SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 1996
COMMUNITY CARE OF AMERICA, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE
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(State of Incorporation)
0-26502 52-1823411
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(Commission File No.) (IRS Employer Identification No.)
3050 NORTH HORSESHOE DRIVE, SUITE 260, NAPLES, FLORIDA 33942
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(Address of Principal Executive Offices) (Zip Code)
(941) 435-0085
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(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 16, 1996, Southern Care Centers, Inc. ("Southern Care") was
merged with and into CCA Acquisition I, Inc. ("Newco"), a newly formed
wholly-owned subsidiary of Community Care of America, Inc. (the "Company"),
pursuant to an Amended and Restated Agreement and Plan of Reorganization (the
"Merger Agreement") dated as of May 10, 1996 among Southern Care, Wallace Olson
and Michael Himmelstein (Southern Care's shareholders), Newco and the Company.
As a result of the Merger, the subsidiaries of Southern Care (the "Acquired
Subsidiaries"), which lease five long-term care facilities in Georgia (the
"Leased Georgia Facilities") and one long-term care facility in Louisiana (the
"Louisiana Facility"), became indirect wholly-owned subsidiaries of the Company.
In addition, another wholly-owned subsidiary of the Company became the manager
of a long-term care facility in Texas owned by a former subsidiary of Southern
Care which was not acquired by the Company (the "Texas Facility") under a
Management Agreement dated as of May 1, 1996 (the "Management Agreement") and
Newco is providing accounting, internal auditing, billing, accounts payable and
certain other services under an Agreement to Provide Accounting and Auditing
Services and Rural Healthcare Provider Network Services dated as of May 1, 1996
(the "Services Agreement") to a company owned by the former shareholders of
Southern Care, which operates another long-term care facility in Georgia. The
terms of the merger and related transactions, including the purchase price paid
to the shareholders of Southern Care, were determined pursuant to arms' length
negotiations. There was no material relationship between either shareholder of
Southern Care and the Company or any of the Company's affiliates, directors or
officers (or any associate of any director or officer of the Company).
Pursuant to the Merger Agreement, the shareholders of Southern Care
received $2.9 million in cash (subject to a dollar-for-dollar adjustment based
upon the amount by which Southern Care's consolidated working capital deficit on
May 1, 1996 varies from $1.8 million) and $6.4 million in Common Stock of the
Company (consisting of 568,888 shares valued at $11.25 per share). In addition,
the shareholders of Southern Care are entitled to receive, on or before March
31, 1997, $500,000 in Common Stock of the Company (consisting of 44,444 shares)
for every $100,000 by which Newco's annualized contribution margin (in general,
income before interest, taxes, depreciation, amortization, rent (except on
equipment leases), corporate overhead, management fees, home office or corporate
charges, charges resulting from accounting changes and non-operational charges)
on a consolidated basis for the year ending December 31, 1996 exceeds $4.4
million, but in no event in excess of $2.0 million in Company Common Stock
(consisting of 177,777 shares). The Company has agreed to file two shelf
registration statements under the Securities Act of 1993, as amended (the
"Act"), covering the shares issued and issuable in the merger (including the
shares subject to the contingent earn-out) upon request of the holders thereof
made at any time after August 15, 1996 and to "piggyback" such shares in certain
registration statements filed by the Company. All such registration statements
are, in general, to be at the Company's expense (except for underwriters' or
brokerage discounts, commissions and expenses), but such rights are only
exercisable until such time as all of such shares are eligible for sale under
Rule 144 under the Act without volume limitation. The shareholders of Southern
Care have agreed to limit sales of Common Stock of the Company issued during any
30-day period to 75,000 shares.
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<PAGE>
Contemporaneously with the consummation of the transaction, the
subsidiaries of Southern Care acquired the five Leased Georgia Facilities from
the prior owners thereof and, in turn, sold those facilities to Health and
Retirement Properties Trust ("HRPT"), which has been the principal financing
source for the Company's major acquisitions to date, for $15.8 million, of which
$2.0 million was used to pay a portion of the cash portion of the merger
consideration, $12.0 million was used by the Acquired Subsidiaries to purchase
the five Leased Georgia Facilities and $1.8 million was paid to a company owned
by the principals of Southern Care. HRPT thereupon leased the Leased Georgia
Facilities to the Acquired Subsidiaries pursuant to separate leases under a
Master Lease (the "New Southern Care Georgia Leases"). The New Southern Care
Georgia Leases provide for an initial term ending on December 31, 2003 and for
up to two additional 13 year terms, each at the Acquired Subsidiary's option.
The initial aggregate annual rent under the New Southern Care Georgia Leases is
$1.8 million. After the first lease year, the Acquired Subsidiaries must pay
additional rent on a facility by facility basis equal to 5% and 2% in the
initial and first renewal terms, and 3% in each case during the second renewal
term, of the year over year increases, if any, in Net Patient Revenues (as
defined) and Non-Inpatient Revenues (as defined), respectively. Any additional
rents that become payable remain payable throughout the balance of the lease
term even if Net Patient Revenues or Non-Inpatient Revenues subsequently
decline. The total minimum and additional rents in any year can not exceed 108%
of the amounts thereof in the prior year. Both the minimum and additional rents
are to be adjusted during the second renewal term.
The Louisiana Facility will continue to be leased under the same
terms as the facility was being leased prior to the merger.
Under the Management Agreement, a newly-formed subsidiary of the
Company is to manage, for a ten year period, subject to earlier termination, the
Texas Facility previously leased by a subsidiary of Southern Care, which
subsidiary was spun-off by Southern Care to its shareholders prior to the
merger. As compensation for its services under the Management Agreement, the
Company's subsidiary is entitled to receive a monthly management fee equal to 4%
of the Texas Facility's monthly revenues. The owner of the facility may
terminate the engagement without cause upon 30 days' prior notice. The Company
may terminate its engagement if, among other things, funds generated from the
operation of the Texas Facility are not sufficient to provide for payment of the
management fee during any six-month period.
Under the Services Agreement, Newco is to provide accounting,
internal auditing, billing, accounts payable and certain other services until
July 31, 2004 to a company owned by the former shareholders of Southern Care
which owns another long-term care facility. For its services, Newco is to
receive $5,000 per month; provided that such amount shall accrue and not be paid
during any period that that long-term care facility's expenses, including lease
payments, debt service and operating and administrative expenses, exceed its
generated revenues. To the extent that such expenses exceed revenues generated
by the facility, Newco is to contribute cash to such facility as needed to meet
expenses as they are incurred.
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<PAGE>
In connection with entering into the original Agreement and Plan of
Reorganization on March 11, 1996, the Company and Southern Care had entered into
a Consulting and Advisory Services Agreement effective as of January 1, 1996,
pursuant to which the Company received consulting fees aggregating approximately
$900,000 for the period January 1, 1996 through the closing date.
ITEM 5. OTHER EVENTS.
In addition to the New Southern Care Georgia Leases discussed in Item
2 of this Report, various subsidiaries of the Company lease an aggregate of 25
other facilities from HRPT and various subsidiaries of the Company have executed
and delivered promissory notes to HRPT in connection with loans to them from
HRPT, the proceeds from the underlying borrowings having been used to finance
the acquisition and, in some instances, the repair, renovation and related
acquisition costs of the acquired facilities. In connection with the financing
of the transactions described in Item 2 of this Report, the Company and its
subsidiaries entered into amendments to certain lease documents previously
entered into with HRPT so that the first renewal term of those leases ends on
December 31, 2016, the same date as the end of the renewal term for the other
leases relating to properties leased from HRPT. In addition, the new Southern
Care properties are linked with the Company's other properties acquired or
leased from HRPT for the purposes of determining the availability of certain
options, rights of first refusal, cross-defaults, cross-guarantees and
cross-collateralization under the lease documents with and certain promissory
notes to HRPT. As part of the financing of the Southern Care Transaction, the
Company deposited an additional $850,000 of cash collateral (the aggregate of
all cash collateral on deposit by the Company with HRPT is presently $6.3
million, after giving effect to such additional deposit).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired (Southern Care
Centers Group).
Pursuant to Instruction (b)(2) of Item 7 to Form 8-K, the
Company intends to file the required historical financial
statements of the Southern Care Centers Group within 60
days after the date this Report was required to be filed.
(b) Pro Forma Financial Information
Pursuant to Instruction (b)(2) of Item 7 of Form 8-K, the
Company intends to file required pro forma financial
information within 60 days after the date this Report was
required to be filed.
(c) Exhibits:
2.1 Amended and Restated Agreement and Plan of
Reorganization dated as of May 10, 1996 among
the Company, Newco, Southern Care, and Wallace
Olson and Michael Himmelstein, the shareholders
of Southern Care.
-4-
<PAGE>
2.2 Consulting and Advisory Services Agreement
effective as of January 1, 1996 among the
Company, Southern Care and its shareholders.
(Incorporated by reference to Exhibit 2.02(b)
to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, File No.
0-26502.)
2.3 Management Agreement dated as of May 10, 1996
between CCA of Texas, Inc. and Southern Care
Centers of Texas, Inc.
2.4 Agreement to Provide Accounting and Auditing
Services and Rural Healthcare Provider Network
Services dated as of May 10, 1996 among Newco
and Buchanan/SCC, Inc.
4.1 Allonge and Amendment dated as of May 10, 1996
to Promissory Note dated December 30, 1993 in
the principal amount of $13,600,000 made by ECA
Holdings, Inc. ("ECA") payable to HRPT.
4.2 Allonge and Amendment dated as of May 10, 1996
to Promissory Note dated December 30, 1993 in
the principal amount of $6,000,000 made by
Community Care of Nebraska Inc. ("CCN") payable
to HRPT.
4.3 Allonge and Amendment to Promissory Note dated
as of May 10, 1996 to Promissory Note dated
April 1, 1995 in the principal amount of
$2,045,000, made by CCN and certain of its
subsidiaries payable to HRPT.
4.4 Allonge and Amendment to Promissory Note dated
as of May 10, 1996 to ECA Holdings Renovation
Funding Promissory Note dated April 1, 1995 in
the principal amount of $6,466,700 made by ECA
payable to HRPT.
4.5 Allonge and Amendment to Promissory Note dated
as of May 10, 1996 to CCN Group Renovation
Funding Promissory Note dated April 1, 1995 in
the principal amount of $2,833,300 made by CCN
and its subsidiaries payable to HRPT.
99.1 Fourth Amendment dated as of May 10, 1996 to
Master Lease Document, General Terms and
Conditions dated December 30, 1993 between HRPT
and ECA.
99.2 First Amendment dated as of May 10, 1996 to
Master Lease Document, General Terms and
Conditions dated April 1, 1995 between HRPT and
ECA.
99.3 Master Lease Document, General Terms and
Conditions dated as of May 10, 1996 between
HRPT and Marietta/SCC, Inc., Glenwood/SCC,
Inc., Dublin/SCC, Inc., Macon/SCC, Inc. and
College Park/SCC, Inc.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY CARE OF AMERICA, INC.
Dated: May 29, 1996 By: /s/ David H. Fater
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David H. Fater, Executive Vice
President and Chief Financial Officer
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AMENDED AND RESTATED AGREEMENT
AND PLAN OF REORGANIZATION
DATED AS OF MAY 10, 1996
AMONG
COMMUNITY CARE OF AMERICA, INC.,
CCA ACQUISITION I, INC.
AND
SOUTHERN CARE CENTERS, INC.
AND ITS
SHAREHOLDERS
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I: MERGER............................................................2
1.1 Merger................................................2
1.2 Issuance of CCA Stock.................................2
1.3 Taking of Necessary Action............................2
1.4 Assets and Liabilities................................2
1.5 Spin-Off Sycamore Care Center.........................2
1.6 Georgia Facilities....................................3
ARTICLE II: CONVERSION.......................................................3
2.1 Conversion of Stock and Cash Conversion Amount........3
2.2 Manner of Exchange....................................4
2.3 Earn-Out Payment......................................4
2.4 Closing and Post-Closing Adjustments..................5
2.5 CCA Stock.............................................6
ARTICLE III: THE CLOSING....................................................12
3.1 Time and Place of Closing............................12
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE
COMPANY..........................................................12
4.1 Organization and Standing of the Company.............12
4.2 Subsidiaries.........................................13
4.3 Absence of Conflicting Agreements....................13
4.4 Consents.............................................13
4.5 Company Shares.......................................13
4.6 Trademarks...........................................14
4.7 Contracts............................................14
4.8 Financial Statements.................................15
4.9 Material Changes.....................................16
4.10 Licenses; Permits; Certificates of Need..............16
4.11 Title, Condition of Personal Property................17
4.12 Legal Proceedings....................................18
4.13 Employees............................................18
4.14 Collective Bargaining, Labor Contracts,
Employment Practices, Etc............................18
4.15 ERISA................................................18
4.16 Insurance and Surety Agreements......................19
4.17 Relationships........................................19
4.18 Absence of Certain Events............................19
4.19 Compliance with Laws.................................20
(i)
<PAGE>
4.20 Finders..............................................20
4.21 Tax Returns..........................................21
4.22 Encumbrances Created by this Agreement...............21
4.23 Environmental Matters................................21
4.24 Leasehold Interests; Condition of the Facilities.....23
ARTICLE V: ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLERS
24
5.1 Authority............................................24
5.2 Binding Effect.......................................24
5.3 Absence of Conflicting Agreements....................24
5.4 Consents.............................................25
5.5 Ownership of Company Shares..........................25
5.6 The Assets...........................................25
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF BUYER.........................25
6.1 Organization and Standing............................25
6.2 Absence of Conflicting Agreements....................25
6.3 Consents.............................................26
6.4 Material Changes.....................................26
6.5 Finders..............................................26
6.6 Power and Authority..................................26
6.7 Binding Agreement....................................26
6.8 CCA Stock............................................26
ARTICLE VII: INFORMATION AND RECORDS CONCERNING THE COMPANY.................26
7.1 Access to Information and Records before Closing.....26
ARTICLE VIII: OBLIGATIONS OF THE PARTIES UNTIL EFFECTIVE TIME OF
MERGER...........................................................27
8.1 Conduct of Business Pending Closing..................27
8.2 Negative Covenants of the Company....................27
8.3 Affirmative Covenants................................27
8.4 Pursuit of Consents and Approvals....................28
8.5 Supplementary Financial Information..................28
8.6 Exclusivity..........................................29
ARTICLE IX: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.....................29
9.1 Representations and Warranties.......................29
9.2 Performance of Covenants.............................29
9.3 Delivery of Closing Certificate......................29
9.4 Opinions of Counsel..................................29
(ii)
<PAGE>
9.5 Legal Matters........................................29
9.6 Authorization Documents..............................29
9.7 Material Change......................................30
9.8 Approvals............................................30
9.9 Working Capital Certificate..........................30
9.10 Labor Agreements.....................................30
9.11 Real Property Consents...............................30
9.12 Title Insurance......................................30
9.13 Environmental Compliance.............................31
9.14 Engineering Report...................................31
9.15 Surveys..............................................31
9.16 Termite Inspections..................................31
9.17 Due Diligence........................................32
9.18 Non-Disturbance Agreement............................32
9.19 Sycamore Care Center.................................32
9.20 Georgia Facilities...................................32
9.21 St. Charles Manor Nursing Center.....................32
9.22 Other Documents......................................32
ARTICLE X: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS.....................32
10.1 Representations and Warranties.......................32
10.2 Performance of Covenants.............................33
10.3 Delivery of Closing Certificate......................33
10.4 Opinion of Counsel...................................33
10.5 Legal Matters........................................33
10.6 Authorization Documents..............................33
10.7 Approvals............................................33
10.8 Georgia Facilities...................................33
10.9 Office Furniture.....................................33
10.10 Other Documents......................................33
ARTICLE XI: OBLIGATIONS OF THE PARTIES AFTER CLOSING........................34
11.1 Survival of Representations, Warranties and
Covenants............................................34
11.2 Indemnification by Sellers...........................34
11.3 Indemnification by Buyer.............................34
11.4 Control of Defense of Indemnifiable Claims...........35
11.5 Restrictions.........................................35
11.6 Records..............................................36
11.7 Audit................................................36
11.8 Chief Operating Officer of the Company...............36
11.9 Retention of Tradename...............................37
(iii)
<PAGE>
ARTICLE XII: TERMINATION....................................................37
12.1 Termination..........................................37
12.2 Effect of Termination................................37
ARTICLE XIII: MISCELLANEOUS.................................................37
13.1 Costs and Expenses...................................37
13.2 Performance..........................................37
13.3 Benefit and Assignment...............................38
13.4 Effect and Construction of this Agreement............38
13.5 Cooperation - Further Assistance.....................38
13.6 Notices..............................................38
13.7 Waiver, Discharge, Etc...............................39
13.8 Rights of Persons Not Parties........................39
13.9 Governing Law........................................39
13.10 Amendments, Supplements, Etc.........................39
13.11 Severability.........................................39
13.12 Joint and Several....................................40
(iv)
<PAGE>
SCHEDULES
Schedule 1.4 - Assets and Liabilities
Schedule 4.2 - Subsidiaries
Schedule 4.3 - Absence of Conflicting Agreements
Schedule 4.4 - Consents
Schedule 4.5 - Company Shares
Schedule 4.6 - Trademarks, Service Marks and Copyrights
Schedule 4.7 - Contracts
Schedule 4.8 - Financial Statements
Schedule 4.9 - Material Changes
Schedule 4.10 - Licenses, Permits
Schedule 4.11(a) - Certain Personal Property
Schedule 4.11(b) - Leases of Personal Property
Schedule 4.11(c) - Permitted Liens
Schedule 4.12 - Legal Proceedings
Schedule 4.13 - Employees
Schedule 4.16 - Insurance and Surety Agreements
Schedule 4.17 - Relationships
Schedule 4.18 - Absence of Certain Events
Schedule 4.19 - Compliance with Laws (Seller)
Schedule 4.23 - Environmental Matters
Schedule 4.24 - Title, Condition of the Facilities
Schedule 5.3 - Absence of Conflicting Agreements
Schedule 6.3 - Consent List of Buyer
Schedule 6.4 - Material Changes (Buyer)
EXHIBITS
Exhibit A - Plan of Merger
Exhibit 9.4 - Seller's Legal Opinion
Exhibit 10.4 - Buyer's Legal Opinion
(v)
<PAGE>
AMENDED AND RESTATED AGREEMENT
AND PLAN OF REORGANIZATION
This Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") is made as of the 10th day of May, 1996, among Community Care of
America, Inc., a Delaware corporation ("Buyer"), CCA Acquisition I, Inc., a
Delaware corporation ("Newco"), Michael A. Himmelstein and Wallace E. Olson
(collectively, the "Sellers" or "Shareholders"), and Southern Care Centers,
Inc., a Georgia corporation (the "Company").
WHEREAS, the Company, directly or through its subsidiaries, is the
owner of the leasehold interests in a total of five (5) skilled nursing
facilities as described on Schedule A hereto (collectively, the "Facilities" and
each a "Facility");
WHEREAS, the Shareholders are the owners of all of the capital stock
of the Company as set forth on Schedule 4.5, such shares being all of the issued
and outstanding shares of the Company (the "Company Shares");
WHEREAS, Newco is a direct wholly owned subsidiary of Buyer;
WHEREAS, the Board of Directors of Buyer, Newco, and the Company deem
it advisable to merge the Company with and into Newco (the "Merger") pursuant to
this Agreement and the Plan of Merger annexed as Exhibit A hereto (the "Plan of
Merger") in a transaction intended to qualify under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the"Code");
WHEREAS, pursuant to the Merger, all Company Shares will be converted
into shares of voting common stock of Community Care of America, Inc. (the "CCA
Stock") and cash; and
WHEREAS, to effectuate the foregoing, the parties desire to adopt a
plan of reorganization in accordance with the provisions of Section 368(a) of
the Code; and
WHEREAS, the parties entered into an Agreement and Plan of
Reorganization dated March 11, 1996, and now wish to amend and restate the
Agreement and Plan of Reorganization.
NOW, THEREFORE, Sellers, Newco, Buyer, and the Company, intending to
be legally bound, agree as follows:
<PAGE>
ARTICLE I: MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time of Merger (as defined in Article III, below), the Company
shall be merged with and into Newco and the separate existence of the Company
shall cease.
1.2 ISSUANCE OF CCA STOCK. Buyer agrees that following the Effective
Time of Merger, it will issue CCA Stock to the extent set forth in, and in
accordance with the terms of this Agreement and the Plan of Merger.
1.3 TAKING OF NECESSARY ACTION. Prior to and after the Effective Time
of Merger, subject to the provisions of this Agreement, each Seller and each of
Buyer, Newco, and the Company shall take all such action as may be necessary or
appropriate in order to effect the Merger and the conversion of Company Shares
as contemplated hereunder. In case at any time after the Effective Time of
Merger any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest Newco with full legal and beneficial ownership of all
assets of the Company and Sellers with full title to the CCA Stock, the parties
shall take all such necessary action.
1.4 ASSETS AND LIABILITIES. As of the Closing Date, and subject to the
provisions of Section 1.5, the consolidated assets and liabilities of the
Company will be substantially the same as set forth on the Company balance
sheet, dated May 31, 1995, as included in the offering memorandum distributed by
Premier HealthCare; provided that the long term mortgage note receivable in the
approximate amount of $470,000, and the officers' loan receivable in the
approximate amount of $235,000, shall have been distributed to the Shareholders
prior to the Closing Date; and provided further that the $470,000 gain on the
sale of the St. Charles property shall be deferred for GAAP (as defined below)
purposes and will be realized by the Company subsequent to the Closing Date;
further provided that the Company assets referred to in Section 1.5 below will
be eliminated and the Company will own the land and improvements subject to the
related debt referred to in Section 1.6 below. The assets of the Company as of
the Closing Date (the "Assets") will include all of the tangible and intangible
assets of the Company as presently constituted, other than inventory, supplies
and other similar expendables disposed of in the ordinary course of business,
but including inventory, supplies and other similar expendables acquired in the
ordinary course of business. All Assets will, as of the Closing Date, be free
and clear of any and all Liens other than Permitted Liens (as hereinafter
defined).
1.5 SPIN-OFF SYCAMORE CARE CENTER. Prior to Closing, the Company shall
transfer and distribute to its shareholders all of the issued and outstanding
stock of its subsidiary, Southern Care Centers of Texas, Inc. ("SCCT"), the
principal asset of which is the leasehold interest and related assets pertaining
to that certain Facility known as the Sycamore Care Center. At the Closing,
Buyer or a wholly owned subsidiary of Buyer will enter into a ten (10) year
management agreement with SCCT at a management fee equal to four (4%) percent of
gross revenues, in the form attached hereto as Exhibit 1.5, pursuant to which
Buyer or such subsidiary will manage and operate the Sycamore Care Center with
the right of the lessee/operator (SCCT) to terminate the management agreement on
thirty (30) days notice.
2
<PAGE>
1.6 GEORGIA FACILITIES.
(A) Simultaneously with the Closing, the Company will purchase from
the landlord thereof the land, buildings and personal property constituting
those certain five (5) Facilities that are identified on Schedule A as being
located in the State of Georgia (collectively, the "Georgia Facilities"). Buyer
hereby expressly authorizes the Company to utilize the Deposit (as defined in
Section 2.2(a), below) for the payment of earnest money deposits to the said
landlords in connection with the purchase of the Georgia Facilities. It is
understood, however, Closing of the Merger is specifically conditioned on
closing of the purchase of the Georgia Facilities referred to herein.
(B) Between the date hereof and the Closing Date, Buyer will consult
with and assist the Company in obtaining mortgage or sale leaseback financing
for the purchase of the Georgia Facilities in a principal amount of not less
than Thirteen Million Eight Hundred Thousand ($13,800,000) Dollars. Buyer shall
have the primary responsibility for identifying appropriate sources for such
financing and for negotiating the terms thereof. Any excess proceeds of such
financing, without reduction for loan origination fees, closing costs or any
other expenses of $13,800,000 loan, remaining after payment of the purchase
price for the Georgia Facilities shall be paid over by the Company at the
Closing to the Shareholders in cash for selected leasehold improvements being
acquired from Buchanan/SCC, Inc.
(C) Simultaneously with the Closing, Newco will execute an agreement
to provide accounting and auditing services and rural healthcare provider
network services with Buchanan/SCC, Inc., a Georgia corporation, all of the
stock which is owned by Sellers, and which operates a facility known as
Countryside, as more particularly described on Schedule 1.6(c).
ARTICLE II: CONVERSION
2.1 CONVERSION OF STOCK AND CASH CONVERSION AMOUNT. At the Effective
Time of Merger:
(A) the Company Shares which are issued and outstanding immediately
prior to the Effective Time of Merger shall, without any action by the holder
thereof, be converted into an aggregate consideration (the "Merger
Consideration") consisting of (i) cash in the amount of TWO MILLION
($2,000,000.00) DOLLARS (the "Cash Conversion Amount"), provided that the Cash
Conversion Amount will be increased by Two Hundred Thousand ($200,000.00)
Dollars per month from January 1, 1996, through the Closing Date (the
"Incremental Increase"), (ii) that number of shares of CCA Stock as shall be
equal in value to SIX MILLION FOUR HUNDRED THOUSAND ($6,400,000.00) DOLLARS,
based upon the valuation of CCA Stock as determined pursuant to Section 2.5(a),
below, and (iii) a contingent right to receive additional shares of CCA Stock in
accordance with Section 2.3, below; and
(B) each share of Company common stock outstanding immediately prior
to the Effective Time of Merger shall be converted into one share of common
stock of the Newco.
3
<PAGE>
(C) The aggregate amount of the Incremental Increase will be payable
as follows: (i) four hundred thousand ($400,000.00) dollars shall be payable
five (5) days after the date of this Agreement; (ii) two hundred thousand
($200,000.00) dollars shall be payable April 1, 1996; and (iii) two hundred
thousand ($200,000.00) dollars shall be payable on the Closing Date.
2.2 MANNER OF EXCHANGE.
(A) At the Effective Time of Merger, each holder of a certificate
theretofore evidencing outstanding Company Shares, upon surrender of such
certificate, shall be entitled to receive in exchange therefor (i) payment, in
the form of a certified check or wire transfer, of such holder's pro rata share
of the Cash Conversion Amount as hereinafter provided, and (ii) a certificate or
certificates representing the number of full shares of CCA Stock for which the
Company Shares theretofore represented by the certificate or certificates so
surrendered shall have been exchanged as provided in this Article II. Until so
surrendered, each such outstanding certificate which, prior to the Effective
Time of Merger, represented Company Shares will be deemed to evidence the right
to receive the cash and the number of shares of CCA Stock into which the shares
of Company Shares represented thereby may be converted. Upon the surrender of
such certificates, they shall be duly canceled.
(B) Subject to and upon the terms and conditions hereof, the Plan of
Merger, the General Corporation Law of the State of Delaware, the Articles of
Merger, and the Business Corporation Code of the State of Georgia, at the
Effective Time of Merger, the Company shall be merged with and into Newco. Each
party hereto approves and agrees to the Plan of Merger and Articles of Merger
and shall execute, deliver and file, or shall cause to be executed, delivered
and filed, all such instruments, covenants, agreements, certificates and
documents as shall be necessary to effectuate the Plan of Merger and Articles of
Merger on the Closing Date (as hereinafter defined).
2.3 EARN-OUT PAYMENT. In addition to the Merger Consideration to be
received by the Shareholders at the Closing, Shareholders shall be entitled to
receive, on or before March 31, 1997 (following receipt of the Company's audited
financial statements for the year ended December 31, 1996), additional shares of
CCA Stock as shall be equal in value to Five Hundred Thousand ($500,000.00)
Dollars, based upon the valuation of CCA Stock as determined pursuant to Section
2.5(a) for every One Hundred Thousand ($100,000.00) Dollars by which the
annualized Contribution Margin (as defined below) of the Company for the year
ended December 31, 1996, exceeds Four Million Four Hundred Thousand
($4,400,000.00) Dollars; provided that the earn-out payable to the Shareholders
hereunder shall in no event exceed Two Million ($2,000,000.00) Dollars of CCA
Stock based on the valuation of Section 2.5(a). For the purposes hereof,
"Contribution Margin" shall be defined as Company income before corporate
overhead or management fees (including costs of the Seller's Chief Operating
Officer), interest, taxes, depreciation, amortization, lease and rental expenses
(other than equipment leases for Company
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operations), home office charges, corporate charges, charges resulting from
accounting changes, expenses of this transaction (including but not limited to
the Incremental Amount), or other costs not directly incurred in connection with
Company operations, and exclusive of additional Medicaid reimbursement related
to a change of ownership, none of which shall be taken into account for purposes
of computing annualized Contribution Margin.
2.4 CLOSING AND POST-CLOSING ADJUSTMENTS.
(A) At the Closing, or within thirty (30) days following the Closing
Date, the Company shall deliver to Buyer the balance sheet of the Company dated
as of the Closing Date, certified by the Company's chief financial officer (the
"Closing Date Balance Sheet"). The Merger Consideration payable to the
Shareholders shall be adjusted if the Closing Date Balance Sheet discloses that
the Company's current liabilities as of the Closing Date exceed or are less than
the Company's current assets as of the Closing Date by more than $1,850,000. To
the extent such current liabilities exceed such current assets (the "Current
Liabilities Excess") by more than $1,850,000, the Merger Consideration shall be
reduced on a dollar-for-dollar basis. To the extent such current liabilities
exceed such current assets by less than $1,850,000 (or if current assets exceed
current liabilities), the Merger Consideration shall be increased on a
dollar-for-dollar basis. The parties acknowledge and agree that $450,000 of the
foregoing $1,850,000 represents the result of an audit of the Facilities' aging
of accounts receivable outstanding for a minimum of ninety (90) days. For the
purposes hereof, current assets and current liabilities shall be determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied ("GAAP"), but without regard to accounting changes effected
at or after Closing, and exclusive of adjustments for intercompany transactions
resulting from the deletion of the Sycamore facility, the operating results of
the Countryside facility, payment of the Incremental Increase, other accounting
changes, and expenses of this transaction.
(B) As soon as is reasonably practicable, but in any event within
ninety (90) days following the Closing Date, Buyer shall complete at its
expense, a review of the Company's Closing Date Balance Sheet, to verify the
Company's current assets and current liabilities as of the Closing Date, and
shall deliver to the Principal Shareholders its written report (the "Working
Capital Report") setting forth the amount of such current assets and current
liabilities. Buyer will cause the auditors to reasonably consult with the
Principal Shareholders during such audit. In the event that the Working Capital
Report discloses that the Current Liabilities Excess was different from the
amount of the Current Liabilities Excess as indicated on the Closing Date
Balance Sheet, the Merger Consideration shall be further adjusted in the same
manner as set forth in Section 2.4(a), and the Buyer or the Shareholders will
make prompt payment of such amount to the other. If the Shareholders dispute the
amount of the reduction as set forth in the Working Capital Audit, the parties
agree to utilize the following procedures with respect to the resolution of such
dispute:
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(I) Within sixty (60) days after delivery to the
Shareholders of the Working Capital Report, the Shareholders may
deliver to Buyer a written report (a "Shareholders' Report") prepared
by an independent accounting firm selected by the Shareholders (the
"Shareholders' Accountants") advising Buyer either that Shareholders'
Accountants (A) agree with the Working Capital Report, or (B) deem
that one or more adjustments are required. The costs and expenses of
the services of the Shareholders' Accountants shall be borne by the
Shareholders. If Buyer shall concur with the adjustments proposed by
the Shareholders' Accountants, or if Buyer shall not object thereto in
writing delivered to the Shareholders within (30) days after Buyer's
receipt of a Shareholders' Report, the calculation of current assets
and current liabilities (as so adjusted as provided in such
Shareholders' Report) shall become final and shall not be subject to
further review, challenge or adjustment absent fraud. If the
Shareholders do not submit a Shareholders' Report within the 60-day
period provided herein, then the Working Capital Report as submitted
by Buyer shall become final and shall not be subject to further
review, challenge or adjustment absent fraud.
(II) In the event that the Shareholders submit a
Shareholders' Report and Buyer and the Shareholders' Accountants are
unable to resolve the disagreements set forth in such report within
thirty (30) days after the date of the Shareholders' Report, then such
disagreements shall be referred to a recognized firm of independent
certified public accountants (not the auditors of CCA or the Company)
experienced in auditing health care companies and selected by mutual
agreement of the Shareholders and Buyer (or if the parties cannot
agree on such selection, then a "big six" accounting firm selected by
lot) (the "Settlement Accountants"), and the determination of the
Settlement Accountants shall be final and shall not be subject to
further review, challenge or adjustment absent fraud. The Settlement
Accountants shall use their best efforts to reach a determination not
more than forty-five (45) days after such referral. The costs and
expenses of the services of the Settlement Accountants shall be paid
by Buyer if it is determined that there will be any adjustment to the
Working Capital Report; otherwise, if there is no adjustment, such
costs and expenses of the Settlement Accountants shall be paid by
Shareholders.
2.5 CCA STOCK. That portion of the merger consideration which is to be
paid by means of the delivery to Sellers of CCA Stock shall be paid in
accordance with the following:
(A) THE CLOSING DATE SHARE VALUE. The number of shares of CCA Stock
issuable pursuant to Sections 2.1 and 2.3 (the "Registrable Securities") shall
in both cases be $11.25. The value of the CCA Stock for indemnification purposes
shall be based upon a price per share of $11.25.
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(B) DEMAND REGISTRATION RIGHTS. At any time after August 15, 1996, the
Shareholders will be entitled to make written demand upon Buyer for the
registration of all of the Registrable Securities then held by them. As soon as
is reasonably practicable following such demand, but in no event later than
ninety (90) days following the date on which such demand is made, Buyer will
cause to be prepared, filed and will use its best efforts to have declared
effective by the Securities and Exchange Commission (the "Commission") a Shelf
Registration with respect to the Registrable Securities. Buyer will be required
to effect not more than two (2) such registrations in the aggregate.
Notwithstanding the foregoing, (i) in the event that the holders of Registrable
Securities shall have already exercised their piggyback rights under subsection
(c) of this Section 2.4, the demand rights under this subsection (b) may be
exercised only after the date which is ninety (90) days following the effective
date of the registration statement in respect of which such piggyback rights
were exercised, and (ii) no demand rights shall be exercisable at any time
during which all of the holders of Registrable Securities would be presently
entitled to sell all of their Registrable Securities pursuant to Rule 144 of the
Commission without any volume limitations.
(C) PIGGYBACK REGISTRATION RIGHTS. If the Buyer shall at any time
propose to file a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") for any sales of securities of the Buyer on
behalf of the Buyer or otherwise, the Buyer shall give to the holders of
Registrable Securities written notice of such registration no later than thirty
(30) days before its filing with the Commission; PROVIDED, that registrations
relating solely to securities to be issued by the Buyer in connection with any
acquisition, employee stock option or employee stock purchase or savings plan on
Form S-4 or S-8 (or successor Forms) under the Securities Act shall not be
subject to this Section 2.4(c). If the holders of Registrable Securities so
request within fifteen (15) days, and the Shareholders consent to such request,
the Buyer shall include any or all of the Registrable Securities then issued in
any such registration. However, the Buyer shall not be obligated to include any
portion (or all) of such Registrable Securities to the extent any underwriter or
underwriters of such securities being otherwise registered by the Buyer shall
determine in good faith that the inclusion of such portion (or all) of such
Registrable Securities (or any portion thereof) would jeopardize the successful
sale of such other securities proposed to be sold by such underwriter or
underwriters; PROVIDED, HOWEVER, that if such offering includes securities being
offered by resale by other stockholders of the Buyer, then the Registrable
Securities may be eliminated from such offering only to the extent that the
securities being offered by such other stockholders also are eliminated on a
PARI PASSU basis, except for any preferential rights held by Equity Linked
Investors I and Equity Linked Investors II. No piggyback registration rights
shall be exercisable at any time during which all of the holders of Registrable
Securities would be presently entitled to sell all of their Registrable
Securities pursuant to Rule 144 of the Commission without any volume
limitations. The terms of this Section 2.5(c) shall not apply to the Buyer's
current S-1 Registration Statement which was filed with the Commission on
February 16, 1996.
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(D) REGISTRATION EXPENSES. Buyer shall bear all reasonable expenses
related to such registration. Such costs and expenses shall include, without
limitation, the fees and expenses of counsel for Buyer and of its accountants,
all other costs, fees and expenses of Buyer incident to the preparation,
printing, registration and filing under the Securities Act of the registration
statement and all amendments and supplements thereto, the cost of furnishing
copies of each preliminary prospectus, each final prospectus and each amendment
or supplement thereto to underwriters, dealers and other purchasers of CCA Stock
and the costs and expenses (including fees and disbursements of counsel)
incurred in connection with the qualification of CCA Stock under the Blue Sky
laws of various jurisdictions. Buyer, however, shall not be required to pay
underwriter's or brokerage discounts, commissions or expenses, or to pay any
costs and expenses in excess in the aggregate of $20,000 for Blue Sky
qualifications of CCA Stock, or to pay any costs or expenses arising out of any
Seller's failure to comply with its obligations under this Section 2.4.
(E) RESALE LIMITATIONS. Sellers hereby covenant with Buyer that sales
by them of CCA Stock shall not in the aggregate, during any 30-day period,
exceed 75,000 shares of CCA Stock issued under this Agreement.
(F) REGISTRATION PROCEDURES, ETC. In connection with the registration
rights granted to Sellers with respect to the CCA Stock as provided in this
Section 2.4, Buyer covenants and agrees as follows:
(I) Buyer will promptly notify Sellers at any time when a
prospectus relating to a registration statement covering Sellers'
shares under this Section 2.4 is required to be delivered under the
Securities Act, of the happening of any event known to Buyer as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(II) Buyer shall furnish Sellers with such number of
prospectuses as shall reasonably be requested, and Sellers agree to
comply with the prospectus delivery requirements of the Securities Act
in connection with any sale of CCA Stock by them.
(III) Buyer shall take all necessary action which may be
required in qualifying or registering CCA Stock included in a
registration statement for offering and sale under the securities or
Blue Sky laws of such states as reasonably are requested by Sellers,
provided that Buyer shall not be obligated to qualify as a foreign
corporation or dealer to do business under the laws of any such
jurisdiction.
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(IV) The information included or incorporated by reference
in the registration statement filed pursuant to this Section 2.4 will
not, at the time any such registration statement becomes effective,
contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein as necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading or necessary to correct any statement
in any earlier filing of such registration statement or any amendments
thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder. Buyer shall indemnify Sellers of CCA Stock
sold in accordance with the provisions of this Section 2.4 pursuant to
the registration statement, their successors and assigns, and each
person, if any, who controls such Sellers within the meaning of Sec.15
of the Securities Act or Sec.20(a) of the Securities Exchange Act of
1934 (the "Exchange Act"), against all loss, claim, damage expense or
liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which any of them may become subject under the Securities Act, the
Exchange Act or any other statute, common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement
of a material fact contained in such registration statement executed
by Buyer or based upon written information furnished by Buyer filed in
any jurisdiction in order to qualify CCA Stock under the securities
laws thereof or filed with the Commission, any state securities
commission or agency, NASDAQ, NYSE or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements contained
therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to
Buyer by any Seller expressly for use in such registration statement,
any amendment or supplement thereto or any application, as the case
may be. If any action is brought against Sellers or any controlling
person of Sellers in respect of which indemnity may be sought against
Buyer pursuant to this subsection 2.4(f)(iv), Sellers or such
controlling person shall within thirty (30) days after the receipt
thereby of a summons or complaint, notify Buyer in writing of the
institution of such action and Buyer shall assume the defense of such
actions, including the employment and payment of reasonable fees and
expenses of counsel. Any Seller or any such controlling person shall
have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of
such Seller or such controlling person unless (A) the employment of
such counsel shall have been authorized in writing by Buyer in
connection with the defense of such action, or (B) Buyer shall not
have employed counsel to have charge of the defense of such action, or
(C) such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them which are different
from or additional to those available to Buyer (in which case, Buyer
shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events
the fees and expenses of not more than one additional firm of
attorneys for Sellers and/or such controlling person shall be borne by
Buyer and such law firm shall be reasonably acceptable to Buyer.
Except as expressly provided in the previous sentence, in the event
that Sellers assume control of the defense of any such action or
claim, Buyer shall not thereafter be liable to Sellers or such
controlling person in investigating,
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preparing or defending any such action or claim. Buyer agrees promptly
to notify Sellers of the commencement of any litigation or proceedings
against Buyer or any of its officers, directors or controlling persons
in connection with the resale of CCA Stock or in connection with such
registration statement. If the indemnification provided for in this
Section 2.4(f)(iv) is held by a court of competent jurisdiction to be
unavailable to a Seller or any controlling person of such Seller with
respect to any loss, liability, claim, damage or expense referred to
herein, then Buyer, in lieu of indemnifying such Seller or any
controlling person of such Seller hereunder, shall contribute to the
amount paid or payable by such Seller or any controlling person of
such Seller hereunder, as a result of such loss, liability, claim,
damage, expense or liability in such proportion as is appropriate to
reflect the relative fault of Buyer on the one hand and of the Seller
or any controlling person of such Seller on the other in connection
with the statements or omissions which resulted in such loss,
liability, claim, damage, expense, or liability, as well as any other
relevant equitable considerations. The relative fault of Buyer and of
such Seller or any controlling person of such Seller shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by Buyer or by the
Seller or any controlling person of such Seller and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(V) Each Seller of CCA Stock to be sold pursuant to a
registration statement, and his or its successors and assigns, shall
severally, and not jointly, indemnify Buyer, its officers and
directors and each person, if any, who controls Buyer within the
meaning of Sec.15 of the Securities Act or Sec.20(a) of the Exchange
Act against all loss, claim, damage, or expense or liability
(including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may
become subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising from information that was
furnished by or on behalf of such Seller, or his or its successors or
assigns and which was included in the selling shareholders provisions
in such registration statement.
(G) NOTICE OF SALE. If they desire to transfer all or any portion of
CCA Stock, the Sellers will deliver written notice to Buyer, describing in
reasonable detail their intention to effect the transfer and the manner of the
proposed transfer. If the transfer is to be pursuant to an effective
registration statement as provided herein, Sellers will sell the CCA Stock in
compliance with the disclosure therein and discontinue any offers and sales
thereunder upon written notice from Buyer that the registration statement
relating to the CCA Stock being transferred is not "current" until Buyer gives
further notice that offers and sales may be recommenced. In the event of any
such notice from Buyer, Buyer agrees to file expeditiously such amendments to
the registration statement as may be necessary to bring it current during the
period specified in Section 2.4(f) and to give prompt notice to Sellers when the
registration statement has again become current. Subject to the resale
limitations set forth in Section 2.4(e) hereof, if Sellers, at their own cost
and expense, deliver to Buyer an opinion of counsel reasonably acceptable to
Buyer and its counsel and to the effect that the proposed transfer of CCA Stock
may be made without registration under the Securities Act and all applicable
state securities
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laws, Sellers will be entitled to transfer CCA Stock in accordance with the
terms of the notice and opinion of their counsel.
(H) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of Buyer to take any action pursuant to this Section 2.4 that
Sellers shall furnish to CCA such information regarding themselves, the CCA
Stock held by them, and the intended method of disposition of such securities as
shall be necessary or appropriate to effect the registration of their CCA Stock.
In that connection, each Seller shall be required to represent to Buyer that all
such information which is given is both complete and accurate in all material
respects and such Seller shall deliver to Buyer a statement in writing from the
beneficial owners of such securities of the bona fide intention to sell,
transfer or otherwise dispose of such securities. Each Seller will, severally,
promptly notify Buyer at any time when a prospectus relating to a registration
statement covering such Seller's shares under this Section 2.4 is required to be
delivered under the Securities Act, of the happening of any event known to such
Seller as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the statements as then
existing.
(I) INVESTMENT REPRESENTATIONS. All shares of CCA Stock to be issued
hereunder will be newly issued shares of Buyer. Sellers represent and warrant to
Buyer that the CCA Stock being issued hereunder is being acquired, and will be
acquired, by Sellers for investment for their own accounts and not with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act or the applicable state securities law; such Sellers
acknowledge that the CCA Stock constitutes restricted securities under Rule 144
promulgated by the Commission pursuant to the Securities Act, and may have to be
held indefinitely, and Sellers agree that no shares of CCA Stock may be sold,
transferred, assigned, pledged or otherwise disposed of except pursuant to an
effective registration statement or an exemption from registration under the
Securities Act, the rules and regulations thereunder, and under all applicable
state securities laws. Sellers have the knowledge and experience in financial
and business matters, are capable of evaluating the merits and risks of the
investment, and are able to bear the economic risk of such investment. Sellers
have been provided with such materials as are generally provided to shareholders
of Buyer and have had the opportunity to make inquiries of and obtain from
representatives and employees of Buyer such other information about Buyer as
they deem necessary in connection with such investment.
(J) LEGEND. It is understood that the certificates evidencing the CCA
Stock shall bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933
OR AN
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OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT.
(K) As long as the Shareholders, or either of them, hold at least
twenty (20%) percent of the CCA Stock issued to them at Closing, the
Shareholders shall be entitled to receive notice of and have the right to attend
all meetings of CCA's Board of Directors.
ARTICLE III: THE CLOSING
3.1 TIME AND PLACE OF CLOSING. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
Buyer's counsel in New York, NY, on May 1, 1996, or at such other time and place
upon which the parties may agree, provided that, for accounting purposes only,
the Closing shall be deemed effective as of 12:01 a.m., May 1, 1996. The date on
which the Closing is held is hereinafter called the "Closing Date." Subject to
the conditions set forth herein, at the Closing (a) Sellers shall deliver for
cancellation all of the stock certificates representing the Company Shares, duly
endorsed, or accompanied by one or more stock powers duly endorsed, and (b)
Buyer, as agent for the Company, shall deliver to Sellers (x) stock certificates
issued in the name of Sellers representing that number of shares of CCA Stock
into which the Company Shares are to be converted as of the Effective Time of
Merger pursuant to Section 2.1(a) hereof and (y) the cash portion of the Cash
Conversion Amount payable as of the Effective Time of Merger in accordance with
Section 2.2(a) hereof.
3.2 FILINGS AT CLOSING. On the Closing Date, Buyer shall cause the
Plan of Merger or such other certificates, instruments and documents as shall be
required to be filed in order to effect the Merger in accordance with the
Delaware General Corporation Law. Company shall cause the Articles of Merger to
be filed in accordance with the Official Code of Georgia Annotated. Each of
Buyer, the Company, Newco and Sellers shall take any and all lawful actions and
use their respective best efforts to cause the Merger to become effective as of
the Closing Date (or as promptly thereafter as possible). If, notwithstanding
the foregoing, the Effective Time of Merger shall not occur on the Closing Date,
the parties will hold all Transaction Documents (as hereinafter defined), other
than those necessary to effect the Merger, in a mutually escrow arrangement
pending such Effective Time of Merger.
3.3 EFFECTIVE TIME. The Merger shall become effective at the time the
Plan of Merger or such other certificate, instruments and documents as shall be
required by the Georgia Secretary of State is made effective under the laws of
the State of Georgia (the "Effective Time of Merger").
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE
COMPANY
Each Seller and the Company hereby represent and warrant to Buyer as
follows:
4.1 ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of
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Georgia. Copies of the Articles of Incorporation and By-Laws of the Company, and
all amendments thereof to date, have been delivered to Buyer and are complete
and correct. The Company has the power and authority to own the property and
assets now owned by it and to conduct the business presently being conducted by
it and to execute and deliver this Agreement and each Transaction Document (as
such term is hereinafter defined) and to carry out the transactions contemplated
hereby and thereby.
4.2 SUBSIDIARIES. Except as described on Schedule 4.2, the Company has
no equity interest or investment in any other corporation, limited liability
company, partnership, joint venture or other entity or association.
4.3 ABSENCE OF CONFLICTING AGREEMENTS. Except as disclosed on Schedule
4.3, the execution and delivery of this Agreement, including all Schedules and
Exhibits hereto, and of the other agreements, instruments, documents and
certificates required or contemplated hereby ("Transaction Documents") by the
Company, and the performance by the Company of the transactions contemplated
hereby and thereby, does not conflict with, or constitute a breach of or a
default under (i) the Articles of Incorporation or By-Laws of the Company; or
(ii) any applicable law, rule, judgment, order, writ, injunction, or decree of
any court; or (iii) any applicable rule or regulation of any administrative
agency or other governmental authority; or (iv) any material agreement,
indenture, contract or instrument to which the Company is now a party or by
which any of the assets of the Company is bound. The execution, delivery and
performance of this Agreement and each Transaction Document and the performance
of each of the transactions contemplated hereby and thereby has been authorized
by all necessary corporate action of the Company. This Agreement has been duly
executed and delivered by the Company. This Agreement is, and when executed and
delivered, each Transaction Document executed by the Company will be, legal,
valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms.
