LEASE AGREEMENT
DATED AS OF FEBRUARY 11, 1994,
BY AND BETWEEN
HEALTH AND REHABILITATION PROPERTIES TRUST,
AS LANDLORD,
AND
CONNECTICUT SUBACUTE CORPORATION II, AS TENANT.
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . 1
1.1 Added Value Percentage . . . . . . . . . . . . . 1
1.2 Additional Rent . . . . . . . . . . . . . . . . 1
1.3 Affiliated Person . . . . . . . . . . . . . . . 1
1.4 Assumed Indebtedness . . . . . . . . . . . . . . 2
1.5 Award . . . . . . . . . . . . . . . . . . . . . 2
1.6 Base Net Patient Revenues . . . . . . . . . . . 2
1.7 Base Rate . . . . . . . . . . . . . . . . . . . 2
1.8 Base Year . . . . . . . . . . . . . . . . . . . 2
1.9 Business Day . . . . . . . . . . . . . . . . . . 2
1.10 Capital Addition . . . . . . . . . . . . . . . . 2
1.11 Capital Additions Cost . . . . . . . . . . . . . 3
1.12 Capital Expenditure . . . . . . . . . . . . . . 3
1.13 Cash Adjustment . . . . . . . . . . . . . . . . 4
1.14 Claims . . . . . . . . . . . . . . . . . . . . . 4
1.15 Code . . . . . . . . . . . . . . . . . . . . . . 4
1.16 Commencement Date . . . . . . . . . . . . . . . 4
1.17 Condemnation . . . . . . . . . . . . . . . . . . 4
1.18 Condemnor . . . . . . . . . . . . . . . . . . . 4
1.19 Consolidated Financials . . . . . . . . . . . . 4
1.20 Control . . . . . . . . . . . . . . . . . . . . 4
1.21 Date of Taking . . . . . . . . . . . . . . . . . 4
1.22 Default . . . . . . . . . . . . . . . . . . . . 5
1.23 Encumbrance . . . . . . . . . . . . . . . . . . 5
1.24 Entity . . . . . . . . . . . . . . . . . . . . . 5
1.25 Environmental Laws . . . . . . . . . . . . . . . 5
1.26 Environmental Notice . . . . . . . . . . . . . . 5
1.27 Environmental Obligation . . . . . . . . . . . . 5
1.28 Event of Default . . . . . . . . . . . . . . . . 5
1.29 Excess Net Patient Revenues . . . . . . . . . . 5
1.30 Extended Terms . . . . . . . . . . . . . . . . . 5
1.31 Facility . . . . . . . . . . . . . . . . . . . . 5
1.32 Facility Mortgage . . . . . . . . . . . . . . . 5
1.33 Facility Mortgagee . . . . . . . . . . . . . . . 5
1.34 Facility Trade Names . . . . . . . . . . . . . . 5
1.35 Fair Market Added Value . . . . . . . . . . . . 6
1.36 Fair Market Rental . . . . . . . . . . . . . . . 6
1.37 Fair Market Value . . . . . . . . . . . . . . . 6
1.38 Fair Market Value Purchase Price . . . . . . . . 6
1.39 Fiscal Year . . . . . . . . . . . . . . . . . . 6
1.40 Fixed Term . . . . . . . . . . . . . . . . . . . 6
1.41 Fixtures . . . . . . . . . . . . . . . . . . . . 6
1.42 Hazardous Substances . . . . . . . . . . . . . . 6
1.43 Immediate Family . . . . . . . . . . . . . . . . 7
1.44 Impositions . . . . . . . . . . . . . . . . . . 7
1.45 Initiating Party . . . . . . . . . . . . . . . . 7
1.46 Insurance Requirements . . . . . . . . . . . . . 7
1.47 Land . . . . . . . . . . . . . . . . . . . . . . 7
1.48 Landlord . . . . . . . . . . . . . . . . . . . . 8
1.49 Landlord Default. . . . . . . . . . . . . . . . . 8
1.50 Lease . . . . . . . . . . . . . . . . . . . . . 8
1.51 Leased Improvements . . . . . . . . . . . . . . 8
1.52 Leased Personal Property . . . . . . . . . . . . 8
1.53 Leased Property . . . . . . . . . . . . . . . . 8
1.54 Legal Requirements . . . . . . . . . . . . . . . 8
1.55 Lending Institution . . . . . . . . . . . . . . 8
1.56 Minimum Rent . . . . . . . . . . . . . . . . . . 8
1.57 Minimum Repurchase Price . . . . . . . . . . . . 8
1.58 Net Patient Revenues . . . . . . . . . . . . . . 9
1.59 Non-Capital Additions . . . . . . . . . . . . . 10
1.60 Officer's Certificate . . . . . . . . . . . . . 10
1.61 Other Leases . . . . . . . . . . . . . . . . . . 10
1.62 Overdue Rate . . . . . . . . . . . . . . . . . . 10
1.63 Parent . . . . . . . . . . . . . . . . . . . . . 10
1.64 Percentage Rent . . . . . . . . . . . . . . . . 10
1.65 Permitted Encumbrances . . . . . . . . . . . . . 10
1.66 Person . . . . . . . . . . . . . . . . . . . . . 10
1.67 Primary Intended Use . . . . . . . . . . . . . . 10
1.68 Qualified Appraiser . . . . . . . . . . . . . . 11
1.69 Records . . . . . . . . . . . . . . . . . . . . 10
1.70 Rent . . . . . . . . . . . . . . . . . . . . . . 10
1.71 Responding Party . . . . . . . . . . . . . . . . 11
1.72 SEC . . . . . . . . . . . . . . . . . . . . . . 11
1.73 State . . . . . . . . . . . . . . . . . . . . . 11
1.74 Subsidiary . . . . . . . . . . . . . . . . . . . 11
1.75 Substitute Properties . . . . . . . . . . . . . 11
1.76 Substitution Date . . . . . . . . . . . . . . . 11
1.77 Successor Landlord . . . . . . . . . . . . . . . 11
1.78 Superior Lease . . . . . . . . . . . . . . . . . 11
1.79 Superior Landlord . . . . . . . . . . . . . . . 11
1.80 Superior Mortgage . . . . . . . . . . . . . . . 11
1.81 Superior Mortgagee . . . . . . . . . . . . . . . 11
1.82 Tenant . . . . . . . . . . . . . . . . . . . . . 11
1.83 Tenant's Personal Property . . . . . . . . . . . 11
1.84 Term . . . . . . . . . . . . . . . . . . . . . . 11
1.85 Test Rate . . . . . . . . . . . . . . . . . . . 12
1.86 Trustees . . . . . . . . . . . . . . . . . . . . 12
1.87 Unavoidable Delays . . . . . . . . . . . . . . . 12
1.88 Unsuitable for Its Primary Intended Use . . . . 12
ARTICLE 2 PREMISES AND TERM . . . . . . . . . . . . . . 12
2.1 Premises . . . . . . . . . . . . . . . . . . . . 12
2.2 Condition of Premises . . . . . . . . . . . . . 13
2.3 Fixed Term . . . . . . . . . . . . . . . . . . . 14
2.4 Extended Terms . . . . . . . . . . . . . . . . . 14
ARTICLE 3 RENT . . . . . . . . . . . . . . . . . . . . . 15
3.1 Rent . . . . . . . . . . . . . . . . . . . . . . 15
3.1.1 Minimum Rent . . . . . . . . . . . . . . 15
3.1.2 Percentage Rent . . . . . . . . . . . . . 15
3.1.3 Additional Rent . . . . . . . . . . . . . 17
3.2 Late Payment of Rent . . . . . . . . . . . . . . 19
3.3 Net Lease . . . . . . . . . . . . . . . . . . . 19
3.4 No Termination, Abatement, Etc . . . . . . . . . 19
ARTICLE 4 USE OF THE LEASED PROPERTY . . . . . . . . . . 20
4.1 Permitted Use . . . . . . . . . . . . . . . . . 20
4.1.1 Primary Intended Use . . . . . . . . . . 20
4.1.2 Necessary Approvals . . . . . . . . . . . 21
4.1.3 Continuous Operation, Etc . . . . . . . . 21
4.1.4 Lawful Use, Etc . . . . . . . . . . . . . 21
4.2 Compliance with Legal and Insurance
Requirements, Instruments, Etc . . . . . . . . 21
4.3 Compliance with Medicaid and Medicare
Requirements . . . . . . . . . . . . . . . . . 21
4.4 Environmental Matters . . . . . . . . . . . . . 22
ARTICLE 5 MAINTENANCE AND REPAIRS, ETC . . . . . . . . . 23
5.1 Maintenance and Repair . . . . . . . . . . . . . 23
5.1.1 Tenant's Obligations . . . . . . . . . . 23
5.1.2 Landlord's Obligations . . . . . . . . . 23
5.2 Capital Expenditure Cost Sharing . . . . . . . . 23
5.3 Tenant's Personal Property . . . . . . . . . . . 24
5.4 Yield Up . . . . . . . . . . . . . . . . . . . . 24
5.5 Encroachments, Restrictions, Etc . . . . . . . . 25
ARTICLE 6 CAPITAL ADDITIONS, ETC. . . . . . . . . . . . 25
6.1 Construction of Capital Additions to the Leased
Property . . . . . . . . . . . . . . . . . . . 25
6.2 Capital Additions Financed by Tenant . . . . . . 27
6.3 Information Regarding Capital Additions . . . . 29
6.4 Non-Capital Additions . . . . . . . . . . . . . 30
6.5 Salvage . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 7 LIENS . . . . . . . . . . . . . . . . . . . . 30
7.1 Liens . . . . . . . . . . . . . . . . . . . . . 30
7.2 Landlord's Lien . . . . . . . . . . . . . . . . 31
7.3 Mechanic's Liens . . . . . . . . . . . . . . . . 32
ARTICLE 8 PERMITTED CONTESTS . . . . . . . . . . . . . . 32
ARTICLE 9 INSURANCE AND INDEMNIFICATION . . . . . . . . 33
9.1 General Insurance Requirements . . . . . . . . . 33
9.2 Waiver of Subrogation . . . . . . . . . . . . . 34
9.3 Form Satisfactory, Etc . . . . . . . . . . . . . 35
9.4 No Separate Insurance . . . . . . . . . . . . . 36
9.5 Indemnification of Landlord . . . . . . . . . . 36
9.6 Indemnification of Tenant . . . . . . . . . . . 36
ARTICLE 10 CASUALTY . . . . . . . . . . . . . . . . . . 37
10.1 Insurance Proceeds . . . . . . . . . . . . . . . 37
10.2 Reconstruction in the Event of Damage or
Destruction . . . . . . . . . . . . . . . . . 37
10.2.1 Material Damage or Destruction of Premises 37
10.2.2 Partial Damage or Destruction . . . . . 38
10.3 Insufficient Insurance Proceeds . . . . . . . . 39
10.4 Disbursement of Proceeds . . . . . . . . . . . . 39
10.5 Tenant's Property . . . . . . . . . . . . . . . 40
10.6 Restoration of Tenant's Property . . . . . . . . 40
10.7 No Abatement of Rent . . . . . . . . . . . . . . 40
10.8 Damage Near End of Term . . . . . . . . . . . . 40
ARTICLE 11 CONDEMNATION . . . . . . . . . . . . . . . . 41
11.1 Total Condemnation . . . . . . . . . . . . . . . 41
11.2 Partial Condemnation . . . . . . . . . . . . . . 41
11.3 Temporary Condemnation . . . . . . . . . . . . . 41
11.4 Tenant's Option . . . . . . . . . . . . . . . . 41
11.5 Allocation of Award . . . . . . . . . . . . . . 42
11.6 Abatement Procedures . . . . . . . . . . . . . . 42
ARTICLE 12 DEFAULTS AND REMEDIES . . . . . . . . . . . . 43
12.1 Events of Default. . . . . . . . . . . . . . . . 43
12.2 Remedies . . . . . . . . . . . . . . . . . . . . 45
12.3 Waiver . . . . . . . . . . . . . . . . . . . . . 47
12.4 Application of Funds . . . . . . . . . . . . . . 47
12.5 Failure to Conduct Business . . . . . . . . . . 47
12.6 Landlord's Right to Cure Tenant's Default . . . 47
12.7 Trade Names . . . . . . . . . . . . . . . . . . 47
ARTICLE 13 HOLDING OVER . . . . . . . . . . . . . . . . 48
ARTICLE 14 LANDLORD'S DEFAULT . . . . . . . . . . . . . 48
ARTICLE 15 PURCHASE OF PREMISES . . . . . . . . . . . . 49
ARTICLE 16 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY 50
16.1 Tenant's Substitution Option . . . . . . . . . . 50
16.2 Landlord's Substitution Option . . . . . . . . . 50
16.3 Substitution Procedures . . . . . . . . . . . . 51
16.4 Conditions to Substitution . . . . . . . . . . . 53
16.5 Conveyance to Tenant . . . . . . . . . . . . . . 54
16.6 Expenses . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 17 SUBLETTING AND ASSIGNMENT . . . . . . . . . . 55
17.1 Subletting and Assignment . . . . . . . . . . . 55
17.2 Required Sublease Provisions . . . . . . . . . . 56
17.3 Sublease Limitation . . . . . . . . . . . . . . 56
17.4 Assignment and Subletting Procedure . . . . . . 56
ARTICLE 18 CERTIFICATES AND FINANCIAL STATEMENTS . . . . 57
18.1 Estoppel Certificates . . . . . . . . . . . . . 57
18.2 Financial Statements . . . . . . . . . . . . . . 57
18.3 General Operations . . . . . . . . . . . . . . . 58
18.3.1 Reimbursement, Licensure, Etc. . . . . . 58
18.3.2 Monthly Reports . . . . . . . . . . . . 59
ARTICLE 19 LANDLORD ACCESS . . . . . . . . . . . . . . . 59
19.1 Landlord's Right to Inspect . . . . . . . . . . 59
19.2 Landlord's Option to Purchase the Tenant's
Personal Property; Transfer of Licenses . . . 59
ARTICLE 20 APPRAISAL . . . . . . . . . . . . . . . . . . 60
20.1 Appraisal Procedure . . . . . . . . . . . . . . 60
ARTICLE 21 MORTGAGES . . . . . . . . . . . . . . . . . . 61
21.1 Landlord May Grant Liens . . . . . . . . . . . . 61
21.2 Subordination of Lease . . . . . . . . . . . . . 61
21.3 Notice to Mortgagee and Ground Landlord . . . . 63
ARTICLE 22 INVESTMENT TAX CREDIT . . . . . . . . . . . . 63
22.1 Investment Tax Credit . . . . . . . . . . . . . 63
ARTICLE 23 ADDITIONAL COVENANTS OF TENANT
23.1 Notice of Change of Name, Administrator, Etc. 64
23.2 Notice of Litigation, Potential Event of
Default, Etc. . . . . . . . . . . . . . . . . 64
23.3 Management of Leased Property . . . . . . . . . 64
23.4 Distributions, Payments to Affiliated Persons,
Etc. . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 24 MISCELLANEOUS . . . . . . . . . . . . . . . . 65
24.1 No Waiver . . . . . . . . . . . . . . . . . . . 65
24.2 Remedies Cumulative . . . . . . . . . . . . . . 65
24.3 Acceptance of Surrender . . . . . . . . . . . . 65
24.4 No Merger of Title . . . . . . . . . . . . . . . 65
24.5 Conveyance by Landlord . . . . . . . . . . . . . 65
24.6 Quiet Enjoyment . . . . . . . . . . . . . . . . 66
24.7 Landlord's Liability . . . . . . . . . . . . . . 66
24.8 Landlord's Consent . . . . . . . . . . . . . . . 66
24.9 Memorandum of Lease . . . . . . . . . . . . . . 67
24.10 Notices . . . . . . . . . . . . . . . . . . . . 67
24.11 Construction . . . . . . . . . . . . . . . . . . 68
24.12 Governing Law . . . . . . . . . . . . . . . . . 68
EXHIBITS
A - Other Leases
B - Permitted Encumbrances
C - The Land
D - Minimum Rent
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of February 11, 1994, is made by and
between HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real
estate investment trust, as landlord ("Landlord"), having its principal
office at 400 Centre Street, Newton, Massachusetts, and CONNECTICUT
SUBACUTE CORPORATION II, a Delaware corporation, as tenant ("Tenant"),
having an office at 400 Centre Street, Newton, Massachusetts 02158.
W I T N E S S E T H :
WHEREAS, Landlord owns the Leased Property (this and other
capitalized terms used and not otherwise defined herein having the
meanings ascribed to such terms in Article 1) and Landlord wishes to
lease the Leased Property to Tenant and Tenant wishes to lease the
Leased Property from Landlord, subject to and upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Landlord and
Tenant hereby agree as follows:
ARTICLE 1
DEFINITIONS
Each reference in this Lease to any of the following terms shall be
construed to incorporate the definitions hereinafter set forth and
include the plural as well as the singular. All accounting terms not
otherwise defined herein shall have the meanings assigned to them in
accordance with generally accepted accounting principles.
1.1 "Added Value Percentage" shall have the meaning given such
term in Section 6.2(a).
1.2 "Additional Rent" shall have the meaning given such term in
Section 3.1.3.
1.3 "Affiliated Person" shall mean, with respect to any Person,
(a) in the case of any such Person which is a partnership, any partner
in such partnership; (b) in the case of any such Person which is a
limited liability company, any member of such company; (c) any other
Person which is a Parent, a Subsidiary, or a Subsidiary of a Parent of
the Persons referred to in the preceding clauses (a) and (b); (d) any
other Person otherwise directly or indirectly controlling or under
common control with such Person or one or more of the Persons referred
to in the preceding clauses (a), (b) and (c); and (e) any other Person
who is a member of the Immediate Family of such Person or any Person
referred to in the preceding clauses (a) through (d).
