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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1998.
[ ] 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: 0-19815
CAREMATRIX CORPORATION
----------------------
(Exact name of Registrant as specified in its charter)
Delaware 04-3069586
-------- ----------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
197 First Avenue, Needham, MA 02494
-----------------------------------
(Address of principal executive offices) (Zip Code)
(781) 433-1000
--------------
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 13, 1998
----- --------------------------------
Common Stock, $.05 par value 17,803,207 shares
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<PAGE>
CAREMATRIX CORPORATION
Table of Contents
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS Page
----
<S> <C>
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997 3
Consolidated Statements of Earnings for the three and nine
months ended September 30, 1998 and September 30, 1997 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and September 30, 1997 5
Notes to Consolidated Financial Statements 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 15
ITEM 2: CHANGES IN SECURITIES 15
ITEM 5: OTHER INFORMATION 15
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 15-16
</TABLE>
2
<PAGE>
CAREMATRIX CORPORATION
CONSOLIDATED BALANCE SHEETS
as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash, cash equivalents and restricted cash $ 33,040,974 $ 155,721,903
Receivables:
Accounts receivable, net 24,096,850 12,461,704
Accounts receivable-related party 14,352,875 9,096,479
Other receivables --- 730,584
Prepaid expenses and other current assets 11,170,023 3,488,592
------------ -------------
Total current assets 82,660,722 181,499,262
Lease acquisition costs, net 11,027,696 4,240,733
Property and equipment, net 146,107,310 4,650,823
Due from shareholder --- 2,622,383
Other long-term assets, net 42,760,329 17,262,630
Goodwill, net 43,388,474 21,772,649
------------ -------------
Total assets $325,944,531 $ 232,048,480
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 683,078 $ 2,000,000
Accounts payable 9,032,241 3,819,719
Accrued compensation 2,481,431 1,103,308
Accrued liabilities 17,344,337 7,925,147
Other current liabilities 1,604,136 827,594
------------ -------------
Total current liabilities 31,145,223 15,675,768
Mortgages payable 44,013,935 ---
Borrowings under line of credit 8,500,000 ---
Convertible subordinated notes 115,000,000 115,000,000
Other long-term liabilities 5,367,751 2,211,412
Commitments and contingencies
Shareholders' equity 121,917,622 99,161,300
------------ -------------
Total liabilities and shareholders' equity $325,944,531 $ 232,048,480
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CAREMATRIX CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
for the three and nine months ended September 30, 1998 and September 30, 1997
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------------- --------------------------------------
September 30, 1998 September 30, 1997 September 30, 1998 September 30, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Resident operations $ 28,431,562 $ 14,777,715 $ 74,580,649 $ 34,726,460
Resident operations - related party 4,741,116 1,286,773 10,582,925 2,171,245
Development fee income 279,051 563,949 1,967,344 2,108,728
Development fee income - related party 6,153,218 4,190,144 16,286,378 9,834,145
-------------- ------------- ------------ ------------
Total revenue 39,604,947 20,818,581 103,417,296 48,840,578
-------------- ------------- ------------ ------------
Expenses:
Facility operating expenses 20,783,902 11,449,766 53,793,800 26,017,062
Facility lease expense 297,930 725,168 1,475,628 1,924,845
Facility lease expense - related party 3,956,108 1,711,659 10,504,311 3,427,361
General and administrative 4,769,318 3,719,974 14,320,758 10,890,928
Depreciation and amortization 1,241,359 574,407 2,842,203 1,552,922
-------------- ------------- ------------ ------------
Total expenses 31,048,617 18,180,974 82,936,700 43,813,118
-------------- ------------- ------------ ------------
Earnings from operations 8,556,330 2,637,607 20,480,596 5,027,460
Interest and other income (expense):
Interest and other income 2,035,013 1,515,813 6,526,359 3,083,364
Interest expense (2,219,593) (907,357) (5,886,303) (1,428,600)
-------------- ------------- ------------ ------------
Total interest and other income (expense), net (184,580) 608,456 640,056 1,654,764
-------------- ------------- ------------ ------------
Earnings before income taxes and preferred dividends 8,371,750 3,246,063 21,120,652 6,682,224
Income taxes 3,432,691 1,305,107 8,659,468 2,686,254
-------------- ------------- ------------ ------------
Earnings before preferred dividends 4,939,059 1,940,956 12,461,184 3,995,970
Preferred dividends 1,825 5,825 8,225 17,875
-------------- ------------- ------------ ------------
Net earnings $ 4,937,234 $ 1,935,131 $ 12,452,959 $ 3,978,095
============== ============= ============ ============
Basic shares outstanding 17,670,260 17,150,878 17,571,062 17,125,115
============== ============= ============ ============
Basic earnings per share $ 0.28 $ 0.11 $ 0.71 $ 0.23
============== ============= ============ ============
Diluted shares outstanding 22,004,210 17,616,696 18,046,997 17,465,598
============== ============= ============ ============
Diluted earnings per share $ 0.27 $ 0.11 $ 0.69 $ 0.23
============== ============= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
CAREMATRIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
for the nine months ended September 30, 1998 and September 30, 1997
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------------------
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Net earnings $ 12,452,959 $ 3,978,095
Noncash items included in net earnings:
Depreciation of fixed assets 910,731 481,365
Amortization of intangible assets 1,480,882 809,682
Amortization of lease acquisition costs 450,590 261,875
Accretion of deferred rent liability --- 48,336
Accretion of bargain purchase option --- 228,769
Increase in current assets (20,407,412) (10,146,319)
Changes in current liabilities 9,621,867 899,942
Other noncash items 85,050 ---
------------- --------------
Net cash provided (used) by operating activities 4,594,667 (3,438,255)
------------- --------------
Cash flows from investing activities:
Purchase of working capital notes --- (300,000)
Additions to property and equipment, net (6,949,802) (1,296,985)
Purchase of SeniorCare Group, Ltd., net of cash acquired (100,122,167) ---
Net change in assets held for sale --- (348,300)
Increase in lease deposits and other long-term assets (25,539,143) (1,023,149)
Lease acquisition costs, net (7,237,553) (7,132,949)
------------- --------------
Net cash used by investing activities (139,848,665) (10,101,383)
------------- --------------
Cash flows from financing activities:
Net increase in amounts due shareholder --- (142,035)
Borrowings under the line of credit 8,500,000 ---
Exercise of stock options and warrants 4,334,747 837,335
Proceeds from issuance of convertible subordinated notes --- 97,250,000
Repayment of debt, net (322,132) (2,602,398)
Other, net 60,454 ---
------------- --------------
Net cash provided by financing activities 12,573,069 95,342,902
------------- --------------
(Decrease) increase in cash and cash equivalents (122,680,929) 81,803,264
Cash and cash equivalents, beginning of period 155,721,903 58,803,105
------------- --------------
Cash and cash equivalents, end of period $ 33,040,974 $ 140,606,369
============= ==============
Other noncash items:
Conversion of convertible debentures into equity $ 2,000,000
=============
Issuance of stock options in connection with
the acquisition of SeniorCare Group, Ltd. $ 3,968,616
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
CareMatrix Corporation (the "Company") develops, manages and operates
assisted living facilities and various other health care facilities.
The accompanying interim unaudited financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such regulations. The
financial statements reflect all adjustments and disclosures which are, in the
opinion of management, necessary for a fair presentation of the financial
position and results of operations for the periods presented. All such
adjustments are of a normal recurring nature. The interim financial statements
should be read in conjunction with the Company's Annual Reports on Form 10-K and
Form 10-K/A for the year ended December 31, 1997, for additional disclosures.
The results of operations for the interim periods presented are not necessarily
indicative of the results that may be achieved for the full year. Certain
reclassifications have been made on the prior year's financial statements to
conform to the current year's presentations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.
2. RESTRICTED CASH
Cash collateral. Under the terms of an agreement to fix interest rates on
future leases with Chancellor Senior Housing Group, Inc., the Company is
required to maintain specified levels of cash collateral with a financial
institution. Interest on the funds held accrues to the benefit of the Company.
At September 30, 1998, the amount held as collateral was approximately $21.1
million.
Lease related. In connection with the acquisition of the management and
lease rights to four facilities in Connecticut, the Company initially deposited
$10.6 million into escrow. Interest on the funds held accrues to the benefit of
the Company. The funds, comprised of lease deposits and lease acquisition costs,
will be released from escrow when the certificate of occupancy is obtained for
each facility. At September 30, 1998, the remaining amount held in escrow was
approximately $5.7 million.
3. RELATED PARTY TRANSACTIONS
As used herein, a "Chancellor Entity" is Chancellor Senior Housing Group,
Inc. (a company primarily owned by Abraham D. Gosman, Chairman of the Board of
Directors of the Company, and certain members of the Company's senior
management) or a company in which Mr. Gosman and certain members of the
Company's senior management exercise significant control.
In January 1998, the Company purchased, for $0.8 million, a management
agreement for a skilled nursing facility located in Florida from PhyMatrix
Corp., a publicly-owned physician practice management company of which Mr.
Gosman is Chairman of the Board and Chief Executive Officer and of which he,
together with his two sons, beneficially owns approximately 24.6%.
6
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. RELATED PARTY TRANSACTIONS (continued)
In 1998, the Company has paid various Chancellor Entities a total of $7.0
million for lease rights to three facilities. The Company also exercised its
option to lease two facilities which it had been managing from certain
Chancellor Entities.
During 1998, the Company also paid a Chancellor Entity $2.0 million for
development and lease rights related to a senior living community in New York.
4. CONVERTIBLE DEBENTURES
In February 1998, the Company's 8.5% Convertible Debentures were converted
into 133,333 shares of the Company's common stock at $15.00 per share (see Note
8 in Notes to Financial Statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, as amended).
5. LINE OF CREDIT
In September 1998, the Company entered into an agreement with a bank for a
$15.0 million line of credit (the "Line of Credit"). The Line of Credit will be
used to fund ongoing working capital, acquisitions, letters of credit and
general corporate purposes. The Line of Credit bears interest at a spread over
LIBOR or Prime Rate as selected by the Company. The applicable spread is
determined based on a defined leverage ratio. The Line of Credit matures on
September 25, 2001 and is collateralized by the Company's accounts receivable.
6. EARNINGS PER SHARE
Earnings per share has been computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per share."
<TABLE>
<CAPTION>
Three months ended September 30, 1998
------------------------------------------
Basic earnings per share Earnings Shares Per share
- - ------------------------ ----------- ---------- ---------
<S> <C> <C> <C>
Earnings available to common
shareholders $ 4,937,234 17,670,260 $ 0.28
Effect of dilutive
securities:
Stock options and warrants --- 351,266 ---
6.25% Convertible Debentures 1,060,156 3,982,684 ---
----------- ---------- ---------
Diluted earnings per share $ 5,997,390 22,004,210 $ 0.27
=========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30, 1998
------------------------------------------
Basic earnings per share Earnings Shares Per share
- - ------------------------ ----------- ---------- ---------
<S> <C> <C> <C>
Earnings available to common
shareholders $12,452,959 17,571,062 $ 0.71
Effect of dilutive
securities:
Stock options and warrants --- 452,231 ---
8.5% Convertible Debentures --- 23,704 ---
----------- ---------- ---------
Diluted earnings per share $12,452,959 18,046,997 $ 0.69
=========== ========== =========
</TABLE>
7
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. EARNINGS PER SHARE (continued)
<TABLE>
<CAPTION>
Three months ended September 30, 1997
-----------------------------------------
Basic earnings per share Earnings Shares Per share
- - ------------------------ ----------- ---------- ---------
<S> <C> <C> <C>
Earnings available to common
shareholders $ 1,935,131 17,150,878 $ 0.11
Effect of dilutive
securities:
Stock options and warrants --- 465,818 ---
----------- ---------- ---------
Diluted earnings per share $ 1,935,131 17,616,696 $ 0.11
=========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30, 1997
-----------------------------------------
Basic earnings per share Earnings Shares Per share
- - ------------------------ ----------- ---------- ---------
<S> <C> <C> <C>
Earnings available to common
shareholders $ 3,978,095 17,125,115 $ 0.23
Effect of dilutive
securities:
Stock options and warrants --- 340,483 ---
----------- ---------- ---------
Diluted earnings per share $ 3,978,095 17,465,598 $ 0.23
=========== ========== =========
</TABLE>
7. NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income," ("FAS
130"). FAS 130 is effective for fiscal years beginning after December 15, 1997.
FAS 130 establishes standards for the reporting and display of all changes in
shareholders' equity during a reporting period except those resulting from
investments by or distributions to shareholders. For the periods included in
this Form 10-Q, the Company does not have items of comprehensive income
requiring reporting or disclosure.
The FASB has also issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Investments and Hedging Activities," ("FAS
133"). FAS 133 is effective for fiscal years beginning after June 15, 1999. FAS
133 requires that all derivatives are required to be recognized on the balance
sheet as either assets or liabilities and measured at fair value. The Company
does not have any derivative financials instruments to which this standard would
apply.
8. ACQUISITIONS AND SALES OF ASSETS
In September 1998, the Company completed the acquisition of six operating
and three development facilities ("SeniorCare") on Long Island, New York. A
tenth facility, located in New Jersey, will be acquired upon receiving all
necessary licenses.
Including the New Jersey facility, the acquisition price consists of
approximately $109.7 million in cash and future payments, 400,000 stock options
of the Company, and the assumption of approximately $43.9 million in debt.
In addition, the Company entered into an arrangement whereby the various
affiliated individuals (the "Sellers") have the right to put to the Company and
the Company has the right to buy from the Sellers certain pharmacy and home
health companies for the greater of $8.0 million or eight times net earnings
before income taxes for a specified period prior to closing.
8
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. ACQUISITIONS AND SALES OF ASSETS (continued)
During the quarter ended September 30, 1998, the Company purchased six
former facilities of The Standish Care Company, Inc. (see Note 1 of Notes to
Financial Statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended) it had previously been leasing under the
terms of various operating leases. The total purchase price was approximately
$8.4 million. Subsequently, three of these facilities representing 164 units
were sold.
9. OTHER EVENTS
In July 1998, the Company entered into an affiliation agreement with
National Assisted Living Limited Partnership. Under the terms of the agreement,
the various sides have a put and call related to up to 600 units in nine
facilities once they achieve stabilized occupancy. The Company is required to
make a purchase deposit of $0.6 million within five days after the certificate
of occupancy is obtained for a facility. In connection with entering into the
agreement, the Company made an initial deposit of $1.0 million.
10. PRO FORMA RESULTS OF OPERATIONS (UNAUDITED)
The following represents the unaudited pro forma combined results of
operations of the Company as if SeniorCare was acquired on January 1, 1997.
<TABLE>
<CAPTION>
Three month period Nine month Twelve month
ended period ended period ended
September 30, 1998 September 30, 1998 December 31, 1997
-------------------- ------------------ -----------------
<S> <C> <C> <C>
Revenue $ 44,574,244 $ 120,367,176 $ 94,913,386
Net earnings $ 4,564,779 $ 10,907,549 $ 3,659,347
Basic earnings per
share $ 0.26 $ 0.62 $ 0.21
Diluted earnings
per share $ 0.21 $ 0.60 $ 0.21
</TABLE>
The pro forma information given above does not purport to be indicative of
the results that actually would have been attained if the acquisition of
SeniorCare had occurred on the date noted, and is not intended to be a
projection of future results or trends.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company is a provider of assisted living services to the elderly. At
September 30, 1998, the Company operated 41 facilities in eleven states with a
capacity of approximately 5,100 residents. Of the facilities, 13 are owned, 14
are leased, and 14 are managed. In addition, the Company currently has under
development 84 facilities with a capacity of approximately 10,000 residents. The
Company provides assistance with the activities of daily living and other
personalized support services in a residential setting for elderly residents who
cannot live independently but who do not need the level of medical care provided
in a skilled nursing facility. The Company also provides additional specialized
care and services to residents with certain low acuity medical needs and
residents with Alzheimer's disease or other forms of dementia. By offering this
full range of services, the Company is able to accommodate the changing needs of
residents as they age within a facility and develop further physical or
cognitive frailties.
The Company derives its revenues from three primary sources: (i) resident
fees for the delivery of independent and assisted living and other long-term
care services; (ii) management services income for management of facilities; and
(iii) fee income from the development and construction of facilities. Resident
fees typically are paid monthly by residents, their families or other
responsible parties. Resident fees and management fees are recognized as
revenues when services are provided. Development fee revenue is recognized on
the percentage of completion basis.
The results of operations for the quarter and nine month period ended
September 30, 1998 include the results of SeniorCare Group, Ltd. ("SeniorCare")
for one month beginning September 1, 1998.
The following discussion, as well as other portions of this document,
includes certain statements which are or may be construed as forward looking
about the Company's business, sales and expenses, and operating and capital
requirements. Any such statements are subject to risks that could cause the
actual results or requirements to vary materially.
The quarter ended September 30, 1998 compared to the quarter ended
September 30, 1997
REVENUES. Resident operations revenue increased by $17.1 million for the
third quarter of 1998 compared to the same period in 1997. The increase is
comprised principally of revenue from facilities leased or owned for less than
one year and from fees related to management contracts and other services as a
result of the increase in the number of facilities under construction and in
operation. Comparable facility revenue decreased $0.3 million.
Development fee income was $6.4 million in the third quarter of 1998
versus $4.8 million in the same period in 1997. The increase is primarily due to
a higher number of projects in development in 1998 compared to the number of
projects in 1997.
FACILITY EXPENSES. Facility operating expenses were $20.8 million in the
third quarter of 1998 compared to $11.4 million in the same period of 1997, an
increase of $9.4 million. The increase is primarily due to a $9.8 million
increase from operating expenses from facilities leased or owned less than one
year. Comparable facility operating expenses decreased $0.4 million.
Facility lease expense was $4.3 million in the third quarter of 1998
compared to $2.4 million in the same period in 1997. The increase of $1.9
million is primarily due to facilities leased less than one year.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The quarter ended September 30, 1998 compared to the quarter ended
September 30, 1997 (continued)
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
third quarter of 1998 increased to $4.8 million from $3.7 million in the same
period of 1997. As a percentage of operating revenue, general and administrative
expenses in the third quarter of 1998 declined to 12.0% from 17.9% in the third
quarter of 1997. The increase in expense is primarily due to an increase in
salary and benefits expenses relating to the hiring of additional corporate
staff in anticipation of the Company's growth plans.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the third
quarter of 1998 increased $0.7 million compared to the same period in 1997. The
increase is due primarily to $0.3 million of depreciation of fixed assets from
newly acquired facilities (see Note 8 of Notes to Consolidated Financial
Statements), $0.3 million of amortization of other intangible assets, and $0.1
million of amortization of debt issuance costs
INTEREST AND OTHER INCOME AND INTEREST EXPENSE. Interest income for the
third quarter of 1998 was $2.0 million compared to $1.5 million for the same
period in 1997. Interest expense for the third quarter of 1998 increased to $2.2
million from $0.9 million for the same period in 1997. The increase is primarily
due to interest expense on the 6 1/4% Convertible Subordinated Notes (the
"Notes") (see Notes 8 of Notes to Financial Statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, as amended) and $0.3
million of interest related to debt assumed in the SeniorCare acquisition (see
Note 8 of Notes to Financial Statements).
INCOME TAXES. The Company's effective tax rate during the third quarter of
1998 was 41.0% compared to 40.2% in 1997. The increase in the effective tax rate
is due to the expected increase in the level of income subject to the federal
tax rate of 35.0% for 1998, as compared to 34.0% for 1997, and the utilization
in 1997 of certain tax benefits that had been fully reserved in 1996.
The nine months ended September 30, 1998 compared to the nine months
ended September 30, 1997
REVENUES. Resident operations revenue increased by $48.3 million for the
first nine months of 1998 compared to the same period in 1997. The increase is
comprised principally of revenue from facilities leased or owned for less than
one year and from fees related to management contracts and other services as a
result of the increase in the number of facilities under construction and in
operation. Comparable facility revenue increased $0.2 million.
Development fee income was $18.3 million in the first nine months of 1998
versus $11.9 million in the same period in 1997. The increase is primarily due
to a higher number of projects in development in 1998 compared to the number of
projects in 1997.
FACILITY EXPENSES. Facility operating expenses were $53.8 million in the
first nine months of 1998 compared to $26.0 million in the same period of 1997,
an increase of $27.8 million. The increase is primarily due to $27.0 million of
operating expenses from facilities leased or owned less than one year.
Comparable facility operating expenses increased $0.8 million.
Facility lease expense was $12.0 million in the first nine months of 1998
compared to $5.4 million in the same period in 1997. The increase of $6.6
million is primarily due to facilities leased less than one year.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The nine months ended September 30, 1998 compared to the nine months
ended September 30, 1997 (continued)
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
first nine months of 1998 increased to $14.3 million from $10.9 million in the
same period of 1997. As a percentage of operating revenue, general and
administrative expenses in the first nine months of 1998 declined to 13.8% from
22.2% in the first nine months of 1997. The increase in expense is primarily due
to an increase in salary and benefits expenses relating to the hiring of
additional corporate staff in anticipation of the Company's growth plans.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the first
nine months of 1998 increased $1.3 million compared to the same period in 1997.
The increase is due primarily to $0.3 million of depreciation of fixed assets
from newly acquired facilities (see Note 8 of Notes to Consolidated Financial
Statements), $0.7 million of amortization of other intangible assets, and $0.3
million of amortization of debt issuance costs.
INTEREST AND OTHER INCOME AND INTEREST EXPENSE. Interest income for the
first nine months of 1998 was $6.5 million compared to $3.1 million for the same
period in 1997. The increase is primarily due to higher average cash balances
due to the issuance in 1997 of the Notes. Interest expense for the first nine
months of 1998 increased to $5.9 million from $1.4 million for the same period
in 1997. The increase is primarily due to interest expense on the Notes and $0.3
million of interest related to debt assumed in the SeniorCare acquisition (see
Note 8 of Notes to Consolidated Financial Statements).
INCOME TAXES. The Company's effective tax rate during the first nine
months of 1998 was 41.0% compared to 40.2% in 1997. The increase in the
effective tax rate is due to the expected increase in the level of income
subject to the federal tax rate of 35.0% for 1998, as compared to 34.0% for
1997, and the utilization in 1997 of certain tax benefits that had been fully
reserved in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and restricted cash at September 30, 1998 were
$33.0 million compared to $155.7 million at December 31, 1997, a decrease of
approximately $122.7 million, primarily due to the acquisition of SeniorCare.
Cash provided by operations was $4.6 million in the first nine months of
1998 compared to a use of $3.4 million for the same period in 1997. The increase
in the cash provided by operations is due primarily to an increase in net
earnings before depreciation and amortization of $9.8 million, and a net
increase in current liabilities of $6.2 million which is primarily due to the
leasing of new facilities, offset by an increase in current assets of $10.3
million which is primarily due to increases in receivables from new facilities
in development and operation.
Cash used in investing activities was $139.8 million in the first nine
months of 1998 compared to a use of $10.1 million for the same period in 1997.
The increase in the use of cash is due primarily to the purchase of SeniorCare
(see Note 8 of Notes to Consolidated Financial Statements) for $100.1 million,
$18.4 million for lease acquisition costs and lease deposits for ten facilities,
$6.9 million in additions to property and equipment due primarily to the
purchase of three facilities (see Note 8 of Notes to Consolidated Financial
Statements), $5.8 million for the purchase of working capital notes for three
facilities, $4.5 million from a note receivable for three facilities that were
sold ( see Note 8 of Notes to Consolidated Financial Statements) and a $4.3
million increase in various joint venture investments.
Cash flows provided by financing activities were $12.6 million in
the first nine months of 1998 compared to cash provided by of $95.3
million for the same period in 1997. The decrease is due primarily to
the issuance in the prior year of the Notes.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
The Company will require resources in the future to fund the planned
acquisition and development of additional assisted living, supportive
independent and extended care facilities as well as its working capital
requirements. The Company expects to partially fund these resource requirements
with its cash on hand as well as related party or third-party financing of
assisted living facilities. The Company and certain related parties are
presently in discussions with a number of third parties to secure commitments
regarding sources of additional financing. Furthermore, the Company intends to
seek bank borrowings and other debt or equity financings to provide additional
sources of capital in the future.
Year 2000
The Year 2000 problem concerns the inability of information systems to
recognize properly and process date-sensitive information beyond January 1,
2000. In July 1998, the Company initiated a formal program to identify and
resolve Year 2000 issues. The scope of the program includes the investigation of
all Company functions and services, including embedded systems in what are not
traditionally considered information technology systems. The program consists of
a two major phases, detection (planning and awareness, systems inventory, and
assessment) and correction (resolution, resource allocation, test plans, test
execution, and implementation).
The Company has identified its resident billing and general ledger as
internal systems that present a high level of risk from a Year 2000 perspective.
The Company has also identified several key external systems that could pose
significant risk to the Company: those of various governmental agencies,
particularly Medicare and Medicaid, its payroll provider, and its investment
management companies and other financial intermediaries. The Company has also
acquired several facilities and/or utilizes third-party management companies to
provide financial information. These acquired systems must also be brought into
the Company's program.
The Company has completed the planning and awareness and systems inventory
phases of the program. The assessment phase is scheduled to be completed in the
first quarter of fiscal 1999, with the correction phase being completed by the
second quarter of the same year. The Company is beginning the process of
assessing the risk of supplier readiness, and in selected cases will review the
preparedness of individual suppliers for the Year 2000 problem.
The Company currently estimates the cost of the Year 2000 program will
approximate $200,000, with a range of plus or minus twenty-five percent. All
costs, except long-lived assets, are expensed as incurred. These costs include
the costs of outside consultants, systems replacements, and other equipment
requirements.
Ultimately, the potential impact of the Year 2000 issue will depend not
only on the corrective measures the Company undertakes, but also on the way in
which the Year 2000 issue is addressed by governmental agencies, businesses and
other entities whose financial condition or operational capability is important
to the Company. Communications with significant third parties will be initiated
to determine the extent of risk created by those third parties' failure to
remediate their own Year 2000 issues; however, it is not possible, at present,
to determine the financial effect if their remediation efforts are not completed
in a timely manner. While the Company expects to resolve all Year 2000 risks
without a material adverse impact on its results of operations and financial
position, there can be no assurance as to the ultimate success of the program.
Uncertainties exist as to the Company's ability to detect all Year 2000 problems
as well as its ability to achieve successful and timely resolution of all Year
2000 issues. A "reasonably likely worst case" scenario of Year 2000 risks for
the Company could include the inability to receive reimbursement from Medicare
and Medicaid, and problems involving the inability of the Company's financial
intermediaries to accurately reflect the Company's cash position. The
consequences of these issues may include lost revenue and lower cash receipts.
The Company is unable to quantify the potential effect of these items on its
results of operations, liquidity, and financial position should some or a
combination of these events occur.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
In addition, because the Company's day-to-day operations are heavily
dependent on its ability to communicate information throughout its network of
facilities, the Company would be particularly susceptible to any possible
effects that the Year 2000 issue has on local and national communications
systems, including without limitation, telephone and data lines, because of the
difficulty in implementing viable contingency plans. Any interruption or
malfunction of such systems could have a material adverse effect on the Company.
As the correction phase of the program is completed in mid-1999, the
Company expects to have developed contingency plans, which would augment
existing contingency plans, for the then current risks.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to litigation in the ordinary course of
business. The Company does not believe that any such litigation will
have a material adverse effect on its business, financial position
or results of operations.
ITEM 2. CHANGES IN SECURITIES
In connection with the exercise of warrants issued by the Company,
the following parties were issued shares of the Company's Common
Stock pursuant to an exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended:
<TABLE>
<CAPTION>
Shares of
Date exercised Common Stock Exercise price
------------------------------------------------------
<S> <C> <C> <C>
Dennis K. Waldman July 13, 1998 1,000 $18.90
Dennis K. Waldman August 3, 1998 1,370 18.90
-------
Total shares of Common Stock: 2,370
========
</TABLE>
ITEM 5. OTHER INFORMATION
The holders of proxies solicited by the Board of Directors of the
Company, to the extent discretionary authority is conferred upon
them by stockholders, shall have the right to exercise such
authority to vote on any matter properly brought to a vote of the
stockholders of the Company at the annual meeting of stockholders to
be held in 1999, with the exception of matters to be brought before
the 1999 annual meeting about which the Company received notice on
or prior to March 29, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a). The following exhibits are filed as part of this report:
3.01 Corrected Third Restated Certificate of Incorporation of CareMatrix
Corporation (2)
3.02 By-laws of CareMatrix Corporation, as amended through December 9,
1996 (1)
10.01 Management agreement dated as of January 30, 1997 between CareMatrix
of Massachusetts, Inc. and Chancellor of Stuart, Inc. (*)
10.02 Management agreement dated as of April 7, 1997 between CareMatrix of
Massachusetts, Inc. and Chancellor of Bonita Springs, Inc. (*)
10.03 Consulting agreement dated as of December 31, 1997 between CCC of
New Jersey, Inc. and CareMatrix of Massachusetts, Inc. (*)
10.04 First amendment to management agreement dated as of April 15, 1998
between CareMatrix of Massachusetts, Inc. and Chancellor of Bonita
Springs, Inc. (*)
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
10.05 First amendment to management agreement dated as of April 15, 1998
between CareMatrix of Massachusetts, Inc. and Chancellor of Stuart,
Inc. (*)
10.06 Consulting agreement dated as of July 1, 1998 between Chancellor of
Bonita Springs, Inc. and CareMatrix of Massachusetts, Inc. (*)
10.07 Consulting agreement dated as of July 1, 1998 between Chancellor of
Aberdeen, Inc. and CareMatrix of Massachusetts, Inc. (*)
10.08 Consulting agreement dated as of July 1, 1998 between Chancellor of
Deerfield Beach, Inc. and CareMatrix of Massachusetts, Inc. (*)
10.09 Consulting agreement dated as of July 1, 1998 between Chancellor of
Stuart, Inc. and CareMatrix of Massachusetts, Inc. (*)
10.10 Consulting agreement dated as of July 1, 1998 between CCC of New
Jersey, Inc. and CareMatrix of Massachusetts, Inc. (*)
10.11 Facility lease agreement dated as of August 7, 1998 between CCC of
New Jersey, Inc. and CareMatrix of Princeton (SNF), Inc. (*)
10.12 Credit agreement dated as of September 25, 1998 between CareMatrix
Corporation and the Chase Manhattan Bank (*)
27 Financial Data Schedule (*)
(b). Reports on Form 8-K
A report on Form 8-K dated July 13, 1998 was filed that stated the Company
entered into a Purchase Agreement among Robert Kaplan, Deborah
Kaplan-Brooks, Barton Kaplan and Edward Kaplan and a subsidiary of the
Company.
A report on Form 8-K dated September 15, 1998 was filed that stated the
Company closed the acquisition of the majority equity interests of Robert
Kaplan, Deborah Kaplan-Brooks, Barton Kaplan and Edward Kaplan in certain
corporations and limited liability companies. Such form was amended on
November 13, 1998 to provide the required combined unaudited pro forma
financial statements and historical SeniorCare Group, Ltd. and Affiliates
audited financial statements.
-------------------------------
(*) Filed herewith.
(1) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities and Exchange Act of 1934, as amended, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
-------------------------
Robert M. Kaufman
Chief Executive Officer
Dated: November 16, 1998
17
<PAGE>
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is dated as of the 30th day of
January 1997, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 (the "Manager"), and Chancellor of Stuart, Inc., a Delaware
corporation, with an office at 197 First Avenue, Needham, Massachusetts 02194
(the "Owner").
WHEREAS, the Owner is the operator of a one hundred forty-eight (148) unit
assisted/independent living facility to be located in Jensen Beach, Florida (the
"Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager
will augment the services provided by it and the employees of the Facility so as
to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote, terminate or fire (subject to the rights of the
<PAGE>
Owner under Section 2.1 of this Agreement to approve the hiring, disciplining
and termination of the Executive Director, the Assistant Administrator and
Director of Resident Services) all personnel involved in the administration and
day-to-day operation of the Facility, including, without limitation, management,
resident assistance and other related personnel, custodial, food service,
cleaning, maintenance and other operational personnel, and secretarial or
bookkeeping personnel, each of whom, other than the Executive Director (as
hereinafter described), shall be employees of the Owner; supervise the
accounting, billing, purchasing and bill payment functions for the Facility;
establish systems of accounts and supervise the maintenance of ledgers and other
primary accounting records by the personnel of the Facility; supervise the
financial affairs of the Facility; establish and supervise the implementation of
operating and capital budgets, including those required to establish
reimbursement rates, if any, with respect to state or federal entitlement
programs as well as self-pay rates; prepare and maintain true, complete and
accurate records necessary for the preparation of such operating budgets;
determine which items of cost and expense properly relate to resident care;
establish and administer financial controls over the operation of the Facility,
develop and establish financial standards and norms by which the income, costs
and operations of the Facility may be evaluated; serve as advisor and consultant
in connection with policy decisions to be made by the Owner; furnish reports to
the Owner as the Owner may reasonably request and provide the Owner with
economic and statistical data in connection with or relative to the operations
of the Facility; represent the Facility in its day-to-day dealings with
creditors, residents, personnel, agents for collection, and insurers; act as
agent for the Owner in disbursing or collecting the funds of the Facility and in
paying the debts and fulfilling the obligations of the Facility; coordinate and
supervise a marketing plan for the Facility to insure that the Facility obtains
full occupancy as soon as possible and, after the Facility has achieved full
occupancy, assist in the development of an annual marketing plan and budget to
maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
2
<PAGE>
2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and
hire a qualified and properly licensed Executive Director (provided, however,
that the wages, salaries and other compensation of the Executive Director shall
be the responsibility of the Owner as set forth in Section 4.2 hereof) who shall
be responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all resident
assistance, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Executive Director shall be the employee of the Manager (subject to Section 4.2
hereof) and all such other personnel shall be employees of the Owner, and the
Owner shall retain full responsibility for payment of wages, salaries and other
compensation and benefits for the Executive Director and such other employees.
The Manager shall, subject to approval by the Owner, establish necessary and
desirable personnel policies and procedures, wage structures and staff
schedules. The Manager, subject to approval by Owner, shall have authority to
hire, discipline, promote and discharge employees of the Owner who participate
in the day-to-day operation and administration of the Facility. Both the Manager
and the Owner must approve the hiring and/or firing of the Executive Director,
Assistant Administrator and the Director of Resident Services, which approval
shall not be unreasonably withheld or delayed. The Manager shall: (i) maintain
or cause to be maintained payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager and such direction,
policy or procedure is subsequently determined to be the result of gross
negligence. The Manager shall provide the Owner with quarterly reports of all
hiring, disciplinary actions, promotions and firings at the Facility for the
month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager
3
<PAGE>
attempts to notify the Owner on a concurrent basis). The Manager shall prepare
and submit to the Owner any certificates of purchasing expenses incurred for the
Facility as may be reasonably requested.
2.3 Collection of Accounts. The Manager shall supervise the
Facility bookkeeping personnel who shall prepare and submit bills and collect
for the account of the Owner any and all moneys owing to the Owner from
residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record
and bookkeeping system for the operation and conduct of business of the Facility
in accordance with generally accepted accounting principles consistently
applied. Books and records at the Facility may be maintained by an employee of
the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times during normal business hours be open for inspection by representatives of
the Owner.
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after
the close of each calendar month, a balance sheet as of the end of the month and
a statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after
the close of each fiscal year, a year-end compilation report, including a
balance sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be
required under any financing terms in accordance with the deadlines set forth in
any financing agreements encumbering the Facility (any such financing agreement
or agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
2.7 Budgets. The Manager shall prepare and submit for approval by
the Owner the following: (a) as soon as possible and not later than thirty (30)
days before the close of each fiscal year, or on such earlier date as may be
required under any Financing Agreement, a detailed written capital and operating
budget for the next succeeding fiscal year, broken down by month
4
<PAGE>
and showing projected expenditures and projected revenues for such budget
period; and (b) such other budgets as may be reasonably required of the Owner
under any Financing Agreement or by regulatory authorities showing, inter alia,
projected ordinary and extraordinary expenditures and protected revenues for
such budget period.
2.8 Insurance. The Manager shall obtain, at the Owner's expense,
on behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and
supervise the agreed upon marketing plan for the Facility during the fill-up
phase (the "Marketing Plan"). Monthly statistical census analysis reports will
be generated by the Manager and delivered to the Owner. The Manager will
recommend adjustments in the Marketing Plan as needed to achieve full occupancy.
For purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment
of, and implement and supervise procedures to provide staff review of all
operational areas, which status shall be reviewed in regularly scheduled
quarterly meetings and at other meetings as may be deemed necessary or desirable
by the Owner.
2.12 Plant and Maintenance.
(i) attention shall be given to preventive maintenance
(this item may be provided by outside parties if economically feasible) and, to
the extent deemed feasible by the
5
<PAGE>
Manager and the Owner, the services of regular Facility maintenance employees
shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
3. Management Fee. As compensation for the services to be rendered by
the Manager during the Term (as hereinafter defined), the Manager shall pay
itself, at its principal office as set forth in Section 18 (or at such other
place as the Manager may from time to time designate in writing), and at the
times hereinafter specified, a monthly management fee (the "Management Fee")
equal to (i) Ten Thousand ($10,000) Dollars per month until the opening of the
Facility for occupancy, (ii) the greater of Ten Thousand ($10,000) Dollars per
month or five (5%) percent of Net Revenues (as hereinafter defined) for the
period commencing on the opening of the Facility for occupancy through the last
day of the twelfth (12th) month following such date, and (iii) five (5%) percent
of Net Revenues for the period commencing on the first day of the month
immediately after the period described in the foregoing clause (ii) through the
remainder of the Term. The Management Fee will be paid in arrears and shall be
due and payable on or before the fifteenth (15th) day of each month following
the month in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of residents directly or
indirectly connected with the Facility or the provision of all such goods and
services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following
expenses incurred by it in the management of the business and properties of the
Facility:
(a) Salary and expenses (including, without limitation,
payroll taxes, costs of employee benefit plans, travel, insurance, and fidelity
bonds) of all personnel employed by the Manager (other than the Executive
Director, who will be paid by the Owner as set forth in Section 4.2 hereof) to
carry out all responsibilities detailed above.
(b) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans, travel, insurance and fidelity
bonds) of all of the Manager's home office personnel and overhead.
6
<PAGE>
4.2 Owner Expenses. Except as otherwise expressly provided herein,
the Owner shall bear all of the expenses of operating and financing the Facility
and rendering resident services not assumed by the Manager, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons
expressly retained by the Owner, or retained by the Manager for the account of
the Owner with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of all staff employed at the Facility by
the Owner, including, without limitation, all administrative, medical, resident
assistance and other health care personnel and the Executive Director;
custodial, food service, cleaning, maintenance, operational, secretarial and
bookkeeping personnel employed to administer the day-to-day operations of the
Facility and to perform health care and related services in the day-to-day
operations of the Facility's business.
(b) Principal, interest and discounts on indebtedness
incurred or assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of the Owner, provided,
however, that all interest and penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager is required to file
pursuant to this Agreement, or to make timely payment of all taxes, levies,
imposts, or other charges, to the extent that sufficient funds were available to
the Manager as of the date such payments were due, shall be the responsibility
of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen
and food service equipment, linens, beds, furniture, clothing and all other
supplies and equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the
design, acquisition, disposition or ownership of real and personal property
devoted, used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
(g) Legal fees and related expenses pertaining to the
Facility, and any other litigation or proceedings to which the Owner is a party.
However, such fees shall not include those fees resulting from or arising out of
the gross negligence by the Manager and the Owner shall provide such necessary
funds to the Manager within ten (10) days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be
7
<PAGE>
paid on behalf of the Owner by the Manager, the Manager shall promptly notify
the Owner of the amount necessary to cure and the reason for such deficit and
the Owner shall provide such necessary funds to the Manager within ten (10) days
after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the
overall rate structure of the Facility and shall supervise the issuance of bills
and the collection of accounts as the true and lawful attorney-in-fact for the
Owner. The Manager shall take possession of and endorse the name of the Owner on
all notes, checks, money orders, insurance payments, and any other instruments
received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the
Facility in the Owner's name, separate from all other accounts and funds of the
Manager, with a bank or banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") or with a savings and loan institution or
institutions whose deposits are insured by the Federal Savings and Loan
Insurance Corporation ("FSLIC") as it deems necessary or desirable. The Manager,
on behalf of the Owner, shall use reasonable efforts to collect (using legal
counsel approved by the Owner, if necessary) all sums due and owing to Owner in
connection with the operation of the Facility. The Manager and the Owner shall
deposit into such accounts all monies furnished by the Owner as working funds
and all receipts and monies arising from the operation of the Facility or
otherwise received by the Owner or by the Manager for or on the behalf of the
Owner.
(iii) Draws on such accounts may be made by the sole
signature of an authorized representative of the Manager (or by wiring
instructions from such authorized representative of the Manager) and shall be
paid to the Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Owner hereby appoints the
Manager, for the term of this Agreement, as the Owner's true and lawful
attorney-in-fact to withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in connection
with the operation of the Facility. The Owner agrees to execute from time to
time any additional documents required by any bank wherein such documents are
held to effectuate all powers of attorney referred to herein. The Manager shall
make disbursements and payments from such accounts, on behalf and in the name of
the Owner, in such amounts and at such times as are deemed by the Manager to be
appropriate or required in connection with, first, payments required by any
Financing Agreement, and second, payments of ownership, maintenance and
operating expenses of the Facility and the other costs, expenses and
expenditures provided for in this Agreement including the Management Fee.
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, 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.
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All dealings between the Owner and the Manager are at arms length as between
non-related parties.
7. Term and Termination.
7.1 Term. This Agreement shall continue for an initial term (the
"Initial Term") commencing on the date which is twelve (12) months prior to the
anticipated date (as mutually agreed to by the Owner and the Manager) for the
opening of the Facility and continue for a period of ten (10) years after the
date on which the Facility is opened for occupancy. The Owner and Manager agree
to execute a certificate setting forth the date on which the Initial Term
commences promptly after such opening. The Term of this Agreement shall be
automatically renewed for three (3) additional five (5) year terms (the "Renewal
Terms)", unless the Manager sends the Owner written notice no less than ninety
(90) days prior to the Initial Term or the then applicable Renewal Term, as the
case may be. The Initial Term and the Renewal Terms being collectively referred
to herein as the "Term".
7.2 Termination for Cause. Either party may terminate this
Agreement by delivering thirty (30) days written notice (a "Termination Notice")
to the other party in the event that any of the following occurs:
(i) any illegal act engaged in by any party in the
operation of the Facility;
(ii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing; or
(iii) the breach by any party (the "Breaching Party") of
any other material provision in, or obligation imposed by, this Agreement which
violation shall have not been cured to the reasonable satisfaction of the other
party (the "Claiming Party") within thirty (30) days following the date on which
the Claiming Party delivers notice to the Breaching Party describing with
specificity both the claimed breach and the actions required to be taken in
order to cure the claimed breach; provided that in the event that the claimed
breach is not reasonably susceptible of being cured within thirty (30) days, the
cure period shall be extended for such additional time as may be reasonably
required, provided further that in the event that the Claiming Party delivers a
Termination Notice and the Breaching Party commences legal proceedings
contesting the termination within thirty (30) days following delivery of the
Termination Notice, then this Agreement shall not terminate unless and until a
final judicial resolution of such legal proceedings beyond the expiration of any
appeal period has been issued upholding said termination.
7.3 Termination for Failure to Pay Fee on a Timely Basis. In
addition to the provisions of Section 7.2 above, the Manager may terminate this
Agreement upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within ten
(10) days after receiving written notice from the Manager.
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8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to keep true, accurate and complete
records. The Manager shall indemnify the Owner and hold it harmless of, from and
against all Costs incurred or suffered by the Owner as a result of any of the
Manager's fraud, willful misconduct, or gross negligence, or as a result of the
Manager's failure to submit proper reports to the appropriate regulatory
agencies or to keep true, accurate and complete records.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v)(1)(i) of the Social Security Act (the "Act"), the Manager
shall, upon written request and in accordance with the above-mentioned section
of the Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provisions of this Section shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any change in any applicable law which has the effect of
rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that in the event that any part of this Agreement
is rendered invalid, illegal, or unenforceable, that they shall negotiate in
good faith to amend any such part of this Agreement so as to comply with any
such law, as amended, and further the respective objectives of the parties
hereto.
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13. Assignment. Subject to Section 8 hereof, neither the Owner nor the
Manager will assign its interests in this Agreement, without the prior written
consent of the other; provided that the Manager may assign its interests
hereunder to an affiliate.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert M. Kaufman, Chief Executive Officer
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
General Counsel/Executive Vice President
As to Owner: Chancellor of Stuart, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: General Counsel
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail or are hand delivered shall be deemed
received upon delivery or when delivery is refused to the office or address of
the addressee.
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the
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property of the Manager. All financial management forms, documents and software
systems including, but not limited to, bookkeeping manuals, financial forms,
financial spreadsheets, database or word processing forms, financial accounting
packages and outcome information systems are and will remain the property of the
Manager. Upon termination of this Agreement, the Owner shall have the option to
purchase operational material belonging to the Manager, except for the financial
accounting packages and outcome information systems, at a mutually agreed upon
price.
18. Lease Option. The Owner hereby agrees that so long as the Manager is
not in default in the performance of any duty or any obligation hereunder, the
Manager shall have the option to lease the Facility at any time during the term
of this Agreement (including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such election. Within thirty
(30) days after the receipt of the Manager's notice to lease, the parties shall
enter into a lease agreement substantially in the form attached hereto as
Exhibit A (the "Lease"), which Lease shall include, without limitation, a ten
(10) year initial term (with three (3) 5-year renewal terms) and rental payments
equal to the fair market value (which will be a negotiated percentage of total
project costs) as determined immediately prior to the initial term of the Lease
and immediately prior to any renewal terms.
19. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
By: By: /s/ Richard Zermani
----------------------- ---------------------------
Name: Name: Richard Zermani
Title: Senior Vice President
WITNESS:
CHANCELLOR OF STUART, INC.
By: By: /s/ Richard Zermani
----------------------- ---------------------------
Name: Name: Richard Zermani
Title: Vice President
12
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is dated as of the 7th day of
April 1997, by and among CareMatrix of Massachusetts, Inc., a Delaware
corporation, with its principal place of business at 197 First Avenue, Needham,
Massachusetts 02194 (the "Manager"), and Chancellor of Bonita Springs, Inc., a
Delaware corporation, with an office at 197 First Avenue, Needham, Massachusetts
02194 (the "Owner").
WHEREAS, the Owner is the operator of a one hundred forty-eight (148) unit
assisted/independent living facility to be located in Bonita Springs, Florida
(the "Facility");
WHEREAS, the Owner determined that the hiring of a management company to
provide day-to-day management of the Facility is necessary for the efficient
operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of similar facilities, is knowledgeable as to the state and federal
requirements governing the operation of senior housing facilities and that the
owners and employees of Manager are qualified management professionals;
WHEREAS, based upon the Manager's representations set forth herein, the
Owner has determined that the hiring of the Manager is cost-effective and
consistent with the Owner's desire to provide quality care to the residents at
the Facility at the lowest cost;
WHEREAS, the Owner has determined that the services provided by Manager
will augment the services provided by it and the employees of the Facility so as
to increase productivity;
WHEREAS, the Owner has determined that the hiring of the Manager on the
terms and conditions hereinafter set forth will not prevent the Owner from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of the
Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Owner engages the Manager to manage and supervise
the Facility with the objective of providing quality care and services to
residents of the Facility and to carry out the general duties with respect to
the Facility under the general supervision and direction of the Owner which
include, but are not limited to, the following:
Supervise on behalf of the Owner, the performance of all such
administrative functions as may be necessary in the management of the Facility;
select, hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote, terminate or fire (subject to the
<PAGE>
rights of the Owner under Section 2.1 of this Agreement to approve the hiring,
disciplining and termination of the Executive Director, the Assistant
Administrator and Director of Resident Services) all personnel involved in the
administration and day-to-day operation of the Facility, including, without
limitation, management, resident assistance and other related personnel,
custodial, food service, cleaning, maintenance and other operational personnel,
and secretarial or bookkeeping personnel, each of whom, other than the Executive
Director (as hereinafter described), shall be employees of the Owner; supervise
the accounting, billing, purchasing and bill payment functions for the Facility;
establish systems of accounts and supervise the maintenance of ledgers and other
primary accounting records by the personnel of the Facility; supervise the
financial affairs of the Facility; establish and supervise the implementation of
operating and capital budgets, including those required to establish
reimbursement rates, if any, with respect to state or federal entitlement
programs as well as self-pay rates; prepare and maintain true, complete and
accurate records necessary for the preparation of such operating budgets;
determine which items of cost and expense properly relate to resident care;
establish and administer financial controls over the operation of the Facility,
develop and establish financial standards and norms by which the income, costs
and operations of the Facility may be evaluated; serve as advisor and consultant
in connection with policy decisions to be made by the Owner; furnish reports to
the Owner as the Owner may reasonably request and provide the Owner with
economic and statistical data in connection with or relative to the operations
of the Facility; represent the Facility in its day-to-day dealings with
creditors, residents, personnel, agents for collection, and insurers; act as
agent for the Owner in disbursing or collecting the funds of the Facility and in
paying the debts and fulfilling the obligations of the Facility; coordinate and
supervise a marketing plan for the Facility to insure that the Facility obtains
full occupancy as soon as possible and, after the Facility has achieved full
occupancy, assist in the development of an annual marketing plan and budget to
maintain the resident census at a proper level; and do all other things
necessary or proper for the daily operation and management of the Facility,
including everything necessary to ensure compliance with all applicable local,
state and federal laws governing or applicable to senior housing facilities. In
addition, in order to plan for future operations and to establish long range
policies and goals for the Facility, the Manager will, under the general
supervision of the Owner, meet on at least a monthly basis with Owner's
representatives and the Executive Director to review financial and operational
statistics of the Facility. The Executive Director also will attend monthly
regional administrator meetings and educational programs.
The Manager further agrees that it will:
(i) perform its duties and responsibilities hereunder in compliance with
all applicable laws;
(ii) supervise and direct the management and operation of the Facility,
exercising the degree of care used by an experienced management company, given
the financial resources available to the Facility, the location of the Facility,
the restrictions of applicable laws, and other existing circumstances; and
(iii) consult with the Owner and keep the Owner advised as to all major
policy and business matters relating to the Facility.
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2. Specific Duties. Without limiting the generality of the foregoing, the
Manager shall have the following specific duties:
2.1 Employees. The Manager shall recruit, evaluate, select, and
hire a qualified and properly licensed Executive Director (provided, however,
that the wages, salaries and other compensation of the Executive Director shall
be the responsibility of the Owner as set forth in Section 4.2 hereof) who shall
be responsible for the functional operation of the Facility and supervision of
personnel at the Facility on a day-to-day basis, as well as all resident
assistance, custodial, food service, cleaning, maintenance, secretarial and
bookkeeping personnel for the day-to-day operations of the Facility. The
Executive Director shall be the employee of the Manager (subject to Section 4.2
hereof) and all such other personnel shall be employees of the Owner, and the
Owner shall retain full responsibility for payment of wages, salaries and other
compensation and benefits for the Executive Director and such other employees.
The Manager shall, subject to approval by the Owner, establish necessary and
desirable personnel policies and procedures, wage structures and staff
schedules. The Manager, subject to approval by Owner, shall have authority to
hire, discipline, promote and discharge employees of the Owner who participate
in the day-to-day operation and administration of the Facility. Both the Manager
and the Owner must approve the hiring and/or firing of the Executive Director,
Assistant Administrator and the Director of Resident Services, which approval
shall not be unreasonably withheld or delayed. The Manager shall: (i) maintain
or cause to be maintained payroll records and prepare weekly and monthly
payrolls, withholding taxes and Social Security taxes; (ii) prepare and submit
all required state and federal tax or benefit returns required with respect to
employees, including, without limitation, the returns required by FICA, FUTA and
all applicable unemployment compensation laws; (iii) maintain in force all
required levels of workers' compensation insurance; and (iv) prepare and submit
to the Owner any certificates of payroll expenses as may be reasonably
requested. The Manager shall not be liable to any employee of the Facility for
wages, salaries and other compensation and benefits, or to the Owner, unless the
Manager was specifically required to obtain the approval of the Owner before
committing to a salary or benefit and such approval was not obtained. The
Manager shall not be liable to the Owner or others for any action or omission on
the part of any employee of the Owner of the Facility, unless the employee was
acting under the express direction of the Manager or unless such employee was
following an express policy or procedure of the Manager and such direction,
policy or procedure is subsequently determined to be the result of gross
negligence. The Manager shall provide the Owner with quarterly reports of all
hiring, disciplinary actions, promotions and firings at the Facility for the
month.
2.2 Purchasing. The Manager shall purchase, for the account of the
Owner, all necessary foodstuffs, supplies, materials, appliances, tools and
equipment necessary for the operation of the Facility. The Manager shall arrange
contracts on behalf of the Owner for electricity, gas, telephone, cable
television and any other utility or service necessary for the operation of the
Facility. The Manager shall, on behalf of the Owner, contract for and supervise
the making of any necessary repairs, alterations, and improvements to the
Facility; provided that in the case of any capital expenditure, alteration or
improvement, the cost of which exceeds Ten Thousand ($10,000) Dollars, the
Manager shall obtain the prior written approval of the Owner; and provided
further, that no such prior written approval shall be required if the
expenditure is made under circumstances reasonably requiring emergency action
(so long as the Manager
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attempts to notify the Owner on a concurrent basis). The Manager shall prepare
and submit to the Owner any certificates of purchasing expenses incurred for the
Facility as may be reasonably requested.
2.3 Collection of Accounts. The Manager shall supervise the
Facility bookkeeping personnel who shall prepare and submit bills and collect
for the account of the Owner any and all moneys owing to the Owner from
residents.
2.4 Bookkeeping. The Manager shall establish and maintain a record
and bookkeeping system for the operation and conduct of business of the Facility
in accordance with generally accepted accounting principles consistently
applied. Books and records at the Facility may be maintained by an employee of
the Owner under the supervision of the Manager. Full books of account with
entries of all receipts and expenditures related to the operation of the
Facility shall be maintained at the offices of the Manager and shall at all
times during normal business hours be open for inspection by representatives of
the Owner.