4.4 CONSENTS. Except as disclosed on Schedule 4.4, no authorization,
consent, approval, license, exemption by, or filing or registration with, any
court, governmental or quasi-governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign (Federal, state or local), is or
will be necessary in connection with the execution, delivery and performance of
this Agreement or of any of the Transaction Documents by the Company.
4.5 COMPANY SHARES. Schedule 4.5 sets forth a complete list and
description of the authorized capital shares of the Company, the number of
shares issued and outstanding of each class or series of such shares, and the
identity of each shareholder of the Company, in each case indicating the class
and number of shares held. All of such shares shown as issued and outstanding
are duly authorized, validly issued, fully paid and non-assessable. None of such
shares are held in the treasury of the Company. The Sellers are the record and
beneficial owners of all of such shares free and clear of any and all liens,
claims, security interests, mortgages, pledges, charges, rights of setoff,
restraints on transfers and encumbrances of any kind or nature whatsoever
("Liens"). On the Closing Date, there will be no preemptive, participation or
rights
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of refusal to purchase or otherwise acquire capital shares of the Company
pursuant to any provision of law or the Articles of Incorporation or By-laws of
the Company or by agreement or otherwise. On the Closing Date, there shall not
be outstanding any warrants, options, or other rights to subscribe for or
purchase from the Company or any Seller any capital shares of the Company, nor
shall there be outstanding any securities convertible into or exchangeable for
such shares.
4.6 TRADEMARKS. Schedule 4.6 sets forth a complete and accurate list
of all registered trademarks, service marks, copyrights, and other items of
intellectual property that are owned, possessed or used by the Company, and any
applications for any of the same. There are no claims or proceedings pending or,
to the knowledge of Sellers and the Company, overtly threatened against the
Company asserting that the use of any of the aforementioned properties or rights
infringes the rights of any other person, and, to the knowledge of the Sellers
and the Company, the Company is not infringing on the intellectual property
rights of any other person.
4.7 CONTRACTS. Schedule 4.7 sets forth a complete and correct list of
all agreements, contracts and commitments (whether or not in writing) of the
following types to which the Company is a party or by which the Company or any
of the Company's assets are bound and as to which the Company has any
outstanding obligations as of the date hereof (the "Contracts"):
(A) each contract or agreement for the employment or retention of, or
collective bargaining, severance or termination agreement with, any director,
officer, employee, consultant, agent or group of employees of the Company and
each non-competition, confidentiality or similar agreement with any such person
or persons;
(B) each profit sharing, thrift, bonus, incentive, deferred
compensation, shares option, shares purchase, severance pay, pension,
retirement, hospitalization, insurance or other similar plan, agreement or
arrangement;
(C) each agreement, option or arrangement for the sale of any of the
Company's assets, properties or rights outside the ordinary course of business
(by sale of assets, sale of shares, merger or otherwise);
(D) each contract which contains any provisions requiring the Company
to indemnify or act for any other person or entity or to guaranty or act as
surety for any other person or entity;
(E) each agreement restricting the Company from conducting any type of
business anywhere in the world for any period of time or restricting its use or
disclosure of any confidential or proprietary information;
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(F) each partnership, joint venture or management contract or similar
arrangement or agreement which involves a right to share profits or future
payments with respect to the Company's business or any portion thereof or the
business of any other person or entity;
(G) each licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment which involves consideration of more than $15,000;
(H) each contract under which the Company performs patient services;
(I) each lease, license, sublease, sublicense, contract, agreement,
restrictive covenant, easement, obligation or arrangement with respect to the
ownership, use or occupancy of any real property or any interest therein or
option therefor;
(J) each lease, license, sublease, sublicense, contract, agreement or
arrangement with respect to the use or ownership of any tangible personal
property used by the Company in connection with the operation of its business;
and
(K) any other agreement which involves consideration of more than
$15,000.
Except as set forth on Schedule 4.7, each of the Contracts was entered
into and requires performance in the ordinary course of business, is valid,
binding and enforceable in accordance with its terms, and is in full force and
effect. Except as set forth on Schedule 4.7, the Company is not in default under
any Contract and there has not been asserted, either by or against the Company
under any Contract, any written notice of default, set-off or claim of default.
To the best knowledge of Sellers and the Company, the parties to the Contracts
other than the Company are not in default of any of their respective obligations
under the Contracts, and there has not occurred any event which with the passage
of time or the giving of notice (or both) would constitute a default or breach
under any Contract. All amounts payable by the Company under the Contracts are,
and will at the Closing Date, be on a current basis. The Company has delivered
to Buyer complete and correct copies of each of the written Contracts and
written descriptions, in reasonable detail, of each oral Contract.
4.8 FINANCIAL STATEMENTS.
(A) The unaudited balance sheet (the "Balance Sheet") of the Company
as of December 31, 1995 (the "Balance Sheet Date"), and the related statements
of operations and accumulated deficit and statements of cash flows for the
six-month period then ended, certified by the Chief Financial Officer of the
Company, previously delivered to Buyer by the Company, present fairly in all
material respects the financial condition and results of operations of the
Company at and for the periods therein specified and were prepared in accordance
with generally accepted accounting principles applied on a consistent basis.
Such statements of operation do not contain any items of special or nonrecurring
income or expense or any other income not earned or expense not incurred in the
ordinary course of business except as expressly specified therein.
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(B) The audited balance sheet of the Company as of June 30, 1995, and
the related statement of operations and accumulated deficit and statement of
cash flows for the year then ended, previously delivered by the Company to
Buyer, present fairly in all material respects the financial condition and
results of operations of the Company at and for the period therein specified and
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis. Such statements of operation do not contain any
items of special or nonrecurring income or expense or any other income not
earned or expense not incurred in the ordinary course of business except as
expressly specified therein.
(C) Except as set forth on Schedule 4.8(c) or as expressly set forth
on the Balance Sheet, at the Balance Sheet Date the Company had no material
liabilities or obligations (whether absolute, accrued, contingent or otherwise
and whether due or to become due, including, without limitation, any guarantees
of any of any obligations of any other person or entity) of any kind or nature,
whether or not of a nature which was or is required by generally accepted
accounting principles to be reflected in a corporate balance sheet and/or the
notes thereto.
4.9 MATERIAL CHANGES. Since the Balance Sheet Date there has not been
any material adverse change in the condition (financial or otherwise) of the
assets, properties or operations of the Company, whether or not covered by
insurance or other indemnity, and during such period of time the Company has and
from the date of this Agreement through the Closing, will have, conducted its
business only in the ordinary and normal course, and made no payments or
distributions to any Seller other than wages paid in the ordinary and normal
course of business, except as otherwise expressly permitted by this Agreement.
4.10 LICENSES; PERMITS; CERTIFICATES OF NEED. Schedule 4.10 sets forth
a description of (a) all licenses and other governmental, quasi-governmental or
other regulatory permits, authorizations or approvals of the Company that are
now in effect; (b) all final Certificates of Need issued with respect to the
Facilities that are now in effect; and (c) each other license, permit, or other
authorization that is necessary for the operation of the Facility (collectively,
the "Licenses"), and the Licenses constitute all of the governmental,
quasi-governmental and regulatory licenses, permits, authorization and approvals
necessary, appropriate or useful to the operation of the Company's business as
it is operated on the date hereof. Schedule 4.10 also sets forth a description
of each accreditation of the Facilities, copies of which the Company has
delivered to Buyer. The Company has delivered to Buyer copies of all of the
Licenses. The Company or the individuals listed on Schedule 4.10 (to the extent
set forth on said Schedule) own, possess or otherwise have the exclusive legal
right to use the Licenses, free and clear of all Liens. Neither the Company nor
any such individual is in material default under any such License, and the
Company has not received any notice of any default or any other claim or
proceeding relating to any such License. No shareholder, director or officer,
employee or former employee of the Company (or any of their respective
affiliates), or any person, firm or corporation other than the Company and the
licensing person, entity or authority, owns or has any proprietary,
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financial or other interest, direct or indirect, in whole or in part in any of
the Licenses, other than Licenses necessary for such individuals to practice
their own professions.
4.11 TITLE, CONDITION OF PERSONAL PROPERTY.
(A) Except as disclosed on Schedule 4.11(a), the Company has good and
indefeasible title to, or valid and subsisting leasehold interests in, all of
the personal property located at or used in connection with the operation of its
business, subject to no Liens whatsoever other than Permitted Liens (as defined
below). No other person has any right to the use or possession of any of such
property which is owned and no currently effective financing statement with
respect to any such personal property has been filed under the Uniform
Commercial Code in any jurisdiction, and the Company has not signed any such
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement except for the Permitted Liens.
All of such personal property comprising equipment, improvements, furniture and
other tangible personal property in use at the Company, whether owned or leased,
is in good operating condition and repair, subject to normal wear and tear, and
is sufficient to enable the Company to operate its business in a manner
consistent with its operation during the immediately preceding twelve (12)
months.
(B) "Permitted Liens" shall mean
(I) carriers', warehouseman's, mechanic's, materialmen's,
repairmen's or other like liens arising in the ordinary course of
business which are (i) not overdue for a period of more than 30 days
unless being contested in good faith and by appropriate proceedings,
provided that if such contest shall continue for more than 30 days,
the amount thereof shall be bonded or properly reserved against at the
end of such 30-day period, (ii) not subject to any foreclosure or
attachment proceeding, and (iii) do not exceed in any single instance,
$15,000 or in the aggregate, $75,000;
(II) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of like nature, in each case incurred in the ordinary
course of business, and if in an amount greater than $15,000 in any
single instance, or if in the aggregate greater than $75,000, as
disclosed to Buyer on Schedule 4.11(b);
(III) rights of lessees under leases set forth on Schedule
4.7;
(IV) pledges or deposits in connection with workman's
compensation, unemployment insurance, and other social security
legislation; and
(V) liens described on Schedule 4.11(b).
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4.12 LEGAL PROCEEDINGS. Other than as set forth on Schedule 4.12,
there are no claims, actions, suits, proceedings, arbitrations or
investigations, either administrative or judicial, pending, or, to the knowledge
of the Sellers and the Company, overtly threatened against or affecting the
Company or the Company's ability to consummate the transactions contemplated
hereby, at law or in equity or otherwise, before or by any court, governmental
or quasi-governmental agency or body, domestic or foreign, or before an
arbitrator of any kind.
4.13 EMPLOYEES. Schedule 4.13 contains a complete and correct list of
the name, position, and current rate of compensation and any other compensation
arrangements or fringe benefits, of (i) each officer, management level employee,
and employee earning gross compensation in excess of a rate of $50,000 per year,
of the Company, and (ii) each consultant or agent of the Company. Except as set
forth on Schedule 4.7, the Company does not have any pension, profit sharing, or
welfare benefit plan applicable to any of its employees. Except as described on
Schedule 4.13, (i) no such employee, consultant or agent has any vested or
unvested retirement benefits or other termination benefits, and (ii) the Company
has no liability for any accrued and unpaid employee benefits (including accrued
vacation and sick days) for which adequate reserves are not reflected on the
Company's Balance Sheet. Schedule 4.13 also sets forth a description of each
Company guideline or policy (whether or not enforceable) applicable generally to
employees such as with respect to vacations, sick days, terminations and the
like.
4.14 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES,
ETC.
(A) During the two years prior to the Closing Date, there has been no
material adverse change in the relationship between the Company and its
employees, nor any strike or material labor disturbance by any of such employees
and, to the knowledge of the Sellers and the Company, there is no indication
that such a change, strike or labor disturbance is likely. Company employees are
not represented by any labor union or similar organization, and the Sellers and
the Company have no reason to believe that there are pending or threatened any
activities, the purpose of which is to achieve such representation, of all or
some of the Company's employees. Except as set forth on Schedules 4.7 and 4.13,
the Company does not have collective bargaining or other labor contracts,
employment contracts, pension, profit-sharing, retirement, insurance, bonus,
deferred compensation or other employee benefit plans, agreements or
arrangements with respect to any of its employees. The Company is in material
compliance with the requirements prescribed by all Federal, state and local
statutes, orders and governmental rules and regulations applicable to any of the
employee benefit plans, agreements and arrangements identified on Schedule 4.7
and Schedule 4.13, including, without limitation, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
4.15 ERISA. The Company does not maintain or make contributions to and
has not at any time in the past maintained or made contributions to, any
employee benefit plan which is covered by or subject to ERISA, including,
without limitation, any minimum funding standards. The Company does not maintain
or make contributions to, and has not at any time in the past maintained or made
contributions to, any multi-employer plan subject to the terms of the
Multi-employer Pension Plan Amendment Act of 1980 (the "Multi-employer Act").
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4.16 INSURANCE AND SURETY AGREEMENTS. Schedule 4.16 contains a true
and correct list of: (a) all policies of fire, liability and other forms of
insurance held or owned by the Company (including but not limited to
professional liability insurance, and any state sponsored plan or program for
worker's compensation); and (b) all bonds, indemnity agreements and other
agreements of suretyship made for or held by the Company, including a brief
description of the character of the bond or agreement and the name of the surety
or indemnifying party. Schedule 4.16 sets forth for each such insurance policy
the name of the insurer, the amount of coverage, the type of insurance, the
policy number, the annual premium and a brief description of the nature of
insurance included under each such policy and of any claims made thereunder
during the past two (2) years. Such policies are owned by and payable solely to
the Company, and said policies or renewals or replacements thereof will be
outstanding and duly in force at the Closing Date. All insurance policies listed
on Schedule 4.16 are in full force and effect, all premiums due on or before the
Closing Date have been or will be paid on or before the Closing Date, the
Company has not been advised by any of its insurance carriers of an intention to
terminate or modify any such policies other than under circumstances where the
Company has received a commitment for a satisfactory replacement policy, nor has
the Company failed to comply with any of the material conditions contained in
any such policies.
4.17 RELATIONSHIPS. Except as disclosed on Schedule 4.17 hereto, no
Seller and no partner or affiliate of any Seller has, or at any time within the
last two (2) years has had, an ownership interest in any business (corporate or
otherwise) that is a party to, or in any property that is the subject of, any
business relationship or arrangement of any kind relating to the operation of
the Company by which the Company will be bound, or upon which the Company will
rely, after the Closing.
4.18 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule 4.18,
since the Balance Sheet Date, the Company has not, and from the date of this
Agreement through the Closing Date, the Company will not have:
(A) sold, assigned or transferred any of its assets or properties,
except in immaterial amounts in the ordinary course of business and consistent
with past practice;
(B) mortgaged, pledged or subjected to any Lien, other than a
Permitted Lien, any of the Company's assets;
(C) made or suffered any amendment or termination of any material
contract, commitment, instrument or agreement other than in the ordinary course
of business and consistent with past practice and as disclosed to Buyer on
Schedule 4.7;
(D) except in the ordinary course of business and consistent with past
practice, or otherwise to the extent necessary to comply with any applicable
minimum wage law, increased the salaries or other compensation of any of its
employees, agents or consultants or
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made any increase in, or any additions to, other benefits to which any of such
employees, agents or consultants may be entitled;
(E) failed to pay or discharge when due any liabilities or
obligations, the failure to pay or discharge which has caused or may cause any
material damage or give rise to the risk of a material loss to the Company;
(F) changed any of the accounting principles followed by it or the
methods of applying such principles;
(G) declared or paid or set aside or reserved any amounts for payment
of any dividend or other distribution in respect of its securities, or redeemed
or repurchased or agreed to redeem or repurchase any of its securities;
(H) failed to collect, withhold and/or pay to any proper governmental
agency or authority, any federal, state or local income, franchise, sales, use,
withholding or similar tax required by applicable law to be so collected,
withheld and/or paid;
(I) instituted, settled or agreed to settle any litigation, action or
proceeding before any court or governmental body relating to it or its property
or received any threat thereof which could have or has had a materially adverse
effect on the condition (financial or otherwise) properties, assets,
liabilities, operations, business or prospects of the Company; or
(J) entered into any material transaction other than in the ordinary
course of business.
4.19 COMPLIANCE WITH LAWS. Except for notices of non-compliance set
forth on Schedule 4.19 and as to which the Company has taken corrective action
acceptable to the applicable governmental agency, the Company has not, within
the period of twenty-four months preceding the date of this Agreement, received
any written notice that it failed to comply in any material respect with any
applicable Federal, state, local or other governmental laws or ordinances, or
any applicable order, rule or regulation of any Federal, state, local or other
governmental or quasi-governmental agency having jurisdiction over it
("Governmental Requirements"). Sellers shall report to Buyer, within five (5)
business days after receipt thereof, any written notices that the Company is not
in compliance in any material respect with any of the foregoing. The Company and
Sellers have no reason to believe that the Company is not in compliance with all
Governmental Requirements applicable to it and its operations, employees and
properties.
4.20 FINDERS. No broker or finder other than Premier HealthCare and
its affiliates has acted for Sellers or the Company in connection with the
transactions contemplated by this Agreement, and no other broker or finder is
entitled to any broker's or finder's fee or other commission in respect thereof
based in any way on agreements, understandings or arrangements with any Seller
or the Company.
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4.21 TAX RETURNS. (a) Except as set forth in SCHEDULE 4.21(A), (i) all
Tax (as defined below) returns, statements, reports and forms required to be
filed with any Governmental Authority on or before the Closing Date by or on
behalf of the Company or any Subsidiary (collectively, the "RETURNS"), have been
or will be filed on or before the Closing Date in accordance with all applicable
Government Requirements (and no extensions shall have been taken), and true and
complete copies of all Returns with respect to income or sales or use for any
period during the three-year period ending on the date hereof have been
delivered to Buyer; (ii) as of the time of filing, the Returns correctly
reflected or will correctly reflect the facts regarding the income, business,
assets, operations, activities and status of the Company and the Subsidiaries
and any other information required to be shown therein; and (iii) the Company
and the Subsidiaries have timely paid all Taxes required to be paid by the
Company or any of the Subsidiaries.
(B) "TAX" (including, with correlative meaning, the terms "TAXES" and
"TAXABLE") means any net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or windfall
profits tax, alternative or add-on minimum tax, customs duty or other tax, fee
assessment or charge of any kind whatsoever, together with any interest and any
penalty, addition to tax or additional amount imposed by any Governmental
Authority.
4.22 ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and
delivery of this Agreement and the Transaction Documents, does not, and the
consummation of the transactions contemplated hereby and thereby will not,
create any liens or other encumbrances on any of the Company's assets in favor
of any third parties.
4.23 ENVIRONMENTAL MATTERS.
(A) At any time during the Company's leasing of the Facilities and, to
the Sellers' and the Company's knowledge, prior to the Company's leasing
thereof:
(I) Such Facilities have not been used for the disposal of
any industrial refuse or waste, including but not limited to
potentially infectious waste, blood-contaminated materials, or other
wastes generated in the course of patient treatment (collectively
"Medical Waste"), or for the processing, manufacture, storage,
handling, treatment or disposal of any hazardous or toxic substance,
material or waste, other than in the ordinary course of its business
and in substantial compliance with applicable Governmental
Requirements;
(II) Except as set forth in Schedule 4.23(a)(ii), no
asbestos- containing materials have been used or disposed of at such
Facilities or used in the construction of such Facilities;
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(III) No machinery, equipment or fixtures containing
polychlorinated biphenyls ("PCBs") are located at such Facilities.
(IV) Except as set forth in Schedule 4.23(a)(iv), no storage
tanks for gasoline, petroleum, or any other substance have been
located at such Facilities;
(V) No Hazardous Substances (as defined below) have been
located at such Facilities, which Hazardous Substances, if found at
such Facilities, would subject the owner or occupant of such
Facilities to damages, penalties, liabilities or an obligation to
remove such Hazardous Substances or materials under any applicable
Governmental Requirements; and
(VI) Within the period of two (2) years preceding the date
of this Agreement, no written notice from any governmental body has
been served upon the Company except for notices of violations as to
which the Company has taken corrective action acceptable to the
applicable governmental agency and as set forth in Schedule
4.23(a)(vi), claiming any material violation of any Federal, state or
local law, regulation or ordinance concerning the generation,
handling, storage, or disposal of Medical Waste, or the environmental
state, condition, or quality of such Facilities, or requiring or
calling attention to the need for any work, repairs, or demolition, on
or in connection with the Facilities in order to comply with any
Governmental Requirements concerning the environmental or healthful
state, condition or quality of such Facilities.
(B) Schedule 4.23 lists all reports of health care and environmental
agencies received by the Company during the last two (2) years from any
supervisory governmental authority with respect to the operations of the
Facilities. The Company has delivered copies of each such report to Buyer.
(C) The Company is in material compliance with all applicable
environmental and related laws, ordinances and governmental rules and
regulations applicable to it and the Facilities, including, but not limited to,
the Resource Conservation and Recovery Act of 1976, as amended, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, the Federal Water Pollution Control Act, as amended by the Clean Water
Act, the Federal Toxic Substances Control Act, as amended, and all other
Federal, state and local laws, regulations and ordinances with respect to the
protection of the environment (collectively, "Environmental Laws"). The
foregoing representation and warranty applies to all aspects of the operation of
the Facilities including, but not limited to, the use, handling, treatment,
storage, transportation and disposal of any hazardous, toxic or infectious
waste, material or substance (including Medical Waste or any other Hazardous
Substances).
(D) The term "Hazardous Substance" as used in this Agreement shall
include, without limitation, gasoline, oil and other petroleum products, and
related and similar materials, and any other substance or material defined as a
hazardous, toxic or polluting substance or material by any federal, state or
local law, ordinance, rule or regulation.
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4.24 LEASEHOLD INTERESTS; CONDITION OF THE FACILITIES.
(A) Annexed hereto as Exhibit 4.24(a) are true and complete copies of
each of the lease agreements pursuant to which the Company is operating the
Facilities. The Company's leasehold interests in the Facilities, and the fee
simple interests of the respective landlords in the Facilities, are free and
clear of all liens, claims, charges, easements, encumbrances and title
exceptions of any kind whatsoever except for Real Estate Permitted Liens (as
defined below).
(B) Except as set forth on Schedule 4.24(b), there are no leases or
other agreements of the Company as sub-lessor, granting to any third party the
right to use or occupy the Facilities (except the rights of the patients of the
Facilities) and no person (other than the landlords identified in such leases)
has any ownership interest or option or right of first refusal (which has not
been waived) to acquire any ownership interest in the Facilities or any building
or improvements thereon;
(C) No written notices of violation have been issued by any
governmental authority and remain in effect which prohibit the existing use of
the structures presently comprising the Facilities;
(D) To the knowledge of the Company, there is no plan, study or effort
by any governmental authority or agency which would in any material way affect
the present use or zoning of the Facilities or any part thereof. To the
knowledge of Sellers and the Company, there are no assessments or proposed
assessments and there is no existing, proposed or contemplated plan to widen,
modify or realign any street or highway or any existing, proposed or
contemplated eminent domain proceedings that would in any material way affect
the Facilities;
(E) The buildings and other improvements comprising the Facilities and
all of their systems, including without limitation, the heating, ventilating and
air conditioning systems, and the plumbing, electrical, mechanical and drainage
systems, and roofs are in good operating condition, repair and working order,
normal wear and tear excepted;
(F) No assessment for public improvements has been made against the
Facilities that remains unpaid, except that, as to any assessments payable in
installments, the Company shall not be required to pay any installments not yet
due at the time of the Closing. All public improvements ordered, commenced or
completed with respect to any Facilities prior to the date of this Agreement
shall be paid for in full by the Company prior to the Closing;
(G) All public utilities required for the operation of the Facilities
either enter the property through adjoining public streets, or if they pass
through adjoining private land
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do so in accordance with valid easements. The Facilities are adjacent to or has
access to an abutting street;
(H) There are no easements traversing or contiguous to the Facilities
which interfere in any material respect with the use and operation of the
Facilities which are not disclosed on any schedule hereto or shown on the
surveys referred to in Section 9.16 hereof; and
(I) Each of the Facilities complies with all applicable zoning
regulations, and the Company has not received any written notice of material
noncompliance from any governmental authority regarding any of the improvements
constructed at any of the Facilities or the use or occupancy thereof which
remains uncured.
(J) "Real Estate Permitted Liens" shall mean
(I) Permitted Liens;
(II) easements, rights-of-way, restrictions and other
encumbrances which, in the aggregate, are not substantial in amount,
and which do not in any case materially interfere with the ordinary
conduct of the business of the Company;
(III) rights of patients of the Facilities to use and occupy
the Facilities; and
(IV) matters which an accurate survey or inspection of the
premises would disclose.
ARTICLE V: ADDITIONAL REPRESENTATIONS AND WARRANTIES OF
SELLERS
Each Seller hereby represents and warrants to Buyer as follows:
5.1 AUTHORITY. Each Seller has the full legal power and authority to
make, execute, deliver and perform this Agreement and the Transaction Documents
to which he or its is or shall be a party. Such execution, delivery, performance
and consummation have been duly authorized by all necessary action, corporate or
otherwise, on the part of such Seller, and any necessary consents of holders of
indebtedness of such Seller have been obtained.
5.2 BINDING EFFECT. This Agreement and all Transaction Documents to
which such Seller is a party constitute the legal, valid and binding obligations
of such Seller, enforceable against such Seller in accordance with their
respective terms.
5.3 ABSENCE OF CONFLICTING AGREEMENTS. Except as disclosed on Schedule
5.3, the execution and delivery by each Seller of this Agreement and each
Transaction Document to which such Seller is or shall be a party, and the
performance by such Seller of the transactions
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contemplated hereby and thereby does not conflict with, or constitute a breach
of or a default under (i) if such Seller is a corporation, its Articles of
Incorporation or By-Laws, or if such Seller is an entity other than a
corporation, its organizational and governance documents, (ii) any law, rule,
judgment, order, writ, injunction, or decree of any court applicable to such
Seller, or (iii) any rule or regulation of any administrative agency or other
governmental or quasi-governmental authority applicable to such Seller, or (iv)
any agreement, indenture, contract or instrument to which such Seller is now a
party or by which any of the assets of such Seller is bound.
5.4 CONSENTS. No authorization, consent, approval, license, exemption
by, filing or registration with any court, governmental or quasi-governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary in connection with the execution, delivery and
performance by any Seller of this Agreement or any of the Transaction Documents
or any of the transactions contemplated hereby or thereby.
5.5 OWNERSHIP OF COMPANY SHARES. Each Seller is the lawful record and
beneficial owner of all of the Company Shares shown as owned by such Seller in
Schedule 4.5, with good and marketable title thereto, free and clear of all
Liens. Such Seller has the full legal power to transfer and deliver such Company
Shares in accordance with this Agreement, and upon the transfer of such shares
to Buyer as contemplated by this Agreement, each Seller shall have conveyed good
and marketable title thereto, free and clear of all Liens. The Company Shares
indicated on Schedule 4.5 as being owned by Sellers constitute all of the issued
and outstanding capital stock of the Company.
5.6 THE ASSETS. As of the Closing, the Assets will constitute all of
those necessary and useful to operate the Company as it is currently operated
and intended to be operated by Buyer after the Closing, and shall be free and
clear of any and all Liens other than Permitted Liens.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Newco each represents and warrants to the Company and
Sellers as follows:
6.1 ORGANIZATION AND STANDING. Each of Buyer and Newco, respectively,
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Copies of Buyer's and of Newco's Articles of
Incorporation and By-Laws, and all amendments thereof to date, have been
delivered to the Company, and are complete and correct. Each of Buyer and Newco
has the power and authority to own the property and assets now owned by it and
to conduct its business presently conducted by it.
6.2 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement, including Buyer's and Newco's Schedules and Exhibits
hereto, or any of the Transaction Documents by Buyer or Newco, nor the
performance by Buyer or Newco of the transactions contemplated hereby and
thereby, conflicts with, or constitutes a breach of or a
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default under (i) the Certificate of Incorporation or By-Laws of Buyer or Newco;
or (ii) any applicable law, rule, judgment, order, writ, injunction, or decree
of any court, currently in effect; or (iii) any applicable rule or regulation of
any administrative agency or other governmental authority currently in effect;
or (iv) any material agreement, indenture, contract or instrument to which Buyer
or Newco is now a party or by which any of the assets of Buyer or Newco is
bound. The execution, delivery and performance of this Agreement and each
Transaction Document and the performance of each of the transactions
contemplated hereby or thereby has been authorized by all necessary corporate
action of the Company and of Newco.
6.3 CONSENTS. Except as set forth in Schedule 6.3 no authorization,
consent, approval, license, exemption by, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
the execution, delivery and performance of this Agreement or any of the
Transaction Documents by Buyer or Newco.
6.4 MATERIAL CHANGES. Except as noted on Schedule 6.4, between
December 31, 1995 and the date of this Agreement, there has not been any
material adverse change in the condition (financial or otherwise) of the assets,
properties or operations of Buyer, whether or not covered by insurance, and
during such period of time Buyer has and from the date of this Agreement through
the Closing, will have, conducted its business only in the ordinary and normal
course.
6.5 FINDERS. Buyer has not dealt with any broker or finder other than
Premier HealthCare and its affiliates in connection with the transactions
contemplated by this Agreement, and no broker or finder is entitled to any
broker's or finder's fee or other commission in respect thereof based in any way
on agreements, understandings or arrangements with Buyer.
6.6 POWER AND AUTHORITY. Each of Buyer and Newco has the corporate
power and authority to execute, deliver and perform this Agreement, and as of
the Closing, each of Buyer and Newco will have the corporate power and authority
to execute and deliver the Transaction Documents required to be delivered by it
to the Company at the Closing.
6.7 BINDING AGREEMENT. This Agreement has been duly executed and
delivered by each of Buyer and Newco. This Agreement is, and when executed and
delivered by each of Buyer and Newco at the Closing, each of the Transaction
Documents executed by Buyer or Newco, as the case may be, will be, the legal,
valid and binding obligation of Buyer or Newco, as the case may be, enforceable
against it in accordance with their respective terms.
6.8 CCA STOCK. The CCA Stock, when issued to the Shareholders at
Closing, will be validly issued and subject to no claims, liens or encumbrances.
ARTICLE VII: INFORMATION AND RECORDS CONCERNING THE COMPANY
7.1 ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING. Prior to the
Closing Date, Buyer may make, or cause to be made, such investigation of the
Company's financial and
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legal condition as Buyer deems necessary or advisable to familiarize itself with
the Company and/or matters relating to its history or operation. The Company
shall permit Buyer and its authorized representatives (including legal counsel
and accountants), to have full access to the Company's books and records upon
reasonable notice and during normal business hours, and the Company will
furnish, or cause to be furnished, to Buyer such financial and operating data
and other information and copies of documents with respect to the Company's
products, services, operations and assets as Buyer shall from time to time
reasonably request. The documents to which Buyer shall have access shall
include, but shall not be limited to, the Company's tax returns and related work
papers since its inception and the Company shall make, or cause to be made,
extracts thereof as Buyer or its representatives may request from time to time
to enable Buyer and its representatives to investigate the affairs of the
Company and the accuracy of the representations and warranties made in this
Agreement. The Company shall cause its accountants to cooperate with Buyer and
to disclose the results of audits relating to the Company and to produce the
working papers relating thereto.
ARTICLE VIII: OBLIGATIONS OF THE PARTIES UNTIL EFFECTIVE TIME OF
MERGER
8.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Effective Time of Merger, the Company shall maintain its
existence and shall conduct its business in the ordinary course of business
consistent with past practice.
8.2 NEGATIVE COVENANTS OF THE COMPANY. Without the prior written
approval of Buyer, which approval shall not be unreasonably withheld, the
Company shall not, between the date hereof and the Effective Time of Merger:
(A) cause or permit to occur any of the events or occurrences
described in Section 4.18 (Absence of Certain Events) of this Agreement, or
which otherwise would have been inconsistent with any of the representations or
warranties of the Company under this Agreement had the same occurred prior to
the date hereof; or
(B) dissolve, merge or enter into a share exchange with or into any
other entity; or
(C) enter into any contract or agreement, or negotiations in
connection with any union or other collective bargaining representative
representing any employees at the Company; or
(D) make any change to its by-laws or articles of incorporation.
8.3 AFFIRMATIVE COVENANTS. Between the date hereof and the Closing,
the Company shall:
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(A) maintain the physical assets of the Company in substantially the
state of repair, order and condition as on the date hereof, reasonable wear and
tear or loss by casualty excepted;
(B) maintain in full force and effect all Licenses currently in effect
with respect to the Company unless such License is no longer necessary for the
operation of the Company;
(C) maintain in full force and effect the insurance policies and
binders currently in effect with respect to the Company, or the replacements
thereof, including without limitation those listed on Schedule 4.16;
(D) utilize their reasonable efforts to preserve intact the present
business organization of the Company; keep available the services of the
Company's present employees and agents; and maintain the Company's relations and
goodwill with suppliers, employees, and any others having business relating to
the Company;
(E) maintain all of the books and records relating to the Company in
accordance with its past practices;
(F) comply in all material respects with all provisions of the
Contracts listed in Schedule 4.17, and with any other material agreements into
which the Company has entered in the ordinary course of business since the date
of this Agreement, and comply in all material respects with the provisions of
all material laws, rules and regulations applicable to the Company's business;
(G) cause to be paid when due, all taxes, assessments and charges or
levies imposed upon the Company or on any of its properties or which it is
required to withhold and pay over; and
(H) promptly advise Buyer in writing of the threat or commencement
against the Company of any claim, action, suit or proceeding, arbitration or
investigation that would materially adversely affect the operations, properties,
assets or prospects of the Company.
8.4 PURSUIT OF CONSENTS AND APPROVALS. Prior to the Closing, Buyer
shall use its reasonable efforts to obtain all consents and approvals of
governmental agencies and all other parties necessary for the lawful
consummation of the transactions contemplated hereby and the lawful use of the
Company's Assets by Buyer ("Required Approvals"). Sellers and the Company shall
cooperate with and use their reasonable efforts to assist Buyer in obtaining all
such approvals.
8.5 SUPPLEMENTARY FINANCIAL INFORMATION. Within twenty-five (25) days
after the end of each calendar month between the date of this Agreement and the
Closing Date, the Company shall provide, or cause to be provided, to Buyer
unaudited financial statements (including at a minimum, income statements and a
balance sheet) for the calendar month then most recently ended, which statements
shall present fairly, in all material respects, the results of the
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operations of the Company at such date and for the period covered thereby, all
in accordance with generally accepted accounting principles applied on a
consistent basis.
8.6 EXCLUSIVITY. Until the earlier of Closing or the termination of
this Agreement pursuant to Section 12.1, neither the Company nor the Sellers,
nor any of their respective affiliates, shall engage in any discussions or
negotiations directly or indirectly with any other party in respect of the sale
of the Company Shares or of substantially all of the assets of the Company, or
in respect of any merger, consolidation, or other reorganization of the Company.
ARTICLE IX: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Buyer's obligation to consummate the purchase of the Company Shares is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived by Buyer in writing. Upon
failure of any of the following conditions, Buyer may terminate this Agreement
prior to Closing pursuant to and in accordance with Article XII herein.
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Sellers in Articles IV and V shall be true and correct in all material
respects at and as of the Closing Date, as though such representations and
warranties were made at and as of such time except to the extent affected by the
transactions herein contemplated.
9.2 PERFORMANCE OF COVENANTS. Each Seller and the Company shall have
performed or complied in all material respects with their respective agreements
and covenants required by this Agreement to be performed or complied with by it
and him prior to or at the Closing.
9.3 DELIVERY OF CLOSING CERTIFICATE. Each Seller and the Company (by
its President), shall have executed and delivered to Buyer a certificate, dated
the Closing Date, upon which Buyer may rely, certifying that the conditions
contemplated by Sections 9.1 and 9.2 applicable to it or him have been
satisfied.
9.4 OPINIONS OF COUNSEL. Sellers shall have delivered to Buyer an
opinion, dated the Closing Date, of their counsel, in the form of Exhibit 9.4.
9.5 LEGAL MATTERS. No preliminary or permanent injunction or other
order (including a temporary restraining order) of any governmental authority
which prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
9.6 AUTHORIZATION DOCUMENTS. Buyer shall have received a certificate
of the Secretary or other officer of the Company certifying a copy of
resolutions adopted by its Board of Directors and unanimously approved by
Sellers (as its sole shareholders) authorizing the Company's execution, delivery
and full performance of this Agreement and the Transaction
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Documents (including, without limitation, the Plan of Merger) and the
transactions contemplated hereby and thereby. Buyer also shall have received a
certificate of the Secretary or other officer certifying as to the incumbency of
the Company's officers.
9.7 MATERIAL CHANGE. Since the date of this Agreement there shall not
have been any material adverse change in the condition (financial or otherwise)
of the assets, properties or operations of the Company except as allowed,
permitted or provided in this Agreement.
9.8 APPROVALS.
(A) The consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby shall have been granted,
including without limitation, the Required Approvals;
(B) None of the foregoing consents or approvals (i) shall have been
conditioned upon the modification, cancellation or termination of any material
lease, contract, commitment, agreement, license, easement, right or other
authorization with respect to the Company, other than as disclosed or approved
hereunder, or (ii) shall impose on Buyer any material condition or provision or
requirement with respect to the Company or its operations that is more
restrictive than or different from the conditions imposed upon such operations
prior to Closing.
9.9 WORKING CAPITAL CERTIFICATE. The Company shall have delivered the
certificate of its Chief Financial Officer as required pursuant to Section 2.3
hereof.
9.10 LABOR AGREEMENTS. The Company shall not have entered into any
contract or agreement, or negotiations in connection with any union or other
collective bargaining representative representing (or seeking to represent) any
employees of the Company.
9.11 REAL PROPERTY CONSENTS. Without limiting the generality of
Section 9.8(b), each of the landlords, if any, with whom the Company has a real
property lease as of the Closing Date shall have consented to the Merger. Buyer
shall have received written notice from Sellers by the Closing Date, identifying
those real property leases and Consents which were included on Schedule 4.7(b)
and as to which any necessary consent to assignment has not been received from
the landlord as of such date. As to each of the remaining real property leases
on Schedule 4.7(b) that require landlord's consent for assignment as of the
Closing Date, Buyer shall have received such consent in writing from the
applicable landlord.
9.12 TITLE INSURANCE. Buyer shall have obtained, at its expense, at
normal rates, a title commitment from a reputable title insurance company
selected by Buyer (the "Title Company") for an owner's title policy, insuring
the Company's interest in the Facilities and insuring that the title to each
Facility shall be good and marketable and free and clear of all liens,
assessments, restrictions, encumbrances, easements, leases, tenancies, claims or
rights of use or possession and other title objections (including any lien or
future claim from materials or labor supplied for improvement of such property)
("Real Estate Liens"), except for Real Estate Permitted Liens and the standard
exceptions normally contained in the lessee's leasehold title
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policy and schedules thereto provided, however, that at the request of Buyer the
Company shall provide such affidavits to the Title Company or take such other
actions that would enable the Title Company to remove any of such standard
exceptions. Buyer may obtain prior to the Closing any survey (or engineering
study), at Buyer's expense, but if such survey (or study) discloses any material
discrepancy or exception to title not included within the restrictions permitted
hereunder, including those matters listed as Permitted Liens, Buyer may consider
such a breach of representation and warranty under Section 4.24, above.
9.13 ENVIRONMENTAL COMPLIANCE. Buyer shall have received, at its own
expense, a written report in form and substance reasonably acceptable to Buyer
and Buyer's lenders, from a qualified geotechnical or engineering firm of
Buyer's choice, concerning the presence of Hazardous Substances, asbestos or
asbestos-containing products, radon and/or ureaformaldehyde insulation on or in
the Facilities. Such report shall disclose at a minimum: (1) the results of a
review of prior uses of the Facilities disclosed by local public records; (2)
contacts with local officials to determine whether any records exist with
respect to the disposal of Hazardous Substances at the Facilities; (3) if deemed
necessary by such engineering or geotechnical firm, or by Buyer, soil samples
and groundwater samples consistent with good engineering practice; and (4)
evaluation of the surrounding areas for sensitive environmental receptors, such
as drinking water wells or aquifers, hospitals and schools.
In the event that such report states that any Hazardous Substance
exists at the Facilities or that the Facilities are not otherwise in material
compliance with applicable environmental laws or regulations, Buyer may consider
such a breach of representation and warranty under Section 9.1, above.
9.14 ENGINEERING REPORT. Buyer shall have received, at its own
expense, an engineering survey and report in form and substance reasonably
satisfactory to Buyer and Buyer's lenders, from a qualified engineering or other
firm of Buyer's choice concerning a full and complete inspection of the
Facilities, the physical soundness and structural integrity of the buildings,
and the condition (including freedom from material defect) of the heating, air
conditioning, plumbing and electrical systems, the appliances of or in the
buildings, and other material components.
In the event that such report states that a material problem exists,
Buyer may consider such a breach of representation and warranty under Section
9.1, above, subject to the proviso therein.
9.15 SURVEYS. Buyer shall have received, at Buyer's expense,
satisfactory surveys of the Facilities, prepared by surveyors licensed in the
respective states where the Facilities are located and approved by Buyer and
Buyer's lenders.
9.16 TERMITE INSPECTIONS. Buyer shall have received, at Buyer's
expense, reports from qualified inspectors approved by Buyer and Buyer's lenders
with respect to any
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termite, wood boring insect or other pest infestation at the Facilities, and/or
resultant damage that has not been corrected in all material respects.
In the event that such report states that a material problem exists,
Buyer may consider such a breach of representation and warranty under Section
9.1, above, subject to the provisions therein.
9.17 DUE DILIGENCE. Buyer shall have completed to its satisfaction its
due diligence investigation and review of the Company and its assets and
businesses, provided that this condition shall be deemed to be fully satisfied
unless Buyer gives written notice to Sellers of its election to terminate this
Agreement.
9.18 NON-DISTURBANCE AGREEMENT. Any Facility lender associated with
mortgage obligations in respect of any of the Facilities shall have entered into
a Non-Disturbance Agreement with Buyer providing that so long as Buyer is not in
default under any lease thereof, such Facility lender shall recognize the rights
of the Buyer under such lease.
9.19 SYCAMORE CARE CENTER. The Company shall have completed the
spin-off of the Sycamore Care Center in accordance with Section 1.5 hereof.
9.20 GEORGIA FACILITIES. The Company shall have completed the purchase
and financing of the Georgia Facilities in accordance with Section 1.6 hereof
and on terms satisfactory to Buyer.
9.21 ST. CHARLES MANOR NURSING CENTER. Sellers shall have obtained the
consent of the landlord (which consent shall not be required if unreasonably
withheld by landlord) and, if applicable, its mortgagee to the assignment of
Luling/SSC, Inc.'s interest as lessee of the St. Charles Manor Nursing Center in
Luling, Louisiana, pursuant to that certain lease dated December 15, 1994.
9.22 OTHER DOCUMENTS. The Company and each Seller shall have furnished
Buyer with all other documents, certificates and other instruments required to
be furnished to Buyer by the Company or such Seller pursuant to the terms
hereof.
ARTICLE X: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
Sellers' obligation to consummate the sale of the Company Shares is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer and Newco in this Agreement shall be true and correct in all
material respects at and as of
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the Closing Date as though such representations and warranties were made at and
as of such time, except to the extent affected by the transactions herein
contemplated.
10.2 PERFORMANCE OF COVENANTS. Buyer and Newco each shall have
performed or complied in all material respects with each of its agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing.
10.3 DELIVERY OF CLOSING CERTIFICATE. Buyer shall have delivered to
Sellers a certificate of an officer of Buyer dated the Closing Date upon which
Sellers can rely, certifying that the statements made in Sections 10.1 and 10.2
are true, correct and complete as of the Closing Date.
10.4 OPINION OF COUNSEL. Buyer shall have delivered to Sellers an
opinion, dated the Closing Date, of Blass & Driggs, Esqs., counsel for Buyer, in
the form of Exhibit 10.4
10.5 LEGAL MATTERS. No preliminary or permanent injunction or other
order (including a temporary restraining order) of any governmental authority
which prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
10.6 AUTHORIZATION DOCUMENTS. Sellers shall have received a
certificate of the Secretary or other officer of each of Buyer and Newco, as the
case may be, certifying a copy of resolutions of the Board of Directors of Buyer
or Newco, as the case may be, authorizing Buyer's or Newco's (as the case may
be) execution, deliver and full performance of this Agreement and the
Transaction Documents (including, without limitation, the Plan of Merger) and
the transactions contemplated hereby and thereby, and the incumbency of the
officers of Buyer or Newco, as the case may be.
10.7 APPROVALS. The Required Approvals shall have been granted.
10.8 GEORGIA FACILITIES. Buyer shall have successfully arranged
mortgage or sale leaseback financing for the Company's purchase of the Georgia
Facilities in accordance with Section 1.6 hereof.
10.9 OFFICE FURNITURE. The Shareholders will be given the option to
purchase office furniture utilized by the Company in its current office at its
depreciated book value, if, after the Closing, such office is closed.
10.10 OTHER DOCUMENTS. Buyer shall have furnished Sellers with all
documents, certificates and other instruments required to be furnished to
Sellers by Buyer pursuant to the terms hereof.
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ARTICLE XI: OBLIGATIONS OF THE PARTIES AFTER CLOSING
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties, covenants and agreements made by each Seller
(including those made with respect to the Company) and Buyer (including those
made with respect to Newco) in this Agreement or in any Schedule, certificate,
document or list delivered by any such party pursuant hereto shall survive the
Closing and the Effective Time of Merger. The representations, warranties and
covenants of the Company and Newco shall cease and terminate at the Effective
Time of Merger. Notwithstanding any investigation conducted before or after the
Closing or the decision of any party to consummate the Closing, each party
hereto shall be entitled to rely and is hereby declared to have reasonably
relied upon the representations and warranties of the other party.
11.2 INDEMNIFICATION BY SELLERS. Each Seller and, unless the Closing
shall occur, the Company shall indemnify and defend Buyer and hold it harmless
against and with respect to any and all damage, loss, liability, deficiency,
cost and expense (including, without limitation, reasonable attorney's fees and
expenses) (all of the foregoing hereinafter collectively referred to as "Loss")
resulting from:
(A) any inaccuracy in any representation, or any breach of any
warranty, made by any Seller or the Company in this Agreement or any Transaction
Document; or
(B) the breach of any covenant or undertaking by any Seller or the
Company contained in this Agreement or any Transaction Document; or
(C) any liability of the Company to the Medicare or Medicaid programs,
or to any other third party payor, for excess reimbursement received by the
Company prior to the Effective Time of Merger; or
(D) the investigation, defense or (to the extent consented to by the
indemnifying party) settlement of any of the foregoing or the enforcement of
this indemnity obligation.
11.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and defend
Sellers and hold them harmless against and with respect to any and all Loss
resulting from:
(A) any inaccuracy in any representation, or breach of any warranty,
made in this Agreement or any Transaction Document; or
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(B) the breach of any covenant or undertaking by Buyer contained in
this Agreement or any Transaction Document; or
(C) the investigation, defense or (to the extent consented to by the
indemnifying party) settlement of any of the foregoing or the enforcement of
this indemnity obligation; or
(D) any liability which may arise after the Closing Date under the
sublease for the Countryside facility or the lease for the St. Charles Manor
Nursing Center; or
(E) any liability of Sellers under that certain $500,000 line of
credit with Southtrust Bank for periods following the Closing; or
(F) any liabilities related to vending machines presently in service
at the Facilities; or (G) any liability of Sellers for presently leased
vehicles.
11.4 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS. A party seeking
indemnification under Section 11.2 or 11.3, shall give the other party prompt
written notice of the claim for which it seeks indemnification and the other
party shall have thirty (30) days following such notice to cure any alleged
default. Failure of the party seeking indemnification to give such prompt notice
shall not relieve the other party of its indemnification obligation, PROVIDED
that such indemnification obligation shall be reduced by any damages suffered by
such other party resulting from a failure to give prompt notice hereunder. The
party receiving the aforementioned notice shall be entitled to participate in
the defense of such claim. If at any time the party receiving such notice
acknowledges in writing that the claim is fully indemnifiable under this
Agreement, it shall have the right to assume total control of the defense of
such claim at its own expense. If the party receiving such notice does not
assume total control of the defense of any such claim, the other party agrees
not to settle such claim without the written consent of the party receiving
notice, which consent shall not be unreasonably withheld, delayed or
conditioned. Nothing contained in this Section 11.4 shall prevent either party
from assuming total control of the defense and/or settling any claim against it
for which indemnification is not sought under this Agreement.
11.5 RESTRICTIONS.
(A) From and after the Closing Date, no Seller shall disclose,
directly or indirectly, to any person outside of Buyer's employ without the
express authorization of Buyer, any pricing strategies or records of the
Company, any proprietary data or trade secrets owned by the Company or any
financial or other information about the Company not then in the public domain;
PROVIDED, HOWEVER, that Sellers shall be permitted to make such disclosures as
may be required by law or by a court or governmental authority.
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(B) For a period of five (5) years after the Closing Date, no Seller
shall engage or participate in any effort or act to induce any of the suppliers,
associates, employees or independent contractors of the Company to cease doing
business, or their association or employment, with the Company.