1.4 "Assumed Indebtedness" shall mean any indebtedness or other
obligations existing at the time of acquisition of the Leased Property
by Landlord secured by a mortgage, deed of trust or other security
agreement creating a lien on the Leased Property and assumed by
Landlord, and any indebtedness resulting from the refinancing thereof,
and/or any subsequent indebtedness resulting from Landlord's financing
of, or Landlord's reimbursement of Tenant's financing of, any Capital
Additions during the Term, except any indebtedness or other obligations
of Tenant not assumed by Landlord prior to or during the Term.
1.5 "Award" shall mean all compensation, sums or other value
awarded, paid or received by virtue of a total or partial Condemnation
of the Leased Property (after deduction of all reasonable legal fees and
other reasonable costs and expenses incurred by Landlord in connection
with obtaining any such award).
1.6 "Base Net Patient Revenues" shall mean Net Patient Revenues
for the Base Year.
1.7 "Base Rate" shall mean the rate of interest, determined daily
and expressed as a percentage, announced by Citibank, N.A., in New York,
New York, from time to time, as Citibank, N.A.'s "base rate" or "prime
rate", so-called, or, if at any time Citibank, N.A. ceases to announce
such a rate, as announced by the largest national or state chartered
banking institution other than Citibank, N.A. then having its principal
office in New York, New York and announcing such a rate. If at any time
neither Citibank, N.A. nor any of the five largest other national or
state chartered banking institutions having their principal offices in
New York, New York is announcing such a floating rate, "Base Rate" shall
mean a rate of interest, determined daily, which is two (2) percentage
points above the 14-day moving average closing trading price of 90-day
Treasury Bills.
1.8 "Base Year" shall mean the twelve-month period beginning June
1, 1999 and ending May 31, 2000.
1.9 "Business Day" shall mean any day other than Saturday, Sunday,
or any other day on which banking institutions in The Commonwealth of
Massachusetts or in New York, New York are authorized by law or
executive action to close.
1.10 "Capital Addition" shall mean one or more new buildings, or
one or more additional structures annexed to any portion of any of the
Leased Improvements, or the material expansion of existing improvements,
which are constructed on any parcel or portion of the Land during the
Term, including, but not limited to, the construction of a new wing or
new story, the renovation of existing improvements on the Leased
Property in order to provide a functionally new facility needed to
provide services not previously offered, or any expansion, construction,
renovation or conversion in order to increase the bed capacity of the
Facility, to change the purpose for which such beds are utilized or to
improve the quality of the Facility.
1.11 "Capital Additions Cost" shall mean the cost of any Capital
Addition proposed to be made by Tenant, whether paid for by Tenant or
Landlord. Such cost shall include (a) the cost of construction of the
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Capital Addition, including, site preparation and improvement,
materials, labor, supervision, developer and administrative fees, legal
fees, and related design, engineering and architectural services, the
cost of any fixtures, the cost of construction financing (including, but
not limited to, capitalized interest) and other miscellaneous costs
approved by Landlord, (b) if agreed to by Landlord in writing, in
advance, the cost of any land contiguous to the Leased Property which is
to become a part of the Leased Property purchased for the purpose of
placing thereon the Capital Addition or any portion thereof or for
providing means of access thereto, or parking facilities therefor,
including the cost of surveying the same, (c) the cost of insurance,
real estate taxes, water and sewage charges and other carrying charges
for such Capital Addition during construction, (d) title insurance
charges, (e) reasonable attorneys' fees, (f) filing and registration
fees and recording taxes, (g) documentary stamp or transfer taxes, and
(h) all actual and reasonable costs and expenses of Landlord and any
Lending Institution committed to finance the Capital Addition,
including, but not limited to, (i) reasonable attorneys' fees, (ii)
printing expenses, (iii) filing, registration and recording taxes and
fees, (iv) documentary stamp or transfer taxes, (v) title insurance
charges and appraisal fees, (vi) rating agency fees, and (vii) loan
commitment fees.
1.12 "Capital Expenditure" shall mean any single required
improvement, alteration, replacement or repair of the Leased Property,
or any part thereof, (a) having a cost in excess of One Hundred Thousand
Dollars ($100,000.00) (which amount shall be increased each year of the
Lease by the product determined by multiplying such amount by the
percentage increase in the Consumer Price Index, Urban Wage Earners and
Clerical Workers, All Items, Base 1982-84=100, published by the U.S.
Department of Labor, All Cities, or such comparable index published by
the U.S. Department of Labor or its successor agency), and (b) having a
useful life in excess of the longer of (i) twelve (12) months, or (ii)
the remaining period of the Term, except capital improvements
necessitated by destruction or Condemnation of the Leased Property, or
any portion thereof.
1.13 "Cash Adjustment" shall have the meaning given such term in
Section 16.3(d).
1.14 "Claims" shall have the meaning given such term in Article 8.
1.15 "Code" shall mean the Internal Revenue Code of 1986 and, to
the extent applicable, the Treasury Regulations promulgated thereunder,
each as from time to time amended.
1.16 "Commencement Date" shall mean the date of this Lease.
1.17 "Condemnation" shall mean (a) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a Condemnor, (b) a
voluntary sale or transfer by Landlord to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are
pending, and (c) a taking or voluntary conveyance of all or part of the
Leased Property, or any interest therein, or right accruing thereto or
use thereof, as the result or in settlement of any Condemnation or other
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eminent domain proceeding affecting any portion of the Leased Property,
whether or not the same shall have actually been commenced.
1.18 "Condemnor" shall mean any public or quasi-public authority,
or private corporation or individual having the power of Condemnation.
1.19 "Consolidated Financials" shall mean, for any Fiscal Year or
other accounting period of Tenant and its consolidated Subsidiaries,
statements of earnings, retained earnings and changes in financial
position for such period and for the period from the beginning of the
applicable Fiscal Year to the end of such period and the balance sheet
as at the end of such period, together with the notes thereto, all in
reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding
Fiscal Year, and prepared in accordance with generally accepted
accounting principles, consistently applied.
1.20 "Control" and any variations thereof shall mean, with respect
to any Person, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, through the ownership of voting securities, partnership
interests or other equity interests.
1.21 "Date of Taking" shall mean the date the Condemnor has the
right to possession of the Leased Property, or any portion thereof, in
connection with a Condemnation.
1.22 "Default" shall mean any event, act or omission which with the
giving of notice and/or lapse of time could constitute an Event of
Default.
1.23 "Encumbrance" shall have the meaning given such term in
Section 21.1.
1.24 "Entity" shall mean any corporation, general or limited
partnership, limited liability company, stock company or association,
joint venture, association, company, trust, bank, trust company, land
trust, business trust, any government or agency or political subdivision
thereof or any other entity.
1.25 "Environmental Laws" shall mean all applicable Federal, state
or local statutes, laws, ordinances, rules and regulations, licensing
requirements or conditions, whether now existing or hereafter arising,
relating to Hazardous Substances.
1.26 "Environmental Notice" shall have the meaning given such term
in Section 4.4.
1.27 "Environmental Obligation" shall mean any cost, expense, loss
or damage arising under any Environmental Law or in connection with any
Hazardous Substance.
1.28 "Event of Default" shall have the meaning given such term in
Section 12.1.
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1.29 "Excess Net Patient Revenues" shall mean the amount of Net
Patient Revenues for any measuring period in excess of the Base Net
Patient Revenues for the equivalent period of the Base Year.
1.30 "Extended Terms" shall have the meaning given such term in
Section 2.4.
1.31 "Facility" shall mean the licensed nursing home being operated
on the Leased Property.
1.32 "Facility Mortgage" shall mean any mortgage, deed of trust or
other security agreement securing any Assumed Indebtedness or any other
encumbrance placed upon the Leased Property in accordance with Article
21.
1.33 "Facility Mortgagee" shall mean the holder of any Facility
Mortgage.
1.34 "Facility Trade Names" shall mean any of the names under which
Tenant operates, or has operated, the Facility at any time during the
Term.
1.35 "Fair Market Added Value" shall mean the Fair Market Value of
the Leased Property (including all Capital Additions) less the Fair
Market Value of the Leased Property determined as if no Capital
Additions financed by Tenant had been constructed.
1.36 "Fair Market Rental" shall mean the rental which a willing
tenant not compelled to rent would pay a willing landlord not compelled
to lease for the use and occupancy of the Leased Property, or applicable
portion thereof, on the terms and conditions of this Lease, for the term
in question, and determined in accordance with the appraisal procedures
set forth in Article 20 or in such other manner as shall be mutually
acceptable to Landlord and Tenant.
1.37 "Fair Market Value" shall mean the price that a willing buyer
not compelled to buy would pay a willing seller not compelled to sell
for the Leased Property, (a) assuming the same is unencumbered by this
Lease, (b) determined in accordance with the appraisal procedures set
forth in Article 20 or in such other manner as shall be mutually
acceptable to Landlord and Tenant, (c) assuming such seller shall pay
the closing costs generally paid by a seller of real property in the
state in which such property is located and that such buyer shall pay
closing costs generally paid by a buyer of real property in the state in
which such property is located, and (d) not taking into account any
reduction in value resulting from any indebtedness to which such
property is subject, except the positive or negative effect on the value
of such property attributable to the interest rate, amortization
schedule, maturity date, prepayment penalty and other terms and
conditions of any lien or encumbrance which is not removed at or prior
to the closing of the transaction as to which such Fair Market Value
determination is being made.
1.38 "Fair Market Value Purchase Price" shall mean the Fair Market
Value of the Leased Property less the Fair Market Added Value.
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1.39 "Fiscal Year" shall mean each twelve (12) month period from
June 1 to May 31.
1.40 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.41 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.42 "Hazardous Substances" shall mean hazardous substances (as
defined by the Comprehensive Environmental Response, Compensation and
Liability Act, as now in effect or as hereafter from time to time
amended), hazardous wastes (as defined by the Resource Conservation and
Recovery Act, as now in effect or as hereafter from time to time
amended), any hazardous waste, hazardous substance, pollutant or
contaminant, oils, radioactive materials, asbestos in any form or
condition, or any pollutant or contaminant or hazardous, dangerous or
toxic chemicals, materials or substances within the meaning of any other
applicable Federal, state or local law, regulation, ordinance or
requirements relating to or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or
materials, all as now in effect or hereafter from time to time amended.
1.43 "Immediate Family" shall mean, with respect to any Person,
his spouse, parents, brothers, sisters, children (natural or adopted),
stepchildren, grandchildren, grandparents, parents-in-law,
brothers-in-law, sisters-in-law, nephews and nieces.
1.44 "Impositions" shall mean all taxes, assessments, and ad
valorem, sales, and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same are imposed on either
Landlord or Tenant with respect to the Leased Property and/or the
business conducted thereon by Tenant and other charges and impositions
(including, but not limited to, fire protection service fees and similar
charges) levied, assessed or imposed at any time during the Term by any
governmental authority upon or against the Leased Property, or taxes in
lieu thereof, and additional types of taxes to supplement real estate
taxes due to legal limits imposed thereon. If, at any time during the
Term, any tax or excise on rents or other taxes, however described, are
levied or assessed against Landlord with respect to the rent reserved
hereunder, either wholly or partially in substitution for, or in
addition to, real estate taxes assessed or levied on the Leased
Property, such tax or excise on rents shall be included in Impositions;
provided, however, that Impositions shall not include franchise, estate,
inheritance, succession, capital levy, transfer, income or excess
profits taxes assessed on Landlord. Impositions shall include any
estimated payment, whether voluntary or required, made by Landlord on
account of a fiscal tax period for which the actual and final amount of
taxes for such period has not been determined by the governmental
authority as of the date of any such estimated payment.
1.45 "Initiating Party" shall have the meaning given such term in
Section 20.1.
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1.46 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Lease and all requirements of the issuer of any
such policy.
1.47 "Land" shall have the meaning given such term in Section
2.1(a).
1.48 "Landlord" shall have the meaning given such term in the
preambles to this Lease.
1.49 "Landlord Default" shall have the meaning given such term in
Article 14.
1.50 "Lease" shall mean this Lease Agreement, including Exhibits A
through D hereto, as it and they may be amended from time to time as
herein provided.
1.51 "Leased Improvements" shall have the meaning given such term
in Section 2.1(b).
1.52 "Leased Personal Property" shall have the meaning given such
term in Section 2.1(e).
1.53 "Leased Property" shall have the meaning given such term in
Section 2.1.
1.54 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions, including,
but not limited to, Environmental Laws, affecting the Leased Property or
the maintenance, construction, use or alteration thereof, whether now or
hereafter enacted, including those which may (a) require repairs,
modifications or alterations in or to the Leased Property or any portion
thereof or (b) in any way adversely affect the use and enjoyment
thereof, and all permits, licenses and authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to
Tenant (other than encumbrances hereinafter created by Landlord without
the consent of Tenant), at any time in force affecting the Leased
Property.
1.55 "Lending Institution" shall mean any insurance company,
federally insured commercial or savings bank, national banking
association, savings and loan association, employees' welfare, pension
or retirement fund or system, corporate profit sharing or pension trust,
college or university, or real estate investment trust, including any
corporation qualified to be treated for federal tax purposes as a real
estate investment trust, having a net worth of at least $10,000,000.
1.56 "Minimum Rent" shall mean the amount set forth in Exhibit D.
1.57 "Minimum Repurchase Price" shall mean that portion of the
aggregate purchase price of the Leased Property paid by Landlord in cash
or in kind, plus the aggregate of unpaid principal balance of all
encumbrances against the Leased Property at the time of purchase thereof
-8-
by Tenant, plus any amounts paid by Landlord to reduce the principal
balance of any Assumed Indebtedness, less all proceeds received by
Landlord from any refinancing of the Leased Property (after payment of
the debt refinanced and net of any costs and expenses incurred in
connection with such refinancing, including, without limitation, loan
points, commitment fees and commissions) and less the net amount (after
deduction of all reasonable legal fees and other costs and expenses,
including, without limitation, expert witness fees, incurred by Landlord
in connection with obtaining any such award) of all awards received by
Landlord from any partial Condemnation of the Leased Property or any
portion thereof which are not applied to restoration.
1.58 "Net Patient Revenues" shall mean all revenues received or
receivable from or by reason of the operation of the Facility, or any
portion thereof, or any other use of the Leased Property, or any portion
thereof, including, without limitation, all patient revenues received or
receivable for the use of or otherwise by reason of all rooms, beds and
other facilities provided, meals served, services performed, space or
facilities subleased or goods sold on the Leased Property, or any
portion thereof, including, without limitation, and except as provided
below, any other arrangements with third parties relating to the
possession or use of any portion of any portion of the Leased Property;
provided, however, Net Patient Revenues shall not include: (a) revenue
from professional fees or charges by physicians and providers (other
than Tenant or Tenant's employees) of ancillary services, when and to
the extent such charges are paid over to such physicians or providers of
ancillary services, or are separately billed and not included in
comprehensive fees; (b) nonoperating revenues such as interest income or
income from the sale of assets not sold in the ordinary course of
business; (c) contractual allowances (relating to any period during the
Term) for billings not paid by or received from the appropriate
governmental agencies or third party providers; (d) allowances according
to generally accepted accounting principles for uncollectible accounts,
including credit card accounts and charity care or other administrative
discounts; (e) all proper patient billing credits and adjustments
according to generally accepted accounting principles relating to health
care accounting; (f) federal, state or local sales or excise taxes and
any tax based on or measured by such revenues which is added to or made
a part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated separately;
(g) provider discounts for hospital or other medical facility
utilization contracts and credit card discounts; (h) revenues
attributable to Capital Additions financed by Tenant as provided in
Section 6.2; (i) revenues attributable to services actually provided off
the Leased Property, such as home health care; and (j) any amounts
actually paid by Tenant for the cost of any federal, state or local
governmental programs imposed specially to provide or finance indigent
patient care. To the extent the Leased Property or any portion thereof
is subleased by Tenant, Net Patient Revenues shall include (x) the Net
Patient Revenues generated from the operations conducted on such
subleased portion of the Leased Property and (y) the rent received or
receivable by Tenant from or under any such sublease to the extent such
rent is not based on Net Patient Revenues and, therefore, has not
already been included in the calculation of Net Patient Revenues
pursuant to clause (x) preceding.
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1.59 "Non-Capital Additions" shall have the meaning given such term
in Section 6.4.
1.60 "Officer's Certificate" shall mean a certificate signed by the
chief financial officer or another officer of Tenant authorized by the
board of directors or by-laws of Tenant, or any other Person whose power
and authority to act has been so authorized.
1.61 "Other Leases" shall mean the Leases described in Exhibit A,
attached hereto and made a part hereof.
1.62 "Overdue Rate" shall mean a rate equal to the lesser of the
Base Rate plus two percent (2%) and the maximum rate then permitted
under applicable law.
1.63 "Parent" shall mean, with respect to any Person, any Person
which owns directly, or indirectly, through one or more Subsidiaries,
twenty percent (20%) or more of the voting or beneficial interests in
such Person or otherwise Controls such Person.
1.64 "Percentage Rent" shall have the meaning given such term in
Section 3.1.2(a).
1.65 "Permitted Encumbrances" shall mean the matters set forth in
Exhibit B, attached hereto and made a part hereof.
1.66 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns
of such Person where the context so admits.
1.67 "Primary Intended Use" shall have the meaning given such term
in Section 4.1.1.
1.68 "Qualified Appraiser" shall mean any disinterested person who
is a member in good standing of the American Institute of Real Estate
Appraisers or the American Society of Real Estate Counselors (or the
successor to either of such organizations) and who has had not less than
ten (10) years experience in appraising and valuing, commercial
buildings in the State.