2.5 Financial Reports. The Manager shall furnish to the Owner the
following financial reports:
(a) as soon as possible and not later than thirty (30) days after
the close of each calendar month, a balance sheet as of the end of the month and
a statement of income and retained earnings for the month and for the
year-to-date, together with a comparison to the budget and a detailed statement
of receipts, disbursements, accounts payable and accounts receivable as of the
end of such monthly period; provided, however, that the computer services
charges connected with the preparation of such information shall not be an
expense of the Owner;
(b) as soon as possible, and not later than sixty (60) days after
the close of each fiscal year, a year-end compilation report, including a
balance sheet as of the end of such year and a statement of income and retained
earnings; and
(c) such other and further reports or calculations as may be
required under any financing terms in accordance with the deadlines set forth in
any financing agreements encumbering the Facility (any such financing agreement
or agreements are collectively referred to herein as a "Financing Agreement").
2.6 Residents. In accordance with the provisions of all applicable
state and federal statutes, as amended from time to time, the Manager shall use
its best efforts to maintain the resident census at the Facility in such numbers
and in such a manner as, in the Manager's judgment, will tend to maintain the
financial stability of the Facility and will comply with the covenants in any
Financing Agreement.
2.7 Budgets. The Manager shall prepare and submit for approval by
the Owner the following: (a) as soon as possible and not later than thirty (30)
days before the close of each fiscal year, or on such earlier date as may be
required under any Financing Agreement, a detailed written capital and operating
budget for the next succeeding fiscal year, broken down by month
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and showing projected expenditures and projected revenues for such budget
period; and (b) such other budgets as may be reasonably required of the Owner
under any Financing Agreement or by regulatory authorities showing, inter alia,
projected ordinary and extraordinary expenditures and protected revenues for
such budget period.
2.8 Insurance. The Manager shall obtain, at the Owner's expense,
on behalf of the Owner and with the Owner's prior approval, all necessary
liability, fire and extended coverage, workers' compensation, and malpractice
insurance covering the Facility, its equipment, the employees of the Owner, and
the employees of Manager, if any, who relate to the operations of the Facility,
which policies of insurance shall name the Owner and the Manager as coinsured
and which policies shall comply with the terms of any Financing Agreement. The
Owner shall bear the expense of the above with respect to the Owner's employees,
equipment and the Facility. The Manager shall bear the expense of the above with
respect to the Manager's employees, if any. Such insurance shall be written by a
responsible insurance company or companies reasonably satisfactory to the Owner
in kinds and amounts and a certificate of insurance shall by provided to the
Owner. The Owner shall retain the right to designate any insurance agent or
agency of its choice through which such insurance shall be obtained.
2.9 Technical and Professional Services. The Manager may, with the
prior approval of the Owner and at the Owner's expense, secure such engineering,
legal, and other specialized technical and professional services as may be
necessary to advise or represent the Owner in connection with any matter
involving or arising out of the ownership and operation of the Facility or the
conduct of affairs of the Facility.
2.10 Marketing. The Manager shall agree to coordinate and
supervise the agreed upon marketing plan for the Facility during the fill-up
phase (the "Marketing Plan"). Monthly statistical census analysis reports will
be generated by the Manager and delivered to the Owner. The Manager will
recommend adjustments in the Marketing Plan as needed to achieve full occupancy.
For purposes of this Agreement, the Facility will be considered to have achieved
full occupancy when ninety percent (90%) of its units have been occupied for a
continuous ninety (90) day period. The Manager will assist the management staff
in the continued development and coordination of advertising and promotional
materials, internal and external public relations programs, sales and staff
development programs, and customer satisfaction programs. The Manager shall
assist the Facility's management staff to develop a yearly Marketing Plan and
budget based upon the Facility's yearly census program and image.
2.11 Administrative. The Manager shall recommend the establishment
of, and implement and supervise procedures to provide staff review of all
operational areas, which status shall be reviewed in regularly scheduled
quarterly meetings and at other meetings as may be deemed necessary or desirable
by the Owner.
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2.12 Plant and Maintenance.
(i) attention shall be given to preventive maintenance
(this item may be provided by outside parties if economically feasible) and, to
the extent deemed feasible by the Manager and the Owner, the services of regular
Facility maintenance employees shall be used; and
(ii) the Manager shall make recommendations to the Owner
regarding entering into contracts with qualified independent contractors for the
maintenance and repair of air conditioning systems and laundry equipment and for
extraordinary repairs beyond the capability of regular Facility maintenance
employees.
3. Management Fee. As compensation for the services to be rendered by the
Manager during the Term (as hereinafter defined), the Manager shall pay itself,
at its principal office as set forth in Section 18 (or at such other place as
the Manager may from time to time designate in writing), and at the times
hereinafter specified, a monthly management fee (the "Management Fee") equal to
(i) Ten Thousand ($10,000) Dollars per month until the opening of the Facility
for occupancy, (ii) the greater of Ten Thousand ($10,000) Dollars per month or
five (5%) percent of Net Revenues (as hereinafter defined) for the period
commencing on the opening of the Facility for occupancy through the last day of
the twelfth (12th) month following such date, and (iii) five (5%) percent of Net
Revenues for the period commencing on the first day of the month immediately
after the period described in the foregoing clause (ii) through the remainder of
the Term. The Management Fee will be paid in arrears and shall be due and
payable on or before the fifteenth (15th) day of each month following the month
in which services were rendered.
"Net Revenues" as used herein shall mean Gross Revenues (defined below)
less contractual adjustments for uncollectible accounts.
"Gross Revenues" as used herein shall mean and include all revenues
received or receivable from or by reason of the operation of the Facility,
including, without limitation, all revenue of the Facility for or on account of
any and all goods provided and services rendered or activities during the period
from the date of this Agreement and thereafter, the gross dollar amount of all
such billings by the Facility to or on behalf of residents directly or
indirectly connected with the Facility or the provision of all such goods and
services.
4. Expenses.
4.1 Manager Expenses. The Manager shall bear the following
expenses incurred by it in the management of the business and properties of the
Facility:
(a) Salary and expenses (including, without limitation,
payroll taxes, costs of employee benefit plans, travel, insurance, and fidelity
bonds) of all personnel employed by the Manager (other than the Executive
Director, who will be paid by the Owner as set forth in Section 4.2 hereof) to
carry out all responsibilities detailed above.
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(b) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans, travel, insurance and fidelity
bonds) of all of the Manager's home office personnel and overhead.
4.2 Owner Expenses. Except as otherwise expressly provided herein,
the Owner shall bear all of the expenses of operating and financing the Facility
and rendering resident services not assumed by the Manager, and without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of independent professional persons
expressly retained by the Owner, or retained by the Manager for the account of
the Owner with the prior permission of the Owner, for any purpose; salary, other
compensation or benefits and expenses of all staff employed at the Facility by
the Owner, including, without limitation, all administrative, medical, resident
assistance and other health care personnel and the Executive Director;
custodial, food service, cleaning, maintenance, operational, secretarial and
bookkeeping personnel employed to administer the day-to-day operations of the
Facility and to perform health care and related services in the day-to-day
operations of the Facility's business.
(b) Principal, interest and discounts on indebtedness
incurred or assumed by the Owner.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of the Owner, provided,
however, that all interest and penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager is required to file
pursuant to this Agreement, or to make timely payment of all taxes, levies,
imposts, or other charges, to the extent that sufficient funds were available to
the Manager as of the date such payments were due, shall be the responsibility
of the Manager.
(d) Medical supplies and equipment, food, fuel, kitchen
and food service equipment, linens, beds, furniture, clothing and all other
supplies and equipment used in supplying services to residents.
(e) Expenses connected directly or indirectly with the
design, acquisition, disposition or ownership of real and personal property
devoted, used, or consumed in the business of the Facility, including, without
limitation, purchase and/or construction of the land and buildings used for such
purpose, maintenance, repair and improvement of property, all real estate and
personal property taxes assessed, premiums for property and liability insurance
on property owned by the Owner, brokerage commissions, and fees and expenses of
consultants, managers, or agents retained directly by the Owner.
(f) The Management Fee.
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(g) Legal fees and related expenses pertaining to the
Facility, and any other litigation or proceedings to which the Owner is a party.
However, such fees shall not include those fees resulting from or arising out of
the gross negligence by the Manager and the Owner shall provide such necessary
funds to the Manager within ten (10) days after receipt of such notice.
In the event that there are insufficient funds available to the Manager to pay
expenses which the Manager is authorized to incur and pay hereunder, including,
without limitation, any taxes to be paid on behalf of the Owner by the Manager,
the Manager shall promptly notify the Owner of the amount necessary to cure and
the reason for such deficit and the Owner shall provide such necessary funds to
the Manager within ten (10) days after receipt of such notice.
4.3 Deposit and Disbursement of Funds.
(i) The Manager shall establish and administer the overall
rate structure of the Facility and shall supervise the issuance of bills and the
collection of accounts as the true and lawful attorney-in-fact for the Owner.
The Manager shall take possession of and endorse the name of the Owner on all
notes, checks, money orders, insurance payments, and any other instruments
received in payment of accounts described below.
(ii) The Manager shall establish such accounts for the
Facility in the Owner's name, separate from all other accounts and funds of the
Manager, with a bank or banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") or with a savings and loan institution or
institutions whose deposits are insured by the Federal Savings and Loan
Insurance Corporation ("FSLIC") as it deems necessary or desirable. The Manager,
on behalf of the Owner, shall use reasonable efforts to collect (using legal
counsel approved by the Owner, if necessary) all sums due and owing to Owner in
connection with the operation of the Facility. The Manager and the Owner shall
deposit into such accounts all monies furnished by the Owner as working funds
and all receipts and monies arising from the operation of the Facility or
otherwise received by the Owner or by the Manager for or on the behalf of the
Owner.
(iii) Draws on such accounts may be made by the sole
signature of an authorized representative of the Manager (or by wiring
instructions from such authorized representative of the Manager) and shall be
paid to the Manager to reimburse the Manager for payments made pursuant to this
Agreement by the Manager from its own accounts. The Owner hereby appoints the
Manager, for the term of this Agreement, as the Owner's true and lawful
attorney-in-fact to withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in connection
with the operation of the Facility. The Owner agrees to execute from time to
time any additional documents required by any bank wherein such documents are
held to effectuate all powers of attorney referred to herein. The Manager shall
make disbursements and payments from such accounts, on behalf and in the name of
the Owner, in such amounts and at such times as are deemed by the Manager to be
appropriate or required in connection with, first, payments required by any
Financing Agreement, and second, payments of ownership, maintenance and
operating expenses of the Facility and the other costs, expenses and
expenditures provided for in this Agreement including the Management Fee.
8
<PAGE>
5. Duty of Manager. The Manager shall render the services called for
hereunder in the utmost good faith and the Manager acknowledges that it is
acting in a fiduciary capacity with respect to the Owner and owes the Owner the
highest duty of care.
6. Relationship of the Parties. The Owner and the Manager are neither
partners nor joint venturers with each other, 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. All dealings between the
Owner and the Manager are at arms length as between non-related parties.
7. Term and Termination.
7.1 Term. This Agreement shall continue for an initial term (the
"Initial Term") commencing on the date which is twelve (12) months prior to the
anticipated date (as mutually agreed to by the Owner and the Manager) for the
opening of the Facility and continue for a period of ten (10) years after the
date on which the Facility is opened for occupancy. The Owner and Manager agree
to execute a certificate setting forth the date on which the Initial Term
commences promptly after such opening. The Term of this Agreement shall be
automatically renewed for three (3) additional five (5) year terms (the "Renewal
Terms"), unless the Manager sends the Owner written notice no less than ninety
(90) days prior to the Initial Term or the then applicable Renewal Term, as the
case may be. The Initial Term and the Renewal Terms being collectively referred
to herein as the "Term".
7.2 Termination for Cause. Either party may terminate this
Agreement by delivering thirty (30) days written notice (a "Termination Notice")
to the other party in the event that any of the following occurs:
(i) any illegal act engaged in by any party in the
operation of the Facility;
(ii) if any party files or has a petition or complaint in
receivership or bankruptcy filed against it which has not been dismissed within
ninety (90) days of such filing; or
(iii) the breach by any party (the "Breaching Party") of
any other material provision in, or obligation imposed by, this Agreement which
violation shall have not been cured to the reasonable satisfaction of the other
party (the "Claiming Party") within thirty (30) days following the date on which
the Claiming Party delivers notice to the Breaching Party describing with
specificity both the claimed breach and the actions required to be taken in
order to cure the claimed breach; provided that in the event that the claimed
breach is not reasonably susceptible of being cured within thirty (30) days, the
cure period shall be extended for such additional time as may be reasonably
required, provided further that in the event that the Claiming Party delivers a
Termination Notice and the Breaching Party commences legal proceedings
contesting the termination within thirty (30) days following delivery of the
Termination Notice, then this Agreement shall not terminate unless and until a
final judicial resolution of such legal proceedings beyond the expiration of any
appeal period has been issued upholding said termination.
9
<PAGE>
7.3 Termination for Failure to Pay Fee on a Timely Basis. In
addition to the provisions of Section 7.2 above, the Manager may terminate this
Agreement upon thirty (30) days written notice of the Owner's failure to pay the
Management Fee when due unless the Owner cures the payment default within ten
(10) days after receiving written notice from the Manager.
8. Indemnification. The Owner shall indemnify the Manager and hold it
harmless of, for, and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Costs"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Owner shall not have any obligation to
indemnify the Manager or hold it harmless of, from, and against Costs incurred
or suffered by the Manager as a result of the Manager's fraud, willful
misconduct, or gross negligence, or for Costs incurred or suffered by the
Manager as a result of the Manager's failure to keep true, accurate and complete
records. The Manager shall indemnify the Owner and hold it harmless of, from and
against all Costs incurred or suffered by the Owner as a result of any of the
Manager's fraud, willful misconduct, or gross negligence, or as a result of the
Manager's failure to submit proper reports to the appropriate regulatory
agencies or to keep true, accurate and complete records.
9. Access to Books and Records. As a subcontractor that may be subject to
Section 1861(v)(1)(i) of the Social Security Act (the "Act"), the Manager
shall, upon written request and in accordance with the above-mentioned section
of the Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Owner. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provisions of this Section shall apply only if this Agreement is
covered by the Act and such provisions shall become void and shall be of no
further force or effect if, at the time a request is made, this Agreement is not
subject to the Act. The Manager agrees that if it carries out any of the duties
of this Agreement through a subcontract with a related organization which
subcontract has a value or cost of $10,000 or more over a twelve (12) month
period, the Manager will obtain an identical access requirement in such
subcontract.
10. Fidelity Bond. The Manager agrees to obtain a fidelity bond, employee
dishonesty insurance policy or other similar coverage, in form and amount
satisfactory to the Owner, covering those employees reasonably required to by
covered by the Owner.
11. Amendments. This Agreement shall not be changed modified, terminated,
or discharged, in whole or in part, except by an instrument in writing signed by
the Owner and the Manager, their respective successors or assigns, or otherwise
as provided herein. Such modifications shall be in writing and signed by the
Owner and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed by,
construed, and interpreted in accordance with the laws of the Commonwealth of
Massachusetts. Any
10
<PAGE>
change in any applicable law which has the effect of rendering any part of this
Agreement invalid, illegal, or unenforceable shall not render the remainder of
this Agreement invalid, illegal, or unenforceable, and the parties hereto agree
that in the event that any part of this Agreement is rendered invalid, illegal,
or unenforceable, that they shall negotiate in good faith to amend any such part
of this Agreement so as to comply with any such law, as amended, and further the
respective objectives of the parties hereto.
13. Assignment. Subject to Section 8 hereof, neither the Owner nor the
Manager will assign its interests in this Agreement, without the prior written
consent of the other; provided that the Manager may assign its interests
hereunder to an affiliate.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope of
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument to be
given or received under this Agreement ("Notice") required or permitted to be
given shall be in writing signed by the party giving such Notice and/or consent
and shall be hand delivered, sent by nationally recognized overnight carrier or
sent, postage prepaid, by Certified or Registered Mail, Return Receipt
Requested, to the other party at the addresses listed below:
As to Manager: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: Robert M. Kaufman, Chief Executive Officer
cc: CareMatrix of Massachusetts, Inc.
197 First Avenue
Needham, MA 02194
Attention: James M. Clary, III, Esq.
General Counsel/Executive Vice President
As to Owner: Chancellor of Bonita Springs, Inc.
197 First Avenue
Needham, Massachusetts 02194
Attention: General Counsel
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All notices sent by certified mail or are hand delivered shall be deemed
received upon delivery or when delivery is refused to the office or address of
the addressee.
11
<PAGE>
17. Property: Trade names, marketing material, marketing ideas and
development material and records developed specifically for and related to this
Facility shall be the property of the Owner. Trade names, ideas and documents,
forms and development material not developed specifically for this Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including, but not limited to, policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and nursing management
books are and will remain the property of the Manager. All financial management
forms, documents and software systems including, but not limited to, bookkeeping
manuals, financial forms, financial spreadsheets, database or word processing
forms, financial accounting packages and outcome information systems are and
will remain the property of the Manager. Upon termination of this Agreement, the
Owner shall have the option to purchase operational material belonging to the
Manager, except for the financial accounting packages and outcome information
systems, at a mutually agreed upon price.
18. Lease Option. The Owner hereby agrees that so long as the Manager is
not in default in the performance of any duty or any obligation hereunder, the
Manager shall have the option to lease the Facility at any time during the term
of this Agreement (including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such election. Within thirty
(30) days after the receipt of the Manager's notice to lease, the parties shall
enter into a lease agreement substantially in the form attached hereto as
Exhibit A (the "Lease"), which Lease shall include, without limitation, a ten
(10) year initial term (with three (3) 5-year renewal terms) and rental payments
equal to the fair market value (which will be a negotiated percentage of total
project costs) as determined immediately prior to the initial term of the Lease
and immediately prior to any renewal terms.
19. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first set forth above.
WITNESS: CAREMATRIX OF MASSACHUSETTS, INC.
By: By: /s/ Richard Zermani
-------------------------- ------------------------------
Name: Name: Richard Zermani
Title: Senior Vice President
WITNESS:
CHANCELLOR OF BONITA SPRINGS, INC.
By: By: /s/ Richard Zermani
-------------------------- ------------------------------
Name: Name: Richard Zermani
Title: Vice President
12
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 31st day
of December, 1997, between CCC of New Jersey, Inc., a Delaware corporation (the
"Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation (the
"Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain management and consulting services for the Company, and the Consultant
desires to be retained by the Company; and
WHEREAS, the Company is the Manager of that two hundred and ten (210)
licensed bed skilled nursing facility to be located in Park Ridge, New Jersey
(the "Facility") and the Consultant desire to set forth the terms and conditions
on which the Consultant shall be retained by and provide services to the Company
at the Facility.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon the request of the Company, certain management
and consulting services relating to the pre-opening marketing and management of
the Facility for the Company.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a monthly retainer of Ten
Thousand ($10,000) Dollars (the "Retainer"), payable on the first (1st) day of
each calendar month during the term of this Agreement.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
December 31, 1997 (the "Effective Date") and continue for a period of
twenty-four (24) months. Notwithstanding the foregoing, either the Company or
the Consultant may terminate this Agreement at any time after the Effective Date
for any reason by
<PAGE>
providing thirty (30) days prior written notice of such intention to terminate
to the other party.
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and is not and shall not be an employee of the
Company. Neither the Consultant nor the Company shall hold the Consultant out as
an agent, partner, officer, director, or other employee of the Company and the
Consultant further specifically disclaims any and all rights to an equity
interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
6. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
7. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
8. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
service, telecommunicated, or mailed (airmail if international) by registered or
certified mail (postage prepaid), return receipt requested, addressed to:
2
<PAGE>
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. CCC of New Jersey, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02194 Needham, MA 02194
Attn: President Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, (b) on the date telecommunicated if by
telegraph, (c) on the date of transmission with confirmed answer back if by
telex, and (d) on the date upon which the return receipt is signed or delivery
is refused or the notice is designated by the postal authorities as not
deliverable, as the case may be, if mailed.
9. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
10. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
11. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
11.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
3
<PAGE>
11.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
CCC OF NEW JERSEY, INC.
By: /s/ James M. Clary III
-------------------------
Name: James M. Clary III
Title: Vice President
CAREMATRIX OF
MASSACHUSETTS, INC.
By: /s/ James M. Clary III
-------------------------
Name: James M. Clary III
Title: Executive Vice President
4
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
---------------------------------------
This First Amendment to Management Agreement (this "Amendment") is
entered into as of the 15th day of April, 1998, by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation (the "Manager"), and Chancellor of
Bonita Springs, Inc. (the "Owner").
WHEREAS, reference is made to that certain Management Agreement dated
as of April 7, 1997 and entered into by and between the Manager and the Owner
(the "Management Agreement"); and
WHEREAS, the Manager and the Owner desire to revise the term of the
Management Agreement and include a right of termination of the Owner in the
event certain events do not occur after a "change in control" of the Manager as
described below.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Manager and the Owner agree as
follows:
1. Capitalized terms used herein but not defined in this Amendment
shall have the same meanings given to them in the Management Agreement.
2. Section 7.1 (Term) of the Management Agreement is hereby deleted in
its entirety and the following is hereby substituted therefore:
"7.1 Term. This Agreement shall continue for a term (the "Term")
commencing on the date which is twelve (12) months prior to the anticipated date
(as mutually agreed to by the Owner and the Manager) for the opening of the
Facility and continue for a period of ten (10) years after the date on which the
Facility is opened for occupancy. The Owner and Manager agree to execute a
certificate setting forth the date on which the Term commences promptly after
such opening."
3. The following Section 7.4 is hereby inserted immediately after
Section 7.3 of the Management Agreement:
"7.4 Termination Upon Change of Control. The Owner shall have the right
to terminate this Agreement upon thirty (30) days written notice to the Manager
in the event that there has been a "change in control" of the Manager during the
Term and the Owner and the Manager have not executed the Lease (defined below)
in accordance with Section 18 below within the later to occur of (i) fifteen
(15) months following the receipt of the certificate of occupancy for the
Facility, or (ii) one (1) year following the "change of control" of the Manager.
For purposes of this provision, "change of control" shall mean with respect to
the Manager: (a) the transfer of all or substantially all of the assets of the
Manager; (b) the transfer of an equity interest in the Manager after which the
acquiror
<PAGE>
holds more than fifty (50%) percent of the voting power of all equity interests
in the Manager; (c) the merger, consolidation, or other reorganization of the
Manager with or into another entity, which results in a change of more than
fifty (50%) percent of the composition of the governing body of the Manager; or
(d) a change in the composition of the governing body of the Manager, other than
in the ordinary course of business, which results in the replacement of more
than fifty (50%) percent of the membership of such governing body, as a result
of one transaction or a series of related transactions."
Except as modified hereby all of the other terms and provisions of the
Management Agreement shall be unchanged and shall remain in full force and
effect.
EXECUTED under seal on this 15th day of April, 1998.
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey Neterval
--------------------------------
Name: Jeffrey Neterval
Title: Vice President
CHANCELLOR OF BONITA SPRINGS, INC.
By: /s/ Jeffrey Neterval
--------------------------------
Name: Jeffrey Neterval
Title: Vice President
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
---------------------------------------
This First Amendment to Management Agreement (this "Amendment") is
entered into as of the 15th day of April, 1998, by and between CareMatrix of
Massachusetts, Inc., a Delaware corporation (the "Manager"), and Chancellor of
Stuart, Inc. (the "Owner").
WHEREAS, reference is made to that certain Management Agreement dated
as of January 30, 1997 and entered into by and between the Manager and the Owner
(the "Management Agreement"); and
WHEREAS, the Manager and the Owner desire to revise the term of the
Management Agreement and include a right of termination of the Owner in the
event certain events do not occur after a "change in control" of the Manager as
described below.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Manager and the Owner agree as
follows:
1. Capitalized terms used herein but not defined in this Amendment
shall have the same meanings given to them in the Management Agreement.
2. Section 7.1 (Term) of the Management Agreement is hereby deleted in
its entirety and the following is hereby substituted therefore:
"7.1 Term. This Agreement shall continue for a term (the "Term")
commencing on the date which is twelve (12) months prior to the anticipated date
(as mutually agreed to by the Owner and the Manager) for the opening of the
Facility and continue for a period of ten (10) years after the date on which the
Facility is opened for occupancy. The Owner and Manager agree to execute a
certificate setting forth the date on which the Term commences promptly after
such opening."
3. The following Section 7.4 is hereby inserted immediately after
Section 7.3 of the Management Agreement:
"7.4 Termination Upon Change of Control. The Owner shall have the right
to terminate this Agreement upon thirty (30) days written notice to the Manager
in the event that there has been a "change in control" of the Manager during the
Term and the Owner and the Manager have not executed the Lease (defined below)
in accordance with Section 18 below within the later to occur of (i) fifteen
(15) months following the receipt of the certificate of occupancy for the
Facility, or (ii) one (1) year following the "change of control" of the Manager.
For purposes of this provision, "change of control" shall mean with respect to
the Manager: (a) the transfer of all or substantially all of the assets of the
Manager; (b) the transfer of an equity interest in the Manager after which the
acquiror holds more than fifty (50%) percent of the voting power of all equity
interests in the
<PAGE>
Manager; (c) the merger, consolidation, or other reorganization of the Manager
with or into another entity, which results in a change of more than fifty (50%)
percent of the composition of the governing body of the Manager; or (d) a change
in the composition of the governing body of the Manager, other than in the
ordinary course of business, which results in the replacement of more than fifty
(50%) percent of the membership of such governing body, as a result of one
transaction or a series of related transactions."
Except as modified hereby all of the other terms and provisions of the
Management Agreement shall be unchanged and shall remain in full force and
effect.
EXECUTED under seal on this 15th day of April, 1998.
CAREMATRIX OF MASSACHUSETTS, INC.
By: /s/ Jeffrey P. Neterval
-------------------------------
Name: Jeffrey P. Neterval
Title: Vice President
CHANCELLOR OF STUART, INC.
By: /s/ Jeffrey P. Neterval
-------------------------------
Name: Jeffrey P. Neterval
Title: Vice President
CONSULTING AGREEMENT
(Bonita Bay)
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 1st day of
July, 1998, between Chancellor of Bonita Springs, Inc., a Delaware corporation
(the "Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation
(the "Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain consulting services for the Company, and the Consultant desires to be
retained by the Company; and
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions on which the Consultant shall be retained by and provide services
to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon request of the Company, certain consulting
services relating to financing for the Company's facility located at Bonita Bay,
Florida.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a consulting fee of
Twenty-Two Thousand Two Hundred Twenty-Two and 22/100 Dollars ($22,222.22) (the
"Consulting Fee) per month, payable on the last day of each month during the
term hereof.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
the date hereof (the "Effective Date") and continue for a period of six (6)
months, and shall be renewable upon thirty (30) days prior notice from the
Company to the Consultant for an additional six (6) month period at the option
of the Company. Notwithstanding the foregoing, either the Company or the
Consultant may terminate this Agreement at any time after the Effective Date for
any reason by providing thirty (30) days prior written notice of such intention
to terminate to the other party.
<PAGE>
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and the officers, directors and employees of
the Consultant are not and shall not be an employee of the Company by virtue of
this Agreement. Neither the Consultant nor the Company shall hold the Consultant
out as an agent, partner, officer, director, or other employee of the Company
and the Consultant further specifically disclaims any and all rights to an
equity interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Indemnity. The Consultant shall indemnify and hold harmless the
Company from and against all claims, losses, costs, damages and expenses
including, without limitation, attorneys' fees and costs, relating to injury to
or death of any Person or damage to real or personal property resulting from or
arising in connection with any negligence or intentional or willful misconduct
by the Consultant in the performance of Consultant's duties under this
Agreement.
6. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
7. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
8. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
9. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
2
<PAGE>
service, delivered by a nationally recognized overnight delivery service, or
mailed by registered or certified mail (postage prepaid), return receipt
requested, addressed to:
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. Chancellor of Bonita Springs, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02494 Needham, MA 02494
Attn: CEO Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, or (b) on the date upon which the
receipt is signed or delivery is refused or the notice is designated by the
postal authorities or delivery service as not deliverable, as the case may be,
if delivered by overnight delivery or mailed.
10. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
11. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
12. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
12.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
3
<PAGE>
12.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Signed in the CHANCELLOR OF BONITA SPRINGS, INC.
Presence of:
/s/ Elizabeth Derrico By: /s/ David B. Currier
- - ----------------------------- ---------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- ---------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
4
CONSULTING AGREEMENT
(Boynton Beach)
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 1st day of
July, 1998, between Chancellor of Aberdeen, Inc., a Delaware corporation (the
"Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation (the
"Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain consulting services for the Company, and the Consultant desires to be
retained by the Company; and
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions on which the Consultant shall be retained by and provide services
to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon request of the Company, certain consulting
services relating to financing for the Company's facility located at Boynton
Beach, Florida.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a consulting fee of
Twenty-Two Thousand Two Hundred Twenty-Two and 22/100 Dollars ($22,222.22) (the
"Consulting Fee) per month, payable on the last day of each month during the
term hereof.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
the date hereof (the "Effective Date") and continue for a period of six (6)
months, and shall be renewable upon thirty (30) days prior notice from the
Company to the Consultant for an additional six (6) month period at the option
of the Company. Notwithstanding the foregoing, either the Company or the
Consultant may terminate this Agreement at any time after the Effective Date for
any reason by providing thirty (30) days prior written notice of such intention
to terminate to the other party.
<PAGE>
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and the officers, directors and employees of
the Consultant are not and shall not be an employee of the Company by virtue of
this Agreement. Neither the Consultant nor the Company shall hold the Consultant
out as an agent, partner, officer, director, or other employee of the Company
and the Consultant further specifically disclaims any and all rights to an
equity interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Indemnity. The Consultant shall indemnify and hold harmless the
Company from and against all claims, losses, costs, damages and expenses
including, without limitation, attorneys' fees and costs, relating to injury to
or death of any Person or damage to real or personal property resulting from or
arising in connection with any negligence or intentional or willful misconduct
by the Consultant in the performance of Consultant's duties under this
Agreement.
6. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
7. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
8. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
9. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
2
<PAGE>
service, delivered by a nationally recognized overnight delivery service, or
mailed by registered or certified mail (postage prepaid), return receipt
requested, addressed to:
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. Chancellor of Aberdeen, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02494 Needham, MA 02494
Attn: CEO Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, or (b) on the date upon which the
receipt is signed or delivery is refused or the notice is designated by the
postal authorities or delivery service as not deliverable, as the case may be,
if delivered by overnight delivery or mailed.
10. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
11. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
12. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
12.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
3
<PAGE>
12.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Signed in the CHANCELLOR OF ABERDEEN, INC.
Presence of:
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- -------------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- --------------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
4
CONSULTING AGREEMENT
(Deerfield Beach)
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 1st day of
July, 1998, between Chancellor of Deerfield Beach, Inc., a Delaware corporation
(the "Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation
(the "Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain consulting services for the Company, and the Consultant desires to be
retained by the Company; and
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions on which the Consultant shall be retained by and provide services
to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon request of the Company, certain consulting
services relating to financing for the Company's facility located at Deerfield
Beach, Florida.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a consulting fee of
Twenty-Two Thousand Two Hundred Twenty-Two and 22/100 Dollars ($22,222.22) (the
"Consulting Fee), per month, payable on the last day of each month during the
term hereof.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
the date hereof (the "Effective Date") and continue for a period of six (6)
months, and shall be renewable upon thirty (30) days prior notice from the
Company to the Consultant for an additional six (6) month period at the option
of the Company. Notwithstanding the foregoing, either the Company or the
Consultant may terminate this Agreement at any time after the Effective Date for
any reason by providing thirty (30) days prior written notice of such intention
to terminate to the other party.
<PAGE>
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and the officers, directors and employees of
the Consultant are not and shall not be an employee of the Company by virtue of
this Agreement. Neither the Consultant nor the Company shall hold the Consultant
out as an agent, partner, officer, director, or other employee of the Company
and the Consultant further specifically disclaims any and all rights to an
equity interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Indemnity. The Consultant shall indemnify and hold harmless the
Company from and against all claims, losses, costs, damages and expenses
including, without limitation, attorneys' fees and costs, relating to injury to
or death of any Person or damage to real or personal property resulting from or
arising in connection with any negligence or intentional or willful misconduct
by the Consultant in the performance of Consultant's duties under this
Agreement.
6. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
7. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
8. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
9. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
2
<PAGE>
service, delivered by a nationally recognized overnight delivery service, or
mailed by registered or certified mail (postage prepaid), return receipt
requested, addressed to:
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. Chancellor of Deerfield Beach, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02494 Needham, MA 02494
Attn: CEO Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, or (b) on the date upon which the
receipt is signed or delivery is refused or the notice is designated by the
postal authorities or delivery service as not deliverable, as the case may be,
if delivered by overnight delivery or mailed.
10. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
11. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
12. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
12.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
3
<PAGE>
12.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Signed in the CHANCELLOR OF DEERFIELD BEACH, INC.
Presence of:
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- -------------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- -------------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
4
CONSULTING AGREEMENT
(Jensen Beach)
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 1st day of
July, 1998, between Chancellor of Stuart, Inc., a Delaware corporation (the
"Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation (the
"Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain consulting services for the Company, and the Consultant desires to be
retained by the Company; and
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions on which the Consultant shall be retained by and provide services
to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon request of the Company, certain consulting
services relating to financing for the Company's facility located at Jensen
Beach, Florida.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a consulting fee of
Twenty-Two Thousand Two Hundred Twenty-Two and 22/100 Dollars ($22,222.22) (the
"Consulting Fee), per month, payable on the last day of each month during the
term hereof.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
the date hereof (the "Effective Date") and continue for a period of six (6)
months, and shall be renewable upon thirty (30) days prior notice from the
Company to the Consultant for an additional six (6) month period at the option
of the Company. Notwithstanding the foregoing, either the Company or the
Consultant may terminate this Agreement at any time after the Effective Date for
any reason by providing thirty (30) days prior written notice of such intention
to terminate to the other party.
<PAGE>
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and the officers, directors and employees of
the Consultant are not and shall not be an employee of the Company by virtue of
this Agreement. Neither the Consultant nor the Company shall hold the Consultant
out as an agent, partner, officer, director, or other employee of the Company
and the Consultant further specifically disclaims any and all rights to an
equity interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Indemnity. The Consultant shall indemnify and hold harmless the
Company from and against all claims, losses, costs, damages and expenses
including, without limitation, attorneys' fees and costs, relating to injury to
or death of any Person or damage to real or personal property resulting from or
arising in connection with any negligence or intentional or willful misconduct
by the Consultant in the performance of Consultant's duties under this
Agreement.
6. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
7. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
8. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
9. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
elected by the person giving such notice) hand delivered by messenger or courier
2
<PAGE>
service, delivered by a nationally recognized overnight delivery service, or
mailed by registered or certified mail (postage prepaid), return receipt
requested, addressed to:
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. Chancellor of Stuart, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02494 Needham, MA 02494
Attn: CEO Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, or (b) on the date upon which the
receipt is signed or delivery is refused or the notice is designated by the
postal authorities or delivery service as not deliverable, as the case may be,
if delivered by overnight delivery or mailed.
10. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
11. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
12. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
12.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
3
<PAGE>
12.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Signed in the CHANCELLOR OF STUART, INC.
Presence of:
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- -------------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- -------------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
4
CONSULTING AGREEMENT
(Park Ridge/Princeton)
THIS CONSULTING AGREEMENT (this "Agreement") made as of this 1st day of
July, 1998, between CCC of New Jersey, Inc., a Delaware corporation (the
"Company"), and CareMatrix of Massachusetts, Inc., a Delaware corporation (the
"Consultant").
WHEREAS, the Company desires to retain the Consultant to perform
certain consulting services for the Company, and the Consultant desires to be
retained by the Company; and
WHEREAS, the Company and the Consultant desire to set forth the terms
and conditions on which the Consultant shall be retained by and provide services
to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Consulting Services. During the term of this Agreement, the
Consultant shall provide, upon request of the Company, certain consulting
services relating to financing for the Company's facilities located at
Princeton, New Jersey and Park Ridge, New Jersey.
2. Consulting Fees and Expenses.
A. The Company shall pay to the Consultant a consulting fee of
Forty-Four Thousand Four Hundred Forty-Four and 44/100 Dollars ($44,444.44) (the
"Consulting Fee), per month, payable on the last day of each month during the
term hereof.
B. The Consultant shall be entitled to reimbursement of all actual,
verifiable and reasonable out-of-pocket expenses.
3. Term. The initial term of this Agreement shall commence effective on
the date hereof (the "Effective Date") and continue for a period of six (6)
months, and shall be renewable upon thirty (30) days prior notice from the
Company to the Consultant for an additional six (6) month period at the option
of the Company. Notwithstanding the foregoing, either the Company or the
Consultant may terminate this Agreement at any time after the Effective Date for
any reason by providing
<PAGE>
thirty (30) days prior written notice of such intention to terminate to the
other party.
4. Independent Contractor. The Consultant is and shall be an
independent contractor hereunder and the officers, directors and employees of
the Consultant are not and shall not be an employee of the Company by virtue of
this Agreement. Neither the Consultant nor the Company shall hold the Consultant
out as an agent, partner, officer, director, or other employee of the Company
and the Consultant further specifically disclaims any and all rights to an
equity interest in or a partnership interest with the Company. The Consultant
specifically acknowledges and agrees that it shall have no authority to execute
any contracts or agreements on behalf of the Company or its Affiliates and shall
have no authority to bind the Company or its Affiliates to any obligation
(contractual or otherwise). The Consultant shall devote such of his time, energy
and skill as is reasonably necessary to perform the services described in
Paragraph 1 above.
5. Indemnity. The Consultant shall indemnify and hold harmless the
Company from and against all claims, losses, costs, damages and expenses
including, without limitation, attorneys' fees and costs, relating to injury to
or death of any Person or damage to real or personal property resulting from or
arising in connection with any negligence or intentional or willful misconduct
by the Consultant in the performance of Consultant's duties under this
Agreement.
6. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed by
the party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
7. Assignment. The Consultant may not assign or delegate its rights
and/or obligations hereunder. The Company may assign its rights hereunder to any
of its Affiliates but shall remain primarily liable hereunder absent a written
release executed by the Consultant.
8. Severability. If any part of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
9. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be (as
2
<PAGE>
elected by the person giving such notice) hand delivered by messenger or courier
service, delivered by a nationally recognized overnight delivery service, or
mailed by registered or certified mail (postage prepaid), return receipt
requested, addressed to:
If to the Consultant: If to the Company:
CareMatrix of Massachusetts, Inc. CCC of New Jersey, Inc.
197 First Avenue 197 First Avenue
Needham, MA 02494 Needham, MA 02494
Attn: CEO Attn: President
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery, or (b) on the date upon which the
receipt is signed or delivery is refused or the notice is designated by the
postal authorities or delivery service as not deliverable, as the case may be,
if delivered by overnight delivery or mailed.
10. Waivers. The failure or delay of any party at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
11. Governing Law. This Agreement and all transactions contemplated by
this Agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the Commonwealth of Massachusetts without regard to
principles of conflicts of laws.
12. Definitions: For purposes of this Agreement, the following terms
shall have the meanings set forth below:
12.1. "Affiliate" shall mean, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with such first Person. For purposes of this
Agreement, the term "control" shall mean the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether
through
3
<PAGE>
the ownership of voting securities, by contract or otherwise.
12.2. "Person" shall mean an individual, partnership, corporation,
limited liability company, trust, joint venture or other
entity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
Signed in the CCC OF NEW JERSEY, INC.
Presence of:
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- -------------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
CAREMATRIX OF MASSACHUSETTS, INC.
/s/ Elizabeth Derrico By: /s/ David B. Currie
- - ----------------------------- -------------------------------
Print Name: Elizabeth Derrico Name: David B. Currie
Title: Vice President
4
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 7th day of
August, 1998 and is between CCC OF NEW JERSEY, INC. ("Lessor"), a Delaware
corporation having its principal office at 197 First Avenue, Needham Heights,
Massachusetts 02194, and CAREMATRIX OF PRINCETON (SNF), INC. ("Lessee"), a
Delaware corporation, having its principal office at 197 First Avenue, Needham
Heights, Massachusetts 02194.
ARTICLE 1
---------
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
-----------------------------------------------
1.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, the Lessor leases to the Lessee and the Lessee rents and
leases from the Lessor all of the Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A-1 attached hereto (the
"Land");
(b) all buildings, structures, Fixtures (as hereinafter defined) and other
improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines, and parking
areas and roadways appurtenant to such buildings and structures presently or
hereafter situated upon the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances of every nature and description
now or hereafter relating to or benefiting any or all of the Land and the Leased
Improvements;
(d) all equipment, machinery, building fixtures, and other items of
property (whether realty, personalty or mixed), including all components
thereof, now or hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, and built-in oxygen and vacuum systems, all of which, to the greatest
extent permitted by law, are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto, but specifically excluding all items included within the
category of Tangible Personal Property (as hereinafter defined) which are not
permanently affixed to or incorporated in the Leased Property (collectively, the
"Fixtures");
(e) those portions of the Building Systems (as hereinafter defined) not
situated upon the Land or located in or on the Leased Improvements that
exclusively serve the Facility (as
<PAGE>
hereinafter defined), including, without limitation, any meter solely
determining utility consumption by the Facility; and
(f) the Lessor's Personal Property (as hereinafter defined);
RESERVING THEREFROM THE FOLLOWING IN FAVOR OF THE LESSOR DURING THE TERM OF THIS
LEASE:
(i) Access to the Leased Property at such reasonable times, and only to
the extent reasonably necessary, to repair, replace, renovate,
alter, and modify those portions of the Utility Systems, and the
pipes, flues, conduits and other appurtenances to the gas-fired hot
water heating production equipment, domestic hot water boiler
equipment and air conditioning production equipment which may now
or hereafter be located within the Facility and which are necessary
for the full use and enjoyment of the Medical Center;
(ii) The right to enter upon the Leased Property from time to time and
at any time as may be necessary in case of emergency to preserve
life and/or property located in the Medical Center; and
(iii) The following non-exclusive rights in favor of Lessor, its
officers, employees, agents, contractors, tenants, subtenants,
servants, visitors, business invitees and licensees, as rights
appurtenant to the Medical Center:
(x) vehicular and pedestrian ingress and egress in connection
with the full use and enjoyment of the Medical Center
over and across: (a) Evergreen Drive and Windrow Drive
and all sidewalks appurtenant thereto and located on the
Leased Property, as the same may from time to time be
constructed and maintained, for all purposes for which
public roads and sidewalks are used in the Township of
Plainsboro, New Jersey, and (b) those driveway areas,
parking lot aisles, and all sidewalks and foot paths,
whether or not appurtenant to such driveway areas, on the
Leased Property, as the same may from time to time be
constructed and maintained, for all purposes for which
public roads and sidewalks are used in the Township of
Plainsboro, New Jersey; and
(y) the parking of vehicles upon any of the parking areas on
the Leased Property, as the same may from time to time be
constructed and maintained for such use.
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by the Lessor and
subject to: (i) the rights of parties in possession; (ii) the existing state of
title including all covenants, conditions, Liens (as hereinafter
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<PAGE>
defined) and other matters of record (including, without limitation, the matters
set forth in EXHIBIT B); (iii) all applicable laws and (iv) all matters, whether
or not of a similar nature, which would be disclosed by an inspection of the
Leased Property or by an accurate survey thereof.
1.2 Term. The term of this Lease shall consist of: the "Initial Term",
which shall commence on August 7, 1998 (the "Commencement Date") and end on
August 6, 2013 (the "Expiration Date"); provided, however, that this Lease may
be sooner terminated as hereinafter provided. In addition, the Lessee shall have
the option(s) to extend the Term (as hereinafter defined) as provided for in
Section 1.3.
1.3 Extended Terms. Provided that this Lease has not been previously
terminated, and as long as there exists no Lease Default (as hereinafter
defined) at the time of exercise and on the last day of the Initial Term or the
then current Extended Term (as hereinafter defined), as the case may be, the
Lessee is hereby granted the option to extend the Initial Term of this Lease for
three (3) additional periods (collectively, the "Extended Terms") as follows:
three (3) successive five (5) year periods for a maximum Term, if all such
options are exercised, which ends on August 6, 2028. The Lessee's extension
options shall be exercised by the Lessee by giving written notice to the Lessor
of each such extension at least one hundred eighty (180) days, but not more than
three hundred sixty (360) days, prior to the termination of the Initial Term or
the then current Extended Term, as the case may be. The Lessee shall have no
right to rescind any such notice once given. The Lessee may not exercise its
option for more than one Extended Term at a time. During each effective Extended
Term, all of the terms and conditions of this Lease shall continue in full force
and effect.
ARTICLE 2
---------
DEFINITIONS AND RULES OF CONSTRUCTION
-------------------------------------
2.1 Definitions. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (ii) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
Access Easement Areas: As defined in the Service, Maintenance and Easement
Agreement.
Accounts: As defined in the UCC.
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<PAGE>
Accreditation Body: All Persons now or hereafter having or claiming
jurisdiction over the accreditation, certification, evaluation or operation of
the Facility.
Act: As defined in Section 11.4.
Additional Charges: As defined in Article 3.
Additional Debt Service Payments: All payments, other than the Debt Service
Rental Payments, due and payable under any Fee Mortgage Loan Documents,
including, without limitation, all reserves, deposits and other costs, expenses
and charges due and payable thereunder (including, without limitation, any other
costs, expenses and late charges incurred by the Lessor as a result of any
failure by Lessee to satisfy, on a timely basis, the obligations set forth under
Section 3.1 and Section 3.3), but, specifically excluding (i) any so-called
"balloon payments" due at the maturity of any loan evidenced by any Fee Mortgage
Loan Documents and all costs and expenses incurred in connection with any
refinancing thereof and (ii) any payments, reserves, deposits and other costs,
expenses and charges due and payable with respect to the CMC Land (and/or any
other real property owned by the Lessor), including, without limitation all
amounts due under the CMC Note and the ALF Note as such terms are defined under
the MMI Loan Documents.
Additional Land: As defined in Section 9.3.
Additional Rent: As defined in Section 3.3.
Affiliate: With respect to any Person (i) any other Person which, directly
or indirectly, controls or is controlled by or is under common control with such
Person, (ii) any other Person that owns, beneficially, directly or indirectly,
five percent (5%) or more of the outstanding capital stock, shares or equity
interests of such Person or (iii) any officer, director, employee, general
partner or trustee of such Person, or any other Person controlling, controlled
by, or under common control with, such Person (excluding trustees and Persons
serving in a fiduciary or similar capacity who are not otherwise an Affiliate of
such Person); provided, however, that notwithstanding the foregoing, in no event
shall any of the following entities be deemed to be an Affiliate of the Lessee:
(i) PhyMatrix Corp., a Delaware corporation and its wholly-owned Subsidiaries
and (ii) Sun Healthcare Group, Inc., a Delaware corporation. For the purposes of
this definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, partnership interests, membership
interests or other equity interests.
Air Conditioning System: The electric air-conditioning production equipment
located in the Medical Center and serving the Facility only, as well as all
pipes, flues, conduits and other
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<PAGE>
appurtenances located in the Building and serving such production equipment
and/or delivering chilled water therefrom, including all additions,
substitutions and replacements thereto.
Appurtenant Agreements: Collectively, all instruments, documents and other
agreements that now or hereafter create any utility, access or other rights or
appurtenances benefiting or relating to the Leased Property.
Assisted Living Facility: The 83-unit assisted living facility located on
real property owned by the Lessor adjoining the SNF/CMC Land and more
particularly shown as New Lot 3.07 on the Subdivision Plan.
Assignment and Assumption Agreement: The Assignment and Assumption
Agreement of even date herewith by and among the Seller, the Lessor and MMI.
Award: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
Bankruptcy Code: Subsection 365(h) of the United States Bankruptcy Code, 11
U.S.C. ss.365(h), as the same may hereafter be amended and including any
successor provision thereto.
Base Debt Service Rental Payments: As defined in Section 3.1.
Base Rent: As defined in Article 3.
Billable Facility Heating Amount: The product of (i) the total number of
BTUs delivered by the Heating System to the Facility for heating during the
applicable period, determined by reference to the BTU meter on the forced hot
water line serving only the Facility, multiplied by (ii) an efficiency factor of
1.25.
Building: Collectively, the Facility, the Assisted Living Facility and the
Medical Center.
Building Systems: Collectively, the Heating System, the Hot Water System,
the Air Conditioning System and the Utility Systems.
Business Day: Any day which is not a Saturday or Sunday or a public holiday
under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which the Lessor's depository bank is
located.
Capital Additions: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and material
expansions of any of the Leased Improvements which are constructed on any
portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of any of the Leased
Improvements on the Leased Property in order to provide a functionally new
facility that
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<PAGE>
is needed or used to provide services not previously offered and any expansion,
construction, renovation or conversion or in order to (i) increase the bed or
unit capacity of the Facility, (ii) change the purpose for which such beds or
units are utilized and/or (iii) change the utilization of any material portion
of any of the Leased Improvements.
Capital Addition Cost: The cost of any Capital Addition made by the Lessee
whether paid for by the Lessee or the Lessor. Such cost shall include all costs
and expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, the Lessor.
CARF: The Commission on Accreditation of Rehabilitation Facilities.
Cash Flow: The Consolidated Net Income (or Consolidated Net Loss), arising
solely from the operation of the Leased Property, before federal and state
income taxes for any period plus (i) the amount of the provision for
depreciation and amortization actually deducted on the books of the applicable
Person for the purposes of computing such Consolidated Net Income (or
Consolidated Net Loss) for the period involved, plus (ii) Rent.
Casualty: As defined in Section 13.1.
Champus: The Civilian Health and Medical Program of the Uniform Service, a
program of medical benefits covering retirees and dependents of members or
former members of a uniformed service provided, financed and supervised by the
United States Department of Defense and established by 10 USC ss.ss.1071 et seq.
CMC Land: The real property comprising that portion of the SNF/CMC Land on
which the Medical Center is located, which property contains approximately
20,205 square feet of land and is more particularly described on EXHIBIT A-2
attached hereto.
Chattel Paper: As defined in the UCC.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
Common Work: As defined in Section 8.1.4.
Common Work Costs: As defined in Section 4.4.3.
Condemnation: With respect to the Leased Property or any interest therein
or right accruing thereto or use thereof (i) the exercise of any Governmental
Authority, whether by legal proceedings or otherwise, by a Condemnor or (ii) a
voluntary sale or transfer by the Lessor to any
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<PAGE>
Condemnor, either under threat of Condemnation or Taking or while legal
proceedings for Condemnation or Taking are pending.
Condemnor: Any public or quasi-public authority, or private corporation or
individual, having the power of condemnation.
Consolidated and Consolidating: The consolidated and consolidating accounts
of the relevant Person and its Subsidiaries consolidated in accordance with
GAAP.
Consolidated Financials: For any fiscal year or other accounting period for
any Person and its consolidated Subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with GAAP, and disclosing all
liabilities of such Person and its consolidated Subsidiaries, including, without
limitation, contingent liabilities.
Consultants: Collectively, the architects, engineers, inspectors, surveyors
and other consultants that are engaged from time to time by the Lessor to
perform services for the Lessor in connection with this Lease.
Consumer Price Index: The Consumer Price Index for Urban Wage Earners and
Clerical Workers, All Items-U.S. Cities Average (1982-84=100), published by the
Bureau of Labor Statistics, U.S. Department of Labor; provided, that, if the
compilation of the Consumer Price Index in its present form and calculated on
its present basis is discontinued or transferred to any other Governmental
Authority, then, the index most similar to the Consumer Price Index published by
the Bureau of Labor Statistics shall be used. If there is no such similar index,
a substitute index which is then generally recognized as being similar to the
Consumer Price Index shall be used, with such substitute index to be reasonably
selected by the Lessor and the Lessee.
Contracts: All agreements (including, without limitation, Provider
Agreements and Patient Admission Agreements), contracts, (including without
limitation, construction contracts, subcontracts, and architects' contracts,)
contract rights, warranties and representations, franchises, and records and
books of account benefiting, relating to or affecting the Leased Property or the
ownership, construction, development, maintenance, management, repair, use,
occupancy, possession, or operation thereof, or the operation of any programs or
services in conjunction with the Leased Property and all renewals, replacement
and substitutions therefor, now or hereafter issued by or entered into with any
Governmental Authority, Accreditation Body or Third Party Payor or maintained or
used by any member of the Leasing Group or entered into by any member of the
Leasing Group with any third Person.
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<PAGE>
Date of Taking: The date the Condemnor has the right to possession of the
property being condemned.
Debt Service: All payments due and payable under any promissory note
secured by a Fee Mortgage, including, without limitation, principal, interest,
additional interest and any other costs, expenses and late charges incurred by
the Lessor as a result of any failure by Lessee to satisfy, on a timely basis,
the obligations set forth under Section 3.1, but specifically excluding any
so-called "balloon payments" due at the maturity thereof and all costs and
expenses incurred in connection with any refinancing thereof.
Debt Service Rental Payments: As defined in Section 3.1.
Deed: As defined in Section 18.3.
Documents: As defined in the UCC.
Encumbrance: As defined in Section 20.3.
Environmental Enforcement Actions: Collectively, all actions or orders
instituted, threatened or required by any Governmental Authority and all claims
made or threatened by any Person against Lessee or the Leased Property (or any
other occupant, prior occupant or prior owner thereof or any other Person),
arising out of or in connection with any of the Environmental Laws or the
assessment, monitoring, clean-up, containment, remediation or removal of, or
damages caused or alleged to be caused by, any Hazardous Substances (i) located
on or under the Leased Property, (ii) emanating from the Leased Property or
(iii) generated, stored, transported, utilized, disposed of, managed or released
by Lessee or any other occupant of the Leased Property.
Environmental Laws: Collectively, all Legal Requirements applicable to (i)
environmental conditions on, under or emanating from the Leased Property and
(ii) the generation, storage, transportation, utilization, disposal, management
or release (whether or not on, under or from the Leased Property) of Hazardous
Substances by the Lessee.