(C) For a period of five (5) years after the Closing Date, the Sellers
shall not, directly or indirectly, for or on behalf of itself or any other
person, firm, entity or other enterprise, engage in or act as a consultant for,
be a partner in, have a proprietary interest in, or loan money to any person,
enterprise, partnership, association, corporation, joint venture or other entity
which is directly or indirectly in the business of owning, operating or managing
any entity of any type, licensed or unlicensed, which is engaged in or provides
nursing home care, assisted living care, senior housing, home health care, adult
day care, primary care clinic services, or medical transportation services
anywhere within a twenty-five (25) mile radius of any Facility; provided,
however, that the foregoing shall not prohibit Sellers' ownership of not more
than 2% of the issued shares of any company whose common stock is listed for
trading on any national securities or on the NASDAQ National Market System.
(D) Sellers acknowledge that the restrictions contained in this
Paragraph 11.5 are reasonable and necessary to protect the legitimate business
interests of Buyer and that any violation thereof by any of them would result in
irreparable harm to Buyer. Accordingly, Sellers agree that upon the violation by
any of them of any of the restrictions contained in this Section 11.5, Buyer
shall be entitled, without the necessity of posting any bond or security, to
obtain from any court of competent jurisdiction a preliminary and permanent
injunction as well as any other relief provided at law or equity, under this
Agreement or otherwise. In the event any of the foregoing restrictions are
adjudged unreasonable in any proceeding, then the parties agree that the period
of time or the scope of such restrictions (or both) shall be adjusted in such a
manner or for such a time (or both) as is adjudged to be reasonable.
Notwithstanding the foregoing, for purposes of this Section 11.5, any
advertisement prepared for and disseminated to the public in general, which
advertises the services of the Company not otherwise in violation of this
Section 11.5 or advertises the need for services to be supplied to the Company,
shall not be deemed to be an inducement or solicitation with respect to any such
suppliers or independent contractors.
11.6 RECORDS. On the Closing Date, the Sellers shall deliver, or cause
to be delivered, to Buyer all records and files not then in Buyer's possession
relating to the operation of the Company.
11.7 AUDIT. Following Closing, Sellers will cooperate and provide such
information as may be necessary in connection with an audit of the Company's
financial statement for the period beginning January 1, 1995 and ending on the
Closing Date. Buyer shall bear the cost of such audit.
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11.8 CHIEF OPERATING OFFICER OF THE COMPANY. After the Closing, and
until the earnout is determined, the Company will retain its current Chief
Operating Officer as an employee of the Company at a salary, benefits and
responsibility level no less than the current status.
11.9 RETENTION OF TRADENAME. Sellers will be able to retain the
tradename "Southern Care Centers."
ARTICLE XII: TERMINATION
12.1 TERMINATION. This Agreement may be terminated at any time at or
prior to the Closing by:
(A) Buyer, if any condition precedent to Buyer's obligations hereunder
set forth in Article IX hereof has not been satisfied by the Closing Date, in
which case Buyer shall be entitled to the return of the Deposit;
(B) Sellers, if any condition precedent to Seller's obligations
hereunder set forth in Article X hereof has not been satisfied by the Closing
Date, in which case Sellers shall be entitled to retain the Deposit if Sellers
are otherwise ready, willing and able to close and all of the conditions
precedent to Buyer's obligations to close shall have been satisfied;
(C) the mutual consent of Buyer and Sellers; or
(D) Buyer or Sellers, if the Closing Date shall not have occurred
within one hundred twenty (120) days following the date hereof (other than due
to the breach of any party hereto), in which case Buyer shall be entitled to the
return of the Deposit.
12.2 EFFECT OF TERMINATION. Except as provided above with respect to
the Deposit, if a party terminates this Agreement because one of its conditions
precedent has not been fulfilled, or if this Agreement is terminated by mutual
consent, this Agreement shall become null and void without any liability of any
party to the other.
ARTICLE XIII: MISCELLANEOUS
13.1 COSTS AND EXPENSES. Except as expressly otherwise provided in
this Agreement, each party hereto shall bear its own costs and expenses in
connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, the Company shall not be charged with any
Seller's or the Company's attorneys' fees and disbursements or other closing
costs in connection with this Agreement, the Option to Purchase and the
transactions thereunder, each of which shall be borne and paid for by the
Sellers.
13.2 PERFORMANCE. In the event of a breach by any party of its
obligations hereunder, the other party shall have the right, in addition to any
other remedies which may be
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available, to obtain specific performance of the terms of this Agreement, and
the breaching party hereby waives the defense that there may be an adequate
remedy at law. Should any party default in its performance, or other remedy, the
prevailing party shall be entitled to its reasonable attorneys' fees.
13.3 BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the
benefit of each party hereto and its successors and proper assigns. Buyer may
not assign its interest under this Agreement to any other person or entity
without the prior written consent of Sellers; provided, however, that Buyer may
assign its rights, duties and obligations hereunder to one or more subsidiaries
or affiliates of Buyer.
13.4 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and the
Exhibits, Schedules, and other agreements referenced herein, hereto embody the
entire agreement and understanding of the parties and supersede any and all
prior agreements, arrangements and understandings relating to matters provided
for herein. The captions used herein are for convenience only and shall not
control or affect the meaning or construction of the provisions of this
Agreement. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same instrument.
13.5 COOPERATION - FURTHER ASSISTANCE. From time to time, as and when
reasonably requested by any party hereto after the Closing, the other parties
will (at the expense of the requesting party) execute and deliver, or cause to
be executed and delivered, all such documents, instruments and consents and will
use reasonable efforts to take all such action as may be reasonably necessary to
carry out the intent and purposes of this Agreement.
13.6 NOTICES. All notices and demands required or permitted hereunder
shall be in writing and shall be deemed to be properly given or made when
personally delivered to the party or parties entitled to receive the notice or
when sent by certified or registered mail, postage prepaid, properly addressed
to the party or parties entitled to receive such notice at the address stated
below:
If to any Seller
or the Company: Southern Care Centers, Inc.
Five Concourse Parkway, Suite 2420
Atlanta, GA 30328
Attention: Michael Himmelstein
Copy to: Arnall Golden & Gregory
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309-3450
Attention: Marc L. Peterzell, Esq.
If to Buyer: Community Care of America, Inc.
3050 North Horseshoe Drive, Suite 260
Naples, FL 33942
38
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Attention: William J. Krystopowicz
Copy to: Blass & Driggs
461 Fifth Avenue
New York, NY 10017
Attention: Michael S. Blass, Esq.
Such addresses may be changed by providing written notice as provided in this
Section 13.6.
13.7 WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
13.8 RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto, other
than the successors and proper assigns of the parties hereto.
13.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, disregarding any contrary
rules relating to the choice or conflict of laws.
13.10 AMENDMENTS, SUPPLEMENTS, ETC. At any time before or after the
execution and delivery of this Agreement by the parties hereto, this Agreement
may be amended or supplemented by additional agreements, articles or
certificates, as may be mutually determined by the parties to be necessary,
appropriate or desirable to further the purposes of this Agreement, to clarify
the intention of the parties, or to add to or to modify the covenants, terms or
conditions hereof or thereof. The parties hereto shall make such technical
changes to this Agreement, not inconsistent with the purposes hereof, as may be
required to effect or facilitate any governmental approval or acceptance of this
Agreement or to effect or facilitate any filing or recording required for the
consummation of any portion of the transactions contemplated hereby. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties.
13.11 SEVERABILITY. Any provision, or distinguishable portion of any
provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties that if any provision of Section 11.5 shall be
determined to be overly broad in any respect, then it should be enforceable to
the maximum extent permissible under the law. To the extent permitted by
applicable law, the parties waive any provision of law which renders a provision
hereof prohibited or unenforceable in any respect.
39
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13.12 JOINT AND SEVERAL. Except as expressly set forth herein, each of
the representations, warranties and covenants of Sellers under this Agreement
shall be joint and several.
[SIGNATURES ON THE FOLLOWING PAGE]
40
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IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
SELLERS:
/S/ MICHAEL A. HIMMELSTEIN
-------------------------------------
Michael A. Himmelstein, individually
/S/ WALLACE E. OLSON
-------------------------------------
Wallace E. Olson, individually
COMPANY:
SOUTHERN CARE CENTERS, INC.
By:/S/ WALLACE E. OLSON
-------------------------------------
Wallace E. Olson
BUYER:
COMMUNITY CARE OF AMERICA, INC.
By:/S/ WILLIAM J. KRYSTOPOWICZ
-------------------------------------
William J. Krystopowicz,
Executive Vice President
NEWCO:
CCA ACQUISITION I, INC.
By:/S/ WILLIAM J. KRYSTOPOWICZ
-------------------------------------
William J. Krystopowicz,
Executive Vice President
41
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is made and entered into
effective as of May 1, 1996, by and between SOUTHERN CARE CENTERS OF TEXAS, INC,
a Georgia corporation with offices at 5 Concourse Parkway, Suite 3100, Atlanta,
GA 30328 ("Owner") and CCA OF TEXAS, INC., a Delaware corporation with offices
at 3050 N. Horseshoe Drive, Suite 260, Naples, FL 33942 ("Manager").
WHEREAS, Owner is the lessee of a skilled nursing facility named
"Sycamore Care Center" located in Ft. Worth, Texas, together with the equipment,
furnishings, and other tangible personal property to be used in connection
therewith (the "Facility"); and
WHEREAS, the Manager is engaged in the ownership and operation of
similar facilities and is experienced in various phases of the management,
operation and ownership thereof; and
WHEREAS, the Owner desires to engage the Manager to manage the
Facility for Owner's account during the term herein provided, and the Manager
desires to accept such engagement, upon the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
EMPLOYMENT OF THE MANAGER
1.1 EMPLOYMENT. For and during the term of this Agreement, the Owner
hereby grants to the Manager the sole and exclusive right, and employs the
Manager to supervise, manage, and operate the Facility in the name and for the
account of the Owner upon the terms and conditions hereinafter set forth.
1.2 ACCEPTANCE. The Manager accepts such employment and agrees that
it will (a) faithfully perform its duties and responsibilities hereunder, (b)
use its best efforts to supervise and direct the management and operation of the
Facility in an efficient manner, and (c) consult with the Owner and keep the
Owner advised of all major policy matters relating to the Facility. Subject to
the foregoing and to the other provisions of this Agreement, the Manager,
without the approval of the Owner (unless such approval is herein specifically
required as to policies and manner of operation) shall have the unrestricted
control and sole discretion with regard to the operation and management of the
Facility for all customary purposes (including the exercise of its rights and
performance of its duties provided for in Article III hereof), and the right to
determine all policies affecting the
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appearance, maintenance, standards of operation, or quality of service, and any
other matter affecting the Facility or the operation thereof.
ARTICLE II
TERM
The initial term of this Agreement shall immediately commence on May
1, 1996 (the "Commencement Date") and shall be for a period of ten (10) years
from the Commencement Date ("Term").
ARTICLE III
RIGHTS AND DUTIES OF THE MANAGER
During the term of this Agreement, and in the course of its
management and operation of the Facility:
3.1 EMPLOYEES. Manager, on Owner's behalf, shall hire, promote,
discharge, and supervise the work of the Facility's administrator, assistant
administrator, department heads, and all operating and service employees
performing services in and about the Facility. All of such employees shall be
employees of the Owner, except for the Administrator, who shall be an employee
of the Manager, and the aggregate compensation, including fringe benefits, with
respect to such employees, including the Administrator, shall be charged to
Owner as an expense of the operation of the Facility. The term "fringe benefits"
as used herein shall include but not be limited to the employer's contribution
of FICA, unemployment compensation, and other employment taxes, retirement plan
contributions, workman's compensation, group life, accident, and health
insurance premium, profit sharing contributions, disability, and other similar
benefits paid or payable by Manager with respect to other facilities which may
be managed by Manager. All such employees of Manager shall be covered by
appropriate malpractice and/or errors omissions insurance as approved by Manager
and Owner. The cost of same shall be charged to Owner as an additional expense
of the operation of said Facility.
3.2 LABOR CONTRACTS. Manager, if requested by Owner, will negotiate,
on Owner's behalf and at Owner's expense, with any labor union lawfully entitled
to represent the employees at the Facility, but any collective bargaining
agreement or labor contract resulting therefrom must first be approved by Owner
who shall be the only person authorized to execute the same. Owner agrees that
all fees and costs of outside professionals in conducting and concluding such
negotiations shall be paid by Owner out of Facility Funds.
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3.3 CONCESSIONAIRES, ETC. Manager shall negotiate and consummate in
the name and at the expense of the Owner, contracts or arrangements with
concessionaires, licensees, tenants, and other intended users of the Facility.
Any fees and expenses incurred in connection therewith shall be charged to the
Owner as an expense of the operation of the Facility.
3.4 ANCILLARY SERVICES, UTILITIES, ETC. Manager shall enter into such
contracts in the name of and at the expense of Owner as may be deemed necessary
or advisable for the furnishing of all ancillary services utilities,
concessions, supplies and other services as may be needed from time to time for
the maintenance and operation of the Facility. Manager is authorized to contract
for or provide ancillary services, including, but not limited to, pharmacy (drug
and I.V.), rehabilitation and respiratory therapy services, and mobile
diagnostic services, through providers which are affiliates of Manager, provided
that such services are rendered at levels of quality and pricing that are
competitive with those available in the community.
3.5 PURCHASES. Manager shall be solely responsible for purchase of
food, beverages, operating supplies, and other materials and supplies in the
name of and for the account and at the expense of Owner as may be needed from
time to time for the maintenance and operation of the Facility.
3.6 REPAIRS. Manager shall make or install or cause to be installed
at Owner's expense and in the name of the Owner any proper repairs,
replacements, additions, and improvements in and to the Facility and the
furnishings and equipment in order to keep and maintain the same in good repair,
working order and condition, and outfitted and equipped for the proper operation
thereof in accordance with industry standards comparable to those prevailing in
other similar facilities, and all applicable state or local rules, regulations,
or ordinances.
3.7 LICENSES AND PERMITS. Manager shall apply for and use its best
efforts to obtain and maintain in the name and at the expense of the Owner, all
licenses and permits required in connection with the management and operation of
the Facility. The Owner agrees to cooperate with Manager in applying for,
obtaining, and maintaining such licenses and permits.
3.8 INSURANCE. Manager shall apply for, obtain and maintain on behalf
of Owner and at Owner's expense at all times during the term of this agreement,
the following insurance in such amounts and coverage as may be mutually agreed
upon by Owner and Manager or as may be required by any financing or lease
arrangements of Owner, whichever is greater:
(a) Insurance on the Facility on a replacement cost basis
(including the equipment, furnishings and other tangible personal
property used in connection therewith) against loss and damage by
fire and lightning with coverage extended by means of an extended
coverage endorsement to a fire insurance policy, so as to include
loss or damage arising out of windstorm, hail, earthquake, provided
such insurance is reasonably available, explosion (except boiler),
and sprinkler damage, if reasonably available;
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(b) Insurance on the Facility against loss or damage,
including business interruption insurance, from explosion of boilers,
heating apparatus, pressure vessels, and pressure pipes installed in
the Facility;
(c) Commercial primary and excess general liability,
including automobile liability (as needed), products liability bonds,
professional and other liability, and property damage insurance,
insuring Owner and Manager against loss or liability for damages or
personal injury, death, or property damage arising or resulting from
the management, maintenance, operation and/or use of the Facility;
(d) Such workers' compensation and other similar insurance
as may be required by law or as may be required to insure Owner and
Manager against loss or the payment of damages for such liabilities
as may be imposed by law;
(e) Unemployment Compensation insurance through the
appropriate state agencies; and
(f) Fidelity and honesty insurance.
Forthwith after the execution of this agreement, Manager shall submit
to Owner for its approval, which approval shall not be unreasonably withheld, a
proposal setting forth the kinds and amounts of insurance which Manager intends
to provide, in connection with the operation of the Facility (including, without
limitation, insurance of the kinds and in the respective amounts described in
Paragraphs [a] through [f] of this section) and Owner shall be deemed to have
approved unless disapproved in writing within ten (10) days of submission of the
proposal by Manager.
All insurance provided for under the foregoing provisions of this
Section shall be effected by policies issued by insurance companies with at
least an "A" rating from A.M. Best and Company of good reputation, of sound
adequate financial responsibility, and properly licensed and qualified to do
business in the State of Texas.
All of the policies of insurance of the character described in
Paragraphs (a) - (b) of this Section shall be carried in the names of Owner,
Manager, the secured parties under any security instrument from time to time
outstanding affecting any of the Facility and the lessors of the Facility. Any
losses payable under such policies of insurance shall be payable to Owner,
Manager, and such secured parties and lessors as their respective interests may
appear. Each of the policies of insurance referred to in Paragraphs (c) - (f) of
this Section shall insure Owner and Manager and their respective officers,
partners, directors, shareholders, managers and employees. Owner, Manager, their
respective officers, partners, directors, shareholders, managers and employees
shall, to the extent permissible, be named as additional insured under all such
policies of insurance.
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3.9 GOVERNMENTAL REGULATION.
(a) The Manager shall use its best efforts to take such
action as shall be reasonably necessary to insure that the Facility
and the management thereof by the Manager complies with all federal,
state and local laws, regulations and ordinances applicable to the
Facility or the management thereof by the Manager including the
particular laws and regulations applicable to nursing home
facilities.
(b) The Manager shall promptly provide to the Owner as and
when received by the Manager, all notices, reports or correspondence
from governmental agencies that assert deficiencies or charges
against the Facility or that otherwise relate to the suspension,
revocation, or any other action adverse to any approval,
authorization, certificate, determination, license or permit required
or necessary to own or operate the Facility. The Manager may appeal
any action taken by any governmental agency against the Facility;
PROVIDED, HOWEVER, that the Owner shall adequately secure and protect
the Manager from loss, cost, damage or expense by bond or other means
satisfactory to Manager in order to contest by proper legal
proceedings the validity of any such statute, ordinance, law,
regulation or order, provided that such contest shall not result in
the suspension of operations of the Facility and PROVIDED, FURTHER,
that the Owner shall have no obligation to secure and protect the
Manager from any loss, cost, damage or expense that arises directly
out of the Manager's breach of any of its covenants under this
Agreement.
3.10 TAXES. The Manager shall cause all taxes, assessments, and
charges of every kind imposed upon the Facility by any governmental authority,
including interest and penalties thereon, to be paid when due if funds are
available, except that Manager shall not cause such payment to be made if (i)
same is in good faith being contested by the Owner at its sole expense and
without cost to the Manager, (ii) enforcement thereof is stayed, and (iii) Owner
shall have given Manager written notice of such contest and stay and authorized
the non-payment thereof, not less than ten (10) days prior to the date on which
such tax assessment, or charge is due and payable. Interest or penalty payments
shall be reimbursed by Manager to Owner if imposed upon the Owner by reason of
negligence on the part of the Manager in making the payment if funds are
available therefore. Manager shall notify Owner of all taxes, assessments or
penalties assessed against the Facility other than in the normal course of
business.
3.11 DEPOSIT AND DISBURSEMENT OF FUNDS. Manager shall deposit in a
banking institution which is a member of the FDIC in accounts in Manager's name
as agent for Owner, all monies arising from the operation of the Facility or
otherwise received by Manager for and on behalf of Owner ("Facility Funds"), and
shall disburse and pay the same from said accounts on behalf and in the name of
Owner in the following order of priority and, in each case, such amounts and at
such times as the same are required to be made in connection with:
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(a) Payment of Facility Debt Service and all costs and
expenses arising out of the ownership, maintenance, and operation of
the Facility, including, without limitation, the reimbursable
expenses of Manager hereunder set forth in Exhibit A hereto;
(b) Payment of Manager's Management Fee provided for in
Article V, below (including any accrued and unpaid Management Fees
for prior periods); and
(c) The balance of such funds shall be distributable to
Owner.
As used herein, "Facility Debt Service" means scheduled payments of
the principal and interest with respect to:
(x) debt service payments pursuant to Schedule B hereof;
and
(y) any additional indebtedness incurred by Owner for the
improvement, maintenance, or operation of the Facility as mutually
agreed upon by Owner and Manager.
"Facility Debt Service" does not include any amounts payable by
reason of voluntary prepayments or the acceleration of such indebtedness for any
reason.
3.12 STATEMENTS. Manager shall deliver or cause to be delivered to
Owner statements as follows:
(a) Within thirty (30) days following the end of each
calendar month, a profit and loss statement and balance sheet
statement (both prepared on an accrual basis in accordance with GAAP)
showing the results of operation of the Facility for such calendar
month and the year-to-date, and having annexed thereto a computation
of the management fee (as determined under Article VI hereof) for
such preceding month and the year-to-date; and
(b) On or before ninety (90) days after the close of each
fiscal year during the term of this Agreement, Manager will also
deliver or cause to be delivered to the Owner a balance sheet and
related statement of profit and loss certified by an independent
public accounting firm and prepared in accordance with GAAP showing
the assets employed in the operation of the Facility and the
liabilities incurred in connection therewith as of the end of the
fiscal year, and the results of the operation of the Facility during
the preceding twelve (12) months then ended, and having annexed
thereto (i) a copy of the Medicare and Medicaid cost report prepared
by Manager with respect to the Facility for such twelve month period,
and (ii) a computation of the management fee for such twelve (12)
month period. All costs and expenses incurred in connection with the
preparation of any statements, schedules, computations, and other
reports required under this Section 3.12(b) shall be borne by the
Owner.
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3.13 LEGAL ACTIONS. Manager shall institute, in its own name or in
the name of the Owner, but in any event at the expense of the Owner, any and all
legal actions or proceedings to collect charges, rent, or other sums due the
Facility or to lawfully oust or dispossess tenants or other persons in
possession under, or lawfully cancel, modify, or terminate any lease, license,
or concession agreement for the breach thereof or default thereunder by the
tenant, licensee, or concessionaire.
Unless otherwise directed by Owner, Manager shall take, at Owner's
expense, appropriate steps to protect and/or litigate to final judgment in any
appropriate court any violation, order, rule, or regulation affecting the
Facility. Any counsel to be engaged under this or the next preceding paragraph
of this Section shall be approved by Owner, which approval shall not be
unreasonably withheld. Manager shall promptly notify Owner of all legal actions.
3.14 MANAGEMENT SERVICES. Without limitation, Manager shall provide
the Facility with all of the management services and techniques, if applicable,
which it employs in operating other facilities which it manages which may be
applicable to and beneficial to the Facility.
3.15 DATA PROCESSING. Manager shall, directly or through an
affiliate, provide the data processing required to maintain the financial,
payroll, and accounting records of the Facility; except that Manager agrees that
the Facility payroll will not be moved to Manager's central payroll
administration until same can be accomplished without a material disruption to
Facility cash flow.
3.16 BOOKS AND RECORDS. Manager on behalf of the Owner shall
supervise and direct the keeping of full and accurate books of account and such
other records reflecting the results of operation of the Facility as required by
law.
ARTICLE IV
RIGHTS AND DUTIES OF THE OWNER
During the term of this Agreement:
4.1 RIGHT OF INSPECTION. Owner shall have the right to enter upon any
part of the Facility upon reasonable advance notice to the Manager for the
purpose of examining or inspecting same or examining or making extracts of books
and records of the Facility, but the same shall be done with as little
disruption to the business of the Facility as possible. However, the books and
records of the Facility shall not be removed from the Facility without the
expressed written consent of the Manager. Owner acknowledges that some books and
records will be maintained at Manager's principal place of business.
Owner shall direct all inquiries regarding operations, procedures,
policies, employee relations, patient care, and all other matters concerning the
Facility to the Executive Vice President
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of Manager or any other officer of Manager as it may from time to time designate
in a written notice to Owner.
4.2 COOPERATION WITH MANAGER. Owner will fully cooperate with Manager
in operating and supervising the operations of the Facility and will reimburse
Manager for all funds expended or costs and expenses incurred to which Manager
is entitled to reimbursement as set forth in Exhibit A of this Agreement.
4.3 OPERATING CAPITAL. To any extent necessary after taking into
account Manager's loans under Article V, below, Owner shall provide Manager with
such amount of working capital as may be required from time to time for the
operation of the Facility on a sound financial basis (including the payment of
all amounts owed to Manager including, but not limited to, the payment of all
management fees, reimbursable expenses and amounts due under the Line of
Credit). If additional working capital is required, Manager shall notify Owner
thereof in writing and Owner shall provide Manager with such increase in working
capital within fifteen (15) days thereafter. If Owner fails to provide such
additional working capital, Manager may, but is not obligated to, provide the
same as a loan to Owner.
4.4 CAPITAL IMPROVEMENTS. Owner shall provide Manager with such
amount of funds as may be required from time to time to make all necessary
capital improvements to the Facility in order to maintain and continue standards
of operation of the Facility as a nursing home.
ARTICLE V
COMPENSATION AND DISTRIBUTIONS
5.1 As full and exclusive compensation for all of the services to be
rendered by Manager during the Term of this Agreement, the Owner shall pay to
the Manager at its principal office, or at such other place as the Manager may
from time to time designate in writing, and at the times hereinafter specified,
a monthly fee (the "Management Fee") equal to four (4%) percent of Gross
Revenues derived from the operation of the Facility determined on the accrual
method of accounting. The Management Fee shall be payable five days after
delivery to Owner of the monthly financial statement referred to in Section 3.12
(each such date being hereinafter referred to as a "Payment Date") and shall be
calculated based upon the Facility's Net Revenues during the preceding month as
set forth in such financial statements.
5.2 For the purposes of determining such management fees, "Gross
Revenues" for any period shall be determined on the basis of all revenues and
income of any kind derived directly or indirectly from the Facility during such
period (including rental or other payment from concessionaires, licensees,
tenants, and other users of the Facility, but excluding therefrom all bequests,
gifts, or similar donations) whether on a cash basis or on credit, paid or
unpaid, collected
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or uncollected, as determined in accordance with generally accepted accounting
principles consistently applied, excluding, however:
(a) federal, state, and municipal excise, sales, and use
taxes collected directly from patients as a part of the sales prices
of any goods or services;
(b) proceeds of any life insurance policies;
(c) gains or losses arising from the sale or other
disposition of capital assets;
(d) any reversal or accrual of any contingency or tax
reserve;
(e) interest earned on sinking funds, Special Security
Accounts, bonds funds, etc. originally and specifically formed as a
requirement of any bond issue utilized to finance the Facility; and
(f) bad debt expense.
The proceeds of business interruption insurance or proceeds as a
result of Medicare and Medicaid audits shall be included in gross revenues of
the Facility. However, funds required to be repaid as a result of Medicare and
Medicaid audits shall be deducted from gross revenues of the Facility.
5.3 Notwithstanding the foregoing, the Management Fee (including any
amount carried over pursuant to the succeeding sentence hereof) shall be payable
on each Payment Date only to the extent that the Facility Funds (as defined in
Section 3.11) shall be sufficient as of such date. Any portion of the Management
Fee not paid due to the foregoing shall be carried over and be payable on the
immediately succeeding Payment Date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF OWNER
Owner represents and warrants to Manager as follows:
6.1 ORGANIZATION AND STANDING OF THE OWNER. The Owner is a
corporations duly organized, validly existing and in good standing under the
laws of the State of Georgia. Copies of the Articles of Incorporation and
By-Laws of the Owner, and all amendments thereof to date, have been, if
requested, delivered to Manager and are complete and correct. The Owner has the
power and authority to own the property and assets now owned by it and to
conduct the business presently being conducted by it.
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6.2 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement, including all Schedules and Exhibits hereto, or any
of the other instruments and documents required or contemplated hereby and
thereby ("Transaction Documents") by the Owner, nor the performance by the Owner
of the transactions contemplated hereby and thereby, conflicts with, or
constitutes a breach of or a default or requires the consent of any third party
under (i) the Articles of Incorporation or By-Laws of the Owner; or (ii) to the
best of its knowledge after due inquiry, any applicable law, rule, judgment,
order, writ, injunction, or decree of any court, currently in effect; or (iii)
to the best of its knowledge after due inquiry, any applicable rule or
regulation of any administrative agency or other governmental authority
currently in effect; or (iv) any agreement, indenture, contract or instrument to
which the Owner is now a party or by which the assets of the Owner are bound.
6.3 CONSENTS. Except as set forth in Schedule 6.3, no authorization,
consent, approval, license, exemption by, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
the execution, delivery and performance of this Agreement by the Owner.
6.4 SHARES. Schedule 6.4 sets forth a complete list and description
of the authorized shares of the Owner, the number of shares issued and
outstanding of each class or series of such shares, and the identity of each
shareholder of the Owner, in each case indicating the class and number of shares
held. The Owner does not have outstanding any warrants, options, or other rights
to subscribe for or purchase from the Owner any capital shares of the Owner, nor
are there outstanding any securities convertible into or exchangeable for such
shares.
6.5 FINANCIAL STATEMENTS.
(a) The audited consolidated balance sheets of the
Facility as of March 31, 1996, and the related statements of
operations and cash flow for the year then ended, annexed hereto as
Exhibit 6.5(a), present fairly in all material respects the financial
condition and results of operations of the Facility at and for the
periods therein specified and were prepared in accordance with GAAP.
(b) The unaudited consolidating balance sheets and the
related statements of operations of the Facility as of March 31,
1996, and cash flow for the 9-month period then ended, certified by
the chief financial officer of the Owner, annexed hereto as Exhibit
6.5(b), present fairly in all material respects the financial
condition and results of operations of the Facility at and for the
periods therein specified and were prepared in accordance with GAAP.
6.6 MATERIAL CHANGES. Since March 31, 1996, there has not been any
material adverse change in the condition (financial or otherwise) of the assets,
properties or operations of the Owner, whether or not covered by insurance, and
during such period of time the Owner has and from the date of this Agreement
through the Commencement Date, will have, conducted the business of the Facility
only in the ordinary and normal course, and made no distributions to any
shareholders of
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the Owner other than wages paid and expenses reimbursed in the ordinary and
normal course of business.
6.7 LICENSES AND PERMITS. Schedule 6.7 sets forth a description of
all licenses and other governmental or other regulatory permits or approvals
required for the operation of the Facility (excluding individual therapists
licenses) that are now in effect (collectively, the "Licenses"). The Owner has
delivered to Manager copies of all of the Licenses. The Owner or the individuals
listed on Schedule 6.7 own, possess or has the legal right to use the Licenses,
free and clear of all liens, pledges, claims or other encumbrances of any nature
whatsoever. The Owner is not in material default under any such License, and the
Owner has not received any notice of any default or any other claim or
proceeding relating to any such License. No shareholder, director or officer,
employee or former employee of the Owner, or any person, firm or corporation
other than the Owner owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part in any of the Licenses, other than
Licenses necessary for such individuals to practice their own professions.
6.8 LEGAL PROCEEDINGS. Other than as set forth on Schedule 6.8, there
are no claims, actions, suits or proceedings or arbitrations, either
administrative or judicial, pending, or, to the knowledge of Owner, overtly
threatened against or affecting the Owner, its affiliates or shareholders, or
their ability to consummate the transactions contemplated herein, at law or in
equity or otherwise, before or by any court or governmental agency or body,
domestic or foreign, or before an arbitrator of any kind.
6.9 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES,
ETC. During the two years prior to the Commencement Date, there has been no
material adverse change in the relationship between the Owner and its employees,
nor any strike or material labor disturbance by such employees affecting the
Owner's business and, to the knowledge of the Owner, there is no indication that
such a change, strike or labor disturbance is likely. Except as set forth on
Schedule 6.9, the Owner's employees are not represented by any labor union or
similar organization and the Owner has no reason to believe that there are
pending or threatened any activities, the purpose of which is to achieve such
representation, of all or some of the Owner's employees. Except as set forth on
Schedules 6.9, the Owner has no collective bargaining or other labor contracts,
employment contracts, pension, profit-sharing, retirement, insurance, bonus,
deferred compensation or other employee benefit plans, agreements or
arrangements with respect to the Owner's employees. The Owner is in material
compliance with the requirements prescribed by all Federal, state and local
statutes, orders and governmental rules and regulations applicable to any of its
employee benefit plans, agreements and arrangements, including, without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
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6.10 RELATIONSHIPS. Except as disclosed on Schedule 6.10 hereto, no
affiliate of the Owner has, or at any time within the last two (2) years has
had, a material ownership interest in any business, corporate or otherwise, that
is a party to, or in any property that is the subject of, business relationships
or arrangements of any kind relating to the operation of the Facility by which
the Owner will be bound after the Commencement Date.
6.11 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule 6.11,
since March 31, 1996, the Owner has not:
(a) sold, assigned or transferred any of its assets or
properties, except in the ordinary course of business;
(b) mortgaged, pledged or subjected to any lien, pledge,
mortgage, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, the Facility's assets;
(c) made or suffered any amendment or termination of any
material contract, commitment, instrument or agreement other than in
the ordinary course of business;
(d) except in the ordinary course of business, or
otherwise as necessary to comply with any applicable minimum wage
law, increased the salaries or other compensation of any of their
employees, or made any increase in, or any additions to, other
benefits to which any of such employees may be entitled;
(e) failed to pay or discharge when due any liabilities,
the failure to pay or discharge which has caused or will cause any
actual material damage or give rise to the risk of a material loss to
the Owner;
(f) changed any of the accounting principles followed by
them or the methods of applying such principles;
(g) entered into any material transaction other than in
the ordinary course of business; or
(h) received any notice of any adverse determination made
by any licensing authority or reimbursement source which may
reasonably be expected to have a material adverse effect on the
revenues or operations of the Facility. The Owner shall report to
Manager, within five (5) business days after receipt thereof, any
written notices that the Owner or the Facility is not in compliance
in any material respect with any of the foregoing.
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6.12 COMPLIANCE WITH LAWS. Except for notices of non-compliance as to
which the Owner has taken corrective action acceptable to the applicable
governmental agency, and as set forth in Schedule 6.12, the Owner has not within
the period of twelve months preceding the date of this Agreement, received any
written notice that it fails to comply in any material respect with any
applicable Federal, state, local or other governmental laws or ordinances, or
any applicable order, rule or regulation of any Federal, state, local or other
governmental agency having jurisdiction over the Owner ("Governmental
Requirements"). The Owner shall report to Manager, within five (5) business days
after receipt thereof, any written notices that the Owner is not in compliance
in any material respect with any of the foregoing.
6.13 TAX RETURNS. Except as set forth on Schedule 6.13, the Owner
have filed all Federal, state, county and local income, excise, property,
employment-related and other tax returns and abandoned property reports (if any)
to date that are due and required to be filed by it, and there are no claims,
liens, or judgments for taxes due from the Owner, and to the knowledge of the
Owner, no basis for any such claim, lien, or judgment exists.
6.14 PAYMENT OBLIGATIONS. The Owner shall have no obligation to pay
any severance or other amounts as a result of the change in management control
contemplated under this Agreement or any of the agreements executed in
connection herewith.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF MANAGER
Manager represents and warrants to the Owner as follows:
7.1 ORGANIZATION AND STANDING OF THE MANAGER. The Manager is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Copies of the Articles of Incorporation and By-Laws of
the Manager, and all amendments thereof to date, have been, if requested,
delivered to the Owner and are complete and correct. The Manager has the power
and authority to own the property and assets now owned by it and to conduct the
business presently being conducted by it.
ARTICLE VIII
TERMINATION RIGHTS
This Agreement may be terminated and, except as to liabilities or
claims of either party hereto which shall have theretofore accrued or arisen,
the obligations of the parties hereto with respect to this Agreement may be
terminated, upon the happening of any of the following events:
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8.1 TERMINATION BY THE OWNER: If at any time or from time to time
during the term of this Agreement any of the following events shall occur and
not be remedied within the applicable period of time herein specified, namely:
(a) The Manager shall apply for or consent to the
appointment of a receiver, trustee, or liquidator of the Manager of
all or a substantial part of its assets, file a voluntary petition in
bankruptcy, make a general assignment for the benefit of creditors,
file a petition or an answer seeking reorganization or arrangement
with creditors or take advantage of any insolvency law, or if an
order, judgment or decree shall be entered by any court of competent
jurisdiction, on the application of a creditor, adjudicating the
Manager as bankrupt or insolvent or approving a petition seeking
reorganization of the Manager or appointing a receiver, trustee, or
liquidator of the Manager or of all or substantial part of its
assets, and such order, judgment or decree shall continue unstayed
and in effect for any period of ninety (90) consecutive days; or
(b) The Manager shall fail to keep, observe, or perform
any material covenant, agreement, term or provision of this Agreement
to be kept, observed, or performed by the Manager, and such default
shall continue for a period of sixty (60) days after written notice
thereof by the Owner to the Manager;
then in case of any such event and upon the expiration of the period of grace
applicable thereto, the term of this Agreement shall expire, at the Owner's
option and upon ten (10) days written notice to the Manager.
8.2 TERMINATION BY THE MANAGER: If at any time or from time to time
during the term of this Agreement any of the following events shall occur and
not be remedied within the applicable period of time herein specified, namely:
(a) The Owner shall fail to keep, observe, or perform any
material covenants, agreement, term or provision of this Agreement to
be kept, observed, or performed by the Owner and such default shall
continue for a period of sixty (60) days after written notice thereof
by the Manager to the Owner, except for Owner's duty to provide for
adequate working capital under Section 4.3 hereof, which shall
continue uncured for a period of thirty (30) days after written
notice thereof;
(b) The Facility or any portion thereof shall be damaged
or destroyed by fire or other casualty and (i) the Owner shall fail
to undertake to repair, restore, rebuild, or replace any such damage
or destruction within forty-five (45) days after such fire or other
casualty, or shall fail to complete such work diligently, and (ii)
such Owner shall fail to permit the Manager to undertake to repair,
restore, rebuild, or replace, at Owner's expense, any such damage or
destruction within forty-five (45) days after such fire or other
casualty;
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(c) The Owner shall apply for or consent to the
appointment of a receiver, trustee, or liquidator of the Owner or of
all or a substantial part of its assets, file a voluntary petition in
bankruptcy or admit in writing its inability to pay its debts as they
become due, make a general assignment for the benefit of creditors,
file a petition or any answer seeking reorganization or arrangement
with creditors or to take advantage of any insolvency law, or if an
order, judgment or decree shall be entered by a court of competent
jurisdiction, on the application of a creditor, adjudicating the
Owner bankrupt or appointing a receiver, trustee, or liquidator of
the Owner with respect to all or substantial part of the assets of
the Owner, and such order, judgment or decree shall continue unstayed
and in effect for any period of ninety (90) consecutive days;
(d) Any license, lease or sub-lease for the operation of
any Facility is at any time suspended, terminated, or revoked and
such suspension, termination, or revocation shall continue unstayed
and in effect for a period of thirty (30) consecutive days; or
(e) Facility Funds shall be insufficient for the payment
of the Management Fees to the Manager pursuant to Article V hereof
for a period of at least six (6) consecutive months;
then in case of any such event and upon the expiration of the period of grace
applicable thereto, the term of this Agreement shall expire, at the Manager's
option and upon ten (10) days written notice to the Owner.
8.3 TERMINATION WITHOUT CAUSE. Owner shall have the right at any time
during the Term of this Agreement to terminate this Agreement without cause by
providing notice to Manager at least thirty (30) days prior to the requested
date of termination.
8.4 MATERIAL ADVERSE CHANGE. Manager shall be entitled to terminate
this Agreement prior to the Commencement Date forthwith upon notice to the Owner
in the event that (a) there shall have occurred since the date hereof any
material adverse change in the financial or operating condition of the Facility,
its business or prospects, including, without limitation, the occurrence of any
event listed in Section 6.11 hereof, or (b) any representation or warranty of
the Owner herein shall have ceased to be true and correct in any material
respect.
8.5 SURVIVING RIGHTS UPON TERMINATION. If either party exercises its
option to terminate pursuant to this Article VIII, each party shall forthwith
account for and pay to the other all sums due and owing pursuant to the terms of
this Agreement. All other rights and obligations of the parties under this
Agreement shall terminate (except as set forth in Article IX hereof).
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ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION OF OWNER BY MANAGER. Manager shall at all times
indemnify and hold harmless the Owner, its officers, directors, employees, and
shareholders, from and against any and all claims, losses, liabilities, actions,
proceedings, and expenses (including reasonable attorneys fees) arising out of
the Manager's operation of the Facility during the term of this Agreement,
including governmental actions and proceedings. The provisions of this Section
9.1 shall survive the termination or expiration of this Agreement.
9.2 INDEMNIFICATION OF MANAGER BY OWNER. The Owner shall at all times
indemnify and hold harmless the Manager, its officers, directors, employees, and
shareholders, from and against any and all claims, losses, liabilities, actions,
proceedings, and expenses (including reasonable attorneys fees) arising out of
(i) the ownership or operation of the Facility prior to the term of this
Agreement, or (ii) any breach of the representations and warranties made by
Owner in Article VI of this Agreement. The provisions of this Section 9.2 shall
survive the termination or expiration of this Agreement.
9.3 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS. A party seeking
indemnification under this Article IX shall give the other party prompt written
notice of the claim for which it seeks indemnification. Failure of the party
seeking indemnification to give such prompt notice shall not relieve the other
party of its indemnification obligation, PROVIDED that such indemnification
obligation shall be reduced by any damages suffered by such other party
resulting from a failure to give prompt notice hereunder. The party receiving
the aforementioned notice shall provide the defense of such claim, including,
without limitation, retention and payment of attorneys.
9.4 PERIOD OF LIMITATION. Any claim for indemnification herewith must
be asserted within twelve (12) months following the Commencement Date, or, in
the case of Section 9.1, within twelve (12) months of the discovery of the
indemnifiable event, except that no such limitation shall apply to any claim
based upon (a) any liability of the Owner to the Medicare and Medicaid programs,
or to any other third party payor, for excess reimbursement received by the
Owner prior to the Commencement Date, or (b) any breach of Owner's
representations and warranties pertaining to litigation or tax matters.
ARTICLE X
CONDEMNATION
If the whole of the Facility shall be taken or condemned in any
eminent domain, condemnation, compulsory acquisition, or like proceeding by a
competent authority for any public or quasi-public use or purpose or if such
portion thereof shall be taken or condemned as to make it
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unsuitable for its primary intended use, then the term of this Agreement shall
cease and terminate on the date on which the Owner shall be required to
surrender possession of the Facility. The Manager shall continue to supervise
and direct the management of the Facility until such time as the Owner shall be
required to surrender possession of the Facility as a consequence of such taking
or condemnation.
If only a part of the Facility shall be taken or condemned and the
taking or condemnation of such part does not make it unsuitable for its primary
intended use, this Agreement shall not terminate.
In the event that the parties herein are unable within a period of
thirty (30) days after controversy arising between them to agree upon the
apportionment of any award or are otherwise in dispute as to any matter arising
under this Article X, any such dispute shall be resolved by arbitration in
accordance with the provision of Article XI hereof and the costs thereof or
incurred therein shall be borne or apportioned and paid as determined by said
arbitration.
ARTICLE XI
ARBITRATION
If any controversy should arise between the parties in performance,
interpretation, or application of this Agreement which involves any matter,
either party may serve upon the other a written notice stating that such party
desires to have the controversy reviewed by an arbitrator. If the parties cannot
agree within fifteen (15) days from the service of such notice upon the
selection of such arbitrator, an arbitrator shall be selected or designated by
the American Arbitration Association upon written request of either party
hereto. Arbitration of such controversy, disagreement, or dispute shall be
conducted in accordance with the Commercial Arbitration Rules then in force of
the American Arbitration Association and the decision and award of the
arbitrator so selected shall be binding upon the Owner and Manager. The
arbitration will be held in Naples, Florida.
As a condition precedent to the appointment of any arbitrator both
parties shall be required to make a good faith effort to resolve the controversy
which effort shall continue for a period of thirty (30) days prior to any demand
for arbitration. The cost of any such arbitration shall be shared equally be the
parties. Each party shall pay its own costs incurred as a result of its
participation in any such arbitration.
If the issue to be arbitrated is Manager's alleged breach of this
Agreement and as a result thereof, Owner has the right to terminate this
Agreement, Manager shall continue to manage the Facility hereunder pending the
outcome of such arbitration.
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The Arbitrator shall have no authority to award punitive damages or
any other damages in excess of the prevailing party's actual damages, and may
not make any ruling, finding or award that does not conform to the terms and
conditions of this Agreement.
ARTICLE XII
SUCCESSORS AND ASSIGNS
12.1 ASSIGNMENTS BY THE MANAGER. The Manager, without the consent of
the Owner, shall have the right to assign this Agreement to a wholly or majority
owned subsidiary provided that the Manager shall not thereby be released from
its obligations hereunder.
In the event that all or substantially all the assets of the Manager
or its capital stock shall during the term of this Agreement be acquired by
another corporation (hereinafter referred to as the "Acquiring Corporation") as
a result of a merger, consolidation, reorganization, or other transaction, the
Acquiring Corporation assumes all of the obligations of the Manager then accrued
hereunder, if any, and Manager shall be relieved of all such obligations (and
such Acquiring Corporation shall be relieved of liability hereunder if it
subsequently is involved in such an acquisition).
Except as otherwise permitted herein, the Manager shall have no right
to assign this Agreement.
12.2 SALE, ASSIGNMENT, OR SUB-LEASE BY THE OWNER. Any sale,
sub-lease, or assignment with respect to the Facility, other than to the
Manager, shall be expressly subject to the terms and provisions of this
Agreement and shall not relieve the Owner of its liability or obligations
hereunder, and Owner shall cause any purchaser, assignee, or sub-lessee to
deliver to the Manager written acknowledgment of its agreement to perform
hereunder including the payment of the management fee described herein.
The Owner may not at any time, without the prior written consent of
the Manager, incur any additional debt or subject its interest in the Facility
or any part thereof to the lien of one or more deeds of trust, mortgages, or
other security instruments. In the event that such consent is given, such
additional debt or security interest shall be subordinate to Manager's rights
and security interest granted pursuant to this Agreement and the Credit
Agreement.
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<PAGE>
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 NOTICES. Any notice or other communication by either party to
the other shall be in writing and shall be given and be deemed to have been duly
given, upon the date delivered if delivered personally or upon the date received
if mailed postage pre-paid, registered, or certified mail, addressed as follows:
To the Owner: SOUTHERN CARE CENTERS OF TEXAS, INC.
Five Concourse Parkway, Suite 2420
Atlanta, GA 30328
Attention: Michael Himmelstein
With a copy to: Arnall, Golden & Gregory
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309-3450
Attention: Marc L. Peterzell, Esq.
To the Manager: COMMUNITY CARE OF AMERICA, INC.
3050 N. Horseshoe Drive
Suite 260
Naples, FL 33942
Attention: William J. Krystopowicz
With a copy to: Blass & Driggs
461 Fifth Avenue, 19th Floor
New York, NY 10017
Attention: Michael S. Blass, Esq.
or to such other address, and to the attention of such other person or officer
as either party may designate in writing by notice.
13.2 NO PARTNERSHIP OR JOINT VENTURE. Nothing contained in the
Agreement shall constitute or be construed to be or create a partnership or
joint venture between the Owner, its successors, or assigns on the one part and
the Manager, its successors, or assigns on the other part. Notwithstanding the
foregoing, the parties hereby agree that they shall each have a duty to act in
good faith and to deal fairly with the other party hereto.
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<PAGE>
13.3 MODIFICATIONS AND CHANGES. This Agreement cannot be changed or
modified except by another agreement in writing signed by the party sought to be
charged therewith or by its duly authorized agent.
13.4 UNDERSTANDING AND AGREEMENTS. This Agreement constitutes the
entire understanding and agreements of whatsoever nature or kind existing
between the parties with respect to the Manager's management of the Facility.
13.5 HEADINGS. The article and paragraph headings contained herein
are for convenience of reference only and are not intended to define, limit, or
describe the scope of intent of any provision of this Agreement.
13.6 APPROVAL OR CONSENT. Whenever under any provisions of this
Agreement, the approval or consent of either party is required, the decision
thereon shall be promptly given and such approval or consent shall not be
unreasonably withheld. It is further understood and agreed that whenever under
any provisions of this Agreement the approval or consent of the Owner is
required, such approval or consent is given by the person or any one of the
persons, as the case may be, designated in a notification signed by or on behalf
of the Owner. For all purposes under this Agreement, the Manager shall determine
solely from the latest such notification received by it the person or persons
authorized to give such approval or consent. The Manager shall rely exclusively
and conclusively on the designation set forth in such notification,
notwithstanding any notice of knowledge to the contrary.
13.7 GOVERNING LAW. This Agreement shall be deemed to have been made
and shall be construed and interpreted in accordance with the laws of the State
of Texas.
13.8 ENFORCEABILITY. Should any provision of this Agreement be
unenforceable as between the parties, such unenforceability shall not affect the
enforceability of the other provisions of this Agreement.
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<PAGE>
13.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Management Agreement effective as of the day and year first above written.
OWNER: MANAGER:
SOUTHERN CARE CENTERS CCA OF TEXAS, INC.
OF TEXAS, INC.