1.69 "Records" shall have the meaning given such term in Section
7.2.
1.70 "Rent" shall mean, collectively, the Minimum Rent, Percentage
Rent and Additional Rent.
1.71 "Responding Party" shall have the meaning given such term in
Section 20.1.
1.72 "SEC" shall mean the Securities and Exchange Commission.
1.73 "State" shall mean the State, Commonwealth, Possession or
Territory in which the Leased Property is located.
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1.74 "Subsidiary" shall mean, with respect to any Person, any
Entity in which such Person shall own, directly or indirectly, through
one or more Subsidiaries, twenty percent (20%) or more of the voting or
beneficial interests or any other entity Controlled by such Person.
1.75 "Substitute Properties" shall have the meaning given such term
in Section 16.1.
1.76 "Substitution Date" shall have the meaning given such term in
Section 16.1.
1.77 "Successor Landlord" shall have the meaning given such term in
Section 21.2.
1.78 "Superior Lease" shall have the meaning given such term in
Section 21.2.
1.79 "Superior Landlord" shall have the meaning given such term in
Section 21.2.
1.80 "Superior Mortgage" shall have the meaning given such term in
Section 21.2.
1.81 "Superior Mortgagee" shall have the meaning given such term in
Section 21.2.
1.82 "Tenant" shall have the meaning given such term in the
preambles to this Lease.
1.83 "Tenant's Personal Property" shall mean all motor vehicles and
consumable inventory and supplies, furniture, equipment and machinery
and all other personal property of Tenant located on the Leased Property
or used in Tenant's business on the Leased Property and all
modifications, replacements, alterations and additions to the Leased
Personal Property installed at the expense of Tenant, other than any
items included within the definition of Fixtures or Leased Personal
Property and expressly excluding Tenant's accounts receivable.
1.84 "Term" shall mean, collectively, the Fixed Term and any
Extended Terms, to the extent properly exercised pursuant to the
provisions of Section 2.4, unless sooner terminated pursuant to the
provisions of this Lease.
1.85 "Test Rate" shall mean the minimum interest rate necessary to
avoid imputation of original issue discount income under Sections 483 or
1272 of the Code or any similar provision.
1.86 "Trustees" shall mean the trustees of Landlord.
1.87 "Unavoidable Delays" shall mean delays due to strikes, lock-
outs, inability to procure materials, power failure, acts of God,
governmental restrictions, enemy action, civil commotion, fire,
unavoidable casualty or other causes beyond the reasonable control of
the party responsible for performing an obligation hereunder, but in no
event to exceed sixty (60) days so long as the affected party shall use
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reasonable efforts to alleviate the cause of such delay and thereafter
promptly perform such obligation; provided, however, that (x) in no
event shall Tenant's obligation to pay the Rent be affected by
Unavoidable Delays, and (y) in no event shall lack of funds be deemed a
cause beyond the control of either party.
1.88 "Unsuitable for Its Primary Intended Use" shall mean a state
or condition of the Facility such that by reason of damage or
destruction, or a partial Condemnation, in the good faith judgment of
Landlord and Tenant, reasonably exercised, the Facility cannot be
operated on a commercially practicable basis for its Primary Intended
Use taking into account, among other relevant factors, the number of
usable beds, the amount of square footage, or revenues affected by such
damage or destruction or partial taking.
ARTICLE 2
PREMISES AND TERM
2.1 Premises. Upon and subject to the terms and conditions herein
set forth, Landlord leases to Tenant and Tenant leases from Landlord all
of the following (collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land as more
particularly described in Exhibit C, attached hereto and made a
part hereof (collectively, the "Land");
(b) all buildings, structures, Fixtures and other
improvements of every kind, including, but not limited to,
alleyways and connecting tunnels, sidewalks, utility pipes,
conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures presently
situated upon the Land and Capital Additions financed by Landlord
(collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures and other items of
property, now or hereafter permanently affixed to or incorporated
into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air
and water pollution control, waste disposal, air-cooling and air-
conditioning systems and apparatus, sprinkler systems and fire and
theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically
excluding all items included within the category of Tenant's
Personal Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings,
moveable walls or partitions, computers or trade fixtures or other
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personal property used or useful in Tenant's business on or in the
Leased Improvements, and located on or in the Leased Improvements
on the Commencement Date, except items, if any, included within the
category of Fixtures, but specifically excluding all items included
within the category of Tenant's Personal Property (collectively the
"Leased Personal Property"); and
(f) all existing leases of space (including any security
deposits held pursuant thereto), if any, in the Leased Improvements
to tenants thereof.
2.2 Condition of Premises. On the Commencement Date, Landlord
shall deliver and Tenant shall accept the Leased Property in "as is"
condition, subject to the rights of parties in possession, the existing
state of title, including all covenants, conditions, restrictions,
easements and other matters of record, all applicable Legal
Requirements, the lien of financing instruments, mortgages and deeds of
trust, and such other matters which would have been disclosed by an
inspection of the Leased Property and the record title thereto or by an
accurate survey thereof. LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART
THEREOF, EITHER AS THE FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, WITH RESPECT TO THE
LEASED PROPERTY OR ANY PORTION THEREOF IT BEING AGREED THAT ALL SUCH
RISKS SHALL BE BORNE BY TENANT. To the extent permitted by law,
however, Landlord grants and assigns to Tenant all of Landlord's rights
to proceed against any predecessor in title for breaches of warranties
or representations or for latent defects in the Leased Property.
Landlord shall cooperate with Tenant in the prosecution of any such
claims, in Landlord's or Tenant's name, all at Tenant's sole cost and
expense. Tenant shall indemnify, and hold harmless Landlord from and
against any loss, cost, damage or liability (including attorneys' fees)
incurred by Landlord in connection with such cooperation.
2.3 Fixed Term. The initial term of this Lease (the "Fixed Term")
shall commence on the date hereof and, unless sooner terminated in
accordance with the terms and conditions of this Lease, shall expire on
December 31, 1998.
2.4 Extended Terms. Provided no Default or Event of Default shall
have occurred and be continuing and Tenant shall simultaneously exercise
its right to extend the term of all of the Other Leases, Tenant shall
have the right to extend the Fixed Term for two additional periods of
ten (10) years each (the "Extended Terms").
Each Extended Term shall commence on the day succeeding the
expiration of the Fixed Term or the preceding Extended Term, as the case
may be, and shall end on the day immediately preceding the tenth
anniversary of the commencement of such Extended Term. All of the
terms, covenants and provisions of this Lease shall apply to each such
Extended Term, except that (a) the Minimum Rent for the second such
Extended Term shall be the greater of (x) the Minimum Rent payable
during the first such Extended Term and (y) the Fair Market Rental for
the Leased Property determined as of the commencement of such Extended
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Term, and (b) Tenant shall have no further right to extend the Term
beyond the Extended Terms hereinabove provided. If Tenant shall elect
to exercise either of the aforesaid options, it shall do so by giving
Landlord written notice thereof not later than one (1) year prior to the
expiration of the then current term of this Lease (Fixed or Extended, as
applicable); it being understood and agreed that time is of the essence
with respect to the giving of such notice. If Tenant shall fail to give
any such notice, this Lease shall automatically terminate at the end of
the term then in effect and Tenant shall have no further option to
extend the term of this Lease. If Tenant shall give such notice, the
extension of this Lease shall be automatically effected, without the
execution of any additional documents.
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ARTICLE 3
RENT
3.1 Rent. Tenant shall pay to Landlord, by check or wire transfer
of immediately available federal funds, as Tenant may elect, without
offset, abatement, demand or deduction, Minimum Rent, Percentage Rent
and Additional Rent, during the Term, as herein provided.
3.1.1 Minimum Rent. Tenant shall pay Minimum Rent in equal
monthly installments, in advance, on the first day of each and every
calendar month during the Term. Minimum Rent for any partial month
shall be pro-rated on a daily basis.
3.1.2 Percentage Rent.
(a) Amount. Commencing June 1, 2000, for each Fiscal Year
during the Term, Tenant shall pay to Landlord, as additional rent,
percentage rent ("Percentage Rent") in an amount equal to three
percent (3%) of Excess Net Patient Revenues for such Fiscal Year.
Percentage Rent shall be calculated and paid quarterly in arrears
on the basis of cumulative Excess Net Patient Revenues as the last
day of each quarter occurring during the applicable Fiscal Year,
less the Percentage Rent, if any, previously paid to Landlord for
such Fiscal Year.
(b) Payment of Percentage Rent. Tenant shall calculate and
deliver Percentage Rent to Landlord within forty-five (45) days
after the end of each quarter of any Fiscal Year (or, in the case
of the final quarter in any Fiscal Year, ninety (90) days
thereafter), together with an Officer's Certificate, setting forth
the calculation of Percentage Rent for such quarter.
(c) Reconciliation of Additional Rent. Within ninety (90)
days after the end of each Fiscal Year, Tenant shall deliver to
Landlord an Officer's Certificate, together with certified audits
with respect to Net Patient Revenues for the Facility and the
facilities leased under the Other Leases, in form and substance
reasonably satisfactory to Landlord, of Tenant's financial
operations prepared by accountants reasonably satisfactory to
Landlord, setting forth the Net Patient Revenues and Excess Net
Patient Revenues for the immediately preceding Fiscal Year,
together with such additional information with respect thereto as
Landlord may reasonably request.
If the Percentage Rent for any Fiscal Year as shown in the
applicable Officer's Certificate and accompanying financial
statements is less than the amount previously paid with respect
thereto, Landlord shall, at Landlord's option, refund any excess
payment to Tenant or grant Tenant a credit against the next due
payment of Percentage Rent in the amount of such difference. If
the Percentage Rent for any Fiscal Year as shown in the applicable
Officer's Certificate exceeds the amount previously paid with
respect thereto, Tenant shall pay such excess to Landlord at such
time as such Officer's Certificate is delivered.
-15-
Any difference between the Percentage Rent for any Fiscal Year
as shown in such Officer's Certificate and the total amount of
quarterly payments for such Fiscal Year previously paid, whether in
favor of Landlord or Tenant, shall bear interest at the Base Rate,
which interest shall accrue from the close of such Fiscal Year
until the amount of such difference shall be paid or otherwise
discharged.
A final reconciliation of Percentage Rent, taking into account
among other relevant adjustments, any contractual allowances which
are accrued after the expiration or sooner termination of this
Lease, but which related to Net Patient Revenues accrued prior to
such termination, and Tenant's good faith best estimate of the
amount of any unresolved contractual allowances shall be made not
later than two (2) years after such termination and Tenant shall
advise Landlord within sixty (60) days after such termination of
Tenant's best estimate at that time of the approximate amount of
such adjustments, which estimate shall not be binding on Tenant.
(d) Confirmation of Percentage Rent. Tenant shall utilize,
or cause to be utilized, an accounting system for the conduct of
its business at the Leased Property in accordance with its usual
and customary practices and in accordance with generally accepted
accounting principles, consistently applied, which will accurately
record all Net Patient Revenues, and shall employ independent
accountants reasonably acceptable to Landlord, and Tenant shall
retain, for at least four (4) years after the expiration of each
Fiscal Year (and in any event until the final reconciliation
described in subparagraph (c) above for such Fiscal Year has been
made), reasonably adequate records conforming to such accounting
system showing all Net Patient Revenues for such Fiscal Year.
Landlord, at its own expense, except as provided below, shall have
the right, from time to time by its accountants or representatives,
to audit the information set forth in the Officer's Certificate
referred to in subparagraph (b) above and, in connection with such
audit, to examine Tenant's records with respect thereto (including
supporting data and sales and excise tax returns), subject to any
prohibitions or limitations on disclosure of any such data under
applicable law or regulations, including, without limitation, any
duly enacted "Patients' Bill of Rights" or similar legislation and
such other limitations as may be necessary to preserve the
confidentiality of the Facility-patient relationship and the
physician-patient privilege. If any such audit shall disclose a
deficiency in the payment of Percentage Rent and either Tenant
agrees with the result of such audit or the matter is otherwise
determined or compromised, Tenant shall forthwith pay to Landlord
the amount of the deficiency, as finally agreed or determined,
together with interest thereon at the Base Rate. If any such audit
discloses that the Net Patient Revenues actually received by Tenant
for any Fiscal Year exceed those reported by Tenant by more than
three percent (3%), Tenant shall pay the reasonable cost of such
audit. Any proprietary information obtained by Landlord pursuant
to the provisions of this section shall be treated as confidential,
except such information may be used, subject to appropriate
confidentiality safeguards, in any litigation between the parties
-16-
and Landlord may disclose such information to prospective
purchasers or lenders.
3.1.3 Additional Rent. In addition to the Minimum Rent and
Percentage Rent, Tenant shall pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions
which Tenant assumes or agrees to pay under this Lease (collectively,
"Additional Rent"), including, but not limited to the following:
(a) Impositions. Subject to Article 8, Tenant shall pay, or
cause to be paid, all Impositions before any fine, penalty,
interest or cost may be added for non-payment, such payments to be
made directly to the taxing authorities where feasible, and shall
promptly, upon request, furnish to Landlord copies of official
receipts or other satisfactory proof evidencing such payments. If
any such Imposition may, at the option of the taxpayer, lawfully be
paid in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), Tenant may exercise the option
to pay the same (and any accrued interest on the unpaid balance of
such Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any
fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or
permitted by applicable law, prepare and file all tax returns in
respect of Landlord's net income, gross receipts, sales and use,
single business, transaction privilege, rent, ad valorem, franchise
taxes and taxes on its capital stock, and Tenant, at its expense,
shall, to the extent required or permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in
respect of any Imposition as may be required by governmental
authorities. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be paid
over to or retained by Tenant if no Default or Event of Default
shall have occurred and be continuing. Landlord and Tenant shall,
upon request of the other, provide such data as is maintained by
the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and
reports. In the event governmental authorities classify any
property covered by this Lease as personal property, Tenant shall
file all personal property tax returns in such jurisdictions where
it may legally so file. Each party shall, to the extent it
possesses the same, provide the other, upon request, with cost and
depreciation records necessary for filing returns for any property
so classified as personal property. Where Landlord is legally
required to file personal property tax returns, Landlord shall
provide Tenant with copies of assessment notices in sufficient time
for Tenant to file a protest. All Impositions assessed against
such personal property shall be (irrespective of whether Landlord
or Tenant shall file the relevant return) paid by Tenant not later
than thirty (30) days prior to the last date on which the same may
be made without interest or penalty. If the provisions of any
Facility Mortgage requires deposits on account of Impositions to be
made with such Facility Mortgagee, provided the Facility Mortgagee
has not elected to waive such provision, Tenant shall either pay
Landlord the monthly amounts required and Landlord shall transfer
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such amounts to such Facility Mortgagee or, pursuant to written
direction by Landlord, Tenant shall make such deposits directly
with such Facility Mortgagee.
Landlord shall give prompt written notice to Tenant of all
Impositions payable by Tenant hereunder of which Landlord at any
time has knowledge; provided, however, Landlord's failure to give
any such notice shall in no way diminish Tenant's obligation
hereunder to pay such Impositions.
Impositions imposed in respect of the tax-fiscal period during
which the Term commences and/or terminates shall be prorated
between Landlord and Tenant, whether or not such Imposition is
imposed before or after such termination.
(b) Utility Charges. Tenant shall pay or cause to be paid
all charges for electricity, power, gas, oil, water and other
utilities used at the Leased Property during the Term.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained
pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations which Tenant assumes or
agrees to pay under this Lease.
3.2 Late Payment of Rent. If any installment of Minimum Rent,
Percentage Rent or Additional Rent (but only as to those items of
Additional Rent which are payable directly to Landlord) shall not be
paid when due, Tenant shall pay Landlord, on demand, as Additional Rent,
a late charge (to the extent permitted by law) computed, during the
first ten (10) days such payment is delinquent at the greater of the
Base Rate and eleven and one-half percent (11.5%) per annum and,
thereafter, at the Overdue Rate, on the amount of such installment, from
the date such installment was due until the date paid. To the extent
that Tenant pays any Additional Rent directly to Landlord pursuant to
any requirement of this Lease, Tenant shall be relieved of its
obligation to pay such Additional Rent to the entity to which they would
otherwise be due.
In the event of any failure by Tenant to pay any Additional Rent
when due, Tenant shall promptly pay and discharge, as Additional Rent,
every fine, penalty, interest and cost which may be added for non-
payment or late payment of such items. Landlord shall have all legal,
equitable and contractual rights, powers and remedies provided either in
this Lease or by statute or otherwise in the case of non-payment of the
Additional Rent as in the case of non-payment of the Minimum Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord, so
that this Lease shall yield to Landlord the full amount of the
installments of Minimum Rent, Percentage Rent and Additional Rent
throughout the Term, subject to any other provisions of this Lease which
expressly provide for adjustment or abatement of Rent or other charges.