ERISA: The Employment Retirement Income Security Act of 1974, as amended.
Event of Default: As defined in Article 16.
Expiration Date: As defined in Section 1.2.
Extended Terms: As defined in Section 1.3.
Facility: The 180-bed skilled nursing facility known as The Forrestal
Skilled Nursing & Rehabilitation Center (together with related parking and other
amenities).
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<PAGE>
Failure to Perform: As defined Article 16.
Fair Market Added Value: The Fair Market Value of the Leased Property
(including all Capital Additions) minus the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by the Lessee had been
constructed.
Fair Market Base Rent: As defined in SCHEDULE 3.1.
Fair Market Value of the Capital Addition: The amount by which the Fair
Market Value of the Leased Property upon the completion of a particular Capital
Addition exceeds the Fair Market Value of the Leased Property just prior to the
construction of the particular Capital Addition.
Fair Market Value of the Leased Property: The fair market value of the
Leased Property, including all Capital Additions, and including the Land and all
other portions of the Leased Property, and (a) assuming the same is unencumbered
by this Lease, (b) determined in accordance with the appraisal procedures set
forth in Section 18.2 or in such other manner as shall be mutually acceptable to
the Lessor and the Lessee (including, without limitation, as a negotiated
percentage of total project costs) and (c) not taking into account any reduction
in value resulting from any Lien to which the Leased Property is subject and
which Lien the Lessee or the Lessor is otherwise required to remove at or prior
to closing of the transaction. However, the positive or negative effect on the
value of the Leased Property attributable to the interest rate, amortization
schedule, maturity date, prepayment provisions and other terms and conditions of
any Lien on the Leased Property which is not so required or agreed to be removed
shall be taken into account in determining the Fair Market Value of the Leased
Property. The Fair Market Value of the Leased Property shall be determined as
the overall value based on due consideration of the "income" approach, the
"comparable sales" approach, and the "replacement cost" approach.
Fair Market Value of the Material Structural Work: The amount by which the
Fair Market Value of the Leased Property upon the completion of any particular
Material Structural Work exceeds the Fair Market Value of the Leased Property
just prior to the construction of the applicable Material Structural Work.
Fee Mortgage: As defined in Section 20.3.
Fee Mortgage Loan Documents: Collectively, all documents, instruments and
agreements now or hereafter executed by the Lessor evidencing and/or securing
any loan secured by any Fee Mortgage, as the same may be amended, modified or
extended from time to time.
Fee Mortgagee: As defined in Section 20.3.
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Financing Party: Any Person who is or may be participating with the Lessor
in any way in connection with the financing of any Capital Addition.
Fiscal Quarter: Each of the three (3) month periods commencing on January
1st, April 1st, July 1st and October 1st.
Fiscal Year: The twelve (12) month period from January 1st to
December 31st.
Fixtures: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
General Intangibles: As defined in the UCC.
Governmental Authorities: Collectively, all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures, and offices of any
nature whatsoever of any government, quasi-government unit or political
subdivision, whether with a federal, state, county, district, municipal, city or
otherwise and whether now or hereinafter in existence.
Gross Revenues: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), whether or
not directly or indirectly received or to be received by the Lessee, including,
without limitation, all revenues received or receivable for the use of, or
otherwise by reason of, all rooms, beds, units and other facilities provided,
meals served, services performed, space or facilities subleased or goods sold on
or from the Leased Property and further including, without limitation, except as
otherwise specifically provided below, any consideration received under any
subletting, licensing, or other arrangements with any Person relating to the
possession or use of the Leased Property and all revenues from all ancillary
services provided at or relating to the Leased Property; provided, however, that
Gross Revenues shall not include non-operating revenues such as interest income
or gain from the sale of assets not sold in the ordinary course of business and
shall not include the proceeds of any loan received by the Lessee; and provided,
further, that there shall be excluded or deducted (as the case may be) from such
revenues:
(i) contractual allowances (relating to any period during the Term of this
Lease and thereafter until the Rent hereunder is paid in full) for billings not
paid by or received from the appropriate Governmental Agencies or Third Party
Payors,
(ii) allowances according to GAAP for uncollectible accounts,
(iii) all proper patient and/or resident billing credits and adjustments
according to GAAP relating to health care accounting,
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(iv) federal, state or local sales, use, gross receipts and excise taxes
and any tax based upon or measured by said Gross Revenues which is added to or
made a part of the amount billed to the patient, resident or other recipient of
such services or goods, whether included in the billing or stated separately,
(v) provider discounts for hospital or other medical facility utilization
contracts,
(vi) the cost of any federal, state or local governmental program imposed
specially to provide or finance indigent patient and/or resident care (other
than Medicare, Medicaid and the like), and
(vii) deposits refundable to residents of the Facility.
To the extent that the Leased Property is subleased or occupied by an
Affiliate of the Lessee which is a wholly-owned subsidiary of the Guarantor,
Gross Revenues calculated for all purposes of this Lease shall include the Gross
Revenues of such Sublessee with respect to the premises demised under the
applicable Sublease (i.e., the Gross Revenues generated from the operations
conducted on such subleased portion of the Leased Property) and the rent
received or receivable from such Sublessee pursuant to such Subleases shall be
excluded from Gross Revenues for all such purposes. As to any other Sublease,
only the rental actually received by the Lessee from such non-Affiliate shall be
included in Gross Revenues.
Guarantor: CareMatrix Corporation, a Delaware corporation.
Guaranty: The Guaranty of even date executed by the Guarantor in favor of
the Lessor.
Hazardous Substances: Collectively, (a) any "hazardous material,"
"hazardous substance," "hazardous waste," "oil," "regulated substance," "toxic
substance," "restricted hazardous waste", "special waste" or words of similar
import as defined under any of the Environmental Laws; (b) asbestos in any form;
(c) urea formaldehyde foam insulation; (d) polychlorinated biphenyls; (e) radon
gas; (f) flammable explosives; (g) radioactive materials; (h) any chemical,
containment, solvent, material, pollutant or substance that may be dangerous or
detrimental to the Leased Property, the environment, or the health and safety of
the patients and other occupants of the Leased Property or of the owners or
occupants of any other real property nearby the Leased Property and (i) any
substance, the generation, storage, transportation, utilization, disposal,
management, release or location of which, on, under or from the Leased Property
is prohibited or otherwise regulated pursuant to any of the Environmental Laws.
Notwithstanding the foregoing, the term Hazardous Substances as defined
herein shall not include (i) pharmaceuticals and cleaning agents of the types
and in the quantities and concentrations normally stocked by health care
providers similar to the Facility, (ii) oil in de minimis amounts typically
associated with the use of certain portions of the Leased Property for driving
and parking motor vehicles or (iii) medical wastes generated at the Facility;
provided that
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the foregoing are used, stored, transported and/or disposed of in accordance
with all Legal Requirements.
Heating System: Collectively, the gas-fired hot water heating production
equipment located in the Medical Center, as well as all pipes, flues, conduits
and other appurtenances located in the Building and serving such production
equipment and/or delivering heat therefrom, including all additions,
substitutions and replacements thereto.
Hot Water System: Collectively, the domestic hot water boiler equipment
located in the Medical Center and serving the Facility only, as well as all
pipes, conduits and other appurtenances located in the Building and serving such
equipment and/or delivering domestic hot water therefrom, including all
additions, substitutions and replacements thereto.
Impositions: Collectively, all taxes (including, without limitation, all
capital stock and franchise taxes of the Lessor, all ad valorem, property,
sales, use, single business, gross receipts, transaction privilege, rent or
similar taxes), assessments (including, without limitation, all assessments for
public improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), ground
rents, water and sewer rents, water charges or other rents and charges, excises,
tax levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), transfer taxes and recordation taxes imposed as
a result of this Lease or any extensions hereof, and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of either or both of the
Leased Property and the Rent (including all interest and penalties thereon due
to any failure in payment by the Lessee), which at any time prior to, during or
in respect of the Term hereof and thereafter until the Leased Property is
surrendered to the Lessor as required by the terms of this Lease, may be
assessed or imposed on or in respect of or be a Lien upon (a) the Lessor or the
Lessor's interest in the Leased Property, (b) the Leased Property or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, sales from, or activity conducted on, or in
connection with, the Leased Property or the leasing or use of the Leased
Property. Notwithstanding the foregoing, nothing contained in this Lease shall
be construed to require the Lessee to pay (1) any tax based on net income
(whether denominated as a franchise or capital stock or other tax) imposed on
the Lessor or any other Person, except the Lessee or its successors, (2) any net
revenue tax of the Lessor or any other Person, except the Lessee and its
successors, (3) any tax imposed with respect to the proceeds, or any portion
thereof, received by the Lessor as a result of the sale, exchange or other
disposition by the Lessor of the Leased Property or the proceeds thereof, except
any sale, transfer, exchange or other disposition of the Leased Property to the
Lessee, or (4) except as expressly provided elsewhere in this Lease, any
principal or interest on any Encumbrance on the Leased Property; provided,
however, the provisos set forth in clauses (1) and (2) of this sentence shall
not be applicable to the extent that any tax, assessment, tax levy or charge
which the Lessee is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied,
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assessed or imposed expressly in lieu thereof. In computing the amount of any
franchise tax or capital stock tax which may be or become an Imposition, the
amount payable by the Lessee shall be equitably apportioned based upon all
properties owned by the Lessor that are located within the particular
jurisdiction subject to any such tax.
Indebtedness: The total of all obligations of a Person, whether current or
long-term, which in accordance with GAAP would be included as liabilities upon
such Person's balance sheet at the date as of which Indebtedness is to be
determined, and shall also include (i) all capital lease obligations and (ii)
all guarantees, endorsements (other than for collection of instruments in the
ordinary course of business), or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement contingent
or otherwise to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
Indemnified Parties: As defined in Section 12.2.
Initial Appraisers: As defined in SCHEDULE 3.1.
Initial Term: As defined in Section 1.2.
Instruments: As defined in the UCC.
Insurance Requirements: All terms of any insurance policy required by this
Lease, all requirements of the issuer of any such policy with respect to the
Leased Property and the activities conducted thereon and the requirements of any
insurance board, association or organization or underwriters' regulations
pertaining to the Leased Property.
Land: As defined in Article 1.
Lease: As defined in the preamble of this Lease.
Lease Default: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace periods under this Lease
and/or any of the other Lease Documents.
Lease Documents: Collectively, this Lease, the Guaranty, the Pledge
Agreement, the Security Agreement, the Permits Assignment and any and all other
instruments, documents, certificates or agreements now or hereafter (i) executed
or furnished by any member of the Leasing Group in connection with the
transactions evidenced by this Lease and/or any of the foregoing documents
and/or (ii) evidencing or securing any of the Lessee's obligations relating to
the Leased Property, including, without limitation, the Lessee's obligations
hereunder, as the
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same maybe amended from time to time. Without limiting the foregoing, the Lease
Documents include the Guaranty.
Lease Obligations: Collectively, all indebtedness, covenants, liabilities,
obligations, agreements and undertakings (other than the Lessor's obligations)
under this Lease and the other Lease Documents.
Lease Year: A twelve-month period ending on July 31st of each year;
provided, that the first Lease Year shall begin on the Commencement Date and
shall end on July 31, 1999.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Group: Collectively, the Lessee, the Guarantor, any Sublessee and
any Manager.
Legal Requirements: Collectively, all statutes, ordinances, by-laws, codes,
rules, regulations, restrictions, orders, judgments, decrees and injunctions
(including, without limitation, all applicable building, health code, zoning,
subdivision, and other land use and health-care licensing statutes, ordinances,
by-laws, codes, rules and regulations), whether now or hereafter enacted,
promulgated or issued by any Governmental Authority, Accreditation Body or Third
Party Payor affecting the Lessor, any member of the Leasing Group or the Leased
Property or the ownership, construction, development, maintenance, management,
repair, use, occupancy, possession or operation thereof or the operation of any
programs or services in connection with the Leased Property, including, without
limitation, any of the foregoing which may (i) require repairs, modifications or
alterations in or to the Leased Property, (ii) in any way affect (adversely or
otherwise) the use and enjoyment of the Leased Property or (iii) require the
assessment, monitoring, clean-up, containment, removal, remediation or other
treatment of any Hazardous Substances on, under or from the Leased Property.
Without limiting the foregoing, the term Legal Requirements includes all
Environmental Laws and shall also include all Permits and Contracts issued or
entered into by any Governmental Authority, any Accreditation Body and/or any
Third Party Payor and all Permitted Encumbrances.
Lessee: As defined in the preamble of this Lease and its successors and
assigns.
Lessee's Election Notice: As defined in Section 14.3.
Lessee's Pro-Rata Share: The percentage derived by dividing the gross floor
area of the Facility by the gross floor area of the Building. In determining
gross floor area, garages, basements, attics and similar uninhabitable areas
shall be excluded. As of the date hereof, the Lessor and the Lessee agree that
the Lessee's Pro-Rata Share is equal to 50.8%.
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Lessor: As defined in the preamble of this Lease and its successors and
assigns.
Lessor Entities: Collectively, Lessor and any other Affiliate of Lessor
which may now or hereafter be a party to any Related Party Agreement.
Lessor's Investment: The sum of (a) SIXTEEN MILLION EIGHTY-TWO THOUSAND
THIRTY-EIGHT DOLLARS ($16,082,038) plus (b) the aggregate amount of all
Subsequent Investments.
Lien: With respect to any real or personal property, any mortgage,
easement, restriction, lien, pledge, collateral assignment, hypothecation,
charge, security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property, whether or not choate, vested or perfected.
Limited Parties: As defined in Section 11.5; provided, however, in no event
shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity, unless such shareholder is a member of the
Leasing Group or an Affiliate of any member of the Leasing Group.
Managed Care Plans: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
Management Agreement: Any agreement, whether written or oral, between the
Lessee or any Sublessee and any other Person pursuant to which the Lessee or
such Sublessee provides any payment, fee or other consideration to any other
Person to operate or manage the Facility, including, without limitation, the
Current Management Agreement.
Manager: Any Person who has entered into a Management Agreement with the
Lessee or any Sublessee.
Material Structural Work: Any (i) structural alteration, (ii) structural
repair or (iii) structural renovation to the Leased Property that would require
(a) the design and/or involvement of a structural engineer and/or architect
and/or (b) the issuance of a Permit.
Medicaid: The medical assistance program established by Title XIX of the
Social Security Act (42 USC ss.ss.1396 et seq.) and any statute succeeding
thereto.
Medical Center: The community medical center located on the CMC Land,
containing approximately 21,837 square feet and approximately 17,000 net
rentable square feet.
Medicare: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC ss.ss.1395 et
seq.) and any statute succeeding thereto.
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MMI: Meditrust Mortgage Investments, Inc., a Delaware corporation.
MMI Loan: That certain loan in the original principal amount of ELEVEN
MILLION EIGHT HUNDRED FOUR THOUSAND TWO HUNDRED SEVEN DOLLARS ($11,804,207) made
by MMI to the Lessor and the Seller, as affected by the Assignment and
Assumption Agreement.
MMI Loan Documents: As defined in Section 24.14.
Monthly Deposit Date: As defined in Section 4.6.
Net Income (or Net Loss): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
Obligations: Collectively, the Lease Obligations and the Related Party
Obligations.
Officer's Certificate: A certificate of the Lessee signed on behalf of the
Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of the Lessee, or another officer authorized to so
sign by the Board of Directors or By-Laws of the Lessee, or any other Person
whose power and authority to act has been authorized by delegation in writing by
any of the Persons holding the foregoing offices.
Overdue Rate: On any date, a rate of interest per annum equal to the
greater of: (i) a variable rate of interest per annum equal to one hundred
twenty percent (120%) of the Prime Rate, or (ii) eighteen percent (18%) per
annum; provided, however, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by the Lessor.
Patient Admission Agreements: All contracts, agreements and consents
executed by or on behalf of any patient or other Person seeking services at the
Facility, including, without limitation, assignments of benefits and guarantees.
PBGC: Pension Benefit Guaranty Corporation.
Permits: Collectively, all permits, licenses, approvals, qualifications,
rights, variances, permissive uses, accreditations, certificates,
certifications, consents, agreements, contracts, contract rights, franchises,
interim licenses, permits and other authorizations of every nature whatsoever
required by, or issued under, applicable Legal Requirements benefiting, relating
or affecting the Leased Property or the construction, development, maintenance,
management, use or operation thereof, or the operation of any programs or
services in conjunction with the Leased Property and all renewals, replacements
and substitutions therefor, now or hereafter required or
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issued by any Governmental Authority, Accreditation Body or Third Party Payor to
any member of the Leasing Group, or maintained or used by any member of the
Leasing Group, or entered into by any member of the Leasing Group with any third
Person.
Permits Assignment: The Collateral Assignment of Permits and Contracts of
even date granted by the Lessee to the Lessor.
Permitted Encumbrances: Collectively, those agreements, covenants and Liens
to which this Lease is expressly subject, whether presently existing, as are
listed on EXHIBIT B or which may hereafter be created in accordance with the
terms hereof.
Permitted Prior Security Interests: As defined in Section 6.1.
Person: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
Plans and Specifications: As defined in Section 13.1.
Pledge Agreement: The Stock Pledge Agreement of even date by and among the
Guarantor, the Lessee and the Lessor.
Primary Intended Use: The use of the Facility as a skilled nursing facility
with 180 beds or such additional number of beds as may hereafter be permitted
under this Lease, and such ancillary uses as are permitted by law and may be
necessary in connection therewith or incidental thereto.
Prime Rate: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by the Lessor.
Principal Place of Business: As defined in Section 10.1.
Proceeds: As defined in the UCC.
Provider Agreements: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of the
Lessee or any Sublessee in connection with the operation of the Facility
relating to any right of payment or other claim
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arising out of or in connection with the Lessee's or such Sublessee's
participation in any Third Party Payor Program.
Purchase Option: As defined in Section 18.3.
Purchase Price: As defined in Section 18.3.
Purchaser: As defined in Section 11.5.
Receivables: Collectively, all (i) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (ii) rights to payment for
goods sold or leased or services rendered by the Lessee or any other party,
whether now in existence or arising from time to time hereafter and whether or
not yet earned by performance, including, without limitation, obligations
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness.
Reference Bank: Fleet Bank of Connecticut, N.A.
Related Parties: Collectively, each Person that may now or hereafter be a
party to any Related Party Agreement other than the Lessor Entities.
Related Party Agreement: Any agreement, document or instrument now or
hereafter evidencing or securing any Related Party Obligation.
Related Party Default: The occurrence of a default or breach of condition
continuing beyond the expiration of any applicable notice and grace periods, if
any, under the terms of any Related Party Agreement.
Related Party Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings due to, or made for the
benefit of, Lessor or any of the other Lessor Entities by Lessee or any other
member of the Leasing Group or any of their respective Affiliates; whether such
indebtedness, covenants, liabilities, obligations, agreements and/or
undertakings are direct or indirect, absolute or contingent, liquidated or
unliquidated, due or to become due, joint, several or joint and several, primary
or secondary, now existing or hereafter arising.
Rent: Collectively, the Base Rent, the Additional Rent, Additional Charges
and all other sums payable under this Lease and the other Lease Documents.
Rent Adjustment Date: The first day of each Extended Term.
Rent Coverage Ratio: The ratio of Cash Flow for each applicable period to
the total of all Debt Service Rental Payments paid or payable during such period
or accrued for such period.
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Rent Insurance Proceeds: As defined in Section 13.8.
Rent Roll: As defined in Section 18.3.
Retainage: As defined in Section 13.1.
Security Agreement: The Security Agreement of even date herewith by and
between the Lessee and the Lessor.
Seller: Mediplex of New Jersey, Inc., a Delaware corporation.
Service, Maintenance and Easement Agreement: The Service, Maintenance and
Easement Agreement dated as of March 15, 1996, by and between the Seller and the
Lessor, recorded in the Middlesex County Clerk's Office on April 2, 1996 in Deed
Book 4315 Page 28.
Sewer Bill: The periodic bill for the Building presented to the Lessor by
the South Brunswick Sanitary Sewage Authority, another applicable Governmental
Authority or a private utility provider.
SNF/CMC Land: The real property shown as New Lot 3.06 on the Subdivision
Plan, and more particularly described in EXHIBIT A-3 attached hereto.
SNF Conversion Date: As defined in the MMI Loan Documents.
State: The state or commonwealth in which the Leased Property is located.
Subdivision Plan: That certain plan entitled: "Final Subdivision Plan Phase
1 & 2 of the Windrows At Princeton Forrestal Property of Trustees of Princeton
University," dated April 5, 1995, last revised September 18, 1995, prepared by
Van Note-Harvey Associates, P.C., Consulting Engineers, Planners, and Land
Surveyors, and filed with the Middlesex County Clerk's Office on April 2, 1996
as Map #4 File 1945.
Sublease: Collectively, all subleases, licenses, use agreements, concession
agreements, tenancy at will agreements, room rentals, rentals of other
facilities of the Leased Property and all other occupancy agreements of every
kind and nature (but excluding Patient Admission Agreements), whether oral or in
writing, now in existence or subsequently entered into by the Lessee,
encumbering or affecting the Leased Property.
Sublessee: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases.
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Subsequent Investments: The aggregate amount of all sums expended and
liabilities incurred by the Lessor in connection with Capital Additions.
Subsidiary or Subsidiaries: With respect to any Person, any corporation or
other entity of which such Person, directly, or indirectly, through another
entity or otherwise, owns, or has the right to control or direct the voting of,
fifty percent (50%) or more of the outstanding capital stock or other ownership
interest having general voting power (under ordinary circumstances).
Surrounding Property: Any real property that abuts the Leased Property or
any portion thereof.
Taking: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property whether or not the same shall have
actually been commenced.
Tangible Net Worth: An amount determined in accordance with GAAP equal to
the total assets of any Person, excluding the total intangible assets of such
Person, minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
Tangible Personal Property: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures, goods,
inventory, supplies, and other personal property owned or leased (pursuant to
equipment leases) by the Lessee and used in connection with the operation of the
Leased Property.
Term: Collectively, the Initial Term and each Extended Term which has
become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the provisions hereof.
Third Appraiser: As defined in SCHEDULE 3.1.
Third Party Payor Programs: Collectively, all third party payor programs in
which the Lessee or any Sublessee presently or in the future may participate,
including without limitation, Medicare, Medicaid, Champus, Blue Cross and/or
Blue Shield, Managed Care Plans, other private insurance plans and employee
assistance programs.
Third Party Payors: Collectively, Medicare, Medicaid, Blue Cross and/or
Blue Shield, private insurers and any other Person which presently or in the
future maintains Third Party Payor Programs.
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UCC: The Uniform Commercial Code as in effect from time to time in the
Commonwealth of Massachusetts.
Unavoidable Delays: Delays due to strikes, lockouts, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of either party
hereto.
United States Treasury Securities: The uninsured treasury securities issued
by the United States Federal Reserve Bank.
Unsuitable For Its Primary Intended Use: As used anywhere in this Lease,
the term "Unsuitable For Its Primary Intended Use" shall mean that, by reason of
Casualty, or a partial or temporary Taking by Condemnation, in the good faith
judgment of the Lessor, the Facility cannot be operated on a commercially
practicable basis for the Primary Intended Use, taking into account, among other
relevant factors, the number of usable beds and/or units affected by such
Casualty or partial or temporary Taking.
Utility Systems: Collectively, the domestic water, common water, sanitary
sewer, cable television, gas and electric lines, wires, flues, conduits and
utility lines, including all additions, substitutions and replacements thereto,
now or hereafter located in the Building.
Water Bill: The monthly or other periodic bill for the Building presented
to the Lessor by the Elizabethtown Water Company, another applicable
Governmental Authority or a private utility provider.
Water Fraction: A fraction, the numerator of which is the number of gallons
used by the Facility during the period reflected in the Water Bill, determined
by reference to the water meter located in the Medical Center that measures the
amount of water consumed by the Facility only, and the denominator of which is
the number of gallons of water used by the Building reported in the Water Bill.
Work: As defined in Section 13.1.
Work Certificates: As defined in Section 13.1.
2.2 Rules of Construction. The following rules of construction shall apply
to the Lease and each of the other Lease Documents: (a) references to "herein",
"hereof" and "hereunder" shall be deemed to refer to this Lease or the other
applicable Lease Document, and shall not be limited to the particular text or
section or subsection in which such words appear; (b) the use of any gender
shall include all genders and the singular number shall include the plural and
vice versa as the context may require; (c) references to the Lessor's attorneys
shall be deemed
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to include, without limitation, special counsel and local counsel for the
Lessor; (d) reference to attorneys' fees and expenses shall be deemed to include
all costs for administrative, paralegal and other support staff; (e) references
to Leased Property shall be deemed to include references to all of the Leased
Property and references to any portion thereof; (f) references to the Lease
Obligations shall be deemed to include references to all of the Lease
Obligations and references to any portion thereof; (g) references to the
Obligations shall be deemed to include references to all of the Obligations and
references to any portion thereof; (h) the term "including", when following any
general statement, will not be construed to limit such statement to the specific
items or matters as provided immediately following the term "including" (whether
or not non-limiting language such as "without limitation" or "but not limited
to" or words of similar import are also used), but rather will be deemed to
refer to all of the items or matters that could reasonably fall within the
broadest scope of the general statement; (i) any requirement that financial
statements be Consolidated in form shall apply only to such financial statements
as relate to a period during any portion of which the relevant Person has one or
more Subsidiaries; (j) all accounting terms not specifically defined in the
Lease Documents shall be construed in accordance with GAAP, (k) all exhibits
annexed to any of the Lease Documents as referenced therein shall be deemed
incorporated in such Lease Document by such annexation and/or reference, (l) all
references to any Fee Mortgage Loan Documents shall mean such Fee Mortgage Loan
Documents as may then be in force and effect and (m) all references to any Fee
Mortgagee shall mean the holder of any Fee Mortgage that is then in force and
effect.
ARTICLE 3
---------
RENT
----
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures. During
the Initial Term, the Lessee will pay to the Lessor, in lawful money of the
United States of America, at the Lessor's address set forth herein or at such
other place or to such other Person as the Lessor from time to time may
designate in writing, a base rent (the "Base Rent") per annum that is equal to
the aggregate amount of Debt Service payments due and payable with respect to
each calendar year (the "Debt Service Rental Payments"), which Base Rent shall
be payable in arrears in consecutive monthly installments due on the first day
of each calendar month (subject to adjustment in accordance with any adjustment
to Debt Service), except with respect to the Base Rent due for the month of
August, 1998, which shall be due and payable concurrently with the execution
hereof; provided, however, that in the event that the terms of any promissory
note secured by any Fee Mortgage requires Debt Service from the Lessor to be
paid on any basis other than monthly in arrears, the Lessee's obligation to make
monthly payments of the Debt Service Rental Payments shall be adjusted
accordingly to coincide with the schedule of payments.
The Lessor reserves the right to refinance any Fee Mortgage now or
hereafter encumbering the Leased Property and no such refinancing will limit or
otherwise affect the Lessee's obligation to make the Debt Service Rental
Payments; provided, that (x) the terms and
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conditions of any such refinancing reflect the terms and conditions that are
then customary and prevailing for commercial loan transactions secured by real
property of similar value and nature to the Leased Property and (y) the original
principal amount of any such refinancing does not exceed the then current Fair
Market Value of the Leased Property minus the Fair Market Added Value.
In the event that, during the Initial Term of this Lease, any applicable
Fee Mortgage Loan is paid in full and is not refinanced (so that no Fee Mortgage
Loan is then in effect), the Lessee shall continue to pay to the Lessor, as the
Base Rent due hereunder, an amount equal to the Debt Service Rental Payments
that were otherwise payable hereunder immediately prior to the payment in full
of the applicable Fee Mortgage, until such time, if any, prior to the expiration
of the Initial Term, that the Lessor obtains a new Fee Mortgage Loan (in
accordance with the terms hereof). From and after such time, if any, that a new
Fee Mortgage Loan is in effect, the Base Rent (and thus the Debt Service Rental
Payments) due hereunder will be calculated based upon the actual Debt Service
due from the Lessor to the holder of such Fee Mortgage.
On each Rent Adjustment Date, if no Fee Mortgage Loan is then in effect,
the Base Rent payable hereunder shall be adjusted so that the Lessee shall
continue to pay to the Lessor, as the Base Rent per annum due hereunder, an
amount equal to the lesser of (i) the then Fair Market Base Rent determined in
accordance with SCHEDULE 3.1 hereof, or (ii) the sum of (A) the Debt Service
Rental Payments payable (x) during the first Lease Year, if the applicable Rent
Adjustment Date occurs on the first day of the first Extended Term or (y) during
the last Lease Year of the immediately preceding Extended Term, if the
applicable Rent Adjustment Date occurs on the first day of the second or third
Extended Term plus (B) the product of (x) fifty (50%) percent multiplied by (y)
a fraction the numerator of which shall be the Consumer Price Index in effect on
the applicable Rent Adjustment Date minus the Consumer Price Index in effect on
the Commencement Date and the denominator of which shall be the Consumer Price
Index in effect on the Commencement Date, multiplied by (z) the Debt Service
Rental Payments payable (i) during the first Lease Year, if the applicable Rent
Adjustment Date occurs on the first day of the first Extended Term or (ii)
during the last Lease Year of the immediately preceding Extended Term, if the
applicable Rent Adjustment Date occurs on the first day of the second or third
Extended Term, until such time, if any, prior to the expiration of the Term,
that the Lessor obtains a new Fee Mortgage Loan (in accordance with the terms
hereof). Notwithstanding the foregoing, in no event shall the Base Rent due
hereunder as determined on any Rent Adjustment Date be less than the Base Rent
that was otherwise payable hereunder as of the date immediately prior to such
Rent Adjustment Date. From and after such time, if any, that a new Fee Mortgage
Loan is in effect (in accordance with the terms hereof), the Base Rent (and thus
the Debt Service Rental Payments) due hereunder shall be calculated based upon
the actual Debt Service due from the Lessor to the holder of such Fee Mortgage.
The Lessee will pay the Debt Service Rental Payments, in lawful money of
the United States of America, directly to the applicable Fee Mortgagee (at the
address that the Lessor or the Fee Mortgagee shall from time to time designate
in writing to the Lessee). If no Fee Mortgage
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Loan is then in effect, the Lessee will pay to the Lessor, in lawful money of
the United States of America, at the Lessor's address set forth herein or at
such other place or to such other Person as the Lessor from time to time may
designate in writing, the Base Rent.
The Base Rent due and payable hereunder for any fractional month during the
Term shall be prorated accordingly.
3.2 Intentionally Omitted.
3.3 Additional Rent. In addition to the Base Rent due and payable
hereunder, the Lessee shall pay, as additional rent (the "Additional Rent") an
amount equal to the Additional Debt Service Payments then due and payable under
any applicable Fee Mortgage Loan Documents. The Additional Rent shall be due and
payable when and if the Additional Debt Service Payments are due and payable
under the applicable Fee Mortgage Loan Documents. The Lessee will pay the
Additional Rent, in lawful money of the United States of America,
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directly to the applicable Fee Mortgagee (at the address that the Lessor or the
Fee Mortgagee shall from time to time designate in writing the Lessee).
Additional Rent due and payable hereunder for any fractional month during
the terms shall be prorated accordingly.
3.4 Service, Maintenance and Easement Agreement. The Lessor shall pay and
perform all of the obligations imposed on the Seller, and each successor owner
of the SNF/CMC Land, under the Service, Maintenance and Easement Agreement,
provided, that, the Lessee shall pay and perform all of the obligations imposed
on the owner of the SNF/CMC Land thereunder relating to or affecting the Access
Easement Areas.
3.5 Additional Charges. Subject to the rights to contest as set forth in
Article 15, in addition to the Base Rent and Additional Rent, (a) the Lessee
will also pay and discharge as and when due and payable all Impositions, all
amounts, liabilities and obligations under the Appurtenant Agreements due from
or payable by the owner of the Leased Property, all amounts, liabilities and,
except as provided in Section 3.3, obligations under the Permitted Encumbrances
due from or payable by the owner of the Leased Property and all other amounts,
liabilities and obligations which the Lessee assumes or agrees to pay under this
Lease, and (b) in the event of any failure on the part of the Lessee to pay any
of those items referred to in clause (a) above, the Lessee will also promptly
pay and discharge every fine, penalty, interest and cost which may be added for
non-payment or late payment of such items (the items referred to in clauses (a)
and (b) above being referred to herein collectively as the "Additional
Charges"), and the Lessor shall have all legal, equitable and contractual
rights, powers and remedies provided in this Lease, by statute or otherwise, in
the case of non-payment of the Additional Charges, as well as the Base Rent and
the Additional Rent. To the extent that the Lessee pays any Additional Charges
to the Lessor pursuant to any requirement of this Lease, the Lessee shall be
relieved of its obligation to pay such Additional Charges to any other Person to
which such Additional Charges would otherwise be due.
3.6 Net Lease. The Rent shall be paid absolutely net to the Lessor, so that
this Lease shall yield to the Lessor the full amount of the installments of Base
Rent, Additional Rent and Additional Charges throughout the Term, without
reduction abatement or offset, except as may be expressly provided herein.
3.7 No Lessee Termination or Offset.
3.7.1 No Termination. Except as may be otherwise specifically and
expressly provided in this Lease, the Lessee, to the extent not prohibited by
applicable law, shall remain bound by this Lease in accordance with its terms
and shall neither take any action without the consent of the Lessor to modify,
surrender or terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent, nor
shall the respective obligations of the Lessor and the Lessee be otherwise
affected by reason of (a)
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any Casualty or any Taking of the Leased Property, (b) the lawful or unlawful
prohibition of, or restriction upon, the Lessee's use of the Leased Property or
the interference with such use by any Person (other than the Lessor, except to
the extent permitted hereunder) or by reason of eviction by paramount title; (c)
any claim that the Lessee has or might have against the Lessor, (d) any default
or breach of any warranty by the Lessor or any of the other Lessor Entities
under this Lease or any other Lease Document or any Related Party Agreement, (e)
any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting the Lessor
or any assignee or transferee of the Lessor or (f) any other cause whether
similar or dissimilar to any of the foregoing, other than a discharge of the
Lessee from any of the Lease Obligations as a matter of law.
3.7.2 Waiver. The Lessee to the fullest extent not prohibited by
applicable law, hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law to
(a) modify, surrender or terminate this Lease or quit or surrender the Leased
Property or (b) entitle the Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by the Lessee hereunder, except as
otherwise specifically and expressly provided in this Lease.
3.7.3 Independent Covenants. The obligations of the Lessor and the
Lessee hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by the Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or (except in those instances
where the obligation to pay expressly survives the termination of this Lease) by
termination of this Lease other than by reason of an Event of Default.
3.8 Abatement of Rent Limited. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that in the event of a
partial Taking or a temporary Taking as described in Section 14.3, the Base Rent
shall be abated as follows: (a) in the case of such a partial Taking, Base Rent
then due during the Lease Year in which such Taking occurs shall be reduced to
equal the product of (i) the then current Base Rent multiplied by (ii) the
difference between one minus a fraction the numerator of which is the Award, the
denominator of which is the Fair Market Value of the Leased Property, and (b) in
the case of such a temporary Taking, by reducing the Base Rent for the period of
such a temporary Taking, by the net amount of the Award received by the Lessor.
For the purposes of this Section 3.8, the "net amount of the Award received
by the Lessor" shall mean the Award paid to the Lessor on account of such
Taking, minus all costs and expenses incurred by the Lessor in connection
therewith, and minus any amounts paid to or for the account of the Lessee to
reimburse for the costs and expenses of reconstructing the Facility following
such Taking in order to create a viable and functional Facility under all of the
circumstances.
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ARTICLE 4
---------
IMPOSITIONS; TAXES; UTILITIES;
------------------------------
INSURANCE PAYMENTS
------------------
4.1 Payment of Impositions.
4.1.1 Lessee To Pay. Subject to the provisions of Section 4.1.2 and Article
15, the Lessee will 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 authority where feasible, and the Lessee will promptly
furnish the Lessor copies of official receipts or other satisfactory proof
evidencing payment not later than the last day on which the same may be paid
without penalty or interest. Subject to the provisions of Article 15 and Section
4.1.2, the Lessee's obligation to pay such Impositions shall be deemed
absolutely fixed upon the date such Impositions become a lien upon the Leased
Property or any part thereof. Notwithstanding the foregoing, if any Impositions
are not separately assessed against the Leased Premises and include all or any
portion of the CMC Land or any portion of the Building or other improvements
thereon, the Lessee shall pay to the Lessor, within ten (10) days of receipt of
an invoice from the Lessor, together with a copy of the applicable bill from the
Governmental Authority or other Person to whom the Imposition is payable, the
Lessee's pro-rata share of the applicable Imposition, which for each Imposition,
shall equal the amount of the Imposition multiplied by a fraction, the numerator
of which shall equal the area of the Land, and the denominator of which shall
equal the area of the SNF/CMC Land or such portion thereof affected by the
applicable Imposition. If the Lessee shall receive any invoices for Impositions
covering any portion of the CMC Land, the Lessee shall, within seven (7) days of
receipt of such invoice, deliver the same to the Lessor along with the Lessee'
pro-rata share of the Imposition set forth on such invoice calculated in
accordance with the immediately preceding sentence.
4.1.2 Installment Elections. If any Imposition that is assessed or imposed
against only the Leased Property (and no other real or personal property not
included in the Leased Property) 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), the Lessee 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 hereof (subject to
the Lessee's right to contest pursuant to the provisions of Section 4.1.5 below)
as the same respectively become due and before any fine, penalty, premium,
further interest or cost may be added thereto.
4.1.3 Returns and Reports. The Lessor, at its expense, shall, to the extent
permitted by applicable law, prepare and file all tax returns and reports as may
be required by Governmental Authorities in respect of the Lessor's net income,
gross receipts, franchise taxes and taxes on its capital stock, and the Lessee,
at its expense, shall, to the extent permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any Imposition as may be required by Governmental Authorities. The Lessor and
the Lessee shall,
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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 that any Governmental
Authority classifies any property covered by this Lease as personal property,
the Lessee shall file all personal property tax returns in such jurisdictions
where it may legally so file. The Lessor, to the extent it possesses the same,
and the Lessee, to the extent it possesses the same, will provide the other
party, upon request, with cost and depreciation records necessary for filing
returns for any portion of Leased Property so classified as personal property.
Where the Lessor is legally required to file personal property tax returns, if
the Lessee notifies the Lessor of the obligation to do so in each year at least
thirty (30) days prior to the date any protest must be filed, the Lessee will be
provided with copies of assessment notices so as to enable the Lessee to file a
protest.
4.1.4 Refunds. If no Lease Default shall have occurred and be continuing,
subject to the terms of any Fee Mortgage Loan Documents, any refund due from any
taxing authority in respect of any Imposition paid by the Lessee shall be paid
over to or retained by the Lessee. If a Lease Default shall have occurred and be
continuing, at the Lessor's or the Fee Mortgagee's option, exercisable by
written notice to the Lessee, such funds shall be paid over to the Lessor or the
Fee Mortgagee or shall be retained by the Lessor and, in any such event, shall
be applied toward the Obligations in accordance with the Lease Documents and/or
any Related Party Agreement.
4.1.5 Protest. Upon giving notice to the Lessor, at the Lessee's option and
sole cost and expense, and subject to compliance with the provisions of Article
15 and the terms of any of the Fee Mortgage Loan Documents, the Lessee may
contest, protest, appeal, or institute such other proceedings as the Lessee may
deem appropriate to effect a reduction of any Imposition and the Lessor, at the
Lessee's cost and expense as aforesaid, shall fully cooperate in a reasonable
manner with the Lessee in connection with such protest, appeal or other action;
provided, however, that the Lessee's right to contest, protest, appeal or take
any such other action regarding any Imposition that includes the CMC Land or any
portion of the Building or other improvements thereon, shall require the
Lessor's prior written consent, which consent may not be unreasonably withheld.
4.2 Notice of Impositions. The Lessor shall give prompt notice to the
Lessee of all Impositions payable by the Lessee hereunder of which the Lessor at
any time has knowledge, but the Lessor's failure to give any such notice shall
in no way diminish the Lessee's obligations hereunder to pay such Impositions.
4.3 Adjustment of Impositions. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between the Lessor and the Lessee, whether or not
such Impositions are imposed before or after such expiration or termination, and
the Lessee's obligation to pay its prorated share thereof shall survive such
expiration or termination.
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4.4 Utilities.
4.4.1 Utility Services. Certain air conditioning, heating, hot water
production equipment, other portions of the Building Systems and other equipment
designed to serve the Facility are located in the Medical Center or on the CMC
Land. During the Term, the Lessor shall, at such times and in such amounts as
reasonably shall be requested by the Lessee, provide (a) forced hot water to the
heating portion of the Heating System located in the Facility, in an amount not
less than shall be sufficient to maintain a constant interior temperature of
70(degree) Fahrenheit, with an exterior temperature of 0(degree) Fahrenheit, (b)
air conditioning to the Facility when reasonably required by the Lessee, (c)
domestic water to the cold water portion of the Utility Systems located in the
Facility, (d) fire sprinkler water to the fire sprinkler water portion of the
Utility Systems located in the Facility, (e) domestic hot water to the domestic
hot water portion of the Utility Systems located in the Facility, and (f)
electric power to the Facility including, without limitation, emergency
electrical power, in such amount not less than the service requirements set
forth on the electrical drawings and specifications for the operation of the
Facility previously approved by the Lessor and the Lessee. The Lessee also shall
have the right to use the sanitary sewage lines in the Medical Center for
disposal of sanitary sewage in such reasonable quantities in accordance with the
Primary Intended Use from the Facility through sanitary sewage lines in the
Facility that connect to such lines in the Medical Center. The Lessor shall
provide dumpsters and a trash compactor on the CMC Land for the reasonable use
by the Lessee.
The Lessor shall not, except as specifically provided in this Section 4.4.1
and Section 8.1.4, be required to provide utility services, equipment or any
other services, of any nature or description, to the Lessee or the Leased
Property.
4.4.2 Utility Charges. The Lessee shall pay to the Lessor the Lessee's
share of the cost of the utility services provided by the Lessor under Section
4.4.1, calculated in the following manner:
(a) The Lessee's contribution to the cost of all water provided to the
Building shall equal an amount, with reference to each Water Bill, determined by
multiplying the amount due under the applicable Water Bill by the Water
Fraction.
(b) The Lessee's contribution to the cost of all sanitary sewage disposed
from the Building shall equal an amount, with reference to each Sewer Bill,
determined by multiplying the amount due under the applicable Sewer Bill by the
Water Fraction (as determined by reference to the Water Bill for the same period
covered by the Sewer Bill).
(c) The Lessee's contribution to the cost of all fuel provided by the
Lessor for the generation of emergency electrical power to the Building shall
equal an amount, with reference to each electric bill for the Building presented
to the Lessor, determined by multiplying the amount due under the applicable
bill by the Lessee's Pro-Rata Share.
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(d) The Lessee's contribution to the cost of all heat provided to the
Building shall equal an amount, with reference to each heating bill for the
Building presented to the Lessor, determined by multiplying the Billable
Facility Heating Amount by a rate mutually agreed to by the Lessor and the
Lessee.
(e) The Lessee's contribution to the cost of all trash removal from the
Building shall equal an amount, with reference to each trash removal bill for
the Building presented to the Lessor, determined by multiplying the amount due
under the applicable bill by the Lessee's Pro-Rata Share.
4.4.3 Common Work Costs. The Lessee's contribution to the reasonable costs,
expenses and fees incurred by the Lessor in performing the Common Work
(collectively, the "Common Work Costs") shall equal an amount determined by
multiplying the Common Work Costs for the applicable period by the Lessee's
Pro-Rata Share.
4.4.4 Method of Payment. The Lessee shall pay to the Lessor, within ten
(10) days after delivery by the Lessor to the Lessee of an invoice therefor, the
Lessee's Pro-Rata Share of the Common Work Costs and the Lessee's share
(calculated in the manner set forth in Section 4.4.2) of the cost of all other
all utility services provided by the Lessor hereunder. The Lessee shall pay or
cause to be paid directly to the applicable Governmental Authority or utility
service provider all other charges for electricity, power, gas, oil, water,
telephone and other utilities used in the Leased Property (whether or not
provided by the Lessor hereunder) during the Term and thereafter until the
Lessee surrenders the Leased Property in the manner required by this Lease,
including, without limitation, charges for utilities serving the Air
Conditioning System and the Hot Water System.
4.5 Insurance Premiums. The Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until the Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and the Lessee shall furnish the Lessor with evidence
satisfactory to the Lessor that all such premiums have been so paid prior to the
commencement of the Term and thereafter at least thirty (30) days prior to the
due date of each premium which thereafter becomes due. Notwithstanding the
foregoing, the Lessee may pay such insurance premiums to the insurer in monthly
installments so long as the applicable insurer is contractually obligated to
give the Lessor not less than a thirty (30) days notice of non-payment and so
long as no Lease Default has occurred and is continuing. In the event of the
failure of the Lessee either to comply with the insurance requirements in
Article 12, or to pay the premiums for such insurance, or to deliver such
policies or certificates thereof to the Lessor at the times required hereunder,
the Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor, which premiums shall be a demand
obligation of the Lessee to the Lessor.
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4.6 Deposits.
4.6.1 Lessor's Option. At the option of the Lessor, which may be exercised
at any time, the Lessee shall, upon written request of the Lessor, on the first
day on the calendar month immediately following such request, and on the first
day of each calendar month thereafter during the Term (each of which dates is
referred to as a "Monthly Deposit Date"), pay to and deposit with the Lessor a
sum equal to one-twelfth (1/12th) of the Impositions to be levied, charged,
filed, assessed or imposed upon or against the Leased Property within one (1)
year after said Monthly Deposit Date and a sum equal to one-twelfth (1/12th) of
the premiums for the insurance policies required pursuant to Article 12 which
are payable within one (1) year after said Monthly Deposit Date. If the amount
of the Impositions to be levied, charged, assessed or imposed or insurance
premiums to be paid within the ensuing one (1) year period shall not be fixed
upon any Monthly Deposit Date, such amount for the purpose of computing the
deposit to be made by the Lessee hereunder shall be estimated by the Lessor with
an appropriate adjustment to be promptly made between the Lessor and the Lessee
as soon as such amount becomes determinable. In addition, the Lessor may, at its
option, from time to time require that any particular deposit be greater than
one-twelfth (1/12th) of the estimated amount payable within one (1) year after
said Monthly Deposit Date, if such additional deposit is required in order to
provide to the Lessor a sufficient fund from which to make payment of all
Impositions on or before the next due date of any installment thereof, or to
make payment of any required insurance premiums not later than the due date
thereof.
4.6.2 Use of Deposits. The sums deposited by the Lessee under this Section
4.6 shall be held by the Lessor and shall be applied in payment of the
Impositions or insurance premiums, as the case may be, when due. Any such
deposits may be commingled with other assets of the Lessor, and shall be
deposited by the Lessor at such bank as the Lessor may, from time to time
select, and the Lessor shall not be liable to the Lessee or any other Person (a)
based on the Lessor's (or such bank's) choice of investment vehicles, (b) for
any consequent loss of principal or interest or (c) for any unavailability of
funds based on such choice of investment. Furthermore, the Lessor shall bear no
responsibility for the financial condition of, nor any act or omission by, the
Lessor's depository bank. The income from such investment or interest on such
deposit shall be paid to the Lessee on a semi-annual basis as long as no Lease
Default has occurred and is then continuing, and as long as no fact or
circumstance exists which, with the giving of notice and/or the passage of time,
would constitute a Lease Default. The Lessee shall give not less than ten (10)
days prior written notice to the Lessor in each instance when an Imposition or
insurance premium is due, specifying the Imposition or premium to be paid and
the amount thereof, the place of payment, and the last day on which the same may
be paid in order to comply with the requirements of this Lease. If the Lessor,
in violation of its obligations under this Lease, does not pay any Imposition or
insurance premium when due, for which a sufficient deposit exists, the Lessee
shall not be in default hereunder by virtue of the failure of the Lessor to pay
such Imposition or such insurance premium and the Lessor shall pay any interest
or fine assessed by virtue of the Lessor's failure to pay such Imposition or
insurance premium.
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4.6.3 Deficits. If for any reason any deposit held by the Lessor under this
Section 4.6 shall not be sufficient to pay an Imposition or insurance premium
within the time specified therefor in this Lease, then, within ten (10) days
after demand by the Lessor, the Lessee shall deposit an additional amount with
the Lessor, increasing the deposit held by the Lessor so that the Lessor holds
sufficient funds to pay such Imposition or premium in full (or in installments
as otherwise provided for herein), together with any penalty or interest due
thereon. The Lessor may change its estimate of any Imposition or insurance
premium for any period on the basis of a change in an assessment or tax rate or
on the basis of a prior miscalculation or for any other good faith reason; in
which event, within ten (10) days after demand by the Lessor, the Lessee shall
deposit with the Lessor the amount in excess of the sums previously deposited
with the Lessor for the applicable period which would theretofore have been
payable under the revised estimate.
4.6.4 Other Properties. If any Imposition shall be levied, charged, filed,
assessed, or imposed upon or against the Leased Property, and if such Imposition
shall also be a levy, charge, assessment, or imposition upon or for any other
real or personal property that does not constitute a part of the Leased Property
(other than Impositions against the CMC Land or any portion of the Building or
any other improvement thereon), then the computation of the amounts to be
deposited under this Section 4.6 shall be based upon the entire amount of such
Imposition and the Lessee shall not have the right to apportion any deposit with
respect to such Imposition.
4.6.5 Transfers. In connection with any assignment of the Lessor's interest
under this Lease, the original Lessor named herein and each successor in
interest shall have the right to transfer all amounts deposited pursuant to the
provisions of this Section 4.6 then in its possession to such assignee (as the
subsequent holder of the Lessor's interest in this Lease) and upon such
transfer, the original Lessor named herein or the applicable successor in
interest transferring the deposits shall thereupon be completely released from
all liability with respect to such deposits so transferred and the Lessee shall
look solely to said assignee, as the subsequent holder of the Lessor's interest
under this Lease, in reference thereto. The original Lessor named herein or the
applicable successor in interest transferring the deposits shall provide written
notice to the Lessee of such transfer.
4.6.6 Security. All amounts deposited with the Lessor pursuant to the
provisions of this Section 4.6 shall be held by the Lessor as additional
security for the payment and performance of the Obligations and, upon the
occurrence of any Lease Default, the Lessor may, in its sole and absolute
discretion, apply said amounts towards payment or performance of such
Obligations.
4.6.7 Return. Upon the expiration or earlier termination of this Lease,
provided, that, all of the Lease Obligations have been fully paid and performed,
any sums then held by the Lessor under this Section 4.6 shall be refunded to the
Lessee; unless a Related Party Default has occurred, in which event such sums
may be applied toward the Obligations.
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4.6.8 Receipts. The Lessee shall deliver to the Lessor copies of all
notices, demands, claims, bills and receipts in relation to the Impositions and
insurance premiums immediately upon receipt thereof by the Lessee.
ARTICLE 5
---------
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
---------------------------------------------------
INSTALLATION, REMOVAL AND REPLACEMENT OF
----------------------------------------
PERSONAL PROPERTY
-----------------
5.1 Ownership of the Leased Property. The Lessee acknowledges that the
Leased Property is the property of the Lessor and that, subject to the Permitted
Encumbrances, the Lessee has only the right to the exclusive possession and use
of the Leased Property upon the terms and conditions of this Lease.
5.2 Personal Property; Removal and Replacement of Personal Property.
5.2.1 Lessee To Equip Facility. The Lessee, at its sole cost and expense,
shall install, affix or assemble or place on the Leased Property, sufficient
items of Tangible Personal Property, in addition to the Lessor's Personal
Property, to enable the Leased Property to be operated, in accordance with the
requirements of this Lease for the Primary Intended Use, and such Tangible
Personal Property and replacements thereof, shall be at all times the property
of the Lessee.
5.2.2 Sufficient Personal Property. The Lessee shall maintain, during the
entire Term, the Tangible Personal Property and the Lessor's Personal Property
in good order and repair and shall provide at its expense all necessary
replacements thereof, as may be necessary in order to operate the Leased
Property in compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Primary Intended Use. In addition, the Lessee shall (a) furnish all
necessary replacements of obsolete items of the Tangible Personal Property and
the Lessor's Personal Property during the Term, unless the Lessee provides the
Lessor with an explanation (reasonably acceptable to the Lessor) as to why such
Tangible Personal Property and/or the Lessor's Personal Property is no longer
required in connection with the operation of the Leased Property and (b) at
least once a year, and more frequently if requested by the Lessor, deliver to
the Lessor, a detailed inventory of all such Tangible Personal Property and the
Lessor's Personal Property.
5.2.3 Removal and Replacement; Lessor's Option to Purchase. The Lessee
shall not remove from the Leased Property any one or more items of Tangible
Personal Property (whether now owned or hereafter acquired), the fair market
value of which exceeds TWENTY-FIVE THOUSAND DOLLARS ($25,000), individually or
ONE HUNDRED THOUSAND DOLLARS ($100,000.00) collectively, except if such Tangible
Personal Property is simultaneously suitably replaced or the Lessee provides the
Lessor with an explanation
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(reasonably satisfactory to the Lessor) as to why such Tangible Personal
Property is no longer required in connection with the operation of the Leased
Property. At its sole cost and expense, the Lessee shall restore the Leased
Property to the condition required by Article 8, including repair of all damage
to the Leased Property caused by the removal of the Tangible Personal Property,
whether effected by the Lessee or the Lessor. Upon the expiration or earlier
termination of this Lease, the Lessor shall have the option, which may be
exercised prior to or within sixty (60) days following such expiration or
termination, of (a) acquiring the Tangible Personal Property (pursuant to a bill
of sale and assignments of any equipment leases, all in such forms as are
reasonably satisfactory to the Lessor) upon payment of its book value (the
Lessee's cost, minus depreciation), but not in excess of its fair market value
or (b) requiring the Lessee to remove the Tangible Personal Property. If the
Lessor exercises its option to purchase the Tangible Personal Property, the
price to be paid by the Lessor shall be (i) reduced by the amount of all
payments due on any equipment leases or any other Permitted Prior Security
Interests assumed by the Lessor and (ii) applied to the Lease Obligations before
any payment to the Lessee. If the Lessor requires the removal of the Tangible
Personal Property, then all of the Tangible Personal Property that is not
removed by the Lessee within ten (10) days following such request shall be
considered abandoned by the Lessee and may be appropriated, sold, destroyed or
otherwise disposed of by the Lessor upon first giving notice thereof to the
Lessee, without any payment to the Lessee and without any obligation to account
therefor.
