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 March 31, 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
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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 02194
-----------------------------------
(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 May 11, 1998
----- ---------------------------
Common Stock, $.05 par value 17,592,839 shares
<PAGE>
CAREMATRIX CORPORATION
Table of Contents
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS Page
----
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 3
Consolidated Statements of Earnings for the quarters ended
March 31, 1998 and March 31, 1997 4
Consolidated Statements of Cash Flows for the quarters ended
March 31, 1998 and March 31, 1997 5
Notes to Consolidated Financial Statements 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
ITEM 2: CHANGES IN SECURITIES
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
2
<PAGE>
CAREMATRIX CORPORATION
CONSOLIDATED BALANCE SHEETS
as of March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $133,628,807 $152,619,435
Restricted cash 16,926,482 3,102,468
Receivables:
Accounts receivable, net 15,364,568 12,461,704
Accounts receivable-related party 13,105,931 9,096,479
Other receivables -- 730,584
Prepaid expenses and other current assets 3,409,756 3,488,592
------------ ------------
Total current assets 182,435,544 181,499,262
Lease acquisition costs, net 7,767,424 4,240,733
Property and equipment, net 5,054,005 4,650,823
Due from shareholder -- 2,622,383
Other long-term assets, net 21,634,394 17,262,630
Goodwill, net 21,543,464 21,772,649
------------ ------------
Total assets $238,434,831 $232,048,480
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ -- $ 2,000,000
Accounts payable 3,324,906 3,819,719
Accrued compensation 1,445,597 1,103,308
Accrued liabilities 7,992,976 7,925,147
Other current liabilities 1,637,306 827,594
------------ ------------
Total current liabilities 14,400,785 15,675,768
Convertible subordinated notes 115,000,000 115,000,000
Other long-term liabilities 1,844,372 2,211,412
Commitments and contingencies
Shareholders' equity 107,189,674 99,161,300
------------ ------------
Total liabilities and shareholders' equity $238,434,831 $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 quarters ended March 31, 1998 and March 31, 1997
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------
March 31, 1998 March 31, 1997
------------------ --------------------
<S> <C> <C>
Revenues:
Resident operations $21,161,980 $ 9,455,101
Resident operations - related party 2,586,386 406,668
Development fee income 974,202 1,394,678
Development fee income - related party 4,923,135 1,835,071
----------- -----------
Total revenue 29,645,703 13,091,518
----------- -----------
Expenses:
Facility operating expenses 15,466,910 6,611,389
Facility lease expense 582,574 564,920
Facility lease expense - related party 3,117,293 882,370
General and administrative 4,464,136 3,648,934
Depreciation and amortization 735,458 509,822
----------- -----------
Total expenses 24,366,371 12,217,435
----------- -----------
Earnings from operations 5,279,332 874,083
Interest income (expense):
Interest income 2,328,942 773,658
Interest expense (1,838,128) (275,442)
----------- -----------
Total interest income 490,814 498,216
----------- -----------
Earnings before income taxes and preferred dividends 5,770,146 1,372,299
Income taxes 2,400,381 551,474
----------- -----------
Earnings before preferred dividends 3,369,765 820,825
Preferred dividends 4,575 6,225
----------- -----------
Net earnings $ 3,365,190 $ 814,600
=========== ===========
Basic shares outstanding 17,377,463 17,109,978
=========== ===========
Basic earnings per share $ 0.19 $ 0.05
=========== ===========
Diluted shares outstanding 18,013,269 17,299,859
=========== ===========
Diluted earnings per share $ 0.19 $ 0.05
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
CAREMATRIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
for the quarters ended March 31, 1998 and March 31, 1997
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------
March 31, 1998 March 31, 1997
--------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,365,190 $ 814,600
Noncash items included in net earnings:
Depreciation of fixed assets 298,773 157,053
Amortization of intangible assets 330,018 257,769
Amortization of lease acquisition costs 106,667 95,000
Accretion of bargain purchase option -- 84,101
Changes in current assets (3,961,094) (3,676,820)
Changes in current liabilities 682,165 (733,171)
Other noncash items 28,350 21,688
------------ -----------
Net cash provided (used) by
operating activities 850,069 (2,979,780)
------------ -----------
Cash flows from investing activities:
Additions to property and equipment (701,954) (221,597)
Net change in assets held for sale -- (325,272)
Change in other long-term assets (4,119,013) (57,217)
Change in restricted cash (13,824,014) (146,785)
Increase in lease acquisition costs (3,633,358) (373,918)
------------ -----------
Net cash used by investing activities (22,278,339) (1,124,789)
------------ -----------
Cash flows from financing activities:
Net increase in amounts due shareholder -- 736,501
Exercise of stock options and warrants 2,663,184 --
Repayment of debt (267,590) (224,898)
Other, net 42,048 (1,899)
------------ -----------
Net cash provided by financing activities 2,437,642 509,704
------------ -----------
Decrease in cash and cash equivalents (18,990,628) (3,594,865)
Cash and cash equivalents, beginning of period 152,619,435 57,966,360
------------ -----------
Cash and cash equivalents, end of period $133,628,807 $54,371,495
============ ===========
Other noncash items:
Conversion of convertible debentures into equity $ 2,000,000
============
</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 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.
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
In connection with the acquisition of the management and lease rights for
four facilities in Connecticut, the Company deposited $10.6 million into escrow.
Interest on the funds accrues to the benefit of the Company. The money,
comprised of lease deposits and lease acquisition costs, will be released from
escrow when the certificate of occupancy is obtained for each facility.
3. RELATED PARTY TRANSACTIONS
As used herein, a "Chancellor Entity" is Chancellor Senior Housing Group,
Inc. (a company primarily owned by Abraham D. Gosman 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.
General and administrative expenses includes a reduction in rent expense of
$44,814 for periods ending March 31, 1998 and 1997, to reflect Meditrust
Corporation's portion of the rent at the Company's principal office space in
Needham, Massachusetts. Mr. Gosman is the Chairman of the Board of Meditrust
Corporation, a publicly-traded real estate investment trust.
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 of which he, together with his two sons,
beneficially owns approximately 24.6%.
In January 1998, the Company paid a Chancellor Entity $2.5 million for the
lease rights to a skilled nursing facility in Connecticut which the Company had
been managing.
6
<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. RELATED PARTY TRANSACTIONS (continued)
In March 1998, the Company purchased from a Chancellor Entity the lease
rights to two facilities in Arizona for $1.1 million. The Company also made a
lease deposit of $4.0 million for these facilities.
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. EARNINGS PER SHARE
Earnings per share has been computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per share." Accordingly, all
earnings per share information reflects the adoption of this statement.
<TABLE>
<CAPTION>
Quarter ended March 31, 1998
---------------------------------------------------------------
Basic earnings per share Earnings Shares Per Share
- ------------------------ -------- ------ ---------
<S> <C> <C> <C>
Earnings available to common shareholders $3,365,190 17,377,463 $0.19
Effect of dilutive securities:
Stock options and warrants -- 564,696 --
8.5% convertible debentures 12,961 71,110 --
------------------ ------------------- -------------------
Diluted earnings per share $3,378,151 18,013,269 $0.19
================== =================== ===================
</TABLE>
<TABLE>
<CAPTION>
Quarter ended March 31, 1997
---------------------------------------------------------------
Basic earnings per share Earnings Shares Per Share
- ------------------------ -------- ------ ---------
<S> <C> <C> <C>
Earnings available to common shareholders $814,600 17,109,978 $0.05
Effect of dilutive securities:
Stock options and warrants -- 189,881 --
------------------ ------------------- -------------------
Diluted earnings per share $814,600 17,299,859 $0.05
================== =================== ===================
</TABLE>
6. NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board 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.
7
<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
March 31, 1998, the Company operated 28 facilities in ten states with a capacity
of 3,069 residents. Of the facilities, two are owned, 16 are leased, and ten are
managed. In addition, the Company currently has under development 77 facilities
with a capacity of approximately 9,300 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 assisted living 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 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 March 31, 1998 compared to the quarter ended March 31, 1997
REVENUES. Resident operations revenue increased by $13.9 million for the
first quarter of 1998 compared to the same period in 1997. The increase is
comprised of $11.6 million from facilities leased for less than one year and
$2.3 million from fees related to new management contracts as a result of the
increase in the number of facilities under construction and in operation.
Development fee income was $5.9 million in the first quarter of 1998 versus
$3.2 million in the same period in 1997. The increase is primarily due to higher
number of projects in development in 1998 compared to the number of projects in
1997.
FACILITY EXPENSES. Facility expenses for the first quarter of 1998
increased by $11.1 million compared to the same period in 1997. The increase in
facility expenses is comprised of an increase in lease expense of $2.3 million
and an increase in operating expenses of $8.8 million.
Facility lease expense was $3.7 million in the first quarter of 1998
compared to $1.4 million in the same period in 1997. The increase of $2.3
million is primarily due to facilities leased less than one year.
Facility operating expenses were $15.4 million in the first quarter of 1998
compared to $6.6 million in the same period of 1997, an increase of $8.8
million. The increase is primarily due to $8.3 million of operating expenses
from facilities leased less than one year. Comparable facility operating
expenses increased $0.6 million.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
first quarter of 1998 increased to $4.5 million from $3.6 million in the same
period of 1997. As a percentage of operating revenue,
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The quarter ended March 31, 1998 compared to the quarter ended March 31, 1997
(continued)
general and administrative expenses in the first quarter of 1998 declined to
15.1% from 27.9% in the first 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 first
quarter of 1998 increased $0.2 million compared to the same period in 1997. The
increase is due primarily to $0.1 million of amortization of debt issuance costs
and $0.1 million of amortization of other intangible assets.
INTEREST INCOME. Interest income for the first quarter of 1998 was $2.3
million compared to $0.8 million for the same period in 1997. The increase is
primarily due to higher average cash balances due to the issuance in 1997 of
$115.0 million of 6 1/4% Convertible Subordinated Notes (the "Notes") (see Note
8 of the Notes to Financial Statements in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, as amended).
INTEREST EXPENSE. Interest expense for the first quarter of 1998 increased
to $1.8 million from $0.3 million for the same period in 1997. The increase is
primarily due to interest expense on the Notes.
INCOME TAXES. The Company's effective tax rate during the first quarter of
1998 was 41.6% 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 and cash equivalents at March 31, 1998 were $133.6 million compared to
$152.6 million at December 31, 1997, a decrease of approximately $19.0 million.
Cash provided by operations was $0.9 million in the first quarter of 1998
compared to a use of $3.0 million for the same period in 1997. The increase in
cash provided by operations is due primarily to an increase in net earnings
before depreciation and amortization of $2.8 million and a net increase in
current liabilities of $1.4 million which is primarily due to the acquisition of
new facilities.
Cash used in investing activities was $22.3 million in the first quarter of
1998 compared to a use of $1.1 million for the same period in 1997. The increase
in the use of cash is due primarily to an increase of $13.8 million in
restricted cash, primarily from $10.6 million paid for the acquisition of the
management and lease rights to four facilities, $3.6 million paid for the
lease rights to two facilities and $4.0 million paid as a lease deposit for two
facilities.
Cash flows provided by financing activities were $2.4 million in the first
quarter of 1998 compared to $0.5 million for the same period in 1997. This
increase is due primarily to the exercise of stock options and warrants.
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
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
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.
10
<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 February 1998, Natwest Securities Corporation converted $2.0 million
in principal amount of the Company's 8.5% Convertible Debentures (the
"Debentures") into 133,333 shares of the Company's Common Stock on a
$15.00 per share basis pursuant to the terms of such Debentures. The
shares were issued by the Company pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act").
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
Act:
<TABLE>
<CAPTION>
Shares of
Date exercised Common Stock Exercise Price
--------------------- ------------------- ----------------
<S> <C> <C> <C>
Robert A. Schneider January 14, 1998 7,858 $18.60
The Manold Group (1) January 18, 1998 11,605 17.75
Roger O. Peterkin III January 22, 1998 1,000 18.90
John DeShazo January 29, 1998 3,749 18.90
Roger O. Peterkin III February 2, 1998 1,000 18.90
Robert A. Schneider March 15, 1998 11,184 19.00
Neil G. Berkman March 19, 1998 6,000 20.80
Robert A. Schneider March 23, 1998 10,000 18.00
The Equity Group, Inc. March 25, 1998 11,875 22.40
Edward M. Mulherin March 26, 1998 3,000 20.65
-------------------
Total shares of Common Stock: 67,271
===================
</TABLE>
(1) The Manold Group is an affiliated group of 11 individuals
and trustees for the benefit of such affiliated persons.
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)
10.00 Assignment agreement dated January 1, 1998 between PhyMatrix Corp.
and CareMatrix of Massachusetts, Inc. (*)
10.01 Facility lease agreement dated as of January 1, 1998 between Continuum
Care of Connecticut, Inc. and CareMatrix of Ridgefield (SNF), Inc. (*)
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
10.02 Facility lease agreement dated as of March 16, 1998 between
Desert Amethyst Phase II Limited Partnership and CareMatrix of
the Inn at the Amethyst, Inc. (*)
10.03 Management agreement dated as of March 16, 1998 between
CareMatrix of the Inn at the Amethyst, Inc. and NetWest
Development Corporation (*)
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
27.3 Restated Financial Data Schedule
-------------------------------
(*) 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.
(b). Reports on Form 8-K
No report on Form 8-K was filed by the Registrant during the quarter
ended March 31, 1998.
12
<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
Exhibit 10.00
ASSIGNMENT AGREEMENT
--------------------
THIS ASSIGNMENT AGREEMENT (this "Agreement") made this 1st day of
January, 1998, by and between PhyMatrix Corp., a Delaware corporation
("PhyMatrix"), and CareMatrix of Massachusetts, Inc., a Delaware corporation
("CareMatrix").
W I T N E S S E T H
-------------------
WHEREAS, CareMatrix entered into that certain Management Agreement with
PBG Medical Mall SNF, Ltd. ("PBG") dated June 30, 1996 for the management of a
120 bed skilled nursing facility to be located in Palm Beach Gardens, Florida
(the "Management Agreement"); and
WHEREAS, CareMatrix assigned all of its rights and obligations under
the Management Agreement to PhyMatrix pursuant to an Assignment Agreement dated
July 1, 1996; and
WHEREAS, PhyMatrix desires to assign its rights and obligations under
the Management Agreement to CareMatrix and CareMatrix desires to assume such
rights and obligations.
NOW, THEREFORE, in consideration of the payment of Eight Hundred
Thousand ($800,000) Dollars and the premises and the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. PhyMatrix hereby assigns, sets over and transfers unto CareMatrix
to have and to hold from and after the date hereof, all of the
right, title and interest of PhyMatrix in, to and under the
Management Agreement, and CareMatrix hereby accepts the within
assignment and assumes and agrees with PhyMatrix, to perform and
comply with and to be bound by all of the terms, covenants,
agreements, provisions and conditions of the Management Agreement
on the part of PhyMatrix thereunder to be performed on and after
the date hereof, in the same manner and with the same force and
effect as if CareMatrix had originally executed the Management
Agreement.
2. This Agreement (i) shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns, (ii) shall be governed by the laws of the Commonwealth
of Massachusetts, and (iii) may
<PAGE>
not be modified orally, but only by a writing signed by each of
PhyMatrix and CareMatrix.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
PHYMATRIX CORP.
By: _________________________
Name:
Title:
CAREMATRIX OF MASSACHUSETTS, INC.
By: _________________________
Name:
Title:
Exhibit 10.01
FACILITY LEASE AGREEMENT
------------------------
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 1st day of
January, 1998 and is between CCC OF CONNECTICUT, INC. ("Lessor"), a Delaware
corporation which has an address at 197 First Avenue, Needham Heights,
Massachusetts 02194, and CAREMATRIX OF RIDGEFIELD (SNF), INC. ("Lessee"), a
Delaware corporation, having its principal office at 197 First Avenue, Needham,
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 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 benefitting any or all of the Land
and the Leased Improvements; and
(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");
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 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.
<PAGE>
1.2 Term. The term of this Lease shall consist of: the "Initial Term",
which shall commence on the date hereof (the "Commencement Date") and end on
December 31, 2017 (the "Expiration Date"); provided, however, that this Lease
may be sooner terminated as hereinafter provided. In addition, the Lessee shall
have the options 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 options to extend the Initial Term of this Lease
for four (4) additional periods (collectively, the "Extended Terms") as follows:
four (4) successive five (5) year periods for a maximum Term, if all such
options are exercised, which ends on December 31, 2033. 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
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DEFINITIONS AND RULES OF CONSTRUCTION
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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.
Additional Charges: As defined in Article 3.