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3.4 No Termination, Abatement, Etc. Except as otherwise
specifically provided in this Lease, Tenant, to the maximum extent
permitted by law, shall remain bound by this Lease in accordance with
its terms and shall neither take any action without the consent of
Landlord to modify, surrender or terminate the same, nor seek, nor be
entitled to any abatement, deduction, deferment or reduction of the
Rent, or set-off against the Rent, nor shall the respective obligations
of Landlord and Tenant be otherwise affected by reason of (a) any damage
to, or destruction of, the Leased Property or any portion thereof from
whatever cause or any Condemnation; (b) the lawful or unlawful
prohibition of, or restriction upon Tenant's use of the Leased Property,
or any portion thereof, or the interference with such use by any Person
or by reason of eviction by paramount title; (c) any claim which Tenant
may have against Landlord by reason of any Landlord Default; (d) any
bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting
Landlord or any assignee or transferee of Landlord; or (e) for any other
cause whether similar or dissimilar to any of the foregoing. Tenant
hereby waives all rights arising from any occurrence whatsoever, which
may now or hereafter be conferred upon it by law to modify, surrender or
terminate this Lease or quit or surrender the Leased Property or any
portion thereof or which may entitle Tenant to any abatement, reduction,
suspension or deferment of the Rent or other sums payable or other
obligations to be performed by Tenant hereunder, except as otherwise
specifically provided in this Lease. The obligations of Landlord and
Tenant hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Tenant hereunder
shall continue to be payable in all events unless the obligations to pay
the same shall be terminated pursuant to the express provisions of this
Lease.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use. Tenant shall continuously use or
cause to be used the Leased Property as a nursing home or subacute
facility and/or other facility offering any higher level health care
services and for such other uses as may be necessary or incidental
thereto (the particular use to which the Leased Property is put at any
particular time, its "Primary Intended Use"). Tenant shall not use the
Leased Property or any portion thereof for other than its Primary
Intended Use without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed; provided,
however, that such consent shall not be deemed to be unreasonably
withheld if, in the reasonable opinion of Landlord, the proposed use
will significantly alter the character or purpose or detract from the
value or operating efficiency of the Leased Property or significantly
impair the revenue-producing capability of the Leased Property or
adversely affect the ability of Tenant to comply with this Lease. No
use shall be made or permitted to be made of the Leased Property and no
acts shall be done thereon which will cause the cancellation of any
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insurance policy covering the Leased Property or any part thereof, nor
shall Tenant sell or otherwise provide to residents or patients therein,
or permit to be kept, used or sold in or about the Leased Property, or
any portion thereof, any article which may be prohibited by law or by
the standard form of fire insurance policies, or any other insurance
policies required to be carried hereunder, or fire underwriter's
regulations.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain all approvals
necessary to use and operate the Leased Property and the Facility for
the Primary Intended Use under applicable local, state and federal law
and, without limiting the generality of the foregoing, shall use its
best efforts to maintain appropriate certifications for reimbursement
licensure.
4.1.3 Continuous Operation, Etc. Tenant shall use its best
efforts to operate continuously the Leased Property as a provider of
health care services in accordance with the Primary Intended Use.
Tenant shall not take, or omit to take, any action, the taking or
omission of which may materially impair the value or the usefulness of
the Leased Property for the Primary Intended Use.
4.1.4 Lawful Use, Etc. Tenant shall not use or suffer or
permit the use of the Leased Property and Tenant's Personal Property for
any unlawful purpose. Tenant shall not commit or suffer to be committed
any waste on the Leased Property or the Facility, nor shall Tenant cause
or permit any nuisance thereon or therein. Tenant shall neither suffer
nor permit the Leased Property or any portion thereof, including any
Capital Addition, whether or not financed by Landlord, or Tenant's
Personal Property, to be used in such a manner as might reasonably tend
to impair Landlord's (or Tenant's, as the case may be) title thereto or
to any portion thereof, or may reasonably make possible any claim for
adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Instruments,
Etc. Subject to the provisions of Article 8, Tenant, at its sole
expense, shall promptly (i) comply with all Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance,
repair, alteration and restoration of the Leased Property and Tenant's
Personal Property, and (ii) procure, maintain and comply with all
appropriate licenses, certificates of need, permits, provider agreements
and other authorizations required for any use of the Leased Property and
Tenant's Personal Property then being made, and for the proper erection,
installation, operation and maintenance of the Leased Property or any
part thereof, including, without limitation, any Capital Additions.
4.3 Compliance with Medicaid and Medicare Requirements. Tenant
shall, at its sole cost and expense, make whatever improvements (capital
or ordinary) as are required to conform the Leased Property to such
standards as may, from time to time, be required by Federal Medicare
(Title 18) or Medicaid (Title 19) skilled and/or intermediate care
nursing programs, if applicable, or any other applicable programs or
legislation, or capital improvements required by any other governmental
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agency having jurisdiction over the Leased Property as a condition of
the continued operation of the Leased Property for the Primary Intended
Use.
4.4 Environmental Matters. Tenant shall not store, spill upon,
dispose of or transfer to or from the Leased Property any Hazardous
Substance, except that Tenant may store, transfer and dispose of
Hazardous Substances in compliance with all Environmental Laws. Tenant
shall maintain the Leased Property at all times free of any Hazardous
Substance (except such Hazardous Substances as are maintained in
compliance with all Environmental Laws). Tenant shall promptly: (a)
notify Landlord in writing of any change in the nature or extent of such
Hazardous Substances maintained, (b) transmit to Landlord a copy of any
report which is required to be filed with respect to the Leased Property
pursuant to any Environmental Law, (c) transmit to Landlord copies of
any citations, orders, notices or other governmental communications
received by Tenant or its agents or representatives with respect thereto
(collectively, "Environmental Notice"), (d) observe and comply with any
and all Environmental Laws relating to the use, maintenance and disposal
of Hazardous Substances and all orders or directives from any official,
court or agency of competent jurisdiction relating to the use or
maintenance or requiring the removal, treatment, containment or other
disposition thereof, and (e) pay or otherwise dispose of any fine,
charge or Imposition related thereto, unless Tenant shall contest the
same in accordance with Article 8.
If at any time prior to the termination of this Lease, Hazardous
Substances are discovered on the Leased Property, Tenant hereby agrees
to take all actions, and to incur any and all expenses, as may be
reasonably necessary and as may be required by any municipal, State or
Federal agency or other governmental entity or agency having
jurisdiction thereof, (a) to clean up and remove from and about the
Leased Property all Hazardous Substances thereon, (b) to contain and
prevent any further release or threat of release of Hazardous Substances
on or about the Leased Property and (c) to eliminate any further release
or threat of release of Hazardous Substances on or about the Leased
Property.
Tenant shall indemnify and hold harmless Landlord and each Facility
Mortgagee from and against all liabilities, obligations, claims,
damages, penalties, costs and expenses (including, without limitation,
reasonable attorney's fees and expenses) imposed upon, incurred by or
asserted against any of them by reason of any failure by Tenant or any
Person claiming under Tenant to perform or comply with any of the terms
of this Section 4.4.
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ARTICLE 5
MAINTENANCE AND REPAIRS, ETC.
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations. Tenant shall, at its sole cost
and expense, keep the Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto (and Tenant's Personal Property)
in good order and repair, reasonable wear and tear excepted, (whether or
not the need for such repairs occurs as a result of Tenant's use, any
prior use, the elements or the age of the Leased Property or Tenant's
Personal Property, or any portion thereof), and shall promptly make all
necessary and appropriate repairs and replacements thereto of every kind
and nature, whether interior or exterior, structural or nonstructural,
ordinary or extraordinary, foreseen or unforeseen or arising by reason
of a condition existing prior to the commencement of the Term (concealed
or otherwise). All repairs shall be at least equivalent in quality to
the original work.
5.1.2 Landlord's Obligations. Landlord shall not, under any
circumstances, be required to build or rebuild any improvement on the
Leased Property, or to make any repairs, replacements, alterations,
restorations or renewals of any nature or description to the Leased
Property, whether ordinary or extraordinary, structural or
non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to
maintain the Leased Property in any way, except as specifically provided
herein. Tenant hereby waives, to the extent permitted by law, the right
to make repairs at the expense of Landlord pursuant to any law in effect
at the time of the execution of this Lease or hereafter enacted.
Landlord shall have the right to give, record and post, as appropriate,
notices of nonresponsibility under any mechanic's lien laws now or
hereafter existing.
5.2 Capital Expenditure Cost Sharing. Replacement of or major
repairs to all structural or mechanical systems shall be undertaken by
Tenant, at its sole cost and expense in the exercise of its reasonable
business judgment, pursuant to and in accordance with plans and
specifications approved in advance by Landlord; provided, however, that
if the useful life of any improvement or repair for which a Capital
Expenditure is made extends beyond the termination of the Term (other
than any early termination resulting from the occurrence of an Event of
Default), provided Tenant shall have obtained Landlord's prior written
consent with respect to the making thereof, the cost of such replacement
or repair shall be apportioned between Landlord and Tenant so that
Landlord shall pay for that portion of the useful life of such item
occurring on or after such termination date. Landlord shall have no
obligation to reimburse Tenant for Landlord's share of the cost of such
replacement or repair until the date of the termination of this Lease.
Notwithstanding the foregoing, Landlord agrees to make any such payment
to Tenant within sixty (60) days after Tenant's written request
therefor.
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5.3 Tenant's Personal Property. Tenant may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any
parcels of the Land or in any of the Leased Improvements, any items of
Tenant's Personal Property, and Tenant may, subject to the conditions
set forth below, remove the same upon the expiration or sooner
termination of the Term. Tenant shall provide and maintain during the
entire Term all such Tenant's Personal Property as shall be necessary in
order to operate the Facility in compliance with all licensure and
certification requirements, applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the
industry for the Primary Intended Use. All of Tenant's Personal
Property not removed by Tenant on or prior to the expiration or earlier
termination of this Lease shall be considered abandoned by Tenant and
may be appropriated, sold, destroyed or otherwise disposed of by
Landlord without the necessity of first giving notice thereof to Tenant,
without any payment to Tenant and without any obligation to account
therefor. Tenant shall, at its expense, restore the Leased Property to
the condition required by Section 5.4, including repair of all damage to
the Leased Property caused by the removal of Tenant's Personal Property,
whether effected by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than
motor vehicles) on, or in connection with, the Leased Property which
belongs to anyone other than Tenant, Tenant shall use its best efforts
to require the agreement permitting such use to provide that Landlord or
its designee may assume Tenant's rights under such agreement upon
management of the Facility by Landlord or its designee.
5.4 Yield Up. Upon the expiration or sooner termination of this
Lease, Tenant shall vacate and surrender the Leased Property to Landlord
in the condition in which the Leased Property was on the Commencement
Date, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease, ordinary wear and
tear excepted.
In addition, upon the expiration or earlier termination of this
Lease, Tenant shall, at Landlord's reasonable cost and expense, use its
best efforts to transfer to and cooperate with Landlord or Landlord's
nominee in connection with the processing of all applications for
licenses, operating permits and other governmental authorizations and
all contracts, including, contracts with governmental or quasi-
governmental entities, which may be necessary for the operation of the
Facility. If requested by Landlord, Tenant shall continue to manage the
Facility after the termination of this Lease and for so long thereafter
as is necessary to obtain all necessary licenses, operating permits and
other governmental authorizations, on such reasonable terms (which shall
include an agreement to reimburse Tenant for its reasonable out-of-
pocket costs and expenses and reasonable administrative costs) as
Landlord shall request.
5.5 Encroachments, Restrictions, Etc. If any of the Leased
Improvements shall, at any time, encroach upon any property, street or
right-of-way adjacent to the Leased Property, or shall violate the
agreements or conditions contained in any lawful restrictive covenant or
other agreement affecting the Leased Property, or any part thereof, or
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shall impair the rights of others under any easement or right-of-way to
which the Leased Property is subject, upon the request of Landlord or of
any person affected by any such encroachment, violation or impairment,
Tenant shall, at its sole cost and expense, subject to its right to
contest the existence of any encroachment, violation or impairment and
in such case, in the event of an adverse final determination, either (a)
obtain, in form and substance satisfactory to Landlord, valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether
the same shall affect Landlord or Tenant, or (b), subject to Landlord's
approval (which shall not be unreasonably withheld or delayed), make
such changes in the Leased Improvements and take such other actions, as
Tenant, in the good faith exercise of its judgment, deems reasonably
practicable, to remove such encroachment, and to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements and, in any event, take all such actions as may be
necessary in order to ensure the continued operation of the Leased
Improvements for the Primary Intended Use substantially in the manner
and to the extent the Leased Improvements were operated prior to the
assertion of such violation, impairment or encroachment. Any such
alteration shall be made in conformity with the applicable requirements
of this Article 5. Tenant's obligations under this Section 5.5 shall be
in addition to and shall in no way discharge or diminish any obligation
of any insurer under any policy of title or other insurance and Tenant
shall be entitled to a credit for any sums recovered by Landlord under
any such policy of title or other insurance.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property.
Provided no Default or Event of Default shall have occurred and be
continuing, Tenant shall have the right, subject to obtaining Landlord's
prior written consent (which consent shall not be unreasonably withheld
or delayed), upon and subject to the terms and conditions set forth
below, to construct or install Capital Additions on the Leased Property.
Landlord's consent shall not be deemed to be unreasonably withheld if
such Capital Addition will significantly alter the character or purpose
or detract from the value or operating efficiency or the
revenue-producing capability of the Leased Property, or adversely affect
the ability of Tenant to comply with this Lease. Any withholding of
consent shall be express and shall be effected within thirty (30) days
after receipt by Landlord of such documents or information as Landlord
may reasonably require, notice of which requirements shall be sent to
Tenant within thirty (30) days after Tenant's request. Failure to give
notice of the withholding of such consent within such thirty (30) day
period shall be deemed approval. Prior to commencing construction of
any Capital Addition, Tenant shall submit to Landlord, in writing, a
proposal setting forth, in reasonable detail, any proposed Capital
Addition and shall provide Landlord with such plans and specifications,
permits, licenses, contracts and other information concerning the
proposed Capital Addition as Landlord may reasonably request. Without
limiting the generality of the foregoing, such proposal shall indicate
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the approximate projected cost of constructing such Capital Addition,
the use or uses to which it will be put and a good faith estimate of the
change, if any, in the Net Patient Revenues that Tenant anticipates will
result from such Capital Addition. Prior to commencing construction of
any Capital Addition, Tenant shall request in writing that Landlord
provide funds to pay for such Capital Addition. If, within sixty (60)
days after receipt of such request, Landlord shall not elect to provide
such financing on terms reasonably acceptable to Tenant (and, for
purposes of this Section 6.1, the failure of Landlord to respond within
such 60 day period shall be deemed an election not to provide such
funding), the provisions of Section 6.2 shall apply. Landlord's notice
of its election to provide such financing shall set forth the terms and
conditions of such proposed financing, including the terms of any
amendment to this Lease (including, without limitation, an increase in
Minimum Rent to compensate Landlord for the additional funds advanced).
In no event shall the portion of the projected Capital Additions Cost
comprised of land, if any, materials, labor charges and fixtures be less
than eighty percent (80%) of the total amount of such cost. Tenant may
withdraw its request by written notice to Landlord at any time before
Tenant's written acceptance of Landlord's terms and conditions. If
Landlord declines to finance a Capital Addition or if Landlord's
proposed financing terms are unacceptable to Tenant, Tenant may solicit
and negotiate a commitment for such financing from another Person,
provided Landlord shall approve all the terms and conditions of such
financing (which approval shall not be unreasonably withheld or
delayed). If Landlord shall finance the proposed Capital Addition,
Tenant shall pay to Landlord, as Additional Rent, all reasonable costs
and expenses paid or incurred by Landlord and any Lending Institution
which has committed to provide financing for such Capital Addition to
Landlord in connection therewith, including, but not limited to, (a) the
reasonable attorneys' fees and expenses, (b) all printing expenses, (c)
all filing, registration and recording taxes and fees, (d) documentary
stamp taxes, (e) title insurance charges, appraisal fees, and rating
agency fees, and (f) commitment fees.
No Capital Addition shall be made which would tie in or connect any
Leased Improvement or any Leased Property with any other improvements on
property adjacent to such Leased Property (and not part of the Land)
including, without limitation, tie-ins of buildings or other structures
or utilities, unless Tenant shall have obtained the prior written
approval of Landlord, which approval may be withheld by Landlord in
Landlord's sole discretion. Any Capital Additions shall, upon the
expiration or sooner termination of this Lease, become the property of
Landlord, free and clear of all encumbrances, subject to the provisions
of Section 6.2.
6.2 Capital Additions Financed by Tenant. Provided that Tenant
has obtained the prior written consent of Landlord in each instance
(which approval shall not be unreasonably withheld or delayed), Tenant
may arrange for financing for Capital Additions from third party lend-
ers; provided, however that (i) the terms and conditions of any such
financing shall be subject to the prior approval of Landlord and (ii)
any security interests in any property of Tenant, including, without
limitation, the Leased Property, shall be expressly and fully
subordinated to this Lease and to the interest of Landlord in the Leased
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Property and to the rights of any Facility Mortgagee. If, pursuant to
the provisions of this Lease, Tenant provides or arranges financing with
respect to any Capital Addition, this Lease shall be and hereby is
amended to provide as follows:
(a) Upon completion of any such Capital Addition, Net Patient
Revenues attributable to such Capital Addition shall be excluded
from Net Patient Revenues of the Leased Property for purposes of
calculating Percentage Rent. The Net Patient Revenues attributable
to any such Capital Addition shall be deemed to be an amount (the
"Added Value Percentage") which bears the same proportion to the
total Net Patient Revenues from the entire Leased Property
(including all Capital Additions) as the Fair Market Added Value of
such Capital Addition bears to the Fair Market Value of the entire
Leased Property (including all Capital Additions) immediately after
completion of such Capital Addition. The Added Value Percentage
for Capital Additions financed by Tenant shall remain in effect
until any subsequent Capital Addition financed by Tenant is
completed.
(b) There shall be no adjustment in the Minimum Rent by
reason of any such Capital Addition.