ARTICLE 6
---------
SECURITY FOR LEASE OBLIGATIONS
------------------------------
6.1 Security for Lessee's Obligations.
6.1.1 Security. In order to secure the payment and performance of all of
the Obligations, the Lessee agrees to provide or cause there to be provided,
among other things, the following security:
(a) a first lien and exclusive security interest in the Tangible Personal
Property and certain other Collateral as more particularly provided for in the
Security Agreement;
(b) a first lien and exclusive pledge of all of the capital stock of the
Lessee all as more particularly set forth in the Pledge Agreements. If any
Person other than the Lessee shall ever operate the Facility, a pledge of all
capital stock of, or partnership or other ownership interests, in such Person
shall also be provided pursuant to a pledge and security agreement substantially
similar to the Pledge Agreements; and
(c) a first lien and exclusive pledge and assignment of, and security
interest in, all Permits and Contracts, as more particularly provided for in the
Permits Assignment.
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Notwithstanding anything to the contrary set forth herein, in no event
shall the Lessee be required to grant to the Lessor any security interest in
Receivables; provided, however, upon any Lease Default or the expiration or
earlier termination of this Lease, the Lessee shall provide the Lessor with
copies of its books and records relating to Receivables, even if excluded from
the security granted to the Lessor, so as to facilitate continuity of patient
and/or resident care and billing.
6.1.2 Purchase-Money Security Interests and Equipment Leases.
Notwithstanding any other provision hereof regarding the creation of Liens, but
subject to Section 11.3.2, the Lessee may grant priority purchase money security
interests in items of Tangible Personal Property or lease Tangible Personal
Property from equipment lessors without the consent of the Lessor as long as the
total amount of the obligations of the Lessee outstanding in connection
therewith do not exceed ONE HUNDRED THOUSAND DOLLARS ($100,000) in the aggregate
and the Lessee may grant purchase money security interests in Tangible Personal
Property and lease Tangible Personal Property from equipment lessors in excess
of such limit, as long as, in each instance, (i) the secured party or equipment
lessor enters into an intercreditor agreement with, and satisfactory to, the
Lessor, pursuant to which, without limiting the foregoing, (x) the Lessor shall
be afforded the option of curing defaults and the option of succeeding to the
rights of the Lessee and (y) the Lessor's security interest in Tangible Personal
Property shall be subordinated to the security interest granted to such secured
party, (ii) all of the terms, conditions and provisions of the purchase money
security agreements or equipment leases evidencing the financing arrangement are
reasonably acceptable to the Lessor, (iii) promptly after the execution thereof,
the Lessee provides to the Lessor true and complete copies, as executed, of all
such purchase money security agreements and equipment leases (and all amendments
thereto) and (iv) no such purchase money security interest or equipment lease
shall be cross-defaulted or cross-collateralized with any other obligation.
Security interests granted by the Lessee in full compliance with the provisions
of this Section 6.1.2 are referred to as "Permitted Prior Security Interests."
ARTICLE 7
---------
CONDITION AND USE OF LEASED PROPERTY;
-------------------------------------
MANAGEMENT AGREEMENTS
---------------------
7.1 Condition of the Leased Property. The Lessee acknowledges receipt and
delivery of possession of the Leased Property and that the Lessee has examined
and otherwise has acquired knowledge of the condition of the Leased Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair and satisfactory for its purposes hereunder. The Lessee
is leasing the Leased Property "AS-IS" in its present condition. The Lessee
waives any claim or action against the Lessor in respect of the condition of the
Leased Property. THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LEASED
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PROPERTY, EITHER AS TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS DESIGN
OR CONDITION OR OTHERWISE, OR AS TO DEFECTS IN THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT; IT BEING AGREED THAT ALL RISKS RELATING
TO THE DESIGN, CONDITION AND/OR USE OF THE LEASED PROPERTY ARE TO BE BORNE BY
THE LESSEE. THE LESSEE HEREBY ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF THE
LEASED PROPERTY, THE SUITABILITY OF THE LEASED PROPERTY FOR THE LESSEE'S
PURPOSES, AND THE COMPLIANCE OR NON-COMPLIANCE OF THE LEASED PROPERTY WITH ALL
APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL LAWS
AND ZONING OR LAND USE LAWS.
Upon the request of the Lessor, at any time and from time to time during
the Term, the Lessee shall engage one (1) or more independent professional
consultants, engineers and inspectors, qualified to do business in the State and
acceptable to the Lessor to perform any environmental and/or structural
investigations and/or other inspections of the Leased Property and the Facility
as the Lessor may reasonably request in order to detect (a) any structural
deficiencies in the Leased Improvements or the utilities servicing the Leased
Property or (b) the presence of any condition that (i) may be harmful or present
a health hazard to the patients and/or residents and other occupants of the
Leased Property or (ii) constitutes a breach or violation of any of the Lease
Documents. In the event that the Lessor reasonably determines that the results
of such testing or inspections are unsatisfactory, within thirty (30) days of
notice from the Lessor, the Lessee shall commence such appropriate remedial
actions as may be reasonably requested by the Lessor to correct such
unsatisfactory conditions and, thereafter, shall diligently and continuously
prosecute such remedial actions to completion within the time limits prescribed
in this Lease or the other Lease Documents.
7.2 Use of the Leased Property; Compliance; Management.
7.2.1 Obligation to Operate. The Lessee shall continuously operate the
Leased Property in accordance with the Primary Intended Use and maintain its
qualifications for licensure and accreditation as required by all applicable
Legal Requirements and Insurance Requirements.
7.2.2 Permitted Uses. During the entire Term, the Lessee shall use the
Leased Property, or permit the Leased Property to be used, only for the Primary
Intended Use. The Lessee shall not use the Leased Property or permit the Leased
Property to be used for any other use without the prior written consent of the
Lessor, which consent may be withheld in the Lessor's sole and absolute
discretion.
7.2.3 Compliance With Insurance Requirements. No use shall be made or
permitted to be made of the Leased Property and no acts shall be done which will
cause the cancellation of any insurance policy covering the Leased Property, nor
shall the Lessee, any Manager or any
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other Person sell or otherwise provide to any patients and/or residents, other
occupants or invitees therein, or permit to be kept, used or sold in or about
the Leased Property, any article which may be prohibited by any Legal
Requirement or by any of the Insurance Requirements. Furthermore, the Lessee
shall, at its sole cost and expense, take whatever other actions that may be
necessary to comply with and to insure that the Leased Property complies with
all Insurance Requirements.
7.2.4 No Waste. The Lessee shall not commit or suffer to be committed any
waste on, in or under the Leased Property, nor shall the Lessee cause or permit
any nuisance thereon.
7.2.5 No Impairment. The Lessee shall neither suffer nor permit the Leased
Property to be used in such a manner as (a) might reasonably tend to impair the
Lessor's title thereto or (b) may reasonably make possible a claim or claims of
adverse usage or adverse possession by the public or of implied dedication of
the Leased Property.
7.2.6 No Liens. Except as permitted pursuant to Section 6.1.2, the Lessee
shall not permit or suffer any Lien to exist on the Tangible Personal Property
and shall in no event cause, permit or suffer any Lien to exist with respect to
the Leased Property other than as set forth in Section 11.5.2.
7.3 Compliance with Legal Requirements. The Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that the
Lessee, at its sole cost and expense, will promptly (a) comply with, and shall
cause every other member of the Leasing Group to comply with, all Legal
Requirements relating to the use, operation, maintenance, repair and restoration
of the Leased Property, whether or not compliance therewith shall require
structural change in any of the Leased Property or interfere with the use and
enjoyment of the Leased Property and (b) procure, maintain and comply with (in
all material respects), and shall cause every other member of the Leasing Group
to procure, maintain and comply with (in all material respects), all Contracts
and Permits necessary or desirable in order to operate the Leased Property for
the Primary Intended Use, and for compliance with all of the terms and
conditions of this Lease. Unless a Lease Default has occurred or any event has
occurred which, with the passage of time and/or the giving of notice would
constitute a Lease Default, the Lessee may, upon prior written notice to the
Lessor, contest any Legal Requirement to the extent permitted by, and in
accordance with, Article 15.
7.4 Management Agreements. From and after the Commencement Date, neither
the Lessee, nor any Sublessee (other than any Sublessee that is not an Affiliate
of the Lessee) shall enter into any Management Agreement, without the prior
written approval of the Lessor and the Fee Mortgagee (to the extent that any
such approval from any Fee Mortgagee is required under any Fee Mortgage Loan
Documents), in each instance, which approval from the Lessor shall not be
unreasonably withheld. The Lessee shall not, without the prior written approval
of the Lessor, in each instance, which approval shall not be unreasonably
withheld, agree to or allow: (a) any change in the ownership or control of the
Manager to the extent that, pursuant to the
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Management Agreement, any such change is prohibited or subject to the Lessee's
approval, (b) the termination of any Management Agreement, except (i) if either
party thereto exercises any right to terminate the Management Agreement in
accordance with its terms (unrelated to an allegation of default) or (ii) in
connection with the exercise by the Lessee of any of its remedies under the
Management Agreement as a result of any default by the Manager thereunder), (c)
any assignment by the Manager of its interest under the Management Agreement or
(d) any material amendment of the Management Agreement. In addition, the Lessee
and every Sublessee (other than any Sublessee that is not an Affiliate of the
Lessee) shall, at their sole cost and expense, promptly and fully perform or
cause to be performed every covenant, condition, promise and obligation of the
licensed operator of the Leased Property under any Management Agreement.
Each Management Agreement shall provide that the Lessor shall be provided
notice of any defaults thereunder and, at the Lessor's option, an opportunity to
cure such default. The Lessee and any Sublessee (other than any Sublessee that
is not an Affiliate of the Lessee) shall furnish to the Lessor, within three (3)
days after receipt thereof, or after the mailing or service thereof by the
Lessee or such Sublessee, as the case may be, a copy of each notice of default
which the Lessee or such Sublessee shall give to, or receive from any Person,
based upon the occurrence, or alleged occurrence, of any default in the
performance of any covenant, condition, promise or obligation under any
Management Agreement.
Whenever and as often as the Lessee or any Sublessee (other than any
Sublessee that is not an Affiliate of the Lessee) shall fail to perform,
promptly and fully, at its sole cost and expense, any covenant, condition,
promise or obligation on the part of the licensed operator of the Leased
Property under and pursuant to any Management Agreement, the Lessor, or a
lawfully appointed receiver of the Leased Property, or, subject to the terms of
any applicable Fee Mortgage Loan Documents, any Fee Mortgagee may, at their
respective options (and without any obligation to do so), after five (5) days'
prior notice to the Lessee (except in the case of an emergency) enter upon the
Leased Property and perform, or cause to be performed, such work, labor,
services, acts or things, and take such other steps and do such other acts as
they may deem advisable, to cure such defaulted covenant, condition, promise or
obligation, and any amount so paid or advanced by the Lessor, such receiver or
such Fee Mortgagee and all costs and expenses reasonably incurred in connection
therewith (including, without limitation, attorneys' fees and expenses), shall
be a demand obligation of the Lessee to the Lessor, such receiver or such Fee
Mortgagee, and, such parties shall have the same rights and remedies for failure
to pay such costs on demand as for the Lessee's failure to pay any other sums
due hereunder.
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ARTICLE 8
---------
REPAIRS; RESTRICTIONS
---------------------
8.1 Maintenance and Repair.
8.1.1 Lessee's Responsibility. The Lessee, at its sole cost and expense,
shall keep the Leased Property and all private roadways, sidewalks and curbs
appurtenant thereto which are under the Lessee's control in good order and
repair (whether or not the need for such repairs occurs as a result of the
Lessee's use, any prior use, the elements or the age of the Leased Property or
such private roadways, sidewalks and curbs or any other cause whatsoever) and,
subject to Articles 9, 13 and 14, the Lessee shall promptly, with the exercise
of all reasonable efforts, undertake and diligently complete all necessary and
appropriate repairs, replacements, renovations, restorations, alterations and
modifications thereof of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition (concealed or otherwise) existing prior to
the commencement of, or during, the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease. In
addition, the Lessee, at its sole cost and expense, shall make all repairs,
modifications, replacements, renovations and alterations of the Leased Property
(and such private roadways, sidewalks and curbs) that are necessary to comply
with all applicable Legal Requirements and Insurance Requirements so that the
Leased Property can be legally operated for the Primary Intended Use. All
repairs, replacements, renovations, alterations, and modifications required by
the terms of this Section 8.1 shall be (a) performed in a good and workmanlike
manner in compliance with all Legal Requirements, Insurance Requirements and the
requirements of Article 9 hereof and any applicable Fee Mortgage Loan Documents,
using new materials well suited for their intended purpose and (b) consistent
with the operation of the Leased Property in a first class manner. The Lessee
will not take or omit to take any action the taking or omission of which might
materially impair the value or the usefulness of the Leased Property for the
Primary Intended Use. To the extent that any of the repairs, replacements,
renovations, alterations or modifications required by the terms of this Section
8.1 constitute Material Structural Work, the Lessee shall obtain the Lessor's
prior written approval (which approval shall not be unreasonably withheld) of
the specific repairs, replacements, renovations, alterations and modifications
to be performed by or on behalf of the Lessee in connection with such Material
Structural Work. Notwithstanding the foregoing, in the event of a bona fide
emergency during which the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such Material Structural
Work as may be necessary in order to address such emergency without the Lessor's
prior approval; provided, however; that the Lessee shall immediately thereafter
advise the Lessor and any Fee Mortgagee of such emergency and the nature and
scope of the Material Structural Work commenced and shall obtain the Lessor's
approval of the remaining Material Structural Work to be completed. The Lessee
shall have the right to access the Medical Center at such reasonable times, and
only to the extent reasonably necessary, to perform the Lessee's obligations
under this Section 8.1 with respect to that portion of the Leased Property
constituting a portion of the Building Systems located in the Medical
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Center, provided, that, notwithstanding anything to the contrary set forth
herein, the Lessee shall perform its obligations (including, without limitation,
the obligations under this Section 8.1), and shall not exercise any right or
take or omit to take any action, under this Lease that would in any manner
unreasonably interfere with the use or operation, or detract from the value or
operating efficiency, of the CMC Land or those portions of the Building and
other improvements thereon, or otherwise adversely affect the CMC Land or such
portions of the Building and other improvements.
8.1.2 No Lessor Obligation. The Lessor shall not, under any circumstances,
be required to build or rebuild any improvements on the Leased Property (or any
private roadways, sidewalks or curbs appurtenant thereto or any other portion of
the Building or Building Systems), or to make any repairs, replacements,
renovations, alterations, restorations, modifications, or renewals of any nature
or description to the Leased Property (or any private roadways, sidewalks or
curbs appurtenant thereto or any other portion of the Building or, except as
hereinafter specifically provided in this Section 8.1, the Building Systems),
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 (or any private
roadways, sidewalks or curbs appurtenant thereto or any other portion of the
Building or, except as hereinafter specifically provided in this Section 8.1,
the Building Systems) in any way.
8.1.3 Lessee May Not Obligate Lessor. Nothing contained herein nor any
action or inaction by the Lessor shall be construed as (a) constituting the
consent or request of the Lessor, express or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) giving the Lessee any right,
power or permission to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such fashion as
would permit the making of any claim against the Lessor for the payment thereof
or to make any agreement that may create, or in any way be the basis for, any
right, title or interest in, or Lien or claim against, the estate of the Lessor
in the Leased Property. Without limiting the generality of the foregoing, the
right, title and interest of the Lessor in and to the Leased Property shall not
be subject to liens or encumbrances for the performance of any labor or services
or the furnishing of any materials or other property furnished to the Leased
Property at or by the request of the Lessee or any other Person other than the
Lessor. The Lessee shall notify any contractor, subcontractor, laborer,
materialman or vendor providing any labor, services or materials to the Leased
Property of this provision.
8.1.4 Lessor's Common Work: The Lessor shall perform or cause to be
performed the following work (the "Common Work"):
(a) replace, repair and maintain those portions of the Building Systems
located within the Building that do not exclusively serve the Facility,
including, without limitation, the meters used to determine shared costs of
utility services, in a condition sufficient for the Lessor to provide the
services required under Section 4.4; and
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(b) replace, repair and maintain, or cause the applicable provider to
replace, repair and maintain, the dumpsters and trash compactor in a condition
sufficient for the Lessee's reasonable use.
8.1.5 Party Wall. The central common wall dividing the Medical Center from
the Facility, the center of said wall being a portion of the common boundary
dividing the Land from the CMC Land, is hereby established as a party wall.
Neither the Lessor nor the Lessee shall use such party wall in any manner that
will interfere with the equal use of the other half of the party wall. The
Lessee shall maintain, repair and replace such party wall in accordance with the
provisions of Section 8.1.1.
8.2 Encroachments; Title Restrictions. 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 Lien now or hereafter affecting the
Leased Property, or shall impair the rights of others under any easement,
right-of-way or other Lien to which the Leased Property is now or hereafter
subject, then promptly upon the request of the Lessor, the Lessee shall, at its
sole cost and expense, subject to the Lessee's right to contest the existence of
any encroachment, violation or impairment as set forth in Article 15, (a) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment or (b)
make such alterations to the Leased Improvements, and take such other actions,
as the Lessee in the good faith exercise of its judgment deems reasonably
practicable, to remove such encroachment, or to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements. Notwithstanding the foregoing, the Lessee shall, in any event,
take all such actions as may be reasonably necessary in order to be able to
continue the operation of the Leased Improvements for the Primary Intended Use
substantially in the manner and to the extent that the Leased Improvements were
operated prior to the assertion of such encroachment, violation or impairment
and nothing contained herein shall limit the Lessee's obligations to operate the
Leased Property in accordance with its Primary Intended Use. Any such alteration
made pursuant to the terms of this Section 8.2 shall be completed in conformity
with the applicable requirements of Section 8.1 and Article 9. The Lessee's
obligations under this Section 8.2 shall be in addition to and shall in no way
discharge or diminish any obligation of any insurer under any policy of title or
other insurance.
ARTICLE 9
---------
MATERIAL STRUCTURAL WORK AND
----------------------------
CAPITAL ADDITIONS
-----------------
9.1 Lessor's Approval. Without the prior written consent of the Lessor,
which consent may be withheld by the Lessor, in its sole and absolute
discretion, the Lessee shall make no Capital Addition or Material Structural
Work to the Leased Property (including, without
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limitation, any change in the size, bed and/or unit capacity of the Facility),
except as may be otherwise expressly required pursuant to Article 8.
9.2 General Provisions as to Capital Additions and Certain Material
Structural Work. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which the Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in the Lessor's written approval.
9.2.1 No Liens. The Lessee shall not be permitted to create any Lien on the
Leased Property in connection with any Capital Addition or Material Structural
Work. Without limiting the foregoing, nothing herein shall be construed as
constituting the permission of the Lessor for any mechanic, materialman or
subcontractor to file any Lien against the Leased Property, and the Lessee
agrees to secure the immediate removal of any such Lien purported to be filed,
by payment or otherwise as provided by law.
9.2.2 Lessee's Proposal Regarding Capital Additions and Material Structural
Work. If the Lessee desires to undertake any Capital Addition or Material
Structural Work, the Lessee shall submit to the Lessor in writing a proposal
setting forth in reasonable detail any proposed Capital Addition or Material
Structural Work and shall provide to the Lessor copies of, or information
regarding, the applicable plans and specifications, Permits, Contracts and any
other materials concerning the proposed Capital Addition or Material Structural
Work, as the case may be, as the Lessor may reasonably request. Without limiting
the generality of the foregoing, each such proposal pertaining to any Capital
Addition 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 Gross Revenues that the Lessee
anticipates will result from the construction of such Capital Addition.
9.2.3 Lessor's Options Regarding Capital Additions and Material Structural
Work. The Lessor shall have the options of: (a) denying permission for the
construction of the applicable Capital Addition or Material Structural Work, (b)
offering to finance the construction of the Capital Addition or Material
Structural Work pursuant to Section 9.3, (c) allowing the Lessee to pay for or
separately finance the construction of the Capital Addition or Material
Structural Work, subject to compliance with the terms and conditions of Section
9.2.1, Section 9.4, Section 13.1, all Legal Requirements and all other
requirements of this Lease and to such other terms and conditions as the Lessor
may in its discretion impose or (d) any combination of the foregoing. Unless the
Lessor notifies the Lessee in writing of a contrary election within forty-five
(45) days of the Lessee's request, the Lessor shall be deemed to have denied the
request for the Capital Addition or Material Structural Work.
9.2.4 Lessor May Elect to Finance Capital Additions or Material Structural
Work. If the Lessor elects to offer financing for the proposed Capital Addition
or Material Structural Work, the provisions of Section 9.3 shall apply.
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9.2.5 Legal Requirements; Quality of Work. All Capital Additions and/or
Material Structural Work shall be performed in full compliance with all
applicable Legal Requirements and shall be performed in a good and workmanlike
manner.
9.3 Capital Additions and Material Structural Work Financed by Lessor.
9.3.1 Lessee's Financing Request. The Lessee may request that the Lessor
provide or arrange financing for a Capital Addition or Material Structural Work
by providing to the Lessor such information about the Capital Addition or
Material Structural Work as he Lessor may reasonably request, including, without
limitation, all information referred to in Section 9.2 above. The Lessee
understands, however, that the Lessor shall be under no obligation to agree to
such request. Nevertheless, the Lessor shall use reasonable efforts to notify
the Lessee, within forty-five (45) days of receipt of such information, as to
whether the Lessor will finance the proposed Capital Addition or Material
Structural Work and, if so, the terms and conditions upon which it would do so,
including the terms of any amendment to this Lease (including, without
limitation, an increase in Base Rent to compensate the Lessor for the additional
funds advanced by it). The Lessee may withdraw its request by notice to the
Lessor at any time before such time as the Lessee accepts the Lessor's terms and
conditions. All advances of funds for any such financing shall be made in
accordance with the requirements and procedures applicable to Work under Section
13.1.
9.3.2 Lessor's General Requirements. If the Lessor agrees to finance the
proposed Capital Addition or Material Structural Work and the Lessee accepts the
Lessor's proposal therefor, in addition to all other items which the Lessor or
any applicable Financing Party may reasonably require, the Lessee shall provide
to the Lessor the following:
(a) prior to any advance of funds, (i) any information, opinions,
certificates, Permits or documents reasonably requested by the Lessor or any
applicable Financing Party which are necessary to confirm that the Lessee will
be able to use the Capital Addition upon the completion thereof or the
applicable portion of the Facility upon the completion of the Material
Structural Work in accordance with the Primary Intended Use and (ii) evidence
satisfactory to the Lessor and any applicable Financing Party that all Permits
required for the construction and use of the Capital Addition or the applicable
portion of the Facility have been obtained, are in full force and effect and are
not subject to appeal, except only for those Permits which cannot in the normal
course be obtained prior to commencement or completion of the construction;
provided, that the Lessor and any applicable Financing Party are furnished with
reasonable evidence that the same will be available in the normal course of
business without unusual condition;
(b) prior to any advance of funds, an Officer's Certificate and, if
requested, a certificate from the Lessee's architect, setting forth in
reasonable detail the projected (or actual, if available) Capital Addition Cost
or the cost of the Material Structural Work;
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(c) bills of sale, instruments of transfer and other documents required by
the Lessor so as to vest title to the Capital Addition or the applicable
Material Structural Work in the Lessor free and clear of all Liens, and
amendments to this Lease and any recorded notice or memorandum thereof, duly
executed and acknowledged, in form and substance reasonably satisfactory to the
Lessor, providing for any changes required by the Lessor including, without
limitation, changes in the Base Rent and the legal description of the Land;
(d) upon payment therefor, a deed conveying to the Lessor title to any land
acquired for the purpose of constructing the Capital Addition or the applicable
Material Structural Work ("Additional Land") free and clear of any Liens except
those approved by the Lessor;
(e) upon completion of the Capital Addition or the Material Structural
Work, a final as-built survey thereof reasonably satisfactory to the Lessor, if
required by the Lessor;
(f) during and following the advance of funds and the completion of the
Capital Addition or the Material Structural Work, endorsements to any
outstanding policy of title insurance covering the Leased Property satisfactory
in form and substance to the Lessor and any Financing Party (i) updating the
same without any additional exception except as may be reasonably permitted by
the Lessor, (ii) if applicable, including the Additional Land in the premises
covered by such title insurance policy and (iii) increasing the coverage thereof
by an amount equal to any amount paid by the Lessor for the Additional Land plus
the Fair Market Value of the Capital Addition or the Fair Market Value of the
Material Structural Work (except to the extent covered by the owner's policy of
title insurance referred to in subparagraph (g) below);
(g) simultaneous with the initial advance of funds, if appropriate, (i) an
owner's policy of title insurance insuring fee simple title to any Additional
Land conveyed to the Lessor pursuant to subparagraph (d) free and clear of all
Liens except those approved by the Lessor and (ii) a lender's policy of title
insurance reasonably satisfactory in form and substance to any applicable
Financing Party;
(h) following the completion of the Capital Addition or the Material
Structural Work, if reasonably deemed necessary by the Lessor, an appraisal of
the Leased Property by an M.A.I. appraiser acceptable to the Lessor, which
states that the Fair Market Value of the Leased Property upon completion of the
Capital Addition or the Material Structural Work exceeds the Fair Market Value
of the Leased Property prior to the commencement of the construction of such
Capital Addition or Material Structural Work by an amount not less than one
hundred twenty-five percent (125%) of the Capital Addition Cost or the cost of
the Material Structural Work; and
(i) during or following the advancement of funds, prints of architectural
and engineering drawings relating to the Capital Addition or the Material
Structural Work and such other materials, including, without limitation,
endorsements to the title insurance policies (insuring the Lessor and any
applicable Financing Party with respect to the Leased Property)
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contemplated by subsection (f) above, opinions of counsel, appraisals, surveys,
certified copies of duly adopted resolutions of the board of directors of the
Lessee authorizing the execution and delivery of the lease amendment and any
other documents and instruments as may be reasonably required by the Lessor and
any applicable Financing Party.
9.3.3 Payment of Costs. By virtue of making a request to finance a Capital
Addition or any Material Structural Work, whether or not such financing is
actually consummated, the Lessee shall be deemed to have agreed to pay, upon
demand, all costs and expenses reasonably incurred by the Lessor and any Person
participating with the Lessor in any way in the financing of the Capital
Addition or Material Structural Work, including, but not limited to (a) fees and
expenses of their respective attorneys, (b) all photocopying expenses, if any,
(c) the amount of any filing, registration and recording taxes and fees, (d)
documentary stamp taxes and intangible taxes and (e) title insurance charges and
appraisal fees.
9.4 General Limitations. Without in any way limiting the Lessor's options
with respect to proposed Capital Additions or Material Structural Work: (a) no
Capital Addition or Material Structural Work shall be completed that could, upon
completion, 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 the Lessee to comply with the terms of this Lease, (b) no Capital
Addition or Material Structural Work shall be completed which would tie in or
connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the Leased Property (and not part of the
Land covered by this Lease) including, without limitation, tie-ins of buildings
or other structures or utilities, unless the Lessee shall have obtained the
prior written approval of the Lessor, which approval may be withheld in the
Lessor's sole and absolute discretion and (c) all proposed Capital Additions and
Material Structural Work shall be architecturally integrated and consistent with
the Leased Property.
9.5 Non-Capital Additions. The Lessee shall have the obligation and right
to make repairs, replacements and alterations which are not Capital Additions as
required by the other Sections of this Lease, but in so doing, the Lessee shall
always comply with and satisfy the conditions of Sections 9.2.1, 9.2.5 and 9.4,
mutatis, mutandis. The Lessee shall have the right, from time to time, to make
additions, modifications or improvements to the Leased Property which do not
constitute Capital Additions or Material Structural Work as it may deem to be
desirable or necessary for its uses and purposes, subject to the same limits and
conditions imposed under Sections 9.2.1, 9.2.5 and 9.4. The cost of any such
repair, replacement, alteration, addition, modification or improvement shall be
paid by the Lessee and the results thereof shall be included under the terms of
this Lease and become a part of the Leased Property, without payment therefor by
the Lessor at any time. Notwithstanding the foregoing, all such additions,
modifications and improvements which affect the structure of any of the Leased
Improvements, or which involve the expenditure of more than FIFTY THOUSAND
DOLLARS ($50,000.00), shall be undertaken only upon compliance with the
provisions of Section 13.1, all Legal Requirements and all other applicable
requirements of this Lease; provided, however, that in the
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event of a bona fide emergency during which the Lessee is unable to contact the
appropriate representatives of the Lessor, the Lessee may commence such
additions, modifications and improvements as may be necessary in order to
address such emergency without the Lessor's prior approval, as long as the
Lessee immediately thereafter advises the Lessor of such emergency and the
nature and scope of the additions, modifications and improvements performed and
obtains the Lessor's approval of the remaining work to be completed.
ARTICLE 10
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WARRANTIES AND REPRESENTATIONS
------------------------------
10.1 Representations and Warranties. The Lessee hereby represents and
warrants to, and covenants and agrees with, the Lessor that:
10.1.1 Existence; Power; Qualification.
The Lessee is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. The Lessee has all requisite corporate
power to own and operate its properties and to carry on its business as now
conducted and as proposed to be conducted and is duly qualified to transact
business and is in good standing in each jurisdiction where such qualification
is necessary or desirable in order to carry out its business as presently
conducted and as proposed to be conducted;
10.1.2 Valid and Binding. The Lessee is duly authorized to make and enter
into all of the Lease Documents to which the Lessee is a party and to carry out
the transactions contemplated therein. All of the Lease Documents to which the
Lessee is a party have been duly executed and delivered by the Lessee, and each
is a legal, valid and binding obligation of the Lessee, enforceable in
accordance with its terms.
10.1.3 Single Purpose. The Lessee is, and during the entire time that this
Lease remains in force and effect shall be, engaged in no business, trade or
activity other than the operation of the Leased Property for the Primary
Intended Use.
10.1.4 No Violation. The execution, delivery and performance of the Lease
Documents and the consummation of the transactions thereby contemplated shall
not result in any breach of, or constitute a default under, or result in the
acceleration of, or constitute an event which, with the giving of notice or the
passage of time, or both, could result in default or acceleration of any
obligation of any member of the Leasing Group under any of the Permits or
Contracts or any other contract, mortgage, lien, lease, agreement, instrument,
franchise, arbitration award, judgment, decree, bank loan or credit agreement,
trust indenture or other instrument to which any member of the Leasing Group is
a party or by which any member of the Leasing Group or the
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Leased Property may be bound or affected and do not violate or contravene any
Legal Requirement.
10.1.5 Consents and Approvals. Except as already obtained or filed, as the
case may be, no consent or approval or other authorization of, or exemption by,
or declaration or filing with, any Person and no waiver of any right by any
Person is required to authorize or permit, or is otherwise required as a
condition of the execution and delivery of any of the Lease Documents by any
member of the Leasing Group and the performance of such member's obligations
thereunder or as a condition to the validity (assuming the due authorization,
execution and delivery by the Lessor of the Lease Documents to which it is a
party).
10.1.6 No Liens or Insolvency Proceedings. Each member of the Leasing Group
is financially solvent and there are no actions, suits, investigations or
proceedings including, without limitation, outstanding federal or state tax
liens, garnishments or insolvency or bankruptcy proceedings, pending or, to the
best of the Lessee's knowledge and belief, threatened:
(a) against or affecting any member of the Leasing Group, which if
adversely resolved to such member of the Leasing Group, would materially
adversely affect the ability of any of the foregoing to perform their respective
obligations under the Lease Documents; or
(b) which may involve or affect the validity, priority or enforceability of
any of the Lease Documents, at law or in equity, or before or by any arbitrator
or Governmental Authority.
10.1.7 No Burdensome Agreements. The Lessee is a party to any agreement the
terms of which now have, or, as far as can be reasonably foreseen, may have, a
material adverse affect on its respective financial condition or business or on
the operation of the Leased Property.
10.1.8 Commercial Acts. The Lessee's performance of and compliance with the
obligations and conditions set forth herein and in the other Lease Documents
will constitute commercial acts done and performed for commercial purposes.
10.1.9 Adequate Capital, Not Insolvent. After giving effect to the
consummation of the transactions contemplated by the Lease Documents, each
member of the Leasing Group:
(a) will be able to pay its debts as they become due;
(b) will have sufficient funds and capital to carry on its business as now
conducted or as contemplated to be conducted (in accordance with the terms of
the Lease Documents);
(c) will own property having a value both at fair valuation and at present
fair salable value greater than the amount required to pay its debts as they
become due; and
(d) will not be rendered insolvent as determined by applicable law.
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10.1.10 Not Delinquent. No member of the Leasing Group is delinquent or
claimed to be delinquent under any obligation for the payment of borrowed money.
10.1.11 No Affiliate Debt. The Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether direct
or contingent) for borrowed money from the Guarantor (or any of its Affiliates)
or any Affiliate of the Lessee that is not fully subordinated to the Lease
Obligations pursuant to the Affiliated Party Subordination Agreement.
10.1.12 Taxes Current. Each member of the Leasing Group has filed all
federal, state and local tax returns which are required to be filed as to which
extensions are not currently in effect and have paid all taxes, assessments,
impositions, fees and other governmental charges (including interest and
penalties) which have become due pursuant to such returns or pursuant to any
assessment or notice of tax claim or deficiency received by each such member of
the Leasing Group. No tax liability has been asserted by the Internal Revenue
Service against any member of the Leasing Group or any other federal, state or
local taxing authority for taxes, assessments, impositions, fees or other
governmental charges (including interest or penalties thereon) in excess of
those already paid.
10.1.13 Intentionally Omitted.
10.1.14 Pending Actions, Notices and Reports.
(a) There is no action or investigation pending or, to the best knowledge
and belief of the Lessee, threatened, anticipated or contemplated (nor, to the
knowledge of the Lessee, is there any reasonable basis therefor) against or
affecting any member of the Leasing Group (or any Affiliate thereof) before any
Governmental Authority, Accreditation Body or Third Party Payor which could
prevent or hinder the consummation of the transactions contemplated hereby or
call into question the validity of any of the Lease Documents or any action
taken or to be taken in connection with the transactions contemplated thereunder
or which in any single case or in the aggregate might result in any material
adverse change in the business, prospects, condition, affairs or operations of
any such member of the Leasing Group or the Leased Property (including, without
limitation, any action to revoke, withdraw or suspend any Permit necessary or
desirable for the operation of the Leased Property in accordance with its
Primary Intended Use and any action to transfer or relocate any such Permit to a
location other than the Leased Property) or any material impairment of the right
or ability of any such member of the Leasing Group to carry on its operations as
proposed to be conducted or which may materially adversely impact reimbursement
to any such member of the Leasing Group for services rendered to beneficiaries
of Third Party Payor Programs.
(b) Neither the Facility nor any member of the Leasing Group has received
any notice of any claim, requirement or demand of any Governmental Authority,
Accreditation Body, Third Party Payor or any insurance body having or claiming
any licensing, certifying, supervising, evaluating or accrediting authority over
the Leased Property to rework or redesign the Leased
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Property, its professional staff or its professional services, procedures or
practices in any material respect or to provide additional furniture, fixtures,
equipment or inventory or to otherwise take action so as to make the Leased
Property conform to or comply with any Legal Requirement; and
(c) The most recent utilization reviews relating to the Leased Property by
all applicable Third Party Payors, Accreditation Bodies and Governmental
Authorities and reviews or scrutiny by any managed care or utilization review
companies have not had a material adverse impact on the utilization of beds,
units or programs at any of the Leased Property. No claims or assertions have
been made in any utilization review that any of the practices or procedures used
at the Leased Property are improper or inappropriate other than such claims or
assertions which singly and in the aggregate will not have a material adverse
impact on the Leased Property.
10.1.15 Compliance with Legal Requirements. The Lessee has obtained all
Permits that are necessary or desirable to operate the Leased Property in
accordance with its Primary Intended Use and all such Permits are in full force
and effect.
10.1.16 Intentionally Omitted.
10.1.17 Intentionally Omitted.
10.1.18 Intentionally Omitted.
10.1.19 Rate Limitations. Except as disclosed on EXHIBIT C, the State
currently imposes no restrictions or limitations on rates which may be charged
to private pay patients and/or residents receiving services at the Facility.
10.1.20 Free Care. Except as disclosed on EXHIBIT D, there are no
Contracts, Permits or Legal Requirements which require that a percentage of
beds, slots or units in any program at the Facility be reserved for Medicaid or
Medicare eligible patients and/or residents or that the Facility provide a
certain amount of welfare, free or charity care or discounted or government
assisted patient and/or resident care.
10.1.21 No Proposed Changes. The Lessee has no actual knowledge of any
Legal Requirements which have been enacted, promulgated or issued within the
eighteen (18) months preceding the date of this Lease or any proposed Legal
Requirements currently pending in the State which may materially adversely
affect rates at the Facility (or any program operated in conjunction with the
Facility) or may result in the likelihood of increased competition at the
Facility or the imposition of Medicaid, Medicare, charity, free care, welfare or
other discounted or government assisted patients at the Facility or require that
the Lessee or the Facility obtain a certificate of need, Section 1122 approval
or the equivalent, which the Lessee or the Facility does not currently possess.
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10.1.22 ERISA. No employee pension benefit plan maintained by any member of
the Leasing Group has any accumulated funding deficiency within the meaning of
the ERISA, nor does any member of the Leasing Group have any material liability
to the PBGC established under ERISA (or any successor thereto) in connection
with any employee pension benefit plan (or other class of benefit which the PBGC
has elected to insure), and there have been no "reportable events" (not waived)
or "prohibited transactions" with respect to any such plan, as those terms are
defined in Section 4043 of ERISA and Section 4975 of the Internal Revenue Code
of 1986, as now or hereafter amended, respectively.
10.1.23 No Broker. No member of the Leasing Group nor any of their
respective Affiliates has dealt with any broker or agent in connection with the
transactions contemplated by the Lease Documents.
10.1.24 No Improper Payments. No member of the Leasing Group nor any of
their respective Affiliates has:
(a) made any contributions, payments or gifts of its funds or property to
or for the private use of any government official, employee, agent or other
Person where either the payment or the purpose of such contribution, payment or
gifts is illegal under the laws of the United States, any state thereof or any
other jurisdiction (foreign or domestic);
(b) established or maintained any unrecorded fund or asset for any purpose
or has made any false or artificial entries on any of its books or records for
any reason;
(c) made any payments to any Person with the intention or understanding
that any part of such payment was to be used for any other purpose other than
that described in the documents supporting the payment; or
(d) made any contribution, or has reimbursed any political gift or
contribution made by any other Person, to candidates for public office, whether
federal, state or local, where such contribution would be in violation of
applicable law.
10.1.25 Nothing Omitted. Neither this Lease, nor any of the other Lease
Documents, nor any certificate, agreement, statement or other document,
including, without limitation, any financial statements concerning the financial
condition of any member of the Leasing Group, furnished to or to be furnished to
the Lessor or its attorneys in connection with the transactions contemplated by
the Lease Documents, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to
prevent all statements contained herein and therein from being misleading. There
is no fact within the special knowledge of the Lessee which has not been
disclosed herein or in writing to the Lessor that materially adversely affects,
or in the future, insofar as the Lessee can reasonably foresee, may materially
adversely affect the business, properties, assets or condition, financial or
otherwise, of any member of the Leasing Group or the Leased Property.
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10.1.26 No Margin Security. The Lessee is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System). The Lessee is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
10.1.27 No Default. No event or state of facts which constitutes, or which,
with notice or lapse of time, or both, could constitute, a Lease Default has
occurred and is continuing.
10.1.28 Principal Place of Business. The principal place of business and
chief executive office of the Lessee is located at 197 First Avenue, Needham
Heights, Massachusetts 02194 (the "Principal Place of Business").
10.1.29 Intentionally Omitted.
10.1.30 Intellectual Property. The Lessee is duly licensed or authorized to
use all (if any) copyrights, rights of reproduction, trademarks, trade-names,
trademark applications, service marks, patent applications, patents and patent
license rights, (all whether registered or unregistered, U.S. or foreign),
inventions, franchises, discoveries, ideas, research, engineering, methods,
practices, processes, systems, formulae, designs, drawings, products, projects,
improvements, developments, know-how and trade secrets which are used in or
necessary for the operation of the Facility in accordance with its Primary
Intended Use, without conflict with or infringement of any, and subject to no
restriction, lien, encumbrance, right, title or interest in others.
10.1.31 Management Agreements. There is no Management Agreement in force
and effect as of the date hereof, other than the Current Management Agreement.
10.2 Continuing Effect of Representations and Warranties. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which shall
remain true, correct and complete throughout the Term. Notwithstanding the
provisions of the foregoing sentence but without derogation from any other terms
and provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be satisfied on
the part of the Lessee, the representations and warranties contained in Sections
10.1.6, 10.1.7, 10.1.10, 10.1.14, 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.28,
and in the second sentence of Section 10.1.12, shall not constitute continuing
representations and warranties throughout the Term.
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ARTICLE 11
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FINANCIAL AND OTHER COVENANTS
-----------------------------
11.1 Status Certificates. At any time, and from time to time, upon request
from the Lessor, the Lessee shall furnish to the Lessor, within ten (10)
Business Days' after receipt of such request, 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) and the dates to which the Rent has been paid. Any Officer's
Certificate furnished pursuant to this Section shall be addressed to any
prospective purchaser or mortgagee of the Leased Property as the Lessor may
request and may be relied upon by the Lessor and any such prospective purchaser
or Fee Mortgagee.
11.2 Financial Statements; Reports; Notice and Information.
11.2.1 Obligation To Furnish. The Lessee will furnish and shall cause to be
furnished to the Lessor the following statements, information and other
materials:
(a) Annual Statements. Within ninety (90) days after the end of each of
their respective fiscal years, (i) a copy of the Consolidated Financials for
each of (x) the Lessee and (y) any Sublessee for the preceding fiscal year,
certified and audited by, and with the unqualified opinion of, independent
certified public accountants acceptable to the Lessor and certified as true and
correct by the Lessee or the applicable Sublessee, as the case may be (and,
without limiting anything else contained herein, the Consolidated Financials for
the Lessee and for each such Sublessee shall include a detailed balance sheet
for Leased Property as of the last day of such fiscal year and a statement of
earnings from the Leased Property for such fiscal year showing, among other
things, all rents and other income therefrom and all expenses paid or incurred
in connection with the operation of the Leased Property); (ii) separate
statements, certified as true and correct by the Lessee and each Sublessee,
stating whether, to the best of the signer's knowledge and belief after making
due inquiry, the Lessee or such Sublessee, as the case may be, is in default in
the performance or observance of any of the terms of this Lease or any of the
other Lease Documents and, if so, specifying all such defaults, the nature
thereof and the steps being taken to immediately remedy the same; (iii) a copy
of all letters from the independent certified accountants engaged to perform the
annual audits referred to above, directed to the management of the Lessee or any
Sublessee, as the case may be, regarding the existence of any reportable
conditions or material weaknesses and (iv) a statement certified as true and
correct by the Lessee setting forth all Subleases as of the last day of such
fiscal year, the respective areas demised thereunder, the names of the
Sublessees thereunder, the respective expiration dates of such Subleases, the
respective rentals provided for therein, and such other information pertaining
to such Subleases as may be reasonably requested by the Lessor.
(b) Monthly Statements of Lessee. Within twenty (20) days after the end of
each calendar month during the pendency of this Lease, (i) an unaudited,
detailed month and year to
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date income and expense statement for the Leased Property which shall include a
comparison to corresponding budget figures, occupancy statistics (including the
actual number of patients, the number of beds available and total patient days
for such month) for the Facility and patient mix breakdowns (for each patient
day during such month classifying patients by the type of care required and
source of payment) for the Facility and (ii) an express written calculation
showing the compliance or non-compliance, as the case may be, with the specific
financial covenants set forth in Section 11.3 for the applicable period,
including, with respect to the calculation of the Lessee's Rent Coverage Ratio,
a schedule substantially in the form attached hereto as EXHIBIT E.
(c) Quarterly Statements. Within twenty (20) days after the end of each
Fiscal Quarter, unaudited Consolidated Financials for the Lessee certified as
true and correct by the Lessee.
(d) Permits and Contracts. Promptly after the issuance or the execution
thereof, as the case may be, true and complete copies of (i) all Permits which
constitute operating licenses for the Facility issued by any Governmental
Authority having jurisdiction over health care matters and (ii) Contracts
(involving payments in the aggregate in excess of $100,000 per annum),
including, without limitation, all Provider Agreements.
(e) Contract Notices. Promptly after the receipt thereof, true and complete
copies of any notices, consents, terminations or statements of any kind or
nature relating to any of the Contracts (involving payments in the aggregate in
excess of $100,000 per annum) other than those issued in the ordinary course of
business.
(f) Permit or Contract Defaults. Promptly after the receipt thereof, true
and complete copies of all surveys, follow-up surveys, licensing surveys,
complaint surveys, examinations, compliance certificates, inspection reports,
statements (other than those statements that are issued in the ordinary course
of business), terminations and notices of any kind (other than those notices
that are furnished in the ordinary course of business) issued or provided to the
Lessee or any Sublessee that is an Affiliate of the Lessee by any Governmental
Authority, Accreditation Body or any Third Party Payor, including, without
limitation, any notices pertaining to any delinquency in, or proposed revision
of, the Lessee's or any such Sublessee's obligations under the terms and
conditions of any Permits or Contracts now or hereafter issued by or entered
into with any Governmental Authority, Accreditation Body or Third Party Payor
and the response(s) thereto made by or on behalf of the Lessee or any such
Sublessee.
(g) Official Reports. Upon completion or filing thereof, complete copies of
all applications (other than those that are furnished in the ordinary course of
business), notices (other than those that are furnished in the ordinary course
of business), statements, annual reports, cost reports and other reports or
filings of any kind (other than those that are furnished in the ordinary course
of business) provided by the Lessee or any Sublessee that is an Affiliate of the
Lessee to
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any Governmental Authority, Accreditation Body or any Third Party Payor with
respect to the Leased Property.
(h) Other Information. With reasonable promptness, such other information
as the Lessor may from time to time reasonably request respecting (i) the
financial condition and affairs of each member of the Leasing Group and the
Leased Property and (ii) the licensing and operation of the Leased Property;
including, without limitation, audited financial statements, certificates and
consents from accountants and all other financial and licensing/operational
information as may be required or requested by any Governmental Authority.
(i) Default Conditions. As soon as possible, and in any event within five
(5) days after the occurrence of any Lease Default, or any event or circumstance
which, with the giving of notice or the passage of time, or both, could
constitute a Lease Default, a written statement of the Lessee setting forth the
details of such Lease Default, event or circumstance and the action which the
Lessee proposes to take with respect thereto.
(j) Official Actions. Promptly after the commencement thereof, notice of
all actions, suits and proceedings before any Governmental Authority or
Accreditation Body which could have a material adverse effect on (i) any member
of the Leasing Group to perform any of its obligations under any of the Lease
Documents or (ii) the Leased Property.
(k) Audit Reports. Promptly after receipt, a copy of all audits or reports
submitted to any member of the Leasing Group by any independent public
accountant in connection with any annual, special or interim audits of the books
of any such member of the Leasing Group and, if requested by the Lessor, any
letter of comments directed by such accountant to the management of any such
member of the Leasing Group.
(l) Adverse Developments. Promptly after the Lessee acquires knowledge
thereof, written notice of:
(i) the potential termination of any Permit or Provider Agreement
necessary for the operation of the Leased Property;
(ii) any loss, damage or destruction to or of the Leased Property in
excess of FIFTY THOUSAND DOLLARS ($50,000) (regardless of whether the same is
covered by insurance);
(iii) any material controversy involving the Lessee or any Sublessee
and (x) Facility administrator or Facility employee of similar stature or (y)
any labor organization;
(iv) any controversy that calls into question the eligibility of the
Lessee or the Facility for the participation in any Medicaid, Medicare or other
Third Party Payor Program;
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(v) any refusal of reimbursement by any Third Party Payor which,
singularly or together with all other such refusals by any Third Party Payors,
could have a material adverse effect on the financial condition of the Lessee or
any Sublessee; and
(vi) any fact within the special knowledge of any member of the Leasing
Group, or any other development in the business or affairs of any member of the
Leasing Group, which may be materially adverse to the business, properties,
assets or condition, financial or otherwise, of any member of the Leasing Group
or the Leased Property.
(m) Responses To Inspection Reports. Within thirty (30) days after receipt
of an inspection report relating to the Leased Property from the Lessor, a
written response describing in detail prepared plans to address concerns raised
by the inspection report.
(n) Public Information. Upon the completion or filing, mailing or other
delivery thereof, complete copies of all financial statements, reports, notices
and proxy statements, if any, sent by any member of the Leasing Group (which is
a publicly held corporation) to its shareholders and of all reports, if any,
filed by any member of the Leasing Group (which is a publicly held corporation)
with any securities exchange or with the Securities Exchange Commission.
(o) Annual Budgets. At least thirty (30) days prior to the end of each
Fiscal Year, the Lessee, any Sublessee and/or any Manager shall submit to the
Lessor a preliminary annual financial budget for the Facility for the next
Fiscal Year, a preliminary capital expenditures budget for the Facility for the
next Fiscal Year and a report detailing the capital expenditures made in the
then current Fiscal Year and on or before the end of the first month of each
Fiscal Year, the Lessee, any applicable Sublessee and/or any Manager shall
submit to the Lessor revised finalized versions of such budgets and report.
(p) Financial Information Required Under Any Fee Mortgage Loan Documents.
The Lessee shall provide to any Fee Mortgagee any information that is required
to be delivered to such Fee Mortgagee pursuant to any Fee Mortgage Loan
Documents respecting (i) the financial condition and affairs of each member of
the Leasing Group and the Leased Property and (ii) the licensing and operation
of the Leased Property; including, without limitation, audited financial
statements, certificates and consents from accountants and all other financial
and licensing/operational information.
11.2.2 Responsible Officer. Any certificate, instrument, notice, or other
document to be provided to the Lessor hereunder by any member of the Leasing
Group shall be signed by an executive officer of such member (in the event that
any of the foregoing is not an individual), having a position of Vice President
or higher and with respect to financial matters, any such certificate,
instrument, notice or other document shall be signed by the chief financial
officer of such member.
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11.2.3 No Material Omission. No certificate, instrument, notice or other
document, including without limitation, any financial statements furnished or to
be furnished to the Lessor pursuant to the terms hereof or of any of the other
Lease Documents shall contain any untrue statement of a material fact or shall
omit to state any material fact necessary in order to prevent all statements
contained therein from being misleading.
11.2.4 Confidentiality. The Lessor shall afford any information received
pursuant to the provisions of the Lease Documents the same degree of
confidentiality that the Lessor affords similar information proprietary to the
Lessor; provided, however, that the Lessor does not in any way warrant or
represent that such information received from any member of the Leasing Group
shall remain confidential (and shall not be liable in any way for any subsequent
disclosure of such information by any Person that the Lessor has provided such
information in accordance with the terms hereof) and provided, further, that the
Lessor shall have the unconditional right to (a) disclose any such information
as the Lessor deems necessary or appropriate in connection with any sale,
transfer, conveyance, participation or assignment of the Leased Property or any
of the Lease Documents or any interest therein and (b) use such information in
any litigation or arbitration proceeding between the Lessor and any member of
the Leasing Group. Without limiting the foregoing, the Lessor may also utilize
any information furnished to it hereunder as and to the extent (i) counsel to
the Lessor determines that such utilization is necessary pursuant to 15 U.S.C.
77a-77aa or 15 U.S.C. 78a-78jj and the rules and regulations promulgated
thereunder, (ii) the Lessor is required or requested by any Governmental
Authority to disclose any such information and/or (iii) the Lessor is requested
to disclose any such information by any of its lenders or potential lenders. The
Lessor shall not be liable in any way for any subsequent disclosure of such
information by any Person to whom the Lessor provided such information in
accordance with the terms hereof. Nevertheless, in connection with any such
disclosure, the Lessor shall inform the recipient of any such information of the
confidential nature thereof. The Lessor shall observe any prohibitions or
limitations on the disclosure of any such information under applicable
confidentiality law or regulations, to the extent that the same are applicable
to such information, including, without limitation, any duly enacted "Patients'
Bill of Rights" or similar legislation, including such limitations as may be
necessary to preserve the confidentiality of the facility-patient/resident
relationship and the physician-patient privilege.
11.3 Financial Covenants. The Lessee covenants and agrees that, throughout
the Term and as long as the Lessee is in possession of the Leased Property:
11.3.1 Rent Coverage Ratio of Lessee. For each fiscal quarter commencing
with the seventh fiscal quarter after the SNF Conversion Date, the Lessee shall
maintain a Rent Coverage Ratio equal to or greater than 1.2 to 1.
11.3.2 No Indebtedness. The Lessee shall not create, incur, assume or
suffer to exist any liability for borrowed money except (i) Indebtedness to the
Lessor under the Lease Documents and, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred upon
customary terms in the ordinary course of business,
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(iv) Indebtedness created in connection with any financing of any Capital
Addition, provided, that each such financing has been approved by the Lessor in
accordance with the terms of Article 9 hereof, (v) Indebtedness to any
Affiliate, provided, that, such Indebtedness is fully subordinated to the Lease
Obligations pursuant to the Affiliated Party Subordination Agreement and (vi)
other Indebtedness of the Lessee in the aggregate amount not to exceed TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000) incurred, for the exclusive use of the
Leased Property, on account of purchase money indebtedness or finance lease
arrangements, each of which shall not exceed the fair market value of the assets
or property acquired or leased and shall not extend to any assets or property
other than those purchased or leased and purchase money security interests in
equipment and equipment leases which comply with the provisions of Section
6.1.2.
