UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 001-15319
SENIOR HOUSING PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 04-3445278
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
400 Centre Street, Newton, Massachusetts 02458
(Address of principal executive offices) (Zip Code)
617-796-8350
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of Common Shares outstanding at May 10, 2000:
26,001,500 shares of beneficial interest, $0.01 par value.
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SENIOR HOUSING PROPERTIES TRUST
FORM 10-Q
MARCH 31, 2000
INDEX
Page
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PART I Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 1
Consolidated Statements of Income - Three Months Ended March 31, 2000 and 1999 2
Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
PART II Other Information
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 13
Certain Important Factors 14
Signatures 15
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SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share)
(unaudited)
March 31, December 31,
2000 1999
----------- ------------
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ASSETS
Real estate properties at cost (including properties leased to affiliates
with a cost of $20,422):
Land $ 69,126 $ 69,673
Buildings and improvements 624,066 639,066
--------- ---------
693,192 708,739
Accumulated depreciation (108,340) (108,709)
--------- ---------
584,852 600,030
Real estate mortgages receivable, net of loan loss reserve of $14,500 22,939 22,939
Cash and cash equivalents 12,870 17,091
Other assets 15,817 13,940
--------- ---------
$ 636,478 $ 654,000
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 188,000 $ 200,000
Deferred rents and other deferred revenues 26,398 26,715
Security deposits 15,235 15,235
Other liabilities 5,479 2,644
Shareholders' equity:
Common shares of beneficial interest, $0.01 par value:
50,000,000 shares authorized, 26,001,500 shares issued and
outstanding 260 260
Additional paid-in capital 444,511 444,511
Cumulative net loss (12,204) (19,764)
Distributions (31,201) (15,601)
--------- ---------
Total shareholder's equity 401,366 409,406
--------- ---------
$ 636,478 $ 654,000
========= =========
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See accompanying notes
1
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SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share)
(unaudited)
Three Months Ended March 31,
---------------------------------
2000 1999
-------- -------
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Revenues:
Rental income $18,060 $21,226
Interest and other income 537 1,442
------- -------
Total revenues 18,597 22,668
------- -------
Expenses:
Interest 4,475 4,976
Depreciation 5,175 5,607
General and administrative 1,387 1,114
------- -------
Total expenses 11,037 11,697
------- -------
Net income $ 7,560 $10,971
======= =======
Weighted average shares outstanding (Note 2) 26,002 26,000
======= =======
Basic and diluted earnings per share data:
Net income $ 0.29 $ 0.42
======= =======
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See accompanying notes
2
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SENIOR HOUSING PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three Months Ended March 31,
-------------------------------
2000 1999
-------- --------
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Cash flows from operating activities:
Net income $ 7,560 $ 10,971
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation 5,175 5,607
Changes in assets and liabilities:
Other assets (2,482) 1,723
Deferred rents and other deferred revenues (317) (481)
Other liabilities 1,265 15
-------- --------
Cash provided by operating activities 11,201 17,835
-------- --------
Cash flows from investing activities:
Proceeds from sale of real estate 12,178 --
Repayments of mortgage loans -- 93
-------- --------
Cash provided by investing activities 12,178 93
-------- --------
Cash flows from financing activities:
Repayment of credit facility (12,000) --
Owner's net distribution -- (17,900)
Distributions (15,600) --
-------- --------
Cash used for financing activities (27,600) (17,900)
-------- --------
(Decrease) increase in cash and cash equivalents (4,221) 28
Cash and cash equivalents at beginning of period 17,091 139
-------- --------
Cash and cash equivalents at end of period $ 12,870 $ 167
======== ========
Supplemental cash flow information:
Cash paid for interest $ 4,227 --
======== ========
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See accompanying notes
3
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SENIOR HOUSING PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization
Senior Housing Properties Trust ("Senior Housing"), a Maryland real estate
investment trust, was organized on December 16, 1998 as a 100% owned subsidiary
of HRPT Properties Trust ("HRPT").
At March 31, 2000, Senior Housing owned 75 properties and 12 mortgages
receivable in 26 states and operates in a single segment.
On October 12, 1999, HRPT distributed 49.3% of its ownership in Senior Housing
to HRPT shareholders (the "Spin-Off"). Prior to the Spin-Off the properties and
mortgages were owned by HRPT. These consolidated financial statements are
presented as if Senior Housing was a separate legal entity from HRPT prior to
the Spin-Off, although no such entity existed until October 12, 1999.
Note 2. Summary of Significant Accounting Policies
BASIS OF PRESENTATION. Prior to the Spin-Off, Senior Housing, including its
properties and mortgages, were owned by HRPT, and transactions in those periods
have been presented on HRPT's historical basis. Prior to the Spin-Off
substantially all the rental income and mortgage interest income received by
HRPT from the tenants and mortgagors of Senior Housing was deposited in and
commingled with HRPT's general funds. Funds for capital investments and other
cash required by Senior Housing were provided by HRPT. Prior to September 1,
1999, interest expense was 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 for the periods prior to the Spin-Off
were allocated to Senior Housing based on HRPT's investment advisory agreement
formula and other costs were 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 were reasonable. It was not practicable to estimate additional costs
that would have been incurred by Senior Housing as a separate entity.
In December 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Accounting for Contingent Rent in Interim Financial Periods"
("SAB 101"). Senior Housing has adopted the provisions of SAB 101 prospectively
as of January 1, 2000. If Senior Housing had elected the adoption retroactively
to January 1, 1999, for the three months ended March 31, 1999, net income would
have been $10.0 million ($0.38/share). SAB 101 will have no impact on Senior
Housing's annual results of operations, rather the accounting changes required
by SAB 101 are expected to, in general, defer recognition of certain percentage
rental income from the first, second and third quarters to the fourth quarter
within a fiscal year.
EARNINGS PER COMMON SHARE. Because Senior Housing's operations were included in
the consolidated financial statements of HRPT prior to the Spin-Off, there were
no shareholder equity accounts for Senior Housing prior to 1999. Common shares
outstanding of 26.0 million at October 12, 1999, have been included in the
earnings per share calculation as if the shares were outstanding for all periods
prior to October 12, 1999. Earnings per common share are computed using the
weighted average number of shares outstanding during the period. Senior Housing
has no common share equivalents, instruments convertible into common shares or
other dilutive instruments.
Note 3. Interim Financial Statements
The financial statements of Senior Housing have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements
and should be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 1999, included in the Annual Report
on Form 10-K. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for interim periods are not necessarily
indicative of the results that may be expected for the full year.
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SENIOR HOUSING PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Real Estate Properties
In February 2000 Senior Housing sold all of the properties that were leased to
The Frontier Group, Inc. ("Frontier") for $13.0 million. Senior Housing is
pursuing claims against Frontier and other parties for breach of its leases and
for rental arrearages. The amount of net gain, if any, which may be realized
from the sale of the Frontier properties will depend upon the outcome of these
claims. The amount of gain or loss to be realized as a result of this
transaction is not expected to be material. The net proceeds of $12.2 million
were used to repay, in part, a portion of the outstanding balance on the bank
credit facility.
Note 5. Report of Tenants' Financial Condition
Two of Senior Housing tenants, Mariner Post-Acute Network, Inc. ("Mariner") and
Integrated Health Services, Inc. ("IHS") have filed for protection under Chapter
11 of the U.S. Bankruptcy Code. Mariner filed in January 2000 and IHS filed in
February 2000.
In March 2000 Senior Housing reached an agreement in principle with
Mariner as follows:
o Mariner's lease obligations for all 26 properties will be terminated.
o Approximately $24.0 million of cash and securities which secure
Mariner's obligations will be retained by Senior Housing.
o Senior Housing will assume operation responsibilities for 17 of these
26 properties. Title to five of these properties will be transferred
to Mariner which will continue the operations. The remaining four
nursing homes are now subleased to two private companies and Senior
Housing expects to negotiate with these two subtenants for their
continued operation of those properties.
o Mariner will continue to pay its contractual obligations to Senior
Housing until the agreement is consummated.
The agreement with Mariner has been approved by Mariner's creditors committee
and the Delaware Bankruptcy Court, before which this bankruptcy is pending. This
agreement still requires regulatory approvals from various states where affected
properties are located. If this agreement is approved, Senior Housing expects
its future earnings and cash flows may be less than the rent previously earned
from the Mariner lease, at least on a short term basis. If and when this
agreement is implemented additional gains or losses may result.
In April 2000 Senior Housing reached an agreement in principle with IHS
as follows:
o The lease for one property will be amended to provide a new ten year
term at $1.2 million per year, effective January 1, 2000.
o Senior Housing's mortgage investment secured by one property will be
cancelled and IHS will continue to own and operate the property.
o IHS's lease and mortgage obligations for 37 properties will be
terminated.
o IHS will pay Senior Housing $500,000 per month for use and occupancy
of Senior Housing's properties from the date of IHS's bankruptcy
filing until this transaction is closed.
o IHS will convey nine properties to Senior Housing which are currently
owned and operated by IHS.
o Senior Housing will assume operating responsibility for 41 properties.
In addition, Horizon/CMS Corporation, a subsidiary of HEALTHSOUTH Corporation,
(together "HEALTHSOUTH") is a guarantor of the lease obligations for four
properties owned by Senior Housing and leased to IHS. Senior Housing and
HEALTHSOUTH have reached an understanding, conditional upon implementation of
the agreement between Senior Housing and IHS, whereby HEALTHSOUTH will assume
operating responsibility for these four properties and lease and operate one
property that will be conveyed to Senior Housing by IHS. Annual rents under
these five leases total approximately $10.0 million.
5
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SENIOR HOUSING PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The agreement with IHS is contingent upon approval by IHS's creditors committees
and the Delaware Bankruptcy Court before which this bankruptcy is pending and
requires regulatory approvals from various states where affected properties are
located. If this agreement is approved, Senior Housing expects its future
earnings and cash flows may be less than the rent previously earned from the IHS
leases, at least on a short term basis. If and when this agreement is
implemented additional gains or losses may result.
Note 6. Transactions with Affiliates
Senior Housing entered into an investment advisory agreement with REIT
Management & Research, Inc. ("REIT Management") to provide investment,
management and administrative services. REIT Management is owned by Gerard M.
Martin and Barry M. Portnoy, who serve as managing trustees of Senior Housing.
Note 7. Indebtedness
Senior Housing has a $350.0 million, three-year, interest only, bank credit
facility. The bank credit facility is secured by 18 properties, with a net book
value of $377.7 million at March 31, 2000, and matures in 2002. The interest
rate is LIBOR plus a premium (7.96% at March 31, 2000). The bank credit facility
is available for acquisitions, working capital and for general business
purposes. As of March 31, 2000, $188.0 million was outstanding and $162.0
million was available under the credit facility.
Note 8. Shareholders' Equity
Senior Housing has reserved 1,300,000 shares of Senior Housing's common shares
under the terms of the 1999 Incentive Share Award Plan (the "Award Plan").
During 1999 the three Independent Trustees, as part of their annual fee, were
each granted 500 common shares from this plan. The shares granted to the
Trustees vest immediately. At March 31, 2000, 1,298,500 of Senior Housing's
common shares remain reserved for issuance under the Award Plan.
In February 2000 Senior Housing paid a distribution of $0.60 per share, or $15.6
million. In April 2000 Senior Housing declared a distribution of $0.30 per
share, or $7.8 million, which will be distributed to shareholders on or about
May 25, 2000.
6
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SENIOR HOUSING PROPERTIES TRUST
Item 2. 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 and mortgages we owned for the three months ended March 31, 2000
and 1999. This discussion includes references to funds from operations. 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
and as clarified from time to time, is net income computed in accordance with
GAAP, before extraordinary items, plus depreciation and amortization and after
adjustment for unconsolidated partnerships and joint ventures. We consider 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. We compute FFO in accordance with the standards established by
NAREIT adjusted for the impact of Staff Accounting Bulletin No. 101, "Accounting
for Contingent Rent in Interim Financial Periods", issued by the Securities and
Exchange Commission in December 1999, and non cash items, which may not be
comparable to FFO reported by other REITs that define the term 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, or as a measure
of liquidity.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to March 31, 1999
For the three months ended March 31, 2000, compared to the three months ended
March 31, 1999, total revenues decreased by $4.1 million, total expenses
decreased by $660,000 and net income decreased by $3.4 million. Revenues
decreased because no rent was received after the sale date from three properties
formerly owned by Senior Housing which have been sold and because reduced rent
and interest was accrued from the properties pursuant to the work out agreements
described below. Total expenses decreased due to a decrease in interest expense
of $501,000 and depreciation expense of $432,000, offset by an increase in
general and administrative expenses of $273,000. The decrease in interest
expense is primarily due to lower interest expense actually incurred during 2000
as compared to HRPT's allocated interest expense in 1999. The decrease in
depreciation expense is primarily due to the write down for the impairment of
assets at December 31, 1999, and the sale of three properties in February 2000.
General and administrative expenses increased in 2000 over 1999 because Senior
Housing's expenses were higher than the allocable portion of HRPT's expenses and
because of costs arising from the work out agreements described below. Net
income was $7.6 million and $11.0 million for the three months ended March 31,
2000 and 1999, respectively.
Two of our tenants, Mariner Post-Acute Network, Inc. ("Mariner") and Integrated
Health Services, Inc. ("IHS") have filed for protection under Chapter 11 of the
U.S. Bankruptcy Code. Mariner filed in January 2000 and IHS filed in February
2000.
In March 2000 we reached an agreement in principle with Mariner as
follows:
o Mariner's lease obligations for all 26 properties will be terminated.
o Approximately $24.0 million of cash and securities which secure
Mariner's obligations will be retained by us.
o We will assume operation responsibilities for 17 of these 26
properties. Title to five of these properties will be transferred to
Mariner which will continue the operations. The remaining four nursing
homes are now subleased to two private companies and we expect to
negotiate with these two subtenants for their continued operations of
these properties.
o Mariner will continue to pay its historical contractual obligations to
us until this agreement is consummated.
The agreement with Mariner has been approved by Mariner's creditors committee
and the Delaware Bankruptcy Court, before which this bankruptcy is pending. This
agreement still requires regulatory approvals from various states where affected
properties are located. If this agreement is approved we expect our future
earnings and cash flows may be less than the rent previously earned from the
Mariner lease, at least on a short term basis. If and when this agreement is
implemented additional material gains or losses may result.
7
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SENIOR HOUSING PROPERTIES TRUST
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - continued
In April 2000 we reached an agreement in principle with IHS as follows:
o The lease for one property will be amended to provide a new ten year
term at $1.2 million per year, effective January 1, 2000.
o Our mortgage investment secured by one property will be cancelled and
IHS will continue to own and operate and mortgage the property.
o IHS's lease and mortgage obligations for 37 properties will be
terminated.
o IHS will pay us $500,000 per month for use and occupancy of Senior
Housing's properties from the date of IHS's bankruptcy filing until
this transaction is closed.
o IHS will convey nine properties to us.
o We will assume operating responsibility for 41 properties.
In addition, Horizon/CMS Corporation, a subsidiary of HEALTHSOUTH Corporation,
(together "HEALTHSOUTH") is a guarantor of the lease obligations for four
properties leased to IHS. We have reached an understanding with HEALTHSOUTH
whereby HEALTHSOUTH will assume operating responsibility for these four
properties and one property that will be conveyed to us by IHS. Annual rents
under these five leases total approximately $10.0 million.
The agreement with IHS is contingent upon approval by IHS's creditors committees
and the Delaware Bankruptcy Court before which this bankruptcy is pending and
requires regulatory approvals from various states where affected properties are
located. If this agreement is approved we expect our future earnings and cash
flows may be less than the rent previously earned from the IHS leases, at least
on a short term basis. If and when this agreement is implemented additional
material gains or losses may result.
FFO for the three months ended March 31, 2000, was $13.3 million, or $0.51 per
share, compared to $16.6 million, or $0.64 per share for the same period in
1999. The decrease of $3.3 million is due to the factors discussed above. Cash
flow provided by operating activities and cash available for distribution may
not necessarily equal funds from operations as cash flow is affected by other
factors not included in the funds from operations calculation, such as changes
in assets and liabilities.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, we had cash and cash equivalents of $12.9 million. For the
three months ended March 31, 2000 and 1999, cash flows provided by operating
activities were $11.2 million and $17.8 million, respectively; cash flows
provided by investing activities were $12.2 million and $93,000, respectively;
and cash used for financing activities was $27.6 million and $17.9 million,
respectively. We expect that our current cash, cash equivalents, future cash
flows from operating activities and availability under our bank credit facility
will be sufficient to meet our short-term and long-term working capital
requirements, including our distribution of $7.8 million, or $0.30 per share,
for the quarter ending on March 31, 2000, which we will pay on or about May 25,
2000.
We have a $350.0 million, three-year, interest only, bank credit facility
secured by first mortgages on 18 properties. The interest rate is LIBOR plus a
premium per annum. The bank credit facility is available for acquisitions,
working capital and for general business purposes. We have the ability to repay
and redraw amounts under this bank credit facility until its maturity in 2002.
Our bank credit facility documentation has customary representations,
warranties, covenants and event of default provisions.
During the first quarter of 2000 we repaid $12.0 million of amounts outstanding
under our bank credit facility with the proceeds from the sale of three
properties. Subsequent to March 31, 2000 we repaid an additional $10.0 million.
We currently have $178.0 million outstanding and $172.0 million available under
this credit facility.
Total assets decreased by $17.5 million from $654.0 million as of December 31,
1999, to $636.5 million as of March 31, 2000. The decrease is primarily due to
depreciation on real estate properties and the sale of the three properties in
February 2000.
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SENIOR HOUSING PROPERTIES TRUST
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations -continued
Year 2000
We experienced no disruptions in our information and non-information technology
systems and incurred no costs with respect to year 2000 issues. We are not aware
of any material problems resulting from year 2000 issues by our systems or the
systems of our tenants or their material vendors and our material vendors, but
will continue to monitor these systems throughout the year to ensure that any
late year 2000 issues that may arise are addressed promptly.
Impact of Inflation
Inflation might have both positive and negative impacts upon our business.
Inflation might cause the value of our real estate investments to increase.
Similarly, in an inflationary environment, the percentage rents which we receive
based upon CPI increases or as a percentage of our tenants' revenues should
increase. Also, rent yields we could charge for new investments would likely
increase. Offsetting these benefits, inflation might cause our costs of equity
and debt capital to increase. To mitigate the adverse impact of increased costs
of debt capital in the event of material inflation we may purchase interest rate
cap agreements. The decision to enter into these agreements will be based on the
amount of floating rate debt outstanding and our belief that material interest
rate increases are likely to occur. We do not believe inflation in the U.S.
economy during the next few years will have any material effect on our business.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market changes in interest rates. Because interest on all our
outstanding debt is at a floating rate, changes in interest rates will not
affect the value of our outstanding debt instruments. However, changes in
interest rates will affect our operating results. For example, the interest rate
payable on our outstanding indebtedness of $188.0 million at March 31, 2000, was
7.96% per annum. An immediate 10% change in that interest rate or 79.6 basis
points, would increase or decrease our costs by approximately $1.5 million, or
$0.06 per share per year:
Impact of Changes in Interest Rates
(dollars in thousands)
Total
Interest
Interest Rate Outstanding Expense Per
Per Year Debt Year
--------------- -------------- ---------------
At March 31, 2000 7.96% $188,000 $14,965
10% reduction 7.16% 188,000 13,461
10% increase 8.76% 188,000 16,469
The foregoing table presents a so-called "shock" analysis, which assumes that
the interest rate change by 10%, or 79.6 basis points, is in effect for a whole
year. If interest rates were to change gradually over one year, the impact would
be less.
We borrow in U.S. dollars and all of our current borrowings are subject to
interest at LIBOR plus a premium. Accordingly, we are vulnerable to changes in
U.S. dollar based short-term rates, specifically LIBOR.
During the past few months, short-term U.S. dollar based interest rates have
tended to rise. We are unable to predict the direction or amount of interest
rate changes during the next year. We purchased an interest rate cap agreement
on our current debt to protect against rate increases above 8%. However, we may
incur additional debt at floating or fixed rates in the future which would
increase our exposure to market changes in interest rates.
We currently own real estate mortgages receivable with a carrying value of $22.9
million. When comparable term market interest rates decline, the value of these
receivables increases; when comparable term market interest rates rise, the
value of these receivables declines. Using discounted cash flow analyses at a
weighted average estimated per year market rate for March 31, 2000, of 10.75%,
the estimated fair value of our mortgage receivables was $23.7 million.
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SENIOR HOUSING PROPERTIES TRUST
Item 3. Quantitative and Qualitative Disclosures About Market Risk - continued
An immediate 10% change in the market rate of interest, or 108 basis points,
applicable to our mortgage receivables at March 31, 2000, would affect the fair
value of those receivables as follows:
Carrying Value
Interest of Mortgages Estimated
Rate Per Year Receivable Fair Value
-------------- ----------------- ---------------
(dollars in thousands)
Estimated market 10.75% $22,939 $23,722
10% reduction 9.68% 22,939 25,256
10% increase 11.83% 22,939 22,328
If the market rate changes occurred gradually over time, the effect of these
changes would be realized gradually. Because our mortgages receivable are fixed
rate instruments, changes in market interest rates will have no effect on our
operating results unless these receivables are sold.
The interest rate changes that affect the valuations of our mortgages are U.S.
dollar long-term rates for corporate obligations of companies with ratings
similar to our mortgagors.
Item 5. Other Information
(a) On May 11, 2000, the Board of Trustees elected John R. Hoadley as
Controller of the Company. Mr. Hoadley is also the Controller of Hospitality
Properties Trust, a position he has held since October 1999. From 1998 until
October 1999, Mr. Hoadley served as the Assistant Controller of REIT Management
& Research, Inc., the Company's investment advisor. Mr. Hoadley was employed by
Arthur Andersen LLP from 1993 to 1998, most recently as a senior auditor, with
clients primarily in the real estate and utilities industries. Mr. Hoadley is a
certified public accountant.
(b) See Item 2 above for information with respect to the Company's
previously disclosed agreements in principle with Mariner Post-Acute Network,
Inc. and its affiliates and with Integrated Health Services, Inc. and its
affiliates.
(c) The Company's Board of Trustees has amended and restated the Company's
Bylaws. The following is a summary of certain provisions of the Bylaws, as
amended. Because it is a summary, it does not contain all of the information
which may be important to a shareholder or other investor. For more information,
the Company refers to the full text of its amended and restated Bylaws which are
being filed as an exhibit to this Quarterly Report on Form 10-Q.
o The Company has elected to be subject to Section 3-804(b) and (c) and
Section 3-805 of Title 3, Subtitle 8 of the Maryland General Corporation
Law. Those sections:
o provide that the number of trustees may be fixed only by a vote of the
Board of Trustees; and
o provide that vacancies on the Board of Trustees may be filled only by
the affirmative vote of a majority of the remaining trustees in
office, even if the remaining trustees do not constitute a quorum.
o The amended Bylaws provide that nomination of persons for election to the
Board of Trustees at an annual meeting of shareholders and business to be
transacted by the shareholders at an annual meeting of shareholders may be
properly brought before the meeting only (1) pursuant to the Company's
notice of meeting, (2) by or at the direction of the Board of Trustees, or
(3) by any shareholder who is a shareholder of record both at the time of
giving of the advance notice described below and at the time of the annual
meeting, who is entitled to vote at the meeting and who complies with the
advance notice and other applicable terms and provisions set forth in the
Bylaws. No business may be transacted at a special meeting of shareholders
except as specifically designated in the notice of the meeting. Nominations
of persons for election to the Board of Trustees at a special meeting of
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SENIOR HOUSING PROPERTIES TRUST
shareholders at which trustees are to be elected may be made only (1)
pursuant to the Company's notice of meeting; (2) by or at the direction of
the Board of Trustees, or (3) by any shareholder who is a shareholder of
record both at the time of giving of the advance notice described below and
at the time of the special meeting, who is entitled to vote at the meeting
and who complies with the advance notice and other applicable terms and
provisions set forth in the Bylaws.
o The amended Bylaws require a shareholder who is nominating a person for
election to the Board of Trustees at an annual meeting or proposing
business to be transacted at an annual meeting to give notice of such
nomination or proposal to the secretary of the Company at the principal
executive offices of the Company 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 date of mailing of the notice for the
preceding year's annual meeting. If the date of mailing of the notice for
the annual meeting is advanced or delayed by more than 30 days from the
anniversary date of the date of mailing of the notice for the preceding
year's 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
the date of mailing of the notice for such annual meeting and not later
than the close of business on the later of: (1) the 90th day prior to the
date of mailing of the notice for such annual meeting or (2) the 10th day
following the day on which public announcement of the date of mailing of
the notice for such meeting is first made by the Company. The public
announcement of a postponement of the mailing of the notice for such annual
meeting or of an adjournment or postponement of an annual meeting to a
later date or time will not commence a new time period for the giving of a
shareholder's notice. If the number of Trustees to be elected to the Board
of Trustees is increased and there is no public announcement by the Company
of such action or specifying the size of the increased Board of Trustees at
least one hundred (100) days prior to the first anniversary of the date of
mailing of notice for the preceding year's annual meeting, a shareholder's
notice also shall be considered timely, but only with respect to nominees
for any new positions created by such increase, if the notice is delivered
to the secretary at the Company's principal executive offices not later
than the close of business on the 10th day immediately following the day on
which such public announcement first is made by the Company.
o The amended Bylaws require a shareholder who is nominating a person for
election to the Board of Trustees at a special meeting at which trustees
are to be elected to give notice of such nomination to the secretary of the
Company at its principal executive offices 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 (1) the 90th day prior to such
special meeting or (2) 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. The public
announcement of a postponement or adjournment of a special meeting to a
later date or time will not commence a new time period for the giving of a
shareholder's notice as described above.
o The amended Bylaws provide that a shareholder's notice of a nomination for
election to the Board of Trustees or of a proposal of business to be
transacted at a shareholders meeting must be in writing and must include:
o as to each person whom the shareholder proposes to nominate for
election or reelection as a Trustee, (1) the person's name, age,
business address and residence address, (2) the class and number of
shares of beneficial interest of the Company that are beneficially
owned or owned of record by such person and (3) all other 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 or any successor provision under the Securities Exchange Act of
1934, including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Trustee if elected;
o as to any business that the shareholder proposes to bring before the
meeting, a description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting
and any interest of such shareholder in such business (including any
anticipated benefit to the shareholder therefrom) and of each
beneficial owner, if any, on whose behalf the proposal is made; and
o as to the shareholder giving the notice and each beneficial owner, if
any, on whose behalf the nomination or proposal is made, (1) the name
and address of such shareholder, as they appear on the Company's share
ledger and current name and address, if different, of any such
beneficial owner and (2) the class and number of shares of the Company
which are owned beneficially and of record by such shareholder and any
such beneficial owner.
11
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
o The amended Bylaws provide that, at the same time as or prior to the
submission to the Board of Trustees of any shareholder proposal of business
to be conducted at an annual or special meeting of the shareholders that,
if approved or implemented, would cause the Company to be in breach of a
covenant under any existing or proposed debt instrument or agreement with
any lender, the proponent shareholder must submit to the secretary of the
Company at the principal executive offices of the Company evidence
satisfactory to the Board of Trustees of the lender's willingness to waive
the breach or a plan for repayment of affected indebtedness which is
satisfactory to the Board of Trustees and which specifically identifies the
source of funds to be used in the repayment and presents evidence
satisfactory to the Board of Trustees that the identified funds could be
applied by the Company to the repayment.
o The amended Bylaws provide that, at the same time as or prior to the
submission to the Board of Trustees of any shareholder proposal of business
to be conducted at an annual or special meeting of the shareholders that,
if approved, could not be implemented by the Company without notifying or
obtaining the consent or approval of any regulatory body, the proponent
shareholder must submit to the secretary of the Company at the principal
executive offices of the Company evidence satisfactory to the Board of
Trustees that any and all required notices, consents or approvals have been
given or obtained or a plan, satisfactory to the Board of Trustees, for
making the requisite notices or obtaining the requisite consents or
approvals, as applicable, prior to the implementation of the proposal.
o The amended Bylaws provide that the Company is not required to include in
its proxy statement a shareholder nomination of persons for election to the
Board of Trustees or a shareholder proposal of business to be brought
before an annual or special meeting of shareholders, unless the proponent
shareholder has complied with (1) all applicable requirements of state and
federal law and the rules and regulations thereunder, including Rule 14a-8
or any successor provision under the Securities Exchange Act of 1934, and
(2) the advance notice and the other applicable procedures and requirements
set forth in the Bylaws. This Bylaw provision does not affect any right of
the Company to omit a shareholder proposal from the Company's proxy
statement under the Securities Exchange Act of 1934, including nominations
of persons for election to the Board of Trustees and business to be brought
before the shareholders at an annual or special meeting of shareholders.
o The amended Bylaws include provisions to clarify the organization and
conduct of meetings of shareholders. These include, among other things,
that
o meetings of shareholders will be conducted by an individual appointed
by the Trustees to be chairperson of the meeting or, in the absence of
such appointment or the absence of the appointed individual, by
specified officers of the Company or, in the absence of such officers,
a chairperson chosen by the shareholders by the vote of holders of
shares of beneficial interest representing a majority of the votes
cast by shareholders present in person or represented by proxy;
o the order of business and all other matters of procedure at any
meeting of shareholders will be determined by the chairperson of the
meeting;
o the chairperson of the meeting may prescribe such rules, regulations
and procedures and take such actions as, in the discretion of such
chairperson, are appropriate for the proper conduct of the meeting,
including, without limitation: (1) restricting admission to the time
set for the commencement of the meeting; (2) limiting attendance at
the meeting to shareholders of record of the Company, their duly
authorized proxies or other such persons as the chairperson of the
meeting may determine; (3) limiting participation at the meeting on
any matter to shareholders of record of the Company entitled to vote
on such matter, their duly authorized proxies or other such persons as
the chairperson of the meeting may determine; (4) limiting the time
allotted to questions or comments by participants; (5) maintaining
order and security at the meeting; (6) removing any shareholder or
other person who refuses to comply with meeting procedures, rules or
guidelines as set forth by the chairperson of the meeting; and (7)
recessing or adjourning the meeting to a later date and time and place
announced at the meeting; and
o unless otherwise determined by the chairperson of the meeting,
meetings of shareholders are not required to be held in accordance
with the rules of parliamentary procedure or any established rules of
order.
As stated in the Company's proxy statement dated March 23, 2000
relating to the annual meeting of shareholders held on May 9, 2000, shareholder
proposals intended to be presented at the Company's 2001 Annual
12
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
Meeting of Shareholders pursuant to Rule 14a-8 under the Securities Exchange Act
of 1934 must be received by the Company at its principal executive offices not
later than December 1, 2000.
Under the amended Bylaws, in order to be considered "timely" within the
meaning of Rule 14a-4(c) under the Securities Exchange Act of 1934, notice of a
shareholder proposal intended for presentation at the Company's 2001 Annual
Meeting of Shareholders made outside of Rule 14a-8 under the Securities Exchange
Act of 1934 must be received by the Company no later than January 2, 2001 and no
earlier than December 1, 2000, rather than respective dates which were specified
in the Company's proxy statement dated March 31, 2000, and must be made in
accordance with the provisions, requirements and procedures set forth in the
Company's amended Bylaws.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Articles Supplementary of the Company. (Filed herewith.)
3.2 Amended and Restated Bylaws of the Company. (Filed herewith.)
10.1 Settlement Agreement, dated as of March 20th, 2000, among the
Company, SPTMNR Properties Trust, Five Star Quality Care, Inc.,
SHOPCO-AZ, LLC, SHOPCO-CA, LLC, SHOPCO-COLORADO, LLC, SHOPCO-WI,
LLC, Mariner Post-Acute Network, Inc., GranCare, Inc., AMS
Properties, Inc. and GCI Health Care Centers, Inc. (Filed
herewith.)
10.2 Settlement Agreement, dated as of April 11, 2000, among the
Company, SPTIHS Properties Trust, HRES1 Properties Trust, HRES2
Properties Trust, SHOPCO-COLORADO, LLC, SHOPCO-CT, LLC,
SHOPCO-GA, LLC, SHOPCO-IA, LLC, SHOPCO-KS, LLC, SHOPCO-MA, LLC,
SHOPCO-MI, LLC, SHOPCO-MO, LLC, SHOPCO-NE, LLC, SHOPCO-WY, LLC,
SNH-NEBRASKA, INC., SNH-IOWA, INC., SNH-MASSACHUSETTS, INC.,
SNH-MICHIGAN, INC., Five Star Quality Care, Inc., Advisors
Healthcare Group, Inc., Integrated Health Services, Inc.,
Community Care of America, Inc., ECA Holdings, Inc., Community
Care of Nebraska, Inc., W.S.T. Care, Inc., Quality Care of Lyons,
Inc., CCA Acquisition I, Inc., MARIETTA/SCC, Inc., Glenwood/SCC,
Inc., Dublin/SCC, Inc., College Park/SCC, 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 154, Inc., IHS Acquisition No. 155,
Inc., IHS Acquisition No. 175, Inc., Integrated Health Services
at Grandview Care Center, Inc., ECA Properties, Inc., CCA of
Midwest, Inc. and Quality Care of Columbus, Inc. (Filed
herewith.)
27. Financial Data Schedule. (Filed herewith.)
(b) Reports on Form 8-K:
None.
13
<PAGE>
SENIOR HOUSING PROPERTIES TRUST
CERTAIN IMPORTANT FACTORS
This Quarterly Report on Form 10-Q contains statements which constitute
forward-looking statements within the meaning of the Securities Exchange Act of
1934, as amended. Those statements appear in a number of places on this Form
10-Q and include statements regarding our beliefs, intent or expectation
concerning projections, plans, future events and performance. The estimates,
assumptions and statements, such as those relating to the approval and
consummation of the Mariner and IHS agreements, our ability to operate and
stabilize operations at the Mariner and IHS properties, our ability to
successfully negotiate with Mariner's subtenants and our ability to make future
distributions, depend upon various factors over some of which we and/or our
lessees have or may have limited or no control. Readers are cautioned that any
such forward looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ materially
from those contained in the forward looking statements. Material changes could
occur as a result of numerous factors. Those factors include, without
limitation, our ability to successfully operate the Mariner and IHS properties
whose operations we assume, the status of the economy, status of the capital
markets (including prevailing interest rates), compliance with the changes to
regulations within the healthcare industry, competition in both the real estate
and healthcare industries, changes to federal, state, and local legislation and
other factors. We cannot predict the impact of these factors, if any. However,
these factors could cause our actual results for subsequent periods to be
different from those stated, estimated or assumed in this discussion and
analysis of our financial condition and results of operations. We believe that
our estimates and assumptions are reasonable and prudent at this time. The
information contained in this Form 10-Q, including the information under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations", identifies other important factors that could cause differences.
THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED
SEPTEMBER 20, 1999, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), 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 UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT 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 US, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS
OF SENIOR HOUSING PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE
OF ANY OBLIGATION.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SENIOR HOUSING PROPERTIES TRUST
By:/s/ David J. Hegarty
David J. Hegarty
President and Chief Operating Officer
Dated: May 12, 2000
By:/s/ Ajay Saini
Ajay Saini
Treasurer and Chief Financial Officer
Dated: May 12, 2000
15
EXHIBIT 3.1
SENIOR HOUSING PROPERTIES TRUST
ARTICLES SUPPLEMENTARY
Senior Housing Properties Trust, a Maryland real estate investment
trust (the "Trust"), hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:
FIRST: Under a power contained in Title 3, Subtitle 8 of the Maryland
General Corporation Law (the "MGCL"), as applicable to Maryland real estate
investment trusts, the Trust, by resolution of its Board of Trustees (the "Board
of Trustees") duly adopted at a meeting duly called and held on May 11, 2000,
amended the Bylaws of the Trust (the "Bylaws") to provide that the Trust elects
to be subject to Section 3-804(b) and (c) of the MGCL.
SECOND: The Bylaws described above provide that, notwithstanding any
other provision in the Declaration of Trust or the Bylaws to the contrary, the
Trust elects to be subject to Section 3-804(b) and (c) of the MGCL, the repeal
of which may be effected only by a subsequent amendment to the Bylaws adopted or
approved by the Board of Trustees.
THIRD: These Articles Supplementary have been approved by the Board of
Trustees in the manner and by the vote required by law.
FOURTH: The undersigned President of the Trust acknowledges these
Articles Supplementary 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
matters and facts are true in all material respects and that this statement is
made under the penalties of perjury.
IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its President and
attested by its Assistant Secretary on this 11th day of May, 2000.
ATTEST: SENIOR HOUSING PROPERTIES
TRUST
/s/ Jennifer B. Clark /s/ David J. Hegarty (SEAL)
Jennifer B. Clark, David J. Hegarty,
Assistant Secretary President
EXHIBIT 3.2
SENIOR HOUSING PROPERTIES TRUST
AMENDED AND RESTATED BYLAWS
As Amended and Restated May 11, 2000
<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......................................................................3
Section 2.9. Voting......................................................................3
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...................................5
Section 2.16. No Shareholder Actions by Written Consent...................................7
Section 2.17. Voting by Ballot............................................................8
ARTICLE III TRUSTEES..................................................................................8
Section 3.1. General Powers; Qualifications; Trustees Holding Over.......................8
Section 3.2. Independent Trustees........................................................8
Section 3.3. Managing Trustees...........................................................8
Section 3.4. Number and Tenure...........................................................8
Section 3.5. Annual and Regular Meetings.................................................8
Section 3.6. Special Meetings............................................................8
Section 3.7. Notice......................................................................8
Section 3.8. Quorum......................................................................9
Section 3.9. Voting......................................................................9
Section 3.10. Telephone Meetings..........................................................9
Section 3.11. Informal Action by Trustees.................................................9
Section 3.12. Waiver of Notice............................................................9
Section 3.13. Vacancies..................................................................10
Section 3.14. Compensation; Financial Assistance.........................................10
Section 3.15. Removal of Trustees........................................................10
Section 3.16. Loss of Deposits...........................................................10
Section 3.17. Surety Bonds...............................................................11
Section 3.18. Reliance...................................................................11
Section 3.19. Interested Trustee Transactions............................................11
i
<PAGE>
<CAPTION>
Table of Contents
(continued)
Page
<S> <C> <C>
Section 3.20. Qualifying Shares Not Required.............................................11
Section 3.21. Certain Rights of Trustees, Officers, Employees and Agents.................11
Section 3.22. Certain Transactions.......................................................11
ARTICLE IV COMMITTEES...............................................................................11
Section 4.1. Number; Tenure and Qualifications..........................................11
Section 4.2. Powers.....................................................................11
Section 4.3. Meetings...................................................................11
Section 4.4. Telephone Meetings.........................................................12
Section 4.5. Informal Action by Committees..............................................12
Section 4.6. Vacancies..................................................................12
ARTICLE V OFFICERS.................................................................................12
Section 5.1. General Provisions.........................................................12
Section 5.2. Removal and Resignation....................................................13
Section 5.3. Vacancies..................................................................13
Section 5.4. Chief Executive Officer....................................................13
Section 5.5. Chief Operating Officer....................................................13
Section 5.6. Chief Financial Officer....................................................13
Section 5.7. Chairman and Vice Chairman of the Board....................................13
Section 5.8. President..................................................................14
Section 5.9. Vice Presidents............................................................14
Section 5.10. Secretary..................................................................14
Section 5.11. Treasurer..................................................................14
Section 5.12. Assistant Secretaries and Assistant Treasurers.............................14
ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS....................................................15
Section 6.1. Contracts..................................................................15
Section 6.2. Checks and Drafts..........................................................15
Section 6.3. Deposits...................................................................15
ARTICLE VII SHARES...................................................................................15
Section 7.1. Certificates...............................................................15
Section 7.2. Transfers..................................................................16
Section 7.3. Replacement Certificate....................................................16
Section 7.4. Closing of Transfer Books or Fixing of Record Date.........................16
Section 7.5. Share Ledger...............................................................17
Section 7.6. Fractional Shares; Issuance of Units.......................................17
ARTICLE VIII FISCAL YEAR..............................................................................17
ii
<PAGE>
<CAPTION>
Table of Contents
(continued)
Page
<S> <C> <C>
ARTICLE IX DISTRIBUTIONS............................................................................17
Section 9.1. Authorization..............................................................17
Section 9.2. Contingencies..............................................................17
ARTICLE X SEAL.....................................................................................18
Section 10.1. Seal.......................................................................18
Section 10.2. Affixing Seal..............................................................18
ARTICLE XI INDEMNIFICATION AND ADVANCE OF EXPENSES..................................................18
ARTICLE XII WAIVER OF NOTICE.........................................................................19
ARTICLE XIII THE ADVISOR..............................................................................19
Section 13.1. Employment of Advisor......................................................19
Section 13.2. Other Activities of Advisor................................................19
ARTICLE XIV AMENDMENT OF BYLAWS......................................................................20
ARTICLE XV MISCELLANEOUS............................................................................20
Section 15.1. References to Declaration of Trust.........................................20
Section 15.2. Inspection of Bylaws.......................................................20
Section 15.3. Election to be Subject to Part of Title 3, Subtitle 8......................20
</TABLE>
iii
<PAGE>
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 within six months after the end of each fiscal year.
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 (a) 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 (b) 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 once deposited in the 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
<PAGE>
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 or otherwise properly brought before the shareholders by or at the
direction of the Trustees.
Section 2.7. Organization of Shareholder Meetings. Every meeting of
shareholders shall be conducted by an individual appointed by the Trustees to be
chairperson of the meeting or, in the absence of such appointment or the absence
of the appointed individual, by the chairman of the board or, in the case of a
vacancy in the office or absence of the chairman of the board, by one of the
following officers present at the meeting: the vice chairman of the board, if
there be one, the president, the vice presidents in their order of rank and
seniority or, in the absence of such officers, a chairperson chosen by the
shareholders by the vote of holders of shares of beneficial interest
representing a majority of the votes cast by shareholders present in person or
represented by proxy. The secretary or, in the secretary's absence, an assistant
secretary or, in the absence of both the secretary and any and all assistant
secretaries, a person appointed by the Trustees or, in the absence of such
appointment, a person appointed by the chairperson of the meeting shall act as
secretary of the meeting and record the minutes of the meeting. If the secretary
presides as chairperson at a meeting of the shareholders, then the secretary
shall not also act as secretary of the meeting and record the minutes of the
meeting. The order of business and all other matters of procedure at any meeting
of shareholders shall be determined by the chairperson of the meeting. The
chairperson of the meeting may prescribe such rules, regulations and procedures
and take such action as, in the discretion of such chairperson, are appropriate
for the proper conduct of the meeting, including, without limitation: (a)
restricting admission to the time set for the commencement of the meeting; (b)
limiting attendance at the meeting to shareholders of record of the Trust, their
duly authorized proxies or other such persons as the chairperson of the meeting
may determine; (c) limiting participation at the meeting on any matter to
shareholders of record of the Trust entitled to vote on such matter, their duly
authorized proxies or other such persons as the chairperson of the meeting may
determine; (d) limiting the time allotted to questions or comments by
participants; (e) maintaining order and security at the meeting; (f) removing
any shareholder or other person who refuses to comply with meeting procedures,
rules or guidelines as set forth by the chairperson of the meeting; and (g)
recessing or adjourning the meeting to a later date and time and place announced
at the meeting. Unless otherwise determined by the chairperson of the meeting,
meetings of shareholders shall not be required to be held in accordance with the
rules of parliamentary procedure or any established rules of order.
-2-
<PAGE>
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.
Section 2.10. Proxies. A shareholder may cast the votes entitled to be
cast 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 pursuant to an 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.
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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.
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
chairperson 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.
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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 business to be
transacted by the shareholders at an annual meeting of shareholders may be
properly brought before the meeting (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 is 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 complies with the terms and
provisions set forth in this Section 2.15.1.
(b) For nominations for election to the Board of Trustees or
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 and such business must
otherwise be a proper matter for action by shareholders. 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 date of mailing of the notice for the preceding year's annual
meeting; provided, however, that in the event that the date of mailing of the
notice for the annual meeting is advanced or delayed by more than thirty (30)
days from the anniversary date of the date of mailing of the notice for the
preceding year's 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
the date of mailing of the notice for such annual meeting and not later than the
close of business on the later of: (i) the 90th day prior to the date of mailing
of the notice for such annual meeting or (ii) the 10th day following the day on
which public announcement of the date of mailing of the notice for such meeting
is first made by the Trust. In no event shall the public announcement of a
postponement of the mailing of the notice for such annual meeting or of an
adjournment or postponement 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: (A) as to each person whom the
shareholder proposes to nominate for election or reelection as a Trustee, (1)
such person's name, age, business address and residence address, (2) the class
and number of shares of beneficial interest of the Trust that are beneficially
owned or owned of record by such person and (3) all other 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 (or any successor provision) 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; (B) as to any business that the shareholder
proposes to bring before the meeting, a description of the business desired to
be brought before the meeting, the reasons for conducting such business at the
meeting and any interest of such shareholder in such business (including any
anticipated benefit to the shareholder therefrom) and of each beneficial owner,
if any, on whose behalf the proposal is made; and (C) as to the shareholder
giving the notice and each beneficial owner, if any, on whose behalf the
nomination or proposal is made, (1) the name and address of such shareholder, as
they appear on the Trust's share ledger and current name and address, if
different, of any such beneficial owner and (2) the class and number of shares
of the Trust which are owned beneficially and of record by such shareholder and
any such beneficial owner.
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(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 of such action or specifying the size of the increased
Board of Trustees at least one hundred (100) days prior to the first anniversary
of the date of mailing of notice for the preceding year's annual meeting, a
shareholder's notice required by this Section 2.15.1 also shall be considered
timely, but only with respect to nominees for any new positions created by such
increase, if the notice is delivered to the secretary at the principal executive
offices of the Trust not later than the close of business on the 10th day
immediately following the day on which such public announcement first is made by
the Trust.
Section 2.15.2 Shareholder Proposals Causing Covenant
Breaches. At the same time as or prior to the submission of any shareholder
proposal of business to be conducted at an annual meeting that, if approved and
implemented by the Trust, would cause the Trust to be in breach of any covenant
of the Trust in any existing or proposed debt instrument of the Trust or
agreement of the Trust with any lender, the proponent shareholder or
shareholders must submit to the secretary of the Trust at the principal
executive offices of the Trust (a) evidence satisfactory to the Board of
Trustees of the lender's willingness to waive the breach of covenant or (b) a
plan for repayment of the indebtedness to the lender, satisfactory to the Board
of Trustees, specifically identifying the source of funds to be used in the
repayment and presenting evidence satisfactory to the Board of Trustees that the
identified funds could be applied by the Trust to the repayment.
Section 2.15.3 Shareholder Proposals Requiring Regulatory
Notice, Consent or Approval. At the same time or prior to the submission of any
shareholder proposal of business to be conducted at an annual meeting that, if
approved, could not be implemented by the Trust without notifying or obtaining
the consent or approval of any federal, state, municipal or other regulatory
body, the proponent shareholder or shareholders must submit to the secretary of
the Trust at the principal executive offices of the Trust (a) evidence
satisfactory to the Board of Trustees that any and all required notices,
consents or approvals have been given or obtained or (b) a plan, satisfactory to
the Board of Trustees, for making the requisite notices or obtaining the
requisite consents or approvals, as applicable, prior to the implementation of
the proposal.
Section 2.15.4 Special Meetings of Shareholders. As set forth
in Section 2.3, only business properly brought before the meeting pursuant to a
proper notice of meeting by or at the direction of the Trustees shall be
conducted at a special meeting of shareholders. Nominations of persons for
election to the Board of Trustees only may be made at a special meeting of
shareholders at which Trustees are to be elected: (a) pursuant to the Trust's
notice of meeting; (b) by or at the direction of the Board of Trustees; or (c)
provided that the Board of Trustees has determined that Trustees shall be
elected at such special meeting, by any shareholder of the Trust who is a
shareholder of record both at the time of giving of notice provided for in this
Section 2.15.4 and at the time of the special meeting, who is entitled to vote
at the meeting and who complies with the notice procedures set forth in this
Section 2.15.4. 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 the
shareholder's notice contains the information required by Section 2.15.1(b) and
the shareholder has given timely notice thereof in writing to the secretary of
the Trust at the principal executive offices of the
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Trust. To be timely, a shareholder's notice shall be delivered to the secretary
of the Trust 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 2.15.4 General.
(a) 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 as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 2.15 shall be
transacted at a meeting of shareholders. The chairperson of the meeting shall
have the power and duty to determine whether a nomination proposed to be made at
or any business proposed to be brought before the meeting was made at or brought
before the meeting, 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
made at or brought before the meeting in compliance with this Section 2.15, to
declare that such nomination or business is out of order and shall be
disregarded.
(b) For purposes of this Section 2.15, (i) the "date of
mailing of the notice" shall mean the date of the proxy statement for the
solicitation of proxies for the election of Trustees and (ii) "public
announcement" shall mean disclosure in (A) a press release either transmitted to
the principal securities exchange on which the Trust's common shares of
beneficial interest are traded or reported by a recognized news service or (B) a
document publicly filed by the Trust with the United States Securities and
Exchange Commission.
(c) The Trust shall not be required to include in the Trust's
proxy statement a shareholder nomination of one or more persons for election to
the Board of Trustees or a shareholder proposal of business to be brought before
an annual or special meeting of shareholders unless the proponent shareholder or
shareholders shall have complied with (i) all applicable requirements of state
and federal law and the rules and regulations thereunder, including without
limitation Rule 14a-8 (or any successor provision) under the Exchange Act, and
(ii) the applicable procedures and other requirements set forth in this Section
2.15. Nothing in this Section 2.15 shall be deemed to affect any right of the
Trust to omit a shareholder proposal from the Trust's proxy statement under the
Exchange Act, including without limitation nominations of persons for election
to the Board of Trustees and business to be brought before the shareholders at
an annual or special meeting of shareholders.
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, the
Declaration of Trust and hereby.
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Section 2.17. Voting by Ballot. Voting on any question or in any
election may be viva voce unless the presiding officer of the meeting 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 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 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 and Tenure. Pursuant to the Articles Supplementary
accepted for record by the State Department of Assessments and Taxation (the
"SDAT") as of May 11, 2000, the number of Trustees constituting the entire Board
of Trustees may be increased or decreased from time to time only by a vote of
the Trustees, provided however that the tenure of office of a Trustee shall not
be affected by any decrease in 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, delivered by electronic mail,
telephoned, facsimile-transmitted or mailed to each Trustee at his business or
residence address. Personally delivered, telegraphed,
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telephoned, facsimile-transmitted or electronically mailed 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 at least seventy-two (72) hours prior to the
meeting. Telephonic 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. Electronic mail
notice shall be deemed to be given upon transmission of the message to the
electronic mail address given to the Trust by the Trustee. 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 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 for that action 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. Waiver 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,
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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. Pursuant to the Articles Supplementary
accepted for record by the SDAT as of May 11, 2000, 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 on the Board of Trustees may
be filled only by a majority of the remaining Trustees, even if the remaining
Trustees do not constitute a quorum. Any Trustee elected to fill a vacancy shall
hold office for the remainder of the full term of the class of Trustees in which
the vacancy occurred and until a successor is elected and qualifies.
The number of Trustees in Group I shall be two (2), the number of
Trustees in Group II shall be two (2), and the number of Trustees in Group III
shall be one (1) (each of Group I, Group II and Group III being referred to
herein as a "Group"). A majority of the entire Board of Trustees shall designate
the Group of which each Trustee shall be a member, subject to the limitations
contained in Section 5.2.2 of the Declaration of Trust. In the event the
Trustees reduce the size of the Board of Trustees, the majority of the entire
Board of Trustees shall reduce the size of one or more Group or Groups by the
aggregate reduction in the number of the Trustees, subject to the limitations
contained in Section 5.2.2 of 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, 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 by 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.
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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, 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.
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 that 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 an audit committee and other committees, composed of three (3) or
more members, at least one (1) of which shall be a Trustee, to serve at the
pleasure of the Board of Trustees.
Section 4.2. Powers. The Trustees may delegate any of the powers of the
Trustees to committees appointed under Section 4.1 and composed solely of
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
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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.
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
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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.
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 any 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, if any, 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, if any, shall preside at such meetings at which he shall be present. The
chairman and the vice chairman of the board, if any, 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, if any, 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 of the board or
if none are appointed, the Managing Trustees, or either of them, shall perform
all duties and have all power and authority assigned to the chairman under these
Bylaws.
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Section 5.8. President. 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 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 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.
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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.
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.
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Section 7.2. Transfers.
(a) 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.
(b) 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 in these Bylaws or by the
laws of the State of Maryland.
(c) 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 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.
(a) 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.
(b) 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.
(c) If no record date is fixed and the share transfer books
are not closed for the determination of shareholders, (i) 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 (ii) 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
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business on the day on which the resolution of the Trustees, declaring the
dividend or allotment of rights, is adopted.
(d) 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.
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.
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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. 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.
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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, these Bylaws or 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, shareholders, partners 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
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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.
Notwithstanding the foregoing, the Advisor shall be required to use its
best efforts to present the Trust with a continuing and suitable program
consistent with the investment policies and objectives of the Trust and with
investments which are representative of, comparable with and on similar terms as
investments being made by Affiliates of the Advisor, or by the Advisor for its
own account or for the account of any person for whom the Advisor is providing
advisory services. In addition, the Advisor shall be required to, upon the
request of any Trustee, promptly furnish the Trustees with such information on a
confidential basis as to any investments within the investment policies of the
Trust made by Affiliates of the Advisor or by the Advisor for its own account or
for the account of any person for whom the Advisor is providing advisory
services.
ARTICLE XIV
AMENDMENT OF BYLAWS
Except for any change for which the Declaration or these Bylaws
requires 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.
Section 15.3. Election to be Subject to Part of Title 3, Subtitle 8.
Notwithstanding any other provision contained in the Declaration of Trust or
these Bylaws, the Trust hereby elects to be subject to Section 3-804(b) and (c)
of Title 3, Subtitle 8 of the Corporations and Associations
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Article of the Annotated Code of Maryland (or any successor statute). This
section 15.3 only may be repealed, in whole or in part, by a subsequent
amendment to these Bylaws.
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EXHIBIT 10.1
CONFIDENTIAL: THIS DOCUMENT IS PROVIDED FOR SETTLEMENT PURPOSES ONLY AND IS
SUBJECT TO THE PROTECTIONS OF FEDERAL RULE OF EVIDENCE 408 AND ALL SIMILAR
PROVISIONS AND SUPPORTING AUTHORITIES.
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is made as of this 20th
day of March, 2000, by and among (a) SENIOR HOUSING PROPERTIES TRUST, a Maryland
real estate investment trust ("SNH") and its wholly-owned subsidiary, SPTMNR
PROPERTIES TRUST, a Maryland real estate investment trust ("SPTMNR"), (b) FIVE
STAR QUALITY CARE, INC., a Delaware corporation (the "New Manager"), (c)
SHOPCO-AZ, LLC, SHOPCO-CA, LLC, SHOPCO-COLORADO, LLC and SHOPCO-WI, LLC, each of
which is a Delaware limited liability company (collectively, the "New Operators"
and, together with SNH, SPTMNR and the New Manager, collectively, the "SNH
Entities"), and (d) MARINER POST-ACUTE NETWORK, INC., a Delaware corporation
(f/k/a Paragon Health Network, Inc.) ("Mariner"), GRANCARE, INC. (f/k/a New
GranCare, Inc.), a Delaware corporation ("GranCare"), AMS PROPERTIES, INC., a
Delaware corporation ("AMS Properties") and GCI HEALTH CARE CENTERS, INC., a
Delaware corporation ("GCIHCC" and, together with Mariner, GranCare and AMS
Properties, collectively, the "Mariner Entities").