(c) Upon the expiration or earlier termination of this Lease
(but if this Lease is terminated by reason of an Event of Default,
only after Landlord is fully compensated for all damages resulting
therefrom), Landlord shall compensate Tenant for all Capital
Additions financed by Tenant in any of the following ways
determined in Landlord's sole discretion:
(i) By purchasing such Capital Additions from Tenant for cash in
the amount of the then Fair Market Added Value of such Capital
Additions;
(ii) By purchasing such Capital Additions from Tenant by delivering
to Tenant Landlord's purchase money promissory note in the
amount of the Fair Market Added Value, which note shall be due
and payable as to both principal and interest on the second
anniversary of the making thereof, shall be on then
commercially reasonable terms and shall be secured by a
mortgage on the Leased Property and such Capital Additions
subject to all existing mortgages and encumbrances on the
Leased Property and such Capital Additions at the time of such
purchase;
(iii) By assigning to Tenant the right to receive an amount equal to
the Added Value Percentage (determined as of the date of the
expiration or earlier termination of this Lease) of all rent
and other consideration receivable by Landlord under any
re-letting or other disposition of the Leased Property and
such Capital Additions, after deducting from such rent all
costs and expenses incurred by Landlord in connection with
such re-letting or other disposition of the Leased Property
and such Capital Additions and all costs and expenses of
operating and maintaining the Leased Property and such Capital
-26-
Additions during the term of any such new lease which are not
borne by the tenant thereunder, with the provisions of this
Section 6.2(c) to remain in effect until the sale or other
final disposition of the Leased Property and such Capital
Additions, at which time the Fair Market Added Value of such
Capital Addition shall be immediately due and payable, such
obligation to be secured by a mortgage on the Leased Property
and such Capital Additions, subject to all existing mortgages
and encumbrances on the Leased Property at the time of such
purchase and assignment; or
(iv) By making such other arrangement regarding such compensation
as shall be mutually acceptable to Landlord and Tenant.
6.3 Information Regarding Capital Additions. Regardless of the
source of financing of any proposed Capital Addition, Tenant shall
provide Landlord with such information as Landlord may from time to time
reasonably request with respect to such Capital Addition, including,
without limitation, the following:
(a) Evidence that such Capital Addition will be, and upon
completion has been, completed in compliance with the applicable
requirements of State and federal law with respect to capital
expenditures for nursing facilities;
(b) Upon completion of such Capital Addition, a copy of the
certificate of occupancy for the Facility updated, if required;
(c) Such information, certificates, licenses, permits or
other documents necessary to confirm that Tenant will be able to
use the Capital Addition upon completion thereof in accordance with
the Primary Intended Use, including all required federal, State or
local government licenses and approvals;
(d) An Officer's Certificate and a certificate from Tenant's
architect setting forth, in reasonable detail, the projected (or
actual, if available) Capital Additions Cost and invoices and lien
waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land acquired
for the purpose of constructing the Capital 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);
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(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord pursuant
to subparagraph (e) above, free and clear of all liens and
encumbrances, except those approved by Landlord, and (ii) a
lender's policy of title insurance, reasonably satisfactory in form
and substance to Landlord and the Lending Institution advancing any
portion of the Capital Additions Cost;
(h) An appraisal of the Leased Property by a Qualified
Appraiser, acceptable to Landlord, and an Officer's Certificate
stating that the value of the Leased Property upon completion of
the Capital Addition exceeds the Fair Market Value thereof prior to
the commencement of such Capital Addition by an amount not less
than 80% of the Capital Additions Cost; and
(i) Prints of architectural and engineering drawings relating
to such Capital Addition and such other certificates, documents,
opinions of counsel, appraisals, surveys, certified copies of duly
adopted resolutions of the board of directors of Tenant authorizing
the execution and delivery of any lease amendment or other
instruments reasonably required by Landlord and any Lending
Institution advancing or reimbursing Tenant for any portion of the
Capital Additions Cost.
6.4 Non-Capital Additions. Tenant shall have the right, at
Tenant's sole cost and expense, to make additions, modifications or
improvements to the Leased Property which are not Capital Additions
("Non-Capital Additions") from time to time as Tenant, in its reasonable
discretion, may deem desirable for the Primary Intended Use, provided
that such action will not adversely alter the character or purpose or
detract from the value, operating efficiency or revenue-producing
capability of the Leased Property, or adversely affect the ability of
Tenant to comply with the provisions of this Lease. All such Non-
Capital Additions shall, upon expiration or earlier termination of this
Lease, become the property of Landlord, free and clear of all
encumbrances other than Permitted Encumbrances.
6.5 Salvage. All materials which are scrapped or removed in
connection with the making of either Capital Additions or repairs
required by Article 5 shall be the property of the party paying or
providing the financing for such work.
ARTICLE 7
LIENS
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at
its expense, any lien, encumbrance, attachment, title retention
agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, other than (a) this Lease,
(b) the Permitted Encumbrances, (c) restrictions, liens and other
encumbrances which are consented to in writing by Landlord, (d) liens
for those taxes of Landlord which Tenant is not required to pay
-28-
hereunder, (e) subleases permitted by Article 17, (f) liens for
Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are not yet payable, or (ii) are
payable without fine or penalty and such liens are being contested in
accordance with Article 8, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums disputed, provided that (i)
the payment of such sums shall not be postponed under any related
contract for more than sixty (60) days after the completion of the
action giving rise to such lien and a reserve or another appropriate
provision as shall be required by law or generally accepted accounting
principles shall have been made therefor, and (ii) any such liens are
being contested in accordance with Article 8, and (h) any liens which
are the responsibility of Landlord pursuant to Article 21.
7.2 Landlord's Lien. In addition to any statutory landlord's lien
and in order to secure payment of the Rent and all other sums payable
hereunder by Tenant, and to secure payment of any loss, cost or damage
which Landlord may suffer by reason of Tenant's breach of this Lease,
Tenant hereby grants unto Landlord a security interest in and an express
contractual lien upon Tenant's Personal Property (except motor vehicles
sold from time to time in the ordinary course of Tenant's operations),
and all ledger sheets, files, records, documents and instruments
(including, without limitation, computer programs, tapes and related
electronic data processing) relating to the operation of the Facility
(collectively, the "Records") and all proceeds therefrom; and Tenant's
Personal Property shall not be removed from the Leased Property without
the Landlord's prior written consent, unless no Default or Event of
Default shall have occurred and be continuing.
Upon Landlord's request, Tenant shall execute and deliver to
Landlord security agreements and financing statements in form sufficient
to perfect the security interests of Landlord in Tenant's Personal
Property and the proceeds thereof in accordance with the provisions of
the applicable laws of the State and otherwise in form and substance
reasonably satisfactory to Landlord. Tenant hereby grants Landlord an
irrevocable limited power of attorney, coupled with an interest, to
execute all such financing statements in Tenant's name, place and stead.
The security interest herein granted is in addition to any statutory
lien for the Rent.
Landlord agrees, at Tenant's request, to execute such documents as
Tenant may reasonably require to subordinate the lien granted pursuant
to this Section 7.2 in Tenant's Personal Property (but not the Records)
to the lien of any Person providing purchase money financing with
respect thereto.
7.3 Mechanic's Liens. Except as permitted with respect to Capital
Additions, nothing contained in this Lease and no action or inaction by
Landlord shall be construed as (a) constituting the consent or request
of Landlord, expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the
Leased Property or any part thereof, or (b) giving Tenant any right,
power or permission to contract for or permit the performance of any
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labor or services or the furnishing of any materials or other property
in such fashion as would permit the making of any claim against Landlord
in respect thereof or to make any agreement that may create, or in any
way be the basis for any right, title, interest, lien, claim or other
encumbrance upon the Leased Property, or any portion thereof.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of
any Imposition, Legal Requirement, Insurance Requirement, lien,
attachment, levy, encumbrance, charge or claim (collectively "Claims")
by appropriate legal proceedings conducted in good faith and with due
diligence, provided that (a) the foregoing shall in no way be construed
as relieving, modifying or extending Tenant's obligation to pay any
Claims as finally determined or prior to the time the Leased Property
may be sold in satisfaction thereof, (b) such contest shall not cause
Landlord or Tenant to be in default under any mortgage or deed of trust
encumbering the Leased Property or any interest therein or result in or
reasonably be expected to result in a lien attaching to the Leased
Property, and (c) Tenant shall indemnify and hold harmless Landlord from
and against any cost, claim, damage, penalty or expense, including
reasonable attorneys' fees, incurred by Landlord in connection therewith
or as a result thereof. Upon Landlord's request, Tenant shall either
(a) provide a bond or other assurance reasonably satisfactory to
Landlord that all Claims which may be assessed against the Leased
Property, together with all interest and penalties thereon will be paid,
or (b) deposit within the time otherwise required for payment with a
bank or trust company, as trustee, as security for the payment of such
Claims, an amount sufficient to pay the same, together with interest and
penalties in connection therewith and all Claims which may be assessed
against or become a Claim against the Leased Property, or any part
thereof, in connection with any such contest. Tenant shall furnish
Landlord and any Facility Mortgagee with reasonable evidence of such
deposit within five (5) days after request therefor. Landlord agrees to
join in any such proceedings if required legally to prosecute such
contest; provided, however, that Landlord shall not thereby be subjected
to any liability therefor (including, for the payment of any costs or
expenses in connection therewith). Tenant shall be entitled to any
refund of any Claims and such charges and penalties or interest thereon
which have been paid by Tenant or paid by Landlord and for which
Landlord has been fully reimbursed by Tenant. If Tenant shall fail (a)
to pay any Claims when due, (b) to provide security therefor as provided
in this Article 8, or (c) to prosecute any such contest diligently and
in good faith, Landlord may, upon reasonable notice to Tenant (which
notice may be oral and shall not be required if Landlord shall determine
the same is not practicable), pay such charges, together with interest
and penalties due with respect thereto, and Tenant shall reimburse
Landlord therefor, upon demand, as Additional Rent.
ARTICLE 9
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INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall at all times
during the Term and any other time Tenant shall be in possession of the
Leased Property, keep the Leased Property, and all property located in
or on the Leased Property, including Tenant's Personal Property, insured
against the risks in the amounts as follows:
(a) Comprehensive general liability insurance, including
bodily injury and property damage (on an occurrence basis and in
the broadest form available, including without limitation broad
form contractual liability, fire legal liability independent
contractor's hazard and completed operations coverage) under which
Tenant is named as an insured and Landlord and any Facility
Mortgagee (and such others as are in privity of estate with
Landlord, as set out in a notice from time to time) are named as
additional insureds as their interests may appear, in an amount
which shall, at the beginning of the Term, be at least equal to
$5,000,000 per occurrence in respect of bodily injury and death and
$1,000,000 per occurrence in respect of property damage, and which,
from time to time during the Term, shall be for such higher limits,
if any, as are customarily carried in the area in which the Leased
Property is located at property similar to the Leased Property and
used for similar purposes;
(b) "All-risk" property insurance on a "replacement cost"
basis with the usual extended coverage endorsements covering the
Leased Property and Tenant's Personal Property;
(c) Business interruption and loss of rental under a rental
value insurance policy covering risk of loss during the lesser of
the first twelve (12) months of reconstruction or the actual
reconstruction period necessitated by the occurrence of any of the
hazards described in paragraphs (a) and (b) above, in such amounts
as may be customary for comparable properties in the area and in an
amount sufficient to prevent Landlord or Tenant from becoming a
co-insurer;
(d) Claims arising out of malpractice in an amount not less
than Five Million Dollars ($5,000,000) for each person and for each
occurrence with respect to the Leased Property, provided the same
is available at rates which are economically practical in relation
to the risk covered, as determined by Tenant and approved by
Landlord (it being agreed that, in the event the same is not
available at rates which are economically practical in relation to
the risks covered, Tenant shall provide such malpractice insurance
by means of the maintenance of a program of self insurance, which,
in accordance with generally accepted accounting principles
consistently applied, satisfies the insurance requirements of this
paragraph (d) and, in such event, Tenant shall submit to Landlord
such records and other evidence thereof as Landlord may from time
to time reasonably request to confirm the maintenance of such a
program);
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(e) Flood (if the Leased Property which is located in whole
or in part within a designated flood plain area) and such other
hazards and in such amounts as may be customary for comparable
properties in the area, provided the same is available at rates
which are economically practical in relation to the risks covered,
as determined by Tenant and approved by Landlord;
(f) Worker's compensation insurance coverage for all persons
employed by Tenant on the Leased Property with statutory limits and
otherwise with limits of and provisions in accordance with the
requirements of applicable local, state and federal law; and
(g) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Waiver of Subrogation. Landlord and Tenant agree that
(insofar as and to the extent that such agreement may be effective
without invalidating or making it impossible to secure insurance
coverage from responsible insurance companies doing business in the
State) with respect to any property loss which is covered by insurance
then being carried by Landlord or Tenant or would be covered by
insurance if insurance were maintained in accordance with the applicable
provisions of this Lease, respectively, the party carrying such
insurance and suffering said loss releases the other of and from any and
all claims with respect to such loss; and they further agree that their
respective insurance companies shall have no right of subrogation
against the other on account thereof, even though extra premium may
result therefrom. In the event that any extra premium is payable by
Tenant as a result of this provision, Landlord shall not be liable for
reimbursement to Tenant for such extra premium.
9.3 Form Satisfactory, Etc. All policies of insurance required
under this Article 9 shall be written in a form reasonably satisfactory
to Landlord and by insurance companies authorized to do business in the
State, insurance, which companies shall be reasonably satisfactory to
Landlord. All policies of insurance required under this Article 9 shall
include no deductible in excess of $250,000 and shall name Landlord and
any Facility Mortgagee as additional insureds, as their interests may
appear. Losses shall be payable to Landlord or Tenant as provided in
Article 10. Any loss adjustment shall require the written consent of
Landlord, Tenant and each Facility Mortgagee. Evidence of insurance
shall be deposited with Landlord and, if requested, any Facility
Mortgagee. If any provisions of any Facility Mortgage requires deposits
of premiums for insurance to be made with such Facility Mortgagee,
provided that the Facility Mortgagee has not elected to waive such
provision, Tenant shall either pay Landlord monthly the amounts required
and Landlord shall transfer such amounts to such Facility Mortgagee, or,
pursuant to written direction by Landlord, Tenant shall make such
deposits directly with such Facility Mortgagee. Tenant shall pay all
insurance premiums, and deliver policies or certificates thereof to
Landlord prior to their effective date (and, with respect to any renewal
policy, ten (10) days prior to the expiration of the existing policy),
and in the event Tenant shall fail either to effect such insurance as
herein required, to pay the premiums therefor or to deliver such
policies or certificates to Landlord at the times required Landlord
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shall have the right, but not the obligation, to effect such insurance
and pay the premiums therefor, which amounts shall be payable to
Landlord, upon demand, as Additional Rent, together with interest
accrued thereon at the Base Rate from the date such payment is made
until the date repaid. All such policies shall provide Landlord (and
any Facility Mortgagee, if required by the same) thirty (30) days' prior
written notice of any materially alter on, expiration or cancellation of
such policy.
9.4 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with
that required by this Article 9 or increase the amount of any existing
insurance by securing an additional policy or additional policies,
unless all parties having an insurable interest in the subject matter of
such insurance, including, Landlord and all Facility Mortgagees, are
included therein as additional insureds, and the loss is payable under
such insurance in the same manner as losses are payable under this
Lease. In the event Tenant shall take out any such separate insurance
or increase any of the amounts of the then existing insurance, Tenant
shall give Landlord prompt written notice thereof.
9.5 Indemnification of Landlord. Tenant shall indemnify and hold
harmless Landlord from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees), to the maximum extent
permitted by law, imposed upon or incurred by or asserted against
Landlord by reason of: (a) any accident, injury to or death of persons
or loss of or damage to property occurring on or about the Leased
Property or adjoining sidewalks, including, without limitation, any
claims of malpractice, (b) any past, present or future use, misuse,
non-use, condition, management, maintenance or repair by Tenant or
anyone claiming under Tenant of the Leased Property or Tenant's Personal
Property or any litigation, proceeding or claim by governmental entities
or other third parties to which Landlord is made a party or participant
related to the Leased Property or Tenant's Personal Property or such
use, misuse, non-use, condition, management, maintenance, or repair
thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any
Impositions (which are the obligations of Tenant to pay pursuant to the
applicable provisions of this Lease), and (d) any failure on the part of
Tenant or anyone claiming under Tenant to perform or comply with any of
the terms of this Lease. Tenant shall pay all amounts payable under
this Section 9.5 within ten (10) days after demand therefor, and if not
timely paid, such amounts shall bear interest at the overdue rate from
the date of determination to the date of payment. Tenant, at its
expense, shall contest, resist and defend any such claim, action or
proceeding asserted or instituted against Landlord or may compromise or
otherwise dispose of the same as Tenant sees fit.
9.6 Indemnification of Tenant. Landlord shall indemnify and hold
harmless Tenant from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses imposed upon or
incurred by or asserted against Tenant as a result of the gross
negligence or willful misconduct of Landlord.
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ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. All proceeds payable by reason of any
loss or damage to the Leased Property and insured under any policy of
insurance required by Article 9 shall be paid to Landlord and held in
trust by Landlord in an interest-bearing account (subject to the
provisions of Section 10.2) and shall be paid out by Landlord from time
to time for the reasonable costs of reconstruction or repair of the
Leased Property necessitated by damage or destruction. Any excess
proceeds of insurance remaining after the completion of the restoration
shall be paid to Tenant. In the event neither Landlord nor Tenant is
required or elects to restore the Leased Property and this Lease is
terminated without purchase or substitution by Tenant pursuant to
Section 10.2, all insurance proceeds therefrom shall be retained by
Landlord. All salvage resulting from any risk covered by insurance
shall belong to Landlord, except any salvage related to Capital
Additions paid for by Tenant or Tenant's Personal Property shall belong
to Tenant.