11.3.3 No Guaranties. The Lessee shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise to invest in any debtor or otherwise to assure any creditor against
loss) in connection with any Indebtedness of any other Person, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
11.4 Affirmative Covenants. The Lessee covenants and agrees that
throughout the Term and any periods thereafter that the Lessee remains in
possession of the Leased Property:
11.4.1 Maintenance of Existence. If the Lessee is a corporation, trust or
partnership, during the entire time that this Lease remains in full force and
effect, the Lessee shall keep in effect its existence and rights as a
corporation, trust or partnership under the laws of the state of its
incorporation or formation and its right to own property and transact business
in the State.
11.4.2 Materials. Except as provided in Section 6.1.2, the Lessee shall not
suffer the use in connection with any renovations or other construction relating
to the Leased Property of any materials, fixtures or equipment intended to
become part of the Leased Property which are purchased upon lease or conditional
bill of sale or to which the Lessee does not have absolute and unencumbered
title, and the Lessee covenants to cause to be paid punctually all sums becoming
due for labor, materials, fixtures or equipment used or purchased in connection
with any such renovations or construction, subject to the Lessee's right to
contest to the extent provided for in Article 15.
11.4.3 Compliance With Legal Requirements And Applicable Agreements. The
Lessee and the Leased Property and all uses thereof shall comply with (i) all
Legal Requirements, (ii) all Permits and Contracts, (iii) all Insurance
Requirements, (iv) the Lease Documents, (v) the Permitted Encumbrances, (vi) the
Appurtenant Agreements and (vii) the Fee Mortgage Loan Documents.
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11.4.4 Books And Records. The Lessee shall cause to be kept and maintained,
and shall permit the Lessor, any Fee Mortgagee and their respective
representatives to inspect at all reasonable times, accurate books of accounts
in which complete entries will be made in accordance with GAAP reflecting all
financial transactions of the Lessee (showing, without limitation, all materials
ordered and received and all disbursements, accounts payable and accounts
receivable in connection with the operation of the Leased Property).
In addition and without limiting the foregoing or any other provision set
forth herein, the Lessee agrees to maintain such books and records and make them
available for inspection, audit, and copying in such manner and for such time as
required by applicable laws and responsible businesses practices. As a
subcontractor that may be subject to Section 1861(v) (1) (I) of the Social
Security Act (the "Act"), the Lessee shall, upon written request and in
accordance with the above-mentioned section of the Act and regulations
promulgated pursuant thereto, make available to the Comptroller General, the
Secretary of Health and Human Services, and their duly authorized
representatives, a copy of this Lease and access to the Lessee's books,
documents, and records necessary to verify the nature and extent of the costs of
services provided to the Lessor. Such access will be available until the
expiration of four (4) years after the services to which the costs are related
have been furnished.
The provisions of this Section shall apply only if this Lease is covered by
the Act and such provisions shall become void and shall be of no further force
or effect if, at the time a request is made, this Lease is not subject to the
Act. The Lessee agrees that if it carries out any of the duties of this Lease
through a subcontract with a related organization which subcontract has a value
or cost of TEN THOUSAND DOLLARS ($10,000) or more over a twelve (12) month
period, the Lessee will obtain an identical access requirement in such
subcontract.
11.4.5 Participation in Third Party Payor Programs. The Lessee and each
Sublessee shall participate in all Third Party Payor Programs (which would be
participated in by a prudent operator in the good faith exercise of commercially
reasonable business judgment), in accordance with all requirements thereof
(including, without limitation, all applicable Provider Agreements), and shall
remain eligible to participate in such Third Party Payor Programs, all as shall
be necessary for the prudent operation of the Facility in the good faith
exercise of commercially reasonable business judgment.
11.4.6 Conduct of its Business. The Lessee will maintain, and cause any
Sublessee and any Manager, as applicable, to maintain, experienced and competent
professional management with respect to its business and with respect to the
Leased Property. The Lessee, any Sublessee and any Manager shall conduct, in the
ordinary course, the operation of the Facility, and the Lessee and any such
Sublessee shall not enter into any other business or venture during the Term or
such time as the Lessee or any such Sublessee is in possession of the Leased
Property.
11.4.7 Address. The Lessee shall provide the Lessor thirty (30) days' prior
written notice of any change of its Principal Place of Business from its current
Principal Place of Business. The Lessee shall maintain all books and records
relating to its business, solely at its Principal Place of
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Business and at the Leased Property. The Lessee shall not (a) remove any books
or records relating to the Lessee's business from either the Leased Property or
the Lessee's Principal Place of Business or (b) relocate its Principal Place of
Business until after receipt of a certificate from the Lessor, signed by an
officer thereof, stating that the Lessor has, to its satisfaction, obtained all
documentation that it deems necessary or desirable to obtain, maintain, perfect
and confirm the first priority security interests granted in the Lease
Documents.
11.4.8 Subordination of Affiliate Transactions. Without limiting the
provisions of any other Section of this Lease or the Affiliated Party
Subordination Agreement, any payments to be made by the Lessee to (a) any member
of the Leasing Group (or any Affiliate of any such member of the Leasing Group)
or (b) any Affiliate of the Lessee, in connection with any transaction between
the Lessee and such Person, including, without limitation, the purchase, sale or
exchange of any property, the rendering of any service to or with any such
Person (including, without limitation, all allocations of any so-called
corporate or central office costs, expenses and charges of any kind or nature)
or the making of any loan or other extension of credit or the making of any
equity investment, shall be subordinate to the complete payment and performance
of the Lease Obligations; provided, however, that, subject to any limitations
set forth under any applicable Fee Mortgage Loan Documents, all such
subordinated payments may be paid at any time unless: (x) after giving effect to
such payment, the Lessee shall be unable to comply with any of its obligations
under any of the Lease Documents or (y) a Lease Default has occurred and is
continuing and has not been expressly waived in writing by the Lessor or an
event or state of facts exists, which, with the giving of notice or the passage
of time, or both, would constitute a Lease Default.
11.4.9 Inspection. At reasonable times and upon reasonable notice, the
Lessee shall permit the Lessor, any Fee Mortgagee and their respective f
authorized representatives (including, without limitation, the Consultants) to
inspect the Leased Property as provided in Section 7.1 above.
11.4.10 Additional Property. In the event that at any time during the Term,
the Lessee holds the fee title to or a leasehold interest in any real property
and/or personal property which is used as an integral part of the operation of
the Leased Property (but is not subject to this Lease), the Lessee shall (i)
provide the Lessor with prior notice of such acquisition and (ii) shall take
such actions and enter into such agreements as the Lessor shall reasonably
request in order to grant the Lessor a first priority mortgage or other security
interest in such real property and personal property, subject only to the
Permitted Encumbrances and other Liens reasonably acceptable to the Lessor.
11.5 Additional Negative Covenants. The Lessee covenants and agrees that,
throughout the Term and such time as the Lessee remains in possession of the
Leased Property:
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11.5.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided in any of the Lease Documents, the Lessee shall not, without
the prior written consent of the Lessor, in each instance, which consent may be
withheld in the sole and absolute discretion of the Lessor:
(a) convey, assign, hypothecate, transfer, dispose of or encumber, or
permit the conveyance, assignment, transfer, hypothecation, disposal or
encumbrance of all or any part of any legal or beneficial interest in this
Lease, its other assets or the Leased Property; provided, however, that this
restriction shall not apply to (i) the Permitted Encumbrances that may be
created after the date hereof pursuant to the Lease Documents; (ii) Liens
created in accordance with Section 6.1.2 against Tangible Personal Property
securing Indebtedness permitted under Section 11.3.2(v) relating to equipment
leasing or financing for the exclusive use of the Leased Property; (iii) the
sale, conveyance, assignment, hypothecation, lease or other transfer of any
material asset or assets (whether now owned or hereafter acquired), the fair
market value of which equals or is less than FIFTY THOUSAND DOLLARS ($50,000),
individually, or TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) collectively;
(iv) without limitation as to amount, the disposition in the ordinary course of
business of any obsolete, worn out or defective fixtures, furnishings or
equipment used in the operation of the Leased Property provided that the same
are replaced with fixtures, furnishings or equipment of equal or greater utility
or value or the Lessee provides the Lessor with an explanation (reasonably
satisfactory to the Lessor) as to why such fixtures, furnishings or equipment is
no longer required in connection with the operation of the Leased Property; (v)
without limitation as to amount, any sale of inventory by the Lessee in the
ordinary course of business and (vi) subject to the terms of the Pledge
Agreement and the Affiliated Party Subordination Agreement, distributions to the
shareholders of the Lessee;
(b) permit the use of the Facility for any purpose other than the Primary
Intended Use; or
(c) liquidate, dissolve or merge or consolidate with any other Person.
11.5.2 No Liens. The Lessee will not directly or indirectly create or allow
to remain and will promptly discharge at its expense any Lien, title retention
agreement or claim upon or against the Leased Property (including the Lessee's
interest therein) or the Lessee's interest in this Lease or any of the other
Lease Documents, or in respect of the Rent, excluding (a) this Lease and any
permitted Subleases, (b) the Permitted Encumbrances, (c) Liens which are
consented to in writing by the Lessor, (d) Liens for those taxes of the Lessor
which the Lessee is not required to pay hereunder, (e) Liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either not yet due or being
contested in strict compliance with the terms and conditions of Article 15, (f)
any Liens which are the responsibility of the Lessor pursuant to the provisions
of Article 20, (g) Liens for Impositions which are either not yet due and
payable or which are in the process of being contested in strict compliance with
the terms and conditions of Article 15 and (h) involuntary Liens caused by the
actions or omissions of the Lessor.
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11.5.3 Limits on Affiliate Transactions. The Lessee shall not enter into
any transaction with any Affiliate, including, without limitation, the purchase,
sale or exchange of any property, the rendering of any service to or with any
Affiliate and the making of any loan or other extension of credit, except in the
ordinary course of, and pursuant to the reasonable requirements of, the Lessee's
business and upon fair and reasonable terms no less favorable to the Lessee than
would be obtained in a comparable arms'-length transaction with any Person that
is not an Affiliate.
11.5.4 Best Efforts To Maximize. The Lessee covenants that the operation of
the Facility shall be conducted in a manner consistent with the prevailing
standards and practices recognized in the health care industry as those
customarily utilized by first class business operations. Subject to any
applicable Legal Requirements, the members of the Leasing Group shall use their
best efforts to maximize the Facility's Gross Revenues, and to that end, but
without limiting the foregoing, (a) a full staff of employees shall be
maintained at the Facility and (b) a maximum amount of space in the Facility
shall be devoted to revenue producing activities and only such part thereof
shall be devoted for office, storage and non-revenue producing purposes as shall
be reasonably necessary.
11.5.5 No Default. The Lessee shall not commit any default or breach under
any of the Lease Documents.
11.5.6 Intentionally Omitted.
11.5.7 Intentionally Omitted.
11.5.8 ERISA. The Lessee shall not establish or permit any Sublessee to
establish any new pension or defined benefit plan or modify any such existing
plan for employees subject to ERISA, which plan provides any benefits based on
past service without the advance consent of the Lessor to the amount of the
aggregate past service liability thereby created.
11.5.9 Forgiveness of Indebtedness. The Lessee will not waive, or permit
any sublessee or Manager which is an Affiliate to waive any debt or claim,
except in the ordinary course of its business.
11.5.10 Value of Assets. Except as disclosed in the financial statements
provided to the Lessor as of the date hereof, the Lessee will not write up (by
creating an appraisal surplus or otherwise) the value of any assets of the
Lessee above their cost to the Lessee, less the depreciation regularly allowable
thereon.
11.5.11 Changes in Fiscal Year and Accounting Procedures. The Lessee shall
not, without the prior written consent of the Lessor, in each instance, which
consent may be withheld in the Lessor's reasonable discretion (a) change its
fiscal year or capital structure or (b) change, alter, amend or in any manner
modify, except in accordance with GAAP, any of its current
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accounting procedures related to the method of revenue recognition, billing
procedures or determinations of doubtful accounts or bad debt expenses nor will
the Lessee permit any of its Subsidiaries to change its fiscal year or suffer or
permit any circumstance to exist in which any Subsidiary is not wholly-owned,
directly or indirectly, by the Lessee.
ARTICLE 12
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INSURANCE AND INDEMNITY
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12.1 General Insurance Requirements. During the Term of this Lease and
thereafter until the Lessee surrenders the Leased Property in the manner
required by this Lease, the Lessee shall at its sole cost and expense keep the
Leased Property and the Tangible Personal Property and the Lessor's Personal
Property located thereon and the business operations conducted on the Leased
Property insured as set forth below.
12.1.1 Types and Amounts of Insurance. The Lessee's insurance shall include
the following:
(a) property loss and physical damage insurance on an all-risk basis
(with only such exceptions as the Lessor may in its reasonable discretion
approve) covering the Leased Property (exclusive of Land) for its full
replacement cost, which cost shall be reset once a year at the Lessor's option,
with an agreed-amount endorsement and a deductible not in excess of TEN THOUSAND
DOLLARS ($10,000.00). Such insurance shall include, without limitation, the
following coverages: (i) increased cost of construction, (ii) cost of
demolition, (iii) the value of the undamaged portion of the Facility and (iv)
contingent liability from the operation of building laws, less exclusions
provided in the normal "All Risk" insurance policy. During any period of
construction, such insurance shall be on a builder's-risk, completed value,
non-reporting form with permission to occupy;
(b) flood insurance (if the Leased Property or any portion thereof is
situated in an area which is considered a flood risk area by the U.S. Department
of Housing and Urban Development or any other Governmental Authority that may in
the future have jurisdiction over flood risk analysis) in limits reasonably
acceptable to the Lessor;
(c) boiler and machinery insurance (including related electrical
apparatus and components) under a standard comprehensive form, providing
coverage against loss or damage caused by explosion of steam boilers, pressure
vessels or similar vessels, now or hereafter installed on or exclusively serving
the Leased Property, in limits reasonably acceptable to the Lessor;
(d) earthquake insurance (if deemed necessary by the Lessor) in limits
and with deductibles reasonably acceptable to the Lessor;
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(e) intentionally omitted;
(f) business interruption and/or rent loss insurance in an amount equal
to the annual Base Rent due hereunder plus the aggregate sum of the Impositions
relating to the Leased Property due and payable during one year;
(g) comprehensive general public liability insurance including coverages
commonly found in the Broad Form Commercial Liability Endorsements with amounts
not less than FIVE MILLION DOLLARS ($5,000,000) per occurrence with respect to
bodily injury and death and THREE MILLION DOLLARS ($3,000,000) for property
damage and with all limits based solely upon occurrences at the Leased Property
without any other impairment;
(h) professional liability insurance in an amount not less than TEN
MILLION DOLLARS ($10,000,000) for each medical incident;
(i) physical damage insurance on an all-risk basis (with only such
exceptions as the Lessor in its reasonable discretion shall approve) covering
the Tangible Personal Property for the full replacement cost thereof and with a
deductible not in excess of one percent (1%) of the full replacement cost
thereof;
(j) Workers' Compensation and Employers' Liability Insurance providing
protection against all claims arising out of injuries to all employees of the
Lessee or of any Sublessee (employed on the Leased Property or any portion
thereof) in amounts equal for Workers' Compensation, to the statutory benefits
payable to employees in the State and for Employers' Liability, to limits of not
less than ONE HUNDRED THOUSAND DOLLARS ($100,000) for injury by accident, ONE
HUNDRED THOUSAND DOLLARS ($100,000) per employee for disease and FIVE HUNDRED
THOUSAND DOLLARS ($500,000) disease policy limit; and
(k) such other insurance as the Lessor from time to time may reasonably
require and also, as may from time to time be required by applicable Legal
Requirements and/or by any Fee Mortgagee.
12.1.2 Insurance Company Requirements. All such insurance required by this
Lease or the other Lease Documents shall be issued and underwritten by insurance
companies licensed to do insurance business by, and in good standing under the
laws of, the State and which companies have and maintain a rating of A-X or
better by A.M. Best Co.
12.1.3 Policy Requirements. Every policy of insurance from time to time
required under this Lease or any of the other Lease Documents (other than
worker's compensation) shall name the Lessor as owner, loss payee, secured party
(to the extent applicable) and additional named insured as its interests may
appear. If an insurance policy covers properties other than the Leased Property,
then the Lessor shall be so named with respect only to the Leased Property. Each
such policy, where applicable or appropriate, shall:
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(a) include an agreed amount endorsement and loss payee, additional named
insured and secured party endorsements, in forms acceptable to the Lessor in its
sole and absolute discretion;
(b) include mortgagee, secured party, loss payable and additional named
insured endorsements reasonably acceptable to each Fee Mortgagee;
(c) provide that the coverages may not be canceled or materially modified
except upon thirty (30) days' prior written notice to the Lessor and any Fee
Mortgagee;
(d) be payable to the Lessor and any Fee Mortgagee notwithstanding any
defense or claim that the insurer may have to the payment of the same against
any other Person holding any other interest in the Leased Property;
(e) be endorsed with standard noncontributory clauses in favor of and in
form reasonably acceptable to the Lessor and any Fee Mortgagee;
(f) expressly waive any right of subrogation on the part of the insurer
against the Lessor, any Fee Mortgagee or the Leasing Group; and
(g) otherwise be in such forms as shall be reasonably acceptable to the
Lessor and any Fee Mortgagee.
12.1.4 Notices; Certificates and Policies. The Lessee shall promptly
provide to the Lessor copies of any and all notices (including notice of
non-renewal), claims and demands which the Lessee receives from insurers of the
Leased Property. At least ten (10) days prior to the expiration of any insurance
policy required hereunder, the Lessee shall deliver to the Lessor certificates
and evidence of insurance relating to all renewals and replacements thereof,
together with evidence, satisfactory to the Lessor, of payment of the premiums
thereon. The Lessee shall deliver to the Lessor original counterparts or copies
certified by the insurance company to be true and complete copies, of all
insurance policies required hereunder not later than the earlier to occur of (a)
thirty (30) days after the effective date of each such policy and (b) ten (10)
days after receipt thereof by the Lessee.
12.1.5 Lessor's Right to Place Insurance. If the Lessee shall fail to
obtain any insurance policy required hereunder by the Lessor, or shall fail to
deliver the certificate and evidence of insurance relating to any such policy to
the Lessor, or if any insurance policy required hereunder (or any part thereof)
shall expire or be canceled or become void or voidable by reason of any breach
of any condition thereof, or if the Lessor determines that such insurance
coverage is unsatisfactory by reason of the failure or impairment of the capital
of any insurance company which wrote any such policy, upon demand by the Lessor,
the Lessee shall promptly obtain new or additional insurance coverage on the
Leased Property, or for those risks required to be insured by the provisions
hereof, satisfactory to the Lessor, and, at its option, the Lessor may
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obtain such insurance and pay the premium or premiums therefor; in which event,
any amount so paid or advanced by the Lessor and all costs and expenses incurred
in connection therewith (including, without limitation, attorneys' fees and
expenses), shall be a demand obligation of the Lessee to the Lessor, payable as
an Additional Charge.
12.1.6 Payment of Proceeds. All insurance policies required hereunder
(except for general public liability, professional liability and workers'
compensation and employers liability insurance) shall provide that in the event
of loss, injury or damage, subject to the rights of any Fee Mortgagee, all
proceeds shall be paid to the Lessor alone (rather than jointly to the Lessee
and the Lessor). The Lessor is hereby authorized to adjust and compromise any
such loss with the consent of the Lessee or, following any Lease Default,
whether or not cured, without the consent of the Lessee, and to collect and
receive such proceeds in the name of the Lessor and the Lessee, and the Lessee
appoints the Lessor (or any agent designated by the Lessor) as the Lessee's
attorney-in-fact with full power of substitution, to endorse the Lessee's name
upon any check in payment thereof. Subject to the provisions of Article 13, such
insurance proceeds shall be applied first toward reimbursement of all costs and
expenses reasonably incurred by the Lessor in collecting said insurance
proceeds, then toward payment of the Lease Obligations or any portion thereof,
then due and payable, in such order as the Lessor determines, and then in whole
or in part toward restoration, repair or reconstruction of the Leased Property
for which such insurance proceeds shall have been paid.
12.1.7 Irrevocable Power of Attorney. The power of attorney conferred on
the Lessor pursuant to the provisions of this Section 12.1, being coupled with
an interest, shall be irrevocable for as long as this Lease is in effect or any
Lease Obligations are outstanding, shall not be affected by any disability or
incapacity which the Lessee may suffer and shall survive the same. Such power of
attorney, is provided solely to protect the interests of the Lessor and shall
not impose any duty on the Lessor to exercise any such power, and neither the
Lessor nor such attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its gross
negligence or willful misconduct.
12.1.8 Blanket Policies. Notwithstanding anything to the contrary contained
herein, the Lessee's obligations to carry the insurance provided for herein may
be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by the Lessee and its Affiliates; provided,
however, that the coverage afforded to the Lessor shall not be reduced or
diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided, further that the
requirements of this Section 12.1 are otherwise satisfied.
12.1.9 No Separate Insurance. The Lessee shall not, on the Lessee's own
initiative or pursuant to the request or requirement of any other Person, take
out separate insurance concurrent in form or contributing in the event of loss
with the insurance required hereunder to be furnished by the Lessee, or increase
the amounts of any then existing insurance by securing an additional policy or
additional policies, unless (a) all parties having an insurable interest in the
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subject matter of the insurance, including the Lessor, are included therein as
additional insureds and (b) losses are payable under said insurance in the same
manner as losses are required to be payable under this Lease. The Lessee shall
immediately notify the Lessor of the taking out of any such separate insurance
or of the increasing of any of the amounts of the then existing insurance by
securing an additional insurance policy or policies.
12.1.10 Assignment of Unearned Premiums. The Lessee hereby assigns to the
Lessor all rights of the Lessee in and to any unearned premiums allocable to the
Leased Property on any insurance policy required hereunder to be furnished by
the Lessee which may become payable or are refundable after the occurrence of an
Event of Default hereunder. In the event that this Lease is terminated for any
reason (other than the purchase of the Leased Property by the Lessee or the
expiration of this Lease at the end of the Term), the insurance policies
required to be maintained hereunder, including all right, title and interest of
the Lessee thereunder, shall become the absolute property of the Lessor.
12.2 Indemnity.
12.2.1 Indemnification. Except with respect to the gross negligence or
willful misconduct of the Lessor or any of the other Indemnified Parties, as to
which no indemnity is provided, the Lessee hereby agrees to defend with counsel
acceptable to the Lessor, indemnify and hold harmless the Lessor and each of the
other Indemnified Parties from and against all damages, losses, claims,
liabilities, obligations, penalties, causes of action, costs and expenses
(including, without limitation, attorneys' fees, court costs and other expenses
of litigation) suffered by, or claimed or asserted against, the Lessor or any of
the other Indemnified Parties, directly or indirectly, based on, arising out of
or resulting from (a) the use and occupancy of the Leased Property or any
business conducted therein, (b) any act, fault, omission to act or misconduct by
(i) any member of the Leasing Group, (ii) any Affiliate of the Lessee or (iii)
any employee, agent, licensee, business invitee, guest, customer, contractor or
sublessee of any of the foregoing parties, relating to, directly or indirectly,
the Leased Property, (c) any accident, injury or damage whatsoever caused to any
Person, including, without limitation, any claim of malpractice, or to the
property of any Person in or about the Leased Property or outside of the Leased
Property where such accident, injury or damage results or is claimed to have
resulted from any act, fault, omission to act or misconduct by any member of the
Leasing Group or any Affiliate of the Lessee or any employee, agent, licensee,
contractor or sublessee of any of the foregoing parties, (d) any Lease Default,
(e) any claim brought or threatened against any of the Indemnified Parties by
any member of the Leasing Group or by any other Person on account of (i) the
Lessor's relationship with any member of the Leasing Group pertaining in any way
to the Leased Property and/or the transaction evidenced by the Lease Documents
and/or (ii) the Lessor's negotiation of, entering into and/or performing any of
its obligations and/or exercising any of its right and remedies under any of the
Lease Documents, (f) any attempt by any member of the Leasing Group or any
Affiliate of the Lessee to transfer or relocate any of the Permits to any
location other than the Leased Property and/or (g) the enforcement of this
indemnity. All amounts which become payable by the Lessee under this Section
12.2.1 shall be a demand
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obligation of the Lessee to the Lessor, payable as an Additional Charge. The
indemnity provided for in this Section 12.2.1 shall survive any termination of
this Lease. Notwithstanding anything to the contrary contained in this Section
12.2.1, no payment for any indemnified claim brought or threatened against any
of the Indemnified Parties shall be due unless and until the earlier to occur of
(x) an agreement by the relevant parties to settle the claim at issue or (y) a
final decision is issued by a court of competent jurisdiction in favor of the
applicable Indemnified Parties and all appeal periods have lapsed or been
exhausted.
12.2.2 Indemnified Parties. As used in this Lease the term "Indemnified
Parties" shall mean Lessor, any Fee Mortgagee and their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners and owners.
12.2.3 Limitation on Lessor Liability. Neither the Lessor nor any Affiliate
of the Lessor shall be liable to any member of the Leasing Group or any
Affiliate of any member of the Leasing Group, or to any other Person whatsoever
for any damage, injury, loss, compensation, or claim (including, but not limited
to, any claim for the interruption of or loss to any business conducted on the
Leased Property) based on, arising out of or resulting from any cause
whatsoever, including, but not limited to, the following: (a) repairs to the
Leased Property, (b) interruption in use of the Leased Property; (c) any
accident or damage resulting from the use or operation of the Leased Property or
any business conducted thereon; (d) the termination of this Lease by reason of
Casualty or Condemnation, (e) any fire, theft or other casualty or crime, (f)
the actions, omissions or misconduct of any other Person, (g) damage to any
property, or (h) any damage from the flow or leaking of water, rain or snow. All
Tangible Personal Property and the personal property of any other Person on the
Leased Property (including, without limitation, the Lessor's Personal Property)
shall be at the sole risk of the Lessee and the Lessor shall not in any manner
be held responsible therefor. Notwithstanding the foregoing, the Lessor shall
not be released from liability for any injury, loss, damage or liability
suffered directly by the Lessee to the extent caused directly by the gross
negligence or willful misconduct of the Lessor, its servants, employees or
agents acting within the scope of their authority on or about the Leased
Property or in regards to the Lease; provided, however, that in no event shall
the Lessor, its servants, employees or agents have any liability based on any
loss with respect to or interruption in the operation of any business at the
Leased Property or for any indirect or consequential damages.
12.2.4 Risk of Loss. During the Term of this Lease, the risk of loss or of
decrease in the enjoyment and beneficial use of the Leased Property in
consequence of any damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
levies or executions of Liens (other than those created by the Lessor in
accordance with the provisions of Article 20) is assumed by the Lessee and, in
the absence of the gross negligence or willful misconduct as set forth in
Section 12.2.3, the Lessor shall in no event be answerable or accountable
therefor (except for the obligation to account for insurance proceeds and Awards
to the extent provided for in Articles 13 and 14) nor shall any of
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the events mentioned in this Section entitle the Lessee to any abatement of Rent
(except for an abatement, if any, as specifically provided for in Section 3.8).
ARTICLE 13
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FIRE AND CASUALTY
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13.1 Restoration Following Fire or Other Casualty.
13.1.1 Following Fire or Casualty. In the event of any damage or
destruction to the Leased Property by reason of fire or other hazard or casualty
(a "Casualty"), the Lessee shall give immediate written notice thereof to the
Lessor and any Fee Mortgagee and, subject to the terms of this Article 13 and
any applicable Fee Mortgage Loan Documents, the Lessee shall proceed with
reasonable diligence, in full compliance with all applicable Legal Requirements,
to perform such repairs, replacement and reconstruction work (referred to herein
as the "Work") to restore the Leased Property to the condition it was in
immediately prior to such damage or destruction and to a condition adequate to
operate the Facility for the Primary Intended Use and in compliance with Legal
Requirements and any applicable Fee Mortgage Loan Documents. All Work shall be
performed and completed in accordance with all Legal Requirements and the other
requirements of this Lease within one hundred twenty (120) days following the
occurrence of the damage or destruction plus a reasonable time to compensate for
Unavoidable Delays (including for the purposes of this Section, delays in
obtaining Permits and in adjusting insurance losses), but in no event beyond two
hundred seventy (270) days following the occurrence of the Casualty.
13.1.2 Procedures. In the event that any Casualty results in non-structural
damage to the Leased Property in excess of FIFTY THOUSAND DOLLARS ($50,000) or
in any structural damage to the Leased Property, regardless of the extent of
such structural damage, prior to commencing the Work, the Lessee shall comply
with the requirements of any applicable Fee Mortgage Loan Documents and the
following requirements:
(a) The Lessee shall furnish to the Lessor complete plans and
specifications for the Work (collectively, the "Plans and Specifications"), for
the Lessor's approval, in each instance, which approval shall not be
unreasonably withheld. The Plans and Specifications shall bear the signed
approval thereof by an architect, licensed to do business in the State,
reasonably satisfactory to the Lessor and shall be accompanied by a written
estimate from the architect, bearing the architect's seal, of the entire cost of
completing the Work, and to the extent feasible, the Plans and Specifications
shall provide for Work of such nature, quality and extent, that, upon the
completion thereof, the Leased Property shall be at least equal in value and
general utility to its value and general utility prior to the Casualty and shall
be adequate to operate the Leased Property for the Primary Intended Use;
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(b) The Lessee shall furnish to the Lessor certified or photostatic
copies of all Permits and Contracts required by all applicable Legal
Requirements in connection with the commencement and conduct of the Work;
(c) The Lessee shall furnish to the Lessor a cash deposit or a payment
and performance bond sufficient to pay for completion of and payment for the
Work in an amount not less than the architect's estimate of the entire cost of
completing the Work, less the amount of property insurance proceeds, if any,
then held by the Lessor and which the Lessor shall be required to apply toward
restoration of the Leased Property as provided in Section 13.2;
(d) The Lessee shall furnish to the Lessor such insurance with respect to
the Work (in addition to the insurance required under Section 12.1 hereof) in
such amounts and in such forms as is reasonably required by the Lessee; and
(e) The Lessee shall not commence any of the Work until the Lessee shall
have complied with the requirements set forth in clauses (a) through (d)
immediately above, as applicable, and, thereafter, the Lessee shall perform the
Work diligently, in a good and workmanlike fashion and in good faith in
accordance with (i) the Plans and Specifications referred to in clause (a)
immediately above, (ii) the Permits and Contracts referred to in clause (b)
immediately above and (iii) all applicable Legal Requirements and other
requirements of this Lease; provided, however, that in the event of a bona fide
emergency during which the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such Work as may be
necessary in order to address such emergency without the Lessor's prior
approval, as long as the Lessee immediately thereafter advises the Lessor and
any applicable Fee Mortgagee of such emergency and the nature and scope of the
Work performed and obtains the Lessor's approval of the remaining Work to be
completed.
13.1.3 Disbursement of Insurance Proceeds. Subject to the terms of any
applicable Fee Mortgage Loan Documents, if, as provided in Section 13.2, the
Lessor is required to apply any property insurance proceeds toward repair or
restoration of the Leased Property, then as long as the Work is being diligently
performed by the Lessee in accordance with the terms and conditions of this
Lease, the Lessor shall disburse such insurance proceeds from time to time
during the course of the Work in accordance with and subject to satisfaction of
the following provisions and conditions. The Lessor shall not be required to
make disbursements more often than at thirty (30) day intervals. The Lessee
shall submit a written request for each disbursement at least ten (10) Business
Days in advance and shall comply with the following requirements in connection
with each disbursement:
(a) Prior to the commencement of any Work, the Lessee shall have received
the Lessor's and any applicable Fee Mortgagee's written approval (to the extent
that any such approval from such Fee Mortgagee is required under any applicable
Fee Mortgage Loan Documents) of the Plans and Specifications (which approval
shall not be unreasonably withheld)
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and the Work shall be supervised by an experienced construction manager with the
consultation of an architect or engineer qualified and licensed to do business
in the State.
(b) Each request for payment shall be accompanied by (x) a certificate of
the architect or engineer, bearing the architect's or engineer's seal, and (y) a
certificate of the general contractor, qualified and licensed to do business in
the State, that is performing the Work (collectively, the "Work Certificates"),
each dated not more than ten (10) days prior to the application for withdrawal
of funds, and each stating:
(i) that all of the Work performed as of the date of the certificates
has been completed in compliance with the approved Plans and Specifications,
applicable Contracts and all applicable Legal Requirements;
(ii) that the sum then requested to be withdrawn has been paid by the
Lessee or is justly due to contractors, subcontractors, materialmen, engineers,
architects or other Persons, whose names and addresses shall be stated therein,
who have rendered or furnished certain services or materials for the Work, and
the certificate shall also include a brief description of such services and
materials and the principal subdivisions or categories thereof and the
respective amounts so paid or due to each of said Persons in respect thereof and
stating the progress of the Work up to the date of said certificate;
(iii) that the sum then requested to be withdrawn, plus all sums
previously withdrawn, does not exceed the cost of the Work insofar as actually
accomplished up to the date of such certificate;
(iv) that the remainder of the funds held by the Lessor will be
sufficient to pay for the full completion of the Work in accordance with the
Plans and Specifications;
(v) that no part of the cost of the services and materials described
in the applicable Work Certificate has been or is being made the basis of the
withdrawal of any funds in any previous or then pending application; and
(vi) that, except for the amounts, if any, specified in the
applicable Work Certificate to be due for services and materials, there is no
outstanding indebtedness known, after due inquiry, which is then due and payable
for work, labor, services or materials in connection with the Work which, if
unpaid, might become the basis of a vendor's, mechanic's, laborer's or
materialman's statutory or other similar Lien upon the Leased Property.
(c) The Lessee shall deliver to the Lessor satisfactory evidence that the
Leased Property and all materials and all property described in the Work
Certificates are free and clear of Liens, except (i) Liens, if any, securing
indebtedness due to Persons (whose names and addresses and the several amounts
due them shall be stated therein) specified in an applicable Work Certificate,
which Liens shall be discharged upon disbursement of the funds then being
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requested, (ii) any Fee Mortgage and (iii) the Permitted Encumbrances. The
Lessor shall accept as satisfactory evidence of the foregoing lien waivers in
customary form from the general contractor and all subcontractors performing the
Work, together with an endorsement of its title insurance policy (relating to
the Leased Property) in form acceptable to the Lessor, dated as of the date of
the making of the then current disbursement, confirming the foregoing.
(d) If the Work involves alteration or restoration of the exterior of any
Leased Improvement that changes the footprint of any Leased Improvement, the
Lessee shall deliver to the Lessor, upon the request of the Lessor, an
"as-built" survey of the Leased Property dated as of a date within ten (10) days
prior to the making of the first and final advances (or revised to a date within
ten (10) days prior to each such advance) showing no encroachments other than
such encroachments, if any, by the Leased Improvements upon or over the
Permitted Encumbrances as are in existence as of the date hereof.
(e) The Lessee shall deliver to the Lessor (i) an opinion of counsel
(satisfactory to the Lessor both as to counsel and as to the form of opinion)
prior to the first advance opining that all necessary Permits for the repair,
replacement and/or restoration of the Leased Property have been obtained and
that the Leased Property, if repaired, replaced or rebuilt in accordance, in all
material respects, with the approved Plans and Specifications and such Permits,
shall comply with all applicable Legal Requirements and (ii) an architect's
certificate (satisfactory to the Lessor both as to the architect and as to the
form of the certificate) prior to the final advance, certifying that the Leased
Property was repaired, replaced or rebuilt in accordance, in all material
respects, with the approved Plans and Specifications and complies with all
applicable Legal Requirements, including, without limitation, all Permits
referenced in the foregoing clause (i).
(f) There shall be no Lease Default or any state of facts or circumstance
existing which, with the giving of notice and/or the passage of time, would
constitute any Lease Default.
The Lessor, at its option, may waive any of the foregoing requirements in whole
or in part in any instance. Upon compliance by the Lessee with the foregoing
requirements (except for such requirements, if any, as the Lessor may have
expressly elected to waive), and to the extent of (x) the insurance proceeds, if
any, which the Lessor may be required to apply to restoration of the Leased
Property pursuant to the provisions of this Lease and (y) all other cash
deposits made by the Lessee, the Lessor shall make available for payment to the
Persons named in the Work Certificate the respective amounts stated in said
certificate(s) to be due, subject to a retention of ten percent (10%) as to all
hard costs of the Work (the "Retainage"). It is understood that the Retainage is
intended to provide a contingency fund to assure the Lessor that the Work shall
be fully completed in accordance with the Plans and Specifications and the
requirements of the Lessor. Upon the full and final completion of all of the
Work in accordance with the provisions hereof, the Retainage shall be made
available for payment to those Persons entitled thereto.
Upon completion of the Work, and as a condition precedent to making any further
advance, in addition to the requirements set forth above, the Lessee shall
promptly deliver to the Lessor:
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(i) written certificates of the architect or engineer, bearing the
architect's or engineer's seal, and the general contractor, certifying that the
Work has been fully completed in a good and workmanlike manner in material
compliance with the Plans and Specifications and all Legal Requirements;
(ii) an endorsement of its title insurance policy (relating to the
Leased Property) in form reasonably acceptable to the Lessor insuring the Leased
Property against all mechanic's and materialman's liens accompanied by the final
lien waivers from the general contractor and all subcontractors;
(iii) a certificate by the Lessee in form and substance reasonably
satisfactory to the Lessor, listing all costs and expenses in connection with
the completion of the Work and the amount paid by the Lessee with respect to the
Work; and
(iv) a temporary certificate of occupancy (if obtainable) and all
other applicable Permits and Contracts (that have not previously been delivered
to the Lessor) issued by or entered into with any Governmental Authority with
respect to the Leased Property and the Primary Intended Use and by the
appropriate Board of Fire Underwriters or other similar bodies acting in and for
the locality in which the Leased Property is situated; provided, that within
thirty (30) days after completion of the Work, the Lessee shall obtain and
deliver to the Lessor a permanent certificate of occupancy for the Leased
Property.
Upon completion of the Work and delivery of the documents required pursuant
to the provisions of this Section 13.1, the Lessor shall pay the Retainage to
the Lessee or to those Persons entitled thereto and if there shall be insurance
proceeds or cash deposits, other than the Retainage, held by the Lessor in
excess of the amounts disbursed pursuant to the foregoing provisions, then
provided that no Lease Default has occurred and is continuing, nor any state of
facts or circumstances which, with the giving of notice and/or the passage of
time would constitute a Lease Default, the Lessor shall pay over such proceeds
or cash deposits to the Lessee.
No inspections or any approvals of the Work during or after construction
shall constitute a warranty or representation by the Lessor, or any of its
agents or Consultants, as to the technical sufficiency, adequacy or safety of
any structure or any of its component parts, including, without limitation, any
fixtures, equipment or furnishings, or as to the subsoil conditions or any other
physical condition or feature pertaining to the Leased Property. All acts,
including any failure to act, relating to the Lessor are performed solely for
the benefit of the Lessor to assure the payment and performance of the Lease
Obligations and are not for the benefit of the Lessee or the benefit of any
other Person.
13.2 Disposition of Insurance Proceeds.
13.2.1 Proceeds To Be Released to Pay For Work. In the event of any
Casualty, except as provided for in Section 13.2.2, but, subject to the terms of
any applicable Fee Mortgage
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Loan Documents, the Lessor shall release proceeds of property insurance held by
it to pay for the Work in accordance with the provisions and procedures set
forth in this Article 13, only if:
(a) all of the terms, conditions and provisions of Sections 13.1 and
13.2.1 are satisfied;
(b) there does not then exist any Lease Default or any state of facts or
circumstance which, with the giving of notice and/or the passage of time, would
constitute such a Lease Default;
(c) The Lessee demonstrates to the Lessor's satisfaction that the Lessee
has the financial ability to satisfy the Lease Obligations during such repair or
restoration; and
(d) no Sublease material to the operation of the Facility immediately
prior to such damage or taking shall have been canceled or terminated, nor
contain any still exercisable right to cancel or terminate, due to such Casualty
if and to the extent that the income from such Sublease is necessary in order to
avoid the violation of any of the financial covenants set forth in this Lease or
otherwise to avoid the creation of an Event of Default.
13.2.2 Proceeds Not To Be Released. If, as the result of any Casualty, the
Leased Property is damaged to the extent it is rendered Unsuitable For Its
Primary Intended Use and if either: (a) the Lessee, after exercise of diligent
efforts, cannot within a reasonable time (not in excess of ninety (90) days)
obtain all necessary Permits in order to be able to perform all required Work
and to again operate the Facility for its Primary Intended Use within two
hundred seventy (270) days from the occurrence of the damage or destruction in
substantially the manner as immediately prior to such damage or destruction or
(b) such Casualty occurs during the last twenty-four (24) months of the Term and
would reasonably require more than nine (9) months to obtain all Permits and
complete the Work, then the Lessee may either (i) acquire the SNF/CMC Land and
all improvements located thereon from the Lessor for a purchase price equal to
the greater of (x) the Lessor's Investment and (y) the sum of (A) the Fair
Market Value of the Leased Property minus the Fair Market Added Value and (B)
the Fair Market Value of the CMC Land and any improvements located thereon, with
the Fair Market Value and the Fair Market Added Value to be determined as of the
day immediately prior to such Casualty and prior to any other Casualty which has
not been fully repaired, restored or replaced, in which event, the Lessee shall
be entitled upon payment of the full purchase price to receive all property
insurance proceeds (less any costs and expenses incurred by the Lessor in
collecting the same), or (ii) terminate this Lease, in which event, the Lessor
shall be entitled to receive and retain the insurance proceeds; provided,
however, that the Lessee shall only have such right of termination effective
upon payment to the Lessor of all Rent and other sums due under this Lease and
the other Lease Documents through the date of termination plus an amount, which
when added to the sum of (1) the Fair Market Value of the Leased Property as
affected by all unrepaired or unrestored damage due to any Casualty (and giving
due regard for delays, costs and expenses incident to completing all repair or
restoration required to fully repair or restore the same) plus (2) the
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amount of insurance proceeds actually received by the Lessor (net of costs and
expenses incurred by the Lessor in collecting the same) equals (3) the Fair
Market Value of the Leased Property minus the Fair Market Added Value, with the
Fair Market Value and the Fair Market Added Value to be determined as of the day
immediately prior to such Casualty and prior to any other Casualty which has not
been fully repaired. Any acquisition of the Leased Property pursuant to the
terms of this Section 13.2.2 shall be consummated in accordance with the
provisions of Article 18, mutatis, mutandis.
13.2.3 Lessee Responsible for Short-Fall. If the cost of the Work exceeds
the amount of proceeds received by the Lessor from the property insurance
required under Article 12 (net of costs and expenses incurred by the Lessor in
collecting the same), the Lessee shall be obligated to contribute any excess
amount needed to repair or restore the Leased Property and pay for the Work.
Such amount shall be paid by the Lessee to the Lessor together with any other
property insurance proceeds for application to the cost of the Work.
13.3 Tangible Personal Property. All insurance proceeds payable by reason
of any loss of or damage to any of the Tangible Personal Property shall be paid
to the Lessor as secured party, subject to the rights of the holders of any
Permitted Prior Security Interests, and, thereafter, provided that no Lease
Default, nor any fact or circumstance which with the giving of notice and/or the
passage of time could constitute a Lease Default, has occurred and is
continuing, the Lessor shall pay such insurance proceeds to the Lessee to
reimburse the Lessee for the cost of repairing or replacing the damaged Tangible
Personal Property, subject to the terms and conditions set forth in the other
provisions of this Article 13, mutatis mutandis.
13.4 Restoration of Certain Improvements and the Tangible Personal
Property. If the Lessee is required or elects to restore the Facility, the
Lessee shall either (a) restore (i) all alterations and improvements to the
Leased Property made by the Lessee and (ii) the Tangible Personal Property or
(b) replace such alterations and improvements and the Tangible Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
13.5 No Abatement of Rent. In no event shall any Rent abate as a result of
any Casualty.
13.6 Termination of Certain Rights. Any termination of this Lease pursuant
to this Article 13 shall cause any right of the Lessee to extend the Term of
this Lease, granted to the Lessee herein and any right of the Lessee to purchase
the Leased Property contained in this Lease to be terminated and to be without
further force or effect.
13.7 Waiver. The Lessee hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction to the Leased Property
due to any Casualty which the Lessee is obligated to restore or may restore
under any of the provisions of this Lease.
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13.8 Application of Rent Loss and/or Business Interruption Insurance.
Subject to the applicable provisions of any Fee Mortgage Loan Documents, all
proceeds of rent loss and/or business interruption insurance (collectively,
"Rent Insurance Proceeds") shall be paid to the Lessor and dealt with as
follows:
(a) if the Work has been promptly and diligently commenced by the Lessee
and is in the process of being completed in accordance with this Lease and no
fact or condition exists which constitutes, or which with the giving of notice
and/or the passage of time would constitute, a Lease Default, the Lessor shall
each month pay to the Lessee out of the Rent Insurance Proceeds a sum equal to
that amount, if any, of the Rent Insurance Proceeds paid by the insurer which is
allocable to the rental loss and/or business interruption for the preceding
month minus an amount equal to the sum of the Rent due hereunder for such month
plus any Impositions relating to the Leased Property then due and payable;
(b) if the Work has not been promptly and diligently commenced by the
Lessee or is not in the process of being completed in accordance with this
Lease, the Rent Insurance Proceeds shall be applied to any Rent then due, and,
to the extent sufficient therefor, an amount equal to Base Rent, Impositions and
insurance premiums payable for the next twelve (12) months, as reasonably
projected by the Lessor, shall be held by the Lessor as security for the Lease
Obligations and applied to the payment of Rent as it becomes due; and
(c) if such Rent Insurance Proceeds received by the Lessor (net of costs
and expenses incurred by the Lessor in collecting the same) exceed the amounts
required under clauses (a) and (b) above, the excess shall be paid to the
Lessee, provided no fact or circumstance exists which constitutes, or with
notice, or passage of time, or both, would constitute, a Lease Default.
Notwithstanding the foregoing, the Lessor may at its option use or release the
Rent Insurance Proceeds to pay for the Work and, if a Lease Default exists, the
Lessor may apply all such insurance proceeds towards the Lease Obligations or
hold such proceeds as security therefor.
13.9 Obligation To Account. Upon the Lessee's written request, which may
not be made not more than once in any three (3) month period, the Lessor shall
provide the Lessee with a written accounting of the application of all insurance
proceeds received by the Lessor.
ARTICLE 14
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CONDEMNATION
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14.1 Parties' Rights and Obligations. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
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14.2 Total Taking. If there is a permanent Taking of all or substantially
all of the Leased Property, this Lease shall terminate on the Date of Taking.
14.3 Partial or Temporary Taking. If there is a permanent Taking of a
portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the Leased Property, this Lease shall remain in effect so long as the
Leased Property is not thereby rendered permanently Unsuitable For Its Primary
Intended Use or temporarily Unsuitable For Its Primary Intended Use for a period
not likely to, or which does not, exceed two hundred and seventy (270) days. If,
however, the Leased Property is thereby so rendered permanently or temporarily
Unsuitable For Its Primary Intended Use: (a) the Lessee shall have the right to
restore the Leased Property, at its own expense, (subject to the right under
certain circumstances as provided for in Section 14.4 to receive the net
proceeds of an Award for reimbursement) to the extent possible, to substantially
the same condition as existed immediately before the partial or temporary Taking
or (b) the Lessee shall have the right to acquire the Leased Property from the
Lessor (i) upon payment of all Rent due through the date that the purchase price
is paid, for a purchase price equal to the greater of (x) the Lessor's
Investment or (y) the sum of (A) the Fair Market Value of the Leased Property
minus the Fair Market Added Value and (B) the Fair Market Value of the CMC Land
and any improvements located thereon, with the Fair Market Value and the Fair
Market Added Value to be determined as of the day immediately prior to such
partial or temporary Taking and (ii) in accordance with the terms and conditions
set forth in Article 18; in which event, this Lease shall terminate upon payment
of such purchase price and the consummation of such acquisition. Notwithstanding
the foregoing, the Lessor may overrule the Lessee's election under clause (a) or
(b) and instead either (1) terminate this Lease as of the date when the Lessee
is required to surrender possession of the portion of the Leased Property so
taken or (2) compel the Lessee to keep the Lease in full force and effect and to
restore the Leased Property as provided in clause (a) above, but only if the
Leased Property may be operated for at least eighty percent (80%) of the
licensed bed capacity of the Facility if operated in accordance with its Primary
Intended Use. The Lessee shall exercise its election under this Section 14.3 by
giving the Lessor notice thereof ("Lessee's Election Notice") within sixty (60)
days after the Lessee receives notice of the Taking. The Lessor shall exercise
its option to overrule the Lessee's election under this Section 14.3 by giving
the Lessee notice of the Lessor's exercise of its rights under Section 14.3
within thirty (30) days after the Lessor receives the Lessee's Election Notice.
If, as the result of any such partial or temporary Taking, this Lease is not
terminated as provided above, the Lessee shall be entitled to an abatement of
Rent, but only to the extent, if any, provided for in Section 3.8, effective as
of the date upon which the Leased Property is rendered Unsuitable For Its
Primary Intended Use.
14.4 Restoration. If there is a partial or temporary Taking of the Leased
Property and this Lease remains in full force and effect pursuant to Section
14.3, the Lessee shall accomplish all necessary restoration and the Lessor shall
release the net proceeds of such Award to reimburse the Lessee for the actual
reasonable costs and expenses thereof, subject to all of the conditions and
provisions set forth in Article 13 as though the Taking was a Casualty and the
Award was insurance proceeds. If the cost of the restoration exceeds the amount
of the Award (net of costs and expenses incurred in obtaining the Award), the
Lessee shall be obligated to contribute any
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excess amount needed to restore the Facility or pay for such costs and expenses.
To the extent that the cost of restoration is less than the amount of the Award
(net of cost and expenses incurred in obtaining the Award), the remainder of the
Award shall be retained by the Lessor and Rent shall be abated as set forth in
Section 3.8.
14.5 Award Distribution. In the event the Lessee completes the purchase of
the Leased Property, as described in Section 14.3, the entire Award shall, upon
payment of the purchase price and all Rent and other sums due under this Lease
and the other Lease Documents, belong to the Lessee and the Lessor agrees to
assign to the Lessee all of the Lessor's rights thereto. In any other event,
subject to any Fee Mortgage Loan Documents, the entire Award shall belong to and
be paid to the Lessor.
14.6 Control of Proceedings. Subject to the rights of any Fee Mortgagee
under any applicable Fee Mortgage Loan Documents, unless and until the Lessee
completes the purchase of the Leased Property as provided in Section 14.3, all
proceedings involving any Taking and the prosecution of claims arising out of
any Taking against the Condemnor shall be conducted, prosecuted and settled by
the Lessor; provided, however, that the Lessor shall keep the Lessee apprised of
the progress of all such proceedings and shall solicit the Lessee's advice with
respect thereto and shall give due consideration to any such advice. In
addition, the Lessee shall reimburse the Lessor (as an Additional Charge) for
all costs and expenses, including reasonable attorneys' fees, appraisal fees,
fees of expert witnesses and costs of litigation or dispute resolution, in
relation to any Taking, whether or not this Lease is terminated.
ARTICLE 15
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PERMITTED CONTESTS
------------------
15.1 Lessee's Right to Contest. To the extent of the express references
made to this Article 15 in other Sections of this Lease, but, subject to the
applicable provisions of any applicable Fee Mortgage Loan Documents, the Lessee,
any Sublessee or any Manager on their own or on the Lessor's behalf (or in the
Lessor's name), but at their sole cost and expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, the decision of any Governmental Authority
related to the operation of the Leased Property for its Primary Intended Use or
any Lien or claim relating to the Leased Property not otherwise permitted by
this Lease; provided, that (a) prior written notice of such contest is given to
the Lessor, (b) in the case of an unpaid Imposition, Lien or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from the Lessor and/or compliance by any applicable member of the
Leasing Group with the contested Legal Requirement or other matter may be
legally delayed pending the prosecution of any such proceeding without the
occurrence or creation of any Lien, charge or liability of any kind against the
Leased Property, (c) neither the Leased Property nor any rent therefrom would be
in any
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immediate danger of being sold, forfeited, attached or lost as a result of such
proceeding, (d) in the case of a Legal Requirement, neither the Lessor nor any
member of the Leasing Group would be in any immediate danger of civil or
criminal liability for failure to comply therewith pending the outcome of such
proceedings, (e) in the event that any such contest shall involve a sum of money
or potential loss in excess of FIFTY THOUSAND DOLLARS ($50,000), the Lessee
shall deliver to the Lessor an Officer's Certificate and opinion of counsel, if
the Lessor deems the delivery of an opinion to be appropriate, certifying or
opining, as the case may be, as to the validity of the statements set forth to
the effect set forth in clauses (b), (c) and (d), to the extent applicable, (f)
the Lessee shall give such cash security as may be demanded in good faith by the
Lessor to insure ultimate payment of any fine, penalty, interest or cost and to
prevent any sale or forfeiture of the affected portion of the Leased Property by
reason of such non-payment or non-compliance, (g) if such contest is finally
resolved against the Lessor or any member of the Leasing Group, the Lessee shall
promptly pay, as Additional Charges due hereunder, the amount required to be
paid, together with all interest and penalties accrued thereon and/or comply
(and cause any Sublessee and any Manager to comply) with the applicable Legal
Requirement, and (h) no state of facts or circumstance exists which constitutes,
or with the passage of time and/or the giving of notice, could constitute a
Lease Default; provided, however, the provisions of this Article 15 shall not be
construed to permit the Lessee to contest the payment of Rent or any other sums
payable by the Lessee to the Lessor under any of the Lease Documents.
15.2 Lessor's Cooperation. The Lessor, at the Lessee's sole cost and
expense, shall execute and deliver to the Lessee such authorizations and other
documents as may reasonably be required in any such contest, so long as the same
does not expose the Lessor or any Fee Mortgagee to any civil or criminal
liability, and, if reasonably requested by the Lessee or if the Lessor so
desires, the Lessor shall join as a party therein.
15.3 Lessee's Indemnity. The Lessee, as more particularly provided for in
Section 12.2, shall indemnify, defend (with counsel acceptable to the Lessor)
and save the Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon the Lessor in connection with any such contest and any loss resulting
therefrom and in the enforcement of this indemnification.