WITNESSETH:
WHEREAS, SPTMNR is the owner of all of the real property, buildings,
plant and equipment and certain of the personal property used in connection with
the operation of various health care and health care related facilities (as
further defined and described herein, the "Facilities"); and
WHEREAS, pursuant to the Master Lease (this and other capitalized terms
used and not otherwise defined herein shall have the meanings given such terms
in Article 1 hereof), SPTMNR leases the Facilities to AMS Properties and GCIHCC;
and
WHEREAS, pursuant to the Christopher East Note, AMS Properties agreed
to pay to SPTMNR certain amounts as further described therein; and
WHEREAS, pursuant to the GranCare Guaranties, GranCare guaranteed the
payment and performance of each and every obligation and liability of AMS
Properties and GCIHCC (each of which is a wholly-owned subsidiary of GranCare)
to SPTMNR; and
WHEREAS, pursuant to the Mariner Guaranty, Mariner guaranteed the
payment and performance of each and every obligation and liability of GranCare
(a wholly-owned subsidiary of Mariner), AMS Properties and GCIHCC to SPTMNR; and
<PAGE>
WHEREAS, pursuant to that certain Collateral Pledge Agreement dated as
of October 31, 1997, Mariner secured the Mariner Guaranty with $15,000,000.00 in
cash (the "Security Deposit"); and
WHEREAS, pursuant to that certain Amended and Restated HRP Shares
Pledge Agreement, dated as of June 30, 1992 by AMS Properties (the "Share Pledge
Agreement"), AMS reaffirmed its pledge of 1,000,000 common shares of beneficial
interest, $.01 par value, of HRPT Properties Trust (f/k/a Health and
Rehabilitation Properties Trust), a Maryland real estate investment trust
("HRP"), which pledge also extends to 100,000 common shares of beneficial
interest, $.01 par value, of SNH which were distributed as a distribution in
respect of such HRP shares (collectively, the "Pledged Shares"), which Pledged
Shares are currently held by REIT Management & Research, Inc., a Delaware
corporation and the successor in interest to HRPT Advisors, Inc. ("RMR") as such
pledgeholder; and
WHEREAS, the Mariner Entities have filed voluntary petitions under
Chapter 11 of the United States Bankruptcy Code, 11 U.S.C.ss.ss.101 et. seq., as
amended (the "Bankruptcy Code") on January 18, 2000 (the "Petition Date"),
before the United States Bankruptcy Court for the District of Delaware (the
"Court"), Case Nos. 00113 through 00214 (collectively, the "Cases"), which Cases
are currently pending and are being jointly administered; and
WHEREAS, the Mariner Entities wish to liquidate and terminate their
obligations to the SNH Entities under the Existing Documents in an orderly
fashion, and to cease operating and/or managing the Retained Facilities, and, in
furtherance thereof, the Mariner Entities have requested that, among other
things, the SNH Entities accept the surrender of the Master Lease and convey to
the Mariner Entities all of the SNH Entities' right, title and interest in and
to the Transferred Facilities; and
WHEREAS, the SNH Entities are willing to accept the surrender of the
Master Lease and to convey to the Mariner Entities all of their right, title and
interest in and to the Transferred Facilities, subject to, and upon, the terms
and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 The following capitalized terms shall have the meanings set forth
below:
"Agreement" shall mean this Settlement Agreement, including all
Appendices, Schedules and Exhibits thereto, as it and they may be amended from
time to time as herein provided.
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"Business Day" shall mean any day other than a Saturday, Sunday, or any
other day on which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive action to close.
"Christopher East Note" shall mean a Promissory Note, dated as of March
28, 1992, made by AMS Properties, in favor of HRP, in the original principal
amount of $1,250,000.
"Consumables" shall mean, with respect to any Facility, all inventory
and consumables, including, without limitation, food, central supplies, unopened
linens and housekeeping supplies and other consumables, customarily used or
consumed in the day-to-day operation of such Facility.
"Contracts" shall mean, with respect to any Facility, each instrument,
contract and agreement to which the Mariner Operator of such Facility is a party
that directly benefits, relates to or affects (i) such Facility, or (ii) the
operation of or the provision of services in conjunction with such Facility.
"Cross-Default/Cross-Collateralization Agreement" shall mean that
certain Guaranty, Cross-Default and Cross-Collateralization Agreement by AMS
Properties and GCIHCC, dated as of June 30, 1992, pursuant to which AMS
Properties and GCIHCC cross-defaulted, cross-collateralized and guaranteed each
other's obligations to SPTMNR.
"Employee Accruals" shall mean, with respect to any Facility, all
Employee Benefits which have been or would have been earned, accrued and/or
payable in accordance with existing employee benefit plans, or shall be or would
be earned, accrued and/or payable in accordance with existing employee benefit
plans, but which remain unpaid with respect to or for any period ending prior to
the Effective Time.
"Employee Benefits" shall mean, with respect to any Facility, all
wages, salary, health insurance coverage, disability coverage, severance pay,
withholding, social security or other employment taxes, vacation and sick pay,
bonuses, commissions, pensions, profit sharing, stock option or other
arrangements or other fringe benefits or other employee benefit plans, practices
or arrangements, whether written or oral, covering any present or former
employee of such Facility as of the moment preceding the Effective Time, whether
or not yet payable.
"Facility" shall mean, as the context may require, any or all of the
Retained Facilities, the Subleased Facilities and the Transferred Facilities.
"Fresno Facility" shall mean that certain Facility having an address of
577 South Peach Avenue, Fresno, California.
"Fresno Sublease" shall mean a Sublease, dated March 31, 1993, between
AMS Properties, as sublandlord, and Covenant Care, Inc., as subtenant and
successor by assignment from Pleasant Care Corporation.
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"Governmental Authority" shall mean all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures and offices of any
nature whatsoever, of any government unit or political subdivision, whether
federal, state, county, district, municipal, city or otherwise, and whether now
or hereafter in existence.
"GranCare Guaranties" shall mean, collectively, various guaranty
agreements, including, without limitation, a certain guaranty, dated as of
October 31, 1997, pursuant to which GranCare guaranteed the payment and
performance of each and every obligation and liability of AMS Properties and
GCIHCC (each of which is a wholly-owned subsidiary of GranCare) to SPTMNR.
"Hazardous Substances" shall mean any hazardous substances (as defined
by the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as now in effect), hazardous wastes (as defined by the Resource
Conservation and Recovery Act ("RCRA"), as now in effect), pollutants or
contaminants, oils, radioactive materials, asbestos in any form or condition, or
any pollutants or contaminants 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, all as now in effect.
"Mariner Entities' Guaranties" shall mean, as the context may require,
any or all of the Cross-Default/Cross-Collateralization Agreement, the GranCare
Guaranties and the Mariner Guaranty.
"Mariner Guaranty" shall mean that certain guaranty, dated as of
October 31, 1997, pursuant to which Mariner guaranteed the payment and
performance of each and every obligation and liability of GranCare (a
wholly-owned subsidiary of Mariner), AMS Properties and GCIHCC to SPTMNR.
"Mariner Operator" shall mean, with respect to any Facility, the
Mariner Entity that operates such Facility and holds the Permits for such
Facility as of the Effective Time.
"Master Lease" shall mean that certain master lease to which SPTMNR,
AMS Properties and GCIHCC are parties, which Master Lease is comprised of: (i) a
Master Lease Document General Terms and Conditions dated as of December 28, 1990
and entered into by and between HRP and AMS Properties; (ii) a Master Lease
Document General Terms and Conditions dated as of June 30, 1992 and entered into
by and between HRP and GCIHCC; (iii) twenty-six (26) facility lease supplements,
some of which are dated as of December 28, 1990, some of which are dated as of
March 27, 1992, some of which are dated June 30, 1992 and others of which are
dated as of June 29, 1998, all as entered into pursuant to the documents
described in preceding clauses (i) and (ii); and (iv) the
Cross-Default/Cross-Collateralization Agreement, all as amended to date.
"Permits" shall mean, with respect to any Facility, all licenses,
approvals, certificates of need, determinations of need, franchises,
accreditations, certificates, certifications, consents, permits and other
authorizations benefiting, relating to or affecting the operation of such
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Facility or the operation of programs or provision of services in conjunction
with such Facility, issued by or entered into with any Governmental Authority,
Third Party Payor or accreditation body (including, without limitation, the
Provider Agreements), and all renewals, replacements and substitutions therefor.
"Permitted Encumbrances" shall mean, with respect to any Facility, all
Permitted Personal Property Encumbrances and all Permitted Real Property
Encumbrances for such Facility.
"Permitted Personal Property Encumbrances" shall mean, (i) with respect
to any personal property present at or used in connection with the operation of
any Transferred Facility, any and all security interests and liens affecting
such personal property other than those arising by, through or under, any SNH
Entity (except that those security interests and liens arising by, through or
under, any SNH Entity as a result of a Mariner Entity's failure to pay or
perform any obligation required to be paid by it as lessee under the Master
Lease prior to the Effective Time shall be Permitted Personal Property
Encumbrances), and (ii) with respect to any personal property present at or used
in connection with the operation of any Retained Facility, those security
interests and liens listed in Schedule 1.1.1 attached hereto (and specifically
excluding, without limitation, any security interests and liens arising by,
through or under any Mariner Entity, or which has been granted by order of the
Court).
"Permitted Real Property Encumbrances" shall mean, (i) with respect to
the real property and the improvements at each Transferred Facility, any and all
liens and encumbrances affecting such real estate and improvements other than
those arising by, through or under, any SNH Entity (except that those liens and
encumbrances arising by, through or under any SNH Entity as a result of any
Mariner Entity's failure to pay or perform any obligation required to be paid by
it as lessee under the Master Lease prior to the Effective Time (such as,
without limitation, the obligation to pay real estate taxes thereunder), shall
be Permitted Real Property Encumbrances), and (ii) with respect to the real
property and the improvements at any Retained Facility, those liens and
encumbrances affecting such real property and improvements existing at the time
the applicable SNH Entity acquired title to such Retained Facility or those
liens and encumbrances arising by, through or under, any SNH Entity (except that
those liens and encumbrances arising by, through or under any SNH Entity as a
result of any Mariner Entity's failure to pay or perform any obligation required
to be paid by it as lessee under the Master Lease prior to the Effective Date
(such as, without limitation, the obligation to pay real estate taxes
thereunder)), and specifically excluding, without limitation, those liens and
encumbrances arising by, through or under any Mariner Entity, or which have been
granted by order of the Court.
"Person" shall mean all individuals, corporations, general and limited
partnerships, limited liability companies, stock companies or associations,
joint ventures, unincorporated associations, companies, trusts, banks, trust
companies, land trusts, business trusts, Governmental Authorities and other
entities of every kind and nature.
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"Pre-Closing Obligations" shall mean, with respect to any Facility, all
debts, liabilities and obligations, whether known or unknown, absolute, mature
or not yet due, liquidated or non-liquidated, contingent, non-contingent, direct
or indirect or otherwise (including, without limitation, payroll, accrued
vacation and other employee benefits and obligations and all other accrued,
vested and unpaid obligations of any kind and all Employee Accruals) relating to
such Facility, and/or arising under any Permits or Contracts or under any other
agreements or instruments (including under Provider Agreements or otherwise
under Third Party Payor Programs), or relating to the management or operation of
such Facility, or arising out of the acts or omissions of any Mariner Entity, in
each case arising out of or attributable to conditions or events occurring prior
to the Effective Time (including, without limitation, those obligations and
liabilities described in Section 10.4 hereof).
"Provider Agreements" shall mean, with respect to any Facility, all
participation, provider and reimbursement agreements or arrangements in effect
for the benefit of or relating to or affecting the operation of any Facility, or
the operation of programs or provision of services therein, relating to any
right of payment or other claim arising out of or in connection with such
Facility's participation in any Third Party Payor Program.
"Retained Facility" shall mean, collectively, the health care and
health care related facilities described in Schedule 1.1.2 hereto, which
facilities shall be retained by SPTMNR pursuant to this Agreement.
"Settlement Documents" shall mean, collectively, this Agreement and
each agreement, undertaking or instrument delivered pursuant to Article 3 and
Article 6 hereof.
"South Dakota Facilities" shall mean that certain Facility having an
address of 3600 S. Norton, Sioux Falls, South Dakota, together with that certain
Facility located at 15th and Michigan and/or 1251 Arizona SW in Huron, South
Dakota.
"South Dakota Subleases" shall mean, collectively, (i) a Sublease,
dated as of March 31, 1994, between GCIHCC, as sublandlord, and HealthQuest,
Inc., as subtenant, and (ii) a Sublease, dated as of May 1, 1994, between
GCIHCC, as sublandlord, and HealthQuest, Inc., as subtenant.
"Subleased Facilities" shall mean, collectively, the health care and
health care related facilities described in Schedule 1.1.3 hereto, which
facilities are currently subleased by AMS Properties or GCIHCC pursuant to the
Subleases.
"Subleases" shall mean, as the context may require, any or all of the
Fresno Sublease and the South Dakota Subleases.
"Subtenants" shall mean (i) with respect to the Fresno Facility,
Covenant Care, Inc., and (ii) with respect to the South Dakota Facilities,
HealthQuest, Inc.
"Third Party Payor Programs" shall mean all third party payor programs
in which any Facility participates, including, without limitation, Medicare,
Medicaid, CHAMPUS, Blue
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Cross and/or Blue Shield, TriCare, managed care plans, other private insurance
programs, workers compensation and employee assistance programs.
"Third Party Payors" shall mean Medicare, Medicaid, CHAMPUS, Blue Cross
and/or Blue Shield, TriCare, private insurers and any other Person which
maintains Third Party Payor Programs.
"Transferred Facilities" shall mean, collectively, the health care and
health care related facilities described in Schedule 1.1.4 hereto, which
facilities shall be transferred by SPTMNR to the Mariner Entities pursuant to
this Agreement.
1.2 The following terms shall have the meanings set forth in the
sections of this Agreement referred to below:
Defined Term: Defined In:
AMS Properties Introduction
Account Transfer Time Section 10.3
Agreed Deficiency Section 4.1
Agreement Introduction
Approval Order Section 2.2
Bankruptcy Code Recitals
Cases Recitals
Chase Section 6.15
Court Recitals
Damages Section 10.5
Effective Time Section 5.1
Exchange Act Section 13.8
Existing A/R Accounts Section 10.3
Existing Documents Section 2.1
Existing Mariner Obligations Section 2.1
Facilities Recitals
GCIHCC Recitals
GranCare Introduction
HRP Recitals
Indemnitee Section 10.5
Interim Management Agreement Section 3.5
Interim Occupancy Agreement Section 3.5
Mariner Introduction
Mariner Entities Introduction
NYSE Requirements Section 13.8
New A/R Accounts Section 10.3
New Manager Introduction
New Operators Introduction
Outside Effective Time Section 5.1
Petition Date Recitals
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Pledged Shares Recitals
Post-Effective A/R Section 10.3
RMR Recitals
SNH Introduction
SNH Declaration Section 13.10
SNH Entities Introduction
SPTMNR Introduction
SPTMNR Declaration Section 13.11
Security Deposit Recitals
Share Pledge Agreement Recitals
Title Commitments Section 7.5
Transaction Approval Motion Section 2.2
Transferred Facilities Recitals
Transferred Real Estate Section 3.6
True-Up Time Section 10.2.2
ARTICLE 2
ACKNOWLEDGMENT OF OBLIGATIONS
2.1 Mariner Obligations. Each of the Mariner Entities hereby
acknowledges that, subject to the effect of the filing of the Cases, it is
unconditionally liable to SPTMNR for the full and immediate payment and
performance of each of the obligations under the terms of the Master Lease and
the other documents, instruments and agreements listed in Schedule 2.1 hereto
(collectively, the "Existing Documents"), plus all charges that may arise under
the various documents executed or delivered by any of the Mariner Entities
evidencing or relating to such obligations, plus all costs of collection
incurred in connection with such obligations by the SNH Entities and the
reasonable fees and expenses incurred by attorneys for the SNH Entities
(hereinafter all such obligations are referred to as the "Existing Mariner
Obligations"), and that none of the Mariner Entities has any defenses,
counterclaims or set-offs with respect to the full and immediate payment of any
or all of the Existing Mariner Obligations other than as may arise by reason of
the filing of the Cases.
2.2 Court Approval. Promptly following execution of this Agreement by
all parties and otherwise within fifteen (15) Business Days after such date, the
Mariner Entities will file a motion with the Court seeking authority to proceed
with the transactions and other matters provided for in this Agreement (the
"Transaction Approval Motion"), together with a proposed form of order (the
"Approval Order") and the Approval Order shall be in a form, and include such
provisions, as the SNH Entities and the Mariner Entities may deem appropriate
under the circumstances.
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ARTICLE 3
TRANSACTIONS TO OCCUR AT THE EFFECTIVE TIME
At the Effective Time, the parties hereto shall effect the following
transactions:
3.1 Surrender of Master Lease. AMS Properties and GCIHCC shall assume,
assign and surrender to the New Operator designated by SPTMNR all of AMS
Properties' and GCIHCC's right, title and interest in, to and under the Master
Lease, and such New Operator shall accept such assignment and surrender,
whereupon all of AMS Properties' and GCIHCC's rights and obligations thereunder
(and the rights and obligations of the Mariner Entities under the Mariner
Entities' Guaranties) shall terminate. All cure payments allocable to
pre-Petition Date periods will be waived.
3.2 Transfer of Personal Property, Etc. AMS Properties and/or GCIHCC
(as applicable) shall, whether by assignment or by assumption and assignment,
assign to the New Operator designated by SPTMNR all of their right, title and
interest in and to any tangible and associated intangible personal property
(including, without limitation, all furniture, furnishings, fixtures, equipment
(not including cash and account receivables but including any Consumables and
computer equipment) and, subject to and upon the terms and conditions of any
applicable licensing agreements with respect thereto, all software and other
software licenses used in the normal course of business operations at the
Retained Facilities. The SNH Entities acknowledge and agree that the terms of
certain site licenses entered into between the Mariner Entities and Microsoft
Corporation and other software licenses for non-proprietary software prohibit
the assignment and transfer of those licenses to the SNH Entities. The Mariner
Entities and the SNH Entities further agree to enter into licensing agreements,
in a form and substance reasonably satisfactory to both parties, to permit the
SNH Entities to use and operate certain clinical software which has been
internally developed by the Mariner Entities to assist in the operation of the
Retained Facilities including, without limitation, those software programs which
are used to track the Minimum Data Set of Medicaid Statistics for each patient
in the Retained Facilities.
3.3. Transfer of Contracts and Permits. AMS Properties and/or GCIHCC
(as applicable) shall assume and assign, set over and transfer to the New
Manager or New Operator all of their right, title and interest in and to (i) all
of the Subleases (other than the right, title and interest of GCIHCC in and to
the Tenant Purchase and Sale Agreement referred to in each of the South Dakota
Subleases, or in and to any promissory note delivered by any Subtenant pursuant
thereto or otherwise delivered in connection with any such Subleases), (ii) to
the extent permitted by law, all of the Permits with respect to the Retained
Facilities that the New Manager or the New Operators elect to assume, and (iii)
all of the Contracts with respect to the Retained Facilities that the New
Manager or the New Operators elect to assume as provided in Section 10.7 hereof,
but specifically excluding, in each of the immediately preceding clauses (i),
(ii) and (iii) any Pre-Closing Obligations (except, in the case of the
Contracts, as otherwise provided in Section 10.7 hereof).
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3.4 Transfer and Release of Certain Collateral. The Mariner Entities
shall transfer and assign to SPTMNR, all of their right, title and interest in
and to (a) the Security Deposit and (b) the Pledged Shares and the proceeds
thereof, and the SNH Entities shall release to GranCare, free and clear of all
liens, claims and encumbrances arising by, through or under any SNH Entity, any
pledges of any stock of AMS Properties or GCIHCC or other collateral securing
the Master Lease or any related guaranties, including, without limitation, any
interest in accounts receivable arising prior to the Effective Time.
3.5 Interim Management and Interim Occupancy Agreements. The Mariner
Operators shall enter into an interim management agreement (an "Interim
Management Agreement"), substantially in the form attached as Schedule 3.5-A
hereto, with respect to the Retained Facilities with the New Manager under
which, to the extent and subject to the limitations imposed by applicable
licensure and certificate or determination of need laws and regulations, each
Mariner Operator shall agree to perform certain management services described
therein with respect to the operation of the Retained Facilities and, subject to
the control and direction of the Mariner Operators, as current licensees, the
New Manager may assume responsibility for certain of such services, pending
receipt by the New Manager and/or New Operator, as the case may be, of all
licenses, certificates, permits and approvals necessary to assume direct
operating control of such Retained Facility. The Mariner Operators also shall
enter into an interim occupancy agreement (an "Interim Occupancy Agreement"),
substantially in the form attached at Schedule 3.5-B hereto, with respect to
each of the Retained Facilities with the appropriate New Operator, which shall
provide that during the term of such Interim Occupancy Agreement, such Mariner
Operator shall continue to occupy such Retained Facility and have such control
over such Retained Facility as is necessary to comply with applicable licensure
and certificate of need statutes and regulations.
3.6 Conveyance of Transferred Facilities. Each SNH Entity shall (i)
convey all of its respective right, title and interest, if any, in and to the
parcels of real property described in Schedule 3.6, together with all
improvements thereon (collectively, the "Transferred Real Estate"), to AMS
Properties or its designee, and (ii) transfer and assign to AMS Properties or
its designee all of its right, title and interest, if any, in and to all
tangible and incorporated intangible personal property (including, without
limitation, all furniture, furnishings, fixtures and equipment) present at or
used in connection with the operation of the nursing facility located on the
Transferred Real Estate, in each case free and clear of all liens, claims and
encumbrances, except Permitted Encumbrances. All deeds, bills of sale,
assignments and other instruments of transfer or releases necessary to effect
such conveyances shall expressly state that they are made without
representations and warranties, express or implied, except as expressly set
forth in this Agreement.
3.7 Bankruptcy Code Provisions. Each of the transactions provided for
in Sections 3.1, 3.2, 3.3, 3.4 and 3.5 shall be completed in accordance with
Sections 105, 363(b), (f), and (m), and 365 and 1146(c) of the Bankruptcy Code,
as applicable, and the provisions of the Approval Order, with the SNH Entities
receiving the full benefits and protections of such sections and the provisions
of the Approval Order.
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ARTICLE 4
CONSIDERATION
4.1 Consideration. In consideration of the transfers and agreements
described in Article 3 hereof, the SNH Entities agree, effective at the
Effective Time, the obligations of the Mariner Entities for the payment of all
amounts due and to become due under the Master Lease, the Christopher East Note,
the GranCare Guaranties and the Mariner Guaranty, in each case as of the date
hereof, are reduced to $1,200,000.00 in the aggregate (such amount, as it may be
further reduced in accordance with the Interim Management Agreement, the "Agreed
Deficiency"). Except for the payment of the Agreed Deficiency, and without
limiting the obligations of the Mariner Entities hereunder and under the other
Settlement Documents, all of the past, present or future liabilities and
obligations of each of the Mariner Entities under the Existing Documents shall
terminate.
ARTICLE 5
CLOSING
5.1 Closing. The closing of the transactions contemplated by this
Agreement shall be held at the offices of Sullivan & Worcester LLP, One Post
Office Square, Boston, Massachusetts 02109, or at such other location as the
parties may agree upon in writing, at 10:00 a.m., local time, on April 12, 2000
(the "Effective Time"); provided, however that, in the event that the conditions
set forth in Article 6 hereof shall not be satisfied as of the Effective Time,
the SNH Entities shall have the right, by notice in writing to the Mariner
Entities, to extend the Effective Time from time to time to no later than 10:00
a.m., local time, on July 1, 2000 (the "Outside Effective Time"), in order to
satisfy such conditions, or in the event that the conditions set forth in
Article 7 hereof shall not be satisfied as of the Effective Time, the Mariner
Entities shall have the right, by notice in writing to the SNH Entities, to
extend the Effective Time from time to time to no later than the Outside
Effective Time in order to satisfy such conditions.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF SNH ENTITIES
The obligation of the SNH Entities to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction of each of
the conditions set forth in this Article 6. The determination that any condition
set forth in this Article 6 has been satisfied or has not been satisfied shall
be made by the SNH Entities in their sole discretion (unless otherwise expressly
provided herein, such as in Section 6.2 and Section 6.12 hereof).
6.1 Trustee Approval. This Agreement and each of the transactions
contemplated hereby shall have been approved by the Board of Trustees of SNH and
by each of the "Independent Trustees" of SNH. The Independent Trustees of SNH
are those trustees who are
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not affiliated with RMR. The SNH Entities shall notify the Mariner Entities if
the Board of Trustees or any of the "Independent Trustees" do not approve of
this Agreement and each of the transactions contemplated hereby on or before
March 31, 2000.
6.2 Documentation. All documentation evidencing or implementing the
transactions contemplated by this Agreement must be in form and substance
reasonably satisfactory to the SNH Entities and their counsel.
6.3 Lien Reports. With respect to each of the Retained Facilities,
SPTMNR shall have received a satisfactory lien report showing that, as of the
Effective Time, such Retained Facility is not subject to any liens, claims or
encumbrances other than the Permitted Encumbrances.
6.4 Receipt of Certain Permits and Approvals. The SNH Entities shall
have received all necessary Permits and approvals from all federal, state and
local regulatory agencies to enable them to: (a) accept the assignment and
surrender of the Master Lease; (b) enter into the Interim Management Agreement
and the Interim Occupancy Agreements with the Mariner Operators; and (c) do such
other acts and enter into such other agreements as are necessary or desirable to
carry out the intents and purposes of this Agreement.
6.5 Due Diligence. The SNH Entities shall have completed such
investigation and received such documentation and other assurances as they shall
deem necessary, in their sole discretion, to assure themselves that there are no
material impediments to the receipt by the SNH Entities of all licenses,
certificates, permits and approvals necessary to lease and to operate, as
licensee, and to manage, as manager, the Retained Facilities as they are
currently operated, and to receive Medicare and Medicaid payments or
reimbursements for services provided at each Retained Facility.
6.6 Reports and Surveys. With respect to each of the Retained
Facilities, the SNH Entities shall have received such reports, surveys and
opinions as they shall have determined are necessary or desirable, including the
following: updated title reports, licensure and Medicare/Medicaid survey reports
and updated appraisals; each such report, survey and opinion shall be
satisfactory to the SNH Entities in their sole discretion.
6.7 No Litigation. Except as disclosed on Schedule 6.7 (and other than
the Cases), there shall be no investigation, audit, governmental proceeding,
suit or other litigation, pending or threatened, seeking to, or the effect of
which would be to, enjoin, prevent or delay consummation of the transactions
contemplated by this Agreement, attach or place a lien on any of the Facilities
or any personal property or accounts receivable associated therewith or have a
reasonable likelihood of resulting in a material reduction of Third Party
Payments thereto, by withholding, offset, recoupment or reduction of prospective
rates of payment, revoke, condition or limit any Permit or approval necessary to
the operation thereof, or which would otherwise adversely affect the
consummation of the transactions contemplated herein or interfere with any SNH
Entity's ownership, lease, use, enjoyment or operation of the Retained
Facilities.
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6.8 No Default. Consummation of the transactions contemplated in this
Agreement shall not constitute, nor with the passage of time or giving of notice
or both result in, a default or event of default under any agreement, contract,
indenture, Permit, instrument or understanding to which any of the Mariner
Entities or any of their subsidiaries is a party or by which it or any of its
properties is bound and which is enforceable against the Mariner Entities in
their capacity as debtors in possession.
6.9 True and Complete Representation. All representations and
warranties of each of the Mariner Entities hereunder and under the Settlement
Documents shall be true, complete and correct in all material respects as of the
date hereof and as of the Effective Time.
6.10 Employment Matters. The SNH Entities shall have reviewed and
approved the contracts and agreements listed in Schedule 9.15 hereof.
6.11 Condition of Retained Facilities. Neither any asset to be conveyed
or transferred to any SNH Entity pursuant to this Agreement nor the business
conducted at any of the Retained Facilities shall have been adversely affected
in any material way from the date hereof to the Effective Time, including,
without limitation: by (a) any actual or threatened interference with use; (b)
fire or other casualty or condemnation; (c) pending or threatened loss,
revocation, restriction or limitation, including, without limitation, any
pending or threatened loss, revocation, restriction or limitation which is
stayed pursuant to an order of the Bankruptcy Court, of any material license,
certification or Permit; or (d) any other material operational matter. Between
the date hereof and the Effective Time, each SNH Entity and its agents and
consultants shall have been given all reasonable access to each Retained
Facility to perform such investigations and due diligence as it deems
appropriate to determine whether each condition precedent to its obligations
hereunder has been satisfied.
6.12 Opinions. The SNH Entities and each New Operator shall have
received such opinions of counsel for the Mariner Entities as they shall
reasonably request.
6.13 Approval Order. The Court shall have entered the Approval Order
and (a) no court of competent jurisdiction shall have entered an order staying
the Approval Order pending appeal, or, in the event a stay of the Approval Order
shall have been entered, then the stay shall have been terminated; (b) all
appeal periods shall have expired with no appeal having been taken or all
appeals shall have been dismissed, or the Approval Order shall have been
affirmed, by final order no longer subject to appeal; or (c) if appealed, such
appeal shall have otherwise been settled or resolved to the satisfaction of the
SNH Entities or this condition shall have been waived by the SNH Entities. The
Approval Order as entered by the Court shall contain no modifications
unacceptable to the SNH Entities and shall include, without limitation,
provisions as follows:
(i) Findings determining that notice of the Transaction
Approval Motion and hearing thereon have been adequate under
the circumstances;
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(ii) Findings that the SNH Entities are good faith purchasers
pursuant to 11 U.S.C.ss.363(m);
(iii) Findings that the consideration provided to the Mariner
Entities by the SNH Entities is adequate;
(iv) Findings that proceeding with those matters provided for
in the Agreement is in the best interest of the Mariner
Entities and their respective creditors;
(v) Finding that Schedule 9.16, updated as appropriate, is a
complete list of Employee Accruals;
(vi) Ordering that the transfer of the Retained Facilities and
personal property present at or used in connection with the
operation of the Retained Facilities is free and clear of all
liens, claims, encumbrances and interests pursuant to Section
363(f) of the Bankruptcy Code, except for the Permitted
Encumbrances;
(vii) Ordering that the transactions pursuant to the terms and
conditions set forth in this Agreement are approved in all
respects pursuant to Sections 363(b), 363(f), 365(b), 365(f)
and 1146(c) of the Bankruptcy Code, and otherwise;
(viii) Ordering that all Medicare and Medicaid payments for
services on or after the Effective Time shall be received by
the respective Mariner Entities and delivered by each to the
SNH Entities free and clear of any liens, claims, encumbrances
or interests;
(ix) Ordering that none of the SNH Entities or their nominees
shall have any liability for any Pre-Closing Obligations or
other obligations of any Mariner Entity or their affiliates or
subsidiaries (except as otherwise expressly provided for
herein); and
(x) Ordering that, in consideration of, and upon, the SNH
Entities' or their nominees' assuming the obligation to pay
the Employee Accruals, the Mariner Entities shall pay to the
SNH Entities the cash equivalent of such Employee Accruals.
6.14 Notice. Within a reasonable time following the filing with the
Court of the Approval Motion, and prior to the hearing and relevant objection
date, the Mariner Entities shall have served notice of the Transaction Approval
Motion in a form acceptable to the SNH Entities upon those persons mutually
designated by both parties and shall publish the notice in such newspapers as
mutually designated by both parties. The Mariner Entities shall pay the costs
incurred in connection with providing notice to mutually-designated parties as
aforesaid and the Mariner Entities and the SNH Entities shall each pay half the
costs for publishing notices in mutually-designated newspapers as aforesaid. In
addition, to the extent that the SNH
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Entities shall request that any additional parties be served any such notices,
or that any such notices be published in any additional newspapers, the Mariner
Entities shall cooperate with the SNH Entities to accomplish the same, and the
SNH Entities shall pay for all such costs in connection therewith.
6.15 Chase/Lender Approval. The SNH Entities shall have received
evidence satisfactory to them that the Chase Manhattan Bank, in its capacity as
collateral agent for the Mariner Entities' pre-petition senior secured lenders
and as agent for the Mariner Entities' debtor in possession lenders (in its
capacities as the collateral agent and the debtor in possession agent,
respectively, "Chase"), has consented to, or agreed not to object to, the
transactions contemplated under this Agreement and all related documents.
6.16 Hart-Scott-Rodino. There shall be no filing required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, relating to
the consummation of the transactions contemplated by this Agreement or, if such
a filing is required, all applicable consents shall have been obtained and the
Mariner Entities shall have agreed to pay all reasonable costs incurred in
connection with such filing.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE MARINER ENTITIES
The obligation of each Mariner Entity to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction of each of
the conditions set forth in this Article 7. The determination that any condition
set forth in this Article 7 has been satisfied or has not been satisfied shall
be made by the Mariner Entities in their sole discretion (unless otherwise
expressly provided herein, such as in Section 7.2 hereof).
7.1 Receipt of Certain Permits. The Mariner Entities shall have
received all Permits from all federal, state and local regulatory agencies to
enable them to: (a) surrender the Master Lease; (b) enter into the Interim
Management Agreement and the Interim Occupancy Agreements with the New
Operators; and (c) do such other acts and enter into such other agreements as
are necessary or desirable to carry out the intents and purposes of this
Agreement.
7.2 Documentation. All documentation evidencing or implementing the
transactions contemplated by this Agreement shall be in form and substance
reasonably satisfactory to the Mariner Entities and their counsel.
7.3 No Litigation. There shall be no investigation, governmental
proceeding, suit or other litigation pending or threatened seeking to, or the
effect of which would be to, enjoin, prevent or delay consummation of the
transactions contemplated by this Agreement.
7.4 Lien Reports. With respect to each of the Transferred Facilities,
Mariner shall have received a satisfactory lien report showing that, as of the
Effective Time, such Transferred
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Facility is not subject to any liens, claims or encumbrances other than the
Permitted Encumbrances.
7.5 Title Commitments. The Mariner Entities shall have obtained title
commitments (the "Title Commitments") committing to insure, at prevailing market
rates, subject to standard exceptions but subject to no special exceptions for
(a) liens or encumbrances arising by or through SPTMNR, SNH, HRP or any other
subsidiary of SNH or HRP (other than those consented to by Mariner or that are
Permitted Encumbrances) or (b) mortgages, deeds of trust, attachments or similar
liens securing payment obligations arising by or through SPTMNR, SNH, HRP or any
other subsidiary of SNH or HRP (other than those that are Permitted
Encumbrances).
7.6 True and Complete Representations. All representations and
warranties of the SNH Entities shall be true, complete and correct in all
material respects as of the date hereof and as of the Effective Time.
7.7 Approval Order. The condition set forth in Section 6.13 shall have
been satisfied.
7.8 Chase/Lender Approval. The Mariner Entities shall have received
evidence satisfactory to them that Chase has consented to, or agreed not to
object to, the transactions contemplated under this Agreement and all related
documents.
7.9 Hart-Scott-Rodino. There shall be no filing required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, relating to
the consummation of the transactions contemplated by this Agreement or, if such
a filing is required, all applicable consents shall have been obtained and the
Mariner Entities shall have agreed to pay all reasonable costs incurred in
connection with such filing.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF SNH ENTITIES
8.1 Reliance. Each of the SNH Entities, jointly and severally, hereby
makes the representations and warranties set forth in this Article 8. Each of
the SNH Entities expressly acknowledges and agrees that, notwithstanding any
provision to the contrary in this or in any other agreement between or among the
parties: (a) Mariner, AMS Properties, GCI and their respective affiliates are
relying, may rely and are and shall be justified in relying on the following
representations and warranties in entering into this Agreement and the other
agreements and instruments referred to in, contemplated by, or executed in
connection with this Agreement and the other Settlement Documents; (b) each of
the following representations and warranties is made to induce the Mariner
Entities and their respective affiliates to enter into and consummate the
transactions contemplated by this Agreement and the other agreements referred to
in or contemplated by this Agreement and the other Settlement Documents, and
their respective affiliates, are and shall be beneficiaries of these
representations and warranties; and (c) each of the following representations
and warranties shall be a continuing representation and
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warranty and shall survive the closing of the transactions contemplated by this
Agreement, the execution of any Settlement Documents, and performance
thereunder.
8.2 Organization. SPTMNR is a real estate investment trust duly
organized, validly existing and in good standing under the laws of the State of
Maryland. SPTMNR has all requisite power and authority to carry on its business
as such business is presently being conducted and, subject to approval of its
Board of Trustees, to enter into this Agreement and to consummate the
transactions contemplated hereby.
8.3 Authorization. The execution, delivery and performance of this
Agreement and each other Settlement Document and all transfers, conveyances,
surrenders of leases, assignments and deliveries provided for herein have been
duly authorized by all necessary corporate, partnership and stockholder action.
This Agreement has been duly executed by each SNH Entity and constitutes the
valid and binding obligation of each SNH Entity, enforceable in accordance with
its terms.
8.4 Successor to HRP. SPTMNR is the successor in interest to HRP under
the Master Lease and the Existing Documents, it has assumed all of HRP's rights,
duties and obligations under the Master Lease and the Existing Documents and HRP
no longer has any rights or claims thereunder.
8.5 Brokerage. The SNH Entities have not used the services of any
broker or finder in connection with the transactions contemplated by this
Agreement and they will indemnify and hold harmless the Mariner Entities from
and against all claims, actions, causes of action, costs, expenses, including
attorneys' fees, and liabilities arising in or out of, or related to any broker
or finder claiming any compensation or fee by reason of an alleged agreement or
understanding with any of the SNH Entities.
8.6 No Actions. There are no actions, proceedings, investigations or
audits pending or threatened against any of the SNH Entities, before or by any
court, arbitrator, administrative agency or other Governmental Authority which
are expected, in the reasonable judgment of the executive officers of any of the
SNH Entities, to materially and adversely affect the assets or the financial
condition or operations of any of the SNH Entities, or their ability to carry
out the transactions contemplated in this Agreement.
8.7 TRANSFERRED FACILITIES CONVEYED "AS IS". THE MARINER ENTITIES
ACKNOWLEDGE THAT THE TRANSFERRED REAL ESTATE BEING CONVEYED OR TRANSFERRED TO
AMS PROPERTIES OR ITS DESIGNEE HEREUNDER IS BEING CONVEYED AND TRANSFERRED "AS
IS, WHERE IS" WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
CONDITION, TITLE, DESIGN, MERCHANTABILITY OR FITNESS FOR USE OF SUCH PROPERTY
AND NO SNH ENTITY HAS MADE, OR SHALL BE DEEMED TO HAVE MADE, ANY OTHER
REPRESENTATION OR WARRANTY, OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT
OR ANY OTHER SETTLEMENT DOCUMENT. Without limiting the generality of the
foregoing, except for representations and
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warranties expressly set forth in this Agreement or in any other Settlement
Document, the transactions contemplated by this Agreement are without any
statutory, express or implied warranty, representation, agreement, statement or
expression of opinion on the part of any SNH Entity of or with respect to (i)
the condition or title of the assets or any aspect thereof, including, without
limitation, any and all statutory, express or implied representations or
warranties related to suitability for habitation, merchantability or fitness for
a particular use or purpose, (ii) the nature or quality of construction,
structural design or engineering of the improvements located on the Transferred
Real Estate, (iii) the quality of the labor or materials included in the
improvements located on the Transferred Real Estate, (iv) the soil conditions,
drainage, topographical features, flora, fauna or other conditions of or which
affect the Transferred Real Estate, (v) any conditions at or which affect the
Transferred Real Estate with respect to any particular use, purpose development
potential or otherwise, (vi) area, size, shape, configuration, location, access,
capacity, quantity, quality, cash flow, expenses, value, condition, make, model,
composition, accuracy, completeness, applicability, assignability,
enforceability, exclusivity, usefulness, authenticity or amount, (vii) any
statutory, express, or implied, representations or warranties created by any
affirmation of fact or promise, by any description of the assets or by operation
of law, (viii) any environmental, structural, or other condition or hazard or
the absence thereof heretofore, now, or hereafter affecting in any manner any of
the Transferred Real Estate, and (ix) all other statutory, express or implied
representations and warranties whatsoever.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF THE MARINER ENTITIES
9.1 Reliance. Each of the Mariner Entities, jointly and severally,
hereby makes the representations and warranties set forth in this Article 9.
Each of the Mariner Entities expressly acknowledges and agrees that,
notwithstanding any provision to the contrary in this or in any other agreement
between or among the parties, the New Manager and/or any New Operator or their
respective affiliates: (a) SPTMNR, the New Manager, each New Operator and their
respective affiliates are relying, may rely and are and shall be justified in
relying on the following representations and warranties in entering into this
Agreement and the other agreements and instruments referred to in, contemplated
by, or executed in connection with this Agreement and the other Settlement
Documents; (b) each of the following representations and warranties is made to
induce the SNH Entities and their respective affiliates to enter into and
consummate the transactions contemplated by this Agreement and the other
agreements referred to in or contemplated by this Agreement and the other
Settlement Documents, and their respective affiliates, are and shall be
beneficiaries of these representations and warranties; and (c) each of the
following representations and warranties shall be a continuing representation
and warranty and shall survive the closing of the transactions contemplated by
this Agreement, the execution of any Settlement Documents, and performance
thereunder.
9.2 Organization. Each of the Mariner Entities is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Subject to the entry of the Approval Order,
each of the Mariner Entities has full power,
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authority and legal right to execute, deliver and perform under this Agreement,
to enter into the Interim Occupancy Agreements, Interim Management Agreement and
the other Settlement Documents and to take all other actions necessary to carry
out the intents and purposes of this Agreement.
9.3 Authorization. The execution, delivery and performance of this
Agreement and each other Settlement Document and all transfers, conveyances,
surrenders of leases, assignments and deliveries provided for herein have been
duly authorized by all necessary corporate, partnership and stockholder action.
This Agreement has been duly executed by each Mariner Entity and, subject to the
entry of the Approval Order, constitutes the valid and binding obligation of
each Mariner Entity, enforceable in accordance with its terms.
9.4 No Liabilities. None of the Mariner Entities has any liabilities
which would impair or encumber title to, or materially adversely affect the
Retained Facilities or their operations, whether absolute, contingent or fixed,
liquidated or unliquidated, matured or not yet due, of any nature, including tax
liabilities, other than liquidated, noncontingent liabilities incurred by the
Mariner Entities in the ordinary course of their businesses. Each of the Mariner
Entities has (a) filed all tax returns which it is required to file and (b)
paid, or simultaneously with the closing will have paid, any taxes levied or
assessed against it or any of its assets, or under any judgment, order, decree,
or a regulation of any court, arbitrator, administrative agency or other
Governmental Authority to which it may be subject which would, in each case, or
in the aggregate, adversely affect the assets, business, prospects, operation or
financial condition of any Retained Facility after the Effective Time.
9.5 Personal Property. The Mariner Entities own all the tangible and
intangible personal property necessary to operate each Retained Facility (other
than those assets subject to personal property leases (complete and accurate
copies of which shall be provided to the SNH Entities for review within fifteen
(15) Business Days of the execution hereof) and the tangible and intangible
personal property necessary to operate the Subleased Facilities, which personal
property is owned by the Subtenants at the Subleased Facilities) with the number
of beds, and providing such services, as are described in Schedule 9.5, free and
clear of all liens, encumbrances, charges, restrictions, conditions and adverse
claims of any kind or nature, except for Permitted Personal Property
Encumbrances. The Consumables located at each Retained Facility as of the
Effective Date and included in the personal property being transferred by the
Mariner Entities pursuant to Section 3.2 are sufficient for at least three (3)
days' operations at such Retained Facility as currently operated, which reserve
is typical and otherwise in accordance with sound business and care practices
for such Retained Facilities.
9.6 Required Consents. No material consent, approval or other
authorization of, or registration, declaration or filing with, any court or
governmental agency or commission which has not been heretofore obtained or
which will not be obtained prior to the Effective Time is required for the due
execution, delivery or performance of this Agreement and the other Settlement
Documents, the assignments and conveyances contemplated hereby or for the
validity or enforceability thereof against any of the Mariner Entities.
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9.7 No Third Party Payor Actions. To the best of their knowledge, there
are no actions, proceedings, investigations or audits claims, orders or
settlement agreements pending or threatened against any of the Mariner Entities,
before or by any court, arbitrator, administrative agency or other Governmental
Authority or Third Party Payor or its agent, including, without limitation, any
action, proceeding, investigation, audit, claim, order, or settlement agreement
likely to result in a Third Party Payor suspending, withholding, or reducing
payments to any of the Facilities for services after the Effective Time, in
order to recoup, offset, or otherwise secure for overpayments or penalties
claimed to be owed by a Mariner Entity, or to secure the payment of fines,
penalties, interest, or other costs in connection therewith, which are expected,
in the reasonable judgment of the executive officers of any of the Mariner
Entities, to materially and adversely affect the assets or the financial
condition or operations of any of the Retained Facilities, or the Mariner
Entities' ability to carry out the transactions contemplated in this Agreement,
and except as otherwise disclosed in writing to the SNH Entities within fifteen
(15) Business Days of the execution hereof.
9.8 No Violations. The execution and delivery of this Agreement, the
compliance with the provisions hereof and the consummation of the transactions
herein contemplated by each of the Mariner Entities, will not result in (a) a
breach or violation of (i) any material law or governmental rule or regulation
now in effect and applicable to any of the Mariner Entities, (ii) any provision
of the Articles of Organization, Certificate of Incorporation, or By-laws of any
of the Mariner Entities, (iii) any judgment, order or decree of any court,
arbitrator, administrative agency or other Governmental Authority binding upon
any of the Mariner Entities, (iv) any agreement or instrument to which any of
the Mariner Entities is a party and by which it is bound as a debtor in
possession or by which it or any of its properties is bound, or (b) the creation
of any lien, claim or encumbrance (other than the Permitted Encumbrances) upon
any of the Retained Facilities.
9.9 Condition of Retained Facilities. As to each of the Retained
Facilities (but, in the case of the Subleased Facilities, to the best of the
knowledge of the Mariner Entities (as such Subleased Facilities are, and have
been, operated by the Subtenants)):
(a) Each Retained Facility and its operation and use are in
compliance with all material municipal, county, state and federal laws,
regulations, ordinances, standards and orders and with all municipal,
health, building and zoning laws and regulations (including, without
limitation, the fire safety code) where the failure to comply therewith
could reasonably be anticipated to have a material adverse effect on
the business, property, condition (financial or otherwise) or operation
of the Retained Facility as it is presently being operated or the
ability to obtain any Necessary License (as such term is defined in the
Interim Management Agreement);
(b) There are no outstanding material deficiencies cited by
any Governmental Authority having jurisdiction over any Retained
Facility requiring conformity to any applicable statute, regulation,
ordinance or bylaw pertaining to the type of facility presently being
operated;
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(c) No claim, requirement or demand has been made by any
licensing or certifying agency supervising or having authority over any
Retained Facility to construct or install improvements to or on, or
otherwise alter or redesign, such Retained Facility or to provide
additional furniture, fixtures, equipment or Consumables so as to
conform to or comply with any existing law, code or standard which has
not been fully satisfied prior to the date hereof;
(d) There exists no material defect or deficiency with regard
to the structure, soil, fixtures, plumbing, septic, electrical,
mechanical or other systems of any Retained Facility which would
materially impair the use or value of such Retained Facility, and each
Retained Facility is in good repair and working order and is not
subject to any substantial deferred maintenance; there is no termite or
other infestation at any Retained Facility and there is not earth
subsidence or earth movement affecting any Retained Facility or the
property on which it is situated; and
(e) Except as set forth in Schedule 9.9(e), each Retained
Facility is duly and properly licensed under all applicable federal,
state and local laws, ordinances and regulations and in conformance
with all insurance requirements and requirements of Third Party Payor
Programs, and holds all other Permits and approvals issued, and has
satisfied all eligibility and other similar requirements imposed, by
hospital, health or similar regulatory bodies, administrative agencies
or other governmental bodies, agencies or officials, or that relate to
all Third Party Payor Programs or other private or governmental
programs for the reimbursement or payment of health care costs or
charges to provide the services and operate the number of beds at such
Retained Facility as described in Schedule 9.5 in the ordinary course
of business consistent with past practices. Other than the Approval
Order and the Chase consents required as provided in Section 6.13 and
Section 6.15 hereof, no consents, approvals or other authorizations,
registrations, declarations or filings, except those with respect to
which application has heretofore been made and received, or will have
been so received by the Effective Time, are required for the transfer
of the property to the SNH Entities and the other transactions
contemplated by this Agreement, including, without limitation, Article
3, Article 4 and Article 10 hereof, and for the Approval Order. There
is no action pending or recommended or threatened by any state or
federal agency having jurisdiction thereof, either to revoke, withdraw
or suspend any license to operate any Retained Facility, nor is there
any decision or threat, or action, pending, recommended or threatened,
not to renew or to revoke any Medicare or Medicaid certification or
Provider Agreements related to any Retained Facility, or any action of
any other type which would have a material adverse effect on any
Retained Facility, its operations or business. No liability or
obligations with respect to any matters referred to herein is being, or
shall be deemed to have been, assumed by SPTMNR or by any SNH Entity.
(f) As to the property on which each Retained Facility is
located:
(i) the Mariner Entities have not received any notice
that any buildings and improvements on the property have not
been constructed in
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compliance with the requirements of all material laws,
ordinances, rules, regulations and restrictions of record
applicable thereto, or that any bills for labor and materials
in connection with the construction thereof have not been paid
in full or provided for;
(ii) there has been no material damage to the
buildings and improvements on the property, and all
improvements are insured for full replacement value;
(iii) all public utilities or adequate and complying
private septic systems, including, but not limited to, water,
sewer, gas and electricity, to the extent necessary for the
operation of the property, are available to service the
property and are adequate for the intended use of the
property;
(iv) all Permits which are necessary to permit the
use of the property in accordance with the provisions of this
Agreement and the transactions contemplated thereby have been
obtained and are in full force and effect, and there has been
no actual or claimed violations of the terms and conditions
thereof;
(v) to the best of the knowledge of the Mariner
Entities, no Hazardous Substance, including, but not limited
to, asbestos, PCB's or ureaformaldehyde, has been generated,
released into, stored or deposited over, upon or below the
property, into any water systems on or below the surface of
the property, or in any structures located on the property,
including, without limitation, the Retained Facilities, from
any sources whatsoever, except such as are used, stored or
disposed of in full compliance with all applicable statutes,
regulations and rules pertaining thereto; and
(vi) no Mariner Entity has entered into, nor is the
property subject to, any option, lease, claim for occupancy or
other agreement other than as contemplated by this Agreement
(other than the Subleases).
9.10 Non-Foreign Status. No Mariner Entity is a "foreign person" within
the meaning of Section 1445(f) of the Internal Revenue Code.
9.11 Filing of Reports and Claims. Each of the Mariner Entities has
filed with all applicable Third Party Payor Programs all required cost reports
and claims for payment with respect to each of the Retained Facilities. All such
reports and claims for payment have been prepared and retained in material
compliance with all applicable governmental and program statutes, rules and
regulations and are true and correct in all material respects. All services to
which such cost reports and claims relate have been at all times provided in
material compliance with all applicable governmental and program statutes, rules
and regulations. The Mariner Entities have retained all records necessary to
document that all facility services have been provided as claimed. Each of the
Mariner Entities has paid or simultaneously with the Closing shall have paid any
liabilities assessed against it or any of its assets under any
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regulation, claim, settlement agreement, judgment, order, decree or regulation
of any administrative agency, Third Party Payor, Third Party Payor Program,
court or arbitrator to which it may be subject, in each case, to the extent that
such liabilities are enforceable against the Mariner Entities in their capacity
as debtors in possession.
9.12 Patient Trust Accounts. There are no deficiencies in any of the
Patient Trust Accounts held for the benefit of residents of any of the Retained
Facilities. Each Mariner Entity has at all times properly prepared and filed all
accountings for Patient Trust Accounts required by applicable law or reconciled
and rectified any improperly prepared or filed accountings.
9.13 List of Patients. On or prior to the Effective Time, each of the
Mariner Entities shall provide the SNH Entities with an accurate and complete
list of the residents of each of the Retained Facilities and the Persons or
Third Party Payor Programs responsible for payment of their charges.
9.14 Contracts. No Mariner Entity is a party to, and none of the
Retained Facilities is subject in any way to, any contract, agreement or
arrangement, written or oral with any other Mariner Entity, any directors,
partners, shareholders or officers of any Mariner Entity, any affiliate or
subsidiary of any Mariner Entity, any third party affiliated with any of the
foregoing, or with any employees, consultants, advisors or agents of any of the
foregoing, with respect to: (i) any plan, contract, agreement or arrangement,
written or oral, providing for bonuses, pensions, options, deferred
compensation, termination or severance pay, retirement payments, profit sharing
or the like that could create any liability or obligation for any of the SNH
Entities; (ii) any contract or agreement involving any joint venture or profit
sharing arrangement with respect to any Retained Facility; (iii) any option or
right of first refusal with respect to any Retained Facility; (iv) any
noncompetition agreement or similar restrictive covenant; (v) any contract or
agreement entered into outside the ordinary course of business and affecting the
assets, business, prospects, operation or financial condition of any Retained
Facility that is enforceable against the Mariner Entities in their capacity as
debtors in possession.
9.15 Labor Unions, Etc. Except as set forth in Schedule 9.15, neither
any Mariner Entity, nor any Retained Facility is a party to any contract or
agreement with a labor union, including without limitation, collective
bargaining or employment agreements, or any agreements that contain any
severance or termination pay liabilities that is enforceable against the Mariner
Entities in their capacity as debtors in possession.
9.16 Employment Matters. Except as set forth in Schedule 9.16, there
are no wages, salaries, vacation, holiday, sick pay or severance pay due or to
become due any employee of any Mariner Entity relating to, or arising out of,
such employee's employment at any Retained Facility prior to the Effective Time
that is enforceable against the Mariner Entities in their capacity as debtors in
possession.
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9.17 No Litigation. Except for the Cases, there is no suit, claim,
action, or legal, administrative, arbitration or other proceeding or
governmental or Third Party Payor investigation or audit pending, or to the best
knowledge of each Mariner Entity, threatened by or against any Mariner Entity,
or any of the Facilities, and no event or condition of any character, which
could prevent the consummation of the transactions contemplated by this
Agreement or adversely affect the SNH Entities' use or enjoyment of the Retained
Facilities or diminish the value of such properties has, to the best knowledge
of each of the Mariner Entities, occurred; and there are no judgments, decrees,
orders, ruling, writs or injunctions, against any Mariner Entity which could
adversely affect the operations or finances of the Retained Facilities, the
property on which each is situated, or the transactions contemplated herein.
9.18 Insurance. Each Mariner Entity has maintained or caused to be
maintained insurance since commencement of its operations at each of the
Retained Facilities, without any interruption of coverage, against liability,
loss or casualty on all aspects of each Retained Facility's operations,
including, but not limited to, its assets, personnel, employees, and residents,
as well as appropriate malpractice insurance. The insurance policies which
currently provide the foregoing insurance coverage are listed and described in
Schedule 9.18.
9.19 Subleases. To the best of the knowledge of the Mariner Entities,
(i) no Mariner Entity has received any notice from any Subtenant purporting to
exercise any right to renew or extend the term of any Sublease, (ii) the list of
Subleases and other documents contained in Schedule 9.19 attached hereto is
true, complete and accurate, includes all amendments thereto and constitutes the
entire agreement between the Mariner Entities and the Subtenants thereunder,
including, without limitation, any financing agreements and all agreements
entered into between the Mariner Entities and the Subtenants and any promissory
notes executed and delivered in connection therewith, and (iii) the Mariner
Entities have provided the SNH Entities with complete and accurate copies of all
documents and correspondence relating to the Subleases that are in their
possession.
9.20 Brokerage. Each of the Mariner Entities represents that it has not
used the services of any broker or finder in connection with the transactions
contemplated by this Agreement and each of the Mariner Entities will indemnify
and hold harmless the SNH Entities from and against all claims, actions, causes
of action, costs, expenses, including attorneys' fees, and liabilities arising
in or out of, or related to any broker or finder claiming any compensation or
fee by reason of an alleged agreement or understanding with any of the Mariner
Entities.
9.21 Knowledge and Expertise. Each of the Mariner Entities represents
that it has the knowledge and expertise in financial and business matters to
enable it to evaluate the risks and merits of the transactions contemplated by
this Agreement.
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ARTICLE 10
CERTAIN MATTERS RELATING TO TRANSITION OF PROPERTIES
10.1 Employees; Employee Benefits.
10.1.1 After the Effective Time and subject to the terms of the Interim
Management Agreement, the Mariner Entities shall employ qualified nursing home
administrators who shall be responsible for the functional day-to-day operation
of the Retained Facilities and supervision of personnel at the Retained
Facilities, as well as all on-site professional, custodial, food service,
cleaning, maintenance, clerical, secretarial, bookkeeping, management,
collection, and other employees for the day-to-day operations of the Retained
Facilities. All such administrators and other personnel shall be employees of
the Mariner Entities.