Additional Land: As defined in Section 9.3.
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). For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
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Appurtenant Agreements: Collectively, all instruments, documents and
other agreements that now or hereafter create any utility, access or other
rights or appurtenances benefitting or relating to the Leased Property.
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 Rent: As defined in Section 3.1.
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, equipment 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 is needed or used to provide services not previously offered and
any expansion, construction, renovation or conversion in order to (i) increase
the unit capacity of a Facility, (ii) change the purpose for which such 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.
Cash Flow Rental Payments: As defined in Section 3.1.
Casualty: As defined in Section 13.1.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
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 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.
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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.
Contracts: All agreements, contracts, (including without limitation,
construction contracts, subcontracts, and architects' contracts,) contract
rights, warranties and representations, franchises, and records and books of
account benefitting, 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 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.
Current Management Agreement: The management agreement between Lessor
and Athena Health Care Associates, Inc.
Current Manager: Athena Health Care Associates, Inc.
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 Mortgage, including, without limitation, principal, 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.
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
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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 senior residential housing facility known as Chancellor
of Ridgefield on the Land (together with related parking and other amenities).
Fee Mortgage: As defined in Section 20.3.
Fee Mortgagee: As defined in Section 20.3.
Facility Expenses: Collectively, all costs, expenses and cash
disbursements of any type relating to or arising out of (i) the ownership of the
Leased Property and which are payable by Lessee hereunder including, without
limitation, Impositions, Capital Additions, Material Structural Work, other
repairs to and/or renovations of the Leased Property, expenses incurred in
connection with the maintenance of the Leased Property and Debt Service and (ii)
the operation of the Lessee's business on the Leased Property, including,
without limitation, the funding of any necessary reserves. To the extent that
any of such costs, including employee costs, relate to property other than the
Leased Property, such costs shall be equitably allocated between the Leased
Property and such other properties.
Failure to Operate: As defined in Article 16.
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 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
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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; provided, however, that the Fair Market Value of
the Leased Property shall in no case be less than the outstanding balance of the
mortgage loan evidenced by the Promissory Note (as defined herein) plus accrued
interest and prepayment penalties applicable from time to time.
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.
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.
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 units, rooms, beds and other facilities provided,
membership fees, entrance fees, meals served, catering, services performed,
space or facilities subleased or goods sold on or from the Leased Property,
including, without limitation, any revenues generated from gift shop, coffee
shop, vending machine, laundry machine, barber shop, beauty shop and all other
concessions 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, further, that there shall be
excluded or deducted (as the case may be) from such revenues:
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(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,
(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.
Hazardous Substances: Collectively, (i) 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; (ii) asbestos in any
form; (iii) urea formaldehyde foam insulation; (iv) polychlorinated biphenyls;
(v) radon gas; (vi) flammable explosives; (vii) radioactive materials; (viii)
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, residents and other occupants of the Leased Property
or of the owners or occupants of any other real property nearby the Leased
Property and (iv) 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.
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, rent, occupancy or hotel taxes, 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
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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 sale, exchange or other
disposition by the Lessor of the Leased Property or the proceeds thereof, 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, 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.
Indemnified Parties: As defined in Section 12.2.
Index: The rate of interest of actively traded marketable United States
Treasury Securities bearing a fixed rate of interest adjusted for a constant
maturity of five (5) years as calculated by the Federal Reserve Board.
Initial Term: As defined in Section 1.2.
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 Deposit: The sum of Eight Hundred Seventy Thousand Dollars
($870,000) to be paid simultaneously with the execution of this Lease.
Lease Documents: Collectively, this Lease, 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.
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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.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Commitment Fee: The sum of One Million Six Hundred Thousand
Dollars ($1,600,000).
Leasing Group: Collectively, the Lessee, 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, assisted living
and independent housing licensing statutes, ordinances, by-laws, codes, rules
and regulations), whether now or hereafter enacted, promulgated or issued by any
Governmental Authority, 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 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.
Lessor: As defined in the preamble of this Lease and its successors and
assigns.
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.
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.
Manager: Any Person who has entered into a Management Agreement with
the Lessee or any Sublessee, including, without limitation, the Current Manager.
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
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of a structural engineer and/or architect and/or (b) the issuance of a Permit;
that, in each instance, would cost FIFTY THOUSAND DOLLARS ($50,000) or more.
Medicaid: The medical assistance program established by Title XIX of
the Social Security Act (42 USC ss.1396 et seq.) and any statute succeeding
thereto.
Medicare: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC ss.1395 et seq.)
and any statute succeeding thereto.
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.
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: 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.
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
benefitting, 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
issued by any Governmental Authority 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.
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 were listed on the UCC lien search results delivered
to the Lessor at or prior to the execution and delivery of this Lease (and were
not required to be terminated as a condition of the execution and delivery of
this Lease), or which may hereafter be created in accordance with the terms
hereof.
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.
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Plans and Specifications: As defined in Section 13.1.
Primary Intended Use: The use of the Facility as a skilled nursing
facility with 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.
Reference Bank: NationsBank, N.A., or its successor.
Rent: Collectively, the Base Rent, the Additional Charges and all other
sums payable under this Lease and the other Lease Documents.
Rent Insurance Proceeds: As defined in Section 13.8.
Resident Agreements: Collectively, all Subleases now or hereafter
executed or entered into by or on behalf of any Person allowing such Person to
reside at the Facility.
Retainage: As defined in Section 13.1.
State: The state or commonwealth in which the Leased Property is
located.
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, 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, but excluding any resident of the Facility
under any Resident Agreement.
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.
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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.
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 units affected by
such Casualty or partial or temporary Taking.
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 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) 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; (h)
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; (i) all accounting terms
not specifically defined in the Lease Documents shall be construed in accordance
with GAAP and (j) all exhibits annexed to any of the Lease Documents as
referenced therein shall be deemed
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incorporated in such Lease Document by such annexation and/or reference.
ARTICLE 3
---------
RENT
----
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures.
The Lessee shall pay to the Lessor a base rent (the "Base Rent") per annum in
the amount of $1,413,992 ($117,832.67 per month), which amount shall not be less
than one hundred five percent (105%) of the amount of the installments of
principal and interest due pursuant to that certain promissory note in the
original principal amount of $13,000,000, from Lessor to Daiwa Finance Corp.
("Lessor's Lender") dated as of January 1, 1998 (the "Promissory Note") during
the applicable period, but specifically excluding any so-called "balloon
payments" due at maturity (the "Debt Service Rental Payments"). The Debt Service
Rental Payments shall be payable in arrears on the first day of each calendar
month, commencing on the first day of the month after full execution hereof;
provided, however, that in the event that the terms of the Promissory Note or
any related documents 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.
In the event of any refinancing of the Fee Mortgage now or hereafter
encumbering the Leased Property, which would increase the amount of Lessee's
Debt Service Rental Payment, Lessee shall have the right to terminate this Lease
upon not less than sixty (60) days written notice to Lessor.
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 Debt Service Rental Payments.
The Base Rent due and payable hereunder for any fractional month during
the Term shall be prorated accordingly.
3.2 Lease Deposit. The Lessee shall pay the Lease Deposit
simultaneously with the execution of this Lease. The Lease Deposit shall be held
in an interest bearing escrow account by an escrow agent acceptable to Lessor
and Lessee, and all income on such escrow account shall accrue to the benefit of
Lessee and be paid to Lessee. In the event that Lessee does not exercise its
option to renew the Lease for any of the Extended Terms, Lessee shall receive a
credit against Base Rent during the remaining months of the initial term or
prior Extended Term, as the case may be, in an amount sufficient to repay the
Lease Deposit to Lessee over the remaining months of the initial or prior
Extended Term of this Lease.
3.3 Leasing Commitment Fee. The Lessee shall pay to the Lessor the
Leasing Commitment Fee simultaneously with the execution of this Lease.
3.4 Additional Charges. Subject to the rights to contest as set forth
in Article 15, in addition to the Base 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 obligations under the
Permitted Encumbrances due from or payable by the owner of the Leased
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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. 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.
3.5 Intentionally Omitted.
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 and Additional Charges throughout the Term, without reduction,
abatement or offset, except as 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) 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 under this Lease
or any other Lease Document, (e) 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
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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 Agreement 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.
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.
4.1.2 Installment Elections. If any such Imposition may, at the option
of the taxpayer, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), 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, 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, any refund
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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 option, such funds shall be paid
over to the Lessor and/or retained by the Lessor and applied toward the Lease
Obligations in accordance with the Lease Documents.
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, 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.
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.
4.4 Utility Charges. The Lessee will pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone and other utilities
used in the Leased Property during the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease.
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.
4.6 Intentionally Omitted.
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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 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, 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 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 during the Term, unless the Lessee
provides the Lessor with an explanation (reasonably acceptable to the Lessor) as
to why such Tangible 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.
ARTICLE 6
---------
ENVIRONMENTAL MATTERS
---------------------
6.1 Maintenance of Leased Property. The Lessee covenants that, as long
as this Lease shall remain in force and effect, the Lessee:
(a) shall 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 and may 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.
6.2 Notice of Environmental Conditions. The Lessee shall provide the
Lessor with
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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) that is not in
compliance with any Environmental Law 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.
6.3 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 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 violates any Environmental Law and 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.
6.4 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,
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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;
(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 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, 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 of any of the rights and remedies
set forth in this Article 6, including, without limitation, any partial
undertaking on the part of the Lessor 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 to complete such actions taken or require
the Lessor to expend further sums to cure such non-compliance.
6.5 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 Lessor 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 hereunder or (c) the enforcement of the aforesaid
indemnification agreement; excluding, however, any matters resulting from the
Lessor's gross negligence or willful misconduct. 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.
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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.
6.6 Survival. The Lessee's liability for a breach of the provisions of
this Article shall survive any termination of this Lease.
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 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.
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.
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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 other Person sell or otherwise provide to
any patients, 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. In no event shall the Lessee 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. Said compliance shall specifically include, without
limitation, the obligation to cure any violation of open space requirements and
comply with the conditions of any variance granted in connection therewith upon
the issuance of any notice of violation by The Town of Ridgefield.
7.4 Management Agreements. From and after the Commencement Date, the
Lessee shall not enter into any Management Agreement other than the Current
Management Agreement without the prior written approval of the Lessor, in each
instance, which approval shall not be unreasonably withheld, provided, however,
that the Lessee may enter into a Management Agreement with an Affiliate of the
Lessee without the approval of the Lessor. 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 Manager or
change in the ownership or control of the Manager, (b) the termination of any
Management Agreement (other than 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 (except to an Affiliate of the Lessee)
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or (d) any material amendment of the Management Agreement. In addition, the
Lessee shall, at its 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 shall furnish to the Lessor, within
three (3) days after receipt thereof, or after the mailing or service thereof by
the Lessee, as the case may be, a copy of each notice of default which the
Lessee 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 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, may, at their respective options (and without
any obligation to do so), after three (3) days' prior notice to the Lessee
(except in the case of an emergency in which event no notice shall be required)
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 or such
receiver and all costs and expenses reasonably incurred in connection therewith
(including, without limitation, attorneys' fees and expenses and court costs),
shall be a demand obligation of the Lessee to the Lessor or such receiver, and,
the Lessor 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.
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
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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,
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 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.
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
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), 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) 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.
8.2 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,
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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 limitation, any change in the
size 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.
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.
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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.
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 the 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 based on the Lessor's then existing terms
and prevailing conditions 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 Lessor's then standard construction loan requirements and
procedures, which may include, without limitation, 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
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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;
(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)
contemplated by subsection (f) above, opinions of counsel, appraisals, surveys,
certified copies
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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 Section 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 Section 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 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.
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ARTICLE 10
----------
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 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
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any of the foregoing to perform their respective obligations under the Lease
Documents;
(b) against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use, occupancy,
possession or operation thereof; or
(c) 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 this Lease);
(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.
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 any Affiliate of the Lessee that is not
fully subordinated to the Lease Obligations pursuant to a written agreement in
form and substance acceptable to the Lessor.
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 Financials Complete and Accurate. The financial statements of
each member of the Leasing Group given to the Lessor in connection with the
execution and delivery
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of this Lease were true, complete and accurate, in all material respects, and
fairly presented the financial condition of each such member of the Leasing
Group as of the date thereof and for the periods covered thereby, having been
prepared in accordance with GAAP and such financial statements disclosed all
liabilities, including, without limitation, contingent liabilities, of each such
member of the Leasing Group.
10.1.14 Pending Actions. 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 the Lessee before any Governmental Authority
which could prevent or hinder the consummation of the transaction 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 transaction contemplated
thereunder.
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 Intentionally Omitted.
10.1.20 Intentionally Omitted.
10.1.21 Intentionally Omitted.
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);
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(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.
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, Massachusetts 02194 (the "Principal Place of Business").
10.1.29 Labor Matters. There are no proceedings now pending, nor, to
the best of the Lessee's knowledge, threatened with respect to the operation of
the Facility before the National Labor Relations Board, State Commission on
Human Rights and Opportunities, State Department of Labor, U.S. Department of
Labor or any other Governmental Authority having jurisdiction of employee rights
with respect to hiring, tenure and conditions of employment, and no member of
the Leasing Group has experienced any material controversy with any Facility
administrator or other employee of similar stature or with any labor
organization.
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
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infringement of any, and subject to no restriction, lien, encumbrance, right,
title or interest in others.
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, 10.1.15, 10.1.22, 10.1.28, 10.1.29 and in the
second sentence of Section 10.1.12 shall not constitute continuing
representations and warranties throughout the Term.
ARTICLE 11
----------
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 mortgagee of the Leased Property.
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 unaudited Consolidated Financials
for each of (x) the Lessee and (y) any Sublessee for the preceding fiscal year
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 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; and (iii) a statement certified as true and correct by the Lessee setting
forth all Subleases (excluding Resident Agreements) 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
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pertaining to such Subleases as may be reasonably requested by the Lessor.
(B) 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 by any Governmental Authority, including, without
limitation, any notices pertaining to any delinquency in, or proposed revision
of, the Lessee's or any 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 and the response(s) thereto made by or on behalf of the
Lessee or any Sublessee.
(C) 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 to any
Governmental Authority with respect to the Leased Property.
(D) 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.
(E) 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.
(F) Official Actions. Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any Governmental Authority 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.
(G) 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.
(H) Adverse Developments. Promptly after the Lessee acquires knowledge
thereof, written notice of:
(i) the potential termination of any Permit necessary for the
operation of the Leased Property;
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(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; and
(iv) 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.
(I) 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.
(J) 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.
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.
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
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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 Intentionally Omitted.
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. 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 renovations or other construction relating to
the Leased Property, 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 and (vi)
the Appurtenant Agreements.
11.4.4 Books And Records. The Lessee shall cause to be kept and
maintained, and shall permit the Lessor and its 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).
11.4.5 Intentionally Omitted.
11.4.6 Conduct of its Business. The Lessee will maintain, and cause any
Sublessee and any Manager 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 Sublessee shall not enter
into any other business or venture during the Term or such time as the Lessee or
any 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
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Business. The Lessee shall maintain all books and records relating to its
business, solely at its Principal Place of 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 including Section 11.5.3, any
payments to be made by the Lessee to (a) any member of the Leasing Group (or any
Affiliate of any 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 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 and its 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:
11.5.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided in Section 19.2 or in any of the other 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
or the Leased Property; provided, however, that this restriction shall not apply
to the Permitted Encumbrances that may be created after the date hereof pursuant
to the Lease Documents;
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(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.
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 Intentionally Omitted.
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,
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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 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
----------
INSURANCE AND INDEMNITY
-----------------------
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 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 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 the Leased Property,
in limits acceptable to the Lessor;
(d) 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;
(e) comprehensive general public liability insurance including
coverages commonly found in the Broad Form Commercial Liability Endorsements
with amounts not less than TWENTY-FOUR MILLION DOLLARS ($24,000,000) of umbrella
coverage;
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(f) 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;
(g) 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
(h) 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
or better by Standard & Poors.
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 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:
(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.
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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)
ninety (90) 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 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 and court costs), 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.
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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
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), 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
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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. Any
amounts which become payable by the Lessee under this Section 12.2.1 shall be a
demand 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.