ARTICLE 16
----------
DEFAULT
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16.1 Events of Default. Each of the following shall constitute an "Event
of Default" hereunder and shall entitle the Lessor to exercise its remedies
hereunder and under any of the other Lease Documents:
(a) any failure of the Lessee to pay any amount due hereunder or under
any of the other Lease Documents within ten (10) days following the date when
such payment was due;
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(b) any failure in the observance or performance of any other covenant,
term, condition or warranty provided in this Lease or any of the other Lease
Documents, other than the payment of any monetary obligation and other than as
specified in subsections (c) through (v) below (a "Failure to Perform"),
continuing for thirty (30) days after the giving of notice by the Lessor to the
Lessee specifying the nature of the Failure to Perform; except as to matters not
susceptible to cure within thirty (30) days, provided that with respect to such
matters, (i) the Lessee commences the cure thereof within thirty (30) days after
the giving of such notice by the Lessor to the Lessee, (ii) the Lessee
continuously prosecutes such cure to completion, (iii) such cure is completed
within ninety (90) days after the giving of such notice by the Lessor to the
Lessee and (iv) such Failure to Perform does not impair the value of, or the
Lessor's rights with respect to, the Leased Property;
(c) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, under
any of the other Lease Documents;
(d) if any representation, warranty or statement contained herein or in
any of the other Lease Documents proves to be untrue in any material respect as
of the date when made or at any time during the Term if such representation or
warranty is a continuing representation or warranty pursuant to Section 10.2;
(e) if the Lessee or the Guarantor shall (i) voluntarily be adjudicated a
bankrupt or insolvent, (ii) seek or consent to the appointment of a receiver or
trustee for itself or for the Leased Property, (iii) file a petition seeking
relief under the bankruptcy or other similar laws of the United States, any
state or any jurisdiction, (iv) make a general assignment for the benefit of
creditors, (v) make or offer a composition of its debts with its creditors or
(vi) be unable to pay its debts as such debts mature;
(f) if any court shall enter an order, judgment or decree appointing,
without the consent of the Lessee or the Guarantor, a receiver or trustee for
the Lessee or the Guarantor or for any of their respective property and such
order, judgment or decree shall remain in force, undischarged or unstayed, sixty
(60) days after it is entered;
(g) if a petition is filed against the Lessee or the Guarantor which
seeks relief under the bankruptcy or other similar laws of the United States,
any state or any other jurisdiction, and such petition is not dismissed within
sixty (60) days after it is filed;
(h) in the event that, without the prior written consent of the Lessor,
in each instance, which consent may be withheld by the Lessor in its sole and
absolute discretion, if any of the outstanding capital stock of the Lessee,
shall be, on any one or more occasions, directly or indirectly, sold, assigned,
hypothecated or otherwise transferred (whether by operation of law or
otherwise);
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(i) the liquidation, dissolution or termination of existence of the
any member of the Lessee or the merger or consolidation of the Guarantor;
provided, however, that notwithstanding the foregoing, a merger or consolidation
involving the Guarantor shall not constitute an Event of Default so long as (i)
the surviving entity relating to such merger has a Tangible Net Worth equal to
or greater than the Tangible Net Worth of the Guarantor immediately prior to
such merger or consolidation, (ii) the Lessor receives at least fifteen (15)
days prior written notice of such merger and (iii) the Lessor receives such
assurances, estoppels, assumptions and confirmations that it reasonably requires
with respect to such merger or consolidation;
(j) if, without the prior written consent of the Lessor, in each
instance, which consent may be withheld by the Lessor in its sole and absolute
discretion, the Lessee's or any Sublessee's interest in the Leased Property
shall be, directly or indirectly, mortgaged, encumbered (by any voluntary or
involuntary Lien other than the Permitted Encumbrances), subleased, sold,
assigned, hypothecated or otherwise transferred (whether by operation of law or
otherwise);
(k) the occurrence of a default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, in
connection with the payment or performance of any other material obligation of
the Lessee or any Sublessee (other than any Sublessee that is not an Affiliate
of the Lessee), whether or not the applicable creditor or obligee elects to
declare the obligations of the Lessee or the applicable Sublessee under the
applicable agreement due and payable or to exercise any other right or remedy
available to such creditor or obligee, if such creditor's or obligee's rights
and remedies may involve or result in (i) the taking of possession of the Leased
Property or (ii) the assertion of any other right or remedy that, in the
Lessor's reasonable opinion, may impair the Lessee's ability punctually to
perform all of its material obligations under this Lease and the other Lease
Documents, may impair such Sublessee's ability punctually to perform all of its
obligations under its Sublease or may materially impair the Lessor's security
for the Lease Obligations; provided, however, that in any event, the election by
the applicable creditor or obligee to declare the obligations of the Lessee
under the applicable agreement due and payable or to exercise any other right or
remedy available to such creditor or obligee shall be an Event of Default
hereunder only if such obligations, individually or in the aggregate, are in
excess of ONE HUNDRED THOUSAND DOLLARS ($100,000);
(l) the occurrence of a Related Party Default;
(m) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, under
any credit agreement, loan agreement or other agreement establishing a major
line of credit (or any documents executed in connection with such lines of
credit) on behalf of any member of the Leasing Group (other than any Sublessee
that is not an Affiliate of the Lessee) whether or not the applicable creditor
has elected to declare the indebtedness due and payable under such line of
credit or to exercise any other right or remedy available to it. For the
purposes of this provision, a major line of credit
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shall mean and include any line of credit established in an amount equal to or
greater than FIVE HUNDRED THOUSAND DOLLARS ($500,000);
(n) except as a result of Casualty or a partial or complete Condemnation,
if the Lessee or any Sublessee ceases operation of the Facility for a period in
excess of thirty (30) days;
(o) if one or more judgments against the Lessee or any Sublessee (other
than any Sublessee that is not an Affiliate of the Lessee) or attachments
against the Lessee's interest or any such Sublessee's interest in the Leased
Property, which in the aggregate exceed ONE HUNDRED THOUSAND DOLLARS ($100,000)
or which may materially and adversely interfere with the operation of the
Facility, remain unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of thirty (30) days;
(p) if any malpractice award or judgment exceeding any applicable
professional liability insurance coverage by more than FIVE HUNDRED THOUSAND
DOLLARS ($500,000) shall be rendered against any member of the Leasing Group and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such award or judgment or (ii) such award or judgment shall continue
unsatisfied and in effect for a period of ten (10) consecutive days without an
insurance company satisfactory to the Lessor (in its sole and absolute
discretion) having agreed to fund such award or judgment in a manner
satisfactory to the Lessor (in its sole and absolute discretion) and in either
case such award or judgment shall, in the reasonable opinion of the Lessor, have
a material adverse affect on the ability of any such member of the Leasing Group
to operate the Facility;
(q) if any Provider Agreement material to the operation or financial
condition of any member of the Leasing Group shall be terminated prior to the
expiration of the term thereof or, without the prior written consent of the
Lessor, in each instance, which consent may be withheld in the Lessor's
reasonable discretion, shall not be renewed or extended upon the expiration of
the stated term thereof;
(r) if, after the Lessee or any Sublessee has obtained approval for
participation in the Medicare and/or Medicaid programs with regard to the
operation of the Facility, a final unappealable determination is made by the
applicable Governmental Authority that the Lessee or any such Sublessee shall
have failed to comply with applicable Medicare and/or Medicaid regulations in
the operation of the Facility, as a result of which failure the Lessee or such
Sublessee is declared ineligible to continue its participation in the Medicare
and/or Medicaid programs;
(s) if any member of the Leasing Group receives notice of a final
unappealable determination by applicable Governmental Authorities of the
revocation of any Permit required for the lawful operation of the Facility in
accordance with the Primary Intended Use or the loss of any Permit under any
other circumstances under which any such member of the Leasing Group is required
to cease the operation of the Facility in accordance with the Primary Intended
Use;
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(t) any failure to maintain the insurance required pursuant to Section 12
of this Lease in force and effect at all times until the Lease Obligations are
fully paid and performed;
(u) the appointment of a temporary manager (or operator) for the Leased
Property by any Governmental Authority; or
(v) the entry of an order by a court with jurisdiction over the Leased
Property to close the Facility, to transfer one or more patients or residents
from the Facility as a result of an allegation of abuse or neglect or to take
any action to eliminate an emergency situation then existing at the Facility.
16.2 Remedies.
(a) If any Lease Default shall have occurred, the Lessor may at its
option terminate this Lease by giving the Lessee not less than ten (10) days'
notice of such termination, or exercise any one or more of its rights and
remedies under this Lease or any of the other Lease Documents, or as available
at law or in equity and upon the expiration of the time fixed in such notice,
the Term shall terminate (but only if the Lessor shall have specifically elected
by a written notice to so terminate the Lease) and all rights of the Lessee
under this Lease shall cease. Notwithstanding the foregoing, in the event of the
Lessee's failure to pay Rent, if such Rent remains unpaid beyond ten (10) days
from the due date thereof, the Lessor shall not be obligated to give ten (10)
days notice of such termination or exercise of any of its other rights and
remedies under this Lease, or the other Lease Documents, or otherwise available
at law or in equity, and the Lessor shall be at liberty to pursue any one or
more of such rights or remedies without further notice. No taking of possession
of the Leased Property by or on behalf of the Lessor, and no other act done by
or on behalf of the Lessor, shall constitute an acceptance of surrender of the
Leased Property by the Lessee or reduce the Lessee's obligations under this
Lease or the other Lease Documents, unless otherwise expressly agreed to in a
written document signed by an authorized officer or agent of the Lessor.
(b) To the extent permitted under applicable law, the Lessee shall pay as
Additional Charges all costs and expenses (including, without limitation,
attorneys' fees and expenses) reasonably incurred by or on behalf of the Lessor
as a result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not this Lease
has been terminated pursuant to Paragraph (a) of this Section, the Lessee shall,
to the extent permitted under applicable law, if required by the Lessor so to
do, upon not less than ten (10) days' prior notice from the Lessor, immediately
surrender to the Lessor the Leased Property pursuant to the provisions of
Paragraph (a) of this Section and quit the same, and the Lessor may enter upon
and repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove the Lessee and all other Persons and any
and all of the Tangible Personal Property from the Leased Property, subject to
the rights of any residents or patients of the Facility and any Sublessees who
are not Affiliates of any member of the Leasing Group and
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to any requirements of applicable law, or the Lessor may claim ownership of the
Tangible Personal Property as set forth in Section 5.2.3 hereof or the Lessor
may exercise its rights as secured party under the Security Agreement. The
Lessor shall use reasonable, good faith efforts to relet the Leased Property or
otherwise mitigate damages suffered by the Lessor as a result of the Lessee's
breach of this Lease.
(d) In addition to all of the rights and remedies of the Lessor set forth
in this Lease and the other Lease Documents, if the Lessee shall fail to pay any
rental or other charge due hereunder (whether denominated as Base Rent,
Additional Rent, Additional Charges or otherwise) within ten (10) days after
same shall have become due and payable, then and in such event the Lessee shall
also pay to the Lessor (i) a late payment service charge (in order to partially
defray the Lessor's administrative and other overhead expenses) equal to two
hundred-fifty ($250) dollars and (ii) to the extent permitted by applicable law,
interest on such unpaid sum at the Overdue Rate; it being understood, however,
that nothing herein shall be deemed to extend the due date for payment of any
sums required to be paid by the Lessee hereunder or to relieve the Lessee of its
obligation to pay such sums at the time or times required by this Lease.
16.3 Damages. None of (a) the termination of this Lease pursuant to
Section 16.2, (b) the eviction of the Lessee or the repossession of the Leased
Property, (c) the failure or inability of the Lessor, notwithstanding reasonable
good faith efforts, to relet the Leased Property, (d) the reletting of the
Leased Property or (e) the failure of the Lessor to collect or receive any
rentals due upon any such reletting, shall relieve the Lessee of its liability
and obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In any such event, the Lessee shall forthwith pay to
the Lessor all Rent due and payable with respect to the Leased Property to and
including the date of such termination, repossession or eviction. Thereafter,
the Lessee shall forthwith pay to the Lessor, at the Lessor's option, either:
(i) the sum of: (x) all Rent that is due and unpaid at later to occur
of termination, repossession or eviction, together with interest thereon at the
Overdue Rate to the date of payment, plus (y) the worth (calculated in the
manner stated below) of the amount by which the unpaid Rent for the balance of
the Term after the later to occur of the termination, repossession or eviction
exceeds the fair market rental value of the Leased Property for the balance of
the Term, plus (z) any other amount necessary to compensate the Lessor for all
damage proximately caused by the Lessee's failure to perform the Lease
Obligations or which in the ordinary course would be likely to result therefrom;
or
(ii) each payment of Rent as the same would have become due and
payable if the Lessee's right of possession or other rights under this Lease had
not been terminated, or if the Lessee had not been evicted, or if the Leased
Property had not been repossessed which Rent, to the extent permitted by law,
shall bear interest at the Overdue Rate from the date when due until the date
paid, and the Lessor may enforce, by action or otherwise, any other term or
covenant of this Lease. There shall be credited against the Lessee's obligation
under this clause (ii) amounts actually collected by the Lessor from another
tenant to whom the Leased Property may have
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actually been leased or, if the Lessor is operating the Leased Property for its
own account, the actual net cash flow of the Leased Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such deter mination and allowed by
applicable law.
16.4 Lessee Waivers. If this Lease is terminated pursuant to Section 16.2,
the Lessee waives, to the extent not prohibited by applicable law, (a) any right
of redemption, re-entry or repossession, (b) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
16, and (c) the benefit of any laws now or hereafter in force exempting property
from liability for rent or for debt.
16.5 Application of Funds. Any payments otherwise payable to the Lessee
which are received by the Lessor under any of the provisions of this Lease
during the existence or continuance of any Lease Default shall be applied to the
Lease Obligations in the order which the Lessor may reasonably determine or as
may be required by the laws of the State.
16.6 Intentionally Omitted.
16.7 Lessor's Right to Cure. If the Lessee shall fail to make any payment,
or to perform any act required to be made or performed under this Lease and to
cure the same within the relevant time periods provided in Section 16.1, the
Lessor, after five (5) Business Days' prior notice to the Lessee (except in an
emergency when such shorter notice shall be given as is reasonable under the
circumstances), and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Lessee, and may, to the extent permitted by law, enter upon the Leased Property
for such purpose and take all such action thereon as, in the Lessor's opinion,
may be necessary or appropriate therefor. No such entry shall be deemed an
eviction of the Lessee. All sums so paid by the Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
paid by the Lessee to the Lessor on demand as an Additional Charge. The
obligations of the Lessee and rights of the Lessor contained in this Article
shall survive the expiration or earlier termination of this Lease.
16.8 No Waiver By Lessor. The Lessor shall not by any act, delay, omission
or otherwise (including, without limitation, the exercise of any right or remedy
hereunder) be deemed to have waived any of its right or remedies hereunder or
under any of the other Lease Documents unless such waiver is in writing and
signed by the Lessor, and then, only to the extent specifically set forth
therein. No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time periods set forth therein for
the performance of the Lease Obligations)
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shall be construed as a waiver of any other term, condition, covenant,
representation or warranty of any of the Lease Documents, nor shall such a
waiver in any one instance or circumstances be construed as a waiver of the same
term, condition, covenant, representation or warranty in any subsequent instance
or circumstance. No such failure, delay or waiver shall be construed as creating
a requirement that the Lessor must thereafter, as a result of such failure,
delay or waiver, give notice to the Lessee or any other Person that the Lessor
does not intend to, or may not, give a further waiver or to refrain from
insisting upon the strict performance of the terms, conditions, covenants,
representations and warranties set forth in the Lease Documents before the
Lessor can exercise any of its rights or remedies under any of the Lease
Documents or before any Lease Default can occur, or as establishing a course of
dealing for interpreting the conduct of and agreements between the Lessor and
the Lessee or any other Person.
The acceptance by the Lessor of any payment that is less than payment in
full of all amounts then due under any of the Lease Documents at the time of the
making of such payment shall not: (a) constitute a waiver of the right to
exercise any of the Lessor's remedies at that time or at any subsequent time,
(b) constitute an accord and satisfaction or (c) nullify any prior exercise of
any remedy, without the express written consent of the Lessor. Any failure by
the Lessor to take any action under this Lease or any of the other Lease
Documents by reason of a default hereunder or thereunder, any acceptance of a
past due installment, or any indulgence granted from time to time shall not be
construed (i) as a novation of this Lease or any of the other Lease Documents,
(ii) as a waiver of any right of the Lessor thereafter to insist upon strict
compliance with the terms of this Lease or any of the other Lease Documents or
(iii) to prevent the exercise of any right of acceleration or any other right
granted hereunder or under applicable law; and to the maximum extent not
prohibited by applicable law, the Lessor hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing.
16.9 Right of Forbearance. Whether or not for consideration paid or
payable to the Lessor and, except as may be otherwise specifically agreed to by
the Lessor in writing, no forbearance on the part of the Lessor, no extension of
the time for the payment of the whole or any part of the Obligations, and no
other indulgence given by the Lessor to the Lessee or any other Person, shall
operate to release or in any manner affect the original liability of the Lessee
or such other Persons, or to limit, prejudice or impair any right of the Lessor,
including, without limitation, the right to realize upon any collateral, or any
part thereof, for any of the Obligations evidenced or secured by the Lease
Documents; notice of any such extension, forbearance or indulgence being hereby
waived by the Lessee and all those claiming by, through or under the Lessee.
16.10 Cumulative Remedies. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to the Lessor
under any of the other Lease Documents or at law or in equity, all of which are
hereby reserved by the Lessor, and this Lease is made and accepted without
prejudice to any such rights and remedies. All of the rights and
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remedies of the Lessor under each of the Lease Documents shall be separate and
cumulative and may be exercised concurrently or successively in the Lessor's
sole and absolute discretion.
ARTICLE 17
----------
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
---------------------------------------------------
17.1 Surrender. The Lessee shall, upon the expiration or prior termination
of the Term (unless the Lessee has concurrently purchased the Leased Property in
accordance with the terms hereof), vacate and surrender the Leased Property to
the Lessor in good repair and condition, in compliance with all Legal
Requirements, all Insurance Requirements, and in compliance with the provisions
of Article 8, except for: (a) ordinary wear and tear (subject to the obligation
of the Lessee to maintain the Leased Property in good order and repair during
the entire Term of the Lease), (b) damage caused by the gross negligence or
willful acts of the Lessor, and (c) any damage or destruction resulting from a
Casualty or Taking that the Lessee is not required by the terms of this Lease to
repair or restore.
17.2 Transfer of Permits and Contracts. In connection with the expiration
or any earlier termination of this Lease (unless the Lessee has concurrently
purchased the Leased Property in accordance with the terms hereof), upon any
request made from time to time by the Lessor, the Lessee shall (a) promptly and
diligently use its best efforts to (i) transfer and assign all Permits and
Contracts necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Lease to the Lessor, any Fee Mortgagee or
any of their respective designees and/or (ii) arrange for the transfer or
assignment of such Permits and Contracts to the Lessor, any Fee Mortgagee or any
such designee, all to the extent the same may be transferred or assigned under
applicable law and (b) cooperate in every respect (and to the fullest extent
possible) and assist the Lessor, any Fee Mortgagee or any such designee in
obtaining such Permits and Contracts (whether by transfer, assignment or
otherwise). Such efforts and cooperation on the part of the Lessee shall
include, without limitation, the execution, delivery and filing with appropriate
Governmental Authorities, Accreditation Bodies and Third Party Payors of any
applications, petitions, statements, notices, requests, assignments and other
documents or instruments requested by the Lessor, any Fee Mortgagee or any such
designee. Furthermore, the Lessee shall not take any action or refrain from
taking any action which would defer, delay or jeopardize the process of the
Lessor, any Fee Mortgagee or any such designee obtaining said Permits and
Contracts (whether by transfer, assignment or otherwise). Without limiting the
foregoing, the Lessee shall not seek to transfer or relocate any of said Permits
or Contracts to any location other than the Leased Property. The provisions of
this Section 17.2 shall survive the expiration or earlier termination of this
Lease.
The Lessee hereby appoints the Lessor as its attorney-in-fact, with full
power of substitution to take such actions, in the event that the Lessee fails
to comply with any request made by the Lessor hereunder, as the Lessor (in its
sole absolute discretion) may deem necessary
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or desirable to effectuate the intent of this Section 17.2. The power of
attorney conferred on the Lessor by the provisions of this Section 17.2, being
coupled with an interest, shall be irrevocable until the Lease Obligations are
fully paid and performed and shall not be affected by any disability or
incapacity which the Lessee may suffer and shall survive the same. Such power of
attorney is provided solely to protect the interests of the Lessor and shall not
impose any duty on the Lessor to exercise any such power and neither the Lessor
nor such attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its gross
negligence or willful misconduct.
17.3 No Acceptance of Surrender. Except at the expiration of the Term in
the ordinary course, no surrender to the Lessor of this Lease or of the Leased
Property or any interest therein shall be valid or effective unless agreed to
and accepted in writing by the Lessor and no act by the Lessor or any
representative or agent of the Lessor, other than such a written acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
17.4 Holding Over. If, for any reason, the Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time the Lessee shall pay as rental each month, one and one-half
times the aggregate of (i) one-twelfth of the aggregate Base Rent and Additional
Rent payable at the time of such expiration or earlier termination of the Term;
(ii) all Additional Charges accruing during the month and (iii) all other sums,
if any, payable by the Lessee pursuant to the provisions of this Lease with
respect to the Leased Property. During such period of tenancy, the Lessee shall
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenants at sufferance, to continue its occupancy and use
of the Leased Property. Nothing contained herein shall constitute the consent,
express or implied, of the Lessor to the holding over of the Lessee after the
expiration or earlier termination of this Lease.
ARTICLE 18
----------
PURCHASE OF THE LEASED PROPERTY
-------------------------------
18.1 Purchase of the Leased Property. In the event the Lessee purchases
the Leased Property from the Lessor pursuant to Article 13 or Article 14 of this
Lease, the Lessor shall, upon receipt from the Lessee of the applicable purchase
price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to
the Lessee a bargain and sale deed with covenants only against acts of the
Lessor conveying the entire interest of the Lessor in and to the Leased Property
(other than those portions of the Leased Property constituting Building Systems
not situated upon the Land, or located in or on the Leased Improvements, that
exclusively serve the Facility) to the Lessee subject to all Legal Requirements,
all of the matters described in clauses (a), (b), (c), (e) and (g) of Section
11.5.2, Impositions, any Liens created by the Lessee, any Liens created in
accordance
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with the terms of this Lease or consented to by the Lessee, the claims of all
Persons claiming by through or under the Lessee, any other matters assented to
by the Lessee and all matters for which the Lessee has responsibility under any
of the Lease Documents, but otherwise not subject to any other Lien created by
the Lessor from and after the Commencement Date (other than an Encumbrance
permitted under Article 20 which the Lessee elects to assume). The applicable
purchase price shall be paid in cash to the Lessor, or as the Lessor may direct,
in federal or other immediately available funds except as otherwise mutually
agreed by the Lessor and the Lessee. All expenses of such conveyance, including,
without limitation, title examination costs, standard (and extended) coverage
title insurance premiums, attorneys' fees incurred by the Lessor in connection
with such conveyance, recording and transfer taxes and recording fees and other
similar charges shall be paid by the Lessee.
18.2 Appraisal.
18.2.1 Designation of Appraisers. In the event that it becomes necessary to
determine the Fair Market Value of the Leased Property for any purpose of this
Lease, the party required or permitted to give notice of such required
determination shall include in the notice the name of a Person selected to act
as appraiser on its behalf. Within ten (10) days after receipt of any such
notice, the Lessor (or the Lessee, as the case may be) shall by notice to the
Lessee (or the Lessor, as the case may be) appoint a second Person as appraiser
on its behalf.
18.2.2 Appraisal Process. The appraisers thus appointed, each of whom must
be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto), shall, within forty-five (45) days after the
date of the notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the Fair Market Value of the Leased Property as of
the relevant date (giving effect to the impact, if any, of inflation from the
date of their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, or if two appraisers shall have been
so appointed but only one such appraiser shall have made such determination
within fifty (50) days after the making of the Lessee's or the Lessor's request,
then the determination of such appraiser shall be final and binding upon the
parties. If two appraisers shall have been appointed and shall have made their
determinations within the respective requisite periods set forth above and if
the difference between the amounts so determined shall not exceed ten per cent
(10%) of the lesser of such amounts, then the Fair Market Value of the Leased
Property shall be an amount equal to fifty percent (50%) of the sum of the
amounts so determined. If the difference between the amounts so determined shall
exceed ten percent (10%) of the lesser of such amounts, then such two appraisers
shall have twenty (20) days to appoint a third appraiser, but if such appraisers
fail to do so, then either party may request the American Arbitration
Association or any successor organization thereto to appoint an appraiser within
twenty (20) days of such request, and both parties shall be bound by any
appointment so made within such twenty (20) day period. If no such appraiser
shall have been appointed within such twenty (20) days or within ninety (90)
days of the original request for a determination of Fair Market Value of the
Leased Property, whichever is earlier, either the Lessor or the Lessee may apply
to any court having jurisdiction to
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have such appointment made by such court. Any appraiser appointed by the
original appraisers, by the American Arbitration Association or by such court
shall be instructed to determine the Fair Market Value of the Leased Property
within thirty (30) days after appointment of such Appraiser. The determination
of the appraiser which differs most in terms of dollar amount from the
determinations of the other two appraisers shall be excluded, and fifty percent
(50%) of the sum of the remaining two determinations shall be final and binding
upon the Lessor and the Lessee as the Fair Market Value of the Leased Property.
18.2.3 Specific Enforcement and Costs. This provision for determination by
appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law. The
Lessor and the Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other cost and expenses incurred in
connection with each appraisal.
18.3 Lessee's Option to Purchase.
18.3.1 Conditions to Option. On the conditions (which conditions the Lessor
may waive, at its sole option, by notice to the Lessee at any time) that (a) at
the time of exercise of the Purchase Option and on the applicable Purchase
Option Date, there then exists no Lease Default, nor any state of facts or
circumstance which constitutes, or with the passage of time and/or the giving of
notice, would constitute a Lease Default and (b) the Lessee strictly complies
with the provisions of this Section 18.3, then the Lessee shall have the option
to purchase the SNF/CMC Land and all of the improvements located thereon, at the
price and upon the terms hereinafter set forth (the "Purchase Option").
18.3.2 Exercise of Option. The Purchase Option shall permit the Lessee to
purchase the SNF/CMC Land and all of the improvements located thereon (a) on the
last day of the Initial Term or (b) on the last day of any Extended Term
effectively exercised by the Lessee (each of such dates are referred to herein
as a "Purchase Option Date") and shall be exercised by notice given by the
Lessee to the Lessor (the "Lessee's Purchase Option Notice") at least one
hundred eighty (180) days (but not more than two hundred seventy (270) days)
prior to the relevant Purchase Option Date. Once given, the Lessee shall have no
right to rescind the Lessee's Purchase Option Notice. In order to determine
whether or not to exercise the Purchase Option, the Lessee may request that the
Lessor provide to the Lessee (within 10 Business Days after any such request) a
rent roll (the "Rent Roll"), in form and substance reasonably acceptable to the
Lessee, (i) identifying each lease in effect relating to any portion of the CMC
Land, (ii) attaching a true and correct copy of each such lease and (iii)
identifying the term of each such lease, the rent payable thereunder, the
security deposit and/or other deposits (if any) held by the landlord thereunder,
whether there are any defaults then existing thereunder, the date through which
rent has been paid thereunder and any other information reasonably requested by
the Lessee. From and after the date of the exercise of the Purchase Option in
accordance with the terms hereof, the
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Lessor shall not enter into any lease relating to all or any portion of the
SNF/CMC Land without the Lessee's prior consent, which consent may not
unreasonably withheld.
18.3.3 Conveyance. If the Purchase Option is exercised by the Lessee in
accordance with the terms hereof, the SNF/CMC Land and all improvements located
thereon shall be conveyed by a good and sufficient deed with covenants only
against acts of the Lessor (the "Deed") running to the Lessee or to such grantee
as the Lessee may designate by notice to the Lessor at least seven (7) days
before the Time of Closing. At the Closing, (a) the Lessor shall assign to the
Lessee (or the Lessee's nominee), and the Lessee (or such nominee) shall assume,
all of the Lessor's right, title and interest in all leases relating to the CMC
Land pursuant to an Assignment and Assumption Agreement, in form and substance
reasonably acceptable to the Lessor and the Lessee (which Assignment and
Assumption Agreement shall include mutual indemnifications relating to the
obligations of the landlord under the leases being assigned and assumed), (b)
the Lessor shall deliver to the Lessee (or its nominee) an updated Rent Roll and
(c) the Lessor shall transfer to the Lessee (or its nominee) all security
deposits and other deposits held by the Lessor under the leases being assigned
and assumed.
18.3.4 Calculation of Purchase Price. The price to be paid by the Lessee
for the acquisition of the Leased Property pursuant to this Purchase Option (the
"Purchase Price") shall be equal to the lesser of (a) an amount equal to the sum
of (i) the Fair Market Value of the Leased Property minus the Fair Market Added
Value plus (ii) the Fair Market Value of the CMC Land and the improvements
located thereon or (b) the sum of (i) the Lessor's Investment plus (ii) the
product of (x) fifty (50%) percent multiplied by (y) a fraction the numerator of
which shall be the Consumer Price Index in effect on the applicable Purchase
Option Date minus the Consumer Price Index in effect on the Commencement Date
and the denominator of which shall be the Consumer Price Index in effect on the
Commencement Date multiplied by (z) the Lessor's Investment. Notwithstanding the
foregoing, in no event shall the Purchase Price due hereunder be less than the
Lessor's Investment.
18.3.5 Payment of Purchase Price. The Purchase Price shall be paid by the
Lessee at the Time of Closing by certified, cashier's, treasurer's or bank
check(s) or wire transfer pursuant to instructions received from the Lessor.
18.3.6 Place and Time of Closing. If the Purchase Option is exercised, the
closing shall occur and the Deed shall be delivered (the "Closing") at the
office of the Lessor at 12:00 o'clock noon (E.S.T.) on the applicable Purchase
Option Date (such time, as the same may be extended by mutual written agreement
of the Lessor and the Lessee, being hereinafter referred to as the "Time of
Closing"). It is agreed that time is of the essence of the Purchase Option.
18.3.7 Condition of Leased Property. The Leased Property is to be purchased
"AS IS" and "WHERE IS" as of the Time of Closing.
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18.3.8 Quality of Title. If the Lessor shall be unable to give title or to
make conveyance, as stipulated in this Section 18.3, then, at the Lessor's
option, the Lessor shall use reasonable efforts to remove all defects in title
and the applicable Purchase Option Date and Time of Closing shall be extended
for period of thirty (30) days. The Lessor shall not be required to expend more
than FIFTY THOUSAND DOLLARS ($50,000) (inclusive of attorney's fees) in order to
have used "reasonable efforts."
18.3.9 Lessor's Inability to Perform. If at the expiration of the extended
time the Lessor shall have failed so to remove any such defects in title, then
all other obligations of all parties hereto under Section 18.3 shall cease and
Section 18.3 shall be void and without recourse to the parties hereto.
Notwithstanding the foregoing, the Lessee shall have the election, at either the
original or extended Purchase Option Date and Time of Closing, to accept such
title as the Lessor can deliver to the Leased Property in its then condition and
to pay therefor the Purchase Price without reduction, in which case the Lessor
shall convey such title; provided, that, in the event of such conveyance, if any
portion of the Leased Property shall have been taken by Condemnation prior to
the applicable Purchase Option Date and Time of Closing, the Lessor shall pay
over or assign to the Lessee at the Time of Closing, all Awards recovered on
account of such Taking, less any amounts reasonably expended by the Lessor in
obtaining such Awards, or, to the extent such Awards have not been recovered as
of the applicable Purchase Option Date and Time of Closing, the Lessor shall
assign to the Lessee all its rights with respect to any claim therefor.
18.3.10 Merger by Deed. The acceptance of the Deed by the Lessee or the
grantee designated by the Lessee, as the case may be, shall be deemed to be a
full
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performance and discharge of every agreement and obligation to be performed by
the Lessor contained or expressed in this Lease.
18.3.11 Use of Purchase Price to Clear Title. To enable the Lessor to make
conveyance as provided in this Section, the Lessor may, at the Time of Closing,
use the Purchase Price or any portion thereof to clear the title of any Lien,
provided that all instruments so procured are recorded contemporaneously with
the Closing or reasonable arrangements are made for a recording subsequent to
the Time of Closing in accordance with customary conveyancing practices.
18.3.12 Lessee's Default. If the Lessee delivers the Lessee's Purchase
Option Notice and fails to consummate the purchase of the Leased Property in
accordance with the terms hereof for any reason other than the Lessor's willful
and unexcused refusal to deliver the Deed, (a) the Lessee shall thereafter have
no further right to purchase the Leased Property pursuant to this Section,
although this Lease shall otherwise continue in full force and effect and (b)
the Lessor shall have the right to sue for specific performance of the Lessee's
obligations to purchase the Leased Property provided such suit for specific
performance is commenced within one (1) year after the applicable Purchase
Option Date on which such sale was supposed to occur.
ARTICLE 19
----------
SUBLETTING AND ASSIGNMENT
-------------------------
19.1 Subletting and Assignment. The Lessee may not, without the prior
written consent of the Lessor and any Fee Mortgagee (if any such consent from
the Fee Mortgagee is required under the Fee Mortgage Loan Documents), which
consent may be withheld in the Lessor's sole and absolute discretion, assign or
pledge all or any portion of its interest in this Lease or any of the other
Lease Documents (whether by operation of law or otherwise) or sublet all or any
part of the Leased Property. For purposes of this Section 19.1 the term "assign"
shall be deemed to include, but not be limited to, any one or more sales,
pledges, hypothecations or other transfers (including, without limitation, any
transfer by operation of law) of any of the capital stock of or partnership
interests in the Lessee or sales, pledges, hypothecations or other transfers
(including, without limitation, any transfer by operation of law) of the capital
or the assets of the Lessee. Any such assignment, pledge, sale, hypothecation or
other transfer made without the Lessor's consent shall be void and of no force
and effect.
19.2 Intentionally Omitted.
19.3 Attornment. The Lessee shall insert in each Sublease provisions to
the effect that (a) such Sublease is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of the Lessor hereunder, (b) in
the event this Lease shall terminate before the expiration of such Sublease, the
Sublessee thereunder will, at the Lessor's option, attorn to the
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Lessor and waive any right the Sublessee may have to terminate the Sublease or
to surrender possession thereunder, as a result of the termination of this Lease
and (c) in the event the Sublessee receives a written notice from the Lessor
stating that the Lessee is in default under this Lease, the Sublessee shall
thereafter be obligated to pay all rentals accruing under said Sublease directly
to the Lessor or as the Lessor may direct. All rentals received from the
Sublessee by the Lessor shall be credited against the amounts owing by the
Lessee under this Lease.
19.4 Permitted Transfers. Notwithstanding anything to the contrary set
forth herein, the Lessee's legal or beneficial interest in this Lease or the
Leased Property and/or all of the outstanding capital stock of the Lessee may be
indirectly transferred in connection with (a) any merger of the Guarantor with
or into any other Person, (b) any sale of all or substantially all of the
Guarantor's assets to any other Person or (c) any transfer of all or
substantially all of the outstanding capital stock of the Guarantor to any other
Person; provided, that, in connection with (i) any such merger, the terms of
Section 16 (i) are satisfied and (ii) any such sale or transfer, the acquiring
Person (x) has a Tangible Net Worth equal to or greater than the Guarantor
immediately prior to such sale or transfer and (y) executes and delivers to the
Lessor, concurrently with such sale or transfer, a guaranty in form and
substance substantially similar to the Guaranty and an opinion, in form and
substance reasonably acceptable to the Lessor, rendered by counsel reasonably
acceptable to the Lessor, evidencing the due authorization and enforceability of
such guaranty.
ARTICLE 20
----------
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
-------------------------------------------
20.1 No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby with the fee estate in the Leased Property by
reason of the fact that the same Person may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (b) the fee estate in the Leased
Property.
20.2 Transfers By Lessor. If the original Lessor named herein or any
successor in interest 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 the Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of the Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
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20.3 Lessor May Grant Liens. Without the consent of the Lessee, but
subject to the terms and conditions set forth below in this Section 20.3, the
Lessor may, from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement upon the Leased
Property or any interest therein ("Encumbrance"), whether to secure any
borrowing or other means of financing or refinancing; provided, that, except as
may otherwise be expressly provided herein or in any Fee Mortgage Loan Documents
to which the Lessee is a party, the Lessee shall have no obligation to make
payments under such Encumbrances. The Lessee shall subordinate this Lease to the
lien of any such Encumbrance, on the condition that the beneficiary or holder of
such Encumbrance executes a non-disturbance agreement in conformity with the
provisions of Section 20.4. To the extent that any such Encumbrance or any other
Permitted Encumbrance consists of a mortgage or deed of trust on the Lessor's
interest in the Leased Property the same shall be referred to herein as a "Fee
Mortgage" and the holder thereof shall be referred to herein as a "Fee
Mortgagee".
20.4 Subordination and Non-Disturbance. Concurrently with the execution
and delivery of any Fee Mortgage entered into after the date hereof, provided
that the Lessee executes and delivers an agreement of the type described in the
following paragraph, the Lessor shall obtain and deliver to the Lessee an
agreement by the holder of such Fee Mortgage, pursuant to which, (a) the
applicable Fee Mortgagee consents to this Lease and (b) agrees that,
notwithstanding the terms of the applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration, termination, foreclosure, sale, entry or
other act or omission under or pursuant to such Fee Mortgage or a transfer in
lieu of foreclosure, (i) the Lessee shall not be disturbed in peaceful enjoyment
of the Leased Property nor shall this Lease be terminated or canceled at any
time, except in the event that the Lessor shall have the right to terminate this
Lease under the terms and provisions expressly set forth herein, (ii) the
Lessee's options to purchase the Leased Property pursuant to Articles 13, 14 and
18 of this Lease shall remain in force and effect pursuant to the terms hereof
and (iii) in the event that the Lessee elects its option to purchase the Leased
Property pursuant to this Lease and performs all of its obligations hereunder in
connection with any such election, the holder of the Fee Mortgage shall release
its Fee Mortgage upon payment by the Lessee of the purchase price required
hereunder, provided, that (1) such purchase price is paid to the holder of the
Fee Mortgage, in the event that the Indebtedness secured by the applicable Fee
Mortgage is equal to or greater than the purchase price or (2) in the event that
the purchase price is greater than the Indebtedness secured by the Fee Mortgage,
a portion of the purchase price equal to the Indebtedness secured by the Fee
Mortgage is paid to the Fee Mortgagee and the remainder of the purchase price is
paid to the Lessor.
At the request from time to time by any Fee Mortgagee, the Lessee shall (a)
subordinate this Lease and all of the Lessee's rights and estate hereunder to
the Fee Mortgage held by such Fee Mortgagee and (b) agree that the Lessee will
attorn to and recognize such Fee Mortgagee or the purchaser at any foreclosure
sale or any sale under a power of sale contained in any such Fee Mortgage as the
Lessor under this Lease for the balance of the Term then remaining. To effect
the intent and purpose of the immediately preceding sentence, the Lessee agrees
to execute and
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deliver such instruments in recordable from as are reasonably requested by the
Lessor or the applicable Fee Mortgagee; provided, however, that such Fee
Mortgagee simultaneously executes, delivers and records a written agreement of
the type described in the preceding paragraph.
ARTICLE 21
----------
LESSOR OBLIGATIONS
------------------
21.1 Quiet Enjoyment. As long as the Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and the other Lease Documents
and fully perform its obligations thereunder, the Lessee shall peaceably and
quietly have, hold and enjoy the Leased Property throughout the Term, free of
any claim or other action by the Lessor or anyone claiming by, through or under
the Lessor, but subject to the Permitted Encumbrances and such Liens as may
hereafter be consented to by the Lessee. No failure by the Lessor to comply with
the foregoing covenant shall give the Lessee any right to cancel or terminate
this Lease, or to fail to perform any other sum payable under this Lease, or to
fail to perform any other obligation of the Lessee hereunder. Notwithstanding
the foregoing, the Lessee shall have the right by separate and independent
action to pursue any claim it may have against the Lessor as a result of a
breach by the Lessor of the covenant of quiet enjoyment contained in this
Article 21.
21.2 Memorandum of Lease. The Lessor and the Lessee shall, promptly upon
the request of either, enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State, in which reference to this
Lease and all options contained herein shall be made. The Lessee shall pay all
recording costs and taxes associated therewith.
21.3 Default by Lessor. The Lessor shall be in default of its obligations
under this Lease only if the Lessor shall fail to observe or perform any term,
covenant or condition of this Lease on its part to be performed and such failure
shall continue for a period of thirty (30) days after notice thereof from the
Lessee (or such shorter time as may be necessary in order to protect the health
or welfare of any patients and/or residents of the Facility or to insure the
continuing compliance of the Facility with the applicable Legal Requirements),
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if the
Lessor, within said thirty (30) day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which the Lessor shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay.
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ARTICLE 22
----------
NOTICES
-------
Any notice, request, demand, statement or consent made hereunder or under
any of the other Lease Documents shall be in writing and shall be deemed duly
given if personally delivered, sent by certified mail, return receipt requested,
or sent by a nationally recognized commercial overnight delivery service with
provision for a receipt, postage or delivery charges prepaid, and shall be
deemed given when so personally delivered or postmarked or placed in the
possession of such mail or delivery service and addressed as follows:
<TABLE>
<S> <C>
If to the Lessee: CareMatrix of Princeton (SNF), Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attention: President
With a copies to: CareMatrix of Princeton (SNF), Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attention: General Counsel
Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attention: General Counsel
If to the Lessor: CCC of New Jersey, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attention: President
With copies to: CCC of New Jersey, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attention: General Counsel
Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attention: General Counsel
</TABLE>
or such other address as the Lessor or the Lessee shall hereinafter from time to
time designate by a written notice to the others given in such manner. Any
notice given to the Lessee by the Lessor at any time shall not imply that such
notice or any further or similar notice was or is required.
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ARTICLE 23
----------
ENVIRONMENTAL MATTERS
---------------------
23.1 Maintenance of Leased Property. The Lessee covenants that, as long as
this Lease shall remain in force and effect, the Lessee:
(a) shall not generate, store, transport, utilize, dispose of,
manage, release or locate, any Hazardous Substances on, under or from the
Leased Property in compliance with all applicable Environmental Laws or
permit the generation, storage, transportation, utilization, disposal,
management, release or threat of release, or location of any Hazardous
Substances on, under or from the Leased Property, but only in compliance
with all applicable Environmental Laws; and
(b) shall not permit any Lien arising under or related to any of the
Environmental Laws to attach to the Leased Property and remain undischarged
or not adequately bonded to the reasonable satisfaction of the Lessor for
more than sixty (60) days.
In addition to all other covenants contained herein, the Lessee agrees that
the Leased Property shall be maintained in compliance with the Environmental
Laws and in compliance with any provisions set forth under any Fee Mortgage Loan
Documents pertaining to the generation, storage, transportation, utilization,
management or release of hazardous Substances on, under or from the Leased
Property.
23.2 Notice of Environmental Conditions. The Lessee shall provide the
Lessor and any Fe Mortgagee with immediate written notice: (a) upon the Lessee
becoming aware of (i) the presence of, any release or any threat of release of
any Hazardous Substances on, under or from the Leased Property (whether or not
caused by the Lessee) and (ii) any Environmental Enforcement Action instituted
or threatened and (b) upon receipt by the Lessee of any notice relating to the
Leased Property or any Hazardous Substance allegedly originating on, under or
from the Leased Property, from any Governmental Authority pursuant to any of the
Environmental Laws.
23.3 The Lessee's Agreement To Take Remedial Actions. Upon the Lessee
becoming aware of the presence of, any release, or any threat of release of any
Hazardous Substances on, under or from the Leased Property caused by the Lessee,
its officers, agents, employees, Sublessees, licensees, concessionaires and/or
invitees or any other occupant of the
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Leased Property during the term of this Lease, the Lessee shall immediately take
all such actions to arrange for the assessment, monitoring, clean-up,
containment, removal, remediation or restoration of the Leased Property as are
required pursuant to any of the Environmental Laws or by any Governmental
Authority.
Upon the Lessee becoming aware of the presence of, any release, or any
threat of release of any Hazardous Substances on any Surrounding Property, but
only to the extent that the presence of any Hazardous Substances on the
Surrounding Property originated on, under or from the Leased Property and such
release or threat of release was caused by the Lessee, its officers, agents,
employees, Sublessees, licensees, concessionaires and/or invitees or any other
occupant of the Leased Property during the term of this Lease, the Lessee shall
immediately take all such actions to arrange for the assessment, monitoring,
clean-up, containment, removal, remediation or restoration of the Surrounding
Property, as are required pursuant to any of the Environmental Laws or by any
Governmental Authority.
23.4 The Lessor's Rights To Inspect The Leased Property and Take Remedial
Actions. So long as this Lease shall remain in force and effect, the Lessor
shall have the right, but not the obligation, to enter upon the Leased Property,
to expend funds to:
(a) cause one or more environmental assessments of the Leased
Property to be undertaken. Such environmental assessments may include,
without limitation, (i) detailed visual inspections of the Leased Property,
including, without limitation, all storage areas, storage tanks, drains,
dry wells and leaching areas, (ii) the taking of soil and surface water
samples, (iii) the performance of soil and ground water analyses and (iv)
the performance of such other investigations or analyses as are necessary
or appropriate and consistent with sound professional environmental
engineering practice in order for the Lessor to obtain a complete
assessment of the compliance of the Leased Property and the use thereof
with all Environmental Laws and to make a determination as to whether there
is any risk of contamination (x) to the Leased Property resulting from
Hazardous Substances originating on, under or from any Surrounding Property
or (y) to any Surrounding Property resulting from Hazardous Substances
originating on, under or from the Leased Property;
(b) cure any breach of the conditions and covenants contained in this
Article 6;
(c) take any actions as are necessary to (i) prevent the migration of
Hazardous Substances on, under or from the Leased Property to any other
property, (ii) clean-up, contain, remediate or remove any Hazardous
Substances on, under or from any other property, which Hazardous Substances
originated on, under or from the Leased Property or (iii) prevent the
migration of any Hazardous Substances on, under or from any other property
to the Leased Property;
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(d) comply with, settle or otherwise satisfy any Environmental
Enforcement Action (including, without limitation, the payment of any fines
or penalties imposed by any Governmental Authority); and
(e) correct or abate any environmental condition on or under the
Leased Property which could cause degradation, damage or injury to the
Leased Property, any Surrounding Property or any Person.
Any amounts paid or advanced by the Lessor (or any Fee Mortgagee) and all
costs and expenses incurred in connection with any action taken pursuant to the
terms of this Article 6 (including, without limitation, environmental
consultants' and experts' fees and expenses, reasonable attorneys' fees and
expenses, court costs and all costs of assessment, monitoring, clean-up,
containment, remediation, removal and restoration), shall be a demand obligation
of the Lessee to the Lessor, but only to the extent that such amounts paid or
advanced and cost and expenses incurred arose out of and/or relate to the
presence of, any release, or any threat of release of any Hazardous Substances
on, under or from the Leased Property caused by the Lessee, its officers,
agents, employees, Sublessees, licensees, concessionaires and/or invitees or any
other occupant of the Leased Property during the term of this Lease, and if such
sums are not paid within ten (10) days after demand, such sums shall thereafter
(to the extent permitted by applicable law) bear interest at the Overdue Rate
until the date of payment.
The Lessor (or any Fee Mortgagee), by making any such payment or incurring
any such costs, shall be subrogated to all rights of the Lessee or any other
occupant of the Leased Property to seek reimbursement from any Person,
including, without limitation, any prior owner or operator of the Leased
Property, who may be a "responsible party" under any of the Environmental Laws,
in connection with the presence of Hazardous Substances on, under or from the
Leased Property.
Any partial exercise by the Lessor (or any Fee Mortgagee) of any of the
rights and remedies set forth in this Article 23, including, without limitation,
any partial undertaking on the part of the Lessor (or such Fee Mortgagee) to
cure any failure by the Lessee or the Leased Property (or any other occupant) to
comply with any of the Environmental Laws, shall not obligate the Lessor (or
such Fee Mortgagee) to complete such actions taken or require the Lessor to
expend further sums to cure such non-compliance.
23.5 Environmental Indemnification. Without limiting any of the other
indemnity provisions set forth in this Lease, the Lessee shall and hereby agrees
to indemnify, exonerate, defend (with counsel acceptable to the Lessor) and hold
the Indemnified Parties harmless from and against any claim, liability, loss,
cost, damage or expense (including, without limitation, environmental
consultants' and experts' fees and expenses, reasonable attorneys' fees and
expenses, court costs and all costs of assessment, monitoring, clean-up,
containment, removal, remediation and restoration) arising out of or in
connection with (a) any breach of any of the conditions and covenants hereunder,
(b) the Lessor's exercise of any of its rights and remedies
-99-
<PAGE>
hereunder or (c) the enforcement of the aforesaid indemnification agreement;
excluding, however, with respect to each Indemnified Party, any matters
resulting from the gross negligence or willful misconduct of such Indemnified
Party. Notwithstanding the foregoing, the Lessor shall have the option of
conducting its defense with counsel of the Lessor's choice, but at the expense
of the Lessee as aforesaid.
The matters covered by the foregoing indemnity with respect to any property
other than the Leased Property shall not include any costs incurred as a result
of the clean-up, containment, remediation or removal of Hazardous Substances on,
under or from such other property or the restoration thereof if such Hazardous
Substances did not originate on, under or from the Leased Property. The Lessee
acknowledges and agrees that its obligations pursuant to the provisions hereof
are in addition to any and all other legal liabilities and responsibilities (at
law or in equity) that the Lessee may otherwise have as an "owner" or "operator"
of the Leased Property or a "responsible party" within the meaning of any of the
Environmental Laws, as the case may be.
23.6 Survival. The Lessee's liability for a breach of the provisions of
this Article shall survive any termination of this Lease.
ARTICLE 24
----------
MISCELLANEOUS PROVISIONS
------------------------
24.1 Broker's Fee Indemnification. The Lessee shall and hereby agrees to
indemnify, defend (with counsel reasonably acceptable to the Lessor) and hold
the Lessor harmless from and against any and all claims for premiums or other
charges, finder's fees, taxes, brokerage fees or commissions and other similar
compensation due in connection with any of the transactions contemplated by the
Lease Documents. Notwithstanding the foregoing, the Lessor shall have the option
of conducting its own defense against any such claims with counsel of the
Lessor's choice, but at the expense of the Lessee, as aforesaid. This
indemnification shall include, without limitation, all reasonable attorneys'
fees and expenses and court costs reasonably incurred by the Lessor in
connection with the defense against any such claims and the enforcement of this
indemnification agreement and shall survive the termination of this Lease.
24.2 No Joint Venture or Partnership. Neither anything contained in any of
the Lease Documents, nor the acts of the parties hereto, shall create, or be
construed to create, a partnership or joint venture between the Lessor and the
Lessee. The Lessee is not the agent or representative of the Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, the Lessor liable to any Person for goods delivered to the
Lessee, services performed with respect to the Leased Property at the direction
of the Lessee or for debts or claims accruing against the Lessee.
-100-
<PAGE>
24.3 Amendments, Waivers and Modifications. Except as otherwise expressly
provided for herein or in any other Lease Document, none of the terms,
covenants, conditions, warranties or representations contained in this Lease or
in any of the other Lease Documents may be renewed, replaced, amended, modified,
extended, substituted, revised, waived, consolidated or terminated except by an
agreement in writing signed by (a) all parties to this Lease or the other
applicable Lease Document, as the case may be, with regard to any such renewal,
replacement, amendment, modification, extension, substitution, revision,
consolidation or termination and (b) the Person against whom enforcement is
sought with regard to any waiver. The provisions of this Lease and the other
Lease Documents shall extend and be applicable to all renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations and
modifications of any of the Lease Documents, the Management Agreements, the Fee
Mortgage Loan Documents, the Related Party Agreements, the Permits and/or the
Contracts. References herein and in the other Lease Documents to any of the
Lease Documents, the Management Agreements, the Fee Mortgage Loan Documents, the
Related Party Agreements, the Permits and/or the Contracts shall be deemed to
include any renewals, replacements, amendments, extensions, substitutions,
revisions, consolidations or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the Lease
Documents, whether express or implied, to any renewal, replacement, amendment,
extension, substitution, revisions, consolidation or modification of any of the
Lease Documents or any Management Agreement, Permit and/or the Contract is not
intended to constitute an agreement or consent by the Lessor to any such
renewal, replacement, amendment, substitution, revision, consolidation or
modification; but, rather as a reference only to those instances where the
Lessor may give, agree or consent to any such renewal, replacement, amendment,
extension, substitution, revision, consolidation or modification as the same may
be required pursuant to the terms, covenants and conditions of any of the Lease
Documents.
24.4 Captions and Headings. The captions and headings set forth in this
Lease and each of the other Lease Documents are included for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 Time is of the Essence. Time is of essence of each and every term,
condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 Counterparts. This Lease may be executed in one or more counterparts,
each of which taken together shall constitute an original and all of which shall
constitute one and the same instrument.
24.7 Entire Agreement. This Lease and the other Lease Documents set forth
the entire agreement of the parties with respect to the subject matter.
-101-
<PAGE>
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, THE LESSOR AND THE LESSEE HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR HEREAFTER HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. The Lessee hereby
certifies that neither the Lessor nor any of the Lessor's representatives,
agents or counsel has represented expressly or otherwise that the Lessor would
not, in the event of any such suit, action or proceeding seek to enforce this
waiver to the right of trial by jury and acknowledges that the Lessor has been
induced by this waiver (among other things) to enter into the transactions
evidenced by this Lease and the other Lease Documents and further acknowledges
that the Lessee (a) has read the provisions of this Lease, and in particular,
the paragraph containing this waiver, (b) has consulted legal counsel, (c)
understands the rights that it is granting in this Lease and the rights that it
waiving in this paragraph in particular and (d) makes the waivers set forth
herein knowingly, voluntarily and intentionally.