Notwithstanding the foregoing, the New Manager shall offer employment
to all or substantially all of the qualified nursing home administrators and
other employees at the Retained Facilities as soon after the Effective Time as
is reasonably practicable. The Mariner Entities acknowledge that the ability of
the New Manager to make any such offer is contingent upon the employees being
employable under state and Federal law and may be subject to the New Operators'
or New Manager's receipt of all licenses, permits, approvals, authorizations,
provider agreements, and certificates and determinations of need as are
necessary for the New Operators and the New Manager to operate the Facilities as
licensees and to receive Medicare and Medicaid reimbursement for the services
provided therein, and that in any event the New Manager will first have to
implement an appropriate accounting and payroll function. The Mariner Entities
further acknowledge that the New Manager may not hire all such employees on the
same date or at the same time. The Mariner Entities agree to cooperate with the
New Manager in connection with such offers of employment and to release any
personnel to whom the New Manager offers employment from any employment
agreements, non-competition, non-solicitation and non-disclosure agreements or
common law obligations relating to their employment with the Mariner Entities to
which they may be a party or subject.
10.1.2 Payroll and payroll related costs shall be prorated as of the
Effective Time.
In addition, the Mariner Entities shall pay to the New Manager for each
Facility an amount of cash equivalent to all Employee Accruals with respect to
such Retained Facility at the Effective Time and, in connection therewith, the
SNH Entities shall assume the Mariner Entities' obligation to pay the same.
AMS Properties, GCIHCC, or the New Manager, as the case may be, shall
pay all payroll and payroll related costs, and maintain, prepare and process all
employee payroll records and tax withholding filings, relating to, or arising
out of, any employee's employment from and after the Effective Date, as provided
in the Interim Management Agreement.
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The Mariner Operator of each Retained Facility shall, as of the
Effective Time, deliver to the New Manager all personnel records for employees
at such Retained Facility. Each Mariner Operator shall have the right to retain
copies of any files which are delivered to the New Manager. The Mariner
Operators, the New Operators and the New Manager, as the case may be, each
further acknowledge and agree that, in order to facilitate the application of
the proration provisions of this Section 10.1, they shall generate terminating
payrolls and make corresponding payments to employees with respect thereto for
each Retained Facility on both the Effective Date and the date that the New
Manager shall hire all or substantially all of the employees at such Retained
Facility.
10.2 Prorations.
10.2.1 Revenues and expenses pertaining to Contracts (to the
extent applicable), utility charges for the billing period in which the
Effective Time occurs, prepaid expenses, real estate taxes, municipal charges,
payroll, Employee Accruals and Employee Benefits and other related items of
revenue or expense attributable to any Retained Facility shall be prorated
between the Mariner Operator for such Retained Facility and the relevant New
Operator as of the Effective Time. In general, such prorations shall be made so
as to reimburse such Mariner Operator for prepaid expense items, and to charge
the relevant Mariner Operator for prepaid revenue items, to the extent that the
same are attributable to periods after the Effective Time.
10.2.2 All such prorations shall be made on the basis of
actual days elapsed in the relevant accounting or revenue period and (i) in the
case of utility charges, real estate taxes, municipal charges, payroll, Employee
Accruals and Employee Benefits, shall be calculated and paid at the Effective
Time as provided in Section 10.2.3 hereof, based on invoices, remittances,
statements and other information available with respect to such charges, and, if
such invoices, remittances, statements and other information are not available
with respect to such charges, on estimates based on prior charges for such
items, (ii) in the case of all Contracts (to the extent applicable) and other
items of revenue or expense attributable to any Retained Facility, shall be
calculated and paid on the date that is the sixtieth (60th) day (the "True-Up
Time") after the Effective Time, as provided in Section 10.2.3 hereof, based on
invoices, remittances, statements and other information then available with
respect to such charges, and, if such invoices, remittances, statements and
other information continue to be unavailable with respect to such charges, on
estimates based on prior charges for such items, and (iii) to the extent that
any prorations for payments and charges outlined in the preceding clauses (i)
and (ii) are based on estimates, the SNH Entities and the Mariner Entities agree
to reconcile the estimates for such items against the actual costs therefor by
no later than September 30, 2000. The SNH Entities and the Mariner Entities
agree that the calculation of the proration at the True-Up Time shall be
performed by Ernst & Young U.S. LLP and that they shall each pay fifty percent
(50%) of the cost therefor. Notwithstanding anything contained in this Agreement
to the contrary, the SNH Entities shall be obligated to make payment for amounts
it collects on account of any prorations paid to the SNH Entities by the Mariner
Entities in accordance with this Section 10.2.
10.2.3 The accounts of the Mariner Entities and SNH Entities
created pursuant hereto shall be netted against each other. If (i) the result is
a net positive balance for the
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Mariner Entities, the SNH Entities shall pay to the Mariner Entities the amount
of such balance by corporate check, and (ii) if the result is a net positive
balance for the SNH Entities, the Mariner Entities shall pay to SPTMNR the
amount of such balance by corporate check.
10.2.4 There shall be no prorations with respect to the
Transferred Facilities (other than with respect to rent and other amounts
payable under the Master Lease), as all such expenses with respect to the
Transferred Facilities are the responsibility of the Mariner Entities prior to
the Effective Time, as lessee under the Master Lease, and thereafter, as owner
of the Transferred Facilities.
10.3 Accounts Receivable. From and after the Effective Time, (i) the
New Operators shall, to the extent permitted by applicable law, own all accounts
receivable which relate to or arise out of services provided by or at the
Retained Facilities from or after the Effective Time (the "Post-Effective A/R"),
(ii) the Mariner Operators shall make and effect collections of all
Post-Effective A/R, (iii) the Mariner Operators shall establish new bank
accounts (the "New A/R Accounts") in the name of each Mariner Operator at such
local banks to be agreed upon by the SNH Entities and the Mariner Entities, and
shall instruct all Third Party Payors and other Persons that directly deposit
monies into the existing bank accounts (the "Existing A/R Accounts") with
respect to the Retained Facilities to terminate such direct deposit and commence
depositing such monies into the New A/R Accounts from and after the date that is
sixty (60) days after the Effective Time (the "Account Transfer Time") or as
soon as is practicable thereafter (and the Mariner Entities shall take such
further action as may be reasonably necessary to cause such Third Party Payors
and other Persons to comply with such instructions so that all Post-Effective
A/R are deposited into the New A/R Accounts from and after the Account Transfer
Time or as soon as is practicable thereafter), (iv) the Mariner Operators shall
continue to endorse and deposit all monies, checks, drafts or other instruments
or items received as payment for any Post-Effective A/R with respect to any
Facility into the Existing A/R Accounts until the Account Transfer Time, (v) the
Mariner Operators shall endorse and deposit all monies, checks, drafts or other
instruments or items received as payment for any Post-Effective A/R from and
after the Account Transfer Time into the New A/R Accounts, (vi) within five (5)
days of the New Operators request therefor (but no sooner than the SNH Licensing
Date), the Mariner Operators shall assign, set over and transfer the New A/R
Accounts to the New Operators, and (vii) the Mariner Entities shall disburse all
proceeds attributable to Post-Effective A/R deposited in the Existing A/R
Accounts or the New A/R Accounts or otherwise received or held by the Mariner
Entities to the SNH Entities (or to such other Person as the SNH Entities may
direct) within five (5) days of the Mariner Entities' receipt thereof.
The SNH Entities and the Mariner Entities acknowledge and agree that
(i) the Mariner Entities shall continue to own all accounts receivable which
relate to or arise out of services provided by or at the Retained Facilities
prior to the Effective Time (the "Pre-Effective A/R"), (ii) the Mariner Entities
shall be entitled to retain all proceeds attributable to Pre-Effective A/R
deposited in the Existing A/R Accounts or the New A/R Accounts or otherwise
received or held by the Mariner Entities, and (iii) the SNH Entities shall
disburse to the Mariner Entities (or to
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such other Person as the Mariner Entities may direct) all such Pre-Effective A/R
within five (5) days of the SNH Entities' receipt thereof.
10.4 No Assumption of Liabilities. Notwithstanding anything in this
Agreement or elsewhere to the contrary, no SNH Entity is assuming, and no SNH
Entity shall be responsible for, any liability of any kind or nature whether
known or unknown, absolute, mature or not yet due, liquidated or non-liquidated,
contingent, non-contingent, direct or indirect or otherwise, of any Mariner
Entity or any other person for:
(a) Any costs or expenses, including, but not limited to,
legal fees, accounting fees, consulting and financing costs incurred by
any Mariner Entity in negotiating this Agreement or in consummating the
transactions contemplated hereby;
(b) Any claim as a result of any injury to any person arising
out of the rendering of or failure to render services by any Mariner
Entity or its or his employees, agents or representatives or any other
person performing services for or on behalf of any Mariner Entity (i)
with respect to the Retained Facilities, prior to the Effective Time
and, subject to, and upon the terms and conditions contained in the
Interim Management Agreement, after the Effective Time, and (ii) with
respect to the Transferred Facilities or any other operations of the
Mariner Entities (except as otherwise expressly set forth herein), both
prior to, and after, the Effective Time;
(c) Any liability to set off or recoupment (including set off
or recoupment against Post-Effective Time accounts receivable) by any
Third Party Payor by reason of any contractual claim, settlement, order
or judgment retroactively adjusting the amounts payable for
reimbursement purposes or recovering overpayments made or requiring the
payment of fines, penalties or damages, or reduction of prospective
payments to any Facility or interest, with respect to, or based upon,
the services rendered by any Mariner Entity (i) with respect to the
Retained Facilities, prior to the Effective Time and, subject to, and
upon the terms and conditions contained in the Interim Management
Agreement, after the Effective Time, and (ii) with respect to the
Transferred Facilities or other operations of the Mariner Entities
(except as otherwise expressly set forth herein), both prior to, and
after, the Effective Time, including liabilities that are subject to a
stay ordered by the Court and liabilities that may be collected against
the New Operator under state or Federal law;
(d) Any taxes owed by any Mariner Entity, including, but not
limited to, any investment tax recapture, depreciation recapture,
employer taxes such as F.I.C.A. and F.U.T.A., any sales or use taxes,
any personal property taxes, any withholding taxes and any workers'
compensation or unemployment insurance premiums or adjustments and, in
the case of any Mariner Entity's employees or any of its affiliates'
employees, relating to, or arising out of, such employee's employment
at any Retained Facility prior to the Effective Time; and with respect
to the Transferred Facilities or other operations of the Mariner
Entities, both prior to, and after, the Effective Time;
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(e) Any claim by any employee of any Mariner Entity for wages,
salary, vacation, holiday, sick pay, welfare, or fringe benefits,
relating to, or arising out of, such employee's employment prior to the
Effective Time, except for those Employee Accruals assumed by the New
Manager pursuant to Section 10.1 hereof and with respect to the
Transferred Facilities or other operations of the Mariner Entities
(except as otherwise expressly set forth herein), both prior to, and
after, the Effective Time;
(f) Any claim arising under any instrument, agreement,
indenture, contract or understanding to which any Mariner Entity is a
party or by which it or any of its property is bound, unless such
instrument, agreement, indenture, contract or understanding is
explicitly described and affirmed and assumed by the SNH Entities in
this Agreement or is otherwise expressly affirmed and assumed by
separate instrument in writing executed by SPTMNR; or
(g) Any claim, order or judgment otherwise arising out of the
operation of any Facility or other operations of the Mariner Entities
(except as otherwise expressly set forth herein but specifically
including any claim, order or judgment arising under any applicable
Federal, state or local statutes, laws, ordinances, rules and
regulations, licensing requirements or conditions (including Medicare
or Medicaid requirements or conditions, and environmental laws), or
involving the imposition of any lien under any applicable law), in each
case to the extent arising or attributable to conditions or events
occurring prior to the Effective Time, and, subject to, and upon the
terms and conditions contained in the Interim Management Agreement,
after the Effective Time, and (ii) with respect to the Transferred
Facilities or other operations of the Mariner Entities (except as
otherwise expressly set forth herein), both prior to, and after, the
Effective Time.
10.5 Indemnification. Without limiting any of the foregoing, each
Mariner Entity agrees, on a joint and several basis, to indemnify, defend and
hold harmless, the SNH Entities, and their respective officers, employees,
directors, trustees, managers, members, consultants and advisors, any of their
respective successors or assigns (individually an "Indemnitee") from and against
the following (collectively, "Damages"): (i) all Pre-Closing Obligations or any
contravention or non-compliance with the Approval Order, and associated claims
or liability, and all other liabilities, losses, damages, costs and expenses of
any kind (including, without limitation, the reasonable fees and disbursements
of counsel for the SNH Entities in connection with any investigative,
administrative or judicial proceeding arising out of the operation of any
Facility or other operations of the Mariner Entities (including any violation or
alleged violation of any and all applicable Federal, state or local statutes,
laws, ordinances, rules and regulations, licensing requirements or conditions,
or involving the imposition of any lien under any such applicable law)) prior to
the Effective Time or for any contravention or non-compliance with the Approval
Order, (ii) any and all liabilities, losses, damages, costs and expenses of any
kind arising out of either a breach, default, contravention, non-compliance by
any Mariner Entity of its obligations under this Agreement or the Approval Order
(including the failure of any representation by any Mariner Entity to be
accurate and complete on the date when made or deemed made), or the enforcement
of such obligations, and (iii) the existence, prior to the Effective Time, of
any Hazardous Substance on, in, or under any Retained Facility (to the
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extent provided for in the Master Lease). The SNH Entities shall, in addition to
any other rights, be entitled to payment in compensation for any of the above,
holding allowed administrative period claims for all such payments due thereon.
10.6 Post-Effective Time Liabilities (Retained Facilities). Each of the
SNH Entities acknowledges and agrees that, subject to, and upon the terms and
conditions contained in the Interim Management Agreement, the New Manager and/or
the New Operators shall indemnify the Mariner Entities from and against all
costs, expenses and liabilities arising out of the operation, maintenance and
management of the Retained Facilities after the Effective Time, except for those
costs, expenses and liabilities arising out of the gross negligence or willful
misconduct of any of the Mariner Entities.
10.7 Financial Records, Etc. Each of the SNH Entities and the Mariner
Entities agree that they shall provide such other party access to the books and
records and other financial information maintained by such party with respect to
the operation of the Facilities (both before and after the Effective Time) as
such party may reasonably request. The Mariner Entities shall provide the SNH
Entities and their accountants with such certifications with respect to such
financial information as the SNH Entities may from time to time reasonably
request.
10.8 Contracts. The Mariner Entities acknowledge that the New Operators
may desire to assume certain of the Contracts and, in connection therewith, the
Mariner Entities agree that they shall (i) within fifteen (15) Business Days of
the execution hereof, provide the SNH Entities with a complete list of the
Contracts and the status thereof (including, without limitation, amounts
outstanding under such Contracts (including those amounts outstanding prior to
the Petition Date)), (ii) assist in the New Operators' evaluation of such
Contracts by providing such information as the New Operators' may reasonably
request regarding the contracting party's performance thereunder, and (iii)
subject to Bankruptcy Court Approval, assume and assign any Contracts that the
New Operators may elect to have the Mariner Entities assume and assign to them,
provided that in no event shall any Mariner Entity be required to pay any cure
amounts, or incur any additional obligations, under any such Contract in
connection with such assumption and assignment beyond those enforceable against
the Mariner Entities in their capacity as debtors in possession (it being
intended by the parties hereto that if the New Operators elect to cause the
Mariner Entities to assume and assign any such Contract in accordance with this
Section 10.7, the New Operators will pay any cure amounts required to effect
such assumption and assignment).
10.9 Survival. The provisions of this Article 10 shall survive the
Closing hereunder.
ARTICLE 11
DAMAGE TO PROPERTY FROM CASUALTY OR TAKING
11.1 In the event of any casualty or damage to any Facility prior to
the Effective Time (which shall not be fully restored prior to the Effective
Time), all sums recovered on
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account of such insurance shall be held in trust for the benefit of and in order
to be paid over to, and all sums recoverable on such account shall be assigned
to, the appropriate SNH Entity or Mariner Entity at the Effective Time. The SNH
Entity and the Mariner Entity which owns, leases or manages such Facility shall
execute and deliver such further instruments of assignment of insurance proceeds
and other documents (including, without limitation, appropriate endorsement of
checks) as any SNH Entity or Mariner Entity may from time to time reasonably
request in order to make such insurance proceeds payable to such SNH Entity or
Mariner Entity.
11.2 In the event that prior to the Effective Time any portion of any
Retained Facility shall be taken or shall be threatened with a taking by any
exercise of the right of eminent domain, or any portion of any Retained Facility
shall sustain any direct or consequential damage for which the owner thereof
shall be entitled to compensation by any public authority, the appropriate SNH
Entity shall be entitled to bring any suit in connection with recovery therefor
in the name of such SNH Entity or, if applicable, any Mariner Entity, or both,
and all sums received on account of any such taking or damages and or an
assignment of all the owner's rights to collect damages therefor shall be
delivered to the appropriate SNH Entity together with the delivery of the
Transaction Documents. The Mariner Entities shall execute and deliver such
further instruments of assignment and such other documents (including, without
limitation, appropriate endorsements of checks and pleadings) as any SNH Entity
may from time to time reasonably request in connection with the foregoing.
11.3 In the event that prior to the Effective Time any portion of any
Transferred Facility shall be taken or shall be threatened with a taking by any
exercise of the right of eminent domain, or any portion of any Transferred
Facility shall sustain any direct or consequential damage for which the owner
thereof shall be entitled to compensation by any public authority, the
appropriate Mariner Entity shall be entitled to bring any suit in connection
with recovery therefor in the name of such Mariner Entity or, if applicable, any
SNH Entity, or both, and all sums received on account of any such taking or
damages and or an assignment of all the owner's rights to collect damages
therefor shall be delivered to the appropriate Mariner Entity together with the
delivery of the Transaction Documents. The SNH Entities shall execute and
deliver such further instruments of assignment and such other documents
(including, without limitation, appropriate endorsements of checks and
pleadings) as any Mariner Entity may from time to time reasonably request in
connection with the foregoing.
ARTICLE 12
RELEASES
12.1 Release of SNH Entities. Subject to, and in consideration for,
each SNH Entity entering into this Agreement and consummating the transactions
contemplated hereby, each Mariner Entity shall release and forever discharge,
each SNH Entity and their respective successors, assigns, agents, shareholders,
directors, officers, employees, agents, attorneys, parent corporations,
subsidiary corporations, affiliated corporations, affiliates, and each of them,
from any and all claims, debts, liabilities, demands, obligations, costs,
expenses, actions
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and causes of action, of every nature and description, whether known or unknown,
absolute, mature, or not yet due, liquidated or non-liquidated, contingent,
non-contingent, direct or indirect or otherwise, which any Mariner Entity now
has or at any time may hold, by reason of any matter, cause or thing occurred,
done, omitted or suffered to be done on or prior to the Effective Time. Each
Mariner Entity waives the benefits of any law, which may provide in substance:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor." Each
Mariner Entity understands that the facts which it believes to be true at the
time of making the release provided for herein may later turn out to be
different than it believes now or at the time of granting such release, and that
information which is not now or then known or suspected may later be discovered.
Each Mariner Entity accepts this possibility, and each Mariner Entity assumes
the risk of the facts turning out to be different and new information being
discovered; and each Mariner Entity further agrees that the release provided for
herein shall in all respects continue to be effective and not subject to
termination or rescission because of any difference in such facts or any new
information.
Notwithstanding anything to the contrary contained in this Section 14.1
or otherwise, this release shall only be effective on and as of the Effective
Time and specifically only upon the consummation of the transactions provided
for in this Agreement and not otherwise.
None of the Mariner Entities is releasing any SNH Entity from any
claims, debts, liabilities, demands, obligations, costs, expenses, actions or
causes of action arising out of this Agreement, any Settlement Document or the
transactions contemplated hereby, or otherwise, except as expressly provided
herein.
12.2 Release of Mariner Entities. Subject to, and in consideration for
each Mariner Entity entering into this Agreement and consummating the
transactions contemplated hereby, each SNH Entity shall release and forever
discharge each Mariner Entity and their respective successors, assigns, agents,
shareholders, directors, officers, employees, agents, attorneys, parent
corporations, subsidiary corporations, affiliated corporations, affiliates, and
each of them, from any and all claims, debts, liabilities, demands, obligations,
costs, expenses, actions and causes of action, of every nature and description,
whether known or unknown, which any SNH Entity now has or at any time may hold,
by reason of any matter, cause or thing occurred, done, omitted or suffered to
be done on or prior to the Effective Time. Each SNH Entity waives the benefits
of any law, which may provide in substance: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." Each SNH Entity understands that the
facts which it believes to be true at the time of making the release provided
for herein may later turn out to be different than it believes now or at the
time of granting such release, and that information which is not now or then
known or suspected may later be discovered. Each SNH Entity accepts this
possibility, and each SNH Entity assumes the risk of the facts turning out to be
different and new information being discovered; and each SNH Entity further
agrees that the release provided for herein shall in all
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respects continue to be effective and not subject to termination or rescission
because of any difference in such facts or any new information.
Notwithstanding anything to the contrary contained in this Section 14.2
or otherwise, this release shall only be effective on and as of the Effective
Time and specifically only upon the consummation of the transactions provided
for in this Agreement and not otherwise.
None of the SNH Entities is releasing any Mariner Entity from any
claims, debts, liabilities, demands, obligations, costs, expenses, actions or
causes of action arising out of this Agreement, any Settlement Document or the
transactions contemplated hereby, or otherwise, except as expressly provided
herein.
12.3 No Further Commitments by SNH Entities. Each Mariner Entity
further acknowledges that, from and after the Effective Time, no SNH Entity has
any existing commitments, obligations or agreements to advance credits or loans,
or to lease property, or make financial or other accommodations to any Mariner
Entity, except as may be specifically set forth in this Agreement or the
Settlement Documents.
ARTICLE 13
GENERAL PROVISIONS
13.1 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT, OR ANY OF THE
AGREEMENTS, INSTRUMENTS OR DOCUMENTS REFERRED TO HEREIN; OR (II) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN OR AMONG THEM; OR (III) ANY
CONDUCT, ACTS OR OMISSIONS OF ANY PARTY HERETO OR ANY OF THEIR DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED
WITH THEM; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
13.2 Survival. Except as otherwise provided by this Agreement, all
covenants, agreements, representations and warranties made by each Mariner
Entity or SNH Entity herein and in all certificates and other instruments
delivered pursuant to this Agreement shall survive the execution and delivery of
the deeds to the Transferred Facilities and the closing of the transactions
contemplated hereby, and the Mariner Entities shall be and remain liable for
breaches of the provisions of this Agreement, the Interim Management Agreement
and the Interim Occupancy Agreements, contravention of the Approval Order or
otherwise for the period including the greater of one (1) year or the last
administrative claims bar date that is established by order of the Court (except
that the SNH Entities shall in all events remain liable to the Mariner Entities
for the amount of any deductible or self-insured retention amounts paid or
payable under Section 5.1(a) of the Interim Management Agreement until such
deductible or self-insured retention amounts shall have been paid). If and to
the extent the Mariner Entities
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shall emerge from the Cases pursuant to a confirmed plan of reorganization prior
to the expiration of such period, then the obligations provided herein shall be
a continuing obligation of the reorganized Mariner Entities for the duration of
such period and any plan confirmed in the Cases shall so provide.
13.3 Notices. All notices, demands and other communications hereunder
shall be in writing and delivered, telegraphed or mailed (by first class
registered or certified mail, postage prepaid) addressed as follows:
(a) if to an SNH Entity:
c/o SENIOR HOUSING PROPERTIES TRUST
400 Centre Street
Newton, MA 02458
Attention: Treasurer
(b) with copy to:
SULLIVAN & WORCESTER LLP
One Post Office Square
Boston, MA 02109
Attention: Nancy S. Grodberg, Esq.
(c) if to any Mariner Entity:
MARINER POST-ACUTE NETWORK, INC.
One Ravinia Drive
Atlanta, GA 30346
Attention: Associate General Counsel
(d) with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street
Atlanta, GA 30303
Attention: Douglas S. Gosden, Esq.
or to such other address as may hereafter be designated by any party for such
other purpose, and shall be effective upon receipt if hand delivered or upon the
expiration of the fifth business day after the day of mailing.
13.4 Governing Law. This Agreement shall be governed by, interpreted,
construed, applied and enforced in accordance with the Bankruptcy Code and the
laws of the Commonwealth of Massachusetts applicable to contracts between
residents of the
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Commonwealth of Massachusetts which are to be performed entirely within the
Commonwealth of Massachusetts, 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 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 the
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 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.
13.5 Successors and Assigns. This Agreement shall be binding upon each
party thereto and its successors and assigns. The rights and obligations of any
party hereto under this Agreement may not be assigned by any party hereto
without the prior written consent of each of the parties hereto.
13.6 Entire Agreement. This Agreement, together with the exhibits
hereto and such other documents as are referred to herein, constitute the entire
agreement of the parties in respect of the subject matter described herein, and
may not be changed or modified except by an agreement in writing signed by the
parties hereto.
13.7 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 and therein shall not in any way be affected or impaired thereby and the
Agreement shall thereupon be reformed and construed and enforced to the maximum
extent permitted by law.
13.8 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
attorneys' fees and other costs incurred in that action in addition to any other
relief to which it or they may be entitled.
13.9 Non-Disclosure. Until this Agreement is publicly announced by SNH
(i) the Mariner Entities, the SNH Entities, and each of their officers,
directors, employees, agents, consultants and advisors, shall keep confidential
all terms hereof and information contained herein (except to the extent required
either (a) in connection with the satisfaction of the conditions contained
herein (including, without limitation, providing such information to its
creditors and their advisors), (b) by the Securities Exchange Act of 1934, as
amended, and the
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rules and regulations promulgated thereunder (the "Exchange Act"), or (c)
reporting requirements, if any, of the New York Stock Exchange ("NYSE
Requirements")), and (ii) neither any Mariner Entity nor any persons or entities
affiliated with any of them or their officers, directors, employees, agents,
consultants and advisors (within the meaning of Rule 405 under the Securities
Act of 1933, as amended) shall trade in SNH's stock. In addition, each Mariner
Entity and each SNH Entity shall obtain the approval of Mariner or SPTMNR
(respectively), which approval shall not be unreasonably withheld, prior to
making any public announcements concerning this Agreement or the transactions
contemplated hereby. Each Mariner Entity, however, acknowledges that SNH may
disclose the existence of this Agreement and the transactions contemplated
hereby in appropriate public filings under the Exchange Act, or pursuant to the
NYSE Requirements, and each Mariner Entity further agrees that it shall provide
such financial statements as are available to such Mariner Entity, as SNH shall
determine necessary for SNH to comply with reporting requirements under the
Exchange Act or NYSE Requirements, if any, with respect to this transaction.
13.10 Required Disclosure. Notwithstanding Section 13.8 hereof, each
party hereby may and shall give all required notices of the existence of this
Agreement and the pending consummation of the transactions contemplated hereby
to any and all appropriate governmental agencies..
13.11 LIMITATION ON LIABILITY. THE DECLARATION OF TRUST OF SNH, DATED
DECEMBER 16, 1998, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"SNH DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "SENIOR HOUSING
PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE SNH DECLARATION COLLECTIVELY
AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF SNH SHALL BE HELD TO ANY PERSONAL LIABILITY,
JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SNH. ALL PERSONS
DEALING WITH SNH, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SNH, FOR THE
PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
13.12 LIMITATION ON LIABILITY. THE DECLARATION OF TRUST OF SPTMNR,
DATED JANUARY 14, 1999, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO
(THE "SPTMNR DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME
"SPTMNR PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE SPTMNR DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SPTMNR SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, SPTMNR. ALL PERSONS DEALING WITH SPTMNR, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF SPTMNR, FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
-36-
<PAGE>
13.13 Costs and Expenses. The Mariner Entities shall pay any and all
costs and expenses incurred by the SNH Entities as a result of or in connection
with the transactions contemplated by this Agreement (other than attorneys' fees
of the SNH Entities), regardless of whether such transactions are consummated,
including, without limitation, (i) all taxes, including, without limitation,
documentary transfer taxes, documentary stamp taxes, mortgage taxes, intangible
taxes, sales and similar taxes applicable to the transactions contemplated
herein together with interest and penalties, if any, thereon, but excluding any
income taxes of the SNH Entities, and (ii) all costs relating to surrender,
assignnment and conveyances contemplated hereby, including, without limitation,
title reports, all costs relating to owner's or lender's title insurance
commitments and policies, and all costs and charges related to recording fees.
13.14 Confidentiality. The parties agree not to disclose or permit
their respective representatives, attorneys, auditors or agents to disclose,
except as may be required by law or performance hereunder, any confidential,
non-public information of the others which is obtained by any of them in
connection with the transactions contemplated by this Agreement.
13.15 Reservation of Rights. Each party hereto acknowledges that it and
the other parties hereto have entered into this Agreement in order to settle and
compromise certain potential claims between them and that the execution,
delivery and performance of this Agreement by the parties hereto is not an
admission of any party's obligations or liabilities whatsoever. This document is
subject to the protections of Federal Rule of Evidence 408 and all similar
provisions and supporting authorities.
13.16 Third Party Beneficiaries. This Agreement and all other
instruments executed and delivered in connection herewith are not intended to
benefit any third parties, including, without limitation, any such parties that
may have claims against any of the Mariner Entities.
-37-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written and their respective seals to
be hereunto affixed and attested by their respective duly authorized officers.
SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Ajay Saini
David J. Hegarty, President
Ajay Saini, Treasurer and Chief Financial Officer
SPTMNR PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Ajay Saini
David J. Hegarty, President
Ajay Saini, Treasurer and Chief Financial Officer
FIVE STAR QUALITY CARE, INC.,
a Delaware corporation
By: /s/ Ajay Saini
Ajay Saini, Treasurer and Assistant Secretary
SHOPCO-AZ, LLC,
a Delaware limited liability company
By: SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust,
its Member
By: /s/ Ajay Saini
David J. Hegarty, President
Ajay Saini, Treasurer and
Chief Financial Officer
-38-
<PAGE>
SHOPCO-CA, LLC,
a Delaware limited liability company
By: SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust,
its Member
By: /s/ Ajay Saini
David J. Hegarty, President
Ajay Saini, Treasurer and
Chief Financial Officer
SHOPCO-COLORADO, LLC,
a Delaware limited liability company
By: SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust,
its Member
By: /s/ Ajay Saini
David J. Hegarty, President
Ajay Saini, Treasurer and
Chief Financial Officer
SHOPCO-WI, LLC,
a Delaware limited liability company
By: SENIOR HOUSING PROPERTIES TRUST,
a Maryland real estate investment trust,
its Member
By: /s/ Ajay Saini
David J. Hegarty, President
Ajay Saini, Treasurer and
Chief Financial Officer
-39-
<PAGE>
MARINER POST-ACUTE NETWORK, INC.
(f/k/a Paragon Health Network, Inc.),
a Delaware corporation
By: /s/ Todd Andrews
Name: Todd Andrews
Its: Vice President
GRANCARE, INC.
(f/k/a New GranCare, Inc.),
a Delaware corporation
By: /s/ Todd Andrews
Name: Todd Andrews
Its: Vice President
AMS PROPERTIES, INC.,
a Delaware corporation
By: /s/ Todd Andrews
Name: Todd Andrews
Its: Vice President
GCI HEALTH CARE CENTERS, INC,
a Delaware corporation
By: /s/ Todd Andrews
Name: Todd Andrews
Its: Vice President
-40-
<PAGE>
SCHEDULE 1.1.1
PERMITTED PERSONAL PROPERTY ENCUMBRANCES
None.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.1.2
RETAINED FACILITIES
Property Name Property Address Tenant
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cedars Health Care Center 1599 Ingalls Street AMS Properties
Lakewood, CO
Cherrelyn Manor Nursing Home 5555 South Elati AMS Properties
Littleton, CO
Christopher East Health Care Center 1132 East Knapp Street AMS Properties
Milwaukee, WI 53202
Greentree Health Care Center 70 Greentree Road AMS Properties
Clintonville, WI 54929
La Mesa Healthcare Center 2470 S. Arizona Avenue GCIHCC
Yuma, AZ 85364
La Salette Health Care & Rehabilitation Center 537 E. Fulton GCIHCC
Stockton, CA 95204
Lancaster Health Care Center 1642 West Avenue "J" AMS Properties
Lancaster, CA
Northwest Health Care Center 7800 West Fond du Lac Avenue AMS Properties
Milwaukee, WI 53218
Pine Manor Health Care Center East Side of County Y Highway AMS Properties
Embarrass (Clintonville), WI
River Hills West Health Care Center 321 Riverside Drive AMS Properties
Pewaukee, WI 53072
Sunny Hill Health Care Center 4325 Nakoma Road AMS Properties
Madison, WI
Sunquest Village of Yuma 265 East 24th Street GCIHCC
Yuma, AZ 85364
Thousand Oaks Health Care Center 93 West Avenida de los Arobules AMS Properties
Thousand Oaks, CA 91360
Van Nuys Health Care Center 6835 Hazeltine Avenue AMS Properties
Van Nuys, CA 91405
Village Green Nursing Home 2932 North 14th Street GCIHCC
Phoenix, AZ 85094
Virginia Health Care Center 1471 Waukesha Avenue AMS Properties
Waukesha, WI
Woodland Health Care Center 18740 W. Bluemound Road AMS Properties
Brookfield, WI
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.1.3
SUBLEASED FACILITIES
Property Name Property Address Tenant
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Huron Nursing Home: 1251 Arizona SW 15th & Michigan GCIHCC
Sunquest Village Huron, SD 57530 Huron, SD 57350
Southridge Health Care Center: 3600 S. Norton GCIHCC
Mom & Dad's Health Care Center Sioux Falls, SD 57105
Pacific Gardens Nursing and Rehabilitation 577 South Peach Street AMS Properties
Center: Pleasant Care Fresno, CA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.1.4
TRANSFERRED FACILITIES
Property Name Property Address Tenant
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Brian Centers-Carbarrus 250 Bishop Lane AMS Properties
Concord, NC 28025
Brian Centers-Wilson 2501 Downing Street Extension AMS Properties
Wilson, NC 53702
Brian Centers-Winston-Salem 6000 Brian Center Lane AMS Properties
Winston-Salem, NC 47106
Flagship Health Care Center 466 Flagship Road AMS Properties
Newport Beach, CA
Tarzana Health Care Center 5640 Reseda Avenue (5650 Reseda Road) AMS Properties
Tarzana, CA
</TABLE>
<PAGE>
SCHEDULE 2.1
EXISTING DOCUMENTS
1. A Master Lease comprised of: (i) a Master Lease Document General Terms and
Conditions dated as of December 28, 1990 and entered into by and between
Health and Retirement Properties Trust ("HRP"), and AMS Properties, Inc.
("AMS Properties"); (ii) a Master Lease Document General Terms and
Conditions dated as of June 30, 1992 and entered into by and between HRP
and GCI Health Care Centers, Inc. ("GCIHCC"); (iii) twenty-six (26)
facility lease supplements, some of which are dated as of December 28,
1990, some of which are dated as of March 27, 1992, some of which are dated
June 30, 1992 and others of which are dated as of June 29, 1998, all as
entered into pursuant to the documents described in preceding clauses (i)
and (ii); and (iv) Guaranty, Cross-Default and Cross-Collateralization
Agreement by AMS Properties and GCIHCC, dated as of June 30, 1992, pursuant
to which AMS Properties and GCIHCC cross-defaulted, cross-collateralized
and guaranteed each other's obligations to HRP., all as amended to date,
pursuant to which AMS and GCIHCC lease twenty-six (26) health care related
facilities (the "Leased Facilities").
2. A Guaranty, dated as of December 28, 1990, from GranCare, Inc., a
__________________ corporation ("Old GranCare") in favor of HRP pursuant to
which all obligations of AMS Properties are guaranteed; the obligations and
liabilities under such Guaranty having been assumed by GranCare, Inc., a
Delaware corporation ("GranCare"), pursuant to the Assumption Agreement.
3. Memoranda of Lease, each dated as of December 28, 1990, March 27, 1992 or
June 30, 1992 and recorded with the Registry of Deeds of the appropriate
county with respect to each Leased Facility.
4. UCC Financing Statements by AMS Properties, showing AMS Properties, as
lessee, and HRP, as lessor, filed with the appropriate State and County UCC
filing office with respect to each Leased Facility.
5. An Amended and Restated HRP Shares Pledge Agreement, dated as of June 30,
1992, between HRP and AMS Properties, pursuant to which AMS Properties has
pledged certain of its shares of HRP to HRP to secure its obligations to
HRP;
6. An Amended and Restated Voting Trust Agreement, dated as of June 30, 1992
from AMS Properties to HRPT Advisors, Inc., as voting trustee, with a
Voting Trust Certificate and Stock Power attached thereto.
7. A Security Agreement, dated as of December 28, 1990 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.
8. A Collateral Assignment of Contracts and Permits, dated as of December 28,
1990 from AMS Properties to HRP, assigning to HRP all contracts and permits
of AMS Properties.
<PAGE>
9. UCC Financing Statements/Fixture Filings by AMS Properties, showing AMS
Properties, as debtor, and HRP, as secured party, filed with the
appropriate UCC filing office and registries of deeds to perfect the
interests of HRP as a secured creditor under the security instruments
referred to above.
10. An Amended and Restated Renovation Funding Agreement dated as of January
13, 1992, between AMS Properties and HRP.
11. A Renovation Loan Agreement, dated as of March 28, 1992, by and between AMS
Properties and HRP relating to certain renovations to be made at the
Christopher East Health Care Center, Milwaukee, Wisconsin.
12. A Promissory Note, dated as of March 28, 1992, in the original principal
amount of $1,250,000, executed by AMS Properties and accepted by HRP.
13. A Security Agreement, dated as of March 28, 1992, made by AMS Properties in
favor of HRP.
14. A Pledge Agreement dated as of December 28, 1990, as supplemented by a
Pledge Agreement Supplement dated as of December 29, 1993, from Old
GranCare (as successor to AMS) to HRP pursuant to which all shares of
capital stock of AMS Properties are pledged to HRP, together with
certificates relating to the AMS Properties shares and stock powers
relating to such shares; the obligations and liabilities under such Pledge
Agreement and Pledge Agreement Supplement having been assumed by GranCare
pursuant to the Assumption Agreement.
15. A Subordination Agreement dated as of December 28, 1990 among Old GranCare
as subordinate creditor, AMS Properties as debtor, and HRP as senior
creditor; the obligations and liabilities under such Subordination
Agreement having been assumed by GranCare pursuant to the Assumption
Agreement.
16. A Subordination Agreement dated as of December 28, 1990 among HMI as
subordinate creditor, AMS Properties as debtor and HRP as senior creditor.
17. A Subordination Agreement dated as of December 28, 1990 among AMS Green
Tree as subordinate creditor, AMS Properties as debtor and HRP as senior
creditor.
18. A Subordination Agreement dated as of December 28, 1990 among Am-Cal as
subordinate creditor, AMS Properties as debtor and HRP as senior creditor.
19. A Consent Letter dated March 31, 1995 by HRP and consented to by GranCare,
AMS Properties and GCIHCC re: Subleases.
20. An Assignment of Sublease Documents dated March 31, 1995 between AMS
Properties and HRP.
21. An Assignment of Leases and Rents dated March 31, 1995 by AMS Properties
re: Subleases.
22. A Rescission Agreement and Amendment to Transaction Documents dated as of
October 1, 1994 among Old GranCare, AMS Properties, GCIHCC and HRP.
-ii-
<PAGE>
23. An Assumption Agreement by New GranCare, Inc. in favor of HRP.
24. A Letter Agreement dated April 25, 1992, from HRP to GranCare, accepted by
GranCare.
25. A Guaranty, dated as of June 30, 1992 from Old GranCare in favor of HRP
pursuant to which all obligations of AMS Properties are guaranteed; the
obligations and liabilities under such Guaranty having been assumed by
GranCare pursuant to the Assumption Agreement referenced below.
26. A Security Agreement, dated as of June 30, 1992, from GCIHCC to HRP,
granting HRP a security interest in all tangible and intangible personal
property and including all accounts receivable, contract rights and general
intangibles.
27. An Assignment of Contracts, Licenses and Permits, dated as of June 30,
1992, from GCIHCC to HRP, assigning to HRP, all contracts, licenses and
permits used in connection with the operation of the Facilities.
28. A Pledge Agreement, dated as of June 30, 1992 Date, from GranCare pursuant
to which all of the capital stock of GCIHCC (the "GCIHCC Stock") is pledged
to HRP to secure the obligations of GCIHCC.
29. A Stock Power relating to GCIHCC Stock.
30. A Subordination Agreement dated as of June 30, 1992 among Old GranCare as
subordinate creditor, GCIHCC as debtor, and HRP as senior creditor; the
obligations and liabilities under such Subordination Agreement having been
assumed by GranCare pursuant to the Assumption Agreement.
31. A Subordination Agreement, dated as of June 30, 1992, among AMS as
subordinated creditor, GCI as the debtor and HRP as senior creditor,
pursuant to which all obligations of GCIHCC to the subordinated creditor
are subordinated.
32. A Representation Letter and Indemnification Agreement, dated June 30, 1992,
from Old GranCare, AMS and GCI, with respect to, inter alia, the continued
effectiveness of the representations and warranties made by GranCare and
GCI in, and the absence of any Defaults under, the Transaction Documents.
33. A Consent Letter dated March 31, 1995 by HRP and consented to by GCI,
GranCare and AMS re: HealthQuest Subleases.
34. An Assignment of Sublease Documents dated March 31, 1995 between GCI and
HRP re: HealthQuest Subleases.
35. An Assignment of Leases and Rents dated March 31, 1995 by GCI re:
HealthQuest Subleases.
36. A Rescission Agreement and Amendment to Transaction Documents dated as of
October 1, 1994 among GranCare, AMS, GCI and HRP.
-iii-
<PAGE>
SCHEDULE 3.5-A
FORM OF INTERIM MANAGEMENT AGREEMENT
<PAGE>
INTERIM MANAGEMENT AGREEMENT
THIS INTERIM MANAGEMENT AGREEMENT (this "Agreement") is made this ____
day of __________ , 2000, among Mariner Post-Acute Network, Inc., a Delaware
corporation (formerly known as Paragon Health Network, Inc.) ("Mariner"), AMS
Properties, Inc., a Delaware corporation ("AMS Properties"), GCI Health Care
Centers, Inc., a Delaware corporation ("GCIHCC" and, together with AMS
Properties, collectively, the "Mariner Licensees"), the entities listed on
Schedule A hereto, each of which is a Delaware limited liability company
(collectively, the "Proposed SNH Licensees"), and Five Star Quality Care, Inc.,
a Delaware corporation (the "Manager").
W I T N E S S E T H:
WHEREAS, SPTMNR Properties Trust, a Maryland real estate investment
trust ("SPTMNR"), is the owner of all of the real property, buildings, plant and
equipment and certain of the personal property used in connection with the
operation of the skilled nursing, intermediate care or residential facilities
listed on Schedule B (each a "Facility" and collectively, the "Facilities"); and
WHEREAS, SPTMNR currently leases the Facilities to the Mariner
Licensees; and
WHEREAS, the Mariner Licensees hold the licenses to operate the
Facilities; and
WHEREAS, pursuant to a Settlement Agreement, dated as of March __, 2000
(the "Settlement Agreement"), among Mariner, the Mariner Licensees, Senior
Housing Properties Trust, a Maryland real estate investment trust ("SNH"),
SPTMNR, the Proposed SNH Licensees and the Manager, the Mariner Licensees have
requested SPTMNR, and SPTMNR has agreed, to accept a surrender (through SPTMNR's
designees the Proposed SNH Licensees), of the Mariner Licensees' lease of the
Facilities, subject to, and upon, the terms and conditions contained therein;
and
WHEREAS, in connection therewith, the Proposed SNH Licensees are
submitting the applications, filings and other documentation necessary to
receive all governmental licenses, permits, approvals, authorizations, provider
agreements and certificates and determinations of need in order for the Proposed
SNH Licensees to operate the Facilities as licensees and to receive Medicare and
Medicaid reimbursement for the services provided therein (such licenses,
permits, approvals, authorizations, provider agreements, and certificates and
determinations of need are hereafter referred to individually, as a "Necessary
License" and collectively, as the "Necessary Licenses"); and
WHEREAS, the Proposed SNH Licensees and the Mariner Licensees desire to
enter into certain arrangements regarding the management of the Facilities and,
more specifically, to provide for the Mariner Licensees to operate the
Facilities pending, and in anticipation of, the receipt by the Proposed SNH
Licensees or the Manager of the Necessary Licenses (the date on which any
Proposed SNH Licensee or the Manager shall have received all such Necessary
<PAGE>
Licenses with respect to a Facility being referred to herein as such Facility's
"SNH Licensing Date"), and to consult and cooperate with the Proposed SNH
Licensees' designee, the Manager, in connection therewith;
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Mariner Licensee; Interim Occupancy Agreements. Each Facility shall continue
to be operated subject to the direction and control of the relevant Mariner
Licensee until such Facility's SNH Licensing Date and, in connection therewith,
each such Mariner Licensee (i) shall retain ultimate authority over the
business, policies, operations and assets of the Facility, (ii) shall remain the
responsible licensee of such Facility and, as such, be fully liable and legally
accountable at all times to all patients, governmental agencies and third
parties for all patient care and funds, and all other aspects of the operation
and maintenance of the Facility, and (iii) shall perform those general and
specific duties described in Sections 2 and 3 hereof.
In order to permit the foregoing, each Mariner Licensee is,
simultaneously herewith, entering into an Interim Occupancy Agreement
(collectively, the "Occupancy Agreements"), [in the form attached hereto as
Schedule C,] with the relevant Proposed SNH Licensee, pursuant to which the
Proposed SNH Licensee shall grant to such Mariner Licensee the right to occupy
such Facility and use certain related personal property for purposes of
exercising its rights, duties and obligations hereunder.
The Mariner Licensees, the Proposed SNH Licensees and the Manager agree
that, subject in all events to the provisions of the first paragraph of this
Section 1, the SNH Proposed Licensees or the Manager may from time to time,
notify the Mariner Licensees that the Manager is prepared to provide any one or
more of those services (the "Designated Services") designated in Schedule D
attached hereto (the "Designated Services Schedule"), with respect to any one or
more of the Facilities, and from and after the date specified in such notice,
the Mariner Licensee shall delegate to Manager and the Manager shall assume and
perform such Designated Services. The Mariner Licensees, the Proposed SNH
Licensees and the Manager shall reasonably cooperate in the transition of the
responsibility for such Designated Service(s) to the Manager, subject to the
continued authority and responsibility of the Mariner Licensee referred to
herein.
The Mariner Licensees, the Proposed SNH Licensees and the Manager
acknowledge and agree that the Mariner Licensees have agreed in this Agreement
that the Mariner Licensees may continue to provide certain services after the
SNH Licensing Date. The Mariner Licensees, the Proposed SNH Licensees and the
Manager acknowledge and agree, however, that, from and after the SNH Licensing
Date with respect to a Facility, the relevant Proposed SNH Licensee shall direct
and control the operations of such Facility and, in connection therewith, shall
have ultimate authority over the business, policies, operation and assets of the
Facility and be the responsible licensee of such Facility and, as such, be fully
liable and legally accountable at all times to all patients and governmental
agencies for all patient care and funds at such Facility, and all other aspects
of the operation and maintenance of such Facility.
-2-
<PAGE>
2. General Duties. The Mariner Licensees shall manage and supervise the
day-to-day operation of the Facilities with the objective of providing skilled
nursing, intermediate care and residential services to patients and residents of
the Facilities and to carry out general management functions with respect to the
Facilities, including, but not limited to, the following: supervise the
performance of all administrative functions as may be necessary in the
management and operation of the Facilities; select, hire or contract for, train,
supervise, monitor the performance of, and terminate or fire, all personnel
involved in the administration and day-to-day operations of the Facilities,
including, without limitation, professional personnel, custodial, cleaning,
maintenance, and other operational personnel, and secretarial and bookkeeping
personnel; provide accounting, billing, purchasing and bill payment functions
for the Facilities; maintain systems of accounts and supervise the maintenance
of ledgers and other primary accounting records with respect to the Facilities;
supervise the financial affairs of the Facilities; establish and supervise the
implementation of operating budgets, and establish and administer financial
controls over the operations and management of the Facilities; develop and
establish financial standards and norms by which the income, costs, and
operations of the Facilities may be evaluated; operate, maintain and administer
the information management systems of the Facilities; maintain patients' medical
records in accordance with all applicable state and Federal requirements;
furnish reports and economic and statistical data in connection with or relative
to the management of the Facilities in order to comply with applicable laws and
regulations; represent the Facilities in their dealings with regulatory
authorities, patients, personnel, agents for collection, insurers and, at the
request of the Proposed SNH Licensees, creditors; prepare and file with
applicable state Medicaid programs and the Medicare program and all other public
and private third party reimbursement programs (collectively, "third party
payors") all required cost reports; administer trust funds for the benefit of
residents of the Facilities and prepare and file all accounts for such funds
required by applicable law; maintain listings of all residents of the Facilities
and the persons or third party payors responsible for their charges; on behalf
of the SNH Entities, disburse and collect the funds of the Facilities in
accordance with the provisions of Section 9.1 hereof, and pay the debts and
fulfill the obligations of the Facilities incurred subsequent to the Effective
Time (as hereafter defined); market the services of the Facilities; manage and
supervise the admission and discharge of residents as required by state and
Federal laws; and generally see to the operations and management of the
Facilities, the marketing of their services, planning for future operations, and
the establishment and implementation of policies for the Facilities.
3. Specific Duties. The Mariner Licensees shall have the following specific
duties:
3.1 Employees. The Mariner Licensees shall recruit, evaluate, and
select qualified nursing home administrators who shall be responsible for the
functional operation of the Facilities and supervision of personnel at the
Facilities, on a day-to-day basis, as well as all on-site professional,
custodial, food service, cleaning, maintenance, clerical, secretarial,
bookkeeping, management, collection, and other employees for the day-to-day
operations of the Facilities. Such administrators and all such other personnel
shall be employees of the Mariner Licensees, and, subject to the provisions of
Section 5 hereof (providing for the Proposed SNH Licensees to pay expenses set
forth in the Expense Statement (including, without limitation, those expenses
specified in Section 5.1(a)) the Mariner Licensees shall have full
responsibility for payment of their wages, salaries, and other compensation and
benefits. The Mariner Licensees shall establish such personnel policies, wage
structures, and staff schedules as they
-3-
<PAGE>
deem necessary and advisable in accordance with applicable law. The Mariner
Licensees shall have authority to continue to employ and to discharge employees.
The Mariner Licensees shall maintain payroll records and shall prepare and
process employee payrolls, and returns of withholding taxes in accordance with
current payroll schedules in place at each Facility.
Anything in this Section 3.1 to the contrary notwithstanding, the
Manager shall offer employment to all or substantially all of the qualified
nursing home administrators and other employees at the Facilities as soon after
the Effective Time as is reasonably practicable. The Mariner Licensees
acknowledge that the ability of the Manager to make any such offer is contingent
upon the employees being employable under state and Federal law and may be
subject to the Proposed SNH Licensees' and the Manager's receipt of all
licenses, permits, approvals, authorizations, provider agreements, and
certificates and determinations of need as are necessary for the Proposed SNH
Licensees and the Manager to operate the Facilities as licensees and to receive
Medicare and Medicaid reimbursement for the services provided therein, and that
in any event the Manager will first have to implement an appropriate accounting
and payroll function. The Mariner Licensees further acknowledge that the Manager
may not hire all such employees on the same date or at the same time. The
Mariner Licensees agree to cooperate with the Manager in connection with such
offers of employment and to release any personnel to whom the Manager offers
employment from any employment agreements, non-competition, non-solicitation and
non-disclosure agreements or common law obligations relating to their employment
with the Mariner Licensees to which they may be a party or subject.
3.2 Purchasing. The Mariner Licensees shall (subject to Section 5)
purchase, in the name, and for the account, of the Proposed SNH Licensees, all
necessary supplies, foodstuffs, materials, appliances, tools, and equipment
customarily used in the operation of the Facilities. The Mariner Licensees shall
use commercially reasonable efforts to limit purchasing costs and to maintain
such costs at a level reasonably calculated to allow the Facilities to operate
profitably. The Mariner Licensees may, but shall not be obligated to, make such
purchases in bulk under a centralized purchasing system established by them for
other facilities under their operation or management in order to minimize costs.
The Mariner Licensees shall arrange contracts for electricity, gas, telephone,
and any other utility or service necessary to the operation of the Facilities,
in each case in the name, and for the account, of the Proposed SNH Licensees.
The Mariner Licensees shall, on their own behalf and/or on behalf of the owner
of the buildings and real property in and on which the Facilities are located
(the "Real Property Owner"), contract for and supervise the making of any
necessary repairs, alterations, and improvements to the Facilities, provided
that in the case of any repair, alteration or improvement, the cost of which
exceeds $5,000, the Mariner Licensees shall obtain the prior approval of the
Proposed SNH Licensee/Manager, except that no such prior approval shall be
required if the expenditure is made under circumstances reasonably requiring
emergency action. The Mariner Licensees shall prepare such certifications as to
expenses incurred in the operation of the Facilities as may be required in order
to comply with applicable law and regulations, including, without limitation,
law and regulations applicable to preparation and submission of cost reports.
3.3 Bookkeeping. The Mariner Licensees shall establish and maintain a
record and bookkeeping system for the operation and conduct of the Facilities in
accordance with generally accepted accounting principles. Full books of account
with entries of all receipts and
-4-
<PAGE>
expenditures of the Facilities shall be open for inspection by representatives
of Proposed SNH Licensees and Manager upon reasonable notice and at reasonable
times.
3.4 Financial Reports. The Mariner Licensees shall: (a) as soon as
reasonably possible after the close of each calendar month, furnish to the
Proposed SNH Licensee and Manager a statement of income for the month and for
the year to date, together with a detailed statement of billings, cash receipts,
cash disbursements, accounts payable and accounts receivable (in hard copy and,
to the extent possible, in electronic format); (b) in the event the Proposed SNH
Licensee or Mariner Licensee is required by applicable law, regulations or the
provisions of any material contract to which it is a party or by which it is
bound or at such other time as the Proposed SNH Licensees may elect in their
reasonable discretion, to conduct an audit of the Facilities' financial
performance, make available all books and records of the Facilities on a timely
basis and cooperate fully with any auditors or accountants selected by Proposed
SNH Licensee; (c) as soon as reasonably possible after the close of each
applicable reporting period for rate setting purposes, and not later than the
applicable deadline, prepare and submit a cost report for each Facility (and
including in any event, any short-year cost report required to be submitted by
the Mariner Licensee or Proposed SNH Licensee), showing the costs and
expenditures relating to resident care for such Facility and such other
information as is required by the applicable governmental authority, each such
report being in all material respects (including as to form) in compliance with
the requirements of such applicable governmental authority; and (d) cooperate
with and furnish information to each Proposed SNH Licensee and Manager in a
timely manner in connection with the preparation of applications by such
Proposed SNH Licensee for any Necessary Licenses with respect to the Facilities.
3.5 Marketing. The Mariner Licensees shall use commercially reasonable
efforts to market the services of the Facilities in order to maintain the
patient or resident census at the Facilities in such numbers and of such
categories as, in the Mariner Licensees' judgment, will tend to maintain the
financial stability of the Facilities and to ensure compliance with applicable
laws, regulations, orders and judgments applicable to the Facilities. The
Mariner Licensees may design and implement programs with third party payors,
such as insurance companies, federal agencies and state and local agencies, for
services to patients on a contract basis, for the purpose of improving the
financial stability of the Facilities.
3.6 Liaison with Agencies. In consultation with the Proposed SNH
Licensees and Manager, the Mariner Licensees shall appear in, prosecute and
defend all formal and informal proceedings before any and all local, state and
federal agencies which regulate the Facilities. Each of the Mariner Licensees,
the Proposed SNH Licensees and Manager shall promptly inform the others of the
commencement of any such proceedings known to it which may have a material
impact upon the operation of the Facilities or which affect reimbursement for
services provided in or by the Facilities, including challenging any findings of
violations or the creation of a duty to correct.
3.7 Insurance. The Mariner Entities shall obtain on behalf of
themselves, the Proposed SNH Licensees, the Manager and the Real Property Owners
for each Facility, as their interests may appear, all customary liability, fire
and extended coverage, professional or malpractice liability and worker's
compensation insurance covering the Facilities, any equipment used in connection
with the Facilities, the Facilities' employees, and the Mariner Entities, the
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<PAGE>
Proposed SNH Licensees, the Manager and the Real Property Owners for each
Facility, as their interests may appear, in such amounts and with such
deductibles and other provisions as may be reasonably agreed upon by the Mariner
Entities, the Proposed SNH Licensees, the Manager and the Real Property Owners.
