenants may be unable to pay their rents on a
timely basis because some of their payment sources, such as Medicare or
Medicaid, are delayed. In these circumstances, Senior Housing may be unable to
meet its debt obligations or to timely pay distributions.
Senior Housing does not currently have a contingency plan in place in the
event its, or its tenants, do not successfully remedy year 2000 compliance
issues that are identified in a timely manner or fail to identify any year 2000
issues. Senior Housing will evaluate the status of its year 2000 compliance plan
during the fourth quarter of 1999 and determine whether a contingency plan is
necessary.
Quantitative and Qualitative Disclosures About Market Risk
Senior Housing is exposed to risk associated with interest rate changes. It
will manage its exposure to this market risk through the monitoring of available
financing alternatives. It does not foresee any significant changes in the
exposure to fluctuations in interest rates or in how this exposure is managed in
the near future.
On a pro forma basis, as of March 31, 1999, Senior Housing had $200 million
of floating rate debt, which was borrowed under its $350 million bank credit
facility that matures in 2002 and Senior Housing did not have any fixed rate
debt. Assuming interest rates increased 1/2 percentage point, the annualized
interest cost on the $200 million of borrowings would increase by $1 million.
The bank credit facility allows Senior Housing to make repayments earlier
than the stated maturity date. This prepayment right affords Senior Housing the
opportunity to mitigate the risk of refinancing at maturity at higher rates by
refinancing prior to maturity. Although it has not done so, from time to time,
Senior Housing may enter into contracts to hedge interest rate risks.
51
<PAGE>
SENIOR HOUSING MANAGEMENT
Senior Housing Trustees and Executive Officers
Senior Housing has two categories of trustees: (1) managing trustees who
are employees of Reit Management and involved in Senior Housing's day-to-day
activities; and (2) independent trustees who are not employees of Reit
Management and not involved in Senior Housing's day-to-day activities. Senior
Housing's bylaws require that a majority of its trustees be independent
trustees. Also, although it is not required by Senior Housing's bylaws, it is
Senior Housing's policy that the same person may not simultaneously serve as an
independent trustee of both Senior Housing and HRPT so long as HRPT owns more
than 10% of the shares of Senior Housing. The bylaws and this policy do not
prohibit former trustees, officers, employees or persons otherwise affiliated
with HRPT or Reit Management from serving as independent trustees of Senior
Housing.
After completion of the spin-off, Senior Housing's trustees and executive
officers will be as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Barry M. Portnoy................... 53 Managing Trustee (term will expire in 2000)
Gerard M. Martin................... 64 Managing Trustee (term will expire in 2001)
Bruce M. Gans, M.D. ............... 52 Independent Trustee (term will expire in 2000)
Arthur G. Koumantzelis............. 68 Independent Trustee (term will expire in 2002)
Vacancy............................ Independent Trustee (term will expire in 2001)
David J. Hegarty................... 42 President, Chief Operating Officer and Secretary
Ajay Saini......................... 39 Treasurer and Chief Financial Officer
</TABLE>
Barry M. Portnoy has been a managing trustee of both HRPT and Hospitality
Properties since their organization in 1986 and 1995, respectively. Mr. Portnoy
is also a Director and 50% owner of Reit Management. Mr. Portnoy has been
actively involved in real estate and real estate finance activities as an
attorney, investor and manager for over 20 years. Mr. Portnoy was a partner in
the law firm of Sullivan & Worcester LLP, Boston, Massachusetts from 1978
through March 31, 1997, and he served as Chairman of that firm from 1994 through
March 1997.
Gerard M. Martin has been a managing trustee of both HRPT and Hospitality
Properties since their organization in 1986 and 1995, respectively. Mr. Martin
is also a Director and 50% owner of Reit Management. Mr. Martin has been active
in the real estate and senior housing industries as a developer, owner and
manager for approximately 30 years. During the past five years, Mr. Martin's
principal employment has been as a managing trustee of HRPT and Hospitality
Properties.
Bruce M. Gans, M.D. has been Senior Vice President for Continuing Care,
Chairman of Physical Medicine and Rehabilitation at North Shore Long Island
Jewish Health System and Professor of Physical Medicine and Rehabilitation at
the Albert Einstein College of Medicine since April 1999. Prior to April 1999
Dr. Gans was a Professor and Chairman of the Department of Physical Medicine and
Rehabilitation at Wayne State University and a Senior Vice President of the
Detroit Medical Center since 1989. Dr. Gans has been a trustee of HRPT since
1995. Upon completion of the spin-off, Dr. Gans will resign from HRPT and will
become one of Senior Housing's independent trustees.
Arthur G. Koumantzelis has been President and Chief Executive Officer of
Gainesborough Investments LLC, a private investment company, since June 1998.
From 1990 to 1998, Mr. Koumantzelis was Senior Vice President and Chief
Financial Officer of Cumberland Farms, Inc., a private company engaged in the
convenience store business and in the distribution and retail sale of gasoline.
Mr. Koumantzelis has been a trustee of Hospitality Properties since its initial
public offering in 1995, and was a trustee of HRPT from 1992 through August
1995. Upon completion of the spin-off, Mr. Koumantzelis will become one of
Senior Housing's independent trustees.
52
<PAGE>
Vacancy. Following the completion of the spin-off, Senior Housing intends
to elect another independent trustee. At this time, no person has been selected
to fill this position.
David J. Hegarty is the President, Chief Operating Officer and Secretary of
HRPT and has been since 1994. Upon completion of the spin-off, Mr. Hegarty will
resign from HRPT and will become Senior Housing's President, Chief Operating
Officer and Secretary. Mr. Hegarty is also a Director and the President and
Secretary of Reit Management. Mr. Hegarty has served HRPT, Reit Management and
their affiliates in various capacities since 1987, prior to which he was an
audit manager with Ernst & Young LLP. Mr. Hegarty is a certified public
accountant.
Ajay Saini is the Treasurer and Chief Financial Officer of HRPT and has
been since 1994. Upon completion of the spin-off, Mr. Saini will resign from
HRPT and will become Senior Housing's Treasurer and Chief Financial Officer. Mr.
Saini is also a Vice President of Reit Management. Mr. Saini has served HRPT,
Reit Management and their affiliates in various capacities since June 1990,
prior to which he was employed by Ernst & Young LLP. Mr. Saini is a certified
public accountant.
Committees of the Board of Trustees
Promptly following completion of the spin-off, the board of trustees will
establish an audit committee that will consist of independent trustees. The
audit committee will make recommendations concerning the engagement of
independent public accountants, review the plans and results of the audit
engagement, approve professional services provided by the independent public
accountants, consider the appropriateness of audit and nonaudit fees charged by
Senior Housing's accountants and review the adequacy of Senior Housing's
internal accounting controls.
The entire board of trustees will function as a compensation committee to
implement Senior Housing's incentive share award plan described below.
Compensation of the Trustees and Officers
Senior Housing will pay its independent trustees an annual fee of $20,000,
plus a fee of $500 for each meeting attended. Each independent trustee will
automatically receive an annual grant of 500 common shares after the completion
of the spin-off, or upon initial election to fill the current vacant position,
and at the first meeting of the board of trustees following each annual meeting
of shareholders, commencing in 2000. In addition, Senior Housing will pay the
independent trustee serving as chairman of the audit committee $2,000 per year.
This position is expected to rotate annually among the independent trustees.
Senior Housing will also reimburse expenses its trustees incur in attending
meetings. Senior Housing's managing trustees and officers are employees of Reit
Management and they will not receive compensation directly from Senior Housing,
except reimbursement of expenses and under the incentive share award plan.
Incentive Share Award Plan
Senior Housing has adopted an incentive share award plan and has reserved
1.3 million shares to grant to its independent trustees, officers and
consultants, including selected employees of Reit Management, but not Reit
Management itself which will be paid under its contract described below. Senior
Housing has established the incentive share award plan to ensure that its
independent trustees, officers and others responsible for its operations have
similar interests with shareholders. In addition, the incentive share award plan
will permit Senior Housing to compensate affiliates for the performance of
services and duties in addition to those compensated by Reit Management.
As discussed above, the independent trustees will automatically receive
grants of 500 common shares per year as part of their annual compensation. In
granting other incentive share awards, the board of trustees intends to consider
a range of factors regarding potential grantees, including the complexity and
duration of tasks performed and the amount and terms of common shares previously
granted. The vesting schedule of each
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incentive share award will be determined at the time of grant. No awards will be
granted under the incentive share award plan before completion of the spin-off.
Limitation of Liability and Indemnification
Under Senior Housing's declaration of trust and bylaws, its trustees,
officers and employees are entitled to indemnification. You can find more
information about indemnification of trustees, officers and employees in the
section entitled "Material Provisions of Maryland Law and of Senior Housing's
Declaration of Trust and Bylaws" on page 61 of this prospectus.
Reit Management and the Advisory Agreement
Reit Management. Reit Management is a Delaware corporation owned by Barry
M. Portnoy and Gerard M. Martin. Its principal place of business is 400 Centre
Street, Newton, Massachusetts and its telephone number is (617) 928-1300. Reit
Management has approximately 180 full time employees including a headquarters
staff, four regional offices and other personnel located throughout the United
States. Reit Management also acts as the investment advisor to HRPT and
Hospitality Properties.
The directors of Reit Management are Barry M. Portnoy, Gerard M. Martin and
David J. Hegarty. The officers of Reit Management are David J. Hegarty,
President and Secretary, John G. Murray, Executive Vice President, John A.
Mannix, Vice President, Thomas M. O'Brien, Vice President, Ajay Saini, Vice
President, David M. Lepore, Vice President, Jennifer B. Clark, Vice President,
and John Popeo, Treasurer. A biographical summary of the officers of Reit
Management who are not described above under "--Senior Housing Trustees and
Executive Officers" or under "Information about HRPT After the Spin-off-- HRPT
Management" on page 25 of this prospectus follows:
John G. Murray, age 38, is the Executive Vice President of Reit Management.
Mr. Murray also is and has been the President, Chief Operating Officer and
Secretary of Hospitality Properties since 1996. Mr. Murray has served in various
capacities for HRPT, Reit Management and their affiliates since 1993. Prior to
1993, Mr. Murray was Director of Finance, Business Analysis and Planning at
Fidelity Brokerage Services, Inc. from 1992 to 1993 and Director of Acquisitions
from 1990 through 1991. Prior to 1990, Mr. Murray was employed by Ernst & Young
LLP. Mr. Murray is a certified public accountant.
Thomas M. O'Brien, age 33, is and has been a Vice President of Reit
Management since 1996. Mr. O'Brien is and also has been the Treasurer and Chief
Financial Officer of Hospitality Properties since 1996. Prior to 1996, Mr.
O'Brien was employed by Arthur Andersen LLP for eight years. Mr. O'Brien is a
certified public accountant.
Jennifer B. Clark, age 38, is a Vice President of Reit Management. Ms.
Clark joined Reit Management in July 1999 and will be primarily responsible for
leasing HRPT's office buildings. From 1994 to July 1999, Ms. Clark's principal
employment was as a partner specializing in real estate law at the law firm of
Sullivan & Worcester LLP, counsel to Reit Management and its affiliates,
including HRPT, Hospitality Properties and Senior Housing.
The Advisory Agreement. The following is a summary of Senior Housing's
advisory agreement with Reit Management. Because it is a summary, it does not
contain all the information that may be important to you. If you would like more
information, you should read the entire agreement, which has been filed with the
SEC as an exhibit to the registration statement of which this prospectus is a
part.
Reit Management is required to use its best efforts to present Senior
Housing with a continuing and suitable investment program consistent with Senior
Housing's investment policies. Subject to its duty of overall management and
supervision, the board of trustees has delegated to Reit Management the power
and duty to:
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o provide research and economic and statistical data in connection with
Senior Housing's investments and recommend changes in Senior Housing's
investment policies when appropriate;
o investigate and evaluate investment, financing and refinancing
opportunities and make recommendations concerning specific investments
to the trustees;
o manage Senior Housing's short-term investments including the
acquisition and sale of money market instruments;
o administer Senior Housing's day-to-day operations including the
leasing of Senior Housing's properties and relations with Senior
Housing's tenants;
o investigate, negotiate and enter contracts for the purchase, lease or
servicing of real estate and related interests, on Senior Housing's
behalf in furtherance of Senior Housing's investment objectives;
o investigate, negotiate and enter contracts for the financing and
refinancing of investments, on Senior Housing's behalf in furtherance
of the financing objectives of Senior Housing;
o act as attorney-in-fact or agent in acquiring and disposing of Senior
Housing's real estate investments, and in handling, prosecuting and
settling any of Senior Housing's claims;
o monitor Senior Housing's real property and other investments as would
be done by a prudent owner;
o monitor all third-party services provided to Senior Housing as would
be done by a prudent owner;
o administer the day-to-day bookkeeping and accounting functions as are
required for the management of Senior Housing's assets, contract for
audits and prepare or cause to be prepared reports required by any
governmental authority in connection with the conduct of Senior
Housing's business;
o provide office space, office equipment and the use of accounting or
computing equipment when required;
o provide personnel necessary for the performance of the foregoing
services; and
o upon request by the trustees, make reports of its performance of the
foregoing services.
In performing its services under the advisory agreement, Reit Management
may use facilities, personnel and support services of various of its affiliates.
Under the advisory agreement, Reit Management assumes no responsibility
other than to render the services described therein in good faith and is not
responsible for any action of the Senior Housing board of trustees in following
or declining to follow any advice or recommendation of Reit Management. In
addition, Senior Housing has agreed to indemnify Reit Management, its
shareholders, directors, officers, employees and affiliates against liabilities
relating to acts or omissions of Reit Management undertaken on Senior Housing's
behalf in good faith.
The initial term of the advisory agreement expires on December 31, 1999.
Renewals or extensions of the advisory agreement will be subject to the periodic
approval of a majority of the independent trustees. Under the advisory
agreement, Reit Management and Messrs. Portnoy and Martin have agreed not to
provide advisory services to, or serve as a director or officer of, any other
REIT which is principally engaged in the business of owning and leasing senior
apartments, congregate communities, assisted living or nursing home properties
or to make competitive direct investments in these types of properties, in each
case, without the consent of Senior Housing's independent trustees.
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Compensation to Reit Management. The board of trustees, acting by a
majority vote of the independent trustees, will determine the amount of
compensation paid to Reit Management when it determines whether to renew, extend
or amend the advisory agreement, based on factors it deems appropriate. These
factors are expected to include:
o the size of the advisory fee in relation to the size, composition,
quality and profitability of Senior Housing's investments;
o the success of Reit Management in generating opportunities that meet
Senior Housing's investment objectives;
o the quality and extent of services and advice furnished by Reit
Management;
o the rates charged by others performing comparable services; and
o the costs of similar services incurred by other REITs.
The advisory agreement currently provides for an annual advisory fee and an
annual incentive fee. The advisory fee is payable monthly and reconciled
annually. The advisory fee is equal to the sum of 0.5% of the historical cost of
the assets transferred to Senior Housing by HRPT, plus 0.7% of Senior Housing's
real estate investments up to an additional $250 million made after the
completion of the spin-off, plus 0.5% of Senior Housing's real estate
investments exceeding these amounts. The annual incentive fee is equal to 15% of
the annual increase in Senior Housing's funds from operations per share times
the weighted average number of shares outstanding on a diluted basis in each
year; provided however, the annual incentive fee shall be no more than $0.02
times the weighted average number of shares. The annual incentive fees payable
to Reit Management will be paid in Senior Housing's shares at market value. No
incentive fees will be payable for 1999.
The advisory agreements currently in effect between Reit Management and
HRPT and between Reit Management and Hospitality Properties are substantially
similar to the advisory agreement between Reit Management and Senior Housing.
Upon completion of the spin-off, Reit Management's contract with HRPT will be
amended so that HRPT's investment in Senior Housing will not be counted for
purposes of determining the advisory fees payable by HRPT to Reit Management.
Senior Housing is not expected to have any employees or administrative
officers separate from Reit Management. Services which might otherwise be
provided by employees will be provided to Senior Housing by employees of Reit
Management. Similarly, office space will be provided to Senior Housing by Reit
Management. Although Senior Housing does not expect to have significant general
and administrative operating expenses in addition to fees payable to Reit
Management, Senior Housing will be required to pay various other expenses,
including the costs and expenses of acquiring, owning and disposing of Senior
Housing's real estate interests. These costs and expenses include acquisition
and disposition diligence, audit and legal fees, the costs of borrowing money
and the costs of securities listing, transfer, registration, compliance with
public reporting requirements and shareholder communications generally. Also,
Senior Housing will pay the fees of its independent trustees.
Related Party Transactions
Senior Housing is currently a 100% owned subsidiary of HRPT. Senior
Housing's managing trustees, Barry M. Portnoy and Gerard M. Martin, also own
Reit Management, and act as managing trustees of HRPT. As a result of these
relationships, HRPT and Messrs. Portnoy and Martin have material interests in
transactions with Senior Housing, including the following:
o Senior Housing is indebted to HRPT for $200 million. After the
spin-off Senior Housing will borrow $200 million under its bank credit
facility and pay this $200 million formation debt to HRPT.
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o Upon completion of the spin-off, Reit Management will become Senior
Housing's investment advisor. The pro forma annual advisory fee that
Senior Housing will pay to Reit Management from the completion of the
spin-off through the initial term of the agreement on December 31,
1999, will be $____, or $3.9 million on an annualized basis. HRPT's
advisory fees to Reit Management will be reduced by the same amount.
o After the spin-off, HRPT will retain 12.8 million of Senior Housing
shares. By retaining these shares, HRPT will be able to participate in
Senior Housing's future success through distributions and
appreciation, if any, in the price of these shares.
o Three of the eleven properties included in the Integrated Health
Services Lease No. 2 are leased by a corporation owned by Messrs.
Portnoy and Martin. Integrated manages these properties under
contracts which expire in 2006 and are renewable thereafter. Under
these management arrangements, Integrated is financially responsible
for the operation of these three properties and has guaranteed the
lease obligations due to Senior Housing. Integrated's obligations for
these leases are subject to cross default and cross collateralization
with other lease and mortgage obligations of Integrated to Senior
Housing included in Integrated's Lease No. 2. Messrs. Portnoy and
Martin have not received, and do not expect to receive, net economic
benefits from their ownership of this tenant entity, and they are not
obligated for these leases to Senior Housing. The arrangement by which
an entity owned by Messrs. Portnoy and Martin became a tenant for
these three properties was established in 1994 in order to facilitate
licensing for a predecessor of Integrated.
LEGAL PROCEEDINGS
Senior Housing has a limited operating history and is not currently a party
to any legal proceedings. Senior Housing is not aware of any material legal
proceeding affecting its properties for which it might become liable. Moreover,
HRPT has agreed to indemnify Senior Housing for any pending litigation affecting
the properties transferred to Senior Housing.
SENIOR HOUSING POLICIES
The following discussion sets forth Senior Housing's policies regarding
investments, dispositions, financings, conflicts of interest and other
activities. The board of trustees has set these policies and although there is
no current intention to do so, the board of trustees may amend or revise these
policies at any time without a vote of shareholders.
Investment Policies
Acquisitions. Senior Housing intends to buy additional senior apartments,
congregate communities, assisted living properties and nursing homes. It is
Senior Housing's policy to acquire assets primarily for income and secondarily
for their appreciation potential. In making future acquisitions, Senior Housing
will consider a range of factors including:
o the acquisition price of the proposed property;
o the estimated replacement cost of the proposed property;
o proposed lease terms;
o the financial strength and operating reputation of the proposed
tenant;
o historical and projected cash flows of the property to be acquired;
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o the location and competitive market environment of the proposed
property;
o the physical condition of the proposed property and its potential for
redevelopment or expansion; and
o the price segment and payment sources in which the proposed property
is operated.
Senior Housing intends to acquire properties which will enhance the
diversity of its portfolio in respect to tenants, types of services provided and
locations. Senior Housing has no policies which specifically limit the
percentage of its assets which may be invested in any individual property, in
any one type of property, in properties leased to any one tenant or in
properties leased to an affiliated group of tenants.
Other Investments in Real Estate. Senior Housing expects to emphasize
direct wholly owned investments in fee interests. However, circumstances may
arise in which Senior Housing may invest in leaseholds, joint ventures,
mortgages and other real estate interests. Senior Housing may invest in real
estate joint ventures if it concludes that by doing so it may benefit from the
participation of co-venturers or that Senior Housing's opportunity to
participate in the investment is contingent on the use of a joint venture
structure. Senior Housing may invest in participating, convertible or other
types of mortgages if it concludes that by doing so it may benefit from the cash
flow or appreciation in the value of a property which is not available for
purchase.
Disposition Policies
From time to time Senior Housing may consider the sale of one or more of
its properties. Future disposition decisions, if any, will be made based on a
number of factors including the following:
o the proposed sale price;
o the strategic fit of the property with the rest of Senior Housing's
portfolio;
o potential opportunities to increase revenues by reinvesting sale
proceeds;
o the potential for, or the existence of, any environmental or
regulatory problems affecting a particular property;
o Senior Housing's alternative capital needs; and
o the maintenance of Senior Housing's qualification as a REIT under the
Internal Revenue Code.
Integrated holds purchase options on four of the nursing homes included in
the Integrated Lease No. 2. Under the options, Integrated has the right to
purchase one of these properties per year commencing in February 2000. The
purchase option prices for these properties are approximately equal to their
historical costs. It is presently unknown if Integrated intends to purchase
these properties.
Financing Policies
Senior Housing has accepted a commitment for a bank credit facility. This
bank credit facility will enable Senior Housing to borrow up to $350 million.
The facility will require payment of interest only at LIBOR plus a premium. The
maturity of this facility will be in three years ending in late 2002. Two
hundred million dollars will be borrowed under this facility shortly after the
spin-off and used to pay Senior Housing formation debt to HRPT. The balance of
$150 million under this facility will be available to Senior Housing after the
spin-off to fund new acquisitions and for general business purposes. This bank
credit facility will be secured by first mortgages upon, and a collateral
assignment of leases from, 18 properties owned by Senior Housing. This bank
credit facility has several covenants typically found in revolving loan
facilities including covenants to maintain a minimum net worth and minimum
collateral value and which prohibit Senior Housing from incurring debt in excess
of 60% of its total capital. This bank credit facility is expected to be fully
documented
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before the spin-off is completed. A copy of the commitment letter evidencing the
terms of this credit facility has been filed as an exhibit to the registration
statement of which this prospectus is part. If you want more information
concerning this bank credit facility you should refer to that filing.
Senior Housing intends to use this bank credit facility to fund future
acquisitions and for working capital. Periodically, Senior Housing expects to
repay amounts drawn under the bank credit facility with proceeds of equity and
long term debt offerings. Senior Housing's organizational documents do not limit
the amount of indebtedness it may incur. At present Senior Housing expects to
maintain a capital structure in which Senior Housing's debt will not exceed 60%
of its total capital. Senior Housing will consider future equity offerings when,
in its judgment, doing so will improve its capital structure without materially
adversely affecting the market value of its shares. During the next few years
Senior Housing expects to lower its target maximum debt to capitalization ratio
to 50% and to achieve an investment grade rating for its debt obligations; but
it does not expect this to happen until it has operated as an independent public
company for several years. Until it achieves an investment grade rating, Senior
Housing expects that the least costly debt capital available to it will be
secured debt and that most of its debt will be secured. In the future, Senior
Housing may modify its current financing policies in light of then current
economic conditions, relative costs of debt and equity capital, acquisition
opportunities and other factors; and its intended ratio of debt to total capital
may change.
Conflict of Interest Policies
Senior Housing has adopted several policies to mitigate existing and
potential conflicts of interest, as follows:
<TABLE>
<CAPTION>
Conflict Policy
- -------- ------
<S> <C>
Reit Management is also the investment advisor for Mr. Hegarty, HRPT's current President and Chief
HRPT and Hospitality Properties and has other Operating Officer, and Mr. Saini, HRPT's current
business interests. Messrs. Portnoy and Martin will Treasurer and Chief Financial Officer will resign
be managing trustees of Senior Housing, HRPT and from HRPT and assume similar positions at Senior
Hospitality Properties and have other business Housing. They will devote substantially all their
interests. Conflicts arise in the allocation of business time to Senior Housing. Reit Management
management time. and Messrs. Portnoy and Martin have agreed not to
provide advisory services or serve as trustees or
officers of any other REIT which is principally
engaged in owning and leasing senior apartments,
congregate communities, assisted iving properties or
nursing homes, or to make competitive direct
investments in these types of properties, in each case,
without the consent of Senior Housing's independent
trustees.
Messrs. Portnoy and Martin own Reit Management. The continuation of the advisory agreement and the
The fees paid by Senior Housing to Reit Management fees payable to Reit Management will be subject to
are based in part upon the size of Senior Housing's periodic review and approval by Senior Housing's
investment portfolio. These circumstances might independent trustees. The incentive fees payable to
provide an economic incentive for Reit Management Reit Management will be based upon increases in
and Messrs. Portnoy and Martin to encourage Senior FFO per share and will be paid in shares of Senior
Housing's investments to raise fees. Housing.
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<CAPTION>
Conflict Policy
- -------- ------
<S> <C>
After the spin-off, HRPT will own 12.8 million HRPT does not intend to purchase additional shares
shares, 49%, of Senior Housing's shares. This will of Senior Housing. Over time, as Senior Housing
afford HRPT considerable influence over Senior issues shares to fund its growth, HRPT's ownership
Housing shareholder actions. Sales of these shares by percentage will decline. So long as HRPT owns over
HRPT could depress the market price of Senior 10% of Senior Housing's shares, no one will serve
Housing's shares. simultaneously as an independent trustee of both
Senior Housing and HRPT. HRPT has agreed to
not sell its Senior Housing shares for one
year following the spin-off without the consent of
Senior Housing's independent trustees.
Mr. Portnoy, one of the Senior Housing's managing Mr. Portnoy will not participate in the review or
trustees, was a partner and chairman of Sullivan & approval of any fees payable by Senior Housing to
Worcester, LLP, Senior Housing's counsel. Mr. Sullivan & Worcester, LLP.
Portnoy retired from that firm in 1997 and will receive
payments from that firm for the next five years in
respect of his retirement.
Other conflicts may develop from time to time. A majority of Senior Housing's board of trustees will
consist of independent trustees who are not
employees of Reit Management and who do not
participate in its day to day activities. No trustee or
officer will participate in decisions made by Senior
Housing in which he or she has a material adverse
interest. Reit Management and all the trustees and
officers of Senior Housing are required by applicable
laws to act in accordance with their fiduciary
responsibilities to Senior Housing, and it is Senior
Housing's policy that those laws be followed.
</TABLE>
Policies with Respect to Other Activities
Senior Housing expects to operate in a manner that will not subject it to
regulation under the Investment Company Act of 1940. Except for the possible
acquisition of other REITs which are engaged in similar businesses, Senior
Housing does not currently intend to invest in the securities of other companies
for the purpose of exercising control, to underwrite securities of other
companies or to trade actively in loans or other investments.
Senior Housing may make investments other than as previously described,
although it does not currently intend to do so. Senior Housing has authority to
repurchase or otherwise reacquire its shares or other securities it issues and
may do so in the future. In the future, Senior Housing may issue shares or other
securities in exchange for property. Also, although it has no current intention
to do so, Senior Housing may make loans to third parties, including to Senior
Housing's trustees and officers and to joint ventures in which it participates.
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MATERIAL PROVISIONS OF MARYLAND LAW AND OF
SENIOR HOUSING'S DECLARATION OF TRUST AND BYLAWS
Senior Housing is organized as a perpetual life Maryland real estate
investment trust. The following is a summary of Senior Housing's declaration of
trust and bylaws and several provisions of Maryland law. Because it is a
summary, it does not contain all the information that may be important to you.
If you want more information, you should read Senior Housing's entire
declaration of trust and bylaws, copies of which are exhibits to the
registration statement of which this prospectus is a part or refer to the
provisions of Maryland law.
Trustees
Senior Housing's declaration and bylaws provide that the board of trustees
will establish the number of trustees. There may not be less than three nor more
than seven trustees. In the event of a vacancy, a majority of the remaining
trustees will fill the vacancy, except that a majority of the entire board of
trustees must fill a vacancy resulting from an increase in the number of
trustees. Senior Housing's bylaws require that a majority of its trustees will
be independent trustees except for temporary periods due to vacancies.
Senior Housing's declaration of trust divides the board of trustees into
three classes. The initial term of the first class will expire in 2000; the
initial term of the second class will expire in 2001; and the initial term of
the third class will expire in 2002. Beginning in 2000, shareholders will elect
trustees of each class for three-year terms upon the expiration of their current
terms. Shareholders will elect only one class of trustees each year. Senior
Housing believes that classification of the board will help to assure the
continuity of Senior Housing's business strategies and policies. There will be
no cumulative voting in the election of trustees. Consequently, at each annual
meeting of shareholders, the holders of a majority of Senior Housing's shares
will be able to elect all of the successors of the class of trustees whose terms
expire at that meeting.
The classified board provision could have the effect of making the
replacement of incumbent trustees more time consuming and difficult. At least
two annual meetings of shareholders will generally be required to effect a
change in a majority of the board of trustees.
The declaration of trust provides that a trustee may be removed with or
without cause by the affirmative vote of at least two-thirds of the shares
entitled to be cast in the election of trustees. This provision precludes
shareholders from removing incumbent trustees unless they can obtain a
substantial affirmative vote of shares.
Advance Notice of Trustee Nominations and New Business
Senior Housing's bylaws provide that nominations of persons for election to
the board of trustees and proposals for business to be considered at shareholder
meetings may be made only in Senior Housing's notice of the meeting, by the
board of trustees, or by a shareholder who is entitled to vote at the meeting
and has complied with the advance notice procedures set forth in the bylaws.
Under Senior Housing's bylaws, a shareholder's notice of nominations for
trustee or other matters to be considered at a shareholders meeting must be
delivered to Senior Housing's secretary at Senior Housing's principal office not
later than the close of business on the 90th day and not earlier than the 120th
day prior to the first anniversary of the preceding year's annual meeting. In
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from the anniversary date, or if Senior Housing
has not previously held an annual meeting, a shareholder's notice must be
delivered not later than the later of 90 days prior to the annual meeting or the
10th day following the day on which Senior Housing first makes a public
announcement of the date of the meeting. Any notice from a shareholder of
nominations for trustee or other matters to be considered at a shareholder
meeting must contain the following:
o as to each person nominated for election as a trustee, all information
relating to the person that is required to be disclosed in
solicitations of proxies for election of trustees or otherwise
required by
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Regulation 14A under the Securities Exchange Act of 1934, together
with the nominee's written consent to being named in the proxy
statement as a nominee and to serving as a trustee if elected;
o as to other business that the shareholder proposes to bring before the
meeting, a brief description of the business, the reasons for
conducting the business and any material interest in the business of
the shareholder and of the beneficial owner, if any, on whose behalf
the proposal is made; and
o as to the shareholder giving the notice and the beneficial owner, if
any, on whose behalf the nomination or proposal is made, the name and
address of the shareholder and beneficial owner and the number of
Senior Housing's shares which (s)he or they own beneficially and of
record.
Meetings of Shareholders
Under Senior Housing's bylaws, Senior Housing's annual meeting of
shareholders will take place on the second Thursday of May of each year, unless
a different date is set by the board of trustees. All meetings of shareholders
may be called only by the board of trustees.
Liability and Indemnification of Trustees and Officers
To the maximum extent permitted by Maryland law, Senior Housing's
declaration of trust and bylaws include provisions limiting the liability of
Senior Housing's present and former trustees, officers and shareholders for
damages and obligating Senior Housing to indemnify them against any claim or
liability to which they may become subject by reason of their status or actions
as present or former Senior Housing trustees, officers or shareholders. Senior
Housing's bylaws also obligate it to pay or reimburse the people described above
for reasonable expenses in advance of final disposition of a proceeding.
Maryland law permits a real estate investment trust to indemnify and
advance expenses to its trustees, officers, employees and agents to the same
extent permitted by the Maryland General Corporation Law for directors and
officers of Maryland corporations. The Maryland corporation statute permits a
corporation to indemnify its present and former directors and officers against
judgments, penalties, fines, settlements and reasonable expenses incurred in
connection with any proceeding to which they may be made a party by reason of
their service in those capacities. However, a Maryland corporation is not
permitted to provide this type of indemnification if the following is
established:
o the act or omission of the director or officer was material to the
matter giving rise to the proceeding and was committed in bad faith or
was the result of active and deliberate dishonesty;
o the director or officer actually received an improper personal benefit
in money, property or services; or
o in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful.
The Maryland corporation statute permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of the
following:
o a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for
indemnification by the corporation; and
o a written undertaking by him or on his behalf to repay the amount paid
or reimbursed by the corporation if it is ultimately determined that
this standard of conduct was not met.
The SEC has expressed the opinion that indemnification of trustees,
officers or persons otherwise controlling a company for liabilities arising
under the Securities Act of 1933 is against public policy and is therefore
unenforceable.
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Shareholder Liability
Under the Maryland REIT statute, a shareholder is not personally liable for
the obligations of a real estate investment trust solely as a result of his
status as a shareholder. Senior Housing's declaration of trust provides that no
shareholder will be liable for any debt, claim, demand, judgment or obligation
of any kind of, against or with respect to, Senior Housing by reason of being a
shareholder. Despite these facts, Senior Housing's legal counsel has advised it
that in some jurisdictions the possibility exists that shareholders of a trust
entity such as Senior Housing may be held liable for acts or obligations of the
trust. While Senior Housing intends to conduct its business in a manner designed
to minimize potential shareholder liability, it can give no assurance that you
can avoid liability in all instances in all jurisdictions. Senior Housing's
trustees do not intend to provide insurance covering these risks to Senior
Housing's shareholders.
Maryland Asset Requirements
To maintain Senior Housing's qualification as a real estate investment
trust, the Maryland REIT statute requires that at least 75% of the value of
Senior Housing's assets be real estate, mortgages or mortgage-related
securities, government securities, cash and cash equivalent items, including
short-term securities and receivables. The Maryland REIT statute also prohibits
Senior Housing from using or applying land for farming, agricultural,
horticultural or similar purposes.
Transactions with Affiliates
Senior Housing's declaration of trust allows it to enter into contracts and
transactions of any kind with any person, including any of Senior Housing's
trustees, officers, employees or agents or any person affiliated with them.
Other than general legal principles applicable to self-dealing by fiduciaries,
there are no prohibitions in Senior Housing's declaration or bylaws which would
prohibit dealings between Senior Housing and its affiliates.
Voting by Shareholders
Whenever shareholders are required or permitted to take any action by a
vote, the action may only be taken by a vote at a shareholders meeting. Under
Senior Housing's declaration and bylaws shareholders do not have the right to
take any action by written consents instead of a vote.
Restrictions on Transfer of Shares
Senior Housing's declaration of trust restricts the amount of shares that
individual shareholders may own. These restrictions are intended to assist with
REIT compliance under the Internal Revenue Code and otherwise to promote Senior
Housing's orderly governance. These restrictions do not apply to HRPT, Reit
Management or their affiliates. All certificates evidencing Senior Housing
shares will bear a legend referring to these restrictions.
Senior Housing's declaration of trust provides that no person may own, or
be deemed to own by virtue of the attribution provisions of the Internal Revenue
Code, more than 9.8% of the number or value of Senior Housing's outstanding
shares. Senior Housing's declaration also prohibits any person from beneficially
or constructively owning shares if that ownership would result in Senior Housing
being closely held under Section 856(h) of the Internal Revenue Code or would
otherwise cause it to fail to qualify as a REIT.
Senior Housing's board of trustees, in its discretion, may exempt a
proposed transferee from the share ownership limitation. So long as the board of
trustees determines that it is in Senior Housing's best interest to qualify as a
REIT, the board may not grant an exemption if the exemption would result in
Senior Housing failing to qualify as a REIT. In determining whether to grant an
exemption, the board of trustees may consider, among other factors, the
following:
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o the general reputation and moral character of the person requesting an
exemption;
o whether the person's ownership of shares would adversely affect Senior
Housing's ability to acquire additional properties; and
o whether granting an exemption would adversely affect any of Senior
Housing's existing contractual arrangements or business policies.
In addition, the board of trustees may require rulings from the Internal Revenue
Service, opinions of counsel, affidavits, undertakings or agreements it deems
advisable in order to make the foregoing decisions.
If a person attempts a transfer of Senior Housing's shares in violation of
the ownership limitations described above, then that number of shares which
would cause the violation will be automatically transferred to a trust for the
exclusive benefit of one or more charitable beneficiaries designated by Senior
Housing. The prohibited owner will not acquire any rights in these excess
shares, will not benefit economically from ownership of any excess shares, will
have no rights to distributions and will not possess any rights to vote. This
automatic transfer will be deemed to be effective as of the close of business on
the business day prior to the date of the violative transfer.
Within 20 days of receiving notice from Senior Housing that its shares have
been transferred to an excess share trust, the excess share trustee will sell
the shares held in the excess share trust to a person designated by the excess
share trustee whose ownership of the shares will not violate the ownership
limitations set forth in Senior Housing's declaration of trust. Upon this sale,
the interest of the charitable beneficiary in the shares sold will terminate and
the excess share trustee will distribute the net proceeds of the sale to the
prohibited owner and to the charitable beneficiary as follows:
o The prohibited owner will receive the lesser of:
(1) the price paid by the prohibited owner for the shares or, if the
prohibited owner did not give value for the shares in connection
with the event causing the shares to be held in the excess share
trust, e.g., a gift, devise or other similar transaction, the
market price of the shares on the day of the event causing the
shares to be transferred to the excess share trust; and
(2) the net price received by the excess share trustee from the sale
of the shares held in the excess share trust.
o Any net sale proceeds in excess of the amount payable to the prohibited
owner shall be paid to the charitable beneficiary.
If, prior to Senior Housing's discovery that shares of beneficial interest
have been transferred to the excess share trust, a prohibited owner sells those
shares, then:
(1) those shares will be deemed to have been sold on behalf of the
excess share trust; and
(2) to the extent that the prohibited owner received an amount for
those shares that exceeds the amount that the prohibited owner
was entitled to receive from a sale by an excess share trustee,
the prohibited owner must pay the excess to the excess share
trustee upon demand.
Also, shares of beneficial interest held in the excess share trust will be
offered for sale to Senior Housing, or its designee, at a price per share equal
to the lesser of:
(1) the price per share in the transaction that resulted in the
transfer to the excess share trust or, in the case of a devise or
gift, the market price at the time of the devise or gift; and
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(2) the market price on the date Senior Housing or its designee,
accept the offer.
Senior Housing will have the right to accept the offer until the excess share
trustee has sold the shares held in the excess share trust. The net proceeds of
the sale to Senior Housing will be distributed similar to any other sale by an
excess share trustee.
Every owner of more than 5% of all classes or series of Senior Housing's
shares is required to give written notice to Senior Housing within 30 days after
the end of each taxable year stating the name and address of the owner, the
number of shares of each class and series of Senior Housing's shares which the
owner beneficially owns, and a description of the manner in which those shares
are held. If the Internal Revenue Code or applicable tax regulations specify a
threshold below 5%, this notice provision will apply to those persons who own
Senior Housing's shares of beneficial interest at the lower percentage. In
addition, each shareholder is required to provide Senior Housing upon demand
with any additional information that it may request in order to determine Senior
Housing's status as a REIT, to determine Senior Housing's compliance with the
requirements of any taxing authority or government and to determine and ensure
compliance with the foregoing share ownership limitations.
The restrictions described above will not preclude the settlement of any
transaction entered into through the facilities of the NYSE or any other
national securities exchange or automated inter-dealer quotation system. The
declaration of trust provides, however, that the fact that the settlement of any
transaction occurs will not negate the effect of any of the foregoing
limitations and any transferee in this kind of transaction will be subject to
all of the provisions and limitations described above.
Business Combinations
The Maryland corporation statute contains a provision which regulates
business combinations with interested shareholders. This provision applies to
Maryland real estate investment trusts like Senior Housing. Under the Maryland
corporation statute, business combinations such as mergers, consolidations,
share exchanges and the like between a Maryland real estate investment trust and
an interested shareholder are prohibited for five years after the most recent
date on which the shareholder becomes an interested shareholder. Under the
statute the following persons are deemed to be interested shareholders:
o any person who beneficially owns 10% or more of the voting power of
the trust's shares;
o an affiliate or associate of the trust who, at any time within the
two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the then outstanding
voting shares of the trust; or
o an affiliate of an interested shareholder.
After the five-year prohibition period has ended, a business combination
between a trust and an interested shareholder must be recommended by the board
of trustees of the trust and must receive the following shareholder approvals:
o the affirmative vote of at least 80% of the votes entitled to be cast;
and
o the affirmative vote of at least two-thirds of the votes entitled to
be cast by holders of shares other than shares held by the interested
shareholder with whom or with whose affiliate or associate the
business combination is to be effected.
The second shareholder approval is not required if the trust's shareholders
receive the minimum price set forth in the Maryland corporation statute for
their shares and the consideration is received in cash or in the same form as
previously paid by the interested shareholder for its shares.
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The foregoing provisions of the Maryland corporation statute do not apply,
however, to business combinations that are approved or exempted by the board of
trustees of the trust prior to the time that the interested shareholder becomes
an interested shareholder. Senior Housing's board of trustees has adopted a
resolution that any business combination between Senior Housing and any other
person is exempted from the provisions of the Maryland corporation statute
described in the preceding paragraphs, provided that the business combination is
first approved by the board of trustees, including the approval of a majority of
the members of the board of trustees who are not affiliates or associates of the
acquiring person. This resolution, however, may be altered or repealed in whole
or in part at any time.
Control Share Acquisitions
The Maryland corporation statute contains a provision which regulates
control share acquisitions. This provision also applies to Maryland real estate
investment trusts. The Maryland corporation statute provides that control shares
of a Maryland real estate investment trust acquired in a control share
acquisition have no voting rights except to the extent that the acquisition is
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of beneficial interest owned by the acquiror, by officers or by
trustees who are employees of the trust. Control shares are voting shares of
beneficial interest which, if aggregated with all other shares of beneficial
interest previously acquired by the acquiror, or in respect of which the
acquiror is able to exercise or direct the exercise of voting power, would
entitle the acquiror to exercise voting power in electing trustees within one of
the following ranges of voting power:
o one-fifth or more but less than one-third,
o one-third or more but less than a majority, or
o a majority or more of all voting power.
An acquiror must obtain the necessary shareholder approval each time he acquires
control shares in an amount sufficient to cross one of the thresholds noted
above.
Control shares do not include shares which the acquiring person is entitled
to vote as a result of having previously obtained shareholder approval by virtue
of a revocable proxy. The Maryland corporation statute provides a list of
exceptions from the definition of control share acquisition.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of the conditions set forth in the statute, including an
undertaking to pay expenses, may compel the board of trustees of the trust to
call a special meeting of shareholders to be held within 50 days of demand to
consider the voting rights of the shares. If no request for a meeting is made,
the trust may itself present the matter at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then
the trust may redeem any or all of the control shares for fair value determined
as of the date of the last control share acquisition by the acquiror or of any
meeting of shareholders at which the voting rights of those shares are
considered and not approved. The right of the trust to redeem any or all of the
control shares is subject to conditions and limitations listed in the statute.
The trust may not redeem shares for which voting rights have previously been
approved. Fair value is determined without regard to the absence of voting
rights for the control shares. If voting rights for control shares are approved
at a shareholders meeting and the acquiror becomes entitled to vote a majority
of the shares entitled to vote, all other shareholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of these
appraisal rights may not be less than the highest price per share paid by the
acquiror in the control share acquisition.
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The control share acquisition statute does not apply to the following:
o shares acquired in a merger, consolidation or share exchange if the
trust is a party to the transaction; or
o acquisitions approved or exempted by a provision in the declaration of
trust or bylaws of the trust adopted before the acquisition of shares.
Senior Housing's bylaws contain a provision exempting any and all
acquisitions by any person of Senior Housing's shares of beneficial interest
from the control share acquisition statute. This provision may be amended or
eliminated at any time in the future.
Amendment to the Declaration of Trust, Dissolution and Mergers
Under the Maryland REIT statute, a real estate investment trust generally
cannot dissolve, amend its declaration of trust or merge, unless these actions
are approved by at least two-thirds of all shares entitled to be cast on the
matter. The statute allows a trust's declaration of trust to set a lower
percentage, so long as the percentage is not less than a majority. Senior
Housing's declaration of trust provides for approval of any of the foregoing
actions by a majority of shares entitled to vote on these actions provided the
action in question has been approved by the Senior Housing board of trustees.
The declaration of trust further provides that if permitted in the future by
Maryland law, the majority required to approve any of the foregoing actions will
be the majority of shares voted. Under the Maryland REIT statute, a declaration
of trust may permit the trustees by a two-thirds vote to amend the declaration
of trust from time to time to qualify as a real estate investment trust under
the Internal Revenue Code or the Maryland REIT statute without the affirmative
vote or written consent of the shareholders. Senior Housing's declaration of
trust permits this type of action by the board of trustees.
Anti-takeover Effect of Maryland Law and of the Declaration of Trust and Bylaws
The following provisions in Senior Housing's declaration and bylaws and in
Maryland law could delay or prevent a change in control of Senior Housing:
o the limitation on ownership and acquisition of more than 9.8% of
Senior Housing shares;
o the classification of the board of trustees into classes and the
election of each class for three-year staggered terms;
o the requirement of a two-thirds majority vote of shareholders for
removal of trustees;
o the facts that the board can increase the size of the board to create
a vacancy and fill it and that shareholders are not entitled to act
without a meeting;
o the provision that only the board of trustees may call meetings of
shareholders;
o the advance notice requirements for shareholder nominations for
trustees and other proposals;
o the control share acquisitions provisions of Maryland law, if the
applicable provisions in Senior Housing's bylaws are rescinded;
o the business combination provisions of Maryland law, if the applicable
resolution of the board of trustees is rescinded or if the board of
trustees' approval of a combination is not obtained; and
o the ability of the board of trustees to authorize and issue additional
shares, including additional classes of shares with rights defined at
the time of issuance, without shareholder approval.
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DESCRIPTION OF SENIOR HOUSING SECURITIES
The following is a summary description of the Senior Housing's shares of
beneficial interest. Because it is a summary, it does not contain all of the
information that may be important to you. If you want more information, you
should read Senior Housing's declaration of trust and bylaws, copies of which
are exhibits to the registration statement of which this prospectus is a part.
General
Senior Housing's declaration of trust provides that it may issue up to 50
million shares of beneficial interest, $0.01 par value per share, all of which
have been classified as common shares. Upon completion of the spin-off, 26
million common shares will be issued and outstanding.
As permitted by the Maryland REIT statute, Senior Housing's declaration of
trust also contains a provision permitting the board of trustees, without any
action by Senior Housing's shareholders, to amend the declaration of trust to
increase or decrease the total number of shares of beneficial interest, to issue
new and different classes of shares in any amount or to reclassify any unissued
shares into other classes or series of classes that it chooses. Senior Housing
believes that giving these powers to its board of trustees will provide it with
increased flexibility in structuring possible future financings and acquisitions
and in meeting other business needs which might arise. Although the board of
trustees has no intention at the present time of doing so, it could authorize
Senior Housing to issue a class or series that could, depending upon the terms
of the class or series, delay or prevent a change in control of Senior Housing.
Common Shares
All Senior Housing common shares to be distributed in the spin-off will be
duly authorized, fully paid and nonassessable. Subject to the preferential
rights of any other class or series of shares which may be issued and to the
provisions of the declaration of trust regarding the restriction of the
ownership of shares of beneficial interest, holders of common shares are
entitled to the following:
o to receive distributions on their shares if, as and when authorized and
declared by Senior Housing's board of trustees out of assets legally
available for distribution; and
o to share ratably in Senior Housing's assets legally available for
distribution to its shareholders in the event of its liquidation,
dissolution or winding up after payment of or adequate provision for
all of its known debts and liabilities.
Subject to the provisions of the declaration of trust regarding the
restriction on the transfer of shares of beneficial interest, each outstanding
common share entitles the holder to one vote on all matters submitted to a vote
of shareholders, including the election of trustees.
Holders of common shares have no preference, conversion, exchange, sinking
fund, redemption or appraisal rights.
Shareholders will have no preemptive rights to subscribe for any of Senior
Housing's securities. Subject to the provisions of the declaration of trust
regarding the restriction on ownership of shares of beneficial interest, common
shares will have equal distribution, liquidation and other rights.
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SENIOR HOUSING PRINCIPAL SHAREHOLDERS
The following table displays information regarding the beneficial ownership
of Senior Housing's common shares by each person Senior Housing knows to own
beneficially more than 5% of its outstanding common shares, each of Senior
Housing's trustees and executive officers and all of Senior Housing's trustees
and executive officers as a group. Unless otherwise noted, each person or entity
has sole voting and investment power with respect to all shares shown.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before The Spin-Off After The Spin-Off(5)
-------------------------- --------------------------
Number Number
Name and Address(1) of Shares Percent of Shares Percent
- ------------------- ---------- ------- ------------ ---------
<S> <C> <C> <C> <C>
HRPT........................................ 26,000,000 100% 12,809,237 49.3%
Barry M. Portnoy(2)......................... -- -- 12,927,159 49.7%
Gerard M. Martin(2)......................... -- -- 12,927,159 49.7%
Bruce M. Gans, M.D.......................... -- -- 200 *
Arthur G. Koumantzelis...................... -- -- 319 *
David J. Hegarty(3)......................... -- -- 2,670 *
Ajay Saini(4)............................... -- -- 1,352 *
All Trustees and executive officers as a
group (six persons)......................... -- -- 12,936,185 49.8%
- -------------------------
<FN>
* Less than 1%.
(1) The address of HRPT is 400 Centre Street, Newton, Massachusetts 02458. The address of each other named
person or entity is c/o Senior Housing Properties Trust, 400 Centre Street, Newton, Massachusetts 02458.
(2) Messrs. Portnoy and Martin are each managing trustees of HRPT. Accordingly, Messrs. Portnoy and Martin
may be deemed to have beneficial ownership of the shares indicated in the table as owned by HRPT. Messrs.
Portnoy and Martin indirectly will jointly own 113,437 shares. Each of Messrs. Portnoy and Martin
individually own 4,485 shares.
(3) Includes 230 shares held jointly by Mr. Hegarty and his wife.
(4) Includes 50 shares in Mr. Saini's IRA account and two shares as custodian for Mr. Saini's minor daughter.
(5) The number of shares and percentages presented assumes that 131.9 million HRPT shares are outstanding on
the record date. If all of the outstanding HRPT convertible subordinated debentures were converted at $18
per share to HRPT common shares on or prior to the record date, the number of shares and applicable
percentages would be as follows: HRPT, 11.7 million shares (44.9%); Barry M. Portnoy, 11.8 million shares
(45.3%); Gerard M. Martin 11.8 million shares (45.3%); and all trustees and executive officers as a group
(six persons), 11.8 million shares (45.4%).
</FN>
</TABLE>
FEDERAL INCOME TAX AND ERISA CONSEQUENCES
General
The following summary description of federal income tax and ERISA
consequences relating to HRPT, Senior Housing and their respective shareholders
supplements the description of these matters in our annual report on Form 10-K
for the year ended December 31, 1998. Sullivan & Worcester LLP, Boston,
Massachusetts, has rendered a legal opinion that the discussions in this section
are accurate in all material respects and fairly summarize the federal income
tax and ERISA issues of the spin-off, and the opinions of counsel referred to in
this section represent Sullivan & Worcester LLP's opinions on those subjects.
Specifically, subject to the qualifications and assumptions contained in its
opinions and in this prospectus, Sullivan and Worcester LLP has rendered
opinions to the effect that:
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o we have been organized and have qualified as a REIT under the Internal
Revenue Code of 1986, as amended, for our 1987 through 1998 taxable years,
and our current investments and plan of operation will enable us to
continue to meet the requirements for qualification and taxation as a REIT
under the Internal Revenue Code; our actual qualification as a REIT,
however, will depend upon our ability to meet, and our meeting, through
actual annual operating results and distributions, the various REIT
qualification tests imposed under the Internal Revenue Code;
o under the Department of Labor's ERISA "plan assets" regulations, our common
shares are publicly offered securities and our assets will not be deemed
plan assets under ERISA;
o for its 1999 taxable year that commences on the date of the spin-off,
Senior Housing will be organized as a REIT under the Internal Revenue Code,
and its current investments and plan of operation will enable it to meet
the requirements for qualification and taxation as a REIT under the
Internal Revenue Code; Senior Housing's actual qualification as a REIT,
however, will depend upon its ability to meet, and its meeting, through
actual annual operating results and distributions, the various REIT
qualification tests imposed under the Internal Revenue Code; and
o under the plan assets regulations, Senior Housing's common shares will be
publicly offered securities and its assets will not be deemed plan assets
under ERISA.
These opinions are conditioned upon the assumption that our and Senior Housing's
leases, our and Senior Housing's declarations of trust and Bylaws, the
transaction agreement, and all other legal documents to which we or Senior
Housing are or have been a party to have been and will be complied with by all
parties to these documents, upon the accuracy and completeness of the factual
matters described in this prospectus, and upon representations we and Senior
Housing have made. The opinions of Sullivan & Worcester LLP are based on the law
as it exists today, but the law may change in the future, possibly with
retroactive effect. Also, an opinion of counsel is not binding on the Internal
Revenue Service or the courts, and the IRS or a court could take a position
different from that expressed by counsel.
The following summary of federal income tax and ERISA consequences is based
on existing law, and is limited to investors who own our shares and Senior
Housing shares as investment assets rather than as inventory or as property used
in a trade or business. The summary does not discuss the particular tax
consequences that might be relevant to you if you are subject to special rules
under the federal income tax law, for example if you are:
o a bank, life insurance company, regulated investment company, or other
financial institution,
o a broker or dealer in securities or foreign currency,
o a person who has a functional currency other than the U.S. dollar,
o a person who acquires our shares or Senior Housing shares in connection
with his employment or other performance of services,
o a person subject to alternative minimum tax,
o a person who owns our shares or Senior Housing shares as part of a
straddle, hedging transaction, or conversion transaction, or
o except as specifically described in the following summary, a tax-exempt
entity or a foreign person.
The sections of the Internal Revenue Code that govern the federal income tax
qualification and treatment of a REIT and its shareholders are complex. This
summary is thus qualified by applicable Internal Revenue Code provisions,
related rules and regulations and administrative and judicial interpretations,
all of which are subject
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to change, possibly with retroactive effect. Future legislative, judicial, or
administrative actions or decisions could affect the accuracy of statements made
in this summary. Neither we nor Senior Housing has sought a ruling from the IRS
with respect to any matter described in this summary, and neither we nor Senior
Housing can assure you that the IRS or a court will agree with the statements
made in this summary. In addition, the following summary is not exhaustive of
all possible tax consequences, and does not discuss any state, local, or foreign
tax consequences. For all these reasons, we urge you and any prospective
acquiror of Senior Housing shares to consult with a tax advisor about the
federal income tax and other tax consequences of the acquisition, ownership and
disposition of our shares, as well as the acquisition, ownership and disposition
of Senior Housing shares.
Federal income tax consequences may differ depending on whether or not a
person is a "U.S. person." For purposes of this summary, a U.S. person for
federal income tax purposes is:
o a citizen or resident of the United States, including an alien individual
who is a lawful permanent resident of the United States or meets the
substantial presence residency test under the federal income tax laws,
o a corporation, partnership or other entity treated as a corporation or
partnership for federal income tax purposes, that is created or organized
in or under the laws of the United States, any state thereof or the
District of Columbia, unless otherwise provided by Treasury regulations,
o an estate the income of which is subject to federal income taxation
regardless of its source, or
o a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust, or electing trusts in existence on August 20, 1996 to the extent
provided in Treasury regulations,
whose status as a U.S. person is not overridden by an applicable tax treaty.
Federal Income Tax Consequences of the Spin-Off to Our Shareholders
In General. Our distribution of Senior Housing shares in the spin-off will
affect us and our shareholders in the same manner as any other distribution of
cash or property we make. These tax consequences are summarized below:
o We generally are not subject to tax on our net income to the extent we
distribute it to our shareholders.
o Distributions to you out of our current or accumulated earnings and profits
that we do not designate as capital gain dividends generally will be taken
into account by you as ordinary income dividends. To the extent of our net
capital gain for the taxable year, we may designate dividends as capital
gain dividends that will be taxable to you as long-term capital gain.
o Distributions in excess of our current and accumulated earnings and profits
will not be taxable to you to the extent that they do not exceed your
adjusted basis in our shares, but rather will reduce the adjusted basis in
those shares.
o Distributions in excess of our current and accumulated earnings and profits
that exceed your adjusted basis in our shares generally will be taxable as
capital gain from the sale of those shares.
o Our current earnings and profits for a year will be allocated among each of
the distributions for that year, in proportion to the amount of each
distribution.
o Because we are a REIT, neither our ordinary income dividends nor our
capital gain dividends will qualify for any dividends received deduction
for our corporate shareholders.
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Accordingly, the spin-off of Senior Housing shares will be treated as a
distribution by us to our shareholders in the amount of the fair market value of
the Senior Housing shares distributed. We expect that a portion of this
distribution will be taxable to you as a dividend and a portion will be treated
as a tax-free reduction in your adjusted basis in our shares. You will have a
tax basis in the Senior Housing shares you receive equal to their fair market
value at the time of the spin-off, and your holding period in those shares
commences on the day after the spin-off.
We believe that for all federal income tax purposes each Senior Housing
share may be properly valued on the distribution date as the average of the
reported high and low trading prices for Senior Housing shares in the public
market on that date, and we will perform all our tax reporting, including
statements supplied to you and to the IRS, on the basis of this average price,
called the distribution price. However, it is possible that for federal income
tax purposes the fair market value of a Senior Housing share that we distribute
will differ from the fair market value of a Senior Housing share received by you
in the distribution. Because of the factual nature of the value of the Senior
Housing shares distributed by us and the value of the Senior Housing shares
received by each of you, our counsel is unable to render an opinion on these
values.
As described in more detail below, although the amount and extent to which
we recognize gains and losses in the spin-off is not free from doubt, we expect:
(1) to recognize a significant portion of the gains, but none of the losses, on
Senior Housing's properties and other assets; and (2) to recognize gains but not
losses on our distribution of Senior Housing shares. We will perform all our tax
reporting, including statements sent to the IRS and to you, on this basis, but
we could in the future be required to amend these tax reports if the IRS
successfully challenges our interpretation of the federal income tax laws on
these points. Gains that we recognize in the spin-off will increase our 1999
current earnings and profits, and this will increase the total amount of our
1999 distributions, including the distribution of Senior Housing shares, that is
taxable as a dividend to you. Computing the amount of these gains and the
additional taxable dividend amount is a complex calculation which requires
information, including the distribution price for Senior Housing shares at the
time of the spin-off and market values for Senior Housing properties and other
assets at the time of the spin-off, that is not available at this time. Based on
our current market value assumptions, on the total number of our shares
presently outstanding, and on an assumed distribution price for Senior Housing
shares of $24 per share, we estimate that if you own one of our common shares
for the entire 1999 calendar year, then as a result of the Senior Housing
spin-off you will have an additional taxable dividend of approximately $1.30 per
share. For higher Senior Housing share distribution prices, the additional
taxable dividend amount would be higher, and for lower distribution prices the
additional taxable dividend amount would be lower. Based on our current
assumptions, we estimate that the additional taxable dividend may fluctuate by
up to $0.20 per HRPT share for each $1 fluctuation in the distribution price for
Senior Housing shares. However, a definitive additional taxable dividend
computation will not be possible until after the spin-off.
To the extent we can, we intend to designate a portion of any additional
taxable dividend as a capital gain dividend that generally will be subject to
tax at the maximum capital gain rates of 20% and 25% in the case of our
noncorporate shareholders.
Taxation of Tax-Exempt Entities. Tax-exempt entities are generally not
subject to federal income taxation except to the extent of their "unrelated
business taxable income," often referred to as UBTI, as defined in Section
512(a) of the Internal Revenue Code. As with our other distributions, the
distribution of Senior Housing shares to you if you are a tax-exempt entity
should generally not constitute UBTI, provided that you have not financed the
acquisition of our shares with acquisition indebtedness within the meaning of
Section 514 of the Internal Revenue Code. However, if you are a tax-exempt
pension trust, including a so-called 401(k) plan but excluding an individual
retirement account or government pension plan, that owns more than 10% by value
of a pension-held REIT, then you may have to report a portion of the dividends
that you receive from the REIT as UBTI. Although we cannot provide complete
assurance on this matter, we believe that we have not been and will not become a
pension-held REIT.
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Taxation of Non-U.S. Persons. If you are a non-U.S. person, the spin-off of
Senior Housing shares will generally be taxable to you in the same manner as any
other distribution of cash or property that we make to you. The rules governing
the federal income taxation of non-U.S. persons are complex, and the following
discussion is intended only as a summary of these rules. If you are a non-U.S.
person, you should consult with your own tax advisor to determine the impact of
federal, state, local, and foreign tax laws, including any tax return filing and
other reporting requirements, with respect to the spin-off of Senior Housing
shares and your investment in our shares.
You will generally be subject to regular federal income tax in the same
manner as a U.S. person with respect to the spin-off of Senior Housing shares
and your investment in our shares, if this investment is effectively connected
with your conduct of a trade or business in the United States. In addition, if
you are a corporate shareholder, your income that is effectively connected with
a trade or business in the United States may also be subject to the 30% branch
profits tax under Section 884 of the Internal Revenue Code, which is payable in
addition to regular federal corporate income tax. The balance of this summary
addresses only those non-U.S. persons whose investment in our common shares is
not effectively connected with the conduct of a trade or business in the United
States.
We are not at this time designating the distribution of Senior Housing
shares as a capital gain dividend that is subject to 35% withholding for
non-U.S. persons, and accordingly the 30% or applicable lower treaty rate
withholding will be imposed upon the fair market value of Senior Housing shares
that we distribute to you. We or other applicable withholding agents will
collect the amount required to be withheld by reducing to cash for remittance to
the IRS a sufficient portion of the Senior Housing shares that you would
otherwise receive, and you will bear the brokerage or other costs for this
withholding procedure. Because we cannot determine our current and accumulated
earnings and profits until the end of our taxable year, withholding at the rate
of 30% or applicable lower treaty rate will be imposed on the gross fair market
value of the Senior Housing shares distributed to you. Notwithstanding this and
other withholding on distributions in excess of our current and accumulated
earnings and profits, these distributions are a nontaxable return of capital to
the extent that they do not exceed your adjusted basis in our shares, and the
nontaxable return of capital will reduce your adjusted basis in these shares. To
the extent that distributions in excess of current and accumulated earnings and
profits exceed your adjusted basis in our shares, the distributions will give
rise to tax liability only if you would otherwise be subject to tax on any gain
from the sale or exchange of our shares. Your gain from the sale or exchange of
our shares will not be taxable if: (1) our shares are "regularly traded" within
the meaning of Treasury regulations under Section 897 of the Internal Revenue
Code and you have at all times during the preceding five years owned 5% or less
by value of our outstanding shares, or (2) we are a "domestically controlled
REIT" within the meaning of Section 897 of the Internal Revenue Code. Although
we cannot provide complete assurance on this matter, we believe that our shares
are regularly traded and that we are a domestically controlled REIT. You may
seek a refund of amounts withheld on distributions to you in excess of our
current and accumulated earnings and profits, provided that you furnish the
required information to the IRS.
We expect that a portion of some or all of our 1999 distributions will be
treated for federal income tax purposes as attributable to our dispositions of
United States real property interests. To the extent that a portion of any of
our distributions, including the distribution of Senior Housing shares, is
attributable to our disposition of United States real property interests, you
will be subject to tax on this portion as though it were gain effectively
connected with a trade or business in the United States conducted. Accordingly,
you will be taxed on these amounts at the capital gain rates applicable to a
U.S. person, subject to any applicable alternative minimum tax and to a special
alternative minimum tax in the case of nonresident alien individuals; you will
be required to file a United States federal income tax return reporting these
amounts, even if applicable withholding is imposed as described below; and if
you are a corporation, you may owe the 30% branch profits tax under Section 884
of the Internal Revenue Code in respect of these amounts.
We and other applicable withholding agents will be required to withhold
from distributions to shareholders that are non-U.S. persons, and to remit to
the IRS, 35% of the maximum amount of any distribution that could be designated
by us as a capital gain dividend. In addition, if we designate prior
distributions as capital gain dividends, then subsequent distributions up to the
amount of the designated prior distributions will be treated as
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capital gain dividends for purposes of the 35% withholding rule. After the close
of our 1999 taxable year, we expect to designate to the maximum extent possible
a portion of one or more of our 1999 distributions as capital gain dividends,
and accordingly 35% withholding will be imposed upon our subsequent
distributions to non-U.S. persons to that extent.
The amount of any tax withheld on distributions to you is creditable
against your United States federal income tax liability, and any amount of tax
withheld in excess of that tax liability may be refunded if you file an
appropriate claim for refund with the IRS. New Treasury regulations will alter
reporting of and withholding on distributions paid to you with respect to our
shares. Under recent administrative guidance, these new Treasury regulations are
to be effective generally for payments made after December 31, 2000. Among other
changes, the new Treasury regulations generally require non-U.S. persons and
withholding agents to use the new IRS Forms W-8 series, rather than the
predecessor IRS Forms W-8, 1001 and 4224.
Federal Income Tax Consequences of the Spin-Off to HRPT
The Internal Revenue Code imposes upon us various REIT qualification tests
comparable to those imposed upon Senior Housing and discussed below. While we
believe that we have operated and will operate in a manner to satisfy the
various REIT qualification tests, counsel has not reviewed and will not review
our compliance with these tests on a continuing basis. The following discussion
summarizes REIT qualification and taxation issues under the Internal Revenue
Code implicated by our spin-off of Senior Housing shares.
In General. So long as Senior Housing and its subsidiaries remain our
wholly owned direct or indirect subsidiaries, they will be qualified REIT
subsidiaries under Section 856(i) of the Internal Revenue Code or, equivalently,
noncorporate entities that are taxed as part of us under regulations issued
under Section 7701 of the Internal Revenue Code. During these periods Senior
Housing and its subsidiaries will not be taxpayers separate from HRPT for
federal income tax purposes. Under the transaction agreement, the federal income
tax liabilities and federal income tax filings for Senior Housing and its
subsidiaries for these periods are the responsibility of HRPT.
When we cease to wholly own Senior Housing and its subsidiaries as a result
of the spin-off of Senior Housing shares, the following will be deemed to have
occurred for federal income tax purposes:
o Immediately preceding the spin-off of Senior Housing shares, we disposed of
the properties and assets of Senior Housing and its subsidiaries in an
exchange, called a deemed exchange, in which our aggregate amount realized
equaled the sum of: (1) the fair market value of the total number of Senior
Housing shares owned by us immediately preceding the spin-off, plus (2) the
promissory obligations owing to us from Senior Housing immediately
preceding the spin-off, including the then outstanding balance of principal
and accrued interest on the formation debt, plus (3) the aggregate amount
of liabilities that are associated with the Senior Housing properties and
assets and that remain the responsibility of Senior Housing and its
subsidiaries after the spin-off.
o Immediately after the deemed exchange, we distributed to our shareholders
13.2 million of the Senior Housing shares we were treated as having
received in the deemed exchange.
Valuing Senior Housing Shares. Our aggregate amount realized in the deemed
exchange and our tax consequences upon the distribution of Senior Housing shares
both depend on the fair market value of the Senior Housing shares. Under
applicable judicial precedent, it is possible that for federal income tax
purposes the following three valuations may differ: (1) the per share fair
market value of the Senior Housing shares we are treated as receiving in the
deemed exchange; (2) the per share fair market value of the Senior Housing
shares that we distribute; and (3) the average of the reported high and low
trading prices for the Senior Housing shares in the public market on the date of
the spin-off, called the distribution price. Because of the factual nature of
the value of the Senior Housing shares, Sullivan & Worcester LLP is unable to
render an opinion on these values. We believe that for all federal income tax
purposes the per share fair market value of Senior Housing
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shares may be properly valued at the distribution price. Accordingly, the
distribution price will be used for all our tax reporting, including for
purposes of computing the aggregate amount realized in the deemed exchange and
for purposes of computing any gain or loss we may have on the distribution of
Senior Housing shares.
Taxation of the Deemed Exchange. Senior Housing believes, and Sullivan &
Worcester LLP has opined that it is more likely than not, that the deemed
exchange is an exchange under Section 351(a) of the Internal Revenue Code which
will be a partially taxable transaction in which our losses are not recognized,
and in which our gains are recognized only to the extent of the value of
property other than Senior Housing shares, including the outstanding balance of
principal and accrued interest on the formation debt, that we receive in the
deemed exchange. We expect that the then outstanding balance on the formation
debt will be sufficiently large so that we will recognize a significant portion
of our gains realized in the deemed exchange.
However, if the deemed exchange is not an exchange under Section 351(a),
then the deemed exchange will be a fully taxable transaction in which our gains
are recognized in full immediately, and in which our losses are recognized in
full when we and Senior Housing cease to be members of the same "controlled
group" within the meaning of Sections 267(f) and 1563 of the Internal Revenue
Code, namely, when we own 50% or less of both the voting power and the value of
Senior Housing's outstanding stock. Although the matter is not free from doubt
because of the factual nature of valuations, we believe that our ownership of
Senior Housing will be below these two 50% thresholds immediately after the
spin-off. Whether or not the deemed exchange is an exchange under Section 351(a)
also will have an impact on our tax basis in the Senior Housing shares that we
distribute and those that we retain, as well as on Senior Housing's initial tax
bases and depreciation schedule in its properties and assets, all as described
below.
Whether the deemed exchange is an exchange under Section 351(a) depends
upon the application of rules that foreclose Section 351(a) treatment for
property transfers to a REIT that accomplish diversification. Thus, under
Section 1.351-1(c) of the Treasury Regulations, if the deemed exchange and our
distribution of Senior Housing shares result, directly or indirectly, in HRPT
diversifying its ownership of the Senior Housing properties and assets, then the
deemed exchange will not be an exchange under Section 351(a). For this purpose,
there is no proscribed diversification if either (1) there is no plan or
intention for Senior Housing to issue more than a de minimis number of shares
following the spin-off, or (2) the Senior Housing portfolio of properties and
assets is already sufficiently diversified. Although it is contemplated that
Senior Housing will issue additional shares in the future to raise capital and
grow as an independent REIT, at the time of the spin-off we expect there to be
no specific plan for raising additional capital. In addition, we believe that
the Senior Housing portfolio is diversified for purposes of these rules, given
the properties' diversity in geography, size, age, operating history and
remaining lease terms. While it is true that the Senior Housing properties are
at present leased to only a modest number of tenants, we believe this does not
detract from the diversified nature of the Senior Housing portfolio because the
owner of the portfolio continues to have an economic stake in each individual
property through: (1) its residual interest in each property at the expiration
of that property's lease term; and (2) receiving rent, in respect of a
significant number of properties in the portfolio, that is based in part on the
gross revenues which the tenant is able to derive from that property. Further,
we believe that the Senior Housing portfolio's modest number of tenants is
consistent with the business model of several other publicly traded REITs and
with prudent real estate investment practices generally. Based on these and
other representations we made regarding the diversity of the Senior Housing
portfolio, our counsel has opined that it is more likely than not that the
deemed exchange will be an exchange described in Section 351(a), and we will
perform all our tax reporting, including statements supplied to our shareholders
and to the IRS, accordingly. We may be required to amend these tax reports,
including those sent to our shareholders, if the IRS successfully challenges our
position that the deemed exchange is an exchange described in Section 351(a). We
expect to ensure our 1999 and future compliance with the 95% REIT distribution
requirements of the Internal Revenue Code by making distributions to our
shareholders that are sufficient regardless of whether the deemed exchange is an
exchange described under Section 351(a).
Regardless of whether Section 351(a) governs the deemed exchange, the
aggregate amount realized in the deemed exchange, as well as the property other
than Senior Housing shares that we receive in the deemed exchange, will be
allocated among the assets of Senior Housing in proportion to their relative
fair market
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values. With respect to each Senior Housing asset, we will realize gain or loss,
as the case may be, equal to the difference between the aggregate amount
realized in the deemed exchange allocable to that asset and our adjusted tax
basis in that asset. If Section 351(a) applies to the deemed exchange, then we
will recognize any realized gain in a Senior Housing asset only to the extent of
that asset's allocable share of the property we receive in the deemed exchange
other than Senior Housing shares, and we will not recognize any realized loss in
a Senior Housing asset. We and our wholly owned direct and indirect subsidiaries
have held the Senior Housing assets for investment with a view to long-term
income production and capital appreciation, and the conversion of Senior Housing
into a separate REIT by means of the spin-off of Senior Housing shares
represents a new, unique opportunity to maximize the value of our investment in
the Senior Housing assets. We therefore believe that our gains on Senior Housing
assets in the deemed exchange will be gains from assets held for investment.
Accordingly, our gains on realty or mortgages on real property will be
qualifying gross income under the 75% and 95% gross income tests of Section
856(c)(2)-(3) of the Internal Revenue Code. Although our gains on personalty
other than mortgages will not be qualifying income under either the 75% or the
95% gross income test, we expect to recognize little or no gain of this type.
However, if any of our gains on Senior Housing assets in the deemed exchange
were to be characterized as gains from the disposition of inventory or other
property held primarily for sale to customers, these gains would be subject to
the 100% penalty tax of Section 857(b)(6) of the Internal Revenue Code. In
addition, some of the Senior Housing assets in the deemed exchange were acquired
in carryover basis transactions from C corporations within the last ten years.
Accordingly, we are subject to a REIT-level federal tax on the gains on these
assets, which federal tax we anticipate to be less than $1 million. Our payment
of this REIT-level federal tax will constitute a deduction for us in computing
the amount of our income that we must distribute to our shareholders and in
computing the portion of our distributions to our shareholders that constitutes
taxable income rather than a return of capital.
Taxation of the Distribution. Our distribution of Senior Housing shares in
the spin-off will be treated in the same manner as any other distribution of
cash or property that we may make. Thus, the distribution of Senior Housing
shares together with our other 1999 distributions will entitle us to a dividends
paid deduction to the extent of our earnings and profits for the year, assuming
as expected that these distributions exceed our earnings and profits. In
addition, we will recognize gain from the distribution of these Senior Housing
shares equal to the excess, if any, of (1) the fair market value of the total
number of Senior Housing shares that we distribute, over (2) our tax basis in
those distributed Senior Housing shares. In contrast, we will not recognize loss
on the distribution even if our tax basis in the distributed Senior Housing
shares exceeds their fair market value.
Under applicable judicial precedent, it is possible that for federal income
tax purposes the per share fair market value of the Senior Housing shares we
distribute will differ from the distribution price. In addition, our counsel is
unable to render an opinion on the fair market value of the total number of
Senior Housing shares that we distribute because of the factual nature of value
determinations. However, on the basis of valuation assumptions described above,
the fair market value of the total number of Senior Housing shares that we
distribute may be computed as the distribution price multiplied by the number of
Senior Housing shares distributed. Our tax basis in the distributed Senior
Housing shares is computed as described below and depends upon whether Section
351(a) governs the deemed exchange.
Any gain that we recognize on our distribution of Senior Housing shares
will be qualifying gross income under the 75% and 95% gross income tests of
Section 856(c)(2)-(3) of the Internal Revenue Code, provided that we are not
treated as holding the distributed Senior Housing shares as inventory or other
property held primarily for sale to customers. If any of this gain were
characterized as the sale of inventory or other property held primarily for sale
to customers, this would not affect our ability to satisfy the 75% and 95% gross
income tests, but the recharacterized gain would be subject to the 100% penalty
tax of Section 857(b)(6) of the Internal Revenue Code. Although we can provide
no assurance on this matter, because we and our wholly owned direct and indirect
subsidiaries have held the Senior Housing properties and assets for investment
with a view to long-term income production and capital appreciation, and because
the conversion of Senior Housing into a separate REIT by means of the
distribution of Senior Housing shares represents a new, unique opportunity to
maximize the value of our investment in the Senior Housing properties and
assets, we do not believe that we have held the Senior Housing shares as
inventory or other property held primarily for sale to customers.
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If we are correct that the deemed exchange is governed by Section 351(a),
then our tax basis in the 100% of the Senior Housing shares that we own
immediately prior to the distribution of Senior Housing shares will be equal to,
and our tax basis in each individual Senior Housing share will be its pro rata
share of, the following sum: (1) our aggregate adjusted tax bases in the Senior
Housing properties and assets immediately prior to the deemed exchange; plus (2)
all gains that we recognize in the deemed exchange; minus (3) Senior Housing's
promissory obligations owing to us immediately preceding the spin-off, including
the then outstanding balance of principal and accrued interest on the formation
debt; minus (4) the aggregate amount of liabilities that are associated with the
Senior Housing properties and assets and that remain the responsibility of
Senior Housing and its subsidiaries after the spin-off. As described above, we
believe that each Senior Housing share we receive in the deemed exchange may be
valued at the distribution price, and we expect that a significant portion of
the realized gains, but none of the realized losses, in the deemed exchange will
be recognized. Accordingly, we expect that our tax basis in each of the Senior
Housing shares that we own immediately prior to the distribution will be, at
most, only a few dollars per share below the distribution price, and may
possibly exceed the distribution price. Under these circumstances, we could
recognize gain but no loss on our distribution of Senior Housing shares.
Alternatively, if the deemed exchange is not governed by Section 351(a),
our tax basis in the 100% of the Senior Housing shares that we own immediately
prior to the spin-off will be their fair market value as determined for purposes
of computing our aggregate amount realized in the deemed exchange. Accordingly,
in the spin-off we would be distributing Senior Housing shares that each have a
fair market value and tax basis equal to the distribution price, and so we would
not recognize any gain or loss in the distribution.
Our Continued Investments in Senior Housing. After the distribution of
Senior Housing shares, we will continue to own Senior Housing shares, and we
expect Senior Housing to qualify as a REIT under the Internal Revenue Code. For
so long as it qualifies as a REIT, our continued investment in Senior Housing
shares will count favorably toward the 75%, 25%, 10%, and 5% gross assets tests
of Section 856(c)(4) of the Internal Revenue Code; similarly, the dividend
income we receive on Senior Housing shares will count as qualifying income for
us under the 75% and 95% gross income tests of Section 856(c)(2)-(3) of the
Internal Revenue Code.
We expect Senior Housing to pay off the formation debt soon after our
spin-off of Senior Housing shares, but if it does not do so, then we will
exercise our rights to have the formation debt adequately secured, within 20
days of the spin-off, by mortgages on the real property owned by one or more of
Senior Housing's subsidiaries. Accordingly, we expect that if the formation debt
is not paid in full soon after the spin-off, then our investment in the
formation debt, as adequately secured by mortgages on real estate, will also
count favorably toward the 75%, 25%, 10%, and 5% gross assets tests of Section
856(c)(4) of the Internal Revenue Code, and similarly the interest income from
the formation debt will count as qualifying income for us under the 75% and 95%
gross income tests of Section 856(c)(2)-(3) of the Internal Revenue Code.
The transaction agreement contains provisions that require Senior Housing
and HRPT to refrain from taking actions that may jeopardize each other's
qualification as a REIT under the Internal Revenue Code.
Federal Income Taxation of Senior Housing and its Shareholders
In General. Senior Housing will elect to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code commencing with its 1999 taxable
year. Senior Housing's 1999 taxable year will begin when it ceases to be wholly
owned by HRPT and will end on December 31, 1999. Senior Housing's REIT election,
assuming continuing compliance with the federal income tax qualification tests
summarized below, continues in effect for subsequent taxable years. Although no
assurance can be given, Senior Housing believes that it will be organized and
will operate in a manner that qualifies it to be taxed under the Internal
Revenue Code as a REIT.
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As a REIT, Senior Housing generally will not be subject to federal income
tax on its net income distributed as dividends to its shareholders.
Distributions to Senior Housing shareholders generally will be includable in
their income as dividends to the extent the distributions do not exceed Senior
Housing's current or accumulated earnings and profits. A portion of these
dividends may be treated as capital gain dividends, as explained below. No
portion of any dividends will be eligible for the dividends received deduction
for corporate shareholders. Distributions in excess of current or accumulated
earnings and profits generally will be treated for federal income tax purposes
as a return of capital to the extent of a recipient shareholder's basis in its
shares, and will reduce this basis.
Senior Housing's counsel, Sullivan & Worcester LLP, has opined that Senior
Housing will be organized as a REIT under the Internal Revenue Code for its 1999
taxable year, and that its current investments and plan of operation will enable
it to meet the requirements for qualification and taxation as a REIT under the
Internal Revenue Code. Senior Housing's actual qualification and taxation as a
REIT will depend upon its ability to meet the various REIT qualification tests
imposed under the Internal Revenue Code and summarized below. While Senior
Housing believes that it will operate in a manner to satisfy the various REIT
qualification tests, counsel has not reviewed and will not review compliance
with these tests on a continuing basis. If Senior Housing fails to qualify as a
REIT in any year, it will be subject to federal income taxation as if it were a
domestic corporation, and its shareholders will be taxed like shareholders of
ordinary corporations. In this event, Senior Housing could be subject to
significant tax liabilities, and the amount of cash available for distribution
to its shareholders may be reduced or eliminated.
If Senior Housing qualifies for taxation as a REIT and distributes to its
shareholders at least 95% of its "real estate investment trust taxable income,"
computed by excluding any net capital gain and before taking into account any
dividends paid deduction for which it is eligible, it generally will not be
subject to federal corporate income taxes on the amount distributed. However,
even if Senior Housing qualifies for federal income taxation as a REIT, it may
be subject to federal tax in the following circumstances:
o Senior Housing will be taxed at regular corporate rates on any
undistributed "real estate investment trust taxable income," including its
undistributed net capital gains.
o If Senior Housing's alternative minimum taxable income exceeds its taxable
income, it may be subject to the corporate alternative minimum tax on its
items of tax preference.
o If Senior Housing has (1) net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in the
ordinary course of business or (2) other nonqualifying income from
foreclosure property, it will be subject to tax on this income at the
highest regular corporate rate, which is currently 35%.
o If Senior Housing has net income from prohibited transactions, including
sales or other dispositions of inventory or property held primarily for
sale to customers in the ordinary course of business other than foreclosure
property, it will be subject to tax on this income at a 100% rate.
o If Senior Housing fails to satisfy the 75% gross income test or the 95%
gross income test discussed below, but nonetheless maintains its
qualification as a REIT, it will be subject to tax at a 100% rate on the
greater of the amount by which it fails the 75% or the 95% test, multiplied
by a fraction intended to reflect its profitability.
o If Senior Housing fails to distribute for any calendar year at least the
sum of (1) 85% of its REIT ordinary income for that year, (2) 95% of its
REIT capital gain net income for that year, and (3) any undistributed
taxable income from prior periods, it will be subject to a 4% excise tax on
the excess of the required distribution over the amounts actually
distributed.
o If Senior Housing acquires an asset from a corporation in a transaction in
which its basis in the asset is determined by reference to the basis of the
asset in the hands of a present or former C corporation, and if it
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subsequently recognizes gain on the disposition of this asset during the
ten-year period beginning on the date on which the asset ceased to be owned
by the C corporation, then Senior Housing will pay tax at the highest
regular corporate tax rate, which is currently 35%, on the lesser of (1)
the excess of the fair market value of the asset over the C corporation's
basis in the asset on the date the asset ceased to be owned by the C
corporation or (2) the gain recognized in the disposition.
If Senior Housing invests in properties in foreign countries, its profits
from these investments will generally be subject to tax in the countries where
those properties are located. The nature and amount of this taxation will depend
on the laws of the countries where the properties are located. If Senior Housing
operates as it currently intends, then it will distribute its taxable income to
its shareholders and it will not pay federal corporate income tax, and thus it
generally cannot recover the cost of foreign taxes imposed on its foreign
investments by claiming foreign tax credits against its federal income tax
liability. Nor can Senior Housing pass through to its shareholders any foreign
tax credits.
If Senior Housing fails to qualify for federal income taxation as a REIT in
any taxable year, then it will be subject to federal taxes in the same manner as
an ordinary corporation. Distributions to its shareholders in any year in which
it fails to qualify as a REIT will not be deductible, nor will these
distributions be required to be made. In that event, to the extent of current
and accumulated earnings and profits, all distributions to Senior Housing
shareholders will be taxable as ordinary dividend income, and subject to
limitations in the Internal Revenue Code, will be eligible for the dividends
received deduction for corporate recipients. Senior Housing would also generally
be disqualified from federal income taxation as a REIT for the four taxable
years following disqualification. Failure to qualify for federal income taxation
as a REIT for even one year could result in Senior Housing incurring substantial
indebtedness or liquidating substantial investments in order to pay the
resulting corporate-level taxes.
General REIT Qualification Requirements. Section 856(a) of the Internal
Revenue Code defines a REIT as a corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares
or by transferable certificates of beneficial interest;
(3) that would be taxable, but for Sections 856 through 859 of the
Internal Revenue Code, as an ordinary domestic corporation;
(4) that is neither a financial institution nor an insurance company
subject to special provisions of the Internal Revenue Code;
(5) the beneficial ownership of which is held by 100 or more persons;
(6) that is not "closely held" as defined under the personal holding
company stock ownership test, as described below; and
(7) that meets other tests regarding income, assets and distributions, all
as described below.
Section 856(b) of the Internal Revenue Code provides that conditions (1) to (4),
inclusive, must be met during the entire taxable year and that condition (5)
must be met during at least 335 days of a taxable year of 12 months, or during a
pro rata part of a taxable year of less than 12 months. Section 856(h)(2) of the
Internal Revenue Code provides that conditions (5) and (6) need not be met for
Senior Housing's 1999 taxable year, which taxable year commences on the date of
the spin-off. Senior Housing believes that it will satisfy conditions (1) to
(6), inclusive, for its 1999 taxable year, and that it will continue to satisfy
those conditions in future taxable years. There can, however, be no assurance in
this regard.
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By reason of condition (6) above, Senior Housing will fail to qualify as a
REIT for a taxable year if at any time during the last half of the year more
than 50% in value of its outstanding shares is owned directly or indirectly by
five or fewer individuals. To help comply with condition (6), Senior Housing's
declaration of trust contains provisions restricting transfers of its shares.
Similarly, for the purpose of HRPT maintaining its own qualification as a REIT
under the Tax Code, HRPT's declaration of trust contains comparable provisions
that limit concentrated ownership of shares in HRPT. In addition, commencing
with its 1999 taxable year, if Senior Housing complies with applicable Treasury
regulations for ascertaining the ownership of its outstanding shares and does
not know, or exercising reasonable diligence would not have known, that it
failed condition (6), then it will be treated as satisfying condition (6). Also,
Senior Housing's failure to comply with these applicable Treasury regulations
for ascertaining ownership of its outstanding shares may result in a penalty of
$25,000, or $50,000 for intentional violations. Accordingly, Senior Housing
intends to comply with these Treasury regulations, and to request annually from
record holders of significant percentages of its shares information regarding
the ownership of its shares. Under Senior Housing's declaration of trust, its
shareholders are required to respond to these requests for information.
The rule that an entity will fail to qualify as a REIT for a taxable year
if at any time during the last half of the year more than 50% in value of its
outstanding shares is owned directly or indirectly by five or fewer individuals
is relaxed in the case of pension trusts owning shares in a REIT. Shares in a
REIT held by a pension trust are treated as held directly by the pension trust's
beneficiaries in proportion to their actuarial interests in the pension trust.
Consequently, five or fewer pension trusts could own more than 50% of the
interests in an entity without jeopardizing that entity's federal income tax
qualification as a REIT. However, as discussed below, if a REIT is a
"pension-held REIT," each pension trust owning more than 10% of the REIT's
shares by value generally will be taxed on a portion of the dividends received
from the REIT, based on the ratio of (1) the REIT's gross income for the year
that would be unrelated trade or business income if the REIT were a qualified
pension trust to (2) the REIT's total gross income for the year.
Senior Housing's Subsidiaries and Partnerships. Section 856(i) of the
Internal Revenue Code provides that any corporation 100% of whose stock is held
by a REIT is a qualified REIT subsidiary and shall not be treated as a separate
corporation. The assets, liabilities and items of income, deduction and credit
of a qualified REIT subsidiary are treated as the REIT's. Senior Housing
believes that each of its direct and indirect wholly owned subsidiaries will
either be a qualified REIT subsidiary within the meaning of Section 856(i) of
the Internal Revenue Code, or a noncorporate entity that for federal income tax
purposes is not treated as separate from its owner under regulations issued
under Section 7701 of the Internal Revenue Code. Thus, in applying all the
federal income tax REIT qualification requirements described in this summary,
Senior Housing's direct and indirect wholly owned subsidiaries are ignored, and
all assets, liabilities and items of income, deduction and credit of its direct
and indirect wholly owned subsidiaries are treated as Senior Housing's.
Senior Housing may invest in real estate through one or more limited or
general partnerships or limited liability companies that are treated as
partnerships for federal income tax purposes. In the case of a REIT that is a
partner in a partnership, regulations under the Internal Revenue Code provide
that, for purposes of the REIT qualification requirements regarding income and
assets discussed below, the REIT is deemed to own its proportionate share of the
assets of the partnership corresponding to the REIT's proportionate capital
interest in the partnership and is deemed to be entitled to the income of the
partnership attributable to this proportionate share. In addition, for these
purposes, the character of the assets and gross income of the partnership
generally retain the same character in the hands of the REIT. Accordingly,
Senior Housing's proportionate share of the assets, liabilities, and items of
income of each partnership in which it is a partner are treated as Senior
Housing's for purposes of the income tests and asset tests discussed below. In
contrast, for purposes of the distribution requirement discussed below, Senior
Housing must take into account as a partner its distributive share of the
partnership's income as determined under the general federal income tax rules
governing partners and partnerships under Sections 701 through 777 of the
Internal Revenue Code.
Income Tests. There are two gross income requirements for qualification as
a REIT under the Internal Revenue Code:
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o First, at least 75% of Senior Housing's gross income, excluding gross
income from sales or other dispositions of property held primarily for
sale, must be derived from investments relating to real property, including
"rents from real property" as defined under Section 856 of the Internal
Revenue Code, mortgages on real property, or shares in other REITs. When
Senior Housing receives new capital in exchange for its shares or in a
public offering of five-year or longer debt instruments, income
attributable to the temporary investment of this new capital in stock or a
debt instrument, if received or accrued within one year of its receipt of
the new capital, is generally also qualifying income under the 75% test.
o Second, at least 95% of Senior Housing's gross income, excluding gross
income from sales or other dispositions of property held primarily for
sale, must be derived from a combination of (1) items of real property
income that satisfy the 75% test described above, (2) dividends, (3)
interest, (4) payments under interest rate swap or cap agreements, options,
futures contracts, forward rate agreements, or similar financial
instruments, and (5) gains from the sale or disposition of stock,
securities, or real property.
For purposes of these two requirements, income derived from a "shared
appreciation provision" in a mortgage loan is generally treated as gain
recognized on the sale of the property to which it relates. Although Senior
Housing will use its best efforts to ensure that the income generated by its
investments will be of a type which satisfies both the 75% and 95% gross income
tests, there can be no assurance in this regard.
In order to qualify as "rents from real property" under Section 856 of the
Internal Revenue Code, several requirements must be met:
o First, the amount of rent received generally must not be based on the
income or profits of any person, but may be based on receipts or sales.
o Second, rents do not qualify if the REIT owns 10% or more of the tenant,
whether directly or after application of attribution rules. While Senior
Housing intends not to lease property to any party if rents from that
property would not qualify as rents from real property, application of the
10% ownership rule is dependent upon complex attribution rules and
circumstances that may be beyond Senior Housing's control. For example, an
unaffiliated third party's ownership directly or by attribution of (1) 10%
or more of Senior Housing's shares, or 10% or more of HRPT's shares for so
long as HRPT owns 10% or more of Senior Housing, as well as (2) 10% or more
of the stock of a Senior Housing lessee, would result in that lessee's
rents not qualifying as rents from real property. Senior Housing's
declaration of trust disallows transfers or purported acquisitions,
directly or by attribution, of its shares that could result in
disqualification as a REIT under the Internal Revenue Code and permits its
trustees to repurchase the shares to the extent necessary to maintain
Senior Housing's status as a REIT under the Internal Revenue Code.
Similarly, for the purpose of HRPT maintaining its own qualification as a
REIT under the Internal Revenue Code, HRPT's declaration of trust contains
provisions that generally limit concentrated ownership of HRPT's shares to
8.5% or below. Furthermore, the transaction agreement provides that HRPT
will not take any actions that may jeopardize Senior Housing's REIT status
under the Internal Revenue Code. Nevertheless, there can be no assurance
that these provisions in Senior Housing's and HRPT's declarations of trust
and the provisions of the transaction agreement will be effective to
prevent REIT status under the Internal Revenue Code from being jeopardized
under the 10% lessee affiliate rule. Furthermore, there can be no assurance
that Senior Housing will be able to monitor and enforce these restrictions,
nor will Senior Housing's shareholders necessarily be aware of ownership of
shares attributed to them under the Internal Revenue Code's attribution
rules.
o Third, in order for rents to qualify, Senior Housing generally must not
manage the property or furnish or render services to the tenants of the
property, except through an independent contractor from whom Senior Housing
derives no income. There is an exception to this rule permitting a REIT to
perform customary tenant services of the sort which a tax-exempt
organization could perform without being considered in receipt of
"unrelated business taxable income" as defined in Section 512(b)(3) of the
Internal Revenue Code. In addition, a de minimis amount of noncustomary
services will not disqualify income as "rents from
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real property" so long as the value of the impermissible services does not
exceed 1% of the gross income from the property.
o Fourth, if rent attributable to personal property leased in connection with
a lease of real property is 15% or less of the total rent received under
the lease, then the rent attributable to personal property will qualify as
rents from real property; if this 15% threshold is exceeded, the rent
attributable to personal property will not so qualify. The portion of
rental income treated as attributable to personal property is determined
according to the ratio of the tax basis of the personal property to the
total tax basis of the real and personal property which is rented.
Senior Housing believes that all or substantially all its rents will qualify as
rents from real property for purposes of Section 856 of the Internal Revenue
Code.
In order to qualify as mortgage interest on real property for purposes of
the 75% test, interest must derive from a mortgage loan secured by real property
with a fair market value at least equal to the amount of the loan. If the amount
of the loan exceeds the fair market value of the real property, the interest
will be treated as interest on a mortgage loan in a ratio equal to the ratio of
the fair market value of the real property to the total amount of the mortgage
loan.
Any gain Senior Housing realizes on the sale of property held as inventory
or other property held primarily for sale to customers in the ordinary course of
business will be treated as income from a prohibited transaction that is subject
to a penalty tax at a 100% rate. This prohibited transaction income also may
have an adverse effect upon Senior Housing's ability to satisfy the 75% and 95%
gross income tests for federal income tax qualification as a REIT. Senior
Housing cannot provide assurances as to whether or not the IRS might
successfully assert that one or more of its dispositions is subject to the 100%
penalty tax. However, Senior Housing believes that any occasional disposition of
assets that it might make will not be subject to the 100% penalty tax, because
it intends to: (1) own its assets for investment with a view to long-term income
production and capital appreciation; (2) engage in the business of developing,
owning and operating its existing properties and acquiring, developing, owning
and operating new properties; and (3) make occasional dispositions of its assets
consistent with its long-term investment objectives.
If Senior Housing fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
that year if: (1) its failure to meet the test was due to reasonable cause and
not due to willful neglect; (2) it reports the nature and amount of each item of
its income included in the 75% or 95% gross income tests for that taxable year
on a schedule attached to its tax return; and (3) any incorrect information on
the schedule was not due to fraud with intent to evade tax. It is impossible to
state whether in all circumstances Senior Housing would be entitled to the
benefit of this relief provision for the 75% and 95% gross income tests. Even if
this relief provision did apply, a special tax equal to 100% is imposed upon the
greater of the amount by which Senior Housing failed the 75% test or the 95%
test, multiplied by a fraction intended to reflect its profitability.
Asset Tests. At the close of each quarter of each taxable year, Senior
Housing must also satisfy three percentage tests relating to the nature of its
assets:
o First, at least 75% of the value of Senior Housing's total assets must
consist of (1) real estate assets, (2) cash and cash items, (3) shares in
other REITs, (4) government securities, and (5) stock or debt instruments
purchased with proceeds of a stock offering or an offering of its debt with
a term of at least five years, but only for the one-year period commencing
with its receipt of the offering proceeds.
o Second, not more than 25% of Senior Housing's total assets may be
represented by securities other than those securities that count favorably
toward the preceding 75% asset test.
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o Third, of the investments included in the preceding 25% asset class, the
value of any one issuer's securities that Senior Housing owns may not
exceed 5% of the value of its total assets, and Senior Housing may not own
more than 10% of any one issuer's outstanding voting securities.
When a failure to satisfy the above asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. Senior Housing intends to maintain records of the value of its
assets to document its compliance with the above three asset tests, and to take
actions as may be required to cure any failure to satisfy the tests within 30
days after the close of any quarter.
Annual Distribution Requirements. In order to qualify for taxation as a
REIT under the Internal Revenue Code, Senior Housing is required to make annual
distributions other than capital gain dividends to its shareholders in an amount
at least equal to the excess of:
(A) the sum of (1) 95% of Senior Housing's "real estate investment trust
taxable income," as defined in Section 857 of the Internal Revenue
Code, but computed without regard to the dividends paid deduction and
net capital gain, and (2) 95% of Senior Housing's net income after tax,
if any, from property received in foreclosure, over
(B) the sum of Senior Housing's qualifying noncash income, e.g.,
imputed rental income or income from transactions inadvertently
failing to qualify as like-kind exchanges.
These distributions must be paid in the taxable year to which they relate,
or in the following taxable year if declared before Senior Housing timely files
its tax return for the earlier taxable year and if paid on or before the first
regular distribution payment after that declaration. Dividends declared in
October, November, or December and paid during the following January will be
treated as having been both paid and received on December 31 of the prior
taxable year. A distribution which is not pro rata within a class of Senior
Housing's beneficial interests entitled to a distribution, or which is not
consistent with the rights to distributions among Senior Housing's classes of
beneficial interests, is a preferential distribution that is not taken into
consideration for purposes of the distribution requirements, and accordingly the
payment of a preferential distribution could affect Senior Housing's ability to
meet the distribution requirements. Taking into account Senior Housing's
distribution policies, including any dividend reinvestment plan it may adopt,
Senior Housing expects that it will not make any preferential distributions. The
distribution requirements may be waived by the IRS if a REIT establishes that it
failed to meet them by reason of distributions previously made to meet the
requirements of the 4% excise tax discussed below. To the extent that Senior
Housing does not distribute all of its net capital gain and all of its real
estate investment trust taxable income, as adjusted, it will be subject to tax
on undistributed amounts.
In addition, Senior Housing will be subject to a 4% excise tax to the
extent it fails within a calendar year to make required distributions to its
shareholders of 85% of its ordinary income and 95% of its capital gain net
income plus the excess, if any, of the "grossed up required distribution" for
the preceding calendar year over the amount treated as distributed for that
preceding calendar year. For this purpose, the term "grossed up required
distribution" for any calendar year is the sum of Senior Housing's taxable
income for the calendar year without regard to the deduction for dividends paid
and all amounts from earlier years that are not treated as having been
distributed under the provision.
If Senior Housing does not have enough cash or other liquid assets to meet
the 95% distribution requirements, it may find it necessary to arrange for new
debt or equity financing to provide funds for required distributions, or else
its REIT status for federal income tax purposes could be jeopardized. Senior
Housing can provide no assurance that financing would be available for these
purposes on favorable terms.
If Senior Housing fails to distribute sufficient dividends for any year, it
may be able to rectify this failure by paying "deficiency dividends" to
shareholders in a later year. These deficiency dividends may be included in
Senior Housing's deduction for dividends paid for the earlier year, but an
interest charge would be imposed
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upon it for the delay in distribution. Although Senior Housing may be able to
avoid being taxed on amounts distributed as deficiency dividends, it will remain
liable for the 4% excise tax discussed above.
Depreciation and Federal Income Tax Treatment of Leases. For properties
purchased after the spin-off, Senior Housing's initial tax basis will generally
be its acquisition cost. Senior Housing will generally depreciate its real
property on a straight-line basis over 40 years and its personal property, if
any, over 12 years. These depreciation schedules may vary for properties that
Senior Housing acquires through tax-free or carryover basis acquisitions.
Senior Housing's initial tax bases and depreciation schedules for its
assets at the time of the spin-off will depend upon whether the deemed exchange
that results from the spin-off is an exchange under Section 351(a) of the
Internal Revenue Code. Assuming Section 351(a) treatment, Senior Housing will
carry over HRPT's tax basis and depreciation schedule in each Senior Housing
asset, and to the extent that HRPT recognizes gain on a Senior Housing asset in
the deemed exchange, Senior Housing will have additional tax basis in that asset
which it will depreciate as described above for newly purchased assets. In
contrast, if Section 351(a) treatment does not apply to the deemed exchange,
then Senior Housing will be treated as though it acquired all its assets at the
time of the spin-off in a fully taxable acquisition, thereby acquiring aggregate
tax bases in these assets equal to the aggregate amount realized by HRPT in the
deemed exchange, and Senior Housing will depreciate these tax bases as described
above for newly purchased assets. Senior Housing believes, and Sullivan &
Worcester LLP has opined that it is more likely than not, that the deemed
exchange will be an exchange under Section 351(a), and Senior Housing will
perform all its tax reporting accordingly. Senior Housing may be required to
amend these tax reports, including those sent to its shareholders, if the IRS
successfully challenges its position that the deemed exchange is an exchange
under Section 351(a). Senior Housing intends to comply with the 95% REIT
distribution requirements in 1999 and future years regardless of whether the
deemed exchange is an exchange under Section 351(a).
Senior Housing will be entitled to depreciation deductions from its
facilities only if it is treated for federal income tax purposes as the owner of
the facilities. This means that the leases of the facilities must be classified
for federal income tax purposes as true leases, rather than as sales or
financing arrangements, and Senior Housing believes this to be the case. In
addition, in the case of sale-leaseback arrangements, the IRS could assert that
Senior Housing realized prepaid rental income in the year of purchase to the
extent that the value of a leased property exceeds the purchase price for that
property. Because of the lack of clear precedent, Senior Housing cannot provide
assurances as to whether the IRS might successfully assert the existence of
prepaid rental income in any of its sale-leaseback transactions.
Additionally, Section 467 of the Internal Revenue Code, which concerns
leases with increasing rents, may apply to those of Senior Housing's leases
which provide for rents that increase from one period to the next. Section 467
of the Internal Revenue Code provides that in the case of a so-called
"disqualified leaseback agreement" rental income must be accrued at a constant
rate. Where constant rent accrual is required, Senior Housing could recognize
rental income from a lease in excess of cash rents and, as a result, encounter
difficulty in meeting the 95% distribution requirement. Disqualified leaseback
agreements include leaseback transactions where a principal purpose for
providing increasing rent under the agreement is the avoidance of federal income
tax. Recently issued Treasury regulations provide that rents will not be treated
as increasing for tax avoidance purposes where the increases are based upon a
fixed percentage of lessee receipts. Therefore, the additional rent provisions
in Senior Housing's leases that are based on a fixed percentage of lessee
receipts generally should not cause the leases to be disqualified leaseback
agreements under Section 467.
Taxation of Shareholders. As long as Senior Housing qualifies as a REIT for
federal income tax purposes, a distribution to its shareholders that Senior
Housing does not designate as a capital gain dividend will be treated as an
ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. Distributions made out of Senior Housing's
current or accumulated earnings and profits that Senior Housing properly
designates as capital gain dividends will be taxed as long-term capital gains,
as discussed below, to the extent they do not exceed actual net capital gain for
the taxable year. However, corporate shareholders may be required to treat up to
20% of any capital gain dividend as ordinary income under Section
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291 of the Internal Revenue Code. In addition, Senior Housing may elect to
retain net capital gain income and treat it as constructively distributed. In
that case,
(1) Senior Housing will be taxed at regular corporate capital gains tax
rates on retained amounts,
(2) each shareholder will be taxed on its designated proportionate share
of Senior Housing's retained net capital gains as though that amount
were distributed and designated a capital gain dividend,
(3) each shareholder will receive a credit for its designated
proportionate share of the tax that Senior Housing pays,
(4) each shareholder will increase its adjusted basis in its Senior
Housing shares by the excess of the amount of its proportionate share
of these retained net capital gains over its proportionate share of
this tax that Senior Housing pays, and
(5) both Senior Housing and its corporate shareholders will make
commensurate adjustments in their respective earnings and profits for
federal income tax purposes.
If Senior Housing elects to retain its net capital gains in this fashion, it
will notify its shareholders of the relevant tax information within 60 days
after the close of the affected taxable year. For noncorporate shareholders,
long-term capital gains are generally taxed at maximum rates of 20% or 25%,
depending upon the type of property disposed of and the previously claimed
depreciation with respect to this property.
Distributions in excess of current or accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
shareholder's adjusted basis in the shareholder's Senior Housing shares, but
will reduce the shareholder's basis in those shares. To the extent that these
excess distributions exceed the adjusted basis of a shareholder's shares, they
will be included in income as capital gain, with long-term gain generally taxed
to noncorporate shareholders at a maximum rate of 20%. No shareholder may
include on his federal income tax return any of Senior Housing's net operating
losses or any of its capital losses.
Dividends that Senior Housing declares in October, November or December of
a taxable year to shareholders of record on a date in those months will be
deemed to have been received by shareholders on December 31 of that taxable
year, provided Senior Housing actually pays these dividends during the following
January. Also, items that are treated differently for regular and alternative
minimum tax purposes are to be allocated between a REIT and its shareholders
under Treasury regulations which are to be prescribed. It is possible that these
Treasury regulations will require tax preference items to be allocated to Senior
Housing shareholders with respect to any accelerated depreciation or other tax
preference items that Senior Housing claims.
The sale or exchange of Senior Housing shares will result in recognition of
gain or loss in an amount equal to the difference between the amount realized
and the shareholder's adjusted basis in the shares sold or exchanged. This gain
or loss will be capital gain or loss, and will be long-term capital gain or loss
if the shareholder's holding period in the shares exceeds one year. In addition,
any loss upon a sale or exchange of Senior Housing shares held for six months or
less will generally be treated as a long-term capital loss to the extent of
Senior Housing long-term capital gain dividends during the holding period.
Noncorporate shareholders who borrow funds to finance their acquisition of
Senior Housing shares could be limited in the amount of deductions allowed for
the interest paid on the indebtedness incurred. Under Section 163(d) of the
Internal Revenue Code, interest paid or accrued on indebtedness incurred or
continued to purchase or carry property held for investment is generally
deductible only to the extent of the investor's net investment income. A
shareholder's net investment income will include ordinary income dividend
distributions received from Senior Housing and, if an appropriate election is
made by the shareholder, capital gain dividend distributions received from
Senior Housing; however, distributions treated as a nontaxable return of the
shareholder's basis will not enter into the computation of net investment
income.
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Taxation of Tax-Exempt Shareholders. In Revenue Ruling 66-106, the IRS
ruled that amounts distributed by a REIT to a tax-exempt employees' pension
trust did not constitute "unrelated business taxable income," even though the
REIT may have financed some its activities with acquisition indebtedness.
Although revenue rulings are interpretive in nature and subject to revocation or
modification by the IRS, based upon the analysis and conclusion of Revenue
Ruling 66-106, Senior Housing's distributions made to shareholders that are
tax-exempt pension plans, individual retirement accounts, or other qualifying
tax-exempt entities should not constitute unrelated business taxable income,
unless the shareholder has financed its acquisition of its shares with
"acquisition indebtedness" within the meaning of the Internal Revenue Code.
Special rules apply to tax-exempt pension trusts, including so-called
401(k) plans but excluding individual retirement accounts or government pension
plans, that own more than 10% by value of a "pension-held REIT" at any time
during a taxable year. The pension trust may be required to treat a percentage
of all dividends received from the pension-held REIT during the year as
unrelated business taxable income. This percentage is equal to the ratio of
(1) the pension-held REIT's gross income derived from the conduct of
unrelated trades or businesses, determined as if the pension-held REIT
were a tax-exempt pension fund, less direct expenses related to that
income, to
(2) the pension-held REIT's gross income from all sources, less direct
expenses related to that income,
except that this percentage shall be deemed to be zero unless it would otherwise
equal or exceed 5%. A REIT is a pension-held REIT if (a) the REIT is
"predominantly held" by tax-exempt pension trusts, and (b) the REIT would
otherwise fail to satisfy the "closely held" ownership requirement discussed
above if the stock or beneficial interests in the REIT held by tax-exempt
pension trusts were viewed as held by tax-exempt pension trusts rather than by
their respective beneficiaries. A REIT is predominantly held by tax-exempt
pension trusts if at least one tax-exempt pension trust owns more than 25% by
value of the REIT's stock or beneficial interests, or if one or more tax-exempt
pension trusts, each owning more than 10% by value of the REIT's stock or
beneficial interests, own in the aggregate more than 50% by value of the REIT's
stock or beneficial interests. Because of the restrictions in Senior Housing's
declaration of trust regarding the ownership concentration of its shares, and
because of the restrictions in HRPT's declaration of trust regarding the
ownership concentration of HRPT's shares, Senior Housing believes that it will
not be a pension-held REIT. However, because Senior Housing's shares and HRPT's
shares will be publicly traded, Senior Housing cannot completely control whether
or not it is or will become a pension-held REIT.
Taxation of Non-U.S. Persons. The rules governing the federal income
taxation of non-U.S. persons are complex, and the following discussion is
intended only as a summary of these rules. If you are a non-U.S. person, you
should consult with your own tax advisor to determine the impact of federal,
state, local, and foreign tax laws, including any tax return filing and other
reporting requirements, with respect to your investment in Senior Housing
shares.
In general, a non-U.S. person will be subject to regular federal income tax
in the same manner as a U.S. person with respect to its investment in Senior
Housing shares if that investment is effectively connected with the non-U.S.
person's conduct of a trade or business in the United States. In addition, a
corporate non-U.S. person that receives income that is or is deemed effectively
connected with a trade or business in the United States may also be subject to
the 30% branch profits tax under Section 884 of the Internal Revenue Code, which
is payable in addition to regular federal corporate income tax. The balance of
this discussion on the federal income taxation of non-U.S. persons addresses
only those non-U.S. persons whose investment in Senior Housing shares is not
effectively connected with the conduct of a trade or business in the United
States.
A distribution by Senior Housing to a non-U.S. person that is not
attributable to gain from the sale or exchange of a United States real property
interest and that is not designated as a capital gain dividend will be treated
as an ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. A distribution of this type will generally be
subject to federal income tax and withholding at the rate of
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30%, or the lower rate that may be specified by a tax treaty if the non-U.S.
person has in the manner prescribed by the IRS demonstrated its entitlement to
benefits under a tax treaty. Because Senior Housing cannot determine its current
and accumulated earnings and profits until the end of the taxable year,
withholding at the rate of 30% or applicable lower treaty rate will be imposed
on the gross amount of any distribution to a non-U.S. person that Senior Housing
makes and does not designate a capital gain dividend. Notwithstanding this
withholding on distributions in excess of Senior Housing current and accumulated
earnings and profits, these distributions are a nontaxable return of capital to
the extent that they do not exceed the non-U.S. person's adjusted basis in
Senior Housing shares, and the nontaxable return of capital will reduce the
adjusted basis in these shares. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the non-U.S. person's
adjusted basis in Senior Housing shares, the distributions will give rise to tax
liability if the non-U.S. person would otherwise be subject to tax on any gain
from the sale or exchange of these shares, as discussed below. A non-U.S. person
may seek a refund of amounts withheld on distributions to him in excess of
Senior Housing's current and accumulated earnings and profits, provided that the
required information is furnished to the IRS.
For any year in which Senior Housing qualifies as a REIT, distributions
that are attributable to gain from the sale or exchange of a United States real
property interest are taxed to a non-U.S. person as if these distributions were
gains effectively connected with a trade or business in the United States
conducted by the non-U.S. person. Accordingly, a non-U.S. person will be taxed
on these amounts at the normal capital gain rates applicable to a U.S. person,
subject to any applicable alternative minimum tax and to a special alternative
minimum tax in the case of nonresident alien individuals; the non-U.S. person
will be required to file a United States federal income tax return reporting
these amounts, even if applicable withholding is imposed as described below; and
corporate non-U.S. persons may owe the 30% branch profits tax under Section 884
of the Internal Revenue Code in respect of these amounts. Senior Housing will be
required to withhold from distributions to non-U.S. persons, and remit to the
IRS, 35% of the maximum amount of any distribution that could be designated as a
capital gain dividend. In addition, for purposes of this withholding rule, if
Senior Housing designates prior distributions as capital gain dividends, then
subsequent distributions up to the amount of the designated prior distributions
will be treated as capital gain dividends. The amount of any tax withheld is
creditable against the non-U.S. person's federal income tax liability, and any
amount of tax withheld in excess of that tax liability may be refunded provided
that an appropriate claim for refund is filed with the IRS.
Tax treaties may reduce the withholding obligations on Senior Housing
distributions. Under some treaties, however, rates below 30% generally
applicable to ordinary income dividends from United States corporations may not
apply to ordinary income dividends from a REIT. If the amount of tax withheld by
Senior Housing with respect to a distribution to a non-U.S. person exceeds the
shareholder's federal income tax liability with respect to the distribution, the
non-U.S. person may file for a refund of the excess from the IRS. In this
regard, note that the 35% withholding tax rate on capital gain dividends
corresponds to the maximum income tax rate applicable to corporate non-U.S.
persons but is higher than the 20% and 25% maximum rates on capital gains
generally applicable to noncorporate non-U.S. persons. Generally effective with
respect to distributions paid after December 31, 2000, new Treasury regulations
alter the information reporting and backup withholding rules applicable to
non-U.S. persons and provide presumptions under which a non-U.S. person is
subject to backup withholding and information reporting until Senior Housing or
the applicable withholding agent receives certification from the shareholder of
its non-U.S. person status. In some instances, these certification requirements
are more detailed and more involved than those applicable under current Treasury
regulations. The new Treasury regulations also provide special rules to
determine whether, for purposes of determining the applicability of a tax
treaty, Senior Housing's distributions to a non-U.S. person that is an entity
should be treated as paid to the entity or to those owning an interest in that
entity, and whether the entity or its owners are entitled to benefits under the
tax treaty. The general thrust of the new Treasury regulations and their
proposed effective date is to encourage non-U.S. persons and withholding agents
to use as soon as possible the new IRS Forms W-8 series, rather than the
predecessor IRS Forms W-8, 1001, and 4224, and to require use of the new IRS
Forms W- 8 series for payments made after December 31, 2000.
If Senior Housing shares are not "United States real property interests"
within the meaning of Section 897 of the Internal Revenue Code, a non-U.S.
person's gain on sale of these shares generally will not be subject to
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federal income taxation, except that a nonresident alien individual who was
present in the United States for 183 days or more during the taxable year will
be subject to a 30% tax on this gain. Senior Housing shares will not constitute
a United States real property interest if Senior Housing is a "domestically
controlled REIT." A domestically controlled REIT is a REIT in which at all times
during the preceding five-year period less than 50% in value of its shares is
held directly or indirectly by foreign persons. Senior Housing believes that it
will be a domestically controlled REIT and thus a non-U.S. person's gain on sale
of its shares will not be subject to federal income taxation. However, because
these shares will be publicly traded, and because the shares of HRPT are
publicly traded, Senior Housing can provide no assurance that it will be a
domestically controlled REIT. If Senior Housing is not a domestically controlled
REIT, a non-U.S. person's gain on sale of Senior Housing shares will not be
subject to federal income taxation as a sale of a United States real property
interest, if (1) that class of shares is "regularly traded," as defined by
applicable Treasury regulations, on an established securities market like the
New York Stock Exchange, and (2) the non-U.S. person has at all times during the
preceding five years owned 5% or less by value of that class of shares. If the
gain on the sale of Senior Housing shares were subject to federal income
taxation, the non-U.S. person will generally be subject to the same treatment as
a U.S. person with respect to its gain, will be required to file a United States
federal income tax return reporting that gain, and in the case of corporate
non-U.S. persons might owe branch profits tax under Section 884 of the Internal
Revenue Code. In any event, a purchaser of Senior Housing shares from a non-U.S.
person will not be required to withhold on the purchase price if the purchased
shares are regularly traded on an established securities market or if Senior
Housing is a domestically controlled REIT. Otherwise, the purchaser of Senior
Housing shares may be required to withhold 10% of the purchase price paid to the
non-U.S. person and to remit the withheld amount to the IRS.
Backup Withholding and Information Reporting
Information reporting and backup withholding may apply to distributions or
proceeds paid to HRPT and Senior Housing shareholders under the circumstances
discussed below. Because the spin-off of Senior Housing shares is an in-kind
distribution on HRPT shares, we or other applicable withholding agents will have
to collect any applicable backup withholding by reducing to cash for remittance
to the IRS a sufficient portion of the Senior Housing shares that the HRPT
shareholder would otherwise receive, and the HRPT shareholder will bear the
brokerage or other costs for this withholding procedure. Amounts withheld under
backup withholding are generally not an additional tax and may be refunded or
credited against the REIT shareholder's federal income tax liability, provided
that it furnishes the required information to the IRS.
A U.S. person will be subject to backup withholding at a 31% rate when it
receives distributions on HRPT or Senior Housing shares or proceeds upon the
sale, exchange, redemption, retirement or other disposition of HRPT or Senior
Housing shares, unless the U.S. person properly executes under penalties of
perjury an IRS Form W-9 or substantially similar form that:
o provides the U.S. person's correct taxpayer identification number; and
o certifies that the U.S. person is exempt from backup withholding because it
is a corporation or come within another exempt category, it has not been
notified by the IRS that it is subject to backup withholding, or it has
been notified by the IRS that it is no longer subject to backup
withholding.
If the U.S. person does not provide its correct taxpayer identification number
on the IRS Form W-9 or substantially similar form, it may be subject to
penalties imposed by the IRS and the REIT may also have to withhold a portion of
any capital gain distributions paid to it. Unless the U.S. person has
established on a properly executed IRS Form W-9 or substantially similar form
that it is a corporation or comes within another exempt category, distributions
on HRPT or Senior Housing shares paid to it during the calendar year, and the
amount of tax withheld if any, will be reported to it and to the IRS.
Distributions on HRPT or Senior Housing shares to a non-U.S. person during
each calendar year, and the amount of tax withheld if any, will generally be
reported to the non-U.S. person and to the IRS. This
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<PAGE>
information reporting requirement applies regardless of whether the non-U.S.
person is subject to withholding on distributions on HRPT or Senior Housing
shares or whether the withholding was reduced or eliminated by an applicable tax
treaty. Also, distributions paid to a non-U.S. person on HRPT or Senior Housing
shares may be subject to backup withholding at a 31% rate, unless the non-U.S.
person properly certifies its non-U.S. person status on an IRS Form W-8 or
substantially similar form in the manner described above. Similarly, information
reporting and 31% backup withholding will not apply to proceeds a non-U.S.
person receives upon the sale, exchange, redemption, retirement or other
disposition of HRPT or Senior Housing shares, if the non-U.S. person properly
certifies its non-U.S. person status on an IRS Form W-8 or substantially similar
form. Even without having executed an IRS Form W-8 or substantially similar
form, however, in some cases information reporting and 31% backup withholding
will not apply to proceeds that a non-U.S. person receives upon the sale,
exchange, redemption, retirement or other disposition of HRPT or Senior Housing
shares if the non-U.S. person receives those proceeds through a broker's foreign
office. As described above, new Treasury regulations alter the information
reporting and backup withholding rules applicable to non-U.S. persons for
payments made after December 31, 2000, and in general these new Treasury
Regulations replace IRS Forms W-8, 1001, and 4224 with the new IRS Forms W-8
series. For a non-U.S. person whose income and gain on HRPT or Senior Housing
shares is effectively connected to the conduct of a United States trade or
business, a slightly different rule may apply to proceeds received upon the
sale, exchange, redemption, retirement or other disposition of HRPT or Senior
Housing shares. Until the non-U.S. person complies with the new Treasury
regulations, information reporting and 31% backup withholding may apply in the
same manner as to a U.S. person, and thus the non-U.S. person may have to
execute an IRS Form W-9 or substantially similar form to prevent the backup
withholding.
Other Tax Consequences
HRPT's, Senior Housing's and their respective shareholders' federal income
tax treatment may be modified by legislative, judicial, or administrative
actions at any time, which actions may be retroactive in effect. The rules
dealing with federal income taxation are constantly under review by the
Congress, the IRS and the Treasury Department, and statutory changes as well as
promulgation of new regulations, revisions to existing regulations, and revised
interpretations of established concepts occur frequently. No prediction can be
made as to the likelihood of passage of new tax legislation or other provisions
either directly or indirectly affecting HRPT, Senior Housing or their respective
shareholders. Revisions in federal income tax laws and interpretations of these
laws could adversely affect the tax consequences of an investment in HRPT or
Senior Housing shares. HRPT, Senior Housing and their respective shareholders
may also be subject to state or local taxation in various state or local
jurisdictions, including those in which HRPT, Senior Housing or their respective
shareholders transact business or reside. State and local tax consequences may
not be comparable to the federal income tax consequences discussed above.
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<PAGE>
ERISA Consequences for Senior Housing and its Shareholders
Fiduciary Obligations. Fiduciaries of a pension, profit-sharing or other
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, ERISA, must consider the following:
o whether their investment in Senior Housing shares satisfies the
diversification requirements of ERISA;
o whether the investment is prudent in light of possible limitations on the
marketability of Senior Housing shares;
o whether they have authority to acquire Senior Housing shares under the
applicable governing instrument and Title I of ERISA; and
o whether the investment is otherwise consistent with their fiduciary
responsibilities.
Trustees and other fiduciaries of an ERISA plan may incur personal
liability for any loss suffered by the plan on account of a violation of their
fiduciary responsibilities. In addition, these fiduciaries may be subject to a
civil penalty of up to 20% of any amount recovered by the plan on account of a
violation. Fiduciaries of any IRA, Roth IRA, Keogh Plan or other qualified
retirement plan not subject to Title I of ERISA, referred to as "non-ERISA
plans," should consider that a plan may only make investments that are
authorized by the appropriate governing instrument. Fiduciary shareholders
should consult their own legal advisors if they have any concern as to whether
the investment is consistent with the foregoing criteria.
Prohibited Transactions. Fiduciaries of ERISA plans and persons making the
investment decision for an IRA or other non-ERISA plan should consider the
application of the prohibited transaction provisions of ERISA and the Internal
Revenue Code in making their investment decision. Sales and other transactions
between an ERISA plan or a non-ERISA plan, and persons related to it are
prohibited transactions. The particular facts concerning the sponsorship,
operations and other investments of an ERISA plan or non-ERISA plan may cause a
wide range of other persons to be treated as disqualified persons or parties in
interest with respect to it. A prohibited transaction, in addition to imposing
potential personal liability upon fiduciaries of ERISA plans, may also result in
the imposition of an excise tax under the Internal Revenue Code or a penalty
under ERISA upon the disqualified person or party in interest with respect to
the plan. If the disqualified person who engages in the transaction is the
individual on behalf of whom an IRA or Roth IRA is maintained or his
beneficiary, the IRA or Roth IRA may lose its tax-exempt status and its assets
may be deemed to have been distributed to the individual in a taxable
distribution on account of the prohibited transaction, but no excise tax will be
imposed. Fiduciary shareholders should consult their own legal advisors if they
have any concern as to whether the ownership of Senior Housing shares involves a
prohibited transaction.
Special Fiduciary and Prohibited Transactions Consequences. The Department
of Labor, which has administrative responsibility over ERISA plans as well as
non-ERISA plans, has issued a regulation defining "plan assets." The regulation
generally provides that when an ERISA or non-ERISA plan acquires a security that
is an equity interest in an entity and that security is neither a "publicly
offered security" nor a security issued by an investment company registered
under the Investment Company Act of 1940, the ERISA plan's or non-ERISA plan's
assets include both the equity interest and an undivided interest in each of the
underlying assets of the entity, unless it is established either that the entity
is an operating company or that equity participation in the entity by benefit
plan investors is not significant.
Each class of Senior Housing shares--that is, its common shares and any
class of preferred shares that it may issue in the future--must be analyzed
separately to ascertain whether it is a publicly offered security. The
regulation defines a publicly offered security as a security that is "widely
held," "freely transferable" and either part of a class of securities registered
under the Securities Exchange Act of 1934, or sold under an effective
registration statement under the Securities Act of 1933, provided the securities
are registered under the Securities Exchange Act of 1934 within 120 days after
the end of the fiscal year of the issuer during which the offering occurred.
Senior Housing shares will be registered under the Securities Exchange Act of
1934.
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The regulation provides that a security is "widely held" only if it is part
of a class of securities that is owned by 100 or more investors independent of
the issuer and of one another. However, a security will not fail to be "widely
held" because the number of independent investors falls below 100 subsequent to
the initial public offering as a result of events beyond the issuer's control.
Senior Housing expects its common shares to be widely held.
The regulation provides that whether a security is "freely transferable" is
a factual question to be determined on the basis of all relevant facts and
circumstances. The regulation further provides that, where a security is part of
an offering in which the minimum investment is $10,000 or less, some
restrictions on transfer ordinarily will not, alone or in combination, affect a
finding that these securities are freely transferable. The restrictions on
transfer enumerated in the regulation as not affecting that finding include:
o any restriction on or prohibition against any transfer or assignment which
would result in a termination or reclassification for federal or state tax
purposes, or would otherwise violate any state or federal law or court
order;
o any requirement that advance notice of a transfer or assignment be given to
the issuer and any requirement that either the transferor or transferee, or
both, execute documentation setting forth representations as to compliance
with any restrictions on transfer which are among those enumerated in the
regulation as not affecting free transferability, including those described
in the preceding clause of this sentence;
o any administrative procedure which establishes an effective date, or an
event prior to which a transfer or assignment will not be effective; and
o any limitation or restriction on transfer or assignment which is not
imposed by the issuer or a person acting on behalf of the issuer.
Senior Housing believes that the restrictions imposed under the declaration
of trust on the transfer of shares do not result in the failure of its shares to
be "freely transferable." Furthermore, Senior Housing believes that at present
there exist no other facts or circumstances limiting the transferability of its
shares which are not included among those enumerated as not affecting their free
transferability under the regulation, and Senior Housing does not expect or
intend to impose in the future, or to permit any person to impose on its behalf,
any limitations or restrictions on transfer which would not be among the
enumerated permissible limitations or restrictions.
Assuming that each class of Senior Housing's shares will be "widely held"
and that no other facts and circumstances exist which restrict transferability
of these shares, Senior Housing has received an opinion of counsel that its
shares will not fail to be "freely transferable" for purposes of the regulation
due to the restrictions on transfer of the shares under Senior Housing's
declaration of trust and that under the regulation the shares are publicly
offered securities and Senior Housing's assets will not be deemed to be "plan
assets" of any ERISA plan or non-ERISA plan that invests in Senior Housing
shares.
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LEGAL MATTERS
Sullivan & Worcester LLP, Boston, Massachusetts, the lawyers for Senior
Housing, have issued an opinion about the legality of the shares. Sullivan &
Worcester LLP will rely, as to certain matters of Maryland law, upon an opinion
of Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland. Barry M. Portnoy
was a partner and chairman of the firm of Sullivan & Worcester LLP until March
31, 1997 and is one of Senior Housing's managing trustees. Mr. Portnoy is also a
managing trustee of HRPT, Hospitality Properties and a director and 50% owner of
Reit Management, the investment advisor to Senior Housing, a director and
significant shareholder of one of Senior Housing's tenants. Jennifer B. Clark, a
vice president at Reit Management, was a partner of Sullivan & Worcester LLP
until July 1, 1999. Sullivan & Worcester LLP represents Senior Housing, HRPT,
Hospitality Properties, Reit Management and their affiliates on various matters.
Ballard Spahr Andrews & Ingersoll LLP is a tenant of HRPT and is counsel to the
agent of Senior Housing's bank credit facility.
EXPERTS
The combined financial statements and schedules of HRPT's Senior Housing
Properties (wholly owned by HRPT Properties Trust) at December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998,
appearing in this prospectus and registration statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
FORWARD LOOKING STATEMENTS
This prospectus contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Those statements appear in a number of places in this prospectus and
include statements regarding the intent, belief or expectations of HRPT, Senior
Housing, their trustees or their officers with respect to the declaration or
payment of dividends, the consummation of additional acquisitions, policies and
plans of HRPT and Senior Housing regarding investments, dispositions,
financings, conflicts of interest or other matters, HRPT's and Senior Housing's
qualification and continued qualification as real estate investment trusts or
trends affecting their businesses, financial condition or results of operations.
HRPT and Senior Housing caution you that these forward looking statements are
not guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from the forward looking statements as a result of
various factors. These factors include, without limitation, changes in financing
terms, HRPT's or Senior Housing's ability or inability to complete acquisitions
and financing transactions, results of operations of HRPT's and Senior Housing's
properties and general changes in economic conditions not presently
contemplated. The "Risk Factors" and "Senior Housing Management's Discussion and
Analysis of Financial Condition and Results of Operations" sections of this
prospectus identify other important factors that could cause these differences.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Senior Housing has filed with the SEC a registration statement, of which
this prospectus is a part, on Form S- 11 under the Securities Act of 1933. This
prospectus does not contain all the information set forth in the registration
statement. Statements contained in this prospectus as to the content of any
contract or other
92
<PAGE>
document are not necessarily complete, and you should consult the copy of those
contracts or other documents filed as exhibits to the registration statement.
For further information regarding Senior Housing, please read the registration
statement and the exhibits and schedules thereto.
You may read and copy the registration statement and its exhibits and
schedules at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. When the Form S-11 becomes effective, Senior Housing
will be subject to the reporting requirements of the Securities Exchange Act of
1934 and the reports, proxy statements and other information filed by Senior
Housing with the SEC can then be inspected and copied at the SEC's Public
Reference Room. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. You may access the
electronic filing of the registration statement and its exhibits and schedules
on the SEC's internet site, http://www.sec.gov.
Senior Housing intends to make available to its shareholders annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each year.
---------------------------
You should rely only on the information contained in this prospectus. We
have not, and the Senior Housing has not, authorized any person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. HRPT and Senior Housing
believe that the information contained in this prospectus is accurate as of the
date on the cover. Changes may occur after that date, and neither HRPT nor
Senior Housing will update the information except as is required in the normal
course of their respective public disclosure practices. You should assume that
HRPT's and Senior Housing's business, financial condition, results of operations
and prospects may have changed since the date appearing on the cover of this
prospectus.
---------------------------
The amended and restated declaration of trust establishing Senior Housing
Properties Trust, dated , 1999, a copy of which, together with all amendments
thereto, is filed in the office of the State Department of Assessments and
Taxation of Maryland, provides that the name "Senior Housing Properties Trust"
refers to the trustees under Senior Housing's declaration as trustees, but not
individually or personally, and that no trustee, officer, shareholder, employee
or agent of Senior Housing shall be held to any personal liability for any
obligation of, or claim against, Senior Housing. All persons dealing with Senior
Housing shall look only to the assets of Senior Housing for the payment of any
sum or the performance of any obligation.
---------------------------
The amended and restated declaration of trust establishing HRPT, dated July
1, 1994, a copy of which, together with all amendments thereto, is filed in the
office of the State Department of Assessments and Taxation of Maryland, provides
that the name "HRPT Properties Trust" refers to the trustees under HRPT's
declaration as trustees, but not individually or personally, and that no
trustee, officer, shareholder, employee or agent of HRPT shall be held to any
personal liability for any obligation of, or claim against, HRPT. All persons
dealing with HRPT shall look only to the assets of HRPT for the payment of any
sum or the performance of any obligation.
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<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<S> <C>
Unaudited Pro Forma Consolidated Financial Statements of HRPT Properties Trust
Introduction to unaudited pro forma consolidated financial statements........................................F-2
Unaudited pro forma consolidated balance sheet as of March 31, 1999..........................................F-3
Unaudited pro forma consolidated statement of income for the three months
ended March 31, 1999.....................................................................................F-4
Unaudited pro forma consolidated statement of income for the year ended December 31, 1998....................F-5
Notes to unaudited pro forma consolidated financial statements...............................................F-6
Unaudited Pro Forma Consolidated Financial Statements of Senior Housing Properties Trust
Introduction to unaudited pro forma consolidated financial statements........................................F-8
Unaudited pro forma consolidated balance sheet as of March 31, 1999..........................................F-9
Unaudited pro forma consolidated statement of income for the three months
ended March 31, 1999....................................................................................F-10
Unaudited pro forma consolidated statement of income for the year ended December 31, 1998...................F-11
Notes to unaudited pro forma consolidated financial statements..............................................F-12
Combined Financial Statements of HRPT's Senior Housing Properties (wholly owned by HRPT
Properties Trust) and Financial Statement Schedules
Report of independent auditors..............................................................................F-14
Combined balance sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited).....................F-15
Combined statements of income for each of the three years in the period ended
December 31, 1998 and for the three months ended March 31, 1998 and 1999 (unaudited)....................F-16
Combined statements of ownership interest of HRPT Properties Trust for
each of the three years in the period ended December 31, 1998 and
for the three months ended
March 31, 1999 (unaudited)..............................................................................F-17
Combined statements of cash flows for each of the three years in the period ended
December 31, 1998 and for the three months ended March 31, 1998 and 1999 (unaudited) ...................F-18
Notes to combined financial statements......................................................................F-19
Schedule III - Real Estate and Accumulated Depreciation......................................................S-1
Schedule IV - Mortgage Loans on Real Estate..................................................................S-4
</TABLE>
F-1
<PAGE>
HRPT Properties Trust
Introduction to Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated balance sheet at March
31, 1999 is intended to present the financial position of HRPT Properties Trust
as if the transactions described in the notes had been completed as of March 31,
1999. The following unaudited pro forma consolidated statements of income are
intended to present the results of operations of HRPT as if these transactions
had been completed as of January 1, 1998.
These unaudited pro forma consolidated financial statements are not
necessarily indicative of what the actual consolidated financial position or
results of operations of HRPT would have been as of the date or for the periods
indicated, nor do they represent our expected consolidated financial position or
results of operations for any future period. Differences would result from,
among other considerations, future changes in HRPT's investments, changes in
rent which we receive, changes in interest rates and changes in the capital
structure of HRPT. For more information about the financial condition and
results of operations of HRPT, please refer to the financial statements of HRPT
filed with the SEC, including the audited consolidated financial statements for
the year ended December 31, 1998, included in HRPT's Current Report on Form 8-K
dated March 5, 1999, and the unaudited consolidated financial statements for the
quarter ended March 31, 1999, included in HRPT's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999.
F-2
<PAGE>
<TABLE>
<CAPTION>
HRPT Properties Trust
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1999
(dollars in thousands, except per share amounts)
Pro Forma
Historical (A) Adjustments Pro Forma
-------------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Real estate properties:
Land $ 364,228 $ (69,673) $ 294,555
Buildings and improvements 2,501,146 (662,720) 1,838,426
----------- ----------- -----------
2,865,374 (732,393) 2,132,981
Accumulated depreciation (167,501) 100,223 (67,278)
----------- -----------
2,697,873 (632,170) (B) 2,065,703
Real estate mortgages 125,827 (37,733) (B) 88,094
Investment in Hospitality Properties 109,842 -- 109,842
Investment in Senior Housing -- 215,017 (C) 215,017
Cash and cash equivalents 32,575 (11,167) (D) 21,408
Other assets, net 84,568 (8,831) (B) 75,737
----------- ----------- -----------
$ 3,050,685 $ (474,884) $ 2,575,801
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank credit facility $-- $-- $--
Senior notes payable, net 892,476 (200,000) (E) 692,476
Mortgage notes payable 24,611 -- 24,611
Convertible subordinated debentures 204,863 -- 204,863
Other liabilities 50,692 (741) (B) 49,951
Deferred rents and other deferred revenues 33,957 (27,785) (B) 6,172
Security deposits 18,435 (15,235) (B) 3,200
Shareholders' equity:
Preferred shares of beneficial interest; $0.01 par
value; 50,000,000 shares authorized; none
issued -- -- --
Common shares of beneficial interest; $0.01 par
value; 150,000,000 shares authorized;
131,893,126 shares issued and outstanding 1,319 -- 1,319
Additional paid-in capital 1,971,146 -- 1,971,146
Cumulative net income 606,778 (10,000) (G) 596,778
Cumulative distributions (753,592) (221,123) (F) (974,715)
----------- ----------- -----------
Total shareholders' equity 1,825,651 (231,123) 1,594,528
----------- ----------- -----------
$ 3,050,685 $ (474,884) $ 2,575,801
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
HRPT Properties Trust
Unaudited Pro Forma Consolidated Statement of Income
For the Three Months Ended March 31, 1999
(amounts in thousands, except per share data)
Pro Forma
Historical (A) Adjustments Pro Forma
---------------- --------------- -------------
<S> <C> <C> <C>
Revenues:
Rental income $ 101,313 $ (21,226) $ 80,087
Interest and other income 3,090 (1,442) 1,648
--------- --------- ---------
Total revenues 104,403 (22,668) (H) 81,735
--------- --------- ---------
Expenses:
Operating expenses 24,006 -- 24,006
Interest 19,437 (2,800) (I) 16,637
Depreciation and amortization 18,831 (5,607) (J) 13,224
General and administrative 4,841 (1,114) (K) 3,727
--------- --------- --------
Total expenses 67,115 (9,521) 57,594
--------- --------- --------
Income before equity in earnings of
Hospitality Properties and Senior
Housing, and gain on sale of properties
37,288 (13,147) 24,141
Equity in earnings of Hospitality Properties 2,008 -- 2,008
Equity in earnings of Senior Housing -- 6,198 (L) 6,198
--------- --------- ---------
Income before gain on sale of properties 39,296 (6,949) 32,347
Gain on sale of properties 8,307 -- 8,307
--------- --------- ---------
Net income $ 47,603 $ (6,949) $ 40,654
========= ========= =========
Weighted average shares outstanding 131,660 -- 131,660
========= ========= =========
Basic and diluted earnings per share:
Income before gain on sale of properties $0.30 $0.25
======== =========
Net income $0.36 $0.31
======== =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
HRPT Properties Trust
Unaudited Pro Forma Consolidated Statement of Income
For the Year Ended December 31, 1998
(amounts in thousands, except per share data)
Pro Forma
Historical (A) Adjustments Pro Forma
---------------- --------------- -------------
<S> <C> <C> <C>
Revenues:
Rental income $ 340,851 $ (82,542) $ 258,309
Interest and other income 15,703 (5,764) 9,939
--------- --------- ---------
Total revenues 356,554 (88,306) (H) 268,248
--------- --------- ---------
Expenses:
Operating expenses 77,536 -- 77,536
Interest 64,326 (12,400) (I) 51,926
Depreciation and amortization 60,764 (18,297) (J) 42,467
General and administrative 17,172 (4,480) (K) 12,692
--------- --------- ---------
Total expenses 219,798 (35,177) 184,621
--------- --------- ---------
Income before equity in earnings of Hospitality
Properties and Senior Housing, and
extraordinary item 136,756 (53,129) 83,627
Equity in earnings of Hospitality Properties 7,687 -- 7,687
Equity in earnings of Senior Housing -- 26,254 (L) 26,254
Gain on equity transaction of Hospitality
Properties 2,213 -- 2,213
--------- --------- ---------
Income before extraordinary item 146,656 (26,875) 119,781
Extraordinary item - early extinguishment of debt (2,140) -- (2,140)
--------- --------- ---------
Net income $ 144,516 $ (26,875) $ 117,641
========= ========= =========
Weighted average shares outstanding 119,867 -- 119,867
========= ========= =========
Basic and diluted earnings per share:
Income before extraordinary item $1.22 $1.00
========= =========
Net income $1.21 $0.98
========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
HRPT Properties Trust
Notes to Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands)
A. Represents the historical consolidated balance sheet and consolidated
statements of income of HRPT Properties Trust ("HRPT") as of the date and
for the periods presented.
Consolidated Balance Sheet Adjustments
B. Represents elimination of HRPT's historical carrying value of 93 senior
housing investments and related assets and liabilities transferred by HRPT
to Senior Housing Properties Trust ("Senior Housing").
<TABLE>
<CAPTION>
C. Represents adjustments to reflect HRPT's investment in Senior Housing after
the spin-off and related transactions using the equity method of
accounting, calculated as follows:
<S> <C>
Net historical carrying value of 93 senior housing investments and
related assets and liabilities transferred to Senior Housing (see note B) $635,140
Estimated cash transferred by HRPT to Senior Housing (see note D) 1,000
Cash payment by Senior Housing of the formation debt to HRPT (see note E) (200,000)
Distribution by HRPT of Senior Housing shares to HRPT shareholders (see note F) (221,123)
--------
HRPT's equity investment in Senior Housing $215,017
========
<CAPTION>
D. Represents the net cash effect of the spin-off and related transactions,
calculated as follows:
<S> <C>
Senior Housing cash at March 31, 1999 $(167)
Estimated cash transferred to Senior Housing from HRPT (1,000)
Estimated transaction costs paid by HRPT (not reimbursed by Senior Housing) (10,000)
Cash received by HRPT from Senior Housing to pay the formation debt (see note E) 200,000
Cash used by HRPT to prepay HRPT senior debt outstanding (see note E) (200,000)
--------
$(11,167)
========
</TABLE>
E. After completion of the spin-off, Senior Housing will borrow $200,000 under
its bank credit facility to pay the Senior Housing formation debt due HRPT
of $200,000. This adjustment reflects the application of these proceeds by
HRPT to prepay HRPT senior debt outstanding.
<TABLE>
<CAPTION>
F. Represents the distribution of Senior Housing shares to HRPT shareholders
on the basis of one Senior Housing share for each 10 HRPT shares
outstanding, calculated as follows:
<S> <C>
Net historical carrying value of 93 senior housing investments and related
assets and liabilities transferred to Senior Housing (see note B) $635,140
Estimated cash transferred to Senior Housing 1,000
Cash received by HRPT from Senior Housing to pay the formation debt (see note E) (200,000)
--------
436,140
Multiplied by:
Senior Housing shares distributed to HRPT shareholders (13.19 million)
as percentage of total Senior Housing shares outstanding (26 million) x 50.7%
$221,123
========
</TABLE>
F-6
<PAGE>
HRPT Properties Trust
Notes to Unaudited Pro Forma Consolidated Financial Statements - continued
(dollars in thousands)
G. Represents estimated transaction costs of $10 millioas percentage n to be
expensed by HRPT. These expenses are not reflected in the pro forma
statements of income because they are not recurring.
Consolidated Statements of Income Adjustments
H. Represents historical rent, interest and other income realized by HRPT from
properties transferred to Senior Housing.
<TABLE>
<CAPTION>
I. Represents the reduction in HRPT's interest expense, calculated as follows:
Three Months Year Ended
Ended March 31, December 31,
1999 1998
--------------- ---------------
<S> <C> <C>
HRPT's senior notes prepaid (see note E) $200,000 $200,000
Multiplied by:
Historical interest rate of debt to be prepaid x 5.6% x 6.2%
--------------- ---------------
Reduction in HRPT's interest expense $2,800 $12,400
=============== ===============
</TABLE>
J. Represents the historical depreciation expense related to the properties
transferred to Senior Housing.
K. Represents the amount of HRPT's general and administrative expense
allocated to the properties transferred to Senior Housing. This allocation
is based upon HRPT's advisory fee formula and other costs allocated pro
rata to the historical cost of the transferred assets compared to HRPT's
historical cost of all its properties. Management believes that this method
of allocating general and administrative expenses is reasonable.
<TABLE>
<CAPTION>
L. Represents HRPT's share of the pro forma consolidated net income of Senior
Housing (presented on pages F-10 and F-11), calculated as follows:
Three Months Year Ended
Ended March 31, December 31,
1999 1998
--------------- ---------------
<S> <C> <C>
Senior Housing pro forma net income $12,572 $53,254
Multiplied by:
HRPT's ownership of Senior Housing shares (12.81 million)
as a percentage of total Senior Housing shares outstanding
(26 million)
x 49.3% x 49.3%
------------- --------------
Equity in earnings of Senior Housing $6,198 $26,254
============= ==============
</TABLE>
F-7
<PAGE>
Senior Housing Properties Trust
Introduction to Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated balance sheet at March
31, 1999, is intended to present the financial position of Senior Housing
Properties Trust as if the transactions described in the notes had been
completed as of March 31, 1999. The following unaudited pro forma consolidated
statements of income are intended to present the results of operations of Senior
Housing as if these transactions had been completed as of January 1, 1998.
These unaudited pro forma consolidated financial statements are not
necessarily indicative of the expected consolidated financial position or
results of operations of Senior Housing for any future period. Differences could
result from many factors, including future changes in Senior Housing's
investments, changes in interest rates and changes in the capital structure of
Senior Housing. This pro forma information should be read in conjunction with
the audited Combined Financial Statements of HRP s Senior Housing Properties
(wholly owned by HRPT Properties Trust) and notes thereto appearing on pages
F-15 through F-21 and with "Senior Housing Management's Discussion and Analysis
of Financial Condition and Results of Operations" appearing elsewhere in this
prospectus.
F-8
<PAGE>
<TABLE>
<CAPTION>
Senior Housing Properties Trust
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 1999
(dollars in thousands, except per share amounts)
Pro Forma
Historical (A) Adjustments Pro Forma
---------------- ------------- -----------
<S> <C> <C> <C>
ASSETS
Real estate properties:
Land $ 69,673 $-- $ 69,673
Buildings and improvements 662,720 -- 662,720
--------- --------- ---------
732,393 -- 732,393
Accumulated depreciation (100,223) -- (100,223)
--------- --------- ---------
632,170 -- 632,170
Real estate mortgages 37,733 -- 37,733
Cash and cash equivalents 167 1,000 (B) 1,167
Other assets 8,831 -- 8,831
--------- --------- ---------
$ 678,901 $ 1,000 $ 679,901
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank credit facility $-- $ 200,000 (C) $ 200,000
Deferred rents and other deferred revenues 27,785 -- 27,785
Security deposits 15,235 -- 15,235
Other liabilities 741 -- 741
Shareholders' equity:
Common shares of beneficial interest; $0.01 par
value; 50,000,000 shares authorized; 26,000,000
pro forma shares issued and outstanding -- 260 (D) 260
Additional paid-in capital -- 435,880 (E) 435,880
Ownership interest of HRPT Properties Trust 635,140 (635,140) (F) --
--------- --------- ---------
Total shareholders' equity 635,140 (199,000) 436,140
--------- --------- ---------
$ 678,901 $ 1,000 $ 679,901
========= ========= =========
</TABLE>
See accompanying notes.
F-9
<PAGE>
Senior Housing Properties Trust
Unaudited Pro Forma Consolidated Statement of Income
For the Three Months Ended March 31, 1999
(amounts in thousands, except per share data)
Pro Forma
Historical (A) Adjustments Pro Forma
---------------- ------------- -----------
Revenues:
Rental income $21,226 $-- $21,226
Interest and other income 1,442 -- 1,442
------- ------- -------
Total revenues 22,668 -- 22,668
------- ------- -------
Expenses:
Interest 4,976 (1,601) (G) 3,375
Depreciation 5,607 -- 5,607
General and administrative 1,114 -- 1,114
------- ------- -------
Total expenses 11,697 (1,601) 10,096
------- ------- -------
Net income $10,971 $ 1,601 $12,572
======= ======= =======
Weighted average shares outstanding 26,000 (H) 26,000
======= =======
Earnings per share $0.48
=======
See accompanying notes.
F-10
<PAGE>
Senior Housing Properties Trust
Unaudited Pro Forma Consolidated Statement of Income
For the Year Ended December 31, 1998
(amounts in thousands, except per share data)
Pro Forma
Historical (A) Adjustments Pro Forma
---------------- ------------- -----------
Revenues:
Rental income $82,542 $ 1,461 $84,003
Interest and other income 5,764 -- 5,764
------- ------- -------
Total revenues 88,306 1,461 (I) 89,767
------- ------- -------
Expenses:
Interest 19,293 (5,793) (G) 13,500
Depreciation 18,297 193 (I) 18,490
General and administrative 4,480 43 (I) 4,523
------- ------- -------
Total expenses 42,070 (5,557) 36,513
------- ------- -------
Net income $46,236 $ 7,018 $53,254
======= ======= =======
Weighted average shares outstanding 26,000 (H) 26,000
======= =======
Earnings per share $2.05
=======
See accompanying notes.
F-11
<PAGE>
Senior Housing Properties Trust
Notes to Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands, except per share data)
A. Represents the historical combined balance sheet and combined statements of
income of HRPT's Senior Housing Properties as presented on pages F-15 and
F-16.
Consolidated Balance Sheet Adjustments
<TABLE>
<CAPTION>
B. Represents the net cash effect of the spin-off and related transactions on
Senior Housing Properties Trust ("Senior Housing"), calculated as follows:
<S> <C>
Estimated cash transferred by HRPT to Senior Housing $1,000
Borrowing under Senior Housing's bank credit facility (see note C) 200,000
Payment by Senior Housing of the formation debt due to HRPT (200,000)
--------
$1,000
========
</TABLE>
C. Represents the borrowing of $200,000 under Senior Housing's bank credit
facility. The proceeds from this borrowing will be used to pay Senior
Housing's formation debt due to HRPT.
D. Represents the $0.01 per share par value of the 26 million Senior Housing
shares issued and outstanding as of the spin-off date.
<TABLE>
<CAPTION>
E. Represents the adjustments from the spin-off and related transactions to
Senior Housing's equity, calculated as follows:
<S> <C>
Ownership interest of HRPT Properties Trust $635,140
Payment by Senior Housing of the formation debt due to HRPT (see note C) (200,000)
Estimated cash transferred to Senior Housing from HRPT (see note B) 1,000
--------
Senior Housing equity 436,140
Par value of Senior Housing shares outstanding (see note D) (260)
--------
Additional paid-in capital $435,880
========
<CAPTION>
F. Represents reclassification of balance of Ownership Interest of HRPT
related to the spin-off, calculated as follows:
<S> <C>
Formation debt due HRPT paid by Senior Housing (see note C) $(200,000)
Estimated cash transferred to Senior Housing from HRPT 1,000
Par value of Senior Housing's 26 million shares outstanding (see note D) (260)
Senior Housing's additional paid-in capital (see note E) (435,880)
---------
$(635,140)
=========
</TABLE>
F-12
<PAGE>
Senior Housing Properties Trust
Notes to Unaudited Pro Forma Consolidated Financial Statements - continued
(dollars in thousands, except per share data)
Consolidated Statements of Income Adjustments
<TABLE>
<CAPTION>
G. Represents adjustments to interest expense from the spin-off and related
transactions, calculated as follows:
Three Months Year Ended
Ended March 31, December 31,
1999 1998
--------------- ------------
<S> <C> <C>
HRPT interest expense allocated to the Senior Housing
properties $(4,976) $(19,293)
Interest expense on Senior Housing's 200,000 borrowing
under its bank credit facility (see note C) 3,375 13,500
---------------- -------------
$(1,601) $(5,793)
================ =============
</TABLE>
The HRPT interest expense allocation to Senior Housing is the historical
amount of HRPT's total interest expense times a fraction, the numerator of
which is the historical cost of HRPT's senior housing properties and the
denominator of which is the historical cost of all HRPT's properties, each
calculated on an average basis for the periods presented. Management
believes this method of allocating interest expense is reasonable.
The interest rate payable by Senior Housing is LIBOR plus a premium,
currently 6.75%. The effect of a 1/8% change in interest rates, on pro
forma borrowings will change interest expense by $250.
H. As of the date of the spin-off, Senior Housing will have 26 million shares
issued and outstanding.
I. Represents rental income, depreciation and general and administrative
expenses arising from the acquisition of five of the Senior Housing
properties in September 1998, as if the properties had been acquired on
January 1, 1998.
F-13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder of Senior Housing Properties Trust:
We have audited the accompanying combined balance sheets of HRPT's Senior
Housing Properties (wholly owned by HRPT Properties Trust, as more fully
discussed in Note 1 to the financial statements) as of December 31, 1998 and
1997, and the related combined statements of income, ownership interest of HRPT
Properties Trust and cash flows for each of the three years in the period ended
December 31, 1998. Our audits also included the financial statement schedules
listed in the Index at F-1. These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of HRPT's Senior Housing
Properties (wholly owned by HRPT Properties Trust) at December 31, 1998 and
1997, and the combined results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
July 1, 1999
F-14
<PAGE>
<TABLE>
<CAPTION>
HRPT's Senior Housing Properties
(wholly owned by HRPT Properties Trust)
Combined Balance Sheets
(dollars in thousands)
As of December 31, As of
------------------------------ March 31,
1997 1998 1999
------------ ----------- ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Real estate properties:
Land $ 68,265 $ 69,673 $ 69,673
Buildings and improvements 652,722 662,720 662,720
--------- --------- ---------
720,987 732,393 732,393
Accumulated depreciation (74,213) (94,616) (100,223)
--------- --------- ---------
646,774 637,777 632,170
Real estate mortgages 38,134 37,826 37,733
Cash and cash equivalents -- 139 167
Other assets 7,678 10,554 8,831
--------- --------- ---------
$ 692,586 $ 686,296 $ 678,901
========= ========= =========
LIABILITIES AND OWNERSHIP INTEREST
Deferred rents and other deferred revenues $ 29,721 $ 28,266 $ 27,785
Security deposits 15,235 15,235 15,235
Other liabilities 692 726 741
Ownership interest of HRPT Properties Trust 646,938 642,069 635,140
--------- --------- ---------
$ 692,586 $ 686,296 $ 678,901
========= ========= =========
</TABLE>
See accompanying notes
F-15
<PAGE>
<TABLE>
<CAPTION>
HRPT's Senior Housing Properties
(wholly owned by HRPT Properties Trust)
Combined Statements of Income
(dollars in thousands)
Three Months Ended
Year Ended December 31, March 31,
--------------------------- --------------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income $66,202 $78,463 $82,542 $20,052 $21,226
Interest and other income 4,240 5,708 5,764 1,444 1,442
------- ------- ------- ------- -------
Total revenues 70,442 84,171 88,306 21,496 22,668
------- ------- ------- ------- -------
Expenses:
Interest 14,719 16,958 19,293 4,705 4,976
Depreciation 15,383 17,826 18,297 4,553 5,607
General and administrative 3,899 4,664 4,480 1,104 1,114
------- ------- ------- ------- -------
Total expenses 34,001 39,448 42,070 10,362 11,697
------- ------- ------- ------- -------
Net income $36,441 $44,723 $46,236 $11,134 $10,971
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-16
<PAGE>
HRPT's Senior Housing Properties
(wholly owned by HRPT Properties Trust)
Combined Statements of Ownership Interest of
HRPT Properties Trust
(dollars in thousands)
Balance at December 31, 1995 $ 573,793
Net income 36,441
Owner contribution, net 54,258
---------
Balance at December 31, 1996 664,492
Net income 44,723
Owner distribution, net (62,277)
---------
Balance at December 31, 1997 646,938
Net income 46,236
Owner distribution, net (51,105)
---------
Balance at December 31, 1998 642,069
Net income (unaudited) 10,971
Owner distribution, net (unaudited) (17,900)
---------
Balance at March 31, 1999 (unaudited) $ 635,140
=========
See accompanying notes.
F-17
<PAGE>
<TABLE>
<CAPTION>
HRPT's Senior Housing Properties
(wholly owned by HRPT Properties Trust)
Combined Statements of Cash Flows
(dollars in thousands)
Three Months Ended
Year Ended December 31, March 31,
----------------------------------- ------------------------
1996 1997 1998 1998 1999
--------- --------- --------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 36,441 $ 44,723 $ 46,236 $ 11,134 $ 10,971
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 15,383 17,826 18,297 4,553 5,607
Changes in assets and liabilities:
Other assets (1,317) (2,394) (2,876) 1,741 1,723
Deferred rents and other deferred revenues 723 22,087 (1,455) (387) (481)
Security deposits 34 8,815 -- -- --
Other liabilities 44 37 34 16 15
--------- --------- --------- --------- ---------
Cash provided by operating activities 51,308 91,094 60,236 17,057 17,835
--------- --------- --------- --------- ---------
Cash Flows From Investing Activities:
Real estate acquisitions and improvements (105,094) (19,799) (2) -- --
Investments in mortgage loans (700) (124) -- -- --
Repayments of mortgage loans 228 260 308 66 93
--------- --------- --------- --------- ---------
Cash (used for) provided by investing
activities
(105,566) (19,663) 306 66 93
--------- --------- --------- --------- ---------
Cash Flows From Financing Activities:
Owner's net contribution (distribution) 54,258 (71,431) (60,403) (17,123) (17,900)
--------- --------- --------- --------- ---------
Cash provided by (used for) financing
activities
54,258 (71,431) (60,403) (17,123) (17,900)
--------- --------- --------- --------- ---------
Increase in cash and cash equivalents -- -- 139 -- 28
Cash and cash equivalents at beginning of period -- -- -- -- 139
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ -- $ -- $ 139 $ -- $ 167
========= ========= ========= ========= =========
Non-Cash Investing Activities:
Real estate acquisitions $ -- $ (9,154) $ (9,298) $ -- $ --
Non-Cash Financing Activities:
Owner's contributions -- 9,154 9,298 -- --
</TABLE>
See accompanying notes.
F-18
<PAGE>
HRPT'S SENIOR HOUSING PROPERTIES
(wholly owned by HRPT Properties Trust)
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1. Organization
The combined financial statements of HRPT's Senior Housing Properties include
the accounts of 81 properties and 12 mortgage receivables (the "Properties") and
of Senior Housing Properties Trust ("Senior Housing Trust"). The Properties and
Senior Housing Trust are collectively referred to as "Senior Housing". These
combined financial statements are presented as if Senior Housing was a legal
entity separate from HRPT Properties Trust ("HRPT"); however, no such entity
exists.
HRPT organized Senior Housing Trust, a 100% owned subsidiary, as a Maryland real
estate investment trust on December 16, 1998. At the time of its organization,
Senior Housing Trust issued 26.4 million shares to HRPT for consideration of
$263,748. Subsequently, 0.4 million shares were cancelled and 26 million shares
are currently issued and outstanding.
As of the dates and for the periods presented, the Properties were owned by
HRPT. On or about June 30, 1999, the Properties were transferred by HRPT to
several of its 100% owned subsidiaries. HRPT is in the process of distributing
13.2 million of its 26 million Senior Housing Trust shares to HRPT's
shareholders (the "Spin-Off"). Senior Housing Trust has filed a registration
statement on Form S-11 with the Securities and Exchange Commission to effect the
Spin-Off. Prior to the completion of the Spin-Off, HRPT will transfer 100%
ownership of the several subsidiaries which own the Properties to Senior Housing
Trust.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation. All of Senior Housing is owned by HRPT, and HRPT's
historical basis has been presented. Substantially all of the rental income and
mortgage interest income received by HRPT from the tenants and mortgagors of
Senior Housing is deposited in and commingled with HRPT's general funds. Capital
investments and other cash required by Senior Housing are provided by HRPT.
Interest expense is allocated based on HRPT's historical interest expense as a
percentage of HRPT's average historical costs of real estate investments.
General and administrative costs of HRPT are allocated to Senior Housing based
on HRPT's investment advisory agreement formula and other costs are allocated
based on historical costs as a percentage of HRPT's average historical costs of
real estate investments. In the opinion of management, the methods for
allocating interest and general and administrative expenses are reasonable. It
is not practicable to estimate additional costs that would have been incurred by
Senior Housing as a separate entity.
Real Estate Properties and Mortgage Investments. Depreciation on real estate
properties is expensed on a straight-line basis over estimated useful lives of
up to 40 years for buildings and improvements and up to 12 years for personal
property. Impairment losses on properties are recognized where indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by the properties are less than the carrying amount of concerned properties. The
determination of net realizable value includes consideration of many factors
including income to be earned from the property, holding costs (exclusive of
interest), estimated selling prices, and prevailing economic and market
conditions. Based upon these factors, the accompanying financial statements
include no impairment losses.
Revenue Recognition. Rental income from operating leases is recognized on a
straight-line basis over the life of the lease agreements. Interest income is
recognized as earned over the terms of the real estate mortgages. Percentage
rent and supplemental mortgage interest income is recognized as earned. For the
years ended December 31, 1996, 1997 and 1998, percentage rent and supplemental
mortgage interest income aggregated $2.6 million, $2.9 million and $2.9 million,
respectively. For the three months ended March 31, 1998 and 1999, percentage
rent and supplemental mortgage interest income aggregated $589,000 (unaudited)
and $1.0 million (unaudited), respectively.
Use of Estimates. Preparation of these financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that may affect the amounts reported in these financial
statements and related notes. The actual results could differ from these
estimates.
F-19
<PAGE>
HRPT'S SENIOR HOUSING PROPERTIES
(wholly owned by HRPT Properties Trust)
NOTES TO COMBINED FINANCIAL STATEMENTS
Income Taxes. Throughout the periods presented herein, Senior Housing's
operations were included in HRPT's income tax returns. HRPT is a real estate
investment trust under the Internal Revenue Code of 1986, as amended.
Accordingly, it is not subject to Federal income taxes provided it distributes
its taxable income and meets other requirements for qualifying as a real estate
investment trust. However, it is subject to state and local taxes on its income
and property. Upon completion of the Spin-Off, Senior Housing intends to qualify
as a real estate investment trust under the Internal Revenue Code of 1986, as
amended.
Note 3. Real Estate Properties
The owned Properties are leased on triple net bases, pursuant to noncancellable,
fixed term operating leases expiring between 2001 to 2019. Generally, the leases
to a single tenant or group of affiliated tenants are cross-defaulted and
cross-guaranteed, and provide for all or none tenant renewal options at existing
rates followed by several market rate renewal terms. These triple net leases
generally require the lessee to pay all property operating costs.
The future minimum lease payments to be received during the current terms of the
leases, as of December 31, 1998, are approximately $79.4 million in 1999, $80.1
million in 2000, $80.1 million in 2001, $81.7 million in 2002, $81.9 million in
2003 and $686.6 million thereafter.
Note 4. Real Estate Mortgages
December 31,
---------------------------
1997 1998
---------------------------
(dollars in thousands)
Mortgage notes receivable due December 2016 $8,800 $8,769
Mortgage note receivable due January 2013 883 883
Mortgage note receivable due December 2010 19,184 18,992
Mortgage notes receivable due January 2006 9,267 9,182
---------------------------
$38,134 $37,826
===========================
At December 31, 1998, the interest rates on these notes receivable ranged from
10.1% to 13.75% per annum.
Note 5. Commitments and Contingencies
At December 31, 1998 and March 31, 1999, HRPT had total commitments aggregating
$3.7 million to fund or finance improvements to the Properties. Upon completion
of the Spin-Off, Senior Housing Trust will assume these commitments.
Note 6. Transactions with Affiliates
HRPT has entered an investment advisory agreement with Reit Management &
Research, Inc. ("Reit Management"). Reit Management provides investment,
management and administrative services to HRPT, and will provide similar
services to Senior Housing Trust. Reit Management is owned by Gerard M. Martin
and Barry M. Portnoy, who also serve as managing trustees of HRPT and will serve
as managing trustees of Senior Housing Trust. Reit Management is paid by HRPT
based on a formula amount of gross invested assets of HRPT. Investment advisory
fees paid by HRPT to Reit Management during 1996, 1997 and 1998 with respect to
Senior Housing's invested assets were $3.2 million, $3.7 million and $3.8
million, respectively. Reit Management is also entitled to an incentive fee paid
in restricted shares based on a formula. Concurrent with the Spin-Off, Senior
Housing Trust will enter a separate agreement with Reit Management on
substantially similar terms.
F-20
<PAGE>
Note 7. Fair Value of Financial Instruments and Commitments
The financial statements presented include mortgage investments, rents
receivable, other liabilities and security deposits. Except as follows, the fair
values of the financial instruments and commitments to fund improvements were
not materially different from their carrying values at December 31, 1997 and
1998:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998
---------------------------- ------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------------------------- ------------------------------
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Real estate mortgages $38,134 $40,466 $37,826 $40,525
Commitments to fund improvements -- 6,207 -- 3,707
</TABLE>
The fair values of the real estate mortgages are based on estimates using
discounted cash flow analyses and currently prevailing market rates. The fair
value of the commitments represent the actual amounts committed.
Note 8. Concentration of Credit Risk
The assets included in these financial statements are primarily income producing
senior housing real estate located throughout the United States. The following
is a summary of the significant lessees and mortgagees as of and for the years
ended December 31, 1997 and 1998:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997 December 31, 1997
----------------------- ---------------------
Investment % of Total Revenue % of Total
----------------------- ---------------------
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Marriott International, Inc. $325,521 43% $ 30,365 36%
Integrated Health Services, Inc. 218,201 29 24,962 30
Brookdale Living Communities, Inc. 101,850 13 10,514 13
Mariner Post-Acute Network, Inc. 75,080 10 12,441 15
All others 38,469 5 4,930 6
--------------------- -------------------
$759,121 100% $ 83,212 100%
===================== ===================
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1998 December 31, 1998
----------------------- ---------------------
Investment % of Total Revenue % of Total
----------------------- ---------------------
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Marriott International, Inc. $325,521 42% $ 30,270 35%
Integrated Health Services, Inc. 217,893 29 26,841 31
Brookdale Living Communities, Inc. 101,850 13 11,074 13
Mariner Post-Acute Network, Inc. 86,486 11 13,620 15
All others 38,469 5 4,952 6
--------------------- -------------------
$770,219 100% $ 86,757 100%
===================== ===================
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
HRPT's Senior Housing Properties
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(Dollars in thousands)
Gross Amount Carried at Close
Initial Cost to Company of Period 12/31/98
----------------------- --------------------------------
Costs Original
Capitalized Accumulated Constr-
Buildings and Subsequent Buildings and Depreciation Date uction
Location State Land Equipment to Acquisition Land Equipment Total (1) (2) Aquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mesa AZ $1,480 $13,320 $ -- $1,480 $13,320 $14,800 $680 12/27/96 1985
Phoenix AZ 655 2,525 5 655 2,530 3,185 471 6/30/92 1963
Scottsdale AZ 979 8,807 140 990 8,936 9,926 1,033 5/16/94 1990
Sun City AZ 1,174 10,569 173 1,189 10,727 11,916 1,218 6/17/94 1990
Yuma AZ 103 604 1 103 605 708 112 6/30/92 1984
Yuma AZ 223 2,100 3 223 2,103 2,326 386 6/30/92 1984
Fresno CA 738 2,577 188 738 2,765 3,503 646 12/28/90 1963
Laguna Hills CA 3,132 28,184 475 3,172 28,619 31,791 3,072 9/9/94 1975
Lancaster CA 601 1,859 1,028 601 2,887 3,488 610 12/28/90 1969
Newport Beach CA 1,176 1,729 1,223 1,176 2,952 4,128 592 12/28/90 1962
Stockton CA 382 2,750 4 382 2,754 3,136 507 6/30/92 1968
Tarzana CA 1,277 977 806 1,278 1,782 3,060 403 12/28/90 1969
Thousand Oaks CA 622 2,522 310 622 2,832 3,454 639 12/28/90 1965
Van Nuys CA 716 378 225 718 601 1,319 154 12/28/90 1969
Canon City CO 292 6,228 -- 292 6,228 6,520 201 9/26/97 1970
Colorado Springs CO 245 5,236 -- 245 5,236 5,481 169 9/26/97 1972
Delta CO 167 3,570 -- 167 3,570 3,737 115 9/26/97 1963
Grand Junction CO 204 3,875 329 204 4,204 4,408 650 12/30/93 1968
Grand Junction CO 6 2,583 1,316 136 3,769 3,905 513 12/30/93 1978
Lakewood CO 232 3,766 723 232 4,489 4,721 970 12/28/90 1972
Littleton CO 185 5,043 348 185 5,391 5,576 1,224 12/28/90 1965
Cheshire CT 520 7,380 1,559 520 8,939 9,459 2,626 11/1/87 1963
Killingly CT 240 5,360 460 240 5,820 6,060 1,970 5/15/87 1972
New Haven CT 1,681 14,953 1,236 1,681 16,189 17,870 3,423 5/11/92 1971
Waterbury CT 1,003 9,023 915 1,003 9,938 10,941 2,097 5/11/92 1974
Waterford CT 86 4,714 453 86 5,167 5,253 1,814 5/15/87 1965
Willimantic CT 134 3,566 479 166 4,013 4,179 1,307 5/15/87 1965
Boca Raton FL 4,404 39,633 799 4,474 40,362 44,836 4,664 5/20/94 1994
Deerfield Beach FL 1,664 14,972 299 1,690 15,245 16,935 1,762 5/16/94 1986
Fort Myers FL 2,349 21,137 419 2,385 21,520 23,905 2,354 8/16/94 1984
Palm Harbor FL 3,327 29,945 591 3,379 30,484 33,863 3,523 5/16/94 1992
Port St. Lucie FL 1,223 11,009 219 1,242 11,209 12,451 1,295 5/20/94 1993
S-1
<PAGE>
<CAPTION>
HRPT's Senior Housing Properties
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(Dollars in thousands)
Gross Amount Carried at Close
Initial Cost to Company of Period 12/31/98
----------------------- --------------------------------
Costs Original
Capitalized Accumulated Constr-
Buildings and Subsequent Buildings and Depreciation Date uction
Location State Land Equipment to Acquisition Land Equipment Total (1) (2) Aquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
College Park GA $300 $2,702 $23 $300 $2,725 $3,025 $220 5/15/96 1985
Dublin GA 442 3,982 80 442 4,062 4,504 312 5/15/96 1968
Glenwood GA 174 1,564 4 174 1,568 1,742 116 5/15/96 1972
Marietta GA 300 2,702 35 300 2,737 3,037 211 5/15/96 1967
Clarinda IA 77 1,453 293 77 1,746 1,823 254 12/30/93 1968
Council Bluffs IA 225 893 99 225 992 1,217 164 4/1/95 1963
Mediapolis IA 94 1,776 251 94 2,027 2,121 303 12/30/93 1973
Pacific Junction IA 32 306 5 32 311 343 32 4/1/95 1978
Winterset IA 111 2,099 493 111 2,592 2,703 375 12/30/93 1973
Arlington Heights IL 3,621 32,587 534 3,665 33,077 36,742 3,550 9/9/94 1986
Chicago IL 6,200 55,800 -- 6,200 55,800 62,000 2,848 12/27/96 1990
Ellinwood KS 130 1,137 53 130 1,190 1,320 126 4/1/95 1972
Boston MA 2,164 20,836 1,978 2,164 22,814 24,978 6,788 5/1/89 1968
Hyannis MA 829 7,463 -- 829 7,463 8,292 1,677 5/11/92 1972
Middleboro MA 1,771 15,752 -- 1,771 15,752 17,523 3,501 5/1/88 1970
Worcester MA 1,829 15,071 1,869 1,829 16,940 18,769 5,522 5/1/88 1970
Silver Spring MD 3,229 29,065 786 3,301 29,779 33,080 3,319 7/25/94 1992
St. Joseph MO 111 1,027 195 111 1,222 1,333 154 6/4/93 1976
Tarkio MO 102 1,938 415 102 2,353 2,455 336 12/30/93 1970
Concord NC 90 2,126 -- 90 2,126 2,216 483 9/10/98 1990
Wilson NC 27 2,375 -- 27 2,375 2,402 538 9/10/98 1990
Winston-Salem NC 75 1,696 -- 75 1,696 1,771 381 9/10/98 1990
Grand Island NE 119 1,446 369 119 1,815 1,934 150 4/1/95 1963
Burlington NJ 1,300 11,700 7 1,300 11,707 13,007 952 9/29/95 1994
Brighton NY 1,070 9,630 -- 1,070 9,630 10,700 492 12/27/96 1988
Grove City OH 332 3,081 32 332 3,113 3,445 430 6/4/93 1965
Canonsburg PA 1,499 13,493 606 1,518 14,080 15,598 3,622 3/1/91 1985
Huron SD 45 968 1 45 969 1,014 177 6/30/92 1968
Huron SD 144 3,108 4 144 3,112 3,256 567 6/30/92 1968
Sioux Falls SD 253 3,062 4 253 3,066 3,319 561 6/30/92 1960
Bellaire TX 1,223 11,010 177 1,238 11,172 12,410 1,291 5/16/94 1991
Arlington VA 1,859 16,734 296 1,885 17,004 18,889 1,895 7/25/94 1992
S-2
<PAGE>
<CAPTION>
HRPT's Senior Housing Properties
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(Dollars in thousands)
Gross Amount Carried at Close
Initial Cost to Company of Period 12/31/98
----------------------- --------------------------------
Costs Original
Capitalized Accumulated Constr-
Buildings and Subsequent Buildings and Depreciation Date uction
Location State Land Equipment to Acquisition Land Equipment Total (1) (2) Aquired Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Charlottesville VA $2,936 $26,422 $471 $2,976 $26,853 $29,829 $3,048 6/17/94 1991
Virginia Beach VA 881 7,926 141 893 8,055 8,948 931 5/16/94 1990
Seattle WA 256 4,869 67 256 4,936 5,192 785 11/1/93 1964
Spokane WA 1,035 13,315 -- 1,035 13,315 14,350 581 5/7/97 1993
Brookfield WI 834 3,849 8,014 834 11,863 12,697 1,928 12/28/90 1964
Clintonville WI 14 1,695 38 14 1,733 1,747 389 12/28/90 1960
Clintonville WI 49 1,625 87 30 1,731 1,761 387 12/28/90 1965
Madison WI 144 1,633 110 144 1,743 1,887 390 12/28/90 1920
Milwaukee WI 232 1,368 1 232 1,369 1,601 281 9/10/98 1970
Milwaukee WI 277 3,883 -- 277 3,883 4,160 769 3/27/92 1969
Pewaukee WI 984 2,432 -- 984 2,432 3,416 518 9/10/98 1963
Waukesha WI 68 3,452 2,232 68 5,684 5,752 1,036 12/28/90 1958
Laramie WY 191 3,632 199 191 3,831 4,022 595 12/30/93 1964
Worland WY 132 2,503 588 132 3,091 3,223 431 12/30/93 1970
--------------------------------------------------------------------------------
Total $69,030 $628,080 $35,283 $69,673 $662,720 $732,393 $94,616
================================================================================
<FN>
(1) Aggregate cost for federal income tax purposes is approximately $706,576.
(2) Depreciation is provided for on buildings and improvements for periods ranging up to 40 years and on equipment up to 12
years.
</FN>
</TABLE>
Reconciliation of the carrying amount of real estate and equipment and
accumulated depreciation at the beginning of the period:
Real Estate and Accumulated
Equipment Depreciation
--------------- --------------
Balance at January 1, 1996 $586,940 $ 41,004
Additions 105,094 15,383
-------- --------
Balance at December 31, 1996 692,034 56,387
Additions 28,953 17,826
-------- --------
Balance at December 31, 1997 720,987 74,213
Additions 11,406 20,403
-------- --------
Balance at December 31, 1998 $732,393 $ 94,616
======== ========
S-3
<PAGE>
<TABLE>
<CAPTION>
HRPT's Senior Housing Properties
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1998
(Dollars in thousands)
Principal Amount of
Final Face Carrying Loans Subject to
Interest Maturity Value of Value of Delinquent Principal
Location Rate Date Periodic Payment Terms Mortgage Mortgage (1) or Interest
- ----------------- --------- ----------- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Farmington, MI 11.50% 1/1/06 Principal and interest, payable monthly in $4,200 $4,200 $--
arrears. $3.8 million due at maturity.
Howell, MI 11.50% 1/1/06 Principal and interest, payable monthly in 4,982 4,982 --
arrears. $4.5 million due at maturity.
Lyons, NE 10.09% 12/31/16 Principal and interest, payable monthly in 1,563 1,563 --
Milford, NE arrears. $835 due at maturity.
Ainsworth, NE 10.64% 12/31/16 Principal and interest, payable monthly in 5,154 5,154 --
Ashland, NE arrears. $2.8 million due at maturity.
Blue Hill, NE
Gretna, NE
Sutherland, NE
Waverly, NE
Ainsworth, NE 11.00% 12/31/16 Principal and interest, payable monthly in 2,052 2,052 --
Ashland, NE arrears. $1.1 million due at maturity.
Blue Hill, NE
Edgar, NE
Gretna, NE
Sutherland, NE
Waverly, NE
Lyons, NE
Milford, NE
Slidell, LA 11.00% 12/31/10 Principal and interest, payable monthly in 18,992 18,992 --
arrears. $13.9 million due at maturity.
Milwaukee, WI 13.75% 1/31/13 Interest only, payable monthly in arrears. 883 883 --
$883 due at maturity.
---------------------------------
$37,826 $37,826 $--
=================================
<FN>
(1) Also represents cost for federal income tax purposes.
</FN>
</TABLE>
S-4
<PAGE>
HRPT's Senior Housing Properties
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1998
(dollars in thousands)
Reconciliation of the carrying amount of mortgage loans at the beginning of the
period:
Balance at January 1, 1996 $ 37,798
New mortgage loans 700
Collections of principal (228)
--------
Balance at December 31, 1996 38,270
New mortgage loans 124
Collections of principal (260)
--------
Balance at December 31, 1997 38,134
Collections of principal (308)
--------
Balance at December 31, 1998 $ 37,826
========
- -------------------------------------------------------------------------------
Other Schedules
Other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the combined
financial statements, including notes thereto.
S-5
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
[Photograph of Building] [Photograph of Building]
Marriott International, Inc. Brookdale Living Communities
Stratford Court of Boca Raton Park Place
Boca Raton, FL Spokane, WA
349 Units, Built 1994 200 Units, Built 1993
[Photograph of Building]
Marriott International, Inc.
Brighton Gardens of Sun City
Sun City, AZ
148 Units, Built 1990
[Photograph of Building]
Brookdale Living Communities, Inc.
The Hallmark
Chicago, IL
341 Units, Built 1990
[Photograph of Building] [Photograph of Building]
Mariner Post-Acute Network Integrated Health Services, Inc.
LaMesa Blue Hill Care Center
Yuma, AZ Blue Hill, NE
128 Units, Built 1984 81 Units, Built 1967
<PAGE>
HRPT Properties Trust
Spin-Off
of
Senior Housing Properties Trust
Through Distribution
of
13,190,763
Common Shares of Beneficial Interest
------------------------------------
PROSPECTUS
------------------------------------
___________ , 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 31. Other Expenses of Issuance and Section Distribution.
The following table itemizes the expenses incurred by Senior Housing
Properties Trust in connection with the distribution of the common shares being
registered. All the amounts shown are estimates except the Securities and
Exchange Commission registration fee and the New York Stock Exchange listing
fee.
Item Amount
SEC Registration Fee...................................... $78,952
New York Stock Exchange Listing Fee....................... *
Transfer Agent=s and Registrar=s Fees..................... *
Printing and Engraving Fees............................... *
Legal Fees and Expenses (other than Blue Sky)............. *
Accounting Fees and Expenses.............................. *
Blue Sky Fees and Expenses (including fees of counsel).... *
Miscellaneous Expenses.................................... *
-------
Total..................................................... *
=======
- --------------------------
* To be provided by Amendment
Item 32. Sales to Special Parties.
See Item 33.
Item 33. Recent Sales of Unregistered Securities.
On December 16, 1998, Senior Housing was initially capitalized through
the issuance of 26,374,760 shares to HRPT Properties Trust in exchange for
$263,747.60. HRPT is currently the sole shareholder of Senior Housing. The
26,374,760 shares currently outstanding were purchased for investment and for
the purpose of organizing Senior Housing. On July 30, 1999, HRPT surrendered
374,760 Senior Housing shares and they were cancelled and returned to the status
of authorized but unissued. Senior Housing believes that the issuance and sale
of these securities are exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
Item 34. Indemnification of Directors and Officers.
The Maryland REIT law permits a Maryland real estate investment trust
to include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages except
for liability resulting from (a) actual receipt of an improper benefit or profit
in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
Declaration of Trust of Senior Housing contains such a provision which
eliminates such liability to the maximum extent permitted by the Maryland REIT
law.
The Declaration of Trust of Senior Housing requires it, to the maximum
extent permitted by Maryland law, to indemnify, and pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to, (a) any individual
who is a present or former trustee or officer of Senior Housing or (b) any
individual who, while a trustee of Senior Housing and at the request of Senior
Housing, serves or has served as a trustee, director, officer or partner of
another real estate investment trust, corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of his or her status or actions as a present or former trustee or
officer of Senior Housing. The Bylaws of Senior Housing obligate it, to the
maximum extent permitted by Maryland law, to indemnify any present or former
Trustee or officer (including any individual who while a Trustee or officer at
the express request of Senior Housing serves or has served another real estate
investment trust, corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, shareholder,
partner or trustee of such real estate investment trust, corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise)
(a) who has been successful, on the merits or otherwise, in the defense of a
proceeding to which he was made a party by reason of such status or service in
such capacity, against reasonable expenses incurred by him in connection with
the proceeding and (b) against
II-1
<PAGE>
any claim or liability to which he may become subject by reason of such status
or actions in such capacity. The Declaration of Trust and Bylaws also permit
Senior Housing to indemnify and advance expenses to any person who served a
predecessor of Senior Housing in any of the capacities described above and to
any employee or agent of Senior Housing or a predecessor of Senior Housing. The
Bylaws require Senior Housing to indemnify a trustee or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity.
The Maryland REIT law permits a Maryland real estate investment trust
to indemnify and advance expenses to its trustees, officers, employees and
agents to the same extent as permitted by the Maryland General Corporation Law
(the AMGCL@) for directors and officers of Maryland corporations. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, under the MGCL, a Maryland corporation may
not indemnify a director for an adverse judgment in a suit by or in the right of
the corporation or for a judgment of liability on the basis that personal
benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation=s receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
Item 35. Treatment of Proceeds From Shares Being Registered.
Senior Housing will not receive any proceeds from the distribution of
the common shares being registered, because they are being distributed by HRPT
to its shareholders.
Item 36. Financial Statements and Exhibits.
(a) Financial Statements.
Reference is made to Page F-1 of the Prospectus filed as part of this
Registration Statement.
(b) Exhibits.
2.1 Form of Transaction Agreement between Senior Housing Properties Trust
and HRPT Properties Trust. (Filed herewith)
3.1 Declaration of Trust of Senior Housing Properties Trust dated December
16, 1998. (Previously filed as an exhibit to the registration statement)
3.2 Form of Amended and Restated Declaration of Trust of Senior Housing
Properties Trust. (Filed herewith)
3.3 Bylaws of Senior Housing Properties Trust. (Previously filed as an
exhibit to the registration statement)
3.4 Form of Amended and Restated Bylaws of Senior Housing Properties Trust.
(Filed herewith)
4.1 Form of share certificate representing common shares of Senior Housing
Properties Trust. (Filed herewith)
5.1 Opinion of Sullivan & Worcester LLP. (Filed herewith)
5.2 Opinion of Ballard Spahr Andrews & Ingersoll, LLP. (Filed herewith)
8.1 Opinion of Sullivan & Worcester LLP re: tax matters. (Filed herewith)
10.1 Form of Advisory Agreement between Senior Housing and Reit Management &
Research, Inc. (Filed herewith)
II-2
<PAGE>
10.2 Form of Senior Housing Properties Trust 1999 Incentive Share Award Plan.
(Filed herewith)
10.3 Form of Promissory Note from SPTMRT Properties Trust, as maker, to HRPT
Properties Trust, as holder. (Contained in Exhibit 2.1)
10.4 Commitment Letter and Summary of Terms and Conditions for $350 million
Secured Credit Facility from Dresdner Bank to Senior Housing Properties
Trust. (Filed herewith)
10.5 Master Lease Agreement, dated as of December 27, 1996, between Health
and Retirement Properties Trust and BLC Property, Inc. (Filed herewith)
10.6 Guaranty Agreement, dated as of December 27, 1996, by Brookdale Living
Communities, Inc., Brookdale Living Communities of Illinois, Inc.,
Brookdale Living Communities of New York, Inc., and Brookdale Living
Communities of Arizona, Inc. in favor of Health and Retirement
Properties Trust. (Filed herewith)
10.7 First Amendment to Master Lease Agreement and Incidental Documents,
dated as of May 7, 1997, by and among Health and Retirement Properties
Trust, BLC Property, Inc., Brookdale Living Communities of Washington,
Inc., Brookdale Living Communities of Arizona, Inc., Brookdale Living
Communities of Illinois, Inc., Brookdale Living Communities of New York,
Inc., Brookdale Living Communities, Inc, The Prime Group, Inc., Prime
International, Inc., PGLP, Inc., Prime Group Limited Partnership, and
Prime Group II, L.P. (Filed herewith)
10.8 Representative Lease for properties leased to subsidiaries of Marriott
International, Inc. (Filed herewith)
10.9 Representative Guaranty of Tenant Obligations, dated as of October 8,
1993, by Marriott International, Inc. in favor of HMC Retirement
Properties, Inc. (Filed herewith)
10.10 Representative First Amendment to Lease for properties leased to
subsidiaries of Marriott International, Inc. (Filed herewith)
10.11 Representative Assignment and Assumption of Leases, Guarantees and
Permits for properties leased to subsidiaries of Marriott International,
Inc. (Filed herewith)
10.12 Representative Second Amendment of Lease for properties leased to
subsidiaries of Marriott International, Inc. (Filed herewith)
10.13 Representative First Amendment of Guaranty by Marriott International,
Inc., dated as of May 16, 1994, in favor of HMC Retirement Properties,
Inc. (Filed herewith)
10.14 Assignment of Lease, dated as of June 16, 1994, by HMC Retirement
Properties, Inc. in favor of Health and Rehabilitation Properties Trust.
(Filed herewith)
10.15 Third Amendment to Facilities Lease, dated as of June 30, 1994, between
HMC Retirement Properties, Inc. and Marriott Senior Living Services,
Inc. (Filed herewith)
10.16 Third Amendment to Facilities Lease, dated as of June 30, 1994, between
HMC Retirement Properties, Inc. and Marriott Senior Living Services,
Inc. (Filed herewith)
10.17 Consent and Modification Agreement, dated as of October 10, 1997,
between Marriott International, Inc., Marriott Senior Living Services,
Inc., New Marriott MI, Inc., Health and Retirement Properties Trust, and
Church Creek Corporation. (Filed herewith)
10.18 Master Lease Document, General Terms and Conditions dated as of December
28, 1990, between Health and Rehabilitation Properties Trust and AMS
Properties, Inc. (Filed herewith)
10.19 Representative Lease for properties leased to Mariner Post-Acute
Network, Inc. (Filed herewith)
10.20 Lease dated as of March 27, 1992, between Health and Rehabilitation
Properties Trust and AMS Properties, Inc. (Filed herewith).
II-3
<PAGE>
10.21 Amendment to Master Lease Document dated as of December 29, 1993 between
Health and Rehabilitation Properties Trust and AMS Properties, Inc.
(Filed herewith)
10.22 Amendment to AMS Properties, Inc. Facility Leases dated as of October 1,
1994 between Health and Retirement Properties Trust and AMS Properties,
Inc. (Filed herewith)
10.23 Amendment to AMS Properties, Inc. Facility Leases dated October 31, 1997
between Health and Retirement Properties Trust and AMS Properties, Inc.
(Filed herewith)
10.24 Representative Lease for properties leased to Mariner Post-Acute, Inc.
(Filed herewith)
10.25 Master Lease Agreement dated as of June 30, 1992 by and between Health
and Rehabilitation Properties Trust and GCI Health Care Centers, Inc.
(Filed herewith)
10.26 Amended and Restated HRP Shares Pledge Agreement, dated as of June 30,
1992, between Health and Retirement Properties Trust and AMS Properties,
Inc. (To be filed by Amendment)
10.27 Amended and Restated Voting Trust Agreement, dated as of June 30, 1992
from AMS Properties, Inc. to HRPT Advisors, Inc., as voting trustee. (To
be filed by Amendment)
10.28 Representative Lease for properties leased to Mariner Post-Acute, Inc.
(Filed herewith)
10.29 Representative Lease for properties leased to Mariner Post-Acute, Inc.
(Filed herewith)
10.30 Amendment to Master Lease Document dated as of December 29, 1993 between
Health and Rehabilitation Properties Trust and GCI Health Care Centers,
Inc. (Filed herewith)
10.31 Amendment to GCI Health Care Centers, Inc., Master Lease Document and
Facility Leases dated as of October 1, 1994 between Health and
Retirement Properties Trust and GCI Health Care Centers, Inc. (Filed
herewith)
10.32 Amendment to GCI Health Care Centers, Inc. Facility Leases dated October
31, 1997 between Health and Retirement Properties Trust and GCI Health
Care Centers, Inc. (Filed herewith)
10.33 Guaranty, Cross Default and Cross Collateralization Agreement, dated as
of June 30, 1992, by and among AMS Properties, Inc., CGI Health Care
Centers, Inc. and Health and Rehabilitation Properties Trust. (Filed
herewith)
10.34 Guaranty, dated as of October 31, 1997, by Grancare Inc. in favor of
Health and Retirement Properties Trust. (Filed herewith)
10.35 Guaranty, dated as of October 31, 1997, by Paragon Health Network, Inc.
in favor of Health and Retirement Properties Trust. (Filed herewith)
10.36 Amended, Restated and Consolidated Master Lease Document, dated as of
September 24, 1997, between Health and Retirement Properties Trust and
ECA Holdings, Inc., Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC,
Inc., and College Park/SCC, Inc. (Filed herewith)
10.37 Guaranty By Integrated Health Services, Inc., dated as of September 24,
1997, by Integrated Health Services, Inc., in favor of Health and
Retirement Properties Trust. (Filed herewith)
10.38 Representative Lease Agreement for properties leased to Integrated
Health Services, Inc. (Filed herewith)
10.39 Representative Lease Agreement for properties leased to Integrated
Health Services, Inc. (Filed herewith)
10.40 Guaranty, dated as of February 11 1994, by Horizon Healthcare
Corporation in favor of Health and Rehabilitation Properties Trust.
(Filed herewith)
10.41 Consent, Assumption and Guaranty Agreement, dated as of December 31,
1997, by and among Integrated Health Services, Inc., IHS Acquisition No.
108, Inc., IHS Acquisition No. 112, Inc., IHS Acquisition No. 113, Inc.,
IHS Acquisition No. 135, Inc., IHS Acquisition No. 148, Inc., IHS
Acquisition No. 152, Inc., IHS Acquisition No. 153, Inc., IHS
Acquisition No. 154, Inc., IHS Acquisition No. 155, Inc., IHS
Acquisition No.
II-4
<PAGE>
175, Inc., Healthsouth Corporation, Horizon Healthcare Corporation,
Health and Retirement Properties Trust, and Indemnity Collection
Corporation. (Filed herewith)
21.1 List of Subsidiaries. (Filed herewith)
23.1 Consent of Ernst & Young LLP. (Filed herewith)
23.2 Consent of Sullivan & Worcester LLP. (Contained in Exhibits 5.1 and 8.1)
24.1 Power of Attorney. (See signature page to the registration statement)
27.1 Financial Data Schedule. (Filed herewith)
27.2 Financial Data Schedule. (Filed herewith)
99.1 Consent of Bruce M. Gans, M.D. to being named as a Trustee nominee.
(Previously filed as an exhibit to the registration statement)
99.2 Consent of Arthur G. Koumantzelis to being named as a Trustee nominee.
(Previously filed as an exhibit to the registration statement)
Item 37. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to trustees, officers and controlling
persons of Senior Housing pursuant to the foregoing provisions, or otherwise,
Senior Housing has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by Senior Housing of expenses incurred or paid by a trustee, officer
or controlling persons of Senior Housing in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, Senior Housing will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification is against public policy as expressed in the Securities Act
of 1933, as amended, and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933, as amended, shall be deemed to
be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Senior Housing certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-11 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newton, Commonwealth of Massachusetts, on July
30, 1999.
SENIOR HOUSING PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
President and
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of Senior Housing and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Barry M. Portnoy Managing Trustee July 30, 1999
Barry M. Portnoy
/s/ Gerard M. Martin Managing Trustee July 30, 1999
Gerard M. Martin
/s/ David J. Hegarty President and Chief Operating July 30, 1999
David J. Hegarty Officer
/s/ Ajay Saini Chief Financial Officer and July 30, 1999
Ajay Saini Treasurer
II-6
FORM OF
TRANSACTION AGREEMENT
by and between
HRPT PROPERTIES TRUST
and
SENIOR HOUSING PROPERTIES TRUST
---------------------------
__________ __, 1999
---------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SECTION 1 DEFINITIONS...........................................................................................1
SECTION 2 TRANSFERS; DISTRIBUTION.............................................................................6
2.1 Transfer of Senior Properties..........................................................6
2.2 Transfer of Capital Stock; Promissory Notes............................................6
2.3 The Distribution.......................................................................7
2.4 Representations; No Implied Representations, etc.......................................8
SECTION 3 POST-DISTRIBUTION COVENANTS. ......................................................................10
3.1 Operations and Investments of HRPT and Senior Housing.................................10
3.2 Cooperation, Exchange of Information, and Retention
of Records............................................................................10
3.3 Repayment of Senior Housing Formation Debt............................................11
3.4 Covenants to Maintain REIT Qualification..............................................12
3.5 Transfer of Senior Housing Shares.....................................................12
SECTION 4 DISTRIBUTION DATE ALLOCATIONS.........................................................................13
4.1 GAAP Allocations. ...................................................................13
4.2 Cash Allocations. ...................................................................13
4.3 No Other Prorations. ................................................................13
SECTION 5 SURVIVAL; INDEMNIFICATION..........................................................................14
5.1 Indemnification by HRPT...............................................................14
5.2 Indemnification by Senior Housing.....................................................14
5.3 Indemnification Procedures............................................................14
5.4 Certain Limitations, Etc..............................................................16
5.5 Priority of Section 6. ..............................................................16
SECTION 6 TAX MATTERS..........................................................................................16
6.1 General Responsibility for Taxes......................................................16
6.2 Allocation of Certain Taxes Among Taxable Periods.....................................17
6.3 Filing and Payment Responsibility.....................................................17
6.4 Refunds and Credits...................................................................18
6.5 Tax Contests..........................................................................18
6.6 Resolution of Disputes................................................................19
<PAGE>
SECTION 7 MISCELLANEOUS........................................................................................19
7.1 Arbitration...........................................................................19
7.2 Confidentiality.......................................................................19
7.3 Notices...............................................................................19
7.4 Waivers, Etc..........................................................................20
7.5 Assignment; Successors and Assigns....................................................21
7.6 Severability..........................................................................21
7.7 Counterparts, Etc.....................................................................21
7.8 Governing Law.........................................................................21
7.9 Expenses..............................................................................21
7.10 Section and Other Headings............................................................22
7.11 Exculpation...........................................................................22
</TABLE>
EXHIBIT A Form of Promissory Note
SCHEDULE I Description of Premises
SCHEDULE II Description of Tenant Leases
SCHEDULE III Description of Transferred Subsidiaries
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TRANSACTION AGREEMENT
TRANSACTION AGREEMENT made __________ __, 1999, by and between HRPT
PROPERTIES TRUST, a Maryland real estate investment trust (including its
successors and permitted assigns, "HRPT"), and SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust (including its successors and permitted
assigns,"Senior Housing") and currently a wholly-owned subsidiary of HRPT.
RECITAL
HRPT is a real estate investment trust which, indirectly through
subsidiaries, owns a diversified portfolio of office buildings and senior
housing properties. The board of trustees of HRPT has determined that it is in
the best interests of HRPT and its shareholders to separate the ownership of the
office building and the senior housing properties and in order to effect such
separation, to transfer all of the stock of HRPT subsidiaries holding senior
housing properties to Senior Housing, to accept $200,000,000 of indebtedness of
Senior Housing and certain of its subsidiaries as partial consideration for such
transfers, and to distribute a majority of the outstanding common shares of
beneficial interest of Senior Housing held by HRPT to the holders of common
shares of beneficial interest of HRPT as a special distribution. As part of this
separation transaction and distribution, HRPT and Senior Housing will assume
certain obligations under this Agreement.
NOW, THEREFORE, it is agreed:
SECTION 1 DEFINITIONS.
Capitalized terms used in this Agreement shall have the meanings set
forth below:
1.1 "Action": any litigation or legal or other actions, arbitrations,
counterclaims, investigations, proceedings, requests for material information by
or pursuant to the order of any Governmental Authority, or suits, at law or in
arbitration or equity commenced by any Person.
1.2 "Advisor": with respect to HRPT or Senior Housing at any time, the
Entity at that time serving as advisor to such party, which for both parties is
initially Reit Management & Research, Inc., a Delaware corporation.
1.3 "Affiliate": with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person, with
"control" for such purpose with respect to a corporation, real estate investment
or business trust or similar entity, meaning the possession of the
<PAGE>
power to vote or direct the voting of a majority of the voting securities of, or
other voting interests in, such Person which are entitled to elect directors,
trustees or similar officials of such Person.
1.4 "Agent": State Street Bank & Trust Company, the distribution agent
appointed by HRPT to distribute the Senior Housing Common Shares to holders of
HRPT Common Shares pursuant to the Distribution.
1.5 "Agreement": this Transaction Agreement, together with the
Schedules and Exhibit hereto.
1.6 "Code": the United States Internal Revenue Code of 1986, as from
time to time in effect, and any successor law, and any reference to any
statutory provision shall be deemed to be a reference to any successor statutory
provision.
1.7 "Commission": the United States Securities and Exchange Commission.
1.8 "Contract": any lease, contract, instrument, license, agreement,
sales order, purchase order, open bid or other obligation or commitment (whether
or not written) and all rights therein.
1.9 "Covered Liabilities": the meaning given in Section 5.1.
1.10 "Deferred Payment": the meaning given in subsection 2.2(b).
1.11 "Deferred Payment Due Date": the meaning given in subsection
2.2(b).
1.12 "Distribution": the distribution of a number of Senior Housing
Common Shares by HRPT to holders of HRPT Common Shares equal to one tenth
(1/10th) of the number of HRPT Common Shares which are issued and outstanding on
the Record Date.
1.13 "Distribution Date": the date determined by the HRPT Board or an
authorized committee thereof as the date on which the Distribution shall be
effected, which Distribution Date is contemplated to occur on or about August
__, 1999.
1.14 "Effective Date": the date on which the Senior Housing
Registration Statement is declared effective by the Commission.
1.15 "Entity": a real estate investment trust, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
1.16 "GAAP": generally accepted accounting principles as in effect from
time to time in the United States of America.
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<PAGE>
1.17 "Governmental Authority": any nation or government, any state or
other political subdivision thereof, any federal, state, local or foreign Entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any government authority,
agency, department, board, commission, or instrumentality of the United States,
any State of the United States or political subdivision thereof, and any
tribunal or arbitral authority of competent jurisdiction, and any
self-regulatory organization.
1.18 "HRPT": the meaning given in the preamble to this Agreement.
1.19 "HRPT Assets": the assets of HRPT and its Subsidiaries (not
including any assets and properties held by Senior Housing and the Transferred
Subsidiaries on the Distribution Date), including all assets of HRPT and its
Affiliates relating to the HRPT Retained Business.
1.20 "HRPT Board": the HRPT Board of Trustees.
1.21 "HRPT Common Shares": the common shares of beneficial interest,
$.01 par value, of HRPT.
1.22 "HRPT Group": HRPT and each Entity whose income is included on the
federal Income Tax Return Form 1120-REIT with HRPT as the parent; provided
Senior Housing and the Transferred Subsidiaries shall only be included thereon
through the Distribution Date.
1.23 "HRPT Indemnified Parties": the meaning given to such term in
Section 5.2.
1.24 "HRPT Retained Business": the businesses conducted by HRPT and its
Subsidiaries pursuant to or utilizing the HRPT Assets, including the
acquisition, development, ownership and leasing of real estate assets; provided,
however, that the HRPT Retained Business shall not in any event include the
Senior Housing Business.
1.25 "Income Taxes": any and all Taxes to the extent based upon or
measured by net income (regardless of whether denominated as an "income tax," a
"franchise tax" or otherwise), imposed by any Taxing Authority, together with
any related interest, penalties or other additions thereto.
1.26 "Independent Trustee": with respect to HRPT or Senior Housing, as
applicable, a Trustee of such party who is not an employee, executive officer,
director (or comparable official) or Affiliate of its respective Advisor.
1.27 "Liability": any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto, and including those debts, liabilities and
obligations arising under any law, rule, regulation, Action, threatened Action,
order
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<PAGE>
or consent decree of any Governmental Authority or any award of any arbitrator
of any kind, and those arising under any contract, commitment or undertaking.
1.28 "Managing Trustee": with respect to HRPT or Senior Housing, as
applicable, a Trustee of such party who is not an Independent Trustee.
1.29 "Office Properties": office buildings, warehouses or malls,
including medical office properties and clinical laboratory buildings, and in
each case whether occupied by a single tenant or multiple tenants, whether
leased to private tenants or Governmental Authorities, and whether of single
purpose or mixed use.
1.30 "Other Taxes": all Taxes other than Income Taxes.
1.31 "Person": any natural individual or any Entity.
1.32 "Premises": the land, improvements and fixtures owned by the
Transferred Subsidiaries (including those described in Schedule I) together with
any personal property owned by the Transferred Subsidiaries and used in
connection therewith.
1.33 "Record Date": the date determined by the HRPT Board or an
authorized committee thereof as the record date for the Distribution, which
Record Date is contemplated to occur on or about ____________, 1999.
1.34 "Retained Liability": all of the Liabilities arising out of or in
connection with the HRPT Assets or the HRPT Retained Business, all of the
Liabilities of HRPT in connection with the Actions which are pending on the
Distribution Date and all other Liabilities of HRPT and its Subsidiaries not
constituting Senior Housing Liabilities.
1.35 "Securities Act": the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect.
1.36 "Senior Housing": the meaning given in the preamble to this
Agreement.
1.37 "Senior Housing Assets": the assets held by Senior Housing and the
Transferred Subsidiaries on and after the Distribution Date.
1.38 "Senior Housing Board": the Senior Housing Board of Trustees.
1.39 "Senior Housing Business": the business conducted by Senior
Housing and its Subsidiaries after the Distribution Date, including pursuant to
or utilizing the Senior Housing Assets and the acquisition, development,
ownership and leasing of Senior Properties.
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<PAGE>
1.40 "Senior Housing Common Shares": the common shares of beneficial
interest, $.01 par value, of Senior Housing.
1.41 "Senior Housing Credit Facility": the meaning given in Section
2.3.
1.42 "Senior Housing Group": Senior Housing and each Entity whose
income is included in the federal Income Tax Return Form 1120-REIT with Senior
Housing as the parent.
1.43 "Senior Housing Indemnified Parties": the meaning given such term
in Section 5.1.
1.44 "Senior Housing Liability": all Liabilities arising out of or in
connection with any of the Senior Housing Assets or the Senior Housing Business,
excluding (i) liabilities arising out of or in connection with the HRPT Assets
or the HRPT Retained Business and (ii) the liabilities in connection with
Actions which are pending on the Distribution Date.
1.45 "Senior Housing Registration Statement": the registration
statement on Form S-11 filed by Senior Housing under the Securities Act in
connection with the Distribution.
1.46 "Senior Properties": senior apartments, congregate communities,
assisted living properties, nursing homes or other healthcare properties, but
excluding medical office properties, medical clinics and clinical laboratory
buildings.
1.47 "Separate Counsel": the meaning given in subsection 5.3(b).
1.48 "Subsidiary": with respect to any Person, any Entity (i) a
majority of the voting securities of, or other voting interests in, such Entity
which are entitled to elect directors, trustees or similar officials of such
Entity, or (ii) a majority of the equity interests of such Entity, of which is
owned directly or indirectly by such Person or any Subsidiary of such Person.
1.49 "Subsidiary Shares": the meaning given in subsection 2.2(a).
1.50 "Taxes": any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.
1.51 "Taxing Authorities": the United States Internal Revenue Service
(or any successor authority) and any other domestic or foreign Governmental
Authority responsible for the administration of any Tax.
1.52 "Tax Contests": the meaning given in Section 6.5.
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<PAGE>
1.53 "Tax Returns": all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be filed
by any taxpayer in connection with, its liability for, or its payment or receipt
of any refund of, any Tax.
1.54 "Tenant Leases": the leases or mortgages of the Premises
identified in Schedule II.
1.55 "Third-Party Claim": any Action by or before any Governmental
Authority asserted by a Person other than any party hereto or their respective
Affiliates which gives rise to a right of indemnification hereunder.
1.56 "Transferred Subsidiaries": those Subsidiaries of HRPT identified
on Schedule III.
SECTION 2 TRANSFERS; DISTRIBUTION.
2.1 Transfer of Senior Properties. Prior to the execution of this
Agreement and pursuant to various assignment and assumption agreements, deeds
and other documents of conveyance, HRPT transferred title to the Premises, all
Tenant Leases and all Contracts, assets and liabilities (other than indebtedness
for borrowed money) related to the ownership, operation and leasing of the
Premises, to the Transferred Subsidiaries as a capital contribution.
2.2 Transfer of Capital Stock; Promissory Notes. HRPT and Senior
Housing agree and, by its joinder to this Agreement below, SPTMRT Properties
Trust (which is a Transferred Subsidiary), agrees to effect the following
transactions:
(a) As of 9:00 a.m., Boston time, on the Effective Date, HRPT
will transfer to Senior Housing, free and clear of all liens or other
encumbrances, all of the issued and outstanding capital stock
(collectively, the "Subsidiary Shares") of (i) SPTMRT Properties Trust,
which transfer shall be partially in consideration of the deferred
payments described in clauses (b) and (c) below and otherwise shall be
a contribution by HRPT to the capital of Senior Housing, and (ii) each
of the other Transferred Subsidiaries, which transfer shall be a
contribution by HRPT to the capital of Senior Housing, in each case by
delivery to Senior Housing of all certificates representing the
Subsidiary Shares, together with stock powers duly executed in blank;
(b) in partial consideration for the transfer to Senior
Housing of the Subsidiary Shares issued by SPTMRT Properties Trust,
Senior Housing agrees (i) to pay to HRPT the aggregate sum of two
hundred million dollars ($200,000,000) (the "Deferred Payment"),
payable on the 10th day following the Distribution Date and in any
event on December 31, 1999 (the earlier of such dates, the "Deferred
Payment Due Date") and prepayable at any time prior to the Deferred
Payment Due Date together with accrued and unpaid interest on the
portion thereof prepaid, and (ii) to pay interest on the unpaid
Deferred
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<PAGE>
Payment from the Effective Date to (but excluding) the date of payment
thereof, payable on the Deferred Payment Due Date and thereafter on
demand, at a rate per annum determined for each day equal to HRPT's
weighted average effective interest rate on its indebtedness for money
borrowed on such day (as determined by HRPT in good faith), but in no
event exceeding the maximum rate permitted by law;
(c) as a condition to Senior Housing's acceptance of the
Subsidiary Shares issued by SPTMRT Properties Trust, SPTMRT Properties
Trust agrees to assume and agrees to pay, as a primary obligor and not
as a guarantor, the Deferred Payment by delivery to HRPT on the
Effective Date of a promissory note, bearing interest, maturing on the
date and otherwise on the terms and conditions contained in the form of
promissory note attached to this Agreement as Exhibit A; and
(d) on the Effective Date, HRPT will make a contribution to
the capital of Senior Housing in the amount of $1,000,000 plus an
amount equal to (i) $169,500 times (ii) the number of days from and
including July 1, 1999 to and excluding the Distribution Date.
2.3 The Distribution. On the Distribution Date, subject to the
conditions set forth in this Agreement, HRPT shall deliver to the Agent a share
certificate representing a number of whole and fractional Senior Housing Common
Shares equal to one tenth (1/10th) the number of HRPT Common Shares issued and
outstanding on the Record Date, and shall instruct the Agent to distribute, on
or as soon as practicable on or following the Distribution Date, to holders of
record of HRPT Common Shares on the Record Date, one tenth (1/10th) of a Senior
Housing Common Share for each HRPT Common Share owned of record by such holder.
In addition, HRPT shall authorize the Agent to perform such withholding in
respect of the Distribution as may be required by Taxing Authorities. Senior
Housing agrees to provide all share certificates that the Agent requires in
order to effect the Distribution and any such associated withholding.
In no event shall the Distribution occur unless the following
conditions shall have been satisfied:
(a) the transactions contemplated by Sections 2.1 and 2.2
shall have been consummated in all material respects;
(b) the Senior Housing Registration Statement shall have been
declared effective by the Commission and listing of the Senior Housing
Common Shares for trading on the New York Stock Exchange shall have
been approved by the Exchange;
(c) Senior Housing shall have entered into a secured revolving
credit facility with one or more commercial banks or other
institutional lenders with availability of not less than $350,000,000
(the "Senior Housing Credit Facility"); and
(d) Ernst & Young LLP shall have delivered to the HRPT Board
and the Senior Housing Board a letter dated the Effective Date, in form
and substance reasonably
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<PAGE>
satisfactory to each of them containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters in a public offering of securities with respect to
financial statements and certain financial information and data
contained in the Senior Housing Registration Statement and prospectus
contained therein;
provided, however, that any such condition may be waived by the HRPT Board and
the Senior Housing Board in their sole discretion.
2.4 Representations; No Implied Representations, etc..
(a) Each of HRPT and Senior Housing represents and warrants to
the other that (i) it is duly authorized to enter into and perform this
Agreement and has duly executed and delivered this Agreement, and (ii)
this Agreement constitutes its valid and binding obligation,
enforceable in accordance with its terms, subject to (A) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement generally of creditors' rights and remedies, (B)
general principles of equity (regardless of whether considered in a
proceeding at law or in equity), including the discretion of any court
of competent jurisdiction in granting specific performance or other
equitable relief, and (C) an implied duty to take action and make
determinations on a reasonable basis and in good faith.
(b) HRPT hereby represents and warrants to Senior Housing that
(i) each Transferred Subsidiary is a real estate investment trust duly
formed and validly existing under the laws of the State of Maryland,
(ii) the Subsidiary Shares have been duly authorized and issued and are
fully paid and nonassessable, and (iii) immediately prior to the
contribution of the Subsidiary Shares to Senior Housing on the
Effective Date pursuant to Section 2.2, the Subject Shares will be
owned by HRPT free of any adverse claims (within the meaning of Article
8 of the Uniform Commercial Code as in effect in Massachusetts) and
will constitute all of the issued and outstanding shares of capital
stock of each Transferred Subsidiary, and no Person other than Senior
Housing will have any option or other right to acquire shares of
capital stock of any Transferred Subsidiary.
(c) Senior Housing represents and warrants to HRPT (i) that it
is aware that the offering and sale of the Subsidiary Shares pursuant
to this Agreement has not been and will not be registered under the
Securities Act and (ii) that Senior Housing is acquiring the Subsidiary
Shares without a view to any distribution thereof which would require
registration under the Securities Act.
(d) EACH OF HRPT AND SENIOR HOUSING ACKNOWLEDGES AND AGREES
THAT NEITHER OF THEM HAS MADE AND NEITHER OF THEM IS MAKING ANY EXPRESS
OR IMPLIED REPRESENTATIONS OR WARRANTIES WHATSOEVER (INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR
PURPOSE, EACH OF WHICH IS HEREBY EXPRESSLY DISCLAIMED) IN CONNECTION
WITH THIS AGREEMENT OR THE
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<PAGE>
TRANSACTIONS CONTEMPLATED HEREBY. Without limiting the generality of
the foregoing, each of HRPT and Senior Housing acknowledges and agrees
that neither of them is making any representation or warranty of any
nature, express or implied, as to (i) the value or freedom from
encumbrance of, or any other matter concerning, the Subsidiary Shares,
the Transferred Subsidiaries or their properties, assets or
liabilities, or the properties, assets or liabilities of any party to
this Agreement, (ii) any past, present or future income, expenses or
results of operations or cash flow of the Premises or the Transferred
Subsidiaries, any projections, the financial viability of the Premises
or the Transferred Subsidiaries, the creditworthiness of any tenants
under the Tenant Leases or any guarantor thereof (it being acknowledged
by Senior Housing that some of such tenants or guarantors or their
parent companies have recently had materially adverse changes in
financial position and are or may be in financial distress or in
bankruptcy proceedings), or the completeness or accuracy of any books
or records of HRPT or any Transferred Subsidiary pertaining to the
Premises; (iii) the validity or binding effect or enforceability of any
Tenant Leases or Contracts, (iv) the legal sufficiency of any
instrument conveying title to any asset transferred pursuant to this
Agreement or any related agreement, including the transfer of the
Premises and Tenant Leases to the Transferred Subsidiaries, or (v) the
Premises or matters affecting the Premises, including physical
condition, title to or the boundaries of the real property constituting
the Premises, pest control matters, soil conditions, environmental
matters, compliance with building, health, safety, environmental, land
use and zoning laws, regulations and orders (including compliance with
the Americans with Disabilities Act or any related regulations),
absence of hazardous materials, operation of mechanical systems,
equipment and fixtures, suitability of soil or geology, absence of
defects, structural and other engineering characteristics, quality of
construction, traffic patterns, market data, economic conditions or
projections, and any other information pertaining to the Premises or
the market and physical environments in which they are located. SENIOR
HOUSING ACKNOWLEDGES AND AGREES THAT THE PREMISES WERE TRANSFERRED TO
THE TRANSFERRED SUBSIDIARIES "AS IS, WHERE IS, WITH ALL FAULTS."
(e) Without limiting the provisions of subsection 2.4(d)
above, Senior Housing, for itself and its subsidiaries (including the
Transferred Subsidiaries) and its and their successors and assignees,
hereby releases HRPT and its subsidiaries, shareholders, officers,
employees, agents, successors and assigns from and waives all claims
and liability against HRPT and its subsidiaries, shareholders,
officers, employees, agents, successors and assigns connected with or
arising out of any structural, physical, or environmental condition in,
at, about or under the Premises and further releases HRPT and its
subsidiaries, shareholders, officers, employees, agents, successors and
assigns from and waives all claims and liability against HRPT and its
subsidiaries, shareholders, officers, employees, agents, successors and
assigns attributable to the structural, physical and environmental
condition and quality of the Premises, including the presence,
discovery or removal of any hazardous materials in, at, about or under
any of the Premises, or for, connected with or arising out of any and
all claims or causes of action based upon CERCLA (Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, and as may be further amended from
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<PAGE>
time to time), or any other federal or state laws or regulations
relating to environmental matters in, at, about or under any of the
Premises Property. As between HRPT, on the one hand, and the respective
Transferred Subsidiaries which own the Premises, on the other, each
Transferred Subsidiary assumes responsibility and liability for all
obligations (past, present or future) attributable to any hazardous
materials in, at, about or under the Premises which it owns at the
Effective Date or the Distribution Date, which responsibilities and
liabilities will be retained by such Transferred Subsidiary when its
Subsidiary Shares are transferred by HRPT to Senior Housing.
(f) For purposes of this Section 2.4, the term "hazardous
material" shall mean any asbestos or asbestos-containing material or
any substance, chemical, waste, oil or other petroleum product or
material that is or becomes regulated by any federal, state or local
governmental authority because of its toxicity, infectiousness,
radioactivity, explosiveness, ignitability, corrosiveness or
reactivity.
(g) Notwithstanding anything herein to the contrary, the
acknowledgments and agreements of the parties set forth in this Section
2.4 shall survive the Distribution Date and the repayment of the
Deferred Payment and shall be enforceable at any time.
SECTION 3 POST-DISTRIBUTION COVENANTS.
3.1 Operations and Investments of HRPT and Senior Housing. HRPT and
Senior Housing hereby acknowledge and agree that for so long as (a) HRPT owns
10% or more of the Senior Housing Common Shares, (b) the Advisor or an Affiliate
thereof serves as advisor for both HRPT and Senior Housing, or (c) any Managing
Trustee of Senior Housing is also a Managing Trustee of HRPT, HRPT will not make
any investment (which may include, without limitation, fee interests in the
underlying property or leaseholds, joint ventures, mortgages and other real
estate interests) in a Senior Property without the prior approval of a majority
of Senior Housing's Independent Trustees and Senior Housing will not make any
investment in an Office Property without the prior approval of a majority of
HRPT's Independent Trustees. In any case where an investment is both a Senior
Property and an Office Property, such investment shall be classified as either
one or the other based on its overriding character as determined by rentable
square footage (excluding common areas). Nothing in this Section 3.1 shall apply
to any investment of HRPT in Senior Properties existing on the Distribution
Date.
3.2 Cooperation, Exchange of Information, and Retention of Records.
(a) Upon reasonable request prior to and after the
Distribution Date, HRPT (on behalf of the HRPT Group) and Senior
Housing (on behalf of the Senior Housing Group) shall promptly provide,
and shall cause their respective Affiliates to provide, the requesting
party with such cooperation and assistance, documents and other
information, without charge, as may be necessary or reasonably helpful
in connection with (i) the consummation
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of the transactions contemplated by this Agreement and the preservation
for each party and for the Transferred Subsidiaries, to the extent
reasonably feasible, the benefits of this Agreement (including, in the
case of Senior Housing and the Transferred Subsidiaries, the economic
and operational benefits of the Senior Housing Assets), (ii) the
continued qualification of each of HRPT and Senior Housing as a REIT
under the Code, including the enforcement of the ownership limitations
and other provisions of their respective declarations of trust relating
to the preservation of the status of each of HRPT and Senior Housing as
a REIT under the Code, (iii) each party's preparation and filing of any
original or amended Tax Return, (iv) the conduct of any audit, appeal,
protest or other examination or any judicial or administrative
proceeding involving to any extent Taxes or Tax Returns within the
scope of this Agreement, and (v) the verification of an amount payable
hereunder to, or receivable hereunder from, the other party. Each party
shall make its officers and facilities available on a mutually
convenient basis to facilitate such cooperation.
(b) HRPT and Senior Housing shall retain or cause to be
retained all books, records and other documents within its possession
relating to the Premises, the Tenant Leases or the Contracts or
otherwise to the Transferred Subsidiaries or their properties, assets
or liabilities, and all Tax Returns, and all books, records, schedules,
workpapers, and other documents relating thereto, which Tax Returns and
other materials are within the scope of this Agreement, until the
expiration of the later of (i) all applicable statutes of limitations
(including any waivers or extensions thereof), and (ii) any retention
period required by law or pursuant to any record retention agreement.
The parties hereto shall provide at least thirty (30) days prior
written notice of any intended destruction of the documents referred to
in the preceding sentence. A party giving such a notification shall not
dispose of any of the foregoing materials without first allowing the
other party a reasonable opportunity to copy them at such other party's
expense.
3.3 Repayment of Senior Housing Formation Debt.
(a) As soon as practicable after the Distribution, but not
later than the Deferred Payment Date, Senior Housing shall pay or cause
SPTMRT Properties Trust to pay the Deferred Payment in full, together
with all accrued and unpaid interest thereon, in accordance with the
terms hereof and of any promissory notes evidencing the Deferred
Payments. Senior Housing represents and warrants to HRPT that, after
giving effect to the Distributions and the consummation of the
transactions contemplated by Sections 2.1 and 2.2, Senior Housing will
have the right to borrow at least $200,000,000 under the Senior Housing
Credit Facility and agrees to maintain that borrowing availability
until the Deferred Payment and all accrued interest thereon has been
paid in full; provided that the obligations of Senior Housing and
SPTMRT Properties Trust to pay the Deferred Payment and interest
thereon shall not be limited to amounts available to be borrowed under
the Senior Housing Credit Facility and shall not be conditioned on the
availability of funds thereunder.
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(b) In the event that any portion of the Deferred Payment and
all accrued interest thereon remains unpaid on the Deferred Payment
Date, Senior Housing agrees to cause SPTMRT Properties Trust to, and by
its joinder to this Agreement below, SPTMRT Properties Trust agrees to,
secure the obligations of Senior Housing and of SPTMRT Properties Trust
to pay the Deferred Payment and all interest accrued or to accrue
thereon within 10 days following the Deferred Payment Date (and in any
event by December 31, 1999) with a perfected, first mortgage lien on
the Premises owned by SPTMRT Properties Trust on the Effective Date and
perfected first assignments of and security interests in all Tenant
Leases, all Contracts and other personal property, fixtures and other
assets and rights related to the ownership, operation and leasing of
these Premises, pursuant to any mortgages, assignments, securities
agreements, financing statements and other security documents which may
reasonably be requested by HRPT from time to time. Senior Housing and,
by its joinder to this Agreement below, SPTMRT Properties Trust
acknowledges and agrees that the performance of its obligations under
this Section 3.3 may be necessary for HRPT's continuing qualification
as a REIT under the Code, that monetary damages would be insufficient
to compensate HRPT for a breach by Senior Housing or SPTMRT Properties
Trust of these obligations and, accordingly, that HRPT shall be
entitled, to the extent permitted by law, to request and obtain
specific performance of the obligations of Senior Housing and SPTMRT
Properties Trust under this Section 3.3 and to injunctive relief
requiring such performance.
3.4 Covenants to Maintain REIT Qualification. For so long as HRPT owns
more than 9.8% of the outstanding Senior Housing Common Shares or 9.8% by value
of the outstanding equity of Senior Housing, (a) HRPT will not acquire or own
more than 9.8% of the equity (measured by vote, value, capital interests or
profits interests) of any tenant of any member of the Senior Housing Group, (b)
HRPT will not consent to any Person owning more than 9.8% of the outstanding
beneficial interests in HRPT if the effect of such ownership would result in
rents received by any member of the Senior Housing Group to not qualify as
"rents from real property" within the meaning of Section 856(d) of the Code, and
(c) HRPT will not take any other action which, in the reasonable judgment of the
Senior Housing Board, would reasonably be expected to have an adverse impact on
the ability of Senior Housing to qualify as a "real estate investment trust"
under Sections 856 through 860 of the Code. For so long as HRPT owns more than
9.8% of the outstanding Senior Housing Common Shares or 9.8% by value of the
outstanding equity of Senior Housing, (a) Senior Housing will not acquire or own
more than 9.8% of the equity (measured by vote, value, capital interests or
profits interests) of any tenant of any member of the HRPT Group, and (b) Senior
Housing will not take any other action which, in the reasonable judgment of the
HRPT Board, would reasonably be expected to have an adverse impact on the
ability of HRPT to qualify as a "real estate investment trust" under Sections
856 through 860 of the Code.
3.5 Transfer of Senior Housing Shares. During the period ending on the
first anniversary of the Distribution Date, HRPT will not sell, transfer or
otherwise dispose of any of the Senior Housing common shares owned by it on the
Distribution Date (after giving effect to the Distribution) without the prior
approval of a majority of the Senior Independent Trustees.
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SECTION 4 DISTRIBUTION DATE ALLOCATIONS.
4.1 GAAP Allocations. For accounting purposes, all items of income and
expense relating to the Transferred Subsidiaries shall be allocated to HRPT in
respect of periods prior to (but excluding) the Distribution Date, and to Senior
Housing for all periods commencing on and after the Distribution Date.
4.2 Cash Allocations. Notwithstanding the provisions of subsection 4.1,
the parties agree that:
(a) Except as otherwise provided in subsection 4.2(c) below,
HRPT shall be entitled to receive and retain all cash and cash
equivalents (including the proceeds of checks received or in process of
collection and of tenant security deposits) of the Transferred
Subsidiaries at the time of the Distribution, regardless of whether
such cash or cash equivalents represent the proceeds of payments in
respect of the Premises, the Tenant Leases or the Contracts which
relate to periods which fall in whole or in part on or after the
Distribution Date (and Senior Housing acknowledges that the Transferred
Subsidiaries will declare a dividend of such cash and cash equivalents
payable to HRPT as holder of record of the Subsidiary Shares prior to
the Distribution Date, even though such dividend may be payable on or
after the Distribution Date);
(b) Senior Housing and the Transferred Subsidiaries shall be
entitled to receive and retain all payments in respect of the Premises,
the Tenant Leases and the Contracts which are received by the
Transferred Subsidiaries from and after the Distribution Date,
regardless of whether the payment relates to periods which fall in
whole or in part prior to the Distribution Date; and
(c) Senior Housing and the Transferred Subsidiaries shall be
entitled to retain, and HRPT shall transfer to Senior Housing or the
applicable Transferred Subsidiaries, any tenant, guarantor or similar
deposits which are required pursuant to a Tenant Lease or a Contract to
be maintained in a segregated escrow account, and thereafter Senior
Housing or the applicable Transferred Subsidiary shall agree to hold
and maintain such deposits in accordance with the applicable Tenant
Lease or Contract. Any tenant, guarantor or similar deposits pursuant
to any Tenant Lease or Contract which are not required to be maintained
in a segregated escrow account will be retained by HRPT, but Senior
Housing or the applicable Transferred Subsidiary will assume any
obligations to return or repay such deposits in accordance with the
applicable Tenant Lease or Contract.
4.3 No Other Prorations. Except as expressly provided in Section 4.1,
4.2 or 6, there shall be no proration, as between HRPT and its Subsidiaries
(exclusive of Senior Housing and the Transferred Subsidiaries), on the one hand,
and Senior Housing and the Transferred Subsidiaries, on the other, in respect of
rents, common area maintenance charges or other fixed or unfixed charges
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payable under the Tenant Leases, fuel, electric, water or other utility costs,
municipal assessments or governmental license or permit fees, real estate Taxes
or assessments, water rates or charges, sewer Taxes or rents, or any other item
of income or expense relating to the Premises (or for any adjustments arrearages
therein or refunds thereof). No insurance policies of HRPT or its Subsidiaries
are to be transferred to Senior Housing and the Transferred Subsidiaries, and no
apportionment of the premiums therefor shall be made.
SECTION 5 SURVIVAL; INDEMNIFICATION.
5.1 Indemnification by HRPT. From and after the Distribution Date, HRPT
shall indemnify and hold harmless Senior Housing, its Subsidiaries (including
the Transferred Subsidiaries), each of their respective directors, trustees,
officers, employees and agents, and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "Senior Housing Indemnified
Parties") from and against any and all damages, claims, losses, expenses, costs,
obligations and liabilities, including liabilities for all reasonable
attorneys', accountants', and experts' fees and expenses, including those
incurred to enforce the terms of this Agreement (collectively, "Covered
Liabilities"), suffered, directly or indirectly, by any Senior Housing
Indemnified Party by reason of, or arising out of:
(a) any breach of any covenant or agreement of HRPT contained
in this Agreement; or
(b) any Retained Liability.
5.2 Indemnification by Senior Housing. From and after the Distribution
Date, Senior Housing shall indemnify and hold harmless HRPT, its Subsidiaries,
each of their respective directors, trustees, officers, employees and agents,
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "HRPT Indemnified Parties") from and against any and all
Covered Liabilities suffered, directly or indirectly, by any HRPT Indemnified
Party by reason of, or arising out of:
(a) any breach of any covenant or agreement of Senior Housing
contained in this Agreement; or
(b) any Senior Housing Liability.
5.3 Indemnification Procedures.
(a) If any indemnified party receives notice of the assertion
of any Third-Party Claim with respect to which an indemnifying party is
obligated under this Agreement to provide indemnification, such
indemnified party shall give such indemnifying party written notice
thereof (together with a copy of such Third-Party Claim, process or
other legal pleading) promptly after becoming aware of such Third-Party
Claim; provided, however, that
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the failure of any indemnified party to give notice as provided in this
Section 5.3 shall not relieve any indemnifying party of its obligations
under this Section 5, except to the extent that such indemnifying party
is actually prejudiced by such failure to give notice. Such notice
shall describe such Third-Party Claim in reasonable detail.
(b) An indemnifying party, at such indemnifying party's own
expense and through counsel chosen by such indemnifying party (which
counsel shall be reasonably acceptable to the indemnified party), may
elect to defend any Third-Party Claim. If an indemnifying party elects
to defend a Third-Party Claim, then, within ten (10) business days
after receiving notice of such Third-Party Claim (or sooner, if the
nature of such Third-Party claim so requires), such indemnifying party
shall notify the indemnified party of its intent to do so, and such
indemnified party shall cooperate in the defense of such Third-Party
Claim (and pending such notice and assumption of defense, an
indemnified party may take such steps to defend against such
Third-Party Claim as, in such indemnified party's good-faith judgment,
are appropriate to protect its interests). The indemnifying party shall
pay such indemnified party's reasonable out-of-pocket expenses incurred
in connection with such cooperation. After notice from an indemnifying
party to an indemnified party of its election to assume the defense of
a Third-Party Claim, such indemnifying party (i) shall not be liable to
such indemnified party under this Section 5 for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than those expenses referred to in the
preceding sentence, and (ii) shall keep the indemnified party
reasonably informed of the status of the defense of such Third-Party
Claim; provided, however, that such indemnified party shall have the
right to employ one law firm as counsel, together with a separate local
law firm in each applicable jurisdiction ("Separate Counsel"), to
represent such indemnified party in any action or group of related
actions (which firm or firms shall be reasonably acceptable to the
indemnifying party) if, in such indemnified party's reasonable judgment
at any time, either a conflict of interest between such indemnified
party and such indemnifying party exists in respect of such claim, or
there may be defenses available to such indemnified party which are
different from or in addition to those available to such indemnifying
party and the representation of both parties by the same counsel would
be inappropriate, and in that event (i) the reasonable fees and
expenses of such Separate Counsel shall be paid by such indemnifying
party (it being understood, however, that the indemnifying party shall
not be liable for the expenses of more than one Separate Counsel
(excluding local counsel) with respect to any Third-Party Claim (even
if against multiple indemnified parties), and (ii) each of such
indemnifying party and such indemnified party shall have the right to
conduct its own defense in respect of such claim. If an indemnifying
party elects not to defend against a Third-Party Claim, or fails to
notify an indemnified party of its election as provided in this Section
5.3 within the period of ten (10) (or, if applicable, fewer) business
days described above, the indemnified party may defend, compromise, and
settle such Third-Party Claim and shall be entitled to indemnification
hereunder (to the extent permitted hereunder); provided, however, that
no such indemnified party may compromise or settle any such Third-Party
claim without the prior written consent of the indemnifying party,
which consent shall not be unreasonably
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withheld or delayed. Notwithstanding the foregoing, the indemnifying
party shall not, without the prior written consent of the indemnified
party, (i) settle or compromise any Third-Party Claim or consent to the
entry of any judgment which does not include as an unconditional term
thereof the delivery by the claimant or plaintiff to the indemnified
party of a written release from all liability in respect of such
Third-Party Claim, or (ii) settle or compromise any Third-Party Claim
in any manner that would reasonably be expected to have a material
adverse effect on the indemnified party.
5.4 Certain Limitations, Etc.
(a) The amount of any Covered Liabilities for which
indemnification is provided under this Agreement shall be net of any
amounts actually recovered by the indemnified party from third parties
(including amounts actually recovered under insurance policies) with
respect to such Covered Liabilities. Any indemnifying party hereunder
shall be subrogated to the rights of the indemnified party upon payment
in full of the amount of the relevant indemnifiable loss. An insurer
who would otherwise be obligated to pay any claim shall not be relieved
of the responsibility with respect thereto or, solely by virtue of the
indemnification provision hereof, have any subrogation rights with
respect thereto. If any indemnified party recovers an amount from a
third party in respect of an indemnifiable loss for which
indemnification is provided in this Agreement after the full amount of
such indemnifiable loss has been paid by an indemnifying party or after
an indemnifying party has made a partial payment of such indemnifiable
loss and the amount received from the third party exceeds the remaining
unpaid balance of such indemnifiable loss, then the indemnified party
shall promptly remit to the indemnifying party the excess of (i) the
sum of the amount theretofore paid by such indemnifying party in
respect of such indemnifiable loss plus the amount received from the
third party in respect thereof, less (ii) the full amount of such
Covered Liabilities.
(b) NO REMEDY UNDER THIS AGREEMENT OR AT LAW OR IN EQUITY
SHALL INCLUDE, PROVIDE FOR OR PERMIT THE PAYMENT OF MULTIPLE,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY EQUITABLE
EQUIVALENT THEREOF OR SUBSTITUTE THEREFOR.
5.5 Priority of Section 6. As to the Tax matters addressed in Section
6, including the indemnification for Taxes and the control and conduct of Tax
Contests, the provisions of Section 6 shall be the exclusive governing
provisions.
SECTION 6 TAX MATTERS.
6.1 General Responsibility for Taxes.
(a) All federal Income Taxes of the HRPT Group shall be borne
by, shall be the responsibility of, and shall be paid by HRPT, and all
federal Income Taxes of the Senior
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Housing Group shall be borne by, shall be the responsibility of, and
shall be paid by Senior Housing. For purposes of federal Income Taxes,
items of income, gain, loss, deduction, expenditure, and credit shall
be allocated and apportioned between the HRPT Group and the Senior
Housing Group in the following manner. Any item relating to the Senior
Housing Assets or the Senior Housing Business shall be: (i) allocated
exclusively to the HRPT Group if such item is in respect of a period
ending before the Distribution Date; (ii) allocated exclusively to the
Senior Housing Group if such item is in respect of a period commencing
after the Distribution Date; and (iii) apportioned between the HRPT
Group and the Senior Housing Group in a manner consistent with (A)
applicable Tax laws, (B) the continued qualification of both HRPT and
Senior Housing as REITs under the Code, and (C) commercially reasonable
pro rations of items between buyers and sellers of real estate, if such
item is in respect of a period that includes the Distribution Date.
(b) For any state or local Income Tax that follows Section
856(i) of the Code (i) such state and local Income Taxes of the HRPT
Group shall be borne by, shall be the responsibility of, and shall be
paid by HRPT, and (ii) such state and local Income Taxes of the Senior
Housing Group shall be borne by, shall be the responsibility of, and
shall be paid by Senior Housing. For purposes of such state and local
Income Taxes, items of income, gain, loss, deduction, expenditure, and
credit shall be allocated and apportioned between the HRPT Group and
the Senior Housing Group in the same manner as Section 6.1(a).
(c) HRPT shall hold Senior Housing harmless from and against
all Taxes which are to be borne by HRPT under Section 6.1. Senior
Housing shall hold HRPT harmless from and against all Taxes which are
to be borne by Senior Housing under Section 6.1.
6.2 Allocation of Certain Taxes Among Taxable Periods. HRPT and Senior
Housing agree that if Senior Housing or any member of the Senior Housing Group
is permitted but not required under any applicable Tax law, including applicable
state and local Income Tax laws, to treat the day before the Distribution Date
or the Distribution Date as the last day of a Taxable period, HRPT and Senior
Housing shall cooperate so that such day will be treated as the last day of a
Taxable period.
6.3 Filing and Payment Responsibility.
(a) From and after the Distribution Date, each of HRPT (on
behalf of the HRPT Group) and Senior Housing (on behalf of the Senior
Housing Group) shall cause to be prepared and filed such Tax Returns as
the HRPT Group and the Senior Housing Group, respectively, are required
to file with applicable Taxing Authorities. Each of HRPT (on behalf of
the HRPT Group) and Senior Housing (on behalf of the Senior Housing
Group) agree that, except as required by applicable law, they will not
take positions in any such Tax Return that are inconsistent with (i)
the description of federal Income Tax consequences in the Senior
Housing Registration Statement and (ii) any other Tax Return, whether
filed on behalf of the HRPT Group or the Senior Housing Group,
previously or substantially
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contemporaneously filed with such Tax Return. In particular, the
parties will use all reasonable business efforts to cooperate with one
another in valuing the individual assets comprising the Senior Housing
Assets on the Distribution Date, to the extent such valuations are
necessary for Tax purposes.
(b) To the extent that either of the HRPT Group or the Senior
Housing Group bears responsibility pursuant to Section 6.1 for some or
all of a Tax which is to be paid with a Tax Return for which the other
bears preparation and filing responsibility pursuant to Section 6.3,
then (i) the party bearing responsibility for some or all of such Tax
shall have the right to review and comment upon such Tax Return at
least fifteen (15) days before such Tax Return must be filed, and (ii)
the party bearing responsibility for some or all of such Tax shall pay
over by wire transfer the amount of such Tax for which it is
responsible to the party filing such Tax Return at least three (3) days
before such Tax Return must be filed, and (iii) the party responsible
for preparing and filing such Tax Return will file such Tax Return on
or before its due date and pay over to the applicable Taxing Authority
the amount of Tax due with such Tax Return.
6.4 Refunds and Credits. Any refunds or credits of Taxes shall be for
the account of the party bearing responsibility for such Taxes under Section
6.1. Each of HRPT and Senior Housing agrees that if as the result of any audit
adjustment made by any Taxing Authority with respect to a Tax to be borne by the
other party under Section 6.1, any member of the HRPT Group or the Senior
Housing Group, respectively, receives a Tax benefit in the form of a cash refund
or in the form of a credit applicable against Tax liabilities to be borne by
such benefited party under this Section 6, then the benefited party shall notify
the other party of the same within ten (10) days of, as applicable, receiving
the cash refund or filing the Tax Return in which such credit is utilized, and
then pay over immediately to such other party the amount of such Tax refund or
credit.