10.2 Reconstruction in the Event of Damage or Destruction.
10.2.1 Material Damage or Destruction of Premises. Except as
provided in Section 10.8, if, during the Term, the Leased Property shall
be totally or partially damaged or destroyed by fire or other casualty
and the Facility is thereby rendered Unsuitable for Its Primary Intended
Use, Tenant shall, at Tenant's option, exercisable by written notice to
Landlord within thirty (30) days after the date of such damage or
destruction, elect either (a) to restore the Facility to substantially
the same condition as existed immediately before such damage or
destruction, or (b) to offer (i) to purchase the Leased Property from
Landlord for a purchase price equal to the greater of the Minimum
Repurchase Price or the Fair Market Value Purchase Price of the Leased
Property immediately prior to such damage or destruction, or (ii) to
substitute a new property for the Leased Property in accordance with the
provisions of Article 16. Failure of Tenant to give Landlord written
notice of any such election within such 30-day period shall be deemed an
election by Tenant to restore the Facility. In the event Tenant shall
proceed in accordance with clause (b) preceding and Landlord does not
accept Tenant's offer to purchase the Leased Property or substitute
another property for the Leased Property within thirty (30) days after
receipt of Tenant's notice thereof, Tenant may either (a) withdraw such
offer and proceed promptly to restore the Facility to substantially the
same conditions as existed immediately before the damage or destruction,
or (b) terminate this Lease without further liability hereunder and
Landlord shall be entitled to retain the insurance proceeds. In the
event Tenant shall acquire the Leased Property or substitute a new
property therefor, the insurance proceeds payable on account of such
damage shall be paid to Tenant.
10.2.2 Partial Damage or Destruction. Except as provided in
Section 10.8, if, during the Term, all or any portion of the Leased
Property shall be totally or partially destroyed by fire or other
casualty and the Facility is not thereby rendered Unsuitable for its
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Primary Intended Use, Tenant shall promptly restore the Facility to
substantially the same condition as existed immediately before such
damage or destruction; provided, however, that if Tenant cannot, using
diligent efforts, obtain all government approvals, including building
permits, licenses, conditional use permits and certificates of need,
necessary to perform all required repair and restoration and to operate
the Facility for its Primary Intended Use in substantially the same
manner as existed immediately prior to such damage or destruction within
one hundred eighty (180) days after the date of such fire or casualty,
Tenant shall, within thirty (30) days thereafter elect, by written
notice to Landlord, either (a) to substitute a new property or
properties for the Leased Property in accordance with the provisions of
Article 16, or (b) purchase the Leased Property for a purchase price
equal to the greater of the then Minimum Repurchase Price or the Fair
Market Value Purchase Price of the Leased Property immediately prior to
such damage or destruction. Failure of Tenant to give such notice
within such period shall be deemed an election by Tenant to purchase the
Leased Property. Within thirty (30) days after receipt of Tenant's
notice, Landlord shall give Tenant written notice as to whether Landlord
accepts such offer. Failure of Landlord to give such notice shall be
deemed an election by Landlord to accept Tenant's offer. If Landlord
shall reject such offer, Tenant shall elect, by written notice to
Landlord, given within thirty (30) days thereafter, either (a) to
withdraw such offer, in which event this Lease shall remain in full
force and effect with and Tenant shall proceed to restore the Facility
as soon as reasonably practicable to substantially the same condition as
existed immediately before such damage or destruction, or (b) terminate
this Lease. Failure of Tenant to give such notice within such period
shall be deemed an election by Tenant to restore the Leased Property.
In the event Landlord shall accept Tenant's offer to purchase
the Leased Property, this Lease shall terminate with respect thereto
upon payment of the purchase price. In the event Landlord shall accept
Tenant's offer to substitute a new property or properties, this Lease
shall be deemed modified to substitute such new property for the Leased
Property (effective as of the date of such substitution pursuant to
Article 16) and all insurance proceeds pertaining to the Leased Property
shall be paid to Tenant. Landlord and Tenant shall promptly execute
appropriate instruments to confirm the foregoing, although the failure
to do so shall not affect this Lease.
10.3 Insufficient Insurance Proceeds. If the cost of the repair
or restoration exceeds the amount of insurance proceeds received by
Landlord pursuant to Article 9, Tenant shall contribute any excess
amounts needed to complete such restoration. Such difference shall be
paid by Tenant to Landlord and held by Landlord in trust in an interest
bearing account, together with any other insurance proceeds, for
application to the cost of repair and restoration in accordance with
Section 10.4.
10.4 Disbursement of Proceeds. In the event Tenant is required to
restore the Leased Property pursuant to Sections 10.1 or 10.2, Tenant
shall, at its sole cost and expense, commence promptly and continue
diligently to perform, or cause to be performed, the repair and restora-
tion of the Leased Property so as to restore the Leased Property in full
-35-
compliance with all Legal Requirements and otherwise in compliance with
any other applicable provisions of this Lease, so that the Leased
Property shall be at least equal in value and general utility to its
general utility and value immediately prior to such damage or
destruction. Subject to the terms hereof, Landlord shall advance the
insurance proceeds (other than proceeds of business interruption
insurance which shall be advanced as provided below) and the amounts
paid to it pursuant to Section 10.3 to Tenant regularly during the
repair and restoration period so as to permit payment for the cost of
such restoration and repair. Any such advances shall be for not less
than $50,000 (or such lesser amount as equals the entire balance of the
repair and restoration costs) and Tenant shall submit to Landlord a
written requisition and substantiation therefor on AIA Forms G702 and
G703 (or on such other form or forms as may be acceptable to Landlord).
Landlord may, at its option, condition advancement of such insurance
proceeds and other amounts on (i) the absence of any Default or Event of
Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord (which approval shall not be unreasonably with-
held or delayed), (iii) general contractors' estimates, (iv) architect's
certificates, (v) unconditional lien waivers of general contractors,
(vi) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required and (vii) such other
certificates as Landlord may, from time to time, reasonably require.
Provided no Default or Event of Default has occurred and is continuing,
on the first day of each calendar month during which proceeds of
business interruption insurance are disbursed to Landlord under the
policy of business interruption insurance maintained pursuant to Article
9, Landlord shall disburse proceeds of business interruption insurance
received by it to Tenant upon notice from Tenant accompanied by a
certification from Tenant that such moneys will be used for costs or
expenses of owning or operating the Leased Property.
Landlord's obligation to disburse insurance proceeds under this
Article 10 shall be subject to the release of such proceeds by any
Facility Mortgagee.
10.5 Tenant's Property. All insurance proceeds payable by reason
of any loss of or damage to any of Tenant's Personal Property or Capital
Additions financed by Tenant shall be paid to Tenant and Tenant shall
hold such proceeds in trust to pay the cost of repairing or replacing
damaged Tenant's Personal Property or Capital Additions paid for or
financed by Tenant.
10.6 Restoration of Tenant's Property. If Tenant shall be
required or elect to restore the Facility as hereinabove provided,
Tenant shall either (a) restore all alterations and improvements made
by Tenant, Tenant's Personal Property and all Capital Additions paid for
or financed by Tenant, or (b) replace such alterations and improvements,
Tenant's Personal Property, and/or Capital Additions with improvements
or items of the same or better quality and utility in the operation of
the Facility.
10.7 No Abatement of Rent. Unless this Lease shall be terminated
as herein provided, during the first twelve (12) months of any period
required for repair or restoration, this Lease shall remain in full
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force and effect and Tenant's obligation to make rental payments and to
pay all other charges required by this Lease shall remain unabated
during the Term notwithstanding any damage affecting the Leased
Property. Thereafter, payments of Minimum Rent shall be adjusted in the
manner provided in Section 11.6. If any fire or other casualty impairs
the revenue producing capacity of the Facility, projected Net Patient
Revenues attributable to the Facility shall be determined by Landlord in
its reasonable discretion.
10.8 Damage Near End of Term. Notwithstanding any provisions of
this Article 10 to the contrary, if (a) damage to or destruction of the
Facility occurs during the last twelve (12) months of the Term, (b)
Tenant has not elected to extend the Term, (c) no Default or Event of
Default shall have occurred and be continuing, and (d) such damage or
destruction cannot be fully repaired and restored within one hundred
eighty (180) days immediately following the date of loss, Tenant shall
have the right to terminate this Lease by the giving of written notice
thereof to Landlord within thirty (30) days after the date of casualty.
Failure of Tenant to give such notice within such 30-day period shall be
a waiver of Tenant's right to terminate this Lease pursuant to this
section.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation. If the whole of the Leased Property
shall be taken by Condemnation, this Lease shall terminate as of the
Date of Taking. In the event a Condemnation of less than the whole of
the Leased Property renders the Leased Property Unsuitable for Its
Primary Intended Use, Tenant and Landlord shall each have the option, by
written notice to the other, given at any time prior to the date title
vests in a third party, to terminate this Lease as of the Date of
Taking, whereupon this Lease shall terminate as of such date.
11.2 Partial Condemnation. In the event of a Condemnation of less
than the whole of the Leased Property such that Leased Property is still
suitable for its Primary Intended Use, or if neither Tenant nor Landlord
shall terminate this Lease as provided in Section 11.1, Tenant, at its
sole cost and expense, shall, with all reasonable dispatch, restore the
untaken portion of the Leased Improvements so that such Leased
Improvements shall constitute a complete architectural unit of the same
general character and condition (as nearly as may be possible under the
circumstances) as the Leased Improvements existing immediately prior to
such Condemnation. Landlord shall, subject to and in accordance with
the applicable provisions of Section 10.4, contribute to the cost of
restoration that part of its Award allocable to such restoration. In
such event, the Minimum Rent shall be permanently reduced as set forth
in Section 11.6.
11.3 Temporary Condemnation. In the event of any temporary
Condemnation of all or any part of the Leased Property or Tenant's
interest under this Lease, this Lease shall continue in full force and
effect and Tenant shall continue to pay, in the manner and on the terms
-37-
herein specified, the full amount of the Rent. To the extent reasonably
practicable, Tenant shall continue to perform and observe all of the
other terms and conditions thereof, on the part of Tenant to be
performed and observed. The entire amount of any Award made for such
temporary Taking or Condemnation allocable to the Term, whether paid by
way of damages, rent or otherwise, shall be paid to Tenant. Tenant
shall, upon the termination of any such period of temporary
Condemnation, at its sole cost and expense (but only to the extent of
the Award payable to Tenant), restore the Leased Property as nearly as
may be reasonably possible, to the condition that existed immediately
prior to such Condemnation, unless such period of temporary use or
occupancy shall extend beyond the expiration of the Term, in which case
Tenant shall not be required to make such restoration.
11.4 Tenant's Option. In the event of the termination of this
Lease as provided in Section 11.1, Tenant shall have the right,
exercisable by written notice to Landlord given within thirty (30) days
after receipt by Tenant of notice of Condemnation, to elect (a) to
acquire the Leased Property from Landlord for a purchase price equal to
the greater of its Minimum Repurchase Price or the Fair Market Value
Purchase Price of the Leased Property immediately prior to such
Condemnation, in which event, upon the closing of such acquisition,
Tenant shall have the right to receive the entire Award, or (b) to
substitute a new property therefor in accordance with the provisions of
Article 16, in which event Tenant shall receive the entire Award.
Failure of Tenant to give such notice within such 30-day period shall be
deemed a waiver of Tenant's rights pursuant to this Section 11.4. In
the event Landlord shall, by written notice to Tenant given within
thirty (30) days after receipt of Tenant's election notice, reject
Tenant's offer so to purchase or substitute, Tenant shall restore the
Leased Property to substantially the same condition as existed
immediately before such Condemnation in accordance with the applicable
provisions of this Lease and, in such event, Landlord shall, subject to
and in accordance with the applicable provisions of Section 10.4,
contribute to the cost of restoration that part of its Award allocable
to such restoration.
11.5 Allocation of Award. Except as provided in the second
sentence of this Section 11.5, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for
the taking of Tenant's leasehold interest in the Leased Property,
Capital Additions paid for or financed by Tenant, loss of business at
the Leased Property during the remainder of the Term, the taking of
Tenant's Personal Property, or Tenant's removal and relocation expenses
shall be the sole property of and payable to Tenant. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own
Award in conformity herewith, at its own expense.
11.6 Abatement Procedures. In the event of a partial Condemnation
as described in Section 11.2, this Lease shall not terminate, but the
Minimum Rent shall be abated and Base Net Patient Revenues shall be
reduced in the manner and to the extent that is fair, just and equitable
to both Tenant and Landlord, taking into consideration, among other
relevant factors, the number of usable beds, the amount of square
footage, or the revenues affected by such partial or temporary taking or
-38-
damage or destruction. If Landlord and Tenant are unable to agree upon
the amount of such abatement within thirty (30) days after such
Condemnation or damage, the matter may be submitted by either party to a
court of competent jurisdiction for resolution or, if the parties so
agree, the matter may be submitted by the parties for resolution by
arbitration in accordance with the rules of the American Arbitration
Association.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this
Lease:
(a) Should Tenant fail to make any payment of the Rent or any
other sum payable hereunder when due and such failure shall
continue for ten (10) days after written notice thereof;
(b) Should Tenant fail to observe or perform any other term,
covenant or condition of this Lease and such failure shall continue
for thirty (30) days after written notice thereof; provided,
however, if such failure cannot with due diligence be cured within
such thirty (30) day period, an Event of Default shall not be
deemed to have occurred for such additional period (not to exceed
120 days in the aggregate) required to cure the same so long as
Tenant commences sure cure within such thirty (30) day period and
thereafter diligently prosecutes such cure to completion;
(c) Should Tenant: (i) admit in writing its inability, or be
unable, to pay its debts generally as they become due; (ii) file a
petition in bankruptcy or a petition to take advantage of any
insolvency law; (iii) make a general assignment for the benefit of
its creditors; (iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its property; or
(v) file a petition or answer seeking reorganization or arrangement
under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof;
(d) Should Tenant be adjudicated a bankrupt or have an order
for relief thereunder entered against it or a court of competent
jurisdiction shall enter an order or decree appointing a receiver
of Tenant or of the whole or substantially all of its property, or
approving a petition filed against Tenant seeking reorganization or
arrangement of Tenant under the federal bankruptcy laws or any
other applicable law or statute of the United States of America or
any state thereof, and such judgment, order or decree shall not be
vacated or set aside within sixty (60) days from the date of entry
thereof;
(e) Should Tenant be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution, or, in any
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manner, permit the sale or divestiture of substantially all of its
assets;
(f) Should the estate or interest of Tenant in the Leased
Property or any part thereof shall be levied upon or attached in
any proceeding and the same shall not be vacated or discharged
within thirty (30) days after commencement thereof (unless Tenant
shall be contesting such lien or attachment in accordance with
Article 8);
(g) Except as a result of damage, destruction, strikes, lock-
outs or a partial or complete Condemnation, should Tenant
voluntarily cease operations on the Leased Property for a period in
excess of thirty (30) days; or
(h) Should any representation or warranty of Tenant contained
in this Lease or any certificate or document delivered in
connection herewith be untrue when made or at any time during the
Term in any material respect which materially and adversely affects
Landlord, and the same shall not be cured within ninety (90) days
after written notice thereof.
Upon the occurrence of any Event of Default, Landlord and the agents and
servants of Landlord lawfully may, in addition to and not in derogation
of any remedies for any preceding breach of covenant, immediately or at
any time thereafter, without demand or notice and with or without
process of law (forcibly, if necessary), enter into and upon the Leased
Property or any part thereof in the name of the whole or mail a notice
of termination addressed to Tenant, and repossess the same and expel
Tenant and those claiming through or under Tenant and remove its and
their effects (forcibly, if necessary), without being deemed guilty of
any manner of trespass and without prejudice to any remedies which might
otherwise be used for arrears of rent or prior breach of covenant, and,
upon such entry or mailing as aforesaid, this Lease shall terminate,
Tenant hereby waiving all statutory rights to the Leased Property
(including, without limitation, rights of redemption, if any, to the
extent such rights may be lawfully waived) and Landlord, without notice
to Tenant, may store Tenant's effects, and those of any person claiming
through or under Tenant, at Tenant's sole expense and risk, and, if
Landlord so elects, may sell such effects at public auction or private
sale and apply the net proceeds to the payment of all sums due to
Landlord from Tenant, if any, and pay over the balance, if any, to
Tenant.
Upon the occurrence of an Event of Default, Landlord may, in
addition to any other remedies provided herein, enter upon the Leased
Property and take possession of any and all of Tenant's Personal
Property and the Records (subject to any prohibitions or limitations to
disclosure of any such data as described in Section 3.1.2(d)) on the
Leased Property, without liability for trespass or conversion (Tenant
hereby waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same at public or private sale,
after giving Tenant reasonable notice of the time and place of any
public or private sale, at which sale Landlord or its assigns may
purchase all or any portion of such Personal Property unless otherwise
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prohibited by law. Unless otherwise provided by law, and without
intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable notice shall be met if such notice
is given in the manner prescribed in this Lease at least ten (10) days
before the day of sale. The proceeds from any such disposition, less
all expenses incurred in connection with the taking of possession,
holding and selling of such property (including, reasonable attorneys'
fees) shall be deducted from the proceeds of such sale. Any surplus
shall be paid to Tenant or as otherwise required by law and Tenant shall
pay any deficiency to Landlord, as Additional Rent, upon demand.
12.2 Remedies. In the event of any termination pursuant to Section
12.1, Tenant shall pay the Rent and other charges payable hereunder up
to the time of such termination and, thereafter, Tenant, until the end
of what would have been the Term of this Lease in the absence of such
termination, and whether or not the Leased Property, or any portion
thereof, shall have been re-let, shall be liable to Landlord for, and
shall pay to Landlord, as current damages, the Rent and other charges
which would be payable hereunder for the remainder of the Term had such
termination not occurred, less the net proceeds, if any, of any
reletting of the Leased Property, after deducting all expenses in
connection with such re-letting, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, attorneys'
fees, advertising, expenses of employees, alteration costs and expenses
of preparation for such reletting. Tenant shall pay such current
damages to Landlord monthly on the days on which the Minimum Rent would
have been payable hereunder if this Lease had not been terminated.