3.8 Technical and Professional Services. The Mariner Entities may
secure such engineering, legal, and other specialized technical and professional
services as may be necessary to advise or to represent the Mariner Entities, the
Proposed SNH Licensees, the Manager and the Real Property Owners for each
Facility, in connection with any matter involving or arising out of the
operation of the Facilities or the conduct of the Facilities.
3.9 Necessary Licenses. Upon receipt by the relevant Proposed SNH
Licensee or the Manager of the Necessary Licenses with respect to a Facility,
the Proposed SNH Licensee or the Manager shall give the relevant Mariner
Licensee prompt written notice.
3.10 Collections, Accounts, Disbursements and Termination Accounting.
(a) Billing. The Mariner Licensees shall prepare and submit
bills for all moneys owing, whether from patients or third party payors, for
services provided by or at the Facilities at any time, whether prior to ______
o'clock p.m. on [day preceding the Closing] (the "Effective Time") or after the
Effective Time.
(b) Collection of Accounts Receivable. The Mariner Licensees
acknowledge that, from and after the Effective Time, (i) the Proposed SNH
Licensees shall, to the extent permitted by applicable law, own all accounts
receivable which relate to or arise out of services provided by or at the
Facilities from or after the Effective Time (the "Post-Effective A/R"), (ii) the
Mariner Licensees shall make and effect collections of all Post-Effective A/R,
(iii) the Mariner Licensees shall establish new bank accounts (the "New A/R
Accounts") in the name of each Mariner Licensee at such local banks to be agreed
upon by the Proposed SNH Licensees and the Mariner Licensees, and shall instruct
all Third Party Payors and other Persons (as such terms are defined in the
Settlement Agreement) that directly deposit monies into the existing bank
accounts (the "Existing A/R Accounts") with respect to the Retained Facilities
to terminate such direct deposit and commence depositing such monies into the
New A/R Accounts from and after the date that is sixty (60) days after the
Effective Time (the "Account Transfer Time") or as soon as is practicable
thereafter (and the Mariner Licensees shall take such further action as may be
reasonably necessary to cause such Third Party Payors and other Persons to
comply with such instructions so that all Post-Effective A/R are deposited into
the New A/R Accounts from and after the Account Transfer Time or as soon as is
practicable thereafter), (iv) the Mariner Licensees shall continue to endorse
and deposit all monies, checks, drafts or other instruments or items received as
payment for any Post-Effective A/R with respect to any Facility into the
Existing A/R Accounts until the Account Transfer Time, (v) the Mariner Licensees
shall endorse and deposit all monies, checks, drafts or other instruments or
items received as payment for any Post-Effective A/R from and after the Account
Transfer Time into the New A/R Accounts, (vi) within five (5) days of the
applicable Proposed SNH Licensee's request therefor (but no sooner than the
applicable SNH Licensing Date), the Mariner Licensees shall assign, set over and
transfer the New A/R Accounts to the Proposed SNH Licensees, and (vii) the
Mariner Licensees shall disburse all proceeds attributable to Post-Effective A/R
deposited in the Existing A/R
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<PAGE>
Accounts or the New A/R Accounts or otherwise received or held by the Mariner
Licensees to the Proposed SNH Licensees (or to such other Person as the Proposed
SNH Licensees may direct) within five (5) days of the Mariner Licensees' receipt
thereof.
The SNH Entities and the Mariner Licensees acknowledge and agree that
(i) the Mariner Licensees shall continue to own all accounts receivable which
relate to or arise out of services provided by or at the Facilities prior to the
Effective Time (the "Pre-Effective A/R"), (ii) the Mariner Licensees shall be
entitled to retain all proceeds attributable to Pre-Effective A/R deposited in
the Existing A/R Accounts or the New A/R Accounts or otherwise received or held
by the Mariner Licensees, and (iii) the Proposed SNH Licensees shall disburse to
the Mariner Licensees (or to such other Person as the Mariner Licensees may
direct) all such Pre-Effective A/R within five (5) days of the SNH Licensees'
receipt thereof.
(c) Books and Records. During the term of this Agreement, the
Mariner Licensees shall keep accurate and complete books and records of all
receipts with respect to all billing, accounts receivable, all deposits and
other transactions whether to the Existing A/R Accounts, the New A/R Accounts,
or to other checking accounts, which books and records shall be made available
to the SNH Licensees and the Manager upon request, and after termination of this
Agreement shall make such books and records available to the Proposed SNH
Licensees and the Manager to the extent necessary to enable the Proposed SNH
Licensee and the Manager to comply with all applicable laws and regulations,
including regulations governing preparation and submission of cost reports. The
Mariner Licensees shall timely prepare and file any cost reports which
applicable laws and regulations require that they file after the termination of
this Agreement.
3.11 Patient Trust Accounts. At such time as a Proposed SNH Licensee
has received all Necessary Licenses with respect to a Facility and has given the
Mariner Licensee notice as provided in Section 3.9, the Mariner Licensee will
transfer the patient trust accounts held for the benefit of residents of such
Facility to the Proposed SNH Licensee, together with all records and an
accounting regarding such accounts.
4. Fee. The Mariner Licensees shall earn, for services rendered by them
hereunder, a servicer fee (the "Fee") on a Facility-by-Facility basis for each
calendar month during the term of this Agreement in an amount equal to the
lesser of (i) five percent (5%) of net patient revenues (as defined below) of
such Facility for such month and (ii) an amount calculated by multiplying (A)
the sum of the Designated Services Percentages, as specified in the Designated
Services Schedule, attributable to the Designated Services being performed by
the applicable Mariner Licensee at such Facility for such month by (B) the
amount of net patient revenues of such Facility for such month.
Until the Agreed Deficiency shall have been reduced to zero (0),
payment of the Fee shall be made by dollar-for-dollar reduction of the Reduced
Deficiency (as such term is defined in the Settlement Agreement).
Notwithstanding anything to the contrary contained in this Section 4, in each of
the first three (3) months of the term hereof, the Fee earned by the Mariner
Licensees hereunder shall be not less than Four Hundred Thousand ($400,000)
(regardless of the amount of net patient revenues at the Facilities for such
month or whether the Manager shall have elected to
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<PAGE>
discontinue the Mariner Licensees' provision of any services specified herein
during such period).
As used in this Agreement, "net patient revenues" shall mean, for any
period, the aggregate amount of all revenues (determined in accordance with
generally accepted accounting principals, consistently applied), received by, or
by reason of the operation of, such Facility during such period, but excluding
(a) revenues from professional fees or charges by physicians and unaffiliated
providers of ancillary services to the extent such charges are paid over to, or
separately billed by, such physicians and unaffiliated providers, (b)
non-operating revenues, (c) revenues attributable to services provided off-site
to non-patients, and (d) all revenues, if any, attributable to child care
services provided primarily to employees of such Facilities, but in all events
excluding any revenues generated for services provided to patients referred by
any Mariner Entity.
5. Expenses.
5.1 During the period from and after the Effective Time to, but
excluding, the date of termination of this Agreement, for each Facility, the
Mariner Licensee shall provide the Proposed SNH Licensees and the Manager with a
weekly statement of expenses of the type listed below to the extent incurred in
the operation and management of such Facility (the "Expense Statements")
accompanied by such documentation as the Proposed SNH Licensee and the Manager
shall reasonably request:
(a) salary and expenses (including, without limitation,
payroll taxes, workers' compensation, costs of employee benefit plans (or such
portion thereof as is properly allocable to such Facility), travel, insurance,
and fidelity bonds) of employees at such Facility, including, without
limitation, administrative, professional, custodial, food service, cleaning and
maintenance, operational, secretarial and bookkeeping personnel;
(b) all supplies and equipment necessary and desirable for
operation of the such Facility as a skilled nursing, intermediate care and
residential facility; food; fuel; kitchen and food service equipment; linens;
beds; furniture; clothing and all other supplies and equipment used in supplying
services to patients;
(c) expenses connected directly or indirectly with the design,
acquisition, disposition, lease, occupancy, ownership or operation of real and
personal property devoted, used or consumed in the business of such Facility,
including, without limitation, maintenance, repair, and improvement of the
Facilities, and premiums, deductibles and self-insured retention amounts with
respect to insurance (including, without limitation, the insurance required to
be obtained pursuant to Section 3.7 hereof (except that the premiums for such
insurance shall be allocated among the facilities covered thereby on such basis
as the Mariner Licensees deem commercially appropriate based on their experience
in such matters and reasonable business judgment, including an assessment by the
Mariner Licensees of the differing risk profiles associated with the facilities
and business of the Mariner Licensees, on the one hand, and the Facilities and
the business of the Proposed SNH Licensees, on the other)); and
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<PAGE>
(d) all other costs, expenses and liabilities arising out of
the operation, maintenance and management of the Facilities, including, without
limitation, fees of professionals engaged to fulfill the Mariner Licensees'
obligations under Section 3.6 and Section 3.8, but excluding those costs,
expenses and liabilities arising out of any such Mariner Licensee's gross
negligence or willful misconduct.
5.2 The following expenses of the Mariner Licensees shall be for the
sole account of the Mariner Licensees and shall not be subject to reimbursement
hereunder: (a) overhead and ordinary administrative expenses, salary (including,
without limitation, payroll taxes, workers' compensation, costs of employee
benefit plans, travel, insurance and fidelity bonds) of financial, accounting
and other personnel employed by the Mariner Licensees to provide centralized
billing, collection, bill paying, accounting, record keeping, information
management, purchasing, personnel and policy planning services to any Facility,
it being understood that in no event shall the salary of the administrator of a
Facility be an expense of the Mariner Licensees; and (b) any losses, cost and
expenses under Section 11(a).
5.3 The Proposed SNH Licensees shall cause the Manager to establish a
bank account under its name and control and to deposit and maintain a minimum
balance therein of $100,000. The Mariner Licensees shall have signing authority
with respect to such account and weekly, upon approval of the Expense Statement,
the Manager shall fund such account with an amount sufficient (over and above
the minimum balance) to fund and for the purpose of paying the expenses set
forth in the Expense Statement. If any Mariner Licensee advances its own funds
for any approved Expense Statement expense, the Manager and the Proposed SNH
Licensees shall promptly reimburse such Mariner Licensee therefor.
5.4 Each Proposed SNH Licensee of each Facility shall pay the Manager a
monthly management fee (the "Manager's Fee") for each Facility, payable prior to
the __ day following the end of each calendar month during the term hereof, (i)
for the first two (2) months of the term hereof, in an amount equal to the costs
and expenses actually incurred by the Manager in connection with the performance
of its duties hereunder during such calendar month, and (ii) thereafter, in an
amount equal to 4.5% of net patient revenues for such Facility for such calendar
month.
6. Access to Records. For the time and to the extent required by applicable law,
including, without limitation, Section 1861(v)(1)(I) of the Social Security Act,
the Mariner Licensees shall retain, and shall permit the Comptroller General of
the United States, the U.S. Department of Health and Human Services, and their
respective duly authorized representatives, and duly authorized state
representatives, access to examine or copy this Agreement and such books,
documents, and records as are reasonably necessary to verify the nature and
extent of goods and services supplied and the costs of the goods and services
supplied, and the payments claimed under this Agreement. In the event any
Mariner Licensee provides any of its services under this Agreement pursuant to a
subcontract and if (i) the services provided pursuant to the subcontract have a
value or cost of $10,000 or more over a twelve (12) month period and (ii) the
subcontract is with a related organization, then such Mariner Licensee agrees
that the subcontract shall contain a clause requiring the subcontractor to
retain and allow access to its records on the same terms and conditions as
required by such Mariner Licensee.
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<PAGE>
7. Duty of Mariner Licensees; Prohibited Transactions. The Mariner Licensees
shall render the services called for hereunder in good faith. Other than the
Fee, none of the Mariner Licensees or any person, firm or corporation which,
directly or indirectly owns or controls, is owned or controlled by, or is under
direct or indirect common ownership or control with the Mariner Licensees or any
person related by blood or marriage within the third degree to persons in such
control (an "Affiliate"), shall receive any remuneration (other than
reimbursements and other payments expressly provided for herein), whether direct
or indirect, for any purchases of goods or services made on behalf of the
Mariner Licensees, the Proposed SNH Licensees or the Manager, and none of the
Mariner Licensees or any of their Affiliates shall markup, increase the price,
or obtain any premium for goods or services purchased by any Mariner Licensee on
behalf of or for the benefit of the Mariner Licensees, the Proposed SNH
Licensees or the Manager.
8. Relationship of Parties. No party to this Agreement is a partner or joint
venturer with any other party, and nothing herein shall be construed so as to
make them such partners or joint venturers or impose on any of them any
liability as partners or joint venturers.
9. Term and Termination.
9.1 The term of this Agreement shall commence at the Effective Time and
shall continue in full force for twelve (12) months unless earlier terminated as
provided below, and thereafter, from month to month thereafter unless terminated
upon not less than thirty (30) days' prior written notice from the Proposed SNH
Licensees or the Mariner Licensees to the other.
Subject to the provisions of the first paragraph in Section 1 of this
Agreement, the Proposed SNH Licensees shall have the further right from time to
time to require the Mariner Licensees' to discontinue provision of any or all
services hereunder to any one or more of the Facilities upon not less than
thirty (30) days' prior written notice to the relevant Mariner Licensee.
If there is a final adverse determination with respect to any Necessary
Licenses, provided that the Proposed SNH Licensee shall have exhausted all
appeals with respect thereto, this Agreement shall terminate with respect to the
Facility(ies) which would be affected.
9.2 From and after the effective date of termination of this Agreement
in accordance with Section 9.1, the Mariner Licensees shall not be entitled to
compensation for further services hereunder (and, in the case of the
discontinuation of services at a Facility in accordance with Section 9.1, from
and after the effective date of such discontinuance, the Mariner Licensees shall
not be entitled to compensation for further services with respect to such
Facility). Upon termination or discontinuance, the relevant Mariner Licensees
shall forthwith:
(a) pay over to the relevant Proposed SNH Licensee all
collections of Post-Effective A/R received by the Mariner Licensees pursuant to
this Agreement;
(b) deliver to the relevant Proposed SNH Licensees and the
Manager a full accounting, including a statement showing all payments collected
by it and a statement of all money held by it, covering the period following the
date of the last accounting furnished to them; and
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(c) deliver to the relevant Proposed SNH Licensees and the
Manager, as the case may be, all property and documents of any of them
(including, without limitation, health care and other patient records) then in
the custody of the Mariner Licensee(s).
10. Notices. All notices and other communications provided for hereunder shall
be in writing (including telecopy communication) and mailed, telecopied or
delivered addressed as follows:
(a) if to the Manager:
Five Star Quality Care, Inc.
400 Centre Street
Newton, MA 02458
Attention: Treasurer
Telecopy No.: 617-796-8349
(b) with copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Nancy S. Grodberg, Esq.
Telecopy No.: 617-338-2880
(c) if to the Mariner Licensees:
AMS Properties, Inc.
On Ravinia Drive, Suite 1500
Atlanta, Georgia 30346
Attention: Associate General Counsel
Telecopy No. 770-698-8199
and to:
GCI Health Care Centers, Inc.
One Ravinia Drive, Suite 1500
Atlanta, Georgia 30346
Attention: Associate General Counsel
Telecopy No. 770-698-8199
(d) If to the Proposed SNH Licensees:
SHOPCO-AZ, LLC
400 Centre Street
Newton, MA 02458
Attention: Treasurer
Telecopy No.: 617-796-8349
SHOPCO-CA, LLC
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400 Centre Street
Newton, MA 02458
Attention: Treasurer
Telecopy No.: 617-796-8349
SHOPCO-COLORADO, LLC
400 Centre Street
Newton, MA 02458
Attention: Treasurer
Telecopy No.: 617-796-8349
SHOPCO-WI, LLC
400 Centre Street
Newton, MA 02458
Attention: Treasurer
Telecopy No.: 617-796-8349
or to such other address as may hereafter be designated by any party for such
other purpose, and shall be effective upon receipt if hand delivered, when
telecopied, if transmitted by telecopier or upon the expiration of the fifth
Business Day after being deposited in the mails, if mailed.
11. Indemnification.
(a) Mariner Licensees' Indemnification. The Mariner Licensees,
jointly and severally, shall protect, indemnify and hold harmless each of the
Proposed SNH Licensees, the Manager and their respective agents, employees,
officers, directors, partners, members, trustees, attorneys, successors or
assigns (hereafter the "SNH Indemnitees," and when referred to singly, an "SNH
Indemnitee") for, from and against any and all debts, obligations, damages,
penalties, liabilities, liens, claims, causes of action, administrative orders
or notices, costs, fines, penalties or expenses (including, without limitation,
reasonable attorney's fees and expenses actually incurred) to the maximum extent
permitted by law imposed upon, incurred by or asserted against any Indemnitee
and arising in connection with any act, omission or obligation of any Mariner
Licensee hereunder, under its Interim Occupancy Agreement, or otherwise in
connection with the Mariner Licensees' activities in operating or overseeing the
operation of any of the Facilities. The Mariner Licensees, at their expense,
shall contest, resist and defend any such claim, action or proceeding asserted
or instituted against any SNH Indemnitee or may compromise or otherwise dispose
of the same, with the relevant SNH Indemnitee's prior written consent (which
consent may not be unreasonably withheld or delayed).
(b) Proposed SNH Licensees' and Manager's Indemnification. The
Proposed SNH Licensees and the Manager (collectively referred to as the SNH
Indemnitors), jointly and severally, shall protect, indemnify and hold harmless
each of the Mariner Licensees and their respective agents, employees, officers,
directors, partners, members, trustees, attorneys, successors and assigns
(hereafter the "Mariner Indemnitees" and when referred to singly, "Mariner
Indemnitee") for, from and against any and all debts, obligations, damages,
penalties, liabilities, liens, claims, causes of action, administrative orders
or notices, costs, fines, penalties, or expenses (including, without limitation,
reasonable attorney's fees and expenses actually
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<PAGE>
incurred) to the maximum extent permitted by law imposed upon, incurred by or
asserted against any Mariner Indemnitee and arising in connection with any act,
omission or obligation of any SNH Indemnitor hereunder, under the Interim
Occupancy Agreements, or otherwise in connection with the SNH Parties'
activities in operating or overseeing the operation of any of the Facilities.
The SNH Parties', at their expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against any Mariner
Indemnitee or may compromise or otherwise dispose of the same, with the relevant
Mariner Licensee's prior written consent (which consent may not be unreasonably
withheld or delayed).
The provisions of this Section 11 shall survive the termination of this
Agreement.
12. Miscellaneous.
12.1 This Agreement shall not be changed, modified, terminated, or
discharged in whole or in part except by an instrument in writing signed by each
of the parties hereto or their respective successors or assigns.
12.2 Non-Assignability. This Agreement shall not be assigned by any
party without the consent of the other party and this Agreement shall be binding
upon and shall inure to the benefit of consented to successors and assigns.
12.3 Governing Law. This Agreement shall be governed by, interpreted,
construed, applied and enforced in accordance with the laws of the Commonwealth
of Massachusetts applicable to contracts between residents of the Commonwealth
of Massachusetts which are to be performed entirely within the Commonwealth of
Massachusetts, 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
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 the jurisdiction other than
the Commonwealth of Massachusetts; or (vii) any combination of the foregoing.
12.4 Entire Agreement. This Agreement, together with the other
agreements contemplated by, referred to in, or contemplated by agreements
referred to herein, together constitute the entire agreement of the parties
hereto with respect to the subject matter hereof and supersede and cancel any
preexisting agreements with respect to such subject matter.
12.5 Attorney's Fees and Costs. If any action is brought for the
enforcement of this Agreement, or because of a dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action in addition to any other relief to which it
may be entitled.
12.6 Confidentiality. The parties agree not to disclose or permit their
respective representatives, attorneys, auditors or agents to disclose, except as
may be required by law or performance hereunder, any confidential non-public
information of the others which is obtained by any of them in connection with
the transactions contemplated by this Agreement.
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12.7 Cooperation; Commercially Reasonable Efforts. The parties shall
cooperate in good faith in connection with all actions to be taken to consummate
the transactions contemplated by, and to enforce the rights created by and
perform the responsibilities imposed by, this Agreement and in order to assure
compliance with Federal, state and local laws, rules and regulations. The
parties agree to execute such amendments, modifications or supplements to this
Agreement or any other agreements between or among any of the parties hereto,
necessary or appropriate to assure such compliance.
12.8 Responsibility for Compliance with Law. During the term of this
Agreement, each Mariner Licensee will keep in full force and effect all
licenses, permits, approvals, authorizations, provider agreements, and
certificates or determinations of need necessary for such Mariner Licensee to
occupy and operate its Facilities and to receive Medicare and Medicaid
reimbursement for services provided therein and the Mariner Licensees will
cooperate with Proposed SNH Licensees in connection with the Proposed SNH
Licensees obtaining provider agreements to ensure there is no period during
which neither a Mariner Licensee nor a Proposed SNH Licensee is entitled to
reimbursement for services provided at the Facilities.
12.9 Bankruptcy Court Authorization. Mariner and the Mariner Licensees
shall seek authorization from the United States Bankruptcy Court for the
District of Delaware in order to proceed with those matters provided herein, in
conjunction with the authorization sought for proceeding with the Settlement
Agreement. The form of order providing authorization shall be in a form
acceptable to SPTMNR, the Proposed SNH Licensees and the Manager.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first set
forth above.
MARINER POST-ACUTE NETWORK, INC.
By:________________________________
Its (Vice) President
AMS PROPERTIES, INC.
By:________________________________
Its (Vice) President
GCI HEALTH CARE CENTERS, INC.
By:________________________________
Its (Vice) President
SHOPCO-AZ, LLC
By:________________________________
Its (Vice) President
SHOPCO-CA, LLC
By:________________________________
Its (Vice) President
SHOPCO-COLORADO, LLC
By:________________________________
Its (Vice) President
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SHOPCO-WI, LLC
By:________________________________
Its (Vice) President
FIVE STAR QUALITY CARE, INC.
By:_______________________
Its (Vice) President
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SCHEDULE A
PROPOSED SNH LICENSEES
1. SHOPCO-AZ LLC, a Delaware limited liability company.
2. SHOPCO-CA LLC, a Delaware limited liability company.
3. SHOPCO-COLORADO LLC, a Delaware limited liability company.
4. SHOPCO-WI LLC, a Delaware limited liability company.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
FACILITIES
Property Name Property Address Tenant
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cedars Health Care Center 1599 Ingalls Street AMS Properties
Lakewood, CO
Cherrelyn Manor Nursing Home 5555 South Elati AMS Properties
Littleton, CO
Christopher East Health Care Center 1132 East Knapp Street AMS Properties
Milwaukee, WI 53202
Greentree Health Care Center 70 Greentree Road AMS Properties
Clintonville, WI 54929
La Mesa Health Care Center 2470 S. Arizona Avenue GCIHCC
Yuma, AZ 85364
La Salette Health Care & Rehabilitation Center 537 E. Fulton GCIHCC
Stockton, CA 95204
Lancaster Health Care Center 1642 West Avenue "J" AMS Properties
Lancaster, CA
Northwest Health Care Center 7800 West Fond du Lac Avenue AMS Properties
Milwaukee, WI 53218
Pine Manor Health Care Center East Side of County Y Highway AMS Properties
Embarrass (Clintonville), WI
River Hills West Health Care Center 321 Riverside Drive AMS Properties
Pewaukee, WI 53072
Sunny Hill Health Care Center 4325 Nakoma Road AMS Properties
Madison, WI
Sunquest Village of Yuma 265 East 24th Street GCIHCC
Yuma, AZ 85364
Thousand Oaks Health Care Center 93 West Avenida de los Arobules AMS Properties
Thousand Oaks, CA 91360
Van Nuys Health Care Center 6835 Hazeltine Avenue AMS Properties
Van Nuys, CA 91405
Village Green Nursing Home 2932 North 14th Street GCIHCC
Phoenix, AZ 85094
Virginia Health Care Center 1471 Waukesha Avenue AMS Properties
Waukesha, WI
Woodland Health Care Center 18740 W. Bluemound Road AMS Properties
Brookfield, WI
</TABLE>
<PAGE>
SCHEDULE C
FORM OF OCCUPANCY AGREEMENT
See attached copy.
[See Schedule 3.5-B to the Settlement Agreement.]
<PAGE>
SCHEDULE D
Designated Services
Information Technology Support 1.0%
Reimbursement 0.5%
Accounts Payable and Payroll Processing 1.5%
Facility, Regional and Clinical 2.0%
(Quality Assurance) Operations
<PAGE>
SCHEDULE 3.5-B
FORM OF INTERIM OCCUPANCY AGREEMENT
<PAGE>
INTERIM OCCUPANCY AGREEMENT
This Interim Occupancy Agreement (this "Interim Occupancy Agreement")
is made this ___ day of 2000, between [insert name of applicable New Operator],
a Delaware corporation ("Sublessor"), and [insert name of applicable Mariner
Licensee], a Delaware corporation ("Sublessee").
WITNESSETH
WHEREAS, SPTMNR Properties Trust, a Maryland real estate investment
trust ("SPTMNR"), and Sublessor are parties to an Amended and Restated Master
Lease Agreement, dated as of ____________ ___, ______ (the "Lease"), with
respect to the skilled nursing facility known as "[insert name of facility]"
(the "Facility"); and
WHEREAS, SPTMNR, Sublessor, Sublessee and various other parties have
entered into a Settlement Agreement (the "Settlement Agreement"), pursuant to
which Sublessee has agreed to manage the operation of the Facility on the terms
contained therein and in an Interim Management Agreement, dated as of the date
hereof (the "Interim Management Agreement"), between Sublessor and Sublessee;
and
WHEREAS, in order to accomplish the foregoing, Sublessor has agreed to
sublease the Facility to Sublessee on the terms contained herein;
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto, intending to be bound,
hereby agree as follows:
1. Sublease. Upon and subject to the terms and conditions hereinafter
set forth, Sublessor subleases to Sublessee, and Sublessee subleases from
Sublessor, all of Sublessor's right, title and interest in, to, under or
relating to the real property, improvements, fixtures and related rights
constituting the Facility (the "Demised Premises"), including, without
limitation, any leasehold rights of Sublessor relating to the use or occupancy
thereto, and Sublessor agrees that Sublessee has and will continue to have
throughout the term of this Interim Occupancy Agreement, the right to use and
occupy the Demised Premises as the licensed operator of the Facility.
2. Term. The term of this Interim Occupancy Agreement shall commence on
the date hereof, and shall end on the earlier of (i) the date on which
Sublessee's obligation to provide services in connection with the management of
the operation of the Facility under the Interim Management Agreement shall have
expired or been terminated pursuant to the terms thereof and (ii) the SNH
Licensing Date (as defined in the Interim Management Agreement). Sublessor and
Sublessee acknowledge that under the Interim Management Agreement, Sublessor may
terminate Sublessee's provision of one or more services thereunder, and that if
Sublessor shall elect to do so, this Interim Occupancy Agreement shall remain in
effect notwithstanding such termination until Sublessor shall have elected to
terminate Sublessee's provision of all services under the Interim Management
Agreement with respect to the Facility.
<PAGE>
3. Rent. Sublessee shall pay to Sublessor as the rent under this
Interim Occupancy Agreement (the "Rent"), all net patient revenues derived from
the operation of the Facility during the term of this Interim Occupancy
Agreement to the extent such net patient revenues are actually collected by
Sublessee. Except as expressly set forth in the preceding sentence, Sublessee
shall have no obligation to pay any amounts or perform any obligations in
respect of this Interim Occupancy Agreement; it being the purpose and intent of
Sublessor and Sublessee that this Interim Occupancy Agreement is a gross lease
and that except for the payment of the Rent, all costs, fees, taxes,
impositions, utility charges, repairs, alterations, restorations, charges,
expenses, reimbursements and obligations of every kind and manner whatsoever
relating to the Demised Premises which may arise or become due during or after
the term of this Interim Occupancy Agreement, shall be paid and discharged by
Sublessor.
4. Surrender of Possession. At the end of the term of this Interim
Occupancy Agreement, Sublessee shall surrender the Facility to Sublessor and, if
Sublessee shall fail to do so, Sublessee shall be a tenant-at-sufferance subject
to all of the terms of this Interim Occupancy Agreement except that Rent shall
be twice the Rent in effect immediately prior to the expiration or termination
hereof. Sublessee shall be liable for all damages incurred by Sublessor as a
result of such holding over.
5. No Subletting or Assignment. Sublessee shall not sublet or assign
any or all of the Facility without the prior consent of Sublessor; provided,
however, that the foregoing shall not be deemed to prohibit Sublessee from
permitting patients or residents to occupy the Facility in the ordinary course
of Sublessee's business.
6. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or on the date of actual receipt, if
sent by certified or registered mail, postage prepaid and return receipt
requested, or one business day after being sent by nationally recognized
overnight courier service, properly addressed and postage prepaid to the party
entitled to receive such notice at the address stated below:
If to the Sublessor: ____________________
400 Centre Street
Newton, MA 02458
Attention: Treasurer
with a copy to: Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Attention: Nancy S. Grodberg, Esq.
If to the Sublessee: ____________________
One Ravinia Drive, Suite 1500
Atlanta, GA 30346
Attention: Associate General Counsel
-2-
<PAGE>
with a copy to: Powell, Goldstein, Frazier & Murphy
191 Peachtree Street
Atlanta, GA 30308
Attention: Douglas S. Gosden, Esq.
7. Miscellaneous.
(a) All the terms and provision of this Interim Occupancy
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Neither party shall be
entitled to assign its rights or obligations under this Sublease without the
prior consent of the other party hereto.
(b) The headings in this Interim Occupancy Agreement are for
convenience of reference only and shall not limit or otherwise affect the terms
hereof.
(c) This Interim Occupancy Agreement shall be governed by and
construed in accordance with the internal laws of the State in which the
Facility is located, without giving effect to contrary conflicts of law
principles.
(d) This Interim Occupancy Agreement may be executed in
separate counterparts, each of which shall be considered an original, and all of
which, when taken together, shall constitute one and the same instrument.
(e) This Interim Occupancy Agreement (including the Schedules
and Exhibits hereto), and the other documents and instruments specifically
provided for herein and therein, contain the entire understanding between the
parties concerning the subject matter hereof and thereof, and except as
expressly provided for herein or therein, supersede all prior understandings and
agreements whether oral or written, between them with respect to the subject
matter hereof and thereof.
(f) Neither this Interim Occupancy Agreement nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing signed by Sublessor and Sublease.
(g) Any rights or remedies that any party hereto may have
under this Interim Occupancy Agreement with respect to any matter shall not be
deemed to be such party's exclusive rights or remedies with respect to such
matter arising out of the Settlement Agreement (or any of the Transaction
Documents referred to therein), and any party may exercise its rights and
remedies under this Interim Occupancy Agreement or the Settlement Agreement (or
any of the Transaction Documents referred to therein) concurrently with any such
other rights or remedies, or in any order that it determines in its sole and
absolute discretion.
[SIGNATURES ON NEXT PAGE]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Interim Occupancy
Agreement to be executed and delivered by their respective officers hereunto
duly authorized.
SUBLESSOR: SUBLESSEE:
[insert name of applicable New Operator] [insert name of Mariner Licensee]
By:___________________________ By:___________________________
Its: _________________________ Its: _________________________
<PAGE>
SCHEDULE 3.6
TRANSFERRED REAL ESTATE
[This schedule contains legal descriptions of real property.]
<PAGE>
SCHEDULE 6.7
LITIGATION
[Omitted.]
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 9.5
BEDS AND SERVICES
Property Name Beds Services
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cedars Health Care Center 175/14 Skilled Nursing Facility/Assisted Living Facility
Cherrelyn Manor Health Care Center 230 Skilled Nursing Facility
Christopher East Health Care Center 215 Skilled Nursing Facility
Greentree Health Care Center 69 Skilled Nursing Facility
La Mesa Health Care Center 128 Skilled Nursing Facility
La Salette Health Care and Rehab. Center 120 Skilled Nursing Facility
Lancaster Health Care Center 99 Skilled Nursing Facility
Northwest Health Care Center 101 Skilled Nursing Facility
Pine Manor Health Care Center 83/25 Skilled Nursing Facility/Facility for Dev. Disabled
River Hills West Health Care Center 237 Skilled Nursing Facility
Sunny Hill Health Care Center 73 Skilled Nursing Facility
Sunquest Village of Yuma 80 Assisted Living Facility
Thousand Oaks Health Care Center 124 Skilled Nursing Facility
Van Nuys Health Care Center 58 Skilled Nursing Facility
Village Green Health Care Center 127 Skilled Nursing Facility
Virginia Health Care Center 105 Skilled Nursing Facility
Woodland Health Care Center 226 Skilled Nursing Facility
</TABLE>
<PAGE>
SCHEDULE 9.15
LABOR UNION CONTRACTS OR AGREEMENTS
1. Contract Agreement, dated as of May 1, 1998, between Local 150 Service
Employees International Union AFL-CIO-CLC and Mariner Post-Acute
Network, Inc. d/b/a The Shores Health and Rehabilitation Center,
Northwest Healthcare Center, Christopher East Health and Rehabilitation
Center, and Park Manor Heathcare Center and Healthcare Services Group,
Inc., a Contractor.
2. Collective Bargaining Agreement, dated May 1, 1998, between Mariner
Post Acute Network, d/b/a River Hills West Nursing Home and District
1199W/United Professionals for Quality Health Care, SEIU, AFL-CIO.
<PAGE>
SCHEDULE 9.16
EMPLOYEE ACCRUALS
[Omitted.]
<PAGE>
SCHEDULE 9.18
INSURANCE POLICIES
[Omitted.]
<PAGE>
SCHEDULE 9.19
SUBLEASES AND OTHER DOCUMENTS
Fresno Sublease Documents
Pleasant Care Corporation
1. Tenant Purchase and Sale Agreement, dated March 31, 1993, by and among
GCI Properties, Inc.("GCI Properties"), AMS Properties and Pleasant
Care Corporation ("Pleasant Care") (Exhibits A through H missing).
2. Sublease Agreement, dated March 31, 1993, by and between AMS
Properties, as sublessor, and Pleasant Care, as subtenant.
3. Assignment and Assumption of Contracts, dated as of March 31, 1993, by
AMS Properties (Exhibit A missing).
4. Bill of Sale, dated March 31, 1993, by AMS Properties (Exhibit A
missing).
5. Temporary Management Agreement, dated as of March 31, 1993, by and
between AMS Properties and Pleasant Care.
6. Management/Transition Agreement, dated as of March 31, 1993, by and
between AMS Properties and Pleasant Care.
7. Security Agreement, dated as of March 31, 1993, by and among Pleasant
Care and GCI Properties, AMS Properties and GranCare.
8. Guaranty, dated as of March 31, 1993, by Emanuel I. Bernabe in favor of
GCI Properties, AMS Properties and GranCare.
9. UCC-1 Financing Statement, dated March 31, 1993, by Pleasant Care in
favor of GCI Properties, AMS Properties and GranCare.
10. Assignment of Leases and Rents, dated as of March 31, 1993, by AMS
Properties to HRPT.
11. Assignment of Sublease Documents, dated as of March 31, 1993, by AMS
Properties, GCI Properties, and GranCare to HRPT.
12. Memorandum of Sublease, made as of March 31, 1993, by and between AMS
Properties and Pleasant Care.
13. UCC-1 Financing Statement (undated) by GCI Properties in favor of HRPT,
as assignee.
14. UCC-2 Financing Statement by Pleasant Care in favor of HRPT, as
assignee.
<PAGE>
Covenant Care California, Inc.
1. Assignment and Assumption of Sublease, Consent, Waiver and Estoppel
Agreement, dated as of January 13, 1995, by and among HRPT, AMS
Properties, Pleasant Care and Covenant Care California, Inc. ("Covenant
Care").
2. Assignment of Sublease Documents, dated as of January 13, 1995, by AMS
Properties to HRPT.
3. Letter Agreement, dated as of January 13, 1995, between HRPT, AMS
Properties, GranCare and GCIHCC re: Transfer from Pleasant Care to
Covenant Care of Rights as Sublessee under Sublease, dated as of March
31, 1993.
4. Memorandum of Sublease, dated as of January 13, 1995.
5. UCC-1 Financing Statement, notarized January 11, 1995, by Covenant Care
in favor of AMS Properties.
6. UCC-2 Financing Statement, notarized January 11, 1995, by Covenant Care
in favor of AMS Properties and HRPT, as assignee
South Dakota Sublease Documents
HealthQuest, Inc. (Southridge Health Care Center/Mom & Dad's Health
Care Center)
1. Tenant Purchase and Sale Agreement, dated as of March 31, 1994, by and
between GCIHCC and HealthQuest, Inc. ("HealthQuest").
2. Sublease, dated as of March 31, 1994, by and between GCIHCC and
HealthQuest.
3. Transition Agreement dated as of March 31, 1994 by and between GCIHCC
and HealthQuest.
4. Amended and Restated Security Agreement, made as of March 31, 1994, by
and between GCIHCC and HealthQuest.
5. Assignment and Assumption of Contracts, dated as of March 31, 1994, by
GCIHCC to HealthQuest.
6. Bill of Sale, dated as of March 31, 1994 by GCIHCC.
7. Amended and Restated Promissory Note, dated as of March 31, 1994, by
HealthQuest in favor of GCIHCC in the amount of $1,190,000.00.
8. Promissory Note, dated as of March 31, 1994, by HealthQuest in favor of
GCIHCC in the amount of $450,000.00.
9. Amended and Restated Guaranty of Joseph M. Higdon, dated as of March
31, 1994.
-ii-
<PAGE>
10. Omnibus First Amendment Agreement, dated as of April 15, 1994, by and
between GCIHCC and HealthQuest.
11. UCC-1 Financing Statement by HealthQuest d/b/a Mom & Dad's Home Health
Care Center in favor of GCIHCC.
HealthQuest (Huron Nursing Home/Sunquest Village)
1. Tenant Purchase and Sale Agreement, dated as of April 29, 1994, by and
between GCIHCC and HealthQuest.
2. Sublease, dated as of May 1, 1994, by and between GCIHCC and
HealthQuest.
3. Transition Agreement, dated as of April 29, 1994, by and between GCIHCC
and HealthQuest.
4. Security Agreement, made as of May 1, 1994, by and between GCIHCC and
HealthQuest.
5. Assignment and Assumption of Contracts, dated as of May 1, 1994, by
GCIHCC to HealthQuest.
6. Bill of Sale, dated as of May 1, 1994, by GCIHCC.
7. Secured Promissory Note, dated as of May 1, 1994, by HealthQuest in
favor of GCIHCC in the amount of $240,000.00.
8. Secured Promissory Note, dated as of May 1, 1994, by HealthQuest in
favor of GCIHCC in the amount of $1,360,000.00.
9. Secured Promissory Note, dated as of May 1, 1994, by HealthQuest in
favor of GCIHCC in the amount of $450,000.00.
10. Guaranty of Joseph M. Higdon, dated as of May 1, 1994.
11. UCC-1 Financing Statement by HealthQuest d/b/a Sunquest Village of
Huron and d/b/a Huron Nursing Home in favor of GCIHCC.
-iii-
EXHIBIT 10.2
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT made this 11th day of April 2000, by and among:
(a) SENIOR HOUSING PROPERTIES TRUST, a Maryland real estate
investment trust ("SNH") and its wholly-owned subsidiaries, SPTIHS
PROPERTIES TRUST ("SPTIHS"), HRES1 PROPERTIES TRUST ("HRES1") and HRES2
PROPERTIES TRUST ("HRES2"), each a Maryland real estate investment
trust;
(b) SHOPCO-COLORADO, LLC, SHOPCO-CT, LLC, SHOPCO-GA, LLC,
SHOPCO-IA, LLC, SHOPCO-KS, LLC, SHOPCO-MA, LLC, SHOPCO-MI, LLC,
SHOPCO-MO, LLC, SHOPCO-NE, LLC, and SHOPCO-WY, LLC, each a Delaware
limited liability company (collectively, the "New LLC Operators");
(c) SNH-NEBRASKA, INC., SNH-IOWA, INC., SNH-MASSACHUSETTS,
INC. and SNH-MICHIGAN, INC., each a Delaware corporation (collectively,
the "New Corporate Operators");
(d) FIVE STAR QUALITY CARE, INC., a Delaware corporation (the
"New Manager");
(e) ADVISORS HEALTHCARE GROUP, INC., a Delaware corporation
(f/k/a "Connecticut Subacute Corporation II") ("Advisors," and together
with SNH, SPTIHS, HRES1, HRES2, the New LLC Operators, the New
Corporate Operators and the New Manager, collectively, the "SNH
Entities");
(f) INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
("IHS");
(g) the following wholly-owned subsidiaries of IHS (the "IHS
Subsidiaries"): COMMUNITY CARE OF AMERICA, INC., a Delaware corporation
("CCA"), ECA HOLDINGS, INC., a Delaware corporation ("ECA"), COMMUNITY
CARE OF NEBRASKA, INC., a Delaware corporation ("CCN"), W.S.T. CARE,
INC., a Nebraska corporation ("WST") and QUALITY CARE OF LYONS, INC., a
Nebraska corporation ("Lyons", and together with CCN and WST, the
"SPTIHS Mortgagors"), CCA ACQUISITION I, INC., a Delaware corporation
("CCAA"), MARIETTA/SCC, INC., a Georgia corporation ("Marietta"),
GLENWOOD/SCC, INC., a Georgia corporation ("Glenwood"), DUBLIN/SCC,
INC., a Georgia corporation ("Dublin"), and COLLEGE PARK/SCC, INC., a
Georgia corporation ("College Park"), and IHS ACQUISITION NO. 108, INC.
("IHS 108"), IHS ACQUISITION NO. 112, INC. ("IHS 112"), IHS ACQUISITION
NO. 113, INC. ("IHS 113"), IHS ACQUISITION NO. 135, INC. ("IHS 135"),
IHS ACQUISITION NO. 148, INC. ("IHS 148"), IHS ACQUISITION NO. 152,
INC. ("IHS 152"), IHS ACQUISITION NO. 153, INC. ("IHS 153"), IHS
ACQUISITION 154, INC. ("IHS 154"), IHS ACQUISITION NO. 155, INC. ("IHS
155") and IHS ACQUISITION NO. 175, INC. ("IHS 175"), each a Delaware
corporation (collectively, the "IHS Acquisition Subsidiaries"); and
<PAGE>
(h) INTEGRATED HEALTH SERVICES AT GRANDVIEW CARE CENTER, INC.,
a Delaware corporation, ECA PROPERTIES, INC., a Delaware corporation,
CCA OF MIDWEST, INC., a Delaware corporation, and QUALITY CARE OF
COLUMBUS, INC., a Nebraska corporation (together with ECA, IHS 148 and
CCN, collectively, the "New Property Owners" and together with IHS and
the IHS Subsidiaries, collectively, the "IHS Entities" or the
"Debtors"), each a wholly-owned Subsidiary of IHS.
WITNESSETH:
WHEREAS, SPTIHS, HRES1 and HRES2 are the respective owners of the real
property, buildings, plant and equipment and certain of the personal property
used in connection with the operation of the health care and health care related
facilities described in Appendix 1 hereto as the SPTIHS Leased Facilities (the
"SPTIHS Leased Facilities"), the HRES1 Leased Facilities (the "HRES1 Leased
Facilities") and the HRES2 Leased Facilities (the "HRES2 Leased Facilities," and
together with the SPTIHS Leased Facilities and the HRES1 Leased Facilities,
collectively, the "Leased Facilities"), respectively; and
WHEREAS, SPTIHS leased the SPTIHS Leased Facilities to ECA, Marietta,
Glenwood, Dublin and College Park (the "SPTIHS Tenants") pursuant to the lease
agreement described in Appendix 2 hereto as the "SPTIHS Lease" (the "SPTIHS
Lease"); HRES1 leased the HRES1 Leased Facilities to Horizon/CMS Healthcare
Corporation, f/k/a Horizon Healthcare Corporation, a Delaware corporation
("Horizon") pursuant to the lease described in Appendix 2 with respect to the
HRES1 Leased Facility located in Canonsburg, Pennsylvania (the "Pennsylvania
Facility) and Horizon has assigned the HRES1 Lease for the Pennsylvania Facility
to IHS 135; HRES1 leased the remaining HRES1 Leased Facilities to Horizon
pursuant to the lease agreements described in Appendix 2 hereto as the "HRES1
Lease" (collectively, together with the HRES1 Lease with respect to the
Pennsylvania Facility, the "HRES1 Lease") and Horizon has entered into
management agreements (the "HRES1 Management Agreements") with respect to the
remaining HRES1 Leased Facilities with IHS 152, IHS 153, IHS 154 and IHS 155
(together with IHS 135, collectively, the "HRES1 Tenants," and together with IHS
135 and the SPTIHS Tenants, collectively the "IHS Tenants"); and HRES2 leased
the HRES2 Leased Facilities to Advisors, as tenant, as an accommodation to
Horizon, and Advisors in turn entered into certain Management Agreements, each
dated as of February 11, 1994, as amended to date (collectively, the "HRES2
Management Agreements") pursuant to which IHS 175 (as successor to Horizon)
agreed to act as Manager of the HRES2 Leased Facilities; and
WHEREAS, each of SPTIHS and HRES1 holds first mortgages and security
interests (the "SPTIHS Mortgages" and the "HRES1 Mortgages," respectively) in
all of the real property, buildings, plant and equipment and substantially all
personal property used in connection with the operation of the health care and
health care related facilities described in Appendix 1 hereto as the "SPTIHS
Mortgaged Facilities" (the "SPTIHS Mortgaged Facilities") and the "HRES1
Mortgaged Facilities" (the "HRES1 Mortgaged Facilities," and together with the
SPTIHS Mortgaged Facilities, collectively, the "Mortgaged Facilities"; the
Mortgaged Facilities and the Leased Facilities, collectively, the "Existing
Facilities"), respectively, securing certain promissory notes described in
Appendix 2 hereto as the "SPTIHS Mortgage
-2-
<PAGE>
Notes" (the "SPTIHS Mortgage Notes") by the SPTIHS Mortgagors parties thereto
and certain promissory notes described in Appendix 2 hereto as the "HRES1
Mortgage Notes" (the "HRES1 Mortgage Notes," and together with the SPTIHS
Mortgage Notes, collectively the "Mortgage Notes") by IHS 113, IHS 112 and IHS
108 (collectively, the "HRES1 Mortgagors," and together with the SPTIHS
Mortgagors, collectively, the "IHS Mortgagors"); and
WHEREAS, IHS has guaranteed to SPTIHS, HRES1, HRES2 and Advisors the
prompt and complete payment and performance of the various obligations of the
IHS Subsidiaries to SPTIHS, HRES1, HRES2 and Advisors pursuant to various
guaranty agreements described in Appendix 2 hereto as the "IHS Guaranties"
(collectively, the "IHS Guaranties"); and
WHEREAS, the SNH Entities claim that by notices dated January 25, 2000,
HRES1 notified certain of the IHS Entities that the HRES1 Lease as to the
Pennsylvania Facility was terminated by virtue of an Event of Default under the
HRES1 Lease and that SPTIHS notified certain of the IHS Entities that the SPTIHS
Lease was terminated by virtue of an Event of Default under the SPTIHS Lease;
WHEREAS, pursuant to that certain letter dated January 25, 2000 and
addressed to Lyons, WST and CCN, SPTIHS exercised its option to purchase certain
Nebraska Facilities under the Right of First Refusal and Option Agreement dated
as of September 24, 1997 among SPTIHS (as successor in interest to HRPT), CCN,
WST and Lyons; and
WHEREAS, on February 2, 2000 (the "Petition Date"), each of the IHS
Entities filed voluntary petitions for relief (collectively, the "Cases") under
Chapter 11 of the United States Bankruptcy Code, ss.ss.101 et seq. (the "Code")
with the United States Bankruptcy Court for the District of Delaware (the
"Court"); and
WHEREAS, the IHS Entities are continuing to operate their respective
businesses and manage their respective properties as debtors-in-possession
pursuant to ss.ss.1107 and 1108 of the Code; and
WHEREAS, the obligations of the IHS Entities with respect to each
Existing Facility under the various agreements or instruments entered into by
the various IHS Entities with or for the benefit of the various SNH Entities
prior to the date hereof, including the agreements and instruments referred to
above (excluding the HRES1 Management Agreements, collectively, the "Existing
Documents") or otherwise under applicable law, constitute a substantial burden
on the financial and administrative resources of the IHS Entities, and the IHS
Entities have concluded that these burdens substantially outweigh any advantages
to be had by continuing to operate each such Existing Facility in accordance
with the Existing Documents; based on this conclusion, the IHS Entities propose,
among other things, to cease operating and/or managing the Existing Facilities
(except for the Pennsylvania Facility and the HRES1 Mortgaged Property located
at Slidell, Louisiana (the "Slidell Facility")) and to liquidate their
obligations to the SNH Entities in an orderly fashion, in each case subject to
the terms and conditions set forth herein; and
WHEREAS, the SNH Entities are willing to agree to such proposal,
subject to the terms and conditions set forth herein;
-3-
<PAGE>
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following capitalized terms shall have the
meanings set forth below:
"Agreement" shall mean this Settlement Agreement, including all
Appendices, Schedules and Exhibits thereto, as it and they may be amended from
time to time as herein provided.
"Assigned Contracts" shall mean, on the Closing Date, the Contracts
listed on Schedule 1.1A hereto, and any Existing Document to the extent
contemplated to be assigned to an SNH Entity pursuant to Section 3.2. Such term
shall also include all other Contracts subsequently designated pursuant to
Section 7.6.
"Business Day" shall mean any day other than a Saturday, Sunday, or any
other day on which banking institutions in The Commonwealth of Massachusetts are
authorized by law or executive action to close.
"Consumables" shall mean, with respect to any Facility, all inventory
and consumables, including, without limitation, food, central supplies, unopened
linens and housekeeping supplies and other consumables, customarily used or
consumed in the day-to-day operation of such Facility.
"Contracts" shall mean, with respect to each Facility, each instrument,
contract and agreement to which the IHS Operator of such Facility is a party
that benefits, relates to or affects such Facility, or the operation of or the
provision of services in conjunction with such Facility (including, without
limitation, Provider Agreements).
"Data" shall mean data and records related to the operation of each
Transfer Facility, including employee information, vendor information, general
ledger transactions, payroll transactions, chart of accounts, peoplesoft
database structures and tables, report definitions and all records, including
medical records, of patients or residents of the Transfer Facilities, that are
embodied or contained in the format or media associated with the Intellectual
Property or in the general corporate information systems of the IHS Entities.
"Employee Benefits" shall mean, with respect to any Facility, all
wages, salary, health insurance coverage, disability coverage, severance pay,
withholding, social security or other employment taxes, vacation and sick pay,
bonuses, commissions, pensions, profit sharing, stock option or other
arrangements or other fringe benefits or other employee benefit plans, practices
or arrangements, whether written or oral, covering any present or former
employee of such Facility as of the moment preceding the Effective Time, whether
or not yet payable.
-4-
<PAGE>
"Excluded Assets" shall mean, with respect to each Facility: all cash,
bank accounts, bonds, security deposits and cash equivalents maintained at or
for the account of such Facility; all accounts receivable arising from services
rendered prior to the Effective Time; insurance policies and insurance contracts
and all prepaid expenses; all Proprietary Information (other than Data); the
right to use the name "Integrated Health Services," "IHS" or "Symphony" or any
derivation thereof in its name; any personal property of any IHS Entity (other
than books and records and Data) that are in the ordinary course of business
located at the corporate offices of IHS at 910 Ridgebrook Road, Sparks,
Maryland; any employee benefit plans or insurance coverage provided by any IHS
Entity; any claims against third parties, including insurance companies, for
reimbursement, indemnification or under any warranties with respect to
Pre-Effective Time Obligations or with respect to any asset or properties not
being conveyed or relinquished to an SNH Entity as provided hereunder; use of
the acquisition, accounting, legal, management information service, human
resource, risk management and other corporate functions provided by IHS to any
of the IHS Entities (other than, in each case, Data); tax refunds, if any in
respect of tax periods ending on or prior to the Effective Time; the capital
stock of any IHS Entity; and the minute books, stock record books and stock
ledgers of each IHS Entity and any other books, records or other data relating
solely to Excluded Assets or Pre-Effective Time Obligations (other than, in each
case, Data).
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Governmental Authority" shall mean all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures and offices of any
nature whatsoever, of any government unit or political subdivision, whether
federal, state, county, district, municipal, city or otherwise, and whether now
or hereafter in existence.
"HealthSouth" shall mean HealthSouth Corporation, a Delaware
corporation.
"IHS Operator" shall mean, with respect to any Facility, the IHS
Tenant, the IHS Mortgagor, the New Property Owner or IHS 175 that operates or
manages such Facility immediately prior to the Effective Time.
"Intellectual Property" means the software applications described on
Schedule 1.1C hereto including the Data imbedded therein.
"Knowledge" shall mean, with respect to any IHS Entity, only the actual
knowledge of Dan Booth or his successor as Senior Vice President, Finance (or
successor office) of IHS, any regional vice president (or successor office) of
IHS with authority over a region that includes any Facility owned, operated or
managed prior to the Effective Time by such IHS Entity, and the administrator of
such Facility.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, operations, assets, property, condition (financial or otherwise),
after the Effective Time, of any Facility being returned, conveyed or otherwise
relinquished to an SNH Entity pursuant to this Agreement, (b) the consummation
of the transactions contemplated hereby or (c) the enforceability of any
material provision of any Settlement Document.
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"Permits" shall mean, with respect to any Facility, all licenses,
approvals, certificates of need, determinations of need, franchises,
accreditations, certificates, certifications, consents, permits and other
authorizations benefiting, relating to or affecting the operation of such
Facility or the operation of programs or provision of services in conjunction
with such Facility, issued by or entered into with any Governmental Authority,
Third Party Payor or accreditation body, and all renewals, replacements and
substitutions therefor (excluding, however, Provider Agreements).
"Permitted Encumbrances" shall mean, with respect to the real property
and the improvements at each Facility, those liens and encumbrances of record on
February 2, 2000, including, without limitation, those disclosed in the
marked-up title commitments or title policies or reports (the "Title Reports")
issued by the Title Company to the SNH Entities on or prior to such date, but
excluding in any event (a) any such lien, claim, security interest or
encumbrance arising under any instrument, agreement, indenture or understanding
for the benefit of any IHS Entity or any affiliate thereof, or which has been
granted by Order of the Court, (b) any encumbrance listed on Schedule 1.1B
hereto, or (c) any such lien, claim, security interest or encumbrance first
appearing of record after February 2, 2000. Real estate taxes for the Transfer
Facilities (other than the five (5) Transfer Facilities located in
Massachusetts) shall be apportioned between the parties at the Closing as of
February 2, 2000.
"Person" shall mean all individuals, corporations, general and limited
partnerships, limited liability companies, stock companies or associations,
joint ventures, unincorporated associations, companies, trusts, banks, trust
companies, land trusts, business trusts, Governmental Authorities and other
entities of every kind and nature.
"Pre-Effective Time Obligations" shall mean, with respect to any
Facility, all debts, liabilities and obligations, whether known or unknown,
absolute, mature or not yet due, liquidated or non-liquidated, contingent,
non-contingent, direct or indirect or otherwise, relating to any Facility and/or
arising under any Permits or Contracts or under any other agreements or
instruments (including under Provider Agreements or otherwise under Third Party
Payor Programs), or relating to the management or operation of any Facility, or
arising out of the acts or omissions of any IHS Entity, in each case only to the
extent arising out of or attributable to conditions or events occurring or in
existence prior to the Effective Time, including, without limitation, the
following:
(a) except to the extent specifically provided in Section
10.14, any costs or expenses (including, but not limited to, legal
fees, accounting fees, consulting and financing costs) incurred by any
IHS Entity in negotiating this Agreement or in consummating the
transactions contemplated hereby; or
(b) any claim as a result of any injury to any person suffered
at any Facility or in connection with the rendering of or the failure
to render services by any IHS Entity or its employees, agents or
representatives or any other person performing services for or on
behalf of any IHS Entity, prior to the Effective Time; or
(c) any liability to, or set off or recoupment (including set
off or recoupment against post-Effective Time accounts receivable) by,
any Third Party Payor arising out
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of events or conditions (including an alleged overpayment under any
Third Party Payor Program) that occurred or existed prior to the
Effective Time; or
(d) except to the extent specifically provided in Section
10.14, any taxes owed by any IHS Entity, including, but not limited to,
any investment tax recapture, depreciation recapture, employer taxes
such as FICA and FUTA, any sales or use taxes, any personal property or
real property taxes, any withholding taxes and any workers'
compensation or unemployment insurance premiums or adjustments; or
(e) any claim by any employee of any IHS Entity at or prior to
the Effective Time for wages, salary, vacation, holiday, sick pay,
welfare or fringe benefits, and all other accrued and unpaid
obligations of any kind and all Employee Benefits; or
(f) any claim arising prior to the Effective Time, to the
extent arising under any instrument, agreement, indenture, lease,
contract or understanding to which any IHS Entity is a party or by
which it or he or any of its or his property is bound (except for
obligations arising and to the extent attributable to periods after the
Effective Time under Assigned Contracts); or
(g) any claim otherwise arising out of the operation of any
Facility (including any claim, order or judgment arising under any
applicable Federal, state or local statutes, laws, ordinances, rules
and regulations, licensing requirements or conditions (including
Medicare or Medicaid requirements or conditions, and environmental
laws), or involving the imposition of any lien under any such
applicable law), in each case only to the extent arising or
attributable to conditions or events occurring prior to the Effective
Time.