6.5 Tax Contests. If either HRPT (on behalf of the HRPT Group) or
Senior Housing (on behalf of the Senior Housing Group) becomes aware of any
audit, pending or threatened assessment, official inquiry, examination or
proceeding ("Tax Contests") that could result in an official determination with
respect to Taxes due or payable the responsibility for any portion of which
rests with the other party, such party shall promptly so notify the other party
in writing. The party bearing greater responsibility for the Taxes contested in
a Tax Contest shall bear the costs (including attorneys' and accountants' fees,
but excluding the contested Taxes) of such Tax Contest, and shall control and
conduct such Tax Contest in a reasonable manner after consulting in good faith
with the other party. The other party shall supply the party controlling the Tax
contest with such powers of attorney and assistance as may be reasonably
requested. The responsibility for any additional liability for Taxes resulting
from a Tax Contest shall be allocated and apportioned between the HRPT Group and
the Senior Housing Group in accordance with Section 6.1. Except to the extent in
conflict with the provisions of this Section 6, the provisions of Section 5.3
shall be applicable to Tax Contests.
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6.6 Resolution of Disputes. At the request of either HRPT or Senior
Housing, any disputes between HRPT (on behalf of the HRPT Group) and Senior
Housing (on behalf of the Senior Housing Group) with respect to matters governed
by this Section 6 shall be resolved through an arbitration by a firm of
independent certified public accountants, mutually agreed upon by HRPT and
Senior Housing and having no material relationship with either HRPT or Senior
Housing, whose determination shall be final and binding on both parties. The
cost of such firm shall be borne equally by HRPT and Senior Housing.
SECTION 7 MISCELLANEOUS.
7.1 Arbitration. The Parties agree that any and all disputes and
disagreements arising out of or relating to this Agreement, other than actions
or claims for injunctive relief or claims raised in actions or proceedings
brought by third parties and other than disputes under Section 6 as to which
either party elects to apply the provisions of Section 6.6, shall be resolved
through negotiations or, if the dispute is not so resolved, through binding
arbitration conducted in Boston, Massachusetts under the J.A.M.S./Endispute
Comprehensive Arbitration Rules and Procedures, with the following amendments to
those rules. First, the parties agree that in no event shall the arbitration
from commencement to issuance of an award take longer than 180 days. Second, the
parties agree that the arbitration tribunal shall consist of three arbitrators
and that the Parties elect not to have the optional appeal procedure provided
for in Rule 23. Third, in lieu of the depositions permitted in Rule 15(E) and
(F) the parties agree that the only depositions shall be a single deposition to
last no longer than one six-hour day that each party may take of the opposing
party or an individual under the control of the opposing party. Judgment on the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
7.2 Confidentiality. Each party hereto shall use its reasonable
business efforts to maintain the confidentiality of any information concerning
the other party or any Subsidiary of the other party provided to or discovered
by it or its representatives and which is not otherwise available on a
nonconfidential basis to such party and shall not (except as may otherwise be
required by applicable law or the rules and regulations of the New York Stock
Exchange) disclose such information, subject to the provisions of this Section,
to anyone other than those people who have a need to know such information in
connection with the conduct of such party's business, including its attorneys,
accountants and other representatives and agents or during the course of or in
connection with any Action based upon or in connection with the subject matter
of this Agreement.
7.3 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written
confirmation of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with
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return receipt requested (if by mail), or with all freight charges
prepaid (if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either
received on a day which is not a business day or is required to be
delivered on or before a specific day which is not a business day, the
day of receipt or required delivery shall automatically be extended to
the next business day.
(c) All such notices shall be addressed,
If to Senior Housing, to:
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: President
Telecopier No. (617) 332-2261
If to HRPT, to:
HRPT Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: President
Telecopier No. (617) 332-2261
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time
to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address
up to two other addresses within the United States of America.
7.4 Waivers, Etc. No provision of this Agreement may be waived except
by a written instrument signed by the party waiving compliance. No waiver by any
party hereto of any of the requirements hereof or of any of such party's rights
hereunder shall release the other parties from full performance of their
remaining obligations stated herein. No failure to exercise or delay in
exercising on the part of any party hereto any right, power or privilege of such
party shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege by such party.
This Agreement may not be amended, nor shall any waiver, change, modification,
consent
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or discharge be effected, except by an instrument in writing executed by or on
behalf of the party against whom enforcement of any amendment, waiver, change,
modification, consent or discharge is sought.
7.5 Assignment; Successors and Assigns. This Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other parties, except to a successor to such party by
merger or consolidation or an assignee of substantially all of the assets of
such party. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Agreement is not intended and shall not be construed to create any rights
in or to be enforceable in any part by any other Person.
7.6 Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
7.7 Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof. This Agreement may not be amended or modified in any
respect other than by the written agreement of all of the parties hereto.
7.8 Governing Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts.
7.9 Expenses. HRPT agrees to pay and to hold Senior Housing harmless
from and against (a) all costs, expenses and fees (including in each case the
reasonable fees and disbursements of counsel), whether incurred by HRPT, Senior
Housing or a Transferred Subsidiary, incident to (i) the drafting, preparation,
execution and delivery of this Agreement and all other agreements, instruments
and other documents entered into by HRPT, Senior Housing or the Transferred
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<PAGE>
Subsidiaries in connection herewith or in connection with the Distribution or
consummation of the other transactions contemplated hereby, (ii) the
preparation, printing, filing and distribution under the Securities Act of the
Senior Housing Registration Statement (including financial statements and
exhibits), each preliminary prospectus and prospectus in connection therewith
and all amendments and supplements to any of them, (iii) the registration or
qualification of the Senior Housing Common Shares for offer and sale under the
securities, Blue Sky or real estate syndication laws of the several states in
connection with the Distribution, (iv) the initial listing of the Senior Housing
Common Shares on the New York Stock Exchange and (v) furnishing such copies of
the Senior Housing Registration Statement, the final prospectus contained
therein and all amendments and supplements thereto as may be requested for use
by tranferors thereof who are required to deliver a prospectus in connection
with the Distribution, (b) the fees and expenses of the Agent in connection with
the Distribution, (c) all costs, expenses and fees (including any up-front or
structuring fees, any mortgage recording fees or taxes and all costs the
reasonable fees and disbursements of counsel for Senior Housing and for any
lenders or agents), in connection with or incident to the establishment of, or
the drafting, preparation, execution and delivery of any and all agreements,
instruments and other documents entered into by Senior Housing or any
Transferred Subsidiaries in connection with, the Senior Housing Credit Facility,
and (d) all real property transfer Taxes, including Taxes levied upon the
transfer of equity in an Entity owning real estate assets, and all excise,
sales, use, value added, registration stamp, recording, documentary,
conveyancing, franchise, property, transfer, gains and similar Taxes, levies,
charges and fees, including any deficiencies, interest, penalties, additions to
Tax or additional amounts excluding any Income Taxes, incurred in connection
with the transactions contemplated by this Section 7.9. HRPT and Senior Housing
shall take all reasonable actions in making efforts to minimize the amount of
Transfer Taxes, and shall cooperate with one another in providing any
appropriate exemption certifications or other similar documentation.
7.10 Section and Other Headings; Interpretation. The headings contained
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Section, subsection, Schedule and Exhibit references are to
this Agreement, unless otherwise specified. The words "including" and "include"
shall be deemed to be followed by the words "without limitation."
7.11 Exculpation. THE DECLARATIONS OF TRUST ESTABLISHING HRPT, SENIOR
HOUSING AND SPTMRT PROPERTIES TRUST, COPIES OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATIONS"), ARE DULY FILED WITH THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDE THAT THE NAMES "HRPT
PROPERTIES TRUST," "SENIOR HOUSING PROPERTIES TRUST" AND "SPTMRT PROPERTIES
TRUST" REFER TO THE TRUSTEES UNDER EACH DECLARATION COLLECTIVELY AS TRUSTEES,
BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,
EMPLOYEE OR AGENT OF HRPT, SENIOR HOUSING OR SPTMRT PROPERTIES TRUST, AS THE
CASE MAY BE, SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
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<PAGE>
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRPT, SENIOR HOUSING OR
SPTMRT PROPERTIES TRUST, AS THE CASE MAY BE. ALL PERSONS DEALING WITH HRPT,
SENIOR HOUSING OR SPTMRT PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF HRPT, SENIOR HOUSING OR SPTMRT PROPERTIES TRUST, AS THE CASE MAY BE,
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. THE PROVISIONS
OF THIS SECTION 7.11 SHALL SURVIVE THE DISTRIBUTION OF SENIOR HOUSING COMMON
SHARES.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
HRPT PROPERTIES TRUST
By:___________________________________
Title:
SENIOR HOUSING PROPERTIES TRUST
By:___________________________________
Title:
THE PROVISIONS OF SECTIONS 2.2 AND 3.3 APPLICABLE TO THE UNDERSIGNED ARE HEREBY
ACCEPTED AND AGREED TO:
SPTMRT PROPERTIES TRUST
By:___________________________________
Title:
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<PAGE>
EXHIBIT A TO
TRANSACTION AGREEMENT
Form of
Promissory Note
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW.
PROMISSORY NOTE
$__________ [DATE]
__________, Massachusetts
FOR VALUE RECEIVED, SPTMRT PROPERTIES TRUST, a Maryland real estate
investment trust (the "Maker"), by this promissory note (this "Note"), promises
unconditionally to pay to HRPT PROPERTIES TRUST, a Maryland real estate
investment trust ("HRPT") or registered assigns (the "Holder") the principal sum
of __________________________________________ DOLLARS ($___________), on the
Deferred Payment Date (as defined below), together with any accrued but unpaid
interest on the principal amount from time to time outstanding hereunder as set
forth below.
This Note shall bear interest on the principal amount from time to time
outstanding hereunder from the date hereof to and including the date on which
the principal amount outstanding hereunder is repaid in full, payable on the
Deferred Payment Due Date and thereafter on demand, at a rate per annum
determined for each day equal to HRPT's weighted average effective interest rate
on its indebtedness for money borrowed on such day (as determined by HRPT in
good faith), but in no event exceeding the maximum rate permitted by law.
The Maker may prepay principal of this Note in part or in whole from
time to time without premium or penalty, but together with accrued and unpaid
interest on the principal amount prepaid.
This Note is made by the Maker pursuant to the terms of the Transaction
Agreement, dated as of __________, 1999 (as amended from time to time, the
"Transaction Agreement"), between HRPT and Senior Housing Properties Trust, a
Maryland real estate investment trust. As used herein, the term "Deferred
Payment Date" means the earlier to occur of (i) the 10th day following the
Distribution Date (as such term is defined in the Transaction Agreement) and
(ii) December 31, 1999.
<PAGE>
All payments of principal, interest and other amounts payable on or in
respect of this Note or the indebtedness evidenced hereby shall be made to the
Holder at such places within the United States of America as the Holder shall
from time to time designate in lawful money of the United States of America.
Payments hereunder shall be made in immediately available funds.
Without limitation of any other right or remedy of the Holder hereunder
or under the Transaction Agreement, if the Maker shall fail to pay the entire
principal amount of this Note on or prior to the Deferred Payment Date, then
without further demand from the Holder, the Maker shall within 10 days following
the Deferred Payment Date (and in any case by December 31, 1999) secure its
obligations under this Note with a perfected, first mortgage lien on the
Premises (as defined in the Transaction Agreement) owned by the Maker and
perfected first assignments of and security interests in all of the Maker's
Tenant Leases and Contracts (as defined in the Transaction Agreement) and all of
its other personal property, fixtures and other assets and rights related to the
ownership, operation and leasing of the Premises, pursuant to such mortgages,
assignments, securities agreements, financing statements and other security
documents which may reasonably be requested by the Holder from time to time.
If the Maker shall (i) dissolve or take any action of its shareholders
or board of trustees to dissolve, (ii) commence or consent to any case or
proceeding under any federal or state bankruptcy, insolvency or reorganization
law or any proceeding for appointment of a trustee, receiver, custodian or
similar official with respect to the Maker, (iii) be subject to any case or
proceeding under any federal or state bankruptcy, insolvency or reorganization
law, or proceeding for appointment of a trustee, receiver, custodian or similar
official with respect to the Maker, that continues for at least sixty (60) days,
(iv) make an assignment for the benefit of creditors, or (v) admit in writing
its inability to pay, or fail to pay, its debts as they mature, the entire
unpaid principal of, and accrued and unpaid interest on, this Note shall
automatically, without any requirement of notice or action by the Holder, become
immediately due and payable.
The Maker will pay on demand all costs of collection, including all
court costs and reasonable attorney's fees paid or incurred by the Holder in
enforcing this Note upon default.
All Makers, sureties, guarantors and endorsers hereof, by executing or
endorsing this Note or by entering into or executing any agreement to pay any of
the indebtedness evidenced hereby, waive (to the fullest extent permitted by
law) all requirements of diligence in collection, presentment, notice of
non-payment, protest, notice of protest, suit and all other conditions precedent
or suretyship defenses in connection with the collection and enforcement of this
Note or any guaranty of the indebtedness evidenced hereby.
The terms of this Note and the performance and observance by the Maker
of any term of this Note may only be waived by a written instrument duly
executed by or on behalf of the Holder. The failure of the Holder to exercise
any of his rights, remedies, powers or privileges hereunder in any instance
shall not constitute a waiver thereof in that or any other instance.
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<PAGE>
This Note may be assigned in whole or, with the prior written consent
of the Maker, in part (provided that any such consent shall not be required if
such assignment occurs after the Deferred Payment Date and the unpaid principal
amount assigned is at least $10,000,000), but any assignee shall take subject to
any and all defenses available to the Maker whether at law or in equity. The
Maker shall keep a register at its principal place of business in the United
States and shall provide for the registration of this Note and of transfers
hereof. Upon surrender of this Note for registration of transfer, the Maker
shall execute and deliver in the name of the designated assignee or assignees
and, in the case of a partial assignment, in the name of the Holder, one or more
new notes containing identical terms and provisions as this Note and in an
aggregate principal amount equal to the then unpaid principal balance hereof.
This Note is delivered in and shall be governed by and interpreted and
determined in accordance with the laws of The Commonwealth of Massachusetts.
THE DECLARATION OF TRUST ESTABLISHING SPTMRT PROPERTIES TRUST, A COPY
OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY
FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE
OF MARYLAND, PROVIDES THAT THE NAME "SPTMRT PROPERTIES TRUST" REFERS TO THE
TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF
SPTMRT PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SPTMRT PROPERTIES TRUST. ALL
PERSONS DEALING WITH SPTMRT PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF SPTMRT PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE
OF ANY OBLIGATION.
WITNESS the execution hereof under seal, as of the day and year first
above written.
SPTMRT PROPERTIES TRUST
By:___________________________________
Title:
A-3
EXHIBIT 3.2
SENIOR HOUSING PROPERTIES TRUST
FORM OF
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: Senior Housing Properties Trust, a Maryland real estate
investment trust (the "Trust") formed under Title 8 of the Corporations and
Associations Article of the Annotated Code of Maryland ("Title 8"), desires to
amend and restate its Declaration of Trust as currently in effect and as
hereinafter amended.
SECOND: The following provisions are all the provisions of the
Declaration of Trust currently in effect and as hereinafter amended:
ARTICLE I
FORMATION
The Trust is a real estate investment trust within the meaning of Title
8. It is also intended that the Trust shall carry on a business as a "qualified
REIT subsidiary" as described in the REIT provisions of the Code (as defined in
Article VII below), for so long as it is wholly owned by HRPT Properties Trust
and thereafter shall qualify and carry on business as a "real estate investment
trust" as described therein. The Trust shall not be deemed to be a general
partnership, limited partnership, joint venture, joint stock company or a
corporation, but nothing herein shall preclude the Trust from being treated for
tax purposes as an association under the Code; nor shall the Trustees or
shareholders or any of them for any purpose be, nor be deemed to be, nor be
treated in any way whatsoever as, liable or responsible hereunder as partners or
joint venturers.
ARTICLE II
NAME
The name of the Trust is:
Senior Housing Properties Trust
Under circumstances in which the Board of Trustees of the Trust (the
"Board of Trustees" or "Board") determines that the use of the name of the Trust
is not practicable, the Trust may use any other designation or name for the
Trust. If permitted by Maryland law, the name of the Trust may be changed from
time to time by the Board of Trustees without any action by the shareholders.
<PAGE>
ARTICLE III
PURPOSES AND POWERS
Section 3.1 Purposes. The purposes for which the Trust is formed are to
invest in and to acquire, hold, manage, administer, control and dispose of
property and interests in property, including, without limitation or obligation,
engaging in business as a real estate investment trust under the Code.
Section 3.2 Powers. The Trust shall have all of the powers granted to
real estate investment trusts by Title 8 and all other powers set forth in the
Declaration of Trust which are not inconsistent with law and are appropriate to
promote and attain the purposes set forth in the Declaration of Trust.
ARTICLE IV
RESIDENT AGENT
The name of the resident agent of the Trust in the State of Maryland is
James J. Hanks, Jr., whose post office address is c/o Ballard Spahr Andrews &
Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202. The resident
agent is a citizen of and resides in the State of Maryland. The Trust may change
such resident agent from time to time as the Board of Trustees shall determine.
The Trust may have such offices or places of business within or outside the
State of Maryland as the Board of Trustees may from time to time determine.
ARTICLE V
BOARD OF TRUSTEES
Section 5.1 Powers. Subject to any express limitations contained in the
Declaration of Trust or in the Bylaws, (a) the business and affairs of the Trust
shall be managed under the direction of the Board of Trustees and (b) the Board
shall have full, exclusive and absolute power, control and authority over any
and all property of the Trust. The Board may take any action as in its sole
judgment and discretion is necessary or appropriate to conduct the business and
affairs of the Trust. The Declaration of Trust shall be construed with the
presumption in favor of the grant of power and authority to the Board. Any
construction of the Declaration of Trust or determination made in good faith by
the Board concerning its powers and authority hereunder shall be conclusive. The
enumeration and definition of particular powers of the Trustees included in the
Declaration of Trust or in the Bylaws shall in no way be construed or deemed by
inference or otherwise in any manner to exclude or limit the powers conferred
upon the Board or the Trustees under the general laws of the State of Maryland
or any other applicable laws.
The Board, without any action by the shareholders of the Trust, shall
have and may exercise, on behalf of the Trust, without limitation, the power to
terminate the status of the Trust as a real estate investment trust under the
Code; to determine that compliance with any restriction or limitations on
ownership and transfers of shares of the Trust's beneficial interest set forth
in Article VII of the Declaration of Trust is no longer required in order for
the Trust to qualify as a real estate
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<PAGE>
investment trust; to adopt, amend and repeal Bylaws not inconsistent with law or
this Declaration of Trust; to elect officers in the manner prescribed in the
Bylaws; to solicit proxies from holders of shares of beneficial interest of the
Trust; and to do any other acts and deliver any other documents necessary or
appropriate to the foregoing powers.
Section 5.2 Number and Classification.
Section 5.2.1 The number of Trustees (hereinafter the
"Trustees") initially shall be five (5), which number may be increased or
decreased pursuant to the Bylaws of the Trust; provided, however, that the Trust
may not have less than three (3) nor more than seven (7) Trustees. Any vacancies
in the Board of Trustees shall be filled by a majority of the Trustees then in
office, except that a majority of the entire Board of Trustees must fill a
vacancy resulting from an increase in the number of Trustees.
Section 5.2.2 The Board of Trustees shall be classified into
three groups: Group I, Group II and Group III. The number of Trustees in each
group shall be determined by the Board in accordance with the Bylaws and the
number of Trustees in any one group shall not exceed the number of Trustees in
any other group by more than one. The Trustees in Group I shall serve for a term
ending at the first annual meeting of shareholders following the end of the
Trust's fiscal year ending December 31, 1999, each Trustee in Group II shall
serve for a term ending at the following annual meeting of shareholders and the
Trustee in Group III shall serve for a term ending at the second following
annual meeting of shareholders. After the respective terms of the groups
indicated, each such group of Trustees shall be elected for successive terms
ending at the annual meeting of shareholders held during the third year after
election.
Section 5.2.3 The names, business addresses and group of the
initial Trustees who shall serve as Trustees are as follows:
Name Address Group
---- ------- -----
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<PAGE>
Section 5.2.4 The Trustees may increase the number of Trustees
and fill any vacancy, whether resulting from an increase in the number of
Trustees or otherwise, on the Board prior to the first annual meeting of
shareholders in the manner provided in the Bylaws. It shall not be necessary to
list in the Declaration of Trust the names and addresses of any Trustees
hereinafter elected. No reduction in the number of Trustees shall have the
effect of removing any Trustee from office prior to the expiration of his or her
term. Subject to the provisions of Section 5.3, each Trustee shall hold office
until the election and qualification of his or her successor. There shall be no
cumulative voting in the election of Trustees.
Section 5.3 Resignation or Removal. Any Trustee may resign by written
notice to the Board, effective upon execution and delivery to the Trust of such
written notice or upon any future date specified in the notice. A Trustee may be
removed at any time with or without cause, at a meeting of the shareholders, by
the affirmative vote of the holders of not less than two-thirds (2/3) of the
Shares (as defined in Section 6.1 below) then outstanding and entitled to vote
generally in the election of Trustees. A Trustee judged incompetent or for whom
a guardian or conservator has been appointed shall be deemed to have resigned as
of the date of such adjudication or appointment.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1 Authorized Shares. The beneficial interest of the Trust
shall be divided into shares of beneficial interest (the "Shares"). The Trust
has authority to issue 50,000,000 Shares, all of which are initially comprised
of common shares of beneficial interest, $.01 par value per share ("Common
Shares"). If shares of one class are classified or reclassified into shares of
another class of shares pursuant to this Article VI, the number of authorized
shares of the former class shall be automatically decreased and the number of
shares of the latter class shall be automatically increased, in each case by the
number of shares so classified or reclassified, so that the aggregate number of
shares of beneficial interest of all classes that the Trust has authority to
issue shall not be more than the total number of shares of beneficial interest
set forth in the second sentence of this paragraph. The Board of Trustees,
without any action by the shareholders of the Trust, may amend the Declaration
of Trust from time to time to increase or decrease the aggregate number of
Shares or the number of Shares of any class or series, including preferred
shares of beneficial interest ("Preferred Shares"), that the Trust has authority
to issue.
Section 6.2 Common Shares. Subject to the provisions of Article VII,
each Common Share shall entitle the holder thereof to one vote on each matter
upon which holders of Common Shares are entitled to vote. The Board of Trustees
may reclassify any unissued Common Shares from time to time in one or more
classes or series of Shares.
Section 6.3 Preferred Shares. The Board of Trustees may classify any
unissued Preferred Shares and reclassify any previously classified but unissued
Preferred Shares of any series from time to time, in one or more series of
Shares.
Section 6.4 Classified or Reclassified Shares. Prior to issuance of
classified or reclassified Shares of any class or series, the Board of Trustees
by resolution shall (a) designate that class or
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<PAGE>
series; (b) specify the number of Shares to be included in the class or series;
(c) set, subject to the provisions of Article VII, the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms and conditions of redemption for
each class or series; and (d) cause the Trust to file articles supplementary
with the State Department of Assessments and Taxation of Maryland (the "SDAT").
Any of the terms of any class or series of Shares set pursuant to clause (c) of
this Section 6.4 may be made dependent upon facts ascertainable outside the
Declaration of Trust (including the occurrence of any event, determination or
action by the Trust or any other person or body) and may vary among holders
thereof, provided that the manner in which such facts or variations shall
operate upon the terms of such class or series of Shares is clearly and
expressly set forth in the articles supplementary filed with the SDAT.
Section 6.5 Authorization by Board of Share Issuance. The Board of
Trustees may authorize the issuance from time to time of Shares of any class or
series, whether now or hereafter authorized, or securities or rights convertible
into Shares of any class or series, whether now or hereafter authorized, for
such consideration (whether in cash, property, past or future services,
obligation for future payment or otherwise) as the Board of Trustees may deem
advisable (or without consideration), subject to such restrictions or
limitations, if any, as may be set forth in this Declaration of Trust or the
Bylaws of the Trust.
Section 6.6 Dividends and Distributions. The Board of Trustees may from
time to time authorize and declare to shareholders such dividends or
distributions, in cash or other assets of the Trust or in securities of the
Trust or from any other source as the Board of Trustees in its discretion shall
determine. Shareholders shall have no right to any dividend or distribution
unless and until authorized and declared by the Board. The exercise of the
powers and rights of the Board of Trustees pursuant to this Section 6.6 shall be
subject to the provisions of any class or series of Shares at the time
outstanding.
Section 6.7 General Nature of Shares. All Shares shall be personal
property entitling the shareholders only to those rights provided in the
Declaration of Trust. The shareholders shall have no interest in the property of
the Trust and shall have no right to compel any partition, division, dividend or
distribution of the Trust or of the property of the Trust. The death of a
shareholder shall not terminate the Trust or affect its continuity nor give his
or her legal representative any rights whatsoever, whether against or in respect
of other shareholders, the Trustees or the trust estate or otherwise, except the
sole right to demand and, subject to the provisions of the Declaration of Trust,
the Bylaws and any requirements of law, to receive a new certificate for Shares
registered in the name of such legal representative, in exchange for the
certificate held by such shareholder. The Trust is entitled to treat as
shareholders only those persons in whose names Shares are registered as holders
of Shares on the beneficial interest ledger of the Trust.
Section 6.8 Fractional Shares. The Trust may, without the consent or
approval of any shareholder, issue fractional Shares, eliminate a fraction of a
Share by rounding up or down to a full Share, arrange for the disposition of a
fraction of a Share by the person entitled to it or pay cash for the fair value
of a fraction of a Share.
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<PAGE>
Section 6.9 Declaration and Bylaws. All shareholders are subject to the
provisions of the Declaration of Trust and the Bylaws of the Trust.
Section 6.10 Divisions and Combinations of Shares. Subject to an
express provision to the contrary in the terms of any class or series of
beneficial interest hereafter authorized, the Board of Trustees shall have the
power to divide or combine the outstanding shares of any class or series of
beneficial interest, without a vote of shareholders.
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1 Definitions. For the purpose of this Article VII, the
following terms shall have the following meanings:
Affiliate. The term "Affiliate" shall mean, with respect to any Person,
another Person controlled by, controlling or under common control with such
Person.
Aggregate Share Ownership Limit. The term "Aggregate Share Ownership
Limit" shall mean 9.8 percent in value or in number of the aggregate of the
outstanding Equity Shares. The value of the outstanding Equity Shares shall be
determined by the Board of Trustees in good faith, which determination shall be
conclusive for all purposes hereof.
Beneficial Ownership. The term "Beneficial Ownership" shall mean
ownership of Equity Shares by a Person, whether the interest in Equity Shares is
held directly or indirectly (including by a nominee), and shall include, but not
be limited to, interests that would be treated as owned through the application
of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The
terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall
have the correlative meanings.
Business Day. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law, regulation or
executive order to close.
Charitable Beneficiary. The term "Charitable Beneficiary" shall mean
one or more beneficiaries of the Charitable Trust as determined pursuant to
Section 7.3.6, provided that each such organization must be described in Section
501(c)(3) of the Code and contributions to each such organization must be
eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the
Code. If the Code shall cease to define a charitable organization, "Charitable
Beneficiary" shall mean an entity organized to do work for charitable purposes
and not for profit.
Charitable Trust. The term "Charitable Trust" shall mean any trust
provided for in Section 7.3.1.
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<PAGE>
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time. All references to specific sections of the Code shall
include applicable successor provisions.
Common Share Ownership Limit. The term "Common Share Ownership Limit"
shall mean 9.8 percent (in value or in number of shares, whichever is more
restrictive) of the aggregate outstanding Common Shares. The number and value of
outstanding Common Shares shall be determined by the Board of Trustees in good
faith, which determination shall be conclusive for all purposes.
Constructive Ownership. The term "Constructive Ownership" shall mean
ownership of Equity Shares by a Person, whether the interest in Equity Shares is
held directly or indirectly (including by a nominee), and shall include, but not
be limited to, interests that would be treated as owned through the application
of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The
terms "Constructive Owner," "Constructively Owns" and "Constructively Owned"
shall have the correlative meanings.
Declaration of Trust. The term "Declaration of Trust" shall mean these
Articles of Amendment and Restatement as accepted for record by the SDAT, and
any amendments thereto.
Equity Shares. The term "Equity Shares" shall mean Shares of all
classes or series, including, without limitation, Common Shares and Preferred
Shares.
Excepted Holder. The term "Excepted Holder" shall mean a shareholder of
the Trust for whom an Excepted Holder Limit is created by this Article VII or by
the Board of Trustees pursuant to Section 7.2.7.
Excepted Holder Limit. The term "Excepted Holder Limit" shall mean,
provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Trustees pursuant to Section 7.2.7, and
subject to adjustment pursuant to Section 7.2.8, the percentage limit
established by the Board of Trustees pursuant to Section 7.2.7.
HRPT. The term "HRPT" shall mean HRPT Properties Trust, a Maryland real
estate investment trust, or any successor thereto by merger or consolidation, or
any transferee of all or substantially all of its assets.
Initial Date. The term "Initial Date" shall mean the date upon which
these Articles of Amendment and Restatement containing this Article VII is
accepted for record by the SDAT.
Market Price. The term "Market Price" on any date shall mean, with
respect to any class or series of outstanding Equity Shares, the Closing Price
for such Equity Shares on such date. The "Closing Price" on any date shall mean
the last sale price for such Equity Shares, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, for such Equity Shares, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the NYSE or, if such Equity Shares are not listed or
admitted to trading on the NYSE, as reported on the principal
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consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such Equity Shares are
listed or admitted to trading or, if such Equity Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price,
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotation system that may then be in use or, if
such Equity Shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such Equity Shares selected by the Board of Trustees or, in the
event that no trading price is available for such Equity Shares, the fair market
value of Equity Shares, as determined in good faith by the Board of Trustees.
NYSE. The term "NYSE" shall mean the New York Stock Exchange.
Person. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including, but not limited to, a trust qualified
under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes described
in Section 642(c) of the Code, association, private foundation within the
meaning of Section 509(a) of the Code, joint stock company or other entity and
also includes a group as that term is used for purposes of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, and a group to which an
Excepted Holder Limit applies.
Prohibited Owner. The term "Prohibited Owner" shall mean, with respect
to any purported Transfer, any Person who, but for the provisions of Section
7.2.1, would Beneficially Own or Constructively Own Equity Shares, and if
appropriate in the context, shall also mean any Person who would have been the
record owner of Equity Shares that the Prohibited Owner would have so owned.
REIT. The term "REIT" shall mean a real estate investment trust within
the meaning of Section 856 of the Code.
Restriction Termination Date. The term "Restriction Termination Date"
shall mean the first day after the Initial Date on which the Board of Trustees
determines that it is no longer in the best interests of the Trust for the
restrictions and limitations on Beneficial Ownership, Constructive Ownership and
Transfers of Equity Shares set forth herein to apply.
RMR. The term "RMR" shall mean REIT Management & Research, Inc., the
Trust's investment advisor, or any successor investment advisor to the Trust.
SDAT. The term "SDAT" shall mean the State Department of Assessments
and Taxation of Maryland.
Transfer. The term "Transfer" shall mean any issuance, sale, transfer,
gift, assignment, devise or other disposition, as well as any other event that
causes any Person to acquire Beneficial Ownership or Constructive Ownership, or
any agreement to take any such actions or cause any such events, of Equity
Shares or the right to vote or receive dividends on Equity Shares, including (a)
the granting or exercise of any option (or any disposition of any option), (b)
any disposition of any
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securities or rights convertible into or exchangeable for Equity Shares or any
interest in Equity Shares or any exercise of any such conversion or exchange
right and (c) Transfers of interests in other entities that result in changes in
Beneficial or Constructive Ownership of Equity Shares; in each case, whether
voluntary or involuntary, whether owned of record, Constructively Owned or
Beneficially Owned and whether by operation of law or otherwise. The terms
"Transferring" and "Transferred" shall have the correlative meanings.
Trustee. The term "Trustee" shall mean the Person unaffiliated with the
Trust and a Prohibited Owner, that is appointed by the Trust to serve as trustee
of the Charitable Trust.
Section 7.2 Equity Shares.
Section 7.2.1 Ownership Limitations. During the period
commencing on the Initial Date and prior to the Restriction Termination Date:
(a) Basic Restrictions.
(i) (1) No Person, other than an Excepted Holder and other
than HRPT, RMR and their affiliates, shall Beneficially Own or Constructively
Own Equity Shares in excess of the Aggregate Share Ownership Limit, (2) no
Person, other than an Excepted Holder and other than HRPT, RMR and their
affiliates, shall Beneficially Own or Constructively Own Common Shares in excess
of the Common Share Ownership Limit and (3) no Excepted Holder shall
Beneficially Own or Constructively Own Equity Shares in excess of the Excepted
Holder Limit for such Excepted Holder.
(ii) No Person shall Beneficially or Constructively Own
Equity Shares to the extent that such Beneficial or Constructive Ownership of
Equity Shares would result in the Trust being "closely held" within the meaning
of Section 856(h) of the Code (without regard to whether the ownership interest
is held during the last half of a taxable year), or otherwise failing to qualify
as a REIT (including, but not limited to, Beneficial or Constructive Ownership
that would result in the Trust owning (actually or Constructively) an interest
in a tenant that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Trust from such tenant would cause the Trust to fail to satisfy
any of the gross income requirements of Section 856(c) of the Code).
(iii) Notwithstanding any other provisions contained herein,
any Transfer of Equity Shares (whether or not such Transfer is the result of a
transaction entered into through the facilities of the NYSE or any other
national securities exchange or automated inter-dealer quotation system) that,
if effective, would result in Equity Shares being beneficially owned by less
than 100 Persons (determined under the principles of Section 856(a)(5) of the
Code) shall be void ab initio, and the intended transferee shall acquire no
rights in such Equity Shares.
(b) Transfer in Trust. If any Transfer of Equity Shares
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the NYSE or any other national securities exchange or
automated inter-dealer quotation system) occurs which, if effective, would
result in any Person Beneficially Owning or Constructively Owning Equity Shares
in violation of Section 7.2.1(a)(i) or (ii),
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(i) then that number of Equity Shares the Beneficial or
Constructive Ownership of which otherwise would cause such Person to violate
Section 7.2.1(a)(i) or (ii) (rounded up to the nearest whole share) shall be
automatically transferred to a Charitable Trust for the benefit of a Charitable
Beneficiary, as described in Section 7.3, effective as of the close of business
on the Business Day prior to the date of such Transfer, and such Person shall
acquire no rights in such Equity Shares; or
(ii) if the transfer to the Charitable Trust described in
clause (i) of this sentence would not be effective for any reason to prevent the
violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that number of
Equity Shares that otherwise would cause any Person to violate Section
7.2.1(a)(i) or (ii) shall be void ab initio, and the intended transferee shall
acquire no rights in such Equity Shares.
Section 7.2.2 Remedies for Breach. If the Board of Trustees or
any duly authorized committee thereof shall at any time determine in good faith
that a Transfer or other event has taken place that results in a violation of
Section 7.2.1 or that a Person intends to acquire or has attempted to acquire
Beneficial or Constructive Ownership of any Equity Shares in violation of
Section 7.2.1 (whether or not such violation is intended), the Board of Trustees
or a committee thereof shall take such action as it deems advisable to refuse to
give effect to or to prevent such Transfer or other event, including, without
limitation, causing the Trust to redeem Equity Shares, refusing to give effect
to such Transfer on the books of the Trust or instituting proceedings to enjoin
such Transfer or other event; provided, however, that any Transfers or attempted
Transfers or other events in violation of Section 7.2.1 shall automatically
result in the transfer to the Charitable Trust described above, and, where
applicable, such Transfer (or other event) shall be void ab initio as provided
above irrespective of any action (or non-action) by the Board of Trustees or a
committee thereof.
Section 7.2.3 Notice of Restricted Transfer. Any Person who
acquires or attempts or intends to acquire Beneficial Ownership or Constructive
Ownership of Equity Shares that will or may violate Section 7.2.1(a), or any
Person who would have owned Equity Shares that resulted in a transfer to the
Charitable Trust pursuant to the provisions of Section 7.2.1(b), shall
immediately give written notice to the Trust of such event, or in the case of
such a proposed or attempted transaction, give at least 15 days prior written
notice, and shall provide to the Trust such other information as the Trust may
request in order to determine the effect, if any, of such Transfer.
Section 7.2.4 Owners Required To Provide Information. From the
Initial Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding Equity Shares, within 30 days after the end of
each taxable year, shall give written notice to the Trust stating the name and
address of such owner, the number of Equity Shares and other Equity Shares
Beneficially Owned and a description of the manner in which such shares are
held. Each such owner shall provide to the Trust such additional information as
the Trust may request in order to determine the effect, if any, of such
Beneficial Ownership on the Trust's status as a REIT and to ensure compliance
with the Aggregate Share Ownership Limit.
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(b) each Person who is a Beneficial or Constructive Owner of
Equity Shares and each Person (including the shareholder of record) who is
holding Equity Shares for a Beneficial or Constructive Owner shall provide to
the Trust such information as the Trust may request, in good faith, in order to
determine the Trust's status as a REIT and to comply with requirements of any
taxing authority or governmental authority or to determine such compliance.
Section 7.2.5 Remedies Not Limited. Subject to Section 5.1 of
the Declaration of Trust, nothing contained in this Section 7.2 shall limit the
authority of the Board of Trustees to take such other action as it deems
necessary or advisable to protect the Trust and the interests of its
shareholders in preserving the Trust's status as a REIT.
Section 7.2.6 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3 or any
definition contained in Section 7.1, the Board of Trustees shall have the power
to determine the application of the provisions of this Section 7.2 or Section
7.3 with respect to any situation based on the facts known to it. In the event
Section 7.2 or 7.3 requires an action by the Board of Trustees and the
Declaration of Trust fails to provide specific guidance with respect to such
action, the Board of Trustees shall have the power to determine the action to be
taken so long as such action is not contrary to the provisions of Sections 7.1,
7.2 or 7.3.
Section 7.2.7 Exceptions.
(a) Subject to Section 7.2.1(a)(ii), the Board of Trustees, in
its sole discretion, may exempt a Person from the Aggregate Share Ownership
Limit and the Common Share Ownership Limit, as the case may be, and may (but is
not required to) establish or increase an Excepted Holder Limit for such Person
if:
(i) the Board of Trustees obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain that no
individual's Beneficial or Constructive Ownership of such Equity Shares will
violate Section 7.2.1(a)(ii);
(ii) such Person does not and represents that it will not
own, actually or Constructively, an interest in a tenant of the Trust (or a
tenant of any entity owned or controlled by the Trust) that would cause the
Trust to own, actually or Constructively, more than a 9.9% interest (as set
forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board of
Trustees obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain this fact (for this purpose, a tenant from
whom the Trust (or an entity owned or controlled by the Trust) derives (and is
expected to continue to derive) a sufficiently small amount of revenue such
that, in the opinion of the Board of Trustees, rent from such tenant would not
adversely affect the Trust's ability to qualify as a REIT, shall not be treated
as a tenant of the Trust); and
(iii) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Sections 7.2.1 through 7.2.6) will
result in such Equity Shares being automatically transferred to a Charitable
Trust in accordance with Sections 7.2.1(b) and 7.3.
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(b) Prior to granting any exception pursuant to Section
7.2.7(a), the Board of Trustees may require a ruling from the Internal Revenue
Service, or an opinion of counsel, in either case in form and substance
satisfactory to the Board of Trustees in its sole discretion, as it may deem
necessary or advisable in order to determine or ensure the Trust's status as a
REIT. Notwithstanding the receipt of any ruling or opinion, the Board of
Trustees may impose such conditions or restrictions as it deems appropriate in
connection with granting such exception.
(c) In determining whether to grant any exemption pursuant to
Section 7.2.7(a), the Board of Trustees may consider, among other factors, (i)
the general reputation and moral character of the person requesting an
exemption, (ii) whether ownership of shares would be direct or through ownership
attribution, (iii) whether the person's ownership of shares would adversely
affect the Trust's ability to acquire additional properties or engage in other
business and (iv) whether granting an exemption for the person requesting an
exemption would adversely affect any of the Trust's existing contractual
arrangements.
(d) Subject to Section 7.2.1(a)(ii), an underwriter which
participates in a public offering or a private placement of Equity Shares (or
securities convertible into or exchangeable for Equity Shares) may Beneficially
Own or Constructively Own Equity Shares (or securities convertible into or
exchangeable for Equity Shares) in excess of the Aggregate Share Ownership
Limit, the Common Share Ownership Limit or both such limits, but only to the
extent necessary to facilitate such public offering or private placement.
(e) The Board of Trustees may only reduce the Excepted Holder
Limit for an Excepted Holder: (1) with the written consent of such Excepted
Holder at any time, or (2) pursuant to the terms and conditions of the
agreements and undertakings entered into with such Excepted Holder in connection
with the establishment of the Excepted Holder Limit for that Excepted Holder. No
Excepted Holder Limit shall be reduced to a percentage that is less than the
Common Share Ownership Limit.
Section 7.2.8 Increase in Aggregate Share Ownership and Common
Share Ownership Limits. The Board of Trustees may from time to time increase the
Common Share Ownership Limit and the Aggregate Share Ownership Limit.
Section 7.2.9 Legend. Each certificate for Equity Shares shall
bear substantially the following legend:
The shares represented by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and
Transfer for the purpose, among others, of the Trust's
maintenance of its status as a Real Estate Investment Trust (a
"REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions and
except as expressly provided in the Trust's Declaration of
Trust, (i) no Person may Beneficially or Constructively Own
Common Shares of the Trust in excess of 9.8 percent (in value
or number of shares) of the outstanding Common Shares of the
Trust unless such Person is an Excepted Holder (in which case
the Excepted Holder Limit shall be applicable); (ii) no Person
may Beneficially or
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Constructively Own Equity Shares of the Trust in excess of 9.8
percent of the value of the total outstanding Equity Shares of
the Trust, unless such Person is an Excepted Holder (in which
case the Excepted Holder Limit shall be applicable); (iii) no
Person may Beneficially or Constructively Own Equity Shares
that would result in the Trust being "closely held" under
Section 856(h) of the Code or otherwise cause the Trust to
fail to qualify as a REIT; and (iv) no Person may Transfer
Equity Shares if such Transfer would result in Equity Shares
of the Trust being owned by fewer than 100 Persons. Any Person
who Beneficially or Constructively Owns or attempts to
Beneficially or Constructively Own Equity Shares which cause
or will cause a Person to Beneficially or Constructively Own
Equity Shares in excess or in violation of the above
limitations must immediately notify the Trust. If any of the
restrictions on transfer or ownership are violated, the Equity
Shares represented hereby will be automatically transferred to
a Trustee of a Charitable Trust for the benefit of one or more
Charitable Beneficiaries. In addition, upon the occurrence of
certain events, attempted Transfers in violation of the
restrictions described above may be void ab initio. All
capitalized terms in this legend have the meanings defined in
the Trust's Declaration of Trust, as the same may be amended
from time to time, a copy of which, including the restrictions
on transfer and ownership, will be furnished to each holder of
Equity Shares of the Trust on request and without charge.
Instead of the foregoing legend, the certificate may state
that the Trust will furnish a full statement about certain restrictions on
transferability to a shareholder on request and without charge.
Section 7.3 Transfer of Equity Shares in Trust.
Section 7.3.1 Ownership in Trust. Upon any purported Transfer
or other event described in Section 7.2.1(b) that would result in a transfer of
Equity Shares to a Charitable Trust, such Equity Shares shall be deemed to have
been transferred to the Trustee as trustee of a Charitable Trust for the
exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the
Trustee shall be deemed to be effective as of the close of business on the
Business Day prior to the purported Transfer or other event that results in the
transfer to the Charitable Trust pursuant to Section 7.2.1(b). The Trustee shall
be appointed by the Trust and shall be a Person unaffiliated with the Trust and
any Prohibited Owner. Each Charitable Beneficiary shall be designated by the
Trust as provided in Section 7.3.6.
Section 7.3.2 Status of Shares Held by the Trustee. Equity
Shares held by the Trustee shall be issued and outstanding Equity Shares of the
Trust. The Prohibited Owner shall have no rights in the shares held by the
Trustee. The Prohibited Owner shall not benefit economically from ownership of
any shares held in trust by the Trustee, shall have no rights to dividends or
other distributions and shall not possess any rights to vote or other rights
attributable to the shares held in the Charitable Trust.
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Section 7.3.3 Dividend and Voting Rights. The Trustee shall
have all voting rights and rights to dividends or other distributions with
respect to Equity Shares held in the Charitable Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend
or other distribution paid prior to the discovery by the Trust that Equity
Shares have been transferred to the Trustee shall be paid with respect to such
Equity Shares to the Trustee upon demand and any dividend or other distribution
authorized but unpaid shall be paid when due to the Trustee. Any dividends or
distributions so paid over to the Trustee shall be held in trust for the
Charitable Beneficiary. The Prohibited Owner shall have no voting rights with
respect to shares held in the Charitable Trust and, subject to Maryland law,
effective as of the date that Equity Shares have been transferred to the
Trustee, the Trustee shall have the authority (at the Trustee's sole discretion)
(i) to rescind as void any vote cast by a Prohibited Owner prior to the
discovery by the Trust that Equity Shares have been transferred to the Trustee
and (ii) to recast such vote in accordance with the desires of the Trustee
acting for the benefit of the Charitable Beneficiary; provided, however, that if
the Trust has already taken irreversible trust action, then the Trustee shall
not have the authority to rescind and recast such vote. Notwithstanding the
provisions of this Article VII, until the Trust has received notification that
Equity Shares have been transferred into a Charitable Trust, the Trust shall be
entitled to rely on its share transfer and other shareholder records for
purposes of preparing lists of shareholders entitled to vote at meetings,
determining the validity and authority of proxies and otherwise conducting votes
of shareholders.
Section 7.3.4 Sale of Shares by Trustee. Within 20 days of
receiving notice from the Trust that Equity Shares have been transferred to the
Charitable Trust, the Trustee of the Charitable Trust shall sell the shares held
in the Charitable Trust to a person, designated by the Trustee, whose ownership
of the shares will not violate the ownership limitations set forth in Section
7.2.1(a). Upon such sale, the interest of the Charitable Beneficiary in the
shares sold shall terminate and the Trustee shall distribute the net proceeds of
the sale to the Prohibited Owner and to the Charitable Beneficiary as provided
in this Section 7.3.4. The Prohibited Owner shall receive the lesser of (1) the
price paid by the Prohibited Owner for the shares or, if the Prohibited Owner
did not give value for the shares in connection with the event causing the
shares to be held in the Charitable Trust (e.g., in the case of a gift, devise
or other such transaction), the Market Price of the shares on the day of the
event causing the shares to be held in the Charitable Trust and (2) the price
per share received by the Trustee from the sale or other disposition of the
shares held in the Charitable Trust. Any net sales proceeds in excess of the
amount payable to the Prohibited Owner shall be immediately paid to the
Charitable Beneficiary. If, prior to the discovery by the Trust that Equity
Shares have been transferred to the Trustee, such shares are sold by a
Prohibited Owner, then (i) such shares shall be deemed to have been sold on
behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner
received an amount for such shares that exceeds the amount that such Prohibited
Owner was entitled to receive pursuant to this Section 7.3.4, such excess shall
be paid to the Trustee upon demand.
Section 7.3.5 Purchase Right in Shares Transferred to the
Trustee. Equity Shares transferred to the Trustee shall be deemed to have been
offered for sale to the Trust, or its designee, at a price per share equal to
the lesser of (i) the price per share in the transaction that resulted in such
transfer to the Charitable Trust (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Trust, or its designee, accepts such offer. The Trust shall have
the right to accept such offer until the Trustee has sold the shares held in the
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Charitable Trust pursuant to Section 7.3.4. Upon such a sale to the Trust, the
interest of the Charitable Beneficiary in the shares sold shall terminate and
the Trustee shall distribute the net proceeds of the sale to the Prohibited
Owner.
Section 7.3.6 Designation of Charitable Beneficiaries. By
written notice to the Trustee, the Trust shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Charitable
Trust such that Equity Shares held in the Charitable Trust would not violate the
restrictions set forth in Section 7.2.1(a) in the hands of such Charitable
Beneficiary.
Section 7.4 NYSE Transactions. Nothing in this Article VII shall
preclude the settlement of any transaction entered into through the facilities
of the NYSE or any other national securities exchange or automated inter-dealer
quotation system. The fact that the settlement of any transaction occurs shall
not negate the effect of any other provision of this Article VII and any
transferee in such a transaction shall be subject to all of the provisions and
limitations set forth in this Article VII.
Section 7.5 Enforcement. The Trust is authorized specifically to seek
equitable relief, including injunctive relief, to enforce the provisions of this
Article VII.
Section 7.6 Non-Waiver. No delay or failure on the part of the Trust or
the Board of Trustees in exercising any right hereunder shall operate as a
waiver of any right of the Trust or the Board of Trustees, as the case may be,
except to the extent specifically waived in writing.
ARTICLE VIII
SHAREHOLDERS
Section 8.1 Meetings. There shall be an annual meeting of the
shareholders, to be held on proper notice at such time (after the delivery of
the annual report) and convenient location as shall be determined by or in the
manner prescribed in the Bylaws, for the election of the Trustees, if required,
and for the transaction of any other business within the powers of the Trust.
Except as otherwise provided in the Declaration of Trust, special meetings of
shareholders may be called in the manner provided in the Bylaws. Shareholders
meetings, including the annual meeting and any special meetings, may be called
only by the Board of Trustees. If there are no Trustees, the officers of the
Trust shall promptly call a special meeting of the shareholders entitled to vote
for the election of successor Trustees. Any meeting may be adjourned and
reconvened as the Trustees determine or as provided in the Bylaws.
Section 8.2 Voting Rights. Subject to the provisions of any class or
series of Shares then outstanding, the shareholders shall be entitled to vote
only on the following matters: (a) election of Trustees as provided in Section
5.2 and the removal of Trustees as provided in Section 5.3; (b) amendment of the
Declaration of Trust as provided in Article X; (c) termination of the Trust as
provided in Section 12.2; (d) merger or consolidation of the Trust, or the sale
or disposition of substantially all of the Trust Property, as provided in
Article XI; and (e) such other matters with respect to which the Board of
Trustees has adopted a resolution declaring that a proposed action is advisable
and directing that the matter be submitted to the shareholders for approval or
ratification.
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Except with respect to the foregoing matters, no action taken by the
shareholders at any meeting shall in any way bind the Board of Trustees.
Section 8.3 Preemptive and Appraisal Rights. Except as may be provided
by the Board of Trustees in setting the terms of classified or reclassified
Shares pursuant to Section 6.4, or as may otherwise be provided by contract, no
holder of Shares shall, as such holder, (a) have any preemptive right to
purchase or subscribe for any additional Shares of the Trust or any other
security of the Trust which it may issue or sell or (b) have any right to
require the Trust to pay him the fair value of his Shares in an appraisal or
similar proceeding.
Section 8.4 Extraordinary Actions. Except as specifically provided in
Section 5.3 (relating to removal of Trustees) and subject to Section 8.5,
notwithstanding any provision of law permitting or requiring any action to be
taken or authorized by the affirmative vote of the holders of a greater number
of votes, any such action shall be effective and valid if taken or approved by
(i) the affirmative vote of holders of Shares entitled to cast a majority of all
the votes entitled to be cast on the matter, or (ii) if Maryland law hereafter
permits the effectiveness of a vote described in this clause (ii), the
affirmative vote of a majority of the votes cast on the matter.
Section 8.5 Board Approval. The submission of any action to the
shareholders for their consideration shall first be approved or advised by the
Board of Trustees, and the shareholders shall not otherwise be entitled to act
thereon.
Section 8.6 Action By Shareholders Without a Meeting. To the extent, if
any, permitted by the Bylaws of the Trust, any action required or permitted to
be taken by the shareholders may be taken without a meeting by the written
consent of the shareholders entitled to cast a sufficient number of votes to
approve the matter as required by statute, the Declaration of Trust or the
Bylaws of the Trust, as the case may be.
ARTICLE IX
LIABILITY LIMITATION, INDEMNIFICATION
AND TRANSACTIONS WITH THE TRUST
Section 9.1 Limitation of Shareholder Liability. No shareholder shall
be liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Trust by reason of his being a shareholder, nor
shall any shareholder be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any person in connection with the property or the
affairs of the Trust by reason of his being a shareholder.
Section 9.2 Limitation of Trustee and Officer Liability. To the maximum
extent that Maryland law in effect from time to time permits limitation of the
liability of trustees and officers of a real estate investment trust, no current
or former Trustee or officer of the Trust shall be liable to the Trust or to any
shareholder for money damages. Neither the amendment nor repeal of this Section
9.2, nor the adoption or amendment of any other provision of the Declaration of
Trust inconsistent with this Section 9.2, shall apply to or affect in any
respect the applicability of the preceding sentence with respect to any act or
failure to act which occurred prior to such amendment,
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repeal or adoption. In the absence of any Maryland statute limiting the
liability of trustees and officers of a Maryland real estate investment trust
for money damages in a suit by or on behalf of the Trust or by any shareholder,
or arising by reason of his or her action on behalf of the Trust, no Trustee or
officer of the Trust shall be liable to the Trust or to any shareholder for
money damages except to the extent that (a) the Trustee or officer actually
received an improper benefit or profit in money, property or services, for the
amount of the benefit or profit in money, property or services actually
received, or (b) a judgment or other final adjudication adverse to the Trustee
or officer is entered in a proceeding based on a finding in the proceeding that
the Trustee's or officer's action or failure to act was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding.
Section 9.3 Express Exculpatory Clauses and Instruments. Any written
instrument creating an obligation of the Trust shall, to the extent practicable,
include a reference to this Declaration and provide that neither the
shareholders nor the Trustees nor any officers, employees or agents (including
the Trust's advisor, the "Advisor") of the Trust shall be liable thereunder and
that all persons shall look solely to the trust estate for the payment of any
claim thereunder or for the performance thereof; however, the omission of such
provision from any such instrument shall not render the shareholders, any
Trustee, or any officer, employee or agent (including the Advisor) of the Trust
liable, nor shall the shareholders, any Trustee or any officer, employee or
agent (including the Advisor) of the Trust be liable to anyone for such
omission.
Section 9.4 Indemnification. The Trust shall, to the maximum extent
permitted by Maryland law in effect from time to time, indemnify, and pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to, (a) any individual who is a present or former shareholder, Trustee or
officer of the Trust or (b) any individual who, while a Trustee of the Trust and
at the request of the Trust, serves or has served as a trustee, director,
officer, partner, employee or agent of another real estate investment trust,
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise from and against any claim or liability to which such person
may become subject or which such person may incur by reason of his status as a
present or former shareholder, Trustee or officer of the Trust. The Trust shall
have the power, with the approval of its Board of Trustees, to provide such
indemnification and advancement of expenses to a person who served a predecessor
of the Trust in any of the capacities described in (a) or (b) above and to any
employee or agent of the Trust or a predecessor of the Trust.
Section 9.5 Transactions Between the Trust and its Trustees, Officers,
Employees and Agents. (a) Subject to any express restrictions adopted by the
Trustees in the Bylaws or by resolution, the Trust may enter into any contract
or transaction of any kind with any person, including any Trustee, officer,
employee or agent of the Trust or any person affiliated with a Trustee, officer,
employee or agent of the Trust, whether or not any of them has a financial
interest in such transaction.
(b) To the extent permitted by Maryland law, a contract or other
transaction between the Trust and any of its trustees or between the Trust and
RMR or any other corporation, trust, firm, or other entity in which any of the
Trust's trustees is a director or trustee or has a material financial interest
shall not be void or voidable if:
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(i) The fact of the common directorship, trusteeship or
interest is disclosed or known to:
(A) The Board of Trustees or a proper committee
thereof, and the Board of Trustees or such Committee
authorizes, approves or ratifies the contract or transaction
by the affirmative vote of a majority of disinterested
trustees, even if the disinterested trustees constitute less
than a quorum; or
(B) The shareholders entitled to vote, and the
contract or transaction is authorized, approved, or ratified
by a majority of the votes cast by the shareholders entitled
to vote other than the votes of shares owned of record or
beneficially by the interested trustee, corporation, trust,
firm or other entity; or
(C) The contract or transaction is fair and
reasonable to the Trust.
(ii) Common or interested trustees or the shares owned by them
or by an interested corporation, trust, firm or other entity may be
counted in determining the presence of a quorum at a meeting of the
Board of Trustees or a committee thereof or at a meeting of the
shareholders, as the case may be, at which the contract or transaction
is authorized, approved or ratified.
This subsection 9.5(b) does not apply to the fixing by the Board of
Trustees of compensation for a Trustee, whether as a Trustee or in any other
capacity, or affect rights of indemnification provided in Section 9.4 or in the
Bylaws or otherwise.
Section 9.6 Right of Trustees, Officers, Employees and Agents to Own
Shares or Other Property and to Engage in Other Business. Subject to any
restrictions which may be adopted by the Trustees in the Bylaws or otherwise:
Any Trustee or officer, employee or agent of the Trust may acquire, own, hold
and dispose of Shares in the Trust, for his or her individual account, and may
exercise all rights of a shareholder to the same extent and in the same manner
as if he or she were not a Trustee or officer, employee or agent of the Trust.
Any Trustee or officer, employee or agent of the Trust may, in his or her
personal capacity or in the capacity of trustee, officer, director, stockholder,
partner, member, advisor or employee of any Person or otherwise, have business
interests and engage in business activities similar to or in addition to those
relating to the Trust, which interests and activities may be similar to and
competitive with those of the Trust and may include the acquisition,
syndication, holding, management, development, operation or disposition, for his
own account, or for the account of such Person or others, of interests in
mortgages, interests in real property, or interests in Persons engaged in the
real estate business. Each Trustee, officer, employee and agent of the Trust
shall be free of any obligation to present to the Trust any investment
opportunity which comes to him or her in any capacity other than solely as
Trustee, officer, employee or agent of the Trust even if such opportunity is of
a character which, if presented to the Trust, could be taken by the Trust. Any
Trustee or officer, employee or agent of the Trust may be interested as trustee,
officer, director, stockholder, partner, member, advisor or employee of, or
otherwise have a direct or indirect interest in, any Person who may be engaged
to render advice or services to the Trust, and may receive compensation from
such Person as well as compensation as
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Trustee, officer, employee or agent or otherwise hereunder. None of these
activities shall be deemed to conflict with his or her duties and powers as
Trustee or officer, employee or agent of the Trust.
Section 9.7 Persons Dealing with Trustees, Officers, Employees or
Agents. Any act of the Trustees or of the officers, employees or agents of the
Trust purporting to be done in their capacity as such, shall, as to any Persons
dealing with such Trustees, officers, employees or agents, be conclusively
deemed to be within the purposes of this Trust and within the powers of such
Trustees or officers, employees or agents. No Person dealing with the Board or
any of the Trustees or with the officers, employees or agents of the Trust shall
be bound to see to the application of any funds or property passing into their
hands or control. The receipt of the Board or any of the Trustees, or of
authorized officers, employees or agents of the Trust, for moneys or other
consideration, shall be binding upon the Trust.
Section 9.8 Reliance. The Trustees and the officers, employees and
agents of the Trust may consult with counsel and the advice or opinion of such
counsel shall be full and complete personal protection to all the Trustees and
the officers, employees and agents of the Trust in respect of any action taken
or suffered by them in good faith and in reliance on or in accordance with such
advice or opinion. In discharging their duties, Trustees or officers, employees
or agents of the Trust, when acting in good faith, may rely upon financial
statements of the Trust represented to them to fairly present the financial
position or results of operations of the Trust by the chief financial officer of
the Trust or the officer of the Trust having charge of its books of account, or
stated in a written report by an independent certified public accountant fairly
to present the financial position or results of operations of the Trust. The
Trustees and the officers, employees and agents of the Trust may rely, and shall
be personally protected in acting, upon any instrument or other document
believed by them to be genuine.
ARTICLE X
AMENDMENTS
Section 10.1 General. The Trust reserves the right from time to time to
make any amendment to the Declaration of Trust, now or hereafter authorized by
law, including any amendment altering the terms or contract rights, as expressly
set forth in the Declaration of Trust, of any Shares, except that the provisions
governing the personal liability of the shareholders, Trustees and of the
officers, employees and agents of the Trust and the prohibition of assessments
upon shareholders may not be amended in any respect that could increase the
personal liability of such shareholders, Trustees or officers, employees and
agents of the Trust. All rights and powers conferred by the Declaration of Trust
on shareholders, Trustees and officers are granted subject to this reservation.
An amendment to the Declaration of Trust (a) shall be signed and acknowledged by
at least a majority of the Trustees, or an officer duly authorized by at least a
majority of the Trustees, (b) shall be filed for record as provided in Section
13.5 and (c) shall become effective as of the later of the time the SDAT accepts
the amendment for record or the time established in the amendment, not to exceed
thirty (30) days after the amendment is accepted for record. All references to
the Declaration of Trust shall include all amendments thereto.
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Section 10.2 By Trustees. The Trustees may amend this Declaration of
Trust from time to time, in the manner provided by Title 8, without any action
by the shareholders, to qualify as a real estate investment trust under the Code
or under Title 8 and as otherwise provided in Section 8-501(e) of Title 8 and
the Declaration of Trust. If permitted by Maryland law as in effect from time to
time, the Trustees may amend this Declaration of Trust from time to time in any
other respect, in accordance with such law, without any action by the
shareholders.
Section 10.3 By Shareholders. Except as otherwise provided in Section
10.2 and subject to the following sentence, any amendment to this Declaration of
Trust must first be advised by the Board of Trustees and then shall be valid
only if approved by (i) the affirmative vote of a majority of all the votes
entitled to be cast on the matter or (ii) if Maryland law hereafter permits the
effectiveness of a vote described in this clause (ii), the affirmative vote of a
majority of the votes cast on the matter. Any amendment to Section 5.2.2 or 5.3
or to this sentence of the Declaration of Trust shall be valid only if approved
by the Board of Trustees and then by the affirmative vote of two-thirds (2/3) of
all votes entitled to be cast on the matter.
ARTICLE XI
MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY
Subject to the provisions of any class or series of Shares at the time
outstanding, the Trust may (a) merge with or into another entity, (b)
consolidate with one or more other entities into a new entity or (c) sell,
lease, exchange or otherwise transfer all or substantially all of the trust
property. Any such action must first be approved by the Board of Trustees and,
after notice to all shareholders entitled to vote on the matter, by (i) the
affirmative vote of a majority of all the votes entitled to be cast on the
matter or (ii) if Maryland law hereafter permits the effectiveness of a vote
described in this clause (ii), the affirmative vote of a majority of the votes
cast on the matter
ARTICLE XII
DURATION AND TERMINATION OF TRUST
Section 12.1 Duration. The Trust shall continue perpetually unless
terminated pursuant to Section 12.2.
Section 12.2 Termination.
(a) Subject to the provisions of any class or series of Shares
at the time outstanding, after approval by a majority of the entire Board of
Trustees, the Trust may be terminated at any meeting of shareholders by (i) the
affirmative vote of a majority of all the votes entitled to be cast on the
matter or (ii) or if hereafter expressly authorized by Title 8, the affirmative
vote of a majority of the votes cast on the matter. Upon the termination of the
Trust:
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
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(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under the Declaration of Trust
shall continue, including the powers to fulfill or discharge the Trust's
contracts, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining property of the Trust to
one or more persons at public or private sale for consideration which may
consist in whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities and do all other acts appropriate to liquidate
its business.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
agreements as they deem necessary for their protection, the Trust may distribute
the remaining property of the Trust among the shareholders so that after payment
in full or the setting apart for payment of such preferential amounts, if any,
to which the holders of any Shares at the time outstanding shall be entitled,
the remaining property of the Trust shall, subject to any participating or
similar rights of Shares at the time outstanding, be distributed ratably among
the holders of Common Shares at the time outstanding.
(b) After termination of the Trust, the liquidation of its
business and the distribution to the shareholders as herein provided, a majority
of the Trustees shall execute and file with the Trust's records a document
certifying that the Trust has been duly terminated and the Trustees shall be
discharged from all liabilities and duties hereunder, and the rights and
interests of all shareholders shall cease.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Governing Law. The Declaration of Trust is executed and
delivered with reference to the laws of the State of Maryland, and the rights of
all parties and the validity, construction and effect of every provision hereof
shall be subject to and construed according to the laws of the State of
Maryland.
Section 13.2 Reliance by Third Parties. Any certificate shall be final
and conclusive as to any person dealing with the Trust if executed by the
Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying
to: (a) the number or identity of Trustees, officers of the Trust or
shareholders; (b) the due authorization of the execution of any document; (c)
the action or vote taken, and the existence of a quorum, at a meeting of the
Board of Trustees or shareholders; (d) a copy of the Declaration of Trust or of
the Bylaws as a true and complete copy as then in force; (e) an amendment to the
Declaration of Trust; (f) the termination of the Trust; or (g) the existence of
any fact relating to the affairs of the Trust. No purchaser, lender, transfer
agent or other person shall be bound to make any inquiry concerning the validity
of any transaction purporting to be made by the Trust on its behalf or by any
officer, employee or agent of the Trust.
Section 13.3 Severability.
(a) The provisions of the Declaration of Trust are severable,
and if the Board of Trustees shall determine, with the advice of counsel, that
any one or more of such provisions (the
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"Conflicting Provisions") are in conflict with the Code, Title 8 or other
applicable federal or state laws, the Conflicting Provisions, to the extent of
the conflict, shall be deemed never to have constituted a part of the
Declaration of Trust, even without any amendment of the Declaration of Trust
pursuant to Article X and without affecting or impairing any of the remaining
provisions of the Declaration of Trust or rendering invalid or improper any
action taken or omitted (including but not limited to the election of Trustees)
prior to such determination. No Trustee shall be liable for making or failing to
make such a determination. In the event of any such determination by the Board
of Trustees, the Board shall amend the Declaration of Trust in the manner
provided in Section 10.2.
(b) If any provision of the Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such holding shall apply only to
the extent of any such invalidity or unenforceability and shall not in any
manner affect, impair or render invalid or unenforceable such provision in any
other jurisdiction or any other provision of the Declaration of Trust in any
jurisdiction.
Section 13.4 Construction. In the Declaration of Trust, unless the
context otherwise requires, words used in the singular or in the plural include
both the plural and singular and words denoting any gender include all genders.
The title and headings of different parts are inserted for convenience and shall
not affect the meaning, construction or effect of the Declaration of Trust. In
defining or interpreting the powers and duties of the Trust and its Trustees and
officers, reference may be made by the Trustees or officers, to the extent
appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3
of the Corporations and Associations Article of the Annotated Code of Maryland.
In furtherance and not in limitation of the foregoing, in accordance with the
provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations
Article of the Annotated Code of Maryland, the Trust shall be included within
the definition of "corporation" for purposes of such provisions.
Section 13.5 Recordation. The Declaration of Trust and any amendment
hereto shall be filed for record with the SDAT and may also be filed or recorded
in such other places as the Trustees deem appropriate, but failure to file for
record the Declaration of Trust or any amendment hereto in any office other than
in the State of Maryland shall not affect or impair the validity or
effectiveness of the Declaration of Trust or any amendment hereto. A restated
Declaration of Trust shall, upon filing, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration of Trust and the various amendments thereto.
THIRD: The amendment to and restatement of the Declaration of Trust of
the Trust as hereinabove set forth have been duly advised by the Board of
Trustees and approved by the shareholders of the Trust as required by law.
FOURTH: The total number of shares of beneficial interest which the
Trust has authority to issue has not been amended by this amendment and
restatement.
The undersigned President acknowledges these Articles of Amendment and
Restatement to be the trust act of the Trust, and as to all matters or facts
required to be verified under oath, the undersigned President acknowledges, that
to the best of his knowledge, information and belief, these
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matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its President and
attested to by its Assistant Secretary on this ______ day of ____________, 1999.
ATTEST: SENIOR HOUSING PROPERTIES TRUST
_________________________ __________________________(SEAL)
Assistant Secretary President
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EXHIBIT 3.4
SENIOR HOUSING PROPERTIES TRUST
FORM OF
AMENDED AND RESTATED BYLAWS
As Amended and Restated _________, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I OFFICES...................................................................................1
Section 1.1 Principal Office.............................................................1
Section 1.2 Additional Offices...........................................................1
ARTICLE II MEETINGS OF SHAREHOLDERS..................................................................1
Section 2.1 Place........................................................................1
Section 2.2 Annual Meeting...............................................................1
Section 2.3 Special Meetings.............................................................1
Section 2.4 Notice of Regular or Special Meetings........................................1
Section 2.5 Notice of Adjourned Meetings.................................................2
Section 2.6 Scope of Notice..............................................................2
Section 2.7 Organization of Shareholder Meetings.........................................2
Section 2.8 Quorum.......................................................................2
Section 2.9 Voting.......................................................................2
Section 2.10 Proxies.....................................................................3
Section 2.11 Voting Rights...............................................................3
Section 2.12 Voting of Shares by Certain Holders.........................................3
Section 2.13 Inspectors..................................................................4
Section 2.14 Reports to Shareholders.....................................................4
Section 2.15 Nominations and Proposals by Shareholders...................................4
Section 2.16 No Shareholder Actions by Written Consent...................................6
Section 2.17 Voting by Ballot............................................................6
ARTICLE III TRUSTEES..................................................................................6
Section 3.1 General Powers; Qualifications; Trustees Holding Over........................6
Section 3.2 Independent Trustees.........................................................7
Section 3.3 Managing Trustees............................................................7
Section 3.4 Number.......................................................................7
Section 3.5 Annual and Regular Meetings..................................................7
Section 3.6 Special Meetings.............................................................7
Section 3.7 Notice.......................................................................7
Section 3.8 Quorum.......................................................................8
Section 3.9 Voting.......................................................................8
Section 3.10 Telephone Meetings..........................................................8
Section 3.11 Informal Action by Trustees.................................................8
Section 3.12 Wavier of Notice............................................................8
Section 3.13 Vacancies...................................................................8
Section 3.14 Compensation; Financial Assistance..........................................9
Section 3.15 Removal of Trustees.........................................................9
Section 3.16 Loss of Deposits............................................................9
Section 3.17 Surety Bonds................................................................9
Section 3.18 Reliance....................................................................9
Section 3.19 Interested Trustee Transactions.............................................9
<PAGE>
Section 3.20 Qualifying Shares Not Required.............................................10
Section 3.21 Certain Rights of Trustees, Officers, Employees
and Agents.............................................................10
Section 3.22 Certain Transactions.......................................................10
ARTICLE IV COMMITTEES...............................................................................10
Section 4.1 Number; Tenure and Qualifications...........................................10
Section 4.2 Powers......................................................................10
Section 4.3 Meetings....................................................................10
Section 4.4 Telephone Meetings..........................................................11
Section 4.5 Informal Action by Committees...............................................11
Section 4.6 Vacancies...................................................................11
ARTICLE V OFFICERS.................................................................................11
Section 5.1 General Provisions..........................................................11
Section 5.2 Removal and Resignation.....................................................11
Section 5.3 Vacancies...................................................................11
Section 5.4 Chief Executive Officer.....................................................12
Section 5.5 Chief Operating Officer.....................................................12
Section 5.6 Chief Financial Officer.....................................................12
Section 5.7 Chairman and Vice Chairman of the Board.....................................12
Section 5.8 President...................................................................12
Section 5.9 Vice Presidents.............................................................12
Section 5.10 Secretary..................................................................12
Section 5.11 Treasurer..................................................................13
Section 5.12 Assistant Secretaries and Assistant Treasurers.............................13
ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS....................................................13
Section 6.1 Contracts...................................................................13
Section 6.2 Checks and Drafts...........................................................13
Section 6.3 Deposits....................................................................13
ARTICLE VII SHARES...................................................................................14
Section 7.1 Certificates................................................................14
Section 7.2 Transfers...................................................................14
Section 7.3 Replacement Certificate.....................................................14
Section 7.4 Closing of Transfer Books or Fixing of Record Date..........................15
Section 7.5 Share Ledger................................................................15
Section 7.6 Fractional Shares; Issuance of Units........................................15
ARTICLE VIII FISCAL YEAR..............................................................................15
ARTICLE IX DISTRIBUTIONS............................................................................16
Section 9.1 Authorization...............................................................16
Section 9.2 Contingencies...............................................................16
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ARTICLE X SEAL.....................................................................................16
Section 10.1 Seal.......................................................................16
Section 10.2 Affixing Seal..............................................................16
ARTICLE XI INDEMNIFICATION AND ADVANCE OF EXPENSES..................................................16
ARTICLE XII WAIVER OF NOTICE.........................................................................17
ARTICLE XIII THE ADVISOR..............................................................................17
Section 13.1 Employment of Advisor......................................................17
Section 13.2 Other Activities of Advisor................................................18
Section 13.3 Advisor Compensation.......................................................18
ARTICLE XIV AMENDMENT OF BYLAWS......................................................................19
ARTICLE XV MISCELLANEOUS............................................................................19
Section 15.1 References to Declaration of Trust.........................................19
Section 15.2 Inspection of Bylaws.......................................................19
</TABLE>
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SENIOR HOUSING PROPERTIES TRUST
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1.1 Principal Office. The principal office of the Trust shall
be located at such place or places as the Board of Trustees may designate.
Section 1.2 Additional Offices. The Trust may have additional offices
at such places as the Board of Trustees may from time to time determine or the
business of the Trust may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1 Place. All meetings of shareholders shall be held at the
principal office of the Trust or at such other place within the United States as
is designated by the Trustees or the Chairman or President, given either before
or after the meeting and filed with the Secretary of the Trust.
Section 2.2 Annual Meeting. An annual meeting of the shareholders for
the election of Trustees and the transaction of any business within the powers
of the Trust shall be held on the second Thursday in May or such other date as
the Board of Trustees may set, after delivery to the shareholders of the annual
report, referred to in Section 2.14, at a convenient location and on proper
notice, and at the time set by the Trustees, beginning with the year 2000.
Failure to hold an annual meeting does not invalidate the Trust's existence or
affect any otherwise valid acts of the Trust.
Section 2.3 Special Meetings. Special meetings of shareholders may be
called only by a majority of the Trustees. If there shall be no Trustees, the
officers of the Trust shall promptly call a special meeting of the shareholders
entitled to vote for the election of successor Trustees. No business shall be
transacted by the shareholders at a special meeting other than business that is
either (i) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Trustees (or any duly authorized committee
thereof) or (ii) otherwise properly brought before the shareholders by or at the
direction of the Trustees.
Section 2.4 Notice of Regular or Special Meetings. Written notice
specifying the place, day and hour of any regular or special meeting, the
purposes of the meeting, and all other matters required by law shall be given to
each shareholder of record entitled to vote, either personally or by sending a
copy thereof by mail, telegraph or telecopier, charges prepaid, to his address
appearing on the books of the Trust or theretofore given by him to the Trust for
the purpose of notice or, if no address appears or has been given, addressed to
the place where the principal office of the Trust is situated. If mailed, such
notice shall be deemed to be given when deposited in the
<PAGE>
U.S. mail addressed to the shareholder at his post office address as it appears
on the records of the Trust, with postage thereon prepaid. It shall be the duty
of the Secretary to give notice of each Annual Meeting of the Shareholders at
least fifteen (15) days and not more than sixty (60) days before the date on
which it is to be held. Whenever an officer has been duly requested by the
Trustees to call a special meeting of shareholders, it shall be his duty to fix
the date and hour thereof, which date shall be not less than twenty (20) days
and not more than sixty (60) days after the receipt of such request, and to give
notice of such special meeting within ten (10) days after receipt of such
request.
Section 2.5 Notice of Adjourned Meetings. It shall not be necessary to
give notice of the time and place of any adjourned meeting or of the business to
be transacted thereat other than by announcement at the meeting at which such
adjournment is taken, except that when a meeting is adjourned for more than 120
days after the original record date, notice of the adjourned meeting shall be
given as in the case of an original meeting.
Section 2.6 Scope of Notice. No business shall be transacted at an
annual or special meeting of shareholders except as specifically designated in
the notice and otherwise properly brought before the shareholders by or at the
direction of the Trustees.
Section 2.7 Organization of Shareholder Meetings. At every meeting of
the shareholders, the chairman of the board, if there be one, shall conduct the
meeting or, in the case of vacancy in office or absence of the chairman of the
board, one of the following officers present shall conduct the meeting in the
order stated: the vice chairman of the board, if there be one, the president,
the vice presidents in their order of rank and seniority, or a chairman chosen
by the shareholders entitled to cast a majority of the votes which all
shareholders present in person or by proxy are entitled to cast. The secretary,
or, in his absence, an assistant secretary, or in the absence of both the
secretary and assistant secretaries, a person appointed by the chairman shall
act as secretary for all shareholder meetings.
Section 2.8 Quorum. At any meeting of shareholders, the presence in
person or by proxy of shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the Declaration of Trust
for the vote necessary for the adoption of any measure. If, however, such quorum
shall not be present at any meeting of the shareholders, the shareholders
entitled to vote at such meeting, present in person or by proxy, shall have the
power to adjourn the meeting from time to time to a date not more than 120 days
after the original record date. At such adjourned meeting at which a quorum
shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 2.9 Voting. A majority of all the votes cast at a meeting of
shareholders duly called and at which a quorum is present shall be sufficient to
elect a Trustee. Each share may be voted for as many individuals as there are
Trustees to be elected and for whose election the share is entitled to be voted.
A majority of the votes cast at a meeting of shareholders duly called and at
which a quorum is present shall be sufficient to approve any other matter which
may properly come before the meeting, unless more than a majority of the votes
cast is required herein or by statute or by the Declaration of Trust.
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Section 2.10 Proxies. A shareholder may cast the votes entitled to be
cast by the shares owned of record by him either in person or by proxy executed
by the shareholder or by his duly authorized agent in any manner permitted by
law. Such proxy shall be filed with such officer of the Trust as the Trustees
shall have designated for such purpose for verification prior to such meeting.
Any proxy relating to the Trust's shares of beneficial interest shall be valid
until the expiration date therein or, if no expiration is so indicated, for such
period as is permitted pursuant to Maryland law. At a meeting of shareholders,
all questions concerning the qualification of voters, the validity of proxies,
and the acceptance or rejection of votes, shall be decided by the Secretary of
the meeting unless inspectors of election are appointed pursuant to Section 2.13
in which event such inspectors shall pass upon all questions and shall have all
other duties specified in said section.
Section 2.11 Voting Rights. The Board of Trustees shall fix the date
for determination of shareholders entitled to vote at a meeting of shareholders.
If no date is fixed for the determination of the shareholders entitled to vote
at any meeting of shareholders, only persons in whose names shares entitled to
vote stand on the share records of the Trust at the opening of business on the
day of any meeting of shareholders shall be entitled to vote at such meeting.
Section 2.12 Voting of Shares by Certain Holders. Shares of the Trust
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such shares pursuant to a bylaw or a resolution of the
governing board of such corporation or other entity or agreement of the partners
of the partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such shares. Any trustee or other
fiduciary may vote shares registered in his name as such fiduciary, either in
person or by proxy.
Shares of the Trust directly or indirectly owned by it shall not be
voted at any meeting and shall not be counted in determining the total number of
outstanding shares entitled to be voted at any given time, unless they are held
by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
The Trustees may adopt by resolution a procedure by which a shareholder
may certify in writing to the Trust that any shares registered in the name of
the shareholder are held for the account of a specified person other than the
shareholder. The resolution shall set forth the class of shareholders who may
make the certification, the purpose for which the certification may be made, the
form of certification and the information to be contained in it; if the
certification is with respect to a record date or closing of the share transfer
books, the time after the record date or closing of the share transfer books
within which the certification must be received by the Trust; and any other
provisions with respect to the procedure which the Trustees consider necessary
or desirable. On receipt of such certification, the person specified in the
certification shall be regarded as, for the purposes set forth in the
certification, the shareholder of record of the specified shares in place of the
shareholder who makes the certification.
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<PAGE>
Notwithstanding any other provision contained herein or in the
Declaration of Trust or these Bylaws, Title 3, Subtitle 7 of the Corporations
and Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to any acquisition by any person of shares of
beneficial interest of the Trust. This section may be repealed, in whole or in
part, at any time, whether before or after an acquisition of control shares and,
upon such repeal, may, to the extent provided by any successor bylaw, apply to
any prior or subsequent control share acquisition.
Section 2.13 Inspectors. At any meeting of shareholders, the chairman
of the meeting may appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented at
the meeting based upon their determination of the validity and effect of
proxies, count all votes, report the results and perform such other acts as are
proper to conduct the election and voting at the meeting.
Each report of an inspector shall be in writing and signed by him or by
a majority of them if there is more than one inspector acting at such meeting.
If there is more than one inspector, the report of a majority shall be the
report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 2.14 Reports to Shareholders. The Trustees shall submit to the
shareholders at or before the annual meeting of shareholders a report of the
business and operations of the Trust during such fiscal year containing
financial statements of the Trust, accompanied by the report of an independent
certified public accountant, and such further information as the Trustees may
determine is required pursuant to any law or regulation to which the Trust is
subject. Within the earlier of twenty (20) days after the annual meeting of
shareholders or 120 days after the end of the fiscal year of the Trust, the
Trustees shall place the annual report on file at the principal office of the
Trust and with any governmental agencies as may be required by law and as the
Trustees may deem appropriate.
Section 2.15 Nominations and Proposals by Shareholders.
Section 2.15.1 Annual Meetings of Shareholders. (a)
Nominations of persons for election to the Board of Trustees and the proposal of
business to be considered by the shareholders may be made at an annual meeting
of shareholders (i) pursuant to the Trust's notice of meeting, (ii) by or at the
direction of the Trustees or (iii) by any shareholder of the Trust who was a
shareholder of record both at the time of giving of notice provided for in this
Section 2.15.1 and at the time of the annual meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 2.15.1.
(b) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to Section 2.15.1(a)(iii),
the shareholder must have given timely notice thereof in writing to the
secretary of the Trust at the principal executive offices of the Trust and such
other business must otherwise be a proper matter for action by shareholders as
determined by the Board of Trustees. To be timely, a shareholder's notice shall
be delivered to the secretary at the principal executive offices of the Trust
not later than the close of business on the 90th day nor earlier than the close
of business on the 120th day prior to the first anniversary of the preceding
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year's annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than thirty (30) days or delayed by more than
sixty (60) days from such anniversary date or if the Trust has not previously
held an annual meeting, notice by the shareholder to be timely must be so
delivered not earlier than the close of business on the 120th day prior to such
annual meeting and not later than the close of business on the later of: (i) the
90th day prior to such annual meeting, or (ii) the 10th day following the day on
which public announcement of the date of such meeting is first made by the
Trust. In no event shall the public announcement of a postponement or
adjournment of an annual meeting to a later date or time commence a new time
period for the giving of a shareholder's notice as described above. A
shareholder's notice shall set forth (i) as to each person whom the shareholder
proposes to nominate for election or reelection as a Trustee, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Trustees in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
Trustee if elected; (ii) as to any other business that the shareholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such shareholder and of
the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as
to the shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
shareholder, as they appear on the Trust's books, and of such beneficial owner
and (y) the number of each class of shares of the Trust which are owned
beneficially and of record by such shareholder and such beneficial owner.
(c) Notwithstanding anything in the second sentence of Section
2.15.1(b) to the contrary, in the event that the number of Trustees to be
elected to the Board of Trustees is increased and there is no public
announcement by the Trust naming all of the nominees for Trustee or specifying
the size of the increased Board of Trustees at least one hundred (100) days
prior to the first anniversary of the preceding year's annual meeting, a
shareholder's notice required by this Section 2.15.1 shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
offices of the Trust not later than the close of business on the 10th day
following the day on which such public announcement is first made by the Trust.
Section 2.15.2 Special Meetings of Shareholders. Only such
business shall be conducted at a special meeting of shareholders as shall have
been brought before the meeting pursuant to the Trust's notice of meeting.
Nominations of persons for election to the Board of Trustees may be made at a
special meeting of shareholders at which Trustees are to be elected (i) pursuant
to the Trust's notice of meeting, (ii) by or at the direction of the Board of
Trustees or (iii), provided that the Board of Trustees has determined that
Trustees shall be elected at such special meeting, by any shareholder of the
Trust who was a shareholder of record both at the time of giving of notice
provided for in this Section 2.15.2 and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 2.15.2. In the event the Trust calls a special meeting
of shareholders for the purpose of electing one or more Trustees to the Board of
Trustees, any such shareholder may nominate a person or persons (as the case may
be) for election to such position as specified in the Trust's notice of meeting,
if
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the shareholder's notice containing the information required by Section
2.15.1(b) shall be delivered to the secretary at the principal executive offices
of the Trust not earlier than the close of business on the 120th day prior to
such special meeting and not later than the close of business on the later of:
(i) the 90th day prior to such special meeting, or (ii) the 10th day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Trustees to be elected at such
meeting. In no event shall the public announcement of a postponement or
adjournment of a special meeting to a later date or time commence a new time
period for the giving of a shareholder's notice as described above.
Section 2.15.3 General. (1) Only such persons who are
nominated in accordance with the procedures set forth in this Section 2.15 shall
be eligible to serve as Trustees and only such business shall be conducted at a
meeting of shareholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 2.15. The chairman of
the meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made or proposed, as
the case may be, in accordance with the procedures set forth in this Section
2.15 and, if any proposed nomination or business is not in compliance with this
Section 2.15, to declare that such nomination or proposal shall be disregarded.
(2) For purposes of this Section 2.15, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Trust with the Securities and Exchange Commission pursuant to Section 13, 14
or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
2.15, a shareholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 2.15. Nothing in this Section
2.15 shall be deemed to affect any right of a shareholder to request inclusion
of a proposal in, nor the right of the Trust to omit a proposal from, the
Trust's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2.16 No Shareholder Actions by Written Consent. Shareholders
shall not be authorized or permitted to take any action required or permitted to
be taken at a meeting of shareholders by written consent, and may take such
action only at an annual or special meeting as provided by Maryland law and the
Declaration of Trust and hereby.
Section 2.17 Voting by Ballot. Voting on any question or in any
election may be viva voce unless the chairman of the meeting officer shall order
or any shareholder shall demand that voting be by ballot.
ARTICLE III
TRUSTEES
Section 3.1 General Powers; Qualifications; Trustees Holding Over. The
business and affairs of the Trust shall be managed under the direction of its
Board of Trustees. A Trustee shall
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be an individual at least twenty-one (21) years of age who is not under legal
disability. In case of failure to elect Trustees at an annual meeting of the
shareholders, the Trustees holding over shall continue to direct the management
of the business and affairs of the Trust until their successors are elected and
qualify.
Section 3.2 Independent Trustees. A majority of the Trustees holding
office shall at all times be Independent Trustees (as defined below); provided,
however, that upon a failure to comply with this requirement as a result of the
creation of a temporary vacancy which must be filled by an Independent Trustee,
whether as a result of enlargement of the Board of Trustees or the resignation,
removal or death of a Trustee who is an Independent Trustee, such requirement
shall not be applicable. An Independent Trustee is one who is not an employee of
the Trust's investment advisor (as defined in Article XIII), and who is not
involved in the Trust's day-to-day activities.
Section 3.3 Managing Trustees. Any Trustee who is not an Independent
Trustee may be designated a Managing Trustee by the Board of Trustees.
Section 3.4 Number. At any regular meeting or at any special meeting
called for that purpose, a majority of the entire Board of Trustees may
establish, increase or decrease the number of Trustees.
Section 3.5 Annual and Regular Meetings. An annual meeting of the
Trustees shall be held immediately after and at the same place as the annual
meeting of shareholders, no notice other than this Bylaw being necessary. The
time and place of the annual meeting of the Trustees may be changed by the Board
of Trustees. The Trustees may provide, by resolution, the time and place, either
within or without the State of Maryland, for the holding of regular meetings of
the Trustees without other notice than such resolution.
Section 3.6 Special Meetings. Special meetings of the Trustees may be
called at any time by the chairman of the board, any Managing Trustee or the
president and shall be called by request of any two (2) Trustees then in office.
The person or persons authorized to call special meetings of the Trustees may
fix any place, either within or without the State of Maryland, as the place for
holding any special meeting of the Trustees called by them.
Section 3.7 Notice. Notice of any special meeting shall be given by
written notice delivered personally, telegraphed, facsimile-transmitted or
mailed to each Trustee at his business or residence address. Personally
delivered or telegraphed notices shall be given at least twenty-four (24) hours
prior to the meeting. Notice by mail shall be deposited in the U.S. mail in the
place in which the principal office of the Trust is located at least seventy-two
(72) hours prior to the meeting. Telephone or facsimile-transmission notice
shall be given at least forty-eight (48) hours prior to the meeting. If mailed,
such notice shall be deemed to be given when deposited in the U.S. mail properly
addressed, with postage thereon prepaid. If given by telegram, such notice shall
be deemed to be given when the telegram is delivered to the telegraph company.
Telephone notice shall be deemed given when the Trustee is personally given such
notice in a telephone call to which he is a party. Facsimile-transmission notice
shall be deemed given upon completion of the transmission of the message to the
number given to the Trust by the Trustee and receipt of a
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completed answer-back indicating receipt. Neither the business to be transacted
at, nor the purpose of, any annual, regular or special meeting of the Trustees
need be stated in the notice, unless specifically required by statute or these
Bylaws.
Section 3.8 Quorum. A majority of the Trustees shall constitute a
quorum for transaction of business at any meeting of the Trustees, provided
that, if less than a majority of such Trustees are present at a meeting, a
majority of the Trustees present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the
Declaration of Trust or these Bylaws, the vote of a majority of a particular
group of Trustees is required for action, a quorum must also include a majority
of such group.
The Trustees present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough Trustees to leave less than a quorum.
Section 3.9 Voting. The action of the majority of the Trustees present
at a meeting at which a quorum is present shall be the action of the Trustees,
unless the concurrence of a greater proportion is required for such action by
specific provision of an applicable statute, the Declaration of Trust or these
Bylaws.
Section 3.10 Telephone Meetings. Trustees may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting. Such meeting shall be deemed to have been held at a place
designated by the Trustees at the meeting.
Section 3.11 Informal Action by Trustees. Unless specifically otherwise
provided in the Declaration of Trust, any action required or permitted to be
taken at any meeting of the Trustees may be taken without a meeting, if a
majority of the Trustees shall individually or collectively consent in writing
to such action. Such written consent or consents shall be filed with the records
of the Trust and shall have the same force and effect as the affirmative vote of
such Trustees at a duly held meeting of the Trustees at which a quorum was
present.
Section 3.12 Wavier of Notice. The actions taken at any meeting of the
Trustees, however called and noticed or wherever held, shall be as valid as
though taken at a meeting duly held after regular call and notice if a quorum is
present and if, either before or after the meeting, each of the Trustees not
present signs a written waiver of notice, a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be lodged with the Trust records or made a part of the minutes
of the meeting.
Section 3.13 Vacancies. If for any reason any or all the Trustees cease
to be Trustees, such event shall not terminate the Trust or affect these Bylaws
or the powers of the remaining Trustees hereunder (even if fewer than three (3)
Trustees remain). Any vacancy shall be filled, at any regular meeting or at any
special meeting called for that purpose, by a majority of the remaining
Trustees, except that a vacancy resulting from an increase in the number of
Trustees shall be filled by a majority of the entire Board of Trustees. Any
individual so elected as Trustee shall hold office
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for the unexpired term of the Trustee he is replacing. The term of a trustee
elected to fill a newly created position shall be set by the Board of Trustees
at the time the position is created by designating the new position as Group I,
Group II or Group III as set forth in the Declaration of Trust.
Section 3.14 Compensation; Financial Assistance.
Section 3.14.1 Compensation. The Trustees shall be entitled to
receive such reasonable compensation for their services as Trustees as the
Trustees may determine from time to time. Trustees may be reimbursed for
expenses of attendance, if any, at each annual, regular or special meeting of
the Trustees or of any committee thereof; and for their expenses, if any, in
connection with each property visit and any other service or activity performed
or engaged in as Trustee. The Trustees shall be entitled to receive remuneration
for services rendered to the Trust in any other capacity, and such services may
include, without limitation, services as an officer of the Trust, services as an
employee of the Advisor (as defined in Article XIII), legal, accounting or other
professional services, or services as a broker, transfer agent or underwriter,
whether performed by a Trustee or any person affiliated with a Trustee.
Section 3.14.2 Financial Assistance to Trustees. The Trust may
lend money to, guarantee an obligation of or otherwise assist a Trustee or a
trustee of its direct or indirect subsidiary. The loan, guarantee or other
assistance may be with or without interest, unsecured, or secured in any manner
that the Board of Trustees approves, including a pledge of shares.
Section 3.15 Removal of Trustees. The shareholders may, at any time,
remove any Trustee in the manner provided in the Declaration of Trust.
Section 3.16 Loss of Deposits. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or shares have been
deposited.
Section 3.17 Surety Bonds. Unless specifically required by law, no
Trustee shall be obligated to give any bond or surety or other security for the
performance of any of his duties.
Section 3.18 Reliance. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his duties with respect to the Trust, be
fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the Trust by any of its
officers or employees or by the Advisor (as defined in Article XIII),
accountants, appraisers or other experts or consultants selected by the Trustees
or officers of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
Section 3.19 Interested Trustee Transactions. Section 2-419 of the
Maryland General Corporation Law (the "MGCL") shall be available for and apply
to any contract or other transaction between the Trust and any of its Trustees
or between the Trust and any other trust, corporation, firm or other entity in
which any of its Trustees is a trustee or director or has a material financial
interest.
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Section 3.20 Qualifying Shares Not Required. Trustees need not be
shareholders of the Trust.
Section 3.21 Certain Rights of Trustees, Officers, Employees and
Agents. The Trustees shall have no responsibility to devote their full time to
the affairs of the Trust. Any Trustee or officer, employee or agent of the
Trust, in his personal capacity or in a capacity as an affiliate, employee, or
agent of any other person, or otherwise, may have business interests and engage
in business activities similar or in addition to those of or relating to the
Trust.
Section 3.22 Certain Transactions. Notwithstanding any other provision
in the Bylaws, no determination shall be made by the Trustees nor shall any
transaction be entered into by the Trust which would cause any shares or other
beneficial interest in the Trust not to constitute "transferable shares" or
"transferable certificates of beneficial interest" under Section 856(a)(2) of
the Internal Revenue Code of 1986, as amended (the "Code") or which would cause
any distribution to constitute a preferential dividend as described in Section
562(c) of the Code.
ARTICLE IV
COMMITTEES
Section 4.1 Number; Tenure and Qualifications. The Board of Trustees
may appoint from among its members an audit committee and other committees,
composed of one (1) or more Trustees, to serve at the pleasure of the Board of
Trustees.
Section 4.2 Powers. The Trustees may delegate to committees appointed
under Section 4.1 any of the powers of the Trustees, except as prohibited by
law.
Section 4.3 Meetings. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint another Trustee to act in the place of such
absent member. Notice of committee meetings shall be given in the same manner as
notice for special meetings of the Board of Trustees.
One-third, but not less than one, of the members of any committee shall
be present in person at any meeting of such committee in order to constitute a
quorum for the transaction of business at such meeting, and the act of a
majority present at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee. The Board of Trustees may designate
a chairman of any committee, and such chairman or any two members of any
committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any such
committee, the members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
Trustee to act at the meeting in the place of such absent or disqualified
members.
Each committee shall keep minutes of its proceedings and shall report
the same to the Board of Trustees at the next succeeding meeting, and any action
by the committee shall be subject to revision and alteration by the Board of
Trustees, provided that no rights of third persons shall be affected by any such
revision or alteration.
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Section 4.4 Telephone Meetings. Members of a committee of the Trustees
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
Section 4.5 Informal Action by Committees. Any action required or
permitted to be taken at any meeting of a committee of the Trustees may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent is filed with the minutes of
proceedings of such committee.
Section 4.6 Vacancies. Subject to the provisions hereof, the Board of
Trustees shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 5.1 General Provisions. The officers of the Trust shall include
a president, a secretary and a treasurer and may include a chairman of the
board, a vice chairman of the board, a chief executive officer, a chief
operating officer, a chief financial officer, one or more vice presidents, one
or more assistant secretaries and one or more assistant treasurers. In addition,
the Trustees may from time to time appoint such other officers with such powers
and duties as they shall deem necessary or desirable. The officers of the Trust
shall be elected annually by the Trustees at the first meeting of the Trustees
held after each annual meeting of shareholders. If the election of officers
shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Each officer shall hold office until his
successor is elected and qualifies or until his death, resignation or removal in
the manner hereinafter provided. Any two or more offices except president and
vice president may be held by the same person. In their discretion, the Trustees
may leave unfilled any office except that of president and secretary. Election
of an officer or agent shall not of itself create contract rights between the
Trust and such officer or agent.
Section 5.2 Removal and Resignation. Any officer or agent of the Trust
may be removed by the Trustees if in their judgment the best interests of the
Trust would be served thereby, but such removal shall be without prejudice to
the contract rights, if any, of the person so removed. Any officer of the Trust
may resign at any time by giving written notice of his resignation to the
Trustees, the chairman of the board, the president or the secretary. Any
resignation shall take effect at any time subsequent to the time specified
therein or, if the time when it shall become effective is not specified therein,
immediately upon its receipt. The acceptance of a resignation shall not be
necessary to make it effective unless otherwise stated in the resignation. Such
resignation shall be without prejudice to the contract rights, if any, of the
Trust.
Section 5.3 Vacancies. A vacancy in any office may be filled by the
Trustees for the balance of the term.
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Section 5.4 Chief Executive Officer. The Trustees may designate a chief
executive officer from among the elected officers. The chief executive officer
shall have responsibility for implementation of the policies of the Trust, as
determined by the Trustees, and for the administration of the business affairs
of the Trust. In the absence of both the chairman and vice chairman of the
board, the chief executive officer shall preside over the meetings of the
Trustees at which he shall be present. The Managing Trustees, or either of them,
may be designated to function as the chief executive officer of the Trust.
Section 5.5 Chief Operating Officer. The Trustees may designate a chief
operating officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the chief executive
officer.
Section 5.6 Chief Financial Officer. The Trustees may designate a chief
financial officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the chief executive
officer.
Section 5.7 Chairman and Vice Chairman of the Board. The chairman of
the board shall preside over the meetings of the Trustees and of the
shareholders at which he shall be present and shall in general oversee all of
the business and affairs of the Trust. In the absence of the chairman of the
board, the vice chairman of the board shall preside at such meetings at which he
shall be present. The chairman and the vice chairman of the board may execute
any deed, mortgage, bond, contract or other instrument, except in cases where
the execution thereof shall be expressly delegated by the Trustees or by these
Bylaws to some other officer or agent of the Trust or shall be required by law
to be otherwise executed. The chairman of the board and the vice chairman of the
board shall perform such other duties as may be assigned to him or them by the
Trustees. In the absence of a chairman and vice chairman or none is appointed,
the Managing Trustees, or either of them, shall act as chairman.
Section 5.8 President. The president shall preside over the meetings of
the shareholders at which he shall be present. The president may execute any
deed, mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Trustees or by these
Bylaws to some other officer or agent of the Trust or shall be required by law
to be otherwise executed; and in general shall perform all duties incident to
the office of president and such other duties as may be prescribed by the
Trustees from time to time.
Section 5.9 Vice Presidents. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Trustees. The Trustees may designate
one or more vice presidents as executive vice president, senior vice president
or as vice president for particular areas of responsibility.
Section 5.10 Secretary. The secretary shall (a) keep the minutes of the
proceedings of the shareholders, the Trustees and committees of the Trustees in
one or more books provided for that
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purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the trust
records and of the seal of the Trust; (d) keep a register of the post office
address of each shareholder which shall be furnished to the secretary by such
shareholder; (e) maintain at the principal office of the Trust a share register,
showing the ownership and transfers of ownership of all shares of the Trust,
unless a transfer agent is employed to maintain and does maintain such a share
register; and (f) in general perform such other duties as from time to time may
be assigned to him by the chief executive officer, the president or by the
Trustees.
Section 5.11 Treasurer. The treasurer shall have the custody of the
funds and securities of the Trust and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit all
moneys and other valuable effects in the name and to the credit of the Trust in
such depositories as may be designated by the Trustees.
He shall disburse the funds of the Trust as may be ordered by the
Trustees, taking proper vouchers for such disbursements, and shall render to the
president and Trustees, at the regular meetings of the Trustees or whenever they
may require it, an account of all his transactions as treasurer and of the
financial condition of the Trust.
Section 5.12 Assistant Secretaries and Assistant Treasurers. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Trustees. The assistant treasurers shall, if required
by the Trustees, give bonds for the faithful performance of their duties in such
sums and with such surety or sureties as shall be satisfactory to the Trustees.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 6.1 Contracts. The Trustees may authorize any officer or agent
to enter into any contract or to execute and deliver any instrument in the name
of and on behalf of the Trust and such authority may be general or confined to
specific instances. Any agreement, deed, mortgage, lease or other document
executed by one or more of the Trustees or by an authorized person shall be
valid and binding upon the Trustees and upon the Trust when authorized or
ratified by action of the Trustees.
Section 6.2 Checks and Drafts. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Trust shall be signed by such officer or agent of the Trust in such
manner as shall from time to time be determined by the Treasurer or by the
Trustees.
Section 6.3 Deposits. All funds of the Trust not otherwise employed
shall be deposited from time to time to the credit of the Trust in such banks,
trust companies or other depositories as the Treasurer or the Trustees may
designate.
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ARTICLE VII
SHARES
Section 7.1 Certificates. Ownership of shares shall be evidenced by
certificates. Each shareholder shall be entitled to a certificate or
certificates, in such form as the Trustees shall from time to time approve,
which shall represent and certify the number of shares of each class of
beneficial interests held by him in the Trust. Unless otherwise determined by
the Trustees, such certificates shall be signed by the chief executive officer,
the president or a vice president and countersigned by the secretary or an
assistant secretary or the treasurer or an assistant treasurer and may be sealed
with the seal, if any, of the Trust. The signatures may be either manual or
facsimile. Certificates shall be consecutively numbered; and if the Trust shall
from time to time issue several classes of shares, each class may have its own
number series. A certificate is valid and may be issued whether or not an
officer who signed it is still an officer when it is issued. There shall be
filed with each transfer agent a copy of the form of certificate as approved by
the Trustees, certified by the chairman, president or secretary, and such form
shall continue to be used unless and until the Trustees approve some other form.
Each certificate representing shares which are restricted as to their
transferability or voting powers, which are preferred or limited as to their
dividends or as to their allocable portion of the assets upon liquidation or
which are redeemable at the option of the Trust, shall have a statement of such
restriction, limitation, preference or redemption provision, or a summary
thereof, plainly stated on the certificate. In lieu of such statement or
summary, the Trust may set forth upon the face or back of the certificate a
statement that the Trust will furnish to any shareholder, upon request and
without charge, a full statement of such information.
Section 7.2 Transfers. Certificates shall be treated as negotiable and
title thereto and to the shares they represent shall be transferred by delivery
thereof to the same extent as those of a Maryland stock corporation. Upon
surrender to the Trust or the transfer agent of the Trust of a share certificate
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the Trust shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
The Trust shall be entitled to treat the holder of record of any share
or shares as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of beneficial
interest of the Trust will be subject in all respects to the Declaration of
Trust and all of the terms and conditions contained therein.
Section 7.3 Replacement Certificate. Any officer designated by the
Trustees may direct a new certificate to be issued in place of any certificate
previously issued by the Trust alleged to have been lost, stolen or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost, stolen or destroyed. When authorizing the issuance of a
new certificate, an officer designated by the Trustees may, in his discretion
and as a condition precedent
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<PAGE>
to the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or the owner's legal representative to advertise the same in such
manner as he shall require and/or to give bond, with sufficient surety, to the
Trust to indemnify it against any loss or claim which may arise as a result of
the issuance of a new certificate.
Section 7.4 Closing of Transfer Books or Fixing of Record Date. The
Trustees may set, in advance, a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
determining shareholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
shareholders for any other proper purpose.
In lieu of fixing a record date, the Trustees may provide that the
share transfer books shall be closed for a stated period but not longer than
twenty (20) days. If the share transfer books are closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days before the
date of such meeting.
If no record date is fixed and the share transfer books are not closed
for the determination of shareholders, (a) the record date for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of shareholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the Trustees,
declaring the dividend or allotment of rights, is adopted.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
Section 7.5 Share Ledger. The Trust shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, a share
ledger containing the name and address of each shareholder and the number of
shares of each class held by such shareholder.
Section 7.6 Fractional Shares; Issuance of Units. The Trustees may
issue fractional shares or provide for the issuance of scrip, all on such terms
and under such conditions as they may determine. Notwithstanding any other
provision of the Declaration of Trust or these Bylaws, the Trustees may issue
units consisting of different securities of the Trust. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Trust, except that the Trustees may provide that for a specified period
securities of the Trust issued in such unit may be transferred on the books of
the Trust only in such unit.
ARTICLE VIII
FISCAL YEAR
The Fiscal year of the Trust shall be the calendar year.
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<PAGE>
ARTICLE IX
DISTRIBUTIONS
Section 9.1 Authorization. Dividends and other distributions upon the
shares of beneficial interest of the Trust may be authorized and declared by the
Trustees, subject to the provisions of law and the Declaration of Trust.
Dividends and other distributions may be paid in cash, property or shares of the
Trust, subject to the provisions of law and the Declaration of Trust.
Section 9.2 Contingencies. Before payment of any dividends or other
distributions, there may be set aside out of any funds of the Trust available
for dividends or other distributions such sum or sums as the Trustees may from
time to time, in their absolute discretion, think proper as a reserve fund for
contingencies or for any other purpose as the Trustees shall determine to be in
the best interest of the Trust, and the Trustees may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X
SEAL
Section 10.1 Seal. The Trustees may authorize the adoption of a seal by
the Trust. The seal shall have inscribed thereon the name of the Trust and the
year of its formation. The Trustees may authorize one or more duplicate seals
and provide for the custody thereof.
Section 10.2 Affixing Seal. Whenever the Trust is permitted or required
to affix its seal to a document, it shall be sufficient to meet the requirements
of any law, rule or regulation relating to a seal to place the word "(SEAL)"
adjacent to the signature of the person authorized to execute the document on
behalf of the Trust.
ARTICLE XI
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Trust shall indemnify (a) any Trustee, officer or shareholder or any
former Trustee, officer or shareholder (including among the foregoing, for all
purposes of this Article XI and without limitation, any individual who, while a
Trustee, officer or shareholder and at the express request of the Trust, serves
or has served another real estate investment trust, corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, shareholder, partner or trustee of such real estate
investment trust, corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) who has been successful, on the merits or
otherwise, in the defense of a proceeding to which he was made a party by reason
of service in such capacity, against reasonable expenses incurred by him in
connection with the proceeding, (b) any Trustee or officer or any former Trustee
or officer against any claim or liability to which he may become liable or
subject by reason of such status or actions in such capacity and (c) each
shareholder or former shareholder against any claim or liability to which he may
become subject by reason of such status.
-16-
<PAGE>
In addition, the Trust shall, without requiring a preliminary determination of
the ultimate entitlement to indemnification, pay or reimburse, in advance of
final disposition of a proceeding, reasonable expenses incurred by a Trustee,
officer or shareholder or former Trustee, officer or shareholder made a party to
a proceeding by reason such status, provided that, in the case of a Trustee or
officer, the Trust shall have received (i) a written affirmation by the Trustee
or officer of his good faith belief that he has met the applicable standard of
conduct necessary for indemnification by the Trust as authorized by Maryland law
and (ii) a written undertaking by him or on his behalf to repay the amount paid
or reimbursed by the Trust if it shall ultimately be determined that the
applicable standard of conduct was not met. The Trust may, with the approval of
its Trustees, provide such indemnification or payment or reimbursement of
expenses to any Trustee, officer or shareholder or any former Trustee, officer
or shareholder who served a predecessor of the Trust and to any employee or
agent of the Trust or a predecessor of the Trust. Neither the amendment nor
repeal of this Article, nor the adoption or amendment of any other provision of
the Declaration of Trust or these Bylaws inconsistent with this Article, shall
apply to or affect in any respect the applicability of this Article with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption.
Any indemnification or payment or reimbursement of the expenses
permitted by these Bylaws shall be furnished in accordance with the procedures
provided for indemnification or payment or reimbursement of expenses, as the
case may be, under Section 2-418 of the MGCL for directors of Maryland
corporations. The Trust may provide to Trustees, officers and shareholders such
other and further indemnification or payment or reimbursement of expenses, as
the case may be, to the fullest extent permitted by the MGCL, as in effect from
time to time, for directors of Maryland corporations.
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Declaration
of Trust or Bylaws or pursuant to applicable law, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at nor the purpose of any meeting
need be set forth in the waiver of notice, unless specifically required by
statute. The attendance of any person at any meeting shall constitute a waiver
of notice of such meeting, except where such person attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE XIII
THE ADVISOR
Section 13.1 Employment of Advisor. The Trustees are not and shall not
be required personally to conduct the business of the Trust, and the Trustees
shall have the power to appoint, employ or contract with any person (including
one or more of themselves or any corporation, partnership, or trust in which one
or more of them may be Trustees, officers, stockholders, partners
-17-
<PAGE>
or trustees) as the Trustees may deem necessary or proper for the transaction of
the business of the Trust. The Trustees may therefore employ or contract with
such person (herein referred to as the "Advisor") and may grant or delegate such
authority to the Advisor as the Trustees may in their sole discretion deem
necessary or desirable without regard to whether such authority is normally
granted or delegated by boards of trustees or boards of directors of business
corporations. The Advisor shall be required to use its best efforts to supervise
the operation of the Trust in a manner consistent with the investment policies
and objectives of the Trust as established from time to time by the Trustees.
The Trustees shall have the power to determine the terms and
compensation of the Advisor or any other person whom it may cause the Trust to
employ or with whom it may cause the Trust to contract for advisory services.
The Trustees may exercise broad discretion in allowing the Advisor to administer
and regulate the operations of the Trust, to act as agent for the Trust, to
execute documents on behalf of the Trustees and to make executive decisions
which conform to general policies and general principles previously established
by the Trustees.
Section 13.2 Other Activities of Advisor. The Advisor shall not be
required to administer the Trust as its sole and exclusive function and may have
other business interests and may engage in other activities similar or in
addition to those relating to the Trust, including the rendering of advice or
services of any kind to other investors or any other persons (including other
real estate investment trusts) and the management of other investments. The
Trustees may request the Advisor to engage in certain other activities which
complement the Trust's investments, and the Advisor may receive compensation or
commissions therefor from the Trust or other persons.
Neither the Advisor nor any affiliate of the Advisor shall be obligated
to present any particular investment opportunities to the Trust, even if such
opportunities are of a character such that, if presented to the Trust, they
could be taken by the Trust, and, subject to the foregoing, each of them shall
be protected in taking for its own account or recommending to others any such
particular investment opportunity.
Section 13.3 Advisor Compensation. The Trustees, including a majority
of the Independent Trustees, shall at least annually review generally the
performance of the Advisor in order to determine whether the compensation which
the Trust has contracted to pay to the Advisor is reasonable in relation to the
nature and quality of services performed and whether the provisions of the
advisory contract with the Advisor are being carried out. Each such
determination shall be based on such of the following and other factors as the
Trustees (including the Independent Trustees) deem appropriate:
(a) the size of the advisory fee in relation to the size,
composition and profitability of the portfolio of the Trust;
(b) the success of the Advisor in generating opportunities
that meet the investment objectives of the Trust;
(c) the rates charged to other real estate investment trusts
and to investors other than real estate investment trusts by advisors performing
similar services;
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<PAGE>
(d) the quality and extent of service and advice furnished by
the Advisor; and
(e) the performance of the investment portfolio of the Trust,
including income, conservation or appreciation of capital, frequency of problem
investments and competence in dealing with distress situations.
ARTICLE XIV
AMENDMENT OF BYLAWS
Except for any change for which the Declaration or these Bylaws require
approval by more than a majority vote of the Trustees, these Bylaws may be
amended or repealed or new or additional Bylaws may be adopted only by the vote
or written consent of a majority of the Trustees.
ARTICLE XV
MISCELLANEOUS
Section 15.1 References to Declaration of Trust. All references to the
Declaration of Trust shall include any amendments thereto.
Section 15.2 Inspection of Bylaws. The Trustees shall keep at the
principal office for the transaction of business of the Trust the original or a
copy of the Bylaws as amended or otherwise altered to date, certified by the
Secretary, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
-19-
EXHIBIT 4.1
[FRONT OF CERTIFICATE]
Temporary Certificate - Exchangeable for Definitive Engraved Certificate
When Available for Delivery
SENIOR HOUSING PROPERTIES TRUST
A MARYLAND REAL ESTATE INVESTMENT TRUST
[Graphic which contains: Number [Graphic which contains: Shares
SHT ______ ] _____________ ]
COMMON SHARES COMMON SHARES
$.01 PAR VALUE $.01 PAR VALUE
THIS CERTIFICATE IS TRANSFERABLE CUSIP _____________
IN BOSTON OR IN NEW YORK CITY SEE REVERSE FOR IMPORTANT
NOTICE ON TRANSFER RESTRICTIONS
AND OTHER INFORMATION
THIS CERTIFIES THAT
IS THE REGISTERED
HOLDER OF
FULLY PAID AND NONASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST IN
[Superimposed over the following paragraph are the words "COMMON SHARES"]
Senior Housing Properties Trust (the "Trust"), a Maryland real estate investment
trust established by Declaration of Trust made as of December 16, 1998, as
amended from time to time, a copy of which, together with all amendments thereto
(the "Declaration"), is on file with the State Department of Assessments and
Taxation of Maryland. The provisions of the Declaration and the Bylaws of the
Trust, and all amendments thereto, are hereby incorporated in and made a part of
this certificate as fully as if set forth herein in their entirety, to all of
which provisions the holder and every transferee or assignee hereof by accepting
or holding the same agrees to be bound. See reverse for existence of Trustees'
authority to determine preferences and other rights of subsequent series of
shares, and of restriction on transfer provisions governing the shares evidenced
by this certificate. This certificate and the shares evidenced hereby are
negotiable and transferable on the books of the Trust by the registered holder
hereof in person or by its duly authorized agent upon surrender of this
certificate properly endorsed or assigned to the same extent as a stock
certificate and the shares of a Maryland corporation. This certificate is not
valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Trust and the facsimile signatures of its
duly authorized officers.
Dated:
Countersigned and Registered
STATE STREET BANK AND TRUST COMPANY
(BOSTON)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
[Signature of Ajay Saini] [Seal of the Trust] [Signature of David J. Hegarty]
TREASURER PRESIDENT
<PAGE>
THE DECLARATION OF TRUST PROVIDES THAT THE NAME "SENIOR HOUSING PROPERTIES
TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST, COLLECTIVELY, AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND NO TRUSTEE, SHAREHOLDER,
EMPLOYEE OR AGENT OF THE TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY
OR SEVERALLY, IN CONNECTION WITH THIS INSTRUMENT. ALL PERSONS DEALING WITH THE
TRUST IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF THE TRUST FOR PAYMENT OF ANY
SUM OR PERFORMANCE OF ANY OBLIGATION.
[The borders of the front of the Certificate contain a graphic design]
(ii)
<PAGE>
[REVERSE OF CERTIFICATE]
SENIOR HOUSING PROPERTIES TRUST
IMPORTANT NOTICE
THE TRUST WILL FURNISH TO ANY SHAREHOLDER, ON REQUEST AND WITHOUT CHARGE, A FULL
STATEMENT OF THE INFORMATION REQUIRED BY SECTION 8-203(d) OF THE CORPORATIONS
AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND WITH RESPECT TO THE
DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS,
QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF THE SHARES OF EACH
CLASS OF BENEFICIAL INTEREST WHICH THE TRUST HAS AUTHORITY TO ISSUE AND, IF THE
TRUST IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN SERIES, (i) THE
DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH
SERIES TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF TRUSTEES TO SET
SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. THE FOREGOING SUMMARY DOES NOT
PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE DECLARATION OF TRUST OF THE TRUST, A COPY OF WHICH WILL BE SENT
WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS. SUCH REQUEST MUST BE MADE TO
THE SECRETARY OF THE TRUST AT ITS PRINCIPAL OFFICE OR TO THE TRANSFER AGENT.
IF NECESSARY TO EFFECT COMPLIANCE BY THE TRUST WITH REQUIREMENTS OF THE INTERNAL
REVENUE CODE RELATING TO REAL ESTATE INVESTMENT TRUSTS, OWNERSHIP OF THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY BE RESTRICTED BY THE TRUST AND/OR THE
TRANSFER THEREOF MAY BE PROHIBITED ALL UPON THE TERMS AND CONDITIONS SET FORTH
IN THE DECLARATION OF TRUST. THE TRUST WILL FURNISH A COPY OF SUCH TERMS AND
CONDITIONS TO THE REGISTERED HOLDER OF THIS CERTIFICATE UPON REQUEST AND WITHOUT
CHARGE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT-______Custodian______
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act_________________
tenants in common (State)
Additional abbreviations may also be used though not inthe above list.
For value received ________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF NEW OWNER
[Box]___________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
________________________________________________________________________________
(iii)
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
Shares of Beneficial Interest represented by the within Certificate, and do
hereby irrevocably constitute and appoint
_______________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated _______________________
(Sign here)________________________________
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE,
IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR
ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: ______________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
(iv)
EXHIBIT 5.1
SULLIVAN & WORCESTER LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
FAX NO. 617-338-2880
IN WASHINGTON, D.C. IN NEW YORK CITY
1025 CONNECTICUT AVENUE, N.W. 767 THIRD AVENUE
WASHINGTON, D.C. 20036 NEW YORK, NEW YORK 10017
(202) 775-8190 (212) 486-8200
FAX NO. 202-293-2275 FAX NO. 212-758-2151
July 30, 1999
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Re: Registration Statement on Form S-11 (No. 333-69703)
14,000,000 Common Shares of Beneficial Interest, par value $.01 per share
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933,
as amended (the "Act") by Senior Housing Properties Trust, a Maryland real
estate investment trust (the "Company"), of 14,000,000 shares (the "Shares") of
its common shares of beneficial interest, par value $.01 per share, the
following opinion is furnished to the Company to be filed with the Securities
and Exchange Commission (the "Commission") as Exhibit 5 to the Company's
registration statement on Form S-11, Registration No. 333-69703 (the
"Registration Statement"). The Registration Statement describes the distribution
of the Shares by HRPT Properties Trust ("HRPT") to the holders of HRPT's common
shares of beneficial interest (the "Distribution").
We have acted as counsel to the Company in connection with the
Distribution, and we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Registration Statement, the form of
Transaction Agreement to be entered into by the Company and HRPT in connection
with the Distribution, the declaration of trust and bylaws of the Company, each
as presently in effect, and such corporate records, certificates and statements
of officers of the Company, of the Company's accountants and of public
officials, and such other documents as we have considered necessary in order to
furnish the opinion hereinafter set forth.
We express no opinion herein as to the laws of any jurisdiction other
than The Commonwealth of Massachusetts and the federal law of the United States,
and we express no opinion as to state securities or blue sky laws. Insofar as
this opinion involves matters of Maryland law we have, with your permission,
relied solely on the opinion of Ballard Spahr Andrews & Ingersoll, LLP, a copy
of which is being filed herewith as Exhibit 5.2 to the Registration Statement,
and our opinion is subject to the exceptions, qualifications and limitations
therein expressed.
<PAGE>
Senior Housing Properties Trust
July 30, 1999
Page 2
Based on and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Shares are duly authorized, validly issued, fully paid
and nonassessable by the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm in the prospectus
forming a part of the Registration Statement. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission promulgated thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER LLP
SULLIVAN & WORCESTER LLP
EXHIBIT 5.2
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
FILE NUMBER
870451
July 30, 1999
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Re: Registration Statement on Form S-11
(Registration No. 333-69703)
Ladies and Gentlemen:
We have acted as Maryland counsel for Senior Housing Properties Trust,
a Maryland real estate investment trust (the "Company"), in connection with
certain matters of Maryland law arising out of the registration of 14,000,000
common shares (the "Shares") of beneficial interest, $.01 par value per share,
of the Company ("Common Shares") to be distributed (the "Distribution") by HRPT
Properties Trust, a Maryland real estate investment trust and, immediately prior
to the effective time of the Distribution, the sole shareholder of the Company
("HRPT"), to holders of common shares of beneficial interest, $.01 par value per
share, of HRPT, covered by the above-referenced Registration Statement, and all
amendments thereto (the "Registration Statement"), filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "1933 Act"). Unless otherwise defined herein,
capitalized terms used herein have the meanings given to them in the
Registration Statement.
In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
1. The Registration Statement in the form in which it was transmitted
by the Company to the Commission under the 1933 Act;
2. The Declaration of Trust of the Company (the "Declaration of
Trust"), certified as of a recent date by the State Department of Assessments
and Taxation of Maryland (the "SDAT");
<PAGE>
Senior Housing Properties Trust
July 30, 1999
Page 2
3. The form of Amended and Restated Declaration of Trust to be filed by
the Company with the SDAT prior to the Distribution (the "Amended and Restated
Declaration of Trust");
4. The Bylaws of the Company, certified as of the date hereof by its
Secretary;
5. The form of Amended Bylaws to be adopted by the Company prior to the
Distribution;
6. A certificate as of a recent date of the SDAT as to the good
standing of the Company;
7. Resolutions adopted by the Board of Trustees of the Company relating
to the authorization of the issuance of the Shares to HRPT, certified as of the
date hereof by the Secretary of the Company;
8. The form of certificate evidencing the Common Shares, certified as
of the date hereof by the Secretary of the Company;
9. A certificate executed by the Secretary of the Company, dated as of
the date hereof; and
10. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed the
following:
1. Each individual executing any of the Documents, whether on behalf of
such individual or another person, is legally competent to do so.
2. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.
3. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding.
<PAGE>
Senior Housing Properties Trust
July 30, 1999
Page 3
4. Any Documents submitted to us as originals are authentic. Any
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all Documents are genuine. All public
records reviewed or relied upon by us or on our behalf are true and complete.
All factual statements and information contained in the Documents are true and
complete. There has been no oral or written modification of or amendment to any
of the Documents, and there has been no waiver of any provision of any of the
Documents, by action or omission of the parties or otherwise.
5. The Shares will not be transferred in violation of any restriction
or limitation contained in the Amended and Restated Declaration of Trust.
6. The form and content of the Amended and Restated Declaration of
Trust, as accepted for record by the SDAT, and the form and content of the
Amended Bylaws, as adopted by the Board of Trustees of the Company, will not
differ in any respect relevant to this opinion from the form and content of
either of such documents reviewed by us in connection with this opinion.
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that, as of the date hereof:
1. The Company is a real estate investment trust duly formed and
existing under and by virtue of the laws of the State of Maryland and is in good
standing with the SDAT.
2. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable.
The foregoing opinion is limited to the substantive laws of the State
of Maryland and we do not express any opinion herein concerning any other law.
We express no opinion as to compliance with federal or state securities laws,
including the securities laws of the State of Maryland, or as to federal or
state laws regarding fraudulent transfers. To the extent that any matter as to
which our opinion is expressed herein would be governed by the laws of any
jurisdiction other than the State of Maryland, we do not express any opinion on
such matter. The opinion expressed herein is subject to the effect of judicial
<PAGE>
Senior Housing Properties Trust
July 30, 1999
Page 4
decisions which may permit the introduction of parol evidence to modify the
terms or the interpretation of agreements. The opinion expressed in this letter
is limited to the matters set forth in this letter and no other opinion should
be inferred beyond the matters expressly stated.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change any opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the Commission
as an exhibit to the Registration Statement and, accordingly, may not be relied
upon by, quoted in any manner to, or delivered to any other person or entity
without, in each instance, our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL, LLP
Exhibit 8.1
SULLIVAN & WORCESTER LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 338-2800
FAX NO. 617-338-2880
IN WASHINGTON, D.C. IN NEW YORK CITY
1025 CONNECTICUT AVENUE, N.W. 767 THIRD AVENUE
WASHINGTON, D.C. 20036 NEW YORK, NEW YORK 10017
(202) 775-8190 (212) 486-8200
FAX NO. 202-293-2275 FAX NO. 212-758-2151
July 30, 1999
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Ladies and Gentlemen:
In connection with the registration by Senior Housing Properties Trust,
a Maryland real estate investment trust (the "Company"), of its common shares of
beneficial interest proposed to be distributed by HRPT Properties Trust ("HRPT")
to the shareholders of HRPT, the following opinion is furnished to the Company
to be filed with the Securities and Exchange Commission (the "SEC") as Exhibit
8.1 to the Company's Registration Statement on Form S-11, File No. 333- 69703
(the "Registration Statement"), under the Securities Act of 1933, as amended
(the "Act").
We have acted as counsel for the Company in connection with the
Registration Statement. In connection with this opinion, we have examined
originals or copies of the Registration Statement, the respective declarations
of trust and bylaws of the Company and of HRPT, as currently in effect, and such
corporate records, certificates and statements of officers of the Company and
HRPT, accountants for the Company and public officials, and such other documents
as we have considered necessary in order to furnish the opinion hereinafter set
forth. With respect to all questions of fact on which the opinion set forth
below is based, we have assumed the accuracy and completeness of and have relied
on the information set forth in the Registration Statement and in the documents
incorporated therein by reference, and on representations made to us by the
officers of the Company and HRPT. We have not independently verified such
information.
The opinion set forth below is based upon the Internal Revenue Code of
1986, as amended, the Treasury Regulations issued thereunder, published
administrative interpretations thereof, and judicial decisions with respect
thereto, all as of the date hereof (collectively, the "Tax Laws"), and upon the
Employee Retirement Income Security Act of 1974, as amended, the Department of
Labor regulations issued thereunder, published administrative interpretations
thereof, and judicial decisions with respect thereto, all as of the date hereof
(collectively, the "ERISA Laws"). No assurance can be given that the Tax Laws or
the ERISA Laws will not change. In preparing the discussions with respect to Tax
Laws and ERISA Laws matters in the section of the Registration Statement
captioned "Federal Income Tax and ERISA
<PAGE>
Senior Housing Properties Trust
July 30, 1999
Page 2
Consequences," we have made certain assumptions and expressed certain conditions
and qualifications therein, all of which assumptions, conditions and
qualifications are incorporated herein by reference.
Based upon and subject to the foregoing, we are of the opinion that the
discussion with respect to Tax Laws and ERISA Laws matters in the section of the
Registration Statement captioned "Federal Income Tax and ERISA Consequences," in
all material respects is accurate and fairly summarizes the Tax Laws issues and
ERISA Laws issues addressed therein, and hereby confirm that the opinions of
counsel referred to in said sections represent our opinions on the subject
matter thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm in the Registration
Statement. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the Act or
under the rules and regulations of the SEC promulgated thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER LLP
SULLIVAN & WORCESTER LLP
EXHIBIT 10.1
FORM OF
ADVISORY AGREEMENT
THIS AGREEMENT is entered into effective as of ____________, 1999, by
and among Senior Housing Properties Trust, a Maryland real estate investment
trust (the "Company"), Reit Management & Research, Inc., a Delaware corporation
(the "Advisor"), and, solely with respect to certain non-competition covenants
in Section 14 of this Agreement, Barry M. Portnoy and Gerard M. Martin.
WHEREAS, the Advisor is a corporation organized for the purpose of
providing management and administrative services with respect to the ownership
of real property and interests in real property;
WHEREAS, in connection with its investments, the Company desires to
make use of the advice and assistance of the Advisor and information available
to the Advisor, and to have the Advisor undertake the duties and
responsibilities hereinafter set forth, on behalf of and subject to the
supervision of the Company's Board of Trustees (the "Trustees"), all as provided
herein;
WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Trustees, on the terms and conditions hereinafter set forth;
and
WHEREAS, the Company has qualified and intends to continue to qualify
as a real estate investment trust as defined in the Internal Revenue Code of
1986, as amended (said Code, as in effect from time to time, together with any
regulations and rulings thereunder, being hereinafter referred to as the
"Internal Revenue Code").
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
1. General Duties of the Advisor. The Advisor shall use its best
efforts to present to the Company a continuing and suitable investment program
consistent with the investment policies and objectives of the Company. Subject
to the supervision of the Trustees and under their direction, and consistent
with the provisions of the Declaration of Trust, the Advisor shall:
(a) serve as the Company's investment advisor, with its
obligations to include providing research and economic and statistical
data in connection with the Company's investments and recommending
changes in the Company's investment policies, when appropriate;
(b) investigate and evaluate investment, financing and
refinancing opportunities and make recommendations concerning these
opportunities to the Trustees;
<PAGE>
(c) manage the Company's short-term investments, including the
acquisition and sale of money market instruments in accordance with the
Company's policies;
(d) administer the day-to-day operations of the Company;
(e) investigate, negotiate and enter into appropriate contracts
on behalf of the Company with individuals, corporations and other
entities (i) for the purchase, lease or servicing of real estate and
related interests and otherwise in furtherance of the investment
activities of the Company and (ii) for the financing and refinancing of
investments and otherwise in furtherance of the financing activities of
the Company;
(f) upon request of the Trustees, act as attorney-in-fact or
agent in acquiring and disposing of investments and funds of the
Company and in handling, prosecuting and settling any claims of the
Company;
(g) obtain for the Company, when appropriate, the services of
property managers or management firms to perform customary property
management services with regard to the real estate properties owned by
or in the possession of the Company, and perform such supervisory or
monitoring services on behalf of the Company with respect to the
activities of those property managers or management firms as would be
performed by a prudent owner, including but not limited to supervising
the activities of property managers or management firms, visiting the
properties, participating in property management budgeting, reviewing
the accounting of property income and expenses, reporting on the
financial status of the properties and reviewing and approving
marketing plans, but excluding the actual on-site property management
functions performed by said property managers or management firms;
(h) obtain for the Company other services as may be required for
other activities relating to the investment portfolio of the Company;
(i) administer the day-to-day bookkeeping and accounting
functions as are required for the proper management of the assets of
the Company, contract for audits and prepare or cause to be prepared
reports as may be required by any governmental authority in connection
with the ordinary conduct of the Company's business, including without
limitation, periodic reports, returns or statements required under the
Securities Exchange Act of 1934, as amended, the Internal Revenue Code,
the securities and tax statutes of any jurisdiction in which the
Company is obligated to file such reports, or the rules and regulations
promulgated under any of the foregoing;
(j) provide office space, office equipment and the use of
accounting or computing equipment when required, and provide personnel
necessary for the performance of the foregoing services; and
(k) from time to time, or at any time requested by the Trustees,
make reports to the Trustees of its performance of the foregoing
services to the Company.
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<PAGE>
In performing its services under this Agreement, the Advisor may
utilize facilities, personnel and support services of various of its Affiliates
(as defined below). The Advisor shall be responsible for paying such Affiliates
for their personnel and support services and facilities out of its own funds.
Notwithstanding the above, the Company may request, and will pay for the direct
costs of, services provided by Affiliates of the Advisor provided that such
request is approved by a majority vote of the Trustees who are not Affiliates of
the Advisor (the "Independent Trustees").
As used in this Agreement, the term "Affiliate" means, as to the
Advisor, (i) any other Person (as defined below) directly or indirectly
controlling, controlled by or under common control with the Advisor, (ii) any
other Person that owns beneficially, directly or indirectly, five percent (5%)
or more of the outstanding capital stock, shares or equity interests of the
Advisor, or (iii) any officer, director, trustee, employee or general partner of
the Advisor or of any Person controlling, controlled by or under common control
with the Advisor. The term "Person" means and includes individuals,
corporations, limited partnerships, general partnerships, limited liability
companies, joint stock companies or associations, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts and
other entities.
2. Bank Accounts. The Advisor shall establish and maintain one or more
bank accounts in its own name or in the name of the Company, and shall collect
and deposit into the account or accounts and disburse therefrom any monies on
behalf of the Company; provided that no funds in any account shall be commingled
with any funds of the Advisor or any other Person. The Advisor shall from time
to time render an appropriate accounting of collections and payments to the
Trustees and to the auditors of the Company.
3. Records. The Advisor shall maintain appropriate books of account and
records relating to services performed pursuant to this Agreement, which books
of account and records shall be available for inspection by representatives of
the Company upon reasonable notice during ordinary business hours.
4. Information Furnished Advisor. The Trustees shall at all times keep
the Advisor fully informed with regard to the investment policies of the
Company, the capitalization policy of the Company, and generally the Trustees'
then-current intentions as to the future of the Company. In particular, the
Company shall notify the Advisor promptly of its intention to sell or otherwise
dispose of any of the Company's investments or to make any new investment. The
Company shall furnish the Advisor with a certified copy of all financial
statements, a signed copy of each report prepared by independent certified
public accountants and other information with regard to its affairs as the
Advisor may from time to time reasonably request. The Company shall retain legal
counsel and accountants to provide legal and accounting advice and services as
the Advisor or the Trustees shall deem necessary or appropriate to adequately
perform the functions of the Company, and shall have legal or accounting
opinions and advice as the Advisor shall reasonably request.
5. REIT Qualification. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from any action (including, without
limitation, the furnishing or rendering of services to tenants of property or
managing real property) which, in its judgment made in good faith, or in the
judgment of the Trustees as transmitted to the Advisor in writing, would (a)
adversely
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<PAGE>
affect the status of the Company as a real estate investment trust as defined
and limited in the Internal Revenue Code or which would make the Company subject
to the Investment Company Act of 1940, as amended, or (b) violate any law, rule,
regulation or statement of policy or any governmental body or agency having
jurisdiction over the Company or over its securities, or (c) otherwise not be
permitted by the Declaration of Trust or Bylaws of the Company, as in effect
from time to time, except if the action shall be ordered by the Trustees, in
which event the Advisor shall promptly notify the Trustees of the Advisor's
judgment that the action would adversely affect the Company's status or violate
any law, rule or regulation or the Declaration of Trust or Bylaws of the Company
and shall refrain from taking the action pending further clarification or
instructions from the Trustees. In addition, the Advisor shall take affirmative
steps which, in its judgment made in good faith, or in the judgment of the
Trustees as transmitted to the Advisor in writing, would prevent or cure any
action described in (a), (b) or (c) above.
6. Self-Dealing. Neither the Advisor nor any Affiliate of the Advisor
shall, directly or indirectly, sell any property or assets to the Company or
purchase any property or assets from the Company, lease any property from the
Company or borrow any money from the Company, except as approved by a majority
of the Independent Trustees. In addition, except as otherwise provided in
Sections 1, 9 or 10 hereof, or except as approved by a majority of the
Independent Trustees, neither the Advisor nor any Affiliate of the Advisor shall
receive any commission or other remuneration, directly or indirectly, in
connection with the activities of the Company or any joint venture or
partnership in which the Company is a party. The foregoing prohibitions shall
not apply to the leases affecting three nursing homes between the Company and an
Affiliate of the Advisor, which leases were entered into by the Company's
predecessor in interest prior to the date of this Agreement.
7. No Partnership or Joint Venture. The Company and the Advisor are not
partners or joint venturers with each other and neither the terms of this
Agreement nor the fact that the Company and the Advisor have joint interests in
any one or more investments shall be construed so as to make them such partners
or joint venturers or impose any liability on either of them.
8. Fidelity Bond. The Advisor shall not be required to obtain or
maintain a fidelity bond in connection with the performance of its services
hereunder.
9. Compensation. The Advisor shall be paid an advisory fee (the
"Advisory Fee") for the services rendered by it to the Company pursuant to this
Agreement. The Advisory Fee for each full fiscal year of the Company shall equal
the sum of one-half of one percent (0.5%) of the Annual Average Transferred
Assets (as defined below), plus seven-tenths of one percent (0.7%) of the Annual
Average Invested Capital (as defined below) up to $250,000,000, plus one-half of
one percent (0.5%) of the Annual Average Invested Capital equal to or exceeding
$250,000,000. The Advisory Fee shall be prorated for any partial fiscal year of
the Company during the term of this Agreement. In addition, the Advisor shall be
paid an annual incentive fee (the "Incentive Fee") for each fiscal year of the
Company, commencing with the Company's fiscal year ending December 31, 2000,
consisting of a number of shares of the Company's common shares of beneficial
interest ("Common Shares") with an aggregate value (determined as provided
below) equal to fifteen percent (15%) of the product of (i) the weighted average
Common Shares of the Company outstanding on
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<PAGE>
a diluted basis during such fiscal year and (ii) the excess if any of FFO Per
Share (as defined below) for such fiscal year over the FFO Per Share for the
preceding fiscal year; provided however, in no event shall the Incentive Fee
payable in respect of any fiscal year exceed $.02 multiplied by the weighted
average number of Common Shares outstanding on a diluted basis during such
fiscal year. (The Advisory Fee and Incentive Fee are hereinafter collectively
referred to as the "Fees"). No Incentive Fee shall be payable for the Company's
fiscal year ending December 31, 1999.
For purposes of this Agreement: "Annual Average Transferred Assets" of
the Company, for any fiscal year, means the daily weighted average during such
fiscal year (or, in the case of the Company's fiscal year ending December 31,
1999, during the period commencing with the date hereof and ending on December
31, 1999) of the aggregate book value of the Transferred Assets, before
depreciation, reserves for bad debts and other similar noncash items. "Annual
Average Invested Capital" of the Company, for any fiscal year, means the daily
weighted average during such fiscal year (or, in the case of the Company's
fiscal year ending December 31, 1999, during the period commencing with the date
hereof and ending on December 31, 1999) of the aggregate book value of the
consolidated assets of the Company, excluding the Transferred Assets, invested,
directly or indirectly, in equity interests in and loans secured by real estate
and personal property owned in connection with such real estate, before
depreciation, reserves for bad debts and other similar noncash items. "FFO Per
Share," for any fiscal year, means (i) the Company's consolidated net income,
computed in accordance with generally accepted accounting principles, before
gain or loss on sale of properties and extraordinary items, depreciation and
other non-cash items, including the Company's pro rata share of the funds from
operations (determined in accordance with this clause) for such fiscal year of
(A) any unconsolidated subsidiary and (B) any entity for which the Company
accounts by the equity method of accounting, divided by (ii) the weighted
average number of Common Shares outstanding on a diluted basis during such
fiscal year; "Transferred Assets" means the assets owned by the Company and its
subsidiaries on the date hereof. FFO Per Share for the Company's fiscal year
ending December 31, 1999 shall be calculated on a pro forma basis adjusted as if
the transactions described in the notes to the unaudited pro forma consolidated
financial statements of the Company contained in the Company's Registration
Statement No. 333-69703 filed with the Securities and Exchange Commission (as
amended through the date hereof) had occurred as of January 1, 1999.
The Advisory Fee shall be computed and paid by the Company on a year to
date basis within thirty (30) days following the end of each fiscal month. These
computations shall be based upon the Company's monthly or quarterly financial
statements, as the case may be, and shall be in reasonable detail. The Incentive
Fee shall be computed and paid by the Company within thirty (30) days following
the public availability of the Company's annual audited financial statements for
each fiscal year. A copy of the computations shall promptly be delivered to the
Advisor accompanied by payment of the Fees shown thereon to be due and payable.
The aggregate Fees paid for each fiscal year shall be subject to
adjustment as of the end of each that year. On or before the 30th day after
public availability of the Company's annual audited financial statements for
each fiscal year, the Company shall deliver to the Advisor an Officer's
Certificate (a "Certificate") reasonably acceptable to the Advisor and certified
by an authorized officer of the Company setting forth (i) the Annual Average
Transferred Assets, the Annual Average
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<PAGE>
Invested Capital and FFO Per Share for the Company's fiscal year ended upon the
immediately preceding December 31, and (ii) the Company's computation of the
Fees payable for the fiscal year. The Certificate shall be accompanied by an
examination of the calculation of Annual Average Invested Capital and FFO Per
Share by the Company's independent certified public accountants.
If the aggregate Fees payable for any fiscal year as shown in the
Certificate exceed the aggregate amounts previously paid by the Company, the
Company shall pay the deficit to the Advisor at the time of delivery of the
Certificate.
If the aggregate Fees payable for any fiscal year as shown in the
Certificate are less than the aggregate amounts previously paid by the Company,
the Company shall specify in the Certificate whether the Advisor should (i)
refund to the Company an amount equal to the difference or (ii) grant the
Company a credit against the Fees next coming due in the amount of the
difference until that amount has been fully paid or otherwise discharged.
Payment of the Incentive Fee shall be made by issuance of Common
Shares. The number of shares to be issued in payment of the Incentive Fee shall
be the whole number of shares (disregarding any fraction) equal to the value of
the Incentive Fee, as provided above, divided by the average closing price of
the Common Shares on the New York Stock Exchange during the month before the end
of the fiscal year for which the computation is made.
10. Compensation for Additional Services. If, and to the extent that,
the Company shall request the Advisor to render services on behalf of the
Company other than those required to be rendered by the Advisor in accordance
with the terms of this Agreement, those additional services shall be compensated
separately on terms to be agreed upon between the Advisor and the Company from
time to time. In addition, the Company may make awards to the employees of the
Advisor and others under the Company's 1999 Incentive Share Award Plan.
11. Expenses of the Advisor. Without regard to the compensation
received by the Advisor from the Company pursuant to this Agreement, the Advisor
shall bear the following expenses incurred in connection with the performance of
its duties under this Agreement:
(a) employment expenses of the personnel employed by the
Advisor, including but not limited to, salaries, wages, payroll taxes
and the cost of employee benefit plans;
(b) fees and travel and other expenses paid to directors,
officers and employees of the Advisor, except fees and travel and other
expenses of persons who are Trustees or officers of the Company
incurred in their capacities as Trustees or officers of the Company;
(c) rent, telephone, utilities, office furniture, equipment and
machinery (including computers, to the extent utilized) and other
office expenses of the Advisor, except to the extent those expenses may
relate solely to an office maintained by the Company separate from the
office of the Advisor, if any; and
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<PAGE>
(d) miscellaneous administrative expenses incurred in
supervising, monitoring and inspecting real property and other
investments of the Company or relating to performance by the Advisor of
its obligations hereunder.
12. Expenses of the Company. Except as expressly otherwise provided in
this Agreement, the Company shall pay all its expenses not payable by the
Advisor, and, without limiting the generality of the foregoing, it is
specifically agreed that the following expenses of the Company shall be paid by
the Company and shall not be paid by the Advisor:
(a) the cost of borrowed money;
(b) taxes on income and taxes and assessments on real
property, if any, and all other taxes applicable to the Company;
(c) legal, auditing, accounting, underwriting, brokerage,
listing, reporting, registration and other fees, and printing,
engraving and other expenses and taxes incurred in connection with the
issuance, distribution, transfer, trading, registration and stock
exchange listing of the Company's securities, including transfer
agent's, registrar's and indenture trustee's fees and charges;
(d) expenses of organizing, restructuring, reorganizing or
terminating the Company, or of revising, amending, converting or
modifying the Company's organizational documents;
(e) fees and travel and other expenses paid to Trustees and
officers of the Company in their capacities as such (but not in their
capacities as officers or employees of the Advisor) and fees and travel
and other expenses paid to advisors, contractors, mortgage servicers,
consultants, and other agents and independent contractors employed by
or on behalf of the Company;
(f) Expenses directly connected with the acquisition,
disposition or ownership of real estate interests or other property
(including the costs of foreclosure, insurance premiums, legal
services, brokerage and sales commissions, maintenance, repair,
improvement and local management of property), other than expenses with
respect thereto of employees of the Advisor, to the extent that those
expenses are to be borne by the Advisor pursuant to Section 11 above;
(g) all insurance costs incurred in connection with the
Company (including officer and trustee liability insurance) or in
connection with any officer and trustee indemnity agreement to which
the Company is a party;
(h) expenses connected with payments of dividends or interest
or contributions in cash or any other form made or caused to be made by
the Trustees to holders of securities of the Company;
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<PAGE>
(i) all expenses connected with communications to holders of
securities of the Company and other bookkeeping and clerical work
necessary to maintaining relations with holders of securities,
including the cost of printing and mailing certificates for securities
and proxy solicitation materials and reports to holders of the
Company's securities;
(j) legal, accounting and auditing fees and expenses; and
(k) expenses relating to any office or office facilities
maintained by the Company separate from the office of the Advisor.
13. Limits of Advisor Responsibility. The Advisor assumes no
responsibility other than to render the services described herein in good faith
and shall not be responsible for any action of the Trustees in following or
declining to follow any advice or recommendation of the Advisor. The Advisor,
its shareholders, directors, officers, employees, agents and Affiliates will not
be liable to the Company, its shareholders, or others, except by reason of acts
constituting bad faith, willful or wanton misconduct or gross negligence. The
Company shall reimburse, indemnify and hold harmless the Advisor, its
shareholders, directors, officers and employees, agents and Affiliates for and
from any and all expenses, losses, damages, liabilities, demands, charges and
claims of any nature whatsoever in respect of or arising from any acts or
omissions of the Advisor undertaken in good faith and in accordance with the
standard set forth above pursuant to the authority granted to it by this
Agreement.
14. Other Activities of the Advisor and its Stockholders. Nothing
herein shall prevent the Advisor from engaging in other activities or businesses
or from acting as advisor to any other Person (including other real estate
investment trusts) even though that Person has investment policies and
objectives similar to those of the Company; provided, however, that neither the
Advisor nor Barry M. Portnoy or Gerard M. Martin shall provide advisory services
to, make competitive direct investment in or, in the case of Messrs. Portnoy and
Martin, serve as a director or officer of, any other real estate investment
trust which is principally engaged in the business of ownership of senior
apartments, congregate communities, assisted living or nursing home properties
without the consent of the Independent Trustees. The Advisor shall be free from
any obligation to present to the Company any particular investment opportunity
which comes to the Advisor. In addition, except as expressly provided herein,
nothing herein shall prevent any stockholder or Affiliate of the Advisor from
engaging in any other business or from rendering services of any kind to any
other corporation, partnership or other entity (including competitive business
activities). Without limiting the foregoing provisions, the Advisor agrees, upon
the request of any Trustee of the Company, to disclose certain investment
information concerning the Advisor or certain of its Affiliates, provided,
however, that the disclosure shall be required only if it does not constitute a
breach of any fiduciary duty or obligation of Advisor.
Directors, officers, employees and agents of the Advisor or of its
Affiliates may serve as Trustees, officers, employees, agents, nominees or
signatories of the Company. When executing documents or otherwise acting in
capacities for the Company, these persons shall use their respective titles in
the Company.
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<PAGE>
15. Term, Termination. This Agreement shall continue in force and
effect until December 31, 1999 (the "Initial Term"), and is renewable
periodically thereafter by the Company, if a majority of the Independent
Trustees determine that the Advisor's performance has been satisfactory.
Paragraph 18 hereof shall govern the rights, liabilities and
obligations of the parties upon termination of this Agreement; and, except as
provided in paragraph 18, a termination shall be without further liability of
either party to the other than for breach or violation of this Agreement prior
to termination.
16. Assignment. The Company may terminate this Agreement at any time in
the event of its assignment by the Advisor except an assignment to a
corporation, partnership, trust, or other successor entity which may take over
the property and carry on the affairs of the Advisor; provided that, following a
permitted assignment, the persons who controlled the operations of the Advisor
immediately prior to the assignment shall control the operation of the
successor, including the performance of its duties under this Agreement, and
this successor shall be bound by the same restrictions by which the Advisor was
bound prior to such assignment. A permitted assignment or any other assignment
of this Agreement by the Advisor shall bind the assignee hereunder in the same
manner as the Advisor is bound hereunder. This Agreement shall not be assignable
by the Company without the prior written consent of the Advisor, except in the
case of any assignment by the Company to a trust, corporation, partnership or
other entity which is the successor to the Company, in which case the successor
shall be bound hereby and by the terms of said assignment in the same manner and
to the same extent as the Company is bound hereby.
17. Default, Bankruptcy, Etc. of the Advisor. At the sole option of the
Company, this Agreement may be terminated immediately by written notice from the
Trustees to the Advisor if any of the following events shall have occurred:
(a) the Advisor shall have violated any provision of this
Agreement and, after written notice from the Trustees of the violation,
shall have failed to cure the default within thirty (30) days;
(b) a petition shall have been filed against the Advisor for an
involuntary proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, and that petition shall
not have been dismissed within ninety (90) days of filing; or a court
having jurisdiction shall have appointed a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Advisor for any substantial portion of its property, or ordered the
winding up or liquidation of its affairs, and that appointment or order
shall not have been rescinded or vacated within ninety (90) days of the
appointment or order; or
(c) the Advisor shall have commenced a voluntary proceeding
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have made any general assignment for the
benefit of creditors, or shall have failed generally to pay its debts
as they became due.
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The Advisor agrees that, if any of the events specified in paragraphs
(b) or (c) of this Section 17 occur, it will give written notice thereof to the
Trustees within seven (7) days following the occurrence of the event.
18. Action Upon Termination. From and after the effective date of any
termination of this Agreement pursuant to Sections 15, 16 or 17 hereof, the
Advisor shall be entitled to no compensation for services rendered hereunder for
the remainder of the then-current term of this Agreement but shall be paid, on a
pro rata basis, all compensation due for services performed prior to
termination, including, without limitation, a pro rata portion of the then
current year's Incentive Fee. Upon termination, the Advisor immediately shall:
(a) pay over to the Company all monies collected and held for
the account of the Company by it pursuant to this Agreement, after
deducting therefrom any accrued and unpaid Fees (including, without
limitation, a pro rata portion of the then current year's Incentive
Fee, and reimbursements for its expenses to which it is then entitled);
(b) deliver to the Trustees a full and complete accounting,
including a statement showing all sums collected by it and a statement
of all sums held by it for the period commencing with the date
following the date of its last accounting to the Trustees; and
(c) deliver to the Trustees all property and documents of the
Company then in its custody or possession.
The amount of Fees paid to the Advisor upon termination shall be
subject to adjustment pursuant to the following mechanism. On or before the 30th
day after public availability of the Company's annual audited financial
statements for the fiscal year in which termination occurs, the Company shall
deliver to the Advisor a Certificate reasonably acceptable to the Advisor and
certified by an authorized officer of the Company setting forth (i) the Annual
Average Invested Capital and FFO Per Share for the Company's fiscal year ended
upon the immediately preceding December 31, and (ii) the Company's computation
of the Fees (including, without limitation, a pro rata portion of the then
current year's Incentive Fee) payable upon the date of termination. The
Certificate shall be accompanied by a review of the calculation of Annual
Average Invested Capital and FFO Per Share by the Company's independent
certified public accountants.
If the annual Fees owed upon termination as shown in the Certificate
exceed the Fees paid by the Company upon termination, the Company shall include
its check for the deficit and deliver the same to the Advisor with the
Certificate.
The Incentive Fee for any partial fiscal year will be determined by
multiplying the Incentive Fee for such year (assuming this Agreement were in
effect for the entire year) by a fraction, the numerator of which is the number
of days in the portion of such year during which this Agreement was in effect,
and the denominator of which shall be 365.
-10-
<PAGE>
If the annual Fees owed upon termination as shown in the Certificate
are less than the Fees paid by the Company upon termination, the Advisor shall
remit to the Company its check in an amount equal to the difference.
19. Trustee Action. Wherever action on the part of the Trustees is
contemplated by this Agreement, action by a majority of the Trustees, including
a majority of the Independent Trustees, shall constitute the action provided for
herein.
20. Arbitration. The Company and the Advisor agree that any and all
disputes and disagreements arising out of or relating to this Agreement, other
than actions or claims for injunctive relief or claims raised in actions or
proceedings brought by third parties, shall be resolved through negotiations or,
if the dispute is not so resolved, through binding arbitration conducted in
Boston, Massachusetts under the J.A.M.S./Endispute Comprehensive Arbitration
Rules and Procedures, with the following amendments to those rules. First, the
parties agree that in no event shall the arbitration from commencement to
issuance of an award take longer than 180 days. Second, the parties agree that
the arbitration tribunal shall consist of three arbitrators and that the parties
elect not to have the optional appeal procedure provided for in Rule 23. Third,
in lieu of the depositions permitted in Rule 15(E) and (F), the parties agree
that the only depositions shall be a single deposition to last no longer than
one six-hour day that each party may take of the opposing party or an individual
under the control of the opposing party. Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
21. TRUSTEES AND SHAREHOLDERS NOT LIABLE. THE DECLARATION OF TRUST OF
THE COMPANY, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS, IS DULY FILED IN THE
OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND PROVIDES
THAT THE NAME SENIOR HOUSING PROPERTIES TRUST REFERS TO THE TRUSTEES
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY. NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
22. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving the notice, report or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses to the parties hereto:
If to the Company:
Senior Housing Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attention: President
-11-
<PAGE>
If to the Advisor:
Reit Management & Research, Inc.
400 Centre Street
Newton, Massachusetts 02458
Attention: President
Such notice shall be effective upon its receipt by the party to whom it
is directed. Either party hereto may at any time give notice to the other party
in writing of a change of its address for purposes of this paragraph 21.
23. Amendments. The Agreement shall not be amended, changed, modified,
terminated, or discharged in whole or in part except by an instrument in writing
signed by each of the parties hereto, or by their respective successors or
assigns, or otherwise as provided herein.
24. Successors and Assigns. This Agreement shall be binding upon any
successors or permitted assigns of the parties hereto as provided herein.
25. Governing Law. The provisions of this Agreement shall be governed
by and construed in accordance with the laws of The Commonwealth of
Massachusetts.
26. Captions. The captions included herein have been inserted for ease
of reference only and shall not be construed to affect the meaning, construction
or effect of this Agreement.
27. Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
and cancels any pre-existing agreements with respect to its subject matter.
28. Attorneys' Fees. If any legal action is brought for the enforcement
of this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action in addition
to any other relief to which it or they may be entitled.
29. Survival. The provisions of Sections 13, 14, 18, 20, 21, 22 and 28
of this Agreement shall survive the termination hereof.
[Remainder of page intentionally left blank.]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, under seal, as of the day and year
first above written.
SENIOR HOUSING PROPERTIES TRUST
By:_________________________________
Its:
REIT MANAGEMENT & RESEARCH, INC.
By:_________________________________
Its:
Solely as to Section 14 hereof:
------------------------------------
Barry M. Portnoy
------------------------------------
Gerard M. Martin
-13-
EXHIBIT 10.2
SENIOR HOUSING PROPERTIES TRUST
FORM OF
1999 INCENTIVE SHARE AWARD PLAN
Senior Housing Properties Trust (the "Company") hereby adopts the
Senior Housing Properties Trust 1999 Incentive Share Award Plan (the "Plan"),
effective as of the date described in Section IX.
I. PURPOSE
The Plan is intended to advance the interests of the Company and its
subsidiaries by providing a means of rewarding selected officers and Trustees of
the Company, employees of its investment advisor, and others rendering valuable
services to the Company or its subsidiaries, through grants of the Company's
Shares.
II. DEFINITIONS
Terms that are capitalized in the text of the Plan have the meanings
set forth below:
(a) "Advisor" means the person or entity serving as investment advisor
to the Company.
(b) "Board" means the Board of Trustees of the Company.
(c) "Company" means Senior Housing Properties Trust, a Maryland real
estate investment trust.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Independent Trustee" means a Trustee who satisfies the criteria
established for Independent Trustees under the Company's bylaws, as in effect
from time to time.
(f) "Key Person" means a consultant, advisor, Trustee, officer or other
person providing services to the Company, to a subsidiary of the Company, or to
the Advisor.
(g) "Participant" means a person to whom Shares have been granted, or
any other person who becomes owner of the Shares by reason of such person's
death or incapacity.
(h) "Plan" means this Senior Housing Properties Trust 1999 Incentive
Share Award Plan, as amended from time to time.
(i) "Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
-2-
(j) "Share Agreement" means an agreement between the Company and a
Participant regarding Shares issued to the Participant pursuant to the Plan. A
Share Agreement may contain such vesting conditions and such other provisions
not inconsistent with the Plan as the Board in its discretion shall establish.
(k) "Shares" means the Company's common shares of beneficial interest,
par value $.01 per share.
(l) "Trustee" means a member of the Board.
III. SHARES SUBJECT TO THE PLAN
Subject to the provisions of Article VII, the total number of Shares
which may be granted under the Plan is one million three hundred thousand
(1,300,000) Shares, from either authorized and unissued or treasury Shares. A
holder of Shares granted under the Plan, whether or not vested, shall have all
of the rights of a shareholder of the Company, including the right to vote the
Shares and the right to receive any distributions, unless the Board shall
otherwise determine. Certificates representing Shares shall be imprinted with a
legend to the effect that the Shares represented may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of except in accordance
with the terms of the Securities Act and the applicable Share Agreement, if any.
IV. METHOD OF GRANTING SHARES
Subject to Section VIII, grants of Shares to any person shall be made
by action of the Board, and shall be made solely in accordance with the
instructions of the Board as to the selection of persons to whom Shares are to
be granted, the amount and timing of each such grant, and the extent, if any, to
which vesting restrictions or other conditions shall apply to the granted
Shares. If a person to whom such a grant of Shares has been made fails to
execute and deliver to the Company a Share Agreement within ten (10) days after
it is submitted to him or her, the grant of Shares related to such Share
Agreement may be cancelled by the Company, acting by the Board, at its option
without further notice to the Participant.
V. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board. All questions of
interpretation and application of the Plan and of grants of Shares shall be
determined by the Board, and its determination shall be final and binding upon
all persons, including the Company and all Participants. Without limiting the
generality of the foregoing, the Board is authorized to adopt and approve from
time to time the forms and, subject to the terms of the Plan, the terms and
conditions of any Share Agreement. If it determines to do so, the Board may
grant shares under this Plan which are not subject to a Share Agreement.
With respect to persons subject to Section 16 of the Exchange Act
("Insiders"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successor under the Exchange Act. To
the extent any provision of the Plan fails to so comply, it shall be
<PAGE>
-3-
deemed to be modified so as to be in compliance with such Rule, or, if such
modification is not possible, it shall be deemed to be null and void, to the
extent permitted by law and deemed advisable by the Board.
VI. ELIGIBLE PERSONS
In addition to the grants specified in Section VIII, the persons
eligible to receive grants of Shares shall be those persons selected by the
Board from among Key Persons who make significant contributions to the business
of the Company and its subsidiaries.
VII. CHANGES IN CAPITAL STRUCTURE
In the event that the outstanding Shares are hereafter changed for a
different number or kind of Shares or other securities of the Company, by reason
of a reorganization, recapitalization, exchange of shares, stock split,
combination of shares or dividend payable in Shares or other securities, a
corresponding adjustment shall be made in the number and kind of Shares or other
securities covered by outstanding grants of Shares, and for which Shares may be
granted under the Plan.
VIII. GRANTS TO INDEPENDENT TRUSTEES
As part of each Independent Trustee's fees, the Company shall annually
grant five hundred (500) Shares pursuant to the Plan to each person serving as
an Independent Trustee on the date of each annual meeting of the Company's
shareholders (other than an Independent Trustee whose term ends on such date
(subject to the election and qualification of his or her successor) and who has
not been elected to a subsequent term as a Trustee), all of which Shares shall
be valued as of the close of business on the date of grant and shall be fully
vested when granted. The Company shall also grant five hundred (500) Shares (i)
to each person serving as an Independent Trustee on the effective date of the
Plan, on that date, and (ii) to each other person who becomes an Independent
Trustee, on the date such person first becomes an Independent Trustee, by reason
of such Independent Trustee's appointment by the Board pursuant to Section 3.12
of the Company's bylaws, all of which Shares shall be valued as of the close of
business on the date of grant and shall be fully vested when granted.
IX. EFFECTIVE DATE, DURATION, AMENDMENT AND TERMINATION OF PLAN
The Plan shall be effective at the close of business on the date of the
distribution of the Company's shares to the shareholders of HRPT Properties
Trust, as described in the Company's Registration Statement on Form S-11, No.
333-69703, filed with the Securities and Exchange Commission. Shares may be
granted under the Plan from time to time until the close of business on the
tenth anniversary of its effective date. The Board hereafter may at any time
amend or extend the Plan, including amendments to change the number of shares
subject to the Plan. The Plan may be terminated at any time by action of the
Board without, however, affecting the rights of a Participant or the Company as
to Shares granted prior to such termination.
<PAGE>
-4-
X. MISCELLANEOUS
A. Nonassignability of Shares. Shares subject to a Share Agreement
shall not be assignable or transferable by a Participant except in accordance
with the terms of the applicable Share Agreement.
B. No Guarantee of Employment. Neither the award of Shares nor a Share
Agreement shall give any person the right to continue in the employment of, or
to continue to act as an officer or, Trustee of, or to serve in any other
capacity with, the Company, any subsidiary or the Advisor, or give the Company,
any subsidiary or the Advisor the right to require such person to continue in
any such capacity.
C. Tax Withholding. To the extent required by law, the Company shall
withhold or cause to be withheld income and other taxes incurred by a
Participant by reason of a grant of Shares, and as a condition to the receipt of
any grant such a Participant shall agree that if the amount payable to him by
the Company in the ordinary course is insufficient to pay such taxes, he or she
shall upon request of the Company pay to the Company an amount sufficient to
satisfy its tax withholding obligations.
Dresdner Bank AG
New York Branch
75 Wall Street
New York, New York 10005-2889
Telefax (212)429-2129
Sender's Direct Dial Number: (212) 429-2201
26 June 1999
Mr. Ajay Saini
Treasurer and Chief Financial Officer
Senior Housing Properties Trust
400 Centre Street
Newton, MA 02158
Re: Commitment Letter for Senior Housing Properties Trust
Dear Ajay:
At your request, Dresdner Bank AG, New York Branch (the "Bank") is pleased to
submit this conditional commitment for a Secured Credit Facility in the amount
of $350,000,000 for Senior Housing Properties Trust as outlined in the attached
summary of terms and conditions. This commitment letter will expire July 30,
1999, unless a copy of this commitment letter and a copy of the Fee Letter dated
July 26, 1999 between the Bank and HRPT Properties Trust, are accepted by you
and HRPT Properties Trust in the places provided, and have been returned to us
together with the $100,000, representing a portion of the up front fee, by our
close of business on that date.
Please note that this commitment letter (including the attached summary terms
and conditions) does not set forth an exhaustive list of terms and conditions on
which we will provide the Secured Credit Facility, but is merely an outline of
the general terms and conditions of the Secured Credit Facility. Our commitment
to provide a Secured Credit Facility is subject to the execution of
documentation in form and substance satisfactory to the Bank, consistent with
such general terms and conditions by August 31, 1999. This commitment letter is
provided to you only for the above stated purpose and may not be relied upon by
any parties other than HRPT Properties Trust, Senior Housing Properties Trust,
REIT Management and Research and their affiliates.
Please contact Andrew Nesi once you have had the chance to review the attached
commitment letter, if you have questions or require additional information. We
look forward to the opportunity to assist you in this transaction.
Sincerely,
/s/ Andrew P. Nesi /s/ Birgit Anderson
Andrew P. Nesi Birgit Anderson
First Vice President Assistant Treasurer
Attachments
<PAGE>
Senior Housing Properties Trust
Summary Terms and Conditions
$350 Million Secured Credit Facility
26 July 1999
Borrower: Senior Housing Properties Trust ("SNH"), a Maryland
real estate investment trust.
Guarantors: i) SPTMRT Properties Trust ("SPTMRT"), a
Maryland real estate investment trust.
ii) SPTBrook Properties Trust ("SPTBrook"), a
Maryland real estate investment trust.
iii) Any other subsidiaries of the Borrower for
the benefit of which Revolving Loan
proceeds have been advanced (guarantees of
such other subsidiaries to be released upon
repayment of such proceeds).
Syndicating Agent: Dresdner Kleinwort Benson North America LLC
Administrative Agent
and Lender: Dresdner Bank AG, New York Branch (and additional
banks joining the lending syndicate as Lenders).
Facility Amount: $350,000,000 (or Advance Ceiling, whichever is less).
Facility Type: Secured Revolving Credit Facility
Availability: The facility will be available for advances for
three years from the closing date. See Facility
Purposes herein.
Collateral: The Lender will have liens on and security interests
in the following assets of the Borrower and the
Guarantors:
i) First mortgage liens on and security
interests in 14 senior living facilities
described in Exhibit A owned by SPTMRT and
leased to subsidiaries of Marriott
International, Inc. under leases which
Marriott International, Inc. has fully
guaranteed (the "Marriott Properties").
ii) First mortgage liens on and security
interests in 4 senior living facilities
described in Exhibit B owned by SPTBrook
and leased to subsidiaries of Brookdale
Living Communities, Inc. under leases which
Brookdale Living Communities, Inc. has
fully guaranteed (the "Brookdale
Properties") (together with the Marriott
Properties, the "Mortgaged Properties").
iii) Assignments of Leases, Rents and Lease
Guaranties for each of the Marriott
Properties and Brookdale Properties.
iv) Pledge by SNH of all stock of SPTMRT and
SPTBrook.
Advance Ceiling: 70% of the sum of the Mortgaged Properties'
Collateral Value as determined by American Appraisal
Associates utilizing methodologies acceptable to the
Lender. The aggregate value of the accepted
appraisal reports will constitute the Collateral
Value.
Facility Purposes: A single advance of up to $200,000,000 will be made
on the closing date and contributed by the Borrower
to SPTMRT to be used to repay SPTMRT's obligations
to HRPT Properties Trust (the "SPTMRT Advance").
Other advances shall be used to acquire additional
income producing senior housing properties and for
general corporate purposes.
1
<PAGE>
Senior Housing Properties Trust
Summary Terms and Conditions
$350 Million Secured Credit Facility
26 July 1999
Up Front Fee: As per fee letter dated July 26, 1999 between
Dresdner Bank AG, New York Branch and HRPT
Properties Trust (the "Fee Letter")
Commitment Fee: 0.375% p.a. on the unused portion of the Facility
Amount, payable quarterly in arrears.
Interest Rate: The Borrower will have the option of the following:
i) London Interbank Offer Rate ("LIBOR") plus
1.75% p.a.
ii) Bank Base Rate (defined as the higher of
(1) the Prime rate, or (2) Federal Funds
Rate + 0.50%)
Facility Maturity: 3 years from the date of the general syndication
closing.
Conditions Precedent to
Closing: Conditions precedent to closing will include, but
not be limited to, the following:
i) Legal documentation required or appropriate
for a transaction of this type in form and
substance satisfactory to Lender including:
Loan Agreement (including Guarantors'
guarantees), Notes, Mortgage and Security
Agreements, Lease Agreements (and related
Lease Guaranties), Assignments of Leases,
Rents and Lease Guaranties, Estoppel
Certificates, SPTMRT and SPTBrook Stock
Pledge Agreements and appropriate legal
opinions and corporate resolutions.
ii) No material adverse change in any
information provided to the Lender.
iii) Acceptable legal opinions from counsel
representing the Borrower and the
Guarantors.
iv) For each Mortgaged Property, fee simple
title to the land (except the
Charlottesville, VA Property may be a
ground leasehold estate under a ground
lease not unsatisfactory to Lender) and any
improvements to the Mortgaged Property,
subject only to such encumbrances as may be
permitted by Lender, insured in favor of
Lender by a title company and under a
policy (and with reinsurance) satisfactory
to Lender and its counsel.
v) For each Mortgaged Property, a satisfactory
Phase I Environmental Report upon which
Lender may rely.
vi) For each Mortgaged Property, a certified
survey and legal description and a
satisfactory appraisal report from American
Appraisal Associates.
vii) Evidence of satisfactory insurance
policies.
viii) Advisory Agreement between SNH and REIT
Management and Research in form and
substance satisfactory to Lender and
subordination of advisory fees to
obligations owed Lender.
ix) Most recent financial statements (including
most recent annual audit) of Marriott
International, Inc. and Brookdale Living
Communities, Inc. delivered in accordance
with the terms of the Lease Guaranties.
x) Financial statements of SNH, SPMRT,
SPTBrook and pro forma financial statements
of SNH.
xi) Any additional information deemed necessary
by Lender and its counsel.
xii) Payment of closing fees, costs and expenses
as per Fee Letter.
2
<PAGE>
Senior Housing Properties Trust
Summary Terms and Conditions
$350 Million Secured Credit Facility
26 July 1999
Covenants: In addition to standard and other appropriate
representations, warranties and covenants, the Loan
Agreement and Mortgage and Security Agreements will
include, but not be limited to, covenants in the
following areas, specifics to be defined:
i) No additional secured indebtedness will be
incurred and no additional liens will be
permitted by SPTMRT and SPTBrook without
Lender's consent.
ii) The Borrower will cause to be maintained
insurance coverages in types and at levels
acceptable to Lender in accordance with the
terms of the Lease Agreements.
iii) Prohibition on Restricted Payments (such as
dividends and advisory fees) by the
Borrower if a Default or an Event of
Default exists and is continuing or if a
Default or Event of Default would occur as
a result of such Restricted Payments.
iv) The Borrower will maintain a minimum fixed
charge coverage ratio of 1.5:1 (defined as
consolidated EBITDA divided by consolidated
fixed charges).
v) The Borrower will maintain a minimum
tangible net worth of $350 million plus 75%
of net increases resulting from any equity
issuances. Historical depreciation recorded
by HRPT on the transferred properties will
be added back for purposes of calculating
tangible net worth.
vi) The Borrower will maintain a maximum debt
to total book capital ratio of 60%.
Property depreciation recorded by HRPT (on
the transferred properties) or by SNH will
be added back for purposes of calculating
total book capital. Security deposits held
by Borrower and repayable subsequent to the
Facility Maturity Date shall not be
included in the definition of debt.
vii) Minimum Collateral Value. If, in the view
of Lender, with substantiation by an
independent appraisal firm, the Mortgaged
Properties suffer a deterioration in
appraised value such that the ratio of the
Facility Amount to collateral value exceeds
70%, then the Borrower will be required to
pay down outstanding advances (or
restricted from drawing down additional
Revolving Loan Advances) to maintain a
maximum 70% Facility Amount to collateral
value ratio.
viii) Mandatory Prepayment Provision. The
Borrower will be required to use the
proceeds from asset sales (including the
sale of the Mortgaged Properties made with
the consent of the Lender), equity and debt
issuances to repay Facility advances.
ix) Lender's consent will be required for,
among other things, any material changes to
any Marriott or Brookdale Lease Agreement
or Lease Guaranty relating thereto.
x) Except as otherwise permitted to the
Tenants under the Lease Agreements,
Lender's consent will be required for the
following:
a) Any material change in any Mortgaged
Property.
b) Any material design change in any
Mortgaged Property.
c) Any change in the business nature
of any Mortgaged Property or in its
management.
3
<PAGE>
Senior Housing Properties Trust
Summary Terms and Conditions
$350 Million Secured Credit Facility
26 July 1999
Other Provisions: In addition to standard and other appropriate
provisions, the Loan Agreement and the security and
other documents delivered to Lender will include,
but not be limited to, provisions in the following
areas, specifics to be defined:
i) Compensation for increased costs, change in
circumstances and changes in Capital
Adequacy requirements.
ii) Indemnification against loss, claim,
damage, liability, action, cause of action,
cost, expense, judgement or award of any
kind whatsoever in connection with or
otherwise relating to any necessary
documentation and the transactions
contemplated thereby.
iii) Syndication of Lender's obligations.
iv) Defaults and remedies.
Syndication Contingency: Notwithstanding anything to the contrary contained
herein, in the event that syndication of the
Facility cannot be achieved in a manner satisfactory
to Syndicating Agent due to the terms, conditions or
structure of the Facility, Borrower agrees to
cooperate with Dresdner in developing an alternative
structure that will permit satisfactory syndication
of the Facility including, but not limited to,
changing the structure, pricing, financial covenants
and maturity and you agree that Dresdner's
commitment hereunder shall be subject to the
development of such an alternative structure
mutually satisfactory to Dresdner and the Borrower;
provided, however, that the amount of the Facility
shall remain unchanged.
Lender Expenses: All reasonable out-of-pocket charges and expenses
incurred by Syndicating Agent, Administrative Agent
and Lender shall be for the account of HRPT
Properties Trust and payable whether or not this
transaction closes. Such payment shall be due on the
date of closing or earlier upon the determination by
Lender that this transaction will not close.
Lender Legal Counsel: Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, PA
Lender Local Real
Estate Counsel: To be determined.
Legal Costs: All legal costs associated with the preparation,
negotiation and review of all necessary
documentation relating to this transaction incurred
by Lender Legal Counsel and Lender Local Real Estate
Counsel will be for the account of HRPT Properties
Trust, and payable whether or not this transaction
closes. Such payment shall be due on the date of
closing or earlier upon the determination by the
Lender that this transaction will not close.
4
<PAGE>
Senior Housing Properties Trust
Summary Terms and Conditions
$350 Million Secured Credit Facility
26 July 1999
Governing Law: State of New York
Agreed To and Accepted By:
SENIOR HOUSING PROPERTIES TRUST
By: /s/ Ajay Saini
Title: Treasurer & CFO
Date: 7/27/99
5
<PAGE>
Senior Housing Properties Trust
Summary Terms and Conditions
$350 Million Secured Credit Facility
26 July 1999
<TABLE>
<CAPTION>
EXHIBIT A
MARRIOTT INTERNATIONAL PROPERTIES
<S> <C> <C>
1) Villa Valencia 24552 Paseo de Valencia, Laguna Hills, CA
2) Church Creek 1250 West Central Road, Arlington Heights, IL
3) Calusa Harbor 2525 East First Street, Fort Myers, FL
4) The Horizon Club 1208 South Military Trail, Deerfield Beach, FL
5) Brighton Gardens of Scottsdale 6001 East Thomas Road, Scottsdale, FL
6) Brighton Gardens of Sun City 17225 Boswell Boulevard, Sun City, AZ
7) Brighton Gardens of Virginia Beach 5620 Wesleyan Drive, Virginia Beach, VA
8) Brighton Gardens of Bellaire 4620 Bellaire Boulevard, Bellaire, TX
9) The Colonnades 2610 Barracks Road, Charlottesville, VA
10) Stratford Court of Palm Harbor 45 Katherine Boulevard, Palm Harbor, FL
11) Bedford Court 3701 International Drive, Silver Spring, MD
12) The Jefferson 900 North Taylor Road, Arlington, VA
13) Brighton Gardens of Port St. Lucie 1699 SE Lyngate Drive, Port St. Lucie, FL
14) Stratford Court of Boca Raton 6343 Via de Sonrisa del Sur, Boca Raton, FL
</TABLE>
6
<PAGE>
Senior Housing Properties Trust
Summary Terms and Conditions
$350 Million Secured Credit Facility
26 July 1999
EXHIBIT B
BROOKDALE LIVING COMMUNITIES PROPERTIES
1) Springs of East Mesa Mesa, Arizona
2) The Hallmark Chicago, IL
3) Gables of Brighton Rochester, NY
4) Park Place Spokane, WA
7
EXHIBIT 10.5
MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 27, 1996
BY AND BETWEEN
HEALTH AND RETIREMENT PROPERTIES TRUST,
AS LANDLORD,
AND
BLC PROPERTY, INC.,
AS TENANT
<PAGE>
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS......................................................1
1.1 Additional Rent...............................................1
1.2 Additional Charges ...........................................2
1.3 Adjusted Purchase Price.......................................2
1.4 Affiliated Person ............................................2
1.5 Agreement.....................................................2
1.6 Applicable Laws...............................................2
1.7 Award.........................................................3
1.8 Base Revenues.................................................3
1.9 Brookdale.....................................................3
1.10 Business Day..................................................3
1.11 Capital Addition..............................................4
1.12 Capital Additions Cost........................................4
1.13 Change in Control.............................................4
1.14 Code..........................................................5
1.15 Collective Leased Properties..................................5
1.16 Commencement Date.............................................5
1.17 Condemnation..................................................5
1.18 Condemnor.....................................................5
1.19 Consolidated Financials.......................................5
1.20 Date of Taking................................................5
1.21 Declaration...................................................5
1.22 Default.......................................................6
1.23 Distribution..................................................6
1.24 Encumbrance...................................................6
1.25 Entity........................................................6
1.26 Environment...................................................6
1.27 Environmental Obligation......................................6
1.28 Environmental Notice..........................................6
1.29 Environmental Report..........................................6
1.30 Event of Default..............................................6
1.31 Excess Total Revenues.........................................6
1.32 Extended Terms................................................6
1.33 Facility......................................................7
1.34 Facility Mortgage.............................................7
1.35 Facility Mortgagee............................................7
1.36 Facility Trade Name...........................................7
1.37 Fair Market Added Value.......................................7
1.38 Fair Market Value.............................................7
1.39 Fair Market Value Purchase Price..............................7
1.40 Financial Officer's Certificate...............................7
1.41 Fiscal Year...................................................8
1.42 Fixed Term....................................................8
1.43 Fixtures......................................................8
1.44 GAAP..........................................................8
1.45 Government Agencies...........................................8
1.46 Guarantors....................................................8
1.47 Guaranty......................................................8
1.48 Hazardous Substances..........................................8
1.49 Immediate Family..............................................9
1.50 Impositions...................................................9
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1.51 Incidental Documents.........................................10
1.52 Indebtedness.................................................10
1.53 Independent Trustees.........................................10
1.54 Insurance Requirements.......................................10
1.55 Interest Rate................................................10
1.56 Investment...................................................10
1.57 IPO..........................................................11
1.58 Land.........................................................11
1.59 Landlord.....................................................11
1.60 Lease Year...................................................11
1.61 Leased Improvements..........................................11
1.62 Leased Personal Property.....................................11
1.63 Leased Property..............................................11
1.64 Legal Requirements...........................................11
1.65 Lending Institution..........................................12
1.66 Lien.........................................................12
1.67 Management Agreement.........................................12
1.68 Manager......................................................12
1.69 Minimum Rent.................................................12
1.70 Notice.......................................................12
1.71 Officer's Certificate........................................12
1.72 Overdue Rate.................................................12
1.73 Parent.......................................................12
1.74 Permitted Encumbrances.......................................13
1.75 Permitted Liens..............................................13
1.76 Permitted Subleases..........................................13
1.77 Permitted Subtenant..........................................13
1.78 Person.......................................................13
1.79 Pledge and Security Agreement................................13
1.80 Primary Intended Use.........................................13
1.81 Prime........................................................13
1.82 Provider Agreements..........................................13
1.83 Qualified Appraiser..........................................14
1.84 Records......................................................14
1.85 Regulated Medical Wastes.....................................14
1.86 Rent.........................................................14
1.87 Residents' Personal Property.................................14
1.88 SEC..........................................................14
1.89 State........................................................14
1.90 Stock Pledge Agreement.......................................14
1.91 Subordinated Creditor........................................14
1.92 Subordination Agreement......................................14
1.93 Subsidiary...................................................15
1.94 Tangible Net Worth...........................................15
1.95 Tenant.......................................................15
1.96 Tenant's Capital Additions...................................15
1.97 Tenant's Personal Property...................................15
1.98 Term.........................................................15
1.99 Third Party Payor Programs...................................16
1.100 Third Party Payors...........................................16
1.101 Total Revenues...............................................16
1.102 Trustees.....................................................16
1.103 Unsuitable for Its Primary Intended Use......................16
1.104 Work.........................................................17
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ARTICLE 2: COLLECTIVE LEASED PROPERTIES AND TERM...........................17
2.1 Collective Leased Properties..................................17
2.2 Condition of Collective Leased Properties.....................18
2.3 Fixed Term....................................................19
2.4 Extended Term.................................................19
ARTICLE 3: RENT............................................................20
3.1 Rent..........................................................20
3.1.1 Minimum Rent.......................................20
3.1.2 Additional Rent....................................20
3.1.3 Additional Charges.................................23
3.2 Late Payment of Rent..........................................25
3.3 Net Lease.....................................................25
3.4 No Termination, Abatement, Etc................................25
ARTICLE 4: USE OF THE COLLECTIVE LEASED PROPERTIES.........................26
4.1 Permitted Use.................................................26
4.1.1 Primary Intended Use...............................26
4.1.2 Necessary Approvals................................27
4.1.3 Lawful Use, Etc....................................27
4.2 Compliance with Legal and Insurance
Requirements, Etc.........................................27
4.3 Compliance with Medicaid and Medicare Requirements............28
4.4 Environmental Matters.........................................28
4.4.1 Restriction on Use, Etc............................28
4.4.2 Environment Report.................................29
4.4.3 Indemnification of Landlord........................30
4.4.4 Survival...........................................31
ARTICLE 5: MAINTENANCE AND REPAIRS, ETC....................................31
5.1 Maintenance and Repair........................................31
5.1.1 Tenant's Obligations...............................31
5.1.2 Landlord's Obligations.............................32
5.1.3 Nonresponsibility of Landlord; No
Mechanics Liens.................................32
5.2 Tenant's Personal Property....................................33
5.3 Yield Up......................................................33
5.4 Encroachments, Restrictions, Etc..............................35
5.5 Landlord to Grant Easements, Etc..............................35
ARTICLE 6: CAPITAL ADDITIONS, ETC..........................................36
6.2 Capital Additions Financed or Paid For by Tenant..............37
6.2.1 Financing of Capital Additions.....................37
6.2.2 Purchase by Landlord...............................37
6.3 Capital Additions Financed by Landlord........................38
6.4 Non-Capital Additions.........................................39
6.5 Improvement Advances..........................................39
6.6 Salvage.......................................................40
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ARTICLE 7: LIENS...........................................................40
7.1 Liens.........................................................40
7.2 Landlord's Lien...............................................41
ARTICLE 8: PERMITTED CONTESTS..............................................41
ARTICLE 9: INSURANCE AND INDEMNIFICATION...................................42
9.1 General Insurance Requirements................................42
9.2 Replacement Cost..............................................44
9.3 Waiver of Subrogation.........................................44
9.4 Form Satisfactory, Etc........................................44
9.5 Blanket Policy................................................45
9.6 No Separate Insurance.........................................45
9.7 Indemnification of Landlord...................................46
ARTICLE 10: CASUALTY.......................................................47
10.1 Insurance Proceeds...........................................47
10.2 Damage or Destruction........................................47
10.2.1 Damage or Destruction of Leased Property.........47
10.2.2 Partial Damage or Destruction....................48
10.2.3 Insufficient Insurance Proceeds..................48
10.2.4 Disbursement of Proceeds.........................48
10.3 Damage Near End of Term......................................49
10.4 Tenant's Property............................................49
10.5 Restoration of Tenant's Property.............................50
10.6 No Abatement of Rent.........................................50
10.7 Waiver.......................................................50
ARTICLE 11: CONDEMNATION...................................................50
11.1 Total Condemnation, Etc......................................50
11.2 Partial Condemnation.........................................50
11.3 Abatement of Rent............................................51
11.4 Temporary Condemnation.......................................52
11.5 Allocation of Award..........................................52
ARTICLE 12: DEFAULTS AND REMEDIES..........................................52
12.1 Events of Default............................................52
12.2 Remedies.....................................................56
12.3 Tenant's Waiver..............................................58
12.4 Application of Funds.........................................58
12.5 Landlord's Right to Cure Tenant's Default....................59
12.6 Trade Names..................................................59
ARTICLE 13: HOLDING OVER...................................................59
ARTICLE 14: LANDLORD'S DEFAULT.............................................60
ARTICLE 15: PURCHASE OF LEASED PROPERTY....................................60
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ARTICLE 16: SUBLETTING AND ASSIGNMENT......................................61
16.1 Subletting and Assignment....................................61
16.2 Required Sublease Provisions.................................62
16.3 Permitted Sublease...........................................63
16.4 Sublease Limitation..........................................63
ARTICLE 17: ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.................64
17.1 Estoppel Certificates........................................64
17.2 Financial Statements.........................................64
17.3 General Operations...........................................65
17.3.1 Reimbursement, Licensure, Etc....................65
17.3.2 Annual Budgets...................................66
ARTICLE 18: LANDLORD'S RIGHT TO INSPECT....................................66
ARTICLE 19: APPRAISAL......................................................67
19.1 Appraisal Procedure..........................................67
19.2 Landlord's Right to Appraisal................................68
ARTICLE 20: REPRESENTATIONS AND WARRANTIES.................................69
20.1 Representations of Tenant....................................69
20.1.1 Status and Authority of Tenant...................69
20.1.2 Action of Tenant.................................69
20.1.3 No Violations of Agreements......................69
20.1.4 Litigation.......................................70
20.1.5 Disclosure.......................................70
20.1.6 Compliance With Law..............................70
20.1.7 Hazardous Substances.............................70
20.2 Representations of Landlord..................................71
20.2.1 Status and Authority of Landlord.................71
20.2.2 Action of Landlord...............................71
20.2.3 No Violations of Agreements......................71
20.2.4 Litigation.......................................71
ARTICLE 21: FACILITY MORTGAGES.............................................72
21.1 Landlord May Grant Liens.....................................72
21.2 Subordination of Lease.......................................72
21.3 Notice to Mortgagee and Ground Landlord......................73
ARTICLE 22: ADDITIONAL COVENANTS OF TENANT.................................74
22.1 Prompt Payment of Indebtedness...............................74
22.2 Conduct of Business..........................................74
22.3 Maintenance of Accounts and Records..........................74
22.4 Notice of Change of Name, Etc................................74
22.5 Notice of Litigation, Potential Event of
Default, Etc............................................75
22.6 Indebtedness of Tenant.......................................75
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22.7 Financial Condition of Tenant................................76
22.8 Distributions, Payments to Affiliated
Persons, Etc...........................................76
22.9 Prohibited Transactions......................................76
22.10 Management of Collective Leased Properties...................76
22.11 Liens and Encumbrances.......................................77
22.12 Merger; Sale of Assets; Etc..................................77
22.13 Permitted Subleases..........................................78
ARTICLE 23: MISCELLANEOUS..................................................78
23.1 Limitation on Payment of Rent................................78
23.2 No Waiver....................................................78
23.3 Remedies Cumulative..........................................78
23.4 Severability.................................................78
23.5 Acceptance of Surrender......................................79
23.6 No Merger of Title...........................................79
23.7 Conveyance by Landlord.......................................79
23.8 Quiet Enjoyment..............................................79
23.9 NON-LIABILITY OF TRUSTEES....................................80
23.10 Landlord's Consent of Trustees...............................80
23.11 Memorandum of Lease..........................................80
23.12 Notices......................................................80
23.13 Construction.................................................82
23.14 Counterparts; Headings.......................................82
23.15 Applicable Law, Etc..........................................82
23.16 Payment of Fees..............................................83
EXHIBITS
A-1 - A-3 - Legal Descriptions
B - Allocable Purchase Prices
<PAGE>
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT is entered into as of this 27 day of
December, 1996, by and between HEALTH AND RETIREMENT PROPERTIES TRUST, a
Maryland real estate investment trust, having its principal office at 400 Centre
Street, Newton, Massachusetts 02158, as landlord ("Landlord"), and BLC PROPERTY,
INC., a Delaware corporation, having its principal office at 77 West Wacker
Drive, Suite 3900, Chicago, Illinois 60601, as tenant ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord, on the date hereof, is acquiring at the request of
Tenant, fee simple title to the three (3) Collective Leased Properties (this and
other capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Collective Leased Properties to
Tenant and Tenant wishes to lease the Collective Leased Properties from
Landlord, all subject to and upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article shall 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 shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.1 "Additional Rent" shall have the meaning given such term in Section
3.1.2(a).
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1.2 "Additional Charges" shall have the meaning given such term in
Section 3.1.3.
1.3 "Adjusted Purchase Price" shall mean, with respect to any of the
Collective Leased Properties, the allocated purchase price of such Leased
Property as set forth in Exhibit B plus the aggregate amount of all
disbursements made by Landlord with respect to such Leased Property pursuant to
the terms of Section 6.5 of this Agreement, plus any other amount disbursed or
advanced by Landlord to finance, or to reimburse Tenant for its financing of,
any Capital Addition to such Leased Property less the amount of any Award or the
proceeds of any insurance received by Landlord in connection with a partial
Condemnation or a partial casualty involving such Leased Property as described
in Section 11.2 or 10.2.2, and not applied by Landlord to the restoration of
such Leased Property as provided therein.
1.4 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any general partner in such
partnership or any limited partner holding, directly or indirectly, fifty
percent (50%) or more of the partnership interests in such partnership; (b) in
the case of any such Person which is a limited liability company, any member of
such company holding, directly or indirectly, fifty percent (50%) or more of the
membership interests in such company; (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (a) and (b); (d) any
other Person who is an officer, director or trustee of, or partner holding,
directly or indirectly, fifty percent (50%) or more of the partnership interests
in, such Person or any Person referred to in the preceding clauses (a), (b) and
(c); and (e) any other Person who is a member of the Immediate Family of such
Person or of any Person referred to in the preceding clauses (a) through (d).
1.5 "Agreement" shall mean this Master Lease Agreement, including
Exhibits A-1 to A-3 and B hereto, as it and they may be amended from time to
time as herein provided.
1.6 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders (whether now
existing or hereafter enacted or promulgated irrespective of whether its
enactment is foreseeable or contemplated), of all courts of competent
jurisdiction and Government Agencies, and all applicable judicial and
administrative and regulatory decrees, judgments and orders, including common
law rulings and determinations, relating to injury to, or the protection of,
real or personal property or human health (except those requirements which, by
definition, are solely the responsibility of employers) or the Environment,
<PAGE>
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including, without limitation, all valid and lawful requirements of courts and
other Government Agencies pertaining to reporting, licensing, permitting,
investigation, remediation and removal of underground improvements (including,
without limitation, treatment or storage tanks, or water, gas or oil wells), or
emissions, discharges, releases or threatened releases of Hazardous Substances,
chemical substances, pesticides, petroleum or petroleum products, pollutants,
contaminants or hazardous or toxic substances, materials or wastes whether
solid, liquid or gaseous in nature, into the Environment, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances or Regulated Medical Wastes,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.
1.7 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Collective Leased Properties (after deduction of all reasonable legal fees and
other reasonable costs and expenses, including, without limitation, expert
witness fees, incurred by Landlord, in connection with obtaining any such
award).
1.8 "Base Revenues" shall mean, with respect to each Leased Property,
Total Revenues for such Leased Property for the 1998 calendar year; provided,
however, that in the event that, with respect to any Lease Year, or portion
thereof, for any reason (including, without limitation, a taking or casualty
with respect to such Leased Property) there shall be a change in the number of
units available at the applicable Facility or in the services provided at such
Facility from the number of such units or the services provided during the 1998
calendar year, in determining Additional Rent payable with respect to such Lease
Year, Base Revenues shall be adjusted on a proportional basis, based on the
number of units and services remaining after such change; it being understood
and agreed that Base Revenues shall be calculated separately for each Leased
Property and shall not be determined on an aggregate basis for the Collective
Leased Properties.
1.9 "Brookdale" shall mean Brookdale Living Communities, Inc., a
Delaware corporation.
1.10 "Business Day" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
or the State of Illinois are authorized by law or executive action to close.
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1.11 "Capital Addition" shall mean one or more new buildings, or one or
more additional structures annexed to any portion of any of the Leased
Improvements with respect to any of the Collective Leased Properties, or the
material expansion of 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, the renovation of existing improvements on any of the Collective
Leased Properties in order 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 number of units of any
Facility to change the purpose for which such units are utilized or to improve
materially the quality of any Facility.
1.12 "Capital Additions Cost" shall mean the cost of any Capital
Addition proposed to be made by Tenant at any of the Collective Leased
Properties, whether paid for by Tenant or Landlord. Such cost shall include, but
not be limited to, the following: (a) the cost of construction of the Capital
Addition, including site preparation and improvement, materials, labor,
supervision, developer and administrative fees, legal fees, and related design,
engineering and architectural services, the cost of any fixtures, the cost of
equipment and other personalty, the cost of construction financing (including,
but not limited to, capitalized interest) and other miscellaneous costs approved
by Landlord, which approval shall not be unreasonably withheld or delayed (b) if
agreed to by Landlord in writing, in advance, the cost of any land (including
all related acquisition costs incurred by Tenant) contiguous to the applicable
Leased Property which is to become a part of such Leased Property purchased for
the purpose of placing thereon a Capital Addition 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 Addition during
construction, (d) title insurance charges, (e) reasonable attorneys' fees and
expenses, (f) filing, registration and recording taxes and fees, (g) documentary
stamp or transfer taxes, and (h) all actual and reasonable costs and expenses of
Landlord and Tenant and, if agreed to by Landlord in writing, in advance, any
Lending Institution committed to finance the Capital Addition.
1.13 "Change in Control" shall mean the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the SEC) of 50% or more, or rights, options or warrants
to acquire 50% or more, of the outstanding shares of voting stock of Tenant or
any Guarantor, as the case may be, or the merger or consolidation of Tenant or
any Guarantor, as the case may be with or into any other Person or any one or
more sales or conveyances to any
<PAGE>
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Person of all or substantially all of the assets of Tenant or any Guarantor, as
the case may be.
1.14 "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.15 "Collective Leased Properties" shall have the meaning given such
term in Section 2.1.
1.16 "Commencement Date" shall mean the date of this Agreement.
1.17 "Condemnation" shall mean, with respect to any of the Collective
Leased Properties, (a) the exercise of any governmental power with respect to
such Leased Property, whether by legal proceedings or otherwise, by a Condemnor
of its power of condemnation; (b) a voluntary sale or transfer of such Leased
Property by Landlord 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, whether or not the same shall have actually been commenced.
1.18 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
1.19 "Consolidated Financials" shall mean, for any Fiscal Year or other
accounting period of Prime and its consolidated subsidiaries prior to the IPO
and of Brookdale and its consolidated subsidiaries subsequent to the IPO, annual
audited and quarterly unaudited financial statements prepared on a consolidated
basis, including Prime's or Brookdale's, as the case may be, consolidated
balance sheet and the related statements of income and cash flows, all in
reasonable detail, and setting forth in comparative form the corresponding
figures for the corresponding period in the preceding Fiscal Year, and prepared
in accordance with GAAP throughout the periods reflected.
1.20 "Date of Taking" shall mean, as to any of the Collective Leased
Properties, the date the Condemnor has the right to possession of such Leased
Property, or any portion thereof, in connection with a Condemnation.
1.21 "Declaration" shall mean the Declaration of Trust establishing
Landlord, dated October 9, 1986, as amended and restated from time to time.
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1.22 "Default" shall mean any event or condition which with the giving
of notice and/or lapse of time may ripen into an Event of Default.
1.23 "Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, (b) any purchase,
redemption, retirement or other acquisition of any shares of any class of
capital stock of a corporation, (c) any other distribution on or in respect of
any shares of any class of capital stock of a corporation, or (d) any return of
capital to shareholders.
1.24 "Encumbrance" shall have the meaning given such term in Section
21.1.
1.25 "Entity" shall mean any general partnership, limited partnership,
limited liability company or partnership, corporation, joint venture, trust,
business trust, cooperative or association.
1.26 "Environment" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
1.27 "Environmental Obligation" shall have the meaning given such term
in Section 4.4.1.
1.28 "Environmental Notice" shall have the meaning given such term in
Section 4.4.1.
1.29 "Environmental Report" shall have the meaning given such term in
Section 4.4.2.
1.30 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.31 "Excess Total Revenues" shall mean, for each Leased Property, with
respect to any Lease Year, or portion thereof, the amount, if any, of Total
Revenues for such Leased Property for such Lease Year, or portion thereof, in
excess of Base Revenues for the equivalent period; it being understood and
agreed that Excess Total Revenues shall be calculated separately for each Leased
Property and shall not be calculated at an aggregate basis with respect to the
Collective Leased Properties.
1.32 "Extended Terms" shall have the meaning given such term in Section
2.4.
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1.33 "Facility" shall mean, with respect to any of the Collective
Leased Properties, the senior housing facility being operated or proposed to be
operated on such Leased Property.
1.34 "Facility Mortgage" shall mean, with respect to any of the
Collective Leased Properties, any Encumbrance placed upon such Leased Property
in accordance with Article 21.
1.35 "Facility Mortgagee" shall mean the holder of any Facility
Mortgage.
1.36 "Facility Trade Name" shall mean, with respect to any Facility,
any name under which Tenant has conducted the business of operating such
Facility at any time during the Term.
1.37 "Fair Market Added Value" shall mean, with respect to any of the
Collective Leased Properties, the Fair Market Value of such Leased Property
(including all Capital Additions) less the Fair Market Value of such Leased
Property determined as if no Tenant's Capital Additions had been constructed.
1.38 "Fair Market Value" shall mean, with respect to any of the
Collective Leased Properties, the price that a willing buyer not compelled to
buy would pay a willing seller not compelled to sell for such Leased Property,
(a) assuming the same is unencumbered by this Agreement, (b) determined by
agreement between Landlord and Tenant or, failing agreement, the appraisal
procedures set forth in Article 19, and (c) not taking into account any
reduction in value resulting from any indebtedness to which such Leased Property
is subject.
1.39 "Fair Market Value Purchase Price" shall mean, with respect to any
of the Collective Leased Properties, the Fair Market Value of such Leased
Property less the Fair Market Added Value.
1.40 "Financial Officer's Certificate" shall mean, as to any Person, a
certificate of the chief financial officer of such Person, duly authorized,
accompanying the financial statements required to be delivered by such Person
pursuant to Section 17.2, in which such officer shall certify (a) that, to such
officer's knowledge, such statements have been properly prepared in accordance
with GAAP and are true, correct and complete in all material respects and fairly
present the consolidated financial condition of such Person at and as of the
dates thereof and the results of its and their operations for the periods
covered thereby, and (b) that such officer has reviewed this Agreement and, to
such officer's knowledge, has no knowledge of any Default or Event of Default
hereunder.
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-8-
1.41 "Fiscal Year" shall mean the twelve (12) month period from January
1 to December 31.
1.42 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.43 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.44 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.45 "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Collective Leased Properties or any portion thereof or the Facilities operated
thereon.
1.46 "Guarantors" shall mean, collectively, each and every guarantor of
Tenant's obligations under this Agreement, and each such guarantor's successors
and assigns.
1.47 "Guaranty" shall mean any guaranty agreement executed by a
Guarantor in favor of Landlord, together with all modifications, amendments or
supplements thereto.
1.48 "Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or
"contaminant" under any present or future federal, state or local
statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. et seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.) and the
regulations promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission,
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board, agency or instrumentality of the United States, any state of the
United States, or any political subdivision thereof; or
(d) the presence of which on any of the Collective Leased
Properties causes or threatens to cause a violation of Applicable Laws
upon such Leased Property or to adjacent properties or poses or
threatens to pose a hazard to any of the Collective Leased Properties
or to the health or safety of persons on or about any of the Collective
Leased Properties; or
(e), without limitation, which contains gasoline, diesel fuel
or other petroleum hydrocarbons or volatile organic compounds; or
(f), without limitation, which contains polychlorinated
biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
(g), without limitation, which contains or emits radioactive
particles, waves or material; or
(h), without limitation, constitutes Regulated Medical Wastes.
1.49 "Immediate Family" shall mean, with respect to any individual,
such individual's spouse, parents, brothers, sisters, children (natural or
adopted), stepchildren, grandchildren, grandparents, parents- in-law,
brothers-in-law, sisters-in-law, nephews and nieces.
1.50 "Impositions" shall mean, with respect to any of the Collective
Leased Properties, 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 Landlord, Tenant or the business conducted upon such Leased
Property), assessments (including, without limitation, all assessments for
public improvements or benefit, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), water,
sewer or other rents and charges, excises, tax levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees) and all
other governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of such
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
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respect of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon (a) Landlord'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 or possession of, or
sales from, or 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, that nothing contained herein shall be construed to require
Tenant to pay (i) any tax based on net income imposed on Landlord, (ii) any net
revenue tax of Landlord, (iii) any transfer fee or other tax imposed with
respect to the sale, exchange or other disposition by Landlord of the applicable
Leased Property or the proceeds thereof (other than in connection with the sale,
exchange or other disposition to, or in connection with a transaction involving,
Tenant), or (iv) any single business, gross receipts (other than a tax on any
rent received by Landlord from Tenant), transaction privilege, rent or similar
taxes as the same relate to or are imposed upon Landlord, 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 (i) or (ii) preceding is
levied, assessed or imposed expressly in lieu thereof.
1.51 "Incidental Documents" shall mean, collectively, the Guaranty, the
Stock Pledge Agreement, the Pledge and Security Agreement and the side letter
agreement of even date.
1.52 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
1.53 "Independent Trustees" shall mean Trustees who, in their
individual capacity, are not Affiliated Persons as to Tenant and do not perform
any services for Landlord except as Trustees.
1.54 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Agreement and all requirements of the issuer of any such
policy.
1.55 "Interest Rate" shall mean a compounded rate of interest of eleven
percent (11%) per annum.
1.56 "Investment" shall mean all loans, advances, extensions of credit
(except for accounts and notes receivable for merchandise sold or services
furnished in the ordinary course of business, and amounts paid in advance on
account of the purchase price of merchandise to be delivered to the payor within
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one year of the date of the advance), or purchases of stock, notes, bonds or
other securities or evidences of indebtedness or capital contribution to any
Person, whether in cash or other property. The amount of an Investment shall be
its cost (the amount of cash or the fair market value of other property given in
exchange therefor), whether or not written or charged off or sold or otherwise
disposed of, except to the extent such cost shall have been paid to Tenant by a
Person in which Tenant had no present or prospective financial interest at the
time of such payment.
1.57 "IPO" shall mean the initial public offering of the stock of
Brookdale as contemplated by Form S-1 Registration Statement No. 333-12259, a
true, correct and complete copy of which has heretofore been delivered by Tenant
to Landlord, as the same may be amended from time to time, with Landlord's prior
written consent with respect to any amendments affecting the Collective Leased
Properties or Total Revenues, which consent shall not be unreasonably withheld,
delayed or conditioned.
1.58 "Land" shall have the meaning given such term in Section 2.1(a).
1.59 "Landlord" shall have the meaning given such term in the preambles
to this Agreement.
1.60 "Lease Year" shall mean each calendar year, or portion thereof,
during the term, commencing with the 1997 calendar year.
1.61 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.62 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.63 "Leased Property" shall mean any one of the Collective Leased
Properties.
1.64 "Legal Requirements" shall mean, with respect to any of the
Collective Leased Properties, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting such Leased Property or the maintenance,
construction, alteration or operation thereof, whether now or hereafter enacted
or in existence, including, without limitation, (a) all permits, licenses,
certificates of need, authorizations and regulations necessary to operate such
Leased Property for its Primary Intended Use, and (b) all covenants, agreements,
restrictions and encumbrances contained in any instruments at any time in force
affecting such Leased Property, including those (i) which may require material
repairs, modifications or alterations in or to
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such Leased Property or (ii) with respect to which a violation thereof would in
any way adversely affect the use and enjoyment thereof.
1.65 "Lending Institution" shall mean 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, real estate
investment trust, including any corporation qualified to be treated for federal
tax purposes as a real estate investment trust, such trust having a net worth of
at least $100,000,000, brokerage house or other entity in the business of making
loans.
1.66 "Lien" shall mean any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind, or any
transfer of any property or assets for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors.
1.67 "Management Agreement" shall mean any agreement whether written or
oral entered into between Tenant and any other party (including any Affiliated
Person as to Tenant) pursuant to which management services are provided to any
Facility, together with all amendments, modifications or supplements thereto.
1.68 "Manager" shall mean the management party under any Management
Agreement.
1.69 "Minimum Rent" shall mean (a) with respect to the period
commencing on the Commencement Date and expiring December 31, 1997, $692,709 per
month; (b) with respect to the 1998 Lease Year, $729,167 per month; (c) with
respect to the 1999 Lease Year, $765,625 per month; and (d) with respect to the
2000 Lease Year and each Lease Year thereafter (including each Lease Year during
any Extended Term), $802,084 per month.
1.70 "Notice" shall mean a notice given in accordance with Section
23.12.
1.71 "Officer's Certificate" shall mean a certificate signed by an
officer of Tenant duly authorized by the board of directors of Tenant.
1.72 "Overdue Rate" shall mean, on any date, a per annum rate of
interest equal to the lesser of fifteen percent (15%) and the maximum rate then
permitted under applicable law.
1.73 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly through one or more
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Subsidiaries or Affiliated Persons, fifty percent (50%) or more of the voting or
beneficial interest in, or otherwise has the right or power (whether by
contract, through ownership of securities or otherwise) to control, such Person.
1.74 "Permitted Encumbrances" shall mean, with respect to any of the
Collective Leased Properties, all rights, restrictions, and easements of record
set forth on Schedule B to the applicable owner's title insurance policy issued
to Landlord on the date hereof, this Lease, the Permitted Subleases and any
other such encumbrances as may have been granted or caused by Landlord or
otherwise consented to in writing by Landlord from time to time.
1.75 "Permitted Liens" shall mean any Liens granted in accordance with
Section 22.11(a).
1.76 "Permitted Subleases" shall mean those Sublease Agreements, dated
as of the date hereof, between Tenant, as sublandlord, and the Permitted
Subtenants, as tenant.
1.77 "Permitted Subtenant" shall mean (a) Brookdale Living Communities
of Illinois, Inc., a Delaware corporation, with respect to the Leased Property
located in Chicago, Illinois; (b) Brookdale Living Communities of New York,
Inc., a Delaware corporation, with respect to the Leased Property located in
Brighton, New York; and (c) Brookdale Living Communities of Arizona, Inc., a
Delaware corporation, with respect to the Leased Property located in East Mesa,
Arizona.
1.78 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits.
1.79 "Pledge and Security Agreement" shall mean the Pledge and Security
Agreement, dated as of the date hereof, made by Tenant and the Permitted
Subtenants for the benefit of Landlord.
1.80 "Primary Intended Use" shall have the meaning given such term in
Section 4.1.1.
1.81 "Prime" shall mean The Prime Group, Inc., an Illinois corporation.
1.82 "Provider Agreements" shall mean all participation, provider and
reimbursement agreements or arrangements now or hereafter in effect for the
benefit of Tenant in connection with the operation of any Facility relating to
any right of payment or other claim arising out of or in connection with
Tenant's participation in any Third Party Payor Program.
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1.83 "Qualified Appraiser" shall mean an appraiser who is not in
control of, controlled by or under common control with either Landlord or Tenant
and has not been an employee of Landlord or Tenant or any Affiliated Person with
respect to either of Landlord or Tenant at any time during the ten (10) year
period preceding the relevant date, who is qualified to appraise commercial real
estate in the State and is a member of the American Institute of Real Estate
Appraisers (or any successor association or body of comparable standing if such
Institute is not then in existence) and who has held his or her certificate as
an M.A.I. or its equivalent for a period of not less than three (3) years, and
has been actively engaged in the appraisal of commercial real estate in such
area for a period of not less than five (5) years, immediately preceding his or
her appointment hereunder.
1.84 "Records" shall have the meaning given such term in Section 7.2.
1.85 "Regulated Medical Wastes" shall mean all materials generated by
Tenant, subtenants, patients, occupants or the operators of the Collective
Leased Properties which are now or may hereafter be subject to regulation
pursuant to the Material Waste Tracking Act of 1988, or any Applicable Laws
promulgated by any Governmental Agencies.
1.86 "Rent" shall mean, collectively, the Minimum Rent, Additional Rent
and Additional Charges.
1.87 "Residents' Personal Property" shall mean such items of furniture,
clothing and other personalty as are the property of any of the residents of any
of the units at any of the Collective Leased Properties.
1.88 "SEC" shall mean the Securities and Exchange Commission.
1.89 "State" shall mean the State in which the applicable Leased
Property is located.
1.90 "Stock Pledge Agreement" shall mean the Stock Pledge and Security
Agreement, dated as of the date hereof, made by Prime Group Limited Partnership,
an Illinois limited partnership, and Tenant to Landlord.
1.91 "Subordinated Creditor" shall mean any creditor of Tenant which is
a party to a Subordination Agreement in favor of Landlord.
1.92 "Subordination Agreement" shall mean any agreement executed by a
Subordinated Creditor pursuant to which the payment
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and performance of Tenant's obligations to such Subordinated Creditor are
subordinated to the payment and performance of Tenant's obligations to Landlord
under this Agreement.
1.93 "Subsidiary" shall mean, with respect to any Person, any Entity
(a) in which such Person owns directly, or indirectly through one or more
Subsidiaries, fifty percent (50%) or more of the voting or beneficial interest
or (b) which such Person otherwise has the right or power to control (whether by
contract, through ownership of securities or otherwise).
1.94 "Tangible Net Worth" shall mean the excess of total assets over
total liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total
assets: (a) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles; (b) all
deferred charges or unamortized debt discount and expense; (c) all reserves
carried and not deducted from assets; (d) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary; (e) securities which are not readily marketable; (f) any
write-up in the book value of any asset resulting from a revaluation thereof
subsequent to the Commencement Date; and (g) any items not included in clauses
(a) through (g) above that are treated as intangibles in conformity with GAAP.
1.95 "Tenant" shall have the meaning given such term in the preambles
to this Agreement.
1.96 "Tenant's Capital Additions" shall have the meaning given such
term in Section 6.2.2.
1.97 "Tenant's Personal Property" shall mean all motor vehicles and
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other personal property of Tenant
acquired by Tenant on and after the date hereof and located at any of the
Collective Leased Properties or used in Tenant's business at any of the
Collective Leased Properties and all modifications, replacements, alterations
and additions to such personal property installed at the expense of Tenant.
1.98 "Term" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement.
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1.99 "Third Party Payor Programs" shall mean all third party payor
programs in which Tenant presently or in the future may participate, including,
without limitation, Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield,
Managed Care Plans, other private insurance programs and employees assistance
programs.
1.100 "Third Party Payors" shall mean Medicare, Medicaid, CHAMPUS, Blue
Cross and/or Blue Shield, private insurers and any other Person which presently
or in the future maintains Third Party Payor Programs.
1.101 "Total Revenues" shall mean, with respect to each Leased
Property, all revenues (determined on an accrual basis in accordance with GAAP)
received or receivable from or by reason of the operation of the Facility
located on the applicable Leased Property, or any portion thereof, or any other
use of such Leased Property, or any portion thereof, including, without
limitation, all resident rents and revenues received or receivable for the use
of or otherwise by reason of all units, beds and other facilities provided,
meals served, services performed, space or facilities subleased or goods sold on
such Leased Property, or any portion thereof, including, without limitation, and
except as provided below, any other arrangements with third parties relating to
the possession or use of any portion of such Leased Property; provided, however,
that Total Revenues shall not include: (a) allowances according to GAAP for
uncollectible accounts, including credit accounts and charity care and other
administrative discounts; (b) revenue from professional fees or charges by
physicians and unaffiliated providers of services, when and to the extent such
charges are paid over to such physicians or unaffiliated providers of services,
or are separately billed and not included in comprehensive fees; (c)
non-operating revenues such as interest income or income from the sale of assets
not sold in the ordinary course of business; (d) revenues attributable to
services actually provided off-site or otherwise away from such Facility, such
as home health care, to persons that are not residents of such Facility; and (e)
security deposits of residents of such Facility; it being understood and agreed
that Total Revenues shall be calculated separately for each Leased Property and
shall not be determined on an aggregate basis for the Collective Leased
Properties.
1.102 "Trustees" shall mean the trustees of Landlord.
1.103 "Unsuitable for Its Primary Intended Use" shall mean, with
respect to any Facility, a state or condition of such Facility, such that (a)
following any damage or destruction involving such Leased Property, such Leased
Property cannot reasonably be expected to be restored to substantially the same
condition as existed immediately before such damage or
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destruction, and as otherwise required by Section 10.2.4, within twelve (12)
months following such damage or destruction or such other period of time as to
which business interruption insurance is available to cover Rent and other costs
related to such Leased Property following such damage or destruction; or (b) as
the result of a partial taking by Condemnation, such Facility or Leased
Improvements, as the case may be, cannot be operated, in the good faith judgment
of Landlord and Tenant, on a commercially practicable basis for its Primary
Intended Use taking into account, among other relevant factors, the number of
usable units, the amount of square footage or the revenues affected by such
damage or destruction or partial taking.
1.104 "Work" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2
COLLECTIVE LEASED PROPERTIES AND TERM
2.1 Collective Leased Properties. Upon and subject to the terms and
conditions hereinafter set forth, Landlord leases to Tenant and Tenant leases
from Landlord all of the following (collectively, the "Collective Leased
Properties"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibits A-1 to A-3, attached hereto
and made a part hereof (the "Land");
(b) all buildings, structures, Fixtures and other improvements of
every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and
lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings and structures presently
situated upon the Land and all Capital Additions other than
Tenant's Capital Additions (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter 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
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and fire and theft protection equipment, all of which, to the
maximum 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 (collectively, the
"Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other
personal property of any kind or description used or useful in
Tenant's business on or in the Leased Improvements, and
located on or in the Leased Improvements, and all
modifications, replacements, alterations and additions to such
personal property, except items, if any, included within the
category of Fixtures, but specifically excluding all items
included within the category of Tenant's Personal Property and
Residents' Personal Property (collectively, the "Leased
Personal Property"); and
(f) all leases of space (including any security deposits held by
Tenant pursuant thereto) in the Leased Improvements to tenants
thereof.
2.2 Condition of Collective Leased Properties. Tenant acknowledges
receipt and delivery of possession of the Collective Leased Properties and
Tenant accepts the Collective Leased Properties in their "as is" condition,
subject to the rights of parties in possession, the existing state of title,
including all covenants, conditions, restrictions, reservations, mineral leases,
easements and other matters of record or that are visible or apparent on the
Collective Leased Properties, all applicable Legal Requirements, the lien of
financing instruments, mortgages and deeds of trust, and such other matters
which would be disclosed by an inspection of the Collective Leased Properties
and the record title thereto or by an accurate survey thereof. TENANT REPRESENTS
THAT IT HAS INSPECTED THE COLLECTIVE LEASED PROPERTIES AND ALL OF THE FOREGOING
AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH
RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN
RESPECT OF THE CONDITION OF THE COLLECTIVE LEASED PROPERTIES. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE COLLECTIVE
LEASED PROPERTIES OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN
OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY
OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT
ALL SUCH RISKS
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ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law, however,
Landlord hereby assigns to Tenant all of Landlord's rights to proceed against
any predecessor in title for breaches of warranties or representations, whether
by contract, at law or in equity, or for latent defects in the Collective Leased
Properties. Landlord shall fully cooperate with Tenant in the prosecution of any
such claims, in Landlord's or Tenant's name, all at Tenant's sole cost and
expense. Tenant shall indemnify, defend, and hold harmless Landlord from and
against any loss, cost, damage or liability (including reasonable attorneys'
fees) incurred by Landlord in connection with such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and expire December 31, 2019.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing and this Agreement shall be in full force and effect,
Tenant shall have the right to extend the Term for two consecutive twenty-five
(25) year renewal terms (collectively, the "Extended Terms").
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Terms. If Tenant shall elect to exercise either
of the aforesaid options, it shall do so by giving Landlord Notice thereof not
later than two (2) years prior to the scheduled expiration of the then current
Term of this Agreement (Fixed or Extended, as the case may be), it being
understood and agreed that time shall be of the essence with respect to the
giving of such Notice. Tenant may not exercise its option for more than one such
Extended Term at a time. If Tenant shall fail to give any such Notice, this
Agreement shall automatically terminate at the end of the Term then in effect
and Tenant shall have no further option to extend the Term of this Agreement. If
Tenant shall give such Notice, the extension of this Agreement shall be
automatically effected without the execution of any additional documents; it
being understood and agreed, however, that Tenant and Landlord shall execute
such documents and agreements as either party shall reasonably require to
evidence the same.
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ARTICLE 3
RENT
3.1 Rent. Tenant shall pay to Landlord, in lawful money of the United
States of America which shall be legal tender for the payment of public and
private debts, without offset, abatement, demand or deduction, Minimum Rent,
Additional Rent and Additional Charges, during the Term, except as hereinafter
expressly provided. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion. Rent for any partial month shall be prorated on a per diem
basis based on a 360 day year consisting of twelve (12) 30-day months.
3.1.1 Minimum Rent:
(a) During Term. Minimum Rent shall be paid in advance on the
first day of each calendar month; provided, however, that the payment
of Minimum Rent with respect to any partial month in which the
Commencement Date occurs and the first full month of the Fixed Term
shall be payable on the Commencement Date.
(b) Adjustments of Minimum Rent Following Disbursements Under
Section 6.5. Effective on the date of each disbursement to pay for the
cost of any renovations pursuant to Section 6.5, the Minimum Rent shall
be increased, effective on the date of such disbursement, to an annual
sum equal to the product of the amount advanced and the Interest Rate.
If any such disbursement is made during any calendar month on a day
other than the first day of a calendar month, Tenant shall pay to
Landlord on the first day of the immediately following calendar month
(in addition to the amount of Minimum Rent payable with respect to such
month, as adjusted pursuant to this paragraph (b)) the amount by which
Minimum Rent for the preceding month, as adjusted for such
disbursement, exceeded the amount of Minimum Rent payable by Tenant for
such preceding month without giving effect to such adjustment.
3.1.2 Additional Rent:
(a) Amount. For each Lease Year or portion thereof during the
Term, commencing with the Lease Year beginning January 1, 1999, Tenant
shall pay, with respect to each Leased Property, additional rent
("Additional Rent") with respect to such Lease Year equal to the
greatest of (x) ten percent (10%) of Excess Total Revenues for such
Leased Property for such Lease Year; (y) the Additional Rent payable in
the immediately preceding Lease Year less the
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Variable Factor Amount (as hereinafter defined); and (z) zero.
As used herein, "Variable Factor Amount" shall mean an amount equal to
twenty-five percent (25%) of the amount of Additional Rent payable for the
applicable Leased Property for the last Lease Year for which Additional Rent was
payable pursuant to clause (x) above. For calculations of Additional Rent for
periods of less than a full calendar year, the Variable Factor Amount shall be
adjusted proportionately.
(b) Monthly Installments. Installments of Additional Rent for
any each Lease Year or portion thereof shall be calculated and paid
monthly in arrears based on the amount of Additional Rent payable for
the preceding Lease Year.
(c) Date of Payment of Additional Rent. Tenant shall deliver
to Landlord an Officer's Certificate setting forth the calculation of
Additional Rent due and payable for each Leased Property for each month
of any Lease Year. Each monthly payment of Additional Rent is due and
payable and shall be delivered to Landlord, together with such
Officer's Certificate, together with the applicable installment of the
Minimum Rent and shall be payable in the manner hereinabove provided
for payment of Minimum Rent.
(d) Reconciliation of Additional Rent. In addition, on or
before March 31, of each year, commencing March 31, 1998, Tenant shall
deliver to Landlord certified audits of Tenant's financial operations
for the preceding Lease Year, together with a certificate from
certified public accountants reasonably acceptable to Landlord, in form
reasonably acceptable to Landlord, setting forth the Total Revenues for
each Leased Property for such preceding Lease Year and such other
matters as Landlord may from time to time reasonably request.
If the annual Additional Rent for the Collective Leased
Properties for such preceding Lease Year as shown in the year-end
certificate exceeds the amount previously paid with respect thereto by
Tenant, Tenant shall pay such excess to Landlord at such time as the
certificate is delivered, together with interest at the Interest Rate,
which interest shall accrue from the close of such preceding Lease Year
until the date paid. If the Annual Additional Rent for the Collective
Leased Properties for such preceding Lease Year as shown in the
year-end certificate is less than the amount previously paid with
respect thereto by Tenant, provided that no Event of Default has
occurred and is continuing, Landlord shall grant Tenant a credit equal
to the amount of such overpayment against Additional Rent next coming
due in the amount of such overpayment, as finally agreed or determined.
If such a credit cannot be made because the
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Term has expired before such credit can be effected, provided that no
Event of Default has occurred and is continuing, Landlord shall pay the
amount of such difference to Tenant. If an Event of Default has
occurred, Landlord shall apply such amounts to amounts due and owing
under this Agreement and to the costs of collection of the same and
shall pay any excess to Tenant.
(e) Confirmation of Additional Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for the Collective Leased
Properties in accordance with its usual and customary practices and in
accordance with GAAP, which will accurately record all Total Revenues,
and shall employ Ernst & Young LLP or other independent accountants
reasonably acceptable to Landlord, and Tenant shall retain, for at
least five (5) years after the expiration of each Lease Year,
reasonably adequate records conforming to such accounting system
showing all Total Revenues for such Lease Year. Landlord, at its own
expense except as provided hereinbelow, shall have the right from time
to time by its accountants or representatives to audit the information
set forth in the Officer's Certificate referred to in subparagraph (c)
above or the year-end certificate referred to in subparagraph (d) above
and, in connection with such audits, to examine Tenant's books and
records (upon reasonable notice during customary business hours) with
respect thereto (including supporting data and sales and excise tax
returns) subject to any prohibitions or limitations on disclosure of
any such data under applicable law or regulations, including such
limitations as may be necessary to preserve the confidentiality of the
facility-patient relationship and the physician-patient privilege
and/or other similar privilege or confidentiality obligations. If any
such audit discloses that the Total Revenues actually received by
Tenant for any Lease Year exceed those reported by Tenant by more than
three percent (3%), Tenant shall pay the reasonable cost of such audit
and examination. If any such audit discloses that Tenant paid more
Additional Rent for any Lease Year than was due hereunder, provided no
Event of Default has occurred and is continuing, Landlord shall grant
Tenant a credit equal to the amount of such overpayment against
Additional Rent next coming due in the amount of such difference. If
such a credit cannot be made because the Term has expired before such
credit can be effected, provided that no Event of Default has occurred
and is continuing, Landlord shall pay the amount of such difference to
Tenant. If an Event of Default has occurred, Landlord shall apply such
amounts to amounts due and owing under this Agreement and to the costs
of collection of the same and shall pay any excess to Tenant.
<PAGE>
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Any proprietary information obtained by Landlord pursuant to
the provisions of this Agreement shall be treated as confidential,
except that such information may be used, subject to appropriate
confidentiality safeguards, in any litigation between the parties and
except further that Landlord may disclose such information to its
prospective lenders. The obligations of Tenant and Landlord contained
in this Section 3.1.2 shall survive the expiration or earlier
termination of this Agreement.
3.1.3 Additional Charges. In addition to the Minimum Rent and
Additional Rent payable hereunder, Tenant shall pay and discharge as and when
due and payable the following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to Permitted
Contests, Tenant shall pay, or cause to be paid, all Impositions before
any fine, penalty, interest or cost (other than any opportunity cost as
a result of a failure to take advantage of any discount for early
payment) may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible, and shall promptly,
upon request, furnish to Landlord 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), Tenant may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, subject to Article 8 relating to
Permitted Contests, shall pay such installments which are due during or
with respect to periods occurring during the Term as the same become
due and before any fine, penalty, premium, further interest or cost may
be added thereto. Landlord, at its expense, shall, to the extent
required or permitted by applicable law, prepare and file all tax
returns in respect of Landlord's net income, gross receipts, sales and
use, single business, transaction privilege, rent, ad valorem,
franchise taxes and taxes on its capital stock, and Tenant, at its
expense, shall, to the extent required or 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 Government Agencies.
Provided no Event of Default shall have occurred and be continuing, 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 an Event of Default has occurred, Landlord shall apply
such amounts to amounts due and owing under this Agreement and to the
costs of collection of the same and shall pay any excess to Tenant.
Landlord and Tenant shall, upon request of the other, provide such data
as is maintained by the party to whom the request is made with
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respect to the Collective Leased Properties as may be necessary to
prepare any required returns and reports. In the event Government
Agencies classify any property covered by this Agreement as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Each party shall, to the
extent it possesses the same, provide the other, upon request, with
cost and depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord is legally
required to file personal property tax returns, Landlord shall provide
Tenant with copies of assessment notices in sufficient time for Tenant
to file a protest. All Impositions assessed against such personal
property shall be (irrespective of whether Landlord or Tenant shall
file the relevant return) paid by Tenant not later than the last date
on which the same may be made without interest or penalty, subject to
the provisions of Article 8 relating to Permitted Contests. If the
provisions of any Facility Mortgage require deposits on account of
Impositions to be made with such Facility Mortgagee, provided the
Facility Mortgagee has not elected to waive such provision, Tenant
shall either pay Landlord the monthly amounts required at the time and
place that payments of Minimum Rent are required and Landlord shall
transfer such amounts to such Facility Mortgagee or, pursuant to
written direction by Landlord, Tenant shall make such deposits directly
with such Facility Mortgagee and any interest paid to Landlord with
respect thereto shall be credited to Tenant.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has
knowledge; provided, however, that Landlord's failure to give any such
notice shall in no way diminish Tenant's obligation hereunder to pay
such Impositions, except that Tenant shall not be obligated to pay any
late charges or penalties attributable to Landlord's failure to give
such Notice promptly to Tenant.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities
used in connection with the Collective Leased Properties.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained
pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations which Tenant assumes or
agrees to pay under this Agreement, including, without limitation, all
agreements to indemnify Landlord under Sections 4.4 and 9.7.
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(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar Additional Charges
attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement (other than
termination following an Event of Default) and Tenant has not exercised
its right to purchase the Collective Leased Properties as provided
herein, Tenant may, within sixty (60) days of the end of the Term,
provide Notice to Landlord of its estimate of such amounts. Landlord
shall promptly reimburse Tenant for all payments of such taxes and
other similar Additional Charges that are attributable to any period
after the Term of this Agreement (unless this Agreement shall have been
terminated following an Event of Default). If an Event of Default has
occurred, Landlord shall apply such amounts to amounts due and owing
under this Agreement and to the costs of collection of the same and
shall pay any excess to Tenant.
3.2 Late Payment of Rent. If any installment of Minimum Rent,
Additional Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid on its due date,
Tenant shall pay Landlord, on demand, as Additional Charges, a late charge (to
the extent permitted by law) computed at the Overdue Rate 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 directly to
Landlord or any Facility Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due.
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 which may be added for non-payment or late
payment of such items. Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in this Agreement or by statute or
otherwise in the case of non-payment of the Additional Charges as in the case of
non-payment of the Minimum Rent and Additional Rent.
3.3 Net Lease. The Minimum Rent and Additional Rent shall be absolutely
net to Landlord so that this Agreement shall yield to Landlord the full amount
of the installments or amounts of Minimum Rent and Additional Rent throughout
the Term, subject to any other provisions of this Agreement which expressly
provide for adjustment or abatement of such Rent.
3.4 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Agreement, Tenant, to the maximum extent permitted by law,
shall remain bound by this Agreement in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate
<PAGE>
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this Agreement, nor seek, nor be entitled to any abatement, deduction, deferment
or reduction of the Rent, or set-off against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a) any
damage to or destruction of any of the Collective Leased Properties or any
portion thereof from whatever cause or any Condemnation; (b) the lawful or
unlawful prohibition of, or restriction upon, Tenant's use of any of the
Collective Leased Properties, or any portion thereof, or the interference with
such use by any Person or by reason of eviction by paramount title; (c) any
claim which Tenant may have against Landlord by reason of any default or breach
of any warranty by Landlord under this Agreement; (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Landlord or any assignee or transferee
of Landlord; or (e) for any other cause whether similar or dissimilar to any of
the foregoing. Tenant hereby waives all rights arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law, to (a)
modify, surrender or terminate this Agreement or quit or surrender any of the
Collective Leased Properties or any portion thereof; or (b) entitle Tenant to
any abatement, reduction, suspension or deferment of the Rent or other sums
payable or other obligations to be performed by Tenant hereunder, except as
otherwise specifically provided in this Agreement. The obligations of 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,
modified or amended pursuant to the express provisions of this Agreement.
ARTICLE 4
USE OF THE COLLECTIVE LEASED PROPERTIES
4.1 Permitted Use.
4.1.1 Primary Intended Use. Tenant shall, at all times during
the Term and at any other time that Tenant shall be in possession of
any Leased Property, continuously use each of the Collective Leased
Properties as a senior housing and assisted living facility and for
such other uses as may be related, incidental or necessary thereto
(such use being hereinafter referred to as such Leased Property's
"Primary Intended Use"). Except for uses as provided and described in
Section 16.3, Tenant shall not use any of the Collective Leased
Properties or any portion thereof for any other use without the prior
written consent of Landlord. No use shall be made or permitted to be
made of any of the Collective Leased Properties and no acts shall be
done thereon which will cause the cancellation of any insurance policy
covering any of the Collective Leased Properties or
<PAGE>
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any part thereof (unless another adequate policy is available), nor
shall Tenant sell or otherwise provide to residents or patients
therein, or permit to be kept, used or sold in or about any of the
Collective Leased Properties any article which may be prohibited by law
or by the standard form of fire insurance policies, or any other
insurance policies required to be carried hereunder, or fire
underwriter's regulations. Tenant shall, at its sole cost, comply with
all of the requirements pertaining to the Collective Leased Properties
of any insurance board, association, organization or company necessary
for the maintenance of insurance, as herein provided, covering the
Collective Leased Properties and Tenant's Personal Property, including,
without limitation, the Insurance Requirements. 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 any of the Collective
Leased Properties or any part thereof for its Primary Intended Use.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain all
approvals necessary to use and operate, for its Primary Intended Use,
each of the Collective Leased Properties and each Facility located
thereon under applicable law and, without limiting the foregoing, shall
use its best efforts to maintain appropriate certifications for
reimbursement and licensure, if any.
4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or
permit the use of any of the Collective Leased Properties or Tenant's
Personal Property for any unlawful purpose. Tenant shall not commit or
suffer to be committed any waste on any of the Collective Leased
Properties, or in any Facility, nor shall Tenant cause or permit any
nuisance thereon or therein. Tenant shall neither suffer nor permit any
of the Collective Leased Properties or any portion thereof, including
any Capital Addition, or Tenant's Personal Property, to be used in such
a manner as (a) might reasonably tend to impair Landlord's (or
Tenant's, as the case may be) title thereto or to any portion thereof,
or (b) may reasonably make possible a claim or claims for adverse usage
or adverse possession by the public, as such, or of implied dedication
of the applicable Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Etc. Subject to
the provisions of Article 8, Tenant, at its sole expense, shall (a) comply in
all material respects with Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration and restoration
of all of the Collective Leased Properties, and (b) procure, maintain
<PAGE>
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and comply in all material respects with all appropriate licenses, certificates
of need, permits, provider agreements and other authorizations and agreements
required for any use of the Collective Leased Properties and Tenant's Personal
Property then being made, and for the proper erection, installation, operation
and maintenance of the Collective Leased Properties or any part thereof,
including, without limitation, any Capital Additions, except where the failure
to comply will not have a material adverse effect on the use or operation of any
of the Collective Leased Properties for its Primary Intended Use or adversely
effect Total Revenues.
4.3 Compliance with Medicaid and Medicare Requirements. Tenant shall,
at its sole cost and expense, make whatever improvements (capital or ordinary)
as are required to conform in all material respects each of the Collective
Leased Properties to such standards, if any, as may, from time to time, be
required by Federal Medicare (Title 18) or Medicaid (Title 19) skilled and/or
intermediate care nursing programs, to the extent Tenant is a participant in
such programs, or any other applicable programs or legislation, or capital
improvements required by any other governmental agency having jurisdiction over
such Leased Property as a condition of the continued operation of such Leased
Property for its Primary Intended Use, except where the failure to comply will
not have a material adverse effect on the use or operation of any of the
Collective Leased Properties for its Primary Intended Use or adversely effect
Total Revenues.
4.4 Environmental Matters.
4.4.1 Restriction on Use, Etc. Tenant shall not store, spill
upon, dispose of or transfer to or from the Collective Leased
Properties any Hazardous Substance, except that Tenant may store,
transfer and dispose of Hazardous Substances in material compliance
with all Applicable Laws. Tenant shall maintain the Collective Leased
Properties at all times free of any Hazardous Substance (except such
Hazardous Substances as are maintained in compliance with all
Applicable Laws). Tenant shall promptly: (a) notify Landlord in writing
of any change in the nature or extent of Hazardous Substances at any of
the Collective Leased Properties to the extent such change violates
Applicable Laws; (b) transmit to Landlord a copy of any Community Right
to Know report which is required to be filed by Tenant with respect to
any of the Collective Leased Properties pursuant to SARA Title III or
any other Applicable Law; (c) transmit to Landlord copies of any
citations, orders, notices or other governmental communications
received by Tenant or its agents or representatives with respect
thereto (collectively, "Environmental Notice"), which Environmental
Notice requires a written response or any action to be taken
<PAGE>
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and/or if such Environmental Notice gives notice of and/or could give
rise to a violation of any Applicable Law and/or could give rise to any
cost, expense, loss or damage (an "Environmental Obligation"); (d)
observe and comply in all material respects with all Applicable Laws
relating to the use, maintenance and disposal of Hazardous Substances
and all orders or directives from any official, court or agency of
competent jurisdiction relating to the use or maintenance or requiring
the removal, treatment, containment or other disposition thereof; and
(e) pay or otherwise dispose of any fine, charge or Imposition related
thereto, unless Tenant shall contest the same in good faith and by
appropriate proceedings and the right to use and the value of any of
the Collective Leased Properties is not materially and adversely
affected thereby.
If, at any time prior to the termination of this Agreement,
Hazardous Substances are discovered on any of the Collective Leased
Properties in violation of Applicable Law, Tenant shall take all
actions and incur any and all expenses, as may be reasonably necessary
and as may be required by any Government Agency, (i) to clean up and
remove from and about the Collective Leased Properties all Hazardous
Substances thereon, (ii) to contain and prevent any further release or
threat of release of Hazardous Substances on or about the Collective
Leased Properties and (iii) to use good faith efforts to eliminate any
further release or threat of release of Hazardous Substances on or
about the Collective Leased Properties.
4.4.2 Environment Report. Six (6) months prior to expiration
of the Term, Tenant, at its sole cost and expense, shall designate a
qualified environmental engineer, satisfactory to Landlord in its sole
discretion, which engineer shall conduct an environmental investigation
of the Collective Leased Properties and prepare an environmental site
assessment report (the "Environmental Report") with respect thereto.
The scope of such Environmental Report shall include, without
limitation, review of relevant records, interviews with persons
knowledgeable about the Collective Leased Properties and relevant
governmental agencies, a site inspection of the Collective Leased
Properties, any buildings, the fencelines of the Collective Leased
Properties and adjoining properties (Phase I) and shall otherwise be
reasonably satisfactory in form and substance to Landlord. If such
investigation, in the opinion of the performing engineer, indicates
that any of the Collective Leased Properties are not free from oil,
asbestos, radon and other Hazardous Substances (except in compliance
with Applicable Laws), such investigation shall also include a more
detailed physical site inspection,
<PAGE>
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appropriate testing, subsurface and otherwise, and review of historical
records (Phase II) to demonstrate the compliance of such of the
Collective Leased Properties with Applicable Laws and the absence of
Hazardous Substances.
Copies of the Environmental Report, and supplements and
amendments thereto, shall be provided to Landlord. With respect to any
recommendations contained in the Environmental Report, violations of
Applicable Laws and/or the existence of any conditions at any of the
Collective Leased Properties which could give rise to an Environmental
Obligation, Tenant shall promptly give Notice thereof to Landlord,
together with a description, setting forth in reasonable detail, all
actions Tenant proposes to take in connection therewith and Tenant
shall promptly take all actions, and incur any and all expenses, as may
be reasonably necessary and as may be required by any Government Agency
and as may be reasonably required by Landlord, to the extent required
by Applicable Law, (i) to clean up, remove or remediate from and about
the Collective Leased Properties all Hazardous Substances thereon, (ii)
to contain, prevent and eliminate any further release or threat of
release of Hazardous Substances on or about the Collective Leased
Properties, and (iii) otherwise to eliminate such violation or
condition from the Collective Leased Properties to the reasonable
satisfaction of Landlord.
4.4.3 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord and each Facility Mortgagee, their
trustees, officers, agents, employees and beneficiaries, and any of
their respective successors or assigns (hereafter the "Indemnitees,"
and when referred to singly, an "Indemnitee") for, from and against any
and all debts, liens, claims, causes of action, administrative orders
or notices, costs, fines, penalties or expenses (including, without
limitation, reasonable attorneys' fees and expenses) imposed upon,
incurred by or asserted against any Indemnitee resulting from, either
directly or indirectly, the presence in, upon or under the soil or
ground water of any of the Collective Leased Properties or any
properties surrounding any of the Collective Leased Properties of any
Hazardous Substances in violation of any Applicable Law or otherwise by
reason of any failure by Tenant or any Person to perform or comply with
any of the terms of this Section 4.4. Tenant's duty herein includes,
but is not limited to, costs associated with personal injury or
property damage claims as a result of the presence of Hazardous
Substances in, upon or under the soil or ground water of any of the
Collective Leased Properties in violation of any Applicable Law. Upon
Notice
<PAGE>
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from Landlord, Tenant shall undertake the defense, at Tenant's sole
cost and expense, of any indemnification duties set forth herein.
Tenant shall, upon demand, pay to Landlord, as an Additional
Charge, any cost, expense, loss or damage (including, without
limitation, reasonable attorneys' fees) incurred by Landlord and
arising from a failure of Tenant strictly to observe and perform the
foregoing requirements, which amounts shall bear interest from the date
incurred until paid by Tenant to Landlord at the Overdue Rate.
4.4.4 Survival. The provisions of this Section 4.4 shall
survive the expiration or sooner termination of this Agreement.
ARTICLE 5
MAINTENANCE AND REPAIRS, ETC.
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations. Tenant shall, at its sole cost and
expense, keep each of the Collective Leased Properties and all private
roadways, sidewalks and curbs appurtenant thereto (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 the
Collective Leased Properties or Tenant's Personal Property, or any
portion thereof), and shall promptly make all necessary and appropriate
repairs and replacements thereto of every kind and nature, whether
interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term (concealed or
otherwise); provided, however, that Tenant shall be permitted to
prosecute claims against Landlord's predecessors in title for breach of
any representation or warranty made to or on behalf of Landlord,
whether in contract, at law or in equity, or for any latent defects in
the Collective Leased Properties. All repairs shall 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 any such work. Tenant shall not take or
omit to take any action, the taking or omission of which would
materially impair the value or the usefulness of any of the Collective
Leased Properties or any part thereof for its respective Primary
Intended Uses. Tenant's obligations under this
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Section 5.1.1 as to any of the Collective Leased Properties shall be
limited in the event of any casualty or Condemnation involving such
Leased Property as set forth in Sections 10.2 and 11.2. Notwithstanding
any provisions of this Section 5.1 to the contrary, Tenant's
obligations with respect to Hazardous Substances are as set forth in
Section 4.4.