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 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 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
-----------------
13.1 Restoration Following Fire or Other Casualty.
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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, subject to the terms of this Article 13, 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. All Work shall be performed and completed in
accordance with all Legal Requirements and the other requirements of this Lease
within one hundred and 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 and 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 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;
(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
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(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 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. 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 written approval of the Plans and Specifications (which
approval shall not be unreasonably withheld) 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
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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
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
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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:
(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,
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except as provided for in Section 13.2.2, the Lessor (or Lessor's Lender for so
long as the Promissory Note remains outstanding) 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 and all of the requirements of Lessor's Lender as set forth
in the mortgage deed securing the Promissory Note 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 or Lessor's Lender's
satisfaction that the Lessee has the financial ability to satisfy the Lease
Obligations during such repair or restoration; and
(d) no Sublease (excluding Resident Agreements) 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 and 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 Leased Property
from the Lessor for a purchase price equal to 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, 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 (subject to the provisions
of the last sentence of this Section 13.2.2) 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 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
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determined as of the day immediately prior to such Casualty and prior to any
other Casualty which has not been fully repaired. In such event Lessee exercises
its option to terminate hereunder, Lessor's Lender shall be permitted to retain
insurance proceeds in order to pay off its mortgage loan on the Leased Property.
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. If such termination becomes effective, the Lessor shall
assign to the Lessee any outstanding insurance claims.
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.
13.8 Application of Rent Loss and/or Business Interruption Insurance.
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,
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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
------------
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.
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 14.5 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 Fair
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Market Value of the Leased Property minus the Fair Market Added Value, with the
Fair Market Value of the Leased Property 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 unit 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 to the
extent that the Award is made available to Lessor by its lender, 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 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,
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, 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; provided, however, if this Lease is terminated as a
result of a Taking, the Lessee's obligation to so reimburse the Lessor shall be
diminished by the amount of the Award, if any, received by the Lessor which is
in excess of the Lessor's Investment.
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ARTICLE 15
----------
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, 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 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 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
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contest and any loss resulting therefrom and in the enforcement of this
indemnification.
ARTICLE 16
----------
DEFAULT
-------
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 ______(___) days following the due date
of such payment;
(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 (p) 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 and (iii) 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 any member of the Leasing Group 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 any member of the Leasing Group, a receiver or trustee
for such member or for any of its 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 any member of the Leasing Group
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;
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(h) 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);
(i) 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;
(j) if one or more judgments against the Lessee or any Sublessee or
attachments against the Lessee's interest or any 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;
(k) 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 member of the Leasing Group to
operate the Facility;
(l) 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 construction or operation of
the Facility in accordance with the Primary Intended Use or the loss of any
Permit under any other circumstances under which any member of the Leasing Group
is required to cease the operation of the Facility in accordance with the
Primary Intended Use;
(m) 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; and
(n) the appointment of a temporary manager (or operator) for the Leased
Property by any Governmental Authority.
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
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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' fee 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 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 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 the later to
occur of termination,
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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 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 determination 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.
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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) 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 Lease 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 Lease 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 or its
designee and/or (ii) arrange for the transfer or assignment of such Permits and
Contracts to the Lessor or its 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 or its 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 and third party payors of any applications, petitions,
statements, notices, requests, assignments and other documents or instruments
requested by the Lessor. 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 or its 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 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.
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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 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 any of the terms 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
deed with covenants only against acts of the Lessor conveying the entire
interest of the Lessor in and to the Leased Property to the Lessee subject to
all Legal Requirements, all of the matters described in clauses (a), (b), (e)
and (g) of Section 11.5.2, Impositions, any Liens created by the Lessee, any
Liens created in accordance 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
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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 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.
ARTICLE 19
----------
SUBLETTING AND ASSIGNMENT
-------------------------
19.1 Subletting and Assignment. The Lessee may not, without the prior
written consent of the Lessor, 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,
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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
more than fifty percent (50%), in the aggregate, of the capital stock 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 Attornment. The Lessee shall insert in each Sublease approved by
the Lessor 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 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.
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 the 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.
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 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 any future Encumbrance executes a
non-disturbance agreement in conformity with the provisions of Section 20.4. To
the extent that any such Encumbrance consists of a mortgage or deed of trust
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<PAGE>
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 and 14
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 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 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
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<PAGE>
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 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.
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:
If to the Lessee: CareMatrix of Ridgefield (SNF), Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: James M. Clary, III, Esq.
With a copy to: CareMatrix of Ridgefield (SNF), Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
If to the Lessor: CCC of Connecticut, Inc.
197 First Avenue
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<PAGE>
Needham Heights, Massachusetts 02194
Attn: President
With copies to: CCC of Connecticut, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
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.
ARTICLE 23
----------
INTENTIONALLY OMITTED
---------------------
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 all 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.
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
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<PAGE>
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 Permits and/or the Contracts. References herein and in the other
Lease Documents to any of the Lease Documents, the Management 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.
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.
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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. 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. 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.
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<PAGE>
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.
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.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and attested by their respective officers thereunto duly authorized.
WITNESSES: LESSEE:
- ---------- -------
CAREMATRIX OF RIDGEFIELD (SNF), INC.,
a Delaware corporation
By:
----------------------------------
Name: Name:
Title:
WITNESS: LESSOR:
- -------- -------
CCC OF CONNECTICUT, INC., a Delaware
corporation
By:
----------------------------------
Name: Name:
Title:
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<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION OF THE LAND
-----------------------------
<PAGE>
EXHIBIT B
---------
PERMITTED ENCUMBRANCES
----------------------
1. Inchoate or statutory liens for taxes not yet delinquent.
2. An easement for highway purposes in favor of the State of Connecticut
as described in Volume 328, Page 615 of the Ridgefield Land Records
3. An electric distribution easement in favor of the Connecticut Light &
Power Company as contained in Volume 474, Page 426 of the Ridgefield
Land Records.
4. Permanent easement for ingress and egress and the installation of
utilities and 20 foot wide permanent easement for the installation of
maintenance of a water transmission line in favor of George L. Bakes as
described in volume 454, Page 1021 of the Ridgefield Land Records.
5. Right to install, maintain, repair and replace a potable water system
in favor of the Ridgefield Water Supply Company as contained in Volume
494, Page 203 of the Ridgefield Land Records.
6. Any other matter of record as of the Commencement Date of the Lease.
<PAGE>
F A C I L I T Y L E A S E A G R E E M E N T
CCC OF CONNECTICUT, INC.
Lessor
AND
CAREMATRIX OF RIDGEFIELD (SNF), INC.
as
Lessee
Dated as of January 1, 1998
For Premises Located At
642 Danbury Road
Ridgefield, Connecticut
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS.................................................1
1.1 Leased Property........................................................................1
1.2 Term...................................................................................1
1.3 Extended Terms.........................................................................2
ARTICLE 2 DEFINITIONS AND RULES OF CONSTRUCTION...........................................................2
2.1 Definitions............................................................................2
2.2 Rules of Construction.................................................................11
ARTICLE 3 RENT...........................................................................................12
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures.......................12
3.2 Intentionally Omitted.................................................................12
3.3 Intentionally Omitted.................................................................12
3.4 Additional Charges....................................................................12
3.5 Intentionally Omitted.................................................................13
3.6 Net Lease.............................................................................13
3.7 No Lessee Termination or Offset.......................................................13
3.7.1 No Termination...............................................................13
3.7.2 Waiver.......................................................................13
3.7.3 Independent Covenants........................................................13
3.8 Abatement of Rent Limited.............................................................13
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS..............................................14
4.1 Payment of Impositions................................................................14
4.1.1 Lessee To Pay................................................................14
4.1.2 Installment Elections........................................................14
4.1.3 Returns and Reports..........................................................14
4.1.4 Refunds......................................................................14
4.1.5 Protest......................................................................14
4.2 Notice of Impositions.................................................................15
4.3 Adjustment of Impositions.............................................................15
4.4 Utility Charges.......................................................................15
4.5 Insurance Premiums....................................................................15
4.6 Intentionally Omitted.................................................................15
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY; INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY..............................................................................15
5.1 Ownership of the Leased Property......................................................15
5.2 Personal Property; Removal and Replacement of Personal Property.......................15
5.2.1 Lessee To Equip Facility.....................................................15
5.2.2 Sufficient Personal Property.................................................16
ARTICLE 6 ENVIRONMENTAL MATTERS..........................................................................16
6.1 Maintenance of Leased Property........................................................16
6.2 Notice of Environmental Conditions....................................................16
6.3 The Lessee's Agreement To Take Remedial Actions.......................................16
(i)
<PAGE>
6.4 The Lessor's Rights To Inspect The Leased Property and Take Remedial Actions..........17
6.5 Environmental Indemnification.........................................................18
6.6 Survival..............................................................................18
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY; MANAGEMENT AGREEMENTS....................................18
7.1 Condition of the Leased Property......................................................18
7.2 Use of the Leased Property; Compliance; Management....................................19
7.2.1 Obligation to Operate........................................................19
7.2.2 Permitted Uses...............................................................19
7.2.3 Compliance With Insurance Requirements.......................................19
7.2.4 No Waste.....................................................................19
7.2.5 No Impairment................................................................19
7.2.6 No Liens.....................................................................19
7.3 Compliance with Legal Requirements....................................................19
7.4 Management Agreements.................................................................20
ARTICLE 8 REPAIRS; RESTRICTIONS..........................................................................21
8.1 Maintenance and Repair................................................................21
8.1.1 Lessee's Responsibility........................................................21
8.1.2 No Lessor Obligation...........................................................21
8.1.3 Lessee May Not Obligate Lessor.................................................21
8.2 Encroachments; Title Restrictions.....................................................22
ARTICLE 9 MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS.................................................22
9.1 Lessor's Approval.....................................................................22
9.2 General Provisions as to Capital Additions and Certain Material Structural Work.......22
9.2.1 No Liens.....................................................................23
9.2.2 Lessee's Proposal Regarding Capital Additions and Material Structural Work...23
9.2.3 Lessor's Options Regarding Capital Additions and Material Structural Work....23
9.2.4 Lessor May Elect to Finance Capital Additions or Material Structural Work....23
9.3 Capital Additions and Material Structural Work Financed by
Lessor................................................................................23
9.3.1 Lessee's Financing Request...................................................23
9.3.2 Lessor's General Requirements................................................23
9.3.3 Payment of Costs.............................................................25
9.4 General Limitations...................................................................25
9.5 Non-Capital Additions.................................................................25
ARTICLE 10 WARRANTIES AND REPRESENTATIONS.................................................................26
10.1 Representations and Warranties........................................................26
10.1.1 Existence; Power; Qualification..............................................26
10.1.2 Valid and Binding............................................................26
10.1.3 Single Purpose...............................................................26
10.1.4 No Violation.................................................................26
(ii)
<PAGE>
10.1.5 Consents and Approvals.......................................................26
10.1.6 No Liens or Insolvency Proceedings...........................................26
10.1.7 No Burdensome Agreements.....................................................27
10.1.8 Commercial Acts..............................................................27
10.1.9 Adequate Capital, Not Insolvent..............................................27
10.1.10 Not Delinquent...............................................................27
10.1.11 No Affiliate Debt............................................................27
10.1.12 Taxes Current................................................................27
10.1.13 Financials Complete and Accurate.............................................28
10.1.14 Pending Actions..............................................................28
10.1.15 Compliance with Legal Requirements...........................................28
10.1.16 Intentionally Omitted........................................................28
10.1.17 Intentionally Omitted........................................................28
10.1.18 Intentionally Omitted........................................................28
10.1.19 Intentionally Omitted........................................................28
10.1.20 Intentionally Omitted........................................................28
10.1.21 Intentionally Omitted........................................................28
10.1.22 ERISA........................................................................28
10.1.23 No Broker....................................................................28
10.1.24 No Improper Payments.........................................................28
10.1.25 Nothing Omitted..............................................................29
10.1.26 No Margin Security...........................................................29
10.1.27 No Default...................................................................29
10.1.28 Principal Place of Business..................................................29
10.1.29 Labor Matters................................................................29
10.1.30 Intellectual Property........................................................29
10.2 Continuing Effect of Representations and Warranties...................................30
ARTICLE 11 FINANCIAL AND OTHER COVENANTS..................................................................30
11.1 Status Certificates...................................................................30
11.2 Financial Statements; Reports; Notice and Information.................................30
11.2.1 Obligation To Furnish........................................................30
11.2.2 Responsible Officer..........................................................32
11.2.3 No Material Omission.........................................................32
11.2.4 Confidentiality..............................................................32
11.3 Intentionally Omitted.................................................................33
11.4 Affirmative Covenants.................................................................33
11.4.1 Maintenance of Existence.....................................................33
11.4.2 Materials....................................................................33
11.4.3 Compliance With Legal Requirements And Applicable Agreements.................33
11.4.4 Books And Records............................................................33
11.4.5 Intentionally Omitted........................................................33
11.4.6 Conduct of its Business......................................................33
11.4.7 Address......................................................................33
11.4.8 Subordination of Affiliate Transactions......................................33
11.4.9 Inspection...................................................................34
11.4.10 Additional Property..........................................................34
11.5 Additional Negative Covenants.........................................................34
11.5.1 Restrictions Relating to Lessee..............................................34
(iii)
<PAGE>
11.5.2 No Liens.....................................................................34
11.5.3 Limits on Affiliate Transactions.............................................35
11.5.4 Intentionally Omitted........................................................35
11.5.5 No Default...................................................................35
11.5.6 Intentionally Omitted........................................................35
11.5.7 Intentionally Omitted........................................................35
11.5.8 ERISA........................................................................35
11.5.9 Forgiveness of Indebtedness..................................................35
11.5.10 Value of Assets..............................................................35
11.5.11 Changes in Fiscal Year and Accounting Procedures.............................35
ARTICLE 12 INSURANCE AND INDEMNITY........................................................................35
12.1 General Insurance Requirements........................................................35
12.1.1 Types and Amounts of Insurance...............................................35
12.1.2 Insurance Company Requirements...............................................36
12.1.3 Policy Requirements..........................................................36
12.1.4 Notices; Certificates and Policies...........................................37
12.1.5 Lessor's Right to Place Insurance............................................37
12.1.6 Payment of Proceeds..........................................................38
12.1.7 Irrevocable Power of Attorney................................................38
12.1.8 Blanket Policies.............................................................38
12.1.9 No Separate Insurance........................................................38
12.1.10 Assignment of Unearned Premiums..............................................38
12.2 Indemnity.............................................................................39
12.2.1 Indemnification..............................................................39
12.2.2 Indemnified Parties..........................................................39
12.2.3 Limitation on Lessor Liability...............................................39
12.2.4 Risk of Loss.................................................................40
ARTICLE 13 FIRE AND CASUALTY..............................................................................40
13.1 Restoration Following Fire or Other Casualty..........................................40
13.1.1 Following Fire or Casualty...................................................40
13.1.2 Procedures...................................................................40
13.1.3 Disbursement of Insurance Proceeds...........................................41
13.2 Disposition of Insurance Proceeds.....................................................44
13.2.1 Proceeds To Be Released to Pay For Work......................................44
13.2.2 Proceeds Not To Be Released..................................................44
13.2.3 Lessee Responsible for Short-Fall............................................45
13.3 Tangible Personal Property............................................................45
13.4 Restoration of Certain Improvements and the Tangible Personal
Property..............................................................................45
13.5 No Abatement of Rent..................................................................45
13.6 Termination of Certain Rights.........................................................45
13.7 Waiver................................................................................45
13.8 Application of Rent Loss and/or Business Interruption Insurance.......................46
13.9 Obligation To Account.................................................................46
ARTICLE 14 CONDEMNATION...................................................................................46
14.1 Parties' Rights and Obligations.......................................................46
14.2 Total Taking..........................................................................46
(iv)
<PAGE>
14.3 Partial or Temporary Taking...........................................................46
14.4 Restoration...........................................................................47
14.5 Award Distribution....................................................................47
14.6 Control of Proceedings................................................................47
ARTICLE 15 PERMITTED CONTESTS.............................................................................48
15.1 Lessee's Right to Contest.............................................................48
15.2 Lessor's Cooperation..................................................................48
15.3 Lessee's Indemnity....................................................................48
ARTICLE 16 DEFAULT........................................................................................49
16.1 Events of Default.....................................................................49
16.2 Remedies..............................................................................50
16.3 Damages...............................................................................51
16.4 Lessee Waivers........................................................................52
16.5 Application of Funds..................................................................52
16.6 Intentionally Omitted.................................................................52
16.7 Lessor's Right to Cure................................................................52
16.8 No Waiver By Lessor...................................................................52
16.9 Right of Forbearance..................................................................53
16.10 Cumulative Remedies...................................................................53
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER............................................53
17.1 Surrender.............................................................................53
17.2 Transfer of Permits and Contracts.....................................................54
17.3 No Acceptance of Surrender............................................................54
17.4 Holding Over..........................................................................54
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY................................................................55
18.1 Purchase of the Leased Property.......................................................55
18.2 Appraisal.............................................................................55
18.2.1 Designation of Appraisers....................................................55
18.2.2 Appraisal Process............................................................55
18.2.3 Specific Enforcement and Costs...............................................56
ARTICLE 19 SUBLETTING AND ASSIGNMENT......................................................................56
19.1 Subletting and Assignment.............................................................56
19.3 Attornment............................................................................56
ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR....................................................57
20.1 No Merger of Title....................................................................57
20.2 Transfers By Lessor...................................................................57
20.3 Lessor May Grant Liens................................................................57
20.4 Subordination and Non-Disturbance.....................................................57
ARTICLE 21 LESSOR OBLIGATIONS.............................................................................58
21.1 Quiet Enjoyment.......................................................................58
21.2 Memorandum of Lease...................................................................58
21.3 Default by Lessor.....................................................................58
(v)
<PAGE>
ARTICLE 22 NOTICES........................................................................................59
ARTICLE 23 INTENTIONALLY OMITTED..........................................................................59
ARTICLE 24 MISCELLANEOUS PROVISIONS.......................................................................59
24.1 Broker's Fee Indemnification..........................................................59
24.2 No Joint Venture or Partnership.......................................................60
24.3 Amendments, Waivers and Modifications.................................................60
24.4 Captions and Headings.................................................................60
24.5 Time is of the Essence................................................................60
24.6 Counterparts..........................................................................60
24.7 Entire Agreement......................................................................61
24.8 WAIVER OF JURY TRIAL..................................................................61
24.9 Successors and Assigns................................................................61
24.10 No Third Party Beneficiaries..........................................................61
24.11 Governing Law.........................................................................61
24.12 General...............................................................................62
EXHIBIT A LEGAL DESCRIPTION OF THE LAND..................................................................63
EXHIBIT B PERMITTED ENCUMBRANCES.........................................................................64
</TABLE>
(vi)
Exhibit 10.02
F A C I L I T Y L E A S E A G R E E M E N T
DESERT AMETHYST PHASE II LIMITED PARTNERSHIP
as
Lessor
AND
CAREMATRIX OF THE INN AT THE AMETHYST, INC.