"Proprietary Information" shall mean all operating manuals and all
software applications, including the Intellectual Property and the software
applications described on Schedule 1.1C hereto.
"Provider Agreements" shall mean, with respect to any Facility, all
participation, provider and reimbursement agreements or arrangements in effect
for the benefit of or relating to or affecting the operation of any Facility, or
the operation of programs or provision of services therein, relating to any
right of payment or other claim arising out of or in connection with such
Facility's participation in any Third Party Payor Program.
"Settlement Documents" shall mean, collectively, this Agreement and
each agreement, undertaking or instrument delivered pursuant to Article 3
hereof.
"Third Party Payor Programs" shall mean all third party payor programs
in which any Facility participates, including, without limitation, Medicare,
Medicaid, CHAMPUS, TRICARE, Blue Cross and/or Blue Shield, managed care plans,
other private insurance programs, workers compensation and employee assistance
programs.
"Third Party Payors" shall mean Medicare, Medicaid, CHAMPUS, TRICARE,
Blue Cross and/or Blue Shield, private insurers and any other Person which
maintains Third Party Payor Programs.
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"Title Company" means Lawyers Title Insurance Company.
"Transfer Facilities" shall mean, collectively, the Leased Facilities
(except for the Pennsylvania Facility), the Mortgaged Facilities (except for the
Slidell Facility) and the New Facilities.
1.2 Other Defined Terms. The following terms shall have the meanings
set forth in the sections of this Agreement referred to below:
Defined Term Defined In:
- ------------ -----------
Advisors Caption
Approval Order ARTICLE 2
Assigning HRES1 Tenants ss.3.2.2
Cases Recitals
CCA Caption
CCAA Caption
CCN Caption
Closing ss.3.1
Closing Date ss.3.1
College Park Caption
Code Recitals
Court Recitals
Debtors Caption
Dublin Caption
ECA Caption
ECAP Caption
Effective Time ss.3.1
Existing Documents Recitals
Existing Facilities Recitals
Facilities ss.3.2.6
foreign person ss.5.6
Glenwood Caption
Horizon Recitals
HRES1 Caption
HRES2 Caption
HRES2 Management Agreements Recitals
HRES1 Leased Facilities Recitals
HRES1 Leases Recitals
HRES1 Mortgage Notes Recitals
HRES1 Mortgaged Facilities Recitals
HRES1 Mortgages Recitals
HRES2 Leased Facilities Recitals
IHS Caption
IHS 108 Caption
IHS 112 Caption
IHS 113 Caption
IHS 135 Caption
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Defined Term Defined In:
- ------------ -----------
IHS 148 Caption
IHS 152 Caption
IHS 153 Caption
IHS 154 Caption
IHS 155 Caption
IHS 175 Caption
IHS Entities Caption
IHS Releasees ss.9.2
IHS Mortgagor Caption
IHS Subsidiaries Caption
IHS Tenant Recitals
Interim Sublease Agreement ss.3.2.14
Leased Facilities Recitals
Management and Servicing Agreement ss.3.2.14
Marietta Caption
Mortgage Notes Recitals
Mortgaged Facilities Recitals
New Corporate Operators Caption
New Facilities ss.3.2.6
New LLC Operators Caption
New Manager Caption
New Property Owners Caption
New Pennsylvania Guaranty ss.3.2.8
New Pennsylvania Lease ss.3.2.8
New Properties ss.3.2.6
New Real Estate ss.3.2.6
Pennsylvania Facility Recitals
Pennsylvania Modification ss.3.2.8
Petition Date Recitals
Slidell Facility Recitals
SNH Caption
SNH Entities Caption
SNH Releasees ss.9.1
SPTIHS Caption
SPTIHS Leased Facilities Recitals
SPTIHS Leases Recitals
SPTIHS Mortgage Notes Recitals
SPTIHS Mortgages Recitals
SPTIHS Mortgaged Facilities Recitals
SPTIHS Mortgagors Caption
SPTIHS Tenants Recitals
Transaction Approval Motion ARTICLE 2
WST Caption
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ARTICLE 2
APPROVAL OF TRANSACTION
Within ten (10) Business Days following the execution of this Agreement
by all parties, the IHS Entities will file a motion with the Court, in a form
acceptable to both the SNH Entities and the IHS Entities, seeking authority to
proceed with the transactions and other matters provided for in this Agreement
(the "Transaction Approval Motion"), together with a proposed form of order in
the form annexed hereto as Exhibit A (the "Approval Order"). The Approval Order
shall be in the form annexed hereto and shall include such additional provisions
as the SNH Entities and IHS Entities may mutually agree.
ARTICLE 3
TRANSACTIONS TO OCCUR AT THE EFFECTIVE TIME
3.1 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall occur on the second Business Day (said date, as
it may be extended pursuant to the provisions of this Agreement, herein referred
to as the "Closing Date") following the first day (which shall not in any event
be later than sixty days from the date hereof, except as expressly provided
herein or unless otherwise agreed in writing by the SNH Entities and the IHS
Entities) on which (i) all of the conditions set forth in Section 6.1 have been
satisfied (or waived by the SNH Entities) and (ii) all of the conditions set
forth in Section 6.2 have been satisfied (or waived by the IHS Entities). The
Closing shall be effective at 12:01 A.M. (Boston time) (the "Effective Time") on
the day following the Closing Date. In the event that on the Closing Date the
SNH Entities shall have any objections or other grounds for refusing to close
this transaction, and if the SNH Entities shall be unwilling to waive the same
and to close this transaction without modification of the terms and provisions
hereof and without allowance of any kind, the IHS Entities shall have the right,
at the IHS Entities' sole election, either (a) use their reasonable, good faith
efforts to remove, remedy or comply with such objections or other grounds, or
(b) to cancel this Agreement. In the event of the IHS Entities' election to take
action to remove, remedy or comply with such objections or other grounds, the
IHS Entities shall be entitled to one or more adjournments of the Closing Date
for one or more periods not to exceed thirty (30) days in the aggregate, and
such Closing Date shall be adjourned to a date specified by the IHS Entities not
beyond such thirty (30) day period, provided the IHS Entities continue to use
their reasonable, good faith efforts during such period. If for any reason
whatsoever the IHS Entities shall not have succeeded in removing, remedying or
complying with such objections or other grounds at the expiration of such
adjournments, or at such time prior thereto as the IHS Entities determine that
they will not be able to satisfy same, the IHS Entities shall give the SNH
Entities written notice thereof and the SNH Entities may elect (within five (5)
Business Days of receipt of such written notice), by written notice to the IHS
Entities, to consummate this transaction without satisfaction of, and subject to
such objection or other grounds. If the SNH Entities shall still be unwilling to
waive the same and to close this transaction without modification of the terms
and provisions hereof and without allowance of any kind, this Agreement shall be
and be deemed to be cancelled. In the event of the cancellation of this
Agreement under any of the circumstances referred to and as provided in this
Article, this Agreement shall cease, terminate and come to an end, and
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neither party hereto shall have any rights, obligations or liabilities against
or to the other hereunder. In no event shall the IHS Entities be required to,
and nothing herein contained shall obligate the IHS Entities to, expend any
money or bring any action or proceeding or otherwise incur any costs or expenses
in order to cure any purported defect or objection or to fulfill any condition.
3.2 Transfers and Conveyances. The parties hereto shall complete the
following transactions at the Closing:
3.2.1 Each SPTIHS Tenant shall assign or assume and assign, as
applicable, to the New LLC Operator designated by SPTIHS all of such SPTIHS
Tenant's right, title and interest in, to and under the SPTIHS Leases to the
extent they may be in effect and consent to the termination of its prior right
to occupy the SPTIHS Leased Facilities; SPTIHS shall consent to such transfer
and shall release the SPTIHS Tenants from all liabilities and obligations under
the SPTIHS Leases and such occupancy, and such consent and release shall be set
forth in such transfer document and shall be executed by SPTIHS.
3.2.2 Each of IHS 152, IHS 153, IHS 154 and IHS 155 (the
"Assigning HRES1 Tenants") shall assign or assume and assign, as applicable, to
the New LLC Operator designated by HRES1 all of such Assigning HRES1 Tenant's
right, title and interest in, to and under the HRES1 Leases and consent to the
termination of its prior right to occupy the HRES1 Leased Facilities. HRES1
shall consent to such transfer and shall release the Assigning HRES1 Tenants
(but not HealthSouth, Horizon or their respective affiliates) from all
liabilities and obligations under the HRES1 Leases and such occupancy, and such
consent and release shall be set forth in such transfer document and shall be
executed by HRES1.
3.2.3 IHS 175 shall assign to Advisors or its designee all of
IHS 175's right, title and interest in, to and under the HRES2 Management
Agreements and all promissory notes of Advisors delivered thereunder.
3.2.4 Each SPTIHS Tenant and IHS 175 (i) shall transfer and
assign to SPTIHS or HRES2, the New LLC Operator or other entity designated by
it, as the case may be, all right, title and interest of such IHS Entity in and
to all tangible personal property (including, without limitation, all furniture,
furnishings, fixtures, equipment and Consumables) present at or used at each
Leased Facility in connection with the operation of each Leased Facility that it
leases or manages, and to all intangible personal property incorporated in such
tangible personal property, and (ii) shall transfer and assign to SPTIHS or
HRES2, the New LLC Operator or other entity designated by it, as the case may
be, all right, title and interest of such IHS Entity in and to all of the
Assigned Contracts and Permits with respect to such Leased Facility (to the
extent permitted by law); provided that the property being transferred pursuant
to this Section 3.2.4 shall not include Excluded Assets in existence on the
Closing Date or any Pre-Effective Time Obligations.
3.2.5 Each IHS Mortgagor (except for IHS 108) shall (i) convey
all of its right, title and interest in and to each Mortgaged Facility to SPTIHS
or HRES1, or the New LLC Operator designated by it, as the case may be, by
quit-claim deed in lieu of foreclosure, and (ii) transfer and assign to SPTIHS
or HRES1, or to such New LLC Operator, as the case may be,
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(A) all right, title and interest of such IHS Mortgagor in and to all tangible
personal property (including, without limitation, all furniture, furnishings,
fixtures, equipment and Consumables) present at or used at the Mortgaged
Facility in connection with the operation of such Mortgaged Facility, and to all
intangible personal property incorporated in such tangible personal property,
and (B) all right, title and interest of such IHS Mortgagor in and to all of the
Assigned Contracts and Permits with respect to such Mortgaged Facility (to the
extent permitted by law); provided that the property being transferred pursuant
to this Section 3.2.5 shall not include Excluded Assets in existence on the
Closing Date or any Pre-Effective Time Obligations.
3.2.6 Each of the New Property Owners (i) shall convey by
quitclaim deed all of its right, title and interest in and to the parcels of
real property described in Schedule 3.2.6 hereto, together with the lease
described in Schedule 3.2.6A hereto, and together with all improvements thereon
(collectively, the "New Properties") to the appropriate New Corporate Operator
designated by the SNH Entities, and (ii) excluding IHS 148, shall transfer and
assign to the designated New Corporate Operator, (A) all right, title and
interest of such New Property Owner in and to all tangible personal property
(including, without limitation, all furniture, furnishings, fixtures, equipment
and Consumables) present at or used at each New Property in connection with the
operation of the nursing facility located at such New Property, and to all
intangible personal property incorporated in such tangible personal property,
and (B) all right, title and interest of such New Property Owner in and to all
of the Assigned Contracts and Permits with respect to the operation of the
nursing facility located at such New Property (to the extent permitted by law)
((i) and (ii), collectively, the "New Facilities, and together with the Existing
Facilities, collectively, the "Facilities"); provided that the property being
transferred pursuant to pursuant to this Section 3.2.6 shall not include
Excluded Assets in existence on the Closing Date or any Pre-Effective Time
Obligations.
3.2.7 Satisfaction and Discharge of Mortgage Debt. HRES1 shall
acknowledge and agree to the satisfaction and discharge of the debt under the
promissory note dated as of January 28, 1995 and shall release its lien and
security interest in and to the HRES1 Mortgaged Facility located at Slidell,
Louisiana.
3.2.8 New Pennsylvania Lease. HRES1 shall rescind its
termination of the HRES1 Lease for the Pennsylvania Facility, and HRES1 and IHS
135 shall enter into an amendment and restatement of such lease agreement, to be
effective as of January 1, 2000, in the form of Exhibit B-1 hereto (the
"Pennsylvania Modification," such lease agreement, as so modified, the "New
Pennsylvania Lease"), and IHS shall deliver a guaranty of the New Pennsylvania
Lease in the form of Exhibit B-2 hereto (the "New Pennsylvania Guaranty"). On
the Closing Date, (i) IHS 135 shall pay HRES1(by wire transfer of immediately
available funds to an account designated by HRES1 in writing prior to the
Closing Date), any installment of Minimum Rent then due and payable under the
New Pennsylvania Lease (to the extent not previously paid), and (ii) each party
to the New Pennsylvania Lease shall deliver an estoppel certificate to other
party thereto in form reasonably acceptable to such other party.
3.2.9 Documentation, Etc. All of the assignments, transfers,
conveyances and agreements contemplated by this Section 3.2 shall be effected or
evidenced by such deeds, bills of sale, assignments and other instruments of
transfer or release, and by such agreements, as are
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in the form agreed to by the parties hereto prior to the date hereof and shall
state that they are made without representations and warranties express or
implied, except as expressly provided in this Agreement. All deeds, bills of
sale, assignments and other instruments of transfer or releases necessary to
effect such assignments, transfers, conveyances and agreements shall be recorded
or filed by the SNH Entities at their sole cost and expense. The SNH Entities
shall have the benefits of Code ss.1146 to the extent granted in the Approval
Order.
3.2.10 Excluded Assets. Notwithstanding anything to the
contrary contained in this Agreement or any other Settlement Document, none of
the Excluded Assets are being transferred, conveyed or assigned to any SNH
Entity. SNH may make a copy of any operating manuals and procedures ("Copies")
provided that all references to any IHS Entities are removed from such Copies
and any use of such Copies or the information contained therein shall be at the
sole cost and risk of the SNH Entities. The SNH Entities shall indemnify and
hold the IHS Entities harmless from and against all costs, expenses, and
liabilities (including reasonable attorneys' fees and disbursements) arising out
of or resulting from any use of such Copies or the information contained
therein.
3.2.11 Facilities Conveyed "As Is". EACH OF THE PARTIES
ACKNOWLEDGES THAT THE PROPERTY BEING CONVEYED OR TRANSFERRED TO IT HEREUNDER IS
BEING CONVEYED OR TRANSFERRED "AS IS, WHERE IS" WITHOUT REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE CONDITION, TITLE, DESIGN,
MERCHANTABILITY OR FITNESS FOR USE OF SUCH PROPERTY, AND NEITHER PARTY HAS MADE,
OR SHALL BE DEEMED TO HAVE MADE, ANY OTHER REPRESENTATION OR WARRANTIES, IN EACH
CASE OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY OTHER SETTLEMENT
DOCUMENT. Without limiting the generality of the foregoing, except for the
representations and warranties expressly set forth in this Agreement or in any
other Settlement Document, the transactions contemplated by this Agreement are
without any statutory, express or implied warranty, representation, agreement,
statement or expression of opinion of or with respect to (i) the condition or
title of the assets or any aspect thereof, including, without limitation, any
and all statutory, express or implied representations or warranties related to
suitability for habitation, merchantability, or fitness for a particular use or
purpose, (ii) the nature or quality of construction, structural design, or
engineering of the Improvements, (iii) the quality of the labor or materials
included in the Improvements, (iv) the soil conditions, drainage, topographical
features, flora, fauna, or other conditions of or which affect the assets, (v)
any conditions at or which affect the assets with respect to any particular use,
purpose, development potential, or otherwise, (vi) area, size, shape,
configuration, location, access, capacity, quantity, quality, cash flow,
expenses, value, condition, make, model, composition, accuracy, completeness,
applicability, assignability, enforceability, exclusivity, usefulness,
authenticity, or amount, (vii) any statutory, express, or implied
representations or warranties created by any affirmation of fact or promise, by
any description of the assets or by operation of law, (viii) any environmental,
botanical, zoological, hydrological, geological, meteorological, structural, or
other condition or hazard or the absence thereof heretofore, now, or hereafter
affecting in any manner any of the assets, and (ix) all other statutory, express
or implied representations and warranties whatsoever. The parties each
acknowledge that it has the knowledge and expertise in financial and business
matters that enable it to evaluate the merits and risks of the transactions
contemplated by this Agreement.
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3.2.12 Bankruptcy Code Provisions. Each of the transactions
provided for in Sections 3.2.1 through 3.2.6, shall be completed in accordance
with Code ss.ss.105, 363(b), (f) and (m), 365(b) and (f) and 1146(c), as
applicable, and the provisions of the Approval Order, with the SNH Entities
receiving the full benefits and protections of such sections and the provisions
of the Approval Order. Notwithstanding any provisions of the Code, the IHS
Entities shall not be required to cure any default, provide any assurances, make
any payment or to incur any cost, expense or liability in order to complete any
of such transactions. Any assumptions made by any IHS Entity of any Existing
Document (but not the New Pennsylvania Lease or any other Settlement Document)
in order to satisfy the conditions set forth in this Article 3 shall be deemed
released pursuant to Section 9.2.
3.2.13 Assigned Contract and Cure Payments. If and to the
extent any performance or payments may be required in order to cure any defaults
as a condition to the assumption and/or assignment of any of the Assigned
Contracts, at the Closing the SNH Entities shall perform and/or pay for or to
the appropriate non-IHS Entity contracting party such acts and/or sums (if any)
as shall be required to cure any default as a condition to the assumption and/or
assignment of any Assigned Contract.
3.2.14 Management and Servicing Agreement; Servicing
Agreement; Interim Sublease Agreement. (a) IHS and each IHS Entity that is a
licensee of any Transfer Facility, jointly, as "Servicer" and the relevant IHS
Operators shall enter into a management and servicing agreement (the "Management
and Servicing Agreement") with the New Manager, Advisors and certain of the New
LLC Operators and New Corporate Operators, in the form of Exhibit C hereto
covering all of the Transfer Facilities (except for the Transfer Facilities
located in Massachusetts); and (b) each IHS Operator that is a licensee of such
a Transfer Facility shall enter into an interim sublease agreement (an "Interim
Sublease Agreement") with respect to such Facility with the appropriate New LLC
Operator or New Corporate Operator, in the form of Exhibit D.
3.3 Payments in Respect of Operating Results. In lieu of the payment of
rent under the Existing Leases for the Transfer Facilities, and the payment for
use and occupancy pursuant to the Code, for the period from the Petition Date to
the Closing Date, IHS shall pay SNH on the Closing Date an amount equal to
$500,000 multiplied by (y) the number of months (or portion thereof) during the
period from and including February 2, 2000 to but excluding the Closing Date.
Such payment shall be made by wire transfer of immediately available funds to an
account designated by SNH in writing prior to the Closing Date.
3.4 Release and Discharge of IHS Entities Liabilities. The parties
hereto agree that, subject to the completion of the transfers and conveyances
described in Section 3.2, the execution and delivery of the instruments and
agreements described in Section 3.2.14, and the payment pursuant to Section 3.3,
and without limiting the provisions of ARTICLE 9, each IHS Entity and any third
party or Person (other than HealthSouth, Horizon or their respective affiliates)
are released from all obligations, liabilities and indebtedness under the
Existing Documents (other than the New Pennsylvania Lease) in each case as of
the Effective Time, and that all of its rights thereunder (other than the New
Pennsylvania Lease) are terminated and extinguished, and that, as to each of the
IHS Entities (but not as to the entities to which such Existing Documents may
have been assigned as provided herein or to which any properties
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subject to any of the Existing Documents have been conveyed or transferred or
any third parties) each of the Existing Documents are released, discharged and
satisfied. On the Closing Date, each of the SNH Entities and IHS Entities shall
execute and deliver a general release in favor of the other parties and each of
its respective affiliates, which releases shall contain the provisions set forth
in Section 9.2 or 9.1, as the case may be, and be in the form attached hereto as
Exhibit E. Notwithstanding the foregoing, the SNH Entities expressly reserve
their right to pursue any and all rights and remedies available to them with
respect to any obligations, liabilities or indebtedness of such third parties or
Persons provided that the SNH Entities shall indemnify and hold harmless the IHS
Entities from and against any and all costs and expenses incurred by the IHS
Entities in connection therewith, including, without limitation, reasonable
legal fees and expenses but expressly excluding any costs and expenses incurred
in connection with the SNH Entities' pursuit of any such rights and remedies
against HealthSouth, Horizon or their affiliates.
3.5 Rescission of Option Exercise. Effective at the Effective Time,
SPTIHS shall be deemed to have rescinded its exercise, effected pursuant to that
certain letter dated January 25, 2000 and addressed to Lyons, WST and CCN, of
its option to purchase certain Nebraska Facilities under the Right of First
Refusal and Option Agreement dated as of September 24, 1997 among SPTIHS (as
successor in interest to HRPT), CCN, WST and Lyons.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SNH ENTITIES
Each SNH Entity hereby represents and warrants (provided that only
HRES1 gives the representation set forth in Section 4.4), solely as to itself as
set forth in this ARTICLE 4, in each case as of the Closing Date. Each SNH
Entity expressly acknowledges and agrees that, notwithstanding any provision to
the contrary in this or in any other agreement between or among the parties
and/or its affiliates, each of the following representations and warranties
shall be a continuing representation and warranty and shall survive the closing
of the transactions contemplated by this Agreement and performance thereunder,
as provided in Section 10.9 below.
4.1 Existence. Such SNH Entity is a real estate investment trust,
limited liability company or corporation duly organized, validly existing and in
good standing under the laws of the state of its organization. Such SNH Entity
has all requisite power and authority to carry on its business as such business
is presently being conducted and to enter into this Agreement and to consummate
the transactions contemplated hereby.
4.2 Authorization, Etc. The execution, delivery and performance by such
SNH Entity of this Agreement and each other Settlement Document and all
releases, consents, transfers, conveyances, surrenders of leases, assignments
and deliveries provided for herein by such SNH Entity have been duly authorized
by all necessary real estate investment trust, limited liability company or
corporate action as the case may be. This Agreement has been duly executed by
such SNH Entity and constitutes the valid and binding obligation of such SNH
Entity, enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, reorganization, insolvency,
moratorium or other laws of general
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applicability affecting the enforcement of creditors' or secured parties' rights
or debtors' obligations generally, and (ii) the availability of specific
performance or other equitable remedies may be limited by equitable principles
of general applicability (whether such matter is considered in a proceeding at
law or in equity).
4.3 Brokers. Such SNH Entity has not used the services of or had any
dealings with any broker or finder in connection with the transactions
contemplated by this Agreement and such SNH Entity will indemnify and hold
harmless the IHS Entities from and against all claims, actions, causes of
action, costs, expenses, including attorneys' fees, and liabilities arising in
or out of, or related to any broker or finder with whom such SNH Entity has had
any dealings or made any agreements or used any services claiming any
compensation or fee by reason of an alleged agreement or understanding with such
SNH Entity.
4.4 Slidell Facility. HRES1 has not assigned or transferred the HRES1
Mortgage on the Slidell Facility, and shall not assign such Mortgage prior to
the Effective Time.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF THE IHS ENTITIES
Each IHS Entity, severally and not jointly, hereby makes the
representations and warranties set forth in this ARTICLE 5 in each case as of
the Closing Date. Each IHS Entity expressly acknowledges and agrees that,
notwithstanding any provision to the contrary in this or in any other agreement
between or among the parties and/or its affiliates, each of the following
representations and warranties shall be a continuing representation and warranty
and shall survive the closing of the transactions contemplated by this Agreement
and performance thereunder, as provided in Section 10.9, below.
5.1 Organization, Etc. Such IHS Entity is a corporation, duly organized
and validly existing under the laws of the jurisdiction of its incorporation.
Provided the conditions set forth in Sections 6.1.1 and 6.2.3 hereof are
satisfied, such IHS Entity has full power, authority and legal right to execute,
deliver and perform under this Agreement, to transfer its right, title and
interest in its Facility or Facilities to SPTIHS or HRES1, to enter into the
Settlement Documents to which it is a party and to take all other actions
necessary to carry out the intents and purposes of this Agreement.
5.2 Authorization, Etc. The execution, delivery and performance of this
Agreement and each other Settlement Document by such IHS Entity and all
transfers, conveyances, surrenders of leases, assignments and deliveries
provided for herein by such IHS Entity have been duly authorized by all
necessary corporate and stockholder action of such IHS Entity. This Agreement
and each other Settlement Document to which such IHS Entity is a party has been
duly executed by such IHS Entity, and provided the conditions set forth in
Sections 6.1.5 and 6.2.3 hereof are satisfied, constitutes the valid and binding
obligation of such IHS Entity, enforceable in accordance with its terms.
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5.3 Personal Property-New Property Owners. Such IHS Entity, excluding
IHS 148, if a New Property Owner, owns all the tangible personal property
present at or used at its New Property (on the Petition Date) in connection with
the operation of the nursing facility located at such New Property, and owns all
intangible personal property incorporated in such tangible personal property on
the Petition Date (except, with respect to both such tangible and intangible
personal property, for Excluded Assets, property rented, leased or licensed
under any Contract (copies of which, to the extent material to such Facility,
have been furnished to SNH prior to the date hereof), and property owned by a
pharmacy or other third party engaged in operations at the Facility (pursuant to
Contracts, copies of which have been furnished to SNH prior to the date
hereof)). The Consumables located at each New Facility as of the Effective Time
and included in the personal property being transferred by such IHS Entity
pursuant to Section 3.2.6 are (to such IHS Entity's Knowledge) sufficient under
applicable law to permit such Facility to be operated as currently operated. All
such tangible and intangible personal property owned by such IHS Entity
(excluding IHS 148) and existing at the New Facility as of the Petition Date
remains at the New Facility except for those used and replaced in the ordinary
course of business and Excluded Assets.
5.4 Personal Property - Tenants and IHS 175. Such IHS Entity, if an
SPTIHS Tenant or IHS 175, owns all the tangible personal property present at, or
used at its Leased Facility (on the Petition Date) in connection with the
operation of such Leased Facility, and owns all intangible personal property
incorporated in such tangible personal property on the Petition Date (except,
with respect to both such tangible and intangible personal property, for
Excluded Assets, property rented, leased or licensed under any Contract (copies
of which, to the extent material to such Facility, have been furnished to SNH
prior to the date hereof), and property owned by a pharmacy or other third party
engaged in operations at the Facility (pursuant to Contracts, copies of which
have been furnished to SNH prior to the date hereof)). The Consumables located
at each such Facility as of the Effective Time and included in the personal
property being transferred by such IHS Entity pursuant to Section 3.2.4 are (to
such IHS Entity's Knowledge) sufficient under applicable law to permit such
Facility to be operated as currently operated. All such tangible and intangible
personal property owned by such IHS Entity and existing at each such Facility as
of the Petition Date remains at such Facility except for those used and replaced
in the ordinary course of business and Excluded Assets.
5.5 Personal Property - IHS Mortgagors. Such IHS Entity, if an IHS
Mortgagor (other than IHS 108) owns all the tangible personal property present
at or used at its Mortgaged Facility (on the Petition Date) in connection with
the operation of such Mortgaged Facility, and owns all intangible personal
property incorporated in such tangible personal property on the Petition Date
(except, with respect to both such tangible and intangible personal property,
for Excluded Assets, property rented, leased or licensed under any Contract
(copies of which, to the extent material to such Mortgaged Facility, have been
furnished to SNH prior to the date hereof), and property owned by a pharmacy or
other third party engaged in operations at such Mortgaged Facility (pursuant to
Contracts, copies of which have been furnished to SNH prior to the date
hereof)). The Consumables located at each such Mortgaged Facility as of the
Effective Time and included in the personal property being transferred by such
IHS Entity pursuant to Section 3.2.5 are (to such IHS Entity's Knowledge)
sufficient under applicable law to permit such Facility to be operated as
currently operated. All such tangible and intangible personal property owned by
such IHS Entity and existing at each such Facility as of the Petition
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Date remains at such Facility except for those used and replaced in the ordinary
course of business and Excluded Assets.
5.6 Licensing, Etc. Excluding the Transfer Facilities located in
Massachusetts, each Facility operated or managed by such IHS Entity has the
applicable healthcare licenses required under all applicable state and local
laws, ordinances and regulations in order to provide the services and operate
the number of beds at such Facility that are described in Schedule 5.6 in the
ordinary course of business consistent with past practices.
5.7 FIRPTA. Such IHS Entity is not a "foreign person" within the
meaning of Section 1445(f) of the Internal Revenue Code.
5.8 Decrees, Etc. There are no decrees, orders, rulings, writs or
injunctions issued by any governmental or municipal authority binding on such
IHS Entity or its Facilities and issued against IHS or any of its subsidiaries
that enjoins or prohibits the transactions contemplated hereby.
5.9 No Broker. Such IHS Entity represents that it has not used the
services of or had any dealings with any broker or finder in connection with the
transactions contemplated by this Agreement and that such IHS Entity will
indemnify and hold harmless each of the SNH Entities from and against all
claims, actions, causes of action, costs, expenses, including attorneys' fees,
and liabilities arising in or out of, or related to any broker or finder with
whom such IHS Entity has had any dealings or made any agreements or used any
services, claiming any compensation or fee by reason of an alleged agreement or
understanding with such IHS Entity.
5.10 No Assignment of Existing Documents. No IHS Entity party to any
SPTIHS Lease, HRES1 Lease or the HRES2 Management Agreements being assigned,
conveyed or transferred to any SNH Entity pursuant to Section 3.2 has assigned
such Lease or HRES2 Management Agreement to any other Person (except as
contemplated in Section 7.4).
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions Precedent To Obligations Of SNH Entities. The obligation
of the SNH Entities to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction of each of the conditions set
forth in this Section 6.1.
6.1.1 Each of the SNH Entities and IHS Entities, as
applicable, shall have received all Permits (if any) from Governmental
Authorities necessary to permit (a) the consummation of the transfers and
conveyances contemplated under Section 3.2; and (b) the execution and delivery
of, and the performance of the obligations of the various parties under, this
Agreement, the Management and Servicing Agreement, the Interim Sublease
Agreements and the other Settlement Documents.
6.1.2 There shall be no investigation, audit, governmental
proceeding, suit or other litigation, pending or threatened, seeking to, or the
effect of which, if obtained, would be
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to, enjoin, prevent or delay consummation of the transactions contemplated by
this Agreement, or revoke, condition or limit any Permit necessary for the
operation of any of the Transfer Facilities, or which could otherwise reasonably
be expected to have a Material Adverse Effect.
6.1.3 All representations and warranties of each of the IHS
Entities hereunder and under the Settlement Documents shall be true, complete
and correct in all material respects at the Closing. Each IHS Entity shall have
complied with all of its agreements and obligations to be effected on or before
the Closing Date under Article 3 and elsewhere under this Agreement.
6.1.4 The appropriate SNH Entities shall have received
confirmation by the Title Company that it is prepared to issue title policies
(or, in the case of any Leased Property, endorsements to existing owner's
policies in favor of such SNH Entity) insuring title to the real property which
is included in the Transfer Facilities free from all liens, claims and
encumbrances other than Permitted Encumbrances.
6.1.5 The Court shall have entered the Approval Order and (a)
no court of competent jurisdiction shall have entered an order staying the
Approval Order pending appeal, or, in the event a stay of the Approval Order
shall have been entered, then the stay shall have been terminated; and either
(b) all appeal periods shall have expired with no appeal having been taken or
all appeals shall have been dismissed by final order no longer subject to
appeal; or (c) if appealed, such appeal shall have otherwise been settled or
resolved to the satisfaction of the SNH Entities. The Approval Order shall be in
the form of Exhibit A and shall contain no modification unacceptable to the SNH
Entities.
6.1.6 No suspension or revocation of the right to
reimbursement under the Medicare and Medicaid programs for services performed at
any Transfer Facility is in effect on the Closing Date, and the SNH Entities
shall have received a certificate signed on behalf of IHS by a duly authorized
officer thereof certifying that, to the Knowledge of the IHS Entities, no such
suspension or revocation is in effect on the Closing Date.
6.1.7 At the Closing, CCN shall convey by quitclaim deed all
of its right, title and interest in and to the parcel of real property described
in Schedule 6.1.7 hereto as the Aurora Parcel, together with all improvements
thereon, to the appropriate New Corporate Operator designated by the SNH
Entities, and such SNH Entity shall have received confirmation by the SNH
Entities' title insurance company that it is prepared to issue a title insurance
policy insuring title to said real property free from all liens, claims and
encumbrances other than Permitted Encumbrances.
6.2 Conditions Precedent to Obligations of IHS Entities. The obligation
of the IHS Entities to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction of each of the conditions set
forth in this Section 6.2.
6.2.1 There shall be no investigation, audit, governmental
proceeding, suit or other litigation, pending or threatened, seeking to, or the
effect of which would be to, enjoin, prevent or delay consummation of the
transactions contemplated by this Agreement.
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6.2.2 All representations and warranties of each of the SNH
Entities hereunder and under the Settlement Documents shall be true, complete
and correct in all material respects at the Closing. Each SNH Entity shall have
complied with all of its agreements and obligations to be effected on or before
the Closing Date under Article 3 and elsewhere under this Agreement.
6.2.3 The Court shall have entered the Approval Order and (a)
no court of competent jurisdiction shall have entered an order staying the
Approval Order pending appeal, or, in the event a stay of the Approval Order
shall have been entered, then the stay shall have been terminated; and either
(b) all appeal periods shall have expired with no appeal having been taken or
all appeals shall have been dismissed by final order no longer subject to
appeal; or (c) if appealed, such appeal shall have otherwise been settled or
resolved to the satisfaction of the IHS Entities. The Approval Order shall be in
the form of Exhibit A and shall contain no modification unacceptable to the IHS
Entities.
ARTICLE 7
COVENANTS OF IHS ENTITIES
7.1 As soon as possible following the filing with the Court of the
Approval Motion, and prior to the hearing and relevant objection date, IHS shall
serve Notice of the Approval Motion in a form mutually acceptable to SNH and IHS
upon such categories of Persons holding claims (as defined in Code ss.101(5)) in
the Cases as are designated by the SNH Entities, shall publish such Notice of
the Approval Motion once in such newspapers as are designated by SNH and
approved by the Court, and shall post such Notice prominently at each Facility.
SNH agrees to reimburse the IHS Entities for 50% of the out-of pocket costs
incurred by the IHS Entities in serving such Notice of the Approval Motion on
Persons holding claims in the Cases and in publishing such Notice.
7.2 At any time and from time to time during the period from the
Effective Time to the fifth (5th) anniversary thereof, each IHS Entity agrees
that, upon not less than twenty (20) business days' notice from any SNH Entity,
such IHS Entity shall (i) use reasonable commercial efforts, at no cost or
expense to any IHS Entity, to furnish any financial reporting information
reasonably requested by any SNH Entity, and (ii) grant such SNH Entity and its
accountants and other representatives reasonable access during normal business
hours, at no cost or expense to any IHS Entity, to all books, contracts and
records of such IHS Entity, in each case, to the extent such information or
access is necessary to obtain information of a nature which is not otherwise
available to the SNH Entities, and (A) relates to the ownership or operation of
any Transfer Facility prior to the Effective Time and (B) is necessary to
complete filings to be made by such SNH Entity or its affiliates with the
Securities and Exchange Commission, or any successor agency, or any other
governmental authority.
7.3 The IHS Entities agree that if any master lease agreements under
which any material personal property or Intellectual Property used at any of the
Leased Facilities (excluding the Pennsylvania Facility) is provided on the
Effective Date remain in effect after the Effective Date, the SNH Entities may
utilize the benefits thereof for so long as such
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agreements remain in effect, provided such use is permitted pursuant to the
terms of such agreements.
7.4 On or prior to the Closing Date, IHS Acquisition No. 151, Inc., a
Delaware corporation, shall convey all of its right, title and interest in and
to the HRES1 Lease of the Pennsylvania Facility to IHS 135 pursuant to an
assignment agreement in the form attached hereto as Exhibit F, and HRES1 shall
consent to such assignment and join in the same for purposes of evidencing such
consent.
7.5 The SNH Entities shall, at all reasonable times after the Closing,
have reasonable access to the Data. The IHS Entities shall, at no cost or
expense to the IHS Entities, cooperate with the SNH Entities in their request to
obtain their own licenses for the software applications listed in Schedule 1.1C.
If the SNH Entities are unable to obtain such licenses or determine that they
wish to use other applications in their operation of any Transfer Facility the
IHS Entities shall, at no cost or expense to any IHS Entity, cooperate with the
SNH Entities in their effecting the transfer and migration of the Data with
respect to such Transfer Facility to such other applications.
7.6 The SNH Entities may from time to time after the execution hereof
(but no later than sixty (60) days after the Closing Date), designate, by
written notice to IHS, certain Contracts (other than the Provider Agreements,
Contracts which affect or relate to the Pennsylvania Facility, the Slidell
Facility or any other facility that is not a Transfer Facility or the Contracts
that have expired or terminated in accordance with their terms) for assumption
by the IHS Entities and assignment to an SNH Entity, and the IHS Entities agree
that they shall, upon receipt of such written notice (but not earlier than the
date of Closing), subject to the IHS Entities' approval, which approval shall
not be unreasonably withheld, conditioned or delayed, and to Court approval,
promptly assume and assign such designated Contracts to the appropriate SNH
Entities designated in such notice. The IHS Entities agree to assist, at no
out-of-pocket cost or expense to the IHS Entities, the SNH Entities in their
evaluation of the Contracts for possible assignment and assumption by providing
such information as the SNH Entities may reasonably request regarding the
contracting parties' performance thereunder. If and to the extent any
performance or payments may be required in order to cure any defaults as a
condition to the assumption and/or assignment of any of such designated
Contracts, on the effective date of such assignment and assumption the SNH
Entities shall perform and/or pay for and/or to the appropriate non-IHS Entity
contracting party such acts and/or sums (if any) as shall be required to cure
any default as a condition to the assumption and/or assignment of any such
Contract. The SNH Entities and the IHS Entities shall cooperate to identify
those Contracts to be assumed and assigned pursuant to the provisions of this
Section 7.6 and IHS may, if it so elects, take all such action as may be
necessary to reject any Contract that is not designated to be assumed and
assigned pursuant to the provisions of this Section 7.6 as soon as is reasonably
possible after notice thereof by the SNH Entities to IHS and upon the IHS
Entities receipt of notice that a Contract is not to be assigned to the SNH
Entities, such Contracts shall no longer be deemed Contracts for the purposes of
this Section 7.6 or for the purposes of Section 4.1(d) of the Management and
Services Agreement.
Each of the transactions provided for in this Section 7.6, shall be
completed in accordance with Code ss.ss.105, 363(b), (f) and (m), 365(b) and (f)
and 1146(c), as applicable,
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and the provisions of the Approval Order, with the SNH Entities receiving the
full benefits and protections of such sections and the provisions of the
Approval Order. Notwithstanding any provisions of the Code, the IHS Entities
shall not be required to cure any default, provide any assurances, make any
payment or to incur any cost, expense or liability in order to complete any of
such transactions.
ARTICLE 8
DAMAGE TO PROPERTY FROM CASUALTY OR TAKING
8.1 In the event of any casualty or damage to any Transfer Facility
after February 2, 2000 but prior to the Effective Time (which shall not be fully
restored prior to the Effective Time), all sums recovered on account of any
insurance with respect thereto shall be held in trust for the benefit of and in
order to be paid over to, and all sums recoverable on such account shall be
assigned to, the appropriate SNH Entity at the Effective Time. The IHS Entity
which owns, leases or manages such Facility shall execute and deliver such
further instruments of assignment of insurance proceeds and other documents
(including, without limitation, appropriate endorsement of checks) as any SNH
Entity may from time to time reasonably request in order to make such insurance
proceeds payable to such SNH Entity.
8.2 In the event that after February 2, 2000 but prior to the Effective
Time any portion of any Transfer Facility shall be taken by any exercise of the
right of eminent domain, or any portion of such Facility shall sustain any
direct or consequential damage for which any SNH Entity or the IHS Entity which
owns, leases or manages such Facility shall be entitled to compensation by any
public authority, such IHS Entity shall permit the appropriate SNH Entity to
bring any suit in connection with recovery therefor in the name of such IHS
Entity or the appropriate SNH Entity, or both, and shall deliver to the
appropriate SNH Entity, together with the deed to such Facility, all sums
received on account of any such taking or damages and/or an assignment of all
the owner's rights to collect damages therefor. The IHS Entity which owns,
leases or manages such Facility shall execute and deliver such further
instruments of assignment and such other documents (including, without
limitation, appropriate endorsements of checks and pleadings) as any SNH Entity
may from time to time reasonably request.
ARTICLE 9
RELEASES
9.1 IHS Release. Effective at the Effective Time, each IHS Entity,
hereby releases and forever discharges each SNH Entity, and their respective
successors, assigns, agents, shareholders, directors, officers, employees,
agents, attorneys, parent corporations, subsidiary corporations, affiliated
corporations, affiliates, and each of them (collectively, the "SNH Releasees"),
from any and all claims, debts, liabilities, demands, obligations, costs,
expenses, actions and causes of action, of every nature and description, known
and unknown, whether or not related to the subject matter of the Existing
Documents, which any IHS Entity now has or at any time may hold, by reason of
any matter, cause or thing occurred, done, omitted or suffered to be done on or
prior to the Effective Time; provided that this release shall not release or
otherwise affect or limit any claims, debts, liabilities, demands, obligations,
costs, expenses, actions and causes of action against any SNH Entity under this
Agreement or any other
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Settlement Document. Each IHS Entity waives the benefits of any law, which may
provide in substance: "A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his settlement
with the debtor." Each IHS Entity understands that the facts which it believes
to be true at the time of making the release provided for herein may later turn
out to be different than it now believes, and that information which is not now
known or suspected may later be discovered. Each IHS Entity accepts this
possibility, and each IHS Entity assumes the risk of the facts turning out to be
different and new information being discovered; and each IHS Entity further
agrees that the release provided for herein shall in all respects continue to be
effective -- and not subject to termination or rescission because of any
difference in such facts or any new information. None of the IHS Entities is
releasing any SNH Entity from any claims, debts, liabilities, demands,
obligations, costs, expenses, actions or causes of action except as expressly
provided herein or in any other Settlement Document, and the obligations under
the Settlement Documents are specifically excluded from this release. Each IHS
Entity further acknowledges that, from and after the Effective Time, no SNH
Entity has any existing commitments, obligations or agreements to advance
credits or loans, or to lease property, or make financial or other
accommodations to any IHS Entity, except as may be specifically set forth in
this Agreement or the other Settlement Documents. The IHS Entities hereby
represent, warrant and covenant, jointly and severally, that the foregoing
release and discharge is given on behalf of and shall be enforceable against,
each of the IHS Releasees (as hereinafter defined).
9.2 SNH Release. Effective at the Effective Time, each SNH Entity
hereby releases and forever discharges each IHS Entity, and their respective
successors, assigns, agents, shareholders, directors, officers, employees,
agents, attorneys, parent corporations, subsidiary corporations, affiliated
corporations, affiliates, and each of them (collectively, the "IHS Releasees"),
from any and all claims, debts, liabilities, demands, obligations, costs,
expenses, actions and causes of action, of every nature and description, known
and unknown, whether or not related to the subject matter of the Existing
Documents, which any SNH Entity now has or at any time may hold, by reason of
any matter, cause or thing occurred, done, omitted or suffered to be done prior
to the Effective Time; provided that this release shall not release or otherwise
affect or limit any claims, debts, liabilities, demands, obligations, costs,
expenses, actions and causes of action against (i) any IHS Entity under this
Agreement or any other Settlement Document or (ii) HealthSouth, Horizon or their
respective affiliates (as such term is defined in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as amended). Each SNH Entity waives the
benefits of any law, which may provide in substance: "A general release does not
extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor." Each SNH Entity understands
that the facts which it believes to be true at the time of making the release
provided for herein may later turn out to be different than it now believes, and
that information which is not now known or suspected may later be discovered.
Each SNH Entity accepts this possibility, and each SNH Entity assumes the risk
of the facts turning out to be different and new information being discovered;
and each SNH Entity further agrees that the release provided for herein shall in
all respects continue to be effective -- and not subject to termination or
rescission because of any difference in such facts or any new information. None
of the SNH Entities is releasing any IHS Entity from any claims, debts,
liabilities, demands, obligations, costs, expenses, actions or causes of action
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except as expressly provided herein or in any other Settlement Document and the
obligations under the Settlement Documents are specifically excluded. Each SNH
Entity further acknowledges that, from and after the Effective Time, no IHS
Entity has any existing commitments, obligations or agreements to advance
credits or loans, or to lease property, or make financial or other
accommodations to any SNH Entity, except as may be specifically set forth in
this Agreement or any other Settlement Document. The SNH Entities hereby
represent, warrant and covenant, jointly and severally, that the foregoing
release and discharge is given on behalf of and shall be enforceable against,
each of the SNH Releasees.
9.3 No Assignment. The SNH Entities and the IHS Entities each represent
and warrant to the others that they have not assigned or transferred any of the
claims or other items which are the subject of the releases set forth in this
Agreement or any Settlement Documents.
ARTICLE 10
GENERAL PROVISIONS
10.1 No Assumption of Liabilities. Notwithstanding anything in this
Agreement or elsewhere to the contrary, no SNH Entity is assuming or shall be
responsible for payment of any Pre-Effective Time Obligation.
10.2 Survival of Representations, Etc. Except as otherwise provided by
this Agreement, all covenants, agreements, representations and warranties made
by each IHS Entity or SNH Entity herein and in all certificates and other
instruments delivered pursuant to this Agreement shall survive the execution and
delivery of the deeds and the other instruments of transfer and assignment, and
the closing of the transactions, contemplated hereby.
10.3 Notices. All notices and other communications provided for
hereunder shall be in writing (including telecopy communication) and mailed,
sent by recognized overnight delivery service, telecopied or delivered addressed
as follows:
(a) if to an SNH Entity:
c/o SENIOR HOUSING PROPERTIES TRUST
400 Centre Street
Newton, MA 02458
Telecopy no.: (617) 796-8349
Attention: Treasurer
(b) with copy to:
SULLIVAN & WORCESTER LLP
One Post Office Square
Boston, MA 02109
Telecopy no.: (617) 338-2880
Attention: Alexander A. Notopoulos, Jr. Esq.
(c) if to any IHS Entity:
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c/o Integrated Health Services, Inc.
The Highlands
910 Ridgebrook Road
Sparks, MD 21152
Telecopy no.: (410) 773-1020
Attention: Daniel J. Booth, Senior Vice President, Finance
(d) with a copy to:
Parker Chapin LLP
405 Lexington Avenue
New York, NY 10174
Telecopy no.: (212) 704-6288
Attention: Charles P. Greenman, Esq.
or to such other address as may hereafter be designated by any party for such
purpose. Each such notice shall be effective (i) upon receipt and written
acknowledgment, if hand delivered, (ii) upon the first Business Day following
the day when telecopied, if transmitted by telecopier, (iii) upon the next
Business Day after being placed in the possession of a recognized overnight
delivery service, if sent by a recognized overnight delivery service, or (iv)
upon the expiration of the fifth Business Day after being deposited in the
mails, if mailed.
10.4 Successors and Assigns. This Agreement shall be binding upon each
party thereto, its successors and assigns and in the case of the IHS Entities
any trustee which may be appointed in its Cases or upon the conversion of the
Cases to Chapter 7 under the Code. The rights and obligations of any party
hereto under this Agreement may not be assigned by such party without the prior
written consent of each other party hereto.
10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
10.6 Amendments in Writing. This Agreement, together with the exhibits
hereto and such other documents as are referred to herein, constitute the entire
agreement of the parties in respect of the subject matter described herein, and
may not be changed or modified except by an agreement in writing signed by the
parties hereto. There have been no representations, warranties or covenants made
by any party to this Agreement to any other party to this Agreement except as
expressly set forth in this Agreement or any Settlement Document.
10.7 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 and therein shall not in any way be affected or impaired thereby and the
Agreement shall thereupon be reformed and construed and enforced to the maximum
extent permitted by law.
10.8 Costs of Enforcement; Nature of Claim; Exclusive and Limited
Remedies. If any legal action is brought for the enforcement of this Agreement
or the Approval Order, or because of an alleged dispute, breach, default,
misrepresentation, non-compliance or contravention in connection with any of the
provisions of this Agreement or the Approval
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Order, the successful or prevailing party or parties shall be entitled to
recover attorneys' fees and other costs incurred in that action in addition to
any other relief to which it or they may be entitled. The sole and exclusive
recourse of any SNH Entity against any IHS Entity to enforce this Agreement, any
other Settlement Document or the Approval Order, or in connection with any
dispute, breach, default or misrepresentation, non-compliance or contravention
in connection with any of the provisions of this Agreement, any other Settlement
Document or the Approval Order (and all costs of enforcement) shall be limited
to a post-petition administrative period claim pursuant to Code ss.503(b) and
ss.507(a)(1) for money damages only (and not for recission or any other
equitable remedy) in the Cases (provided that this Section 10.8 shall not limit
the remedies available to the Landlord under the New Pennsylvania Lease or the
New Pennsylvania Guaranty). This limitation shall have no effect on the SNH
Entities' rights and remedies against third parties except as specifically
provided herein.
10.9 Survival. Except as otherwise provided by this Agreement or in any
other Settlement Document, all covenants, agreements, representations and
warranties made by each IHS Entity or SNH Entity herein and in all certificates
and other instruments delivered pursuant to this Agreement shall survive the
closing of the transactions contemplated hereby but only until the last
administrative bar date established by order of the Court and of which the SNH
Entities shall have received timely notice, and the IHS Entities shall be and
remain liable for breaches of the provisions of this Agreement and the other
Settlement Documents until the last administrative bar date established by order
of the Court and of which the SNH Entities shall have received timely notice
(except that this Section 10.9 shall not, in any event, limit the obligations of
the parties to the New Pennsylvania Lease or the New Pennsylvania Guaranty).
10.10 Notices to Regulators, Etc. Each party hereby may and shall give
all required notices of the existence of this Agreement and the pending
consummation of the transactions contemplated hereby to any and all appropriate
Governmental Authorities. The parties shall cooperate with each other to effect,
at the earliest practicable date, the transfer or reissuance to the appropriate
New LLC Operator, New Corporate Operator or other SNH Entity of all Permits and
Provider Agreements currently held by an IHS Entity or affiliate thereof and
pertaining to a Transfer Facility.
10.11 No Third Party Rights. Unless expressly stated herein to the
contrary, nothing in this Agreement or in any other Settlement Document, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement or any other Settlement Document on any Persons other
than the parties hereto and their respective legal representatives, successors
and permitted assigns. It is expressly understood that each person or entity
that is being released pursuant to this Agreement shall be a third party
beneficiary entitled to enforce such release on his or her own behalf. Except as
expressly provided in this Agreement or in any other Settlement Document nothing
herein or therein is intended to relieve or discharge the obligation or
liability of any third Persons to any party to this Agreement (including without
limitation, the obligations and liabilities of HealthSouth, Horizon or their
respective affiliates to any SNH Entity or Advisors), nor shall any provision
give any third Persons any right of subrogation or action over or against any
party to this Agreement or any other Settlement Document.
-26-
<PAGE>
10.12 Reservation of Rights. Each party hereto acknowledges that it and
the other parties hereto have entered into this Agreement in order to settle and
compromise certain potential claims between them and that the execution,
delivery and performance of this Agreement by the parties hereto is not an
admission of any party's obligations or liabilities whatsoever. This document is
subject to the protections of Federal Rule of Evidence 408 and all similar
provisions and supporting authorities.
10.13 Declarations of Trust. THE DECLARATION OF TRUST OF EACH OF SNH,
SPTIHS, HRES1 AND HRES2, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO
(EACH A "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME
"SENIOR HOUSING PROPERTIES TRUST," "SPTIHS PROPERTIES TRUST," "HRES1 PROPERTIES
TRUST" AND "HRES2 PROPERTIES TRUST," AS THE CASE MAY BE, REFERS TO THE TRUSTEES
UNDER EACH SUCH DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SNH,
SPTIHS, HRES1 OR HRES2, AS THE CASE MAY BE, SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SNH,
SPTIHS, HRES1 OR HRES2. ALL PERSONS DEALING WITH SNH, SPTIHS, HRES1 OR HRES2 IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SNH, SPTIHS, HRES1 OR HRES2,
RESPECTIVELY, FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
10.14 Expenses. Each party to this Agreement shall pay its own costs
and expenses incurred as a result of or in connection with the transactions
contemplated by this Agreement, regardless of whether such transactions are
consummated; provided that the SNH Entities agree to pay all transfer and
recording taxes and fees (including sales, use and similar taxes) in connection
with all lease assignments and title conveyances or transfers of all properties
being conveyed, transferred or relinquished to the SNH Entities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written and their respective seals to
be hereunto affixed and attested by their respective duly authorized officers.
SENIOR HOUSING PROPERTIES TRUST, a Maryland
real estate investment trust
By: /s/ Ajay Saini
Its:
SPTIHS PROPERTIES TRUST, a Maryland real estate
investment trust
-27-
<PAGE>
By: /s/ Ajay Saini
Its:
HRES1 PROPERTIES TRUST, a Maryland real estate
investment trust
By: /s/ Ajay Saini
Its:
HRES2 PROPERTIES TRUST, a Maryland real estate
investment trust
By: /s/ Ajay Saini
Its:
SHOPCO-COLORADO, LLC
SHOPCO-CT, LLC
SHOPCO-GA, LLC
SHOPCO-IA, LLC
SHOPCO-KS, LLC
SHOPCO-MA, LLC
SHOPCO-MI, LLC
SHOPCO-MO, LLC
SHOPCO-NE, LLC
SHOPCO-WY, LLC, each a Delaware limited liability company
By: /s/ Ajay Saini
Its:
SNH-NEBRASKA, INC.
SNH-IOWA, INC.
SNH-MASSACHUSETTS, INC. and
SNH-MICHIGAN, INC., each a Delaware corporation
By: /s/ Ajay Saini
Its:
ADVISORS HEALTHCARE GROUP, INC., a Delaware
corporation
-28-
<PAGE>
By: /s/ Donald J. Buckley
Its: President
FIVE STAR QUALITY CARE, INC., a Delaware
corporation
By: /s/ Ajay Saini
Its:
INTEGRATED HEALTH SERVICES, INC.
By: /s/ Daniel J. Booth
Its: Senior Vice President
COMMUNITY CARE OF AMERICA, INC.
ECA HOLDINGS, INC.
COMMUNITY CARE OF NEBRASKA, INC.
W.S.T. CARE, INC.
QUALITY CARE OF LYONS, INC.
CCA ACQUISITION I, INC.
MARIETTA/SCC, INC.
GLENWOOD/SCC, INC.
DUBLIN/SCC, INC.
COLLEGE PARK/SCC, 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. 175, INC.
INTEGRATED HEALTH SERVICES AT GRANDVIEW CARE CENTER, INC.
ECA PROPERTIES, INC.
CCA OF MIDWEST, INC.
QUALITY CARE OF COLUMBUS, INC.