By: /s/ Michael Himmelstein By: /s/ William J. Krystopowicz
------------------------------ ------------------------------
Michael Himmelstein William J. Krystopowicz
Title: Vice President Title: Executive Vice President
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EXHIBIT A
The following is a list of items and travel expenses not included in the CCA
Management Fee. These facility specific expenses are passed directly to the
facility in which the expense was incurred.
* CCA consultant travel expenses when Facility specific,
e.g. regional nurse, dietician, business office analyst,
regional Vice President, marketing, reimbursement,
accounting.
* Administrator wages, benefits and related travel expenses.
(This includes an annual administrator conference).
* Computer hardware and software purchased for Facility.
* Facility specific legal and accounting fees.
* Facility specific fees associated with union organization
attempts, elections, etc.
* Payroll processing fee.
* Outside consultants used for Medicare or Medicaid cost
reports and Medicare exception requests.
* Travel costs for facility personnel training.
* All other costs incurred related to facility-specific
matter.
AGREEMENT TO PROVIDE
ACCOUNTING AND AUDITING SERVICES
AND
RURAL HEATHCARE PROVIDER NETWORK SERVICES
THIS AGREEMENT (the "Agreement") made this 1st day of May 1996, by
and between CCA Acquisition I, Inc. (hereinafter called "Provider") and
Buchanan/SCC, Inc. d/b/a Countryside Nursing Home (hereinafter called "Owner").
WITNESSETH
Owner and Provider agree that Provider shall provide Countryside
Nursing Home in Buchanan, Georgia (hereinafter referred to as the "Center") a
long term care facility owned and operated by Owner, the following auditing and
accounting services on the following terms and conditions:
SECTION ONE
PROVIDER DUTIES AND OBLIGATIONS
1.01 SERVICES PROVIDED: During the term of this Agreement, Provider
shall provide the following auditing and accounting services to the Owner:
(a) Provider shall audit proper coding of the subsidiary accounts
payable by the Center's bookkeepers.
(b) Provider shall examine all invoices for comparison against the
Center's financial statements and audit periodic vendor amounts due and goods
and services provided for any given statement period.
(c) Provider shall prepare a schedule of all accounts payable
invoices.
<PAGE>
(d) Provider shall batch accounts payable invoices for electronic
data processing into budgeted categories, consistent with departmental budgeting
submitted to provider by Center's bookkeeper.
(e) Provider shall keypunch all accounts payable invoices for
electronic data processing.
(f) Provider shall generate and balance the accounts payable
subsidiary ledger for the Center for each accounting period.
(g) Provider shall generate a comparative budget report relating to
the accounts payable ledger for the administration and all departmental
supervisors.
(h) Provider shall audit deposits of the Center.
(i) Provider shall categorize deposits by payment status.
(j) Provider shall keypunch for electronic data processing all
deposit information.
(k) Provider shall audit all deposits with bank statements.
(l) Provider shall audit all of the Center's bank accounts.
(m) Provider shall generate an accounts receivable report with an
aging analysis by payment category.
(n) Provider shall assist Center's bookkeeper with billings in a
timely manner.
(o) Provider shall examine all billings of Center to assure accuracy.
(p) Provider shall prepare a monthly trial balance and edit schedule
for the entire chart of accounts.
(q) Provider shall prepare the monthly and year to date profit and
loss statements for the Center with budget comparisons.
(r) Provider shall prepare the monthly and year end balance sheet for
the Center.
<PAGE>
(s) Provider shall prepare a schedule of changes in financial
condition for the Center.
(t) Provider shall prepare a monthly cash flow analysis with a
sources and uses analysis.
(u) Provider shall assist in providing information for audits by
governmental agencies (Medicare/Medicaid).
(v) Provider shall assist in preparing the cost reports for Center
including conversion of financial statement information to cost reporting forms.
(w) Provider shall prepare all accounting information, including but
not limited to operational summaries, projections and cash flow statements for
submission to prospective purchasers or lessees, if any.
(x) Provider shall assist in preparing all reports (to include
payroll tax returns, unemployment tax returns and any other quarterly/annual
returns) for any and all Federal, state, and any other reporting authorities.
1.02 REPORTS TO OWNER: Provider shall prepare and deliver to Owner
monthly financial statements (unaudited) containing a balance sheet and
statement of income and expenses in reasonable detail, and such monthly
financial statements shall be delivered to Owner within twenty-five (25) days
after the close of each calendar month.
1.03 ACCESS TO FINANCIAL BOOKS AND RECORDS: The financial books and
records for the Center shall be maintained at the Provider's office and copies
shall be maintained at the Center. Provider shall promptly respond to any
questions of Owner with respect to such books and records.
1.04 LICENSES: Neither Owner nor Provider shall knowingly take any
action which may (1) cause any governmental authority having jurisdiction over
the operation of similar centers to institute any proceeding for the rescission
or revocation of any necessary license, permit, consent or approval,
<PAGE>
or (2) adversely affect Owner's right to accept and obtain payments under
Medicare, Medicaid, Blue Cross or any other public or private medical payment
program.
1.05 TAXES: Any taxes or other governmental obligations properly
imposed on the Center are the obligations of the Owner, not of Provider, and
shall be paid out of the Operating Accounts of the Center.
1.06 USE OF PROVIDER'S PERSONNEL: Provider and/or its designee shall
visit the Center as often as it deems necessary but not less than twice each
month unless mutually agreed by Owner and Provider. The time of such visits
shall not be changed to Owner, but out-of-pocket expenses arising from travel
and lodging connected with such visits shall be paid weekly out of the Center's
Operating Accounts as an expense of the Center.
SECTION TWO
TERM AND TERMINATION
2.01 TERM: This Agreement shall be treated as effective from May 1,
1996 and terminate on July 31, 2004 unless otherwise terminated by mutual
consent of the parties or as otherwise outlined herein.
2.02 TERMINATION:
(a) If either party shall apply for or consent to the appointment of
a receiver, trustee or liquidator of it or all or of a substantial part of its
assets, file a voluntary petition in bankruptcy, make a general assignment for
the benefit of creditors, file a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any insolvency law, or if an
order, judgment or decree shall be imminent in any court of competent
jurisdiction, on an application of a creditor, potentially adjudicating said
party a bankrupt or insolvent or approving a petition seeking
<PAGE>
reorganization of said party or appointment a receiver, trustee or liquidator of
said party or of all or a substantial part of its assets, then in case of any
such event, the term of this Agreement shall expire, at the other party's
option, on five (5) days written notice.
(b) If Owner or Provider shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement required to be
kept, observed, or performed by it, and such default shall continue for a period
of thirty (30) days, or ten (10) days in the case of a failure to pay fees under
this Agreement, after notice thereof by one to the other, then in case of any
such event and upon the expiration of any period of grace applicable thereto,
the term of this Agreement shall expire, at the option of the party against whom
such default is contended, on five (5) days written notice to the other party.
SECTION THREE
RURAL HEALTHCARE PROVIDER NETWORK SERVICES AND FEES
3.01 SERVICES: The Provider is recognized to have the ability to
provide a Rural Healthcare Network that will enhance the ability of the Center
to provide services and continue to meet its debt service requirements. The
Provider is therefore engaged to provide any and all services necessary to
establish a Rural HealthCare Network in Buchanan, Georgia. A partial list of the
services to be included is on Exhibit A.
3.02. COMPENSATION: In exchange for the services to be provided, the
Provider will be entitled to $5,000.00 per month; provided however that any such
fees shall accrue and not be due or payable unless and until revenues generated
by the Center exceed all expenses of the Center including, but not limited to
lease payments, debt service, operating and administrative expenses and the fees
due hereunder. To the extent that during the term of this Agreement all such
expenses exceed the
<PAGE>
revenues generated by the Center, Provider shall absorb such excess by
contributing cash to the Center on a monthly basis as needed to meet expenses as
they are incurred.
SECTION FOUR
MISCELLANEOUS
4.01 ASSIGNMENT BY PROVIDER: Provider may not assign its rights
and/or obligations under this Agreement without the prior written consent of
Owner.
4.01 ASSIGNMENT BY OWNER: Owner may assign its right or obligations
under this Agreement without the consent of Provider.
4.03 BINDING ON SUCCESSORS AND ASSIGNS: The terms, covenants,
conditions, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto, their successors and assigns.
4.04 NEGATION OF PARTNERSHIP, JOINT VENTURE AND AGENCY: The
relationship of Provider to Owner under this Agreement is that of an independent
contractor, not that of an agent, and nothing contained herein shall be
construed to create a relationship of agency between Provider and Owner. Nothing
herein shall be construed to the effect that Provider is Manager of the Center
or in charge of the day to day operations of the Center, all of which
responsibilities are Owner's.
4.05 NOTICES: All notices hereunder by either party to the other
shall be in writing. All notices, demands and requests shall be deemed given
when mailed, postage prepaid, registered, or certified mail return receipt
requested; or when sent by telecopier with evidence of confirmation as follows:
(a) To Owner, by addressing the same to:
Buchanan/SCC, Inc.
5 Concourse Parkway
<PAGE>
Suite 3100
Atlanta, Georgia 30328
Fax No. (770) 804-5867
with a copy to:
Marc L. Peterzell, Esq.
Arnall Golden & Gregory
1201 West Peachtree Street
2800 One Atlantic Center
Atlanta, Georgia 30309-3450
Fax No. (404) 873-8663
(b) To Provider, by addressing the same to:
Community Care of America, Inc.
3050 N. Horseshoe Drive, Suite 260
Naples, Florida 33942
Attention: William J. Krystopowicz
Fax No. (941) 261-5624
with a copy to:
Blass & Driggs
461 Fifth Avenue
New York, New York 10017
Attention: Michael S. Blass, Esq.
Fax No. (212) 447-5429
or to such other address or telecopier number or to such other person as may be
designated by notice given from time to time during the term by one party to the
other.
4.06 ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties hereto, and no representation or agreements, oral or
otherwise, between the parties not embodies herein or attached hereto shall be
of any force and effect. Any additions or amendments to this Agreement
subsequent hereto shall be of no force and effect unless in writing and signed
by the parties hereto.
<PAGE>
4.07 GOVERNING LAW: This agreement has been executed and delivered in
the State of Georgia, and all the terms and provisions hereof and the rights and
obligations of the parties hereto shall be construed and enforced in accordance
with the laws thereof.
4.08 CAPTIONS AND HEADINGS: The captions and headings throughout this
Agreement are 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 any
provision of or the scope or intent of this Agreement nor in any way affect this
agreement.
4.09 NONASSUMPTION OF LIABILITIES: Provider shall not, by entering
into and performing this Agreement, become liable for any of the existing
liabilities or debts of Owner.
4.10 RESPONSIBILITY FOR MISCONDUCT OF EMPLOYEES AND OTHER PERSONS:
Provider will have no liability whatsoever for damages suffered on account of
the dishonesty, willful misconduct or negligence of any employee of the Center
or Owner. Provider shall be liable to the Center in connection with damage or
loss directly sustained by it by reason of the dishonesty, willful misconduct or
negligence of Provider's employees in the course of providing the services
outlined herein.
4.11 AUTHORIZATION OF AGREEMENT: Provider and Owner represent and
warrant, each to the other, (i) that this Agreement has been duly authorized by
the respective Boards of Directors of Owner and Provider; (ii) that this
Agreement constitutes a valid and enforceable obligation of Provider and Owner
in accordance with its terms; and (iii) that the Provider has the authority to
enter into this Agreement.
<PAGE>
4.12 Notwithstanding anything to the contrary herein, this agreement
does not constitute an agreement to provide general management or readmission
policy and planning procedures or functions as the same are defined by the
reimbursement regulations of the State of Georgia. Therefore, it is expressly
understood and agreed that day-to-day operations and administration of policy
and planning of the Center, including but not limited to, development and
implementation of policies and procedures for the Center shall be the sole and
exclusive responsibility of the Center's administrator and Owner. Provider shall
have no implied supervision or control over the Center, its employees or Owner
as a result of or incident to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
the day and year first above written.
BUCHANAN/SCC, INC.
By: /s/ Michael Himmelstein
---------------------------------
Michael Himmelstein
CCA ACQUISITION I, INC.
By: /s/ William J. Krystopowicz
---------------------------------
William J. Krystopowicz
In consideration for Buchanan/SCC, Inc. giving CCA ACQUISITION I,
INC. the opportunity to provide accounting and auditing services to the Center
and to operate a rural healthcare provider network, the undersigned hereby
unconditionally guarantees each and every obligation of CCA ACQUISITION I, INC.
in the above Agreement.
COMMUNITY CARE OF AMERICA, INC.
By: /s/ William J. Krystopowicz
---------------------------------
William J. Krystopowicz
<PAGE>
EXHIBIT A
---------
Physical Therapy
Occupational Therapy
Speech Therapy
Dementia Therapy
Infusion Therapy
Respiratory Therapy
Hospice Care
Respite Care
Extensive Rehab Restorative Program
Wound Care
Tracheotomy Care
Post Stroke & Hip Replacement Treatment
Antibiotic Treatment
Enteral Feeding/IV
Urological & Ostomy Care
ALLONGE AND AMENDMENT TO PROMISSORY NOTE
Reference is made to that certain Promissory Note in the original
principal amount of $13,600,000, dated December 30, 1993 as modified by an
Allonge and Amendment dated as of April 1, 1995 (the "ORIGINAL NOTE") , made by
ECA Holdings, Inc., a Delaware corporation ("MAKER"), and payable to Health and
Retirement Properties Trust ("LENDER"). This Allonge and Amendment (this
"ALLONGE") shall be and remain attached to and shall constitute an integral part
of the above described Original Note from and after the date hereof (the
Original Note as modified by this Allonge being hereinafter referred to as the
"NOTE"). Terms capitalized but not otherwise defined herein shall have the
meanings given to them, respectively, in the Original Note.
The Original Note is hereby amended in the following particulars:
7. PREPAYMENT. (a) (i) In the event the option to renew
those certain leases variously dated as of December 30, 1993 and
November 1, 1994, each as amended, between Lender as landlord and
Maker, as tenant with respect to certain real property and
improvements located in Colorado, Kansas, Iowa, Missouri and Wyoming,
for the First Extended Term (as such term is defined therein) is not
exercised on the terms set forth in such leases, Lender, at its
election by written notice to Maker given on or prior to January 31,
2003, shall have the right, in its sole discretion and for any reason
or no reason, to require the Maker to prepay this Note in full on
December 31, 2003, together with interest and the Make-Whole Premium,
and other charges accrued and unpaid hereunder and/or under the Deeds
of Trust and the Security Instruments on such monthly payment date.
(ii) In the event the option to renew those certain leases
variously dated as of April 1, 1995, each as amended, between Lender
as landlord and Maker, as tenant with respect to certain real
property and improvements located in Nebraska, Kansas, Iowa and
Missouri for the First Extended Term (as such term is defined
therein) is not exercised on the terms set forth in such leases,
Lender, at its election by written notice to Maker given on or prior
to January 31, 2007, shall have the right, in its sole discretion and
for any reason or no reason, to require the Maker to prepay this Note
in full on December 31, 2007, together with interest and the
Make-Whole Premium, and other charges accrued and unpaid hereunder
and/or under the Deeds of Trust and the Security Instruments on such
monthly payment date.
(iii) In the event the option to renew those certain leases
variously dated as of May 10, 1996 between Lender as landlord and
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc., Macon/SCC,
Inc. and College Park/SCC, Inc., each a Georgia corporation
(collectively, the "SCC SUBSIDIARIES"), as tenants with respect to
certain real property, related improvements and personal property
located in Georgia, for the First Extended Term (as such term is
defined therein) is not exercised on the terms set forth in such
leases, Lender, at its election by written notice to Maker given on
or prior to January 31, 2003, shall have the right, in its sole
discretion and for any reason or no reason, to require the Maker to
prepay this Note in full on December 31, 2003, together with interest
and the Make-Whole Premium, and other
<PAGE>
charges accrued and unpaid hereunder and/or under the Deeds of Trust
and the Security Instruments on such monthly payment date.
Except as modified hereby, all the terms and conditions of the
Original Note are hereby ratified and confirmed. This Allonge may be signed in
one or more counterparts each of which taken together shall constitute one and
the same instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LENDER, DATED OCTOBER 9, 1986, A COPY OF WHICH , TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 10th day of May, 1996.
Attest: ECA HOLDINGS, INC.
By:_______________________ By:_______________________
Name: Name:
Title: Title:
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By:_______________________
Name:
Title:
2
ALLONGE AND AMENDMENT TO PROMISSORY NOTE
Reference is made to that certain Promissory Note in the original
principal amount of $6,000,000, dated December 30, 1993 as modified by an
Allonge and Amendment dated as of April 1, 1995 (the "ORIGINAL NOTE") , made by
COMMUNITY CARE OF NEBRASKA, INC., a Delaware corporation ("MAKER"), and payable
to HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real estate investment
trust ("LENDER"). This Allonge and Amendment (this "ALLONGE") shall be and
remain attached to and shall constitute an integral part of the above described
Original Note from and after the date hereof (the Original Note as modified by
this Allonge being hereinafter referred to as the "NOTE"). Terms capitalized but
not otherwise defined herein shall have the meanings given to them,
respectively, in the Original Note.
The Original Note is hereby amended in the following particulars:
5. PREPAYMENT. (a)(i) In the event the option to renew
those certain leases variously dated as of December 30, 1993 and
November 1, 1994, each as amended, between Lender as landlord and ECA
Holdings, Inc., a Delaware corporation, as tenant with respect to
certain real property and improvements located in Colorado, Kansas,
Iowa, Missouri and Wyoming, for the First Extended Term (as such term
is defined therein) is not exercised on the terms set forth in such
leases, Lender, at its election by written notice to Maker given on
or prior to January 31, 2003, shall have the right, in its sole
discretion and for any reason or no reason, to require the Makers to
prepay this Note in full on December 31, 2003, together with interest
and the Make-Whole Premium, and other charges accrued and unpaid
hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
(ii) In the event the option to renew those certain leases
variously dated as of April 1, 1995, each as amended, between Lender
as landlord and ECA Holdings, Inc., a Delaware corporation, as tenant
with respect to certain real property and improvements located in
Nebraska, Kansas, Iowa, and Missouri, for the First Extended Term (as
such term is defined therein) is not exercised on the terms set forth
in such leases, Lender, at its election by written notice to Maker
given on or prior to January 31, 2007, shall have the right, in its
sole discretion and for any reason or no reason, to require the Maker
to prepay this Note in full on December 31, 2007, together with
interest and the Make-Whole Premium, and other charges accrued and
unpaid hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
(iii) In the event the option to renew those certain leases
variously dated as of May 10, 1996, each as amended, between Lender
as landlord and Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC,
Inc., Macon/SCC, Inc. and College Park/SCC, Inc., each a Georgia
corporation (collectively, the "SCC SUBSIDIARIES"), as tenants with
respect to certain real property, related improvements and personal
property located in Georgia, for the First Extended Term (as such
term is defined therein) is not exercised on the terms
<PAGE>
set forth in such leases, Lender, at its election by written notice
to Maker given on or prior to January 31, 2003, shall have the right,
in its sole discretion and for any reason or no reason, to require
the Maker to prepay this Note in full on December 31, 2003, together
with interest and the Make-Whole Premium, and other charges accrued
and unpaid hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
Except as modified hereby, all the terms and conditions of the
Original Note are hereby ratified and confirmed. This Allonge may be signed in
one or more counterparts each of which taken together shall constitute one and
the same instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LENDER, DATED OCTOBER 9, 1986, A COPY OF WHICH , TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
2
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 10th day of May, 1996.
Attest: COMMUNITY CARE OF NEBRASKA, INC.
By:______________________ By:__________________________
Name: Name:
Title: Title:
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By:______________________
Name:
Title:
3
ALLONGE AND AMENDMENT TO PROMISSORY NOTE
Reference is made to that certain Promissory Note (the "ORIGINAL
NOTE") in the original principal amount of $2,045,000, dated April 1, 1995, made
by COMMUNITY CARE OF NEBRASKA, INC., a Delaware corporation, W.S.T. CARE, INC.,
a Nebraska corporation, QUALITY CARE OF LYONS, INC., a Nebraska corporation and
QUALITY CARE OF COLUMBUS, INC., a Nebraska corporation (collectively, the
"MAKERS") and payable to HEALTH AND RETIREMENT PROPERTIES TRUST, a Maryland real
estate investment trust ("LENDER"). This Allonge and Amendment (this "ALLONGE")
shall be and remain attached to and shall constitute an integral part of the
above described Original Note from and after the date hereof (the Original Note
as modified by this Allonge being hereinafter referred to as the "NOTE"). Terms
capitalized but not otherwise defined herein shall have the meanings given to
them, respectively, in the Original Note.
The Original Note is hereby amended in the following particulars:
A. Paragraph 5(a) on page 2 is amended to read as follows:
5. PREPAYMENT. (a)(i) In the event the option to renew
those certain leases variously dated as of December 30, 1993 and
November 1, 1994, each as amended, between Lender as landlord and ECA
Holdings, Inc., a Delaware corporation, as tenant with respect to
certain real property and improvements located in Colorado, Kansas,
Iowa, Missouri and Wyoming, for the First Extended Term (as such term
is defined therein) is not exercised on the terms set forth in such
leases, Lender, at its election by written notice to Makers given on
or prior to January 31, 2003, shall have the right, in its sole
discretion and for any reason or no reason, to require the Makers to
prepay this Note in full on December 31, 2003, together with interest
and the Make-Whole Premium, and other charges accrued and unpaid
hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
(ii) In the event the option to renew those certain leases
variously dated as of April 1, 1995, each as amended, between Lender
as landlord and ECA Holdings, Inc., a Delaware corporation, as tenant
with respect to certain real property and improvements located in
Nebraska, Kansas, Iowa, and Missouri, for the First Extended Term (as
such term is defined therein) is not exercised on the terms set forth
in such leases, Lender, at its election by written notice to Makers
given on or prior to January 31, 2007, shall have the right, in its
sole discretion and for any reason or no reason, to require the
Makers to prepay this Note in full on December 31, 2007, together
with interest and the Make-Whole Premium, and other charges accrued
and unpaid hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
(iii) In the event the option to renew those certain leases
variously dated as of May 10, 1996 between Lender as landlord and
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc., Macon/SCC,
Inc. and College Park/SCC, Inc., each a Georgia corporation
(collectively, the "SCC SUBSIDIARIES"), as tenants with respect to
certain real property, related improvements and personal property
located in Georgia, for the First Extended Term (as such
<PAGE>
term is defined therein) is not exercised on the terms set forth in
such leases, Lender, at its election by written notice to Makers
given on or prior to January 31, 2003, shall have the right, in its
sole discretion and for any reason or no reason, to require the
Makers to prepay this Note in full on December 31, 2003, together
with interest and the Make-Whole Premium, and other charges accrued
and unpaid hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
B. Paragraph 5(b) on page 3 is deleted in its entirety.
C. The first sentence of Paragraph 5(e) on page 4 is amended to delete
reference to paragraph 5(b).
Except as modified hereby, all the terms and conditions of the
Original Note are hereby ratified and confirmed. This Allonge may be signed in
one or more counterparts each of which taken together shall constitute one and
the same instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LENDER, DATED OCTOBER 9, 1986, A COPY OF WHICH , TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
-2-
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 10th day of May, 1996.
COMMUNITY CARE OF NEBRASKA, INC.,
Attest: a Delaware corporation
By:________________________ By:_____________________________
Name: Name:
Title: Title:
W.S.T. CARE, INC., a Nebraska
Attest: corporation
By:_________________________ By:______________________________
Name: Name:
Title: Title:
QUALITY CARE OF LYONS, INC., a
Attest: Nebraska corporation
By:__________________________ By:_______________________________
Name: Name:
Title: Title:
QUALITY CARE OF COLUMBUS, INC., a
Attest: Nebraska corporation
By:__________________________ By:_______________________________
Name: Name:
Title: Title:
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By:___________________________
Name:
Title
-3-
ALLONGE AND AMENDMENT OF PROMISSORY NOTE
Reference is made to that certain ECA Holdings Renovation Funding
Promissory Note (the "ORIGINAL NOTE") in the original principal amount of
$6,466,700, dated April 1, 1995, made by ECA HOLDINGS, INC., a Delaware
corporation ("MAKER"), and payable to HEALTH AND RETIREMENT PROPERTIES TRUST, a
Maryland real estate investment trust ("LENDER"). This Allonge and Amendment
(this "ALLONGE") shall be and remain attached to and shall constitute an
integral part of the above described Original Note from and after the date
hereof (the Original Note as modified by this Allonge being hereinafter referred
to as the "NOTE"). Terms capitalized but not otherwise defined herein shall have
the meanings given to them, respectively, in the Original Note.
The Original Note is hereby amended in the following particulars:
A. Paragraph 5(a) on page 2 is amended to read as follows:
5. PREPAYMENT. (a)(i) In the event the option to renew
those certain leases variously dated as of December 30, 1993 and
November 1, 1994, each as amended, between Lender as landlord and
Maker as tenant with respect to certain real property and
improvements located in Colorado, Kansas, Iowa, Missouri and Wyoming,
for the First Extended Term (as such term is defined therein) is not
exercised on the terms set forth in such leases, Lender, at its
election by written notice to Maker given on or prior to January 31,
2003, shall have the right, in its sole discretion and for any reason
or no reason, to require the Maker to prepay this Note in full on
December 31, 2003, together with interest and the Make-Whole Premium,
and other charges accrued and unpaid hereunder and/or under the Deeds
of Trust and the Security Instruments on such monthly payment date.
(ii) In the event the option to renew those certain leases
variously dated as of April 1, 1995, each as amended, between Lender
as landlord and Maker as tenant with respect to certain real property
and improvements located in Nebraska, Kansas, Iowa, and Missouri, for
the First Extended Term (as such term is defined therein) is not
exercised on the terms set forth in such leases, Lender, at its
election by written notice to Maker given on or prior to January 31,
2007, shall have the right, in its sole discretion and for any reason
or no reason, to require the Maker to prepay this Note in full on
December 31, 2007, together with interest and the Make-Whole Premium,
and other charges accrued and unpaid hereunder and/or under the Deeds
of Trust and the Security Instruments on such monthly payment date.
(iii) In the event the option to renew those certain leases
variously dated as of May 10, 1996 between Lender as landlord and
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc., Macon/SCC,
Inc. and College Park/SCC, Inc., each a Georgia corporation
(collectively, the "SCC SUBSIDIARIES"), as tenants with respect to
certain real property, related improvements and personal property
located in Georgia, for the First Extended Term (as such term is
defined therein) is not exercised on the terms set forth in such
leases, Lender, at its election by written notice to Maker given on
or prior to January 31, 2003, shall have the right,
<PAGE>
in its sole discretion and for any reason or no reason, to require
the Maker to prepay this Note in full on December 31, 2003, together
with interest and the Make-Whole Premium, and other charges accrued
and unpaid hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
B. Paragraph 5(b) on page 3 is deleted in its entirety.
C. The first sentence of paragraph 5(e) on page 3 is amended to
delete reference to paragraph 5(b).
D. Except as modified hereby, all the terms and conditions of the
Original Note are hereby ratified and confirmed. This Allonge may be signed in
one or more counterparts each of which taken together shall constitute one and
the same instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LENDER, DATED OCTOBER 9, 1986, A COPY OF WHICH , TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
- 2 -
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 10th of May, 1996.
ECA HOLDINGS, INC., a Delaware
Attest: corporation
By:___________________ By:___________________________
Name: Name:
Title: Title:
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By:___________________
Name:
Title:
- 3 -
ALLONGE AND AMENDMENT TO PROMISSORY NOTE
Reference is made to that certain CCN Group Renovation Funding
Promissory Note (the "ORIGINAL NOTE") in the original principal amount of
$2,833,300 dated April 1, 1995, made by COMMUNITY CARE OF NEBRASKA, INC., a
Delaware corporation, QUALITY CARE OF LYONS, INC., a Nebraska corporation,
W.S.T. CARE, INC., a Nebraska corporation, QUALITY CARE OF COLUMBUS, INC., a
Nebraska corporation, (collectively, the "CO-MAKERS"), and payable to HEALTH AND
RETIREMENT PROPERTIES TRUST, a Maryland real estate investment trust ("LENDER").
This Allonge and Amendment (this "ALLONGE") shall be and remain attached to and
shall constitute an integral part of the above described Original Note from and
after the date hereof (the Original Note as modified by this Allonge being
hereinafter referred to as the "NOTE"). Terms capitalized but not otherwise
defined herein shall have the meanings given to them, respectively, in the
Original Note.
The Original Note is hereby amended in the following particulars:
A. Paragraph 5(a) on page 2 is amended to read as follows:
5. PREPAYMENT. (a)(i) In the event the option to renew
those certain leases variously dated as of December 30, 1993 and
November 1, 1994, each as amended, between Lender as landlord and ECA
Holdings, Inc., a Delaware corporation, as tenant with respect to
certain real property and improvements located in Colorado, Kansas,
Iowa, Missouri and Wyoming, for the First Extended Term (as such term
is defined therein) is not exercised on the terms set forth in such
leases, Lender, at its election by written notice to the Co-Makers
given on or prior to January 31, 2003, shall have the right, in its
sole discretion and for any reason or no reason, to require the
Co-Makers to prepay this Note in full on December 31, 2003, together
with interest and the Make-Whole Premium, and other charges accrued
and unpaid hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
(ii) In the event the option to renew those certain leases
variously dated as of April 1, 1995, each as amended, between Lender
as landlord and ECA Holdings, Inc., a Delaware corporation, as tenant
with respect to certain real property and improvements located in
Nebraska, Kansas, Iowa, and Missouri, for the First Extended Term (as
such term is defined therein) is not exercised on the terms set forth
in such leases, Lender, at its election by written notice to the
Co-Makers given on or prior to January 31, 2007, shall have the
right, in its sole discretion and for any reason or no reason, to
require the Co-Makers to prepay this Note in full on December 31,
2007, together with interest and the Make-Whole Premium, and other
charges accrued and unpaid hereunder and/or under the Deeds of Trust
and the Security Instruments on such monthly payment date.
(iii) In the event the option to renew those certain leases
variously dated as of May 10, 1996 between Lender as landlord and
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc., Macon/SCC,
Inc. and College Park/SCC, Inc., each a Georgia corporation
<PAGE>
(collectively, the "SCC SUBSIDIARIES"), as tenants with respect to
certain real property, related improvements and personal property
located in Georgia, for the First Extended Term (as such term is
defined therein) is not exercised on the terms set forth in such
leases, Lender, at its election by written notice to the Co-Makers
given on or prior to January 31, 2003, shall have the right, in its
sole discretion and for any reason or no reason, to require the
Co-Makers to prepay this Note in full on December 31, 2003, together
with interest and the Make-Whole Premium, and other charges accrued
and unpaid hereunder and/or under the Deeds of Trust and the Security
Instruments on such monthly payment date.
B. Paragraph 5(b) on pages 2 and 3 is deleted in its entirety.
C. Paragraph 5(e) on page 3 is revised to delete reference to paragraph
5(b).
Except as modified hereby, all the terms and conditions of the
Original Note are hereby ratified and confirmed. This Allonge may be signed in
one or more counterparts each of which taken together shall constitute one and
the same instrument.
NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING
LENDER, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
RETIREMENT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LENDER SHALL BE HELD TO ANY
PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LENDER. ALL PERSONS DEALING WITH LENDER, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF LENDER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
- 2 -
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Allonge to be executed under seal by its officer
thereunto duly authorized as of the 10th day of May, 1996.
COMMUNITY CARE OF NEBRASKA, INC.,
Attest: a Delaware corporation
By:____________________ By:_____________________________
Name: Name:
Title: Title:
W.S.T. CARE, INC., a Nebraska
Attest: corporation
By:____________________ By:______________________________
Name: Name:
Title: Title:
QUALITY CARE OF LYONS, INC.,
Attest: a Nebraska corporation
By:____________________ By:_______________________________
Name: Name:
Title: Title:
QUALITY CARE OF COLUMBUS, INC.,
Attest: a Nebraska corporation
By:____________________ By:_______________________________
Name: Name:
Title: Title:
- 3 -
<PAGE>
ACCEPTED BY:
HEALTH AND RETIREMENT PROPERTIES TRUST
By:______________________
Name:
Title:
- 4 -
AMENDMENT TO 1993 MASTER LEASE DOCUMENT
THIS AMENDMENT TO MASTER LEASE DOCUMENT AND FACILITY LEASES, dated as
of May 10, 1996 between HEALTH AND RETIREMENT PROPERTIES TRUST (formerly known
as Health and Rehabilitation Properties Trust), a Maryland real estate
investment trust ("Landlord"), having its principal office at 400 Centre Street,
Newton, Massachusetts 02158, and ECA HOLDINGS, INC., a Delaware corporation
("TENANT"), having its principal office at 3050 North Horseshoe Drive, Naples,
Florida 33942.
RECITALS
WHEREAS, Landlord and Tenant have entered into leases for certain
real property, and the related improvements and personal property, each of which
is dated as of December 30, 1993 (the "1993 LEASES"), and leases for the real
property, and the related improvements and personal property, each of which is
dated as of November 1, 1994 (the "1994 LEASES" and together with the 1993
Leases, the "LEASES"), each incorporating by reference a Master Lease Document,
General Terms and Conditions, dated as of December 30, 1993 (the "1993 MASTER
LEASE DOCUMENT") between Landlord and Tenant;
WHEREAS, Landlord and Tenant have agreed to amend the Leases and the
Master Lease as hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant agree as follows:
SECTION I. AMENDMENTS TO MASTER LEASE
A. The Recitals to the Master Lease Document are amended to include
the following additional recital F:
F. Pursuant to those five Facility Leases each dated as of
May 10, 1996 between Landlord as Landlord and one of
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc.,
Macon/SCC, Inc. and College Park/SCC, Inc., each a Georgia
corporation (together with their successors and assigns,
collectively, the "SCC SUBSIDIARIES" and individually, an
"SCC SUBSIDIARY") as tenants, each of which Facility
Leases incorporates by reference that certain Master Lease
Document, General Terms and Conditions dated as of May 10,
1996 (the "1996 MASTER LEASE DOCUMENT") between Landlord
and the SCC Subsidiary, Landlord currently leases to the
SCC Subsidiaries certain real property, and the related
improvements and personal property located in Georgia
(such leases being the "1996 LEASES" and such properties
being the "1996 LEASED PROPERTIES").
<PAGE>
B. The First paragraph of SECTION 2.4 to the Master Lease Document is
amended in full to read as follows:
2.4 EXTENDED TERM.
Tenant shall have the right to extend the Term as set forth in the
applicable Lease and below (the "EXTENDED TERM(S)"), provided (a) Tenant or each
SCC Subsidiary has (i) with respect to the First Extended Term, irrevocably
exercised such right or its right to extend the term of all, and not less than
all, of the Collective Leased Properties or all, and not less than all, of the
1996 Leases to which it is a party for the First Extended Term thereunder, and
(ii) with respect to the Second Extended Term, irrevocably exercised such right
or its right to extend the term of all, and not less than all, of the Collective
Leased Properties or all, and not less than all, of the 1996 Leases to which it
is a party for the Second Extended Term thereunder, (b) no Default shall have
occurred and be continuing under the applicable Lease or the Master Lease
Document, any other Lease pertaining to the Collective Leased Properties, any
1995 Lease pertaining to the 1995 Leased Properties or any 1996 Lease pertaining
to the 1996 Leased Properties and (c) the applicable Lease and each other Lease
pertaining to the Collective Leased Properties, each 1995 Lease pertaining to a
1995 Leased Property and each 1996 Lease pertaining to a 1996 Leased Property
shall be in full force and effect (other than any such lease that has been
terminated in accordance with the provisions hereof or thereof, following a
condemnation or casualty involving such leased properties).
C. SECTION 20.1 to the Master Lease Document is amended in full to
read as follows:
20.1 FIRST REFUSAL TO PURCHASE.
Tenant shall have a right of first refusal to purchase the
applicable Leased Property (subject to SECTION 21.1) upon the same
price, terms and conditions as Landlord shall propose to sell such
Leased Property, or upon the same price, terms and conditions of any
written offer from a third party to purchase such Leased Property
which Landlord intends to accept (or has accepted subject to Tenant's
right of first refusal herein provided), provided (a) no Default has
occurred and is continuing, (b) the Leases for each of the Collective
Leased Properties, the 1995 Leases for each of the 1995 Leased
Properties and the 1996 Leases for each of the 1996 Leased Properties
shall be in full force and effect (other than any Lease, 1995 Lease
or 1996 Lease that has been terminated in accordance with the
provisions hereof or thereof, following a condemnation or casualty
involving such leased property), (c) other than as expressly
permitted by ARTICLE 16 hereof or of the 1995 Master Lease, Tenant
shall not have assigned the Leases for any of the Collective Leased
Properties or the 1995 Leases for the 1995 Leased Properties or
subleased all
- 2 -
<PAGE>
or any portion of the Collective Leased Properties or the 1995 Leased
Properties and (d) other than as expressly permitted by ARTICLE 16 of
the 1996 Master Lease Document, no SCC Subsidiary shall have assigned
any of the 1996 Leases for any of the 1996 Leased Properties or
subleased all or any portion of the 1996 Leased Properties, during
the Term. If, during the Term and for sixty (60) days after
expiration of the Term, Landlord reaches such agreement with a third
party or proposes to offer the applicable Leased Property for sale,
Landlord shall promptly give Notice to Tenant of the purchase price
and all other material terms and conditions of such agreement or
proposed sale and Tenant shall have thirty (30) days thereafter to
exercise Tenant's right of first refusal to purchase by Notice to
Landlord thereof. Failure of Tenant to respond within such 30-day
period shall be deemed a waiver of Tenant's right to purchase such
Leased Property pursuant to this SECTION 20.1. If Tenant exercises
its right of first refusal, the sale to Tenant shall be consum mated
upon the same terms and conditions as contained in such agreement or
Landlord's Notice of the proposed sale (including all terms certain
in such agreement or Notice relating to any security deposit or fee,
and the date of closing). Such sale to Tenant shall be made in
accordance with the provisions of ARTICLE 15, to the extent not
inconsistent herewith, no later than the closing date (or, if no
closing date is specified in such agreement or Notice, thirty (30)
days after Tenant exercises its right of first refusal), specified in
such agreement or Notice. If Tenant shall not exercise its right of
first refusal within the time period and in the manner above
provided, Landlord shall be free to sell such Leased Property to any
third party at a price and upon terms substantially similar and in
any event no less favorable to Landlord than those offered to Tenant.
Tenant shall be entitled to exercise its right of first refusal as
provided in this SECTION 20.1 as to any subsequent or proposed sale
during the Term.
Tenant's right of first refusal shall be applicable to all
sales or proposed sales of any portion of the applicable Leased
Personal Property.
D. SECTION 20.2 to the Master Lease Document is amended in full to
read as follows:
20.2 FIRST REFUSAL TO LEASE.
Tenant shall have a first refusal option to lease the Leased Property
for a period of thirty (30) days after the expiration of the Term, upon the same
terms and conditions as Landlord shall propose to lease the Leased Property to a
third party or upon the same terms and conditions of any offer from any third
party which Landlord intends to accept (or has accepted subject to Tenant's
right of first refusal herein provided) provided, (a) no Default has occurred
and is continuing, (b) the Leases for each of the Collective Leased Properties,
the 1995 Leases for each of the 1995 Leased Properties and the 1996 Leases for
each of the 1996 Leased Properties shall
- 3 -
<PAGE>
be in full force and effect (other than any Lease, 1995 Lease or 1996 Lease that
has been terminated in accordance with the provisions hereof or thereof,
following a condemnation or casualty involving such leased property), (c) other
than as expressly permitted by ARTICLE 16 hereof or of the 1995 Master Lease,
Tenant shall not have assigned the Leases for any of the Collective Leased
Properties or the 1995 Leases for any of the 1995 Leased Properties or subleased
all or any portion of the Collective Leased Properties or the 1995 Leased
Properties and (d) other than as expressly permitted by ARTICLE 16 of the 1996
Master Lease Document, no SCC Subsidiary shall have assigned any of the 1996
Leases for any of the 1996 Leased Properties or subleased all or any portion of
the 1996 Leased Properties, during the Term. If, at any time prior to the
expiration of such thirty (30) day period, Landlord reaches such agreement with
a third party or proposes to lease the Leased Property to a third party,
Landlord shall promptly notify Tenant of the rental rates and all other material
terms of such agreement or proposal and Tenant shall have five (5) days after
receipt of such notice within which time to exercise its right of first refusal
to lease. Landlord and Tenant shall enter into a new lease of the Leased
Property, in form reasonably satisfactory to both Landlord and Tenant, as soon
as practicable after the date of receipt by Landlord of Tenant's election to
exercise such right of first refusal to lease. Failure of Tenant to give such
notice to Landlord within such five (5) day period and such thirty (30) day
period, as the case may be, or to enter into such new lease within fifteen (15)
days after exercise of such right of first refusal to lease shall be deemed a
waiver of Tenant's rights pursuant to this SECTION 20.2.
E. SECTION 20.4 to the Master Lease Document is amended in full to
read as follows:
20.4 TENANT'S OPTION TO PURCHASE THE LEASED PROPERTY.
Provided, (a) no Default has occurred and is continuing at the time
of exercise of the purchase option provided for in this SECTION 20.4 or at the
time of payment of the purchase price provided for in this SECTION 20.4, (b) the
Leases for each of the Collective Leased Properties, the 1995 Leases for the
1995 Leased Properties and the 1996 Leases for each of the 1996 Leased
Properties (other than leases that have been terminated in accordance with the
provisions hereof or thereof, following a condemnation or casualty involving the
related leased property) shall be in full force and effect, (c) other than as
expressly permitted by ARTICLE 16 hereof or of the 1995 Master Lease Document,
Tenant shall not have assigned the Leases for any of the Collective Leased
Properties or the 1995 Leases for the 1995 Leased Properties or subleased all or
any portion of the Collective Leased Properties or the 1995 Leased Properties
and (d) other than as expressly permitted by ARTICLE 16 of the 1996 Master Lease
Document, no SCC Subsidiary shall have assigned any of the 1996 Leases for any
of the 1996 Leased Properties or subleased all or any portion of the 1996 Leased
Properties, effective on not less than twelve (12) months' Notice, given not
more than
- 4 -
<PAGE>
eighteen (18) months prior to the expiration of the then current Term of the
Leases (such Notice to be accompanied by a non-refundable deposit made by
certified check payable to Landlord in an amount equal to five percent (5%) of
the Option Purchase Price), Tenant shall have the option to purchase the
Collective Leased Properties at a purchase price (the "OPTION PURCHASE PRICE")
equal to the greater of (i) the applicable Option Percentage multiplied by the
aggregate of the Adjusted Purchase Prices of such Collective Leased Properties
and (ii) the aggregate of the Fair Market Value Purchase Prices, in each case
determined as of the last day of the applicable Term during which such option is
exercised; PROVIDED, HOWEVER, in no event shall the Option Purchase Price exceed
the amount equal to the applicable Option Percentage Cap multiplied by the
aggregate of the Adjusted Purchase Prices of such Collective Leased Properties.
Tenant's option to purchase is subject to (i) Tenant's exercising such option
simultaneously with respect to all, and not less than all, of (A) the Collective
Leased Properties that are then subject to a Lease, as provided herein, and (B)
the 1995 Properties that are then subject to a 1995 Lease, as provided in the
1995 Lease, and (ii) the payment in full of all Indebtedness now or hereafter
owed to Landlord by Tenant, Community Care of America, Inc., a Delaware
corporation, Community Care of Nebraska, Inc., a Delaware corporation, Quality
Care of Lyons, Inc., a Nebraska corporation, W.S.T. Care, Inc., a Nebraska
corporation, Quality Care of Columbus, Inc., a Nebraska corporation, the SCC
Subsidiaries or any of their respective Affiliates. Such purchase by Tenant
shall be made in accordance with the provisions of ARTICLE 15 hereof and the
closing date for such purchase shall be the date of expiration of the then
current Term.
SECTION II. EFFECT ON 1993 MASTER LEASE
1. Except as specifically provided above, 1993 Master Lease and
Facility Leases shall remain in full force and effect and are hereby ratified
and confirmed.
2. The amendments set forth herein (i) do not constitute an
amendment, waiver or modification of any term, condition or covenant of the 1993
Master Lease or Facility Leases, or any of the instruments or documents referred
to therein, other than as specifically set forth herein, and (ii) shall not
prejudice any rights which Landlord or its successors and assigns may now or
hereafter have under or in connection with the 1993 Master Lease or Facility
Leases, as amended hereby or any of the instruments or documents referred to
therein.
SECTION III. EFFECTIVENESS
This Amendment shall become effective as of the date first above
indicated when a counterpart to this Amendment shall have been executed by each
of the parties hereto.
- 5 -
<PAGE>
SECTION IV. COSTS, EXPENSES AND TAXES
Tenant agrees to pay all costs and expenses of Landlord in connection
with the preparation, reproduction, execution and delivery of this Amendment,
including the reasonable fees and expenses of Sullivan & Worcester, special
counsel to Landlord with respect thereto.
SECTION V. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION VI. NON LIABILITY OF TRUSTEES
THE DECLARATION OF TRUST ESTABLISHING LANDLORD, DATED OCTOBER 9,
1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE
STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES
TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES,
BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,
EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY
OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
[Remainder of this page intentionally left blank]
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this amendment as a
sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND RETIREMENT PROPERTIES TRUST,
a Maryland real estate investment trust
By:_____________________________________
Name:
Title:
TENANT:
ECA HOLDINGS, INC.,
a Delaware corporation
By:_____________________________________
Name:
Title:
- 7 -
AMENDMENT TO 1995 MASTER LEASE DOCUMENT AND FACILITY LEASES
THIS AMENDMENT TO MASTER LEASE DOCUMENT AND FACILITY LEASES, dated as
of May 10, 1996 between HEALTH AND RETIREMENT PROPERTIES TRUST (formerly known
as Health and Rehabilitation Properties Trust), a Maryland real estate
investment trust ("LANDLORD"), having its principal office at 400 Centre Street,
Newton, Massachusetts 02158, and ECA HOLDINGS, INC., a Delaware corporation
("TENANT") having its principal office at 3050 North Horseshoe Drive, Naples,
Florida 33942.
RECITALS
WHEREAS, Landlord and Tenant have entered into leases for certain
real property, and the related improvements and personal property, located in
Kansas, Missouri, Iowa and Nebraska, each of which is dated as of April 1, 1995
(the "1995 LEASES"), each incorporating by reference a Master Lease Document,
General Terms and Conditions dated as of April 1, 1995 (the "1995 MASTER LEASE
DOCUMENT") between Landlord and Tenant;
WHEREAS, Landlord and Tenant have agreed to amend the Leases and the
Master Lease as hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant agree as follows:
SECTION I. AMENDMENTS TO MASTER LEASE
A. The Recitals to the Master Lease are amended to include the
following additional recital F:
F. Pursuant to those five Facility Leases each dated as of
May 10, 1996 between Landlord as Landlord, and one of
Marietta/SCC, Inc., Glenwood/SCC, Inc., Dublin/SCC, Inc.,
Macon/SCC, Inc. and College Park/SCC, Inc., each a Georgia
corporation (together with their successors and assigns,
collectively, the "SCC SUBSIDIARIES and individually, an
"SCC SUBSIDIARY") as tenants, each of which Facility
Leases incorporates by reference that certain Master Lease
Document, General Terms and Conditions dated as of May 10,
1996 (the "1996 MASTER LEASE DOCUMENT") between the
Landlord and the SCC Subsidiaries, Landlord currently
leases to the SCC Subsidiaries certain real property, and
the related improvements and personal property located in
Georgia (such leases being the "1996 LEASES" and such
properties being the "1996 LEASED PROPERTIES").
B. The first paragraph of SECTION 2.4 to the Master Lease Document is
amended in full to read as follows:
<PAGE>
2.4 EXTENDED TERM.
Tenant shall have the right to extend the Term as set forth in the
applicable Lease and below (the "EXTENDED TERM(S)"), provided (a) Tenant or each
SCC Subsidiary has (i) with respect to the First Extended Term, irrevocably
exercised such right or its right to extend the term of all, and not less than
all, of the 1993 Leases or all, and not less than all, of the 1996 Leases to
which it is a party for the First Extended Term thereunder, and (ii) with
respect to the Second Extended Term, irrevocably exercised such right or its
right to extend the term of all, and not less than all, of the 1993 Leases or
all, and not less than all, of the 1996 Leases to which it is a party for the
Second Extended Term thereunder, (b) no Default shall have occurred and be
continuing under the applicable Lease or the Master Lease Document, any other
Lease pertaining to the Collective Leased Properties, any 1993 Lease pertaining
to the 1993 Leased Properties, or any 1996 Lease pertaining to the 1996 Leased
Properties, and (c) the applicable Lease and each other Lease pertaining to the
Collective Leased Properties, each 1993 Lease pertaining to a 1993 Leased
Property and each 1996 Lease pertaining to a 1996 Leased Property shall be in
full force and effect (other than any such lease that has been terminated in
accordance with the provisions hereof or thereof, following a condemnation or
casualty involving the related leased property).