5.1.2 Landlord's Obligations. Landlord shall not, under any
circumstances, be required to build or rebuild any improvement on the
Collective Leased Properties, or to make any repairs, replacements,
alterations, restorations or renewals of any nature or description to
the Collective Leased Properties, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto (except as provided in
Articles 10 and 11 with respect to disbursement of insurance and Award
proceeds), or to maintain the Collective Leased Properties in any way,
except as specifically provided herein. Tenant hereby waives, to the
maximum extent permitted by law, the right to make repairs at the
expense of Landlord pursuant to any law in effect on the date hereof or
hereafter enacted. Landlord shall have the right to give, record and
post, as appropriate, notices of nonresponsibility under any mechanic's
lien laws now or hereafter existing.
5.1.3 Nonresponsibility of Landlord; No Mechanics Liens.
Landlord's interest in the Collective Leased Properties shall not be
subject to liens for Capital Additions made by Tenant and Tenant shall
have no power or authority to create any lien or permit any lien to
attach to any of the Collective Leased Properties or the present
estate, reversion or other estate of Landlord in the Collective Leased
Properties or on the building or other improvements thereon as a result
of Capital Additions made by Tenant or for any other cause or reason.
All materialmen, contractors, artisans, mechanics and laborers and
other persons contracting with Tenant with respect to the Collective
Leased Properties, or any part thereof, are hereby charged with notice
that such liens are expressly prohibited and that they must look solely
to Tenant to secure payment for any work done or material furnished for
Capital Additions by Tenant or for any other purpose during the term of
this Agreement.
Nothing contained in this Agreement shall be deemed or
construed in any way as constituting the consent or request of
Landlord, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialmen for the performance
of any labor or the furnishing of any
<PAGE>
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materials for any alteration, addition, improvement or repair to any of
the Collective Leased Properties or any part thereof or as giving
Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would
give rise to the filing of any lien against any of the Collective
Leased Properties or any part thereof nor to subject Landlord's estate
in any of the Collective Leased Properties or any part thereof to
liability under any Mechanic's Lien Law of the State in any way, it
being expressly understood Landlord's estate shall not be subject to
any such liability.
5.2 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 at any time, provided that no Event of Default has occurred and is
continuing. Tenant shall provide and maintain throughout the Term all such
Tenant's Personal Property as shall be necessary in order to operate all of the
Facilities located at the Collective Leased Properties in material compliance
with all applicable licensure and certification requirements, in compliance with
applicable Legal Requirements and Insurance Requirements. All of Tenant's
Personal Property not removed by Tenant on or prior to the expiration or earlier
termination of this Agreement shall be considered abandoned by Tenant and may be
appropriated, sold, destroyed or otherwise disposed of by Landlord without the
necessity of first giving notice thereof to Tenant, without any payment to
Tenant and without any obligation to account therefor. Tenant shall, at its
expense, restore each of the Collective Leased Properties to the condition
required by Section 5.3, including repair of all damage to the Collective Leased
Properties caused by the removal of Tenant's Personal Property, whether effected
by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than motor
vehicles) on, or in connection with, any Leased Property which belongs to anyone
other than Tenant, Tenant shall use its reasonable efforts to require the
agreement permitting such use to provide that Landlord or its designee may
assume Tenant's rights under such agreement upon management or operation of the
applicable Facility by Landlord or its designee.
5.3 Yield Up. (a) Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate and surrender each of the Collective Leased
Properties to Landlord in the condition in which each of the Collective Leased
Properties was in on the Commencement Date, except as repaired, rebuilt,
restored, altered or added to as permitted or required by the
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provisions of this Agreement, reasonable wear and tear excepted (and casualty
damage and Condemnation, in the event that this Agreement is terminated with
respect to any of the Collective Leased Properties following a casualty or total
Condemnation in accordance with Article 10 or Article 11).
In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its best
efforts to transfer to and cooperate with Landlord or Landlord's nominee in
connection with the processing of all applications for licenses, operating
permits and other governmental authorizations and all contracts, including
contracts with governmental or quasi-governmental entities which may be
necessary for the operation of the Facilities located on the Collective Leased
Properties. If requested by Landlord, Tenant will continue to manage any such
Facility after the expiration of the Term and for as long thereafter as is
necessary to obtain all necessary licenses, operating permits and other
governmental authorizations, on such reasonable terms (which shall include an
agreement to pay Tenant a market rate management fee and reimburse Tenant for
its reasonable out-of-pocket costs and expenses, and reasonable administrative
costs) as Landlord shall request.
(b) Effective on not less than fifteen (15) days' prior Notice given at
least sixty (60) days prior to expiration of the Term (or such shorter period as
shall be appropriate if this Agreement is terminated with respect to any of the
Collective Leased Properties prior to its expiration date), Landlord shall have
the option to purchase all (but not less than all) of Tenant's Personal Property
(except motor vehicles) with respect to any of the Collective Leased Properties,
at the expiration or sooner termination of this Agreement with respect to such
Leased Property, for an amount equal to the then fair market value thereof
(determined by the agreement of Landlord and Tenant if they can agree and
otherwise in accordance with the appraisal procedures set forth in Article 19),
subject to, and with appropriate price adjustments for, all equipment leases,
conditional sale contracts, security interests and other encumbrances to which
such Tenant's Personal Property is subject. Tenant's Personal Property shall be
conveyed to Landlord on an "as-is" basis, in its then current condition and
state of repair. Tenant shall provide Landlord with warranties of title,
reflecting no encumbrances as to which adjustments to the purchase price
thereof, as required by the previous sentence, have not been made. Failure of
Landlord to notify Tenant of its election to purchase Tenant's Personal Property
at any of the Collective Leased Properties by the 75th day prior to the
expiration of this Agreement (or such shorter period as may be appropriate if
this Agreement is terminated with respect to any of the Collective Leased
Properties prior to its expiration date)
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shall be deemed to constitute a waiver of Landlord's right to purchase Tenant's
Personal Property with respect to such Leased Property.
5.4 Encroachments, Restrictions, Etc. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the affected Leased Property, or shall violate the agreements or conditions
contained in any lawful restrictive covenant or other agreement affecting any of
the Collective Leased Properties, or any part thereof, or shall impair the
rights of others under any easement or right-of-way to which any of the
Collective Leased Properties is subject, upon the request of Landlord (but only
as to any encroachment, violation or impairment that is not a Permitted
Encumbrance) or of any Person affected by any such encroachment, violation or
impairment, Tenant shall, at its sole cost and expense, subject to its right to
contest the existence of any encroachment, violation or impairment in accordance
with the provisions of Article 8, either (a) 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 Landlord or
Tenant, or (b) make such changes in the Leased Improvements and take such other
actions, as are 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 ensure the continued operation of the affected Leased
Improvements for their respective Primary Intended Use substantially in the
manner and to the extent such Leased Improvements were operated prior to the
assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of this Article 5.
Tenant's obligations under this Section 5.4 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.
5.5 Landlord to Grant Easements, Etc. Landlord shall from time to time,
so long as no Event of Default shall have occurred and be continuing, at the
request of Tenant and at Tenant's sole cost and expense, (a) grant easements and
other rights in the nature of easements with respect to any of the Collective
Leased Properties to third parties; (b) release existing easements or other
rights in the nature of easements which are for the benefit of any of the
Collective Leased Properties; (c) dedicate or transfer unimproved portions of
any of the Collective Leased Properties for road, highway or other public
purposes; (d) execute petitions to have any of the Collective Leased Properties
annexed to any municipal corporation or utility district; (e) execute amendments
to any covenants and restrictions affecting any of the Collective Leased
Properties; and (f) execute and
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deliver to any Person any instrument appropriate to confirm or effect such
grants, release, dedications, transfers, petitions and amendments (to the extent
of its interests in such Leased Property); provided, however, that Landlord
shall have first reasonably determined in good faith that such grant, release,
dedication, transfer, petition or amendment is not detrimental to the operation
of the applicable Leased Property for its Primary Intended Use and does not
materially reduce the value of such Leased Property, and Landlord shall have
received an Officer's Certificate certifying that such grant, release,
dedication, transfer, petition or amendment is not detrimental to the operation
of the applicable Leased Property for its Primary Intended use and does not
materially reduce the value of such Leased Property, together with such
additional information with respect thereto as Landlord may reasonably request.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions. Tenant shall not construct or
install Capital Additions on any of the Collective Leased Properties without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned, provided that no consent shall be
required for any Capital Addition so long as (a) the Capital Additions Costs for
such Capital Addition are less than $250,000 in the aggregate; (b) such
construction or installation would not adversely affect or violate any Legal
Requirement or Insurance Requirement applicable to the applicable Leased
Property; and (c) Landlord shall have received an Officer's Certificate
certifying as to the satisfaction of the conditions set out in clauses (a) and
(b) above. If Landlord's consent is required, prior to commencing construction
of any Capital Addition, Tenant shall submit to Landlord, in writing, a proposal
setting forth, in reasonable detail, any proposed Capital Addition and shall
provide to Landlord such plans and specifications, permits, licenses, contracts
and other information concerning the proposed Capital Addition as Landlord may
reasonably request. Landlord shall have ten (10) Business Days to review all
materials submitted to Landlord in connection with any such proposal. Failure of
Landlord to respond to Tenant's proposal within ten (10) Business Days after
receipt of all information and materials requested by Landlord in connection
with the proposed Capital Addition shall be deemed to constitute approval of
such proposed Capital Addition. 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.
No Capital Addition shall be made which would tie in or connect any Leased
Improvement on the applicable
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Leased Property with any other improvements on property adjacent to such Leased
Property (and not part of the Land), including, without limitation, tie-ins of
buildings or other structures or utilities. Tenant shall not finance the cost of
any construction of any Capital Addition except as provided in Section 6.2.1.
Any Capital Additions (including Tenant's Capital Additions) shall, upon the
expiration or sooner termination of this Agreement, pass to and become the
property of Landlord, free and clear of all encumbrances other than Permitted
Encumbrances but subject to Landlord's obligation to compensate Tenant for
Tenant's Capital Additions as provided below.
6.2 Capital Additions Financed or Paid For by Tenant.
6.2.1 Financing of Capital Additions. Tenant may arrange for
financing for Capital Additions, provided, that (a) the terms and
conditions of any such financing shall be commercially reasonable; (b)
any lender with respect thereto shall be a Subordinated Creditor and
any security interests in any property of Tenant, including, without
limitation, the applicable Leased Property, shall be expressly and
fully subordinated to this Agreement and to the interest of Landlord in
the applicable Leased Property and to the rights of any Facility
Mortgagee; and (c) the aggregate proceeds of such financing shall be
used for improvements in or at the Collective Leased Properties.
Otherwise, the terms of Tenant's financing of any Capital Additions
shall be subject to Landlord's prior written approval, which approval
may be given or withheld by Landlord in Landlord's sole discretion.
6.2.2 Purchase by Landlord. If, pursuant to the provisions of
this Agreement, Tenant either pays for or arranges financing (to the
extent permitted in Section 6.2.1) to pay for the costs of construction
or installation of any Capital Addition ("Tenant's Capital Additions")
(but excluding, in any event, any Capital Addition financed by or
through Landlord including, without limitation, all Capital Additions
paid for or financed through disbursements under Section 6.5), upon the
expiration or earlier termination of this Agreement (but if this
Agreement is terminated by reason of an Event of Default, only after
Landlord is fully compensated for all damages resulting therefrom),
Landlord shall compensate Tenant for all Tenant's Capital Additions in
any of the following ways determined in Landlord's sole discretion:
(a) By purchasing such Tenant's Capital Additions from Tenant
for cash in the amount of the then Fair Market Added Value of such
Tenant's Capital Additions; or
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(b) By making such other arrangement regarding such
compensation as shall be mutually acceptable to Landlord and Tenant.
6.3 Capital Additions Financed by Landlord. If Landlord shall, at the
request of Tenant and in Landlord's sole discretion (except as provided in
Section 6.5), elect to finance any proposed Capital Addition, Tenant shall
provide Landlord with such information as Landlord may from time to time
request, including, without limitation, the following:
(a) Evidence that such Capital Addition will be, and, upon
completion, has been, completed in compliance with the applicable
requirements of State and federal law with respect to capital
expenditures for facilities like the Facilities;
(b) Copies of all building, zoning and land use permits and
approvals and upon completion of such Capital Addition, a copy of the
certificate of occupancy for such Capital Addition, if required;
(c) Such information, certificates, licenses, permits or other
documents 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;
(d) An Officer's Certificate and a certificate from Tenant's
architect, if available, setting forth, in reasonable detail, the
projected (or actual, if available) Capital Additions Cost and invoices
and lien waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land acquired
for the purpose of constructing the Capital Addition free and clear of
any liens or encumbrances, except those approved by Landlord, and, upon
completion of the Capital Addition, a final as-built survey thereof
reasonably satisfactory to Landlord;
(f) Endorsements to any outstanding policy of title insurance
covering the applicable Leased Property or commitments therefor,
reasonably satisfactory in form and substance to Landlord, (i) updating
the same without any additional exceptions except as reasonably
approved by Landlord, and (ii) 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 (g) below);
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(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord pursuant to
subparagraph (e) above, free and clear of all liens and encumbrances,
except those reasonably approved by Landlord, and (ii) a lender's
policy of title insurance, reasonably satisfactory in form and
substance to Landlord and any Facility Mortgagee; and
(h) Prints of architectural and engineering drawings relating
to such Capital Addition and such other certificates, documents,
opinions of counsel, appraisals, surveys, certified copies of duly
adopted resolutions of the board of directors of Tenant authorizing the
execution and delivery of any lease amendment or other instruments
reasonably required by Landlord, any Facility Mortgagee and any Lending
Institution advancing or reimbursing Landlord or Tenant for any portion
of the Capital Additions Cost.
If Landlord shall finance the proposed Capital Addition, Tenant shall
pay to Landlord all reasonable costs and expenses paid or incurred by Landlord
and any Facility Mortgagee or Lending Institution which has committed to finance
such Capital Addition in connection therewith, including, but not limited to,
(a) the reasonable attorneys' fees and expenses, (b) all printing expenses, (c)
all filing, registration and recording taxes and fees, (d) documentary stamp
taxes, (e) title insurance charges, appraisal fees, and rating agency fees, and
(f) commitment fees.
6.4 Non-Capital Additions. Tenant shall have the right, at Tenant's
sole cost and expense, without Landlord consent, to make additions,
modifications or improvements to the Collective Leased Properties which are not
Capital Additions ("Non-Capital Additions") from time to time as Tenant, in its
discretion, may deem desirable for the applicable Primary Intended Use provided
that any such Non-Capital Addition will not materially alter the character or
purpose or materially detract from the value, operating efficiency or
revenue-producing capability of the applicable Leased Property or adversely
affect the ability of Tenant to comply with the provisions of this Agreement
and, without limiting the foregoing, will not adversely affect or violate any
Legal Requirement or Insurance Requirement applicable to the applicable Leased
Property. All such Non-Capital Additions shall, upon expiration or earlier
termination of this Agreement, pass to and become the property of Landlord, free
and clear of all liens and encumbrances, other than Permitted Encumbrances.
6.5 Improvement Advances. At any time during that portion of the Term
commencing on the Commencement Date and expiring June 30, 1998, Landlord agrees
to advance to Tenant, from time to time, as hereinafter provided, an aggregate
amount of up to Two
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Million Five Hundred Thousand Dollars ($2,500,000) for the purpose of making
Capital Additions and Non-Capital Additions to the Collective Lease Properties.
The obligation of Landlord to make each advance pursuant to this Section 6.5
shall be subject to the prior or simultaneous satisfaction of the following
conditions:
(a) at the time of each disbursement, no Event of Default
shall have occurred and be continuing; and
(b) at least fifteen (15) Business Days before the date on
which Tenant desires a disbursement to be made hereunder (but in no
event subsequent to June 30, 1998), Tenant shall submit to Landlord a
written requisition and the substantiation therefor which shall include
bills and invoices with respect to the work for which reimbursement is
sought, together with such other information with respect thereto as
Landlord may reasonably require, including, without limitation, the
items identified in Section 6.3, if applicable. Any such requisition
shall be for not less than $250,000 (or such lesser amount as shall
constitute the difference between $2,500,000 and the aggregate of all
prior disbursements). Such requisitions shall be made not more
frequently than monthly.
6.6 Salvage. All materials which are scrapped or removed in connection
with the making of either Capital Additions or Non-Capital Additions or repairs
required by Article 5 shall be or become the property of the party that paid for
such work.
ARTICLE 7
LIENS
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge or bond over
in a manner reasonably satisfactory to Landlord, at its expense, any lien,
encumbrance, attachment, title retention agreement or claim upon the Collective
Leased Properties or Tenant's leasehold interest therein or any attachment,
levy, claim or encumbrance in respect of the Rent, other than (a) Permitted
Encumbrances; (b) restrictions, liens and other encumbrances which are consented
to in writing by Landlord; (c) liens for those taxes of Landlord which Tenant is
not required to pay hereunder; (d) subleases permitted by Article 17; (e) liens
for Impositions or for sums resulting from noncompliance with Legal Requirements
so long as
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(i) the same are not yet payable, or (ii) are being contested in accordance with
Article 8; (f) liens of mechanics, laborers, materialmen, suppliers or vendors
incurred in the ordinary course of business that are not yet due and payable or
are for sums that are being contested in accordance with Article 8; and (g) any
Facility Mortgages or other liens which are the responsibility of Landlord
pursuant to the provisions of Article 21.
7.2 Landlord's Lien. In addition to any statutory landlord's lien and
in order to secure payment of the Rent and all other sums payable hereunder by
Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant's breach of this Agreement, Tenant hereby grants unto
Landlord a security interest in and an express contractual lien upon Tenant's
Personal Property (except motor vehicles), and all ledger sheets, files,
records, documents and instruments (including, without limitation, computer
programs, tapes and related electronic data processing) relating primarily to
the operation of the Facilities (the "Records") and all proceeds therefrom,
subject to any Permitted Encumbrances; and such Tenant's Personal Property shall
not be removed from the Collective Leased Properties at any time when an Event
of Default has occurred and is continuing.
Upon Landlord's reasonable request, Tenant shall execute and deliver to
Landlord financing statements in form sufficient to perfect the security
interest of Landlord in Tenant's Personal Property and the proceeds thereof in
accordance with the provisions of the applicable laws of the State. Tenant
hereby grants Landlord an irrevocable limited power of attorney, coupled with an
interest, upon the occurrence and during the continuance of any Event of
Default, to execute all such financing statements in Tenant's name, place and
stead. The security interest herein granted is in addition to any statutory lien
for the Rent.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively, "Claims") as to any of the
Collective Leased Properties, by appropriate legal proceedings, conducted in
good faith and with due diligence, provided that (a) the foregoing shall in no
way be construed as relieving, modifying or extending Tenant's obligation to pay
any Claims as finally determined; (b)
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such contest shall not cause Landlord or Tenant to be in default under any
mortgage or deed of trust encumbering such Leased Property or any interest
therein or result in a lien attaching to such Leased Property; (c) no part of
such Leased Property nor any Rent therefrom shall be in any immediate danger of
sale, forfeiture, attachment or loss; and (d) Tenant shall indemnify and hold
harmless Landlord from and against any cost, claim, damage, penalty or
reasonable expense, including reasonable attorneys' fees, incurred by Landlord
in connection therewith or as a result thereof. Upon Landlord's request, Tenant
shall either (i) provide a bond, title indemnity, endorsement or other assurance
reasonably satisfactory to Landlord that all Claims which may be assessed
against any of the Collective Leased Properties, together with all interest and
penalties thereon will be paid, or (ii) deposit within the time otherwise
required for payment with a bank or trust company, as trustee, as security for
the payment of such Claims, an amount sufficient to pay the same, together with
interest and penalties in connection therewith and all Claims which may be
assessed against or become a Claim on any of the Collective Leased Properties,
or any part thereof, in connection with any such contest. Tenant shall furnish
Landlord and any Facility Mortgagee with reasonable evidence of such deposit,
title indemnity, endorsement or other assurance within five (5) days after
request therefor. Landlord agrees to join in any such proceedings if required
legally to prosecute such contest, provided that Landlord shall not thereby be
subjected to any liability therefor (including, without limitation, for the
payment of any costs or expenses in connection therewith). Tenant shall be
entitled to any refund of any Claims and such charges and penalties or interest
thereon which have been paid by Tenant or paid by Landlord and for which
Landlord has been fully reimbursed by Tenant. If Tenant shall fail (x) to pay
any Claims when finally determined, (y) to provide security therefor as provided
in this Article 8, or (z) to prosecute any such contest diligently and in good
faith, Landlord may, upon reasonable notice to Tenant which notice shall not be
required if Landlord shall reasonably determine that the same is not
practicable), pay such charges, together with interest and penalties due with
respect thereto, and Tenant shall reimburse Landlord therefor, upon demand, as
Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall, at all times during
the Term and at any other time Tenant shall be in possession of any of the
Collective Leased Properties, keep each of the Collective Leased Properties and
all property located therein or thereon, including Tenant's Personal Property,
insured
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against the risks and in the amounts as follows and shall maintain the following
insurance:
(a) "All-risk" property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief, explosion of
steamboilers, pressure vessels or other similar apparatus, now or
hereafter installed in the Facility located at such Leased Property,
extended coverage perils, earthquake and all physical loss perils
insurance, including, but not limited to, sprinkler leakage, in an
amount equal to one hundred percent (100%) of the then full Replacement
Cost thereof (as defined in Section 9.2) with the usual extended
coverage endorsements, including a Replacement Cost Endorsement and
Builder's Risk Coverage during the continuance of any construction at
such Leased Property;
(b) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy covering risk of loss
during the lesser of the first twelve (12) months of reconstruction or
the actual reconstruction period necessitated by the occurrence of any
of the hazards described in subparagraphs (a) and (b) above, in such
amounts as may be customary for comparable properties in the area and
in an amount sufficient to prevent Landlord or Tenant from becoming a
co-insurer;
(c) Comprehensive general liability insurance, including
bodily injury and property damage (on an occurrence basis and on a 1988
ISO CGL form or its equivalent or otherwise in the broadest form
available, including, without limitation, broad form contractual
liability, fire legal liability independent contractor's hazard and
completed operations coverage) in an amount not less than One Million
Dollars ($1,000,000) per occurrence, Two Million Dollars ($2,000,000)
in the aggregate and umbrella coverage of all such claims in an amount
not less than Twenty-Five Million Dollars ($25,000,000);
(d) Flood (when the applicable Leased Property is located in
whole or in part within an area identified as an area having special
flood hazards and in which flood insurance has been made available
under the National Flood Insurance Act of 1968, as amended, or the
Flood Disaster Protection Act of 1973, as amended (or any successor
acts thereto)) and such other hazards and in such amounts as may be
customary for comparable properties in the area;
(e) Worker's compensation insurance coverage for all persons
employed by Tenant on the applicable Leased Property with statutory
limits and otherwise with limits of and
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provisions in accordance with the requirements of applicable local,
State and federal law, and employer's liability insurance in such
amounts as Landlord and any Facility Mortgagee shall reasonably
require; and
(f) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Replacement Cost. "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, less exclusions
provided in the standard form of fire insurance policy. In the event either
party believes that the then full Replacement Cost has increased or decreased at
any time during the Term, such party, at its own cost, shall have the right to
have such full Replacement Cost redetermined by an accredited appraiser approved
by the other, which approval shall not be unreasonably withheld or delayed. The
party desiring to have the full Replacement Cost so redetermined shall
forthwith, on receipt of such determination by such appraiser, give written
notice thereof to the other. The determination of such appraiser shall be final
and binding on the parties hereto, and Tenant shall forthwith conform the amount
of the insurance carried to the amount so determined by the appraiser.
9.3 Waiver of Subrogation. Landlord 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 which
is covered by insurance then being carried by Landlord 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. In the event that any extra premium is payable by Tenant as a result
of this provision, Landlord shall not be liable for reimbursement to Tenant for
such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for, nonassessable and
shall contain such provisions and expiration dates and be in such form and
amounts and issued by insurance carriers authorized to do business in the State,
having a general policy holder's rating of A or A+ in Best's latest rating
guide, and as otherwise shall be approved by Landlord. Without limiting the
foregoing, such policies shall include no deductible in excess of $25,000
(unless consistent with
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deductibles included in policies carried by entities engaged in similar
businesses and owning similar properties similarly situated and agreed to in
advance by Landlord) and, with the exception of the insurance described in
Section 9.1(e), shall name Landlord and any Facility Mortgagee as additional
insureds, as their interests may appear. All losses shall be payable to
Landlord, any Facility Mortgagee or Tenant as provided in Article 10. Any loss
adjustment shall require the prior written consent of Landlord, Tenant, and each
Facility Mortgagee, which consent shall not be unreasonably withheld, delayed or
conditioned by Landlord. Tenant shall pay all insurance premiums and deliver
policies or certificates thereof to Landlord prior to their effective date (and,
with respect to any renewal policy, thirty (30) days prior to the expiration of
the existing policy) and, in the event Tenant shall fail to effect such
insurance as herein required, to pay the premiums therefor or to deliver such
policies or certificates to Landlord or any Facility Mortgagee at the times
required, Landlord shall have the right, but not the obligation, upon the giving
of written Notice thereof to Tenant, to acquire such insurance and pay the
premiums therefor, which amounts shall be payable to Landlord, upon demand, as
Additional Charges, together with interest accrued thereon at the Overdue Rate
from the date such payment is made until the date repaid. All such policies
shall provide Landlord (and any Facility Mortgagee, if required by the same)
thirty (30) days' prior written notice of any modification, expiration or
cancellation of such policy.
9.5 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant and its Affiliated Persons, provided,
that (a) the coverage thereby afforded will not be reduced or diminished from
that which would exist under a separate policy meeting all other requirements of
this Agreement, and (b) the requirements of this Article 9 are otherwise
satisfied. Without limiting the foregoing, the amounts of insurance that are
required to be maintained pursuant to Section 9.1 shall be on a Facility by
Facility basis, and shall not be subject to an aggregate limit less than the sum
of the coverages required for each Leased Property (except in the case of the
umbrella coverage required under Section 9.1(c)).
9.6 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with that
required by this Article 9, or increase the amount of any existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of such insurance, including
Landlord and all Facility Mortgagees, are included
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therein as additional insureds and the loss is payable under such insurance in
the same manner as losses are payable under this Agreement. In the event Tenant
shall take out any such separate insurance or increase any of the amounts of the
then existing insurance, Tenant shall give Landlord prompt Notice thereof.
9.7 Indemnification of Landlord. Notwithstanding the existence of any
insurance provided for herein and without regard to the policy limits of any
such insurance, Tenant shall protect, indemnify and hold harmless Landlord for,
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord (except to the extent that any
of the following result from Landlord's gross negligence or willful misconduct)
by reason of: (a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Collective Leased Properties or
adjoining sidewalks or rights of way, including, without limitation, any claims
of malpractice; (b) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Tenant or anyone claiming under Tenant of
the Collective Leased Properties or Tenant's Personal Property or any
litigation, proceeding or claim by governmental entities or other third parties
to which Landlord is made a party or participant relating to the Collective
Leased Properties or Tenant's Personal Property or such use, misuse, non-use,
condition, management, maintenance, or repair thereof including, failure to
perform obligations (other than Condemnation proceedings) to which Landlord is
made a party; (c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Agreement); and (d) any failure on
the part of Tenant or anyone claiming under Tenant to perform or comply with any
of the terms of this Agreement. Tenant shall pay all amounts payable under this
Section 9.7 within ten (10) Business Days after demand therefor, and if not
timely paid, such amounts shall bear interest at the Overdue Rate from the date
of 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 Landlord or may compromise or otherwise dispose of the same, with
Landlord's prior written consent (which consent may not be unreasonably
withheld, delayed or conditioned). The obligations of Tenant under this Section
9.7 are in addition to the obligations set forth in Section 4.4 and shall
survive the termination of this Agreement.
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ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. All proceeds payable by reason of any loss or
damage to the Collective Leased Properties, or any portion thereof, and insured
under any policy of insurance required by Article 9 (including, without
limitation, proceeds of any business interruption insurance) shall be paid
directly to Landlord (subject to the provisions of Section 10.2). If Tenant is
required to reconstruct or repair any of the Collective Leased Properties as
provided herein, such proceeds shall be paid out by Landlord from time to time
for the reasonable costs of reconstruction or repair of such Leased Property
necessitated by such damage or destruction, subject to the provisions of Section
10.2.4. Provided no Event of Default has occurred and is continuing, any excess
proceeds of insurance remaining after the completion of the restoration shall be
paid to Tenant. In the event that Section 10.2.1 below is applicable, the
insurance proceeds shall be retained by the party entitled thereto pursuant to
Section 10.2.1. All salvage resulting from any risk covered by insurance shall
belong to Landlord, except any salvage related to Tenant's Capital Additions and
Tenant's Personal Property shall belong to Tenant.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property. If, during
the Term, any of the Collective Leased Properties shall be totally or
partially destroyed and the Facility located thereon is thereby
rendered Unsuitable for Its Primary Intended Use, Tenant shall, at its
option, exercisable by the giving of Notice thereof to Landlord within
sixty (60) days after the date of casualty, elect either (a) to
purchase such Leased Property from Landlord for a purchase price equal
to the greater of (i) the Adjusted Purchase Price of such Leased
Property and (ii) the Fair Market Value Purchase Price of such Leased
Property immediately prior to such damage or destruction, or (b)
terminate this Agreement with respect to the affected Leased Property.
Failure by Tenant to give such Notice prior to the expiration of such
60-day period shall be deemed an election by Tenant to purchase such
Leased Property in accordance with clause (a) preceding. In the event
Tenant elects to terminate this Agreement with respect to the affected
Leased Property, this Agreement shall, thereupon, terminate with
respect to the applicable Leased Property and Landlord shall be
entitled to retain the insurance proceeds payable on account of such
damage. In the event Tenant purchases such Leased Property as provided
in this Section 10.2.1, the insurance proceeds payable on account of
such damage shall be paid to Tenant. If Tenant purchases the applicable
Leased Property as provided herein, the closing
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with respect thereto shall occur on a date designated by Landlord by
Notice to Tenant (but in no event prior to 30 days after such Notice),
this Agreement shall terminate as to the applicable Leased Property
upon payment of the purchase price therefor, and Landlord shall remit
to Tenant all insurance proceeds pertaining to the applicable Leased
Property then held by Landlord. Upon termination of this Agreement with
respect to such Leased Property as hereinabove provided, the Minimum
Rent thereafter payable hereunder shall be reduced by an amount
reasonably determined by Landlord in good faith to be that portion of
the Minimum Rent allocable to such Leased Property.
10.2.2 Partial Damage or Destruction. If, during the Term, any
of the Collective Leased Properties shall be totally or partially
destroyed but the Facility located thereon is not rendered Unsuitable
for Its Primary Intended Use, Tenant shall promptly restore such
Facility as provided in Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds. If the cost of the
repair or restoration of the applicable Leased Property exceeds the
amount of insurance proceeds received by Landlord pursuant to Article
9, Tenant shall contribute any excess amounts needed to restore such
Leased Property. Such difference shall be paid by Tenant to Landlord
and held by Landlord, together with any other insurance proceeds, for
application to the cost of repair and restoration.
10.2.4 Disbursement of Proceeds. In the event Tenant is
required to restore the applicable Leased Property pursuant to Section
10.2, Tenant shall, at its sole cost and expense, commence promptly and
continue diligently to perform the repair and restoration of such
Leased Property (hereinafter called the "Work"), or shall cause the
same to be done, so as to restore such Leased Property in full
compliance with all Legal Requirements and so that such Leased Property
shall be at least equal in value and general utility to its general
utility and value immediately prior to such damage or destruction.
Subject to the terms hereof, Landlord shall advance the insurance
proceeds (other than proceeds of business interruption insurance which
shall be advanced as provided below) and the amounts paid to it
pursuant to Section 10.2.3 to Tenant regularly during the repair and
restoration period so as to permit payment for the cost of any such
restoration and repair. Any such advances shall be for not less than
$250,000 (or such lesser amount as equals the entire balance of the
repair and restoration) and Tenant shall submit to Landlord a written
requisition and substantiation therefor on AIA Forms G702 and G703 (or
on such other form or forms as may be acceptable to Landlord). Landlord
may, at its option, condition advancement of said insurance proceeds
and other
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amounts on (a) the absence of any Default or Event of Default; (b) its
reasonable approval of plans and specifications of an architect
reasonably satisfactory to Landlord; (c) general contractors'
estimates; (d) architect's certificates; (e) unconditional lien waivers
of general contractors; (f) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required; and
(g) such other certificates as Landlord may, from time to time,
reasonably require. Proceeds of business interruption insurance shall
be applied by Landlord to the payment of all Minimum Rent, Additional
Rent and Additional Charges then due and payable and to become due and
payable for the period for which such proceeds have been paid by the
insurance provider. Any excess shall, provided no Event of Default has
occurred and is continuing, be disbursed to Tenant. If an Event of
Default has occurred, Landlord shall apply such amounts to amounts due
and owing under this Agreement and to the costs of collection of the
same and shall pay any excess to Tenant.
Landlord's obligation to disburse insurance proceeds under
this Article 10 shall be subject to the release of such proceeds by the
applicable Facility Mortgagee to Landlord.
Tenant's obligation to restore the applicable Leased Property
pursuant to this Article 10 shall be subject to the release of
available insurance proceeds by the applicable Facility Mortgagee to
Landlord and by Landlord to Tenant in accordance with the terms of this
Agreement.
10.3 Damage Near End of Term. Notwithstanding any provisions of Section
10.1 or 10.2 to the contrary, if damage to or destruction of any of the
Collective Leased Properties occurs during the last twenty-four (24) months of
the Term and if such damage or destruction cannot reasonably be expected to be
fully repaired and restored prior to the date that is twelve (12) months prior
to the end of such Term, the provisions of Section 10.2.1 shall apply as if such
Leased Property had been totally or partially destroyed and the Facility located
thereon rendered Unsuitable for its Primary Intended Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property or Tenant's Capital
Additions shall be paid to Tenant and, to the extent necessary to repair or
replace Tenant's Capital Additions or Tenant's Personal Property in accordance
with Section 10.5, Tenant shall hold such proceeds in trust to pay the cost of
repairing or replacing damaged Tenant's Personal Property or Tenant's Capital
Additions.
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10.5 Restoration of Tenant's Property. If Tenant is required to restore
the applicable Leased Property as hereinabove provided, Tenant shall either (a)
restore all alterations and improvements made by Tenant, Tenant's Personal
Property and all Tenant's Capital Additions, or (b) replace such alterations and
improvements, Tenant's Personal Property, and/or Tenant's Capital Additions with
improvements or items of the same or better quality and utility in the operation
of such Leased Property.
10.6 No Abatement of Rent. This Agreement shall remain in full force
and effect and Tenant's obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall, except as
otherwise provided in Section 10.2.1, remain unabated during the Term
notwithstanding any damage involving any of the Collective Leased Properties
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 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 provide for such a contingency shall have any application in such
case.
10.7 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of any of the Collective
Leased Properties.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (a) the whole of any of the
Collective Leased Properties shall be taken by Condemnation or (b) a
Condemnation of less than the whole of any of the Collective Leased Properties
renders such Leased Property Unsuitable for Its Primary Intended Use, this
Agreement shall terminate with respect to such Leased Property, Tenant and
Landlord shall seek the Award for their interests in such Leased Property as
provided in Section 11.5 and the Minimum Rent thereafter payable shall be
reduced by an amount reasonably determined by Landlord in good faith to be that
portion of the Minimum Rent allocable to such Leased Property. If the Award
received by Landlord for Landlord's interest in such Leased Property is less
than the greater of (x) the Adjusted Purchase Price or (y) the Fair Market Value
Purchase Price of such Leased Property immediately prior to such Condemnation,
Tenant shall contribute and pay to Landlord the amount of such shortfall.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of any of the Collective Leased Properties such that such Leased
Property is still suitable for its Primary Intended Use, Tenant shall, at its
sole cost and expense,
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commence promptly and continue diligently to restore the untaken portion of the
Leased Improvements on such Leased Property so that such Leased Improvements
shall constitute a complete architectural unit of the same general character and
condition (as nearly as may be possible under the circumstances) as the Leased
Improvements existing immediately prior to such Condemnation, in full compliance
with all Legal Requirements. Subject to the terms hereof, Landlord shall
contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements, to Tenant regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration. Landlord may, at its option, condition advancement of such Award
and other amounts on (a) the absence of any Event of Default; (b) its approval
of plans and specifications of an architect satisfactory to Landlord (which
approval shall not be unreasonably withheld or delayed); (c) general
contractors' estimates; (d) architect's certificates; (e) unconditional lien
waivers of general contractors; (f) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required; and (g) such
other certificates as Landlord may, from time to time, reasonably require.
Landlord's obligation under this Section 11.2 to disburse the Award and such
other amounts shall be subject to (x) the collection thereof by Landlord and (y)
the satisfaction of any applicable requirements of any Facility Mortgage, and
the release of such Award by the applicable Facility Mortgagee. Tenant's
obligation to restore the applicable Leased Property shall be subject to the
release of the Award by the applicable Facility Mortgagee to Landlord and
Landlord's release of the Award to Tenant in accordance with the terms of this
Agreement. If the cost of the restoration of the applicable Leased Property
exceeds that part of the Award necessary to complete such restoration, together
with severance and other damages awarded for the taken Leased Improvements,
Tenant shall contribute upon the demand of Landlord any excess amounts needed to
restore such Leased Property. Such difference shall be paid by Tenant to
Landlord and held by Landlord, together with such part of the Award and such
severance and other damages, for application to the cost of restoration.
11.3 Abatement of Rent. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Collective Leased Properties. The
provisions of this Article 11 shall be considered an express agreement governing
any Condemnation involving any or all of the Collective Leased Properties and,
to the maximum extent permitted bylaw, 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.
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11.4 Temporary Condemnation. In the event of any temporary Condemnation
of all or any part of the Collective Leased Properties or Tenant's interest
therein, this Agreement shall continue in full force and effect, and Tenant
shall continue to pay, in the manner and on the terms herein specified, the full
amount of the Rent. Tenant shall continue to perform and observe all of the
other terms and conditions this Agreement on the part of the Tenant to be
performed and observed. Provided no Event of Default has occurred and is
continuing, the entire amount of any Award made for such temporary Condemnation
allocable to the Term, whether paid by way of damages, rent or otherwise, shall
be paid to Tenant. Tenant shall, promptly upon the termination of any such
period of temporary Condemnation, at its sole cost and expense, restore such
Leased Property to the condition that existed immediately prior to such
Condemnation, in full compliance with all Legal Requirements, unless such period
of temporary Condemnation shall extend beyond the expiration of the Term, in
which event Tenant shall not be required to make such restoration. For purposes
of this Section 11.4, a Condemnation shall be deemed to be temporary if the
period of such Condemnation is not expected to, and does not, exceed twenty-four
(24) months.
11.5 Allocation of Award. Except as provided in the second sentence of
this Section 11.5, the total Award shall be solely the property of and payable
to Landlord. Any portion of the Award made for the taking of Tenant's leasehold
interest in the applicable Leased Property, Tenant's Capital Additions, loss of
business during the remainder of the Term, the taking of Tenant's Personal
Property, or Tenant's removal and relocation expenses shall be the sole property
of and payable to Tenant (subject to the provisions of Section 11.2). In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of the Rent when
due and such failure shall continue for a period of five (5) Business
Days after the due date or should Tenant fail to pay any other sum
(including, but not limited to, payment of the purchase price for any
of the Collective Leased Properties which Tenant shall be obligated to
purchase pursuant to the terms of this Agreement) payable hereunder
when due and such failure shall continue for a period of five (5)
Business Days after Notice thereof; or
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(b) should Tenant shall fail to maintain the insurance
coverages required under Article 9; or
(c) should Tenant default in the due observance or performance
of any of the terms, covenants or agreements contained herein to be
performed or observed by it (other than as specified in clauses (a) and
(b) above) or should any Guarantor or any Permitted Subtenant default
in the due observance or performance of any of the terms, covenants or
agreements contained in any Incidental Document, and, in any such case,
such default shall continue for a period of fifteen (15) days after
Notice thereof from Landlord to Tenant (provided that no such notice
shall be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property); provided, however,
that if such default is susceptible of cure but such cure cannot be
accomplished with due diligence within such period of time and if, in
addition, Tenant, such Guarantor or such Permitted Subtenant commences
to cure such default within thirty (30) days after Notice thereof from
Landlord and thereafter prosecutes the curing of such default with all
due diligence, such period of time shall be extended to such period of
time (not to exceed an additional sixty (60) days in the aggregate) as
may be necessary to cure such default with all due diligence; or
(d) should any obligation of Tenant or any of the Permitted
Subtenants, in respect of any Indebtedness for money borrowed or for
the deferred purchase price of any material property or services
(excluding trade accounts payable in the ordinary course of business on
customary trade terms) or any guaranty relating thereto, be declared to
be or become due and payable prior to the stated maturity thereof and
any applicable grace or notice period with respect thereto shall have
lapsed, or should there occur and be continuing with respect to any
such Indebtedness or deferred purchase price any default under any
instrument or agreement evidencing or securing the same, the effect of
which is to permit the holder or holders of such instrument or
agreement or a trustee, agent or other representative on behalf of such
holder or holders, to cause such any such obligations to become due
prior to its stated maturity and any applicable grace or notice period
with respect thereto shall have lapsed (provided that, in any such
event, the same shall not be deemed an Event of Default if Tenant or
any Permitted Subtenant shall be contesting the same in good faith and
shall provide such security with respect thereto as Landlord may
reasonably require); or
(e) should any obligation of any Guarantor, in respect of any
Indebtedness for money borrowed or for the deferred purchase price of
any material property or services (excluding trade accounts payable in
the ordinary course of business on customary trade terms) or any
guaranty relating
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thereto, be declared to be or become due and payable prior to the
stated maturity thereof and any applicable grace or notice period with
respect thereto shall have lapsed, or should there occur and be
continuing with respect to any such Indebtedness or deferred purchase
price any default under any instrument or agreement evidencing or
securing the same, the effect of which is to permit the holder or
holders of such instrument or agreement or a trustee, agent or other
representative on behalf of such holder or holders, to cause such any
such obligations to become due prior to its stated maturity and any
applicable grace or notice period with respect thereto shall have
lapsed and Landlord shall reasonably determine such event may
materially and adversely impact such Guarantor's ability to perform its
respective obligations under the Guaranty (provided that, in any such
event, the same shall not be deemed an Event of Default if such
Guarantor shall be contesting the same in good faith and shall provide
such security with respect thereto as Landlord may reasonably require);
or
(f) should there occur a final unappealable determination by
applicable State authorities of the revocation or limitation of any
license, permit, certification or approval required for the lawful
operation of any of the Facilities in accordance with its Primary
Intended Use or the loss or limitation of any license, permit,
certification or approval under any other circumstances under which
Tenant or any of the Permitted Subtenants is required to cease its
operation of such Facility in accordance with its Primary Intended Use
at the time of such loss or limitation and such event or failure has a
material adverse effect on the use or operation of the applicable
Leased Property or an adverse effect on Total Revenues; or
(g) should any representation or warranty made by or on behalf
of Tenant, any Guarantor or any Permitted Subtenant under or in
connection with this Agreement, any Incidental Document, or in any
document, certificate or agreement delivered in connection herewith or
therewith prove to have been false or misleading in any material
respect on the day when made or deemed made; or
(h) should Tenant, any Guarantor or any Permitted Subtenant
generally not be paying its debts as they become due, or should Tenant,
any Guarantor or any Permitted Subtenant, make a general assignment for
the benefit of creditors; or
(i) should any petition be filed by or against Tenant, any
Guarantor or any Permitted Subtenant under the Federal bankruptcy laws,
or should any other proceeding be instituted by or against Tenant, any
Guarantor or any Permitted Subtenant seeking to adjudicate it a
bankrupt or
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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, such
Guarantor or Permitted Subtenant, or for any substantial part of the
property of Tenant, such Guarantor or Permitted Subtenant, and any such
proceeding is not dismissed within ninety (90) days after institution
thereof, or should Tenant, such Guarantor or Permitted Subtenant take
any action to authorize or effect any of the actions set forth above in
this paragraph; or
(j) should Tenant, any Guarantor or any Permitted Subtenant
any proceeding for its dissolution or termination; or
(k) should Tenant or any of the Permitted Subtenants
voluntarily cease operation of any of the Collective Leased Properties
for its Primary Intended Use for a period in excess of thirty (30)
consecutive days, except as a result of damage, destruction or partial
or complete Condemnation; or
(l) should a default shall occur under any mortgage which is
secured by Tenant's leasehold interest hereunder or the mortgagee under
any such mortgage accelerates the indebtedness secured thereby or
commence a foreclosure action in connection with said mortgage; or
(m) should the estate or interest of Tenant or any of the
Permitted Subtenants in any of the Collective Leased Properties or any
part thereof be levied upon or attached in any proceeding and the same
shall not be vacated or discharged within the later of (x) one hundred
and twenty (120) days after commencement thereof, unless the amount in
dispute is less than $10,000, in which case Tenant shall give notice to
Landlord of the dispute but Tenant may defend in any suitable way, and
(y) thirty (30) days after receipt by Tenant of Notice thereof from
Landlord (unless Tenant shall be contesting such lien or attachment in
good faith in accordance with Article 8); or
(n) should there occur any Change in Control of the Tenant,
any Guarantor or any of the Permitted Subtenants, except for any Change
in Control of Tenant as a result of the closing of the IPO, or as
otherwise permitted by Section 16.1; or
(o) should any default occur under the Permitted Subleases and
continue beyond the expiration of any applicable notice or cure period;
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then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement with respect to any or all of the
Collective Leased Properties by giving Notice thereof to Tenant and upon the
expiration of the time, if any, fixed in such Notice, this Agreement shall
terminate and all rights of Tenant under this Agreement shall cease with respect
to such of the Collective Leased Properties as shall have been identified in
such Notice. Landlord shall have and may exercise all rights and remedies
available at law and in equity to Landlord as a result of Tenant's breach of
this Agreement.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, subject to applicable law, enter upon the
Collective Leased Properties or any portion thereof and take possession of any
and all of Tenant's Personal Property and the Records (subject to any
prohibitions or limitations to disclosure of any such data as described in
Section 3.1.2(e)) on any such Leased Property, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same at public or private sale,
after giving Tenant reasonable Notice of the time and place of any public or
private sale, at which sale Landlord or its assigns may purchase all or any
portion of Tenant's Personal Property unless otherwise prohibited by law. Unless
otherwise provided by law and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable Notice shall be
met if such Notice is given at least ten (10) days before the date of sale. The
proceeds from any such disposition, less all expenses incurred in connection
with the taking of possession, holding and selling of such property (including,
reasonable attorneys' fees) shall be applied as a credit against the
indebtedness which is secured by the security interest granted in Section 7.2.
Any surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.
12.2 Remedies. None of (a) the termination of this Agreement with
respect to any or all of the Collective Leased Properties pursuant to Section
12.1; (b) the repossession of any or all of the Collective Leased Properties or
any portion thereof; (c) the failure of Landlord to re-let any or all of the
Collective Leased Properties or any portion thereof; nor (d) the reletting of
all or any of portion of the Collective Leased Properties, shall relieve Tenant
of its liability and obligations hereunder, all of which shall survive any such
termination, repossession or re-letting. In the event of any such termination,
Tenant shall forthwith pay to Landlord all Rent due and payable with respect to
the any of the Collective Leased Properties as to which this Agreement is so
terminated through and including the date of such termination and, if this
Agreement shall be terminated with respect to less than all of the Collective
Leased Properties, the allocation of the Rent with
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respect to the Collective Leased Properties as to which this Agreement shall
have been terminated shall be made in such manner as Landlord, in Landlord's
sole and absolute discretion, shall determine. Thereafter, Tenant, until the end
of what would have been the Term of this Agreement in the absence of such
termination, and whether or not any of the Collective Leased Properties as to
which this Agreement is so terminated or any portion thereof shall have been
re-let, shall be liable to Landlord for, and shall pay to Landlord, as current
damages, the Rent and other charges which would be payable hereunder for the
remainder of the Term had such termination not occurred, less the net proceeds,
if any, of any re-letting of the applicable Leased Property, after deducting all
expenses in connection with such reletting, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys' fees,
advertising, expenses of employees, alteration costs and expenses of preparation
for such reletting, and, if this Agreement shall be terminated with respect to
less than all of the Collective Leased Properties, the allocation of the Rent
with respect to the Collective Leased Properties as to which this Agreement
shall have been terminated shall be made in such manner as Landlord, in
Landlord's reasonable discretion in good faith, shall determine. Tenant shall
pay such current damages to Landlord monthly on the days on which the Minimum
Rent would have been payable hereunder if this Agreement had not been so
terminated with respect to such of the Collective Leased Properties.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord either
(a) an amount equal to the excess, if any, of the Rent and other charges which
would be payable hereunder from the date of such termination (assuming that, for
the purposes of this paragraph, annual payments by Tenant on account of
Impositions would be the same as payments required for the immediately preceding
twelve calendar months, or if less than twelve calendar months have expired
since the Commencement Date, the payments required for such lesser period
projected to an annual amount) for what would be the then unexpired term of this
Agreement if the same remained in effect, over the Fair Market Rental for the
same period, or (b) an amount equal to the lesser of (i) the Rent and other
charges that would have been payable for the balance of the Term had it not been
terminated, and (ii) the aggregate of the Rent and other charges accrued in the
twelve (12) months ended next prior to such termination (without reduction for
any free rent or other concession or abatement); provided, however, that if this
Agreement shall have been terminated with respect to less than all of the
Collective Leased Properties, the allocation of the Rent with respect to the
Collective Leased Properties as to which this Agreement shall have been
terminated shall be made in such manner as Landlord, in Landlord's sole and
absolute discretion, shall determine. In the event this Agreement is so
terminated prior to the expiration of the first full year of the Term, the
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liquidated damages which Landlord may elect to recover pursuant to clause (b)
(ii) of this paragraph shall be calculated as if such termination had occurred
on the first anniversary of the Commencement Date. Nothing contained in this
Agreement shall, however, limit or prejudice the right of Landlord to prove and
obtain in proceedings for bankruptcy or insolvency an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet any of the
Collective Leased Properties as to which this Agreement is so terminated or any
part or parts thereof, either in the name of Landlord or otherwise, for a term
or terms which may at Landlord'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 Landlord considers advisable
and necessary to relet the same, and (b) may make such reasonable alterations,
repairs and decorations in any applicable Leased Property or any portion thereof
as Landlord, in its reasonable discretion, in good faith, considers advisable
and necessary for the purpose of reletting any such 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. Landlord
shall in no event be liable in any way whatsoever for any failure to relet all
or any portion of the Collective Leased Properties, or, in the event that any of
the Collective Leased Properties is relet, for failure to collect the rent under
such reletting. To the maximum 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 being evicted or dispossessed, or in the event of
Landlord obtaining possession of any of the Collective Leased Properties, by
reason of the violation by Tenant of any of the covenants and conditions of this
Agreement.
12.3 Tenant's Waiver. IF THIS AGREEMENT IS TERMINATED WITH RESPECT TO
ANY OF THE COLLECTIVE LEASED PROPERTIES PURSUANT TO SECTION 12.1 OR 12.2, TENANT
WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN THE
EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN THIS ARTICLE
12, AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING PROPERTY
FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds. Any payments received by Landlord under any
of the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's obligations
under
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this Agreement in such order as Landlord may determine or as may be required by
applicable law.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine in good
faith immediate action is necessary to protect person or property), without
waiving or releasing any obligation of Tenant and without waiving or releasing
any Event of Default, may (but shall not be obligated 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 maximum extent permitted by law, enter upon
any of the Collective Leased Properties or any portion thereof for such purpose
and take all such action thereon as, in Landlord's reasonable discretion, in
good faith, may be necessary or appropriate therefor, including the management
of the Facility located thereon by Landlord or its designee, and Tenant hereby
irrevocably appoints, in the event of such election by Landlord, upon the
occurrence and during the continuance of any Event of Default, Landlord or its
designee as manager of any such Facility and its attorney in fact for such
purpose, irrevocably and coupled with an interest, in the name, place and stead
of Tenant. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Trade Names. If this Agreement is terminated with respect to any
of the Collective Leased Properties for any reason, Tenant shall not use a
Facility Trade Name in the same market in which the Facility located thereon is
located in connection with any business that competes with such Facility.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to two (2) times the Minimum Rent and the Additional Rent then in effect
plus Additional Charges and other charges herein provided (prorated on a daily
basis). Tenant shall also pay to Landlord all damages (direct or indirect)
sustained by reason of any such holding over. Otherwise, such holding over shall
be on the terms and conditions set forth in this Agreement, to the extent
applicable. Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Agreement.
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ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in this Agreement and such default shall
continue for a period of thirty (30) days after Notice thereof from Tenant to
Landlord and any applicable Facility Mortgagee, or such additional period as may
be reasonably required to correct the same, Tenant may declare the occurrence of
a "Landlord Default" by a second Notice to Landlord and to such Facility
Mortgagee. Thereafter, Tenant may forthwith cure the same and, subject to the
provisions of the following paragraph, invoice Landlord for costs and expenses
(including reasonable attorneys' fees and court costs) incurred by Tenant in
curing the same, together with interest thereon from the date Landlord receives
Tenant's invoice, at the Overdue Rate. Tenant shall have no right to terminate
this Agreement for any default by Landlord hereunder and no right, for any such
default, to offset or counterclaim against any Rent or other charges due
hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof. If Tenant and Landlord shall fail, in good faith, to resolve any such
dispute within ten (10) days after Landlord's Notice of dispute, either may
submit the matter for resolution to a court of competent jurisdiction.
ARTICLE 15
PURCHASE OF LEASED PROPERTY
In the event Tenant shall purchase any of the Collective Leased
Properties from Landlord pursuant to the terms of this Agreement, Landlord
shall, upon receipt from Tenant of the applicable purchase price, together with
full payment of any unpaid Rent and 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 instruments, conveying the entire interest of Landlord
in and to such Leased Property to Tenant, free and clear of all encumbrances
created through the act or omission of Landlord other than (i) Permitted
Encumbrances and such other liens, if any, which Tenant has agreed in writing to
accept and take title subject to, and (ii) encumbrances imposed on such Leased
Property under Section 5.5. The
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difference between the applicable purchase price and the total cost of
discharging the encumbrances described in clause (i) preceding shall be paid to
Landlord or as Landlord may direct, by wire transfer of immediately available
federal funds. Such Leased Property shall be conveyed to Tenant on an "as is"
basis and in its "as-is" physical condition. The closing of any such sale shall
be subject to all terms and conditions with respect thereto set forth in this
Agreement and shall, unless waived by Tenant, be contingent upon and subject to
Tenant's obtaining all required governmental consents and approvals for such
transfer. All expenses of such conveyance, including, without limitation, all
transfer and sales taxes, documentary fees, the fees and expenses of counsel to
Landlord and the cost of any title examination or title insurance, shall be paid
by Tenant.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment. Except as provided in the last sentence
of this paragraph and Section 16.3 below, Tenant shall not, without the prior
written consent of a majority of the Independent Trustees and a majority of the
Trustees, assign, mortgage, pledge, hypothecate, encumber or otherwise transfer
this Agreement or sublease (which term shall be deemed to include the granting
of concessions, licenses and the like), all or any part of the Collective Leased
Properties or suffer or permit this Agreement or the leasehold estate created
hereby or any other rights arising under this Agreement to be assigned,
transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in
part, whether voluntarily, involuntarily or by operation of law, or permit the
use or occupancy of any of the Collective Leased Properties by anyone other than
Tenant, or any of the Collective Leased Properties to be offered or advertised
for assignment or subletting. For purposes of this Section 16.1, an assignment
of this Agreement shall be deemed to include any Change in Control of Tenant
(other than any Change in Control resulting from (x) the closing of the IPO, (y)
the trading of shares by the public on a nationally recognized exchange,
including, without limitation, NASDAQ, or (z) the issuance of additional equity
interests in Tenant or any Guarantor on commercially reasonable terms) or any
transaction pursuant to which Tenant is merged or consolidated with another
entity or pursuant to which all or substantially all of Tenant's assets are
transferred to any other entity, as if such change in control or transaction
were an assignment of this Agreement. Landlord's consent shall not be required
in connection with the transfer of all of the interests in Tenant to Prime,
provided that Prime shall, simultaneously therewith, execute and deliver to
Landlord a Stock Pledge and Security Agreement in the form of the Stock Pledge
Agreement.
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If this Agreement is assigned or if any of the Collective Leased
Properties or any part thereof are sublet (or occupied by anybody other than
Tenant or residents of the units at the Facilities) Landlord 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 the first paragraph of
this Section 16.1, the acceptance by Landlord of such assignee, subtenant or
occupant, as the case may be, as a tenant, or a release of Tenant from the
future performance by Tenant of its covenants, agreements or obligations
contained in this Agreement.
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 a particular instance shall be deemed to be a waiver of the
prohibition set forth in this Section 16.1. No assignment, subletting or
occupancy shall affect any Primary Intended Use. Any subletting, assignment or
other transfer of Tenant's interest under this Agreement in contravention of
this Section 16.1 shall be voidable at Landlord's option.
16.2 Required Sublease Provisions. Any sublease of all or any portion
of any of the Collective Leased Properties (except to residents of the units
located at the Facilities) shall provide (a) that it is subject and subordinate
to this Agreement and to the matters to which this Agreement is or shall be
subject or subordinate; (b) that in the event of termination of this Agreement
or reentry or dispossession of Tenant by Landlord under this Agreement, Landlord
may, at its option, terminate such sublease or take over all of the right, title
and interest of Tenant, as sublessor under such sublease, and such subtenant
shall, at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Facility
Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or omission
of Tenant under such sublease, (ii) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant,
(iii) be bound by any previous modification of such sublease not consented to in
writing by Landlord or by any previous prepayment of more than one (1) month's
Rent, (iv) be bound by any covenant of Tenant to undertake or complete any
construction of such Leased Property or any portion thereof, (v) be required to
account for any security deposit of the subtenant other than any security
deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date
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of such attornment, (vii) be responsible for any monies owing by Tenant to the
credit of such subtenant, or (viii) be required to remove any Person occupying
any portion of the Collective Leased Properties; and (c), in the event that such
subtenant receives a written Notice from Landlord or any Facility Mortgagee
stating that an Event of Default has occurred and is continuing, such subtenant
shall thereafter be obligated to pay all rentals accruing under such sublease
directly to the party giving such Notice or as such party may direct. All
rentals received from such subtenant by Landlord or the Facility Mortgagee, as
the case may be, shall be credited against the amounts owing by Tenant under
this Agreement and such sublease shall provide that the subtenant thereunder
shall, at the request of Landlord, execute a suitable instrument in confirmation
of such agreement to attorn. 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 form and substance reasonably satisfactory to
Landlord, shall be delivered promptly to Landlord and (a) in the case of an
assignment, the assignee shall assume in writing and agree to keep and perform
all of the terms of this Agreement 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 and (b) in case of either an assignment or subletting,
Tenant shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the performance and observance of all of
the covenants and conditions to be performed by Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 16.1.
16.3 Permitted Subleases. Notwithstanding the foregoing, but subject to
the provisions of Section 16.4 and any other express conditions or limitations
set forth herein, Tenant may enter into the Permitted Subleases and third party
residency agreements with respect to the units located at the Facilities and
may, in each instance after Notice to Landlord, sublease space at any of the
Collective Leased Properties for laundry, commissary or child care purposes or
other concessions in the ordinary course of business, so long as such sublease
will not reduce the number of units at the applicable Facility, will not violate
or affect any Legal Requirement or Insurance Requirement, and Tenant shall
provide such additional insurance coverage applicable to the activities to be
conducted in such subleased space as Landlord and any Facility Mortgagee may
require.
16.4 Sublease Limitation. Anything contained in this Agreement to the
contrary notwithstanding, Tenant shall not sublet any of the Collective Leased
Properties on any basis such that the rental to be paid by any sublessee
thereunder would be
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based, in whole or in part, on either (a) the income or profits derived by the
business activities of such sublessee, or (b) any other formula such that any
portion of such sublease rental 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 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) days prior Notice by a party, the other party shall furnish
to the requesting party an Officer's Certificate certifying that this Agreement
is unmodified and in full force and effect (or that this Agreement is in full
force and effect as modified and setting forth the modifications), the date to
which the Rent has been paid, that, to such party's knowledge, no Default or an
Event of Default has occurred and is continuing or, if a Default or an Event of
Default shall exist, specifying in reasonable detail the nature thereof, and the
steps being taken to remedy the same, and such additional information as the
requesting party may reasonably request. Any such certificate furnished pursuant
to this Section 17.1 may be relied upon by the requesting party, any Facility
Mortgagee and any prospective purchaser or mortgagee of any of the Collective
Leased Properties.
17.2 Financial Statements.
Tenant shall furnish the following statements to Landlord:
(a) within forty-five (45) days after each of the first three
quarters of any Fiscal Year, the most recent Consolidated Financials
and the most recent unaudited financial statements of Tenant prepared
on a Facility by Facility basis, in each case accompanied by the
Financial Officer's Certificate;
(b) within one hundred twenty (120) days after the end of each
Fiscal Year, the most recent Consolidated Financials for such year,
including the most recent financial statements of Tenant prepared on a
Facility by Facility basis, in each case certified by Ernst & Young LLP
or another independent certified public accountant reasonably
satisfactory to Landlord and accompanied by a Financial Officer's
Certificate;
(c) within thirty (30) days after the end of each calendar
month, an unaudited statement of income prepared on
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a Facility by Facility basis, including occupancy percentages and payor
mix, accompanied by a Financial Officer's Certificate;
(d) promptly after the sending or filing thereof, copies of
all reports which Tenant and/or any Guarantor sends to its security
holders generally, and copies of all periodic reports which Tenant
and/or any Guarantor files with the SEC or any stock exchange on which
its shares are listed or traded;
(e) promptly after the delivery thereof to Tenant or any
Guarantor, or either of their management, a copy of any management
letter or written report prepared by the certified public accountants
with respect to the financial condition, operations, business or
prospects of Tenant or such Guarantor, as the case may be;
(f) at any time and from time to time upon not less than
twenty (20) days Notice from Landlord (or such additional period as may
be reasonably required to comply with such request), any Consolidated
Financials or any other financial reporting information required to be
filed by Landlord with any securities and exchange commission, the SEC
or any successor agency, or any other governmental authority, or
required pursuant to any order issued by any court, governmental
authority or arbitrator in any litigation to which Landlord is a party,
for purposes of compliance therewith; and
(g) promptly, upon Notice from Landlord, such other
information concerning the business, financial condition and affairs of
Tenant and any Guarantor as Landlord may reasonably request from time
to time.
Landlord may at any time, and from time to time, provide any Facility Mortgagee
with copies of any of the foregoing statements.
17.3 General Operations.
Tenant covenants and agrees to furnish to Landlord:
17.3.1 Reimbursement, Licensure, Etc. Within thirty
(30) days after receipt or modification thereof, copies of:
(a) all licenses authorizing Tenant to operate each Facility
for its Primary Intended Use;
(b) all Medicare and Medicaid certifications, together with
provider agreements and all material correspondence
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relating thereto with respect to each Facility (excluding, however,
correspondence which may be subject to any attorney-client privilege);
(c) all reports of surveys, statements of deficiencies, plans
of correction, and all material correspondence relating thereto,
including, without limitation, all reports and material correspondence
concerning compliance with or enforcement of licensure,
Medicare/Medicaid, and accreditation requirements, including physical
environment and Life Safety Code survey reports (excluding, however,
correspondence which may be subject to any attorney-client privilege);
and
(d) with reasonable promptness, such other confirmation as to
the licensure and Medicare and Medicaid participation of Tenant as
Landlord may reasonably request from time to time.
17.3.2 Annual Budgets. Commencing with the 1998 Fiscal Year,
not less than thirty (30) days prior to commencement of any Fiscal Year,
proposed annual income and ordinary expense and capital improvement budgets
setting forth projected income and costs and expenses projected to be incurred
by Tenant in managing, owning, maintaining and operating the Facilities during
the next succeeding Fiscal Year.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Collective Leased Properties during usual business hours upon not
less than twenty-four (24) hours' notice (provided that no such notice shall be
required if Landlord shall reasonably determine immediate action is necessary to
protect person or property), and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of this Agreement, provided that any
inspection or repair by Landlord or its representatives will not unreasonably
interfere with Tenant's use and operation of the applicable Leased Property and
further provided that in the event of an emergency, as determined by Landlord in
its sole discretion, prior Notice shall not be necessary.
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ARTICLE 19
APPRAISAL
19.1 Appraisal Procedure. In the event that it becomes necessary to
determine the Fair Market Value of any of the Collective Leased Properties for
any purpose of this Agreement and the parties cannot agree thereon, such Fair
Market Value shall be determined upon the written demand of either party in
accordance with the following procedure.
The party requesting an appraisal, by Notice given within thirty (30)
days after the date of the event which requires or permits such procedure, shall
propose and unilaterally approve a Qualified Appraiser. The other party, by
Notice given within fifteen (15) days after receipt of such Notice appointing
the first Qualified Appraiser, may appoint a second Qualified Appraiser. If the
other party fails to appoint the second Qualified Appraiser within such fifteen
(15) day period, such party shall have waived its right to appoint a Qualified
Appraiser, the first Qualified Appraiser shall appoint a second Qualified
Appraiser within fifteen (15) days thereafter and the Fair Market Value shall be
determined by the Qualified Appraisers as set forth below.
The two Qualified Appraisers shall thereupon endeavor to agree upon the
Fair Market Value. If the two Qualified Appraisers so named cannot agree upon
such value within thirty (30) days after the designation of the second such
appraiser, each such appraiser shall, within five (5) days after the expiration
of such thirty (30) day period, submit his appraisal of fair market value to the
other appraiser in writing, and if the fair market values set forth in such
appraisals vary by five percent (5%) or less of the greater value, the fair
market value shall be determined by calculating the average of the two fair
market values determined by the two appraisers.
If the fair market values set forth in the two appraisals vary by more
than five percent (5%) of the greater value, the two Qualified Appraisers shall
select a third Qualified Appraiser within an additional fifteen (15) days
following the expiration of the aforesaid five (5) day period. If the two
appraisers are unable to agree upon the appointment of a third appraiser within
such fifteen (15) day period, either party may, upon written notice to the
other, request that such appointment be made by the then President (or
equivalent officer) of the State's Chapter of the American Institute of Real
Estate Appraisers, or his or her designee or, if there is no such organization
or if such individual declines to make such appointment, by any state or Federal
court of competent jurisdiction for the State.
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In the event that all three of the appraisers cannot agree upon Fair
Market Value within twenty (20) days following the selection of the third
appraiser, each appraiser shall, within ten (10) days thereafter, submit his
appraisal of fair market value to the other two appraisers in writing, and the
fair market value shall be determined by calculating the average of the two
numerically closest values (or, if the values are equidistant, the average of
all three values) determined by the three appraisers.
In the event that any appraiser appointed hereunder does not or is
unable to perform his or her obligation hereunder, then the party or the
appraisers appointing such appraiser shall have the right to propose and approve
unilaterally a substitute Qualified Appraiser, but if the party or the
appraisers who have the right to appoint a substitute Qualified Appraiser fail
to do so within ten (10) days after written notice from the other party (or
either party in the event such appraiser was appointed by the other appraisers)
either party may, upon written notice to the party having the right to appoint a
substitute Qualified Appraiser, request that such appointment be made by such
officer of the American Institute of Real Estate Appraisers or court of
competent jurisdiction as described above; provided, however, that a party who
has the right to appoint an appraiser or a substitute appraiser shall have the
right to make such appointment only up until the time such appointment is made
by such officer or court.
In connection with the appraisal process, Tenant shall provide the
appraisers full access during normal business hours to examine the applicable
Leased Property, the books, records and files of Tenant and all agreements,
leases and other operating agreements relating to the applicable Leased
Property.
The costs (other than Landlord's counsel fees) of each such appraisal
shall be borne by Tenant and shall be included as part of the Additional
Charges. Upon determining such value, the appraisers shall promptly notify
Landlord and Tenant in writing of such determination. If any party shall fail to
appear at the hearings appointed by the appraisers, the appraisers may act in
the absence of such party.
The determination of the Qualified Appraisers made in accordance with
the foregoing provisions shall be final and binding upon the parties, such
determination may be entered as an award in arbitration in a court of competent
jurisdiction, and judgment thereon may be entered.
19.2 Landlord's Right to Appraisal. Landlord shall have the right,
exercisable twice at any time during the Term, to appoint a Qualified Appraiser
to perform a complete appraisal of
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any or all of the Collective Leased Properties, (each such appraisal to include
complete valuations of any such Leased Property based upon (a) the "Cost
Approach", (b) the "Market Approach" and (c) the "Income Approach"), which
appraisal shall meet all requirements of any state or Federal bank regulatory
authority that Landlord considers relevant or any Facility Mortgagee. The costs
of each such appraisal shall be borne by Tenant and shall be included as part of
the Additional Charges.
ARTICLE 20
REPRESENTATIONS AND WARRANTIES
20.1 Representations of Tenant. To induce Landlord to enter into this
Agreement, Tenant represents and warrants to Landlord as follows:
20.1.1 Status and Authority of Tenant. Tenant is a corporation
duly organized, validly existing and in corporate good standing under
the laws of its state of incorporation. Tenant has all requisite power
and authority under the laws of its state of formation and its charter
documents to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.
Tenant has duly qualified to transact business in each jurisdiction in
which the nature of the business conducted by it requires such
qualification.
20.1.2 Action of Tenant. Tenant has taken all necessary action
to authorize the execution, delivery and performance of this Agreement,
and this Agreement constitutes the valid and binding obligation and
agreement of Tenant, enforceable against Tenant in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors.
20.1.3 No Violations of Agreements. Neither the execution,
delivery or performance of this Agreement by Tenant, nor compliance
with the terms and provisions hereof, will result in any breach of the
terms, conditions or provisions of, or conflict with or constitute a
default under, or result in the creation of any lien, charge or
encumbrance upon any of the Collective Leased Properties pursuant to
the terms of any indenture, mortgage, deed of trust, note, evidence of
indebtedness or any other material agreement or instrument by which
Tenant is bound.
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20.1.4 Litigation. Tenant has received no written notice of
and, to Tenant's knowledge, no action or proceeding is pending or
threatened and no investigation looking toward such an action or
proceeding has begun, which questions the validity of this Agreement or
any action taken or to be taken pursuant hereto, will result in any
material adverse change in the business, operation, affairs or
condition of any of the Collective Leased Properties, result in or
subject the Collective Leased Properties to a material liability, or
involves condemnation or eminent domain proceedings against any
material part of the Collective Leased Properties.
20.1.5 Disclosure. To Tenant's knowledge, there is no fact or
condition which materially and adversely affects the business or
condition of the Collective Leased Properties which has not been set
forth in this Agreement or in the other documents, certificates or
statements furnished to Landlord in connection with the transactions
contemplated hereby.
20.1.6 Compliance With Law. Except as disclosed in writing to
Landlord, to Tenant's knowledge, the Collective Leased Properties and
the use and operation thereof do not violate any material federal,
state, municipal and other governmental statutes, ordinances, by-laws,
rules, regulations or any other legal requirements, including, without
limitation, those relating to construction, occupancy, zoning, adequacy
of parking, environmental protection, occupational health and safety
and fire safety applicable thereto; and there are presently in effect
all material licenses, permits and other authorizations necessary for
the current use, occupancy and operation thereof. Tenant has not
received written notice of any threatened request, application,
proceeding, plan, study or effort which would materially adversely
affect the present use or zoning of any of the Collective Leased
Properties or which would modify or realign any adjacent street or
highway in a manner which would materially adversely affect the use and
operation of the Collective Leased Properties.
20.1.7 Hazardous Substances. Except as disclosed to Landlord
or as described in any environmental report delivered to Landlord, to
Tenant's knowledge, none of Tenant nor any tenant or other occupant or
user of any of the Collective Leased Properties, or any portion
thereof, has stored or disposed of (or engaged in the business of
storing or disposing of) or has released or caused the release of any
Hazardous Substances on any of the Collective Leased Properties, or any
portion thereof, the removal of which is required or the maintenance of
which is prohibited or
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penalized by any Applicable Law, and, to Tenant's knowledge, except as
disclosed to Landlord or as described in any environmental report
delivered to Landlord, the Collective Leased Properties are free from
any such Hazardous Substances, except any such materials maintained in
accordance with Applicable Law.
20.2 Representations of Landlord. To induce Tenant to enter in this
Agreement, Landlord represents and warrants to Tenant as follows:
20.2.1 Status and Authority of Landlord. Landlord is a
Maryland real estate investment trust duly organized, validly existing
and in trust good standing under the laws of the State of Maryland, and
has all requisite power and authority under the laws of such state and
under its charter documents to enter into and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. Landlord has duly qualified and is in good standing as a trust
or unincorporated business association in each jurisdiction in which
the nature of the business conducted by it requires such qualification.
20.2.2 Action of Landlord. Landlord has taken all necessary
action to authorize the execution, delivery and performance of this
Agreement, and upon the execution and delivery of this Agreement by
Landlord constitutes the valid and binding obligation and agreement of
Landlord, enforceable against Landlord in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application
affecting the rights and remedies of creditors.
20.2.3 No Violations of Agreements. Neither the execution,
delivery or performance of this Agreement by Landlord, nor compliance
with the terms and provisions hereof, will result in any breach of the
terms, conditions or provisions of, or conflict with or constitute a
default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of Landlord pursuant to the
terms of any indenture, mortgage, deed of trust, note, evidence of
indebtedness or any other agreement or instrument by which Landlord is
bound.
20.2.4 Litigation. No investigation, action or proceeding is
pending and, to Landlord's actual knowledge, no action or proceeding is
threatened and no investigation looking toward such an action or
proceeding has begun, which questions the validity of this Agreement or
any action taken or to be taken pursuant hereto.
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ARTICLE 21
FACILITY MORTGAGES
21.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord
may, subject to the terms and conditions set forth in this Section 21.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon any of the
Collective Leased Properties, or any portion thereof or interest therein,
whether to secure any borrowing or other means of financing or refinancing. Any
such Encumbrance shall include the right to prepay (whether or not subject to a
prepayment penalty) and shall provide (subject to Section 21.2 below) that it is
subject to the rights of Tenant under this Agreement, including the rights of
Tenant to acquire the Collective Leased Properties pursuant to the applicable
provisions of this Agreement.
21.2 Subordination of Lease. Subject to Section 21.1, this Agreement,
any and all rights of Tenant hereunder, are and shall be subject and subordinate
to any ground or master lease, and all renewals, extensions, modifications and
replacements thereof, and to all mortgages and deeds of trust, which may now or
hereafter affect the Collective Leased Properties, or any of them, or any
improvements thereon and/or any of such leases, whether or not such mortgages or
deeds of trust shall also cover other lands and/or buildings and/or leases, to
each and every advance made or hereafter to be made under such mortgages and
deeds of trust, and to all renewals, modifications, replacements and extensions
of such leases and such mortgages and deeds of trust and all consolidations of
such mortgages and deeds of trust. This section shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any deed of trust or any of their
respective successors in interest may reasonably request to evidence such
subordination provided that such agreement does not amend or modify this
Agreement and includes customary non-disturbance and recognition provisions. Any
lease to which this Agreement is, at the time referred to, subject and
subordinate is herein called "Superior Lease" and the lessor of a Superior Lease
or its successor in interest at the time referred to, is herein called "Superior
Landlord" and any mortgage or deed of trust to which this Agreement is, at the
time referred to, subject and subordinate, is herein called "Superior Mortgage"
and the holder, trustee or beneficiary of a Superior Mortgage is herein called
"Superior Mortgagee".
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If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Agreement with respect to one or more of the
Collective Leased Properties, whether through possession or foreclosure action
or delivery of a new lease or deed, or otherwise, then at the request of such
party so succeeding to Landlord's rights (herein called "Successor Landlord")
and upon such Successor Landlord's written agreement to accept Tenant's
attornment, Tenant shall attorn to and recognize such Successor Landlord as
Tenant's landlord under this Agreement with respect to one or more of the
Collective Leased Properties, and shall promptly execute and deliver any
instrument that such Successor Landlord may reasonably request to evidence such
attornment provided that such agreement does not amend or modify this Agreement
and includes customary non-disturbance and recognition provisions. Upon such
attornment, this Agreement shall continue in full force and effect as a direct
lease between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Agreement, except that the
Successor Landlord (unless formerly the landlord under this Agreement or its
nominee or designee) shall not be (a) liable in any way to Tenant for any act or
omission, neglect or default on the part of Landlord under this Agreement; (b)
responsible for any monies owing by or on deposit with Landlord to the credit of
Tenant; (c) subject to any counterclaim or setoff which theretofore accrued to
Tenant against Landlord; (d) bound by any modification of this Agreement
subsequent to such Superior Lease or Mortgage, or by any previous prepayment of
Minimum Rent or Additional Rent for more than one (1) month, which was not
approved in writing by the Superior Landlord or the Superior Mortgagee thereto;
(e) liable to Tenant beyond the Successor Landlord's interest in the applicable
Leased Property and the rents, income, receipts, revenues, issues and profits
issuing from such Leased Property; (f) responsible for the performance of any
work to be done by the Landlord under this Agreement to render the applicable
Leased Property ready for occupancy by Tenant; or (g) required to remove any
Person occupying the applicable Leased Property or any part thereof, except if
such person claims by, through or under the Successor Landlord. Tenant agrees at
any time and from time to time to execute a suitable instrument in confirmation
of Tenant's agreement to attorn, as aforesaid.
21.3 Notice to Mortgagee and Ground Landlord. Subsequent to the receipt
by Tenant of notice from any Person that it is a Facility Mortgagee, or that it
is the ground lessor under a lease with Landlord, as ground lessee, which
includes the applicable Leased Property as part of the demised premises, no
notice from Tenant to Landlord as to the applicable Leased Property shall be
effective unless and until a copy of the same is given to such Facility
Mortgagee or ground lessor, and the curing of any of
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Landlord's defaults by such Facility Mortgagee or ground lessor shall be treated
as performance by Landlord.
ARTICLE 22
ADDITIONAL COVENANTS OF TENANT
22.1 Prompt Payment of Indebtedness. Tenant shall, and shall cause the
Permitted Subtenants to, (a) pay or cause to be paid when due all payments of
principal of and premium and interest on Indebtedness for money borrowed and
shall not permit or suffer any such Indebtedness to become or remain in default
beyond any applicable grace or cure period; (b) pay or cause to be paid when due
all lawful claims for labor and rents; (c) pay or cause to be paid when due all
trade payables; and (d) pay or cause to be paid when due all other Indebtedness
upon which it is or becomes obligated, except, in each case, to the extent
payment is being contested in good faith by appropriate proceedings in
accordance with Article 8 and if Tenant shall have set aside on its books
adequate reserves with respect thereto in accordance with GAAP or unless and
until foreclosure, distraint sale or other similar proceedings shall have been
commenced.
22.2 Conduct of Business. Tenant shall, and shall cause the Permitted
Subtenants to, do or cause to be done all things necessary to preserve, renew
and keep in full force and effect and in good standing its corporate existence
and its rights and licenses necessary to conduct its business.
22.3 Maintenance of Accounts and Records. Tenant shall keep true
records and books of account in which full, true and correct entries will be
made of dealings and transactions in relation to the business and affairs of
Tenant in accordance with GAAP. Tenant shall apply accounting principles in the
preparation of the financial statements of Tenant which, in the judgment of and
the opinion of its independent public accountants, are in accordance with GAAP,
except for changes approved by such independent public accountants. Tenant shall
provide to Landlord either in a footnote to the financial statements delivered
under Section 17.2 which relate to the period in which such change occurs, or in
separate schedules to such financial statements, information sufficient to show
the effect of any such changes on such financial statements.
22.4 Notice of Change of Name, Etc. Tenant shall give prompt Notice to
Landlord of any change in (a) the name (operating or otherwise) of Tenant or any
Facility; (b) the individual licensed as executive director of any Facility; (c)
the number of units available for use at any Facility; and (d)
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the patient and/or child care services, if any, that are offered at any
Facility.
22.5 Notice of Litigation, Potential Event of Default, Etc. Tenant
shall give prompt Notice to Landlord of any litigation or any administrative
proceeding to which it, any Guarantor or any of the Permitted Subtenants may
hereafter become a party which involves a potential liability equal to or
greater than Two Hundred Fifty Thousand Dollars ($250,000) or which may
otherwise result in any material adverse change in the business, operations,
property, prospects, results of operation or condition, financial or other, of
Tenant, such Guarantor or Permitted Subtenant. Forthwith upon Tenant obtaining
knowledge of any Default, Event of Default or any default or event of default
under any agreement relating to Indebtedness for money borrowed in an aggregate
amount exceeding, at any one time, Two Hundred Fifty Thousand Dollars
($250,000), or any event or condition that would be required to be disclosed in
a current report filed by Tenant, any Guarantor or any of the Permitted
Subtenants on Form 8-K or in Part II of a quarterly report on Form 10-Q if
Tenant, any Guarantor or any of their Affiliated Persons required to file such
reports under the Securities Exchange Act of 1934, as amended, Tenant shall
furnish Notice thereof to Landlord specifying the nature and period of existence
thereof and what action Tenant has taken or is taking or proposes to take with
respect thereto.
22.6 Indebtedness of Tenant. None of Tenant or the Permitted Subtenants
shall create, incur, assume or guarantee, or permit to exist, or become or
remain liable directly or indirectly upon, any Indebtedness except the
following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for taxes, assessments,
governmental charges or levies, to the extent that payment thereof
shall not at the time be required to be made in accordance with the
provisions of Article 8;
(c) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period
and in respect of which execution thereof shall have been stayed
pending such appeal or review, or (ii) which are fully covered by
insurance payable to Tenant, or (iii) which are for an amount not in
excess of $10,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable appeal
period, so long as execution is not levied thereunder or (y) in respect
of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of Article
8, and in respect
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of which execution thereof shall have been stayed pending such appeal
or review;
(d) unsecured borrowings from Affiliated Persons which are by
their terms expressly subordinate pursuant to a Subordination Agreement
to the payment and performance of Tenant's obligations under this
Agreement;
(e) Indebtedness for purchase money financing or goods and
services incurred in the ordinary course of business; or
(f) Indebtedness permitted pursuant to the terms of Section
6.2.1.
22.7 Financial Condition of Tenant. Tenant shall at all times maintain
Tangible Net Worth in an amount at least equal to one year's Minimum Rent;
provided, however, that so long as Prime or Brookdale is a Guarantor pursuant to
a Guaranty, any demand promissory note made by Prime or Brookdale to the order
of Tenant shall, to the extent of the outstanding principal amount thereof, be
counted toward satisfying such requirement.
22.8 Distributions, Payments to Affiliated Persons, Etc. Tenant shall
not declare, order, pay or make, directly or indirectly, any Distributions or
any payment to any Affiliated Person of Tenant (including payments in the
ordinary course of business and payments pursuant to management agreements with
any such Affiliated Person) or set apart any sum or property therefor, or agree
to do so, if, at the time of such proposed action, or immediately after giving
effect thereto, there shall exist any (a) Monetary Default, (b) Default as to
which Landlord shall have given Tenant Notice thereof or (c) Event of Default.
22.9 Prohibited Transactions. Tenant shall not permit to exist or enter
into any agreement or arrangement whereby it or any Permitted Subtenant engages
in a transaction of any kind with any Affiliated Person as to Tenant or any
Guarantor, except on terms and conditions which are not less favorable to Tenant
or the Permitted Subtenant than those on which similar transactions between
unaffiliated parties could fairly be expected to be entered into on an
arms-length basis.
22.10 Management of Collective Leased Properties. Tenant shall not
enter into or permit to exist any Management Agreement unless the terms thereof
have been previously approved in writing by Landlord, which approval may be
given or withheld in Landlord's reasonable discretion in good faith. All
management fees, payments in connection with any extension of credit and fees
for services provided in connection with the operation of the applicable Leased
Property, payable by Tenant to any Guarantor (or any Affiliated Person as to
Tenant or such
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Guarantor), shall be subordinated to all of the obligations of Tenant due under
this Agreement pursuant to a Subordination Agreement. Tenant shall not agree to
any change in the Manager of any of the Collective Leased Properties and/or any
Facility, to any change in any Management Agreement, terminate any Management
Agreement or permit any Manager to assign any Management Agreement without the
prior written approval of Landlord in each instance, which approval may be given
or withheld in Landlord's reasonable discretion in good faith. Any Management
Agreement shall provide that Landlord shall be provided notice of any defaults
thereunder and, at Landlord's option, an opportunity to cure such defaults and
shall otherwise be in form and substance satisfactory to Landlord in its
reasonable discretion in good faith. If Landlord shall cure any of Tenant's
defaults under any Management Agreement, the cost of such cure shall be payable
upon demand by Tenant to Landlord with interest accruing from the demand date at
the Overdue Rate and Landlord shall have the same rights and remedies for
failure to pay such costs on demand as for Tenant's failure to pay Minimum Rent.
Tenant shall deliver to Landlord any instrument requested by Landlord to
implement the intent of the foregoing provision.
22.11 Liens and Encumbrances. Except as permitted by Section 7.1,
subject to the provisions of Article 8 relating to Permitted Contests, Tenant
shall not create or incur or suffer to be created or incurred or to exist any
Lien on this Agreement, Tenant's Personal Property or any of its other
respective assets, properties, rights or income, or any of its interest therein,
now or at any time hereafter owned, other than:
(a) Security interests securing Indebtedness permitted
pursuant to Section 22.6; and
(b) Permitted Encumbrances.
22.12 Merger; Sale of Assets; Etc. Except as otherwise expressly
provided in this Agreement, Tenant shall not (a) sell, lease (as lessor or
sublessor), transfer or otherwise dispose of, or abandon, all or any material
portion of its assets (including capital stock) or business to any Person; (b)
merge into or with or consolidate with any other Entity; or (c) sell, lease (as
lessor or sublessor), transfer or otherwise dispose of, or abandon, any personal
property or fixtures or any real property; provided, however, that,
notwithstanding the provisions of clause (c) preceding, Tenant may dispose of
equipment or fixtures which have become inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary, provided substitute equipment or
fixtures having equal or greater value and utility (but not necessarily having
the same function) have been provided.
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22.13 Permitted Subleases. Tenant shall not amend, modify or terminate
the Permitted Subleases without the prior written consent of Landlord.
ARTICLE 23
MISCELLANEOUS
23.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under applicable law, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
23.2 No Waiver. No failure by Landlord 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 maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
23.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord, now or
hereafter provided either in this Agreement 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 Landlord of any one
or more of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Landlord of any or all of such other rights, powers
and remedies.
23.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this
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Agreement, but rather the effect thereof shall be confined to the clause,
sentence, paragraph, section or provision so held to be invalid, illegal or
ineffective, and this Agreement shall be construed as if such invalid, illegal
or ineffective provisions had never been contained therein.
23.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of any of the Collective Leased Properties or any part thereof, or
of any interest therein, shall be valid or effective unless agreed to and
accepted in writing by Landlord and no act by Landlord or any representative or
agent of Landlord, other than such a written acceptance by Landlord, shall
constitute an acceptance of any such surrender.
23.6 No Merger of Title. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in any of the Collective Leased Properties.
23.7 Conveyance by Landlord. If Landlord or any successor owner of all
or any portion of any of the Collective Leased Properties shall convey all or
any portion of the Collective Leased Properties in accordance with the terms
hereof other than as security for a debt, and the grantee or transferee of such
of the Collective Leased Properties shall expressly assume all obligations of
Landlord hereunder arising or accruing from and after the date of such
conveyance or transfer, Landlord or such successor owner, as the case may be,
shall thereupon be released from all future liabilities and obligations of
Landlord under this Agreement with respect to such of the Collective Leased
Properties arising or accruing from and after the date of such conveyance or
other transfer and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
23.8 Quiet Enjoyment. So long as Tenant shall pay the Rent as the same
becomes due and shall comply with all of the terms of this Agreement, Tenant
shall peaceably and quietly have, hold and enjoy the Collective Leased
Properties for the Term, free of hindrance or molestation by Landlord or anyone
claiming by, through or under Landlord, but subject to (a) any Encumbrance
permitted under Article 21 or otherwise permitted to be created by Landlord
hereunder, (b) all Permitted Encumbrances, (c) liens as to obligations of
Landlord that are either not yet due or which are being contested in good faith
and by proper proceedings, and (d) liens that have been consented to in writing
by Tenant. Except as otherwise provided in this Agreement, no failure by
Landlord to comply with the foregoing covenant shall give Tenant any right to
cancel or terminate this Agreement or
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abate, reduce or make a deduction from or offset against the Rent or any other
sum payable under this Agreement, or to fail to perform any other obligation of
Tenant hereunder.
23.9 NON-LIABILITY OF TRUSTEES. THE DECLARATION, A COPY OF WHICH IS
DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
23.10 Landlord's Consent of Trustees. Where provision is made in this
Agreement for Landlord's consent and Landlord shall fail or refuse to give such
consent, Tenant shall not be entitled to any damages for any withholding by
Landlord of its consent, it being intended that Tenant's sole remedy shall be an
action for specific performance or injunction, and that such remedy shall be
available only in those cases where Landlord has expressly agreed in writing not
unreasonably to withhold its consent.
23.11 Memorandum of Lease. Neither Landlord nor Tenant shall record
this Agreement. However, Landlord and Tenant shall promptly, upon the request of
the other, enter into a short form memorandum of this Agreement, in form
suitable for recording under the laws of the State in which reference to this
Agreement, and all options contained herein, shall be made. Tenant shall pay all
costs and expenses of recording such memorandum.
23.12 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with return receipt requested (if
by mail), or with all freight charges prepaid (if by Federal Express or
similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except
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that whenever under this Agreement a notice is either received on a day
which is not a Business Day or is required to be delivered on or before
a specific day which is not a Business Day, the day of receipt or
required delivery shall automatically be extended to the next Business
Day.
(c) All such notices shall be addressed,
if to Landlord to:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to Tenant to:
BLC Property, Inc.
c/o The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attn: Mr. Mark J. Schulte
[Telecopier No. (312) 917-0460]
with a copy to:
The Prime Group, Inc.
77 West Walker Drive, Suite 3900
Chicago, Illinois 60601
Attn: Robert J. Rudnik, Esq.
[Telecopier No. (312) 917-1684]
and to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601-9703
Attn: Wayne D. Boberg, Esq.
[Telecopier No. (312) 558-5700]
(d) By notice given as herein provided, the parties hereto and their
respective successor and assigns shall have the right
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from time to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other address
within the United States of America.
23.13 Construction. Anything contained in this Agreement to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to any of the Collective Leased Properties shall survive
such termination or expiration. In no event shall Landlord be liable for any
consequential damages suffered by Tenant as the result of a breach of this
Agreement by Landlord. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated except by an instrument in writing
signed by the party to be charged. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Each term or provision of this
Agreement to be performed by Tenant shall be construed as an independent
covenant and condition. Time is of the essence with respect to the exercise of
any rights of Tenant under this Agreement. Except as otherwise set forth in this
Agreement, any obligations of Tenant (including without limitation, any
monetary, repair and indemnification obligations) shall survive the expiration
or sooner termination of this Agreement.
23.14 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
23.15 Applicable Law, Etc. Except as to matters regarding the internal
affairs of Landlord and issues of or limitations on any personal liability of
the shareholders and trustees of Landlord for obligations of Landlord, as to
which the laws of the State of Maryland shall govern, this Agreement shall be
interpreted, construed, applied and enforced in accordance with the laws of the
State of New York applicable to contracts between residents of New York which
are to be performed entirely within New York, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any
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action or other proceeding is instituted or pending; or (v) the nationality,
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State of New York; or (vii) any combination of the foregoing.
Notwithstanding the foregoing, the laws of the State shall apply to the
perfection and priority of liens upon and the disposition of and disposition
with respect to any of the Collective Leased Properties.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in New York and to service of
process by registered mail, return receipt requested, or by any other manner
provided by law.
23.16 Payment of Fees. Tenant shall pay to Landlord, upon demand, all
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection with the preparation, execution and delivery
of this Agreement and all acts undertaken by Landlord in contemplation thereof
or in connection therewith.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
HEALTH AND RETIREMENT PROPERTIES
TRUST
By: /s/ David J. Hegarty
Its: President
TENANT:
BLC PROPERTY, INC.
By: /s/
Its Executive (Vice) President
<PAGE>
EXHIBITS A-1 TO A-3
The Land
[See attached copies.]
<PAGE>
Omitted Exhibits
The following exhibits to the Master Lease Agreement, dated as of
December 27, 1996, between Health and Retirement Properties Trust and BLC
Properties, Inc., have been omitted:
Exhibit Letter Exhibit Title
A-1 Legal Description
A-2 Legal Description
A-3 Legal Description
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibits to the Securities and Exchange Commission upon request.
<PAGE>
EXHIBIT B
Allocable Purchase Prices
East Mesa, Arizona $14,800,000
Rochester, New York $10,700,000
Chicago, Illinois $62,000,000
EXHIBIT 10.6
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Agreement") is made and given as of this
27th day of December, 1996, by (i) BROOKDALE LIVING COMMUNITIES, INC., a
Delaware corporation ("Brookdale"), (ii) THE PRIME GROUP, INC., PRIME
INTERNATIONAL, INC. and PGLP, INC., each an Illinois corporation (collectively,
the "Prime Companies"), (iii) PRIME GROUP LIMITED PARTNERSHIP and PRIME GROUP
II, each an Illinois limited partnership (collectively, the "Partnerships"), and
(iv) BROOKDALE LIVING COMMUNITIES OF ILLINOIS, INC., BROOKDALE LIVING
COMMUNITIES OF NEW YORK, INC. and BROOKDALE LIVING COMMUNITIES OF ARIZONA, INC.,
each a Delaware corporation (collectively, the "Subtenants" and, together with
Brookdale, the Prime Companies and the Prime Partnerships, the "Guarantors"),
for the benefit of HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real
estate investment trust (together with its successors and assigns, "HRP").
W I T N E S S E T H :
WHEREAS, pursuant to a Master Lease Agreement, dated as of the date
hereof (the "Lease"), HRP has agreed to lease to BLC Property, Inc., a Delaware
corporation (the "Tenant"), certain real property, together with the related
improvements and personal property, as more particularly described in the Lease;
and
WHEREAS, it is a condition precedent to HRP's entering into the Lease
that the Guarantors, jointly and severally, guarantee all of the payment and
performance obligations of the Tenant with respect to the Lease; and
WHEREAS, the transactions contemplated by the Lease are of direct
material benefit to each of the Guarantors;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the mutual receipt and legal sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Terms. Capitalized terms used and not otherwise defined in
this Agreement shall have the meanings ascribed to such terms in the Lease. The
Lease and the Incidental Documents are herein referred collectively referred to
as the "Transaction Documents."
2. Guaranteed Obligations. For purposes of this Agreement, the term
"Guaranteed Obligations" shall mean the payment and performance of each and
every obligation of the Tenant to HRP, under the Transaction Documents or
relating
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thereto, whether now existing or hereafter arising, and including, without
limitation, the payment of the full amount of the Rent payable under the Lease.
3. Representations and Covenants. The Guarantors, jointly and
severally, represent, warrant, covenant and agree that:
3.1 Incorporation of Representations and Warranties. The
representations and warranties of the Tenant and its Affiliated Persons set
forth in the Transaction Documents are true and correct on and as of the date
hereof in all material respects.
3.2 Performance of Covenants and Agreements. Each of the
Guarantors hereby agrees to take all lawful action in its power to cause the
Tenant duly and punctually to perform all of the covenants and agreements set
forth in the Transaction Documents.
3.3 Validity of Agreement. The Guarantors have duly and
validly executed and delivered this Agreement; this Agreement constitutes the
legal, valid and binding obligation of the Guarantors, enforceable against each
of them in accordance with its terms, except as the enforceability thereof may
be subject to bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights generally
and subject to general equitable principles, regardless of whether
enforceability is considered in a proceeding at law or in equity; and the
execution, delivery and performance of this Agreement have been duly authorized
by all requisite action of the Guarantors and such execution, delivery and
performance by the Guarantors will not result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any of the
property or assets of any of the Guarantors pursuant to the terms of, any
indenture, mortgage, deed of trust, note, other evidence of indebtedness,
agreement or other instrument to which any Guarantor may be a party or by which
the Guarantors or any property or assets of a Guarantor may be bound, or violate
any provision of law, or any applicable order, writ, injunction, judgement or
decree of any court or any order or other public regulation of any governmental
commission, bureau or administrative agency.
3.4 Payment of Expenses. The Guarantors jointly and severally
agree, as principal obligors and not as guarantors only, to pay to HRP
forthwith, upon demand, in immediately available federal funds, all costs and
expenses (including reasonable attorneys' fees and disbursements) incurred or
expended by HRP in connection with the enforcement of this Agreement, together
with interest on amounts recoverable under this Agreement from the time such
amounts become due until payment at the Overdue Rate. The Guarantors' joint and
several
<PAGE>
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covenants and agreements set forth in this Section 3.4 shall survive the
termination of this Agreement.
3.5 Notices. Each of the Guarantors shall promptly give notice
to HRP of any event known to it which might reasonably result in a material
adverse change in the financial condition of any Guarantor.
3.6 Reports. Each of the Guarantors shall promptly provide to
HRP each of the financial reports, certificates and other documents required of
such Guarantor under the Transaction Documents.
3.7 Books and Records. Each of the Guarantors shall at all
times keep proper books of record and account in which full, true and correct
entries shall be made of its transactions in accordance with generally accepted
accounting principles and shall set aside on its books from its earnings for
each fiscal year all such proper reserves, including reserves for depreciation,
depletion, obsolescence and amortization of its properties during such fiscal
year, as shall be required in accordance with generally accepted accounting
principles, consistently applied, in connection with its business. Each
Guarantor shall permit access to HRP and its agents to the books and records
maintained by such Guarantor during normal business hours and upon reasonable
notice.
3.8 Taxes, Etc. Each Guarantor shall pay and discharge
promptly as they become due and payable all taxes, assessments and other
governmental charges or levies imposed upon such Guarantor or the income of such
Guarantor or upon any of the property, real, personal or mixed of such
Guarantor, or upon any part thereof, as well as all claims of any kind
(including claims for labor, materials and supplies) which, if unpaid, might by
law become a lien or charge upon any property and result in a material adverse
change in the financial condition of any such Guarantor; provided, however, that
such Guarantor shall not be required to pay any such tax, assessment, charge,
levy or claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings or other appropriate
actions promptly initiated and diligently conducted and if such Guarantor shall
have set aside on its books such reserves of such Guarantor, if any, with
respect thereto as are required by generally accepted accounting principles.
3.9 Legal Existence. Each Guarantor shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
legal existence and shall not, other than (x) as a result of the closing of the
IPO or as otherwise permitted by the Lease or (y), in the case of each of the
Subtenants, as a result of the transfer of the capital stock of the Tenant to
The Prime Group, Inc., suffer or permit any Change in Control of, or transfer of
interests in, such Guarantor without the prior written consent of HRP, which
consent may be
<PAGE>
-4-
given or withheld by HRP in HRP's sole discretion, for any reason or for no
reason at all.
3.10 Compliance. Each Guarantor shall use reasonable business
efforts to comply in all material respects with all applicable statutes, rules,
regulations and orders of, and all applicable restrictions imposed by, all
governmental authorities in respect of the conduct of the business of such
Guarantor and the ownership of the property of such Guarantor (including,
without limitation, applicable statutes, rules, regulations, orders and
restrictions relating to environmental, safety and other similar standards or
controls).
3.11 Insurance. Each Guarantor shall maintain, with
financially sound and reputable insurers, insurance with respect to the
properties and business of such Guarantor against loss or damage of the kinds
customarily insured against by owners of established reputation engaged in the
same or similar businesses and similarly situated, in such amounts and by such
methods as shall be customary for such owners and deemed adequate by such
Guarantor.
3.12 Financial Statements, Etc. The financial statements
previously delivered to HRP by each Guarantor fairly present the financial
condition of such Guarantor in accordance with generally accepted accounting
principles consistently applied and there has been no material adverse change
from the date thereof through the date hereof.
3.13 Restricted Payments, Etc. The Guarantors shall not
declare, order, pay or make, directly or indirectly, any Restricted Payment (as
defined below) or any payment to any Affiliated Person as to any Guarantor
(including payments in the ordinary course of business and payment pursuant to
management agreements with any such Affiliated Person) or set apart any sum or
property therefor, or agree to do so, if, at the time of such proposed action,
or immediately after giving effect thereto, any event or condition shall exist
which constitutes an Event of Default.
For purposes of this Section 3.13, the term "Restricted Payment" shall
mean (i) any declaration or payment of any dividend on or in respect of any
shares of any class of capital stock of the Guarantor, (ii) any purchase,
redemption, retirement or other acquisition of any shares of any class of
capital stock of corporation, (iii) any other distribution on or in respect of
any shares of any class of capital stock of a corporation, or (iv) any return of
capital to shareholders.
4. Guarantee. The Guarantors hereby jointly and severally
unconditionally guarantee that the Guaranteed Obligations which are monetary
obligations shall be paid in full when due and payable, whether upon demand, at
the stated or accelerated maturity thereof pursuant to any Transaction Document,
or
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-5-
otherwise, and that the Guaranteed Obligations which are performance obligations
shall be fully performed at the times and in the manner such performance is
required by the Transaction Documents. With respect to the Guaranteed
Obligations which are monetary obligations, this guarantee is a guarantee of
payment and not of collectibility and is absolute and in no way conditional or
contingent. In case any part of the Guaranteed Obligations shall not have been
paid when due and payable or performed at the time performance is required, the
Guarantors shall, within five (5) Business Days after receipt of notice from
HRP, pay or cause to be paid to HRP the amount thereof as is then due and
payable and unpaid (including interest and other charges, if any, due thereon
through the date of payment in accordance with the applicable provisions of the
Transaction Documents) or perform or cause to be performed such obligations in
accordance with the Transaction Documents.
5. Set-Off. Each of the Guarantors hereby authorizes HRP, at any time
and without notice to the Guarantors, to set off the whole or any portion or
portions of any or all sums credited by or due from HRP to such Guarantor
against amounts payable under this Agreement. HRP shall promptly notify the
applicable Guarantor or Guarantors of any such set-off made by HRP and the
application made by HRP of the proceeds thereof.
6. Unenforceability of Guaranteed Obligations, Etc. If the Tenant is
for any reason under no legal obligation to discharge any of the Guaranteed
Obligations (other than because the same have been previously discharged in
accordance with the terms of the Transaction Documents), or if any other moneys
included in the Guaranteed Obligations have become unrecoverable from the Tenant
by operation of law or for any other reason, including, without limitation, the
invalidity or irregularity in whole or in part of any Guaranteed Obligation or
of any Transaction Document or any limitation on the liability of the Tenant
thereunder not contemplated by the Transaction Documents or any limitation on
the method or terms of payment thereunder which may now or hereafter be caused
or imposed in any manner whatsoever, the guarantees contained in this Agreement
shall nevertheless remain in full force and effect and shall be binding upon the
Guarantors to the same extent as if the Guarantors at all times had been the
principal joint and several debtors on all such Guaranteed Obligations.
7. Additional Guarantees. This Agreement shall be in addition to any
other guarantee or other security for the Guaranteed Obligations and it shall
not be prejudiced or rendered unenforceable by the invalidity of any such other
guarantee or security or by any waiver, amendment, release or modification
thereof.
8. Consents and Waivers, Etc. The Guarantors hereby jointly and
severally acknowledge receipt of correct and complete copies of each of the
Transaction Documents, and consent to all
<PAGE>
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of the terms and provisions thereof, as the same may be from time to time
hereafter amended or changed in accordance with the terms and conditions
thereof, and, except as otherwise provided herein, to the maximum extent
permitted by applicable law, waive (a) presentment, demand for payment, and
protest of nonpayment, of any principal of or interest on any of the Guaranteed
Obligations, (b) notice of acceptance of this Agreement and of diligence,
presentment, demand and protest, (c) notice of any default hereunder and any
default, breach or nonperformance or Event of Default under any of the
Guaranteed Obligations or the Transaction Documents, (d) notice of the terms,
time and place of any private or public sale of any collateral held as security
for the Guaranteed Obligations, (e) demand for performance or observance of, and
any enforcement of any provision of, or any pursuit or exhaustion of rights or
remedies against the Tenant or any other guarantor of the Guaranteed
Obligations, under or pursuant to the Transaction Documents, or any agreement
directly or indirectly relating thereto and any requirements of diligence or
promptness on the part of the holders of the Guaranteed Obligations in
connection therewith, and (f) to the extent the Guarantors lawfully may do so,
any and all demands and notices of every kind and description with respect to
the foregoing or which may be required to be given by any statute or rule of law
and any defense of any kind which it may now or hereafter have with respect to
this Agreement, or any of the Transaction Documents or the Guaranteed
Obligations (other than that the same have been discharged in accordance with
the Transaction Documents).
9. No Impairment, Etc. The joint and several obligations, covenants,
agreements and duties of the Guarantors under this Agreement shall not be
affected or impaired by any assignment or transfer in whole or in part of any of
the Guaranteed Obligations without notice to the Guarantors, or any waiver by
HRP or any holder of any of the Guaranteed Obligations or by the holders of all
of the Guaranteed Obligations of the performance or observance by the Tenant or
any other guarantor of any of the agreements, covenants, terms or conditions
contained in the Guaranteed Obligations or the Transaction Documents or any
indulgence in or the extension of the time for payment by the Tenant or any
other guarantor of any amounts payable under or in connection with the
Guaranteed Obligations or the Transaction Documents or any other instrument or
agreement relating to the Guaranteed Obligations or of the time for performance
by the Tenant or any other guarantor of any other obligations under or arising
out of any of the foregoing or the extension or renewal thereof (except that
with respect to any extension of time for payment or performance of any of the
Guaranteed Obligations granted by HRP or any other holder of such Guaranteed
Obligations to Tenant, the Guarantors' obligations to pay or perform such
Guaranteed Obligation shall be subject to the same extension of time for
performance), or the modification or amendment (whether material or otherwise)
of any duty, agreement or obligation of the Tenant or any other guarantor set
forth in any of the foregoing, or the voluntary or involuntary sale or other
<PAGE>
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disposition of all or substantially all the assets of the Tenant or any other
guarantor or insolvency, bankruptcy, or other similar proceedings affecting the
Tenant or any other guarantor or any assets of the Tenant or any such other
guarantor, or the release or discharge of the Tenant or any such other guarantor
from the performance or observance of any agreement, covenant, term or condition
contained in any of the foregoing without the consent of the holders of the
Guaranteed Obligations by operation of law, or any other cause, whether similar
or dissimilar to the foregoing.
10. Reimbursement, Subrogation, Etc. The Guarantors hereby jointly and
severally covenant and agree that no Guarantor will enforce or otherwise
exercise any rights of reimbursement, subrogation, contribution or other similar
rights against the Tenant (or any other person against whom HRP may proceed)
with respect to the Guaranteed Obligations prior to the payment in full of all
amounts owing with respect to the Lease, and until all indebtedness of the
Tenant to HRP shall have been paid in full, no Guarantor shall have any right of
subrogation, and each of the Guarantors waives any defense it may have based
upon any election of remedies by HRP which destroys such Guarantor's subrogation
rights or such Guarantor's rights to proceed against the Tenant for
reimbursement, including, without limitation, any loss of rights such Guarantor
may suffer by reason of any rights, powers or remedies of the Tenant in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging the indebtedness to HRP. Until all obligations of the Tenant
pursuant to the Transaction Documents shall have been paid and satisfied in
full, each of the Guarantors further waives any right to enforce any remedy
which HRP now has or may in the future have against the Tenant, any other
guarantor or any other person and any benefit of, or any right to participate
in, any security whatsoever now or in the future held by HRP.
11. Defeasance. (a) Except as expressly provided in paragraph (b) below
with respect to certain of the Guarantors, this Agreement shall terminate at
such time as the Guaranteed Obligations have been paid and performed in full and
all other obligations of the Guarantors to HRP under this Agreement have been
satisfied in full; provided, however, if at any time, all or any part of any
payment applied on account of the Guaranteed Obligations is or must be rescinded
or returned for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of the Tenant), this Agreement, to the
extent such payment is or must be rescinded or returned, shall be deemed to have
continued in existence notwithstanding any such termination.
(b) Provided that no (i) monetary Default, (ii) Default with respect to
which HRP shall have given Notice thereof to Tenant, or (iii) Event of Default
shall have occurred and be continuing under the Lease, in the event that the IPO
shall be consummated and (x) the common shares of Brookdale issued in
<PAGE>
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connection therewith shall not be subject to redemption, (y) Brookdale shall
have a resulting equity market capitalization of not less than Thirty-Five
Million Dollars ($35,000,0000) and (z) HRP shall receive such evidence thereof
as HRP may reasonably require, HRP shall, promptly upon the written request of
any Guarantor other than Brookdale and the Subtenants, release such Guarantor
(other than Brookdale and the Subtenants) from all obligations and liabilities
arising under this Agreement subsequent to the release date, HRP agreeing, in
connection with any such release, promptly to execute and deliver to the
released Guarantors all documents reasonably necessary to effect such release.
It is expressly understood and agreed that Brookdale and the Subtenants shall
not be released from their liabilities and obligations under this Agreement,
except as provided in paragraph (a) above.
12. Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to HRP to:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
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if to any of the Guarantors to:
c/o The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attn: Mr. Michael W. Reschke
[Telecopier No. (312) 917-1511]
with a copy to:
The Prime Group, Inc.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attn: Mr. Robert J. Rudnik, Esq.
[Telecopier No. (312) 917-1684]
and to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601-9703
Attn: Wayne D. Boberg, Esq.
[Telecopier No. (312) 558-5700]
(d) By notice given as herein provided, the parties hereto and their
respective successor and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
13. Successors and Assigns. Whenever in this Agreement, any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, including without limitation the holders,
from time to time, of the Guaranteed Obligations; and all representations,
warranties, covenants and agreements by or on behalf of the Guarantors which are
contained in this Agreement shall inure to the benefit of HRP's successors and
assigns, including without limitation said holders, whether so expressed or not.
14. Applicable Law. Except as to matters regarding the internal affairs
of HRP and issues of or limitations on any personal liability of the
shareholders and trustees of HRP for obligations of HRP, as to which the laws of
the State of Maryland shall govern, this Agreement, the Transaction Documents
and any other instruments executed and delivered to evidence, complete or
perfect the transactions contemplated hereby and thereby shall be interpreted,
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of New York which are to be
performed entirely within New York, regardless of (i) where any such instrument
is executed or delivered; or (ii) where any payment or other performance
<PAGE>
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required by any such instrument is made or required to be made; or (iii) where
any breach of any provision of any such instrument occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State of New York; or (vii) any
combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of New York as may be provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
15. Modification of Agreement. No modification or waiver of any
provision of this Agreement, nor any consent to any departure by a Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by HRP, and such modification, waiver or consent shall be effective
only in the specific instances and for the purpose for which given. No notice to
or demand on the Guarantors in any case shall entitle the Guarantors to any
other or further notice or demand in the same, similar or other circumstances.
This Agreement may not be amended except by an instrument in writing executed by
or on behalf of the party against whom enforcement of such amendment is sought.
16. Waiver of Rights by HRP. Neither any failure nor any delay on HRP's
part in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege.
17. Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, but this Agreement
shall be reformed and construed and enforced to the maximum extent permitted by
applicable law.
18. Entire Contract. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the subject matter hereof.
<PAGE>
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19. Headings; Counterparts. Headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument,
and in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.
20. Remedies Cumulative. No remedy herein conferred upon HRP is
intended to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
21. NON-LIABILITY OF TRUSTEES. THE DECLARATION PROVIDES THAT THE NAME
"HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE
DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND
THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HRP SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, HRP. ALL PERSONS DEALING WITH HRP, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
22. NON-RECOURSE. ANYTHING CONTAINED HEREIN OR IN ANY TRANSACTION
DOCUMENT TO THE CONTRARY NOTWITHSTANDING, NO RECOURSE SHALL BE HAD FOR ANY OF
THE GUARANTEED OBLIGATIONS OR ANY OTHER OBLIGATION UNDER THIS AGREEMENT OR ANY
OF THE TRANSACTION DOCUMENTS AGAINST ANY SHAREHOLDER, PARTNER, AGENT, DIRECTOR,
OFFICER OR EMPLOYEE OF ANY GUARANTOR, AND NO SUCH PERSON SHALL BE HELD LIABLE
FOR ANY OF THE GUARANTEED OBLIGATIONS OR FOR ANY OTHER OBLIGATION UNDER THIS
AGREEMENT OR ANY OF THE TRANSACTION DOCUMENTS. IT IS UNDERSTOOD THAT THE
PRECEDING SENTENCE SHALL NOT (A) AFFECT THE ABILITY OF HRP TO ENFORCE THE
GUARANTEED OBLIGATIONS AGAINST THE GUARANTORS IN ACCORDANCE WITH THIS AGREEMENT
AND (B) IN THE EVENT ANY OF MALFEASANCE, SUCH AS FRAUD, MISAPPROPRIATION OF
FUNDS OR INTENTIONAL MISREPRESENTATION, ESTOP ANY HOLDER OF GUARANTEED
OBLIGATIONS FROM OTHERWISE MAKING A CLAIM AGAINST THE PERSON OR PERSONS
COMMITTING SUCH MALFEASANCE.
<PAGE>
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WITNESS the execution hereof under seal as of the date above first
written.
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/
Its Executive (Vice) President
THE PRIME GROUP, INC.
By: /s/
Its Executive (Vice) President
PRIME INTERNATIONAL, INC.
By: /s/
Its Executive (Vice) President
PGLP, INC.
By: /s/
Its (Vice) President
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ Michael W. Reschke
Michael W. Reschke, its
Managing General Partner
PRIME GROUP II, L.P.
By: PGLP, INC., its Managing
General Partner
By: /s/
Its (Vice) President
<PAGE>
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BROOKDALE LIVING COMMUNITIES OF
ILLINOIS, INC.
By: /s/
Its Executive (Vice) President
BROOKDALE LIVING COMMUNITIES OF NEW
YORK, INC.
By: /s/
Its Executive (Vice) President
BROOKDALE LIVING COMMUNITIES OF
ARIZONA, INC.
By: /s/
Its Executive (Vice) President
EXHIBIT 10.7
FIRST AMENDMENT TO MASTER
LEASE AGREEMENT AND INCIDENTAL DOCUMENTS
THIS FIRST AMENDMENT TO MASTER LEASE AGREEMENT AND INCIDENTAL DOCUMENTS
(this "Amendment") is entered into as of this 7th day of May, 1997, by and among
(i) HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real estate investment
trust ("HRP"); (ii) BLC PROPERTY, INC., a Delaware corporation, ("Tenant");
(iii) BROOKDALE LIVING COMMUNITIES OF WASHINGTON, INC., a Delaware corporation
(the "Washington Subtenant"); (iv) BROOKDALE LIVING COMMUNITIES OF ARIZONA,
INC., BROOKDALE LIVING COMMUNITIES OF ILLINOIS, INC. and BROOKDALE LIVING
COMMUNITIES OF NEW YORK, INC., each a Delaware corporation (collectively, the
"Existing Subtenants"); (v) BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation ("Brookdale"); and (vi) THE PRIME GROUP, INC., PRIME INTERNATIONAL,
INC. and PGLP, INC., each a Delaware corporation, and PRIME GROUP LIMITED
PARTNERSHIP and PRIME GROUP II, L.P., each an Illinois limited partnership
(collectively, the "Prime Entities").
W I T N E S S E T H:
WHEREAS, pursuant to a Master Lease Agreement, dated as of December 27,
1996 (the "Master Lease"), HRP leased to Tenant and Tenant leased from HRP
certain properties located in Chicago, Illinois, Brighton, New York and Phoenix,
Arizona, all as more particularly described in and subject to and upon the terms
and conditions set forth in the Master Lease; and
WHEREAS, the obligations of Tenant under the Master Lease are secured
and guaranteed by certain undertakings and agreements of the Existing
Subtenants, Brookdale and the Prime Entities pursuant to the Incidental
Documents (this and other capitalized terms used and not otherwise defined
herein having the meanings ascribed to such terms in the Master Lease); and
WHEREAS, Tenant has requested that HRP acquire certain premises located
in Spokane, Washington, as more particularly described in Exhibit A to this
Amendment (the "Additional Premises"), and lease the same to Tenant, subject to
and upon the terms and conditions hereinafter set forth; and
WHEREAS, the transactions contemplated by this Amendment are of direct
substantial and material benefit to the Existing Subtenants, Brookdale and the
Prime Entities and, therefore, such parties have agreed to amend the Incidental
Documents as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration,
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the mutual receipt and legal sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. The Master Lease is hereby amended by inserting the following
immediately prior to Section 1.1 thereof:
1.0 "Additional Premises Commencement Date" shall
mean May 7, 1997.
2. Section 1.5 of the Master Lease is hereby amended by deleting the
reference to "A-3" therein and inserting a reference to "A-4" in its place.
3. Section 1.16 of the Master Lease is hereby deleted in its entirety
and the following inserted in its place:
1.16 "Commencement Date" shall mean the Additional Premises
Commencement Date or the Original Commencement Date, as the
context may require.
4. Section 1.69 of the Master Lease is hereby deleted in its entirety
and the following inserted in its place:
"Minimum Rent" shall mean (a) with respect to the period
commencing on the Original Commencement Date and expiring on
the day preceding the Additional Premises Commencement Date,
$692,709 per month; (b) with respect to the period commencing
the Additional Premises Commencement Date and expiring
December 31, 1997, $806,314 per month; (c) with respect to the
1998 Lease Year, $848,751 per month; (d) with respect to the
1999 Lease Year, $891,188 per month; and (e) with respect to
the 2000 Lease Year and each Lease Year thereafter (including
each Lease Year during any Extended Term), $933,626 per month.
5. The Master Lease is hereby further amended by inserting the
following immediately after Section 1.71 thereof:
1.71A "Original Commencement Date" shall mean December 27,
1997.
6. Section 1.76 of the Master Lease is hereby amended by deleting the
phrase "dated as of the date hereof" appearing therein.
7. Section 1.77 of the Master Lease is hereby amended by deleting the
word "and" between clauses (b) and (c) thereof and inserting the following new
clause at the end thereof:
<PAGE>
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; and (d) Brookdale Living Communities of Washington, Inc., a
Delaware corporation, with respect to the Leased Property
located in Spokane, Washington.
8. Section 2.1 (a) of the Master Lease is hereby amended by deleting
the reference to Exhibit "A-3" therein and inserting a reference to Exhibit
"A-4" in its place.
9. Exhibit A to the Master Lease is hereby amended by adding Exhibit A
to this Amendment thereto as Master Lease Exhibit A-4.
10. Exhibit B to the Master Lease is hereby amended by inserting the
following at the end thereof:
Spokane, Washington $14,350,000
11. All references in the Master Lease to the Incidental Documents are
hereby amended to refer to the Incidental Documents as amended by this
Amendment.
12. Each of the Incidental Documents is hereby amended so that each
reference therein to the Master Lease or to any other Incidental Document shall
mean the Master Lease and such Incidental Document as amended by this Amendment.
13. The Pledge and Security Agreement is hereby amended such that (a)
all references therein to the "Properties" shall include the Additional
Premises; (b) all references therein to the "Subleases" shall include the
sublease of even date, between Tenant and the Washington Subtenant; (c) all
references therein to the "Subtenants" shall include the Washington Subtenant;
and (d) the information set forth in Schedule 1 to this Amendment is inserted at
the end of Schedule 1 thereto.
14. The Stock Pledge Agreement is hereby amended such that (a) all
references therein to the "Properties" shall include the Additional Premises;
(b) all references therein to the "Subleases" shall include the Sublease of even
date between Tenant and the Washington Subtenant; and (c) all references therein
to the "Subtenants" shall include the Washington Subtenant.
15. As an inducement to HRP to enter into this Agreement, Tenant hereby
represents and warrants (x) that all of the representations and warranties of
Tenant set forth in Section 20.1 of the Master Lease are true and correct as of
the date hereof and (y) that no Default or Event of Default has occurred and is
continuing under the Master Lease or any other Incidental Document.
16. By execution of this Amendment, the Washington Subtenant hereby
joins in (x) the Guaranty as a guarantor, and (y) the Pledge and Security
Agreement as a debtor.
<PAGE>
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17. As amended hereby, the Master Lease and the Incidental Documents
shall remain in full force and effect in accordance with their respective terms
and provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
under seal as of the date above first written.
HEALTH AND RETIREMENT PROPERTIES
TRUST
By: /s/ David J. Hegerty
Its President
BLC PROPERTY, INC.
By: /s/
Its President
BROOKDALE LIVING COMMUNITIES OF
WASHINGTON, INC.
By: /s/
Its President
BROOKDALE LIVING COMMUNITIES OF
ARIZONA, INC.
By: /s/
Its President
BROOKDALE LIVING COMMUNITIES OF
ILLINOIS, INC.
By: /s/
Its President
BROOKDALE LIVING COMMUNITIES OF NEW
YORK, INC.
By: /s/
Its President
<PAGE>
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BROOKDALE LIVING COMMUNITIES, INC.
By: /s/
Its President
THE PRIME GROUP, INC.
By: /s/ Michael W. Reschke
Its President
PRIME INTERNATIONAL, INC.
By: /s/ Michael W. Reschke
Its President
PGLP, INC.
By: /s/ Michael W. Reschke
Its President
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ Michael W. Reschke
Michael W. Reschke, its
Managing General Partner
PRIME GROUP II
By: PGLP, Inc. its
Managing General Partner
By: /s/ Michael W. Reschke
Its (Vice) President
<PAGE>
Omitted Exhibits and Schedules
The following exhibit and schedule to the First Amendment to Master
Lease and Incidental Documents have been omitted:
Exhibit Letter Exhibit Title
A Legal Description of Property
Schedule Number Schedule Title
1 Address of Debtor
The registrant agrees to furnish supplementally a copy of the foregoing
omitted schedule and exhibit to the Securities and Exchange Commission upon
request.
EXHIBIT 10.8
LEASE
for the
MARRIOTT BRIGHTON GARDENS FACILITY
between
HMC RETIREMENT PROPERTIES, INC.
("LANDLORD")
and
MARRIOTT SENIOR LIVING SERVICES, INC.
("TENANT")
at
SCOTTSDALE
MARICOPA COUNTY, ARIZONA
<PAGE>
TABLE OF CONTENTS
FACILITIES LEASE AGREEMENT
PAGE
ARTICLE 1 LEASE OF PREMISES..............................................1
Section 1.01 "As-Is" Letting..................................1
Section 1.02 Tenant's Right of Possession.....................2
Section 1.03 Landlord's Corporation...........................2
ARTICLE 2 DEFINITION OF TERMS............................................3
Section 2.01 Definition of Terms..............................3
ARTICLE 3 TERM..........................................................10
Section 3.01 Term............................................10
Section 3.02 Extended Term...................................10
Section 3.03 Notice of Termination...........................11
Section 3.04 Obligations of Parties at Termination...........11
ARTICLE 4 ABSOLUTELY NET LEASE..........................................12
Section 4.01 Net Lease.......................................12
Section 4.02 Non-Terminability of Lease......................12
ARTICLE 5 RENTAL........................................................13
Section 5.01 Rental..........................................13
Section 5.02 Payment of Rental...............................14
Section 5.03 Records; Audit by Landlord......................15
Section 5.04 Subleases, Licenses and Concessions.............16
Section 5.05 Rental Upon Change of Use.......................17
Section 5.06 Rental Upon Certain Expansions..................17
Section 5.07 Special Rental Advance..........................18
ARTICLE 6 OPERATION AND MAINTENANCE OF PREMISES.........................18
Section 6.01 Operation and Maintenance of Premises...........18
Section 6.02 Taxes...........................................19
Section 6.03 Compliance with Requirements,
Covenants and Restrictions....................19
(i)
<PAGE>
Section 6.04 Landlord's Right to Perform
Tenant Obligations............................20
Section 6.05 Compliance with Laws............................20
Section 6.06 Tenant's Right to Contest.......................20
Section 6.07 Liens...........................................21
ARTICLE 7 USE...........................................................22
Section 7.01 Use.............................................22
Section 7.02 Change of Use...................................22
ARTICLE 8 INDEMNIFICATION...............................................22
Section 8.01 General Indemnification by Tenant...............22
Section 8.02 Environmental Indemnification...................24
Section 8.03 Defense of Indemnified Parties..................24
Section 8.04 Payment by Tenant...............................25
Section 8.05 Survival........................................25
Section 8.06 Continuing Obligations..........................25
ARTICLE 9 ALTERATIONS AND EXPANSIONS....................................25
Section 9.01 Alterations and Expansions......................25
Section 9.02 Alterations and Expansions During,
Last Five Years of Term.......................26
Section 9.03 Recovery of Mandated Expenditures...............26
ARTICLE 10 FF&E, FIXED ASSET SUPPLIES AND INVENTORIES...................27
Section 10.01 FF&E Upon Commencement Date....................27
Section 10.02 FF&E Upon Termination..........................28
Section 10.03 Landlord's Security Interest in
Tenant's FF&E, Fixed Asset
Supplies and Inventories.....................28
ARTICLE 11 TRADEMARKS, TRADE NAMES AND SERVICE MARKS.....................29
Section 11.01 Trademarks, Trade Names and
Service Marks................................29
(ii)
<PAGE>
ARTICLE 12 ENVIRONMENTAL HAZARDS.........................................30
Section 12.01 Compliance with Environmental Law..............30
Section 12.02 Environmental Assessments......................32
ARTICLE 13 INSURANCE.....................................................34
Section 13.01 Property & Business Interruption
Insurance.....................................34
Section 13.02 Application of Proceeds........................34
Section 13.03 Waiver of Rights of Subrogation................36
Section 13.04 Operational Insurance..........................36
Section 13.05 Blanket and Self-Insurance.....................36
Section 13.06 Costs of Insurance.............................37
Section 13.07 Defense of Claims after Termination............37
Section 13.08 Coverage and Certificates......................37
Section 13.09 Alternative Insurance Coverage.................38
ARTICLE 14 DAMAGE BY FIRE OR OTHER CASUALTY..............................38
Section 14.01 Damage by Fire or Other Casualty...............38
Section 14.02 Partial Damage by Fire or Other Casualty.......39
Section 14.03 Damage Occurring After the 10th
Anniversary of Commencement Date.............39
Section 14.04 No Abatement of Rent Due to Casualty...........39
Section 14.05 Early Termination..............................40
Section 14.06 Uninsurable Loss...............................40
ARTICLE 15 CONDEMNATION..................................................41
Section 15.01 Notice of Condemnation and Assignment
of Rights....................................41
Section 15.02 Tenant's Right to Pursue a Claim...............41
Section 15.03 Temporary Taking...............................41
Section 15.04 Total Taking...................................42
Section 15.05 Substantial Taking.............................43
Section 15.06 Partial Taking.................................43
(iii)
<PAGE>
ARTICLE 16 ASSIGNMENT, SALE AND SUBLETTING...............................46
Section 16.01 Sale or Assignment by Landlord..................46
Section 16.02 Assignment by Tenant............................46
Section 16.03 Tenant's Right to Sublease......................47
ARTICLE 17 HOLDING OVER..................................................47
Section 17.01 Holdover.......................................47
ARTICLE 18 ESTOPPEL CERTIFICATES.........................................47
Section 18.01 Estoppel Certificates..........................47
ARTICLE 19 LANDLORD FINANCING ...........................................48
Section 19.01 Right to Finance...............................48
Section 19.02 Priority.......................................48
Section 19.03 Mortgage Amendments.............................49
ARTICLE 20 DEFAULT BY TENANT.............................................49
Section 20.01 Events of Default..............................49
Section 20.02 Landlord's Rights Upon an Event of Default.....50
Section 20.03 Implied Waiver.................................52
Section 20.04 Injunctive Relief..............................52
ARTICLE 21 PROVISIONS APPLICABLE TO PURCHASE
BY TENANT OF THE PREMISES...................................53
Section 21.01 Procedures Upon Purchase.......................53
ARTICLE 22 NOTICES.......................................................55
Section 22.01 Notices........................................55
ARTICLE 23 MEMORANDUM OF LEASE...........................................57
Section 23.01 Memorandum of Lease............................57
(iv)
<PAGE>
ARTICLE 24 MISCELLANEOUS.................................................57
Section 24.01 Partial Invalidity.............................57
Section 24.02 Headings.......................................57
Section 24.03 Binding Effect.................................58
Section 24.04 Representations................................58
Section 24.05 Amendments.....................................58
Section 24.06 Brokers........................................58
Section 24.07 Authority to Execute...........................58
Section 24.08 Applicable Law.................................58
Section 24.09 Construction...................................58
Section 24.10 Impossibility of Performance...................59
Section 24.11 Time of Essence................................59
Section 24.12 Attorney's Fees................................59
Section 24.13 No Merger......................................59
Section 24.14 Landlord's Right to Enter......................59
Section 24.15 Corporate Reorganization of Tenant.............59
Section 24.16 No Waiver......................................60
Section 24.17 Confidentiality................................60
Section 24.18 Gender and Number..............................60
Section 24.19 Survival.......................................61
Section 24.20 Acceptance of Surrender........................61
Section 24.21 Non-Recourse as to Landlord....................61
Section 24.22 Entire Agreement; Integration..................61
Section 24.23 Waiver of Trial by Jury........................62
Section 24.24 Tenant's Remedies..............................62
Section 24.25 Landlord and Tenant Relationship...............62
ARTICLE 25 SPECIAL PROVISIONS............................................63
Section 25.01 Supremacy of Article 25........................63
Section 25.02 Completion of Construction.....................63
EXHIBITS
A Description of Land and Premises with Site Plan
B [This Exhibit Intentionally Not Used]
C Schedules of Landlord's FF&E, Fixed Asset Supplies and Inventories
D Landlord's Trademarks, Etc.
E Related Landlord Leases
(v)
<PAGE>
FACILITIES LEASE AGREEMENT
THIS LEASE is made as of the 8th day of October, 1993 ("Commencement
Date"), by and between HMC RETIREMENT PROPERTIES, INC. ("Landlord"), a Delaware
corporation with a mailing address at 10400 Fernwood Road, Bethesda, Maryland
20817, and MARRIOTT SENIOR LIVING SERVICES, INC. ("Tenant"), a Delaware
corporation, with a mailing address at 10400 Fernwood Road, Bethesda, Maryland
20817.
R E C I T A L S:
A. The Premises were developed by a corporation which was an Affiliate
of Tenant. Both such corporations were subsidiaries of Landlord and engaged in
the business of owning and/or operating senior living retirement and health care
facilities under the Marriott trade name.
B. The lease transaction described herein is a portion of a larger
transaction involving multiple properties. As a material inducement to the other
party, each party hereto has agreed to also enter into the Related Landlord
Lease(s).
ARTICLE 1
LEASE OF PREMISES
Section 1.01 "As-Is" Letting
A. In consideration of the Rentals, covenants and agreements to be
paid, kept and performed hereunder, Landlord, for the term and upon the
conditions hereinafter set forth, leases to Tenant and Tenant leases and takes
from Landlord, the Premises, together with all privileges, easements and
appurtenances beneficial thereto.
B. The Premises are leased to Tenant "as is" and Landlord makes no
representation or warranty, express or implied, with respect to the condition of
the Premises, or as to the compliance of the Premises with any Legal
Requirements. Tenant has examined the Premises and title to the Premises and has
found all of the same satisfactory for its purposes. Tenant accepts the Premises
subject to the existing state of title. During the term of this Lease, Tenant
shall have the nonexclusive right to use, enforce and obtain the benefits of all
guaranties and warranties relating to the construction, improvement, alteration
and repair of the Premises and all architectural and engineering plans, drawings
and specifications related thereto, and during the term of this Lease Landlord
shall execute such assignments or other transfer instruments as are necessary to
transfer the benefits of all such guaranties, warranties and rights to Tenant,
and shall not waive, surrender or modify any of Landlord's rights with respect
thereto without obtaining Tenant's prior written consent.
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<PAGE>
Section 1.02 Tenant's Right of Possession
During the term of this Lease, Tenant shall have exclusive possession
(subject to the rights of existing residents therein) and control of the
Premises.
Section 1.03 Landlord's Cooperation
A. Landlord agrees upon request by Tenant to provide all information
relevant to Landlord, its officers and directors, and to execute, and to cause
its officers and directors to sign, promptly, and without charge, all
applications (including all documents related thereto) for licenses, permits,
instruments or other general approvals required to be submitted to any
governmental authority that are necessary for the proper and successful conduct
of Tenant's lawful business operations at the Premises if and to the extent such
execution and/or information by or from Landlord and/or any of its officers and
directors is required by law, regulation or governmental practice in order for
Tenant to obtain any such license, permit, instrument or other governmental
approval; provided, however, that all costs and expenses associated therewith
shall be the sole obligation of Tenant, and Tenant shall promptly pay and
discharge the same, and provided further, that the proper execution of any such
application shall not expose Landlord to any personal liability. In all cases,
Landlord shall have a reasonable amount of time to comply with Tenant's requests
pursuant to this Section 1.03A, Landlord and Tenant shall, in good faith,
cooperate with each other in determining and complying with relevant
governmental requirements, and Tenant shall afford Landlord every reasonable
opportunity to question and challenge by appropriate administrative and/or
judicial process any relevant governmental requirement so long as such challenge
does not materially and adversely affect any material license, permit or
governmental approval of Tenant. Tenant hereby agrees that it will fully
indemnify, defend and save Landlord harmless from and against any and all costs,
losses and expenses, including, without limitation, any and all legal fees and
court costs incurred or suffered by Landlord as a result of its compliance with
the obligations imposed upon Landlord under this Section 1.03 except in the case
of Landlord's fraud or willful misconduct.
B. If Landlord should fail to comply with the requirements of Section
1.03A above, and such failure should continue for more than thirty (30) days
after Notice from Tenant specifying the required cooperation and informing
Landlord that Tenant intends to act pursuant to this Section 1.03B if such
cooperation is not provided within said thirty (30) day period and such failure
results, or with reasonable certainty will result, in the denial, non-renewal or
withdrawal of a material license, permit or governmental approval that will
materially and adversely affect Tenant's business at the Premises, then, in
addition and not as a substitution for any remedies available to Tenant under
Section 24.24 of this Lease, if such failure is not cured within such thirty
(30) day period, Tenant shall have the right to terminate this Lease by so
notifying Landlord not later than the date which is sixty (60) days after the
date of the aforesaid Notice. If Tenant elects to exercise the night described
in the preceding sentence, it shall, simultaneously with its delivery of its
Notice of termination, deliver to Landlord its irrevocable offer to purchase the
Premises for an amount equal to the Leasehold Purchase Price.
C. Landlord may accept or reject Tenant's irrevocable offer to purchase
the Premises by sending Tenant a Notice of rejection or acceptance within thirty
(30) days from the date upon which Landlord received Tenant's Notice of
termination. If Landlord fails to send Tenant a
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<PAGE>
Notice of rejection or acceptance within thirty (30) days of its receipt of
Tenant's irrevocable offer to purchase the Premises, Landlord shall be deemed to
have accepted such offer. If Landlord accepts or is deemed to have accepted
Tenant's offer to purchase, the Lease shall terminate and closing of such
purchase shall occur in accordance with the provisions of Article 21. Upon such
termination, Tenant shall pay to Landlord all Rental due through such date of
termination landlord shall convey the Premises to Tenant in accordance with the
provisions of Section 21.01.
D. If Landlord rejects Tenant's irrevocable offer to purchase pursuant
to Section 1.03B, this Lease shall terminate on a Minimum Rental payment date
specified by Tenant in its Notice of termination which occurs not earlier than
ninety (90) days nor later than one hundred twenty (120) days after delivery to
Landlord of Tenant's irrevocable offer to purchase, provided that this Lease
shall not terminate unless and until Tenant shall have paid all sums due
hereunder (including, without limitation, all taxes and insurance premiums) as
of the actual date of termination. Upon such termination, Tenant shall vacate
the Premises in accordance with the provisions of Section 3.04.
E. Landlord shall have the right at all times prior to either a closing
date for any purchase under Section 1.03C or the termination date under Section
1.03D, to cancel the right of Tenant to so purchase or terminate pursuant to
said sections, by complying with the requirements of Section 1.03A in sufficient
time and manner so that the subject license, permit or approval is obtained or
reinstated by a date that is prior to the aforesaid closing date or termination
date as the case may be.
END OF ARTICLE 1
ARTICLE 2
DEFINITION OF TERMS
Section 2.01 Definition of Terms
The following terms when used in this Lease shall have the meanings
indicated:
"Accounting Period" shall mean the four (4) week accounting periods
having the same beginning and ending dates as Tenant's four (4) week accounting
periods, except that an Accounting Period may occasionally contain five (5)
weeks when necessary to conform Tenant's accounting system to the calendar.
"Additional Rental" shall mean any obligation of Tenant to pay money to
Landlord under this Lease, other than Minimum Rental or Percentage Rental.
"Affiliate" shall mean any individual or entity directly or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with a party. The term "control," as used in the immediately preceding
sentence, means, with respect to a corporation, the right to the exercise,
directly or indirectly, of more than fifty percent (50%) of the voting
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<PAGE>
rights attributable to the shares of the controlled corporation, and, with
respect to an entity that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the controlled entity.
"Alternative Rental" shall have the meaning set forth in Section 5.05.
"Business Day(s)" means Monday through Friday (except holidays);
"normal business hours" means 8:00 a.m. to 6:00 p.m. on Business Days; and
"holidays" mean New Year's Day, President's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
"Change of Use" shall have the meaning set forth in Section 7.02.
"Commencement Date" shall have the meaning set forth in the Preamble.
"Effective Extended Term" means any Extended Term that has become
effective by reason of the occurrence of the first day of such Extended Term or
because Tenant has irrevocably exercised its option to extend the Term through
such Extended Term.
"Environmental Laws" shall mean: (a) the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as now
or hereafter amended and the Resource Conservation and Recovery Act of 1976, as
now or hereafter amended; (b) the regulations promulgated thereunder, from time
to time; (c) all federal, state and local laws, rules and regulations (now or
hereafter in effect) dealing with the use, generation, treatment, management,
storage, disposal or abatement of Hazardous Materials or protection of human
health or the environment.
"Environmental Violation" shall mean any violation of any Environmental
Law at or relating to the Premises.
"Event of Default" shall have the meaning set forth in Section 20.01.
"Expansion" shall have the meaning set forth in Section 9.01.
"Expansion Rental" shall have the meaning set forth in Section 5.06B.
"Extended Term(s)" shall have the meaning set forth in Section 3.02.
"FF&E" shall mean all of the furniture, furnishings, and equipment
(including trade fixtures and equipment) owned by Landlord and/or Tenant,
situated at or on the Premises and used in connection with Tenant's use and
occupancy of the Premises.
"Fiscal Quarter" shall mean the period of time which (i) commences on
the first day of a Fiscal Year and ends on the last day of the third (3rd)
Accounting Period of such Fiscal Year; (ii) commences on the first day of the
fourth (4th) Accounting Period of a Fiscal Year and ends on the last day of the
sixth (6th) Accounting Period of such Fiscal Year; (iii) commences on the first
day of the seventh (7th) Accounting Period of a Fiscal Year and ends on the last
day of the
-4-
<PAGE>
ninth (9th) Accounting Period of such Fiscal Year; and (iv) commences on the
first day of the tenth (10th) Accounting Period of a Fiscal Year and ends on the
last day of such Fiscal Year.
"Fiscal Year" shall mean Tenant's Fiscal Year which now ends at
midnight on the Friday closest to December 31 in each calendar year; the new
Fiscal Year begins on the Saturday immediately following said Friday. If
Tenant's Fiscal Year is changed in the future, appropriate adjustment to this
Lease's reporting and accounting procedures shall be made; provided, however,
that no such change or adjustment shall alter the Term of this Lease or in any
way reduce the payment of Percentage Rental or other payments due Landlord
hereunder.
"Fixed Asset Supplies" shall mean supply items included within
"Property and Equipment" under the Uniform System of Accounts including linen,
china, glassware, silver, uniforms, and similar items.
"GDP Deflator" shall mean the "Gross Domestic Product Implicit Price
Deflator" issued from time to time by the United States Bureau of Economic
Analysis of the Department of Commerce, or if the aforesaid GDP Deflator is not
at such time so prepared and published, any comparable index selected by
Landlord and reasonably satisfactory to Tenant (a "Substitute Index") then
prepared and published by an agency of the Government of the United States,
appropriately adjusted for changes in the manner in which such index is prepared
and/or year upon which such index is based. Except as otherwise expressly stated
herein, whenever a number or amount is required to be "adjusted by the GDP
Deflator", or similar terminology, such adjustment shall be equal to the
percentage increase in the GDP Deflator which is issued for the month in which
such adjustment is to be made (or, if the GDP Deflator for such month is not yet
publicly available, the GDP Deflator for the most recent month for which the GDP
Deflator is publicly available) as compared to the GDP Deflator which was issued
for the month in which the Commencement Date occurred, it being agreed that for
purposes of this Lease, no GDP Deflator adjustment shall operate to decrease any
sum or number specified in this lease.
"Guaranty" means that certain Agreement of Guaranty between Landlord
and Guarantor of even date herewith.
"Guarantor" shall mean Marriott International, Inc., a Delaware
corporation, whose mailing address is 10400 Fernwood Road, Bethesda, Maryland
20817.
"Hazardous Materials" shall mean and include any substance or material
containing one or more of any of the following: "hazardous material", "hazardous
waste", hazardous substance", "regulated substance", "petroleum", "petroleum
products", "pollutant", "contaminant", "polychlorinated biphenyls",
"pesticides", "asbestos", or "asbestos containing materials" as such terms are
defined in any applicable Environmental Law.
"Improvements" shall mean the buildings, parking lots, structures, and
all other improvements and fixtures (other than trade fixtures owned by Tenant)
now or hereafter located on the Land together with the electrical, mechanical,
plumbing and HVAC systems installed therein.
"Indemnified Parties" shall have the meaning set forth in Section 8.01.
-5-
<PAGE>
"Initial Term" shall have the meaning set forth in Section 3.01.
"Insubstantial Taking" shall mean a condemnation of a portion of the
Premises that is less than all or substantially all of the Premises if (i) the
Improvements can be restored to substantially the same physical condition which
prevailed therein and thereon prior to such condemnation at a cost not exceeding
the condemnation award payable with respect thereto, (ii) the condemnation does
not cause a material reduction in the size or useability of any building on the
Premises or any material disruption to Tenant's use and occupancy of the
Premises, and (iii) such condemnation will not materially reduce the operating
profitability of its business on the Premises after any restoration when
compared to such profitability before the condemnation.
"Insurance Requirements" shall mean the requirements of any and all
insurance policies procured in accordance with the terms hereof.
"Insurance Trustee" shall mean a bank, insurance company, pension fund,
real estate investment trust or commercial lending institution, with financial
statements audited by an independent public accounting firm and a net worth of
at least One Hundred Million Dollars ($100,000,000). The Senior Mortgagee shall
be the Insurance Trustee if the Senior Mortgagee fulfills the requirements of
the first sentence of this paragraph. If there is no Senior Mortgagee that
fulfills the requirements of the first sentence of this paragraph, the Insurance
Trustee shall be such qualifying institution as is selected by Tenant and
approved by Landlord, such approval not to be unreasonably withheld,
conditioned, or delayed.
"Inventories" shall mean "Inventories" as defined in the Uniform System
of Accounts, such as provisions in storerooms, refrigerators, pantries and
kitchens; beverages in wine cellars and bars; other merchandise intended for
sale; fuel; mechanical supplies; stationery; and other expensed supplies and
similar items.
"Land" shall mean the real property described in Exhibit A hereto, or
such lesser area that from time to time may be leased by Tenant hereunder as set
forth in this Lease.
"Landlord" shall have the meaning set forth in the Preamble and its
successors and assigns.
"Landlord's Audit" shall have the meaning set forth in Section 5.03.
"Landlord's Temporary Taking Award" shall have the meaning set forth in
Section 15.03.
"Lease" shall mean this Facilities Lease Agreement between Landlord and
Tenant dated as of the Commencement Date.
"Lease Interest Rate" shall mean the Prime Rate as set from time to
time by. Bankers Trust Company, New York, New York plus two (2) percentage
points per annum, but in no event shall the Lease Interest Rate be less than ten
percent (10%) per annum; provided, however, that the Lease Interest Rate shall
not exceed the maximum rate of interest from time to
-6-
<PAGE>
time permitted to be charged under applicable law with respect to the
indebtedness and party for which and against whom such interest is charged under
this Lease.
"Lease Memorandum" shall have the meaning set forth in Section 23.01.
"Leasehold Purchase Price" shall be at any particular time during the
Term, the dollar amount equal to the present value as of the date of such
purchase of the payments of Minimum Rental, Alternative Rental if any, and
Expansion Rental if any, that would have been payable during the period
commencing on the date of such purchase and ending on the date of expiration of
the current term of this Lease (including any Effective Extended Term)
discounted to the date of purchase at an interest rate equal to the effective
interest rate on United States Treasury, obligations as of the month preceding
the date of such purchase and having a maturity most nearly equal to the number
of months remaining in the current term of this Lease (including any Effective
Extended Term) as of the date of such purchase.
'Legal Requirement(s)" shall have the meaning set forth in Section
6.05.
"Major Casualty" shall mean any damage to or destruction of all or any
portion of the Premises when such casualty is likely to result in a significant
reduction in the operating profitability of Tenant's business on the Premises
for a period exceeding twelve (12) months based upon the assumption that the
casualty will be repaired with reasonable diligence.
"Mandated Expenditure(s)" shall mean all costs in excess of Twenty Five
Thousand Dollars ($25,000) adjusted by the GDP Deflator, in the aggregate in any
Fiscal Year that are: (i) incurred by Tenant to (x) repair, renovate, or improve
the Premises or (y) remedy or mitigate any condition therein, thereon or
thereunder if such actions referred to in clause (x) or clause (y) (1) are
required to be made by reason of any Legal Requirement not in effect on the
Commencement Date, (2) are made to enable Tenant to continue its then current
operations in the Premises and (3) would be capitalized under generally accepted
accounting principles; (ii) incurred by Tenant pursuant to Section 8.02, Section
12.01 or Section 12.02 that are attributable to (A) remediating or correcting a
condition on the Premises that existed on the Commencement Date (whether or not
such condition was a violation of any Environmental Laws in effect on the
Commencement Date), or (B) the migration of any Hazardous Materials to the
Premises from real property other than the Premises, or (C) the adoption or
amendment of any Environmental Law that results in any act or omission occurring
after the Commencement Date constituting a violation of any Environmental Law if
and to the extent that such act or omission was not a violation of any
Environmental Law when it occurred; or (iii) costs that constitute Mandated
Expenditures pursuant to Section 14.06B.
"Minimum Rental" shall have the meaning set forth in Section 5.01.
"Mortgage" shall mean any security instrument which encumbers the
Premises, including, without limitation, mortgages, deeds of trust, security
deeds and similar instruments.
"Mortgagee" shall mean the holder of, or beneficiary under, any
Mortgage on Landlord's interest in the Premises.
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"Notice" shall have the meaning set forth in Section 22.01.
"Operating Revenues" shall mean the aggregate of all monies received by
Tenant from or with respect to the Premises, including without limitation,
moneys received for (i) the sale of goods, wares and merchandise, and (ii) the
provision of accommodations and food services and (iii) the provision of
nursing, health care and retirement community services, and (iv) the provision
of any other services or the sale of any other goods, for cash or credit on or
from the Premises during the Term hereof including, but not limited to income
arising from: rental of rooms, stores, offices and meeting and sales spaces of
every kind; license, lease and concession fees and rentals paid to Tenant (but
not including gross receipts of licensees, lessees and concessionaires); food
and beverage sales and services; sales of merchandise; service charges, to the
extent not distributed to Tenant's employees as gratuities; net receipts from
ancillary health care related services provided by third party contractors,
vending machines, stamp machines, telephones, and the like (but not including
gross receipts of same collected by or paid to others except to the extent
hereafter provided); provided, however, that Operating Revenues shall not
include the following:
(a) returns or refunds, or credits received in settlement of
claims for loss or damage to goods, wares, merchandise, or deficient services;
(b) all sales taxes, excise taxes, occupational taxes, gross
receipt taxes and similar taxes paid, whether imposed under any existing or
future rules, regulations, laws or ordinances, provided, however, that any
income, excess profits, franchise, or other taxes based upon, or measured by,
Tenant's income shall not be excluded from Operating Revenues;
(c) any receipts from the transfer of goods, wares or
merchandise from the Premises to any other facility operated by Tenant or its
Affiliates;
(d) all receipts from sales to employees made at a discount;
provided, however, if the Premises are convened to a store which is closed to
the general public, but offers merchandise for sale to its employees, then such
sales are to be included in the definition of Operating Revenues;
(e) gratuities to Tenant's employees;
(f) insurance proceeds;
(g) condemnation award(s) (other than any condemnation
award for a temporary taking as described in Section 15.03 hereof); and
(h) proceeds from the sale of Tenant's FF&E or all or a
substantial part of its stock-in-trade and merchandise at a sale other than in
the ordinary course of business.
"Partial Condemnation Reduction Percentage" shall mean that percentage
applicable in the event of a condemnation equal to the fraction whose numerator
is the fair market value of the Premises immediately prior to the effective date
of such condemnation less the fair market value of the Premises remaining
immediately after such condemnation has become effective and excluding the
portion of the Premises taken by the condemning authority and whose denominator
is the fair market value of the Premises immediately prior to the effective date
of such condemnation. Thus, for example, if the fair market value of the
Premises immediately prior to such condemnation was $20 million and the fair
market value of the premises remaining immediately after such condemnation was
$15 million, the Partial Condemnation Reduction Percentage would be 25%.
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"Partial Fiscal Year" shall mean (i) the period between the
Commencement Date and the commencement of the first full Fiscal Year of this
Lease, and (ii) the period between the end of the last full Fiscal Year of this
Lease and the termination of this Lease, and (iii) the period between the first
day of the Fiscal Year in which Alternative Rental or Expansion Rental becomes
payable in lieu of Percentage Rental and the date upon which Percentage Rental
ceases.
"Percentage Rental" shall have the meaning set forth in Section 5.01.
"Premises" shall mean all of the Land and the Improvements or such
lesser area or portion that from time to time may be leased by Tenant hereunder
as set forth in this Lease.
"Prospectus" shall have the meaning set forth in Section 24.17.
"Related Landlord Lease" as of any date shall mean each of those leases
described in Exhibit E hereto with respect to which as of such date Landlord
hereunder or any Affiliate of Landlord hereunder is also the landlord under such
lease or leases as of such date.
"Rental(s)" shall mean Minimum Rental, Percentage Rental, Alternative
Rental, Additional Rental, and Expansion Rental either collectively or any one
or more of same as the context may indicate.
"Sale of the Premises" shall mean any sale, assignment, transfer or
other disposition, for value or otherwise, voluntary or involuntary, of the fee
simple title to the Land and/or the Premises. For purposes of this Lease, a Sale
of the Premises shall also include a lease (subject to this Lease) of all or
substantially all of the Premises or Land and any sale, assignment, transfer or
other disposition, for value or otherwise, voluntary or involuntary , in a
single transaction or a series of related transactions, of the controlling
interest in Landlord. If Landlord is a corporation, the phrase "controlling
interest" shall mean the right to exercise, directly or indirectly, more than
fifty percent (50%) of the voting rights attributable to the shares of Landlord
(through ownership of such shares or by contract). If Landlord is not a
corporation, the phrase "controlling interest" shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of Landlord.
"Senior Mortgagee" shall mean the holder, of, or beneficiary under,
from time to time the most senior Mortgage against Landlord's interest in the
Premises.
"Site Assessment" shall have the meaning ascribed to it in Section
12.02.
"Site Reviewer" shall have the meaning ascribed to it in Section 12.02.
"Special Rental Advance" shall have the meaning ascribed to it in
Section 5.07.
"Substantial Taking" shall mean a condemnation of a portion of the
Premises that is less than all or substantially all of the Premises and that is
not an Insubstantial Taking.
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"Surviving Obligations" shall mean any obligations of Tenant under this
Lease, actual or contingent, which arise on or prior to the expiration or prior
termination of this Lease and which survive such expiration or termination by
their own terms.
"Tenant" shall have the meaning set forth in the Preamble and its
successors and assigns. "Term" shall have the meaning set forth in Section 3.01.
"Uniform System of Accounts" shall mean the Uniform System of Accounts
for Hotels, Eighth Revised Edition, 1986, as published by the Hotel Association
of New York City, Inc.
"Use Award" shall have the meaning set forth in Section 15.03.
"Year" shall mean a calendar year commencing on January 1 and ending on
December 31. A Partial Year shall mean that portion of a Year that occurs during
the Term in the case of the Year in which the Commencement Date occurs and the
Year in which the expiration or termination of this Lease occurs.
END OF ARTICLE 2
ARTICLE 3
TERM
Section 3.01 Term
The "Term" shall consist of the Initial Term, the Extended Term(s), if
any, and any extensions of the Term of this Lease pursuant to Section 9.03A. The
Initial Term of this Lease shall commence on the Commencement Date, and, unless
sooner terminated as otherwise provided herein, shall expire on December 31,
2013.
Section 3.02 Extended Term
If Tenant has not given Notice of its intention to terminate this Lease
pursuant to Section 3.03 and the Initial Term has not been sooner term, the Term
of this Lease shall automatically be extended on the same terms and conditions
as set forth herein for an Extended Term of five (5) years (the "First Extended
Term"). If Tenant has not given Notice of its intention to terminate pursuant to
Section 3.03 and the Initial Term and the First Extended Term has not been
sooner terminated, the Term of the Lease shall automatically be extended on the
same terms and conditions as set forth herein for one (1) additional Extended
Term of five (5) full Years (the "Second Extended Term"). If Tenant has not
given Notice of its intention to terminate pursuant to Section 3.03 and the
Initial Term, the First Extended Term or the Second Extended Term have not been
sooner terminated, the Term of the Lease shall automatically be extended on the
same terms and conditions as set forth herein for one (1) additional Extended
Term of five (5) full years (the "Third Extended Term"). If Tenant has not given
Notice of its intention to terminate pursuant to Section 3.03 and the Initial
Term, the First Extended Term, the Second Extended Term and the Third Extended
Term have not been sooner terminated, the
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Term of the Lease shall automatically be extended on the same terms and
conditions as set forth herein for one (1) additional Extended Term of five (5)
Years (the "Fourth Extended Term"). Notwithstanding the foregoing, Tenant may
elect at any time throughout the Term to exercise, by Notice to Landlord, its
option to extend the Term through any or all Extended Terms. If and to the
extent Tenant elects by written notice to Landlord to exercise its option to
extend the Term through any Extended Term, Tenant's option to terminate this
Lease pursuant to Section 3.03 with respect to such Extended Term for which
Tenant has exercised its extension option shall no longer be applicable, but
such option to terminate pursuant to Section 3.03 shall continue to apply to any
Extended Term with respect to which such option to extend was not exercised
pursuant to this Section 3.02. All elections to extend the Term shall be
irrevocable after exercised.
Section 3.03 Notice of Termination
Tenant may terminate the Lease at the end of the Initial Term or at the
end of any Extended Term upon Notice to Landlord not less than twenty-four (24)
calendar months prior to the expiration of the Initial Term or the then current
Extended Term, as the case may be. In addition, Tenant may terminate this Lease
if Tenant gives a Notice of termination to Landlord after the date which is
twenty-four (24) months prior to the expiration of the Initial Term or the then
current Extended Term, as the case may be (but prior to the last day of the
Initial Term or the then current Extended Term and prior to the expiration of
the thirty (30) day period referenced below), and in such event this Lease shall
terminate on the date which is twenty-four (24) months after the date upon which
Tenant delivers such Notice; except that if, after the beginning of the
twenty-four (24) month period prior to the expiration of the Initial Term or the
then current Extended Term, as the case may be, Tenant does not give a Notice of
termination within thirty (30) days after Landlord requests Tenant to notify
Landlord whether Tenant intends to terminate this Lease, the Term of this Lease
shall be automatically extended for the next Extended Term and Tenant's right to
terminate this Lease prior to the expiration of the next Extended Term shall
cease to have any further force or effect.
Section 3.04 Obligations of Parties at Termination
A. Promptly upon the effective date of any termination of this Lease,
Tenant shall peaceably surrender the Premises to Landlord in the same condition
as the Premises were in as of the Commencement Date subject only to such
additions and alterations as have been permitted pursuant to Article 9 hereof
and subject to reasonable wear and tear. Tenant shall assign and deliver to
Landlord Tenant's entire interest in any and all service contracts, guaranties
and warranties relating to the construction, improvement, alteration and repair
of the Premises and all architectural and engineering plans, drawings and
specifications related thereto; and if Landlord so requests, cause any person or
entity occupying the Premises by, through or under Tenant to be evicted and
removed from the Premises.
B. Rental shall be paid through the date of termination. Within ninety
(90) days after this Lease terminates, Tenant shall deliver to Landlord a
complete and final accounting, prepared in accordance with the provisions of
Section 5.03 hereof of Operating Revenues together with
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all payments of Rental due hereunder. Landlord's right to audit Tenant's books
and records as described in Section 5.03 and to receive Percentage Rental and
Additional Rental, if any, together with interest at the Lease Interest Rate
shall survive the termination of this Lease.
C. If Landlord, directly or indirectly, intends to conduct upon
termination of this Lease a business or use at the Premises similar to Tenant's
business or use, Tenant, at Landlord's request, shall (i) make available to
Landlord such books and records as are appropriate to such business and/or use
(but not including employee or resident records which must remain confidential
either under Legal Requirements or reasonable policies of Tenant, or any
proprietary information or property of Tenant), and (ii) assign or transfer to
Landlord or its designee, to the extent permitted by Legal Requirements, all
licenses, permits, permissions and approvals pertinent to the conduct of such
business or use on the Premises, provided that if Tenant has expended any of its
own funds within the five (5) year period preceding the termination date in the
acquisition or maintenance of any such license, permit, permission or approval
(other than annual license fees whether prepaid or paid currently), or if there
are any deposits or escrow funds relevant thereto that Tenant assigns and
transfers to Landlord, Landlord shall, as a condition of receiving an assignment
or transfer of such license, permit, deposit, escrow fund, permission or
approval (if requested by Landlord), reimburse Tenant therefor. The cost of
effectuating any such transfer of any licenses, permits, permissions or
approvals shall be borne by Landlord except when termination is due to Tenant's
default.
D. The provisions of Section 10.02 shall apply upon termination of this
Lease and Tenant shall take all other appropriate actions as required under all
other applicable provisions of this Lease. The provisions of this Section 3.04,
as well as all Surviving Obligations, Landlord's right to receive the late
charges described in Section 5.02B, interest on sums outstanding at the Lease
Interest Rate and legal fees (but if termination was not due to an Event of
Default such Legal Fees shall be reasonable legal fees) and court costs, shall
survive termination of this Lease.
END OF ARTICLE 3
ARTICLE 4
ABSOLUTELY NET LEASE
Section 4.01 Net Lease
Notwithstanding any other provision of this Lease - other than Sections
5.03 and 9.03C it is expressly understood and agreed by and between the parties
that this Lease is an absolutely net lease, and the Rentals and all other sums
payable hereunder to or on behalf of Landlord shall be paid without Notice or
demand and without set-off, counterclaim, abatement, suspension, deduction, or
defense, and Landlord is not obligated to expend any of its funds in connection
with the Premises or this Lease.
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Section 4.02 Non-Terminability of Lease
A. Except as otherwise expressly provided herein, this Lease shall not
terminate, nor shall Tenant have any night to terminate this Lease, nor shall
the obligations hereunder of Tenant be otherwise affected, by reason of any
damage to or destruction of all or any portion of the Premises from whatever
cause, the taking of the Premises or any portion thereof by condemnation, the
prohibition, limitation or restriction of Tenant's use of the Premises, or
interference with such use by any private person or corporation or by reason of
any eviction or otherwise, or Tenant's acquisition of ownership of the Premises
otherwise than pursuant to an express provision of this Lease, or for any other
cause whether similar or dissimilar to the foregoing, any present or future
Legal Requirement to the contrary notwithstanding, it being the intention of the
parties hereto that the Rental and all other charges payable hereunder to or on
behalf of Landlord, shall continue to be payable in all events and the
obligations of Tenant hereunder shall continue unaffected, unless the
requirement to pay or perform the same shall be terminated pursuant to an
express provision of this Lease.
B. Tenant covenants and agrees that it will remain obligated under this
Lease in accordance with its terms, and that Tenant will not take any action to
terminate, rescind, reject or avoid this Lease or any term, part, or provision
hereof, notwithstanding the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding-up or other proceeding affecting
Landlord or any assignee of Landlord in any such proceeding and notwithstanding
any action with respect to this Lease which may be taken by any trustee or
receiver of Landlord or of any assignee of Landlord in any such proceeding or by
any court in any such proceeding.
C. Except as otherwise expressly provided in this Lease, Tenant waives
all rights now or hereafter conferred by law or obtainable in equity (i) to
quit, terminate or surrender this Lease or the Premises, or any part thereof, or
(ii) to any abatement, suspension, deferment or reduction of any Rentals or
charges payable hereunder to or on behalf of Landlord, regardless of whether
such rights shall arise from any present or future constitution, statute or rule
of law.
END OF ARTICLE 4
ARTICLE 5
RENTAL
Section 5.01 Rental
Tenant covenants to pay Landlord Rental for the Premises as follows:
(i) Commencing with the Commencement Date and continuing to
the end of the Term (including all Extended Terms), Minimum Rental in an amount
equal to Seven Hundred Thirty-seven Thousand Dollars ($737,000.00) per Year for
each Year; plus
(ii) For each Fiscal Year or Partial Fiscal Year (including
all Extended Terms), Percentage Rental equal to four and one-half percent (4.5%)
of that portion of the Operating Revenues for such Fiscal Year or Partial Fiscal
Year that exceed $2,355,000.00
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multiplied, in the case of a Partial Fiscal Year, by a fraction the numerator of
which is the number of days in such Partial Fiscal Year and the denominator of
which is 365.
Section 5.02 Payment of Rental
A. Minimum Rental shall be paid quarterly, in advance, on or before the
first day of January, April, July and October during each Year. Minimum Rental
for any Partial Fiscal Year shall be prorated and computed by multiplying the
annual Minimum Rental by a fraction, the numerator of which is the number of
days in such partial Year and the denominator of which is three hundred and
sixty-five (365) or three hundred sixty-six (366) as the case may be. Payments
for any Partial Fiscal Year shall be made in the same manner and at the same
times as payments are to be made during a full Fiscal Year as provided in this
Section. Percentage Rental shall be calculated on a Fiscal Year (or Partial
Fiscal Year) basis and shall be paid in arrears on or before forty-five (45)
days after the end of each Fiscal Year or Partial Fiscal Year in which
Percentage Rental become due. All installments of Rental not paid by Tenant when
same become due shall bear interest from the date due until paid at the Lease
Interest Rate. Time is of the essence, and installments of Rental shall become
due and payable without Notice or demand. All Rental payments shall be made in
lawful money of the United States of America and shall be paid to Landlord at
Landlord's address for receipt of Notices or to such other party and/or to such
other address as Landlord may from time to time designate by Notice to Tenant in
accordance with this Lease.
B. Tenant acknowledges that late payment of Rental by Tenant to
Landlord will cause Landlord to incur costs not contemplated in this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges and late
charges that may be imposed upon Landlord by the terms of any mortgage covering
the Premises. Accordingly, in addition to the interest payable by Tenant
pursuant to Section 5.02A, after a period of five (5) days following the date
all or any portion of Rental is due and unpaid Tenant shall pay to Landlord an
amount equal to five percent (5 %) of the amount of such unpaid instillment or
portion thereof. The parties agree such late charges represent a fair and
reasonable estimate of the cost Landlord will incur by reason of the late
payment by Tenant.
C. In the event that the Premises are damaged by fire or other casualty
and Tenant discontinues all or substantially all business operations therein,
Tenant's obligation to pay Percentage Rental for the Fiscal Year in which Tenant
has so discontinued its business operations shall be computed as if such Fiscal
Year was a Partial Fiscal Year and as if the number of days in such Partial
Fiscal Year excluded the number of days during which Tenant discontinued all or
substantially all of its business operations in the Premises.
D. If, at any time during the Term, there is a good faith dispute
between Landlord and Tenant with respect to the amount of Percentage Rental
properly due hereunder Tenant's failure to pay the disputed amount shall not be
deemed an Event of Default with respect to the provisions of Section 20.01 and
20.02 until such time as the dispute is resolved; provided, that Tenant shall
pay any such disputed amount of Percentage Rental into an escrow account to be
held and invested by the Insurance Trustee or such other escrow agent as may be
mutually approved by Landlord and Tenant (specifically created for such purpose
with interest to follow
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final distribution of principal) as soon as such disputed amount becomes known,
and the provisions of Section 5.02B shall apply to any such disputed amount
ultimately determined to be due Landlord but with payment into the escrow
account being deemed payment to Landlord for purposes of Section 5.02B.
Section 5.03 Records; Audit by Landlord
A. Tenant shall keep, in appropriate detail and in accordance with
standard accounting practices, at its principal business office, records of all
sums, constituting, and specifically excluded from, Operating Revenues with
respect to each Fiscal Year for a period of not less than four (4) Fiscal Years
after the expiration of the Fiscal Year to which such records relate. Tenant
shall deliver to Landlord a statement from an appropriate corporate officer, or
general partner of Tenant, certifying the annual Operating Revenues within sixty
(60) days after the end of each Fiscal Year. If there is any overpayment of
Percentage Rental, the excess shall be credited against any future Percentage
Rental when next due. If Landlord delivers its written request to Tenant, within
thirty (30) days after receipt of any such certified statement, for copies of
records and data to support such statement, then Tenant shall provide same to
Landlord within thirty (30) days after receipt of such written request. Landlord
shall be entitled, at its own expense, to audit such statement and supporting
records and data, provided Landlord shall cause such audit to commence within
ninety (90) days after receipt of said statement and to be completed within one
hundred twenty (120) days after receipt of all information requested by Landlord
reasonably related to such audit. In order to provide finality, absent fraud
and, except as otherwise provided below in this Section, Tenant shall be
entitled to treat such statement as being correct if Landlord does not so audit
or otherwise challenge said statement within the time period above provided, and
Landlord shall have no right thereafter to question or examine the same. If the
audit or any audit hereinafter referred to in this Section (collectively a
"Landlord's Audit") discloses an understatement of annual Operating Revenues,
Tenant shall immediately pay Landlord the additional Percentage Rental found to
be due plus interest thereon at the Lease Interest Rate. However, if Landlord's
Audit discloses that Percentage Rental has been overpaid by Tenant, the excess
shall be credited against any future Percentage Rental when next due hereunder.
Tenant shall have the right to be informed as to any interim and/or final
results of any such audit. In addition, if Landlord's Audit discloses any
underpayment of the total payment of Percentage Rental for any Fiscal Year so
audited, which underpayment is in excess of three percent (3 %) of the
Percentage Rental due for such Fiscal Year, Tenant shall, upon demand and
receipt of evidence of payment, pay Landlord as Additional Rental the reasonable
cost of Landlord's Audit; and Landlord shall have the option, at Tenant's
expense, to audit the certified statements and supposing records and data for
the two (2) immediately preceding Fiscal Years, with such audit to be commenced
by Landlord within sixty (60) days after Landlord's receipt of the initial audit
showing an underpayment of Percentage Rental, and to be completed within one
hundred twenty (120) days after receipt of all information requested by Landlord
reasonably related to such audit.
B. Landlord shall keep all information regarding annual Operating
Revenues with respect to the Premises in strict confidence and shall not divulge
such information to third parties except (i) to Landlord's accountants and
attorneys, or (ii) to then existing or prospective purchasers, Mortgagees,
partners, lenders, or trustees of Landlord, or (iii) in connection with any
claim relating to Percentage Rental payable under this Lease, or (iv) as may be
required by
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law, or (v) to the holders of direct and indirect beneficial ownership interests
in Landlord and its Affiliates.
Section 5.04 Subleases, Licenses and Concessions
A. If Tenant should sublease all or substantially all of the Premises,
then notwithstanding any other provision of this Lease to the contrary,
Operating Revenues shall not include any rent or other consideration paid by
such subtenant to Tenant but Operating Revenues shall include all gross receipts
of such subtenant that would be included in Operating Revenues if realized by
Tenant.
B. If Tenant should ever contract with a third party subtenant,
licensee or concessionaire to deliver goods or services to the residents,
clients or customers at the Premises, which goods and services had previously
been provided by Tenant to Tenant's residents, clients or customers at the
Premises, then notwithstanding any other provision of this Lease to the
contrary, the gross receipts of such subtenant(s), licensee(s) and
concessionaire(s) that would be included in Operating Revenues if realized by
Tenant shall be included in Operating Revenues; and in any case in which the
gross receipts of any subtenant, licensee, or concessionaire are included in
Operating Revenues hereunder the rental, license, or concession fees, if any,
paid by such subtenant, licensee, or concessionaire to Tenant shall not be
included in Operating Revenues; provided, however, that the provisions of this
Section 5.04B shall not apply to the gross receipts of any one or more
subtenants, licensees or concessionaires in the event that the gross receipts of
all such subtenants, licensees or concessionaires in the applicable Fiscal Year
do not exceed Fifty Thousand Dollars ($50,000), which $50,000 amount shall be
increased on the fifth (5th) anniversary of the Commencement Date and every
fifth (5th) anniversary thereof by an amount proportionate to the percentage
increase in the GDP Deflator over the preceding five (5) year period.
C. If any subtenant, licensee or concessionaire that delivers goods or
services to Tenant's residents, clients or customers at the Premises is an
Affiliate of Tenant, the gross receipts of such subtenant, licensee or
concessionaire that would be included in Operating Revenues if realized by
Tenant shall be included in Operating Revenues and the rental, license or
concession fees, if any, paid by such subtenant, licensee or concessionaire to
Tenant shall not be included in Operating Revenues.
D. Tenant shall not enter into any sublease, license or concession
agreement or amendment thereto in which the determination of the amount of rent,
license cr concession fee depends in whole or in part on, or is expressed in
whole or in part as, a percentage of the income or profits derived by such
subtenant, licensee or concessionaire or any other person or entity. In any
lease, license or concession agreement or amendment thereto executed by Tenant
in which the amount of rent, license or concession fee is determined in whole or
in part by reference to the gross sales or gross receipts of the subtenant,
licensee or concessionaire or any other person or entity, such sublease, license
or concession agreement shall contain a provision stating that the gross
receipts or gross sales of the subtenant, licensee or concessionaire or any
other person or entity shall not be determined in whole or in part by reference
to the income or profits derived by the subtenant, licensee or concessionaire or
any other person or entity from the Premises or the subject matter or such
lease, license or concession agreement (other than an
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amount based on a fixed percentage or percentages of gross receipts or gross
sales). In the event that Tenant violates the provisions of this paragraph with
respect to any sublease, license or concession agreement, then in addition to
any other rights and remedies that Landlord may have under this Lease or
applicable law, the gross receipts of such subtenant, licensee or concessionaire
under such sublease, license or concession agreement that would be included in
Operating Revenues if realized by Tenant shall be included in Operating Revenues
and the rental, license or concession fee, if any, paid by such subtenant,
licensee or concessionaire shall not be included in Operating Revenues.
Section 5.05 Rental Upon Change of Use
Upon any Change of Use as described in Section 7.02, Tenant's
obligation to pay Percentage Rental pursuant to Section 5.01(ii) shall cease and
in lieu thereof Tenant shall pay Alternative Rental for each Fiscal Year during
the remainder of the Term of this Lease in an amount equal to the average amount
per Fiscal Year of Percentage Rental payable by Tenant for the two (2) full
Fiscal Years immediately preceding the earlier of (i) the commencement of
construction of improvements for such Change of Use, or (ii) the commencement of
such Change of Use; provided, however, that the amount of Alternative Rental
shall be increased on the anniversary of the occurrence of the Change of Use and
each annual anniversary thereafter by an amount proportionate to the percentage
increase in the GDP Deflator over the preceding twelve (12) month period. Such
Alternative Rental will be paid in arrears within forty five (45) days after the
end of each Fiscal Year and will be prorated for any partial Fiscal Years.
Section 5.06 Rental Upon Certain Expansions
A. If Tenant completes any Expansion at the Premises and Tenant is
either then paying, or as the result of said Expansion will be paying,
Alternative Rental pursuant to the provisions of Section 5.05, the provisions of
this Section 5.06 shall not apply.
B. If Tenant completes any Expansion at the Premises that does not
constitute a Change of Use and no such Change of Use has previously occurred
with respect to which (i) the cost of such Expansion exceeds One Million Dollars
($1,000,000), and (ii) such Expansion results, either by itself or aggregated
with any and all prior Expansions, in an increase greater than five percent (5%)
in the capacity (measured either in terms of net useable building square footage
' or the aggregate number of independent living units, assisted living units,
and nursing care rooms) of the buildings on the Premises, then, from the first
day of the first month following the date of completion of such Expansion
throughout the remaining Term of this Lease, Tenant shall pay in lieu of
Percentage Rental the lesser of either (x) Percentage Rental calculated pursuant
to Section 5.01(ii) hereof, or (y) Expansion Rental for each Fiscal Quarter
during the remainder of the Term hereof in an amount equal to the average amount
of Percentage Rental payable by Tenant for the two (2) full Fiscal Years
immediately preceding the commencement of construction of such Expansion;
provided, however, that the amount of Expansion Rental shall be increased on
each anniversary of the date such Expansion Rental first became effective by an
amount proportionate to the percentage increase in the GDP Deflator over the
preceding twelve (12) month period.
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Section 5.07 Special Rental Advance
A. Guarantor shall maintain a long-term debt rating of either (i)
"BBB-" (triple B minus) or greater by Standard & Poor's Corporation or (ii)
"Baa3" or greater by Moody's (an "Investment Grade Rating"). If throughout any
period of time during the Term Guarantor fails to maintain an Investment Grade
Rating, Tenant shall pay a Special Rental Advance to Landlord to be held by
Landlord as security against Tenant's obligation to pay Rental hereunder. The
Special Rental Advance shall be in an amount equal to one quarterly payment of
Minimum Rental and shall be paid as follows: thirty (30) days after the date on
which Guarantor's long term debt rating was downgraded as aforesaid, Tenant
shall pay Landlord one-third (1/3) of the Special Rental Advance, thirty (30)
days later Tenant shall pay Landlord an additional one-third (1/3) of the
Special Rental Advance, and thirty (30) days later Tenant shall pay Landlord the
final one-third (1/3) of the Special Rental Advance. Tenant shall continue to
make all Rental payments due under this Lease without regard to the payment of
the Special Rental Advance. If Landlord should apply all or any portion of the
Special Rental Advance to any Rental due from Tenant under this Lease, Tenant,
within two (2) business days after Notice from Landlord, shall replace said
amount. If Guarantor subsequently achieves an Investment Grade Rating, or, on
the last day of the penultimate Fiscal Quarter of the Term of this Lease, Tenant
may then credit the Special Rental Advance against its next due Rental under
this Lease.
B. Throughout the Term, Tenant shall cause Guarantor at all times to
maintain a long-term debt rating of its senior, unsecured debt by either
Standard & Poor's Corporation or Moody's (or a successor of each or both of them
acceptable to Landlord) provided that if either or both of such companies (or
any successor(s)) shall not issue such a credit rating notwithstanding Tenant's
best efforts to obtain same, then Tenant shall propose a substitute rating
agency and such substitute rating agency's ratings for purposes of this Section
5.07 and Landlord shall in its reasonable discretion approve or disapprove such
proposed substitute rating agency and its ratings. If Tenant shall fail to
propose such a substitute rating agency, or if Landlord shall disapprove a
substitute rating agency proposed by Tenant, then Landlord, on notice to Tenant
shall have the right to reasonably designate such substitute rating agency and
rating.
END OF ARTICLE 5
ARTICLE 6
OPERATION AND MAINTENANCE OF PREMISES
Section 6.01 Operation and Maintenance of Premises
Throughout the Term, Tenant, at its own expense, shall keep and
maintain the Premises in good condition and repair, reasonable wear and tear
excepted, and in conformity with all Legal Requirements and shall make or cause
to be made all ordinary and extraordinary, foreseen and unforeseen items of
maintenance, repair, replacement and alteration to the Premises as necessary for
such purpose. Landlord shall not be required to maintain, repair, or rebuild all
or any part of the Premises. Tenant shall provide all services required and
perform all
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obligations incurred in connection with the use, operation and maintenance of
the Premises, and Tenant shall be responsible for the payment of all costs and
expenses incurred in the use, operation, or maintenance of the Premises,
including, but not limited to, management fees, real estate taxes, insurance,
supplies and materials used in the operation and maintenance of the Premises,
the cost of all maintenance, janitorial, security and service agreements for the
Premises and the equipment therein and thereon, and the cost of electricity,
water and any and all other utilities supplied to the Premises, but not
including any costs or expenses affirmatively incurred by Landlord that arc not
attributable to a default by Tenant in the performance of Tenant's obligations
under this Lease.
Section 6.02 Taxes
A. Tenant shall pay, prior to delinquency: (i) all taxes, including
sales, excise, value added, use and real estate taxes, assessments, levies,
fees, water and sewer rents and charges, and all other governmental charges,
general and special, ordinary and extraordinary, foreseen and unforeseen, which
are imposed or levied upon or assessed against or which arise with respect to
the Premises, any Rental or other sums payable hereunder, this Lease or the
leasehold estate hereby created or which arise in respect of the operation,
possession or use of the Premises by Tenant or the leasing, operation,
possession or use of the Premises; (ii) all gross receipts, sales, excise or
similar taxes (i.e., taxes based upon gross income which fail to take into
account deductions with respect to the Premises, such as depreciation, interest,
taxes or ordinary and necessary business expenses) imposed or levied upon,
assessed against or measured by any Rental or others payable hereunder; and
(iii) all charges of utilities, communications and other services serving the
Premises.
B. Notwithstanding the foregoing provisions of Section 6.02A but
subject to the provisions of Section 6.02C, Tenant shall not be required to pay
any franchise, estate, inheritance, transfer, income or similar tax assessed or
imposed against Landlord, any Rental or other sums payable hereunder, this
Lease, the Land or Improvements (other than any tax referred to in clause (ii)
of Section 6.02A). Tenant will furnish to Landlord, within ten (10) days after
demand therefor, proof of payment of all items referred to above which are
payable by Tenant.
C. If, at any time, any Federal, state or local governmental entity
shall impose upon the Rental payable to Landlord any tax or other imposition in
lieu of any existing real estate or other tax payable by Tenant as of the
Commencement Date, then notwithstanding the provisions of Section 6.02B, Tenant,
at its sole cost and expense, shall pay such tax or imposition on Landlord's
behalf the same as if such tax or imposition had been levied against Tenant or
Tenant's interest in the Premises as well as any additional income taxes
assessed against Landlord with respect to such payment.
Section 6.03 Compliance with Requirements, Covenants and Restrictions
A. Tenant shall comply with and cause the Premises to comply with all
obligations and liabilities with respect to all Insurance Requirements
(including, without limitation, to the extent necessary to prevent cancellation
thereof and to insure full payment of any claims made under such policies)
required to be maintained by Tenant under this Lease. Tenant shall comply with,
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cause the Premises to comply with, and shall assume all easements, agreements,
covenants, conditions and restrictions applicable to the Premises or the
ownership, operation, use or possession thereof that are of record on the
Commencement Date or are hereafter executed by Tenant or are hereafter consented
to by Tenant in a writing.
B. During the Term, Tenant will not enter into or consent to any
easements, covenants, conditions or restrictions which would affect the Premises
beyond the Term or any termination of this Lease without the prior consent of
Landlord, which consent will not be unreasonably withheld, conditioned, or
delayed.
Section 6.04 Landlord's Right to Perform Tenant Obligations
If Tenant fails promptly to make any repairs, payments or otherwise
take any actions that are Tenant's obligation to make or do under this Lease,
Landlord, at its option, may make or perform same at the expiration of any
applicable Notice and grace period provided for herein (except that in the event
of any emergency presenting immediate danger to person or property, such Notice
and grace period shall only be what is reasonable under the circumstances), and
Tenant shall pay Landlord, upon demand and receipt of evidence of payment, as
Additional Rental, Landlord's actual costs plus interest thereon from the date
of expenditure until paid at the Lease Interest Rate. The provisions of this
Section 6.04 shall be for the sole and exclusive benefit of Landlord. Nothing
contained herein shall be construed so as to require Landlord to exercise any of
its rights under this Section 6.04.
Section 6.05 Compliance with Laws
Subject to the provisions of Section 6.06, Tenant, at its sole expense,
shall comply with and cause the Premises to comply with, and assume all
obligations and liabilities with respect to all laws, orders, ordinances, and
regulations of Federal, state, county, municipal and other authorities having
jurisdiction over the Premises and/or the business or operations conducted
thereon, or the matters which are the subject of this Lease, including but not
limited to any building, zoning or use laws, ordinances, regulations or orders,
Environmental Laws, fire department rules, and health department regulations;
whether such rules, orders, and regulations are presently in effect or hereafter
enacted (whether or not presently contemplated) which would impose any
violation, requirement, order or duty with respect to the Premises, or the use,
ownership, operation or occupation thereof (such laws, orders, ordinances and
regulations being herein referred to as "Legal Requirements").
Section 6.06 Tenant's Right to Contest
Notwithstanding any other provision of this Lease, Tenant shall have
the right to contest (i) the payment of any tax or other imposition, (ii)
compliance with any Legal Requirement or (iii) any lien referred to in Section
6.07 so long as (w) at the time of any such contest, no Event of Default exists,
(x) no such contest shall subject Landlord to the risk of criminal liability,
(y) any such taxes or impositions are paid prior to the assessment of penalties
or interest thereon unless such payment would deprive Tenant of the right to
contest the validity or amount of such taxes or impositions, and (z) Tenant
shall contest, in good faith, the existence, amount or validity thereof, the
amount of the damages caused thereby, or the extent of its or Landlord's
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liability therefor by appropriate proceedings which shall operate during the
pendency thereof to prevent or stay (1) the collection of, or other realization
upon, the matter contested, (2) the sale, forfeiture or loss of any of the
Premises or any portion thereof or any Rental to satisfy or to pay any damages
caused by any of the matters described in clauses (i), (ii), and (iii), (3) any
interference with the use or occupancy of any of the Premises (4) any
interference with the payment of any Rental (5) the cancellation of any
insurance policy and (6) the enforcement or execution of any injunction, order
or Legal Requirement with respect to such matter. Tenant further agrees that any
such contest shall be prosecuted to a final conclusion or settled as
expeditiously as is reasonably possible under the circumstances. Any rebate made
on account of any taxes or other impositions shall be repaid to the party who
made such payment. If and to the extent required by applicable law or
regulation, Landlord shall render to Tenant, at no cost to Landlord, any and all
reasonable assistance in contesting the validity or amount of an), impositions,
including (if requested by Tenant) joining in the signing of any protests or
pleading which Tenant may reasonably deem advisable to file. Tenant shall pay
any and all losses, judgments, decrees and costs in connection with any such
contest and shall, promptly after the final determination of such contest, fully
pay and discharge the amounts which shall be levied, assessed, charged or
imposed or be determined to be payable therein or in connection therewith,
together with all penalties, fines, interest and costs thereof or in connection
therewith, and perform all acts the performance of which shall be ordered or
decreed as a result thereof. Upon termination of this Lease for any reason other
than an Event of Default, Landlord shall promptly reimburse Tenant for any such
payment made by Tenant for taxes and impositions described in Section 6.02A
attributable to the Premises applicable to any period subsequent to the
termination of the Lease.
Section 6.07 Liens
Tenant shall keep the Premises free from any liens arising from any
work performed, materials furnished, or obligations incurred by or at the
request of Tenant or any subtenant, licensee or concessionaire of Tenant or
arising from any breach by Tenant of its obligations under this Lease, and any
liens with respect to any taxes Tenant is obligated to pay under this Lease or
Legal Requirements. If any lien is filed against the Premises or Tenant's
leasehold interest therein, or if any lien is filed against the Premises which
arises out of any purported act or agreement of Tenant, or any subtenant,
licensee or concessionaire of Tenant, Tenant shall discharge the same within
thirty (30) days after Tenant receives Notice of its filing by payment, filing
of the bond required by law or otherwise. If Tenant fails to discharge such lien
within such period, then, in addition to any other right or remedy of Landlord,
Landlord may, at its election, discharge the lien by paying the amount claimed
to be due, by obtaining the discharge by deposit with a court or a title
company, or by bonding. Tenant shall pay on demand, as Additional Rental, any
amount paid by Landlord for the discharge or satisfaction of any such lien,
together with interest thereon from the date of such expenditure until paid at
the Lease Interest Rate, and all reasonable attorneys' fees and other costs and
expenses of Landlord incurred in defending any such action or in obtaining the
discharge of such lien, together with all necessary disbursements in connection
therewith. Nothing contained in this Lease shall be construed as constituting
the consent or request of Landlord, express or implied, to or for the
performance by any contractor, laborer, materialman, or vendor of any labor or
services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Premises or any part
thereof. Notice is hereby given that Landlord will not be liable
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for any labor, services or materials furnished or to be furnished to Tenant, or
to anyone holding an interest in the Premises or any part thereof through or
under Tenant, and that no mechanic's, materialmen's or other liens for any such
labor, services or materials shall attach to or affect the interest of Landlord
in and to the Premises; and appropriate notice to this effect will be included
in the Lease Memorandum and all construction contracts entered into by Tenant.
END OF ARTICLE 6
ARTICLE 7
USE
Section 7.01 Use
Tenant shall have the right to use the Premises for a residential
retirement community, including nursing care, congregate care, and all other
uses reasonably incidental thereto.
Section 7.02 Change of Use
In addition to the uses permitted under Section 7.01, Tenant may
discontinue the uses permitted under Section 7.01 and use the Premises for
office, retail sales, commercial uses and residential purposes other than a
retirement community and for any other lawful business or commercial purpose
permitted under applicable Legal Requirements (a "Change of Use"), provided such
Change of Use is commercially reasonable and does not diminish the value of the
Premises and provided further that such Change of Use occurs prior to the date
that is three (3) years prior to the expiration of the Term of this Lease
(including all Effective Extended Terms). At the request of Tenant, Landlord
shall execute such applications, petitions or other documents that may be
required to be filed with any governmental authority that are reasonably
necessary to seek and obtain such a Change of Use, provided, that Landlord shall
not be required to incur any expense in connection therewith, and provided
further that the execution of any such document shall not expose Landlord to any
personal liability.
END OF ARTICLE 7
ARTICLE 8
INDEMNIFICATION
Section 8.01 General Indemnification by Tenant
A. In addition to the provisions of any indemnity provided elsewhere in
this Lease (other than Section 8.02 hereof), Tenant shall pay, protect,
indemnify, defend, save and hold harmless, Landlord, any Mortgagee, ground
lessor, and any Affiliate, partner, trustee, officer, director, employee, agent
or shareholder of Landlord, or any holder of any beneficial interest in any of
them (the "Indemnified Parties'), from and against all liabilities, obligations,
claims, damages (including punitive damages), penalties and causes of action or
judgments of any nature
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whatsoever, howsoever caused and arising out of events or circumstances causing
personal injury or property damage during the Term (except that this indemnity
shall not cover liabilities or claims arising by reason of the gross negligence
or willful misconduct of an Indemnified Party, or its employees or agents),
without regard to the form of action and whether based on strict or statutory
liability, gross negligence, negligence (including the negligence of any
Indemnified Party) or any other theory of recovery at law or in equity, and all
reasonable and documented costs and expenses (including reasonable attorneys'
fees and legal costs and expenses), imposed upon or incurred by or asserted
against any of the Indemnified Parties by reason of or in connection with:
(a) Any matter pertaining to the leasing, use, non-use,
occupancy, operation, management, condition, design, construction, maintenance,
repair or restoration of any of the Premises or the employment of any persons on
the Premises;
(b) Any casualty in any manner arising from or in connection
with any of the Premises or any operations or activities thereon, whether or not
Landlord has or should have knowledge or notice of any default or condition
causing or contributing to the casualty;
(c) Any violation by Tenant (or any subtenant, concessionaire
or licensee of Tenant) of any provision of this Lease, any contract or agreement
to which Tenant (or any subtenant, concessionaire or licensee of Tenant) is a
party, any violation or alleged violation of any Legal Requirement (including
anti-discrimination laws) or any Insurance Requirement;
(d) Any contest undertaken by or on behalf of Tenant with
respect to any Legal Requirement, Insurance Requirement, tax imposition or
otherwise, regardless of whether the same is permitted pursuant to the terms
hereof; except in each case to the extent the same directly result from the
gross negligence or willful misconduct by an Indemnified Party; and
B. In addition to the provisions of any indemnity provided elsewhere in
this Lease (other than Section 8.02 hereof), Tenant shall pay, protect,
indemnify, defend, save and hold harmless, the Indemnified Parties, from and
against all liabilities, obligations, claims, damages (including punitive
damages), penalties and causes of action or judgments of any nature whatsoever,
howsoever caused, arising out of events or circumstances causing personal injury
or property damage prior to the Commencement Date (except that this indemnity
shall not cover liabilities or claims arising by reason of the gross negligence
or willful misconduct of an Indemnified Party or its employees or agents),
without regard to the form of action and whether based on strict or statutory
liability, gross negligence, negligence (including the negligence of any
Indemnified Party) or any other theory of recovery at law or in equity, and all
reasonable and documented costs and expenses (including reasonable attorneys'
fees and legal costs and expenses), imposed upon or incurred by or asserted
against any of the Indemnified Parties by reason of or in connection with:
(a) Any matter pertaining to the leasing, use, non-use,
occupancy, operation, management, maintenance, or repair (but not to the design,
development or construction) of all or any pan of the Premises, or the
employment of any persons on the Premises;
(b) Any casualty in any manner arising from or in connection
with any operations or activities on the Premises (but not casualties arising
from the structural condition, design, development, or construction of the
Premises), whether or not Landlord has or should have knowledge or notice of any
default or condition causing or contributing to the casualty;
(c) Any violation by Landlord (or any tenant, affiliate,
concessionaire or licensee of Landlord) of any provision of any contract or
agreement pertaining to the retirement community operations of Landlord at the
Premises, any violation or alleged violation of any
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Legal Requirement (including anti-discrimination laws) or any Insurance
Requirement pertaining to the retirement community operations of Landlord at the
Premises;
(d) Any contest undertaken by or on behalf of Landlord with
respect to any, Legal Requirement, Insurance Requirement, tax imposition or
otherwise relating to the Premises, regardless of whether the same is permitted
pursuant to the terms hereof; except in each case to the extent the same
directly result from the gross negligence or willful misconduct by an
Indemnified Party; and
C. Any matter covered by Section 8.02 shall be deemed excluded from
this Section 8.01.
Section 8.02 Environmental Indemnification
Tenant shall pay, protect, indemnify, defend, save and hold harmless
the Indemnified Parties, from and against all liabilities, obligations, claims
(including without limitation, claims by third parties alleging violation of or
liability under any Environmental Law), damages (including punitive damages),
penalties and causes of action or judgments, without regard to the form of
action and whether based on strict or statutory liability, Tenant's gross
negligence, negligence (including the negligence of any Indemnified Party or
their agents but not including liabilities, obligations, claims, damages, causes
of action, or judgments arising out of any gross negligence or willful
misconduct of any Indemnified Party or their agents) any other theory of
recovery at law or in equity, and all reasonable and documented costs and
expenses (including reasonable attorneys' fees, expert's legal costs and
expenses), imposed upon or incurred by, or asserted against any of the
Indemnified Parties by reason of or in connection with:
(a) Tenant's failure to perform its duties and obligations as
set forth in Article 12; and
(b) All claims asserted during or after the Term by any third
party for personal or bodily injury or death where such claims allege injury or
damages as a result of exposure, that occurred during the Term, to Hazardous
Material that existed at or were located in, on, or under the Premises at any
time prior to or during the Term provided, however, that this indemnity shall
not cover claims arising by reason of the gross negligence or willful misconduct
of Landlord and its agents, or an Indemnified Party and their agents.
Section 8.03 Defense of Indemnified Parties
Promptly after receipt by an Indemnified Party of Notice of the
commencement or assertion against it of any claim, action or proceeding, such
Indemnified Party shall, if a claim in respect thereof is to be made against
Tenant under this Article Eight, notify Tenant thereof; but the omission so to
notify Tenant shall not relieve Tenant from any liability which it may have to
such Indemnified Party under this Article Eight except to the extent that Tenant
shall have been prejudiced by such failure. As long as no Event of Default
exists and provided that representation by counsel selected by Tenant will not,
in Indemnified Party's reasonable judgment, prejudice Indemnified Party in any
manner, Tenant, at its sole cost and expense, shall have the right by counsel
reasonably satisfactory to the Indemnified Party, to contest, resist and defend
any claim, action or proceeding with respect to which it shall have received the
Notice described in the preceding sentence; provided, however, that Tenant may
not compromise or otherwise dispose of the same without the prior written
approval of the Indemnified Party, such
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approval not to be unreasonably withheld, conditioned, or delayed so long as the
Indemnified Party receives a full release with respect to the claim, action or
proceeding. If an Event of Default exists, or, in Indemnified Party's judgment,
representation by counsel selected by Tenant will prejudice Indemnified Party in
any manner, such Indemnified Party shall have the right to retain its own
counsel and defend such action. If Tenant shall have assumed responsibility for
such contest and defense, Tenant shall not be obligated to pay any attorneys'
fees or other legal costs incurred by or on behalf of the Indemnified Party
unless an Event of Default exists. Notwithstanding the foregoing, each
Indemnified Party shall, at Tenant's request and expense, cooperate with Tenant,
at no cost or expense to the Indemnified Party, in the defense of any such
claim, action or proceeding.
Section 8.04 Payment by Tenant
Any amounts which become payable by Tenant under this Article Eight
shall be paid as Additional Rental no later than ten (10) days after demand by
the Indemnified Party entitled thereto (which demand shall not be made more than
ten (10) days prior to the proposed date of actual payment by the Indemnified
Party to a third party) and, if such payment is not timely paid, shall bear
interest at the Lease Interest Rate from the date when due to the date of
payment.
Section 8.05 Survival
Tenant's liability under this Article Eight shall survive the
expiration or earlier termination of this Lease. The failure or inability on the
part of Tenant to carry insurance required to be maintained under Article
Thirteen shall not affect in any way its indemnification obligations hereunder.
Section 8.06 Continuing Obligations
The indemnities set forth herein shall in no way affect or impact any
other obligations on the part of Tenant or any of its Affiliates that may exist
under law or under any other agreement in favor of any Indemnified Party.
END OF ARTICLE 8
ARTICLE 9
ALTERATIONS AND EXPANSIONS
Section 9.01 Alterations and Expansions
A. Tenant may at its expense and without Landlord's prior written
consent, make any replacements or alterations to the Premises and may expand the
existing Improvements or construct additional Improvements on the Land (an
"Expansion"), provided, that (i) the fair market value of the Premises shall not
be lessened thereby, and (ii) no structural elements of the Improvements shall
be demolished without obtaining Landlord's prior written consent, which
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consent shall not be unreasonably withheld, conditioned, or delayed, and (iii)
such replacements, alterations and/or Expansions will not adversely affect the
structure or the safety of the Improvements, or adversely affect the electrical,
heating, ventilating, air-conditioning, plumbing or mechanical systems or the
functioning thereof. Landlord has the right to require from Tenant assurances,
reasonably acceptable to Landlord, to be delivered to Landlord prior to the
commencement of any work, that Tenant will fully perform and complete its
Expansion, free and clear of any mechanics' and materialmen's liens. Tenant
shall procure at its own expense such governmental approvals and permits as may
be required for any alterations made by Tenant. At Tenant's expense, Landlord
shall join in submitting Tenant's plans for any necessary governmental approval,
if required by Legal Requirements. All such construction, alterations, and
maintenance work done by, or for, Tenant shall comply with all Legal
Requirements and Insurance Requirements, be completed in a good and workmanlike
manner and with reasonable diligence, and will be completed in all material
respects in accordance with plans prepared by a licensed architect. In the event
any Expansion will cost more than One Million Dollars ($1,000,000), adjusted by
the GDP Deflator, (w) Tenant shall furnish Landlord with the plans and
specifications therefor prior to commencing work, (x) the contractor selected by
Tenant to perform the work shall be subject to Landlord's approval, which
approval shall not be unreasonably withheld, conditioned, or delayed, (y) Tenant
shall carry builder's risk insurance in amounts reasonably sufficient to cover
the cost of replacement of the work during the course of such construction, and
(z) upon the request of Landlord or any Mortgagee, provide appropriate
securities, completion bonds, or like reasonable assurances that construction
will be completed. Tenant shall also furnish Landlord with copies of any and all
final plans and specifications (including all changes and modifications thereto)
and all necessary governmental permits prepared or issued for all alterations
(whether or not Landlord's consent was required in connection with such
alterations).
B. All replacements, alterations, substitutions and Expansions made to
the Premises (but not the FF&E, Fixed Asset Supplies, or Inventories) pursuant
to this Article 9 shall be and remain part of the realty and the property of
Landlord and shall be subject to this lease.
Section 9.02 Alterations and Expansions During, Last Five Years of Term
Landlord's prior written consent, which may be withheld in Landlord's
sole, absolute, and subjective discretion, shall be required for any
replacements, alterations or Expansions of or to the Premises to be constructed
during the last five (5) years of the Term (including any Effective Extended
Term), provided however, if Tenant shall then exercise its rights under Section
3.02 to extend the Term hereof so that at least ten (10) years will remain in
the Term once the construction is completed, then the provisions of Section
9.01A shall apply.
Section 9.03 Recovery of Mandated Expenditures
A. Mandated Expenditures shall be amortized by Tenant in equal monthly
installments in accordance with generally accepted accounting principles
consistently applied, but in no event shall any category of Mandated
Expenditures be amortized for longer than fifteen (15) years. If, as of any date
that would otherwise be a date of expiration or termination of the Term of this
Lease, there exists an unamortized balance of Mandated Expenditures, Tenant
shall have the right, exercisable by giving Landlord Notice to such effect at
least ninety (90) days
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prior to the end of the then current term, but not the obligation, to extend the
Term as hereinafter provided and receive a credit against Minimum Rental as
herein provided. If Tenant exercises its right to extend the Term under this
Section 9.03A, Tenant shall have no further right to extend the Term of the
Lease pursuant to any of the provisions of Article 3.
B. The length of any extension of the Lease Term pursuant to this
Section 9.03, shall be determined as follows: the unamortized balance of
Mandated Expenditures shall be divided by a number equal to forty percent (40%)
of the annual Minimum Rental; the result shall be rounded to the next whole
number; and, the Term shall be extended by a number of years equal to said whole
number.
C. During any such extended Term, Tenant shall receive a credit against
Minimum Rental equal to 50% of such Minimum Rental until such time as the
aggregate amount of such rent credit equals the unamortized balance of Mandated
Expenditures plus interest thereon at the Lease Interest Rate.
D. Landlord shall have the right, but not the obligation, of avoiding
any extension of the Term pursuant to this Section 9.03, by paying to Tenant,
within thirty (30) days after Tenant's Notice pursuant to Section 9.03A, an
amount equal to the unamortized balance of Mandated Expenditures.
E. The provisions of this Section 9.03 shall not apply in the case of
any termination of this Lease due to the default of Tenant.
F. Within six (6) months after the close of each Fiscal Year, Tenant
shall deliver to Landlord a written statement of (i) the amount of Mandated
Expenditures incurred by Tenant during such Fiscal Year with sufficient
information to establish that such expenditure qualifies as a Mandated
Expenditure, (ii) the amortization period that will be applicable to each such
Mandated Expenditures and (iii) the unamortized balance of all Mandated
Expenditures as of the last day of such Fiscal Year that has been incurred
during the Term. No expenditure shall be treated as a Mandated Expenditure
unless included within the annual statement referred to in the preceding
sentence.
END OF ARTICLE 9
ARTICLE 10
FF&E, FIXED ASSET SUPPLIES AND INVENTORIES
Section 10.01 FF&E Upon Commencement Date
On the Commencement Date, Landlord shall make available to Tenant all
of the FF&E, Fixed Asset Supplies, and Inventories indicated on the schedules
attached hereto as Exhibit C located at the Premises and to be used and consumed
at the Premises during the Term at no further cost to Tenant. Landlord shall
have no further obligations to provide any additional FF&E, Fixed Asset Supplies
or Inventories. Thereafter during the Term, Tenant shall, at its
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own cost, replace FF&E, Fixed Asset Supplies, and Inventories as it deems
necessary and all such replacement FF&,E, Fixed Asset Supplies and Inventories
shall be and remain the property of Tenant. Any net proceeds realized by Tenant
from the sale or other disposition of any FF&E owned by Landlord and identified
in Exhibit C shall be paid promptly by Tenant to Landlord.
Section 10.02 FF&E Upon Termination
A. Landlord shall have the option, to be exercised by sending Notice to
Tenant on or before the date that is either (i) six (6) months prior to the date
of expiration of the Term of this Lease or (ii) the date of expiration or
termination of the Term of this Lease, if this Lease terminates prior to the
expiration of the Term, to purchase from Tenant upon the date of termination of
this Lease any or all of the items of FF&E, Fixed Asset Supplies, and
Inventories then located at the Premises at their then fair market value. If the
parties are unable to agree upon such fair market value within thirty (30) days
following such expiration or termination, the parties shall appoint an
independent appraiser mutually agreeable to them to determine such fair market
value, which determination shall be net of the cost to Tenant to remove such
items from the Premises, and which shall be binding on the parties. The costs of
such appraiser shall be shared equally by the parties. If Landlord exercises its
option to purchase, Landlord shall have the right to use, after the date of
expiration or termination of this Lease, the items of FF&E, Fixed Asset Supplies
and Inventories so elected to be purchased by Landlord and Landlord shall pay
such fair market value to Tenant within thirty (30) days after agreement by the
parties or determination by the appraiser; and this provision shall survive such
expiration or termination. Landlord shall not have the option of purchasing from
Tenant any computer software that is proprietary to Tenant, any Affiliate, or
the licensor of any of them (including without limitation applications used by
Tenant as part of Tenant's accounting, centralized or local sales, business
management systems and otherwise), or any leased equipment.
B. Subject to the provisions of Section 10.02A, Tenant shall remove, at
Tenant's expense, all of its FF&E, Fixed Asset Supplies, and Inventories from
the Premises on or before the date of expiration or termination of this Lease
and repair any damage caused to the Premises by such removal. If Tenant fails to
remove such items by such date and/or fails to repair such damage, Landlord
shall have the right to do so and charge Tenant the cost therefor together with
interest thereon from the date of such expenditure until paid at the Lease
Interest Rate. The provisions of this Section 10.02 shall survive the expiration
or termination of this Lease.
Section 10.03 Landlord's Security Interest in Tenant's FF&E, Fixed
Asset Supplies and Inventories
As security for payment by Tenant of the Rentals payable hereunder and
the performance of all of Tenant's obligations under this Lease, Tenant hereby
grants to Landlord a security interest under the Uniform Commercial Code of the
jurisdiction in which the Premises are situated in all FF&E, Fixed Asset
Supplies and Inventories now or hereafter owned by Tenant and now or hereafter
ordinarily used on or in the Premises. Tenant shall execute and deliver to
Landlord such Uniform Commercial Code financing statements and continuation
statements as Landlord determines to be necessary from time to time to perfect
and continue the perfection of Landlord's security interest in such collateral.
Tenant shall have the right to replace any such
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collateral, to remove any such collateral from the Premises and dispose of any
such collateral, in the ordinary course of Tenant's business.
END OF ARTICLE 10
ARTICLE 11
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
Section 11.01 Trademarks, Trade Names and Service Marks
A. During the Term, the Premises may be known as a Marriott Retirement
Community, or such other name as Tenant may from time to time designate with
additional identification utilizing one or more trademarks and/or trade names of
Tenant as may be necessary to provide local identification. All Tenant's
trademarks, service marks, trade names, logos, symbols and designs shall in all
events remain the exclusive property of Tenant and its Affiliates, and nothing
contained herein shall confer on Landlord the right to use such names,
trademarks, service marks, trade names, logos, symbols or designs other than in
strict accordance with the terms of this Lease. Except as provided in Section
11.01B, upon the expiration or termination of this Lease, any use of or right to
use said names, trademarks, service marks, trade names, logos, symbols or
designs by Landlord shall cease forthwith and Tenant shall (at Tenant's sole
cost and expense) promptly remove from the Premises any signs or similar items
which contain any of Tenant's names, trademarks, trade names, service marks,
logos, symbols or designs, provided however, that Tenant shall be responsible
for the cost of any resulting repairs that may be necessary as a result of such
removal. Included under the terms of this Section are all trademarks, service
marks, trade names, symbols, logos or designs used in conjunction with the
Premises, including but not limited to restaurant times, lounge names, etc.,
whether or not the marks contain the "Marriott" name. The right to use such
trademarks, service marks, trade names, symbols, logos or designs belongs
exclusively to Tenant, and the use thereof inures to the benefit of Tenant
whether or not the same are registered and regardless of the source of the same.
B. Landlord covenants that any items of FF&E, Inventories or Fixed
Asset Supplies which are purchased by Landlord upon the expiration or
termination of this Lease, and which are marked with the Tenant's name or any
Tenant trademark, trade name, logo, symbol or design, shall be used exclusively
in connection with the Premises until they are consumed.
C. Any computer software (including upgrades and replacements) at the
Premises owned by Tenant, an Affiliate, or the licensor of any of them is
proprietary to Tenant, such Affiliate, or the licensor of any of them and shall
in all events remain the exclusive property of Tenant, the Affiliate, or the
licensor of any of them, as the case may be, and nothing contained in this Lease
shall confer on Landlord the right to use any of such software. Upon expiration
or termination of this Lease, Tenant shall have the right to remove from the
Premises without compensation to Landlord any computer software (including
upgrades and replacements) owned by Tenant, any Affiliate, or the licensor of
any of them. Notwithstanding anything contained in this Section 11.01C to the
contrary, any computer software directly relating to the operation
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and maintenance of the Improvements and their various systems shall be and
remain the property of Landlord through the term hereof and upon any expiration
or termination of this Lease.
D. Notwithstanding any provision of Section 11.01 to the contrary, the
parties acknowledge and agree that the trade name(s), trademark(s), service
mark(s), logo(s), symbol(s) or design(s) shown on Exhibit D associated with the
Premises, are proprietary to, and the property of, Landlord and upon expiration
or termination of this Lease Tenant shall not, thereafter, make any further use
thereof.
E. Tenant and/or its Affiliates and Landlord and/or its Affiliates
shall each be entitled, in case of any breach of the covenants of Article 11 by
Landlord or Tenant or others claiming through Landlord or Tenant, to injunctive
relief and to any other night or remedy available at law. The provisions of
Article 11 shall survive expiration or termination of this Lease.
F. Nothing contained herein shall diminish or abrogate the rights of
Landlord, its subsidiaries and Affiliates to use the trademarks of Tenant and
its subsidiaries and Affiliates granted under that certain Assignment & License
Agreement of even date herewith between Host Marriott Corporation and Marriott
International, Inc. Nothing contained herein shall be construed so as to require
Landlord, after the expiration or termination of this Lease, to remove any trade
names, trademarks, logos, symbols, service marks or designs which are integral
to the Improvements, including without limitation marked wallpaper, marked
plumbing and electrical fixtures, floors, carpets and distinctive color schemes.
END OF ARTICLE 11
ARTICLE 12
ENVIRONMENTAL HAZARDS
Section 12.01 Compliance with Environmental Law
A. During the Term, Tenant at its cost shall cause the Premises to be
in compliance with all Environmental Laws, whether or not such noncompliance is
the result of a breach of Tenant's obligations under Section 12.01B or 12.0IC.
B. Tenant shall never during the Term permit to be discharged at,
released at, or otherwise disposed of Hazardous Materials in, on or under the
Premises other than in insignificant concentrations or amounts that do not
impose a significant risk of any clean up, removal, monitoring or,
responsibility under any applicable Environmental Laws and do not impose a
significant risk of harm to guests, invitees, or employees of the Premises. In
the event that with or without Tenant's knowledge or permission there is any
discharge at, release at or disposal of Hazardous Materials in, on or under the
Premises during the Term other than in insignificant concentrations or amounts
that do not impose a significant risk of any clean up, removal, monitoring or
responsibility under any applicable Environmental Law and do not impose a
materially significant risk of harm to guests, invitees or employees of the
Premises,
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Tenant shall, subject to the provisions of this Article 12, diligently
clean up and remove such Hazardous Materials.
C. During the Term and for a period of five (5) year commencing after
the expiration of the Term, if any Hazardous Materials are discovered in, on or
under the Premises and result from, are introduced by, or arise out of, or the
damage from which is materially expanded as a result of Tenant's acts, its
negligence, or the acts or negligence of its employees or agents, or the acts or
negligence of any subtenants, licensees, concessionaires, contractors or
entities acting on behalf of Tenant or any of their employees or agents, the
cost incurred in complying with Environmental Laws with respect to such
Hazardous Materials shall be borne by Tenant. Tenant's obligation under this
subparagraph C shall continue after expiration of the Term until no further
compliance is required with respect to such Hazardous Materials.
D. If during the Term any Hazardous Materials are discovered in, on or
under the Premises and are the result of migration from a source other than the
Premises and are not a result of Tenant's acts, its negligence, or the acts or
negligence of its employees or agents, or the acts or negligence of any
subtenants, licensees, concessionaires, contractors or entities acting on behalf
of Tenant or any of their employees or agents, the cost incurred in complying
with Environmental Laws for such Hazardous Materials shall be borne by Tenant
until the expiration of the Term. After the expiration of the Term, Tenant shall
have no further liability to Landlord for complying with Environmental Laws for
such Hazardous Materials and Landlord shall indemnify Tenant for any liability
associated with the compliance of Environmental Laws with respect to such
Hazardous Materials.
E. In the event Tenant is required to implement a plan to investigate,
monitor, abate or remove Hazardous Materials pursuant to the requirements of any
Environmental Law, Tenant shall notify Landlord of its planned method, time and
procedure for such implementation and Landlord shall have the right to require
reasonable changes in such method, time or procedure. Nothing contained herein
shall be deemed to vest any control whatsoever in Landlord with respect to
Tenant's use, management, or disposal of Hazardous Materials on the Premises.
F. During the Term, Landlord may not enter into any agreement,
settlement or consent order with any third party or governmental entity
concerning the payment or possible payment of funds, or the investigation,
monitoring, abatement or removal of Hazardous Materials located in, on, or near
the Premises without the written consent of Tenant which consent shall not be
unreasonably withheld, conditioned or delayed. If Landlord fails to obtain
Tenant's written consent prior to entering into any such agreement, settlement
or consent order, any terms, conditions, obligations or liabilities contained
therein shall be non-binding on Tenant, Tenant shall have no responsibility to
Landlord under this Article 12, and Landlord shall indemnify Tenant for any
costs or losses incurred by Tenant as a result of such agreement, settlement or
consent order.
G. During the Term, Tenant may not enter into any agreement, settlement
or consent order with any third party or governmental entity concerning the
payment or possible payment of funds, or the investigation, monitoring,
abatement or removal of Hazardous Materials located in, on, or near the Premises
without the written consent of Landlord if such agreement, settlement or consent
order will impose any financial obligations on Tenant or Landlord, which
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are to be paid in whole or in part, after the expiration of the Term. Landlord's
consent shall not be unreasonably withheld, conditioned or delayed. Failure by
Tenant to obtain the Landlord's written consent shall be an Event of Default.
H. During the Term, Tenant may elect to defend any imposition, order,
demand, decree, lawsuit or governmental action that seeks to impose liability on
Tenant or Landlord due to the existence of Hazardous Materials in, on, or near
the Premises. If Tenant elects to take such action, Tenant shall not be deemed
to be in violation of any provision of this Article 12 so long as such action or
contest by Tenant does not result in a risk of the imposition of any criminal
sanctions against Landlord or any of its directors, officers or employees,
provided however, if Landlord or Tenant is ultimately held liable for the costs
associated with the existence of such Hazardous Materials, Tenant's liability
shall not be reduced by reason of any delay in such remediation.
Section 12.02 Environmental Assessments
A. If Landlord has reasonable cause to believe that an Environmental
Violation may exist on the Premises, or if Landlord desires to sell or finance
the Premises, or if any Mortgagee desires to sell or participate its interest in
the Premises, or if requested by the Senior Mortgagee, or if an Event of Default
exists, or if there is less than one (1) year remaining prior to the expiration
of the Term, then, upon written direction by Landlord to Tenant, Tenant shall
engage such persons as Tenant shall select ("Site Reviewers"), such selection
subject to the reasonable approval of Landlord, to visit the Premises and
perform, as agents of Tenant, such environmental site investigations and
assessments ("Site Assessments") as may be necessary to determine whether there
exists on the Premises any Environmental Violation, and, if any Environmental
Violation exists, to estimate the cost of remediating any such Environmental
Violation; provided, however, if an Event of Default exists or if there is less
than one year remaining prior to the expiration of the Term, Tenant shall select
the Site Reviewer from a list of no less than five (5) nationally recognized
Site Reviewers, such list to be provided by Landlord, and Landlord shall have
the right to approve the Site Reviewer, such approval to be exercised in a
reasonable manner recognizing Landlord's significant interest in the adequacy of
the report and the scope of work to be performed by such Site Reviewer. Landlord
shall have the right to approve any guidance or instruction requested by such
Site Reviewer during the Site Assessment, and Landlord shall have the right to
confirm that any draft or final reports furnished by such Site Reviewers conform
to approved scope of work, guidance and instructions. if Tenant fails or refuses
to engage Site Reviewers within thirty (30) days after such direction, Landlord
may engage the Site Reviewers. If an Event of Default or a material
Environmental Violation exists that was caused by Tenant, its employees or
agents, or by any Subtenant, licensee, concessionaire, contractor or entity
acting on behalf of Tenant, or any of their employees or agents, the cost of any
Site Assessment shall be paid by Tenant. In all other cases, the costs of an
Environmental Assessment shall be paid by Landlord (or Landlord shall cause such
costs to be paid by any Mortgagee requesting such Environmental Assessment) and
Tenant may demand adequate assurances that such costs will be paid before
engaging the Site Reviewers. Such Site Assessments may, at the option of
Landlord, include both above and below the ground testing and such other tests
as may be necessary, in the reasonable opinion of the Site Reviewers, to verify
the existence of an Environmental Violation or to estimate the cost of
remediating any such Environmental Violation. Tenant shall supply to the Site
Reviewers
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such historical and operational information regarding the Premises as may be
reasonably requested by the Site Reviewers to facilitate the Site Assessments,
and shall make available for meetings with the Site Reviewers appropriate
personnel having knowledge of such matters. The Site Reviewers shall include in
their report a statement estimating the cost of any remediation, monitoring and
other compliance program, if any, necessary to cure or remediate such
Environmental Violation. All of the Site Reviewers' work shall be made available
to Landlord and Tenant.
B. If Tenant fails diligently to pursue any of its obligations under
this Section 12.02 and such failure continues for a period of thirty (30) days
after Notice from Landlord, Landlord shall have the right (but no obligation),
in addition to any other rights or remedies it may have pursuant to this Lease
or under applicable law, to take any and all reasonable actions as Landlord
shall deem necessary or advisable in order to effect such compliance, for and on
behalf of Tenant and at the cost and expense of Tenant, including to enter the
Premises for the purpose of making tests, obtaining samples and surveys and
performing any other acts as may be reasonably necessary or desirable in the
reasonable discretion of Landlord, and reimbursement to Landlord of the cost
thereof shall be due and payable by Tenant as Additional Rental on demand with
interest thereon at the Lease Interest Rate from the date such cost is incurred.
C. If, during the Term, an Environmental Violation occurs or is found
to exist at the Premises which shall impose a liability to Tenant after the
expiration of the Term pursuant to this Article 12, and in the judgment of the
Site Reviewers, remediation, monitoring or other compliance program relating to
any such Environmental Violation has not or will not be completed as required by
any applicable Environmental Laws by the expiration or earlier termination of
the Term, then Tenant shall provide to Landlord, no later than thirty (30) days
prior to the expiration or earlier termination of the Term, a bond, letter of
credit or other security reasonably satisfactory to Landlord for 110% of the
amount determined by the Site Reviewers to be necessary to complete such
remediation, monitoring or other compliance program. If an Environmental
Violation occurs because of the existence of Hazardous Material in, on or under
the Premises in excess of any reportable quantity established under any
Environmental Law, and Tenant makes all notifications and undertakes and
diligently prosecutes to completion all regulatory, remedial or other actions
which are required by any applicable Environmental Law by any federal, state or
local governmental agency having jurisdiction over such affected Premises, then
Tenant shall not be in default under this Lease so long as Tenant diligently
pursues any and all such actions toward completion, and any action or non-action
by Tenant does not result in a risk of the imposition of any criminal sanctions
against Landlord or any of its directors, officers or employees.
END OF ARTICLE 12
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ARTICLE 13
INSURANCE
Section 13.01 Property & Business Interruption Insurance
Tenant shall, at its own expense, commencing with the Commencement Date
and continuing throughout the Term, procure and maintain with insurance
companies of recognized responsibility (with a rating of no less than A-VII by
A.M. Best, except that such rating shall not be applicable to those insurers
providing flood and earthquake insurance under this Section) property insurance
with the following minimum coverages:
(i) insurance on the Premises (including contents) against
loss or damage by fire, lightning and all other risks covered by the
usual standard extended coverage endorsement, and with coverage in the
amount of not less than one hundred percent (100%) of the replacement
cost thereof, exclusive of footings and foundations;
(ii) insurance against loss or damage from explosion of
boilers, pressure vessels, pressure pipes and sprinklers installed in
the Premises;
(iii) business interruption insurance covering loss of profits
and necessary continuing expenses (including Rentals payable under this
Lease) for interruptions caused by any occurrences covered by the
insurance referred to in subparagraphs (i) and (ii) of this Section
13.01, for a period of at least eighteen (18) months and of a type and
in amounts generally carried by prudent owners of similar properties;
(iv) flood insurance in an amount not less than the maximum
limit available under the National Flood Insurance Program (but only if
the Premises are located in a zone identified by the Federal Emergency
Management Agency as a flood hazard area);
(v) earthquake insurance and, if the Premises are not located
in a zone identified by the Federal Emergency Management Agency as a
flood hazard area, flood insurance (but only to the extent such
insurance is then carried by prudent owners of similar properties); and
(vi) such other property risk insurance, as may from time to
time be generally carried by prudent owners of similar properties, in
such amounts and against such risks as are then customary for property
similar in use to the Premises.
Section 13.02 Application of Proceeds
A. All proceeds of any insurance payable on account of any casualty
other than proceeds attributable to Tenant's personal property and other than
the proceeds of insurance referred to in Section 13.01(iii) shall be paid to the
Insurance Trustee who shall hold said proceeds in trust for the parties in
accordance with the provisions of this Section 13.02; provided, however, that in
the event that the aggregate amount of such proceeds with respect to any such
casualty is less than Two Hundred Fifty Thousand Dollars ($250,000), such
proceeds shall be paid to Tenant who shall use such proceeds for the purpose of
restoration of the Premises. Insurance proceeds attributable to Tenant's
personal property shall be paid directly to Tenant and shall not be considered
when making calculations pursuant to the preceding sentence. The proceeds of the
insurance referred to in Section 13.01(iii) shall be paid to Tenant except that
any such proceeds attributable to the Rentals payable under this Lease shall
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be paid to Landlord (as a credit against such Rentals) to the extent that such
Rentals have not been previously paid by Tenant to Landlord.
B. Provided that no default hereunder has occurred and is continuing,
and provided that Tenant complies with all of the terms and conditions of this
Section 13.02, all insurance proceeds received with respect to a casualty shall
be applied to the restoration of the Premises.
C. Tenant shall commence the restoration of the Premises not later than
the date which is one hundred eighty (180) days after the date upon which the
casualty occurred and thereafter prosecute the restoration with diligence and
continuity.
D. In the case of any casualty, prior to commencing any restoration
work that will cost more than Five Hundred Thousand Dollars ($500,000) to
repair, as adjusted by the GDP Deflator, Tenant, at its sole cost shall (i)
obtain the services of a licensed architect to prepare any required plans and
specifications for such restoration to the extent that such restoration work
cannot be performed based upon previously existing plans and specifications for
the Improvements; and (ii) submit a set of final plans and specifications to
Landlord and the Senior Mortgagee for approval to the extent that such
restoration work involves a departure from or addition to previously existing
plans and specifications for the Premises (which approval may not be
unreasonably withheld, conditioned, or delayed); and further, with respect to
any casualty that will cost more than One Million Dollars to repair, (iii) the
contractor selected by Tenant to perform the work shall be subject to Landlord's
approval, which approval shall not be unreasonably withheld, conditioned or
delayed, and (iv) Tenant shall carry builder's risk insurance in amounts
reasonably sufficient to cover the cost of replacement of the work during the
course of such construction.
E. In proceeding with such restoration work, Tenant shall first expend
an amount, if any, equal to the excess of the projected cost of the restoration
work over the amount of all insurance proceeds paid to the Insurance Trustee.
Thereafter, Tenant shall be entitled to submit to the Insurance Trustee, not
more frequently than once every thirty (30) days, an invoice together with such
other documentation (including mechanics lien waivers and title insurance policy
endorsements obtained at Tenant's sole cost and expense) as is customarily
required by lenders at such time making construction loans. Upon receipt of an
invoice in proper form, the Insurance Trustee shall make a disbursement within
ten (10) business days equal to ninety percent (90%) of the amount shown on the
invoice, provided, however, that upon final completion of the restoration work,
the Insurance Trustee shall disburse the final amount due Tenant, but only if it
has received any of the following: (a) final mechanics lien waivers from all
parties having rights to mechanics liens against the Premises on account of such
restoration work, (b) appropriate endorsements or policies of title insurance
protecting Landlord and Mortgagee against mechanics liens arising out of the
restoration work, or (c) a mechanic's Lien bond. In the event that the amount
disbursed upon final completion of the restoration work in accordance with the
previous sentence shall be less than the total insurance proceeds then held by
the Insurance Trustee, such excess shall be paid to Tenant.
F. In the event that Tenant shall fail to prosecute the restoration
work with diligence and continuity until completion, regardless of whether an
Event of Default has occurred, Landlord shall have the right to use any proceeds
held by Insurance Trustee to complete such renovation work. Tenant shall be
liable for any sums incurred by Landlord to complete such
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restoration work in excess of the amount held and disbursed by the Insurance
Trustee.
G. In the event that an Event of Default has occurred, Tenant shall not
have access to any insurance proceeds unless and until Tenant shall have cured
such Event of Default, and until such time, Tenant shall use its own funds to
prosecute the restoration work.
H. Upon the expiration or termination of the Term of this Lease, all
insurance proceeds received by the Insurance Trustee or Tenant and not applied
to the costs of restoration shall be paid to Landlord except as otherwise
provided in Article 21.
Section 13.03 Waiver of Rights of Subrogation
Landlord and Tenant hereby waive their rights of recovery against each
other, their respective officers, directors, agents and employees for loss or
damage to the Premises and any resultant business interruption to the extent
covered by the insurance maintained under Section 13.01. Should any such
policies of insurance require an endorsement to effect such a waiver, the Tenant
shall cause them to be so endorsed.
Section 13.04 Operational Insurance
Tenant shall, at its own expense, commencing with the Commencement Date
and continuing throughout the Term, procure and maintain operational insurance
with reputable insurance companies of recognized responsibility; provided,
however, that, with respect to the first One Million Dollars ($1,000,000) of
coverage required by this Section such coverage shall be obtained from insurance
companies authorized to do business in the United States with a rating of no
less than A-VII by A.M. Best. All other coverage shall be obtained from one or
more insurance companies with an A.M. Best rating of no less than B+V with
respect to domestic insurance companies or of at least comparable standing if a
foreign-based insurer. Operational insurance required herein shall have the
following minimum coverage:
(i) comprehensive or commercial general liability insurance
against claims for death, bodily injury, or property damage occurring
on, in or about the Premises, and automobile liability insurance on
vehicles operated in conjunction with the Premises with a combined
single limit of not less than One Hundred Million Dollars
($100,000,000) per occurrence.
(ii) such other insurance as Tenant in its reasonable judgment
deems advisable for protection against claims, liabilities and losses
arising out of or connected with its operation of the Premises.
Section 13.05 Blanket and Self-Insurance
All insurance described in Sections 13.01 and 13.0.4 may be obtained by
Tenant by endorsement or equivalent means under its blanket insurance policies,
provided that such blanket policies fulfill the requirements specified herein.
With respect to the insurance described in Section 13.04 the deductible or
self-insured retention limits shall not exceed Two Hundred Fifty Thousand
Dollars ($250,000) (to be increased on the fifth (5th) anniversary of the
Commencement Date and every subsequent fifth (5th) anniversary thereof, by an
amount proportionate to the percentage increase in the GDP Deflator over the
preceding five (5) year
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period) or such lesser amount as is then applicable to a majority of the other
properties covered under Tenant's company wide insurance program. As to all
insurance described in Section 13.01, deductible limits or self-insured
retentions shall not exceed Fifty Thousand Dollars ($50,000) (to be increased on
the fifth (5th) anniversary of the Commencement Date and every subsequent fifth
(5th) anniversary thereof, by an amount proportionate to the percentage increase
in the GDP Deflator over the preceding five (5) year period) or, with respect to
"high hazard classification" (as such term is customarily understood in the
insurance industry), such other amount as may then be required by responsible
insurance companies for similar properties and risks.
Section 13.06 Costs of Insurance
Insurance premiums and any costs or expenses with aspect to the
insurance described in this Article 13 shall be borne' by Tenant. Any losses,
costs, damages or expenses which fall within the deductible limits or are
included within an allowed self-insurance program pursuant to Section 13.05
above shall be borne by Tenant. If Tenant shall fail to pay any premium for any
such insurance, or if an Event of Default with respect to any of the provisions
of this Article 13 shall occur, Landlord may pay such premium or procure the
insurance coverages required by this Article 13 and all amounts paid by Landlord
in accordance herewith shall become Additional Rent which is due and payable
within five (5) Business Days after such expenditures are made.
Section 13.07 Defense of Claims after Termination
With respect to any claim relating to an accident or other occurrence
within a given Year for which Tenant is obligated to indemnify Landlord under
Article 8 which is not finally resolved either through litigation or settlement
prior to the expiration or termination of this Lease, Tenant shall be obligated
to continue to defend such accrued claims regardless of such expiration or
termination.
Section 13.08 Coverage and Certificates
All insurance policies provided for under Section 13.01 or Section
13.04 above shall be carried in the name of Tenant, with Landlord and any
Mortgagee on the Premises as additional insureds, and with loss payable, in the
case of any policies procured under Section 13.01, in accordance with the
provisions of Section 13.02. Tenant shall deliver to Landlord certificates of
insurance with respect to all policies so procured under Section 13.01 or
Section 13.04, including existing, additional and renewal policy certificates
and, in the case of insurance about to expire, shall deliver certificates of
insurance with respect to the renewal policies prior to the respective dates of
expiration. All insurance policies provided for under Section 13.01 or Section
13.04 above shall, to the extent obtainable, have attached thereto an
endorsement that such policy shall not be cancelled or materially changed
without at least thirty (30) days' prior written Notice to Landlord, Tenant, and
the holder of any Mortgage. Upon request by Landlord or any Mortgagee, the
requesting party or its representatives shall be entitled to examine at Tenant's
corporate headquarters all insurance policies maintained by Tenant with respect
to the Premises.
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Section 13.09 Alternative Insurance Coverage
Notwithstanding any other provisions of this Lease to the contrary, if
at any time during the Term hereof Tenant is not able to obtain any one or more
of the insurance coverages required pursuant to this Article 13 because the
subject insurance coverage(s) are not then reasonably available in the insurance
marketplace, then, Tenant's failure to so obtain such insurance coverage(s)
shall not constitute an Event of Default so long as Tenant does obtain coverage
as similar to that required under this Lease as is reasonably available. For
purposes of this Section 13.09 the term "reasonably available" means that type
of coverage then obtainable from reputable insurance companies for properties
similar to the Premises and purchased by prudent owners of businesses similar to
that operated by Tenant at the Premises.
END OF ARTICLE 13
ARTICLE 14
DAMAGE BY FIRE OR OTHER CASUALTY
Section 14.01 Damage by Fire or Other Casualty
Subject to the provisions of Section 14.06, if during the Term the
Premises shall be damaged or destroyed by fire, or any other casualty or cause
whatsoever, Tenant shall forthwith proceed to repair and/or rebuild the same,
free of all liens, claims and encumbrances, to the same general design and
specification as existed immediately before such damage or destruction occurred,
subject to such delays as may be reasonably attributable to governmental
restrictions or failure to obtain materials or labor, or other causes (other
than financial), whether similar or dissimilar beyond the control of Tenant.
Materials used in repair shall be as nearly like or superior in quality to
original materials as may then be reasonably procured in regular channels of
supply. All proceeds of insurance carried on the Premises pursuant to Article 13
hereof, payable as a result of such damage or destruction, shall be used for the
purpose of such repair or rebuilding in accordance with the provisions of
Article 13, and, if such insurance proceeds are not so made available by the
Insurance Trustee or Landlord in accordance with the provisions of Article 13
and such failure shall continue for a period of 90 days after Notice of such
failure is delivered by Tenant to Landlord, Tenant's obligation to repair and
rebuild hereunder shall be suspended until such time as such insurance proceeds
are so made available. If such insurance proceeds are not so made available
within one (1) year thereafter, Tenant, at its option may terminate this Lease
upon ninety (90) days prior Notice to Landlord. Upon any such termination,
Landlord shall have all rights to any insurance proceeds. In the event Tenant is
not required to repair or rebuild by the terms or conditions of this Lease, all
such insurance proceeds (whether paid to the Insurance Trustee or Tenant) shall
be paid to Landlord. If Tenant is required to, and does repair or rebuild, any
excess insurance proceeds shall be paid to Tenant.
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Section 14.02 Partial Damage by Fire or Other Casualty
In the event of any partial damage or destruction, Tenant shall
continue to occupy and use the Premises to the extent that it may be practicable
to do so, and Tenant shall proceed to repair and/or rebuild the Premises in the
manner and at the time described in Sections 13.02 and 14.01.
Section 14.03 Damage Occurring After the 10th Anniversary of
Commencement Date
A. In the event of a Major Casualty occurring after the tenth (10th)
anniversary of the Commencement Date, Tenant shall have the right to terminate
this Lease by so notifying Landlord not later than the date which is sixty (60)
days after the occurrence of such Major Casualty. If Tenant elects to exercise
the right described in the preceding sentence, it shall, simultaneously with its
delivery of its Notice of termination, deliver to Landlord its irrevocable offer
to purchase the Premises for an amount equal to the Lease Purchase Price.
B. Landlord may accept or reject Tenant's irrevocable offer to purchase
the Premises by sending Tenant a Notice of rejection or acceptance within thirty
(30) days from the date upon which Landlord received Tenant's Notice of
termination. If Landlord fails to send Tenant a Notice of rejection or
acceptance within thirty (30) days of its receipt of Tenant's irrevocable offer
to purchase the Premises, Landlord shall be deemed to have accepted such offer.
If Landlord accepts or is deemed to have accepted Tenant's offer to purchase,
the Lease shall terminate and closing of such purchase shall occur in accordance
with the provisions of Article 21. Upon such termination, Tenant shall pay to
Landlord all Rental due through such date of termination. Landlord shall convey
the Premises to Tenant in accordance with the provisions of Section 21.01.
C. If Landlord rejects Tenant's irrevocable offer to purchase pursuant
to Section 14.03A, this Lease shall terminate on a Minimum Rental payment date
specified by Tenant in its Notice of termination which occurs not earlier than
ninety (90) days nor later than one hundred twenty (120) days after Landlord's
receipt of Tenant's irrevocable offer to purchase, provided that this Lease
shall not terminate unless and until Tenant shall have paid all sums due
hereunder (including, without limitation, all taxes and insurance premiums) as
of the actual date of termination. Upon such termination, Tenant shall vacate
the Premises in accordance with the provisions of Section 3.04.
Section 14.04 No Abatement of Rent Due to Casualty
No damages, compensation, or claim shall be payable by Landlord for
inconvenience, loss of business, or annoyance arising from any repair or
restoration of any portion of the Premises or the Improvements. If this Lease is
not terminated as a result of a casualty pursuant to Section 14.03, all proceeds
of insurance carried pursuant to Section 13.01(iii) shall be paid to Tenant
(except as otherwise provided in Section 13.02). There shall be no abatement of
Rentals following any casualty and during any period of repair or reconstruction
contemplated in this Article 14.
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Section 14.05 Early Termination
In the event of the termination of this Lease pursuant to the
provisions of Sections 14.03 or 15.04 of this Lease, the Term and the estate
hereby granted shall expire as of the date of such termination in the same
manner and with the same effect as if it were the date set for the normal
expiration of the Term, and Rental shall be apportioned as of the date of
termination.
Section 14.06 Uninsurable Loss
A. If there is a casualty at or to the Premises with respect to which
all or a portion of such loss is an "uninsurable loss", then Tenants obligations
under this Lease to repair and/or rebuild the Premises shall be limited to only
such casualties where the cost of repair and/or rebuilding (in addition to any
available insurance proceeds and exclusive of all applicable deductible limits
and self-insured retentions) will not exceed forty percent (40%) of the fair
market value of the Premises immediately prior to the casualty. In all other
circumstances, Tenant shall have the right, but not the obligation, to terminate
this Lease upon ninety (90) days Notice to Landlord and, upon such termination,
Tenant shall have no further obligations to pay any Rentals or otherwise under
this Lease.
B. All costs incurred by Tenant in repairing and/or replacing the
Premises in the event of an "uninsurable loss" shall constitute Mandated
Expenditures.
C. As used in this Section 14.06, the term "uninsurable loss" shall
mean any casualty for which insurance coverage was not then obtainable from
reputable insurance companies for properties similar to the Premises and being
purchased by prudent owners of businesses similar to that operated by Tenant at
the Premises. In no event shall the phrase "uninsurable loss" mean a loss which
is uninsurable because such loss was caused by the intentional, willful or
grossly negligent acts of Tenant, its agents, employees or contractors.
D. Upon receipt of any Notice from Tenant of a proposed termination of
this Lease pursuant to the provisions of Section 14.0.4A above, Landlord shall
have the right, but not any obligation, to avoid such termination by paying to
Tenant a sum equal to the amount by which the costs (in addition to any
available insurance proceeds and exclusive of all applicable deductible limits
and self-insured retention) to repair and/or rebuild the Premises in the event
of an uninsurable loss that exceeds forty percent (40%) of the fair market value
of the Premises immediately prior to the casualty. Such right in Landlord shall
be exercised by Landlord giving Notice to such effect to Tenant within ten (10)
days following Landlord's receipt of Tenant's Notice of Termination, and by
Landlord paying the requisite sum to the Insurance Trustee within thirty (30)
days thereafter, to be disbursed by the Insurance Trustee in accordance with the
provisions of Section 13.02.
END OF ARTICLE 14
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ARTICLE 15
CONDEMNATION
Section 15.01 Notice of Condemnation and Assignment of Rights
A. The party receiving any Notice of the kinds specified below shall
promptly give the other party Notice of the receipt, contents and date of the
Notice received:
(i) Notice of intended condemnation;
(ii) Service of any legal process relating to condemnation of
any portion of the Premises or Improvements;
(iii) Notice in connection with any proceedings or
negotiations with respect to such a condemnation; or
(iv) Notice of intent or willingness to make or negotiate a
private purchase, sale, or transfer in lieu of condemnation.
B. Subject to the rights of each party as set forth in this Article 15,
each party hereby irrevocably assigns to Insurance Trustee any award or payment
to which they may be or become entitled by reason of any taking of the Premises
or any part thereof, in or by condemnation or other eminent domain proceedings
pursuant to any law, general or special. Insurance Trustee shall distribute all
such condemnation proceeds to the benefit of Landlord and/or Tenant in
accordance with the provisions of this Article 15. Each party shall be entitled
to participate at its own expense in any such proceedings.
Section 15.02 Tenant's Right to Pursue a Claim
Notwithstanding anything herein to the contrary, Tenant shall have the
right to pursue a claim with and retain any award from the condemning authority
or entity for damage to or loss of Tenant's leasehold estate in the Premises as
well as for any other separate damages that Tenant may suffer, provided,
however, that such award or payment to Tenant is completely separate from and
shall in no manner reduce the award or payment to Landlord for the value of the
Premises unencumbered by the Lease. If the foregoing contingency is not met, any
Tenant's award or payment shall be deemed assigned to the Insurance Trustee
pursuant to Section 15.01.