By: /s/ Daniel J. Booth
Its: Senior Vice President
-29-
<PAGE>
<TABLE>
<CAPTION>
APPENDIX 1
SPTIHS Leased Facilities
Name of Facility Address
- ------------------------------------ ----------------------------------------------------------------------------
<S> <C>
Integrated Health Services @ Canon ECA Holdings, Inc. dba Integrated Health Services at Canon City
City, Canon City, CO1 515 Fairview Street, Canon City, CO 81212
Integrated Health Services @ Springs ECA Holdings, Inc. dba Integrated Health Services at Springs Village
Village, Colorado Springs, CO 110 W. Van Buren, Colorado Springs, CO 80907
Integrated Health Services @ Delta, ECA Holdings, Inc. dba Integrated Health Services at Delta
Delta, CO 2050 South Main Street, Delta, CO 81416
Integrated Health Services @ Mantey ECA Holdings, Inc. dba Integrated Health Services at Mantey Heights
Heights, Grand Junction, CO 2825 Patterson Road, Grand Junction, CO 81506
Integrated Health Services @ LaVilla ECA Holdings, Inc. dba Integrated Health Services at LaVilla Grande
Grande, Grand Junction, CO 2501 Little Bookcliff Drive, Grand Junction, CO 81501
College Park Health Care Center, College Park/SCC, Inc. dba College Park Health Care Center
College Park, GA 1765 Temple Avenue, College Park, GA 30337
Community Care of America at Dublin, Dublin/SCC, Inc. dba IHS of Dublin
Dublin, GA 606 Simmons Street, Box 549, Dublin, GA 31040
Community Care of America @ Marietta/SCC, Inc. dba Community Care of America at Marietta
Marietta, Marietta, GA 1480 Sandtown Road, Marietta, GA 30060
Community Care of America @ Conner, Glenwood/SCC, Inc. dba Community Care of America at Conner
Glenwood, GA 303 Fifth Street, P.O. Box 618, Glenwood, GA 30428
Integrated Health Services of ECA Holdings, Inc. dba Integrated Health Services of Clarinda
Clarinda, Clarinda, IA 600 Manor Drive, Clarinda, IA 51632
Integrated Health Services of ECA Holdings, Inc. dba Integrated Health Services of Council Bluffs South
Council Bluffs South, Council 34 Northcrest Drive, Council Bluffs, IA 51501
Bluffs, IA
Integrated Health Services @ ECA Holdings, Inc. dba Integrated Health Services at Mediapolis
Mediapolis, Mediapolis, IA 608 Prairie Street, Mediapolis, IA 52637
Integrated Health Services of ECA Holdings, Inc. dba Integrated Health Services of Winterset
Winterset, Winterset, IA1 1015 West Summit, Winterset, IA 50273
IHS at Pacific Place, Pacific ECA Holdings, Inc. dba Integrated Health Services at Pacific Place
Junction, IA 20937 Hwy. 385 West, Pacific Junction, IA 51561
IHS of Woodhaven, Ellinwood, KS ECA Holdings, Inc. dba IHS of Woodhaven
510 W. 7th Street, Ellinwood, KS 67526
IHS @ Tarkio, ECA Holdings, Inc. dba IHS at Tarkio
Tarkio, MO 300 Cedar Street, Tarkio, MO 64491
Wedgewood Care Center, Grand Island, ECA Holdings, Inc. dba Wedgewood Care Center
NE 800 Stoeger Drive, Grand Island, NE 68803
IHS @ Laramie, ECA Holdings, Inc. dba IHS at Laramie
Laramie, WY 503 South 18th St., Laramie, WY 82070
Community Care of America @ Worland, ECA Holdings, Inc. dba Community Care of America at Worland
Worland, WY1 1901 Howell, Worland, WY 82401
<FN>
1 Two properties are located at each of these locations.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HRES1 Leased Facilities
Name of Facility Address
- ------------------------------------ ----------------------------------------------------------------------------
<S> <C>
Greenery Rehabilitation Center, Horizon/CMS Healthcare Corporation dba Greenery Rehabilitation Center
Brighton, MA 99-111 Chestnut Hill Avenue, Brighton, MA 02135
Greenery Rehabilitation & Skilled Horizon/CMS Healthcare Corporation dba Greenery Rehabilitation and Skilled
Nursing Center of Middleboro, Nursing Center of Middleboro
Middleboro, MA P.O. Box 1330, Isaac Street, Middleboro, MA 02346
Greenery Rehabilitation and Skilled Horizon/CMS Healthcare Corporation dba Greenery Rehabilitation and Skilled
Nursing Center of Hyannis, Hyannis, Nursing Center of Hyannis
MA 89 Lewis Bay Road, Hyannis, MA 02601
Greenery Extended Care Center Horizon/CMS Healthcare Corporation dba Greenery Extended Care Center
Worcester, MA 59 Acton Street, Worcester, MA 01604
IHS Greenery of Canonsburg, IHS Acquisition No 135, Inc. dba IHS Greenery of Canonsburg
Canonsburg, PA 2200 Hill Church Houston Road, Canonsburg, PA 15317
<CAPTION>
HRES2 Leased Facilities
Name of Facility Address
- ------------------------------------ ----------------------------------------------------------------------------
<S> <C>
Clifton House Rehabilitation Center, Advisors Healthcare Group, Inc. dba Clifton House Rehabilitation Center
New Haven, CT 181 Clifton Street, New Haven, CT 06513
Greenery Rehabilitation Center @ Advisors Healthcare Group, Inc. dba Greenery Rehabilitation Center at
Waterbury, Waterbury, CT Waterbury
177 Whitewood Road, Waterbury, CT 06708
Greenery Extended Care Center @ Advisors Healthcare Group, Inc. dba Greenery Extended Care Center at
Cheshire, Cheshire, CT Cheshire
50 Hazel Drive, Cheshire, CT 06410
<CAPTION>
SPTIHS Mortgaged Facilities
Name of Facility Address
- ------------------------------------ ----------------------------------------------------------------------------
<S> <C>
Integrated Health Services @ Lyons, Quality Care of Lyons, Inc. dba Integrated Health Services at Lyons
Lyons, NE 1035 Diamond Street, Lyons, NE 68038
Integrated Health Services @ W.S.T. Care, Inc. dba Integrated Health Services at Milford
Milford, Milford, NE P.O. Box D, 1100 W. First Street, Milford, NE 68405
Integrated Health Services of Community Care of Nebraska, Inc. dba Integrated Health Services of Waverly
Waverly, Waverly, NE P.O. Box 160, 11041 N. 137th Street, Waverly, NE 68462
Ainsworth Care Center, Community Care of Nebraska, Inc. dba Ainsworth Care Center
Ainsworth, NE 143 N. Fullerton Street, Ainsworth, NE 69210
Integrated Health Services @ Community Care of Nebraska, Inc. dba Integrated Health Services at Ashland
Ashland, Ashland, NE 1700 Furnas Street, Ashland, NE 68003
Blue Hill Care Center, Blue Hill, NE Community Care of Nebraska, Inc. dba Blue Hill Care Center
P.O. Box 156, 414 N. Wilson, Blue Hill, NE 68930
Integrated Health Services @ Gretna, Community Care of Nebraska, Inc. dba Integrated Health Services at Gretna
Gretna, NE 700 Highway 6, Gretna, NE 68028
Integrated Health Services @ Community Care of Nebraska, Inc. dba Integrated Health Services at
Sutherland, Sutherland, NE Sutherland
P.O. Box 307, 333 Maple Street, Sutherland, NE 69165
-2-
<PAGE>
<CAPTION>
Name of Facility Address
- ------------------------------------ ----------------------------------------------------------------------------
<S> <C>
Integrated Health Services @ Edgar, Community Care of Nebraska, Inc. dba Integrated Health Services at Edgar
Edgar, NE RR 1 Box 83A, 106 5th Street, Edgar, NE 68935
- -------------------------------------- ----------------------------------------------------------------------------
<CAPTION>
HRES1 Mortgaged Facilities
Name of Facility Address
- ------------------------------------ ----------------------------------------------------------------------------
<S> <C>
Integrated Health Services of Integrated Health Services of Slidell Rehabilitation Center
Slidell Rehabilitation Center, 1400 W. Lindberg Drive, Slidell, LA 70458 No DBA.
Slidell, LA
Farmington Health Care Center, IHS Acquisition No. 112, Inc. dba Farmington Health Care Center
Farmington, MI 34225 Grand River, Farmington, MI 48335-3512
Integrated Health Services of IHS Acquisition No. 113, Inc. dba Integrated Health Services of Michigan
Michigan @ Howell, Howell, MI at Howell
3003 W. Grand River Avenue, Howell, MI 48843-8539
</TABLE>
-3-
<PAGE>
APPENDIX 2
Existing Documents
I. IHS Tenants
1. SPTIHS Lease:
A. Amended, Restated and Consolidated Master Lease Document,
dated as of September 24, 1997, between SPTIHS Properties
Trust (as successor in interest to HRPT), as Landlord, and
ECA, Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc.
and College Park/SCC, Inc. (the "SPTIHS Tenants"), as Tenants.
Applicable to:
Leased Properties from 1993 Transaction: La Ville-Grand Junction, CO;
Grand Junction, CO; Clarinda, IA; Mediapolis, IA; Winterset, IA;
Tarkio, MO; Worland, WY; Laramie, WY (the "1993 Leased Properties").
Leased Properties from 1995 Transaction: Gentry South-Council Bluffs,
IA; Grand Island, NE; Pacific Junction, IA; Elinwood, KS (the "1995
Leased Properties").
Leased Properties from 1996 Transaction: Marietta, GA; Glenwood, GA;
Dublin, GA; College Park, GA (the "1996 Leased Properties").
Leased Properties from 1997 Transaction: Canon City, CO; Colorado
Springs, CO; Delta, CO (the "1997 Leased Properties").
B. Leases, each dated as of December 30, 1993, between HRPT as
Landlord and ECA as Tenant, for each 1993 Leased Property, as
amended by:
(i) Amendment to 1993 Master Lease Document and Facility
Leases dated as of July 16, 1996; and
(ii) Second Amendment to 1993 Facility Leases, dated as of
September 24, 1997.
C. Facility Leases, each dated as of April 1, 1995, between HRPT
as Landlord and ECA as Tenant, for each 1995 Leased Property,
as amended by:
(i) Amendment to 1995 Master Lease Document and Facility
Leases dated as of July 16, 1996; and
(ii) Second Amendment to 1995 Facility Leases, dated as of
September 24, 1997.
<PAGE>
D. Facility Leases, each dated as of May 10, 1996, between HRPT
as Landlord and the Georgia Subsidiaries as Tenant for each
1996 Leased Property, as amended by:
(i) Amendment to 1996 Master Lease Document and Facility
Leases dated as of July 16, 1996, between HRPT and the Georgia
Subsidiaries; and
(ii) Amendment to 1996 Facility Leases, dated as of September
24, 1997, between HRPT and the Georgia Subsidiaries.
E. Facility Leases, each dated as of September 24, 1997, between
HRPT and ECA for each 1997 Leased Property.
2. HRES1 Leases:
A. Lease Agreements each dated as of February 11, 1994, between
HRES1 Properties Trust (as successor in interest to HRPT
Properties Trust), as Landlord, and Horizon.
Applicable to: Brighton, MA; Middleboro, MA; Hyannis MA; Worcester, MA;
Canonsburg, PA.
-2-
<PAGE>
II. Management Agreements:
1. HRES2 Lease: Lease Agreements, each dated as of February 11, 1994,
between HRES2 Properties Trust (as successor in interest to HRPT
Properties Trust), as Landlord, and Advisors (formerly known as
Connecticut Subacute Corporation II) as Tenant, as amended to date.
Applicable to: New Haven, CT; Waterbury, CT; Cheshire, CT (the "HRES2
Leased Facilities").
2. Management Agreement: Management Agreements, each dated as of February
11, 1994, between Advisors and IHS 175 (as successor to Horizon), as
amended to date.
Applicable to the HRES2 Leased Facilities.
III. Mortgage Notes
1. SPTIHS Mortgages:1
A. Amended and Restated Promissory Note (effective as of
September 24, 1997) originally dated December 30, 1993, in the
principal amount of $6,000,000, by Community Care of Nebraska,
Inc. ("CCN") for the benefit of SPTIHS (as successor in
interest to HRPT).
B. Amended and Restated Promissory Note (effective as of
September 24, 1997), originally dated April 1, 1995, in the
principal amount of $2,045,000 made by CCN and W.S.T. Care,
Inc., a Nebraska corporation and Quality Care of Lyons, Inc.,
a Nebraska corporation and together with WST, for the benefit
of SPTIHS (as successor in interest to HRPT).
C. Amended and Restated Promissory Note (effective as of
September 24, 1997), originally dated April 1, 1995, in the
principal amount of $2,833,300 made by the SPTIHS Mortgagors
to SPTIHS (as successor in interest to HRPT).
D. Amended and Restated Promissory Note (effective as of
September 24, 1997), originally dated July 16, 1996, in the
principal amount of $6,500,000 made by the SPTIHS Mortgagors
to SPTIHS (as successor in interest to HRPT).
E. Deed(s) of Trust and Construction Security Agreement, dated as
of December 30, 1993 made by CCN in favor of SPTIHS (as
successor in interest to HRPT) (with respect to property in
Ainsworth, Ashland, Blue Hill, Gretna, Sutherland and Waverly,
NE), as amended by:
(i) First Amendments dated as of April 1, 1995
- --------
1 Applicable to: Lyons, NE; Milford, NE; Waverly, NE; Ainsworth, NE;
Ashland, NE; Blue Hill, NE; Gretna, NE; Sutherland, NE; Edgar, NE.
-3-
<PAGE>
(ii) Second Amendments dated as of July 16, 1996
(iii) Third Amendments dated as of September 24, 1997
F. Deed of Trust, dated as of April 1, 1995, made by WST in favor
of SPTIHS (as successor in interest to HRPT) (relating to
property at Milford, NE), as amended by:
(i) Amendment dated as of July 16, 1996
(ii) Second Amendment dated as of September 24, 1997
G. Deed of Trust, dated as of April 1, 1995, made by Lyons in
favor of SPTIHS (as successor in interest to HRPT) (relating
to property at Lyons, NE), as amended by:
(i) Amendment dated as of July 16, 1996
(ii) Second Amendment dated as of September 24, 1997
2. HRES1 Mortgage Notes:2
A. Mortgage and Security Agreement, by IHS 112 and IHS 113 (as
successors to Horizon) to HRES1 (as successor in interest to
HRPT), dated November 29, 1993, effective February 11, 1994.
B. Mortgage and Security Agreement, by IHS 108 (as successor to
Horizon) to HRES1 (as successor in interest to HRPT), dated
January 28, 1995, effective December 31, 1994.
C. Assignment of Leases and Rents, from Horizon to HRES1 (as
successor in interest to HRPT), dated February 11, 1994.
D. Assignment of Leases and Rents, dated January 28, 1995 and
effective as of December 31, 1994, made by Horizon for the
benefit of HRES1 (as successor in interest to HRPT).
E. Promissory Note in the original principal amount of $5,100,000
from Horizon to HRES1 (as successor in interest to HRPT),
dated February 11, 1994.
F. Promissory Note in the original principal amount of $4,300,000
from Horizon to HRES1 (as successor in interest to HRPT),
dated February 11, 1994.
G. Promissory Note, dated January 28, 1995, and effective as of
December 31, 1994, made by Horizon to HRES1 (as successor in
interest to HRPT) in the original principal amount of
$19,500,000.
IV. IHS Guaranties
- ---------
2 Applicable to: Howell, MI; Farmington, MI; Slidell, LA.
-4-
<PAGE>
1. Consent, Assumption and Guaranty Agreement dated as of December 31,
1997 by and among (i) Integrated Health Services, Inc. ("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., (iii)
HealthSouth Corporation ("HealthSouth"), (iv) Horizon, (v) HRPT, and
(vi) Indemnity Collection Corporation ("ICC")
2. Guaranty by IHS dated as of September 24, 1997.
3. Amended, Restated and Consolidated Cross Guaranty, Cross Default and
Cross Collateralization Agreement, dated as of September 24, 1997,
among Community Care of America, Inc. ("CCA"), ECA, ECA Properties,
Inc. ("ECAP"), ECA Holdings II, Inc. ("New ECA"), CCN, the CCN
Subsidiaries, CCA Acquisition I, Inc. ("CCAA"), the Georgia
Subsidiaries, and HRPT.
4. Guaranties (2), each dated as of December 30, 1993, from CCA in favor
of HRPT.
5. Guaranties (2), each dated as of December 30, 1993, from MeritWest,
Inc. ("MeritWest") in favor of HRPT.
6. Guaranties (2), each dated as of December 30, 1993, from MTC West, Inc.
("MTC") in favor of HRPT.
7. Guaranty dated as of December 30, 1993, from ECA in favor of HRPT.
8. Guaranty dated as of April 1, 1995, from CCA in favor of HRPT, of ECA
obligations.
9. Guaranty dated as of April 1, 1995, from CCA in favor of HRPT, of CCN
and CCN Subsidiary obligations.
10. Guaranty dated as of April 1, 1995, from ECA in favor of HRPT, of CCN
and CCN Subsidiary obligations.
11. Guaranty dated as of May 10, 1996 by CCA in favor of HRPT, of CCAA and
Georgia Subsidiary obligations.
12. Guaranty dated as of May 10, 1996 by CCAA in favor of HRPT, of Georgia
Subsidiary obligations.
-5-
<PAGE>
SCHEDULE 1.1A
List of Assigned Contracts.
[Omitted.]
<PAGE>
SCHEDULE 1.1B
Real Property Encumbrances to be Released prior to Closing
<PAGE>
Delta, CO
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Bethesda Care
Grand Junction, CO
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
LaVilla Grande
Grand Junction, CO
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Colorado Springs, CO
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
Statement of lien claimed by Nexera in the amount of $5,625, recorded in
Reception No. 2000013600.
<PAGE>
Canon City, CO
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
College Park, GA
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
UCC-1 Financing Statement No. 60199701802, having College Park/SCC, Inc. as
Debtor and NationsBank, National Association (South), as Agent, as Secured
party, filed for record January 28, 1997, at 10:38 a.m., Central Filing System
of Georgia.
<PAGE>
Dublin, GA
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Marietta, GA
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Glenwood, GA
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Winterset, IA
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Clarinda, IA
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
[Mechanics' Lien filed November 7, 1996 as LN-LN 100044 by Crain Construction,
Inc. in the amount of $18,845, plus interest.]
<PAGE>
Mediapolis, IA
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Council Bluffs, IA
Real Property Encumbrances to be
Released Prior to Closing
1. Real estate taxes and water and sewer charges delinquent as of February
2, 2000.
<PAGE>
Pacific Junction, IA
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Ellinwood, KS
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Tarkio, MO
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Grand Island, NE
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Laramie, WY
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Worland, WY
Real Property Encumbrances to be
Released Prior to Closing
Civil Action No. 990016
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Lyons, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Quality Care of Lyons, Inc. for the benefit of IHS
Financial Holdings, Inc. in the amount of $5,000,000 dated July 18,
1997 and recorded in Book 102 of Mortgages, Page 723.
2. Taxes for the second half of 1998 totalling $6,747.04 plus interest and
penalties. Tax Sale Certificate #9, purchased March 6, 2000 by AAM US
Bank.
3. Real estate taxes and water and sewer charges delinquent as of February
2, 2000.
4. UCC Financing Statement No. 999878947 dated 11/13/98 to MLC Group, Inc.
<PAGE>
Ainsworth, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Real estate taxes and water and sewer charges delinquent as of February
2, 2000.
2. Deed of Trust dated July 18, 1997, and filed for record on July 15,
1997, in Book 70 of Mortgages at page 356 of the records of Brown
County, Nebraska, wherein Community Care of Nebraska, a Delaware
corporation, conveys said real estate in trust with power of sale in
favor of First American Title Insurance Company, Trustee, for the
benefit of IHS Financial Holdings, Inc., a Delaware corporation, in
consideration of a line of credit in the principal amount of up to
$5,000,000.00.
<PAGE>
Ashland, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust in the amount of $5,000,000 dated July 18, 1997 in Book
212, Page 820 from Community Care of Nebraska, Inc. for the benefit of
IHS Financial Holdings, Inc.
2. Real estate taxes and water and sewer charges delinquent as of February
2, 2000.
3. Construction Lien in the amount of $475, Book 242, Page 70, filed by
Commercial Flooring Systems, Inc.
4. Construction Lien in the amount of $895, Book 242, Page 75, filed by
Commercial Flooring Systems, Inc.
<PAGE>
Blue Hill, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Community Care of Nebraska, Inc. for the benefit of
IHS Financial Holdings, Inc., dated July 18, 1997 in the amount of
$5,000,000 and recorded in Book 97, Page 1188
2. Real estate taxes and water and sewer charges delinquent as of February
2, 2000.
<PAGE>
Gretna, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Community Care of Nebraska, Inc. for the benefit of
IHS Financial Holdings, Inc. dated July 18, 1997 in the amount of
$5,000,000 recorded as Instrument no. 97-15776.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Sutherland, NE
Real Property Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Community Care of Nebraska, Inc. for the benefit of
IHS Financial Holdings, Inc., dated July 18, 1997 in the principal
amount of $5,000,000, recorded in Book 559, Page 140.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Waverly, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Community Care of Nebraska, Inc. for the benefit of
IHS Financial Holdings, Inc., dated July 18, 1997 in the amount of
$5,000,000, recorded as Instrument No. 97-29466.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Milford, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from W.S.T. Care, Inc. for the benefit of IHS Financial
Holdings, Inc. in the amount of $5,000,000 dated July 18, 1997 and
recorded in Book 238, Page 195.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Brighton, MA
Real Property Encumbrances to be
Released Prior to Closing
None
<PAGE>
Worcester, MA
Real Property Encumbrances to be
Released Prior to Closing
None
<PAGE>
Middleboro, MA
Real Property Encumbrances to be
Released Prior to Closing
None
<PAGE>
Hyannis, MA
Real Property Encumbrances to be
Released Prior to Closing
None
<PAGE>
Canonsburg, PA
Real Estate Encumbrances to be Released
Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Howell, MI
Real Property Encumbrances to be Released
Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Farmington, MI
Real Property Encumbrances to be Released
Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
New Haven, CT
Real Property Encumbrances to be
Released Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Waterbury, CT
Real Property Encumbrances to be
Released Prior to Closing
1998 Tax Lien in Volume 295, Page 46.
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
Cheshire, CT
Real Property Encumbrances to be
Released Prior to Closing
Certificate of Sewer Lien recorded March 26, 1998 in Volume 1265, Page 71.
Real estate taxes and water and sewer charges delinquent as of February 2, 2000.
<PAGE>
N. Andover, MA
Real Estate Encumbrances to be Released
Prior to Closing
1. Massachusetts Excise Tax Lien.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Des Moines, IA
Real Estate Encumbrances to be Released
Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2,2000.
<PAGE>
Glenwood (Park Place) Iowa
Real Estate Encumbrances to be Released
Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2,2000.
<PAGE>
Utica, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Community Care of Nebraska, Inc. for the benefit of
IHS Financial Holdings, Inc. dated July 18, 1997 recorded in Book 238,
Page 218.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
3. Mechanics Lien to Jorad, Inc. in the amount of $2,456.15 dated December
3, 1999 in Book 7, Page 685.
<PAGE>
Palmer, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust and Security Agreement dated July 19, 1997 from CCA of
Midwest, Inc. to IHS Financial Holdings, Inc. in the amount of
$5,000,000 recorded in Book 120, Page 234.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Exeter, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Community Care of Nebraska, Inc. for the benefit of
IHS Financial Holdings, Inc., dated July 18, 1997 in the amount of
$5,000,000 recorded in Mortgage Book 146, Page 17.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Central City, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Columbus, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
2. Deed of Trust from Quality Care of Columbus, Inc. for the benefit of
IHS Financial Holdings, Inc. dated July 18, 1997 in the amount of
$5,000,000 in Book 376, Page 203.
<PAGE>
Edgar, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Community Care of Nebraska, Inc. for the benefit of
IHS Financial Holdings, Inc., dated July 18, 1997 in the amount of
$5,000,000 recorded in Mortgage Book 174, Page 21.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
Campbell, NE
Real Estate Encumbrances to be Released
Prior to Closing
Real estate taxes and water and sewer charges delinquent as of February 2,2000.
<PAGE>
Aurora, NE
Real Estate Encumbrances to be Released
Prior to Closing
1. Deed of Trust from Community Care of Nebraska, Inc. for the benefit of
HIS Financial Holdings, Inc., July 18, 1997 recorded in Book 168, Page
21.
2. Real estate taxes and water and sewer charges delinquent as of February
2,2000.
<PAGE>
SCHEDULE 1.1C
Standard System Configuration
Number Hardware Related Software
- -------------------------------------------------------------------------------
1 Sprint CSU
1 Cisco 1601 Router
1 HP 10MB Manageable Ethernet Hub
1 Emulux Terminal/Printer Server 8 or 16 Hub
5 Wyse60 Terminals
3 PCs Win95 MS Office 97, Internet Explorer 4.01, PC
Anywhere v8, Norton v4.02, Powerterm 5.2
2 HP Personal Laser Printers PC connect
2 HP 4000N Laserjet Printer Jet Direct Network Card
1 PC Kronos, DOS
1 Standalone Modem
1 Okidata 321 Printer
1 Okidata 395 Printer
1 Kronos Time Clock
1 HP LCII or LC III Server SCO Openserver 5.04 AFPS for LAN
1 Backup Server Modem
1 APC 1400 UPS Parachute Plus for Unix v4.2.2
Software Description
- -------------------------------------------------------------------------------
Achieve (v7.312) MDS, care plans, physician orders,
resident trust, billing and AR
IBM Passport (v2.R1LE) Claims processing
Kronos (v7B.06 TKC for DOS) Time and attendance
RFW (v4.3A SR5) Misc. charge capture via barcode
Menutracker (v02.10.00) Dietary meal management
MS Office 97 Word, Excel, and Powerpoint
<PAGE>
SCHEDULE 3.2.6
Description of New Properties
[This schedule contains legal descriptions of real property located in Central
City, NE, Campbell, NE, Columbus, NE, Exeter, NE, Palmer, NE, Utica, NE, Des
Moines, IA, Park Place/Glenwood, IA, N. Andover, MA.]
<PAGE>
SCHEDULE 3.2.6A
1. Lease dated March 15, 1999 between IHS Acquisition No. 148, Inc., as
Landlord, and Horizon/CMS Healthcare Corporation, as Tenant (relating
to No. Andover, MA facility).
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 5.6
Licenses
SPTIHS Leased Facilities
Name of Facility Beds Services
- ---------------- ---- --------
<S> <C> <C>
Integrated Health Services @ Canon 85 Skilled Nursing Facility
City, Canon City, CO1 48 units Apartments
Integrated Health Services @ Delta, 90 Skilled Nursing Facility
Delta, CO 6 Personal Care Boarding Home
Integrated Health Services @ LaVilla 96 Skilled Nursing Facility
Grande, Grand Junction, CO
Integrated Health Services @ Mantey 82 Skilled Nursing Facility
Heights, Grand Junction, CO
Integrated Health Services @ Springs 100 Skilled Nursing Facility
Village, Colorado Springs, CO
College Park Health Care Center, 100 Skilled Nursing Facility
College Park, GA
Community Care of America @ Conner, 62 Skilled Nursing Facility
Glenwood, GA
Community Care of America at Dublin, 130 Skilled Nursing Facility
Dublin, GA
Community Care of America @ 109 Skilled Nursing Facility
Marietta, Marietta, GA
Integrated Health Services of 117 Skilled Nursing Facility
Clarinda, Clarinda, IA
Integrated Health Services of 62 Skilled Nursing Facility
Council Bluffs South, Council
Bluffs, IA
Integrated Health Services @ 62 Skilled Nursing Facility
Mediapolis, Mediapolis, IA
IHS at Pacific Place, Pacific 12 Intermediate Care Facility for Mentally Retarded
Junction, IA
Integrated Health Services of 80 Skilled Nursing Facility
Winterset, Winterset, IA1 19 Residential Care Facility
19 units Apartments
IHS of Woodhaven, 54 Skilled Nursing Facility
Ellinwood, KS
IHS @ Tarkio, 95 Skilled Nursing Facility
Tarkio, MO
Wedgewood Care Center, 74 Skilled Nursing Facility
Grand Island, NE
IHS @ Laramie, 144 Skilled Nursing Facility
Laramie, WY
Community Care of America @ Worland, 87 Skilled Nursing Facility
Worland, WY1 13 units Apartments
<FN>
1 Two properties are located at each of these locations.
</FN>
</TABLE>
<PAGE>
HRES1 Leased Facilities
Name of Facility Beds Services
- ---------------- ---- --------
Greenery Rehabilitation Center, 201 Skilled Nursing Facility
Brighton, MA
Greenery Rehabilitation & Skilled 124 Skilled Nursing Facility
Nursing Center of Middleboro,
Middleboro, MA
Greenery Rehabilitation and Skilled 142 Skilled Nursing Facility
Nursing Center of Hyannis, Hyannis,
MA
Greenery Extended Care Center 173 Skilled Nursing Facility
Worcester, MA
IHS Greenery of Canonsburg, 140 Skilled Nursing Facility
Canonsburg, PA
HRES2 Leased Facilities
Name of Facility Beds Services
- ---------------- ---- --------
Clifton House Rehabilitation Center, 195 Skilled Nursing Facility
New Haven, CT
Greenery Rehabilitation Center @ 180 Skilled Nursing Facility
Waterbury, Waterbury, CT
Greenery Extended Care Center @ 210 Skilled Nursing Facility
Cheshire, Cheshire, CT
SPTIHS Mortgaged Facilities
Name of Facility Beds Services
- ---------------- ---- --------
Ainsworth Care Center, Ainsworth, NE 50 Skilled Nursing Facility
IHS @ Ashland, 101 Skilled Nursing Facility
Ashland, NE
Blue Hill Care Center, 68 Skilled Nursing Facility
Blue Hill, NE
IHS @ Edgar, 54 Skilled Nursing Facility
Edgar, NE
IHS @ Gretna, 63 Skilled Nursing Facility
Gretna, NE
IHS @ Lyons, 82 Skilled Nursing Facility
Lyons, NE
IHS @ Milford, 60 Skilled Nursing Facility
Milford, NE
IHS @ Sutherland, 62 Skilled Nursing Facility
Sutherland, NE
IHS of Waverly, 51 Skilled Nursing Facility
Waverly, NE
-2-
<PAGE>
HRES1 Mortgaged Facilities
Name of Facility Beds Services
- ---------------- ---- --------
Farmington Health Care Center 153 Nursing Home (Long Term Care)
Farmington, MI
IHS of Michigan at Howell 176 Nursing Home (Long Term Care)
Howell, MI
New Facilities
Name of Facility Beds Services
- ---------------- ---- --------
Grandview Manor 45 Skilled Nursing Facility
Campbell, NE 68932
Integrated Health Services of 70 Skilled Nursing Facility
Central City
Central City, NE 68826
Mory's Haven 48 Skilled Nursing Facility
Columbus, NE 68601
Exeter Care Center 56 Skilled Nursing Facility
Exeter, NE 68351
IHS at Palmer 35 Nursing Facility
Palmer, NE 68864
Utica Community Center 41 Skilled Nursing Facility
Utica, NE 68456
Integrated Health Services of Iowa 93 Skilled Nursing Facility
at Des Moines
Des Moines, IA 50316
IHS at Park Place 128 Intermediate care facility
Glenwood, IA 51534 for mentally retarded
Greenery Extended Care Center at 122 Skilled nursing facility
North Andover
North Andover, MA 01845
-3-
<PAGE>
SCHEDULE 6.1.7
Aurora Parcel
[This schedule contains a legal description of real property located in Aurora,
NE.]
<PAGE>
EXHIBIT A
[This exhibit contains a copy of the filing made in the United States Bankruptcy
Court for the District of Delaware in re Integrated Health Services, Inc., et
al.]
<PAGE>
EXHIBIT B-1
PENNSYLVANIA MODIFICATION
S&W DRAFT 04/05/00
AMENDED AND RESTATED LEASE AGREEMENT
DATED AS OF JANUARY 1, 2000
(originally dated as of February 11, 1994)
BY AND BETWEEN
HRES1 PROPERTIES TRUST
AS LANDLORD,
AND
IHS ACQUISITION NO. 135, INC.
AS TENANT
<PAGE>
AMENDED AND RESTATED LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT, dated as of January 1, 2000,
is made by and between HRES1 PROPERTIES TRUST, a Maryland real estate investment
trust, as landlord ("Landlord"), having its principal office at 400 Centre
Street, Newton, Massachusetts, and IHS ACQUISITION 135, INC., a Delaware
corporation, as tenant ("Tenant"), having its principal office at The Highlands,
910 Ridgebrook Road, Sparks, Maryland.
W I T N E S S E T H
WHEREAS, Landlord and Tenant are parties to a Lease Agreement dated as
of February 11, 1994, as amended (the "Original Lease"), originally between HRPT
Properties Trust (f/k/a "Health and Rehabilitation Properties Trust"), a
Maryland real estate investment trust ("HRPT"), as landlord, and Horizon
Healthcare Corporation, a Delaware corporation ("Horizon"), as tenant;
WHEREAS, Landlord has succeeded to the interest of HRPT as landlord
under the original Lease and is the record and beneficial owner of the title to
the Land, the Leased Improvements and the Fixtures (each as defined in Section
2.1 hereof);
WHEREAS, pursuant to an Assignment and Assumption of Real Property
Lease dated as of December 31, 1997 by and between Horizon/CMS Healthcare
Corporation (the successor to Horizon), as assignor, and IHS Acquisition No.
151, Inc., a Delaware corporation ("IHS 151"), as assignee, IHS 151 acquired all
right, title and interest of Horizon/CMS Healthcare Corporation under the
Original Lease;
WHEREAS, pursuant to a Consent, Assumption and Guaranty Agreement dated
as of December 31, 1997 (the "IHS Consent") among Integrated Health Services
Inc., a Delaware Corporation ("IHS"), Tenant and certain other subsidiaries of
IHS, HealthSouth Corporation, Horizon, HRPT and Indemnity Collection
Corporation, IHS and IHS 151 assumed the obligations of Horizon under the
Original Lease;
WHEREAS, pursuant to an Assignment and Assumption of Real Property
Lease dated as of December 31, 1997 by and between IHS 151, as assignor, and
Tenant, as assignee, Tenant acquired all right, title and interest of IHS 151
under the Original Lease;
WHEREAS, Landlord alleges that by a notice dated January 25, 2000, the
Original Lease was terminated by virtue of an Event of Default under the
Original Lease;
WHEREAS, on February 3, 2000, IHS and certain of its subsidiaries,
including Tenant, filed voluntary petitions for relief (collectively, the
"Cases") under chapter 11 of the United States Bankruptcy Code, ss.ss.101 et
seq. (the "Bankruptcy Code") with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court");
WHEREAS, IHS and Tenant are continuing to operate their businesses and
manage their respective properties as debtors-in-possession pursuant to
ss.ss.1107 and 1108 of the Bankruptcy Code; and
<PAGE>
WHEREAS, pursuant to, and in accordance with, a Settlement Agreement
dated as of March __, 2000 among, inter alia, IHS, Landlord and Tenant (the
"Settlement Agreement"), Landlord has agreed to rescind its alleged termination
of the Original Lease, Landlord and Tenant have agreed to amend and restate the
Original Lease as set forth herein, and IHS has agreed to guaranty the
obligations of Tenant hereunder pursuant to a Guaranty dated as of even date
herewith by IHS in favor of Landlord (as amended, modified or supplemented from
time to time, the "Guaranty");
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
to amend and restate the Original Lease in full to read 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.
"Added Value Percentage" shall mean, with respect to any Capital
Addition financed by Tenant hereunder, a percentage bearing the same proportion
to total Net Patient Revenues for 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.
1.1 "Additional Rent" shall have the meaning given such term in Section
3.1.2.
1.2 "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).
1.3 "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
-2-
<PAGE>
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.
1.4 "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).
1.5 "Bankruptcy Code" shall have the meaning given such term in the
recitals.
1.6 "Bankruptcy Court" shall have the meaning given such term in the
recitals.
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 "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.
1.9 "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 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.
1.10 "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
-3-
<PAGE>
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.
1.11 "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 Index), 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.
1.12 "Cases" shall have the meaning given such term in the recitals.
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 January 1, 2000.
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, a statement of earnings prepared in accordance with
generally accepted accounting principles, consistently applied, and in the form
consistently prepared by Tenant.
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.
-4-
<PAGE>
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.
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 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.30 "Facility" shall mean the licensed nursing home being operated on
the Leased Property.
1.31 "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.
1.32 "Facility Mortgagee" shall mean the holder of any Facility
Mortgage.
1.33 "Facility Trade Names" shall mean any of the names under which
Tenant operates, or has operated, the Facility at any time during the Term.
1.34 "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.
1.35 "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.
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1.36 "Fair Market Value" shall mean the price that a willing buyer riot
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.
1.37 "Fair Market Value Purchase Price" shall mean the Fair Market
Value of the Leased Property less the Fair Market Added Value.
1.38 "Fiscal Year" shall mean each twelve (12) month period from
January 1 to December 31.
1.39 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.40 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.41 "Guarantor" shall mean Integrated Health Services, Inc., a
Delaware corporation.
1.42 "Guaranty" shall have the meaning given such term in the recitals.
1.43 "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 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.
1.44 "IHS Entity" shall have the meaning given such term in the
Settlement Agreement.
1.45 "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.
1.46 "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
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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.
1.47 "Index" shall mean the Consumer Price Index, Urban Wage Earners
and Clerical Workers, All Items, Base 1982-84=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 due from Tenant or other amount 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 in urban
areas. In the event the Index ceases to use 1982-84=100 as the basis of
calculation, 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 date of this
Lease not been altered.
1.48 "Initiating Party" shall have the meaning given such term in
Section 20.1.
1.49 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Lease and all requirements of the issuer of any such
policy.
1.50 "Land" shall have the meaning given such term in Section 2.1(a).
1.51 "Landlord" shall have the meaning given such term in the preambles
to this Lease.
1.52 "Landlord Default" shall have the meaning given such term in
Article 14.
1.53 "Lease" shall mean this Amended and Restated Lease Agreement,
including Exhibits A and B hereto, as it and they may be amended from time to
time as herein provided.
1.54 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.55 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.56 "Leased Property" shall have the meaning given such term in
Section 2.1.
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1.57 "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.
1.58 "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.
1.59 "Minimum Rent" shall mean $100,000 per month, provided that (i)
commencing January 1, 2004, and on the first day of each calendar year
thereafter during the Fixed Term, the amount of each installment of Minimum Rent
shall be adjusted to be equal to the product of (x) Minimum Rent as at December
31 of the prior year multiplied by (y) 1.0 plus the percentage increase (not in
excess of 2%) in the Index as reported for December 31st of the prior year as
compared to the Index as reported for January 1st of such prior year, and (ii)
commencing the first anniversary of the first day of each Extended Term, and on
the first day of each calendar year thereafter during such Extended Term, the
amount of each installment of Minimum Rent shall be adjusted to be equal to the
product of (x) Minimum Rent as at December 31st of the prior year of such
Extended Term (as determined in accordance with Section 2.4 hereof) multiplied
by (y) 1.0 plus the percentage increase (not in excess of 2%) in the Index as
reported for December 31st of the prior year of such Extended Term as compared
to the Index as reported for January 1st of such prior year.
1.60 "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 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.
1.61 "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
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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 on Net Patient Revenues and,
therefore, has not already been included in the calculation of Net Patient
Revenues pursuant to clause (x) preceding.
1.62 "Non-Capital Additions" shall have the meaning given such term in
Section 6.4.
1.63 "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.
1.64 "Orders" shall mean, collectively, the Approval Order and the
Licensure Order, as such terms are defined in the Settlement Agreement.
1.65 "Overdue Rate" shall mean a rate equal to the lesser of the Base
Rate plus four percent (4%) and the maximum rate then permitted under applicable
law.
1.66 "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.
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1.67 "Permitted Encumbrances" shall mean the matters set forth in
Exhibit B, attached hereto and made a part hereof.
1.68 "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.
1.69 "Primary Intended Use" shall have the meaning given such term in
Section 4.1.1.
1.70 "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.
1.71 "Records" shall have the meaning given such term in Section 7.2.
1.72 "Rent" shall mean, collectively, the Minimum Rent and Additional
Rent.
1.73 "Responding Party" shall have the meaning given such term in
Section 20.1.
1.74 "SEC" shall mean the Securities and Exchange Commission.
1.75 "Settlement Agreement" shall have the meaning given such term in
the recitals.
1.76 "Settlement Document" shall have the meaning given such term in
the Settlement Agreement.
1.77 "State" shall mean the Commonwealth of Pennsylvania.
1.78 "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.
1.79 "Substitute Properties" shall have the meaning given such term in
Section 16.1.
1.80 "Substitution Date" shall have the meaning given such term in
Section 16.1.
1.81 "Successor Landlord" shall have the meaning given such term in
Section 21.2.
1.82 "Superior Lease" shall have the meaning given such term in Section
21.2.
1.83 "Superior Landlord" shall have the meaning given such term in
Section 21.2.
1.84 "Superior Mortgage" shall have the meaning given such term in
Section 21.2.
1.85 "Superior Mortgage" shall have the meaning given such term in
Section 21.2.
1.86 "Tenant" shall have the meaning given such term in the preambles
to this Lease.
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1.87 "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.
1.88 "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.
1.89 "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.
1.90 "Trustees" shall mean the trustees of Landlord.
1.91 "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.
1.92 "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
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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 airconditioning 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, OR
AS TO TITLE, 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 (other than
HRPT) 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.
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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, 2010.
2.4 Extended Terms. Provided no Event of Default shall have occurred
and be continuing, Tenant shall have the right to extend the Fixed Term for
three additional periods of ten (10) years each (each, an "Extended Term").
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
first year of each Extended Term shall be the greater of (x) the Minimum Rent
payable during the last year of the Fixed Term (for the first Extended Term) or
the last year of the immediately preceding Extended Term (for the second and
third Extended Terms), as the case may be, 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.
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 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; provided that, notwithstanding the foregoing, the first
installment of Minimum Rent shall be paid on the Closing Date, shall cover the
period from the Commencement Date to the end of the calendar month in which the
Closing Date occurs (the "Initial Period"), and shall be in an amount equal to
the product of (x) $100,000 multiplied by (y) the number of calendar months
during the Initial Period. Minimum Rent for any partial month shall be pro-rated
on a daily basis.
3.1.2 Additional Rent. In addition to the Minimum 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:
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(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 refund shall be due from any
taxing authority in respect of any Imposition paid by Tenant,
the same shall be paid over to or retained by Tenant if no
Event of Default shall have occurred 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.
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 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.
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(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 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 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 I 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
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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 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.
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 No Actions Impairing Value, Etc. 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
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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 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 officials 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.
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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, 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.
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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 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
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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 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 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
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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 to
any Capital Addition, 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 Capital Addition.
(b) 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;
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(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
(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;
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(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 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.
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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, material men, 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 lose, 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
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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, material man 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 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
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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) Commercial general liability insurance, including bodily
injury and property damage (in the broadest form available, including
broad form contractual liability, fire legal liability, products and
completed operations coverage) and healthcare facility professional
liability insurance, under which Tenant is named as an insured and
Landlord and any Facility Mortgagee are named as additional insureds as
their interests may appear, in an amount which shall be at least equal
to $1,000,000 per occurrence with respect to bodily injury liability,
property damage liability or professional liability, and umbrella
coverage of all such claims in an amount not less than $10,000,000;
(b) "All-risk" property insurance on a "replacement cost"
basis (including boiler and machinery) with the usual extended coverage
endorsements (including increased costs of construction, demolition and
ordinance or law) covering the Leased Property and Tenant's Personal
Property;
(c) Business interruption and loss of (i) rent or rental
income under a rental value insurance policy covering risk of loss
during the lesser of the first twelve (12) months of reconstruction or
(ii) the actual reconstruction period necessitated by the occurrence of
any of the hazards described in paragraph (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) 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, which approval shall not be
unreasonably withheld or delayed;
(e) 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 employer's
liability insurance in such amounts as necessary to satisfy the
aforementioned [underlying insurance requirements]; and
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(f) 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 written by insurance companies authorized to do business in the State, which
insurance 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 (with the exception of the insurance described in paragraph (e)
of Section 9.1) 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.
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, five (5) 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 cancellation or non-renewal of such policy (except in the
event of any cancellation or non-renewal for non-payment of premium, in which
case such policy shall provide for ten (10) days prior written notice thereof).
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 Sections 9.1(b), (c) and (d) 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.
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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.
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
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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 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
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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 (as to which Landlord has given notice to Tenant)
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 (as to which Landlord
has given notice to Tenant) 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
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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.
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 (as to which Landlord has given
notice to Tenant) 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
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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 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 in the manner and to the extent that is fair, just and equitable
to both Tenant and Landlord, taking into
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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) If Tenant shall fail to make any payment of Rent or any
other sum payable hereunder when due and such failure shall continue
for ten (10) days after written notice thereof;
(b) If Tenant shall fail to observe any term, covenant or
condition set forth in Section 9 of this Lease and such failure shall
continue for ten (10) days after written notice thereof;
(c) If Tenant or the Guarantor shall 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 any such failure, not involving the
payment of money, 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 or Guarantor
commences sure cure within such thirty (30) day period and thereafter
diligently prosecutes such cure to completion;
(d) If, following confirmation of a plan of reorganization for
Tenant or Guarantor, as applicable,
(A) Tenant or Guarantor shall (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;
or
(B) Tenant or Guarantor shall be adjudicated a
bankrupt or shall have an order for relief thereunder entered
against it or a court of competent jurisdiction shall enter an
order or decree appointing a receiver for it or of the
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whole or substantially all of its property, or approving a
petition filed against it seeking reorganization or
arrangement of Tenant or Guarantor under the Bankruptcy Code
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) If Tenant or Guarantor shall 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;
(f) If 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) If, except as a result of damage, destruction, strikes,
lock-outs or a partial or complete Condemnation, Tenant shall
voluntarily cease operations on the Leased Property for a period in
excess of thirty (30) days; or
(h) If any representation or warranty of Tenant or Guarantor
and contained in this Lease or the Guaranty shall prove to be untrue in
any material respect on the date when made which materially and
adversely affects Landlord, and the same shall not be cured within
ninety (90) days after written notice thereof;
(i) If the Cases of the Tenant or Guarantor shall be dismissed
or converted to a Case under Chapter 7 of the Bankruptcy Code; or a
trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, a
responsible officer or an examiner with enlarged powers relating to the
operation of the business (powers beyond those set forth in
ss.1106(a)(3) and (4) of the Bankruptcy Code) under ss.1106(b) of the
Bankruptcy Code shall be appointed in any of the Cases of the Tenant or
Guarantor and the order appointing such trustee, responsible officer or
examiner shall not be reversed or vacated within 60 days after the
entry thereof; or
(j) If an order of the Bankruptcy Court shall be entered
reversing, amending, supplementing, staying for a period in excess of
10 days, vacating or otherwise modifying the Orders in a manner that is
materially adverse to Landlord.
Upon the occurrence of any Event of Default, and without further order
of or application to the Bankruptcy Court, 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
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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. In addition, subject solely to the terms of the Orders, the automatic
stay provided in ss.362 of the Bankruptcy Code shall be deemed automatically
vacated without further action or order of the Bankruptcy Court and the Landlord
shall be entitled to exercise all of its respective rights and remedies under
this Lease Agreement and the Guaranty, including, without limitation, all rights
and remedies with respect to the Tenant's Personal Property and Guarantor.
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.
The automatic stay provided in ss.362 of the Bankruptcy Code shall be
modified so as to permit Landlord to deliver notices of default to Tenant and/or
Guarantor pursuant to the appropriate paragraphs of Section 12.1 and to take all
other actions provided for above without further action or order of the
Bankruptcy Court.
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.
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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 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 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.
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.
WITHOUT LIMITING THE EFFECT OR GENERALITY OF OTHER WAIVERS PROVIDED FOR
IN THIS LEASE, TENANT EXPRESSLY WAIVES
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THOSE BENEFITS CONFERRED ON TENANTS BY ACT NO. 20, APPROVED APRIL 6, 1951,
ENTITLED "THE LANDLORD AND TENANT ACT OF 1951", AS AMENDED, WHICH GOVERN
REQUIREMENTS OF NOTICE TO VACATE THE LEASED PREMISES IN THE EVENT OF ANY DEFAULT
OR AT THE END OF THE TERM AND REQUIREMENTS REGARDING SECURITY DEPOSITS, THE
RETURN THEREOF AND THE ACCOUNTING AND DELIVERY OF INTEREST THEREON.
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 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.
12.6 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 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),
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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.
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
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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
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
(and giving effect to projected residual values).
16.2 Substitution Procedures.
(a) If 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
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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 Code, and (z) the substitution, together with
all other substitutions made or requested by Tenant of all or any
portion of the Leased Property 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
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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.
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 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;
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(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.
16.4 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.
16.5 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.
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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 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.
Tenant shall have the right, without the consent of Landlord, (A) to
assign Tenant's interest in this Lease to a corporation or other entity which
shall (1) control, (2) be under the control of, or (3) be under common control
with the Tenant (the term "control" and "controlling" as used herein shall be
deemed to mean ownership or control (direct or indirect) of more than 50% of the
outstanding voting stock of a corporation, or an equivalent majority and
controlling interest in another form of entity) (any such entity being a
"Related Entity"); (B) to sublease all or part of the Leased Property to a
Related Entity; and (C) to grant concessions and licenses (subject and
subordinate to this Lease and to the matters to which the Lease is subject and
subordinate), in the ordinary course of Tenant's business, for portions of the
Leased Property to be used in connection with Tenant's Primary Intended Use.
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 (excluding any
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assignment or sublease to a Related Entity), 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
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, (a) 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 (i) the income or profits derived by the
business activities of the sublessee, or (ii) any other formula such that any
portion of the sublease rental 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 and (b) Tenant will neither assign (including
through merger or consolidation) or sublet the Leased Property to any Person
performing management or servicing functions to, or on behalf of, Landlord or
any Affiliated Person thereof if either Landlord or its Affiliated Person
intends such Person to qualify as an "independent contractor from whom" neither
Landlord nor any Affiliated Person thereof "derives or receives any income"
within the meaning of Section 856 of the Code, nor will Tenant acquire any asset
or enter into any merger, consolidation or other transactions that would require
it to perform such functions in the capacity of a Person that either Landlord or
any Affiliated Person thereof intends to be an "independent contractor from
whom" neither Landlord nor any Affiliated Person "derives or receives any
income" within the meaning of Section 856 of the Code.
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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, and Landlord shall be deemed to have consented to any proposed
assignment or sublease with a Related Entity, provided that in any such case
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 of Tenant for such
year, together with an Officer's Certificate certifying to the accuracy
of such Consolidated Financials; and
(c) At any time and from time to time upon not less than
twenty (20) business 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
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any litigation to which Landlord is a party, for purposes of compliance
therewith, but only to the extent such information is reasonably
available and then all at the sole cost and expense of Landlord.
18.3 General Operations. Tenant covenants and agrees to furnish to
Landlord:
18.3.1 Reimbursement, Licensure, Etc. Within thirty (30) days
after request therefor by Landlord (but in each case only to the extent such
information is reasonably available and then at the sole cost and expense of
Landlord), copies of:
(A) The primary operating license authorizing Tenant
to operate the Facility for its Primary Intended Use;
(B) All Medicare and Medicaid certifications and
provider agreements with respect to the Facility;
(C) A Nursing Home Administrator License for the
individuals 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 and
Medicare/Medicaid requirements, including physical environment
and Life Safety Code survey reports (excluding, however,
correspondence which may be subject to any attorney-client
privilege).
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 which such Personal Property is subject; provided,
however, Landlord shall not have the right to purchase any Facility Trade Name
or logo.
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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 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
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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 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 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
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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 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
ADDITIONAL COVENANTS OF TENANT
22.1 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.
22.2 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,
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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.
22.3 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
(as to which Landlord has given notice to Tenant) or an Event of Default.
ARTICLE 23
MISCELLANEOUS
23.1 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.
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 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.
23.3 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.
23.4 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.
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23.5 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.
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 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.
23.7 Landlord's Liability. THE DECLARATION OF TRUST OF LANDLORD, DATED
________________, 1999, 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 "HRES1
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.
23.8 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
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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 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.
23.10 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 it at:
c/o SENIOR HOUSING PROPERTIES TRUST
400 Centre Street
Newton, MA 02458
Telecopy no.: (617) 796-8349
Attention: President,
with copy to:
SULLIVAN & WORCESTER LLP
One Post Office Square
Boston, MA 02109
Telecopy no.: (617) 338-2880
Attention: Alexander A. Notopoulos, Jr. Esq.,
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and if to any Tenant, to it:
c/o Integrated Health Services, Inc.
The Highlands
910 Ridgebrook Road
Sparks, MD 21152
Telecopy no.: (410) 773-1020
Attention: Daniel J. Booth,
Senior Vice President, Finance
with a copy to:
Parker Chapin LLP
405 Lexington Avenue
New York, NY 10174
Telecopy no.: (212) 704-6288
Attention: Charles P. Greenman, Esq.
(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.
23.11 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. Landlord
and Tenant intend that this Lease shall be construed as a post-petition
agreement of Tenant, notwithstanding that it is dated January 1, 2000.
23.12 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;
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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.
23.13 Consent to Jurisdiction. 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.
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IN WITNESS WHEREOF, the parties have executed this Lease, as a sealed
instrument, as of the date first above written.