as
Lessee
Dated as of March 16, 1998
For Premises Located At
18172 North 91st Avenue
Peoria, AZ 85832
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS.................................................1
1.1 Leased Property.................................................................................1
1.2 Term............................................................................................2
1.3 Extended Terms..................................................................................2
ARTICLE 2 DEFINITIONS AND RULES OF CONSTRUCTION...........................................................2
2.1 Definitions.....................................................................................2
2.2 Rules of Construction..........................................................................18
ARTICLE 3 RENT...........................................................................................18
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures................................18
3.2 Additional Rent. .............................................................................19
3.3 Additional Charges.............................................................................20
3.4 Net Lease......................................................................................20
3.5 No Lessee Termination or Offset................................................................20
3.5.1 No Termination........................................................................20
3.5.2 Waiver................................................................................21
3.5.3 Independent Covenants.................................................................21
3.6 Abatement of Rent Limited......................................................................21
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS..............................................22
4.1 Payment of Impositions.........................................................................22
4.1.1 Lessee To Pay.........................................................................22
4.1.2 Installment Elections.................................................................22
4.1.3 Returns and Reports...................................................................22
4.1.4 Refunds...............................................................................23
4.1.5 Protest...............................................................................23
4.2 Notice of Impositions..........................................................................23
4.3 Adjustment of Impositions......................................................................23
4.4 Utility Charges................................................................................23
4.5 Insurance Premiums.............................................................................23
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY..............................................................................24
5.1 Ownership of the Leased Property...............................................................24
5.2 Personal Property; Removal and Replacement of Personal Property................................24
5.2.1 Lessee To Equip Facility..............................................................24
5.2.2 Sufficient Personal Property..........................................................24
5.2.3 Removal and Replacement; Lessor's Option to Purchase..................................24
(i)
<PAGE>
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS.................................................................25
6.1 Security for Lessee's Obligations..............................................................25
6.1.1 Security..............................................................................25
6.1.2 Purchase-Money Security Interests and Equipment Leases................................25
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS..........................................................................26
7.1 Condition of the Leased Property...............................................................26
7.2 Use of the Leased Property; Compliance; Management.............................................26
7.2.1 Obligation to Operate.................................................................26
7.2.2 Permitted Uses........................................................................26
7.2.3 Compliance With Insurance Requirements................................................26
7.2.4 No Waste..............................................................................27
7.2.5 No Impairment.........................................................................27
7.2.6 No Liens..............................................................................27
7.3 Compliance with Legal Requirements.............................................................27
7.4 Management Agreements..........................................................................27
ARTICLE 8 REPAIRS; RESTRICTIONS..........................................................................29
8.1 Maintenance and Repair.........................................................................29
8.1.1 Lessee's Responsibility.................................................................29
8.1.2 No Lessor Obligation....................................................................30
8.1.3 Lessee May Not Obligate Lessor..........................................................30
ARTICLE 9 MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS.................................................30
9.1 Lessor's Approval..............................................................................30
9.2 General Provisions as to Capital Additions and Certain Material Structural
Work...........................................................................................30
9.2.1 No Liens..............................................................................31
9.2.2 Lessee's Proposal Regarding Capital Additions and Material
Structural Work.......................................................................31
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work.......................................................................31
9.2.4 Lessor May Elect to Finance Capital Additions or Material
Structural Work.......................................................................31
9.3 Capital Additions and Material Structural Work Financed by Lessor..............................31
9.3.1 Lessee's Financing Request............................................................31
9.3.2 Lessor's General Requirements.........................................................32
9.3.3 Payment of Costs......................................................................33
9.4 General Limitations............................................................................34
9.5 Non-Capital Additions..........................................................................34
(ii)
<PAGE>
ARTICLE 10 WARRANTIES AND REPRESENTATIONS.................................................................35
10.1 Representations and Warranties.................................................................35
10.1.1 Existence; Power; Qualification.......................................................35
10.1.2 Valid and Binding.....................................................................35
10.1.3 Single Purpose........................................................................35
10.1.4 No Violation..........................................................................35
10.1.5 Consents and Approvals................................................................35
10.1.6 No Liens or Insolvency Proceedings....................................................36
10.1.7 No Burdensome Agreements..............................................................36
10.1.8 Commercial Acts.......................................................................36
10.1.9 Adequate Capital, Not Insolvent.......................................................36
10.1.10 Not Delinquent....................................................................36
10.1.11 No Affiliate Debt.................................................................36
10.1.12 Taxes Current.....................................................................37
10.1.13 Financials Complete and Accurate..................................................37
10.1.14 Pending Actions, Notices and Reports..............................................37
10.1.15 Compliance with Legal and Other Requirements......................................37
10.1.16 ERISA.............................................................................37
10.1.17 No Broker.........................................................................37
10.1.18 No Improper Payments..............................................................38
10.1.19 Nothing Omitted...................................................................38
10.1.20 No Default........................................................................38
10.1.21 Principal Place of Business.......................................................38
10.1.22 Management Agreements.............................................................38
10.2 Continuing Effect of Representations and Warranties............................................38
ARTICLE 11 FINANCIAL AND OTHER COVENANTS..................................................................39
11.1 Status Certificates............................................................................39
11.2 Financial Statements; Reports; Notice and Information..........................................39
11.2.1 Obligation To Furnish.................................................................39
11.2.2 Responsible Officer...................................................................41
11.2.3 No Material Omission..................................................................42
11.2.4 Confidentiality.......................................................................42
11.3 Affirmative Covenants..........................................................................42
11.3.1 Maintenance of Existence..............................................................42
11.3.2 Materials.............................................................................43
11.3.3 Compliance With Legal Requirements And Applicable Agreements..........................43
11.3.4 Books And Records.....................................................................43
11.3.5 Conduct of its Business...............................................................43
11.3.6 Address...............................................................................44
11.3.7 Subordination of Affiliate Transactions...............................................44
11.3.8 Inspection............................................................................44
11.3.9 HUD Financing Documents...............................................................44
(iii)
<PAGE>
11.4 Additional Negative Covenants..................................................................45
11.4.1 Restrictions Relating to Lessee.......................................................45
11.4.2 No Liens..............................................................................45
11.4.3 Limits on Affiliate Transactions......................................................45
11.4.4 No Default............................................................................46
11.4.5 ERISA.................................................................................46
11.4.6 Forgiveness of Indebtedness...........................................................46
11.4.7 Value of Assets.......................................................................46
11.4.8 Changes in Fiscal Year and Accounting Procedures......................................46
ARTICLE 12 INSURANCE AND INDEMNITY........................................................................46
12.1 General Insurance Requirements.................................................................46
12.1.1 Types and Amounts of Insurance........................................................46
12.1.2 Insurance Company Requirements........................................................47
12.1.3 Policy Requirements...................................................................48
12.1.4 Notices; Certificates and Policies....................................................48
12.1.5 Lessor's Right to Place Insurance.....................................................49
12.1.6 Payment of Proceeds...................................................................49
12.1.7 Irrevocable Power of Attorney.........................................................49
12.1.8 Blanket Policies......................................................................49
12.1.9 No Separate Insurance.................................................................50
12.1.10 Assignment of Unearned Premiums...................................................50
12.2 Indemnity......................................................................................50
12.2.1 Indemnification.......................................................................50
12.2.2 Indemnified Parties...................................................................51
12.2.3 Limitation on Lessor Liability........................................................51
12.2.4 Risk of Loss..........................................................................51
ARTICLE 13 FIRE AND CASUALTY..............................................................................52
13.1 Restoration Following Fire or Other Casualty...................................................52
13.1.1 Following Fire or Casualty............................................................52
13.1.2 Procedures............................................................................52
13.1.3 Disbursement of Insurance Proceeds....................................................53
13.2 Disposition of Insurance Proceeds..............................................................57
13.2.1 Proceeds To Be Released to Pay For Work...............................................57
13.2.2 Proceeds Not To Be Released...........................................................57
13.2.3 Lessee Responsible for Short-Fall.....................................................58
13.3 Tangible Personal Property.....................................................................58
13.4 Restoration of Certain Improvements and the Tangible Personal Property.........................59
13.5 No Abatement of Rent...........................................................................59
13.6 Termination of Certain Rights..................................................................59
13.7 Waiver.........................................................................................59
13.8 Application of Rent Loss and/or Business Interruption Insurance................................59
13.9 Obligation To Account..........................................................................60
(iv)
<PAGE>
ARTICLE 14 CONDEMNATION...................................................................................60
14.1 Parties' Rights and Obligations................................................................60
14.2 Total Taking...................................................................................60
14.3 Partial or Temporary Taking....................................................................60
14.4 Restoration....................................................................................61
14.5 Award Distribution.............................................................................62
14.6 Control of Proceedings.........................................................................62
ARTICLE 15 PERMITTED CONTESTS.............................................................................62
15.1 Lessee's Right to Contest......................................................................62
15.2 Lessor's Cooperation...........................................................................63
15.3 Lessee's Indemnity.............................................................................63
ARTICLE 16 DEFAULT........................................................................................63
16.1 Events of Default..............................................................................63
16.2 Remedies.......................................................................................65
16.3 Damages........................................................................................66
16.4 Lessee Waivers.................................................................................67
16.5 Application of Funds...........................................................................67
16.6 Lessor's Right to Cure.........................................................................67
16.7 No Waiver By Lessor............................................................................67
16.8 Right of Forbearance...........................................................................68
16.9 Cumulative Remedies............................................................................68
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER............................................69
17.1 Surrender......................................................................................69
17.2 Transfer of Permits and Contracts..............................................................69
17.3 No Acceptance of Surrender.....................................................................70
17.4 Holding Over...................................................................................70
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY................................................................70
18.1 Purchase of the Leased Property................................................................70
18.2 Appraisal......................................................................................71
18.2.1 Designation of Appraisers.............................................................71
18.2.2 Appraisal Process.....................................................................71
18.2.3 Specific Enforcement and Costs........................................................72
18.3 Lessee's Option to Purchase....................................................................72
18.3.1 Conditions to Option..................................................................72
18.3.2 Exercise of Option....................................................................72
18.3.3 Conveyance............................................................................73
18.3.4 Calculation of Purchase Price.........................................................73
18.3.5 Payment of Purchase Price.............................................................73
18.3.6 Place and Time of Closing.............................................................73
18.3.7 Condition of Leased Property..........................................................73
(v)
<PAGE>
18.3.8 Quality of Title......................................................................73
18.3.9 Lessor's Inability to Perform.........................................................73
18.3.10 Merger by Deed........................................................................74
18.3.11 Use of Purchase Price to Clear Title..................................................74
18.3.12 Lessee's Default......................................................................74
ARTICLE 19 SUBLETTING AND ASSIGNMENT......................................................................74
19.1 Subletting and Assignment......................................................................74
19.2 Permitted Subleases............................................................................75
19.3 Attornment.....................................................................................75
19.4 Permitted Transfers............................................................................75
ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR....................................................75
20.1 No Merger of Title.............................................................................75
20.2 Transfers By Lessor............................................................................76
20.3 Lessor May Grant Liens.........................................................................76
20.4 Subordination and Non-Disturbance..............................................................76
ARTICLE 21 LESSOR OBLIGATIONS.............................................................................77
21.1 Quiet Enjoyment................................................................................77
21.2 Memorandum of Lease............................................................................77
21.3 Default by Lessor..............................................................................78
ARTICLE 22 NOTICES........................................................................................78
ARTICLE 23 ENVIRONMENTAL MATTERS..........................................................................79
23.1 Maintenance of Leased Property.................................................................79
23.2 Notice of Environmental Conditions.............................................................80
23.3 The Lessee's Agreement To Take Remedial Actions................................................80
23.4 The Lessor's Rights To Inspect The Leased Property and Take Remedial
Actions........................................................................................80
23.5 Environmental Indemnification..................................................................82
23.6 Survival.......................................................................................82
ARTICLE 24 MISCELLANEOUS PROVISIONS.......................................................................83
24.1 Broker's Fee Indemnification...................................................................83
24.2 No Joint Venture or Partnership................................................................83
24.3 Amendments, Waivers and Modifications..........................................................83
24.4 Captions and Headings..........................................................................84
24.5 Time is of the Essence.........................................................................84
24.6 Counterparts...................................................................................84
24.7 Entire Agreement...............................................................................84
24.8 WAIVER OF JURY TRIAL...........................................................................84
24.9 Successors and Assigns.........................................................................85
(vi)
<PAGE>
24.10 No Third Party Beneficiaries...................................................................85
24.11 Governing Law..................................................................................85
24.12 General........................................................................................86
24.13 Consents.......................................................................................86
24.14 HUD Regulatory Agreements......................................................................87
EXHIBIT A LEGAL DESCRIPTION OF THE LAND
EXHIBIT B PERMITTED ENCUMBRANCES
</TABLE>
(vii)
<PAGE>
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 16th day of
March, 1998 and is between Desert Amethyst Phase II Limited Partnership (the
"Lessor"), an Arizona limited partnership, having its principal office at 2221
East Broadway, Suite 211, Tucson, AZ 85719, and CareMatrix of the Inn at the
Amethyst, Inc. (the "Lessee"), a Delaware corporation, having its principal
office at 197 First Avenue, Needham, 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 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; and
(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"); and
<PAGE>
(e) Lessor's Personal Property.
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 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 March 16, 1998 (the "Commencement Date") and end on
March 15, 2013 (the "Expiration Date"); provided, however, that this Lease may
be sooner terminated as hereinafter provided. In addition, the Lessee shall have
the options 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 options 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 March 15, 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
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DEFINITIONS AND RULES OF CONSTRUCTION
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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.
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Accounts: As defined in the UCC.
Act: As defined in Section 11.3.
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 3.2), but, specifically excluding any so-called "balloon
payments" due at the maturity any loan evidenced by any Fee Mortgage Loan
Documents and all costs and expenses incurred in connection with any refinancing
thereof.
Additional Charges: As defined in Article 3.
Additional HUD Insured Mortgage: That certain Deed of Trust, dated as
of June 25, 1990, granted by the Lessor to Ticor Title Insurance Company for the
benefit of RLM, recorded in the Office of the Maricopa County Recorder in
Document No. 90-282763, as affected by (i) that certain Consolidation and
Modification Agreement, dated as of June 25, 1990, by and between the Lessor,
RLM and the Department, recorded in the Office of the Maricopa County Recorder
in Document No. 90-282764, (ii) that certain Assignment of Deed of Trust, dated
June 27, 1990, from RLM to the HUD Mortgagee, recorded in the Office of the
Maricopa County Recorder in Document No. 90-286786, and (iii) that certain
Modification of Deed of Trust Note and Deed of Trust, dated as of December 15,
1992, by and between the Lessor and the HUD Mortgagee, recorded in Document No.