Section 15.03 Temporary Taking
A. In the event that the use of the Premises or any part thereof is
taken in condemnation by any governmental authority under the power of eminent
domain for a period of time, whether definite or indefinite (but less than the
acquisition of a fee simple interest in perpetuity), or whether less than, equal
to or greater than the unexpired portion of the Term of this Lease, this Lease
shall nevertheless continue in full force and effect and Tenant shall have the
right (except as hereinafter provided) to receive the entire award ("Use Award")
attributable to the unexpired portion of the Term of this Lease (including any
Effective Extended Term), and Landlord shall have the right to receive the
entire award ("Landlord's Temporary Taking Award") attributable to the period
after the expiration of the Term of this Lease (including any Effective Extended
Term), and no claim or demand of any kind shall be made by Tenant against
Landlord by reason
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of such taking, no claim for abatement of Minimum Rental or Percentage Rental
and other amounts which may become due under this Lease shall be made by reason
of such taking and the rights and liabilities of the parties hereto shall be the
same as if there had been no such taking.
B. The Use Award, in such amount as may be eventually determined, shall
be paid to and held in trust by the Insurance Trustee and shall be administered
as hereinafter set forth. There shall first be deducted therefrom and paid out
all legal and other expenses, reasonable in amount, which were incurred in
obtaining such Use Award, except that Landlord shall pay that portion of such
expenses (but not to exceed the amount of Landlord's Temporary Taking Award)
that Landlord's Temporary Taking Award bears to the sum of Landlord's Temporary
Taking Award and the Use Award. The Use Award shall be administered as follows:
(i) If any such Use Award shall be in the form of rent
recoverable for such taking and shall be payable in quarterly (or more
frequent) installments, the Insurance Trustee shall pay to Landlord
quarterly such installments of the Use Award on account of and to the
extent of Tenant's obligations to pay Minimum Rental and Percentage
Rental under this lease; any balance remaining from each such quarterly
(or more frequent) installment shall be paid by the Insurance Trustee
to Tenant. The entire amount of such quarterly (or more frequent)
installments of the Use Award received by the Insurance Trustee
(whether paid to Landlord or Tenant) shall be included in the cash
receipts of Tenant during the quarter when received by the Insurance
Trustee for purposes of determining Operating Revenues.
(ii) If any such Use Award is made in a lump sum or in the
form of rent recoverable for such taking and is payable in installments
less frequently than quarterly, the lump sum or other installment shall
be divided by the number of calendar quarters included in the period
for which such award has been paid, and the Insurance Trustee shall pay
to Landlord such quotient quarterly on account of and to the extent of
Tenant's obligation to pay Minimum Rental and Percentage Rental under
this Lease; any balance remaining from each such quarterly quotient
shall be paid by the Insurance Trustee to Tenant. The entire amount of
such quarterly installments of the Use Award received by the Insurance
Trustee (whether paid to Landlord or Tenant) shall be included in the
cash receipts of Tenant during the quarter in which such quarterly
quotient is distributed by the Insurance Trustee to Landlord and Tenant
for purposes of determining Operating Revenues.
(iii) If any such Use Award shall be made for the cost of
repairs and restoration following termination of such temporary taking,
then the Insurance Trustee shall apply the same to Tenant's obligation
hereunder to repair and restore as herein provided.
C. Any Use Award deposited with the Insurance Trustee shall be invested
by the Insurance Trustee in an interest-bearing account, with interest to be
added to the amount of the Use Award and distributed as pan of the Use Award in
accordance with the provisions of this Section 15.03. All such interest shall be
included in Operating Revenues for the month in which such interest is
distributed by the Insurance Trustee.
Section 15.04 Total Taking
If, during the Term, all or substantially all of the Premises shall be
taken in or by condemnation or other eminent domain proceedings pursuant to any
law, general or special, then this Lease shall terminate on the date such taking
becomes effective. Tenant shall pay all Rental
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and all other sums due hereunder (including, without limitation, all taxes and
insurance premiums) through such date. All condemnation proceeds shall belong to
and be paid to Landlord, except that to the extent such proceeds exceed the
Leasehold Purchase Price as of such termination date, such excess shall first be
payable to Tenant up to an amount equal to any unamortized Mandated
Expenditures, with any remaining portion of such excess being payable to
Landlord.
Section 15.05 Substantial Taking
A. In the event of a Substantial Taking, Tenant shall have the right to
terminate this Lease by so notifying Landlord not later than the date which is
sixty (60) days after the occurrence of such Substantial Taking. If Tenant
elects to exercise the right described in the preceding sentence, it shall,
simultaneously with its delivery of its Notice of termination, deliver to
Landlord its irrevocable offer to purchase the Premises for an amount equal to
the Lease Purchase Price.
B. Landlord may reject or accept Tenant's irrevocable offer to purchase
the Premise by sending Tenant a Notice of such rejection or acceptance within
thirty (30) days from the date upon which Landlord received Tenant's Notice of
termination. If Landlord fails to send Tenant a Notice of rejection or
acceptance within thirty (30) days of its receipt of Tenant's irrevocable offer
to Purchase the Premises, Landlord shall be deemed to have accepted such offer.
If Landlord accepts or is deemed to have accepted Tenant's offer to purchase,
the Lease shall terminate on a Minimum Rental payment date specified by Tenant
in its Notice of termination which occurs not earlier than ninety (90) days nor
later than one hundred twenty (120) days after Landlord's receipt of Tenant's
irrevocable offer to purchase. Upon such termination, Tenant shall pay Landlord
all Rental due through such date and Landlord and the Insurance Trustee shall
assign all their right, title and interest in condemnation proceeds payable and
shall deliver any condemnation proceeds previously paid to, and then held by,
the Insurance Trustee with respect to such Substantial Taking to Tenant and
Landlord shall convey the Premises to Tenant in accordance with the provisions
of Section 21.01.
C. If Landlord rejects Tenant's irrevocable offer to purchase pursuant
to Section 15.05A, this Lease shall terminate on a Minimum Rental payment date
specified by Tenant in its Notice of termination which occurs not earlier than
ninety (90) days nor later than one hundred twenty (120) days after Landlord's
receipt of Tenant's irrevocable offer to purchase, provided that this Lease
shall not terminate unless and until Tenant shall have paid all sums due
hereunder (including, without limitation, all taxes and insurance premium) as of
the actual date of termination. Upon such termination, all condemnation proceeds
shall be delivered to Landlord and Tenant shall vacate the Premises in
accordance with the provisions of Section 3.04.
Section 15.06 Partial Taking
A. In the event of a Substantial Taking pursuant to which this Lease is
not terminated pursuant to the provisions of Section 15.05, then, in the event
of any condemnation of less than all to substantially all of the Premises,
Tenant shall be obligated to restore the Premises not taken by the governmental
authority to a condition as good as or better than the condition which
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prevailed thereon and therein prior to such condemnation as is practicable under
the circumstances; provided, however, that Tenant shall not be obligated to
expend any sums in excess of the condemnation proceeds. In the event of an
Insubstantial Taking, the Tenant shall not be obligated to replace any
landscaping or facilities taken by the governmental authority but shall only be
obligated to repair any damage to the Premises not taken by the governmental
authority. Materials used in repair and restoration shall be as nearly like or
superior in quality to the original materials as may then be reasonably procured
in regular channels of supply, and construction shall be completed in a
workmanlike manner free of all liens and encumbrances. All condemnation proceeds
payable on account of such condemnation other than proceeds attributable to
Tenant's personal property shall be paid to the Insurance Trustee who shall hold
said proceeds in trust for the parties in accordance with the provisions of this
Section 15.06.
B. Tenant shall commence the restoration of the Premises as soon as
practicable not later than the date which is one hundred eighty (180) days after
the date upon which the condemnation occurred and thereafter prosecute the
restoration with diligence and continuity.
C. Prior to commencing any restoration! work, Tenant, at its sole cost
shall (i) obtain the services of a licensed architect to prepare any required
plans and specifications for such restoration; and (ii) submit a set of final
plans and specifications to Landlord and the Senior Mortgagee for approval
(which approval may not be unreasonably withheld, conditioned or delayed), and
further, with any restoration that will cost more than One Million Dollars
($1,000,000), (iii) the contractor selected by Tenant to perform the work shall
be subject to Landlord's approval, which approval shall not be unreasonably
withheld, conditioned, or delayed, or (iv) Tenant shall carry builder's risk
insurance in amounts reasonably sufficient to cover the cost of replacement of
the work during the course of such construction.
D. In proceeding with such restoration work, Tenant shall first expend
an amount, if any, equal to the excess of the projected cost of the restoration
work over the amount of all condemnation proceeds. Thereafter, Tenant shall be
entitled to submit to the Insurance Trustee, not more frequently than once every
thirty (30) days, an invoice together with such other documentation (including
mechanics lien waivers and title insurance policy endorsements obtained at
Tenant's sole cost and expense) as is customarily required by lenders at such
time making construction loans. Upon receipt of an invoice in proper form, the
Insurance Trustee shall make a disbursement equal to ninety percent (90%) of the
amount shown on the invoice, provided, however, that upon final completion of
the restoration work, the Insurance Trustee shall disburse to Tenant the final
ten percent (10%) due that has been so retained, but only if it has received
either final mechanics lien waivers from all parties having rights to mechanics
liens against the Premises on account of such restoration work or appropriate
endorsements or policies of title insurance protecting Landlord and Mortgagee
against mechanics liens arising out of the restoration work. In the event that
the amount disbursed in accordance with the previous sentence shall be less than
the total condemnation proceeds, such excess shall be distributed to Landlord
and Tenant as hereinafter provided in Section 15.06F and Section 15.06G.
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E. Any award attributable to personal property owned by Tenant that is
not attributable to FF&E shall be paid to Tenant. Any award attributable to FF&E
shall be paid to Tenant and applied by Tenant for the purpose of replacing such
FF&E in the event and to the extent that the Premises remaining after such
condemnation requires such replacement FF&E to be fully operational.
F. In the event of a condemnation that is an Insubstantial Taking, the
condemnation proceeds remaining after application thereof to the cost of the
restoration work shall be paid to Landlord and Tenant in the following
proportions: Landlord shall receive that portion of said remaining proceeds
equal to a fraction whose numerator is the number of years in the Term of this
Lease (including all Effective Extended Terms as of the date Tenant receives
notice of such condemnation) that have elapsed as of the effective date of such
condemnation and whose denominator is the number of years in the Term of this
Lease (including all Effective Extended Terms as of the date Tenant receives
notice of such condemnation) and Tenant shall receive the balance of such
remaining proceeds. Thus, for examples if such condemnation occurred on the last
day of the 21st year of the Term and the only Effective Extended Term was the
First Extended Term, Landlord would receive 21/25th of such remaining
condemnation proceeds and Tenant would receive 4/25th of such remaining
condemnation proceeds.
G. In the event of a condemnation that is a Substantial Taking and in
the event that this lease is not terminated pursuant to Section 15.05, the
condemnation proceeds remaining after application thereof to the cost of the
restoration work shall be allocated between Landlord and Tenant in proportion to
the value of their respective interests in the Premises; provided, however, that
in no event shall Landlord receive a portion of such remarketing proceeds that
is less than the Leasehold Purchase Price multiplied by the Partial Condemnation
Reduction Percentage.
H. In the event of a condemnation that is an Insubstantial Taking,
there shall be no reduction in or abatement of the Minimum Rental or Percentage
Rental thereafter payable by Tenant. In the event of a condemnation that is a
Substantial Taking and in the event that this Lease is not terminated pursuant
to Section 15.05, there shall be a reduction in the Minimum Rental payable by
Tenant effective as of the date of the Substantial Taking in an amount equal to
nine percent (9%) of the lesser of (i) the portion of the condemnation award so
distributed to Landlord or (ii) eleven and one tenths (11.1) multiplied by the
annual Minimum Rental multiplied by the Partial Condemnation Reduction
Percentage and there shall be a reduction in the Alternative Rental or Expansion
Rental (if then applicable) in an amount equal to the Alternative Rental or
Expansion Rental payable immediately prior to such condemnation multiplied by
the Partial Condemnation Reduction Percentage.
I. In the event that Tenant shall fail to prosecute the restoration
work with diligence and continuity until completion, regardless of whether an
Event of Default has occurred, Landlord shall have the right to use any proceeds
held by Insurance Trustee to complete such restoration work. Tenant shall be
liable for any sums incurred by Landlord to complete such restoration work in
excess of the amount held and disbursed by the Insurance Trustee.
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J. In the event that an Event of Default has occurred Tenant shall not
have access to any condemnation proceeds unless and until Tenant shall have
cured such Event of Default, and until such time, Tenant shall use its own funds
to prosecute the restoration work.
END OF ARTICLE 15
ARTICLE 16
ASSIGNMENT, SALE AND SUBLETTING
Section 16.01 Sale or Assignment by Landlord
Landlord shall have the right to assign or transfer its interest in
this Lease in connection with a Sale of the Premises subject to this Lease which
shall remain in fall force and effect, provided Tenant's ability to obtain and
maintain the licenses and permits necessary for the operation of its retirement
and health care facilities is not materially and adversely affected by any
proposed sale or assignment of Landlord's interest in the Premises. Furthermore,
Landlord shall have the right to assign or transfer without restriction its
interest in this Lease as collateral security with respect to any financing
secured by an interest in the Premises. Upon any Sale of the Premises, Landlord
shall assign this Lease to the purchaser and, concurrently with the finalization
thereof, the purchaser shall, by an appropriate written instrument, assume
(subject to the provisions of Section 24.21) all of Landlord's obligations
hereunder. Any attempted sale or assignment in violation of the provisions of
this Section 16.01 shall be void and without effect. Within thirty (30) days
after Landlord sends Notice to Tenant advising Tenant of the name, identity and
address of any proposed assignee or transferee and requesting a determination as
to whether the proposed assignment or transfer would violate the requirements of
the first sentence of this Section 16.01, Tenant shall advise Landlord by Notice
to Landlord whether or not such proposed assignment or transfer would violate
such requirements and, if so, setting forth in reasonable detail the basis for
such violation (which Notice shall be binding upon Tenant), and if Tenant fails
to send such Notice to Landlord prior to the expiration of such thirty (30) day
period, such assignment or transfer shall be deemed to comply with the
requirements of the first sentence of this Section 16.01.
Section 16.02 Assignment by Tenant
Tenant shall have the right to transfer or assign its interest in this
Lease without Landlord's consent provided that (w) the transferee or assignee is
a corporation organized under the laws of any state in the United States and in
good standing and authorized to do business in the state in which the Premises
is located, (x) such transferee or assignee assumes this Lease by an appropriate
writing, (y) Tenant shall continue to remain liable under all of the provisions
of this Lease, and (z) the Guaranty of Tenant's performance hereunder shall not
be terminated or altered by any such assignment.
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Section 16.03 Tenant's Right to Sublease
Tenant may sublease space or grant concessions or licenses at the
Premises so long as the terms of any such subleases, concessions or licenses do
not exceed the Term and shall expire upon any termination of this Lease.
END OF ARTICLE 16
ARTICLE 17
HOLDING OVER
Section 17.01 Holdover
Should Tenant continue to hold the Premises after the termination of
this lease, whether the termination occurs by lapse of time or otherwise, such
holding over, unless otherwise agreed to by Landlord in writing, shall
constitute and be construed as a tenancy at sufferance at a daily Rental equal
to 1/91st of an amount equal to two hundred percent (200%) of the quarterly
Minimum Rental last in effect and subject to all of the other obligations
imposed on Tenant hereunder, but the foregoing shall not constitute a consent by
Landlord to such holding over and shall not prevent Landlord from exercising any
of its remedies under this Lease or applicable law by reason of such holding
over.
END OF ARTICLE 17
ARTICLE 18
ESTOPPEL CERTIFICATES
Section 18.01 Estoppel Certificates
Tenant agrees to furnish periodically, within ten (10) days after
written request therefor by Landlord; or any actual or prospective Mortgagee
covering the Premises, or any interest of Landlord therein or any actual or
prospective purchaser of Landlord's interest, a certificate signed by Tenant
(which may require a true and correct copy of this Lease and any and all
amendments hereto to be attached) certifying (to the extent same is true) that
this Lease is in full force and effect and unmodified; that the Term has
commenced and the full Rental is then accruing hereunder; that, subject to the
provisions of Section 5.07, no Rental under this Lease has been paid more than
ninety (90) days in advance of its due date; that the address for Notices to be
sent to Tenant is as set forth in this Lease (or has been changed by Notice duly
given and is as set forth in the certificate); that Tenant has no knowledge of
any default by Landlord then existing under this Lease; and such other matters
as may be reasonably requested by Landlord or any Mortgagee, prospective
Mortgagee or prospective purchaser. If Tenant is unable to so certify as to one
or more of the foregoing items, Tenant shall specify its reason therefor in
writing. Any such certificate may be relied upon by any prospective purchaser,
ground lessor, Mortgagee, or any beneficiary under any deed of trust on the
Improvements or the Land or any
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part thereof. Landlord agrees to furnish periodically, within ten (10) days
after written request therefor by Tenant, a certificate signed by Landlord
containing substantially the same information as described above.
END OF ARTICLE 18
ARTICLE 19
LANDLORD FINANCING
Section 19.01 Right to Finance
Landlord shall have the right, at any time, and from time to time, to
subject its interest in the Premises to one or more Mortgages without Tenant's
consent.
Section 19.02 Priority
A. Landlord agrees that this Lease and any extensions, renewals,
replacements or modifications thereto and all right and interest of Tenant in
and to the Premises shall be superior to any and all Mortgages now or hereafter
granted by Landlord.
B. As more particularly described herein, Tenant has no right to
cancel, rescind or terminate this Lease except as expressly provided in the
particular provisions specified herein. Without limiting the foregoing or the
effect of Tenant's waivers set forth herein, or any other provisions herein that
negates Tenant's right to cancel, terminate or rescind this lease or any of its
obligations hereunder, if any circumstances nevertheless as a matter of law or
otherwise would give Tenant the right, immediately or after lapse of a period of
time, to cancel, rescind or terminate this Lease, or to claim a partial or total
eviction, Tenant shall not exercise such right (a) until it has given written
notice of such circumstance to the Senior Mortgagee and (b) until a reasonable
period for remedying such circumstance shall have elapsed following such written
notice by Tenant to the Senior Mortgagee (which reasonable period, if required
by the Senior Mortgagee, shall in no event be less than the greater of (i) the
period to which Landlord would be entitled (under this Lease or otherwise),
after similar notice, to effect such remedy, plus ninety (90) days, and (ii) the
period of time needed by the Senior Mortgagee to obtain possession of the
Premises by foreclosure or otherwise), plus ninety (90) days, provided that the
Senior Mortgagee shall be entitled to the additional time period referred to in
the preceding clause (i) only if the Senior Mortgagee shall with due diligence
(a) give Tenant notice of intention to remedy such circumstance and (b) commence
and continue to remedy such circumstances to the extent it is reasonably able to
do so without possession or seek possession, directly or through a receiver, and
upon obtaining possession of the Premises, commence and continue to remedy such
circumstance.
C. If at any time there shall occur a foreclosure action with respect
to the interest of Landlord under this Lease, or a deed in lieu of foreclosure,
or any similar action or proceeding, then (i) this Lease shall not terminate,
and (ii) Tenant shall attorn to and recognize the purchaser at such foreclosure
sale (whether such person is the Mortgagee or another person or entity) or
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the grantee of a deed in lieu of foreclosure as Tenant's landlord under this
Lease, except that neither such purchaser or grantee, nor anyone claiming by,
through or under any such person or grantee, shall be:
(x) liable for any action or omission of Landlord (or its
predecessors in interest);
(y) subject to any offsets or defenses which Tenant may have
against Landlord (or its predecessors in interest); or
(z) bound by any payment of Rental, other than the Special
Rental Advance if any, which Tenant might have made to landlord (or its
predecessors in interest) for more than one Fiscal Quarter in advance of the
date the same was due under this Lease; but the foregoing shall not relieve any
such purchaser or grantee, or anyone claiming by, through or under any such
purchaser or grantee from performing all obligations of Landlord under this
Lease after it acquires title to the Premises.
Section 19.03 Mortgage Amendments
If at any time, any prospective Mortgagee requests any change or
modification to this Lease as a condition of granting a Mortgage to Landlord,
Tenant shall consent to such change or modification provided that (i) Landlord
bears the cost of preparing all documentation required to effect such change or
modification; (ii) such change or modification does not materially and adversely
increase Tenant's cost of operating the Premises or performing its obligations
under this Lease; and (iii) such change does not materially and adversely affect
Tenant's rights hereunder. Examples of modifications to which Tenant shall
consent include, without limitation, obligations to give copies of notices and
other documents to Mortgagees where Tenant has previously agreed to give same to
Landlord, to obtain a Mortgagee's consent or approval where Tenant has
previously agreed to obtain Landlord's consent or approval, to allow a Mortgagee
to act for Landlord in the event that Landlord fails to exercise a right granted
to Landlord hereunder, and provisions which govern the relationship between
Landlord and Mortgagee.
END OF ARTICLE 19
ARTICLE 20
DEFAULT BY TENANT
Section 20.01 Events of Default
The occurrence of any one or more of the following events shall
constitute an Event of Default by Tenant under this Lease:
A. Tenant shall fail to pay any Rental or other sums payable by Tenant
hereunder as and when such Rental or other sums become due and payable and such
failure shall continue for more than five (5) Business Days after Notice;
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B. Tenant shall fail to perform or observe any covenant or obligation
hereunder (other than the financial obligations referred to in subparagraph A
above) and such failure shall continue for more than thirty (30) days after
Notice; or, if such failure cannot be cured with reasonable diligence within
such thirty (30) day period, if Tenant does not commence to correct same within
said thirty (30) day period and thereafter prosecute the correction of same with
reasonable diligence and continuity to completion;
C. Any petition is filed by or against Tenant or Guarantor under any
section or chapter of the present or any future Federal Bankruptcy Code or under
any similar law or statute of the United States or any state thereof (which, in
the case of an involuntary proceeding, is not permanently discharged, dismissed,
stayed, or vacated, as the case may be, within ninety (90) days of its filing),
or if any order for relief shall be entered against Tenant in proceedings filed
under any section or chapter of the present or any future Federal Bankruptcy
Code or under any similar law or statute of the United States or any state
thereof;
D. A receiver, trustee or liquidator of Tenant or Guarantor or of all
or substantially all of the assets of Tenant or Guarantor shall be appointed.
E. An Event of Default shall have occurred under any lease that is a
Related Landlord Lease as of the date of such Event of Default thereunder. IN
THIS REGARD, IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT THE PRECEDING
SENTENCE IS A MATERIAL PART OF THE CONSIDERATION DUE LANDLORD FROM TENANT WITH
RESPECT TO THIS LEASE AND THAT LANDLORD WOULD NOT HAVE ENTERED INTO THIS LEASE
WITH TENANT WITHOUT INCLUSION IN THIS LEASE OF THE PRECEDING SENTENCE.
F. A third party lender to either Guarantor or Tenant accelerates any
indebtedness of Guarantor or Tenant, the amount of which then equals or exceeds
Fifty Million Dollars ($50,000,000), and Guarantor or Tenant fails to fully
satisfy such accelerated indebtedness within five (5) business days next
following the date such indebtedness was accelerated.
Section 20.02 Landlord's Rights Upon an Event of Default
A. If an Event of Default occurs, then, subject to the provisions of
Section 20.02B and C, Landlord may commence doing any one or more of the
following provided that such commencement is prior to the date that Tenant or
Guarantor cures such default:
(1) Terminate this Lease upon ten (10) days Notice to Tenant,
in which event Tenant shall immediately surrender the Premises to Landlord and
Tenant shall be liable to Landlord for all Surviving Obligations and to the
extent provided in Section 17.01 and to the extent hereinafter provided in this
Section 20.02A. If Tenant fails to do so, Landlord may, without Notice and
without prejudice to any other remedy Landlord may have, enter upon and take
possession of the Premises and expel or remove Tenant and its effects without
being liable to prosecution or any claim for damages therefor. Tenant shall
indemnify Landlord for all loss and damage which Landlord may suffer by reason
of such Termination, whether through inability to relet the Premises or
otherwise, including any loss of Rental for the remainder of the Term. In
connection with Landlord's exercise of the remedy described in this
Subparagraph, Landlord shall have the right to seize and take possession of all
of Tenant's FF&E located
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on the Premises and either use same in connection with operating the property or
dispose of same as Landlord sees fit to do. To the greatest extent permitted by
law, Tenant hereby fully, formally and forever waives any and all protections
provided by applicable law against Landlord's right of distraint.
(2) Enter upon and take possession of the Premises as Tenant's
agent, with the right but not the obligation of terminating this Lease and
without being liable to prosecution or any claim for damages therefor, and
Landlord may relet the Premises either in its own name or as Tenant's agent and
in either event receive the rent therefor, in any of which events Tenant shall
pay to Landlord on demand (i) any and all costs of re-leasing, renovating,
repairing, and altering the Premises (including but not limited to advertising
costs, commissions, finders fees, legal fees and other costs) for a new tenant
or tenants, and (ii) any deficiency that may arise by reason of such reletting
from the net income from the Premises that Landlord would have received if there
had not been a default by Tenant. In addition, to the extent the Premises are
not relet, Tenant shall continue to be obligated to satisfy all of its
obligations under this Lease. In connection with Landlord's exercise of the
remedy described in this Subparagraph, Landlord shall have the right to seize
and take possession of all of Tenant's FF&E located on the Premises and either
use same in connection with operating the property or dispose of same as
Landlord sees fit to do. To the greatest extent permitted by law, Tenant hereby
fully, finally and forever waives any and all protections provided by applicable
law against Landlord's right of distraint.
(3) Do whatever Tenant is obligated to do under this Lease and
enter the Premises without being liable to prosecution or any claim for damages
therefor to accomplish this purpose. Tenant shall reimburse Landlord, as
Additional Rental, immediately upon demand for any expenses which Landlord
incurs in thus effecting compliance with this Lease on Tenant's behalf, together
with interest thereon from the date of such expenditure until paid at the Lease
Interest Rate.
(4) Bring a summary proceeding/action for ejectment in order
to recover possession of the Premises.
(5) Landlord hereby reserves the right to institute successive
legal actions to collect any damages payable to Landlord hereunder, it being
intended that a suit for damages shall not bar any subsequent suit for damages
that have subsequently accrued.
(6) Accelerate the Minimum Rentals due under this Lease. The
discount rate to be used in computing the amount of Minimum Rental due hereunder
shall be equal to the effective annual yield prevailing on the date the Event of
Default occurred with respect to United States treasury obligations having a
maturity date that is the same or nearest to the date on which this Lease would
have expired if no Event of Default occurred.
B. If an Event of Default has occurred under Section 20.01A, or if an
Event of Default has occurred under Section 20.01E that consists of the failure
of Tenant to pay any Rental or other sums payable to the Landlord under a
Related Landlord Lease as and when such Rental or other sums become due and
payable, Landlord, prior and as a condition precedent to exercising any rights
pursuant to Subsections 20.02(A)(1), (2), (4) or (6) above, shall give Guarantor
Notice of the Event of Default and afford Guarantor a period of five (5)
Business Days after Guarantor receives Notice pursuant to this Section 20.02B
within which to cure such Event of Default. If Guarantor cures such Event of
Default, Landlord shall have no further rights under this Section 20.02 with
respect to the particular Event of Default in question.
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C. If an Event of Default has occurred under Section 20.01B, or under
Section 20.01B of any Related Landlord Lease Landlord, prior and as a condition
precedent to exercising any rights pursuant to Subsections 20.02A(l), (2), (4)
or (6) above, shall give Guarantor notice of such Event of Default and Guarantor
shall have thirty (30) days within which either to cure such Event of Default;
or, if such Event of Default cannot be cured with reasonable diligence within
such thirty (30) day period, to commence to correct same within said thirty (30)
day period and thereafter prosecute the correction of same with reasonable
diligence and continuity to completion. If and so long as Guarantor commences
and continues to take action to cure such Event of Default as required pursuant
to the preceding sentence and cures such Event of Default, Landlord shall have
no further rights under this Section 20.02 with respect to the particular Event
of Default in question.
D. If an Event of Default has occurred under Section 20.01A, or if an
Event of Default has occurred under Section 20.01E that consists of the failure
of Tenant to pay any Rental or other sums payable to the Landlord under a
Related Landlord Lease as and when such Rental or other sums become due and
payable, then, notwithstanding anything in applicable law, to the contrary,
Landlord shall have no obligation whatsoever to mitigate any of its damages. If
any other Event of Default shall have occurred, Landlord shall be obligated to
mitigate its damages only to the extent it is required to do so under applicable
law.
Section 20.03 Implied Waiver
A. No act or thing done by Landlord or its agents during the Term shall
constitute an acceptance of an attempted surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless made in
writing and signed by Landlord. No re-entry or taking possession of the Premises
by Landlord pursuant to Section 20.02(B) or otherwise shall constitute an
election by Landlord to terminate this Lease, unless a written Notice of such
intention is given to Tenant. No waiver by Landlord of any breach of this Lease
shall constitute a waiver of any other violation or breach of any of the terms
hereof.
B. No provision of this Lease shall be deemed to have been waived by
Landlord or Tenant unless such waiver is in writing and signed by such party.
The rights granted to Landlord and Tenant in this Lease shall be cumulative of
every other right or remedy which Landlord or Tenant may otherwise have at law
or in equity or by statute, and the exercise of one or more rights or remedies
shall not prejudice or impair the concurrent or subsequent exercise of other
rights or remedies.
Section 20.04 Injunctive Relief
Landlord shall be entitled to obtain injunctive relief in case of the
violation, or attempted or threatened violation, of any of the provisions
hereof, or to a decree compelling performance of any of the provisions hereof,
to the extent that any such relief is provided by a court of equity.
END OF ARTICLE 20
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ARTICLE 21
PROVISIONS APPLICABLE TO PURCHASE
BY TENANT OF THE PREMISES
Section 21.01 Procedures Upon Purchase
A. If Tenant is to acquire the Premises pursuant to Section 1.03,
Section 14.03 or Section 15.05 of this Lease, the Premises shall be transferred
"As Is" on the date of transfer and otherwise as provided in Section 1.01
hereof. Landlord shall convey title to the Premises to Tenant in the same
condition of title (including all restrictions, limitations, covenants and
easements of record and all encroachments) that existed as of the Commencement
Date, subject, however, to (i) the lien of real estate taxes, water and sewer
charges and other governmental charges that are not then due and payable, (ii)
all restrictions, limitations, covenants, easements and encroachments that were
created after the Commencement Date other than those created by Landlord without
the written consent of Tenant, and (iii) all Legal Requirements, but free of the
following items ("Landlord Obligations"): (x) the lien of any security interest
created by any Mortgage on Landlord's interest, (y) the lien of any judgment,
tax assessment or other obligation incurred by Landlord that is not the
responsibility of Tenant under this Lease, and (z) any liens created on and
after the Commencement Date which have been created by or resulted solely from
acts of Landlord undertaken without the written consent of Tenant. Landlord
shall pay off and discharge all Landlord Obligations at closing of Tenant's
purchase of the Premises, but Landlord shall have the right to apply the
purchase price proceeds for the purpose of discharging such Landlord
Obligations.
B. If Landlord accepts Tenant's irrevocable offer pursuant to Section
1.03, Section 14.03 or Section 15.05 to purchase the Premises, closing of such
purchase shall be held on the date (the "Purchase Closing Date") specified by
Tenant in its notice of Termination pursuant to Section 1.03, Section 14.03 or
Section 15.05 which occurs not earlier than ninety (90) days nor later than one
hundred twenty (120) days after Landlord's receipt of Tenant's irrevocable offer
to purchase. Closing of such purchase shall be conducted by an escrow agent (the
"Closing Escrow Agent") which shall be a national title insurance company
designated by Tenant that meets with the reasonable satisfaction of Landlord.
C. On the Purchase Closing Date, Landlord shall deliver to the Closing
Escrow Agent a deed ("Landlord's Deed") conveying the Premises to Tenant or
Tenant's designee and containing no warranties other than a warranty that the
Premises are not subject to (i) the lien of any security interest created by any
Mortgage executed by Landlord on Landlord's interest, (ii) the lien of any
judgment, tax assessment or other obligation incurred by Landlord that is not
the responsibility of Tenant under this Lease and (iii) any liens created on or
after the Commencement Date which have been created by or resulted solely from
acts of Landlord undertaken without the consent of Tenant.
D. On the Purchase Closing Date, Landlord shall deliver to the Closing
Escrow, Agent a written instrument (the "Assignment"), without warranty of
title, assigning and transferring to Tenant or Tenant's designee (i) Landlord's
interest in any FF&E leased by
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Landlord to Tenant hereunder and any licenses or permits relating to the
Premises and (ii) Landlord's interest in any insurance proceeds payable with
respect to any casualty that has previously occurred to the Premises (if any)
(which assignment of insurance proceeds shall be consented to by the Insurance
Trustee). If and to the extent that there are any insurance proceeds previously
paid to Landlord or the Insurance Trustee which have not been applied for the
purpose of repair or restoration and are then held by Landlord or the Insurance
Trustee, Landlord and the Insurance Trustee, as the case may be, shall deliver
such insurance proceeds (the "Escrowed Insurance Proceeds") to the Closing
Escrow Agent. The Tenant shall deliver to the Closing Escrow Agent current
immediately available funds in the amount of. the purchase price and any costs
payable by Tenant hereunder that are set forth in Section 21.01H ("Tenant's
Funds"). Closing Agent shall then proceed to consummate the Closing in
accordance with local custom and practice.
E. In the event that Tenant fails to perform its obligations under this
Section 21.01 on the Purchase Closing Date for any reason other than the default
of Landlord, the Tenant's Notice of Termination pursuant to Section 1.03,
Section 14.03 or Section 15.05 shall be rescinded and deemed null and void, the
Lease shall continue in full force and effect and neither Tenant nor Landlord
shall have any liability or obligation to the other by reason of such failure to
consummate settlement of such purchase except that Tenant shall pay to Landlord,
as fixed, agreed and liquidated damages for Tenant's default, the sum of Fifty
Thousand Dollars ($50,000).
F. In the event that Landlord fails to perform its obligations under
this Section 21.01 on the Purchase Closing Date for any reason other than the
default of Tenant and an order of specific performance is not obtained by Tenant
and complied with, the Lease shall terminate as of the Purchase Closing Date and
neither Tenant nor Landlord shall have any liability or obligation to the other
by reason of such failure to consummate settlement of such purchase except that
Landlord shall pay to Tenant, as fixed, agreed and liquidated damages for
Landlord's default, the sum of Fifty Thousand Dollars ($50,000).
G. All costs and expenses in connection with any such purchase,
including title insurance, transfer taxes, recording costs and the reasonable
attorney's fees of Landlord and any Mortgagee, shall be paid by Tenant.
H. Percentage Rental shall be prorated as of the date of such purchase
based upon the number of days in the Fiscal Year in which such purchase occurs
that precede the date of such purchase by prorating the dollar figure set forth
in Section 5.01(ii) so that such dollar figure is multiplied by a fraction whose
numerator is the number of days in such Fiscal Year that precede the date of
such purchase and whose denominator is three hundred sixty five (365).
END OF ARTICLE 21
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ARTICLE 22
NOTICES
Section 22.01 Notices
A. Any Notice or demand, consent, approval or disapproval, or statement
(collectively called "Notice" or "Notices") required or permitted to be given by
the terms and provisions of this Lease, or by any law or governmental
regulation, shall be in writing (unless otherwise specified herein) and unless
otherwise required by such law or regulation, shall be personally delivered with
receipt acknowledged in writing or sent by United States mail postage prepaid as
registered or certified mail, return receipt requested or by courier service
guarantying overnight delivery. Any Notice shall be addressed to Landlord or
Tenant, as applicable, at its address specified below as said address may be
changed from time to time as hereinafter provided. By giving the other party at
least ten (10) days' prior written Notice, either party may designate a
different address or addresses for Notices. Landlord may elect to require Tenant
to send a copy of any Notice of Landlord's default to Landlord's Mortgagee(s)
simultaneously with the sending of Notice to Landlord, provided that Landlord
shall have supplied to Tenant the name and address of such Mortgagee(s).
B. Any Notice shall be deemed given as of the date of delivery as
indicated by affidavit in case of personal delivery or by the return receipt in
the case of mailing or by the confirmation of the courier service making
delivery; and in the event of failure to deliver by reason of changed address of
which no Notice was given or refusal to accept delivery, as of the date of such
failure as indicated by affidavit or on the return receipt or by Notice of the
postal service or by the confirmation of the courier service making delivery, as
the case may be.
C. A copy of each Notice given pursuant to Section 22.01A above shall
also be sent to the addressee by FAX.
D. Notices shall be sent as follows:
To Tenant:
Marriott Senior Living Services, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: President
FAX No: (301) 380-8957
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With a copy to:
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Chief Financial Officer
FAX No: (301) 380-3969
and,
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: General Counsel
FAX No: (301) 380-6727
To Landlord:
Host Marriott, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Chief Financial Officer
FAX No: (301) 380-5067
and,
Host Marriott, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: General Counsel
FAX No: (301) 380-6727
and,
The Senior Mortgagee
(as identified by Notice from Landlord to Tenant)
END OF ARTICLE 22
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ARTICLE 23
MEMORANDUM OF LEASE
Section 23.01 Memorandum of Lease
A. Landlord and Tenant shall execute, acknowledge and deliver a
memorandum of this Lease (a "Lease Memorandum") in recordable form selling forth
the date of this Lease, the names of the parties hereto, the Commencement Date,
the Expiration Date, a description of the Land and the Premises, Tenant's rights
to renew this Lease, Landlord's disclaimer of liability for mechanic's liens
attributable to Tenant's use, occupancy and possession of the Premises, and such
other provisions of this Lease as either party may designate. Said Lease
Memorandum shall not in any circumstances be deemed to modify or to change any
of the provisions of this Lease.
B. Tenant shall after the expiration or Termination of the Term, at the
request of Landlord, execute, acknowledge and deliver to Landlord a memorandum
in recordable form evidencing the expiration or Termination of this Lease.
END OF ARTICLE 23
ARTICLE 24
MISCELLANEOUS
Section 24.01 Partial Invalidity
In the event that any portion of this Lease shall be declared invalid
by order, decree or judgment of a court, or governmental agency having
jurisdiction, this Lease shall be construed as if such portion had not been
inserted herein, except when such construction would operate as an undue
hardship on Tenant or Landlord, constitute a substantial deviation from the
general intent and purpose of said parties as reflected in this Lease, or deny
either Tenant or Landlord to a material extent a right or benefit pursuant to
this Lease as originally written, in which event this Lease in pertinent part
shall be reformed so as to place both Landlord and Tenant to the greatest extent
permitted by law in the same relative positions as they would have enjoyed under
the Lease as originally written.
Section 24.02 Headings
The article and section headings and the Table of Contents contained in
this Lease are for convenience only and shall not enlarge or limit the scope or
meaning of the various and several provisions hereof.
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Section 24.03 Binding Effect
All agreements and covenants herein contained shall be binding upon the
respective heirs, personal representatives, successors, and, to the extent
permitted under this Lease, assigns of the parties hereto.
Section 24.04 Representations
Neither Landlord nor Landlord's agents have made any representations or
promises with respect to the Premises except as herein expressly set forth and
all reliance with respect to any representations or promises is based solely on
those contained herein.
Section 24.05 Amendments
No amendment or modification of this Lease shall be binding or valid
unless expressed in a writing executed by both parties hereto.
Section 24.06 Brokers
Neither party has engaged any agents or brokers with respect to the
negotiation and execution of this Lease and each party shall indemnify and
defend the other with respect to any claim by an agent or broker claiming
through the indemnifying party against the indemnified party.
Section 24.07 Authority to Execute
A. Tenant represents and warrants that Tenant has the full right and
authority to enter into this Lease, and that all persons signing on behalf of
the Tenant were authorized to do so by any and all necessary or appropriate
corporate actions.
B. Landlord represents and warrants that Landlord has the full right
and authority to enter into this Lease, and that all persons signing on behalf
of Landlord were authorized to do so by any and all necessary or appropriate
corporate or partnership actions.
Section 24.08 Applicable Law
This Lease shall be governed by and construed under the laws of the
state within which the Land is located.
Section 24.09 Construction
All exhibits referred to in this Lease are by this reference
incorporated fully herein. The term "this Lease" shall be considered to include
all such exhibits.
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Section 24.10 Impossibility of Performance
In the event that any covenant or obligation of Tenant under this Lease
(other than a covenant or obligation to pay Rental or other sums payable by
Tenant hereunder) as applied to a particular circumstance cannot be fully
performed by any person or entity that had funds available for the performance
of such covenants or obligations under this Lease, then Tenant shall only be
obligated to perform such covenant or obligation as applied to such circumstance
to the extent that such covenant or obligation can be so performed.
Section 24.11 Time of Essence
Time is of the essence with respect to the rights and obligations of
Landlord and Tenant under this Lease.
Section 24.12 Attorney's Fees
Except as otherwise provided herein, in any action or proceeding
(including without limitation appellate proceedings) brought by either party
against the other under this Lease, the prevailing party shall be entitled to
recover from the other party reasonable attorneys' fees, investigation costs,
and other reasonable legal expenses and court costs incurred by such plan in
such action or proceeding.
Section 24.13 No Merger
There shall be no merger of this Lease or of the leasehold estate
hereby created with the fee estate in the Premises by reason of the fact that
the same person acquires or finds, directly or indirectly, this Lease or the
leasehold estate hereby created or any interest herein or in such leasehold
estate as well as the fee estate in the Premises or any interest in such fee
estate.
Section 24.14 Landlord's Right to Enter
Landlord and its agents and designees may enter upon and examine the
Premises at reasonable times, accompanied by a representative of Tenant that
Tenant shall make available to Landlord, and show the Premises to prospective
purchasers, partners, investors, mortgagees or lessees as long as such
examination or showing shall not unreasonably interfere with the business
operations of Tenant on the Premises.
Section 24.15 Corporate Reorganization of Tenant
In the event of the merger of Tenant into another corporation where
Tenant is not the surviving corporation or the consolidation of Tenant with one
or more other corporations where Tenant is not the surviving corporation, or the
sale or other disposition of all or substantially all of the assets of Tenant to
one or more other entities, the surviving entity or transferee of assets, as the
case may be, shall be deemed to have assumed all obligations, covenants and
responsibilities of Tenant under this Lease. Promptly after such corporate
reorganization, such entity shall deliver to Landlord an instrument in
recordable form reasonably acceptable to counsel for both parties, evidencing
such assumption.
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Section 24.16 No Waiver
The failure of either party to insist upon a strict performance of any
of the terms or provisions of this Lease or to exercise any option, right or
remedy herein contained shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party.
Section 24.17 Confidentiality
The parties hereby agree that the matters set forth in this Lease are
strictly confidential and each party will make every effort to ensure that such
information is not disclosed to any outside persons or entities (including the
press) without the consent of the other party, except as required by ERISA or
any other Legal Requirement reporting and disclosure rules or otherwise
specifically provided herein. For purposes of the preceding sentence, the words
"outside persons or entities" do not include the parties' attorneys,
accountants, consultants, shareholders, lenders, partners, investors, or any
prospective lenders, partners and investors. No references to Tenant or to any
Affiliate will be made in any prospectus, private placement memorandum, offering
circular or offering documentation related thereto (collectively referred to as
the "Prospectus"), issued by Landlord or one of its affiliates, which is
designated to interest potential investors in the Premises, unless Tenant has
previously received a copy of all such references. However, regardless of
whether Tenant does or does not so receive a copy of all such references,
neither Tenant nor any Affiliate will be deemed a sponsor of the offering
described in the Prospectus, nor will it have any responsibility for the
Prospectus, and the Prospectus will so state. Landlord shall indemnify, defend
and hold Tenant harmless from and against all loss, costs, liability and damage
(including reasonable attorneys' fees and expenses, and the cost of litigation)
arising out of any Prospectus or the offering described therein; and this
obligation of Landlord shall survive Termination of this Lease.
Section 24.18 Gender and Number
Words of any gender used in the Lease shall be held to include any
other gender, and words in the singular shall be held to include the plural and
vice versa, when the sense requires and the following words and phrases shall
have the following meanings: (i) "including" shall mean "including without
limitation"; (ii) "provisions" shall mean "provisions, terms, agreements,
covenants and/or conditions"; (iii) "lien" shall mean "lien, charge,
encumbrance, title retention agreement, pledge, security interest, mortgage
and/or deed of trust"; (iv) "obligation" shall mean "obligation, duty,
agreement, liability, covenant and/or condition"; (v) "any of the Premises'
shall mean "the Premises or any part thereof or interest therein"; (vi) "any of
the Land" shall mean "the Land or any part thereof or interest therein"; (vii)
"any of the Improvements" shall mean "the Improvements or any part thereof or
interest therein"; and (viii) "any of the personal property" shall mean "the
personal property or any part thereof or interest therein."
-60-
<PAGE>
Section 24.19 Survival
All claim and liabilities of either party existing or arising prior to
the expiration or earlier termination of the Lease, unless otherwise
specifically provided herein, and all Surviving Obligations shall survive such
expiration or earlier Termination.
Section 24.20 Acceptance of Surrender
No surrender to Landlord of this Law or of the Premises or of any part
thereof or of any interest therein shall be valid or effective unless agreed to
and accepted in writing by Landlord and the Senior Mortgagee if any, and no act
by Landlord or any representative or agent of Landlord, other than a written
acceptance, shall constitute an acceptance of any such surrender.
Section 24.21 Non-Recourse as to Landlord
Anything contained herein to the contrary notwithstanding, any claim
based on or in respect of any liability of Landlord under this Lease shall be
enforced only against the Premises and not against any other tangible or
intangible assets, properties or funds of (i) Landlord, (ii) any shareholder of
Landlord or any director, officer, general partner, limited partner, employee or
agent of Landlord, (or any legal representative, heir, estate, successor or
assign of any thereof), (iii) any predecessor or successor partnership or
corporation (or other entity) of Landlord, or any of its shareholders, either
directly or through Landlord or its shareholders or any predecessor or successor
partnership or corporation or their shareholders, officers, directors, employees
or agents (or other entity), or (iv) any other Affiliate of any of the
foregoing, or any director, officer, employee or agent of any thereof; provided,
however, that if, as a result of a judicial foreclosure of any Mortgage, the
interest of Landlord in the Premises is transferred to a Mortgagee or any other
person or entity and at the date of such foreclosure, Tenant has a legal
proceeding against Landlord, which is determined adversely to Landlord after the
exhaustion of all appeal periods, Tenant shall have the right to enforce any
judgment from any assets or other properties of Landlord but not against any
Mortgagee or any other person or any of the parties listed at (ii) through (iv)
above.
Section 24.22 Entire Agreement; Integration
A. The Lease contains all the agreements and conditions made between
the parties hereto with respect to the matters contained herein and may not be
modified orally or in any manner other than by an agreement in writing signed by
all the parties hereto or their respective successors and assigns. All prior
written and oral understandings and agreements shall be deemed to have merged
into the Lease and have no further force and effect.
B. Landlord and Tenant are business entities having substantial
experience with the subject matter of this Lease and have each fully
participated in the negotiation and drafting of this Lease. Accordingly, this
Lease shall be construed without regard to the rule that ambiguities in a
document are to be construed against the drafter.
-61-
<PAGE>
C. No inferences shall be drawn from the fact that the final, duty
executed Lease differs in any respect from any previous draft hereof.
D. If there is more than one Tenant, the obligations of each shall be
joint and several.
Section 24.23 Waiver of Trial by Jury
The parties hereto each waive all right to elect a trial by jury in any
litigation relative to this Lease.
Section 24.24 Tenant's Remedies
Tenant shall have the right to seek all remedies at law and/or in
equity, including an order for specific performance, to obtain full performance
of all Landlord's obligations under this Lease, and/or to recover damages for
any breach by Landlord hereunder; provided, however, that Tenant shall not have
the right (i) to terminate this Lease (except as otherwise specifically provided
in this Lease) by reason of any breach of Landlord's obligations hereunder; (ii)
to set-off against Rentals hereunder any amounts owing to Tenant by Landlord; or
(iii) to assert by way of defense, cross-claim or counterclaim in any action by
Landlord to recover Rental or other sums due from Tenant any right to withhold
Rental or to pay less than the amount due hereunder. Any exercise of Tenant's
rights hereunder shall be through a separate and independent action unrelated to
any claim Landlord has against Tenant for Rental due hereunder.
Section 24.25 Landlord and Tenant Relationship
The parties hereto specifically acknowledge and agree that,
notwithstanding any other provision contained in this Lease (including the
provisions for payment of Percentage Rental), it is the intent of the parties
that their relationship thereunder is and shall at all times be that of Landlord
and Tenant and not that of partners, joint venturers, lender and borrower, or
any other relationship other than that of Landlord and Tenant.
END OF ARTICLE 24
-62-
<PAGE>
ARTICLE 25
SPECIAL PROVISIONS
Section 25.01 Supremacy of Article 25
Notwithstanding anything contained in this Lease to the contrary, the
provisions of this Article 25 shall be controlling and any inconsistencies
between the provisions of this Article 25 and any other provision contained in
this Lease shall be decided in favor of this Article 25.
Section 25.02 Completion of Construction
Landlord is obligated to complete construction of the Premises in
accordance with the plans and specifications set forth in Exhibit A, (the
"Work"). The Work is not an Expansion as defined in Section 9.01 and the
provisions of Article 9 does not apply to the Work.
EXECUTED under seal as of the date first written above.
TENANT: LANDLORD:
MARRIOTT SENIOR LIVING SERVICES, INC. HMC RETIREMENT
PROPERTIES, INC.
By: /s/ By: /s/
Its: President Its: Vice President
ATTEST: ATTEST:
By: /s/ By: /s/
[Assistant] Secretary [Assistant] Secretary
[Corporate Seal]
-63-
<PAGE>
Omitted Exhibits
The following exhibits to the Assignment and Assumption of Leases,
Guarantees and Permits have been omitted:
Exhibit Letter Exhibit Title
A The Premises.
B The Leases.
C The Guarantees
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibits to the Securities and Exchange Commission upon request.
<PAGE>
SCHEDULE TO EXHIBIT 10.8
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Leases and Sublease, which are substantially identical in all material respects
to the Lease for the Marriott Brighton Gardens Facility located in Scottsdale,
Maricopa County, Arizona filed herewith, are omitted. The following list sets
forth the material differences in the leased premises, landlord, minimum annual
rental, the Percentage Rent "Break Point," and Section 25.
<TABLE>
<CAPTION>
Minimum Percentage
Annual Rent
Leased Premises Landlord Rental "Break Point" Section 25
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sun City HMC Retirement $918,000 $2,508,000 See attached
Maricopa County, AZ Properties, Inc. Schedule D.
Port St. Lucie, HMC Retirement $945,000 $2,287,000 See attached
St. Lucie County FL Properties, Inc. Schedule D.
Bellaire/Houston HMC Retirement $1,213,000 $3,086,000 See attached
Harris County, TX Properties, Inc. Schedule E.
Virginia Beach HMC Retirement $717,000 $1,960,000 See attached
City of Virginia Beach, VA Properties, Inc. Schedule E.
Bedfort Court HMC Retirement $4,054,000 $7,379,000 See attached
Montgomery, MD Properties, Inc. Schedule E.
Deerfield Beach/ HMH Properties, Inc. $127,900 $4,227,000 See attached
Horizon Club Schedule E.
Broward County, FL
Palms Harbor HMC Retirement $2,346,000 $5,592,000 See attached
Pinellas County, FL Properties, Inc. Schedule E.
Boca Pointe HMH Properties, Inc. $3,376,000 $6,473,000 See attached
Palm Beach, FL Schedule E.
Church Creek HMC Retirement See attached $6,576,000 See attached
Cook County, IL Properties, Inc. Schedule B. Schedule F.
Villa Valencia HMC Retirement $3,319,000 $9,326,000 See attached
Orange County, CA Properties, Inc. Schedule G.
Calusa Harbour HMC Retirement See attached $6,731,000 See attached
Lee County, FL Properties, Inc. Schedule C. Schedule H.
The Jefferson HMC Retirement $2,208,000 $6,579,000 See attached
Arlington County, VA Properties, Inc. Schedule I.
<PAGE>
The Colonnades HMC Retirement $2,892,000 $6,434,000 See attached
Albermarle County, CA Properties, Inc. Schedule J.
</TABLE>
<PAGE>
SCHEDULE B TO EXHIBIT 10.8
MINIMUM RENTAL SCHEDULE
Period Minimum Rental
- ------ --------------
Commencement Date though end of 2001 $1,600,000
2002 through the end of 2010 $3,000,000
<PAGE>
SCHEDULE C TO EXHIBIT 10.8
EXHIBIT F
MINIMUM RENTAL SCHEDULE
YEAR PRINCIPAL AMORTIZATION ADMINISTRATIVE FEES
- ---- ---------------------- -------------------
1993 $424,000 $23,502
1994 $468,000 $23,502
1995 $517,000 $23,502
1996 $571,000 $23,502
1997 $631,000 $23,502
1998 $697,000 $23,502
1999 $770,000 $23,502
2000 $850,000 $23,502
2001 $940,000 $23,502
2002 $1,038,000 $23,502
2003 $1,147,000 $23,502
2004 $1,267,000 $23,502
2005 $1,399,000 $23,502
2006 $1,546,000 $23,502
2007 $1,708,000 $23,502
2008 $1,887,000 $23,502
2009 $1,903,000 $23,502
<PAGE>
SCHEDULE D TO EXHIBIT 10.8
ARTICLE 25
SPECIAL PROVISIONS
Section 25.01 Supremacy of Article 25
Notwithstanding anything contained in this Lease to the contrary, the
provisions of this Article 25 shall be controlling and any inconsistencies
between the provisions of this Article 25 and any other provision contained in
this Lease shall be decided in favor of this Article 25.
Section 25.02 Work in Progress
The parties acknowledge that there is ongoing construction at the
Premises that includes, among other things, the conversion of personal care
rooms to nursing rooms, the construction of new nursing rooms and increased
dining, pantry, storage and parking areas (collectively, the "Work"). The Work
is not an Expansion as defined in Section 9.01 and the provisions of Article 9
do not apply to the Work.
END OF ARTICLE 25
<PAGE>
SCHEDULE E TO EXHIBIT 10.8
ARTICLE 25
SPECIAL PROVISIONS
[INTENTIONALLY NOT USED]
END OF ARTICLE 25
<PAGE>
SCHEDULE F TO EXHIBIT 10.8
ARTICLE 25
SPECIAL PROVISIONS
Section 25.01 Definitions
The capitalized terms contained in this Article 25 which are not
defined below or elsewhere in this Lease shall have the meanings ascribed to
them in the Reimbursement Agreement (the "Reimbursement Agreement"), dated as of
April 15, 1991, between Landlord and Allied Irish Banks, p.l.c.
Section 25.02 Landlord's Bond Obligations
In 1991, Landlord refinanced its Indebtedness related to the Premises
by entering into, among other agreements with the Bank, the Reimbursement
Agreement, the Borrower Documents, and the Related Documents. Landlord remains
obligated to the Bank under the terms of the Reimbursement Agreement, the
Borrower Documents, and the Related Documents, and Landlord intends to
restructure this Indebtedness (the "Restructuring") in accordance with the terms
of that certain Letter of Intent, dated July 29, 1993, between Landlord and the
Bank. In the event that Tenant is dispossessed of the Premises as a direct
result of Landlord's default under the terms of the Reimbursement Agreement, the
Borrower Documents, or the Related Documents, this Lease shall automatically
terminate and Tenant's obligations to landlord hereunder shall expire.
Section 25.03 Collateral Assignment of Lease
In connection with the Restructuring, Landlord intends to grant to the
Bank a collateral assignment and security interest in this Lease to secure
Landlord's obligations under the Borrower Documents and the Related Documents.
Landlord hereby acknowledges and recognizes the Bank's interests in this Lease
under the terms of the Restructuring and agrees not to interfere with such
interests.
Section 25.04 Lease Subordination
Notwithstanding anything to the contrary contained in this Lease,
including, without limitation, the provisions of Section 19.02, all rights and
interests of Tenant in and to the Premises are and shall be expressly junior,
subject and subordinate in all respects to (i) that certain Mortgage Security
Agreement and Assignment of Leases and Occupancy Agreements, Rents and Profits
dated as of May 8, 1991 and are recorded on that date with the Recorder's Office
of Orange County, Florida (the "Mortgage"), (ii) the Reimbursement Agreement;
and (iii) any other Related Documents; provided, however, that the Bank, at any
time, may permit, in its sole and absolute discretion, upon written
confirmation, this Lease to be treated as having priority over the lien of the
Mortgage. Notwithstanding any provision of this Lease to the contrary, the terms
of the Mortgage shall govern with respect to the disposition of any insurance
proceeds or eminent domain awards, and any obligations of Landlord to restore
the Property shall, insofar as they apply to the Bank, be limited to insurance
proceeds or eminent domain
<PAGE>
-2-
awards received by the Bank after the deduction of all reasonable costs and
expenses incurred in obtaining such proceeds or awards. Section 25.05 Tenant's
Bond Obligations
Notwithstanding anything to the contrary contained in this Lease,
Tenant covenants to pay Landlord as Additional Rental in an amount and when due
and payable, in each and every case, all amounts due and payable under the
Borrower Documents and the Related Documents, including, whether upon maturity,
as a result of acceleration or otherwise, the full principal amount of the
Bonds; however, such Additional Rental shall not include interest on the Bonds
or the sinking Fund Payments mandated by ss.3.02 of the Indentures, such
obligations having been included in the calculation of Minimum Rental. Except as
set forth in the preceding sentence, Tenant's obligations contained in this
Section 25.04 shall be in addition to, and not to the exclusion of, Tenant's
other obligations under this Lease, including, but not by way of limitation,
Tenant's obligations under Article 5 of this lease.
Section 25.06 Prepaid Rental
If, under the terms of this Article 25, Tenant is required to pay the
full principal amount of the Bonds, whether upon maturity, acceleration, or
otherwise, Tenant shall be entitled to a credit against Minimum Rental for such
payment, which credit until it is exhausted shall constitute Prepaid Rental and
be applicable to future Minimum Rental due. The unapplied portion of such
Prepaid Rental shall bear interest at the Prime Rate as set from time to time by
Bankers Trust Company, New York, New York, with such interest constituting
additional Prepaid Rental.
Section 25.07 Delivery of Rental
In accordance with the provisions of Sections 5.02A and 22.01 of this
lease, Landlord hereby directs Tenant to pay directly to the Bank all Rentals
required under this Lease at the Bank's address for the receipt of payments
specified in the Reimbursement Agreement.
Section 25.08 Notices
Tenant agrees to give to the Bank a copy of any notice of default under
the Lease served by Tenant upon Landlord. Landlord agrees to give to the Bank a
copy of any notice of default under the Lease served by Landlord upon Tenant.
Section 25.09 Limitation on Termination Rights
Tenant hereby waives, to the extent permitted by law, the provisions of
any statute or rule of law now or hereafter in effect which may give or purport
to give Tenant any right or election to terminate or otherwise adversely affect
this Lease or the obligations of Tenant under this Lease by reason of any
foreclosure proceedings, so long as the Bonds remain outstanding.
END OF ARTICLE 25
<PAGE>
SCHEDULE G TO EXHIBIT 10.8
ARTICLE 25
SPECIAL PROVISIONS
Section 25.01 Supremacy of Article 25
Notwithstanding anything contained in this Lease to the contrary, the
provisions of this Article 25 shall be controlling and any inconsistencies
between the provisions of this Article 25 and any other provision contained in
this Lease shall be decided in favor of this Article 25.
Section 25.02 Definitions
The capitalized terms contained in this Article 25 which are not
defined below or elsewhere in this Lease shall have the meanings ascribed to
them in the Reimbursement Agreement (the "Reimbursement Agreement"), dated as of
April 15, 1991, between Landlord and Allied Irish Banks, p.l.c.
Section 25.03 Landlord's Bond Obligations
In 1991, Landlord refinanced its Indebtedness related to the Premises
by entering into, among other agreements with the Bank, the Reimbursement
Agreement, the Borrower Documents, and the Related Documents. Landlord remains
obligated to the Bank under the terms of the Reimbursement Agreement, the
Borrower Documents, and the Related Documents, and Landlord intends to
restructure this Indebtedness (the "Restructuring") in accordance with the terms
of that certain Letter of Intent, dated July 29, 1993, between Landlord and the
Bank. In the event that Tenant is dispossessed of the Premises as a direct
result of Landlord's default under the terms of the Reimbursement Agreement, the
Borrower Documents, or the Related Documents, this Lease shall automatically
terminate and Tenant's obligations to landlord hereunder shall expire.
Section 25.04 Lease Subordination
Notwithstanding anything to the contrary contained in this Lease,
including, without limitation, the provisions of Section 19.02, all rights and
interests of Tenant in and to the Premises are and shall be expressly junior,
subject and subordinate in all respects to (i) that certain Mortgage Security
Agreement and Assignment of Leases and Occupancy Agreements, Rents and Profits
dated as of May 8, 1991 and are recorded on that date with the Recorder's Office
of Orange County, Florida (the "Mortgage"), (ii) the Reimbursement Agreement;
and (iii) any other Related Documents; provided, however, that the Bank, at any
time, may permit, in its sole and absolute discretion, upon written
confirmation, this Lease to be treated as having priority over the lien of the
Mortgage. Notwithstanding any provision of this Lease to the contrary, the terms
of the Mortgage shall govern with respect to the disposition of any insurance
proceeds or eminent domain awards, and any obligations of Landlord to restore
the Property shall, insofar as they apply to the Bank, be limited to insurance
proceeds or eminent domain awards received by the Bank after the deduction of
all reasonable costs and expenses incurred in obtaining such proceeds or awards.
<PAGE>
-2-
Section 25.05 Asbestos
Landlord and Tenant acknowledge the presence of Asbestos Containing
Material ("ACM") in the Premises. Landlord is in the preliminary stages of
litigation against Versar, Inc., a consulting firm (the "Consultant") that
erroneously represented to Landlord that there was no ACM in the Premises. If
Tenant, as a result of the assignment set forth in Section 25.07, is successful
in its suit against the Consultant and recovers monetary damages attributable to
the presence of ACM in the Premises, Tenant shall deduct from the gross award
obtained in such litigation or settlement thereof (the "Gross Award") all costs
incurred in pursuing said litigation such as, but not limited to, reasonable
attorneys' fees, consultant fees, in-house expenses, and court costs and place
the remainder of such award (the "Net Award") in an interest bearing escrow
account controlled by Tenant ("Escrow Account"). The Net Award and all interest
earned thereon, shall be used by Tenant to pay for any and all costs associated
with the presence of ACM in the Premises and to pay for the remediation,
monitoring or removal of such ACM by Tenant which may be performed at Tenant's
sole discretion, unless required pursuant to any Environmental Law ("ACM
Costs"). Tenant shall be reimbursed for its ACM Costs to the extent there are
funds available in the Escrow Account. Tenant shall provide notice to landlord
prior to drawing any funds out of the Escrow Account and shall provide Landlord
with documentation reasonably satisfactory to Landlord evidencing that the funds
withdrawn from the Escrow Account will be used to reimburse Tenant for its ACM
Costs. Upon expiration of the lease any funds remaining in the Escrow Account,
plus accrued interest, shall become the property of Landlord.
Section 25.06 Landlord's Cooperation
Landlord agrees upon request by Tenant to sign promptly, and without
charge, any documents (i) required by any governmental authority of (ii) that
Tenant determines are necessary or reasonably desirable to pursue litigation
against the Consultant; provided, however, that all costs and expenses
associated therewith shall be the sole obligation of Tenant, and shall not be
deducted from the Gross Award, and Tenant shall promptly pay and discharge the
same, and provided further, that the execution of any such document shall not
expose Landlord to any personal liability. Tenant hereby agrees that it will
fully indemnify, defend and save Landlord harmless from and against any and all
costs, losses and expenses, including, without limitation, any and all legal
fees and court costs incurred or suffered by Landlord as a result of its
compliance with the obligations imposed upon Landlord under this Section 25.06
or as a result of Tenant's actions or failure to act in connection with ACM in
the Premises and the suit against the Consultant.
Section 25.07 Assignment of Rights
During the Term, and except as otherwise provided in this Article 25,
Landlord hereby assigns to Tenant all of its right, title and interest to any
awards or damages resulting from the presence of ACM in the Premises and
Landlord will not pursue any independent right of recovery against any entity by
reason of the presence of ACM in the Premises during the Term.
<PAGE>
-3-
Section 25.08 Notices
Tenant agrees to give to the Bank a copy of any notice of default under
the Lease served by Tenant upon Landlord. Landlord agrees to give to the Bank a
copy of any notice of default under the Lease served by Landlord upon Tenant.
Section 25.09 Limitation on Termination Rights
Tenant hereby waives, to the extent permitted by law, the provisions of
any statute or rule of law now or hereafter in effect which may give or purport
to give Tenant any right or election to terminate or otherwise adversely affect
this Lease or the obligations of Tenant under this Lease by reason of any
foreclosure proceedings, so long as the Bonds remain outstanding.
END OF ARTICLE 25
<PAGE>
SCHEDULE H TO EXHIBIT 10.8
ARTICLE 25
SPECIAL PROVISIONS
Section 25.01 Definitions
The capitalized terms contained in this Article 25 not defined below or
elsewhere in this Lease shall have the meanings ascribed to them in the
Assignment, Assumption and Consent Agreement (the "Assignment Agreement"), dated
December 21, 1989, between Landlord, Host Marriott Corporation, Congregate
Housing Partnership, Sun Bank, N.A., Barnett Banks Trust, N.A., and Citizens
Fidelity Mortgage Company; and those meanings ascribed to them in the Bond
Documents, as defined in the Assignment Agreement, including, but not by way of
limitation, the Developer Agreement, the Regulatory Agreement as to tax
exemption, the Deed Restrictions Agreement, and the Mortgage.
Section 25.02 Landlord's Bond Obligations
In connection with Landlord's purchase of the Premises, Landlord, as
evidenced in the Assignment Agreement, assumed various obligations of the
obligor under the Bond Documents. Landlord remains obligated under the Bond
Documents as provided in the Assignment Agreement. Provided that Tenant is not
in default under the terms of the Lease, in the event that Tenant is
dispossessed of the Premises solely as a result of Landlord's default under the
terms of the Bond Documents, the Lease shall automatically terminate as of the
date of any such dispossession and Tenant's obligations to Landlord thereunder
shall expire.
Section 25.03 Non-Interference
Tenant acknowledges Landlord's obligations under the Bond Documents and
agrees not to interfere with the rights of the Trustee, the Bondholder, or the
Issuer thereunder. Notwithstanding anything to the contrary contained in this
Lease, Tenant shall be prohibited from taking any action or failing to take any
action under the Lease which would result in a default under the Bond Documents,
until the earlier of the expiration of the Term or Landlord's satisfaction of
its obligations under the Bond Documents. The foregoing prohibition is expressly
applicable to, but not by way of limitation, Sections 7.02, 9.01, 16.02, 16.03,
and 21.01 among others.
Section 25.04 Tenant's Bond Obligations
Notwithstanding anything to the contrary contained in this Lease,
Tenant agrees to pay Landlord as Additional Rental, in an amount and when due
and payable, all interest due and payable on the Bonds in accordance with the
provisions of Section 2.02 of the Trust Indenture. Tenant's obligations
contained in this Section 25.04 shall be in addition to, and not to the
exclusion of Tenant's other obligations under this Lease, including, but not by
way of limitation, Tenant's obligations under Article 5 of this Lease.
<PAGE>
-2-
Section 25.05 Bond Acceleration
Notwithstanding anything to the contrary contained in this Lease, if
Landlord is required to pay the full principal amount of the Bonds prior to
maturity, Tenant shall continue to pay the Minimum Rental required to be paid
under Article 5 of this Lease and the Additional Rental required to be paid
under this Article 25 as if the bond obligations had continued in existence
until maturity. Tenant's obligations to pay Minimum Rental and the Additional
Rental required to be paid under this Article 25 shall be unaffected by
Landlord's satisfaction of its obligations under the Bonds.
Section 25.06 Delivery of Rental
In accordance with the provisions of Sections 5.02A and 22.01 of this
Lease, Landlord hereby directs Tenants to pay directly to Sun Bank, as Trustee,
all Minimum Rental required to be paid under Article 5 of this Lease and all
Additional Rental required to be paid under this Article 25, until Landlord's
obligations under the Bond Documents have been satisfied.
Section 25.07 Additional Tenant Indemnifications
Solely for the purposes of the Indemnifications contained in Article 8
of this Lease, the Issuer shall be deemed to be an "Indemnified Party", as such
term is defined in Section 8.01A.
END OF ARTICLE 25
<PAGE>
SCHEDULE I TO EXHIBIT 10.8
ARTICLE 25
CONDOMINIUM PROVISIONS
Section 25.01 Supremacy of Article 25
Notwithstanding anything contained in this Lease to the contrary, the
provisions of this Article 25 shall be controlling and any inconsistencies
between the provisions of this Article 25 and any other provision contained in
this Lease shall be decided in favor of this Article 25.
Section 25.02 Definitions
"Condominium Act" shall have the meaning ascribed to it in Section
25.03.
"Condominium Instruments" shall mean the Amended and Restated
Declaration for The Jefferson Senior Living Condominium Community, recorded in
Deed Book 2537 at Page 1269 among the land records of Arlington County,
Virginia, together with the Bylaws and all other exhibits thereto.
"Condominium Unit" shall mean the residential condominium units at The
Jefferson.
"Deed of Bargain and Sale" shall mean that certain Deed of Bargain and
Sale attached hereto as Exhibit G.
"The Jefferson" shall mean the Jefferson Senior Living Condominium
Community in Arlington, Virginia, as recorded in Deed Book 2537 at page number
1289 among the land records of Arlington County, Virginia.
"Minimum Required Fee" shall have the meaning ascribed to it in the
Deed of Bargain and Sale.
"Reverted Unit" shall have the meaning ascribed to it in Section 25.10.
"Revertee" shall have the meaning ascribed to it in the Deed of Bargain
and Sale.
"Revertor" shall have the meaning ascribed to it in the Deed of Bargain
and Sale.
"Sales Period" shall have the meaning ascribed to it in the Deed of
Bargain and Sale.
"Unit Three" shall have the meaning ascribed to it in the Condominium
Instruments.
Section 25.03 Right as Declarant
To the fullest possible extent, Landlord hereby transfers and assigns
all rights, power, and duties as "Declarant" under Section 55-79.39 et seq. of
the Code of Virginia (1950) ("Condominium Act") and the Condominium Instruments
to Tenant and Tenant's successors and assigns until the termination of this
Lease. To evidence and effectuate the transfer, Landlord and
<PAGE>
-2-
Tenant shall sign, acknowledge and record a "Transfer of Special Declarant
Rights" in accordance with the Condominium Act and the Condominium Instruments
in form similar to the form attached hereto as Exhibit F.
Section 25.04 Rights as Unit Owner
To the fullest possible extent, Landlord hereby transfers and assigns
all rights, powers, duties and obligations as a "Unit Owner" under the
Condominium Act and the Condominium Instruments to Tenant and Tenant's
successors and assigns until the termination of this Lease; provided, however,
that Tenant is expressly not authorized to exercise Landlord's rights as a "Unit
Owner" under Section 55-79.72:1 of the Virginia Condominium Act.
Section 25.05 Easement and Other Rights
To the fullest possible extent, Landlord hereby transfers and assigns
all rights, powers, duties and obligations under any applicable easement,
license or permit affecting the Premises to Tenant and Tenant's successors and
assigns until the termination of this Lease.
Section 25.06 Compliance with Condominium Act and Condominium
Instruments
Subject to Section 25.07, Tenant's right to use and occupy the Premises
shall be subject and subordinate in all respects to the provisions of the
Condominium Instruments and to such other rules and regulations as the Board of
Directors of the unit owners association may from time to time promulgate
("Rules and Regulations"). Failure to comply with the provisions of the
Condominium Instruments or the Rules and Regulations shall constitute a material
breach of this Lease. Tenant shall indemnify and hold harmless Landlord from and
against any damages, direct or indirect, incurred by Landlord as a result of the
negligent acts or omissions of Tenant and the noncompliance by Tenant and
Tenant's permittees, licensees, employees and agents with the provisions of any
of the Condominium Instruments, the Rules and Regulations, and the Condominium
Act.
Section 25.07 Modification of Insurance, Restoration and Condemnation
Provisions
Because the Premises are subject to the Condominium Instruments and the
Condominium Act, certain portions of Articles 13, 14 and 15 are not applicable
and must be modified. Therefore, notwithstanding the provisions of Section
13.02, the first sentence of Section 13.08, 14.01, 14.02 and 15.06 I and J, the
applicable provisions of the Condominium Instruments and the Condominium Act
shall govern; provided, however, that any reference in this Lease to insurance
or condemnation proceeds shall mean those proceeds to which Tenant is entitled
pursuant to the Condominium Instruments and the Condominium Act and, to the
extent that any right or obligation of the parties is inconsistent with the
Condominium Instruments or the Condominium Act, such right or obligation shall
be void.
<PAGE>
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Section 25.08 Further Assurances
Landlord and Tenant shall sign, acknowledge and, if appropriate, record
such further documents as may be required from time to time to effectuate the
provisions of this Article.
Section 25.09 Fees for the Sale of Reverted Units
Tenant shall receive a fee equal to six percent (6%) of the sales price
("Sales Fee"), payable at closing, for each Reverted Unit sold. Tenant shall
provide the marketing, advertising, printing, mailing and other services
necessary to promote the sale of a Reverted Unit.
Section 25.10 Reversion of Condominium Units
The Deed of Bargain and Sale contains a reversionary clause that, under
certain circumstances, can cause title to a Condominium Unit to revert to the
Revertee. The specific conditions that create this event are set forth in the
Deed of Bargain and Sale. If title to a Condominium Unit reverts to the Revertee
during the Term (a "Reverted Unit"), Tenant shall use its best efforts to sell
the Reverted Unit at a reasonable market price, taking into account prevailing
market conditions and in accordance with the provisions contained in the Deed of
Bargain and Sale. If the Reverted Unit is sold during the Sales Period, Landlord
shall pay to the Revertor the gross sales price less the deductions permitted in
the Deed of Bargain and Sale. Upon the sale of a Reverted Unit, Landlord shall
pay to Tenant the Sales Fee payable under Section 25.09 hereof and the Minimum
Required Fee that Landlord is permitted to deduct from the gross sales price.
If the Reverted Unit is not sold during the Sales Period, Tenant shall
purchase the Reverted Unit from Landlord within twenty (20) days after the
expiration of the Sales Period for an amount equal to the price Landlord is
required to pay to the Revertor under Paragraph 3 of the Deed of Bargain and
Sale. Title to any Reverted Unit conveyed to Tenant shall be subject only to the
conditions and encumbrances that existed at the time of the reversion but shall
not include any liens, mortgages or deeds of trust. All closing costs associated
with the transfer of a Reverted Unit to tenant shall be shared equally by tenant
and Landlord.
At the expiration of the Term, provided that Tenant is not in default,
Tenant shall have the option, at its sole discretion, to require Landlord to
purchase any or all of the Reverted Units owned by tenant for a price equal to
the fair market value of the Reverted Units being sold. All closing costs
associated with the transfer of the Reverted Units to Landlord shall be shared
equally by Tenant and Landlord. Tenant shall not be entitled to receive a Sales
Fee upon the sale of Reverted Units to Landlord.
Section 25.11 Limitation on Change of Use
Notwithstanding the provisions contained in Article 7 hereof, at least
ten (10) years of the Term must remain for tenant to make a Change of Use of
Unit Three unilaterally. If the remaining Term is less than ten (10) years but
greater than three (3) and Tenant desires to make a Change of Use of Unit Three,
Tenant must obtain Landlord's prior written approval, which may
<PAGE>
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not be unreasonably withheld, conditioned, or delayed. If the remaining Term is
less than three (3) years, the provision of Section 7.02 shall govern Change of
Use.
END OF ARTICLE 25
<PAGE>
SCHEDULE J TO EXHIBIT 10.8
ARTICLE 25
SPECIAL PROVISIONS
Section 25.01 Supremacy of Article 25
Notwithstanding anything contained in this Sublease to the contrary,
the provisions of this Article 25 shall be controlling and any inconsistencies
between the provisions of this Article 25 and any other provision contained in
this Sublease shall be decided in favor of this Article 25.
Section 25.02 New Definitions
"Lessee" shall have the meaning ascribed to it in Recital A.
"Lessor" shall have the meaning ascribed to it in Recital A.
"Groundlease" shall have the meaning ascribed to it in Recital A.
Section 25.03 Obligations of Subtenant
During the Term, Subtenant shall pay directly to Lessor all payments
due under the Groundlease and perform all obligations (other than those that can
only be performed by Sublandlord) of Lessee under the Groundlease.
Section 25.04 Affirmative Covenants of Sublandlord
During the Term, Sublandlord shall not take any action that will cause
an Event of Default to occur under the Groundlease as that term is defined in
the Groundlease. Sublandlord shall comply with all of its obligations as Lessee
under the Groundlease including, without limitation, the restrictions imposed
upon Lessee in the Groundlease with respect to: (i) assignment and subletting,
(ii) leasehold financing, (iii) encumbering the feehold interest, and (iv)
supplying financial information about itself to Lessor. Sublandlord shall not
terminate the Groundlease without Subtenants written consent which consent may
be withheld at Subtenant's sole discretion. Sublandlord shall provide copies to
Subtenant of all notices received from Landlord within 7 days of receipt of
same. If Sublandlord breaches any of the covenants set forth above, Subtenant's
exclusive remedy for such breach shall be limited to monetary damages and
Subtenant shall not be entitled to the remedy of injunctive relief.
Section 25.05 Default by Sublandlord Under the Groundlease
If an Event of Default occurs under the Groundlease, as that term is
defined in the Groundlease, and the leasehold mortgagee, if any, fails to cure
such default within the time requirements set forth in the Groundlease,
Subtenant shall have the right to cure such default on behalf of Sublandlord.
Any sums expended by Subtenant in curing such default shall be credited against
the Minimum - Rental, Percentage Rental, and Alternative and/or Expansion
Rental, if any, due Sublandlord under this Sublease.
Section 25.06 Lessor's Right to Sell the Land
<PAGE>
If Sublandlord receives notice from Lessor of its intention to sell or
assign the Land pursuant to Article XIV of the Groundlease, Sublandlord will
promptly notify Subtenant of the receipt of such notice and inform Subtenant if
it intends to negotiate with Lessor for the purchase of the Land. If Sublandlord
elects to negotiate with Lessor for the purchase of the Land, Sublandlord will
keep Subtenant informed as to the status of such negotiations. If Sublandlord
elects not to negotiate with Lessor for the purchase of the Land, Sublandlord
will notify Subtenant and Lessor of its decision within thirty (30) days of its
receipt of notice from Lessor, and Subtenant shall have the right, and
Sublandlord hereby assigns to Subtenant all of the rights of Sublandlord, to
negotiate with Lessor for the purchase of the Land as set forth in Article XIV
of the Groundlease.
Section 25.07 Special Insurance Provisions
Notwithstanding any provisions of this Sublease to the contrary, the
terms of the Groundlease shall govern with respect to the disposition of any
insurance proceeds in the event of a casualty. In the event of any
inconsistencies between this Sublease and the Groundlease with respect to the
disposition of any insurance proceeds in the event of a casualty, the
Groundlease shall be controlling. Furthermore, Subtenant shall be obligated to
comply with the insurance provisions that are more stringent, either in the
Groundlease or Sublease.
Section 25.08 Special Condemnation Provisions
In the event of a taking of a portion or all of the Premises, Article
VIII of the Groundlease shall supersede the provisions of Article XV contained
herein. Sublandlord shall not negotiate a settlement with Lessor or any taking
authority without the participation of Subtenant in any such negotiations nor
agree to any settlement without the written approval of Subtenant. The provision
of Article XV herein shall apply to Sublandlord and Subtenant only to the extent
such provisions do not contradict the provision of Article VIII of the
Groundlease.
Section 25.09 Termination of Groundlease by Lessor
In the event Lessor provides notice of its intent to terminate the
Groundlease pursuant to Section 12.1 of the Groundlease, Sublandlord shall
promptly notify Subtenant and shall take such action as Subtenant may direct
Sublandlord to do at no cost or liability to Sublandlord, provided, however,
such action is not an Event of Default under the Groundlease or this Sublease.
In the event the Groundlease is terminated pursuant to Section 12.2 of the
Groundlease, Sublandlord shall not negotiate a settlement with Lessor without
the participation of Subtenant in any such negotiations nor agree to any
settlement without the written approval of Subtenant. Subtenant's participation
shall be limited in a manner and to an extent commensurate with its interest in
the proceeds of the sale. The purchase price agreed to by Lessor, Sublandlord
and Subtenant shall be distributed to Sublandlord and Subtenant and treated as
if such sum were condemnation proceeds in a total taking as of the date the
Premises are sold to Lessor and the provisions of Section 15.04 of the Sublease
shall be controlling.
Section 25.10 Termination of Sublease
<PAGE>
Notwithstanding anything to the contrary contained in this Sublease, if
the Groundlease is terminated through no fault of Subtenant, this Sublease shall
automatically terminate and Subtenant's obligations to Sublandlord hereunder
shall expire.
Section 25.11 Subleasing and Assignment of Sublease
Notwithstanding any provisions of this Sublease to the contrary, the
terms of the Groundlease shall govern with respect to any subleasing and
assignment of this Sublease.
END OF ARTICLE 25
EXHIBIT 10.9
MARRIOTT INTERNATIONAL, INC.
GUARANTY OF TENANT OBLIGATIONS
THIS GUARANTY ("Guaranty") is made as of the 8th day of October, 1993,
by, Marriott International, Inc., a Delaware corporation ("Guarantor") in favor
of HMC Retirement Properties, Inc., a Delaware corporation ("Landlord").
FOR VALUE RECEIVED, and as an inducement to Landlord to enter into the
Facilities Lease Agreement of even date herewith between Landlord and Marriott
Senior Living Services, Inc. ("Tenant"), a wholly owned subsidiary of Guarantor,
for Premises known as The Marriott Brighton Gardens Facility at Scottsdale,
Maricopa County, Arizona (the "Lease"), which Lease will be to the direct
interest and benefit of Guarantor, and in consideration of the mutual covenants
set forth herein and in the Lease, Guarantor agrees as follows:
1. Guarantor does hereby unconditionally guaranty to Landlord, its
successors, successors-in-title and assigns, without demand, the full and
punctual payment of all Rentals and the due performance of all the other terms,
covenants and conditions contained in the Lease on the part of Tenant to be paid
and/or performed thereunder as and when such payment and performance shall
become due, and, if payment and performance under the Lease is not made or
performed when due thereunder, Guarantor hereby covenants and agrees to pay to
Landlord in each and every instance such sum or sums of money as Tenant is and
shall become Liable for and/or obligated to pay under the Lease and/or fully to
satisfy and perform such other terms, covenants and conditions of the Lease on
the part of Tenant to be performed thereunder and to pay also any and all
damages, expenses and reasonable attorneys fees (hereafter collectively called
"Damages") that may be suffered or incurred by Landlord in consequence of the
nonpayment of Rental or the nonperformance of any such other terms, covenants
and conditions of the Lease; such payments of Rental to be made quarterly or at
such other intervals as the same shall or may become payable under the Lease,
including any accelerations thereof, such performance of said other terms,
covenants and conditions to be made when due under the Lease and such Damages to
be paid when incurred by Landlord except as otherwise provided under Sections
20.02 and 22.01 of the Lease; and the maintenance of any action or proceeding by
Landlord to recover any sum or sums that may be or become due under the Lease,
or to secure the performance of any of the other terms, covenants and conditions
of the Lease or to recover Damages, shall not preclude Landlord from thereafter
instituting and maintaining subsequent actions or proceedings for any subsequent
default or defaults of Tenant under the Lease.
2. Subject to the provisions of Paragraph 22 of this Guaranty, Guarantor
does hereby consent that, without affecting its liability under this Guaranty
and without Notice to Guarantor, time may be given by Landlord to Tenant for
payment of Rental and performance of said other terms, covenants and conditions,
or any of them, and such time extended and indulgences granted, from time to
time, or Tenant may be dispossessed or Landlord may avail itself of or exercise
any or all of the rights and/or remedies against Tenant provided by law or by
the Lease, and may proceed either against Tenant alone or jointly against Tenant
and Guarantor or against Guarantor alone without proceeding against Tenant.
<PAGE>
3. Subject to the provisions of Paragraph 22 of this Guarantee,
Guarantor hereby consents and agrees that Landlord may at any time, and from
time to time, without notice to or further consent from Guarantor, either with
or without consideration, and without affecting Guarantor's liability hereunder,
modify or restate the terms of the Lease; extend or renew the Lease for any
period; grant releases, compromises and indulgences with respect to the Lease to
any persons, firms or corporations now or hereafter liable thereunder or
hereunder; release any, other guarantor of the Lease; consent to any transfer or
assign Tenant's interest in the Law; take and hold additional security for
performance of all obligations under the Lease and exchange, save or release
such security, accept or make compositions or other arrangements or file or
refrain from filing a claim in any bankruptcy proceeding of or affecting Tenant
or any other guarantor or pledgor or the property of any of them, or take or
fail to take any action of any type whatsoever. Subject to the provisions of
Paragraph 22 of this Guaranty, no such action which Landlord shall take or fail
to take in connection with the Lease, nor any course of dealing with Tenant or
any other person, firm or corporation, shall release Guarantor's obligations
hereunder or affect this Guaranty in any way and the provisions of this
Guaranty, shall extend and be applicable to all amendments, extensions,
modifications, and restatements of the Lease, and any and all references herein
to the Lease shall be deemed to include any such amendments, extensions,
consolidations, modifications or restatements thereof.
4. Guarantor does hereby further unconditionally and irrevocably,
knowingly and voluntarily, agree that in respect of any payments made by
Guarantor hereunder, Guarantor shall not exercise any rights of subrogation,
reimbursement, contribution or indemnity, whether now, or hereafter existing and
whether arising under contract, under law or equity or otherwise and any rights
to participate in any security given to Landlord on behalf of Tenant for the
Lease, or have any rights based on suretyship or otherwise to stand in the place
of Landlord so as to compete with Landlord as a creditor of Tenant, unless and
until all claims of Landlord under the Lease shall have been fully paid and
satisfied.
5. As a further inducement to Landlord to make the Lease and in
consideration therefor, Landlord and Guarantor hereby agree that in any action,
proceeding or counterclaim brought by either Landlord or Guarantor against the
other on any matters whatsoever arising out of or in any way connected with the
Lease or this Guaranty, Landlord and Guarantor shall and do hereby waive trial
by jury.
6. This is a guaranty of payment and performance and not of collection.
The liability of Guarantor under this Guaranty shall be direct and immediate and
not conditional or contingent upon the pursuit of any, remedies against Tenant
or any other person, firm or corporation, nor against securities or liens
available to Landlord, its successors, successors-in-title, endorsees or
assigns. Guarantor knowingly and voluntarily waives any right to require that an
action be brought against Tenant or any other person, firm or corporation or to
require that resort be had to any security deposit or to any commitment, deposit
or credit on the books of Landlord in favor of Tenant or any other person, firm
or corporation. Guarantor knowingly and voluntarily waives any right to benefit
of, participate in, direct the application of, or the right to require Landlord
to proceed against or to pursue any other remedy in Landlord's power in regard
to any other security held by Landlord. Subject to the provisions of Paragraph
22 of this Guaranty, in the event of an Event of Default (as defined in the
Lease) under the Lease,
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<PAGE>
Landlord shall have the right to enforce its rights, powers and remedies
thereunder or hereunder or under any other instrument now or hereafter
evidencing, securing or otherwise relating to the transactions contemplated by
the Lease in any order, and all rights, powers and remedies available to
Landlord in such event shall be nonexclusive and cumulative of other rights,
powers and remedies provided thereunder or hereunder or by law or in equity.
Accordingly, Guarantor hereby authorizes and empowers Landlord upon the
occurrence of an Event of Default under the Lease (and the lapse of any
applicable cure periods set forth therein, if any), at its sole discretion, and
without notice to Guarantor other than as provided in the Lease, to exercise
any, right or remedy which Landlord may have under the Lease or this Guarantee.
If the obligations guaranteed hereby are partially paid or partially performed
by reason of the election of Landlord, its successors, endorsees or assigns, to
pursue any of the remedies available to Landlord, or if such obligations are
otherwise partially paid or partially performed, this Guaranty shall
nevertheless remain in full force and effect, and Guarantor shall remain liable
for the entire unpaid or unperformed balance of the obligations guaranteed
hereby even though any rights which Guarantor may have against Tenant may be
destroyed or diminished by the exercise of any such remedy.
7. Subject to the provisions of Paragraph 22 of this Guaranty,
Guarantor hereby knowingly and voluntarily waives and agrees not to assert or
take advantage of: (a) the benefit of or right to assert any statute of
limitations affecting the liability of Guarantor hereunder or the enforcement
thereof to the extent permitted by law (and any part performance by Tenant or
other circumstance which operates to toll any statute of limitations as to
Tenant shall also operate to toll the statute of limitations as to Guarantor);
(b) any defense that may arise by reason of the incapacity, lack of authority,
cessation of liability of Tenant for any cause, death or disability of Tenant or
any other person, firm or corporation, or the failure of Landlord to file or
enforce a claim against the estate (either in administration, bankruptcy, or any
other proceeding) of Tenant or any other person, firm or corporation; (c) any
defense arising out of the absence, impairment or loss of any right of
reimbursement or subrogation rights of Guarantor or the night of Guarantor to
proceed against Tenant for reimbursement, or both, resulting from the exercise
or election of any remedy by Landlord; (d) any defense based upon failure of
Landlord to commence an action against Tenant; (e) acceptance or notice of
acceptance of this Guaranty by Landlord; (f) notice of presentment and demand
for payment of any indebtedness or performance of any obligations hereby
guaranteed; (g) protest and notice of dishonor or of default to Guarantor or to
any other party with respect to any indebtedness or performance of obligations
hereby guaranteed; (h) any defense based on lack of due diligence by Landlord in
collection, protection or realization upon any collateral securing any
indebtedness or performance of obligations evidenced by the Lease; (i) the
benefits or defenses, if Guarantor is entitled to any benefits or defenses, of
any or all anti-deficiency statutes or single-action legislation in effect in
the state where the Premises are located; (j) the rights, benefits and defenses
arising out of any statute resulting from alteration, impairment or suspension
in any respect or by any means of any of Tenant's obligations under the Lease or
any of Landlord's rights or remedies under the Lease without Landlord's prior
consent; and (k) any other legal or equitable defenses whatsoever to which
Guarantor might otherwise be entitled except for a defense that Guarantor was
deprived of any of its material rights under Sections 20.02 and 22.01 of the
Lease or that the obligations guaranteed hereunder have been satisfied in full
as a result of the full performance (as distinguished from a waiver thereof or
other defense) by Tenant or a defense based on a written
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<PAGE>
and unconditional agreement signed by all persons entitled to the benefits of
this Guaranty whereby Guarantor has explicitly been fully and unconditionally
released hereunder.
8. Guarantor hereby covenants and agrees with Landlord as follows:
(a) By the execution and delivery of this Guaranty, Guarantor hereby
irrevocably submits, to the extent permitted by applicable law, to the
jurisdiction of any Maryland State or Federal court sitting in Maryland in any
action or proceeding arising out of or relating to this Guaranty, and Guarantor
hereby irrevocably agrees that all claims against it with respect to such action
or proceeding against Guarantor may he heard and determined in such courts. To
the extent permitted by applicable law, no other court, except those described
in the preceding sentence, will have any jurisdiction in any action or
proceeding against Guarantor arising out of or relating to this Guaranty.
Service of any summons and complaint and any other process which may be served
in any such action or proceeding in the courts referred to in the first sentence
of this subparagraph 8(a) may be made by delivering by hand or certified or
overnight mail a copy of such process to Guarantor. To the extent permitted by
applicable law, Guarantor agrees that a final judgment obtained in any such
court described in the first sentence of this subparagraph 8(a) in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Subject to the exclusive jurisdiction provided in subparagraph 9(a)
above, nothing in this Guaranty shall affect the right of Landlord to serve
legal process in any other manner permitted by law.
(c) To the extent that Guarantor has or hereafter may acquire any
immunity from Jurisdiction of any such court referred to in the first sentence
of subparagraph 9(a) above or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, to the extent permitted by
applicable law, Guarantor hereby irrevocably waives such immunity with respect
to its obligations under this Guaranty.
(d) Guarantor hereby irrevocably waives, to the extent permitted by
applicable law, any objection, including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or proceeding in
such respective courts referred to in the first sentence of subparagraph 9(a)
above.
9. All capitalized terms contained in this Guaranty has not defined
herein shall have the respective meanings ascribed to such terms in the Lease.
10. If so provided in the Lease, Guarantor agrees that bankruptcy,
insolvency and other actions by, against or on behalf of Guarantor, as set forth
therein, may be declared by Landlord to be Events of Default under the Lease.
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<PAGE>
11. The obligations of Guarantor hereunder are independent of the
obligations of Tenant. Guarantor expressly and specifically agrees that a
separate action or actions may be brought and prosecuted against Guarantor
whether or not action is brought against Tenant and whether or not Tenant is
joined in any action against Guarantor.
12. Guarantor hereby authorizes Landlord, without notice to Guarantor,
to apply all payments and credits received from or funds released by Tenant or
Guarantor or realized from any security in such manner and in such priority as
Landlord in its sole judgment shall see fit.
13. It is not necessary for Landlord to inquire into the powers of
Tenant or of the officers, partners, joint venturers or agents, if any, acting
or purporting to act on Tenant's behalf.
14. If at any time, any prospective Mortgagee or other creditor of
Landlord or any affiliate of Landlord requests any change or modification to
this Guaranty as a condition of granting a Mortgage or extending other credit to
Landlord or such Affiliate, Guarantor shall consent to such change or
modification, provided that (i) Landlord or Landlord's Affiliate bears the cost
of preparing all documentation required to effect such change or modification;
and (ii) such change or modification does not materially and adversely increase
Guarantor's obligations under this Guaranty.
15. Guarantor agrees to pay all attorneys' and paralegal fees and
costs, court costs and disbursements and other costs and expenses which may be
incurred by Landlord in the enforcement of this Guaranty, including, without
limitation, those incurred in connection with any case, action, proceeding,
claim or otherwise under Chapters 7, 11 or 13 of the Bankruptcy Code or any
successor statute or statutes thereto whether the same be commenced or filed by
Tenant, Guarantor or any other person or entity.
16. Guarantor acknowledges that this Guaranty shall be governed and
construed in accordance with the laws of the State of Maryland.
17. If all or any portion of the obligations guaranteed hereunder are
paid or performed, the obligations of Guarantor hereunder shall continue and
shall remain in full force and effect in the event that all or any, part of such
payment or performance is avoided or recovered directly or indirectly from
Landlord as a preference, fraudulent transfer or otherwise under the Bankruptcy
Code or any other Federal or state laws, irrespective of (a) any notice of
revocation given by Guarantor prior to such avoidance or recovery, and (b) full
payment and performance of all of the indebtedness and obligations required by
the Lease.
18. This Guaranty may not be changed orally, and no obligation of
Guarantor may be released or waived by Landlord or any officer or agent of,
except by a writing signed by a duly authorized officer of Landlord. This
Guaranty shall be irrevocable by Guarantor until all obligations and
undertakings of Tenant under, by reason of, or pursuant to the Lease have been
completely performed.
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<PAGE>
19. If from any circumstances whatsoever fulfillment of any provisions
of this Guaranty, at the time performance of such provision shall be due, shall
involve transcending the limit of validity presently prescribed by any
applicable usury statute or any other applicable law, with regard to obligations
of like character and amount, then ipso facto the obligation to be fulfilled
shall be reduced to the limit of such validity, so that in no event shall any
exaction be possible under this Guaranty that is in excess of the current limit
of such validity, but such obligation shall be fulfilled to the limit of such
validity. The provisions of this paragraph 20 shall control every other
provision of this Guaranty.
20. (a) Whenever any notice, demand or request is required or permitted
hereunder, such notice, demand or request shall be made in writing and shall be
delivered as described below, sent via: prepaid courier, telecopier, or
deposited in the United States mail, registered or certified, return receipt
requested, postage prepaid, addressed to the addresses (and individuals) set
forth below:
As to Landlord: HMC Retirement Properties, Inc.
c/o Host Marriott Corporation
Treasury Department
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Robert E. Parsons, Jr.
Fax number: (301) 380-5067
As to Guarantor: Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department
General Counsel
Fax number: (301) 380-6727
or to such other person or entity or persons and such other place or places as
said party may desire written notices to be delivered or sent in accordance
herewith.
(b) A notice shall be deemed to have been duly received (and
the time period in which a response thereto is required shall commence), (i) if
sent via prepaid courier, upon delivery thereof, (ii) if sent via certified
mail, on the date set forth on the return receipt or (iii) if sent via
telecopier, upon telephone confirmation to the numbers provided above.
(c) The inability to deliver any notice, demand or request
because the individual to whom it is properly addressed in accordance with
paragraph 21 (a) refuses delivery thereof or because of changed address of which
no notice was sent shall be deemed to be receipt of the notice as of the date of
such inability to deliver or rejection or refusal to accept.
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<PAGE>
21. Guarantor specifically agrees that Landlord may assign this
Guaranty to any successor landlord and to any mortgagee or any other party with
an interest in Landlord's estate in the Premises or in this Lease party as
security as further security therefor, and any assignment hereof or transfer or
assignment of the Lease by Landlord shall vest in any such assignee all rights
and powers conferred upon and granted herein to Landlord; provided, however,
that nothing contained in any such assignment shall be deemed to limit any claim
that Landlord may have against Guarantor by reason of Guarantor's failure to
perform its obligations hereunder, or limit the right of Landlord to perform its
obligations hereunder or limit Landlord to institute suit with respect to such
failure to perform, notwithstanding that Landlords rights under the Lease may
have been assigned to a new landlord.
22. As an inducement to Guarantor to make this Guaranty, Landlord has
agreed to certain provisions of the Lease, including, among others, the
provisions set forth in Sections 22.01 and 20.02 A, B and C, which provisions
provide certain rights and privileges to Guarantor. Nothing in this Guaranty is
intended to, or shall be so construed as to, modify, lessen, cancel or waive any
such Guarantor rights under the Lease. The enforcement of this Guaranty and
Guarantor's obligations hereunder (is) are specifically contingent upon
Landlord's full compliance with the provisions of the Lease which provide any
such material rights and privileges to Guarantor. Notwithstanding any other
provision of this Guaranty to the contrary, Landlord agrees that it will not
consent to or make any modification or amendment to the Lease, or waive any
condition upon or requirements of Tenant thereunder that would constitute to any
material extent a modification, amendment, cancellation or waiver of any
specific right afforded to Guarantor under the Lease including any right to any
notice and the right to take any specific action, without the consent of
Guarantor, and any such action by Landlord without Guarantor's consent when
required by this provision shall not be binding upon Guarantor and shall not
have any force and effect with respect to Guarantor's obligations under this
Guaranty.
23. Without limiting Guarantor's obligations elsewhere under this
Guaranty, if Tenant, or Tenant's trustee, receiver or other officer with similar
powers with respect to Tenant, rejects, disaffirm or otherwise terminates the
Lease pursuant to any bankruptcy, insolvency, reorganization, moratorium or any
other law affecting creditors' rights generally, Guarantor shall automatically
be deemed to have assumed, from and after the date such rejection, disaffirmance
or other termination of the Lease is deemed effective, all obligations and
liabilities of Tenant under the Lease to the same extent as if Guarantor had
been originally named instead of Tenant as a party to the Lease and the Lease
had never been so rejected, disaffirmed or otherwise terminated. Guarantor, upon
such assumption, shall be obligated to perform and observe all of the Lease
covenants whether theretofore accrued or thereafter accruing and Guarantor shall
be subject to any rights or remedies of Landlord which may have theretofore
accrued or which may thereafter accrue against Tenant on account of any default
under the Lease, notwithstanding that such defaults existed prior to the date
Guarantor was deemed to have automatically assumed the Lease or that such rights
or remedies are unenforceable against Tenant by reason of such rejection,
disaffirmance or other termination. Guarantor shall confirm such assumption in
writing at the request of Landlord upon or after such rejection, disaffirmance
or other termination, but the failure to do so shall not affect such assumption.
Guarantor, upon the assumption of the Lease, shall have all of the rights of
Tenant under the Lease (to the extent permitted by law). Neither Guarantor's
obligation to make payment in accordance with this
-7-
<PAGE>
Guaranty nor any remedy for the enforcement thereof shall be impaired, modified,
changed, stayed, released or limited in any manner by any impairment,
modification, change, release, limitation or stay of the liability of Tenant or
its estate in bankruptcy or any remedy for the enforcement thereof, resulting
from the operation of any present or future provision of the Bankruptcy Code of
the United States or other statute or from the decision of any court
interpreting any of the same, and Guarantor shall be obligated under this
Guaranty as if no such impairment, stay, modification, change, release or
limitation had occurred.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
the date first above written.
MARRIOTT INTERNATIONAL, INC.,
a Delaware corporation
By: /s/
Name:
Title:
Attest: /s/
Its: Assistant Secretary
(corporate seal)
ACCEPTED:
LANDLORD:
HMC RETIREMENT PROPERTIES, INC.
a Delaware corporation
By /s/
Name:
Title: Vice President
Attest: /s/
Its: Assistant Secretary
(corporate seal)
-8-
<PAGE>
SCHEDULE TO EXHIBIT 10.9
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Guarantees of Tenant Obligations and Guaranty of Subtenant Obligations, which
are substantially identical in all material respects to the Guaranty of Tenant
Obligations filed herewith, are omitted. The following list sets forth the
material differences in the premises and landlord.
<TABLE>
<CAPTION>
Leased Premises Landlord
<S> <C>
Sun City, Maricopa County, AZ HMC Retirement Properties, Inc.
Villa Valencia, Orange County, CA HMC Retirement Properties, Inc.
Deerfield Beach/Horizon Club, Broward County, FL HMH Properties, Inc.
Palms Harbor, Pinellas County, FL HMC Retirement Properties, Inc.
Calusa Harbour, Lee County, FL HMC Retirement Properties, Inc.
Bedford Court, Montgomery, MD HMC Retirement Properties, Inc.
Bellaire/Houston, Harris County, TX HMC Retirement Properties, Inc.
The Jefferson, Arlington County, VA HMC Retirement Properties, Inc.
Virginia Beach, City of Virginia Beach, VA HMC Retirement Properties, Inc.
Church Creek, Cook County, IL HMC Retirement Properties, Inc.
Port St. Lucie, St. Lucie County, FL HMC Retirement Properties, Inc.
Boca Pointe, Palm Beach County, FL HMH Properties, Inc.
The Colonnades, Albemarle County, VA HMC Retirement Properties, Inc.
</TABLE>
EXHIBIT 10.10
FIRST AMENDMENT TO THE LEASE
FOR THE
MARRIOTT SENIOR LIVING SERVICES FACILITY
AT
SCOTTSDALE, MARICOPA COUNTY, ARIZONA
THIS FIRST AMENDMENT TO THE LEASE FOR THE MARRIOTT SENIOR LIVING
SERVICES FACILITY AT SCOTTSDALE, MARICOPA COUNTY, ARIZONA ("AMENDMENT") is made
and entered into this 19th day of January 1994 by and between HMC Retirement
Properties, Inc., a Delaware Corporation ('Landlord'), and Marriott Senior
Living Services, Inc., a Delaware Corporation ("Tenant").
Recitals:
WHEREAS, Landlord and Tenant entered into that certain Lease for the
Marriott Senior Living Services Facility at Scottsdale, Marricopa County,
Arizona, dated September 8, 1993 (the "Lease"); and
WHEREAS, Landlord and Tenant agree and acknowledge that the parties
intended to provide that the calculation for the Percentage Rental was to begin
on the first day of the first full Fiscal Year of the Initial Term; and
WHEREAS, the parties desire to correct the error concerning the
commencement of the Percentage Rental by emending Section 5.01 of the Lease.
NOW, THEREFORE, in consideration of the premises and the mutual
obligations and agreements set forth below, the sufficiency and receipt of which
are hereby acknowledged, Landlord and Tenant agree as follows:
1. Section 5.01 of the Lease shall be amended by adding the following
words at the beginning of 5.01(ii);
"Commencing on the first day of the first full Fiscal Year..."
2. All capitalized terms not defined herein shall have the meaning set
forth in the Lease.
3. Any conflict between the terms and conditions of this Amendment and the
Lease shall be resolved in favor of this Amendment.
4. Other than as modified herein, all of the terms and provisions of the
Lease shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have extended this Amendment as
of the date first written above.
TENANT: LANDLORD:
Marriott Senior Living Services, Inc. HMC Retirement Properties, Inc.
By:/s/ By: /s/
Its: Vice President Its: Vice President
Attest: /s/ Attest: /s/ Pamela J. Murch
By: /s/ By: /s/ Pamela J. Murch
Its: Assistant Secretary Its: Assistant Secretary
<PAGE>
SCHEDULE TO EXHIBIT 10.10
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
First Amendment to the Leases or Subleases, which are substantially identical in
all material respects to the First Amendment to the Lease for the Marriott
Senior Living Services Facility at Scottsdale, Maricopa County, Arizona filed
herewith, are omitted. The following list sets forth the material differences in
the leased premises and landlord.
<TABLE>
<CAPTION>
Leased Premises Landlord
<S> <C>
Sun City, Maricopa County, AZ HMC Retirement Properties, Inc.
Villa Valencia, Orange County, CA HMC Retirement Properties, Inc.
Deerfield Beach/Horizon Club, Broward County, FL HMH Properties, Inc.
Palms Harbor, Pinellas County, FL HMC Retirement Properties, Inc.
Calusa Harbour, Lee County, FL HMC Retirement Properties, Inc.
Bedford Court, Montgomery, MD HMC Retirement Properties, Inc.
Bellaire/Houston, Harris County, TX HMC Retirement Properties, Inc.
The Jefferson, Arlington County, VA HMC Retirement Properties, Inc.
Virginia Beach, City of Virginia Beach, VA HMC Retirement Properties, Inc.
Church Creek, Cook County, IL HMC Retirement Properties, Inc.
Port St. Lucie, St. Lucie County, FL HMC Retirement Properties, Inc.
The Colonnades, Albemarle County, VA HMC Retirement Properties, Inc.
</TABLE>
EXHIBIT 10.11
ASSIGNMENT AND ASSUMPTION OF
LEASES, GUARANTEES AND PERMITS
THIS ASSIGNMENT AND ASSUMPTION OF LEASES, GUARANTEES AND PERMITS (this
"Assignment") dated as of this 13th day of May, 1994, by HMC RETIREMENT
PROPERTIES, INC., a Delaware corporation with its principal office at 10400
Fernwood Road, Bethesda, Maryland 20817 ("Assignor"), to and in favor of HEALTH
AND REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust
with its principal office at 400 Centre Street, Newton, Massachusetts 02158
("Assignee").
W I T N E S S E T H :
In connection with the sale by Assignor to Assignee of the real
property and improvements thereon, located in Scottsdale, Arizona, as more
particularly described in Exhibit A, attached hereto and made a part hereof (the
"Premises"), and for other good and valuable consideration paid by Assignee to
Assignor, the receipt and sufficiency of which are hereby acknowledged, Assignor
does hereby grant, bargain, sell, set over, assign, transfer and deliver unto
Assignee and its successors and assigns all of its right, title and interest in
and to the following described Leases, Guarantees and Permits with respect to
the Premises:
1. All of Assignor's right, title and interest in and to any and all
leases affecting the Premises as identified on Exhibit B, attached hereto and
made a part hereof (the "Leases");
2. All of Assignor's right, title and interest in and to any and all
guarantees of the Leases as identified on Exhibit C attached hereto and made a
part hereof (the "Guarantees"); and
3. All of Assignors' right, title and interest in and to any and all
licenses, franchises, certificates of occupancy, certificates of need, permits
and approvals issued by any governmental authority or any third party with
respect to all or any portion of the Premises, to the extent assignable
(collectively, the "Permits").
<PAGE>
-2-
In connection with the foregoing, Assignor and Assignee hereby agree as
follows:
1. Assignor shall indemnify and hold harmless Assignee from and against
all liabilities, cost, loss and damage arising under the Leases, Guarantees and
Permits prior to the date hereof.
2. Assignee hereby assumes and agrees to be bound by all of Assignor's
liabilities and obligations under the Leases, Guarantees and Permits and agrees
to perform and observe all of the covenants and agreements set forth therein.
Assignee shall indemnify and hold harmless Assignor from and against all
liabilities, cost, loss and damage arising under the Leases, Guarantees and
Permits from and after the date hereof.
3. This Assignment shall inure to the benefit of and shall be binding
upon the parties hereto and their respective successors and assigns.
4. This Assignment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
5. This Assignment shall be governed by and construed in accordance
with the laws of the State of Maryland.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
under seal as of the date above first written.
ASSIGNOR:
WITNESS HMC RETIREMENT PROPERTIES, INC.
/s/ David L. Buckley By:/s/ Pamela J. Murch
Its (Vice) President
ASSIGNEE:
HEALTH AND REHABILITATION PROPERTIES
TRUST
By:/s/ David J. Hegarty
Its:Executive Vice President
<PAGE>
STATE OF MARYLAND )
) ss
COUNTY OF MONTGOMERY)
This instrument was acknowledged by me this 13th day of May,
1994, above-named Pamela J. Murch to be the free act and deed of
MC Rtirement Properties, Inc., a Delaware corporation.
/s/ Miriam A. Fox
Name: Miriam A. Fox
Notary Public
My Commission Expires: 10/1/96
STATE OF MASSACHUSETTS)
) ss
COUNTY OF SUFFOLK )
This instrument was acknowledged by me this 12th day of May,
1994, above-named David J. Hegarty to be the free act and
deed of Health and Rehabilitation Properties, Inc., a
Maryland real estate investment trust.
/s/ Nicole M. Priolo
Name: Nicole M. Priolo
Notary Public
My Commission Expires: 11/4/99
<PAGE>
SCHEDULE TO EXHIBIT 10.11
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Assignments and Assumptions of Leases, Guarantees and Permits, which are
substantially identical in all material respects to the Assignment and
Assumption of Leases, Guarantees and Permits filed herewith, are omitted. The
following list sets forth the material differences in the property location,
date of Assignment and Assumption of Leases, Guarantees and Permits, assignor
and assignee.
<TABLE>
<CAPTION>
Property Location Date Assignor Assignee
<S> <C> <C> <C>
Sun City, AZ June 16, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Laguna Hills, CA September 7, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Deerfield Beach, FL May 13, 1994 HMH Properties, Inc. Health and Rehabilitation
Properties Trust
Palms Harbor, FL May 13, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Boca Pointe, FL May 13, 1994 HMH Properties, Inc. Health and Rehabilitation
Properties Trust
Calusa Harbour, FL August 16, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Bedford Court, MD July 25, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Bellaire, TX May 13, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Arlington, VA July 25, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Charlottesville, VA June 16, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Virginia Beach, VA May 13, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
Church Creek, IL September 7, 1994 HMC Retirement Church Creek Corporation
Properties, Inc.
Port St. Lucie, FL May 13, 1994 HMC Retirement Health and Rehabilitation
Properties, Inc. Properties Trust
</TABLE>
EXHIBIT 10.12
SECOND AMENDMENT OF LEASE
SECOND AMENDMENT OF LEASE (this "Amendment"), dated as of May 16, 1994,
between HMC RETIREMENT PROPERTIES, INC., a Delaware corporation ("HMC") and
MARRIOTT SENIOR LIVING SERVICES, INC., a Delaware corporation ("MSLS").
R E C I T A L S:
A. HMC, as landlord, and MSLS, as tenant, are parties to a certain
Lease, dated as of October 8, 1993, which Lease has been amended by First
Amendment to Lease dated January 19, 1994 (said Lease, as so amended, the
"Lease"), relating to certain land and improvements located in Maricopa County,
Scottsdale, Arizona.
B. HMC and MSLS now wish to provide for the amendment of the Lease on
the terms and conditions set forth herein.
NOW, THEREFORE, for TEN DOLLARS and other good and valuable
consideration, the receipt and sufficiency are hereby acknowledged, HMC and MSLS
hereby agree as follows:
1. Defined Terms. Any capitalized term used but not defined herein
shall have the meaning given such term in the Lease.
2. Definition of Applicable Percentage. Article 2 of the Lease shall be
amended by inserting the following definition of "Applicable Percentage" in its
proper alphabetical order:
"Applicable Percentage" shall mean a per annum rate of interest,
expressed as a percentage, equal to the then current yield on United States
treasury obligations having a maturity closest, in Landlord's determination, to
the expiration date of the current term of this Lease (including any Effective
Extended Term)."
3. Leasehold Purchase Price. Article 2 of the Lease shall be amended by
deleting the definition of Leasehold Purchase Price and substituting therefor
the following:
"Leasehold Purchase Price" shall be, at any particular time
during the Term, the dollar amount equal to the present value, as of
the date of any contemplated purchase, of the payments of Minimum
Rental, Alternative Rental, if any, and Expansion Rental, if any, that
would have been payable during the period commencing on the date of
such purchase and ending on the date of the expiration of the current
term of this Lease (including any Effective Extended Term), discounted
to the date of purchase (on a quarterly basis) at an interest rate
equal to the Applicable Percentage. Further, the term "Lease Purchase
Price" shall be synonymous with "Leasehold Purchase Price.
<PAGE>
4. Mortgagee's Consent Required for Landlord's Rejection of Irrevocable
Offer. In any instance in which Tenant shall have the right or the obligation
under the Lease to make an irrevocable offer to the Landlord to terminate the
Lease, no purported rejection of such offer shall be effective unless it is in
writing and signed by both Landlord and the Mortgagee. The failure of Landlord
and the Mortgagee to give such notice of rejection within the time periods
provided in the Lease shall be deemed an acceptance of such offer. In the event
that Landlord and the Mortgagee shall provide Tenant with conflicting notices,
the Mortgagee's notice shall control.
5. Uninsurable Loss Requires Either Restoration or Rejectable Offer.
(a) Section 14.06A of the Lease is amended by deleting such section in
its entirety and substituting therefor the following:
"A. If (i) there is a casualty at or to the Premises with
respect to which all or a portion of such loss is an "uninsurable loss"
and (ii) the cost to repair and/or rebuild the Premises (less the
amount of any available insurance proceeds, after taking into account
applicable deductibles and self-insured retentions permitted hereunder)
exceeds forty percent (40%) of the then-fair market value of the
Premises immediately prior to the casualty, then Tenant may elect to
terminate this Lease and make an irrevocable offer to purchase the
Premises on the same terms and conditions as are set forth in Section
14.03 of this Lease as if such casualty were a Major Casualty occurring
after the tenth (10th) anniversary of the Commencement Date. If Tenant
desires to make the election described in the preceding sentence, it
shall give Notice to Landlord not later than the date which is sixty
(60) days after the occurrence of such casualty and, simultaneously
with the delivery of such Notice, shall deliver to Landlord its
irrevocable offer to purchase the Premises for an amount equal to the
Leasehold Purchase Price. If Tenant shall not elect to terminate this
Lease as aforesaid, then Tenant shall be obligated to rebuild and/or
restore the Premises in accordance with the provisions of Section 14.01
of this Lease (without any regard to the reference in the first
sentence thereof to Section 14.06)."
(b) Section 14.06D of the Lease is deleted in its entirety.
6. Tenant Must Make Irrevocable Offer Upon Total Taking. Section 15.04
of the Lease is amended by deleting such section in its entirety and
substituting therefor the following:
<PAGE>
"Section 15.04 Total Taking.
A. If, during the Term, Landlord or Tenant shall have received
a Notice of Intended Taking with respect to all or substantially all of
the Premises, then Tenant shall be obligated, within thirty (30) days
after the receipt by Tenant of a Notice of Intended Taking (whether
directly or indirectly (through Landlord)) from the condemning
authority, to deliver to Landlord an irrevocable offer to purchase all
of Landlord's right, title and interest in and to the Premises
(including any condemnation award payable in connection with such
taking) for an amount equal to the Leasehold Purchase Price. As used
herein, "Notice of Intended Taking" shall mean any notice or
notification on which a reasonably prudent person would rely and which
he would interpret as expressing an existing intention of a taking in
or by condemnation or other eminent domain proceedings pursuant to any
law, general or special (as distinguished from a notice representing a
mere preliminary inquiry or proposal), including but not limited to the
service of a condemnation summons and complaint on a party to this
Lease, and such notice shall be considered to have been received when a
party to this Lease receives from the condemning agency or entity a
notice of intent to take, in writing, containing a description or map
of the taking reasonably defining the extent of the taking.
B. Landlord may accept or reject Tenant's irrevocable offer to
purchase the Premises by sending Tenant a Notice of such rejection or
acceptance within thirty (30) days from the date upon which Landlord
received Tenant's irrevocable offer. If Landlord fails to send Tenant a
Notice of rejection or acceptance within thirty (30) days of its
receipt of such irrevocable offer, Landlord shall be deemed to have
accepted such offer. If Landlord accepts or is deemed to have accepted
such offer, this Lease shall terminate on a Minimum Rental payment date
specified by Tenant in its Notice of irrevocable offer which occurs not
earlier than ninety (90) days nor later than one hundred and twenty
(120) days after Landlord's receipt of Tenant's irrevocable offer. Upon
such termination, Tenant shall pay Landlord all Rental due through the
date of termination, and Landlord and the Insurance Trustee shall
assign all their right, title and interest in condemnation proceeds
previously paid to, and then held by, the Insurance Trustee with
respect to such taking and Landlord
<PAGE>
shall convey all of its right, title and interest in and to the
Premises to the Tenant in accordance with Section 21.01.
C. If Landlord rejects Tenant's irrevocable offer to purchase
pursuant to Section 15.04B, this Lease shall terminate on a Minimum
Rental payment date specified by Tenant in its Notice of irrevocable
offer, which shall be not earlier than ninety (90) days nor later that
one hundred and twenty (120) days after Landlord's receipt of Tenant's
irrevocable offer to purchase, provided that this Lease shall not
terminate unless and until Tenant shall have paid all sums due
hereunder (including, without limitation, all taxes and insurance
premiums) as of the actual date of termination. Upon such termination,
all condemnation proceeds shall be delivered to Landlord, and Tenant
shall vacate the Premises in accordance with the provisions of Section
3.04."
7. Restoration Upon Substantial Taking. Section 15.06A of the Lease is
amended by deleting the phrase "provided, however, that Tenant shall not be
obligated to expend any sums in excess of the condemnation proceeds" from the
first sentence thereof.
8. Reduction of Rent Upon Substantial Taking. Section 15.06H of the
Lease is amended by deleting such section in its entirety and substituting
therefor the following:
"H. In the event of a condemnation that is an Insubstantial
Taking, there shall be no reduction in or abatement of the Minimum
Rental or Percentage Rental thereafter payable by Tenant. If there
occurs a condemnation that is a Substantial Taking and this Lease is
not terminated pursuant to Section 15.05, there shall be a reduction in
the Minimum Rental payable by Tenant, effective as of the date of the
Substantial Taking, such reduction to be in an amount equal to the
lesser of (i) an amount equal to the Applicable Percentage multiplied
by the portion of the condemnation award so distributed to the Landlord
or (ii) an amount equal to the Minimum Rental multiplied by the Partial
Condemnation Reduction Percentage and there shall be a reduction in the
Alternative Rental or Expansion Rental payable immediately prior to
such condemnation equal to the amount of such rental multiplied by the
Partial Condemnation Reduction Percentage."
9. Discount Rate for Accelerated Rent. Section 20.02.A(6) of the Lease
is amended by deleting such provision in its entirety and substituting therefor
the following:
<PAGE>
"(6) Accelerate the Minimum Rentals due under this Lease. The
discount rate (applied on a quarterly basis) to be used in computing
the then- present value of the Minimum Rental due hereunder shall be
equal to the Applicable Percentage.
10. Deletion of Certain Liquidated Damages Upon Failure to Purchaser.
Section 21.01E and 21.01F of the Lease are amended by deleting such sections in
their entirety.
11. Section 22.01A of the Lease is hereby amended by inserting at the
end thereof the sentence "A copy of all notices to Tenant shall be sent to
Guarantor."
12. References to Lease. References herein or in the Lease to the
"Lease" shall mean the Lease as amended hereby, except to the extent the context
shall require otherwise.
13. Effective Time. This Amendment shall be effective upon execution
hereof but shall become void and of no further force or effect upon the
expiration of the Initial Term.
14. Memorandum. Landlord and Tenant shall execute, acknowledge and
deliver a memorandum of this Amendment in recordable form. Said memorandum shall
not be deemed to modify or to change any of the provisions of this Amendment.
15. Miscellaneous. Sections 24.01, 24.02, 24,03, 24.04, 24.05, 24.06,
24.07, 24.08 and 24.22 of the Lease are hereby incorporated by reference, except
that any reference therein to the Lease shall be deemed to refer to this
Amendment.
16. Counterparts. This Amendment may be executed in counterparts.
17. No Amendment. The Lease is in full force and effect and, except as
modified hereby, has not been amended.
<PAGE>
IN WITNESS WHEREOF, HMC, as Landlord, and MSLS, as Tenant, have
executed and delivered this Amendment on the date first hereinabove set forth.
HMC RETIREMENT PROPERTIES, INC., a
Delaware corporation
By:/s/ Pamela J. Murch
Name: Pamela J. Murch
(Vice) President
[SEAL]
ATTEST:
By: /s/ David L. Buckley
Name: David L. Buckley
(Assistant) Secretary
MARRIOTT SENIOR LIVING SERVICES,
INC., a Delaware corporation
By:/s/
Name:
(Vice) President
[SEAL]
ATTEST:
By:/s/
Name:
(Assistant) Secretary
<PAGE>
SCHEDULE TO EXHIBIT 10.12
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Second Amendment of Leases and First Amendment of Lease, which are substantially
identical in all material respects to the Second Amendment of Lease for the
Marriott Senior Living Services Facility at Scottsdale, Maricopa County, Arizona
filed herewith, are omitted. The following list sets forth the material
differences in the leased premises and landlord.
<TABLE>
<CAPTION>
Leased Premises Landlord
<S> <C>
Sun City, Maricopa County, AZ HMC Retirement Properties, Inc.
Villa Valencia, Orange County, CA HMC Retirement Properties, Inc.
Deerfield Beach/Horizon Club, Broward County, FL HMH Properties, Inc.
Palms Harbor, Pinellas County, FL HMC Retirement Properties, Inc.
Calusa Harbour, Lee County, FL HMC Retirement Properties, Inc.
Bedford Court, Montgomery, MD HMC Retirement Properties, Inc.
Bellaire/Houston, Harris County, TX HMC Retirement Properties, Inc.
The Jefferson, Arlington County, VA HMC Retirement Properties, Inc.
Virginia Beach, City of Virginia Beach, VA HMC Retirement Properties, Inc.
Church Creek, Cook County, IL HMC Retirement Properties, Inc.
Port St. Lucie, St. Lucie County, FL HMC Retirement Properties, Inc.
Boca Pointe, Palm Beach County, FL HMH Properties, Inc.
</TABLE>
EXHIBIT 10.13
FIRST AMENDMENT OF GUARANTY
FIRST AMENDMENT OF GUARANTY (this "Amendment"), dated as of May 16,
1994 between MARRIOTT INTERNATIONAL, INC., a Delaware corporation ("Guarantor"),
in favor of HMC RETIREMENT PROPERTIES, INC., a Delaware corporation ("HMC").
R E C I T A L S:
A. HMC, as landlord, and Marriott Senior Living Services, Inc., a
Delaware corporation ("MSLS"), as tenant, are parties to a certain Lease, dated
as of October 8, 1993, which Lease has been amended by First Amendment to Lease,
dated January 19, 1994, relating to certain land and improvements located in
Maricopa County, Scottsdale, Arizona.
B. Said Lease has been guaranteed by Guarantor in favor of HMC pursuant
to a Guaranty, dated as of October 8, 1993 (the "Guaranty").
C. Concurrently herewith, HMC and MSLS are further amending the Lease
pursuant to a Second Amendment of Lease, dated as of the date hereof (the
"Amendment", and said Lease, as so amended through the Amendment, the "Lease").
D. Guarantor and HMC desire to provide for the amendment of the
Guaranty on the terms and conditions set forth herein.
NOW, THEREFORE, for TEN DOLLARS and other good and valuable
consideration, the receipt and sufficiency are hereby acknowledged, Guarantor
and HMC hereby agree as follows:
1. Defined Terms. Any capitalized terms used but not defined herein
shall have the meaning given such term in the Guaranty.
2. Lease Amendment. Guarantor hereby consents to and approves the
Amendment and acknowledges that the Guaranty shall extend to the Lease as
amended through the Amendment.
3. No Right of Setoff, Counterclaim, Etc. Guarantor hereby expressly
waives any right of set-off, counter claim or offset against Landlord or in
respect of Rental or any other amounts due and payable under the Lease or
hereunder. Further, Guarantor hereby waives any suretyship defenses it might
have under the laws of California or of any other state or foreign jurisdiction.
In the event that Guarantor at any time pledges (or is deemed to have pledged)
any real property as security for the Guaranty, whether by mortgage, deed of
trust or otherwise, Guarantor hereby expressly agrees to waive and does hereby
waive the benefits of California code of Civil Procedure Sections 580a, 580d and
726 and any other provisions of state, federal or foreign law relating to such
real property security or the judicial or non-
<PAGE>
-2-
judicial enforcement thereof.
4. Limited Conditions to Guarantor's Obligations. Paragraph 22 of the
Guaranty is hereby amended by deleting such provision in its entirety and
substituting therefor the following:
"22. As an inducement to Guarantor to make this Guaranty,
Landlord has agreed to the provisions set forth in Sections 22.01 A and
20.02, B and C of the Lease, which provisions provide certain rights
and privileges to Guarantor. Nothing in this Guaranty is intended to,
or shall be so construed as to, modify, lessen, cancel or waive any
such Guarantor rights under the Lease. The enforcement of this Guaranty
and Guarantor's obligations hereunder are specifically contingent upon
Landlord's full compliance with said Sections 22.01 A and 20.02, B and
C (it being agreed, however, that at such time as Landlord shall comply
with said Sections 22.01 A and 20.02, B and C, Guarantor shall be
obligated to perform under this Guaranty, notwithstanding any prior
failure of Landlord to so comply). Notwithstanding any other provision
of this Guaranty to the contrary, Landlord agrees that it will not,
without the consent of Guarantor, consent to or make any material
modification or amendment to the Lease, and any such action by
Landlord, without Guarantor's consent when required by this provision,
shall not be binding upon Guarantor and shall not have any force and
effect with respect to Guarantor's obligations under this Guaranty.
5. Successors. This Amendment, as well as the Guaranty, shall bind, and
inure to the benefit of, the successor and permitted assigns of Landlord and
Guarantor.
6. No Amendment. The Guaranty is in full force and effect and, except
as modified hereby, has not been amended.
<PAGE>
-3-
IN WITNESS WHEREOF, Guarantor has executed and delivered, and Landlord
has accepted, this Amendment on the date first hereinabove set forth.
MARRIOTT INTERNATIONAL, INC.,
a Delaware corporation
By: /s/
Name:
(Vice) President
[SEAL]
ATTEST:
By: /s/
Name:
(Assistant) Secretary
ACCEPTED:
HMC RETIREMENT PROPERTIES, INC.,
a Delaware corporation
By: /s/ Pamela J. Murch
Name: Pamela J. Murch
(Vice) President
[SEAL]
ATTEST:
By: /s/ David L. Buckley
Name David L. Buckley
(Assistant) Secretary
<PAGE>
SCHEDULE TO EXHIBIT 10.13
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
First Amendment of Guarantees, which are substantially identical in all material
respects to the First Amendment of Guaranty filed herewith, are omitted. The
following list sets forth the material differences in the premises and landlord.
<TABLE>
<CAPTION>
Leased Premises Landlord
<S> <C>
Sun City, Maricopa County, AZ HMC Retirement Properties, Inc.
Villa Valencia, Orange County, CA HMC Retirement Properties, Inc.
Deerfield Beach/Horizon Club, Broward County, FL HMH Properties, Inc.
Palms Harbor, Pinellas County, FL HMC Retirement Properties, Inc.
Calusa Harbour, Lee County, FL HMC Retirement Properties, Inc.
Bedford Court, Montgomery, MD HMC Retirement Properties, Inc.
Bellaire/Houston, Harris County, TX HMC Retirement Properties, Inc.
The Jefferson, Arlington County, VA HMC Retirement Properties, Inc.
Virginia Beach, City of Virginia Beach, VA HMC Retirement Properties, Inc.
Church Creek, Cook County, IL HMC Retirement Properties, Inc.
Port St. Lucie, St. Lucie County, FL HMC Retirement Properties, Inc.
Boca Pointe, Palm Beach County, FL HMH Properties, Inc.
The Colonnades, Albemarle County, VA HMC Retirement Properties, Inc.
</TABLE>
EXHIBIT 10.14
ASSIGNMENT OF LEASE
THIS ASSIGNMENT OF LEASE is made and delivered on this 16th day of
June, 1994, by HMC RETIREMENT PROPERTIES, INC., a Delaware corporation
("Assignor"), to HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real
estate investment trust ("Assignee").
W I T N E S S E T H :
WHEREAS, by a lease, dated as of April 1, 1989 (the "Lease"), Marriott
Corporation, a Delaware corporation, as tenant, leased certain land and
improvements thereon located in Charlottesville, Virginia, and as more
particularly described in Exhibit A, attached hereto and made a part hereof,
from UREF Retirement Corporation, a Virginia corporation ("Landlord"); and
WHEREAS, by that certain Assignment of Lease, dated October 7, 1993,
Host Marriott Corporation, successor in interest to Marriott Corporation,
assigned its interest as tenant under the Lease to Assignor; and
WHEREAS, Assignor now desires to assign its interest under the Lease to
Assignee, and Assignee desires to assume all of Assignor's obligations under the
Lease;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Assignor hereby grants,
assigns, transfers, and sets over to Assignee all of Assignor's right, title and
interest in, to and under the Lease and the leasehold estate of Assignor as
created by the Lease, together with any and all easement rights of any kind
appurtenant to and benefiting the premises demised under the Lease and with all
right, title and interest of Assignor in and to any and all buildings,
structures and improvements now or hereafter located on the premises demised
under the Lease.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof and for the rest of the term mentioned in the Lease,
subject to the terms, covenants, provisions and conditions of the Lease, and
subject to all existing title encumbrances of record.
Assignee hereby assumes and agrees to assume all obligations of
Assignor under the Lease, subject to the exculpation provisions of Section
13.6(b) of the Lease, arising from and after the date hereof, to perform all of
the respective covenants
<PAGE>
-2-
and agreements contained therein, and be bound by all the respective terms and
provisions thereof, from and after the date hereof.
Assignor hereby agrees to indemnify and hold Assignee harmless from and
against any and all liability, loss, costs, damages and expenses, including
reasonable attorneys' fees, incurred by Assignee as a result of Assignor's
actions as tenant under the Lease before the date of this instrument.
Assigne hereby agrees to indemnify and hold Assignor harmless from and
against any and all liability, loss, costs, damages and expenses, including
reasonable attorneys' fees, incurred by Assignor as a result of Assignee's
actions as tenant under the Lease from and after the date of this instrument.
IN WITNESS WHEREOF, the parties have executed this Assignment of Lease
this 16th day of June, 1994.
ASSIGNOR:
HMC RETIREMENT PROPERTIES, INC.
By:/s/ Pamela J. Murch
Name: Pamela J. Murch
Title: Vice President
Attest: /s/ Abbi J. Weisman
Name: Abbi J. Weisman
Title:Assistant Secretary
[SEAL]
ASSIGNEE:
HEALTH AND REHABILITATION PROPERTY
TRUST
By: /s/ David J. Hegarty
Name:David J. Hegarty
Title:Executive Vice President
<PAGE>
-3-
Signed, acknowledged and delivered in the presence of the following two
witnesses as to each signature of Assignee and Assignor:
/s/ Jennifer B. Clark
Name: Jennifer B. Clark
/s/ Elizabeth S. Wigon
Name: Elizabeth S. Wigon
This document prepared by/after recording return to:
Jennifer B. Clark, Esq.
Sullivan & Worcester
One Post Office Square
Boston, MA 02109
Send property tax bills and correspondence to Assignee at:
400 Centre Street
Newton, MA 02158
Attn: David J. Hegarty
<PAGE>
STATE OF Massachusetts )
COUNTY OF Suffolk )
I, the undersigned Notary Public in and for the jurisdiction aforesaid,
do hereby certify that Pamela J. Murch and as Vice President and Abbi J. Weisman
Assistant Secretary of HMC RETIREMENT PROPERTIES, INC., a Delaware corporation,
whose names are signed to the foregoing instrument, personally appeared before
me in my jurisdiction aforesaid and acknowledged the same on behalf of said
corporation.
GIVEN, under my hand and seal this 16th day of June, 1994.
/s/ Nicole M. Priolo
Notary Public
My Commission Expires: November 4, 1999
STATE OF Massachusetts )
COUNTY OF Suffolk )
I, the undersigned Notary Public in and for the jurisdiction aforesaid,
do hereby certify that David J. Hegarty as Executive Vice President of Health
and Rehabilitation Properties Trust, a Maryland real estate investment trust,
whose name is signed to the foregoing instrument, personally appeared before me
in my jurisdiction aforesaid and acknowledged the same on behalf of said trust.
GIVEN, under my hand and seal this 16th day of June, 1994.
/s/ Nicole M. Priolo
Notary Public
My Commission Expires: November 4, 1999
<PAGE>
Omitted Exhibits
The following exhibit to the Assignment of Lease has been omitted:
Exhibit Letter Exhibit Title
A The Premises
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibit to the Securities and Exchange Commission upon request.
EXHIBIT 10.15
THIRD AMENDMENT TO FACILITIES LEASE
AMENDMENT (this "Amendment") dated as of June 30, 1994 by and between
HMC RETIREMENT PROPERTIES, INC., a Delaware corporation having an address c/o
Host Marriott Corporation, 10400 Fernwood Road, Bethesda, Maryland 20817
("Landlord"), and MARRIOTT SENIOR LIVING SERVICES, INC., a Delaware corporation
having an address c/o Marriott International, Inc., 10400 Fernwood Road,
Bethesda, Maryland 20817 ("Tenant").
W I T N E S S E T H :
WHEREAS, reference is hereby made to that certain Facilities Lease
Agreement dated as of October 8, 1993 by and between Landlord and Tenant,
pursuant to which Landlord leases to Tenant, and Tenant leases from Landlord,
certain premises located in Lee County, Florida (as amended by an instrument
dated May 16, 1994, the "Lease"); and
WHEREAS, Landlord and Tenant desire to amend certain of the terms and
conditions of the Lease in the manner set forth below.
NOW, THEREFORE, in consideration of the mutual premises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Section 5.01 of the Lease shall be amended by deleting
Section 3.01(i) in its entirety and replacing it with the following: "(i)
Commencing with the Commencement Date and continuing to the end of the Term
(including all Extended Terms), Minimum Rental in an amount equal to Two Million
Forty Thousand Dollars ($2,040,000) per Year for each year; plus".
Section 2. If any terms and conditions of this Amendment conflict with
the terms and conditions of the Lease, the terms and conditions of this
Amendment shall prevail. Except as specifically modified herein, the Lease is in
full force and effect.
Section 3. This Amendment may be executed in several counterparts, each
of which shall be deemed to be an original, and all of which taken together
shall constitute one of the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first above written.
ATTEST: HMC RETIREMENT PROPERTIES, INC.
By: /s/ By: /s/ Pamela J. Murch
Assistant Secretary Vice President
ATTEST: MARRIOTT SENIOR LIVING SERVICES, INC.
By: /s/ By: /s/
Assistant Secretary Vice President
EXHIBIT 10.16
THIRD AMENDMENT TO FACILITIES LEASE
AMENDMENT (this "Amendment") dated as of June 30, 1994 by and between
HMC RETIREMENT PROPERTIES, INC., a Delaware corporation having an address c/o
Host Marriott Corporation, 10400 Fernwood Road, Bethesda, Maryland 20817
("Landlord"), and MARRIOTT SENIOR LIVING SERVICES, INC., a Delaware corporation
having an address c/o Marriott International, Inc., 10400 Fernwood Road,
Bethesda, Maryland 20817 ("Tenant")
W I T N E S S E T H :
WHEREAS, reference is hereby made to that certain Facilities Lease
Agreement dated as of October 8, 1993 by and between Landlord and Tenant,
pursuant to which Landlord leases to Tenant, and Tenant leases from Landlord,
certain premises located in Cook County, Illinois (as amended by an instrument
dated May 16, 1994, the "Lease");
WHEREAS, Landlord and Tenant desire to amend certain of the terms and
conditions of the Lease in the manner set forth below.
NOW, THEREFORE, in consideration of the mutual premises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Section 5.01 of the Lease shall be amended by deleting
Section 5.01(i) in its entirety and replacing it with the following: "(i)
Commencing with the Commencement Date and continuing to the end of 2001, Minimum
Rental equal to One Million Six Hundred Thousand Dollars ($1,600,000) per Year
for each such Year; commencing at the beginning of 2002 and continuing to the
end of 2010, Minimum Rental in an amount equal to Three Million Dollars
($3,000,000) per Year for each such Year; commencing at the beginning of 2011
and continuing to the end of 2013, Zero Dollars ($0.00) Minimum Rental per Year
for each such Year; and commencing at the commencement of the Extended Term, if
any, and continuing to the end of the Term (including all Extended Terms),
Minimum Rental in an amount equal to One Million Nine Hundred Fifty-five
Thousand Dollars ($1,955,000) per year for each Year; plus".
Section 2. If any terms and conditions of this Amendment conflict with
the terms and conditions of the Lease, the terms and conditions of this
Amendment shall prevail. Except as specifically modified herein, the Lease is in
full force and effect.
Section 3. This Amendment may be executed in several counterparts, each
of which shall be deemed to be an original, and all of which taken together
shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first above written.
ATTEST: HMC RETIREMENT PROPERTIES, INC.
By: /s/ By: /s/ Pamela J. Murch
Assistant Secretary Vice President
ATTEST: MARRIOTT SENIOR LIVING SERVICES, INC.
By: /s/ By: /s/
Assistant Secretary Vice President
EXHIBIT 10.17
CONSENT AND MODIFICATION AGREEMENT
(HRPT)
This CONSENT AND MODIFICATION AGREEMENT made as of this 10th day of
October, 1997 by and between MARRIOTT INTERNATIONAL, INC. ("MII"), MARRIOTT
SENIOR LIVING SERVICES, INC. ("MSLS"), NEW MARRIOTT MI, INC. ("New Marriott")
(which, by name change, will be renamed Marriott International, Inc.), HEALTH
AND RETIREMENT PROPERTIES TRUST, formerly known as Health and Rehabilitation
Properties Trust ("HRPT") and CHURCH CREEK CORPORATION ("CCC") (HRPT and CCC
collectively, "Owner").
WHEREAS, MII, MSLS and HMC Retirement Properties, Inc. ("HMC") entered
into certain agreements, including, but not limited to those agreements listed
on Exhibit A hereto (as the same may be amended, hereinafter referred to as
"Transaction Agreements"), relating to certain senior living retirement
facilities located in the United States (hereinafter referred to as
"Transaction"); and
WHEREAS, Owner has succeeded to the interests of HMC in said leases and
the guaranties by MII; and
WHEREAS, MII and New Marriott intend to undertake certain corporate
transactions which are set forth in the press release attached hereto as Exhibit
B, it being understood that New Marriott is intended to be the entity that will
constitute the "new" Marriott International and will own, directly or
indirectly, all or substantially all of MII's lodging, distribution services and
senior living services businesses. As used herein, the term "Intended Corporate
Transaction," shall refer to the transaction (a) in which MII spins off New
Marriott (or its assigns, as permitted pursuant to the terms and provisions of
Section 4 hereto) in a transaction which is not materially different from that
described in Exhibit B and (b) which will result, after giving effect to the
Intended Corporate Transaction, in New Marriott (or its assigns, as permitted
pursuant to the terms and provisions of Section 4 hereof) having a long term
debt rating of its senior, unsecured debt of "BBB-" (triple B minus) or greater
by Standard & Poor's Corporation; and
WHEREAS, the parties desire to consent to the Intended Corporate
Transaction and to modify the terms of the Transaction Agreements, as set forth
hereinbelow.
NOW, THEREFORE, the parties agree as follows:
1. The parties agree that upon the closing of the Intended Corporate
Transaction (the "Closing"), without further documentation or action:
(a) All references to MII in all Transaction Agreements shall
thereafter refer to New Marriott, and not to MII, as if New Marriott and not MII
were originally the named entity, and all Transaction Agreements which are to be
executed subsequent to the
<PAGE>
Closing shall be modified to name New Marriott, and not MII, as the party to
execute such Transaction Agreements,
(b) MII shall be released from any and all liabilities and
obligations to HMC under each and every Transaction Agreement, notwithstanding
when, and how, such liabilities or obligations arose or may arise, and New
Marriott shall be liable for all such liabilities and obligations of MII to
Owner under each and every Transaction Agreement, notwithstanding when, and how,
such liabilities or obligations arose or may arise,
2. On or after the date of Closing, upon the request of Owner, New
Marriott will execute such documents as Owner may reasonably request to evidence
its assumption of the liabilities and obligations of MII as herein provided;
including a confirmation of each Guaranty of Tenant Obligations of each Lease
(as set forth on Exhibit A hereto) and an opinion of in-house counsel of New
Marriott that New Marriott has taken all necessary corporate action to authorize
such assumption and that such Guaranty is the, valid, binding and enforceable
obligation of New Marriott. Upon the request of New Marriott or MII, Owner will
enter into such documents as MII or New Marriott may reasonably request to
evidence the release of MII from all liabilities and obligations to Owner.
3. The parties agree to cooperate with each other in order to
facilitate the transactions contemplated herein and shall execute and deliver
such documents and agreements as may be necessary or appropriate to accomplish
the purposes of the Intended Corporate Transaction. MII and New Marriott shall
give prior notice of the anticipated date of Closing; provided, however, (a)
such anticipated date may be extended or delayed in the sole discretion of MII
and/or New Marriott, and such extension or delay shall not have any effect on
this Agreement, and (b) such prior notice shall not be required if MII and/or
New Marriott, in its judgment, believes that the giving of such prior notice may
violate any federal or state securities law.
4. Prior to the Closing of the Intended Corporate Transaction, New
Marriott may assign its rights and obligations hereunder to any wholly owned
U.S. subsidiary of MII, which wholly owned subsidiary shall, following the
Intended Corporate Transaction, own all or substantially all of MII's lodging,
distribution services and senior living services businesses in accordance with
the second Whereas clause herein. In the event of such an assignment and
assumption, the assignor shall be released from all of its obligations under
this agreement and the assignee shall become New Marriott for all purposes under
this agreement.
5. Exception as specifically set forth herein, nothing contained herein
shall be deemed to modify, amend, waive or supersede any provision of any
Transaction Agreement, including, without limitation, Section 5.07 of each
Lease.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hand and seal.
ATTEST/WITNESS: MARRIOTT INTERNATIONAL, INC.
/s/ By:/s/ C. S. Lynch
MARRIOTT SENIOR LIVING SERVICES, INC.
/s/ By:/s/ C.S. Lynch
NEW MARRIOTT MI, INC.
/s/ By: /s/ C. S. Lynch
HEALTH AND RETIREMENT PROPERTIES TRUST
/s/ By: /s/ Ajay Saini
CHURCH CREEK CORPORATION
/s/ By: /s/ Ajay Saini
-3-
<PAGE>
Omitted Exhibits
The following exhibit to the Consent and Modification Agreement has
been omitted:
Exhibit Letter Exhibit Title
A Transaction Agreements
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibit to the Securities and Exchange Commission upon request.
EXHIBIT 10.18
MASTER LEASE DOCUMENT
GENERAL TERMS AND CONDITIONS
DATED AS OF DECEMBER 28, 1990,
FOR LEASES TO BE EXECUTED BY
HEALTH AND REHABILITATION PROPERTIES TRUST
(Known in Wisconsin as "Health and Rehabilitation
Properties REIT"), AS LANDLORD,
AND
AMS PROPERTIES, INC., AS TENANT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1 DEFINITIONS............................................................................................2
ARTICLE 2 LEASED PROPERTY AND TERM..............................................................................12
2.1 Leased Property...........................................................................12
2.2 Condition of Leased Property..............................................................13
2.3 Fixed Term................................................................................14
2.4 Extended Terms............................................................................14
ARTICLE 3 RENT..................................................................................................15
3.1 Rent......................................................................................15
3.2 Late Payment of Rent......................................................................23
3.3 Net Lease.................................................................................23
3.4 No Termination, Abatement, Etc............................................................24
ARTICLE 4 USE OF THE APPLICABLE LEASED PROPERTY.................................................................24
4.1 Permitted Use.............................................................................24
4.2 Compliance with Legal and Insurance Requirements, Etc.....................................26
4.3 Compliance with Medicaid and Medicare Requirements........................................26
4.4 Environmental Matters.....................................................................26
ARTICLE 5 MAINTENANCE AND REPAIRS...............................................................................27
5.1 Maintenance and Repair....................................................................27
5.2 Tenant's Personal Property................................................................28
5.3 Yield Up..................................................................................29
5.4 Encroachments, Restrictions, Etc..........................................................29
5.5 Landlord to Grant Easements, Etc..........................................................30
ARTICLE 6 CAPITAL ADDITIONS, ETC................................................................................31
6.1 Construction of Capital Additions to the Leased Property..................................31
6.2 Capital Additions Financed or Paid For by Tenant..........................................32
6.3 Non-Capital Additions.....................................................................34
6.4 Salvage...................................................................................34
ARTICLE 7 LIENS.................................................................................................34
7.1 Liens.....................................................................................34
7.2 Landlord's Lien...........................................................................35
ARTICLE 8 PERMITTED CONTESTS....................................................................................35
ARTICLE 9 INSURANCE AND INDEMNIFICATION.........................................................................36
9.1 General Insurance Requirements............................................................36
9.2 Replacement Cost..........................................................................37
9.3 Waiver of Subrogation.....................................................................38
9.4 Form Satisfactory, Etc....................................................................38
9.5 Blanket Policy............................................................................39
9.6 No Separate Insurance.....................................................................39
9.7 Indemnification of Landlord...............................................................39
<PAGE>
ARTICLE 10 CASUALTY..............................................................................................40
10.1 Insurance Proceeds.......................................................................40
10.2 Damage or Destruction....................................................................41
10.3 Damage Near End of Term..................................................................42
10.4 Tenant's Property........................................................................43
10.5 Restoration of Tenant's Property.........................................................43
10.6 Abatement of Rent........................................................................43
10.7 Termination of Rights of First Refusal and Option to Purchase............................44
10.8 Waiver...................................................................................44
ARTICLE 11 CONDEMNATION..........................................................................................44
11.1 Total Condemnation, Etc..................................................................44
11.2 Partial Condemnation.....................................................................44
11.3 Abatement of Rent........................................................................45
11.4 Temporary Condemnation...................................................................45
11.5 Allocation of Award......................................................................46
11.6 Termination of Rights of First Refusal and Option to Purchase............................46
ARTICLE 12 DEFAULTS AND REMEDIES.................................................................................46
12.1 Events of Default........................................................................50
12.2 Remedies.................................................................................52
12.3 TENANT'S WAIVER..........................................................................52
12.4 Application of Funds.....................................................................52
12.5 Failure to Conduct Business..............................................................52
12.6 Landlord's Right to Cure Tenant's Default................................................53
12.7 Trade Names..............................................................................53
ARTICLE 13 HOLDING OVER..........................................................................................53
ARTICLE 14 LANDLORD'S DEFAULT....................................................................................53
ARTICLE 15 PURCHASE OF LEASED PROPERTY...........................................................................54
ARTICLE 16 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY......................................................55
16.1 Tenant's Substitution Option.............................................................55
16.2 Landlord's Substitution Option...........................................................56
16.3 Substitution Procedures..................................................................56
16.4 Conditions to Substitution...............................................................57
16.5 Conveyance to Tenant.....................................................................59
16.6 Expenses.................................................................................59
ARTICLE 17 SUBLETTING AND ASSIGNMENT.............................................................................60
17.1 Subletting and Assignment................................................................60
17.2 Required Sublease Provisions.............................................................61
17.3 Permitted Sublease.......................................................................62
17.4 Sublease Limitation......................................................................62
ARTICLE 18 ESTOPPEL CERTIFICATES.................................................................................62
ARTICLE 19 LANDLORD'S RIGHT TO INSPECT...........................................................................63
<PAGE>
ARTICLE 20 APPRAISAL.............................................................................................63
20.1 Appraisal Procedure......................................................................63
20.2 Landlord's Right to Appraisal............................................................64
ARTICLE 21 RIGHTS OF FIRST REFUSAL; OPTION TO PURCHASE...........................................................64
21.1 First Refusal to Purchase................................................................64
21.2 First Refusal to Lease...................................................................65
21.3 Landlord's Option to Purchase the Tenant's Personal
Property; Transfer of Licenses.........................................................66
21.4 Tenant's Option to Purchase the Collective Leased Properties.............................67
ARTICLE 22 FACILITY MORTGAGES....................................................................................67
22.1 Landlord may Grant Liens.................................................................67
22.2 Subordination of Lease...................................................................68
22.3 Notice to Mortgagee and Ground Landlord..................................................70
ARTICLE 23 MISCELLANEOUS.........................................................................................70
23.1 No Waiver................................................................................70
23.2 Remedies Cumulative......................................................................70
23.3 Acceptance of Surrender..................................................................70
23.4 No Merger of Title.......................................................................71
23.5 Conveyance by Landlord...................................................................71
23.6 Quiet Enjoyment..........................................................................71
23.7 NON-LIABILITY OF TRUSTEES................................................................71
23.8 Landlord's Consent of Trustees...........................................................72
23.9 Memorandum of Lease......................................................................72
23.10 Notices.................................................................................72
23.11 Incorporation by Reference..............................................................72
23.12 Construction............................................................................73
23.13 GOVERNING LAW...........................................................................74
SCHEDULE 1 LIST OF TRANSACTION DOCUMENTS
</TABLE>
<PAGE>
MASTER LEASE DOCUMENT
THIS MASTER LEASE DOCUMENT, GENERAL TERMS AND CONDITIONS (hereinafter
the "Master Lease Document") is prepared for and will be adopted as part of each
lease to be executed by HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland
real estate investment trust (known in Wisconsin as "Health and Rehabilitation
Properties REIT"), having its principal office at 400 Centre Street, Newton,
Massachusetts 02158, as Landlord, and AMS PROPERTIES, INC., a Delaware
corporation having its principal office at 200 East Del Mar, Suite 126,
Pasadena, California 91105, as Tenant.
RECITALS
This Master Lease Document is made and entered into with reference to
the following recitals:
A. Landlord, Tenant, American Medical Services, Inc., a Wisconsin
corporation ("AMS"), which owns beneficially and of record all of the
capital stock of Tenant, AMS Holding Co., a California corporation
("AMSHC"), which owns beneficially and of record all of the capital
stock of AMS, and Host Masters, Inc., a California corporation ("HMI"),
which owns beneficially and of record all of the capital stock of
AMSHC, have entered into an Acquisition Agreement, Agreement to Lease
and Mortgage Loan Agreement dated as of even date herewith (as the same
may be amended, modified or supplemented from time to time, the
"Acquisition Agreement"), pursuant to which, inter alia, Landlord
agreed to acquire from AMS and simultaneously to lease to Tenant
certain parcels of real property and improvements (the "Collective
Leased Properties") each for use and operation as a licensed nursing
home or as otherwise described on Exhibit A-1 hereto. The Collective
Leased Properties are identified in Exhibit A-2 hereto.
B. Landlord and Tenant have executed and delivered a lease for each of the
Collective Leased Properties of each of which leases are substantially
in the form of Exhibit B hereto and incorporate by reference this
Master Lease Document. Each such lease is hereinafter referred to as a
"Lease".
C. Notwithstanding anything herein to the contrary, the terms and
conditions of this Master Lease Document shall be construed and
interpreted as to each Lease as if a separate lease containing all the
terms of this Master Lease Document and such Lease had been executed by
Landlord and Tenant with respect to the Collective Leased Property
described in such Lease.
<PAGE>
-2-
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Master Lease Document, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article shall 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 shall have the meanings assigned to them in ac cordance
with generally accepted accounting principles consistently applied, (iii) all
references in this Master Lease Document to designated "Articles," "Sections"
and other subdivisions are to the designated Articles, Sections and other
subdivisions of this Master Lease Document and (iv) the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Master
Lease Document as a whole and not to any particular Article, Section or other
subdivision.
Acquisition Agreement: As defined in the recital clauses hereto.
Additional Charges: As defined in Section 3.1.3.
Additional Rent: As defined in Section 3.1.2 with respect to the
applicable Leased Property.
Additional Rent Adjustment Date shall mean, for any Fiscal Year, the
date on which an amount of Net Patient Revenues shall have been generated by
each of the Collective Leased Properties, such that (a) five percent (5%) of the
sum of the excess, for all the Collective Leased Properties, of (x) the Net
Patient Revenues for each Collective Leased Property for such Fiscal Year
through such date over (y) the Net Patient Revenues for such Collective Leased
Property during the Base Year shall equal (b) two percent (2%) of the sum of the
Adjusted Purchase Prices of all the Collective Leased Properties.
Adjusted Purchase Price shall mean, for the applicable Leased Property
or Collective Leased Property, as the case may be, the Purchase Price of such
Leased Property or Collective Leased Property, plus the aggregate amount of all
disbursements made by Landlord with respect to such Leased Property or
Collective Leased Property pursuant to the terms of the Renovation Funding
Agreement, plus any amount disbursed or advanced by Landlord to finance, or to
reimburse Tenant for its financing of, any Capital Addition to such Leased
Property or Collective Leased Property (but excluding any amounts disbursed by
Landlord under the terms of the Renovation Escrow Agreement), less the amount of
any Award
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or the proceeds of any insurance received by Landlord in connection
with a partial Condemnation or a partial casualty involving the applicable
Leased Property as described in Section 11.2 or 10.2.2, and not applied by
Landlord to the restoration of the applicable Leased Property as provided
therein.
Affiliate shall mean as to any Person (a) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more on a consolidated basis, of the
outstanding capital stock, shares, equity or beneficial interests of such
Person, (c) any officer, director, employee, general partner or trustee of such
Person or any other Person controlling, controlled by or under common control
with such Person (excluding trustees and Persons serving in similar capacities
who are not otherwise an Affiliate of such Person), or (d) with respect to any
individual, a spouse, any ancestor or descendant, or any other relative (by
blood, adoption or marriage), within the third degree, of such individual. For
the purposes of this definition, "control" (including the correlative meanings
of the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, through the ownership of voting securities, partnership interests or
other equity interests.
AMS: As defined in the recital clauses hereto.
AMSHC: As defined in the recital clauses hereto.
Award shall mean all compensation, sums or other value awarded, paid or
received by virtue of a total or partial Condemnation of the applicable Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses, including, without limitation, expert witness fees, incurred
by Landlord in connection with obtaining any such award).
Base Net Patient Revenues shall mean, for the applicable Leased
Property, Net Patient Revenues for such Leased Property for the Base Year.
Base Year shall mean the year beginning January 1, 1991, and ending
December 31, 1991.
Business Day shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in the State are authorized by law or
executive action to close.
Capital Addition shall mean 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
existing improvements, which are constructed on any parcel or portion of the
Land during
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the Term, including, the construction of a new wing or new story to the
renovation of existing improvements on such Leased Property in order 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 on 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 shall mean the cost of any Capital Addition
proposed to be made by Tenant at the applicable Leased Property, whether paid
for by Tenant or Landlord. Such cost shall include (a) the cost of construction
of the Capital Addition, including site preparation and improvement, materials,
labor, supervision, developer and administrative fees, legal fees, and related
design, engineering and architectural services, the cost of any fixtures, the
cost of equipment and other personalty, the cost of construction financing
(including, but not limited to, capitalized interest) and other miscellaneous
costs approved by Landlord, (b) if agreed to by Landlord in writing, in advance,
the cost of any land (including all related acquisition costs incurred by
Tenant) contiguous to the Leased Property which is to become a part of the
Leased Property purchased for the purpose of placing thereon the Capital
Addition or any portion thereof or for providing means of access thereto, or
parking facilities therefor, including the cost of surveying the same, (c) the
cost of insurance, real estate taxes, water and sewage charges and other
carrying charges for such Capital Addition during construction, (d) title
insurance charges, (e) reasonable attorneys' fees and expenses, (f) filing,
registration and recording taxes and fees, (g) documentary stamp or transfer
taxes, and (h) all actual and reasonable costs and expenses of Landlord and
Tenant and, if agreed to by Landlord in writing, in advance, any Lending
Institution committed to finance the Capital Addition, including, but not
limited to, all (i) reasonable attorneys' fees and expenses, (ii) printing
expenses, (iii) filing, registration and recording taxes and fees, (iv)
documentary stamp or transfer taxes, (v) title insurance charges and appraisal
fees, (vi) rating agency fees, and (vii) if agreed to by Landlord in writing, in
advance, commitment fees charged by any Lending Institution advancing or
offering to advance any portion of any financing to which Landlord has consented
in writing for such Capital Addition.
Code shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as from time
to time amended.
Collective Leased Properties: As defined in the recital clauses hereto.
Commencement Date: As defined in the applicable Lease.
Condemnation shall mean, as to the applicable Leased Property, (a) the
exercise of any governmental power, whether by
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legal proceedings or otherwise, by a Condemnor, (b) a voluntary sale or transfer
by Landlord 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,
whether or not the same shall have actually been commenced.
Condemnor shall mean any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
Date of Taking shall mean, 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.
Default shall mean (a) any Event of Default and (b) and any condition
or event that (i) with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default and (ii) either relates to
the payment of Rent or relates to a matter as to which Landlord has given Notice
of default to Tenant.
Encumbrance: As defined in Section 22.1.
Event of Default: As defined in Section 12.1.
Excess Net Patient Revenues shall mean, for the applicable Leased
Property for any Fiscal Year or quarter thereof, the amount of Net Patient
Revenues for such Leased Property for such Fiscal Year (or applicable quarter
thereof) in excess of the Base Net Patient Revenues for such Leased Property
(or, with respect to any quarter in any Fiscal Year, twenty-five percent (25%)
of the total Base Net Patient Revenues for such Leased Property); provided that
such term shall mean, (i) with respect to any partial Fiscal Year (other than as
to any complete quarter thereof), the amount by which the Net Patient Revenues
for such Leased Property for such partial Fiscal Year, prorated to reflect the
number of days in such partial Fiscal Year, exceeds the product of (x) a
fraction of which the numerator is the number of days in such partial Fiscal
Year, and the denominator is 360, multiplied by (y) the total Base Net Patient
Revenues for such Leased Property; and (ii) with respect to any partial quarter,
the amount by which the Net Patient Revenues for such Leased Property for such
partial quarter, prorated to reflect the number of days in such partial quarter,
exceeds the product of (x) a fraction of which the numerator is the number of
days in such partial quarter, and the denominator is 360, multiplied by (y) the
total Base Net Patient Revenues for such Leased Property.
Extended Term(s): As defined in Section 2.4.
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Facility shall mean the facility being operated or proposed to be rated
on the applicable Leased Property.
Facility Mortgage shall mean any Encumbrance placed upon the applicable
Leased Property in accordance with Article 22 hereof.
Facility Mortgagee shall mean the holder of any Facility Mortgage.
Facility Trade Name shall mean any name under which Tenant holds or has
held itself out to the public in operating the Facility with respect to the
applicable Leased Property at any time during the Term.
Fair Market Added Value shall mean, as to any applicable Leased
Property, the Fair Market Value of such Leased Property (including all Capital
Additions) less the Fair Market Value of such Leased Property determined as if
no Tenant's Capital Additions had been constructed.
Fair Market Rental shall mean, as to the applicable Leased Property,
the rental which a willing tenant not compelled to rent would pay a willing
landlord not compelled to lease for the use and occupancy of such Leased
Property (including all Capital Additions other than Tenant's Capital Additions)
on the terms and conditions of the applicable Lease for the term in question,
assuming Tenant is not in default thereunder and determined in accordance with
the appraisal procedures set forth in Article 20 hereof or in such other manner
as shall be mutually acceptable to Landlord and Tenant.
Fair Market Value shall mean the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for the
applicable Leased Property, (a) assuming the same is unencumbered by the
applicable Lease, (b) determined in accordance with the appraisal procedures set
forth in Article 20 hereof or in such other manner as shall be mutually
acceptable to-Landlord and Tenant, and (c) not taking into account any reduction
in value resulting from any indebtedness to which such property is subject,
except the positive or negative effect on the value of such 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.
Fair Market Value Purchase Price shall mean the Fair Market Value of
the applicable Leased Property less the Fair Market Added Value.
Fiscal Year shall mean the twelve (12) month period from January 1 to
December 31.
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Five Percent Additional Rent shall mean, for the applicable Lease
Property and for any Fiscal Year, the sum equal to five percent (5%) o all
Excess Net Patient Revenues for such Leased Property for such Fiscal Year
through the Additional Rent Adjustment Date.
Fixed Term: As defined in Section 2.3.
Fixtures: As defined in Section 2.1(d).
Guarantor shall mean any guarantor of Tenant's obligations under the
applicable Lease, including, without limitation, AMS and AMSHC.
Hazardous Substances: As defined in Section 4.4.
HRP Shares Pledge Agreement shall mean the HRP Shares Pledge Agreement
dated as of even date herewith by Tenant in favor of Landlord, as the same may
be amended, modified or supplemented from time to time.
Impositions shall mean for the 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 benefit, whether
or not commenced or completed prior to the date hereof and whether or not to be
completed within the Term), ground rents (including any minimum rent under any
ground lease, and any additional rent or charges thereunder, whether payable by
reference to Rent payable hereunder or otherwise), 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) Landlord'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 or possession of, or sales from, or 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 the Lease with
respect to the ap plicable Leased Property shall be construed to require Tenant
to pay (1) any tax based on net income imposed on Landlord, or (2) any transfer,
or net revenue tax of Landlord, or (3) any transfer
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fee or other tax imposed with respect to the sale, exchange or other disposition
by Landlord of the applicable Leased Property or the proceeds thereof (other
than in connection with the sale, exchange or other disposition to, or in
connection with a transaction involving, Tenant), or (4) any single business,
gross receipts (other than a tax on any rent received by Landlord from Tenant),
transaction privilege, rent or similar taxes as the same related to or are
imposed upon Landlord, 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.
Independent Trustees shall mean Trustees who, in their individual
capacity, (a) are not Affiliates of Tenant and (b) do not perform any services
for Landlord except as Trustees.
Insurance Requirements shall mean all terms of any insurance policy
required by the Lease with respect to the applicable Leased Property and all
requirements of the issuer of any such policy.
Land: As defined in Section 2.1(a) with respect to the applicable
Lease.
Landlord shall mean Health and Rehabilitation Properties Trust, a
Maryland real estate investment trust, and its successors and assigns.
Lease: As defined in the recital clauses hereto.
Leased Improvements: As defined in Section 2.1(b) with respect to the
applicable Lease.
Leased Personal Property: As defined in Section 2.1(e) with respect to
the applicable Lease.
Leased Property: As defined in Section 2.1 with respect to the
applicable Lease.
Legal Requirements shall mean, as to the applicable Leased Property,
all federal, state, county, municipal and other governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions
affecting such Leased Property or the maintenance, construction, alteration or
operation thereof, whether now or hereafter enacted or in existence, including,
without limitation, (a) all permits, licenses, certificates of need,
authorizations and regulations necessary to operate such Leased Property for its
Primary Intended Use, and (b) all covenants, agreements, restrictions and
encumbrances contained in any instruments at any time in force affecting such
Leased Property, including those which may (i) require material repairs,
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modifications or alterations in or to such Leased Property or (ii) in any way
adversely affect the use and enjoyment thereof.
Minimum Rent: As defined in the applicable Lease, as the same may be
adjusted from time to time in accordance with Section 3.1.1.
Net Patient Revenues with respect to the Facility located at the
applicable Leased Property (or Collective Leased Property, as the case may be),
shall mean all revenues (determined in ac cordance with GAAP, except as provided
below) received or receivable from or by reason of the operation of such
Facility, or any other use of such Facility, including without limitation all
patient or client revenues received or receivable for the use of or otherwise by
reason of all rooms, beds and other facilities provided, meals served, services
performed or provided, space or facilities subleased or goods sold at such
Facility, including, without limitation, any other arrangements with third
parties relating to the possession or use of any portion of such Facility;
provided, however, that Net Patient Revenues shall not include:
(a) revenue from professional fees or charges by physicians and
unaffiliated providers of ancillary services, when and to the extent such
charges are paid over to such physicians or unaffiliated providers of ancillary
services, or are separately billed and not included in comprehensive fees;
(b) non-operating revenues such as interest income or income from the
sale of assets not sold in the ordinary course of business;
(c) revenues attributable to services actually provided off-site or
otherwise away from such Facility, such as home health care, to persons that are
not patients at such Facility;
(d) all revenues attributable to Tenant's Capital Additions; and
(e) revenues attributable to child care services used primarily for
employees of such Facility.
Notice shall mean a notice given in accordance with Section 24.10.
Officer's Certificate shall mean a certificate signed by a Responsible
Officer.
Overdue Rate shall mean, on any date, a per annum rate of interest
equal to (a) two percent (2%), plus (b) a percentage equal to (i) the quotient
(expressed as a decimal) of the aggregate Minimum Rent payable for all the
Collective Leased Properties for the then current Fiscal Year, divided by the
aggregate of the then Adjusted Purchase Prices for the Collective Leased
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Properties, multiplied by (ii) 100; but in no event greater than the maximum
rate then permitted under applicable law.
Permitted Encumbrances shall mean, with respect to the applicable
Leased Property those matters, if any, set forth on Exhibit B of the Lease with
respect thereto.
Person shall mean any individual, corporation, general or limited
partnership, stock company or association, joint venture, association, company,
trust, bank, trust company, land trust, business trust, any government or agency
or political subdivision thereof or any other entity.
Primary Intended Use: As defined in Section 4.1.1.
Purchase Price(s): With respect to the applicable Leased Property, the
amount identified as such in the applicable Lease and, with respect to each
Collective Leased Property, the amount identified as such in the Lease for such
Collective Leased Property.
Relevant Percentage shall mean, with respect to the first quarter of
any Fiscal Year, twenty-five percent (25%), with respect to the second quarter
of such Fiscal Year, fifty percent (50%), with respect to the third quarter of
such Fiscal Year, seventy-five percent (75%), and with respect to the fourth
quarter of such Fiscal Year, one hundred percent (100%).
Renovation Escrow Agreement shall mean the Renovation Escrow Agreement
dated as of even date herewith between Tenant and Landlord, relating to certain
improvements to be made at the Collective Leased Properties, as the same may be
amended, modified or supplemented from time to time.
Renovation Funding Agreement shall mean the Renovation Funding
Agreement dated as of even date herewith between Tenant and Landlord, relating
to certain required improvements to be made at the Collective Leased Properties,
as the same may be amended, modified or supplemented from time to time.
Rent shall mean, collectively, the Minimum Rent, Additional Rent and
Additional Charges payable with respect to the applicable Leased Property.
Responsible Officer shall mean Eugene E. Burleson, or successor chief
executive officer of Tenant.
SEC shall mean the Securities and Exchange Commission.
State shall mean the State or Commonwealth in which the applicable
Leased Property is located.
Subsidiary shall mean, with respect to any Person, any corporation or
other entity of which securities or other ownership
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interests having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at the time directly
or indirectly owned by such Person.
Substitute Properties: As defined in Article 16.
Substitution Date: As defined in Article 16.
Tenant's Capital Additions: As defined in Section 6.4.
Tenant's Personal Property shall mean (a) all motor vehicles and (b)
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other personal property of Tenant
acquired by Tenant after the date hereof and located on the applicable Leased
Property or used in Tenant's business on such Leased Property and all modifica
tions, replacements, alterations and additions to such personal property
installed at the expense of Tenant, other than any items included within the
definition of Fixtures or Leased Personal Property.
Term shall mean, collectively, for the applicable Lease, the Fixed term
and any Extended Term(s), to the extent properly exercised pursuant to the
provisions of Section 2.4, unless sooner terminated pursuant to the provisions
of this Master Lease Document or the applicable Lease.
Test Rate shall mean the minimum interest rate necessary to avoid
imputation of original issue discount or interest income under Sections 483 or
1272 of the Code or any similar provision.
Transaction Documents shall mean the documents listed on Schedule 1
hereto.
Trustees shall mean the trustees of Landlord.
TW Note shall mean, collectively, the Payment Obligation, dated as of
even date herewith, by AMS in favor of AMS Holdings, Inc., a New York
corporation, any guaranty thereof and the Real Estate Collateral Agreement (as
defined therein), as each of the same may be amended, modified or supplemented
from time to time.
Unavoidable Delays shall mean delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, unavoidable casualty or any other
causes beyond the reasonable control of the party responsible for performing an
obligation hereunder, but in no event to exceed forty-five (45) days (provided
that lack of funds shall not be deemed a cause beyond the control of Tenant) so
long as Tenant shall use reasonable efforts to alleviate the cause of such delay
and thereafter promptly perform such obligation, and so long as, in any event,
no permit, license, certificate of need or authorization necessary to operate
such Leased Property for its Primary Intended Use is adversely
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affected or subject to any danger of revocation or termination. In no event
shall Tenant's obligation to pay the Rent be affected by Unavoidable Delays.
Unsuitable for its Primary Intended Use shall mean a state or condition
of the Facility located at if applicable Leased Property such that (a) following
any damage or destruction involv ing such Leased Property, such Leased Property
cannot reasonably be expected to be restored to substantially the same condition
as existed immediately before such damage or destruction, and as otherwise
required by Section 10.2.4, within a period equal to eighteen (18) months
following such damage or destruction or such shorter period of time as to which
business interruption insurance is available to cover Rent and other costs
related to such Leased Property following such damage or destruction, or (b) as
the result of a partial taking by Condemnation, such Facility cannot be
operated, in the good faith judgment of Landlord, on a commercially practicable
basis for its Primary Intended Use taking into account, among other relevant
factors, the number of usable beds, the amount of square footage, or the
revenues affected by such damage or destruction or partial taking.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property.
Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord with respect to each
applicable Lease all of the following (collectively, the "Leased Property"):
(a) that certain tract, piece and parcel of land, as more
particularly described in the applicable Lease (the "Land");
(b) all buildings, structures, Fixtures and other improvements of
every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and
lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings and structures presently
situated upon the Land and all Capital Additions other than
Tenant's Capital Additions (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or
incorporated into the Leased Improvements, including, without
limitation, all furnaces, boilers, heaters,
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electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the
greatest extent permitted by 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 (collectively the
"Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other
personal property of any kind or description used or useful in
Tenant's business on or in the Leased Improvements, and
located on or in the Leased Improve ments, except items, if
any, included within the category of Fixtures, but
specifically excluding all items included within the category
of Tenant's Personal Property (collectively the "Leased
Personal Property"); and
(f) all existing leases of space (including any security deposits
held by Tenant pursuant thereto) in the Leased Improvements to
tenants thereof.
2.2 Condition of Leased Property.
Tenant acknowledges receipt and delivery of possession of the
applicable Leased Property and Tenant accepts such Leased Property in "as is"
condition, subject to the rights of parties in possession, the existing state of
title, including all covenants, conditions, restrictions, easements and other
matters of record, all applicable Legal Requirements, the lien of financing
instruments, mortgages and deeds of trust, and such other matters which would be
disclosed by an inspection of such Leased Property and the record title thereto
or by an accurate survey thereof. TENANT REPRESENTS THAT IT HAS INSPECTED SUCH
LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF
SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR
LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM
OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE APPLICABLE LEASED
PROPERTY. LANDLORD MAKES NO WARRANTY OR REPRESENTATION EXPRESS OR IMPLIED, IN
RESPECT OF THE APPLICABLE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS
FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT. To the
extent permitted by law, however, Landlord hereby assigns to Tenant all of
Landlord's rights to proceed against any predecessor in title for breaches of
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warranties or representations or for latent defects in the applicable Leased
Property. Landlord shall fully cooperate with Tenant in the prosecution of any
such claims, in Landlord's or Tenant's name of all at Tenant's sole cost and
expense. Tenant shall indemnify, defend, and hold harmless Landlord from and
against any loss cost, damage or liability (including reasonable attorneys'
fees) incurred by Landlord in connection with such cooperation.
2.3 Fixed Term.
The initial term of the applicable Lease (the "Fixed Term") shall be
for a fixed term as set forth in such Lease.
2.4 Extended Terms.
Provided that no Default shall have occurred and be continuing, and the
applicable Lease and each other Lease shall be in full force and effect (other
than Leases that have been terminated in accordance with the provisions hereof,
or by the mutual agreement of Landlord and Tenant, other than after an Event of
Default), Tenant shall have the right to extend the Term as set forth in the
applicable Lease and below (the "Extended Term(s)"); provided, however, Tenant's
right to extend is subject to Tenant exercising such right simultaneously with
respect to all, and not less than all, of the Collective Leased Properties that
are then subject to a Lease.
Each Extended Term for the applicable Lease shall commence on the day
succeeding the expiration of the Fixed Term or the preceding Extended Term
therefor, as the case may be. All of the terms, covenants and provisions of such
Lease shall apply to each such Extended Term, except that the Minimum Rent for
each such Extended Term shall be as set forth in Section 3.1.1(e) (subject to
adjustment as provided in Section 3.1.1) with respect thereto. If Tenant shall
elect to exercise any of the aforesaid extensions, it shall do so by giving
Landlord Notice thereof not later than twelve (12) months prior to the
expiration of the then current term of such Lease (Fixed or Extended, as
applicable), it agreed that time is of the essence with respect to the giving of
such Notice. Tenant may not exercise its option for more than one Extended Term
at a time. If Tenant shall fail to give any such Notice, the applicable Lease
shall automatically terminate at the end of the term then in effect, and Tenant
shall have no further option to extend the Term of the applicable Lease. If
Tenant shall give such Notice, the extension of the applicable Lease shall be
automatically effected without the execution of any additional documents; it
being understood and agreed, however, that Tenant and Landlord shall execute
such documents and agreements as either party shall reasonably require to
evidence the same.
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ARTICLE 3
RENT
3.1 Rent.
Tenant shall pay to Landlord, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
at Landlord's address set forth above or at such other place or to such other
Person as Landlord from time to time may designate in a Notice to Tenant,
without offset, abatement, demand or deduction, Minimum Rent, Additional Rent
and Additional Charges, during the Term, as hereinafter provided. All payments
to Landlord shall be made by certified check, wire transfer of immediately
available funds or by other means acceptable to Landlord in its sole discretion.
3.1.1 Minimum Rent:
(a) During Fixed Term. The annual sum set forth in the applicable Lease
(subject to adjustment as provided herein) payable in advance in equal,
consecutive monthly installments as set forth in such Lease, on the first day of
each calendar month of the Fixed 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.
(b) Adjustments of Minimum Rent Following Disbursements under
Renovation Funding Agreement. Effective on the date of each disbursement to pay
or the cost of any renovations at the applicable Leased Property pursuant to the
terms of the Renovation Funding Agreement, the Minimum Rent under the Lease for
such Leased Property shall be adjusted, effective on the date of such
disbursement, to an annual sum equal to the product of (i) the sum of the
Adjusted Purchase Price for such Leased Property (giving effect to the making of
such disbursement) and (ii) (1) if such disbursement occurs prior to the first
anniversary of the Com mencement Date, Thirteen and Twenty-Five Hundredths
percent (13.25%), (2) if such disbursement occurs on or after the first
anniversary of the Commencement Date but prior to the second anniversary of the
Commencement Date, Thirteen and Fifty Hundredths percent (13.50%), or (3) if
such disbursement occurs on or after the second anniversary of the Commencement
Date, Thirteen and Seventy-Five Hundredths percent (13.75%). If any such
disbursement is made during any calendar month on other than the first day of
such calendar month, Tenant shall pay to Landlord on the first day of the
following calendar month (in addition to the amount of Minimum Rent payable with
respect to such month, as adjusted pursuant to this paragraph (b)) the amount by
which minimum Rent for such Leased Property for the preceding month, as adjusted
for such disbursement, exceeded the amount of Minimum
<PAGE>
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Rent for such Leased Property payable by Tenant for such preceding month without
giving effect to such adjustment.
(c) Adjustments of Minimum Rent at the First and Second Anniversaries
of the Commencement Date. During the Fixed Term of the applicable Lease, on each
of the first and second anniversaries of the Commencement Date therefor, the
Minimum Rent under such Lease shall be increased by an amount equal to 0.25% of
the Adjusted Purchase Price of the applicable Leased Property.
(d) Adjustments of Minimum Rent Connection with the Release and
Re-Pledging of Pledged Shares under the HRP Shares Pledge Agreement.
Notwithstanding anything herein to the contrary, each monthly installment of
Minimum Rent payable following the date of the release of fifty percent (50%) of
the Pledged Shares under and as defined in the HRP Shares Pledge Agreement
pursuant to and in accordance with the provisions of the HRP Shares Pledge
Agreement, shall be increased by Five Thousand Dollars ($5,000) (such amount,
the "Increased Minimum Rent") over the aggregate amount of Minimum Rent that
would nave been payable for all of the Collective Leased Properties without
giving effect to this paragraph (d) (allocated on a pro rata basis among the
Collective Leased Properties based upon their respective Adjusted Purchase
Prices). If, following the release of such Pledged Shares, Landlord becomes
entitled under the HRP Shares Pledge Agreement to request that the released
shares (or cash collateral) be re-pledged (or pledged) under the ERP Shares
Pledge Agreement, and Tenant thereafter re-pledges such shares (or pledges such
cash collateral) in accordance with the provisions thereof, Tenant shall not be
required to pay the Increased Minimum Rent as to any installment of Minimum Rent
coming due after the date of the re-pledge of such shares (or the pledge of such
cash collateral) until such time, if any, that Landlord is required to release
such pledged Shares (or cash collateral) pursuant to the terms of the HRP Shares
Pledge Agreement.
(e) Computation of Minimum Rent for each Extended Term. The Minimum
Rent payable with respect to the Extended Term(s) for the applicable Lease shall
equal an annual sum (determined at the commencement of each Extended Term for
such Lease and subject to adjustment an set forth herein) equal to the greatest
of (a) the Minimum Rent payable for the immediately preceding twelve (12) months
for such Lease (without giving effect to any adjustment pursuant to paragraph
(d) above), (b) the product of (i) the Adjusted Purchase Price for the
applicable Leased Property, and (ii) a percentage equal to 525 basis points
above the yield (calculated on the basis of a monthly equivalent yield) on
5-year United States Treasury securities at the close of the Business Day which
immediately precedes the commencement of the Extended Term for which the Minimum
Rent is being calculated, or (c) the Fair Market Rental for such Lease, payable
in advance in equal, consecutive monthly installments on the first day of each
calendar month of each Extended Term. The computation of the yield referenced in
the preceding sentence shall be made using the
<PAGE>
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information shown for such date quoted in The Wall Street Journal published on
the following day. If there is no such quotation, the next preceding day for
which there is a quotation shall be used. If The Wall Street Journal shall not
be available, Landlord shall choose the quotation from another recognized
source.
(f) Mid-Term Adjustments of Minimum Rent. During the Term of the
applicable Lease, on the 5th, 15th, 25th and 35th anniversary of the
Commencement Date therefor, the Minimum Rent under such Lease shall be adjusted
to the annual sum equal to the greater of (a) the Minimum Rent under such Lease
for the immediately preceding twelve (12) months (without giving effect to any
adjustment pursuant to paragraph (d) above) or (b) the product of (i) the sum of
the Adjusted Purchase Price for the applicable Leased Property, and (ii) a
percentage equal to 525 basis points above the yield (calculated on the basis of
a monthly equivalent yield) on 5-year United States Treasury securities at the
close of the Business Day immediately preceding such anniversary. The
computation of the yield referenced in the preceding sentence shall be made
using the information shown for such date quoted in The Wall Street Journal
published on the following day. If there is no such quotation, the next
preceding day for which there is a quotation shall be used. If The Wall Street
Journal shall not be available, Landlord shall choose the quotation from another
recognized source.
(g) Credits Against Minimum Rent. (i) Renovation Escrow Agreement. The
average daily amount, if any, on deposit under the Renovation Escrow Agreement
shall bear interest at a rate of eight percent (8%) per annum, calculated on the
basis of a 365-day year which interest shall be credited by Landlord against
payments of Minimum Rent.
(ii) Excess Condemnation and Casualty Proceeds. Landlord shall
credit the amount or any Award or the proceeds of any insurance
received by Landlord in connection with a partial Condemnation or a
partial casualty involving the applicable Leased Property as described
in Section 11.2 or 10.2.2, and not applied by Landlord to the
restoration of the app-applicable Leased Property affected by such
partial Condemnation or partial casualty as provided therein, to the
payment of Minimum Rent payable with respect to such Leased Property.
(iii) Notice. Landlord shall calculate the amount of such
credits days after the end of each calendar month, shall Notify Tenant
of such amount as soon as reasonably practicable after such
calculation, and shall reduce the amount of the installment of Minimum
Rent next due after the date of such Notice by the amount of such
credits.
(iv) HRP Shares Pledge Agreement. The dividends paid under the
HRP Shares Pledge Agreement shall be applied to installments of Minimum
Rent and/or to the other obligations hereunder and under the other
Transaction Documents as provided therein.
<PAGE>
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3.1.2 Additional Rent:
(a) Amount. For each Fiscal Year during the Term, commencing with the
Fiscal Year ending December 31, 1992, Tenant shall pay an amount ("Additional
Rent") with respect to the applicable Leased Property equal to the greater of:
(i) (1) five percent (5%) of Excess Net Patient Revenues for
such Leased Property for such Fiscal Year if no Additional Rent
Adjustment Date shall have occurred during such Fiscal Year, or
(2) if an Additional Rent Adjustment Date shall have occurred
during such Fiscal Year, the sum of (a) the Five Percent Additional
Rent for such Leased Property for such Fiscal Year plus (b) two and
one-half percent (2.5%) of the Excess Net Patient Revenues for such
Leased Property in respect of the period from such Additional Rent
Adjustment Date through the end of such Fiscal Year; or
(ii) Additional Rent payable for such Leased Property for the
immediately preceding Fiscal Year.
(b) Quarterly Installments. Installments of Additional Rent for the
applicable Leased Property for any Fiscal Year shall be calculated and paid
quarterly in arrears as follows:
(1) For each quarter of such Fiscal Year ending on or prior to the
Additional Rent Adjustment Date, if any, occurring in such
Fiscal Year, Tenant shall pay an amount equal to the excess of
(a) the greater of (x) the Relevant Percentage for such
quarter of the Additional Rent for such Leased Property
payable for the immediately preceding Fiscal Year or (y) five
percent (5%) of the sum of the Excess Net Patient Revenues for
such Leased Property for such quarter of such Fiscal Year and
for any previous quarter(s) of such Fiscal Year, over (b) the
sum of the installments of Additional Rent paid for such
Leased Property for any previous quarter(s) in such Fiscal
Year; and
(2) For any quarter of such Fiscal Year ending after an Additional
Rent Adjustment Date occurring in such Fiscal Year, Tenant
shall pay an amount equal to the excess of (a) the greater of
(x) the Relevant Percentage for such quarter of the Additional
Rent for such Leased Property payable for the immediately
preceding Fiscal Year or (y) an amount equal the sum of (i)
the Five Percent Additional Rent for such Leased Property for
such Fiscal Year plus (ii) two and one-half percent (2.5%) of
the sum of the Excess Net Patient Revenues for such Leased
Property for any quarters or portion thereof from such
Additional Rent Adjustment Date through the end of such
<PAGE>
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quarter of such Fiscal Year, over (b) the sum of the
installments of Additional Rent-paid-for such Leased Property
for any previous quarter(s) in such Fiscal Year.
Installments of Additional Rent for the applicable Leased Property due
with respect to a partial quarter in any Fiscal Year shall be the excess of (1)
the greater of (a) the product of (x) a fraction of which the numerator is the
number of days in such Fiscal Year, and the denominator is 360, multiplied by
(y) the Additional Rent for such Leased Property payable for the immediately
preceding Fiscal Year, or (b) the sum of (x) five percent (5%) of all Excess Net
Patient Revenues for such Leased Property through the end of such partial
quarter or, if an Additional Rent Adjust ment Date has occurred during such
Fiscal Year, through such Additional Rent Adjustment Date, plus (y) if an
Additional Rent Adjustment Date has occurred during such Fiscal Year, two and
one-half percent (2.5%) of all Excess Net Patient Revenues for such Leased
Property from such Additional Rent Adjustment Date through the end of such
partial quarter, over (2) the Additional Rent paid for such Leased Property for
any previous quarters in such Fiscal Year.
(b) Date of Payment of Additional Rent. Tenant shall deliver to
Landlord an Officer's Certificate setting forth the calculation of Additional
Rent due and payable for the applicable Leased Property for each quarter of any
Fiscal Year. Each quarterly payment of Additional Rent for the applicable Leased
Property is due and payable and shall be delivered to Landlord, together with
such Officer's Certificate, within forty-five (45) days after the end of each
quarter of any Fiscal Year (or, in the case of the final quarter in any Fiscal
Year, eighty (80) days thereafter), commencing with the quarter ending March 31,
1992, during the Fixed Term and the Extended Terms.
(c) Reconciliation of Additional Rent. In addition, on or before March
31 of each year, commencing with March 31, 1992, Tenant shall deliver to
Landlord certified audits of Tenant's financial operations for the preceding
Fiscal Year, together with a certificate from Ernst & Young, or other certified
public accountants reasonably acceptable to Landlord (the "Accountants"), in
form acceptable to Landlord, setting forth the Net Patient Revenues for the
applicable Leased Property for such preceding Fiscal Year, and such other
matters as Landlord may from time to time reasonably request.
If the annual Additional Rent for the applicable Leased Property for
said preceding Fiscal Year as shown in the year-end certificate is less than the
amount previously paid with respect thereto by Tenant, Landlord shall grant
Tenant a credit against Additional Rent for such Leased Property next coming due
in the amount of such difference, together with interest thereon at the Base
Rate, which interest shall accrue from the close of such preceding Fiscal Year
until the date that such credit is made such a credit cannot be made because the
Term of the applicable
<PAGE>
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Lease has expired before the credit can be effected, Landlord will pay, by check
the amount of such difference to Tenant, together with interest thereon at the
then applicable Base Rate, which interest shall accrue from the close of such
preceding Fiscal Year until the date that such check is drawn.
If the annual Additional Rent for the applicable Leased Property for
said preceding Fiscal Year as shown in the year-end certificate exceeds the
amount previously paid with respect thereto by Tenant, Tenant shall pay such
excess to Landlord at such time as the certificate is delivered, together with
interest at the Base Rate, which interest shall accrue from the close of such
preceding Fiscal Year until the date that such certificate is required to be
delivered, and thereafter such interest shall accrue at the Overdue Rate, until
the amount of such difference shall be paid or otherwise discharged.
(d) Confirmation of Additional Rent. Tenant shall utilize, or cause to
be utilized, an accounting system for the applicable Leased Property (which
shall be the same as that used for all the Collective Leased Properties) in
accordance with its usual and customary practices and in accordance with
generally accepted accounting principles consistently applied, which will
accurately record all Net Patient Revenues, and shall employ independent
accountants reasonably acceptable to Landlord, and Tenant shall retain, for at
least five (5) years after the expiration of each Fiscal Year, reasonably
adequate records conforming to such accounting system showing all Net Patient
Revenues for such Fiscal Year. Landlord, at its own expense except as provided
hereinbelow, shall have the right from time to time by its accountants or
representatives to audit the information set forth in the Officer's Certificate
referred to in subparagraph (b) above or the year-end certificate referred to in
subparagraph (c) above, and in connection with such audits to examine Tenant's
books and records with respect thereto (including supporting data and sales and
excise tax returns) subject to any prohibitions or limitations on disclosure of
any such data under applicable law or regulations, including without limitation
any duly enacted "Patients' Bill of Rights" or similar legislation, including
such limitations as may be necessary to preserve the confidentiality of the
facility-patient relationship and the physician-patient privileges If any such
audit discloses a deficiency in the payment of Additional Rent, and either
Tenant agrees with the result of such audit or the matter is otherwise
determined or compromised with Landlord, Tenant shall forthwith pay to Landlord
the amount of the deficiency, as finally agreed or determined, together with
interest at the Test Rate, or if no such Test Rate exists, then at the Overdue
Rate from the date when said payment should have been made to the date of
payment thereof; provided, however, that as to any audit that is commenced more
than two (2) years after the date Net Patient Revenues for any Fiscal Year are
reported by Tenant to Landlord, the deficiency, if any, with respect to such Net
Patient Revenues shall bear interest as permitted herein only from the date such
determination of deficiency is made unless such
<PAGE>
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deficiency is the result of gross negligence or willful misconduct on the part
of Tenant. If any such audit discloses that the Net Patient Revenues actually
received by Tenant for any Fiscal Year exceed those reported by Tenant by more
than three percent (3%), Tenant shall pay the reasonable cost of such audit and
examina tion. if any such audit discloses that Tenant paid more Additional Rent
for any Fiscal Year than was due hereunder, and either Landlord agrees with the
result of such audit or the matter is otherwise determined or compromised,
Landlord shall grant Tenant a credit against Additional Rent next coming due in
the amount of such difference, as finally agreed or determined. if such a credit
cannot be made because the Term of the applicable Lease has expired before the
credit can be effected, Landlord will pay, by check, the amount of such
difference to Tenant.
Any proprietary information obtained by Landlord pursuant to the
provisions of the applicable Lease shall be treated as confidential, except that
such information may be used, subject to appropriate confidentiality safeguards,
in any litigation between the parties and except further that Landlord may
disclose such information to its prospective lenders. The obligations of Tenant
contained in this Section 3.1.2 shall survive the expiration or earlier
termination of the applicable Lease.
3.1.3 Additional Charges.
In addition to the Minimum Rent and Additional 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"):
(a) Impositions. Subject to Article 8 relating to Permitted Contests,
Tenant shall pay, or cause to be paid, all Impositions before any fine, penalty,
interest or cost (other than any opportunity cost as a result of a failure to
take advantage of any discount for early payment) may be added for non-payment,
such payments to be made directly to the taxing authorities where feasible, and
shall promptly upon request, furnish to Landlord 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), Tenant may
exercise the option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any fine,
penalty, premium, further interest or cost may be added thereto. Landlord, at
its expense, shall, to the extent required or permitted by applicable law,
prepare and file all tax returns in respect of Landlord's net income, gross
receipts, sales and use, single business, transaction privilege, rent, ad
valorem, franchise taxes and taxes on its capital stock, and Tenant, at its
expense, shall, to the extent required or permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any
<PAGE>
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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 so no Default shall have
occurred and be continuing. Landlord and Tenant shall, upon request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the applicable Leased Property as may be necessary to
prepare any required returns and reports. In the event governmental authorities
classify any property covered by the applicable Lease as personal property,
Tenant shall file all personal property tax returns in such jurisdictions where
it may legally so file. Each party shall, to the extent it possesses the same,
provide the other, upon request, with cost and depreciation records necessary
for filing returns for any property so classified as personal property. Where
Landlord is legally required to file personal property tax returns, Landlord
shall provide Tenant with copies of assessment notices in sufficient time for
Tenant to file a protest. All impositions assessed against such personal
property shall be (irrespective of whether Landlord or Tenant shall file the
relevant return) paid by Tenant not later than the last date on which the same
may be made without interest or penalty. If the provisions of any Facility
Mortgage require deposits on account of Impositions to be made with such
Facility Mortgagee, provided the Facility Mortgagee has not elected to waive
such provision, Tenant shall either pay Landlord the monthly amounts required at
the time and place that payments of Minimum Rent are required and Landlord shall
transfer such amounts to such Facility Mortgagee or, pursuant to written
direction by Landlord, Tenant shall make such deposits directly with such
Facility Mortgagee.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge, provided,
Landlord's failure to give any such notice shall in no way diminish Tenant's
obligation hereunder to pay such Impositions.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in the
applicable Leased Property during the Term.
(c) Insurance Premiums. Tenant shall pay or cause to be paid,
as Additional Charges, all premiums for the insurance coverage required to be
maintained pursuant to Article 9 hereof.
(d) Other Charges. Tenant shall pay or cause to be paid, as
Additional Charges, all other amounts, liabilities and obligations which Tenant
assumes or agrees to pay under the ap plicable Lease, including, without
limitation, all agreements to indemnify Landlord under Sections 4.4 and 9.7.
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar Additional Charges attributable to
periods after the end of the Term, whether
<PAGE>
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upon expiration or sooner termination of the applicable Lease (other than
termination following an Event of Default) and Tenant has not exercised its
right to purchase the applicable Leased Property as provided herein, Tenant may,
within sixty (60) days of the end of the Term, provide written Notice to
Landlord of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional Charges that
are attributable to any period after the Term of the Lease.
3.2 Late Payment of Rent.
If any installment of Minimum Rent, Additional Rent or Additional
Charges (but only as to those Additional Charges which are payable directly to
Landlord) shall not be paid on its due date, Tenant shall pay Landlord, on
demand, as Additional Charges, a late charge (to the extent permitted by law)
computed at the Overdue Rate 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 directly to Landlord pursuant to any
requirement of the applicable Lease, Tenant shall be relieved of its obligation
to pay such Additional Charges to the entity to which they would otherwise be
due.
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 which may be added for non-payment or late
payment of such items. Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in the applicable Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Minimum Rent and Additional Rent.
3.3 Net Lease.
The Rent shall be absolutely net to Landlord, so that the applicable
Lease shall yield to Landlord the full amount of the installments or amounts of
Rent throughout the Term, subject to any other provisions of the applicable
Lease or this Master Lease Document which expressly provide for adjustment or
abatement of Rent or other charges. Without limiting the foregoing, if rent
under any ground lease for the applicable Leased Property shall be calculated by
reference to Rent payable under the applicable Lease or revenues attributable to
the Facility located at such Leased Property, the amount of Rent payable under
the applicable Lease shall automatically be increased so that Landlord receives,
net of any amounts payable under such ground lease (including any additional
amounts payable under the ground lease as the result of such automatic
increase), an amount equal to the amount Landlord would have received had there
been no requirement that rent be paid under such ground lease.
<PAGE>
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3.4 No Termination, Abatement, Etc.
Except as otherwise specifically provided in the applicable Lease or in
this Master Lease Document, Tenant, to the extent permitted by law, shall remain
bound by the applicable Lease in accordance with its terms and shall neither
take any action without the consent of Landlord to modify, surrender or
terminate the same, nor seek, nor be entitled to any abatement, deduction,
deferment or reduction of the Rent, or set-off against the Rent, nor shall the
respective obligations of Landlord and Tenant be otherwise affected by reason of
(a) any damage to, or destruction of, the applicable Leased Property or any
portion thereof from whatever cause or any Condemnation, (b) the lawful or
unlawful prohibition of, or restriction upon Tenant's use of the applicable
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title; (c) any claim which
Tenant may have against Landlord by reason of any default or breach of any
warranty by Landlord under the applicable Lease or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties, (d) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord, or (e) for any other cause whether similar or
dissimilar to any of the foregoing. Tenant hereby waives all rights arising from
any occurrence whatsoever, which may now or hereafter be conferred upon it by
law, to (a) modify, surrender or terminate the applicable Lease or quit or
surrender the applicable Leased Property or any portion thereof, or (b) entitle
Tenant to any abatement, reduction, suspension or deferment of the Rent or other
sums payable or other obligations to be performed by Tenant hereunder, except as
otherwise specifically provided in the applicable Lease or in this Master Lease
Document. The obligations of Tenant hereunder shall be separate and independent
covenants and agreements, and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of the
applicable Lease or by termination of the applicable Lease other than by reason
of an Event of Default.
ARTICLE 4
USE OF THE APPLICABLE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use.
Tenant shall, at all times during the Term, and at any other time
Tenant shall be in possession of the Leased Property, continuously use or cause
to be used the applicable Leased Property as a licensed nursing home and for
such other uses as may be necessary or incidental thereto (such use, such Leased
<PAGE>
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Property's "Primary Intended Use"). Tenant shall not use the ap plicable Leased
Property or any portion thereof for any other use without the prior written
consent of Landlord (which 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 thereon which will cause the cancellation of
any insurance policy covering such Leased Property or any part thereof (unless
another adequate policy is available), 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 underwriter's 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 such Leased Property and Tenant's Personal
Property, including, without limitation, the Insurance Requirements.
4.1.2 Necessary Approvals.
Tenant shall proceed with all due diligence and exercise best efforts
to obtain and maintain all approvals necessary to use and operate, for its
Primary intended Use, the applicable Leased Property and the Facility located at
such Leased Property under applicable local, state and federal law, and without
limiting the foregoing, shall use its best efforts to maintain appropriate
certifications for reimbursement and licensure.
4.1.3 Continuous Operation, Etc.
Tenant shall use its best efforts to operate continuously the
applicable Leased Property as a provider of health care services in accordance
with its Primary Intended Use. Tenant will 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.
4.1.4 Lawful Use, Etc.
Tenant shall not use or suffer or permit the use of the applicable
Leased Property and Tenant's Personal Property for any unlawful purpose. Tenant
shall not commit or suffer to be committed any waste on the applicable Leased
Property, or in the Facility located on the applicable Leased Property located
thereon, nor shall Tenant cause or permit any nuisance thereon or therein.
Tenant shall neither suffer nor permit the applicable Leased Property or any
portion thereof, including any Capital Addition, or Tenant's Personal Property,
to be used in such a manner as (i) might reasonably tend to impair Landlord'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 for adverse usage or
<PAGE>
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adverse possession by the public, as such, or of implied dedication of the
applicable Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Etc.
Subject to the provisions of Article 8 hereof, Tenant,,at its sole
expense, shall promptly (i) comply with all material Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair,
alteration and restoration of the applicable Leased Property, and (ii) procure,
maintain and comply with all appropriate licenses, certificates of need,
permits, provider agreements and other authorizations and agreements 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.
4.3 Compliance with Medicaid and Medicare Requirements.
Tenant shall, at its sole cost and expense, make whatever improvements
(capital or ordinary) as are required to conform the applicable Leased Property
to such standards as may, from time to time, be required by Federal Medicare
(Title 18) or Medicaid (Title 19) skilled and/or intermediate care nursing
programs, if applicable, or any other applicable programs or legislation, or
capital improvements required by any other governmental agency having
jurisdiction over such Leased Property as a condition of the continued operation
of such Leased Property for its Primary Intended Use.
4.4 Environmental Matters.
Tenant shall not store, spill upon, dispose of or transfer to or from
the applicable Leased Property any hazardous waste, contaminants, oil,
radioactive or other material (including, without limitation, medical or
infectious waste), the removal of which is required or the maintenance of which
is prohibited or penalized by any applicable federal, state or local statutes,
laws, ordinances, rules or regulations (collectively "Hazardous Substances"),
except that Tenant may store, transfer and dispose of Hazardous Substances in
compliance with all applicable statutes, laws, ordinances, rules and
regulations. Tenant shall maintain the applicable Leased Property at all times
free of any Hazardous Substance (except in compliance with all statutes, laws,
ordinances, rules and regulations). Tenant shall, as to the applicable Leased
Property, promptly: (a) notify Landlord in writing of any material change in the
nature or extent of such Hazardous Substances maintained, (b) transmit to
Landlord copies of any citations, orders, notices or other material governmental
communications received with respect thereto, (c) observe and comply with any
and all statutes, laws, ordinances, rules and regulations, licensing
requirements or conditions relating to the use, maintenance and disposal of
Hazardous Substances and all orders or directives from any official, court or
agency of competent jurisdiction relating to the
<PAGE>
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use or maintenance or requiring the removal, treatment, containment or other
disposition thereof, and (d) pay or otherwise dispose of any fine, charge or
Imposition related thereto, unless Tenant shall contest the same in the right to
use and the value of such Leased Property is not materially and adversely
affected thereby. Tenant shall, upon demand, pay to Landlord, as an Additional
Charge, any cost, expense, loss or damage incurred by Landlord and growing out
of a failure of Tenant strictly to observe and perform the foregoing
requirements, (including, without limitation, reasonable attorneys' fees), which
amounts shall bear interest from the date incurred until paid at the overdue
Rate.
Tenant shall protect, indemnify and hold harmless Landlord and each
Facility Mortgagee from and-against all liabilities, obligations, claims,
damages, penalties, costs and expenses (including, without limitation,
reasonable attorney's fees and expenses) imposed upon, incurred by or asserted
against any of them by reason of any failure by Tenant or any Person claiming
under Tenant to perform or comply with any of the terms of this Section 4.4. The
provisions of this Section 4.4 shall survive the expiration or sooner
termination of the applicable Lease.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Tenant shall, at its sole cost and expense, keep the
applicable Leased Property and all private roadways: sidewalks and
curbs appurtenant thereto (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 or Tenant's
Personal Property, or any portion thereof), and, shall promptly make
all necessary and appropriate repairs and replacements thereto of every
kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or
arising by reason of a condition existing prior to the commencement of
the Term (concealed or otherwise), provided, Tenant shall be permitted
to prosecute claims against Landlord's predecessors in title for breach
of any representation or warranty made to or on behalf of Landlord, or
for any latent defects in such Leased Property. All repairs shall 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 any such work. Tenant will not
take or omit to take any action, the taking or omission of which would
materially impair the value or the
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usefulness of the applicable Leased Property or any part thereof for
its Primary Intended Use. Tenant's obligations under this Section 5.1.1
as to the applicable Leased Property shall be limited, in the event of
any casualty or Condemnation involving such Leased Property, as set
forth in Sections 10.2.1 and 11.1.
5.1.2 Landlord's Obligations.
Landlord shall not, under any circumstances, be required to
build or rebuild any improvement on the applicable 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
nonstructural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with the applicable
Lease, or to maintain the applicable Leased Property in any way, except
as specifically provided herein. Tenant hereby waives, to the extent
permitted by law, the right to make repairs at the expense of Landlord
pursuant to any law in effect at the time of the execution of the
applicable Lease or hereafter enacted. Landlord shall have the right to
give, record and post, as appropriate, notices of nonresponsibility
under any mechanic's lien laws now or hereafter existing.
5.1.3 Nonresponsibility of Landlord.
Nothing contained in the applicable Lease and no action or
inaction by Landlord shall be construed as (i) constituting the consent
or request of Landlord, expressed or implied, to any contractor,
sub-contractor, laborer, materialman or vendor to or for the
performance of any labor or services or the furnishing of any materials
or other property for the construction, alteration, addition, repair or
demolition of or to the applicable 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 Landlord 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
Landlord in the applicable Leased Property, or any portion thereof.
5.2 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 at any time, provided
that no Default has occurred and is continuing. Tenant shall provide and
maintain during the entire Term all such Tenant's Personal Property as
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shall be necessary in order to operate the Facility located at the Leased
Property in compliance with all licensure and certification requirements, in
compliance with 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 on or
prior to the expiration or earlier termination of the applicable Lease of 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 Landlord without the necessity of first giving
notice thereof to Tenant, without any payment to Tenant and without any
obligation to account therefor. Tenant shall, at its expense, restore such
Leased Property to the condition required by Section 5.3, including repair of
all damage to such Leased Property caused by the removal of Tenant's Personal
Property, whether effected by Tenant or Landlord.
5.3 Yield Up.
Upon the expiration or sooner termination of the applicable Lease
(unless the applicable Leased Property is transferred to Tenant as provided
herein), Tenant shall vacate and surrender the applicable Leased Property to
Landlord in the condition in which such Leased Property was on the Commencement
Date, except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of such Lease, ordinary wear and tear excepted (and
casualty damage and condemnation, in the event that the applicable Lease is
terminated following a casualty or total condemnation in accordance with Article
10 or Article 11).
In addition, upon the expiration or earlier termination of the
applicable Lease unless the applicable Leased Property or total condemnation is
transferred to Tenant as provided herein, Tenant shall, at Landlord's sole cost
and expense, use all reasonable efforts to transfer to and cooperate with
Landlord or Landlord's nominee in connection with the processing of all ap
plications for licenses, operating permits and other governmental authorizations
and all contracts, including contracts with governmental or quasi-governmental
entities which may be necessary for the operation of the Facility located on
such Leased Property. If requested by Landlord, Tenant will continue to manage
such Facility after the expiration of the Term and for as long thereafter as is
necessary to obtain all necessary licenses, operating permits and other
governmental authorizations, on such reasonable terms (which shall include an
agreement to reimburse Tenant for its reasonable out-of-pocket costs and
expenses, and reasonable administrative costs) as Landlord shall request.
5.4 Encroachments, Restrictions, Etc.
If any of the Leased Improvements on the applicable Leased Property
shall, at any time, encroach upon any property, street or right-of-way adjacent
to such Leased Property, or shall violate
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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 such
Leased Property is subject, upon the request of Landlord (but only as to any
encroachment, violation or impairment that is not a Permitted Encumbrance) or of
any Person affected by any such encroachment, violation or impairment, Tenant
shall, at its sole cost and expense, subject to its right to contest the
existence of any encroachment, violation or impairment in accordance with the
provisions of Article 8, either (a) 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 Landlord or
Tenant, or (b) make such changes in the Leased Improvements and take such other
actions, as are 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 ensure the continued operation of the Leased improvements
for the Primary Intended Use substantially in the manner and to the extent the
Leased Improvements were operated prior to the assertion of such violation,
impairment or encroachment. Any such alteration shall be made in conformity with
the applicable requirements of this Article 5. Tenant's obligations under this
Section 5.4 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.
5.5 Landlord to Grant Easements, Etc.
Landlord will, from time to time, so long as no Default shall have
occurred and be continuing, at the request of Tenant with respect to the
applicable Leased Property and at Tenant's sole cost and expense, (a) grant
easements and other rights in the nature of easements with respect to such
Leased Property to third parties, (b) release existing easements or other rights
in the nature of easements which are for the benefit of such Leased Property,
(c) dedicate or transfer unimproved portions of such Leased Property for road,
highway or other public purposes, (d) execute petitions to have such Leased
Property annexed to any municipal corporation or utility district, (e) execute
amendments to any covenants and restrictions affecting such Leased Property and
(f) execute and deliver to any Person any instrument appropriate to confirm or
effect such grants, release, dedications, transfers, petitions and amendments
(to the extent of its interests in such Leased Property); provided that Landlord
shall have determined that such grant, release, dedication, transfer, petition
or amendment is not detrimental to the operation of such Leased Property for its
Primary Intended Use and does not materially reduce the value of such Leased
Property, and that Landlord shall have received an Officer's Certificate
confirming such certification, and such additional information as Landlord may
reasonably request.
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ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property.
Provided no 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 Addi tions on the applicable Leased Property.
Tenant's right to construct or install Capital Additions on the applicable
Leased Property shall be subject to obtaining Landlord's prior written consent
(which consent shall not be unreasonably withheld or delayed) provided that no
consent shall be required for any Capital Addition financed under the Renovation
Funding Agreement, or the Renovation Escrow Agreement or for any other Capital
Addition so long as (i) the Capital Additions Costs for such Capital Addition
are less than $250,000, (ii) such construction or instal lation would not
adversely affect or violate any Legal Requirement or Insurance Requirement
applicable to the applicable Leased Property and (iii) Landlord shall have
received a certificate from a Responsible officer certifying as to the
satisfaction of the conditions set out in clauses (i) and (ii) above. If
Landlord's consent is required, such consent shall not be deemed to be
unreasonably withheld if such Capital Addition will significantly alter the
character or purpose or materially detract from the value or operating
efficiency or the revenue-producing capability of such Leased Property, or
adversely affect the ability of Tenant to comply with the applicable Lease.
Prior to commencing construction of any Capital Addition (other than a Capital
Addition financed under the Renovation Funding Agreement), Tenant shall submit
to Landlord, in writing, a proposal setting forth, in reasonable detail any
proposed Capital Addition and shall provide to Landlord, such plans and
specifications, permits, licenses, contracts and other information concerning
the proposed Capital Addition as Landlord may reasonably request. Without
limiting the generality of the foregoing, such proposal shall indicate the
approximate projected cost of constructing such Capital Addition, the use or
uses to which it will be put and a good faith estimate of the change, if any, in
the Net Patient Revenues that Tenant anticipates will result from such Capital
Addition. No Capital Addition shall be made which would tie in or connect any
Leased Improvement on the applicable Leased Property with any other improvements
on property adjacent to such Leased Property (and not part of the Land)
including, without limitation, tie-ins of buildings or other structures or
utilities. Tenant shall not finance the cost of any construction of any Capital
Addition without the prior written consent of Landlord. Any Capital Additions
(including Tenant's Capital Additions) shall, upon the expiration or sooner
termination of the applicable Lease for such Leased Property, pass to and become
the property of Landlord, free and clear of all encumbrances other than
Permitted Encumbrances but
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subject to Landlord's obligation to compensate Tenant for Tenant's Capital
Additions as provided below.
6.2 Capital Additions Financed or Paid For by Tenant.
6.2.1 Financing of Capital Additions.
Provided that Tenant has obtained the prior written consent of Landlord
in each instance, Tenant may arrange for financing for Capital Additions from
third party lenders, provided, however that the terms and conditions of any such
financing shall be subject to the prior approval of Landlord; and (ii) if
Landlord consents to the grant thereof, which consent may be withheld in the
sole discretion of Landlord, any security interests in any property of Tenant,
including without limitation the applicable Leased Property, shall be expressly
and fully subordinated to the applicable Lease and to the interest of Landlord
in the applicable Leased Property and to the rights of any Facility Mortgagee.
6.2.2 Amendments to Lease.
If, pursuant to the provisions of this Lease, Tenant either pays for or
arranges financing (to the extent permitted in Section 6.2.1) to pay for the
costs of construction or installation of any Capital Addition including
disbursements under the Renovation Escrow Agreement ("Tenant's Capital
Addition") (but excluding, in any event, any Capital Addition financed by or
through Landlord including, without limitation, all Capital Additions paid for
or financed through disbursements under the Renovation Funding Agreement), this
Lease shall be and hereby is amended to provide as follows:
(a) Upon completion of any such Tenant's Capital Addition, Net
Patient Revenues attributable to such Tenant's Capital Addition shall
be excluded from Net Patient Revenues of the applicable Leased Property
for purposes of calculating Additional Rent. The Net Patient Revenues
attributable to any such Tenant's Capital Addition shall be deemed to
be an amount (the "Added Value Percentage") which bears the same
proportion to the total Net Patient Revenues from the entire Leased
Property (including all Capital Additions) as the Fair market Added
Value of such Capital Addition bears to the Fair Market Value of the
entire Leased Property (including all Capital Additions) immediately
after completion of such Tenant's Capital Addition. The Added Value
Percentage for any Tenant's Capital Additions shall remain in effect
until any subsequent Capital Addition is completed, at which time the
Added Value Percentage will again be determined as provided above.
(b) There shall be no adjustment in the Minimum Rent by reason
of any such Tenant's Capital Addition.
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(c) Upon the expiration or earlier termination of this Lease
(but if this Lease is terminated by reason of an Event of Default, only
after Landlord is fully compensated for all damages resulting
therefrom), Landlord shall compensate Tenant for all Tenant's Capital
Additions in any of the following ways determined in Landlord's sole
discretion:
(i) By purchasing such Tenant's Capital Additions from
Tenant for cash in the amount of the then Fair Market
Added Value of such Tenant's Capital Additions; or
(ii) By purchasing such Tenant's Capital Additions from
Tenant by delivering to Tenant Landlord's purchase
money promissory note in the amount of the Fair
Market Added Value, which note shall be on then
commercially reasonable terms and shall be secured by
a mortgage on the Leased Property and such Tenant's
Capital Additions subject to all existing mortgages
and encumbrances on the Leased Property and such
Tenant's Capital Additions at the time of such
purchase; or
(iii) By assigning to Tenant the right to receive an amount
equal to the Added Value Percentage (determined as of
the date of the expiration or earlier termination of
this Lease) of all rent and other consideration
receivable by Landlord under any re-letting or other
disposition of the Leased Property and such Tenant's
Capital Additions, after deducting from such rent all
costs and expenses incurred by Landlord in connection
with such reletting or other disposition of the
Leased Property and such Tenant's Capital Additions
and all costs and expenses of operating and
maintaining the Leased Property and such Tenant's
Capital Additions during the term of any such new
lease which are not borne by the tenant thereunder,
with the provisions of this Section 6.2.2 to remain
in effect until the sale or other final-disposition
of the Leased Property and such Tenant's Capital
Additions, at which time the Fair Market Added Value
of such Tenant's Capital Addition shall be
immediately due and payable, such obligation to be
secured by a mortgage on the Leased Property and such
Tenant's Capital Additions, subject to all existing
mortgages and encumbrances on the Leased Property at
the time of such purchase and assignment; or
(iv) By making such other arrangement regarding such
compensation as shall be mutually acceptable to
Landlord and Tenant.
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6.3 Non-Capital Additions.
Tenant shall have the right, at Tenant's sole cost and expense to make
additions, modifications or improvements to the applicable Leased Property which
are not Capital Additions ("Non-Capital Additions") from time to time as Tenant,
in its discretion, may deem desirable for the Primary Intended Use, provided
that such action will not materially alter the character or purpose or
materially detract from the value, operating efficiency or revenue producing
capability of such Leased Property, or adversely affect the ability of Tenant to
comply with the provisions of the applicable Lease, and, without limiting the
foregoing will not adversely affect or violate any Legal Requirement or
Insurance Requirement applicable to the applicable Leased Property. All such
Non-Capital Additions shall, upon expiration or earlier-termination of the
applicable Lease for such Leased Property, pass to and become the property of
Landlord, free and clear of all encumbrances, other than Permitted Encumbrances.
6.4 Salvage.
All materials which are scrapped or removed in connection with the
making of either Capital Additions or Non-Capital Additions or repairs required
by Article 5 shall be or become the property of the party that paid for such
work.
ARTICLE 7
LIENS
7.1 Liens.
Subject to Article 8, Tenant shall not directly or indirectly create or
allow to remain and shall promptly discharge, at its expense, any lien,
encumbrance, attachment, title retention agree ment or claim upon the applicable
Leased Property or any attachment, levy, claim or encumbrance in respect of the
Rent, other than (a) Permitted Encumbrances, (b) restrictions, liens and other
encumbrances which are consented to in writing by Landlord, (c) liens for those
taxes of Landlord which Tenant is not required to pay hereunder, (d) subleases
permitted by Article 17, (e) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as (i) the same are not yet
payable, or (ii) are being contested in accordance with Article 8, (f) liens of
mechanics, laborers, materialmen, suppliers or vendors incurred in the ordinary
course of business that are not yet due and payable, or are for sums that are
being contested in accordance with Article 8, and (g) any Facility Mortgages or
other liens which are the responsibility of Landlord pursuant to the provisions
of Article 22.
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7.2 Landlord's Lien.
In addition to any statutory landlord's lien and in order to secure
payment of the Rent and all other sums payable hereunder by Tenant and to secure
payment of any loss, cost or damage which Landlord may suffer by reason of
Tenant's breach of the applicable Lease, Tenant hereby grants unto Landlord a
security interest in and an express contractual lien upon the Tenant's Personal
Property (except motor vehicles), and all ledger sheets, files, records,
documents and instruments (including, without limitation, computer programs,
tapes and related electronic data processing) relating to the operation of the
Facility located at the applicable Leased Property (the "Records") and all
proceeds therefrom; and such Tenant's Personal Property shall not be removed
from the applicable Leased Property at any time when a Default has occurred and
is continuing.
Upon Landlord's Landlord' request, Tenant shall execute and deliver to
Landlord a financing statement in form sufficient to perfect the security
interest of Landlord in Tenant's Personal Property and in accordance with the
provisions of the State. Tenant hereby grants Landlord an irrevocable limited
power of attorney, coupled with an interest, to execute all such financing
statements in Tenant's name, place and stead. The security interest herein
granted is in addition to any statutory lien for the Rent.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively "Claims") as to the applicable Leased
Property, by appropriate legal proceedings, conducted in good faith and with due
diligence, provided that (a) the foregoing shall in no way be construed as
relieving, modifying or extending Tenant's obligation to pay any Claims as
finally determined, (b) such contest shall not cause Landlord or Tenant to be in
default under any mortgage or deed of trust encumbering such Leased Property or
any interest therein or result in or reasonably be expected to result in a lien
attaching to such Leased Property, (c) no part of the applicable Leased Property
nor any Rent therefrom shall be in any immediate danger of sale, forfeiture,
attachment or loss, and (d) Tenant shall indemnify and hold harmless Landlord
from and against any cost, claim, damage, penalty or reasonable expense,
including reasonable attorneys' fees, incurred by Landlord in connection
therewith or as a result thereof. Upon Landlord's request, Tenant shall either
(i) provide a bond or other assurance reasonably satisfactory to Landlord that
all Claims which may be assessed against the applicable Leased Property,
together with all interest and penalties thereon will be paid, or (ii) deposit
within the
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time otherwise required for payment with a bank or trust company, as trustees as
security for the payment of such Claims, an amount sufficient to pay the same,
together with interest and penalties in connection therewith and all Claims
which may be assessed against or become a Claim on the applicable Leased
Property, or any part thereof, in connection with any such contest. Tenant shall
furnish Landlord and any Facility Mortgagee with reasonable evidence of such
deposit within five (5) days after request therefor. Landlord agrees to join in
any such proceedings if required legally to prosecute such contest; provided,
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith). Tenant shall be entitled to any refund of any Claims and such
charges and penalties or interest thereon which have been paid by Tenant or paid
by Landlord and for which Landlord has been fully reimbursed by Tenant. If
Tenant shall fail (x) to pay any Claims when finally determined, (y) to provide
security therefor as provided in this Article 8, or (z) to prosecute any such
contest diligently and in good faith, Landlord may, upon reasonable notice to
Tenant (which notice may be oral and shall not be required if Landlord shall
determine the same is not practicable), pay such charges, together with interest
and penalties due with respect thereto, and Tenant shall reimburse Landlord
therefor, upon demand, as Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements.
Tenant shall at all times during the Term and at any other time Tenant
shall be in possession of the applicable Leased Property, keep the applicable
Leased Property and all property located in or on the applicable Leased
Property, including Tenant's Personal Property, insured against the risks and in
the amounts (unless Landlord shall agree in writing that Tenant may maintain
insurance in lesser amounts) as follows:
(a) Loss or damage by fire, vandalism and malicious mischief,
extended coverage perils, earthquake and all physical loss perils
insurance, including but not limited to sprinkler leakage, in an amount
equal to not less than one hundred percent (100%) of the then full
Replacement Cost thereof (as defined in Section 9.2 below) with the
usual extended coverage endorsements;
(b) Loss or damage by explosion of steam boilers, pressure
vessels or other similar apparatus, now or hereafter installed in the
Facility located at the Leased Property, in such amounts as may be
reasonably required by Landlord or any Facility Mortgage from time to
time;
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(c) Business interruption and loss of rental under a rental
value insurance policy covering risk of loss during the lesser of the
first twelve (12) months of reconstruction or the actual reconstruction
period necessitated by the occurrence of any of the hazards described
in subparagraphs (a) and (b) above, in such amounts as may be customary
for comparable properties in the area and in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer;
(d) 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), in an amount not less than Five Million
Dollars ($5,000,000) per occurrence in respect of bodily injury and
death and One Million Dollars ($1,000,000) in respect of property
damage;
(e) Claims arising out of malpractice in an amount not less
than Five Million Dollars ($5,000,000) for each person and for each
occurrence;
(f) Flood (when the applicable Leased Property is located in
whole or in part within an area identified as an area having special
flood hazards and in which flood insurance has been made available
under the National Flood insurance Act of 1968, as amended, or the
Flood Disaster Protection Act of 1973, as amended (or any successor
acts thereto)) and such other hazards and in such amounts as may be
customary for comparable properties in the area;
(g) worker's compensation insurance coverage for all persons
employed by Tenant on the applicable Leased Property with statutory
limits and otherwise with limits of and provisions in accordance with
the requirements of applicable local, State and federal law, and
employer's liability insurance in such amounts as Landlord and any
Facility Mortgagee shall reasonably require; and
(h) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Replacement Cost.
"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, less exclusions provided in the
standard form of fire insurance policy. In the event either party believes that
the then full replacement cost less such exclusions has increased or decreased
at any time during the Term, such party, at its own cost, shall have the right
to have such full replacement cost redetermined by
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an accredited appraiser approved by the other, which approval shall not be
unreasonably withheld or delayed. The party desiring to have the full
replacement cost so redetermined shall forthwith, on receipt of such
determination by such appraiser, give written notice thereof to the other. The
determination of such appraiser shall be final and binding on the parties
hereto, and Tenant shall forthwith conform the amount of the insurance carried
to the amount so determined by the appraiser.
9.3 Waiver of Subrogation.
Landlord 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 which is covered by insurance then
being carried by Landlord 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. In the event
that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra premium.
9.4 Form Satisfactory, Etc.
All insurance policies and endorsements required pursuant to this
Article 9 shall be fully paid for, nonassessable and contain such provisions and
expiration dates and be in such form and amounts and issued by insurance
carriers authorized to do business in the State in which the applicable Leased
Property is located, having a general policy holder's rating of A or A+ in
Best's latest rating guide and as otherwise shall be approved by Landlord.
Without limiting the foregoing, such policies shall include no deductible
(unless agreed to in advance by Landlord) and shall name Landlord and any
Facility Mortgagee as additional insured, as their interests may appear. All
losses shall be payable to Landlord, any Facility Mortgagee or Tenant as
provided in Article 10. Any loss adjustment in excess of $50,000.00 shall
require the written consent of Landlord, Tenant, and each Facility Mortgagee.
Tenant shall pay all insurance premiums, and deliver policies or certificates
thereof to Landlord prior to their effective date (and, with respect to any
renewal policy, ten (10) days prior to the expiration of the existing policy),
and in the event Tenant shall fail either to effect such insurance as herein
required, to pay the premiums therefor, or to deliver such policies or
certificates to Landlord or any Facility Mortgagee at the times required,
Landlord shall have the right, but not the obligation, to effect such insurance
and pay the premiums therefor, which amounts shall be payable to Landlord, upon
demand, as Additional Charges, together with interest accrued thereon at the
Overdue Rate from the date such payment is made until the date repaid.
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All such policies shall provide Landlord (and any Facility Mortgagee, if
required by the same) thirty (30) days' prior written notice of any
modification, expiration or cancellation of such policy.
9.5 Blanket Policy.
Notwithstanding anything to the contrary contained in this Article 9,
Tenant's obligation to maintain the insurance herein required may be brought
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Tenant; provided, that (a) the coverage thereby
afforded will not be reduced or diminished from that which would exist under a
separate policy meeting all other requirements of the applicable Lease, and (b)
the requirements of this Article 9 are otherwise satisfied. Without limiting the
foregoing the amounts of insurance that are required to be maintained pursuant
to Section 9.1 shall be on a Facility by Facility basis, and shall not be
subject to an aggregate limit.
9.6 No Separate Insurance.
Tenant shall not take out separate insurance, concurrent in form or
contributing in the event of loss with that required by this Article 9, or
increase the amount of any existing insurance by securing an additional policy
or additional policies, unless all parties having an insurable interest in the
subject matter of such insurance, including, Landlord and all Facility
Mortgagees, are included therein as additional insured, and the loss is payable
under such insurance in the same manner as losses are payable under the
applicable Lease. In the event Tenant shall take out any such separate insurance
or increase any of the amounts of the then existing insurance, Tenant shall give
Landlord prompt Notice thereof.
9.7 Indemnification of Landlord.
Tenant shall indemnify and hold harmless Landlord from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and reasonable expenses (including, without limitation, reasonable attorneys'
fees), to the maximum extent permitted by law, imposed upon or incurred by or
asserted against Landlord by reason of: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the applicable
Leased Property or adjoining sidewalks, including, without limitation, any
claims of malpractice, (b) any past, present or future user misuse, non-use,
condition, management, maintenance or repair by Tenant or anyone claiming under
Tenant of the applicable Leased Property or Tenant's Personal Property or any
litigation, proceeding or claim by governmental entities or other third parties
to which Landlord is made a party or participant related to the applicable
Leased Property or Tenant's Personal Property or such use, misuse, non-use,
condition, management, maintenance, or repair thereof including,
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failure to perform obligations (other than Condemnation proceedings) to which
Landlord is made a party, (c) any Impositions (which are the obligations of
Tenant to pay pursuant to the applicable provisions of the applicable Lease),
and (d) any failure on the part of Tenant or anyone claiming under Tenant to
perform or comply with any of the terms of the applicable Lease. Notwithstanding
the foregoing Tenant shall not be required to indemnify Landlord against any
liabilities, obligations, claims, damages, penalties, causes of action, or costs
that arise from events occurring after Landlord, or anyone claiming by, through
or under Landlord (other than Tenant or anyone claiming by, through or under
Tenant) shall take actual possession of the applicable Leased Property or
directly result from the gross negligence or willful misconduct of Landlord.
Tenant shall pay all amounts payable under this Section 9.8 within ten (10) days
after demand therefor, and if not timely paid, such amounts shall bear interest
at the overdue rate from the date of 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 Landlord or may compromise or
otherwise dispose of the same, with Landlord's prior written consent (which
consent may not be unreasonably withheld or delayed). The obligation of Tenant
under this Section 9.8 shall survive the termination of the applicable Lease.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds.
All proceeds in excess of $10,000.00 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 9 shall be paid to Landlord
(subject to the provisions of Section 10.2). If Tenant is required to
reconstruct or repair such Leased Property as provided herein, such proceeds
shall be paid out by Landlord from time to time for the reasonable costs of
reconstruction or repair of such Leased Property necessitated by such damage or
destruction, subject to the provisions of Section 10.2.4. Any excess proceeds of
insurance remaining after the completion of the restoration shall be paid to
Landlord. In the event that Section 10.2.1 below is applicable, the insurance
proceeds shall be retained by the party entitled thereto pursuant to Section
10.2.1. All salvage resulting from any risk covered by insurance shall belong to
Landlord, except any salvage related to Tenant's Capital Additions and Tenant's
Personal Property shall belong to Tenant.
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10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property.
If, during the Term, the applicable Leased Property shall be
either (a) totally or partially destroyed and the Facility located
thereon is thereby rendered Unsuitable for Its Primary Intended Use or
(b) totally destroyed, but the Facility located thereon is not thereby
rendered Unsuitable for its Primary Intended Use, Tenant shall, at
Tenant's option, exercisable by Notice to Landlord within thirty (30)
days after the date of such damage or destruction, either irrevocably
offer (i) to purchase such Leased Property (and the proceeds of any
insurance payable as a result of such damage) from Landlord for a
purchase price equal to the greater of (x)the Adjusted Purchase Price
of such Leased Property or (y) the Fair Market Value Purchase Price of
such Leased Property immediately prior to such damage or destruction or
(ii) to substitute a new property for the applicable Leased Property in
accordance with the provisions of Article 16 hereof. If Tenant shall
fail to give such Notice, Tenant shall be deemed to have elected the
option provided in clause (i) above; provided that in the case of total
destruction of the Facility as described in clause (b), Tenant shall be
deemed to have elected to restore the Facility as provided in Section
10.2.4. In the event Landlord does not accept Tenant's offer to
purchase the applicable Leased Property or substitute another property
for the applicable Leased Property within thirty (30) days after
receipt of Tenant's Notice of election, the applicable Lease with
respect to the applicable Leased Property shall terminate without
further liability hereunder and Landlord shall be entitled to retain
the insurance proceeds payable on account of such damage. In the event
Tenant purchases such Leased Property as provided in this Section
10.2.1, the insurance proceeds payable on account of such damage shall
be paid to Tenant.
10.2.2 Partial Damage or Destruction.
If, during the Term, the applicable Leased Property shall be
totally or partially destroyed but the Facility located thereon is not
thereby rendered Unsuitable for Its Primacy Intended Use (provided
Tenant has not elected to purchase such Leased Property or to
substitute a property for such Leased Property as permitted under
Section 10.2.1), Tenant shall promptly restore such Facility as
provided in Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds.
If the cost of the repair or restoration of the applicable
Leased Property exceeds the amount of insurance proceeds received by
Landlord pursuant to Article 9, upon the demand of Landlord, Tenant
shall contribute any excess
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amounts needed to restore such Leased Property. Such difference shall
be paid by Tenant to Landlord and held by Landlord, together with any
other insurance proceeds, for application to the cost of repair and
restoration.
10.2.4 Disbursement of Proceeds.
In the event Tenant is required to restore the applicable
Leased Property pursuant to this Section 10.2, Tenant will, at its sole
cost and expense, commence promptly and continue diligently to perform
the repair and restoration of such Leased Property (hereinafter called
the "Work"), or shall cause the same to be done, so as to restore such
Leased Property in full compliance with all Legal Requirements and so
that such Leased Property shall be at least equal in value and general
utility to its and general utility value immediately prior to such
damage or destruction. Subject to the terms hereof, Landlord shall
advance the insurance proceeds (and the amounts paid to it pursuant to
Section 10.2.3) to Tenant regularly during the repair and restoration
period so as to permit payment for the cost of any such restoration and
repair. Landlord may, at its option, condition advancement of said
insurance proceeds and other amounts on (i) the absence of any Default,
(ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably
withheld or delayed), (iii) general contractors' estimates, (iv)
architect's certificates, (v) conditional lien waivers of general
contractors, (vi) evidence of approval by all governmental authorities
and other regulatory bodies whose approval is required and (vii) such
other certificates as Landlord may, from time to time, reasonably
require. Landlord's obligation to disburse insurance proceeds under
this Article 10 shall be subject to the satisfaction of any applicable
requirements of any Facility Mortgage, and the release of such proceeds
by the applicable Facility Mortgagee to Landlord.
10.2.5 Termination of Applicable Lease.
If Landlord accepts Tenant's offer to purchase the applicable
Leased Property or to substitute a new property in place of the
applicable Leased Property, as provided herein, the applicable Lease
shall terminate as to the applicable Leased Property upon payment of
the purchase price therefor or substitution of the new property, and
Landlord shall remit to Tenant all insurance proceeds pertaining to the
applicable Leased Property then held by Landlord.
10.3 Damage Near End of Term.
Notwithstanding any provisions of Section 10.1 or 10.2 to the
contrary, if damage to or destruction of the applicable Leased Property
occurs during the last eighteen (18) months of the then
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applicable Term (whether Fixed or Extended) of the applicable Lease, if
Tenant has irrevocably waived, in writing, its right to extend the Term
and to purchase the Collective Leased Properties as provided herein,
and if such damage or destruction cannot reasonably be expected to be
fully repaired and restored prior to the sixth month prior to the end
of the then applicable Term, then Tenant shall have the right to
terminate the applicable Lease on thirty (30) days prior Notice to
Landlord by giving Notice thereof to Landlord within sixty (60) days
after the date of such damage or destruction.
10.4 Tenant's Property.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property or Tenant's Capital Additions shall be paid to
Tenant and, to the extent necessary to repair or replace Tenant's Capital
Additions or Tenant's Personal Property in accordance with Section 10.2.1,
Tenant shall hold such proceeds in trust to pay the cost of repairing or
replacing damaged Tenant's Personal Property or Tenant's Capital Additions.
10.5 Restoration of Tenant's Property.
If Tenant is required to restore the applicable Leased Property as
hereinabove provided, Tenant, shall either (a) restore all alterations and
improvements made by Tenant, Tenant's Personal Property and all Tenant's Capital
Additions, or (b) replace such alterations and improvements, Tenant's Personal
Property, and/or Tenant's Capital Additions with improvements or items of the
same or better quality and utility in the operation of such Leased Property.
10.6 Abatement of Rent.
The applicable Lease shall remain in full force and effect and Tenant's
obligation to make all payments of Rent (including, without limitation,
Additional Rent) and to pay all other charges as and when required under such
Lease shall remain unabated during the Term notwithstanding any damage involving
the applicable Leased Property (provided that Landlord shall credit against such
payments any amounts paid to Landlord as a consequence of such damage under any
business interruption insurance obtained by Ten ant hereunder); provided,
however, that effective upon the purchase of such Leased Property or termination
of such Lease pursuant to and in accordance with Section 10.2, such Lease shall
terminate except with respect to the obligations and liabilities of Tenant
thereunder, actual or contingent, that arose prior to such termination. The
provisions of this Article 10 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, laws, rules,
regulation or ordinance in effect during the Term which provide for such a
contingency shall have any application in such case.
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10.7 Termination of Rights of First Refusal and Option to Purchase.
Any termination of the applicable Lease pursuant to this Article 10
shall cause any rights of first refusal and options to purchase granted to
Tenant under the applicable Lease with respect to such Leased Property to be
terminated and to be without further force or effect.
10.8 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 Landlord is obligated to restore or may restore under any of the
provisions of the applicable Lease.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc.
If either (i) the whole of the applicable Leased Property shall be
taken by Condemnation or (ii) a Condemnation of less than the whole of such
Leased Property renders such Leased Property Unsuitable for Its Primary Intended
Use, the Rent for such Leased Property shall abate in its entirety on the Date
of Taking and Tenant and Landlord shall seek the Award for their interests in
such Leased Property as provided in Section 11.5. If the Award received by
Landlord for Landlord's interest if such Leased Property is less than the
greater of (x) the Adjusted Purchase Price or (y) the Fair Market Value Purchase
Price of such Leased Property immediately prior to such Condemnation, Tenant
shall contribute and pay to Landlord the lesser of (1) the amount of Tenant's
Award or (2) such shortfall; provided, however, that notwithstanding the
foregoing, if the sum of the Awards received by Landlord and Tenant with respect
to such Condemnation are less than the Adjusted Purchase Price of such Leased
Property, Tenant shall pay the amount of such difference to Landlord, whether or
not such amount exceeds Tenant's Award.
11.2 Partial Condemnation.
In the event of a Condemnation of less than the whole of the applicable
Leased Property such that such Leased Property is still suitable for its Primary
Intended Use, Tenant will, at its sole cost and expense, commence promptly and
continue diligently to restore the untaken portion of the Leased Improvements on
such Leased Property so that such Leased Improvements shall constitute a
complete architectural unit of the same general character and condition (as
nearly as may be possible under the circumstances) as the Leased Improvements
existing immediately prior to such Condemnation, in full compliance with, all
Legal Requirements. Subject to the terms hereof, Landlord shall contribute to
the cost
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of restoration that part of the Award necessary to complete such repair or
restoration, together with severance and other damages awarded for the taken
Leased Improvements to Tenant regularly during the restoration period so as to
permit payment for the cost of such repair or restoration. Landlord may, at its
option, condition advancement of said Award and other amounts on (i) the absence
of any Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld or
delayed), (iii) general contractors' estimates, (iv) architect's certificates,
(v) conditional lien waivers of general contractors, (vi) evidence of approval
by all governmental authorities and other regulatory bodies whose approval is
required and (vii) such other certificates as Landlord may, from time to time,
reasonably require. Landlord's obligation under this Section 11.2 to disburse
the Award shall be subject to (1) the collection thereof by Landlord and (2) the
satisfaction of any applicable requirements of any Facility Mortgage, and the
release of such Award by the applicable Facility Mortgagee. If the cost of the
restoration of the applicable Leased Property exceeds that part of the Award
necessary to complete such restoration, together with severance and other
damages awarded for the taken Leased Improvements, Tenant shall contribute upon
the demand of Landlord any excess amounts needed to restore such Leased
Property. Such difference shall be paid by Tenant to Landlord and held by
Landlord, together with such part of the Award and such severance and other
damages, for application to the cost of restoration.
11.3 Abatement of Rent.
Other than as specifically provided in this Master Lease Document, the
applicable Lease shall remain in full force and effect and Tenant's obligation
to make all payments of Rent (includ ing, without limitation, Additional Rent)
and to pay all other charges as and when required under such Lease shall remain
unabated during the Term notwithstanding any Condemnation involving the
applicable Leased Property; provided, however, that effective upon the purchase
of such Leased Property or the termination of the Lease pursuant to and in
accordance with Section 11.1, such Lease shall terminate except with respect to
the obligations and liabilities of Tenant thereunder, actual or contingent, that
arose prior to such termination. The provisions of this Article 11 shall be
considered an express agreement governing any Condemnation involving the
applicable Leased Property and, to the maximum extent permitted by law, no local
or State statute, laws, rules regulation or ordinance in effect during the Term
which provide for such a contingency shall have any application in such case.
11.4 Temporary Condemnation.
In the event of any temporary Condemnation of all or any part of the
applicable Leased Property or Tenant's interest under the applicable Lease of
such Leased Property, the applicable Lease shall continue in full force and
effect, and Tenant shall continue
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to pay, in the manner and on the terms therein specified, the full amount of the
Rent. Tenant shall continue to perform and observe all of the other terms and
conditions hereof on the part of the Tenant to be performed and observed. The
entire amount of any Award made for such temporary Condemnation allocable to the
Term, whether paid by way of damages, rent or otherwise, shall be paid to
Tenant. Tenant shall, upon the termination of any such period of temporary
Condemnation, at its sole cost and expenses restore such Leased Property to the
condition that existed immediately prior to such Condemnation, in full
compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration.