LANDLORD:
HRES1 PROPERTIES TRUST
BY:_________________________________
Its:______________________________
TENANT:
IHS ACQUISITION 135, INC.,
a Delaware corporation
By: _________________________________
Its (Vice) President
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
EXHIBITS
A - Permitted Encumbrances
B - The Land
<PAGE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE 1 DEFINITIONS...................................................................................2
1.1 "Additional Rent"....................................................................2
1.2 "Affiliated Person"..................................................................2
1.3 "Assumed Indebtedness"...............................................................2
1.4 "Award"..............................................................................3
1.5 "Bankruptcy Code"....................................................................3
1.6 "Bankruptcy Court"...................................................................3
1.7 "Base Rate"..........................................................................3
1.8 "Business Day".......................................................................3
1.9 "Capital Addition"...................................................................3
1.10 "Capital Additions Cost".............................................................3
1.11 "Capital Expenditure"................................................................4
1.12 "Cases"..............................................................................4
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".....................................................................5
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 "Extended Terms".....................................................................5
1.30 "Facility"...........................................................................5
1.31 "Facility Mortgage"..................................................................5
1.32 "Facility Mortgagee".................................................................5
1.33 "Facility Trade Names"...............................................................5
1.34 "Fair Market Added Value"............................................................5
1.35 "Fair Market Rental".................................................................5
1.36 "Fair Market Value"..................................................................6
1.37 "Fair Market Value Purchase Price"...................................................6
1.38 "Fiscal Year"........................................................................6
1.39 "Fixed Term".........................................................................6
1.40 "Fixtures"...........................................................................6
1.41 "Guarantor"..........................................................................6
1.42 "Guaranty"...........................................................................6
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1.43 "Hazardous Substances"...............................................................6
1.44 "IHS Entity".........................................................................6
1.45 "Immediate Family"...................................................................6
1.46 "Impositions"........................................................................6
1.47 "Index"..............................................................................7
1.48 "Initiating Party"...................................................................7
1.49 "Insurance Requirements".............................................................7
1.50 "Land"...............................................................................7
1.51 "Landlord"...........................................................................7
1.52 "Landlord Default"...................................................................7
1.53 "Lease"..............................................................................7
1.54 "Leased Improvements"................................................................7
1.55 "Leased Personal Property"...........................................................7
1.56 "Leased Property"....................................................................7
1.57 "Legal Requirements".................................................................8
1.58 "Lending Institution"................................................................8
1.59 "Minimum Rent".......................................................................8
1.60 "Minimum Repurchase Price"...........................................................8
1.61 "Net Patient Revenues"...............................................................8
1.62 "Non-Capital Additions"..............................................................9
1.63 "Officer's Certificate"..............................................................9
1.64 "Orders".............................................................................9
1.65 "Overdue Rate".......................................................................9
1.66 "Parent".............................................................................9
1.67 "Permitted Encumbrances"............................................................10
1.68 "Person"............................................................................10
1.69 "Primary Intended Use"..............................................................10
1.70 "Qualified Appraiser"...............................................................10
1.71 "Records"...........................................................................10
1.72 "Rent"..............................................................................10
1.73 "Responding Party"..................................................................10
1.74 "SEC"...............................................................................10
1.75 "Settlement Agreement"..............................................................10
1.76 "Settlement Document"...............................................................10
1.77 "State".............................................................................10
1.78 "Subsidiary"........................................................................10
1.79 "Substitute Properties".............................................................10
1.80 "Substitution Date".................................................................10
1.81 "Successor Landlord"................................................................10
1.82 "Superior Lease"....................................................................10
1.83 "Superior Landlord".................................................................10
1.84 "Superior Mortgage".................................................................10
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1.85 "Superior Mortgage".................................................................10
1.86 "Tenant"............................................................................10
1.87 "Tenant's Personal Property"........................................................11
1.88 "Term"..............................................................................11
1.89 "Test Rate".........................................................................11
1.90 "Trustees"..........................................................................11
1.91 "Unavoidable Delays"................................................................11
1.92 "Unsuitable for Its Primary Intended Use"...........................................11
ARTICLE 2 PREMISES AND TERM............................................................................11
2.1 Premises............................................................................11
2.2 Condition of Premises...............................................................12
2.3 Fixed Term..........................................................................13
2.4 Extended Terms......................................................................13
ARTICLE 3 RENT.........................................................................................13
3.1 Rent................................................................................13
3.2 Late Payment of Rent................................................................15
3.3 Net Lease...........................................................................15
3.4 No Termination, Abatement, Etc......................................................15
ARTICLE 4 USE OF THE LEASED PROPERTY...................................................................16
4.1 Permitted Use.......................................................................16
4.2 Compliance with Legal and Insurance Requirements, Instruments, Etc..................17
4.3 Compliance with Medicaid and Medicare Requirements..................................17
4.4 Environmental Matters...............................................................17
ARTICLE 5 MAINTENANCE AND REPAIRS, ETC.................................................................18
5.1 Maintenance and Repair..............................................................18
5.2 Capital Expenditure Cost Sharing....................................................18
5.3 Tenant's Personal Property..........................................................19
5.4 Yield Up............................................................................19
5.5 Encroachments, Restrictions, Etc....................................................19
ARTICLE 6 CAPITAL ADDITIONS, ETC.......................................................................20
6.1 Construction of Capital Additions to the Leased Property............................20
6.2 Capital Additions Financed by Tenant................................................21
6.3 Information Regarding Capital Additions.............................................22
6.4 Non-Capital Additions...............................................................23
6.5 Salvage.............................................................................24
ARTICLE 7 LIENS........................................................................................24
7.1 Liens...............................................................................24
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7.2 Landlord's Lien.....................................................................24
7.3 Mechanic's Liens....................................................................25
ARTICLE 8 PERMITTED CONTESTS...........................................................................25
ARTICLE 9 INSURANCE AND INDEMNIFICATION................................................................26
9.1 General Insurance Requirements......................................................26
9.2 Waiver of Subrogation...............................................................27
9.3 Form Satisfactory, Etc..............................................................27
9.4 No Separate Insurance...............................................................27
9.5 Indemnification of Landlord.........................................................28
9.6 Indemnification of Tenant...........................................................28
ARTICLE 10 CASUALTY.....................................................................................28
10.1 Insurance Proceeds..................................................................28
10.2 Reconstruction in the Event of Damage or Destruction................................28
10.3 Insufficient Insurance Proceeds.....................................................30
10.4 Disbursement of Proceeds............................................................30
10.5 Tenant's Property...................................................................30
10.6 Restoration of Tenant's Property....................................................31
10.7 No Abatement of Rent................................................................31
10.8 Damage Near End of Term.............................................................31
ARTICLE 11 CONDEMNATION.................................................................................31
11.1 Total Condemnation..................................................................31
11.2 Partial Condemnation................................................................31
11.3 Temporary Condemnation..............................................................32
11.4 Tenant's Option.....................................................................32
11.5 Allocation of Award.................................................................32
11.6 Abatement Procedures................................................................32
ARTICLE 12 DEFAULTS AND REMEDIES........................................................................33
12.1 Events of Default...................................................................33
12.2 Remedies............................................................................35
12.3 Waiver..............................................................................36
12.4 Application of Funds................................................................37
12.5 Landlord's Right to Cure Tenant's Default...........................................37
12.6 Trade Names.........................................................................37
ARTICLE 13 HOLDING OVER.................................................................................37
ARTICLE 14 LANDLORD'S DEFAULT...........................................................................38
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ARTICLE 15 PURCHASE OF PREMISES.........................................................................38
ARTICLE 16 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY.............................................39
16.1 Tenant's Substitution Option........................................................39
16.2 Substitution Procedures.............................................................39
16.3 Conditions to Substitution..........................................................41
16.4 Conveyance to Tenant................................................................42
16.5 Expenses............................................................................42
ARTICLE 17 SUBLETTING AND ASSIGNMENT....................................................................43
17.1 Subletting and Assignment...........................................................43
17.2 Required Sublease Provisions........................................................44
17.3 Sublease Limitation.................................................................44
17.4 Assignment and Subletting Procedure.................................................45
ARTICLE 18 CERTIFICATES AND FINANCIAL STATEMENTS........................................................45
18.1 Estoppel Certificates...............................................................45
18.2 Financial Statements................................................................45
18.3 General Operations..................................................................46
ARTICLE 19 LANDLORD ACCESS..............................................................................46
19.1 Landlord's Right to Inspect.........................................................46
19.2 Landlord's Option to Purchase the Tenant's Personal Property: Transfer of Licenses..46
ARTICLE 20 APPRAISAL....................................................................................47
20.1 Appraisal Procedure.................................................................47
ARTICLE 21 MORTGAGES....................................................................................47
21.1 Landlord May Grant Liens............................................................47
21.2 Subordination of Lease..............................................................48
21.3 Notice to Mortgagee and Ground Landlord.............................................49
ARTICLE 22 ADDITIONAL COVENANTS OF TENANT...............................................................49
22.1 Notice of Change of Name, Administrator, Etc........................................49
22.2 Notice of Litigation, Potential Event of Default, Etc...............................49
22.3 Distributions, Payments to Affiliated Persons, Etc..................................50
ARTICLE 23 MISCELLANEOUS................................................................................50
23.1 No Waiver...........................................................................50
23.2 Remedies Cumulative.................................................................50
23.3 Acceptance of Surrender.............................................................50
23.4 No Merger of Title..................................................................50
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23.5 Conveyance by Landlord..............................................................51
23.6 Quiet Enjoyment.....................................................................51
23.7 Landlord's Liability................................................................51
23.8 Landlord's Consent..................................................................51
23.9 Memorandum of Lease.................................................................52
23.10 Notices.............................................................................52
23.11 Construction........................................................................53
23.12 Governing Law.......................................................................53
23.13 Consent to Jurisdiction.............................................................54
</TABLE>
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EXHIBIT B-2
NEW PENNSYLVANIA GUARANTY
S&W DRAFT 03/13/00
GUARANTY BY INTEGRATED HEALTH SERVICES, INC.
GUARANTY dated as of January 1, 2000 made by INTEGRATED HEALTH
SERVICES, INC., a Delaware corporation ("Guarantor") in favor of HRES1
PROPERTIES TRUST, a Maryland real estate investment trust (with its successor
and assigns, "Landlord").
W I T N E S S E T H :
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WHEREAS, Landlord and IHS Acquisition No. 135, Inc., a Delaware
corporation ("IHS 135") are parties to a Lease Agreement dated as of February
11, 1994, as amended (the "Original Lease"), originally between HRPT Properties
Trust (f/k/a "Health and Rehabilitation Properties Trust"), a Maryland real
estate investment trust ("HRPT"), as landlord, and Horizon Healthcare
Corporation, a Delaware corporation ("Horizon"), as tenant;
WHEREAS, Landlord has succeeded to the interest of HRPT as landlord
under the Original Lease;
WHEREAS, pursuant to an Assignment and Assumption of Real Property
Lease dated as of December 31, 1997 by and between Horizon/CMS Healthcare
Corporation (the successor to Horizon), as assignor, and IHS Acquisition No.
151, Inc., a Delaware corporation ("IHS 151"), as assignee, IHS 151 acquired all
right, title and interest of Horizon/CMS Healthcare Corporation under the
Original Lease;
WHEREAS, pursuant to an Assignment and Assumption of Real Property
Lease dated as of December 31, 1997 by and between IHS 151, as assignor, and IHS
135, as assignee, IHS 135 acquired all right, title and interest of IHS 151
under the Original Lease;
WHEREAS, pursuant to a Consent, Assumption and Guaranty Agreement dated
as of December 31, 1997 (the "IHS Consent") among Guarantor, IHS 135 and certain
other subsidiaries of Guarantor, HealthSouth Corporation, Horizon, HRPT and
Indemnity Collection Corporation, Guarantor and IHS 135 assumed the obligations
of Horizon under the Original Lease;
WHEREAS, Landlord claims that by a notice dated January 25, 2000,
Landlord notified IHS 135 that the Original Lease was terminated by virtue of an
Event of Default under the Original Lease;
WHEREAS, on February 3, 2000, Guarantor and certain of its
subsidiaries, including IHS 135, filed voluntary petitions for relief
(collectively, the "Cases") under chapter 11 of the United States Bankruptcy
Code, ss.ss.101 et seq. (the "Bankruptcy Code") with the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court");
WHEREAS, Guarantor and IHS 135 are continuing to operate their
businesses and manage their respective properties as debtors-in-possession
pursuant to ss.ss.1107 and 1108 of the Bankruptcy Code;
<PAGE>
WHEREAS, pursuant to, and in accordance with, a Settlement Agreement
dated as of March __, 2000 among, inter alia, Guarantor, Landlord and IHS 135
(as amended, amended and restated, modified or supplemented from time to time,
the "Settlement Agreement"), Landlord has agreed to rescind its alleged
termination of the Original Lease, Landlord and IHS 135 have agreed to amend and
restate the Original Lease as set forth in an Amended and Restated Lease
Agreement dated as of even date herewith (as amended, amended and restated,
modified or supplemented from time to time, the "Lease") between IHS 135 and
Landlord, and Guarantor has agreed to guaranty the obligations of IHS 135 under
the Lease;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Guarantor hereby agrees with Landlord as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are defined in
the Lease and used herein are so used as so defined. In addition, the following
terms shall have the meanings set forth below:
"Consolidated Financials" shall mean, for any fiscal year or
other accounting period of Guarantor and its consolidated Subsidiaries,
its annual Form 10-K and quarterly Form 10-Q prepared pursuant to the
Securities and Exchange Act of 1934, as amended, or comparable
financial statement.
"Lease Documents" shall mean, collectively, the Lease and any
sublease or assumption of lease entered into by a Related Entity
pursuant to Article 17 of the Lease, as any of the same may from time
to time be amended, modified or supplemented.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of Guarantor and its Subsidiaries taken as a
whole, (b) the ability of Guarantor to perform its obligations under
this Guaranty, or (c) the validity or enforceability of this Guaranty,
or the rights of Landlord hereunder.
"Obligations" shall mean the payment and performance of each
and every obligation and liability of Tenant (and each of them) to
Landlord under any Lease 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, all Minimum Rent and Additional Rent
under the Lease, and all fees and charges, and all costs and expenses,
payable under any Lease 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.
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"Tenant" shall mean and be a reference to each of IHS 135 and
any Related Entity (as such term is defined in Section 17.1 of the
Lease) that is an assignee of IHS 135's interest in the Lease or a
sublessee of any portion of the Leased Property from IHS 135.
2. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees to
Landlord the prompt and complete payment and performance by Tenant, 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
Landlord) which may be paid or incurred by Landlord 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 Tenant of any Obligation without requiring
Landlord to resort to any other Person (including without limitation Tenant) 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 Lease Documents.
3. Costs and Expenses of Collection. The Guarantor agrees, as principal obligor
and not as a guarantor only, to pay to Landlord forthwith upon demand, in
immediately available funds, all reasonable costs and expenses (including,
without limitation, all court costs and all reasonable fees and disbursements of
counsel to Landlord) incurred or expended by Landlord 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 Overdue Rate. It shall be a
condition of the obligations of Guarantor to pay any fees and expenses payable
by it under this Guaranty that Landlord shall have, or shall have caused to
have, provided Guarantor with a writing describing such fees and/or expenses in
reasonable detail.
4. Subrogation and Contribution. Until the Obligations shall have been paid and
performed in full after the termination of the Lease Documents, 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 Guarantor hereunder, to the rights of Landlord against
Tenant, or otherwise to be reimbursed, indemnified or exonerated by Tenant 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 Guarantor hereunder. Until the Obligations shall have been
paid and performed in full after the termination of the Lease Documents,
Guarantor waives any defense it may have based upon any election of remedies by
Landlord which impairs Guarantor's subrogation rights or Guarantor's rights to
proceed against Tenant for reimbursement (including without limitation any loss
of rights Guarantor may suffer by reason of any rights, powers or remedies of
Tenant in connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging any indebtedness to Landlord). Until the Obligations
shall have been paid, performed and satisfied in full after the termination of
the Lease Documents, Guarantor further waives any right to enforce any remedy
which Landlord now has or may in the future have against 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 Landlord.
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5. 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 Tenant or any other Person or otherwise, all such amounts
otherwise subject to acceleration shall nonetheless be payable by Guarantor
under this Guaranty forthwith upon demand.
6. Receipt of Lease Documents, etc. Guarantor confirms, represents and warrants
to Landlord that (i) it has received true and complete copies of all the Lease,
and 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
Guarantor which would limit or qualify in any way the terms of this Guaranty;
(iii) Landlord has made no representation to Guarantor as to the
creditworthiness of IHS 135; and (iv) Guarantor has established adequate means
of obtaining from Tenant on a continuing basis information regarding Tenant'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
Guarantor's risks under this Guaranty, and Guarantor further agrees that
Landlord shall have no obligation to disclose to Guarantor any information or
documents acquired by Landlord in the course of its relationship with Tenant.
7. Amendments, etc. with Respect to the Obligations. The obligations of
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 Tenant shall have
any knowledge or notice thereof), including without limitation (a) any amendment
or modification of or supplement to any Lease Document, or any obligation, duty
or agreement of Tenant 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 Lease 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 Tenant 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 Tenant or by any other Person on behalf of or for
the benefit of Tenant; (f) the merger or consolidation of Tenant with or into
any other Person or of any other Person with or into Tenant; (g) the voluntary
or involuntary sale or other disposition of all or substantially all the assets
of Tenant or any other Person; (h) the voluntary or involuntary liquidation,
dissolution or termination of Tenant or any other Person; (i) any failure on the
part of Tenant or any other Person (other than Landlord) for any reason to
perform or comply with any term of any Lease Document or any other agreement; or
(j) any other act, omission or occurrence whatsoever, whether similar or
dissimilar to the foregoing. The Guarantor authorizes each Tenant, each other
guarantor in respect of the Obligations and Landlord at any time in its
discretion, as the case may be, to alter any of the terms of any of the
Obligations.
8. Guarantor as Principal. If for any reason [(other than Landlord's material
default, negligence or willful misconduct)], Tenant, 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
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<PAGE>
become unrecoverable from Tenant, or any of them, or any other Person by
operation of law or for any other reason [(other than Landlord's material
default, negligence or willful misconduct)], including, without limitation, the
invalidity or irregularity in whole or in part of any Obligation or of any Lease
Document, the legal disability of Tenant or any other obligor in respect of
Obligations, any discharge of or limitation on the liability of Tenant or any
other Person or any limitation on the method or terms of payment under any
Obligation, or of any Lease 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 Guarantor to the same extent as if Guarantor at
all times had been the principal obligor on all Obligations.
9. 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 Lease 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 Tenant, Landlord,
any endorser or creditor of Tenant 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 Lease 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 Paragraph 8 above; (f) any defense of any kind which Guarantor
may now have with respect to his liability under this Guaranty (other than the
defense of payment); (g) any right to require Landlord, as a condition of
enforcement of this Guaranty, to proceed against Tenant or any other Person or
to proceed against or exhaust any security held by Landlord at any time or to
pursue any other right or remedy in Landlord's power before proceeding against
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
Landlord 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 Landlord; (j) any defense arising
by reason of any "one action" or "anti-deficiency" law or any other law which
may prevent Landlord from bringing any action, including a claim for deficiency,
against Guarantor, before or after Landlord'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 Landlord in the collection of any
Obligation; (l) any duty on the part of Landlord to disclose to Guarantor any
facts Landlord may now or hereafter know about Tenant or any other obligor in
respect of Obligations; (m) any defense arising because of an election made by
Landlord under Section 1111(b)(2) of the Federal Bankruptcy Code; and (n) any
defense based on any borrowing or grant of a security interest under Section 364
of the Federal Bankruptcy Code. Guarantor acknowledges and agrees that each of
the waivers set forth herein on the part of 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
not prohibited by such applicable law.
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10. 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
Landlord upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Tenant or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for,
Tenant or any substantial part of its property, or otherwise, all as though such
payments had not been made.
11. Payments. The Guarantor hereby agrees that the Obligations will be paid to
Landlord without set-off or counterclaim in U.S. Dollars at the office of
Landlord located at 400 Centre Street, Newton, Massachusetts 02458, or to such
other location as Landlord shall notify Guarantor.
12. Covenants. The Guarantor hereby covenants and agrees with Landlord that,
from and after the date of this Guaranty until the Obligations are paid in full
and all Lease Documents have been terminated:
(a) Notices. The Guarantor shall endeavor to give prompt notice to
Landlord 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
Guarantor and its Subsidiaries taken as a whole, provided, however the
Guarantor's failure to do so shall not be deemed to be a default of the
Guarantor hereunder.
(b) Financial Statements. The Guarantor shall furnish the following
statements to Landlord:
(i) within sixty (60) days after each of the first three
quarters of any Fiscal Year, the Consolidated Financials for such
fiscal quarter; and
(ii) within one hundred twenty (120) days after the end of
each Fiscal Year, the Consolidated Financials for such Fiscal Year.
Landlord may at any time, and from time to time, provide any lender to Landlord
with copies of any of the foregoing statements.
(c) Reports. The Guarantor shall cause the Tenant to provide such
certificates, reports and other documents required of it hereunder and under the
Lease 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 Paragraph 13(f) hereof).
(e) 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 assets, whether now owned
or hereafter acquired, except that Guarantor may merge or consolidate with any
Person, or convey, transfer or lease substantially all of its assets so long as
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<PAGE>
the successor formed by such consolidation or the survivor of such merger, if
not the Guarantor, or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of Guarantor, as the case may be, shall assume
the obligations of the Guarantor hereunder 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.
13. 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. Landlord shall
not by any act (except by a written instrument pursuant to Paragraph 18 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 Landlord, 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
Landlord of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Landlord 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 Guarantor and Landlord,
provided that any provision of this Guaranty may be waived by Landlord in a
letter or agreement executed by Landlord or by telecopy from Landlord. This
Guaranty shall be binding upon the successors and assigns of Guarantor and shall
inure to the benefit of Landlord 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 LEASE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY.
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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 STATE OF NEW YORK IN ANY ACTION, SUIT OR
PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
GUARANTY, ANY LEASE 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; AND (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.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
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 Landlord, at 400 Centre Street, Newton, Massachusetts 02458,
Attention: President (telecopy no. 617-796-8349), with a copy to Sullivan &
Worcester LLP, One Post Office Square, Boston, Massachusetts 02109, Attention:
Alexander A. Notopoulos, Jr. Esq. (telecopy no. 617-338-2880), and if to
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 and acknowledged in writing; 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, five
business days after deposit in the postal system, first class postage prepaid;
and in the case of telecopy notices, the first business day following the date
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 Paragraph.
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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.
INTEGRATED HEALTH SERVICES, INC.
By_________________________________
Name:
Title:
Address for Notices:
Integrated Health Services, Inc.
The Highlands
910 Ridgebrook Road
Sparks, MD 21152
Telecopy no.: (410) 773-1020
Attn: Daniel J. Booth,
Senior Vice President, Finance
with a copy to:
Parker Chapin LLP
405 Lexington Avenue
New York, NY 10174
Telecopy no.: 212-704-6288
Attention: Charles P. Greenman, Esq.
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EXHIBIT C
S&W DRAFT 04/07/00
MANAGEMENT AND SERVICING AGREEMENT
THIS MANAGEMENT AND SERVICING AGREEMENT (this "Agreement") is made this
____ day of __________ 2000, among INTEGRATED HEALTH SERVICES, INC., a Delaware
corporation ("IHS"), the entities identified on the signature pages hereto as
"IHS Licensees" (collectively, the "IHS Licensees" and together with IHS, the
"Relevant IHS Entities," and in their capacity as "Servicer" hereunder,
"Servicer"), SENIOR HOUSING PROPERTIES TRUST, a Maryland real estate investment
trust ("SNH"), FIVE STAR QUALITY CARE, INC., a Delaware corporation ("Manager"),
the entities identified on the signature pages hereto as "Proposed Operators"
(collectively, the "Proposed Operators"), and ADVISORS HEALTHCARE GROUP, INC., a
Delaware corporation (f/k/a "Connecticut Subacute Corporation II") ("Advisors",
and together with the IHS Licensees, collectively, the "Licensees").
W I T N E S S E T H:
WHEREAS, each of the IHS Licensees holds a license to operate each of
the skilled nursing, intermediate care or residential facilities identified on
Schedule A-1 as being licensed to it (the "IHS Facilities"), and Advisors holds
a license to operate the skilled nursing, intermediate care or residential
facilities listed on Schedule A-2 (the "Advisors Facilities," together with the
IHS Facilities, collectively, the "Facilities"); and
WHEREAS, Servicer has, prior to the date hereof, provided management
services of the nature set forth in Sections 1 and 2 hereof for each of the
Facilities; and
WHEREAS, Manager has agreed to provide management services to each
Proposed Operator and Advisors with respect to each of the Facilities; and
WHEREAS, each of the Proposed Operators and Advisors leases, as tenant,
the Facilities identified as being leased by it on Schedule A; and
WHEREAS, each of the IHS Licensees has entered into an Interim Sublease
Agreement dated as of even date herewith (collectively, the "Sublease
Agreements") with the relevant Proposed Operator pursuant to which such IHS
Licensee, as subtenant of such Proposed Operator, occupies its IHS Facility; and
WHEREAS, each IHS Licensee wishes to delegate to Manager certain
authority and responsibility to manage its IHS Facility, pending and in
anticipation of receipt by the appropriate Proposed Operator of the licenses and
determinations of need and suitability of the types listed on Schedule B-1
necessary for the Proposed Operator to operate such IHS Facility as licensee
(individually, a "Necessary License" and collectively, the "Necessary Licenses,"
and together with all provider agreements and certifications of the types listed
on Schedule B-2 necessary for such Proposed Operator of such IHS Facility to
receive Medicare and Medicaid reimbursement for the services provided therein,
individually, a "License" and collectively, the "Licenses"); and
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WHEREAS, Advisors wishes to delegate to Manager certain authority and
responsibility to manage each of the Advisors Facilities and each Proposed
Operator wishes to delegate to Manager, following receipt of all Necessary
Licenses with respect thereto, certain authority and responsibility to manage
each of its IHS Facilities (the term "Relevant Licensee" shall mean (a) with
respect to any Advisors Facility, Advisors, and (b) with respect to any IHS
Facility (i) the IHS Licensee for such IHS Facility prior to the receipt of all
Necessary Licenses for such IHS Facility and (ii) the Proposed Operator for such
IHS Facility after the receipt of all Necessary Licenses for such IHS Facility);
and
WHEREAS, Manager is willing to assume such responsibilities, provided
that it is permitted to delegate to Servicer, and that Servicer assume, certain
authority and responsibility to manage the Facilities; and
WHEREAS, Servicer is willing to assume such authority and
responsibility, all on the terms and conditions set forth herein;
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. General Duties. To the fullest extent permitted by applicable law, and
subject to the control and direction of the Relevant Licensees, each of the
Licensees and Proposed Operators hereby engages Manager, and Manager hereby
delegates to Servicer (subject to the assumption by Manager of the duties of
Servicer as provided in the last sentence of this Section 1), and Servicer
hereby assumes (subject as provided in the last sentence of this Section 1 and
as provided in Section 8.1), the responsibility to manage and supervise the
day-to day operation of the Facilities with the objective of providing skilled
nursing, intermediate care and residential services to patients and residents of
the Facilities and to carry out general management functions with respect to the
Facilities, including, but not limited to, the following: supervise the
performance of all administrative functions as may be necessary in the
management and operation of the Facilities; select, hire, train, supervise,
monitor the performance of, and terminate or fire, all personnel involved in the
administration and day-to-day operations of the Facilities, including, without
limitation, professional personnel, custodial, cleaning, maintenance, and other
operational personnel, and secretarial and bookkeeping personnel; provide
accounting, billing, purchasing and bill payment functions for the Facilities;
establish systems of accounts and supervise the maintenance of ledgers and other
primary accounting records by personnel of the Facilities; supervise the
financial affairs of the Facilities; establish and supervise the implementation
of operating budgets, and establish and administer financial controls over the
operations and management of the Facilities; develop and establish financial
standards and norms by which the income, costs, and operations of the Facilities
may be evaluated; serve as advisor and consultant in connection with policy
decisions to be made by the Relevant Licensee; to operate, maintain and
administer the information management systems of the Facilities; prepare and
furnish reports and economic and statistical data in connection with or relative
to the management of the Facilities to the Relevant Licensee as the Relevant
Licensee may request in order to comply with applicable law and regulations;
represent the Facilities in its dealings with creditors, patients, personnel,
agents for collection and insurers; file with applicable state Medicaid programs
and the Medicare programs and all other public and private third party
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reimbursement programs (collectively, "third party payors") all required claims
for payment and cost reports; administer trust funds for the benefit of
residents of the Facilities and prepare and file all accounts for such funds
required by applicable law; maintain listings of all residents of the Facilities
and the persons or third party payors responsible for their charges; act as
agent for Relevant Licensee in disbursing or collecting the funds of the
Facilities, and in paying the debts and fulfilling the obligations of the
Facilities incurred subsequent to the Effective Time (as hereafter defined);
market the services of the Facilities; and generally see to the operations and
management of the Facilities, the marketing of their services, planning for
future operations, and the establishment and implementation of policies for the
Facilities. In addition, each of the Licensees and Proposed Operators hereby
engage Manager to secure such engineering, legal, and other specialized
technical and professional services as may be necessary to advise or to
represent the Licensees and Proposed Operators for each Facility in connection
with any matter involving or arising out of the operation of the Facilities or
the conduct of the Facilities. Manager shall, at all times during the term of
this Agreement keep Servicer reasonably informed as to any matters with respect
to which any such engineering, legal or other services are retained and with
respect to the advice rendered and actions taken with respect to such matters.
Servicer is neither authorized nor obligated to perform such functions. If, as
provided in Section 8.2 hereof, Manager advises Servicer in writing that
Servicer may discontinue the provision of certain described services to be
provided by Servicer under this Section 1 and/or Section 2 hereof, Manager shall
automatically be deemed to have assumed full responsibility for providing such
services to the Relevant Licensee under the terms of this Section 1 and/or
Section 2 as if Manager were the "Servicer" referred to herein or therein.
2. Specific Duties. To the fullest extent permitted by applicable law, and
subject to the control and direction of the Relevant Licensee, and without
limiting the generality of the foregoing, Servicer shall have the following
specific duties:
2.1 Employees. Servicer shall recruit, evaluate, and select, subject to
such review by Relevant Licensee as shall be required by applicable law and
regulations, qualified nursing home administrators who shall be responsible for
the functional operation of the Facilities and supervision of personnel at the
Facilities, on a day-to-day basis, as well as all on-site professional,
custodial, food service, cleaning, maintenance, clerical, secretarial,
bookkeeping, management, collection, and other administrative personnel for the
day-to-day operations of the Facilities (collectively, "Personnel"). Such
Personnel shall be employees of Servicer (subject to the following sentence),
provided Manager, Advisors and the Proposed Operator of the relevant Facility
shall have full responsibility for payment of their wages, salaries, and other
compensation and benefits (in accordance with Section 4). Anything in this
Section 2.1 to the contrary notwithstanding, Manager shall offer employment to
all such Personnel at or as soon after the Effective Time as is reasonably
practicable, but not later than sixty (60) days after the Effective Time, in any
event. Servicer shall establish such personnel policies, wage structures, and
staff schedules as it deems necessary and advisable in accordance with
applicable law. Servicer shall have authority to hire and discharge employees
who, immediately prior to the Effective Time, were employed at the Facilities.
Servicer shall maintain payroll records and shall prepare weekly and monthly
payrolls, and returns of withholding taxes. Servicer acknowledges that the
ability of Manager to make any such offer may be subject to receipt of the
Necessary Licenses and that in any event, Manager will first have to implement
an appropriate accounting and payroll function. Servicer agrees to cooperate
with Manager in connection with
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such offers of employment and to release any Personnel to whom Manager offers
employment from any employment agreements, non-competition, non-solicitation and
non-disclosure agreements or common law obligations to which they may be party
or subject. Notwithstanding anything to the contrary contained in this
Agreement, Servicer shall have no liability whatsoever to or with respect to any
of the Personnel or by reason of any actions taken or omitted by any of the
Personnel, in each case relating to any period on or after the Effective Time
(regardless of the fact that the Personnel may be employees of Servicer).
Notwithstanding anything to the contrary contained in this Agreement, the
Manager shall not be required or permitted to offer employment at any time to
any person then employed as a member of the IHS corporate staff ("IHS Corporate
Staff") (excluding, however, regional vice presidents and their staff (the
"RVPs") as to which Manager has provided reasonable prior notice to IHS),
without the prior consent of IHS (which consent will not be unreasonably
withheld). If IHS shall consent to the making of any such offer, it will
cooperate with Manager with respect thereto, and if any such member of the IHS
Corporate Staff or any RVP shall become an employee of any SNH Entity, he or she
shall be deemed to belong to Personnel.
2.2 Purchasing. Servicer shall (subject to Section 4) purchase
substantially all necessary supplies, foodstuffs, materials, appliances, tools,
and equipment customarily used in the operation of the Facilities. Servicer
shall use commercially reasonable efforts to limit purchasing costs and to
maintain such costs at a level reasonably calculated to allow the Facilities to
operate profitably. Servicer may, but shall not be obligated to, make such
purchases in bulk under a centralized purchasing system established by it for
other facilities under its management in order to minimize costs. Servicer shall
arrange contracts for electricity, gas, telephone, and any other utility or
service necessary to the operation of the Facilities. Servicer shall, on behalf
of the Proposed Operator and/or the owner of the buildings and real property in
and on which the Facilities are located (the "Real Property Owner"), contract
for and supervise the making of any necessary repairs, alterations, and
improvements to the Facilities, provided that in the case of any repair,
alteration or improvement, the cost of which exceeds $5,000, Servicer shall
obtain the prior approval of Manager and the Relevant Licensee, except that no
such prior approval shall be required if the expenditure is made under
circumstances reasonably requiring emergency action. Without limiting the
provisions of Sections 2.4 and 4, Servicer shall, upon written request, submit
to the Proposed Operator and Licensee such certification as to expenses incurred
in the operation of the Facilities as may be reasonably required by the Proposed
Operator or Licensee in order to comply with applicable law and regulations,
including, without limitation, law and regulations applicable to preparation and
submission of cost reports.
2.3 Bookkeeping. Servicer shall establish and maintain a record and
bookkeeping system for the operation and conduct of the Facilities in accordance
with generally accepted accounting principles. Full books of account with
entries of all receipts and expenditures of the Facilities shall be open for
inspection by representatives of Licensee, Manager and Proposed Operator upon
reasonable notice and at reasonable times, to the extent required by Licensee,
Manager or Proposed Operator in order to comply with applicable law and
regulations, including, without limitation, law and regulations applicable to
preparation and submission of cost reports.
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2.4 Financial Reports. Servicer shall: (a) as soon as reasonably
possible after the close of each calendar month (and as soon as reasonably
possible after the termination of the obligations of the Relevant IHS Entities,
as Servicer, in accordance with Section 8.1) furnish to the Relevant Licensee
and Manager a statement of income for the month (or portion thereof) and for the
year to date, together with a detailed statement of billings, receipts,
disbursements, accounts payable and accounts receivable; (b) in the event the
Relevant Licensee is required by applicable law, regulations or the provisions
of any material contract to which it is a party or by which it is bound to
conduct or submit to an audit of the Facilities' financial performance relative
to the period during which Servicer performed services under this Agreement,
make available all books and records of the Facilities on a timely basis and
cooperate fully with any auditors or accountants designated by the Relevant
Licensee; (c) as soon as reasonably possible after the close of each applicable
reporting period for rate setting purposes, and not later than the applicable
deadline, prepare for submission by the Relevant Licensee a cost report for each
Facility (and including in any event, any short-year cost report required to be
submitted by the IHS Licensee after receipt of the Necessary Licenses and
provider agreements by the Proposed Operator), showing the costs and
expenditures relating to resident care for such Facility and such other
information as is required by the applicable governmental authority, such report
being in all material respects (including as to form) in compliance with the
requirements of such applicable governmental authority; and (d) cooperate with
and furnish information to each Proposed Operator and Manager in a timely manner
in connection with the preparation of applications by such Proposed Operator for
any Licenses with respect to the Facilities. Servicer shall supply all
information, reports, forms and data required to be provided by it pursuant to
this Section 2.4 in electronic or hard copy form (and, in the case of clause (a)
above, if such information and data are provided in hard copy form, Servicer
shall provide such information to Manager in electronic form also, if available
in the ordinary course), as determined by Servicer consistent with its ordinary
practice, unless applicable law shall require that any such information, report,
form or data be submitted in a particular form, in which case, Servicer shall
comply with such applicable law.
The provisions of paragraphs (b), (c) and (d) of this Section 2.4 shall
survive the termination of the obligation of the Relevant IHS Entities as
Servicer under Section 8.1, to the extent such provisions relate to the period
prior to such termination.
2.5 Marketing. Servicer shall use commercially reasonable efforts to
market the services of the Facilities in order to maintain the patient or
resident census at the Facilities in such numbers and of such categories as, in
Servicer's judgment, will tend to maintain the financial stability of the
Facilities and to ensure compliance with laws, regulations, orders and judgments
applicable to the Facilities. Servicer may design and implement programs with
third party payors, such as insurance companies, federal agencies and state and
local agencies, for services to patients on a contract basis, for the purpose of
improving the financial stability of the Facilities.
2.6 Notices of Proceedings. Each of Servicer, Manager and Relevant
Licensee shall promptly inform the others of the commencement of any formal or
informal investigations or proceedings known to it before any and all local,
state and federal agencies which purport to regulate any Facility to the extent
such proceeding may have a material impact upon the operation of any Facility.
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2.7 Insurance.
(a) Manager shall obtain on behalf of itself and Servicer,
Licensee, Proposed Operator and the Real Property Owners for each
Facility, as their interests may appear, commercial general liability,
all risk property, professional or malpractice liability and worker's
compensation insurance covering the Facilities, any equipment used in
connection with the Facilities, the Personnel and any other employees
located at the Facilities, and Manager, Servicer, Licensees, Proposed
Operator and the Real Property Owners for each Facility, as their
interests may appear, in such amounts and with such deductibles as are,
in each case, described in Schedule 2.7 hereto, and with such
additional provisions or coverage as may be determined by Manager.
(b) All insurance provided under this Section 2.7 shall be
issued by insurance companies with an A.M. Best Rating of not less than
A-VI and that are licensed and qualified to do business in the state of
operation of the relevant Facility.
(c) Notwithstanding the provisions for deductibles in Section
2.7, it is understood and agreed that the policies of insurance
provided for in this Section 2.7 may contain deductible or retention
provisions in such amounts as are maintained with respect to similar
type facilities in the industry. In addition to premiums, Manager and
SNH shall be responsible for all deductibles, retentions, collateral
and expenses associated with such insurance.
(d) Each of the policies of liability insurance referred to in
this Section 2.7 (including the umbrella coverage, and, for as long as
any Personnel remain employees of any Relevant IHS Entity, workman's
compensation insurance) shall name IHS, Servicer and each applicable
IHS Licensee as an insured or additional insured, as appropriate.
Manager shall provide Servicer with a Certificate of Insurance at the
Effective Time naming IHS, Servicer and each applicable IHS Licensee as
an insured or additional insured with respect to such liability
insurance, as appropriate, and within two Business Days of any
subsequent request. Manager shall notify Servicer at least (30) days in
advance of a cancellation or expiration of such policies. It is further
understood that Manager shall provide all necessary risk management
services.
2.8 Collections, Accounts, Disbursements and Termination Accounting.
(a) Billing. Servicer shall prepare and submit bills for all
moneys owing to the Relevant Licensee, whether from patients or third
party payors, for services provided by or at the Facilities at any
time, whether prior to 12:01 A.M. (Boston time) on the day following
the Closing (the "Effective Time") or after the Effective Time.
(b) Collection of Accounts Receivable.
(i) Each IHS Licensee and Relevant IHS Entity acknowledges
that, pursuant to the provisions of the Settlement Agreement dated as
of April __, 2000 among, inter alia, Integrated Health Services, Inc.,
SNH, SPTIHS Properties Trust, HRES1 Properties Trust and HRES2
Properties Trust, each a Maryland real estate investment trust
("SPTIHS," "HRES1" and "HRES2," respectively), Manager, the Proposed
Operators
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and the Licensees (the "Settlement Agreement"), the Proposed Operators
(to the extent permitted by applicable law) and Advisors own all
accounts receivable to the extent arising from services provided by or
at its respective Facility after the Effective Time (the
"Post-Effective Time Receivables"). Servicer is hereby authorized and
directed to make and effect collections of all Post-Effective Time
Receivables. With respect to all such Post-Effective Time Receivables
with respect to any Facility that are owed by a Medicaid program or the
Medicare program or other federal or state programs (collectively,
"Government Receivables") and that are payable under the existing
Provider Agreements of any Licensee, Servicer shall endorse and deposit
into the Licensee bank account for such Facility under the name and
control of the Licensee for such Facility (a "Licensee Account"), any
and all monies, checks, drafts or other instruments or items received
as payment for such Government Receivables. With respect to all
Post-Effective Time Receivables with respect to any Facility other than
Government Receivables (collectively, "Other Receivables"), Servicer
shall, subject to paragraph (ii) below, endorse and deposit into a bank
account under the name and control of the Proposed Operator of such
Facility that is designated in writing from time to time by the
Proposed Operator (each a "Proposed Operator Account"), any and all
monies, checks, drafts or other instruments or items received as
payment for such Other Receivables. Each IHS Licensee or Relevant IHS
Entity that receives any proceeds of Post-Effective Time Receivables
with respect to any Facility, whether as a deposit in the relevant
Licensee Account or otherwise, and whether such proceeds are of
Government Receivables or Other Receivables, acknowledges that, subject
to paragraph (ii) below, it has no right to use any such proceeds for
any purpose, and shall hold any and all such proceeds in trust for the
Proposed Operator of such Facility or Advisors, as the case may be, and
shall prior to the close of business on the Business Day on which it
receives such amount, cause such funds to be paid into the applicable
Proposed Operator Account for the account of the Proposed Operator or
the Licensee Account of Advisors, as the case may be. As soon as
practicable after the Effective Time, Servicer shall (to the extent
permitted by law) instruct account debtors of each Facility to make
payment directly into the relevant Proposed Operator Account for such
IHS Facility and the Licensee Account of Advisors, as the case may be.
During the term of this Agreement, Servicer shall keep accurate and
complete books and records of all receipts with respect to all billing,
accounts receivable, all deposits and other transactions affecting any
Post-Effective Time Receivable whether to the Licensee Account, the
Proposed Operator Account or to other checking accounts, which books
and records shall be made available to Licensee, Proposed Operator and
Manager upon request, and after termination of this Agreement shall
make such books and records available to Licensee, Manager and Proposed
Operator to the extent necessary to enable Licensee, Manager and
Proposed Operator to comply with all applicable laws and regulations,
including regulations governing preparation, submission and audits of
cost reports. If any amount shall be collected within the first 60 days
after the Effective Time from an account debtor that is not
identifiable, using reasonable best efforts, as being in payment of a
Post-Effective Time Receivable, then 100% of such amount shall be
deemed to have been collected in respect of an account receivable that
was due to the Servicer or an IHS Licensee in respect of services
provided prior to the Effective Time (and the Servicer or such IHS
Licensee shall be permitted to retain such proceeds, without
limitation). If any amount shall be
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collected during the period from the 61st to the 120th day after the
Effective Time from an account debtor that is not identifiable, using
reasonable best efforts, as being in payment of a Post-Effective Time
Receivable, then 50% of such amount shall be deemed to have been
collected in respect of an account receivable that was due to the
Servicer or an IHS Licensee in respect of services provided prior to
the Effective Time (and the Servicer or such IHS Licensee shall be
permitted to retain such proceeds without limitation), and the other
50% of such amount shall be deemed to have been collected in respect of
a Post-Effective Time Receivable (and such Proposed Operator shall be
permitted to retain such proceeds without limitation). If any amount
shall be collected after the 120th day after the Effective Time from an
account debtor that is not identifiable, using reasonable best efforts,
as being in payment of a Post-Effective Time Receivable, then 100% of
such amount shall be deemed to have been collected in respect of a
Post-Effective Time Receivable (and the Proposed Operator shall be
permitted to retain such proceeds, without limitation). Each party
hereto agrees to provide written notice to each other party hereto not
affiliated with it, promptly following the last Business Day of each
calendar month, if such party has received a payment during such
calendar month that is not identifiable, using reasonable best efforts,
as being in payment of a Post-Effective Time Receivable. Such written
notice shall set out the amount of the payment and the person or entity
that made the payment. If and to the extent that Manager or any
Proposed Operator or any of their respective affiliates shall collect
any account receivable owned (or deemed to be owned) by any Relevant
IHS Entity, such person or entity shall immediately pay such amount to
such Relevant IHS Entity, and until such payment is so made, Manager
shall hold such amount in trust for the benefit of such Relevant IHS
Entity.
(ii) Notwithstanding anything to the contrary contained in
this Agreement, if the Manager, SNH, or any Proposed Operator shall
fail to make any payment to the Servicer or any IHS Licensee pursuant
to Section 4 hereof when and as due in accordance with Section 4, then
Servicer and such IHS Licensee shall be entitled to collect and retain
any amounts due in respect of Post-Effective Time Receivables to the
extent necessary to offset such amount due under Section 4. Servicer or
the applicable IHS Licensee shall promptly notify the Manager of any
such offset. The rights and remedies of Servicer and the IHS Licensees
under this paragraph (ii) shall be in addition to, and shall not be
exclusive of, any other rights or remedies that may be available to
Servicer or the IHS Licensee under this Agreement, any other agreement
between the parties, at law, in equity, or otherwise, all of which
rights may be exercised concurrently or in any order or priority.
(iii) IHS shall cause exclusive control of the Licensee
Account for the Facilities located in Connecticut to be transferred to
Advisors effective as of the Closing Date.
(c) Reduction Claims.
(i) If and to the extent that there shall be a reduction (a
"Reduction") in the amount to be paid on any account receivable due to
any IHS Licensee by a Medicaid program or the Medicare program for
services rendered at any Facility from and after the
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Effective Time (an "IHS Government Receivable") by reason of any
withholding, freeze, restriction, offset or recoupment applied against
such IHS Government Receivable for an amount payable by any IHS Entity
to the applicable Third Party Payor (as such term is defined in the
Settlement Agreement) with respect to services provided on or prior to
the Effective Time (a "Pre-Effective Date Third Party Payor Claim"),
then the SNH Entities shall have a claim against the IHS Entities (a
"Reduction Claim") that is: (1) in the amount of the Reduction; and (2)
of equal priority to the priority that would have been accorded to the
Pre-Effective Date Third Party Payor Claim in the IHS Entities'
bankruptcies, under bankruptcy or other applicable law, or if and to
the extent the Third Party Payor is not subject to the jurisdiction of
the Court or limited in its recourse by the filing of the Case (as such
term is defined in the Settlement Agreement), such other rights as the
Third Party Payor may exercise.
(ii) The Manager shall give notice of any Reduction Claim (the
"Manager's Notice") to the Senior Vice President-Finance of IHS, with
such Manager's Notice to set forth the amount of such Reduction, the
basis for the Pre-Effective Date Third Party Payor Claim (to the extent
known to Manager), and the Reduction Claim that the Manager believes
that is payable by the IHS Entities to the SNH Entities. The IHS
Entities shall then have thirty (30) days from the date of the receipt
of the Manager's Notice to pay the amount of the Reduction to the SNH
Entities. The payment by the IHS Entities of any amount in accordance
with the preceding sentence shall be without prejudice to the right of
the IHS Entities to dispute, at any time, the SNH Entities' entitlement
to any such payment, as follows:
(A) If the IHS Entities shall dispute the Third Party
Payor's basis for the Pre-Effective Date Third Party Payor
Claim or the amount of such Pre-Effective Date Third Party
Payor Claim, then the applicable IHS Entity shall have the
sole authority to dispute or settle such Pre-Effective Date
Third Party Payor Claim, and the IHS Entities shall bear the
costs and expenses of such efforts. The SNH Entities shall
cooperate in all reasonable respects with the IHS Entities in
connection with the IHS Entities' efforts to resolve or settle
such dispute. Notwithstanding anything to the contrary
contained in this Agreement or in any other Settlement
Document, the IHS Entities shall be deemed to own (and shall
be entitled to collect, retain and/or assign) any funds that
are collected in respect of any Pre-Effective Date Third Party
Payor Claim disputed in accordance with this clause (A). If
any SNH Entity shall collect any such amount, it shall
immediately pay such amount to the applicable IHS Entity.
(B) If the IHS Entities shall dispute the amount or
priority of the Reduction Claim to which the Manager believes
the SNH Entities are entitled in accordance with subsection
(c)(i) above, then the parties shall immediately submit such
dispute to binding arbitration in accordance with the
Commercial Arbitration Rules then in force of the American
Arbitration Association, and judgment upon the award rendered
by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The SNH Entities shall forthwith return
to the applicable IHS Entity any amount that the arbitrator
determines to be in excess of the amount to which the SNH
Entities were entitled in accordance with subsection (c)(i)
above.
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In any such dispute, the prevailing party shall be entitled to
reimbursement of its related costs and expenses, including
reasonable attorney's fees. Moreover, if it is determined that
the SNH Entities asserted a Reduction Claim in excess of the
amount to which they were entitled, they shall be obligated to
pay to the applicable IHS Entity interest on such excess at
the rate of eight percent (8%) per annum from the date such
amount was paid to the SNH Entities until the date paid by the
SNH Entities to the applicable IHS Entity.
(d) The provisions of paragraphs (b) and (c) of this Section
2.8 shall survive the termination of the obligations of the Relevant
IHS Entities under Section 8.
2.9 Patient-Trust Accounts. At such time as a Proposed Operator for any
Facility has all Necessary Licenses, Servicer and the applicable Licensee will
transfer the patient trust accounts held for the benefit of residents of the
relevant Facility to the Proposed Operator of that Facility. Promptly
thereafter, Servicer and the applicable Licensee will furnish to such Proposed
Operator current bank statements with respect to such accounts. Such Proposed
Operator shall thereupon assume all liabilities arising thereunder other than
liabilities for acts or omissions by the Licensee prior to the Effective Time or
arising out of gross negligence or willful misconduct of Servicer or Licensee
after the Effective Time.
3. Servicer Consideration. The Relevant IHS Entities have agreed to perform the
services that are contemplated to be rendered by them hereunder as "Servicer"
during the five (5) month period provided in Section 8.1 and as "Servicer" under
the Servicing Agreement dated as of even date among SNH, Manager, IHS and IHS
152 (the "Other Servicing Agreement"), in consideration of the release by SNH,
SPTIHS, HRES1, HRES2, Advisors and the other SNH Entities (as defined in the
Settlement Agreement) of their claims against Servicer and the other IHS
Entities (as defined in the Settlement Agreement) under the Existing Documents
(as defined in the Settlement Agreement) pursuant to the Settlement Agreement.
Such releases shall not be affected if, during the first five (5) full months of
the term of this Agreement, Manager advises Servicer, pursuant to Section 8.2,
to discontinue provision of any portion of the services provided by Servicer
hereunder or if any Facility is sold or its operation discontinued for any
reason whatsoever.
4. Expenses.
4.1 For purposes of this Agreement, "Expenses" shall mean, liabilities,
costs and expenses of the type listed below to the extent incurred in connection
with the operation and management of such Facility in the ordinary course of
business after the Effective Time:
(a) salary and related costs (including, without limitation,
payroll taxes, workers' compensation, costs of employee benefit plans,
travel, insurance, and fidelity bonds) of Personnel at such Facility,
including, without limitation, administrative, professional, custodial,
food service, cleaning and maintenance, operational, secretarial and
bookkeeping personnel (collectively, "Payroll Expenses");
(b) the cost of all supplies and equipment necessary for the
continued operation of such Existing Facility as a skilled nursing,
intermediate care and for
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residential facility in the ordinary course of its business, including
without limitation, the cost of all pharmaceuticals, food, fuel,
kitchen and food service equipment, linens, beds, furniture, clothing
and other supplies and equipment used in supplying services to patients
in the ordinary course;
(c) expenses attributable to the maintenance and operation of
real and personal property devoted, used or consumed in the operation
of such Facility in the ordinary course, including, without limitation,
expenses incurred in connection with maintenance and repair of such
Facility, and insurance premiums, deductibles and retentions for
insurance obtained pursuant to Section 2.7;
(d) all liabilities incurred after the Effective Time under
any Contracts (as such term is defined in the Settlement Agreement)
that any IHS Entity is required not to reject in accordance with
Section 7.6 of the Settlement Agreement (but specifically excluding any
Pre-Effective Time Obligations (as such term is defined in the
Settlement Agreement)); and
(e) all other costs, expenses and liabilities arising out of
the ownership, operation, maintenance and management of the Facilities,
including, without limitation, real estate, income and other taxes
payable in connection with the operation of the Facilities (the costs
and expenses referred to in paragraphs (b), (c), (d) and (e) hereof,
collectively, "A/P Expenses");
provided, however, that the following expenses of the Relevant IHS Entities as
"Servicer" hereunder shall be for the sole account of the Relevant IHS Entities,
shall not be subject to reimbursement hereunder, and shall be deemed excluded
from the term "Expenses": (i) the Relevant IHS Entities overhead and ordinary
administrative expenses, and salary (including, without limitation, payroll
taxes, workers' compensation, costs of employee benefit plans, travel, insurance
and fidelity bonds) of financial, accounting and other personnel employed by the
Relevant IHS Entities (other than Personnel) to provide centralized billing,
collection, bill paying, accounting, record keeping, information management,
purchasing, personnel and policy planning services to any Facility, it being
understood that in no event shall the salary or other compensation of any
Personnel be an expense of Servicer; (ii) the cost of obtaining and maintaining
insurance outside of that described in Section 2.7; and (iii) any loss, cost or
expense for which Servicer is liable under Section 10.
4.2 SNH, Manager, Advisors and the Proposed Operators shall be jointly
and severally liable for the payment and satisfaction of all Expenses, when and
as the same shall become due in accordance with the terms hereof. In furtherance
thereof, Manager shall establish separate bank accounts ("Expense Accounts") for
Payroll Expense and A/P Expense under its name and control, with respect to
which Servicer shall have signing authority in order to pay Expenses. At the
close of the last Business Day of each calendar week (commencing with the
calendar week in which the Closing Date occurs), Servicer shall provide Manager
with a check register showing the payee name, the amount of such check (with
deductions, if any), the payee code and the check number for each check drawn on
the Expense Accounts during such week. On the day preceding the Closing Date and
at the close of business on the last Business Day of each calendar week
thereafter, Servicer shall provide Manager with a statement (the "Cash
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Projection") setting forth the aggregate Dollar amount of the checks that
Servicer then expects to draw on the Expense Accounts during the following
calendar week (the projected Dollar amount for such following week, the
"Projected Cash Requirement") and setting forth the amount to be deposited into
the Expense Accounts in accordance with the following sentence. By the close of
business on the Closing Date and on the second Business Day of such following
calendar week, SNH or the Proposed Operators shall deposit into the Expense
Accounts such amounts as shall be necessary so that the Aggregate Balance (as
hereinafter defined) of the Expense Accounts on such Business Day shall at least
equal the sum of: (x) the Projected Cash Requirement for the current calendar
week plus (y) $1,000,000. As used herein, the term "Aggregate Balance" shall
mean, as of the date of determination, the sum of all amounts deposited in
either Expense Account, less the aggregate dollar amount of all checks written
on either Expense Account and reflected in the check registers theretofore
furnished to Manager (whether or not such checks have been paid from such
Expense Accounts). The monies so deposited by SNH or the Proposed Operators
shall be allocated between the two Expense Accounts as Servicer may direct from
time to time, based on its Cash Projections. Servicer shall provide Manager with
a list of its payee codes (with descriptions identifying these codes) on or
prior to the Closing Date, and shall promptly inform Manager of any subsequent
modifications thereto. The Servicer shall promptly reimburse the SNH Entities
for any amounts paid out of the Expense Accounts to satisfy obligations of any
IHS Entity that are not required to be paid by any SNH Entity pursuant to this
Agreement or the Settlement Agreement or any other of the Settlement Documents
(as such term is defined in the Settlement Agreement). Nothing contained in the
foregoing sentence shall be deemed to permit the Servicer to use funds in the
Expense Accounts to satisfy its own obligations except to the extent expressly
provided in this Agreement. The provisions of the first sentence of this Section
4.2 shall survive the termination of this Agreement.
4.3 The parties acknowledge that Servicer and the Licensees shall have
no obligation to advance any funds on behalf of any of the Facilities, Manager
or the Proposed Operators. If Servicer does advance its own funds for any
Expense, SNH and the Proposed Operators shall promptly reimburse Servicer
therefor. Moreover, Manager and SNH assume all risk of loss to third parties
arising out of the failure to make any payment of any Expense. The provisions of
this Section 4.3 shall survive the termination of this Agreement.
4.4 Each Proposed Operator of each Facility shall pay Manager a monthly
management fee (the "Manager's Fee") for each Facility, payable prior to the __
day following the end of each calendar month during the term hereof, (i) for the
first two (2) months of the term thereof, in an amount equal to the costs and
expenses incurred by the Manager in connection with the performance by Manager
of its duties hereunder during such calendar month, and (ii) thereafter, in an
amount equal to 4.5% of net patient revenues for such Facility for such calendar
month.
5. Access to Records, Etc.
5.1 For the time and to the extent required by applicable law, Servicer
shall retain, and shall permit the Comptroller General of the United States, the
U.S. Department of Health and Human Services and duly authorized state agencies,
and their respective duly authorized representatives access to examine or copy
this Agreement and such books, documents, and records as are necessary to verify
the nature and extent of the costs of the services supplied under
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this Agreement. In the event Servicer provides any of its services under this
Agreement pursuant to a subcontract and if (i) the services provided pursuant to
the subcontract have a value or cost of $10,000 or more over a twelve (12) month
period and (ii) the subcontract is with a related organization, then Servicer
agrees that the subcontract shall contain a clause requiring the subcontractor
to retain and allow access to its records on the same terms and conditions as
required by Servicer. This provision shall be null and void should it be
determined that Section 1861(v)(1)(I) of the Social Security Act is not
applicable to this Agreement. The provisions of this Section 5.1 shall survive
the termination of the obligations of the Relevant IHS Entities as Servicer
under Section 8.1.
5.2 For the time and to the extent required by applicable law, Manager
shall retain, and shall permit the Comptroller General of the United States, the
U.S. Department of Health and Human Services and duly authorized state agencies
and their respective duly authorized representatives access to examine or copy
this Agreement and such books, documents, and records as are necessary to verify
the nature and extent of the costs of the services supplied under this
Agreement. In the event Manager provides any of its services under this
Agreement pursuant to a subcontract and if (i) the services provided pursuant to
the subcontract have a value or cost of $10,000 or more over a twelve (12) month
period and (ii) the subcontract is with a related organization, then Manager
agrees that the subcontract shall contain a clause requiring the subcontractor
to retain and allow access to its records on the same terms and conditions as
required by Manager. This provision shall be null and void should it be
determined that Section 1861(v)(1)(I) of the Social Security Act is not
applicable to this Agreement.
5.3 As soon as reasonably possible after the close of each reporting
period for rate setting purposes, and not later than the applicable deadline,
the Relevant IHS Entities shall prepare for submission by the IHS Licensees,
Medicare and/or Medicaid cost reports, as applicable, for each Facility for the
reporting period during which such IHS Licensee provided facility services
(regardless whether such services were provided before or after the Effective
Date) showing the costs and expenditures relating to resident care for such
Facility and such other information as is required by the applicable
governmental authority, such report being in all material respects (including as
to form) in compliance with the requirements of such applicable governmental
authority. The provisions of this Section 5.3 shall survive the termination of
the obligations of the Relevant IHS Entities as Servicer under Section 8.1.