24.9 Successors and Assigns. This Lease and the other Lease Documents
shall be binding and inure to the benefit of (a) upon the Lessee and the
Lessee's legal representatives and permitted successors and assigns and (b) the
Lessor and any other Person who may now or hereafter hold the interest of the
Lessor under this Lease and their respective successors and assigns.
Notwithstanding the foregoing, the Lessee shall not assign any of its rights or
obligations hereunder or under any of the other Lease Documents without the
prior written consent of the Lessor, in each instance, which consent may be
withheld in the Lessor's sole and absolute discretion.
24.10 No Third Party Beneficiaries. This Lease and the other Lease
Documents are solely for the benefit of the Lessor, its successors, assigns and
participants (if any), the Indemnified Parties, the Lessee, the other members of
the Leasing Group and their respective permitted successors and assigns, and,
except as otherwise expressly set forth in any of the Lease Documents, nothing
contained therein shall confer upon any Person other than such parties any right
to insist upon or to enforce the performance or observance of any of the
obligations contained therein. Without limiting the foregoing, it is
acknowledged and agreed that for such time as any Fee Mortgage may remain in
effect, it is intended that the applicable Fee Mortgagee holding such Fee
Mortgage be a third party beneficiary of the terms and conditions set forth
under this Lease and, from and after the exercise by such Fee Mortgagee of its
rights an remedies under any Fee Mortgage (or any assignment of leases and rents
granted by the Lessor to such Fee Mortgagee) in accordance with the terms
thereto (so that such Fee Mortgage has succeeded to the interest of the Lessor
in the Leased Property and/or the Lease), such Fee Mortgagee shall be entitled
(subject to and in accordance with the terms of any applicable Fee Mortgage Loan
Documents) to enforce the terms and conditions of this Lease to the fullest
extent, and in all respects, as if such Fee Mortgagee were a party hereto.
Notwithstanding the foregoing, it is not intended that any of the terms and
conditions set forth herein expand or be deemed to expand the benefits, rights
and/or remedies of the Fee Mortgagee under the Fee Mortgage Loan Documents
-102-
<PAGE>
beyond the terms and conditions set forth therein other than providing to such
Fee Mortgagee the Lessee's agreement to terms and conditions set forth in such
Fee Mortgage Loan Documents to the extent that such terms and conditions relate
to the Lessee and/or the Leased Property. All conditions to the obligations of
the Lessor to advance or make available proceeds of insurance or Awards, or to
release any deposits held for Impositions or insurance premiums are imposed
solely and exclusively for the benefit of the Lessor, its successors and assigns
and any Fee Mortgagee. No other Person shall have standing to require
satisfaction of such conditions in accordance with their terms, and no other
Person shall, under any circumstances, be a beneficiary of such conditions, any
or all of which may be freely waived in whole or in part by the Lessor at any
time, if, in the Lessor's sole and absolute discretion, the Lessor deems it
advisable or desirable to do so.
24.11 Governing Law. This Lease shall be construed and the rights and
obligations of the Lessor and the Lessee shall be determined in accordance with
the laws of the State.
The Lessee hereby consents to personal jurisdiction in the courts of the
State and the United States District Court for the District in which the Leased
Property is situated as well as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts, for the purpose of any suit,
action or other proceeding arising out of or with respect to any of the Lease
Documents, the negotiation and/or consummation of the transactions evidenced by
the Lease Documents, the Lessor's relationship of any member of the Leasing
Group in connection with the transactions evidenced by the Lease Documents
and/or the performance of any obligation or the exercise of any remedy under any
of the Lease Documents and expressly waives any and all objections the Lessee
may have as to venue in any of such courts.
24.12 General. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, the Lessee or the
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
If any provision of this Lease or any of the other Lease Documents or any
application thereof shall be invalid or unenforceable, the remainder of this
Lease or the other applicable Lease Document, as the case may be, and any other
application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that if
any provision of any of this Lease is capable of two (2) constructions, one of
which would render the provision void and the other of which would render the
provision valid, then such provision shall be construed in accordance with the
construction which renders such provision valid.
If any late charges provided for in any provision of this Lease or any of
the other Lease Documents 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.
-103-
<PAGE>
The Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as to all of the foregoing as expressly
provided for herein.
24.13 Consents. In the event that the Lessor's consent is required by the
terms hereof or of any other Lease Document for any purpose whatsoever, it is
understood and agreed that (a) the Lessor's consent shall be subject to the
consent of any Fee Mortgagee to the extent that such consent from any Fee
Mortgage is required under the terms of the applicable financing documents
(which consent the Lessor shall seek to obtain) and (b) notwithstanding anything
to the contrary set forth herein, it shall not be deemed unreasonable for the
Lessor to withhold its consent in any given circumstance based upon the Lessor's
inability to obtain any required consent from any Fee Mortgagee.
24.14 MMI Loan. Without limiting the provisions of Section 24.13, in the
event of any conflict between the provisions hereof and the provisions of any of
the documents evidencing and/or securing the MMI Loan (collectively, the "MMI
Loan Documents"), the MMI Loan Documents shall control.
-104-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
attested by their respective officers thereunto duly authorized.
<TABLE>
<S> <C>
WITNESS: LESSEE:
- - -------- -------
CAREMATRIX OF PRINCETON (SNF),
INC., a Delaware corporation
By: /s/ James M. Clary III
- - -------------------------------- ------------------------
Name: Name:
Title: Executive Vice President
WITNESS: LESSOR:
- - -------- -------
CCC OF NEW JERSEY, INC., a
Delaware corporation
By: /s/ James M. Clary III
- - -------------------------------- ------------------------
Name: Name:
Title: Vice President
</TABLE>
-105-
<PAGE>
EXHIBIT A-1
-----------
LEGAL DESCRIPTION OF THE LAND
-----------------------------
The land with the improvements thereon located in Plainsboro, Middlesex
County, New Jersey, described as follows:
Lot 3.06, containing 6.710 acres more or less, shown on a Plan entitled
"Final Subdivision Plan Phase I and II of the Windrows at Princeton Forrestal,
Property of Trustees of Princeton University, Plainsboro Twp., Middlesex Co.,
NJ, April 5, 1995", last revised 9/18/95, prepared by Van Note-Harvey
Associates, P.C., Consulting Engineers, Planners and Land Surveyors, 777
Alexander Road, Princeton, NJ, 08540, said Plan being filed in the Middlesex
County Clerk's Office on April 2, 1996 as Map No. 4, File 1945 and which is more
particularly bounded and described on the legal description attached hereto as
Exhibit A-1.
The above-described premises are also shown as Lot 3.06, in Block 3, on
Sheet 2, of the Plainsboro Twp. Tax Map.
EXCEPTING AND EXCLUDING THEREFROM that portion of said premises on which
the Community Medical Center is located, shown as "PROPOSED GROUND LEASE,
Containing 0.464 Ac., 20,205 sq. ft." on a Plan entitled "Ground Lease Plan for
Mediplex of New Jersey, Inc.," dated March 15, 1996, prepared by Nassau
Surveying, 777 Alexander Road, Princeton, New Jersey 08540, and recorded in the
Middlesex County Clerk's Office as an Exhibit to that certain Notice of Ground
Lease dated as of March 29, 1996 by and between Mediplex of New Jersey, Inc.,
and CCC of New Jersey, Inc., which Notice of Ground Lease is recorded in said
Clerk's Office at Book 4315, Page 050.
<PAGE>
EXHIBIT A-2
-----------
DESCRIPTION OF THE CMC LAND
---------------------------
The land with the improvements thereon located in Plainsboro, Middlesex
County, New Jersey, described as follows:
That portion of the SNF/CMC Land on which the Community Medical Center is
located, shown as "PROPOSED GROUND LEASE, Containing 0.464 Ac., 20,205 sq. ft."
on a Plan entitled "Ground Lease Plan for Mediplex of New Jersey, Inc.," dated
March 15, 1996, prepared by Nassau Surveying, 777 Alexander Road, Princeton, New
Jersey 08540, and recorded in the Middlesex County Clerk's Office as an Exhibit
to that certain Notice of Ground Lease dated as of March 29, 1996 by and between
Mediplex of New Jersey, Inc., and CCC of New Jersey, Inc., which Notice of
Ground Lease is recorded in said Clerk's Office at Book 4315, Page 050.
<PAGE>
EXHIBIT A-3
-----------
DESCRIPTION OF THE SNF/CMC LAND
-------------------------------
The land with the improvements thereon located in Plainsboro, Middlesex
County, New Jersey, described as follows:
Lot 3.06, containing 6.710 acres more or less, shown on a Plan entitled
"Final Subdivision Plan Phase I and II of the Windrows at Princeton Forrestal,
Property of Trustees of Princeton University, Plainsboro Twp., Middlesex Co.,
NJ, April 5, 1995", last revised 9/18/95, prepared by Van Note-Harvey
Associates, P.C., Consulting Engineers, Planners and Land Surveyors, 777
Alexander Road, Princeton, NJ, 08540, said Plan being filed in the Middlesex
County Clerk's Office on April 2, 1996 as Map No. 4, File 1945 and which is more
particularly bounded and described on the legal description attached hereto as
Exhibit A-1.
The above-described premises are also shown as Lot 3.06, in Block 3, on
Sheet 2, of the Plainsboro Twp. Tax Map.
<PAGE>
EXHIBIT B
---------
PERMITTED ENCUMBRANCES
----------------------
<TABLE>
<S> <C>
1. Conservation and Maintenance Easement recorded in Deed Book 3459 Page
278 and as amended by Agreement dated 3/15/96 and recorded in the
Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page 876.
2. Utility Easement recorded in Deed Book 3622 Page 19, and as affected by
a certain Consent and Approval dated August 16, 1995 and recorded in the
Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page 576.
3. Agreements as recorded in Deed Book 3352 Page 810 and Deed Book 3470
Page 642, as amended by Deed Book 3598 Page 976 and Deed Book 3598 Page
982.
4. Terms and conditions as set forth in a certain Drainage Easement between
the Congregation of the Mission of St. Vincent De Paul in Princeton, New
Jersey (grantor), the Lessor and the Seller dated 1/13/96 and recorded
in the Middlesex County Clerk's Office on 4/2/96 in Deed book 4314 Page
814. (Affects only appurtenant rights in said Easement).
5. Terms and conditions as set forth in a certain Agreement between Gale &
Wentworth Princeton Partners, L.P., the Lessor and the Seller dated
2/15/96 and recorded in the Middlesex County Clerk's office on 4/2/96 in
Deed Book 4315 Page 1. (Affects only appurtenant rights in said
Agreement)
6. Ingress, Egress, Regress and Utility Easement Agreement between the
Seller (grantor), The Trustees of Princeton University and the Lessor
(grantees) dated 3/28/96, recorded in the Middlesex County Clerk's
Office on 4/2/96 in Deed Book 4314 Page 744.
7. Terms and conditions other than those set forth in paragraph 9(i) as set
forth in a certain Ingress, Egress and Regress Easement Agreement
between Forrestal Center Corporation, (grantor) and the Seller (grantee)
dated 3/15/96 and recorded in the Middlesex County Clerk's office on
4/2/96 in Deed Book 4314 Page 716. (Affects only appurtenant rights in
said Agreement)
8. Declaration of Easements, Covenants, Conditions and Restrictions by the
Trustees of Princeton University, dated 3/28/96 and recorded in the
Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page 601.
9. Terms and conditions as set forth in a certain Grant of Easement
(Sanitary Sewer) between the Trustees of Princeton University (grantor),
the Lessor and the Seller (grantees), dated 3/28/96 and recorded in the
Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page 831.
(Affects only appurtenant rights in said Easement)
<PAGE>
<S> <C>
10. The Service, Maintenance and Easement Agreement.
11. Restrictive Covenant in favor of the County of Middlesex, dated March
1996 and recorded in the Middlesex County Clerk's Office on 4/2/96 in
Deed Book 4314 Page 868.
12. Terms and conditions as set forth in a certain Grant of Easement
(Drainage) between The Trustees of Princeton University (grantor), the
Seller and the Lessor (grantees) dated March 1996 and recorded in the
Middlesex County Clerk's Office on 4/2/96 in Deed Book 4314 Page 792.
(Affects only appurtenant rights in said Easement)
13. Terms and conditions of Temporary Access Easement between Princeton
Forrestal Associates, The Lessor and The Seller dated 3/28/96 and
recorded in the Middlesex County Clerk's Office on 4/2/96 in Deed Book
4314 Page 854. (Affects only appurtenant rights in said Easement)
14. Inchoate or statutory liens for taxes not yet delinquent.
15. Resident Agreements now or hereafter in effect.
16. Any other matter of record as of the date hereof.
</TABLE>
<PAGE>
EXHIBIT C
---------
RATE LIMITATIONS
----------------
None
<PAGE>
EXHIBIT D
---------
FREE CARE REQUIREMENTS
----------------------
None
<PAGE>
EXHIBIT E
---------
CALCULATION OF RENT COVERAGE RATIO
----------------------------------
<PAGE>
SCHEDULE 3.1
------------
CALCULATION OF FAIR MARKET BASE RENT
------------------------------------
For the purposes of Section 3.1, "Fair Market Base Rent" shall be as
reasonably determined by the Lessor to be the annual rental charge on a
so-called "triple net" basis (including without limitation Base Rent and
Additional Charges) as of the applicable Rent Adjustment Date, for new leases
then being negotiated or executed for comparable skilled nursing facilities in
the area surrounding Princeton, New Jersey for terms commencing on or about the
date of commencement of each Extension Term. In determining Fair Market Base
Rent, the Lessor shall take into consideration the size of the premises,
location of the premises, lease term, condition and location of the applicable
skilled nursing facility, services and amenities provided by the Lessor, rental
concessions and other comparable factors. Bona fide written offers to lease
comparable space received by the Lessor from third parties (at arm's length) may
be used by the Lessor as an indication of the Fair Market Base Rent.
The Lessor shall notify the Lessee of its determination of Fair Market Base
Rent within ten (10) days after the Lessor's receipt of the Lessee's notice
exercising its option to extend and the Lessor shall furnish data in support of
such determination. If the Lessor does not receive written notice from the
Lessee of the Lessee's disagreement with the Lessor's determination of the Fair
Market Base Rent within ten (10) days after the Lessee's receipt of said
determination, the Lessee shall be deemed to have accepted said determination by
the Lessor. If the Lessee disagrees with the Lessor's determination of the Fair
Market Base Rent, the Lessee shall have the right, by written notice given to
the Lessor within thirty (30) days after the Lessee has received notice of the
Lessor's determination, to request that such Fair Market Base Rent be determined
by appraisal in accordance with the provisions of this EXHIBIT 3.1. In such
event, the Fair Market Base Rent shall be determined by impartial MAI
appraisers, one to be chosen by the Lessor, one to be chosen by the Lessee
(collectively, the "Initial Appraisers"), and, if necessary, a third to be
selected as provided below. The Lessor and the Lessee shall each notify the
other of its selected appraiser within ten (10) days following giving of the
Lessee's request for appraisal as provided above. Each appraiser shall be
independent, have at least five (5) years experience with commercial properties
in the area, and be familiar with skilled nursing facilities and leases and
rents in Princeton, New Jersey (and the surrounding area) and experienced in
making real estate appraisals. The cost of each Initial Appraiser shall be paid
by the party selecting such Initial Appraiser. The appraisers shall render their
written appraisal of the Fair Market Base Rent for the applicable Extension Term
within thirty (30) days following the appointment of both such appraisers. If
the appraisals determined by the Initial Appraisers are less than five percent
(5%) apart (i.e., the higher appraisal is less than 105% of the lower
appraisal), then the Fair Market Base Rent shall be determined by taking the
average of the two appraisals. In the event that the appraisals determined by
the Initial Appraisers are five percent (5%) or more apart, the Initial
Appraisers shall promptly select a third appraiser who meets the same criteria
as required of the Initial Appraisers ("Third Appraiser"). The Third Appraiser
shall submit to the Lessor and the Lessee, within twenty-one (21) days after its
appointment, its written appraisal of the Fair Market Base Rent with respect to
the Leased Property as of the commencement date of the applicable Extension
Term, which appraisal shall be binding upon the Lessor and the Lessee. The cost
of the Third Appraiser shall be borne equally by the Lessor and the Lessee.
<PAGE>
FACILITY LEASE AGREEMENT
CCC OF NEW JERSEY, INC.
as
Lessor
AND
CAREMATRIX OF PRINCETON (SNF), INC.
as
Lessee
Dated as of August 7, 1998
For Premises Located At
Plainsboro, New Jersey
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS .............................................. 1
1.1 Leased Property .............................................................................. 1
1.2 Term ......................................................................................... 3
1.3 Extended Terms ............................................................................... 3
ARTICLE 2 DEFINITIONS AND RULES OF CONSTRUCTION ........................................................ 3
2.1 Definitions .................................................................................. 3
2.2 Rules of Construction ........................................................................ 21
ARTICLE 3 RENT ......................................................................................... 22
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures .............................. 22
3.2 Intentionally Omitted ........................................................................ 24
3.3 Additional Rent .............................................................................. 24
3.4 Service, Maintenance and Easement Agreement .................................................. 25
3.5 Additional Charges ........................................................................... 25
3.6 Net Lease .................................................................................... 25
3.7 No Lessee Termination or Offset .............................................................. 25
3.7.1 No Termination ...................................................................... 25
3.7.2 Waiver .............................................................................. 26
3.7.3 Independent Covenants ............................................................... 26
3.8 Abatement of Rent Limited .................................................................... 26
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS ............................................ 27
4.1 Payment of Impositions ....................................................................... 27
4.1.1 Lessee To Pay ....................................................................... 27
4.1.2 Installment Elections ............................................................... 27
4.1.3 Returns and Reports ................................................................. 27
4.1.4 Refunds ............................................................................. 28
4.1.5 Protest ............................................................................. 28
4.2 Notice of Impositions ........................................................................ 28
4.3 Adjustment of Impositions .................................................................... 28
4.4 Utilities .................................................................................... 29
4.4.1 Utility Services .................................................................... 29
4.4.2 Utility Charges ..................................................................... 29
4.4.3 Common Work Costs ................................................................... 30
4.4.4 Method of Payment ................................................................... 30
4.5 Insurance Premiums ........................................................................... 30
4.6 Deposits ..................................................................................... 31
4.6.1 Lessor's Option ..................................................................... 31
4.6.2 Use of Deposits ..................................................................... 31
4.6.3 Deficits ............................................................................ 32
4.6.4 Other Properties .................................................................... 32
4.6.5 Transfers ........................................................................... 32
(i)
<PAGE>
<S> <C> <C>
4.6.6 Security ............................................................................ 32
4.6.7 Return .............................................................................. 32
4.6.8 Receipts............................................................................. 33
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY............................................................................. 33
5.1 Ownership of the Leased Property.............................................................. 33
5.2 Personal Property; Removal and Replacement of Personal Property............................... 33
5.2.1 Lessee To Equip Facility............................................................. 33
5.2.2 Sufficient Personal Property......................................................... 33
5.2.3 Removal and Replacement; Lessor's Option to Purchase................................. 33
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS................................................................ 34
6.1 Security for Lessee's Obligations............................................................. 34
6.1.1 Security............................................................................. 34
6.1.2 Purchase-Money Security Interests and Equipment Leases............................... 35
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS......................................................................... 35
7.1 Condition of the Leased Property.............................................................. 35
7.2 Use of the Leased Property; Compliance; Management............................................ 36
7.2.1 Obligation to Operate................................................................ 36
7.2.2 Permitted Uses....................................................................... 36
7.2.3 Compliance With Insurance Requirements............................................... 36
7.2.4 No Waste............................................................................. 37
7.2.5 No Impairment........................................................................ 37
7.2.6 No Liens............................................................................. 37
7.3 Compliance with Legal Requirements............................................................ 37
7.4 Management Agreements......................................................................... 37
ARTICLE 8 REPAIRS; RESTRICTIONS......................................................................... 39
8.1 Maintenance and Repair........................................................................ 39
8.1.1 Lessee's Responsibility................................................................ 39
8.1.2 No Lessor Obligation................................................................... 40
8.1.3 Lessee May Not Obligate Lessor......................................................... 40
8.1.4 Lessor's Common Work .................................................................. 40
8.1.5 Party Wall ............................................................................ 41
8.2 Encroachments; Title Restrictions............................................................. 41
ARTICLE 9 MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS................................................ 41
9.1 Lessor's Approval............................................................................. 41
9.2 General Provisions as to Capital Additions and Certain Material Structural
Work.......................................................................................... 42
9.2.1 No Liens............................................................................. 42
(ii)
<PAGE>
<S> <C> <C>
9.2.2 Lessee's Proposal Regarding Capital Additions and Material
Structural Work...................................................................... 42
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work...................................................................... 42
9.2.4 Lessor May Elect to Finance Capital Additions or Material
Structural Work...................................................................... 42
9.2.5 Legal Requirements; Quality of Work ................................................. 43
9.3 Capital Additions and Material Structural Work Financed by Lessor............................. 43
9.3.1 Lessee's Financing Request........................................................... 43
9.3.2 Lessor's General Requirements........................................................ 43
9.3.3 Payment of Costs..................................................................... 45
9.4 General Limitations........................................................................... 45
9.5 Non-Capital Additions......................................................................... 45
ARTICLE 10 WARRANTIES AND REPRESENTATIONS................................................................ 46
10.1 Representations and Warranties................................................................ 46
10.1.1 Existence; Power; Qualification...................................................... 46
10.1.2 Valid and Binding.................................................................... 46
10.1.3 Single Purpose....................................................................... 46
10.1.4 No Violation......................................................................... 46
10.1.5 Consents and Approvals............................................................... 47
10.1.6 No Liens or Insolvency Proceedings................................................... 47
10.1.7 No Burdensome Agreements............................................................. 47
10.1.8 Commercial Acts...................................................................... 47
10.1.9 Adequate Capital, Not Insolvent...................................................... 47
10.1.10 Not Delinquent.............................................................. 48
10.1.11 No Affiliate Debt........................................................... 48
10.1.12 Taxes Current............................................................... 48
10.1.13 Intentionally Omitted....................................................... 48
10.1.14 Pending Actions, Notices and Reports........................................ 48
10.1.15 Compliance with Legal Requirements.......................................... 49
10.1.16 Intentionally Omitted....................................................... 49
10.1.17 Intentionally Omitted....................................................... 49
10.1.18 Intentionally Omitted....................................................... 49
10.1.19 Rate Limitations............................................................ 49
10.1.20 Free Care................................................................... 49
10.1.21 No Proposed Changes......................................................... 49
10.1.22 ERISA....................................................................... 50
10.1.23 No Broker................................................................... 50
10.1.24 No Improper Payments........................................................ 50
10.1.25 Nothing Omitted............................................................. 50
10.1.26 No Margin Security.......................................................... 51
10.1.27 No Default.................................................................. 51
10.1.28 Principal Place of Business................................................. 51
(iii)
<PAGE>
<S> <C> <C>
10.1.29 Intentionally Omitted....................................................... 51
10.1.30 Intellectual Property....................................................... 51
10.1.31 Management Agreements....................................................... 51
10.2 Continuing Effect of Representations and Warranties........................................... 51
ARTICLE 11 FINANCIAL AND OTHER COVENANTS................................................................. 52
11.1 Status Certificates........................................................................... 52
11.2 Financial Statements; Reports; Notice and Information......................................... 52
11.2.1 Obligation To Furnish................................................................ 52
11.2.2 Responsible Officer.................................................................. 55
11.2.3 No Material Omission................................................................. 56
11.2.4 Confidentiality...................................................................... 56
11.3 Financial Covenants........................................................................... 56
11.3.1 Rent Coverage Ratio of Lessee........................................................ 56
11.3.2 No Indebtedness...................................................................... 56
11.3.3 No Guaranties........................................................................ 57
11.4 Affirmative Covenants......................................................................... 57
11.4.1 Maintenance of Existence............................................................. 57
11.4.2 Materials............................................................................ 57
11.4.3 Compliance With Legal Requirements And Applicable
Agreements.................................................................. 57
11.4.4 Books And Records.................................................................... 58
11.4.5 Participation in Third Party Payor Programs.......................................... 58
11.4.6 Conduct of its Business.............................................................. 58
11.4.7 Address.............................................................................. 58
11.4.8 Subordination of Affiliate Transactions.............................................. 59
11.4.9 Inspection........................................................................... 59
11.4.10 Additional Property......................................................... 59
11.5 Additional Negative Covenants................................................................. 59
11.5.1 Restrictions Relating to Lessee...................................................... 60
11.5.2 No Liens............................................................................. 60
11.5.3 Limits on Affiliate Transactions..................................................... 61
11.5.4 Best Efforts To Maximize............................................................. 61
11.5.5 No Default........................................................................... 61
11.5.6 Intentionally Omitted................................................................ 61
11.5.7 Intentionally Omitted................................................................ 61
11.5.8 ERISA................................................................................ 61
11.5.9 Forgiveness of Indebtedness.......................................................... 61
11.5.10 Value of Assets............................................................. 61
11.5.11 Changes in Fiscal Year and Accounting Procedures............................ 61
ARTICLE 12 INSURANCE AND INDEMNITY....................................................................... 62
12.1 General Insurance Requirements................................................................ 62
(iv)
<PAGE>
<S> <C> <C>
12.1.1 Types and Amounts of Insurance....................................................... 62
12.1.2 Insurance Company Requirements....................................................... 63
12.1.3 Policy Requirements.................................................................. 63
12.1.4 Notices; Certificates and Policies................................................... 64
12.1.5 Lessor's Right to Place Insurance.................................................... 64
12.1.6 Payment of Proceeds.................................................................. 65
12.1.7 Irrevocable Power of Attorney........................................................ 65
12.1.8 Blanket Policies..................................................................... 65
12.1.9 No Separate Insurance................................................................ 65
12.1.10 Assignment of Unearned Premiums............................................. 66
12.2 Indemnity..................................................................................... 66
12.2.1 Indemnification...................................................................... 66
12.2.2 Indemnified Parties.................................................................. 67
12.2.3 Limitation on Lessor Liability....................................................... 67
12.2.4 Risk of Loss......................................................................... 67
ARTICLE 13 FIRE AND CASUALTY............................................................................. 68
13.1 Restoration Following Fire or Other Casualty.................................................. 68
13.1.1 Following Fire or Casualty........................................................... 68
13.1.2 Procedures........................................................................... 68
13.1.3 Disbursement of Insurance Proceeds................................................... 69
13.2 Disposition of Insurance Proceeds............................................................. 72
13.2.1 Proceeds To Be Released to Pay For Work.............................................. 72
13.2.2 Proceeds Not To Be Released.......................................................... 73
13.2.3 Lessee Responsible for Short-Fall.................................................... 74
13.3 Tangible Personal Property.................................................................... 74
13.4 Restoration of Certain Improvements and the Tangible Personal Property........................ 74
13.5 No Abatement of Rent.......................................................................... 74
13.6 Termination of Certain Rights................................................................. 74
13.7 Waiver........................................................................................ 74
13.8 Application of Rent Loss and/or Business Interruption Insurance............................... 75
13.9 Obligation To Account......................................................................... 75
ARTICLE 14 CONDEMNATION.................................................................................. 75
14.1 Parties' Rights and Obligations............................................................... 75
14.2 Total Taking.................................................................................. 76
14.3 Partial or Temporary Taking................................................................... 76
14.4 Restoration................................................................................... 76
14.5 Award Distribution............................................................................ 77
14.6 Control of Proceedings........................................................................ 77
ARTICLE 15 PERMITTED CONTESTS............................................................................ 77
15.1 Lessee's Right to Contest..................................................................... 77
(v)
<PAGE>
<S> <C> <C>
15.2 Lessor's Cooperation.......................................................................... 78
15.3 Lessee's Indemnity............................................................................ 78
ARTICLE 16 DEFAULT....................................................................................... 78
16.1 Events of Default............................................................................. 78
16.2 Remedies...................................................................................... 82
16.3 Damages....................................................................................... 83
16.4 Lessee Waivers................................................................................ 84
16.5 Application of Funds.......................................................................... 84
16.6 Intentionally Omitted......................................................................... 84
16.7 Lessor's Right to Cure........................................................................ 84
16.8 No Waiver By Lessor........................................................................... 84
16.9 Right of Forbearance.......................................................................... 85
16.10 Cumulative Remedies........................................................................... 85
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER........................................... 86
17.1 Surrender..................................................................................... 86
17.2 Transfer of Permits and Contracts............................................................. 86
17.3 No Acceptance of Surrender.................................................................... 87
17.4 Holding Over.................................................................................. 87
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY............................................................... 87
18.1 Purchase of the Leased Property............................................................... 87
18.2 Appraisal..................................................................................... 88
18.2.1 Designation of Appraisers............................................................ 88
18.2.2 Appraisal Process.................................................................... 88
18.2.3 Specific Enforcement and Costs....................................................... 89
18.3 Lessee's Option to Purchase. ................................................................ 89
18.3.1 Conditions to Option................................................................. 89
18.3.2 Exercise of Option................................................................... 89
18.3.3 Conveyance........................................................................... 90
18.3.4 Calculation of Purchase Price........................................................ 90
18.3.5 Payment of Purchase Price............................................................ 90
18.3.6 Place and Time of Closing............................................................ 90
18.3.7 Condition of Leased Property......................................................... 90
18.3.8 Quality of Title..................................................................... 91
18.3.9 Lessor's Inability to Perform........................................................ 91
18.3.10 Merger by Deed.............................................................. 91
18.3.11 Use of Purchase Price to Clear Title........................................ 92
18.3.12 Lessee's Default............................................................ 92
ARTICLE 19 SUBLETTING AND ASSIGNMENT..................................................................... 92
19.1 Subletting and Assignment..................................................................... 92
(vi)
<PAGE>
<S> <C> <C>
19.2 Intentionally Omitted......................................................................... 92
19.3 Attornment.................................................................................... 92
19.4 Permitted Transfers........................................................................... 93
ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR................................................... 93
20.1 No Merger of Title............................................................................ 93
20.2 Transfers By Lessor........................................................................... 93
20.3 Lessor May Grant Liens........................................................................ 94
20.4 Subordination and Non-Disturbance............................................................. 94
ARTICLE 21 LESSOR OBLIGATIONS............................................................................ 95
21.1 Quiet Enjoyment............................................................................... 95
21.2 Memorandum of Lease........................................................................... 95
21.3 Default by Lessor............................................................................. 95
ARTICLE 22 NOTICES....................................................................................... 96
ARTICLE 23 ENVIRONMENTAL MATTERS......................................................................... 97
23.1 Maintenance of Leased Property................................................................ 97
23.2 Notice of Environmental Conditions............................................................ 97
23.3 The Lessee's Agreement To Take Remedial Actions............................................... 97
23.4 The Lessor's Rights To Inspect The Leased Property and Take Remedial
Actions....................................................................................... 98
23.5 Environmental Indemnification................................................................. 99
23.6 Survival......................................................................................100
ARTICLE 24 MISCELLANEOUS PROVISIONS......................................................................100
24.1 Broker's Fee Indemnification..................................................................100
24.2 No Joint Venture or Partnership...............................................................100
24.3 Amendments, Waivers and Modifications.........................................................101
24.4 Captions and Headings.........................................................................101
24.5 Time is of the Essence........................................................................101
24.6 Counterparts..................................................................................101
24.7 Entire Agreement..............................................................................101
24.8 WAIVER OF JURY TRIAL..........................................................................102
24.9 Successors and Assigns........................................................................102
24.10 No Third Party Beneficiaries..................................................................102
24.11 Governing Law.................................................................................103
24.12 General.......................................................................................103
24.13 Consents......................................................................................104
24.14 MMI Loan......................................................................................104
</TABLE>
(vii)
<PAGE>
<TABLE>
<S> <C>
EXHIBIT A-1 LEGAL DESCRIPTION OF THE LAND
EXHIBIT A-2 DESCRIPTION OF THE CMC LAND
EXHIBIT A-3 DESCRIPTION OF THE SNF/CMC LAND
EXHIBIT B PERMITTED ENCUMBRANCES
EXHIBIT C RATE LIMITATIONS
EXHIBIT D FREE CARE REQUIREMENTS
EXHIBIT E CALCULATION OF RENT COVERAGE RATIO
</TABLE>
(viii)
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
dated as of
September 25, 1998
among
CAREMATRIX CORPORATION
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions............................................................................................1
Section 1.01 Defined Terms..............................................................................1
Section 1.02 Classification of Loans and Borrowings....................................................16
Section 1.03 Terms Generally...........................................................................17
Section 1.04 Accounting Terms; GAAP....................................................................17
ARTICLE II The Credits..........................................................................................17
Section 2.01 Commitments...............................................................................17
Section 2.02 Loans and Borrowings......................................................................18
Section 2.03 Requests for Revolving Borrowings.........................................................18
Section 2.04 Swingline Loans...........................................................................19
Section 2.05 Letters of Credit.........................................................................20
Section 2.06 Funding of Borrowings.....................................................................25
Section 2.07 Interest Elections........................................................................25
Section 2.08 Termination and Reduction of Commitments..................................................27
Section 2.09 Repayment of Loans; Evidence of Debt......................................................27
Section 2.10 Prepayment of Loans.......................................................................28
Section 2.11 Fees......................................................................................29
Section 2.12 Interest..................................................................................30
Section 2.13 Alternate Rate of Interest................................................................30
Section 2.14 Increased Costs...........................................................................31
Section 2.15 Break Funding Payments....................................................................32
Section 2.16 Taxes.....................................................................................33
Section 2.17 Payments Generally; Pro Rata Treatment; Sharing of Set-offs...............................34
Section 2.18 Mitigation Obligations; Replacement of Lenders............................................35
ARTICLE III Representations and Warranties......................................................................36
Section 3.01 Organization; Powers......................................................................36
Section 3.02 Authorization; Enforceability.............................................................37
Section 3.03 Governmental Approvals; No Conflicts......................................................37
Section 3.04 Financial Condition; No Material Adverse Change...........................................37
Section 3.05 Properties................................................................................37
Section 3.06 Litigation and Environmental Matters......................................................38
Section 3.07 Compliance with Laws and Agreements; Operating Licenses...................................38
Section 3.08 Investment and Holding Company Status.....................................................38
Section 3.09 Taxes.....................................................................................39
Section 3.10 ERISA.....................................................................................39
Section 3.11 Disclosure................................................................................39
Section 3.12 Year 2000.................................................................................39
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV Conditions...........................................................................................40
Section 4.01 Effective Date............................................................................40
Section 4.02 Each Credit Event.........................................................................41
ARTICLE V Affirmative Covenants.................................................................................42
Section 5.01 Financial Statements and Other Information................................................42
Section 5.02 Notices of Material Events................................................................43
Section 5.03 Existence; Conduct of Business............................................................44
Section 5.04 Payment of Obligations....................................................................44
Section 5.05 Maintenance of Properties; Insurance......................................................44
Section 5.06 Books and Records; Inspection Rights......................................................45
Section 5.07 Compliance with Laws......................................................................45
Section 5.08 Use of Proceeds and Letters of Credit.....................................................45
ARTICLE VI Negative Covenants...................................................................................45
Section 6.01 Indebtedness..............................................................................45
Section 6.02 Liens.....................................................................................46
Section 6.03 Fundamental Changes.......................................................................47
Section 6.04 Investments, Loans, Advances, Guarantees and Acquisitions.................................48
Section 6.05 Hedging Agreements........................................................................48
Section 6.06 Restricted Payments.......................................................................48
Section 6.07 Transactions with Affiliates..............................................................49
Section 6.08 Restrictive Agreements....................................................................49
Section 6.09 Fixed Coverage Ratio......................................................................49
Section 6.10 Leverage Ratio............................................................................49
Section 6.11 Net Worth.................................................................................50
Section 6.12 EBITDA....................................................................................50
ARTICLE VII Events of Default...................................................................................50
ARTICLE VIII The Administrative Agent...........................................................................53
ARTICLE IX Miscellaneous........................................................................................55
Section 9.01 Notices...................................................................................55
Section 9.02 Waivers; Amendments.......................................................................56
Section 9.03 Expenses; Indemnity; Damage Waiver........................................................56
Section 9.04 Successors and Assigns....................................................................58
Section 9.05 Survival..................................................................................60
Section 9.06 Counterparts; Integration; Effectiveness..................................................61
Section 9.07 Severability..............................................................................61
Section 9.08 Right of Setoff...........................................................................61
Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process................................61
Section 9.10 WAIVER OF JURY TRIAL......................................................................62
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.11 Headings..................................................................................62
Section 9.12 Confidentiality...........................................................................62
Section 9.13 Interest Rate Limitation..................................................................63
</TABLE>
SCHEDULES:
- - ----------
Schedule 2.01 -- Commitments
Schedule 3.06 -- Disclosed Matters
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.08 -- Existing Restrictions
EXHIBITS:
- - ---------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Interest Election Request
Exhibit C -- Form of Promissory Note
Exhibit D -- Form of Opinion of Borrower's Counsel
Exhibit E -- Form of Compliance Certificate
(iii)
<PAGE>
CREDIT AGREEMENT dated as of September 25, 1998, among CAREMATRIX
CORPORATION, a Delaware corporation (the "Borrower"), the LENDERS party hereto,
and THE CHASE MANHATTAN BANK, as Administrative Agent.
WHEREAS, the Borrower desires to arrange for a $15,000,000 credit
facility, the proceeds of which will be used to fund ongoing working capital,
acquisitions, letters of credit and general corporate purposes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE I
Definitions
-----------
Section 1.01 Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire in
a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
Prime Rate in effect on such day plus the Applicable Rate. Any change in the
Alternate Base Rate due to a change in the Prime Rate, shall be effective from
and including the effective date of such change in the Prime Rate.
1
<PAGE>
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Applicable Rate" means, for any day, with respect to any Eurodollar
Loan or ABR Loan, as the case may be, the applicable percentage per annum as set
forth below opposite the Consolidated Leverage Ratio:
<TABLE>
<CAPTION>
Consolidated Applicable
Leverage Eurodollar Applicable
Ratio Rate ABR Rate
----- ---- --------
<S> <C> <C> <C>
Greater than or
equal to: 6.00:1.00 2.50% 1.50%
Greater than or
equal to: 5.50:1.00 2.25% 1.25%
but less than: 6.00:1.00
Greater than or
equal to: 5.00:1.00 2.00% 1.00%
but less than: 5.50:1.00
Greater than or
equal to: 4.50:1.00 1.75% 0.75%
but less than: 5.00:1.00
Greater than or
equal to: 4.00:1.00 1.50% 0.50%
but less than: 4.50:1.00
Less than: 4.00:1.00 1.25% 0.25%
</TABLE>
Upon delivery of the Compliance Certificate by the Borrower to the
Administrative Agent pursuant to Section 5.01(c), the Applicable ABR Rate and
the Applicable Eurodollar Rate shall automatically be adjusted in accordance
with such Compliance Certificate, such adjustment to become effective on the
next succeeding Business Day following the receipt by the Administrative Agent
of such Compliance Certificate; provided, in the event a Compliance Certificate
is not delivered on or before the date such Compliance Certificate is required
to be delivered pursuant to Section 5.01(c), then until delivery of such
Compliance Certificate, the Applicable Eurodollar Rate shall be 2.50% per annum
and the Applicable ABR Rate shall be 1.50% per annum; provided further that if a
Compliance Certificate erroneously indicates an applicable rate more favorable
to the Borrower than would be afforded by the actual
2
<PAGE>
calculation of the Consolidated Leverage Ratio, the Borrower shall promptly pay
such additional interest as shall correct for such error.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"Assignment of Leases and Rents" means, collectively, the Assignments
of Leases and Rents, each dated as of the date hereof, executed by the
Mortgagors in favor of the Administrative Agent.
"Availability Period" means the period from and including the Effective
Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrowing" means (a) Revolving Loans of the same Type, made, converted
or continued on the same date and, in the case of Eurodollar Loans, as to which
a single Interest Period is in effect, or (b) a Swingline Loan.
"Borrowing Request" means a request by the Borrower for a Revolving
Borrowing in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Change in Control" means the occurrence of one or more of the
following: (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group other than the Ownership Group
of shares representing more than 20% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower; (b) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group of a number of shares of the Borrower's outstanding common
stock which is greater
3
<PAGE>
than the number of shares of such common stock owned, directly or indirectly,
beneficially or of record, by the Ownership Group; (c) occupation of a majority
of the seats (other than vacant seats) on the board of directors of the Borrower
by Persons who were neither (i) nominated by the board of directors of the
Borrower nor (ii) appointed by directors so nominated; or (d) the acquisition of
direct or indirect Control of the Borrower by any Person or group other than the
Ownership Group. As used in this definition of "Change of Control", terms
defined in the Securities Exchange Act of 1934 or the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof, shall have
the respective meanings ascribed to them therein.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.14(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans
or Swingline Loans.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral Assignment of Permits, Licenses, Approvals and Contracts"
means, collectively, the Collateral Assignments of Permits, Licenses, Approvals
and Contracts, each dated as of the date hereof, executed by the Mortgagors in
favor of the Administrative Agent.
"Commitment" means, with respect to each Lender, the commitment of such
Lender to make Revolving Loans and to acquire participations in Letters of
Credit and Swingline Loans hereunder, expressed as an amount representing the
maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder,
as such commitment may be (a) reduced from time to time pursuant to Section 2.08
and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial amount of each Lender's
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Commitment, as applicable.
The initial aggregate amount of the Lenders' Commitments is $15,000,000.
4
<PAGE>
"Commitment Fee Rate" means, for any day, the applicable percentage per
annum as set forth below opposite the Consolidated Leverage Ratio:
<TABLE>
<CAPTION>
Consolidated Commitment
Leverage Ratio Fee Rate
-------------- --------
<S> <C> <C>
Greater than or
equal to: 6.00:1.00 0.625%
Greater than or
equal to: 5.00:1.00 0.500%
but less than: 6.00:1.00
Greater than or
equal to: 4.00:1.00 0.375%
but less than: 5.00:1.00
Less than: 4.00:1.00 0.250%
</TABLE>
Upon delivery of the Compliance Certificate by the Borrower to the
Administrative Agent pursuant to Section 5.01(c), the Commitment Fee Rate shall
automatically be adjusted in accordance with such Compliance Certificate, such
adjustment to become effective on the next succeeding Business Day following the
receipt by the Administrative Agent of such Compliance Certificate; provided, in
the event a Compliance Certificate is not delivered on or before the date such
Compliance Certificate is required to be delivered pursuant to Section 5.01(c),
then until delivery of such Compliance Certificate, the applicable Commitment
Fee Rate shall be 0.625% per annum; provided further that if a Compliance
Certificate erroneously indicates an applicable rate more favorable to the
Borrower than would be afforded by the actual calculation of the Consolidated
Leverage Ratio, the Borrower shall promptly pay such additional interest as
shall correct for such error.
"Compliance Certificate" means a certificate delivered to the
Administrative Agent and the Lenders by the Borrower pursuant to Section
5.01(c).
"Consolidated EBITDA" means, for each twelve month period ending on the
last day of the accounting period covered by the consolidated financial
statements of the Borrower and its Subsidiaries, and delivered pursuant to
Section 5.01, the sum of (a) Consolidated Net Income (but excluding any
extraordinary losses or nonrecurring expenses, in each case only to the extent
that such amount was otherwise included in the determination of applicable
Consolidated Net Income), plus (b) interest expense, plus (c) taxes deducted in
calculating Consolidated Net Income, plus (d) depreciation, plus (e)
amortization, in each case of the Borrower and its Subsidiaries on a
consolidated basis determined in accordance with GAAP.
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<PAGE>
"Consolidated EBITDAR" means, for each twelve month period ending on
the last day of the accounting period covered by the consolidated financial
statements of the Borrower and its Subsidiaries, and delivered pursuant to
Section 5.01, the sum of (a) Consolidated EBITDA, plus (b) Rent, in each case of
the Borrower and its Subsidiaries on a consolidated basis determined in
accordance with GAAP.
"Consolidated Fixed Coverage Ratio" means, for each twelve month period
ending on the last day of the accounting period covered by the consolidated
financial statements of the Borrower and its Subsidiaries, and delivered
pursuant to Section 5.01, the ratio of (a) Consolidated EBITDAR for such period,
to (b) (i) Rent, plus (ii) the sum of interest and principal payments due in
respect of Indebtedness for such period (excluding the $7,500,000 balloon
payment due on October 31, 1998), in each case of the Borrower and its
Subsidiaries on a consolidated basis determined in accordance with GAAP.
"Consolidated Leverage Ratio" means, for each twelve month period
ending on the last day of the accounting period covered by the consolidated
financial statements of the Borrower and its Subsidiaries, and delivered
pursuant to Section 5.01, the ratio of (a) without duplication (i) Indebtedness,
plus (ii) LC Exposure, plus (iii) Capital Lease Obligations, plus (iv) the
product of eight (8) times Rent, to (b) Consolidated EBITDAR, in each case of
the Borrower and its Subsidiaries on a consolidated basis determined in
accordance with GAAP.
"Consolidated Net Income" means the net income (or loss), after taxes,
of the Borrower and its Subsidiaries on a consolidated basis determined in
accordance with GAAP.
"Consolidated Net Worth" means, as of the date of any determination
thereof, the sum of the capital stock (including paid-in-capital) accounts (net
of treasury shares) plus (or minus in the case of a deficit) the retained
earnings of the Borrower and its Subsidiaries determined on a consolidated basis
in accordance with GAAP.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"dollars" or "$" refers to lawful money of the United States of
America.
"Effective Date" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
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"Environmental Indemnity Agreement" means the Environmental Indemnity
Agreement made as of the date hereof, executed by and among the Borrower, the
Mortgagors and the Administrative Agent.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived), (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan, (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan,
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan, (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan, or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
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"Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
VII.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.16(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.16(a).
"Federal Funds Effective Rate" means for any day, a fluctuating
interest rate per annum equal to the weighted average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York or,
if such rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day on such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by the Administrative
Agent.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means generally accepted accounting principles in the United
States of America.
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<PAGE>
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"Guarantee Agreement" has the meaning assigned to such term in Section
4.01(e).
"Guarantors" means the Subsidiaries.
"Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien
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<PAGE>
on property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances;
provided that the term "Indebtedness" shall not include Guarantees by such
Person of future rent expense payable by others to any landlord of real
property. The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Interest Election Request" means a request by the Borrower to convert
or continue a Revolving Borrowing in accordance with Section 2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan (other
than a Swingline Loan), the last day of each March, June, September and
December, (b) with respect to any Eurodollar Loan, the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part and, in the case
of a Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of such Interest Period,
and (c) with respect to any Swingline Loan, the day that such Loan is required
to be repaid.
"Interest Period" means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect, provided that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
the case of a Revolving Borrowing, thereafter shall be the effective date of the
most recent conversion or continuation of such Borrowing.
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<PAGE>
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.05(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time, plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time. The LC Exposure of any Lender at any time shall be
its Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance. Unless the context otherwise requires, the term
"Lenders" includes the Swingline Lender.
"Letter of Credit" means any letter of credit issued pursuant to this
Agreement.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate (rounded
upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
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"Loans" means the loans made by the Lenders to the Borrower pursuant to
this Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any of its obligations under this Agreement or (c) the
rights of or benefits available to the Lenders under this Agreement.
"Material Indebtedness" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrower and its Subsidiaries in an aggregate
principal amount exceeding $1,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrower or any
Subsidiary in respect of any Hedging Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Subsidiary would be required to pay if such Hedging Agreement were
terminated at such time.
"Maturity Date" means September 25, 2001.
"Moody's" means Moody's Investors Service, Inc.
"Mortgaged Properties" means all real properties and interests therein
owned by the Subsidiaries with respect to which the Administrative Agent, for
the benefit of the Lenders, has a first priority mortgage.
"Mortgagors" means (a) Lakes Region Villages, L.L.C., (b) CareMatrix of
Dominion Village at Chesapeake, Inc., (c) CareMatrix of Dominion Village at
Poquoson, Inc. and (d) CareMatrix of Dominion Village at Williamsburg, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Open-End Mortgage, Assignment and Security Agreement" means,
collectively, the Open-End Mortgage, Assignment and Security Agreements, each
made as of the date hereof, executed by and between the Administrative Agent and
the Mortgagors.
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Ownership Group" means the group consisting of: Abraham D. Gosman,
Andrew D. Gosman, Michael M. Gosman, Chancellor Partners Limited Partnership I,
Chancellor Partners Limited Partnership II, CLP, Inc. and Chancellor Partners
Business Trust.
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<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for Taxes that are not yet due or are
being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with
Section 5.04;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Borrower or any
Subsidiary; and
(f) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (l) of Article VII;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America),
in each case maturing within one year from the date of acquisition
thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or from
Moody's;
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<PAGE>
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, any domestic office of
any commercial bank organized under the laws of the United States of
America or any State thereof which has a combined capital and surplus
and undivided profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria
described in clause (c) above.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective (the Prime Rate not being intended to be the lowest rate of interest
charged by The Chase Manhattan Bank to its borrowers).
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"Real Estate Security Documents" means, collectively, the Open-End
Mortgage, Assignment and Security Agreement, the Assignment of Leases and Rents,
the Collateral Assignment of Permits, Licenses, Approvals and Contracts, the
Environmental Indemnity Agreement and such other documents related to the
Mortgaged Properties, each as from time to time amended, modified or
supplemented.
"Register" has the meaning assigned to such term in Section 9.04.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Rent" means, for each twelve month period ending on the last day of
the accounting period covered by the consolidated financial statements of the
Borrower and its Subsidiaries, and delivered pursuant to Section 5.01, the
dollar amount of rent expense payable to any
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<PAGE>
landlord of real property recognized in the aforementioned consolidated
financial statements, but shall not include amounts required to be paid in
respect of maintenance, repairs, income taxes, insurance, assessments or other
similar charges.
"Required Lenders" means, at any time, Lenders having Revolving Credit
Exposures and unused Commitments representing 66 2/3% of the sum of the total
Revolving Credit Exposures and unused Commitments at such time.
"Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any shares of any class
of capital stock of the Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares of capital stock of the Borrower
or any option, warrant or other right to acquire any such shares of capital
stock of the Borrower.
"Revolving Credit Exposure" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Revolving
Loans and its LC Exposure and Swingline Exposure at such time.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw Hill Companies, Inc. or any successor thereof.
"Security Documents" has the meaning assigned to such term in Section
4.01(f).
"Senior Care Subsidiaries" means (a) Westbury Home Operating Company,
LLC, (b) Island Manor Operating Company, LLC, (c) The Islandia Community for
Seniors Operating Company, LLC, (d) Shirlbart Real Estate Operating Company,
LLC, (e) South Shore Associates, LLC, (f) SeniorLand Company, LLC, (g)
SeniorCare Group, Ltd. and (h) Alandco Development Corporation.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject, with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable
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regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower as of the date of
this Agreement, or formed or acquired thereafter.
"Swingline Exposure" means, at any time, the aggregate principal amount
of all Swingline Loans outstanding at such time. The Swingline Exposure of any
Lender at any time shall be its Applicable Percentage of the total Swingline
Exposure at such time.
"Swingline Lender" means The Chase Manhattan Bank, in its capacity as
lender of Swingline Loans hereunder.
"Swingline Loan" means a Loan made pursuant to Section 2.04.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Transactions" means the execution, delivery and performance by the
Borrower of this Agreement, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02 Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
(e.g., a "Eurodollar Revolving
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Loan"). Borrowings also may be classified and referred to by Class (e.g., a
"Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class
and Type (e.g., a "Eurodollar Revolving Borrowing").
Section 1.03 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
Section 1.04 Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
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Section 2.01 Commitments. Subject to the terms and conditions set forth
herein, each Lender agrees to make Revolving Loans to the Borrower from time to
time during the Availability Period in an aggregate principal amount that will
not result in (a) such Lender's Revolving Credit Exposure exceeding such
Lender's Commitment at such time, or (b) the total Revolving Credit Exposures
exceeding the total Commitments at such time. Within the
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foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Revolving Loans.
Section 2.02 Loans and Borrowings.
(a) Each Revolving Loan shall be made as part of a Borrowing
consisting of Revolving Loans made by the Lenders ratably in accordance with
their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender's failure to make Loans as
required.
(b) Subject to Section 2.13, each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith, and each Swingline Loan shall be an ABR Loan. Each
Lender at its option may make any Eurodollar Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any
Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate amount
that is an integral multiple of $250,000 and not less than $250,000. At the time
that each ABR Revolving Borrowing is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of $250,000 and not less than
$250,000; provided that an ABR Revolving Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.05(e). Each Swingline Loan shall be in an amount that is an integral
multiple of $100,000. Borrowings of more than one Type and Class may be
outstanding at the same time; provided that there shall not at any time be more
than a total of seven (7) Eurodollar Revolving Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
Section 2.03 Requests for Revolving Borrowings. To request a Revolving
Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of the proposed
Borrowing, or (b) in the case of an ABR Borrowing, not later than 11:00 a.m.,
New York City time, one Business Day before the date of the proposed Borrowing;
provided that any such notice of an ABR Revolving Borrowing to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be
given not later than 10:00 a.m., New York City time, on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand
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delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Borrower. Each
such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:
(a) the aggregate amount of the requested Borrowing;
(b) the date of such Borrowing, which shall be a Business Day;
(c) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(d) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period"; and
(e) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.06.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month's
duration. Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
Section 2.04 Swingline Loans.
(a) Subject to the terms and conditions set forth herein, the
Swingline Lender agrees to make Swingline Loans to the Borrower from time to
time during the Availability Period, in an aggregate principal amount at any
time outstanding that will not result in (i) the aggregate principal amount of
outstanding Swingline Loans exceeding $1,000,000 or (ii) the sum of the total
Revolving Credit Exposures at such time exceeding the total Commitments at such
time; provided that the Swingline Lender shall not be required to make a
Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Swingline Loans. Notwithstanding anything to the
contrary in this Section 2.04, the Borrower cannot request a Swingline Loan and
the Swingline Lender shall not provide any Swingline Loans until otherwise
agreed to by the Administrative Agent.