92-714603.
Additional Land: As defined in Section 9.3.
Additional Rent: As defined in Section 3.2.
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). 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.
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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.
Award: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
Base Rent: As defined in Section 3.1.
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 is needed or used to provide services not previously offered and
any expansion, construction, renovation or conversion or in order to (i)
increase the unit capacity of a Facility, (ii) change the purpose for which such
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.
CareMatrix: CareMatrix Corporation, a Delaware corporation, and its
successors and assigns.
Cash Flow: The Net Income (or Net Loss), arising solely from the
operation of the Leased Property, before federal and state income taxes for any
period plus the amount of the provision for depreciation and amortization
actually deducted on the books of the Facility for the purposes of computing
such Consolidated Net Income (or Consolidated Net Loss) for the period involved.
Cash Flow Rental Payments: As defined in Section 3.1.
Casualty: As defined in Section 13.1.
Chattel Paper: As defined in the UCC.
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Closing: As defined in Section 18.3.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
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 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.
Contracts: All 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 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.
Current Management Agreement: That certain Management Agreement of even
date by and between the Lessee and the Current Manager.
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Current Manager: Netwest Development Corporation, an Arizona
corporation.
Date of Taking: The date the Condemnor has the right to possession of
the property being condemned.
Debt Service: All principal and interest payments due and payable under
any Fee Mortgage Loan Documents, but specifically excluding any so-called
"balloon payments" due at the maturity any loan evidenced by any Fee Mortgage
Loan Documents 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.
Department: The United States Department of Housing and Urban
Development.
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.
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Facility: The 81 unit retirement, independent living and assisted
living facility known as the Inn at the Amethyst Assisted Living Community
located on the Land (together with related parking and other amenities).
Facility Expenses: Collectively, (i) all costs, expenses and cash
disbursements of any type relating to or arising out of (a) the ownership of the
Leased Property and which are payable by Lessee hereunder including, without
limitation, Impositions, Capital Additions, Material Structural Work, other
repairs to and/or renovations of the Leased Property, expenses incurred in
connection with the maintenance of the Leased Property and the Debt Service
Rental Payments and the Additional Rent payable by Lessee hereunder, (b) the
operation of the Lessee's business on the Leased Property, including, without
limitation, the funding of any necessary reserves and the payment of any
management fees and (ii) the performance of any obligation imposed on the Lessee
hereunder as a result of any obligations, conditions and/or requirements set
forth under any Fee Mortgage Loan Documents.
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 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.
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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 Mortgagee: 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.
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 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 and other facilities provided,
membership fees, entrance fees, meals served, catering and other services
performed, space or facilities subleased or goods sold on or from the Leased
Property, including, without limitation, any revenues generated from gift shop,
coffee shop, vending machine, laundry machine, barber shop, beauty shop and all
other concessions 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
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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 loans 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,
(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 CareMatrix, 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 shall be included in Gross
Revenues.
Hazardous Substances: Collectively, (i) 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; (ii) asbestos in any
form; (iii) urea formaldehyde foam insulation; (iv) polychlorinated biphenyls;
(v) radon gas; (vi) flammable explosives; (vii) radioactive materials; (viii)
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, residents and other occupants of the Leased Property
or of the owners
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or occupants of any other real property nearby the Leased Property and (ix) 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.
HUD Escrow Accounts: Collectively, all escrow accounts held by the HUD
Mortgagee to secure the obligations under the HUD Financing Documents.
HUD Financing Documents: Collectively, the HUD Insured Note, the HUD
Insured Mortgage, the Additional HUD Insured Mortgage, the HUD Regulatory
Agreements and all other documents and instruments evidencing, securing or
otherwise given in connection with the loan evidenced by the HUD Insured Note,
as all of the same may be hereafter amended, modified, revised, renewed and/or
replaced.
HUD Insured Mortgage: That certain Deed of Trust, dated as of December
15, 1988, granted by the Lessor to Title USA Company of Arizona as Trustee for
the benefit of RLM, recorded in the Office of the Maricopa County Recorder in
Document No. 88-609068, as affected by (i) that certain Consolidation and
Modification Agreement, dated as of June 25, 1990, by and between the Lessor,
RLM and the Department, recorded in the Office of the Maricopa County Recorder
in Document No. 90-282764, (ii) that certain Assignment of Deed of Trust, dated
June 27, 1990, from RLM to the HUD Mortgagee, recorded in the Office of the
Maricopa County Recorder in Document No. 90-286786, and (iii) that certain
Modification of Deed of Trust Note and Deed of Trust, dated as of December 15,
1992, by and between the Lessor and the HUD Mortgagee, recorded in the Office of
the Maricopa County Recorder in Document No. 92-714603.
HUD Insured Note: That certain Deed of Trust Note dated December 15,
1988, in the original principal amount of THREE MILLION SIX HUNDRED THIRTY-THREE
THOUSAND FIVE HUNDRED DOLLARS ($3,633,500) made by the Lessor to RLM, as
affected by that certain Modification of Deed of Trust Note and Deed of Trust,
dated as of December 15, 1992, by and between the Lessor and the HUD Mortgagee,
recorded in the Office of the Maricopa County Recorder in Document No.
92-714603.
HUD Mortgagee: The State Teachers Retirement Board of Ohio, a statutory
organization under the laws of the State of Ohio.
HUD Regulatory Agreements: Collectively, that certain (i) Regulatory
Agreement by and between the Lessor and the HUD Secretary, dated December 15,
1988 and (ii) Regulatory Agreement by and between the Lessee and the HUD
Secretary, as the same may be hereafter amended, modified, revised, reviewed
and/or replaced.
HUD Secretary: The Secretary of Housing and Urban Development, acting
by and through the Federal Housing Commissioner.
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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, rent, occupancy and/or hotel taxes, 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, 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, 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
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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 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, 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 same may be amended from time to time.
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.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Group: Collectively, the Lessee, 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 assisted living
and independent senior housing licensing statutes, ordinances, by-laws, codes,
rules and regulations), whether now or hereafter enacted, promulgated or issued
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by any Governmental Authority, 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 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 Purchase Option Notice: As defined in Section 18.3.
Lessor: As defined in the preamble of this Lease and its successors and
assigns.
Lessor's Personal Property: The personal property owned by the Lessor
that located at or used in connection with the operation of the Leased Property.
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.
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, as the same may be amended, modified
or extended from time to time, including, without limitation, the Current
Management Agreement.
Manager: Any Person who has entered into a Management Agreement with
the Lessee or any Sublessee, including, without limitation, the Current Manager.
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.
Monthly Debt Service: The monthly debt service (i.e. all interest,
including without limitation, interest, if any, calculated at a default or
penalty rate and principal) payments due under any Fee Mortgage Loan Documents
during any calendar month including, without
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limitation, any costs, expenses and late charges incurred by the Lessor as a
result of any failure by the Lessee to satisfy, on a timely basis, the Lessee's
obligations under the Lease, but, specifically excluding any so-called "balloon
payments" due at the maturity thereof.
Net Income (or Net Loss): The net income (or net loss, expressed as a
negative number) of the Facility for any period, after all taxes actually paid
or accrued and all expenses and other charges determined in accordance with
GAAP.
Non-Chancellor Percentage: The percentage of the partnership interests,
from time to time, held in the Lessor by all partners other than Chancellor of
Arizona, Inc.
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.
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
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.
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 were listed on the UCC lien search results delivered
to the Lessor at or prior to the execution and delivery of this Lease (and were
not required to be terminated as a condition of the execution and delivery of
this Lease), or which may hereafter be created in accordance with the terms
hereof, including, without limitation, any Encumbrances.
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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.
Positive Cash Flow: The excess, if any, of the Gross Revenues for any
given period over the total amount of Facility Expenses for the applicable
period.
Primary Intended Use: The use of the Facility as an independent living
and assisted living facility with eighty-one (81) units or such additional
number of units 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; provided, however, that, subject to the terms
of the HUD Regulatory Agreement, as long as the number of units at the Facility
is at no time below 160, the Lessee may change the number of units at the
Facility, provided, further, that (i) any such change is effected in accordance
with all applicable Legal Requirements, (ii) the Lessee shall deliver to the
Lessor prior written notice of its intention to effect such change and (iii) it
is not reasonably foreseeable that any such change would have a materially
adverse impact on the financial condition of the Facility.
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.
Purchase Option: As defined in Section 18.3.
Purchase Price: As defined in Section 18.3.
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.
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Reference Bank: NationsBank, N.A.
Rent: Collectively, the Base Rent, the Additional Rent, the Additional
Charges and all other sums payable under this Lease and the other Lease
Documents.
Rent Insurance Proceeds: As defined in Section 13.8.
Resident Agreements: Collectively, all Subleases now or hereafter
executed or entered into by or on behalf of any Person allowing such Person to
reside at the Facility, as the same may be amended from time to time.
Retainage: As defined in Section 13.1.
RLM: Reinlein/Leiser/McGee, a California general partnership.
State: The state or commonwealth in which the Leased Property is
located.
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, 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, but excluding any resident of the Facility
under any Resident Agreement.
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).
Surplus Cash: With respect to any applicable period, any cash remaining
after:
(l) the payment of the
(a) all sums due or currently required to be paid under
the terms of any of the HUD Financing Documents;
(b) all amounts required to be deposited in the reserve
fund for replacements under the HUD Financing
Documents;
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(c) all other Facility Expenses other than the
obligations described in clause (a) above unless
funds are set aside or deferment of payment has been
approved by the HUD Secretary; and
(2) The segregation of:
(a) an amount equal to the aggregate of all special funds
required to be maintained by the Facility under the
HUD Financing Documents; and
(b) all tenants security deposits held.
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 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.
Time of Closing: As defined in Section 18.3.
UCC: The Uniform Commercial Code as in effect from time to time in the
State of Arizona.
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.
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
17
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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 units affected by such Casualty or partial or temporary Taking.
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 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) 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; (h)
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; (i) all accounting terms
not specifically defined in the Lease Documents shall be construed in accordance
with GAAP and (j) 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, (k) all references to any Fee Mortgage Loan
Documents shall mean such Fee Mortgage Loan Documents as may then be in force
and effect and (l) 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.
The Lessee shall pay to the Lessor a base rent (the "Base Rent") per annum that
is equal to: (a) an amount equal to the Debt Service due from the Lessor to the
holder of any Fee Mortgage encumbering the Leased Property during the applicable
period (the "Debt Service Rental
18
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Payments") and (b) an amount equal to the Non-Chancellor Percentage multiplied
by the Positive Cash Flow, if any, for the applicable period (the "Cash Flow
Rental Payments"). The Debt Service Rental Payments and the Cash Flow Rental
Payments shall be payable in arrears on the first day of each calendar month,
commencing on April 1, 1998; 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 due to the
applicable Fee Mortgagee under the applicable Fee Mortgage Loan Documents. The
monthly Cash Flow Rental Payments to be paid in arrears shall be paid based upon
the Lessee's estimate of the Positive Cash Flow for the immediately preceding
month and shall be adjusted on the date that the next monthly Cash Flow Rental
Payment is due, based on the actual Positive Cash Flow for the applicable month.
The Lessor may refinance any Fee Mortgage now or hereafter encumbering
the Leased Property, provided, that the Lessor obtains the Lessee's prior
written consent to all of the terms and conditions of any such refinancing,
which consent may be withheld in the Lessee's sole and absolute discretion.
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 Cash Flow Rental Payments. 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).
The Base Rent due and payable hereunder for any fractional month during
the Term shall be prorated accordingly.
Notwithstanding anything to the contrary set forth herein, at all times
while any of the HUD Financing Documents may be in effect, (i) Cash Flow Rental
Payments shall be defined as an amount equal to the Non-Chancellor Percentage
multiplied by the Surplus Cash, if any for the applicable period, (ii) Cash Flow
Rental Payments may only be made bi-annually, for the periods ending June 30th
and December 31st of each year and (iii) Cash Flow Rental Payments may only be
made after obtaining approval from the HUD Secretary with respect to the
calculation of the Surplus Cash for the applicable period.
3.2 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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<PAGE>
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.
3.3 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
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.
3.4 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.
3.5 No Lessee Termination or Offset.
3.5.1 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) 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 under this Lease
or any other Lease Document, (e) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
20
<PAGE>
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.
3.5.2 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.
3.5.3 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.
3.6 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 3.6, 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.
4.1.2 Installment Elections. If any such Imposition may, at the option
of the taxpayer, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), 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 and subject to Section 11.3.9, 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, 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.
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<PAGE>
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 Lease Obligations in accordance with the
Lease Documents.
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.
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.
4.4 Utility Charges. The Lessee will pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone and other utilities
used in the Leased Property during the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease.
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
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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.
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, 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 FIFTY THOUSAND DOLLARS ($50,000), individually or TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) collectively, except if such
Tangible Personal
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<PAGE>
Property is simultaneously suitably replaced or the Lessee provides the Lessor
with an explanation (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 without 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. 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 resident care and billing.
6.1.2 Purchase-Money Security Interests and Equipment Leases.
Notwithstanding any other provision hereof regarding the creation of Liens, the
Lessee may (a) grant priority purchase money security interests in items of
Tangible Personal Property, (b) lease Tangible Personal Property from equipment
lessors and (c) grant security interests in Receivables to institutional
lenders. 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."
25
<PAGE>
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 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.
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 other Person sell or otherwise provide to
any patients, residents, other occupants or invitees therein, or permit to be
kept, used or sold in or about the Leased
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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 11.4.2.
7.3 Compliance with Legal Requirements. Without limiting any of the
other terms or conditions set forth herein, 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, the provisions set forth in Article 15.
7.4 Management Agreements. From and after the Commencement Date, the
Lessee shall not 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; provided, however, that, subject to the terms of any
applicable Fee Mortgage Loan Documents, the Lessee may enter into a Management
Agreement with an Affiliate of the Lessee without the approval of the Lessor.
The Lessee shall not, without the prior written approval of the Lessor and any
Fee
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Mortgagee (to the extent that any such consent from any Fee Mortgagee is
required under any Fee Mortgage Loan Documents), 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, subject to the
terms of the 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 a right to terminate the Management
Agreement in accordance with its terms (unrelated to an allegation of a 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 (except to an Affiliate of the Lessee) or (d) any material
amendment of the Management Agreement. In addition, the Lessee shall, at its
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.
The Lessee shall furnish to the Lessor and any Fee Mortgagee, within
three (3) Business Days after receipt thereof, or after the mailing or service
thereof by the Lessee, as the case may be, a copy of each notice of default
which the Lessee 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 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, in which event, no notice shall be
required) 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,
conditioned or delayed) 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.
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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
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), 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) 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.
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 limitation, any change in the
size 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.
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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.
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.
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
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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;
(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 (the "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
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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 five percent (105%) 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)
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.
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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 Section 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 Section 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 ONE HUNDRED THOUSAND DOLLARS
($100,000.00), 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 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.
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ARTICLE 10
----------
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 the
State 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 the Lessee 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 the Lessee is a party or by which the Lessee or the 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 the
Lessee and the performance of the Lessee'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).
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10.1.6 No Liens or Insolvency Proceedings. The Lessee 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 the Lessee, which if adversely resolved to the
Lessee, would materially adversely affect the ability of any of the foregoing to
perform their respective obligations under the Lease Documents;
(b) against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use, occupancy,
possession or operation thereof; or
(c) 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 not 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, the
Lessee:
(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.
10.1.10 Not Delinquent. The Lessee is not 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
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borrowed money from any Affiliate of the Lessee that is not fully subordinated
to the Lease Obligations pursuant to a written agreement in form and substance
acceptable to the Lessor.
10.1.12 Taxes Current. The Lessee 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 the Lessee. No tax liability has been asserted
by the Internal Revenue Service against the Lessee 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 Financials Complete and Accurate. The financial statements of
the Lessee given to the Lessor in connection with the execution and delivery of
this Lease were true, complete and accurate, in all material respects, and
fairly presented the financial condition of the Lessee as of the date thereof
and for the periods covered thereby, having been prepared in accordance with
GAAP and such financial statements disclosed all liabilities, including, without
limitation, contingent liabilities, of the Lessee.
10.1.14 Pending Actions, Notices and Reports. 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 the Lessee before any
Governmental Authority 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.
10.1.15 Compliance with Legal and Other 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 ERISA. No employee pension benefit plan maintained by the
Lessee has any accumulated funding deficiency within the meaning of the ERISA,
nor does the Lessee 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.
10.1.17 No Broker. Neither the Lessee nor any of its Affiliates has
dealt with any broker or agent in connection with the transactions contemplated
by the Lease Documents.
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10.1.18 No Improper Payments. Neither the Lessee nor any of its
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.