11.5 Allocation of Award.
Except as provided in the second sentence of this Section 11.5, the
total Award shall be solely the property of and payable to Landlord. Any portion
of the Award made for the taking of Tenant's leasehold interest in the Leased
Property, Tenant's Capital Additions, loss of business during the remainder of
the Term, the taking of Tenant's Personal Property, or Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant (subject
to the provisions of Section 11.2 hereof). In any Condemnation proceedings,
Landlord and Tenant shall each seek its own Award in conformity herewith, at its
own expense.
11.6 Termination of Rights of First Refusal and Option to Purchase.
Any termination of the applicable Lease pursuant to this Article 11
shall cause any rights of first refusal and options to purchase granted to
Tenant under the applicable Lease to be terminated and to be without further
force or effect.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" under the applicable Lease:
(a) an Event of Default (as defined therein) shall occur and
be continuing under any Transaction Document (other than the applicable
Lease); or
(b) Tenant shall fail to make any payment of the Rent or any
other sum (including, but not limited to, payment of the purchase price
for any of the Collective Leased Properties which Tenant shall be
obligated or elects to purchase
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pursuant to the terms of this Master Lease Document or any Lease)
payable hereunder for more than ten (10) days after the date when due;
or
(c) Tenant shall default in the due observance or performance
of any of the terms, covenants or agreements contained herein to be
performed or observed by it relating to other than the payment of money
and not otherwise referred to in this Section 12.1, and such default
shall remain unremedied for ten (10) days after written notice thereof
from Landlord, provided, however, that if such default is susceptible
of cure but such cure cannot be accomplished with due diligence within
such period of time, and if in addition Tenant commences to cure such
default within ten (10) days after written notice thereof from
Landlord, and thereafter prosecutes the curing of such default with all
due diligence, such period of time shall be extended to such period of
time (not to exceed an additional fifty (50) days) as may be necessary
to cure such default with all due diligence, provided, further,
however, that the period within which Tenant must commence-e such cure
or complete such cure shall be extended by the number of days during
which there shall exist any Unavoidable Delay; or
(d) Tenant shall default in due performance or observance of
any term, covenant or agreement on its part to be performed or observed
pursuant to Section 7.1 or 9.1; or
(e) any Guarantor shall default in due performance or
observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty; or
(f) any of the Transaction Documents shall cease for any
reason to be in full force and effect (other than as specifically
provided therein, or released as provided therein), or Tenant or any
Guarantor shall so assert in writing; or
(g) the occurrence of a default or breach of condition
continuing beyond the expiration of any applicable grace period under
the terms of any other agreement, document or instrument (including,
without limitation, all leases and loan documents) evidencing any
indebtedness, covenant, liability, obligation or undertaking due to, or
made for the benefit of, Landlord and/or any of its Affiliates by (i)
Tenant, (ii) any Affiliate of Tenant, (iii) any Guarantor, or (iv) any
entity owned, legally or beneficially, by Tenant or any Guarantor,
whether such indebtedness, covenants, liabilities, obligations or
undertakings are direct or indirect, absolute or contingent, liquidated
or unliquidated, due or to become due, joint, several or joint and
several, primary or secondary, now existing or hereafter arising; or
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(h) any obligation of Tenant or any Guarantor, or of any
subsidiary of either, in respect of any indebtedness for borrowed money
or for the deferred purchase price of any material property or services
(including, without limitation, indebtedness under the TW Note, but
excluding (1) trade accounts payable in the ordinary course of business
on customary trade terms and (2) indebtedness or obligations under the
Transaction Documents) (hereinafter, "Indebtedness for Borrowed Money")
or any guaranty relating thereto shall be declared to be or shall
become due and payable prior to the stated maturity thereof, or such
Indebtedness for Borrowed Money shall not be paid as and when the same
becomes due and payable, or there shall occur and be continuing any
default under any instrument, agreement or evidence of indebtedness
relating to any such indebtedness for Borrowed Money the effect of
which is to permit the holder or holders of such instrument, agreement
or evidence of indebtedness, or a trustee, agent or other
representative on behalf of such holder or holders, to cause such
Indebtedness for Borrowed money to become due prior to its stated
maturity; or
(i) there shall occur a final unappealable determination by
applicable state authorities of the revocation of any licenses, permits
or approvals required for the lawful operation of the Facility located
on the applicable Leased Property in accordance with its Primary
Intended Use or the loss of any license under any other circumstances
under which Tenant is required to cease its operation of such Facility
in accordance with its Primary Intended Use as currently operated, and
Tenant shall not, within thirty (30) days thereafter, have commenced
appropriate procedures for the substitution of a new property therefor
in accordance with the provisions of Article 16 hereof, or, if Tenant
shall have commenced such procedures, the substitution of such new
property shall not have occurred within ninety (90) days of such
determination or loss; or
(j) any material representation or warranty made by or on
behalf of Tenant or any Guarantor under or in connection with the
applicable Lease or any of the other Transaction Documents, or in any
document, certificate or agreement delivered pursuant to the terms of
such Lease or any of the other Transaction Documents, shall prove to
have been false or misleading in any material respect on the day when
made or deemed made; or
(k) Tenant, AKS or AMSHC shall be generally not paying its
debts as they become due, or Tenant or any Guarantor, or any subsidiary
thereof, shall make a general assignment for the benefit of creditors;
or
(l) any petition shall be filed by or against Tenant or any
Guarantor or any subsidiary of either under the Federal bankruptcy
laws, or any other proceeding shall be instituted
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by or against Tenant or such Guarantor or 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 such Guarantor or subsidiary, or
for any substantial part of the property of Tenant or such Guarantor or
subsidiary, and such proceeding is not dismissed within ninety (90)
days after institution thereof, or Tenant or such Guarantor or
subsidiary shall take any action to authorize or effect any of the
actions set forth above in this paragraph (l); or
(m) Tenant or any Guarantor or any subsidiary of either shall
cause or institute any proceeding for its dissolution or termination;
or
(n) Tenant shall voluntarily cease operations on the
applicable Leased Property for a period in excess of thirty (30)
consecutive days, except as a result of damage, destruction or partial
or complete condemnation, and Tenant shall not within thirty (30) days
thereafter, have commenced appropriate procedures for the substitution
of a new property therefor in accordance with the provisions of Article
16 hereof, or, if Tenant shall have commenced such procedures, the
substitution of such new property shall not have occurred within ninety
(90) days of the cessation of such operations; or
(o) a default shall occur under any mortgage which is secured
by Tenant's leasehold interest in the applicable Lease or the mortgagee
under any such mortgage accelerates the indebtedness secured thereby or
commences a foreclosure action in connection with said mortgage;
then, and in any such event, Landlord, by a vote of a majority of the
Independent Trustees, may terminate the applicable Lease by giving Notice of
such termination, and upon the expiration of the time, if any, fixed in such
Notice, the Term shall terminate and all rights of Tenant under the applicable
Lease shall cease. Landlord shall have all rights at law and in equity available
to Landlord as a result of Tenant's breach of the applicable Lease.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the applicable Leased Property
or any portion thereof and take possession of any and all of Tenant's Personal
Property and the Records (subject to any prohibitions or limitations to
disclosure of any such data as described in Section 3.1.2(d)) on the applicable
Leased Property, without liability for trespass or conversion (Tenant hereby
waiving any right to notice or hearing prior to
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such taking of possession by Landlord) and sell the same at public or private
sale, after giving Tenant reasonable notice of the time and place of any public
or private sale, at which sale Landlord or its assigns may purchase all or any
portion of such Personal Property unless otherwise prohibited by law. Unless
otherwise provided by law, and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable notice shall be
met if such notice is given in the manner prescribed in the applicable Lease at
least five (5) days before the day of sale. The proceeds from any such
disposition, less all expenses incurred in connection with the taking of
possession, holding and selling of such property (including, reasonable
attorneys' fees) shall be applied as a credit against the indebted ness which is
secured by the security interest granted in Section 7.2. Any surplus shall be
paid to Tenant or as otherwise required by law and Tenant shall pay any
deficiency to Landlord, as Ad ditional Rent, upon demand.
12.2 Remedies.
Neither (a) the termination of the applicable Lease pursuant to Section
12.1, (b) the repossession of the applicable Leased Property or any portion
thereof, (c) the failure of Landlord, notwithstanding reasonable good faith
efforts, to relet the applicable Leased Property or any portion thereof, nor (d)
the relenting of all or any portion thereof, 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 Landlord all Rent due and payable with respect to
the applicable Leased Property to and including the date of such termination.
Thereafter, Tenant, until the end of what would have been the Term of the
applicable Lease in the absence of such termination, and whether or not the
applicable Leased Property or any portion thereof shall have been re-let, shall
be liable to Landlord for, and shall pay to Landlord, as current damages, the
Rent and other charges which would be payable hereunder for the remainder of the
Term had such termination not occurred, less the net proceeds, if any, of any
relenting of the applicable Leased Property, after deducting all expenses in
connection with such re-letting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, advertising,
expenses of employees, alteration costs and expenses of preparation for such
relenting. Tenant shall pay such current damages to Landlord monthly on the days
on which the Minimum Rent would have been payable hereunder if the applicable
Lease had not been terminated. Additional Rent for the purposes of this Section
12.2 shall be a sum equal to the annual amount of the Additional Rent for the
Fiscal Year immediately preceding the Fiscal Year in which the termination,
re-entry or repossession takes place. If, however, such termination, re-entry or
repossession occurs during the first full Fiscal Year after the Commencement
Date, the Additional Rent for such Leased Property shall be determined based on
the assumption that Additional Rent for such Leased Property would have
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continued to accrue at the same rate that it had for the period prior to such
termination, re-entry or repossession determination.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages and in lieu of
all such current damages beyond the date of such termination, at Landlord's
election, Tenant shall pay to Landlord either (a) an amount equal to the excess,
if any, of the Rent and other charges which would be payable hereunder from the
date of such termination (assuming that, for the purposes of this paragraph,
annual payments by Tenant on account of Impositions would be the same as
payments required for the immediately preceding twelve calendar months, or if
less than twelve calendar months have expired since the Commencement Date, the
payments required for such lesser period projected to an annual amount) for what
would be the then unexpired term of the applicable Lease if the same remained in
effect, over the Fair Market Rental for the same period, or (b) an amount equal
to the lesser of (i) the Rent and other charges that would have been payable for
the balance of the Term had it not been terminated, or (ii) the aggregate of the
Minimum Rent, Additional Rent, Additional Charges and other charges accrued in
the twelve (12) months ended next prior to such termination (without reduction
for any free rent or other concession or abatement). In the event the applicable
Lease is so terminated prior the expiration of the first full year of the Term,
the liquidated damages which Landlord may elect to recover pursuant to clause
(b) (ii) of this paragraph shall be calculated as if such termination had
occurred on the first anniversary of the Commencement Date. Nothing contained in
the applicable Lease shall, however, limit or prejudice the right of Landlord to
prove and obtain in proceedings for bankruptcy or insolvency an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, the damages are to be proved, whether or
not the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet the applicable
Leased Property or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may at Landlord'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 Landlord
considers advisable and necessary to relet the same, and (b) may make such
reasonable alterations, repairs and decorations in the applicable Leased
Property or any portion thereof as Landlord, in its sole judgment, considers it
advisable and necessary for the 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.
Landlord shall in no event be liable in any way whatsoever for failure to relet
the applicable Leased Property, or, in the event that the applicable Leased
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Property is relent 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 being evicted or dispossessed, or in the event of Landlord obtaining
possession of the applicable Leased Property, by reason of the violation by
Tenant of any of the covenants and conditions of the applicable Lease.
12.3 TENANT'S WAIVER.
IF THE APPLICABLE LEASE IS TERMINATED PURSUANT TO SECTION 12.1 OR 12.2
HEREOF, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, (A) ANY RIGHT TO A TRIAL
BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTE IN
THIS ARTICLE 12, AND (B) THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE
EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds.
Any payments received by Landlord under any of the provisions of the
applicable Lease during the existence or continuance of any Event of Default
(and any payment made to Landlord rather than Tenant due to the existence of an
Event of Default) shall be applied to Tenant's obligations under the applicable
Lease and under the other Transaction Documents in such order as Landlord may
determine or as may be prescribed by the laws of the State.
12.5 Failure to Conduct Business.
For the purpose of determining rental loss damages for Additional Rent,
in the event Tenant shall fail to conduct its business at the applicable Leased
Property for the Primary Intended Use, exact damages or the amount of Additional
Rent being unascertainable, the Additional Rent for such Leased Property shall
be deemed to be equal to the annual amount of the Additional Rent for the Fiscal
Year immediately preceding the Fiscal Year in which such determination takes
place. If, however, such determination occurs during the first full Fiscal Year
after the Commencement Dater the Additional Rent for such Leased Property shall
be determined based on the assumption that Additional Rent for such Leased
Property would have continued to accrue at the same rate that it had for the
period prior to such determination.
12.6 Landlord's Right to Cure Tenant's Default.
If an Event of Default shall have occurred and be continuing, Landlord,
after Notice to Tenant (provided that no such notice shall be required if
Landlord shall reasonably determine immediate action is necessary to protect
person or property), without waiving or releasing any obligation of Tenant, and
without waiving or releasing any Event of Default, may (but shall not be
obligated 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
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extent permitted by law, enter upon the applicable Leased Property or an portion
thereof for such purpose and take all such action thereon as, in Landlord's
opinion, may be necessary or appropriate therefor, including the management of
the Facility located on the applicable Leased Property by Landlord or its
designee (which may include, without limitation, Greenery Managers, Inc.), and
Tenant hereby irrevocably appoints, in the event of such election by Landlord,
Landlord or its designee as manager of the Facility located on the applicable
Leased Property and its attorney in fact for such purpose, irrevocably and
coupled with an interest, in the name, place and stead of Tenant. No such entry
shall be deemed an eviction of Tenant. All reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by Landlord
in connection therewith, together with interest thereon (to the extent permitted
by law) at the Overdue Rate from the date such sums are paid by Landlord until
repaid, shall be paid by Tenant to Landlord, on demand.
12.7 Trade Names.
If the applicable Lease relating to a Facility is terminated for any
reason, Tenant shall not thereafter use a Facility Trade Name in the same market
in which such Facility is located in con nection with any business that competes
with such Facility.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration of the Term shall be
treated as a daily tenancy at sufferance at a rate equal to 1-1/2 times the
Minimum Rent and the Additional Rent then in effect plus Additional Charges and
other charges herein provided (prorated on a daily basis). Tenant shall also pay
to Landlord all damages (other than consequential damages) sustained by reason
of any such holding over. Otherwise, such holding over shall be on the terms and
conditions set forth in the applicable Lease, to the extent applicable. Nothing
contained herein shall constitute the consent, express or implied, of Landlord
to the holding over of Tenant after the expiration or earlier termination of the
applicable Lease.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in the applicable Lease, and such default
shall continue for a period of thirty (30) days after Notice thereof from Tenant
to Landlord and any applicable Facility Mortgagee, or such additional period as
may be reasonably required to correct the same, Tenant may declare the
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occurrence of a "Landlord Default" by a second Notice to Landlord and to such
Facility Mortgagee. Thereafter, Tenant may forthwith cure the same and, subject
to the provisions of the following paragraph invoice Landlord for costs and
expenses (including reasonable attorneys' fees and court costs) incurred by
Tenant in curing the same together with interest from the date Landlord receives
Tenant's invoice, at a rate equal to the lesser of the Overdue Rate or the
maximum rate allowed by law. Tenant shall have no right to terminate the
applicable Lease for any default by Landlord hereunder and no right, for any
such default, to offset or counterclaim against any Rent or other charges due
hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give written notice thereof to Tenant, setting forth, in reasonable detail, the
basis therefor, no Landlord Default shall be deemed to have occurred and
Landlord shall have no obligation with respect thereto until final adverse
determination thereof. If Tenant and Landlord shall fail, in good faith, to
resolve the dispute within ten (10) days after Landlord's notice of dispute,
either may submit the matter for resolution to a court of competent
jurisdiction.
ARTICLE 15
PURCHASE OF LEASED PROPERTY
In the event Tenant shall purchase the applicable Leased Property from
Landlord pursuant to the terms of the applicable Lease, Landlord shall, upon
receipt from Tenant of the applicable purchase price, together with full payment
of any unpaid Rent and other charges due and payable with respect to any period
ending on or before the date of the purchase, and so long as no Default shall
have occurred and be continuing at such time (or, solely in the case of the
purchase of the Collective Leased Properties pursuant to Section 21.4, so long
as no Default involving the nonpayment of Rent shall have occurred and be
continuing), deliver to Tenant a title insurance policy, together with an
appropriate deed or other instruments, conveying the entire interest of Landlord
in and to such Leased Property to Tenant, free and clear of all encumbrances
created through the act or omission of Landlord other than (i) those liens, if
any, which Tenant has agreed in writing to accept and take title subject to, and
(ii) encumbrances imposed on such Leased Property under Section 5.5 hereof. The
difference between the applicable purchase price and the total cost of
discharging the encumbrances described in clause (i) above shall be paid in cash
to Landlord or as Landlord may direct, in federal or other immediately available
funds. 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. The
closing of any such sale shall be subject to all terms and conditions with
respect thereto set forth in the applicable Lease and in the other Transaction
Documents, and shall,
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unless waived by Tenant, be contingent upon and subject to Tenant's obtaining
all required governmental consents and approvals for such transfer. All expenses
of such conveyance, including, without limitation, all transfer and sales taxes,
documentary fees, the fees and expenses of counsel to Landlord and the cost of
any title examination or title insurance, shall be paid by Tenant.
ARTICLE 16
SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY
16.1 Tenant's Substitution Option.
If (a) in the good faith judgment of Tenant, the Leased Property shall
become Unsuitable for Its Primary Intended Use, and no Default shall have
occurred and then be continuing, or (b) Tenant shall have voluntarily ceased
operations on the applicable Leased Property or there shall have occurred a
final unappealable determination by an applicable State authority of the
revocation of any license, permit or approval required for the lawful operation
of the Facility located on the applicable Leased Property in accordance with
Primary Intended Use or the loss of any license under any other circumstances
under which Tenant is required to cease its operation of such Facility in
accordance with its Primary Intended Use, and no Event of Default shall have.
occurred and then be continuing, Tenant shall have the right, subject to the
conditions set forth in this Article 16, upon not less than thirty (30) days,
and not more than ninety (90) days, prior Notice to Landlord, to substitute one
or more properties (collectively, "Substitute Properties" or individually,
"Substitute Property") on the date specified in such Notice (the "Substitution
Date"); provided, however, if Tenant is required by court order or
administrative action to divest or otherwise dispose of the applicable Leased
Property in less than thirty (30) days and Tenant shall have given Landlord
prior Notice of the filing of such court or administrative action and kept
Landlord reasonably apprised of the status thereof, the time period shall be
shortened appropriately to meet the reasonable needs of Tenant, but in no event
less than ten (10) Business Days after the receipt by Landlord of such Notice.
Such Notice shall (i) be in the form of an Officer's Certificate, setting forth
in reasonable detail the reason(s) for the substitution and the proposed
Substitution Date, and (ii) designate not less than two properties (or groups of
properties), each of which properties (or groups of properties) shall provide
Landlord with a yield (i.e., annual return on its equity in such property)
substantially equivalent to Landlord's yield from the applicable Leased Property
at the time of such proposed substitution (or in the case of substitution
because of damage or destruction, the yield immediately prior to such damage or
destruction) and as reasonably projected over the remaining Term of the
applicable Lease, as determined by a majority of the Independent Trustees of
Landlord and a majority of the Trustees of Landlord.
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16.2 Landlord's Substitution Option.
If Tenant shall have voluntarily or involuntarily discontinued use of
the applicable Leased Property for its business operations for a period in
excess of one year, Landlord shall have the right, exercisable by thirty (30)
days prior written notice to Tenant, to require Tenant to substitute a
Substitute Property (in which event, Tenant shall comply with subparagraph
16.l(ii) within thirty (30) days thereafter).
16.3 Substitution Procedures.
(a) If either Landlord or Tenant shall initiate a substitution pursuant
to Section 16.1 or 16.2 above, Landlord shall have a period of thirty (30) days
within which to review the designated properties and such additional information
as may be requested by Landlord and either accept or reject the Substitute
Properties so presented, unless Tenant is required by a court order or
administrative action to divest or otherwise dispose of the Leased Property
within a shorter time period, in which case the time period shall be shortened
appropriately to meet the reasonable needs of Tenant, but in no event shall such
period be less than ten (10) Business Days after Landlord's actual receipt of
Tenant's notice (subject to further extension for any period of time in which
Landlord is not timely provided with the information provided for in this
Section 16.3 and Section 16.4 below). Landlord and Tenant shall use good faith
efforts to agree on a Substitute Property.
(b) Tenant's right (and obligation) to offer to substitute a property
as set forth in this Article is subject to (i) satisfaction of the conditions
set forth in Section 16.4 below, (ii) determination by a majority of the
Trustees and a majority of the Independent Trustees of Landlord, that the
Substitute Property shall provide Landlord with a yield substantially equivalent
to Landlord's yield from the Leased Property immediately before such
substitution or such damage or destruction, as the case may be, and as projected
over the remainder of the Term, and (iii) the delivery of an opinion of counsel
for Landlord confirming that (w) the substitution of the Substitute Property for
the Leased Property will qualify as an exchange solely of property of a like
kind under Section 1031 of the Code, in which, generally, except for "boot", no
gain or loss will be recognized by Landlord, (x) the substitution will not
result in ordinary recapture income to Landlord pursuant to Code Section
1250(d)(4) or any other Code provision, (y) the substitution will result in
income, if any, to the Landlord of a type described in Code Section 856(c)(2) or
(3) and will not result in income of the types described in Code Section
856(c)(4) or result in the tax imposed under Code Section 857(b)(6), and (z) the
substitution, together with all other substitutions made or requested by Tenant
or an Affiliate pursuant to any other lease with Landlord or other transfers of
the Leased Property or properties leased under other such leases, during the
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relevant time period, will not jeopardize the qualification of Landlord as a
real estate investment trust under Code Sections 856-860.
(c) In the event that the then Fair Market Value of the Substitute
Property or group of Substitute Properties minus the encumbrances assumed by
Landlord, or as to which the Landlord will take the Substitute Property or group
of Substitute Properties subject, as of the Substitution Date is greater than
the then Fair Market Value Purchase p rice of the Leased Property minus the
encumbrances assumed by Tenant, or as to which the Tenant will take the Leased
Property subject, as of the Substitution Date (or in the case of damage or
destruction, the Fair Market Value Purchase Price immediately prior to such
damage or destruction), Landlord shall pay to Tenant an amount equal to the
difference, subject to the limitation set forth below; in the event that such
value of the Substitute Property or group of Substitute Properties is less than
such value of the Leased Property, Tenant shall pay to Landlord an amount equal
to the difference, subject to the limitation set forth below, provided, however,
neither Landlord nor Tenant shall be obligated to consummate such substitution
if such party would be required to make a payment (the "Cash Adjustment") to the
other in excess of an amount equal to fifteen percent (15%) of the Fair Market
Value of the Leased Property. Without limiting the effect of the preceding
sentence, in the event that, on the Substitution Date, Landlord is obligated to
pay a Cash Adjustment to Tenant and Landlord, by a vote of a majority of the
Independent Trustees, shall elect not to make such payment in cash, Landlord
shall provide Tenant with (and Tenant shall accept) a purchase money note and
mortgage or deed of trust, on then commercially reasonable terms.
(d) The Rent for such Substitute Property shall, in all respects,
provide Landlord with a yield (i.e., annual return on its equity in such
property) substantially equivalent to Landlord's yield from the Leased Property
at the time of such substitution (or in the case of substitution because of
damage or destruction the yield immediately prior to such damage or destruction)
and as reasonably projected over the remaining Term, taking into account the
Cash Adjustment paid or received by Landlord and any other relevant factors, as
determined by a majority of the Independent Trustees and a majority of the
Trustees.
(e) The Adjusted Purchase Price of the Substitute Property shall be an
amount equal to the Adjusted Purchase Price of the Leased Property (i) increased
by any Cash Adjustment paid by Landlord pursuant to paragraph (d) above, or (ii)
decreased by any Cash Adjustment paid by Tenant pursuant to paragraph (c) above.
16.4 Conditions to Substitution.
On the Substitution Date, the Substitute Property shall become the
Leased Property hereunder, upon delivery by Tenant to Landlord of the following:
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(a) An Officer's Certificate, and, with respect to the matters
described in (ii), (iii) and (iv) below, an opinion of counsel to
Tenant acceptable to Landlord, certifying that (i) the Substitute
Property has been accepted by Tenant for all purposes of the applicable
Lease and there has been no material damage to the improvements located
thereon, nor is any condemnation or eminent domain proceeding pending
with respect thereto; (ii) all appropriate permits, licenses and
certificates (including, but not limited to, a permanent, unconditional
certificate of occupancy and all certificates of need, licenses and
provider agreements) which are necessary to permit the use of the
Substitute Property in accordance with the provisions of the applicable
Lease have been obtained and are in full force and effect; (iii) under
applicable zoning and use laws, ordinances, rules and regulations, the
Substitute Property may be used for the purposes contemplated by the
applicable Lease and all necessary subdivision approvals, if any, have
been obtained; (iv) there are no mechanics' or materialmen's liens
outstanding or threatened to the knowledge of Tenant against the
Substitute Property arising out of or in connection with the
construction of the improvements thereon, other than those being
contested by Tenant pursuant to Article 8 hereof; (v) no Default
exists, and no defense, offset of claim exists with respect to any sums
payable by Tenant hereunder; and (vi) any exceptions to Landlord's
title to the Substitute Property do not materially interfere with the
intended use of the Substitute Property by Tenant;
(b) A deed with limited warranties or assignment of a
leasehold estate with limited warranties (as applicable) conveying to
Landlord title to the Substitute Property free and clear of any liens
or encumbrances, except those approved by Landlord;
(c) an amendment duly executed, acknowledged and delivered by
Tenant, in form and substance satisfactory to Landlord, amending the
applicable Lease to (i) correct the legal description of the Land, (ii)
establish the Adjusted Purchase Price and Minimum Rent of the
Substitute Property and (iii) make such other changes herein as may be
necessary or appropriate under the circumstances;
(d) counterparts of a standard owner's or lessee's (as
applicable) policy of title insurance covering the Substitute Property
(or a valid, binding, unconditional commitment therefor), dated as of
the Substitution Date, in current form and including mechanics' and
materialmen's lien coverage, issued to Landlord by a title insurance
company and in the form reasonably satisfactory to Landlord. Such
policy shall (i) insure (x) Landlord's fee title or leasehold estate to
the Substitute Property, subject to no liens or encumbrances
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except those approved by Landlord and (y) that any restrictions
affecting the Substitute Property have not been violated; (ii) be in an
amount at least equal to the Fair Market Value of the Substitute
Property; and (iii) contain such affirmative coverage endorsements as
Landlord shall reasonably request;
(e) certificates of insurance with respect to the Substitute
Property fulfilling the requirements of Article 9;
(f) current appraisals or other evidence satisfactory to
Landlord, in its sole discretion as to the then current Fair Market
Values and the projected residual values of such Substitute Property
and the applicable Leased Property;
(g) all available revenue data relating to the Substitute
Property for the period from the date of opening for business of the
Facility on such Substitute Property to the date of Tenant's most
recent Fiscal Year end, or for the most recent three (3) years,
whichever is less;
(h) written confirmation from any guarantor of Tenant's
obligations under the applicable Lease; and
(i) such other certificates, documents, opinions of counsel
and other instruments as may be reasonably required by Landlord.
16.5 Conveyance to Tenant.
On the Substitution Date, Landlord shall convey the Leased Property to
Tenant in accordance with the provisions of Article 15 hereof (except as to
payment of any expenses in connection therewith which shall be governed by
Section 16.6 below) upon conveyance to Landlord of the Substitute Property, as
appropriate.
16.6 Expenses.
Tenant shall pay or cause to be paid, on demand, all reasonable costs
and expenses paid or incurred by Landlord in connection with the substitution
and conveyance of the Leased Property and Substitute Property, including, but
not limited to, (a) reasonable fees and expenses of counsel, (b) all printing
expenses, (c) the amount of filing, registration and recording taxes and fees,
(d) the cost of preparing and recording, if appropriate, a release of the Leased
Property from the lien of any mortgage, (e) brokers' fees and commissions, (f)
documentary stamp and transfer taxes, (g) title insurance charges and premiums,
and (h) escrow fees.
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ARTICLE 17
SUBLETTING AND ASSIGNMENT
17.1 Subletting and Assignment.
Except as provided in Section 17.3 below, Tenant shall not, without the
prior written consent of a majority of the Independent Trustees and a majority
of the Trustees, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer the applicable Lease or sublease (which term shall be deemed to include
the granting of concessions and licenses and the like) all or any part of the
applicable Leased Property or suffer or permit the applicable Lease or the
leasehold estate created hereby or thereby or any other rights arising under the
applicable Lease to be assigned, transferred, mortgaged, pledged, hypothecated
or encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the use or occupancy of the applicable Leased
Property by anyone other than Tenant, or the applicable Leased Property to be
offered or advertised for assignment or subletting except as hereinafter
provided. For purposes of this Section 17.1, an assignment of the applicable
Lease shall be deemed to Include any change in control of Tenant or any
transaction pursuant to which Tenant is merged or consolidated with another
entity or pursuant to which all or substantially all of Tenant's assets are
transferred to any other entity, as if such change in control or transaction
were an assignment of the applicable Lease. Changes in control of Tenant shall
include, without limitation, transfers (by one or more transfers) of the stock
or partnership or beneficial interests or other evidences of ownership of Tenant
or the issuance of additional stock or partnership or beneficial interests or
other indicia of ownership in Tenant which cause a change in the control of
Tenant.
If the applicable Lease is assigned or if the applicable Leased
Property or any part thereof are sublet (or occupied by anybody other than
Tenant and its employees) Landlord, after an Event of Default occurs and is
continuing, may collect the rents from such assignee subtenant or occupant, as
the case may be, and apply the not amount collected to the Rent herein reserved,
but no such collection shall be deemed a waiver of the provisions set forth in
the first paragraph of this Section 17.1, the acceptance by Landlord of such
assignee, subtenant or occupant, as the case may be, as a tenant, or a release
of Tenant from the future performance by Tenant of its covenants, agreements or
obligations contained in the applicable Lease.
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 a particular instance shall be deemed to be a waiver of the
prohibition set forth in this Section 17.1. No assignment, subletting or
occupancy shall affect the Primary Intended Use. Any subletting, assignment or
other
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transfer of Tenants interest in the applicable Lease in contravention of this
Section 17.1 shall be voidable at Landlord's option.
17.2 Required Sublease Provisions.
Any sublease of all or any portion of the applicable Leased Property
shall provide (a) that it is subject and subordinate to the applicable Lease and
to the matters to which the applicable Lease and such Lease is or shall be
subject or subordinate; (b) that in the event of termination of such Lease or
reentry or dispossession of Tenant by Landlord under such Lease, Landlord may,
at its option, take over all of the right, title and interest of Tenant, as
sublessor under such sublease, and such subtenant shall, at Landlord's option
attorn to Landlord pursuant to the then executory provisions of such sublease,
except that neither Landlord nor any Facility Mortgagee, as holder of a mortgage
or as Landlord under the applicable Lease, if such mortgagee succeeds to that
position, shall (i) be liable for any act or omission of Tenant under such
sublease, (ii) be subject to any credit, counterclaim, offset or defense which
theretofore accrued to such subtenant against Tenant, (iii) be bound by any
previous modification of such sublease not consented to in writing by Landlord
or by any previous prepayment of more than one (1) month's Rent, (iv) be bound
by any covenant of Tenant to undertake or complete any construction of such
Leased Property or any portion thereof, (v) be required to account for any
security deposit of the subtenant other than any security deposit actually
delivered to Landlord by Tenant, (vi) be bound by any obligation to make any
payment to such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease that are performed
after the date of such allotment, (vii) be responsible for any monies owing by
Tenant to the credit of such subtenant, or (viii) be required to remove any
Person occupying such Leased Property or any part thereof; and (c) in the event
the sublessee receives a written Notice from Landlord or the Facility mortgagee,
if any, stating that an Event of Default has occurred and is continuing, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice or as such party may direct.
All rentals received from the sublessee by Landlord or the Facility Mortgagee,
if any, as the case may be, shall be credited against the amounts owing by
Tenant under the applicable Lease; and such sublease shall provide that the
subtenant thereunder shall, at the request of Landlord, execute a suitable
instrument in confirmation of such agreement to attorn. An original counterpart
of each such sublease and assignment and assumption, duly executed by Tenant and
such sublessee or assignee, as the case may be, in form and substance
satisfactory to Landlord, shall be delivered promptly to Landlord and (a) in the
case of an assignment, the assignee shall assume in writing and agree to keep
and perform all of the terms of the applicable 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 and (b) in case of either
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an assignment or subletting, Tenant shall remain primarily liable, as principal
rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Tenant hereunder.
The provisions of this Section 17.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 17.1.
17.3 Permitted Sublease.
Notwithstanding the foregoing, but subject to the provisions of Section
17.4 below and any other express conditions or limitations set forth herein,
Tenant may, in each instance after Notice to Landlord, sublease space at the
applicable Leased Property for laundry, commissary or child care purposes in
furtherance of the Primary Intended Use, so long as such sublease would not
reduce the number of licensed beds at the applicable Facility, would not violate
or affect any Legal Requirement, Insurance Requirement, and Tenant has provided
such additional insurance coverage applicable to the activities to be conducted
in such subleased space as is acceptable to Landlord in its discretion.
17.4 Sublease Limitation.
Anything contained in this Lease to the contrary notwithstanding,
Tenant shall not sublet the applicable Leased Property on any basis such that
the rental to be paid by the sublessee thereunder would be based, in whole or in
part, on either (a) the income or profits derived by the business ' activities
of the sublessee, or (b) any other formula such that any portion of the sublease
rental 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 18
ESTOPPEL CERTIFICATES
At any time and from time to time, upon not less than ten (10) days
prior Notice by Landlord, Tenant shall furnish to Landlord an Officer's
Certificate certifying that the applicable Lease is unmodified and in full force
and effect (or that the applicable Lease is in full force and effect as modified
and setting forth the modifications), the date to which the Rent has been paid,
that Tenant is not in default in the performance or observance of any of the
terms of the applicable Lease and that no event exists which with the giving of
notice, lapse of time, or both, would constitute a Default or an Event of
Default, or if a Default or an Event of Default shall exist, specifying in
reasonable detail such Default or an Event of Default, and the steps being taken
to remedy the same, and such additional information as Landlord may reasonably
request. Any such certificate furnished
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pursuant to this Section may be relied upon by Landlord and any prospective
purchaser or mortgagee of the applicable Leased Property.
ARTICLE 19
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the applicable Leased Property during usual business hours upon not less
than three (3) Business Days notice, and to make such repairs as Landlord is
permitted or required to make pursuant to the terms of the applicable Lease;
provided that any inspection or repair by Landlord or its representatives will
not unreasonably interfere with Tenant's use and operation of applicable Leased
Property.
ARTICLE 20
APPRAISAL
20.1 Appraisal Procedure.
In the event that it becomes necessary to determine the Fair Market
Value or Fair Market Rental of any property for any purpose of the applicable
Lease, and the parties cannot agree amongst themselves on such Fair Market Value
or Fair Market Rental, Tenant may request that Landlord select, or Landlord may
on its own initiative select, a Qualified Appraiser (as hereinafter defined). If
Tenant does not accept the Fair Market Value or Fair Market Rental, as the case
may be, of such property as of the relevant date as determined by such Qualified
Appraiser, Tenant may, within ten (10) days after receiving the report of such
Qualified Appraiser, by written notice to Landlord, appoint a Second Qualified
Appraiser. If Tenant does not so appoint a Second Qualified Appraiser within
such ten (10) day period, Tenant shall be deemed to have accepted the Fair
Market Value or Fair Market Rental determined by the first Qualified Appraiser.
The two appraisers so designated shall meet within ten (10) days after the
second appraiser as designated, and, if within ten (10) days after the second
appraiser is designated, the two appraisers do not agree upon the Fair Market
Value or Fair Market Rental, as the case may be, of any property as of the
relevant date, the two appraisers shall designate a third Qualified Appraiser,
within ten (10) days thereafter. In the event that the two appraisers are unable
to agree upon the appointment of a third Qualified Appraiser within such ten
(10) day period, either Landlord or Tenant, on behalf of both, may then request
appointment of such appraiser the then president of the American Arbitration
Association. In the event of a failure, refusal or inability of any appraiser to
a new appraiser shall be appointed in his stead, which appointment shall
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be made in the same manner as hereinabove provided for the appointment of such
appraiser so failing, refusing or being unable to act. in the event that all
appraisers cannot agree upon such value ten (10) days as aforesaid, each
appraiser shall submit his appraisal of such value to the other two appraisers
in writing, and such value shall be determined by calculating the average of the
two numerically closest (or, if the values are equidistant, all three) values
determined by the three appraisers.
"Qualified Appraiser" shall mean any disinterested person who is a
member in good standing of the American Institute of Real Estate Appraisers or
the American Society of Real Estate Counselors (or the successor to either of
such organizations) and who has had not less than ten (10) years experience in
appraising and valuing, commercial buildings in the State.
The costs (other than Landlord's counsel fees) of such appraisal shall
be borne by Tenant. Upon determining such value, the appraisers shall promptly
notify Landlord and Tenant in writing of such determination. If any party shall
fail to appear at the hearings appointed by the appraisers, the appraisers may
act in the absence of such party.
The determination of the board of appraisers (or the single qualified
Additional Appraiser, as appropriate) made in accordance with the foregoing
provisions shall be final and binding upon the parties, such determination may
be entered as an award in arbitration in a court of competent jurisdiction, and
judgment thereon may be entered.
20.2 Landlord's Right to Appraisal.
Landlord shall have the right, exercisable at any time during the Term,
to appoint a Qualified Appraiser (which may include, without limitation,
Valuation Counselors, Inc.) to perform a complete appraisal of the applicable
Leased Property (such appraisal may, if Landlord requests, include complete
valuations of such Leased Property based upon (i) the "Cost Approach", (ii) the
"Market Approach" and (iii) the "Income Approach"), which appraisal shall met
all requirements of any state or Federal bank regulatory authority that Landlord
considers relevant. The costs of such appraisal shall be borne by Tenant and
shall be included as part of the Additional Charges. Such right may not be
exercised more than once during the Term.
ARTICLE 21
RIGHTS OF FIRST REFUSAL; OPTION TO PURCHASE
21.1 First Refusal to Purchase.
Provided, (a) no Default has occurred and is continuing, (b) the Leases
for each of the Collective Leased Properties shall be
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in full force and effect (other than Leases that have been terminated in
accordance with the provisions hereof (other than after the occurrence of an
Event of Default, and (c) other than as expressly permitted by Article 16,
Tenant shall not have assigned the Leases any of the Collective Leased
Properties or subleased all or any portion of the Collective Leased Properties,
during the Term and for sixty (60) days after the expiration of the Term Tenant
shall have a right of first refusal option to purchase the applicable Leased
Property (subject to Section 22.1) upon the same price, terms and conditions as
Landlord shall propose to sell such Leased Property, or upon the same price,
terms and conditions of any written offer from a third party to purchase such
Leased Property which Landlord intends to accept (or has accepted subject to
Tenant's right of first refusal herein provided). If during the Term and for
sixty (60) days after the expiration of the Term, Landlord reaches such
agreement with a third party or proposes to offer the applicable Leased Property
for sale, Landlord shall promptly give Notice to Tenant of the purchase price
and all other material terms and conditions of such agreement or proposed sale
and Tenant shall have sixty (60) days thereafter to exercise Tenant's right of
first refusal to purchase by written notice to Landlord thereof. Failure of
Tenant to respond within such 60-day period shall be deemed a waiver of Tenant's
right to purchase such Leased Property pursuant to this Article 21. If Tenant
exercises its right of first refusal, the sale to Tenant shall be consummated
upon the same terms and conditions as contained in such agreement or Landlord's
notice of the proposed sale (including all terms' certain in such agreement or
notice relating to any security deposit or fee, and the date of closing). Such
sale to Tenant shall be made in accordance with the provisions of Article 15, to
the extent not inconsistent herewith, no later than the closing date (or, if no
closing date is specified in such agreement or notice, the date that such offer
terminates) specified in such agreement or notice. If Tenant shall not exercise
its option to purchase within the time period and in the manner above provided,
Landlord shall be free to sell such Leased Property to any third party at a
price and upon terms substantially similar to and in any event no less favorable
to Landlord than those offered to Tenant. Tenant shall be entitled to exercise
its right of first refusal as provided in Section 21.1 as to any subsequent or
proposed sale during the Term.
Tenant's right of first refusal shall be applicable to all sales or
promised sales of any parts of the applicable Leased Property and the price at
which Tenant may so purchase such parts shall be the lesser of (a) the proposed
sale price of the parts or (b) the then Fair Market Value Purchase Price of the
parts of the applicable Leased Property.
21.2 First Refusal to Lease.
Provided (a) this Lease shall not have been terminated in connection
with an Event of Default, and (b) other than as expressly permitted by Article
17 hereof, Tenant shall not have
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assigned this Lease or subleased all or any portion of the Leased Property,
Tenant shall have a first refusal option to lease the Leased Property for a
period of sixty (60) days after the expiration of the Term, upon the same terms
and conditions as Landlord shall proposes to lease the Leased Property or upon
the same terms and conditions of any offer from any third party which Landlord
intends to accept (or has accepted subject to Tenant's right of first refusal
herein provided). If, at any time prior to the expiration of such sixty (60) day
period, Landlord reaches such agreement with a third party or proposes to lease
the Leased Property to a third party, Landlord shall promptly notify Tenant of
the rental rates and all other material terms of such agreement or proposal and
Tenant shall have five (5) days after receipt of such notice within which time
to exercise its option. Landlord and Tenant shall enter into a new lease of the
Leased Property, in form reasonably satisfactory to both Landlord and Tenant, as
soon as practicable after the date of receipt by Landlord of Tenant's election
to exercise such option. Failure of Tenant to give such notice to Landlord
within such five (5) day period or to enter into such new lease within fifteen
(15) days after exercise of such option shall be deemed a waiver of Tenant's
rights pursuant to this Section 21.2.
21.3 Landlord's Option to Purchase the Tenant's Personal Property;
Transfer of Licenses.
Effective on not less than fifteen (15) days' prior notice given at any
time within sixty (60) days prior to expiration of the Term (or such shorter
period as shall be appropriate if the applicable Lease is terminated prior to
its expiration date), Landlord shall have the option to purchase all (but not
less than all) of Tenant's Personal Property (except motor vehicles), if any, at
the expiration or termination of the applicable Lease, for an amount equal to
the then fair market value thereof (determined in accordance with the appraisal
procedures set forth in Article 20), subject to, and with appropriate price
adjustments for, all equipment leases, conditional sale contracts, security
interests and other encumbrances to which such Tenant's Personal Property is
subject. Tenant's Personal Property will be conveyed to Landlord on an
"s-is"basis, in its then current condition and state of repair. Tenant shall
provide Landlord with warranties of title, reflecting no encumbrances as to
which adjustments to the purchase price thereof, as required by the previous
sentence, have not been made. Failure of Landlord to notify Tenant of the
election of its option the purchase Tenant's Personal Property by the fifteenth
day prior to the termination of the applicable Lease shall be deemed to
constitute a waiver of Landlord's right to purchase Tenant's Personal Property
at the applicable Leased Property. Upon the expiration or sooner termination of
the applicable Lease, or upon management of the Facility located on the
applicable Leased Property by the Landlord or its designee, Tenant shall use all
reasonable efforts to transfer and assign to Landlord or its designee, or assist
Landlord or its designee in obtaining, any
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contracts, licenses, and certificates required for the then operation of such
Facility.
21.4 Tenant's Option to Purchase the Collective Leased Properties.
Provided (a) no Default involving the nonpayment of Rent shall have
occurred and be continuing, (b) the Leases for each of the Collective Leased
Properties shall be in full force and effect (other than Leases that have been
terminated in accordance with the provisions hereof, other than after the
occurrence of an Event of Default), and (c) other than as expressly permitted by
Article 17, Tenant shall not have assigned the Leases for any of the Collective
Leased Properties or subleased all or any portion of the Collective Leased
Properties, Tenant shall have the option, exercisable on not less than twelve
(12) months prior Notice to Landlord, to purchase all, but not less than all,
the Collective Leased Properties (other than those Collective Leased Properties
whose Leases have been terminated in accordance with the provisions of Article
10 or Article 11) upon the expiration of the Fixed Term or any Extended Term,
each for a purchase price equal to the sum of the greater of (i) ninety percent
(90%) of the Fair Market Value Purchase Price of such Collective Leased Property
as of the expiration of the Fixed Term or Extended Term, as the case may be, or
(ii)(1) if such option is exercised at the end of the Fixed Term, one hundred
twenty percent (120%) of the Adjusted Purchase Price of such Collective Leased
Property, (2) if such option is exercised at the end of the first Extended Term,
one hundred fifty percent (150%) of such Adjusted Purchase Price, (3) if such
option is exercised at the end of the second Extended Term, two hundred percent
(200%) of such Adjusted Purchase Price or (4) if such option is exercised at the
end of the third Extended Term, three hundred percent (300%) of such Adjusted
Purchase Price. Such purchase by Tenant shall be made in ac cordance with the
provisions of Article 15.
ARTICLE 22
FACILITY MORTGAGES
22.1 Landlord may Grant Liens.
Without the consent of Tenant, Landlord may, subject to the terms and
conditions set forth in this Section 22.1, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance or title
retention agreement ("Encumbrance") upon the applicable
Leased Property, or any portion thereof or interest therein, whether to secure
any borrowing or other means of financing or refinancing. Any such Encumbrance
shall include the right to prepay (whether or not subject to a prepayment
penalty) and shall provide (subject to Section 22.2 below) that it is subject to
the rights of Tenant under the applicable Lease, including the rights of Tenant
to acquire such Leased Property
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pursuant to the applicable provisions of the applicable Lease (except Tenant's
right of first refusal to purchase such Leased Property shall not apply upon
foreclosure or transfer in lieu thereof, provided, that any such purchaser or
transferee (a) shall take title subject to Tenant's rights to acquire such
Leased Property pursuant to the applicable Lease, (b) shall agree to give Tenant
the same notice, if any, given to Landlord of any default or acceleration of any
obligation with respect to such Encumbrance, and (c) shall agree to permit
Tenant to appear by its representative and bid at any sale in foreclosure made
with respect to any such Encumbrance).
22.2 Subordination of Lease.
Subject to Section 22.1 above and the last paragraph of this Section
22.2, the applicable Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate to any ground or master lease, and all renewals,
extensions, modifications and replacements thereof, and to all mortgages and
deeds of trust, which may now or hereafter affect the applicable Leased Property
or any improvements thereon and/or any of such leases, whether or not such
mortgages or deeds of trust shall also cover other lands and/or buildings and/or
leases, to each and every advance made or hereafter to be made under such
mortgages and deeds of trust, and to all renewals, modifications, replacements
and extensions of such leases and such mortgages and deeds of trust and all
consolidations of such mortgages and deeds of trust. This Section shall be
self-operative and no further instrument of subordination shall be required. in
confirmation of such subordination, Tenant shall promptly execute, acknowledge
and deliver any instrument that Landlord, the lessor under any such lease or the
holder of any such mortgage or the trustee or beneficiary of any deed of trust
or any of their respective successors in interest may reasonably request to
evidence such subordination. Any lease to which the applicable Lease is, at the
time referred to, subject and subordinate is herein called "Superior Lease" and
the lessor of a Superior Lease or its successor in interest at the time referred
to, is herein called "Superior Landlord" and any mortgage or deed of trust to
which the applicable Lease is, at the time referred to, subject and subordinate,
is herein called "Superior Mortgage" and the holder, trustee or beneficiary of a
Superior mortgage is herein called "Superior Mortgagee".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under the applicable Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise, then at the
request of such party so succeeding to Landlord's rights (herein called
"Successor Landlord") and upon such Successor Landlord's written agreement to
accept Tenant's attornment, Tenant shall attorn to and recognize such Successor
Landlord as Tenant's landlord under the applicable Lease, and shall promptly
execute and deliver any instrument that such Successor Landlord may reasonably
request to evidence such
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attornment. Upon such attornment, the applicable Lease shall continue in full
force and effect as a direct lease between the Successor Landlord and Tenant
upon all of the terms, conditions and covenants as are set forth in the
applicable Lease, except that the Successor Landlord (unless formerly the
landlord under the applicable Lease or its nominee or designee) shall not be (a)
liable in any way to Tenant for any act or omission, neglect or default on the
part of Landlord under the applicable Lease, (b) responsible for any monies
owing by or on deposit with Landlord to the credit of Tenant, (c) subject to any
counterclaim or set off which theretofore accrued to Tenant against Landlord,
(d) bound by any modification of the applicable Lease subsequent to such
Superior Lease or Mortgage, or by any previous prepayment of Minimum Rent or
Additional Rent for more than one (1) month, which was not approved in writing
by the Superior Landlord or the Superior Mortgagee thereto, (e) liable to the
Tenant beyond the Successor Landlord's interest in the applicable Leased
Property and the rents, income, receipts, revenues, issues and profits issuing
from such Leased Property, (f) responsible for the performance of any work to be
done by the Landlord under the applicable Lease to render the applicable Leased
Property ready for occupancy by Tenant, or (g) required to remove any Person
occupying the applicable Leased Property or any part thereof, except if such
person claims by, through or under the Successor Landlord. Tenant agrees at any
time and from time to time to execute a suitable instrument in confirmation of
Tenant's agreement to attorn, as aforesaid.
Tenant's obligation to subordinate the applicable Lease and Tenant's
rights hereunder to any Superior Mortgage or Superior Lease and to attorn to any
Successor Landlord, shall be conditioned upon Landlord obtaining from any
Superior Mortgagee or Superior Landlord, an agreement which shall be executed by
Tenant and such Superior Mortgagee or Superior Landlord which shall provide in
substance that so long as no Event of Default exists as would entitle Landlord
or any such Superior Mortgagee or Superior Landlord to terminate the applicable
Lease or would cause, without any further action of Landlord or such Superior
Mortgagee or Superior Landlord, the termination of the applicable Lease or would
entitle Landlord or such Superior Mortgagee or Superior Landlord to dispossess
Tenant, the applicable Lease shall not be terminated nor shall Tenant's use,
possession or enjoyment of the applicable Leased Property, in accordance with
the terms and provisions of the applicable Lease, be interfered with, nor shall
the leasehold estate granted by the applicable Lease be affected in any other
manner, in any foreclosure or any action or proceeding instituted under or in
connection with such Superior Mortgage or Superior Lease, or in the event such
Superior Mortgagee or Superior Landlord takes possession of the applicable
Leased Property pursuant to any provisions of such Superior Mortgage or Superior
Lease, unless Landlord or such Superior Mortgagee or Superior Landlord would
have had such right of termination pursuant to the applicable Lease. Such
agreement shall be in form
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customarily used by the holder of any such Superior Mortgage or Superior Lease.
22.3 Notice to Mortgagee and Ground Landlord.
Subsequent to the receipt by Tenant of notice from any Person that it
is a Facility Mortgagee, or that it is the ground lessor under a lease with
Landlord, as ground lessee, which includes the applicable Leased Property as
part of the demised premises, no notice from Tenant to Landlord as to the
applicable Leased Property shall be effective unless and until a copy of the
same is given to such Facility Mortgagee or ground lessor and the curing of any
of Landlord's defaults by such Facility Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 23
MISCELLANEOUS
23.1 No Waiver.
No failure by Landlord 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 the applicable Lease, which shall continue in full force and
effect with respect to any other then existing or subsequent breach.
23.2 Remedies Cumulative.
To the extent permitted by law, each legal, equitable or contractual
right, power and remedy of Landlord, now or hereafter provided either in the
applicable 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 Landlord of any one or more of such rights,
powers and remedies shall not preclude the simultaneous or subsequent exercise
by Landlord of any or all of such other rights powers and remedies.
23.3 Acceptance of Surrender.
No surrender to Landlord of the applicable Lease or of the applicable
Leased Property or any part thereof, or of any interest therein, shall be valid
or effective unless agreed to and accepted in writing by Landlord and no act by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, shall constitute an acceptance of any such surrender.
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23.4 No Merger of Title.
It is expressly acknowledged to be the intent of the parties that there
shall be no merger of the applicable Lease or of the leasehold estate created
hereby by reason of the fact that the same Person may acquire, own or hold,
directly or indirectly (a) the applicable Lease or the leasehold estate created
hereby or any interest in the applicable Lease or such leasehold estate and (b)
the fee estate or ground landlord's interest in the applicable Leased Property.
23.5 Conveyance by Landlord.
If Landlord or any successor owner of the applicable 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 such Leased Property
shall expressly assume all obligations of Landlord hereunder arising or accruing
from and after the date of such conveyance or transfer, Landlord or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Landlord under the applicable Lease 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 shall thereupon
be binding upon the new owner.
23.6 Quiet Enjoyment.
So long as Tenant shall pay the Rent as the same becomes due and shall
substantially comply with all of the terms of the applicable Lease and perform
its obligations hereunder and thereunder, Tenant shall peaceably and quietly
have, hold and enjoy the applicable Leased Property for the Term hereof, free of
any claim or other action by Landlord or anyone claiming by, through or under
Landlord, but subject to (i) any Encumbrance permitted under Article 22, or
otherwise permitted to be created by Landlord hereunder, (ii) all liens and
encumbrances of record as of the date hereof, (iii) liens as to obligations of
Landlord that are either not yet due or which are being contested in good faith
and by proper proceedings, and (iv) liens that have been consented to in writing
by Tenant. Except as otherwise provided in the applicable Lease, no failure by
Landlord to comply with the foregoing covenant shall give Tenant any right to
cancel or terminate the applicable Lease or abate, reduce or make a deduction
from or offset against the Rent or any other sum payable under the applicable
Lease, or to fail to perform any other obligation of Tenant hereunder.
23.7 NON-LIABILITY OF TRUSTEES.
THE DECLARATION OF TRUST ESTABLISHING LANDLORD, DATED OCTOBER 9, 1986,
A COPY OF WHICH, TOGETHER WITH ALL ACCOUNTANTS THERETO
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(THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF AS SESSMENTS AND
TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME: "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK
ONLY TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION.
23.8 Landlord's Consent of Trustees.
Where provision is made in the applicable Lease for Landlord's consent
and Landlord shall fail or refuse to give such consent, Tenant shall not be
entitled to any damages for any with holding by Landlord of its consent, it
being intended that Tenant's sole remedy shall be an action for specific
performance or injunction, and that such remedy shall be available only in those
cases where Landlord has expressly agreed in writing not to unreasonably
withhold its consent.
23.9 Memorandum of Lease.
Neither Landlord nor Tenant shall record the applicable Lease or this
Master Lease Document. However, Landlord and Tenant shall promptly, upon the
request of either, enter into a short form memorandum of the applicable Lease,
in form suitable for recording under the laws of the State in which reference to
the applicable Lease and the Master Lease Document, and all options contained
herein, shall be made. Tenant shall pay all costs and expenses of recording such
memorandum.
23.10 Notices.
Any notice, request, demand, statement or consent ("Notice") desired or
required to be given hereunder shall be in writing-and shall be delivered by
hand, sent by certified mail, return receipt requested, sent by a nationally
recognized commercial overnight delivery service with provisions for a receipt,
postage or delivery charges prepaid, or sent by facsimile transmission, and
shall be deemed given (i) when actually delivered, if delivered by hand, (ii)
upon receipt, if sent by certified mail, (iii) the next Business Day after being
placed in the possession of an overnight delivery service, if sent by an
overnight delivery service or (iv) if sent by facsimile transmission, when
electronic indication of receipt is received, and shall be addressed as follows:
If to Tenant: AMS Properties, Inc.
200 East Del Mar, Suite 126
Pasadena, California 91105
Attn: General Counsel
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With a copy to: Andrews & Kurth
555 South Flower Street
Los Angeles, California 90071
Attn: Everett W. Benton, Esq.
If to Landlord: Health and Rehabilitation Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: President
In each case
with copies to: Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attn: Lena G. Goldberg, Esq.
or at such other place as any party hereto may from time to time hereafter
designate to the other in writing. Any Notice given to Tenant from Landlord
shall not imply that such Notice or any further or similar Notice was or is
required.
23.11 Incorporation by Reference.
All of the representations, warranties and covenants of Tenant
contained in the Acquisition Agreement and in each of the other Transaction
Documents to which Tenant is a party are hereby incorporated by reference
herein.
23.12 Construction.
Anything contained in the applicable Lease to the contrary
notwithstanding, (i) all claims against, and liabilities of, Tenant or Landlord
arising prior to any date of termination of the applicable Lease shall survive
such termination and (ii) neither party hereto shall be liable for any
consequential damages suffered by the other party as the result of a breach by
such party of its obligations owed to the other party. If any term or provision
of the applicable Lease or any application thereof shall be invalid or
unenforceable, the remainder of the applicable Lease and any other application
of such term or provisions shall not be affected thereby. If any late charges or
any interest rate 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
the applicable Lease nor any provision hereof may be changed, waived, discharged
or terminated except by an instrument in writing signed by the party to be
charged. All the terms and provisions of the applicable Lease shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Each term or provision of this Master Lease Document or
the applicable Lease to be performed by Tenant shall be construed as an
independent covenant and condition. Time is of the essence with respect to the
exercise of any
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rights of Tenant under this Master Lease Document and the applicable Lease.
Except as otherwise set forth in this Master Lease Document, any obligations of
Tenant (including without limitation, any monetary, repair and indemnification
obligations) shall survive the expiration or sooner termination of the
applicable Lease. The headings in the applicable Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
23.13 GOVERNING LAW.
THE APPLICABLE LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE.
IN WITNESS WHEREOF, the parties have executed this Master Lease
Document as a sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST, a Maryland real estate
investment trust
By: /s/ David J. Hergarty
Its: Treasurer
TENANT:
AMS PROPERTIES, INC.
By: /s/
Its: President
<PAGE>
SCHEDULE I TO MASTER LEASE DOCUMENT,
GENERAL TERMS AND CONDITIONS
1. An acquisition agreement, dated as of the date hereof (the
"Closing Date") among AMS Holding Co. ("AMSHC"), American Medical
Services, Inc. ("AMS"), AMS Properties, Inc. ("AMS Properties"),
HostMasters, Inc. ("HMI") and Health and of IMP of ) Rehabilitation
Properties Trust ( as the same may be amended, modified or supplemented
from time to time.
AMSHC Documents
2. A guaranty, dated as of the Closing Date, from AMSHC in
favor of HRP pursuant to which all obligations of AMS Properties are
guaranteed, as the same may be amended, modified or supplemented from
time to time;
3. A pledge agreement, dated as of the Closing Date, from
AMSHC to HRP and consented to by AMS, as the same may be amended,
modified or supplemented from time to time, pursuant to which all
shares of capital stock of AMS (the "AMS Shares") shall be pledged to
HRP, together with certificates relating to the AMS Shares and stock
powers relating to such shares;
4. A security agreement, dated as of the Closing Date, from
AMSHC to HRP granting HRP a security interest in all now owned and
hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of AMSEC, as the
same may be amended, modified or supplemented from time to time;
5. A collateral assignment of contracts and permits, dated as
of the Closing Date, from AMSHC to HRP assigning to HRP all contracts
and permits of AMSHC, as the same may be amended, modified or
supplemented from time to time; and
6. A subordination agreement, dated as of the Closing Date,
among AMSHC as subordinate creditor, AMS Properties as debtor, and ERP
as senior creditor, as the same may be amended, modified or
supplemented from time to time.
AMS Documents
7. A guaranty, dated as of the Closing Date, from AMS in favor
of HRP pursuant to which all obligations of AMS Properties under the
Transaction Documents are guaranteed, as the same may be amended,
modified or supplemented from time to time;
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8. A pledge agreement, dated as of the Closing Date, from AMS
to HRP and consented to by AMS Properties, as the same may be amended,
modified or supplemented from time to timer pursuant to which all
shares of capital stock of AMS Properties shall be pledged to HRP,
together with certificates relating to the AMS Properties shares and
stock powers relating to such shares;
9. A pledge agreement, dated as of the Closing Date, from AMS
to HRP and consented to by AMS Greentree Inc., a Wisconsin corporation
and a wholly-owned subsidiary of AMS ("AMS Greentree"), as the same may
be amended, modified or supplemented from time to time, pursuant to
which all shares of the capital stock of AMS Greentree will be pledged
to HRP, together with certificates relating to the shares of AMS
Greentree and stock powers relating to such shares;
10. A pledge agreement, dated as of the Closing Date, from AMS
to HRP and consented to by AMS Leisure, Inc., a Wisconsin corporation
and a wholly-owned subsidiary of AMS ("AMS Leisure"), as the same may
be amended, modified or supplemented-from time to time, pursuant to
which all shares of the capital stock of AMS Leisure will be pledged to
RRP, together with certificates relating to the shares of AMS Leisure
and stock powers relating to such shares;
11. A pledge agreement, dated as of the Closing Date from AMS
to HRP and consented to by AMS Rehab, Inc., a Delaware corporation and
a wholly-owned subsidiary of AMS ("AMS Rehab"), as the same may be
amended, modified or supplemented from time to time, pursuant to which
all shares of the capital stock of AMS Rehab will be pledged to HRP,
together with certificates relating to the shares of AMS Rehab and
stock powers relating to such shares;
12. A pledge agreement, dated as of the Closing Date, from AMS
to HRP and consented to by American-Cal Medical Services, Inc., a
California corporation and a wholly owned subsidiary of AMS ("Am-Cal"),
as the same may be amended, modified or supplement-t-e-d-from time to
time, pursuant to which all shares of the capital stock of Am-Cal will
be pledged to HRP, together with certificates relating to the shares of
Am Cal and stock powers relating to such shares;
13. A pledge agreement, dated as of the Closing Date, from AMS
to HRP and consented to by American-Cal Medical Services, No. 1, Inc.,
a California corporation and a wholly owned subsidiary of AMS ("Am-Cal
No. 1"), as the same may be amended, modified or supplemented from time
to time, pursuant to which all shares of the capital stock of Am-Cal
No. I will be pledged to HRP, together with certificates relating to
the shares of Am-Cal No. 1 and stock powers relating to such shares;
<PAGE>
-3-
14. Leasehold mortgages, each dated as of the Closing Date,
between AMS as mortgagor and HRP as mortgagee with respect to each of
the following leased properties of AMS:
a. Camellia Health Care Center located at Aurora,
Colorado; and
b. Valley Manor Health Care Center located at Aurora,
Colorado;
15. A leasehold mortgage, dated as of the Closing Date,
between AMS and AMS Greentree as mortgagors and HRP as mortgagee with
respect to the leased property of AMS and AMS Greentree known as AMS
Greentree Health Care Center located at Glendale, Wisconsin ("AMS
Greentree Facility"), as the same may be amended, from time to time;
16. A security agreement, dated as of the Closing Date, from
AMS to HRP granting HRP a security interest in all now owned and
hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of AMS, as the same
may be amended, modified or supplemented from time to time;
17. A collateral assignment of contracts and permits, dated as
of the Closing Date, from AMS to HRP assigning to HRP all contracts and
permits of AMS, as the same may be amended, modified or supplemented
from time to time; and
18. A subordination agreement, dated as of the Closing Date,
among AMS as subordinate creditor, AMS Properties as debtor and HRP as
senior creditor, as the same may be amended, modified or supplemented
from time to time.
AMS Properties Documents
19. The Promissory Note, dated as of the Closing Date, from
AMS Properties to the order of HRP, as the same may be amended,
modified or supplemented from time to time;
20. The ERP Shares Pledge Agreement, dated as of the closing
Date, from AMS Properties to ERP, as the same may be amended, modified
or supplemented from time to time;
21. The Voting Trust Agreement, dated as of the Closing Date,
from AKS Properties to HRPT Advisors, Inc., as voting trustee, as the
same may be amended, modified or supplemented from time to time;
22. The mortgages or deeds of trust (the "Mortgages"), each
dated as of the Closing Date, by AMS Properties as
<PAGE>
-4-
mortgagor in favor of HRP as mortgagee or to a trustee for the benefit
of with respect to each property of AMS Properties described in
Exhibits F-1 through F-2 (the "Mortgaged Property"), as the same may be
amended, modified of supplemented from time to time;
23. A security agreement, dated as of the Closing Date, from
AMS Properties to HRP granting HRP a security interest in all now owned
and hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of AMS Properties,
as the same may be amended, modified or supplemented from time to time;
24. A collateral assignment of contracts and permits, dated as
of the Closing Date, from AMS Properties to HRP assigning to HRP all
contracts and permits relating to any licensed nursing home, retirement
center, congregate living facility, pharmacy or other facility offering
related health care products or services being operated or proposed to
be operated (collectively, the "Facilities"), as the same may be
amended, modified or supplemented from time to time;
25. A renovation funding agreement , dated as of the Closing
Date, between AMS Properties and HRP pursuant to which AMS Properties
shall agree to cause certain renovations, repairs and improvements to
the Collective Lease Properties, as the same may be amended, modified
or supplemented from time to time;
26. A renovation escrow agreement, dated as of the Closing
Date, between AMS Properties and HRP pursuant to which HRP shall agree
to hold the certain proceeds from the sale by AMS Properties of the
Mortgaged Property for the purposes of making certain renovations,
repairs and improvements to the Collective Lease Properties as provided
therein, as the same may be amended, modified or supplemented from time
to time;
27. A Memorandum of option and Right of First Refusal, and as
of the Closing Date, between AMS Properties and HRP, pursuant to which
AMS Properties shall grant HRP an option to purchase the Pacific Crest
Health Care Center, located at Gresham, Oregon ("Pacific Crest"), as
the same may be amended, modified or supplemented from time to time;
28. A Memorandum of Option and Right of First Refusal, dated
as of the Closing Date, between AMS Properties and HRP, pursuant to
which AMS Properties shall grant HRP an option to purchase the
Northwest Health Care Center, located at Milwaukee, Wisconsin
("Northwest"), as the same may be amended, modified or supplemented
from time to time;
29. A Memorandum of option and Right of First Refusal, dated
as of the Closing Date, between AMS Properties and HRP,
<PAGE>
-5-
pursuant to which AMS Properties shall grant HRP an Option to purchase
the River Hills East Health Care Center, located at Milwaukee,
Wisconsin ("River Hills East"), as the same may be amended, modified or
supplemented from time to time;
30. A Memorandum of Option and Right of First Refusal, dated
as of the Closing Date, between AMS Properties and HRP, pursuant to
which AMS Properties shall grant HRP an option to purchase the River
Hills West Health Care Center, located at Pewaukee, Wisconsin ("River
Hills West"), as the same may be amended, modified or supplemented from
time to time; and
31. A Memorandum of Option and Right of First Refusal, dated
as of the Closing Date, between AMS Properties and HRP, pursuant to
which AMS Properties shall grant HRP an option to purchase the
Lakefront Health Care Center, located at Mequon, Wisconsin
("Lakefront"), as the same may be amended, modified or supplemented
from time to time.
HMI Documents
32. A guaranty, dated as of the Closing Date, from
Hostmasters, Inc., a California corporation in favor of HRP pursuant to
which all obligations of AMS Properties are guaranteed, as the same may
be amended, modified or supplemented from time to time;
33. A pledge agreement dated as of the Closing Date, from HMI
to HRP and consented to by AMSHC, pursuant to which all shares of the
capital stock of AMSHC shall be pledged to HRP, together with
certificates relating to such shares and stock powers relating thereto,
as the same may be amended, modified or supplemented from time to time;
34. Leasehold mortgages, each dated as of the Closing Date,
between HMI as mortgagor and HRP as mortgagee with respect to each of
the following leased properties of HMI:
a. Cambridge Care Center located in Petaluma,
California;
b. Redwood Christian Convalescent Hospital located in
Napa, California;
c. Vale Care Center located in San Pedro, California;
d. Brighton Convalescent Center located in Pasadena,
California;
e. Pineridge Care Center located in Sylmar,
California; and
<PAGE>
-6-
f. Desert Valley Rehab Medical Center located in
Phoenix, Arizona;
35. A security agreement, dated as of the Closing Date, from
HMI to HRP granting HRP a security interest in all now owned or
hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of HMI, as the same
may be amended, modified or supplemented from time to time;
36. A collateral assignment of contracts and permits, dated as
of the Closing Date, from HMI to HRP assigning to HRP all contracts and
permits of EMI, as the same may be amended, modified or supplemented
from time to time; and
37. A subordination agreement, dated as of the Closing Date,
among HMI as subordinate creditor, AMS Properties as debtor and HRP as
senior creditor, as the same may be amended, modified or supplemented
from time to time.
HMICC Documents
38. A guaranty, dated as of the Closing Date, from HMI
Convalescent Care, Inc., a California corporation and a wholly-owned
subsidiary of HMI ("HMICC") in favor of HRP pursuant to which all
obligations of AMS Properties under the Transaction Documents are
guaranteed, as the same may be amended, modified or supplemented from
time to time;
39. Leasehold mortgages each dated as of the Closing Date
between HMICC as mortgagor and HRP as mortgagee with respect to each of
the following leased properties of HMICC:
a. Pacific Care Convalescent Hospital located in
Oakland, California; and
b. Fruitvale Care Convalescent Hospital located in
Oakland, California;
40. A security agreement, dated as of the Closing Date from
SHICC to MTP granting HRP a security interest in all now owned or
hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of E24ICC, as the
same may be amended, modified or supplemented from time to time;
41. A collateral assignment of contracts and permits, dated as
of the Closing Date from HMICC to HRP assigning to HRP all contracts
and permits of HMICC, as the same may be amended, modified or
supplemented from time to time; and
42. A subordination agreement dated as of the Closing Date
among HMICC as subordinate creditor, AMS Properties as
<PAGE>
-7-
debtor and HRP as senior creditor, as the same may be amended, modified
or supplemented from time to time.
AMS Greentree Documents
43. A guaranty, dated as of the Closing Date, from AMS
Guarantee in favor of HRP pursuant to which all obligations of AMS
Properties under the Acquisition Agreement, Agreement to Lease,
Mortgage Loan Agreement, Lease, Promissory Note, Security Documents and
each of the other documents, instruments, and agreements delivered
pursuant thereto (the "Transaction Documents") are guaranteed, as the
same may be amended, or supplemented from time to time;
44. A leasehold mortgage, dated as of the Closing Date,
between AMS and AMS Greentree as mortgagors and HRP as mortgagee with
respect to the AMS Greentree Facility, as the same may be amended,
modified or supplemented from time to time;
45. A security agreement, dated as of the Closing Date, from
AMS Greentree to HRP granting HRP a security interest in all now owned
or hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of AMS Greentree,
as the same may be amended, modified or supplemented from time to time;
46. A collateral assignment of contracts and permits, dated as
of the Closing Date, from AMS Greentree to HRP assigning to HRP all
contracts and permits owned by AMS Greentree, as the same may be
amended, modified or supplemented from time to time; and
47. A subordination agreement, dated as of the Closing Date,
among AMS Greentree as subordinate creditor, AMS Properties as debtor
and HRP as senior creditor, as the same may be amended, modified or
supplemented from time to time.
AMS Leisure Documents
48. A guaranty, dated as of the Closing Date, from AMS Leisure
in favor of HRP pursuant to which all obligations of AMS Properties
under the Transaction Documents are guaranteed, as the same may be
amended, modified or supplemented from time to time;
49. A security agreement, dated as of the Closing Date, from
AMS Leisure to HRP granting HRP a security interest in all now owned or
hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of AMS Leisure, as
the same may be amended, modified or supplemented from time to time;
<PAGE>
-8-
50. A collateral assignment of contracts and permits, dated as
of the Closing Date, from AMS Leisure to HRP assigning to HRP all
contracts and permits owned by AMS Leisure as the same may be amended,
modified or supplemented from time to time; and
51. A subordination agreement, dated as of the Closing Date,
among AMS Leisure as subordinate creditor, AMS Properties as debtor and
HRP as senior creditor, as the same may be amended, modified and
supplemented from time to time.
AMS Rehab Documents
52. A guaranty, dated as of the Closing Date, from AMS Rehab
in favor of HRP pursuant to which all obligations of AMS Properties
under the Transaction Documents are guaranteed, as the same may be
amended, modified or supplemented from time to time;
53. A leasehold mortgage, dated as of the Closing Date,
between AMS-Rehab as mortgagor and HRP as mortgagee with respect to the
leased property of AMS-Rehab known as Saline (Rehab) Health Care
Center, and located at Ann Arbor, Michigan, as the same may be amended,
modified or supplemented from time to time;
54. A security agreement, dated as of the Closing Date, from
AMS Rehab to HRP granting HRP a security interest in all now owned or
hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of AMS Rehab, as
the same may be amended, modified or supplemented from time to time;
55. A collateral assignment of contracts and permits, dated as
of the Closing Date, from AMS Rehab to HRP assigning to HRP all
contracts and permits owned by AMS Rehab, as the same may be amended,
modified or supplemented from time to time; and
56. A subordination agreement, dated as of the Closing Date,
among AMS Rehab as subordinate creditor, AMS Properties as debtor and
HRP as senior creditor, as the same may be amended, modified or
supplemented from time to time.
Am-Cal Documents.
57. A guaranty, dated as of the Closing Date, from Am-Cal in
favor of HRP pursuant to which all obligations of AMS Properties under
the Transaction Documents are guaranteed, as the same may be amended,
modified or supplemented from time to time;
<PAGE>
-9-
58. Leasehold mortgages, each dated as of the Closing Date,
between Am-Cal as mortgagor and HRP as mortgagee with respect to each
of the following !eased properties of Am-Cal:
a. Inglewood Health Care Center located at Los
Angeles, California; and
b. Santa Monica Health Care Center located at Los
Angeles, California;
59. A security agreement, dated as of the Closing Date from
AM-Cal to HRP granting HRP a security interest in all now owned or
hereafter acquired tangible personal property and all accounts
receivable, contract rights and general intangibles of Am-Cal, as the
same may be amended, modified or supplemented from time to time;
60. A collateral assignment of contracts and permits, dated as
of the Closing Date, from Am-Cal to ERP assigning to HRP all contracts
and permits owned by Am-Cal, as the same may be amended, modified or
supplemented from time to time; and
61. A subordination agreement, dated as of the Closing Date,
among Am-Cal as subordinate creditor, AMS Properties as debtor and HRP
as senior creditor, as the same may be amended, modified or
supplemented from time to time.
Am-Cal No. 1 Documents
62. A guaranty, dated as of the Closing Date, from Am-Cal No.
1 in favor of HRP, as the same may be amended, modified or supplemented
from time to time, pursuant to which all obligations of AMS Properties
under the Transaction Documents are guaranteed;
63. Leasehold mortgages, each dated as of the Closing Date,
between Am-Cal No. I as mortgagor and HRP as mortgagee with respect to
each of the following leased properties of Am-Cal No. 1:
a. Newport Villa Health Care Center located at
Newport Beach, California; and
b. Newport Villa West Health Care Center located at
Newport Beach, California;
64. A security agreement, dated as of the Closing Date, from
Am-Cal No. I to HRP granting HRP a security interest in all now owned
or hereafter acquired tangible personal property and all accounts
receivable, contract rights and
<PAGE>
-10-
general intangibles of Am-Cal No. 1, as the same may be amended to
modified or supplemented from time to time;
65. A collateral assignment of contracts and permits, dated as
of the Closing Date, from Am-Cal No. I to HRP assigning to HRP all
contracts and permits owned by Am-Cal No. 1, as the same may be
amended, modified or supplemented from time to time; and
66. A subordination agreement, dated as of the Closing Date,
among Am-Cal No. 1 as subordinate creditor, AMS Properties as debtor
and HRP as senior creditor, as the same may be amended, modified or
supplemented from time to time.
<PAGE>
Exhibit A-1 to Master
Lease Document, General
Terms and Conditions
Facility Name State Offered Services
- ------------- ----- ----------------
Flagship CA Skilled Care
Golden Hill CA Skilled Care
Lancaster CA Skilled Care
Pacific Gardens CA Skilled Care
Palm Springs, Health Care CA Skilled care
Tarzana CA Skilled Care
Thousand Oaks CA Skilled Care
Van Nuys CA Skilled Care
Ceders Health Care CO Skilled & Intermediate Care
Cherrelyn Manor CO Skilled a Intermediate Care
Friendship Manor IC Skilled & Intermediate Care
Greentree Health Care WI Skilled Care
Park Manor WI Skilled Care
Pine Manor WI Skilled Care
Sunny Hill Health Care WI Skilled Care
The Virginia WI Skilled care
Woodland WI Skilled Care
<PAGE>
EXHIBIT A-2
Collective Leased Properties
<PAGE>
EXHIBIT A-2-1
Lots 14, 15, 16, 17, 18, 19, and 20, Block 1, in Casper, Donoghue and Hoff's
Subdivision of a part of the Northwest 1/4 of Section 15. Town 7 North, Range 22
East City of Milwaukee, County of Milwaukee, State of Wisconsin.
Tax Key No. 316-0013-100-4
Address: 1824 East Park Place
<PAGE>
EXHIBIT A-2-2
Lot Five (5), Block Five (5), First Addition to Crawford Heights, in the City of
Madison, Dane County, Wisconsin.
TAX ROLL PARCEL NUMBER - 60-0709-324-0318-5
<PAGE>
EXHIBIT A-2-3
THE SOUTH HALF OF THE EAST HALF OF SOUTHEAST QUARTER OF NORTHEAST QUARTER OF
SOUTHEAST QUARTER OF SECTION 14, TOWNSHIP 4 SOUTH, RANGE 4 EAST, SAN BERNARDINO
MERIDIAN, IN THE CITY OF PALM SPRINGS, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA,
ACCORDING TO THE OFFICIAL PLAT THEREOF, ALSO KNOWN AS THE SOUTH HALF OF BLOCK
241, AS SHOWN ON WEHR' MAP OF AGUA CALIENTE RESERVATION SUBDIVISION OF SECTION
14, DATED NOVEMBER, 1948, ON FILE WITH THE BUREAU OF INDIAN AFFAIRS.
SUPPLEMENTAL PLATS OF SAID LAND BASED UPON THE ABOVE SURVEY WERE ACCEPTED FOR
THE DIRECTOR, BUREAU OF LAND MANAGEMENT, ON APRIL 21, 1955, JULY 5, 1955, JUNE
27, 1956, AND MAY 27, 1958, AND WERE FILED IN THE DISTRICT LAND OFFICE ON MAY 6,
1966, SEPTEMBER 16, 1955, OCTOBER 22, 1956 AND JULY 21, 1958, RESPECTIVELY.
<PAGE>
DESCRIPTION
That portion of the Northwest quarter of Section 33, Township 2 North, Range 19
West, Rancho El Conejo, in the City of Thousand Oaks, County of Ventura, State
of California, according to the map thereof recorded in Book 1, Page 746, Deeds,
described as follows:
Beginning at a point on the Easterly line of said Northwest quarter of Section
33, distant along said Easterly line South 336.20 feet from the Northeasterly
corner of said Northwest quarter of Section 33; thence continuing along said
Easterly line,
1st: South 305.40 feet; thence,
2nd: South 72(degree) 06' 52" West 252.19 feet to the intersection with a line
which is parallel with and distant Westerly 240 feet, measured at right angles,
from said Easterly line: thence along said parallel line.
3rd: North 382.86 feet to the intersection with a line which bears West,
measured at right angles to said Easterly line, from said point of beginning:
thence along said right angle line,
4th: East 240 feet to the point of beginning.
EXCEPT 50% of all oil, gas, petroleum and other hydrocarbon substances and
minerals lying and being 500 feet or more below the surface of said land, with
no right to enter upon the surface or subsurface or said land above the depth of
500 feet for the development of said substances as reserved by John Lawrence
Pederson and Vida L. Pederson, in deed recorded November 20, 1959 as Document
No. 42723 in Book 1799, Page 264, Official Records.
<PAGE>
EXHIBIT A-2-5
3. The land referred to in this report is situated in the State of California,
County of LOS ANGELES and is described as follows:
PARCELS A AND B OF PARCEL MAP L.A. NO. 1624, IN THE CITY OF LOS ANGELES,
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 19,
PAGE 63 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
EXCEPT THEREFROM THAT PORTION CONTAINED THAT CERTAIN IRREVOCABLE
OFFER TO DEDICATE, RECORDED JUNE 2, 1969, AS INSTRUMENT NO. 3392.
<PAGE>
That portion of Lot 169 in Block 2 of Irvine's Subdivision, in the City of
Newport Beach, County of Orange, State of California, as per Map recorded in
Book 1, Page 88 of Miscellaneous Maps, in the office of the County Recorder of
said County, described as follows:
Beginning at the Northeast corner of Tract No. 5854, as per map recorded in Book
213, Page 38 and 39 of Miscellaneous Maps in the Office of the County Recorder
of said County; thence South 50(degree) 00' 00" East, 406.61 feet to the
Southeast corner of last said Tract, being on the Northwesterly line of Newport
Boulevard, as described int he Deed recorded in Book 2538, Page 66, Official
Records; thence North 25(degree) 02' 39" East, 168.72 feet along said
Northwesterly line to the Southwesterly line of the land described in the Deed
to Lesser Industrial Properties, Ltd., recorded September 30, 1958 in Book 4430,
Page 409, Official Records; thence North 49(degree) 59' 15" West, 363.07 feet to
the centerline of Flagship Road, as described in the Deed to the City of Newport
Beach, recorded June 27, 1962 in Book 6159, Page 464, Official Records; thence
South 40(degree) 00' 00" West 163.08 feet to the point of beginning.
Said land is shown on a Map filed in Book 79, Page 7 of Record of Surveys, in
the office of the County Recorder of said County.
<PAGE>
EXHIBIT A-2-7
3. The land referred to in this report is situated in the State of California,
county of San Diego and is described as follows:
Lot No. 1 of GOLDEN VIEW, UNIT NO.1, in the City of San Diego, County of San
Diego, State of California, according to Map thereof No. 6188, filed in the
Office to the County Recorder of San Diego County on September 6, 1968.
<PAGE>
PARCEL 1:
THE NORTH 430 FEET OF THE EAST HALF OF THE WEST HALF OF THE NORTHEAST QUARTER OF
THE NORTHWEST QUARTER OF SECTION 21, TOWNSHIP 7 NORTH, RANGE 12 WEST, SAN
BERNARDINO MERIDIAN, IN THE CITY OF LANCASTER, COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT OF SAID LAND.
EXCEPT THEREFROM THE EAST 150 FEET THEREOF, ALSO EXCEPT THE EAST 7.40 FEET OF
THAT PORTION OF THE REMAINDER OF SAID LAND LYING SOUTHERLY OF THE SOUTH LINE OF
THE NORTH 370 FEET OF THE EAST HALF OF WEST HALF OF NORTHEAST QUARTER OF THE
NORTHWEST QUARTER OF SAID SECTION 21.
PARCEL 2:
AN EASEMENT FOR ROAD PURPOSES OVER THE EAST 30 FEET OF THE WEST HALF OF THE WEST
HALF OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 21, TOWNSHIP 7
NORTH, RANGE 12 WEST, SAN BERNARDINO MERIDIAN, IN THE CITY OF LANCASTER, COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT OF THE
SURVEY OF SAID LAND ON FILE IN THE BUREAU OF LAND MANAGEMENT APPROVED BY THE
SURVEYOR GENERAL ON JUNE 19, 1856.
PARCEL 3:
THE SOUTH 119 FEET OF THE NORTH 549 FEET OF THE EAST HALF OF THE WEST HALF OF
THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 21, TOWNSHIP 7 NORTH,
RANGE 12 WEST, SAN BERNARDINO MERIDIAN, IN THE CITY OF LANCASTER, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, ACCORDING TO THE OFFICIAL PLAT OF SAID LAND.
EXCEPT THEREFROM THE EAST 150.00 FEET OF SAID LAND.
ALSO EXCEPT THEREFROM THE EAST 7.40 FEET OF THAT PORTION OF THE REMAINDER OF
SAID LAND LYING SOUTHERLY OF THE SOUTH LINE OF THE NORTH 370 FEET OF THE EAST
HALF CP THE WEST HALF OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF
SECTION 2: TOWNSHIP 7 NORTH, RANGE 12 WEST, SAN BERNARDINO MERIDIAN.
<PAGE>
EXHIBIT A-2-9
The land referred to is situated int he State of California, County of
Fresno and is described as follows:
PARCEL 1:
City of Fresno:
Parcel A of Parcel Map No. 86-47, according to the map thereof recorded July 13,
1987, in Book 46, Page 65, of Parcel Maps, Fresno County Records.
<PAGE>
PARCEL 2:
Parcel B of Parcel Map 76-60, according to the map thereof recorded in Book 23,
page 44, of Parcel Maps.
<PAGE>
EXHIBIT A-2-10
THOSE PORTIONS OF LOTS 71, 72, 95 THROUGH 98 INCLUSIVE, OF TRACT NO. 5692, IN
THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 60 PAGES 72 AND 73 IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY, DESCRIBED IN THE DEED TO THE STATE OF CALIFORNIA, RECORDED IN BOOK 49997
PAGE 151, IN BOOK 48700 PAGE 58, IN BOOK 50480 PAGE 138, IN BOOK 49139 PAGE 87,
IN BOOK 49688 PAGE 162, IN BOOK 444459 PAGE 449, IN BOOK 44815 PAGE 286, IN BOOK
44306 PAGE 398 AND IN BOOK 44216 PAGE 139, ALL OF OFFICIAL RECORDS IN SAID
OFFICE, DESCRIBED AS A WHOLE AS FOLLOWS:
BEGINNING AT THE NORTHEASTERLY CORNER OF THAT CERTAIN PARCEL OF LAND, DESCRIBED
IN SAID DEED RECORDED IN BOOK 50480 PAGE 138 OF SAID OFFICIAL RECORDS; THENCE
ALONG THE NORTHERLY LINE AND ITS WESTERLY PROLONGATION OF SAID CERTAIN PARCEL OF
LAND, NORTH 89 DEGREES 38 MINUTES 10 SECONDS WEST 195.03 FEET TO THE WESTERLY
LINE OF SAID LOT 98, THENCE ALONG SAID WESTERLY LINE SOUTH 00 DEGREES 01 MINUTES
50 SECONDS WEST 233.52 FEET; THENCE SOUTH 78 DEGREES 44 MINUTES 46 SECONDS EAST
267.08 FEET, THENCE SOUTH 69 DEGREES 24 MINUTES 26 SECONDS EAST 80.55 FEET;
THENCE SOUTH 66 DEGREES 06 MINUTES 06 SECONDS EAST 35.07 FEET, THENCE NORTH 00
DEGREES 01 MINUTES 50 SECONDS EAST 48.09 FEET TO THE MOST EASTERLY CORNER OF
THAT CERTAIN PARCEL OF LAND DESCRIBED IN SAID DEED RECORDED IN BOOK 49997 PAGE
151 OF SAID OFFICIAL RECORDS; THENCE NORTHERLY ALONG THE EASTERLY LINE OF SAID
LAST MENTIONS CERTAIN PARCEL OF LAND AND NORTHWESTERLY ALONG THE NORTHERLY LINE
OF THAT CERTAIN PARCEL OF LAND DESCRIBED IN SAID DEED RECORDED IN BOOK 48700
PAGE 58 OF SAID OFFICIAL RECORDS, TO THE POINT OF BEGINNING.
EXCEPT FROM THAT PORTION OF LOT 71 LYING WITHIN THE EAST 50 FEET THEREOF, ALL
MINERALS, OIL PETROLEUM, KINDRED SUBSTANCES AND NATURAL GAS UNDER AND IN SAID
LAND, AS RESERVED BY LLOYD A. STEPHENS AND KATHRYN E. STEPHENS, HUSBAND AND
WIFE, IN DEED RECORDED AUGUST 17, 1948 AS INSTRUMENT NO. 452.
ALSO EXCEPT FROM THAT PORTION OF LOT 71 LYING WITHIN THE EAST 50 FEET THEREOF,
INTEREST IN AND TO THE OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS,
NATURAL GAS RIGHTS AND OTHER HYDROCARBONS, BY WHATSOEVER NAME KNOWN, THAT MAY BE
WITHIN OR UNDER SAID LAND WITHOUT, HOWEVER, THE RIGHT EVER TO DRILL, DIG OR MINE
THROUGH THE SURFACE OF SAID LAND THEREFOR, OR OTHERWISE DEVELOP SAME IN SUCH
MANNER AS TO ENDANGER THE SAFETY OF ANY HIGHWAY THAT MAY BE CONSTRUCTED ON THE
LAND HEREIN DESCRIBED, AS RESERVED BY FAYETT H. CARLIN AND KATHLEEN R. CARLIN,
HUSBAND AND WIFE, IN DEED RECORDED JUNE 15, 1954 AS INSTRUMENT NO. 2309.
ALSO EXCEPT FROM THAT PORTION WITHIN LOT 95 ALL MINERALS, COAL, OILS, PETROLEUM
AND KINDRED SUBSTANCES AND NATURAL GAS, UNDER AND IN SAID LAND, AS RESERVED BY
JAMES W. TRUDELL AND MAYBELLE E. TRUDELL, HIS WIFE, IN DEED RECORDED MAY 26,
195? AS INSTRUMENT NO. 319.
ALSO EXCEPT FROM LOT 95 ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL
GAS, NATURAL GAS RIGHTS AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT BE
WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED TOGETHER WITH THE
PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR AND REMOVE
THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR
DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED
OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF
LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY
DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR
THEREOF AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE
<PAGE>
WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE
THROUGH THE SURFACE OR THE UPPER 100 FEET OF THE SUBSURFACE OF THE LAND
HEREINABOVE DESCRIBED OTHERWISE IN SUCH MANNER AS TO ENDANGER THE SAFETY OF ANY
HIGHWAY THAT MAY BE CONSTRUCTED ON SAID LANDS, AS RESERVED BY JAMES W. TRUDELL
AND MAYBELLE E. TRUDELL, HIS WIFE, IN DEED RECORDED JANUARY 10, 1956 AS
INSTRUMENT NO. 1934.
ALSO EXCEPT FROM THE SOUTH ONE-HALF OF LOTS 97 AND 98 ONE-HALF OF ALL MINERALS,
OIL, COAL, NATURAL GAS AND KINDRED SUBSTANCES IN OR UNDER SAID LAND, AS RESERVED
BY ELLEN A. MCFARLAND, IN DEED RECORDED MARCH 5, 1946 IN BOOK 22810 PAGE 446 OF
OFFICIAL RECORDS IN SAID OFFICE.
ALSO EXCEPT FROM A PORTION OF THE SOUTH ONE-HALF OF LOTS 97 AND 98, THE PRESENT
INTEREST IN AND TO THE OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS,
NATURAL GAS RIGHTS AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE
WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE
PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR AND
REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHTS TO
WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LAND, INCLUDING THE RIGHT TO
WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE
HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR
ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED AND TO BOTTOM SUCH
WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH
OR BEYOND THE EXTERIOR LIMITS THEREOF AND TO REDRILL, RETUNNEL, EQUIP.,
MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT HOWEVER,
THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER
100 FEET OF THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, OR OTHERWISE IN
SUCH MANNER AS TO ENDANGER THE SAFETY OF ANY HIGHWAY THAT MAY BE CONSTRUCTED ON
SAID LANDS, AS RESERVED BY ANGELO PERRINO AND CATHERINE PERRINO, HUSBAND AND
WIFE, INDEED RECORDED OCTOBER 4, 1955 AS INSTRUMENT NO. 3568.
ALSO EXCEPT FROM A PORTION OF THE SOUTH ONE-HALF OF LOTS 97 AND 98, THE PRESENT
INTEREST OF THE GRANTOR IN AND TO THE OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS,
NATURAL GAS, NATURAL GAS RIGHTS AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN
THAT MAY WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH
THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFOR AND
REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO
WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE
HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH, OR
ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED AND TO BOTTOM SUCH
WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH
OR BEYOND THE EXTERIOR LIMITS THEREOF AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN,
REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT HOWEVER, THE RIGHT
TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OR THE UPPER 100 FEET OF
THE SUBSURFACE OR THE LAND HEREINABOVE DESCRIBED, OR OTHERWISE IN SUCH MANNER AS
TO ENDANGER THE SAFETY OF ANY HIGHWAY THAT MAY BE CONSTRUCTED ON SAID LANDS, AS
RESERVED BY ROBERT W. SPRINGEL AND MABLE SPRINGEL, HUSBAND AND WIFE, JOHN O.
YOUNG AND DOROTHY V. YOUNG, HUSBAND AND WIFE, RAYMOND M. LONGFELLOW AND DOROTHY
L. LONGFELLOW, HUSBAND AND WIFE, DEED RECORDED DECEMBER 2, 1955 AS INSTRUMENT
NO. 1720.
<PAGE>
EXHIBIT A-2-11
Lots 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21. Block 2, and the West 1/2 of
vacated Waukesha Avenue adjoining on the East; and the South 30 feet of Lot 6,
all of Lots 7, 8, 9, 10, 11 and 12. Block 3 and the East 1/2 of vacated Waukesha
Avenue adjoining Lots 7, 8, 9, 10, 11, and 12. Block 3 on the West and all of
vacated Peck Street adjoining Lots 13 and 21, Block 2 on the South, all in
Elevated Home Addition to Waukesha, a Subdivision of part of the South 1/2 of
Section 35, Town 7 North, Range 19 East, City of Waukesha County of Waukesha,
State of Wisconsin.
Tax Key Nos. 1004.080 and 1004.083
ADDRESS: 1471 Waukesha Avenue
<PAGE>
EXHIBIT A-2-12
A parcel of land located in part of the Southeast 1/4 of the Southeast 1/4 of
Section 14; Township 25 North, Range 14 East, City of Clintonville, Waupaca
County, Wisconsin, more fully described as follows: Commencing at the Southeast
corner of the Southeast 1/4 of said Section 14; thence due West along the South
line of said Southeast 1/4 60.00 feet; thence North 00 degrees 07 minutes 40
seconds West parallel with the East line of said Southeast 1/4, 33.2 feet to its
intersection with the North right-of-way line of Harriet Street as presently
laid out and the point of beginning; thence North 89 degrees; 44 minutes 22
seconds West along the North right-of-way line of Green Tree Road as presently
laid out, 600.01 feet to its intersection with the West line of lands as
described in Volume 568 of Records, page 692 Waupaca County Records; thence
North 00 degrees 07 minutes 40 seconds West along the West line of said
described lands and parallel with the East line of said Southeast 1/4 354.00
feet to the Northwest corner of said described lands; thence due East along the
North line of said described lands and parallel with the South line of said
Southeast 600.00 feet to its intersection with the West right-of-way line of
Harriet Street (said line being 60.00 feet West of as measured as right angles
from the East line of said Southeast 1/4); thence South 00 degrees 07 minutes 40
seconds East along said West right-of-way line and parallel with the East line
of said Southeast 1/4 356.73 feet to the point of beginning.
(Tax Key No. 30-14-44-2)
<PAGE>
EXHIBIT A-2-13
Parcel 1:
That part of the Southwest 1/4 of Section 28, Town 7 North, Range 20 East, in
town of Brookfield, County of Waukesha, State of Wisconsin, which is bounded and
described as follows: Commencing at a point in the West line of said 1/4
Section, which is 394.15 feet of the Northwest corner of said 1/4 Section;
running thence South along the West of said 1/4 Section, 808.05 feet to a point
in the center line of West Bluemound thence North 84(degree) 00' 00" East along
said centerline, 333.37 feet to a point; thence North and parallel to the West
line of said 1/4 Section 768.58 feet; thence North 12' 00" and parallel to the
North line of said 1/4 Section, 331.58 feet to the place of beginning.
TOGETHER WITH the sanitary sewer easement reserved unto the grantor in Warranty
Deed recorded as No. 774101. ALSO TOGETHER WITH the easements set forth in
Easement Agreement dated April 5, 197? and recorded April 28, 1978 on Reel 296,
Image 399 as Document No. 1044758. EXCEPTING THEREFROM that part thereof
conveyed by W.J. Theurmann, widower, to Waukesha County dated October 24, 1946
and recorded December 7, 1946 in Volume 426 Deeds on Page 540 as Document No.
296109.
ALSO EXCEPTING THEREFROM the West 45.00 feet dedicated to the City of Brookfield
by Quit Claim Deed recorded on April 18, 1963 in Volume 945 of Deeds on Page 147
as Document No. 585198.
Parcel 2:
Parcel 3 of Certified Survey Map recorded November 30, 1970 in Volume 8 of
Certificates Survey maps on Pages 331, 332 and 333 as Document No. 774250, being
a part of the N.W. 1/4 of the S.W. 1/4 of Section 28, T7N, R20E, city of
Brookfield, County of Waukesha State of Wisconsin.
Tax Key No. 1119.998
ADDRESS: 18740 W. Bluemound Road
<PAGE>
EXHIBIT A-2-14
LOTS 1 THROUGH 14, LOTS 35 THROUGH 48, BLOCK 7, AND LOTS 24 AND 25, BLOCK 26,
EDGEWATER, TOGETHER WITH THAT PART OF VACATED CARSON STREET LYING BETWEEN BLOCKS
7 AND 26, EDGEWATER ACCORDING TO THE PLAT RECORDED MAY 13, 1989 IN PLAT BOOK 1
AT PAGE 37, COUNTY OF JEFFERSON, STATE OF COLORADO.
<PAGE>
EXHIBIT A-2-15
THE NORTH 65 FEET OF THE WEST HALF OF TRACT 47, EXCEPT THE EAST 2? FEET THEREOF.
ALSO THE WEST HALF OF TRACT 48, EXCEPT THE EAST 25 FEET THEREOF, INTERURBAN
ADDITION, TOGETHER WITH THE EAST 25 FEET OF VACATED SOUTH FOX STREET. AND ALSO
THOSE PORTIONS OF THE WEST 25 FEET OF VACATED SOUTH FOX STREET AS DESCRIBED IN
BOOK 2308 AT PAGES 638 AND 639, COUNTY OF ARAPAHCE, STATE OF COLORADO.
<PAGE>
EXHIBIT A-2-16
The portion of the fractional Northwest 1/4 of the Northeast 1/4 and the
fractional Northeast 1/4 of the Northwest 1/4 of Section 4, Township 25, North,
Range 15 East, in the Village of Embarrass, Waupaca County, Wisconsin, bounded
and described as follows: Commencing at the intersection of the North Line of
the said Section 4, with the East line of County Trunk Highway "Y"; thence South
33 degrees 49 minutes West, 383.75 feet thence South 32 degrees 35 minutes West,
521.57 feet; thence South 76 degrees 00 minutes 36 seconds East, 212.80 feet;
thence South 06 degrees 35 minutes 41 seconds West, 101.46 feet; thence South 45
degrees 18 minutes 40 seconds East, 88.06 feet; thence South 47 degrees 55
minutes 50 seconds West, 134.98 feet; thence South 73 degrees 19 minutes 37
seconds East, 27 feet more or less to the thread of Matteson Creek and the place
of beginning; thence North 73 degrees 19 minutes 37 seconds West. Retracing the
last described line 27 feet more or less; thence North 47 degrees 55 minutes 50
seconds East, 134.98 feet; thence North 45 degrees 18 minutes 40 seconds West,
88.06 feet; thence North 06 degrees 35 minutes 41 seconds East, 101.46 feet;
thence North 76 degrees 00 minutes 36 seconds West, 212.80 feet; thence North 32
degrees 35 minutes 00 seconds East, 242.20 feet; thence South 81 degrees 15
minutes East. 190.00 feet; thence North 88 degrees 15 minutes East, 31.73 feet;
thence North 32 degrees 35 minutes East, 182.55 feet; thence North 33 degrees 49
minutes East, 113.48 feet; thence North 89 degrees 04 minutes 00 seconds East,
851 feet more or less to the thread of a drainage ditch leading to Matteson
Creek; thence Southeasterly along the said drainage ditch thread to its
intersection with the thread of Matteson Creek; thence Westerly along the thread
of Matteson Creek to the Place of beginning; EXCEPT that parcel of land
described in Warranty Deed recorded in Volume 478 of Records on page 291 as
Document No. 356324, Waupaca County Registry.
(Tax Key No. 24-0 4-21-11)
<PAGE>
EXHIBIT A-2-17
LEGAL DESCRIPTION
Lots 8 and 9 in Melvin Harre's Second Subdivision to the City of Nashville,
Illinois, being a part of the West One-Half of the West One-Half of the
Southeast Quarter of the Northeast Quarter of Section 23, Township 2 South,
Range 3 West of the Third Principal Meridian, and a tract of land in the
Northeast Quarter of Section 23 bounded by a line commencing at the Southwest
corner of Lot 9 in Harre's Section Subdivision to the City of Nashville,
Illinois, running thence West 175 feet, thence North 179 feet, thence East 175
feet to the Northwest corner of Lot 8 in said Subdivision, thence South 179 feet
to the corner of Lot 8 in said Subdivision, thence south 179 feet to the place
of beginning.
A part of the Northeast Quarter of Section 23, Township 2 south, Range 3 West of
the Third Principal Meridian bounded by a line commencing as an iron pin set for
the southwest corner of Lot 10 in Melvin Harre's Second Subdivision to the City
of Nashville, Illinois, as shown by Plat thereof, recorded in Plat Book B, page
83, in the Recorder's Office of Washington County, Illinois, running thence West
30 feet, thence North 533 feet, thence East 30 feet to the Northwest corner of
said Lot 10, thence South along the West line of said Lot 10, 533 feet to the
place of beginning.
Lots 5 and 10 in Melvin Harre's Second Subdivision to the City of Nashville,
Illinois, as shown by Plat thereof dated September 13, 1963, and recorded in
Plat Book B, page 83, in the Recorder's Office of Washington County, Illinois.
Outlot A and Lots 1 and 2 of Brink and Jones First Addition to the City of
Nashville, Illinois, being a part of the Northeast Quarter of Section 23,
Township 2 South, Range 3 West of the Third Principal Meridian.
ALL SITUATED IN WASHINGTON COUNTY, ILLINOIS
<PAGE>
EXHIBIT B
Form of Lease
<PAGE>
LEASE
THIS LEASE is made as of December 28, 1990 between HEALTH AND
REHABILITATION PROPERTIES TRUST (known in Wisconsin as "Health and
Rehabilitation Properties REIT"), a Maryland real estate investment Trust
("Landlord"), having its principal office at 400 Centre Street, Newton,
Massachusetts and AMS PROPERTIES, INC. a Delaware corporation, ("Tenant") having
its principal office 200 East del Mar, Suite 126, Pasadena, California 91105,
with reference to the following facts:
A. Landlord, Tenant, American Medical Services, Inc. ("AMS"), which
owns beneficially and of record all of the capital stock of Tenant, and AMS
Holding Co. ("AMSHC"), which owns benenfically and of record all of the capital
stock of AMS, and HostMasters, Inc., which owns beneficially and of record all
of the capital stock of AMSHC have entered into an Acquisition Agreement,
Agreement to Lease and Mortgage Loan Agreement dated as of even date herewith,
pursuant to which, among other things, Landlord agreed to acquire from AMS and
simultaneously to lease to Tenant certain parcels of real property and
improvements (the "Collective Lease Properties") each for use and operation as a
licensed nursing home.
B. The transaction contemplated in the foregoing recital provides that
each Collective Leased Property will be leased pursuant to a Lease which shall
incorporate a Master Lease Document dated as of December 28, 1990 between
Landlord and Tenant (as the same may be amended, modified or supplemented from
time to time, the "Master Lease").
C. The Leased Property identified in Paragraph 3 below (the "Leased
Property") is one of the Collective Leased Properties.
In consideration of the foregoing, the parties agree:
1. Purchase Price. The Purchase Price paid by Landlord to Tenant for
the Leased Property was the sum of _______ Dollars ($_____).
2. Incorporation of Master Lease. The Master Lease is hereby
incorporated herein in its entirety as though each and every part thereof were
set forth in full herein.
3. Description of Leased Property. The Leased Property is that property
located at the following street address:
[Name of Facility]
__________________
__________________
The Land referred to in the Master Lease is more particularly described
in Schedule A hereto.
<PAGE>
4. Fixed Term. The Fixed Term of this Lease is ten (10) years,
commencing on December 28, 1990 (the "Commencement Date"), and ending on
December 28, 2000.
5. Extended Terms. Subject to the provisions of Section 2.4 of the
Master Lease, Tenant is hereby granted the right to renew the Lease for three
(3) 10-year consecutive optional renewal terms for a maximum term if all such
options are exercised of thirty (30) years after the expiration of the Fixed
Term.
6. Rental. The initial Minimum Rent payable during the Fixed Term
pursuant to Section 3.1.1.(a) of the Master Lease is the annual sum of _________
Dollars ($____) payable in equal monthly installment of ________ Dollars
($_______). The minimum Rent for the Extended Terms shall be at the rental
provided for in Section 3.1.1(e) of the Master Lease. During the Term, Minimum
Rent shall be subject to adjustment as provided in Sections 3.1.1(b) through
3.1.1(d) and 3.1.1(f) of the Master Lease. Landlord will credit against
installments of Minimum Rent the amounts determined in accordance with Section
3.1.1(g) of the Master Lease. Tenant shall also pay Additional Rent pursuant to
Section 3.1.2 of the Master Lease.
7. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD IN ANY WAY SHALL LOOK ONLY
TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST, a Maryland
real estate investment trust
By:
Name:
Title:
<PAGE>
TENANT: AMS PROPERTIES, INC.
a Delaware corporation
By:
Name:
Title:
EXHIBIT 10.19
LEASE
THIS LEASE is made as of December 28, 1990 between HEALTH AND
REHABILITATION PROPERTIES TRUST (known in Wisconsin as "Health and
Rehabilitation Properties REIT"), a Maryland real estate investment Trust
("Landlord"), having its principal office at 400 Centre Street, Newton,
Massachusetts and AMS PROPERTIES, INC. a Delaware corporation, ("Tenant") having
its principal office 200 East del Mar, Suite 126, Pasadena, California 91105,
with reference to the following facts:
A. Landlord, Tenant, American Medical Services, Inc. ("AMS"), which
owns beneficially and of record all of the capital stock of Tenant, and AMS
Holding Co. ("AMSHC"), which owns beneficially and of record all of the capital
stock of AMS, and HostMasters, Inc., which owns beneficially and of record all
of the capital stock of AMSHC have entered into an Acquisition Agreement,
Agreement to Lease and Mortgage Loan Agreement dated as of even date herewith,
pursuant to which, among other things, Landlord agreed to acquire from AMS and
simultaneously to lease to Tenant certain parcels of real property and
improvements (the "Collective Leased Properties") each for use and operation as
a licensed nursing home.
B. The transaction contemplated in the foregoing recital provides that
each Collective Leased Property will be leased pursuant to a Lease which shall
incorporate a Master Lease Document dated as of December 28, 1990 between
Landlord and Tenant (as the same may be amended, modified or supplemented from
time to time, the "Master Lease").
C. The Leased Property identified in Paragraph 3 below (the "Leased
Property") is one of the Collective Leased Properties.
In consideration of the foregoing, the parties agree:
1. Purchase Price. The Purchase Price paid by Landlord to AMS for the
Leased Property was the sum of Four Million Five Hundred Three Thousand and
No/100 Dollars ($4,503,000).
2. Incorporation of Master Lease. The Master Lease is hereby
incorporated herein in its entirety as though each and every part thereof were
set forth in full herein.
3. Description of Leased Property. The Leased Property which Landlord
shall lease to Tenant and Tenant shall lease from Landlord, pursuant to the
terms hereof and the terms of the Master Lease, is that property located at the
following street address:
Cedars Health Care Center
1599 Ingalls Street
Lakewood, CO
<PAGE>
-2-
The Land referred to in the Master Lease is more particularly described
in Schedule A hereto.
4. Fixed Term. The Fixed Term of this Lease is ten (10) years,
commencing on December 28, 1990 (the "Commencement Date"), and ending on
December 28, 2000.
5. Extended Terms. Subject to the provisions of Section 2.4 of the
Master Lease, Tenant is hereby granted the right to renew the Lease for three
(3) 10-year consecutive optional renewal terms for a maximum tern if all such
options are exercised of thirty (30) years after the expiration of the Fixed
Term.
6. Rental The initial Minimum Rent payable during the Fixed Term
pursuant to Section 3.1.1(a) of the Master Lease is the annual sum of Five
Hundred Ninety Six Thousand Six Hundred Forty Eight and No/100 Dollars $596,648)
payable in equal monthly installments of Forty Nine Thousand Seven Hundred
Twenty and 67/100 Dollars ($49,720.67). The Minimum Rent for the Extended Terms
shall be at the rental provided for in Section 3.1.1(e) of the Master Lease.
During the Term, Minimum Rent shall be subject to adjustment as provided in
Sections 3.1.1(b) through 3.1.1(d) and 3.1.1(f) of the Master Lease. Landlord
will credit against installments of Minimum Rent the amounts determined in
accordance with Section 3.1.1(g) of the Master Lease. Tenant shall also pay
additional Rent pursuant to Section 3.1.2 of the Master Lease.
7. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEE, BUT NOT INDIVIDUALLY OR PERSONALLY. NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD IN ANY WAY SHALL LOOK ONLY
TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LANDLORD: HEALTH AND REHABILITATION
PROPERTIES TRUST, a Maryland
real estate investment trust
By: /s/
Name:
Title:
<PAGE>
-3-
TENANT: AMS PROPERTIES, INC.
a Delaware corporation
By: /s/
Name:
Title:
<PAGE>
Omitted Exhibits
The following exhibits to the Lease have been omitted:
Exhibit Letter Exhibit Title
A Description of Land
B Permitted Encumbrances
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibits to the Securities and Exchange Commission upon request.
<PAGE>
SCHEDULE TO EXHIBIT 10.19
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Leases, which are substantially identical in all material respects to the Lease
filed herewith, are omitted. The following list sets forth the material
differences in the leased premises, purchase price, annual rental and monthly
rent.
<TABLE>
<CAPTION>
Annual Monthly
Leased Premises Purchase Price Rental Rent
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greentree Health Care Center $ 1,886,000.00 $ 249,895.00 $ 20,824.58
70 Greentree Road
Clintonville, WI
Lancaster Convalescent Center $ 2,771,000.00 $ 367,158.00 $ 30,596.50
1642 West Avenue "J"
Lancaster, CA
Park Manor Health Care Center $ 4,003,000.00 $ 530,398.00 $ 44,199.83
1824 East Park Place
Milwaukee WI
Virginia Health Care Center $ 3,964,000.00 $ 525,230.00 $ 43,769.17
1471 Waukesha Avenue
Waukesha, WI
acific Gardens Health Care Center $ 3,733,000.00 $ 494,623.00 $ 41,218.58
577 South Peach Avenue
Fresno, CA
Tarzana Health Care Center $ 2,540,000.00 $ 336,550.00 $ 28,045.83
5640 Reseda Avenue
Tarzana, CA
Van Nuys Convalarium $ 1,232,000.00 $ 163,240.00 $ 13,603.33
6835 Hazeltine Avenue
Van Nuys, CA
Thousand Oaks Convalarium $ 3,541,000.00 $ 469,183.00 $ 39,098.58
93 West Avenida de los Arobules
Thousand Oaks, CA
Flagship Health Care Center $ 3,272,000.00 $ 433,540.00 $ 36,128.33
466 Flagship Road
Newport Beach, CA
<PAGE>
Woodlawn Health Care Center $ 5,273,000.00 $ 698,673.00 $ 58,222.75
18740 W. Bluemound Rd.
Brookfield, WI
Pine Manor $ 1,925,000.00 $ 255,063.00 $ 21,255.25
East Side of County Y Highway
Embarrass [Clintonville], WI
Sunny Hills Health Care Center $ 2,001,000.00 $ 265,133.00 $ 22,094.42
4325 Nakoma Road
Madison, WI
Cherrelyn Manor Nursing Home $ 5,889,000.00 $ 780,293.00 $ 65,024.42
5555 South Elati
Littleton, CO
</TABLE>
EXHIBIT 10.20
LEASE
THIS LEASE is made as of March 27, 1992 between HEALTH AND
REHABILITATION PROPERTIES TRUST (known in Wisconsin as "Health and
Rehabilitation Properties REIT"), a Maryland real estate investment Trust
("Landlord"), having its principal office at 400 Centre Street, Newton,
Massachusetts and AMS PROPERTIES, INC. a Delaware corporation, ("Tenant") having
its principal office at 300 Corporate Pointe, Culver City, California 90230,
with reference to the following facts:
A. Landlord, Tenant, American Medical Services, Inc. ("AMS"), which
owns beneficially and of record all of the capital stock of Tenant, HostMasters,
Inc. ("HMI"), and GranCare, Inc. (f/k/a AMS Holding Co.) ("GranCare"), which
owns beneficially and of record all of the capital stock of AMS and HMI, have
entered into an Acquisition Agreement, Agreement to Lease and Mortgage Loan
Agreement dated as of December 28, 1990, as heretofore amended (the "Acquisition
Agreement"), pursuant to which, among other things, Landlord acquired from AMS
and simultaneously leased to Tenant seventeen different parcels of real property
and improvements (the "Original Collective Leased Properties") each for use and
operation as a licensed nursing home.
B. Each Original Collective Leased Property was leased to Tenant
pursuant to a Lease which incorporated a Master Lease Document dated as of
December 28, 1990 between Landlord and Tenant (as heretofore amended, and as the
same may be further amended, modified or supplemented from time to time, the
"Master Lease").
C. Landlord has, on the date hereof, purchased the property identified
in Paragraph 3 below (the "Leased Property") from Tenant pursuant to the option
to purchase provided in Section 10.3 of the Acquisition Agreement.
D. Landlord has agreed, as provided in Section 10.3 of the Acquisition
Agreement, to lease the Leased Property back to Tenant upon the terms set forth
below.
In consideration of the foregoing, the parties agree:
1. Purchase Price. The Purchase price paid by Landlord to Tenant for
the Leased Property was the sum of Four Million One Hundred Sixty Thousand One
Hundred Dollars ($4,160,100).
2. Incorporation of Master Lease. The Master Lease is hereby
incorporated herein in its entirety as though each and every part thereof were
set forth in full herein.
<PAGE>
-2-
3. Description of Leased Property. The Leased Property is that property
located at the following street address:
Christopher East Health Care Center
1132 East Knapp Street
Milwaukee, Wisconsin 53202
The Land referred to in the Master Lease with respect to the Leased
Property is more particularly described in Schedule A hereto.
4. Fixed Term. The Fixed Term of this Lease shall commence on the date
hereof (the "Commencement Date"), and shall end on December 28, 2000; provided,
that for the purposes of Section 3.1.1. of the Master Lease (and subject to
paragraph 6 below), the Commencement Date shall be deemed to be December 28,
1990.
5. Extended Terms. Subject to the provisions of Section 2.4 of the
Master Lease, Tenant is hereby granted the right to renew the Lease for three
(3) 10-year consecutive optional renewal terms for a maximum term if all such
options are exercised of thirty (30) years after the expiration of the Fixed
Term.
6. Rental. The initial Minimum Rent payable during the Fixed Term
pursuant to Section 3.1.1(a) of the Master Lease is the annual sum of Five
Hundred Sixty One Thousand, Six Hundred Fourteen Dollars ($561,614) payable in
equal monthly installments (commencing April 1, 1992) of Forty Six Thousand,
Eight Hundred One Dollars ($46,801). The Minimum Rent for the Extended Terms
shall be at the rental provided for in Section 3.1.1(e) of the Master Lease.
During the Term, Minimum Rent shall be subject to adjustment as provided in
Sections 3.1.1(b) through 3.1.1(d) and 3.1.1(f) of the Master Lease; provided
that Landlord and Tenant acknowledge that the initial Minimum Rent payable
hereunder reflects the adjustment made on December 28, 1990 under Section
3.1.1(c) of the Master Lease. Landlord will credit against installments of
Minimum Rent the amounts determined in accordance with Section 3.1.(g) of the
Master Lease. Tenant shall also pay Additional Rent pursuant to Section 3.1.2 of
the Master Lease. For the purposes of computing Additional Rent for the Leased
Property, the Leased Property shall be deemed to have been a "Leased Property"
under the Master Lease at all times since December 28, 1990.
7. Collective Leased Properties. The Leased Property shall be deemed to
be a Collective Leased Property for all purposes under the Master Lease.
8. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
<PAGE>
-2-
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY. NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD IN ANY WAY SHALL LOOK ONLY
TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LANDLORD: HEALTH AND REHABILITATION PROPERTIES
TRUST (known in Wisconsin as "Health
and Rehabilitation Properties REIT"),
a Maryland real estate investment trust
By: /s/ David J. Hegarty
Name: David J. Hegarty
Title: Treasuer
By: /s/
Name:
Title:
TENANT: AMS PROPERTIES, INC.
a Delaware corporation
By: /s/
Name:
Title:
By: /s/
Name:
Title:
<PAGE>
Schedule A
Description of Land
Lots 1, 2, 4, 5 and 7 al in Subdivision of Lot 4 and a part of Lot 3, in Block
196 in Rogers Addition, in the Southeast 1/4 of Section 21, in Town 7 North,
Range 22 East, in the City of Milwaukee, County of Milwaukee, State of Wisconsin
Tax Key No. 359-0501-100-4
Address: 1132 East Knapp Street (formerly 1301 North Franklin Place)
EXHIBIT 10.21
AMENDMENT TO MASTER LEASE DOCUMENT
AMENDMENT dated as of December 29, 1993 between HEALTH AND
REHABILITATION PROPERTIES TRUST (known in Wisconsin as "Health and
Rehabilitation Properties REIT"), a real estate investment trust formed under
the laws of the State of Maryland ("HRP") and AMS PROPERTIES, INC., a Delaware
corporation ("AMS Properties")
W I T N E S S E T H:
WHEREAS, HRP, as landlord, and AMS Properties, as tenant, have entered
into a Master Lease Document, General Terms and Conditions dated as of December
28, 1990 (as amended, the "Master Lease"), and have also executed Facility
Leases which incorporate by reference the Master Lease (collectively, the
"Facility Leases") relating to the health care facilities described on Exhibit
A-2 to the Master Lease and on Exhibit F-3 to the Acquisition Agreement,
Agreement to Lease and Mortgage Loan Agreement, dated as of December 28, 1990,
as amended, between HRP, AMS Properties, Hostmasters, Inc., GranCare, Inc.
(formerly known as AMS Holding Co.) and American Medical Services, Inc. (the
"Acquisition Agreement");
WHEREAS, HRP and AMS Properties have agreed to amend the Master Lease
as hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, HRP and AMS Properties agree as follows:
SECTION 1. AMENDMENT TO MASTER LEASE
The Master Lease is hereby amended as follows:
(a) The definitions "Guarantor", "Net Patient Revenues" and
"Transaction Documents" in Article 1 of the Master Lease are hereby amended in
full to read as follows:
Guarantor shall mean any guarantor of Tenant's obligations
under the applicable Lease, including, without limitation, GranCare,
Inc. (f/k/a AMS Holding Co.) and GCI Health Care Centers, Inc.
Net Patient Revenues with respect to the Facility located at
the applicable Leased Property (or Collective Leased Property, as the
case may be), shall mean all
<PAGE>
-2-
revenues (determined in accordance with GAAP, except as provided below)
received or receivable from or by reason of the operation of such
Facility, or any other use of such Facility, including without
limitation all patient or client revenues received or receivable for
the use of or otherwise by reason of all rooms, beds and other
facilities provided, meals served, services performed or provided,
space or facilities subleased or goods sold at such Facility,
including, without limitation, any other arrangements with third
parties relating to the possession or use of any portion of such
Facility; provided, however, that Net Patient Revenues shall not
include:
(a) revenue from professional fees or charges by
physicians and unaffiliated providers of ancillary services,
when and to the extent such charges are paid over to such
physicians or unaffiliated providers of ancillary services, or
are separately billed and not included in comprehensive fees;
(b) non-operating revenues such as interest income or
income from the sale of assets not sold in the ordinary course
of business;
(c) revenues attributable to services actually
provided off-site or otherwise away from such Facility, such
as home health care, to persons that are not patients at such
Facility;
(d) all revenues attributable to Tenant's Capital
Additions;
(e) revenues attributable to child care services used
primarily for employees of such Facility; and
(f) all revenues attributable to pharmacy services
provided to patients of such Facility by Tenant or its
Affiliates, and other services provided to patients of such
Facility by Tenant or its Affiliates that Landlord
acknowledges in writing following the written request of
Tenant (which acknowledgement will not be unreasonably
withheld) are not typically provided to nursing home patients
by the operators of such facilities; provided that this clause
(f) shall be given effect with respect to calculations of
Additional Rent (including, without limitation, the
computation of Base Net Patient Revenues for the Base Year)
only as to Fiscal Years ending after December 31, 1993.
Transaction Documents has the meaning given that term in the
Acquisition Agreement.
(b) Section 12.1(h) of the Master Lease is amended in full to read as
follows:
<PAGE>
-3-
(h)(A) any obligation of Tenant or any Guarantor (other than
GranCare, Inc.), or of any Subsidiary thereof, in respect of any
indebtedness for borrowed money or for the deferred purchase price of
any material property or services (excluding (1) trade accounts payable
in the ordinary course of business on customary trade terms and (2)
indebtedness or obligations under the Transaction Documents)
(hereinafter, "Indebtedness for Borrowed Money") or any guaranty
relating thereto shall be declared to be or shall become due and
payable prior to the stated maturity thereof, or such Indebtedness for
Borrowed Money shall not be paid as and when the same becomes due and
payable, or there shall occur and be continuing any default under any
instrument, agreement or evidence of indebtedness relating to any such
Indebtedness for Borrowed Money the effect of which is to permit the
holder or holders of such instrument, agreement or evidence of
indebtedness, or a trustee, agent or other representative on behalf of
such holder or holders, to cause such Indebtedness for Borrowed Money
to become due prior to its stated maturity; or (B) any obligation of
GranCare, Inc., a Delaware corporation (f/k/a AMS Holding Co.), or of
any Subsidiary thereof, in respect of any Indebtedness for Borrowed
Money or any guaranty relating thereto shall be declared to be or shall
become due and payable prior to the stated maturity thereof, or the
holder or holders of any instrument, agreement or evidence of
indebtedness relating to any such Indebtedness for Borrowed Money, or a
trustee, agent or other representative on behalf of such holder or
holders, shall deliver a notice of default, or shall accelerate or
demand payment of such Indebtedness for Borrowed Money, or initiate
foreclosure proceedings or exercise any other creditor's remedies in
respect of such Indebtedness for Borrowed Money (whether similar or
dissimilar to the foregoing); or
(c) Section 21.4 of the Master Lease is amended in full to read as
follows:
21.4 Tenant's Option to Purchase the Collective Leased
Properties.
Provided,
(a) no Default involving the nonpayment of Rent shall
have occurred and be continuing,
(b) the Leases for each of the Collective Leased
Properties shall be in full force and effect (other than
Leases that have been terminated in accordance with the
provisions hereof, other than after the occurrence of an Event
of Default), and
(c) other than as expressly permitted by Article 17,
Tenant shall not have assigned the Leases for any
<PAGE>
-4-
of the Collective Leased Properties or subleased all or any
portion of the Collective Leased Properties,
Tenant shall have the option, exercisable on not less than twelve (12)
months prior Notice to Landlord, to purchase all, but not less than
all, the Collective Leased Properties (other than those Collective
Leased Properties whose Leases have been terminated in accordance with
the provisions of Article 10 or Article 11) upon the expiration of any
Extended Term, each for a purchase price equal to the sum of the
greater of (i) ninety percent (90%) of the Fair Market Value Purchase
Price of such Collective Leased Property as of the expiration of such
Extended Term, or (ii)(1) if such option is exercised at the end of the
first Extended Term, one hundred fifty percent (150%) of such Adjusted
Purchase Price, (2) if such option is exercised at the end of the
second Extended Term, two hundred percent (200%) of such Adjusted
Purchase Price or (3) if such option is exercised at the end of the
third Extended Term, three hundred percent (300%) of such Adjusted
Purchase Price. Such purchase by Tenant shall be made in accordance
with the provisions of Article 15.
SECTION 2. EFFECT ON MASTER LEASE
(a) Except as specifically provided above, the Master Lease shall
remain in full force and effect and is hereby ratified and confirmed.
(b) The amendments set forth herein (i) do not constitute an amendment,
waiver or modification of any term, condition or covenant of the Master Lease,
or any of the instruments or documents referred to therein, other than as
specifically set forth herein, and (ii) shall not prejudice any rights which HRP
or its successors and assigns may now or hereafter have under or in connection
with the Master Lease, as amended hereby or any of the instruments or documents
referred to therein.
SECTION 3. EFFECTIVENESS
This Amendment shall become effective as of the date first above
indicated when a counterpart to this Amendment shall have been executed by each
of the parties hereto.
SECTION 4. COSTS, EXPENSES AND TAXES
AMS Properties agrees to pay all costs and expenses of HRP in
connection with the preparation, reproduction, execution and delivery of this
Amendment, including the reasonable fees and expenses of Sullivan & Worcester,
special counsel to HRP with respect thereto.
<PAGE>
-5-
SECTION 5. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN AC CORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION 6. NO LIABILITY OF TRUSTEES
THE DECLARATION OF TRUST OF HRP, DATED OCTOBER 9, 1986, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED
IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF HRP SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY,
FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS DEALING WITH HRP, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this amendment as a
sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST,
a Maryland real estate
investment trust
By:/s/ David J. Hegarty
Name: David J. Hegarty
Title:
TENANT:
AMS PROPERTIES, INC.
By:/s/ Evrett Benton
Name:
Title:
EXHIBIT 10.22
AMENDMENT TO AMS PROPERTIES, INC.
MASTER LEASE DOCUMENT AND FACILITY LEASES
AMENDMENT dated as of October 1, 1994 between HEALTH AND RETIREMENT
PROPERTIES TRUST (known in Wisconsin as "Health and Rehabilitation Properties
REIT"), a real estate investment trust formed under the laws of the State of
Maryland ("HRP") and AMS PROPERTIES, INC., a Delaware corporation ("AMS
Properties")
W I T N E S S E T H:
WHEREAS, HRP, as landlord, and AMS Properties, as tenant, have entered
into a Master Lease Document, General Terms and Conditions dated as of December
28, 1990, as amended (the "Master Lease"), and have also executed Facility
Leases which incorporate by reference the Master Lease (collectively, the
"Facility Leases") relating to the health care facilities described on Exhibit
A-2 to the Master Lease and on Exhibit F-3 to the Acquisition Agreement,
Agreement to Lease and Mortgage Loan Agreement, dated as of December 28, 1990,
as amended (the "Acquisition Agreement"), between HRP, AMS Properties,
HostMasters, Inc., GranCare, Inc. (formerly known as AMS Holding Co.) and
American Medical Services, Inc.;
WHEREAS, HRP and AMS Properties have agreed to amend the Master Lease
and the Facility Leases as hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, HRP and AMS Properties agree as follows:
SECTION 1. AMENDMENTS TO MASTER LEASE
The Master Lease is hereby amended as follows:
(a) Section 3.1.1(b) of the Master Lease is amended in full to
read as follows:
(b) Adjustments of Minimum Rent Following Disbursements under
Renovation Funding Agreement. Effective on the date of each
disbursement made pursuant to the terms of the Renovation Funding
Agreement after September 30, 1994 for the purpose of paying for the
cost of renovations at the applicable Leased Property, each installment
of Minimum Rent under the Lease for such Leased Property shall be
increased, effective on the date of such disbursement, to an amount
equal to the product of (i) a fraction, the numerator of which is the
amount advanced and the denominator of which is twelve (12) multiplied
by (ii) the higher of (x) ten percent (10%) or (y) the quoted yield, on
the date of disbursement, for United States Treasury obligations
maturing on December 31, 2010
<PAGE>
-2-
(or the next longest maturity if no maturity on December 31, 2010 is
available) plus four hundred (400) basis points. The computation of
yield shall be made using the information on the date of disbursement
quoted in The Wall Street Journal. If The Wall Street Journal shall not
be available, Landlord shall choose the quotation from another
recognized source. If any such disbursement is made during any calendar
month on a day other than the first day of a calendar month, Tenant
shall pay to Landlord on the first day of the immediately following
calendar month (in addition to the amount of Minimum Rent payable with
respect to such month, as adjusted pursuant to this paragraph (b)) the
amount by which Minimum Rent for the preceding month, as adjusted for
such disbursement, exceeded the amount of Minimum Rent payable by
Tenant for such preceding month without giving effect to such
adjustment.
(b) Section 3.1.2 of the Master Lease is amended in full to read as
follows:
3.1.2 Additional Rent.
Tenant shall pay Landlord additional rent ("Additional Rent")
(a) for the Collective Leased Properties in the amount of $200,000 on
or before December 31, 1995, and (b) for the applicable Leased
Property, in advance on the first day of each calendar month of each
calendar year, commencing January 1, 1996, in an amount equal to the
product of (x) the Minimum Rent for the applicable Leased Property as
at December 31 of the prior year multiplied by (y) seventy-five percent
(75%) of the percentage increase in the Index (as hereinafter defined)
since September 30, 1994 as measured at December 31 of such prior year;
provided that the amount of each monthly installment of Additional Rent
payable for any calendar year may not exceed an amount that, when
aggregated with the monthly installment of Minimum Rent for the
applicable Leased Property for such year, would exceed the sum of the
monthly installments of Minimum Rent and Additional Rent for the
applicable Leased Property for December of the previous year by more
than 2%. As used herein, the term "Index" shall mean the Consumer Price
Index for Urban Wage Earners and Clerical Workers, Boston,
Massachusetts, All Items 1982-1984=100. The Index is presently
published by the Bureau of Labor Statistics of the United States
Department of Labor. In the event publication of the Index ceases, the
computation of the Additional Rent due from Tenant during each year
with respect to which the Index is to be applied shall be computed upon
the basis of whatever index published by the United States Department
of Labor at that time is most nearly comparable as a measure of general
changes in price levels for the Boston area.
SECTION 2. AMENDMENTS TO FACILITY LEASES
The first sentence of Paragraph 6 of the Facility Lease for each Leased
Property is hereby amended to provide that the annual amount of initial Minimum
Rent and the amount of each monthly installment of initial Minimum Rent are the
respective amounts set forth on Schedule 1 hereto.
<PAGE>
-3-
SECTION 3. EFFECT ON MASTER LEASE AND FACILITY LEASES
(a) Except as specifically provided above, the Master Lease and the
Facility Leases shall remain in full force and effect and each is hereby
ratified and confirmed.
(b) The amendments set forth herein (i) do not constitute an amendment,
waiver or modification of any term, condition or covenant of the Master Lease or
any Facility Lease, or any of the instruments or documents referred to therein,
other than as specifically set forth herein, and (ii) shall not prejudice any
rights which HRP or its successors and assigns may now or hereafter have under
or in connection with the Master Lease and the Facility Leases, as amended
hereby, or any of the instruments or documents referred to therein.
SECTION 4. EFFECTIVENESS
This Amendment shall become effective as of the date first above
indicated when a counterpart to this Amendment shall have been executed by each
of the parties hereto.
SECTION 5. COSTS, EXPENSES AND TAXES
AMS Properties agrees to pay all costs and expenses of HRP in
connection with the preparation, reproduction, execution and delivery of this
Amendment, including the reasonable fees and expenses of Sullivan & Worcester,
special counsel to HRP with respect thereto.
SECTION 6. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION 7. NO LIABILITY OF TRUSTEES
THE DECLARATION OF TRUST OF HRP, DATED OCTOBER 9, 1986, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED
IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF HRP SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY,
FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS DEALING WITH HRP, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
<PAGE>
-4-
IN WITNESS WHEREOF, the parties have executed this amendment as a
sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND RETIREMENT
PROPERTIES TRUST,
a Maryland real estate
investment trust
By:/s/ David J. Hegarty
Name: David J. Hegarty
Title: President
TENANT:
AMS PROPERTIES, INC.
By: /s/
Name:
Title:
<PAGE>
SCHEDULE 1 TO AMENDMENT
Schedule of Revised Minimum Rent Amounts
Amount of Monthly
Aggregate Yearly Installment of
Facility Name State Minimum Rent Minimum Rent
Flagship CA $ 714,759 $ 59,563.00
Golden Hill CA 458,213 38,184.00
Lancaster CA 585,057 48,755.00
Pacific Gardens CA 802,330 50,194.00
Palm Springs, CA 402,107 33,509.00
Health Care
Tarzana CA 623,338 51,945.00
Thousand Oaks CA 639,036 53,253.00
Van Nuys CA 244,457 20,371.00
Ceders Health Care CO 783,615 65,301.00
Cherrelyn Manor CO 1,017,118 84,760.00
Friendship Manor IL 452,148 37,679.00
Greentree Health WI 317,831 26,486.00
Care
Park Manor WI 635,366 52,947.00
Pine Manor WI 319,471 26,623.00
Sunny Hill Health WI 348,958 29,080.00
Care
The Virginia WI 885,698 72,142.00
Woodland WI 1,535,970 127,998.00
River Hills East WI 773,840 64,487.00
11,539,312 943,277
========== =======
EXHIBIT 10.23
AMENDMENT TO AMS PROPERTIES, INC.
FACILITY LEASES
AMENDMENT dated as of October 31, 1997 between HEALTH AND RETIREMENT
PROPERTIES TRUST (known in Wisconsin as "Health and Rehabilitation Properties
REIT"), a real estate investment trust formed under the laws of the State of
Maryland ("HRP") and AMS PROPERTIES, INC., a Delaware corporation ("AMS
Properties")
W I T N E S S E T H:
WHEREAS, HRP, as landlord, and AMS Properties, as tenant, have entered
into a Master Lease Document, General Terms and Conditions dated as of December
28, 1990, as amended (the "Master Lease"), and have also executed Facility
Leases which incorporate by reference the Master Lease (collectively, the
"Facility Leases") relating to the health care facilities described on Exhibit
A-2 to the Master Lease;
WHEREAS, HRP and AMS Properties have agreed to amend the Facility
Leases as hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, HRP and AMS Properties agree as follows:
SECTION 1. AMENDMENTS TO FACILITY LEASES
1.1 Paragraphs 4 and 5 of the Facility Lease for each Leased Property
is hereby amended in full to read as follows:
4. Fixed Term. The Fixed Term of this Lease is twenty-two (22)
years and thirty four (34) days, commencing on December 28, 1990 (the
"Commencement Date"), and ending on January 31, 2013.
5. Extended Terms. Subject to the provisions of Section 2.4 of
the Master Lease, Tenant is hereby granted the right to renew the Lease
for two (2) 10-year consecutive optional renewal terms for a maximum
term if all such options are exercised of twenty (20) years after the
expiration of the Fixed Term.
1.2 The first sentence of Paragraph 6 of the Facility Lease for each
Leased Property listed on Schedule 1 hereto is hereby amended to provide that
the annual amount of initial Minimum Rent and the amount of each monthly
installment of initial Minimum Rent for such Leased Property are the respective
amounts set forth on Schedule 1 hereto.
<PAGE>
-2-
SECTION 2. EFFECT ON FACILITY LEASES
2.1 Except as specifically provided above, the Facility Leases shall
remain in full force and effect and each is hereby ratified and confirmed.
2.2 The amendments set forth herein (i) do not constitute an amendment,
waiver or modification of any term, condition or covenant of any Facility Lease,
or any of the instruments or documents referred to therein, other than as
specifically set forth herein, and (ii) shall not prejudice any rights which HRP
or its successors and assigns may now or hereafter have under or in connection
with Facility Leases, as amended hereby, or any of the instruments or documents
referred to therein.
SECTION 3. EFFECTIVENESS
This Amendment shall become effective as of the date first above
indicated when a counterpart to this Amendment shall have been executed by each
of the parties hereto.
SECTION 4. COSTS, EXPENSES AND TAXES
AMS Properties agrees to pay all costs and expenses of HRP in
connection with the preparation, reproduction, execution and delivery of this
Amendment, including the reasonable fees and expenses of Sullivan & Worcester
LLP, special counsel to HRP with respect thereto.
SECTION 5. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION 6. NO LIABILITY OF TRUSTEES
THE DECLARATION OF TRUST OF HRP, DATED OCTOBER 9, 1986, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED
IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF HRP SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY,
FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS DEALING WITH HRP, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
<PAGE>
-3-
IN WITNESS WHEREOF, the parties have executed this amendment as a
sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND RETIREMENT
PROPERTIES TRUST,
a Maryland real estate
investment trust
By:/s/ David J. Hegarty
Name:
Title:
TENANT:
AMS PROPERTIES, INC.
By:/s/ M. Henry Day, Jr.
Name: M. Henry Day, Jr.
Title: Assistant Secretary
<PAGE>
SCHEDULE 1 TO AMENDMENT
Schedule of Revised Minimum Rent Amounts
Amount of
Aggregate Monthly
Facility Name State Yearly Installment of
Minimum Rent Minimum Rent
Flagship CA $751,478 $62,623.17
Lancaster CA 606,825 50,568.75
Pacific Gardens CA 602,330 50,194.17
Tarzana CA 661,377 55,114.75
Thousand Oaks CA 666,301 55,525.08
Van Nuys CA 257,210 21,434.17
Ceders Health Care CO 822,093 68,507.75
Cherrelyn Manor CO 1,067,690 88,974.17
Greentree Health Care WI 332,343 27,695.25
Pine Manor WI 341,679 28,473.25
Sunny Hill Health Care WI 365,010 30,417.50
The Virginia WI 888,125 74,010.42
Woodland WI 1,587,861 132,321.75
Christopher East WI 821,109 68,425.75
$9,771,431.00 $814,285.92
============= ===========
EXHIBIT 10.24
LEASE
THIS LEASE is made as of June 29, 1998 between HEALTH AND RETIREMENT
PROPERTIES TRUST (known in Wisconsin as "Health and Retirement Properties
REIT"), a Maryland real estate investment trust ("Landlord"), having its
principal office at 400 Centre Street, Newton, Massachusetts and AMS PROPERTIES,
INC. a Delaware corporation ("Tenant"), having its principal office at One
Ravina Drive, Suite 1500, Atlanta, Georgia 30346, with reference to the
following facts:
A. Pursuant to the terms of an Restructure and Asset Exchange
Agreement dated as of even date herewith (the "Exchange
Agreement"), Landlord agreed to acquire from Tenant, and then
lease back to Tenant, certain real property and the related
improvements and personal property located in Wilson, Concord
and Winston- Salem, North Carolina, and Milwaukee and
Pewaukee, Wisconsin (collectively, the "Exchange Properties")
pursuant to leases of even date herewith each of which
incorporates by reference an Master Lease Document dated as of
December 28, 1990, as amended (as amended, and as such
document may be further amended, amended and restated,
supplemented or modified from time to time, the "Master
Lease") among Tenant, as tenant, and the Landlord, as
landlord.
B. Landlord has, as of the Commencement Date referenced below,
acquired the property identified in Paragraph 3 below (the
"Leased Property") and the other Exchange Properties from
Tenant in accordance with the terms of the Exchange Agreement.
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties agree as follows:
1. Purchase Price. The Purchase Price for the Leased Property, for the
purposes of the Master Lease and this Lease shall be deemed to be
$4,345,000.00 (the "Purchase Price").
2. Incorporation of Master Lease. The Master Lease is hereby incorporated
herein in its entirety as though each and every part thereof were set
forth in full herein.
3. Description of Leased Property. The Leased Property demised pursuant to
Article 2 of the Master Lease is that property located at the following
street address:
River Hills West Health Care Center
321 Riverside Drive
Pewaukee, Wisconsin 53072
The Land referred to in the Master Lease is more particularly described
in Schedule A hereto.
4. Fixed Term. The Fixed Term of this Lease shall commence on June 29,
1998 (the "Commencement Date"), and shall end on January 31, 2013.
<PAGE>
-2-
5. Extended Terms. Subject to the provisions of Section 2.4 of the Master
Lease, Tenant is hereby granted the right to renew the Lease for two
(2) 10-year consecutive optional renewal terms for a maximum term if
all such options are exercised of twenty (20) years after the
expiration of the Fixed Term.
6. Rental. The initial Minimum Rent payable during the Fixed Term pursuant
to Section 3.1.1(a) of the Master Lease is the annual sum of $585,812
payable in equal monthly installments of $48,817.66. The Minimum Rent
for each Extended Term shall be at the rental provided for in Section
3.1.1(e) of the Master Lease. During the Term, Minimum Rent shall be
subject to adjustment as provided in paragraphs (b) and (f) of Section
3.1.1 of the Master Lease. Landlord will credit against installments of
Minimum Rent the amounts determined in accordance with Section 3.1.1(g)
of the Master Lease. Tenant shall also pay Additional Rent pursuant to
Section 3.1.2 of the Master Lease.
7. Collective Leased Properties. The Leased Property shall be deemed to be
a "Collective Leased Property" for all purposes under the Master Lease.
8. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,
PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY. NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY
OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL
PERSONS DEALING WITH LANDLORD IN ANY WAY SHALL LOOK ONLY TO THE ASSETS
OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
<PAGE>
-3-
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LANDLORD: HEALTH AND RETIREMENT PROPERTIES
TRUST (known in Wisconsin as "Health
and Retirement Properties REIT"),
a Maryland real estate investment trust
By: /s/
Name:
Title:
TENANT: AMS PROPERTIES, INC.,
a Delaware corporation
By: /s/
Name:
Title:
<PAGE>
SCHEDULE TO EXHIBIT 10.24
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Leases, which are substantially identical in all material respects to the Lease
for property located at River Hills West Health Care Center, 321 Riverside
Drive, Pewaukee, Wisconsin 53072, are omitted. The following list sets forth the
material differences in the street address of the leased property, the purchase
price, and the annual rent from the lease filed herewith:
Street Address of Property Purchase Price Annual Rent
- ------------------------------------------------------------------------------
Northwest Health Care Center $2,215,000.00 $274,504
7800 West Fond du Lac Avenue
Milwaukee, Wisconsin 53218
Brian Centers-Wilson $2,680,000.00 $408,922
2501 Downing St. Extension
Wilson, NC 53072
Brain Centers-Carbarrus $2,840,000.00 $377,213
250 Bishop Lane
Concord, NC 28025
Brian Centers-Winston-Salem $2,280,000.00 $301,377
6000 Brian Center Lane
Winston-Salem, NC 47106
EXHIBIT 10.25
MASTER LEASE DOCUMENT
GENERAL TERMS AND CONDITIONS
DATED AS OF JUNE 30, 1992
FOR LEASES TO BE EXECUTED BY
HEALTH AND REHABILITATION PROPERTIES TRUST,
AS LANDLORD,
AND
GCI HEALTH CARE CENTERS, INC.,
AS TENANT
<PAGE>
MASTER LEASE DOCUMENT
THIS MASTER LEASE DOCUMENT, GENERAL TERMS AND CONDITIONS (hereinafter,
the "Master Lease Document") is prepared for and will be adopted as part of each
lease to be executed by HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland
real estate investment trust, having its principal office at 400 Centre Street,
Newton, Massachusetts 02158, as Landlord, and GCI HEALTH CARE CENTERS, INC., a
Delaware corporation, having its principal office at 300 Corporate Pointe, Suite
300, Culver City, California 90230, as Tenant.
RECITALS
This Master Lease Document is made and entered into with reference to
the following recitals:
A. Landlord has entered into separate Acquisition Agreements, dated as of
May 29, 1992 (as the same may be amended, modified or supplemented from
time to time, the "Acquisition Agreements"), with each of Samaritan
Senior Services of Arizona, Inc., an Arizona non-profit corporation
("Samaritan Arizona"), Samaritan Senior Services of California, Inc., a
California non-profit corporation ("Samaritan California') and
Samaritan Senior Services of South Dakota, Inc., a South Dakota
non-profit corporation ("Samaritan South Dakota", together with
Samaritan Arizona and Samaritan California, the "Sellers"), pursuant to
which Landlord has agreed to acquire from the Sellers certain parcels
of real property and improvements (together the "Collective Leased
Properties", individually, a "Leased Property [as such terms are
further defined below]") as otherwise described on Exhibit A-1 hereto.
The Collective Leased Properties are identified in Exhibit A-2 hereto.
B. Landlord and GranCare, Inc., a California corporation ("GranCare") and
owner of 100% of the issued and outstanding capital stock of Tenant
have entered into a letter agreement dated April 10, 1992, pursuant to
which Landlord has agreed to lease to Tenant the Collective Leased
Properties.
C. Landlord and Tenant have executed and delivered a lease for each of the
Collective Leased Properties, each of which leases is substantially in
the form of Exhibit B hereto and incorporates by reference all of the
terms and conditions of this Master Lease Document. Each such lease is
hereinafter referred to as a "Lease".
D. Notwithstanding anything herein to the contrary, the terms and
conditions of this Master Lease Document shall be construed and
interpreted as to each Lease as if a separate
<PAGE>
-2-
lease containing all the terms of this Master Lease Document and such
Lease had been executed by Landlord and Tenant with respect to the
Leased Property described in such Lease (hereinafter referred to as the
"applicable Leased Property").
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Master Lease Document, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article shall 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 shall have the meanings assigned to them in accordance
with generally accepted accounting principles consistently applied, (iii) all
references in this Master Lease Document to designated "Articles," "Sections"
and other subdivisions are to the designated Articles, Sections and other
subdivisions of this Master Lease Document, and (iv) the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Master
Lease Document as a whole and not to any particular Article, Section or other
subdivision.
Acquisition Agreements: As defined in the recital clauses hereto.
Added Value Percentage: As defined in Section 6.2.2(a).
Additional Charges: As defined in Section 3.1.3.
Additional Rent: As defined in Section 3.1.2 with respect to the
Collective Leased Properties.
Additional Rent Adjustment Date shall mean, for any Fiscal Year during
the Fixed Term and the First Extended Term, the date on which an amount of Net
Patient Revenues shall have been generated by the Collective Leased Properties,
such that the aggregate Additional Rent due to HRP for the Collective Leased
Properties for the then current Fiscal Year is equal to two percent (2%) of the
sum of the Purchase Prices for the Collective Leased Properties.
Adjusted Percentage Yield shall mean, for the applicable Lease, a
percentage equal to 450 basis points above the yield (calculated on the basis of
a monthly equivalent yield) on 5-year United States Treasury securities computed
at the close of the applicable Business Day and based upon information quoted in
The
<PAGE>
-3-
Wall Street Journal, all as more particularly described in Section 3.1.1.
Adjusted Purchase Price shall mean, for the applicable Leased Property,
the Purchase Price of such Leased Property plus the aggregate amount of all
disbursements made by Landlord with respect to such Leased Property pursuant to
the terms of any renovation funding agreement, plus any other amount disbursed
or advanced by Landlord to finance, or to reimburse Tenant for its financing of,
any Capital Addition to such Leased Property less any amounts that have been
repaid to Landlord pursuant to the terms of any renovation funding agreement or
otherwise, less the amount of any Award or the proceeds of any insurance
received by Landlord in connection with a partial Condemnation or a partial
casualty involving the applicable Leased Property as described in Section 11.2
or 10.2.2, and not applied by Landlord to the restoration of the applicable
Leased Property as provided therein.
Affiliate shall mean as to any Person (a) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more on a consolidated basis, of the
outstanding capital stock, shares, equity or beneficial interests of such
Person, (c) any officer, director, employee, general partner or trustee of such
Person or any other Person controlling, controlled by or under common control
with such Person (excluding trustees and Persons serving in similar capacities
who are not otherwise an Affiliate of such Person), or (d) with respect to any
individual, a spouse, any ancestor or descendant, or any other relative (by
blood, adoption or marriage), within the third degree, of such individual. For
the purposes of this definition, "control" (including the correlative meanings
of the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, through the ownership of voting securities, partnership interests or
other equity interests.
Applicable Laws: As defined in Section 4.4.
Award shall mean all compensation, sums or other value awarded, paid or
received by virtue of a total or partial Condemnation of the applicable Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses, including, without limitation, expert witness fees, incurred
by Landlord or Tenant, as the case may be, in connection with obtaining any such
award).
Base Net Patient Revenues shall mean the aggregate amount of Net
Patient Revenues for the Collective Leased Properties for the applicable Base
Year.
<PAGE>
-4-
Base Year shall mean, with respect to the Fixed Term and the First
Extended Term, the Fiscal Year beginning January 1, 1992 and ending December 31,
1992; and with respect to the Second Extended Term, the Fiscal Year beginning
January 1, 2017 and ending December 31, 2017.
Business Day shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in the State are authorized by law or
executive action to close.
Capital Addition shall mean 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
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,
the renovation of existing improvements on such Leased Property in order 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 on 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 shall mean the cost of any Capital Addition
proposed to be made by Tenant at the applicable Leased Property, whether paid
for by Tenant or Landlord. Such cost shall include (a) the cost of construction
of the Capital Addition, including site preparation and improvement, materials,
labor, supervision, developer and administrative fees, legal fees, and related
design, engineering and architectural services, the cost of any fixtures, the
cost of equipment and other personalty, the cost of construction financing
(including, but not limited to, capitalized interest) and other miscellaneous
costs approved by Landlord, (b) if agreed to by Landlord in writing, in advance,
the cost of any land (including all related acquisition costs incurred by
Tenant) contiguous to the Leased Property which is to become a part of the
Leased Property purchased for the purpose of placing thereon the Capital
Addition or any portion thereof or for providing means of access thereto, or
parking facilities therefor, including the cost of surveying the same, (c) the
cost of insurance, real estate taxes, water and sewage charges and other
carrying charges for such Capital Addition during construction, (d) title
insurance charges, (e) reasonable attorneys' fees and expenses, (f) filing,
registration and recording taxes and fees, (g) documentary stamp or transfer
taxes, and (h) all actual and reasonable costs and expenses of Landlord and
Tenant and, if agreed to by Landlord in writing, in advance, any Lending
Institution committed to finance the Capital Addition, including, but not
limited to, all (i) reasonable attorneys' fees and expenses, (ii) printing
expenses, (iii) filing, registration and recording taxes and fees, (iv)
documentary stamp or transfer taxes, (v) title insurance charges and appraisal
fees, (vi) rating agency fees, and (vii) commitment fees charged by any Lending
<PAGE>
-5-
Institution advancing or offering to advance any portion of any financing to
which Landlord has consented in writing for such Capital Addition.
Change in Control shall mean the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission) of 20% or more, or rights,
options or warrants to acquire 20% or more, of the outstanding shares of voting
stock of Tenant or the merger or consolidation of Tenant with or into any other
Person or any one or more sales or conveyances to any Person of all or
substantially all of the assets of Tenant.
Code shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as from time
to time amended.
Collective Leased Properties shall mean, at any time and from time to
time at the time of determination, all of the Leased Properties that are then
subject to a Lease.
Commencement Date: As defined in the applicable Lease.
Condemnation shall mean, as to the applicable Leased Property, (a) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor of its power of condemnation, (b) a voluntary sale or transfer by
Landlord 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,
whether or not the same shall have actually been commenced.
Condemnor shall mean any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
Consolidated Financials shall mean, for any Fiscal Year or other
accounting period of Tenant, annual audited and quarterly unaudited financial
statements prepared on a consolidated basis, including Tenant's consolidated
balance sheet and the related statements of income, 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, consistently applied throughout
the periods reflected.
Cost of Living Index shall mean the United States Department of Labor,
Bureau to Labor statistics Consumer Price Index for all Urban Consumers, United
States Average, Subgroup "All Items" (1982-1984-100).
<PAGE>
-6-
Date of Taking shall mean, 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.
Default shall mean (a) any Event of Default or (b) any condition or
event that has occurred and is continuing and that (i) with the giving of notice
or lapse of time or both would, unless cured or waived, become an Event of
Default and (ii) either relates to the payment of Rent or relates to a matter as
to which Landlord has given Notice of default to Tenant.
Encumbrance: As defined in Section 22.1.
Environmental Obligation: As defined in Section 4.4.
Environmental Notice: As defined in Section 4.4.
Environmental Report: As defined in Section 4.4.
Event of Default: As defined in Section 12.1.
Excess Net Patient Revenues shall mean, for any Fiscal Year or quarter
thereof, the aggregate amount of Net Patient Revenues for such Fiscal Year (or
applicable quarter thereof) in excess of the Base Net Patient Revenues (or, with
respect to any quarter in any Fiscal Year, twenty-five percent (25%) of the Base
Net Patient Revenues); provided that such term shall mean, (i) with respect to
any partial Fiscal Year (other than as to any complete quarter thereof), the
amount by which the Net Patient Revenues for such partial Fiscal Year, prorated
to reflect the number of days in such partial Fiscal Year, exceeds the product
of (x) a fraction of which the numerator is the number of days in such partial
Fiscal Year, and the denominator is 360, multiplied by (y) the Base Net Patient
Revenues ; and (ii) with respect to any partial quarter, the amount by which the
Net Patient Revenues for such partial quarter, prorated to reflect the number of
days in such partial quarter, exceeds the product of (x) a fraction of which the
numerator is the number of days in such partial quarter, and the denominator is
360, multiplied by (y) the Base Net Patient Revenues for the applicable Base
Year.
Extended Term(s): As defined in Section 2.4.
Facility shall mean the facility offering health care or related
services being operated or proposed to be operated on the applicable Leased
Property.
Facility Mortgage shall mean any Encumbrance placed upon the applicable
Leased Property in accordance with Article 22 hereof.
Facility Mortgagee shall mean the holder of any Facility Mortgage.
<PAGE>
-7-
Facility Trade Name shall mean any name under which Tenant has
conducted the business of operating the Facility located on the applicable
Leased Property at any time during the Term.
Fair Market Added Value shall mean, as to any applicable Leased
Property, the Fair Market Value of such Leased Property (including all Capital
Additions) less the Fair Market Value of such Leased Property determined as if
no Tenant's Capital Additions had been constructed.
Fair Market Rental shall mean, as to the applicable Leased Property,
the rental which a willing tenant not compelled to rent would pay a willing
landlord not compelled to lease for the use and occupancy of such Leased
Property (including all Capital Additions other than Tenant's Capital Additions)
on the terms and conditions of the applicable Lease for the term in question,
assuming Tenant is not in default thereunder and determined by agreement between
Landlord and Tenant, or, failing agreement, in accordance with the appraisal
procedures set forth in Article 20 hereof or in such other manner as shall be
mutually acceptable to Landlord and Tenant. The determination of such Fair
Market Rental shall be made without regard to the fact that Additional Rent may
be payable.
Fair Market Value shall mean the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for the
applicable Leased Property, (a) assuming the same is unencumbered by the
applicable Lease, (b) determined in accordance with the appraisal procedures set
forth in Article 20 hereof or in such other manner as shall be mutually
acceptable to Landlord and Tenant, and (c) not taking into account any reduction
in value resulting from any indebtedness to which such Leased Property is
subject, except the positive or negative effect on the value of such 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.
Fair Market Value Purchase Price shall mean the Fair Market Value of
the applicable Leased Property less the Fair Market Added Value.
Financial Officer's Certificate shall mean a certificate of the
financial officer of Tenant, duly authorized, accompanying the financial
statements required to be delivered by Tenant pursuant to Section 18.2, in which
such officer shall (a) certify that such statements have been properly prepared
in accordance with GAAP and are true, correct and complete in all material
respects and fairly present the consolidated financial condition of Tenant at
and as of the dates thereof and the results of its and their operations for the
periods covered thereby, (b) certify that such officer has reviewed the Leases
and has no knowledge of any material default by Tenant in the performance or
observance of any of the
<PAGE>
-8-
provisions of the Leases or any other Transaction Document or of any condition
or event which constitutes an Event of Default under the Leases or any of the
Transaction Documents or which with the passage of time or the giving of notice
or both would become such an Event of Default, and (c) provide computations and
schedules showing in reasonable detail compliance, as at the date of each such
financial statement, with Section 23.7 of the Master Lease Document.
Fiscal Year shall mean the twelve (12) month period from January 1 to
December 31.
Fixed Term: As defined in Section 2.3.
Fixtures: As defined in Section 2.1(d).
First Extended Term: As defined in the applicable Lease.
Five Percent Additional Rent shall mean, for any Fiscal Year during the
Fixed Term and the First Extended Term, the sum equal to five percent (5%) of
all Excess Net Patient Revenues for such Fiscal Year through the Additional Rent
Adjustment Date.
GAAP shall mean generally accepted accounting principles consistently
applied.
GranCare shall mean GranCare, Inc., a California corporation, and its
successors and assigns.
Guarantor(s) shall mean any guarantor of Tenant's obligations under the
applicable Lease, including, without limitation, GranCare and AMS Properties,
Inc., a Delaware corporation, and their respective successors and assigns.
Guaranty shall mean and include any guaranty agreement executed by a
Guarantor in favor of Landlord pursuant to which the payment and performance of
Tenant's obligations under the Lease are guaranteed, together with all
modifications, amendments or supplements thereto.
Hazardous Substances: As defined in Section 4.4.
HRP Shares Pledge Agreement shall mean the Amended and Restated Pledge
Agreement of even date herewith executed by AMS Properties, Inc., a Delaware
corporation, in favor of Landlord, as such agreement may be modified, amended or
supplemented from time to time.
Impositions shall mean for the 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 Landlord, Tenant
<PAGE>
-9-
or the business conducted upon the applicable Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), water, sewer or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees) and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the 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) Landlord'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 or possession of, or sales from, or 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 the Lease with
respect to the applicable Leased Property shall be construed to require Tenant
to pay (1) any tax based on net income imposed on Landlord, or (2) any net
revenue tax of Landlord, or (3) any transfer fee or other tax imposed with
respect to the sale, exchange or other disposition by Landlord of the applicable
Leased Property or the proceeds thereof (other than in connection with the sale,
exchange or other disposition to, or in connection with a transaction involving,
Tenant), or (4) any single business, gross receipts (other than a tax on any
rent received by Landlord from Tenant), transaction privilege, rent or similar
taxes as the same are related to or imposed upon Landlord, 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.
Increased Minimum Rent: As defined in Section 3.1.1(b).
Independent Trustees shall mean Trustees who, in their individual
capacity, (a) are not Affiliates of Tenant and (b) do not perform any services
for Landlord except as Trustees.
Insurance Requirements shall mean all terms of any insurance policy
required by the applicable Lease with respect to the applicable Leased Property
and all requirements of the issuer of any such policy.
Land: As defined in Section 2.1(a) with respect to the applicable
Lease.
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Landlord shall mean Health and Rehabilitation Properties Trust, a
Maryland real estate investment trust, and its successors and assigns.
Lease(s): As defined in the recital clauses hereto.
Leased Improvements: As defined in Section 2.1(b) with respect to the
applicable Lease.
Leased Personal Property: As defined in Section 2.1(e) with respect to
the applicable Lease.
Leased Property: As defined in Section 2.1 with respect to the
applicable Lease.
Legal Requirements shall mean, as to the applicable Leased Property,
all federal, state, county, municipal and other governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions
affecting such Leased Property or the maintenance, construction, alteration or
operation thereof, whether now or hereafter enacted or in existence, including,
without limitation, (a) all permits, licenses, certificates of need,
authorizations and regulations necessary to operate such Leased Property for its
Primary Intended Use, and (b) all covenants, agreements, restrictions and
encumbrances contained in any instruments at any time in force affecting such
Leased Property, including those which may (i) require material repairs,
modifications or alterations in or to such Leased Property or (ii) in any way
adversely affect the use and enjoyment thereof.
Lending Institution shall mean 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, such trust having a net worth of
at least $10,000,000.
Minimum Rent: As defined in the applicable Lease, as the same may be
adjusted from time to time in accordance with Section 3.1.1, and including all
Increased Minimum Rent, as provided in Section 3.1.1(b).
Minimum Rent Adjustment Date shall mean, for the applicable Lease, each
of the 5th, 10th, 15th, 20th, and 30th anniversary of the Commencement Date.
Net Patient Revenues with respect to the Facilities located at the
Collective Leased Properties shall mean the aggregate amount of all revenues
(determined in accordance with GAAP, except as provided below) received or
receivable from or by reason of the operation of such Facilities, or any other
use of such Facilities,
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including without limitation all patient or client revenues received or
receivable for the use of or otherwise by reason of all rooms, beds and other
facilities provided, meals served, services performed or provided, space or
facilities subleased or goods sold at such Facilities, including, without
limitation, any other arrangements with third parties relating to the possession
or use of any portion of such Facilities; provided, however, that Net Patient
Revenues shall not include:
(a) revenue from professional fees or charges by physicians
and unaffiliated providers of ancillary services, when and to the
extent such charges are paid over to such physicians or unaffiliated
providers of ancillary services, or are separately billed and not
included in comprehensive fees;
(b) non-operating revenues such as interest income or income
from the sale of assets not sold in the ordinary course of business;
(c) revenues attributable to services actually provided
off-site or otherwise away from such Facilities, such as home health
care, to persons that are not patients at such Facility;
(d) all revenues attributable to Tenant's Capital Additions
(as such revenues are calculated in accordance with Section 6.2.2(a));
and
(e) revenues attributable to child care services provided
primarily to employees of such Facilities.
Notice shall mean a notice given in accordance with Section 24.12.
Officer's Certificate shall mean a certificate signed by an officer of
Tenant duly authorized by the board of directors of Tenant.
Overdue Rate shall mean, on any date, a per annum rate of interest
equal to (a) two percent (2%), plus (b) a percentage equal to (i) the quotient
(expressed as a decimal) of the aggregate Minimum Rent payable for the
Collective Leased Properties for the then current Fiscal Year, divided by the
aggregate of the then Adjusted Purchase Prices for the Collective Leased
Properties, multiplied by (ii) 100; but in no event greater than the maximum
rate then permitted under applicable law.
Permitted Encumbrances shall mean, with respect to the applicable
Leased Property all rights, restrictions, and easements of record set forth on
Schedule B to the applicable owner's title insurance policy issued to Landlord
in accordance with the applicable Acquisition Agreement, plus any other such
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encumbrances as may have been consented to in writing by Landlord from time to
time.
Person shall mean any individual, corporation, general or limited
partnership, stock company or association, joint venture, association, company,
trust, bank, trust company, land trust, business trust, any government or agency
or political subdivision thereof or any other entity.
Pledged Shares: As defined in the HRP Shares Pledge Agreement.
Primary Intended Use: As defined in Section 4.1.1.
Purchase Price(s): With respect to the applicable Leased Property, the
amount identified as such in the applicable Lease.
Records: As defined in Section 7.2.
Relevant Percentage shall mean, with respect to the first quarter of
any Fiscal Year, twenty-five percent (25%), with respect to the second quarter
of such Fiscal Year, fifty percent (50%), with respect to the third quarter of
such Fiscal Year, seventy-five percent (75%), and with respect to the fourth
quarter of such Fiscal Year, one hundred percent (100%).
Rent shall mean, collectively, the Minimum Rent, Additional Rent and
Additional Charges payable with respect to the applicable Leased Property.
SEC shall mean the Securities and Exchange Commission.
Second Extended Term: As defined in the applicable Lease.
Sellers: As defined in the Recitals.
State shall mean the State or Commonwealth in which the applicable
Leased Property is located.
Subordinated Creditor shall mean any creditor of Tenant party to a
Subordination Agreement in favor of Landlord, including, without limitation,
GranCare, AMS Properties, Inc., a Delaware corporation and Affiliates of either
of them, respectively.
Subordination Agreement shall mean and include any agreement executed
by a Subordinated Creditor pursuant to which the payment and performance of
Tenant's obligations to such Subordinated Creditor are subordinated to the
payment and performance of Tenant's obligations to Landlord under the Leases and
the other Transaction Documents.
Subsidiary shall mean, with respect to any Person, any corporation or
other entity of which the securities or other ownership interests having
ordinary voting power to elect a
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majority of the board of directors or other Persons performing similar functions
are at the time directly or indirectly owned by such Person.
Substitute Properties: As defined in Article 16.
Substitution Date: As defined in Article 16.
Tenant shall mean GCI Health Care Centers, Inc., a Delaware
corporation, and its permitted successors and assigns.
Tenant's Capital Additions: As defined in Section 6.2.2.
Tenant's Personal Property shall mean (a) all motor vehicles and (b)
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other personal property of Tenant
acquired by Tenant on and after the date hereof and located on the applicable
Leased Property or used in Tenant's business on such Leased Property and all
modifications, replacements, alterations and additions to such personal property
installed at the expense of Tenant, other than any items included within the
definition of Fixtures or Leased Personal Property.
Term shall mean, collectively, for the applicable Lease, the Fixed Term
and the Extended Terms, to the extent properly exercised pursuant to the
provisions of Section 2.4, unless sooner terminated pursuant to the provisions
of this Master Lease Document or the applicable Lease.
Test Rate shall mean the minimum interest rate necessary to avoid
imputation of original issue discount or interest income under Sections 483 or
1272 of the Code or any similar provision.
Three Percent Additional Rent shall mean, for any Fiscal Year during
the Second Extended Term, the sum equal to three percent (3%) of all Excess Net
Patient Revenues for such Fiscal Year.
Transaction Documents shall mean the documents listed on Schedule 1
hereto, as such documents may be modified, amended or supplemented from time to
time, together with any and all other documents executed in connection with,
relating to, evidencing, or creating collateral or security for, the Leases.
Trustees shall mean the trustees of Landlord.
Unavoidable Delays shall mean delays due to strikes, lockouts,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, unavoidable casualty or any other
causes beyond the reasonable control of the party responsible for performing an
obligation hereunder, but in no event to exceed forty-five (45) days (provided
that lack of funds shall not be deemed a cause beyond
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the control of Tenant) so long as Tenant shall use reasonable efforts to
alleviate the cause of such delay and thereafter promptly perform such
obligation, and so long as, in any event, no permit, license, certificate of
need or authorization necessary to operate such Leased Property for its Primary
Intended Use is adversely affected or subject to any danger of revocation or
termination. In no event shall Tenant's obligation to pay the Rent be affected
by Unavoidable Delays.
Unsuitable for Its Primary Intended Use shall mean a state or condition
of the Facility located at the applicable Leased Property such that (a)
following any damage or destruction involving such Leased Property, such Leased
Property cannot reasonably be expected to be restored to substantially the same
condition as existed immediately before such damage or destruction, and as
otherwise required by Section 10.2.4, within a period equal to eighteen (18)
months following such damage or destruction or such shorter period of time as to
which business interruption insurance is available to cover Rent and other costs
related to such Leased Property following such damage or destruction, or (b) as
the result of a partial taking by Condemnation, such Facility cannot be
operated, in the good faith judgment of Landlord, on a commercially practicable
basis for its Primary Intended Use taking into account, among other relevant
factors, the number of usable beds, the amount of square footage, or the
revenues affected by such damage or destruction or partial taking.
Work: As defined in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property.
Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord with respect to each
applicable Lease all of the following (collectively, the "Leased Property"):
(a) that certain tract, piece and parcel of land, as more
particularly described in the applicable Lease (the "Land");
(b) all buildings, structures, Fixtures and other improvements of
every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and
lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings and structures presently
situated upon the Land and all Capital Additions other than
Tenant's Capital Additions (collectively, the "Leased
Improvements");
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(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or
incorporated into the Leased Improvements, including, without
limitation, all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control,
waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection
equipment, all of which, to the greatest extent permitted by
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 (collectively the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other
personal property of any kind or description used or useful in
Tenant's business on or in the Leased Improvements, and
located on or in the Leased Improvements, and all
modifications, replacements, alterations and additions to such
personal property, except items, if any, included within the
category of Fixtures, but specifically excluding all items
included within the category of Tenant's Personal Property
(collectively the "Leased Personal Property"); and
(f) all existing leases of space (including any security deposits
held by Tenant pursuant thereto) in the Leased Improvements to
tenants thereof.
2.2 Condition of Leased Property.
Tenant acknowledges receipt and delivery of possession of the
applicable Leased Property and Tenant accepts such Leased Property in its "as
is" condition, subject to the rights of parties in possession, the existing
state of title, including all covenants, conditions, restrictions, reservations,
mineral leases, easements and other matters of record or that are visible or
apparent on the Leased Property, all applicable Legal Requirements, the lien of
financing instruments, mortgages and deeds of trust, and such other matters
which would be disclosed by an inspection of such Leased Property and the record
title thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT HAS
INSPECTED SUCH LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE
CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
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EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST
LANDLORD IN RESPECT OF THE CONDITION OF THE APPLICABLE LEASED PROPERTY. LANDLORD
MAKES NO WARRANTY OR REPRESENTATION EXPRESS OR IMPLIED, IN RESPECT OF THE
APPLICABLE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR
USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO
THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT. To the extent permitted by
law, however, Landlord hereby assigns to Tenant all of Landlord's rights to
proceed against any predecessor in title for breaches of warranties or
representations or for latent defects in the applicable Leased Property.
Landlord shall fully cooperate with Tenant in the prosecution of any such
claims, in Landlord's or Tenant's name, all at Tenant's sole cost and expense.
Tenant shall indemnify, defend, and hold harmless Landlord from and against any
loss, cost, damage or liability (including reasonable attorneys' fees) incurred
by Landlord in connection with such cooperation.
2.3 Fixed Term.
The initial term of the applicable Lease (the "Fixed Term") shall be
for a fixed term as set forth in such Lease.
2.4 Extended Term.
Provided that no Default shall have occurred and be continuing under
the Lease or Master Lease Document or any other applicable Lease and provided
that this Lease and each other Lease pertaining to the Collective Leased
Properties shall be in full force and effect (other than Leases that have been
terminated in accordance with the provisions hereof, or by the mutual agreement
of Landlord and Tenant, other than after an Event of Default), Tenant shall have
the right to extend the Term as set forth in the applicable Lease and below (the
"Extended Term(s)"); provided, however, Tenant's right to extend is subject to
Tenant exercising such right simultaneously with respect to all, and not less
than all, of the Collective Leased Properties.
Each Extended Term for the applicable Lease shall commence on the day
succeeding the expiration of the Fixed Term or the preceding Extended Term
therefor, as the case may be. All of the terms, covenants and provisions of such
Lease shall apply to each such Extended Term, except that the Minimum Rent for
each such Extended Term shall be as set forth in Section 3.1.1(b) (subject to
adjustment as provided in Section 3.1.1) with respect thereto. If Tenant shall
elect to exercise any of the aforesaid extensions, it shall do so by giving
Landlord Notice thereof not later than twenty-four (24) months prior to the
scheduled expiration of the then current Term of such Lease (Fixed or Extended,
as applicable), it being agreed that time is of the essence with respect to the
giving of such Notice. Tenant may not exercise its option for more than one such
Extended Term at a time. If Tenant shall fail to give any such Notice, the
Leases shall automatically
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terminate at the end of the Term then in effect and Tenant shall have no further
option to extend the Term of the Leases. If Tenant shall give such Notice, the
extension of the Leases shall be automatically effected without the execution of
any additional documents; it being understood and agreed, however, that Tenant
and Landlord shall execute such documents and agreements as either party shall
reasonably require to evidence the same. Notwithstanding the provisions of the
foregoing sentence, if, subsequent to the giving of such Notice, any Event of
Default shall occur, unless Landlord shall otherwise consent in writing, the
extension of the Leases shall cease to take effect and the Leases shall
automatically terminate at the end of the Term then in effect and Tenant shall
have no further option to extend the Term of the Leases.
ARTICLE 3
RENT
3.1 Rent.
Tenant shall pay to Landlord, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
at Landlord's address set forth above or at such other place or to such other
Person as Landlord from time to time may designate in a Notice to Tenant,
without offset, abatement, demand or deduction, Minimum Rent, Additional Rent
and Additional Charges, during the Term, except as hereinafter expressly
provided. All payments to Landlord shall be made by certified check, wire
transfer of immediately available funds or by other means acceptable to Landlord
in its sole discretion.
3.1.1 Minimum Rent:
(a) During Fixed Term. The Minimum Rent payable with respect to the
Fixed Term is the annual sum set forth in the applicable Lease (subject to
adjustment as provided herein), payable in advance in equal, consecutive monthly
installments as set forth in such Lease, on the first day of each calendar month
of the Fixed 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.
(b) Computation of Minimum Rent for the Extended Terms. (i) First
Extended Term. The Minimum Rent payable with respect to the First Extended Term
for the applicable Lease shall equal an annual sum (determined at the
commencement of such Extended Term for such Lease and subject to adjustment as
set forth herein) equal to the greater of (x) the Minimum Rent payable for the
immediately preceding twelve (12) months for such Lease, or (y) the product of
(1) the Adjusted Purchase Price for the applicable Leased Property, and (2) the
Adjusted Percentage Yield, payable in
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advance in equal, consecutive monthly installments on the first day of each
calendar month of the First Extended Term. The computation of such Adjusted
Percentage Yield shall be made using the information quoted in The Wall Street
Journal published on the fifth Business Day immediately preceding the
commencement of the First Extended Term. If there is no such quotation, the next
preceding day for which there is a quotation shall be used. If The Wall Street
Journal shall not be available, Landlord shall choose the quotation from another
recognized source.
(ii) Second Extended Term. The Minimum Rent payable with
respect to the Second Extended Term for the applicable Lease shall equal an
annual sum (determined at the commencement of such Extended Term for such Lease
and subject to adjustment as set forth herein) equal to the greater of (x) the
sum of (1) the Minimum Rent payable for the immediately preceding twelve (12)
months for such Lease and (2) the Additional Rent payable for the immediately
preceding twelve (12) months for such Lease allocable to such Leased Property
based upon the Excess Net Patient Revenues generated by such Leased Property
during such twelve (12) month period or (y) the Fair Market Rental for such
Leased Property, payable in advance in equal, consecutive monthly installments
on the first day of each calendar month of the Second Extended Term.
(c) Mid-Term Adjustments of Minimum Rent. During the Term of the
applicable Lease, on each Minimum Rent Adjustment Date, the Minimum Rent payable
under such Lease shall be adjusted to the annual sum equal to the greater of (i)
the Minimum Rent payable for the immediately preceding twelve (12) months for
such Lease or (ii) the product of (x) the Adjusted Purchase Price for the
applicable Leased Property and (y) the Adjusted Percentage Yield. The
computation of such Adjusted Percentage Yield shall be made using the
information quoted in The Wall Street Journal published on the fifth Business
Day immediately preceding such Minimum Rent Adjustment Date. If there is no such
quotation, the next preceding day for which there is a quotation shall be used.
If The Wall Street Journal shall not be available, Landlord shall choose the
quotation from another recognized source.
(d) Credits Against Minimum Rent.
(i) Excess Condemnation and Casualty Proceeds. Landlord shall
credit the amount or any Award or the proceeds of any insurance received by
Landlord in connection with a partial Condemnation or a partial casualty
involving the applicable Leased Property as described in Section 11.2 or 10.2.2,
and not applied by Landlord to the restoration of the applicable Leased Property
affected by such partial Condemnation or partial casualty as provided therein,
to the payment of Minimum Rent payable with respect to such Leased Property.
(ii) Notice. Landlord shall calculate the amount of such
credits within 15 days after the end of each calendar month, shall Notify Tenant
of such amount as soon as reasonably
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practicable after such calculation, and shall reduce the amount of the
installment of Minimum Rent next due after the date of such Notice by the amount
of such credits.
3.1.2 Additional Rent:
(a) Amount. For each Fiscal Year or portion thereof during the Term,
commencing with the Fiscal Year ending December 31, 1993, Tenant shall pay an
amount ("Additional Rent") with respect to the Collective Leased Properties
equal to the greater of:
(i) (A) during the Fixed Term and the First Extended
Term: (x) the Five Percent Additional Rent
for such Fiscal Year if no Additional Rent
Adjustment Date shall have occurred during
such Fiscal Year or portion thereof; or, if
an Additional Rent Adjustment Date shall
have occurred during such Fiscal Year or
portion thereof, (y) the sum of (1) the Five
Percent Additional Rent for such Fiscal Year
or portion thereof plus (2) two and one-half
percent (2.5%) of the Excess Net Patient
Revenues in respect of the period from such
Additional Rent Adjustment Date through the
end of such Fiscal Year;
(B) during the Second Extended Term: the Three
Percent Additional Rent for such Fiscal
Year; and
(ii) Additional Rent payable for the immediately preceding
Fiscal Year; provided, however, calculation of this amount shall not
include any Additional Rent allocable to any Leased Property (based
upon the Excess Net Patient Revenues generated by such Leased Property
during such Fiscal Year) which is no longer subject to a Lease.
(b) Quarterly Installments. Installments of Additional Rent for any
Fiscal Year or portion thereof shall be calculated and paid quarterly in arrears
as follows:
(i) For each quarter of such Fiscal Year during the Term, Tenant
shall pay an amount equal to the excess of (x) the greater of
(1) the Relevant Percentage for such quarter of the Additional
Rent payable for the immediately preceding Fiscal Year or (2)
the Additional Rent (calculated as provided in Section
3.1.2(a) above) payable for such quarter of such Fiscal Year
and for any previous quarter(s) of such Fiscal Year, over (y)
the sum of the installments of such Additional Rent payable
for any previous quarter(s) in such Fiscal Year.
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Installments of Additional Rent due with respect to a partial quarter
in any Fiscal Year shall be calculated on a pro rata basis as follows: a sum
equal to the excess of (1) the greater of (a) the product of (x) a fraction of
which the numerator is the number of days in such Fiscal Year, and the
denominator is 360, multiplied by (y) the Additional Rent payable for such
Leased Property for the immediately preceding Fiscal Year (calculated as
provided in Section 3.1.2(a)(ii) above), or (b) the sum of the Additional Rent
(calculated as provided in Section 3.1.2(a)) payable through the end of such
partial quarter over (2) the Additional Rent payable for any previous quarters
in such Fiscal Year.
(c) Date of Payment of Additional Rent. Tenant shall deliver to
Landlord an Officer's Certificate setting forth the calculation of Additional
Rent due and payable for each quarter of any Fiscal Year. Each quarterly payment
of Additional Rent for the applicable Leased Property is due and payable and
shall be delivered to Landlord, together with such Officer's Certificate, within
forty-five (45) days after the end of each quarter of any Fiscal Year (or in the
case of the final quarter in any Fiscal Year, eighty (80) days thereafter),
commencing with the quarter ending March 31, 1993, during the Term.
(d) Reconciliation of Additional Rent. In addition, on or before March
31, of each year, commencing with March 31, 1993, Tenant shall deliver to
Landlord certified audits of Tenant's financial operations for the preceding
Fiscal Year, together with a certificate from Ernst & Young or other certified
public accountants reasonably acceptable to Landlord, in form reasonably
acceptable to Landlord, setting forth the Net Patient Revenues for such
preceding Fiscal Year, and such other matters as Landlord may from time to time
reasonably request.
If the annual Additional Rent for said preceding Fiscal Year as shown
in the year-end certificate is less than the amount previously paid with respect
thereto by Tenant, Landlord shall grant Tenant a credit against Additional Rent
next coming due in the amount of such difference, together with interest at the
Test Rate, which interest shall accrue from the close of such preceding Fiscal
Year until the date such credit is applied or paid, as the case may be. If such
a credit cannot be made because the Term of the applicable Lease has expired
before the credit can be effected, Landlord will pay, by check, the amount of
such difference to Tenant, together with any interest which shall have accrued
as provided in the preceding sentence.
If the annual Additional Rent for the applicable Leased Property for
said preceding Fiscal Year as shown in the year-end certificate exceeds the
amount previously paid with respect thereto by Tenant, Tenant shall pay such
excess to Landlord at such time as the certificate is delivered, together with
interest at the Test Rate, which interest shall accrue from the close of such
preceding Fiscal Year until the date that such certificate is
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required to be delivered, and thereafter such interest shall accrue at the
Overdue Rate, until the amount of such difference shall be paid or otherwise
discharged.
(e) Confirmation of Additional Rent. Tenant shall utilize, or cause to
be utilized, an accounting system for the applicable Leased Property (which
shall be the same as that used for all the Collective Leased Properties) in
accordance with its usual and customary practices and in accordance with GAAP,
which will accurately record all Net Patient Revenues, and shall employ
independent accountants reasonably acceptable to Landlord, and Tenant shall
retain, for at least five (5) years after the expiration of each Fiscal Year,
reasonably adequate records conforming to such accounting system showing all Net
Patient Revenues for such Fiscal Year. Landlord, at its own expense except as
provided hereinbelow, shall have the right from time to time by its accountants
or representatives to audit the information set forth in the Officer's
Certificate referred to in subparagraph (c) above or the year-end certificate
referred to in subparagraph (d) above, and in connection with such audits to
examine Tenant's books and records with respect thereto (including supporting
data and sales and excise tax returns) subject to any prohibitions or
limitations on disclosure of any such data under applicable law or regulations,
including without limitation any duly enacted "Patients' Bill of Rights" or
similar legislation, including such limitations as may be necessary to preserve
the confidentiality of the facility-patient relationship and the
physician-patient privilege and/or other similar privilege or confidentiality
obligations. If any such audit discloses a deficiency in the payment of
Additional Rent, and either Tenant agrees with the result of such audit or the
matter is otherwise determined with Landlord, Tenant shall forthwith pay to
Landlord the amount of the deficiency, as finally agreed or determined, together
with interest at the Test Rate, or if no such Test Rate exists, then at a per
annum rate of interest equal to the Overdue Rate, from the date when said
payment should have been made to the date of payment thereof; provided, however,
that as to any audit that is commenced more than two (2) years after the date
Net Patient Revenues for any Fiscal Year are reported by Tenant to Landlord, the
deficiency, if any, with respect to such Net Patient Revenues shall bear
interest as permitted herein only from the date such determination of deficiency
is made unless such deficiency is the result of gross negligence or willful
misconduct on the part of Tenant. If any such audit discloses that the Net
Patient Revenues actually received by Tenant for any Fiscal Year exceed those
reported by Tenant by more than three percent (3%), Tenant shall pay the
reasonable cost of such audit and examination. If any such audit discloses that
Tenant paid more Additional Rent for any Fiscal Year than was due hereunder, and
either Landlord agrees with the result of such audit or the matter is otherwise
determined, Landlord shall grant Tenant a credit equal to the amount of such
overpayment against Rent due and payable or next coming due in the amount of
such difference, as finally agreed or determined, together with interest thereon
at
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the Test Rate, or if no such Test Rate exists, then at a per annum rate of
interest equal to the overdue Rate, from the date of such audit until the date
such credit is made; provided, however, if an Event of Default has occurred and
is continuing, such credit shall not include a credit for interest. If such a
credit cannot be made because the Term of the applicable Lease has expired
before the credit can be effected, Landlord will pay, by check, the amount of
such credit to Tenant.
Any proprietary information obtained by Landlord pursuant to the
provisions of the applicable Lease shall be treated as confidential, except that
such information may be used, subject to appropriate confidentiality safeguards,
in any litigation between the parties and except further that Landlord may
disclose such information to its prospective lenders. The obligations of Tenant
and Landlord contained in this Section 3.1.2 shall survive the expiration or
earlier termination of the applicable Lease.
3.1.3 Additional Charges.
In addition to the Minimum Rent and Additional 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"):
(a) Impositions. Subject to Article 8 relating to Permitted
Contests, Tenant shall pay, or cause to be paid, all Impositions before any
fine, penalty, interest or cost (other than any opportunity cost as a result of
a failure to take advantage of any discount for early payment) may be added for
non-payment, such payments to be made directly to the taxing authorities where
feasible, and shall promptly upon request, furnish to Landlord 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), Tenant may exercise the option to pay the same (and any accrued
interest on the unpaid balance of such Imposition) in installments and, in such
event, shall pay such installments during the Term as the same become due and
before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of Landlord's net
income, gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock, and Tenant, at
its expense, shall, to the extent required or 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. Provided no
Default shall have occurred and be continuing, 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. Landlord and Tenant shall, upon request
of the other, provide such data as is maintained by the party to whom
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the request is made with respect to the applicable Leased Property as may be
necessary to prepare any required returns and reports. In the event governmental
authorities classify any property covered by the applicable Lease as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Each party shall, to the extent it
possesses the same, provide the other, upon request, with cost and depreciation
records necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to file a protest. All Impositions assessed against
such personal property shall be (irrespective of whether Landlord or Tenant
shall file the relevant return) paid by Tenant not later than the last date on
which the same may be made without interest or penalty. If the provisions of any
Facility Mortgage require deposits on account of Impositions to be made with
such Facility Mortgagee, provided the Facility Mortgagee has not elected to
waive such provision, Tenant shall either pay Landlord the monthly amounts
required at the time and place that payments of Minimum Rent are required and
Landlord shall transfer such amounts to such Facility Mortgagee or, pursuant to
written direction by Landlord, Tenant shall make such deposits directly with
such Facility Mortgagee.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge, provided,
Landlord's failure to give any such notice shall in no way diminish Tenant's
obligation hereunder to pay such Impositions.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in the
applicable Leased Property during the Term.
(c) Insurance Premiums. Tenant shall pay or cause to be paid,
as Additional Charges, all premiums for the insurance coverage required to be
maintained pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid, as
Additional Charges, all other amounts, liabilities and obligations which Tenant
assumes or agrees to pay under the applicable Lease, including, without
limitation, all agreements to indemnify Landlord under Sections 4.4 and 9.7.
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar Additional Charges attributable to
periods after the end of the Term, whether upon expiration or sooner termination
of the applicable Lease (other than termination following an Event of Default)
and Tenant has not exercised its right to purchase the Collective Leased
Properties as provided herein, Tenant may, within sixty (60) days of the end of
the Term, provide Notice to Landlord of its estimate of such amounts. Landlord
shall promptly reimburse Tenant for all
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payments of such taxes and other similar Additional Charges that are
attributable to any period after the Term of the Lease.
(f) Sales Tax. Tenant shall also pay, as Additional Charges,
with all Rent due under the applicable Lease an amount equal to all sales, use,
excise and other taxes now or hereafter imposed by any lawful authority on all
amounts due or required under the applicable Lease and classified as Rent by any
such authority.
3.2 Late Payment of Rent.
If any installment of Minimum Rent, Additional Rent or Additional
Charges (but only as to those Additional Charges which are payable directly to
Landlord) shall not be paid on its due date, Tenant shall pay Landlord, on
demand, as Additional Charges, a late charge (to the extent permitted by law)
computed at the Overdue Rate 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 directly to Landlord pursuant to any
requirement of the applicable Lease, Tenant shall be relieved of its obligation
to pay such Additional Charges to the entity to which they would otherwise be
due.
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 which may be added for non-payment or late
payment of such items. Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in the applicable Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Minimum Rent and Additional Rent.
3.3 Net Lease.
The Rent shall be absolutely net to Landlord, so that the applicable
Lease shall yield to Landlord the full amount of the installments or amounts of
Rent throughout the Term, subject to any other provisions of the applicable
Lease or this Master Lease Document which expressly provide for adjustment or
abatement of Rent or other charges.
3.4 No Termination, Abatement, Etc.
Except as otherwise specifically provided in the applicable Lease or in
this Master Lease Document, Tenant, to the extent permitted by law, shall remain
bound by the applicable Lease in accordance with its terms and shall neither
take any action without the consent of Landlord to modify, surrender or
terminate the same, nor seek, nor be entitled to any-abatement, deduction,
deferment or reduction of the Rent, or set-off against the Rent, nor shall the
respective obligations of Landlord and Tenant be otherwise affected by reason of
(a) any damage to, or destruction
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of, the applicable Leased Property or any portion thereof from whatever cause or
any Condemnation, (b) the lawful or unlawful prohibition of, or restriction upon
Tenant's use of the applicable Leased Property, or any portion thereof, or the
interference with such use by any Person or by reason of eviction by paramount
title; (c) any claim which Tenant may have against Landlord by reason of any
default or breach of any warranty by Landlord under the applicable Lease or any
other agreement between Landlord and Tenant, or to which Landlord and Tenant are
parties, (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Landlord or any assignee or transferee of Landlord, or (e) for any
other cause whether similar or dissimilar to any of the foregoing. Tenant hereby
waives all rights arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law, to (a) modify, surrender or terminate the
applicable Lease or quit or surrender the applicable Leased Property or any
portion thereof, or (b) entitle Tenant to any abatement, reduction, suspension
or deferment of the Rent or other sums payable or other obligations to be
performed by Tenant hereunder, except as otherwise specifically provided in the
applicable Lease or in this Master Lease Document. The obligations of Tenant
hereunder shall be separate and independent covenants and agreements, and the
Rent and all other sums payable by Tenant hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of the applicable Lease or by termination of
the applicable Lease other than by reason of an Event of Default.
ARTICLE 4
USE OF THE APPLICABLE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use.
Tenant shall, at all times during the Term, and at any other time
Tenant shall be in possession of the Leased Property, continuously use or cause
to be used the applicable Leased Property as a licensed nursing home or as
otherwise described on Exhibit A-1 hereto and for such other uses as may be
incidental or necessary thereto (such use being hereinafter referred to as such
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 Landlord (which 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 thereon which will cause the cancellation of
any insurance policy covering such Leased Property or any part thereof (unless
another adequate policy is available), nor shall Tenant sell or otherwise
provide to residents or
<PAGE>
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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 underwriter's 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
such Leased Property and Tenant's Personal Property, including, without
limitation, the Insurance Requirements.
4.1.2 Necessary Approvals.
Tenant shall proceed with all due diligence and exercise its best
efforts to maintain all approvals necessary to use and operate, for its Primary
Intended Use, the applicable Leased Property and the Facility located at such
Leased Property under applicable local, state and federal law, and without
limiting the foregoing, shall use its best efforts to maintain appropriate
licenses and certifications and approvals for Medicare and Medicaid
reimbursement.
4.1.3 Continuous Operation, Etc.
Tenant shall use its best efforts to operate continuously the
applicable Leased Property as a provider of health care or related services in
accordance with its Primary Intended Use. Tenant will not take or omit to take
any action, the taking or omission of which would materially impair the value or
the usefulness of such Leased Property or any part thereof for its Primary
Intended Use.
4.1.4 Lawful Use, Etc.
Tenant shall not use or suffer or permit the use of the applicable
Leased Property and Tenant's Personal Property for any unlawful purpose. Tenant
shall not commit or suffer to be committed any waste on the applicable Leased
Property, or in the Facility located on the applicable Leased Property located
thereon, nor shall Tenant cause or permit any nuisance thereon or therein.
Tenant shall neither suffer nor permit the applicable Leased Property or any
portion thereof, including any Capital Addition, or Tenant's Personal Property,
to be used in such a manner as (i) might reasonably tend to impair Landlord'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 for adverse usage or adverse
possession by the public, as such, or of implied dedication of the applicable
Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Etc.
Subject to the provisions of Article 8 hereof, Tenant, at its sole
expense, shall promptly (i) comply with all material Legal
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Requirements and all Insurance Requirements in respect of the use, operation,
maintenance, repair, alteration and restoration of the applicable Leased
Property, and (ii) procure, maintain and comply with all appropriate licenses,
certificates of need, permits, provider agreements and other authorizations and
agreements 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, including compliance with
all Legal Requirements pertaining thereto.
4.3 Compliance with Medicaid and Medicare Requirements.
Tenant shall, at its sole cost and expense, make whatever improvements
(capital or ordinary) as are required to conform the applicable Leased Property
to such standards as may, from time to time, be required by Federal Medicare
(Title 18) or Medicaid (Title 19) skilled nursing facility and/or nursing
facility programs, if applicable, or any other applicable programs or
legislation, or capital improvements required by any other governmental agency
having jurisdiction over such Leased Property as a condition of the continued
operation of such Leased Property for its Primary Intended Use.
4.4 Environmental Matters.
Tenant shall not store, spill upon, dispose of or transfer to or from
the applicable Leased Property any Hazardous Substance, except that Tenant may
store, transfer and dispose of Hazardous Substances in compliance with all
Applicable Laws. Tenant shall maintain the applicable Leased Property at all
times free of any Hazardous Substance (except such Hazardous Substances as are
maintained in compliance with all Applicable Laws). Tenant shall, as to the
applicable Leased Property, promptly: (a) notify Landlord in writing of any
change in the nature or extent of such Hazardous Substances maintained, (b)
transmit to Landlord a copy of any Community Right to Know report, which is
required to be filed, if any, by Tenant for the applicable Leased Property
pursuant to SARA Title III or any other Applicable Law, (c) transmit to Landlord
copies of any citations, orders, notices or other governmental communications
received by Tenant or its agents or representatives with respect thereto
(collectively, "Environmental Notice"), which Environmental Notice requires a
written response or any action to be taken and/or if such Environmental Notice
gives notice of and/or could give rise to a violation of any Applicable Law
and/or could give rise to any cost, expense, loss or damage (an "Environmental
Obligation"), (d) observe and comply with any and all Applicable Laws relating
to the use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction relating
to the use or maintenance or requiring the removal, treatment, containment or
other disposition thereof, and (e) pay or otherwise dispose of any fine, charge
or
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Imposition related thereto, unless Tenant shall contest the same in good faith
and by appropriate proceedings and the right to use and the value of such Leased
Property is not materially and adversely affected thereby.
For purposes of this Section 4.4, (i) the term "Applicable Laws" shall
mean and include all applicable Federal, state or local statutes, laws,
ordinances, rules and regulations, licensing requirements or conditions, whether
now existing or hereafter arising, relating to Hazardous Substances; and (ii)
the term "Hazardous Substances" shall mean hazardous substances (as defined by
the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), as now in effect or as hereafter from time to time amended), hazardous
wastes (as defined by the Resource Conservation and Recovery Act (RCRA), as now
in effect or as hereafter from time to time amended), any hazardous waste,
hazardous substance, pollutant or contaminant, oils, radioactive materials,
asbestos in any form or condition, or any pollutant or contaminant or hazardous,
dangerous or toxic chemicals, materials or substances within the meaning of any
other applicable Federal, state or local law, regulation, ordinance or
requirements relating to or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or materials, all
as now in effect or hereafter from time to time amended.
If at any time prior to the termination of the applicable Lease,
Hazardous Substances are discovered on the applicable Leased Property, Tenant
hereby agrees to take all actions, and to incur any and all expense, as may be
reasonably necessary and as may be required by any municipal, State or Federal
agency or other governmental entity or agency having jurisdiction thereof, (i)
to clean up and remove from and about the applicable Leased Property all
Hazardous Substances thereon, (ii) to contain and prevent any further release or
threat of release of Hazardous Substances on or about the applicable Leased
Property and (iii) to use good faith efforts to eliminate any further release or
threat of release of Hazardous Substances on or about the applicable Leased
Property.
Six (6) months prior to expiration of the final Term of the applicable
Lease, Tenant, at its sole cost and expense, shall designate a qualified
environmental engineer, satisfactory to Landlord in its sole discretion, which
engineer shall conduct an environmental investigation of the applicable Leased
Property and prepare an environmental site assessment report (the "Environmental
Report"). The scope of the investigation must include the matters set forth on
Schedule II hereto and otherwise may be limited to review of relevant records,
interviews with persons knowledgeable about the applicable Leased Property and
relevant governmental agencies and a site inspection of the applicable Leased
Property, any buildings, the fenceline of the applicable Leased Property and
adjoining properties (Phase I), if such investigation in the opinion of such
engineer clearly indicates that the applicable Leased Property is
environmentally sound and is free from oil, asbestos, radon and other Hazardous
<PAGE>
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Substances except in compliance with Applicable Laws. Otherwise, the
investigation shall include a more detailed physical site inspection,
appropriate testing, subsurface and otherwise, and review of historical records
(Phase II) to demonstrate the compliance of the applicable Leased Property with
Applicable Laws and the absence of Hazardous Substances.
All preliminary drafts of such Environmental Report, and supplements
and amendments thereto, shall be provided to Landlord contemporaneously with
delivery thereof to Tenant. With respect to any recommendations contained in the
Environmental Report, violations of Applicable Laws and/or the existence of any
conditions at the applicable Leased Property which could give rise to an
Environmental Obligation, Tenant shall promptly give Notice to Landlord of all
action Tenant proposes to take in connection therewith and Tenant shall promptly
take all actions, and incur any and all expense, as may be reasonably necessary
and as may be required by any municipal, State or Federal agency or other
governmental entity or agency having jurisdiction thereof and as may be required
by Landlord, (i) to clean up, remove or remediate from and about the applicable
Leased Property all Hazardous Substances thereon, (ii) to contain, prevent and
eliminate any further release or threat of release of Hazardous Substances on or
about the applicable Leased Property, and (iii) to otherwise eliminate such
violation or condition from the applicable Leased Property to the reasonable
satisfaction of Landlord.
Tenant shall protect, indemnify and hold harmless Landlord and each
Facility Mortgagee, their trustees, officers, agents, employees and
beneficiaries, and any of their respective successors or assigns (hereafter the
"Indemnitees," and when referred to singly, an "Indemnitee") for, from and
against any and all debts, liens, claims, causes of action, administrative
orders or notices, costs, fines, penalties or expenses, including attorney's
fees suffered or incurred by the Indemnitees resulting from, either directly or
indirectly, the presence in, upon or under the soil or ground water of the
applicable Leased Property or any properties surrounding the applicable Leased
Property of any Hazardous Substances in violation of any Applicable Law.
Tenant's duty herein includes but is not limited to costs associated with
personal injury or property damage claims as a result of the presence of
Hazardous Substances in, upon or under the soil or ground water of the
applicable Leased Property in violation of any Applicable Law. Upon written
request of Landlord, Tenant shall undertake the defense, at Tenant's sole cost
and expense, of any indemnification duties set forth herein. In the event that
Tenant refuses to undertake the defense of an Indemnitee promptly after
receiving such notice, such Indemnitee may undertake its own defense.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any reasonable cost or expense incurred by Landlord and growing out of a failure
of Tenant strictly to observe and perform the foregoing requirements (including,
without limitation,
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reasonable attorneys' fees), which amounts shall bear interest from the date
incurred until paid at the Overdue Rate.
The provisions of this Section 4.4 shall survive the expiration or
sooner termination of the applicable Lease.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Tenant shall, at its sole cost and expense, keep the
applicable Leased Property and all private roadways, sidewalks and
curbs appurtenant thereto (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 or Tenant's
Personal Property, or any portion thereof), and, shall promptly make
all necessary and appropriate repairs and replacements thereto of every
kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or
arising by reason of a condition existing prior to the commencement of
the Term (concealed or otherwise), provided, Tenant shall be permitted
to prosecute claims against Landlord's predecessors in title for breach
of any representation or warranty made to or on behalf of Landlord, or
for any latent defects in such Leased Property. All repairs shall 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 any such work. Tenant will not
take or omit to take any action, the taking or omission of which would
materially impair the value or the usefulness of the applicable Leased
Property or any part thereof for its Primary Intended Use. Tenant's
obligations under this Section 5.1.1 as to the applicable Leased
Property shall be limited, in the event of any casualty or Condemnation
involving such Leased Property, as set forth in Sections 10.2.1 and
11.1. Notwithstanding this Section 5.1.1, Tenant's obligations with
respect to Hazardous Substances are as set forth in Article 4.
5.1.2 Landlord's Obligations.
Landlord shall not, under any circumstances, be required to
build or rebuild any improvement on the applicable 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
<PAGE>
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extraordinary, structural or nonstructural, foreseen or unforeseen, or
to make any expenditure whatsoever with respect thereto, in connection
with the applicable Lease, or to maintain the applicable Leased
Property in any way, except as specifically provided herein. Tenant
hereby waives, to the extent permitted by law, the right to make
repairs at the expense of Landlord pursuant to any law in effect at the
time of the execution of the applicable Lease or hereafter enacted.
Landlord shall have the right to give, record and post, as appropriate,
notices of nonresponsibility under any mechanic's lien laws now or
hereafter existing.
5.1.3 Nonresponsibility of Landlord; No Mechanics Liens.
Landlord's interest in the Leased Property shall not be
subject to liens for Capital Additions made by the Tenant, and Tenant
shall have no power or authority to create any lien or permit any lien
to attach to the Leased Property or the present estate, reversion or
other estate of Landlord in the Leased Property or on the building or
other improvements thereon as a result of Capital Additions made by
Tenant or for any other cause or reason. All materialmen, contractors,
artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property or any part thereof, are
hereby charged with notice that such liens are expressly prohibited and
that they must look solely to Tenant to secure payment for any work
done or material furnished for Capital Additions by Tenant or for any
other purpose during the term of the applicable Lease.
Nothing contained in this Lease shall be deemed or construed
in any way as constituting the consent or request of Landlord., express
or implied by inference or otherwise, to any contractor, subcontractor,
laborer or materialmen for the performance of any labor or the
furnishing of any materials for any alteration, addition, improvement
or repair to the Leased Property or any part thereof or as giving
Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would
give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or
any part thereof to liability under the mechanic's Lien Law of the
State in any way, it being expressly understood Landlord's estate shall
not be subject to any such liability.
5.2 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 at any time, provided
that no Default
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has occurred and is continuing. Tenant shall provide and maintain during the
entire Term all such Tenant's Personal Property as shall be necessary in order
to operate the Facility located at the Leased Property in compliance with all
applicable licensure and certification requirements, in compliance with
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 on or prior to the
expiration or earlier termination of the applicable Lease of 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 Landlord without the necessity of first giving notice
thereof to Tenant, without any payment to Tenant and without any obligation to
account therefor. Tenant shall, at its expense, restore such Leased Property to
the condition required by Section 5.3, including repair of all damage to such
Leased Property caused by the removal of Tenant's Personal Property, whether
effected by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than motor
vehicles) on, or in connection with, the Leased Property which belongs to anyone
other than Tenant and which is material to the operation of the Facility for its
Primary Intended Use, Tenant shall use good faith efforts to require the
agreement permitting such use to provide that Landlord or its designee may
assume Tenant's rights under such agreement upon exercise of Landlord's rights
hereunder pursuant to Section 7.2.
5.3 Yield Up.
Upon the expiration or sooner termination of the applicable Lease
(unless the applicable Leased Property is transferred to Tenant as provided
herein), Tenant shall vacate and surrender the applicable Leased Property to
Landlord in the condition in which such Leased Property was on the Commencement
Date, except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of such Lease, ordinary wear and tear excepted (and
casualty damage and condemnation, in the event that the applicable Lease is
terminated following a casualty or total condemnation in accordance with Article
10 or Article 11).
In addition, upon the expiration or earlier termination of the
applicable Lease unless the applicable Leased Property is transferred to Tenant
as provided herein, Tenant shall, at Landlord's sole cost and expense, use its
best efforts to transfer to and cooperate with Landlord or Landlord's nominee in
connection with the processing of all applications for licenses, operating
permits and other governmental authorizations and all contracts, including
contracts with governmental or quasi-governmental entities which may be
necessary for the operation of the Facility located on such Leased Property. If
requested by Landlord, Tenant will continue to manage such Facility after the
expiration of the Term and for as long thereafter as is necessary to obtain all
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necessary licenses, operating permits and other governmental authorizations, on
such reasonable terms (which shall include an agreement to reimburse Tenant for
its reasonable out-of-pocket costs and expenses, and reasonable administrative
costs) as Landlord shall request.
5.4 Encroachments, Restrictions, Etc.
If any of the Leased Improvements on the applicable Leased Property
shall, at any time, encroach upon any property, street or right-of-way adjacent
to such Leased Property, other than Permitted Encumbrances, 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 such Leased
Property is subject, upon the request of Landlord (but only as to any
encroachment, violation or impairment that is not a Permitted Encumbrance) or of
any Person affected by any such encroachment, violation or impairment, Tenant
shall, at its sole cost and expense, subject to its right to contest the
existence of any encroachment, violation or impairment in accordance with the
provisions of Article 8, either (a) 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 Landlord or
Tenant, or (b) make such changes in the Leased Improvements and take such other
actions, as are 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 ensure the continued operation of the Leased Improvements
for the Primary Intended Use substantially in the manner and to the extent the
Leased Improvements were operated prior to the assertion of such violation,
impairment or encroachment. Any such alteration shall be made in conformity with
the applicable requirements of this Article 5. Tenant's obligations under this
Section 5.4 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.
5.5 Landlord to Grant Easements, Etc.
Landlord will, from time to time, so long as no Default shall have
occurred and be continuing, at the request of Tenant with respect to the
applicable Leased Property and at Tenant's sole cost and expense, (a) grant
easements and other rights in the nature of easements with respect to such
Leased Property to third parties, (b) release existing easements or other rights
in the nature of easements which are for the benefit of such Leased Property,
(c) dedicate or transfer unimproved portions of such Leased Property for road,
highway or other public purposes, (d) execute petitions to have such Leased
Property annexed to any municipal corporation or utility district, (e) execute
amendments to any covenants and restrictions affecting such Leased Property
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and (f) execute and deliver to any Person any instrument appropriate to confirm
or effect such grants, release, dedications, transfers, petitions and amendments
(to the extent of its interests in such Leased Property); provided that Landlord
shall have reasonably determined that such grant, release, dedication, transfer,
petition or amendment is not materially detrimental to the operation of such
Leased Property for its Primary Intended Use and does not materially reduce the
value of such Leased Property, and that Landlord shall have received an
Officer's Certificate confirming such determination, and such additional
information as Landlord may reasonably request.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property.
Tenant shall not construct or install Capital Additions on the
applicable Leased Property without obtaining Landlord's prior written consent,
provided that no consent shall be required for any Capital Addition so long as
(a) the Capital Additions Costs for such Capital Addition are less than
$250,000, (b) such construction or installation would not adversely affect or
violate any Legal Requirement or Insurance Requirement applicable to the
applicable Leased Property, (c) such construction or installation is not
expected, in Tenant's reasonable opinion, to result in a decrease of the Net
Patient Revenues for such Leased Property on an aggregate basis for the twelve
(12) month period following completion of construction, and (d) Landlord shall
have received an Officer's Certificate certifying as to the satisfaction of the
conditions set out in clauses (a) (b) and (c) above. If Landlord's consent is
required, prior to commencing construction of any Capital Addition, Tenant shall
submit to Landlord, in writing, a proposal setting forth, in reasonable detail,
any proposed Capital Addition and shall provide to Landlord, such plans and
specifications, permits, licenses, contracts and other information concerning
the proposed Capital Addition as Landlord may reasonably request. Without
limiting the generality of the foregoing, such proposal shall indicate the
approximate projected cost of constructing such Capital Addition, the use or
uses to which it will be put and a good faith estimate of the change, if any, in
the Net Patient Revenues that Tenant anticipates will result from such Capital
Addition. No Capital Addition shall be made which would tie in or connect any
Leased Improvement on the applicable Leased Property with any other improvements
on property adjacent to such Leased Property (and not part of the Land)
including, without limitation, tie-ins of buildings or other structures or
utilities. Tenant shall not finance the cost of any construction of any Capital
Addition without the prior written consent of Landlord, which consent may be
withheld by Landlord in Landlord's sole discretion. Any Capital Additions
(including
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Tenant's Capital Additions) shall, upon the expiration or sooner termination of
the applicable Lease for such Leased Property, pass to and become the property
of Landlord, free and clear of all encumbrances other than Permitted
Encumbrances but subject to Landlord's obligation to compensate Tenant for
Tenant's Capital Additions as provided below.
6.2 Capital Additions Financed or Paid For by Tenant.
6.2.1 Financing of Capital Additions.
Provided that Tenant has obtained the prior written consent of Landlord
in each instance, Tenant may arrange for financing for Capital Additions from
third party lenders, provided, however that (i) the terms and conditions of any
such financing shall be subject to the prior approval of Landlord; and (ii) if
Landlord consents to the grant thereof, which consent may be withheld in the
sole discretion of Landlord, any security interests in any property of Tenant,
including without limitation the applicable Leased Property, shall be expressly
and fully subordinated to the applicable Lease and to the interest of Landlord
in the applicable Leased Property and to the rights of any Facility Mortgagee.
6.2.2 Amendments to Lease.
If, pursuant to the provisions of this Lease, Tenant either pays for or
arranges financing (to the extent permitted in Section 6.2.1) to pay for the
costs of construction or installation of any Capital Addition ("Tenant's Capital
Additions") (but excluding, in any event, any Capital Addition financed by or
through Landlord), this Lease shall be and hereby is amended to provide as
follows:
(a) Upon completion of any such Tenant's Capital Addition, Net
Patient Revenues attributable to such Tenant's Capital Addition shall
be excluded from Net Patient Revenues of the applicable Leased Property
for purposes of calculating Additional Rent. The Net Patient Revenues
attributable to any such Tenant's Capital Addition shall be deemed to
be an amount (the "Added Value Percentage") which bears the same
proportion to the total Net Patient Revenues from the entire Leased
Property (including all Capital Additions) as the Fair Market Added
Value of such Capital Addition bears to the Fair Market Value of the
entire Leased Property (including all Capital Additions) immediately
after completion of such Tenant's Capital Addition. The Added Value
Percentage for any Tenant's Capital Additions shall remain in effect
until any subsequent Capital Addition is completed, at which time the
Added Value Percentage will again be determined as provided above.
(b) There shall be no adjustment in the Minimum Rent by reason
of any such Tenant's Capital Addition.
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(c) upon the expiration or earlier termination of the
applicable Lease (but if the applicable Lease is terminated by reason
of an Event of Default, only after Landlord is fully compensated for
all damages resulting therefrom), Landlord shall compensate Tenant for
all Tenant's Capital Additions in any of the following ways determined
in Landlord's sole discretion:
(i) By purchasing such Tenant's Capital Additions from
Tenant for cash in the amount of the then Fair Market
Added Value of such Tenant's Capital Additions; or
(ii) By making such other arrangement regarding such
compensation as shall be mutually acceptable to
Landlord and Tenant; or
(iii) If such termination is by reason of an Event of
Default:
(1) By purchasing such Tenant's Capital
Additions from Tenant by delivering to
Tenant Landlord's purchase money promissory
note in the amount of the Fair Market Added
Value, which note shall be on then
commercially reasonable terms and secured by
a mortgage or deed of trust on the
applicable Leased Property and such Tenant's
Capital Additions subject to all existing
mortgages and encumbrances on such Leased
Property and such Tenant's Capital Additions
at the time of such purchase; or
(2) By assigning to Tenant the right to receive
an amount equal to the Added Value
Percentage (determined as of the date of the
expiration or earlier termination of this
Lease) of all rent and other consideration
receivable by Landlord under any reletting
or other disposition of the Leased Property
and such Tenant's Capital Additions, after
deducting from such rent all costs and
expenses incurred by Landlord in connection
with such reletting or other disposition of
the Leased Property and such Tenant's
Capital Additions and all costs and expenses
of operating and maintaining the Leased
Property and such Tenant's Capital Additions
during the term of any such new lease which
are not borne by the tenant thereunder, with
the provisions of this Section 6.2.2 to
remain in effect until the sale or other
final disposition of the Leased Property and
such Tenant's Capital Additions, at which
time the Fair Market Added Value of such
Tenant's Capital Addition shall be
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immediately due and payable, such obligation
to be secured by a mortgage on the Leased
Property and such Tenant's Capital
Additions, subject to all existing mortgages
and encumbrances on the Leased Property at
the time of such purchase and assignment.
6.3 Capital Additions Financed by Landlord.
If Landlord shall, at the request of Tenant and in Landlord's sole
discretion, elect to finance the proposed Capital Addition, Tenant shall provide
Landlord with such information as Landlord may from time to time request.
If Landlord shall finance the proposed Capital Addition, Tenant shall
pay to Landlord all reasonable costs and expenses paid or incurred by Landlord
and any Facility Mortgagee or Lending Institution which has committed to finance
such Capital Addition in connection therewith, including, but not limited to,
(a) the reasonable attorneys' fees and expenses, (b) all printing , expenses,
(c) all filing, registration and recording taxes and fees, (d) documentary stamp
taxes, (e) title insurance charges, appraisal fees, and rating agency fees, and
(f) commitment fees.
6.4 Non-Capital Additions.
Tenant shall have the right, at Tenant's sole cost and expense, to make
additions, modifications or improvements to the applicable Leased Property which
are not Capital Additions ("Non-Capital Additions") from time to time as Tenant,
in its discretion, may deem desirable for the Primary Intended Use, provided
that such action will not materially alter the character or purpose or
materially detract from the value, operating efficiency or revenue-producing
capability of such Leased Property, or adversely affect the ability of Tenant to
comply with the provisions of the applicable Lease, and, without limiting the
foregoing, will not adversely affect or violate any Legal Requirement or
Insurance Requirement applicable to the applicable Leased Property. All such
Non-Capital Additions shall, upon expiration or earlier termination of the
applicable Lease for such Leased Property, pass to and become the property of
Landlord, free and clear of all liens and encumbrances, other than Permitted
Encumbrances.
6.5 Salvage.
All materials which are scrapped or removed in connection with the
making of either Capital Additions or Non-Capital Additions or repairs required
by Article 5 shall be or become the property of the party that paid for such
work.
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ARTICLE 7
LIENS
7.1 Liens.
Subject to Article 8, Tenant shall not directly or indirectly create or
allow to remain and shall promptly discharge, at its expense, any lien,
encumbrance, attachment, title retention agreement or claim upon the applicable
Leased Property or Tenant's leasehold interest in such Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, other than (a)
Permitted Encumbrances, (b) restrictions, liens and other encumbrances which are
consented to in writing by Landlord, (c) liens for those taxes of Landlord which
Tenant is not required to pay hereunder, (d) subleases permitted by Article 17,
(e) liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are not yet payable, or (ii) are being
contested in accordance with Article 8, (f) liens of mechanics, laborers,
materialmen, suppliers or vendors incurred in the ordinary course of business
that are not yet due and payable, or are for sums that are being contested in
accordance with Article 8, and (g) any Facility Mortgages or other liens which
are the responsibility of Landlord pursuant to the provisions of Article 22.
7.2 Landlord's Lien.
In addition to any statutory landlord's lien and in order to secure
payment of the Rent and all other sums payable hereunder by Tenant, and to
secure payment of any loss, cost or damage which Landlord may suffer by reason
of Tenant's breach of the applicable Lease, Tenant hereby grants unto Landlord a
security interest in and an express contractual lien upon the Tenant's Personal
Property (except motor vehicles), and all ledger sheets, files, records,
documents and instruments (including, without limitation, computer programs,
tapes and related electronic data processing) relating to the operation of the
Facility located at the applicable Leased Property (the "Records") and all
proceeds therefrom; and such Tenant's Personal Property shall not be removed
from the applicable Leased Property at any time when a Default has occurred and
is continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord a
financing statement in form sufficient to perfect the security interest of
Landlord in Tenant's Personal Property and the proceeds thereof in accordance
with the provisions of the applicable laws of the State. Tenant hereby grants
Landlord an irrevocable limited power of attorney, coupled with an interest, to
execute all such financing statements in Tenant's name, place and stead. The
security interest herein granted is in addition to any statutory lien for the
Rent.
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ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively "Claims") as to the applicable Leased
Property, by appropriate legal proceedings, conducted in good faith and with due
diligence, provided that (a) the foregoing shall in no way be construed as
relieving, modifying or extending Tenant's obligation to pay any Claims as
finally determined, (b) such contest shall not cause Landlord or Tenant to be in
default under any mortgage or deed of trust encumbering such Leased Property or
any interest therein or result in or reasonably be expected to result in a lien
attaching to such Leased Property, (c) no part of the applicable Leased Property
nor any Rent therefrom shall be in any immediate danger of sale, forfeiture,
attachment or loss, and (d) Tenant shall indemnify and hold harmless Landlord
from and against any cost, claim, damage, penalty or reasonable expense,
including reasonable attorneys' fees, incurred by Landlord in connection
therewith or as a result thereof. Upon Landlord's request, Tenant shall either
(i) provide a bond or other assurance reasonably satisfactory to Landlord that
all Claims which may be assessed against the applicable Leased Property,
together with all interest and penalties thereon will be paid, or (ii) deposit
within the time otherwise required for payment with a bank or trust company, as
trustee, as security for the payment of such Claims, an amount sufficient to pay
the same, together with interest and penalties in connection therewith and all
Claims which may be assessed against or become a Claim on the applicable Leased
Property, or any part thereof, in connection with any such contest. Tenant shall
furnish Landlord and any Facility Mortgagee with reasonable evidence of such
deposit within five (5) days after request therefor. Landlord agrees to join in
any such proceedings if required legally to prosecute such contest; provided,
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith). Tenant shall be entitled to any refund of any Claims and such
charges and penalties or interest thereon which have been paid by Tenant or paid
by Landlord and for which Landlord has been fully reimbursed by Tenant. If
Tenant shall fail (x) to pay any Claims when finally determined, (y) to provide
security therefor as provided in this Article 8, or (z) to prosecute any such
contest diligently and in good faith, Landlord may, upon reasonable notice to
Tenant (which notice may be oral and shall not be required if Landlord shall
determine the same is not practicable), pay such charges, together with interest
and penalties due with respect thereto, and Tenant shall reimburse Landlord
therefor, upon demand, as Additional Charges.
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ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements.
Tenant shall at all times during the Term and at any other time Tenant
shall be in possession of the applicable Leased Property, keep the applicable
Leased Property and all property located in or on the applicable Leased
Property, including Tenant's Personal Property, insured against the risks and in
the amounts (unless Landlord shall agree in writing that Tenant may maintain
insurance in lesser amounts) as follows:
(a) Loss or damage by fire, vandalism and malicious mischief,
extended coverage perils, earthquake and all physical loss perils
insurance, including but not limited to sprinkler leakage, in an amount
equal to not less than the full Replacement Cost thereof (as defined in
Section 9.2 below) with the usual extended coverage endorsements,
including a Replacement Cost Endorsement and Builder's Risk Coverage
during the continuance of any construction on the applicable Leased
Property;
(b) Loss or damage by explosion of steamboilers, pressure
vessels or other similar apparatus, now or hereafter installed in the
Facility located at the Leased Property, in such amounts as may be
reasonably required by Landlord or any Facility Mortgagee from time to
time;
(c) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy covering risk of loss
during the lesser of the first twelve (12) months of reconstruction or
the actual reconstruction period necessitated by the occurrence of any
of the hazards described in subparagraphs (a) and (b) above, in such
amounts as may be customary for comparable properties in the area and
in an amount sufficient to prevent Landlord or Tenant from becoming a
co-insurer;
(d) Claims for personal injury or property damage under a
policy of comprehensive general accident and public liability insurance
(in a broad form comprehensive policy, including, without limitation,
broad form contractual liability, independent contractor's hazard and
completed operations coverage), claims arising out of malpractice in an
amount not less than One Million Dollars ($1,000,000) per occurrence,
Three Million Dollars ($3,000,000) in the aggregate and umbrella
coverage of all such claims in an amount not less than Ten Million
Dollars ($10,000,000);
(e) Flood (when the applicable Leased Property is located in
whole or in part within an area identified as an area having special
flood hazards and in which flood
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insurance has been made available under the National Flood Insurance
Act of 1968, as amended, or the Flood Disaster Protection Act of 1973,
as amended (or any successor acts thereto)) and such other hazards and
in such amounts as may be customary for comparable properties in the
area;
(f) Worker's compensation insurance coverage for all persons
employed by Tenant on the applicable Leased Property with statutory
limits and otherwise with limits of and provisions in accordance with
the requirements of applicable local, State and federal law, and
employer's liability insurance in such amounts as Landlord and any
Facility Mortgagee shall reasonably require; and
(g) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Replacement Cost.
"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, less exclusions provided in the
standard form of fire insurance policy. In the event either party believes that
the then full replacement cost less such exclusions has increased or decreased
at any time during the Term, such party, at its own cost, shall have the right
to have such full replacement cost redetermined by an accredited appraiser
approved by the other, which approval shall not be unreasonably withheld or
delayed. The party desiring to have the full replacement cost so redetermined
shall forthwith, on receipt of such determination by such appraiser, give
written notice thereof to the other. The determination of such appraiser shall
be final and binding on the parties hereto, and Tenant shall forthwith conform
the amount of the insurance carried to the amount so determined by the
appraiser.
9.3 Waiver of Subrogation.
Landlord 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 which is covered by insurance then
being carried by Landlord 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. In the event
that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra premium.
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9.4 Form Satisfactory, Etc.
All insurance policies and endorsements required pursuant to this
Article 9 shall be fully paid for, nonassessable and contain such provisions and
expiration dates and be in such form and amounts and issued by insurance
carriers authorized to do business in the State, having a general policy
holder's rating of A or A+ in Best's latest rating guide, and as otherwise shall
be approved by Landlord. Without limiting the foregoing, such policies shall
include no deductible (unless consistent with deductibles included in policies
carried by entities engaged in similar businesses and owning similar properties
similarly situated or agreed to in advance by Landlord) and, with the exception
of the insurance described in Section 9.1(f), shall name Landlord and any
Facility Mortgagee as additional insureds, as their interests may appear. All
losses shall be payable to Landlord, any Facility Mortgagee or Tenant as
provided in Article 10. Any loss adjustment in excess of $50,000 shall require
the written consent of Landlord, Tenant, and each Facility Mortgagee. Tenant
shall pay all insurance premiums, and deliver policies or certificates thereof
to Landlord prior to their effective date (and, with respect to any renewal
policy, thirty (30) days prior to the expiration of the existing policy), and in
the event Tenant shall fail either to effect such insurance as herein required,
to pay the premiums therefor, or to deliver such policies or certificates to
Landlord or any Facility Mortgagee at the times required, Landlord shall have
the right, but not the obligation, to acquire such insurance and pay the
premiums therefor, which amounts shall be payable to Landlord, upon demand, as
Additional Charges, together with interest accrued thereon at the Overdue Rate
from the date such payment is made until the date repaid. All such policies
shall provide Landlord (and any Facility Mortgagee, if required by the same)
thirty (30) days' prior written notice of any expiration or cancellation of such
policy or any modification thereof the effect of which is to reduce the amount
of insurance maintained or otherwise fail to effect the insurance required by
this Article 9.
9.5 Blanket Policy.
Notwithstanding anything to the contrary contained in this Article 9,
Tenant's obligation to maintain the insurance herein required may be brought
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Tenant; provided, that (a) the coverage thereby
afforded will not be reduced or diminished from that which would exist under a
separate policy meeting all other requirements of the applicable Lease, and (b)
the requirements of this Article 9 are otherwise satisfied. Without limiting the
foregoing, the amounts of insurance that are required to be maintained pursuant
to Section 9.1 shall be on a Facility by Facility basis, and shall not be
subject to an aggregate limit.
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9.6 No Separate Insurance.
Tenant shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required by this Article 9, or
increase the amount of any existing insurance by securing an additional policy
or additional policies, unless all parties having an insurable interest in the
subject matter of such insurance, including, Landlord and all Facility
Mortgagees, are included therein as additional insureds, and the loss is payable
under such insurance in the same manner as losses are payable under the
applicable Lease. In the event Tenant shall take out any such separate insurance
or increase any of the amounts of the then existing insurance, Tenant shall give
Landlord prompt Notice thereof.
9.7 Indemnification of Landlord.
Notwithstanding the existence of any insurance or self-insurance
provided for herein, and without regard to the policy limits of any such
insurance or self-insurance, Tenant shall protect, indemnify and hold harmless
Landlord from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and reasonable expenses (including, without
limitation, reasonable attorneys' fees), to the maximum extent permitted by law,
imposed upon or incurred by or asserted against Landlord by reason of: (a) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the applicable Leased Property or adjoining sidewalks or
rights of way, including, without limitation, any claims of malpractice, (b) any
past, present or future use, misuse, non-use, condition, management, maintenance
or repair by Tenant or anyone claiming under Tenant of the applicable Leased
Property or Tenant's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which Landlord is made a party
or participant related to the applicable Leased Property or Tenant's Personal
Property or such use, misuse, non-use, condition, management, maintenance, or
repair thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any Impositions
(which are the obligations of Tenant to pay pursuant to the applicable
provisions of the applicable Lease), and (d) any failure on the part of Tenant
or anyone claiming under Tenant to perform or comply with any of the terms of
the applicable Lease. Notwithstanding the foregoing, Tenant shall not be
required to indemnify Landlord against any liabilities, obligations, claims,
damages, penalties, causes of action, or costs that arise from events occurring
after Landlord, or anyone claiming by, through or under Landlord (other than
Tenant or anyone claiming by, through or under Tenant) shall take actual
possession of the applicable Leased Property or that directly result from the
gross negligence or willful misconduct of Landlord. Tenant shall pay all amounts
payable under this Section 9.7 within ten (10) days after demand therefor, and
if not timely paid, such amounts shall bear interest
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at the Overdue Rate from the date of 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 Landlord or may compromise or
otherwise dispose of the same, with Landlord's prior written consent (which
consent may not be unreasonably withheld or delayed). The obligations of Tenant
under this Section 9.7 shall survive the termination of the applicable Lease.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds.
All proceeds in excess of $10,000 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 9 (including, without
limitation, proceeds of any business interruption insurance) shall be paid
directly to Landlord (subject to the provisions of Section 10.2). If Tenant is
required to reconstruct or repair such Leased Property as provided herein, such
proceeds shall be paid out by Landlord from time to time for the reasonable
costs of reconstruction or repair of such Leased Property necessitated by such
damage or destruction, subject to the provisions of Section 10.2.4. Provided no
Default or Event of Default has occurred and is continuing, any excess proceeds
of insurance remaining after the completion of the restoration shall be paid to
Tenant. In the event that Section 10.2.1 below is applicable, the insurance
proceeds shall be retained by the party entitled thereto pursuant to Section
10.2.1. All salvage resulting from any risk covered by insurance shall belong to
Landlord, except any salvage related to Tenant's Capital Additions and Tenant's
Personal Property shall belong to Tenant.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property.
If, during the Term, the applicable Leased Property shall be
totally or partially destroyed and the Facility located thereon is
thereby rendered Unsuitable for Its Primary Intended Use, Tenant shall,
at Tenant's option, exercisable by Notice to Landlord within thirty
(30) days after the date of such damage or destruction, either
irrevocably offer (a) to purchase such Leased Property from Landlord
for a purchase price equal to the greater of (i) the Adjusted Purchase
Price of such Leased Property or (ii) the Fair Market Value Purchase
Price of such Leased Property immediately prior to such damage or
destruction or (b) to substitute a new property for the applicable
Leased Property in accordance with the provisions of Article 16 hereof.
If Tenant shall fail to give such Notice, Tenant shall be deemed
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to have elected the option provided in clause (a) above. In the event
Landlord does not accept Tenant's offer to purchase the applicable
Leased Property or substitute another property for the applicable
Leased Property within thirty (30) days after receipt of Tenant's
Notice of election, the applicable Lease with respect to the applicable
Leased Property shall terminate without further liability hereunder and
Landlord shall be entitled to retain the insurance proceeds payable on
account of such damage. In the event Tenant purchases such Leased
Property as provided in this Section 10.2.1, the insurance proceeds
payable on account of such damage shall be paid to Tenant.
10.2.2 Partial Damage or Destruction.
If during the Term, the applicable Leased Property shall be
totally or partially destroyed but the Facility located thereon is not
rendered Unsuitable for its Primary Intended Use, Tenant shall promptly
restore such Facility as provided in Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds.
If the cost of the repair or restoration of the applicable
Leased Property exceeds the amount of insurance proceeds received by
Landlord pursuant to Article 9, upon the demand of Landlord, Tenant
shall contribute any excess amounts needed to restore such Leased
Property. Such difference shall be paid by Tenant to Landlord and held
by Landlord, together with any other insurance proceeds, for
application to the cost of repair and restoration.
10.2.4 Disbursement of Proceeds.
In the event Tenant is required to restore the applicable
Leased Property pursuant to Section 10.2, Tenant will, at its sole cost
and expense, commence promptly and continue diligently to perform the
repair and restoration of such Leased Property (hereinafter called the
"Work"), or shall cause the same to be done, so as to restore such
Leased Property in full compliance with all Legal Requirements and so
that such Leased Property shall be at least equal in value and general
utility to its general utility and value immediately prior to such
damage or destruction. Subject to the terms hereof, Landlord shall
advance the insurance proceeds (other than proceeds of business
interruption insurance which should be advanced as provided below) and
the amounts paid to it pursuant to Section 10.2.3 to Tenant regularly
during the repair and restoration period so as to permit payment for
the cost of any such restoration and repair. Any such advances shall be
for not less than $50,000 (or such lesser amount as equals the entire
balance of the repair and restoration) and Tenant shall submit to
Landlord a written requisition and substantiation therefor on AIA Forms
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G702 and G703 (or on such other form or forms as may be acceptable to
Landlord). Landlord may, at its option, condition advancement of said
insurance proceeds and other amounts on (i) the absence of any Default,
(ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably
withheld or delayed), (iii) general contractors' estimates, (iv)
architect's certificates, (v) unconditional lien waivers of general
contractors, (vi) evidence of approval by all governmental authorities
and other regulatory bodies whose approval is required and (vii) such
other certificates as Landlord may, from time to time, reasonably
require. Except as provided in the following sentence and provided no
Default has occurred and is continuing, on the first day of each
calendar month during which proceeds of business interruption insurance
are disbursed to Landlord under the policy of business interruption
insurance maintained pursuant to Article 9, Landlord shall disburse
proceeds of business interruption insurance received by it to Tenant
upon Notice from Tenant accompanied by a certification from Tenant that
such moneys will be used for costs or expenses of owning or operating
the applicable Leased Property, including any corporate allocation in
compliance with Section 23.9. Proceeds of business interruption
insurance shall be applied by Landlord, on the first day of the
calendar month following such disbursement, first to the payment of all
Minimum Rent, Additional Rent and Additional Charges then due and
payable and to become due and payable for the period for which such
proceeds have been paid by the insurance provider, if at any time the
amount of such proceeds will be insufficient to pay all Minimum Rent,
Additional Rent and Additional Charges due or to come due during such
period, Landlord shall suspend disbursement of such proceeds.
Landlord's obligation to disburse insurance proceeds under
this Article 10 shall be subject to the release of such proceeds by the
applicable Facility Mortgagee to Landlord.
10.2.5 Termination of Applicable Lease.
If Landlord accepts Tenant's offer to purchase the applicable
Leased Property or to substitute a new property in place of the
applicable Leased Property, as provided herein, the applicable Lease
shall terminate as to the applicable Leased Property upon payment of
the purchase price therefor or substitution of the new property, and
Landlord shall remit to Tenant all insurance proceeds pertaining to the
applicable Leased Property then held by Landlord.
10.3 Damage Near End of Term.
Notwithstanding any provisions of Section 10.1 or 10.2 to the contrary,
if damage to or destruction of the applicable Leased Property occurs during the
last eighteen (18) months of the then
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applicable Term (whether Fixed or Extended) of the applicable Lease, if Tenant
has not exercised its option to further extend the Term, and if such damage or
destruction cannot reasonably be expected to be fully repaired and restored
prior to the date that is six (6) months prior to the end of such Term, then
Tenant shall have the right to terminate the applicable Lease on thirty (30)
days prior Notice to Landlord by giving Notice thereof to Landlord within sixty
(60) days after the date of such damage or destruction.
10.4 Tenant's Property.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property or Tenant's Capital Additions shall be paid to
Tenant and, to the extent necessary to repair or replace Tenant's Capital
Additions or Tenant's Personal Property in accordance with Section 10.5, Tenant
shall hold such proceeds in trust to pay the cost of repairing or replacing
damaged Tenant's Personal Property or Tenant's Capital Additions.
10.5 Restoration of Tenant's Property.
If Tenant is required to restore the applicable Leased Property as
hereinabove provided, Tenant shall either (a) restore all alterations and
improvements made by Tenant, Tenant's Personal Property and all Tenant's Capital
Additions, or (b) replace such alterations and improvements, Tenant's Personal
Property, and/or Tenant's Capital Additions with improvements or items of the
same or better quality and utility in the operation of such Leased
Property.
10.6 No Abatement of Rent.
The applicable Lease shall remain in full force and effect and Tenant's
obligation to make all payments of Rent (including, without limitation,
Additional Rent) and to pay all other charges as and when required under such
Lease shall remain unabated during the Term notwithstanding any damage involving
the applicable Leased Property (provided that Landlord shall credit against such
payments any amounts paid to Landlord as a consequence of such damage under any
business interruption insurance obtained by Tenant hereunder); provided,
however, that effective upon the purchase of such Leased Property or termination
of such Lease pursuant to and in accordance with Section 10.2, such Lease shall
terminate except with respect to the obligations and liabilities of Tenant
thereunder, actual or contingent, that arose prior to such termination. The
provisions of this Article 10 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, laws, rules,
regulation or ordinance in effect during the Term which provide for such a
contingency shall have any application in such case.
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10.7 Termination of Rights of First Refusal and Option to Purchase.
Any termination of the applicable Lease pursuant to this Article 10
shall cause any rights of first refusal and options to purchase granted to
Tenant under the applicable Lease with respect to such Leased Property to be
terminated and to be without further force or effect.
10.8 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 Landlord is obligated to restore or may restore under any of the
provisions of the applicable Lease.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc.
If either (i) the whole of the applicable Leased Property shall be
taken by Condemnation or (ii) a Condemnation of less than the whole of such
Leased Property renders such Leased Property Unsuitable for Its Primary Intended
Use, the Rent for such Leased Property shall abate in its entirety on the Date
of Taking, the applicable Lease shall terminate and Tenant and Landlord shall
seek the Award for their interests in such Leased Property as provided in
Section 11.5. If the Award received by Landlord for Landlord's interest in such
Leased Property is less than the greater of (x) the Adjusted Purchase Price or
(y) the Fair Market Value Purchase Price of such Leased Property immediately
prior to such Condemnation, Tenant shall contribute and pay to Landlord the
lesser of (1) the amount of Tenant's Award or (2) such shortfall; provided,
however, that notwithstanding the foregoing, if the sum of the Awards received
by Landlord and Tenant with respect to such Condemnation is less than the
Adjusted Purchase Price of such Leased Property, Tenant shall pay the amount of
such difference to Landlord, whether or not such amount exceeds Tenant's Award.
11.2 Partial Condemnation.
In the event of a Condemnation of less than the whole of the applicable
Leased Property such that such Leased Property is still suitable for its Primary
Intended Use, Tenant will, at its sole cost and expense, commence promptly and
continue diligently to restore the untaken portion of the Leased Improvements on
such Leased Property so that such Leased Improvements shall constitute a
complete architectural unit of the same general character and condition (as
nearly as may be possible under the circumstances) as the Leased Improvements
existing immediately prior to such Condemnation, in full compliance with all
Legal Requirements.
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Subject to the terms hereof, Landlord shall contribute to the cost of
restoration that part of the Award necessary to complete such repair or
restoration, together with severance and other damages awarded for the taken
Leased Improvements, to Tenant regularly during the restoration period so as to
permit payment for the cost of such repair or restoration. Landlord may, at its
option, condition advancement of said Award and other amounts on (i) the absence
of any Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld or
delayed), (iii) general contractors' estimates, (iv) architect's certificates,
(v) unconditional lien waivers of general contractors, (vi,) evidence of
approval by all governmental authorities and other regulatory bodies whose
approval is required and (vii) such other certificates as Landlord may, from
time to time, reasonably require. Landlord's obligation under this Section 11.2
to disburse the Award and such other amounts shall be subject to (1) the
collection thereof by Landlord and (2) the satisfaction of any applicable
requirements of any Facility Mortgage, and the release of such Award by the
applicable Facility Mortgagee. If the cost of the restoration of the applicable
Leased Property exceeds that part of the Award necessary to complete such
restoration, together with severance and other damages awarded for the taken
Leased Improvements, Tenant shall contribute upon the demand of Landlord any
excess amounts needed to restore such Leased Property. Such difference shall be
paid by Tenant to Landlord and held by Landlord, together with such part of-the
Award and such severance and other damages, for application to the cost of
restoration.
11.3 Abatement of Rent.
Other than as specifically provided in this Master Lease Document, the
applicable Lease shall remain in full force and effect and Tenant's obligation
to make all payments of Rent (including, without limitation, Additional Rent)
and to pay all other charges as and when required under such Lease shall remain
unabated during the Term notwithstanding any Condemnation involving the
applicable Leased Property; provided, however that effective upon the purchase
of such Leased Property or the termination of the Lease pursuant to and in
accordance with Section 11.1, such Lease shall terminate except with respect to
the obligations and liabilities of Tenant thereunder, actual or contingent, that
arose prior to such termination. The provisions of this Article 11 shall be
considered an express agreement governing any Condemnation involving 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.
11.4 Temporary Condemnation.
In the event of any temporary Condemnation of all or any part of the
applicable Leased Property or Tenant's interest under the
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applicable Lease of such Leased Property, the applicable Lease shall continue in
full force and effect, and Tenant shall continue to pay, in the manner and on
the terms therein specified, the full amount of the Rent. Tenant shall continue
to perform and observe all of the other terms and conditions hereof on the part
of the Tenant to be performed and observed. Provided no Default or Event of
Default that relates to the payment of money has occurred and is continuing, the
entire amount of any Award made for such temporary Condemnation allocable to the
Term, whether paid by way of damages, rent or otherwise, shall be paid to
Tenant. Tenant shall, promptly upon the termination of any such period of
temporary Condemnation, at its sole cost and expense, restore such Leased
Property to the condition that existed immediately prior to such Condemnation,
in full compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration. For purposes of this
Section 11.4, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twenty-four (24)
months.