(b) To request a Swingline Loan, the Borrower, shall notify
the Administrative Agent of such request by telephone (confirmed by telecopy),
not later than 12:00 noon, New York City time, on the day of a proposed
Swingline Loan. Each such notice
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shall be irrevocable and shall specify the requested date (which shall be a
Business Day) and the amount of the requested Swingline Loan. The Administrative
Agent will promptly advise the Swingline Lender of any such notice received from
the Borrower. The Swingline Lender shall make each Swingline Loan available to
the Borrower by means of a credit to the general deposit account of the Borrower
with the Swingline Lender (or, in the case of a Swingline Loan made to finance
the reimbursement of an LC Disbursement as provided in Section 2.05(e), by
remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the
requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Lenders to acquire participations on such Business Day
in all or a portion of the Swingline Loans outstanding. Such notice shall
specify the aggregate amount of Swingline Loans in which Lenders will
participate. Promptly upon receipt of such notice, the Administrative Agent will
give notice thereof to each Lender, specifying in such notice such Lender's
Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as
provided in Section 2.06 with respect to Loans made by such Lender (and Section
2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
and the Administrative Agent shall promptly pay to the Swingline Lender the
amounts so received by it from the Lenders. The Administrative Agent shall
notify the Borrower of any participations in any Swingline Loan acquired
pursuant to this paragraph, and thereafter payments in respect of such Swingline
Loan shall be made to the Administrative Agent and not to the Swingline Lender.
Any amounts received by the Swingline Lender from the Borrower (or other party
on behalf of the Borrower) in respect of a Swingline Loan after receipt by the
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.
Section 2.05 Letters of Credit.
(a) General. Subject to the terms and conditions set forth
herein, the Borrower may request the issuance of Letters of Credit for its own
account, in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from
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time to time during the Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance
of a Letter of Credit, or identifying the Letter of Credit to be amended,
renewed or extended, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such Letter of Credit, the name and address of the beneficiary thereof
and such other information as shall be necessary to prepare, amend, renew or
extend such Letter of Credit. If requested by the Issuing Bank, the Borrower
also shall submit a letter of credit application on the Issuing Bank's standard
form in connection with any request for a Letter of Credit. A Letter of Credit
shall be issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Letter of Credit the Borrower shall be
deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension (i) the LC Exposure shall not exceed $5,000,000
and (ii) the sum of the total Revolving Credit Exposures at such time shall not
exceed the total Commitments at such time.
(c) Expiration Date. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or
an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Lender, and each Lender hereby acquires from the
Issuing Bank, a participation in such Letter of Credit equal to such Lender's
Applicable Percentage of the aggregate amount available to be drawn under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to the Administrative
Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage
of each LC Disbursement made by the Issuing Bank and not reimbursed by the
Borrower on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any reason.
Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or
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extension of any Letter of Credit or the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower, shall have received notice of
such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or,
if such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that,
if such LC Disbursement is not less than $1,000,000, the Borrower may, subject
to the conditions to borrowing set forth herein, request in accordance with
Section 2.03 or 2.04 that such payment be financed with an ABR Revolving
Borrowing or Swingline Loan in an equivalent amount and, to the extent so
financed, the Borrower's obligation to make such payment shall be discharged and
replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the
Borrower fails to make such payment when due, the Administrative Agent shall
notify each Lender of the applicable LC Disbursement, the payment then due from
the Borrower in respect thereof and such Lender's Applicable Percentage thereof.
Promptly following receipt of such notice, each Lender shall pay to the
Administrative Agent its Applicable Percentage of the payment then due from the
Borrower, in the same manner as provided in Section 2.06 with respect to Loans
made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders
and the Issuing Bank as their interests may appear. Any payment made by a Lender
pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement
(other than the funding of ABR Revolving Loans or a Swingline Loan as
contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligations to
reimburse LC Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a
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draft or other document that does not comply with the terms of such Letter of
Credit, or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section, constitute a legal or equitable discharge of, or provide a right of
setoff against, the Borrower's obligations hereunder. Neither the Administrative
Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall
have any liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure to make
any payment thereunder (irrespective of any of the circumstances referred to in
the preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuing Bank; provided
that the foregoing shall not be construed to excuse the Issuing Bank from
liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by the Issuing Bank's failure to exercise care when determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof. The parties hereto expressly agree that, in the absence
of gross negligence or wilful misconduct on the part of the Issuing Bank (as
finally determined by a court of competent jurisdiction), the Issuing Bank shall
be deemed to have exercised care in each such determination. In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.12(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest
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accrued on and after the date of payment by any Lender pursuant to paragraph (e)
of this Section to reimburse the Issuing Bank shall be for the account of such
Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the Administrative
Agent, the replaced Issuing Bank and the successor Issuing Bank. The
Administrative Agent shall notify the Lenders of any such replacement of the
Issuing Bank. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.11(b). From and after the effective date of
any such replacement, (i) the successor Issuing Bank shall have all the rights
and obligations of the Issuing Bank under this Agreement with respect to Letters
of Credit to be issued thereafter and (ii) references herein to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the replacement of an Issuing Bank hereunder, the
replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement with respect
to Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall
occur and be continuing, on the Business Day that the Borrower receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Lenders with LC Exposure representing greater
than 66 2/3% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to the LC Exposure as of such
date plus any accrued and unpaid interest thereon; provided that the obligation
to deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice
of any kind, upon the occurrence of any Event of Default with respect to the
Borrower described in clause (i) or (j) of Article VII. Such deposit shall be
held by the Administrative Agent as collateral for the payment and performance
of the obligations of the Borrower under this Agreement. The Administrative
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account. Other than any interest earned on the
investment of such deposits, which investments shall be made at the option and
sole discretion of the Administrative Agent and at the Borrower's risk and
expense, such deposits shall not bear interest. Interest or profits, if any, on
such investments shall accumulate in such account. Moneys in such account shall
be applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Lenders with LC Exposure
representing greater than 66 2/3% of the total LC Exposure), be applied to
satisfy other obligations of the Borrower under this Agreement. If the Borrower
is required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of
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Default, such amount (to the extent not applied as aforesaid) shall be returned
to the Borrower within three Business Days after all Events of Default have been
cured or waived.
Section 2.06 Funding of Borrowings.
(a) Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 12:00 noon, New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders;
provided that Swingline Loans shall be made as provided in Section 2.04. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
maintained with the Administrative Agent in New York City and designated by the
Borrower in the applicable Borrowing Request; provided that ABR Revolving Loans
made to finance the reimbursement of an LC Disbursement as provided in Section
2.05(e) shall be remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
Section 2.07 Interest Elections.
(a) Each Revolving Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Revolving Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as
provided in this Section. The Borrower may elect different options with respect
to different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing. This Section shall not apply to Swingline Borrowings, which
may not be converted or continued.
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(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.03 if the Borrower
were requesting a Revolving Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request, substantially in the form of Exhibit B hereto, and signed by the
Borrower.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election
Request applies and, if different options are being elected with
respect to different portions thereof, the portions thereof to be
allocated to each resulting Borrowing (in which case the information to
be specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant
to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar
Borrowing, the Interest Period to be applicable thereto after giving
effect to such election, which shall be a period contemplated by the
definition of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Revolving Borrowing prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Borrower then, so long as an Event of Default is continuing, (i) no outstanding
Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing
and (ii) unless repaid, each Eurodollar
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Revolving Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.
Section 2.08 Termination and Reduction of Commitments.
(a) Unless previously terminated, the Commitments shall
terminate on the Maturity Date.
(b) The Borrower may at any time terminate, or from time to
time reduce, the Commitments; provided that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $1,000,000 and
not less than $1,000,000 and (ii) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.10, the Revolving Credit Exposures would exceed the
total Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; provided that a notice
of termination of the Commitments delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments shall be made ratably
among the Lenders in accordance with their respective Commitments.
Section 2.09 Repayment of Loans; Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay (i) to
the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Revolving Loan on the Maturity Date, and (ii) to the
Swingline Lender the then unpaid principal amount of each Swingline Loan on the
earlier of the Maturity Date and the first date after such Swingline Loan is
made that is the 15th or last day of a calendar month and is at least two
Business Days after such Swingline Loan is made; provided that on each date that
a Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then
outstanding.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
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(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced
by a promissory note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) in
substantially the form attached hereto as Exhibit C. Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
Section 2.10 Prepayment of Loans.
(a) The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to prior
notice in accordance with paragraph (c) of this Section.
(b) The Borrower shall be required to pay to the
Administrative Agent for the account of each Lender to be applied ratably to the
prepayment of the Loans without penalty or premium (except for LIBO Rate
breakage costs, if any), (i) the net proceeds received by the Borrower or any of
its Subsidiaries from the sale or disposition (other than in the ordinary course
of business for an aggregate consideration not exceeding $500,000) of all or any
part of the assets of the Borrower or any of its Subsidiaries, (ii) the net
proceeds received by the Borrower from the issuance of any equity or
Indebtedness subordinated to the Loans hereunder, and (iii) any insurance
recoveries or condemnation awards received by the Borrower or any of its
Subsidiaries which are not applied toward the repair or replacement of the
damaged or condemned property within three months of receipt.
(c) The Borrower shall notify the Administrative Agent (and,
in the case of prepayment of a Swingline Loan, the Swingline Lender) by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment, (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later
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than 11:00 a.m., New York City time, one Business Day before the date of
prepayment or (iii) in the case of prepayment of a Swingline Loan, not later
than 12:00 noon, New York City time, on the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid; provided that, if a
notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.08, then such notice
of prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.08. Promptly following receipt of any such notice
relating to a Revolving Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Revolving
Borrowing shall be in an amount that would be permitted in the case of an
advance of a Revolving Borrowing of the same Type as provided in Section 2.02.
Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing. Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.12.
Section 2.11 Fees.
(a) The Borrower agrees to pay to the Administrative Agent for
the account of each Lender a facility fee which shall accrue at the Commitment
Fee Rate on the daily average unused portion of the facility until the later of
the termination of the Commitments or until the entire Revolving Credit Exposure
has been paid or terminated in full. Accrued facility fees shall be payable in
arrears on the last day of March, June, September and December of each year and
on the date on which the Commitments terminate, commencing on the first such
date to occur after the date hereof; provided that any facility fees accruing
after the date on which the Commitments terminate shall be payable on demand.
All facility fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative
Agent, for the account of each Lender, a fee with respect to each Lender's
participations in Letters of Credit, which shall accrue at the same Applicable
Rate as interest on Eurodollar Revolving Loans on the average daily amount of
such Lender's LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender's
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) the Issuing Bank's standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder.
(c) The Borrower agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due,
in immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable
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to it) for distribution, in the case of facility fees and participation fees, to
the Lenders. Fees paid shall not be refundable under any circumstances.
Section 2.12 Interest.
(a) The Loans comprising each ABR Borrowing (including each
Swingline Loan) shall bear interest at the Alternate Base Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 3% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section or (ii) in the case of any other amount, 3%
plus the rate applicable to ABR Loans as provided in paragraph (a) of this
Section.
(d) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and, in the case of Revolving Loans,
upon termination of the Commitments; provided that (i) interest accrued pursuant
to paragraph (c) of this Section shall be payable on demand, (ii) in the event
of any repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Availability Period), accrued interest on
the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a
leap year), and in each case shall be payable for the actual number of days
elapsed (including the first day but excluding the last day). The applicable
Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
Section 2.13 Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable
means do not exist for
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ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Required
Lenders the Adjusted LIBO Rate or the LIBO Rate, as applicable, for
such Interest Period will not adequately and fairly reflect the cost to
such Lenders (or Lender) of making or maintaining their Loans (or its
Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be
ineffective and (ii) if any Borrowing Request requests a Eurodollar Revolving
Borrowing, such Borrowing shall be made as an ABR Borrowing; provided that if
the circumstances giving rise to such notice affect only one Type of Borrowings,
then the other Type of Borrowings shall be permitted.
Section 2.14 Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender (except any
such reserve requirement reflected in the Adjusted LIBO Rate) or the
Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the
London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any
Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Bank's capital or on
the capital of such Lender's or the Issuing
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Bank's holding company, if any, as a consequence of this Agreement or the Loans
made by, or participations in Letters of Credit held by, such Lender, or the
Letters of Credit issued by the Issuing Bank, to a level below that which such
Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company could have achieved but for such Change in Law (taking into
consideration such Lender's or the Issuing Bank's policies and the policies of
such Lender's or the Issuing Bank's holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting
forth the amount or amounts necessary to compensate such Lender or the Issuing
Bank or its holding company, as the case may be, as specified in paragraph (a)
or (b) of this Section, shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender or the
Issuing Bank pursuant to this Section for any increased costs or reductions
incurred more than 270 days prior to the date that such Lender or the Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 270-day period referred to above shall be extended to include the period of
retroactive effect thereof.
Section 2.15 Break Funding Payments. In the event of (a) the payment of
any principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Revolving Loan on the date specified in any notice delivered pursuant
hereto (regardless of whether such notice may be revoked under Section 2.10(c)
and is revoked in accordance therewith) or (d) the assignment of any Eurodollar
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Borrower pursuant to Section 2.18, then, in any such
event, the Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a Eurodollar Loan, such loss, cost or
expense to any Lender shall be deemed to include an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest
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Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section shall be delivered
to the Borrower and shall be conclusive absent manifest error. The Borrower
shall pay such Lender the amount shown as due on any such certificate within 10
days after receipt thereof.
Section 2.16 Taxes.
(a) Any and all payments by or on account of any obligation of
the Borrower hereunder shall be made free and clear of and without deduction for
any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law; provided further, that
the payment of any Taxes relating to any Property which is subject to the Real
Estate Security Documents shall be governed by the terms of the Real Estate
Security Documents.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent,
each Lender and the Issuing Bank, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
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(e) Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate.
Section 2.17 Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.
(a) The Borrower shall make each payment required to be made
by it hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.14, 2.15 or 2.16, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 999 Broad Street,
Bridgeport, CT, or such other address as the Administrative Agent shall specify
in writing, except payments to be made directly to the Issuing Bank or Swingline
Lender as expressly provided herein and except that payments pursuant to
Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements or
Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations in
LC Disbursements and Swingline Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the
Revolving Loans and participations
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in LC Disbursements and Swingline Loans of other Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders ratably
in accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans and participations in LC Disbursements and
Swingline Loans; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC Disbursements to any
assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.
(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative Agent
may assume that the Borrower has made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders or
the Issuing Bank, as the case may be, the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders or the
Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to
be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b) or 2.17(d),
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are fully
paid.
Section 2.18 Mitigation Obligations; Replacement of Lenders.
(a) If any Lender requests compensation under Section 2.14, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans
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hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.
(b) If any Lender requests compensation under Section 2.14, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent (and,
if a Commitment is being assigned, the Issuing Bank and Swingline Lender), which
consent shall not be unreasonably withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and
participations in LC Disbursements and Swingline Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under Section
2.14 or payments required to be made pursuant to Section 2.16, such assignment
will result in a reduction in such compensation or payments. A Lender shall not
be required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
ARTICLE III
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
Section 3.01 Organization; Powers. Each of the Borrower and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to own its property and assets and to carry on its business as now
conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is duly qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
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Section 3.02 Authorization; Enforceability. The Transactions are within
the Borrower's powers and have been duly authorized by all necessary corporate
action and, if required, stockholder action. This Agreement has been duly
executed and delivered by the Borrower and constitutes a legal, valid and
binding obligation of the Borrower, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
Section 3.03 Governmental Approvals; No Conflicts. The Transactions (a)
do not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained
or made and are in full force and effect, (b) will not violate any applicable
law, statute, rule or regulation or any order, writ, injunction or decree of any
Governmental Authority, (c) will not violate any provision of the charter,
by-laws or other organizational documents of the Borrower or any of its
Subsidiaries, (d) will not violate or result in a default under any mortgage,
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and (e) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries except pursuant to the Security Documents.
Section 3.04 Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders' equity and
cash flows (i) as of and for the fiscal years ended December 31, 1995, December
31, 1996, and December 31, 1997, reported on by PricewaterhouseCoopers LLP,
independent public accountants, and (ii) as of and for the fiscal quarter and
the portion of the fiscal year ended June 30, 1998, certified by a Financial
Officer. Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Borrower and
its consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii) above.
(b) Since December 31, 1997, there has been no material
adverse change in the business, assets, operations, prospects or condition,
financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole.
Section 3.05 Properties.
(a) Each of the Borrower and its Subsidiaries has good title
to, or valid leasehold or subleasehold interests in, all its real and personal
property material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
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(b) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
Section 3.06 Litigation and Environmental Matters.
(a) There are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority pending against or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve this Agreement or the
Transactions.
(b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change
in the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
Section 3.07 Compliance with Laws and Agreements; Operating Licenses.
Each of the Borrower and its Subsidiaries is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it or
its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing. Each of the Borrower and its
Subsidiaries has such operating licenses that are material to the condition
(financial or otherwise), business or operations of the Borrower and its
Subsidiaries, and each such operating license, when issued, was issued either
(a) for a period of twelve months or longer or (b) if issued for a period of
less than twelve months, for the maximum period for which such operating
licenses are issued by the issuing jurisdiction.
Section 3.08 Investment and Holding Company Status. Neither the
Borrower nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
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Section 3.09 Taxes. Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
Section 3.10 ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $100,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $100,000 the fair market value of
the assets of all such underfunded Plans.
Section 3.11 Disclosure. The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.
Section 3.12 Year 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Borrower's computer
systems and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which the Borrower's systems interface) and
the testing of all such systems and equipment, as so reprogrammed, will be
completed by January 1, 1999. The cost to the Borrower of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to the
Borrower (including, without limitation, reprogramming errors and the failure of
others' systems or equipment) will not result in a Default or a Material Adverse
Effect. Except for such of the reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems of
the Borrower and its Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue for the
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term of this Agreement to be, sufficient to permit the Borrower and its
Subsidiaries to conduct their businesses without Material Adverse Effect.
ARTICLE IV
Conditions
Section 4.01 Effective Date. The obligations of the Lenders to make
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this
Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders
and dated the Effective Date) of Nutter, McClennen & Fish, LLP, counsel
for the Borrower, substantially in the form of Exhibit D, and covering
such other matters relating to the Borrower, this Agreement or the
Transactions as the Required Lenders shall reasonably request. The
Borrower hereby requests such counsel to deliver such opinion.
(c) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good
standing of the Borrower, the authorization of the Transactions and any
other legal matters relating to the Borrower, this Agreement or the
Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a
Vice President or a Financial Officer of the Borrower, confirming
compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.02.
(e) The Administrative Agent shall have received a guarantee
executed by the Guarantors in form and substance satisfactory to the
Administrative Agent and its counsel (as amended, modified or
supplemented from time to time, the "Guarantee Agreement").
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(f) The Administrative Agent shall have received the Real
Estate Security Documents and such security agreements, pledge
agreements, financing statements, intercreditor agreements, and other
documents relating to all collateral securing the Loans, in form,
substance and scope satisfactory to the Administrative Agent and its
counsel (as amended, modified or supplemented from time to time,
collectively, the "Security Documents").
(g) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all
reasonable out-of-pocket expenses required to be reimbursed or paid by
the Borrower hereunder.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at
or prior to 3:00 p.m., New York City time, on November 13, 1998 (and, in the
event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).
Section 4.02 Each Credit Event. The obligation of each Lender to make a
Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:
(a) The representations and warranties of the Borrower set
forth in this Agreement shall be true and correct on and as of the date
of such Borrowing or the date of issuance, amendment, renewal or
extension of such Letter of Credit, as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, no Default shall have occurred and be
continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
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ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been paid
in full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:
Section 5.01 Financial Statements and Other Information. The Borrower
will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the
Borrower, its audited consolidated balance sheet and related statements
of operations, stockholders' equity and cash flows as of the end of and
for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by
PricewaterhouseCoopers LLP or other independent public accountants of
recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception
as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, its consolidated
balance sheet and related statements of operations, stockholders'
equity and cash flows as of the end of and for such fiscal quarter and
the then elapsed portion of the fiscal year, setting forth in each case
in comparative form the figures for the corresponding period or periods
of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries
on a consolidated basis in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments and the absence of
footnotes;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) above, a certificate of a Financial Officer of
the Borrower in the form of Exhibit E (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the
details thereof and any action taken or proposed to be taken with
respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.09, 6.10, 6.11 and 6.12, and
(iii) stating whether any change in GAAP or in the application thereof
has occurred since the date of the most recent audited financial
statements delivered to the Administrative Agent and, if any such
change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate;
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(d) concurrently with any delivery of financial statements
under clause (a) above, a certificate of the accounting firm that
reported on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the
extent required by accounting rules or guidelines);
(e) within 60 days after the beginning of each fiscal year,
budgets in the form previously provided to the Administrative Agent and
the Lenders or such other form satisfactory to the Administrative Agent
prepared by the Borrower, setting forth, with appropriate discussion,
the principal assumptions upon which such budgets are based, which
shall be accompanied by a certificate of a Financial Officer to the
effect that such principal assumptions are reasonable for the period
covered thereby;
(f) within 10 Business Days of receipt by the Borrower, a copy
of each report or "management letter" submitted to the Borrower by its
independent accountants in connection with any annual, interim or
special audit made by it of the books of the Borrower;
(g) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
(including, but not limited to, all Form 8-Ks, 10-Ks and 10-Qs) filed
by the Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of
the functions of said Commission, or with any national securities
exchange, or distributed by the Borrower to its shareholders generally,
as the case may be; and
(h) promptly following any request therefor, such other
information (including, but not limited to, copies of licensure
surveys) regarding the operations, business affairs and financial
condition of the Borrower or any Subsidiary, or compliance with the
terms of this Agreement, as the Administrative Agent or any Lender may
reasonably request.
Section 5.02 Notices of Material Events. The Borrower will furnish to
the Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority
against or affecting the Borrower or any Subsidiary or Affiliate
thereof that, if adversely determined, could reasonably be expected to
result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in
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liability of the Borrower and its Subsidiaries in an aggregate amount
exceeding $100,000;
(d) the initiation by any party of any delicensure proceedings
affecting any of the facilities owned, operated, managed, leased or
subleased, or from which income is otherwise derived, by the Borrower
or any of its Subsidiaries (which notice shall be furnished within
three Business Days after the Borrower or any of its Subsidiaries or
Affiliates becomes aware, whether by written notice or otherwise, of
such initiation);
(e) any other development that results in a Material Adverse
Effect; and
(f) any other development that could reasonably be expected to
result in a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
Section 5.03 Existence; Conduct of Business. The Borrower will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section
6.03.
Section 5.04 Payment of Obligations. The Borrower will, and will cause
each of its Subsidiaries to, pay its obligations, including Tax liabilities,
that, if not paid, could result in a Material Adverse Effect before the same
shall become delinquent or in default, except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) the
Borrower or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
Section 5.05 Maintenance of Properties; Insurance. The Borrower will,
and will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, (b) maintain, with financially sound and
reputable insurance companies, insurance in such amounts and against such risks
as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations; provided that the
covenants contained in this Section 5.05 shall not be deemed to modify or limit
any other covenants relating to insurance coverage or maintenance of Property
contained in the Real Estate Security Documents.
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Section 5.06 Books and Records; Inspection Rights. The Borrower will,
and will cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, to discuss its affairs, finances and condition with its officers and
independent accountants, and to conduct appraisals of the assets relating to the
Real Estate Security Documents, all at such reasonable times and as often as
reasonably requested and any such reasonable costs associated therewith shall be
borne by the Borrower; provided, however, that the Borrower shall not be
required to pay for any appraisals more frequently than once in two years.
Section 5.07 Compliance with Laws. The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 5.08 Use of Proceeds and Letters of Credit. The proceeds of the
Loans will be used only to fund acquisitions of the stock or assets of senior
housing services, assisted living facilities or other supportive independent
living or specialized living health care facilities (and such other related
ancillary businesses), to provide working capital and for general corporate
purposes. No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the Regulations
of the Board, including Regulations U and X. Letters of Credit will be issued
only for purposes satisfactory to the Administrative Agent.
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the Lenders
that:
Section 6.01 Indebtedness. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in
Schedule 6.01, but not any extensions, renewals or replacements of any
such Indebtedness; provided
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that the Senior Care Subsidiaries may refinance their outstanding
Indebtedness to Sun America up to an aggregate principal amount of
$85,000,000 on terms which, taken as a whole, are no less favorable to
the Borrower and the Senior Care Subsidiaries than in effect on the
Effective Date, but not any further extensions, renewals or
replacements of such Indebtedness;
(c) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;
(d) Guarantees by the Borrower of Indebtedness of any
Subsidiary and by any Subsidiary of Indebtedness of the Borrower or any
other Subsidiary;
(e) Indebtedness of the Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such
assets or secured by a Lien on any such assets prior to the acquisition
thereof, and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof; provided that (i) such Indebtedness is incurred prior to or
within 90 days after such acquisition or the completion of such
construction or improvement and (ii) the aggregate principal amount of
Indebtedness permitted by this clause (e) shall not exceed $500,000 at
any time outstanding;
(f) Indebtedness incurred in connection with an acquisition by
the Borrower satisfying the requirements of Section 6.04(e) and, if
applicable, Section 6.03(a)(i) or (ii); provided that (i) such
Indebtedness exists at the time such acquisition is consummated and is
not created in contemplation of or in connection with such acquisition
and (ii) the aggregate principal amount of Indebtedness permitted by
this clause (f) shall not exceed $25,000 at any time outstanding; and
(g) Indebtedness of the Borrower or any Subsidiary as an
account party in respect of trade letters of credit.
Section 6.02 Liens. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02;
provided that (i) such Lien shall not apply to any other property or
assets of the Borrower or any Subsidiary and (ii) (x) such Lien shall
secure only those obligations which it secures on the date hereof
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or (y) in the case of the Senior Care Subsidiaries, such Lien shall
secure only those obligations which it secures on the date hereof and
those obligations permitted under Section 6.01(b) (provided that in no
event shall the Borrower or any Subsidiary pledge any stock or security
or grant any security interest in any accounts, contracts or contract
rights to secure any obligations to any holder of such Indebtedness);
(c) any Lien incurred or assumed in connection with an
acquisition by the Borrower satisfying the requirements of Section
6.04(e) and, if applicable, Section 6.03(a)(i) or (ii); provided that
(i) such Lien is not created in contemplation of or in connection with
such acquisition, (ii) such Lien shall not apply to any other property
or assets of the Borrower or any Subsidiary and (iii) such Lien shall
secure only those obligations which it secures on the date of such
acquisition;
(d) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary; provided that (i) such
security interests secure Indebtedness permitted by clause (e) of
Section 6.01, (ii) such security interests and the Indebtedness secured
thereby are incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement, (iii) the
Indebtedness secured thereby does not exceed 80% of the cost of
acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or
assets of the Borrower or any Subsidiary.
Section 6.03 Fundamental Changes.
(a) The Borrower will not, and will not permit any Subsidiary
to, merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or
substantially all of its assets, or all or substantially all of the stock, or
other beneficial interest in, any of its Subsidiaries (in each case, whether now
owned or hereafter acquired), or liquidate or dissolve, except that, if at the
time thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) any Person may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation, (ii) any Person
may merge into any wholly owned Subsidiary in a transaction in which the
surviving corporation is a wholly owned Subsidiary, (iii) any wholly owned
Subsidiary that is a corporation may be converted into a limited liability
company as long as such limited liability company executes such guarantees,
security agreements, mortgages, pledge agreements, financing statements,
intercreditor agreements and such other documents as are requested by the
Administrative Agent, (iv) any Subsidiary may sell, transfer, lease or otherwise
dispose of its assets to the Borrower or to a wholly owned Subsidiary and (v)
any Subsidiary may liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and does not result in a Material Adverse Effect; provided that any
such merger involving a Person that is not a wholly owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by Section
6.04.
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(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto.
Section 6.04 Investments, Loans, Advances, Guarantees and Acquisitions.
The Borrower will not, and will not permit any of its Subsidiaries to, purchase,
hold or acquire (including pursuant to any merger not permitted under Section
6.03) any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, Guarantee any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person, or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person constituting a business unit,
except:
(a) Permitted Investments;
(b) investments by the Borrower existing on the date hereof in
the capital stock, or other beneficial interest in, any Subsidiary;
(c) loans or advances made by the Borrower to any Subsidiary
and made by any Subsidiary to the Borrower or any other Subsidiary;
(d) Guarantees constituting Indebtedness permitted by Section
6.01; and
(e) acquisitions by the Borrower as long as (i) the Board of
Directors of the Borrower has approved the proposed acquisition, (ii)
immediately before and immediately after such acquisition no Default or
Event of Default will occur or exist and (iii) if such acquisition
involves the formation or acquisition by the Borrower of any Person
that becomes a Subsidiary, such Subsidiary shall execute such
guarantees, security agreements, mortgages, pledge agreements,
financing statements, intercreditor agreements and such other documents
as are requested by the Administrative Agent.
Section 6.05 Hedging Agreements. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any Hedging Agreement, other than
Hedging Agreements acceptable to the Administrative Agent and entered into in
the ordinary course of business to hedge or mitigate risks to which the Borrower
or any Subsidiary is exposed in the conduct of its business or the management of
its liabilities.
Section 6.06 Restricted Payments. The Borrower will not, and will not
permit any of its Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except (a) the Borrower may
declare and pay dividends with respect to its capital stock payable solely in
additional shares of its common stock, (b) Subsidiaries may declare and pay
dividends ratably with respect to their capital stock, (c) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other
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benefit plans for management or employees of the Borrower and its Subsidiaries
and (d) the Borrower may declare and pay dividends with respect to its preferred
stock outstanding on the date hereof up to an aggregate amount of $7,300 per
year.
Section 6.07 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Subsidiary than could
be obtained on an arm's-length basis from unrelated third parties, (b)
transactions between or among the Borrower and its wholly owned Subsidiaries not
involving any other Affiliate and (c) any Restricted Payment permitted by
Section 6.06.
Section 6.08 Restrictive Agreements. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any Subsidiary
to create, incur or permit to exist any Lien upon any of its property or assets,
or (b) the ability of any Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay loans or
advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of
the Borrower or any other Subsidiary; provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Agreement, (ii)
the foregoing shall not apply to restrictions and conditions existing on the
date hereof identified on Schedule 6.08 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to restrictions
or conditions contained in the documentation related to the refinancing of the
Indebtedness of the Senior Care Subsidiaries as permitted under Section 6.01(b)
(provided that such restrictions and conditions taken as a whole shall not
expand the scope of the restrictions and conditions with respect to such
Indebtedness existing on the date hereof), (iv) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale (provided that such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder), (v) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness, and (vi) clause
(a) of the foregoing shall not apply to customary provisions in leases
restricting the assignment thereof.
Section 6.09 Fixed Coverage Ratio. The Borrower shall not permit the
Consolidated Fixed Coverage Ratio to be less than 1.25-to-1.00 at any time.
Section 6.10 Leverage Ratio. The Borrower shall not permit the
Consolidated Leverage Ratio to exceed at any time: (a) from the Effective Date
until December 31, 1998, 6.50-to-1.00; (b) from January 1, 1999 until December
31, 1999, 6.25-to-1.00; (c) from
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January 1, 2000 until December 31, 2000, 6.00-to-1.00; and (d) from January 1,
2001 until the Maturity Date, 5.75-to-1.00.
Section 6.11 Net Worth. The Borrower shall maintain at all times
minimum Consolidated Net Worth of not less than the sum of (a) $112,921,013,
plus (b) 75% of Consolidated Net Income after June 30, 1998, plus (c) all cash
net proceeds received by the Borrower after June 30, 1998 from the issuance of
equity interests.
Section 6.12 EBITDA. The Borrower shall not permit Consolidated EBITDA
to be less than $35,000,000 for any twelve month period.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan
or any reimbursement obligation in respect of any LC Disbursement when
and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in clause
(a) of this Article) payable under this Agreement, when and as the same
shall become due and payable, and such failure shall continue
unremedied for a period of five days;
(c) any representation or warranty made or deemed made by or
on behalf of the Borrower or any Subsidiary in or in connection with
this Agreement or any amendment or modification hereof or waiver
hereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with this Agreement or
any amendment or modification hereof or waiver hereunder, shall prove
to have been incorrect when made or deemed made;
(d) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02(a), (b),
(c), (d) or (e), 5.03 (with respect to the Borrower's existence) or
5.08 or in Article VI;
(e) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.01(a) or (b),
and such failure shall continue unremedied for a period of 10 days
after notice thereof from the Administrative Agent to the Borrower
(which notice will be given at the request of the Required Lenders);
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(f) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other
than those specified in clause (a), (b), (d) or (e) of this Article),
and such failure shall continue unremedied for a period of 30 days
after notice thereof from the Administrative Agent to the Borrower
(which notice will be given at the request of the Required Lenders);
(g) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become
due and payable;
(h) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of
time or both) the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material
Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (h) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the
property or assets securing such Indebtedness;
(i) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of the Borrower or any
Subsidiary or its debts, or of a substantial part of its assets, under
any Federal, state or foreign bankruptcy, insolvency, receivership or
similar law now or hereafter in effect or (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any Subsidiary or for a substantial part
of its assets, and, in any such case, such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(j) the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or petition described in
clause (i) of this Article, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or
for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the
foregoing;
(k) the Borrower or any Subsidiary shall become unable, admit
in writing that it is unable, or fail generally to pay its debts as
they become due;
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(l) one or more judgments for the payment of money in an
aggregate amount in excess of $250,000 shall be rendered against the
Borrower, any Subsidiary or any combination thereof and the same shall
remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to attach or levy upon the assets
of the Borrower or any Subsidiary to enforce any such judgment;
(m) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events
that have occurred, could reasonably be expected to result in a
Material Adverse Effect;
(n) a Change in Control shall occur;
(o) the Guarantee Agreement or any material provision thereof
shall cease to be in full force and effect or any Guarantor or Person
acting by or on behalf of any Guarantor shall deny or disaffirm such
Guarantor's obligations under the Guarantee Agreement;
(p) any Security Document shall cease to be in full force and
effect, or shall cease to give the Administrative Agent the Liens,
rights, powers and privileges purported to be created thereby, in favor
of the Administrative Agent on behalf of the Lenders, superior to and
prior to the rights of all third Persons and subject to no other Liens
(except in each case to the extent expressly permitted herein or in the
Security Documents);
(q) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in the Security Documents
beyond applicable notice and cure periods;
(r) the delicensure of any facility owned, operated, managed,
leased or subleased, or from which income is otherwise derived, by the
Borrower or any of its Subsidiaries;
then, and in every such event (other than an event with respect to the Borrower
described in clause (i) or (j) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower;
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and in case of any event with respect to the Borrower described in clause (i) or
(j) of this Article, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without present ment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent
------------------------
Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
wilful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance
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of any of the covenants, agreements or other terms or conditions set forth
herein, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this paragraph, the Administrative Agent may resign at any
time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Bank, appoint a successor Administrative Agent which shall be a bank with an
office in New York, New York, or an Affiliate of any such bank. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Administrative Agent's
resignation hereunder, the provisions of this Article and Section 9.03 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.
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Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
-------------
Section 9.01 Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to CareMatrix Corporation, 197
First Avenue, Needham, MA 02494, Attention of Chief Executive Officer
(Telecopy No. (781) 433- 1192), with a copy to (i) CareMatrix
Corporation, 197 First Avenue, Needham, MA 02494, Attention of General
Counsel (Telecopy No. (781) 433-1192), and (ii) Nutter, McClennen &
Fish, LLP, One International Place, Boston, MA 02110, Attention of
Paul R. Eklund, Esq. (Telecopy No. (617) 973-9748);
(b) if to the Administrative Agent, the Issuing Bank or the
Swingline Lender, to The Chase Manhattan Bank, 999 Broad Street,
Bridgeport, CT 06604, Attention of Loan Department (Telecopy No. (203)
382-5360), with a copy to (i) The Chase Manhattan Bank, 85 Wells
Avenue, Suite 200, Newton, MA 02159, Attention of Roger A. Stone,
Senior Vice President (Telecopy No. (617) 928-3057), and (ii) Goodwin,
Procter & Hoar LLP, Exchange Place, Boston, MA 02109, Attention of
Raymond C. Zemlin, P.C. (Telecopy No. (617) 523-1231); and
(c) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
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Section 9.02 Waivers; Amendments.
(a) No failure or delay by the Administrative Agent, the
Issuing Bank or any Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Issuing Bank and the Lenders hereunder are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, any Lender or the
Issuing Bank may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders or by the Borrower
and the Administrative Agent with the consent of the Required Lenders; provided
that no such agreement shall (i) increase the Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of any Loan
or LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, or (v) change any of the provisions of this
Section or the definition of "Required Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent, the Issuing Bank or the Swingline Lender hereunder
without the prior written consent of the Administrative Agent, the Issuing Bank
or the Swingline Lender, as the case may be.
Section 9.03 Expenses; Indemnity; Damage Waiver.
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this
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Agreement or any amendments, modifications or waivers of the provisions hereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all
out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for the
Administrative Agent, the Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement,
including its rights under this Section, or in connection with the Loans made or
Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.
(b) The Borrower shall indemnify the Administrative Agent, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Bank to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
the Borrower or any of its Subsidiaries, or any Environmental Liability related
in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent, the Issuing Bank or the
Swingline Lender under paragraph (a) or (b) of this Section, each Lender
severally agrees to pay to the Administrative Agent, the Issuing Bank or the
Swingline Lender, as the case may be, such Lender's Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Administrative Agent, the
Issuing Bank or the Swingline Lender in its capacity as such.
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(d) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable not
later than three days after written demand therefor.
Section 9.04 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit), except that the Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of each Lender (and any attempted assignment or transfer by the
Borrower without such consent shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the Issuing Bank and the Lenders)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment to a Lender or an Affiliate of a Lender,
the Borrower and the Administrative Agent (and, in the case of an assignment of
all or a portion of a Commitment or any Lender's obligations in respect of its
LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender)
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld), (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment, the amount of the Commitment of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender's rights and obligations under this Agreement, (iv) the parties
to each assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500 and (v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; and provided further that
any consent of the Borrower otherwise required under this paragraph shall not be
required if an Event of Default under clause (i) or (j) of Article VII has
occurred and is continuing. Subject
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to acceptance and recording thereof pursuant to paragraph (d) of this Section,
from and after the effective date specified in each Assignment and Acceptance,
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Accep tance, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.14,
2.15, 2.16 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in the City of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Commitment
of, and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks or other entities (a "Participant") in all
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent, the Issuing Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender
59
<PAGE>
shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not, without
the consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (f) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 9.08 as
though it were a Lender, provided such Participant agrees to be subject to
Section 2.17(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.14 or 2.16 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.16 unless
the Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.16(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
Section 9.05 Survival. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 9.03 and Article
VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments, or the termination of this Agreement or any provision hereof.
60
<PAGE>
Section 9.06 Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
Section 9.07 Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 9.08 Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
Section 9.09 Governing Law; Jurisdiction; Consent to Service of
Process.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto
61
<PAGE>
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement
against the Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
Section 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 9.11 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 9.12 Confidentiality. Each of the Administrative Agent, the
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action
62
<PAGE>
or proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis from a source other than the
Borrower. For the purposes of this Section, "Information" means all information
received from the Borrower relating to the Borrower or its business, other than
any such information that is available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis prior to disclosure by the
Borrower; provided that, in the case of information received from the Borrower
after the date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
Section 9.13 Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively, the "Charges"), shall exceed
the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
63
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CAREMATRIX CORPORATION
By: /s/ David B. Currie
-------------------------------------
David B. Currie
Vice President
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent
By: /s/ Roger A. Stone
-------------------------------------
Roger A. Stone
Senior Vice President
64
<PAGE>
SCHEDULE 2.01
-------------
Commitments
<TABLE>
<CAPTION>
Commitment Maximum Amount of
Lender Percentage Revolving Credit Exposure
- - ------ ---------- -------------------------
<S> <C> <C>
The Chase Manhattan Bank 100% $15,000,000
</TABLE>
<PAGE>
EXHIBIT A
---------
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of September 25,
1998 (as amended and in effect on the date hereof, the "Credit Agreement"),
among CareMatrix Corporation, the Lenders named therein and The Chase Manhattan
Bank, as Administrative Agent for the Lenders. Terms defined in the Credit
Agreement are used herein with the same meanings.
The Assignor named on the reverse hereof hereby sells and assigns,
without recourse, to the Assignee named on the reverse hereof, and the Assignee
hereby purchases and assumes, without recourse, from the Assignor, effective as
of the Assignment Date set forth on the reverse hereof, the interests set forth
on the reverse hereof (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
interests set forth on the reverse hereof in the Commitment of the Assignor on
the Assignment Date and Revolving Loans owing to the Assignor which are
outstanding on the Assignment Date, together with the participations in Letters
of Credit, LC Disbursements and Swingline Loans held by the Assignor on the
Assignment Date, but excluding accrued interest and fees to and excluding the
Assignment Date. The Assignee hereby acknowledges receipt of a copy of the
Credit Agreement. From and after the Assignment Date (i) the Assignee shall be a
party to and be bound by the provisions of the Credit Agreement and, to the
extent of the Assigned Interest, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent of the Assigned Interest,
relinquish its rights and be released from its obligations under the Credit
Agreement.
This Assignment and Acceptance is being delivered to the Administrative
Agent together with (i) if the Assignee is a Foreign Lender, any documentation
required to be delivered by the Assignee pursuant to Section 2.16(e) of the
Credit Agreement, duly completed and executed by the Assignee, and (ii) if the
Assignee is not already a Lender under the Credit Agreement, an Administrative
Questionnaire in the form supplied by the Administrative Agent, duly completed
by the Assignee. The [Assignee/Assignor] shall pay the fee payable to the
Administrative Agent pursuant to Section 9.04(b) of the Credit Agreement.
This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
("Assignment Date"):
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------
Percentage Assigned of
Facility/Commitment (set
forth, to at least 8
decimals, as a percentage
of the Facility and the
aggregate Commitments of
Facility Principal Amount Assigned all Lenders thereunder)
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Commitment Assigned: $ %
- - ----------------------------------------------------------------------------------------------------
Revolving Loans:
- - ----------------------------------------------------------------------------------------------------
</TABLE>
The terms set forth above and on the reverse side hereof are hereby
agreed to:
[Name of Assignor], as Assignor
By:
----------------------------
Name:
Title:
[Name of Assignee], as Assignee
By:
----------------------------
Name:
Title:
<PAGE>
The undersigned hereby consent to the within assignment:(1)
CAREMATRIX CORPORATION
By:
-------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent,
By:
-------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Issuing Bank
By:
-------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Swingline Lender
By:
-------------------------
Name:
Title:
- - ----------------------
(1) Consents to be included to the extent required by Section 9.04(b) of
the Credit Agreement.
<PAGE>
EXHIBIT B
---------
FORM OF
INTEREST ELECTION REQUEST
The Chase Manhattan Bank,
as Administrative Agent
999 Broad Street
Bridgeport, CT 06604
Re: Credit Agreement dated as of September 25, 1998 by and among CareMatrix
Corporation (the "Borrower"), the Lenders party thereto, and The Chase
Manhattan Bank, as Administrative Agent (the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to Section 2.07(b) of the Credit Agreement, the undersigned
hereby confirms its request made on _________, for a [Eurodollar] [ABR]
Borrowing in the amount of
$__________.
[The Interest Period applicable to said Eurodollar Revolving Borrowing
will be [one][two][three][six] months.](1)
[Said Eurodollar Revolving Borrowing represents a [conversion/
continuation] of the Eurodollar Revolving Borrowing in the same amount made
on ________.](2)
The undersigned hereby confirms that all of the representations and
warranties of the Borrower contained in the Credit Agreement or any other
agreement executed in connection therewith are true and correct as of the date
hereof.
The undersigned hereby certifies that no Default or Event of Default
has occurred and is continuing.
CAREMATRIX CORPORATION
By:
--------------------------
Name:
Title:
- - ------------------
(1) To be inserted in any request for a Eurodollar Borrowing.
(2) To be inserted in any request for conversion or continuation.
<PAGE>
EXHIBIT C
---------
FORM OF
PROMISSORY NOTE
Needham, Massachusetts
$ , 1998
--------------- --------------
FOR VALUE RECEIVED, CareMatrix Corporation (the "Borrower") hereby
promises to pay to the order of or its registered assigns (the "Bank"), in
lawful money of the United States of America in immediately available funds, at
the office of the Administrative Agent (as defined in the Agreement) located at
999 Broad Street, Bridgeport, CT 06604 on the Maturity Date (as defined in the
Agreement) the principal sum of _____________________ DOLLARS ($________) or, if
less, the then aggregate unpaid principal amount of all Loans (as defined in the
Agreement) made by the Bank pursuant to the Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in the Agreement.
This Note is subject to the terms of that certain Credit Agreement,
dated as of September 25, 1998, among the Borrower, the financial institutions
from time to time parties thereto (including the Bank), and The Chase Manhattan
Bank, as Administrative Agent (as amended, modified or supplemented from time to
time, the "Agreement") and is entitled to the benefits thereof and of the
Guarantee Agreement (as defined in the Agreement). This Note is secured by the
Security Documents (as defined in the Agreement). As provided in the Agreement,
this Note is subject to voluntary prepayment and, in certain circumstances,
mandatory prepayment prior to the Maturity Date, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may become
or be declared to be due and payable in the manner and with the effect provided
in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
CAREMATRIX CORPORATION
By:
-----------------------
Name:
Title:
<PAGE>
EXHIBIT D
---------
FORM OF
OPINION OF BORROWER'S COUNSEL
September 25, 1998
To the Lenders and the Administrative
Agent Referred to Below
c/o The Chase Manhattan Bank,
as Administrative Agent
999 Broad Street
Bridgeport, CT 06604
Ladies and Gentlemen:
We have acted as counsel for CareMatrix Corporation, a Delaware corporation
(the "Borrower"), and the entities listed on Schedule I hereto (collectively,
the "Guarantors"), in connection with a $15,000,000 revolving credit facility
made available to the Borrower from The Chase Manhattan Bank pursuant to and
under that certain Credit Agreement, dated as of September 25, 1998 (the "Credit
Agreement"), among the Borrower, the banks and other financial institutions
identified therein as Lenders, and The Chase Manhattan Bank, as Administrative
Agent.
The opinions expressed below are furnished pursuant to Section 4.01(b) of
the Credit Agreement. Terms defined in the Credit Agreement are used herein with
the same meanings.
We have examined and relied upon the following documents:
i. Credit Agreement;
ii. Guarantee Agreement;
iii. Security Documents;
iv. The Promissory Note(s) issued by the Borrower to the Lenders
(collectively the Credit Agreement, the Guarantee Agreement, the
Security Documents and such Promissory Note(s) shall be referred to
as, the "Credit Documents");
v. A copy of the charter documents of the Borrower and each Guarantor as
certified by the respective Secretaries of State of their
jurisdictions of organization;
vi. Good standing certificates from the Secretary of State of the
respective jurisdictions of organization of the Borrower and each
Guarantor;
<PAGE>
vii. Foreign qualification certificates for the jurisdictions listed on
Schedule I;
viii. A copy of the By-Laws of the Borrower and each Guarantor as certified
by such entities' Secretary or Member, as the case may be; and
ix. Certificates of an officer of the Borrower and each Guarantor (the
"Officer's Certificates").
In addition, we have examined and relied upon originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and other instruments and
have conducted such other investigations of fact and law as we have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing and subject to the further
qualifications set forth at the end of our opinion, having regard for the legal
considerations which we deem relevant and having made such investigation as we
deem necessary, we are of the opinion that:
1. Each of the Borrower and the Guarantors (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own its property
and assets and to carry on its business as now conducted and is duly
qualified to do business in, and is in good standing in, the jurisdictions
set forth on Schedule I.
2. Each of the Borrower and the Guarantors has the requisite power and
authority to execute, deliver and perform its respective obligations under
each of the Credit Documents to which it is a party and has taken all
necessary corporate action and, if required, stockholder action to
authorize the execution, delivery and performance by it of each of the
Credit Documents to which it is a party. Each of the Borrower and the
Guarantors has duly executed and delivered each of the Credit Documents to
which it is a party, and each such Credit Document constitutes a legal,
valid and binding obligation of the Borrower and the Guarantors,
enforceable in accordance with its terms.
3. Neither the execution, delivery or performance by each of the Borrower and
the Guarantors of each of the Credit Documents to which it is a party, nor
compliance by it with the terms and provisions thereof, nor the
consummation of the transactions contemplated therein (a) will require any
consent or approval of, registration or filing with, or any other action
by, any Governmental Authority, except such as have been obtained or made
and are in full force and effect, (b) will violate any applicable law,
statute, rule or regulation or any order, writ, injunction or decree of any
Governmental Authority, (c) will violate any provision of the charter,
by-laws or other organizational documents of the Borrower or any of the
Guarantors, (d) to our knowledge, will violate or result in a default under
any mortgage, indenture, agreement or other instrument
2
<PAGE>
binding upon the Borrower or any of the Guarantors or its assets, or will
give rise to a right thereunder to require any payment to be made by the
Borrower or any of the Guarantors, or (e) to our knowledge, will result in
the creation or imposition of any Lien on any asset of the Borrower or any
of the Guarantors (except pursuant to the Security Documents).
4. To our knowledge, there are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority pending against, or threatened
against or affecting the Borrower or any of the Guarantors (a) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected individually or in the
aggregate, to have a material adverse effect on (i) the business, assets,
operations, prospects or condition, financial or otherwise, of the Borrower
and its Subsidiaries taken as a whole, (ii) the ability of the Borrower or
any of the Guarantors to perform its respective obligations under each of
the Credit Documents to which it is a party or (iii) the rights of or
benefits available to the Lenders under any Credit Document (other than the
Disclosed Matters) or (b) that involve the Credit Documents or the
Transactions.
5. To the extent that a security interest may be granted in the collateral
described in the Security Documents pursuant to Articles 8 and 9 of the
Uniform Commercial Code (the "UCC"), the Security Documents are sufficient
in form to create in favor of the Administrative Agent a legal and valid
security interest in the collateral described therein. The description of
the collateral set forth in the financing statements prepared in connection
with the transaction contemplated by the Credit Documents is sufficient to
perfect a security interest in the items and type of collateral described
therein in which a security interest may be perfected by the filing of a
financing statement under the UCC.
6. Neither the Borrower nor any of the Guarantors is (a) an "investment
company" within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, or (b) a "holding company" within the
meaning of, or subject to regulation under, the Public Utility Holding
Company Act of 1935.
Our opinion is subject to the following qualifications:
1. Insofar as this opinion relates to factual matters not independently
established, we have relied solely upon the Officer's Certificates and
certificates of public officials.
2. The opinions expressed in paragraph 2 are qualified to the extent that
the enforceability of any provision of the Credit Documents is limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other similar laws relating to or affecting the rights of
creditors generally and is subject to general principles of equity (whether such
enforcement is considered in a proceeding at law or in equity). It should also
be noted that the availability and exercise of particular remedies under the
Credit Documents may
3
<PAGE>
be subject to applicable statutory and decisional law (including, but not
limited to, any requirement for notice and/or a hearing) which may affect
remedial provisions contained therein, none of which statutory or decisional law
should interfere with the substantial realization of the rights intended to be
afforded by the Credit Documents. Furthermore, we have assumed that at all times
the Administrative Agent and the Lenders act in good faith in a commercially
reasonable manner.
3. We have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies, and the
accuracy and completeness of all corporate records made available to us by the
Borrowers and the Guarantors.
4. For purposes of this opinion, we are assuming that the Administrative
Agent and the Lenders have all requisite power and authority and have taken all
necessary corporate action to execute and deliver any of the instruments to
which the Administrative Agent and Lenders are parties.
5. We have made such examination of Massachusetts, Federal, and Delaware
corporate laws as we have deemed relevant for the purposes of this opinion, but
we have not made a review of and do not opine as to the laws of any other state
or jurisdiction. For purposes of the enforceability opinion expressed in
paragraph 2, we have assumed that applicable New York and Massachusetts laws are
identical.
6. We express no opinion as to future events and the future state of
statutory and case law applicable to the opinions expressed herein.
7. To the extent our opinion is "to our knowledge," or as to matters that
we "know" or are "known to us," such opinion is based solely upon the knowledge
of those attorneys in our firm who have devoted substantive time on matters for
the Borrower and the Guarantors.
8. This opinion is solely for the benefit of the Administrative Agent and
its counsel, and may not be quoted or relied upon by, nor copies be delivered to
any other person (other than your successors and assigns as Lenders and Persons
that acquire participation in your Loans), nor used for any other purpose,
without our prior written consent.
Very truly yours,
Nutter, McClennen & Fish, LLP
4
<PAGE>
EXHIBIT E
---------
FORM OF
COMPLIANCE CERTIFICATE
The Chase Manhattan Bank,
as Administrative Agent
85 Wells Avenue, Suite 200
Newton, MA 02159
Attention: Roger A. Stone
Senior Vice President
Ladies and Gentlemen:
This Compliance Certificate is delivered to you pursuant to Section
5.01(c) of that certain Credit Agreement, dated as of September 25, 1998, among
CareMatrix Corporation (the "Borrower"), the financial institutions from time to
time parties thereto (the "Lenders"), and The Chase Manhattan Bank, as
Administrative Agent (as amended, supplemented or modified from time to time,
the "Credit Agreement"). Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Credit Agreement.
The undersigned, as the duly elected, qualified and acting [Chief
Financial Officer] [Principal Accounting Officer] [Treasurer] [Controller] of
the Borrower, hereby certifies on behalf of the Borrower as follows:
1. The undersigned has reviewed and is familiar with the contents of
this Certificate.
2. The undersigned has reviewed the terms of the Credit Agreement and
has made or caused to be made under [his/her] supervision a review in reasonable
detail of the transactions and condition of the Borrower during the accounting
period covered by the financial statements attached hereto as Attachment 1 (the
"Financial Statements"). Such review did not disclose the existence during or at
the end of the accounting period covered by the Financial Statements, and the
undersigned has no knowledge of the existence, as of the date of this
Certificate, of any condition or event which constitutes a Default or Event of
Default [, except as set forth below].
3. Attached hereto as Attachment 2 are calculations demonstrating that,
based upon the Financial Statements, and at the date hereof, the Borrower is in
compliance with all financial covenants set forth in Sections 6.09, 6.10, 6.11
and 6.12 of the Credit Agreement.
4. There has been [no] [the following] changes in GAAP or in the
application thereof since December 31, ____ [and such changes have had the
following effects on the Financial Statements].
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
this ___ day of ______, ____.
CAREMATRIX CORPORATION
By:
----------------------------
Name:
Title:
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