10.1.19 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
of the Lessee, 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 the Lessee.
10.1.20 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.
10.1.21 Principal Place of Business. The principal place of business
and chief executive office of the Lessee is located at 197 First Avenue,
Needham, Massachusetts 02194 (the "Principal Place of Business").
10.1.22 Management Agreements. There is no Management Agreement in
force and effect as of the date hereof, except 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
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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, 10.1.11, 10.1.12, 10.1.14, 10.1.16 and 10.1.22 shall not constitute
continuing representations and warranties throughout the Term.
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 (or such shorter period of time as
may be required under any applicable Fee Mortgage Loan Documents, 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 of the Leased Property or any Fee Mortgagee 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 or such earlier period as may be required under
the HUD Regulatory Agreement or any other HUD Financing Document, (i) a copy of
the unaudited Consolidated Financials for each of (x) the Lessee and (y) any
Sublessee for the preceding fiscal year, 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 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
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remedy the same; and (iii) a statement certified as true and correct by the
Lessee setting forth all Subleases (excluding Resident Agreements) 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) 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 and/or assisted living matters
and (ii) Contracts (involving payments in the aggregate in excess of $200,000
per annum).
(c) 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 $200,000 per annum) other than those issued in the ordinary course
of business.
(d) 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 by any Governmental Authority, including, without
limitation, any notices pertaining to any delinquency in, or proposed revision
of, the Lessee's or any 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 and the response(s) thereto made by or on behalf of the
Lessee or any Sublessee.
(e) 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 to any
Governmental Authority with respect to the Leased Property.
(f) 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.
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(g) 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.
(h) Official Actions. Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any Governmental Authority which
could have a material adverse effect on (i) Lessee to perform any of its
obligations under any of the Lease Documents or (ii) the Leased Property.
(i) Adverse Developments. Promptly after the Lessee acquires knowledge
thereof, written notice of:
(i) the potential termination of any Permit necessary for the
operation of the Leased Property;
(ii) any loss, damage or destruction to or of the Leased
Property in excess of ONE HUNDRED THOUSAND DOLLARS ($100,000) (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; and
(iv) 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.
(j) 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.
(k) 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
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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.
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 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:
11.3.1 Maintenance of Existence. 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
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corporation under the laws of the state of its incorporation and its right to
own property and transact business in the State.
11.3.2 Materials. 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 renovations or construction relating to the
Leased Property, subject to the Lessee's right to contest to the extent provided
for in Article 15.
11.3.3 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.
11.3.4 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.
11.3.5 Conduct of its Business. The Lessee will maintain, and cause any
Sublessee and any Manager to maintain, experienced and competent professional
management
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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 Sublessee shall not enter into
any other business or venture during the Term or such time as the Lessee or any
Sublessee is in possession of the Leased Property.
11.3.6 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 Business and
at the Leased Property. The Lessee provide the Lessor with ten (10) days' notice
prior to (a) removing 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) relocating its Principal Place of Business.
11.3.7 Subordination of Affiliate Transactions. Without limiting the
provisions of any other Section of this Lease, any payments to be made by the
Lessee to (a) any member of the Leasing Group (or any Affiliate of any 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.
11.3.8 Inspection. At reasonable times and upon reasonable notice, the
Lessee shall permit the Lessor, any Fee Mortgagee and their respective
representatives (including, without limitation, the Consultants) to inspect the
Leased Property.
11.3.9 HUD Financing Documents. Notwithstanding anything to the
contrary contained in the HUD Financing Documents, and, without limiting the
provisions of Section 3.1, Lessee shall fully and timely perform all of the
Lessor's obligations under the HUD Financing Documents (other than any
obligation thereunder requiring Lessor to maintain its existence as a limited
partnership under the laws of the State) and shall not cause, or allow there to
exist, any default thereunder (other than any such default relating to the
solvency of Lessor or any failure by Lessor to maintain its existence as a
limited partnership under the State).
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11.4 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:
11.4.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided in Section 19.2 and Section 19.4 or in any of the other 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 and any other consents that may be required under any
of the HUD Financing Documents:
(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
or the Leased Property; provided, however, that this restriction shall not apply
to the Permitted Encumbrances that may be created after the date hereof pursuant
to the Lease Documents;
(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.
11.4.2 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.
11.4.3 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.
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11.4.4 No Default. The Lessee shall not commit any default or breach
under any of the Lease Documents.
11.4.5 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.
11.4.6 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.
11.4.7 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.
11.4.8 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 accounting
procedures related to the method of revenue recognition, billing procedures or
determinations of doubtful accounts or bad debt expenses.
ARTICLE 12
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INSURANCE AND INDEMNITY
-----------------------
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, 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,
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without limitation, 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 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 the Leased Property,
in limits acceptable to the Lessor;
(d) 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;
(e) comprehensive general public liability insurance including
coverages commonly found in the Broad Form Commercial Liability Endorsements
with amounts not less than TEN MILLION DOLLARS ($10,000,00) of umbrella
coverage;
(f) 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;
(g) 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;
(h) 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
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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:
(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)
ninety (90) days after the effective date of each such policy and (b) ten (10)
days after receipt thereof by the Lessee.
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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 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
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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
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, 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 the Lessee or any employee, agent,
licensee, business invitee, guest, customer, contractor or sublessee of the
Lessee, relating to 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
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resulted from any act, fault, omission to act or misconduct by of the Lessee or
any employee, agent, licensee, contractor or sublessee of the Lessee, (d) any
Lease Default, (e) any attempt by the Lessee to transfer or relocate any of the
Permits to any location other than the Leased Property and/or (f) the
enforcement of this indemnity. Any amounts which become payable by the Lessee
under this Section 12.2.1 shall be a demand 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.
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. The Lessor shall not 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 the events
mentioned in this Section entitle the Lessee to
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any abatement of Rent (except for an abatement, if any, as specifically provided
for in Section 3.6).
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, including, without limitation, any occurrence which, without the fault
or neglect of the Lessee renders the Leased Premises untentable or unfit for
occupancy (any such damage or destruction is referred to herein as 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 and 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
three-hundred and sixty-five (365) 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 ONE HUNDRED THOUSAND
DOLLARS ($100,000) 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
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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;
(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. The Lessor may
also require the Lessee to furnish a mechanic's and materialman's lien payment
bond in compliance with A.R.S. ss.33-1003 and upon such terms and conditions as
the Lessor may reasonably require;
(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:
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(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) 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.
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(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
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) Prior to the first advance, the Lessee shall deliver to the Lessor
(i) architect's certificate (satisfactory to the Lessor both as to the architect
and as to the form of the certificate) 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). To the extent required under applicable
Fee Mortgage Loan Documents, such architect's certificates shall be certified to
the applicable Fee Mortgagee.
(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
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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:
(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.
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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 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 (excluding Resident Agreements) 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 three
hundred and sixty-five (365) 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 Leased
Property from the Lessor for a purchase
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price equal to 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, restored or replaced, in
which event, the Lessee shall be entitled, upon (x) payment of the full purchase
price and (y) an assumption by the Lessee of all of the Lessor's obligations
under all of the documents evidencing any Fee Mortgage Loan (including, without
limitation, if applicable, the HUD Financing Documents), together with a full
release of the Lessor (in form and substance acceptable to the Lessor) from all
obligations thereunder, provided, however, that, the provisions of this clause
(y) shall only apply in the event that the Lessee elects to assume the
obligations under any Fee Mortgage Loan, to receive (1) all property insurance
proceeds (less any costs and expenses incurred by the Lessor in collecting the
same) and (2) in the event that the Lessee has elected to assume the obligations
under any Fee Mortgage Loan, an assignment from the Lessor of all of its right,
title and interest to all amounts, if any, held in escrow by any applicable Fee
Mortgagee (including, without limitation, if applicable, any amounts held in the
HUD Escrow Accounts), or (ii) terminate this Lease, in which event (subject to
the provisions of the last sentence of this Section 13.2.2) 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 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. If such termination becomes effective, the Lessor shall
assign to the Lessee any outstanding insurance claims.
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,
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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 or be
reduced as a result of any Casualty, including, without limitation, any
occurrence which without fault or neglect of the Lessee renders the Leased
Premises untentable or unfit for occupancy.
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.
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
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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
----------
CONDEMNATION
------------
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.
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 three hundred and sixty-five (365)
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 14.5 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
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through the date that the purchase price is paid, for a purchase price equal to
the Fair Market Value of the Leased Property minus the Fair Market Added Value,
with the Fair Market Value of the Leased Property and the Fair Market Added
Value to be determined as of the day immediately prior to such partial or
temporary Taking, (ii) upon the assumption by the Lessee of all of the Lessor's
obligations under all of the documents evidencing any applicable Fee Mortgage
Loan (including, without limitation, if applicable, the HUD Financing
Documents), together with a full release (in form and substance acceptable to
the Lessor) of the Lessor from all obligations thereunder, but the provisions of
this clause (ii) shall apply only in the event that the Lessee has elected to
assume the obligations under any Fee Mortgage Loan and (iii) in accordance with
the terms and conditions set forth in Article 18; in which event, (x) the Lessor
shall assign to the Lessee all of the Lessor's right, title and interest in the
amounts, if any, then held in escrow by any applicable Fee Mortgagee (including,
without limitation, if applicable, any amounts held in the HUD Escrow Accounts)
if the Lessee has elected to assume the obligations under the applicable Fee
Mortgage Loan and (y) 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 unit 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 3.6, 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 all reasonable costs and expenses
incurred in obtaining the Award), the Lessee shall be obligated to contribute
any 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 all reasonable costs 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 3.6.
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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 the terms of 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
----------
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 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
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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 Indemnified Parties 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
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DEFAULT
-------
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;
(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
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than the payment of any monetary obligation and other than as specified in
subsections (c) through (l) 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 and (iii) 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 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, a receiver or trustee for the Lessee and such
order, judgment or decree shall remain in force, undischarged or unstayed,
ninety (90) days after it is entered;
(g) if a petition is filed against the Lessee 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 ninety (90) days
after it is filed;
(h) the liquidation, dissolution or termination of existence of the
Lessee or the merger or consolidation of the Lessee with any other Person;
(i) subject to Section 19.4 hereof, 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 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);
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(j) except as a result of Casualty or a partial or complete
Condemnation, if the Lessee ceases operation of the Facility for a period in
excess of thirty (30) days;
(k) if one or more judgments against the Lessee or attachments against
the Lessee'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; or
(l) 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.
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) Business
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)
Business 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) Business 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
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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 the Lessee and 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. 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 the 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
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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 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 determination 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 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.
16.7 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
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of the Lease Obligations) 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.
16.8 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 Lease 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 Lease 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.
16.9 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
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the rights and 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 commercially reasonable 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 or
its designee and/or (ii) arrange for the transfer or assignment of such Permits
and Contracts to the Lessor, any Fee Mortgagee or any of their respective
designees, 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 and Third Party Payors of any applications, petitions,
statements, notices, requests, assignments and other documents or instruments
reasonably 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
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necessary 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 any of the terms of this Lease,
the Lessor shall, upon (a) 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 and (b) if
the Lessee so elects, the assumption by Lessee of all obligations under all of
the documents evidencing any Fee Mortgage Loan (including, without limitation,
if applicable, the HUD Financing Documents), together with a full release (in
form and substance acceptable to Lessor) of Lessor from all obligations
thereunder, deliver to the Lessee (i) a deed with covenants only against acts of
the Lessor conveying the entire interest
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of the Lessor in and to the Leased Property to the Lessee subject to all Legal
Requirements, all of the matters described in clauses (a), (b), (e) and (g) of
Section 11.4.2, Impositions, any Liens created by the Lessee, any Liens created
in accordance 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) and (ii) if the Lessee has elected to assume any Fee Mortgage Loan, an
assignment from the Lessor of all of its right, title and interest to all
amounts, if any, then held in escrow by the applicable Fee Mortgagee (including,
without limitation, all amounts, if applicable, held in the HUD Escrow
Accounts). 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. Each party shall pay
all of the expenses incurred by it in connection with any such conveyance. All
recording and transfer taxes and recording fees and other similar charges shall
be split equally between the Lessor and the Lessee.
Notwithstanding anything to the contrary set forth herein, in no event
shall the Lessee be obligated to assume any Fee Mortgage Loan and, in the event
that the Lessee does not elect to assume any Fee Mortgage Loan, the Lessor shall
pay all amounts outstanding under all applicable Fee Mortgage Loans so as to be
able to transfer the Leased Property to the Lessee free and clear of all liens
securing any Fee Mortgage Loan.
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
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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 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 Leased Property, 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 Leased Property (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
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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.
18.3.3 Conveyance. If the Purchase Option is exercised by the Lessee in
accordance with the terms hereof, the Leased Property 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.
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 (i) the then Fair
Market Value of the Leased Property minus the Fair Market Added Value and (ii)
an amount equal to the product of eight and one-half (8 1/2) multiplied by the
then trailing twelve (12) month Cash Flow (computed with respect to the twelve
month period ending on the last day of the last calendar month prior to the
calendar month in which the Closing occurs).
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.
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
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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 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 or the Fee Mortgagee'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
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of this Section 19.1, but subject to Section 19.4 hereof, 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 more than fifty percent (50%), in the
aggregate, the capital stock of or partnership interest 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 Permitted Subleases. Notwithstanding anything to the contrary set
forth herein, the Lessee shall have the right to enter into Resident Agreements
without the prior consent of the Lessor and any Fee Mortgagee; provided,
however, that all such Resident Agreements shall comply with all of the terms
and conditions of the HUD Regulatory Agreement.
19.3 Attornment. The Lessee shall insert in each Sublease approved by
the Lessor and any other Sublease that may be permitted hereunder, other than
Resident Agreements, 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 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
directly or indirectly transferred in connection with any merger of CareMatrix
with or into any other Person, any sale of all or substantially all of the
CareMatrix's assets or any transfer of all or substantially all of the
outstanding capital stock of the CareMatrix.
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
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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 the 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.
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 option 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 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
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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 deliver such instruments in
recordable from as are reasonably requested by the Lessor or the applicable Fee
Mortgagee; provided, however, that any 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.
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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 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.
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:
If to the Lessee: CareMatrix of the Inn at the Amethyst, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: CareMatrix of the Inn at the Amethyst, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
and
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
Attn: Marianne Ajemian, Esq.
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If to the Lessor: Ironwood Greens Limited Partnership II
c/o Netwest Development Corporation
2221 East Broadway, Suite 211
Tucson, AZ 85719
Attn: Priscilla Kuhn
With copies to: Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
Attn: Dee T. O'Neill, Esq.
and
Chancellor of Arizona, Inc.
197 First Avenue
Needham Heights, MA 02194
Attn: General Counsel
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.
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 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 and may 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.
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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, disposition, 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 Fee 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) that is not in compliance with any Environmental Law 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 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 (a) required pursuant to and in
accordance with any of the Environmental Laws or Fee Mortgage Loan Documents
and/or (b) 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 violates any Environmental Law and 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
(a) pursuant to any of the Environmental Laws or Fee Mortgage Loan Documents
and/or (b) 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 and, subject to the terms of any applicable Fee Mortgage Loan Documents,
the applicable Fee Mortgagee shall have the right, but not the obligation, to
enter upon the Leased Property, to expend funds to:
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(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 23;
(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;
(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 23 (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
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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 (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 to
complete such actions taken or require the Lessor (or such Fee Mortgagee) 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 hereunder or (c) the
enforcement of the aforesaid indemnification agreement; excluding, however, with
respect to each Indemnification Party, any matters resulting from the Lessor's
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.
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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 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.
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 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 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,
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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.
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.
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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, except as may be permitted pursuant to Article
19, 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, 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 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
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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.
In the event that any amounts payable hereunder by the Lessee
(including, without limitation, Additional Charges) are deemed to be interest
and/or in the nature of interest, the Lessee agrees to pay such amounts as a
contracted for rate of interest.
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
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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 HUD Regulatory Agreements. Notwithstanding any provision in this
Lease to the contrary, so long as the Primary HUD Insured Mortgage, the
Additional HUD Insured Mortgage and/ or the Secondary HUD Insured Mortgage
encumbers the Land and is insured or held by the Department or the HUD
Secretary, in the event there is a conflict between the terms of this Lease, on
the one hand, and the terms and conditions of the HUD Regulatory Agreements, on
the other hand, the terms and conditions of the HUD Regulatory Agreements shall
prevail.
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IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and attested by their respective officers thereunto duly authorized.