11.5 Allocation of Award.
Except as provided in the second sentence of this Section 11.5, the
total Award shall be solely the property of and payable to Landlord. Any portion
of the Award made for the taking of Tenant's leasehold interest in the Leased
Property, Tenant's Capital Additions, loss of business during the remainder of
the Term, the taking of Tenant's Personal Property, or Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant (subject
to the provisions of Section 11.2 hereof). In any Condemnation proceedings,
Landlord and Tenant shall each seek its own Award in conformity herewith, at its
own expense.
11.6 Termination of Rights of First Refusal.
Any termination of the applicable Lease pursuant to this Article 11
shall cause any rights of first refusal and options to purchase granted to
Tenant under the applicable Lease to be terminated and to be without further
force or effect.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default.
The occurrence, and continuance beyond the expiration of any applicable
grace period specifically provided for in this Section 12.1 or in any
Transaction Document, of any one or more of the following events shall
constitute an "Event of Default" under the applicable Lease:
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(a) an Event of Default (as defined therein) shall occur and
be continuing under any Transaction Document (other than the applicable
Lease); or
(b) Tenant shall fail to make any payment of the Rent or any
other sum (including, but not limited to, payment of the purchase price
for any of the Collective Leased Properties which Tenant shall be
obligated or elects to purchase pursuant to the terms of this Master
Lease Document or any Lease) payable hereunder or under any Lease when
due and such failure continues for a period of ten (10) days after the
date when due; or
(c) Tenant shall default in the due observance or performance
of any of the terms, covenants or agreements contained herein or in any
other Transaction Document to be performed or observed by it relating
to other than the payment of money and not otherwise referred to in
this Section 12.1, and such default shall remain unremedied for a
period of ten (10) days after Notice thereof from Landlord (provided
that no such notice shall be required if Landlord shall reasonably
determine immediate action is necessary to protect person or property),
provided, however that if such default is susceptible of cure but such
cure cannot be accomplished with due diligence within such period of
time, and if in addition Tenant commences to cure such default within
ten (10) days after Notice thereof from Landlord, and thereafter
prosecutes the curing of such default with all due diligence, such
period of time shall be extended to such period of time (not to exceed
an additional fifty (50) days) as may be necessary to cure such default
with all due diligence provided, further, however, that the period
within which Tenant must commence such cure or complete such cure shall
be extended by the number of days during which there shall exist any
Unavoidable Delay; or
(d) Tenant shall default in due performance or observance of
any term, covenant or agreement on its part to be performed or observed
pursuant to Article 7 or Section 9.1 or 9.4; or
(e) any Guarantor shall default in due performance or
observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty; or
(f) any of the Transaction Documents shall cease for any
reason to be in full force and effect (other than as specifically
provided therein, or released as provided therein), or Tenant or any
Guarantor shall so assert in writing; or
(g) the occurrence of a default or breach of condition
continuing beyond the expiration of any applicable grace
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period under the terms of any other agreement, document or instrument
(including, without limitation, all leases and loan documents)
evidencing any indebtedness, covenant, liability, obligation or
undertaking due to, or made for the benefit of, Landlord, HRPT
Advisors, Inc., or any Subsidiary of either of them, by (i) Tenant,
(ii) any Affiliate of Tenant, (iii) any Guarantor, (iv) any Affiliate
of any Guarantor or (v) any entity owned, legally or beneficially, by
Tenant or any Guarantor, whether such indebtedness, covenants,
liabilities, obligations or undertakings are direct or indirect,
absolute or contingent, liquidated or unliquidated, due or to become
due, joint, several or joint and several, primary or secondary, now
existing or hereafter arising; or
(h) any obligation of Tenant or any Guarantor, or of any
Subsidiary of either, in respect of any Indebtedness for money borrowed
(excluding trade accounts payable in the ordinary course of business on
customary trade terms), or any guaranty relating thereto shall be
declared to be or shall become due and payable prior to the stated
maturity thereof, or there shall occur and be continuing any default
under any instrument, agreement or evidence of indebtedness relating to
any such Indebtedness for money borrowed the effect of which is to
permit the holder or holders of such instrument, agreement or evidence
of indebtedness, or a trustee, agent or other representative on behalf
of such holder or holders, to cause such Indebtedness for money
borrowed to become due prior to its stated maturity; or
(i) there shall occur a final unappealable determination by
applicable state authorities of the revocation or limitation of any
license, permit, certification or approval required for the lawful
operation of the Facility located on the applicable Leased Property in
accordance with its Primary Intended Use or the loss or limitation of
any license, permit, certification or approval under any other
circumstances under which Tenant is required to cease its operation of
such Facility in accordance with its Primary Intended Use as currently
operated, and Tenant shall not, within thirty (30) days thereafter,
have commenced appropriate procedures for the substitution of a new
property therefor in accordance with the provisions of Article 16
hereof, or, if Tenant shall have commenced such procedures, the
substitution of such new property shall not have occurred within ninety
(90) days of such determination or loss; or
(j) any representation or warranty made by or on behalf of
Tenant or any Guarantor under or in connection with the applicable
Lease or any of the other Transaction Documents, or in any document,
certificate or agreement delivered pursuant to the terms of such Lease
or any of the other Transaction Documents, shall prove to have been
false or
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misleading in any material respect on the day when made or deemed made;
or
(k) Tenant or any Guarantor shall be generally not paying its
debts as they become due, or Tenant or any Guarantor, or any subsidiary
thereof, shall make a general assignment for the benefit of creditors;
or
(l) any petition shall be filed by or against (i) Tenant or
(ii) any Guarantor or (iii) any Affiliate of either (where the filing
of such petition against any such Affiliate will have a material
adverse effect upon the operations, business, prospects, property, or
assets of, liabilities, or the condition of, Tenant or any Guarantor),
under the Federal bankruptcy laws, or any other proceeding shall be
instituted by or against Tenant or such Guarantor or Affiliate 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 such Guarantor or Affiliate, or
for any substantial part of the property of Tenant or such Guarantor or
Affiliate, and such proceeding is not dismissed within ninety (90) days
after institution thereof, or Tenant or such Guarantor or Affiliate
shall take any action to authorize or effect any of the actions set
forth above in this paragraph (1); or
(m) Tenant or any Guarantor or any Affiliate of any of them
(where the dissolution or termination or any such Affiliate will have a
material adverse effect upon the operations, business prospects,
property, or assets of, liabilities, or the condition of, Tenant or any
Guarantor) shall cause or institute any proceeding for its dissolution
or termination; or
(n) Tenant shall voluntarily cease operation of the applicable
Leased Property for its Primary Intended Use for a period in excess of
thirty (30) consecutive days, except as a result of damage, destruction
or partial or complete condemnation, and Tenant shall not, within
thirty (30) days thereafter, have commenced appropriate procedures for
the substitution of a new property therefor in accordance with the
provisions of Article 16 hereof, or, if Tenant shall have commenced
such procedures, the substitution of such new property shall not have
occurred within ninety (90) days of the cessation of such operations;
or
(o) a default shall occur under any mortgage which is secured
by Tenant's leasehold interest in the applicable Lease or the mortgagee
under any such mortgage accelerates
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the indebtedness secured thereby or commences a foreclosure action in
connection with said mortgage;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate the applicable Lease by giving Notice of such
termination, and upon the expiration of the time, if any, fixed in such Notice,
the Term shall terminate and all rights of Tenant under the applicable Lease
shall cease. Landlord shall have all rights at law and in equity available to
Landlord as a result of Tenant's breach of the applicable Lease.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Collective Leased
Properties or any portion thereof and take possession of any and all of Tenant's
Personal Property and the Records (subject to any prohibitions or limitations to
disclosure of any such data as described in Section 3.1.2(e)) on the applicable
Leased Property, without liability for trespass or conversion (Tenant hereby
waiving any right to notice or hearing prior to such taking of possession by
Landlord) and sell the same at public or private sale, after giving Tenant
reasonable Notice of the time and place of any public or private sale, at which
sale Landlord or its assigns may purchase all or any portion of Tenant's
Personal Property unless otherwise prohibited by law. Without intending to
exclude any other manner of giving Tenant reasonable notice, the requirement of
reasonable Notice shall be met if such Notice is given at least ten (10) days
before the day of sale. The proceeds from any such disposition, less all
expenses incurred in connection with the taking of possession, holding and
selling of such property (including, reasonable attorneys' fees) shall be
applied as a credit against the indebtedness which is secured by the security
interest granted in Section 7.2. Any surplus shall be paid to Tenant or as
otherwise required by law and Tenant shall pay any deficiency to Landlord, as
Additional Charges, upon demand.
12.2 Remedies.
Neither (a) the termination of the applicable Lease pursuant to Section
12.1, (b) the repossession of the applicable Leased Property or any portion
thereof, (c) the failure of Landlord, notwithstanding reasonable good faith
efforts, to relet the applicable Leased Property or any portion thereof, nor (d)
the reletting of all or any portion thereof, 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 Landlord all Rent due and payable with respect to
the applicable Leased Property to and including the date of such termination.
Thereafter, Tenant, until the end of what would have been the Term of the
applicable Lease in the absence of such termination, and whether or not the
applicable Leased Property or any portion thereof shall have been relet, shall
be liable to Landlord for, and shall pay to Landlord, as current damages, the
Rent and other
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charges which would be payable hereunder for the remainder of the Term had such
termination not occurred, less the net proceeds, if any, of any reletting of the
applicable Leased Property, after deducting all reasonable expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, advertising,
expenses of employees, alteration costs and expenses of preparation for such
reletting. Tenant shall pay such current damages to Landlord monthly on the days
on which the Minimum Rent would have been payable hereunder if the applicable
Lease had not been terminated. Additional Rent for the purposes of this Section
12.2 shall be a sum equal to the amount of the Additional Rent (determined on an
annualized basis) payable for the Fiscal Year immediately preceding the Fiscal
Year in which the termination, re-entry or repossession takes place. If,
however, such termination, re-entry or repossession occurs during the first full
Fiscal Year after the Commencement Date, the Additional Rent for such Leased
Property shall be determined based on the assumption that Additional Rent for
such Leased Property would have continued to accrue at the same rate that it had
for the Fiscal Year immediately prior to such termination, re-entry or
repossession determination.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord either
(a) an amount equal to the excess, if any, of the Rent and other charges which
would be payable hereunder from the date of such termination (assuming that, for
the purposes of this paragraph, annual payments by Tenant on account of
Impositions would be the same as payments required for the immediately preceding
twelve calendar months, or if less than twelve calendar months have expired
since the Commencement Date, the payments required for such lesser period
projected to an annual amount) for what would be the then unexpired term of the
applicable Lease if the same remained in effect, over the Fair Market Rental for
the same period, or (b) an amount equal to the lesser of (i) the Rent and other
charges that would have been payable for the balance of the Term had it not been
terminated, or (ii) the aggregate of the Rent and other charges accrued in the
twelve (12) months ended next prior to such termination (without reduction for
any free rent or other concession or abatement). In the event the applicable
Lease is so terminated prior to the expiration of the first full year of the
Term, the liquidated damages which Landlord may elect to recover pursuant to
clause (b) (ii) of this paragraph shall be calculated as if such termination had
occurred on the first anniversary of the Commencement Date. Nothing contained in
the applicable Lease shall, however, limit or prejudice the right of Landlord to
prove and obtain in proceedings for bankruptcy or insolvency an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, the damages are to be proved, whether or
not the amount be greater
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than, equal to, or less than the amount of the loss or damages referred to
above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet the applicable
Leased Property or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may at Landlord'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 Landlord
considers advisable and necessary to relet the same, and (b) may make such
reasonable alterations, repairs and decorations in the applicable Leased
Property or any portion thereof as Landlord, in its sole judgment, considers it
advisable and necessary for the 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.
Landlord shall in no event be liable in any way whatsoever for failure to relet
the applicable Leased Property, or, in the event that the applicable 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 being evicted or dispossessed, or in the event of Landlord obtaining
possession of the applicable Leased Property, by reason of the violation by
Tenant of any of the covenants and conditions of the applicable Lease.
12.3 TENANT'S WAIVER.
IF THE APPLICABLE LEASE IS TERMINATED PURSUANT TO SECTION 12.1 OR 12.2
HEREOF, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, (A) ANY RIGHT TO A TRIAL
BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN
THIS ARTICLE 12, AND (B) THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE
EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds.
Any payments received by Landlord under any of the provisions of the
applicable Lease during the existence or continuance of any Default or Event of
Default (and any payment made to Landlord rather than Tenant due to the
existence of any Default or Event of Default) shall be applied to Tenant's
obligations under the applicable Lease and under the other Transaction
Documents, in such order as Landlord may determine or as may be prescribed by
the laws of the State.
12.5 Failure to Conduct Business.
For the purpose of determining rental loss damages for Additional Rent,
in the event Tenant shall fail to conduct its business at the applicable Leased
Property for the Primary
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Intended Use, exact damages or the amount of Additional Rent being
unascertainable, the Additional Rent for such Leased Property shall be deemed to
be equal to the annual amount of the Additional Rent for the Fiscal Year
immediately preceding the Fiscal Year in which such determination takes place.
If, however, such determination occurs during the first full Fiscal Year after
the Commencement Date, the Additional Rent for such Leased Property shall be
determined based on the assumption that Additional Rent for such Leased Property
would have continued to accrue at the same rate that it had for the period prior
to such determination.
12.6 Landlord's Right to Cure Tenant's Default.
If an Event of Default shall have occurred and be continuing, Landlord,
after Notice to Tenant (provided that no such notice shall be required if
Landlord shall reasonably determine immediate action is necessary to protect
person or property), without waiving or releasing any obligation of Tenant, and
without waiving or releasing any Event of Default, may (but shall not be
obligated 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 the applicable Leased Property or any portion thereof for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor, including the management of the Facility
located on the applicable Leased Property by Landlord or its designee (which may
include, without limitation, Greenery Managers, Inc.), and Tenant hereby
irrevocably appoints, in the event of such election by Landlord, Landlord or its
designee as manager of the Facility located on the applicable Leased Property
and its attorney in fact for such purpose, irrevocably and coupled with an
interest, in the name, place and stead of Tenant. No such entry shall be deemed
an eviction of Tenant. All reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by Landlord in connection
therewith, together with interest thereon (to the extent permitted by law) at
the Overdue Rate from the date such sums are paid by Landlord until repaid,
shall be paid by Tenant to Landlord, on demand.
12.7 Trade Names.
If the applicable Lease relating to a Facility is terminated for any
reason Tenant shall not use a Facility Trade Name in the same market in which
such Facility is located in connection with any business that competes with such
Facility.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration of the Term shall be
treated as a daily-tenancy at sufferance at a rate equal to 1-1/2 times the
Minimum Rent and the Additional Rent then in
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effect plus Additional Charges and other charges herein provided (prorated on a
daily basis). Tenant shall also pay to Landlord all damages (other than
consequential damages) sustained by reason of any such holding over. Otherwise,
such holding over shall be on the terms and conditions set forth in the
applicable Lease, to the extent applicable. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of the applicable Lease.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in the applicable Lease, and such default
shall continue for a period of thirty (30) days after Notice thereof from Tenant
to Landlord and any applicable Facility Mortgagee, or such additional period as
may be reasonably required to correct the same, Tenant may declare the
occurrence of a "Landlord Default" by a second Notice to Landlord and to such
Facility Mortgagee. Thereafter, Tenant may forthwith cure the same and, subject
to the provisions of the following paragraph, invoice Landlord for costs and
expenses (including reasonable attorneys' fees and court costs) incurred by
Tenant in curing the same, together with interest from the date Landlord
receives Tenant's invoice, at a rate equal to the lesser of the Overdue Rate or
the maximum rate allowed by law. Tenant shall have no right to terminate the
applicable Lease for any default by Landlord hereunder and no right, for any
such default, to offset or counterclaim against any Rent or other charges due
hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof. If Tenant and Landlord shall fail, in good faith, to resolve the
dispute within ten (10) days after Landlord's Notice of dispute, either may
submit the matter for resolution to a court of competent jurisdiction.
ARTICLE 15
PURCHASE OF LEASED PROPERTY
In the event Tenant shall purchase the applicable Leased Property from
Landlord pursuant to the terms of the applicable Lease, Landlord shall, upon
receipt from Tenant of the applicable purchase price, together with full payment
of any unpaid Rent and other charges due and payable with respect to any period
ending on
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or before the date of the purchase, and so long as no Default shall have
occurred and be continuing at such time, (or, solely in the case of the purchase
of the Collective Leased Properties pursuant to Section 21.4, so long as no
Default involving the nonpayment of Rent shall have occurred and be continuing),
deliver to Tenant a title insurance policy, together with an appropriate deed or
other instruments, conveying the entire interest of Landlord in and to such
Leased Property to Tenant, free and clear of all encumbrances created through
the act or omission of Landlord other than (i) those liens, if any, which Tenant
has agreed in writing to accept and take title subject to, and (ii) encumbrances
imposed on such Leased Property under Section 5.5 hereof. The difference between
the applicable purchase price and the total cost of discharging the encumbrances
described in clause (i) above shall be paid in cash to Landlord or as Landlord
may direct, in federal or other immediately available funds. 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. The closing of any such
sale shall be subject to all terms and conditions with respect thereto set forth
in the applicable Lease and in the other Transaction Documents, and shall,
unless waived by Tenant, be contingent upon and subject to Tenant's obtaining
all required governmental consents and approvals for such transfer. All expenses
of such conveyance, including, without limitation, all transfer and sales taxes,
documentary fees, the reasonable fees and expenses of counsel to Landlord and
the cost of any title examination or title insurance, shall be paid by Tenant.
ARTICLE 16
SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY
16.1 Tenant's Substitution Option.
If (a) in the good faith judgment of Tenant, the Leased Property shall
become Unsuitable for Its Primary Intended Use, and no Default shall have
occurred and then be continuing, or (b) Tenant shall have voluntarily ceased
operations on the applicable Leased Property or there shall have occurred a
final unappealable determination by an applicable State authority of the
revocation of any license, permit or approval required for the lawful operation
of the Facility located on the applicable Leased Property in accordance with its
Primary Intended Use or the loss of any license under any other circumstances
under which Tenant is required to cease its operation of such Facility in
accordance with its Primary Intended Use, and no Event of Default shall have
occurred and then be continuing, Tenant shall have the right, subject to the
conditions set forth in this Article 16, upon not less than thirty (30) days,
and not more than ninety (90) days, prior Notice to Landlord, to substitute one
or more properties (collectively, "Substitute Properties" or individually,
"Substitute Property") on the date specified in such Notice (the
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"Substitution Date") (which date shall not be more than ninety (90) days from
the date of cessation of operations at the Facility); provided, however, if
Tenant is required by court order or administrative action to divest or
otherwise dispose of the applicable Leased Property in less than thirty (30)
days and Tenant shall have given Landlord prior Notice of the filing of such
court or administrative action and kept Landlord reasonably apprised of the
status thereof, the time period shall be shortened appropriately to meet the
reasonable needs of Tenant, but in no event less than ten (10) Business Days
after the receipt by Landlord of such Notice. Such Notice shall (i) be in the
form of an Officer's Certificate, setting forth in reasonable detail the
reason(s) for the substitution and the proposed Substitution Date, and (ii)
designate not less than two properties (or groups of properties), each of which
properties (or groups of properties) shall provide Landlord with a yield (i.e.,
annual return on its equity in such property) substantially equivalent to
Landlord's yield from the applicable Leased Property at the time of such
proposed substitution (or in the case of substitution because of damage or
destruction, the yield immediately prior to such damage or destruction) and as
reasonably projected over the remaining Term of the applicable Lease.
16.2 Substitution Procedures.
(a) If Tenant shall initiate a substitution pursuant to Section 16.1 or
above, Landlord shall have a period of thirty (30) days within which to review
the designated properties and such additional information as may be reasonably
requested by Landlord and either accept or reject the Substitute Properties so
presented, unless Tenant is required by a court order or administrative action
to divest or otherwise dispose of the Leased Property within a shorter time
period, in which case the time period shall be shortened appropriately to meet
the reasonable needs of Tenant, but in no event shall such period be less than
ten (10) Business Days after Landlord's actual receipt of Tenant's notice
(subject to further extension for any period of time in which Landlord is not
timely provided with the information provided for in this Section 16.2 and
Section 16.3 below). Landlord and Tenant shall use good faith efforts to agree
on a Substitute Property.
(b) Tenant's right (and obligation) to offer to substitute a property
as set forth in this Article is subject to (i) satisfaction of the conditions
set forth in Section 16.3 below, (ii) determination by Landlord that the
Substitute Property shall provide Landlord with a yield substantially equivalent
to Landlord's yield from the Leased Property immediately before such
substitution or such damage or destruction, as the case may be, and as projected
over the remainder of the Term, and (iii) the delivery of an opinion of counsel
for Landlord confirming that (w) the substitution of the Substitute Property for
the Leased Property will qualify as an exchange solely of property of a like
kind under Section 1031 of the Code, in which, generally, except
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for "boot", no gain or loss will be recognized by Landlord, (x) the substitution
will not result in ordinary recapture income to Landlord pursuant to Code
Section 1250(d)(4) or any other Code provision, (y) the substitution will result
in income, if any, to the Landlord of a type described in Code Section 856(c)(2)
or (3) and will not result in income of the types described in Code Section
856(c)(4) or result in the tax imposed under Code Section 857(b)(6), and (z) the
substitution, together with all other substitutions made or requested by Tenant
or an Affiliate pursuant to any other lease with Landlord or other transfers of
the Leased Property or properties leased under other such leases, during the
relevant time period, will not jeopardize the qualification of Landlord as a
real estate investment trust under Code Sections 856-860 .
(c) In the event that the then Fair Market Value of the Substitute
Property or group of Substitute Properties minus the encumbrances assumed by
Landlord, or as to which the Landlord will take the Substitute Property or group
of Substitute Properties subject, as of the Substitution Date is greater than
the then Adjusted Purchase Price of the applicable Leased Property minus the
encumbrances assumed by Tenant, or as to which the Tenant will take the
applicable Leased Property subject, as of the Substitution Date (or in the case
of damage or destruction, the Adjusted Purchase Price of the applicable Leased
Property immediately prior to such damage or destruction), Landlord shall pay to
Tenant an amount equal to the difference, subject to the limitation set forth
below; in the event that such value of the Substitute Property or group of
Substitute Properties is less than such value of the applicable Leased Property,
Tenant shall pay to Landlord an amount equal to the difference, subject to the
limitation set forth below, provided, however, neither Landlord nor Tenant shall
be obligated to consummate such substitution if such party would be required to
make a payment (the "Cash Adjustment") to the other in excess of an amount equal
to fifteen percent (15%) of the Fair Market Value of the applicable Leased
Property. Without limiting the effect of the preceding sentence, in the event
that, on the Substitution Date, Landlord is obligated to pay a Cash Adjustment
to Tenant and Landlord, by a vote of a majority of the Independent Trustees,
shall elect not to make such payment in cash, Landlord shall provide Tenant with
(and Tenant shall accept) a purchase money note and mortgage or deed of trust,
on then commercially reasonable terms.
(d) The Rent for such Substitute Property from the Substitution Date
shall, in all respects, provide Landlord with a yield (i.e., annual return on
its equity in such property) substantially equivalent to Landlord's yield from
the Leased Property at the time of such substitution (or in the case of
substitution because of damage or destruction the yield immediately prior to
such damage or destruction) and as reasonably projected over the remaining Term,
taking into account the Cash Adjustment paid or received by-Landlord and any
other relevant
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factors, as determined by a majority of the Independent Trustees and a majority
of the Trustees.
(e) The Adjusted Purchase Price of the Substitute Property shall be an
amount equal to the Adjusted Purchase Price of the Leased Property (i) increased
by any Cash Adjustment paid by Landlord pursuant to paragraph (c) above, or (ii)
decreased by any Cash Adjustment paid by Tenant pursuant to paragraph (c) above.
16.3 Conditions to Substitution.
On the Substitution Date, the Substitute Property shall become the
Leased Property hereunder, upon delivery by Tenant to Landlord of the following:
(a) An Officer's Certificate, and, with respect to the matters
described in (ii), (iii) and (iv) below, an opinion of counsel to
Tenant reasonably acceptable to Landlord, certifying that (i) the
Substitute Property has been accepted by Tenant for all purposes of the
applicable Lease and there has been no material damage to the
improvements located thereon, nor is any condemnation or eminent domain
proceeding pending with respect thereto; (ii) all appropriate permits,
licenses and certificates (including, but not limited to, a permanent,
unconditional certificate of occupancy and all certificates of need,
licenses and provider agreements) which are necessary to permit the use
of the Substitute Property in accordance with the provisions of the
applicable Lease have been obtained and are in full force and effect;
(iii) under applicable zoning and use laws, ordinances, rules and
regulations, the Substitute Property may be used for the purposes
contemplated by the applicable Lease and all necessary subdivision
approvals, if any, have been obtained; (iv) there are no mechanics' or
materialmen's liens outstanding or threatened to the knowledge of
Tenant against the Substitute Property arising out of or in connection
with the construction of the improvements thereon, other than those
being contested by Tenant pursuant to Article 8 hereof; (v) no Default
exists, and no defense, offset or claim exists with respect to any sums
payable by Tenant under the applicable Lease; and (vi) any exceptions
to Landlord's title to the Substitute Property do not materially
interfere with the intended use of the Substitute Property by Tenant;
(b) A deed with limited warranties or assignment of a
leasehold estate with limited warranties (as applicable) conveying to
Landlord title to the Substitute Property free and clear of any liens
or encumbrances, except those approved by Landlord;
(c) an amendment duly executed, acknowledged and delivered by
Tenant, in form and substance reasonably satisfactory to Landlord,
amending the applicable Lease to (i) correct the legal description of
the Land, (ii) establish
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(x) the Adjusted Purchase Price and (y) the Minimum Rent of, the
Substitute Property and (iii) make such other changes herein as may be
necessary or appropriate under the circumstances;
(d) counterparts of a standard owner's or lessee's (as
applicable) policy of title insurance covering the Substitute Property
(or a valid, binding, unconditional commitment therefor), dated as of
the Substitution Date, in then current form and including mechanics'
and materialmen's lien coverage, issued to Landlord by a title
insurance company and in the form reasonably satisfactory to Landlord.
Such policy shall (i) insure (x) Landlord's fee title or leasehold
estate to the Substitute Property, subject to no liens or encumbrances
except those approved by Landlord and (y) that any restrictions
affecting the Substitute Property have not been violated; (ii) be in an
amount at least equal to the Fair Market Value of the Substitute
Property; and (iii) contain such affirmative coverage endorsements as
Landlord shall reasonably request;
(e) certificates of insurance with respect to the Substitute
Property fulfilling the requirements of Article 9;
(f) current appraisals or other evidence satisfactory to
Landlord, in its sole discretion, as to the then current Fair Market
Values and the projected residual values of such Substitute Property
and the applicable Leased Property for the remainder of the Term;
(g) all available revenue data relating to the Substitute
Property for the period from the date of opening for business of the
Facility on such Substitute Property to the date of Tenant's most
recent Fiscal Year end, or for the most recent three (3) years,
whichever is less;
(h) written confirmation from any guarantor of Tenant's
obligations under the applicable Lease; and
(i) such other certificates, documents, opinions of counsel
and other instruments as may be reasonably required by Landlord.
16.4 Conveyance to Tenant.
On the Substitution Date, Landlord shall convey the Leased Property to
Tenant in accordance with the provisions of Article 15 hereof (except as to
payment of any expenses in connection therewith which shall be governed by
Section 16.5 below) upon conveyance to Landlord of the Substitute Property, as
appropriate.
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16.5 Expenses.
Tenant shall pay or cause to be paid, on demand, all reasonable costs
and expenses paid or incurred by Landlord in connection with the substitution
and conveyance of the Leased Property and Substitute Property, including, but
not limited to, (a) reasonable fees and expenses of counsel, (b) all printing
expenses, (c) the amount of filing, registration and recording taxes and fees,
(d) the cost of preparing and recording, if appropriate, a release of the Leased
Property from the lien of any mortgage, (e) brokers' fees and commissions, (f)
documentary stamp and transfer taxes, (g) title insurance charges and premiums,
and (h) escrow fees.
ARTICLE 17
SUBLETTING AND ASSIGNMENT
17.1 Subletting and Assignment.
Except as provided in Section 17.3 below, Tenant shall not, without the
prior written consent of a majority of the Independent Trustees and a majority
of the Trustees, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer the applicable Lease or sublease (which term shall be deemed to include
the granting of concessions and licenses and the like), all or any part of the
applicable Leased Property or suffer or permit the applicable Lease or the
leasehold estate created hereby or thereby or any other rights arising under the
applicable Lease to be assigned, transferred, mortgaged, pledged, hypothecated
or encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the use or occupancy of the applicable Leased
Property by anyone other than Tenant, or the applicable Leased Property to be
offered or advertised for assignment or subletting except as hereinafter
provided. For purposes of this Section 17.1, an assignment of the applicable
Lease shall be deemed to include any Change in Control of Tenant or any
transaction pursuant to which Tenant is merged or consolidated with another
entity or pursuant to which all or substantially all of Tenant's assets are
transferred to any other entity, as if such Change in Control or transaction
were an assignment of the applicable Lease.
If the applicable Lease is assigned or if the applicable Leased
Property or any part thereof are sublet (or occupied by anybody other than
Tenant and its employees, except as permitted by Section 17.3) Landlord, after
an Event of Default occurs and 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 the first paragraph of this Section 17.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its
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covenants, agreements or obligations contained in the applicable Lease.
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 a particular instance shall be deemed to be a waiver of the
prohibition set forth in this Section 17.1. No assignment, subletting or
occupancy shall affect the Primary Intended Use. Any subletting, assignment or
other transfer of Tenant's interest in the applicable Lease in contravention of
this Section 17.1 shall be voidable at Landlord's option.
17.2 Required Sublease Provisions.
Any sublease of all or any portion of the applicable Leased Property
shall provide (a) that it is subject and subordinate to the applicable Lease and
to the matters to which the applicable Lease and such Lease is or shall be
subject or subordinate; (b) that in the event of termination of such Lease or
reentry or dispossession of Tenant by Landlord under such Lease, Landlord may,
at its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Facility
Mortgagee, as holder of a mortgage or as Landlord under the applicable Lease, if
such mortgagee succeeds to that position, shall (i) be liable for any act or
omission of Tenant under such sublease, (ii) be subject to any credit,
counterclaim, offset or defense which theretofore accrued to such subtenant
against Tenant, (iii) be bound by any previous modification of such sublease not
consented to in writing by Landlord or by any previous prepayment of more than
one (1) month's Rent, (iv) be bound by any covenant of Tenant to undertake or
complete any construction of such Leased Property or any portion thereof, (v) be
required to account for any security deposit of the subtenant other than any
security deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person occupying such Leased Property or any
part thereof; and (c) in the event the subtenant receives a written Notice from
Landlord or the Facility Mortgagee, if any, stating that an Event of Default has
occurred and is continuing, 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
Landlord or the Facility Mortgagee, if any, as the case may be, shall be
credited against the amounts owing by Tenant under the applicable Lease; and
such sublease shall provide that the subtenant thereunder shall, at the request
of Landlord,
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execute a suitable instrument in confirmation of such agreement to attorn. 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 form
and substance satisfactory to Landlord, shall be delivered promptly to Landlord
and (a) in the case of an assignment, the assignee shall assume in writing and
agree to keep and perform all of the terms of the applicable 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 and (b) in case of
either an assignment or subletting, Tenant shall remain primarily liable, as
principal rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Tenant hereunder.
The provisions of this Section 17.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 17.1.
17.3 Permitted Sublease.
Notwithstanding the foregoing, but subject to the provisions of Section
17.4 below and any other express conditions or limitations set forth herein,
Tenant may, in each instance after Notice to Landlord, sublease space at the
applicable Leased Property for laundry, commissary or child care purposes in
furtherance of the Primary Intended Use, so long as such sublease would not
reduce the number of licensed beds at the applicable Facility, would not violate
or affect any Legal Requirement or Insurance Requirement, and Tenant has
provided such additional insurance coverage applicable to the activities to be
conducted in such subleased space as is acceptable to Landlord (and any Facility
Mortgagee) in its discretion.
17.4 Sublease Limitation.
Anything contained in this Lease to the contrary notwithstanding,
Tenant shall not sublet the applicable Leased Property on any basis such that
the rental to be paid by the sublessee thereunder would be based, in whole or in
part, on either (a) the income or profits derived by the business activities of
the sublessee, or (b) any other formula such that any portion of the sublease
rental 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.
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ARTICLE 18
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
18.1 Estoppel Certificates
At any time and from time to time, upon not less than ten (10) days
prior Notice by Landlord, Tenant shall furnish to Landlord an Officer's
Certificate certifying that the applicable Lease is unmodified and in full force
and effect (or that the applicable Lease is in full force and effect as modified
and setting forth the modifications), the date to which the Rent has been paid,
that Tenant is not in default in the performance of observance of any of the
terms of the applicable Lease and that no event exists which with the giving of
notice, lapse of time, or both, would constitute a Default or an Event of
Default, or if a Default or an Event of Default shall exist, specifying in
reasonable detail such Default or an Event of Default, and the steps being taken
to remedy the same, and such additional information as Landlord may reasonably
request. Any such certificate furnished pursuant to this Section 18.1 may be
relied upon by Landlord and any prospective purchaser or mortgagee of the
applicable Leased Property.
18.2 Financial Statements.
Tenant shall furnish the following statements to Landlord:
(a) within forty-five (45) days after each of the first three
quarters of any Fiscal Year, the most recent Consolidated Financials of
Tenant, accompanied by the Financial Officer's Certificate;
(b) within ninety (90) days after the end of each Fiscal Year,
the most recent Consolidated Financials of Tenant for such year,
certified by Ernst & Young or any other independent certified public
accountant reasonably satisfactory to Landlord and accompanied by the
Financial Officer's Certificate;
(c) promptly after the sending or filing thereof, copies of
all reports which Tenant sends to its security holders generally, and
copies of all periodic reports which Tenant files with the SEC or any
stock exchange on which its shares are listed or traded;
(d) promptly after the delivery thereof to Tenant, or its
management, a copy of any management letter or written report prepared
by the certified public accountants with respect to the financial
condition, operations, business or prospects of Tenant.
(e) at any time and from time to time upon not less than
twenty (20) days Notice from Landlord, Tenant will
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furnish to Landlord any Consolidated Financials or any other financial
reporting information required to be filed by Landlord with any
securities and exchange commission, the SEC or any successor agency, or
any other governmental authority, or required pursuant to any order
issued by any court governmental authority or arbitrator in any
litigation to which Landlord is a party, for purposes of compliance
therewith; and
(f) promptly upon notice from Landlord, such other information
concerning the business, financial condition and affairs of Tenant as
Landlord may reasonably request from time to time.
Landlord may at any time, and from time to time, provide any Facility Mortgagee
with copies of any of the foregoing statements.
18.3 General Operations.
Tenant covenants and agrees to furnish to Landlord:
18.3.1 Reimbursement, Licensure etc.
Within thirty (30) days after receipt or modification thereof, copies
of
(a) all licenses authorizing Tenant to operate the
Facility for its Primary Intended Use;
(b) all Medicare and Medicaid certifications, together
with provider agreements and all material
correspondence relating thereto with respect to the
Facility (excluding, however, correspondence which
may be subject to any attorney-client privilege);
(c) a Nursing Home Administrator License for the
individual employed in such capacity with respect to
the Facility; and
(d) all reports of surveys, statements of deficiencies,
plans of correction, and all material correspondence
relating thereto, including, without limitation, all
reports and material correspondence concerning
compliance with or enforcement of licensure,
Medicare/ Medicaid, and accreditation requirements,,
including physical environment and Life Safety Code
survey reports (excluding, however, correspondence
which may be subject to any attorney-client
privilege); and
(e) with reasonable promptness, such other confirmation
as to the Licensure and Medicare
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and Medicaid participation of Tenant as Landlord may
reasonably request from time to time.
18.3.2 Annual Budgets.
Not less than thirty (30) days prior to commencement of any Fiscal
Year, proposed annual income and ordinary expense and capital improvement
budgets setting forth projected income and costs and expenses projected to be
incurred by Tenant in managing, owning, maintaining and operating the Facility
during the next succeeding Fiscal Year.
ARTICLE 19
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the applicable Leased Property during usual business hours upon not less
than three (3) Business Days' Notice (provided that no such notice shall be
required if Landlord shall reasonably determine immediate action is necessary to
protect person or property), and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of the applicable Lease; provided that
any inspection or repair by Landlord or its representatives will not
unreasonably interfere with Tenant's use and operation of applicable Leased
Property; further provided that in the event of an emergency, as determined by
Landlord in its sole discretion, prior notice shall not be necessary.
ARTICLE 20
APPRAISAL
20.1 Appraisal Procedure.
In the event that it becomes necessary to determine the Fair Market
Value or Fair Market Rental of any property for any purpose of the applicable
Lease, and the parties cannot agree amongst themselves on such Fair Market Value
or Fair Market Rental, Tenant may request that Landlord select, or Landlord may
on its own initiative select, a Qualified Appraiser (as hereinafter defined). If
Tenant does not accept the Fair Market Value or Fair Market Rental, as the case
may be, of such property as of the relevant date as determined by such Qualified
Appraiser, Tenant may, within ten (10) days after receiving the report of such
Qualified Appraiser, by written notice to Landlord, appoint a second Qualified
Appraiser. If Tenant does not so appoint a second Qualified Appraiser within
such ten (10) day period, Tenant shall be deemed to have accepted the Fair
Market Value or Fair Market Rental determined by the first Qualified Appraiser.
The two appraisers
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so designated shall meet within ten (10) days after the second Qualified
Appraiser is designated, and, if within ten (10) days after the second Qualified
Appraiser is designated, the two appraisers do not agree upon the Fair Market
Value or Fair Market Rental, as the case may be, of any property as of the
relevant date, the two appraisers shall designate a third Qualified Appraiser,
within ten (10) days thereafter. In the event that the two appraisers are unable
to agree upon the appointment of a third Qualified Appraiser within such ten
(10) day period, either Landlord or Tenant, on behalf of both, may then request
appointment of such appraiser by the then president of the American Arbitration
Association. In the event of a failure, refusal or inability of any appraiser to
act, a new Qualified Appraiser shall be appointed in his stead, which
appointment shall be made in the same manner as hereinabove provided for the
appointment of such appraiser so failing, refusing or being unable to act. In
the event that all appraisers cannot agree upon such value within ten (10) days
as aforesaid, each appraiser shall submit his appraisal of such value to the
other two appraisers in writing, and such value shall be determined by
calculating the average of the two numerically closest (or, if the values are
equidistant, all three) values determined by the three appraisers.
"Qualified Appraiser" shall mean any-disinterested person who is a
member in good standing of the American Institute of Real Estate Appraisers or
the American Society of Real Estate Counselors (or the successor to either of
such organizations) and who has had not less than ten (10) years experience in
appraising and valuing, commercial buildings in the State.
The costs (other than Landlord's counsel fees) of each such appraisal
shall be borne by Tenant and shall be included as part of the Additional
Charges. Upon determining such value, the appraisers shall promptly notify
Landlord and Tenant in writing of such determination. If any party shall fail to
appear at the hearings appointed by the appraisers, the appraisers may act in
the absence of such party.
The determination of the board of appraisers (or the single Qualified
Appraiser, as appropriate) made in accordance with the foregoing provisions
shall be final and binding upon the parties, such determination may be entered
as an award in arbitration in a court of competent jurisdiction, and judgment
thereon may be entered.
20.2 Landlord's Right to Appraisal.
Landlord shall have the right, exercisable twice at any time during the
Term, to appoint a Qualified Appraiser (which may include, without limitation,
American Appraisal Associates) to perform a complete appraisal of the applicable
Leased Property, (each such appraisal to include complete valuations of such
Leased Property based upon (a) the "Cost Approach", (b) the "Market Approach"
and (c) the "Income Approach"), which appraisal shall
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meet all requirements of any state or Federal bank regulatory authority that
Landlord considers relevant or any Facility Mortgagee. The costs of each such
appraisal shall be borne by Tenant and shall be included as part of the
Additional Charges. Such right may not be exercised more than twice during the
Term.
ARTICLE 21
RIGHTS OF FIRST REFUSAL; OPTION TO PURCHASE
21.1 First Refusal to Purchase.
Provided, (a) no Default has occurred and is continuing, (b) the Leases
for each of the Collective Leased Properties shall be in full force and effect
(other than Leases that have been terminated in accordance with the provisions
hereof for reasons other than as a result of the occurrence of an Event of
Default), and (c) other than as expressly permitted by Article 17,
Tenant shall not have assigned the Leases for any of the Collective Leased
Properties or subleased all or any portion of the Collective Leased Properties,
during the Term and for sixty (60) days after expiration of the Term, Tenant
shall have a right of first refusal to purchase the applicable Leased Property
(subject to Section 22.1) upon the same price, terms and conditions as Landlord
shall propose to sell such Leased Property, or upon the same price, terms and
conditions of any written offer from a third party to purchase such Leased
Property which Landlord intends to accept (or has accepted subject to Tenant's
right of first refusal herein provided). If, during the Term and for sixty (60)
days after expiration of the Term, Landlord reaches such agreement with a third
party or proposes to offer the applicable Leased Property for sale, Landlord
shall promptly give Notice to Tenant of the purchase price and all other
material terms and conditions of such agreement or proposed sale and Tenant
shall have thirty (30) days thereafter to exercise Tenant's right of first
refusal to purchase by Notice to Landlord thereof. Failure of Tenant to respond
within such 30-day period shall be deemed a waiver of Tenant's right to purchase
such Leased Property pursuant to this Section 21.1. If Tenant exercises its
right of first refusal, the sale to Tenant shall be consummated upon the same
terms and conditions as contained in such agreement or Landlord's Notice of the
proposed sale (including all terms certain in such agreement or Notice relating
to any security deposit or fee, and the date of closing). Such sale to Tenant
shall be made in accordance with the provisions of Article 15, to the extent not
inconsistent herewith, no later than the closing date (or, if no closing date is
specified in such agreement or Notice, thirty (30) days after Tenant exercises
its right of first refusal), specified in such agreement or Notice. If Tenant
shall not exercise its right of first refusal within the time period and in the
manner above provided, Landlord shall be free to sell such Leased Property to
any third party at a price and upon terms substantially similar and in any event
no less favorable to Landlord than those offered
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to Tenant. Tenant shall be entitled to exercise its right of first refusal as
provided in this Section 21.1 as to any subsequent or proposed sale during the
Term.
Tenant's right of first refusal shall be applicable to all sales or
proposed sales of any portion of the applicable Leased Personal Property and the
price at which Tenant may so purchase such parts shall be the lesser of (a) the
proposed sale price of the parts or (b) the then Fair Market Value Purchase
Price of the parts of the applicable Leased Personal Property.
21.2 First Refusal to Lease.
Provided (a) this Lease shall not have been terminated in connection
with an Event of Default, and (b) other than as expressly permitted by Article
17 hereof, Tenant shall not have assigned this Lease or subleased all or any
portion of the Leased Property, Tenant shall have a first refusal option to
lease the Leased Property for a period of sixty (60) days after the expiration
of the Term, upon the same terms and conditions as Landlord shall propose to
lease the Leased Property to a third party or upon the same terms and conditions
of any offer from any third party which Landlord intends to accept (or has
accepted subject to Tenant's right of first refusal herein provided). If, at any
time prior to the expiration of such sixty (60) day period, Landlord reaches
such agreement with a third party or proposes to lease the Leased Property to a
third party, Landlord shall promptly notify Tenant of the rental rates and all
other material terms of such agreement or proposal and Tenant shall have five
(5) days after receipt of such notice within which time to exercise its right of
first refusal to lease. Landlord and Tenant shall enter into a new lease of the
Leased Property, in form reasonably satisfactory to both Landlord and Tenant, as
soon as practicable after the date of receipt by Landlord of Tenant's election
to exercise such right of first refusal to lease. Failure of Tenant to give such
notice to Landlord within such five (5) day period and such sixty (60) day
period, as the case may be, or to enter into such new lease within fifteen (15)
days after exercise of such right of first refusal to lease shall be deemed a
waiver of Tenant's rights pursuant to this Section 21.2.
21.3 Landlord's Option to Purchase the Tenant's Personal Property;
Transfer of Licenses.
Effective on not less than fifteen (15) days' prior notice given at
least sixty (60) days prior to expiration of the Term (or such shorter period as
shall be appropriate if the applicable Lease is terminated prior to its
expiration date), Landlord shall have the option to purchase all (but not less
than all) of Tenant's Personal Property (except motor vehicles), if any, at the
expiration or termination of the applicable Lease, for an amount equal to the
then fair market value thereof (determined in accordance with the appraisal
procedures set forth in Article 20),
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subject to, and with appropriate price adjustments for, all equipment leases,
conditional sale contracts, security interests and other encumbrances to which
such Tenant's Personal Property is subject. Tenant's Personal Property will be
conveyed to Landlord on an "as-is" basis, in its then current condition and
state of repair. Tenant shall provide Landlord with warranties of title,
reflecting no encumbrances as to which adjustments to the purchase price
thereof, as required by the previous sentence, have not been made. Failure of
Landlord to notify Tenant of the election of its option to purchase Tenant's
Personal Property by the fifteenth day prior to the termination of the
applicable Lease shall be deemed to constitute a waiver of Landlord's right to
purchase Tenant's Personal Property at the applicable Leased Property. Upon the
expiration or sooner termination of the applicable Lease, or upon management of
the Facility located on the applicable Leased Property by the Landlord or its
designee, Tenant shall use all reasonable efforts to transfer and assign to
Landlord or its designee, or assist Landlord or its designee in obtaining, any
contracts, licenses, and certificates required for the then operation of such
Facility.
21.4 Tenant's Option to Purchase the Leased Property.
Provided, (a) no Default has occurred and is continuing at the time of
exercise of the purchase option provided for in this Section 21.4 or at the time
of payment of the purchase price provided for in this Section 21.4, (b) the
Leases for each of the Collective Leased Properties (other than Leases that have
been terminated in accordance with the provisions hereof for reasons other than
as a result of the occurrence of an Event of Default) shall be in full force and
effect and (c) other than as expressly permitted by Article 17, Tenant shall not
have assigned the Leases for any of the Collective Leased Properties or
subleased all or any portion of the Collective Leased Properties, effective on
not less than twelve (12) months Notice, given not more than thirty six (36)
months prior to the expiration of the then current Term of the Leases, Tenant
shall have the option to purchase the Collective Leased Properties at a purchase
price equal to the greater of (i) one hundred twenty percent (120%) of the
aggregate of the Adjusted Purchase Prices of such Collective Leased Properties
or (ii) the aggregate of the Adjusted Purchase Prices of such Collective Leased
Properties, each as increased by the increase in the Cost of Living Index from
the date hereof, as of the date of expiration of the then current Term;
provided, however, Tenant's option to purchase is subject to Tenant exercising
such option simultaneously with respect to all, and not less than all, of the
Collective Leased Properties that are then subject to a Lease, as provided
herein. Such purchase by Tenant shall be made in accordance with the provisions
of Article 15 hereof and the closing date for such purchase shall be the date of
expiration of the then current Term.
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ARTICLE 22
FACILITY MORTGAGES
22.1 Landlord May Grant Liens.
Without the consent of Tenant, Landlord may, subject to the terms and
conditions set forth in this Section 22.1, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance or title
retention agreement ("Encumbrance") upon the applicable Leased Property, or any
portion thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing. Any such Encumbrance shall include the right
to prepay (whether or not subject to a prepayment penalty) and shall provide
(subject to Section 22.2 below) that it is subject to the rights of Tenant under
the applicable Lease, including the rights of Tenant to acquire such Leased
Property pursuant to the applicable provisions of the applicable Lease (except
Tenant's right of first refusal to purchase such Leased Property shall not apply
upon foreclosure or transfer in lieu thereof, provided, that any such purchaser
or transferee (a) shall take title subject to Tenant's rights to acquire such
Leased Property pursuant to the applicable Lease, (b) shall agree to give Tenant
the same notice, if any, given to Landlord of any default or acceleration of any
obligation with respect to such Encumbrance, and (c) shall agree to permit
Tenant to appear by its representative and bid at any sale in foreclosure made
with respect to any such Encumbrance).
22.2 Subordination of Lease.
Subject to Section 22.1 above and the last paragraph of this Section
22.2, the applicable Lease, any and all rights of Tenant hereunder, are and
shall be subject and subordinate to any ground or master lease, and all
renewals, extensions, modifications and replacements thereof, and to all
mortgages and deeds of trust, which may now or hereafter affect the applicable
Leased Property or any improvements thereon and/or any of such leases, whether
or not such mortgages or deeds of trust shall also cover other lands and/or
buildings and/or leases, to each and every advance made or hereafter to be made
under such mortgages and deeds of trust, and to all renewals, modifications,
replacements and extensions of such leases and such mortgages and deeds of trust
and all consolidations of such mortgages and deeds of trust. This Section shall
be self-operative and no further instrument of subordination shall be required.
In confirmation of such subordination, Tenant shall promptly execute,
acknowledge and deliver any instrument that Landlord, the lessor under any such
lease or the holder of any such mortgage or the trustee or beneficiary of any
deed of trust or any of their respective successors in interest may reasonably
request to evidence such subordination. Any lease to which the applicable Lease
is, at the time referred to, subject and subordinate is herein called "Superior
Lease" and the lessor of a Superior Lease or its successor in interest at the
time
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referred to, is herein called "Superior Landlord" and any mortgage or deed of
trust to which the applicable Lease is, at the time referred to, subject and
subordinate, is herein called "Superior Mortgage" and the holder, trustee or
beneficiary of a Superior Mortgage is herein called "Superior Mortgagee".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under the applicable Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise, then at the
request of such party so succeeding to Landlord's rights (herein called
"Successor Landlord") and upon such Successor Landlord's written agreement to
accept Tenant's attornment, Tenant shall attorn to and recognize such Successor
Landlord as Tenant's landlord under the applicable Lease, and shall promptly
execute and deliver any instrument that such Successor Landlord may reasonably
request to evidence such attornment. Upon such attornment, the applicable Lease
shall continue in full force and effect as a direct lease between the Successor
Landlord and Tenant upon all of the terms, conditions and covenants as are set
forth in the applicable Lease, except that the Successor Landlord (unless
formerly the landlord under the applicable Lease or its nominee or designee)
shall not be (a) liable in any way to Tenant for any act or omission, neglect or
default on the part of Landlord under the applicable Lease, (b) responsible for
any monies owing by or on deposit with Landlord to the credit of Tenant, (c)
subject to any counterclaim or setoff which theretofore accrued to Tenant
against Landlord, (d) bound by any modification of the applicable Lease
subsequent to such Superior Lease or Mortgage, or by any previous prepayment of
Minimum Rent or Additional Rent for more than one (1) month, which was not
approved in writing by the Superior Landlord or the Superior Mortgagee thereto,
(e) liable to the Tenant beyond the Successor Landlord's interest in the
applicable Leased Property and the rents, income, receipts, revenues, issues and
profits is suing from such Leased Property, (f) responsible for the performance
of any work to be done by the Landlord under the applicable Lease to render the
applicable Leased Property ready for occupancy by Tenant, or (g) required to
remove any Person occupying the applicable Leased Property or any part thereof,
except if such person claims by, through or under the Successor Landlord. Tenant
agrees at any time and from time to time to execute a suitable instrument in
confirmation of Tenant's agreement to attorn, as aforesaid.
Tenant's obligation to subordinate the applicable Lease and Tenant's
rights hereunder to any Superior Mortgage or Superior Lease and to attorn to any
Successor Landlord, shall be conditioned upon Landlord obtaining from any
Superior Mortgagee or Superior Landlord, an agreement which shall be executed by
Tenant and such Superior Mortgagee or Superior Landlord which shall provide in
substance that so long as no Event of Default exists as would entitle Landlord
or any such Superior Mortgagee or Superior Landlord to terminate the applicable
Lease or would cause, without
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any further action of Landlord or such Superior Mortgagee or Superior Landlord,
the termination of the applicable Lease or would entitle Landlord or such
Superior Mortgagee or Superior Landlord to dispossess Tenant, the applicable
Lease shall not be terminated, nor shall Tenant's use, possession or enjoyment
of the applicable Leased Property, in accordance with the terms and provisions
of the applicable Lease, be interfered with, nor shall the leasehold estate
granted by the applicable Lease be affected in any other manner, in any
foreclosure or any action or proceeding instituted under or in connection with
such Superior Mortgage or Superior Lease, or in the event such Superior
Mortgagee or Superior Landlord takes possession of the applicable Leased
Property pursuant to any provisions of such Superior Mortgage or Superior Lease,
unless Landlord or such Superior Mortgagee or Superior Landlord would have had
such right of termination pursuant to the applicable Lease. Such agreement shall
be in form customarily used by the holder of any such Superior Mortgage or
Superior Lease.
22.3 Notice to Mortgagee and Ground Landlord.
Subsequent to the receipt by Tenant of notice from any Person that it
is a Facility Mortgagee, or that it is the ground lessor under a lease with
Landlord, as ground lessee, which includes the applicable Leased Property as
part of the demised premises, no notice from Tenant to Landlord as to the
applicable Leased Property shall be effective unless and until a copy of the
same is given to such Facility Mortgagee or ground lessor, and the curing of any
of Landlord's defaults by such Facility Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 23
ADDITIONAL COVENANTS OF TENANT
23.1 Prompt Payment of Indebtedness.
Tenant will (a) pay or cause to be paid when due all payments of
principal of and premium and interest on Indebtedness for money borrowed and
will not permit or suffer any such Indebtedness to become or remain in default
beyond any applicable grace or cure period, (b) pay or cause to be paid when due
all lawful claims for labor and rents, (c) pay or cause to be paid on customary
trade terms and in any event prior to the institution of proceedings for the
collection thereof, all trade payables and (d) pay or cause to be paid when due
all other Indebtedness upon which it is or becomes obligated, except, in each
case, other than that referred to in clause (a), to the extent payment is being
contested in good faith by appropriate proceedings in accordance with Article 8
and if Tenant shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP or unless and until foreclosure, distraint sale
or other similar proceedings shall have been commenced.
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23.2 Conduct of Business.
Tenant will not engage in any business other than the ownership and
operation of (a) the Collective Leased Properties, (b) any Substitute
Properties, or (c) any other health care properties owned by Landlord and leased
to Tenant or given as security for Indebtedness owed to Landlord, and will do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect and in good standing its corporate existence and its rights and
licenses necessary to conduct such business.
23.3 Accreditation.
Tenant agrees to make diligent efforts to secure accreditation by the
Joint Commission on Accreditation of Health Care Organizations or the Commission
of Accreditation of Rehabilitation Facilities for the Facility maintained upon
the Applicable Leased Property such accreditation to be obtained as soon as
reasonably practicable.
23.4 Maintenance of Accounts and Records.
Tenant will keep true records and books of account in which full, true
and correct entries will be made of dealings and transactions in relation to the
business and affairs of Tenant in accordance with GAAP. Tenant will apply
accounting principles in the preparation of the financial statements of Tenant
which, in the judgment of and the opinion of its independent public accountants,
are in accordance with GAAP, except for changes approved by such independent
public accountants. Tenant will provide to Landlord either in a footnote to the
financial statements delivered under Section 18.2 which relate to the period in
which such change occurs, or in separate schedules to such financial statements,
information reasonably sufficient to show the effect of any such changes on such
financial statements.
23.5 Notice of Change of Name, Administrator, Etc.
Tenant will promptly give Notice to Landlord of any change in (a) the
name (operating or otherwise) of Tenant or the Facility, (b) the individual
licensed as administrator of the Facility, (c) the number of beds in any bed
category for which the Facility is licensed or the number of beds in any bed
category available for use at the Facility (except for changes in the number of
certified distinct part beds made for reimbursement maximization purposes), and
(d) the patient and/or child care services that are offered at the Facility.
23.6 Notice of Litigation, Potential Event of Default, Etc.
Tenant will promptly give Notice to Landlord of any litigation or any
administrative proceeding to which it may hereafter become a party which
involves a potential liability
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equal to or greater than $100,000, or which may otherwise result in any material
adverse change in the business, operations, property, prospects results of
operation or condition financial or other, of Tenant. Forthwith upon Tenant
obtaining knowledge of any Default, Event of Default or event of default under
any agreement relating to Indebtedness for money borrowed, or any event or
condition that would be required to be disclosed in a current report filed by
Tenant on Form 8-K or in Part II of a quarterly report on Form 10-Q if Tenant
were required to file such reports under the Securities Exchange Act of 1934, as
amended, Tenant will furnish a Notice to Landlord specifying the nature and
period of existence thereof and what action Tenant has taken or is taking or
proposes to take with respect thereto.
23.7 Indebtedness of Tenant.
Tenant shall not create, incur, assume or guarantee, or permit to
exist, or become or remain liable directly or indirectly upon, any Indebtedness
except the following:
(a) Indebtedness of Tenant to Landlord;
(b) unsecured Indebtedness of Tenant, other than for money borrowed
incurred in the ordinary course of business;
(c) Indebtedness of Tenant for taxes, assessments, governmental charges
or levies, to the extent that payment thereof shall not at the time be required
to be made in accordance with the provisions of Article 8;
(d) Indebtedness of Tenant in respect of judgments or awards which have
been in force for less than the applicable appeal period and in respect of which
execution thereof shall have been stayed pending such appeal or review, or (ii)
which are fully covered by insurance payable to Tenant, or (iii) which have been
in force for not longer than the applicable appeal period, so long as execution
is not levied thereunder, or (iv) in respect of which an appeal or proceedings
for review shall at the time be prosecuted in good faith in accordance with the
provisions of Article 8, and in respect of which execution thereof shall have
been stayed pending such appeal or review;
(e) unsecured borrowings of Tenant from its Affiliates which are by
their terms expressly subordinate to the payment and performance of Tenant's
obligations under the Leases;
(f) Indebtedness (including without limitation, accrued and unpaid
management fees) of Tenant owed to GranCare or any wholly-owned Subsidiary of
GranCare, provided that the payment of such Indebtedness shall be subject to the
terms of a subordination agreement among Tenant as debtor, GranCare or such
wholly-owned Subsidiary as subordinate creditor and HRP as senior creditor,
which subordination agreement shall be satisfactory to HRP in its sole and
absolute discretion.
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(g) Indebtedness of Tenant to Samaritan Arizona, Samaritan California
and Samaritan South Dakota under Section 7.2 of those certain Tenant Purchase
and Sale Agreement, dated as of May 29, 1992, by and among Tenant, Samaritan
Arizona and such affiliates. This Master Lease Document shall not affect the
validity, or in any other way, interfere with or adversely affect, the
indemnification and hold harmless clauses appearing in those various agreements.
(h) Indebtedness incurred to finance the purchase price of Tenant's
Personal Property or replacements to the Leased Personal Property; or
(i) Indebtedness expressly consented to in writing by Landlord.
23.8 Financial Condition of Tenant.
(a) Tenant shall at all times maintain a ratio of current assets to
current liabilities of not less than 1 to 1. The terms "current assets" and
"current liabilities", respectively, shall mean all assets or liabilities, as
the case may be, which should, in accordance with GAAP, be classified as current
assets or current liabilities, as the case may be.
(b) Tenant shall at all times maintain Tangible Net Worth of
$1,000,000.
23.9 Distributions, Payments to Affiliates, Etc.
Tenant will not declare, order, pay or make, directly or indirectly,
any Distribution or any payment to any Affiliate (including payments in the
ordinary course of business and payment pursuant to management agreements with
any such Affiliate) or set apart any sum or property therefor, or agree to do
so, if, at the time of such proposed action, or immediately after giving effect
thereto, any event or condition shall exist which constitutes a Default or an
Event of Default.
23.10 Investments.
Tenant shall not make, or permit to remain outstanding, at any time any
Investment except the following:
(a) Marketable direct full faith and credit obligations of, and
marketable obligations guaranteed by, the United States of America, or any
agency or instrumentality thereof, which mature within one year from the date of
acquisition thereof;
(b) Marketable direct full faith and credit obligations of any state of
the United States of America, or any county, city, town, township or other
governmental subdivision of any such state, which mature within one year from
the date of acquisition
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thereof, provided, that such obligations are accorded a rating within one of the
three highest grades by Moody's Investors Service, Inc. or Standard & Poor's
Corporation;
(c) Commercial paper maturing no more than two hundred and seventy
(270) days from the date of issue, provided that such paper is accorded a rating
within the highest category by Moody's Investors Service, Inc. or Standard &
Poor's Corporation; or
(d) Certificates of deposit which have a remaining term to maturity at
the time of purchase of no more than one year (or which are subject to a
repurchase agreement with one of the banks or trust companies described in this
paragraph (c) exercisable within one year from the time of purchase) issued by
banks or trust companies organized under the laws of the United States of
America or a State thereof and which are member banks of the Federal Reserve
System, and have aggregate capital, surplus and undivided profits of at least
$100,000,000 and the long term obligations of which carry a rating of "A" or
better by Moody's Investors Service, Inc. or Standard & Poor's Corporation;
(e) Bonds or debentures which have a remaining term to maturity at the
time of purchase of no more than one year, issued by a corporation, other than
GranCare or an Affiliate thereof, organized under the laws of a State of the
United States or the District of Columbia; provided, that such obligations carry
a rating of "A" or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation.
23.11 Prohibited transactions.
Tenant shall not permit to exist or enter into any agreement or
arrangement whereby it engages in a transaction of any kind with any Affiliate
of Tenant, except on terms and conditions which are not less favorable to Tenant
than those on which similar transactions between unaffiliated parties could
fairly be expected to be entered into on an arms-length basis except, Tenant may
enter into a management agreement with its Affiliates without regard to this
Section 23.11 provided to do so would not give rise to a Default or Event of
Default and the payment of all fees thereunder is expressly subordinate to the
obligations of Tenant to HRP.
23.12 Management of Leased Property.
Tenant shall not enter into any management or similar agreement in
respect of the applicable Leased Property without the express prior written
consent of Landlord except Tenant may enter into a management agreement with its
Affiliates in compliance with Section 23.11.
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23.13 Definitions.
When used in this Article 23 the following terms shall have the
respective meanings provided therefor and, unless otherwise specifically
indicated, shall be deemed to relate to Tenant.
(a) The term "Distribution" shall mean (i) the declaration or payment
of any dividend (except dividends payable in common stock of Tenant) on or in
respect of any shares of any class of capital stock of Tenant, (ii) the
purchase, redemption or other retirement of any shares of any class of capital
stock of Tenant owned by a Person other than Tenant, and (iii) any other
distribution on or in respect of any shares of any class of capital stock of
Tenant by a Person other than Tenant.
(b) The term "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.
(c) The term "Investment" shall mean all loans, advances, extensions of
credit (except for accounts and notes receivable for merchandise sold or
services furnished in the ordinary course of business, and amounts paid in
advance on account of the purchase price of merchandise to be delivered to the
payor within one year of the date of the advance), or purchases of stock, notes,
bonds or other securities or evidences of indebtedness or capital contribution
to any Person, whether in cash or other property. The amount of an Investment
shall be its cost (the amount of cash or the fair market value of other property
given in exchange therefor), whether or not written or charged off or -sold or
otherwise disposed of, except to the extent such cost shall have been paid to
Tenant by a Person in which Tenant had no present or prospective financial
interest at the time of such payment.
(d) "Tangible Net Worth" shall mean the excess of total assets over
total liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total
assets: (i) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles; (ii) all
deferred charges or unamortized debt discount and expense; (iii) all reserves
carried and not deducted from assets; (iv) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary; (v) securities which are not readily marketable other than
undrawn amounts under the $750,000.00 Promissory Note from GranCare, Inc. to
Tenant of even date herewith; (vi) any write-up in the book value of any asset
resulting from a revaluation thereof subsequent to the Closing Date; and (vii)
any items not included in clauses (i) through (vi) above that are treated as
intangibles in conformity with GAAP.
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ARTICLE 24
MISCELLANEOUS
24.1 Limitation on Payment of Rent.
All agreements between Landlord and Tenant herein are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of Rent, or otherwise, shall the Rent or any other amounts payable
to Landlord under this Lease or any of the other Transaction Documents exceed
the maximum permissible under applicable law, the benefit of which may be
asserted by Tenant as a defense, and if, from any circumstance whatsoever,
fulfillment of any provision of the applicable Lease or any of the other
Transaction Documents, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, or if from
any circumstances Landlord should ever receive as fulfillment of such provision
such an excessive amount, then, ipso facto, the amount which would be excessive
shall be applied to that reduction of the installments of Minimum Rent next due
and not to the payment of such excessive amount. This provision shall control
every other provision of the Transaction Documents and any other agreements
between Landlord and Tenant.
24.2 No Waiver.
No failure by Landlord 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 the applicable Lease, which shall continue in full force and
effect with respect to any other then existing or subsequent breach.
24.3 Remedies Cumulative.
To the extent permitted by law, each legal, equitable or contractual
right, power and remedy of Landlord, now or hereafter provided either in the
applicable 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 Landlord of any one or more of such rights,
powers and remedies shall not preclude the simultaneous or subsequent exercise
by Landlord of any or all of such other rights, powers and remedies.
24.4 Severability.
Any clause, sentence, paragraph, section or provision of the applicable
Lease held by a court of competent jurisdiction to be invalid, illegal or
ineffective shall not impair, invalidate or
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nullify the remainder of the applicable Lease, but rather the effect thereof
shall be confined to the clause, sentence, paragraph, section or provision so
held to be invalid, illegal or ineffective, and the applicable Lease shall be
construed as if such invalid, illegal or ineffective provisions had never been
contained therein.
24.5 Acceptance of Surrender.
No surrender to Landlord of the applicable Lease or of the applicable
Leased Property or any part thereof, or of any interest therein, shall be valid
or effective unless agreed to and accepted in writing by Landlord and no act by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, shall constitute an acceptance of any such surrender.
24.6 No Merger of Title.
It is expressly acknowledged to be the intent of the parties that there
shall be no merger of the applicable Lease or of the leasehold estate created
hereby by reason of the fact that the same Person may acquire, own or hold,
directly or indirectly (a) the applicable Lease or the leasehold estate created
hereby or any interest in the applicable Lease or such leasehold estate and (b)
the fee estate or ground landlord's interest in the applicable Leased Property.
24.7 Conveyance by Landlord.
If Landlord or any successor owner of the applicable 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 such Leased Property
shall expressly assume all obligations of Landlord hereunder arising or accruing
from and after the date of such conveyance or transfer, Landlord or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Landlord under the applicable Lease 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 shall thereupon
be binding upon the new owner.
24.8 Quiet Enjoyment.
So long as Tenant shall pay the Rent as the same becomes due and shall
substantially comply with all of the terms of the applicable Lease and perform
its obligations hereunder and thereunder, Tenant shall peaceably and quietly
have, hold and enjoy the applicable Leased Property for the Term hereof, free of
any claim or other action by Landlord or anyone claiming by, through or under
Landlord, but subject to (i) any Encumbrance permitted under Article 22, or
otherwise permitted to be created by Landlord hereunder, (ii) all Permitted
Encumbrances, (iii) liens as to obligations of Landlord that are either not yet
due or
<PAGE>
-84-
which are being contested in good faith and by proper proceedings, and (iv)
liens that have been consented to in writing by Tenant. Except as otherwise
provided in the applicable Lease, no failure by Landlord to comply with the
foregoing covenant shall give Tenant any right to cancel or terminate the
applicable Lease or abate, reduce or make a deduction from or offset against the
Rent or any other sum payable under the applicable Lease, or to fail to perform
any other obligation of Tenant hereunder.
24.9 NON-LIABILITY OF TRUSTEES.
THE DECLARATION OF TRUST ESTABLISHING LANDLORD, DATED OCTOBER 9, 1986,
A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS
DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
24.10 Landlord's Consent of Trustees.
Where provision is made in the applicable Lease for Landlord's consent
and Landlord shall fail or refuse to give such consent, Tenant shall not be
entitled to any damages for any withholding by Landlord of its consent, it being
intended that Tenant's sole remedy shall be an action for specific performance
or injunction, and that such remedy shall be available only in those cases where
Landlord has expressly agreed in writing not to unreasonably withhold its
consent.
24.11 Memorandum of Lease.
Neither Landlord nor Tenant shall record the applicable Lease or this
Master Lease Document. However, Landlord and Tenant shall promptly, upon the
request of either, enter into a short form memorandum of the applicable Lease,
in form suitable for recording under the laws of the State in which reference to
the applicable Lease and the Master Lease Document, and all options contained
herein, shall be made. Tenant shall pay all costs and expenses of recording such
memorandum.
24.12 Notices.
Any notice, request, demand, statement or consent ("Notice") desired or
required to be given hereunder shall be in writing and shall be delivered by
hand, sent by certified mail, return receipt requested, or sent by a nationally
recognized commercial overnight delivery service with provisions for a receipt,
postage or delivery charges prepaid, and shall be deemed given (i) when
<PAGE>
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actually delivered, if delivered by hand, (ii) upon receipt, if sent by
certified mail, or (iii) the next Business Day after being placed in the
possession of an overnight delivery service, if sent by an overnight delivery
service, and shall be addressed as follows:
If to Tenant: c/o GranCare, Inc.
300 Corporate Pointe
Suite 300
Culver City, CA 90230
With copies to: Andrews & Kurth, L.L.P.
4200 Texas Commerce Tower
600 Travis
Houston, TX 77002
Attn: John H. Nash, Esq.
If to Landlord: Health and Rehabilitation Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: President
With a copy to: Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attn: Lena G. Goldberg, Esq.
or at such other place as any party hereto may from time to time hereafter
designate to the other in writing. Any Notice given to Tenant from Landlord
shall not imply that such Notice or any further or similar Notice was or is
required. The failure of Landlord or Tenant to provide the copies indicated
above shall not render any Notice given by Landlord to Tenant or Tenant to
Landlord ineffective.
24.13 Incorporation by Reference.
All of the representations, warranties and covenants of Tenant
contained in the Acquisition Agreements and in each of the other Transaction
Documents to which Tenant is a party are hereby incorporated by reference
herein.
24.14 Construction.
Anything contained in the applicable Lease to the contrary
notwithstanding, (i) all claims against, and liabilities of, Tenant or Landlord
arising prior to any date of termination or expiration of the applicable Lease
shall survive such termination or expiration and (ii) neither party hereto shall
be liable for any consequential damages suffered by the other party as the
result of a breach by such party of its obligations owed to the other party. If
any term or provision of the applicable Lease or
<PAGE>
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any application thereof shall be invalid or unenforceable, the remainder of the
applicable Lease and any other application of such term or provisions shall not
be affected thereby. If any late charges or any interest rate 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 the applicable Lease nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing signed by the party to be charged. All the terms and provisions of
the applicable Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Each term or
provision of this Master Lease Document or the applicable Lease to be performed
by Tenant shall be construed as an independent covenant and condition. Time is
of the essence with respect to the exercise of any rights of Tenant under this
Master Lease Document and the applicable Lease. Except as otherwise set forth in
this Master Lease Document, any obligations of Tenant (including without
limitation, any monetary, repair and indemnification obligations) shall survive
the expiration or sooner termination of the applicable Lease. The headings in
the applicable Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
24.15 GOVERNING LAW.
THE APPLICABLE LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, EXCEPT AS TO MATTERS
REGARDING THE INTERNAL AFFAIRS OF LANDLORD AND ISSUES OF OR LIMITATIONS ON ANY
PERSONAL LIABILITY OF THE SHAREHOLDERS AND TRUSTEES OF LANDLORD FOR OBLIGATIONS
OF LANDLORD, AS TO WHICH THE LAWS OF THE STATE OF MARYLAND SHALL GOVERN.
[Intentionally left blank]
<PAGE>
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IN WITNESS WHEREOF, the parties have executed this Master Lease
Document as a sealed instrument as of the date first above written.
Executed in the LANDLORD:
presence of:
HEALTH AND REHABILITATION PROPERTIES
TRUST, a Maryland real estate investment trust
By: /s/ David J. Hegarty
David J. Hegarty
Its: Treasurer
/s/
As to Landlord
TENANT:
GCI HEALTH CARE CENTERS, INC.,
a Delaware corporation
By: /s/ Evrett W. Benton
Evrett W. Benton
Its: Executive Vice President
/s/
As to Landlord
Signature Page to
Master Lease Document
dated as of June 30, 1992
<PAGE>
EXHIBIT A-1
Primary Intended Use
<PAGE>
EXHIBIT A-2
Collective Leased Properties
<PAGE>
Mom and Dad's Sioux Falls, South Dakota
Description
The land together with the buildings and improvements thereon, located
in the County of Minnehaha, State of South Dakota and described as follows:
Blocks 2 and 4, and that portion of vacated Norton Avenue lying
adjacent thereto in Freed's Addition to South Sioux Falls, Minnehaha County,
South Dakota, according to the recorded plat thereof; and
Lot 1 in County Auditor's subdivision of the Sl/2NEl/4 of Section 32,
Township 101 North, Range 49 West of the 5th P.M., Minnehaha County, South
Dakota, according to the recorded plat thereof.
<PAGE>
Village Green, Phoenix, Arizona
Description
The land, together with the buildings and improvements thereon, located
in the County of Maricopa, State of Arizona, more particularly described as
follows:
Lots 6, 7 and 8, FORMAN TRACT, a subdivision recorded in Book 13 of
Maps, page 29 records of Maricopa County, Arizona.
<PAGE>
La Mesa, Yuma, Arizona
Description
The land, together with the buildings and improvements thereon, located
in Yuma County, Arizona, more particularly described as follows:
Tract "B", La Mesa Linda, according to the plat of record in the office
of the County Recorder of Yuma, Arizona, in Book 3 of Plats, page 140;
EXCEPT the North 179 feet of the East 179 feet thereof.
<PAGE>
Huron, Huron, South Dakota
Description
The land, together with the buildings and improvements thereon, located
in Beadle County, South Dakota, more particularly described as follows:
PARCEL I: Dynacor Lot 1, City of Huron,
Beadle county, South Dakota
PARCEL II: Lots 1, 2, 3, 4 and 5, Block 2,
Camden Addition to the City
of Huron, Beadle County, South Dakota
<PAGE>
La Sallette, Stockton, California
Description
PARCEL ONE:
A tract of land situated in the County Of San Josquin. State of California, in
the Southeast quarter (SE 1/4) of Section seventeen (17), C. M. WEBER GRANT,
more particularly described as follows:
COMMENCING at a steel axle at the Northwest corner of Oak Park, being also the
1/4 Section corner between Sections seventeen (17) and eighteen (18) of said C.
M. Weber Grant; thence along the West line of the Southeast 1/4 of said Section
seventeen (17). North 17 degrees 33 minutes West, 40 feet; thence along the
North line of Fulton Street (formerly Calaveras Avenue), North 72 degrees 30
minutes East 959.7 feet to an iron pipe at the Southwest corner of true point of
beginning of the within described tract; thence continue along the North line of
Fulton Street. North 72 degrees 30 minutes East, 97 feet to the Southeast corner
of the 0.96 acre tract, described in Deed to Toso, recorded in Vol. 597 of
Official Records, page 493, San Joaquin County Records; thence along the East
line of above mentioned 0.96 acre tract, North 17 degrees 30 minutes West, 150
feet to an iron pipe thence South 72 degrees 30 minutes West, 97 feet to an iron
pipe; thence South 17 degrees 30 minutes East 150 feet to the Point of
Beginning.
EXCEPTING the South 10 feet as described in Dead to City of Stockton recorded
August 8, 1967 in Vol. 3144 of Official Records, page 30, San Joaquin County
Records.
PARCEL TWO:
A tract of land situated in the County of San Joaquin, State of California, in
the Southeast quarter (SE 1/4) of Section seventeen (17), C. M. WEBER GRANT,
more particularly described as follows:
COMMENCING at a steel axle at the Northwest corner of Oak Park, being also the
114 Section corner between Sections seventeen (17) and eighteen (18) of said C.
M. Weber Grant; thence along the West line of the Southeast 114 of said Section
seventeen (17), North 17 degrees 33 minutes West, 40 feet; thence along the
North line of Fulton Street (formerly Calaveras Avenue) North 72 degrees 30
minutes East 862.7 feet to an iron pipe at the southwest corner of the 0.75 acre
tract described in Dead to Toso recorded in Vol. 1864 of Official Records, page
404, San Joaquin County Records; and being the Southwest corner and true point
of beginning of the within described tract; thence along the West line of said
0.75 acre tract, North 17 degrees 30 minutes West, 150 feet to an iron pipe;
thence North 72 degrees 30 minutes East, 97 feet to an iron pipe; thence South
17 degrees 30 minutes East, 150 foot to an iron pipe in the North line of Fulton
Street; thence along the North line Fulton Street, South 72 degrees 30 minutes
West, 97 feet to the True Point of Beginning.
EXCEPTING the South 10 feet as described in Deed to City of Stockton, recorded
August 6, 1967 in Vol. 3144 of Official Records. page 30, San Joaquin County
Records.
PARCEL THREE:
<PAGE>
A portion of the Southeast quarter (SE 114) of Section seventeen (17), C. M.
WEBER GRANT, said portion being more particularly described as follows:
COMMENCING at a steel axle at the Northwest corner of Oak Park, (formerly known
as Goodwater Grove) said axle being at the 1/4 section corner between Section
eighteen (18), and said Section seventeen (17); and running thence North 17
degrees 33 minutes West, 40 feet along said 1/4 section line in the middle of
said Section seventeen (17) to a steel axle in the North line of Fulton Street
(formerly Calaveras Avenue); thence along the North line of Fulton Street
(formerly Calaveras Avenue), North 72 degrees 30 minutes East, 662.7 feet to an
iron pipe at the Southwest corner of the 0.75 acre tract described in Dead to
Toso, recorded in Vol. 1864 of Official Records, page 404, San Joaquin County
Records; thence along the West line of said 0.75 acre tract, North 17 degrees 30
minutes West, 150 feet to an iron pipe and being the true point of beginning of
the property hereinafter described; thence continue North 17 degrees 30 minutes
West, 233.50 feet to an iron pipe on the South line of that certain 19.68 acre
tract, as described in Book A of Deeds, Vol. 199, page 441, San Joaquin County
Records; thence North 72 degrees 30 minutes Fast. 194 feet to the Northeast
corner of that certain 0.96 acre tract described in Deed recorded June 22, 1938
in Vol. 597 of Official Records, page 493, San Joaquin County Records; thence
South 17 degrees 30 minutes East, 233.50 feet to the Northeast corner of Parcel
described in Deed to Harvey J. Toso, recorded September 7, 1965 in Vol. 1900 of
Official Records, page 385, San Joaquin County Records; thence South 72 degrees
30 minutes West along North line of Harvey J. Toto property and said North line
extended Westerly, 194 feet to the Point of Beginning.
-2-
<PAGE>
EXHIBIT B
Form of Lease
<PAGE>
EXHIBIT B
FORM OF LEASE
THIS LEASE is made as of June 30, 1992 between HEALTH AND
REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust
("Landlord"), having its principal office at 400 Centre Street, Newton,
Massachusetts 02158, and GCI HEALTH CARE CENTERS, INC., a Delaware corporation,
("Tenant"), having its principal office at 300 Corporate Pointe, Suite 300,
Culver City, California 90230, with reference to the following facts:
A. Landlord, and Samaritan Senior Services of [State], Inc., a [State]
corporation ("Samaritan"), have entered into an Acquisition Agreement, dated as
of May 29, 1992 (as the same may be amended, modified or supplemented from time
to time, the "Acquisition Agreement"), pursuant to which Landlord has agreed to
acquire from Samaritan and simultaneously to lease to Tenant certain parcels of
real property and improvements (together the "Collective Leased Properties",
individually, a "Leased Property") each for use and operation as a licensed
nursing home or other facility offering other related health care products and
services.
B. The transaction contemplated in the foregoing recital provides that
each Leased Property will be leased pursuant to a lease which shall incorporate
a Master Lease Document dated as of June 30, 1992 between Landlord and Tenant
(as the same may be amended, modified or supplemented from time to time, the
"Master Lease Document"). This Lease is a Lease referred to in the Master Lease
Document.
In consideration of the foregoing, the parties agree:
1. Incorporation of Master Lease Document. The Master Lease Document is
hereby incorporated herein in its entirety as though each and every part thereof
were set forth in full herein.
2. Description of Leased Property. The Leased Property demised pursuant
to Article 2 of the Master Lease Document is that property located at the
following street address:
The Land referred to in the Master Lease Document is more particularly
described in Schedule A hereto.
3. Purchase Price. Landlord purchased the Leased Property from
Samaritan for the sum of _________ Dollars ($___________) (the "Purchase
Price").
4. Fixed Term. The Fixed Term of this Lease is fourteen (14) years,
commencing on July 1, 1992 (the "Commencement Date,") and ending on June 30,
2006.
<PAGE>
5. Extended Term. Subject to the provisions of Section 2.4 of the
Master Lease Document, Tenant is hereby granted the right to renew the Lease for
two consecutive optional renewal terms ("Extended Term(s)") as follows: (i) the
"First Extended Term" is for ten (10) years and six (6) months, ending on
December 31, 2016, and (ii) the "Second Extended Term" is for ten (10) years and
six (6) months, ending on June 30, 2027.
6. Rental. The initial Minimum Rent payable pursuant to Section
3.1.1(a) of the Master Lease Document during years (i) one and two of the Fixed
Term is the annual sum of ________ Dollars ($_______) payable in equal monthly
installments of ________Dollars ($_______) (ii) three through five of the Fixed
Term is the annual sum of ________ Dollars ($_______) payable in equal monthly
installments of ______ Dollars ($_______), and (iii) thereafter, at the rental
provide for in Section 3.1.1(c) . of the Master Lease Document. The Minimum Rent
for the Extended Terms shall be at the rental provided for in Section 3.1.1(b)
of the Master Lease Document. During the Term, Minimum Rent shall be subject to
adjustment as provided in Section 3.1.1(c) of the Master Lease Document.
Landlord will credit against installments of Minimum Rent the amounts determined
in accordance with Section 3.1.1(d) of the Master Lease Document. Tenant shall
also pay Additional Rent pursuant to Section 3.1.2 of the Master Lease Document.
7. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY. NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD IN ANY WAY SHALL LOOK ONLY
TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
[Intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST, a Maryland real
estate investment trust
By:___________________________
David J. Hegarty
Its: Treasurer
TENANT:
GCI HEALTH CARE CENTERS, INC.
By:__________________________
Its:
Signature page for Lease
dated as of June 30, 1992
Property address:
<PAGE>
SCHEDULE A
Description of Land
(Legal description)
<PAGE>
SCHEDULE I
Transaction Documents
<PAGE>
Schedule I
1. Letter Agreement, dated April 25, 1992, from HRP to GranCare,
accepted by GranCare.
2. Closing Escrow Agreement, dated May 29, 1992, among HRP,
Samaritan, Samaritan Arizona, Samaritan California, Samaritan
South Dakota and GCI and the Title Company, as escrow agent,
delivering various closing documents and providing information
and instructions regarding delivery and recording of such
documents.
3. Master Lease Document, dated as of June 30, 1992, between HRP
as Landlord and GCI as Tenant.
4. Facility Leases, each dated as of June 30, 1992, between HRP
as Landlord and GCI as Tenant, for each Facility.
5. Amended and Restated HRP Shares Pledge Agreement, dated as of
June 30, 1992, between HRP and AMS, pursuant to which AMS has
pledged the HRP Shares to HRP to secure its obligations to
HRP.
6. Amended and Restated Voting Trust Agreement, dated as of June
30, 1992 from AMS to HRPT Advisors, Inc., as voting trustee.
(a) Voting Trust Certificate
(b) Stock Power
7. Guaranty, Cross Default and Cross Collateralization Agreement,
dated as of June 30, 1992, from AMS and GCI, in favor of HRP.
8. Guaranty, dated as of June 30, 1992 from GranCare, in favor o
HRP.
9. Security Agreement, dated as of June 30, 1992, from GCI to
HRP, granting HRP a security interest in all tangible and
intangible personal property and including all accounts
receivable, contract rights and general intangibles.
10. Assignment of Contracts, Licenses and Permits, dated as of
June 30, 1992, from GCI to HRP, assigning to HRP, all
contracts, licenses and permits used in connection with the
operation of the Facilities.
11. Pledge Agreement, dated as of June 30, 1992 Date, from
GranCare pursuant to which all of the capital stock of GCI is
pledged to HRP to secure the obligations of GCI.
(a) Stock power relating to pledged shares
<PAGE>
12. Subordination Agreement, dated as of June 30, 1992, among
GranCare, subordinated creditor, GCI, as debtor and HRP as
senior creditor, pursuant to which all obligations of GCI to
the subordinated creditor are subordinated.
13. Subordination Agreement, dated as of June 30, 1992, among AMS
as subordinated creditor, GCI, as debtor and HRP as senior
creditor, pursuant to which all obligations of GCI to the
subordinated creditor are subordinated.
14. $750,000 Promissory Note made by GranCare, Inc. to GCI for
working capital purposes.
15. Representation Letter and Indemnification Agreement, dated
June 30, 1992, from GranCare, AMS and GCI, with respect to,
inter Al", the continued effectiveness of the representations
and warranties made by GranCare and GCI in, and the absence of
any Defaults under, the Transaction Documents.
-2-
<PAGE>
SCHEDULE II
DRAFT ENVIRONMENTAL QUESTIONNAIRE FOR NURSING HOME REFINANCING
1. PROJECT DESCRIPTION
1.1 Site location/address:
1.2 Name of present owner of Facility and Site:
1.3 Description of present uses of Facility and Site:
1.4 Describe the known history of the use(s) of the Site:
2. HAZARDOUS WASTES
2.1 State whether the Facility uses, generates, stores, treats, or
disposes of any hazardous substances, materials or wastes (as
defined by applicable federal or state laws, including,
without limitation, medical wastes).
If any of the above conditions apply,
2.1.1 Describe in terms of types of materials, substances
or wastes involved, including estimated annual
volumes of each.
2.1.2 Describe current hazardous waste disposal practices,
including identification of offsite disposal
facilities used, where applicable.
2.1.3 Provide a copy of all hazardous waste manifests for
the most recent twelve month period, where
applicable.
2.1.4 Provide a copy of the Facility's U.S. EPA Hazardous
Waste Identification Number along with a copy of any
other required federal or state hazardous waste
permit or approval, where applicable.
2.2 State whether the Facility or Site has any underground storage
tanks.
If any underground tanks are present,
2.2.1 Provide a description of each including location,
capacity, contents, and tank age. If federal or state
registration is required, furnish copy of appropriate
registration.
<PAGE>
2.3 Describe any known legal, administrative or other action that
has been taken by any governmental agency relative to the
actual or potential release of hazardous wastes or petroleum
hydrocarbons on or beneath the Site. For each such action,
describe the circumstances, including current status of case.
2.4 Has the Facility been designated as a Potentially Responsible
Party by any federal or state agency with regard to the
off-site disposal of hazardous wastes originating from the
Facility? If so, describe the situation, including the current
status of the case.
3 PCB'S AND ASBESTOS
3.1 Does the Facility or Site contain any electrical
transformers or capacitors? If so, are any labeled as
containing PCB's?
3.2 Does the Facility appear to have asbestos containing
materials (ACM)? If so, describe locations of ACM and
physical condition of the ACM.
Comprehensive inspection not required.
-2-
EXHIBIT 10.28
LEASE
THIS LEASE is made as of June 30, 1992 between HEALTH AND
REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust
("Landlord"), having its principal office at 400 Centre Street, Newton,
Massachusetts 02158, and CGI HEALTH CARE CENTERS, INC., a Delaware corporation,
("Tenant"), having its principal office at 300 Corporate Pointe, Suite 300,
Culver City, California 90230, with reference to the following facts:
A. Landlord and Samaritan Senior Services of South Dakota, Inc., a
South Dakota corporation ("Samaritan"), have entered into an Acquisition
Agreement, dated as of May 29, 1992 (as the same may be amended, modified or
supplemented from time to time, the "Acquisition Agreement"), pursuant to which
Landlord has agreed to acquire from Samaritan and simultaneously to lease to
Tenant certain parcels of real property and improvements (together the
"Collective Leased Properties", individually, a "Leased Property") each for use
and operation as a licensed nursing home or other facility offering other
related health care products and services.
B. The transaction contemplated in the foregoing recital provides that
each Leased Property will be leased pursuant to a lease which shall incorporate
a Master Lease Document dated as of June 30, 1992 between Landlord and Tenant
(as the same may be amended, modified or supplemented from time to time, the
"Master Lease Document"). This Lease is a Lease referred to in the Master Lease
Document.
In consideration of the foregoing, the parties agree:
1. Incorporation of Master Lease Document. The Master Lease Document is
hereby incorporated herein in its entirety as though each and every part thereof
were set forth in full herein.
2. Description of Leased Property. The Leased Property demised pursuant
to Article 2 of the Master Lease Document is that property located at the
following street address:
15th & Michigan 1251 Arizona SW
Huron, SD 57350 Huron, SD 57350
The Land referred to in the Master Lease Document is more particularly
described in Schedule A hereto.
3. Purchase Price. Landlord purchased the Leased Property from
Samaritan for the sum of Four Million Two Hundred Eighty Four Thousand Dollars
($4,284,000.00) (the "Purchase Price").
<PAGE>
-2-
4. Fixed Term. The Fixed Term of this Lease is fourteen (14) years,
commencing on July 1, 1992 (the "Commencement Date,") and ending on June 30,
2006.
5. Extended Term. Subject to the provisions of Section 2.4 of the
Master Lease Document, Tenant is hereby granted the right to renew the Lease for
two consecutive optional renewal terms ("Extended Term(s)") as follows: (i) the
"First Extended Term" is for ten (10) years and six (6) months, ending on
December 31, 2016, and (ii) the "Second Extended Term" is for ten (10) years and
six (6) months, ending on June 30, 2027.
6. Rental. The initial Minimum Rent payable pursuant to Section
3.1.1(a) of the Master Lease Document during years (i) one and two of the Fixed
Term is the annual sum of Four Hundred Ninety Two Thousand Six Hundred Sixty
Dollars ($492,660.00) payable in equal monthly installments of Forty One
Thousand Fifty Five Dollars ($41,055.00), (ii) three through five of the Fixed
Term is the annual sum of Five Hundred Fourteen Thousand Eighty Dollars
($514,080.00) payable in equal monthly installments of Forty Two Thousand Eight
Hundred Forty Dollars ($42,840.00), and (iii) thereafter, at the rental provide
for in Section 3.1.1(c) of the Master Lease Document. The Minimum Rent for the
Extended Terms shall be at the rental provided for in Section 3.1.1(b) of the
Master Lease Document. During the Term, Minimum Rent shall be subject to
adjustment as provided in Section 3.1.1(c) of the Master Lease Document.
Landlord will credit against installments of Minimum Rent the amounts determined
in accordance with Section 3.1.1(d) of the Master Lease Document. Tenant shall
also pay Additional Rent pursuant to Section 3.1.2 of the Master Lease Document.
7. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY. NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD IN ANY WAY SHALL LOOK ONLY
TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
[Intentionally left blank.]
<PAGE>
-3-
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION PROPERTIES
TRUST, a Maryland real estate
investment trust
By:/s/ David J. Hegarty
David J. Hegarty
Its: Treasurer
TENANT:
CGI HEALTH CARE CENTERS, INC.
By:/s/ Evrett W. Benton
Evrett W. Benton
Its: Executive Vice President
Property address: 15th & Michigan
Huron, SD 57350
and
1251 Arizona SW
Huron, SD 57350
Signature page for Lease
dated as of June 30, 1992
<PAGE>
SCHEDULE A
Description of Land
[Legal description]
<PAGE>
Omitted Exhibit
---------------
The following exhibit to the Lease has been omitted:
Exhibit Letter Exhibit Title
- -------------- -------------
A Description of Land
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibit to the Securities and Exchange Commission upon request.
<PAGE>
SCHEDULE TO EXHIBIT 10.28
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Leases, which are substantially identical in all material respects to the Lease
filed herewith, are omitted. The following list sets forth the material
differences in the leased premises, purchase price and annual rent.
Annual Annual
Rent for Years 1 Rent for Years 3
Leased Premises Purchase Price and 2 through 5
- --------------------------------------------------------------------------------
537 E. Fulton $ 3,146,268.66 $361,820.90 $377,552.24
Stockton, CA 95204
3600 S. Norton $ 332,970.15 $382,946.57 $399,596.42
Sioux Falls, SD 57105
EXHIBIT 10.29
LEASE
THIS LEASE is made as of June 30, 1992 between HEALTH AND
REHABILITATION PROPERTIES TRUST, a Maryland real estate investment trust
("Landlord"), having its principal office at 400 Centre Street, Newton,
Massachusetts 02158, and GCI HEALTH CARE CENTERS, INC., a Delaware corporation,
("Tenant"), having its principal office at 300 Corporate Pointe, Suite 300,
Culver City, California 90230, with reference to the following facts:
A. Landlord and Samaritan Senior Services of Arizona, Inc., an Arizona
corporation ("Samaritan"), have entered into an Acquisition Agreement, dated as
of may 29, 1992 (as the same may be amended, modified or supplemented from time
to time, the "Acquisition Agreement"), pursuant to which Landlord has agreed to
acquire from Samaritan and simultaneously to lease to Tenant certain parcels of
real property and improvements (together the "Collective Leased Properties",
individually, a "Leased Property") each for use and operation as a licensed
nursing home or other facility offering other related health care products and
services.
B. The transaction contemplated in the foregoing recital provides that
each Leased property will be leased pursuant to a lease which shall incorporate
a Master Lease Document dated as of June 30, 1992 between Landlord and Tenant
(as the same may be amended, modified or supplemented from time to time, the
"Master Lease Document"). This Lease is a Lease referred to in the Master Lease
Document.
In consideration of the foregoing, the parties agree:
1. Incorporation of Master Lease Document. The Master Lease Document is
hereby incorporated herein in its entirety as though each and every part thereof
were set forth in full herein.
2. Description of Leased Property. The Leased Property demised pursuant
to Article 2 of the Master Lease Document is that property located at the
following street address:
2470 S. Arizona Avenue 265 East 24th Street
Yuma, AZ 85364 Yuma, AZ 85364
The Land referred to in the master Lease Document is more particularly
described in Schedule A hereto.
3. Purchase Price. Landlord purchased the Leased Property from
Samaritan for the sum of Three Million Forty Four Thousand Seven Hundred Seventy
Six and 12/100 Dollars ($3,044,776.12) (the "Purchase Price").
<PAGE>
-2-
4. Fixed Term. The Fixed Term of this Lease is fourteen (14) years,
commencing on July 1, 1992 (the "Commencement Date,") and ending on June 30,
2006.
5. Extended Term. Subject to the provisions of Section 2.4 of the
Master Lease Document, Tenant is hereby granted the right to renew the Lease for
two consecutive optional renewal terms ("Extended Term(s)") as follows: (i) the
"First Extended Term" is for ten (10) years and six (6) months, ending on
December 31, 2016, and (ii) the "Second Extended Term" is for ten (10) years and
six (6) months, ending on June 30, 2027.
6. Rental. The initial Minimum Rent payable pursuant to Section
3.1.1(a) of the Master Lease Document during years (i) one and two of the Fixed
Term is the annual sum of Three Hundred Fifty Thousand One Hundred Forty-Nine
and 25/100 Dollars ($350,149.25) payable in equal monthly installments of Twenty
Nine Thousand One Hundred Seventy Nine and 11/100 Dollars ($29,179.11), (ii)
three through five of the Fixed Term is the annual sum of Three Hundred
Sixty-Five Thousand Three Hundred Seventy-Three and 13/100 dollars ($365,373.13)
payable in equal monthly installments of Thirty Thousands Four Hundred
Forty-Seven and 76/100 Dollars ($30,447.76), and (iii) thereafter, at the rental
provide for in Section 3.1.1(c) of the Master Lease Document. The Minimum Rent
for the Extended Terms shall be at the rental provided for in Section 3.1.1(b)
of the Master Lease Document. During the Term, Minimum Rent shall be subject to
adjustment as provided in Section 3.1.1.(c) of the Master Lease Document.
Landlord will credit against installments of Minimum Rent the amounts determined
in accordance with Section 3.1.1(d) of the Master Lease Document. Tenant shall
also pay Additional Rent pursuant to Section 3.1.2 of the Master Lease Document.
7. Additional Arizona Remedies. Upon the occurrence of an Event of
Default (as defined in Section12.1 of the Master Lease Document), Landlord will
be entitled to pursue any one or more of the following remedies:
(A) Landlord may terminate this Lease and Tenant's right
to possession of the Leased Property by specific
written election.
(B) Landlord may reenter and retake possession of the
Leased Property through judicial process or through
self-help by lock out under A.R.S. ss. 33-361(A).
(C) Landlord may commence a forcible entry and detainer
action for recovery of possession of the Leased
Property and all due and unpaid Rent under A.R.S. ss.
33-361(A).
(D) Landlord may commence an action for ejectment under
A.R.S. ss. 12-1251.
<PAGE>
-3-
(E) Landlord may enforce any common law, statutory, or
contractual Landlord's lien under Arizona law. A.R.S.
ss. 33-361(D), or the Lease.
(F) Landlord may commence an action for rent under A.R.S.
ss. 12- 1271.
(G) Landlord may commence, from time to time, an action
to recover any Rent, accelerated Rent, liquidated
damages, or any other sums due to Landlord under this
Lease.
The remedies established in this Section 7 will be in addition to all other
legal remedies available to Landlord under Arizona law and not in lieu of any
other remedies. Landlord and Tenant agree that, unless Landlord has made a
specific written election to terminate the Lease, Landlord will not be deemed to
have elected to terminate the Lease as a result of Landlord's exercise of any of
its remedies outlined in Paragraphs (B) through (G), inclusive. Specifically,
but without limitation, neither the Landlord's acts nor Landlord's re-entry and
retaking of the Lease Property nor the Tenant's surrender of the Lease Property
nor the Landlord's commencement of an action for future rent will result in a
termination of the Lease, absent a written election to terminate by Landlord.
Without limitation of the previous two (2) sentences, the commencement by
Landlord of a forcible entry and detainer action will not, by itself, indicate
Landlord's election to terminate the Lease absent a specific written election by
Landlord in the complaint or in a separate written notice.
8. Non-Exclusivity of Remedies. Landlord's pursuit of the foregoing
remedies will not preclude Landlord's pursuit of any of the other remedies
provided for in this Lease or the Master Lease Document or any other remedies
provided by law or at equity. All remedies are cumulative.
9. Attorney Fees. Tenant agrees to pay all attorney fees incurred by
Landlord in the enforcement of this Lease and in the exercise of any remedies
available to Landlord, and, to the extent permitted by law, Landlord's attorney
fees will be deemed an Additional Charge under this Lease.
10. Severability. If any of Landlord's remedies outlined above are
determined to be unconscionable or unenforceable, Landlord and Tenant intend
that all other remedies will remain enforceable to the fullest extent and that
the enforcement of the unenforceable or unconscionable provision be limited to
the minimum extent necessary to make the unenforceable or unconscionable clause
enforceable.
<PAGE>
-4-
11. NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY. NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD IN ANY WAY SHALL LOOK ONLY
TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
[Intentionally left blank.]
<PAGE>
-5-
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
HEALTH AND REHABILITATION PROPERTIES
TRUST, a MARYLAND real estate
investment trust
By: /s/ David J. Hegarty
David J. Hegarty
Its: Treasurer
TENANT:
GCI HEALTH CARE CENTER, INC.
By: /s/ Everett W. Benton
Everett W. Benton
Its: Executive Vice President
Property address: 2470 S. Arizona Avenue
Yuma, AZ 85362
and
265 East 24th Street
Yuma, AZ 85364
Signature page for Lease
dated as of June 30, 1992
<PAGE>
SCHEDULE A
Description of Land
[Legal description]
<PAGE>
Omitted Exhibit
---------------
The following exhibit to the Lease has been omitted:
Exhibit Letter Exhibit Title
- -------------- -------------
A Description of Land
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibit to the Securities and Exchange Commission upon request.
<PAGE>
SCHEDULE TO EXHIBIT 10.29
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Lease, which is substantially identical in all material respects to the Lease
filed herewith, is omitted. The following list sets forth the material
differences in the leased premise, purchase price and annual rent.
Annual Annual
Rent for Years 1 Rent for Years 3
Leased Premises Purchase Price and 2 through 5
- -------------------------------------------------------------------------------
2932 North 14th Street $ 3,194,985.07 $ 367,423.28 $ 383,398.21
Phoeniz, AZ 85094
EXHIBIT 10.30
AMENDMENT TO MASTER LEASE DOCUMENT
AMENDMENT dated as of December 29, 1993 between HEALTH AND
REHABILITATION PROPERTIES TRUST, a real estate investment trust formed under the
laws of the State of Maryland ("HRP") and GCI HEALTH CARE CENTERS, INC., a
Delaware corporation ("GCIHCC")
W I T N E S S E T H:
WHEREAS, HRP, as landlord, and GCIHCC, as tenant, have entered into a
Master Lease Document, General Terms and Conditions dated as of June 30, 1992
(as amended, the "Master Lease"), and have also executed Facility Leases which
incorporate by reference the Master Lease (collectively, the "Facility Leases")
relating to the health care facilities described on Exhibit A-2 to the Master
Lease;
WHEREAS, HRP and GCIHCC have agreed to amend the Master Lease as
hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, HRP and GCIHCC agree as follows:
SECTION 1. AMENDMENT TO MASTER LEASE
The Master Lease is hereby amended as follows:
(a) The definition of "Net Patient Revenues" in Article 1 of the Master
Lease is hereby amended in full to read as follows:
Net Patient Revenues with respect to the Facilities located at
the Collective Leased Properties, shall mean the aggregate amount of
all revenues (determined in accordance with GAAP, except as provided
below) received or receivable from or by reason of the operation of
such Facilities, or any other use of such Facilities, including without
limitation all patient or client revenues received or receivable for
the use of or otherwise by reason of all rooms, beds and other
facilities provided, meals served, services performed or provided,
space or facilities subleased or goods sold at such Facilities,
including, without limitation, any other arrangements with third par
ties relating to the possession or use of any portion of
<PAGE>
-2-
such Facilities; provided, however, that Net Patient Revenues shall not
include:
(a) revenue from professional fees or charges by
physicians and unaffiliated providers of ancillary services,
when and to the extent such charges are paid over to such
physicians or unaffiliated providers of ancillary services, or
are separately billed and not included in comprehensive fees;
(b) non-operating revenues such as interest income or
income from the sale of assets not sold in the ordinary course
of business;
(c) revenues attributable to services actually
provided off-site or otherwise away from such Facilities, such
as home health care, to persons that are not patients at such
Facilities;
(d) all revenues attributable to Tenant's Capital
Additions (as such revenues are calculated in accordance with
Section 6.2.2(a));
(e) revenues attributable to child care services used
primarily for employees of such Facilities; and
(f) all revenues attributable to pharmacy services
provided to patients of such Facilities by Tenant or its
Affiliates, and other services provided to patients of such
Facilities by Tenant or its Affiliates that Landlord
acknowledges in writing following the written request of
Tenant (which acknowledgement will not be unreasonably
withheld) are not typically provided to nursing home patients
by the operators of such facilities; provided that this clause
(f) shall be given effect with respect to calculations of
Additional Rent (including, without limitation, the
computation of Base Net Patient Revenues for the applicable
Base Year) only for Fiscal Years ending after December 31,
1993.
(b) Section 12.1(h) of the Master Lease is amended in full to read as
follows:
(h)(A) any obligation of Tenant or any Guarantor (other than
GranCare, Inc.), or of any Subsidiary thereof, in respect of any
indebtedness for borrowed money or for the deferred purchase price of
any material property or services (excluding (1) trade accounts payable
in the ordinary course of business on customary trade terms and (2)
indebtedness or obligations under the Transaction Documents)
(hereinafter, "Indebtedness for Borrowed Money") or any guaranty
relating thereto shall be declared to be or shall become due and
payable prior to the stated maturity thereof, or such Indebtedness for
Borrowed Money shall not be paid as and when the same becomes due and
payable, or there shall occur
<PAGE>
-3-
and be continuing any default under any instrument, agreement or
evidence of indebtedness relating to any such Indebtedness for Borrowed
Money the effect of which is to permit the holder or holders of such
instrument, agreement or evidence of indebtedness, or a trustee, agent
or other representative on behalf of such holder or holders, to cause
such Indebtedness for Borrowed Money to become due prior to its stated
maturity; or (B) any obligation of GranCare, Inc., a Delaware
corporation, or of any Subsidiary thereof, in respect of any
Indebtedness for Borrowed Money or any guaranty relating thereto shall
be declared to be or shall become due and payable prior to the stated
maturity thereof, or the holder or holders of any instrument, agreement
or evidence of indebtedness relating to any such Indebtedness for
Borrowed Money, or a trustee, agent or other representative on behalf
of such holder or holders, shall deliver a notice of default, or shall
accelerate or demand payment of such Indebtedness for Borrowed Money,
or initiate foreclosure proceedings or exercise any other creditor's
remedies in respect of such Indebtedness for Borrowed Money (whether
similar or dissimilar to the foregoing); or
(c) Section 21.4 of the Master Lease is amended in full to read as
follows:
21.4 Tenant's Option to Purchase the Collective Leased
Properties.
(a) no Default has occurred and is continuing at the time
of exercise of the purchase option provided for in
this Section 21.4 or at the time of payment of the
purchase price provided for in this Section 21.4;
(b) the Leases for each of the Collective Leased
Properties (other than Leases that have been
terminated in accordance with the provisions hereof
for reasons other than as a result of the occurrence
of an Event of Default) shall be in full force and
effect; and
(c) other than as expressly permitted by Article 17,
Tenant shall not have assigned the Leases for any of
the Collective Leased Properties or subleased all or
any portion of the Collective Leased Properties,
effective on not less than twelve (12) months Notice, given not more than
thirty-six (36) months prior to the expiration of any Extended Term of the
Leases, Tenant shall have the option to purchase the Collective Leased
Properties at a purchase price equal to the greater of (1) one hundred twenty
percent (120%) of the aggregate of the Adjusted Purchase Prices of such
Collective Leased Properties or (ii) the aggregate of the Adjusted Purchase
Prices of such Collective Leased Properties, each as increased by
<PAGE>
-4-
the increase in the Cost of Living Index from June 30, 1992, as of the date of
expiration of the then current Extended Term; provided, however, Tenant's option
to purchase (a) is subject to Tenant exercising such option simultaneously with
respect to all, and not less than all, of the Collective Leased Properties that
are then subject to a Lease, as provided herein and (b) may only be exercised at
the end of the first or second Extended Terms. Such purchase by Tenant shall be
made in accordance with the provisions of Article 15 hereof and the closing date
for such purchase shall be the date of the expiration of the then current
Extended Term.
SECTION 2. EFFECT ON MASTER LEASE
(a) Except as specifically provided above, the Master Lease shall
remain in full force and effect and is hereby ratified and confirmed.
(b) The amendments set forth herein (i) do not constitute an amendment,
waiver or modification of any term, condition or covenant of the Master Lease,
or any of the instruments or documents referred to therein, other than as
specifically set forth herein, and (ii) shall not prejudice any rights which HRP
or its successors and assigns may now or hereafter have under or in connection
with the Master Lease, as amended hereby or any of the instruments or documents
referred to therein.
SECTION 3. EFFECTIVENESS
This Amendment shall become effective as of the date first above
indicated when a counterpart to this Amendment shall have been executed by each
of the parties hereto.
SECTION 4. COSTS, EXPENSES AND TAXES
GCIHCC agrees to pay all costs and expenses of HRP in connection with
the preparation, reproduction, execution and delivery of this Amendment,
including the reasonable fees and expenses of Sullivan & Worcester, special
counsel to HRP with respect thereto.
SECTION 5. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION 6. NO LIABILITY OF TRUSTEES
THE DECLARATION OF TRUST OF HRP, DATED OCTOBER 9, 1986, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED
IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT
<PAGE>
-5-
THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES
UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HRP
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS DEALING WITH HRP, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this amendment as a
sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST,
a Maryland real estate
investment trust
By:/s/ David J. Hegarty
Name: David J. Hegarty
Title: Executive Vice President
TENANT:
GCI HEALTH CARE CENTERS, INC.
By:/s/ Evrett Benton
Name:
Title:
EXHIBIT 10.31
AMENDMENT TO GCI HEALTH CARE CENTERS, INC.
MASTER LEASE DOCUMENT AND FACILITY LEASES
AMENDMENT dated as of October 1, 1994 between HEALTH AND RETIREMENT
PROPERTIES TRUST (known in Wisconsin as "Health and Rehabilitation Properties
REIT"), a real estate investment trust formed under the laws of the State of
Maryland ("HRP") and GCI HEALTH CARE CENTERS, INC., a Delaware corporation
("GCIHCC")
W I T N E S S E T H:
WHEREAS, HRP, as landlord, and GCIHCC, as tenant, have entered into a
Master Lease Document, General Terms and Conditions dated as of June 30, 1992,
as amended (the "Master Lease"), and have also executed Facility Leases which
incorporate by reference the Master Lease (collectively, the "Facility Leases")
relating to the health care facilities described on Exhibit A-2 to the Master
Lease;
WHEREAS, HRP and GCIHCC have agreed to amend the Master Lease and the
Facility Leases as hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, HRP and GCIHCC agree as follows:
SECTION 1. AMENDMENTS TO MASTER LEASE
The Master Lease is hereby amended as follows:
(a) Section 3.1.2 of the Master Lease is amended in full to read as
follows:
3.1.2 Additional Rent.
Tenant shall pay Landlord additional rent ("Additional Rent")
(a) for the Collective Leased Properties in the amount of $100,000 on
or before December 31, 1995, and (b) for the applicable Leased
Property, in advance on the first day of each calendar month of each
calendar year, commencing January 1, 1996, in an amount equal to the
product of (x) the Minimum Rent for the applicable Leased Property as
at December 31 of the prior year multiplied by (y) seventy-five percent
(75%) of the percentage increase in the Index (as hereinafter defined)
since September 30, 1994 as measured at December 31 of such prior year;
provided that the amount of each monthly installment of Additional Rent
payable for any calendar year may not exceed an amount that, when
aggregated with the monthly installment of Minimum Rent for the
applicable Leased Property for such year, would exceed the sum of the
monthly installments of Minimum Rent and
<PAGE>
-2-
Additional Rent for the applicable Leased Property for December of the
previous year by more than 2%. As used herein, the term "Index" shall
mean the Consumer Price Index for Urban Wage Earners and Clerical
Workers, Boston, Massachusetts, All Items 1982-1984=100. The Index is
presently published by the Bureau of Labor Statistics of the United
States Department of Labor. In the event publication of the Index
ceases, the computation of the Additional Rent due from Tenant during
each year with respect to which the Index is to be applied shall be
computed upon the basis of whatever index published by the United
States Department of Labor at that time is most nearly comparable as a
measure of general changes in price levels for the Boston area.
SECTION 2. AMENDMENTS TO FACILITY LEASES
The first sentence of Paragraph 6 of the Facility Lease for each Leased
Property is hereby amended to provide that the annual amount of initial Minimum
Rent and the amount of each monthly installment of initial Minimum Rent are the
respective amounts set forth on Schedule 1 hereto.
SECTION 3. EFFECT ON MASTER LEASE AND FACILITY LEASES
(a) Except as specifically provided above, the Master Lease and the
Facility Leases shall remain in full force and effect and each is hereby
ratified and confirmed.
(b) The amendments set forth herein (i) do not constitute an amendment,
waiver or modification of any term, condition or covenant of the Master Lease or
any Facility Lease, or any of the instruments or documents referred to therein,
other than as specifically set forth herein, and (ii) shall not prejudice any
rights which HRP or its successors and assigns may now or hereafter have under
or in connection with the Master Lease and the Facility Leases, as amended
hereby, or any of the instruments or documents referred to therein.
SECTION 4. EFFECTIVENESS
This Amendment shall become effective as of the date first above
indicated when a counterpart to this Amendment shall have been executed by each
of the parties hereto.
SECTION 5. COSTS, EXPENSES AND TAXES
GCIHCC agrees to pay all costs and expenses of HRP in connection with
the preparation, reproduction, execution and delivery of this Amendment,
including the reasonable fees and expenses of Sullivan & Worcester, special
counsel to HRP with respect thereto.
SECTION 6. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
<PAGE>
-3-
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION 7. NO LIABILITY OF TRUSTEES
THE DECLARATION OF TRUST OF HRP, DATED OCTOBER 9, 1986, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED
IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF HRP SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY,
FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS DEALING WITH HRP, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
IN WITNESS WHEREOF, the parties have executed this amendment as a
sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND RETIREMENT
PROPERTIES TRUST,
a Maryland real estate
investment trust
By: /s/ David J. Hegarty
Name: David J. Hegarty
Title: Executive Vice President
TENANT:
GCI HEALTH CARE CENTERS, INC.
By: /s/
Name:
Title:
<PAGE>
SCHEDULE 1 TO AMENDMENT
Schedule of Revised Minimum Rent Amounts
Amount of Monthly
Aggregate Yearly Installment of
Facility Name State Minimum Rent Minimum Rent
- ------------- ----- ---------------- -----------------
Mom & Dad's Home & Health SD $ 435,718 $ 36,310.00
Care Center, Sioux Falls
Village Green Nursing Home, AZ 408,555 34,046.00
Phoenix
La Sallette Rehabilitation and CA 407,499 33,958.00
Convalescent Hospital, Stockton
Huron Nursing Home and SD 545,791 45,483.00
Sunquest Village of Huron,
Huron
La Mesa Care Center and AZ 401,268 33,439.00
---------- -----------
Sunquest Village of Yuma,
Yuma
$ 2,198,831 $183,236.00
=========== ===========
EXHIBIT 10.32
AMENDMENT TO GCI HEALTH CARE CENTERS, INC.
FACILITY LEASES
AMENDMENT dated as of October 31, 1997 between HEALTH AND RETIREMENT
PROPERTIES TRUST, a real estate investment trust formed under the laws of the
State of Maryland ("HRP") and GCI HEALTH CARE CENTERS, INC., a Delaware
corporation ("GCIHCC")
W I T N E S S E T H:
WHEREAS, HRP, as landlord, and GCIHCC, as tenant, have entered into a
Master Lease Document, General Terms and Conditions dated as of June 30, 1992,
as amended (the "Master Lease"), and have also executed Facility Leases which
incorporate by reference the Master Lease (collectively, the "Facility Leases")
relating to the health care facilities described on Exhibit A-2 to the Master
Lease;
WHEREAS, HRP and GCIHCC have agreed to amend the Facility Leases as
hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, HRP and GCIHCC agree as follows:
SECTION 1. AMENDMENTS TO FACILITY LEASES
1.1 Paragraphs 4 and 5 of the Facility Lease for each Leased Property
is hereby amended in full to read as follows:
4. Fixed Term. The Fixed Term of this Lease is twenty (20)
years and two hundred fourteen (214) days, commencing on July 1, 1992
(the "Commencement Date"), and ending on January 31, 2013.
5. Extended Terms. Subject to the provisions of Section 2.4 of
the Master Lease, Tenant is hereby granted the right to renew the Lease
for two (2) 10-year consecutive optional renewal terms for a maximum
term if all such options are exercised of twenty (20) years after the
expiration of the Fixed Term.
1.2 The first sentence of Paragraph 6 of the Facility Lease for each
Leased Property listed on Schedule 1 hereto is hereby amended to provide that
the annual amount of initial Minimum Rent and the amount of each monthly
installment of initial Minimum Rent for such Leased Property are the respective
amounts set forth on Schedule 1 hereto.
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SECTION 2. EFFECT ON FACILITY LEASES
2.1 Except as specifically provided above, the Facility Leases shall
remain in full force and effect and each is hereby ratified and confirmed.
2.2 The amendments set forth herein (i) do not constitute an amendment,
waiver or modification of any term, condition or covenant of any Facility Lease,
or any of the instruments or documents referred to therein, other than as
specifically set forth herein, and (ii) shall not prejudice any rights which HRP
or its successors and assigns may now or hereafter have under or in connection
with Facility Leases, as amended hereby, or any of the instruments or documents
referred to therein.
SECTION 3. EFFECTIVENESS
This Amendment shall become effective as of the date first above
indicated when a counterpart to this Amendment shall have been executed by each
of the parties hereto.
SECTION 4. COSTS, EXPENSES AND TAXES
GCIHCC agrees to pay all costs and expenses of HRP in connection with
the preparation, reproduction, execution and delivery of this Amendment,
including the reasonable fees and expenses of Sullivan & Worcester LLP, special
counsel to HRP with respect thereto.
SECTION 5. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION 6. NO LIABILITY OF TRUSTEES
THE DECLARATION OF TRUST OF HRP, DATED OCTOBER 9, 1986, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED
IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF HRP SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY,
FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS DEALING WITH HRP, IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
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IN WITNESS WHEREOF, the parties have executed this amendment as a
sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND RETIREMENT
PROPERTIES TRUST,
a Maryland real estate
investment trust
By: /s/ David J. Hegarty
Name: David J. Hegarty
Title: President
TENANT:
GCI HEALTH CARE CENTERS, INC.
By: /s/ M. Henry Day, Jr.
Name: M. Henry Day, Jr.
Title: Assistant Secretary
<PAGE>
SCHEDULE 1 TO AMENDMENT
Schedule of Revised Minimum Rent Amounts
Amount of
Aggregate Monthly
Yearly Installment of
Facility Name State Minimum Rent Minimum Rent
- ------------- ----- ------------ ------------
Village Green Nursing Arizona $436,479 $36,373.25
Home
La Mesa Care Center Arizona 337,939 28,161.58
SunQuest Village of Arizona 109,063 9,088.58
Yuma
La Sallette Health and CA 433,884 36,157.00
Rehabilitation Center
Huron Nursing Home SD 418,585 34,882.08
SunQuest Village of SD 127,206 10,600.50
Huron
Mom & Dads Home SD 435,716 36,309.67
and Health Care Center
$2,298,872.00 $191,572.67
============= ===========
EXHIBIT 10.33
GUARANTY, CROSS DEFAULT AND
CROSS COLLATERALIZATION AGREEMENT
THIS GUARANTY, CROSS DEFAULT AND CROSS COLLATERALIZATION AGREEMENT
(hereinafter this "Agreement") made as of June 30, 1992 among AMS PROPERTIES,
INC., a Delaware corporation ("AMS"), and GCI HEALTH CARE CENTERS, INC., a
Delaware corporation ("GCI"), and HEALTH AND REHABILITATION PROPERTIES TRUST, a
Maryland real estate investment trust (together with its successors and assigns,
"HRP") .
WHEREAS, pursuant to a letter agreement dated April 10, 1992 (the
"Letter Agreement"), between GranCare, Inc., a California corporation and owner
of 100% of the capital stock of GCI ("GranCare"), and HRP, HRP and GCI agreed to
enter into a long-term lease with respect to certain real property, and the
related improvements and personal property, located in Arizona, California and
South Dakota pursuant to leases of even date herewith each of which incorporates
by reference a master lease document of even date herewith by and between HRP,
as Landlord and GCI, as tenant (as such leases may be amended, modified or
supplemented from time to time, the "GCI Lease");
WHEREAS, HRP has agreed to enter into the GCI Lease provided that AMS,
which company is under common control with GCI and has heretofore entered into
sale-leaseback, mortgage financing and/or leasing transactions with HRP, agrees
to guarantee payment and performance of GCI's obligations to HRP and to certain
cross collateralization and cross default provisions;
WHEREAS, AMS will materially benefit from the consummation of the
transaction described in the Letter Agreement and in furtherance thereof AMS has
determined that it is in its best interests and in pursuit of its business
purposes that it induce HRP to enter into the GCI Lease by executing and
delivering this Guaranty;
WHEREAS, upon the consummation of the transaction described in the
Letter Agreement and execution and delivery of the GCI Lease, GCI will conduct
its business at the Leased Properties (as such term is defined in the GCI Lease)
and GCI will materially benefit from the GCI Lease and, in furtherance thereof,
GCI has determined that it is in its best interests and in pursuant of its
business purposes that it induce HRP to enter into the GCI Lease by executing
and delivering this Guaranty; and
WHEREAS, AMS has agreed to guaranty payment and performance of GCI's
obligations to HRP and to the requested cross collateralization and cross
default provisions only if GCI agrees to guaranty payment and performance of the
obligations of AMS to
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HRP and to certain cross collateralization and cross default provisions.
NOW THEREFORE in consideration of the foregoing and to induce HRP to
enter into the GCI Lease, and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
Section 1. Definitions.
Capitalized terms used and not otherwise defined herein shall have the
meaning assigned to such terms in the GCI Lease and the AMS Lease, respectively,
otherwise the terms set forth below shall have the following definitions:
"Affiliate" shall mean as to any Person (a) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more on a consolidated basis, of the
outstanding capital stock, shares, equity or beneficial interests of such
Person, or (c) any officer, director, employee, general partner or trustee of
such Person or any other Person controlling, controlled by or under common
control with such Person (excluding trustees and Persons serving in similar
capacities who are not otherwise an Affiliate of such Person). For the purposes
of this definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, partnership interests or other
equity interests or otherwise.
"Event of Default" shall mean any "Event of Default" under, and as
defined in, any Security Document.
"Guaranteed Obligations" shall mean collectively the payment and
performance of each and every obligation, joint or several, now existing or
hereafter incurred, and whether contingent, noncontingent, liquidated,
unliquidated, matured or unmatured, or otherwise, of each of AMS and GCI (each a
"Guarantor" and collectively the "Guarantors") to HRP, under any and all
documents, agreements and instruments by, between or among any Guarantor or
Guarantors with, to or for the benefit of HRP, whether now existing or hereafter
arising, and, including, without limitation,
(i) payment and performance of all covenants and agreements of
the tenant/lessee, including, without limitation, payment of
all Minimum Rent, Additional Rent and Additional Charges (as
such terms are defined in the applicable Lease) and all other
amounts due and payable
<PAGE>
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under (A) the GCI Lease; and (B) the leases, dated as of
December 28, 1990, each of which incorporates by reference a
master lease document dated as of December 28, 1990, between
HRP, as lessor and AMS, as lessee, relating to the real and
personal property subject thereto and being described more
particularly therein (as such leases may be amended, modified
or supplemented from time to time, the "AMS Lease", and
together with the GCI Lease, the "Leases");
(ii) payment of the principal of, and all interest and other
charges or amounts due on or under, the Promissory Note, dated
December 28, 1990, made by AMS to the order of HRP, in the
original principal amount of Fifteen Million Dollars
($15,000,000) (the "AMS Note"); and
(iii) payment and performance of all covenants and agreements
of either of the Guarantors to HRP under any of the Security
Documents (as hereinafter defined); and
(iv) payment and performance of all other now existing or
hereafter arising Indebtedness, covenants, liabilities,
obligations and agreements to, with or for the benefit of HRP
(including, without limitation, all now existing or hereafter
arising Indebtedness, covenants, obligations and agreements
created, arising or set forth under all leases and loan
documents with HRP) from, of or by (A) the Guarantors (and/or
any of their Affiliates) and/or (B) any endorser, surety or
guarantor of any of the Security Documents (and/or any
Affiliate of any such endorser, surety or guarantor).
"Guarantors" shall mean collectively, AMS and GCI and their respective
successors and assigns.
"Guaranty" shall mean any obligation, contingent or otherwise, of any
Person guaranteeing any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, and including any obligation of
such Person, direct or indirect: (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness; or (ii) to purchase property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness; or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term Guaranty shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
"Indebtedness" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on
<PAGE>
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the obligor's balance sheet or in notes thereto as liabilities and in any event
shall include all Guaranties. The amount of any Guaranty of Indebtedness or
other contingent Indebtedness shall equal the amount of such Indebtedness as
though it were not contingent.
"Leases" shall mean collectively, the GCI Lease and the AMS Lease.
"Notice" As defined in Section 22.
"Person" shall mean any individual, corporation, general or limited
partnership, stock company or association, joint venture, association, company,
trust, bank, trust company, land trust, business trust, unincorporated
association, any government or agency or political subdivision thereof or any
other entity.
"Security Documents" shall mean any and all documents, agreements and
instruments, whether now existing or hereafter executed, made in connection
with, relating to, evidencing, or creating security or collateral for the
Guaranteed Obligations including, without limitation, the AMS Note, the Leases,
the Transaction Documents (as such term is defined in the AMS Lease and in the
GCI Lease, respectively) and the Amended and Restated HRP Shares Pledge
Agreement of even date herewith by and between AMS and HRP.
Section 2. Guarantee.
Each Guarantor hereby, jointly and severally, unconditionally
guarantees to HRP (i) the full and punctual payment when due, whether at the
stated or accelerated maturity thereof or upon any mandatory or voluntary
prepayment date, termination or otherwise, of each of the Guaranteed
Obligations, and (ii) the performance and observance of all agreements,
obligations, warranties and covenants of any of the Guarantors comprising the
Guaranteed Obligations. This guarantee is a guarantee of payment and not of
collectibility and is absolute and in no way conditional or contingent and each
Guarantor hereby expressly waives any right to require that any action be
brought against the primary obligor or principal debtor on any Guaranteed
Obligation, against such Guarantor or against any other Guarantor or to require
that resort be had to any security or collateral. In case any part of the
Guaranteed Obligations shall not have been paid when due and payable, each
Guarantor shall, within ten (10) days after receipt of Notice (as such term is
hereinafter defined) from HRP, pay or cause to be paid to HRP the amount thereof
as shall then be due and payable (including interest and other charges, if any,
due thereon through the date of payment); provided, however, nothing herein
shall be construed to create or extend any grace period under any Security
Document.
<PAGE>
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Each Guarantor further agrees, both jointly and severally, that if at
any time all or any part of any payment theretofore made by the principal
debtor, primary obligor or any other Guarantor to HRP for application to or in
respect of any of the Guaranteed Obligations is or must be rescinded or returned
or restored for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of any obligor of the Guaranteed
Obligations or any other Guarantor), such Guaranteed Obligations shall, for the
purposes of this Agreement, to the extent that such payment is or must be
rescinded, restored or returned, be deemed to have continued in existence,
notwithstanding such payment or application, and this Agreement shall continue
to be effective or be reinstated, as the case may be, as to such Guaranteed
Obligations, all as though such payment to or application by HRP had not been
made.
Section 3. Cross Default; Cross Collateralization.
Each Guarantor agrees that all collateral now or hereafter pledged,
granted, mortgaged, deeded, assigned or otherwise transferred as security for
any indebtedness or obligations of any Guarantor to HRP shall constitute and be
deemed to be collateral (the "Collateral") securing all of the Guaranteed
Obligations, and each Guarantor hereby grants to HRP a continuing security
interest in all the Collateral and in all additions, accessions and replacements
thereof and thereto. Any default in the full and punctual payment and
performance of any of the Guaranteed Obligations or in or under any Security
Document or in or under this Agreement shall, after the passage of any
applicable grace period, constitute and be deemed to be an event of default in
respect of each and every Guaranteed Obligation under each Security Document.
Upon the occurrence of any such default, in addition to all other rights and
remedies HRP may have under any Security Document HRP may, at its option,
declare all of the Guaranteed Obligations and all other liabilities and
obligations of the Guarantors to HRP hereunder, under the Security Documents or
otherwise, immediately due and payable to HRP without further demand or notice
of any nature, all of which are expressly waived by the Guarantors. HRP may
realize upon the Collateral in any manner and in any order not inconsistent with
applicable law and each Guarantor hereby waives, to the fullest extent permitted
by applicable law, the right, if any, to require any sale of Collateral to be
made in parcels, and the right, if any, to select parcels to be sold, and the
right, if any, to require marshalling of Collateral or assets.
Section 4. Unenforceability of Guaranteed Obligations, Etc.
If the primary obligor, any other Guarantor or any other person is for
any reason under no legal obligation to discharge any of the Guaranteed
Obligations, or if any other moneys included in the Guaranteed Obligations have
become unrecoverable from the
<PAGE>
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primary obligor, any other Guarantor or any other person by operation of law or
for any other reason, including, without limitation, the invalidity or
irregularity in whole or in part of any Guaranteed Obligation, any document,
instrument or agreement creating or evidencing any Guaranteed Obligation or any
Security Document or any limitation on the liability of the primary obligor, any
other Guarantor or any other person thereunder or any limitation on the method
or terms of payment under any Guaranteed Obligation which may now or hereafter
be caused or imposed in any manner whatsoever, the guarantees hereby and herein
granted and set forth in this Agreement shall nevertheless remain in full force
and effect and shall be binding upon each other Guarantor to the same extent as
if each such Guarantor at all times had been the primary obligor or principal
debtor on all such Guaranteed Obligations.
Section 5. Representations and Warranties.
Each Guarantor hereby represents, and warrants, for itself and for the
other Guarantors, that:
5.1. Status and Authority of Guarantors. Each Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization and has all requisite power and authority
(corporate and other) under the laws of such state and its corporate charter and
by-laws to own its property and assets, to enter into and perform its
obligations, under this Agreement and the Security Documents to which it is a
party, and to transact the business in which it is engaged or presently proposes
to engage. Each Guarantor has duly qualified and is in good standing in each
jurisdiction in which the nature of the business conducted or to be conducted by
it or the ownership of its properties requires such qualification.
5.2. Corporate Action of Guarantors. Each Guarantor has taken all
necessary action (corporate or other) under its corporate charter and by-laws to
authorize the execution, delivery and performance, of this Agreement and the
Security Documents to which it is a party, and this Agreement and each Security
Document constitute the valid and binding obligation and agreement of each
Guarantor enforceable in accordance with its terms, except insofar as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws of general application affecting the rights and remedies of
creditors, and moratorium laws from time to time in effect.
5.3. Adverse Restrictions, Authorizations. Neither the execution and
delivery of this Agreement by any Guarantor nor compliance with the terms and
provisions hereof are events which of themselves, or with the giving of notice
or the passage of time, or both, could constitute, a violation of or conflict
with, or result in any breach of, or default under, the terms, conditions or
provisions of, or require any consent, permit,
<PAGE>
-7-
approval, authorization, declaration or filing under or pursuant to, any
statute, law, judgment, decree, order, rule or regulation applicable to any
Guarantor, any of the Security Documents or any other agreement, instrument or
understanding to which any Guarantor is a party or by which either Guarantor, or
any of their properties is bound, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever on any of such properties
or any portion thereof or interest therein (other than the liens created by the
Security Documents), and no such condition or event of itself, or with the
giving of notice or the passage of time, or both, will result in the
acceleration of the due date of any obligation of any Guarantor or by which any
Guarantor or any of its properties is bound.
Section 6. Covenants.
6.1. Prompt Payment of Guaranteed Obligations. Each Guarantor will pay
or cause to be paid when due the Guaranteed Obligations and all other
obligations under this Agreement.
6.2. Maintenance of Accounts and Records. Each Guarantor will keep true
records and books of account in which full, true and correct entries will be
made of dealings and transactions in relation to the business and affairs of
such Guarantor in accordance with GAAP. Each Guarantor will apply accounting
principles in the preparation of its financial statements which, in the judgment
and the opinion of its independent public accountants, are in accordance with
GAAP, except for changes approved by such independent public accountants.
6.3. Payment of Expenses. Each Guarantor agrees, as principal obligor
and not as guarantor only, to pay to HRP forthwith upon demand, in immediately
available Federal funds, all costs and expenses (including court costs and
reasonable legal expenses) incurred or expended by HRP in connection with the
enforcement of this Agreement, together with interest on amounts recoverable
under this Agreement from the time such amounts become due until payment at the
highest rate then prevailing under the terms of the applicable Security Document
for overdue payments of principal, interest or rent, as the case may be, or if
less, the maximum rate of interest permitted by law. The covenants and
agreements of each Guarantor set forth in this Section 6.3 shall survive the
termination of this Agreement.
6.4. Reports. Each Guarantor shall promptly provide to HRP such
certificates, reports and other documents required of it hereunder and under the
Security Documents.
6.5. Taxes, etc. Each Guarantor shall pay and discharge promptly as
they become due and payable all taxes, assessments charges or levies imposed
upon such Guarantor or such Guarantor's income, property, real, personal or
mixed, or upon any part thereof, as well as all claims of any kind (including
claims for
<PAGE>
-8-
labor, materials and supplies) which, if unpaid, might by law become a lien or
charge upon such Guarantor's property.
6.6. Legal Existence. Each Guarantor shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence.
6.7. Compliance. Each Guarantor shall comply in all respects with all
applicable statutes, rules, regulations and orders of, and all applicable
restrictions imposed by, all governmental authorities in respect of the conduct
of its business and the ownership of its property (including, without
limitation, applicable statutes, rules, regulations, orders and restrictions
relating to environmental, safety and other similar standards or controls).
6.8. Insurance. Each Guarantor shall maintain with financially sound
and reputable insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by owners of
established reputation engaged in the same or similar businesses and similarly
situated, in such amounts and by such methods as shall be customary for such
owners.
6.9. Adverse Change. Each Guarantor shall promptly give notice to HRP
of any event which will or either Guarantor reasonably believes will result in a
material adverse change in its financial condition.
Section 7. Stay of Acceleration.
If acceleration of the time for payment or performance of any
Guaranteed Obligation is stayed upon the insolvency, bankruptcy or
reorganization of any Guarantor or any other Person or otherwise, all such
amounts otherwise subject to acceleration shall nonetheless be payable by the
other Guarantor hereunder forthwith upon demand.
Section 8. Additional Guarantees.
This Agreement shall be in addition to any other guarantee or other
security for the Guaranteed Obligations, and it shall not be prejudiced or
rendered unenforceable by the invalidity of any such other guarantee or
security.
Section 9. Setoff.
In addition to and not in limitation of any rights of HRP, HRP shall,
upon the occurrence of any default or Event of Default, have the right to
appropriate and apply to the payment of the Guaranteed Obligations, whether or
not then due, and each
<PAGE>
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Guarantor hereby grants to HRP a continuing security interest in, any and all
balances, credits, deposits, security deposits, accounts or monies of the
Guarantors now or hereafter maintained with or for the account of HRP.
Section 10. Consents and Waivers, Etc.
Each Guarantor hereby (a) acknowledges receipt of correct and complete
copies of each of the Security Documents, and consents to all of the terms and
provisions thereof, as the same may be from time to time hereafter amended or
changed in accordance therewith, (b) agrees that the documents, instruments and
agreements creating or evidencing the Guaranteed Obligations may be modified or
amended at any time without the consent of each Guarantor and that no such
modification or amendment shall in any way release or discharge any Guarantor
from its obligations under this Agreement; and (c) waives to the maximum extent
permitted by applicable law, (i) presentment, demand for payment, and protest of
nonpayment, of any principal of or interest or premium on any of the Guaranteed
Obligations, (ii) notice of acceptance of this Agreement, (iii) notice of any
indulgence, extensions or renewals granted to any obligor with respect to the
Guaranteed Obligations, (iv) any requirement of diligence or promptness in the
enforcement of rights under the Security Documents or any other agreement or
instrument directly or indirectly relating thereto or to the Guaranteed
Obligations, (v) any enforcement of any present or future agreement or
instrument relating directly or indirectly thereto or to the Guaranteed
Obligations, (vi) notice of any of the matters referred to in subsection (b)
hereof, (vii) any and all notices of every kind and description which may be
required to be given by any statute or rule of law and any defense of any kind
which it may now or hereafter have with respect to its liability under this
Agreement, (viii) all statutes of limitations as a defense to any action brought
against any Guarantor, to the fullest extent permitted by law, (ix) any right to
require HRP, as a condition of enforcement of this guaranty, to proceed against
the primary obligor, any other Guarantor or any other person or to proceed
against or exhaust any security held by HRP at any time or to pursue any other
right or remedy in HRP's power before proceeding against any Guarantor, (x) any
defense that may arise by reason of the incapacity, lack of authority, death or
disability of any other person or persons or the failure of HRP to file or
enforce a claim against the estate (in administration, bankruptcy, or any other
proceeding) of any other person or persons, (xi) any defense based upon an
election of remedies by HRP, (xii) any defense based upon any lack of diligence
by HRP in the collection of any Guaranteed Obligation, (xiii) any duty on the
part of HRP to disclose to any Guarantor any facts HRP may now or hereafter know
about another Guarantor, (xiv) any defense arising because of an election made
by HRP under Section 1111(b)(2) of the Federal Bankruptcy Code, (xv) any defense
based on any borrowing or grant of a security interest under Section 364 of the
Federal Bankruptcy Code, and (xvi) any defense based upon
<PAGE>
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or arising out of any defense which any Guarantor or any other person may have
to the payment or performance of the Guaranteed Obligations. Each Guarantor
authorizes each other Guarantor and each other obligor in respect of the
Guaranteed Obligations and HRP at any time in its discretion, as the case may
be, to alter any of the terms of the Guaranteed Obligations.
Section 11. WAIVER OF JURY TRIAL.
INITIALS EXCEPT TO THE EXTENT PROHIBITED BY LAW WHICH CANNOT BE WAIVED,
EACH GUARANTOR HEREBY WAIVES TRIAL BY JURY IN CONNECTION WITH
ANY ACTION OR PROCEEDING OF ANY NATURE WHATSOEVER ARISING
UNDER, OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY
SECURITY DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY, WHETHER ARISING UNDER STATUTE (INCLUDING ANY FEDERAL
OR STATE CONSTITUTION) OR UNDER THE LAW OF CONTRACT, TORT OR
OTHERWISE AND INCLUDING, WITHOUT LIMITATION, ANY CHALLENGE TO
THE LEGALITY, VALIDITY, BINDING EFFECT OR ENFORCEABILITY OF
THIS PARAGRAPH OR THIS AGREEMENT OR ANY OF THE SECURITY
DOCUMENTS. EACH PARTY ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT ON THE OTHER
GUARANTOR'S ENTERING INTO THIS AGREEMENT.
Section 12. No Impairment, Etc.
The joint and several obligations, covenants, agreements and duties of
each Guarantor under this Agreement shall not be affected or impaired by any of
the following: (i) any assignment or transfer in whole or in part of any of the
Guaranteed Obligations without notice to the Guarantors, (ii) any waiver by HRP
or any holder of any of the Guaranteed Obligations or by the holders of all of
the Guaranteed Obligations of the performance or observance by any Guarantor of
any of the agreements, covenants, terms or conditions contained in the
Guaranteed Obligations or the Security Documents, (iii) any indulgence in or the
extension of the time for payment of any amounts payable under or in connection
with the Guaranteed Obligations or the security Documents or any other
instrument or agreement relating to the Guaranteed Obligations or of the time
for performance of any other obligations under or arising out of any of the
foregoing or the extension or renewal thereof, (iv) the modification or
amendment (whether material or otherwise) of any duty, agreement or obligation
of any Guarantor set forth in any of the foregoing, (v) a Change in Control or
the voluntary or involuntary sale or other disposition of all or substantially
all the assets of any of the Guarantors, (vi) insolvency, bankruptcy, or other
similar proceedings affecting any Guarantor or any assets of any Guarantor,
(vii) the release or discharge of any Guarantor from the performance or
observance of any agreement, covenant, term or condition contained in any of the
foregoing without the consent of
<PAGE>
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the holders of the Guaranteed Obligations by operation of law, or (viii) any
other cause, whether similar or dissimilar to the foregoing.
Section 13. Reimbursement, Subrogation, Etc.
Each Guarantor hereby covenants and agrees that no Guarantor will
enforce or otherwise exercise any rights of reimbursement, subrogation,
contribution or other similar rights against the primary obligor, any other
Guarantor or any other Person with respect to the Guaranteed Obligations prior
to the payment in full and performance of all of the Guaranteed Obligations.
Section 14. Successors and Assigns.
Whenever in this Agreement, any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party, including without limitation the holders, from time to time, of the
Guaranteed Obligations; and all representations, warranties, covenants and
agreements by or on behalf of each Guarantor which are contained in this
Agreement shall inure to the benefit of HRP's successors and assigns, including
without limitation said holders, whether so expressed or not.
Section 15. Governing Law.
EXCEPT AS TO MATTERS REGARDING THE INTERNAL AFFAIRS OF HRP AND ISSUES
OF OR LIMITATIONS ON ANY PERSONAL LIABILITY OF THE SHAREHOLDERS AND TRUSTEES OF
HRP FOR OBLIGATIONS OF HRP, AS TO WHICH THE LAWS OF THE STATE OF MARYLAND SHALL
GOVERN, THIS AGREEMENT AND ANY OTHER INSTRUMENTS EXECUTED AND DELIVERED TO
EVIDENCE, COMPLETE, OR PERFECT THE TRANSACTIONS CONTEMPLATED HEREBY WILL BE
INTERPRETED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS (OTHER
THAN THE LAWS GOVERNING CONFLICTS OF LAWS) OF THE COMMONWEALTH OF MASSACHUSETTS.
ANY ACTION TO ENFORCE, ARISING OUT OF, OR RELATING IN ANY WAY TO, ANY
OF THE PROVISIONS OF THIS AGREEMENT MAY BE BROUGHT AND PROSECUTED IN SUCH COURT
OR COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS AS IS PROVIDED BY LAW;
AND THE PARTIES CONSENT TO THE JURISDICTION OF SAID COURT OR COURTS LOCATED IN
THE COMMONWEALTH OF MASSACHUSETTS AND TO SERVICE OF PROCESS BY REGISTERED MAIL,
RETURN RECEIPT REQUESTED, OR BY ANY OTHER MANNER PROVIDED BY LAW.
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Section 16. Modification of Agreement.
No modification or waiver of any provision of this Agreement, nor any
consent to any departure by a Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by HRP, and such
modification, waiver or consent shall be effective only in the specific
instances and for the specific purpose for which given. No notice to or demand
on any Guarantor in any case shall entitle any Guarantor to any other or further
notice or demand in the same, similar or other circumstances.
Section 17. No Waiver of Rights by HRP.
Neither any failure nor any delay on the part of HRP, or on the part of
any holder of the Guaranteed Obligations, in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise or the
exercise of any other right, power or privilege.
Section 18. Severability.
In case any one or more of the provisions contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby, but this Agreement shall be
reformed and construed and enforced to the maximum extent permitted by
applicable law.
Section 19. Headings; Counterparts.
Headings in this Agreement are for purposes of reference only and shall
not limit or otherwise affect the meaning hereof. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument, and in pleading or proving any
provision of this Agreement, it shall not be necessary to produce more than one
of such counterparts.
Section 20. Remedies Cumulative.
No remedy herein conferred upon HRP or the holders of the Guaranteed
Obligations is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
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Section 21. Amendments to Security Documents.
Each Guarantor agrees that if and to the extent that pursuant to the
laws of any jurisdiction in which any Security Document is recorded or filed an
amendment to such Security Document is required to be recorded or filed to
implement, perfect the interests granted by or carry out the intents and
purposes of this Agreement, HRP may prepare and file or record such amendment
and each Guarantor agrees to use its best efforts to effect any required or
desirable recordation or filing of any such amendment. HRP, as attorney in fact
pursuant to Section 23 hereof, may, in the name and stead of each of the
Guarantors, be required or desire to make and to execute all conveyances,
assignments, amendments and transfers of this Agreement pursuant to this Section
21. If so requested by HRP, each of the Guarantors shall ratify and confirm any
such assignment or amendment by executing and delivering to HRP all such
instruments as may, in the judgment of HRP, be reasonably necessary or
appropriate for such purpose.
Section 22. Notices.
Any notice, request, demand, statement or consent ("Notice") desired or
required to be given hereunder shall be in writing and shall be delivered by
hand, sent by certified mail, return receipt requested, sent by a nationally
recognized commercial overnight delivery service with provisions for a receipt,
postage or delivery charges prepaid, and shall be deemed given (i) when actually
delivered, if delivered by hand, (ii) upon receipt, if sent by certified mail,
or (iii) the next business day after being placed in the possession of an
overnight delivery service, if sent by an overnight delivery service, and shall
be addressed as follows:
If to any Guarantor: [Guarantor]
c/o GranCare, Inc.
300 Corporate Pointe
Suite 300
Culver City, California 90230
Attn: President
With a copy to: Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attn: John H. Nash, Esq.
If to HRP: Health and Rehabilitation Properties Trust
400 Centre Street
Newton, Massachusetts 02458
Attn: President
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In each case
With a copy to: Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Lena G. Goldberg, Esq.
or at such other place as any party hereto may from time to time hereafter
designate to the other in writing.
Each Guarantor covenants and agrees to give to HRP not less than 10
days' prior Notice of any change in (i) the name in which it conducts its
business, (ii) the location and address of its chief executive office or its
chief place of business and (iii) the location of any Collateral, clearly
describing such change and providing such other information in connection
therewith as HRP may reasonably request.
Section 23. HRP Appointed Attorney in Fact; Indemnity.
HRP is hereby appointed the attorney-in fact, with full power of
substitution, of each Guarantor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instruments which such
attorney-in-fact may deem necessary or advisable to accomplish the purposes
hereof. This power of attorney, being coupled with an interest, shall be
irrevocable until all of the Guaranteed Obligations have been fully paid and
performed and shall not be affected by any disability or incapacity which the
Guarantors may suffer and shall survive the same. The power of attorney
conferred on HRP pursuant to the provisions of this Section 23 is provided
solely to protect the interests of HRP and shall not impose any duty on HRP to
exercise any such power, and neither HRP nor such attorney in-fact shall be
liable for any act, omission, error in judgment or mistake of law, except as the
same may result from its gross negligence or willful misconduct. Each Guarantor
shall and hereby agrees on demand to indemnify and save harmless HRP for, from
and against any liability or damage which it may incur, in good faith and
without negligence, in the exercise and performance of any of HRP's powers and
duties specifically set forth herein.
Section 24. Nonliability of Trustees.
THE DECLARATION OF TRUST ESTABLISHING HRP, DATED OCTOBER 9, 1986, A
COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY
FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,
PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST" REFERS TO
THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF HRP SHALL BE HELD TO ANY
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PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, HRP. ALL PERSONS DEALING WITH HRP IN ANY WAY SHALL LOOK ONLY TO THE
ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
WITNESS the execution hereof under seal as of the date first written
above.
GUARANTORS:
GCI HEALTH CARE CENTERS, INC.,
a Delaware corporation
By:/S/ Evrett Benton
Evrett W. Benton
Its: Executive Vice President
AMS PROPERTIES, INC.,
a Delaware corporation
By:/s/ Kevin W. Pendergest
Kevin W. Pendergest
Its: Executive Vice President
Agreed and Accepted:
HEALTH AND REHABILITATION
PROPERTIES TRUST, a Maryland
real estate investment trust
By:/s/ David J. Hegarty
David J. Hegarty
Its: Treasurer
Signature page for Guaranty, Cross Default and
Cross Collateralization Agreement by and among
GCI Health Care Centers, Inc. and AMS Properties, Inc.
dated as of June 30, 1992.
EXHIBIT 10.34
GUARANTY BY GRANCARE, INC.
GUARANTY dated as of October 31, 1997 made by GRANCARE, INC., a
Delaware corporation (the "Guarantor") and HEALTH AND RETIREMENT PROPERTIES
TRUST, a Maryland real estate investment trust (with its successor and assigns,
"HRP").
W I T N E S S E T H :
WHEREAS, pursuant to and subject to the terms and conditions of a Third
Amended and Restated Agreement and Plan of Merger dated as of September 17, 1997
among the Guarantor, LCA Acquisition Sub, Inc., a Delaware corporation ("LCA
Acquisition") and a wholly-owned subsidiary of Paragon Health Network, Inc., a
Delaware corporation (f/k/a Living Centers of America, Inc.) ("Paragon"),
paragon and Apollo Management, L.P. on behalf of one or more of its managed
investment funds, Guarantor shall become a wholly-owned subsidiary of Paragon
through the merger of LCA Acquisition with and into the Guarantor and those
certain other transactions defined as the "Transactions" in the Joint Proxy
Statement dated September 26, 1997 by the Guarantor and GranCare (the
"Transactions");
WHEREAS, the Guarantor has requested that HRP consent to the
Transactions and to make certain modifications to the GranCare Documents in
connection therewith;
WHEREAS, HRP is willing to so consent and agree, subject to the terms
and conditions of a certain Restructure and Asset Exchange Agreement dated as of
even date herewith (the "Restructure Agreement") among Guarantor, and AMS
Properties, Inc. and GCI Health Care Centers, Inc., each a Delaware corporation
and a wholly-owned subsidiary of the Guarantor ("AMS Properties"and "GCIHCC,"
respectively), and HRP;
WHEREAS, it is a condition to the effectiveness of the Restructure
Agreement that, among other things, the Guarantor deliver this Guaranty in favor
of HRP;
WHEREAS, by virtue of the Transactions and the related modifications to
the GranCare Documents contemplated by the Restructure Agreement, the GranCare
Companies will benefit substantially from, among other things, increased access
to capital;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Guarantor hereby agrees with HRP as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are defined in
the Restructure Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
"Applicable Law" shall mean any law of any governmental
authority, whether domestic or foreign, including without limitation
all federal and state laws, to which the
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Person in question is subject or by which it or any of its property is
bound, and including without limitation any: (a) administrative,
executive, judicial, legislative or other action, code, consent decree,
constitution, decree, directive, enactment, finding, guideline,
injunction, interpretation, judgment, law, order, ordinance, policy
statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or
writ, of any governmental authority, domestic or foreign, whether or
not having the force of law; (b) common law or other legal or
quasi-legal precedent; or (c) arbitrator's, mediator's or referee's
award, decision, finding or recommendation, or, in any case, any
particular section, part or provision thereof
"GranCare Documents" shall mean, collectively, any agreement,
note, lease, master lease, mortgage, security agreement, pledge
agreement, assignment, guaranty or other agreement or instrument now or
hereafter executed by one or more of the GranCare Companies with, in
favor of or for the benefit of, HRP or any Affiliate thereof
(including, without limitation, any and all other documents executed in
connection with, relating to, evidencing or creating collateral or
security in favor of or for the benefit of HRP or any Affiliate
thereof), and any agreement, note, mortgage, security agreement, pledge
agreement, assignment, guaranty or other agreement or instrument
hereafter executed by one or both of the GranCare Companies in
connection with any extension, renewal, refunding or refinancing
thereof, as any of the same may hereafter from time to time be amended,
modified or supplemented.
"GranCare Companies" shall mean, collectively, AMS Properties
and GCIHCC, and their respective successors and assigns.
"Default Rate" shall mean 4% per annum above the prime rate or
base rate on corporate loans at large U.S. money center commercial
banks as published in The Wall Street Journal or, if publication of
such rate shall be suspended or terminated, the annual rate of
interest, determined daily and expressed as a percentage, from time to
time announced by one of the five largest national-chartered banking
institutions having their principal office in New York, New York and
selected by HRP at the time such publication is suspended or
terminated. Each change in the Interest Rate shall take effect
simultaneously with the date of publication or announcement, as
applicable, of each corresponding change in such prime rate or base
rate.
"Event of Default" shall have the meaning set forth in any
GranCare Document.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property or condition (financial or
otherwise) of the Guarantor, or of the Guarantor and its Subsidiaries
taken as a whole, (b) the ability of the Guarantor to perform its
obligations under this Guaranty, or (c) the validity or enforceability
of this Guaranty, or the rights of HRP hereunder.
"Obligations" shall mean the payment and performance of each
and every obligation and liability of any GranCare Company to HRP under
any GranCare
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Document, whether now existing or hereafter arising or created, joint
or several, direct or indirect, absolute or contingent, due or to
become due, matured or unmatured, liquidated orunliquidated, arising by
contract, operation of law or otherwise, and including, without
limitation, (i) all principal, premium or prepayment fee and interest
under any promissory note payable to HRP by any GranCare Company, (ii)
all rent under any lease with HRP as landlord, and (iii) all fees and
charges, and all costs and expenses payable under any GranCare
Document.
"Subsidiary" shall mean any corporation of which more than
fifty percent of the outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time capital stock of any other
class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency) is at the time directly or
indirectly owned by Guarantor, or Guarantor and one or more other
Subsidiaries, or by one or more Subsidiaries.
2. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees to
HRP the prompt and complete payment and performance by the GranCare Companies
(and each of them), when due (whether at stated maturity, by acceleration or
otherwise), of the Obligations. The Guarantor further agrees to pay any and all
reasonable expenses (including, without limitation, all reasonable fees and
disbursements of counsel to HRP) which may be paid or incurred by HRP in
enforcing any of its rights under this Guaranty. This Guaranty is a guaranty of
payment and not of collectibility and is absolute and in no way conditional or
contingent. The Guarantor's liability hereunder is direct and unconditional and
may be enforced after nonpayment or nonperformance by any GranCare Company of
any Obligation without requiring HRP to resort to any other Person (including
without limitation such GranCare Company) or any other right, remedy or
collateral. This Guaranty shall remain in full force and effect until the
Obligations are paid in full following the termination of all GranCare Documents
(the "Termination Date").
3. Costs and Expenses of Collection. The Guarantor agrees, as principal obligor
and not as a guarantor only, to pay to HRP forthwith upon demand, in immediately
available funds, all costs and expenses (including, without limitation, all
court costs and all fees and disbursements of counsel to HRP) incurred or
expended by HRP in connection with the enforcement of this Guaranty, together
with interest on such amounts from the time such amounts become due until
payment at the Default Rate. It shall be a condition of the obligations of
Guarantor to pay any fees and expenses payable by it under this Guaranty that
HRP shall have, or shall have caused to have, provided the Guarantor with a
writing describing such fees and/or expenses in reasonable detail.
4. Right of Setoff. Regardless of the adequacy of any collateral or other means
of obtaining repayment of the Obligations, HRP is hereby authorized, without
notice to the Guarantor or compliance with any other condition precedent now or
hereafter imposed by Applicable Law (all of which are hereby expressly waived to
the extent permitted by Applicable Law) and to the fullest extent permitted by
Applicable Law, to set off and apply any securities, deposits or other property
belonging to the Guarantor now or hereafter held by HRP against the obligations
of the Guarantor under this Guaranty, whether or not HRP shall have made any
demand under this
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Guaranty, at any time and from time to time after the occurrence of a Event of
Default under and as defined in any GranCare Document, in such manner as HRP in
its sole discretion maydetermine, and the Guarantor hereby grants HRP a
continuing security interest in such securities, deposits and property for the
payment and performance of such obligations.
5. Subrogation and Contribution. Until the Obligations shall have been paid and
performed in full after the Termination Date, the Guarantor irrevocably and
unconditionally suspends and subordinates any and all rights to which it may be
entitled, by operation of law or otherwise, to be subrogated, with respect to
any payment made by the Guarantor hereunder, to the rights of HRP against any
GranCare Company, or otherwise to be reimbursed, indemnified or exonerated by
any GranCare Company in respect thereof or to receive any payment, in the nature
of contribution or for any other reason, from any other guarantor of the
Obligations with respect to any payment made by the Guarantor hereunder. Until
the Obligations shall have been paid and performed in full, the Guarantor waives
any defense it may have based upon any election of remedies by HRP which impairs
the Guarantor's subrogation rights or the Guarantor's rights to proceed against
any GranCare Company for reimbursement (including without limitation any loss of
rights the Guarantor may suffer by reason of any rights, powers or remedies of
such GranCare Company in connection with any anti-deficiency laws or any other
laws limiting, qualifying or discharging any indebtedness to HRP). Until the
Obligations shall have been paid, performed and satisfied in full, the Guarantor
further suspends and subordinates any right to enforce any remedy which HRP now
has or may in the future have against any GranCare Company, any other guarantor
or any other Person and any benefit of, or any right to participate in, any
security whatsoever now or in the future held by HRP.
6. Effect of Bankruptcy Stay. If acceleration of the time for payment or
performance of any of the Obligations is stayed upon the insolvency, bankruptcy
or reorganization of any GranCare Company or any other Person or otherwise, all
such amounts otherwise subject to acceleration shall nonetheless be payable by
the Guarantor under this Guaranty forthwith upon demand.
7. Receipt of GranCare Documents, etc. The Guarantor confirms, represents and
warrants to HRP that (i) it has received true and complete copies of all
existing GranCare Documents from the GranCare Companies (giving effect to the
Closing under the Restructure Agreement), has read the contents thereof and
reviewed the same with legal counsel of its choice; (ii) no representations or
agreements of any kind have been made to the Guarantor which would limit or
qualify in any way the terms of this Guaranty; (iii) this Guaranty is executed
at the GranCare Companies' request and not at the request of HRP; (iv) HRP has
made no representation to the Guarantor as to the creditworthiness of any
GranCare Company; and (v) the Guarantor has established adequate means of
obtaining from each GranCare Company on a continuing basis information regarding
such GranCare Company's financial condition. The Guarantor agrees to keep
adequately informed from such means of any facts, events, or circumstances which
might in any way affect the Guarantor's risks under this Guaranty, and the
Guarantor further agrees that HRP shall have no obligation to disclose to the
Guarantor any information or documents acquired by HRP in the course of its
relationship with the GranCare Companies.
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8. Amendments, etc. with Respect to the Obligations. The obligations of the
Guarantor under this Guaranty shall remain in full force and effect without
regard to, and shall not be released, altered, exhausted, discharged or in any
way affected by any circumstance or condition (whether or not any GranCare
Company shall have any knowledge or notice thereof), including without
limitation (a) any amendment or modification of or supplement to any GranCare
Document, or any obligation, duty or agreement of the GranCare Companies or any
other Person thereunder or in respect thereof; (b) any assignment or transfer in
whole or in part of any of the Obligations; any furnishing, acceptance, release,
nonperfection or invalidity of any direct or indirect security or guaranty for
any of the Obligations; (c) any waiver, consent, extension, renewal, indulgence,
settlement, compromise or other action or inaction under or in respect of any
GranCare Document, or any exercise or nonexercise of any right, remedy, power or
privilege under or in respect of any such instrument (whether by operation of
law or otherwise); (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to any
GranCare Company or any other Person or any of their respective properties or
creditors or any resulting release or discharge of any Obligation (including
without limitation any rejection of any lease pursuant to Section 365 of the
Federal Bankruptcy Code); (e) any new or additional financing arrangements
entered into by any GranCare Company or by any other Person on behalf of or for
the benefit of any GranCare Company; (f) the merger or consolidation of any
GranCare Company with or into any other Person or of any other Person with or
into any GranCare Company; (g) the voluntary or involuntary sale or other
disposition of all or substantially all the assets of any GranCare Company or
any other Person; (h) the voluntary or involuntary liquidation, dissolution or
termination of any GranCare Company or any other Person; (i) any invalidity or
unenforceability, in whole or in part, of any term hereof or of any GranCare
Document, or any obligation, duty or agreement of any GranCare Company or any
other Person thereunder or in respect thereof; (j) any provision of any
applicable law or regulation purporting to prohibit the payment or performance
by any GranCare Company or any other Person of any Obligation; (k) any failure
on the part of any GranCare Company or any other Person for any reason to
perform or comply with any term of any GranCare Document or any other agreement;
or (l) any other act, omission or occurrence whatsoever, whether similar or
dissimilar to the foregoing. The Guarantor authorizes each GranCare Company,
each other guarantor in respect of the Obligations and HRP at any time in its
discretion, as the case may be, to alter any of the terms of any of the
Obligations.
9. Guarantor as Principal. If for any reason the GranCare Companies, or any of
them, or any other Person is under no legal obligation to discharge any
Obligation, or if any other moneys included in the Obligations have become
unrecoverable from the GranCare Companies, or any of them, or any other Person
by operation of law or for any other reason, including, without limitation, the
invalidity or irregularity in whole or in part of any Obligation or of any
GranCare Document, the legal disability of any GranCare Company or any other
obligor in respect of Obligations, any discharge of or limitation on the
liability of any GranCare Company or any other Person or any limitation on the
method or terms of payment under any Obligation, or of any GranCare Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensual or arising by operation of law or otherwise), this Guaranty
shall
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nevertheless remain in full force and effect and shall be binding upon the
Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all Obligations.
10. Waiver of Demand, Notice, Etc. The Guarantor hereby waives, to the extent
not prohibited by applicable law, all presentments, demands for performance,
notice of nonperformance, protests, notices of protests and notices of dishonor
in connection with the Obligations or any GranCare Document, including but not
limited to (a) notice of the existence, creation or incurring of any new or
additional obligation or of any action or failure to act on the part of any
GranCare Company, HRP, any endorser or creditor of any GranCare Company or any
other Person; (b) any notice of any indulgence, extensions or renewals granted
to any obligor with respect to the Obligations; (c) any requirement of diligence
or promptness in the enforcement of rights under any GranCare Document, or any
other agreement or instrument directly or indirectly relating thereto or to the
Obligations; (d) any enforcement of any present or future agreement or
instrument relating directly or indirectly thereto or to the Obligations; (e)
notice of any of the matters referred to in Section 9 above; (f) any defense of
any kind which the Guarantor may now have with respect to his liability under
this Guaranty; (g) any right to require HRP, as a condition of enforcement of
this Guaranty, to proceed against any GranCare Company or any other Person or to
proceed against or exhaust any security held by HRP at any time or to pursue any
other right or remedy in HRP's power before proceeding against the Guarantor;
(h) any defense that may arise by reason of the incapacity, lack of authority,
death or disability of any other Person or Persons or the failure of HRP to file
or enforce a claim against the estate (in administration, bankruptcy, or any
other proceeding) of any other Person or Persons; (i) any defense based upon an
election of remedies by HRP; (j) any defense arising by reason of any "one
action" or "anti-deficiency" law or any other law which may prevent HRP from
bringing any action, including a claim for deficiency, against the Guarantor,
before or after HRP's commencement of completion of any foreclosure action,
either judicially or by exercise of a power of sale; (k) any defense based upon
any lack of diligence by HRP in the collection of any Obligation; (l) any duty
on the part of HRP to disclose to the Guarantor any facts HRP may now or
hereafter know about any GranCare Company or any other obligor in respect of
Obligations; (m) any defense arising because of an election made by HRP under
Section 1111(b)(2) of the Federal Bankruptcy Code; (n) any defense based on any
borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code; (o) and any defense based upon or arising out of any defense
which any GranCare Company or any other Person may have to the payment or
performance of the Obligations (including but not limited to failure of
consideration, breach of warranty, fraud, payment, accord and satisfaction,
strict foreclosure, statute of frauds, bankruptcy, infancy, statute of
limitations, lender liability and usury). Guarantor acknowledges and agrees that
each of the waivers set forth herein on the part of the Guarantor is made with
Guarantor's full knowledge of the significance and consequences thereof and
that, under the circumstances, the waivers are reasonable. If any such waiver is
determined to be contrary to Applicable Law such waiver shall be effective only
to the extent no prohibited by such Applicable Law.
11. Reinstatement. This Guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
HRP upon the insolvency, bankruptcy, dissolution,
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liquidation or reorganization of any GranCare Company or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, any GranCare Company or any substantial part of its
property, or otherwise, all as though such payments had not been made.
12. Payments. The Guarantor hereby agrees that the Obligations will be paid to
HRP without set-off or counterclaim in U.S. Dollars at the office of HRP located
at 400 Centre Street, Newton, Massachusetts 02158, or to such other location as
HRP shall notify the Guarantor.
13. Covenants. The Guarantor hereby covenants and agrees with HRP that, from and
after the date of this Guaranty until the Obligations are paid in full and all
GranCare Documents have been terminated:
(a) Legal Existence. The Guarantor shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence (subject as provided in Section 13.(b) hereof).
(b) Merger; Sale of Assets, Etc. HRP agrees that, notwithstanding
anything to the contrary in any GranCare Document, the Guarantor and any of its
Affiliates (specifically excluding AMS Properties and GCIHCC), or any successors
of any of the foregoing, may, without any consent or approval of HRP, enter into
mergers, consolidations, acquisitions, asset sales, sales of minority or
majority interests in the Guarantor or such Affiliate or any other transactions
(including, without limitation, any change of control, recapitalization or other
restructuring of the Guarantor or any of such Affiliates or successors);
provided, however, that so long as the Guarantor is a direct or indirect
shareholder of AMS Properties or GCIHCC, the Guarantor (i) shall not liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution) and (ii)
may not merge or consolidate with any Person, or convey, transfer or lease
substantially all of its assets unless:
(i) giving effect to such transaction, no Event of Default, or
an event or condition that with the giving of notice or lapse of time
or both would become an Event of Default, would occur under and as
defined in any GranCare Document; and
(ii) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the Guarantor, as
the case may be, shall be a corporation organized and existing under
the laws of the United States or any State thereof (including the
District of Columbia), and, if the Guarantor is not such corporation,
(i) such corporation shall have executed and delivered to HRP its
assumption of the due and punctual performance and observance of each
covenant and condition of this Guaranty to the same extent and with the
same effect as though such corporation was a party hereto and was named
and defined as the "Guarantor" herein and (ii) shall have caused to be
delivered to HRP an opinion of outside counsel to such corporation to
the effect that all agreements or instruments effecting such assumption
are enforceable in accordance with their terms and comply with the
terms hereof.
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(c) Severability. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
14. Additional Guaranties. This Guaranty shall be in addition to any other
guaranty or other security for the Obligations, and it shall not be prejudiced
or rendered unenforceable by the invalidity of any such other guaranty or
security.
15. Paragraph Headings. The paragraph headings used in this Guaranty are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
16. No Waiver; Cumulative Remedies, Documentation of Expenses. HRP shall not by
any act (except by a written instrument pursuant to Paragraph 17 hereof), delay,
indulgence, omission or otherwise, be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of HRP, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by HRP of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which HRP would otherwise have on any future occasion. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
17. Waivers and Amendments; Successors and Assigns. None of the terms or
provisions of this Guaranty may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Guarantor and HRP,
provided that any provision of this Guaranty may be waived by HRP in a letter or
agreement executed by HRP or by telecopy from HRP. This Guaranty shall be
binding upon the successors and assigns of the Guarantor and shall inure to the
benefit of HRP and its successors and assigns.
18. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING LAW. THE GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL
IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTY, ANY GRANCARE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR (1)
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY
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ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS GUARANTY, ANY GRANCARE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH SUCH ACTION, SUIT OR
PROCEEDING MAY BE BROUGHT; (2) IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN WHICH IT
SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER HEREINAFTER PROVIDED; (3) TO
THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT, BY WAY
OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT
ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION,
SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF
IS IMPROPER; AND (4) AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH
ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL
LAWS OF MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR
RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
19. Notices. All notices under this Guaranty shall be in writing, and shall be
delivered by hand, by a nationally recognized commercial overnight delivery
service, by first class mail or by telecopy, delivered, addressed or
transmitted, if to HRP, at 400 Centre Street, Newton, Massachusetts 02158,
Attention: President (telecopy no. 617-332-2261), with a copy to Sullivan &
Worcester LLP, One Post Office Square, Boston, Massachusetts 02109, Attention:
Harry E. Ekblom, Esq. (telecopy no. 617-338-2880), and if to the Guarantor, at
its address or telecopy number set out below its signature in this Guaranty.
Such notices shall be effective: in the case of hand deliveries, when received;
in the case of an overnight delivery service, on the next business day after
being placed in the possession of such delivery service, with delivery charges
prepaid; in the case of mail, three days after deposit in the postal system,
first class postage prepaid; and in the case of telecopy notices, when
electronic indication of receipt is received. Either party may change its
address and telecopy number by written notice to the other delivered in
accordance with the provisions of this Section.
20. Termination. The obligations of Guarantor hereunder shall automatically
terminate upon the indefeasible satisfaction in full of all Obligations after
the Termination Date.
21. Existing Guaranties. This Guaranty amends, restates and consolidates the
Guaranties dated as of December 28, 1990 and June 30, 1992, each as amended, by
the Guarantor in favor of HRP.
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IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly
executed and delivered as of the date first above written.
GRANCARE, INC.
By /s/ M. Henry Day, Jr.
Name: M. Henry Day
Title:Assistant Secretary
Address for Notices:
GranCare, Inc.
One Ravinia Drive
Atlanta GA 30346
Attn: General Counsel
Signature page to Guaranty by GranCare, Inc.
dated as of October 31, 1997.
EXHIBIT 10.35
GUARANTY BY PARAGON HEALTH NETWORK, INC.
GUARANTY dated as of October 31, 1997 made by PARAGON HEALTH NETWORK,
INC. (f/k/a "Living Centers of America, Inc."), a Delaware corporation (the
"Guarantor") and HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real estate
investment trust (with its successor and assigns, "HRP").
W I T N E S S E T H :
WHEREAS, GranCare, Inc., a Delaware corporation ("GranCare") and the
other GranCare Companies (as hereinafter defined) have entered into certain
lease and loan financings with HRP governed by the GranCare Documents (as
hereinafter defined);
WHEREAS, pursuant to and subject to the terms and conditions of a Third
Amended and Restated Agreement and Plan of Merger dated as of September 17, 1997
among the Guarantor, LCA Acquisition Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Guarantor ("LCA Acquisition"), GranCare and
Apollo Management, L.P. on behalf of one or more of its managed investment
funds, GranCare shall become a wholly-owned subsidiary of the Guarantor through
the merger of LCA Acquisition with and into GranCare and those certain other
transactions defined as the "Transactions" in the Joint Proxy Statement dated
September 26, 1997 by the Guarantor and GranCare (the "Transactions");
WHEREAS, the Guarantor and GranCare have requested that HRP consent to
the Transactions and to make certain modifications to the GranCare Documents in
connection therewith;
WHEREAS, HRP is willing to so consent and agree, subject to the terms
and conditions of a certain Restructure and Asset Exchange Agreement dated as of
even date herewith (the "Restructure Agreement") among AMS Properties, Inc. and
GCI Health Care Centers, Inc., each a Delaware corporation and a wholly-owned
subsidiary of GranCare ("AMS Properties"and "GCIHCC," respectively), and HRP;
WHEREAS, it is a condition to the effectiveness of the Restructure
Agreement that, among other things, the Guarantor deliver this Guaranty in favor
of HRP;
WHEREAS, by virtue of the Transactions and the related modifications to
the GranCare Documents contemplated by the Restructure Agreement, the GranCare
Companies will benefit substantially from, among other things, increased access
to capital;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Guarantor hereby agrees with HRP as follows:
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1. Defined Terms. Unless otherwise defined herein, terms which are defined in
the Restructure Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
"Applicable Law" shall mean any law of any governmental
authority, whether domestic or foreign, including without limitation all
federal and state laws, to which the Person in question is subject or by
which it or any of its property is bound, and including without
limitation any: (a) administrative, executive, judicial, legislative or
other action, code, consent decree, constitution, decree, directive,
enactment, finding, guideline, injunction, interpretation, judgment,
law, order, ordinance, policy statement, proclamation, promulgation,
regulation, requirement, rule, rule of law, rule of public policy,
settlement agreement, statute, or writ, of any governmental authority,
domestic or foreign, whether or not having the force of law; (b) common
law or other legal or quasi-legal precedent; or (c) arbitrator's,
mediator's or referee's award, decision, finding or recommendation, or,
in any case, any particular section, part or provision thereof
"GranCare Documents" shall mean, collectively, any agreement,
note, lease, master lease, mortgage, security agreement, pledge
agreement, assignment, guaranty or other agreement or instrument now or
hereafter executed by one or more of the GranCare Companies with, in
favor of or for the benefit of, HRP or any Affiliate thereof (including,
without limitation, any and all other documents executed in connection
with, relating to, evidencing or creating collateral or security in
favor of or for the benefit of HRP or any Affiliate thereof), and any
agreement, note, mortgage, security agreement, pledge agreement,
assignment, guaranty or other agreement or instrument hereafter executed
by one or more of the GranCare Companies in connection with any
extension, renewal, refunding or refinancing thereof, as any of the same
may hereafter from time to time be amended, modified or supplemented.
"GranCare Companies" shall mean, collectively, GranCare, AMS
Properties and GCIHCC, and their respective successors and assigns.
"Consolidated Financials" shall mean, for any fiscal year or
other accounting period of the Guarantor and its consolidated
Subsidiaries, annual audited and quarterly unaudited financial
statements prepared on a consolidated basis, including the Guarantor's
consolidated balance sheet and the related statements of income and cash
flows, all in reasonable detail, and setting forth in comparative form
the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with GAAP consistently applied
throughout the periods presented.
"Default Rate" shall mean 4% per annum above the prime rate or
base rate on corporate loans at large U.S. money center commercial
banks as published in The Wall Street Journal or, if publication of
such rate shall be suspended or terminated, the annual rate of
interest, determined daily and expressed as a percentage, from time to
time announced by one of the five largest national-chartered banking
institutions having their principal office in New York, New York and
selected by HRP at the time such publication
<PAGE>
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is suspended or terminated. Each change in the Interest Rate shall take
effectsimultaneously with the date of publication or announcement, as
applicable, of each corresponding change in such prime rate or base
rate.
"Event of Default" shall have the meaning set forth in any
GranCare Document.
"Financial Officer's Certificate" shall mean a certificate of
the chief financial officer, treasurer or other executive officer of the
Guarantor, duly authorized, accompanying the financial statements
required to be delivered by such Person pursuant to Section 14, in which
such officer shall (a) certify that such statements have been properly
prepared in accordance with GAAP and are true, correct and complete in
all material respects and fairly present the consolidated financial
condition of the Guarantor at and as of the dates thereof and the
results of its and their operations for the periods covered thereby, and
(b) certify that such officer has reviewed the GranCare Documents and
has no knowledge of any material default by the Guarantor or any
Subsidiary thereof in the performance or observance of any of the
provisions of any GranCare Document or of any condition or event which
constitutes an Event of Default under any GranCare Document or which
with the passage of time or the giving of notice or both would become
such an Event of Default.
"Material Adverse Effect" means a material adverse effect on (a)
the business, operations, property or condition (financial or otherwise)
of the Guarantor and its Subsidiaries taken as a whole, (b) the ability
of the Guarantor to perform its obligations under this Guaranty, or (c)
the validity or enforceability of this Guaranty, or the rights of HRP
hereunder.
"Obligations" shall mean the payment and performance of each and
every obligation and liability of any GranCare Company to HRP under any
GranCare Document, whether now existing or hereafter arising or created,
joint or several, direct or indirect, absolute or contingent, due or to
become due, matured or unmatured, liquidated or unliquidated, arising by
contract, operation of law or otherwise, and including, without
limitation, (i) all principal, premium or prepayment fee and interest
under any promissory note payable to HRP by any GranCare Company, (ii)
all rent under any lease with HRP as landlord, and (iii) all fees and
charges, and all costs and expenses payable under any GranCare Document.
"Subsidiary" shall mean any corporation of which more than fifty
percent of the outstanding capital stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time capital stock of any other
class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency) is at the time directly or
indirectly owned by Guarantor, or Guarantor and one or more other
Subsidiaries, or by one or more Subsidiaries.
2. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees to
HRP the prompt and complete payment and performance by the GranCare Companies
(and each of them),
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when due (whether at stated maturity, by acceleration or otherwise), of the
Obligations. The Guarantor further agrees to pay any and all reasonable expenses
(including, without limitation, all reasonable fees and disbursements of counsel
to HRP) which may be paid or incurred by HRP in enforcing any of its rights
under this Guaranty. This Guaranty is a guaranty of payment and not of
collectibility and is absolute and in no way conditional or contingent. The
Guarantor's liability hereunder is direct and unconditional and may be enforced
after nonpayment or nonperformance by any GranCare Company of any Obligation
without requiring HRP to resort to any other Person (including without
limitation such GranCare Company) or any other right, remedy or collateral. This
Guaranty shall remain in full force and effect until the Obligations are paid in
full following the termination of all GranCare Documents (the "Termination
Date").
3. Costs and Expenses of Collection. The Guarantor agrees, as principal obligor
and not as a guarantor only, to pay to HRP forthwith upon demand, in immediately
available funds, all costs and expenses (including, without limitation, all
court costs and all reasonable fees and disbursements of counsel to HRP)
incurred or expended by HRP in connection with the enforcement of this Guaranty,
together with interest on such amounts from the time such amounts become due
until payment at the Default Rate. It shall be a condition of the obligations of
Guarantor to pay any fees and expenses payable by it under this Guaranty that
HRP shall have, or shall have caused to have, provided the Guarantor with a
writing describing such fees and/or expenses in reasonable detail.
4. Right of Setoff. Regardless of the adequacy of any collateral or other means
of obtaining repayment of the Obligations, HRP is hereby authorized, without
notice to the Guarantor or compliance with any other condition precedent now or
hereafter imposed by Applicable Law (all of which are hereby expressly waived to
the extent permitted by Applicable Law) and to the fullest extent permitted by
Applicable Law, to set off and apply any securities, deposits or other property
belonging to the Guarantor now or hereafter held by HRP against the obligations
of the Guarantor under this Guaranty, whether or not HRP shall have made any
demand under this Guaranty, at any time and from time to time after the
occurrence of a Event of Default under and as defined in any GranCare Document,
in such manner as HRP in its sole discretion may determine, and the Guarantor
hereby grants HRP a continuing security interest in such securities, deposits
and property for the payment and performance of such obligations.
5. Subrogation and Contribution. Until the Obligations shall have been paid and
performed in full after the Termination Date, the Guarantor irrevocably and
unconditionally suspends and subordinates any and all rights to which it may be
entitled, by operation of law or otherwise, to be subrogated, with respect to
any payment made by the Guarantor hereunder, to the rights of HRP against any
GranCare Company, or otherwise to be reimbursed, indemnified or exonerated by
any GranCare Company in respect thereof or to receive any payment, in the nature
of contribution or for any other reason, from any other guarantor of the
Obligations with respect to any payment made by the Guarantor hereunder. Until
the Obligations shall have been paid and performed in full, the Guarantor waives
any defense it may have based upon any election of remedies by HRP which impairs
the Guarantor's subrogation rights or the Guarantor's rights to proceed against
any GranCare Company for reimbursement (including without limitation any loss of
rights the Guarantor may suffer by reason of any rights, powers or remedies of
such
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GranCare Company in connection with any anti-deficiency laws or any other laws
limiting, qualifying or discharging any indebtedness to HRP). Until the
Obligations shall have been paid, performed and satisfied in full after the
Termination Date, the Guarantor further suspends and subordinates any right to
enforce any remedy which HRP now has or may in the future have against any
GranCare Company, anyother guarantor or any other Person and any benefit of, or
any right to participate in, any security whatsoever now or in the future held
by HRP.
6. Effect of Bankruptcy Stay. If acceleration of the time for payment or
performance of any of the Obligations is stayed upon the insolvency, bankruptcy
or reorganization of any GranCare Company or any other Person or otherwise, all
such amounts otherwise subject to acceleration shall nonetheless be payable by
the Guarantor under this Guaranty forthwith upon demand.
7. Receipt of GranCare Documents, etc. The Guarantor confirms, represents and
warrants to HRP that (i) it has received true and complete copies of all
existing GranCare Documents from the GranCare Companies (giving effect to the
Closing under the Restructure Agreement), has read the contents thereof and
reviewed the same with legal counsel of its choice; (ii) no representations or
agreements of any kind have been made to the Guarantor which would limit or
qualify in any way the terms of this Guaranty; (iii) this Guaranty is executed
at the GranCare Companies' request and not at the request of HRP; (iv) HRP has
made no representation to the Guarantor as to the creditworthiness of any
GranCare Company; and (v) the Guarantor has established adequate means of
obtaining from each GranCare Company on a continuing basis information regarding
such GranCare Company's financial condition. The Guarantor agrees to keep
adequately informed from such means of any facts, events, or circumstances which
might in any way affect the Guarantor's risks under this Guaranty, and the
Guarantor further agrees that HRP shall have no obligation to disclose to the
Guarantor any information or documents acquired by HRP in the course of its
relationship with the GranCare Companies.
8. Amendments, etc. with Respect to the Obligations. The obligations of the
Guarantor under this Guaranty shall remain in full force and effect without
regard to, and shall not be released, altered, exhausted, discharged or in any
way affected by any circumstance or condition (whether or not any GranCare
Company shall have any knowledge or notice thereof), including without
limitation (a) any amendment or modification of or supplement to any GranCare
Document, or any obligation, duty or agreement of the GranCare Companies or any
other Person thereunder or in respect thereof; (b) any assignment or transfer in
whole or in part of any of the Obligations; any furnishing, acceptance, release,
nonperfection or invalidity of any direct or indirect security or guaranty for
any of the Obligations; (c) any waiver, consent, extension, renewal, indulgence,
settlement, compromise or other action or inaction under or in respect of any
GranCare Document, or any exercise or nonexercise of any right, remedy, power or
privilege under or in respect of any such instrument (whether by operation of
law or otherwise); (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to any
GranCare Company or any other Person or any of their respective properties or
creditors or any resulting release or discharge of any Obligation (including
without limitation any rejection of any lease pursuant to Section 365 of the
Federal Bankruptcy Code); (e) any new or additional financing arrangements
entered into by any GranCare Company or by any other Person on behalf of or for
the benefit of any GranCare Company; (f) the merger or
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consolidation of any GranCare Company with or into any other Person or of any
other Person with or into any GranCare Company; (g) the voluntary or involuntary
sale or other disposition of all or substantially all the assets of any GranCare
Company or any other Person; (h) the voluntary or involuntary liquidation,
dissolution or termination of any GranCare Company or any other Person; (i) any
invalidity or unenforceability, in whole or in part, of any term hereof or of
any GranCare Document, or any obligation, duty or agreement of any GranCare
Company or any other Person thereunder or in respect thereof; (j) any provision
of any applicable law or regulation purporting to prohibit the payment or
performance by any GranCare Company or any other Person of any Obligation; (k)
any failure on the part of any GranCare Company or any other Person for any
reason to perform or comply with any term of any GranCare Document or any other
agreement; or (l) any other act, omission or occurrence whatsoever, whether
similar or dissimilar to the foregoing. The Guarantor authorizes each GranCare
Company, each other guarantor in respect of the Obligations and HRP at any time
in its discretion, as the case may be, to alter any of the terms of any of the
Obligations.
9. Guarantor as Principal. If for any reason the GranCare Companies, or any of
them, or any other Person is under no legal obligation to discharge any
Obligation, or if any other moneys included in the Obligations have become
unrecoverable from the GranCare Companies, or any of them, or any other Person
by operation of law or for any other reason, including, without limitation, the
invalidity or irregularity in whole or in part of any Obligation or of any
GranCare Document, the legal disability of any GranCare Company or any other
obligor in respect of Obligations, any discharge of or limitation on the
liability of any GranCare Company or any other Person or any limitation on the
method or terms of payment under any Obligation, or of any GranCare Document,
which may now or hereafter be caused or imposed in any manner whatsoever
(whether consensual or arising by operation of law or otherwise), this Guaranty
shall nevertheless remain in full force and effect and shall be binding upon the
Guarantor to the same extent as if the Guarantor at all times had been the
principal obligor on all Obligations.
10. Waiver of Demand, Notice, Etc. The Guarantor hereby waives, to the extent
not prohibited by applicable law, all presentments, demands for performance,
notice of nonperformance, protests, notices of protests and notices of dishonor
in connection with the Obligations or any GranCare Document, including but not
limited to (a) notice of the existence, creation or incurring of any new or
additional obligation or of any action or failure to act on the part of any
GranCare Company, HRP, any endorser or creditor of any GranCare Company or any
other Person; (b) any notice of any indulgence, extensions or renewals granted
to any obligor with respect to the Obligations; (c) any requirement of diligence
or promptness in the enforcement of rights under any GranCare Document, or any
other agreement or instrument directly or indirectly relating thereto or to the
Obligations; (d) any enforcement of any present or future agreement or
instrument relating directly or indirectly thereto or to the Obligations; (e)
notice of any of the matters referred to in Section 9 above; (f) any defense of
any kind which the Guarantor may now have with respect to his liability under
this Guaranty; (g) any right to require HRP, as a condition of enforcement of
this Guaranty, to proceed against any GranCare Company or any other Person or to
proceed against or exhaust any security held by HRP at any time or to pursue any
other right or remedy in HRP's power before proceeding against the Guarantor;
(h) any defense that may arise by reason of the incapacity, lack of authority,
death or disability of any other Person or
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Persons or the failure of HRP to file or enforce a claim against the estate (in
administration, bankruptcy, or any other proceeding) of any other Person or
Persons; (i) any defense based upon an election of remedies by HRP; (j) any
defense arising by reason of any "one action" or "anti-deficiency" law or any
other law which may prevent HRP from bringing any action, including a claim for
deficiency, against the Guarantor, before or after HRP's commencement of
completion of any foreclosure action, either judicially or by exercise of a
power of sale; (k) any defense based upon any lack of diligence by HRP in the
collection of any Obligation; (l) any duty on the part of HRP to disclose to the
Guarantor any facts HRP may now or hereafter know about any GranCare Company or
any other obligor in respect of Obligations; (m) any defense arising because of
an election made by HRP under Section 1111(b)(2) of the Federal Bankruptcy Code;
(n) any defense based on any borrowing or grant of a security interest under
Section 364 of the Federal Bankruptcy Code; (o) and any defense based upon or
arising out of any defense which any GranCare Company or any other Person may
have to the payment or performance of the Obligations (including but not limited
to failure of consideration, breach of warranty, fraud, payment, accord and
satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability and usury). Guarantor acknowledges and
agrees that each of the waivers set forth herein on the part of the Guarantor is
made with Guarantor's full knowledge of the significance and consequences
thereof and that, under the circumstances, the waivers are reasonable. If any
such waiver is determined to be contrary to Applicable Law such waiver shall be
effective only to the extent no prohibited by such Applicable Law.
11. Reinstatement. This Guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
HRP upon the insolvency, bankruptcy, dissolution, liquidation or reorganization
of any GranCare Company or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, any GranCare
Company or any substantial part of its property, or otherwise, all as though
such payments had not been made.
12. Payments. The Guarantor hereby agrees that the Obligations will be paid to
HRP without set-off or counterclaim in U.S. Dollars at the office of HRP located
at 400 Centre Street, Newton, Massachusetts 02158, or to such other location as
HRP shall notify the Guarantor.
13. Representations and Warranties. The Guarantor represents and warrants that:
(i) Corporate Existence. The Guarantor is a corporation duly
incorporated and validly existing under the laws of the jurisdiction of
its incorporation, and is duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property owned or
business transacted by it makes such licensing or qualification
necessary, except where the failure to be licensed or to so qualify
could not have a Material Adverse Effect.
(ii) No Violation. The execution, delivery and performance of
this Guaranty and each other Restructure Document to which the Guarantor
is a party will not contravene any provision of law, statute, rule or
regulation to which the Guarantor or any GranCare Company is subject or
any judgment, decree, franchise, order or permit applicable to the
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Guarantor, or conflict or be inconsistent with or result in any breach
of, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any lien or security interest
upon any of the property or assets of the Guarantor pursuant to the
terms of any agreement or instrument to which the Guarantor is party or
by which its assets are bound, or violate any provision of the
respective corporate charters or bylaws of the Guarantor.
(iii) Corporate Authority and Power. The execution, delivery and
performance of this Guaranty and each other Restructure Document to
which the Guarantor is a party is within the corporate powers of the
Guarantor and has been duly authorized by all necessary corporate
action.
(iv) Enforceability. This Guaranty and each other Restructure
Document to which the Guarantor is a party have been duly executed and
delivered by the Guarantor, and this Guaranty and each such Restructure
Document constitutes the valid and binding obligation of the Guarantor
enforceable against the Guarantor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except as enforceability may be subject
to general principles of equity, whether such principles are applied in
a court of equity or at law.
(v) Governmental Approvals. No order, permission, consent,
approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental authority is required to
authorize, or is required in connection with, the execution, delivery
and performance of this Guaranty or any other Restructure Document to
which the Guarantor is a party, or the taking of any action contemplated
hereby or thereby.
(vi) Litigation. The Guarantor has no notice or knowledge of any
action, suit or proceeding pending or threatened against or affecting it
at law or in equity or before or by any governmental department, court,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind that would, if adversely
determined, have a Material Adverse Effect.
(vii) Financial Statements. The consolidated financial
statements of the Guarantor contained in the joint proxy statement dated
September 26, 1997 filed in connection with the Transactions, fairly
present, in accordance with GAAP, the consolidated financial condition
of the Guarantor and its Subsidiaries as of their dates of presentation,
and the consolidated results of their operations and their consolidated
cash flows for the respective fiscal period then ended.
14. Covenants. The Guarantor hereby covenants and agrees with HRP that, from and
after the date of this Guaranty until the Obligations are paid in full and all
GranCare Documents have been terminated:
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(a) Notices. The Guarantor shall promptly give notice to HRP of any
Default or Event of Default under any GranCare Document.
(b) Financial Statements. The Guarantor shall furnish the following
statements to HRP:
(i) within forty-five (45) days after each of the first three
quarters of any Fiscal Year, the Consolidated Financials for such fiscal
quarter, in each case accompanied by the Financial Officer's
Certificate;
(ii) within ninety (90) days after the end of each Fiscal Year,
the Consolidated Financials for such Fiscal Year, in each case certified
by Ernst & Young LLP or any other independent certified public
accountant of national reputation, and accompanied by the Financial
Officer's Certificate;
(iii) promptly after the sending or filing thereof, copies of
all reports which the Guarantor sends to its security holders generally,
and copies of all periodic reports which the Guarantor files with the
SEC or any stock exchange on which its shares are listed or traded;
(iv) at any time and from time to time upon not less than thirty
(30) days notice from HRP, the Guarantor will furnish to HRP any
Consolidated Financials or any other financial reporting information
required to be filed by HRP with any securities and exchange commission,
the SEC or any successor agency, or any other governmental authority, or
required pursuant to any order issued by any court governmental
authority or arbitrator in any litigation to which HRP is a party, for
purposes of compliance therewith; and
(v) promptly upon notice from HRP, such other information
concerning the business, financial condition and affairs of the
Guarantor as HRP may reasonably request from time to time.
HRP may at any time, and from time to time, provide any lender to HRP with
copies of any of the foregoing statements.
(c) Reports. The Guarantor shall promptly provide to HRP such
certificates, reports and other documents required of the Guarantor hereunder
and the Guarantor shall cause each GranCare Company to provide such
certificates, reports and other documents required of it under the GranCare
Documents.
(d) Legal Existence. The Guarantor shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence (subject as provided in Section 14.(f) hereof).
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(e) Compliance. The Guarantor shall , and shall cause each of its
Subsidiaries to, comply in all material respects with all Applicable Laws in
respect of the conduct of its business and the ownership of its property
(including, without limitation, applicable statutes, rules, regulations, orders
and restrictions relating to environmental, safety and other similar standards
or controls), except where the failure to comply, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(f) Merger; Sale of Assets, Etc. HRP agrees that, notwithstanding
anything to the contrary in any GranCare Document, the Guarantor and any of its
Affiliates (specifically excluding AMS Properties and GCIHCC), or any successors
of any of the foregoing, may, without any consent or approval of HRP, enter into
mergers, consolidations, acquisitions, asset sales, sales of minority or
majority interests in the Guarantor or such Affiliate or any other transactions
(including, without limitation, any change of control, recapitalization or other
restructuring of the Guarantor or any of such Affiliates or successors);
provided, however, that the Guarantor (i) shall not liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution) and (ii) may not
merge or consolidate with any Person, or convey, transfer or lease substantially
all of its assets unless:
(i) giving effect to such transaction, no Event of Default, or
an event or condition that with the giving of notice or lapse of time or
both would become an Event of Default, would occur under and as defined
in any GranCare Document; and
(ii) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer or
lease substantially all of the assets of the Guarantor, as the case may
be, shall be a corporation organized and existing under the laws of the
United States or any State thereof (including the District of Columbia),
and, if the Guarantor is not such corporation, (i) such corporation
shall have executed and delivered to HRP its assumption of the due and
punctual performance and observance of each covenant and condition of
this Guaranty to the same extent and with the same effect as though such
corporation was a party hereto and was named and defined as the
"Guarantor" herein and (ii) shall have caused to be delivered to HRP an
opinion of outside counsel to such corporation to the effect that all
agreements or instruments effecting such assumption are enforceable in
accordance with their terms and comply with the terms hereof.
(g) Ownership of Stock of Tenant Entities. The Guarantor shall at all
times, either directly or indirectly through one or more wholly-owned
Subsidiaries that have each executed and delivered to HRP a guaranty in
substantially the form of the Guaranty dated as of even date herewith by
GranCare in favor of HRP, be the beneficial and record owner of all the shares
of the outstanding capital stock of AMS Properties and GCIHCC.
15. Severability. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition
<PAGE>
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or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Additional Guaranties. This Guaranty shall be in addition to any other
guaranty or other security for the Obligations, and it shall not be prejudiced
or rendered unenforceable by the invalidity of any such other guaranty or
security.
17. Paragraph Headings. The paragraph headings used in this Guaranty are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
18. No Waiver; Cumulative Remedies, Documentation of Expenses. HRP shall not by
any act (except by a written instrument pursuant to Paragraph 19 hereof), delay,
indulgence, omission or otherwise, be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of HRP, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by HRP of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which HRP would otherwise have on any future occasion. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
19. Waivers and Amendments; Successors and Assigns. None of the terms or
provisions of this Guaranty may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Guarantor and HRP,
provided that any provision of this Guaranty may be waived by HRP in a letter or
agreement executed by HRP or by telecopy from HRP. This Guaranty shall be
binding upon the successors and assigns of the Guarantor and shall inure to the
benefit of HRP and its successors and assigns.
20. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING LAW. THE GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL
IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTY, ANY GRANCARE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR (1)
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT
OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTY, ANY GRANCARE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ADDITION TO
<PAGE>
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ANY OTHER COURT IN WHICH SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT; (2)
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED BY ANY SUCH COURT IN ANY
SUCH ACTION, SUIT OR PROCEEDING IN WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS
IN THE MANNER HEREINAFTER PROVIDED; (3) TO THE EXTENT THAT IT MAY LAWFULLY DO
SO, WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT ITS PROPERTY IS
EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER; AND (4) AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION,
SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL LAWS OF
MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR RULE 4 OF
THE FEDERAL RULES OF CIVIL PROCEDURE.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
21. Notices. All notices under this Guaranty shall be in writing, and shall be
delivered by hand, by a nationally recognized commercial overnight delivery
service, by first class mail or by telecopy, delivered, addressed or
transmitted, if to HRP, at 400 Centre Street, Newton, Massachusetts 02158,
Attention: President (telecopy no. 617-332-2261), with a copy to Sullivan &
Worcester LLP, One Post Office Square, Boston, Massachusetts 02109, Attention:
Harry E. Ekblom, Esq. (telecopy no. 617-338-2880), and if to the Guarantor, at
its address or telecopy number set out below its signature in this Guaranty.
Such notices shall be effective: in the case of hand deliveries, when received;
in the case of an overnight delivery service, on the next business day after
being placed in the possession of such delivery service, with delivery charges
prepaid; in the case of mail, three days after deposit in the postal system,
first class postage prepaid; and in the case of telecopy notices, when
electronic indication of receipt is received. Either party may change its
address and telecopy number by written notice to the other delivered in
accordance with the provisions of this Section.
22. Termination. The obligations of Guarantor hereunder shall automatically
terminate upon the indefeasible satisfaction in full of all Obligations after
the Termination Date.
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IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly
executed and delivered as of the date first above written.
PARAGON HEALTH NETWORK, INC. (f/k/a
"Living Centers of America, Inc.")
By /s/
Name:
Title:
Address for Notices:
Paragon Health Network, Inc.
15145 Katy Freeway
Suite 860
Houston, Texas 77094
Attn: General Counsel
EXHIBIT 10.36
AMENDED, RESTATED AND CONSOLIDATED
MASTER LEASE DOCUMENT
GENERAL TERMS AND CONDITIONS
DATED AS OF SEPTEMBER 24, 1997
FOR LEASES BETWEEN
HEALTH AND RETIREMENT PROPERTIES TRUST, AS LANDLORD
(THE "LANDLORD")
AND
ECA HOLDINGS, INC.
MARIETTA/SCC, INC.
GLENWOOD/SCC, INC.
DUBLIN/SCC, INC.
AND
COLLEGE PARK/SCC, INC., AS TENANTS
(COLLECTIVELY, THE "TENANTS")
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS..................................................2
ARTICLE 2 LEASED PROPERTY AND TERM....................................11
2.1 Leased Property.............................................11
2.2 Condition of Leased Property................................12
2.3 Fixed Term..................................................13
ARTICLE 3 RENT........................................................13
3.1 Rent........................................................13
3.2 Late Payment of Rent........................................16
3.3 Net Lease...................................................16
3.4 No Termination, Abatement, Etc..............................16
ARTICLE 4 USE OF THE APPLICABLE LEASED PROPERTY.......................17
4.1 Permitted Use...............................................17
4.2 Compliance with Legal and Insurance Requirements, Etc.......18
4.3 Compliance with Medicaid and Medicare Requirements..........18
4.4 Environmental Matters.......................................18
ARTICLE 5 MAINTENANCE AND REPAIRS.....................................20
5.1 Maintenance and Repair......................................20
5.2 Tenant's Personal Property..................................21
5.3 Yield Up....................................................22
5.4 Encroachments, Restrictions, Etc............................22
5.5 Landlord to Grant Easements, Etc............................23
ARTICLE 6 CAPITAL ADDITIONS, ETC......................................23
6.1 Construction of Capital Additions to the Leased Property....23
6.2 Capital Additions Financed or Paid For by Tenant............24
6.3 Capital Additions Financed by Landlord......................25
6.4 Non-Capital Additions.......................................26
6.5 Salvage.....................................................26
ARTICLE 7 LIENS.......................................................27
7.1 Liens.......................................................27
7.2 Landlord's Lien.............................................27
ARTICLE 8 PERMITTED CONTESTS..........................................27
ARTICLE 9 INSURANCE AND INDEMNIFICATION...............................28
9.1 General Insurance Requirements..............................28
9.2 Replacement Cost............................................29
9.3 Waiver of Subrogation.......................................29
9.4 Form Satisfactory, Etc......................................29
9.5 Blanket Policy..............................................30
9.6 No Separate Insurance.......................................30
9.7 Indemnification of Landlord.................................30
ARTICLE 10 CASUALTY....................................................31
10.1 Insurance Proceeds..........................................31
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10.2 Damage or Destruction.......................................31
10.3 Damage Near End of Term.....................................33
10.4 Tenant's Property...........................................33
10.5 Restoration of Tenant's Property............................33
10.6 No Abatement of Rent........................................33
10.7 Waiver......................................................34
ARTICLE 11 CONDEMNATION................................................34
11.1 Total Condemnation, Etc.....................................34
11.2 Partial Condemnation........................................34
11.3 Abatement of Rent...........................................35
11.4 Temporary Condemnation......................................35
11.5 Allocation of Award.........................................36
ARTICLE 12 DEFAULTS AND REMEDIES.......................................36
12.1 Events of Default...........................................36
12.2 Remedies....................................................39
12.3 TENANT'S WAIVER.............................................40
12.4 Application of Funds........................................40
12.5 Landlord's Right to Cure Tenant's Default...................40
12.6 Trade Names.................................................40
ARTICLE 13 HOLDING OVER................................................41
ARTICLE 14 LANDLORD'S DEFAULT..........................................41
ARTICLE 15 PURCHASE OF LEASED .........................................41
ARTICLE 16 SUBLETTING AND ASSIGNMENT...................................42
16.1 Subletting and Assignment...................................42
16.2 Required Sublease Provisions................................42
16.3 Permitted Sublease..........................................43
16.4 Sublease Limitation.........................................43
ARTICLE 17 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS..............44
17.1 Estoppel Certificates.......................................44
17.2 Financial Statements........................................44
17.3 General Operations..........................................44
ARTICLE 18 LANDLORD'S RIGHT TO INSPECT.................................45
ARTICLE 19 APPRAISAL...................................................46
19.1 Appraisal Procedure.........................................46
19.2 Landlord's Right to Appraisal...............................47
ARTICLE 20 LANDLORD'S OPTION TO PURCHASE...............................47
20.1 Landlord's Option to Purchase the Tenant's Personal
Property; Transfer of Licenses............................47
ARTICLE 22 FACILITY MORTGAGES..........................................48
22.1 Landlord May Grant Liens....................................48
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22.2 Subordination of Lease......................................48
22.3 Notice to Mortgagee and Ground Landlord.....................49
ARTICLE 23 ADDITIONAL COVENANTS OF TENANT..............................49
23.1 Prompt Payment of Indebtedness..............................49
23.2 Conduct of Business.........................................50
23.3 Maintenance of Accounts and Records.........................50
23.4 Notice of Change of Name, Administrator, Etc................50
23.5 Notice of Litigation, Potential Event of Default, Etc.......50
23.6 Indebtedness of Tenant......................................50
23.7 Financial Condition of Tenant...............................51
23.8 Distributions, Payments to Affiliates, Etc. ...............51
23.9 Prohibited Transactions.....................................52
23.10 Investments.................................................52
23.11 Management of Leased Property...............................52
23.12 Liens and Encumbrances......................................53
23.13 Merger; Sale of Assets; Etc.................................53
23.14 Definitions.................................................54
ARTICLE 24 MISCELLANEOUS...............................................55
24.1 Limitation on Payment of Rent...............................55
24.2 No Waiver...................................................55
24.3 Remedies Cumulative.........................................55
24.4 Severability................................................55
24.5 Acceptance of Surrender.....................................55
24.6 No Merger of Title..........................................56
24.7 Conveyance by Landlord......................................56
24.8 Quiet Enjoyment.............................................56
24.9 NON-LIABILITY OF TRUSTEES...................................56
24.10 Landlord's Consent of Trustees..............................57
24.11 Memorandum of Lease.........................................57
24.12 Notices....................................................57
24.13 Construction................................................58
24.14 CONSENT TO JURISDICTION.....................................58
24.15 WAIVER OF JURY TRIAL........................................58
24.16 GOVERNING LAW...............................................58
<PAGE>
AMENDED, RESTATED AND CONSOLIDATED MASTER LEASE DOCUMENT
GENERAL TERMS AND CONDITIONS
This AMENDED, RESTATED AND CONSOLIDATED MASTER LEASE DOCUMENT, GENERAL
TERMS AND CONDITIONS (hereinafter, the "Master Lease Document"), dated as of
September 24, 1997 is adopted as part of each lease executed by HEALTH AND
RETIREMENT PROPERTIES TRUST, a Maryland real estate investment trust, as
landlord ("Landlord"), on the one hand, and any of MARIETTA/SCC, INC.,
GLENWOOD/SCC, INC., DUBLIN/SCC, INC. and COLLEGE PARK/SCC, INC., each a Georgia
corporation (collectively, the "Georgia Companies") or ECA HOLDINGS, INC., a
Delaware corporation ("ECA"), as tenant (together with the Georgia Companies,
collectively, the "Tenants"), on the other.
RECITALS
This Master Lease Document is made and entered into with reference to
the following recitals:
A. Pursuant to that certain Master Lease Document, General Terms and
Conditions dated as of December 30, 1993, as amended, between Landlord
and ECA (the "1993 Master Lease Document") and the several Facility
Leases, as amended, between Landlord and ECA that incorporate by
reference the 1993 Master Lease Document, ECA has leased from Landlord
certain real property, and related improvements and personal property,
located in Colorado, Iowa, Kansas, Missouri and Wyoming (such leases
being the "1993 Leases" and such properties being the "1993 Leased
Properties").
B. Pursuant to that certain Master Lease Document, General Terms and
Conditions dated as of April 1, 1995, as amended, between Landlord and
ECA (the "1995 Master Lease Document") and the several Facility Leases,
as amended, between Landlord and ECA that incorporate by reference the
1995 Master Lease Document, Landlord has leased to ECA certain real
property, and related improvements and personal property, located in
Iowa, Kansas, Missouri and Nebraska (such leases being the "1995
Leases" and such properties being the "1995 Leased Properties").
C. Pursuant to that certain Master Lease Document, General Terms and
Conditions dated as of May 10, 1996, as amended, between Landlord and
the Georgia Companies (the "1996 Master Lease Document") and the
several Facility Leases, as amended, entered into between Landlord and
the Georgia Companies that incorporate by reference the 1996 Master
Lease Document, Landlord has leased to the Georgia Companies certain
real property, and related improvements and personal property, located
in Georgia (such leases being the "1996 Leases", and together with the
1993 Leases and the 1995 Leases, collectively, the "Existing Leases";
and such properties being the "1996 Leased Properties").
D. Pursuant to the terms of a Purchase and Sale Agreement dated as of even
date herewith (the "Restructuring Agreement"), the parties hereto have
agreed to amend, restate and consolidate the 1993 Master Lease
Document, the 1995 Master Lease Document and the 1996 Master Lease
Document, and to amend each of the Existing Leases.
E. The Restructuring Agreement also provides that Landlord will acquire
from ECA and simultaneously lease back to ECA under the terms of this
Master Lease Document and the several Facility Leases between Landlord
and ECA that incorporate by reference this Master Lease Document (such
leases being the "1997 Leases", and together with the Existing Leases,
as
<PAGE>
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amended pursuant to the Restructuring Agreement, collectively, the
"Leases") certain real property and related improvements and personal
property, located in Canon City, Colorado Springs and Delta, Colorado
and as otherwise described on Exhibit A hereto (such properties being
the "1997 Leased Properties", and together with the 1993 Leased
Properties, the 1995 Leased Properties and the 1996 Leased Properties,
collectively, the "Collective Leased Properties").
F. Notwithstanding anything herein to the contrary, the terms and
conditions of this Master Lease Document shall be construed and
interpreted as to each Lease as if a separate lease containing all the
terms of this Master Lease Document and such Lease had been executed by
Landlord and the relevant Tenant with respect to the Leased Property
described in such Lease (hereinafter referred to as the "applicable
Leased Property").
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and each Tenant (hereinafter, "Tenant") agree that the
1993 Master Lease Document, the 1995 Master Lease Document and the 1996 Master
Lease Document are amended, restated and consolidated to read as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Master Lease Document, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article shall 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 shall have the meanings assigned to them in accordance
with GAAP consistently applied, (iii) the use in this Master Lease Document of
"Articles," "Sections" and terms denoting other subdivisions shall refer to the
designated Articles, Sections and other subdivisions of this Master Lease
Document, and (iv) the words "herein," "hereof," "hereunder" and other words of
similar import shall refer to this Master Lease Document as a whole and not to
any particular Article, Section or other subdivision.
Added Value Percentage shall mean with respect to any Tenant's Capital
Addition, an amount (expressed as a percentage) equal to the quotient of the
Fair Market Added Value of such Capital Addition over the Fair Market Value of
the entire Leased Property (including all Capital Additions) immediately after
completion of such Tenant's Capital Addition. The Added Value Percentage for any
Tenant's Capital Additions shall remain in effect until any subsequent Capital
Addition is completed, at which time the Added Value Percentage will again be
determined as provided above.
Additional Charges: As defined in Section 3.1.2.
Adjusted Purchase Price shall mean, for the applicable Leased Property,
the Purchase Price of such Leased Property plus the aggregate amount of all
disbursements made by Landlord with respect to such Leased Property pursuant to
the terms of any renovation funding agreement, plus any other amount disbursed
or advanced by Landlord to finance, or to reimburse Tenant for its financing of,
any Capital Addition to such Leased Property less the amount of any Award or the
proceeds of any insurance received by Landlord in connection with a partial
Condemnation or a partial casualty involving the applicable Leased Property as
described in Section 11.2 or 10.2.2, and not applied by Landlord to the
restoration of the applicable Leased Property as provided therein.
<PAGE>
-3-
Affiliate shall mean as to any Person (a) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more on a consolidated basis, of the
outstanding capital stock, shares, equity or beneficial interests of such
Person, (c) any officer, director, employee, general partner or trustee of such
Person or any other Person controlling, controlled by or under common control
with such Person (excluding trustees and Persons serving in similar capacities
who are not otherwise an Affiliate of such Person), or (d) with respect to any
individual, a spouse, any ancestor or descendant, or any other relative (by
blood, adoption or marriage), within the third degree, of such individual. For
the purposes of this definition, "control" (including the correlative meanings
of the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, through the ownership of voting securities, partnership interests or
other equity interests.
Applicable Laws: As defined in Section 4.4.
Applicable Percentage shall mean initially (a) 11.91% with respect to
any 1993 Leased Property, (b) 12.55% with respect to any 1995 Leased Property,
(c) 11.00% with respect to any 1996 Leased Property and (d) 11.7% with respect
to any 1997 Leased Property. Effective on the first day of each calendar year,
commencing January 1, 1999, the Applicable Percentage with respect to the
applicable Leased Property for such calendar year shall be increased to equal
the product of (x) the Applicable Percentage for the applicable Leased Property
on the last day of the prior calendar year multiplied by (y) a fraction, the
denominator of which shall be the Index (as hereinafter defined) (A) at June 30,
1997, in the case of the adjustment effective January 1, 1999 or (B) at November
30 of the year prior to such prior calendar year, in the case of the adjustment
effective any January 1 thereafter, and the numerator of which shall be the
Index at November 30 of the prior calendar year. As used herein, the term
"Index" shall mean the Consumer Price Index for Urban Wage Earners and Clerical
Workers, United States, All Items 1982-1984=100. The Index is presently
published by the Bureau of Labor Statistics of the United States Department of
Labor. In the event publication of the Index ceases, the computation of the
Minimum Rent during each year with respect to which the Index is to be applied
shall be computed upon the basis of whatever index published by the United
States Department of Labor at that time is most nearly comparable as a measure
of general changes in price levels for the United States. In the event that the
Index ceases to use 1982-84=100 as the basis of calculation, or if a substantial
change is made in the method used to determine the Index or the items used to
calculate the Index and Landlord shall in its sole discretion so elect, then the
Index shall be converted to the amount(s) that would have resulted had the
manner of calculating the Index in effect at the Effective Date not been
altered.
Award shall mean all compensation, sums or other value awarded, paid or
received by virtue of a total or partial Condemnation of the applicable Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses, including, without limitation, expert witness fees, incurred
by Landlord, in connection with obtaining any such award).
Business Day shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in the State are authorized by law or
executive action to close.
Capital Addition shall mean 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
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,
the renovation of existing improvements on such Leased Property in order to
provide a functionally new
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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 on 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 shall mean the cost of any Capital Addition
proposed to be made by Tenant to the applicable Leased Property, whether paid
for by Tenant or Landlord. Such cost shall include (a) the cost of construction
of the Capital Addition, including site preparation and improvement, materials,
labor, supervision, developer and administrative fees, legal fees, and related
design, engineering and architectural services, the cost of any fixtures, the
cost of equipment and other personalty, the cost of construction financing
(including, but not limited to, capitalized interest) and other miscellaneous
costs approved by Landlord, (b) if agreed to by Landlord in writing, in advance,
the cost of any land (including all related acquisition costs incurred by
Tenant) contiguous to the Leased Property which is to become a part of the
Leased Property purchased for the purpose of placing thereon the Capital
Addition or any portion thereof or for providing means of access thereto, or
parking facilities therefor, including the cost of surveying the same, (c) the
cost of insurance, real estate taxes, water and sewage charges and other
carrying charges for such Capital Addition during construction, (d) title
insurance charges, (e) reasonable attorneys' fees and expenses, (f) filing,
registration and recording taxes and fees, (g) documentary stamp or transfer
taxes, and (h) all actual and reasonable costs and expenses of Landlord and
Tenant and, if agreed to by Landlord in writing, in advance, of any Lending
Institution committed to finance the Capital Addition, including, but not
limited to, all (i) reasonable attorneys' fees and expenses, (ii) printing
expenses, (iii) filing, registration and recording taxes and fees, (iv)
documentary stamp or transfer taxes, (v) title insurance charges and appraisal
fees, (vi) rating agency fees, and (vii) commitment fees charged by any Lending
Institution advancing or offering to advance any portion of any financing to
which Landlord has consented in writing for such Capital Addition.
CCA Entity: As defined in the Restructuring Agreement.
Change in Control shall be deemed to exist (a) if IHS shall cease to
own directly or indirectly, both beneficially and of record all the issued and
outstanding capital stock of any CCA Entity, or (b) upon the merger or
consolidation of IHS or any CCA Entity with or into any other Person or any one
or more sales or conveyances to any Person of all or substantially all of the
assets of IHS or any CCA Entity (provided that any merger or consolidation of
IHS with another Person or any sale of substantially all of the assets of IHS,
that in either case complies with Section 14(f) of the Guaranty dated as of
September 24, 1997, as in effect from time to time, by IHS in favor of Landlord,
shall not constitute a Change in Control for the purposes of this clause (b)).
Code shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as from time
to time amended.
Collective Leased Properties shall mean, at any time and from time to
time at the time of determination, all of the Leased Properties that are then
subject to a Lease.
Commencement Date: As defined in the applicable Lease.
Community Care shall mean Community Care of America, Inc., a Delaware
corporation, and its successors and assigns.
Condemnation shall mean, as to the applicable Leased Property, (a) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor of its power of
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condemnation, (b) a voluntary sale or transfer by Landlord 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, whether or not the same shall
have actually been commenced.
Condemnor shall mean any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
Contingent Obligation of any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise, other
than agreements to purchase goods at an arm's length price in the ordinary
course of business) or (ii) entered into for the purpose of assuring in any
other manner the holder of such Indebtedness of the payment thereof or to
protect such holder against loss in respect thereof (in whole or in part),
provided that the term Contingent Obligation shall not include endorsements for
collection or deposit in the ordinary course of business.
Date of Taking shall mean, 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.
Default shall mean (a) any Event of Default or (b) any condition or
event that has occurred and is continuing and that (i) with the giving of notice
or lapse of time or both would, unless cured or waived, become an Event of
Default and (ii) either relates to the payment of Rent or relates to a matter as
to which Landlord has given Notice of default to any Tenant.
Distribution: As defined in Section 23.14.
Effective Date: As defined in the Restructuring Agreement.
Encumbrance: As defined in Section 22.1.
Environmental Obligation: As defined in Section 4.4.
Environmental Notice: As defined in Section 4.4.
Environmental Report: As defined in Section 4.4.
Event of Default: As defined in Section 12.1.
Extended Term(s): As defined in Section 2.4.
Facility shall mean the facility offering health care or related
services being operated or proposed to be operated on the applicable Leased
Property.
Facility Mortgage shall mean any Encumbrance placed upon the applicable
Leased Property in accordance with Article 22 hereof.
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Facility Mortgagee shall mean the holder of any Facility Mortgage.
Facility Trade Name shall mean any name under which any Tenant has
conducted the business of operating the Facility located on the applicable
Leased Property at any time during the Term.
Fair Market Added Value shall mean, as to any applicable Leased
Property, the Fair Market Value of such Leased Property (including all Capital
Additions) less the Fair Market Value of such Leased Property determined as if
no Tenant's Capital Additions had been constructed.
Fair Market Rental shall mean, as to the applicable Leased Property,
the rental which a willing tenant not compelled to rent would pay a willing
landlord not compelled to lease for the use and occupancy of such Leased
Property (including all Capital Additions other than Tenant's Capital Additions)
on the terms and conditions of the applicable Lease for the term in question,
assuming Tenant is not in default thereunder and determined by agreement between
Landlord and Tenant, or, failing agreement, in accordance with the appraisal
procedures set forth in Article 19 hereof or in such other manner as shall be
mutually acceptable to Landlord and Tenant.
Fair Market Value shall mean the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for the
applicable Leased Property, (a) assuming the same is unencumbered by the
applicable Lease, (b) determined in accordance with the appraisal procedures set
forth in Article 19 hereof or in such other manner as shall be mutually
acceptable to Landlord and the applicable Tenant, and (c) not taking into
account any reduction in value resulting from any indebtedness to which such
Leased Property is subject.
Fair Market Value Purchase Price shall mean the Fair Market Value of
the applicable Leased Property less the Fair Market Added Value.
Financial Officer's Certificate shall mean, as to any Person, a
certificate of the financial officer of such Person, duly authorized,
accompanying the financial statements required to be delivered by such Person
pursuant to Section 17.2, in which such officer shall (a) certify that such
statements have been properly prepared in accordance with GAAP and are true,
correct and complete in all material respects and fairly present the
consolidated financial condition of such Person at and as of the dates thereof
and the results of its and their operations for the periods covered thereby, (b)
certify that such officer has reviewed the Leases and has no knowledge of any
material default by Tenants or any other Guarantor in the performance or
observance of any of the provisions of the Leases or any Transaction Document or
of any condition or event which constitutes an Event of Default under the Leases
or any of the Transaction Documents or which with the passage of time or the
giving of notice or both would become such an Event of Default, and (c) provide
computations and schedules showing in reasonable detail compliance, as at the
date of each such financial statement, with Section 23.7 of the Master Lease
Document.
Financial Statements shall mean, for any Fiscal Year or other
accounting period of IHS and its consolidated subsidiaries, annual audited and
quarterly unaudited financial statements of each Tenant, including such Tenant's
balance sheet and the related statements of income and cash flows, all in
reasonable detail, and setting forth in comparative form the corresponding
figures for the corresponding period in the preceding Fiscal Year, and prepared
in accordance with GAAP.
Fiscal Year shall mean the twelve (12) month period from January 1 to
December 31.
Fixed Term: As defined in Section 2.3.
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Fixtures: As defined in Section 2.1(d).
First Extended Term: As defined in the applicable Lease.
GAAP shall mean generally accepted accounting principles consistently
applied.
Guarantor(s) shall mean any guarantor of any Tenant's obligations under
the applicable Lease, including, without limitation, IHS, each other CCA Entity,
and each such guarantor's successors and assigns.
Guaranty shall mean and include any guaranty or other agreement
executed by a Guarantor in favor of Landlord pursuant to which the payment and
performance of each Tenant's obligations under the applicable Lease (among other
obligations) are guaranteed, together with all modifications, amendments or
supplements thereto.
Hazardous Substances: As defined in Section 4.4.
IHS shall mean Integrated Health Services, Inc., a Delaware
corporation, and its successors and assigns.
Impositions shall mean for the 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 Landlord, Tenant
or the business conducted upon the applicable Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), ground rents (including any
minimum rent under any ground lease, and any additional rent or charges
thereunder, whether payable by reference to Rent payable hereunder or
otherwise), 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) Landlord'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 or possession of, or
sales from, or 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 the Lease with respect to the applicable
Leased Property shall be construed to require Tenant to pay (1) any tax based on
net income imposed on Landlord, or (2) any net revenue tax of Landlord, or (3)
any transfer fee or other tax imposed with respect to the sale, exchange or
other disposition by Landlord of the applicable Leased Property or the proceeds
thereof (other than in connection with the sale, exchange or other disposition
to, or in connection with a transaction involving, Tenant), or (4) any single
business, gross receipts (other than a tax on any rent received by Landlord from
Tenant), transaction privilege, rent or similar taxes as the same are related to
or imposed upon Landlord, 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.
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Indebtedness shall mean, as to any Person (determined without
duplication): (i) indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
or acquisition price of property or services (including amounts payable under
agreements not to compete and other similar arrangements), other than accounts
payable (other than for borrowed money) incurred in the ordinary course of
business and accrued expenses incurred in the ordinary course of business; (ii)
obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for the
account of such Person; (iii) obligations of such Person under leases or real or
personal property that are or should be classified as capitalized lease
obligations under GAAP; (iv) obligations of such Person to redeem or otherwise
retire shares of capital stock of such Person; (v) indebtedness of others of the
type described in clauses (i) through (iv) above secured by a Lien on the
property of such Person, whether or not the respective obligation so secured has
been assumed by such Person; and (vi) all indebtedness of others of the type
described in clauses (i) through (v) above as to which such Person has entered
into a Contingent Obligation.
Independent Trustees shall mean Trustees who, in their individual
capacity, (a) are not Affiliates of Tenant and (b) do not perform any services
for Landlord except as Trustees.
Insurance Requirements shall mean all terms of any insurance policy
required by the applicable Lease with respect to the applicable Leased Property
and all requirements of the issuer of any such policy.
Investment: As defined in Section 23.10.
Land: As defined in Section 2.1(a) with respect to the applicable
Lease.
Landlord shall mean Health and Retirement Properties Trust (f/k/a
"Health and Rehabilitation Properties Trust"), a Maryland real estate investment
trust, and its successors and assigns.
Lease(s): As defined in the recital clauses hereto, and each other
lease entered into between Landlord and any Tenant, which incorporates by
reference this Master Lease Document.
Leased Improvements: As defined in Section 2.1(b) with respect to the
applicable Lease.
Leased Personal Property: As defined in Section 2.1(e) with respect to
the applicable Lease.
Leased Property: As defined in Section 2.1 with respect to the
applicable Lease.
Legal Requirements shall mean, as to the applicable Leased Property,
all federal, state, county, municipal and other governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions
affecting such Leased Property or the maintenance, construction, alteration or
operation thereof, whether now or hereafter enacted or in existence, including,
without limitation, (a) all permits, licenses, certificates of need,
authorizations and regulations necessary to operate such Leased Property for its
Primary Intended Use, and (b) all covenants, agreements, restrictions and
encumbrances contained in any instruments at any time in force affecting such
Leased Property, including those which may (i) require material repairs,
modifications or alterations in or to such Leased Property or (ii) in any way
adversely affect the use and enjoyment thereof.
Lending Institution shall mean any insurance company, federally insured
commercial or savings bank, national banking association, savings and loan
association, employees' welfare, pension or
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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, such
trust having a net worth of at least $100,000,000.
Lien shall mean and include any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind, or any
transfer of any property or assets for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors.
Management Agreement shall mean and include any agreement whether
written or oral entered into between Tenant and any other party (including any
Affiliate of Tenant) pursuant to which management services are provided to the
Facility located on the applicable Leased Property, together with all
amendments, modifications or supplements thereto.
Manager shall mean the management party under any Management Agreement.
Minimum Rent: As defined in the applicable Lease, as the same may be
adjusted from time to time in accordance with Section 3.1.1.
Notice shall mean a notice given in accordance with Section 24.12.
Officer's Certificate shall mean a certificate signed by an officer of
Tenant duly authorized by the board of directors of Tenant.
Overdue Rate shall mean, on any date, a per annum rate of interest
equal to eighteen percent (18%) but in no event greater than the maximum rate
then permitted under applicable law.
Permitted Encumbrances shall mean, with respect to the applicable
Leased Property, all rights, restrictions, and easements of record set forth on
Schedule B to the applicable owner's or leasehold title insurance policy issued
to Landlord on the date of the applicable Existing Lease, plus any other such
encumbrances as may have been consented to in writing by Landlord from time to
time.
Permitted Liens shall mean any Lien granted in compliance with Section
23.12.
Person shall mean any individual, corporation, general or limited
partnership, stock company or association, joint venture, association, company,
trust, bank, trust company, land trust, business trust, any government or agency
or political subdivision thereof or any other entity.
Primary Intended Use, with respect to the applicable Leased Property,
shall mean use as a licensed nursing home and such other uses as may be
incidental or necessary thereto.
Provider Agreements: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of Tenant
in connection with the operation of the applicable Facility relating to any
right of payment or other claim arising out of or in connection with Tenant's
participation in any Third Party Payor Program.
Purchase Price(s): With respect to the applicable Leased Property, the
amount identified as such in the applicable Lease.
Records: As defined in Section 7.2.
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Renovation Funding Agreement shall mean any agreement, whether now
existing or hereafter entered into, between any Tenant and Landlord, relating to
certain improvements made or to be made at a Leased Property, as the same may be
amended, modified or supplemented from time to time.
Rent shall mean, in connection with any applicable Leased Property, the
sum of Minimum Rent and Additional Charges payable with respect to such Leased
Property.
SEC shall mean the Securities and Exchange Commission.
Second Extended Term: As defined in the applicable Lease.
State shall mean the State or Commonwealth in which the applicable
Leased Property is located.
Subordinated Creditor shall mean any creditor of Tenant party to a
Subordination Agreement in favor of Landlord.
Subordination Agreement shall mean any agreement executed by a
Subordinated Creditor, Landlord and the Tenants pursuant to which the payment
and performance of Tenants' obligations to such Subordinated Creditor are
subordinated to the payment and performance of Tenants' obligations to Landlord
under the Leases and the other Transaction Documents.
Subsidiary shall mean, with respect to any Person, any corporation or
other entity of which the securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are at the time directly or indirectly
owned by such Person.
Tangible Net Worth: As defined in Section 23.14.
Tenant: As defined in the applicable Lease.
Tenants: As defined in the caption.
Tenant's Capital Additions: As defined in Section 6.2.2.
Tenant's Personal Property shall mean (a) all motor vehicles and (b)
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other personal property of Tenant
acquired by Tenant on and after the date hereof and located on the applicable
Leased Property or used in Tenant's business on such Leased Property and all
modifications, replacements, alterations and additions to such personal property
installed at the expense of Tenant, other than any items included within the
definition of Fixtures or Leased Personal Property.
Term shall mean, collectively, for the applicable Lease, the Fixed Term
and the Extended Terms, to the extent properly exercised pursuant to the
provisions of Section 2.4, unless sooner terminated pursuant to the provisions
of this Master Lease Document or the applicable Lease.
Test Rate shall mean the minimum interest rate necessary to avoid
imputation of original issue discount or interest income under Sections 483 or
1272 of the Code or any similar provision.
Third Party Payor Programs: All third party payor programs in which
Tenant currently or in the future may participate, including, without
limitation, Medicare, Medicaid, CHAMPUS, Blue Cross
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and/or Blue Shield, Managed Care Plans, other private insurance programs and
employee assistance programs.
Third Party Payors: Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue
Shield, private insurers and any other person which presently or in the future
maintains Third Party Payor Programs.
Transaction Documents shall mean, collectively, any agreement, note,
lease, master lease, mortgage, security agreement, pledge agreement, assignment,
guaranty or other agreement or instrument now or hereafter executed by, on the
one hand, Landlord or any Affiliate thereof, and on the other, any Tenant or any
guarantor of the obligations of any Tenant hereunder or under any lease, or any
of them (including, without limitation, any and all other documents executed in
connection with, relating to, evidencing or creating collateral or security for
the Leases), and any agreement, note, mortgage, security agreement, pledge
agreement, assignment, guaranty or other agreement or instrument hereafter
executed in connection with any extension, renewal, refunding or refinancing
thereof, as any of the same may hereafter from time to time be amended, modified
or supplemented.
Trustees shall mean the trustees of Landlord.
Unavoidable Delays shall mean delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, unavoidable casualty or any other
causes beyond the reasonable control of the party responsible for performing an
obligation hereunder, but in no event to exceed forty-five (45) days (provided
that lack of funds shall not be deemed a cause beyond the control of Tenant) so
long as Tenant shall use reasonable efforts to alleviate the cause of such delay
and thereafter promptly perform such obligation, and so long as, in any event,
no permit, license, certificate of need or authorization necessary to operate
such Leased Property for its Primary Intended Use is adversely affected or
subject to any danger of revocation or termination. In no event shall Tenant's
obligation to pay the Rent be affected by Unavoidable Delays.
Unsuitable for Its Primary Intended Use shall mean a state or condition
of the Facility located at the applicable Leased Property such that (a)
following any damage or destruction involving such Leased Property, such Leased
Property cannot reasonably be expected to be restored to substantially the same
condition as existed immediately before such damage or destruction, and as
otherwise required by Section 10.2.4, within a period equal to six (6) months
following such damage or destruction or such shorter period of time as to which
business interruption insurance is available to cover Rent and other costs
related to such Leased Property following such damage or destruction, or (b) as
the result of a partial taking by Condemnation, either (i) such Facility cannot
reasonably be expected to be operated on a commercially practicable basis for
its Primary Intended Use taking into account, among other relevant factors, the
number of usable beds, the amount of square footage, or the revenues affected by
such partial taking or (ii) such Facility loses the use of more than 25% of the
number of usable beds available immediately prior to such partial taking.
Work: As defined in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property.
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Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord with respect to each
applicable Lease all of the following (collectively, the "Leased Property"):
(a) that certain tract, piece and parcel of land, as more
particularly described in the applicable Lease (the "Land");
(b) all buildings, structures, Fixtures and other improvements
of every kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site), parking
areas and roadways appurtenant to such buildings and structures currently
situated upon the Land and all Capital Additions other than Tenant's Capital
Additions (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or incorporated into the
Leased Improvements, including, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by 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 (collectively the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other personal property of
any kind or description used or useful in Tenant's business on or in the Leased
Improvements, and located on or in the Leased Improvements, and all
modifications, replacements, alterations and additions to such personal
property, except items, if any, included within the category of Fixtures, but
specifically excluding all items included within the category of Tenant's
Personal Property (collectively the "Leased Personal Property"); and
(f) all existing leases of space (including any security
deposits held by Tenant pursuant thereto) in the Leased Improvements to tenants
thereof.
2.2 Condition of Leased Property.
Tenant acknowledges receipt and delivery of possession of the
applicable Leased Property and Tenant accepts such Leased Property in its "as
is" condition, subject to the rights of Persons in possession, the existing
state of title, including all covenants, conditions, restrictions, reservations,
mineral leases, easements and other matters of record or that are visible or
apparent on the Leased Property, all applicable Legal Requirements, the liens of
financing instruments, mortgages and deeds of trust, and such other matters
which would be disclosed by an inspection of such Leased Property and the record
title thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT HAS
INSPECTED SUCH LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE
CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT THERETO AND
TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION
OF THE APPLICABLE LEASED PROPERTY. LANDLORD MAKES NO WARRANTY OR REPRESENTATION
EXPRESS OR
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IMPLIED, IN RESPECT OF THE APPLICABLE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
To the extent permitted by law, however, Landlord hereby assigns to Tenant all
of Landlord's rights to proceed against any predecessor in title for breaches of
warranties or representations or for latent defects in the applicable Leased
Property. Landlord shall fully cooperate with Tenant in the prosecution of any
such claims, in Landlord's or Tenant's name, all at Tenant's sole cost and
expense. Tenant shall indemnify, defend, and hold harmless Landlord from and
against any loss, cost, damage or liability (including reasonable attorneys'
fees) incurred by Landlord in connection with such cooperation.
2.3 Fixed Term.
The initial term of the applicable Lease (the "Fixed Term") shall be
for a fixed term as set forth in such Lease.
2.4 Extended Term.
The Tenants shall have the right to extend the Term of all, but not
less than all, of the Leases pertaining to the Collective Leased Properties, as
set forth in each Lease and below (the "Extended Term(s)") provided that (i) no
Default or default shall have occurred and be continuing under the applicable
Lease or the Master Lease Document, any other Lease pertaining to the Collective
Leased Properties, and (ii) this Lease and each other Lease pertaining to any
Collective Leased Property shall be in full force and effect (other than any
such Lease that has been terminated following condemnation or casualty in
accordance with the provisions hereof).
Each Extended Term under each Lease shall commence on the day
succeeding the expiration of the Fixed Term or the preceding Extended Term, as
the case may be. All of the terms, covenants and provisions of such Lease shall
apply to each such Extended Term, except that the Minimum Rent for the Second
Extended Term shall be as set forth in Section 3.1.1(c) (subject to adjustment
as provided in Section 3.1.1) with respect thereto. If the Tenants shall elect
to exercise any of the aforesaid extensions, they shall do so by giving Landlord
Notice thereof simultaneously as to all of the Collective Leased Properties not
later than twelve (12) months prior to the scheduled expiration of the then
current Term of the Leases (Fixed or Extended, as applicable), it being agreed
that time is of the essence with respect to the giving of such Notice. The
Tenants may not exercise their option for more than one such Extended Term at a
time. If the Tenants shall fail to give any such Notice, the Leases shall
automatically terminate at the end of the Term then in effect and Tenants shall
have no further option to extend the Term of the Leases. If the Tenants shall
give such Notice, the extension of the Leases shall be automatically effected
without the execution of any additional documents; it being understood and
agreed, however, that the Tenants and Landlord shall execute such documents and
agreements as either party shall reasonably require to evidence the same.
Notwithstanding the provisions of the foregoing sentence, if, subsequent to the
giving of such Notice, an Event of Default shall occur, the extension of the
Leases shall cease to take effect and the Leases shall automatically terminate
at the end of the Term then in effect and the Tenants shall have no further
option to extend the Term of the Leases, unless Landlord shall otherwise consent
in writing.
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ARTICLE 3
RENT
3.1 Rent.
Tenant shall pay to Landlord, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
at Landlord's address set forth above or at such other place or to such other
Person as Landlord from time to time may designate in a Notice to Tenant,
without offset, abatement, demand or deduction, Rent consisting of Minimum Rent
and Additional Charges during the Term, in each case except as hereinafter
expressly provided. All payments to Landlord shall be made by certified check,
wire transfer of immediately available funds or by other means acceptable to
Landlord in its sole discretion.
3.1.1 Minimum Rent:
(a) During Fixed Term and Extended Terms. The Minimum Rent
payable with respect to the Fixed Term and First Extended Term is the annual sum
set forth in the applicable Lease (subject to adjustment as provided herein).
The Minimum Rent payable with respect to the Second Extended Term for the
applicable Lease shall equal an annual sum (determined at the commencement of
such Extended Term for such Lease and subject to adjustment as set forth herein)
equal to the greater of (i) the product of (x) the Adjusted Purchase Price for
such Leased Property at such time and (y) the then Applicable Percentage, and
(ii) ninety-five percent (95%) of the Fair Market Rental for such Leased
Property at such time. Minimum Rent shall be payable in advance in equal,
consecutive monthly installments as set forth in such Lease, 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.
(b) Adjustments of Minimum Rent Following Disbursements Under
Renovation Funding Agreement. Effective on the date of each disbursement made
after the Effective Date to pay for the cost of any renovations at the
applicable Leased Property pursuant to the terms of the applicable Renovation
Funding Agreement, the Minimum Rent under the applicable Lease for such Leased
Property shall be adjusted, effective on the date of such disbursement, to an
annual sum equal to the product of (i) the Adjusted Purchase Price for such
Leased Property (giving effect to the making of such disbursement) and (ii) the
then Applicable Percentage. If any such disbursement is made during any calendar
month on other than the first day of such calendar month, Tenant shall pay to
Landlord on the first day of the immediately following calendar month (in
addition to the amount of Minimum Rent payable with respect to such month, as
adjusted pursuant to this paragraph (b)) the amount by which Minimum Rent for
such Leased Property for the preceding month, as adjusted for such disbursement,
exceeded the amount of Minimum Rent for such Leased Property payable by Tenant
for such preceding month without giving effect to such adjustment.
(c) Annual Adjustments of Minimum Rent. Effective on the first
day of each calendar year, commencing January 1, 1999, Minimum Rent with respect
to the applicable Leased Property for such calendar year shall be adjusted to
equal the product of (i) the Adjusted Purchase Price for such Leased Property as
of December 31 of the prior year and (ii) the Applicable Percentage as adjusted
in accordance with the definition of such term on such January 1.
Notwithstanding the foregoing (1) the maximum increase in Minimum Rent with
respect to the applicable Leased Property for any calendar year shall be limited
to 4% of Minimum Rent for the applicable Leased Property for the
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prior calendar year and (2) the minimum increase in Minimum Rent with respect to
the applicable Leased Property for any calendar year shall be 2% of Minimum Rent
for the applicable Leased Property for the prior calendar year.
(d) Credits Against Minimum Rent; Excess Condemnation and
Casualty Proceeds. Landlord shall credit the amount of any Award or the proceeds
of any insurance received by Landlord in connection with a partial Condemnation
or a partial casualty involving the applicable Leased Property as described in
Section 11.2 or 10.2.2, and not applied by Landlord to the restoration of the
applicable Leased Property affected by such partial Condemnation or partial
casualty as provided therein, to the payment of Minimum Rent payable with
respect to such Leased Property. Landlord shall calculate the amount of such
credits within 15 days after the end of each calendar month, and shall reduce
the amount of the installment of Minimum Rent next due after the date of such
calculation by the amount of such credits.
3.1.2 Additional Charges.
In addition to the Minimum Rent payable with respect to the applicable
Leased Property or otherwise, Tenant shall pay and discharge as and when due and
payable the following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to Permitted
Contests, Tenant shall pay, or cause to be paid, all Impositions before any
fine, penalty, interest or cost (other than any opportunity cost as a result of
a failure to take advantage of any discount for early payment) may be added for
non-payment, such payments to be made directly to the taxing authorities where
feasible, and shall promptly upon request, furnish to Landlord 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), Tenant may exercise the option to pay the same (and any accrued
interest on the unpaid balance of such Imposition) in installments and, in such
event, shall pay such installments during the Term as the same become due and
before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of Landlord's net
income, gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock, and Tenant, at
its expense, shall, to the extent required or 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. Provided no
Default shall have occurred and be continuing, 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. Landlord and Tenant shall, upon request
of the other, provide such data as is maintained by the party to whom the
request is made with respect to the applicable Leased Property as may be
necessary to prepare any required returns and reports. In the event governmental
authorities classify any property covered by the applicable Lease as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Each party shall, to the extent it
possesses the same, provide the other, upon request, with cost and depreciation
records necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to file a protest. All Impositions assessed against
such personal property shall be (irrespective of whether Landlord or Tenant
shall file the relevant return) paid by Tenant not later than the last date on
which the same may be made without interest or penalty. If the provisions of any
Facility Mortgage require deposits on account of Impositions to be made with
such Facility Mortgagee, provided the Facility Mortgagee has not elected to
waive such provision, Tenant shall either pay Landlord the monthly
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amounts required at the time and place that payments of Minimum Rent are
required and Landlord shall transfer such amounts to such Facility Mortgagee or,
pursuant to written direction by Landlord, Tenant shall make such deposits
directly with such Facility Mortgagee.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge, provided,
Landlord's failure to give any such Notice shall in no way diminish Tenant's
obligation hereunder to pay such Impositions, except that Tenant shall not be
obligated to pay any late charges or penalties attributable to Landlord's
failure to give such Notice promptly to Tenant.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in the
applicable Leased Property during the Term.