Percentage Rent for the purposes of this Section 12.2 shall be deemed to
be a sum equal to the amount of the Percentage Rent (determined on an
annualized basis) payable for the Fiscal Year immediately preceding the
Fiscal Year in which the termination, re-entry or repossession takes
place. If, however, such termination, re-entry or repossession occurs
during the first full Fiscal Year after the Base Year, the Percentage
Rent shall be an amount reasonably determined by Landlord.
At any time after such termination, whether or not Landlord shall
have collected any such current damages, as liquidated final damages and
in lieu of all such current damages beyond the date of such demand, at
Landlord's election, Tenant shall pay to Landlord either (a) an amount
equal to the excess, if any, of the Rent and other charges which would
be payable hereunder from the date of such demand (assuming that, for
the purposes of this paragraph, annual payments by Tenant on account of
Impositions would be the same as payments required for the immediately
preceding twelve calendar months, or if less than twelve calendar months
have expired since the Commencement Date, the payments required for such
lesser period projected to an annual amount and Percentage Rent shall be
determined in the manner set forth above) for what would be the then
unexpired term of this Lease if the same remained in effect, over the
Fair Market Rental for the same period, or (b) an amount equal to the
lesser of (i) the Rent and other charges that would have been payable
for the balance of the Term had it not been terminated, or (ii) the
aggregate of the Minimum Rent, Percentage Rent and other charges accrued
in the twelve (12) months ended next prior to such termination (without
reduction for any free rent or other concession or abatement). In the
event this Lease is so terminated prior the expiration of the first full
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year of the Term, the liquidated damages which Landlord may elect to
recover pursuant to clause (b) (ii) of this paragraph shall be
calculated as if such termination had occurred on the first anniversary
of the Commencement Date. Nothing contained in this Lease shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum
allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved,
whether or not the amount be greater than, equal to, or less than the
amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (a)
relet the Leased Property or any part or parts thereof, either in the
name of Landlord or otherwise, for a term or terms which may at
Landlord's option, be equal to, less than or exceed the period which
would otherwise have constituted the balance of the Term and may grant
concessions or free rent to the extent that Landlord considers advisable
and necessary to relet the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property as Landlord,
in its sole judgment, considers advisable and necessary for the purpose
of reletting the Leased Property; and the making of such alterations,
repairs and decorations shall not operate or be construed to release
Tenant from liability hereunder as aforesaid. Landlord shall in no
event be liable in any way whatsoever for failure to relet the Leased
Property, or any portion thereof, or, in the event that the Leased
Property is relet, for failure to collect the rent under such reletting.
To the fullest extent permitted by law, Tenant hereby expressly waives
any and all rights of redemption granted under any present or future
laws in the event of Tenant being evicted or dispossessed, or in the
event of Landlord obtaining possession of the Leased Property, by reason
of the violation by Tenant of any of the covenants and conditions of
this Lease.
12.3 Waiver. If this Lease is terminated pursuant to Section 12.1
or 12.2, Tenant waives, to the extent permitted by law, (a) any right to
a trial by jury in the event of summary proceedings to enforce the
remedies set forth in this Article 12, and (b) the benefit of any laws
now or hereafter in force exempting property from liability for rent or
for debt.
12.4 Application of Funds. Any payments received by Landlord
under any of the provisions of this Lease during the existence or
continuance of any Event of Default (and any payment made to Landlord
rather than Tenant due to the existence of an Event of Default) shall be
applied to Tenant's obligations in such order as Landlord may determine
or as may be prescribed by the laws of the State.
12.5 Failure to Conduct Business. For the purpose of determining
rental loss damages or Percentage Rent, in the event Tenant shall fail
to conduct its business at the Leased Property for its Primary Intended
Use, exact damages or the amount of Percentage Rent being
unascertainable, the Percentage Rent for such period shall be deemed to
by an amount reasonably determined by Landlord.
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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 written
notice to Tenant (provided that no such notice shall be required if
Landlord shall reasonably determine immediate action is necessary to
protect person or property), without waiving or releasing any obligation
of Tenant, and without waiving or releasing any Event of Default, may
(but shall not be obligated to), at any time thereafter, make such
payment or perform such act for the account and at the expense of
Tenant, and may, to the extent permitted by law, enter upon the Leased
Property, or any portion thereof, for such purpose and take all such
action thereon as, in Landlord's opinion, may be necessary or
appropriate therefor, including, the management of the Facility by
Landlord or its designee, and Tenant hereby irrevocably appoints, in the
event of such election by Landlord, Landlord or its designee as manager
of the Facility and its attorney in fact for such purpose, irrevocably
and coupled with an interest, in the name, place and stead of Tenant.
All costs and expenses (including, without limitation, reasonable
attorneys' fees) incurred by Landlord in connection therewith, together
with interest thereon (to the extent permitted by law) at the Overdue
Rate from the date such sums are paid by Landlord until repaid, shall be
paid by Tenant to Landlord, on demand.
12.7 Trade Names. If this Lease is terminated for any reason,
Landlord shall, upon the request of Tenant, cause the name of the
business conducted upon the Leased Property to be changed to a name
other than a Facility Trade Name or any approximation or abbreviation
thereof and sufficiently dissimilar to such name as to be unlikely to
cause confusion with such name; provided, however, that Tenant shall not
thereafter use a Facility Trade Name in the same market in which the
Facility is located in connection with any business that competes with
the Facility.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration of the Term shall
be treated as a daily tenancy at sufferance at a rate equal to two (2)
times the Minimum Rent and Percentage Rent then in effect plus
Additional Rent and other charges herein provided (prorated on a daily
basis). Tenant shall also pay to Landlord all damages, direct and/or
consequential (foreseeable and unforeseeable), sustained by reason of
any such holding over. Otherwise, such holding over shall be on the
terms and conditions set forth in this Lease, to the extent applicable.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any
of its covenants or obligations set forth in this Lease and such default
shall continue for a period of thirty (30) days after written notice
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thereof, or such additional period as may be reasonably required to
correct the same (except if such default shall constitute an immediate
threat to life or property, five (5) Business Days) Tenant may declare
the occurrence of a "Landlord Default" by a second notice to Landlord.
Thereafter, Tenant may forthwith cure the same and, subject to the
provisions of the following paragraph, invoice Landlord for costs and
expenses (including reasonable attorneys' fees and court costs) incurred
by Tenant in curing the same, together with interest from the date
Landlord receives Tenant's invoice, at a rate equal to the Base Rate.
Tenant shall have no right to terminate this Lease for any default by
Landlord hereunder and no right, for any such default, to offset or
counterclaim against any rent or other charges due hereunder.
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If Landlord shall in good faith dispute the occurrence of any
Landlord Default and Landlord, before the expiration of the applicable
cure period, shall give written notice thereof to Tenant, setting forth,
in reasonable detail, the basis therefor, no Landlord Default shall be
deemed to have occurred and Landlord shall have no obligation with
respect thereto until final adverse determination thereof. If Tenant
and Landlord shall fail, in good faith, to resolve the dispute within
five (5) days after Landlord's notice of dispute, either may submit the
matter to arbitration for resolution in accordance with the commercial
arbitration rules of the American Arbitration Association. Such
arbitration shall be final and binding on Landlord and Tenant and
judgment thereon may be entered into any court of competent
jurisdiction. Within five (5) days after submission to arbitration,
Landlord and Tenant shall submit all information required for such
arbitration and shall take all other actions required for such
arbitration to proceed and the arbitrators shall be instructed to render
a determination as soon as possible and in any event not later than
thirty (30) days after submission.
ARTICLE 15
PURCHASE OF PREMISES
In the event Tenant shall purchase the Leased Property from
Landlord pursuant to any of the terms of this Lease, Landlord shall,
upon receipt from Tenant of the applicable purchase price, together with
full payment of any unpaid Rent and other charges due and payable with
respect to any period ending on or before the date of the purchase,
deliver to Tenant a title insurance policy, together with an appropriate
deed or other instruments, conveying the entire interest of Landlord in
and to the Leased Property to Tenant, free and clear of all encumbrances
other than (a) those Tenant has agreed hereunder to pay or discharge,
(b) those liens, if any, which Tenant has agreed in writing to accept
and take title subject to, (c) the Permitted Encumbrances, and (d) any
other encumbrances permitted to be imposed on the Leased Property (x)
pursuant to the terms of this Lease or (y) otherwise permitted to be
imposed under the provisions of Section 21.1 which are assumable at no
cost to Tenant or to which Tenant may take subject without cost to
Tenant. The difference between the applicable purchase price and the
total of the encumbrances assumed or taken subject to shall be paid in
cash to Landlord or as Landlord may direct, in federal or other
immediately available funds. The closing of any such sale shall be
contingent upon and subject to Tenant's obtaining all required
governmental consents and approvals for such transfer and if such sale
shall fail to be consummated by reason of the inability of Tenant to
obtain all such approvals and consents, any options to extend the Term
of this Lease which otherwise would have expired during the escrow
period of such proposed sale shall be deemed to remain in effect for 30
days after termination thereof. All expenses of such conveyance,
including, without limitation, the cost of title examination or standard
coverage title insurance, usually paid by a purchaser of real property
in the State shall be paid by Tenant; all expenses of such conveyance
usually paid by a seller of real property in the State shall be paid by
Landlord.
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ARTICLE 16
SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY
16.1 Tenant's Substitution Option. Provided (a) in the good faith
judgment of Tenant, the Leased Property shall become Unsuitable for its
Primary Intended Use, (b) no Default or Event of Default shall have
occurred and be continuing, and (c) not less than one (1) year shall
remain in the Term, Tenant shall have the right, subject to the
conditions set forth in this Article 16, upon not less than thirty (30)
days prior written notice to Landlord, to substitute one or more
properties (collectively, the "Substitute Properties" or individually,
"Substitute Property") on the date specified in such notice (the
"Substitution Date"); provided, however, that if Tenant is required by
court order or administrative action to divest or otherwise dispose of
the Leased Property in less than thirty (30) days and Tenant shall have
given Landlord prior written notice of the filing of such court or
administrative action and kept Landlord reasonably apprised of the
status thereof, the time period shall be shortened appropriately to meet
the reasonable needs of Tenant, but in no event less than ten (10)
Business Days after the receipt by Landlord of such notice. Such notice
shall include (a) an Officer's Certificate, setting forth in reasonable
detail the reason(s) for the substitution and the proposed Substitution
Date, and (b) designate not less than two properties (or groups of
properties), each of which properties (or groups of properties) shall
provide Landlord with a yield (i.e., annual return on its equity in such
property) substantially equivalent to Landlord's yield from the Leased
Property at the time of such proposed substitution (or in the case of
substitution because of damage or destruction, the yield immediately
prior to such damage or destruction) and as reasonably projected over
the remaining Term of this Lease.
16.2 Landlord's Substitution Option. If Tenant shall have
voluntarily or involuntarily discontinued use of the Leased Property for
its business operations for a period in excess of one year, Landlord
shall have the right, exercisable by thirty (30) days prior written
notice to Tenant, to require Tenant to substitute a Substitute Property
for the Leased Property, (in which event, Tenant shall comply with the
applicable provisions of Section 16.1 within thirty (30) days
thereafter).
16.3 Substitution Procedures. (a) If either Landlord or Tenant
shall initiate a substitution pursuant to Section 16.1 or 16.2, Landlord
shall have a period of thirty (30) days within which to review the
designated properties and such additional information and either accept
or reject the Substitute Properties so presented, unless Tenant is
required by a court order or administrative action to divest or
otherwise dispose of the Leased Property within a shorter time period,
in which case the time period shall be shortened appropriately to meet
the reasonable needs of Tenant, but in no event shall such period be
less than five (5) Business Days after Landlord's actual receipt of
Tenant's notice (subject to further extension for any period of time in
which Landlord is not timely provided with the information provided for
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in this Section 16.3 and Section 16.4 below). Landlord and Tenant shall
use good faith efforts to agree on a Substitute Property.
(b) In the event that, on or before the expiration of the
applicable time period for Landlord's review, Landlord has rejected
both of the Substitute Properties so presented, Tenant shall, for a
period of sixty (60) days after the expiration of such period, have
the right to terminate this Lease, by the giving of written notice
thereof to Landlord, accompanied by an offer to purchase the Leased
Property on the date set forth in such notice, but in no event less
than ninety (90) days thereafter, for a purchase price equal to the
greater of the then Fair Market Value Purchase Price or the Minimum
Repurchase Price, and, subject to the provisions of Article 15,
this Lease shall terminate on such purchase date.
(c) Landlord shall not unreasonably withhold its consent to
an offer by Tenant to substitute a property as set forth in this
Article provided (i) Landlord shall determine the Substitute
Property shall provide Landlord with a yield substantially
equivalent to Landlord's yield from the Leased Property immediately
before such substitution or such damage or destruction, as the case
may be, and as projected over the remainder of the Term, and (ii)
the delivery of an opinion of counsel for Landlord confirming that
(w) the substitution of the Substitute Property for the Leased
Property will qualify as an exchange solely of property of a
like-kind under Section 1031 of the Code, in which, generally,
except for "boot", no gain or loss will be recognized by Landlord,
(x) the substitution will not result in ordinary recapture income
to Landlord pursuant to Section 1250(d)(4) of the Code or any other
provision of the Code, (y) the substitution will result in income,
if any, to Landlord of a type described in Section 856(c)(2) or (3)
of the Code and will not result in income of the types described in
Section 856(c)(4) of the Code or result in the tax imposed under
Section 857(b)(6) of the Code, and (z) the substitution, together
with all other substitutions made or requested by Tenant or an
Affiliated Person pursuant to the Other Leases or other transfers
of all or any portion of the Leased Property or properties leased
under the Other Leases, during the relevant time period, will not
jeopardize the qualification of Landlord as a real estate
investment trust under Sections 856-860 of the Code.
(d) In the event that the then Fair Market Value of the
Substitute Property or group of Substitute Properties minus the
encumbrances assumed by Landlord, or as to which Landlord will take
the Substitute Property or group of Substitute Properties subject,
as of the Substitution Date is greater than the then Fair Market
Value of the Leased Property minus the encumbrances assumed by
Tenant, or as to which the Tenant will take the Leased Property
subject, as of the Substitution Date (or in the case of damage or
destruction, the Fair Market Value immediately prior to such damage
or destruction), Landlord shall pay to Tenant an amount equal to
the difference, subject to the limitation set forth below; in the
event that such value of the Substitute Property or group of
Substitute Properties is less than such value of the Leased
Property, Tenant shall pay to Landlord an amount equal to the
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difference, subject to the limitation set forth below; provided,
however, neither Landlord nor Tenant shall be obligated to
consummate such substitution if such party would be required to
make a payment (the "Cash Adjustment") to the other in excess of an
amount equal to five percent (5%) of the Fair Market Value of the
Leased Property.
(e) The Rent for such Substitute Property shall, in all
respects, provide Landlord with a yield (i.e., annual return on its
equity in such property) substantially equivalent to Landlord's
yield from the Leased Property at the time of such substitution (or
in the case of substitution because of damage or destruction the
yield immediately prior to such damage or destruction) and as
reasonably projected over the remaining Term, taking into account
the Cash Adjustment paid or received by Landlord and any other
relevant factors, as reasonably determined by Landlord.
(f) The Minimum Repurchase Price of the Substitute Property
shall be an amount equal to the Minimum Repurchase Price of the
Leased Property (i) increased by any Cash Adjustment paid by
Landlord pursuant to Paragraph (d) above, or (ii) decreased by any
Cash Adjustment paid by Tenant pursuant to paragraph (d) above.
16.4 Conditions to Substitution. On the Substitution Date, the
Substitute Property shall become the Leased Property hereunder, upon
delivery by Tenant to Landlord of the following:
(a) An Officer's Certificate certifying that (i) the
Substitute Property has been accepted by Tenant for all purposes of
this Lease and there has been no material damage to the
improvements located thereon, nor is any Condemnation pending or
threatened with respect thereto; (ii) all appropriate permits,
licenses and certificates (including, but not limited to, a
permanent, unconditional certificate of occupancy and all
certificates of need, licenses and provider agreements) which are
necessary to permit the use of the Substitute Property in
accordance with the provisions of this Lease have been obtained and
are in full force and effect; (iii) under applicable zoning and use
laws, ordinances, rules and regulations, the Substitute Property
may be used for the purposes contemplated by this Lease and all
necessary subdivision approvals, if any, have been obtained; (iv)
there are no mechanics' or materialmen's liens outstanding or
threatened to the knowledge of Tenant against the Substitute
Property arising out of or in connection with the construction of
the improvements thereon, other than those being contested by
Tenant pursuant to Article 8; (v) to the best knowledge of Tenant,
there exists no Default or Event of Default, and no defense, offset
or claim with respect to any sums payable by Tenant hereunder; and
(vi) any exceptions to Landlord's title to the Substitute Property
do not materially interfere with the intended use of the Substitute
Property by Tenant;
(b) A deed with full warranties or assignment of a leasehold
estate with full warranties (as applicable) conveying to Landlord
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title to the Substitute Property free and clear of any liens or
encumbrances, except those approved by Landlord;
(c) an amendment duly executed, acknowledged and delivered by
Tenant, in form and substance satisfactory to Landlord, amending
this Lease to correct the legal description of the Land and make
such other changes herein as may be necessary or appropriate under
the circumstances;
(d) counterparts of a standard owner's or lessee's (as
applicable) policy of title insurance covering the Substitute
Property (or a valid, binding, unconditional commitment therefor),
dated as of the Substitution Date, in current form and including
mechanics' and materialmen's lien coverage, issued to Landlord by a
title insurance company and in the form reasonably satisfactory to
Landlord, which policy shall (i) insure (x) Landlord's fee title or
leasehold estate to the Substitute Property, subject to no liens or
encumbrances except those approved by Landlord and (y) that any
restrictions affecting the Substitute Property have not been
violated; (ii) be in an amount at least equal to the Fair Market
Value of the Substitute Property; and (iii) contain such
affirmative coverage endorsements as Landlord shall reasonably
request;
(e) certificates of insurance with respect to the Substitute
Property fulfilling the requirements of Article 9;
(f) current appraisals or other evidence satisfactory to
Landlord, in its sole discretion, as to the then current Fair
Market Values and the projected residual values of such Substitute
Property and the Leased Property as to which such substitution is
being made;
(g) all available revenue data relating to the Substitute
Property for the period from the date of opening for business of
the Facility on such Substitute Property to the date of Tenant's
most recent Fiscal Year end, or for the most recent three (3)
years, whichever is less; and
(h) such other certificates, documents, opinions of counsel
and other instruments as may be reasonably required by Landlord.