5.4 The Proposed Operators agree to use their best efforts to obtain
all Necessary Licenses as promptly as possible, and to use all reasonable
efforts to obtain all other Licenses as promptly as possible. Upon receipt by a
Proposed Operator of the Necessary Licenses with respect to an IHS Facility,
Manager shall give Servicer and each IHS Licensee prompt written notice thereof.
5.5 Subject to the provisions of Section 12.10 hereof, each of the IHS
Licensees and Servicer agrees to cooperate with the Manager and the Proposed
Operators in their efforts to obtain all Licenses, such cooperation to include,
without limitation, the IHS Licensees taking all action that is necessary and
reasonable to ensure that there is no period during which neither an IHS
Licensee nor a Proposed Operator is entitled to reimbursement for services
provided at the Facilities. Without limiting the foregoing, each Relevant IHS
Entity and IHS Licensee agrees to use all reasonable efforts to assist each
Proposed Operator in obtaining all Licenses as soon as
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possible. Such efforts shall include (i) (to the extent required as a condition
to the issuance of any License with respect to any Facility) the preparation and
filing of terminating cost reports with respect to the Facility in compliance in
all material respects with applicable law, (ii) promptly furnishing to such
Proposed Operator, upon its request, all information and materials required to
be (or that any governmental agency or official has requested be) furnished as a
condition to or in connection with the issuance of any Licenses (including any
financial, census and staffing data, information regarding special services and
programs, Life Safety Code Waivers and other waiver history, facility plans of
correction and compliance status, to the extent required or requested by the
applicable agency or official), in each case to the extent available to such
Relevant IHS Entity or IHS Licensee or Affiliate thereof, (iii) the filing of
such notices and documents with such agencies or officials as such agency or
official may require or request. Notwithstanding the foregoing, the SNH Entities
shall promptly reimburse the IHS Licensees and the Servicer for all third-party
out-of-pocket costs and expenses incurred in connection with this Section 5.5,
including, without limitation, reasonable attorneys' fees and expenses. The
provisions of this Section 5.5 shall survive the termination of the obligations
of the Relevant IHS Entities and IHS Licensees under Section 8.
5.6 Each party hereto agrees to comply in all material respects with
all provisions of federal and state law applicable to it in connection with the
operation of the Facilities.
6. Duty of Servicer; Indemnity; Prohibited Transactions.
6.1 Servicer shall render the services called for hereunder in good
faith.
6.2 SNH, Manager, Advisors and the Proposed Operators, jointly and
severally, agree to indemnify and hold Servicer, IHS and each subsidiary of IHS
and their respective shareholders, officers, directors, advisors, agents,
representatives and employees (each an "Indemnified Party") harmless from and
against all Damages (as hereinafter defined), arising out of (i) any action or
omission of Servicer in connection with the provision of services under this
Agreement taken or omitted to be taken in good faith after the Effective Time,
(ii) any injury to any person suffered at any Facility, or the rendering of or
the failure to render services by, any Personnel, Manager, Advisors or any
Proposed Operator or their respective employees, agents or representatives or
any other person performing services for or on behalf of Manager, Advisors or
any Proposed Operator (including, without limitation, any obligations under
Section 1 above), or the operation of any Facility after the Effective Time,
(iii) the employment or termination of any of the Personnel after the Effective
Time, including without limitation, any wages, salaries, payroll taxes,
reimbursements, sick pay, paid time off or other vacation benefits, severance
and all other compensation and benefits incurred, earned or accrued after the
Effective Time, whether under any agreement, benefit plan or as imposed by
applicable law, (iv) arising out of any action taken or omitted by any Personnel
after the Effective Time, or (v) arising out of any failure to make any payment
when due under Section 4 above or any refusal to approve any payment in
accordance with Section 4 above; provided that no Indemnified Party shall be
entitled to indemnification for any action taken or omitted to be taken to the
extent resulting from such Indemnified Party's gross negligence, willful
misconduct or fraud, provided further that it is understood that the actions and
omissions of the Personnel shall not be deemed to be the actions or omissions of
any IHS Entity, notwithstanding that such Personnel may be employees of an IHS
Entity or under the supervision of any IHS Entity. The term "Damages" shall mean
all
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actual monetary and non-consequential losses, damages, liabilities, claims,
demands, penalties, judgments, costs and expenses, including, without
limitation, reasonable legal fees, suffered by an Indemnified Party, but shall
not, in any event, include any Pre-Effective Time Obligation (as defined in the
Settlement Agreement). The provisions of this Section 6.2 shall survive the
termination of this Agreement.
6.3 Neither Servicer nor any person, firm or corporation which,
directly or indirectly owns or controls, is owned or controlled by, or is under
direct or indirect common ownership or control with Servicer or any person
related by blood or marriage within the third degree to persons in such control
(an "Affiliate"), shall receive any remuneration (other than reimbursement),
whether direct or indirect, for any purchases of goods or services made on
behalf of the Relevant Licensee, the Proposed Operator or Manager, and neither
Servicer nor any Affiliate shall markup, increase the price, or obtain any
premium for goods or services purchased by Servicer on behalf of or for the
benefit of Relevant Licensee, Proposed Operator or Manager.
7. Relationship of Parties. No party to this Agreement is a partner or joint
venturer with any other party, and nothing herein shall be construed so as to
make them such partners or joint venturers or impose on any of them any
liability as partners or joint venturers.
8. Term and Termination.
8.1 Unless the Relevant IHS Entities shall otherwise agree in writing,
on the five-month anniversary of the date hereof, their obligations as Servicer
hereunder shall be deemed to have been satisfied, terminated and discontinued in
full, and Manager shall be deemed to have assumed responsibility for the
performance thereof. Servicer and Manager agree to negotiate any extension of
such five month period in good faith; provided that in no event shall Servicer
be required to negotiate any extension to perform any services after the first
anniversary of the Effective Time.
8.2 It is the intention of Manager to assume responsibility for many of
the services provided by Servicer and described in Sections 1 and 2 during the
term of this Agreement. In connection therewith, at any time and from time to
time after the date hereof, Manager may advise Servicer, by written notice, that
Servicer may discontinue the provision of certain services described in such
notice, in which event Manager shall be deemed to have assumed full
responsibility for providing such service hereunder in lieu of Servicer (but
such discontinuance of services shall not constitute a termination of this
Agreement or affect the release referred to in Section 3 above).
8.3 Subject to the provisions of Section 8.1 that limit the obligations
of Servicer under this Agreement, the term of this Agreement shall commence at
the Effective Time and shall terminate on the [___ anniversary of the date
hereof; provided that the term hereof shall automatically renew for an
additional term of one year, unless Manager or SNH shall have given the other
parties hereto written notice, not later than 90 days prior to the last day of
the existing term, of its intent to terminate this Agreement, effective at the
end of the existing term]. Notwithstanding anything to the contrary contained in
this Agreement or any Sublease, on such date (a "Sublease Termination Date") as
any IHS Licensee shall receive written notice from Manager under Section 5.4
confirming that the Necessary Licenses shall have been obtained by a
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Proposed Operator with respect to any IHS Facility, all of the obligations of
the applicable IHS Licensee under this Agreement (other than in its capacity as
"Servicer", subject to Section 8.1 above and the last sentence of Section 1
above) and the applicable Sublease shall terminate with respect to such IHS
Facility. After the first anniversary of the Effective Time, Manager shall be
obligated to pay a fee (the "Sublease Extension Fee") to IHS at the rate of
$2,000 per month per State in which the Sublease Termination Date has not
occurred with respect to all IHS Facilities in such State; provided, however,
that until the Sublease Termination Date shall have occurred with respect to all
of the IHS Facilities, the minimum Sublease Extension Fee shall be at the rate
of $10,000 per month. Notwithstanding anything to the contrary contained in this
Agreement or any Sublease, each IHS Licensee shall have the right, at any time
after the first anniversary of the Effective Time, to terminate the obligations
of such IHS Licensee under this Agreement and each applicable Sublease (by
giving notice of such termination to the Manager) on the earlier to occur of:
(x) the last administrative bar date established by order of the Court (as such
term is defined in the Settlement Agreement) and of which the SNH Entities shall
have received timely notice, and (y) the second anniversary of the Effective
Time. Notwithstanding the foregoing, if Manager shall receive written notice
from the applicable governmental licensing authority with respect to the
Necessary Licenses for any IHS Facility that the Proposed Operator shall be
denied any Necessary License with respect to such IHS Facility, then such IHS
Facility shall not thereafter be included for purposes of determining whether
any Sublease Extension Fee shall be payable. If the Manager or the Proposed
Operator shall be in default of their obligations hereunder to Servicer or the
IHS Licensees for more than 30 days after written notice thereof from the
Servicer or the IHS Licensees to Manager and the Proposed Operator, then the
Servicer and/or the IHS Licensees shall be entitled to terminate this Agreement
and/or any of the Sublease Agreements.
8.4 Upon the effective date of termination of the obligations of the
Relevant IHS Entities, as Servicer, in accordance with Section 8.1, the Relevant
IHS Entities shall forthwith:
(a) pay over to the relevant Proposed Operator all money
collected pursuant to this Agreement owned by the Proposed Operator or
to which the Proposed Operator is otherwise entitled pursuant to this
Agreement or the Settlement Agreement;
(b) deliver to Manager, the Relevant Licensee and the Proposed
Operator a full accounting for all monies then held by the Relevant IHS
Entities; and
(c) deliver to Manager, the Relevant Licensee or Proposed
Operator, as the case may be, all property and documents of any of them
then in the custody of the Relevant IHS Entity.
9. Notices. All notices and other communications provided for hereunder shall be
in writing (including telecopy communication) and mailed, telecopied or
delivered addressed as follows:
(a) if to SNH or any Proposed Operator, to it at:
400 Centre Street
Newton, MA 02458
Telecopy no.: (617) 796-8349
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Attention: President
(b) with copy to:
SULLIVAN & WORCESTER LLP
One Post Office Square
Boston, MA 02109
Telecopy no.: (617) 338-2880
Attention: Alexander A. Notopoulos, Jr., Esq.
(c) if to Manager, to it at:
400 Centre Street
Newton, MA 02458
Telecopy no.: (617) 332-2261
Attention: Treasurer
(d) if to any Relevant IHS Entity or any IHS Licensee, to it
at:
c/o Integrated Health Services, Inc.
The Highlands
910 Ridgebrook Road
Sparks, MD 21152
Telecopy no.: (410) 773-1020
Attention: Daniel J. Booth,
Senior Vice President, Finance
(e) with a copy to:
Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Telecopy no.: (212) 704-6137
Attention: Charles P. Greenman, Esq.
and to
Blass & Driggs
461 Fifth Avenue
New York, NY 10017
Telecopy no.: (212) 447-5428
Attention: Andrew S. Bogen, Esq.
or to such other address as may hereafter be designated by any party for such
purpose. Each such notice shall be effective (i) upon receipt and written
acknowledgment, if hand delivered, (ii) upon the first Business Day following
the day when telecopied, if transmitted by telecopier, (iii) upon the next
Business Day after being placed in the possession of a recognized overnight
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delivery service, if sent by a recognized overnight delivery service, or (iv)
upon the expiration of the fifth Business Day after being deposited in the
mails, if mailed.
10. Liability of IHS Entity. No IHS Entity shall have any liability for breach
of any of its obligations under this Agreement, except for breaches resulting
from fraud, bad faith, gross negligence or willful misconduct; it being
understood that the actions and omissions of the Personnel shall not be deemed
to be the actions or omissions of any IHS Entity, notwithstanding that such
Personnel may be employees of an IHS Entity or under the supervision of any IHS
Entity. The liability of Servicer shall survive the termination of this
Agreement.
11. Proprietary Material. The Manager and the Proposed Operators acknowledge and
agree that the Proprietary Property (as defined in the Settlement Agreement) is
and shall remain (along with any corresponding copyrights or similar rights) the
sole property of Servicer and shall not at any time be directly or indirectly
used, distributed, disclosed, copied or otherwise employed by the Manager or any
Proposed Operator, except in the provision of the services by the Servicer
during the term of this Agreement or to the extent contemplated by the
Settlement Agreement. Upon termination of this Agreement, the Manager and the
Proposed Operators shall return to the Servicer all such Proprietary Property in
their possession or control, and use their best efforts to ensure that their
employees have not retained any Proprietary Property and upon request by
Servicer, confirm compliance with the foregoing in writing. The provisions of
this Section 11 shall survive the termination of this Agreement.
12. Miscellaneous.
12.1 Amendments. This Agreement shall not be changed, modified,
terminated, or discharged in whole or in part except by an instrument in writing
signed by each of the parties hereto or their respective successors or assigns.
12.2 Non-Assignability. This Agreement shall not be assigned by any
party without the consent of each other party hereto, and this Agreement shall
be binding upon and shall inure to the benefit of consented to successors and
assigns.
12.3 GOVERNING LAW. THE PROVISIONS OF THIS AGREEMENT SHALL BE
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
12.4 Entire Agreement. This Agreement, together with the other
agreements contemplated by, referred to in, or contemplated by agreements
referred to herein, together constitute the entire agreement of the parties
hereto with respect to the subject matter hereof and supersede and cancel any
preexisting agreements with respect to such subject matter.
12.5 Headings. The headings of the various articles, sections and
subsections of this Agreement have been inserted for the purpose of convenience
of reference only, are not a part of this Agreement and shall not be deemed in
any manner to modify, explain, enlarge or restrict any of the provisions of this
Agreement.
12.6 Attorney's Fees and Costs. If any action is brought for the
enforcement of this Agreement, or because of a dispute, breach, default or
misrepresentation in connection with any
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<PAGE>
of the provisions of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action in
addition to any other relief to which it may be entitled.
12.7 Confidentiality. The parties agree not to disclose or permit their
respective representatives, attorneys, auditors or agents to disclose, except as
may be required by law or performance hereunder, any confidential non-public
information of the others which is obtained by any of them in connection with
the transactions contemplated by this Agreement.
12.8 Cooperation; Commercially Reasonable Efforts. The parties shall
cooperate in good faith in connection with all actions to be taken to consummate
the transactions contemplated by, and to enforce the rights created by and
perform the responsibilities imposed by, this Agreement.
12.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
together shall constitute one and the same instrument.
12.10 Responsibility for Compliance with Law, Etc. During the term of
this Agreement, each Relevant Licensee will use reasonable commercial efforts to
keep in full force and effect all licenses, permits, approvals, authorizations,
provider agreements, and certificates or determinations of need necessary for
such Relevant Licensee to occupy and operate its Facilities and to receive
Medicare and Medicaid reimbursement for services provided therein.
Notwithstanding anything to the contrary contained in this Agreement or the
Settlement Agreement, each of the SNH Entities agrees and acknowledges that no
IHS Licensee shall be obligated to assume and/or assign to any SNH Entity any
Medicare or Medicaid provider numbers or agreements; provided that the
applicable IHS Licensees shall use their commercially reasonable efforts to
maintain such provider agreements and numbers until they no longer hold the
applicable licenses (so long as maintaining such provider agreements and numbers
do not require that the IHS Licensees assume such provider agreements and
numbers). The SNH Entities are assuming all risk arising out of their failure to
obtain Medicare and/or Medicaid provider numbers or agreements with respect to
any Facilities. SNH, Manager and each Proposed Operator jointly and severally
agree to indemnify each IHS Licensee and Relevant IHS Entity against all Damages
incurred by such IHS Licensee or Relevant IHS Entity arising out of the
discharge from any IHS Facility of any Medicare or Medicaid beneficiary who was
a resident or patient of such IHS Facility immediately prior to the time that
the applicable IHS Licensee ceases to hold a Medicare or Medicaid number or
provider agreement, resulting from the applicable Proposed Operator's inability
to timely obtain a Medicare or Medicaid provider number or agreement (to the
extent that such failure to obtain such provider number or agreement was not due
to the act or omission of any IHS Entity). The provisions of this Section 12.10
shall survive the termination of this Agreement.
12.11 THE DECLARATION OF TRUST OF SNH, DATED DECEMBER 16, 1998, 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 "SENIOR HOUSING PROPERTIES TRUST" REFERS TO
THE TRUSTEES
-19-
<PAGE>
UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SNH
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SNH. ALL PERSONS DEALING WITH SNH, IN ANY WAY,
SHALL LOOK ONLY TO THE ASSETS OF SNH, FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first set
forth above.
SERVICER:
INTEGRATED HEALTH SERVICES, INC., a Delaware
Corporation
By:
Its:
IHS LICENSEES:
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 OF MIDWEST, INC., a Delaware corporation
INTEGRATED HEALTH SERVICE AT GRANDVIEW CARE
CENTER, INC., a Delaware corporation
QUALITY CARE OF COLUMBUS, INC., a Nebraska
corporation
MARIETTA/SCC, INC., a Georgia corporation
GLENWOOD/SCC, INC., a Georgia corporation
DUBLIN/SCC, INC., a Georgia corporation
COLLEGE PARK/SCC, INC., a Georgia
corporation
IHS ACQUISITION NO. 112, INC., a Delaware
corporation
IHS ACQUISITION NO. 113, INC., a Delaware
corporation
IHS ACQUISITION NO. 175, INC., a Delaware
corporation
By:
Its: [Vice] President
-21-
<PAGE>
SNH:
SENIOR HOUSING PROPERTIES TRUST, a Maryland
real estate investment trust
By:
Its:
MANAGER:
FIVE STAR QUALITY CARE, INC., a Delaware
corporation
By:
Its (Vice) President
-22-
<PAGE>
PROPOSED OPERATORS:
SHOPCO-COLORADO, LLC
SHOPCO-CT, LLC
SHOPCO-GA, LLC
SHOPCO-IA, LLC
SHOPCO-KS, LLC
SHOPCO-MI, LLC
SHOPCO-MO, LLC
SHOPCO-NE, LLC
SHOPCO-WY, LLC, each a Delaware limited
liability company
By:
Its:
SNH-NEBRASKA, INC.,
SNH-IOWA, INC.,
SNH-MICHIGAN, INC., each a Delaware
corporation
By:
Its:
ADVISORS:
ADVISORS HEALTHCARE GROUP, INC, a
Delaware corporation
By:
Its:
-23-
<PAGE>
Schedule A-1
<TABLE>
<CAPTION>
IHS Facilities
- ------------------------------------------------------------------------ ------------------ --------------------------
Facility Licensee Proposed Operator
- ------------------------------------------------------------------------ ------------------ --------------------------
<S> <C> <C>
Integrated Health Services at Canon City ECA Holdings, Shopco-Colorado, LLC
515 Fairview Street Inc. ("ECA") ("Colorado LLC")
Canon City, CO 81212
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services at Springs Village ECA Colorado LLC
110 W. Van Buren
Colorado Springs, CO 80907
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services at Delta ECA Colorado LLC
2050 South Main Street
Delta, CO 81416
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services at Mantey Heights ECA Colorado LLC
2823 Patterson Road
Grand Junction, CO 81506
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services at LaVilla Grande ECA (DBA, Colorado LLC
2501 Little Bookcliff Drive Integrated
Grand Junction, CO 81501 Health Services
at LaVilla
Grande)
- ------------------------------------------------------------------------ ------------------ --------------------------
College Park Health Care Center College Park/ Shopco-GA, LLC
1765 Temple Avenue SCC, Inc. ("GA LLC")
College Park, GA 30337
- ------------------------------------------------------------------------ ------------------ --------------------------
Community Care of America at Dublin Dublin/SCC, Inc. GA LLC
606 Simmons Street, Box 549
Dublin, GA 31040
- ------------------------------------------------------------------------ ------------------ --------------------------
Community Care of America at Conner Glenwood/ GA LLC
303 Fifth Street, P.O. Box 618 SCC, Inc.
Glenwood, GA 30428
- ------------------------------------------------------------------------ ------------------ --------------------------
Community Care of America at Marietta Marietta/ GA LLC
1480 Sandtown Road SCC, Inc.
Marietta, GA 30060
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services of Clarinda ECA Shopco-IA LLC
600 Manor Drive ("IA LLC")
Clarinda, IA 51632
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services of Council Bluffs South ECA IA LLC
34 Northcrest Drive
- ------------------------------------------------------------------------ ------------------ --------------------------
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------ ------------------ --------------------------
Facility Licensee Proposed Operator
- ------------------------------------------------------------------------ ------------------ --------------------------
<S> <C> <C>
Council Bluffs, IA 51501
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services at Mediapolis ECA IA LLC
608 Prairie Street
Mediapolis, IA 52637
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Pacific Place ECA IA LLC
20937 Hwy. 385 West
Pacific Junction, IA 51561
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services of Winterset ECA IA LLC
1015 West Summit
Winterset, IA 50273
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services of Iowa at Des Moines Integrated SNH-IOWA, Inc.
2348 E. Ninth Street Health Services, ("IA INC.")
Des Moines, IA 50316 Inc.
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Park Place ECA IA INC
114 East Green Street
Glenwood, IA 51534
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS of Woodhaven ECA Shopco-KS, LLC
510 W. 7th Street
Ellinwood, KS 67526
- ------------------------------------------------------------------------ ------------------ --------------------------
Farmington Health Care Center IHS Acquisition Shopco-MI, LLC
34225 Grand River No. 112, Inc. ("MI LLC")
Farmington, MI 48335-3512
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS of Michigan at Howell IHS MI LLC
3003 W. Grand River Avenue Acquisition No.
Howell, MI 48843-8539 113, Inc.
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Tarkio ECA Shopco-MO, LLC
300 Cedar Street
Tarkio, MO 64491
- ------------------------------------------------------------------------ ------------------ --------------------------
Ainsworth Care Center Community Care Shopco-NE, LLC
143 N. Fullerton Street of Nebraska, Inc. ("NE LLC")
Ainsworth, NE 69210 ("CCN")
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Ashland CCN NE LLC
1700 Furnas Street
Ashland, NE 68003
- ------------------------------------------------------------------------ ------------------ --------------------------
-2-
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------ ------------------ --------------------------
Facility Licensee Proposed Operator
- ------------------------------------------------------------------------ ------------------ --------------------------
<S> <C> <C>
Blue Hill Care Center CCN NE LLC
P.O. Box 156, 414 N. Wilson
Blue Hill, NE 68930
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Edgar CCN. NE INC
RR 1 Box 83A, 106 5th Street
Edgar, NE 68935
- ------------------------------------------------------------------------ ------------------ --------------------------
Wedgewood Care Center ECA NE LLC
800 Stoeger Drive
Grand Island, NE 68803
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Gretna CCN NE LLC
700 Highway 6
Gretna, NE 68028
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Lyons Quality Care of NE LLC
1035 Diamond Street Lyons, Inc.
Lyons, NE 68038
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Milford W.S.T. Care, NE LLC
P.O. Box D, 1100 W. First Street Inc.
Milford, NE 68405
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Sutherland CCN NE LLC
P.O. Box 307, 333 Maple Street
Sutherland, NE 69165
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS of Waverly CCN NE LLC
P.O. Box 160, 11041 N. 137th Street
Waverly, NE 68462
- ------------------------------------------------------------------------ ------------------ --------------------------
Grandview Manor ECA Properties, SNH-Nebraska
Broad Street & Highway 4 Inc. ("NE INC")
Campbell, NE 68932
- ------------------------------------------------------------------------ ------------------ --------------------------
Integrated Health Services of Central City Quality Care of NE INC
2720 South 17th Avenue Columbus,
Central City, NE 68826 Inc.
- ------------------------------------------------------------------------ ------------------ --------------------------
Mory's Haven Quality Care of NE INC
1112 Fifteenth Street Columbus, Inc.
Columbus, NE 68601
- ------------------------------------------------------------------------ ------------------ --------------------------
Exeter Care Center CCN NE INC
425 South Empire Avenue, P.O. Box 59
Exeter, NE 68351
- ------------------------------------------------------------------------ ------------------ --------------------------
-3-
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------ ------------------ --------------------------
Facility Licensee Proposed Operator
- ------------------------------------------------------------------------ ------------------ --------------------------
<S> <C> <C>
IHS at Palmer CCA of Midwest, NE INC
RR #2, Box 28A Inc.
Palmer, NE 68864
- ------------------------------------------------------------------------ ------------------ --------------------------
Utica Community Center CCN NE INC
1350 Centennial Avenue
Utica, NE 68456
- ------------------------------------------------------------------------ ------------------ --------------------------
IHS at Laramie ECA Shopco-WY, LLC
503 South 18th Street ("WY LLC")
Laramie, WY 82070
- ------------------------------------------------------------------------ ------------------ --------------------------
Community Care of America at Worland ECA WY LLC
1901 Howell
Worland, WY 82401
- ------------------------------------------------------------------------ ------------------ --------------------------
</TABLE>
-4-
<PAGE>
Schedule A-2
<TABLE>
<CAPTION>
Advisors Facilities
- ---------------------------------------------------------- ------------------------------------------------------------
Facility Licensee
- ---------------------------------------------------------- ------------------------------------------------------------
<S> <C>
Clifton House Rehabilitation Center Advisors Healthcare Group, Inc.
181 Clifton Street, New Haven, CT 06513 (195 bed chronic and convalescent nursing home)
- ---------------------------------------------------------- ------------------------------------------------------------
Greenery Rehabilitation Center at Waterbury Advisors Healthcare Group, Inc.
177 Whitewood Road, Waterbury, CT 06708 (180 bed chronic and convalescent nursing home)
- ---------------------------------------------------------- ------------------------------------------------------------
Greenery Extended Care Center at Cheshire Advisors Healthcare Group, Inc.
50 Hazel Drive, Cheshire, CT 06410 (210 bed chronic and convalescent nursing home)
- ---------------------------------------------------------- ------------------------------------------------------------
</TABLE>
-5-
<PAGE>
Schedule B
<TABLE>
<CAPTION>
Necessary Licenses
- --------------------------------------------------------------- ------------------------------------------------------
Facility Necessary Licenses
- --------------------------------------------------------------- ------------------------------------------------------
<S> <C>
Integrated Health Services at Canon City License to Operate an 85-bed Long-Term Care Facility
515 Fairview Street
Canon City, CO 81212
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services at Springs Village License to Operate a 100-bed Long-Term Care Facility
110 W. Van Buren
Colorado Springs, CO 80907
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services at Delta License to Operate a 90-bed Long-Term Care Facility
2050 South Main Street License to Operate a 6-bed Personal Care Boarding
Delta, CO 81416 Home
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services at Mantey Heights License to Operate an 82-bed Long-Term Care Facility
2825 Patterson Road
Grand Junction, CO 81506
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services at LaVilla Grande License to Operate a 96-bed Long-Term Care Facility
2501 Little Bookcliff Drive
Grand Junction, CO 81501
- --------------------------------------------------------------- ------------------------------------------------------
College Park Health Care Center Permit to Operate a 100-bed Nursing Home
1765 Temple Avenue
College Park, GA 30337
- --------------------------------------------------------------- ------------------------------------------------------
Community Care of America at Dublin Permit to Operate a 130-bed Nursing Home
606 Simmons Street, Box 549
Dublin, GA 31040
- --------------------------------------------------------------- ------------------------------------------------------
Community Care of America at Conner Permit to Operate a 62-bed Nursing Home
303 Fifth Street, P.O. Box 618
Glenwood, GA 30428
- --------------------------------------------------------------- ------------------------------------------------------
Community Care of America at Marietta Permit to Operate a 109-bed Nursing Home
1480 Sandtown Road
Marietta, GA 30060
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services of Clarinda License to Operate a 117-bed Nursing Facility
600 Manor Drive
Clarinda, IA 51632
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services of Council Bluffs South License to Operate a 62-bed Nursing Facility
34 Northcrest Drive
Council Bluffs, IA 51501
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services at Mediapolis License to Operate a 62-bed Nursing Facility
608 Prairie Street
Mediapolis, IA 52637
- --------------------------------------------------------------- ------------------------------------------------------
-1-
<PAGE>
<CAPTION>
- --------------------------------------------------------------- ------------------------------------------------------
Facility Necessary Licenses
- --------------------------------------------------------------- ------------------------------------------------------
<S> <C>
IHS at Pacific Place License to Operate a 12-bed Intermediate Care
20937 Hwy. 385 West Facility for the Mentally Retarded
Pacific Junction, IA 51561
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services of Winterset License to Operate an 80-bed Nursing Facility
1015 West Summit License to Operate a 19-bed Residential Care Facility
Winterset, IA 50273
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services of Iowa at Des Moines License to Operate a 93-bed Nursing Facility
2348 E. Ninth Street
Des Moines, IA 50316
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Park Place License to Operate a 128-bed Intermediate Care
114 East Green Street Facility for the Mentally Retarded
Glenwood, IA 51534
- --------------------------------------------------------------- ------------------------------------------------------
IHS of Woodhaven License to Operate a 54-bed Adult Care Home
510 W. 7th Street
Ellinwood, KS 67526
- --------------------------------------------------------------- ------------------------------------------------------
Farmington Health Care Center Certificate of Need
34225 Grand River License to Operate a 153-bed Nursing Home (Long Term
Farmington, MI 48335-3512 Care)
- --------------------------------------------------------------- ------------------------------------------------------
IHS of Michigan at Howell Certificate of Need
3003 W. Grand River Avenue License to Operate a 176-bed Nursing Home (Long Term
Howell, MI 48843-8539 Care)
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Tarkio License to Operate a 95-bed Skilled Nursing Facility
300 Cedar Street
Tarkio, MO 64491
- --------------------------------------------------------------- ------------------------------------------------------
Ainsworth Care Center License to Operate a 50-bed Skilled Nursing Facility
143 N. Fullerton Street (Distinct Part) (Outpatient PT/Rehab)
Ainsworth, NE 69210
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Ashland License to Operate a 101-bed Skilled Nursing/NSG
1700 Furnas Street Facility (Distinct Part)
Ashland, NE 68003 (Outpatient PT/Rehab, Alzheimer Unit)
- --------------------------------------------------------------- ------------------------------------------------------
Blue Hill Care Center License to Operate a 68-bed Skilled Nursing/NSG
P.O. Box 156 Facility (Distinct part)(Alzheimer Unit)
414 N. Wilson
Blue Hill, NE 68930
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Edgar License to Operate a 54-bed Skilled Nursing/NSG
RR 1 Box 83A Facility (Distinct Part)
106 5th Street
Edgar, NE 68935
- --------------------------------------------------------------- ------------------------------------------------------
Wedgewood Care Center License to Operate a 74-bed Skilled Nursing/NSG
800 Stoeger Drive Facility (Outpatient Rehab, Alzheimer Unit)
Grand Island, NE 68803
- --------------------------------------------------------------- ------------------------------------------------------
-2-
<PAGE>
<CAPTION>
- --------------------------------------------------------------- ------------------------------------------------------
Facility Necessary Licenses
- --------------------------------------------------------------- ------------------------------------------------------
<S> <C>
IHS at Gretna License to Operate a 63-bed Skilled Nursing Facility
700 Highway 6
Gretna, NE 68028
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Lyons License to Operate an 82-bed Skilled Nursing Facility
1035 Diamond Street
Lyons, NE 68038
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Milford License to Operate a 60-bed Skilled Nursing/NSG
P.O. Box D Facility (Distinct Part)
1100 W. First Street
Milford, NE 68405
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Sutherland License to Operate a 62-bed Skilled Nursing/NSG
P.O. Box 307 Facility (Distinct Part)
333 Maple Street (Alzheimer Unit)
Sutherland, NE 69165
- --------------------------------------------------------------- ------------------------------------------------------
IHS of Waverly License to Operate a 51-bed Skilled Nursing Facility
P.O. Box 160
11041 N. 137th Street
Waverly, NE 68462
- --------------------------------------------------------------- ------------------------------------------------------
Grandview Manor License to Operate a 45-bed Skilled Nursing Facility
Broad Street & Highway 4
Campbell, NE 68932
- --------------------------------------------------------------- ------------------------------------------------------
Integrated Health Services of Central City License to Operate a 70-bed Skilled Nursing
2720 South 17th Avenue Facility/Nursing Facility Distinct Part
Central City, NE 68826
- --------------------------------------------------------------- ------------------------------------------------------
Mory's Haven License to Operate a 48-bed Skilled Nursing Facility
1112 Fifteenth Street Dual
Columbus, NE 68601
- --------------------------------------------------------------- ------------------------------------------------------
Exeter Care Center License to Operate a 56-bed Skilled Nursing
425 South Empire Avenue Facility/Nursing Facility Distinct Part
P.O. Box 59
Exeter, NE 68351
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Palmer License to Operate a 35-bed Nursing Facility
RR #2, Box 28A
Palmer, NE 68864
- --------------------------------------------------------------- ------------------------------------------------------
Utica Community Care Center License to Operate a 41-bed Skilled Nursing Facility
1350 Centennial Avenue Dual
Utica NE 68456
- --------------------------------------------------------------- ------------------------------------------------------
IHS at Laramie License to Operate a 144-bed Nursing Care Facility
503 South 18th St.
Laramie, WY 82070
- --------------------------------------------------------------- ------------------------------------------------------
-3-
<PAGE>
<CAPTION>
- --------------------------------------------------------------- ------------------------------------------------------
Facility Necessary Licenses
- --------------------------------------------------------------- ------------------------------------------------------
<S> <C>
Community Care of America at Worland License to Operate an 87-bed Nursing Facility
1901 Howell
Worland, WY 82401
- --------------------------------------------------------------- ------------------------------------------------------
</TABLE>
-4-
<PAGE>
Schedule B-2
<TABLE>
<CAPTION>
Other Licenses
- ---------------------------------------------------------------- -----------------------------------------------------
Facility Other Licenses
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C>
Integrated Health Services at Canon City Medicare/Medicaid certification
515 Fairview Street Medicare provider agreement
Canon City, CO 81212 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Integrated Health Services at Springs Village Medicare/Medicaid certification
110 W. Van Buren Medicare provider agreement
Colorado Springs, CO 80907 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Integrated Health Services at Delta Medicare/Medicaid certification
2050 South Main Street Medicare provider agreement
Delta, CO 81416 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Integrated Health Services at Mantey Heights Medicare/Medicaid certification
2823 Patterson Road Medicare provider agreement
Grand Junction, CO 81506 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Integrated Health Services at LaVilla Grande Medicare/Medicaid certification
2501 Little Bookcliff Drive Medicare provider agreement
Grand Junction, CO 81501 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
College Park Health Care Center Medicare/Medicaid certification
1765 Temple Avenue Medicare provider agreement
College Park, GA 30337 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Community Care of America at Dublin Medicare/Medicaid certification
606 Simmons Street, Box 549 Medicare provider agreement
Dublin, GA 31040 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Community Care of America at Conner Medicare/Medicaid certification
303 Fifth Street, P.O. Box 618 Medicare provider agreement
Glenwood, GA 30428 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Community Care of America at Marietta Medicare/Medicaid certification
1480 Sandtown Road Medicare provider agreement
Marietta, GA 30060 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Integrated Health Services of Clarinda Medicare/Medicaid certification
600 Manor Drive Medicare provider agreement
Clarinda, IA 51632 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Integrated Health Services of Council Bluffs South Medicare/Medicaid certification
34 Northcrest Drive Medicare provider agreement
Council Bluffs, IA 51501 Medicaid provider agreement
- ----------------------------------------------------------------- ----------------------------------------------------
Integrated Health Services at Mediapolis Medicare/Medicaid certification
608 Prairie Street Medicare provider agreement
Mediapolis, IA 52637 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Pacific Place Medicaid certification
20937 Hwy. 385 West Medicaid provider agreement
Pacific Junction, IA 51561
- ---------------------------------------------------------------- -----------------------------------------------------
-1-
<PAGE>
<CAPTION>
- ---------------------------------------------------------------- -----------------------------------------------------
Facility Other Licenses
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C>
Integrated Health Services of Winterset Medicare/Medicaid certification
1015 West Summit Medicare provider agreement
Winterset, IA 50273 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Integrated Health Services of Iowa at Des Moines Medicare/Medicaid certification
2348 E. Ninth Street Medicare provider agreement
Des Moines, IA 50316 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Park Place Medicaid certification
114 East Green Street Medicaid provider agreement
Glenwood, IA 51534
- ---------------------------------------------------------------- -----------------------------------------------------
IHS of Woodhaven Medicare/Medicaid certification
510 W. 7th Street Medicare provider agreement
Ellinwood, KS 67526 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Farmington Health Care Center Medicare/Medicaid certification
34225 Grand River Medicare provider agreement
Farmington, MI 48335-3512 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
IHS of Michigan at Howell Medicare/Medicaid certification
3003 W. Grand River Avenue Medicare provider agreement
Howell, MI 48843-8539 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Tarkio Medicare/Medicaid certification
300 Cedar Street Medicare provider agreement
Tarkio, MO 64491 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Ainsworth Care Center Medicare/Medicaid certification
143 N. Fullerton Street Medicare provider agreement
Ainsworth, NE 69210 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Ashland Medicare/Medicaid certification
1700 Furnas Street Medicare provider agreement
Ashland, NE 68003 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Blue Hill Care Center Medicare/Medicaid certification
P.O. Box 156 Medicare provider agreement
414 N. Wilson Medicaid provider agreement
Blue Hill, NE 68930
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Edgar Medicare/Medicaid certification
RR 1 Box 83A Medicare provider agreement
106 5th Street Medicaid provider agreement
Edgar, NE 68935
- ---------------------------------------------------------------- -----------------------------------------------------
Wedgewood Care Center Medicare/Medicaid certification
800 Stoeger Drive Medicare provider agreement
Grand Island, NE 68803 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Gretna Medicare/Medicaid certification
700 Highway 6 Medicare provider agreement
Gretna, NE 68028 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
-2-
<PAGE>
<CAPTION>
- ---------------------------------------------------------------- -----------------------------------------------------
Facility Other Licenses
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C>
IHS at Lyons Medicare/Medicaid certification
1035 Diamond Street Medicare provider agreement
Lyons, NE 68038 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Milford Medicare/Medicaid certification
P.O. Box D Medicare provider agreement
1100 W. First Street Medicaid provider agreement
Milford, NE 68405
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Sutherland Medicare/Medicaid certification
P.O. Box 307 Medicare provider agreement
333 Maple Street Medicaid provider agreement
Sutherland, NE 69165
- ---------------------------------------------------------------- -----------------------------------------------------
IHS of Waverly Medicare/Medicaid certification
P.O. Box 160 Medicare provider agreement
11041 N. 137th Street Medicaid provider agreement
Waverly, NE 68462
- ---------------------------------------------------------------- -----------------------------------------------------
Grandview Manor Medicare/Medicaid certification
Broad Street & Highway 4 Medicare provider agreement
Campbell, NE 68932 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Integrated Health Services of Central City Medicare/Medicaid certification
2720 South 17th Avenue Medicare provider agreement
Central City, NE 68826 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Mory's Haven Medicare/Medicaid certification
1112 Fifteenth Street Medicare provider agreement
Columbus, NE 68601 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Exeter Care Center Medicare/Medicaid certification
425 South Empire Avenue Medicare provider agreement
P.O. Box 59 Medicaid provider agreement
Exeter, NE 68351
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Palmer Medicaid certification
RR #2, Box 28A Medicaid provider agreement
Palmer, NE 68864
- ---------------------------------------------------------------- -----------------------------------------------------
Utica Community Center Medicare/Medicaid certification
1350 Centennial Avenue Medicare provider agreement
Utica NE 68456 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
IHS at Laramie Medicare/Medicaid certification
503 South 18th St. Medicare provider agreement
Laramie, WY 82070 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
Community Care of America at Worland Medicare/Medicaid certification
1901 Howell Medicare provider agreement
Worland, WY 82401 Medicaid provider agreement
- ---------------------------------------------------------------- -----------------------------------------------------
-3-
<PAGE>
<CAPTION>
- ---------------------------------------------------------------- -----------------------------------------------------
Facility Other Licenses
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C>
- ---------------------------------------------------------------- -----------------------------------------------------
</TABLE>
-4-
<PAGE>
Schedule 2.7
<TABLE>
<CAPTION>
Insurance
- ---------------------------------------- -------------------------------------- --------------------------------------
Coverage Type Limits Deductible
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
All Risk Property (bldg & contents) $140,000,000 $10,000
- ---------------------------------------- -------------------------------------- --------------------------------------
All Risk Property (BI) $82,000,000 $10,000
- ---------------------------------------- -------------------------------------- --------------------------------------
General/Professional Liability $1,000,000/$3,000,000 $50,000
- ---------------------------------------- -------------------------------------- --------------------------------------
Workers' Comp Statutory 0
- ---------------------------------------- -------------------------------------- --------------------------------------
Umbrella $10,000,000 per location NA
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
<PAGE>
EXHIBIT D
[INSERT NAME OF FACILITY] SUBLEASE*
This Sublease* (this "Sublease"*) is dated as of [insert Settlement
closing date] , 2000 and is entered into by and between [insert name of
applicable Proposed Operator], a corporation with an address at ("Sublessor"*),
and [insert name of applicable licensee], a corporation with an address at (the
"Sublessee"*).
RECITALS
A. [insert name of owner of the real property], a corporation
("Lessor") and Sublessor are parties to a Lease Agreement (the "Lease"), dated
as of , with respect to the skilled nursing facility known as "[insert name of
facility]" (the "Facility").
B. Sublessee has agreed, as an accommodation to the Sublessor, to
sublease the Facility from the Sublessor on the terms and conditions contained
herein, and [insert name of SNH entity that will manage the Facility] (the
"Manager") has agreed to manage the operation of the Facility pursuant to a
Management and Servicing Agreement (the "Management Agreement"), dated as of the
date hereof, between the Manager and Sublessee.
C. Sublessee has agreed, pursuant to the Management Agreement, to
perform, on behalf of the Manager, certain of the services of the Manager under
the Management Agreement.
D. Concurrently herewith the Sublessor, Sublessee, Manager and various
other parties are entering into a Settlement Agreement (the "Settlement
Agreement"), pursuant to which, among other things, Sublessee is assigning all
of its right, title and interest in, to and under a the Lease to Sublessor.
Capitalized terms used herein and not otherwise defined herein are used herein
with the meanings ascribed to such terms in the Settlement Agreement.
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties hereto, intending to be bound,
hereby agree as follows:
1. Sublease. Upon and subject to the terms and conditions hereinafter
set forth, Sublessor subleases to Sublessee, and Sublessee subleases from
Sublessor all of Sublessor's right, title and interest in, to, under or relating
to the real property, improvements, fixtures and related rights constituting the
Facility (the "Demised Premises"), including, without limitation, any leasehold
rights of the Sublessor relating to the use or occupancy thereto. Sublessor
represents, warrants and covenants that Sublessee has and will continue to have
throughout the term of this Sublease, the right to use and occupy the Demised
Premises as the licensed operator of the Facility.
<PAGE>
2. Term.
(a) The term of this Sublease shall commence on the date
hereof and shall end on the date specified in the Management Agreement.
3. Rent; Limitation on Other Obligations. Sublessee shall have no
obligation to pay any rent or other amounts under this Sublease, and Sublessee
shall have no obligation to perform any obligations in respect of this Sublease;
it being the purpose and intent of the Sublessor and Sublessee that all costs,
fees, taxes, impositions, utility charges, repairs, alterations, restorations,
charges, expenses, reimbursements and obligations of every kind and manner
whatsoever relating to the Demised Premises which arise or become due during or
after the term of this Sublease, shall be paid and discharged by Sublessor. All
financial risk of operating the Facility during the term of this Sublease shall
be borne entirely by Sublessor, including without limitation, the risk of any
condemnation or eminent domain proceeding or of any fire or other casualty or
damage to or destruction of any or all of the Facility.
4. Surrender of Possession. At the end of the term of this Sublease,
Sublessee shall surrender the Facility to Sublessor. Upon termination of the
term of this Sublease, Sublessor shall immediately provide an operator to
succeed Sublessee as operator who meets all qualifications to obtain, and shall
have, all licenses, permits, approvals and consents of all applicable
governmental authorities necessary to operate the Facility so that, among other
things, all residents and patients at the Facility shall, at no cost, expense or
liability to Sublessee, have continuous care in accordance with all applicable
laws. Sublessor shall indemnify and hold harmless each Indemnified Party (as
such term is defined in the Settlement Agreement) from and against any and all
Damages (as such term is defined in the Settlement Agreement) arising out of any
breach of the foregoing provision. The provisions of this Section 4 shall
survive the termination or expiration of the term of this Sublease.
5. No Subletting or Assignment. Sublessee shall not sublet or assign
any or all of the Facility without the prior consent of Sublessor; provided,
however, that the foregoing shall not be deemed to prohibit Sublessee from
permitting patients or residents to occupy the Facility in the ordinary course
of Sublessee's business.
6. Appointment of Manager. Sublessor agrees that Sublessee shall engage
Manager to manage the Facility.
7. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or on the date of actual receipt, if
sent by certified or registered mail, postage prepaid and return receipt
requested, or one business day after being sent by nationally recognized
overnight courier service, properly addressed and postage prepaid to the party
entitled to receive such notice at the address stated below:
If to the Sublessor:
---------------------------------
---------------------------------
---------------------------------
Attention:
-2-
<PAGE>
with a copy to:
---------------------------------
---------------------------------
---------------------------------
Attention:
If to the Sublessee: [ ]
c/o Integrated Health Services, Inc.
The Highlands,
910 Ridgebrook Road,
Sparks, Maryland 21152
Attention: Daniel J. Booth, Senior Vice President
and Marshall A. Elkins, General Counsel
With a copy to: Blass & Driggs
461 Fifth Avenue, 19th Floor
New York, New York 10017
Attn: Andrew S. Bogen, Esq.
8. Miscellaneous.
(a) All the terms and provision of this Sublease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither party shall be entitled to assign its
rights or obligations under this Sublease without the prior consent of the other
party hereto.
(b) The headings in this Sublease are for convenience of
reference only and shall not limit or otherwise affect the terms hereof.
(c) This Sublease shall be governed by and construed in
accordance with the internal laws of the State in which the Facility is located,
without giving effect to contrary conflicts of law principles.
(d) This Sublease may be executed in separate counterparts,
each of which shall be considered an original, and all of which, when taken
together, shall constitute one and the same instrument.
(e) This Sublease (including the Schedules and Exhibits
hereto), and the other documents and instruments specifically provided for
herein and therein, contain the entire understanding between the parties
concerning the subject matter hereof and thereof, and except as expressly
provided for herein or therein, supersede all prior understandings and
agreements whether oral or written, between them with respect to the subject
matter hereof and thereof.
(f) Neither this Sublease nor any provision hereof may be
changed, waived, discharged or terminated except by an instrument in writing
signed by Sublessor and Sublessee.
(g) Any rights or remedies that any party hereto may have
under this Sublease with respect to any matter shall not be deemed to be such
party's exclusive rights or remedies with respect to such matter arising out of
the Settlement Agreement (or any of the Transaction
-3-
<PAGE>
Documents referred to therein), and any party may exercise its rights and
remedies under this Sublease or the Settlement Agreement (or any of the
Transaction Documents referred to therein) concurrently with any such other such
rights or remedies, or in any order that it determines in its sole and absolute
discretion.
[SIGNATURES ON NEXT PAGE]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Sublease to be
executed and attested by their respective officers hereunto duly authorized.
Sublessor: Sublessee:
[insert name of applicable [insert name of applicable licensee]
Proposed Operator]
By: By:
------------------------ ------------------------
- -------------------
*Note that if the Proposed Operator will be the owner (as opposed to lessee) of
the property, then the applicable agreement will be a Lease (rather than a
Sublease), and the parties will be defined as the "Lessor" (instead of
"Sublessor") and "Lessee" (instead of "Sublessee").
-5-
<PAGE>
EXHIBIT E-1
SNH Release
Reference is made to that certain Settlement Agreement dated as of
April __, 2000 (the "Settlement Agreement") among, inter alia, Integrated Health
Services, Inc. and the other IHS Entities referred to therein and Senior Housing
Properties Trust and the other SNH Entities referred to therein. The terms
defined in the Settlement Agreement are used herein as therein defined, unless
otherwise defined herein.
Each SNH Entity hereby releases and forever discharges each IHS Entity,
and their respective successors, assigns, agents, shareholders, directors,
officers, employees, agents, attorneys, parent corporations, subsidiary
corporations, affiliated corporations, affiliates, and each of them, from any
and all claims, debts, liabilities, demands, obligations, costs, expenses,
actions and causes of action, of every nature and description, known and
unknown, whether or not related to the subject matter of the Existing Documents,
which any SNH Entity now has or at any time may hold, by reason of any matter,
cause or thing occurred, done, omitted or suffered to be done prior to the
Effective Time; provided that this release shall not release or otherwise affect
or limit any claims, debts, liabilities, demands, obligations, costs, expenses,
actions and causes of action against (i) any IHS Entity under the Settlement
Agreement or any other Settlement Document or (ii) HealthSouth, Horizon or their
respective affiliates (as such term is defined in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as amended). Each SNH Entity waives the
benefits of any law, which may provide in substance: "A general release does not
extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor." Each SNH Entity understands
that the facts which it believes to be true at the time of making the release
provided for herein may later turn out to be different than it now believes, and
that information which is not now known or suspected may later be discovered.
Each SNH Entity accepts this possibility, and each SNH Entity assumes the risk
of the facts turning out to be different and new information being discovered.
Each SNH Entity further agrees that the release provided for herein shall in all
respects continue to be effective -- and not subject to termination or
rescission because of any difference in such facts or any new information. None
of the SNH Entities is releasing any IHS Entity from any claims, debts,
liabilities, demands, obligations, costs, expenses, actions or causes of action
except as expressly provided herein or in any other Settlement Document and the
obligations under the Settlement Documents are specifically excluded. Each SNH
Entity further acknowledges that, from and after the Effective Time, no IHS
Entity has any existing commitments, obligations or agreements to advance
credits or loans, or to lease property, or make financial or other
accommodations to any SNH Entity, except as may be specifically set forth in the
Settlement Agreement or any other Settlement Document. The SNH Entities hereby
represent, warrant and covenant, jointly and severally, that the foregoing
release and discharge is given on behalf of and shall be enforceable against,
each of the SNH Entities, their respective successors, assigns, agents,
shareholders, directors, officers, employees, agents, attorneys, parent
corporations, subsidiary corporations, affiliated corporations, and affiliates.
THE DECLARATION OF TRUST OF EACH OF SNH, SPTIHS, HRES1 AND HRES2, A
COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (EACH A "DECLARATION"), IS
DULY FILED IN THE OFFICE OF THE DEPARTMENT OF
<PAGE>
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME
"SENIOR HOUSING PROPERTIES TRUST," "SPTIHS PROPERTIES TRUST," "HRES1 PROPERTIES
TRUST" AND "HRES2 PROPERTIES TRUST," AS THE CASE MAY BE, REFERS TO THE TRUSTEES
UNDER EACH SUCH DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SNH,
SPTIHS, HRES1 OR HRES2, AS THE CASE MAY BE, SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SNH,
SPTIHS, HRES1 OR HRES2. ALL PERSONS DEALING WITH SNH, SPTIHS, HRES1 OR HRES2 IN
ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SNH, SPTIHS, HRES1 OR HRES2,
RESPECTIVELY, FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
THIS RELEASE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have caused this Release to
be executed under seal by their duly authorized officers as of ________________
2000.
SENIOR HOUSING PROPERTIES TRUST, a Maryland
real estate investment trust
By:
Its:
SPTIHS PROPERTIES TRUST, a Maryland real estate
investment trust
By:
Its:
HRES1 PROPERTIES TRUST, a Maryland real estate
investment trust
By:
Its:
HRES2 PROPERTIES TRUST, a Maryland real estate
investment trust
By:
Its:
-3-
<PAGE>
SHOPCO-COLORADO, LLC
SHOPCO-CT, LLC
SHOPCO-GA, LLC
SHOPCO-IA, LLC
SHOPCO-KS, LLC
SHOPCO-MA, LLC
SHOPCO-MI, LLC
SHOPCO-MO, LLC
SHOPCO-NE, LLC
SHOPCO-WY, LLC, each a Delaware limited liability company
By:
Its:
SNH-NEBRASKA, INC.
SNH-IOWA, INC.
SNH-MASSACHUSETTS, INC. and
SNH-MICHIGAN, INC., each a Delaware corporation
By:
Its:
ADVISORS HEALTHCARE GROUP, INC., a Delaware
corporation
By:
Its:
FIVE STAR QUALITY CARE, INC., a Delaware
corporation
By:
Its:
-4-
<PAGE>
EXHIBIT E-2
IHS Release
Reference is made to that certain Settlement Agreement dated as of
April __, 2000 (the "Settlement Agreement") among, inter alia, Integrated Health
Services, Inc. and the other IHS Entities referred to therein and Senior Housing
Properties Trust and the other SNH Entities referred to therein. The terms
defined in the Settlement Agreement are used herein as therein defined, unless
otherwise defined herein.
Each IHS Entity hereby releases and forever discharges each SNH Entity,
and their respective successors, assigns, agents, shareholders, directors,
officers, employees, agents, attorneys, parent corporations, subsidiary
corporations, affiliated corporations, affiliates, and each of them, from any
and all claims, debts, liabilities, demands, obligations, costs, expenses,
actions and causes of action, of every nature and description, known and
unknown, whether or not related to the subject matter of the Existing Documents,
which any IHS Entity now has or at any time may hold, by reason of any matter,
cause or thing occurred, done, omitted or suffered to be done on or prior to the
Effective Time; provided that this release shall not release or otherwise affect
or limit any claims, debts, liabilities, demands, obligations, costs, expenses,
actions and causes of action against any SNH Entity under the Settlement
Agreement or any other Settlement Document. Each IHS Entity waives the benefits
of any law, which may provide in substance: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." Each IHS Entity understands that the
facts which it believes to be true at the time of making the release provided
for herein may later turn out to be different than it now believes, and that
information which is not now known or suspected may later be discovered. Each
IHS Entity accepts this possibility, and each IHS Entity assumes the risk of the
facts turning out to be different and new information being discovered. Each IHS
Entity further agrees that the release provided for herein shall in all respects
continue to be effective -- and not subject to termination or rescission because
of any difference in such facts or any new information. None of the IHS Entities
is releasing any SNH Entity from any claims, debts, liabilities, demands,
obligations, costs, expenses, actions or causes of action except as expressly
provided herein or in any other Settlement Document, and the obligations under
the Settlement Documents are specifically excluded from this release. Each IHS
Entity further acknowledges that, from and after the Effective Time, no SNH
Entity has any existing commitments, obligations or agreements to advance
credits or loans, or to lease property, or make financial or other
accommodations to any IHS Entity, except as may be specifically set forth in the
Settlement Agreement or the other Settlement Documents. The IHS Entities hereby
represent, warrant and covenant, jointly and severally, that the foregoing
release and discharge is given on behalf of and shall be enforceable against
each IHS Entity, their respective successors, assigns, agents, shareholders,
directors, officers, employees, agents, attorneys, parent corporations,
subsidiary corporations, affiliated corporations, and affiliates.
THIS RELEASE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have caused this Release to
be executed under seal by their duly authorized officers as of ________________
2000.
INTEGRATED HEALTH SERVICES, INC.
By:
Its:
COMMUNITY CARE OF AMERICA, INC.
ECA HOLDINGS, INC.
COMMUNITY CARE OF NEBRASKA, INC.
W.S.T. CARE, INC.
QUALITY CARE OF LYONS, INC.
CCA ACQUISITION I, INC.
MARIETTA/SCC, INC.
GLENWOOD/SCC, INC.
DUBLIN/SCC, INC.
COLLEGE PARK/SCC, 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. 175, INC.
INTEGRATED HEALTH SERVICES AT GRANDVIEW CARE CENTER, INC.
ECA PROPERTIES, INC.
CCA OF MIDWEST, INC.
QUALITY CARE OF COLUMBUS, INC.
By:
Its:
<PAGE>
EXHIBIT F
ASSIGNMENT AND ASSUMPTION OF
REAL PROPERTY LEASE
[Omitted.]
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-01-2000
<CASH> 12,870
<SECURITIES> 0
<RECEIVABLES> 37,439
<ALLOWANCES> 14,500
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 693,192
<DEPRECIATION> 108,340
<TOTAL-ASSETS> 636,478
<CURRENT-LIABILITIES> 0
<BONDS> 188,000
0
0
<COMMON> 260
<OTHER-SE> 401,106
<TOTAL-LIABILITY-AND-EQUITY> 636,478
<SALES> 0
<TOTAL-REVENUES> 18,597
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,562
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,475
<INCOME-PRETAX> 7,560
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,560
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,560
<EPS-BASIC> 0.29
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