C. SECTION 20.1 to the Master Lease Document is amended in full to
read as follows:
20.1 FIRST REFUSAL TO PURCHASE.
Tenant shall have a right of first refusal to purchase the applicable
Leased Property (subject to SECTION 21.1) upon the same price, terms and
conditions as Landlord shall propose to sell such Leased Property, or upon the
same price, terms and conditions of any written offer from a third party to
purchase such Leased Property which Landlord intends to accept (or has accepted
subject to Tenant's right of first refusal herein provided) provided, (a) no
Default has occurred and is continuing, (b) the Leases for each of the
Collective Leased Properties, the 1993 Leases for each of the 1993 Leased
Properties and the 1996 Leases for each of the 1996 Leased Properties shall be
in full force and effect (other than any Lease, 1993 Lease or 1996 Lease that
has been terminated in accordance with the provisions hereof or thereof,
following a condemnation or casualty involving such leased property), (c) other
than as expressly permitted by ARTICLE 16 hereof or of the 1993 Master Lease
Document, Tenant shall not have assigned the Leases for any of the Collective
Leased Properties or the 1993 Leases for the 1993 Leased Properties or subleased
all or any portion of the Collective Leased Properties or the 1993 Leased
Properties, and (d) other than as expressly permitted by ARTICLE 16 of the 1996
Master Lease Document, no SCC Subsidiary shall have assigned any of the 1996
Leases for any of the 1996 Leased Properties or subleased all or any portion of
the 1996 Leased Properties, during the Term. If, during the Term and for sixty
(60) days after expiration of the Term, Landlord reaches such agreement with a
third party or proposes to offer the applicable Leased Property for sale,
Landlord shall promptly give Notice to Tenant of the purchase price and all
other material terms and conditions of such agreement or proposed sale and
Tenant shall have thirty (30) days thereafter to exercise Tenant's right of
first refusal to purchase by Notice to Landlord thereof.
- 2 -
<PAGE>
Failure of Tenant to respond within such 30-day period shall be deemed a waiver
of Tenant's right to purchase such Leased Property pursuant to this SECTION
20.1. If Tenant exercises its right of first refusal, the sale to Tenant shall
be consummated upon the same terms and conditions as contained in such agreement
or Landlord's Notice of the proposed sale (including all terms certain in such
agreement or Notice relating to any security deposit or fee, and the date of
closing). Such sale to Tenant shall be made in accordance with the provisions of
ARTICLE 15, to the extent not inconsistent herewith, no later than the closing
date (or, if no closing date is specified in such agreement or Notice, thirty
(30) days after Tenant exercises its right of first refusal), specified in such
agreement or Notice. If Tenant shall not exercise its right of first refusal
within the time period and in the manner above provided, Landlord shall be free
to sell such Leased Property to any third party at a price and upon terms
substantially similar and in any event no less favorable to Landlord than those
offered to Tenant. Tenant shall be entitled to exercise its right of first
refusal as provided in this SECTION 20.1 as to any subsequent or proposed sale
during the Term.
Tenant's right of first refusal shall be applicable to all sales or
proposed sales of any portion of the applicable Leased Personal Property.
D. SECTION 20.2 to the Master Lease Document is amended in full to
read as follows:
20.2 FIRST REFUSAL TO LEASE.
Tenant shall have a first refusal option to lease the Leased Property
for a period of thirty (30) days after the expiration of the Term, upon the same
terms and conditions as Landlord shall propose to lease the Leased Property to a
third party or upon the same terms and conditions of any offer from any third
party which Landlord intends to accept (or has accepted subject to Tenant's
right of first refusal herein provided) provided, (a) no Default has occurred
and is continuing, (b) the Leases for each of the Collective Leased Properties,
the 1993 Leases for each of the 1993 Leased Properties and the 1996 Leases for
each of the 1996 Leased Properties shall be in full force and effect (other than
any Lease, 1993 Lease or 1996 Lease that has been terminated in accordance with
the provisions hereof or thereof following a condemnation or casualty involving
such leased property), (c) other than as expressly permitted by ARTICLE 16
hereof or of the 1993 Master Lease Document, Tenant shall not have assigned the
Leases for any of the Collective Leased Properties or the 1993 Leases for any of
the 1993 Leased Properties or subleased all or any portion of the Collective
Leased Properties or the 1993 Leased Properties and (d) other than as expressly
permitted by ARTICLE 16 of the 1996 Master Lease Document, no SCC Subsidiary
shall have assigned any of the 1996 Leases for any of the 1996 Leased Properties
or subleased all or any portion of the 1996 Leased Properties, during the Term.
If, at any time prior to the expiration of such thirty (30) day period, Landlord
reaches such agreement with a third party or proposes to lease the Leased
Property to a third party, Landlord shall promptly notify Tenant of the rental
rates and all other material terms of such agreement or proposal and Tenant
shall have five (5) days after receipt of such notice within which time to
exercise its right of first refusal to lease. Landlord and Tenant shall enter
into a new lease of the Leased Property, in form reasonably satisfactory to both
Landlord and Tenant, as soon as
- 3 -
<PAGE>
practicable after the date of receipt by Landlord of Tenant's election to
exercise such right of first refusal to lease. Failure of Tenant to give such
notice to Landlord within such five (5) day period and such thirty (30) day
period, as the case may be, or to enter into such new lease within fifteen (15)
days after exercise of such right of first refusal to lease shall be deemed a
waiver of Tenant's rights pursuant to this SECTION 20.2.
E. SECTION 20.4 to the Master Lease Document is amended in full to
read as follows:
20.4 TENANT'S OPTION TO PURCHASE THE LEASED PROPERTY.
Provided, (a) no Default has occurred and is continuing at the time
of exercise of the purchase option provided for in this SECTION 20.4 or at the
time of payment of the purchase price provided for in this SECTION 20.4, (b) the
Leases for each of the Collective Leased Properties, the 1993 Leases for the
1993 Leased Properties and the 1996 Leases for the 1996 Leased Properties (other
than leases that have been terminated in accordance with the provisions hereof
or thereof following a condemnation or casualty involving the related leased
property) shall be in full force and effect, (c) other than as expressly
permitted by ARTICLE 16 hereof or of the 1993 Master Lease Document, Tenant
shall not have assigned the Leases for any of the Collective Leased Properties
or the 1993 Leases for the 1993 Leased Properties or subleased all or any
portion of the Collective Leased Properties or the 1993 Leased Properties and
(d) other than as expressly permitted by ARTICLE 16 of the 1996 Master Lease
Document, no SCC Subsidiary shall have assigned any of the 1996 Leases for any
of the 1996 Leased Properties or subleased all or any portion of the 1996 Leased
Properties, effective on not less than twelve (12) months' Notice, given not
more than eighteen (18) months prior to the expiration of the then current Term
of the Leases (such Notice to be accompanied by a non-refundable deposit made by
certified check payable to Landlord in an amount equal to five percent (5%) of
the Option Purchase Price), Tenant shall have the option to purchase the
Collective Leased Properties at a purchase price (the "OPTION PURCHASE PRICE")
equal to the greater of (i) the applicable Option Percentage multiplied by the
sum of (x) the aggregate of the Adjusted Purchase Prices of such Collective
Leased Properties and (y) $1,000,000 and (ii) the aggregate of the Fair Market
Value Purchase Prices, in each case determined as of the last day of the
applicable Term during which such option is exercised; PROVIDED, HOWEVER, in no
event shall the Option Purchase Price exceed the amount equal to the applicable
Option Percentage Cap multiplied by the sum of (x) the aggregate of the Adjusted
Purchase Prices of such Collective Leased Properties and (y) $1,000,000.
Tenant's option to purchase is subject to (i) Tenant's exercising such option
simultaneously with respect to all, and not less than all, of (A) the Collective
Leased Properties that are then subject to a Lease, as provided herein and (B)
the 1993 Properties that are then subject to a 1993 Lease as provided in the
1993 Lease, and (ii) the payment in full of all Indebtedness now or hereafter
owed to Landlord by Tenant, Community Care, CCN, the Group B Subsidiaries, the
SCC Subsidiaries or any of their respective Affiliates. Such purchase by Tenant
shall be made in accordance with the provisions of ARTICLE 15 hereof and the
closing date for such purchase shall be the date of expiration of the then
current Term.
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<PAGE>
SECTION II. Amendment to 1995 Leases (Facility Leases)
A. Paragraph 5. Each 1995 Lease is amended in full to read:
5. EXTENDED TERM. Subject to the provisions of SECTION 2.4
of the Master Lease Document, Tenant is hereby granted the
right to renew the Lease for two consecutive optional
renewal terms ("EXTENDED TERM(S)") as follows: (i) the
"FIRST EXTENDED TERM" is for nine (9) years, ending on
December 31, 2016, and (ii) the "SECOND EXTENDED TERM" is
for thirteen (13) years, ending on December 31, 2029.
SECTION III. EFFECT ON 1995 MASTER LEASE AND FACILITY LEASES
1. Except as specifically provided above, the 1995 Master Lease and
Facility Leases shall remain in full force and effect and are hereby ratified
and confirmed.
2. The amendments set forth herein (i) do not constitute an
amendment, waiver or modification of any term, condition or covenant of the 1995
Master Lease and Facility Leases, or any of the instruments or documents
referred to therein, other than as specifically set forth herein, and (ii) shall
not prejudice any rights which Landlord or its successors and assigns may now or
hereafter have under or in connection with the 1995 Master Lease and Facility
Leases, as amended hereby or any of the instruments or documents referred to
therein.
SECTION IV. EFFECTIVENESS
This Amendment shall become effective as of the date first above
indicated when a counterpart to this Amendment shall have been executed by each
of the parties hereto.
SECTION V. COSTS, EXPENSES AND TAXES
Tenant agrees to pay all costs and expenses of Landlord in connection
with the preparation, reproduction, execution and delivery of this Amendment,
including the reasonable fees and expenses of Sullivan & Worcester, special
counsel to Landlord with respect thereto.
SECTION VI. GOVERNING LAW
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION VII. NO LIABILITY OF TRUSTEES
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<PAGE>
THE DECLARATION OF TRUST ESTABLISHING LANDLORD, DATED OCTOBER 9,
1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE
STATE OF MARYLAND, PROVIDES THT THE NAME "HEALTH AND RETIREMENT PROPERTIES
TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES,
BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER,
EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY
OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this amendment as a
sealed instrument as of the date first above written.
LANDLORD:
HEALTH AND RETIREMENT PROPERTIES TRUST,
a Maryland real estate investment trust
By:_____________________________________
Name:
Title:
TENANT:
ECA HOLDINGS, INC.,
a Delaware corporation
By:____________________________________
Name:
Title:
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MASTER LEASE DOCUMENT
GENERAL TERMS AND CONDITIONS
DATED AS OF MAY 10, 1996
FOR LEASES TO BE EXECUTED BY
HEALTH AND RETIREMENT PROPERTIES TRUST,
(THE "LANDLORD")
AND
MARIETTA/SCC, INC.
GLENWOOD/SCC, INC.
DUBLIN/SCC, INC.
MACON/SCC, INC.
AND
COLLEGE PARK/SCC, INC.
(COLLECTIVELY, THE "TENANTS")
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
DEFINITIONS.........................................................2
ARTICLE 2
LEASED PROPERTY AND TERM...........................................16
2.1 Leased Property.......................................16
2.2 Condition of Leased Property..........................17
2.3 Fixed Term............................................17
2.4 Extended Term.........................................17
ARTICLE 3
RENT...............................................................18
3.1 Rent..................................................18
3.2 Late Payment of Rent..................................24
3.3 Net Lease.............................................25
3.4 No Termination, Abatement, Etc........................25
3.5 Security Deposit......................................26
ARTICLE 4
USE OF THE APPLICABLE LEASED PROPERTY..............................26
4.1 Permitted Use.........................................26
4.2 Compliance with Legal and Insurance
Requirements, Etc...................................27
4.3 Compliance with Medicaid and Medicare Requirements....27
4.4 Environmental Matters.................................28
ARTICLE 5
MAINTENANCE AND REPAIRS............................................30
5.1 Maintenance and Repair................................30
5.2 Tenant's Personal Property............................32
5.3 Yield Up..............................................32
5.4 Encroachments, Restrictions, Etc......................33
5.5 Landlord to Grant Easements, Etc......................33
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<PAGE>
ARTICLE 6
CAPITAL ADDITIONS, ETC.............................................34
6.1 Construction of Capital Additions
to the Leased Property...............................34
6.2 Capital Additions Financed or Paid For by Tenant......35
6.3 Capital Additions Financed by Landlord................37
6.4 Non-Capital Additions.................................38
6.5 Salvage...............................................38
ARTICLE 7
LIENS..............................................................39
7.1 Liens.................................................39
7.2 Landlord's Lien.......................................39
ARTICLE 8
PERMITTED CONTESTS.................................................40
ARTICLE 9
INSURANCE AND INDEMNIFICATION......................................41
9.1 General Insurance Requirements........................41
9.2 Replacement Cost......................................42
9.3 Waiver of Subrogation.................................42
9.4 Form Satisfactory, Etc................................42
9.5 Blanket Policy........................................43
9.6 No Separate Insurance.................................43
9.7 Indemnification of Landlord...........................44
ARTICLE 10
CASUALTY...........................................................44
10.1 Insurance Proceeds....................................44
10.2 Damage or Destruction.................................45
10.3 Damage Near End of Term...............................47
10.4 Tenant's Property.....................................47
10.5 Restoration of Tenant's Property......................47
10.6 No Abatement of Rent..................................47
10.7 Waiver................................................48
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<PAGE>
ARTICLE 11
CONDEMNATION.......................................................48
11.1 Total Condemnation, Etc...............................48
11.2 Partial Condemnation..................................48
11.3 Abatement of Rent.....................................49
11.4 Temporary Condemnation................................50
11.5 Allocation of Award...................................50
ARTICLE 12
DEFAULTS AND REMEDIES..............................................50
12.1 Events of Default.....................................50
12.2 Remedies..............................................54
12.3 TENANT'S WAIVER.......................................56
12.4 Application of Funds..................................56
12.5 Failure to Conduct Business...........................56
12.6 Landlord's Right to Cure Tenant's Default.............57
12.7 Trade Names...........................................57
ARTICLE 13
HOLDING OVER.......................................................57
ARTICLE 14
LANDLORD'S DEFAULT.................................................58
ARTICLE 15
PURCHASE OF LEASED PROPERTY........................................58
ARTICLE 16
SUBLETTING AND ASSIGNMENT..........................................59
16.1 Subletting and Assignment.............................59
16.2 Required Sublease Provisions..........................60
16.3 Permitted Sublease....................................61
16.4 Sublease Limitation...................................61
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<PAGE>
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.....................61
17.1 Estoppel Certificates.................................61
17.2 Financial Statements..................................62
17.3 General Operations....................................63
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT........................................64
ARTICLE 19
APPRAISAL..........................................................64
19.1 Appraisal Procedure...................................64
19.2 Landlord's Right to Appraisal.........................65
ARTICLE 20
LANDLORD'S OPTION TO PURCHASE......................................65
20.1 Landlord's Option to Purchase the
Tenant's Personal Property; Transfer of Licenses....65
ARTICLE 21
FACILITY MORTGAGES.................................................66
21.1 Landlord May Grant Liens..............................66
21.2 Subordination of Lease................................66
21.3 Notice to Mortgagee and Ground Landlord...............68
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<PAGE>
ARTICLE 22
ADDITIONAL COVENANTS OF TENANT.....................................68
22.1 Prompt Payment of Indebtedness........................68
22.2 Conduct of Business...................................68
22.3 Accreditation.........................................68
22.4 Maintenance of Accounts and Records...................69
22.5 Notice of Change of Name, Administrator, Etc..........69
22.6 Notice of Litigation, Potential Event of
Default, Etc........................................69
22.7 Indebtedness of Tenant................................69
22.8 Distributions, Payments to Affiliates, Etc............70
22.9 Investments...........................................71
22.10 Prohibited Transactions...............................72
22.11 Management of Leased Property.........................72
22.12 Liens and Encumbrances................................72
22.13 Merger; Sale of Assets; Etc...........................73
22.14 Definitions...........................................73
ARTICLE 23
MISCELLANEOUS......................................................74
23.1 Limitation on Payment of Rent.........................74
23.2 No Waiver.............................................74
23.3 Remedies Cumulative...................................75
23.4 Severability..........................................75
23.5 Acceptance of Surrender...............................75
23.6 No Merger of Title....................................75
23.7 Conveyance by Landlord................................75
23.8 Quiet Enjoyment.......................................76
23.9 NON-LIABILITY OF TRUSTEES.............................76
23.10 Landlord's Consent of Trustees........................76
23.11 Memorandum of Lease...................................77
23.12 Notices...............................................77
23.13 Incorporation by Reference............................78
23.14 Construction..........................................78
23.15 CONSENT TO JURISDICTION...............................78
23.16 WAIVER OF JURY TRIAL..................................79
23.17 GOVERNING LAW.........................................79
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<PAGE>
MASTER LEASE DOCUMENT
GENERAL TERMS AND CONDITIONS
This MASTER LEASE DOCUMENT, GENERAL TERMS AND CONDITIONS
(hereinafter, the "MASTER LEASE DOCUMENT"), dated as of May 10, 1996 is prepared
for and will be adopted as part of each lease to be executed by HEALTH AND
RETIREMENT PROPERTIES TRUST, a Maryland real estate investment trust, having its
principal office at 400 Centre Street, Newton, Massachusetts 02158,
("LANDLORD"), and MARIETTA/SCC, INC., GLENWOOD/SCC, INC., DUBLIN/SCC, INC.,
MACON/SCC, INC., AND COLLEGE PARK/SCC, INC., each a Georgia corporation, having
their principal office at 3050 North Horseshoe Drive, Naples, Florida 33942
(collectively, the "TENANTS").
RECITALS
This Master Lease Document is made and entered into with reference to
the following recitals:
A. Community Care of America, Inc., a Delaware corporation ("COMMUNITY
CARE") has entered into (a) an Amended and Restated Agreement and
Plan or Reorganization dated as of May 10, 1996 (the "MERGER
AGREEMENT") among Community Care, as buyer, Southern Care Centers,
Inc., a Georgia corporation ("SCC"), Michael A. Himmelstein and
Wallace E. Olson, sole shareholders of SCC, as sellers and CCA
Acquisition I, Inc., a newly- formed Delaware corporation and a
wholly owned subsidiary of Community Care ("NEWCO"), pursuant to
which SCC will merge with and into Newco, which will remain a wholly
owned subsidiary of Community Care;
B. Pursuant to a commitment letter dated May 8, 1996 (the COMMITMENT
LETTER") between Community Care and Landlord, Landlord has agreed to
acquire from each Tenant and simultaneously lease back to such
Tenant, certain real property and related improvements and personal
property (collectively, the "COLLECTIVE LEASED PROPERTIES", and each
a "LEASED PROPERTY", as such terms are further defined below),
located in Georgia and as otherwise described on EXHIBIT A-1 hereto.
Each such property will be operated by such Tenant for the Primary
Intended Use (as further defined below) described on EXHIBIT A-2
hereto.
C. Landlord and each Tenant have executed and delivered a lease for each
Leased Property, each in substantially the form of EXHIBIT B hereto
and incorporating by reference all of the terms and conditions of
this Master Lease Document. Each such lease is hereinafter referred
to as a "LEASE".
D. Pursuant to that certain Master Lease Document, General Terms and
Conditions dated as of December 30, 1993 (as amended on July __, 1994
and November 1, 1994, the "1993 MASTER LEASE DOCUMENT") and various
Facility Leases entered into by the Landlord and
<PAGE>
ECA Holdings, Inc., a Delaware corporation ("ECA") in connection
therewith, Landlord currently leases to ECA certain real property,
and the related improvements and personal property, located in
Colorado, Iowa, Kansas, Missouri and Wyoming (such leases being the
"1993 LEASES" and such properties being the "1993 LEASED
PROPERTIES").
E. Pursuant to that certain Master Lease Document, General Terms and
Conditions dated as of April 1, 1995 (the "1995 MASTER LEASE
DOCUMENT") and various Facility Leases entered into by Landlord and
ECA in connection therewith, Landlord currently leases to ECA certain
real property and the related improvements and personal property
located in Iowa, Kansas, Missouri and Nebraska (such leases being the
"1995 LEASES" and such properties being the "1995 LEASED
PROPERTIES").
F. Notwithstanding anything herein to the contrary, the terms and
conditions of this Master Lease Document shall be construed and
interpreted as to each Lease as if a separate lease containing all
the terms of this Master Lease Document and such Lease had been
executed by Landlord and the relevant Tenant with respect to the
Leased Property described in such Lease (hereinafter referred to as
the "APPLICABLE LEASED PROPERTY").
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and each Tenant (hereinafter, "TENANT") agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Master Lease Document, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article shall have the meanings assigned to them in this Article
and include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein shall have the meanings assigned to them in accordance
with generally accepted accounting principles consistently applied, (iii) the
use in this Master Lease Document of "Articles," "Sections" and terms denoting
other subdivisions shall refer to the designated Articles, Sections and other
subdivisions of this Master Lease Document, and (iv) the words "herein,"
"hereof," "hereunder" and other words of similar import shall refer to this
Master Lease Document as a whole and not to any particular Article, Section or
other subdivision.
ADDED VALUE PERCENTAGE: As defined in SECTION 6.2.2(A).
ADDITIONAL RENT: As defined in SECTION 3.1.2(A).
ADDITIONAL CHARGES: As defined in SECTION 3.1.4.
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<PAGE>
ADJUSTED PURCHASE PRICE shall mean, for the applicable Leased
Property, the Purchase Price of such Leased Property PLUS the aggregate amount
of all disbursements made by Landlord with respect to such Leased Property
pursuant to the terms of any renovation funding agreement, PLUS any other amount
disbursed or advanced by Landlord to finance, or to reimburse the Tenant for its
financing of, any Capital Addition to such Leased Property LESS the amount of
any Award or the proceeds of any insurance received by Landlord in connection
with a partial Condemnation or a partial casualty involving the applicable
Leased Property as described in SECTION 11.2 or 10.2.2, and not applied by
Landlord to the restoration of the applicable Leased Property as provided
therein.
AFFILIATE shall mean as to any Person (a) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more on a consolidated basis, of the
outstanding capital stock, shares, equity or beneficial interests of such
Person, (c) any officer, director, employee, general partner or trustee of such
Person or any other Person controlling, controlled by or under common control
with such Person (excluding trustees and Persons serving in similar capacities
who are not otherwise an Affiliate of such Person), or (d) with respect to any
individual, a spouse, any ancestor or descendant, or any other relative (by
blood, adoption or marriage), within the third degree, of such individual. For
the purposes of this definition, "control" (including the correlative meanings
of the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, through the ownership of voting securities, partnership interests or
other equity interests.
APPLICABLE LAWS: As defined in SECTION 4.4.
AWARD shall mean all compensation, sums or other value awarded, paid
or received by virtue of a total or partial Condemnation of the applicable
Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert witness
fees, incurred by Landlord, in connection with obtaining any such award).
BASE NET PATIENT REVENUES shall mean, with reference to any Leased
Property, (i) for the Fixed Term and the First Extended Term, the aggregate
amount of Net Patient Revenues for such Leased Property for the Lease Year
ending April 30, 1997 and (ii) for the Second Extended Term, the aggregate
amount of Net Patient Revenues for such Leased Property for the Lease Year
ending December 31, 2023.
BASE NON-INPATIENT REVENUES shall mean, with reference to any Leased
Property, (i) for the Fixed Term and the First Extended Term, the aggregate
amount of Non-Inpatient Revenues for such Leased Property for the Lease Year
ending April 30, 1997 and (ii) for the Second Extended Term, the aggregate
amount of Non-Inpatient Revenues for such Leased Property for the Lease Year
ending December 31, 2023.
- 3 -
<PAGE>
BUSINESS DAY shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in the State are authorized by law or
executive action to close.
CAPITAL ADDITION shall mean one or more new buildings, or one or more
additional structures annexed to any portion of any of the Leased Improvements
with respect to the applicable Leased Property, or the material expansion of
existing improvements, which are constructed on any parcel or portion of the
Land during the Term, including, the construction of a new wing or new story,
the renovation of existing improvements on such Leased Property in order to
provide a functionally new facility needed to provide services not previously
offered, or any expansion, construction, renovation or conversion in order to
increase the bed capacity of the Facility located on the applicable Leased
Property, to change the purpose for which such beds are utilized or to
materially improve the quality of such Facility.
CAPITAL ADDITIONS COST shall mean the cost of any Capital Addition
proposed to be made by Tenant to the applicable Leased Property, whether paid
for by Tenant or Landlord. Such cost shall include (a) the cost of construction
of the Capital Addition, including site preparation and improvement, materials,
labor, supervision, developer and administrative fees, legal fees, and related
design, engineering and architectural services, the cost of any fixtures, the
cost of equipment and other personalty, the cost of construction financing
(including, but not limited to, capitalized interest) and other miscellaneous
costs approved by Landlord, (b) if agreed to by Landlord in writing, in advance,
the cost of any land (including all related acquisition costs incurred by
Tenant) contiguous to the Leased Property which is to become a part of the
Leased Property purchased for the purpose of placing thereon the Capital
Addition or any portion thereof or for providing means of access thereto, or
parking facilities therefor, including the cost of surveying the same, (c) the
cost of insurance, real estate taxes, water and sewage charges and other
carrying charges for such Capital Addition during construction, (d) title
insurance charges, (e) reasonable attorneys' fees and expenses, (f) filing,
registration and recording taxes and fees, (g) documentary stamp or transfer
taxes, and (h) all actual and reasonable costs and expenses of Landlord and
Tenant and, if agreed to by Landlord in writing, in advance, of any Lending
Institution committed to finance the Capital Addition, including, but not
limited to, all (i) reasonable attorneys' fees and expenses, (ii) printing
expenses, (iii) filing, registration and recording taxes and fees, (iv)
documentary stamp or transfer taxes, (v) title insurance charges and appraisal
fees, (vi) rating agency fees, and (vii) commitment fees charged by any Lending
Institution advancing or offering to advance any portion of any financing to
which Landlord has consented in writing for such Capital Addition.
CHANGE IN CONTROL shall be deemed to exist if (a) Newco shall cease
to own all the issued and outstanding capital stock of any Tenant, or (b)
Community Care shall cease to own all the issued and outstanding capital stock
of Newco, or (c) any Person, or two or more Persons acting in concert, shall
acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission) of 20% or more, or rights, options or warrants to
acquire 20% or more, of the outstanding shares of voting stock of Community
Care, or (d) the merger or consolidation of Community Care, Newco or any Tenant
with or into any other Person or any one
- 4 -
<PAGE>
or more sales or conveyances to any Person of all or substantially all of the
assets of Community Care, Newco or any Tenant.
CODE shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as from time
to time amended.
COLLECTIVE LEASED PROPERTIES shall mean, at any time and from time to
time at the time of determination, all of the Leased Properties that are then
subject to a Lease.
COMMENCEMENT DATE: As defined in the applicable Lease.
COMMUNITY CARE shall mean Community Care of America, Inc., a Delaware
corporation, and its successors and assigns.
CONDEMNATION shall mean, as to the applicable Leased Property, (a)
the exercise of any governmental power, whether by legal proceedings or
otherwise, by a Condemnor of its power of condemnation, (b) a voluntary sale or
transfer by Landlord to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending, and (c) a taking or
voluntary conveyance of all or part of such Leased Property, or any interest
therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting such
Leased Property, whether or not the same shall have actually been commenced.
CONDEMNOR shall mean any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
CONSOLIDATED FINANCIALS shall mean, for any Fiscal Year or other
accounting period of Community Care and its consolidated subsidiaries, annual
audited and quarterly unaudited financial statements prepared on a consolidated
basis, including Community Care's consolidated balance sheet and the related
statements of income and cash flows, all in reasonable detail, and setting forth
in comparative form the corresponding figures for the corresponding period in
the preceding Fiscal Year, and prepared in accordance with generally accepted
accounting principles, consistently applied throughout the periods presented.
DATE OF TAKING shall mean, as to the applicable Leased Property, the
date the Condemnor has the right to possession of such Leased Property, or any
portion thereof, in connection with a Condemnation.
DEFAULT shall mean (a) any Event of Default or (b) any condition or
event that has occurred and is continuing and that (i) with the giving of notice
or lapse of time or both would, unless cured or waived, become an Event of
Default and (ii) either relates to the payment of Rent or relates to a matter as
to which Landlord has given Notice of default to any Tenant.
- 5 -
<PAGE>
DEPOSIT shall mean the cash collateral deposited with Landlord, from
time to time, pursuant to the Deposit Pledge Agreement (initially, $850,000).
DEPOSIT PLEDGE AGREEMENT shall mean the Deposit Pledge Agreement of
even date herewith executed by Community Care in favor of Landlord, relating to
the cash collateral deposited with Landlord by Community Care, as such agreement
may be modified, amended or supplemented from time to time.
DISTRIBUTION: As defined in SECTION 22.14.
ENCUMBRANCE: As defined in SECTION 21.1.
ENVIRONMENTAL OBLIGATION: As defined in SECTION 4.4.
ENVIRONMENTAL NOTICE: As defined in SECTION 4.4.
ENVIRONMENTAL REPORT: As defined in SECTION 4.4.
EVENT OF DEFAULT: As defined in SECTION 12.1.
EXCESS NET PATIENT REVENUES shall mean, for the applicable Leased
Property for any Lease Year or quarter thereof, the amount of Net Patient
Revenues for such Leased Property for such Lease Year (or applicable quarter
thereof) in excess of the Base Net Patient Revenues for such Leased Property
(or, with respect to any quarter in any Lease Year, twenty-five percent (25%) of
the Base Net Patient Revenues for such Leased Property); PROVIDED that such term
shall mean, (i) with respect to any partial Lease Year (other than as to any
complete quarter thereof), the amount by which the Net Patient Revenues for such
Leased Property for such partial Lease Year exceeds the product of (x) a
fraction of which the numerator is the number of days in such partial Lease
Year, and the denominator is 360, MULTIPLIED BY (y) the Base Net Patient
Revenues for such Leased Property; and (ii) with respect to any partial quarter,
the amount by which the Net Patient Revenues for such Leased Property for such
partial quarter exceeds the product of (x) a fraction of which the numerator is
the number of days in such partial quarter, and the denominator is 360,
MULTIPLIED BY (y) the Base Net Patient Revenues for such Leased Property.
EXCESS NON-INPATIENT REVENUES shall mean, for the applicable Leased
Property for any Lease Year or quarter thereof, the amount of Non-Inpatient
Revenues for such Leased Property for such Lease Year (or applicable quarter
thereof) in excess of the Base Non-Inpatient Revenues for such Leased Property
(or, with respect to any quarter in any Lease Year, twenty-five percent (25%) of
the Base Non-Inpatient Revenues for such Leased Property); PROVIDED that such
term shall mean, (i) with respect to any partial Lease Year (other than as to
any complete quarter thereof), the amount by which the Non-Inpatient Revenues
for such Leased Property for such partial Lease Year exceeds the product of (x)
a fraction of which the numerator is the number of days in such partial Lease
Year, and the denominator is 360, MULTIPLIED BY (y) the Base Non-
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<PAGE>
Inpatient Revenues for such Leased Property; and (ii) with respect to any
partial quarter, the amount by which the Non-Inpatient Revenues for such Leased
Property for such partial quarter exceeds the product of (x) a fraction of which
the numerator is the number of days in such partial quarter, and the denominator
is 360, MULTIPLIED BY (y) the Base Non-Inpatient Revenues for such Leased
Property.
EXTENDED TERM(S): As defined in SECTION 2.4.
FACILITY shall mean the facility offering health care or related
services being operated or proposed to be operated on the applicable Leased
Property.
FACILITY MORTGAGE shall mean any Encumbrance placed upon the
applicable Leased Property in accordance with ARTICLE 21 hereof.
FACILITY MORTGAGEE shall mean the holder of any Facility Mortgage.
FACILITY TRADE NAME shall mean any name under which any Tenant has
conducted the business of operating the Facility located on the applicable
Leased Property at any time during the Term.
FAIR MARKET ADDED VALUE shall mean, as to any applicable Leased
Property, the Fair Market Value of such Leased Property (including all Capital
Additions) less the Fair Market Value of such Leased Property determined as if
no Tenant's Capital Additions had been constructed.
FAIR MARKET RENTAL shall mean, as to the applicable Leased Property,
the rental which a willing tenant not compelled to rent would pay a willing
landlord not compelled to lease for the use and occupancy of such Leased
Property (including all Capital Additions other than Tenant's Capital Additions)
on the terms and conditions of the applicable Lease for the term in question,
assuming Tenant is not in default thereunder and determined by agreement between
Landlord and Tenant, or, failing agreement, in accordance with the appraisal
procedures set forth in ARTICLE 19 hereof or in such other manner as shall be
mutually acceptable to Landlord and Tenant. The determination of such Fair
Market Rental shall be made without regard to the fact that Additional Rent may
be payable.
FAIR MARKET VALUE shall mean the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for the
applicable Leased Property, (a) assuming the same is unencumbered by the
applicable Lease, (b) determined in accordance with the appraisal procedures set
forth in ARTICLE 19 hereof or in such other manner as shall be mutually
acceptable to Landlord and the applicable Tenant, and (c) not taking into
account any reduction in value resulting from any indebtedness to which such
Leased Property is subject.
-7-
<PAGE>
FAIR MARKET VALUE PURCHASE PRICE shall mean the Fair Market Value of
the applicable Leased Property less the Fair Market Added Value.
FINANCIAL OFFICER'S CERTIFICATE shall mean, as to any Person, a
certificate of the financial officer of such Person, duly authorized,
accompanying the financial statements required to be delivered by such Person
pursuant to SECTION 17.2, in which such officer shall (a) certify that such
statements have been properly prepared in accordance with GAAP and are true,
correct and complete in all material respects and fairly present the
consolidated financial condition of such Person at and as of the dates thereof
and the results of its and their operations for the periods covered thereby, (b)
certify that such officer has reviewed the Leases and has no knowledge of any
material default by Tenants, Community Care or any other Guarantor in the
performance or observance of any of the provisions of the Leases or any other
Transaction Document or of any condition or event which constitutes an Event of
Default under the Leases or any of the Transaction Documents or which with the
passage of time or the giving of notice or both would become such an Event of
Default, and (c) provide computations and schedules showing in reasonable detail
compliance, as at the date of each such financial statement, with SECTION 22.8
of the Master Lease Document.
FISCAL YEAR shall mean the twelve (12) month period from January 1 to
December 31.
FIXED TERM: As defined in SECTION 2.3.
FIXTURES: As defined in SECTION 2.1(D).
FIRST EXTENDED TERM: As defined in the applicable Lease.
FIVE PERCENT ADDITIONAL RENT shall mean, for the applicable Leased
Property for any Lease Year during the Fixed Term and the First Extended Term,
an amount equal to five percent (5%) of all Excess Net Patient Revenues for such
Leased Property for such Lease Year.
GAAP shall mean generally accepted accounting principles consistently
applied.
GUARANTOR(S) shall mean any guarantor of Tenant's obligations under
the applicable Lease, including, without limitation, Community Care, ECA, Newco,
ECA Properties, Inc., a Delaware corporation, and each such Guarantor's
successors and assigns.
GUARANTY shall mean and include any guaranty or other agreement
executed by a Guarantor in favor of Landlord pursuant to which the payment and
performance of Tenant's obligations under the Lease are guaranteed, together
with all modifications, amendments or supplements thereto.
HAZARDOUS SUBSTANCES: As defined in SECTION 4.4.
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IMPOSITIONS shall mean for the applicable Leased Property,
collectively, all taxes (including, without limitation, all taxes imposed under
the laws of the State, as such laws may be amended from time to time, and all ad
valorem, sales and use, single business, gross receipts, transaction privilege,
rent or similar taxes as the same relate to or are imposed upon Landlord, Tenant
or the business conducted upon the applicable Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), ground rents (including any
minimum rent under any ground lease, and any additional rent or charges
thereunder, whether payable by reference to Rent payable hereunder or
otherwise), water, sewer or other rents and charges, excises, tax levies, fees
(including, without limitation, license, permit, inspection, authorization and
similar fees) and all other governmental charges, in each case whether general
or special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the applicable Leased Property or the business conducted
thereon by Tenant (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon (a) Landlord's interest in such Leased Property, (b) such Leased Property
or any part thereof or any rent therefrom or any estate, right, title or
interest therein, or (c) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with such Leased Property
or the leasing or use of such Leased Property or any part thereof by Tenant.
Provided, however, nothing contained in the Lease with respect to the applicable
Leased Property shall be construed to require Tenant to pay (1) any tax based on
net income imposed on Landlord, or (2) any net revenue tax of Landlord, or (3)
any transfer fee or other tax imposed with respect to the sale, exchange or
other disposition by Landlord of the applicable Leased Property or the proceeds
thereof (other than in connection with the sale, exchange or other disposition
to, or in connection with a transaction involving, Tenant), or (4) any single
business, gross receipts (other than a tax on any rent received by Landlord from
Tenant), transaction privilege, rent or similar taxes as the same are related to
or imposed upon Landlord, except to the extent that any tax, assessment, tax
levy or charge, which Tenant is obligated to pay pursuant to the first sentence
of this definition and which is in effect at any time during the Term hereof is
totally or partially repealed, and a tax, assessment, tax levy or charge set
forth in CLAUSE (1) or (2) is levied, assessed or imposed expressly in lieu
thereof.
INDEBTEDNESS: As defined in SECTION 22.15.
INDEPENDENT TRUSTEES shall mean Trustees who, in their individual
capacity, (a) are not Affiliates of Tenant and (b) do not perform any services
for Landlord except as Trustees.
INSURANCE REQUIREMENTS shall mean all terms of any insurance policy
required by the applicable Lease with respect to the applicable Leased Property
and all requirements of the issuer of any such policy.
INVESTMENT: As defined in SECTION 22.15.
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LAND: As defined in SECTION 2.1(A) with respect to the applicable
Lease.
LANDLORD shall mean Health and Retirement Properties Trust (f/k/a
"Health and Rehabilitation Properties Trust"), a Maryland real estate investment
trust, and its successors and assigns.
LEASE(S): As defined in the recital clauses hereto, and each other
lease entered into between Landlord and any Tenant, which incorporates by
reference this Master Lease Document.
LEASE YEAR: shall mean when used with reference to the Fixed Term,
the twelve (12) month period from May 1 to April 30, and, when used with
reference to any Extended Term, the twelve (12) month period from January 1 to
December 31.
LEASED IMPROVEMENTS: As defined in SECTION 2.1(B) with respect to the
applicable Lease.
LEASED PERSONAL PROPERTY: As defined in SECTION 2.1(E) with respect
to the applicable Lease.
LEASED PROPERTY: As defined in SECTION 2.1 with respect to the
applicable Lease.
LEGAL REQUIREMENTS shall mean, as to the applicable Leased Property,
all federal, state, county, municipal and other governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions
affecting such Leased Property or the maintenance, construction, alteration or
operation thereof, whether now or hereafter enacted or in existence, including,
without limitation, (a) all permits, licenses, certificates of need,
authorizations and regulations necessary to operate such Leased Property for its
Primary Intended Use, and (b) all covenants, agreements, restrictions and
encumbrances contained in any instruments at any time in force affecting such
Leased Property, including those which may (i) require material repairs,
modifications or alterations in or to such Leased Property or (ii) in any way
adversely affect the use and enjoyment thereof.
LENDING INSTITUTION shall mean any insurance company, federally
insured commercial or savings bank, national banking association, savings and
loan association, employees' welfare, pension or retirement fund or system,
corporate profit sharing or pension trust, college or university, or real estate
investment trust, including any corporation qualified to be treated for federal
tax purposes as a real estate investment trust, such trust having a net worth of
at least $100,000,000.
LIEN shall mean and include any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind, or any
transfer of any property or assets for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors.
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MANAGEMENT AGREEMENT shall mean and include any agreement whether
written or oral entered into between Tenant and any other party (including any
Affiliate of Tenant) pursuant to which management services are provided to the
Facility located on the applicable Leased Property, together with all
amendments, modifications or supplements thereto.
MANAGER shall mean the management party under any Management
Agreement.
MERGER AGREEMENT: As defined in the Recitals.
MINIMUM RENT: As defined in the applicable Lease, as the same may be
adjusted from time to time in accordance with SECTION 3.1.1.
NET PATIENT REVENUES with respect to the Facility located at the
applicable Leased Property shall mean all revenues (determined on an accrual
basis in accordance with GAAP, except as provided below) received or receivable
by Tenant and any Affiliate of Tenant from or by reason of the operation of such
Facility, or any other use of such Facility, including without limitation all
patient or client revenues received or receivable for the use of or otherwise by
reason of all rooms, beds and other facilities provided, meals served, services
performed or provided, space or facilities subleased or goods sold at such
Facility, including, without limitation, any other arrangements with third
parties relating to the possession or use of any portion of such Facilities;
PROVIDED, HOWEVER, that Net Patient Revenues shall not include:
(a) revenue from professional fees or charges by
physicians and unaffiliated providers of ancillary services, when and
to the extent such charges are paid over to such physicians or
unaffiliated providers of ancillary services, or are separately
billed and not included in comprehensive fees;
(b) non-operating revenues such as interest income or
income from the sale of assets not sold in the ordinary course of
business;
(c) revenues attributable to services actually provided
off-site or otherwise away from such Facility, such as home health
care, to Persons who are not patients at such Facility;
(d) all revenues attributable to Tenant's Capital
Additions (as such revenues are calculated in accordance with Section
6.2.2(A)); and
(e) Non-Inpatient Revenues attributable to services
performed or provided, or goods sold, at such Facility.
NON-INPATIENTS with respect to any Facility located at the applicable
Leased Property shall mean all Persons receiving services at such Facility who
are not, at the time of such services are provided or performed, occupying a bed
at such Facility.
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NON-INPATIENT REVENUES with respect to the Facility located at the
applicable Leased Property shall mean all revenues (determined on an accrual
basis in accordance with GAAP, except as provided below) received or receivable
by Tenant and any Affiliate of Tenant from or by reason of services performed or
provided or goods sold or provided to Non-Inpatients at such Facility; PROVIDED,
HOWEVER, that Non-Inpatient Revenues shall not include:
(a) revenue from professional fees or charges by
physicians and unaffiliated providers of ancillary services, when and
to the extent such charges are paid over to such physicians or
unaffiliated providers of ancillary services, or are separately
billed and not included in comprehensive fees;
(b) non-operating revenues such as interest income or
income from the sale of assets not sold in the ordinary course of
business;
(c) revenues attributable to services actually provided
off-site or otherwise away from such Facility, such as home health
care, to Persons who are Non-Inpatients with respect to such
Facility; and
(d) all revenues attributable to Tenant's Capital
Additions (as such revenues are calculated in accordance with Section
6.2.2(A)).
NOTICE shall mean a notice given in accordance with SECTION 23.12.
OFFICER'S CERTIFICATE shall mean a certificate signed by an officer
of Tenant duly authorized by the board of directors of Tenant.
OVERDUE RATE shall mean, on any date, a PER ANNUM rate of interest
equal to eighteen percent (18%) but in no event greater than the maximum rate
then permitted under applicable law.
PERMITTED ENCUMBRANCES shall mean, with respect to the applicable
Leased Property, all rights, restrictions, and easements of record set forth on
Schedule B to the applicable owner's or leasehold title insurance policy issued
to Landlord on the date hereof, plus any other such encumbrances as may have
been consented to in writing by Landlord from time to time.
PERMITTED LIENS shall mean any Lien granted in compliance with
SECTION 22.13.
PERSON shall mean any individual, corporation, general or limited
partnership, stock company or association, joint venture, association, company,
trust, bank, trust company, land trust, business trust, any government or agency
or political subdivision thereof or any other entity.
PRIMARY INTENDED USE: As defined in SECTION 4.1.1.
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PROVIDER AGREEMENTS: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of Tenant
in connection with the operation of the applicable Facility relating to any
right of payment or other claim arising out of or in connection with Tenant's
participation in any Third Party Payor Program.
PURCHASE PRICE(s): With respect to the applicable Leased Property,
the amount identified as such in the applicable Lease.
RECORDS: As defined in SECTION 7.2.
RELEVANT PERCENTAGE shall mean, with respect to the first quarter of
any Lease Year, twenty-five percent (25%), with respect to the second quarter of
such Lease Year, fifty percent (50%), with respect to the third quarter of such
Lease Year, seventy-five percent (75%), and with respect to the fourth quarter
of such Lease Year, one hundred percent (100%).
RENOVATION FUNDING AGREEMENT shall mean the Renovation Funding
Agreement of even date herewith between Tenants and Landlord, relating to
certain required improvements to be made at the Collective Leased Properties, as
the same may be amended, modified or supplemented from time to time, together
with any renovation funding agreement entered into between Landlord and Tenants
after the date hereof.
RENT shall mean, in connection with any Leased Property, the sum of
Minimum Rent, Additional Rent and Additional Charges payable with respect to the
applicable Leased Property.
SEC shall mean the Securities and Exchange Commission.
SECOND EXTENDED TERM: As defined in the applicable Lease.
STATE shall mean the State or Commonwealth in which the applicable
Leased Property is located.
SUBORDINATED CREDITOR shall mean any creditor of Tenant party to a
Subordination Agreement in favor of Landlord, including, without limitation,
Community Care, Manager, and Affiliates of any of them.
SUBORDINATION AGREEMENT shall mean and include any agreement executed
by a Subordinated Creditor pursuant to which the payment and performance of
Tenant's obligations to such Subordinated Creditor are subordinated to the
payment and performance of Tenant's obligations to Landlord under the Leases and
the other Transaction Documents.
SUBSIDIARY shall mean, with respect to any Person, any corporation or
other entity of which the securities or other ownership interests having
ordinary voting power to elect a majority
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of the board of directors or other Persons performing similar functions are at
the time directly or indirectly owned by such Person.
TANGIBLE NET WORTH: As defined in SECTION 22.15.
TENANT: As defined in the applicable Lease and in the Recitals.
TENANTS shall mean, collectively, Marietta/SCC, Inc., Glenwood/SCC,
Inc., Dublin/SCC, Inc., Macon/SCC, Inc. and College Park/SCC, Inc., each a
Georgia corporation, and their permitted successors and assigns.
TENANT'S CAPITAL ADDITIONS: As defined in SECTION 6.2.2.
TENANT'S PERSONAL PROPERTY shall mean (a) all motor vehicles and (b)
consumable inventory and supplies, furniture, furnishings, movable walls and
partitions, equipment and machinery and all other personal property of Tenant
acquired by Tenant on and after the date hereof and located on the applicable
Leased Property or used in Tenant's business on such Leased Property and all
modifications, replacements, alterations and additions to such personal property
installed at the expense of Tenant, OTHER THAN any items included within the
definition of Fixtures or Leased Personal Property.
TERM shall mean, collectively, for the applicable Lease, the Fixed
Term and the Extended Terms, to the extent properly exercised pursuant to the
provisions of SECTION 2.4, unless sooner terminated pursuant to the provisions
of this Master Lease Document or the applicable Lease.
TEST RATE shall mean the minimum interest rate necessary to avoid
imputation of original issue discount or interest income under SECTIONS 483 or
1272 of the Code or any similar provision.
THIRD PARTY PAYOR PROGRAMS: All third party payor programs in which
Tenant currently or in the future may participate, including, without
limitation, Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, Managed
Care Plans, other private insurance programs and employee assistance programs.
THIRD PARTY PAYORS: Medicare, Medicaid, CHAMPUS, Blue Cross and/or
Blue Shield, private insurers and any other person which presently or in the
future maintains Third Party Payor Programs.
THREE PERCENT ADDITIONAL RENT shall mean, for the applicable Leased
Property for any Lease Year during the Second Extended Term, an amount equal to
three percent (3%) of the sum of (i) all Excess Net Patient Revenues for such
Lease Year PLUS (ii) all Excess Non-Inpatient Revenues for such Lease Year.
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TRANSACTION DOCUMENTS shall mean the documents listed on SCHEDULE 1
hereto, as such documents may be modified, amended or supplemented from time to
time, together with any and all other documents executed in connection with,
relating to, evidencing or creating collateral or security for the Leases.
TRUSTEES shall mean the trustees of Landlord.
TWO PERCENT ADDITIONAL RENT shall mean, for the applicable Leased
Property for any Lease Year during the Fixed Term and the First Extended Term,
an amount equal to two percent (2%) of all Excess Non-Inpatient Revenues for
such Lease Year.
UNAVOIDABLE DELAYS shall mean delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, unavoidable casualty or any other
causes beyond the reasonable control of the party responsible for performing an
obligation hereunder, but in no event to exceed forty-five (45) days (provided
that lack of funds shall not be deemed a cause beyond the control of Tenant) so
long as Tenant shall use reasonable efforts to alleviate the cause of such delay
and thereafter promptly perform such obligation, and so long as, in any event,
no permit, license, certificate of need or authorization necessary to operate
such Leased Property for its Primary Intended Use is adversely affected or
subject to any danger of revocation or termination. In no event shall Tenant's
obligation to pay the Rent be affected by Unavoidable Delays.