(c) Insurance Premiums. Tenant shall pay or cause to be paid,
as Additional Charges, all premiums for the insurance coverage required to be
maintained pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid, as
Additional Charges, all other amounts, liabilities and obligations which Tenant
assumes or agrees to pay under the applicable Lease, including, without
limitation, all agreements to indemnify Landlord under Sections 4.4 and 9.7.
(e) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar Additional Charges attributable to
periods after the end of the Term, whether upon expiration or sooner termination
of the applicable Lease (other than termination following an Event of Default)
Tenant may, within sixty (60) days of the end of the Term, provide Notice to
Landlord of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional Charges that
are attributable to any period after the Term of the Lease.
(f) Sales Tax. Tenant shall also pay, as Additional Charges,
with all Rent due under the applicable Lease an amount equal to all sales, use,
excise and other taxes now or hereafter imposed by any lawful authority on all
amounts due or required under the applicable Lease and classified as Rent by any
such authority.
3.2 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 Landlord) shall not be
paid within ten (10) calendar days of its scheduled due date, Tenant shall pay
Landlord, on demand, as Additional Charges, a late charge (to the extent
permitted by law) computed at the Overdue Rate 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 directly to
Landlord pursuant to any requirement of the applicable Lease, Tenant shall be
relieved of its obligation to pay such Additional Charges to the entity to which
they would otherwise be due.
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 which may be added for non-payment or late
payment of such items. Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in the applicable Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Minimum Rent.
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3.3 Net Lease.
The Rent shall be absolutely net to Landlord, so that the applicable
Lease shall yield to Landlord the full amount of the installments or amounts of
Rent throughout the Term, subject to any other provisions of the applicable
Lease or this Master Lease Document which expressly provide for adjustment or
abatement of Rent or other charges.
3.4 No Termination, Abatement, Etc.
Except as otherwise specifically provided in the applicable Lease or in
this Master Lease Document, Tenant, to the extent permitted by law, shall remain
bound by the applicable Lease in accordance with its terms and shall neither
take any action without the consent of Landlord to modify, surrender or
terminate the same, nor seek, nor be entitled to any abatement, deduction,
deferment or reduction of the Rent, or set-off against the Rent, nor shall the
respective obligations of Landlord and Tenant be otherwise affected by reason of
(a) any damage to, or destruction of, the applicable Leased Property or any
portion thereof from whatever cause or any Condemnation, (b) the lawful or
unlawful prohibition of, or restriction upon Tenant's use of the applicable
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title; (c) any claim which
Tenant may have against Landlord by reason of any default or breach of any
warranty by Landlord under the applicable Lease or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties, (d) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord, or (e) for any other cause whether similar or
dissimilar to any of the foregoing. Tenant hereby waives all rights arising from
any occurrence whatsoever, which may now or hereafter be conferred upon it by
law, to (a) modify, surrender or terminate the applicable Lease or quit or
surrender the applicable Leased Property or any portion thereof, or (b) entitle
Tenant to any abatement, reduction, suspension or deferment of the Rent or other
sums payable or other obligations to be performed by Tenant hereunder, except as
otherwise specifically provided in the applicable Lease or in this Master Lease
Document. The obligations of Tenant hereunder shall be separate and independent
covenants and agreements, and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of the
applicable Lease or by termination of the applicable Lease other than by reason
of an Event of Default.
ARTICLE 4
USE OF THE APPLICABLE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use.
Tenant shall, at all times during the Term, and at any other time
Tenant shall be in possession of the Leased Property, continuously use or cause
to be used the applicable Leased Property for its 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 Landlord (which 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 thereon which
will cause the cancellation of any insurance policy covering such Leased
Property or any part thereof (unless another adequate policy is available), nor
shall Tenant sell or
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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 underwriter's 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 such Leased Property and Tenant's Personal
Property, including, without limitation, the Insurance Requirements.
4.1.2 Necessary Approvals.
Tenant shall proceed with all due diligence and exercise best efforts
to obtain and maintain all approvals necessary to use and operate, for its
Primary Intended Use, the applicable Leased Property and the Facility located at
such Leased Property under applicable local, state and federal law, and without
limiting the foregoing, shall use its best efforts to maintain appropriate
certifications for reimbursement and licensure.
4.1.3 Continuous Operation, Etc.
Tenant shall operate continuously the applicable Leased Property as a
provider of health care services in accordance with its Primary Intended Use.
Tenant will 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.
4.1.4 Lawful Use, Etc.
Tenant shall not use or suffer or permit the use of the applicable
Leased Property and Tenant's Personal Property for any unlawful purpose. Tenant
shall not commit or suffer to be committed any waste on the applicable Leased
Property, or in the Facility located on the applicable Leased Property located
thereon, nor shall Tenant cause or permit any nuisance thereon or therein.
Tenant shall neither suffer nor permit the applicable Leased Property or any
portion thereof, including any Capital Addition, or Tenant's Personal Property,
to be used in such a manner as (i) might reasonably tend to impair Landlord'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 for adverse usage or adverse
possession by the public, as such, or of implied dedication of the applicable
Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Etc.
Subject to the provisions of Article 8 hereof, Tenant, at its sole
expense, shall promptly (i) comply with Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair, alteration
and restoration of the applicable Leased Property, and (ii) procure, maintain
and comply with all appropriate licenses, certificates of need, permits,
provider agreements and other authorizations and agreements 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.
4.3 Compliance with Medicaid and Medicare Requirements.
Tenant shall, at its sole cost and expense, make whatever improvements
(capital or ordinary) as are required to conform the applicable Leased Property
to such standards as may, from time to time, be
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required by Federal Medicare (Title 18) or Medicaid (Title 19) skilled and/or
intermediate care nursing programs, to the extent Tenant is a participant in
such programs, or any other applicable programs or legislation, or capital
improvements required by any other governmental agency having jurisdiction over
such Leased Property as a condition of the continued operation of such Leased
Property for its Primary Intended Use.
4.4 Environmental Matters.
Tenant shall not store, spill upon, dispose of or transfer to or from
the applicable Leased Property any Hazardous Substance, except that Tenant may
store, transfer and dispose of Hazardous Substances in compliance with all
Applicable Laws. Tenant shall maintain the applicable Leased Property at all
times free of any Hazardous Substance (except such Hazardous Substances as are
maintained in compliance with all Applicable Laws). Tenant shall, as to the
applicable Leased Property, promptly: (a) notify Landlord in writing of any
change in the nature or extent of such Hazardous Substances maintained, (b)
transmit to Landlord a copy of any Community-Right-To-Know report, which is
required to be filed, if any, by Tenant for the applicable Leased Property
pursuant to SARA Title III or any other Applicable Law, (c) transmit to Landlord
copies of any citations, orders, notices or other governmental communications
received by Tenant or its agents or representatives with respect thereto
(collectively, "Environmental Notice"), which Environmental Notice requires a
written response or any action to be taken and/or if such Environmental Notice
gives notice of and/or could give rise to a violation of any Applicable Law
and/or could give rise to any cost, expense, loss or damage (an "Environmental
Obligation"), (d) observe and comply with any and all Applicable Laws relating
to the use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction relating
to the use or maintenance or requiring the removal, treatment, containment or
other disposition thereof, and (e) pay or otherwise dispose of any fine, charge
or Imposition related thereto, unless Tenant shall contest the same in good
faith and by appropriate proceedings and the right to use and the value of such
Leased Property is not materially and adversely affected thereby.
For purposes of this Section 4.4, (i) the term "Applicable Laws" shall
mean and include all applicable Federal, state or local statutes, laws,
ordinances, rules and regulations, licensing requirements or conditions, whether
now existing or hereafter arising, relating to Hazardous Substances; and (ii)
the term "Hazardous Substances" shall mean hazardous substances (as defined by
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as now in effect or as hereafter from time to time amended),
hazardous wastes (as defined by the Resource Conservation and Recovery Act
("RCRA"), as now in effect or as hereafter from time to time amended), any
hazardous waste, hazardous substance, pollutant or contaminant, oils,
radioactive materials, asbestos in any form or condition, or any pollutant or
contaminant or hazardous, dangerous or toxic chemicals, materials or substances
within the meaning of any other applicable Federal, state or local law,
regulation, ordinance or requirements relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or materials, all as now in effect or hereafter from time to time
amended.
If at any time prior to the termination of the applicable Lease,
Hazardous Substances are discovered on the applicable Leased Property, Tenant
hereby agrees to take all actions, and to incur any and all expense, as may be
reasonably necessary and as may be required by any municipal, State or Federal
agency or other governmental entity or agency having jurisdiction thereof, (i)
to clean up and remove from and about the applicable Leased Property all
Hazardous Substances thereon, (ii) to contain and prevent any further release or
threat of release of Hazardous Substances on or about the applicable Leased
Property and (iii) to use good faith efforts to eliminate any further release or
threat of release of Hazardous Substances on or about the applicable Leased
Property.
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Six (6) months prior to expiration of the final Term for the Collective
Leased Properties, Tenant, at its sole cost and expense, shall designate a
qualified environmental engineer, satisfactory to Landlord in its sole
discretion, which engineer shall conduct an environmental investigation of the
Collective Leased Properties and prepare an environmental site assessment report
(the "Environmental Report"). The scope of such Environmental Report shall
include, without limitation, review of relevant records, interviews with persons
knowledgeable about the Collective Leased Properties and relevant governmental
agencies, a site inspection of the Collective Leased Properties, any buildings,
the fence lines of the Collective Leased Properties and adjoining properties
(Phase I) and shall otherwise be reasonably satisfactory in form and substance
to Landlord. If such investigation, in the opinion of the performing engineer,
indicates that any Leased Property is not free from oil, asbestos, radon and
other Hazardous Substances (except in compliance with Applicable Laws), such
investigation shall also include a more detailed physical site inspection,
appropriate testing, subsurface and otherwise, and review of historical records
(Phase II) of such Leased Property to demonstrate the compliance of such Leased
Property with Applicable Laws and the absence of Hazardous Substances.
All preliminary drafts of such Environmental Report, and supplements
and amendments thereto, shall be provided to Landlord contemporaneously with
delivery thereof to Tenant. With respect to any recommendations contained in the
Environmental Report, violations of Applicable Laws and/or the existence of any
conditions at the applicable Leased Property which could give rise to an
Environmental Obligation, Tenant shall promptly give Notice to Landlord of all
action Tenant proposes to take in connection therewith and Tenant shall promptly
take all actions, and incur any and all expense, as may be reasonably necessary
and as may be required by any municipal, State or Federal agency or other
governmental entity or agency having jurisdiction thereof and as may be required
by Landlord, (i) to clean up, remove or remediate from and about the applicable
Leased Property all Hazardous Substances thereon, (ii) to contain, prevent and
eliminate any further release or threat of release of Hazardous Substances on or
about the applicable Leased Property, and (iii) to otherwise eliminate such
violation or condition from the applicable Leased Property to the reasonable
satisfaction of Landlord.
Tenant shall protect, indemnify and hold harmless Landlord and each
Facility Mortgagee, their trustees, officers, agents, employees and
beneficiaries, and any of their respective successors or assigns (hereafter the
"Indemnitees," and when referred to singly, an "Indemnitee") for, from and
against any and all debts, liens, claims, causes of action, administrative
orders or notices, costs, fines, penalties or expenses (including, without
limitation, attorney's fees and expenses) imposed upon, incurred by or asserted
against any Indemnitee resulting from, either directly or indirectly, the
presence in, upon or under the soil or ground water of the applicable Leased
Property or any properties surrounding the applicable Leased Property of any
Hazardous Substances in violation of any Applicable Law or otherwise by reason
of any failure by Tenant or any Person claiming under Tenant to perform or
comply with any of the terms of this Section 4.4. Tenant's duty herein includes
but is not limited to costs associated with personal injury or property damage
claims as a result of the presence of Hazardous Substances in, upon or under the
soil or ground water of the applicable Leased Property in violation of any
Applicable Law. Upon written request of Landlord, Tenant shall undertake the
defense, at Tenant's sole cost and expense, of any indemnification duties set
forth herein. In the event that Tenant refuses to undertake the defense of an
Indemnitee promptly after receiving such notice, such Indemnitee may undertake
its own defense.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage incurred by Landlord and growing out of a
failure of Tenant strictly to observe and perform the foregoing requirements
(including, without limitation, reasonable attorneys' fees), which amounts shall
bear interest from the date incurred until paid at the Overdue Rate.
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The provisions of this Section 4.4 shall survive the expiration or
sooner termination of the applicable Lease.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Tenant shall, at its sole cost and expense, keep the applicable Leased
Property and all private roadways, sidewalks and curbs appurtenant thereto (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 or
Tenant's Personal Property, or any portion thereof), and, shall promptly make
all necessary and appropriate repairs and replacements thereto of every kind and
nature, whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the commencement of the Term (concealed or otherwise),
provided, Tenant shall be permitted to prosecute claims against Landlord's
predecessors in title for breach of any representation or warranty made to or on
behalf of Landlord, or for any latent defects in such Leased Property. All
repairs shall 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 any such work. Tenant will not take or
omit to take any action, the taking or omission of which would materially impair
the value or the usefulness of the applicable Leased Property or any part
thereof for its Primary Intended Use. Tenant's obligations under this Section
5.1.1 as to the applicable Leased Property shall be limited, in the event of any
casualty or Condemnation involving such Leased Property, as set forth in
Sections 10.2.1 and 11.1. Notwithstanding this Section 5.1.1, Tenant's
obligations with respect to Hazardous Substances are as set forth in Article 4.
5.1.2 Landlord's Obligations.
Landlord shall not, under any circumstances, be required to build or
rebuild any improvement on the applicable 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 nonstructural, foreseen or unforeseen, or to make
any expenditure whatsoever with respect thereto, in connection with the
applicable Lease, or to maintain the applicable Leased Property in any way,
except as specifically provided herein. Tenant hereby waives, to the extent
permitted by law, the right to make repairs at the expense of Landlord pursuant
to any law in effect at the time of the execution of the applicable Lease or
hereafter enacted. Landlord shall have the right to give, record and post, as
appropriate, notices of nonresponsibility under any mechanic's lien laws now or
hereafter existing.
5.1.3 Nonresponsibility of Landlord; No Mechanics Liens.
Landlord's interest in the Leased Property shall not be subject to
liens for Capital Additions made by Tenant, and Tenant shall have no power or
authority to create any lien or permit any lien to attach to the Leased Property
or the present estate, reversion or other estate of Landlord in the Leased
Property or on the building or other improvements thereon as a result of Capital
Additions made by
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Tenant or for any other cause or reason. All materialmen, contractors, artisans,
mechanics and laborers and other persons contracting with Tenant with respect to
the Leased Property or any part thereof, are hereby charged with notice that
such liens are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished for Capital Additions by
Tenant or for any other purpose during the term of the applicable Lease.
Nothing contained in this Lease shall be deemed or construed in any way
as constituting the consent or request of Landlord, express or implied by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under the Mechanic's Lien Law of the State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.
5.2 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 at any time, provided
that no Default has occurred and is continuing. Tenant shall provide and
maintain during the entire Term all such Tenant's Personal Property as shall be
necessary in order to operate the Facility located at the Leased Property in
compliance with all applicable licensure and certification requirements, in
compliance with 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 on or
prior to the expiration or earlier termination of the applicable Lease of 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 Landlord without the necessity of first giving
notice thereof to Tenant, without any payment to Tenant and without any
obligation to account therefor. Tenant shall, at its expense, restore such
Leased Property to the condition required by Section 5.3, including repair of
all damage to such Leased Property caused by the removal of Tenant's Personal
Property, whether effected by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than motor
vehicles) on, or in connection with, the Leased Property which belongs to anyone
other than Tenant, Tenant shall use all reasonable efforts to require the
agreement permitting such use to provide that Landlord or its designee may
assume Tenant's rights under such agreement upon management or operation of the
applicable Facility by Landlord or its designee.
5.3 Yield Up.
Upon the expiration or sooner termination of the applicable Lease
(unless the applicable Leased Property is transferred to Tenant as provided
herein), Tenant shall vacate and surrender the applicable Leased Property to
Landlord in the condition in which such Leased Property was on the Commencement
Date, except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of such Lease, ordinary wear and tear excepted (and
casualty damage and condemnation, in the event that the applicable Lease is
terminated following a casualty or total condemnation in accordance with Article
10 or Article 11).
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In addition, upon the expiration or earlier termination of the
applicable Lease unless the applicable Leased Property is transferred to Tenant
as provided herein, Tenant shall, at Landlord's sole cost and expense, use its
best efforts to transfer to and cooperate with Landlord or Landlord's nominee in
connection with the processing of all applications for licenses, operating
permits and other governmental authorizations and all contracts, including
contracts with governmental or quasi-governmental entities which may be
necessary for the operation of the Facility located on such Leased Property. If
requested by Landlord, Tenant will continue to manage such Facility after the
expiration of the Term and for as long thereafter as is necessary to obtain all
necessary licenses, operating permits and other governmental authorizations, on
such reasonable terms (which shall include an agreement to reimburse Tenant for
its reasonable out-of-pocket costs and expenses, and reasonable administrative
costs) as Landlord shall request.
5.4 Encroachments, Restrictions, Etc.
If any of the Leased Improvements on the applicable Leased Property
shall, at any time, encroach upon any property, street or right-of-way adjacent
to such Leased Property, other than Permitted Encumbrances, 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 such Leased
Property is subject, upon the request of Landlord (but only as to any
encroachment, violation or impairment that is not a Permitted Encumbrance) or of
any Person affected by any such encroachment, violation or impairment, Tenant
shall, at its sole cost and expense, subject to its right to contest the
existence of any encroachment, violation or impairment in accordance with the
provisions of Article 8, either (a) 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 Landlord or
Tenant, or (b) make such changes in the Leased Improvements and take such other
actions, as are 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 ensure the continued operation of the Leased Improvements
for the Primary Intended Use substantially in the manner and to the extent the
Leased Improvements were operated prior to the assertion of such violation,
impairment or encroachment. Any such alteration shall be made in conformity with
the applicable requirements of this Article 5. Tenant's obligations under this
Section 5.4 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.
5.5 Landlord to Grant Easements, Etc.
Landlord will, from time to time, so long as no Default shall have
occurred and be continuing, at the request of Tenant with respect to the
applicable Leased Property and at Tenant's sole cost and expense, (a) grant
easements and other rights in the nature of easements with respect to such
Leased Property to third parties, (b) release existing easements or other rights
in the nature of easements which are for the benefit of such Leased Property,
(c) dedicate or transfer unimproved portions of such Leased Property for road,
highway or other public purposes, (d) execute petitions to have such Leased
Property annexed to any municipal corporation or utility district, (e) execute
amendments to any covenants and restrictions affecting such Leased Property and
(f) execute and deliver to any Person any instrument appropriate to confirm or
effect such grants, release, dedications, transfers, petitions and amendments
(to the extent of its interests in such Leased Property); provided that Landlord
shall have determined that such grant, release, dedication, transfer, petition
or amendment is not detrimental to the operation of such Leased Property for its
Primary Intended Use and does not materially reduce the value of such Leased
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Property, and that Landlord shall have received an Officer's Certificate
confirming such determination, and such additional information as Landlord may
request.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property.
Tenant shall not construct or install Capital Additions on the
applicable Leased Property without obtaining Landlord's prior written consent,
provided that no consent shall be required for any Capital Addition so long as
(a) the Capital Additions Costs for such Capital Addition are less than
$250,000, (b) such construction or installation would not adversely affect or
violate any Legal Requirement or Insurance Requirement applicable to the
applicable Leased Property, (c) such construction or installation could not
reasonably be expected to result in a decrease in the Fair Market Value or the
Fair Market Rental for such Leased Property, and (d) Landlord shall have
received an Officer's Certificate certifying as to the satisfaction of the
conditions set out in clauses (a), (b) and (c) above. If Landlord's consent is
required, prior to commencing construction of any Capital Addition, Tenant shall
submit to Landlord, in writing, a proposal setting forth, in reasonable detail,
any proposed Capital Addition and shall provide to Landlord, such plans and
specifications, and such available permits, licenses, contracts and other
information concerning the proposed Capital Addition as Landlord may request.
Landlord shall have thirty (30) days to review all materials submitted to
Landlord in connection with any such proposal. Failure of Landlord to respond to
Tenant's proposal within thirty-five (35) days after receipt of all information
and materials requested by Landlord in connection with the proposed Capital
Addition shall be deemed to constitute approval of such proposed Capital
Addition. Without limiting the generality of the foregoing, such proposal shall
indicate the approximate projected cost of constructing such Capital Addition,
the use or uses to which it will be put and a good faith estimate of the change,
if any, in the Fair Market Value or the Fair Market Rental that Tenant
anticipates will result from such Capital Addition. No Capital Addition shall be
made which would tie in or connect any Leased Improvement on the applicable
Leased Property with any other improvements on property adjacent to such Leased
Property (and not part of the Land) including, without limitation, tie-ins of
buildings or other structures or utilities. Tenant shall not finance the cost of
any construction of any Capital Addition except as provided in Section 6.2.1.
Any Capital Additions (including Tenant's Capital Additions) shall, upon the
expiration or sooner termination of the applicable Lease for such Leased
Property, pass to and become the property of Landlord, free and clear of all
encumbrances other than Permitted Encumbrances but subject to Landlord's
obligation to compensate Tenant for Tenant's Capital Additions as provided
below.
6.2 Capital Additions Financed or Paid For by Tenant.
6.2.1 Financing of Capital Additions.
Tenant may arrange for financing for Capital Additions from third party
lenders, provided, however that (i) the terms and conditions of any such
financing shall be commercially reasonable; (ii) any lender with respect thereto
shall be a Subordinated Creditor (as to Tenant) and any security interests in
any property of Tenant, including, without limitation, the applicable Leased
Property, shall be expressly and fully subordinated to this Agreement and to the
interest of Landlord in the applicable Leased Property and to the rights of any
Facility Mortgagee; and (iii) the aggregate proceeds of such financing shall be
used for improvements in or at the Collective Leased Properties.
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6.2.2 Amendments to Lease.
If, pursuant to the provisions of this Lease, Tenant either pays for or
arranges financing (to the extent permitted in Section 6.2.1) to pay for the
costs of construction or installation of any Capital Addition ("Tenant's Capital
Additions") (but excluding, in any event, any Capital Addition financed by or
through Landlord including, without limitation, all Capital Additions paid for
or financed through disbursements under any Renovation Funding Agreement), this
Lease shall be and hereby is amended to provide as follows:
(a) There shall be no adjustment in the Minimum Rent by reason
of any such Tenant's Capital Addition.
(b) Upon the expiration or earlier termination of the
applicable Lease (but if the applicable Lease is terminated by reason of an
Event of Default, only after Landlord is fully compensated for all damages
resulting therefrom), Landlord shall compensate Tenant for all Tenant's Capital
Additions in any of the following ways determined in Landlord's sole discretion:
(i) By purchasing such Tenant's Capital Additions from Tenant
for cash in the amount of the then Fair Market Added Value of such
Tenant's Capital Additions; or
(ii) By purchasing such Tenant's Capital Additions from Tenant
by delivering to Tenant Landlord's purchase money promissory note in
the amount of the Fair Market Added Value, which note shall be on then
commercially reasonable terms and secured by a mortgage or deed of
trust on the applicable Leased Property and such Tenant's Capital
Additions subject to all existing mortgages and encumbrances on such
Leased Property and such Tenant's Capital Additions at the time of such
purchase; or
(iii) Upon termination of the applicable Lease by reason of an
Event of Default, by assigning to Tenant the right to receive an amount
equal to the Added Value Percentage (determined as of the date of the
expiration or earlier termination of this Lease) of all rent and other
consideration receivable by Landlord under any re-letting or other
disposition of the Leased Property and such Tenant's Capital Additions,
after deducting from such rent all costs and expenses incurred by
Landlord in connection with such reletting or other disposition of the
Leased Property and such Tenant's Capital Additions and all costs and
expenses of operating and maintaining the Leased Property and such
Tenant's Capital Additions during the term of any such new lease which
are not borne by Tenant thereunder, with the provisions of this Section
6.2.2 to remain in effect until the sale or other final disposition of
the Leased Property and such Tenant's Capital Additions, at which time
the Fair Market Added Value of such Tenant's Capital Addition shall be
immediately due and payable, such obligation to be secured by a
mortgage on the Leased Property and such Tenant's Capital Additions,
subject to all existing mortgages and encumbrances on the Leased
Property at the time of such purchase and assignment; or
(iv) By making such other arrangement regarding such
compensation as shall be mutually acceptable to Landlord and Tenant.
<PAGE>
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6.3 Capital Additions Financed by Landlord.
If Landlord shall, at the request of Tenant and in Landlord's sole
discretion, elect to finance the proposed Capital Addition, Tenant shall provide
Landlord with such information as Landlord may from time to time request,
including, without limitation, the following:
(a) Evidence that such Capital Addition will be, and upon
completion, has been completed in compliance with the applicable requirements of
State and federal law with respect to capital expenditures for healthcare
facilities;
(b) Copies of all building, zoning and land use permits and
approvals and upon completion of such Capital Addition, a copy of the
certificate of occupancy for such Capital Addition, if required;
(c) Such information, certificates, licenses, permits or other
documents 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;
(d) An Officer's Certificate and a certificate from Tenant's
architect setting forth, in reasonable detail, the projected (or actual, if
available) Capital Additions Cost and invoices and lien waivers from Tenant's
contractors for such work;
(e) A deed conveying to Landlord title to any land acquired
for the purpose of constructing the Capital Addition free and clear of any liens
or encumbrances, except those approved by Landlord, and, upon completion of the
Capital Addition, a final as-built survey thereof reasonably satisfactory to
Landlord;
(f) Endorsements to any outstanding policy of title insurance
covering the Leased Property or commitments therefor, satisfactory in form and
substance to Landlord, (i) updating the same without any additional exceptions
except as approved by Landlord, and (ii) 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 (g) below);
(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord pursuant to
subparagraph (e) above, free and clear of all liens and encumbrances, except
those approved by Landlord, and (ii) a lender's policy of title insurance,
reasonably satisfactory in form and substance to Landlord and any Facility
Mortgagee;
(h) An appraisal of the Leased Property by Valuation
Counselors or some other Member of the Appraisal Institute of America,
acceptable to Landlord, and/or an Officer's Certificate stating that the value
of the Leased Property upon completion of the Capital Addition exceeds the Fair
Market Value thereof prior to the commencement of such Capital Addition by an
amount not less than 80% of the Capital Additions Cost; and
(i) Prints of architectural and engineering drawings relating
to such Capital Addition and such other certificates, documents, opinions of
counsel, appraisals, surveys, certified copies of duly adopted resolutions of
the board of directors of Tenant authorizing the execution and delivery of any
lease amendment or other instruments required by Landlord, any Facility
Mortgagee and any
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Lending Institution advancing or reimbursing Landlord or Tenant for any portion
of the Capital Additions Cost.
If Landlord shall finance the proposed Capital Addition, Tenant shall
pay to Landlord all reasonable costs and expenses paid or incurred by Landlord
and any Facility Mortgagee or Lending Institution which has committed to finance
such Capital Addition in connection therewith, including, but not limited to,
(a) the reasonable attorneys' fees and expenses, (b) all printing expenses, (c)
all filing, registration and recording taxes and fees, (d) documentary stamp
taxes, (e) title insurance charges, appraisal fees, and rating agency fees, and
(f) commitment fees.
6.4 Non-Capital Additions.
Tenant shall have the right, at Tenant's sole cost and expense, to make
additions, modifications or improvements to the applicable Leased Property which
are not Capital Additions ("Non-Capital Additions") from time to time as Tenant,
in its discretion, may deem desirable for the Primary Intended Use, provided
that such action will not materially alter the character or purpose or
materially detract from the value, operating efficiency or revenue-producing
capability of such Leased Property, or adversely affect the ability of Tenant to
comply with the provisions of the applicable Lease, and, without limiting the
foregoing, will not adversely affect or violate any Legal Requirement or
Insurance Requirement applicable to the applicable Leased Property. All such
Non-Capital Additions shall, upon expiration or earlier termination of the
applicable Lease for such Leased Property, pass to and become the property of
Landlord, free and clear of all liens and encumbrances, other than Permitted
Encumbrances.
6.5 Salvage.
All materials which are scrapped or removed in connection with the
making of either Capital Additions or Non-Capital Additions or repairs required
by Article 5 shall be or become the property of the party that paid for such
work.
ARTICLE 7
LIENS
7.1 Liens.
Subject to Article 8, Tenant shall not directly or indirectly create,
suffer to be created or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the applicable Leased Property or Tenant's leasehold interest in such
Leased Property or any attachment, levy, claim or encumbrance in respect of the
Rent, other than (a) Permitted Encumbrances, (b) restrictions, liens and other
encumbrances which are consented to in writing by Landlord, (c) liens for those
taxes of Landlord which Tenant is not required to pay hereunder, (d) subleases
permitted by Article 16, (e) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as (i) the same are not yet
payable, or (ii) are being contested in accordance with Article 8, (f) liens of
mechanics, laborers, materialmen, suppliers or vendors incurred in the ordinary
course of business that are not yet due and payable, or are for sums that are
being contested in accordance with Article 8, and (g) any Facility Mortgages or
other liens which are the responsibility of Landlord pursuant to the provisions
of Article 22.
<PAGE>
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7.2 Landlord's Lien.
In addition to any statutory landlord's lien and in order to secure
payment of the Rent and all other sums payable hereunder by Tenant, and to
secure payment of any loss, cost or damage which Landlord may suffer by reason
of Tenant's breach of the applicable Lease, Tenant hereby grants unto Landlord a
security interest in and an express contractual lien upon the Tenant's Personal
Property (except motor vehicles), and all ledger sheets, files, records,
documents and instruments (including, without limitation, computer programs,
tapes and related electronic data processing) relating to the operation of the
Facility located at the applicable Leased Property (the "Records") and all
proceeds therefrom, subject to any Permitted Liens; and such Tenant's Personal
Property shall not be removed from the applicable Leased Property at any time
when a Default has occurred and is continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in Tenant's Personal Property and the proceeds thereof in accordance
with the provisions of the applicable laws of the State. Tenant hereby grants
Landlord an irrevocable limited power of attorney, coupled with an interest, to
execute all such financing statements in Tenant's name, place and stead. The
security interest herein granted is in addition to any statutory lien for the
Rent.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively "Claims") as to the applicable Leased
Property, by appropriate legal proceedings, conducted in good faith and with due
diligence, provided that (a) the foregoing shall in no way be construed as
relieving, modifying or extending Tenant's obligation to pay any Claims as
finally determined, (b) such contest shall not cause Landlord or Tenant to be in
default under any mortgage or deed of trust encumbering such Leased Property or
any interest therein or result in or reasonably be expected to result in a lien
attaching to such Leased Property, (c) no part of the applicable Leased Property
nor any Rent therefrom shall be in any immediate danger of sale, forfeiture,
attachment or loss, and (d) Tenant shall indemnify and hold harmless Landlord
from and against any cost, claim, damage, penalty or reasonable expense,
including reasonable attorneys' fees, incurred by Landlord in connection
therewith or as a result thereof. Upon Landlord's request, Tenant shall either
(i) provide a bond or other assurance reasonably satisfactory to Landlord that
all Claims which may be assessed against the applicable Leased Property,
together with all interest and penalties thereon will be paid, or (ii) deposit
within the time otherwise required for payment with a bank or trust company, as
trustee, as security for the payment of such Claims, an amount sufficient to pay
the same, together with interest and penalties in connection therewith and all
Claims which may be assessed against or become a Claim on the applicable Leased
Property, or any part thereof, in connection with any such contest. Tenant shall
furnish Landlord and any Facility Mortgagee with reasonable evidence of such
deposit within five (5) days after request therefor. Landlord agrees to join in
any such proceedings if required legally to prosecute such contest; provided,
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith). Tenant shall be entitled to any refund of any Claims and such
charges and penalties or interest thereon which have been paid by Tenant or paid
by Landlord and for which Landlord has been fully reimbursed by Tenant. If
Tenant shall fail (x) to pay any Claims when finally determined, (y) to provide
security therefor as provided in this Article 8, or (z) to prosecute any such
contest diligently and in good faith, Landlord may, upon reasonable notice to
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Tenant (which notice may be oral and shall not be required if Landlord shall
determine the same is not practicable), pay such charges, together with interest
and penalties due with respect thereto, and Tenant shall reimburse Landlord
therefor, upon demand, as Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements.
Tenant shall at all times during the Term and at any other time Tenant
shall be in possession of the applicable Leased Property, keep the applicable
Leased Property and all property located in or on the applicable Leased
Property, including Tenant's Personal Property, insured against the risks and in
the amounts as follows:
(a) Loss or damage by fire, vandalism and malicious mischief,
extended coverage perils, earthquake and all physical loss perils insurance,
including but not limited to sprinkler leakage, in an amount equal to not less
than the greater of (i) the Adjusted Purchase Price or (ii) one hundred percent
(100%) of the then full Replacement Cost thereof (as defined in Section 9.2
below) with the usual extended coverage endorsements, including a Replacement
Cost Endorsement and Builder's Risk Coverage during the continuance of any
construction on the applicable Leased Property;
(b) Loss or damage by explosion of steam boilers, pressure
vessels or other similar apparatus, now or hereafter installed in the Facility
located at the Leased Property, in such amounts as may be reasonably required by
Landlord or any Facility Mortgagee from time to time;
(c) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy covering risk of loss during the
lesser of the first twelve (12) months of reconstruction or the actual
reconstruction period necessitated by the occurrence of any of the hazards
described in subparagraphs (a) and (b) above, in such amounts as may be
customary for comparable properties in the area and in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer;
(d) Claims for personal injury or property damage under a
policy of comprehensive general accident and public liability insurance (in a
broad form comprehensive policy, including, without limitation, broad form
contractual liability, independent contractor's hazard and completed operations
coverage), claims arising out of malpractice in an amount not less than One
Million Dollars ($1,000,000) per occurrence, Three Million Dollars ($3,000,000)
in the aggregate and umbrella coverage of all such claims in an amount not less
than Ten Million Dollars ($10,000,000);
(e) Flood (when the applicable Leased Property is located in
whole or in part within an area identified as an area having special flood
hazards and in which flood insurance has been made available under the National
Flood Insurance Act of 1968, as amended, or the Flood Disaster Protection Act of
1973, as amended (or any successor acts thereto)) and such other hazards and in
such amounts as may be customary for comparable properties in the area;
(f) Worker's compensation insurance coverage for all persons
employed by Tenant on the applicable Leased Property with statutory limits and
otherwise with limits of and provisions in
<PAGE>
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accordance with the requirements of applicable local, State and federal law, and
employer's liability insurance in such amounts as Landlord and any Facility
Mortgagee shall reasonably require; and
(g) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Replacement Cost.
"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, less exclusions provided in the
standard form of fire insurance policy. In the event either party believes that
the then full replacement cost less such exclusions has increased or decreased
at any time during the Term, such party, at its own cost, shall have the right
to have such full replacement cost redetermined by an accredited appraiser
approved by the other, which approval shall not be unreasonably withheld or
delayed. The party desiring to have the full replacement cost so redetermined
shall forthwith, on receipt of such determination by such appraiser, give
written Notice thereof to the other. The determination of such appraiser shall
be final and binding on the parties hereto, and Tenant shall forthwith conform
the amount of the insurance carried to the amount so determined by the
appraiser.
9.3 Waiver of Subrogation.
Landlord 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 which is covered by insurance then
being carried by Landlord 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. In the event
that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra premium.
9.4 Form Satisfactory, Etc.
All insurance policies and endorsements required pursuant to this
Article 9 shall be fully paid for, nonassessable and contain such provisions and
expiration dates and be in such form and amounts and issued by insurance
carriers authorized to do business in the State, having a general policy
holder's rating of A or A+ in Best's latest rating guide, and as otherwise shall
be approved by Landlord. Without limiting the foregoing, such policies shall
include no deductible in excess of $5,000 (unless consistent with deductibles
included in policies carried by entities engaged in similar businesses and
owning similar properties similarly situated and agreed to in advance by
Landlord) and, with the exception of the insurance described in Section 9.1(f),
shall name Landlord and any Facility Mortgagee as additional insureds, as their
interests may appear. All losses shall be payable to Landlord, any Facility
Mortgagee and Tenant as provided in Article 10. Any loss adjustment shall
require the prior written consent of Landlord, Tenant, and each Facility
Mortgagee. Tenant shall pay all insurance premiums, and deliver policies or
certificates thereof to Landlord prior to their effective date (and, with
respect to any renewal policy, thirty (30) days prior to the expiration of the
existing policy), and in the event Tenant shall fail either to effect such
insurance as herein required, to pay the premiums therefor, or to deliver such
policies or certificates to Landlord or any Facility Mortgagee at the times
required, Landlord shall have the right, but not the obligation, to acquire such
insurance and pay the premiums therefor, which amounts shall be payable to
Landlord, upon demand, as Additional Charges, together with interest accrued
<PAGE>
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thereon at the Overdue Rate from the date such payment is made until the date
repaid. All such policies shall provide Landlord (and any Facility Mortgagee, if
required by the same) thirty (30) days' prior written notice of any
modification, expiration or cancellation of such policy.
9.5 Blanket Policy.
Notwithstanding anything to the contrary contained in this Article 9,
Tenant's obligation to maintain the insurance herein required may be brought
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Tenant; provided, that (a) the coverage thereby
afforded will not be reduced or diminished from that which would exist under a
separate policy meeting all other requirements of the applicable Lease, and (b)
the requirements of this Article 9 are otherwise satisfied. Without limiting the
foregoing, the amounts of insurance that are required to be maintained pursuant
to Section 9.1 shall be on a Facility by Facility basis, and shall not be
subject to an aggregate limit.
9.6 No Separate Insurance.
Tenant shall not take out separate insurance, concurrent in form or
contributing in the event of loss with that required by this Article 9, or
increase the amount of any existing insurance by securing an additional policy
or additional policies, unless all parties having an insurable interest in the
subject matter of such insurance, including, Landlord and all Facility
Mortgagees, are included therein as additional insureds, and the loss is payable
under such insurance in the same manner as losses are payable under the
applicable Lease. In the event Tenant shall take out any such separate insurance
or increase any of the amounts of the then existing insurance, Tenant shall give
Landlord prompt Notice thereof.
9.7 Indemnification of Landlord.
Notwithstanding the existence of any insurance provided for herein, and
without regard to the policy limits of any such insurance, the Tenants jointly
and severally agree to protect, indemnify and hold harmless Landlord for, from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and reasonable expenses (including, without limitation, reasonable
attorneys' fees), to the maximum extent permitted by law, imposed upon or
incurred by or asserted against Landlord by reason of: (a) any accident, injury
to or death of persons or loss of or damage to property occurring on or about
any Collective Leased Property or adjoining sidewalks or rights of way,
including, without limitation, any claims of malpractice, (b) any past, present
or future use, misuse, non-use, condition, management, maintenance or repair by
any Tenant or anyone claiming under any Tenant of any Collective Leased Property
or Tenant's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which Landlord is made a party
or participant related to any Collective Leased Property or Tenant's Personal
Property or such use, misuse, non-use, condition, management, maintenance, or
repair thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any Impositions
(which is the joint and several obligation of the Tenants to pay pursuant to the
applicable provisions of the applicable Lease), and (d) any failure on the part
of any Tenant or anyone claiming under any Tenant to perform or comply with any
of the terms of any applicable Lease. The Tenants shall pay all amounts payable
under this Section 9.7 within ten (10) days after demand therefor, and if not
timely paid, such amounts shall bear interest at the Overdue Rate from the date
of determination to the date of payment. Each Tenant, at its expense, agrees,
jointly and severally, to contest, resist and defend any such claim, action or
proceeding asserted or instituted against Landlord or may compromise or
otherwise dispose of the same, with Landlord's prior written consent (which
consent may not be unreasonably withheld or delayed).
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The obligations of each Tenant under this Section 9.7 are in addition to the
obligations set forth in Section 4.4 and shall survive the termination of the
applicable Lease.
ARTICLE 10
CASUALTY
10.1 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 9 (including, without limitation, proceeds of any
business interruption insurance) shall be paid directly to Landlord (subject to
the provisions of Section 10.2). If Tenant is required to reconstruct or repair
such Leased Property as provided herein, such proceeds shall be paid out by
Landlord from time to time for the reasonable costs of reconstruction or repair
of such Leased Property necessitated by such damage or destruction, subject to
the provisions of Section 10.2.4. Provided no Default or Event of Default has
occurred and is continuing, any excess proceeds of insurance remaining after the
completion of the restoration shall be paid to Tenant. In the event that Section
10.2.1 below is applicable, the insurance proceeds shall be retained by the
party entitled thereto pursuant to Section 10.2.1. All salvage resulting from
any risk covered by insurance shall belong to Landlord, except any salvage
related to Tenant's Capital Additions and Tenant's Personal Property shall
belong to Tenant.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property.
If, during the Term, the applicable Leased Property shall be totally or
partially destroyed and the Facility located thereon is thereby rendered
Unsuitable for Its Primary Intended Use, Tenant shall, at Tenant's option,
exercisable by Notice to Landlord within sixty (60) days after the date of such
damage or destruction, irrevocably offer either (a) to purchase such Leased
Property from Landlord within one hundred twenty (120) of such Notice for a
purchase price equal to the greater of (i) the Adjusted Purchase Price of such
Leased Property or (ii) the Fair Market Value Purchase Price of such Leased
Property immediately prior to such damage or destruction or (b) to restore the
Facility to substantially the same condition as existed immediately before the
damage or destruction. If Tenant shall fail to give such Notice, Tenant shall be
deemed to have elected the option provided in clause (a) above. In the event
Landlord does not accept Tenant's offer to purchase the applicable Leased
Property within thirty (30) days after receipt of Tenant's Notice of election,
the applicable Lease with respect to the applicable Leased Property shall
terminate without further liability hereunder and Landlord shall be entitled to
retain the insurance proceeds payable on account of such damage. In the event
Tenant purchases such Leased Property as provided in this Section 10.2.1, the
insurance proceeds payable on account of such damage shall be paid to Tenant.
10.2.2 Partial Damage or Destruction.
If during the Term, the applicable Leased Property shall be totally or
partially destroyed but the Facility located thereon is not rendered Unsuitable
for its Primary Intended Use, Tenant shall promptly restore such Facility as
provided in Section 10.2.4.
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10.2.3 Insufficient Insurance Proceeds.
If the cost of the repair or restoration of the applicable Leased
Property exceeds the amount of insurance proceeds received by Landlord pursuant
to Article 9, upon the demand of Landlord, Tenant shall contribute any excess
amounts needed to restore such Leased Property. Such difference shall be paid by
Tenant to Landlord and held by Landlord, together with any other insurance
proceeds, for application to the cost of repair and restoration.
10.2.4 Disbursement of Proceeds.
In the event Tenant is required to restore the applicable Leased
Property pursuant to Section 10.2, Tenant will, at its sole cost and expense,
commence promptly and continue diligently to perform the repair and restoration
of such Leased Property (hereinafter called the "Work"), or shall cause the same
to be done, so as to restore such Leased Property in full compliance with all
Legal Requirements and so that such Leased Property shall be at least equal in
value and general utility to its general utility and value immediately prior to
such damage or destruction. Subject to the terms hereof, Landlord shall advance
the insurance proceeds (other than proceeds of business interruption insurance
which shall be advanced as provided below) and the amounts paid to it pursuant
to Section 10.2.3 to Tenant regularly during the repair and restoration period
so as to permit payment for the cost of any such restoration and repair. Any
such advances shall be for not less than $50,000 (or such lesser amount as
equals the entire balance of the repair and restoration) and Tenant shall submit
to Landlord a written requisition and substantiation therefor on AIA Forms G702
and G703 (or on such other form or forms as may be acceptable to Landlord).
Landlord may, at its option, condition advancement of said insurance proceeds
and other amounts on (i) the absence of any Default, (ii) its approval of plans
and specifications of an architect satisfactory to Landlord, (iii) general
contractors' estimates, (iv) architect's certificates, (v) unconditional lien
waivers of general contractors, (vi) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required and (vii)
such other certificates as Landlord may, from time to time, reasonably require.
Except as provided in the following sentence and provided no Default has
occurred and is continuing, on the first day of each calendar month during which
proceeds of business interruption insurance are disbursed to Landlord under the
policy of business interruption insurance maintained pursuant to Article 9,
Landlord shall disburse proceeds of business interruption insurance received by
it to Tenant upon Notice from Tenant accompanied by a certification from Tenant
that such moneys will be used for costs or expenses of owning or operating the
applicable Leased Property. Proceeds of business interruption insurance shall be
applied by Landlord, on the first day of the calendar month following such
disbursement, first to the payment of all Minimum Rent and Additional Charges
then due and payable and to become due and payable for the period for which such
proceeds have been paid by the insurance provider, if at any time the amount of
such proceeds will be insufficient to pay all Minimum Rent and Additional
Charges due or to come due during such period, Landlord shall suspend
disbursement of such proceeds.
Landlord's obligation to disburse insurance proceeds under this Article
10 shall be subject to the release of such proceeds by the applicable Facility
Mortgagee to Landlord.
Tenant's obligation to restore the applicable Leased Property pursuant
to this Article 10 shall be subject to the release of available insurance
proceeds by the applicable Facility Mortgagee to Landlord.
10.2.5 Termination of Applicable Lease.
If Landlord accepts Tenant's offer to purchase the applicable Leased
Property, as provided herein, the applicable Lease shall terminate as to the
applicable Leased Property upon payment of the
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purchase price therefor, and Landlord shall remit to Tenant all insurance
proceeds pertaining to the applicable Leased Property then held by Landlord.
10.3 Damage Near End of Term.
Notwithstanding any provisions of Section 10.1 or 10.2 to the contrary,
if damage to or destruction of the applicable Leased Property occurs during the
last eighteen (18) months of the Second Extended Term of the applicable Lease
and if such damage or destruction cannot reasonably be expected to be fully
repaired and restored prior to the date that is six (6) months prior to the end
of such Term, then Tenant shall have the right to terminate the applicable Lease
on thirty (30) days prior Notice to Landlord by giving Notice thereof to
Landlord within sixty (60) days after the date of such damage or destruction.
10.4 Tenant's Property.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property or Tenant's Capital Additions shall be paid to
Tenant and, to the extent necessary to repair or replace Tenant's Capital
Additions or Tenant's Personal Property in accordance with Section 10.5, Tenant
shall hold such proceeds in trust to pay the cost of repairing or replacing
damaged Tenant's Personal Property or Tenant's Capital Additions.
10.5 Restoration of Tenant's Property.
If Tenant is required to restore the applicable Leased Property as
hereinabove provided, Tenant shall either (a) restore all alterations and
improvements made by Tenant, Tenant's Personal Property and all Tenant's Capital
Additions, or (b) replace such alterations and improvements, Tenant's Personal
Property, and/or Tenant's Capital Additions with improvements or items of the
same or better quality and utility in the operation of such Leased Property.
10.6 No Abatement of Rent.
The applicable Lease shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under such Lease shall remain unabated during the Term notwithstanding
any damage involving the applicable Leased Property (provided that Landlord
shall credit against such payments any amounts paid to Landlord as a consequence
of such damage under any business interruption insurance obtained by Tenant
hereunder); provided, however, that effective upon the purchase of such Leased
Property or termination of such Lease pursuant to and in accordance with Section
10.2, such Lease shall terminate except with respect to the obligations and
liabilities of Tenant thereunder, actual or contingent, that arose prior to such
termination. The provisions of this Article 10 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,
laws, rules, regulation or ordinance in effect during the Term which provide for
such a contingency shall have any application in such case.
10.7 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 Landlord is obligated to restore or may restore under any of the
provisions of the applicable Lease.
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ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc.
11.1.1 Total Condemnation.
If the whole of the applicable Leased Property shall be taken by
Condemnation, the Rent for such Leased Property shall abate in its entirety on
the Date of Taking, the applicable Lease shall terminate and Tenant and Landlord
shall seek the Award for their interests in such Leased Property as provided in
Section 11.5. If the Award received by Landlord for Landlord's interest in such
Leased Property is less than the greater of (x) the Adjusted Purchase Price or
(y) the Fair Market Value Purchase Price of such Leased Property immediately
prior to such Condemnation, Tenant shall contribute and pay to Landlord the
lesser of (1) the amount of Tenant's Award or (2) such shortfall; provided,
however, that notwithstanding the foregoing, if the sum of the Awards received
by Landlord and Tenant with respect to such Condemnation is less than the
Adjusted Purchase Price of such Leased Property, Tenant shall pay the amount of
such difference to Landlord, whether or not such amount exceeds Tenant's Award.
11.1.2 Constructive Total Condemnation.
If a Condemnation of less than the whole of the applicable Leased
Property renders such Leased Property Unsuitable for Its Primary Intended Use,
Tenant shall irrevocably offer to Landlord, by Notice to Landlord within sixty
(60) days after the Date of Taking, the right either (a) to have Tenant purchase
such Leased Property from Landlord within one hundred twenty (120) days of such
Notice for a purchase price equal to the greater of (i) the Adjusted Purchase
Price of such Leased Property or (ii) the Fair Market Value Purchase Price of
such Leased Property immediately prior to such Condemnation or (b) to terminate
this Agreement with respect to the affected Leased Property. Failure by Landlord
to elect clause (a) or (b) above in response to Tenant's Notice of such offer
within thirty (30) days following the date of Tenant's Notice shall be deemed an
election by Landlord to sell such Leased Property to Tenant in accordance with
clause (a) preceding. In the event Landlord elects to terminate this Agreement
with respect to the affected Leased Property, the Rent for such Leased Property
shall abate in its entirety on the Date of Taking, the applicable Lease shall
terminate and Tenant and Landlord shall seek the Award for their interests in
such Leased Property as provided in Section 11.5. In the event Tenant purchases
such Leased Property as provided in this Section 11.1.2, the Tenant shall be
entitled to receive the Award that the Landlord would have been entitled to
receive had it made the election described in clause (b) above.
11.2 Partial Condemnation.
In the event of a Condemnation of less than the whole of the applicable
Leased Property such that such Leased Property is still suitable for its Primary
Intended Use, Tenant will, at its sole cost and expense, commence promptly and
continue diligently to restore the untaken portion of the Leased Improvements on
such Leased Property so that such Leased Improvements shall constitute a
complete architectural unit of the same general character and condition (as
nearly as may be possible under the circumstances) as the Leased Improvements
existing immediately prior to such Condemnation, in full compliance with all
Legal Requirements. Subject to the terms hereof, Landlord shall contribute to
the cost of restoration that part of the Award necessary to complete such repair
or restoration, together with severance and other damages awarded for the taken
Leased Improvements, to Tenant regularly during the restoration period so as to
permit payment for the cost of such repair or restoration. Landlord may, at its
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option, condition advancement of said Award and other amounts on (i) the absence
of any Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably withheld or
delayed), (iii) general contractors' estimates, (iv) architect's certificates,
(v) unconditional lien waivers of general contractors, (vi) evidence of approval
by all governmental authorities and other regulatory bodies whose approval is
required and (vii) such other certificates as Landlord may, from time to time,
reasonably require. Landlord's obligation under this Section 11.2 to disburse
the Award and such other amounts shall be subject to (1) the collection thereof
by Landlord and (2) the satisfaction of any applicable requirements of any
Facility Mortgage, and the release of such Award by the applicable Facility
Mortgagee. Tenant's obligation to restore the applicable Leased Property shall
be subject to the release of the Award by the applicable Facility Mortgagee to
Landlord. If the cost of the restoration of the applicable Leased Property
exceeds that part of the Award necessary to complete such restoration, together
with severance and other damages awarded for the taken Leased Improvements,
Tenant shall contribute upon the demand of Landlord any excess amounts needed to
restore such Leased Property. Such difference shall be paid by Tenant to
Landlord and held by Landlord, together with such part of the Award and such
severance and other damages, for application to the cost of restoration.
11.3 Abatement of Rent.
Other than as specifically provided in this Master Lease Document, the
applicable Lease shall remain in full force and effect and Tenant's obligation
to make all payments of Rent and to pay all other charges as and when required
under such Lease shall remain unabated during the Term notwithstanding any
Condemnation involving the applicable Leased Property; provided, however, that
effective upon the purchase of such Leased Property or the termination of the
Lease pursuant to and in accordance with Section 11.1, such Lease shall
terminate except with respect to the obligations and liabilities of Tenant
thereunder, actual or contingent, that arose prior to such termination. The
provisions of this Article 11 shall be considered an express agreement governing
any Condemnation involving 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.
11.4 Temporary Condemnation.
In the event of any temporary Condemnation of all or any part of the
applicable Leased Property or Tenant's interest under the applicable Lease of
such Leased Property, the applicable Lease shall continue in full force and
effect, and Tenant shall continue to pay, in the manner and on the terms therein
specified, the full amount of the Rent. Tenant shall continue to perform and
observe all of the other terms and conditions hereof on the part of the Tenant
to be performed and observed. Provided no Default or Event of Default that
relates to the payment of money has occurred and is continuing, the entire
amount of any Award made for such temporary Condemnation allocable to the Term,
whether paid by way of damages, rent or otherwise, shall be paid to Tenant.
Tenant shall, promptly upon the termination of any such period of temporary
Condemnation, at its sole cost and expense, restore such Leased Property to the
condition that existed immediately prior to such Condemnation, in full
compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration. For purposes of this
Section 11.4, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twenty-four (24)
months.
11.5 Allocation of Award.
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Except as provided in the second sentence of this Section 11.5, the
total Award shall be solely the property of and payable to Landlord. Any portion
of the Award made for the taking of Tenant's leasehold interest in the Leased
Property, Tenant's Capital Additions, loss of business during the remainder of
the Term, the taking of Tenant's Personal Property, or Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant (subject
to the provisions of Section 11.2 hereof). In any Condemnation proceedings,
Landlord and Tenant shall each seek its own Award in conformity herewith, at its
own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default.
The occurrence, and continuance beyond the expiration of any applicable
grace period specifically provided for in this Section 12.1, of any one or more
of the following events shall constitute an "Event of Default" under the
applicable Lease:
(a) an Event of Default (as defined therein) shall occur and
be continuing under any Deed of Trust or Security Agreement constituting a
Transaction Document; or
(b) any Tenant shall fail to make any payment of the Rent or
any other sum (including, but not limited to, payment of the purchase price for
any of the Collective Leased Properties which any Tenant shall be obligated or
elects to purchase pursuant to the terms of this Master Lease Document or any
Lease) payable hereunder or under any Lease when due and such failure continues
unremedied for a period of ten (10) days after Notice thereof from Landlord; or
(c) any Tenant or Guarantor shall default in the due
observance or performance of any of the terms, covenants or agreements contained
herein or in any other Transaction Document to be performed or observed by it,
in each case relating to other than the payment of money and not otherwise
referred to in this Section 12.1, and such default shall remain unremedied for a
period of thirty (30) days after Notice thereof from Landlord (provided that no
such Notice shall be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), provided, however, that if
such default is susceptible of cure but such cure cannot be accomplished with
due diligence within such period of time, and if in addition such Tenant or
Guarantor commences to cure such default within thirty (30) days after Notice
thereof from Landlord, and thereafter prosecutes the curing of such default with
all due diligence, such period of time shall be extended to such period of time
(not to exceed an additional forty-five (45) days, or with respect to any such
default under Section 4.4 hereof or like provision of any other Transaction
Document, ninety (90) days) as may be necessary to cure such default with all
due diligence; or
(d) any Tenant shall default in due performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to Articles 7, 9 or 16 and such default shall remain unremedied for a
period of thirty (30) days after Notice thereof from Landlord; or
(e) IHS shall default in the due performance or observance of
Section 14(d), (f) or (g) of the IHS Guaranty; or
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(f) any material Transaction Document shall cease for any
reason to be in full force and effect (other than as specifically provided
therein, or released as provided therein), or any Tenant or any Guarantor shall
so assert in writing; or
(g) any obligation of IHS or of any Subsidiary thereof, in
respect of any Indebtedness (excluding trade accounts payable in the ordinary
course of business on customary trade terms) in each case in the aggregate
amount of $30,000,000, or any guaranty relating thereto shall be declared to be
or shall become due and payable prior to the stated maturity thereof, or there
shall occur and be continuing any default under any instrument, agreement or
evidence of indebtedness relating to any such Indebtedness for money borrowed
the effect of which is to permit the holder or holders of such instrument,
agreement or evidence of indebtedness, or a trustee, agent or other
representative on behalf of such holder or holders, to cause such Indebtedness
for money borrowed to become due prior to its stated maturity; or
(h) if:
(i) a final unappealable determination by applicable state
authorities of the revocation or limitation of any license, permit,
certification or approval required for the lawful operation of any
Facility located on any Collective Leased Property in accordance with
its Primary Intended Use or the loss or limitation of any license,
permit, certification or approval under any other circumstances under
which the applicable Tenant is required to cease its operation of such
Facility in accordance with its Primary Intended Use at the time of
such loss or limitation, or
(ii) any Provider Agreement material to the operation or
financial condition of any Tenant or any Facility shall be terminated
prior to the expiration of the term thereof or, without the prior
written consent of Landlord in each instance (which consent may be
withheld in Landlord's sole and absolute discretion), shall not be
renewed or extended or replaced upon the expiration of the stated term
thereof and such termination, or
(iii) after any Tenant has obtained approval for Medicare
and/or Medicaid funding, a final unappealable determination is made by
the applicable governmental authority that Tenant shall have failed to
comply with applicable Medicare and/or Medicaid regulations in the
operation of any Facility, as a result of which failure such Tenant is
declared ineligible to receive reimbursements under the Medicare and/or
Medicaid programs,
and in any such case such event or condition (x) may reasonably be expected to
have a material adverse effect upon the operations, business, property, or
assets of, liabilities, or the condition of, or revenues generated by, the
Tenants or their Facilities taken as a whole, and (y) remains unremedied for a
period of thirty (30) days after Notice thereof from Landlord; or
(i) any representation or warranty that is qualified as to
materiality, and any material representation or warranty that is not qualified
as to materiality, made by or on behalf of any Tenant or any Guarantor under or
in connection with any Lease or any of the other Transaction Documents, or in
any document, certificate or agreement delivered pursuant to the terms of such
Lease or any of the other Transaction Documents, shall prove to have been false
or misleading in any material respect on the day when made or deemed made,
provided, however, that if such default is susceptible of cure such default
shall not constitute an Event of Default hereunder unless it shall remain
unremedied for a period of thirty (30) days after Notice thereof from Landlord;
or
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(j) any Tenant or any Guarantor shall make a general
assignment for the benefit of creditors; or
(k) any petition shall be filed by or against (i) any Tenant
or (ii) any Guarantor under the Federal bankruptcy laws, or any other proceeding
shall be instituted by or against any Tenant or any Guarantor 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 any Tenant or any Guarantor or for any
substantial part of the property of any Tenant or any Guarantor, and such
proceeding is not dismissed within ninety (90) days after institution thereof,
or any Tenant or any Guarantor shall take any action to authorize or effect any
of the actions set forth above in this paragraph (k); or
(l) any Tenant or any Guarantor shall cause or institute any
proceeding for its dissolution or termination; or
(m) A final judgment which, with other outstanding final
judgments against IHS or any Subsidiary thereof, exceeds an aggregate of
$50,000,000 in excess of applicable insurance coverage shall be rendered against
IHS or any Subsidiary thereof, if, (i) within 30 days after entry thereof, such
judgment shall not have been discharged or execution thereof stayed pending
appeal or (ii) within 30 days after the expiration of any such stay, such
judgment shall not have been discharged.
(n) if, except as a result of damage, destruction or a partial
or complete Condemnation, any Tenant voluntarily ceases operations on any
applicable Leased Property for its Primary Intended Use for a period in excess
of thirty (30) consecutive days, provided, however, that in the event that
before the expiration of said 30-day period, Tenant makes the determination
provided for in Section 21.1 and follows the procedures set forth therein then
the continued cessation of operating beyond the 30th day shall not be an Event
of Default;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate all of the Leases, or any of them, as Landlord,
in its sole discretion, elects, by giving Notice of such termination, and upon
the expiration of the time, if any, fixed in such Notice, the Term of each Lease
designated by Landlord shall terminate and all rights of any Tenant under such
Lease shall cease. Landlord shall have all rights at law and in equity available
to Landlord as a result of Tenant's breach of any Lease.
Upon the occurrence of an Event of Default, Landlord may, in
addition to any other remedies provided herein, enter upon the Collective Leased
Properties or any portion thereof and take possession of any and all of Tenant's
Personal Property and the Records on the applicable Leased Property, without
liability for trespass or conversion (Tenant hereby waiving any right to notice
or hearing prior to such taking of possession by Landlord) and sell the same at
public or private sale, after giving Tenant reasonable Notice of the time and
place of any public or private sale, at which sale Landlord or its assigns may
purchase all or any portion of Tenant's Personal Property unless otherwise
prohibited by law. Unless otherwise provided by law and without intending to
exclude any other manner of giving Tenant reasonable notice, the requirement of
reasonable Notice shall be met if such Notice is given at least five (5) days
before the day of sale. The proceeds from any such disposition, less all
expenses incurred in connection with the taking of possession, holding and
selling of such property (including, reasonable attorneys' fees) shall be
applied as a credit against the indebtedness which is secured by the security
interest granted in Section 7.2. Any surplus shall be paid to Tenant or as
otherwise required by law and Tenant shall pay any deficiency to Landlord, as
Additional Charges, upon demand.
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12.2 Remedies.
Neither (a) the termination of the applicable Lease pursuant to Section
12.1, (b) the repossession of the applicable Leased Property or any portion
thereof, (c) the failure of Landlord, notwithstanding reasonable good faith
efforts, to re-let the applicable Leased Property or any portion thereof, nor
(d) the reletting of all or any portion thereof, shall relieve Tenant of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or re-letting. In the event of any such termination,
Tenant shall forthwith pay to Landlord all Rent due and payable with respect to
the applicable Leased Property to and including the date of such termination.
Thereafter, Tenant, until the end of what would have been the Term of the
applicable Lease in the absence of such termination, and whether or not the
applicable Leased Property or any portion thereof shall have been re-let, shall
be liable to Landlord for, and shall pay to Landlord, as current damages, the
Rent and other charges which would be payable hereunder for the remainder of the
Term had such termination not occurred, less the net proceeds, if any, of any
re-letting of the applicable Leased Property, after deducting all expenses in
connection with such reletting, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, advertising,
expenses of employees, alteration costs and expenses of preparation for such
reletting. Tenant shall pay such current damages to Landlord monthly on the days
on which the Minimum Rent would have been payable hereunder if the applicable
Lease had not been terminated.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord either
(a) an amount equal to the excess, if any, of the Rent and other charges which
would be payable hereunder from the date of such termination (assuming that, for
the purposes of this paragraph, annual payments by Tenant on account of
Impositions would be the same as payments required for the immediately preceding
twelve calendar months, or if less than twelve calendar months have expired
since the Commencement Date, the payments required for such lesser period
projected to an annual amount) for what would be the then unexpired term of the
applicable Lease if the same remained in effect, over the Fair Market Rental for
the same period, or (b) an amount equal to the lesser of (i) the Rent and other
charges that would have been payable for the balance of the Term had it not been
terminated, or (ii) the aggregate of the Rent and other charges accrued in the
twelve (12) months ended next prior to such termination (without reduction for
any free rent or other concession or abatement). In the event the applicable
Lease is so terminated prior to the expiration of the first full year of the
Term, the liquidated damages which Landlord may elect to recover pursuant to
clause (b) (ii) of this paragraph shall be calculated as if such termination had
occurred on the first anniversary of the Commencement Date. Nothing contained in
the applicable Lease shall, however, limit or prejudice the right of Landlord to
prove and obtain in proceedings for bankruptcy or insolvency an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, the damages are to be proved, whether or
not the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (a) relet the
applicable Leased Property or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may at Landlord'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 Landlord considers advisable and necessary to relet the same, and (b) may
make such reasonable alterations, repairs and decorations in the applicable
Leased Property or any portion thereof as Landlord, in its sole judgment,
considers it advisable and necessary for the 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.
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Landlord shall in no event be liable in any way whatsoever for failure to relet
the applicable Leased Property, or, in the event that the applicable 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 being evicted or dispossessed, or in the event of Landlord obtaining
possession of the applicable Leased Property, by reason of the violation by
Tenant of any of the covenants and conditions of the applicable Lease.
12.3 TENANT'S WAIVER.
IF THE APPLICABLE LEASE IS TERMINATED PURSUANT TO SECTION 12.1 OR 12.2
HEREOF, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, (A) ANY RIGHT TO A TRIAL
BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN
THIS ARTICLE 12, AND (B) THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE
EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds.
Any payments received by Landlord under any of the provisions of the
applicable Lease during the existence or continuance of any Default or Event of
Default (and any payment made to Landlord rather than Tenant due to the
existence of any Default or Event of Default) shall be applied to the Tenants'
obligations under the applicable Lease and under the other Transaction Documents
in such order as Landlord may determine or as may be prescribed by the laws of
the State.
12.5 Landlord's Right to Cure Tenant's Default.
If an Event of Default shall have occurred and be continuing, Landlord,
after Notice to Tenant (provided that no such notice shall be required if
Landlord shall reasonably determine immediate action is necessary to protect
person or property), without waiving or releasing any obligation of Tenant, and
without waiving or releasing any Event of Default, may (but shall not be
obligated 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 the applicable Leased Property or any portion thereof for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor, including the management of the Facility
located on the applicable Leased Property by Landlord or its designee, and
Tenant hereby irrevocably appoints, in the event of such election by Landlord,
Landlord or its designee as manager of the Facility located on the applicable
Leased Property and its attorney in fact for such purpose, irrevocably and
coupled with an interest, in the name, place and stead of Tenant. No such entry
shall be deemed an eviction of Tenant. All reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by Landlord
in connection therewith, together with interest thereon (to the extent permitted
by law) at the Overdue Rate from the date such sums are paid by Landlord until
repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Trade Names.
If the applicable Lease relating to a Facility is terminated for any
reason Tenant shall not use a Facility Trade Name in the same market in which
such Facility is located in connection with any business that competes with such
Facility.
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ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration of the Term shall be
treated as a daily tenancy at sufferance at a rate equal to 1-1/2 times the
Minimum Rent then in effect plus Additional Charges and other charges herein
provided (prorated on a daily basis). Tenant shall also pay to Landlord all
damages (other than consequential damages) sustained by reason of any such
holding over. Otherwise, such holding over shall be on the terms and conditions
set forth in the applicable Lease, to the extent applicable. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of the
applicable Lease.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in the applicable Lease, and such default
shall continue for a period of thirty (30) days after Notice thereof from Tenant
to Landlord and any applicable Facility Mortgagee, or such additional period as
may be reasonably required to correct the same, Tenant may declare the
occurrence of a "Landlord Default" by a second Notice to Landlord and to such
Facility Mortgagee. Thereafter, Tenant may forthwith cure the same and, subject
to the provisions of the following paragraph, invoice Landlord for costs and
expenses (including reasonable attorneys' fees and court costs) incurred by
Tenant in curing the same, together with interest from the date Landlord
receives Tenant's invoice, at a rate equal to the lesser of the Overdue Rate or
the maximum rate allowed by law. Tenant shall have no right to terminate the
applicable Lease for any default by Landlord hereunder and no right, for any
such default, to offset or counterclaim against any Rent or other charges due
hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof. If Tenant and Landlord shall fail, in good faith, to resolve the
dispute within ten (10) days after Landlord's Notice of dispute, either may
submit the matter for resolution to a court of competent jurisdiction.
ARTICLE 15
PURCHASE OF LEASED PROPERTY
In the event Tenant shall purchase the applicable Leased Property from
Landlord pursuant to the terms of the applicable Lease and this Master Lease
Document, Landlord shall, upon receipt from Tenant of the applicable purchase
price, together with full payment of any unpaid Rent and other charges due and
payable with respect to any period ending on or before the date of the purchase,
and so long as no Default shall have occurred and be continuing at such time,
deliver to Tenant an appropriate deed or other instruments, conveying the entire
interest of Landlord in and to such Leased Property to Tenant, free and clear of
all encumbrances created through the act or omission of Landlord other than (i)
those liens, if any, which Tenant has agreed in writing to accept and take title
subject to, and (ii) encumbrances imposed on such Leased Property under Section
5.5 hereof. The difference between the applicable
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purchase price and the total cost of discharging the encumbrances described in
clause (i) above shall be paid in cash to Landlord or as Landlord may direct, in
federal or other immediately available funds. 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. The closing of any such sale shall be
subject to all terms and conditions with respect thereto set forth in the
applicable Lease and in the other Transaction Documents, and shall, unless
waived by Tenant, be contingent upon and subject to Tenant's obtaining all
required governmental consents and approvals for such transfer. All expenses of
such conveyance, including, without limitation, all transfer and sales taxes,
documentary fees, the fees and expenses of counsel to Landlord and the cost of
any title examination or title insurance, shall be paid by Tenant.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment.
Except as provided in Section 16.3 below, Tenant shall not, without the
prior written consent of a majority of the Independent Trustees and a majority
of the Trustees, assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer the applicable Lease or sublease (which term shall be deemed to include
the granting of concessions and licenses and the like), all or any part of the
applicable Leased Property or suffer or permit the applicable Lease or the
leasehold estate created hereby or thereby or any other rights arising under the
applicable Lease to be assigned, transferred, mortgaged, pledged, hypothecated
or encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the use or occupancy of the applicable Leased
Property by anyone other than Tenant, or the applicable Leased Property to be
offered or advertised for assignment or subletting. For purposes of this Section
16.1, any Change in Control, including without limitation, any transaction
pursuant to which Tenant is merged or consolidated with another entity or
pursuant to which all or substantially all of Tenant's assets are transferred to
any other entity, shall be deemed to be an assignment of the applicable Lease.
If the applicable Lease is assigned or if the applicable Leased
Property or any part thereof are sublet (or occupied by anybody other than
Tenant and its employees) Landlord, after an Event of Default occurs and 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
the first paragraph of this Section 16.1, the acceptance by Landlord of such
assignee, subtenant or occupant, as the case may be, as a tenant, or a release
of Tenant from the future performance by Tenant of its covenants, agreements or
obligations contained in the applicable Lease.
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 a particular instance shall be deemed to be a waiver of the
prohibition set forth in this Section 16.1. No assignment, subletting or
occupancy shall affect the Primary Intended Use. Any subletting, assignment or
other transfer of Tenant's interest in the applicable Lease in contravention of
this Section 16.1 shall be voidable at Landlord's option.
16.2 Required Sublease Provisions.
Any sublease of all or any portion of the applicable Leased Property
shall provide (a) that it is subject and subordinate to the applicable Lease and
to the matters to which the applicable Lease
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and such Lease is or shall be subject or subordinate; (b) that in the event of
termination of such Lease or reentry or dispossession of Tenant by Landlord
under such Lease, Landlord may, at its option, terminate such sublease or take
over all of the right, title and interest of Tenant, as sublessor under such
sublease, and such subtenant shall, at Landlord's option, attorn to Landlord
pursuant to the then executory provisions of such sublease, except that neither
Landlord nor any Facility Mortgagee, as holder of a mortgage or as Landlord
under the applicable Lease, if such mortgagee succeeds to that position, shall
(i) be liable for any act or omission of Tenant under such sublease, (ii) be
subject to any credit, counterclaim, offset or defense which theretofore accrued
to such subtenant against Tenant, (iii) be bound by any previous modification of
such sublease not consented to in writing by Landlord or by any previous
prepayment of more than one (1) month's Rent, (iv) be bound by any covenant of
Tenant to undertake or complete any construction of such Leased Property or any
portion thereof, (v) be required to account for any security deposit of the
subtenant other than any security deposit actually delivered to Landlord by
Tenant, (vi) be bound by any obligation to make any payment to such subtenant or
grant any credits, except for services, repairs, maintenance and restoration
provided for under the sublease that are performed after the date of such
attornment, (vii) be responsible for any monies owing by Tenant to the credit of
such subtenant, or (viii) be required to remove any Person occupying such Leased
Property or any part thereof; and (c) in the event the subtenant receives a
written Notice from Landlord or the Facility Mortgagee, if any, stating that an
Event of Default has occurred and is continuing, 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 Landlord or the Facility Mortgagee, if any, as the case may be,
shall be credited against the amounts owing by Tenant under the applicable
Lease; and such sublease shall provide that the subtenant thereunder shall, at
the request of Landlord, execute a suitable instrument in confirmation of such
agreement to attorn. 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 form and substance satisfactory to Landlord,
shall be delivered promptly to Landlord and (a) in the case of an assignment,
the assignee shall assume in writing and agree to keep and perform all of the
terms of the applicable 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 and (b) in case of either an assignment or subletting,
Tenant shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the performance and observance of all of
the covenants and conditions to be performed by Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 16.1.
16.3 Permitted Sublease.
Notwithstanding the foregoing, but subject to the provisions of Section
16.4 below and any other express conditions or limitations set forth herein,
Tenant may, in each instance after Notice to Landlord, sublease space at the
applicable Leased Property for laundry, commissary or child care purposes or
similar concessions in furtherance of the Primary Intended Use, so long as such
sublease would not reduce the number of licensed beds at the applicable
Facility, would not violate or affect any Legal Requirement or Insurance
Requirement, and Tenant has provided such additional insurance coverage
applicable to the activities to be conducted in such subleased space as is
acceptable to Landlord (and any Facility Mortgagee) in its discretion.
16.4 Sublease Limitation.
Anything contained in this Lease to the contrary notwithstanding,
Tenant shall not sublet the applicable Leased Property on any basis such that
the rental to be paid by the sublessee thereunder would
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be based, in whole or in part, on either (a) the income or profits derived by
the business activities of the sublessee, or (b) any other formula such that any
portion of the sublease rental 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 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates
At any time and from time to time, upon not less than ten (10) days
prior Notice by Landlord, Tenant shall furnish to Landlord an Officer's
Certificate certifying that the applicable Lease is unmodified and in full force
and effect (or that the applicable Lease is in full force and effect as modified
and setting forth the modifications), the date to which the Rent has been paid,
that Tenant is not in default in the performance or observance of any of the
terms of the applicable Lease and that no event exists which with the giving of
notice, lapse of time, or both, would constitute a Default or an Event of
Default, or if a Default or an Event of Default shall exist, specifying in
reasonable detail such Default or an Event of Default, and the steps being taken
to remedy the same, and such additional information as Landlord may reasonably
request. Any such certificate furnished pursuant to this Section 17.1 may be
relied upon by Landlord and any prospective purchaser or mortgagee of the
applicable Leased Property.
17.2 Financial Statements.
Tenant shall furnish the following statements to Landlord:
(a) within sixty (60) days after each of the first three
quarters of any Fiscal Year, the unaudited Financial Statements for such
quarter, prepared on a Facility by Facility basis (together with occupancy
percentages and payor mix on a Facility by Facility basis), in each case
accompanied by the Financial Officer's Certificate;
(b) within one hundred twenty (120) days after the end of each
Fiscal Year, the Financial Statements for such year, including the most recent
financial statements of Tenant prepared on a Facility by Facility basis, in each
case certified by Peat Marwick LLP or any other independent certified public
accountant reasonably satisfactory to Landlord and accompanied by the Financial
Officer's Certificate;
(c) at any time and from time to time upon not less than
thirty (30) days Notice from Landlord, Tenant will furnish to Landlord any
Financial Statements or any other financial reporting information required to be
filed by Landlord with any securities and exchange commission, the SEC or any
successor agency, or any other governmental authority, or required pursuant to
any order issued by any court governmental authority or arbitrator in any
litigation to which Landlord is a party, for purposes of compliance therewith;
and
(d) promptly upon Notice from Landlord, such other information
concerning the business, financial condition and affairs of Tenant as Landlord
may reasonably request from time to time.
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Landlord may at any time, and from time to time, provide any Facility Mortgagee
with copies of any of the foregoing statements.
17.3 General Operations.
Tenant covenants and agrees to furnish to Landlord:
17.3.1 Reimbursement, Licensure, Etc.
Within thirty (30) days after receipt or modification thereof, copies
of
(a) all licenses authorizing Tenant to operate the Facility
for its Primary Intended Use;
(b) all Medicare and Medicaid certifications, together with
provider agreements and all material correspondence relating thereto with
respect to the Facility (excluding, however, correspondence which may be subject
to any attorney-client privilege);
(c) a Nursing Home Administrator License for the individual
employed in such capacity with respect to the Facility; and
(d) all reports of surveys, statements of deficiencies, plans
of correction, and all material correspondence relating thereto, including,
without limitation, all reports and material correspondence concerning
compliance with or enforcement of licensure, Medicare/Medicaid, and
accreditation requirements, including physical environment and Life Safety Code
survey reports (excluding, however, correspondence which may be subject to any
attorney-client privilege); and
(e) with reasonable promptness, such other confirmation as to
the Licensure and Medicare and Medicaid participation of Tenant as Landlord may
reasonably request from time to time.
17.3.2 Annual Budgets.
Not less than ninety (90) days after the commencement of any Fiscal
Year, proposed annual income and ordinary expense and capital improvement
budgets setting forth projected income and costs and expenses projected to be
incurred by Tenant in managing, owning, maintaining and operating the Facility
for such Fiscal Year.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the applicable Leased Property during usual business hours upon not less
than twenty-four (24) hours' Notice (provided that no such notice shall be
required if Landlord shall reasonably determine immediate action is necessary to
protect person or property), and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of the applicable Lease; provided that
any inspection or repair by Landlord or its representatives will not
unreasonably interfere with Tenant's use and operation of applicable Leased
Property; further provided that in the event of an emergency, as determined by
Landlord in its sole discretion, prior notice shall not be necessary.
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ARTICLE 19
APPRAISAL
19.1 Appraisal Procedure.
In the event that it becomes necessary to determine the Fair Market
Value or Fair Market Rental of any property for any purpose of the applicable
Lease, and the parties cannot agree amongst themselves on such Fair Market Value
or Fair Market Rental, Tenant may request that Landlord select, or Landlord may
on its own initiative select, a Qualified Appraiser (as hereinafter defined). If
Tenant does not accept the Fair Market Value or Fair Market Rental, as the case
may be, of such property as of the relevant date as determined by such Qualified
Appraiser, Tenant may, within ten (10) days after receiving the report of such
Qualified Appraiser, by written Notice to Landlord, appoint a second Qualified
Appraiser. If Tenant does not so appoint a second Qualified Appraiser within
such ten (10) day period, Tenant shall be deemed to have accepted the Fair
Market Value or Fair Market Rental determined by the first Qualified Appraiser.
The two appraisers so designated shall meet within ten (10) days after the
second Qualified Appraiser is designated, and, if within ten (10) days after the
second Qualified Appraiser is designated, the two appraisers do not agree upon
the Fair Market Value or Fair Market Rental, as the case may be, of any property
as of the relevant date, the two appraisers shall designate a third Qualified
Appraiser, within ten (10) days thereafter. In the event that the two appraisers
are unable to agree upon the appointment of a third Qualified Appraiser within
such ten (10) day period, either Landlord or Tenant, on behalf of both, may then
request appointment of such appraiser by the then president of the American
Arbitration Association. In the event of a failure, refusal or inability of any
appraiser to act, a new Qualified Appraiser shall be appointed in his stead,
which appointment shall be made in the same manner as hereinabove provided for
the appointment of such appraiser so failing, refusing or being unable to act.
In the event that all appraisers cannot agree upon such value within ten (10)
days as aforesaid, each appraiser shall submit his appraisal of such value to
the other two appraisers in writing, and such value shall be determined by
calculating the average of the two numerically closest (or, if the values are
equidistant, all three) values determined by the three appraisers.
"Qualified Appraiser" shall mean any disinterested person who is a
member in good standing of the American Institute of Real Estate Appraisers or
the American Society of Real Estate Counselors (or the successor to either of
such organizations) and who has had not less than ten (10) years experience in
appraising and valuing, commercial buildings in the State.
The costs (other than Landlord's counsel fees) of each such appraisal
shall be borne by Tenant and shall be included as part of the Additional
Charges. Upon determining such value, the appraisers shall promptly notify
Landlord and Tenant in writing of such determination. If any party shall fail to
appear at the hearings appointed by the appraisers, the appraisers may act in
the absence of such party.
The determination of the board of appraisers (or the single Qualified
Appraiser, as appropriate) made in accordance with the foregoing provisions
shall be final and binding upon the parties, such determination may be entered
as an award in arbitration in a court of competent jurisdiction, and judgment
thereon may be entered.
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19.2 Landlord's Right to Appraisal.
Landlord shall have the right, exercisable twice at any time during the
Term, to appoint a Qualified Appraiser (which may include, without limitation,
American Appraisal Associates) to perform a complete appraisal of the applicable
Leased Property, (each such appraisal to include complete valuations of such
Leased Property based upon (a) the "Cost Approach", (b) the "Market Approach"
and (c) the "Income Approach"), which appraisal shall meet all requirements of
any state or Federal bank regulatory authority that Landlord or any Facility
Mortgagee considers relevant. The costs of the first of such appraisals shall be
borne by Tenant and shall be included as part of the Additional Charges.
ARTICLE 20
LANDLORD'S OPTION TO PURCHASE
20.1 Landlord's Option to Purchase the Tenant's Personal Property;
Transfer of Licenses.
Effective on not less than fifteen (15) days' prior Notice given at
least sixty (60) days prior to expiration of the Term (or such shorter period as
shall be appropriate if the applicable Lease is terminated prior to its
expiration date), Landlord shall have the option to purchase all (but not less
than all) of Tenant's Personal Property (except motor vehicles), if any, at the
expiration or termination of the applicable Lease, for an amount equal to the
then fair market value thereof (determined in accordance with the appraisal
procedures set forth in Article 19), subject to, and with appropriate price
adjustments for, all equipment leases, conditional sale contracts, security
interests and other encumbrances to which such Tenant's Personal Property is
subject. Tenant's Personal Property will be conveyed to Landlord on an "as-is"
basis, in its then current condition and state of repair. Tenant shall provide
Landlord with warranties of title, reflecting no encumbrances as to which
adjustments to the purchase price thereof, as required by the previous sentence,
have not been made. Failure of Landlord to notify Tenant of the election of its
option to purchase Tenant's Personal Property by the fifteenth day prior to the
termination of the applicable Lease shall be deemed to constitute a waiver of
Landlord's right to purchase Tenant's Personal Property at the applicable Leased
Property. Upon the expiration or sooner termination of the applicable Lease, or
upon management of the Facility located on the applicable Leased Property by the
Landlord or its designee, Tenant shall use all reasonable efforts to transfer
and assign to Landlord or its designee, or assist Landlord or its designee in
obtaining, any contracts, licenses, and certificates required for the then
operation of such Facility.
ARTICLE 21
PURCHASE OF LEASED PROPERTY BY TENANT
21.1 If any Tenant has (a) either (x) permanently ceased operation of
any Collective Leased Property for its Primary Intended Use or (y) has
reasonably determined that the operating revenues from such Leased Property have
not been, and will not be in the foreseeable future, sufficient to cover Rent
for such Leased Property as and when due, and (b) entered into a binding
agreement to sell, or sublease for the remaining Term, such Leased Property to a
Person that is not an Affiliate of Tenant, IHS or any other CCA Entity, and
neither Tenant, IHS nor any other CCA Entity retains any management or service
rights in such Leased Property or with regard to the residents of the applicable
Facility (a "Disposition Transaction"), such Tenant may give Landlord
irrevocable written Notice of its election to terminate the Lease for such
Leased Property and simultaneously purchase such Leased Property from the
Landlord
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for a purchase price equal to the greater of (i) one hundred twenty percent
(120%) of the Adjusted Purchase Price for such Leased Property or (ii) where
such Leased Property is being sold to an unaffiliated third party as provided
above, the proceeds (net of reasonable and customary costs of disposition) of
such sale, effective on the Business Day occurring not later than ninety (90)
days after the date of such Notice (the "Purchase Date") designated in such
Notice. Such Notice shall be accompanied by an Officer's Certificate that both
demonstrates and certifies that Tenant is entitled to provide such Notice
pursuant to this Section 21.1. Upon receipt from Tenant of the purchase price
provided for above and any Rent due and payable through the Purchase Date under
the Lease for the applicable Leased Property, and, in the case of a Disposition
Transaction, subject to Landlord having received evidence satisfactory to it
that all applicable conditions to the consummation of such Disposition
Transaction have been satisfied, Landlord shall convey such Leased Property to
Tenant on the Purchase Date in accordance with the provisions of Article 15 and
such Lease shall thereupon terminate as to such Leased Property, provided no
Event of Default shall have occurred and be continuing.
ARTICLE 22
FACILITY MORTGAGES
22.1 Landlord May Grant Liens.
Without the consent of Tenant, Landlord may, subject to the terms and
conditions set forth in this Section 22.1, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance or title
retention agreement ("Encumbrance") upon the applicable Leased Property, or any
portion thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing. Any such Encumbrance shall include the right
to prepay (whether or not subject to a prepayment penalty) and shall provide
(subject to Section 22.2 below) that it is subject to the rights of Tenant under
the applicable Lease, including the rights of Tenant to acquire such Leased
Property pursuant to the applicable provisions of the applicable Lease (except
Tenant's right of first refusal to purchase such Leased Property shall not apply
upon foreclosure or transfer in lieu thereof, provided, that any such purchaser
or transferee (a) shall take title subject to Tenant's rights to acquire such
Leased Property pursuant to the applicable Lease, (b) shall agree to give Tenant
the same Notice, if any, given to Landlord of any default or acceleration of any
obligation with respect to such Encumbrance, and (c) shall agree to permit
Tenant to appear by its representative and bid at any sale in foreclosure made
with respect to any such Encumbrance).
22.2 Subordination of Lease.
Subject to Section 22.1 above, the applicable Lease, any and all rights
of Tenant hereunder, are and shall be subject and subordinate to any ground or
master lease, and all renewals, extensions, modifications and replacements
thereof, and to all mortgages and deeds of trust, which may now or hereafter
affect the applicable Leased Property or any improvements thereon and/or any of
such leases, whether or not such mortgages or deeds of trust shall also cover
other lands and/or buildings and/or leases, to each and every advance made or
hereafter to be made under such mortgages and deeds of trust, and to all
renewals, modifications, replacements and extensions of such leases and such
mortgages and deeds of trust and all consolidations of such mortgages and deeds
of trust. This Section shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination, Tenant
shall promptly execute, acknowledge and deliver any instrument that Landlord,
the lessor under any such lease or the holder of any such mortgage or the
trustee or beneficiary of any deed of trust or any of their respective
successors in interest may reasonably request to evidence such
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subordination. Any lease to which the applicable Lease is, at the time referred
to, subject and subordinate is herein called "Superior Lease" and the lessor of
a Superior Lease or its successor in interest at the time referred to, is herein
called "Superior Landlord" and any mortgage or deed of trust to which the
applicable Lease is, at the time referred to, subject and subordinate, is herein
called "Superior Mortgage" and the holder, trustee or beneficiary of a Superior
Mortgage is herein called "Superior Mortgagee".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under the applicable Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise, then at the
request of such party so succeeding to Landlord's rights (herein called
"Successor Landlord") and upon such Successor Landlord's written agreement to
accept Tenant's attornment, Tenant shall attorn to and recognize such Successor
Landlord as Tenant's landlord under the applicable Lease, and shall promptly
execute and deliver any instrument that such Successor Landlord may reasonably
request to evidence such attornment. Upon such attornment, the applicable Lease
shall continue in full force and effect as a direct lease between the Successor
Landlord and Tenant upon all of the terms, conditions and covenants as are set
forth in the applicable Lease, except that the Successor Landlord (unless
formerly the landlord under the applicable Lease or its nominee or designee)
shall not be (a) liable in any way to Tenant for any act or omission, neglect or
default on the part of Landlord under the applicable Lease, (b) responsible for
any monies owing by or on deposit with Landlord to the credit of Tenant, (c)
subject to any counterclaim or setoff which theretofore accrued to Tenant
against Landlord, (d) bound by any modification of the applicable Lease
subsequent to such Superior Lease or Mortgage, or by any previous prepayment of
Minimum Rent for more than one (1) month, which was not approved in writing by
the Superior Landlord or the Superior Mortgagee thereto, (e) liable to the
Tenant beyond the Successor Landlord's interest in the applicable Leased
Property and the rents, income, receipts, revenues, issues and profits issuing
from such Leased Property, (f) responsible for the performance of any work to be
done by the Landlord under the applicable Lease to render the applicable Leased
Property ready for occupancy by Tenant, or (g) required to remove any Person
occupying the applicable Leased Property or any part thereof, except if such
person claims by, through or under the Successor Landlord. Tenant agrees at any
time and from time to time to execute a suitable instrument in confirmation of
Tenant's agreement to attorn, as aforesaid.
22.3 Notice to Mortgagee and Ground Landlord.
Subsequent to the receipt by Tenant of Notice from any Person that it
is a Facility Mortgagee, or that it is the ground lessor under a lease with
Landlord, as ground lessee, which includes the applicable Leased Property as
part of the demised premises, no Notice from Tenant to Landlord as to the
applicable Leased Property shall be effective unless and until a copy of the
same is given to such Facility Mortgagee or ground lessor, and the curing of any
of Landlord's defaults by such Facility Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 23
ADDITIONAL COVENANTS OF TENANT
23.1 Prompt Payment of Indebtedness.
Tenant will (a) pay or cause to be paid when due all payments of
principal of and premium and interest on Indebtedness for money borrowed and
will not permit or suffer any such Indebtedness to
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become or remain in default beyond any applicable grace or cure period, (b) pay
or cause to be paid when due all lawful claims for labor and rents, (c) pay or
cause to be paid when due all trade payables and (d) pay or cause to be paid
when due all other Indebtedness upon which it is or becomes obligated, except,
in each case, other than that referred to in clause (a), to the extent payment
is being contested in good faith by appropriate proceedings in accordance with
Article 8 and if Tenant shall have set aside on its books adequate reserves with
respect thereto in accordance with GAAP or unless and until foreclosure,
distraint sale or other similar proceedings shall have been commenced.
23.2 Conduct of Business.
Tenant will not engage in any business other than the ownership and
operation of (a) the applicable Leased Property, or (b) any other health care
properties owned by Landlord and leased to Tenant or given as security for
Indebtedness owed to Landlord, and will do or cause to be done all things
necessary to preserve, renew and keep in full force and effect and in good
standing its corporate existence and its rights and licenses necessary to
conduct such business.
23.3 Maintenance of Accounts and Records.
Tenant will keep true records and books of account in which full, true
and correct entries will be made of dealings and transactions in relation to the
business and affairs of Tenant in accordance with GAAP. Tenant will apply
accounting principles in the preparation of the financial statements of Tenant
which, in the judgment of and the opinion of its independent public accountants,
are in accordance with GAAP, except for changes approved by such independent
public accountants. Tenant will provide to Landlord either in a footnote to the
financial statements delivered under Section 17.2 which relate to the period in
which such change occurs, or in separate schedules to such financial statements,
information sufficient to show the effect of any such changes on such financial
statements.
23.4 Notice of Change of Name, Administrator, Etc.
Tenant will promptly give Notice to Landlord of any change in (a) the
name (operating or otherwise) of Tenant or the applicable Facility, (b) the
individual licensed as administrator of the Facility, (c) the number of beds in
any bed category for which the applicable Facility is licensed or the number of
beds in any bed category available for use at the applicable Facility, and (d)
the patient and/or child care services that are offered at the applicable
Facility.
23.5 Notice of Litigation, Potential Event of Default, Etc.
Tenant will promptly give Notice to Landlord of any litigation or any
administrative proceeding to which it may hereafter become a party which
involves a potential liability equal to or greater than $250,000, or which may
otherwise result in any material adverse change in the business, operations,
property, prospects, results of operation or condition, financial or other, of
Tenant. Forthwith upon Tenant obtaining knowledge of any Default or Event of
Default, or any event or condition that would be required to be disclosed in a
current report filed by Tenant on Form 8-K or in Part II of a quarterly report
on Form 10-Q if Tenant were required to file such reports under the Securities
Exchange Act of 1934, as amended, Tenant will furnish a Notice to Landlord
specifying the nature and period of existence thereof and what action Tenant has
taken or is taking or proposes to take with respect thereto.
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23.6 Indebtedness of Tenant.
Tenant shall not create, incur, assume or guarantee, or permit to
exist, or become or remain liable directly or indirectly upon, any Indebtedness
except the following:
(a) Indebtedness of Tenant to Landlord;
(b) unsecured Indebtedness of Tenant, other than for money
borrowed, incurred in the ordinary course of business;
(c) Indebtedness of Tenant for taxes, assessments,
governmental charges or levies, to the extent that payment thereof shall not at
the time be required to be made in accordance with the provisions of Article 8;
(d) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period and in
respect of which execution thereof shall have been stayed pending such appeal or
review, or (ii) which are fully covered by insurance payable to Tenant, or (iii)
which are for an amount not in excess of (x) $5,000,000 in the aggregate at any
one time outstanding for all Tenants or (y) $250,000 individually, and (A) which
have been in force for not longer than the applicable appeal period, so long as
execution is not levied thereunder, or (B) in respect of which an appeal or
proceedings for review shall at the time be prosecuted in good faith in
accordance with the provisions of Article 8, and in respect of which execution
thereof shall have been stayed pending such appeal or review;
(e) Indebtedness (including without limitation, accrued and
unpaid management fees) of Tenant owed to IHS or any wholly-owned Subsidiary of
IHS, provided that the payment of such Indebtedness shall be subject to the
terms of a Subordination Agreement among Tenant as debtor, IHS or such
wholly-owned Subsidiary as subordinate creditor and Landlord as senior creditor,
which subordination agreement shall be satisfactory to Landlord in its sole and
absolute discretion; or
(f) Indebtedness of Tenant secured by security interests
permitted by paragraph (a) of Section 23.12, which Indebtedness is obtained from
a Lending Institution that is not an Affiliate of Tenant; provided that at the
time of incurrence thereof and after giving effect thereto, Tenant, on a pro
forma basis, would have had a ratio of current assets to current liabilities,
determined in accordance with GAAP, of at least 1 to 1, if such Indebtedness had
been outstanding on the last day of the most recently completed fiscal quarter
of Tenant and any Indebtedness which is to be satisfied with the proceeds of
such Indebtedness had been satisfied as of such day; or
(g) Indebtedness of Tenant as guarantor of or co-borrower with
IHS or any Subsidiary thereof, secured by security interests permitted by
paragraph (b) of Section 23.12, which Indebtedness is obtained from a Lending
Institution that is not an Affiliate of Tenant; provided that at the time of
incurrence thereof and after giving effect thereto, no Event of Default shall
have occurred and be continuing; or
(h) Indebtedness of Tenant expressly consented to in writing
by Landlord.
23.7 Financial Condition of Tenant.
(a) Tenant shall at all times maintain a ratio of Current
Assets to Current Liabilities of at least 1 to 1.
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(b) Tenant shall at all times maintain Tangible Net Worth in
an amount at least equal to $1.00.
23.8 Distributions, Payments to Affiliates, Etc.
Tenant will not declare, order, pay or make, directly or indirectly,
any Distributions or any payment to any Affiliate (including payments in the
ordinary course of business and payments pursuant to management agreements with
any such Affiliate) or set apart any sum or property therefor, or agree to do
so, if, at the time of such proposed action, or immediately after giving effect
thereto, any event or condition shall exist which constitutes a Default or an
Event of Default; provided however that, notwithstanding the foregoing, if,
after the occurrence and during the continuance of a Default or Event of
Default, HRP requests that an Affiliate of Tenant (including IHS) provide goods
or services to the applicable Facility or its residents, such Affiliate shall be
entitled to be paid for such goods or services so provided on customary
commercial terms.
23.9 Prohibited Transactions.
Tenant shall not permit to exist or enter into any agreement or
arrangement whereby it engages in a transaction of any kind with any Affiliate
of Tenant, unless such Affiliate, Tenant and Landlord shall have first executed
and delivered a Subordination Agreement covering the obligations of the Tenant
under such arrangement or agreement.
23.10 Investments.
Tenant shall not make, or permit to remain outstanding, at any time any
Investment (including without limitation, the formation of or investment in any
Subsidiary or the acquisition of any business) except the following:
(a) Marketable direct full faith and credit obligations of,
and marketable obligations guaranteed by, the United States of America, or any
agency or instrumentality thereof, which mature within one year from the date of
acquisition thereof;
(b) Marketable direct full faith and credit obligations of any
state of the United States of America, or any county, city, town, township or
other governmental subdivision of any such state, which mature within one year
from the date of acquisition thereof, provided, that such obligations are
accorded a rating within one of the three highest grades by Moody's Investors
Service, Inc. or Standard & Poor's Corporation;
(c) Commercial paper maturing no more than two hundred and
seventy (270) days from the date of issue, provided that such paper is accorded
a rating within the highest category by Moody's Investors Service, Inc. or
Standard & Poor's Corporation; or
(d) Certificates of deposit which have a remaining term to
maturity at the time of purchase of no more than one year (or which are subject
to a repurchase agreement with one of the banks or trust companies described in
this paragraph (d) exercisable within one year from the time of purchase) issued
by banks or trust companies organized under the laws of the United States of
America or a State thereof and which are member banks of the Federal Reserve
System, and have aggregate capital, surplus and undivided profits of at least
$100,000,000 and the long term obligations of which carry a rating of "A" or
better by Moody's Investors Service, Inc. or Standard & Poor's Corporation;
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(e) Bonds or debentures which have a remaining term to
maturity at the time of purchase of no more than one year, issued by a
corporation, organized under the laws of a State of the United States or the
District of Columbia; provided, that such obligations carry a rating of "A" or
better by Moody's Investors Service, Inc. or Standard & Poor's Corporation.
23.11 Management of Leased Property.
Tenant shall not enter into any Management Agreement unless the terms
thereof have been previously approved in writing by Landlord, and such approval
shall be in Landlord's sole discretion, except that no such approval shall be
required with respect to any Management Agreement between Tenant and IHS or a
Subsidiary thereof as Manager (an "IHS Management Agreement") provided that
Landlord is promptly provided with a true and complete copy of such Management
Agreement. All management fees, payments in connection with any extension of
credit and fees for services provided in connection with the operation of the
applicable Facility, payable by Tenant, to (a) any Guarantor (or any of its
Affiliates) or (b) any Affiliates of Tenant, shall be subordinated to all of the
obligations of Tenant due under the applicable Lease pursuant to a Subordination
Agreement. Tenant shall not agree to any change in the Manager of the applicable
Leased Property and/or the applicable Facility, to any change in the Management
Agreement, or, other than an IHS Management Agreement, terminate any Management
Agreement or permit the Manager to assign the Management Agreement to any person
other than IHS or a Subsidiary thereof without the prior written approval of
Landlord in each instance, which approval shall be subject to Landlord's sole
and absolute discretion. The Management Agreement shall provide that Landlord
shall be provided notice of any defaults thereunder and, at Landlord's option,
an opportunity to cure such default; all in form and substance satisfactory to
Landlord in its sole and absolute discretion. If Landlord shall cure any of
Tenant's defaults under the Management Agreement, the cost of such cure shall be
payable upon demand by Tenant to Landlord with interest accruing from the demand
date at the Overdue Rate and the Landlord shall have the same rights and
remedies for failure to pay such costs on demand as for Tenant's failure to pay
Minimum Rent. Tenant shall deliver to Landlord any instrument requested by
Landlord to implement the intent of the foregoing provision.
23.12 Liens and Encumbrances. Except as permitted by Section 7.1,
Tenant shall not create or incur or suffer to be created or incurred or to exist
any Lien on any applicable Lease, the capital stock of Tenant, Tenant's Personal
Property or any of its other respective assets, properties, rights or income, or
any of its interest therein, now or at any time hereafter owned, other than:
(a) Security interests securing the purchase price of
equipment or personal property acquired after the Commencement Date; provided,
however, that (i) such Lien shall at all times be confined solely to the asset
in question, (ii) the aggregate principal amount of Indebtedness secured by any
such Lien does not exceed the cost of acquisition or construction of the
property subject thereto; (iii) the aggregate principal amount of Indebtedness
secured by any such Lien in favor of a single vendor shall not exceed $250,000
at any one time outstanding, and (iv) the incurrence of the Indebtedness so
secured complied with clause (g) of Section 23.6; or
(b) Security interests in its capital stock, and in its
accounts receivable and general intangibles relating to such accounts
receivable, and books and records relating to accounts receivable and such
general intangibles; provided, however, that (i) such security interest shall at
all times be confined solely to such assets, (ii) the incurrence of the
Indebtedness so secured complies with clause (g) of Section 23.6 and (iii) the
Person issuing such Indebtedness becomes party to an intercreditor agreement
with Landlord, the terms and conditions of which are reasonably satisfactory to
Landlord; or
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(c) Permitted Encumbrances.
23.13 Merger; Sale of Assets; Etc. Tenant shall not (i) sell, lease (as
lessor or sublessor), transfer or otherwise dispose of, or abandon, all or any
material portion of its assets (including capital stock) or business to any
Person, (ii) merge into or with or consolidate with any other entity, or (iii)
sell, lease (as lessor or sublessor), transfer or otherwise dispose of, or
abandon, any personal property or fixtures or any real property, provided that,
notwithstanding the provisions of clause (iii), Tenant may dispose of equipment
or fixtures which have become inadequate, obsolete, worn-out, unsuitable,
undesirable or unnecessary, provided substitute equipment or fixtures having
equal or greater value and utility (but not necessarily having the same
function) have been provided.
23.14 Definitions.
When used in this Article 23 the following terms shall have the
respective meanings provided therefor and, unless otherwise specifically
indicated, shall be deemed to relate to Tenant:
(a) The term "Current Assets" shall mean, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
assets on the balance sheet of Tenant as at such date (excluding those accounts
receivable of any Affiliate account debtor, where such account debtor is either
not financially viable, or where the account receivable is not considered
collectible under GAAP).
(b) The term "Current Liabilities" shall mean, as of any
applicable date, all amounts that should, in accordance with GAAP, be included
as current liabilities on the balance sheet of Tenant as at such date,
excluding, however, all current liabilities owed to any Affiliate so long as
such current liabilities are subordinated to the obligations of Tenant to
Landlord pursuant to a Subordination Agreement.
(c) The term "Distributions" shall mean (i) any declaration or
payment of any dividend (except dividends payable in common stock of Tenant) on
or in respect of any shares of any class of capital stock of Tenant, (ii) any
purchase, redemption retirement or other acquisition of any shares of any class
of capital stock of a corporation, (iii) any other distribution on or in respect
of any shares of any class of capital stock of a corporation, or (iv) any return
of capital to shareholders.
(d) The term "Investment" shall mean all loans, advances,
extensions of credit (except for accounts and notes receivable for merchandise
sold or services furnished in the ordinary course of business, and amounts paid
in advance on account of the purchase price of merchandise to be delivered to
the payor within one year of the date of the advance), or purchases of stock,
notes, bonds or other securities or evidences of indebtedness or capital
contribution to any Person, whether in cash or other property. The amount of an
Investment shall be its cost (the amount of cash or the fair market value of
other property given in exchange therefor), whether or not written or charged
off or sold or otherwise disposed of, except to the extent such cost shall have
been paid to Tenant by a Person in which Tenant had no present or prospective
financial interest at the time of such payment.
(e) The term "Tangible Net Worth" shall mean the excess of
total assets over total liabilities, total assets and total liabilities each to
be determined in accordance with GAAP; excluding, however, from the
determination of total assets: (i) goodwill, organizational expenses, research
and development expenses, trademarks, trade names, copyrights, patents, patent
applications, licenses and rights in any thereof, and other similar intangibles;
(ii) all deferred charges or unamortized debt discount and expense; (iii) all
reserves carried and not deducted from assets; (iv) treasury stock and capital
stock,
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obligations or other securities of, or capital contributions to, or investments
in, any subsidiary; (v) securities which are not readily marketable; (vi) any
write-up in the book value of any asset resulting from a revaluation thereof
subsequent to the Commencement Date; and (vii) any items not included in clauses
(i) through (vi) above that are treated as intangibles in conformity with GAAP;
and excluding from the determination of total liabilities all liabilities owing
by Tenant to any Affiliate so long as such liabilities are subordinated to the
obligations of Tenant to Landlord pursuant to a Subordination Agreement.
ARTICLE 24
MISCELLANEOUS
24.1 Limitation on Payment of Rent.
All agreements between Landlord and Tenant herein are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of Rent, or otherwise, shall the Rent or any other amounts payable
to Landlord under this Lease or any of the other Transaction Documents exceed
the maximum permissible under applicable law, the benefit of which may be
asserted by Tenant as a defense, and if, from any circumstance whatsoever,
fulfillment of any provision of the applicable Lease or any of the other
Transaction Documents, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, or if from
any circumstances Landlord should ever receive as fulfillment of such provision
such an excessive amount, then, ipso facto, the amount which would be excessive
shall be applied to the reduction of the installment(s) of Minimum Rent next due
and not to the payment of such excessive amount. This provision shall control
every other provision of the Transaction Documents and any other agreements
between Landlord and Tenant.
24.2 No Waiver.
No failure by Landlord 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 the applicable Lease, which shall continue in full force and
effect with respect to any other then existing or subsequent breach.
24.3 Remedies Cumulative.
To the extent permitted by law, each legal, equitable or contractual
right, power and remedy of Landlord, now or hereafter provided either in the
applicable 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 Landlord of any one or more of such rights,
powers and remedies shall not preclude the simultaneous or subsequent exercise
by Landlord of any or all of such other rights, powers and remedies.
24.4 Severability.
Any clause, sentence, paragraph, section or provision of the applicable
Lease held by a court of competent jurisdiction to be invalid, illegal or
ineffective shall not impair, invalidate or nullify the remainder of the
applicable Lease, but rather the effect thereof shall be confined to the clause,
sentence,
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paragraph, section or provision so held to be invalid, illegal or ineffective,
and the applicable Lease shall be construed as if such invalid, illegal or
ineffective provisions had never been contained therein.
24.5 Acceptance of Surrender.
No surrender to Landlord of the applicable Lease or of the applicable
Leased Property or any part thereof, or of any interest therein, shall be valid
or effective unless agreed to and accepted in writing by Landlord and no act by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, shall constitute an acceptance of any such surrender.
24.6 No Merger of Title.
It is expressly acknowledged to be the intent of the parties that there
shall be no merger of the applicable Lease or of the leasehold estate created
hereby by reason of the fact that the same Person may acquire, own or hold,
directly or indirectly (a) the applicable Lease or the leasehold estate created
hereby or any interest in the applicable Lease or such leasehold estate and (b)
the fee estate or ground landlord's interest in the applicable Leased Property.
24.7 Conveyance by Landlord.
If Landlord or any successor owner of the applicable 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 such Leased Property
shall expressly assume all obligations of Landlord hereunder arising or accruing
from and after the date of such conveyance or transfer, Landlord or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Landlord under the applicable Lease 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 shall thereupon
be binding upon the new owner.
24.8 Quiet Enjoyment.
So long as Tenant shall pay the Rent as the same becomes due and shall
substantially comply with all of the terms of the applicable Lease and perform
its obligations hereunder and thereunder, Tenant shall peaceably and quietly
have, hold and enjoy the applicable Leased Property for the Term hereof, free of
any claim or other action by Landlord or anyone claiming by, through or under
Landlord, but subject to (a) any Encumbrance permitted under Article 21, or
otherwise permitted to be created by Landlord hereunder, (b) all Permitted
Encumbrances, (c) liens as to obligations of Landlord that are either not yet
due or which are being contested in good faith and by proper proceedings, and
(d) liens that have been consented to in writing by Tenant. Except as otherwise
provided in the applicable Lease, no failure by Landlord to comply with the
foregoing covenant shall give Tenant any right to cancel or terminate the
applicable Lease or abate, reduce or make a deduction from or offset against the
Rent or any other sum payable under the applicable Lease, or to fail to perform
any other obligation of Tenant hereunder.
24.9 NON-LIABILITY OF TRUSTEES.
THE DECLARATION OF TRUST ESTABLISHING LANDLORD, DATED OCTOBER 9, 1986,
A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS
DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
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RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK
ONLY TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION.
24.10 Landlord's Consent of Trustees.
Where provision is made in the applicable Lease for Landlord's consent
and Landlord shall fail or refuse to give such consent, Tenant shall not be
entitled to any damages for any withholding by Landlord of its consent, it being
intended that Tenant's sole remedy shall be an action for specific performance
or injunction, and that such remedy shall be available only in those cases where
Landlord has expressly agreed in writing not to unreasonably withhold its
consent.
24.11 Memorandum of Lease.
Neither Landlord nor Tenant shall record the applicable Lease or this
Master Lease Document. However, Landlord and Tenant shall promptly, upon the
request of either, enter into a short form memorandum of the applicable Lease,
in form suitable for recording under the laws of the State in which reference to
the applicable Lease and the Master Lease Document, and all options contained
herein, shall be made. Tenant shall pay all costs and expenses of recording such
memorandum.
24.12 Notices.
Any notice, request, demand, statement or consent ("Notice") desired or
required to be given hereunder shall be in writing and shall be delivered by
hand, sent by certified mail, return receipt requested, or sent by a nationally
recognized commercial overnight delivery service with provisions for a receipt,
postage or delivery charges prepaid, and shall be deemed given (1) when actually
delivered, if delivered by hand, (2) upon receipt, if sent by certified mail, or
(3) the next Business Day after being placed in the possession of an overnight
delivery service, if sent by an overnight delivery service, and shall be
addressed as follows:
If to Tenant: c/o Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Attn: Eleanor C. Harding,
Executive Vice President--Finance
With copies to: Blass & Driggs
461 Fifth Avenue
New York, New York 10017
Attn: Michael S. Blass, Esq.
If to Landlord: Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: President
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With a copy to: Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Harry E. Ekblom, Jr., Esq.
or at such other place as any party hereto may from time to time hereafter
designate to the other in writing. Any Notice given to Tenant from Landlord
shall not imply that such Notice or any further or similar Notice was or is
required. The failure of Landlord to provide the copies indicated above shall
not render any Notice given by Landlord to Tenant ineffective.
24.13 Construction.
Anything contained in the applicable Lease to the contrary
notwithstanding, (i) all claims against, and liabilities of, Tenant or Landlord
arising prior to any date of termination or expiration of the applicable Lease
shall survive such termination or expiration and (ii) neither party hereto shall
be liable for any consequential damages suffered by the other party as the
result of a breach by such party of its obligations owed to the other party. If
any term or provision of the applicable Lease or any application thereof shall
be invalid or unenforceable, the remainder of the applicable Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate 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 the applicable Lease nor any provision hereof may be changed,
waived, discharged or terminated except by an instrument in writing signed by
the party to be charged. All the terms and provisions of the applicable Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Each term or provision of this Master Lease
Document or the applicable Lease to be performed by Tenant shall be construed as
an independent covenant and condition. Time is of the essence with respect to
the exercise of any rights of Tenant under this Master Lease Document and the
applicable Lease. Except as otherwise set forth in this Master Lease Document,
any obligations of Tenant (including without limitation, any monetary, repair
and indemnification obligations) shall survive the expiration or sooner
termination of the applicable Lease. The headings in the applicable Lease are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
24.14 CONSENT TO JURISDICTION.
ANY ACTION TO ENFORCE, ARISING OUT OF, OR RELATING IN ANY WAY TO, ANY
OF THE PROVISIONS OF THE APPLICABLE LEASE OR ANY TRANSACTION DOCUMENT MAY BE
BROUGHT AND PROSECUTED IN SUCH COURT OR COURTS LOCATED IN THE COMMONWEALTH OF
MASSACHUSETTS AS IS PROVIDED BY LAW; AND TENANT CONSENTS TO THE JURISDICTION OF
SAID COURT OR COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS AND TO SERVICE
OF PROCESS BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR IN ANY
MANNER PROVIDED BY LAW.
24.15 WAIVER OF JURY TRIAL.
EXCEPT TO THE EXTENT PROHIBITED BY LAW WHICH CANNOT BE WAIVED, TENANT
HEREBY WAIVES TRIAL BY JURY IN CONNECTION WITH ANY ACTION OR PROCEEDING OF ANY
NATURE WHATSOEVER ARISING UNDER, OUT OF OR IN CONNECTION WITH THE APPLICABLE
LEASE OR ANY OTHER TRANSACTION DOCUMENT AND IN CONNECTION WITH SUCH ACTION OR
PROCEEDING, WHETHER ARISING UNDER
<PAGE>
-60-
STATUTE (INCLUDING ANY FEDERAL OR STATE CONSTITUTION) OR UNDER THE LAW OF
CONTRACT, TORT OR OTHERWISE AND INCLUDING, WITHOUT LIMITATION, ANY CHALLENGE TO
THE LEGALITY, VALIDITY, BINDING EFFECT OR ENFORCEABILITY OF THIS PARAGRAPH OR
THE APPLICABLE LEASE OR ANY OTHER TRANSACTION DOCUMENTS.
24.16 GOVERNING LAW.
THE APPLICABLE LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS (EXCLUDING RULES REGARDING CHOICE OF LAW) OF THE COMMONWEALTH OF
MASSACHUSETTS, EXCEPT AS TO MATTERS REGARDING THE INTERNAL AFFAIRS OF LANDLORD
AND ISSUES OF OR LIMITATIONS ON ANY PERSONAL LIABILITY OF THE SHAREHOLDERS AND
TRUSTEES OF LANDLORD FOR OBLIGATIONS OF LANDLORD, AS TO WHICH THE LAWS OF THE
STATE OF MARYLAND SHALL GOVERN AND EXCEPT TO THE EXTENT THAT MATTERS OF TITLE OR
RELATING TO INTERESTS IN REAL PROPERTY ARE REQUIRED TO BE GOVERNED BY THE LAWS
OF THE STATE.
<PAGE>
-60-
IN WITNESS WHEREOF, the parties have executed this Master Lease
Document as a sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND RETIREMENT PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ David J. Hegarty
David J. Hegarty
Its: President
TENANTS:
ECA HOLDINGS, INC.,
a Delaware Corporation
By: /s/
Its:_______________________
MARIETTA/SCC, INC.
a Georgia corporation
By: /s/
Its: _______________________
GLENWOOD/SCC, INC.
a Georgia corporation
By: /s/
Its: _______________________
Signature Pages to
Amended, Restated and Consolidated Master Lease Document
dated as of September 24, 1997
<PAGE>
-61-
DUBLIN/SCC, INC.
a Georgia corporation
By: /s/
Its: _______________________
COLLEGE PARK/SCC, INC.
a Georgia corporation
By: /s/
Its: _______________________
Signature Pages to
Amended, Restated and Consolidated Master Lease Document
dated as of September 24, 1997
<PAGE>
EXHIBIT A
Collective Leased Properties
<PAGE>
Omitted Exhibit
---------------
The following exhibit to the Amended, Restated and Consolidated Master
Lease Document has been omitted:
Exhibit Number Exhibit Title
- -------------- -------------
A Collective Leased Property
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibit to the Securities and Exchange Commission upon request.
EXHIBIT 10.37
GUARANTY BY INTEGRATED HEALTH SERVICES, INC.
GUARANTY dated as of September 24, 1997 made by INTEGRATED
HEALTH SERVICES, INC., a Delaware corporation (the "Guarantor") and HEALTH AND
RETIREMENT PROPERTIES TRUST, a Maryland real estate investment trust (with its
successor and assigns, "HRP").
W I T N E S S E T H :
WHEREAS, Community Care of America, Inc., a Delaware corporation
("CCA") and the other CCA Companies (as hereinafter defined) have entered into
certain loan and lease financings with HRP governed by the CCA Documents (as
hereinafter defined);
WHEREAS, pursuant to and subject to the terms and conditions of an
Agreement and Plan of Merger dated as of August 1, 1997 among the Guarantor, IHS
Acquisition XXVI, Inc., a Delaware corporation and a wholly-owned indirect
subsidiary of the Guarantor ("IHS Acquisition") and CCA, CCA shall become a
wholly-owned indirect subsidiary of the Guarantor through a tender offer by IHS
Acquisition for all the common stock of CCA, followed by the merger of IHS
Acquisition with and into CCA (the "Acquisition");
WHEREAS, the Guarantor and CCA have requested that HRP consent to the
Acquisition and to make certain modifications to the CCA Documents in connection
therewith;
WHEREAS, HRP is willing to so consent and agree, subject to the terms
and conditions of a certain Asset Exchange Agreement between ECA Holdings II,
Inc., a Delaware corporation and a wholly-owned indirect subsidiary of CCA ("New
ECA"), and HRP, and a Restructuring Agreement among HRP, the Guarantor, and CCA
and the other CCA Companies, each of which Agreements are dated as of even date
herewith (collectively, the "Restructuring Agreement")
WHEREAS, it is a condition to the effectiveness of the Restructuring
Agreement that, among other things, the Guarantor deliver this Guaranty in favor
of HRP;
WHEREAS, the CCA Companies will benefit substantially from, among other
things, increased access to capital, by virtue of the Acquisition and the
related modifications to the CCA Documents contemplated by the Restructuring
Agreement
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Guarantor hereby agrees with HRP as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are defined in
the Restructuring Agreement and used herein are so used as so defined. In
addition, the following terms shall have the meanings set forth below:
"Applicable Law" shall mean any law of any governmental
authority, whether domestic or foreign, including without limitation
all federal and state laws, to which the Person in question is subject
or by which it or any of its property is bound, and including without
limitation any: (a) administrative, executive, judicial, legislative or
other action, code, consent decree, constitution, decree, directive,
enactment, finding, guideline, injunction, interpretation, judgment,
law, order, ordinance, policy statement, proclamation, promulgation,
regulation, requirement, rule, rule of law, rule of public policy,
settlement agreement, statute, or writ, of any governmental authority,
domestic or foreign, whether or not having the force of law; (b) common
law or other legal or
<PAGE>
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quasi-legal precedent; or (c) arbitrator's, mediator's or referee's
award, decision, finding or recommendation, or, in any case, any
particular section, part or provision thereof
"CCA Documents" shall mean, collectively, any agreement, note,
lease, master lease, mortgage, security agreement, pledge agreement,
assignment, guaranty or other agreement or instrument now or hereafter
executed by one or more of the CCA Companies with, in favor of or for
the benefit of, HRP or any Affiliate thereof (including, without
limitation, any and all other documents executed in connection with,
relating to, evidencing or creating collateral or security in favor of
or for the benefit of HRP or any Affiliate thereof), and any agreement,
note, mortgage, security agreement, pledge agreement, assignment,
guaranty or other agreement or instrument hereafter executed in
connection with any extension, renewal, refunding or refinancing
thereof, as any of the same may hereafter from time to time be amended,
modified or supplemented.
"CCA Companies" shall mean, collectively, CCA, New ECA, ECA
Holdings, Inc., a Delaware corporation, Community Care of Nebraska,
Inc., a Delaware corporation, W.S.T. Care, Inc., a Nebraska
corporation, Quality Care of Lyons, Inc., a Nebraska corporation, CCA
Acquisition I, Inc., a Delaware corporation, Marietta/SCC, Inc., a
Georgia corporation, Glenwood/SCC, Inc., a Georgia corporation,
Dublin/SCC, Inc., a Georgia corporation, and College Park/SCC, Inc., a
Georgia corporation, and their respective successors and assigns.
"Consolidated Financials" shall mean, for any fiscal year or
other accounting period of the Guarantor and its consolidated
Subsidiaries, annual audited and quarterly unaudited financial
statements prepared on a consolidated basis, including the Guarantor's
consolidated balance sheet and the related statements of income and
cash flows, all in reasonable detail, and setting forth in comparative
form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared in accordance with GAAP
consistently applied throughout the periods presented.
"Default Rate" shall mean 4% per annum above the prime rate or
base rate on corporate loans at large U.S. money center commercial
banks as published in The Wall Street Journal or, if publication of
such rate shall be suspended or terminated, the annual rate of
interest, determined daily and expressed as a percentage, from time to
time announced by one of the five largest national-chartered banking
institutions having their principal office in New York, New York and
selected by HRP at the time such publication is suspended or
terminated. Each change in the Interest Rate shall take effect
simultaneously with the date of publication or announcement, as
applicable, of each corresponding change in such prime rate or base
rate.
"Financial Officer's Certificate" shall mean a certificate of
the financial officer of the Guarantor, duly authorized, accompanying
the financial statements required to be delivered by such Person
pursuant to Section 14, in which such officer shall (a) certify that
such statements have been properly prepared in accordance with GAAP and
are true, correct and complete in all material respects and fairly
present the consolidated financial condition of the Guarantor at and as
of the dates thereof and the results of its and their operations for
the periods covered thereby, and (b) certify that such officer has
reviewed the CCA Documents and has no knowledge of any material default
by the Guarantor or any Subsidiary thereof in the performance or
observance of any of the provisions of any CCA Document or of any
condition or event which constitutes an Event of Default under any CCA
Document or which with the passage of time or the giving of notice or
both would become such an Event of Default.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Guarantor, or of the
<PAGE>
- 3 -
Guarantor and its Subsidiaries taken as a whole, (b) the ability of the
Guarantor to perform its obligations under this Guaranty, or (c) the
validity or enforceability of this Guaranty, or the rights of HRP
hereunder.
"Obligations" shall mean the payment and performance of each
and every obligation and liability of any CCA Company to HRP under any
CCA Document, whether now existing or hereafter arising or created,
joint or several, direct or indirect, absolute or contingent, due or to
become due, matured or unmatured, liquidated or unliquidated, arising
by contract, operation of law or otherwise, and including, without
limitation, (i) all principal, premium or prepayment fee and interest
under any promissory note payable to HRP by any CCA Company, (ii) all
rent under any lease with HRP as landlord, and (iii) all fees and
charges, and all costs and expenses payable under any CCA Document.
"Subsidiary" shall mean any corporation of which more than
fifty percent of the outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time capital stock of any other
class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency) is at the time directly or
indirectly owned by Guarantor, or Guarantor and one or more other
Subsidiaries, or by one or more Subsidiaries.
2. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees to
HRP the prompt and complete payment and performance by the CCA Companies (and
each of them), when due (whether at stated maturity, by acceleration or
otherwise), of the Obligations. The Guarantor further agrees to pay any and all
reasonable expenses (including, without limitation, all reasonable fees and
disbursements of counsel to HRP) which may be paid or incurred by HRP in
enforcing any of its rights under this Guaranty. This Guaranty is a guaranty of
payment and not of collectibility and is absolute and in no way conditional or
contingent. The Guarantor's liability hereunder is direct and unconditional and
may be enforced after nonpayment or nonperformance by any CCA Company of any
Obligation without requiring HRP to resort to any other Person (including
without limitation such CCA Company) or any other right, remedy or collateral.
This Guaranty shall remain in full force and effect until the Obligations are
paid in full following the termination of all CCA Documents.
3. Costs and Expenses of Collection. The Guarantor agrees, as principal obligor
and not as a guarantor only, to pay to HRP forthwith upon demand, in immediately
available funds, all costs and expenses (including, without limitation, all
court costs and all fees and disbursements of counsel to HRP) incurred or
expended by HRP in connection with the enforcement of this Guaranty, together
with interest on such amounts from the time such amounts become due until
payment at the Default Rate. It shall be a condition of the obligations of
Guarantor to pay any fees and expenses payable by it under this Guaranty that
HRP shall have, or shall have caused to have, provided the Guarantor with a
writing describing such fees and/or expenses in reasonable detail.
4. Right of Setoff. Regardless of the adequacy of any collateral or other means
of obtaining repayment of the Obligations, HRP is hereby authorized, without
notice to the Guarantor or compliance with any other condition precedent now or
hereafter imposed by Applicable Law (all of which are hereby expressly waived to
the extent permitted by Applicable Law) and to the fullest extent permitted by
Applicable Law, to set off and apply any securities, deposits or other property
belonging to the Guarantor now or hereafter held by HRP against the obligations
of the Guarantor under this Guaranty, whether or not HRP shall have made any
demand under this Guaranty, at any time and from time to time after the
occurrence of a Event of Default under and as defined in any CCA Document, in
such manner as HRP in its sole discretion may determine, and the Guarantor
hereby grants HRP a continuing security interest in such securities, deposits
and property for the payment and performance of such obligations.
<PAGE>
- 4 -
5. Subrogation and Contribution. Until the Obligations shall have been paid and
performed in full, the Guarantor irrevocably and unconditionally waives any and
all rights to which it may be entitled, by operation of law or otherwise, to be
subrogated, with respect to any payment made by the Guarantor hereunder, to the
rights of HRP against any CCA Company, or otherwise to be reimbursed,
indemnified or exonerated by any CCA Company in respect thereof or to receive
any payment, in the nature of contribution or for any other reason, from any
other guarantor of the Obligations with respect to any payment made by the
Guarantor hereunder. Until the Obligations shall have been paid and performed in
full, the Guarantor waives any defense it may have based upon any election of
remedies by HRP which impairs the Guarantor's subrogation rights or the
Guarantor's rights to proceed against any CCA Company for reimbursement
(including without limitation any loss of rights the Guarantor may suffer by
reason of any rights, powers or remedies of such CCA Company in connection with
any anti-deficiency laws or any other laws limiting, qualifying or discharging
any indebtedness to HRP). Until the Obligations shall have been paid, performed
and satisfied in full, the Guarantor further waives any right to enforce any
remedy which HRP now has or may in the future have against any CCA Company, any
other guarantor or any other Person and any benefit of, or any right to
participate in, any security whatsoever now or in the future held by HRP.
6. Effect of Bankruptcy Stay. If acceleration of the time for payment or
performance of any of the Obligations is stayed upon the insolvency, bankruptcy
or reorganization of any CCA Company or any other Person or otherwise, all such
amounts otherwise subject to acceleration shall nonetheless be payable by the
Guarantor under this Guaranty forthwith upon demand.
7. Receipt of CCA Documents, etc. The Guarantor confirms, represents and
warrants to HRP that (i) it has received true and complete copies of all
existing CCA Documents from the CCA Companies, has read the contents thereof and
reviewed the same with legal counsel of its choice; (ii) no representations or
agreements of any kind have been made to the Guarantor which would limit or
qualify in any way the terms of this Guaranty; (iii) this Guaranty is executed
at the CCA Companies' request and not at the request of HRP; (iv) HRP has made
no representation to the Guarantor as to the creditworthiness of any CCA
Company; and (v) the Guarantor has established adequate means of obtaining from
each CCA Company on a continuing basis information regarding such CCA Company's
financial condition. The Guarantor agrees to keep adequately informed from such
means of any facts, events, or circumstances which might in any way affect the
Guarantor's risks under this Guaranty, and the Guarantor further agrees that HRP
shall have no obligation to disclose to the Guarantor any information or
documents acquired by HRP in the course of its relationship with the CCA
Companies.
8. Amendments, etc. with Respect to the Obligations. The obligations of the
Guarantor under this Guaranty shall remain in full force and effect without
regard to, and shall not be released, altered, exhausted, discharged or in any
way affected by any circumstance or condition (whether or not any CCA Company
shall have any knowledge or notice thereof), including without limitation (a)
any amendment or modification of or supplement to any CCA Document, or any
obligation, duty or agreement of the CCA Companies or any other Person
thereunder or in respect thereof; (b) any assignment or transfer in whole or in
part of any of the Obligations; any furnishing, acceptance, release,
nonperfection or invalidity of any direct or indirect security or guaranty for
any of the Obligations; (c) any waiver, consent, extension, renewal, indulgence,
settlement, compromise or other action or inaction under or in respect of any
CCA Document, or any exercise or nonexercise of any right, remedy, power or
privilege under or in respect of any such instrument (whether by operation of
law or otherwise); (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to any
CCA Company or any other Person or any of their respective properties or
creditors or any resulting release or discharge of any Obligation (including
without limitation any rejection of any lease pursuant to Section 365 of the
Federal Bankruptcy Code); (e) any new or additional financing arrangements
entered
<PAGE>
- 5 -
into by any CCA Company or by any other Person on behalf of or for the benefit
of any CCA Company; (f) the merger or consolidation of any CCA Company with or
into any other Person or of any other Person with or into any CCA Company; (g)
the voluntary or involuntary sale or other disposition of all or substantially
all the assets of any CCA Company or any other Person; (h) the voluntary or
involuntary liquidation, dissolution or termination of any CCA Company or any
other Person; (i) any invalidity or unenforceability, in whole or in part, of
any term hereof or of any CCA Document, or any obligation, duty or agreement of
any CCA Company or any other Person thereunder or in respect thereof; (j) any
provision of any applicable law or regulation purporting to prohibit the payment
or performance by any CCA Company or any other Person of any Obligation; (k) any
failure on the part of any CCA Company or any other Person for any reason to
perform or comply with any term of any CCA Document or any other agreement; or
(l) any other act, omission or occurrence whatsoever, whether similar or
dissimilar to the foregoing. The Guarantor authorizes each CCA Company, each
other guarantor in respect of the Obligations and HRP at any time in its
discretion, as the case may be, to alter any of the terms of any of the
Obligations.
9. Guarantor as Principal. If for any reason the CCA Companies, or any of them,
or any other Person is under no legal obligation to discharge any Obligation, or
if any other moneys included in the Obligations have become unrecoverable from
the CCA Companies, or any of them, or any other Person by operation of law or
for any other reason, including, without limitation, the invalidity or
irregularity in whole or in part of any Obligation or of any CCA Document, the
legal disability of any CCA Company or any other obligor in respect of
Obligations, any discharge of or limitation on the liability of any CCA Company
or any other Person or any limitation on the method or terms of payment under
any Obligation, or of any CCA Document, which may now or hereafter be caused or
imposed in any manner whatsoever (whether consensual or arising by operation of
law or otherwise), this Guaranty shall nevertheless remain in full force and
effect and shall be binding upon the Guarantor to the same extent as if the
Guarantor at all times had been the principal obligor on all Obligations.
10. Waiver of Demand, Notice, Etc. The Guarantor hereby waives, to the extent
not prohibited by applicable law, all presentments, demands for performance,
notice of nonperformance, protests, notices of protests and notices of dishonor
in connection with the Obligations or any CCA Document, including but not
limited to (a) notice of the existence, creation or incurring of any new or
additional obligation or of any action or failure to act on the part of any CCA
Company, HRP, any endorser or creditor of any CCA Company or any other Person;
(b) any notice of any indulgence, extensions or renewals granted to any obligor
with respect to the Obligations; (c) any requirement of diligence or promptness
in the enforcement of rights under any CCA Document, or any other agreement or
instrument directly or indirectly relating thereto or to the Obligations; (d)
any enforcement of any present or future agreement or instrument relating
directly or indirectly thereto or to the Obligations; (e) notice of any of the
matters referred to in Section 9 above; (f) any defense of any kind which the
Guarantor may now have with respect to his liability under this Guaranty; (g)
any right to require HRP, as a condition of enforcement of this Guaranty, to
proceed against any CCA Company or any other Person or to proceed against or
exhaust any security held by HRP at any time or to pursue any other right or
remedy in HRP's power before proceeding against the Guarantor; (h) any defense
that may arise by reason of the incapacity, lack of authority, death or
disability of any other Person or Persons or the failure of HRP to file or
enforce a claim against the estate (in administration, bankruptcy, or any other
proceeding) of any other Person or Persons; (i) any defense based upon an
election of remedies by HRP; (j) any defense arising by reason of any "one
action" or "anti-deficiency" law or any other law which may prevent HRP from
bringing any action, including a claim for deficiency, against the Guarantor,
before or after HRP's commencement of completion of any foreclosure action,
either judicially or by exercise of a power of sale; (k) any defense based upon
any lack of diligence by HRP in the collection of any Obligation; (l) any duty
on the part of HRP to disclose to the Guarantor any facts HRP may now or
hereafter know about any CCA Company or any other obligor in respect of
Obligations; (m) any defense arising because of an election made by HRP under
Section
<PAGE>
- 6 -
1111(b)(2) of the Federal Bankruptcy Code; (n) any defense based on any
borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code; (o) and any defense based upon or arising out of any defense
which any CCA Company or any other Person may have to the payment or performance
of the Obligations (including but not limited to failure of consideration,
breach of warranty, fraud, payment, accord and satisfaction, strict foreclosure,
statute of frauds, bankruptcy, infancy, statute of limitations, lender liability
and usury). Guarantor acknowledges and agrees that each of the waivers set forth
herein on the part of the Guarantor is made with Guarantor's full knowledge of
the significance and consequences thereof and that, under the circumstances, the
waivers are reasonable. If any such waiver is determined to be contrary to
Applicable Law such waiver shall be effective only to the extent no prohibited
by such Applicable Law.
11. Reinstatement. This Guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
HRP upon the insolvency, bankruptcy, dissolution, liquidation or reorganization
of any CCA Company or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, any CCA Company
or any substantial part of its property, or otherwise, all as though such
payments had not been made.
12. Payments. The Guarantor hereby agrees that the Obligations will be paid to
HRP without set-off or counterclaim in U.S. Dollars at the office of HRP located
at 400 Centre Street, Newton, Massachusetts 02158, or to such other location as
HRP shall notify the Guarantor.
13. Representations and Warranties. The Guarantor represents and warrants that:
(i) Corporate Existence. The Guarantor is a corporation duly
incorporated and validly existing under the laws of the jurisdiction of
its incorporation, and is duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property owned or
business transacted by it makes such licensing or qualification
necessary, except where the failure to be licensed or to so qualify
could not have a Material Adverse Effect.
(ii) No Violation. The execution, delivery and performance of
this Guaranty will not contravene any provision of law, statute, rule
or regulation to which the Guarantor or any of its Subsidiaries is
subject or any judgment, decree, franchise, order or permit applicable
to the Guarantor, or conflict or be inconsistent with or result in any
breach of, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any lien or security interest
upon any of the property or assets of the Guarantor pursuant to the
terms of any agreement or instrument to which the Guarantor is party or
by which its assets are bound, or violate any provision of the
respective corporate charters or bylaws of the Guarantor.
(iii) Corporate Authority and Power. The execution, delivery
and performance of this Guaranty is within the corporate powers of the
Guarantor and has been duly authorized by all necessary corporate
action.
(iv) Enforceability. This Guaranty has been duly executed and
delivered by the Guarantor, and this Guaranty constitutes the valid and
binding obligation of the Guarantor enforceable against the Guarantor
in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally
and except as enforceability may be subject to general principles of
equity, whether such principles are applied in a court of equity or at
law.
<PAGE>
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(v) Governmental Approvals. No order, permission, consent,
approval, license, authorization, registration or validation of, or
filing with, or exemption by, any governmental authority is required to
authorize, or is required in connection with, the execution, delivery
and performance of this Guaranty, or the taking of any action
contemplated hereby or thereby.
(vi) Litigation. The Guarantor has no notice or knowledge of
any action, suit or proceeding pending or threatened against or
affecting it at law or in equity or before or by any governmental
department, court, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any
kind that would, if adversely determined, have a Material Adverse
Effect.
14. Covenants. The Guarantor hereby covenants and agrees with HRP that, from and
after the date of this Guaranty until the Obligations are paid in full and all
CCA Documents have been terminated:
(a) Notices. The Guarantor shall promptly give notice to HRP of any
event which will, or that may reasonably be expected to, result in a material
adverse change in the financial condition or operation of the Guarantor and its
Subsidiaries taken as a whole.
(b) Financial Statements. The Guarantor shall furnish the following
statements to HRP:
(i) within sixty (60) days after each of the first three
quarters of any Fiscal Year, the Consolidated Financials for such
fiscal quarter, in each case accompanied by the Financial Officer's
Certificate;
(ii) within one hundred twenty (120) days after the end of
each Fiscal Year, the Consolidated Financials for such Fiscal Year, in
each case certified by Peat Marwick LLP or any other independent
certified public accountant of national reputation, and accompanied by
the Financial Officer's Certificate;
(iii) promptly after the sending or filing thereof, copies of
all reports which the Guarantor sends to its security holders
generally, and copies of all periodic reports which the Guarantor files
with the SEC or any stock exchange on which its shares are listed or
traded;
(iv) at any time and from time to time upon not less than
thirty (30) days notice from HRP, the Guarantor will furnish to HRP any
Consolidated Financials or any other financial reporting information
required to be filed by HRP with any securities and exchange
commission, the SEC or any successor agency, or any other governmental
authority, or required pursuant to any order issued by any court
governmental authority or arbitrator in any litigation to which HRP is
a party, for purposes of compliance therewith; and
(v) promptly upon notice from HRP, such other information
concerning the business, financial condition and affairs of the
Guarantor as HRP may reasonably request from time to time.
HRP may at any time, and from time to time, provide any lender to HRP with
copies of any of the foregoing statements (provided that HRP shall obtain the
prior consent of the Guarantor (which shall not be unreasonably withheld) prior
to furnishing to such lender copies of any of the foregoing furnished to HRP
pursuant to subparagraph (v) above that is known to HRP to contain non-public
information).
<PAGE>
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(c) Reports. The Guarantor shall promptly provide to HRP such
certificates, reports and other documents required of the Guarantor hereunder
and under the CCA Documents, and the Guarantor shall cause each CCA Company to
provide such certificates, reports and other documents required of it hereunder
and under the CCA Documents.
(d) Legal Existence. The Guarantor shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence (subject as provided in Section 14.(f) hereof).
(e) Compliance. The Guarantor shall , and shall cause each of its
Subsidiaries to, comply in all material respects with all Applicable Laws in
respect of the conduct of its business and the ownership of its property
(including, without limitation, applicable statutes, rules, regulations, orders
and restrictions relating to environmental, safety and other similar standards
or controls), except where the failure to comply, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(f) Merger; Sale of Assets, Etc. The Guarantor shall not enter into any
transaction of merger or consolidation, or liquidate, wind-up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, sub-lease,
transfer or otherwise dispose of in one transaction or a series of transactions,
all or substantially all of its business, property or fixed assets, whether now
owned or hereafter acquired, except that the Guarantor may merge or consolidate
with any Person, or convey, transfer or lease substantially all of its assets so
long as:
(i) no condition or event shall exist, either before or
immediately after giving effect to such merger or consolidation, or
such conveyance, transfer or lease, that constitutes an Event of
Default under and as defined in the Master Lease or any Mortgage
included in the CCA Documents or that, with the giving of notice or
lapse of time or both would become such an Event of Default;
(ii) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the Guarantor, as
the case may be, shall be a corporation organized and existing under
the laws of the United States or any State thereof (including the
District of Columbia), and, if the Guarantor is not such corporation,
(i) such corporation shall have executed and delivered to HRP its
assumption of the due and punctual performance and observance of each
covenant and condition of this Guaranty to the same extent and with the
same effect as though such corporation was a party hereto and was named
and defined as the "Guarantor" herein and (ii) shall have caused to be
delivered to HRP an opinion of nationally recognized independent
counsel, or other independent counsel reasonably satisfactory to HRP,
to the effect that all agreements or instruments effecting such
assumption are enforceable in accordance with their terms and comply
with the terms hereof; and
(1) if the survivor of any such merger is the Guarantor,
the consolidated net worth of the Guarantor and its
Subsidiaries (determined in accordance with GAAP)
giving effect to such merger shall not be less than
$300,000,000; or
(2) if the successor formed by such consolidation or the
survivor of such merger, if other than the Guarantor,
or the Person that acquires by conveyance, transfer
or lease substantially all of the assets of the
Guarantor as an entirety, as the case may be, giving
effect to such consolidation or merger, or such
conveyance,
<PAGE>
- 9 -
transfer or lease, has a consolidated net worth
(determined in accordance with GAAP) of not less than
$300,000,000.
(g) Net Worth. From and after the date that any Person, or two or more
Persons acting in concert, shall acquire beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission) of 30% or more,
or rights, options or warrants to acquire 30% or more, of the outstanding shares
of voting stock of the Guarantor, the Guarantor shall not permit the
consolidated net worth of the Guarantor and its Subsidiaries (determined in
accordance with GAAP) to be less than $300,000,000 at any time.
15. Severability. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
16. Additional Guaranties. This Guaranty shall be in addition to any other
guaranty or other security for the Obligations, and it shall not be prejudiced
or rendered unenforceable by the invalidity of any such other guaranty or
security.
17. Paragraph Headings. The paragraph headings used in this Guaranty are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
18. No Waiver; Cumulative Remedies, Documentation of Expenses. HRP shall not by
any act (except by a written instrument pursuant to Paragraph 19 hereof), delay,
indulgence, omission or otherwise, be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of HRP, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by HRP of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which HRP would otherwise have on any future occasion. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
19. Waivers and Amendments; Successors and Assigns. None of the terms or
provisions of this Guaranty may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Guarantor and HRP,
provided that any provision of this Guaranty may be waived by HRP in a letter or
agreement executed by HRP or by telecopy from HRP. This Guaranty shall be
binding upon the successors and assigns of the Guarantor and shall inure to the
benefit of HRP and its successors and assigns.
20. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; GOVERNING LAW. THE GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO A JURY TRIAL
IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTY, ANY CCA DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR (1)
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF
<PAGE>
- 10 -
MASSACHUSETTS IN ANY ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH
ARISES OUT OF OR BY REASON OF THIS GUARANTY, ANY CCA DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ADDITION TO ANY OTHER COURT IN
WHICH SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT; (2) IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR
PROCEEDING IN WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER
HEREINAFTER PROVIDED; (3) TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH
ACTION, SUIT OR PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURT, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM
ATTACHMENT OR EXECUTION, THAT THE ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER; AND (4) AGREES THAT
PROCESS MAY BE SERVED UPON IT IN ANY SUCH ACTION, SUIT OR PROCEEDING IN THE
MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL LAWS OF MASSACHUSETTS, RULE 4 OF
THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR RULE 4 OF THE FEDERAL RULES OF
CIVIL PROCEDURE.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
21. Notices. All notices under this Guaranty shall be in writing, and shall be
delivered by hand, by a nationally recognized commercial overnight delivery
service, by first class mail or by telecopy, delivered, addressed or
transmitted, if to HRP, at 400 Centre Street, Newton, Massachusetts 02158,
Attention: President (telecopy no. 617-332-2261), with a copy to Sullivan &
Worcester LLP, One Post Office Square, Boston, Massachusetts 02109, Attention:
Harry E. Ekblom, Esq. (telecopy no. 617-338-2880), and if to the Guarantor, at
its address or telecopy number set out below its signature in this Guaranty.
Such notices shall be effective: in the case of hand deliveries, when received;
in the case of an overnight delivery service, on the next business day after
being placed in the possession of such delivery service, with delivery charges
prepaid; in the case of mail, three days after deposit in the postal system,
first class postage prepaid; and in the case of telecopy notices, when
electronic indication of receipt is received. Either party may change its
address and telecopy number by written notice to the other delivered in
accordance with the provisions of this Section.
<PAGE>
- 11 -
IN WITNESS WHEREOF, the undersigned has caused this Guaranty
to be duly executed and delivered as of the date first above written.
INTEGRATED HEALTH SERVICES, INC.
By /s/
Name:
Title:
Address for Notices:
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Attn: Eleanor C. Harding
Executive Vice President--Finance
Fax: 410-998-8716
Signature page to Guaranty by Integrated Health Services, Inc.
dated as of September 24, 1997.
EXHIBIT 10.38
LEASE AGREEMENT
DATED AS OF FEBRUARY 11, 1994
BY AND BETWEEN
HEALTH AND REHABILITATION PROPERTIES TRUST,
AS LANDLORD,
AND
HORIZON HEALTHCARE CORPORATION, AS TENANT.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1 DEFINITIONS.....................................................................................1
1.1 "Added Value Percentage"...................................................................1
1.2 "Additional Rent"..........................................................................1
1.3 "Affiliated Person"........................................................................1
1.4 "Assumed Indebtedness" ....................................................................2
1.5 "Award" ...................................................................................2
1.6 "Base Net Patient Revenues" ...............................................................2
1.7 "Base Rate" ...............................................................................2
1.8 "Base Year" ...............................................................................2
1.9 "Business Day" ............................................................................2
1.10 "Capital Addition" .......................................................................2
1.11 "Capital Additions Cost" .................................................................3
1.12 "Capital Expenditure" ....................................................................3
1.13 "Cash Adjustment" ........................................................................4
1.14 "Claims" .................................................................................4
1.15 "Code" ...................................................................................4
1.16 "Commencement Date" ......................................................................4
1.17 "Condemnation" ...........................................................................4
1.18 ..........................................................................................4
1.19 "Consolidated Financials" ................................................................4
1.20 "Control" ................................................................................4
1.21 "Date of Taking" .........................................................................4
1.22 "Default" ................................................................................5
1.23 "Encumbrance" ............................................................................5
1.24 "Entity" .................................................................................5
1.25 "Environmental Laws" .....................................................................5
1.26 "Environmental Notice" ...................................................................5
1.27 "Environmental Obligation" ...............................................................5
1.28 "Event of Default" .......................................................................5
1.29 "Excess Net Patient Revenues" ............................................................5
1.30 "Extended Terms" .........................................................................5
1.31 "Facility" ...............................................................................5
1.32 "Facility Mortgage" ......................................................................5
1.33 "Facility Mortgagee" .....................................................................5
1.34 "Facility Trade Names" ...................................................................5
1.35 "Fair Market Added Value" ................................................................6
1.36 "Fair Market Rental" .....................................................................6
1.37 "Fair Market Value" ......................................................................6
1.38 "Fair Market Value Purchase Price" .......................................................6
1.39 "Fiscal Year" ............................................................................6
1.40 "Fixed Term" .............................................................................6
1.41 "Fixtures" ...............................................................................6
1.42 "Hazardous Substances" ...................................................................6
1.43 "Immediate Family" .......................................................................7
1.44 "Impositions" ............................................................................7
1.45 "Initiating Party" .......................................................................7
1.46 "Insurance Requirements" .................................................................7
<PAGE>
1.47 "Land" ...................................................................................7
1.48 "Landlord" ...............................................................................8
1.49 "Landlord Default" .......................................................................8
1.50 "Lease" ..................................................................................8
1.51 "Leased Improvements" ....................................................................8
1.52 "Leased Personal Property" ...............................................................8
1.53 "Leased Property" ........................................................................8
1.54 "Legal Requirements" .....................................................................8
1.55 "Lending Institution" ....................................................................8
1.56 "Minimum Rent" ...........................................................................8
1.57 "Minimum Repurchase Price" ...............................................................8
1.58 "Net Patient Revenues" ...................................................................9
1.59 "Non-Capital Additions" .................................................................10
1.60 "Officer's Certificate" .................................................................10
1.61 "Other Leases" ..........................................................................10
1.62 "Other Obligations" .....................................................................10
1.63 "Overdue Rate" ..........................................................................10
1.64 "Parent" ................................................................................10
1.65 "Percentage Rent" .......................................................................10
1.66 "Permitted Encumbrances" ................................................................10
1.67 "Person" ................................................................................11
1.68 "Primary Intended Use" ..................................................................11
1.69 "Qualified Appraiser" ...................................................................11
1.70 "Records" ...............................................................................11
1.71 "Rent" ..................................................................................11
1.72 "Responding Party" ......................................................................11
1.73 "SEC" ...................................................................................11
1.74 "State" .................................................................................11
1.75 "Subsidiary" ............................................................................11
1.76 "Substitute Properties" .................................................................11
1.77 "Substitution Date" .....................................................................11
1.78 "Successor Landlord" ....................................................................11
1.79 "Superior Lease" ........................................................................11
1.80 "Superior Landlord" .....................................................................11
1.81 "Superior Mortgage" .....................................................................12
1.82 "Superior Mortgagee" ....................................................................12
1.83 "Tenant" ................................................................................12
1.84 "Tenant's Personal Property" ............................................................12
1.85 "Term" ..................................................................................12
1.86 "Test Rate" .............................................................................12
1.87 "Trustees" ..............................................................................12
1.88 "Unavoidable Delays" ....................................................................12
1.89 "Unsuitable for Its Primary Intended Use" ...............................................12
ARTICLE 2 PREMISES AND TERM..............................................................................13
2.1 Premises..................................................................................14
2.2 Condition of Premises.....................................................................14
2.3 Fixed Term................................................................................14
2.4 Extended Terms............................................................................14
<PAGE>
ARTICLE 3 RENT...........................................................................................15
3.1 Rent......................................................................................15
3.1.1 Minimum Rent.......................................................................15
3.1.2 Percentage Rent....................................................................15
3.1.3 Additional Rent....................................................................17
3.2 Late Payment of Rent......................................................................19
3.3 Net Lease.................................................................................19
3.4 No Termination, Abatement, Etc............................................................20
ARTICLE 4 USE OF THE LEASED PROPERTY.....................................................................20
4.1 Permitted Use.............................................................................20
4.1.1 Primary Intended Use...............................................................20
4.1.2 Necessary Approvals................................................................21
4.1.3 Continuous Operation, Etc..........................................................21
4.1.4 Lawful Use, Etc....................................................................21
4.2 Compliance with Legal and Insurance
Requirements, Instruments, Etc..........................................................21
4.3 Compliance with Medicaid and Medicare
Requirements............................................................................22
4.4 Environmental Matters.....................................................................22
ARTICLE 5 MAINTENANCE AND REPAIRS, ETC...................................................................23
5.1 Maintenance and Repair....................................................................23
5.1.1 Tenant's Obligations...............................................................23
5.1.2 Landlord's Obligations.............................................................23
5.2 Capital Expenditure Cost Sharing..........................................................24
5.3 Tenant's Personal Property................................................................24
5.4 Yield Up..................................................................................25
5.5 Encroachments, Restrictions, Etc..........................................................25
ARTICLE 6 CAPITAL ADDITIONS, ETC.........................................................................26
6.1 Construction of Capital Additions to the Leased Property..................................26
6.2 Capital Additions Financed by Tenant......................................................27
6.3 Information Regarding Capital Additions...................................................29
6.4 Non-Capital Additions.....................................................................30
6.5 Salvage...................................................................................31
<PAGE>
ARTICLE 7 LIENS..........................................................................................31
7.1 Liens.....................................................................................31
7.2 Landlord's Lien...........................................................................31
7.3 Mechanic's Liens..........................................................................32
ARTICLE 8 PERMITTED CONTESTS.............................................................................32
ARTICLE 9 INSURANCE AND INDEMNIFICATION..................................................................33
9.1 General Insurance Requirements............................................................33
9.2 Waiver of Subrogation.....................................................................35
9.3 Form Satisfactory, Etc....................................................................35
9.4 No Separate Insurance.....................................................................36
9.5 Indemnification of Landlord...............................................................36
9.6 Indemnification of Tenant.................................................................37
ARTICLE 10 CASUALTY.......................................................................................37
10.1 Insurance Proceeds.......................................................................37
10.2 Reconstruction in the Event of Damage or Destruction.....................................37
10.2.1 Tenant's Obligations.............................................................37
10.2.2 Tenant's Obligations.............................................................38
10.3 Insufficient Insurance Proceeds..........................................................37
10.4 Disbursement of Proceeds.................................................................39
10.5 Tenant's Property........................................................................39
10.6 Restoration of Tenant's Property.........................................................40
10.7 No Abatement of Rent.....................................................................40
10.8 Damage Near End of Term..................................................................40
ARTICLE 11 CONDEMNATION...................................................................................41
11.1 Total Condemnation.......................................................................41
11.2 Partial Condemnation.....................................................................41
11.3 Temporary Condemnation...................................................................41
11.4 Tenant's Option..........................................................................42
11.5 Allocation of Award......................................................................42
11.6 Abatement Procedures.....................................................................42
ARTICLE 12 DEFAULTS AND REMEDIES..........................................................................43
12.1 Events of Default........................................................................42
12.2 Remedies.................................................................................45
12.3 Waiver...................................................................................47
12.4 Application of Funds.....................................................................47
12.5 Failure to Conduct Business..............................................................47
12.6 Landlord's Right to Cure Tenant's Default................................................47
12.7 Trade Names..............................................................................48
<PAGE>
ARTICLE 13 HOLDING OVER...................................................................................48
ARTICLE 14 LANDLORD'S DEFAULT.............................................................................48
ARTICLE 15 PURCHASE OF PREMISES...........................................................................49
ARTICLE 16 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY...............................................50
16.1 Tenant's Substitution Option.............................................................51
16.2 Landlord's Substitution Option...........................................................51
16.3 Substitution Procedures..................................................................51
16.4 Conditions to Substitution...............................................................53
16.5 Conveyance to Tenant.....................................................................54
16.6 Expenses.................................................................................55
ARTICLE 17 SUBLETTING AND ASSIGNMENT......................................................................55
17.1 Subletting and Assignment................................................................55
17.2 Required Sublease Provisions.............................................................56
17.3 Sublease Limitation......................................................................57
17.4 Assignment and Subletting Procedure......................................................57
ARTICLE 18 CERTIFICATES AND FINANCIAL STATEMENTS..........................................................57
18.1 Estoppel Certificates....................................................................57
18.2 Financial Statements.....................................................................58
18.3 General Operations.......................................................................58
18.3.1 Reimbursement, Licensure, Etc....................................................58
18.3.2 Monthly Reports..................................................................59
ARTICLE 19 LANDLORD ACCESS................................................................................59
19.1 Landlord's Right to Inspect..............................................................59
19.2 Landlord's Option to Purchase the Tenant's Personal Property; Transfer of
Licenses.......................................................................................60
ARTICLE 20 APPRAISAL......................................................................................60
20.1 Appraisal Procedure......................................................................60
ARTICLE 21 MORTGAGES......................................................................................61
21.1 Landlord May Grant Liens.................................................................61
21.2 Subordination of Lease...................................................................61
21.3 Notice to Mortgagee and Ground Landlord..................................................63
ARTICLE 22 INVESTMENT TAX CREDIT..........................................................................64
22.1 Investment Tax Credit....................................................................64
<PAGE>
ARTICLE 23 ADDITIONAL COVENANTS OF TENANT.................................................................64
23.1 Notice of Change of Name, Administrator, Etc.............................................64
23.2 Notice of Litigation, Potential Event of Default, Etc....................................64
23.3 Management of Leased Property............................................................65
23.4 Distributions, Payments to Affiliated Persons, Etc.......................................65
ARTICLE 24 MISCELLANEOUS..................................................................................65
24.1 No Waiver................................................................................65
24.2 Remedies Cumulative......................................................................65
24.3 Acceptance of Surrender..................................................................66
24.4 No Merger of Title.......................................................................66
24.5 Conveyance by Landlord...................................................................66
24.6 Quiet Enjoyment..........................................................................66
24.7 Landlord's Liability.....................................................................67
24.8 Landlord's Consent.......................................................................67
24.9 Memorandum of Lease......................................................................67
24.10 Notices.................................................................................67
24.11 Construction............................................................................67
24.12 Governing Law...........................................................................69
24.13 Purchase Option.........................................................................69
24.14 Purchase Option.........................................................................70
</TABLE>
EXHIBITS
A - Other Leases
B - Permitted Encumbrances
C - The Land
D - Minimum Rent
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of February 11, 1994, is made by and
between HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate
investment trust, as landlord ("Landlord"), having its principal office at 400
Centre Street, Newton, Massachusetts, and HORIZON HEALTHCARE CORPORATION, a
Delaware corporation, as tenant ("Tenant"), having its principal office at 6001
Indian School Road, N.E., Suite 530, Albuquerque, New Mexico.
W I T N E S S E T H :
WHEREAS, Landlord owns the Leased Property (this and other capitalized
terms used and not otherwise defined herein having the meanings ascribed to such
terms in Article 1) and Landlord wishes to lease the Leased Property to Tenant
and Tenant wishes to lease the Leased Property from Landlord, subject to and
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contain
and other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
ARTICLE 1
DEFINITIONS
Each reference in this Lease to any of the following terms shall be
construed to incorporate the definitions hereinafter set forth and include the
plural as well as the singular. All accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with generally
accepted accounting principles.
1.1 "Added Value Percentage" shall have the meaning given such term in
Section 6.2(a).
1.2 "Additional Rent" shall have the meaning given such term in Section
3.1.3.
1.3 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership; (b) in the case of any such Person which is a limited liability
company, any member of such company; (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent o the Persons referred to in the
preceding clauses (a) and (b); (d) any other Person otherwise directly or
indirectly controlling or under common control with such Person or one or more
of the Persons referred to in the preceding clauses (a), (b) and (c); and (e)
any other
<PAGE>
-2-
Person who is a member of the Immediate Family of such Person or any Person
referred to in the preceding clauses (a) through (d).
1.4 "Assumed Indebtedness" shall mean any indebtedness or other
obligations existing at the time of acquisition of the Leased Property by
Landlord secured by a mortgage, deed of trust or other security agreement
creating a lien on the Leased Property and assumed by Landlord, and any
indebtedness resulting from the refinancing thereof, and/or any subsequent
indebtedness resulting from Landlord's financing of, or Landlord's reimbursement
of Tenant's financing of, any Capital Additions during the Term, except any
indebtedness or other obligations of Tenant not assumed by Landlord prior to or
during the Term.
1.5 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of the Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses incurred by Landlord in connection with obtaining any such
award).
1.6 "Base Net Patient Revenues" shall mean Net Patient Revenues for the
Base Year.
1.7 "Base Rate" shall mean the rate of interest, determined daily and
expressed as a percentage, announced by Citibank, N.A., in New York, New York,
from time to time, as Citibank, N.A.'s "base rate" or "prime rate", so-called,
or, if at any time Citibank, N.A. ceases to announce such a rate, as announced
by the largest national or state chartered banking institution other than
Citibank, N.A. then having its principal office in New York, New York and
announcing such a rate. If at any time neither Citibank, N.A. nor any of the
five largest other national or state chartered banking institutions having their
principal offices in New York, New York is announcing such a floating rate,
"Base Rate" shall mean a rate of interest, determined daily, which is two (2)
percentage points above the 14-day moving average closing trading price of
90-day Treasury Bills.
1.8 "Base Year" shall mean the twelve-month period beginning June 1,
1999 and ending May 31, 2000.
1.9 "Business Day" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
or in New York, New York are authorized by law or executive action to close.
1.10 "Capital Addition" shall mean one or more new buildings, or one or
more additional structures annexed to any portion of any of the Leased
Improvements, or the material expansion of existing improvements, which are
constructed on any parcel or portion of the Land during the Term, including, but
not
<PAGE>
-3-
limited to, the construction of a new wing or new story, the renovation of
existing improvements on the Leased Property in order 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, to change the purpose for which such beds are utilized
or to improve the quality of the Facility.
1.11 "Capital Additions Cost" shall mean the cost of any Capital
Addition proposed to be made by Tenant, whether paid for by Tenant or Landlord.
Such cost shall include (a) the cost of construction of the Capital Addition,
including, site preparation and improvement, materials, labor, supervision,
developer and administrative fees, legal fees, and related design, engineering
and architectural services, the cost of any fixtures, the cost of construction
financing (including, but not limited to, capitalized interest) and other
miscellaneous costs approved by Landlord, (b) if agreed to by Landlord in
writing, in advance, the cost of any land contiguous to the Leased Property
which is to become a part of the Leased Property purchased for the purpose of
placing thereon the Capital Addition or any portion thereof or for providing
means of access thereto, or parking facilities therefor, including the cost of
surveying the same, (c) the cost of insurance, real estate taxes, water and
sewage charges and other carrying charges for such Capital Addition during
construction, (d) title insurance charges, (e) reasonable attorneys, fees, (f)
filing and registration fees and recording taxes, (g) documentary stamp or
transfer taxes, and (h) all actual and reasonable costs and expenses of Landlord
and any Lending Institution committed to finance the Capital Addition,
including, but not limited to, (i) reasonable attorneys' fees, (ii) printing
expenses, (iii) filing, registration and recording taxes and fees, (iv)
documentary stamp or transfer taxes, (v) title insurance charges and appraisal
fees, (vi) rating agency fees, and (vii) loan commitment fees.
1.12 "Capital Expenditure" shall mean any single required improvement,
alteration, replacement or repair of the Leased Property, or any part thereof,
(a) having a cost in excess of one Hundred Thousand Dollars ($100,000.00) (which
amount shall be increased each year of the Lease by the product determined by
multiplying such amount by the percentage increase in the Consumer Price Index,
Urban Wage Earners and Clerical Workers, All Items, Base 1982- 84=100, published
by the U.S. Department of Labor, All Cities, or such comparable index published
by the U.S. Department of Labor or its successor agency), and (b) having a
useful life in excess of the longer of (i) twelve (12) months, or (ii) the
remaining period of the Term, except capital improvements necessitated by
destruction or Condemnation of the Leased Property, or any portion thereof.
<PAGE>
-4-
1.13 "Cash Adjustment" shall have the meaning given such term in
Section 16.3 (d) .
1.14 "Claims" shall have the meaning given such term in Article 8.
1.15 "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.16 "Commencement Date" shall mean the date of this Lease.
1.17 "Condemnation" shall mean (a) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a Condemnor, (b) a
voluntary sale or transfer by Landlord 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 the 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 any
portion of the Leased Property, whether or not the same shall have actually been
commenced.
1.18 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual having the power of Condemnation.
1.19 "Consolidated Financials" shall mean, for any Fiscal Year or other
accounting period of Tenant and its consolidated Subsidiaries, statements of
earnings, retained earnings and changes in financial position for such period
and for the period from the beginning of the applicable Fiscal Year to the end
of such period and the 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, consistently applied.
1.20 "Control" and any variations thereof shall mean, with respect to
any Person, the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, partnership interests or other equity interests.
1.21 "Date of Taking" shall mean the date the Condemnor has the right
to possession of the Leased Property, or any portion thereof, in connection with
a Condemnation.
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1.22 "Default" shall mean any event, act or omission which with the
giving of notice and/or lapse of time could constitute an Event of Default.
1.23 "Encumbrance" shall have the meaning given such term in Section
21.l.
1.24 "Entity" shall mean any corporation, general or limited
partnership, limited liability company, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, any government or agency or political subdivision thereof or any other
entity.
1.25 "Environmental Laws" shall mean all applicable Federal, state or
local statutes, laws, ordinances, rules and regulations, licensing requirements
or conditions, whether now existing or hereafter arising, relating to Hazardous
Substances.
1.26 "Environmental Notice" shall have the meaning given such term in
Section 4.4.
1.27 "Environmental Obligation" shall mean any cost, expense, loss or
damage arising under any Environmental Law or in connection with any Hazardous
Substance.
1.28 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.29 "Excess Net Patient Revenues" shall mean the amount of Net Patient
Revenues for any measuring period in excess of the Base Net Patient Revenues for
the equivalent period of the Base Year.
1.30 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.31 "Facility" shall mean the licensed nursing home being operated on
the Leased Property.
1.32 "Facility Mortgage" shall mean any mortgage, deed of trust or
other security agreement securing any Assumed Indebtedness or any other
encumbrance placed upon the Leased Property in accordance with Article 21.
1.33 "Facility Mortgagee" shall mean the holder of any Facility
Mortgage.
1.34 "Facility Trade Names" shall mean any of the names under which
Tenant operates, or has operated, the Facility at any time during the Term.
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1.35 "Fair Market Added Value" shall mean the Fair Market Value of the
Leased Property (including all Capital Additions) less the Fair Market Value of
the Leased Property determined as if no Capital Additions financed by Tenant had
been constructed.
1.36 "Fair Market Rental" shall mean the rental which a willing tenant
not compelled to rent would pay a willing landlord not compelled to lease for
the use and occupancy of the Leased Property, or applicable portion thereof, on
the terms and conditions of this Lease, for the term in question, and determined
in accordance with the appraisal procedures set forth in Article 20 or in such
other manner as shall be mutually acceptable to Landlord and Tenant.
1.37 "Fair Market Value" shall mean the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for the Leased
Property, (a) assuming the same is unencumbered by this Lease, (b) determined in
accordance with the appraisal procedures set forth in Article 20 or in such
other manner as shall be mutually acceptable to Landlord and Tenant, (c)
assuming such seller shall pay the closing costs generally paid by a seller of
real property in the state in which such property is located and that such buyer
shall pay closing costs generally paid by a buyer of real property in the state
in which such property is located, and (d) not taking into account any reduction
in value resulting from any indebtedness to which such property is subject,
except the positive or negative effect on the value of such property
attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any lien or 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.
1.38 "Fair Market Value Purchase Price" shall mean the Fair Market
Value of the Leased Property less the Fair Market Added Value.
1.39 "Fiscal Year" shall mean each twelve (12) month period from June 1
to May 31.
1.40 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.41 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.42 "Hazardous Substances" shall mean hazardous substances (as defined
by the Comprehensive Environmental Response, Compensation and Liability Act, as
now in effect or as hereafter from time to time amended), hazardous wastes (as
defined by the Resource Conservation and Recovery Act, as now in effect or as
hereafter from time to time amended), any hazardous waste,
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hazardous substance, pollutant or contaminant, oils, radioactive materials,
asbestos in any form or condition, or any pollutant or contaminant or hazardous,
dangerous or toxic chemicals, materials or substances within the meaning of any
other applicable Federal, state or local law, regulation, ordinance or
requirements relating to or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or materials, all
as now in effect or hereafter from time to time amended.
1.43 "Immediate Family" shall mean, with respect to any Person, his
spouse, parents, brothers, sisters, children (natural or adopted), stepchildren,
grandchildren, grandparents, parents-in-law, brothers-in-law, sisters-in-law,
nephews and nieces.
1.44 "Impositions" shall mean all taxes, assessments, and ad valorem,
sales, and use, single business, gross receipts, transaction privilege, rent or
similar taxes as the same are imposed on either Landlord or Tenant with respect
to the Leased Property and/or the business conducted thereon by Tenant and other
charges and impositions (including, but not limited to, fire protection service
fees and similar charges) levied, assessed or imposed at any time during the
Term by any governmental authority upon or against the Leased Property, or taxes
in lieu thereof, and additional types of taxes to supplement real estate taxes
due to legal limits imposed thereon. If, at any time during the Term, any tax or
excise on rents or other taxes, however described, are levied or assessed
against Landlord with respect to the rent reserved hereunder, either wholly or
partially in substitution for, or in addition to, real estate taxes assessed or
levied on the Leased Property, such tax of excise on rents shall be included in
Impositions; provided, however, that Impositions shall not include franchise,
estate, inheritance, succession, capital levy, transfer, income or excess
profits taxes assessed on Landlord. Impositions shall include any estimated
payment, whether voluntary or required, made by Landlord on account of a fiscal
tax period for which the actual and final amount of taxes for such period has
not been determined by the governmental authority as of the date of any such
estimated payment.
1.45 "Initiating Party" shall have the meaning given such term in
Section 20.1.
1.46 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Lease and all requirements of the issuer of any such
policy.
1.47 "Land" shall have the meaning given such term in Section 2.1(a).
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1.48 "Landlord" shall have the meaning given such term in the preambles
to this Lease.
1.49 "Landlord Default" shall have the meaning given such term in
Article 14.
1.50 "Lease" shall mean this Lease Agreement, including Exhibits A
through D hereto, as it and they may be amended from time to time as herein
provided.
1.51 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.52 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.53 "Leased Property" shall have the meaning given such term in
Section 2.1.
1.54 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions, including, but not limited to,
Environmental Laws, affecting the Leased Property or the maintenance,
construction, use or alteration thereof, whether now or hereafter enacted,
including those which may (a) require repairs, modifications or alterations in
or to the Leased Property or any portion thereof or (b) in any way adversely
affect the use and enjoyment thereof, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Tenant (other than encumbrances hereinafter created by Landlord without
the consent of Tenant), at any time in force affecting the Leased Property.
1.55 "Lending Institution" shall mean 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
$10,000,000.
1.56 "Minimum Rent" shall mean the amount set forth in Exhibit D.
1.57 "Minimum Repurchase Price" shall mean that portion of the
aggregate purchase price of the Leased Property paid by Landlord in cash or in
kind, plus the aggregate of unpaid principal balance of all encumbrances against
the Leased Property at the time of purchase thereof by Tenant, plus any amounts
paid
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by Landlord to reduce the principal balance of any Assumed Indebtedness, less
all proceeds received by Landlord from any refinancing of the Leased Property
(after payment of the debt refinanced and net of any costs and expenses incurred
in connection with such refinancing, including, without limitation, loan points,
commitment fees and commissions) and less the net amount (after deduction of all
reasonable legal fees and other costs and expenses, including, without
limitation, expert witness fees, incurred by Landlord in connection with
obtaining any such award) of all awards received by Landlord from any partial
Condemnation of the Leased Property or any portion thereof which are not applied
to restoration.
1.58 "Net Patient Revenues" shall mean all revenues received or
receivable from or by reason of the operation of the Facility, or any portion
thereof, or any other use of the Leased Property, or any portion thereof,
including, without limitation, all patient revenues received or receivable for
the use of or otherwise by reason of all rooms, beds and other facilities
provided, meals served, services performed, space or facilities subleased or
goods sold on the Leased Property, or any portion thereof, including, without
limitation, and except as provided below, any other arrangements with third
parties relating to the possession or use of any portion of any portion of the
Leased Property; provided, however, Net Patient Revenues shall not include: (a)
revenue from professional fees or charges by physicians and providers (other
than Tenant or Tenant's employees) of ancillary services, when and to the extent
such charges are paid over to such physicians or providers of ancillary
services, or are separately billed and not included in comprehensive fees; (b)
nonoperating revenues such as interest income or income from the sale of assets
not sold in the ordinary course of business; (c) contractual allowances
(relating to any period during the Term) for billings not paid by or received
from the appropriate governmental agencies or third party providers; (d)
allowances according to generally accepted accounting principles for
uncollectible accounts, including credit card accounts and charity care or other
administrative discounts; (e) all proper patient billing credits and adjustments
according to generally accepted accounting principles relating to health care
accounting; (f) federal, state or local sales or excise taxes and any tax based
on or measured by such revenues which is added to or made a part of the amount
billed to the patient or other recipient of such services or goods, whether
included in the billing or stated separately; (g) provider discounts for
hospital or other medical facility utilization contracts and credit card
discounts; (h) revenues attributable to Capital Additions financed by Tenant as
provided in Section 6.2; (i) revenues attributable to services actually,
provided off the Leased Property, such as home health care; and (j) any amounts
actually paid by Tenant for the cost of any federal, state or local governmental
programs imposed specially to provide or finance
<PAGE>
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indigent patient care. To the extent the Leased Property or any portion thereof
is subleased by Tenant, Net Patient Revenues shall include (x) the Net Patient
Revenues generated from the operations conducted on such subleased portion of
the Leased Property and (y) the rent received or receivable by Tenant from or
under any such sublease to the extent such rent is not based on Net Patient
Revenues and, therefore, has not already been included in the calculation of Net
Patient Revenues pursuant to clause (x) preceding.
1.59 "Non-Capital Additions" shall have the meaning given such term in
Section 6.4.
1.60 "Officer's Certificate" shall mean a certificate signed by the
chief financial officer or another officer of Tenant authorized by the board of
directors or by-laws of Tenant, or any other Person whose power and authority to
act has been so authorized.
1.61 "Other Leases" shall mean the Leases described in Exhibit A,
attached hereto and made a part hereof.
1.62 "Other Obligations" shall mean (i) the obligations of Tenant under
and with respect to the loan made by Landlord to Tenant and evidenced by that
certain promissory note of even date in the original principal amount of
$5,100,000; (ii) the obligations of Tenant under and with respect to the loan
made by Landlord to Tenant and evidenced by that certain promissory note of even
date in the original principal amount of $4,300,000; and (iii) the monetary
obligations of Tenant under and with respect to the Management Agreements, dated
as of the date hereof, between Connecticut Subacute Corporation II and Tenant,
including, without limitation, the guaranty of the payment of rent under the
Leases (as defined in the Management Agreements).
1.63 "Overdue Rate" shall mean a rate equal to the lesser of the Base
Rate plus two percent (2%) and the maximum rate then permitted under applicable
law.
1.64 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly, through one or more Subsidiaries, twenty percent
(20%) or more of the voting or beneficial interests in such Person or otherwise
Controls such Person.
1.65 "Percentage Rent" shall have the meaning given such term in
Section 3.1.2(a).
1.66 "Permitted Encumbrances" shall mean the matters set forth in
Exhibit B, attached hereto and made a part hereof.
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1.67 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives. successors and assigns of such
Person where the context so admits.
1.68 "Primary Intended Use" shall have the meaning given such term in
Section 4.1.1.
1.69 "Qualified Appraiser" shall mean any disinterested person who is a
member in good standing of the American Institute of Real Estate Appraisers or
the American Society of Real Estate Counselors (or the successor to either of
such organizations) and who has had not less than ten (10) years experience in
appraising and valuing, commercial buildings in the State.
1.70 "Records" shall have the meaning given such term in Section 7.2.
1.71 "Rent" shall mean, collectively, the Minimum Rent, Percentage Rent
and Additional Rent.
1.72 "Responding Party" shall have the meaning given such term in
Section 20.1.
1.73 "SEC" shall mean the Securities and Exchange commission.
1.74 "State" shall mean the State, Commonwealth, Possession or
Territory in which the Leased Property is located.
1.75 "Subsidiary" shall mean, with respect to any Person, any Entity in
which such Person shall own, directly or indirectly, through one or more
Subsidiaries, twenty percent (20%) or more of the voting or beneficial interests
or any other entity Controlled by such Person.
1.76 "Substitute Properties" shall have the meaning given such term in
Section 16.1.
1.77 "Substitution Date" shall have the meaning given such term in
Section 16.1.
1.78 "Successor Landlord" shall have the meaning given such term in
Section 21.2.
1.79 "Superior Lease" shall have the meaning given such term in Section
21.2.
1.80 "Superior Landlord" shall have the meaning given such term in
Section 21.2.
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1.81 "Superior Mortgage" shall have the meaning given such term in
Section 21.2.
1.82 "Superior Mortgagee" shall have the meaning given such term in
Section 21.2.
1.83 "Tenant" shall have the meaning given such term in the preambles
to this Lease.
1.84 "Tenant's Personal Property" shall mean all motor vehicles and
consumable inventory and supplies, furniture, equipment and machinery and all
other personal property of Tenant located on the Leased Property or used in
Tenant's business on the Leased Property and all modifications, replacements,
alterations and additions to the Leased Personal Property installed at the
expense of Tenant, other than any items included within the definition of
Fixtures or Leased Personal Property and expressly excluding Tenant's accounts
receivable.
1.85 "Term" shall mean, collectively, the Fixed Term and any Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Lease.
1.86 "Test Rate" shall mean 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.
1.87 "Trustees" shall mean the trustees of Landlord.
1.88 "Unavoidable Delays" shall mean delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the reasonable control of the party responsible for performing an
obligation hereunder, but in no event to exceed sixty (60) days so long as the
affected party shall use reasonable efforts to alleviate the cause of such delay
and thereafter promptly perform such obligation; provided, however, that (x) in
no event shall Tenant's obligation to pay the Rent be affected by Unavoidable
Delays, and (y) in no event shall lack of funds be deemed a cause beyond the
control of either party.
1.89 "Unsuitable for Its Primary Intended Use" shall mean a state or
condition of the Facility such that by reason of damage or destruction, or a
partial Condemnation,'.in the good faith judgment of Landlord and Tenant.,
reasonably exercised, the Facility cannot be operated on a commercially
practicable basis for its Primary Intended Use taking into account, among other
relevant factors, the number of usable beds, the amount of square footage, or
revenues affected by such damage or destruction or partial taking.
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ARTICLE 2
PREMISES AND TERM
2.1 Premises. Upon and subject to the terms and conditions herein set
forth, Landlord leases to Tenant and Tenant leases from Landlord all of the
following (collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land as more
particularly described in Exhibit C, attached hereto and made a part
hereof (collectively, the "Land");
(b) all buildings, structures, Fixtures and other improvements
of every kind, including, but not limited to, alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Land and Capital Additions
financed by Landlord (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures and other items of
property, now or hereafter permanently affixed to or incorporated into
the Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment,
all of which, to the greatest extent permitted by 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 (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other personal
property used or useful in Tenant's business on or in the Leased
Improvements, and'.located on or in the Leased Improvements on the
Commencement Date, except items, if any, included within the category
of Fixtures, but specifically excluding all items included within the
category of Tenant's Personal Property (collectively the "Leased
Personal Property"); and
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(f) all existing leases of space (including any security
deposits held pursuant thereto), if any, in the Leased Improvements to
tenants thereof.
2.2 Condition of Premises. On the Commencement Date, Landlord shall
deliver and Tenant shall accept the Leased Property in "as is" condition,
subject to the rights of parties in possession, the existing state of title,
including all covenants, conditions, restrictions, easements and other matters
of record, all applicable Legal Requirements, the lien of financing instruments,
mortgages and deeds of trust, and such other matters which would have been
disclosed by an inspection of the Leased Property and the record title thereto
or by an accurate survey thereof. LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS THE FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF IT
BEING AGREED THAT ALL SUCH RISKS SHALL BE BORNE BY TENANT. To the extent
permitted by law, however, Landlord grants and assigns to Tenant all of
Landlord's rights to proceed against any predecessor in title for breaches of
warranties or representations or for latent defects in the Leased Property.
Landlord shall cooperate with Tenant in the prosecution of any such claims, in
Landlord's or Tenant's name, all at Tenant's sole cost and expense. Tenant shall
indemnify, and hold harmless Landlord from and against any loss, cost, damage or
liability (including attorneys, fees) incurred by Landlord in connection with
such cooperation.
2.3 Fixed Term. The initial term of this Lease (the "Fixed Term") shall
commence on the date hereof and, unless sooner terminated in accordance with the
terms and conditions of this Lease, shall expire on June 30, 2005.
2.4 Extended Terms. Provided no Default or Event of Default shall have
occurred and be continuing and Tenant shall simultaneously exercise its right to
extend the term of all of .the Other Leases, Tenant shall have the right to
extend the Fixed Term for two additional periods of ten (10) years each (the
"Extended Terms").
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be, and shall
end on the day immediately preceding the tenth anniversary of the commencement
of such Extended Term. All of the terms, covenants and provisions of this Lease
shall apply to each such Extended Term, except that (a) the Minimum Rent-for the
second such Extended Term shall be the greater of (x) the Minimum Rent payable
during the first such Extended Term and (y) the Fair Market Rental for the
Leased Property determined
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as of the commencement of such Extended Term, and (b) Tenant shall have no
further right to extend the Term beyond the Extended Terms hereinabove provided.
If Tenant shall elect to exercise either of the aforesaid options, it shall do
so by giving Landlord written notice thereof not later than one (1) year prior
to the expiration of the then current term of this Lease (Fixed or Extended, as
applicable); it being understood and agreed that time is of the essence with
respect to the giving of such notice. If Tenant shall fail to give any such
notice, this Lease shall automatically terminate at the end of the term then in
effect and Tenant shall have no further option to extend the term of this Lease.
If Tenant shall give such notice, the extension of this Lease shall be
automatically effected, without the execution of any additional documents.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay to Landlord, by check or wire transfer of
immediately available federal funds, as Tenant may elect, without offset,
abatement, demand or deduction, Minimum Rent, Percentage Rent and Additional
Rent, during the Term, as herein provided.
3.1.1 Minimum Rent. Tenant shall pay Minimum Rent in equal
monthly installments, in advance, on the first day of each and every calendar
month during the Term. Minimum Rent for any partial month shall be pro-rated on
a daily basis.
3.1.2 Percentage Rent.
(a) Amount. Commencing June 1, 2000, for each Fiscal Year
during the Term, Tenant shall pay to Landlord, as additional rent,
percentage rent ("Percentage Rent") in an amount equal to three percent
(3%) of Excess Net Patient Revenues for such Fiscal Year. Percentage
Rent shall be calculated and paid quarterly in arrears on the basis of
cumulative Excess Net Patient Revenues as the last day of each quarter
occurring during the applicable Fiscal Year, less the Percentage Rent,
if any, previously paid to Landlord for such Fiscal Year.
(b) Payment of Percentage Rent. Tenant shall calculate and
deliver Percentage Rent-to Landlord within forty-five (45) days after
the end of each quarter of any Fiscal Year (or, in the case of the
final quarter in any Fiscal Year, ninety (90) days thereafter),
together with an Officer's Certificate, setting forth the calculation
of Percentage Rent for such quarter.
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(c) Reconciliation of Additional Rent. Within ninety (90) days
after the end of each Fiscal Year, Tenant shall deliver to Landlord an
Officer's Certificate, together with certified audits with respect to
Net Patient Revenues for the Facility and the facilities leased under
the Other Leases, in form and substance reasonably satisfactory to
Landlord, of Tenant's financial operations prepared by accountants
reasonably satisfactory to Landlord, setting forth the Net Patient
Revenues and Excess Net Patient Revenues for the immediately preceding
Fiscal Year, together with such additional information with respect
thereto as Landlord may reasonably request.
If the Percentage Rent for any Fiscal Year as shown in the
applicable officer's Certificate and accompanying financial statements
is less than the amount previously paid with respect thereto, Landlord
shall, at Landlord's option, refund any excess payment to Tenant or
grant Tenant a credit against the next due payment of Percentage Rent
in the amount of such difference. If the Percentage Rent for any Fiscal
Year as shown in the applicable Officer's Certificate exceeds the
amount previously paid with respect thereto, Tenant shall pay such
excess to Landlord at such time as such Officer's Certificate is
delivered.
Any difference between the Percentage Rent for any Fiscal Year
as shown in such Officer's Certificate and the total amount of
quarterly payments for such Fiscal Year previously paid, whether in
favor of Landlord or Tenant, shall bear interest at the Base Rate,
which interest shall accrue from the close of such Fiscal Year until
the amount of such difference shall be paid or otherwise discharged.
A final reconciliation of Percentage Rent, taking into account
among other relevant adjustments, any contractual allowances which are
accrued after the expiration or sooner termination of this Lease, but
which related to Net Patient Revenues accrued prior to such
termination, and Tenant's good faith best estimate of the amount of any
unresolved contractual allowances shall be made not later than two (2)
years after such termination and Tenant shall advise Landlord within
sixty (60) days after such termination of Tenant's best estimate at
that time of the approximate amount of such adjustments, which estimate
shall not be binding on Tenant.
(d) Confirmation of Percentage Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for the conduct of its
business at the Leased Property in accordance with its usual and
customary practices and in accordance with generally accepted
accounting principles, consistently applied, which will accurately
record all Net
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Patient Revenues, and shall employ independent accountants reasonably
acceptable to Landlord, and Tenant shall retain, for at least four (4)
years after the expiration of each Fiscal Year (and in any event until
the final reconciliation described in subparagraph (c) above for such
Fiscal Year has been made), reasonably adequate records conforming to
such accounting system showing all Net Patient Revenues for such Fiscal
Year. Landlord, at its own expense, except as provided below, shall
have the right, from time to time by its accountants or
representatives, to audit the information set forth in the Officer's
Certificate referred to in subparagraph (b) above and, in connection
with such audit, to examine Tenant's records with respect thereto
including supporting data and sales and excise tax returns), subject to
any prohibitions or limitations on disclosure of any such data under
applicable law or regulations, including, without limitation, any duly
enacted "Patients' Bill of Rights" or similar legislation and such
other limitations as may be necessary to preserve the confidentiality
of the Facility patient relationship and the physician-patient
privilege. If any such audit shall disclose a deficiency in the payment
of Percentage Rent and either Tenant agrees with the result of such
audit or the matter is otherwise determined or compromised, Tenant
shall forthwith pay to Landlord the amount of the deficiency, as
finally agreed or determined, together with interest thereon at the
Base Rate. If any such audit discloses that the Net Patient Revenues
actually received by Tenant for any Fiscal Year exceed those reported
by Tenant by more than three percent (3%), Tenant shall pay the
reasonable cost of such audit. Any proprietary information obtained by
Landlord pursuant to the provisions of this section shall be treated as
confidential, except such information may be used, subject to
appropriate confidentiality safeguards, in any litigation between the
parties and Landlord may disclose such information to prospective
purchasers or lenders.
3.1.3 Additional Rent. In addition to the Minimum Rent and
Percentage Rent, Tenant shall pay and discharge as and when due and payable all
other amounts, liabilities, obligations and Impositions which Tenant assumes or
agrees to pay under this Lease (collectively, "Additional Rent"), including, but
not limited to the following:
(a) Impositions. Subject to Article 8, Tenant shall pay, or
cause to be paid, all Impositions before any fine, penalty, interest or
cost may be added for non-payment, such payments to be made directly to
the taxing authorities where feasible, and shall promptly, upon
request, furnish to Landlord 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
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installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any
fine, penalty, premium, further interest or cost may be added thereto.
Landlord, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of
Landlord's net income, gross receipts, sales and use, single business,
transaction privilege, rent, ad valorem, franchise taxes and taxes on
its capital stock, and Tenant, at its expense, shall, to the extent
required or 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 Default or
Event of Default shall have occurred and be continuing. Landlord and
Tenant shall, upon request of the other, provide such data as is
maintained by the party to whom the request is made with respect to the
Leased Property as may be necessary to prepare any required returns and
reports. In the event governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all
personal property tax returns in such jurisdictions where it may
legally so file. Each party shall, to the extent it possesses the same,
provide the other, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property
tax returns, Landlord shall provide Tenant with copies of assessment
notices in sufficient time for Tenant to file a protest. All
Impositions assessed against such personal property shall be
(irrespective of whether Landlord or Tenant shall file the relevant
return) paid by Tenant not later than thirty (30) days prior to the
last date on which the same may be made without interest or penalty. If
the provisions of any Facility Mortgage requires deposits on account of
Impositions to be made with such Facility Mortgagee, provided the
Facility Mortgagee has not elected to waive such provision, Tenant
shall either pay Landlord the monthly amounts required and Landlord
shall transfer such amounts to such Facility Mortgagee or, pursuant to
written direction by Landlord, Tenant shall make such deposits directly
with such Facility Mortgagee.
Landlord shall give prompt written notice to Tenant of all
Impositions payable by Tenant hereunder of which Landlord at any time
has knowledge; provided, however, Landlord's failure to give any such
notice shall in no way
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diminish Tenant's obligation hereunder to pay such Impositions.
Impositions imposed in respect of the tax-fiscal period during
which the Term commences and/or terminates shall be prorated between
Landlord and Tenant, whether or not such Imposition is imposed before
or after such termination.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities
used at the Leased Property during the Term.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained
pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations which Tenant assumes or
agrees to pay under this Lease.
3.2 Late Payment of Rent. If any installment of Minimum Rent,
Percentage Rent or Additional Rent (but only as to those items of Additional
Rent which are payable directly to Landlord) shall not be paid when due, Tenant
shall pay Landlord, on demand, as Additional Rent, a late charge (to the extent
permitted by law) computed, during the first ten (10) days such payment is
delinquent at the greater of the Base Rate and eleven and one-half percent
(11.5%) per annum and, thereafter, at the Overdue Rate, on the amount of
such-installment, from the date such installment was due until the date paid. To
the extent that Tenant pays any Additional Rent directly to Landlord pursuant to
any requirement of this Lease, Tenant shall be relieved of its obligation to pay
such Additional Rent to the entity to which they would otherwise be due.
In the event of any failure by Tenant to pay any Additional Rent when
due, Tenant shall promptly pay and discharge, as Additional Rent, every fine,
penalty, interest and cost which may be added for non-payment or late payment of
such items. Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of non-payment of the Additional Rent as in the case of non-payment of
the Minimum Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord, so that
this Lease shall yield to Landlord the full amount of the installments of
Minimum Rent, Percentage Rent and Additional Rent throughout the Term, subject
to any other provisions of this Lease which expressly provide for adjustment or
abatement of Rent or other charges.
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3.4 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Tenant, to the maximum 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 Landlord to modify, surrender or terminate the
same, nor seek, nor be entitled to any abatement, deduction, deferment or
reduction of the Rent, or set-off against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a) any
damage to, or destruction of, the Leased Property or any portion thereof from
whatever cause or any Condemnation; (b) the lawful or unlawful prohibition of,
or restriction upon Tenant's use of the Leased Property, or any portion thereof,
or the interference with such use by any Person or by reason of eviction by
paramount title; (c) any claim which Tenant may have against Landlord by reason
of any Landlord Default; (d) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Landlord or any assignee or transferee of Landlord; or (e)
for any other cause whether similar or dissimilar to any of the foregoing.
Tenant hereby waives all rights arising from any occurrence whatsoever, which
may now or hereafter be conferred upon it by law to modify, surrender or
terminate this Lease or quit or surrender the Leased Property or any portion
thereof or which may entitle Tenant to any abatement, reduction, suspension or
deferment of the Rent or other sums payable or other obligations to be performed
by Tenant hereunder, except as otherwise specifically provided in this Lease.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use. Tenant shall continuously use or
cause to be used the Leased Property as a nursing home or subacute facility
and/or other facility offering any higher level health care services and for
such other uses as may be necessary or incidental thereto (the particular use to
which the Leased Property is put at any particular time, its "Primary Intended
Use"). Tenant shall not use the Leased Property or any portion thereof for other
than its Primary Intended Use without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed; provided, however,
that such consent shall not be deemed to be unreasonably withheld if, in
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the reasonable opinion of Landlord, the proposed use will significantly alter
the character or purpose or detract from the value or operating efficiency of
the Leased Property or significantly impair the revenue-producing capability of
the Leased Property or adversely affect the ability of Tenant to comply with
this Lease. No use shall be made or permitted to be made of the Leased Property
and no acts shall be done thereon which will cause the cancellation of any
insurance policy covering the 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 the Leased Property, or any portion thereof,
any article which may be prohibited by law or by the standard form of fire
insurance policies, or any other insurance policies required to be carried
hereunder, or fire underwriter's regulations.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain all approvals
necessary to use and operate the Leased Property and the Facility for the
Primary Intended Use under applicable local, state and federal law and, without
limiting the generality of the foregoing, shall use its best efforts to maintain
appropriate certifications for reimbursement licensure.
4.1.3 Continuous Operation, Etc. Tenant shall use its best
efforts to operate continuously the Leased Property as a provider of health care
services in accordance with the Primary Intended Use. 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 the Leased Property for the Primary Intended Use.
4.1.4 Lawful Use, Etc. Tenant shall not use or suffer or
permit the use of the Leased Property and Tenant's Personal Property for any
unlawful purpose. Tenant shall not commit or suffer to be committed any waste on
the Leased Property or the Facility, nor shall Tenant cause or permit any
nuisance thereon or therein. Tenant shall neither suffer nor permit the Leased
Property or any portion thereof, including any Capital Addition, whether or not
financed by Landlord, or Tenant's Personal Property, to be used in such a manner
as might reasonably tend to impair Landlord's (or Tenant's, as the case may be)
title thereto or to any portion thereof, or may reasonably make possible any
claim for adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Instruments, Etc.
Subject to the provisions of Article 8, Tenant, at its sole expense, shall
promptly (i) comply with all Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration and restoration
<PAGE>
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of the Leased Property and Tenant's Personal Property, and (ii) procure,
maintain and comply with all appropriate licenses, certificates of need,
permits, provider agreements and other authorizations required for any use of
the Leased Property and Tenant's Personal Property then being made, and for the
proper erection, installation, operation and maintenance of the Leased Property
or any part thereof, including, without limitation, any Capital Additions.
4.3 Compliance with Medicaid and Medicare Requirements. Tenant shall,
at its sole cost and expense, make whatever improvements (capital or ordinary)
as are required to conform the Leased Property to such standards as may, from
time to time, be required by Federal Medicare (Title 18) or Medicaid (Title 19)
skilled and/or intermediate care nursing programs, if applicable, or any other
applicable programs or legislation, or capital improvements required by any
other governmental agency having jurisdiction over the Leased Property as a
condition of the continued operation of the Leased Property for the Primary
Intended Use.
4.4 Environmental Matters. Tenant shall not store, spill upon, dispose
of or transfer to or from the Leased Property any Hazardous Substance, except
that Tenant may store, transfer and dispose of Hazardous Substances in
compliance with all Environmental Laws. Tenant shall maintain the Leased
Property at all times free of any Hazardous Substance (except such Hazardous
Substances as are maintained in compliance with all Environmental Laws). Tenant
shall promptly: (a) notify Landlord in writing of any change in the nature or
extent of such Hazardous Substances maintained, (b) transmit to Landlord a copy
of any report which is required to be filed with respect to the Leased Property
pursuant to any Environmental Law, (c) transmit to Landlord copies of any
citations, orders, notices or other governmental communications received by
Tenant or its agents or representatives with respect thereto (collectively,
"Environmental Notice"), (d) observe and comply with any and all Environmental
Laws relating to the use, maintenance and disposal of Hazardous Substances and
all orders or directives from any official, court or agency of competent
jurisdiction relating to the use or maintenance or requiring the removal,
treatment, containment or other disposition thereof, and (e) pay or otherwise
dispose of any fine, charge or Imposition related thereto, unless Tenant shall
contest the same in accordance with Article 8.
If at any time prior to the termination of this Lease, Hazardous
Substances are discovered on the Leased Property, Tenant hereby agrees to take
all actions, and to incur any and all expenses, as may be reasonably necessary
and as may be required by any municipal, State or Federal agency or other
governmental entity or agency having jurisdiction thereof, (a) to
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clean up and remove from and about the Leased Property all Hazardous Substances
thereon, (b) to contain and prevent any further release or threat of release of
Hazardous Substances on or about the Leased Property and (c) to eliminate any
further release or threat of release of Hazardous Substances on or about the
Leased Property.
Tenant shall indemnify and hold harmless Landlord and each Facility
Mortgagee from and against all liabilities, obligations, claims, damages,
penalties, costs and expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
of them by reason of any failure by Tenant or any Person claiming under Tenant
to perform or comply with any of the terms of this Section 4.4.
ARTICLE 5
MAINTENANCE AND REPAIRS, ETC.
5.1 Maintenance and Repair.
5.1.1 Tenant's obligations. Tenant shall, at its sole cost and
expense, keep the Leased Property and all private roadways, sidewalks and curbs
appurtenant thereto (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
the Leased Property or Tenant's Personal Property, or any portion thereof), and
shall promptly make all necessary and appropriate repairs and replacements
thereto of every kind and nature, whether interior or exterior, structural or
nonstructural, 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 be at least equivalent in quality to the
original work.
5.1.2 Landlord's Obligations. Landlord shall not, under any
circumstances, be required to build or rebuild any improvement on the Leased
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether ordinary
or extraordinary, structural or non-structural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect thereto, in connection with this
Lease, or to maintain the Leased Property in any way, except as specifically
provided herein. Tenant hereby waives, to the extent permitted by law, the right
to make repairs at the expense of Landlord pursuant to any law in effect at the
time of the execution of this Lease or hereafter enacted. Landlord shall have
the right to give, record and post,
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as appropriate, notices of nonresponsibility under any mechanic's lien laws now
or hereafter existing.
5.2 Capital Expenditure Cost Sharing. Replacement of or major repairs
to all structural or mechanical systems shall be undertaken by Tenant, at its
sole cost and expense in the exercise of its reasonable business judgment,
pursuant to and in accordance with plans and specifications approved in advance
by Landlord; provided, however, that if the useful life of any improvement or
repair for which a Capital Expenditure is made extends beyond the termination of
the Term (other than any early termination resulting from the occurrence of an
Event of Default), provided Tenant shall have obtained Landlord's prior written
consent with respect to the making thereof, the cost of such replacement or
repair shall be apportioned between Landlord and Tenant so that Landlord shall
pay for that portion of the useful life of such item occurring on or after such
termination date. Landlord shall have no obligation to reimburse Tenant for
Landlord's share of the cost of such replacement or repair until the date of the
termination of this Lease. Notwithstanding the foregoing, Landlord agrees to
make any such payment to Tenant within sixty (60) days after Tenant's written
request therefor.
5.3 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 sooner termination of the Term. Tenant shall provide
and maintain during the entire Term all such Tenant's Personal Property as shall
be necessary in order to operate the Facility in compliance with all licensure
and certification requirements, 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 on or prior to the expiration or earlier termination of this Lease shall
be considered abandoned by Tenant and may be appropriated, sold, destroyed or
otherwise disposed of by Landlord without the necessity of first giving notice
thereof to Tenant, without any payment to Tenant and without any obligation to
account therefor. Tenant shall, at its expense, restore the Leased Property to
the condition required by Section 5.4, including repair of all damage to the
Leased Property caused by the removal of Tenant's Personal Property, whether
effected by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than motor
vehicles) on, or in connection with, the Leased Property which belongs to anyone
other than Tenant, Tenant shall use its best efforts to require the agreement
permitting such use to provide that Landlord or its designee may assume Tenant's
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rights under such agreement upon management of the Facility by Landlord or its
designee.
5.4 Yield Up. Upon the expiration or sooner termination of this Lease,
Tenant shall vacate and surrender the Leased Property to Landlord in the
condition in which the Leased Property was on the Commencement Date, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease, ordinary wear and tear excepted.
In addition, upon the expiration or earlier termination of this Lease,
Tenant shall, at Landlord's reasonable cost and expense, use its best efforts to
transfer to and cooperate with Landlord or Landlord's nominee in connection with
the processing of all applications for licenses, operating permits and other
governmental authorizations and all contracts, including, contracts with
governmental or quasi-governmental entities, which may be necessary for the
operation of the Facility. If requested by Landlord, Tenant shall continue to
manage the Facility after the termination of this Lease and for so long
thereafter as is necessary to obtain all necessary licenses, operating permits
and other governmental authorizations, on such reasonable terms (which shall
include an agreement to reimburse Tenant for its reasonable out-of-pocket costs
and expenses and reasonable administrative costs) as Landlord shall request.
5.5 Encroachments, Restrictions, Etc. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any lawful restrictive covenant or other agreement affecting the Leased
Property, or any part thereof, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, upon the
request of Landlord or of any person affected by any such encroachment,
violation or impairment, Tenant shall, at its sole cost and expense, subject to
its right to contest the existence of any encroachment, violation or impairment
and in such case, in the event of an adverse final determination, either (a)
obtain, in form and substance satisfactory to Landlord, 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
Landlord or Tenant, or (b), subject to Landlord's approval (which shall not be
unreasonably withheld or delayed), make such changes in the Leased Improvements
and take such other actions, as Tenant, in the good faith exercise of its
judgment, deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Leased Improvements and, in any event, take all such actions as may be
necessary in order to ensure the continued operation of the Leased Improvements
for the Primary Intended Use substantially in the
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manner and to the extent the Leased Improvements were operated prior to the
assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of this Article 5.
Tenant's obligations under this Section 5.5 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 Landlord under any such policy of title or other insurance.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property. Provided
no Default or Event of Default shall have occurred and be continuing, Tenant
shall have the right, subject to obtaining Landlord's prior written consent
(which consent shall not be unreasonably withheld or delayed), upon and subject
to the terms and conditions set forth below, to construct or install Capital
Additions on the Leased Property. Landlord's consent shall not be deemed to be
unreasonably withheld if such Capital Addition will significantly alter the
character or purpose or detract from the value or operating efficiency or the
revenue-producing capability of the Leased Property, or adversely affect the
ability of Tenant to comply with this Lease. Any withholding of consent shall be
express and shall be effected within thirty (30) days after receipt by Landlord
of such documents or information as Landlord may reasonably require, notice of
which requirements shall be sent to Tenant within thirty (30) days after
Tenant's request. Failure to give notice of the withholding of such consent
within such thirty (30) day period shall be deemed approval. Prior to commencing
construction of any Capital Addition, Tenant shall submit to Landlord, in
writing, a proposal setting forth, in reasonable detail, any proposed Capital
Addition and shall provide Landlord with such plans and specifications, permits,
licenses, contracts and other information concerning the proposed Capital
Addition as Landlord may reasonably request. Without limiting the generality of
the foregoing, such proposal shall indicate the approximate projected cost of
constructing such Capital Addition, the use or uses to which it will be put and
a good faith estimate of the change, if any, in the Net Patient Revenues that
Tenant anticipates will result from such Capital Addition. Prior to commencing
construction of any Capital Addition, Tenant shall request in writing that
Landlord provide funds to pay for such Capital Addition. If, within sixty (60)
days after receipt of such request, Landlord shall not elect to provide such
financing on terms reasonably acceptable to Tenant (and, for purposes of this
Section 6.1, the failure of Landlord to respond within such 60 day period shall
be deemed an election not to provide such
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funding), the provisions of Section 6.2 shall apply. Landlord's notice of its
election to provide such financing shall set forth the terms and conditions of
such proposed financing, including the terms of any amendment to this Lease
(including, without limitation, an increase in Minimum Rent to compensate
Landlord for the additional funds advanced). 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 eighty percent (80%) of the total amount of
such cost. Tenant may withdraw its request by written notice to Landlord at any
time before Tenant's written acceptance of Landlord's terms and conditions. If
Landlord declines to finance a Capital Addition or if Landlord's proposed
financing terms are unacceptable to Tenant, Tenant may solicit and negotiate a
commitment for such financing from another Person, provided Landlord shall
approve all the terms and conditions of such financing (which approval shall not
be unreasonably withheld or delayed). If Landlord shall finance the proposed
Capital Addition, Tenant shall pay to Landlord, as Additional Rent, all
reasonable costs and expenses paid or incurred by Landlord and any Lending
Institution which has committed to provide financing for such Capital Addition
to Landlord in connection therewith, including, but not limited to, (a) the
reasonable attorneys, fees and expenses, (b) all printing expenses, (c) all
filing, registration and recording taxes and fees, (d) documentary stamp taxes,
(e) title insurance charges, appraisal fees, and rating agency fees, and (f)
commitment fees.
No Capital Addition shall be made which would tie in or connect any
Leased Improvement or any Leased Property with any other improvements on
property adjacent to such Leased Property (and not part of the Land) including,
without limitation, tie-ins of buildings or other structures or utilities,
unless Tenant shall have obtained the prior written approval of Landlord, which
approval may be withheld by Landlord in Landlord's sole, discretion. Any Capital
Additions shall, upon the expiration or sooner termination of this Lease, become
the property of Landlord, free and clear of all encumbrances, subject to the
provisions of Section 6.2.
6.2 Capital Additions Financed by Tenant. Provided that Tenant has
obtained the prior written consent of Landlord in each instance (which approval
shall not be unreasonably withheld or delayed), Tenant may arrange for financing
for Capital Additions from third party lenders; provided, however that (i) the
terms and conditions of any such financing shall be subject to the prior
approval of Landlord and (ii) any security interests in any property of Tenant,
including, without limitation, the Leased Property, shall be expressly and fully
subordinated to this Lease and to the interest of Landlord in the Leased
Property and to the rights of any Facility Mortgagee. If, pursuant to the
provisions of this Lease, Tenant provides or arranges financing with respect
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to any Capital Addition, this Lease shall be and hereby is amended to provide as
follows:
(a) Upon completion of any such Capital Addition, Net Patient
Revenues attributable to such Capital Addition shall be excluded from
Net Patient Revenues of the Leased Property for purposes of calculating
Percentage Rent. The Net Patient Revenues attributable to any such
Capital Addition shall be deemed to be an amount (the "Added Value
Percentage ") which bears the same proportion to the total Net Patient
Revenues from the entire Leased Property (including all Capital
Additions) as the Fair Market Added value of such Capital Addition
bears to the Fair Market Value of the entire Leased Property (including
all Capital Additions) immediately after completion of such Capital
Addition. The Added Value Percentage for Capital Additions financed by
Tenant shall remain in effect until any subsequent Capital Addition
financed by Tenant is completed.
(b) There shall be no adjustment in the Minimum Rent by reason
of any such Capital Addition.
(c) Upon the expiration or earlier termination of this Lease
(but if this Lease is terminated by reason of an Event of Default, only
after Landlord is fully compensated for all damages resulting
therefrom), Landlord shall compensate Tenant for all Capital Additions
financed by Tenant in any of the following ways determined in
Landlord's sole discretion:
(i) By purchasing such Capital Additions from Tenant for cash in
the amount of the then Fair Market Added Value of such Capital
Additions;
(ii) By purchasing such Capital Additions from Tenant by delivering
to Tenant Landlord's purchase money promissory note in the
amount of the Fair Market Added Value, which note shall be due
and payable as to both principal and interest on the second
anniversary of the making thereof, shall be on then
commercially reasonable terms and shall be secured by a
mortgage on the Leased Property and such Capital Additions
subject to all existing mortgages and encumbrances on the
Leased Property and such Capital Additions at the time of such
purchase;
(iii) By assigning to Tenant the right to receive an amount equal to
the Added Value Percentage (determined as of the date of the
expiration or earlier termination of this Lease) of all rent
and other consideration receivable by Landlord under any
re-letting or other disposition of the Leased Property and
such Capital
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Additions, after deducting from such rent all costs and
expenses incurred by Landlord in connection with such
re-letting or other disposition of the Leased Property and
such Capital Additions and all costs and expenses of operating
and maintaining the Leased Property and such Capital Additions
during the term of any such new lease which are not borne by
the tenant thereunder, with the provisions of this Section
6.2(c) to remain in effect until the sale or other final
disposition of the Leased Property and such Capital Additions,
at which time the Fair Market Added Value of such Capital
Addition shall be immediately due and payable, such obligation
to be secured by a mortgage on the Leased Property and such
Capital Additions, subject to all existing mortgages and
encumbrances on the Leased Property at the time of such
purchase and assignment; or
(iv) By making such other arrangement regarding such compensation
as shall be mutually acceptable to Landlord and Tenant.
6.3 Information Regarding Capital Additions. Regardless of the source
of financing of any proposed Capital Addition, Tenant shall provide Landlord
with such information as Landlord may from time to time reasonably request with
respect to such Capital Addition, including, without limitation, the following:
(a) Evidence that such Capital Addition will be, and upon
completion has been, completed in compliance with the applicable
requirements of State and federal law with respect to capital
expenditures for nursing facilities;
(b) Upon completion of such Capital Addition, a copy of the
certificate of occupancy for the Facility updated, if required;
(c) Such information, certificates, licenses, permits or other
documents 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;
(d) An Officer's Certificate and a certificate from Tenant's
architect setting forth, in reasonable detail, the projected (or
actual, if available) Capital Additions Cost and invoices and lien
waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land acquired
for the purpose of constructing the Capital
<PAGE>
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Addition free and clear of any liens or encumbrances, except those
approved by Landlord and, upon completion of the Capital Addition, a
final as-built survey thereof reasonably satisfactory to Landlord;
(f) Endorsements to any outstanding policy of title insurance
covering the Leased Property or commitments therefor, satisfactory in
form and substance to Landlord, (i) updating the same without any
additional exceptions except as approved by Landlord, and (ii)
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 (g)
below);
(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord pursuant to
subparagraph (e) above, free and clear of all liens and encumbrances,
except those approved by Landlord, and (ii) a lender's policy of title
insurance, reasonably satisfactory in form and substance to Landlord
and the Lending Institution advancing any portion of the Capital
Additions Cost;
(h) An appraisal of the Leased Property by a Qualified
Appraiser, acceptable to Landlord, and an officer's Certificate stating
that the value of the Leased Property upon completion of the Capital
Addition exceeds the Fair Market Value thereof prior to the
commencement of such Capital Addition by an amount not less than 80% of
the Capital Additions Cost; and
(i) Prints of architectural and engineering drawings relating
to such Capital Addition and such other certificates , documents,
opinions of counsel, appraisals, surveys, certified copies of duly
adopted resolutions of the board of directors of Tenant authorizing the
execution and delivery of any lease amendment or other instruments
reasonably required by Landlord and any Lending Institution advancing
or reimbursing Tenant for any portion of the Capital Additions Cost.
6.4 Non-Capital Additions. Tenant shall have the right, at Tenant's
sole cost and expense, to make additions, modifications or improvements to the
Leased Property which are not Capital Additions ("Non-Capital Additions") from
time to time as Tenant, in its reasonable discretion, may deem desirable for the
Primary Intended Use, provided that such action will not adversely alter the
character or purpose or detract from the value, operating efficiency or revenue-
producing capability of the Leased Property, or adversely affect the ability of
Tenant to comply with the provisions of this Lease. All such Non-Capital
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Additions shall, upon expiration or earlier termination of this Lease, become
the property of Landlord, free and clear of all encumbrances other than
Permitted Encumbrances.
6.5 Salvage. All materials which are scrapped or removed in connection
with the making of either Capital Additions or repairs required by Article 5
shall be the property of the party paying or providing the financing for such
work.
ARTICLE 7
LIENS
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the Leased Property or any attachment, levy, claim or encumbrance in
respect of the Rent, other than (a) this Lease, (b) the Permitted Encumbrances,
(c) restrictions, liens and other encumbrances which are consented to in writing
by Landlord, (d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder, (e) subleases permitted by Article 17, (f) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (i) the same are not yet payable, or (ii) are payable without fine or
penalty and such liens are being contested in accordance with Article 8, (g)
liens of mechanics, laborers, materialmen, suppliers or vendors for sums
disputed, provided that (i) 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 a re-serve or another appropriate
provision as shall be required by law or generally accepted accounting
principles shall have been made therefor, and (ii) any such liens are being
contested in accordance with Article 8, and (h) any liens which are the
responsibility of Landlord pursuant to Article 21.
7.2 Landlord's Lien. In addition to any statutory landlord's lien and
in order to secure payment of the Rent and all other sums payable hereunder by
Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant's breach of this Lease, Tenant hereby grants unto
Landlord a security interest in and an express contractual lien upon Tenant's
Personal Property (except motor vehicles sold from time to time in the ordinary
course of Tenant's operations), and all ledger sheets, files, records, documents
and instruments (including, without limitation, computer programs, tapes and
related electronic data processing) relating to the operation of the Facility
(collectively, the "Records") and all proceeds therefrom; and Tenant's Personal
Property shall not be removed from the Leased Property without the Landlord's
prior written
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consent, unless no Default or Event of Default shall have occurred and be
continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
security agreements and financing statements in form sufficient to perfect the
security interests of Landlord in Tenant's Personal Property and the proceeds
thereof in accordance with the provisions of the applicable laws of the State
and otherwise in form and substance reasonably satisfactory to Landlord. Tenant
hereby grants Landlord an irrevocable limited power of attorney, coupled with an
interest, to execute all such financing statements in Tenant's name, place and
stead. The security interest herein granted is in addition to any statutory lien
for the Rent.
Landlord agrees, at Tenant's request, to execute such documents as
Tenant may reasonably require to subordinate the lien granted pursuant to this
Section 7.2 in Tenant's Personal Property (but not the Records) to the lien of
any Person providing purchase money financing with respect thereto.
7.3 Mechanic's Liens. Except as permitted with respect to Capital
Additions, nothing contained in this Lease and no action or inaction by Landlord
shall be construed as (a) constituting the consent or request of Landlord,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof, or (b)
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
Landlord 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 Leased Property, or any portion thereof.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively "Claims") by appropriate legal
proceedings conducted in good faith and with due diligence, provided that (a)
the foregoing shall in no way be construed as relieving, modifying or extending
Tenant's obligation to pay any Claims as finally determined or prior to the time
the Leased Property may be sold in satisfaction thereof, (b) such contest shall
not cause
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Landlord or Tenant to be in default under any mortgage or deed of trust
encumbering the Leased Property or any interest therein or result in or
reasonably be expected to result in a lien attaching to the Leased Property, and
(c) Tenant shall indemnify and hold harmless Landlord from and against any cost,
claim, damage, penalty or expense, including reasonable attorneys, fees,
incurred by Landlord in connection therewith or as a result thereof. Upon
Landlord's request, Tenant shall either (a) provide a bond or other assurance
reasonably satisfactory to Landlord that all Claims which may be assessed
against the Leased Property, together with all interest and penalties thereon
will be paid, or (b) deposit within the time otherwise required for payment with
a bank or trust company, as trustee, as security for the payment of such Claims,
an amount sufficient to pay the same, together with interest and penalties in
connection therewith and all Claims which may be assessed against or become a
Claim against the Leased Property, or any part thereof, in connection with any
such contest. Tenant shall furnish Landlord and any Facility Mortgagee with
reasonable evidence of such deposit within five (5) days after request therefor.
Landlord agrees to join in any such proceedings if required legally to prosecute
such contest; provided, however, that Landlord shall not thereby be subjected to
any liability therefor (including, for the payment of any costs or expenses in
connection therewith). Tenant shall be entitled to any refund of any Claims and
such charges and penalties or interest thereon which have been paid by Tenant or
paid by Landlord and for which Landlord has been fully reimbursed by Tenant. If
Tenant shall fail (a) to pay any Claims when due, (b) to provide security
therefor as provided in this Article 8, or (c) to prosecute any such contest
diligently and in good faith, Landlord may, upon reasonable notice to Tenant
(which notice may be oral and shall not be required if Landlord shall determine
the same is not practicable), pay such charges, together with interest and
penalties due with respect thereto, and Tenant shall reimburse Landlord
therefor, upon demand, as Additional Rent.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall at all times during
the Term and any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property, and all property located in or on the Leased
Property, including Tenant's Personal Property, insured against the risks in the
amounts as follows:
(a) Comprehensive general liability insurance, including
bodily injury and property damage (on an occurrence basis and in the
broadest form available,
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including without limitation broad form contractual liability, fire
legal liability independent contractor's hazard and completed
operations coverage) under which Tenant is named as an insured and
Landlord and any Facility Mortgagee (and such others as are in privity
of estate with Landlord, as set out in a notice from time to time) are
named as additional insureds as their interests may appear, in an
amount which shall, at the beginning of the Term, be at least equal to
$5,000,000 per occurrence in respect of bodily injury and death and
$1,000,000 per occurrence in respect of property damage, and which,
from time to time during the Term, shall be for such higher limits, if
any, as are customarily carried in the area in which the Leased
Property is located at property similar to the Leased Property and used
for similar purposes;
(b) "All-risk" property insurance on a "replacement cost"
basis with the usual extended coverage endorsements covering the Leased
Property and Tenant's Personal Property;
(c) Business interruption and loss of rental under a rental
value insurance policy covering risk of loss during the lesser of the
first twelve (12) months of reconstruction or the actual reconstruction
period necessitated by the occurrence of any of the hazards described
in paragraphs (a) and (b) above, in such amounts as may be customary
for comparable properties in the area and in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer;
(d) Claims arising out of malpractice in an amount not less
than Five Million Dollars ($5,000,000) for each person and for each
occurrence with respect to the Leased Property, provided the same is
available at rates which are economically practical in relation to the
risk covered, as determined by Tenant and approved by Landlord (it
being agreed that, in the event the same is not available at rates
which are economically practical in relation to the risks covered,
Tenant shall provide such malpractice insurance by means of the
maintenance of a program of self insurance, which, in accordance with
generally accepted accounting principles consistently applied,
satisfies the insurance requirements of this paragraph (d) and, in such
event, Tenant shall submit to Landlord such records and other evidence
thereof as Landlord may from time to time reasonably request to confirm
the maintenance of such a program);
(e) Flood (if the Leased Property which is located in whole or
in part within a designated flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in
the area, provided the same is
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available at rates which are economically practical in relation to the
risks covered, as determined by Tenant and approved by Landlord;
(f) Worker's compensation insurance coverage for all persons
employed by Tenant on the Leased Property with statutory limits and
otherwise with limits of and provisions in accordance with the
requirements of applicable local, state and federal law; and
(g) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Waiver of Subrogation. Landlord 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 which
is covered by insurance then being carried by Landlord or Tenant or would be
covered by insurance if insurance were maintained in accordance with the
applicable provisions of this Lease, 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. In the event
that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra premium.
9.3 Form Satisfactory, Etc. All policies of insurance required under
this Article 9 shall be written in a form reasonably satisfactory to Landlord
and by insurance companies authorized to do business in the State, insurance,
which companies shall be reasonably satisfactory to Landlord. All policies of
insurance required under this Article 9 shall include no deductible in excess of
$250,000 and shall name Landlord and any Facility Mortgagee as additional
insureds, as their interests may appear. Losses shall be payable to Landlord or
Tenant as provided in Article 10. Any loss adjustment shall require the written
consent of Landlord, Tenant and each Facility Mortgagee. Evidence of insurance
shall be deposited with Landlord and, if requested, any Facility Mortgagee. If
any provisions of any Facility Mortgage requires deposits of premiums for
insurance to be made with such Facility Mortgagee, provided that the Facility
Mortgagee has not elected to waive such provision, Tenant shall either pay
Landlord monthly the amounts required and Landlord shall transfer such amounts
to such Facility Mortgagee, or, pursuant to written direction by Landlord,
Tenant shall make such deposits directly with such Facility Mortgagee. Tenant
shall pay all insurance premiums, and deliver policies or certificates
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thereof to Landlord prior to their effective date (and, with respect to any
renewal policy, ten (10) days prior to the expiration of the existing policy),
and in the event Tenant shall fail either to effect such insurance as herein
required, to pay the premiums therefor or to deliver such policies or
certificates to Landlord at the times required Landlord shall have the right,
but not the obligation, to effect such insurance and pay the premiums therefor,
which amounts shall be payable to Landlord, upon demand, as Additional Rent,
together with interest accrued thereon at the Base Rate from the date such
payment is made until the date repaid. All such policies shall provide Landlord
(and any Facility Mortgagee, if required by the same) thirty (30) days, prior
written notice of any materially alter on, expiration or cancellation of such
policy.
9.4 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with that
required by this Article 9 or increase the amount of any existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of such insurance, including,
Landlord and all Facility Mortgagees, are included therein as additional
insureds, and the loss is payable under such insurance in the same manner as
losses are payable under this Lease. In the event Tenant shall take out any such
separate insurance or increase any of the amounts of the then existing
insurance, Tenant shall give Landlord prompt written notice thereof.
9.5 Indemnification of Landlord. Tenant shall indemnify and hold
harmless Landlord from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees), to the maximum extent permitted by law,
imposed upon or incurred by or asserted against Landlord by reason of: (a) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Property or adjoining sidewalks, including,
without limitation, any claims of malpractice, (b) any past, present or future
use, misuse, non-use, condition, management, maintenance or repair by Tenant or
anyone claiming under Tenant of the Leased Property or Tenant's Personal
Property or any litigation, proceeding or claim by governmental entities or
other third parties to which Landlord is made a party or participant related to
the Leased Property or Tenant's Personal Property or such use, misuse, non-use,
condition, management, maintenance, or repair thereof including, failure to
perform obligations (other than Condemnation proceedings) to which Landlord is
made a party, (c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease), and (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. Tenant shall pay
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all amounts payable under this Section 9.5 within ten (10) days after demand
therefor, and if not timely paid, such amounts shall bear interest at the
overdue rate from the date of 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 Landlord or may compromise or
otherwise dispose of the same as Tenant sees fit.
9.6 Indemnification of Tenant. Landlord shall indemnify and hold
harmless 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 willful
misconduct of Landlord.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. All proceeds payable by reason of any loss or
damage to the Leased Property and insured under any policy of insurance required
by Article 9 shall be paid to Landlord and held in trust by Landlord in an
interest- bearing account (subject to the provisions of Section 10.2) and shall
be paid out by Landlord from time to time for the reasonable costs of
reconstruction or repair of the Leased Property necessitated by damage or
destruction. Any excess proceeds of insurance remaining after the completion of
the restoration shall be paid to Tenant. In the event neither Landlord nor
Tenant is required or elects to restore the Leased Property and this Lease is
terminated without purchase or substitution by Tenant pursuant to Section 10.2,
all insurance proceeds therefrom shall be retained by Landlord. All salvage
resulting from any risk covered by insurance shall belong to Landlord, except
any salvage related to Capital Additions paid for by Tenant or Tenant's Personal
Property shall belong to Tenant.
10.2 Reconstruction in the Event of Damage or Destruction.
10.2.1 Material Damage or Destruction of Premises. Except as
provided in Section 10.8, if, during the Term, the Leased Property shall be
totally or partially damaged or destroyed by fire or other casualty and the
Facility is thereby rendered Unsuitable for Its Primary Intended Use, Tenant
shall, at Tenant's option, exercisable by written, notice to Landlord within
thirty (30) days after the date of such damage or destruction, elect either (a)
to restore the Facility to substantially the same condition as existed
immediately before such damage or destruction, or (b) to offer (i) to purchase
the Leased Property from Landlord for a purchase price equal to the greater of
the Minimum Repurchase Price or the Fair Market Value
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Purchase Price of the Leased Property immediately prior to such damage or
destruction, or (ii) to substitute a new property for the Leased Property in
accordance with the provisions of Article 16. Failure of Tenant to give Landlord
written notice of any such election within such 30-day period shall be deemed an
election by Tenant to restore the Facility. In the event Tenant shall proceed in
accordance with clause (b) preceding and Landlord does not accept Tenant's offer
to purchase the Leased Property or substitute another property for the Leased
Property within thirty (30) days after receipt of Tenant's notice thereof,
Tenant may either (a) withdraw such offer and proceed promptly to restore the
Facility to substantially the same conditions as existed immediately before the
damage or destruction, or (b) terminate this Lease without further liability
hereunder and Landlord shall be entitled to retain the insurance proceeds. In
the event Tenant shall acquire the Leased Property or substitute a new property
therefor, the insurance proceeds payable on account of such damage shall be paid
to Tenant.
10.2.2 Partial Damage or Destruction. Except as provided in
Section 10.8, if, during the Term, all or any portion of the Leased Property
shall be totally or partially destroyed by fire or other casualty and the
Facility is not thereby rendered Unsuitable for its Primary Intended Use, Tenant
shall promptly restore the Facility to substantially the same condition as
existed immediately before such damage or destruction; provided, however, that
if Tenant cannot, using diligent efforts, obtain all government approvals,
including building permits, licenses, conditional use permits and certificates
of need, necessary to perform all required repair and restoration and to operate
the Facility for its Primary Intended Use in substantially the same manner as
existed immediately prior to such damage or destruction within one hundred
eighty (180) days after the date of such fire or casualty, Tenant shall, within
thirty (30) days thereafter elect, by written notice to Landlord, either (a) to
substitute a new property or properties for the Leased Property in accordance
with the provisions of Article 16, or (b) purchase the Leased Property for a
purchase price equal to the greater of the then Minimum Repurchase Price or the
Fair Market Value Purchase Price of the Leased Property immediately prior to
such damage or destruction. Failure of Tenant to give such notice within such
period shall be deemed an election by Tenant to purchase the Leased Property.
Within thirty (30) days after receipt of Tenant's notice, Landlord shall give
Tenant written notice as to whether Landlord accepts such offer. Failure of
Landlord to give such notice shall be deemed an election by Landlord to accept
Tenant's offer. If Landlord shall reject such offer, Tenant shall elect, by
written notice to Landlord, given within thirty (30) days thereafter, either (a)
to withdraw such offer, in which event this Lease shall remain in full force and
effect with and Tenant shall proceed to restore the Facility as soon as
reasonably practicable to substantially the same condition as
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existed immediately before such damage or destruction, or (b) terminate this
Lease. Failure of Tenant to give such notice within such period shall be deemed
an election by Tenant to restore the Leased Property.
In the event Landlord shall accept Tenant's offer to purchase the
Leased Property, this Lease shall terminate with respect thereto upon payment of
the purchase price. In the event Landlord shall accept Tenant's offer to
substitute a new property or properties, this Lease shall be deemed modified to
substitute such new property for the Leased Property (effective as of the date
of such substitution pursuant to Article 16) and all insurance proceeds
pertaining to the Leased Property shall be paid to Tenant. Landlord and Tenant
shall promptly execute appropriate instruments to confirm the foregoing,
although the failure to do so shall not affect this Lease.
10.3 Insufficient Insurance Proceeds. If the cost of the repair or
restoration exceeds the amount of insurance proceeds received by Landlord
pursuant to Article 9, Tenant shall contribute any excess amounts needed to
complete such restoration. Such difference shall be paid by Tenant to Landlord
and held by Landlord in trust in an interest bearing account, together with any
other insurance proceeds, for application to the cost of repair and restoration
in accordance with Section 10.4.
10.4 Disbursement of Proceeds. In the event Tenant is required to
restore the Leased Property pursuant to Sections 10.1 or 10.2, Tenant shall, at
its sole cost and expense, commence promptly and continue diligently to perform,
or cause to be performed, the repair and restoration of the Leased Property so
as to restore the Leased Property in full compliance with all Legal Requirements
and otherwise in compliance with any other applicable provisions of this Lease,
so that the Leased Property shall be at least equal in-value and general utility
to its general utility and value immediately prior to such damage or
destruction. Subject to the terms hereof, Landlord shall advance the insurance
proceeds (other than proceeds of business interruption insurance which shall be
advanced as provided below) and the amounts paid to it pursuant to Section 10.3
to Tenant regularly during the repair and restoration period so as to permit
payment for the cost of such restoration and repair. Any such advances shall be
for not less than $50,000 (or such lesser amount as equals the entire balance of
the repair and restoration costs) and Tenant shall submit to Landlord, a written
requisition and substantiation therefor on AIA Forms G702 and G703 (or on such
other form or forms as may be acceptable to Landlord). Landlord may, at its
option, condition advancement of such insurance proceeds and other amounts on
(i) the absence of any Default or Event of Default, (ii) its approval of plans
and specifications of an architect satisfactory to Landlord (which
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approval shall not be unreasonably withheld or delayed), (iii) general
contractors' estimates, (iv) architect's certificates, (v) unconditional lien
waivers of general contractors, (vi) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required and (vii)
such other certificates as Landlord may, from time to time, reasonably require.
Provided no Default or Event of Default has occurred and is continuing, on the
first day of each calendar month during which proceeds of business interruption
insurance are disbursed to Landlord under the policy of business interruption
insurance maintained pursuant to Article 9, Landlord shall disburse proceeds of
business interruption insurance received by it to Tenant upon notice from Tenant
accompanied by a certification from Tenant that such moneys will be used for
costs or expenses of owning or operating the Leased Property.
Landlord's obligation to disburse insurance proceeds under this Article
10 shall be subject to the release of such proceeds by any Facility Mortgagee.
10.5 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property or Capital Additions
financed by Tenant shall be paid to Tenant and Tenant shall hold such proceeds
in trust to pay the cost of repairing or replacing damaged Tenant's Personal
Property or Capital Additions paid for or financed by Tenant.
10.6 Restoration of Tenant's Property. If Tenant shall be required or
elect to restore the Facility as hereinabove provided, Tenant shall either (a)
restore all alterations and improvements made by Tenant, Tenant's Personal
Property and all Capital Additions paid for or financed by Tenant, or (b)
replace such alterations and improvements, Tenant's Personal Property, and/or
Capital Additions with improvements or items of the same or better quality and
utility in the operation of the Facility.
10.7 No Abatement of Rent. Unless this Lease shall be terminated as
herein provided, during the first twelve (12) months of any period required for
repair or restoration, this Lease shall remain in full force and effect and
Tenant's obligation to make rental payments and to pay all other charges
required by this Lease shall remain unabated during the Term notwithstanding any
damage affecting the Leased Property. Thereafter, payments of Minimum Rent shall
be adjusted in the manner provided in Section 11.6. If any fire or other
casualty impairs the revenue producing capacity of the Facility, projected Net
Patient Revenues attributable to the Facility shall be determined by Landlord in
its reasonable discretion.
10.8 Damage Near End of Term. Notwithstanding any provisions of this
Article 10 to the contrary, if (a) damage to or destruction of the Facility
occurs during the last twelve (12)
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months of the Term, (b) Tenant has not elected to extend the Term, (c) no
Default or Event of Default shall have occurred and be continuing, and (d) such
damage or destruction cannot be fully repaired and restored within one hundred
eighty (180) days immediately following the date of loss, Tenant shall have the
right to terminate this Lease by the giving of written notice thereof to
Landlord within thirty (30) days after the date of casualty. Failure of Tenant
to give such notice within such 30-day period shall be a waiver of Tenant's
right to terminate this Lease pursuant to this section.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation. If the whole of the Leased Property shall be
taken by Condemnation, this Lease shall terminate as of the Date of Taking. In
the event a Condemnation of less than the whole of the Leased Property renders
the Leased Property Unsuitable for Its Primary Intended Use, Tenant and Landlord
shall each have the option, by written notice to the other, given at any time
prior to the date title vests in a third party, to terminate this Lease as of
the Date of Taking, whereupon this Lease shall terminate as of such date.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of the Leased Property such that Leased Property is still suitable for
its Primary Intended Use, or if neither Tenant nor Landlord shall terminate this
Lease as provided in Section 11.1, Tenant, at its sole cost and expense, shall,
with all reasonable dispatch, restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to such Condemnation. Landlord shall, subject to and in
accordance with the applicable provisions of Section 10.4, contribute to the
cost of restoration that part of its Award allocable to such restoration. In
such event, the Minimum Rent shall be permanently reduced as set forth in
Section 11.6.
11.3 Temporary Condemnation. In the event of any temporary Condemnation
of all or any part of the Leased Property or Tenant's interest under this Lease,
this Lease shall continue in full force and effect and Tenant shall continue to
pay, in the manner and on the terms herein specified, the full amount of the
Rent. To the extent reasonably practicable, Tenant shall continue to perform and
observe all of the other terms and conditions thereof, on the part of Tenant to
be performed and observed. The entire amount of any Award made for such
temporary Taking or Condemnation allocable to the Term, whether paid by way
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of damages, rent or otherwise, shall be paid to Tenant. Tenant shall, upon the
termination of any such period of temporary condemnation, at its sole cost and
expense (but only to the extent of the Award payable to Tenant), restore the
Leased Property as nearly as may be reasonably possible, to the condition that
existed immediately prior to such Condemnation, unless such period of temporary
use or occupancy shall extend beyond the expiration of the Term, in which case
Tenant shall not be required to make such restoration.
11.4 Tenant's Option. In the event of the termination of this Lease as
provided in Section 11.1, Tenant shall have the right, exercisable by written
notice to Landlord given within thirty (30) days after receipt by Tenant of
notice of Condemnation, to elect (a) to acquire the Leased Property from
Landlord for a purchase price equal to the greater of its Minimum Repurchase
Price or the Fair Market Value Purchase Price of the Leased Property immediately
prior to such Condemnation, in which event, upon the closing of such
acquisition, Tenant shall have the right to receive the entire Award, or (b) to
substitute a new property therefor in accordance with the provisions of Article
16, in which event Tenant shall receive the entire Award. Failure of Tenant to
give such notice within such 30-day period shall be deemed a waiver of Tenant's
rights pursuant to this Section 11.4. In the event Landlord shall, by written
notice to Tenant given within thirty (30) days after receipt of Tenant's
election notice, reject Tenant's offer so to purchase or substitute, Tenant
shall restore the Leased Property to substantially the same condition as existed
immediately before such Condemnation in accordance with the applicable
provisions of this Lease and, in such event, Landlord shall, subject to and in
accordance with the applicable provisions of Section 10.4, contribute to the
cost of restoration that part of its Award allocable to such restoration.
11.5 Allocation of Award. Except as provided in the second sentence of
this Section 11.5, the total Award shall be solely the property of and payable
to Landlord. Any portion of the Award made for the taking of Tenant's leasehold
interest in the Leased Property, Capital Additions paid for or financed by
Tenant, loss of business at the Leased Property during the remainder of the
Term, the taking of Tenant's Personal Property, or Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
11.6 Abatement Procedures. In the event of a partial Condemnation as
described in Section 11.2, this Lease shall not terminate, but the Minimum Rent
shall be abated and Base Net Patient Revenues shall be reduced in the manner and
to the extent that is fair, just and equitable to both Tenant and Landlord,
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taking into consideration, among other relevant factors, the number of usable
beds, the amount of square footage, or the revenues affected by such partial or
temporary taking or damage or destruction. If Landlord and Tenant are unable to
agree upon the amount of such abatement within thirty (30) days after such
Condemnation or damage, the matter may be submitted by either party to a court
of competent jurisdiction for resolution or, if the parties so agree, the matter
may be submitted by the parties for resolution by arbitration in accordance with
the rules of the American Arbitration Association.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Lease:
(a) Should there occur and be continuing beyond the expiration
of any applicable cure period a default by Tenant under any document,
instrument or agreement evidencing or securing the other Obligations or
should there occur an Event of Default (as defined therein) under any
of the Other Leases;
(b) Should Tenant fail to make any payment of the Rent or any
other sum payable hereunder when due and such failure shall continue
for ten (10) days after written notice thereof;
(c) Should Tenant fail to observe or perform any other term,
covenant or condition of this Lease and such failure shall continue for
thirty (30) days after written notice thereof; provided, however, if
such failure cannot with due diligence be cured within such thirty (30)
day period, an Event of Default shall not be deemed to have occurred
for such additional period (not to exceed 120 days in the aggregate)
required to cure the same so long as Tenant commences sure cure within
such thirty (30) day period and thereafter diligently prosecutes such
cure to completion;
(d) Should Tenant: (i) admit in writing its inability, or be
unable, to pay its debts generally as they become due; (ii) file a
petition in bankruptcy or a petition to take advantage of any
insolvency law; (iii) make a general 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
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law or statute of the United States of America or any state thereof;
(e) Should Tenant be adjudicated a bankrupt or have an order
for relief thereunder entered against it or a court of competent
jurisdiction shall enter an order or decree appointing a receiver of
Tenant or of the whole or substantially all of its property, or
approving a petition filed against Tenant seeking reorganization or
arrangement of Tenant under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof, and such judgment, order or decree shall not be vacated or set
aside within sixty (60) days from the date of entry thereof;
(f) Should Tenant be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution, or, in any manner,
permit the sale or divestiture of substantially all of its assets;
(g) Should the estate or interest of Tenant in the Leased
Property or any part thereof shall be levied upon or attached in any
proceeding and the same shall not be vacated or discharged within
thirty (30) days after commencement thereof (unless Tenant shall be
contesting such lien or attachment in accordance with Article 8);
(h) Except as a result of damage, destruction, strikes,
lock-outs or a partial or complete Condemnation, should Tenant
voluntarily cease operations on the Leased Property for a period in
excess of thirty (30) days; or
(i) Should any representation or warranty of Tenant contained
in this Lease or any certificate or document delivered in connection
herewith be untrue when made or at any time during the Term in any
material respect which materially and adversely affects Landlord, and
the same shall not be cured within ninety (90) days after written
notice thereof.
Upon the occurrence of any Event of Default, Landlord and the agents and
servants of Landlord lawfully may, in addition to and not in derogation of any
remedies for any preceding breach of covenant, immediately or at any time
thereafter, without demand or notice and with or without process of law
(forcibly, if necessary), enter into and upon the Leased Property or any part
thereof in the name of the whole or mail a notice of termination addressed to
Tenant, and repossess the same and expel Tenant and those claiming through or
under Tenant and remove its and their effects (forcibly, if necessary), without
being deemed guilty of any manner of trespass and without prejudice to any
remedies which might otherwise be used for arrears of rent or prior breach
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of covenant, and, upon such entry or mailing as aforesaid, this Lease shall
terminate, Tenant hereby waiving all statutory rights to the Leased Property
(including, without limitation, rights of redemption, if any, to the extent such
rights may be lawfully waived) and Landlord, without notice to Tenant, may store
Tenant's effects, and those of any person claiming through or under Tenant, at
Tenant's sole expense and risk, and, if Landlord so elects, may sell such
effects at public auction or private sale and apply the net proceeds to the
payment of all sums due to Landlord from Tenant, if any, and pay over the
balance, if any, to Tenant.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Leased Property and take
possession of any and all of Tenant's Personal Property and the Records (subject
to any prohibitions or limitations to disclosure of any such data as described
in Section 3.1.2(d)) on the Leased Property, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same at public or private sale,
after giving Tenant reasonable notice of the time and place of any public or
private sale, at which sale Landlord or its assigns may purchase all or any
portion of such Personal Property unless otherwise prohibited by law. Unless
otherwise provided by law, and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable notice shall be
met if such notice is given in the manner prescribed in this Lease at least ten
(10) days before the day of sale. The proceeds from any such disposition, less
all expenses incurred in connection with the taking of possession, holding and
selling of such property (including, reasonable attorneys' fees) shall be
deducted from the proceeds of such sale. Any surplus shall be paid to Tenant or
as otherwise required by law and Tenant shall pay any deficiency to Landlord, as
Additional Rent, upon demand.
12.2 Remedies. In the event of any termination pursuant to Section
12.1, Tenant shall pay the Rent and other charges payable hereunder up to the
time of such termination and, thereafter, Tenant, until the end of what would
have been the Term of this Lease in the absence of such termination, and whether
or not the Leased Property, or any portion thereof, shall have been re-let,
shall be liable to Landlord for, and shall pay to Landlord, as current damages,
the Rent and other charges which would be payable hereunder for the remainder of
the Term had such termination not occurred, less the net proceeds, if any, of
any reletting of the Leased Property, after deducting all expenses in connection
with such re- letting, including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alteration costs and expenses of preparation for such reletting.