WITNESSES: LESSEE:
- ---------- -------
CAREMATRIX OF THE INN AT THE
AMETHYST, INC., a Delaware
corporation
_________________________ By:_________________________________
Name: Name: James M. Clary, III
Title: Executive Vice President
_________________________
Name:
WITNESSES: LESSOR:
- ---------- -------
DESERT AMETHYST PHASE II
LIMITED PARTNERSHIP, an Arizona
limited partnership
By: NETWEST DEVELOPMENT
CORPORATION, an Arizona
corporation, its sole general partner
_________________________ By:________________________________
Name: Name: Priscilla S. Kuhn
Title: President
_________________________
Name:
88
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STATE OF ARIZONA )
County of PIMA ) ss.
The foregoing instrument was acknowledged before me this 25th day of
March, 1998, by Priscilla S. Kuhn, the President of NETWEST DEVELOPMENT
CORPORATION, an Arizona corporation, on behalf of the corporation, as General
Partner of DESERT AMETHYST PHASE II LIMITED PARTNERSHIP, an Arizona limited
partnership, on behalf of said partnership.
In witness whereof, I have hereunto set my hand and official seal.
--------------------------
Notary Public
My commission expires:
- ----------------------
STATE OF ARIZONA )
County of PIMA ) ss.
The foregoing instrument was acknowledged before me this 25th day of
March, 1998, by JAMES M. CLARY, III, the Executive Vice President of CAREMATRIX
OF THE INN AT THE AMETHYST, INC. a Delaware corporation, on behalf of the
corporation.
In witness whereof, I have hereunto set my hand and official seal.
--------------------------
Notary Public
My commission expires:
- ----------------------
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EXHIBIT A
---------
LEGAL DESCRIPTION OF THE LAND
-----------------------------
PARCEL NO. 1:
- -------------
That portion of the East half of the East half of Section 33, Township 4 North,
Range 1 East of the Gila and Salt River Base and Meridian, Maricopa County,
Arizona, described as follows:
COMMENCING at the Northeast corner of said Section 33;
THENCE South 00(degree) 23' 11" East, along the East line of said Section 33, a
distance of 715.86 feet (715.83 feet, record);
THENCE South 89(degree) 32' 10" West a distance of 980.00 feet to the TRUE POINT
OF BEGINNING;
THENCE South 00(degree) 23' 11" East a distance of 685.91 feet;
THENCE South 89(degree) 32' 10" West a distance of 345.04 feet;
THENCE North 00(degree) 24' 40" West, along the West line of the East half of
the East half of said Section 33, a distance of 685.91 feet (685.88 feet,
record);
THENCE North 89(degree) 32' 10" East a distance of 345.34 feet to the TRUE POINT
OF BEGINNING.
PARCEL NO. 2:
- -------------
An easement for ingress and egress, as created by instrument recorded in
Document No. 87-681099, records of Maricopa County, Arizona, over the following
described property:
That portion of the East half of the East half of Section 33, Township 4 North,
Range 1 East of the Gila and Salt River Base and Meridian, Maricopa County,
Arizona, described as follows:
COMMENCING at the Northeast corner of said Section 33;
THENCE South 00(degree) 23' 11" East, along the East line of said Section 33, a
distance of 1401.77 feet (1401.71 feet, record);
THENCE South 89(degree) 32' 10" West a distance of 55.00 feet to the TRUE POINT
OF BEGINNING; THENCE South 89(degree) 32' 10" West a distance of 925.00 feet;
THENCE North 00(degree) 23' 11" West a distance of 36.00 feet; THENCE North
89(degree) 32' 10" East a distance of 830.00 feet;
THENCE Northeasterly a distance of 34.84 feet along the arc of a curve, said
curve being concave Northwesterly and having a radius of 56.24 feet;
THENCE North 54(degree) 06' 59" East a distance of 36.47 feet;
THENCE Northeasterly a distance of 34.84 feet along the arc of a curve, said
curve being concave Southeasterly and having a radius of 56.24 feet;
<PAGE>
THENCE South 00(degree) 23' 11" East a distance of 78.00 feet to the TRUE POINT
OF BEGINNING.
PARCEL NO. 3:
- -------------
An easement for access, ingress, egress, closure, landscaping, fence
construction and extension and common wall use and maintenance, as created in
Instrument recorded in Document No. 88-588954, records of Maricopa County,
Arizona, over the following described property:
The North 43 feet of the East 5 feet of Lot 176;
The East 5 feet of Lot 177;
The East 5 feet of Lot 181;
The East 5 feet of Lot 182;
The East 5 feet of Lot 184; and
The South 79 feet of the East 5 feet of Lot 185, all of Sun City Unit
Fifty-Three, according to Book 189 of Maps, page 19, records of Maricopa County,
Arizona.
PARCEL NO. 4:
- -------------
That portion of the East half of the East half of Section 33, Township 4 North,
Range 1 East of the Gila and Salt River Base and Meridian, Maricopa County,
Arizona, described as follows:
COMMENCING at the Northeast corner of said Section 33;
THENCE South 00(degree) 23' 11" East, along the East line of said Section 33, a
distance of 715.86 feet (715.83 feet record);
THENCE South 89(degree) 32' 10" West a distance of 980.00 feet to the TRUE POINT
OF BEGINNING;
THENCE South 89(degree) 32' 10" West a distance of 345.34 feet; THENCE North
00(degree) 24' 40" West a distance of 1.00 feet;
THENCE North 89(degree) 32' 10" East a distance of 345.34 feet;
THENCE South 00(degree) 23' 11" East a distance of 1.00 feet to the TRUE POINT
OF BEGINNING.
<PAGE>
EXHIBIT B
---------
PERMITTED ENCUMBRANCES
----------------------
1. Resident Agreements
2. Inchoate or statutory liens for taxes not yet delinquent.
3. Those matters listed on Schedule B-II to Leasehold Title Insurance
Commitment No. 214652 issued to the Lessee by Transnation Title
Insurance Company
Exhibit 10.03
MANAGEMENT AGREEMENT - THE INN AT THE AMETHYST
This Management Agreement (the "Agreement") dated as of the 16th day of
March, 1998, is by and between CAREMATRIX OF THE INN AT THE AMETHYST, INC., a
Delaware corporation with an address of 197 First Avenue, Needham, Massachusetts
02194 (the "Lessee"), and NETWEST DEVELOPMENT CORPORATION, an Arizona
corporation, with an address of 2221 East Broadway Boulevard, Suite 211, Tucson,
Arizona 85719 (the "Manager").
WHEREAS, pursuant to that certain Facility Lease Agreement of even date
herewith, by and between Desert Amethyst Phase II Limited Partnership, an
Arizona limited partnership, as lessor (the "Owner"), and the Lessee, as lessee
(the "Lease"), the Lessee has leased a retirement, independent living and
assisted living facility located in Peoria, Arizona, which is comprised of
eighty-one (81) units and is known as the "The Inn at the Amethyst Assisted
Living Community" (the "Facility");
WHEREAS, the Lessee has 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 assisted living, independent living and other senior housing
facilities which promote clean, safe and secure living environments for its
residents, and, is knowledgeable as to the state and federal requirements
governing the licensure, operation and accreditation of such facilities and that
the employees of the Manager rendering health care services are qualified health
care professionals or are rendering such services under the direction of
qualified health care professionals;
WHEREAS, the Manager has represented that the officers, directors and
employees of the Manager are qualified to render high quality care and services
to its residents,
WHEREAS, based upon the Manager's representations set forth herein, the
Lessee has determined that the hiring of the Manager is cost-effective and
consistent with the Lessee's desire to provide high quality care and services to
the residents at the Facility at the lowest reasonable cost;
WHEREAS, the Lessee has determined that the hiring of the Manager on
the terms and conditions hereinafter set forth will not prevent it 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.
<PAGE>
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Lessee engages the Manager to manage, supervise
and operate the Facility with the objective of providing quality care and
assisted and independent living services to the residents of the Facility and to
carry out the general duties relating to the day-to-day operation of the
Facility under the general supervision and direction of the Lessee which duties
include, but are not limited to, the following:
Supervise the performance of all such administrative functions as may
be necessary in connection with the management of the Facility; select,
hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote or terminate (subject to the rights of the
Lessee under Paragraph 2.1 of this Agreement to approve the hiring,
disciplining and termination of the Administrator and all other
Department Heads) all personnel involved in the administration, and the
day-to-day operation of the Facility, including, without limitation,
management, resident assistants, and other health care personnel,
custodial, food service, cleaning, maintenance and other operational
personnel, and secretarial or bookkeeping personnel, each of whom shall
be employees of the Manager; provide centralized 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 with respect to state or
federal entitlement programs as well as self pay rates, if any; the
preparation and maintenance of 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 Lessee; furnish such reports to the Lessee as the Lessee
may reasonably request and/or as the Lessee or the Owner may be
required to provide to any Lender (as hereinafter defined) under any
Loan Documents (as hereinafter defined), and provide the Lessee 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 regulatory and ratesetting authorities. The Manager shall
provide the Lessee with rate setting and cost reporting information
prior to submission (including preparation and submission of reports
for reimbursement), creditors, residents, personnel, agents for
collection and insurers; act as agent for the Lessee in disbursing or
collecting the funds of the facility, 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 to assist in the development of an annual marketing plan
and budget to maintain the resident census at a proper level; to do all
other things necessary or proper in connection with the daily operation
and management of the Facility,
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including, without limitation, everything necessary to ensure
compliance with the Public Health Code of the State of Arizona and with
any other local, state or federal requirements governing or applicable
to retirement, independent living and/or assisted living facilities;
and, under the general supervision of the Lessee, to plan for future
operations and to establish long range policies and goals for the
Facility; the Manager will, at a minimum, meet on a monthly basis with
Lessee's representatives and the Administrator to review financial and
operational statistics of the Facility; the Administrator, in addition,
will attend monthly administration meetings and educational programs.
Without limiting the foregoing, the Manager further agrees that it
will:
(a) perform its duties and responsibilities hereunder, in
compliance with all applicable legal requirements;
(b) supervise and direct the management and operation of
the Facility as a retirement, independent living and
assisted living facility, exercising the highest
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 legal requirements and all
other relevant circumstances pertaining the Facility;
(c) perform its duties and responsibilities hereunder in
accordance with, and take such actions as are
necessary in order to enable the Owner to maintain
its compliance with, the conditions, covenants and
requirements set forth under any Loan Documents
relating to the management and/or operation of the
Facility [and, without limiting the provisions of
Section 19, the Manager acknowledges that in the
event of any conflict between the provisions hereof
and the provisions of any Loan Documents or the HUD
Regulatory Agreement (as defined under the Lease)
pertaining to the management and/or operation of the
Facility, the provisions of the Loan Documents or the
HUD Regulatory Agreement, as applicable, shall
control]; and
(d) consult with the Lessee and keep the Lessee advised
as to all major policy and business matters relating
to the Facility.
As used herein, the term "Loan Documents" shall mean all documents,
instruments and agreements now or hereafter executed by the Owner evidencing
and/or securing any loan secured by a mortgage, deed of trust or other lien
encumbering the Facility.
As used herein, the term "Lender" shall mean any party that holds the
lender's interest (or any portion thereof) under any Loan Documents.
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1.1 Opinion of Counsel. The Manager shall have the duty to
consult with counsel for the Lessee whenever questions arise as to the
meaning and interpretations of the phrase "relating to resident care"
as such phrase is used above with reference to the submission of
expenses for reimbursement pursuant to applicable state or federal
statutes or regulations relating to entitlement programs. The Manager
shall be entitled to rely upon any such opinion when rendered by
counsel.
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 Administrator who shall be
responsible for the functional operation and management of the Facility
and the supervision of the Facility personnel, on a day-to-day basis,
as well as all on-site medical, resident assistance, custodial, food
service, cleaning, maintenance, secretarial and bookkeeping personnel
for the day-to-day operations of the Facility. All such personnel shall
be employees of the Manager, and the Manager shall retain full
responsibility for payment of their wages, salaries and other
compensation and benefits from the Gross Revenues (as hereinafter
defined) of the Facility. The Manager shall, subject to approval by the
Lessee, establish necessary and desirable personnel policies and
procedures, wage structures and staff schedules for Facility personnel.
The Manager shall have the authority to hire, discipline, promote and
discharge employees of the Lessee who participate in the day-to-day
operation and administration of the Facility; provided, however that
both the Manager and the Lessee must approve the hiring and/or firing
of the Administrator and the Department Heads. Such approval shall not
be unreasonably withheld. With respect to all Facility employees, the
Manager shall maintain payroll records and shall prepare bi-weekly or
semi-monthly payrolls, withholding taxes and Social Security taxes,
shall prepare and submit all required State and Federal Tax or Benefit
returns required with respect to such employees, including, without
limitation, the returns required by FICA, FUTA and all applicable
unemployment compensation laws; shall maintain in force all levels of
workers' compensation insurances required under applicable law; and
shall prepare and submit to the Lessee any certificates of payroll
expenses as may be reasonably requested by the Lessee.
The Manager shall provide the Lessee with monthly reports of
all hiring, disciplinary actions, promotions and firings at the
Facility for the month, and any other reports or materials reasonably
requested by the Lessee.
2.2 Purchasing. The Manager shall purchase for the account of
the Lessee all necessary foodstuffs, supplies, materials, appliances,
tools and equipment necessary in the operation of the Facility. The
Manager shall arrange contracts for electricity, gas, telephone, cable
television and any other utility or service necessary to the operation
of the Facility. The Manager shall, on behalf of the Lessee, contract
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for and supervise the making of any necessary repairs, alterations, and
improvements to the Facility; provided, however, that in the case of
any capital expenditure, alteration or improvement, the cost of which
exceeds FIVE THOUSAND DOLLARS ($5,000), the Manager shall obtain the
prior written approval of the Lessee; and provided, further, that no
such prior written approval shall be required if the expenditure is
made under circumstances requiring emergency action so long as the
Manager attempts to notify the Lessee on a concurrent basis. The
Manager shall prepare and submit to the Lessee any certificates of
purchasing expenses incurred for the Facility as may be reasonable
requested by the Lessee or required under any Loan Documents or the
Lease.
2.3 Collection of Accounts. The Manager shall prepare and
submit bills and collect for the account of the Lessee any and all
moneys owing to the Lessee, including, but not general to sums due from
residents.
2.4 Bookkeeping. The Manager shall establish and maintain a
record and bookkeeping system for the operation and conduct of business
at the Facility in accordance with generally accepted accounting
principles consistently applied. Books and records at the Facility
shall be maintained by an employee 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 be open for inspection by representatives of the
Lessee during normal business hours. The Manager shall be responsible
for filing all local, state and federal tax returns relating to the
operation of the Facility, with the exception of income tax returns,
and shall be responsible for penalties, interest, and audit costs
arising out of late, inaccurate, or incomplete filings, or the
Manager's failure to file such tax returns (provided, however, that the
Lessee makes available sufficient funds for payment of any taxes due
and has approved and executed any necessary returns in a timely
fashion).
2.5 Financial Reports. The Manager shall furnish to the Lessee
the following financial reports:
(a) as soon as possible and not later than thirty-five
(35) 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) with detailed statement of
receipts, disbursements, accounts payable and
accounts receivable as of the end of such monthly
period (with a comparison to the budget), provided,
however, that the computer services or any other
charges connected with the preparation of such
information shall not be an expense of the Lessee;
(b) as soon as possible and not later than forty-five
(45) days after the close of each fiscal year, a
year-end compilation report including a
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balance sheet as of the end of such year and a
statement of income and retained earnings;
(c) as soon as possible after the close of the year for
rate-setting purposes and not later than the
applicable deadline, a year-end cost report showing
cost and expenditures relating to resident care, such
report in all respects, being in compliance with the
requirements of any entity or authority to whom the
Lessee may be obligated to furnish reports all in a
form suitable for submission to the party;
(d) as soon as possible after the end of each quarter
commencing with the first quarter for which a
calculation is required to be made pursuant to any
agreement by and between the Lessee and any lender,
such unaudited financial statements, rate covenant,
calculation or other indication of compliance as may
be required under any Loan Documents; and
(e) such other and further reports or calculations as may
be required under any Loan Documents or the Lease in
accordance with the deadlines set forth therein.
2.6 Residents. 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, without limiting any of the
other provisions set forth herein, will comply with the operational
conditions, covenants and requirements relating to the Facility set
forth in any Loan Documents or the Lease.
2.7 Budgets. The Manager shall prepare and submit to the
Lessee 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 Loan Documents or the Lease, a detailed
written capital and operating budget for the next succeeding fiscal
year (broken down by month) showing projected ordinary and
extraordinary expenditures and projected revenues for such budget
period; and (b) such other budgets as may be reasonably required under
any of the Loan Documents or the Lease or by any governmental authority
having jurisdiction over the Facility.