UNSUITABLE FOR ITS PRIMARY INTENDED USE shall mean a state or
condition of the Facility located at the applicable Leased Property such that
(a) following any damage or destruction involving such Leased Property, such
Leased Property cannot reasonably be expected to be restored to substantially
the same condition as existed immediately before such damage or destruction, and
as otherwise required by SECTION 10.2.4, within a period equal to six (6) months
following such damage or destruction or such shorter period of time as to which
business interruption insurance is available to cover Rent and other costs
related to such Leased Property following such damage or destruction, or (b) as
the result of a partial taking by Condemnation, such Facility cannot be
operated, in the good faith judgment of Landlord, on a commercially practicable
basis for its Primary Intended Use taking into account, among other relevant
factors, the number of usable beds, the amount of square footage, or the
revenues affected by such damage or destruction or partial taking.
WORK: As defined in SECTION 10.2.4.
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ARTICLE 2
LEASED PROPERTY AND TERM
2.1 LEASED PROPERTY.
Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord with respect to each
applicable Lease all of the following (collectively, the "LEASED PROPERTY"):
(a) that certain tract, piece and parcel of land, as more
particularly described in the applicable Lease (the
"LAND");
(b) all buildings, structures, Fixtures and other improvements
of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and
lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings and structures currently
situated upon the Land and all Capital Additions other
than Tenant's Capital Additions (collectively, the "LEASED
IMPROVEMENTS");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or
incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems
and fire and theft protection equipment, all of which, to
the greatest extent permitted by law, are hereby deemed by
the parties hereto to constitute real estate, together
with all replacements, modifications, alterations and
additions thereto, but specifically excluding all items
included within the category of Tenant's Personal Property
(collectively the "FIXTURES");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other
personal property of any kind or description used or
useful in Tenant's business on or in the Leased
Improvements, and located on or in the Leased
Improvements, and all modifications, replacements,
alterations and additions to such personal property,
except items, if any, included within the category of
Fixtures, but specifically excluding all items included
within the category of Tenant's Personal Property
(collectively the "LEASED PERSONAL PROPERTY"); and
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(f) all existing leases of space (including any security
deposits held by Tenant pursuant thereto) in the Leased
Improvements to tenants thereof.
2.2 CONDITION OF LEASED PROPERTY.
Tenant acknowledges receipt and delivery of possession of the
applicable Leased Property and Tenant accepts such Leased Property in its "as
is" condition, subject to the rights of Persons in possession, the existing
state of title, including all covenants, conditions, restrictions, reservations,
mineral leases, easements and other matters of record or that are visible or
apparent on the Leased Property, all applicable Legal Requirements, the liens of
financing instruments, mortgages and deeds of trust, and such other matters
which would be disclosed by an inspection of such Leased Property and the record
title thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT HAS
INSPECTED SUCH LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE
CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT THERETO AND
TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION
OF THE APPLICABLE LEASED PROPERTY. LANDLORD MAKES NO WARRANTY OR REPRESENTATION
EXPRESS OR IMPLIED, IN RESPECT OF THE APPLICABLE LEASED PROPERTY OR ANY PART
THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE
TO BE BORNE BY TENANT. To the extent permitted by law, however, Landlord hereby
assigns to Tenant all of Landlord's rights to proceed against any predecessor in
title for breaches of warranties or representations or for latent defects in the
applicable Leased Property. Landlord shall fully cooperate with Tenant in the
prosecution of any such claims, in Landlord's or Tenant's name, all at Tenant's
sole cost and expense. Tenant shall indemnify, defend, and hold harmless
Landlord from and against any loss, cost, damage or liability (including
reasonable attorneys' fees) incurred by Landlord in connection with such
cooperation.
2.3 FIXED TERM.
The initial term of the applicable Lease (the "FIXED TERM") shall be
for a fixed term as set forth in such Lease.
2.4 EXTENDED TERM.
The Tenants shall have the right to extend the Term of all, but not
less than all, of the Leases pertaining to the Collective Leased Properties, as
set forth in each Lease and below (the "EXTENDED TERM(S)") provided that (i) no
Default or default shall have occurred and be continuing under the applicable
Lease or the Master Lease Document, any other Lease pertaining to the Collective
Leased Properties, or any 1993 Lease pertaining to any 1993 Leased Property, or
any
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1995 Lease pertaining to any 1995 Leased Property, and (ii) this Lease and each
other Lease pertaining to any Collective Leased Property, each 1993 Lease
pertaining to any 1993 Leased Property, and any 1995 Lease pertaining to any
1995 Leased Properties, shall be in full force and effect (other than any such
lease that has been terminated following condemnation or casualty in accordance
with the provisions hereof, and (iii) that the term of each 1993 Lease and 1995
Lease shall have been extended simultaneously with the Leases pertaining to the
Collective Leased Properties for an extended term ending December 31, 2016 or
December 31, 2029, as the case may be.
Each Extended Term under each Lease shall commence on the day
succeeding the expiration of the Fixed Term or the preceding Extended Term, as
the case may be. All of the terms, covenants and provisions of such Lease shall
apply to each such Extended Term, except that the Minimum Rent for the Second
Extended Term shall be as set forth in SECTION 3.1.1(E) (subject to adjustment
as provided in SECTION 3.1.1) with respect thereto. If the Tenants shall elect
to exercise any of the aforesaid extensions, they shall do so by giving Landlord
Notice thereof simultaneously as to all of the Collective Leased Properties not
later than twenty-four (24) months prior to the scheduled expiration of the then
current Term of the Leases (Fixed or Extended, as applicable), it being agreed
that time is of the essence with respect to the giving of such Notice. The
Tenants may not exercise their option for more than one such Extended Term at a
time. If the Tenants shall fail to give any such Notice, the Leases shall
automatically terminate at the end of the Term then in effect and Tenants shall
have no further option to extend the Term of the Leases. If the Tenants shall
give such Notice, the extension of the Leases shall be automatically effected
without the execution of any additional documents; it being understood and
agreed, however, that the Tenants and Landlord shall execute such documents and
agreements as either party shall reasonably require to evidence the same.
Notwithstanding the provisions of the foregoing sentence, if, subsequent to the
giving of such Notice, an Event of Default shall occur, the extension of the
Leases shall cease to take effect and the Leases shall automatically terminate
at the end of the Term then in effect and the Tenants shall have no further
option to extend the Term of the Leases, unless Landlord shall otherwise consent
in writing.
ARTICLE 3
RENT
3.1 RENT.
Tenant shall pay to Landlord, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
at Landlord's address set forth above or at such other place or to such other
Person as Landlord from time to time may designate in a Notice to Tenant,
without offset, abatement, demand or deduction, Rent consisting of Minimum Rent,
Additional Rent and Additional Charges during the Term, in each case except as
hereinafter
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expressly provided. All payments to Landlord shall be made by certified check,
wire transfer of immediately available funds or by other means acceptable to
Landlord in its sole discretion.
3.1.1 MINIMUM RENT:
(a) DURING FIXED TERM AND FIRST EXTENDED TERM. The Minimum Rent
payable with respect to the Fixed Term and First Extended Term is the annual sum
set forth in the applicable Lease (subject to adjustment as provided herein),
payable in advance in equal, consecutive monthly installments as set forth in
such Lease, on the first day of each calendar month of the Fixed Term and First
Extended Term; PROVIDED, HOWEVER, that the first monthly payment of Minimum Rent
shall be payable on the Commencement Date and that the first and last monthly
payments of Minimum Rent shall be prorated as to any partial month.
(b) ADJUSTMENTS OF MINIMUM RENT FOLLOWING DISBURSEMENTS UNDER
RENOVATION FUNDING AGREEMENT. Effective on the date of each disbursement to pay
for the cost of any renovations at the applicable Leased Property pursuant to
the terms of the Renovation Funding Agreement, the Minimum Rent under the Lease
for such Leased Property shall be adjusted, effective on the date of such
disbursement, to an annual sum equal to the product of (i) the Adjusted Purchase
Price for such Leased Property (giving effect to the making of such
disbursement) and (ii) eleven percent (11%). If any such disbursement is made
during any calendar month on other than the first day of such calendar month,
Tenant shall pay to Landlord on the first day of the immediately following
calendar month (in addition to the amount of Minimum Rent payable with respect
to such month, as adjusted pursuant to this PARAGRAPH (B)) the amount by which
Minimum Rent for such Leased Property for the preceding month, as adjusted for
such disbursement, exceeded the amount of Minimum Rent for such Leased Property
payable by Tenant for such preceding month without giving effect to such
adjustment.
(c) COMPUTATION OF MINIMUM RENT FOR THE SECOND EXTENDED TERM. The
Minimum Rent payable with respect to the Second Extended Term for the applicable
Lease shall equal an annual sum (determined at the commencement of such Extended
Term for such Lease and subject to adjustment as set forth herein) equal to the
greater of (i) the sum of (1) the Minimum Rent payable for the immediately
preceding twelve (12) months for such Lease and (2) the Additional Rent payable
for the immediately preceding twelve (12) months for such Lease allocable to
such Leased Property and (ii) ninety-five percent (95%) of the Fair Market
Rental for such Leased Property at such time, payable in advance in equal,
consecutive monthly installments on the first day of each calendar month of the
Second Extended Term.
(d) CREDITS AGAINST MINIMUM RENT.
(i) EXCESS CONDEMNATION AND CASUALTY PROCEEDS. Landlord shall
credit the amount of any Award or the proceeds of any insurance received by
Landlord in connection with a partial Condemnation or a partial casualty
involving the applicable Leased Property as described in SECTION 11.2 or 10.2.2,
and not applied by Landlord to the restoration of the applicable Leased
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Property affected by such partial Condemnation or partial casualty as provided
therein, to the payment of Minimum Rent payable with respect to such Leased
Property.
(ii) NOTICE. Landlord shall calculate the amount of such credits
within 15 days after the end of each calendar month, and shall reduce the amount
of the installment of Minimum Rent next due after the date of such calculation
by the amount of such credits.
3.1.2 ADDITIONAL RENT:
(a) AMOUNT. For each Lease Year or portion thereof during the Term,
starting with the Lease Year beginning May 1, 1997, Tenant shall pay an amount
("ADDITIONAL RENT") with respect to the applicable Leased Property equal to the
greater of:
(i) (A) DURING THE FIXED TERM AND THE FIRST EXTENDED
TERM: the sum of (x) the Five Percent
Additional Rent for such Lease Year PLUS (y)
the Two Percent Additional Rent for such Lease
Year; and
(B) DURING THE SECOND EXTENDED TERM: the Three
Percent Additional Rent for such Lease Year;
and
(ii) Additional Rent payable for the immediately preceding
Lease Year.
(b) QUARTERLY INSTALLMENTS. Installments of Additional Rent for the
applicable Leased Property for any Lease Year or portion thereof shall be
calculated and paid quarterly in arrears as follows: for each quarter of such
Lease Year during the Term, Tenant shall pay an amount equal to the excess of
(x) the greater of (1) the Relevant Percentage of the aggregate Additional Rent
payable for such Leased Property for the immediately preceding Lease Year or (2)
the Additional Rent (calculated as provided in SECTION 3.1.2(A)(I) above)
payable for such quarter of such Lease Year and for any previous quarter(s) of
such Lease Year, OVER (y) the sum of the installments of such Additional Rent
payable for any previous quarter(s) in such Lease Year.
Installments of Additional Rent for the applicable Leased Property
due with respect to a partial quarter in any Lease Year shall be calculated on a
PRO RATA basis as follows: a sum equal to the excess of (1) the greater of (a)
the product of (x) a fraction of which the numerator is the number of days in
such Lease Year through the end of such partial quarter, and the denominator is
360, MULTIPLIED BY (y) the Additional Rent payable for such Leased Property for
the immediately preceding Lease Year and (b) the sum of the Additional Rent
payable for such Leased Property through the end of such partial quarter OVER
(2) the Additional Rent payable for such Leased Property for any previous
quarters in such Lease Year.
(c) DATE OF PAYMENT OF ADDITIONAL RENT. Tenant shall deliver to
Landlord an Officer's Certificate setting forth the calculation of Additional
Rent due and payable for the applicable Leased Property for each quarter of any
Lease Year. Each quarterly payment of Additional Rent
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for the applicable Leased Property is due and payable and shall be delivered to
Landlord, together with such Officer's Certificate, within thirty (30) days
after the end of each quarter of each Lease Year, commencing with the quarter
ending July 31, 1997, during the Term.
(d) RECONCILIATION OF ADDITIONAL RENT. In addition, on or before July
31 of each year during the Fixed Term, commencing with July 31, 1997, and on or
before March 31 of each year during any Extended Term, Tenant shall deliver to
Landlord certified audits of Tenant's revenues for the preceding Lease Year,
together with a certificate from KPMG Peat Marwick or other certified public
accountants reasonably acceptable to Landlord, in form reasonably acceptable to
Landlord, setting forth the Net Patient Revenues and the Non-Inpatient Revenues
for the applicable Leased Property for such preceding Lease Year, and such other
matters as Landlord may from time to time reasonably request.
If the annual Additional Rent for the applicable Leased Property for
said preceding Lease Year as shown in the year-end certificate is less than the
amount previously paid with respect thereto by Tenant, Landlord shall grant
Tenant a credit against Additional Rent for such Leased Property next coming due
in the amount of such difference, together with interest at the Test Rate, which
interest shall accrue from the close of such preceding Lease Year until the date
such credit is applied or paid, as the case may be. If such a credit cannot be
made because the Term of the applicable Lease has expired before the credit can
be effected, Landlord will pay, by check, the amount of such difference to
Tenant.
If the annual Additional Rent for the applicable Leased Property for
said preceding Lease Year as shown in the year-end certificate exceeds the
amount previously paid with respect thereto by Tenant, Tenant shall pay such
excess to Landlord at such time as the certificate is delivered, together with
interest at the Test Rate, which interest shall accrue from the close of such
preceding Lease Year until the date that such certificate is required to be
delivered, and thereafter such interest shall accrue at the Overdue Rate, until
the amount of such difference shall be paid or otherwise discharged.
(e) CONFIRMATION OF ADDITIONAL RENT. Tenant shall utilize, or cause
to be utilized, an accounting system for the applicable Leased Property (which
shall be the same as that used for all the Collective Leased Properties, the
1993 Leased Properties and the 1995 Leased Properties) in accordance with its
usual and customary practices and in accordance with GAAP, which will accurately
record all Net Patient Revenues and all Non-Inpatient Revenues, and shall employ
independent accountants reasonably acceptable to Landlord, and Tenant shall
retain, for at least five (5) years after the expiration of each Lease Year,
reasonably adequate records conforming to such accounting system showing all Net
Patient Revenues and all Non-Inpatient Revenues for such Lease Year. Landlord,
at its own expense except as provided herein below, shall have the right from
time to time by its accountants or representatives to audit the information set
forth in the Officer's Certificate referred to in subparagraph (c) above or the
year-end certificate referred to in subparagraph (d) above, and in connection
with such audits to examine Tenant's books and records with respect thereto
(including supporting data and sales and excise tax returns) subject to
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any prohibitions or limitations on disclosure of any such data under applicable
law or regulations, including without limitation any duly enacted "Patients'
Bill of Rights" or similar legislation, including such limitations as may be
necessary to preserve the confidentiality of the facility-patient relationship
and the physician-patient privilege and/or other similar privilege or
confidentiality obligations. If any such audit discloses a deficiency in the
payment of Additional Rent, and either Tenant agrees with the result of such
audit or the matter is otherwise compromised with Landlord, Tenant shall
forthwith pay to Landlord the amount of the deficiency, as finally agreed or
determined, together with interest at the Test Rate, or if no such Test Rate
exists, then at the Overdue Rate, from the date when said payment should have
been made to the date of payment thereof; PROVIDED, HOWEVER, that as to any
audit that is commenced more than two (2) years after the date Net Patient
Revenues and Non-Inpatient Revenues for any Lease Year are reported by Tenant to
Landlord, the deficiency, if any, with respect to such Net Patient Revenues or
Non-Inpatient Revenues shall bear interest as permitted herein only from the
date such determination of deficiency is made unless such deficiency is the
result of gross negligence or willful misconduct on the part of Tenant. If any
such audit discloses that the Net Patient Revenues or Non-Inpatient Revenues
actually received by Tenant for any Lease Year exceed those reported by Tenant
by more than three percent (3%), Tenant shall pay the reasonable cost of such
audit and examination. If any such audit discloses that Tenant paid more
Additional Rent for any Lease Year than was due hereunder, and either Landlord
agrees with the result of such audit or the matter is otherwise determined,
provided no Default has occurred and is continuing, Landlord shall grant Tenant
a credit equal to the amount of such overpayment against Additional Rent next
coming due in the amount of such difference, as finally agreed or determined. If
such a credit cannot be made because the Term of the applicable Lease has
expired before the credit can be effected, Landlord will pay, by check, the
amount of such difference to Tenant.
Any proprietary information obtained by Landlord pursuant to the
provisions of the applicable Lease shall be treated as confidential, except that
such information may be used, subject to appropriate confidentiality safeguards,
in any litigation between the parties and except further that Landlord may
disclose such information to its prospective lenders. The obligations of Tenant
contained in this SECTION 3.1.2 shall survive the expiration or earlier
termination of the applicable Lease.
3.1.3 RENT CAP; ADDITIONAL RENT FLOOR.
(a) Notwithstanding any of the other terms hereof but
subject to SECTION 3.1.3(B), the total of the Minimum Rent and Additional Rent
due during any Lease Year shall not be greater than one hundred eight percent
(108%) of the sum of Minimum Rent and Additional Rent for the immediately
preceding Lease Year.
(b) SECTION 3.1.3(A) shall have no applicability in
determining the Minimum Rent or Additional Rent due during the first Lease Year
of any Extended Term.
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(c) Notwithstanding any of the other terms hereof, the
Additional Rent due during any Lease Year shall in no event be less than the
Additional Rent due during the immediately preceding Lease Year.
3.1.4 ADDITIONAL CHARGES.
In addition to the Minimum Rent and Additional Rent payable with
respect to the applicable Leased Property or otherwise, Tenant shall pay and
discharge as and when due and payable the following (collectively, "ADDITIONAL
CHARGES"):
(a) IMPOSITIONS. Subject to ARTICLE 8 relating to Permitted
Contests, Tenant shall pay, or cause to be paid, all Impositions before any
fine, penalty, interest or cost (other than any opportunity cost as a result of
a failure to take advantage of any discount for early payment) may be added for
non-payment, such payments to be made directly to the taxing authorities where
feasible, and shall promptly upon request, furnish to Landlord copies of
official receipts or other satisfactory proof evidencing such payments. If any
such Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Tenant may exercise the option to pay the same (and any accrued
interest on the unpaid balance of such Imposition) in installments and, in such
event, shall pay such installments during the Term as the same become due and
before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of Landlord's net
income, gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock, and Tenant, at
its expense, shall, to the extent required or permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any Imposition as may be required by governmental authorities. Provided no
Default shall have occurred and be continuing, if any refund shall be due from
any taxing authority in respect of any Imposition paid by Tenant, the same shall
be paid over to or retained by Tenant. Landlord and Tenant shall, upon request
of the other, provide such data as is maintained by the party to whom the
request is made with respect to the applicable Leased Property as may be
necessary to prepare any required returns and reports. In the event governmental
authorities classify any property covered by the applicable Lease as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Each party shall, to the extent it
possesses the same, provide the other, upon request, with cost and depreciation
records necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to file a protest. All Impositions assessed against
such personal property shall be (irrespective of whether Landlord or Tenant
shall file the relevant return) paid by Tenant not later than the last date on
which the same may be made without interest or penalty. If the provisions of any
Facility Mortgage require deposits on account of Impositions to be made with
such Facility Mortgagee, provided the Facility Mortgagee has not elected to
waive such provision, Tenant shall either pay Landlord the monthly amounts
required at the time and place that payments of Minimum Rent are required and
Landlord shall transfer such
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amounts to such Facility Mortgagee or, pursuant to written direction by
Landlord, Tenant shall make such deposits directly with such Facility Mortgagee.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has knowledge,
provided, Landlord's failure to give any such notice shall in no way diminish
Tenant's obligation hereunder to pay such Impositions.
(b) UTILITY CHARGES. Tenant shall pay or cause to be paid
all charges for electricity, power, gas, oil, water and other utilities used in
the applicable Leased Property during the Term.
(c) INSURANCE PREMIUMS. Tenant shall pay or cause to be
paid, as Additional Charges, all premiums for the insurance coverage required to
be maintained pursuant to ARTICLE 9.
(d) OTHER CHARGES. Tenant shall pay or cause to be paid, as
Additional Charges, all other amounts, liabilities and obligations which Tenant
assumes or agrees to pay under the applicable Lease, including, without
limitation, all agreements to indemnify Landlord under SECTIONS 4.4 and 9.7.
(e) REIMBURSEMENT FOR ADDITIONAL CHARGES. If Tenant pays or
causes to be paid property taxes or similar Additional Charges attributable to
periods after the end of the Term, whether upon expiration or sooner termination
of the applicable Lease (other than termination following an Event of Default)
Tenant may, within sixty (60) days of the end of the Term, provide Notice to
Landlord of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional Charges that
are attributable to any period after the Term of the Lease.
(f) SALES TAX. Tenant shall also pay, as Additional Charges,
with all Rent due under the applicable Lease an amount equal to all sales, use,
excise and other taxes now or hereafter imposed by any lawful authority on all
amounts due or required under the applicable Lease and classified as Rent by any
such authority.
3.2 LATE PAYMENT OF RENT.
If any installment of Minimum Rent, Additional Rent or Additional
Charges (but only as to those Additional Charges which are payable directly to
Landlord) shall not be paid within ten (10) calendar days of its scheduled due
date, Tenant shall pay Landlord, on demand, as Additional Charges, a late charge
(to the extent permitted by law) computed at the Overdue Rate on the amount of
such installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord pursuant to any requirement of the applicable Lease, Tenant shall be
relieved of its obligation to pay such Ad ditional Charges to the entity to
which they would otherwise be due.
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In the event of any failure by Tenant to pay any Additional Charges
when due, Tenant shall promptly pay and discharge, as Additional Charges, every
fine, penalty, interest and cost which may be added for non-payment or late
payment of such items. Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in the applicable Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Minimum Rent and Additional Rent.
3.3 NET LEASE.
The Rent shall be absolutely net to Landlord, so that the applicable
Lease shall yield to Landlord the full amount of the installments or amounts of
Rent throughout the Term, subject to any other provisions of the applicable
Lease or this Master Lease Document which expressly provide for adjustment or
abatement of Rent or other charges.
3.4 NO TERMINATION, ABATEMENT, ETC.
Except as otherwise specifically provided in the applicable Lease or
in this Master Lease Document, Tenant, to the extent permitted by law, shall
remain bound by the applicable Lease in accordance with its terms and shall
neither take any action without the consent of Landlord to modify, surrender or
terminate the same, nor seek, nor be entitled to any abatement, deduction,
deferment or reduction of the Rent, or set-off against the Rent, nor shall the
respective obligations of Landlord and Tenant be otherwise affected by reason of
(a) any damage to, or destruction of, the applicable Leased Property or any
portion thereof from whatever cause or any Condemnation, (b) the lawful or
unlawful prohibition of, or restriction upon Tenant's use of the applicable
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction by paramount title; (c) any claim which
Tenant may have against Landlord by reason of any default or breach of any
warranty by Landlord under the applicable Lease or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties, (d) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord, or (e) for any other cause whether similar or
dissimilar to any of the foregoing. Tenant hereby waives all rights arising from
any occurrence whatsoever, which may now or hereafter be conferred upon it by
law, to (a) modify, surrender or terminate the applicable Lease or quit or
surrender the applicable Leased Property or any portion thereof, or (b) entitle
Tenant to any abatement, reduction, suspension or deferment of the Rent or other
sums payable or other obligations to be performed by Tenant hereunder, except as
otherwise specifically provided in the applicable Lease or in this Master Lease
Document. The obligations of Tenant hereunder shall be separate and independent
covenants and agreements, and the Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of the
applicable Lease or by termination of the applicable Lease other than by reason
of an Event of Default.
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3.5 SECURITY DEPOSIT. As additional security for the due and punctual
payment and performance of the obligations of Tenant under the Leases and the
other Transaction Documents, Tenant has paid the Deposit to Landlord to be held
and applied as provided in the Deposit Pledge Agreement.
ARTICLE 4
USE OF THE APPLICABLE LEASED PROPERTY
4.1 PERMITTED USE.
4.1.1 PRIMARY INTENDED USE.
Tenant shall, at all times during the Term, and at any other time
Tenant shall be in posses sion of the Leased Property, continuously use or cause
to be used the applicable Leased Property as a licensed nursing home or as
otherwise described on EXHIBIT A-1 hereto and for such other uses as may be
incidental or necessary thereto (such use being hereinafter referred to as such
Leased Property's "PRIMARY INTENDED USE"). Tenant shall not use the applicable
Leased Property or any portion thereof for any other use without the prior
written consent of Landlord (which consent shall not be unreasonably withheld or
delayed). No use shall be made or permitted to be made of the applicable Leased
Property and no acts shall be done thereon which will cause the cancellation of
any insurance policy covering such Leased Property or any part thereof (unless
another adequate policy is available), nor shall Tenant sell or otherwise
provide to residents or patients therein, or permit to be kept, used or sold in
or about such Leased Property any article which may be prohibited by law or by
the standard form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriter's regulations. Tenant
shall, at its sole cost, comply with all of the requirements pertaining to the
applicable Leased Property or other improvements of any insurance board,
association, organization or company necessary for the maintenance of insurance,
as herein provided, covering such Leased Property and Tenant's Personal
Property, including, without limitation, the Insurance Requirements.
4.1.2 NECESSARY APPROVALS.
Tenant shall proceed with all due diligence and exercise best efforts
to obtain and maintain all approvals necessary to use and operate, for its
Primary Intended Use, the applicable Leased Property and the Facility located at
such Leased Property under applicable local, state and federal law, and without
limiting the foregoing, shall use its best efforts to maintain appropriate
certifications for reimbursement and licensure.
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4.1.3 CONTINUOUS OPERATION, ETC.
Tenant shall operate continuously the applicable Leased Property as a
provider of health care services in accordance with its Primary Intended Use.
Tenant will not take or omit to take any action, the taking or omission of which
may materially impair the value or the usefulness of such Leased Property or any
part thereof for its Primary Intended Use.
4.1.4 LAWFUL USE, ETC.
Tenant shall not use or suffer or permit the use of the applicable
Leased Property and Tenant's Personal Property for any unlawful purpose. Tenant
shall not commit or suffer to be committed any waste on the applicable Leased
Property, or in the Facility located on the applicable Leased Property located
thereon, nor shall Tenant cause or permit any nuisance thereon or therein.
Tenant shall neither suffer nor permit the applicable Leased Property or any
portion thereof, including any Capital Addition, or Tenant's Personal Property,
to be used in such a manner as (i) might reasonably tend to impair Landlord's
(or Tenant's, as the case may be) title thereto or to any portion thereof, or
(ii) may reasonably make possible a claim or claims for adverse usage or adverse
possession by the public, as such, or of implied dedication of the applicable
Leased Property or any portion thereof.
4.2 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS, ETC.
Subject to the provisions of ARTICLE 8 hereof, Tenant, at its sole
expense, shall promptly (i) comply with Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair, alteration
and restoration of the applicable Leased Property, and (ii) procure, maintain
and comply with all appropriate licenses, certificates of need, permits,
provider agree ments and other authorizations and agreements required for any
use of the applicable Leased Property and Tenant's Personal Property then being
made, and for the proper erection, installation, operation and maintenance of
the applicable Leased Property or any part thereof, including, without
limitation, any Capital Additions.
4.3 COMPLIANCE WITH MEDICAID AND MEDICARE REQUIREMENTS.
Tenant shall, at its sole cost and expense, make whatever
improvements (capital or ordinary) as are required to conform the applicable
Leased Property to such standards as may, from time to time, be required by
Federal Medicare (Title 18) or Medicaid (Title 19) skilled and/or intermediate
care nursing programs, to the extent Tenant is a participant in such programs,
or any other applicable programs or legislation, or capital improvements
required by any other governmental agency having jurisdiction over such Leased
Property as a condition of the continued operation of such Leased Property for
its Primary Intended Use.
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4.4 ENVIRONMENTAL MATTERS.
Tenant shall not store, spill upon, dispose of or transfer to or from
the applicable Leased Property any Hazardous Substance, except that Tenant may
store, transfer and dispose of Hazardous Substances in compliance with all
Applicable Laws. Tenant shall maintain the applicable Leased Property at all
times free of any Hazardous Substance (except such Hazardous Substances as are
maintained in compliance with all Applicable Laws). Tenant shall, as to the
applicable Leased Property, promptly: (a) notify Landlord in writing of any
change in the nature or extent of such Hazardous Substances maintained, (b)
transmit to Landlord a copy of any Community-Right-To-Know report, which is
required to be filed, if any, by Tenant for the applicable Leased Property
pursuant to SARA Title III or any other Applicable Law, (c) transmit to Landlord
copies of any citations, orders, notices or other governmental communications
received by Tenant or its agents or representatives with respect thereto
(collectively, "ENVIRONMENTAL NOTICE"), which Environmental Notice requires a
written response or any action to be taken and/or if such Environmental Notice
gives notice of and/or could give rise to a violation of any Applicable Law
and/or could give rise to any cost, expense, loss or damage (an "ENVIRONMENTAL
OBLIGATION"), (d) observe and comply with any and all Applicable Laws relating
to the use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction relating
to the use or maintenance or requiring the removal, treatment, containment or
other disposition thereof, and (e) pay or otherwise dispose of any fine, charge
or Imposition related thereto, unless Tenant shall contest the same in good
faith and by appropriate proceedings and the right to use and the value of such
Leased Property is not materially and adversely affected thereby.
For purposes of this SECTION 4.4, (i) the term "APPLICABLE LAWS"
shall mean and include all applicable Federal, state or local statutes, laws,
ordinances, rules and regulations, licensing requirements or conditions, whether
now existing or hereafter arising, relating to Hazardous Substances; and (ii)
the term "HAZARDOUS SUBSTANCES" shall mean hazardous substances (as defined by
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as now in effect or as hereafter from time to time amended),
hazardous wastes (as defined by the Resource Conservation and Recovery Act
("RCRA"), as now in effect or as hereafter from time to time amended), any
hazardous waste, hazardous substance, pollutant or contaminant, oils,
radioactive materials, asbestos in any form or condition, or any pollutant or
contaminant or hazardous, dangerous or toxic chemicals, materials or substances
within the meaning of any other applicable Federal, state or local law,
regulation, ordinance or requirements relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or materials, all as now in effect or hereafter from time to time
amended.
If at any time prior to the termination of the applicable Lease,
Hazardous Substances are discovered on the applicable Leased Property, Tenant
hereby agrees to take all actions, and to incur any and all expense, as may be
reasonably necessary and as may be required by any municipal, State or Federal
agency or other governmental entity or agency having jurisdiction
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thereof, (i) to clean up and remove from and about the applicable Leased
Property all Hazardous Substances thereon, (ii) to contain and prevent any
further release or threat of release of Hazardous Substances on or about the
applicable Leased Property and (iii) to use good faith efforts to eliminate any
further release or threat of release of Hazardous Substances on or about the
applicable Leased Property.
Six (6) months prior to expiration of the final Term of the
applicable Lease, Tenant, at its sole cost and expense, shall designate a
qualified environmental engineer, satisfactory to Landlord in its sole
discretion, which engineer shall conduct an environmental investigation of the
applicable Leased Property and prepare an environmental site assessment report
(the "ENVIRONMENTAL REPORT"). The scope of the investigation must include the
matters set forth on SCHEDULE II hereto and otherwise may be limited to review
of relevant records, interviews with persons knowledgeable about the applicable
Leased Property and relevant governmental agencies and a site inspection of the
applicable Leased Property, any buildings, the fenceline of the applicable
Leased Property and adjoining properties (Phase I), if such investigation in the
opinion of such engineer clearly indicates that the applicable Leased Property
is environmentally sound and is free from oil, asbestos, radon and other
Hazardous Substances except in compliance with Applicable Laws. Otherwise, the
investigation shall include a more detailed physical site inspection,
appropriate testing, subsurface and otherwise, and review of historical records
(Phase II) to demonstrate the compliance of the applicable Leased Property with
Applicable Laws and the absence of Hazardous Substances.
All preliminary drafts of such Environmental Report, and supplements
and amendments thereto, shall be provided to Landlord contemporaneously with
delivery thereof to Tenant. With respect to any recommendations contained in the
Environmental Report, violations of Applicable Laws and/or the existence of any
conditions at the applicable Leased Property which could give rise to an
Environmental Obligation, Tenant shall promptly give Notice to Landlord of all
action Tenant proposes to take in connection therewith and Tenant shall promptly
take all actions, and incur any and all expense, as may be reasonably necessary
and as may be required by any municipal, State or Federal agency or other
governmental entity or agency having jurisdiction thereof and as may be required
by Landlord, (i) to clean up, remove or remediate from and about the applicable
Leased Property all Hazardous Substances thereon, (ii) to contain, prevent and
eliminate any further release or threat of release of Hazardous Substances on or
about the applicable Leased Property, and (iii) to otherwise eliminate such
violation or condition from the applicable Leased Property to the reasonable
satisfaction of Landlord.
Tenant shall protect, indemnify and hold harmless Landlord and each
Facility Mortgagee, their trustees, officers, agents, employees and
beneficiaries, and any of their respective successors or assigns (hereafter the
"INDEMNITEES," and when referred to singly, an "INDEMNITEE") for, from and
against any and all debts, liens, claims, causes of action, administrative
orders or notices, costs, fines, penalties or expenses (including, without
limitation, attorney's fees and expenses) imposed upon, incurred by or asserted
against any Indemnitee resulting from, either directly or indirectly, the
presence in, upon or under the soil or ground water of the applicable Leased
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Property or any properties surrounding the applicable Leased Property of any
Hazardous Substances in violation of any Applicable Law or otherwise by reason
of any failure by Tenant or any Person claiming under Tenant to perform or
comply with any of the terms of this SECTION 4.4. Tenant's duty herein includes
but is not limited to costs associated with personal injury or property damage
claims as a result of the presence of Hazardous Substances in, upon or under the
soil or ground water of the applicable Leased Property in violation of any
Applicable Law. Upon written request of Landlord, Tenant shall undertake the
defense, at Tenant's sole cost and expense, of any indemnification duties set
forth herein. In the event that Tenant refuses to undertake the defense of an
Indemnitee promptly after receiving such notice, such Indemnitee may undertake
its own defense.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage incurred by Landlord and growing out of a
failure of Tenant strictly to observe and perform the foregoing requirements
(including, without limitation, reasonable attorneys' fees), which amounts shall
bear interest from the date incurred until paid at the Overdue Rate.
The provisions of this SECTION 4.4 shall survive the expiration or
sooner termination of the applicable Lease.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 MAINTENANCE AND REPAIR.
5.1.1 TENANT'S OBLIGATIONS.
Tenant shall, at its sole cost and expense, keep the
applicable Leased Property and all private roadways, sidewalks and
curbs appurtenant thereto (and Tenant's Personal Property) in good
order and repair, reasonable wear and tear excepted (whether or not
the need for such repairs occurs as a result of Tenant's use, any
prior use, the elements or the age of such Leased Property or
Tenant's Personal Property, or any portion thereof), and, shall
promptly make all necessary and appropriate repairs and replacements
thereto of every kind and nature, whether interior or exterior,
structural or nonstructural, ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
commencement of the Term (concealed or otherwise), provided, Tenant
shall be permitted to prosecute claims against Landlord's
predecessors in title for breach of any representation or warranty
made to or on behalf of Landlord, or for any latent defects in such
Leased Property. All repairs shall be made in good, workmanlike and
first-class manner, in accordance with all applicable federal, state
and local statutes, ordinances, by-laws, codes, rules and regulations
relating to any such work. Tenant will not take or omit to take any
action, the taking or omission of which would materially impair the
value
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or the usefulness of the applicable Leased Property or any part
thereof for its Primary Intended Use. Tenant's obligations under this
SECTION 5.1.1 as to the applicable Leased Property shall be limited,
in the event of any casualty or Condemnation involving such Leased
Property, as set forth in SECTIONS 10.2.1 and 11.1. Notwithstanding
this SECTION 5.1.1, Tenant's obligations with respect to Hazardous
Substances are as set forth in ARTICLE 4.
5.1.2 LANDLORD'S OBLIGATIONS.
Landlord shall not, under any circumstances, be required to
build or rebuild any improvement on the applicable Leased Property,
or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the applicable Leased
Property, whether ordinary or extraordinary, structural or
nonstructural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with the applicable
Lease, or to maintain the applicable Leased Property in any way,
except as specifically provided herein. Tenant hereby waives, to the
extent permitted by law, the right to make repairs at the expense of
Landlord pursuant to any law in effect at the time of the execution
of the applicable Lease or hereafter enacted. Landlord shall have the
right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter
existing.
5.1.3 NONRESPONSIBILITY OF LANDLORD; NO MECHANICS
LIENS.
Landlord's interest in the Leased Property shall not be
subject to liens for Capital Additions made by the Tenant, and Tenant
shall have no power or authority to create any lien or permit any
lien to attach to the Leased Property or the present estate,
reversion or other estate of Landlord in the Leased Property or on
the building or other improvements thereon as a result of Capital
Additions made by Tenant or for any other cause or reason. All
materialmen, contractors, artisans, mechanics and laborers and other
persons contracting with Tenant with respect to the Leased Property
or any part thereof, are hereby charged with notice that such liens
are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished for Capital
Additions by Tenant or for any other purpose during the term of the
applicable Lease.
Nothing contained in this Lease shall be deemed or
construed in any way as constituting the consent or request of
Landlord, express or implied by inference or otherwise, to any
contractor, subcontractor, laborer or materialmen for the performance
of any labor or the furnishing of any materials for any alteration,
addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract
for or permit the rendering of any services or the furnishing of any
materials that would give rise to the filing of any lien against the
Leased Property or any part thereof nor to subject Landlord's estate
in the Leased Property or any part thereof to
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liability under the Mechanic's Lien Law of the State in any way, it
being expressly understood Landlord's estate shall not be subject to
any such liability.
5.2 TENANT'S PERSONAL PROPERTY.
Tenant may (and shall as provided hereinbelow), at its expense,
install, affix or assemble or place on any parcels of the Land or in any of the
Leased Improvements, any items of Tenant's Personal Property, and Tenant may,
subject to the conditions set forth below, remove the same at any time, provided
that no Default has occurred and is continuing. Tenant shall provide and
maintain during the entire Term all such Tenant's Personal Property as shall be
necessary in order to operate the Facility located at the Leased Property in
compliance with all applicable licensure and certification requirements, in
compliance with applicable Legal Requirements and Insurance Requirements and
otherwise in accordance with customary practice in the industry for the Primary
Intended Use. All of Tenant's Personal Property not removed by Tenant on or
prior to the expira tion or earlier termination of the applicable Lease of the
applicable Leased Property where such Tenant's Personal Property is located
shall be considered abandoned by Tenant and may be ap propriated, sold,
destroyed or otherwise disposed of by Landlord without the necessity of first
giving notice thereof to Tenant, without any payment to Tenant and without any
obligation to ac count therefor. Tenant shall, at its expense, restore such
Leased Property to the condition required by SECTION 5.3, including repair of
all damage to such Leased Property caused by the removal of Tenant's Personal
Property, whether effected by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than
motor vehicles) on, or in connection with, the Leased Property which belongs to
anyone other than Tenant, Tenant shall use its best efforts to require the
agreement permitting such use to provide that Landlord or its designee may
assume Tenant's rights under such agreement upon management or operation of the
applicable Facility by Landlord or its designee.
5.3 YIELD UP.
Upon the expiration or sooner termination of the applicable Lease
(unless the applicable Leased Property is transferred to Tenant as provided
herein), Tenant shall vacate and surrender the applicable Leased Property to
Landlord in the condition in which such Leased Property was on the Commencement
Date, except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of such Lease, ordinary wear and tear excepted (and
casualty damage and condemnation, in the event that the applicable Lease is
terminated following a casualty or total condemnation in accordance with ARTICLE
10 or ARTICLE 11).
In addition, upon the expiration or earlier termination of the
applicable Lease unless the applicable Leased Property is transferred to Tenant
as provided herein, Tenant shall, at Landlord's sole cost and expense, use its
best efforts to transfer to and cooperate with Landlord or Landlord's nominee in
connection with the processing of all applications for licenses, operating
permits and other governmental authorizations and all contracts, including
contracts with
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governmental or quasi-governmental entities which may be necessary for the
operation of the Facility located on such Leased Property. If requested by
Landlord, Tenant will continue to man age such Facility after the expiration of
the Term and for as long thereafter as is necessary to obtain all necessary
licenses, operating permits and other governmental authorizations, on such
reasonable terms (which shall include an agreement to reimburse Tenant for its
reasonable out-of-pocket costs and expenses, and reasonable administrative
costs) as Landlord shall request.
5.4 ENCROACHMENTS, RESTRICTIONS, ETC.
If any of the Leased Improvements on the applicable Leased Property
shall, at any time, encroach upon any property, street or right-of-way adjacent
to such Leased Property, other than Permitted Encumbrances, or shall violate the
agreements or conditions contained in any lawful restrictive covenant or other
agreement affecting such Leased Property, or any part thereof, or shall impair
the rights of others under any easement or right-of-way to which such Leased
Property is subject, upon the request of Landlord (but only as to any
encroachment, violation or impairment that is not a Permitted Encumbrance) or of
any Person affected by any such encroachment, violation or impairment, Tenant
shall, at its sole cost and expense, subject to its right to contest the
existence of any encroachment, violation or impairment in accordance with the
provisions of ARTICLE 8, either (a) obtain valid and effective waivers or
settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Landlord or
Tenant, or (b) make such changes in the Leased Improvements and take such other
actions, as are reasonably practicable to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Leased Improvements and, in any event, take all such actions as may be
necessary in order to ensure the continued operation of the Leased Improvements
for the Primary Intended Use substantially in the manner and to the extent the
Leased Improvements were operated prior to the assertion of such violation,
impairment or encroachment. Any such alteration shall be made in conformity with
the applicable requirements of this ARTICLE 5. Tenant's obligations under this
SECTION 5.4 shall be in addition to and shall in no way discharge or diminish
any obligation of any insurer under any policy of title or other insurance.
5.5 LANDLORD TO GRANT EASEMENTS, ETC.
Landlord will, from time to time, so long as no Default shall have
occurred and be continuing, at the request of Tenant with respect to the
applicable Leased Property and at Tenant's sole cost and expense, (a) grant
easements and other rights in the nature of easements with respect to such
Leased Property to third parties, (b) release existing easements or other rights
in the nature of easements which are for the benefit of such Leased Property,
(c) dedicate or transfer unimproved portions of such Leased Property for road,
highway or other public purposes, (d) execute petitions to have such Leased
Property annexed to any municipal corporation or utility district, (e) execute
amendments to any covenants and restrictions affecting such Leased Property and
(f) execute and deliver to any Person any instrument appropriate to confirm or
effect such grants, release, dedications, transfers, petitions and amendments
(to the
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extent of its interests in such Leased Property); PROVIDED that Landlord shall
have determined that such grant, release, dedication, transfer, petition or
amendment is not detrimental to the operation of such Leased Property for its
Primary Intended Use and does not materially reduce the value of such Leased
Property, and that Landlord shall have received an Officer's Certificate
confirming such determination, and such additional information as Landlord may
request.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 CONSTRUCTION OF CAPITAL ADDITIONS TO THE LEASED PROPERTY.
Tenant shall not construct or install Capital Additions on the
applicable Leased Property without obtaining Landlord's prior written consent,
PROVIDED that no consent shall be required for any Capital Addition so long as
(a) the Capital Additions Costs for such Capital Addition are less than
$250,000, (b) such construction or installation would not adversely affect or
violate any Legal Requirement or Insurance Requirement applicable to the
applicable Leased Property, (c) such construction or installation is not
expected to result in a decrease of the Net Patient Revenues or Non-Inpatient
Revenues for such Leased Property on an aggregate basis for the twelve (12)
month period following completion of construction, and (d) Landlord shall have
received an Officer's Certificate certifying as to the satisfaction of the
conditions set out in CLAUSES (A), (B) and (C) above. If Landlord's consent is
required, prior to commencing construction of any Capital Addition, Tenant shall
submit to Landlord, in writing, a proposal setting forth, in reasonable detail,
any proposed Capital Addition and shall provide to Landlord, such plans and
specifications, permits, licenses, contracts and other information concerning
the proposed Capital Addition as Landlord may request. Landlord shall have
thirty (30) days to review all materials submitted to Landlord in connection
with any such proposal. Failure of Landlord to respond to Tenant's proposal
within thirty-five (35) days after receipt of all information and materials
requested by Landlord in connection with the proposed Capital Addition shall be
deemed to constitute approval of such proposed Capital Addition. Without
limiting the generality of the foregoing, such proposal shall indicate the
approximate projected cost of constructing such Capital Addition, the use or
uses to which it will be put and a good faith estimate of the change, if any, in
the Net Patient Revenues or Non-Inpatient Revenues that Tenant anticipates will
result from such Capital Addition. No Capital Addition shall be made which would
tie in or connect any Leased Improvement on the applicable Leased Property with
any other improvements on property adjacent to such Leased Property (and not
part of the Land) including, without limitation, tie-ins of buildings or other
structures or utilities. Tenant shall not finance the cost of any construction
of any Capital Addition without the prior written consent of Landlord, which
consent may be withheld by Landlord in Landlord's sole discretion. Any Capital
Additions (including Tenant's Capital Additions) shall, upon the expiration or
sooner termination of the applicable Lease for such Leased Property, pass to and
become the property of Landlord, free and clear of all
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encumbrances other than Permitted Encumbrances but subject to Landlord's
obligation to compensate Tenant for Tenant's Capital Additions as provided
below.
6.2 CAPITAL ADDITIONS FINANCED OR PAID FOR BY TENANT.
6.2.1 FINANCING OF CAPITAL ADDITIONS.
Provided that Tenant has obtained the prior written consent of
Landlord in each instance, Tenant may arrange for financing for Capital
Additions from third party lenders, provided, however that (i) the terms and
conditions of any such financing shall be subject to the prior approval of
Landlord; and (ii) if Landlord consents to the grant thereof, which consent may
be withheld in the sole discretion of Landlord, any security interests in any
property of Tenant, including without limitation the applicable Leased Property,
shall be expressly and fully subordinated to the applicable Lease and to the
interest of Landlord in the applicable Leased Property and to the rights of any
Facility Mortgagee.
6.2.2 AMENDMENTS TO LEASE.
If, pursuant to the provisions of this Lease, Tenant either pays for
or arranges financing (to the extent permitted in SECTION 6.2.1) to pay for the
costs of construction or installation of any Capital Addition ("TENANT'S CAPITAL
ADDITIONS") (but excluding, in any event, any Capital Addition financed by or
through Landlord including, without limitation, all Capital Additions paid for
or financed through disbursements under any Renovation Funding Agreement), this
Lease shall be and hereby is amended to provide as follows:
(a) Upon completion of any such Tenant's Capital Addition,
Net Patient Revenues and Non-Inpatient Revenues attributable to such
Tenant's Capital Addition shall be excluded from Net Patient Revenues
and Non-Inpatient Revenues of the applicable Leased Property for
purposes of calculating Additional Rent. The Net Patient Revenues and
Non-Inpatient Revenues attributable to any such Tenant's Capital
Addition shall be deemed to be an amount (the "ADDED VALUE
PERCENTAGE") which bears the same proportion to the total Net Patient
Revenues and Non-Inpatient Revenues from the entire Leased Property
(including all Capital Additions) as the Fair Market Added Value of
such Capital Addition bears to the Fair Market Value of the entire
Leased Property (including all Capital Additions) immediately after
completion of such Tenant's Capital Addition. The Added Value
Percentage for any Tenant's Capital Additions shall remain in effect
until any subsequent Capital Addition is completed, at which time the
Added Value Percentage will again be determined as provided above.
(b) There shall be no adjustment in the Minimum Rent by
reason of any such Tenant's Capital Addition.