Tenant shall pay such current damages to Landlord monthly on the days on
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which the Minimum Rent would have been payable hereunder if this Lease had not
been terminated. Percentage Rent for the purposes of this Section 12.2 shall be
deemed to be a sum equal to the amount of the Percentage Rent (determined on an
annualized basis) payable for the Fiscal Year immediately preceding the Fiscal
Year in which the termination, re-entry or repossession takes place. If,
however, such termination, re-entry or repossession occurs during the first full
Fiscal Year after the Base Year, the Percentage Rent shall be an amount
reasonably determined by Landlord.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages and in lieu of
all such current damages beyond the date of such demand, at Landlord's election,
Tenant shall pay to Landlord either (a) an amount equal to the excess, if any,
of the Rent and other charges which would be payable hereunder from the date of
such demand (assuming that, for the purposes of this paragraph, annual payments
by Tenant on account of Impositions would be the same as payments required for
the immediately preceding twelve calendar months, or if less than twelve
calendar months have expired since the Commencement Date, the payments required
for such lesser period projected to an annual amount and Percentage Rent shall
be determined in the manner set forth above) for what would be the then
unexpired term of this Lease if the same remained in effect, over the Fair
Market Rental for the same period, or (b) an amount equal to the lesser of (i)
the Rent and other charges that would have been payable for the balance of the
Term had it not been terminated, or (ii) the aggregate of the Minimum Rent,
Percentage Rent and other charges accrued in the twelve (12) months ended next
prior to such termination (without reduction for any free rent or other
concession or abatement). In the event this Lease is so terminated prior the
expiration of the first full year of the Term, the liquidated damages which
Landlord may elect to recover pursuant to clause (b) (ii) of this paragraph
shall be calculated as if such termination had occurred on the first anniversary
of the Commencement Date. Nothing contained in this Lease shall, however, limit
or prejudice the right of Landlord to prove and obtain in proceedings for
bankruptcy or insolvency an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the proceedings in
which, the damages are to be proved, whether or not the amount be greater than,
equal to, or less than the amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise; for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of
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the Term and may grant concessions or free rent to the extent that Landlord
considers advisable and necessary to relet the same, and (b) may make such
reasonable alterations, repairs and decorations in the Leased Property as
Landlord, in its sole judgment, considers advisable and necessary for the
purpose of reletting the 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. Landlord shall in no event be liable in any
way whatsoever for failure to relet the Leased Property, or any portion thereof,
or, in the event that the 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 being evicted or dispossessed, or in the
event of Landlord obtaining possession of the Leased Property, by reason of the
violation by Tenant of any of the covenants and conditions of this Lease.
12.3 Waiver. If this Lease is terminated pursuant to Section 12.1 or
12.2, Tenant waives, to the extent permitted by law, (a) any right to a trial by
jury in the event of summary proceedings to enforce the remedies set forth in
this Article 12, and (b) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt.
12.4 Application of Funds. Any payments received by Landlord under any
of the provisions of this Lease during the existence or continuance of any Event
of Default (and any payment made to Landlord rather than Tenant due to the
existence of an Event of Default) shall be applied to Tenant's obligations in
such order as Landlord may determine or as may be prescribed by the laws of the
State.
12.5 Failure to Conduct Business. For the purpose of determining rental
loss damages or Percentage Rent, in the event Tenant shall fail to conduct its
business at the Leased Property for its Primary Intended Use, exact damages or
the amount of Percentage Rent being unascertainable, the Percentage Rent for
such period shall be deemed to by an amount reasonably determined by Landlord.
12.6 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after written notice to Tenant
(provided that no such notice shall be required if Landlord shall reasonably
determine immediate action is necessary to protect person or property), without
waiving or releasing any obligation of Tenant, and without waiving or releasing
any Event of Default, may (but shall not be obligated 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 the
Leased Property, or any
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portion thereof, for such purpose and take all such action thereon as, in
Landlord's opinion, may be necessary or appropriate therefor, including, the
management of the Facility by Landlord or its designee, and Tenant hereby
irrevocably appoints, in the event of such election by Landlord, Landlord or its
designee as manager of the Facility and its attorney in fact for such purpose,
irrevocably and coupled with an interest, in the name, place and stead of
Tenant. All costs and expenses (including, without limitation, reasonable
attorneys' fees) incurred by Landlord in connection therewith, together with
interest thereon (to the extent permitted by law) at the Overdue Rate from the
date such sums are paid by Landlord until repaid, shall be paid by Tenant to
Landlord, on demand.
12.7 Trade Names. If this Lease is terminated for any reason, Landlord
shall, upon the request of Tenant, cause the name of the business conducted upon
the Leased Property to be changed to a name other than a Facility Trade Name or
any approximation or abbreviation thereof and sufficiently dissimilar to such
name as to be unlikely to cause confusion with such name; provided, however,
that Tenant shall not thereafter use a Facility Trade Name in the same market in
which the Facility is located in connection with any business that competes with
the Facility.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration of the Term shall be
treated as a daily tenancy at sufferance at a rate equal to two (2) times the
Minimum Rent and Percentage Rent then in effect plus Additional Rent and other
charges herein provided (prorated on a daily basis). Tenant shall also pay to
Landlord all damages, direct and/or consequential (foreseeable and
unforeseeable), sustained by reason of any such holding over. Otherwise, such
holding over shall be on the terms and conditions set forth in this Lease, to
the extent applicable.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in this Lease and such default shall
continue for a period of thirty (30) days after written notice thereof, or such
additional period as may be reasonably required to correct the same (except if
such default shall constitute an immediate threat to life or property, five (5)
Business Days) Tenant may declare the occurrence of a
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"Landlord Default" by a second notice to Landlord. Thereafter, Tenant may
forthwith cure the same and, subject to the provisions of the following
paragraph, invoice Landlord for costs and expenses (including reasonable
attorneys, fees and court costs) incurred by Tenant in curing the same, together
with interest from the date Landlord receives Tenant's invoice, at a rate equal
to the Base Rate. In addition, upon the occurrence and during the continuance of
any Landlord Default, Tenant shall have the right to purchase the Leased
Property from the Landlord on the terms and conditions of that certain Purchase
Option Agreement of even date, between Landlord and Tenant, notwithstanding the
provisions of Section 2 thereof and notwithstanding the limitations regarding
timing and order of exercise of the right to purchase therein set forth. Tenant
shall have no right to terminate this Lease for any default by Landlord
hereunder and no right, for any such default, to offset or counterclaim against
any rent or other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give written notice thereof to Tenant, setting forth, in reasonable detail, the
basis therefor, no Landlord Default shall be deemed to have occurred and
Landlord shall have no obligation with respect thereto until final adverse
determination thereof. If Tenant and Landlord shall fail, in good faith, to
resolve the dispute within five (5) days after Landlord's notice of dispute,
either may submit the matter to arbitration for resolution in accordance with
the commercial arbitration rules of the American Arbitration Association. Such
arbitration shall be final and binding on Landlord and Tenant and judgment
thereon may be entered into any court of competent jurisdiction. within five (5)
days after submission to arbitration, Landlord and Tenant shall submit all
information required for such arbitration and shall take all other actions
required for such arbitration to proceed and the arbitrators shall be instructed
to render a determination as soon as possible and in any event not later than
thirty (30) days after submission.
ARTICLE 15
PURCHASE OF PREMISES
In the event Tenant shall purchase the Leased Property from Landlord
pursuant to any of the terms of this Lease, Landlord shall, upon receipt from
Tenant of the applicable purchase price, together with full payment of any
unpaid Rent and other charges due and payable with respect to any period ending
on or before the date of the purchase, deliver to Tenant a title insurance
policy, together with an appropriate deed or other instruments, conveying the
entire interest of Landlord in and to the Leased
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Property to Tenant, free and clear of all encumbrances other than (a) those
Tenant has agreed hereunder to pay or discharge, (b) those liens, if any, which
Tenant has agreed in writing to accept and take title subject to, (c) the
Permitted Encumbrances, and (d) any other encumbrances permitted to be imposed
on the Leased Property (x) pursuant to the terms of this Lease or (y) otherwise
permitted to be imposed under the provisions of Section.21.1 which are assumable
at no cost to Tenant or to which Tenant may take subject without cost to Tenant.
The difference between the applicable purchase price and the total of the
encumbrances assumed or taken subject to shall be paid in cash to Landlord or as
Landlord may direct, in federal or other immediately available funds. The
closing of any such sale shall be contingent upon and subject to Tenant's
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 Lease which otherwise would have expired during the escrow period of such
proposed sale shall be deemed to remain in effect for 30 days after termination
thereof. All expenses of such conveyance, including, without limitation, the
cost of title examination or standard coverage title insurance, usually paid by
a purchaser of real property in the State shall be paid by Tenant; all expenses
of such conveyance usually paid by a seller of real property in the State shall
be paid by Landlord.
ARTICLE 16
SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY
16.1 Tenant's Substitution Option. Provided (a) in the good faith
judgment of Tenant, the Leased Property shall become Unsuitable for its Primary
Intended Use, (b) no Default or Event of Default shall have occurred and be
continuing, and (c) not less than one (1) year shall remain in the Term, Tenant
shall have the right, subject to the conditions set forth in this Article 16,
upon not less than thirty (30) days prior written notice to Landlord, to
substitute one or more properties (collectively, the "Substitute Properties" or
individually, "Substitute Property") on the date specified in such notice (the
"Substitution Date"); provided, however, that if Tenant is required by court
order or administrative action to divest or otherwise dispose of the Leased
Property in less than thirty (30) days and Tenant shall have given Landlord
prior written notice of the filing of such court or administrative action and
kept Landlord reasonably apprised of the status thereof, the time period shall
be shortened appropriately to meet the reasonable needs of Tenant, but in no
event less than ten (10) Business Days after the receipt by Landlord of such
notice. Such notice shall include (a) an officer's Certificate, setting forth in
reasonable detail the reason(s) for the substitution and the proposed
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Substitution Date, and (b) designate not less than two properties (or groups of
properties), each of which properties (or groups of properties) shall provide
Landlord with a yield (i.e., annual return on its equity in such property)
substantially equivalent to Landlord's yield from the Leased Property at the
time of such proposed substitution (or in the case of substitution because of
damage or destruction, the yield immediately prior to such damage or
destruction) and as reasonably projected over the remaining Term of this Lease.
16.2 Landlord's Substitution Option. If Tenant shall have voluntarily
or involuntarily discontinued use of the Leased Property for its business
operations for a period in excess of one year, Landlord shall have the right,
exercisable by thirty (30) days prior written notice to Tenant, to require
Tenant to substitute a Substitute Property for the Leased Property, (in which
event, Tenant shall comply with the applicable provisions of Section 16.1 within
thirty (30) days thereafter).
16.3 Substitution Procedures. (a) If either Landlord or Tenant shall
initiate a substitution pursuant to Section 16.1 or 16.2, Landlord shall have a
period of thirty (30) days within which to review the designated properties and
such additional information and either accept or reject the Substitute
Properties so presented, unless Tenant is required by a court order or
administrative action to divest or otherwise dispose of the Leased Property
within a shorter time period, in which case the time period shall be shortened
appropriately to meet the reasonable needs of Tenant, but in no event shall such
period be less than five (5) Business Days after Landlord's actual receipt of
Tenant's notice (subject to further extension for any period of time in which
Landlord is not timely provided with the information provided for in this
Section 16.3 and Section 16.4 below). Landlord and Tenant shall use good faith
efforts to agree on a Substitute Property.
(b) In the event that, on or before the expiration of the
applicable time period for Landlord's review, Landlord has rejected
both of the Substitute Properties so presented, Tenant shall, for a
period of sixty (60) days after the expiration of such period, have the
right to terminate this Lease, by the giving of written notice thereof
to Landlord, accompanied by an offer to purchase the Leased Property on
the date set forth in such notice, but in no event less than ninety
(90) days thereafter, for a purchase price equal to the greater of the
then Fair Market Value Purchase Price or the Minimum Repurchase Price,
and, subject to the provisions of Article 15, this Lease shall
terminate on such purchase date.
(c) Landlord shall not unreasonably withhold its consent to an
offer by Tenant to substitute a property as
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set forth in this Article provided (i) Landlord shall determine the
Substitute Property shall provide Landlord with a yield substantially
equivalent to Landlord's yield from the Leased Property immediately
before such substitution or such damage or destruction, as the case may
be, and as projected over the remainder of the Term, and (ii) the
delivery of an opinion of counsel for Landlord confirming that (w) the
substitution of the Substitute Property for the Leased Property will
qualify as an exchange solely of property of a like kind under Section
1031 of the Code, in which, generally, except for "boot", no gain or
loss will be recognized by Landlord, (x) the substitution will not
result in ordinary recapture income to Landlord pursuant to Section
1250(d)(4) of the Code or any other provision of the Code, (y) the
substitution will result in income, if any, to Landlord of a type
described in Section 856(c)(2) or (3) of the Code and will not result
in income of the types described in Section 856(c)(4) of the Code or
result in the tax imposed under Section 857(b)(6) of the Code, and (z)
the substitution, together with all other substitutions made or
requested by Tenant or an Affiliated Person pursuant to the Other
Leases or other transfers of all or any portion of the Leased Property
or properties leased under the Other Leases, during the relevant time
period, will not jeopardize the qualification of Landlord as a real
estate investment trust under Sections 856-860 of the Code.
(d) In the event that the then Fair Market Value of the
Substitute Property or group of Substitute Properties minus the
encumbrances assumed by Landlord, or as to which Landlord will take the
Substitute Property or group of Substitute Properties subject, as of
the Substitution Date is greater than the then Fair Market Value of the
Leased Property minus the encumbrances assumed by Tenant, or as to
which the Tenant will take the Leased Property subject, as of the
Substitution Date (or in the case of damage or destruction, the Fair
Market Value immediately prior to such damage or destruction), Landlord
shall pay to Tenant an amount equal to the difference, subject to the
limitation set forth below; in the event that such value of the
Substitute Property or group of Substitute Properties is less than such
value of the Leased Property, Tenant shall pay to Landlord an amount
equal to the difference, subject to the limitation set forth below;
provided, however, neither Landlord nor Tenant shall be obligated to
consummate such substitution if such party would be required to make a
payment (the "Cash Adjustment") to the other in excess of an amount
equal to five percent (5%) of the Fair Market Value of the Leased
Property.
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(e) The Rent for such Substitute Property shall, in all
respects, provide Landlord with a yield (i.e., annual return on its
equity in such property) substantially equivalent to Landlord's yield
from the Leased Property at the time of such substitution (or in the
case of substitution because of damage or destruction the yield
immediately prior to such damage or destruction) and as reasonably
projected over the remaining Term, taking into account the Cash
Adjustment paid or received by Landlord and any other relevant factors,
as reasonably determined by Landlord.
(f) The Minimum Repurchase Price of the Substitute Property
shall be an amount equal to the Minimum Repurchase Price of the Leased
Property (i) increased by any Cash Adjustment paid by Landlord pursuant
to Paragraph (d) above, or (ii) decreased by any Cash Adjustment paid
by Tenant pursuant to paragraph (d) above.
16.4 Conditions to Substitution. On the Substitution Date, the
Substitute Property shall become the Leased Property hereunder, upon delivery by
Tenant to Landlord of the following:
(a) an Officer's Certificate certifying that (i) the
Substitute Property has been accepted by Tenant for all purposes of
this Lease and there has been no material damage to the improvements
located thereon, nor is any Condemnation pending or threatened with
respect thereto; (ii) all appropriate permits, licenses and
certificates (including, but not limited to, a permanent, unconditional
certificate of occupancy and all certificates of need, licenses and
provider agreements) which are necessary to permit the use of the
Substitute Property in accordance with the provisions of this Lease
have been obtained and are in full force and effect; (iii) under
applicable zoning and use laws, ordinances, rules and regulations, the
Substitute Property may be used for the purposes contemplated by this
Lease and all necessary subdivision approvals, if any, have been
obtained; (iv) there are no mechanics, or materialmen's liens
outstanding or threatened to the knowledge of Tenant against the
Substitute Property arising out of or in connection with the
construction of the improvements thereon, other than those being
contested by Tenant pursuant to Article 8; (v) to the best knowledge of
Tenant, there exists no Default or Event of Default, and no defense,
offset or claim with respect to any sums payable by Tenant hereunder;
and (vi) any exceptions to Landlord's title to the Substitute Property
do not materially interfere with the intended use of the Substitute
Property by Tenant;
(b) a deed with full warranties or assignment of a leasehold
estate with full warranties (as applicable)
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conveying to Landlord title to the Substitute Property free and clear
of any liens or encumbrances, except those approved by Landlord;
(c) an amendment duly executed, acknowledged and delivered by
Tenant, in form and substance satisfactory to Landlord, amending this
Lease to correct the legal description of the Land and make such other
changes herein as may be necessary or appropriate under the
circumstances;
(d) counterparts of a standard owner's or lessee's (as
applicable) policy of title insurance covering the Substitute Property
(or a valid, binding, unconditional commitment therefor), dated as of
the Substitution Date, in current form and including mechanics, and
materialmen's lien coverage, issued to Landlord by a title insurance
company and in the form reasonably satisfactory to Landlord, which
policy shall (i) insure (x) Landlord's fee title or leasehold estate to
the Substitute Property, subject to no liens or encumbrances except
those approved by Landlord and (y) that any restrictions affecting the
Substitute Property have not been violated; (ii) be in an amount at
least equal to the Fair Market Value of the Substitute Property; and
(iii) contain such affirmative coverage endorsements as Landlord shall
reasonably request;
(e) certificates of insurance with respect to the Substitute
Property fulfilling the requirements of Article 9;
(f) current appraisals or other evidence satisfactory to
Landlord, in its sole discretion, as to the then current Fair Market
Values and the projected residual values of such Substitute Property
and the Leased Property as to which such substitution is being made;
(g) all available revenue data relating to the Substitute
Property for the period from the date of opening for business of the
Facility on such Substitute Property to the date of Tenant's most
recent Fiscal Year end, or for the most recent three (3) years,
whichever is less; and
(h) such other certificates, documents, opinions of counsel
and other instruments as may be reasonably required by Landlord.
16.5 Conveyance to Tenant. On the Substitution Date, Landlord shall
convey the Leased Property to Tenant in accordance with the provisions of
Article 15 (except as to payment of any expenses in connection therewith which
shall be governed by Section 16.6) upon either (a) payment in cash therefor or
(b)
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conveyance to Landlord of the Substitute Property, as appropriate.
16.6 Expenses. Tenant shall pay or cause to be paid, on demand, all
reasonable costs and expenses paid or incurred by Landlord in connection with
the substitution and conveyance of the Leased Property and Substitute Property,
including, but not limited to, (a) reasonable fees and expenses of counsel, (b)
all printing expenses, (c) the amount of filing, registration and recording
taxes and fees, (d) the cost of preparing and recording, if appropriate, a
release of the Leased Property from the lien of any mortgage, (e) brokers' fees
and commissions, (f) documentary stamp and transfer taxes, (g) title insurance
charges and premiums, and (h) escrow fees.
ARTICLE 17
SUBLETTING AND ASSIGNMENT
17.1 Subletting and Assignment. Except as hereinafter provided, Tenant
shall not assign, mortgage, pledge, hypothecate, encumber or otherwise transfer
this Lease or sublease (which term shall be deemed to include the granting of
concessions and licenses and the like) all or any part of the Leased Property or
suffer or permit this Lease or the leasehold estate hereby created or any other
rights arising under this Lease to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or occupancy of the
Leased Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting except as hereinafter
provided. For purposes of this Section 17.1, an assignment of this Lease shall
be deemed to include any transaction pursuant to which Tenant is merged or
consolidated with another entity or pursuant to which all or substantially all
of Tenant's assets are transferred to any other entity, as if such or
transaction were an assignment of this Lease.
If this Lease is assigned or if the Leased Property or any part thereof
are sublet (or occupied by anybody other than Tenant and its employees)
Landlord, after default by Tenant hereunder, 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 the first paragraph of this Section 17.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its covenants, agreements or obligations contained in this Lease.
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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 a particular instance shall be deemed to be a waiver of the
obligation to obtain the Landlord's written approval in the case of any other
subletting or assignment. 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 17.1 shall be
voidable at Landlord's option.
If the rent and other sums (including, without limitation, the
reasonable value of any services performed by any assignee or subtenant in
consideration of such assignment or sublease) either initially or over the term
of any assignment or sublease, payable by such assignee or subtenant on account
of an assignment or sublease exceed the Rent called for hereunder with respect
to the space assigned or sublet, Tenant shall pay to Landlord as Additional Rent
one hundred percent (100%) of such excess net of the costs and expenses incurred
by Tenant in procuring such sublease payable monthly at the time for payment
Minimum Rent.
17.2 Required Sublease Provisions. Any sublease of all or any portion
of the Leased Property shall provide that it is subject and subordinate to this
Lease and to the matters to which this Lease is or shall be subject or
subordinate, and that in the event of termination of this Lease or reentry or
dispossession of Tenant by Landlord under this Lease, Landlord may, at its
option,. take over all of the right, title and interest of Tenant, as sublessor
under such sublease, and such subtenant shall, at Landlord's option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except that
neither Landlord nor any Facility Mortgagee, as holder of a mortgage or as
Landlord under this Lease, if such mortgagee succeeds to that position, shall
(a) be liable for any act or omission of Tenant under such sublease, (b) be
subject to any credit, counterclaim, offset or defense which theretofore accrued
to such subtenant against Tenant, (c) be bound by any previous modification of
such sublease or by any previous prepayment of more than one (1) month's rent,
(d) be bound by any covenant of Tenant to undertake or complete any construction
of the Leased Property or any portion thereof, (e) be required to account for
any security deposit of the subtenant other than any security deposit actually
delivered to Landlord by Tenant, (f) be bound by any obligation to make any
payment to such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease to be performed
after the date of such attornment, (g) be responsible for any monies owing by
Tenant to the credit of such Subtenant, or (h) be required to remove any person
occupying the Leased Property or any part thereof; and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. The
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provisions of this paragraph shall not be deemed a waiver of the provisions
set forth in the first paragraph of Section 17.1.
17.3 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 sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of the sublessee, or (b) any other formula such that any
portion of the sublease rental 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.
17.4 Assignment and Subletting Procedure. Anything contained in this
Lease to the contrary notwithstanding, if Tenant wishes to enter into a sublease
with respect to any portion of the Leased Property or an assignment of this
Lease, Tenant shall give Landlord notice of such intent, which notice ("Tenant's
Notice") shall state, in the event of a proposed sublease, the location and
amount of area intended to be covered by such sublease and the term of the
proposed sublease, the proposed effective date of such sublease or assignment,
and the identity of such proposed subtenant or assignee and such other
information with respect thereto as Landlord may reasonably require. Landlord
shall not unreasonably withhold its consent to any proposed assignment or
sublease provided Tenant shall deliver to Landlord a written instrument, in form
and substance reasonably satisfactory to Landlord, pursuant to which such
assignee agrees directly with Landlord to be bound by all the terms of this
Lease and to be jointly and severally liable with Tenant for all of Tenant's
obligations under this Lease.
ARTICLE 18
CERTIFICATES AND FINANCIAL STATEMENTS
18.1 Estoppel Certificates. At any time and from time to time, upon not
less than twenty (20) days prior written notice by Landlord, Tenant shall
furnish to Landlord an officer's Certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications), the date to which the
Rent has been paid, that, to the best of Tenant's knowledge and belief after
making due inquiry, 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 a default hereunder, or if
Tenant shall be in default or any such event shall exist, specifying in
reasonable detail all such defaults or events, and the steps being taken to
remedy the same, and such additional information as Landlord may reasonably
request. Any
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such certificate furnished pursuant to this section may be relied upon by
Landlord and any prospective purchaser or mortgagee of the Leased Property.
18.2 Financial Statements. Tenant shall furnish the following
statements to Landlord:
(a) Within forty-five (45) days after each of the first three
quarters of each Fiscal Year, the most recent Consolidated Financials
of Tenant, together with an Officer's Certificate certifying to the
accuracy of such Consolidated Financials;
(b) Within one hundred twenty (120) days after the end of each
Fiscal Year, the most recent Consolidated Financials of Tenant for such
year, certified by an independent certified public accountant
satisfactory to Landlord;
(c) Promptly after the sending or filing thereof, copies of
all reports which Tenant sends to its security holders generally, and
copies of all periodic reports which Tenant files with the SEC or any
stock exchange on which its shares are listed or traded;
(d) Promptly after the delivery thereof to Tenant, or its
management, a copy of any management letter or written report prepared
by Tenant's certified public accountants with respect to the financial
condition, operations, business or prospects of Tenant;
(e) At any time and from time to time upon not less than
twenty (20) days notice from Landlord, any Consolidated Financials or
any other financial reporting information required to be filed by
Landlord with any securities and exchange commission, the SEC or any
successor agency, or any other governmental authority, or required
pursuant to any order issued by any court governmental authority or
arbitrator in any litigation to which Landlord is a party, for purposes
of compliance therewith; and
(f) With reasonable promptness, such other information as to
the financial condition and affairs of Tenant as Landlord may
reasonably request.
18.3 General Operations. Tenant covenants and agrees to furnish to
Landlord:
18.3.1 Reimbursement, Licensure etc. Within thirty (30) days
after receipt or modification thereof, copies of
(a) All licenses authorizing Tenant to operate the
Facility for its Primary Intended Use;
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(b) All Medicare and Medicaid certifications,
together with provider agreements and all material
correspondence relating thereto with respect to the Facility
(excluding, however, correspondence which may be subject to
any attorney-client privilege);
(c) A Nursing Home Administrator License for the
individuals employed in such capacity with respect to the
Facility;
(d) All reports of surveys, statements of
deficiencies, plans of correction, and all material
correspondence relating thereto, including, without
limitation, all reports and material correspondence concerning
compliance with or enforcement of licensure,
Medicare/Medicaid, and accreditation requirements, including
physical environment and Life Safety Code survey reports
(excluding, however, correspondence which may be subject to
any attorney-client privilege);and
(e) With reasonable promptness, such other
confirmation as to the Licensure and Medicare and Medicaid
participation of Tenant as Landlord may reasonably request
from time to time.
18.3.2 Monthly Reports. Tenant shall prepare and furnish to
Landlord for the Leased Property, within thirty (30) days after the end of each
calendar month during the term of this Agreement, a monthly report, such report
to include a balance sheet, a current month and year to date income statement,
showing each item of actual and projected income and expense, prepared on an
accrual basis and a current month and year to date cash flow statement,
reflecting the operating results of the Facility; a statement of Net Patient
Revenues for such month; and such additional information as the Company may from
time to time reasonably require.
ARTICLE 19
LANDLORD ACCESS
19.1 Landlord's Right to Inspect. Tenant shall permit Landlord and its
authorized representatives to inspect the Leased Property during usual business
hours, and to do and make such repairs as Landlord is permitted or required to
make pursuant to the terms of this Lease, subject to any security, health,
safety or patient or business confidentiality requirements of Tenant or any
governmental agency or Insurance Requirement relating to the Leased Property or
imposed by law.
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19.2 Landlord's Option to Purchase the Tenant's Personal Property;
Transfer of Licenses. Effective on not less than ninety (90) days' prior notice
given at any time within one hundred eighty (180) days after the expiration of
the Term (or such shorter period as shall be appropriate if this Lease is
terminated prior to its expiration date), Landlord shall have the option to
purchase all (but not less than all) of Tenant's Personal Property (except motor
vehicles), if any, at the expiration or termination of this Lease, for an amount
equal to the then net market value thereof (current replacement cost as
determined by appraisal less accumulated depreciation on Tenant's books
pertaining thereto), subject to, and with appropriate price adjustments for, all
equipment leases, conditional sale contracts, UCC-1 financing statements and
other encumbrances to which such Personal Property is subject; provided,
however, Landlord shall not have the right to purchase any Facility Trade Name
or logo.
ARTICLE 20
APPRAISAL
20.1 Appraisal Procedure. In the event that it becomes necessary to
determine the Fair Market Value, Fair Market Value Purchase Price or Fair Market
Rental of the Leased Property or a Substitute Property for any purpose of this
Lease, the party required or permitted to give notice of such required
determination (the "Initiating Party") shall include in such notice the name of
a designated Qualified Appraiser (hereinafter defined) on its behalf. Within 10
(ten) days after notice, the party receiving such notice (the "Responding
Party") shall, by written notice to the other, appoint a second Qualified
Appraiser. If the Responding Party shall fail, neglect or refuse within said
ten-day period to designate another appraiser willing so to act, the appraiser
designated by the Initiating Party shall designate the second Qualified
Appraiser within ten (10) days thereafter. The two appraisers so designated
shall meet within ten (10) days after the second appraiser is designated, and,
if within ten (10) days after the second appraiser is designated, the two
appraisers do not agree upon the Fair Market Value, Fair Market Value Purchase
Price or Fair Market Rental, as the case may be, of the applicable property as
of the relevant date, the two appraisers shall designate a third Qualified
Appraiser, within ten (10) days thereafter. In the event that the two appraisers
are unable to agree upon the appointment of a third Qualified Appraiser, within
such ten (10) day period, either Landlord or Tenant, on behalf of both, may then
request appointment of such appraiser the then president of the American
Arbitration Association. In the event of a failure, refusal or inability of any
appraiser to act, a new
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appraiser shall be appointed in his stead, which appointment shall be made in
the same manner as hereinabove provided for the appointment of such appraiser so
failing, refusing or being unable to act. In the event that all appraisers
cannot agree upon such value ten (10) days as aforesaid, each appraiser shall
submit his appraisal of such value to the other two appraisers in writing, and
such value shall be determined by calculating the average of the two numerically
closest (or, if the values are equidistant, all three) values determined by the
three appraisers.
The costs, other than counsel fees, of such appraisal shall be borne
equally by the parties. Upon determining such value, the appraisers shall
promptly notify Landlord and Tenant in writing of such determination. If any
party shall fail to appear at the hearings appointed by the appraisers, the
appraisers may act in the absence of such party.
The determination of the board of appraisers (or the single additional
Qualified Appraiser, as appropriate) made in accordance with the foregoing
provisions shall be final and binding upon the parties, such determination may
be entered as an award in arbitration in a court of competent jurisdiction, and
judgment thereon may be entered.
ARTICLE 21
MORTGAGES
21.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord
may, subject to the terms and conditions set forth in this Section 21.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Any such Encumbrance,
other than one the proceeds of which are used to finance construction of a
Capital Addition pursuant to the provisions of Sections 6.1 and 6.3, shall
include the right to prepay (whether or not subject to a prepayment penalty) and
shall provide (subject to Section 21.2) that it is subject to the rights of
Tenant under this Lease.
21.2 Subordination of Lease. Subject to Section 21.1 and the last
paragraph of this Section 21.2, this Lease, and all rights of Tenant hereunder,
are and shall be subject and subordinate to any ground or master lease, and all
renewals, extensions, modifications and replacements thereof, and to all
mortgages and deeds of trust, which may now or hereafter affect
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the Leased Property or any improvements thereon and/or any of such leases,
whether or not such mortgages or deeds of trust shall also cover other lands
and/or buildings and/or leases, to each and every advance made or hereafter to
be made under such mortgages and deeds of trust, and to all renewals,
modifications, replacements and extensions of such leases and such mortgages and
deeds of trust and all consolidations of such mortgages and deeds of trust. This
section shall be self-operative and no further instrument of subordination shall
be required. In confirmation of such subordination, Tenant shall promptly
execute, acknowledge and deliver any instrument that Landlord, the lessor under
any such lease or the holder of any such mortgage or the trustee or beneficiary
of any deed of trust or any of their respective successors in interest may
reasonably request to evidence such subordination. Any lease to which this Lease
is, at the time referred to, subject and subordinate is herein called "Superior
Lease" and the lessor of a Superior Lease or its successor in interest at the
time referred to, is herein called "Superior Landlord" and any mortgage or deed
of trust to which this Lease is, at the time referred to, subject and
subordinate, is herein called "Superior Mortgage" and the holder, trustee or
beneficiary of a Superior Mortgage is herein called "Superior Mortgagee".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Lease, whether through possession or foreclosure
action or delivery of a new lease or deed, or otherwise, then at the request of
such party so succeeding to Landlord's rights (herein called ("Successor
Landlord") and upon such Successor Landlord's written agreement to accept
Tenant's attornment, Tenant shall attorn to and recognize such Successor
Landlord as Tenants landlord under this Lease and shall promptly execute and
deliver any instrument that such Successor Landlord may reasonably request to
evidence such attornment. Upon such attornment, this Lease shall continue in
full force and effect as a direct lease between the Successor Landlord and
Tenant upon all of the terms, conditions and covenants as are set forth in this
Lease, except that the Successor Landlord (unless formerly the landlord under
this Lease or its nominee or designee) shall not be (a) liable in any way to
Tenant for any act or omission, neglect or default on the part of Landlord under
this Lease, (b) responsible for any monies owing by or on deposit with Landlord
to the credit of Tenant, (c) subject to any counterclaim or setoff which
theretofore accrued to Tenant against Landlord, (d) bound by any modification of
this Lease subsequent to such Superior Lease or mortgage, or by any previous
prepayment of Minimum Rent or Percentage Rent for more than one (1) month, which
was not approved in writing by the Superior Landlord or the Superior
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Mortgagee thereto, (e) liable to the Tenant beyond the Successor Landlord's
interest in the Leased Property and the rents, income, receipts, revenues,
issues and profits issuing from the Leased Property, (f) responsible for the
performance of any work to be done by the Landlord under this Lease to render
the Leased Property ready for occupancy by Tenant, or (g) required to remove any
person occupying the Leased Property or any part thereof, except if such person
claims by, through or under the Successor Landlord. Tenant agrees at any time
and from time to time to execute a suitable instrument in confirmation of
Tenant's agreement to attorn, as aforesaid.
Tenant's obligation to subordinate this Lease and Tenant's rights
hereunder to any Superior Mortgage or Superior Lease shall be conditioned upon
Landlord obtaining from any Superior Mortgagee or Superior Landlord, an
agreement which shall be executed by Tenant and such Superior Mortgagee or
Superior Landlord which shall provide in substance that so long as no Event of
Default exists as would entitle Landlord or any such Superior Mortgagee or
Superior Landlord to terminate this Lease or would cause, without any further
action of Landlord or such Superior Mortgagee or Superior Landlord, the
termination of this Lease or would entitle Landlord or such Superior Mortgagee
or Superior Landlord to dispossess Tenant, this Lease shall not be terminated,
nor shall Tenant's use, possession or enjoyment of the Leased Property, in
accordance with the terms and provisions of this Lease, be interfered with, nor
shall the leasehold estate granted by this Lease be affected in any other
manner, in any foreclosure or any action or proceeding instituted under or in
connection with such Superior Mortgage or Superior Lease, or in the event such
Superior Mortgagee or Superior Landlord takes possession of the Leased Property
pursuant to any provisions of such Superior Mortgage or Superior Lease, unless
Landlord or such Superior Mortgagee or Superior Landlord would have had such
right of termination pursuant to this Lease. Such agreement shall be in form
customarily used by the holder of any such Superior Mortgage or Superior Lease.
21.3 Notice to Mortgagee and Ground Landlord. Subsequent to the receipt
by Tenant of notice from any person, firm or other entity that it is a Facility
Mortgagee, or that it is the ground lessor under a lease with Landlord, as
ground lessee, which includes the Leased Property as part of the demised
premises, no notice from Tenant to Landlord shall be effective unless and until
a copy of the same is given to such Facility Mortgagee or
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ground lessor and the curing of any of Landlord's defaults by such Facility
Mortgagee or ground lessor shall be treated as performance by Landlord.
ARTICLE 22
INVESTMENT TAX CREDIT
22.1 Investment Tax Credit. Landlord agrees to elect, in accordance
with Section 48(d) of the Code, to treat Tenant as having purchased all such
eligible property in the Leased Property as may be designated by Tenant in order
that Tenant may obtain the benefit of the credit, if any, allowed or allowable
with respect thereto under Section 38 of the Code. Landlord makes no
representation or warranty with respect to the availability of the credit to
Tenant or the efficacy of such election. Landlord's sole responsibility in this
regard shall be to execute such documents as are reasonably required to effect
the election, which documents Tenant shall prepare, at Tenant's sole cost and
expense, and to provide Tenant with such information as may be reasonably
requested by Tenant in connection therewith. In addition, Landlord agrees it and
its assignees will not claim the credit provided by Section 38 of the Code for
any property included in the Leased Property.
ARTICLE 23
ADDITIONAL COVENANTS OF TENANT
23.1 Notice of Change of Name, Administrator, Etc. Tenant shall give
prompt notice to Landlord of any change in (a) the name (operating or otherwise)
of Tenant or the Facility, (b) the individual licensed as administrator of the
Facility, (c) the number of beds in any bed category for which the Facility is
licensed or the number of beds in any bed category available for use at the
Facility (except for changes in the number of certified distinct part beds made
for reimbursement maximization purposes), and (d) the patient and/or child care
services that are offered at the Facility.
23.2 Notice of Litigation, Potential Event of Default, Etc. Tenant
shall give prompt notice to Landlord of any litigation or any administrative
proceeding to which it may hereafter become a party which involves a potential
liability equal to or greater than $250,000, or which may otherwise result in
any material adverse change in the business, operations, property, prospects,
results of operation or condition, financial or other, of Tenant.
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Forthwith upon Tenant obtaining knowledge of any Default or Event of Default, or
any event or condition that would be required to be disclosed in a current
report filed by Tenant on Form 8- K or in Part II of a quarterly report on Form
10-Q if Tenant were required to file such reports under the Securities Exchange
Act of 1934, as amended, Tenant shall give Landlord notice thereof, which notice
shall set forth in reasonable detail the nature and period of existence thereof
and what action Tenant has taken or is taking or proposes to take with respect
thereto.
23.3 Management of Leased Property. Tenant shall not enter into any
management or similar agreement in respect of the Leased Property without the
express prior written consent of Landlord.
23.4 Distributions, Payments to Affiliated Persons, Etc. Tenant will
not declare, order, pay or make, directly or indirectly, any distribution or any
payment to any Affiliated Person as to Tenant (including payments in the
ordinary course of business and payment pursuant to management agreements with
any such Affiliated Person) or set apart any sum or property therefor, or agree
to do so, if, at the time of such proposed action, or immediately after giving
effect thereto, any event or condition shall exist which constitutes a Default
or an Event of Default.
ARTICLE 24
MISCELLANEOUS
24.1 No Waiver. No failure by Landlord 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.
24.2 Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Landlord, 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 Landlord or Tenant of any one
or more of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Landlord or Tenant of any or all of such other rights,
powers and remedies.
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24.3 Acceptance of Surrender. No surrender to Landlord of this Lease or
of the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Landlord and no
act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
24.4 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (b) the fee estate or ground
landlord's interest in the Leased Property.
24.5 Conveyance by Landlord. If Landlord or any successor owner of the
Leased Property shall convey the Leased Property in accordance with the terms
hereof other than as security for a debt, and the grantee or transferee of the
Leased Property shall expressly assume all obligations of Landlord hereunder
arising or accruing from and after the date of such conveyance or transfer and
shall be reasonably capable of performing the obligations of Landlord hereunder,
Landlord or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of Landlord under this
Lease arising or accruing from and after the date of such conveyance or other
transfer as to the Leased Property and all such future liabilities and
obligations shall thereupon be binding upon the new owner.
24.6 Quiet Enjoyment. So long as Tenant shall pay the Rent as the same
becomes due and shall substantially comply with all of the terms of this Lease
and perform its obligations hereunder, Tenant shall peaceably and quietly have,
hold and enjoy the Leased Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or
hereafter consented to by Tenant. Except as otherwise provided in this Lease, no
failure by Landlord 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 Landlord as a result of a breach by
Landlord of the covenant of quiet enjoyment contained in this Section.
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24.7 Landlord's Liability. THE DECLARATION OF TRUSTEES ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK
ONLY TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION. Tenant, its successors and assigns, shall not assert nor seek to
enforce any claim for breach of this Lease against any of Landlord's assets
other than Landlord's interest in the Leased Property and in the rents, issues
and profits thereof, and Tenant agrees to look solely to such interest for the
satisfaction of any liability or claim against Landlord under this Lease, it
being specifically agreed that in no event whatsoever shall Landlord (which term
shall include, without limitation, any general or limited partner, trustees,
beneficiaries, officers, directors, or stockholders of Landlord) ever be
personally liable for any such liability. In no event shall Landlord ever be
liable to Tenant for any indirect or consequential damages.
24.8 Landlord's Consent. Where provisions are made in this Lease for
Landlord's consent and Landlord shall fail or refuse to give such consent,
Tenant shall not be entitled to any damages for any withholding by Landlord of
its consent, it being intended that Tenant's sole remedy shall be an action for
specific performance or injunction, and that such remedy shall be available only
in those cases where Landlord has expressly agreed in writing not to
unreasonably withhold its consent.
24.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Lease. However, Landlord 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 reference to this Lease, and all options
contained herein, shall be made. Tenant shall pay all costs and expenses of
recording such memorandum of this Lease.
24.10 Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Lease shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with
<PAGE>
-68-
all freight charges prepaid (if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Lease upon
the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Lease a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
Health and Rehabilitation Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attn: Lena G. Goldberg, Esq.
[Telecopier No. (617) 338-2880]
if to Tenant to:
Horizon Healthcare Corporation
6001 Indian School Road, N.E., Suite 530
Albuquerque, New Mexico 87110
Attn: Mr. Neal Elliott
[Telecopier No. (505) 881-5097]
with a copy to:
Kemp Smith Duncan and Hammond, P.C.
2000 State National Plaza
El Paso, Texas 79901-1447
Attn: Dane George, Esq.
[Telecopier No. (915) 546-5360]
<PAGE>
-69-
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time
to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address
any other address within the United States of America.
24.11 Construction. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Tenant or Landlord
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 thereof
shall be invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate 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 signed by the party
to be charged. All the terms and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. The headings in this Lease are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof. This Lease
represents the entire agreement among the parties and amends and restates the
original Leases in their entirety. This Lease may not be amended or modified in
any respect except by the written agreement of Landlord and Tenant.
24.12 Governing Law. This Lease shall be interpreted, construed,
applied and enforced in accordance with the laws of the State applicable to
contracts between residents of the State which are to be performed entirely
within the State, regardless of (i) where this Lease is executed or delivered;
or (ii) where any payment or other performance required by this Lease is made or
required to be made; or (iii) where any breach of any provision of this Lease
occurs, or any cause of action otherwise accrues; or (iv) where any action or
other proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principle place of business, or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum jurisdiction
otherwise would apply the laws of a jurisdiction other than the State; or (vii)
any combination of the foregoing.
<PAGE>
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To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Lease may be brought and prosecuted in such court or courts located in the
State as is provided by law; and the parties consent to the jurisdiction of said
court or courts located in the State and to service of process by registered
mail, return receipt requested, or by any other manner provided by law.
24.13 Purchase Option. It is acknowledged and agreed by the parties
that Tenant has the option to purchase the Leased Property subject to and upon
the terms and conditions set forth in the Purchase Option Agreement, dated as of
the date hereof, between Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Lease, as a sealed
instrument, as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST
By: /s/ John G. Murray
Its: Treasurer
TENANT:
HORIZON HEALTHCARE CORPORATION
By:___________________________________
Its: (Vice) President
<PAGE>
-70-
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Lease may be brought and prosecuted in such court or courts located in the
State as is provided by law; and the parties consent to the jurisdiction of said
court or courts located in the State and to service of process by registered
mail, return receipt requested, or by any other manner provided by law.
24.13 Purchase Option. It is acknowledged and agreed by the parties
that Tenant has the option to purchase the Leased Property subject to and upon
the terms and conditions set forth in the Purchase Option Agreement, dated as of
the date hereof, between Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Lease, as a sealed
instrument, as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST
By:___________________________________
Its:_____________________________
TENANT:
HORIZON HEALTHCARE CORPORATION
By: /s/ Paul Elliott
Its: President
<PAGE>
EXHIBIT A
Other Leases
[See attached copy.]
<PAGE>
EXHIBIT B
Permitted Encumbrances
[See attached copy.]
<PAGE>
EXHIBIT C
The Land
[See attached copy.]
<PAGE>
Omitted Exhibits
----------------
The following exhibits to the Lease Agreement have been omitted:
Exhibit Letter Exhibit Title
- -------------- -------------
A Other Leases
B Permitted Encumbrances
C The Land
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibits to the Securities and Exchange Commission upon request.
<PAGE>
EXHIBIT D
Minimum Rent
[See attached copy.]
<PAGE>
EXHIBIT D
Monthly Rent Allocation
Hyannis, MA $86,517
<PAGE>
SCHEDULE TO EXHIBIT 10.38
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Lease Agreements, which are substantially identical in all material respects to
the Lease Agreement filed herewith, are omitted. The following list sets forth
the material differences in the Leased Premises and Monthly Rent Allocation.
Leased Premises Monthly Rent Allocation
- ---------------------------------------------------------------------
Boston, MA $260,594
Middleboro, MA $177,204
Worcester, MA $182,416
Cannonsburg, PA $162,611
EXHIBIT 10.39
LEASE AGREEMENT
DATED AS OF FEBRUARY 11, 1994,
BY AND BETWEEN
HEALTH AND REHABILITATION PROPERTIES TRUST,
AS LANDLORD,
AND
CONNECTICUT SUBACUTE CORPORATION II, AS TENANT.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1 DEFINITIONS................................................................................ 1
1.1 Added Value Percentage................................................................ 1
1.2 Additional Rent....................................................................... 1
1.3 Affiliated Person..................................................................... 1
1.4 Assumed Indebtedness.................................................................. 2
1.5 Award................................................................................. 2
1.6 Base Net Patient Revenues............................................................. 2
1.7 Base Rate............................................................................. 2
1.8 Base Year............................................................................. 2
1.9 Business Day.......................................................................... 2
1.10 Capital Addition...................................................................... 2
1.11 Capital Additions Cost................................................................ 3
1.12 Capital Expenditure................................................................... 3
1.13 Cash Adjustment....................................................................... 4
1.14 Claims................................................................................ 4
1.15 Code.................................................................................. 4
1.16 Commencement Date..................................................................... 4
1.17 Condemnation.......................................................................... 4
1.18 Condemnor............................................................................. 4
1.19 Consolidated Financials............................................................... 4
1.20 Control............................................................................... 4
1.21 Date of Taking........................................................................ 4
1.22 Default............................................................................... 5
1.23 Encumbrance........................................................................... 5
1.24 Entity................................................................................ 5
1.25 Environmental Laws.................................................................... 5
1.26 Environmental Notice.................................................................. 5
1.27 Environmental Obligation.............................................................. 5
1.28 Event of Default...................................................................... 5
1.29 Excess Net Patient Revenues........................................................... 5
1.30 Extended Terms........................................................................ 5
1.31 Facility.............................................................................. 5
1.32 Facility Mortgage..................................................................... 5
1.33 Facility Mortgagee.................................................................... 5
1.34 Facility Trade Names.................................................................. 5
1.35 Fair Market Added Value............................................................... 6
1.36 Fair Market Rental.................................................................... 6
1.37 Fair Market Value..................................................................... 6
1.38 Fair Market Value Purchase Price...................................................... 6
1.39 Fiscal Year........................................................................... 6
1.40 Fixed Term............................................................................ 6
1.41 Fixtures.............................................................................. 6
1.42 Hazardous Substances.................................................................. 6
1.43 Immediate Family...................................................................... 7
1.44 Impositions........................................................................... 7
1.45 Initiating Party...................................................................... 7
1.46 Insurance Requirements................................................................ 7
<PAGE>
-ii-
1.47 Land.................................................................................. 7
1.48 Landlord.............................................................................. 8
1.49 Landlord Default...................................................................... 8
1.50 Lease................................................................................. 8
1.51 Leased Improvements................................................................... 8
1.52 Leased Personal Property.............................................................. 8
1.53 Leased Property....................................................................... 8
1.54 Legal Requirements.................................................................... 8
1.55 Lending Institution................................................................... 8
1.56 Minimum Rent.......................................................................... 8
1.57 Minimum Repurchase Price.............................................................. 8
1.58 Net Patient Revenues.................................................................. 9
1.59 Non-Capital Additions................................................................. 10
1.60 Officer's Certificate................................................................. 10
1.61 Other Leases.......................................................................... 10
1.62 Overdue Rate.......................................................................... 10
1.63 Parent................................................................................ 10
1.64 Percentage Rent....................................................................... 10
1.65 Permitted Encumbrances................................................................ 10
1.66 Person................................................................................ 10
1.67 Primary Intended Use.................................................................. 10
1.68 Qualified Appraiser................................................................... 11
1.69 Records............................................................................... 10
1.70 Rent.................................................................................. 10
1.71 Responding Party...................................................................... 11
1.72 SEC................................................................................... 11
1.73 State................................................................................. 11
1.74 Subsidiary............................................................................ 11
1.75 Substitute Properties................................................................. 11
1.76 Substitution Date..................................................................... 11
1.77 Successor Landlord.................................................................... 11
1.78 Superior Lease........................................................................ 11
1.79 Superior Landlord..................................................................... 11
1.80 Superior Mortgage..................................................................... 11
1.81 Superior Mortgagee.................................................................... 11
1.82 Tenant................................................................................ 11
1.83 Tenant's Personal Property............................................................ 11
1.84 Term.................................................................................. 11
1.85 Test Rate............................................................................. 12
1.86 Trustees.............................................................................. 12
1.87 Unavoidable Delays.................................................................... 12
1.88 Unsuitable for Its Primary Intended Use............................................... 12
ARTICLE 2 PREMISES AND TERM.......................................................................... 12
2.1 Premises.............................................................................. 12
2.2 Condition of Premises................................................................. 13
2.3 Fixed Term............................................................................ 14
2.4 Extended Terms........................................................................ 14
<PAGE>
-iii-
ARTICLE 3 RENT....................................................................................... 15
3.1 Rent.................................................................................. 15
3.1.1 Minimum Rent................................................................... 15
3.1.2 Percentage Rent................................................................ 15
3.1.3 Additional Rent................................................................ 17
3.2 Late Payment of Rent.................................................................. 19
3.3 Net Lease............................................................................. 19
3.4 No Termination, Abatement, Etc........................................................ 19
ARTICLE 4 USE OF THE LEASED PROPERTY................................................................. 20
4.1 Permitted Use......................................................................... 20
4.1.1 Primary Intended Use........................................................... 20
4.1.2 Necessary Approvals............................................................ 21
4.1.3 Continuous Operation, Etc...................................................... 21
4.1.4 Lawful Use, Etc................................................................ 21
4.2 Compliance with Legal and Insurance
Requirements, Instruments, Etc.................................................... 21
4.3 Compliance with Medicaid and Medicare
Requirements...................................................................... 21
4.4 Environmental Matters................................................................. 22
ARTICLE 5 MAINTENANCE AND REPAIRS, ETC............................................................... 23
5.1 Maintenance and Repair................................................................ 23
5.1.1 Tenant's Obligations........................................................... 23
5.1.2 Landlord's Obligations......................................................... 23
5.2 Capital Expenditure Cost Sharing...................................................... 23
5.3 Tenant's Personal Property............................................................ 24
5.4 Yield Up.............................................................................. 24
5.5 Encroachments, Restrictions, Etc...................................................... 25
ARTICLE 6 CAPITAL ADDITIONS, ETC..................................................................... 25
6.1 Construction of Capital Additions to the Leased
Property.......................................................................... 25
6.2 Capital Additions Financed by Tenant.................................................. 27
6.3 Information Regarding Capital Additions............................................... 29
6.4 Non-Capital Additions................................................................. 30
6.5 Salvage............................................................................... 30
<PAGE>
-iv-
ARTICLE 7 LIENS...................................................................................... 30
7.1 Liens................................................................................. 30
7.2 Landlord's Lien....................................................................... 31
7.3 Mechanic's Liens...................................................................... 32
ARTICLE 8 PERMITTED CONTESTS......................................................................... 32
ARTICLE 9 INSURANCE AND INDEMNIFICATION.............................................................. 33
9.1 General Insurance Requirements........................................................ 33
9.2 Waiver of Subrogation................................................................. 34
9.3 Form Satisfactory, Etc................................................................ 35
9.4 No Separate Insurance................................................................. 36
9.5 Indemnification of Landlord........................................................... 36
9.6 Indemnification of Tenant............................................................. 36
ARTICLE 10 CASUALTY.................................................................................. 37
10.1 Insurance Proceeds.................................................................... 37
10.2 Reconstruction in the Event of Damage or
Destruction ...................................................................... 37
10.2.1 Material Damage or Destruction of Premises 37
10.2.2 Partial Damage or Destruction................................................. 38
10.3 Insufficient Insurance Proceeds....................................................... 39
10.4 Disbursement of Proceeds.............................................................. 39
10.5 Tenant's Property..................................................................... 40
10.6 Restoration of Tenant's Property...................................................... 40
10.7 No Abatement of Rent.................................................................. 40
10.8 Damage Near End of Term............................................................... 40
ARTICLE 11 CONDEMNATION.............................................................................. 41
11.1 Total Condemnation.................................................................... 41
11.2 Partial Condemnation.................................................................. 41
11.3 Temporary Condemnation................................................................ 41
11.4 Tenant's Option....................................................................... 41
11.5 Allocation of Award................................................................... 42
11.6 Abatement Procedures.................................................................. 42
ARTICLE 12 DEFAULTS AND REMEDIES..................................................................... 43
12.1 Events of Default..................................................................... 43
12.2 Remedies.............................................................................. 45
12.3 Waiver................................................................................ 47
12.4 Application of Funds.................................................................. 47
12.5 Failure to Conduct Business........................................................... 47
12.6 Landlord's Right to Cure Tenant's Default............................................. 47
12.7 Trade Names........................................................................... 47
<PAGE>
-v-
ARTICLE 13 HOLDING OVER.............................................................................. 48
ARTICLE 14 LANDLORD'S DEFAULT........................................................................ 48
ARTICLE 15 PURCHASE OF PREMISES...................................................................... 49
ARTICLE 16 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY 50
16.1 Tenant's Substitution Option.......................................................... 50
16.2 Landlord's Substitution Option........................................................ 50
16.3 Substitution Procedures............................................................... 51
16.4 Conditions to Substitution............................................................ 53
16.5 Conveyance to Tenant.................................................................. 54
16.6 Expenses.............................................................................. 54
ARTICLE 17 SUBLETTING AND ASSIGNMENT................................................................. 55
17.1 Subletting and Assignment............................................................. 55
17.2 Required Sublease Provisions.......................................................... 56
17.3 Sublease Limitation................................................................... 56
17.4 Assignment and Subletting Procedure................................................... 56
ARTICLE 18 CERTIFICATES AND FINANCIAL STATEMENTS..................................................... 57
18.1 Estoppel Certificates................................................................. 57
18.2 Financial Statements.................................................................. 57
18.3 General Operations.................................................................... 58
18.3.1 Reimbursement, Licensure, Etc................................................. 58
18.3.2 Monthly Reports............................................................... 59
ARTICLE 19 LANDLORD ACCESS........................................................................... 59
19.1 Landlord's Right to Inspect........................................................... 59
19.2 Landlord's Option to Purchase the Tenant's
Personal Property; Transfer of Licenses........................................... 59
ARTICLE 20 APPRAISAL................................................................................. 60
20.1 Appraisal Procedure................................................................... 60
ARTICLE 21 MORTGAGES................................................................................. 61
21.1 Landlord May Grant Liens.............................................................. 61
21.2 Subordination of Lease................................................................ 61
21.3 Notice to Mortgagee and Ground Landlord............................................... 63
ARTICLE 22 INVESTMENT TAX CREDIT..................................................................... 63
22.1 Investment Tax Credit................................................................. 63
<PAGE>
-vi-
ARTICLE 23 ADDITIONAL COVENANTS OF TENANT
23.1 Notice of Change of Name, Administrator, Etc......................................... 64
23.2 Notice of Litigation, Potential Event of
Default, Etc........................................................................ 64
23.3 Management of Leased Property......................................................... 64
23.4 Distributions, Payments to Affiliated Persons,
Etc............................................................................... 64
ARTICLE 24 MISCELLANEOUS............................................................................. 65
24.1 No Waiver............................................................................. 65
24.2 Remedies Cumulative................................................................... 65
24.3 Acceptance of Surrender............................................................... 65
24.4 No Merger of Title.................................................................... 65
24.5 Conveyance by Landlord................................................................ 65
24.6 Quiet Enjoyment....................................................................... 66
24.7 Landlord's Liability.................................................................. 66
24.8 Landlord's Consent.................................................................... 66
24.9 Memorandum of Lease................................................................... 67
24.10 Notices............................................................................... 67
24.11 Construction.......................................................................... 68
24.12 Governing Law......................................................................... 68
</TABLE>
EXHIBITS
A - Other Leases
B - Permitted Encumbrances
C - The Land
D - Minimum Rent
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of February 11, 1994, is made by and
between HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate
investment trust, as landlord ("Landlord"), having its principal office at 400
Centre Street, Newton, Massachusetts, and CONNECTICUT SUBACUTE CORPORATION II, a
Delaware corporation, as tenant ("Tenant"), having an office at 400 Centre
Street, Newton, Massachusetts 02158.
W I T N E S S E T H :
WHEREAS, Landlord owns the Leased Property (this and other capitalized
terms used and not otherwise defined herein having the meanings ascribed to such
terms in Article 1) and Landlord wishes to lease the Leased Property to Tenant
and Tenant wishes to lease the Leased Property from Landlord, subject to and
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
Each reference in this Lease to any of the following terms shall be
construed to incorporate the definitions hereinafter set forth and include the
plural as well as the singular. All accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with generally
accepted accounting principles.
1.1 "Added Value Percentage" shall have the meaning given such term in
Section 6.2(a).
1.2 "Additional Rent" shall have the meaning given such term in Section
3.1.3.
1.3 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership; (b) in the case of any such Person which is a limited liability
company, any member of such company; (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent of the Persons referred to in the
preceding clauses (a) and (b); (d) any other Person otherwise directly or
indirectly controlling or under common control with such Person or one or more
of the Persons referred to in the preceding clauses (a), (b) and (c); and (e)
any other Person who is a member of the Immediate Family of such Person or any
Person referred to in the preceding clauses (a) through (d).
<PAGE>
-2-
1.4 "Assumed Indebtedness" shall mean any indebtedness or other
obligations existing at the time of acquisition of the Leased Property by
Landlord secured by a mortgage, deed of trust or other security agreement
creating a lien on the Leased Property and assumed by Landlord, and any
indebtedness resulting from the refinancing thereof, and/or any subsequent
indebtedness resulting from Landlord's financing of, or Landlord's reimbursement
of Tenant's financing of, any Capital Additions during the Term, except any
indebtedness or other obligations of Tenant not assumed by Landlord prior to or
during the Term.
1.5 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of the Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses incurred by Landlord in connection with obtaining any such
award).
1.6 "Base Net Patient Revenues" shall mean Net Patient Revenues for the
Base Year.
1.7 "Base Rate" shall mean the rate of interest, determined daily and
expressed as a percentage, announced by Citibank, N.A., in New York, New York,
from time to time, as Citibank, N.A.'s "base rate" or "prime rate", so-called,
or, if at any time Citibank, N.A. ceases to announce such a rate, as announced
by the largest national or state chartered banking institution other than
Citibank, N.A. then having its principal office in New York, New York and
announcing such a rate. If at any time neither Citibank, N.A. nor any of the
five largest other national or state chartered banking institutions having their
principal offices in New York, New York is announcing such a floating rate,
"Base Rate" shall mean a rate of interest, determined daily, which is two (2)
percentage points above the 14-day moving average closing trading price of
90-day Treasury Bills.
1.8 "Base Year" shall mean the twelve-month period beginning June 1,
1999 and ending May 31, 2000.
1.9 "Business Day" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
or in New York, New York are authorized by law or executive action to close.
1.10 "Capital Addition" shall mean one or more new buildings, or one or
more additional structures annexed to any portion of any of the Leased
Improvements, or the material expansion of existing improvements, which are
constructed on any parcel or portion of the Land during the Term, including, but
not limited to, the construction of a new wing or new story, the renovation of
existing improvements on the Leased Property in order to provide a functionally
new facility needed to provide
<PAGE>
-3-
services not previously offered, or any expansion, construction, renovation or
conversion in order to increase the bed capacity of the Facility, to change the
purpose for which such beds are utilized or to improve the quality of the
Facility.
1.11 "Capital Additions Cost" shall mean the cost of any Capital
Addition proposed to be made by Tenant, whether paid for by Tenant or Landlord.
Such cost shall include (a) the cost of construction of the Capital Addition,
including, site preparation and improvement, materials, labor, supervision,
developer and administrative fees, legal fees, and related design, engineering
and architectural services, the cost of any fixtures, the cost of construction
financing (including, but not limited to, capitalized interest) and other
miscellaneous costs approved by Landlord, (b) if agreed to by Landlord in
writing, in advance, the cost of any land contiguous to the Leased Property
which is to become a part of the Leased Property purchased for the purpose of
placing thereon the Capital Addition or any portion thereof or for providing
means of access thereto, or parking facilities therefor, including the cost of
surveying the same, (c) the cost of insurance, real estate taxes, water and
sewage charges and other carrying charges for such Capital Addition during
construction, (d) title insurance charges, (e) reasonable attorneys' fees, (f)
filing and registration fees and recording taxes, (g) documentary stamp or
transfer taxes, and (h) all actual and reasonable costs and expenses of Landlord
and any Lending Institution committed to finance the Capital Addition,
including, but not limited to, (i) reasonable attorneys' fees, (ii) printing
expenses, (iii) filing, registration and recording taxes and fees, (iv)
documentary stamp or transfer taxes, (v) title insurance charges and appraisal
fees, (vi) rating agency fees, and (vii) loan commitment fees.
1.12 "Capital Expenditure" shall mean any single required improvement,
alteration, replacement or repair of the Leased Property, or any part thereof,
(a) having a cost in excess of One Hundred Thousand Dollars ($100,000.00) (which
amount shall be increased each year of the Lease by the product determined by
multiplying such amount by the percentage increase in the Consumer Price Index,
Urban Wage Earners and Clerical Workers, All Items, Base 1982-84=100, published
by the U.S. Department of Labor, All Cities, or such comparable index published
by the U.S. Department of Labor or its successor agency), and (b) having a
useful life in excess of the longer of (i) twelve (12) months, or (ii) the
remaining period of the Term, except capital improvements necessitated by
destruction or Condemnation of the Leased Property, or any portion thereof.
1.13 "Cash Adjustment" shall have the meaning given such term in
Section 16.3(d).
<PAGE>
-4-
1.14 "Claims" shall have the meaning given such term in Article 8.
1.15 "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.16 "Commencement Date" shall mean the date of this Lease.
1.17 "Condemnation" shall mean (a) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a Condemnor, (b) a
voluntary sale or transfer by Landlord 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 the 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 any
portion of the Leased Property, whether or not the same shall have actually been
commenced.
1.18 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual having the power of Condemnation.
1.19 "Consolidated Financials" shall mean, for any Fiscal Year or other
accounting period of Tenant and its consolidated Subsidiaries, statements of
earnings, retained earnings and changes in financial position for such period
and for the period from the beginning of the applicable Fiscal Year to the end
of such period and the 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, consistently applied.
1.20 "Control" and any variations thereof shall mean, with respect to
any Person, the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, partnership interests or other equity interests.
1.21 "Date of Taking" shall mean the date the Condemnor has the right
to possession of the Leased Property, or any portion thereof, in connection with
a Condemnation.
1.22 "Default" shall mean any event, act or omission which with the
giving of notice and/or lapse of time could constitute an Event of Default.
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1.23 "Encumbrance" shall have the meaning given such term in Section
21.1.
1.24 "Entity" shall mean any corporation, general or limited
partnership, limited liability company, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, any government or agency or political subdivision thereof or any other
entity.
1.25 "Environmental Laws" shall mean all applicable Federal, state or
local statutes, laws, ordinances, rules and regulations, licensing requirements
or conditions, whether now existing or hereafter arising, relating to Hazardous
Substances.
1.26 "Environmental Notice" shall have the meaning given such term in
Section 4.4.
1.27 "Environmental Obligation" shall mean any cost, expense, loss or
damage arising under any Environmental Law or in connection with any Hazardous
Substance.
1.28 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.29 "Excess Net Patient Revenues" shall mean the amount of Net Patient
Revenues for any measuring period in excess of the Base Net Patient Revenues for
the equivalent period of the Base Year.
1.30 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.31 "Facility" shall mean the licensed nursing home being operated on
the Leased Property.
1.32 "Facility Mortgage" shall mean any mortgage, deed of trust or
other security agreement securing any Assumed Indebtedness or any other
encumbrance placed upon the Leased Property in accordance with Article 21.
1.33 "Facility Mortgagee" shall mean the holder of any Facility
Mortgage.
1.34 "Facility Trade Names" shall mean any of the names under which
Tenant operates, or has operated, the Facility at any time during the Term.
1.35 "Fair Market Added Value" shall mean the Fair Market Value of the
Leased Property (including all Capital Additions) less the Fair Market Value of
the Leased Property determined as if no Capital Additions financed by Tenant had
been constructed.
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1.36 "Fair Market Rental" shall mean the rental which a willing tenant
not compelled to rent would pay a willing landlord not compelled to lease for
the use and occupancy of the Leased Property, or applicable portion thereof, on
the terms and conditions of this Lease, for the term in question, and determined
in accordance with the appraisal procedures set forth in Article 20 or in such
other manner as shall be mutually acceptable to Landlord and Tenant.
1.37 "Fair Market Value" shall mean the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for the Leased
Property, (a) assuming the same is unencumbered by this Lease, (b) determined in
accordance with the appraisal procedures set forth in Article 20 or in such
other manner as shall be mutually acceptable to Landlord and Tenant, (c)
assuming such seller shall pay the closing costs generally paid by a seller of
real property in the state in which such property is located and that such buyer
shall pay closing costs generally paid by a buyer of real property in the state
in which such property is located, and (d) not taking into account any reduction
in value resulting from any indebtedness to which such property is subject,
except the positive or negative effect on the value of such property
attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any lien or 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.
1.38 "Fair Market Value Purchase Price" shall mean the Fair
Market Value of the Leased Property less the Fair Market Added
Value.
1.39 "Fiscal Year" shall mean each twelve (12) month period from June 1
to May 31.
1.40 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.41 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.42 "Hazardous Substances" shall mean hazardous substances (as defined
by the Comprehensive Environmental Response, Compensation and Liability Act, as
now in effect or as hereafter from time to time amended), hazardous wastes (as
defined by the Resource Conservation and Recovery Act, as now in effect or as
hereafter from time to time amended), any hazardous waste, hazardous substance,
pollutant or contaminant, oils, radioactive materials, asbestos in any form or
condition, or any pollutant or contaminant or hazardous, dangerous or toxic
chemicals, materials or substances within the meaning of any other applicable
Federal, state or local law, regulation, ordinance or requirements
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relating to or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or materials, all as now in
effect or hereafter from time to time amended.
1.43 "Immediate Family" shall mean, with respect to any Person, his
spouse, parents, brothers, sisters, children (natural or adopted), stepchildren,
grandchildren, grandparents, parents-in-law, brothers-in-law, sisters-in-law,
nephews and nieces.
1.44 "Impositions" shall mean all taxes, assessments, and ad valorem,
sales, and use, single business, gross receipts, transaction privilege, rent or
similar taxes as the same are imposed on either Landlord or Tenant with respect
to the Leased Property and/or the business conducted thereon by Tenant and other
charges and impositions (including, but not limited to, fire protection service
fees and similar charges) levied, assessed or imposed at any time during the
Term by any governmental authority upon or against the Leased Property, or taxes
in lieu thereof, and additional types of taxes to supplement real estate taxes
due to legal limits imposed thereon. If, at any time during the Term, any tax or
excise on rents or other taxes, however described, are levied or assessed
against Landlord with respect to the rent reserved hereunder, either wholly or
partially in substitution for, or in addition to, real estate taxes assessed or
levied on the Leased Property, such tax or excise on rents shall be included in
Impositions; provided, however, that Impositions shall not include franchise,
estate, inheritance, succession, capital levy, transfer, income or excess
profits taxes assessed on Landlord. Impositions shall include any estimated
payment, whether voluntary or required, made by Landlord on account of a fiscal
tax period for which the actual and final amount of taxes for such period has
not been determined by the governmental authority as of the date of any such
estimated payment.
1.45 "Initiating Party" shall have the meaning given such term in
Section 20.1.
1.46 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Lease and all requirements of the issuer of any such
policy.
1.47 "Land" shall have the meaning given such term in Section 2.1(a).
1.48 "Landlord" shall have the meaning given such term in the preambles
to this Lease.
1.49 "Landlord Default" shall have the meaning given such term in
Article 14.
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1.50 "Lease" shall mean this Lease Agreement, including Exhibits A
through D hereto, as it and they may be amended from time to time as herein
provided.
1.51 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.52 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.53 "Leased Property" shall have the meaning given such term in
Section 2.1.
1.54 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions, including, but not limited to,
Environmental Laws, affecting the Leased Property or the maintenance,
construction, use or alteration thereof, whether now or hereafter enacted,
including those which may (a) require repairs, modifications or alterations in
or to the Leased Property or any portion thereof or (b) in any way adversely
affect the use and enjoyment thereof, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Tenant (other than encumbrances hereinafter created by Landlord without
the consent of Tenant), at any time in force affecting the Leased Property.
1.55 "Lending Institution" shall mean 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
$10,000,000.
1.56 "Minimum Rent" shall mean the amount set forth in Exhibit D.
1.57 "Minimum Repurchase Price" shall mean that portion of the
aggregate purchase price of the Leased Property paid by Landlord in cash or in
kind, plus the aggregate of unpaid principal balance of all encumbrances against
the Leased Property at the time of purchase thereof by Tenant, plus any amounts
paid by Landlord to reduce the principal balance of any Assumed Indebtedness,
less all proceeds received by Landlord from any refinancing of the Leased
Property (after payment of the debt refinanced and net of any costs and expenses
incurred in connection with such refinancing, including, without limitation,
loan points, commitment fees and commissions) and less the net
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amount (after deduction of all reasonable legal fees and other costs and
expenses, including, without limitation, expert witness fees, incurred by
Landlord in connection with obtaining any such award) of all awards received by
Landlord from any partial Condemnation of the Leased Property or any portion
thereof which are not applied to restoration.
1.58 "Net Patient Revenues" shall mean all revenues received or
receivable from or by reason of the operation of the Facility, or any portion
thereof, or any other use of the Leased Property, or any portion thereof,
including, without limitation, all patient revenues received or receivable for
the use of or otherwise by reason of all rooms, beds and other facilities
provided, meals served, services performed, space or facilities subleased or
goods sold on the Leased Property, or any portion thereof, including, without
limitation, and except as provided below, any other arrangements with third
parties relating to the possession or use of any portion of any portion of the
Leased Property; provided, however, Net Patient Revenues shall not include: (a)
revenue from professional fees or charges by physicians and providers (other
than Tenant or Tenant's employees) of ancillary services, when and to the extent
such charges are paid over to such physicians or providers of ancillary
services, or are separately billed and not included in comprehensive fees; (b)
nonoperating revenues such as interest income or income from the sale of assets
not sold in the ordinary course of business; (c) contractual allowances
(relating to any period during the Term) for billings not paid by or received
from the appropriate governmental agencies or third party providers; (d)
allowances according to generally accepted accounting principles for
uncollectible accounts, including credit card accounts and charity care or other
administrative discounts; (e) all proper patient billing credits and adjustments
according to generally accepted accounting principles relating to health care
accounting; (f) federal, state or local sales or excise taxes and any tax based
on or measured by such revenues which is added to or made a part of the amount
billed to the patient or other recipient of such services or goods, whether
included in the billing or stated separately; (g) provider discounts for
hospital or other medical facility utilization contracts and credit card
discounts; (h) revenues attributable to Capital Additions financed by Tenant as
provided in Section 6.2; (i) revenues attributable to services actually provided
off the Leased Property, such as home health care; and (j) any amounts actually
paid by Tenant for the cost of any federal, state or local governmental programs
imposed specially to provide or finance indigent patient care. To the extent the
Leased Property or any portion thereof is subleased by Tenant, Net Patient
Revenues shall include (x) the Net Patient Revenues generated from the
operations conducted on such subleased portion of the Leased Property and (y)
the rent received or receivable by Tenant from or under any such sublease to the
extent such rent is not based
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on Net Patient Revenues and, therefore, has not already been included in the
calculation of Net Patient Revenues pursuant to clause (x) preceding.
1.59 "Non-Capital Additions" shall have the meaning given such term in
Section 6.4.
1.60 "Officer's Certificate" shall mean a certificate signed by the
chief financial officer or another officer of Tenant authorized by the board of
directors or by-laws of Tenant, or any other Person whose power and authority to
act has been so authorized.
1.61 "Other Leases" shall mean the Leases described in Exhibit A,
attached hereto and made a part hereof.
1.62 "Overdue Rate" shall mean a rate equal to the lesser of the Base
Rate plus two percent (2%) and the maximum rate then permitted under applicable
law.
1.63 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly, through one or more Subsidiaries, twenty percent
(20%) or more of the voting or beneficial interests in such Person or otherwise
Controls such Person.
1.64 "Percentage Rent" shall have the meaning given such term in
Section 3.1.2(a).
1.65 "Permitted Encumbrances" shall mean the matters set forth in
Exhibit B, attached hereto and made a part hereof.
1.66 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits.
1.67 "Primary Intended Use" shall have the meaning given such term in
Section 4.1.1.
1.68 "Qualified Appraiser" shall mean any disinterested person who is a
member in good standing of the American Institute of Real Estate Appraisers or
the American Society of Real Estate Counselors (or the successor to either of
such organizations) and who has had not less than ten (10) years experience in
appraising and valuing, commercial buildings in the State.
1.69 "Records" shall have the meaning given such term in Section 7.2.
1.70 "Rent" shall mean, collectively, the Minimum Rent, Percentage Rent
and Additional Rent.
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1.71 "Responding Party" shall have the meaning given such term in
Section 20.1.
1.72 "SEC" shall mean the Securities and Exchange Commission.
1.73 "State" shall mean the State, Commonwealth, Possession or
Territory in which the Leased Property is located.
1.74 "Subsidiary" shall mean, with respect to any Person, any Entity in
which such Person shall own, directly or indirectly, through one or more
Subsidiaries, twenty percent (20%) or more of the voting or beneficial interests
or any other entity Controlled by such Person.
1.75 "Substitute Properties" shall have the meaning given such term in
Section 16.1.
1.76 "Substitution Date" shall have the meaning given such term in
Section 16.1.
1.77 "Successor Landlord" shall have the meaning given such term in
Section 21.2.
1.78 "Superior Lease" shall have the meaning given such term in Section
21.2.
1.79 "Superior Landlord" shall have the meaning given such term in
Section 21.2.
1.80 "Superior Mortgage" shall have the meaning given such term in
Section 21.2.
1.81 "Superior Mortgagee" shall have the meaning given such term in
Section 21.2.
1.82 "Tenant" shall have the meaning given such term in the preambles
to this Lease.
1.83 "Tenant's Personal Property" shall mean all motor vehicles and
consumable inventory and supplies, furniture, equipment and machinery and all
other personal property of Tenant located on the Leased Property or used in
Tenant's business on the Leased Property and all modifications, replacements,
alterations and additions to the Leased Personal Property installed at the
expense of Tenant, other than any items included within the definition of
Fixtures or Leased Personal Property and expressly excluding Tenant's accounts
receivable.
1.84 "Term" shall mean, collectively, the Fixed Term and any Extended
Terms, to the extent properly exercised pursuant to the
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provisions of Section 2.4, unless sooner terminated pursuant to the provisions
of this Lease.
1.85 "Test Rate" shall mean 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.
1.86 "Trustees" shall mean the trustees of Landlord.
1.87 "Unavoidable Delays" shall mean delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the reasonable control of the party responsible for performing an
obligation hereunder, but in no event to exceed sixty (60) days so long as the
affected party shall use reasonable efforts to alleviate the cause of such delay
and thereafter promptly perform such obligation; provided, however, that (x) in
no event shall Tenant's obligation to pay the Rent be affected by Unavoidable
Delays, and (y) in no event shall lack of funds be deemed a cause beyond the
control of either party.
1.88 "Unsuitable for Its Primary Intended Use" shall mean a state or
condition of the Facility such that by reason of damage or destruction, or a
partial Condemnation, in the good faith judgment of Landlord and Tenant,
reasonably exercised, the Facility cannot be operated on a commercially
practicable basis for its Primary Intended Use taking into account, among other
relevant factors, the number of usable beds, the amount of square footage, or
revenues affected by such damage or destruction or partial taking.
ARTICLE 2
PREMISES AND TERM
2.1 Premises. Upon and subject to the terms and conditions herein set
forth, Landlord leases to Tenant and Tenant leases from Landlord all of the
following (collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land as more
particularly described in Exhibit C, attached hereto and made a part
hereof (collectively, the "Land");
(b) all buildings, structures, Fixtures and other improvements
of every kind, including, but not limited to, alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Land and Capital Additions
<PAGE>
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financed by Landlord (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures and other items of
property, now or hereafter permanently affixed to or incorporated into
the Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment,
all of which, to the greatest extent permitted by 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 (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other personal
property used or useful in Tenant's business on or in the Leased
Improvements, and located on or in the Leased Improvements on the
Commencement Date, except items, if any, included within the category
of Fixtures, but specifically excluding all items included within the
category of Tenant's Personal Property (collectively the "Leased
Personal Property"); and
(f) all existing leases of space (including any security
deposits held pursuant thereto), if any, in the Leased Improvements to
tenants thereof.
2.2 Condition of Premises. On the Commencement Date, Landlord shall
deliver and Tenant shall accept the Leased Property in "as is" condition,
subject to the rights of parties in possession, the existing state of title,
including all covenants, conditions, restrictions, easements and other matters
of record, all applicable Legal Requirements, the lien of financing instruments,
mortgages and deeds of trust, and such other matters which would have been
disclosed by an inspection of the Leased Property and the record title thereto
or by an accurate survey thereof. LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS THE FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF IT
BEING AGREED THAT ALL SUCH RISKS SHALL BE
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BORNE BY TENANT. To the extent permitted by law, however, Landlord grants and
assigns to Tenant all of Landlord's rights to proceed against any predecessor in
title for breaches of warranties or representations or for latent defects in the
Leased Property. Landlord shall cooperate with Tenant in the prosecution of any
such claims, in Landlord's or Tenant's name, all at Tenant's sole cost and
expense. Tenant shall indemnify, and hold harmless Landlord from and against any
loss, cost, damage or liability (including attorneys' fees) incurred by Landlord
in connection with such cooperation.
2.3 Fixed Term. The initial term of this Lease (the "Fixed Term") shall
commence on the date hereof and, unless sooner terminated in accordance with the
terms and conditions of this Lease, shall expire on December 31, 1998.
2.4 Extended Terms. Provided no Default or Event of Default shall have
occurred and be continuing and Tenant shall simultaneously exercise its right to
extend the term of all of the Other Leases, Tenant shall have the right to
extend the Fixed Term for two additional periods of ten (10) years each (the
"Extended Terms").
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be, and shall
end on the day immediately preceding the tenth anniversary of the commencement
of such Extended Term. All of the terms, covenants and provisions of this Lease
shall apply to each such Extended Term, except that (a) the Minimum Rent for the
second such Extended Term shall be the greater of (x) the Minimum Rent payable
during the first such Extended Term and (y) the Fair Market Rental for the
Leased Property determined as of the commencement of such Extended Term, and (b)
Tenant shall have no further right to extend the Term beyond the Extended Terms
hereinabove provided. If Tenant shall elect to exercise either of the aforesaid
options, it shall do so by giving Landlord written notice thereof not later than
one (1) year prior to the expiration of the then current term of this Lease
(Fixed or Extended, as applicable); it being understood and agreed that time is
of the essence with respect to the giving of such notice. If Tenant shall fail
to give any such notice, this Lease shall automatically terminate at the end of
the term then in effect and Tenant shall have no further option to extend the
term of this Lease. If Tenant shall give such notice, the extension of this
Lease shall be automatically effected, without the execution of any additional
documents.
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ARTICLE 3
RENT
3.1 Rent. Tenant shall pay to Landlord, by check or wire transfer of
immediately available federal funds, as Tenant may elect, without offset,
abatement, demand or deduction, Minimum Rent, Percentage Rent and Additional
Rent, during the Term, as herein provided.
3.1.1 Minimum Rent. Tenant shall pay Minimum Rent in equal
monthly installments, in advance, on the first day of each and every calendar
month during the Term. Minimum Rent for any partial month shall be pro-rated on
a daily basis.
3.1.2 Percentage Rent.
(a) Amount. Commencing June 1, 2000, for each Fiscal Year
during the Term, Tenant shall pay to Landlord, as additional rent,
percentage rent ("Percentage Rent") in an amount equal to three percent
(3%) of Excess Net Patient Revenues for such Fiscal Year. Percentage
Rent shall be calculated and paid quarterly in arrears on the basis of
cumulative Excess Net Patient Revenues as the last day of each quarter
occurring during the applicable Fiscal Year, less the Percentage Rent,
if any, previously paid to Landlord for such Fiscal Year.
(b) Payment of Percentage Rent. Tenant shall calculate and
deliver Percentage Rent to Landlord within forty-five (45) days after
the end of each quarter of any Fiscal Year (or, in the case of the
final quarter in any Fiscal Year, ninety (90) days thereafter),
together with an Officer's Certificate, setting forth the calculation
of Percentage Rent for such quarter.
(c) Reconciliation of Additional Rent. Within ninety (90) days
after the end of each Fiscal Year, Tenant shall deliver to Landlord an
Officer's Certificate, together with certified audits with respect to
Net Patient Revenues for the Facility and the facilities leased under
the Other Leases, in form and substance reasonably satisfactory to
Landlord, of Tenant's financial operations prepared by accountants
reasonably satisfactory to Landlord, setting forth the Net Patient
Revenues and Excess Net Patient Revenues for the immediately preceding
Fiscal Year, together with such additional information with respect
thereto as Landlord may reasonably request.
If the Percentage Rent for any Fiscal Year as shown in the
applicable Officer's Certificate and accompanying financial statements
is less than the amount previously paid
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with respect thereto, Landlord shall, at Landlord's option, refund any
excess payment to Tenant or grant Tenant a credit against the next due
payment of Percentage Rent in the amount of such difference. If the
Percentage Rent for any Fiscal Year as shown in the applicable
Officer's Certificate exceeds the amount previously paid with respect
thereto, Tenant shall pay such excess to Landlord at such time as such
Officer's Certificate is delivered.
Any difference between the Percentage Rent for any Fiscal Year
as shown in such Officer's Certificate and the total amount of
quarterly payments for such Fiscal Year previously paid, whether in
favor of Landlord or Tenant, shall bear interest at the Base Rate,
which interest shall accrue from the close of such Fiscal Year until
the amount of such difference shall be paid or otherwise discharged.
A final reconciliation of Percentage Rent, taking into account
among other relevant adjustments, any contractual allowances which are
accrued after the expiration or sooner termination of this Lease, but
which related to Net Patient Revenues accrued prior to such
termination, and Tenant's good faith best estimate of the amount of any
unresolved contractual allowances shall be made not later than two (2)
years after such termination and Tenant shall advise Landlord within
sixty (60) days after such termination of Tenant's best estimate at
that time of the approximate amount of such adjustments, which estimate
shall not be binding on Tenant.
(d) Confirmation of Percentage Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for the conduct of its
business at the Leased Property in accordance with its usual and
customary practices and in accordance with generally accepted
accounting principles, consistently applied, which will accurately
record all Net Patient Revenues, and shall employ independent
accountants reasonably acceptable to Landlord, and Tenant shall retain,
for at least four (4) years after the expiration of each Fiscal Year
(and in any event until the final reconciliation described in
subparagraph (c) above for such Fiscal Year has been made), reasonably
adequate records conforming to such accounting system showing all Net
Patient Revenues for such Fiscal Year. Landlord, at its own expense,
except as provided below, shall have the right, from time to time by
its accountants or representatives, to audit the information set forth
in the Officer's Certificate referred to in subparagraph (b) above and,
in connection with such audit, to examine Tenant's records with respect
thereto (including supporting data and sales and excise tax returns),
subject to any prohibitions or limitations on disclosure of any such
data under applicable law or regulations, including, without
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limitation, any duly enacted "Patients' Bill of Rights" or similar
legislation and such other limitations as may be necessary to preserve
the confidentiality of the Facility- patient relationship and the
physician-patient privilege. If any such audit shall disclose a
deficiency in the payment of Percentage Rent and either Tenant agrees
with the result of such audit or the matter is otherwise determined or
compromised, Tenant shall forthwith pay to Landlord the amount of the
deficiency, as finally agreed or determined, together with interest
thereon at the Base Rate. If any such audit discloses that the Net
Patient Revenues actually received by Tenant for any Fiscal Year exceed
those reported by Tenant by more than three percent (3%), Tenant shall
pay the reasonable cost of such audit. Any proprietary information
obtained by Landlord pursuant to the provisions of this section shall
be treated as confidential, except such information may be used,
subject to appropriate confidentiality safeguards, in any litigation
between the parties and Landlord may disclose such information to
prospective purchasers or lenders.
3.1.3 Additional Rent. In addition to the Minimum Rent and
Percentage Rent, Tenant shall pay and discharge as and when due and payable all
other amounts, liabilities, obligations and Impositions which Tenant assumes or
agrees to pay under this Lease (collectively, "Additional Rent"), including, but
not limited to the following:
(a) Impositions. Subject to Article 8, Tenant shall pay, or
cause to be paid, all Impositions before any fine, penalty, interest or
cost may be added for non-payment, such payments to be made directly to
the taxing authorities where feasible, and shall promptly, upon
request, furnish to Landlord 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), Tenant may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during the
Term as the same become due and before any fine, penalty, premium,
further interest or cost may be added thereto. Landlord, at its
expense, shall, to the extent required or permitted by applicable law,
prepare and file all tax returns in respect of Landlord's net income,
gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock, and
Tenant, at its expense, shall, to the extent required or 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
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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 Default or Event of Default shall have occurred and be
continuing. Landlord and Tenant shall, upon request of the other,
provide such data as is maintained by the party to whom the request is
made with respect to the Leased Property as may be necessary to prepare
any required returns and reports. In the event governmental authorities
classify any property covered by this Lease as personal property,
Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Each party shall, to the
extent it possesses the same, provide the other, upon request, with
cost and depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord is legally
required to file personal property tax returns, Landlord shall provide
Tenant with copies of assessment notices in sufficient time for Tenant
to file a protest. All Impositions assessed against such personal
property shall be (irrespective of whether Landlord or Tenant shall
file the relevant return) paid by Tenant not later than thirty (30)
days prior to the last date on which the same may be made without
interest or penalty. If the provisions of any Facility Mortgage
requires deposits on account of Impositions to be made with such
Facility Mortgagee, provided the Facility Mortgagee has not elected to
waive such provision, Tenant shall either pay Landlord the monthly
amounts required and Landlord shall transfer such amounts to such
Facility Mortgagee or, pursuant to written direction by Landlord,
Tenant shall make such deposits directly with such Facility Mortgagee.
Landlord shall give prompt written notice to Tenant of all
Impositions payable by Tenant hereunder of which Landlord at any time
has knowledge; provided, however, Landlord's failure to give any such
notice shall in no way diminish Tenant's obligation hereunder to pay
such Impositions.
Impositions imposed in respect of the tax-fiscal period during
which the Term commences and/or terminates shall be prorated between
Landlord and Tenant, whether or not such Imposition is imposed before
or after such termination.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities
used at the Leased Property during the Term.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained
pursuant to Article 9.
<PAGE>
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(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations which Tenant assumes or
agrees to pay under this Lease.
3.2 Late Payment of Rent. If any installment of Minimum Rent,
Percentage Rent or Additional Rent (but only as to those items of Additional
Rent which are payable directly to Landlord) shall not be paid when due, Tenant
shall pay Landlord, on demand, as Additional Rent, a late charge (to the extent
permitted by law) computed, during the first ten (10) days such payment is
delinquent at the greater of the Base Rate and eleven and one-half percent
(11.5%) per annum and, thereafter, at the Overdue Rate, on the amount of such
installment, from the date such installment was due until the date paid. To the
extent that Tenant pays any Additional Rent directly to Landlord pursuant to any
requirement of this Lease, Tenant shall be relieved of its obligation to pay
such Additional Rent to the entity to which they would otherwise be due.
In the event of any failure by Tenant to pay any Additional Rent when
due, Tenant shall promptly pay and discharge, as Additional Rent, every fine,
penalty, interest and cost which may be added for non-payment or late payment of
such items. Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of non-payment of the Additional Rent as in the case of non-payment of
the Minimum Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord, so that
this Lease shall yield to Landlord the full amount of the installments of
Minimum Rent, Percentage Rent and Additional Rent throughout the Term, subject
to any other provisions of this Lease which expressly provide for adjustment or
abatement of Rent or other charges.
3.4 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Tenant, to the maximum 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 Landlord to modify, surrender or terminate the
same, nor seek, nor be entitled to any abatement, deduction, deferment or
reduction of the Rent, or set-off against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a) any
damage to, or destruction of, the Leased Property or any portion thereof from
whatever cause or any Condemnation; (b) the lawful or unlawful prohibition of,
or restriction upon Tenant's use of the Leased Property, or any portion thereof,
or the interference with such use by any Person or by reason of eviction by
paramount title; (c) any claim which Tenant may have against Landlord by reason
of any Landlord Default; (d) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up
<PAGE>
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or other proceedings affecting Landlord or any assignee or transferee of
Landlord; or (e) for any other cause whether similar or dissimilar to any of the
foregoing. Tenant hereby waives all rights arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law to modify,
surrender or terminate this Lease or quit or surrender the Leased Property or
any portion thereof or which may entitle Tenant to any abatement, reduction,
suspension or deferment of the Rent or other sums payable or other obligations
to be performed by Tenant hereunder, except as otherwise specifically provided
in this Lease. The obligations of Landlord and Tenant hereunder shall be
separate and independent covenants and agreements and the Rent and all other
sums payable by Tenant hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the
express provisions of this Lease.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use. Tenant shall continuously use or
cause to be used the Leased Property as a nursing home or subacute facility
and/or other facility offering any higher level health care services and for
such other uses as may be necessary or incidental thereto (the particular use to
which the Leased Property is put at any particular time, its "Primary Intended
Use"). Tenant shall not use the Leased Property or any portion thereof for other
than its Primary Intended Use without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed; provided, however,
that such consent shall not be deemed to be unreasonably withheld if, in the
reasonable opinion of Landlord, the proposed use will significantly alter the
character or purpose or detract from the value or operating efficiency of the
Leased Property or significantly impair the revenue-producing capability of the
Leased Property or adversely affect the ability of Tenant to comply with this
Lease. No use shall be made or permitted to be made of the Leased Property and
no acts shall be done thereon which will cause the cancellation of any insurance
policy covering the 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 the Leased Property, or any portion thereof, any
article which may be prohibited by law or by the standard form of fire insurance
policies, or any other insurance policies required to be carried hereunder, or
fire underwriter's regulations.
<PAGE>
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4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain all approvals
necessary to use and operate the Leased Property and the Facility for the
Primary Intended Use under applicable local, state and federal law and, without
limiting the generality of the foregoing, shall use its best efforts to maintain
appropriate certifications for reimbursement licensure.
4.1.3 Continuous Operation, Etc. Tenant shall use its best
efforts to operate continuously the Leased Property as a provider of health care
services in accordance with the Primary Intended Use. 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 the Leased Property for the Primary Intended Use.
4.1.4 Lawful Use, Etc. Tenant shall not use or suffer or
permit the use of the Leased Property and Tenant's Personal Property for any
unlawful purpose. Tenant shall not commit or suffer to be committed any waste on
the Leased Property or the Facility, nor shall Tenant cause or permit any
nuisance thereon or therein. Tenant shall neither suffer nor permit the Leased
Property or any portion thereof, including any Capital Addition, whether or not
financed by Landlord, or Tenant's Personal Property, to be used in such a manner
as might reasonably tend to impair Landlord's (or Tenant's, as the case may be)
title thereto or to any portion thereof, or may reasonably make possible any
claim for adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Instruments, Etc.
Subject to the provisions of Article 8, Tenant, at its sole expense, shall
promptly (i) comply with all Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration and restoration
of the Leased Property and Tenant's Personal Property, and (ii) procure,
maintain and comply with all appropriate licenses, certificates of need,
permits, provider agreements and other authorizations required for any use of
the Leased Property and Tenant's Personal Property then being made, and for the
proper erection, installation, operation and maintenance of the Leased Property
or any part thereof, including, without limitation, any Capital Additions.
4.3 Compliance with Medicaid and Medicare Requirements. Tenant shall,
at its sole cost and expense, make whatever improvements (capital or ordinary)
as are required to conform the Leased Property to such standards as may, from
time to time, be required by Federal Medicare (Title 18) or Medicaid (Title 19)
skilled and/or intermediate care nursing programs, if applicable, or any other
applicable programs or legislation, or capital
<PAGE>
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improvements required by any other governmental agency having jurisdiction over
the Leased Property as a condition of the continued operation of the Leased
Property for the Primary Intended Use.
4.4 Environmental Matters. Tenant shall not store, spill upon, dispose
of or transfer to or from the Leased Property any Hazardous Substance, except
that Tenant may store, transfer and dispose of Hazardous Substances in
compliance with all Environmental Laws. Tenant shall maintain the Leased
Property at all times free of any Hazardous Substance (except such Hazardous
Substances as are maintained in compliance with all Environmental Laws). Tenant
shall promptly: (a) notify Landlord in writing of any change in the nature or
extent of such Hazardous Substances maintained, (b) transmit to Landlord a copy
of any report which is required to be filed with respect to the Leased Property
pursuant to any Environmental Law, (c) transmit to Landlord copies of any
citations, orders, notices or other governmental communications received by
Tenant or its agents or representatives with respect thereto (collectively,
"Environmental Notice"), (d) observe and comply with any and all
Environmental Laws relating to the use, maintenance and disposal of Hazardous
Substances and all orders or directives from any official, court or agency of
competent jurisdiction relating to the use or maintenance or requiring the
removal, treatment, containment or other disposition thereof, and (e) pay or
otherwise dispose of any fine, charge or Imposition related thereto, unless
Tenant shall contest the same in accordance with Article 8.
If at any time prior to the termination of this Lease, Hazardous
Substances are discovered on the Leased Property, Tenant hereby agrees to take
all actions, and to incur any and all expenses, as may be reasonably necessary
and as may be required by any municipal, State or Federal agency or other
governmental entity or agency having jurisdiction thereof, (a) to clean up and
remove from and about the Leased Property all Hazardous Substances thereon, (b)
to contain and prevent any further release or threat of release of Hazardous
Substances on or about the Leased Property and (c) to eliminate any further
release or threat of release of Hazardous Substances on or about the Leased
Property.
Tenant shall indemnify and hold harmless Landlord and each Facility
Mortgagee from and against all liabilities, obligations, claims, damages,
penalties, costs and expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
of them by reason of any failure by Tenant or any Person claiming under Tenant
to perform or comply with any of the terms of this Section 4.4.
<PAGE>
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ARTICLE 5
MAINTENANCE AND REPAIRS, ETC.
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations. Tenant shall, at its sole cost and
expense, keep the Leased Property and all private roadways, sidewalks and curbs
appurtenant thereto (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
the Leased Property or Tenant's Personal Property, or any portion thereof), and
shall promptly make all necessary and appropriate repairs and replacements
thereto of every kind and nature, whether interior or exterior, structural or
nonstructural, 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 be at least equivalent in quality to the
original work.
5.1.2 Landlord's Obligations. Landlord shall not, under any
circumstances, be required to build or rebuild any improvement on the Leased
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether ordinary
or extraordinary, structural or non-structural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect thereto, in connection with this
Lease, or to maintain the Leased Property in any way, except as specifically
provided herein. Tenant hereby waives, to the extent permitted by law, the right
to make repairs at the expense of Landlord pursuant to any law in effect at the
time of the execution of this Lease or hereafter enacted. Landlord shall have
the right to give, record and post, as appropriate, notices of nonresponsibility
under any mechanic's lien laws now or hereafter existing.
5.2 Capital Expenditure Cost Sharing. Replacement of or major repairs
to all structural or mechanical systems shall be undertaken by Tenant, at its
sole cost and expense in the exercise of its reasonable business judgment,
pursuant to and in accordance with plans and specifications approved in advance
by Landlord; provided, however, that if the useful life of any improvement or
repair for which a Capital Expenditure is made extends beyond the termination of
the Term (other than any early termination resulting from the occurrence of an
Event of Default), provided Tenant shall have obtained Landlord's prior written
consent with respect to the making thereof, the cost of such replacement or
repair shall be apportioned between Landlord and Tenant so that Landlord shall
pay for that portion of the useful life of such item occurring on or after such
termination date. Landlord shall have no obligation to reimburse Tenant for
<PAGE>
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Landlord's share of the cost of such replacement or repair until the date of the
termination of this Lease. Notwithstanding the foregoing, Landlord agrees to
make any such payment to Tenant within sixty (60) days after Tenant's written
request therefor.
5.3 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 sooner termination of the Term. Tenant shall provide
and maintain during the entire Term all such Tenant's Personal Property as shall
be necessary in order to operate the Facility in compliance with all licensure
and certification requirements, 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 on or prior to the expiration or earlier termination of this Lease shall
be considered abandoned by Tenant and may be appropriated, sold, destroyed or
otherwise disposed of by Landlord without the necessity of first giving notice
thereof to Tenant, without any payment to Tenant and without any obligation to
account therefor. Tenant shall, at its expense, restore the Leased Property to
the condition required by Section 5.4, including repair of all damage to the
Leased Property caused by the removal of Tenant's Personal Property, whether
effected by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than motor
vehicles) on, or in connection with, the Leased Property which belongs to anyone
other than Tenant, Tenant shall use its best efforts to require the agreement
permitting such use to provide that Landlord or its designee may assume Tenant's
rights under such agreement upon management of the Facility by Landlord or its
designee.
5.4 Yield Up. Upon the expiration or sooner termination of this Lease,
Tenant shall vacate and surrender the Leased Property to Landlord in the
condition in which the Leased Property was on the Commencement Date, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease, ordinary wear and tear excepted.
In addition, upon the expiration or earlier termination of this Lease,
Tenant shall, at Landlord's reasonable cost and expense, use its best efforts to
transfer to and cooperate with Landlord or Landlord's nominee in connection with
the processing of all applications for licenses, operating permits and other
governmental authorizations and all contracts, including, contracts with
governmental or quasi-governmental entities, which may be necessary for the
operation of the Facility. If requested by Landlord, Tenant shall continue to
manage the Facility after
<PAGE>
-25-
the termination of this Lease and for so long thereafter as is necessary to
obtain all necessary licenses, operating permits and other governmental
authorizations, on such reasonable terms (which shall include an agreement to
reimburse Tenant for its reasonable out-of-pocket costs and expenses and
reasonable administrative costs) as Landlord shall request.
5.5 Encroachments, Restrictions, Etc. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any lawful restrictive covenant or other agreement affecting the Leased
Property, or any part thereof, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, upon the
request of Landlord or of any person affected by any such encroachment,
violation or impairment, Tenant shall, at its sole cost and expense, subject to
its right to contest the existence of any encroachment, violation or impairment
and in such case, in the event of an adverse final determination, either (a)
obtain, in form and substance satisfactory to Landlord, 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
Landlord or Tenant, or (b), subject to Landlord's approval (which shall not be
unreasonably withheld or delayed), make such changes in the Leased Improvements
and take such other actions, as Tenant, in the good faith exercise of its
judgment, deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Leased Improvements and, in any event, take all such actions as may be
necessary in order to ensure the continued operation of the Leased Improvements
for the Primary Intended Use substantially in the manner and to the extent the
Leased Improvements were operated prior to the assertion of such violation,
impairment or encroachment. Any such alteration shall be made in conformity with
the applicable requirements of this Article 5. Tenant's obligations under this
Section 5.5 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 Landlord under
any such policy of title or other insurance.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property. Provided
no Default or Event of Default shall have occurred and be continuing, Tenant
shall have the right, subject to obtaining Landlord's prior written consent
(which consent
<PAGE>
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shall not be unreasonably withheld or delayed), upon and subject to the terms
and conditions set forth below, to construct or install Capital Additions on the
Leased Property. Landlord's consent shall not be deemed to be unreasonably
withheld if such Capital Addition will significantly alter the character or
purpose or detract from the value or operating efficiency or the
revenue-producing capability of the Leased Property, or adversely affect the
ability of Tenant to comply with this Lease. Any withholding of consent shall be
express and shall be effected within thirty (30) days after receipt by Landlord
of such documents or information as Landlord may reasonably require, notice of
which requirements shall be sent to Tenant within thirty (30) days after
Tenant's request. Failure to give notice of the withholding of such consent
within such thirty (30) day period shall be deemed approval. Prior to commencing
construction of any Capital Addition, Tenant shall submit to Landlord, in
writing, a proposal setting forth, in reasonable detail, any proposed Capital
Addition and shall provide Landlord with such plans and specifications, permits,
licenses, contracts and other information concerning the proposed Capital
Addition as Landlord may reasonably request. Without limiting the generality of
the foregoing, such proposal shall indicate the approximate projected cost of
constructing such Capital Addition, the use or uses to which it will be put and
a good faith estimate of the change, if any, in the Net Patient Revenues that
Tenant anticipates will result from such Capital Addition. Prior to commencing
construction of any Capital Addition, Tenant shall request in writing that
Landlord provide funds to pay for such Capital Addition. If, within sixty (60)
days after receipt of such request, Landlord shall not elect to provide such
financing on terms reasonably acceptable to Tenant (and, for purposes of this
Section 6.1, the failure of Landlord to respond within such 60 day period shall
be deemed an election not to provide such funding), the provisions of Section
6.2 shall apply. Landlord's notice of its election to provide such financing
shall set forth the terms and conditions of such proposed financing, including
the terms of any amendment to this Lease (including, without limitation, an
increase in Minimum Rent to compensate Landlord for the additional funds
advanced). 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
eighty percent (80%) of the total amount of such cost. Tenant may withdraw its
request by written notice to Landlord at any time before Tenant's written
acceptance of Landlord's terms and conditions. If Landlord declines to finance a
Capital Addition or if Landlord's proposed financing terms are unacceptable to
Tenant, Tenant may solicit and negotiate a commitment for such financing from
another Person, provided Landlord shall approve all the terms and conditions of
such financing (which approval shall not be unreasonably withheld or delayed).
If Landlord shall finance the proposed Capital Addition, Tenant shall pay to
Landlord, as Additional Rent, all reasonable costs and expenses
<PAGE>
-27-
paid or incurred by Landlord and any Lending Institution which has committed to
provide financing for such Capital Addition to Landlord in connection therewith,
including, but not limited to, (a) the reasonable attorneys' fees and expenses,
(b) all printing expenses, (c) all filing, registration and recording taxes and
fees, (d) documentary stamp taxes, (e) title insurance charges, appraisal fees,
and rating agency fees, and (f) commitment fees.
No Capital Addition shall be made which would tie in or connect any
Leased Improvement or any Leased Property with any other improvements on
property adjacent to such Leased Property (and not part of the Land) including,
without limitation, tie-ins of buildings or other structures or utilities,
unless Tenant shall have obtained the prior written approval of Landlord, which
approval may be withheld by Landlord in Landlord's sole discretion. Any Capital
Additions shall, upon the expiration or sooner termination of this Lease, become
the property of Landlord, free and clear of all encumbrances, subject to the
provisions of Section 6.2.
6.2 Capital Additions Financed by Tenant. Provided that Tenant has
obtained the prior written consent of Landlord in each instance (which approval
shall not be unreasonably withheld or delayed), Tenant may arrange for financing
for Capital Additions from third party lenders; provided, however that (i) the
terms and conditions of any such financing shall be subject to the prior
approval of Landlord and (ii) any security interests in any property of Tenant,
including, without limitation, the Leased Property, shall be expressly and fully
subordinated to this Lease and to the interest of Landlord in the Leased
Property and to the rights of any Facility Mortgagee. If, pursuant to the
provisions of this Lease, Tenant provides or arranges financing with respect to
any Capital Addition, this Lease shall be and hereby is amended to provide as
follows:
(a) Upon completion of any such Capital Addition, Net Patient
Revenues attributable to such Capital Addition shall be excluded from
Net Patient Revenues of the Leased Property for purposes of calculating
Percentage Rent. The Net Patient Revenues attributable to any such
Capital Addition shall be deemed to be an amount (the "Added Value
Percentage") which bears the same proportion to the total Net Patient
Revenues from the entire Leased Property (including all Capital
Additions) as the Fair Market Added Value of such Capital Addition
bears to the Fair Market Value of the entire Leased Property (including
all Capital Additions) immediately after completion of such Capital
Addition. The Added Value Percentage for Capital Additions financed by
Tenant shall remain in effect until any subsequent Capital Addition
financed by Tenant is completed.
<PAGE>
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(b) There shall be no adjustment in the Minimum Rent by reason
of any such Capital Addition.
(c) Upon the expiration or earlier termination of this Lease
(but if this Lease is terminated by reason of an Event of Default, only
after Landlord is fully compensated for all damages resulting
therefrom), Landlord shall compensate Tenant for all Capital Additions
financed by Tenant in any of the following ways determined in
Landlord's sole discretion:
(i) By purchasing such Capital Additions from Tenant for cash in
the amount of the then Fair Market Added Value of such Capital
Additions;
(ii) By purchasing such Capital Additions from Tenant by delivering
to Tenant Landlord's purchase money promissory note in the
amount of the Fair Market Added Value, which note shall be due
and payable as to both principal and interest on the second
anniversary of the making thereof, shall be on then
commercially reasonable terms and shall be secured by a
mortgage on the Leased Property and such Capital Additions
subject to all existing mortgages and encumbrances on the
Leased Property and such Capital Additions at the time of such
purchase;
(iii) By assigning to Tenant the right to receive an amount equal to
the Added Value Percentage (determined as of the date of the
expiration or earlier termination of this Lease) of all rent
and other consideration receivable by Landlord under any
re-letting or other disposition of the Leased Property and
such Capital Additions, after deducting from such rent all
costs and expenses incurred by Landlord in connection with
such re-letting or other disposition of the Leased Property
and such Capital Additions and all costs and expenses of
operating and maintaining the Leased Property and such Capital
Additions during the term of any such new lease which are not
borne by the tenant thereunder, with the provisions of this
Section 6.2(c) to remain in effect until the sale or other
final disposition of the Leased Property and such Capital
Additions, at which time the Fair Market Added Value of such
Capital Addition shall be immediately due and payable, such
obligation to be secured by a mortgage on the Leased Property
and such Capital Additions, subject to all existing mortgages
and encumbrances on the Leased Property at the time of such
purchase and assignment; or
<PAGE>
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(iv) By making such other arrangement regarding such compensation
as shall be mutually acceptable to Landlord and Tenant.
6.3 Information Regarding Capital Additions. Regardless of the source
of financing of any proposed Capital Addition, Tenant shall provide Landlord
with such information as Landlord may from time to time reasonably request with
respect to such Capital Addition, including, without limitation, the following:
(a) Evidence that such Capital Addition will be, and upon
completion has been, completed in compliance with the applicable
requirements of State and federal law with respect to capital
expenditures for nursing facilities;
(b) Upon completion of such Capital Addition, a copy of the
certificate of occupancy for the Facility updated, if required;
(c) Such information, certificates, licenses, permits or other
documents 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;
(d) An Officer's Certificate and a certificate from Tenant's
architect setting forth, in reasonable detail, the projected (or
actual, if available) Capital Additions Cost and invoices and lien
waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land acquired
for the purpose of constructing the Capital Addition free and clear of
any liens or encumbrances, except those approved by Landlord and, upon
completion of the Capital Addition, a final as-built survey thereof
reasonably satisfactory to Landlord;
(f) Endorsements to any outstanding policy of title insurance
covering the Leased Property or commitments therefor, satisfactory in
form and substance to Landlord, (i) updating the same without any
additional exceptions except as approved by Landlord, and (ii)
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 (g)
below);
(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord pursuant to
subparagraph (e) above, free and clear
<PAGE>
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of all liens and encumbrances, except those approved by Landlord, and
(ii) a lender's policy of title insurance, reasonably satisfactory in
form and substance to Landlord and the Lending Institution advancing
any portion of the Capital Additions Cost;
(h) An appraisal of the Leased Property by a Qualified
Appraiser, acceptable to Landlord, and an Officer's Certificate stating
that the value of the Leased Property upon completion of the Capital
Addition exceeds the Fair Market Value thereof prior to the
commencement of such Capital Addition by an amount not less than 80% of
the Capital Additions Cost; and
(i) Prints of architectural and engineering drawings relating
to such Capital Addition and such other certificates, documents,
opinions of counsel, appraisals, surveys, certified copies of duly
adopted resolutions of the board of directors of Tenant authorizing the
execution and delivery of any lease amendment or other instruments
reasonably required by Landlord and any Lending Institution advancing
or reimbursing Tenant for any portion of the Capital Additions Cost.
6.4 Non-Capital Additions. Tenant shall have the right, at Tenant's
sole cost and expense, to make additions, modifications or improvements to the
Leased Property which are not Capital Additions ("Non-Capital Additions") from
time to time as Tenant, in its reasonable discretion, may deem desirable for the
Primary Intended Use, provided that such action will not adversely alter the
character or purpose or detract from the value, operating efficiency or
revenue-producing capability of the Leased Property, or adversely affect the
ability of Tenant to comply with the provisions of this Lease. All such
Non-Capital Additions shall, upon expiration or earlier termination of this
Lease, become the property of Landlord, free and clear of all encumbrances other
than Permitted Encumbrances.
6.5 Salvage. All materials which are scrapped or removed in connection
with the making of either Capital Additions or repairs required by Article 5
shall be the property of the party paying or providing the financing for such
work.
ARTICLE 7
LIENS
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the Leased
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Property or any attachment, levy, claim or encumbrance in respect of the Rent,
other than (a) this Lease, (b) the Permitted Encumbrances, (c) restrictions,
liens and other encumbrances which are consented to in writing by Landlord, (d)
liens for those taxes of Landlord which Tenant is not required to pay hereunder,
(e) subleases permitted by Article 17, (f) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (i) the same are
not yet payable, or (ii) are payable without fine or penalty and such liens are
being contested in accordance with Article 8, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums disputed, provided that (i) 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 a reserve or another appropriate provision as shall be required by law or
generally accepted accounting principles shall have been made therefor, and (ii)
any such liens are being contested in accordance with Article 8, and (h) any
liens which are the responsibility of Landlord pursuant to Article 21.
7.2 Landlord's Lien. In addition to any statutory landlord's lien and
in order to secure payment of the Rent and all other sums payable hereunder by
Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant's breach of this Lease, Tenant hereby grants unto
Landlord a security interest in and an express contractual lien upon Tenant's
Personal Property (except motor vehicles sold from time to time in the ordinary
course of Tenant's operations), and all ledger sheets, files, records, documents
and instruments (including, without limitation, computer programs, tapes and
related electronic data processing) relating to the operation of the Facility
(collectively, the "Records") and all proceeds therefrom; and Tenant's Personal
Property shall not be removed from the Leased Property without the Landlord's
prior written consent, unless no Default or Event of Default shall have occurred
and be continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
security agreements and financing statements in form sufficient to perfect the
security interests of Landlord in Tenant's Personal Property and the proceeds
thereof in accordance with the provisions of the applicable laws of the State
and otherwise in form and substance reasonably satisfactory to Landlord. Tenant
hereby grants Landlord an irrevocable limited power of attorney, coupled with an
interest, to execute all such financing statements in Tenant's name, place and
stead. The security interest herein granted is in addition to any statutory lien
for the Rent.
Landlord agrees, at Tenant's request, to execute such documents as
Tenant may reasonably require to subordinate the lien granted pursuant to this
Section 7.2 in Tenant's Personal
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Property (but not the Records) to the lien of any Person providing purchase
money financing with respect thereto.
7.3 Mechanic's Liens. Except as permitted with respect to Capital
Additions, nothing contained in this Lease and no action or inaction by Landlord
shall be construed as (a) constituting the consent or request of Landlord,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof, or (b)
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
Landlord 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 Leased Property, or any portion thereof.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively "Claims") by appropriate legal
proceedings conducted in good faith and with due diligence, provided that (a)
the foregoing shall in no way be construed as relieving, modifying or extending
Tenant's obligation to pay any Claims as finally determined or prior to the time
the Leased Property may be sold in satisfaction thereof, (b) such contest shall
not cause Landlord or Tenant to be in default under any mortgage or deed of
trust encumbering the Leased Property or any interest therein or result in or
reasonably be expected to result in a lien attaching to the Leased Property, and
(c) Tenant shall indemnify and hold harmless Landlord from and against any cost,
claim, damage, penalty or expense, including reasonable attorneys' fees,
incurred by Landlord in connection therewith or as a result thereof. Upon
Landlord's request, Tenant shall either (a) provide a bond or other assurance
reasonably satisfactory to Landlord that all Claims which may be assessed
against the Leased Property, together with all interest and penalties thereon
will be paid, or (b) deposit within the time otherwise required for payment with
a bank or trust company, as trustee, as security for the payment of such Claims,
an amount sufficient to pay the same, together with interest and penalties in
connection therewith and all Claims which may be assessed against or become a
Claim against the Leased Property, or any part thereof, in connection with any
such contest. Tenant shall furnish Landlord and any
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Facility Mortgagee with reasonable evidence of such deposit within five (5) days
after request therefor. Landlord agrees to join in any such proceedings if
required legally to prosecute such contest; provided, however, that Landlord
shall not thereby be subjected to any liability therefor (including, for the
payment of any costs or expenses in connection therewith). Tenant shall be
entitled to any refund of any Claims and such charges and penalties or interest
thereon which have been paid by Tenant or paid by Landlord and for which
Landlord has been fully reimbursed by Tenant. If Tenant shall fail (a) to pay
any Claims when due, (b) to provide security therefor as provided in this
Article 8, or (c) to prosecute any such contest diligently and in good faith,
Landlord may, upon reasonable notice to Tenant (which notice may be oral and
shall not be required if Landlord shall determine the same is not practicable),
pay such charges, together with interest and penalties due with respect thereto,
and Tenant shall reimburse Landlord therefor, upon demand, as Additional Rent.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall at all times during
the Term and any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property, and all property located in or on the Leased
Property, including Tenant's Personal Property, insured against the risks in the
amounts as follows:
(a) Comprehensive general liability insurance, including
bodily injury and property damage (on an occurrence basis and in the
broadest form available, including without limitation broad form
contractual liability, fire legal liability independent contractor's
hazard and completed operations coverage) under which Tenant is named
as an insured and Landlord and any Facility Mortgagee (and such others
as are in privity of estate with Landlord, as set out in a notice from
time to time) are named as additional insureds as their interests may
appear, in an amount which shall, at the beginning of the Term, be at
least equal to $5,000,000 per occurrence in respect of bodily injury
and death and $1,000,000 per occurrence in respect of property damage,
and which, from time to time during the Term, shall be for such higher
limits, if any, as are customarily carried in the area in which the
Leased Property is located at property similar to the Leased Property
and used for similar purposes;
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(b) "All-risk" property insurance on a "replacement cost"
basis with the usual extended coverage endorsements covering the Leased
Property and Tenant's Personal Property;
(c) Business interruption and loss of rental under a rental
value insurance policy covering risk of loss during the lesser of the
first twelve (12) months of reconstruction or the actual reconstruction
period necessitated by the occurrence of any of the hazards described
in paragraphs (a) and (b) above, in such amounts as may be customary
for comparable properties in the area and in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer;
(d) Claims arising out of malpractice in an amount not less
than Five Million Dollars ($5,000,000) for each person and for each
occurrence with respect to the Leased Property, provided the same is
available at rates which are economically practical in relation to the
risk covered, as determined by Tenant and approved by Landlord (it
being agreed that, in the event the same is not available at rates
which are economically practical in relation to the risks covered,
Tenant shall provide such malpractice insurance by means of the
maintenance of a program of self insurance, which, in accordance with
generally accepted accounting principles consistently applied,
satisfies the insurance requirements of this paragraph (d) and, in such
event, Tenant shall submit to Landlord such records and other evidence
thereof as Landlord may from time to time reasonably request to confirm
the maintenance of such a program);
(e) Flood (if the Leased Property which is located in whole or
in part within a designated flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in
the area, provided the same is available at rates which are
economically practical in relation to the risks covered, as determined
by Tenant and approved by Landlord;
(f) Worker's compensation insurance coverage for all persons
employed by Tenant on the Leased Property with statutory limits and
otherwise with limits of and provisions in accordance with the
requirements of applicable local, state and federal law; and
(g) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Waiver of Subrogation. Landlord and Tenant agree that (insofar as
and to the extent that such agreement may be
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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 which is covered by insurance then being carried by
Landlord or Tenant or would be covered by insurance if insurance were maintained
in accordance with the applicable provisions of this Lease, 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. In
the event that any extra premium is payable by Tenant as a result of this
provision, Landlord shall not be liable for reimbursement to Tenant for such
extra premium.
9.3 Form Satisfactory, Etc. All policies of insurance required under
this Article 9 shall be written in a form reasonably satisfactory to Landlord
and by insurance companies authorized to do business in the State, insurance,
which companies shall be reasonably satisfactory to Landlord. All policies of
insurance required under this Article 9 shall include no deductible in excess of
$250,000 and shall name Landlord and any Facility Mortgagee as additional
insureds, as their interests may appear. Losses shall be payable to Landlord or
Tenant as provided in Article 10. Any loss adjustment shall require the written
consent of Landlord, Tenant and each Facility Mortgagee. Evidence of insurance
shall be deposited with Landlord and, if requested, any Facility Mortgagee. If
any provisions of any Facility Mortgage requires deposits of premiums for
insurance to be made with such Facility Mortgagee, provided that the Facility
Mortgagee has not elected to waive such provision, Tenant shall either pay
Landlord monthly the amounts required and Landlord shall transfer such amounts
to such Facility Mortgagee, or, pursuant to written direction by Landlord,
Tenant shall make such deposits directly with such Facility Mortgagee. Tenant
shall pay all insurance premiums, and deliver policies or certificates thereof
to Landlord prior to their effective date (and, with respect to any renewal
policy, ten (10) days prior to the expiration of the existing policy), and in
the event Tenant shall fail either to effect such insurance as herein required,
to pay the premiums therefor or to deliver such policies or certificates to
Landlord at the times required Landlord shall have the right, but not the
obligation, to effect such insurance and pay the premiums therefor, which
amounts shall be payable to Landlord, upon demand, as Additional Rent, together
with interest accrued thereon at the Base Rate from the date such payment is
made until the date repaid. All such policies shall provide Landlord (and any
Facility Mortgagee, if required by the same) thirty (30) days' prior written
notice of any materially alter on, expiration or cancellation of such policy.
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9.4 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with that
required by this Article 9 or increase the amount of any existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of such insurance, including,
Landlord and all Facility Mortgagees, are included therein as additional
insureds, and the loss is payable under such insurance in the same manner as
losses are payable under this Lease. In the event Tenant shall take out any such
separate insurance or increase any of the amounts of the then existing
insurance, Tenant shall give Landlord prompt written notice thereof.
9.5 Indemnification of Landlord. Tenant shall indemnify and hold
harmless Landlord from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees), to the maximum extent permitted by law,
imposed upon or incurred by or asserted against Landlord by reason of: (a) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Property or adjoining sidewalks, including,
without limitation, any claims of malpractice, (b) any past, present or future
use, misuse, non-use, condition, management, maintenance or repair by Tenant or
anyone claiming under Tenant of the Leased Property or Tenant's Personal
Property or any litigation, proceeding or claim by governmental entities or
other third parties to which Landlord is made a party or participant related to
the Leased Property or Tenant's Personal Property or such use, misuse, non-use,
condition, management, maintenance, or repair thereof including, failure to
perform obligations (other than Condemnation proceedings) to which Landlord is
made a party, (c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease), and (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. Tenant shall pay all amounts payable under this Section
9.5 within ten (10) days after demand therefor, and if not timely paid, such
amounts shall bear interest at the overdue rate from the date of 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 Landlord or
may compromise or otherwise dispose of the same as Tenant sees fit.
9.6 Indemnification of Tenant. Landlord shall indemnify and hold
harmless 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 willful
misconduct of Landlord.
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ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. All proceeds payable by reason of any loss or
damage to the Leased Property and insured under any policy of insurance required
by Article 9 shall be paid to Landlord and held in trust by Landlord in an
interest-bearing account (subject to the provisions of Section 10.2) and shall
be paid out by Landlord from time to time for the reasonable costs of
reconstruction or repair of the Leased Property necessitated by damage or
destruction. Any excess proceeds of insurance remaining after the completion of
the restoration shall be paid to Tenant. In the event neither Landlord nor
Tenant is required or elects to restore the Leased Property and this Lease is
terminated without purchase or substitution by Tenant pursuant to Section 10.2,
all insurance proceeds therefrom shall be retained by Landlord. All salvage
resulting from any risk covered by insurance shall belong to Landlord, except
any salvage related to Capital Additions paid for by Tenant or Tenant's Personal
Property shall belong to Tenant.
10.2 Reconstruction in the Event of Damage or Destruction.
10.2.1 Material Damage or Destruction of Premises. Except as
provided in Section 10.8, if, during the Term, the Leased Property shall be
totally or partially damaged or destroyed by fire or other casualty and the
Facility is thereby rendered Unsuitable for Its Primary Intended Use, Tenant
shall, at Tenant's option, exercisable by written notice to Landlord within
thirty (30) days after the date of such damage or destruction, elect either (a)
to restore the Facility to substantially the same condition as existed
immediately before such damage or destruction, or (b) to offer (i) to purchase
the Leased Property from Landlord for a purchase price equal to the greater of
the Minimum Repurchase Price or the Fair Market Value Purchase Price of the
Leased Property immediately prior to such damage or destruction, or (ii) to
substitute a new property for the Leased Property in accordance with the
provisions of Article 16. Failure of Tenant to give Landlord written notice of
any such election within such 30-day period shall be deemed an election by
Tenant to restore the Facility. In the event Tenant shall proceed in accordance
with clause (b) preceding and Landlord does not accept Tenant's offer to
purchase the Leased Property or substitute another property for the Leased
Property within thirty (30) days after receipt of Tenant's notice thereof,
Tenant may either (a) withdraw such offer and proceed promptly to restore the
Facility to substantially the same conditions as existed immediately before the
damage or destruction, or (b) terminate this Lease without further liability
hereunder and Landlord shall be entitled to retain the insurance proceeds. In
the event Tenant shall acquire the Leased Property or substitute
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a new property therefor, the insurance proceeds payable on account of such
damage shall be paid to Tenant.
10.2.2 Partial Damage or Destruction. Except as provided in
Section 10.8, if, during the Term, all or any portion of the Leased Property
shall be totally or partially destroyed by fire or other casualty and the
Facility is not thereby rendered Unsuitable for its Primary Intended Use, Tenant
shall promptly restore the Facility to substantially the same condition as
existed immediately before such damage or destruction; provided, however, that
if Tenant cannot, using diligent efforts, obtain all government approvals,
including building permits, licenses, conditional use permits and certificates
of need, necessary to perform all required repair and restoration and to operate
the Facility for its Primary Intended Use in substantially the same manner as
existed immediately prior to such damage or destruction within one hundred
eighty (180) days after the date of such fire or casualty, Tenant shall, within
thirty (30) days thereafter elect, by written notice to Landlord, either (a) to
substitute a new property or properties for the Leased Property in accordance
with the provisions of Article 16, or (b) purchase the Leased Property for a
purchase price equal to the greater of the then Minimum Repurchase Price or the
Fair Market Value Purchase Price of the Leased Property immediately prior to
such damage or destruction. Failure of Tenant to give such notice within such
period shall be deemed an election by Tenant to purchase the Leased Property.
Within thirty (30) days after receipt of Tenant's notice, Landlord shall give
Tenant written notice as to whether Landlord accepts such offer. Failure of
Landlord to give such notice shall be deemed an election by Landlord to accept
Tenant's offer. If Landlord shall reject such offer, Tenant shall elect, by
written notice to Landlord, given within thirty (30) days thereafter, either (a)
to withdraw such offer, in which event this Lease shall remain in full force and
effect with and Tenant shall proceed to restore the Facility as soon as
reasonably practicable to substantially the same condition as existed
immediately before such damage or destruction, or (b) terminate this Lease.
Failure of Tenant to give such notice within such period shall be deemed an
election by Tenant to restore the Leased Property.
In the event Landlord shall accept Tenant's offer to purchase
the Leased Property, this Lease shall terminate with respect thereto upon
payment of the purchase price. In the event Landlord shall accept Tenant's offer
to substitute a new property or properties, this Lease shall be deemed modified
to substitute such new property for the Leased Property (effective as of the
date of such substitution pursuant to Article 16) and all insurance proceeds
pertaining to the Leased Property shall be paid to Tenant. Landlord and Tenant
shall promptly execute appropriate instruments to confirm the foregoing,
although the failure to do so shall not affect this Lease.
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10.3 Insufficient Insurance Proceeds. If the cost of the repair or
restoration exceeds the amount of insurance proceeds received by Landlord
pursuant to Article 9, Tenant shall contribute any excess amounts needed to
complete such restoration. Such difference shall be paid by Tenant to Landlord
and held by Landlord in trust in an interest bearing account, together with any
other insurance proceeds, for application to the cost of repair and restoration
in accordance with Section 10.4.
10.4 Disbursement of Proceeds. In the event Tenant is required to
restore the Leased Property pursuant to Sections 10.1 or 10.2, Tenant shall, at
its sole cost and expense, commence promptly and continue diligently to perform,
or cause to be performed, the repair and restoration of the Leased Property so
as to restore the Leased Property in full compliance with all Legal Requirements
and otherwise in compliance with any other applicable provisions of this Lease,
so that the Leased Property shall be at least equal in value and general utility
to its general utility and value immediately prior to such damage or
destruction. Subject to the terms hereof, Landlord shall advance the insurance
proceeds (other than proceeds of business interruption insurance which shall be
advanced as provided below) and the amounts paid to it pursuant to Section 10.3
to Tenant regularly during the repair and restoration period so as to permit
payment for the cost of such restoration and repair. Any such advances shall be
for not less than $50,000 (or such lesser amount as equals the entire balance of
the repair and restoration costs) and Tenant shall submit to Landlord a written
requisition and substantiation therefor on AIA Forms G702 and G703 (or on such
other form or forms as may be acceptable to Landlord). Landlord may, at its
option, condition advancement of such insurance proceeds and other amounts on
(i) the absence of any Default or Event of Default, (ii) its approval of plans
and specifications of an architect satisfactory to Landlord (which approval
shall not be unreasonably withheld or delayed), (iii) general contractors'
estimates, (iv) architect's certificates, (v) unconditional lien waivers of
general contractors, (vi) evidence of approval by all governmental authorities
and other regulatory bodies whose approval is required and (vii) such other
certificates as Landlord may, from time to time, reasonably require. Provided no
Default or Event of Default has occurred and is continuing, on the first day of
each calendar month during which proceeds of business interruption insurance are
disbursed to Landlord under the policy of business interruption insurance
maintained pursuant to Article 9, Landlord shall disburse proceeds of business
interruption insurance received by it to Tenant upon notice from Tenant
accompanied by a certification from Tenant that such moneys will be used for
costs or expenses of owning or operating the Leased Property.
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Landlord's obligation to disburse insurance proceeds under this Article
10 shall be subject to the release of such proceeds by any Facility Mortgagee.
10.5 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property or Capital Additions
financed by Tenant shall be paid to Tenant and Tenant shall hold such proceeds
in trust to pay the cost of repairing or replacing damaged Tenant's Personal
Property or Capital Additions paid for or financed by Tenant.
10.6 Restoration of Tenant's Property. If Tenant shall be required or
elect to restore the Facility as hereinabove provided, Tenant shall either (a)
restore all alterations and improvements made by Tenant, Tenant's Personal
Property and all Capital Additions paid for or financed by Tenant, or (b)
replace such alterations and improvements, Tenant's Personal Property,
and/or Capital Additions with improvements or items of the same or better
quality and utility in the operation of the Facility.
10.7 No Abatement of Rent. Unless this Lease shall be terminated as
herein provided, during the first twelve (12) months of any period required for
repair or restoration, this Lease shall remain in full force and effect and
Tenant's obligation to make rental payments and to pay all other charges
required by this Lease shall remain unabated during the Term notwithstanding any
damage affecting the Leased Property. Thereafter, payments of Minimum Rent shall
be adjusted in the manner provided in Section 11.6. If any fire or other
casualty impairs the revenue producing capacity of the Facility, projected Net
Patient Revenues attributable to the Facility shall be determined by Landlord in
its reasonable discretion.
10.8 Damage Near End of Term. Notwithstanding any provisions of this
Article 10 to the contrary, if (a) damage to or destruction of the Facility
occurs during the last twelve (12) months of the Term, (b) Tenant has not
elected to extend the Term, (c) no Default or Event of Default shall have
occurred and be continuing, and (d) such damage or destruction cannot be fully
repaired and restored within one hundred eighty (180) days immediately following
the date of loss, Tenant shall have the right to terminate this Lease by the
giving of written notice thereof to Landlord within thirty (30) days after the
date of casualty. Failure of Tenant to give such notice within such 30- day
period shall be a waiver of Tenant's right to terminate this Lease pursuant to
this section.
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ARTICLE 11
CONDEMNATION
11.1 Total Condemnation. If the whole of the Leased Property shall be
taken by Condemnation, this Lease shall terminate as of the Date of Taking. In
the event a Condemnation of less than the whole of the Leased Property renders
the Leased Property Unsuitable for Its Primary Intended Use, Tenant and Landlord
shall each have the option, by written notice to the other, given at any time
prior to the date title vests in a third party, to terminate this Lease as of
the Date of Taking, whereupon this Lease shall terminate as of such date.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of the Leased Property such that Leased Property is still suitable for
its Primary Intended Use, or if neither Tenant nor Landlord shall terminate this
Lease as provided in Section 11.1, Tenant, at its sole cost and expense, shall,
with all reasonable dispatch, restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to such Condemnation. Landlord shall, subject to and in
accordance with the applicable provisions of Section 10.4, contribute to the
cost of restoration that part of its Award allocable to such restoration. In
such event, the Minimum Rent shall be permanently reduced as set forth in
Section 11.6.
11.3 Temporary Condemnation. In the event of any temporary Condemnation
of all or any part of the Leased Property or Tenant's interest under this Lease,
this Lease shall continue in full force and effect and Tenant shall continue to
pay, in the manner and on the terms herein specified, the full amount of the
Rent. To the extent reasonably practicable, Tenant shall continue to perform and
observe all of the other terms and conditions thereof, on the part of Tenant to
be performed and observed. The entire amount of any Award made for such
temporary Taking or Condemnation allocable to the Term, whether paid by way of
damages, rent or otherwise, shall be paid to Tenant. Tenant shall, upon the
termination of any such period of temporary Condemnation, at its sole cost and
expense (but only to the extent of the Award payable to Tenant), restore the
Leased Property as nearly as may be reasonably possible, to the condition that
existed immediately prior to such Condemnation, unless such period of temporary
use or occupancy shall extend beyond the expiration of the Term, in which case
Tenant shall not be required to make such restoration.
11.4 Tenant's Option. In the event of the termination of this Lease as
provided in Section 11.1, Tenant shall have the
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right, exercisable by written notice to Landlord given within thirty (30) days
after receipt by Tenant of notice of Condemnation, to elect (a) to acquire the
Leased Property from Landlord for a purchase price equal to the greater of its
Minimum Repurchase Price or the Fair Market Value Purchase Price of the Leased
Property immediately prior to such Condemnation, in which event, upon the
closing of such acquisition, Tenant shall have the right to receive the entire
Award, or (b) to substitute a new property therefor in accordance with the
provisions of Article 16, in which event Tenant shall receive the entire Award.
Failure of Tenant to give such notice within such 30-day period shall be deemed
a waiver of Tenant's rights pursuant to this Section 11.4. In the event Landlord
shall, by written notice to Tenant given within thirty (30) days after receipt
of Tenant's election notice, reject Tenant's offer so to purchase or substitute,
Tenant shall restore the Leased Property to substantially the same condition as
existed immediately before such Condemnation in accordance with the applicable
provisions of this Lease and, in such event, Landlord shall, subject to and in
accordance with the applicable provisions of Section 10.4, contribute to the
cost of restoration that part of its Award allocable to such restoration.
11.5 Allocation of Award. Except as provided in the second sentence of
this Section 11.5, the total Award shall be solely the property of and payable
to Landlord. Any portion of the Award made for the taking of Tenant's leasehold
interest in the Leased Property, Capital Additions paid for or financed by
Tenant, loss of business at the Leased Property during the remainder of the
Term, the taking of Tenant's Personal Property, or Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
11.6 Abatement Procedures. In the event of a partial Condemnation as
described in Section 11.2, this Lease shall not terminate, but the Minimum Rent
shall be abated and Base Net Patient Revenues shall be reduced in the manner and
to the extent that is fair, just and equitable to both Tenant and Landlord,
taking into consideration, among other relevant factors, the number of usable
beds, the amount of square footage, or the revenues affected by such partial or
temporary taking or damage or destruction. If Landlord and Tenant are unable to
agree upon the amount of such abatement within thirty (30) days after such
Condemnation or damage, the matter may be submitted by either party to a court
of competent jurisdiction for resolution or, if the parties so agree, the matter
may be submitted by the parties for resolution by arbitration in accordance with
the rules of the American Arbitration Association.
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ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Lease:
(a) Should Tenant fail to make any payment of the Rent or any
other sum payable hereunder when due and such failure shall continue
for ten (10) days after written notice thereof;
(b) Should Tenant fail to observe or perform any other term,
covenant or condition of this Lease and such failure shall continue for
thirty (30) days after written notice thereof; provided, however, if
such failure cannot with due diligence be cured within such thirty (30)
day period, an Event of Default shall not be deemed to have occurred
for such additional period (not to exceed 120 days in the aggregate)
required to cure the same so long as Tenant commences sure cure within
such thirty (30) day period and thereafter diligently prosecutes such
cure to completion;
(c) Should Tenant: (i) admit in writing its inability, or be
unable, to pay its debts generally as they become due; (ii) file a
petition in bankruptcy or a petition to take advantage of any
insolvency law; (iii) make a general 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;
(d) Should Tenant be adjudicated a bankrupt or have an order
for relief thereunder entered against it or a court of competent
jurisdiction shall enter an order or decree appointing a receiver of
Tenant or of the whole or substantially all of its property, or
approving a petition filed against Tenant seeking reorganization or
arrangement of Tenant under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof, and such judgment, order or decree shall not be vacated or set
aside within sixty (60) days from the date of entry thereof;
(e) Should Tenant be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution, or, in any manner,
permit the sale or divestiture of substantially all of its assets;
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(f) Should the estate or interest of Tenant in the Leased
Property or any part thereof shall be levied upon or attached in any
proceeding and the same shall not be vacated or discharged within
thirty (30) days after commencement thereof (unless Tenant shall be
contesting such lien or attachment in accordance with Article 8);
(g) Except as a result of damage, destruction, strikes,
lock-outs or a partial or complete Condemnation, should Tenant
voluntarily cease operations on the Leased Property for a period in
excess of thirty (30) days; or
(h) Should any representation or warranty of Tenant contained
in this Lease or any certificate or document delivered in connection
herewith be untrue when made or at any time during the Term in any
material respect which materially and adversely affects Landlord, and
the same shall not be cured within ninety (90) days after written
notice thereof.
Upon the occurrence of any Event of Default, Landlord and the agents and
servants of Landlord lawfully may, in addition to and not in derogation of any
remedies for any preceding breach of covenant, immediately or at any time
thereafter, without demand or notice and with or without process of law
(forcibly, if necessary), enter into and upon the Leased Property or any part
thereof in the name of the whole or mail a notice of termination addressed to
Tenant, and repossess the same and expel Tenant and those claiming through or
under Tenant and remove its and their effects (forcibly, if necessary), without
being deemed guilty of any manner of trespass and without prejudice to any
remedies which might otherwise be used for arrears of rent or prior breach
of covenant, and, upon such entry or mailing as aforesaid, this Lease shall
terminate, Tenant hereby waiving all statutory rights to the Leased Property
(including, without limitation, rights of redemption, if any, to the extent such
rights may be lawfully waived) and Landlord, without notice to Tenant, may store
Tenant's effects, and those of any person claiming through or under Tenant, at
Tenant's sole expense and risk, and, if Landlord so elects, may sell such
effects at public auction or private sale and apply the net proceeds to the
payment of all sums due to Landlord from Tenant, if any, and pay over the
balance, if any, to Tenant.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Leased Property and take
possession of any and all of Tenant's Personal Property and the Records (subject
to any prohibitions or limitations to disclosure of any such data as described
in Section 3.1.2(d)) on the Leased Property, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and
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sell the same at public or private sale, after giving Tenant reasonable notice
of the time and place of any public or private sale, at which sale Landlord or
its assigns may purchase all or any portion of such Personal Property unless
otherwise prohibited by law. Unless otherwise provided by law, and without
intending to exclude any other manner of giving Tenant reasonable notice, the
requirement of reasonable notice shall be met if such notice is given in the
manner prescribed in this Lease at least ten (10) days before the day of sale.
The proceeds from any such disposition, less all expenses incurred in connection
with the taking of possession, holding and selling of such property (including,
reasonable attorneys' fees) shall be deducted from the proceeds of such sale.
Any surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Rent, upon demand.
12.2 Remedies. In the event of any termination pursuant to Section
12.1, Tenant shall pay the Rent and other charges payable hereunder up to the
time of such termination and, thereafter, Tenant, until the end of what would
have been the Term of this Lease in the absence of such termination, and whether
or not the Leased Property, or any portion thereof, shall have been re-let,
shall be liable to Landlord for, and shall pay to Landlord, as current damages,
the Rent and other charges which would be payable hereunder for the remainder of
the Term had such termination not occurred, less the net proceeds, if any, of
any reletting of the Leased Property, after deducting all expenses in connection
with such re-letting, including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alteration costs and expenses of preparation for such reletting.
Tenant shall pay such current damages to Landlord monthly on the days on which
the Minimum Rent would have been payable hereunder if this Lease had not been
terminated. Percentage Rent for the purposes of this Section 12.2 shall be
deemed to be a sum equal to the amount of the Percentage Rent (determined on an
annualized basis) payable for the Fiscal Year immediately preceding the Fiscal
Year in which the termination, re-entry or repossession takes place. If,
however, such termination, re-entry or repossession occurs during the first full
Fiscal Year after the Base Year, the Percentage Rent shall be an amount
reasonably determined by Landlord.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages and in lieu of
all such current damages beyond the date of such demand, at Landlord's election,
Tenant shall pay to Landlord either (a) an amount equal to the excess, if any,
of the Rent and other charges which would be payable hereunder from the date of
such demand (assuming that, for the purposes of this paragraph, annual payments
by Tenant on account of Impositions would be the same as payments required for
the immediately
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preceding twelve calendar months, or if less than twelve calendar months have
expired since the Commencement Date, the payments required for such lesser
period projected to an annual amount and Percentage Rent shall be determined in
the manner set forth above) for what would be the then unexpired term of this
Lease if the same remained in effect, over the Fair Market Rental for the same
period, or (b) an amount equal to the lesser of (i) the Rent and other charges
that would have been payable for the balance of the Term had it not been
terminated, or (ii) the aggregate of the Minimum Rent, Percentage Rent and other
charges accrued in the twelve (12) months ended next prior to such termination
(without reduction for any free rent or other concession or abatement). In the
event this Lease is so terminated prior the expiration of the first full year of
the Term, the liquidated damages which Landlord may elect to recover pursuant to
clause (b) (ii) of this paragraph shall be calculated as if such termination had
occurred on the first anniversary of the Commencement Date. Nothing contained in
this Lease shall, however, limit or prejudice the right of Landlord to prove and
obtain in proceedings for bankruptcy or insolvency an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may at Landlord'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 Landlord considers
advisable and necessary to relet the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property as Landlord, in its
sole judgment, considers advisable and necessary for the purpose of reletting
the 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. Landlord shall in no event be liable in any way whatsoever for
failure to relet the Leased Property, or any portion thereof, or, in the event
that the 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 being evicted or dispossessed, or in the event of
Landlord obtaining possession of the Leased Property, by reason of the violation
by Tenant of any of the covenants and conditions of this Lease.
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12.3 Waiver. If this Lease is terminated pursuant to Section 12.1 or
12.2, Tenant waives, to the extent permitted by law, (a) any right to a trial by
jury in the event of summary proceedings to enforce the remedies set forth in
this Article 12, and (b) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt.
12.4 Application of Funds. Any payments received by Landlord under any
of the provisions of this Lease during the existence or continuance of any Event
of Default (and any payment made to Landlord rather than Tenant due to the
existence of an Event of Default) shall be applied to Tenant's obligations in
such order as Landlord may determine or as may be prescribed by the laws of the
State.
12.5 Failure to Conduct Business. For the purpose of determining rental
loss damages or Percentage Rent, in the event Tenant shall fail to conduct its
business at the Leased Property for its Primary Intended Use, exact damages or
the amount of Percentage Rent being unascertainable, the Percentage Rent for
such period shall be deemed to by an amount reasonably determined by Landlord.
12.6 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after written notice to Tenant
(provided that no such notice shall be required if Landlord shall reasonably
determine immediate action is necessary to protect person or property), without
waiving or releasing any obligation of Tenant, and without waiving or releasing
any Event of Default, may (but shall not be obligated 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 the
Leased Property, or any portion thereof, for such purpose and take all such
action thereon as, in Landlord's opinion, may be necessary or appropriate
therefor, including, the management of the Facility by Landlord or its designee,
and Tenant hereby irrevocably appoints, in the event of such election by
Landlord, Landlord or its designee as manager of the Facility and its attorney
in fact for such purpose, irrevocably and coupled with an interest, in the name,
place and stead of Tenant. All costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by Landlord in connection
therewith, together with interest thereon (to the extent permitted by law) at
the Overdue Rate from the date such sums are paid by Landlord until repaid,
shall be paid by Tenant to Landlord, on demand.
12.7 Trade Names. If this Lease is terminated for any reason, Landlord
shall, upon the request of Tenant, cause the name of the business conducted upon
the Leased Property to be changed to a name other than a Facility Trade Name or
any approximation or abbreviation thereof and sufficiently dissimilar
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to such name as to be unlikely to cause confusion with such name; provided,
however, that Tenant shall not thereafter use a Facility Trade Name in the same
market in which the Facility is located in connection with any business that
competes with the Facility.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration of the Term shall be
treated as a daily tenancy at sufferance at a rate equal to two (2) times the
Minimum Rent and Percentage Rent then in effect plus Additional Rent and other
charges herein provided (prorated on a daily basis). Tenant shall also pay to
Landlord all damages, direct and/or consequential (foreseeable and
unforeseeable), sustained by reason of any such holding over. Otherwise, such
holding over shall be on the terms and conditions set forth in this Lease, to
the extent applicable.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in this Lease and such default shall
continue for a period of thirty (30) days after written notice thereof, or such
additional period as may be reasonably required to correct the same (except if
such default shall constitute an immediate threat to life or property, five (5)
Business Days) Tenant may declare the occurrence of a "Landlord Default" by a
second notice to Landlord. Thereafter, Tenant may forthwith cure the same and,
subject to the provisions of the following paragraph, invoice Landlord for costs
and expenses (including reasonable attorneys' fees and court costs) incurred by
Tenant in curing the same, together with interest from the date Landlord
receives Tenant's invoice, at a rate equal to the Base Rate. Tenant shall have
no right to terminate this Lease for any default by Landlord hereunder and no
right, for any such default, to offset or counterclaim against any rent or other
charges due hereunder.
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If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give written notice thereof to Tenant, setting forth, in reasonable detail, the
basis therefor, no Landlord Default shall be deemed to have occurred and
Landlord shall have no obligation with respect thereto until final adverse
determination thereof. If Tenant and Landlord shall fail, in good faith, to
resolve the dispute within five (5) days after Landlord's notice of dispute,
either may submit the matter to arbitration for resolution in accordance with
the commercial arbitration rules of the American Arbitration Association. Such
arbitration shall be final and binding on Landlord and Tenant and judgment
thereon may be entered into any court of competent jurisdiction. Within five (5)
days after submission to arbitration, Landlord and Tenant shall submit all
information required for such arbitration and shall take all other actions
required for such arbitration to proceed and the arbitrators shall be instructed
to render a determination as soon as possible and in any event not later than
thirty (30) days after submission.
ARTICLE 15
PURCHASE OF PREMISES
In the event Tenant shall purchase the Leased Property from Landlord
pursuant to any of the terms of this Lease, Landlord shall, upon receipt from
Tenant of the applicable purchase price, together with full payment of any
unpaid Rent and other charges due and payable with respect to any period ending
on or before the date of the purchase, deliver to Tenant a title insurance
policy, together with an appropriate deed or other instruments, conveying the
entire interest of Landlord in and to the Leased Property to Tenant, free and
clear of all encumbrances other than (a) those Tenant has agreed hereunder to
pay or discharge, (b) those liens, if any, which Tenant has agreed in writing to
accept and take title subject to, (c) the Permitted Encumbrances, and (d) any
other encumbrances permitted to be imposed on the Leased Property (x) pursuant
to the terms of this Lease or (y) otherwise permitted to be imposed under the
provisions of Section 21.1 which are assumable at no cost to Tenant or to which
Tenant may take subject without cost to Tenant. The difference between the
applicable purchase price and the total of the encumbrances assumed or taken
subject to shall be paid in cash to Landlord or as Landlord may direct, in
federal or other immediately available funds. The closing of any such sale shall
be contingent upon and subject to Tenant's 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 Lease which otherwise would
have expired during the escrow
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period of such proposed sale shall be deemed to remain in effect for 30 days
after termination thereof. All expenses of such conveyance, including, without
limitation, the cost of title examination or standard coverage title insurance,
usually paid by a purchaser of real property in the State shall be paid by
Tenant; all expenses of such conveyance usually paid by a seller of real
property in the State shall be paid by Landlord.
ARTICLE 16
SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY
16.1 Tenant's Substitution Option. Provided (a) in the good faith
judgment of Tenant, the Leased Property shall become Unsuitable for its Primary
Intended Use, (b) no Default or Event of Default shall have occurred and be
continuing, and (c) not less than one (1) year shall remain in the Term, Tenant
shall have the right, subject to the conditions set forth in this Article 16,
upon not less than thirty (30) days prior written notice to Landlord, to
substitute one or more properties (collectively, the "Substitute Properties" or
individually, "Substitute Property") on the date specified in such notice (the
"Substitution Date"); provided, however, that if Tenant is required by court
order or administrative action to divest or otherwise dispose of the Leased
Property in less than thirty (30) days and Tenant shall have given Landlord
prior written notice of the filing of such court or administrative action and
kept Landlord reasonably apprised of the status thereof, the time period shall
be shortened appropriately to meet the reasonable needs of Tenant, but in no
event less than ten (10) Business Days after the receipt by Landlord of such
notice. Such notice shall include (a) an Officer's Certificate, setting forth in
reasonable detail the reason(s) for the substitution and the proposed
Substitution Date, and (b) designate not less than two properties (or groups of
properties), each of which properties (or groups of properties) shall provide
Landlord with a yield (i.e., annual return on its equity in such property)
substantially equivalent to Landlord's yield from the Leased Property at the
time of such proposed substitution (or in the case of substitution because of
damage or destruction, the yield immediately prior to such damage or
destruction) and as reasonably projected over the remaining Term of this Lease.
16.2 Landlord's Substitution Option. If Tenant shall have voluntarily
or involuntarily discontinued use of the Leased Property for its business
operations for a period in excess of one year, Landlord shall have the right,
exercisable by thirty (30) days prior written notice to Tenant, to require
Tenant to substitute a Substitute Property for the Leased Property, (in which
event, Tenant shall comply with the applicable provisions of Section 16.1 within
thirty (30) days thereafter).
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16.3 Substitution Procedures. (a) If either Landlord or Tenant shall
initiate a substitution pursuant to Section 16.1 or 16.2, Landlord shall have a
period of thirty (30) days within which to review the designated properties and
such additional information and either accept or reject the Substitute
Properties so presented, unless Tenant is required by a court order or
administrative action to divest or otherwise dispose of the Leased Property
within a shorter time period, in which case the time period shall be shortened
appropriately to meet the reasonable needs of Tenant, but in no event shall such
period be less than five (5) Business Days after Landlord's actual receipt of
Tenant's notice (subject to further extension for any period of time in which
Landlord is not timely provided with the information provided for in this
Section 16.3 and Section 16.4 below). Landlord and Tenant shall use good faith
efforts to agree on a Substitute Property.
(b) In the event that, on or before the expiration of the
applicable time period for Landlord's review, Landlord has rejected
both of the Substitute Properties so presented, Tenant shall, for a
period of sixty (60) days after the expiration of such period, have the
right to terminate this Lease, by the giving of written notice thereof
to Landlord, accompanied by an offer to purchase the Leased Property on
the date set forth in such notice, but in no event less than ninety
(90) days thereafter, for a purchase price equal to the greater of the
then Fair Market Value Purchase Price or the Minimum Repurchase Price,
and, subject to the provisions of Article 15, this Lease shall
terminate on such purchase date.
(c) Landlord shall not unreasonably withhold its consent to an
offer by Tenant to substitute a property as set forth in this Article
provided (i) Landlord shall determine the Substitute Property shall
provide Landlord with a yield substantially equivalent to Landlord's
yield from the Leased Property immediately before such substitution or
such damage or destruction, as the case may be, and as projected over
the remainder of the Term, and (ii) the delivery of an opinion of
counsel for Landlord confirming that (w) the substitution of the
Substitute Property for the Leased Property will qualify as an exchange
solely of property of a like-kind under Section 1031 of the Code, in
which, generally, except for "boot", no gain or loss will be recognized
by Landlord, (x) the substitution will not result in ordinary recapture
income to Landlord pursuant to Section 1250(d)(4) of the Code or any
other provision of the Code, (y) the substitution will result in
income, if any, to Landlord of a type described in Section 856(c)(2) or
(3) of the Code and will not result in income of the types described in
Section 856(c)(4) of the Code or result in the tax imposed under
Section 857(b)(6) of the
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Code, and (z) the substitution, together with all other substitutions
made or requested by Tenant or an Affiliated Person pursuant to the
Other Leases or other transfers of all or any portion of the Leased
Property or properties leased under the Other Leases, during the
relevant time period, will not jeopardize the qualification of Landlord
as a real estate investment trust under Sections 856-860 of the Code.
(d) In the event that the then Fair Market Value of the
Substitute Property or group of Substitute Properties minus the
encumbrances assumed by Landlord, or as to which Landlord will take the
Substitute Property or group of Substitute Properties subject, as of
the Substitution Date is greater than the then Fair Market Value of the
Leased Property minus the encumbrances assumed by Tenant, or as to
which the Tenant will take the Leased Property subject, as of the
Substitution Date (or in the case of damage or destruction, the Fair
Market Value immediately prior to such damage or destruction), Landlord
shall pay to Tenant an amount equal to the difference, subject to the
limitation set forth below; in the event that such value of the
Substitute Property or group of Substitute Properties is less than such
value of the Leased Property, Tenant shall pay to Landlord an amount
equal to the difference, subject to the limitation set forth below;
provided, however, neither Landlord nor Tenant shall be obligated to
consummate such substitution if such party would be required to make a
payment (the "Cash Adjustment") to the other in excess of an amount
equal to five percent (5%) of the Fair Market Value of the Leased
Property.
(e) The Rent for such Substitute Property shall, in all
respects, provide Landlord with a yield (i.e., annual return on its
equity in such property) substantially equivalent to Landlord's yield
from the Leased Property at the time of such substitution (or in the
case of substitution because of damage or destruction the yield
immediately prior to such damage or destruction) and as reasonably
projected over the remaining Term, taking into account the Cash
Adjustment paid or received by Landlord and any other relevant factors,
as reasonably determined by Landlord.
(f) The Minimum Repurchase Price of the Substitute Property
shall be an amount equal to the Minimum Repurchase Price of the Leased
Property (i) increased by any Cash Adjustment paid by Landlord pursuant
to Paragraph (d) above, or (ii) decreased by any Cash Adjustment paid
by Tenant pursuant to paragraph (d) above.
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16.4 Conditions to Substitution. On the Substitution Date, the
Substitute Property shall become the Leased Property hereunder, upon delivery by
Tenant to Landlord of the following:
(a) An Officer's Certificate certifying that (i) the
Substitute Property has been accepted by Tenant for all purposes of
this Lease and there has been no material damage to the improvements
located thereon, nor is any Condemnation pending or threatened with
respect thereto; (ii) all appropriate permits, licenses and
certificates (including, but not limited to, a permanent, unconditional
certificate of occupancy and all certificates of need, licenses and
provider agreements) which are necessary to permit the use of the
Substitute Property in accordance with the provisions of this Lease
have been obtained and are in full force and effect; (iii) under
applicable zoning and use laws, ordinances, rules and regulations, the
Substitute Property may be used for the purposes contemplated by this
Lease and all necessary subdivision approvals, if any, have been
obtained; (iv) there are no mechanics' or materialmen's liens
outstanding or threatened to the knowledge of Tenant against the
Substitute Property arising out of or in connection with the
construction of the improvements thereon, other than those being
contested by Tenant pursuant to Article 8; (v) to the best knowledge of
Tenant, there exists no Default or Event of Default, and no defense,
offset or claim with respect to any sums payable by Tenant hereunder;
and (vi) any exceptions to Landlord's title to the Substitute Property
do not materially interfere with the intended use of the Substitute
Property by Tenant;
(b) A deed with full warranties or assignment of a leasehold
estate with full warranties (as applicable) conveying to Landlord title
to the Substitute Property free and clear of any liens or encumbrances,
except those approved by Landlord;
(c) an amendment duly executed, acknowledged and delivered by
Tenant, in form and substance satisfactory to Landlord, amending this
Lease to correct the legal description of the Land and make such other
changes herein as may be necessary or appropriate under the
circumstances;
(d) counterparts of a standard owner's or lessee's (as
applicable) policy of title insurance covering the Substitute Property
(or a valid, binding, unconditional commitment therefor), dated as of
the Substitution Date, in current form and including mechanics' and
materialmen's lien coverage, issued to Landlord by a title insurance
company and in the form reasonably satisfactory to Landlord, which
policy shall (i) insure (x) Landlord's fee title or leasehold estate to
the Substitute Property, subject to no
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liens or encumbrances except those approved by Landlord and (y) that
any restrictions affecting the Substitute Property have not been
violated; (ii) be in an amount at least equal to the Fair Market Value
of the Substitute Property; and (iii) contain such affirmative coverage
endorsements as Landlord shall reasonably request;
(e) certificates of insurance with respect to the Substitute
Property fulfilling the requirements of Article 9;
(f) current appraisals or other evidence satisfactory to
Landlord, in its sole discretion, as to the then current Fair Market
Values and the projected residual values of such Substitute Property
and the Leased Property as to which such substitution is being made;
(g) all available revenue data relating to the Substitute
Property for the period from the date of opening for business of the
Facility on such Substitute Property to the date of Tenant's most
recent Fiscal Year end, or for the most recent three (3) years,
whichever is less; and
(h) such other certificates, documents, opinions of counsel
and other instruments as may be reasonably required by Landlord.
16.5 Conveyance to Tenant. On the Substitution Date, Landlord shall
convey the Leased Property to Tenant in accordance with the provisions of
Article 15 (except as to payment of any expenses in connection therewith which
shall be governed by Section 16.6) upon either (a) payment in cash therefor or
(b) conveyance to Landlord of the Substitute Property, as appropriate.
16.6 Expenses. Tenant shall pay or cause to be paid, on demand, all
reasonable costs and expenses paid or incurred by Landlord in connection with
the substitution and conveyance of the Leased Property and Substitute Property,
including, but not limited to, (a) reasonable fees and expenses of counsel, (b)
all printing expenses, (c) the amount of filing, registration and recording
taxes and fees, (d) the cost of preparing and recording, if appropriate, a
release of the Leased Property from the lien of any mortgage, (e) brokers' fees
and commissions, (f) documentary stamp and transfer taxes, (g) title insurance
charges and premiums, and (h) escrow fees.
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ARTICLE 17
SUBLETTING AND ASSIGNMENT
17.1 Subletting and Assignment. Except as hereinafter provided, Tenant
shall not assign, mortgage, pledge, hypothecate, encumber or otherwise transfer
this Lease or sublease (which term shall be deemed to include the granting of
concessions and licenses and the like) all or any part of the Leased Property or
suffer or permit this Lease or the leasehold estate hereby created or any other
rights arising under this Lease to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or occupancy of the
Leased Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting except as hereinafter
provided. For purposes of this Section 17.1, an assignment of this Lease shall
be deemed to include any transaction pursuant to which Tenant is merged or
consolidated with another entity or pursuant to which all or substantially all
of Tenant's assets are transferred to any other entity, as if such or
transaction were an assignment of this Lease.
If this Lease is assigned or if the Leased Property or any part thereof
are sublet (or occupied by anybody other than Tenant and its employees)
Landlord, after default by Tenant hereunder, 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 the first paragraph of this Section 17.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its covenants, agreements or obligations contained in this Lease.
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 a particular instance shall be deemed to be a waiver of the
obligation to obtain the Landlord's written approval in the case of any other
subletting or assignment. 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 17.1 shall be
voidable at Landlord's option.
If the rent and other sums (including, without limitation, the
reasonable value of any services performed by any assignee or subtenant in
consideration of such assignment or sublease) either initially or over the term
of any assignment or sublease, payable by such assignee or subtenant on account
of an assignment or sublease exceed the Rent called for hereunder with respect
to the
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space assigned or sublet, Tenant shall pay to Landlord as Additional Rent one
hundred percent (100%) of such excess net of the costs and expenses incurred by
Tenant in procuring such sublease payable monthly at the time for payment
Minimum Rent.
17.2 Required Sublease Provisions. Any sublease of all or any portion
of the Leased Property shall provide that it is subject and subordinate to this
Lease and to the matters to which this Lease is or shall be subject or
subordinate, and that in the event of termination of this Lease or reentry or
dispossession of Tenant by Landlord under this Lease, Landlord may, at its
option, take over all of the right, title and interest of Tenant, as sublessor
under such sublease, and such subtenant shall, at Landlord's option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except that
neither Landlord nor any Facility Mortgagee, as holder of a mortgage or as
Landlord under this Lease, if such mortgagee succeeds to that position, shall
(a) be liable for any act or omission of Tenant under such sublease, (b) be
subject to any credit, counterclaim, offset or defense which theretofore accrued
to such subtenant against Tenant, (c) be bound by any previous modification of
such sublease or by any previous prepayment of more than one (1) month's rent,
(d) be bound by any covenant of Tenant to undertake or complete any construction
of the Leased Property or any portion thereof, (e) be required to account for
any security deposit of the subtenant other than any security deposit actually
delivered to Landlord by Tenant, (f) be bound by any obligation to make any
payment to such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease to be performed
after the date of such attornment, (g) be responsible for any monies owing by
Tenant to the credit of such Subtenant, or (h) be required to remove any person
occupying the Leased Property or any part thereof; and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. The
provisions of this paragraph shall not be deemed a waiver of the provisions set
forth in the first paragraph of Section 17.1.
17.3 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 sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of the sublessee, or (b) any other formula such that any
portion of the sublease rental 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.
17.4 Assignment and Subletting Procedure. Anything contained in this
Lease to the contrary notwithstanding, if Tenant wishes to enter into a sublease
with respect to any
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portion of the Leased Property or an assignment of this Lease, Tenant shall give
Landlord notice of such intent, which notice ("Tenant's Notice") shall state, in
the event of a proposed sublease, the location and amount of area intended to be
covered by such sublease and the term of the proposed sublease, the proposed
effective date of such sublease or assignment, and the identity of such proposed
subtenant or assignee and such other information with respect thereto as
Landlord may reasonably require. Landlord shall not unreasonably withhold its
consent to any proposed assignment or sublease provided Tenant shall deliver to
Landlord a written instrument, in form and substance reasonably satisfactory to
Landlord, pursuant to which such assignee agrees directly with Landlord to be
bound by all the terms of this Lease and to be jointly and severally liable with
Tenant for all of Tenant's obligations under this Lease.
ARTICLE 18
CERTIFICATES AND FINANCIAL STATEMENTS
18.1 Estoppel Certificates. At any time and from time to time, upon not
less than twenty (20) days prior written notice by Landlord, Tenant shall
furnish to Landlord an Officer's Certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications), the date to which the
Rent has been paid, that, to the best of Tenant's knowledge and belief after
making due inquiry, 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 a default hereunder, or if Tenant shall be in
default or any such event shall exist, specifying in reasonable detail all such
defaults or events, and the steps being taken to remedy the same, and such
additional information as Landlord may reasonably request. Any such certificate
furnished pursuant to this section may be relied upon by Landlord and any
prospective purchaser or mortgagee of the Leased Property.
18.2 Financial Statements. Tenant shall furnish the following
statements to Landlord:
(a) Within forty-five (45) days after each of the first three
quarters of each Fiscal Year, the most recent Consolidated Financials
of Tenant, together with an Officer's Certificate certifying to the
accuracy of such Consolidated Financials;
(b) Within one hundred twenty (120) days after the end of each
Fiscal Year, the most recent Consolidated Financials
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of Tenant for such year, certified by an independent certified public
accountant satisfactory to Landlord;
(c) Promptly after the sending or filing thereof, copies of
all reports which Tenant sends to its security holders generally, and
copies of all periodic reports which Tenant files with the SEC or any
stock exchange on which its shares are listed or traded;
(d) Promptly after the delivery thereof to Tenant, or its
management, a copy of any management letter or written report prepared
by Tenant's certified public accountants with respect to the financial
condition, operations, business or prospects of Tenant;
(e) At any time and from time to time upon not less than
twenty (20) days notice from Landlord, any Consolidated Financials or
any other financial reporting information required to be filed by
Landlord with any securities and exchange commission, the SEC or any
successor agency, or any other governmental authority, or required
pursuant to any order issued by any court governmental authority or
arbitrator in any litigation to which Landlord is a party, for purposes
of compliance therewith; and
(f) With reasonable promptness, such other information as to
the financial condition and affairs of Tenant as Landlord may
reasonably request.
18.3 General Operations. Tenant covenants and agrees to furnish to
Landlord:
18.3.1 Reimbursement, Licensure etc. Within thirty (30) days
after receipt or modification thereof, copies of
(a) All licenses authorizing Tenant to operate the
Facility for its Primary Intended Use;
(b) All Medicare and Medicaid certifications,
together with provider agreements and all material
correspondence relating thereto with respect to the Facility
(excluding, however, correspondence which may be subject to
any attorney-client privilege);
(c) A Nursing Home Administrator License for the
individuals employed in such capacity with respect to the
Facility;
(d) All reports of surveys, statements of
deficiencies, plans of correction, and all material
correspondence relating thereto, including, without
limitation, all reports and material correspondence
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concerning compliance with or enforcement of licensure,
Medicare/Medicaid, and accreditation requirements, including
physical environment and Life Safety Code survey reports
(excluding, however, correspondence which may be subject to
any attorney-client privilege); and
(e) With reasonable promptness, such other
confirmation as to the Licensure and Medicare and Medicaid
participation of Tenant as Landlord may reasonably request
from time to time.
18.3.2 Monthly Reports. Tenant shall prepare and furnish to
Landlord for the Leased Property, within thirty (30) days after the end of each
calendar month during the term of this Agreement, a monthly report, such report
to include a balance sheet, a current month and year to date income statement,
showing each item of actual and projected income and expense, prepared on an
accrual basis and a current month and year to date cash flow statement,
reflecting the operating results of the Facility; a statement of Net Patient
Revenues for such month; and such additional information as the Company may from
time to time reasonably require.
ARTICLE 19
LANDLORD ACCESS
19.1 Landlord's Right to Inspect. Tenant shall permit Landlord and its
authorized representatives to inspect the Leased Property during usual business
hours, and to do and make such repairs as Landlord is permitted or required to
make pursuant to the terms of this Lease, subject to any security, health,
safety or patient or business confidentiality requirements of Tenant or any
governmental agency or Insurance Requirement relating to the Leased Property or
imposed by law.
19.2 Landlord's Option to Purchase the Tenant's Personal Property;
Transfer of Licenses. Effective on not less than ninety (90) days' prior notice
given at any time within one hundred eighty (180) days after the expiration of
the Term (or such shorter period as shall be appropriate if this Lease is
terminated prior to its expiration date), Landlord shall have the option to
purchase all (but not less than all) of Tenant's Personal Property (except motor
vehicles), if any, at the expiration or termination of this Lease, for an amount
equal to the then net market value thereof (current replacement cost as
determined by appraisal less accumulated depreciation on Tenant's books
pertaining thereto), subject to, and with appropriate price adjustments for, all
equipment leases, conditional sale contracts, UCC-1 financing statements and
other encumbrances to
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which such Personal Property is subject; provided, however, Landlord shall not
have the right to purchase any Facility Trade Name or logo.
ARTICLE 20
APPRAISAL
20.1 Appraisal Procedure. In the event that it becomes necessary to
determine the Fair Market Value, Fair Market Value Purchase Price or Fair Market
Rental of the Leased Property or a Substitute Property for any purpose of this
Lease, the party required or permitted to give notice of such required
determination (the "Initiating Party") shall include in such notice the name of
a designated Qualified Appraiser (hereinafter defined) on its behalf. Within 10
days after notice, the party receiving such notice (the "Responding Party")
shall, by written notice to the other, appoint a second Qualified Appraiser. If
the Responding Party shall fail, neglect or refuse within said ten-day period to
designate another appraiser willing so to act, the appraiser designated by the
Initiating Party shall designate the second Qualified Appraiser within ten (10)
days thereafter. The two appraisers so designated shall meet within ten (10)
days after the second appraiser is designated, and, if within ten (10) days
after the second appraiser is designated, the two appraisers do not agree upon
the Fair Market Value, Fair Market Value Purchase Price or Fair Market Rental,
as the case may be, of the applicable property as of the relevant date, the two
appraisers shall designate a third Qualified Appraiser, within ten (10) days
thereafter. In the event that the two appraisers are unable to agree upon the
appointment of a third Qualified Appraiser within such ten (10) day period,
either Landlord or Tenant, on behalf of both, may then request appointment of
such appraiser the then president of the American Arbitration Association. In
the event of a failure, refusal or inability of any appraiser to act, a new
appraiser shall be appointed in his stead, which appointment shall be made in
the same manner as hereinabove provided for the appointment of such appraiser so
failing, refusing or being unable to act. In the event that all appraisers
cannot agree upon such value ten (10) days as aforesaid, each appraiser shall
submit his appraisal of such value to the other two appraisers in writing, and
such value shall be determined by calculating the average of the two numerically
closest (or, if the values are equidistant, all three) values determined by the
three appraisers.
The costs, other than counsel fees, of such appraisal shall be borne
equally by the parties. Upon determining such value, the appraisers shall
promptly notify Landlord and Tenant in writing of such determination. If any
party shall fail to appear
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at the hearings appointed by the appraisers, the appraisers may act in the
absence of such party.
The determination of the board of appraisers (or the single additional
Qualified Appraiser, as appropriate) made in accordance with the foregoing
provisions shall be final and binding upon the parties, such determination may
be entered as an award in arbitration in a court of competent jurisdiction, and
judgment thereon may be entered.
ARTICLE 21
MORTGAGES
21.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord
may, subject to the terms and conditions set forth in this Section 21.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Any such Encumbrance,
other than one the proceeds of which are used to finance construction of a
Capital Addition pursuant to the provisions of Sections 6.1 and 6.3, shall
include the right to prepay (whether or not subject to a prepayment penalty) and
shall provide (subject to Section 21.2) that it is subject to the rights of
Tenant under this Lease.
21.2 Subordination of Lease. Subject to Section 21.1 and the last
paragraph of this Section 21.2, this Lease, and all rights of Tenant hereunder,
are and shall be subject and subordinate to any ground or master lease, and all
renewals, extensions, modifications and replacements thereof, and to all
mortgages and deeds of trust, which may now or hereafter affect the Leased
Property or any improvements thereon and/or any of such leases, whether or not
such mortgages or deeds of trust shall also cover other lands and/or buildings
and/or leases, to each and every advance made or hereafter to be made under such
mortgages and deeds of trust, and to all renewals, modifications, replacements
and extensions of such leases and such mortgages and deeds of trust and all
consolidations of such mortgages and deeds of trust. This section shall be
self-operative and no further instrument of subordination shall be required. In
confirmation of such subordination, Tenant shall promptly execute, acknowledge
and deliver any instrument that Landlord, the lessor under any such lease or the
holder of any such mortgage or the trustee or beneficiary of any deed of trust
or any of their respective successors in interest may reasonably request to
evidence such subordination. Any lease to which this Lease is, at the time
referred to, subject and subordinate is herein called "Superior Lease" and the
lessor of a Superior Lease or its successor in
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interest at the time referred to, is herein called "Superior Landlord" and any
mortgage or deed of trust to which this Lease is, at the time referred to,
subject and subordinate, is herein called "Superior Mortgage" and the holder,
trustee or beneficiary of a Superior Mortgage is herein called "Superior
Mortgagee".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Lease, whether through possession or foreclosure
action or delivery of a new lease or deed, or otherwise, then at the request of
such party so succeeding to Landlord's rights (herein called "Successor
Landlord") and upon such Successor Landlord's written agreement to accept
Tenant's attornment, Tenant shall attorn to and recognize such Successor
Landlord as Tenant's landlord under this Lease and shall promptly execute and
deliver any instrument that such Successor Landlord may reasonably request to
evidence such attornment. Upon such attornment, this Lease shall continue in
full force and effect as a direct lease between the Successor Landlord and
Tenant upon all of the terms, conditions and covenants as are set forth in this
Lease, except that the Successor Landlord (unless formerly the landlord under
this Lease or its nominee or designee) shall not be (a) liable in any way to
Tenant for any act or omission, neglect or default on the part of Landlord under
this Lease, (b) responsible for any monies owing by or on deposit with Landlord
to the credit of Tenant, (c) subject to any counterclaim or setoff which
theretofore accrued to Tenant against Landlord, (d) bound by any modification of
this Lease subsequent to such Superior Lease or Mortgage, or by any previous
prepayment of Minimum Rent or Percentage Rent for more than one (1) month, which
was not approved in writing by the Superior Landlord or the Superior Mortgagee
thereto, (e) liable to the Tenant beyond the Successor Landlord's interest in
the Leased Property and the rents, income, receipts, revenues, issues and
profits issuing from the Leased Property, (f) responsible for the performance of
any work to be done by the Landlord under this Lease to render the Leased
Property ready for occupancy by Tenant, or (g) required to remove any person
occupying the Leased Property or any part thereof, except if such person claims
by, through or under the Successor Landlord. Tenant agrees at any time and from
time to time to execute a suitable instrument in confirmation of Tenant's
agreement to attorn, as aforesaid.
Tenant's obligation to subordinate this Lease and Tenant's rights
hereunder to any Superior Mortgage or Superior Lease shall be conditioned upon
Landlord obtaining from any Superior Mortgagee or Superior Landlord, an
agreement which shall be executed by Tenant and such Superior Mortgagee or
Superior Landlord which shall provide in substance that so long as no Event of
Default exists as would entitle Landlord or any such Superior Mortgagee or
Superior Landlord to terminate this Lease
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or would cause, without any further action of Landlord or such Superior
Mortgagee or Superior Landlord, the termination of this Lease or would entitle
Landlord or such Superior Mortgagee or Superior Landlord to dispossess Tenant,
this Lease shall not be terminated, nor shall Tenant's use, possession or
enjoyment of the Leased Property, in accordance with the terms and provisions of
this Lease, be interfered with, nor shall the leasehold estate granted by this
Lease be affected in any other manner, in any foreclosure or any action or
proceeding instituted under or in connection with such Superior Mortgage or
Superior Lease, or in the event such Superior Mortgagee or Superior Landlord
takes possession of the Leased Property pursuant to any provisions of such
Superior Mortgage or Superior Lease, unless Landlord or such Superior Mortgagee
or Superior Landlord would have had such right of termination pursuant to this
Lease. Such agreement shall be in form customarily used by the holder of any
such Superior Mortgage or Superior Lease.
21.3 Notice to Mortgagee and Ground Landlord. Subsequent to the receipt
by Tenant of notice from any person, firm or other entity that it is a Facility
Mortgagee, or that it is the ground lessor under a lease with Landlord, as
ground lessee, which includes the Leased Property as part of the demised
premises, no notice from Tenant to Landlord shall be effective unless and until
a copy of the same is given to such Facility Mortgagee or ground lessor and the
curing of any of Landlord's defaults by such Facility Mortgagee or ground lessor
shall be treated as performance by Landlord.
ARTICLE 22
INVESTMENT TAX CREDIT
22.1 Investment Tax Credit. Landlord agrees to elect, in accordance
with Section 48(d) of the Code, to treat Tenant as having purchased all such
eligible property in the Leased Property as may be designated by Tenant in order
that Tenant may obtain the benefit of the credit, if any, allowed or allowable
with respect thereto under Section 38 of the Code. Landlord makes no
representation or warranty with respect to the availability of the credit to
Tenant or the efficacy of such election. Landlord's sole responsibility in this
regard shall be to execute such documents as are reasonably required to effect
the election, which documents Tenant shall prepare, at Tenant's sole cost and
expense, and to provide Tenant with such information as may be reasonably
requested by Tenant in connection therewith. In addition, Landlord agrees it and
its assignees will not claim the credit provided by Section 38 of the Code for
any property included in the Leased Property.
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ARTICLE 23
ADDITIONAL COVENANTS OF TENANT
23.1 Notice of Change of Name, Administrator, Etc. Tenant shall give
prompt notice to Landlord of any change in (a) the name (operating or otherwise)
of Tenant or the Facility, (b) the individual licensed as administrator of the
Facility, (c) the number of beds in any bed category for which the Facility is
licensed or the number of beds in any bed category available for use at the
Facility (except for changes in the number of certified distinct part beds made
for reimbursement maximization purposes), and (d) the patient and/or child care
services that are offered at the Facility.
23.2 Notice of Litigation, Potential Event of Default, Etc. Tenant
shall give prompt notice to Landlord of any litigation or any administrative
proceeding to which it may hereafter become a party which involves a potential
liability equal to or greater than $250,000, or which may otherwise result in
any material adverse change in the business, operations, property, prospects,
results of operation or condition, financial or other, of Tenant. Forthwith upon
Tenant obtaining knowledge of any Default or Event of Default, or any event or
condition that would be required to be disclosed in a current report filed by
Tenant on Form 8-K or in Part II of a quarterly report on Form 10-Q if Tenant
were required to file such reports under the Securities Exchange Act of 1934, as
amended, Tenant shall give Landlord notice thereof, which notice shall set forth
in reasonable detail the nature and period of existence thereof and what action
Tenant has taken or is taking or proposes to take with respect thereto.
23.3 Management of Leased Property. Tenant shall not enter into any
management or similar agreement in respect of the Leased Property without the
express prior written consent of Landlord.
23.4 Distributions, Payments to Affiliated Persons, Etc. Tenant will
not declare, order, pay or make, directly or indirectly, any distribution or any
payment to any Affiliated Person as to Tenant (including payments in the
ordinary course of business and payment pursuant to management agreements with
any such Affiliated Person) or set apart any sum or property therefor, or agree
to do so, if, at the time of such proposed action, or immediately after giving
effect thereto, any event or condition shall exist which constitutes a Default
or an Event of Default.
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ARTICLE 24
MISCELLANEOUS
24.1 No Waiver. No failure by Landlord 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.
24.2 Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Landlord, 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 Landlord or Tenant of any one
or more of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Landlord or Tenant of any or all of such other rights,
powers and remedies.
24.3 Acceptance of Surrender. No surrender to Landlord of this Lease or
of the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Landlord and no
act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
24.4 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (b) the fee estate or ground
landlord's interest in the Leased Property.
24.5 Conveyance by Landlord. If Landlord or any successor owner of the
Leased Property shall convey the Leased Property in accordance with the terms
hereof other than as security for a debt, and the grantee or transferee of the
Leased Property shall expressly assume all obligations of Landlord hereunder
arising or accruing from and after the date of such conveyance or transfer and
shall be reasonably capable of performing the obligations of Landlord hereunder,
Landlord or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of Landlord under this
Lease arising or accruing from and after the date of such conveyance or other
transfer as
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to the Leased Property and all such future liabilities and obligations shall
thereupon be binding upon the new owner.
24.6 Quiet Enjoyment. So long as Tenant shall pay the Rent as the same
becomes due and shall substantially comply with all of the terms of this Lease
and perform its obligations hereunder, Tenant shall peaceably and quietly have,
hold and enjoy the Leased Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or
hereafter consented to by Tenant. Except as otherwise provided in this Lease, no
failure by Landlord 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 Landlord as a result of a breach by
Landlord of the covenant of quiet enjoyment contained in this Section.
24.7 Landlord's Liability. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK
ONLY TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION. Tenant, its successors and assigns, shall not assert nor seek to
enforce any claim for breach of this Lease against any of Landlord's assets
other than Landlord's interest in the Leased Property and in the rents, issues
and profits thereof, and Tenant agrees to look solely to such interest for the
satisfaction of any liability or claim against Landlord under this Lease, it
being specifically agreed that in no event whatsoever shall Landlord (which term
shall include, without limitation, any general or limited partner, trustees,
beneficiaries, officers, directors, or stockholders of Landlord) ever be
personally liable for any such liability. In no event shall Landlord ever be
liable to Tenant for any indirect or consequential damages.
24.8 Landlord's Consent. Where provisions are made in this Lease for
Landlord's consent and Landlord shall fail or refuse to give such consent,
Tenant shall not be entitled to any damages for any withholding by Landlord of
its consent, it being intended
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that Tenant's sole remedy shall be an action for specific performance or
injunction, and that such remedy shall be available only in those cases where
Landlord has expressly agreed in writing not to unreasonably withhold its
consent.
24.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Lease. However, Landlord 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 reference to this Lease, and all options
contained herein, shall be made. Tenant shall pay all costs and expenses of
recording such memorandum of this Lease.
24.10 Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Lease shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Lease upon
the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Lease a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
Health and Rehabilitation Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attn: Lena G. Goldberg, Esq.
[Telecopier No. (617) 338-2880]
<PAGE>
-68-
if to Tenant to:
Connecticut Subacute Corporation II
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. Mark Finklestein
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attn: Lena G. Goldberg, Esq.
[Telecopier No. (617) 338-2880]
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time
to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address
any other address within the United States of America.
24.11 Construction. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Tenant or Landlord
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 thereof
shall be invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate 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 signed by the party
to be charged. All the terms and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. The headings in this Lease are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof. This Lease
represents the entire agreement among the parties and amends and restates the
Original Leases in their entirety. This Lease may not be amended or modified in
any respect except by the written agreement of Landlord and Tenant.
24.12 Governing Law. This Lease shall be interpreted, construed,
applied and enforced in accordance with the laws of the State applicable to
contracts between residents of the State which are to be performed entirely
within the State, regardless
<PAGE>
-69-
of (i) where this Lease is executed or delivered; or (ii) where any payment or
other performance required by this Lease is made or required to be made; or
(iii) where any breach of any provision of this Lease occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principle
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State; or (vii) any combination of the
foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Lease may be brought and prosecuted in such court or courts located in the
State as is provided by law; and the parties consent to the jurisdiction of said
court or courts located in the State and to service of process by registered
mail, return receipt requested, or by any other manner provided by law.
INTENTIONALLY DELETED
IN WITNESS WHEREOF, the parties have executed this Lease, as a sealed
instrument, as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST
By: /s/ John G. Murray
Its: Treasurer
TENANT:
CONNECTICUT SUBACUTE CORPORATION II
By: /s/ Barry M. Portnoy
Secretary
<PAGE>
EXHIBIT A
Other Leases
[See attached copy.]
<PAGE>
EXHIBIT B
Permitted Encumbrances
[See attached copy.]
<PAGE>
EXHIBIT C
The Land
[See attached copy.]
<PAGE>
Omitted Exhibits
----------------
The following exhibits to the Lease Agreement have been omitted:
Exhibit Letter Exhibit Title
- -------------- -------------
A Other Leases
B Permitted Encumbrances
C The Land
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibits to the Securities and Exchange Commission upon request.
<PAGE>
EXHIBIT D
Minimum Rent
[See attached copy.]
<PAGE>
EXHIBIT D
Monthly Rent Allocation
Cheshire, Connecticut 83,390
<PAGE>
SCHEDULE TO EXHIBIT 10.39
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Lease Agreements, which are substantially identical in all material respects to
the Lease Agreement filed herewith, are omitted. The following list sets forth
the material differences in the Leased Premises and Monthly Rent Allocation.
Leased Premises Monthly Rent Allocation
- ------------------------------------------------------------------
Waterbury, Connecticut $104,238
New Haven, Connecticut $156,357
EXHIBIT 10.40
GUARANTY
February 11, 1994
Health and Rehabilitation Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
Re: Leases dated February 11, 1994, with
respect to certain premises located in
Waterbury, Cheshire and New Haven, Connecticut
Ladies and Gentlemen:
The undersigned, Horizon Healthcare Corporation, a Delaware corporation
(the "Guarantor"), hereby agrees with Health and Rehabilitation Properties
Trust, a Maryland real estate investment trust (the "Landlord"), as follows:
1. Reference to Agreements, Etc. Reference is made to the Leases of
even date (the "Leases"), between the Landlord and Connecticut Subacute
Corporation II, a Delaware corporation (the "Tenant"), pursuant to which the
Landlord has agreed to lease certain premises (as more particularly described in
the Leases) to the Tenant. Reference is further made to that certain Management
Agreement of even date (the "Management Agreement"), pursuant to which the
Guarantor will manage the premises demised under the Leases for and on behalf of
the Tenant. Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to such terms in the Leases.
2. Guaranteed Obligations. For purposes of this Agreement, the term
"Guaranteed Obligations" shall mean the payment of each and every monetary
obligation of the Tenant under the Leases accruing prior to the expiration of
the term of the Management Agreement or the sooner termination thereof (unless
such termination results from the occurrence of an Event of Default (as defined
therein) by the Guarantor under the Management Agreement.
3. Representations and Covenants. The Guarantor represents, warrants,
covenants and agrees that:
<PAGE>
-2-
3.1. Performance of Covenants and Agreements. The Guarantor
will use best efforts to cause the Tenant duly and punctually to
perform all of the monetary obligations under the Leases.
3.2. Validity of Agreement. The Guarantor has duly and validly
executed and delivered this Agreement; this Agreement constitutes the
legal, valid and binding obligation of the Guarantor, enforceable
against the Guarantor in accordance with its terms; and the execution,
delivery and performance of this Agreement have been duly authorized by
all requisite action of the Guarantor and such execution, delivery and
performance by the Guarantor will not result in any breach of the
terms, conditions or provisions of, or conflict with or constitute a
default under, or result in the creation of any lien, charge or
encumbrance upon any of the property or assets of the Guarantor
pursuant to the terms of, any indenture, mortgage, deed of trust, note,
other evidence of indebtedness, agreement or other instrument to which
the Guarantor may be a party or by which the Guarantor or any property
or assets of the Guarantor may be bound, or violate any provision of
law, or any applicable order, writ, injunction, judgement or decree of
any court or any order or other public regulation of any governmental
commission, bureau or administrative agency.
3.3. Payment of Expenses. The Guarantor agrees, as principal
obligor and not as a guarantor only, to pay to the Landlord forthwith
upon demand, in immediately available Federal funds, all costs and
expenses (including court costs and reasonable legal expenses) incurred
or expended by the Landlord in connection with the enforcement of this
Agreement, together with interest on amounts recoverable under this
Agreement from the time such amounts become due until payment at the
Overdue Rate. The Guarantor's covenants and agreements set forth in
this Section 3.3 shall survive the termination of this Agreement.
3.4. Notices. The Guarantor shall promptly give notice to the
Landlord of any event which might reasonably result in a material
adverse change in the financial condition of the Guarantor.
3.5. Reports. Within one hundred twenty (120) days after the
end of each fiscal year of the Guarantor, the Guarantor shall promptly
provide to the Landlord copies of the audited financial statements of
the Guarantor, prepared in accordance with generally accepted
accounting principles, consistently applied, for the preceding fiscal
year.
<PAGE>
-3-
3.6. Legal Existence. The Guarantor shall do or cause to be
done all things necessary to preserve and keep in full force and effect
its corporate existence; provided, however, that nothing in this
subsection shall prevent a consolidation, combination or merger of the
Guarantor with any other person or entity.
3.7. Financial Statements, Etc. The financial statements of
the Guarantor previously delivered to the Landlord fairly present the
financial condition of the Guarantor in accordance with generally
accepted accounting principles consistently applied and there has been
no material adverse change from the date thereof through the date
hereof.
4. Guarantee. The Guarantor hereby unconditionally guarantees that the
Guaranteed Obligations shall be paid in full when due and payable under the
Leases. This guarantee is a guarantee of payment and not of collectibility and
is absolute and in no way conditional or contingent. In case any part of the
Guaranteed Obligations which shall not have been paid when due and payable, the
Guarantor shall, within ten (10) days after receipt of notice from the Landlord,
pay or cause to be paid to the Landlord the amount thereof as is then due and
payable and unpaid (including interest and other charges, if any, due thereon
through the date of payment in accordance with the applicable provisions of the
Leases).
5. Unenforceability of Guaranteed Obligations, Etc. Until the
termination of this Agreement, as provided in Section 10, if the Tenant is for
any reason under no legal obligation to discharge any of the Guaranteed
Obligations, or if any moneys included in the Guaranteed Obligations have become
unrecoverable from the Tenant by operation of law or for any other reason,
(including, without limitation, the invalidity or irregularity in whole or in
part of any Guaranteed Obligation or of the Leases or any limitation on the
liability of the Tenant thereunder or any limitation on the method or terms of
payment thereunder which may now or hereafter be caused or imposed in any manner
whatsoever), the guarantees contained in this Agreement shall nevertheless
remain in full force and effect and shall be binding upon the Guarantor to the
same extent as if the Guarantor at all times had been the Tenant under the
Leases.
6. Additional Guarantees. This Agreement shall be in addition to any
other guarantee or other security for the Guaranteed Obligations, and it shall
not be prejudiced or rendered unenforceable by the invalidity of any such other
guarantee or security or by any waiver, amendment, release or modification
thereof.
<PAGE>
-4-
7. Consents and Waivers, Etc. The Guarantor hereby acknowledges receipt
of correct and complete copies of the Leases, and consents to all of the terms
and provisions thereof, as the same may be from time to time hereafter amended
or changed in accordance therewith, and waives (a) presentment, demand for
payment, and protest of nonpayment, of any principal of or interest on any of
the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of
diligence, presentment, demand and protest, (c) notice of any default hereunder
and any default, breach or nonperformance or Event of Default with respect to
any of the Guaranteed Obligations under the Leases, (d) notice of the terms,
time and place of any private or public sale of collateral held as security for
the Guaranteed Obligations, (e) demand for performance or observance of, and any
enforcement of any provision of, or any pursuit or exhaustion of rights or
remedies against the Tenant or any other guarantor of the Guaranteed
Obligations, under or pursuant to the Leases, or any agreement directly or
indirectly relating thereto and any requirements of diligence or promptness on
the part of the holders of the Guaranteed Obligations in connection therewith,
and (f) to the extent the Guarantor lawfully may do so, any and all demands and
notices of every kind and description with respect to the foregoing or which may
be required to be given by any statute or rule of law and any defense of any
kind which it may now or hereafter have with respect to this Agreement, or the
Leases or the Guaranteed Obligations.
8. No Impairment, Etc. The obligations, covenants, agreements and
duties of the Guarantor under this Agreement shall not be affected or impaired
by any assignment or transfer in whole or in part of any of the Guaranteed
Obligations or the Landlord's interest under the Leases without notice to the
Guarantor, or any waiver by the Landlord or any holder of any of the Guaranteed
Obligations or by the holders of all of the Guaranteed Obligations of the
performance or observance by the Tenant or any other guarantor of any of the
agreements, covenants, terms or conditions contained in the Guaranteed
Obligations or the Leases or any indulgence in or the extension of the time for
payment by the Tenant or any other guarantor of any amounts payable under or in
connection with the Guaranteed Obligations or the Leases or any other instrument
or agreement relating to the Guaranteed Obligations or of the time for
performance by the Tenant or any other guarantor of any other obligations under
or arising out of any of the foregoing or the extension or renewal thereof, or
the modification or amendment (whether material or otherwise) of any duty,
agreement or obligation of the Tenant or any other guarantor set forth in any of
the foregoing, or the voluntary or involuntary sale or other disposition of all
or substantially all the assets of the Tenant or any other guarantor or
insolvency, bankruptcy, or other similar proceedings affecting the Tenant or any
other guarantor or any assets of the Tenant or any such other guarantor, or the
<PAGE>
-5-
release or discharge of the Tenant or any such other guarantor from the
performance or observance of any agreement, covenant, term or condition
contained in any of the foregoing without the consent of the holders of the
Guaranteed Obligations by operation of law, or any other cause, whether similar
or dissimilar to the foregoing.
9. Reimbursement, Subrogation, Etc. Subject to the applicable
provisions of the Management Agreement, if any, the Guarantor hereby covenants
and agrees that the Guarantor shall not enforce or otherwise exercise any rights
of reimbursement, subrogation, contribution or other similar rights against the
Tenant or any other person with respect to the Guaranteed Obligations prior to
the payment in full of the monetary obligations of the Tenant under the Leases.
Until all monetary obligations of the Tenant under the Leases shall have been
paid in full, the Guarantor shall have no right of subrogation, and the
Guarantor waives any defense it may have based upon any election of remedies by
the Landlord which destroys the Guarantor's subrogation rights or the
Guarantor's rights to proceed against the Tenant for reimbursement, (including,
without limitation, any loss of rights the Guarantor may suffer by reason of any
rights, powers or remedies of the Tenant in connection with any anti-deficiency
laws or any other laws limiting, qualifying or discharging the indebtedness to
the Landlord). Until all monetary obligations of the Tenant pursuant to the
Leases shall have been paid in full, the Guarantor further waives any right to
enforce any remedy which the Landlord now has or may in the future have against
the Tenant, any other guarantor or any other person and any benefit of, or any
right to participate in, any security whatsoever now or in the future held by
the Landlord.
10. Defeasance. This Agreement shall terminate at such time as the
Guaranteed Obligations have been paid in full and all other obligations of the
Guarantor to the Landlord under Section 3.3 of this Agreement have been
satisfied in full; provided, however, if at any time, all or any part of any
payment applied on account of the Guaranteed Obligations is or must be rescinded
or returned for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of the Tenant), this Agreement, to the
extent such payment is or must be rescinded or returned, shall be deemed to have
continued in existence notwithstanding any such termination.
11. Notices. Any notice or demand under this Agreement shall be given
in the manner provided in Section 24.10 of the Leases, and shall be addressed to
the party to receive such notice at its address as follows: (a), in the case of
the Guarantor, addressed to the Guarantor, 6001 Indian School Road, NE, Fl. 5,
Albuquerque, NM 87110, Attn: Neal Elliott, Telecopy No. (505) 881-5097, with a
copy to Horizon Healthcare
<PAGE>
-6-
Corporation, 6001 Indian School Road, NE, Fl. 5, Albuquerque, NM 87110, Attn:
Scot Sauder, Esq., Telecopy No. (505) 881-5097, and (b), in the case of the
Landlord, addressed to the Landlord, 400 Centre Street, Newton, Massachusetts
02158, Attn: Mr. David J. Hegarty, Telecopy No. (617) 332-2261, with a copy to
Sullivan & Worcester, One Post Office Square, Boston, Massachusetts 02109, Attn:
Lena G. Goldberg, Esq., Telecopy No. (617) 338-2880, or in the case of any
party, to such other address as such party may have furnished by written notice
given as herein provided.
12. Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, including without limitation the holders,
from time to time, of the Guaranteed Obligations; and all representations,
warranties, covenants and agreements by or on behalf of the Guarantor which are
contained in this Agreement shall inure to the benefit of the Landlord's
successors and assigns, including without limitation said holders, whether so
expressed or not.
13. Applicable Law. This Agreement and the Leases and any other
instruments executed and delivered to evidence, complete or perfect the
transactions contemplated hereby and thereby shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts, regardless of (i) where any
such instrument is executed or delivered; or (ii) where any payment or other
performance required by any such instrument is made or required to be made; or
(iii) where any breach of any provision of any such instrument occurs, or any
cause of action otherwise accrues; or (iv) where any action or other proceeding
is instituted or pending; or (v) the nationality, citizenship, domicile,
principal place of business, or jurisdiction of organization or domestication of
any party; or (vi) whether the laws of the forum jurisdiction otherwise would
apply the laws of a jurisdiction other than The Commonwealth of Massachusetts;
or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as may be provided by law; and the parties
consent to the jurisdiction of said court or courts located in The Commonwealth
of Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
14. Modification of Agreement. No modification or waiver of any
provision of this Agreement, nor any consent to any departure by the Guarantor
therefrom, shall in any event be
<PAGE>
-7-
effective unless the same shall be in writing and signed by the Landlord, and
such modification, waiver or consent shall be effective only in the specific
instances and for the purpose for which given. No notice to or demand on the
Guarantor in any case shall entitle the Guarantor to any other or further notice
or demand in the same, similar or other circumstances.
15. Waiver of Rights by Landlord. Neither any failure nor any delay on
the Landlord's part in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise or the exercise of any
other right, power or privilege.
16. Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, but this Agreement
shall be reformed and construed and enforced to the maximum extent permitted by
applicable law.
17. Entire Contract. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the subject matter hereof.
18. Headings; Counterparts. Headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument,
and in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.
19. Remedies Cumulative. No remedy herein conferred upon the Landlord
is intended to be exclusive of any other remedy, and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or otherwise.
20. Landlord's Liability. THE DECLARATION OF TRUST ESTABLISHING THE
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE LANDLORD SHALL BE HELD
TO ANY PERSONAL LIABILITY,
<PAGE>
-8-
JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE LANDLORD. ALL
PERSONS DEALING WITH THE LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF
THE LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
21. Guarantor Acknowledgements. The Guarantor acknowledges that the
transactions contemplated by the Leases are of material and substantial benefit
to the Guarantor. The Guarantor further acknowledges that the execution and
delivery of this Guaranty is a substantial and material inducement to the
Landlord to enter into the Leases and to consummate certain other transactions
on or about the date hereof with the Guarantor.
WITNESS the execution hereof under seal as of the date above first
written.
HORIZON HEALTHCARE CORPORATION
By: /s/ Paul Elliott
Its President
EXHIBIT 10.41
CONSENT, ASSUMPTION AND GUARANTY AGREEMENT
THIS CONSENT, ASSUMPTION AND GUARANTY AGREEMENT (this "Agreement") is
entered into as of this 31st day of December, 1997, by and among (i) INTEGRATED
HEALTH SERVICES, INC., a Delaware corporation ("IHS"), (ii) IHS ACQUISITION NO.
108, INC., IHS ACQUISITION NO. 112, INC., IHS ACQUISITION NO. 113, INC., IHS
ACQUISITION NO. 135, INC., IHS ACQUISITION NO. 148, INC., IHS ACQUISITION NO.
152, INC., IHS ACQUISITION NO. 153, INC., IHS ACQUISITION NO. 154, INC., IHS
ACQUISITION NO. 155, INC. AND IHS ACQUISITION NO. 175, INC., each a Delaware
corporation (collectively, the "Acquisition Subsidiaries"), (iii) HEALTHSOUTH
CORPORATION, a Delaware corporation ("HealthSouth"), (iv) HORIZON HEALTHCARE
CORPORATION, a Delaware corporation ("Horizon"), (v) HEALTH AND RETIREMENT
PROPERTIES TRUST, a Maryland real estate investment trust (together with its
successors and assigns, "HRP"), and (vi) INDEMNITY COLLECTION CORPORATION, a
Delaware corporation ("ICC").
W I T N E S S E T H:
WHEREAS, pursuant to certain documents and agreements listed on Exhibit
A to this Agreement (such documents and agreements, as amended from time to
time, and, together with any other documents or agreements executed in
connection therewith or incidental thereto, collectively, the "Transaction
Documents"), Horizon incurred certain obligations to and made certain
undertakings and covenants for the benefit of HRP; and
WHEREAS, HealthSouth has guaranteed the obligations of Horizon to HRP
under the Transaction Documents; and
WHEREAS, IHS and the Acquisition Subsidiaries wish to acquire the
interests of Horizon under the Transaction Documents; and
WHEREAS, the Transaction Documents require that Horizon, HealthSouth,
IHS and the Acquisition Subsidiaries obtain HRP's prior approval of such
acquisition; and
WHEREAS, HRP is willing to grant such approval on the condition that
Horizon, HealthSouth, IHS and the Acquisition Subsidiaries enter into this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration,
<PAGE>
-2-
the mutual receipt and legal sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. (a) Capitalized terms used and not otherwise defined in
this Agreement shall have the meanings ascribed to such terms in the Transaction
Documents.
(b) "Assumed Obligations" shall mean, with respect to each of IHS and
each of the Acquisition Subsidiaries, all obligations and liabilities arising
under the Transaction Documents relating to the property or properties set forth
opposite its name on Exhibit B to this Agreement.
(c) "Guaranteed Obligations" shall mean, with respect to IHS, the
payment and performance of each and every obligation of the Acquisition
Subsidiaries to HRP, and, with respect to the Acquisition Subsidiaries, the
payment and performance of each and every obligation of IHS and each other
Acquisition Subsidiary to HRP under the Transactions Documents, whether now
existing or hereafter arising, and including, without limitation, payment of the
principal of, and all interest and other charges due on, all notes to HRP and
the payment of the full amount of the rent and other charges payable under all
leases with HRP if and to the extent such obligations are not Assumed
Obligations.
(d) "Licensure Date" shall mean, with respect to any Facility located
in Massachusetts, the date IHS or any Acquisition Subsidiary shall obtain from
the Department of Health of The Commonwealth of Massachusetts an unconditional
license to operate the Facilities located in Massachusetts and any applicable
notice and/or appeal periods have lapsed.
(e) "Licensing Deadline" shall mean the date one hundred eighty (180)
days after the date of this Agreement.
2. Assumption of Assumed Obligations. Each of IHS and the Acquiring
Subsidiaries hereby assumes its respective Assumed Obligations. In any case
where more than one party shall be assuming any of the Assumed Obligations, such
Assumed Obligations shall be the joint and several obligation of each such
party.
3. Representations and Covenants of IHS and Acquisition Subsidiaries.
IHS and the Acquisition Subsidiaries, jointly and severally, represent, warrant,
covenant and agree that:
(a) IHS and the Acquisition Subsidiaries shall duly and punctually
perform all of their covenants and agreements relative to their respective
Assumed Obligations set forth in the Transaction Documents.
<PAGE>
-3-
(b) Each of the IHS and the Acquisition Subsidiaries has duly and
validly executed and delivered this Agreement; this Agreement constitutes the
legal, valid and binding obligation of IHS and the Acquisition Subsidiaries,
enforceable against IHS and the Acquisition Subsidiaries in accordance with its
terms; and the execution, delivery and performance of this Agreement have been
duly authorized by all requisite action of IHS and the Acquisition Subsidiaries
and such execution, delivery and performance by IHS and the Acquisition
Subsidiaries will not result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any of the property or assets
of IHS or any of the Acquisition Subsidiaries pursuant to the terms of, any
indenture, mortgage, deed of trust, note, other evidence of indebtedness,
agreement or other instrument to which IHS and/or any of the Acquisition
Subsidiaries may be a party or by which any of their property or assets may be
bound, or violate any provision of law, or any applicable order, writ,
injunction, judgement or decree of any court or any order or other public
regulation of any governmental commission, bureau or administrative agency
applicable to IHS and/or any of the Acquisition Subsidiaries.
(c) Each of IHS and the Acquisition Subsidiaries agrees, as principal
obligor and not as Guarantor only, to pay to HRP forthwith, upon demand, in
immediately available Federal funds, all costs and expenses (including, without
limitation, court costs and reasonable legal expenses) incurred or expended by
HRP in connection with the enforcement of this Agreement, together with interest
on amounts recoverable under this Agreement from the time such amounts become
due until payment at the Default Rate. Each of IHS and the Acquisition
Subsidiaries shall, upon demand, pay to HRP all costs and expenses (including,
without limitation, reasonable legal expenses) incurred by HRP in connection
with the preparation and negotiation of this Agreement. Each of IHS's and the
Acquisition Subsidiaries' covenants and agreements set forth in this section
shall survive the termination of this Agreement.
(d) IHS and the Acquisition Subsidiaries shall promptly give notice to
HRP of any event which might reasonably result in a material adverse change in
the financial condition of any of them.
(e) IHS shall promptly provide to HRP, with respect to IHS, each of the
financial reports, certificates and other documents required of any person under
the Transaction Documents.
(f) IHS and the Acquisition Subsidiaries shall do or cause to be done
all things necessary to preserve and keep in full force and effect each of their
respective corporate existences
<PAGE>
-4-
and shall not suffer or permit any change in control of, or transfer of
interests in, IHS or the Acquisition Subsidiaries without the prior written
consent of HRP, which consent may be given or withheld by HRP in HRP's sole
discretion, for any reason or for no reason at all; provided, however, that (x)
change of control of IHS shall not be deemed to occur by reason of the election
of directors of IHS unless more than a majority of the directors of IHS are
changed in a period of twelve (12) consecutive months; (y) a transfer of
interests in IHS shall not be deemed to occur by reason of public trading in
IHS's securities unless fifty percent (50%) or more of the direct or indirect
ownership interests of IHS come under control of one or more Affiliated Persons
or Entities or Persons or Entities acting in concert; and (z) no consent shall
be required with respect to IHS if the successor or surviving Person has a
tangible net worth, determined in accordance with GAAP, equal to or greater than
One Billion Dollars ($1,000,000,000).
(g) There shall be no material adverse change in the financial
condition of IHS or any of the Acquisition Subsidiaries unless and until all of
the Guaranteed Obligations have been satisfied in full.
4. Guarantee. Each of IHS and the Acquisition Subsidiaries hereby,
jointly and severally, unconditionally guarantees that the Guaranteed
Obligations which are monetary obligations shall be paid in full when due and
payable, whether upon demand, at the stated or accelerated maturity thereof or
upon any mandatory or voluntary prepayment pursuant to any Transaction Document,
or otherwise, and that the Guaranteed Obligations which are performance
obligations shall be fully performed at the times and in the manner such
performance is required by the Transaction Documents. With respect to the
Guaranteed Obligations which are monetary obligations, this guarantee is a
guarantee of payment and not of collectibility and is absolute and in no way
conditional or contingent. In case any part of the Guaranteed Obligations shall
not have been paid when due and payable or performed at the time performance is
required, IHS and the Acquisition Subsidiaries shall, within five (5) days after
receipt of notice from HRP, pay or cause to be paid to HRP the amount thereof as
is then due and payable and unpaid (including interest and other charges, if
any, due thereon through the date of payment in accordance with the applicable
provisions of the Transaction Documents) or perform or cause to be performed
such obligations in accordance with the Transaction Documents.
5. Set-Off. Regardless of the adequacy of any collateral or other means
of obtaining payment of the Guaranteed Obligations, HRP may, upon the occurrence
and during the continuance of any monetary Event of Default by IHS of its
guaranty obligations pursuant to this Agreement or any monetary
<PAGE>
-5-
event of default of IHS pursuant to that certain guaranty of obligations of
Community Care of America, Inc. and its Affiliated Persons to HRP, with or
without notice to IHS and/or the Acquisition Subsidiaries, set off the whole or
any portion or portions of any or all sums held by HRP and/or credited by or due
from HRP to IHS or any of its Affiliated Persons against amounts payable under
this Agreement and/or the Transaction Documents.
6. Unenforceability of Guaranteed Obligations, Etc. If any of IHS or
the Acquisition Subsidiaries is for any reason under no legal obligation to
discharge any of the Guaranteed Obligations, or if any other moneys included in
the Guaranteed Obligations have become unrecoverable from any obligor by
operation of law or for any other reason, including, without limitation, the
invalidity or irregularity in whole or in part of any Guaranteed Obligation or
of any Transaction Document or any limitation on the liability of any obligor
thereunder or any limitation on the method or terms of payment thereunder which
may now or hereafter be caused or imposed in any manner whatsoever, the
guarantees contained in this Agreement shall nevertheless remain in full force
and effect and shall be binding upon IHS and the Acquisition Subsidiaries to the
same extent as if such party at all times had been the principal joint and
several debtors on all such Guaranteed Obligations.
7. Additional Guarantees, Etc. The undertakings of IHS and the
Acquisition Subsidiaries pursuant to this Agreement shall be in addition to any
other guarantee or other security for the Guaranteed Obligations, and it shall
not be prejudiced or rendered unenforceable by the invalidity of any such other
guarantee or security or by any waiver, amendment, release or modification
thereof. In the event of any conflict between the provisions of this Agreement
and the provisions of any Transaction Document, the provisions of this Agreement
shall control.
8. Consents and Waivers, Etc. Each of IHS and the Acquisition
Subsidiaries hereby acknowledges receipt of correct and complete copies of each
of the Transaction Documents, and consent to all of the terms and provisions
thereof, as the same may be from time to time hereafter amended or changed in
accordance therewith, and waive, in their respective capacities as guarantors
but not as primary obligors, (a) presentment, demand for payment, and protest of
nonpayment, of any principal of or interest on any of the Guaranteed
Obligations, (b) notice of acceptance of this Agreement and of diligence,
presentment, demand and protest, (c) notice of any default hereunder and any
default, breach or nonperformance or Event of Default under any of the
Guaranteed Obligations or the Transaction Documents, (d) notice of the terms,
time and place of any private or public sale of collateral held as security for
the Guaranteed Obligations,
<PAGE>
-6-
(e) demand for performance or observance of, and any enforcement of any
provision of, or any pursuit or exhaustion of rights or remedies against any
obligor or any other guarantor of the Guaranteed Obligations, under or pursuant
to the Transaction Documents, or any agreement directly or indirectly relating
thereto and any requirements of diligence or promptness on the part of the
holders of the Guaranteed Obligations in connection therewith, and (f) to the
extent IHS and the Acquisition Subsidiaries lawfully may do so, any and all
demands and notices of every kind and description with respect to the foregoing
or which may be required to be given by any statute or rule of law and any
defense of any kind which it may now or hereafter have with respect to this
Agreement, or any of the Transaction Documents or the Guaranteed Obligations.
9. No Impairment, Etc. The obligations, covenants, agreements and
duties of IHS and the Acquisition Subsidiaries under this Agreement shall not be
affected or impaired by any assignment or transfer in whole or in part of any of
the Guaranteed Obligations without notice to any of IHS and the Acquisition
Subsidiaries, or any waiver by HRP or any holder of any of the Guaranteed
Obligations or by the holders of all of the Guaranteed Obligations of the
performance or observance by any obligor or any other guarantor of any of the
agreements, covenants, terms or conditions contained in the Guaranteed
Obligations or the Transaction Documents or any indulgence in or the extension
of the time for payment by any obligor or any other guarantor of any amounts
payable under or in connection with the Guaranteed Obligations or the
Transaction Documents or any other instrument or agreement relating to the
Guaranteed Obligations or of the time for performance by any obligor or any
other guarantor of any other obligations under or arising out of any of the
foregoing or the extension or renewal thereof, or the modification or amendment
(whether material or otherwise) of any duty, agreement or obligation of any
obligor or any other guarantor set forth in any of the foregoing, or the
voluntary or involuntary sale or other disposition of all or substantially all
the assets of any obligor or any other guarantor or insolvency, bankruptcy, or
other similar proceedings affecting any obligor or any other guarantor or any
assets of any obligor or any such other guarantor, or the release or discharge
of any obligor or any such other guarantor from the performance or observance of
any agreement, covenant, term or condition contained in any of the foregoing
without the consent of the holders of the Guaranteed Obligations by operation of
law, or any other cause, whether similar or dissimilar to the foregoing.
10. Reimbursement, Subrogation, Etc. Each of IHS and the Acquisition
Subsidiaries hereby covenant and agree that it will not enforce or otherwise
exercise any rights of reimbursement, subrogation, contribution or other similar
rights against any
<PAGE>
-7-
other person with respect to the Guaranteed Obligations prior to the payment in
full of all amounts owing under the Transaction Documents, and, until all
indebtedness to HRP shall have been paid in full, none of IHS or the Acquisition
Subsidiaries shall have any right of subrogation, and waives any defense it may
have based upon any election of remedies by HRP which destroys its subrogation
rights or its rights to proceed against any other person for reimbursement,
including, without limitation, any loss of rights it may suffer by reason of any
rights, powers or remedies of any other person in connection with any
anti-deficiency laws or any other laws limiting, qualifying or discharging the
indebtedness to HRP. Until all obligations pursuant to the Transaction Documents
shall have been paid and satisfied in full, each of IHS and the Acquisition
Subsidiaries further waive any right to enforce any remedy which any of them now
has or may in the future have against the others, or any other guarantor, and
hereby waive any benefit of, or any right to participate in, any security
whatsoever now or in the future held by HRP.
11. Defaults. IHS and the Acquisition Subsidiaries acknowledge and
agree that any default under this Agreement shall be an Event of Default under
the Transaction Documents and that any Event of Default under any Transaction
Document shall constitute and Event of Default under this Agreement and under
every other Transaction Document. All collateral given to HRP to secure any
obligation under any Transaction Document shall serve as collateral for all
obligations under all Transaction Documents; provided, however, that, if IHS or
any Acquisition Subsidiary shall satisfy its obligations under any Transaction
Document, including the purchase of any of the leased properties pursuant to the
terms of the Transaction Documents or the prepayment of mortgage indebtedness
with respect to any of the mortgaged properties pursuant to the terms of any
Transaction Document, the applicable Transaction Documents shall terminate as to
such properties in accordance with their respective terms, any collateral
provided in connection therewith shall be released in accordance with the terms
of the applicable Transaction Document.
12. Security Deposits. HRP represents that, as of the date hereof, it
holds no cash security for any obligations under the Transaction Documents.
13. Consent. In reliance on the undertakings set forth in this
Agreement, and provided that IHS, IHS Acquisition No. 175, Inc., and Connecticut
Subacute Corporation II shall enter into an agreement in the form attached
hereto as Exhibit C, HRP hereby consents to the acquisition of the interests of
Horizon under the Transaction Documents by IHS and the Acquisition Subsidiaries
as set forth in Exhibit B. If and to the extent HRP's consent, as mortgagee, may
be required for the transfer to IHS or its
<PAGE>
-8-
Affiliated Persons of Horizon's interests with respect to certain facilities
known as Ridge Crest Care Center, Warren, Ohio and/or San Jacinto Nursing Home,
Deer Park, Texas, HRP hereby grants such consent.
14. Subleases and Management Agreements. Notwithstanding anything to
the contrary set forth in the Transaction Documents, IHS may, upon prior written
notice to HRP, enter into subleases and/or submanagement agreements with the
Acquisition Subsidiaries. Until the Licensure Date, IHS may enter into a
management agreement with Horizon with respect to the Facilities located in
Massachusetts.
15. Release of HealthSouth and Horizon. HRP hereby releases HealthSouth
and Horizon from all obligations arising under the Transaction Documents, which
accrue on or after the date hereof; provided, however, that, with respect to any
Transaction Documents which relate to Facilities located in Massachusetts, such
release shall not be effective until the Licensure Date has occurred with
respect to the subject Facility.
16. Assignment of Claims. As an inducement to HRP to grant its consent
hereunder, HealthSouth, Horizon and IHS hereby assign to ICC all their right,
title and interest in, to and under any indemnities and/or undertakings made by
New MediCo Holding Co., Inc. and/or any of its Affiliated Persons for the
benefit of Greenery Rehabilitation Group, Inc. and certain others, now known to
exist or as may hereafter become known or arise in the future, which indemnities
are currently a subject of dispute among the parties thereto (the "Assigned
Claims"). HealthSouth and Horizon represent and warrant that they have not
previously assigned, pledged or encumbered the Assigned Claims. ICC and HRP
understand that IHS may have no interest in the Assigned Claims. HealthSouth and
Horizon agree to pay (or cause to be paid) Horizon's pro rata share of all costs
and expenses (including attorneys' fees) incurred with respect to the Assigned
Claims through the date hereof (the amount due through November 30, 1997 being
$61,860.93) and ICC shall be liable for all such costs and expenses incurred
subsequent to the date hereof. Each of HealthSouth, Horizon and IHS shall, to
the extent reasonably requested by ICC, cooperate with ICC in the prosecution
and defense of the Assigned Claims and shall take such actions and execute such
documents and agreements as ICC may reasonably require in connection with the
Assigned Claims, including, without limitation, making personnel available and
providing access to books and records. If HealthSouth, Horizon or IHS believe
any request by ICC is unreasonable, they shall give prompt written notice
thereof to ICC. The parties shall endeavor to resolve such issue in good faith.
If they cannot reach resolution within 30 days after notice of dispute is given
to ICC, any party may submit the matter to arbitration, each party
<PAGE>
-9-
hereby agreeing to submit to the jurisdiction of any tribunal hearing issues
relating to the Assigned Claims. Failure of IHS or its Affiliated Persons so to
cooperate and the continuance thereof for 10 days after notice thereof shall
constitute an Event of Default under the Transaction Documents.
17. Term Extensions. The Fixed Term and maturity date of each of the
Transaction Documents, other than those with respect to the Facility located in
Louisiana, is hereby extended to January 1, 2006.
18. Licensing Deadline. IHS and the Acquisition Subsidiaries shall use
best efforts to cause the Licensure Date with respect to all Massachusetts
Facilities to occur on or before the Licensing Deadline. If the Licensure Date
shall not occur with respect to any Facility prior to the Licensing Deadline and
provided IHS shall given written notice thereof to HRP prior to the Licensing
Deadline, IHS shall be automatically released with respect to the obligations
arising under any Transaction Document with respect to the affected Facility. In
the event IHS shall fail to give such notice, HRP shall provide IHS with a
notice inquiring as to the status of such licenses. If IHS shall advise HRP in
writing within ten (10) Business Days after receipt of such notice that the
Licensure Date has not occurred with respect to any Facility, IHS shall be
automatically released with respect to obligations arising under any Transaction
Document with respect to the affected Facility.
19. Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
<PAGE>
-10-
(c) All such notices shall be addressed,
if to HRP to:
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to IHS and/or the Acquisition Subsidiaries:
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owing Mills, MD 21117
Attn: Ms. Eleanor Harding
[Telecopier No. (410) 998-8716]
(d) By notice given as herein provided, the parties hereto and their
respective successor and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
20. Successors and Assigns. Whenever in this Agreement, any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, including without limitation the holders,
from time to time, of the Guaranteed Obligations and the Transaction Documents;
and all representations, warranties, covenants and agreements by or on behalf of
IHS and/or the Acquisition Subsidiaries which are contained in this Agreement
shall inure to the benefit of HRP's successors and assigns, including without
limitation, such holders, whether so expressed or not.
21. Applicable Law. Except as to matters regarding the internal affairs
of HRP and issues of or limitations on any personal liability of the
shareholders and trustees of HRP for obligations of HRP, as to which the laws of
the State of Maryland shall govern, this Agreement shall be interpreted,
construed,
<PAGE>
-11-
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts, regardless of (i) where any
such instrument is executed or delivered; or (ii) where any payment or other
performance required by any such instrument is made or required to be made; or
(iii) where any breach of any provision of any such instrument occurs, or any
cause of action otherwise accrues; or (iv) where any action or other proceeding
is instituted or pending; or (v) the nationality, citizenship, domicile,
principal place of business, or jurisdiction of organization or domestication of
any party; or (vi) whether the laws of the forum jurisdiction otherwise would
apply the laws of a jurisdiction other than The Commonwealth of Massachusetts;
or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as may be provided by law; and the parties
consent to the jurisdiction of said court or courts located in The Commonwealth
of Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
22. Modification of Agreement. No modification or waiver of any
provision of this Agreement, nor any consent to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
party against whom enforcement is sought, and such modification, waiver or
consent shall be effective only in the specific instances and for the purpose
for which given. No notice to or demand on the IHS and/or the Acquisition
Subsidiaries in any case shall entitle such party to any other or further notice
or demand in the same, similar or other circumstances.
23. Waiver of Rights by HRP. Neither any failure nor any delay on HRP's
part in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege. Nothing contained herein shall be deemed to waive HRP's right to
give or withhold its consent in any subsequent transaction.
<PAGE>
-12-
24. Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, but this Agreement
shall be reformed and construed and enforced to the maximum extent permitted by
applicable law.
25. Entire Contract. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the subject matter hereof.
26. Headings; Counterparts. Headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument,
and in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.
27. Remedies Cumulative. No remedy herein conferred upon HRP is
intended to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
28. NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST OF HRP PROVIDES
THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES
UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF HRP
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, HRP. ALL PERSONS DEALING WITH HRP, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF HRP FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
<PAGE>
-13-
29. Payment of Fees. IHS shall pay all attorney fees incident to the
preparation, negotiation and implementation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date above first written.
INTEGRATED HEALTH SERVICES, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 108, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 112, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 113, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 135, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 148, INC.
By: /s/
Its Executive Vice President
<PAGE>
-14-
IHS ACQUISITION NO. 152, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 153, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 154, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 155, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 175, INC.
By: /s/
Its Executive Vice President
HEALTHSOUTH CORPORATION
By: /s/
Its (Vice) President
HORIZON HEALTHCARE CORPORATION
By: /s/
Its (Vice) President
<PAGE>
-15-
HEALTH AND RETIREMENT PROPERTIES
TRUST
By: /s/ David J. Hegarty
Its President
INDEMNITY COLLECTION CORPORATION
By: /s/ David J. Hegarty
Its (Vice) President
<PAGE>
EXHIBIT A
List of Documents and Agreements
1. Promissory Note dated February 11, 1994 in the original principal
amount of $5,100,000.
2. Mortgage and Security Agreement, dated November 29, 1993, with respect
to Howell, Michigan.
3. Assignment of Leases and Rents, dated February 11, 1994, with respect
to Howell, Michigan.
4. Promissory Note, dated February 11, 1994, in the original principal
amount of $4,300,000.
5. Mortgage and Security Agreement, dated November 29, 1993, with respect
to Farmington, Michigan.
6. Assignment of Leases and Rents, dated February 11, 1994, with respect
to Farmington, Michigan.
7. Leases, dated February 11, 1994, with respect to properties located in
Hyannis, North Andover, Middleboro and Worcester, Massachusetts,
Cannonsburg, PA and Boston, MA.
8. Guarantees of Leases to Connecticut Subacute Corporation II, dated
February 11, 1994.
9. Purchase Option Agreement dated as of February 11, 1994.
10. Master Lease Document General Terms and Conditions, dated as of May 15,
1987.
11. Promissory Note, dated January 28, 1995, in the original principal
amount of $19,500,000.
12. Mortgage and Security Agreement, dated January 28, 1995, with respect
to Slidell, Louisiana.
13. Assignment of Leases and Rents, dated January 28, 1995, with respect to
Slidell, Louisiana.
14. UCC-1 Financing Statements with respect to the above.
<PAGE>
EXHIBIT B
ASSUMED OBLIGATIONS
Property Obligors
Worcester, MA IHS and
IHS Acquisition No. 155, Inc.
North Andover, MA IHS and
IHS Acquisition No. 148, Inc.
Boston, MA IHS and
IHS Acquisition No. 152, Inc.
Hyannis, MA IHS and
IHS Acquisition No. 153, Inc.
Middleboro, MA IHS and
IHS Acquisition No. 154, Inc.
Cannonsburg, PA IHS and
IHS Acquisition No. 135, Inc.
Farmington, MI IHS Acquisition No. 112, Inc.
Howell, MI IHS Acquisition No. 113, Inc.
Slidell, LA IHS Acquisition No. 108, Inc.
Clifton House,* IHS Acquisition No. 175, Inc.
New Haven, CT
Cheshire, CT* IHS Acquisition No. 175, Inc.
Waterbury, CT* IHS Acquisition No. 175, Inc.
*IHS to assume lease obligation pursuant to CSC Consent and will be only a
guarantor of the Management Contracts.
<PAGE>
EXHIBIT C
CSC Consent Agreement
[See attached copy.]
<PAGE>
CONSENT, GUARANTY AND ASSUMPTION AGREEMENT
THIS CONSENT, GUARANTY AND ASSUMPTION AGREEMENT (this "Agreement") is
entered into as of this 31st day of December 1997, by and among (i) INTEGRATED
HEALTH SERVICES, INC., a Delaware corporation ("IHS"), (ii) IHS ACQUISITION NO.
175, INC., a Delaware corporation ("Acquisition Subsidiary"), (iii) HEALTHSOUTH
CORPORATION, a Delaware corporation ("HealthSouth"), (iv) HORIZON HEALTHCARE
CORPORATION, a Delaware corporation ("Horizon"), and (v) CONNECTICUT SUBACUTE
CORPORATION II, a Delaware corporation (together with its successors and
assigns, "CSC").
W I T N E S S E T H:
WHEREAS, pursuant to certain Management Agreements, dated February 1,
1994 (as amended from time to time, collectively, the "Management Agreements"
and, together with any other documents or agreements executed in connection
therewith or incidental thereto, the "Transaction Documents"), Horizon incurred
certain obligations to and made certain undertakings and covenants for the
benefit of CSC; and
WHEREAS, HealthSouth has guaranteed the obligations of Horizon under
the Transaction Documents; and
WHEREAS, IHS and Acquisition Subsidiary wish to acquire the interest of
Horizon under the Transaction Documents; and
WHEREAS, the Transaction Documents require that Horizon, IHS and
Acquisition Subsidiary obtain CSC's prior approval of such acquisition; and
WHEREAS, CSC is willing to grant such approval on the condition that
HealthSouth, Horizon, IHS and Acquisition Subsidiary enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Definitions. (a) Capitalized terms used and not otherwise defined in
this Agreement shall have the meanings ascribed to such terms in the Transaction
Documents.
(b) "Guaranteed Obligations" shall mean the payment and performance of
each and every obligation of Acquisition
<PAGE>
-2-
Subsidiary to CSC, whether under the Transaction Documents, or otherwise,
whether now existing or hereafter arising, and including, without limitation,
the payment of the full amount of rent and other charges payable under the
Leases and all working capital required to operate the Facilities.
2. Representations and Covenants of IHS and Acquisition Subsidiary. IHS
and Acquisition Subsidiary represent, warrant, covenant and agree that:
(a) Each of IHS and Acquisition Subsidiary has duly and validly
executed and delivered this Agreement; this Agreement constitutes the legal,
valid and binding obligation of IHS and Acquisition Subsidiary, enforceable
against IHS and Acquisition Subsidiary in accordance with its terms; and the
execution, delivery and performance of this Agreement have been duly authorized
by all requisite action of IHS and Acquisition Subsidiary and such execution,
delivery and performance by IHS and Acquisition Subsidiary will not result in
any breach of the terms, conditions or provisions of, or conflict with or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any of the property or assets of IHS and Acquisition Subsidiary
pursuant to the terms of, any indenture, mortgage, deed of trust, note, other
evidence of indebtedness, agreement or other instrument to which IHS and
Acquisition Subsidiary may be a party or by which IHS and Acquisition Subsidiary
or any of their property or assets may be bound, or violate any provision of
law, or any applicable order, writ, injunction, judgement or decree of any court
or any order or other public regulation of any governmental commission, bureau
or administrative agency applicable to IHS or the Acquisition Subsidiary.
(b) IHS and Acquisition Subsidiary shall promptly give notice to CSC of
any event which might reasonably result in a material adverse change in the
financial condition of either of them.
(c) IHS and Acquisition Subsidiary shall do or cause to be done all
things necessary to preserve and keep in full force and effect each of their
respective corporate existence and shall not suffer or permit any change in
control of, or transfer of interests in, IHS and Acquisition Subsidiary without
the prior written consent of CSC, which consent may be given or withheld by CSC
in CSC's sole discretion, for any reason or for no reason at all; provided,
however, that (x) a change of control of IHS shall not be deemed to occur by
reason of the election of directors of IHS unless more than a majority of the
directors of IHS are changed in a period of twelve (12) consecutive months; (y)
a transfer of interests in IHS shall not be deemed to occur by reason of public
trading in IHS's securities unless fifty percent
<PAGE>
-3-
(50%) or more of the direct or indirect ownership interests of IHS come under
control of one or more Affiliated Persons or Entities or Persons or Entities
acting in concert; and (z) no consent shall be required with respect to IHS if
the successor or surviving person has a tangible net worth, determined in
accordance with GAAP, equal to or greater than One Billion Dollars
($1,000,000,000).
(d) IHS agrees, as principal obligor and not as guarantor only, to pay
to CSC forthwith, upon demand, in immediately available Federal funds, all costs
and expenses (including, without limitation, court costs and reasonable legal
expenses) incurred or expended by CSC in connection with the enforcement of this
Agreement from the time such amounts become due until payment at the maximum
rate permitted by applicable law. The covenants and agreements of IHS set forth
in this section shall survive the termination of this Agreement.
3. Guarantee. IHS hereby unconditionally guarantees that the Guaranteed
Obligations which are monetary obligations shall be paid in full when due and
payable, whether upon demand, at the stated or accelerated maturity thereof or
upon any mandatory or voluntary prepayment pursuant to any Transaction Document,
or otherwise, and that the Guaranteed Obligations which are performance
obligations shall be fully performed at the times and in the manner such
performance is required by the Transaction Documents. With respect to the
Guaranteed Obligations which are monetary obligations, this guarantee is a
guarantee of payment and not of collectibility and is absolute and in no way
conditional or contingent. In case any part of the Guaranteed Obligations shall
not have been paid when due and payable or performed at the time performance is
required, IHS shall, within five (5) days after receipt of notice from CSC, pay
or cause to be paid to CSC the amount thereof as is then due and payable and
unpaid (including interest and other charges, if any, due thereon through the
date of payment in accordance with the applicable provisions of the Transaction
Documents) or perform or cause to be performed such obligations in accordance
with the Transaction Documents.
4. Set-Off. Regardless of the adequacy of any collateral or other means
of obtaining payment of the Guaranteed Obligations, CSC may at any time and
without notice to IHS and/or Acquisition Subsidiary set off the whole or any
portion or portions of any or all sums held by CSC and/or credited by or due
from CSC to IHS or any of its Affiliated Persons against amounts payable under
this Agreement and/or the Transaction Documents.
5. Unenforceability of Guaranteed Obligations, Etc. If Acquisition
Subsidiary is for any reason under no legal obligation to discharge any of the
Guaranteed Obligations, or if
<PAGE>
-4-
any other moneys included in the Guaranteed Obligations have become
unrecoverable from Acquisition Subsidiary by operation of law or for any other
reason, including, without limitation, the invalidity or irregularity in whole
or in part of any Guaranteed Obligation or of any Transaction Document or any
limitation on the liability of Acquisition Subsidiary thereunder or any
limitation on the method or terms of payment thereunder which may now or
hereafter be caused or imposed in any manner whatsoever, the guarantees
contained in this Agreement shall nevertheless remain in full force and effect
and shall be binding upon IHS to the same extent as if IHS at all times had been
the principal joint and several debtor on all such Guaranteed Obligations.
6. Additional Guarantees, Etc. IHS's undertakings pursuant to this
Agreement shall be in addition to any other guarantee or other security for the
Guaranteed Obligations, and it shall not be prejudiced or rendered unenforceable
by the invalidity of any such other guarantee or security or by any waiver,
amendment, release or modification thereof. In the event of any conflict between
the provisions of this Agreement and the provisions of any Transaction Document,
the provisions of this Agreement shall control.
7. Consents and Waivers, Etc. IHS hereby acknowledges receipt of
correct and complete copies of each of the Transaction Documents, and consents
to all of the terms and provisions thereof (including, without limitation,
Sections 6.3 and 9.10 thereof), as the same may be from time to time hereafter
amended or changed in accordance therewith, and waives (a) presentment, demand
for payment, and protest of nonpayment, of any principal of or interest on any
of the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of
diligence, presentment, demand and protest, (c) notice of any default hereunder
and any default, breach or nonperformance or Event of Default under any of the
Guaranteed Obligations or the Transaction Documents, (d) notice of the terms,
time and place of any private or public sale of collateral held as security for
the Guaranteed Obligations, (e) demand for performance or observance of, and any
enforcement of any provision of, or any pursuit or exhaustion of rights or
remedies against Acquisition Subsidiary or any other guarantor of the Guaranteed
Obligations, under or pursuant to the Transaction Documents, or any agreement
directly or indirectly relating thereto and any requirements of diligence or
promptness on the part of the holders of the Guaranteed Obligations in
connection therewith, and (f) to the extent IHS lawfully may do so, any and all
demands and notices of every kind and description with respect to the foregoing
or which may be required to be given by any statute or rule of law and any
defense of any kind which it may now or hereafter have with respect to this
Agreement, or any of the Transaction Documents or the Guaranteed Obligations.
<PAGE>
-5-
8. No Impairment, Etc. The obligations, covenants, agreements and
duties of IHS under this Agreement shall not be affected or impaired by any
assignment or transfer in whole or in part of any of the Guaranteed Obligations
without notice to IHS, or any waiver by CSC or any holder of any of the
Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of
the performance or observance by Acquisition Subsidiary or any other guarantor
of any of the agreements, covenants, terms or conditions contained in the
Guaranteed Obligations or the Transaction Documents or any indulgence in or the
extension of the time for payment by Acquisition Subsidiary or any other
guarantor of any amounts payable under or in connection with the Guaranteed
Obligations or the Transaction Documents or any other instrument or agreement
relating to the Guaranteed Obligations or of the time for performance by
Acquisition Subsidiary or any other guarantor of any other obligations under or
arising out of any of the foregoing or the extension or renewal thereof, or the
modification or amendment (whether material or otherwise) of any duty, agreement
or obligation of Acquisition Subsidiary or any other guarantor set forth in any
of the foregoing, or the voluntary or involuntary sale or other disposition of
all or substantially all the assets of Acquisition Subsidiary or any other
guarantor or insolvency, bankruptcy, or other similar proceedings affecting
Acquisition Subsidiary or any other guarantor or any assets of Acquisition
Subsidiary or any such other guarantor, or the release or discharge of
Acquisition Subsidiary or any such other guarantor from the performance or
observance of any agreement, covenant, term or condition contained in any of the
foregoing without the consent of the holders of the Guaranteed Obligations by
operation of law, or any other cause, whether similar or dissimilar to the
foregoing.
9. Reimbursement, Subrogation, Etc. IHS hereby covenants and agrees
that IHS will not enforce or otherwise exercise any rights of reimbursement,
subrogation, contribution or other similar rights against Acquisition Subsidiary
or any other person with respect to the Guaranteed Obligations prior to the
payment in full of all amounts owing under the Transaction Documents, and until
all indebtedness of Acquisition Subsidiary to CSC shall have been paid in full,
IHS shall have no right of subrogation, and IHS waives any defense it may have
based upon any election of remedies by CSC which destroys IHS's subrogation
rights or IHS's rights to proceed against Acquisition Subsidiary for
reimbursement, including, without limitation, any loss of rights IHS may suffer
by reason of any rights, powers or remedies of Acquisition Subsidiary in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging the indebtedness to CSC. Until all obligations of Acquisition
Subsidiary pursuant to the Transaction Documents shall have been paid and
satisfied in full, IHS further waives any right to
<PAGE>
-6-
enforce any remedy which CSC now has or may in the future have against
Acquisition Subsidiary, any other guarantor or any other person and any benefit
of, or any right to participate in, any security whatsoever now or in the future
held by CSC.
10. Defaults. IHS and Acquisition Subsidiary acknowledge and agree that
any default under this Agreement shall be an Event of Default under the
Transaction Documents and that any Event of Default under any Transaction
Document shall constitute and Event of Default under this Agreement and under
every other Transaction Document.
11. Extension of Term. To induce CSC to enter into this Agreement, IHS
and Acquisition Subsidiary hereby agree that the term of the Management
Agreements is hereby extended to January 1, 2006. The parties acknowledge that
the Leases will be and hereby are extended through such period.
12. Assumption; Acknowledgment of Certain Liabilities. Acquisition
Subsidiary hereby assumes all obligations and liabilities of Horizon under the
Transaction Documents. Without limiting the generality of the foregoing or of
Section 3.3 of the Management Agreements, Acquisition Subsidiary acknowledges
that it is liable for, and shall indemnify and hold harmless CSC and HRP from
and against all fines and penalties assessed in connection with the operation of
the Facilities. IHS hereby assumes all obligations of CSC arising under the
Leases with HRP and IHS and CSC acknowledge and agree that, from and after the
date hereof, they shall be jointly and severally liable under such Leases.
13. Consent and Release. In reliance on the undertakings set forth in
this Agreement, CSC hereby consents to the transfer of Horizon's rights under
the Transaction Documents to Acquisition Subsidiary. CSC hereby releases
HealthSouth and Horizon from all obligations which accrue under the Transaction
Documents on or after the date hereof.
14. B&G Note. As an inducement to the directors and shareholders of CSC
to cause CSC to enter into this Agreement, IHS and HealthSouth hereby agree that
each is or has been a holder of that certain Promissory Note, made December 10,
1993, made by B&G Partners Limited Partnership to the order of Greenery
Rehabilitation Group, Inc.
15. Management Fees. The parties represent and warrant that, as of the
date hereof, all management fees due and payable under the Transaction Documents
have been paid in full and there is no accrual of any such fees.
<PAGE>
-7-
16. Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to CSC to:
Connecticut Subacute Corporation II
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. Gerard M. Martin
[Telecopier No. (617) 928-1305]
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Jennifer B. Clark, Esq.
[Telecopier No. (617) 338-2880]
if to IHS or Acquisition Subsidiary:
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owing Mills, MD 21117
Attn: Ms. Eleanor Harding
[Telecopier No. (410) 998-8716]
(d) By notice given as herein provided, the parties hereto and their
respective successor and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon
<PAGE>
-8-
receipt by the other parties of such notice and each shall have the right to
specify as its address any other address within the United States of America.
17. Successors and Assigns. Whenever in this Agreement, any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, including without limitation the holders,
from time to time, of the Transaction Documents; and all representations,
warranties, covenants and agreements by or on behalf of IHS and/or Acquisition
Subsidiary which are contained in this Agreement shall inure to the benefit of
CSC's successors and assigns, including without limitation, such holders,
whether so expressed or not.
18. Applicable Law. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts between residents of Massachusetts which
are to be performed entirely within Massachusetts, regardless of (i) where any
such instrument is executed or delivered; or (ii) where any payment or other
performance required by any such instrument is made or required to be made; or
(iii) where any breach of any provision of any such instrument occurs, or any
cause of action otherwise accrues; or (iv) where any action or other proceeding
is instituted or pending; or (v) the nationality, citizenship, domicile,
principal place of business, or jurisdiction of organization or domestication of
any party; or (vi) whether the laws of the forum jurisdiction otherwise would
apply the laws of a jurisdiction other than The Commonwealth of Massachusetts;
or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
The Commonwealth of Massachusetts as may be provided by law; and the parties
consent to the jurisdiction of said court or courts located in The Commonwealth
of Massachusetts and to service of process by registered mail, return receipt
requested, or by any other manner provided by law.
19. Modification of Agreement. No modification or waiver of any
provision of this Agreement, nor any consent to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
party against whom enforcement is sought, and such modification, waiver or
consent shall be effective only in the specific instances and for the purpose
for which given. No notice to or demand on IHS or Acquisition Subsidiary in any
case shall entitle such party to
<PAGE>
-9-
any other or further notice or demand in the same, similar or other
circumstances.
20. Waiver of Rights by CSC. Neither any failure nor any delay on CSC's
part in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege. Nothing contained herein shall be deemed to waive CSC's right to
give or withhold its consent in any subsequent transaction.
21. Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, but this Agreement
shall be reformed and construed and enforced to the maximum extent permitted by
applicable law.
22. Entire Contract. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede and take the place of any other instruments purporting to be an
agreement of the parties hereto relating to the subject matter hereof.
23. Headings; Counterparts. Headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument,
and in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.
24. Remedies Cumulative. No remedy herein conferred upon CSC is
intended to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
25. Limitation of Liability. By execution hereof, IHS and Acquisition
Subsidiary expressly acknowledge and agree that the liability of CSC hereunder
and under the Transaction Documents shall be limited to the operating assets and
working capital of CSC arising from the operations of the Leased Property and
IHS and Acquisition Subsidiary shall have no recourse to (x) any shareholder,
officer or director of CSC, or any officer or trustee thereof, or (y) any other
assets of CSC.
<PAGE>
-10-
26. Payment of Fees. IHS shall pay all attorney fees incident to the
preparation, negotiation and implementation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date above first written.
INTEGRATED HEALTH SERVICES, INC.
By: /s/
Its Executive Vice President
IHS ACQUISITION NO. 175, INC.
By: /s/
Its Executive Vice President
HEALTHSOUTH CORPORATION
By: /s/
Its (Vice) President
HORIZON HEALTHCARE CORPORATION
By: /s/
Its (Vice) President
CONNECTICUT SUBACUTE CORPORATION II
By: /s/
Its (Vice) President
ACKNOWLEDGED AND AGREED:
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
Its President
Exhibit 21.1
SENIOR HOUSING PROPERTIES TRUST
SUBSIDIARIES OF THE REGISTRANT
The registrant currently does not have any subsidiaries. Upon completion of the
transaction described in the prospectus included in this registration statement,
the following Maryland real estate investment trusts will be wholly owned
subsidiaries of the registrant:
HRES1 Properties Trust
HRES2 Properties Trust
SPTBROOK Properties Trust
SPTGEN Properties Trust
SPTIHS Properties Trust
SPTMISC Properties Trust
SPTMNR Properties Trust
SPTMRT Properties Trust
SPTSUN Properties Trust
SPTSUN II Properties Trust
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 1, 1999, with respect to the combined financial
statements and schedules of HRPT's Senior Housing Properties (wholly owned by
HRPT Properties Trust) included in pre-effective amendment No. 2 to the
Registration Statement (Form S-11) and related prospectus of Senior Housing
Properties Trust.
/s/ Ernst & Young LLP
Boston, Massachusetts
July 23, 1999
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