2.8 Certification, Licenses and Accreditation. The Manager
shall prepare all reports and materials and follow all procedures
necessary to obtain and/or maintain all federal and state certificates,
licenses and accreditation necessary to maintain the Facility as a
retirement, independent living and assisted living facility.
2.9 Liaison with Agencies. To the extent desired by the
Lessee, the Manager shall represent the Lessee in all formal or
informal proceedings before all
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state and federal agencies engaged in the regulation, payment,
rate-setting, and/or licensing of retirement, independent living and
assisted living facilities. The Lessee reserves the right to approve
all settlements prior to their finalization.
2.10 Insurance. The Manager shall obtain and maintain at the
Lessee's expense and on behalf of the Lessee and with the Lessee's
prior written approval, all necessary liability, fire and extended
coverage workers' compensation, business interruption (to the extent
required under any Loan Documents) and malpractice insurance covering
the Facility, its equipment, and the employees of the Manager employed
at the Facility; which policies of insurance shall name the Lessee and
the Manager as coinsured and shall name the Owner and any Lender as an
additional insureds. Such insurance, in kinds and amounts acceptable to
the Lessee, the Owner, the Department (as defined under the Lease)
under the HUD Financing Documents (as defined under the Lease) and any
Lender in accordance with the terms of any Loan Documents, shall be
written by a responsible insurance company or companies satisfactory to
the Lessee, the Owner, the Department and any Lender and, upon any
request of the Lessee, made from time to time, a certificate of
insurance shall be provided to the Lessee, the Owner, the Department
and any Lender. The Lessee shall retain the right to designate any
insurance agent or agency of its choice through which such insurance
shall be obtained. The insurer shall agree to notify the Lessee in
writing in advance of any intended cancellation of such insurance
policies. With limiting any other provisions set forth herein, the
Manager acknowledges and agrees that all such insurance obtained and
maintained hereunder must satisfy the applicable conditions and
requirements set forth under any Loan Documents and under the Lease.
2.11 Technical and Professional Services. The Manager may,
with the prior written approval of the Lessee and at the Lessee's
expense, secure such engineering, legal, and other specialized
technical and professional services as may be necessary to advise or to
represent the Lessee in connection with any matter involving or arising
out of the Lessee's use and/or operation of the Facility and/or the
conduct of the affairs of the Facility.
2.12 Marketing. The Manager will maintain, develop and/or
coordinate advertising and promotional materials, internal and external
public relations programs, sales and staff development programs, and
customer satisfaction programs for the Facility. The Manager shall
develop a yearly marketing plan and budget based on the Facility's
yearly census program and image.
2.13 Administrative. The Manager shall:
(i) establish, implement and supervise procedures to
provide staff review of all operational areas. The status of
such reviews shall be discussed and/or addressed in regularly
scheduled quarterly meetings and at other
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meetings as may be necessary or desirable with the Lessee and
the Administrator; and
(ii) provide on-going review and monitoring of all
obligations of the Facility to regulatory agencies with
respect to inspections and compliance requirements for
licensing of the Facility (which status shall be reviewed in
regularly scheduled quarterly meetings and at other meeting as
may be necessary or desirable with the Lessee).
2.14 Plant and Maintenance. The Manager shall:
(i) in consultation with the Lessee, address all
reasonable and customary maintenance items (it being
understood that any such items may be provided by outside
parties if economically feasible), and to the extent
reasonably deemed feasible by the Manager, the services or
regular maintenance employees shall be used; and
(ii) contract 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 maintenance employees.
2.15 Lease Obligations and Obligations under the HUD Financing
Documents. The Manager acknowledges that it has received a copy of the
Lease and the HUD Financing Documents and is familiar with the terms
thereof. Notwithstanding any other provision of this Agreement, the
Manager agrees that in the event the Manager's obligations hereunder
conflict or are inconsistent with the obligations of Lessee under the
Lease or any of the obligations under the HUD Financing Documents, the
obligations of the Manager herein shall be automatically modified
without any action on the part of the parties hereto so as to comply
with all such conflicting or inconsistent terms of the Lease and the
HUD Financing Documents.
3. Management Fee. The Manager shall be paid for the services rendered
by it hereunder a management fee equal to four and 75/100 percent (4.75%) of the
Gross Revenues resulting from the operation of the Facility (the "Management
Fee") payable in equal monthly installments, in arrears. The Management Fee
shall be due on or before the fifteenth day of each month following the month in
which services were rendered. Unpaid Management Fees shall bear interest from
the due date therefor at the rate of ten percent (10%) per annum. The term
"Gross Revenues" shall be defined to mean all of the gross collectible rental
receipts from residents of the Facility plus ancillary revenues less bad debt.
The Management Fee shall be automatically subordinate to the payment of rent
under the Lease and the Manager hereby agrees to execute and deliver any and all
documents, agreements, and instruments requested by the Owner to further
evidence such subordination.
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4. Expenses.
4.1 Lessee Expenses. Except as herein expressly otherwise
provided, the Lessee shall bear all the expenses of operating the
Facility 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 any independent professional
expressly retained by the Lessee, or retained by the
Manager for the account of the Lessee with the prior
written permission of the Lessee, for any purpose.
(b) Interest and discounts on indebtedness incurred or
assumed by the Lessee.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of
the Lessee; 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 and to the extent that the Lessee
had timely approved and executed any necessary
returns in connection therewith, shall be the
responsibility of the Manager.
(d) 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, expenses incurred in connection with
maintenance, repair and improvement of such real and
personal property; all real estate and personal
property tax assessed against such property, premiums
for property and liability insurance on property
leased by the Lessee; brokerage commissions; and fees
and expenses of consultants, managers and agents
retained directly by the Lessee.
(e) The Management Fee.
(f) Legal fees and related expenses pertaining to the
sale, mortgaging or leasing of property, litigation
and proceedings relating to rates and charges at the
Facility, and any other litigation or proceedings to
which the Lessee is a party. Such fees shall not,
however, include those fees resulting from or arising
out of negligence by the Manager.
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(g) Principal and interest on any loan to the Owner
payable under the Loan Documents (as the same may be
passed through to the Lessee as a rent obligation
under the Lease).
(h) Principal and interest on any loan to the Lessee
relating to the Facility.
(i) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans,
travel, insurance and fidelity bonds) of the
employees of the Manager employed at the Facility.
In the event 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 Lessee by the Manager and the Management Fee, the Manager
shall promptly notify the Lessee in writing of the amount necessary to
pay such deficit (and the reason for such deficit) and the Lessee shall
provide such necessary funds to the Manager within ten (10) days after
receipt of such notice.
4.3 Deposit and Disbursement of Funds and Fidelity Bond.
(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 Lessee. The Manager shall take possession of
and endorse the name of the Lessee 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 Manager'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 Lessee shall use
reasonable efforts to collect (if necessary using legal counsel
approved in writing by the Lessee) when due all charges receivable by
the Lessee (whether from residents, third-party payors or others) in
connection with the operation of the Facility and deposit all monies
received in such accounts. The Manager and the Lessee shall deposit
into such accounts all monies furnished by the Lessee as working funds
and all receipts and monies arising from the operation of the Facility
or otherwise received by the Lessee or by the Manager for and on behalf
of the Lessee.
(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 (or its
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affiliates) to reimburse the Manager (or its affiliates) for payments
made pursuant to this Agreement by the Manager (or its affiliates) from
its own accounts. The Lessee hereby appoints the Manager for the term
of this Agreement as the Lessee'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 Manager shall
disburse and pay in the same form such accounts on behalf and in the
name of the Lessee in such amounts and at such times as the same are
deemed by the Manager to be appropriate or required to be made in
connection with, first, payments required by the Lease, and second,
payments of ownership, maintenance and operating expenses of the
Facility and the other costs, expenses and expenditures provided for in
this Agreement (other than the Manager's Management Fee) and third,
payment of the Management Fee provided for in Paragraph 3 hereof.
(iv) The Manager will furnish a fidelity bond which is at
least equal to the gross potential income of the Facility for two (2)
months and is conditioned to protect the Owner, the Lessee, the
Department and any Lender against the misapplication of Facility funds
by the Manager, its employees and representatives and any other
employees of the Facility. The other terms and conditions of the bond
and the surety thereon, will be subject to the approval of the Lessee.
If any of the Manager's principals and/or supervisory staff have access
to funds or accounts of the Lessee or the Facility, the Manager will
pay fidelity bond costs for its principals and supervisory staff. The
bond costs for employees of the Manager employed at the Facility will
be paid by the Manager from the Gross Revenues of the Facility.
5. Duty of the Manager. The Manager shall render the services called
for hereunder in the utmost good faith, and the Manager acknowledges that it is
acting in fiduciary capacity with respect to the Lessee and owes the Lessee the
highest duty of care.
6. Relationship of the Parties. The Lessee and the Manager are not
partners or joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint ventures or impose on either
of them any liability as partners or joint venturers. All dealings between the
Lessee and the Manager are at arms length as between non-related parties as
independent contractor and Lessee.
7. Term and Termination.
7.1 Period of the Term. This Agreement shall continue in force
for a period of fifteen years (15) commencing on March 16, 1998 (the
"Commencement Date") and terminating on March 15, 2013 unless earlier
terminated pursuant to Paragraph 7.2. The Lessee shall have the option
to extend the Agreement for three (3) additional five (5) year renewal
terms upon ninety (90) days written notice to the Manager.
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7.2 Termination for Cause. Except for a failure by the Lessee
to pay the Manager the Management Fee as a result of the subordination
described in Paragraph 3 of this Agreement, either party may terminate
this Agreement for "cause" by delivering thirty (30) days written
notice to the other. "Cause" shall include, but not be general to, each
of the following:
(i) the violation by either party of any material
provision in or obligation imposed by this Agreement
(other than the failure of the Lessee to pay the
Management Fee as a result of the subordination
described in Paragraph 3 of this Agreement) which
violation shall not have been cured to the reasonable
satisfaction of the other party within thirty (30)
days following the date on which written notice of
termination has been received by the party who has
violated a material provision or obligation imposed
by this Agreement;
(ii) any illegal or improper act engaged in by either
party in the operation of the Facility;
(iii) if the other 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
(iv) if the Lessee is required pursuant to the terms and
conditions of any Loan Documents or the Lease to
retain new management for the Facility.
If this Agreement is terminated for cause, the Lessee shall
pay the Manager any installment(s) of the Management Fee then accrued
under this Agreement together with any reimbursable expenses then due
within fifteen (15) days after such termination, and neither party
shall have any further obligations to the other.
7.3 Termination for Failure to Pay Management Fee on a Timely
Basis. The Manager may terminate this Agreement upon thirty (30) days
written notice of the Lessee's failure to pay the Management Fee when
due unless the Lessee cures the payment default within thirty (30) days
after receiving written notice form the Manager; provided, however, if
such failure to pay the Management Fee on a timely basis is due to a
subordination of the Management Fee as provided in Paragraph 3 of this
Agreement, then the Manager shall only have the right to terminate this
Agreement for failure to be paid on a timely basis upon sixty (60) days
written notice to the Lessee if the Manager has not received the
Management Fee on a timely basis for a period of four (4) consecutive
months.
7.4 Termination Due to Change in Ownership or Control. In the
event that the Lessee assigns its interest in the Lease to any
non-related party or any other
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permitted transfer described in Section 19.4 of the Lease occurs, the
Lessee shall have the right to terminate the Agreement by giving the
Manager ninety (90) days' prior written notice. Such notice must be
given prior to the consummation of such assignment or other permitted
transfer. Related parties shall include, but not be limited to, family
members, relatives, employees and business partners.
The Manager shall be paid by the Lessee prior to or at the
consummation of such assignment or other permitted transfer for any
services rendered through the termination date and any other
outstanding sums.
7.5 Termination Due to Breach under HUD Financing Documents.
The HUD Secretary (as defined under the Lease) may terminate this Agreement in
the event of (a) any failure by the Manager to comply with the terms of the
Management Certificate or other good cause, thirty (30) days after the
Department and/or HUD Secretary has mailed the Lessee and the Manager a notice
of termination and (b) any default under any of the HUD Financing Documents
(including, without limitation, the HUD Regulatory Agreement), immediately upon
the issuance of a notice of termination to the Lessee and the Manager. If this
Agreement is terminated pursuant to the provisions of this Section 7.5, the
Lessee shall promptly make arrangements satisfactory to the Department and/or
the HUD Secretary for the continuing proper management of the Facility.
8. Covenant Not to Compete. The Manager agrees that it will not
directly or indirectly manage, own or operate a senior housing facility, or
permit any of its subsidiaries to directly or indirectly manage or own a senior
housing facility within a fifteen (15) mile radius of the Facility, without the
prior written consent of the Lessee during the term of this Agreement.
9. Indemnification. The Lessee shall indemnify the Manager and hold it
harmless of, from and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Cost"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Lessee shall have no 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
negligence, and for Costs incurred or suffered by the Manager as a result of the
Manger's failure to submit proper reports to the appropriate regulatory
agencies, to keep true, accurate and complete records or to obtain any necessary
opinion of counsel as required by Section 1.1 of this Agreement. The Manager
shall indemnify the Lessee and hold it harmless of, from and against all Costs
incurred or suffered by the Lessee as a result of any of the Manager's fraud,
willful misconduct, or negligence, or as a result of the Manager's failure to
submit proper reports to the appropriate regulatory agencies, to keep true,
accurate and complete records or to obtain any necessary opinion of counsel as
required by Paragraph 1.1 of this Agreement.
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10. 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 Lessee. Such access will be available until
the expiration of four (4) years after the services to which the related cost
have been furnished. The provision of this Paragraph 10 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 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.
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 Lessee and the Manager or their respective successors or
assigns, or otherwise as provided herein. The Manager agrees to make any
reasonable modifications to the Agreement as may be required by any lender. Such
modifications shall be in writing and signed by the Lessee 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 State of
Arizona. Any change in or enactment of 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 in valid, illegal, or unenforceable, 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 to further the respective objectives of the parties hereto.
13. Assignment. Neither the Lessee nor the Manager shall assign its
interest in this Agreement without the prior written consent of the other.
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 or
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument
required or permitted to be given under this Agreement ("Notice") shall be in
writing signed by the party
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giving such Notice and shall be hand delivered, sent by telecopier, nationally
recognized overnight carrier or sent, postage prepaid, by Certified or
Registered Mail, Return Requested, to the other party at the addresses listed
below:
As to Lessee: Carematrix of The Inn at the Amethyst, Inc.
197 First Avenue
Needham, MA 02194
Attn: James M, Clary, III, Esq.
General Counsel/Executive Vice President
With a copy to: Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Attn: Marianne Ajemian, Esq.
As the Manager: Netwest Development Corporation
2221 East Broadway Boulevard
Suite 211
Tucson, AZ 85719
Attn: Dee T. O'Neill, 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 shall be deemed received upon the
earlier of three (3) days after the date postmarked or the date of actual
receipt. All Notices that are hand delivered shall be deemed received upon
delivery to the office or address of the addressee.
17. Property. Trade names, marketing materials, marketing ideas and
development material and records developed specifically for and related to the
Facility shall be the property the Lessee. Trade names, ideas and documents,
forms and development material not developed specifically for the 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 resident assistant
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, and financial accounting packages are and will remain the
property of the Manager. Upon the termination of this Agreement, the Lessee
shall have the option to purchase operational material, except for the financial
accounting packages, belonging to the Manager at a mutually agreed upon price.
18. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed original.
15
<PAGE>
19. Consents. In the event that the Lender's consent is required by the
terms hereof for any purpose whatsoever, it is understood and agreed that (i)
the Lessee's consent shall be subject to the consent of any Lender to the extent
that such consent from any Lender is required under the terms of the applicable
Loan Documents (which consent the Lessee shall seek to obtain), (ii) the
Lessee's consent shall be subject to the consent of the Owner Lender to the
extent that such consent from the Owner is required under the terms of the Lease
(which consent the Lessee shall seek to obtain) and (iii) notwithstanding
anything to the contrary set forth herein, it shall not be deemed unreasonable
for the Lessee to withhold its consent in any given circumstance based upon the
Lessee's inability to obtain any required consent from any Lender or the Owner.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Agreement
as of the date first set forth above.
WITNESS: LESSEE:
- -------- -------
CAREMATRIX OF THE INN AT THE AMETHYST,
INC.
____________________________ By: _________________________________
Name: Name: James M. Clary, III, Esq.
Title: Executive Vice President
WITNESS: MANAGER:
- -------- --------
NETWEST DEVELOPMENT CORPORATION
____________________________ By: _________________________________
Name: Name: Priscilla S. Kuhn
Title: President
17
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