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(c) Upon the expiration or earlier termination of the
applicable Lease (but if the applicable Lease is terminated by reason
of an Event of Default, only after Landlord is fully compensated for
all damages resulting therefrom), Landlord shall compensate Tenant
for all Tenant's Capital Additions in any of the following ways
determined in Landlord's sole discretion:
(i) By purchasing such Tenant's Capital
Additions from Tenant for cash in
the amount of the then Fair Market
Added Value of such Tenant's Capital
Additions; or
(ii) By purchasing such Tenant's Capital
Additions from Tenant by delivering
to Tenant Landlord's purchase money
promissory note in the amount of the
Fair Market Added Value, which note
shall be on then commercially
reasonable terms and secured by a
mortgage or deed of trust on the
applicable Leased Property and such
Tenant's Capital Additions subject
to all existing mortgages and
encumbrances on such Leased Property
and such Tenant's Capital Additions
at the time of such purchase; or
(iii) Upon termination of the applicable
Lease by reason of an Event of
Default, by assigning to Tenant the
right to receive an amount equal to
the Added Value Percentage
(determined as of the date of the
expiration or earlier termination of
this Lease) of all rent and other
consideration receivable by Landlord
under any re-letting or other
disposition of the Leased Property
and such Tenant's Capital Additions,
after deducting from such rent all
costs and expenses incurred by
Landlord in connection with such
reletting or other disposition of
the Leased Property and such
Tenant's Capital Additions and all
costs and expenses of operating and
maintaining the Leased Property and
such Tenant's Capital Additions
during the term of any such new
lease which are not borne by the
tenant thereunder, with the
provisions of this SECTION 6.2.2 to
remain in effect until the sale or
other final disposition of the
Leased Property and such Tenant's
Capital Additions, at which time the
Fair Market Added Value of such
Tenant's Capital Addition shall be
immediately due and payable, such
obligation to be secured by a
mortgage on the Leased Property and
such Tenant's Capital Additions,
subject to all existing mortgages
and encumbrances on the Leased
Property at the time of such
purchase and assignment; or
(iv) By making such other arrangement
regarding such compensation as shall
be mutually acceptable to Landlord
and Tenant.
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6.3 CAPITAL ADDITIONS FINANCED BY LANDLORD.
If Landlord shall, at the request of Tenant and in Landlord's sole
discretion, elect to finance the proposed Capital Addition, Tenant shall provide
Landlord with such information as Landlord may from time to time request,
including, without limitation, the following:
(a) Evidence that such Capital Addition will be, and upon
completion, has been completed in compliance with the applicable
requirements of State and federal law with respect to capital
expenditures for healthcare facilities;
(b) Copies of all building, zoning and land use permits
and approvals and upon completion of such Capital Addition, a copy of
the certificate of occupancy for such Capital Addition, if required;
(c) Such information, certificates, licenses, permits or
other documents necessary to confirm that Tenant will be able to use
the Capital Addition upon completion thereof in accordance with the
Primary Intended Use, including all required federal, State or local
government licenses and approvals;
(d) An Officer's Certificate and a certificate from
Tenant's architect setting forth, in reasonable detail, the projected
(or actual, if available) Capital Additions Cost and invoices and
lien waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land
acquired for the purpose of constructing the Capital Addition free
and clear of any liens or encumbrances, except those approved by
Landlord, and, upon completion of the Capital Addition, a final
as-built survey thereof reasonably satisfactory to Landlord;
(f) Endorsements to any outstanding policy of title
insurance covering the Leased Property or commitments therefor,
satisfactory in form and substance to Landlord, (i) updating the same
without any additional exceptions except as approved by Landlord, and
(ii) increasing the coverage thereof by an amount equal to the Fair
Market Value of the Capital Addition (except to the extent covered by
the owner's policy of title insurance referred to in subparagraph (g)
below);
(g) If appropriate, (i) an owner's policy of title
insurance insuring fee simple title to any land conveyed to Landlord
pursuant to subparagraph (e) above, free and clear of all liens and
encumbrances, except those approved by Landlord, and (ii) a lender's
policy of title insurance, reasonably satisfactory in form and
substance to Landlord and any Facility Mortgagee;
(h) An appraisal of the Leased Property by Valuation
Counselors or some other Member of the Appraisal Institute of
America, acceptable to Landlord, and/or an
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Officer's Certificate stating that the value of the Leased Property
upon completion of the Capital Addition exceeds the Fair Market Value
thereof prior to the commencement of such Capital Addition by an
amount not less than 80% of the Capital Additions Cost; and
(i) Prints of architectural and engineering drawings
relating to such Capital Addition and such other certificates,
documents, opinions of counsel, appraisals, surveys, certified copies
of duly adopted resolutions of the board of directors of Tenant
authorizing the execution and delivery of any lease amendment or
other instruments required by Landlord, any Facility Mortgagee and
any Lending Institution advancing or reimbursing Landlord or Tenant
for any portion of the Capital Additions Cost.
If Landlord shall finance the proposed Capital Addition, Tenant shall
pay to Landlord all reasonable costs and expenses paid or incurred by Landlord
and any Facility Mortgagee or Lending Institution which has committed to finance
such Capital Addition in connection therewith, including, but not limited to,
(a) the reasonable attorneys' fees and expenses, (b) all printing expenses, (c)
all filing, registration and recording taxes and fees, (d) documentary stamp
taxes, (e) title insurance charges, appraisal fees, and rating agency fees, and
(f) commitment fees.
6.4 NON-CAPITAL ADDITIONS.
Tenant shall have the right, at Tenant's sole cost and expense, to
make additions, modifications or improvements to the applicable Leased Property
which are not Capital Additions ("NON-CAPITAL ADDITIONS") from time to time as
Tenant, in its discretion, may deem desirable for the Primary Intended Use,
PROVIDED that such action will not materially alter the character or purpose or
materially detract from the value, operating efficiency or revenue-producing
capability of such Leased Property, or adversely affect the ability of Tenant to
comply with the provisions of the applicable Lease, and, without limiting the
foregoing, will not adversely affect or violate any Legal Requirement or
Insurance Requirement applicable to the applicable Leased Property. All such
Non-Capital Additions shall, upon expiration or earlier termination of the
applicable Lease for such Leased Property, pass to and become the property of
Landlord, free and clear of all liens and encumbrances, other than Permitted
Encumbrances.
6.5 SALVAGE.
All materials which are scrapped or removed in connection with the
making of either Capital Additions or Non-Capital Additions or repairs required
by ARTICLE 5 shall be or become the property of the party that paid for such
work.
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ARTICLE 7
LIENS
7.1 LIENS.
Subject to ARTICLE 8, Tenant shall not directly or indirectly create,
suffer to be created or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the applicable Leased Property or Tenant's leasehold interest in such
Leased Property or any attachment, levy, claim or encumbrance in respect of the
Rent, other than (a) Permitted Encumbrances, (b) restrictions, liens and other
encumbrances which are consented to in writing by Landlord, (c) liens for those
taxes of Landlord which Tenant is not required to pay hereunder, (d) subleases
permitted by ARTICLE 16, (e) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as (i) the same are not yet
payable, or (ii) are being contested in accordance with ARTICLE 8, (f) liens of
mechanics, laborers, materialmen, suppliers or vendors incurred in the ordinary
course of business that are not yet due and payable, or are for sums that are
being contested in accordance with ARTICLE 8, and (g) any Facility Mortgages or
other liens which are the responsibility of Landlord pursuant to the provisions
of ARTICLE 21.
7.2 LANDLORD'S LIEN.
In addition to any statutory landlord's lien and in order to secure
payment of the Rent and all other sums payable hereunder by Tenant, and to
secure payment of any loss, cost or damage which Landlord may suffer by reason
of Tenant's breach of the applicable Lease, Tenant hereby grants unto Landlord a
security interest in and an express contractual lien upon the Tenant's Personal
Property (except motor vehicles), and all ledger sheets, files, records,
documents and instruments (including, without limitation, computer programs,
tapes and related electronic data processing) relating to the operation of the
Facility located at the applicable Leased Property (the "RECORDS") and all
proceeds therefrom, subject to any Permitted Liens; and such Tenant's Personal
Property shall not be removed from the applicable Leased Property at any time
when a Default has occurred and is continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in Tenant's Personal Property and the proceeds thereof in accordance
with the provisions of the applicable laws of the State. Tenant hereby grants
Landlord an irrevocable limited power of attorney, coupled with an interest, to
execute all such financing statements in Tenant's name, place and stead. The
security interest herein granted is in addition to any statutory lien for the
Rent.
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ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (col lectively "CLAIMS") as to the applicable
Leased Property, by appropriate legal proceedings, conducted in good faith and
with due diligence, provided that (a) the foregoing shall in no way be construed
as relieving, modifying or extending Tenant's obligation to pay any Claims as
finally determined, (b) such contest shall not cause Landlord or Tenant to be in
default under any mortgage or deed of trust encumbering such Leased Property or
any interest therein or result in or reasonably be expected to result in a lien
attaching to such Leased Property, (c) no part of the applicable Leased Property
nor any Rent therefrom shall be in any immediate danger of sale, forfeiture,
attachment or loss, and (d) Tenant shall indemnify and hold harmless Landlord
from and against any cost, claim, damage, penalty or reasonable expense,
including reasonable at torneys' fees, incurred by Landlord in connection
therewith or as a result thereof. Upon Landlord's request, Tenant shall either
(i) provide a bond or other assurance reasonably satisfactory to Landlord that
all Claims which may be assessed against the applicable Leased Property,
together with all interest and penalties thereon will be paid, or (ii) deposit
within the time otherwise required for payment with a bank or trust company, as
trustee, as security for the payment of such Claims, an amount sufficient to pay
the same, together with interest and penalties in connection therewith and all
Claims which may be assessed against or become a Claim on the applicable Leased
Property, or any part thereof, in connection with any such contest. Tenant shall
furnish Landlord and any Facility Mortgagee with reasonable evidence of such
deposit within five (5) days after request therefor. Landlord agrees to join in
any such proceedings if required legally to prosecute such contest; provided,
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith). Tenant shall be entitled to any refund of any Claims and such
charges and penalties or interest thereon which have been paid by Tenant or paid
by Landlord and for which Landlord has been fully reimbursed by Tenant. If
Tenant shall fail (x) to pay any Claims when finally determined, (y) to provide
security therefor as provided in this ARTICLE 8, or (z) to prosecute any such
contest diligently and in good faith, Landlord may, upon reasonable notice to
Tenant (which notice may be oral and shall not be required if Landlord shall
determine the same is not practicable), pay such charges, together with interest
and penalties due with respect thereto, and Tenant shall reimburse Landlord
therefor, upon demand, as Additional Charges.
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ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 GENERAL INSURANCE REQUIREMENTS.
Tenant shall at all times during the Term and at any other time
Tenant shall be in possession of the applicable Leased Property, keep the
applicable Leased Property and all property located in or on the applicable
Leased Property, including Tenant's Personal Property, insured against the risks
and in the amounts as follows:
(a) Loss or damage by fire, vandalism and malicious
mischief, extended coverage perils, earthquake and all physical loss
perils insurance, including but not limited to sprinkler leakage, in
an amount equal to not less than the greater of (i) the Adjusted
Purchase Price or (ii) one hundred percent (100%) of the then full
Replacement Cost thereof (as defined in SECTION 9.2 below) with the
usual extended coverage endorsements, including a Replacement Cost
Endorsement and Builder's Risk Coverage during the continuance of any
construction on the applicable Leased Property;
(b) Loss or damage by explosion of steamboilers, pressure
vessels or other similar apparatus, now or hereafter installed in the
Facility located at the Leased Property, in such amounts as may be
reasonably required by Landlord or any Facility Mortgagee from time
to time;
(c) Business interruption and blanket earnings plus extra
expense under a rental value insurance policy covering risk of loss
during the lesser of the first twelve (12) months of reconstruction
or the actual reconstruction period necessitated by the occurrence of
any of the hazards described in subparagraphs (a) and (b) above, in
such amounts as may be customary for comparable properties in the
area and in an amount sufficient to prevent Landlord or Tenant from
becoming a co-insurer;
(d) Claims for personal injury or property damage under a
policy of comprehensive general accident and public liability
insurance (in a broad form comprehensive policy, including, without
limitation, broad form contractual liability, independent
contractor's hazard and completed operations coverage), claims
arising out of malpractice in an amount not less than One Million
Dollars ($1,000,000) per occurrence, Three Million Dollars
($3,000,000) in the aggregate and umbrella coverage of all such
claims in an amount not less than Ten Million Dollars ($10,000,000);
(e) Flood (when the applicable Leased Property is located
in whole or in part within an area identified as an area having
special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968, as amended,
or the Flood Disaster Protection Act of 1973, as amended (or any
successor
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acts thereto)) and such other hazards and in such amounts as may be
customary for comparable properties in the area;
(f) Worker's compensation insurance coverage for all
persons employed by Tenant on the applicable Leased Property with
statutory limits and otherwise with limits of and provisions in
accordance with the requirements of applicable local, State and
federal law, and employer's liability insurance in such amounts as
Landlord and any Facility Mortgagee shall reasonably require; and
(g) Such additional insurance as may be reasonably
required, from time to time, by Landlord or any Facility Mortgagee.
9.2 REPLACEMENT COST.
"REPLACEMENT COST" as used herein, shall mean the actual replacement
cost of the property requiring replacement from time to time, including an
increased cost of construction endorsement, less exclusions provided in the
standard form of fire insurance policy. In the event either party believes that
the then full replacement cost less such exclusions has increased or decreased
at any time during the Term, such party, at its own cost, shall have the right
to have such full replacement cost redetermined by an accredited appraiser
approved by the other, which approval shall not be unreasonably withheld or
delayed. The party desiring to have the full replacement cost so redetermined
shall forthwith, on receipt of such determination by such appraiser, give
written notice thereof to the other. The determination of such appraiser shall
be final and binding on the parties hereto, and Tenant shall forthwith conform
the amount of the insurance carried to the amount so determined by the
appraiser.
9.3 WAIVER OF SUBROGATION.
Landlord and Tenant agree that (insofar as and to the extent that
such agreement may be effective without invalidating or making it impossible to
secure insurance coverage from responsible insurance companies doing business in
the State) with respect to any property loss which is covered by insurance then
being carried by Landlord or Tenant, respectively, the party carrying such
insurance and suffering said loss releases the other of and from any and all
claims with respect to such loss; and they further agree that their respective
insurance companies shall have no right of subrogation against the other on
account thereof, even though extra premium may result therefrom. In the event
that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra premium.
9.4 FORM SATISFACTORY, ETC.
All insurance policies and endorsements required pursuant to this
ARTICLE 9 shall be fully paid for, nonassessable and contain such provisions and
expiration dates and be in such form and amounts and issued by insurance
carriers authorized to do business in the State, having a general
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policy holder's rating of A or A+ in Best's latest rating guide, and as
otherwise shall be approved by Landlord. Without limiting the foregoing, such
policies shall include no deductible in excess of $5,000 (unless consistent with
deductibles included in policies carried by entities engaged in similar
businesses and owning similar properties similarly situated and agreed to in
advance by Landlord) and, with the exception of the insurance described in
SECTION 9.1(F), shall name Landlord and any Facility Mortgagee as additional
insureds, as their interests may appear. All losses shall be payable to
Landlord, any Facility Mortgagee and Tenant as provided in ARTICLE 10. Any loss
adjustment shall require the prior written consent of Landlord, Tenant, and each
Facility Mortgagee. Tenant shall pay all insurance premiums, and deliver
policies or certificates thereof to Landlord prior to their effective date (and,
with respect to any renewal policy, thirty (30) days prior to the expiration of
the existing policy), and in the event Tenant shall fail either to effect such
insurance as herein required, to pay the premiums therefor, or to deliver such
policies or certificates to Landlord or any Facility Mortgagee at the times
required, Landlord shall have the right, but not the obligation, to acquire such
insurance and pay the premiums therefor, which amounts shall be payable to
Landlord, upon demand, as Additional Charges, together with interest accrued
thereon at the Overdue Rate from the date such payment is made until the date
repaid. All such policies shall provide Landlord (and any Facility Mortgagee, if
required by the same) thirty (30) days' prior written notice of any
modification, expiration or cancellation of such policy.
9.5 BLANKET POLICY.
Notwithstanding anything to the contrary contained in this ARTICLE 9,
Tenant's obligation to maintain the insurance herein required may be brought
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Tenant; provided, that (a) the coverage thereby
afforded will not be reduced or diminished from that which would exist under a
separate policy meeting all other requirements of the applicable Lease, and (b)
the requirements of this ARTICLE 9 are otherwise satisfied. Without limiting the
foregoing, the amounts of insurance that are required to be maintained pursuant
to SECTION 9.1 shall be on a Facility by Facility basis, and shall not be
subject to an aggregate limit.
9.6 NO SEPARATE INSURANCE.
Tenant shall not take out separate insurance, concurrent in form or
contributing in the event of loss with that required by this ARTICLE 9, or
increase the amount of any existing insurance by securing an additional policy
or additional policies, unless all parties having an insurable interest in the
subject matter of such insurance, including, Landlord and all Facility
Mortgagees, are included therein as additional insureds, and the loss is payable
under such insurance in the same manner as losses are payable under the
applicable Lease. In the event Tenant shall take out any such separate insurance
or increase any of the amounts of the then existing insurance, Tenant shall give
Landlord prompt Notice thereof.
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9.7 INDEMNIFICATION OF LANDLORD.
Notwithstanding the existence of any insurance provided for herein,
and without regard to the policy limits of any such insurance, the Tenants
jointly and severally agree to protect, indemnify and hold harmless Landlord
for, from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about any Collective Leased Property or adjoining sidewalks or rights of way,
including, without limitation, any claims of malpractice, (b) any past, present
or future use, misuse, non-use, condition, management, maintenance or repair by
any Tenant or anyone claiming under any Tenant of any Collective Leased Property
or Tenant's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which Landlord is made a party
or participant related to any Collective Leased Property or Tenant's Personal
Property or such use, misuse, non-use, condition, management, maintenance, or
repair thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any Impositions
(which is the joint and several obligation of the Tenants to pay pursuant to the
applicable provisions of the applicable Lease), and (d) any failure on the part
of any Tenant or anyone claiming under any Tenant to perform or comply with any
of the terms of any applicable Lease. The Tenants shall pay all amounts payable
under this SECTION 9.7 within ten (10) days after demand therefor, and if not
timely paid, such amounts shall bear interest at the Overdue Rate from the date
of determination to the date of payment. Each Tenant, at its expense, agrees,
jointly and severally, to contest, resist and defend any such claim, action or
proceeding asserted or instituted against Landlord or may compromise or
otherwise dispose of the same, with Landlord's prior written consent (which
consent may not be unreasonably withheld or delayed). The obligations of each
Tenant under this SECTION 9.7 are in addition to the obligations set forth in
SECTION 4.4 and shall survive the termination of the ap plicable Lease.
ARTICLE 10
CASUALTY
10.1 INSURANCE PROCEEDS.
All proceeds payable by reason of any loss or damage to the
applicable Leased Property, or any portion thereof, and insured under any policy
of insurance required by ARTICLE 9 (including, without limitation, proceeds of
any business interruption insurance) shall be paid directly to Landlord (subject
to the provisions of SECTION 10.2). If Tenant is required to reconstruct or
repair such Leased Property as provided herein, such proceeds shall be paid out
by Landlord from time to time for the reasonable costs of reconstruction or
repair of such Leased Property necessitated by such damage or destruction,
subject to the provisions of SECTION 10.2.4. Provided no Default
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or Event of Default has occurred and is continuing, any excess proceeds of
insurance remaining after the completion of the restoration shall be paid to
Tenant. In the event that SECTION 10.2.1 below is applicable, the insurance
proceeds shall be retained by the party entitled thereto pursuant to SECTION
10.2.1. All salvage resulting from any risk covered by insurance shall belong to
Landlord, except any salvage related to Tenant's Capital Additions and Tenant's
Personal Property shall belong to Tenant.
10.2 DAMAGE OR DESTRUCTION.
10.2.1 DAMAGE OR DESTRUCTION OF LEASED PROPERTY.
If, during the Term, the applicable Leased Property shall
be totally or partially destroyed and the Facility located thereon is
thereby rendered Unsuitable for Its Primary Intended Use, Tenant
shall, at Tenant's option, exercisable by Notice to Landlord within
thirty (30) days after the date of such damage or destruction, either
irrevocably offer (a) to purchase such Leased Property from Landlord
for a purchase price equal to the greater of (i) the Adjusted
Purchase Price of such Leased Property or (ii) the Fair Market Value
Purchase Price of such Leased Property immediately prior to such
damage or destruction. If Tenant shall fail to give such Notice,
Tenant shall be deemed to have elected the option provided in CLAUSE
(A) above. In the event Landlord does not accept Tenant's offer to
purchase the applicable Leased Property within thirty (30) days after
receipt of Tenant's Notice of election, the applicable Lease with
respect to the applicable Leased Property shall terminate without
further liability hereunder and Landlord shall be entitled to retain
the insurance proceeds payable on account of such damage. In the
event Tenant purchases such Leased Property as provided in this
SECTION 10.2.1, the insurance proceeds payable on account of such
damage shall be paid to Tenant.
10.2.2 PARTIAL DAMAGE OR DESTRUCTION.
If during the Term, the applicable Leased Property shall
be totally or partially destroyed but the Facility located thereon is
not rendered Unsuitable for its Primary Intended Use, Tenant shall
promptly restore such Facility as provided in SECTION 10.2.4.
10.2.3 INSUFFICIENT INSURANCE PROCEEDS.
If the cost of the repair or restoration of the applicable
Leased Property exceeds the amount of insurance proceeds received by
Landlord pursuant to ARTICLE 9, upon the demand of Landlord, Tenant
shall contribute any excess amounts needed to restore such Leased
Property. Such difference shall be paid by Tenant to Landlord and
held by Landlord, together with any other insurance proceeds, for
application to the cost of repair and restoration.
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10.2.4 DISBURSEMENT OF PROCEEDS.
In the event Tenant is required to restore the applicable
Leased Property pursuant to SECTION 10.2, Tenant will, at its sole
cost and expense, commence promptly and continue diligently to
perform the repair and restoration of such Leased Property
(hereinafter called the "WORK"), or shall cause the same to be done,
so as to restore such Leased Property in full compliance with all
Legal Requirements and so that such Leased Property shall be at least
equal in value and general utility to its general utility and value
immediately prior to such damage or destruction. Subject to the terms
hereof, Landlord shall advance the insurance proceeds (other than
proceeds of business interruption insurance which shall be advanced
as provided below) and the amounts paid to it pursuant to SECTION
10.2.3 to Tenant regularly during the repair and restoration period
so as to permit payment for the cost of any such restoration and
repair. Any such advances shall be for not less than $50,000 (or such
lesser amount as equals the entire balance of the repair and
restoration) and Tenant shall submit to Landlord a written
requisition and substantiation therefor on AIA Forms G702 and G703
(or on such other form or forms as may be acceptable to Landlord).
Landlord may, at its option, condition advancement of said insurance
proceeds and other amounts on (i) the absence of any Default, (ii)
its approval of plans and specifications of an architect satisfactory
to Landlord, (iii) general contractors' estimates, (iv) architect's
certificates, (v) unconditional lien waivers of general contractors,
(vi) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required and (vii) such other
certificates as Landlord may, from time to time, reasonably require.
Except as provided in the following sentence and provided no Default
has occurred and is continuing, on the first day of each calendar
month during which proceeds of business interruption insurance are
disbursed to Landlord under the policy of business interruption
insurance maintained pursuant to ARTICLE 9, Landlord shall disburse
proceeds of business interruption insurance received by it to Tenant
upon Notice from Tenant accompanied by a certification from Tenant
that such moneys will be used for costs or expenses of owning or
operating the applicable Leased Property, including any corporate
allocation in compliance with SECTION 22.9. Proceeds of business
interruption insurance shall be applied by Landlord, on the first day
of the calendar month following such disbursement, first to the
payment of all Minimum Rent, Additional Rent and Additional Charges
then due and payable and to become due and payable for the period for
which such proceeds have been paid by the insurance provider, if at
any time the amount of such proceeds will be insufficient to pay all
Minimum Rent, Additional Rent and Additional Charges due or to come
due during such period, Landlord shall suspend disbursement of such
proceeds.
Landlord's obligation to disburse insurance proceeds under
this ARTICLE 10 shall be subject to the release of such proceeds by
the applicable Facility Mortgagee to Landlord.
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Tenant's obligation to restore the applicable Leased
Property pursuant to this ARTICLE 10 shall be subject to the release
of available insurance proceeds by the applicable Facility Mortgagee
to Landlord.
10.2.5 TERMINATION OF APPLICABLE LEASE.
If Landlord accepts Tenant's offer to purchase the
applicable Leased Property, as provided herein, the applicable Lease
shall terminate as to the applicable Leased Property upon payment of
the purchase price therefor, and Landlord shall remit to Tenant all
insurance proceeds pertaining to the applicable Leased Property then
held by Landlord.
10.3 DAMAGE NEAR END OF TERM.
Notwithstanding any provisions of SECTION 10.1 OR 10.2 to the
contrary, if damage to or destruction of the applicable Leased Property occurs
during the last eighteen (18) months of the Second Extended Term of the
applicable Lease and if such damage or destruction cannot reasonably be expected
to be fully repaired and restored prior to the date that is six (6) months prior
to the end of such Term, then Tenant shall have the right to terminate the
applicable Lease on thirty (30) days prior Notice to Landlord by giving Notice
thereof to Landlord within sixty (60) days after the date of such damage or
destruction.
10.4 TENANT'S PROPERTY.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property or Tenant's Capital Additions shall be paid to
Tenant and, to the extent necessary to repair or replace Tenant's Capital
Additions or Tenant's Personal Property in accordance with SECTION 10.5, Tenant
shall hold such proceeds in trust to pay the cost of repairing or replacing
damaged Tenant's Personal Property or Tenant's Capital Additions.
10.5 RESTORATION OF TENANT'S PROPERTY.
If Tenant is required to restore the applicable Leased Property as
hereinabove provided, Tenant shall either (a) restore all alterations and
improvements made by Tenant, Tenant's Personal Property and all Tenant's Capital
Additions, or (b) replace such alterations and improvements, Tenant's Personal
Property, and/or Tenant's Capital Additions with improvements or items of the
same or better quality and utility in the operation of such Leased Property.
10.6 NO ABATEMENT OF RENT.
The applicable Lease shall remain in full force and effect and
Tenant's obligation to make all payments of Rent (including, without limitation,
Additional Rent) and to pay all other charges as and when required under such
Lease shall remain unabated during the Term notwithstanding any damage involving
the applicable Leased Property (provided that Landlord shall credit against
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such payments any amounts paid to Landlord as a consequence of such damage under
any business interruption insurance obtained by Tenant hereunder); PROVIDED,
HOWEVER, that effective upon the purchase of such Leased Property or termination
of such Lease pursuant to and in accordance with SECTION 10.2, such Lease shall
terminate except with respect to the obligations and liabilities of Tenant
thereunder, actual or contingent, that arose prior to such termination. The
provisions of this ARTICLE 10 shall be considered an express agreement governing
any cause of damage or destruction to the applicable Leased Property and, to the
maximum extent permitted by law, no local or State statute, laws, rules,
regulation or ordinance in effect during the Term which provide for such a
contingency shall have any application in such case.
10.7 WAIVER.
Tenant hereby waives any statutory rights of termination which may
arise by reason of any damage or destruction of the applicable Leased Property
which Landlord is obligated to restore or may restore under any of the
provisions of the applicable Lease.
ARTICLE 11
CONDEMNATION
11.1 TOTAL CONDEMNATION, ETC.
If either (i) the whole of the applicable Leased Property shall be
taken by Condemnation or (ii) a Condemnation of less than the whole of such
Leased Property renders such Leased Property Unsuitable for Its Primary Intended
Use, the Rent for such Leased Property shall abate in its entirety on the Date
of Taking, the applicable Lease shall terminate and Tenant and Landlord shall
seek the Award for their interests in such Leased Property as provided in
SECTION 11.5. If the Award received by Landlord for Landlord's interest in such
Leased Property is less than the greater of (x) the Adjusted Purchase Price or
(y) the Fair Market Value Purchase Price of such Leased Property immediately
prior to such Condemnation, Tenant shall contribute and pay to Landlord the
lesser of (1) the amount of Tenant's Award or (2) such shortfall; PROVIDED,
HOWEVER, that notwithstanding the foregoing, if the sum of the Awards received
by Landlord and Tenant with respect to such Condemnation is less than the
Adjusted Purchase Price of such Leased Property, Tenant shall pay the amount of
such difference to Landlord, whether or not such amount exceeds Tenant's Award.
11.2 PARTIAL CONDEMNATION.
In the event of a Condemnation of less than the whole of the
applicable Leased Property such that such Leased Property is still suitable for
its Primary Intended Use, Tenant will, at its sole cost and expense, commence
promptly and continue diligently to restore the untaken portion of the Leased
Improvements on such Leased Property so that such Leased Improvements shall
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constitute a complete architectural unit of the same general character and
condition (as nearly as may be possible under the circumstances) as the Leased
Improvements existing immediately prior to such Condemnation, in full compliance
with all Legal Requirements. Subject to the terms hereof, Landlord shall
contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements, to Tenant regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration. Landlord may, at its option, condition advancement of said Award
and other amounts on (i) the absence of any Default, (ii) its approval of plans
and specifications of an architect satisfactory to Landlord (which approval
shall not be unreasonably withheld or delayed), (iii) general contractors'
estimates, (iv) architect's certificates, (v) unconditional lien waivers of
general contractors, (vi) evidence of approval by all governmental authorities
and other regulatory bodies whose approval is required and (vii) such other
certificates as Landlord may, from time to time, reasonably require. Landlord's
obligation under this SECTION 11.2 to disburse the Award and such other amounts
shall be subject to (1) the collection thereof by Landlord and (2) the
satisfaction of any applicable requirements of any Facility Mortgage, and the
release of such Award by the applicable Facility Mortgagee. Tenant's obligation
to restore the applicable Leased Property shall be subject to the release of the
Award by the applicable Facility Mortgagee to Landlord. If the cost of the
restoration of the applicable Leased Property exceeds that part of the Award
necessary to complete such restoration, together with severance and other
damages awarded for the taken Leased Improvements, Tenant shall contribute upon
the demand of Landlord any excess amounts needed to restore such Leased
Property. Such difference shall be paid by Tenant to Landlord and held by
Landlord, together with such part of the Award and such severance and other
damages, for application to the cost of restoration.
11.3 ABATEMENT OF RENT.
Other than as specifically provided in this Master Lease Document,
the applicable Lease shall remain in full force and effect and Tenant's
obligation to make all payments of Rent (includ ing, without limitation,
Additional Rent) and to pay all other charges as and when required under such
Lease shall remain unabated during the Term notwithstanding any Condemnation
involving the applicable Leased Property; PROVIDED, HOWEVER, that effective upon
the purchase of such Leased Property or the termination of the Lease pursuant to
and in accordance with SECTION 11.1, such Lease shall terminate except with
respect to the obligations and liabilities of Tenant thereunder, actual or
contingent, that arose prior to such termination. The provisions of this Article
11 shall be considered an express agreement governing any Condemnation involving
the applicable Leased Property and, to the maximum extent permitted by law, no
local or State statute, law, rule, regulation or ordinance in effect during the
Term which provides for such a contingency shall have any application in such
case.
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11.4 TEMPORARY CONDEMNATION.
In the event of any temporary Condemnation of all or any part of the
applicable Leased Property or Tenant's interest under the applicable Lease of
such Leased Property, the applicable Lease shall continue in full force and
effect, and Tenant shall continue to pay, in the manner and on the terms therein
specified, the full amount of the Rent. Tenant shall continue to perform and
observe all of the other terms and conditions hereof on the part of the Tenant
to be performed and observed. Provided no Default or Event of Default that
relates to the payment of money has occurred and is continuing, the entire
amount of any Award made for such temporary Condemnation allocable to the Term,
whether paid by way of damages, rent or otherwise, shall be paid to Tenant.
Tenant shall, promptly upon the termination of any such period of temporary
Condemnation, at its sole cost and expense, restore such Leased Property to the
condition that existed immediately prior to such Condemnation, in full
compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration. For purposes of this
SECTION 11.4, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twenty-four (24)
months.
11.5 ALLOCATION OF AWARD.
Except as provided in the second sentence of this SECTION 11.5, the
total Award shall be solely the property of and payable to Landlord. Any portion
of the Award made for the taking of Tenant's leasehold interest in the Leased
Property, Tenant's Capital Additions, loss of business during the remainder of
the Term, the taking of Tenant's Personal Property, or Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant (subject
to the provisions of SECTION 11.2 hereof). In any Condemnation proceedings,
Landlord and Tenant shall each seek its own Award in conformity herewith, at its
own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 EVENTS OF DEFAULT.
The occurrence, and continuance beyond the expiration of any
applicable grace period specifically provided for in this SECTION 12.1, of any
one or more of the following events shall constitute an "EVENT OF DEFAULT" under
the applicable Lease:
(a) an Event of Default (as defined therein) shall occur
and be continuing under any Transaction Document; or
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(b) any Tenant shall fail to make any payment of the Rent
or any other sum (including, but not limited to, payment of the
purchase price for any of the Collective Leased Properties which any
Tenant shall be obligated or elects to purchase pursuant to the terms
of this Master Lease Document or any Lease) payable hereunder or
under any Lease when due and such failure continues for a period of
ten (10) days after the date when due; or
(c) any Tenant shall default in the due observance or
performance of any of the terms, covenants or agreements contained
herein or in any other Transaction Document to be performed or
observed by it or Community Care shall default in the due observance
of Section 4 of the CCA Guaranty, in each case relating to other than
the payment of money and not otherwise referred to in this SECTION
12.1, and such default shall remain unremedied for a period of
fifteen (15) days after Notice thereof from Landlord (provided that
no such notice shall be required if Landlord shall reasonably
determine immediate action is necessary to protect person or
property), PROVIDED, HOWEVER, that if such default is susceptible of
cure but such cure cannot be accomplished with due diligence within
such period of time, and if in addition such Tenant or Community Care
commences to cure such default within fifteen (15) days after Notice
thereof from Landlord, and thereafter prosecutes the curing of such
default with all due diligence, such period of time shall be extended
to such period of time (not to exceed an additional thirty (30) days)
as may be necessary to cure such default with all due diligence; or
(d) any Tenant shall default in due performance or
observance of any term, covenant or agreement on its part to be
performed or observed pursuant to ARTICLES 7, 9 or 16 and Landlord
shall elect, by Notice to such Tenant, to treat such default as an
Event of Default hereunder; or
(e) any Guarantor shall default in due performance or
observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty (other than Section 4
of the CCA Guaranty); or
(f) any of the Transaction Documents shall cease for any
reason to be in full force and effect (other than as specifically
provided therein, or released as provided therein), or any Tenant or
any Guarantor shall so assert in writing; or
(g) the occurrence of a default or breach of condition
continuing beyond the expiration of any applicable grace period under
the terms of any other agreement, document or instrument (including,
without limitation, all leases and loan documents) evidencing any
indebtedness, covenant, liability, obligation or undertaking due to,
or made for the benefit of, Landlord and/or any of its Affiliates by
(i) any Tenant, (ii) any Affiliate of any Tenant, (iii) any
Guarantor, (iv) any Affiliate of any Guarantor or (v) any entity
owned, legally or beneficially, by any Tenant or any Guarantor,
whether such indebtedness, covenants, liabilities, obligations or
undertakings are direct or indirect,
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absolute or contingent, liquidated or unliquidated, due or to become
due, joint, several or joint and several, primary or secondary, now
existing or hereafter arising; or
(h) any obligation of any Tenant or any Guarantor, or of
any Subsidiary of either, in respect of any Indebtedness for money
borrowed or for the deferred purchase price of any material property
or services (excluding trade accounts payable in the ordinary course
of business on customary trade terms) in each case in the aggregate
amount of $10,000, or any guaranty relating thereto shall be declared
to be or shall become due and payable prior to the stated maturity
thereof, or there shall occur and be continuing any default under any
instrument, agreement or evidence of indebtedness relating to any
such Indebtedness for money borrowed the effect of which is to permit
the holder or holders of such instrument, agreement or evidence of
indebtedness, or a trustee, agent or other representative on behalf
of such holder or holders, to cause such Indebted ness for money
borrowed to become due prior to its stated maturity; or
(i) there shall occur a final unappealable determination
by applicable state authorities of the revocation or limitation of
any license, permit, certification or approval required for the
lawful operation of any Facility located on any Collective Leased
Property in accordance with its Primary Intended Use or the loss or
limitation of any license, permit, certification or approval under
any other circumstances under which the applicable Tenant is required
to cease its operation of such Facility in accordance with its
Primary Intended Use at the time of such loss or limitation; or
(j) any representation or warranty made by or on behalf of
any Tenant or any Guarantor under or in connection with any Lease or
any of the other Transaction Documents, or in any document,
certificate or agreement delivered pursuant to the terms of such
Lease or any of the other Transaction Documents, shall prove to have
been false or misleading in any material respect on the day when made
or deemed made; or
(k) any Tenant or any Guarantor shall be generally not
paying its debts as they become due, or any Tenant or any Guarantor,
or any subsidiary thereof, shall make a general assignment for the
benefit of creditors; or
(l) any petition shall be filed by or against (i) any
Tenant or (ii) any Guarantor or (iii) any Affiliate of either (where
the filing of such petition or commencement or adjudication of such
proceeding by or against any such Affiliate will have a material
adverse effect upon the operations, business prospects, property, or
assets of, liabilities, or the condition of, any Tenant or any
Guarantor), under the Federal bankruptcy laws, or any other
proceeding shall be instituted by or against any Tenant or such
Guarantor or Affiliate seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other
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similar official for any Tenant or such Guarantor or Affiliate, or
for any substantial part of the property of any Tenant or such
Guarantor or Affiliate, and such proceeding is not dismissed within
ninety (90) days after institution thereof, or any Tenant or such
Guarantor or Affiliate shall take any action to authorize or effect
any of the actions set forth above in this PARAGRAPH (L); or
(m) any Tenant or any Guarantor or any Affiliate of any of
them (where the dissolution or termination of any such Affiliate will
have a material adverse effect upon the operations, business
prospects, property, or assets of, liabilities, or the condition of,
any Tenant or any Guarantor) shall cause or institute any proceeding
for its dissolution or termination; or
(n) any Tenant shall voluntarily cease operation of any
Collective Leased Property for its Primary Intended Use for a period
in excess of thirty (30) consecutive days, except as a result of
damage, destruction or partial or complete condemnation; or
(o) a default shall occur under any mortgage which is
secured by any Tenant's leasehold interest in any Lease or the
mortgagee under any such mortgage accelerates the indebtedness
secured thereby or commences a foreclosure action in connection with
said mortgage; or
(p) if the estate or interest of any Tenant in any
Collective Leased Property or any part thereof shall be levied upon
or attached in any proceeding and the same shall not be vacated or
discharged within the later of (i) one hundred and twenty (120) days
after commencement thereof, unless the amount in dispute is less than
$10,000, in which case such Tenant shall give notice to Landlord of
the dispute but such Tenant may defend in any suitable way, and (ii)
thirty (30) days after receipt by such Tenant of notice thereof from
Landlord (unless such Tenant shall be contesting such lien or
attachment in good faith in accordance with ARTICLE 8 hereof); or
(q) if any of the representations or warranties made in
the Merger Agreement proves to be untrue when made in any material
respect; or
(r) if any Provider Agreement material to the operation or
financial condition of any Tenant or any Facility shall be terminated
prior to the expiration of the term thereof or, without the prior
written consent of Landlord in each instance (which consent may be
withheld in Landlord's sole and absolute discretion), shall not be
renewed or extended or replaced upon the expiration of the stated
term thereof and such termination is expected to have a material
adverse effect upon the operations, business prospects, property, or
assets of, liabilities, or the condition of, or Net Patient Revenues
or Non-Inpatient Revenues generated by, such Facility or such Tenant;
or
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(s) if, after any Tenant has obtained approval for
Medicare and/or Medicaid funding, a final unappealable determination
is made by the applicable governmental authority that Tenant shall
have failed to comply with applicable Medicare and/or Medicaid
regulations in the operation of any Facility, as a result of which
failure such Tenant is declared ineligible to receive reimbursements
under the Medicare and/or Medicaid programs;
then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate all of the Leases, or any of them, as Landlord,
in its sole discretion, elects, by giving Notice of such termination, and upon
the expiration of the time, if any, fixed in such Notice, the Term of each Lease
designated by Landlord shall terminate and all rights of any Tenant under such
Lease shall cease. Landlord shall have all rights at law and in equity available
to Landlord as a result of Tenant's breach of any Lease.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Collective Leased
Properties or any portion thereof and take possession of any and all of Tenant's
Personal Property and the Records (subject to any prohibitions or limitations to
disclosure of any such data as described in SECTION 3.1.2(E)) on the applicable
Leased Property, without liability for trespass or conversion (Tenant hereby
waiving any right to notice or hearing prior to such taking of possession by
Landlord) and sell the same at public or private sale, after giving Tenant
reasonable Notice of the time and place of any public or private sale, at which
sale Landlord or its assigns may purchase all or any portion of Tenant's
Personal Property unless otherwise prohibited by law. Unless otherwise provided
by law and without intending to exclude any other manner of giving Tenant
reasonable notice, the requirement of reasonable Notice shall be met if such
Notice is given at least five (5) days before the day of sale. The proceeds from
any such disposition, less all expenses incurred in connection with the taking
of possession, holding and selling of such property (including, reasonable at
torneys' fees) shall be applied as a credit against the indebtedness which is
secured by the security interest granted in SECTION 7.2. Any surplus shall be
paid to Tenant or as otherwise required by law and Tenant shall pay any
deficiency to Landlord, as Additional Charges, upon demand.
12.2 REMEDIES.
Neither (a) the termination of the applicable Lease pursuant to
SECTION 12.1, (b) the repossession of the applicable Leased Property or any
portion thereof, (c) the failure of Landlord, notwithstanding reasonable good
faith efforts, to re-let the applicable Leased Property or any portion thereof,
nor (d) the reletting of all or any portion thereof, shall relieve Tenant of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or re-letting. In the event of any such termination,
Tenant shall forthwith pay to Landlord all Rent due and payable with respect to
the applicable Leased Property to and including the date of such termination.
Thereafter, Tenant, until the end of what would have been the Term of the
applicable Lease in the absence of such termination, and whether or not the
applicable Leased Property or any portion thereof shall have been re-let, shall
be liable to Landlord for, and shall pay
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to Landlord, as current damages, the Rent and other charges which would be
payable hereunder for the remainder of the Term had such termination not
occurred, less the net proceeds, if any, of any re-letting of the applicable
Leased Property, after deducting all expenses in connection with such reletting,
including, without limitation, all repossession costs, brokerage commissions,
legal expenses, attorneys' fees, advertising, expenses of employees, alteration
costs and expenses of preparation for such reletting. Tenant shall pay such
current damages to Landlord monthly on the days on which the Minimum Rent would
have been payable hereunder if the applicable Lease had not been terminated.
Additional Rent for the purposes of this SECTION 12.2 shall be a sum equal to
the amount of the Additional Rent (determined on an annualized basis) payable
for the Fiscal Year immediately preceding the Fiscal Year in which the
termination, re-entry or repossession takes place. If, however, such
termination, re-entry or repossession occurs during the first full Fiscal Year
after the Commencement Date, the Additional Rent for such Leased Property shall
be determined based on the assumption that Additional Rent for such Leased
Property would have continued to accrue at the same rate that it had for the
Fiscal Year immediately prior to such termination, re-entry or repossession
determination.
At any time after such termination, whether or not Landlord shall
have collected any such current damages, as liquidated final damages beyond the
date of such termination, at Landlord's election, Tenant shall pay to Landlord
either (a) an amount equal to the excess, if any, of the Rent and other charges
which would be payable hereunder from the date of such termination (assuming
that, for the purposes of this paragraph, annual payments by Tenant on account
of Impositions would be the same as payments required for the immediately
preceding twelve calendar months, or if less than twelve calendar months have
expired since the Commencement Date, the payments required for such lesser
period projected to an annual amount) for what would be the then unexpired term
of the applicable Lease if the same remained in effect, over the Fair Market
Rental for the same period, or (b) an amount equal to the lesser of (i) the Rent
and other charges that would have been payable for the balance of the Term had
it not been terminated, or (ii) the aggregate of the Rent and other charges
accrued in the twelve (12) months ended next prior to such termination (without
reduction for any free rent or other concession or abatement). In the event the
applicable Lease is so terminated prior to the expiration of the first full year
of the Term, the liquidated damages which Landlord may elect to recover pursuant
to CLAUSE (B) (II) of this paragraph shall be calculated as if such termination
had occurred on the first anniversary of the Commencement Date. Nothing
contained in the applicable Lease shall, however, limit or prejudice the right
of Landlord to prove and obtain in proceedings for bankruptcy or insolvency an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater than, equal to, or less than the
amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (a) relet the
applicable Leased Property or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may at Landlord's option, be
equal to, less than or exceed the period which would otherwise have
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constituted the balance of the Term and may grant concessions or free rent to
the extent that Landlord considers advisable and necessary to relet the same,
and (b) may make such reasonable alterations, repairs and decorations in the
applicable Leased Property or any portion thereof as Landlord, in its sole
judgment, considers it advisable and necessary for the purpose of reletting the
applicable Leased Property; and the making of such alterations, repairs and
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Landlord shall in no event be liable in any way
whatsoever for failure to relet the applicable Leased Property, or, in the event
that the applicable Leased Property is relet, for failure to collect the rent
under such reletting. To the fullest extent permitted by law, Tenant hereby
expressly waives any and all rights of redemption granted under any present or
future laws in the event of Tenant being evicted or dispossessed, or in the
event of Landlord obtaining possession of the applicable Leased Property, by
reason of the violation by Tenant of any of the covenants and conditions of the
applicable Lease.
12.3 TENANT'S WAIVER.
IF THE APPLICABLE LEASE IS TERMINATED PURSUANT TO SECTION 12.1 OR
12.2 HEREOF, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, (A) ANY RIGHT TO A
TRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET
FORTH IN THIS ARTICLE 12, AND (B) THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN
FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 APPLICATION OF FUNDS.
Any payments received by Landlord under any of the provisions of the
applicable Lease during the existence or continuance of any Default or Event of
Default (and any payment made to Landlord rather than Tenant due to the
existence of any Default or Event of Default) shall be applied to the Tenants'
obligations under the applicable Lease and under the other Transaction Documents
in such order as Landlord may determine or as may be prescribed by the laws of
the State.
12.5 FAILURE TO CONDUCT BUSINESS.
For the purpose of determining rental loss damages for Additional
Rent, in the event Tenant shall fail to conduct its business at the applicable
Leased Property for the Primary Intended Use, exact damages or the amount of
Additional Rent being unascertainable, the Additional Rent for such Leased
Property shall be deemed to be equal to the annual amount of the Additional Rent
for the Fiscal Year immediately preceding the Fiscal Year in which such
determination takes place. If, however, such determination occurs during the
first full Fiscal Year after the Commencement Date, the Additional Rent for such
Leased Property shall be determined based on the assumption that Additional Rent
for such Leased Property would have continued to accrue at the same rate that it
had for the period prior to such determination.
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12.6 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT.
If an Event of Default shall have occurred and be continuing,
Landlord, after Notice to Tenant (provided that no such notice shall be required
if Landlord shall reasonably determine immediate action is necessary to protect
person or property), without waiving or releasing any obligation of Tenant, and
without waiving or releasing any Event of Default, may (but shall not be
obligated to), at any time thereafter, make such payment or perform such act for
the account and at the expense of Tenant, and may, to the extent permitted by
law, enter upon the applicable Leased Property or any portion thereof for such
purpose and take all such action thereon as, in Landlord's opinion, may be
necessary or appropriate therefor, including the management of the Facility
located on the applicable Leased Property by Landlord or its designee, and
Tenant hereby irrevocably appoints, in the event of such election by Landlord,
Landlord or its designee as manager of the Facility located on the applicable
Leased Property and its attorney in fact for such purpose, irrevocably and
coupled with an interest, in the name, place and stead of Tenant. No such entry
shall be deemed an eviction of Tenant. All reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by Landlord
in connection therewith, together with interest thereon (to the extent permitted
by law) at the Overdue Rate from the date such sums are paid by Landlord until
repaid, shall be paid by Tenant to Landlord, on demand.
12.7 TRADE NAMES.
If the applicable Lease relating to a Facility is terminated for any
reason Tenant shall not use a Facility Trade Name in the same market in which
such Facility is located in connection with any business that competes with such
Facility.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration of the Term shall be
treated as a daily tenancy at sufferance at a rate equal to 1-1/2 times the
Minimum Rent and the Additional Rent then in effect plus Additional Charges and
other charges herein provided (prorated on a daily basis). Tenant shall also pay
to Landlord all damages (other than consequential damages) sustained by reason
of any such holding over. Otherwise, such holding over shall be on the terms and
conditions set forth in the applicable Lease, to the extent applicable. Nothing
contained herein shall constitute the consent, express or implied, of Landlord
to the holding over of Tenant after the expiration or earlier termination of the
applicable Lease.
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ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in the applicable Lease, and such default
shall continue for a period of thirty (30) days after Notice thereof from Tenant
to Landlord and any applicable Facility Mortgagee, or such additional period as
may be reasonably required to correct the same, Tenant may declare the
occurrence of a "LANDLORD DEFAULT" by a second Notice to Landlord and to such
Facility Mortgagee. Thereafter, Tenant may forthwith cure the same and, subject
to the provisions of the following paragraph, invoice Landlord for costs and
expenses (including reasonable attorneys' fees and court costs) incurred by
Tenant in curing the same, together with interest from the date Landlord
receives Tenant's invoice, at a rate equal to the lesser of the Overdue Rate or
the maximum rate allowed by law. Tenant shall have no right to terminate the
applicable Lease for any default by Landlord hereunder and no right, for any
such default, to offset or counterclaim against any Rent or other charges due
hereunder.
If Landlord shall in good faith dispute the occurrence of any
Landlord Default and Landlord, before the expiration of the applicable cure
period, shall give Notice thereof to Tenant, setting forth, in reasonable
detail, the basis therefor, no Landlord Default shall be deemed to have occurred
and Landlord shall have no obligation with respect thereto until final adverse
determination thereof. If Tenant and Landlord shall fail, in good faith, to
resolve the dispute within ten (10) days after Landlord's Notice of dispute,
either may submit the matter for resolution to a court of competent
jurisdiction.
ARTICLE 15
PURCHASE OF LEASED PROPERTY
In the event Tenant shall purchase the applicable Leased Property
from Landlord pursuant to the terms of the applicable Lease, Landlord shall,
upon receipt from Tenant of the applicable purchase price, together with full
payment of any unpaid Rent and other charges due and payable with respect to any
period ending on or before the date of the purchase, and so long as no Default
shall have occurred and be continuing at such time, deliver to Tenant an
appropriate deed or other instruments, conveying the entire interest of Landlord
in and to such Leased Property to Tenant, free and clear of all encumbrances
created through the act or omission of Landlord other than (i) those liens, if
any, which Tenant has agreed in writing to accept and take title subject to, and
(ii) encumbrances imposed on such Leased Property under SECTION 5.5 hereof. The
difference between the applicable purchase price and the total cost of
discharging the encumbrances described in CLAUSE (I) above shall be paid in cash
to Landlord or as Landlord may direct, in federal or other immediately available
funds. Other than as specifically provided above, such Leased Property shall be
conveyed to Tenant on an "as is" basis, and in its then physical
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condition. The closing of any such sale shall be subject to all terms and
conditions with respect thereto set forth in the applicable Lease and in the
other Transaction Documents, and shall, unless waived by Tenant, be contingent
upon and subject to Tenant's obtaining all required governmental consents and
approvals for such transfer. All expenses of such conveyance, including, without
limitation, all transfer and sales taxes, documentary fees, the fees and
expenses of counsel to Landlord and the cost of any title examination or title
insurance, shall be paid by Tenant.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 SUBLETTING AND ASSIGNMENT.
Except as provided in SECTION 16.3 below, Tenant shall not, without
the prior written consent of a majority of the Independent Trustees and a
majority of the Trustees, assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer the applicable Lease or sublease (which term shall be deemed
to include the granting of concessions and licenses and the like), all or any
part of the applicable Leased Property or suffer or permit the applicable Lease
or the leasehold estate created hereby or thereby or any other rights arising
under the applicable Lease to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or occupancy of the
applicable Leased Property by anyone other than Tenant, or the applicable Leased
Property to be offered or advertised for assignment or subletting. For purposes
of this SECTION 16.1, an assignment of the applicable Lease shall be deemed to
include any Change in Control of Tenant or any transaction pursuant to which
Tenant or Newco is merged or consolidated with another entity or pursuant to
which all or substantially all of Tenant's or Newco's assets are transferred to
any other entity, as if such Change in Control or transaction were an assignment
of the applicable Lease.
If the applicable Lease is assigned or if the applicable Leased
Property or any part thereof are sublet (or occupied by anybody other than
Tenant and its employees) Landlord, after an Event of Default occurs and is
continuing, may collect the rents from such assignee, subtenant or occupant, as
the case may be, and apply the net amount collected to the Rent herein reserved,
but no such collection shall be deemed a waiver of the provisions set forth in
the first paragraph of this SECTION 16.1, the acceptance by Landlord of such
assignee, subtenant or occupant, as the case may be, as a tenant, or a release
of Tenant from the future performance by Tenant of its covenants, agreements or
obligations contained in the applicable Lease.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder, and no consent to any subletting or
assignment in a particular instance shall be deemed to be a waiver of the
prohibition set forth in this SECTION 16.1. No assignment, subletting or
occupancy shall affect the Primary Intended Use. Any subletting, assignment or
other transfer
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of Tenant's interest in the applicable Lease in contravention of this SECTION
16.1 shall be voidable at Landlord's option.
16.2 REQUIRED SUBLEASE PROVISIONS.
Any sublease of all or any portion of the applicable Leased Property
shall provide (a) that it is subject and subordinate to the applicable Lease and
to the matters to which the applicable Lease and such Lease is or shall be
subject or subordinate; (b) that in the event of termination of such Lease or
reentry or dispossession of Tenant by Landlord under such Lease, Landlord may,
at its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Facility
Mortgagee, as holder of a mortgage or as Landlord under the applicable Lease, if
such mortgagee succeeds to that position, shall (i) be liable for any act or
omission of Tenant under such sublease, (ii) be subject to any credit,
counterclaim, offset or defense which theretofore ac crued to such subtenant
against Tenant, (iii) be bound by any previous modification of such sublease not
consented to in writing by Landlord or by any previous prepayment of more than
one (1) month's Rent, (iv) be bound by any covenant of Tenant to undertake or
complete any construction of such Leased Property or any portion thereof, (v) be
required to account for any security deposit of the subtenant other than any
security deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person occupying such Leased Property or any
part thereof; and (c) in the event the subtenant receives a written Notice from
Landlord or the Facility Mortgagee, if any, stating that an Event of Default has
occurred and is continuing, the subtenant shall thereafter be obligated to pay
all rentals accruing under said sublease directly to the party giving such
Notice or as such party may direct. All rentals received from the subtenant by
Landlord or the Facility Mortgagee, if any, as the case may be, shall be
credited against the amounts owing by Tenant under the applicable Lease; and
such sublease shall provide that the subtenant thereunder shall, at the request
of Landlord, execute a suitable instrument in confirmation of such agreement to
attorn. An original counterpart of each such sublease and assignment and
assumption, duly executed by Tenant and such subtenant or assignee, as the case
may be, in form and substance satisfactory to Landlord, shall be delivered
promptly to Landlord and (a) in the case of an assignment, the assignee shall
assume in writing and agree to keep and perform all of the terms of the
applicable Lease on the part of Tenant to be kept and performed and shall be,
and become, jointly and severally liable with Tenant for the performance thereof
and (b) in case of either an assignment or subletting, Tenant shall remain
primarily liable, as principal rather than as surety, for the prompt payment of
the Rent and for the performance and observance of all of the covenants and
conditions to be performed by Tenant hereunder.
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The provisions of this SECTION 16.2 shall not be deemed a waiver of
the provisions set forth in the first paragraph of SECTION 16.1.
16.3 PERMITTED SUBLEASE.
Notwithstanding the foregoing, but subject to the provisions of
SECTION 16.4 below and any other express conditions or limitations set forth
herein, Tenant may, in each instance after Notice to Landlord, sublease space at
the applicable Leased Property for laundry, commissary or child care purposes or
similar concessions in furtherance of the Primary Intended Use, so long as such
sublease would not reduce the number of licensed beds at the applicable
Facility, would not violate or affect any Legal Requirement or Insurance
Requirement, and Tenant has provided such additional insurance coverage
applicable to the activities to be conducted in such subleased space as is
acceptable to Landlord (and any Facility Mortgagee) in its discretion.
16.4 SUBLEASE LIMITATION.
Anything contained in this Lease to the contrary notwithstanding,
Tenant shall not sublet the applicable Leased Property on any basis such that
the rental to be paid by the sublessee thereunder would be based, in whole or in
part, on either (a) the income or profits derived by the business activities of
the sublessee, or (b) any other formula such that any portion of the sublease
rental would fail to qualify as "rents from real property" within the meaning of
Section 856(d) of the Code, or any similar or successor provision thereto.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 ESTOPPEL CERTIFICATES
At any time and from time to time, upon not less than ten (10) days
prior Notice by Landlord, Tenant shall furnish to Landlord an Officer's
Certificate certifying that the applicable Lease is unmodified and in full force
and effect (or that the applicable Lease is in full force and effect as modified
and setting forth the modifications), the date to which the Rent has been paid,
that Tenant is not in default in the performance or observance of any of the
terms of the applicable Lease and that no event exists which with the giving of
notice, lapse of time, or both, would constitute a Default or an Event of
Default, or if a Default or an Event of Default shall exist, specifying in
reasonable detail such Default or an Event of Default, and the steps being taken
to remedy the same, and such additional information as Landlord may reasonably
request. Any such certificate furnished pursuant to this SECTION 17.1 may be
relied upon by Landlord and any prospective purchaser or mortgagee of the
applicable Leased Property.
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17.2 FINANCIAL STATEMENTS.
Tenant shall furnish the following statements to Landlord:
(a) within forty-five (45) days after each of the
first three quarters of any Fiscal Year, the
most recent Consolidated Financials and the
most recent unaudited financial statements of
Tenant prepared on a Facility by Facility
basis, in each case accompanied by the
Financial Officer's Certificate;
(b) within ninety (90) days after the end of each
Fiscal Year, the most recent Consolidated
Financials for such year, including the most
recent financial statements of Tenant prepared
on a Facility by Facility basis, in each case
certified by or any other independent certified
public accountant reasonably satisfactory to
Landlord and accompanied by the Financial
Officer's Certificate;
(c) within thirty (30) days after the end of each
calendar month, an unaudited statement of
income prepared on a Facility by Facility
basis, including occupancy percentages and
payor mix, accompanied by the Financial
Officer's Certificate;
(d) promptly after the sending or filing thereof,
copies of all reports which Tenant sends to its
security holders generally, and copies of all
periodic reports which Tenant files with the
SEC or any stock exchange on which its shares
are listed or traded;
(e) promptly after the delivery thereof to Tenant,
or its management, a copy of any management
letter or written report prepared by the
certified public accountants with respect to
the financial condition, operations, business
or prospects of Tenant.
(f) at any time and from time to time upon not less
than twenty (20) days Notice from Landlord,
Tenant will furnish to Landlord any
Consolidated Financials or any other financial
reporting information required to be filed by
Landlord with any securities and exchange
commission, the SEC or any successor agency, or
any other governmental authority, or required
pursuant to any order issued by any court
governmental authority or arbitrator in any
litigation to which Landlord is a party, for
purposes of compliance therewith; and
(g) promptly upon notice from Landlord, such other
information concerning the business, financial
condition and affairs of Tenant as Landlord may
request from time to time.
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Landlord may at any time, and from time to time, provide any Facility Mortgagee
with copies of any of the foregoing statements.
17.3 GENERAL OPERATIONS.
Tenant covenants and agrees to furnish to Landlord:
17.3.1 REIMBURSEMENT, LICENSURE, ETC.
Within thirty (30) days after receipt or modification thereof, copies
of
(a) all licenses authorizing Tenant to
operate the Facility for its Primary
Intended Use;
(b) all Medicare and Medicaid
certifications, together with
provider agreements and all material
correspondence relating thereto with
respect to the Facility (excluding,
however, correspondence which may be
subject to any attorney-client
privilege);
(c) a Nursing Home Administrator License
for the individual employed in such
capacity with respect to the
Facility; and
(d) all reports of surveys, statements
of deficiencies, plans of
correction, and all material
correspondence relating thereto,
including, without limitation, all
reports and material correspondence
concerning compliance with or
enforcement of licensure,
Medicare/Medicaid, and accreditation
requirements, including physical
environment and Life Safety Code
survey reports (excluding, however,
correspondence which may be subject
to any attorney-client privilege);
and
(e) with reasonable promptness, such
other confirmation as to the
Licensure and Medicare and Medicaid
participation of Tenant as Landlord
may reasonably request from time to
time.
17.3.2 ANNUAL BUDGETS.
Not less than thirty (30) days prior to commencement of any Fiscal
Year, proposed annual income and ordinary expense and capital improvement
budgets setting forth projected income and costs and expenses projected to be
incurred by Tenant in managing, owning, maintaining and operating the Facility
during the next succeeding Fiscal Year.
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ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the applicable Leased Property during usual business hours upon not less
than twenty-four (24) hours' Notice (provided that no such notice shall be
required if Landlord shall reasonably determine immediate action is necessary to
protect person or property), and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of the applicable Lease; PROVIDED that
any inspection or repair by Landlord or its representatives will not
unreasonably interfere with Tenant's use and operation of applicable Leased
Property; FURTHER PROVIDED that in the event of an emergency, as determined by
Landlord in its sole discretion, prior notice shall not be necessary.
ARTICLE 19
APPRAISAL
19.1 APPRAISAL PROCEDURE.
In the event that it becomes necessary to determine the Fair Market
Value or Fair Market Rental of any property for any purpose of the applicable
Lease, and the parties cannot agree amongst themselves on such Fair Market Value
or Fair Market Rental, Tenant may request that Landlord select, or Landlord may
on its own initiative select, a Qualified Appraiser (as hereinafter defined). If
Tenant does not accept the Fair Market Value or Fair Market Rental, as the case
may be, of such property as of the relevant date as determined by such Qualified
Appraiser, Tenant may, within ten (10) days after receiving the report of such
Qualified Appraiser, by written notice to Landlord, appoint a second Qualified
Appraiser. If Tenant does not so appoint a second Qualified Appraiser within
such ten (10) day period, Tenant shall be deemed to have accepted the Fair
Market Value or Fair Market Rental determined by the first Qualified Appraiser.
The two appraisers so designated shall meet within ten (10) days after the
second Qualified Appraiser is designated, and, if within ten (10) days after the
second Qualified Appraiser is designated, the two appraisers do not agree upon
the Fair Market Value or Fair Market Rental, as the case may be, of any property
as of the relevant date, the two appraisers shall designate a third Qualified
Appraiser, within ten (10) days thereafter. In the event that the two appraisers
are unable to agree upon the appointment of a third Qualified Appraiser within
such ten (10) day period, either Landlord or Tenant, on behalf of both, may then
request appointment of such appraiser by the then president of the American
Arbitration Association. In the event of a failure, refusal or inability of any
appraiser to act, a new Qualified Appraiser shall be appointed in his stead,
which appointment shall be made in the same manner as hereinabove provided for
the appointment of such appraiser so failing, refusing or being unable to act.
In the event that all appraisers cannot agree upon such value within ten (10)
days as aforesaid, each appraiser shall submit his appraisal of such value to
the other two appraisers in writing, and such value shall be determined by
calculating the average
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of the two numerically closest (or, if the values are equidistant, all three)
values determined by the three appraisers.
"QUALIFIED APPRAISER" shall mean any disinterested person who is a
member in good standing of the American Institute of Real Estate Appraisers or
the American Society of Real Estate Counselors (or the successor to either of
such organizations) and who has had not less than ten (10) years experience in
appraising and valuing, commercial buildings in the State.
The costs (other than Landlord's counsel fees) of each such appraisal
shall be borne by Tenant and shall be included as part of the Additional
Charges. Upon determining such value, the appraisers shall promptly notify
Landlord and Tenant in writing of such determination. If any party shall fail to
appear at the hearings appointed by the appraisers, the appraisers may act in
the absence of such party.
The determination of the board of appraisers (or the single Qualified
Appraiser, as appropriate) made in accordance with the foregoing provisions
shall be final and binding upon the parties, such determination may be entered
as an award in arbitration in a court of competent jurisdiction, and judgment
thereon may be entered.
19.2 LANDLORD'S RIGHT TO APPRAISAL.
Landlord shall have the right, exercisable twice at any time during
the Term, to appoint a Qualified Appraiser (which may include, without
limitation, American Appraisal Associates) to perform a complete appraisal of
the applicable Leased Property, (each such appraisal to include complete
valuations of such Leased Property based upon (a) the "Cost Approach", (b) the
"Market Approach" and (c) the "Income Approach"), which appraisal shall meet all
requirements of any state or Federal bank regulatory authority that Landlord
considers relevant or any Facility Mortgagee. The costs of each such appraisal
shall be borne by Tenant and shall be included as part of the Additional
Charges.
ARTICLE 20
LANDLORD'S OPTION TO PURCHASE
20.1 LANDLORD'S OPTION TO PURCHASE THE TENANT'S PERSONAL
PROPERTY; TRANSFER OF LICENSES.
Effective on not less than fifteen (15) days' prior notice given at
least sixty (60) days prior to expiration of the Term (or such shorter period as
shall be appropriate if the applicable Lease is terminated prior to its
expiration date), Landlord shall have the option to purchase all (but not less
than all) of Tenant's Personal Property (except motor vehicles), if any, at the
expiration or termination of the applicable Lease, for an amount equal to the
then fair market value thereof
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(determined in accordance with the appraisal procedures set forth in ARTICLE
19), subject to, and with appropriate price adjustments for, all equipment
leases, conditional sale contracts, security interests and other encumbrances to
which such Tenant's Personal Property is subject. Tenant's Personal Property
will be conveyed to Landlord on an "as-is" basis, in its then current condition
and state of repair. Tenant shall provide Landlord with warranties of title,
reflecting no encumbrances as to which adjustments to the purchase price
thereof, as required by the previous sentence, have not been made. Failure of
Landlord to notify Tenant of the election of its option to purchase Tenant's
Personal Property by the fifteenth day prior to the termination of the
applicable Lease shall be deemed to constitute a waiver of Landlord's right to
purchase Tenant's Personal Property at the applicable Leased Property. Upon the
expiration or sooner termination of the applicable Lease, or upon management of
the Facility located on the applicable Leased Property by the Landlord or its
designee, Tenant shall use all reasonable efforts to transfer and assign to
Landlord or its designee, or assist Landlord or its designee in obtaining, any
contracts, licenses, and certificates required for the then operation of such
Facility.
ARTICLE 21
FACILITY MORTGAGES
21.1 LANDLORD MAY GRANT LIENS.
Without the consent of Tenant, Landlord may, subject to the terms and
conditions set forth in this SECTION 21.1, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance or title
retention agreement ("ENCUMBRANCE") upon the applicable Leased Property, or any
portion thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing. Any such Encumbrance shall include the right
to prepay (whether or not subject to a prepayment penalty) and shall provide
(subject to SECTION 21.2 below) that it is subject to the rights of Tenant under
the applicable Lease, including the rights of Tenant to acquire such Leased
Property pursuant to the applicable provisions of the applicable Lease (except
Tenant's right of first refusal to purchase such Leased Property shall not apply
upon foreclosure or transfer in lieu thereof, provided, that any such purchaser
or transferee (a) shall take title subject to Tenant's rights to acquire such
Leased Property pursuant to the applicable Lease, (b) shall agree to give Tenant
the same notice, if any, given to Landlord of any default or acceleration of any
obligation with respect to such Encumbrance, and (c) shall agree to permit
Tenant to appear by its representative and bid at any sale in foreclosure made
with respect to any such Encumbrance).
21.2 SUBORDINATION OF LEASE.
Subject to SECTION 21.1 above, the applicable Lease, any and all
rights of Tenant hereunder, are and shall be subject and subordinate to any
ground or master lease, and all renewals, extensions, modifications and
replacements thereof, and to all mortgages and deeds of trust, which may now or
hereafter affect the applicable Leased Property or any improvements
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thereon and/or any of such leases, whether or not such mortgages or deeds of
trust shall also cover other lands and/or buildings and/or leases, to each and
every advance made or hereafter to be made under such mortgages and deeds of
trust, and to all renewals, modifications, replacements and extensions of such
leases and such mortgages and deeds of trust and all consolidations of such
mortgages and deeds of trust. This Section shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any deed of trust or any of their
respective successors in interest may reasonably request to evidence such
subordination. Any lease to which the applicable Lease is, at the time referred
to, subject and subordinate is herein called "SUPERIOR LEASe" and the lessor of
a Superior Lease or its successor in interest at the time referred to, is herein
called "SUPERIOR LANDLORD" and any mortgage or deed of trust to which the
applicable Lease is, at the time referred to, subject and subordinate, is herein
called "SUPERIOR MORTGAGE" and the holder, trustee or beneficiary of a Superior
Mortgage is herein called "SUPERIOR MORTGAGEE".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under the applicable Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise, then at the
request of such party so succeeding to Landlord's rights (herein called
"SUCCESSOR LANDLORD") and upon such Successor Landlord's written agreement to
accept Tenant's attornment, Tenant shall attorn to and recognize such Successor
Landlord as Tenant's landlord under the applicable Lease, and shall promptly
execute and deliver any instrument that such Successor Landlord may reasonably
request to evidence such attornment. Upon such attornment, the applicable Lease
shall continue in full force and effect as a direct lease between the Successor
Landlord and Tenant upon all of the terms, conditions and covenants as are set
forth in the applicable Lease, except that the Successor Landlord (unless
formerly the landlord under the applicable Lease or its nominee or designee)
shall not be (a) liable in any way to Tenant for any act or omission, neglect or
default on the part of Landlord under the applicable Lease, (b) responsible for
any monies owing by or on deposit with Landlord to the credit of Tenant, (c)
subject to any counterclaim or setoff which theretofore accrued to Tenant
against Landlord, (d) bound by any modification of the applicable Lease
subsequent to such Superior Lease or Mortgage, or by any previous prepayment of
Minimum Rent or Additional Rent for more than one (1) month, which was not
approved in writing by the Superior Landlord or the Superior Mortgagee thereto,
(e) liable to the Tenant beyond the Successor Landlord's interest in the
applicable Leased Property and the rents, income, receipts, revenues, issues and
profits issuing from such Leased Property, (f) responsible for the performance
of any work to be done by the Landlord under the applicable Lease to render the
applicable Leased Property ready for occupancy by Tenant, or (g) required to
remove any Person occupying the applicable Leased Property or any part thereof,
except if such person claims by, through or under the Successor Landlord. Tenant
agrees at any time and from time to time to execute a suitable instrument in
confirmation of Tenant's agreement to attorn, as aforesaid.
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21.3 NOTICE TO MORTGAGEE AND GROUND LANDLORD.
Subsequent to the receipt by Tenant of notice from any Person that it
is a Facility Mortgagee, or that it is the ground lessor under a lease with
Landlord, as ground lessee, which includes the applicable Leased Property as
part of the demised premises, no notice from Tenant to Landlord as to the
applicable Leased Property shall be effective unless and until a copy of the
same is given to such Facility Mortgagee or ground lessor, and the curing of any
of Landlord's defaults by such Facility Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 22
ADDITIONAL COVENANTS OF TENANT
22.1 PROMPT PAYMENT OF INDEBTEDNESS.
Tenant will (a) pay or cause to be paid when due all payments of
principal of and premium and interest on Indebtedness for money borrowed and
will not permit or suffer any such Indebtedness to become or remain in default
beyond any applicable grace or cure period, (b) pay or cause to be paid when due
all lawful claims for labor and rents, (c) pay or cause to be paid when due all
trade payables and (d) pay or cause to be paid when due all other Indebtedness
upon which it is or becomes obligated, except, in each case, other than that
referred to in clause (a), to the extent payment is being contested in good
faith by appropriate proceedings in accordance with ARTICLE 8 and if Tenant
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP or unless and until foreclosure, distraint sale or other
similar proceedings shall have been commenced.
22.2 CONDUCT OF BUSINESS.
Tenant will not engage in any business other than the ownership and
operation of (a) the applicable Leased Property, or (b) any other health care
properties owned by Landlord and leased to Tenant or given as security for
Indebtedness owed to Landlord, and will do or cause to be done all things
necessary to preserve, renew and keep in full force and effect and in good
standing its corporate existence and its rights and licenses necessary to
conduct such business.
22.3 ACCREDITATION.
Tenant agrees to make diligent efforts to secure accreditation by the
Joint Commission on Accreditation of Health Care Organizations or the Commission
of Accreditation of Rehabilitation Facilities for the Facility maintained upon
the applicable Leased Property such accreditation to be obtained as soon as
reasonably practicable.
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22.4 MAINTENANCE OF ACCOUNTS AND RECORDS.
Tenant will keep true records and books of account in which full,
true and correct entries will be made of dealings and transactions in relation
to the business and affairs of Tenant in accordance with GAAP. Tenant will apply
accounting principles in the preparation of the financial statements of Tenant
which, in the judgment of and the opinion of its independent public accountants,
are in accordance with GAAP, except for changes approved by such independent
public accountants. Tenant will provide to Landlord either in a footnote to the
financial statements delivered under SECTION 17.2 which relate to the period in
which such change occurs, or in separate schedules to such financial statements,
information sufficient to show the effect of any such changes on such financial
statements.
22.5 NOTICE OF CHANGE OF NAME, ADMINISTRATOR, ETC.
Tenant will promptly give Notice to Landlord of any change in (a) the
name (operating or otherwise) of Tenant or the applicable Facility, (b) the
individual licensed as administrator of the Facility, (c) the number of beds in
any bed category for which the applicable Facility is licensed or the number of
beds in any bed category available for use at the applicable Facility, and (d)
the patient and/or child care services that are offered at the applicable
Facility.
22.6 NOTICE OF LITIGATION, POTENTIAL EVENT OF DEFAULT, ETC.
Tenant will promptly give Notice to Landlord of any litigation or any
administrative proceeding to which it may hereafter become a party which
involves a potential liability equal to or greater than $50,000, or which may
otherwise result in any material adverse change in the business, operations,
property, prospects, results of operation or condition, financial or other, of
Tenant. Forthwith upon Tenant obtaining knowledge of any Default, Event of
Default or event of default under any agreement relating to Indebtedness for
money borrowed in an aggregate amount exceeding, at any one time, Ten Thousand
Dollars ($10,000), or any event or condition that would be required to be
disclosed in a current report filed by Community Care or Tenant on Form 8-K or
in Part II of a quarterly report on Form 10-Q if Tenant were required to file
such reports under the Securities Exchange Act of 1934, as amended, Tenant will
furnish a Notice to Landlord specifying the nature and period of existence
thereof and what action Tenant has taken or is taking or proposes to take with
respect thereto.
22.7 INDEBTEDNESS OF TENANT.
Tenant shall not create, incur, assume or guarantee, or permit to
exist, or become or remain liable directly or indirectly upon, any Indebtedness
except the following:
(a) Indebtedness of Tenant to Landlord;
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(b) unsecured Indebtedness of Tenant, other than for money
borrowed, incurred in the ordinary course of business;
(c) Indebtedness of Tenant for taxes, assessments,
governmental charges or levies, to the extent that payment thereof shall not at
the time be required to be made in accordance with the provisions of ARTICLE 8;
(d) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period and in
respect of which execution thereof shall have been stayed pending such appeal or
review, or (ii) which are fully covered by insurance payable to Tenant, or (iii)
which are for an amount not in excess of $50,000 in the aggregate at any one
time outstanding, and (x) which have been in force for not longer than the
applicable appeal period, so long as execution is not levied thereunder, or (y)
in respect of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of ARTICLE 8, and in
respect of which execution thereof shall have been stayed pending such appeal or
review;
(e) unsecured borrowings of Tenant from its Affiliates which
are by their terms expressly subordinate pursuant to a Subordination Agreement
to the payment and performance of Tenant's obligations under the Leases; or
(f) Indebtedness (including without limitation, accrued and
unpaid manage ment fees) of Tenant owed to Community Care or any wholly-owned
Subsidiary of Community Care, PROVIDED that the payment of such Indebtedness
shall be subject to the terms of a Subordination Agreement among Tenant as
debtor, Community Care or such wholly-owned Subsidiary as subordinate creditor
and Landlord as senior creditor, which subordination agreement shall be
satisfactory to Landlord in its sole and absolute discretion; or
(g) Indebtedness of Tenant permitted by clause (a) or (b) of
SECTION 22.12 which is obtained from a Lending Institution which is not an
Affiliate of Tenant and which may be secured as provided in such clauses;
provided that at the time of incurrence thereof and after giving effect thereto,
Tenant, on a pro forma basis, would have had a ratio of current assets to
current liabilities, determined in accordance with GAAP, of at least 1 to 1, if
such Indebtedness had been outstanding on the last day of the most recently
completed fiscal quarter of Tenant and any Indebtedness which is to be satisfied
with the proceeds of such Indebtedness had been satisfied as of such day; or
(h) Indebtedness of Tenant expressly consented to in writing
by Landlord.
22.8 DISTRIBUTIONS, PAYMENTS TO AFFILIATES, ETC.
Tenant will not declare, order, pay or make, directly or indirectly,
any Distributions or any payment to any Affiliate (including payments in the
ordinary course of business and payments
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pursuant to management agreements with any such Affiliate) or set apart any sum
or property therefor, or agree to do so, if, at the time of such proposed
action, or immediately after giving effect thereto, (a) any event or condition
shall exist which constitutes a Default or an Event of Default or (b) the
aggregate amount of all such Distributions, from and after the Commencement Date
shall exceed the sum of one hundred percent (100%) of the net income of Tenant,
determined on a combined basis, for the period from the Commencement Date
through the date of the proposed Distribution, determined after provision for
taxes and before extraordinary items in accordance with GAAP.
22.9 INVESTMENTS.
Tenant shall not make, or permit to remain outstanding, at any time
any Investment (including without limitation, the formation of or investment in
any Subsidiary or the acquisition of any business) except the following:
(a) Marketable direct full faith and credit obligations of,
and marketable obligations guaranteed by, the United States of America, or any
agency or instrumentality thereof, which mature within one year from the date of
acquisition thereof;
(b) Marketable direct full faith and credit obligations of
any state of the United States of America, or any county, city, town, township
or other governmental subdivision of any such state, which mature within one
year from the date of acquisition thereof, provided, that such obligations are
accorded a rating within one of the three highest grades by Moody's Investors
Service, Inc. or Standard & Poor's Corporation;
(c) Commercial paper maturing no more than two hundred and
seventy (270) days from the date of issue, provided that such paper is accorded
a rating within the highest category by Moody's Investors Service, Inc. or
Standard & Poor's Corporation; or
(d) Certificates of deposit which have a remaining term to
maturity at the time of purchase of no more than one year (or which are subject
to a repurchase agreement with one of the banks or trust companies described in
this PARAGRAPH (D) exercisable within one year from the time of purchase) issued
by banks or trust companies organized under the laws of the United States of
America or a State thereof and which are member banks of the Federal Reserve
System, and have aggregate capital, surplus and undivided profits of at least
$100,000,000 and the long term obligations of which carry a rating of "A" or
better by Moody's Investors Service, Inc. or Standard & Poor's Corporation;
(e) Bonds or debentures which have a remaining term to
maturity at the time of purchase of no more than one year, issued by a
corporation, other than Community Care or an Affiliate thereof, organized under
the laws of a State of the United States or the District of Columbia; PROVIDED,
that such obligations carry a rating of "A" or better by Moody's Investors
Service, Inc. or Standard & Poor's Corporation.
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22.10 PROHIBITED TRANSACTIONS.
Tenant shall not permit to exist or enter into any agreement or
arrangement whereby it engages in a transaction of any kind with any Affiliate
of Tenant, except on terms and conditions which are not less favorable to Tenant
than those on which similar transactions between unaffiliated parties could
fairly be expected to be entered into on an arms-length basis except, Tenant may
enter into a Management Agreement with its Affiliates without regard to this
SECTION 22.10 provided such Management Agreement is entered into in compliance
with the provisions of SECTION 22.11.
22.11 MANAGEMENT OF LEASED PROPERTY.
Tenant shall not enter into any Management Agreement unless the terms
thereof have been previously approved in writing by Landlord, and such approval
shall be in Landlord's sole discretion. All management fees, payments in
connection with any extension of credit and fees for services provided in
connection with the operation of the applicable Facility, payable by Tenant, to
(a) any Guarantor (or any of its Affiliates) or (b) any Affiliates of Tenant,
shall be subordinated to all of the obligations of Tenant due under the
applicable Lease pursuant to a Subordination Agreement. Tenant shall not agree
to any change in the Manager of the applicable Leased Property and/or the
applicable Facility, to any change in the Management Agreement, terminate any
Management Agreement or permit the Manager to assign the Management Agreement
without the prior written approval of Landlord in each instance, which approval
shall be subject to Landlord's sole and absolute discretion. The Management
Agreement shall provide that Landlord shall be provided notice of any defaults
thereunder and, at Landlord's option, an opportunity to cure such default; all
in form and substance satisfactory to Landlord in its sole and absolute
discretion. If Landlord shall cure any of Tenant's defaults under the Management
Agreement, the cost of such cure shall be payable upon demand by Tenant to
Landlord with interest accruing from the demand date at the Overdue Rate and the
Landlord shall have the same rights and remedies for failure to pay such costs
on demand as for Tenant's failure to pay Minimum Rent or Additional Rent. Tenant
shall deliver to Landlord any instrument requested by Landlord to implement the
intent of the foregoing provision.
22.12 LIENS AND ENCUMBRANCES. Except as permitted by SECTION 7.1,
Tenant shall not create or incur or suffer to be created or incurred or to exist
any Lien on the Leases, Tenant's Personal Property or any of its other
respective assets, properties, rights or income, or any of its interest therein,
now or at any time hereafter owned, other than:
(a) Security interests securing the purchase price of
equipment or personal property acquired after the Commencement Date;
provided, however, that (i) such Lien shall at all times be confined
solely to the asset in question, (ii) the aggregate principal amount
of Indebtedness secured by any such Lien does not exceed the cost of
acquisition or construction of the property subject thereto; and
(iii) the aggregate principal amount of
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all Indebtedness secured by any such Lien shall not exceed
$__________ at any one time outstanding; or
(b) Security interests in accounts receivable; provided,
however, that (i) such Lien shall at all times be confined solely to
such assets, (ii) the aggregate principal amount of Indebtedness
secured by any such Lien shall not exceed 65% of the fair market
value of such accounts receivable, (iii) the incurrence of the
Indebtedness so secured complied with CLAUSE (G) of SECTION 22.7 and
(iv) the Person issuing such Indebtedness becomes party to an
intercreditor agreement with Landlord, the terms and conditions of
which are satisfactory to Landlord.
(c) Permitted Encumbrances.
22.13 MERGER; SALE OF ASSETS; ETC. Tenant shall not (i) sell, lease
(as lessor or sublessor), transfer or otherwise dispose of, or abandon, all or
any material portion of its assets (including capital stock) or business to any
Person, (ii) merge into or with or consolidate with any other entity, or (iii)
sell, lease (as lessor or sublessor), transfer or otherwise dispose of, or
abandon, any personal property or fixtures or any real property, provided that,
notwithstanding the provisions of clause (iii), Tenant may dispose of equipment
or fixtures which have become inadequate, obsolete, worn-out, unsuitable,
undesirable or unnecessary, provided substitute equipment or fixtures having
equal or greater value and utility (but not necessarily having the same
function) have been provided.
22.14 DEFINITIONS.
When used in this ARTICLE 22 the following terms shall have the
respective meanings provided therefor and, unless otherwise specifically
indicated, shall be deemed to relate to Tenant:
(a) The term "DISTRIBUTIONS" shall mean (i) any declaration
or payment of any dividend (except dividends payable in common stock of Tenant)
on or in respect of any shares of any class of capital stock of Tenant, (ii) any
purchase, redemption retirement or other acquisition of any shares of any class
of capital stock of a corporation, (iii) any other distribution on or in respect
of any shares of any class of capital stock of a corporation, or (iv) any return
of capital to shareholders.
(b) The term "INDEBTEDNESS" shall mean all obligations,
contingent or otherwise, which in accordance with GAAP should be reflected on
the obligor's balance sheet as liabilities.
(c) The term "INVESTMENT" shall mean all loans, advances,
extensions of credit (except for accounts and notes receivable for merchandise
sold or services furnished in the ordinary course of business, and amounts paid
in advance on account of the purchase price of merchandise to be delivered to
the payor within one year of the date of the advance), or purchases
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of stock, notes, bonds or other securities or evidences of indebtedness or
capital contribution to any Person, whether in cash or other property. The
amount of an Investment shall be its cost (the amount of cash or the fair market
value of other property given in exchange therefor), whether or not written or
charged off or sold or otherwise disposed of, except to the extent such cost
shall have been paid to Tenant by a Person in which Tenant had no present or
prospective financial interest at the time of such payment.
(d) "TANGIBLE NET WORTH" shall mean the excess of total
assets over total liabilities, total assets and total liabilities each to be
determined in accordance with GAAP, EXCLUDING, HOWEVER, from the determination
of total assets: (i) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, and other similar intangibles; (ii) all
deferred charges or unamortized debt discount and expense; (iii) all reserves
carried and not deducted from assets; (iv) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any subsidiary; (v) securities which are not readily marketable; (vi) any
write-up in the book value of any asset resulting from a revaluation thereof
subsequent to the Commencement Date; and (vii) any items not included in clauses
(i) through (vi) above that are treated as intangibles in conformity with GAAP.
ARTICLE 23
MISCELLANEOUS
23.1 LIMITATION ON PAYMENT OF RENT.
All agreements between Landlord and Tenant herein are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of Rent, or otherwise, shall the Rent or any other
amounts payable to Landlord under this Lease or any of the other Transaction
Documents exceed the maximum permissible under applicable law, the benefit of
which may be asserted by Tenant as a defense, and if, from any circumstance
whatsoever, fulfillment of any provision of the applicable Lease or any of the
other Transaction Documents, at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by law, or if
from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, IPSO FACTO, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of the Transaction Documents and any other
agreements between Landlord and Tenant.
23.2 NO WAIVER.
No failure by Landlord to insist upon the strict performance of any
term hereof or to exercise any right, power or remedy consequent upon a breach
thereof, and no acceptance of full
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or partial payment of Rent during the continuance of any such breach, shall
constitute a waiver of any such breach or of any such term. To the extent
permitted by law, no waiver of any breach shall affect or alter the applicable
Lease, which shall continue in full force and effect with respect to any other
then existing or subsequent breach.
23.3 REMEDIES CUMULATIVE.
To the extent permitted by law, each legal, equitable or contractual
right, power and remedy of Landlord, now or hereafter provided either in the
applicable Lease or by statute or otherwise, shall be cumulative and concurrent
and shall be in addition to every other right, power and remedy and the exercise
or beginning of the exercise by Landlord of any one or more of such rights,
powers and remedies shall not preclude the simultaneous or subsequent exercise
by Landlord of any or all of such other rights, powers and remedies.
23.4 SEVERABILITY.
Any clause, sentence, paragraph, section or provision of the
applicable Lease held by a court of competent jurisdiction to be invalid,
illegal or ineffective shall not impair, invalidate or nullify the remainder of
the applicable Lease, but rather the effect thereof shall be confined to the
clause, sentence, paragraph, section or provision so held to be invalid, illegal
or ineffective, and the applicable Lease shall be construed as if such invalid,
illegal or ineffective provisions had never been contained therein.
23.5 ACCEPTANCE OF SURRENDER.
No surrender to Landlord of the applicable Lease or of the applicable
Leased Property or any part thereof, or of any interest therein, shall be valid
or effective unless agreed to and accepted in writing by Landlord and no act by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, shall constitute an acceptance of any such surrender.
23.6 NO MERGER OF TITLE.
It is expressly acknowledged to be the intent of the parties that
there shall be no merger of the applicable Lease or of the leasehold estate
created hereby by reason of the fact that the same Person may acquire, own or
hold, directly or indirectly (a) the applicable Lease or the leasehold estate
created hereby or any interest in the applicable Lease or such leasehold estate
and (b) the fee estate or ground landlord's interest in the applicable Leased
Property.
23.7 CONVEYANCE BY LANDLORD.
If Landlord or any successor owner of the applicable Leased Property
shall convey such Leased Property in accordance with the terms hereof other than
as security for a debt, and the
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grantee or transferee of such Leased Property shall expressly assume all
obligations of Landlord hereunder arising or accruing from and after the date of
such conveyance or transfer, Landlord or such successor owner, as the case may
be, shall thereupon be released from all future liabilities and obligations of
Landlord under the applicable Lease arising or accruing from and after the date
of such conveyance or other transfer as to such Leased Property and all such
future liabilities and obligations shall thereupon be binding upon the new
owner.
23.8 QUIET ENJOYMENT.
So long as Tenant shall pay the Rent as the same becomes due and
shall substantially comply with all of the terms of the applicable Lease and
perform its obligations hereunder and thereunder, Tenant shall peaceably and
quietly have, hold and enjoy the applicable Leased Property for the Term hereof,
free of any claim or other action by Landlord or anyone claiming by, through or
under Landlord, but subject to (a) any Encumbrance permitted under ARTICLE 21,
or otherwise permitted to be created by Landlord hereunder, (b) all Permitted
Encumbrances, (c) liens as to obligations of Landlord that are either not yet
due or which are being contested in good faith and by proper proceedings, and
(d) liens that have been consented to in writing by Tenant. Except as otherwise
provided in the applicable Lease, no failure by Landlord to comply with the
foregoing covenant shall give Tenant any right to cancel or terminate the
applicable Lease or abate, reduce or make a deduction from or offset against the
Rent or any other sum payable under the applicable Lease, or to fail to perform
any other obligation of Tenant hereunder.
23.9 NON-LIABILITY OF TRUSTEES.
THE DECLARATION OF TRUST ESTABLISHING LANDLORD, DATED OCTOBER 9,
1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED WITH THE DEPARTMENT OF AS SESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, LANDLORD. ALL PERSONS
DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF LANDLORD FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
23.10 LANDLORD'S CONSENT OF TRUSTEES.
Where provision is made in the applicable Lease for Landlord's
consent and Landlord shall fail or refuse to give such consent, Tenant shall not
be entitled to any damages for any with holding by Landlord of its consent, it
being intended that Tenant's sole remedy shall be an action
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for specific performance or injunction, and that such remedy shall be available
only in those cases where Landlord has expressly agreed in writing not to
unreasonably withhold its consent.
23.11 MEMORANDUM OF LEASE.
Neither Landlord nor Tenant shall record the applicable Lease or this
Master Lease Document. However, Landlord and Tenant shall promptly, upon the
request of either, enter into a short form memorandum of the applicable Lease,
in form suitable for recording under the laws of the State in which reference to
the applicable Lease and the Master Lease Document, and all options contained
herein, shall be made. Tenant shall pay all costs and expenses of recording such
memorandum.
23.12 NOTICES.
Any notice, request, demand, statement or consent ("NOTICE") desired
or required to be given hereunder shall be in writing and shall be delivered by
hand, sent by certified mail, return receipt requested, or sent by a nationally
recognized commercial overnight delivery service with provisions for a receipt,
postage or delivery charges prepaid, and shall be deemed given () when actually
delivered, if delivered by hand, ((A)) upon receipt, if sent by certified mail,
or (3) the next Business Day after being placed in the possession of an
overnight delivery service, if sent by an overnight delivery service, and shall
be addressed as follows:
If to Tenant: c/o Community Care of America, Inc.
3050 North Horseshoe Drive, Suite 260
Naples, Florida 33942
With copies to: Blass & Driggs
461 Fifth Avenue
New York, New York 10017
Attn: Michael S. Blass, Esq.
If to Landlord: Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: President
With a copy to: Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Harry E. Ekblom, Jr., Esq.
or at such other place as any party hereto may from time to time hereafter
designate to the other in writing. Any Notice given to Tenant from Landlord
shall not imply that such Notice or any
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further or similar Notice was or is required. The failure of Landlord to provide
the copies indicated above shall NOT render any Notice given by Landlord to
Tenant ineffective.
23.13 INCORPORATION BY REFERENCE.
All of the representations, warranties and covenants of Tenant
contained in the Merger Agreement and in each of the other Transaction Documents
to which Tenant is a party are hereby incorporated by reference herein.
23.14 CONSTRUCTION.
Anything contained in the applicable Lease to the contrary
notwithstanding, (i) all claims against, and liabilities of, Tenant or Landlord
arising prior to any date of termination or expiration of the applicable Lease
shall survive such termination or expiration and (ii) neither party hereto shall
be liable for any consequential damages suffered by the other party as the
result of a breach by such party of its obligations owed to the other party. If
any term or provision of the applicable Lease or any application thereof shall
be invalid or unenforceable, the remainder of the applicable Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable law,
the parties agree that such charges shall be fixed at the maximum permissible
rate. Neither the applicable Lease nor any provision hereof may be changed,
waived, discharged or terminated except by an instrument in writing signed by
the party to be charged. All the terms and provisions of the applicable Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Each term or provision of this Master Lease
Document or the applicable Lease to be performed by Tenant shall be construed as
an independent covenant and condition. Time is of the essence with respect to
the exercise of any rights of Tenant under this Master Lease Document and the
applicable Lease. Except as otherwise set forth in this Master Lease Document,
any obligations of Tenant (including without limitation, any monetary, repair
and indemnification obligations) shall survive the expiration or sooner
termination of the applicable Lease. The headings in the applicable Lease are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
23.15 CONSENT TO JURISDICTION.
ANY ACTION TO ENFORCE, ARISING OUT OF, OR RELATING IN ANY WAY TO, ANY
OF THE PROVISIONS OF THE APPLICABLE LEASE OR ANY TRANSACTION DOCUMENT MAY BE
BROUGHT AND PROSECUTED IN SUCH COURT OR COURTS LOCATED IN THE COMMONWEALTH OF
MASSACHUSETTS AS IS PROVIDED BY LAW; AND TENANT CONSENTS TO THE JURISDICTION OF
SAID COURT OR COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS AND TO SERVICE
OF PROCESS BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR IN ANY
MANNER PROVIDED BY LAW.
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23.16 WAIVER OF JURY TRIAL.
EXCEPT TO THE EXTENT PROHIBITED BY LAW WHICH CANNOT BE WAIVED, TENANT
HEREBY WAIVES TRIAL BY JURY IN CONNECTION WITH ANY ACTION OR PROCEEDING OF ANY
NATURE WHATSOEVER ARISING UNDER, OUT OF OR IN CONNECTION WITH THE APPLICABLE
LEASE OR ANY OTHER TRANSACTION DOCUMENT AND IN CONNECTION WITH SUCH ACTION OR
PROCEEDING, WHETHER ARISING UNDER STATUTE (INCLUDING ANY FEDERAL OR STATE
CONSTITUTION) OR UNDER THE LAW OF CONTRACT, TORT OR OTHERWISE AND INCLUDING,
WITHOUT LIMITATION, ANY CHALLENGE TO THE LEGALITY, VALIDITY, BINDING EFFECT OR
ENFORCEABILITY OF THIS PARAGRAPH OR THE APPLICABLE LEASE OR ANY OTHER
TRANSACTION DOCUMENTS.
23.17 GOVERNING LAW.
THE APPLICABLE LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS (EXCLUDING RULES REGARDING CHOICE OF LAW) OF THE COMMONWEALTH OF
MASSACHUSETTS, EXCEPT AS TO MATTERS REGARDING THE INTERNAL AFFAIRS OF LANDLORD
AND ISSUES OF OR LIMITATIONS ON ANY PERSONAL LIABILITY OF THE SHAREHOLDERS AND
TRUSTEES OF LANDLORD FOR OBLIGATIONS OF LANDLORD, AS TO WHICH THE LAWS OF THE
STATE OF MARYLAND SHALL GOVERN AND EXCEPT TO THE EXTENT THAT MATTERS OF TITLE OR
RELATING TO INTERESTS IN REAL PROPERTY ARE REQUIRED TO BE GOVERNED BY THE LAWS
OF THE STATE.
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IN WITNESS WHEREOF, the parties have executed this Master Lease
Document as a sealed instrument as of the date first above written.
Executed in the LANDLORD:
presence of:
HEALTH AND RETIREMENT PROPERTIES
TRUST, a Maryland real estate investment trust
By: /s/ David J. Hegarty
- ---------------------- ---------------------------
David J. Hegarty
Its: President
TENANTS:
MARIETTA/SCC, INC.
a Georgia corporation
By: /s/
- ---------------------- ---------------------------
Its:
----------------------
GLENWOOD/SCC, INC.
a Georgia corporation
By: /s/
- ---------------------- ---------------------------
Its:
----------------------
DUBLIN/SCC, INC.
a Georgia corporation
By: /s/
- ---------------------- ---------------------------
Its:
----------------------
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MACON/SCC, INC.
a Georgia corporation
By: /s/
- ---------------------- ---------------------------
Its:
----------------------
COLLEGE PARK/SCC, INC.
a Georgia corporation
By: /s/
- ---------------------- ---------------------------
Its:
----------------------
Signature Page to
Master Lease Document
dated as of May 10, 1996
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EXHIBIT A-1
COLLECTIVE LEASED PROPERTIES
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EXHIBIT A-2
PRIMARY INTENDED USE
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EXHIBIT B
FORM OF LEASE
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SCHEDULE I
TRANSACTION DOCUMENTS
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SCHEDULE II
ENVIRONMENTAL MATTERS
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