16.5 Conveyance to Tenant. On the Substitution Date, Landlord
shall convey the Leased Property to Tenant in accordance with the
provisions of Article 15 (except as to payment of any expenses in
connection therewith which shall be governed by Section 16.6) upon
either (a) payment in cash therefor or (b) conveyance to Landlord of the
Substitute Property, as appropriate.
16.6 Expenses. Tenant shall pay or cause to be paid, on demand,
all reasonable costs and expenses paid or incurred by Landlord in
connection with the substitution and conveyance of the Leased Property
and Substitute Property, including, but not limited to, (a) reasonable
fees and expenses of counsel, (b) all printing expenses, (c) the amount
of filing, registration and recording taxes and fees, (d) the cost of
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preparing and recording, if appropriate, a release of the Leased
Property from the lien of any mortgage, (e) brokers' fees and
commissions, (f) documentary stamp and transfer taxes, (g) title
insurance charges and premiums, and (h) escrow fees.
ARTICLE 17
SUBLETTING AND ASSIGNMENT
17.1 Subletting and Assignment. Except as hereinafter provided,
Tenant shall not assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer this Lease or sublease (which term shall be deemed to
include the granting of concessions and licenses and the like) all or
any part of the Leased Property or suffer or permit this Lease or the
leasehold estate hereby created or any other rights arising under this
Lease to be assigned, transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily, involuntarily or
by operation of law, or permit the use or occupancy of the Leased
Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting except as hereinafter
provided. For purposes of this Section 17.1, an assignment of this
Lease shall be deemed to include any transaction pursuant to which
Tenant is merged or consolidated with another entity or pursuant to
which all or substantially all of Tenant's assets are transferred to any
other entity, as if such or transaction were an assignment of this
Lease.
If this Lease is assigned or if the Leased Property or any part
thereof are sublet (or occupied by anybody other than Tenant and its
employees) Landlord, after default by Tenant hereunder, may collect the
rents from such assignee, subtenant or occupant, as the case may be, and
apply the net amount collected to the Rent herein reserved, but no such
collection shall be deemed a waiver of the provisions set forth in the
first paragraph of this Section 17.1, the acceptance by Landlord of such
assignee, subtenant or occupant, as the case may be, as a tenant, or a
release of Tenant from the future performance by Tenant of its
covenants, agreements or obligations contained in this Lease.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder, and no consent to any subletting
or assignment in a particular instance shall be deemed to be a waiver of
the obligation to obtain the Landlord's written approval in the case of
any other subletting or assignment. No assignment, subletting or
occupancy shall affect the Primary Intended Use. Any subletting,
assignment or other transfer of Tenant's interest in this Lease in
contravention of this Section 17.1 shall be voidable at Landlord's
option.
If the rent and other sums (including, without limitation, the
reasonable value of any services performed by any assignee or subtenant
in consideration of such assignment or sublease) either initially or
over the term of any assignment or sublease, payable by such assignee or
subtenant on account of an assignment or sublease exceed the Rent called
for hereunder with respect to the space assigned or sublet, Tenant shall
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pay to Landlord as Additional Rent one hundred percent (100%) of such
excess net of the costs and expenses incurred by Tenant in procuring
such sublease payable monthly at the time for payment Minimum Rent.
17.2 Required Sublease Provisions. Any sublease of all or any
portion of the Leased Property shall provide that it is subject and
subordinate to this Lease and to the matters to which this Lease is or
shall be subject or subordinate, and that in the event of termination of
this Lease or reentry or dispossession of Tenant by Landlord under this
Lease, Landlord may, at its option, take over all of the right, title
and interest of Tenant, as sublessor under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to
the then executory provisions of such sublease, except that neither
Landlord nor any Facility Mortgagee, as holder of a mortgage or as
Landlord under this Lease, if such mortgagee succeeds to that position,
shall (a) be liable for any act or omission of Tenant under such
sublease, (b) be subject to any credit, counterclaim, offset or defense
which theretofore accrued to such subtenant against Tenant, (c) be bound
by any previous modification of such sublease or by any previous
prepayment of more than one (1) month's rent, (d) be bound by any
covenant of Tenant to undertake or complete any construction of the
Leased Property or any portion thereof, (e) be required to account for
any security deposit of the subtenant other than any security deposit
actually delivered to Landlord by Tenant, (f) be bound by any obligation
to make any payment to such subtenant or grant any credits, except for
services, repairs, maintenance and restoration provided for under the
sublease to be performed after the date of such attornment, (g) be
responsible for any monies owing by Tenant to the credit of such
Subtenant, or (h) be required to remove any person occupying the Leased
Property or any part thereof; and such sublease shall provide that the
subtenant thereunder shall, at the request of Landlord, execute a
suitable instrument in confirmation of such agreement to attorn. The
provisions of this paragraph shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 17.1.
17.3 Sublease Limitation. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not sublet the Leased Property on
any basis such that the rental to be paid by the sublessee thereunder
would be based, in whole or in part, on either (a) the income or profits
derived by the business activities of the sublessee, or (b) any other
formula such that any portion of the sublease rental would fail to
qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
17.4 Assignment and Subletting Procedure. Anything contained in
this Lease to the contrary notwithstanding, if Tenant wishes to enter
into a sublease with respect to any portion of the Leased Property or an
assignment of this Lease, Tenant shall give Landlord notice of such
intent, which notice ("Tenant's Notice") shall state, in the event of a
proposed sublease, the location and amount of area intended to be
covered by such sublease and the term of the proposed sublease, the
proposed effective date of such sublease or assignment, and the identity
of such proposed subtenant or assignee and such other information with
respect thereto as Landlord may reasonably require. Landlord shall not
unreasonably withhold its consent to any proposed assignment or sublease
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provided Tenant shall deliver to Landlord a written instrument, in form
and substance reasonably satisfactory to Landlord, pursuant to which
such assignee agrees directly with Landlord to be bound by all the terms
of this Lease and to be jointly and severally liable with Tenant for all
of Tenant's obligations under this Lease.
ARTICLE 18
CERTIFICATES AND FINANCIAL STATEMENTS
18.1 Estoppel Certificates. At any time and from time to time,
upon not less than twenty (20) days prior written notice by Landlord,
Tenant shall furnish to Landlord an Officer's Certificate certifying
that this Lease is unmodified and in full force and effect (or that this
Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, that, to the
best of Tenant's knowledge and belief after making due inquiry, Tenant
is not in default in the performance or observance of any of the terms
of this Lease and that no event exists which with the giving of notice,
lapse of time, or both, would constitute a default hereunder, or if
Tenant shall be in default or any such event shall exist, specifying in
reasonable detail all such defaults or events, and the steps being taken
to remedy the same, and such additional information as Landlord may
reasonably request. Any such certificate furnished pursuant to this
section may be relied upon by Landlord and any prospective purchaser or
mortgagee of the Leased Property.
18.2 Financial Statements. Tenant shall furnish the following
statements to Landlord:
(a) Within forty-five (45) days after each of the first three
quarters of each Fiscal Year, the most recent Consolidated
Financials of Tenant, together with an Officer's Certificate
certifying to the accuracy of such Consolidated Financials;
(b) Within one hundred twenty (120) days after the end of
each Fiscal Year, the most recent Consolidated Financials of Tenant
for such year, certified by an independent certified public
accountant satisfactory to Landlord;
(c) Promptly after the sending or filing thereof, copies of
all reports which Tenant sends to its security holders generally,
and copies of all periodic reports which Tenant files with the SEC
or any stock exchange on which its shares are listed or traded;
(d) Promptly after the delivery thereof to Tenant, or its
management, a copy of any management letter or written report
prepared by Tenant's certified public accountants with respect to
the financial condition, operations, business or prospects of
Tenant;
(e) At any time and from time to time upon not less than
twenty (20) days notice from Landlord, any Consolidated Financials
or any other financial reporting information required to be filed
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by Landlord with any securities and exchange commission, the SEC or
any successor agency, or any other governmental authority, or
required pursuant to any order issued by any court governmental
authority or arbitrator in any litigation to which Landlord is a
party, for purposes of compliance therewith; and
(f) With reasonable promptness, such other information as to
the financial condition and affairs of Tenant as Landlord may
reasonably request.
18.3 General Operations. Tenant covenants and agrees to furnish
to Landlord:
18.3.1 Reimbursement, Licensure etc. Within thirty (30) days
after receipt or modification thereof, copies of
(a) All licenses authorizing Tenant to operate the
Facility for its Primary Intended Use;
(b) All Medicare and Medicaid certifications, together
with provider agreements and all material correspondence
relating thereto with respect to the Facility (excluding,
however, correspondence which may be subject to any
attorney-client privilege);
(c) A Nursing Home Administrator License for the
individuals employed in such capacity with respect to the
Facility;
(d) All reports of surveys, statements of deficiencies,
plans of correction, and all material correspondence relating
thereto, including, without limitation, all reports and
material correspondence concerning compliance with or
enforcement of licensure, Medicare/Medicaid, and accreditation
requirements, including physical environment and Life Safety
Code survey reports (excluding, however, correspondence which
may be subject to any attorney-client privilege); and
(e) With reasonable promptness, such other confirmation
as to the Licensure and Medicare and Medicaid participation
of Tenant as Landlord may reasonably request from time to
time.
18.3.2 Monthly Reports. Tenant shall prepare and furnish to
Landlord for the Leased Property, within thirty (30) days after the end
of each calendar month during the term of this Agreement, a monthly
report, such report to include a balance sheet, a current month and year
to date income statement, showing each item of actual and projected
income and expense, prepared on an accrual basis and a current month and
year to date cash flow statement, reflecting the operating results of
the Facility; a statement of Net Patient Revenues for such month; and
such additional information as the Company may from time to time
reasonably require.
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ARTICLE 19
LANDLORD ACCESS
19.1 Landlord's Right to Inspect. Tenant shall permit Landlord and
its authorized representatives to inspect the Leased Property during
usual business hours, and to do and make such repairs as Landlord is
permitted or required to make pursuant to the terms of this Lease,
subject to any security, health, safety or patient or business
confidentiality requirements of Tenant or any governmental agency or
Insurance Requirement relating to the Leased Property or imposed by law.
19.2 Landlord's Option to Purchase the Tenant's Personal Property;
Transfer of Licenses. Effective on not less than ninety (90) days'
prior notice given at any time within one hundred eighty (180) days
after the expiration of the Term (or such shorter period as shall be
appropriate if this Lease is terminated prior to its expiration date),
Landlord shall have the option to purchase all (but not less than all)
of Tenant's Personal Property (except motor vehicles), if any, at the
expiration or termination of this Lease, for an amount equal to the then
net market value thereof (current replacement cost as determined by
appraisal less accumulated depreciation on Tenant's books pertaining
thereto), subject to, and with appropriate price adjustments for, all
equipment leases, conditional sale contracts, UCC-1 financing statements
and other encumbrances to which such Personal Property is subject;
provided, however, Landlord shall not have the right to purchase any
Facility Trade Name or logo.
ARTICLE 20
APPRAISAL
20.1 Appraisal Procedure. In the event that it becomes necessary
to determine the Fair Market Value, Fair Market Value Purchase Price or
Fair Market Rental of the Leased Property or a Substitute Property for
any purpose of this Lease, the party required or permitted to give
notice of such required determination (the "Initiating Party") shall
include in such notice the name of a designated Qualified Appraiser
(hereinafter defined) on its behalf. Within 10 days after notice, the
party receiving such notice (the "Responding Party") shall, by written
notice to the other, appoint a second Qualified Appraiser. If the
Responding Party shall fail, neglect or refuse within said ten-day
period to designate another appraiser willing so to act, the appraiser
designated by the Initiating Party shall designate the second Qualified
Appraiser within ten (10) days thereafter. The two appraisers so
designated shall meet within ten (10) days after the second appraiser is
designated, and, if within ten (10) days after the second appraiser is
designated, the two appraisers do not agree upon the Fair Market Value,
Fair Market Value Purchase Price or Fair Market Rental, as the case may
be, of the applicable property as of the relevant date, the two
appraisers shall designate a third Qualified Appraiser, within ten (10)
days thereafter. In the event that the two appraisers are unable to
agree upon the appointment of a third Qualified Appraiser within such
ten (10) day period, either Landlord or Tenant, on behalf of both, may
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then request appointment of such appraiser the then president of the
American Arbitration Association. In the event of a failure, refusal or
inability of any appraiser to act, a new appraiser shall be appointed in
his stead, which appointment shall be made in the same manner as
hereinabove provided for the appointment of such appraiser so failing,
refusing or being unable to act. In the event that all appraisers
cannot agree upon such value ten (10) days as aforesaid, each appraiser
shall submit his appraisal of such value to the other two appraisers in
writing, and such value shall be determined by calculating the average
of the two numerically closest (or, if the values are equidistant, all
three) values determined by the three appraisers.
The costs, other than counsel fees, of such appraisal shall be
borne equally by the parties. Upon determining such value, the
appraisers shall promptly notify Landlord and Tenant in writing of such
determination. If any party shall fail to appear at the hearings
appointed by the appraisers, the appraisers may act in the absence of
such party.
The determination of the board of appraisers (or the single
additional Qualified Appraiser, as appropriate) made in accordance with
the foregoing provisions shall be final and binding upon the parties,
such determination may be entered as an award in arbitration in a court
of competent jurisdiction, and judgment thereon may be entered.
ARTICLE 21
MORTGAGES
21.1 Landlord May Grant Liens. Without the consent of Tenant,
Landlord may, subject to the terms and conditions set forth in this
Section 21.1, from time to time, directly or indirectly, create or
otherwise cause to exist any lien, encumbrance or title retention
agreement ("Encumbrance") upon the Leased Property, or any portion
thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing. Any such Encumbrance, other than one
the proceeds of which are used to finance construction of a Capital
Addition pursuant to the provisions of Sections 6.1 and 6.3, shall
include the right to prepay (whether or not subject to a prepayment
penalty) and shall provide (subject to Section 21.2) that it is subject
to the rights of Tenant under this Lease.
21.2 Subordination of Lease. Subject to Section 21.1 and the last
paragraph of this Section 21.2, this Lease, and all rights of Tenant
hereunder, are and shall be subject and subordinate to any ground or
master lease, and all renewals, extensions, modifications and
replacements thereof, and to all mortgages and deeds of trust, which may
now or hereafter affect the Leased Property or any improvements thereon
and/or any of such leases, whether or not such mortgages or deeds of
trust shall also cover other lands and/or buildings and/or leases, to
each and every advance made or hereafter to be made under such mortgages
and deeds of trust, and to all renewals, modifications, replacements and
extensions of such leases and such mortgages and deeds of trust and all
consolidations of such mortgages and deeds of trust. This section shall
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be self-operative and no further instrument of subordination shall be
required. In confirmation of such subordination, Tenant shall promptly
execute, acknowledge and deliver any instrument that Landlord, the
lessor under any such lease or the holder of any such mortgage or the
trustee or beneficiary of any deed of trust or any of their respective
successors in interest may reasonably request to evidence such
subordination. Any lease to which this Lease is, at the time referred
to, subject and subordinate is herein called "Superior Lease" and the
lessor of a Superior Lease or its successor in interest at the time
referred to, is herein called "Superior Landlord" and any mortgage or
deed of trust to which this Lease is, at the time referred to, subject
and subordinate, is herein called "Superior Mortgage" and the holder,
trustee or beneficiary of a Superior Mortgage is herein called "Superior
Mortgagee".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to
the rights of Landlord under this Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise,
then at the request of such party so succeeding to Landlord's rights
(herein called "Successor Landlord") and upon such Successor Landlord's
written agreement to accept Tenant's attornment, Tenant shall attorn to
and recognize such Successor Landlord as Tenant's landlord under this
Lease and shall promptly execute and deliver any instrument that such
Successor Landlord may reasonably request to evidence such attornment.
Upon such attornment, this Lease shall continue in full force and effect
as a direct lease between the Successor Landlord and Tenant upon all of
the terms, conditions and covenants as are set forth in this Lease,
except that the Successor Landlord (unless formerly the landlord under
this Lease or its nominee or designee) shall not be (a) liable in any
way to Tenant for any act or omission, neglect or default on the part of
Landlord under this Lease, (b) responsible for any monies owing by or on
deposit with Landlord to the credit of Tenant, (c) subject to any
counterclaim or setoff which theretofore accrued to Tenant against
Landlord, (d) bound by any modification of this Lease subsequent to such
Superior Lease or Mortgage, or by any previous prepayment of Minimum
Rent or Percentage Rent for more than one (1) month, which was not
approved in writing by the Superior Landlord or the Superior Mortgagee
thereto, (e) liable to the Tenant beyond the Successor Landlord's
interest in the Leased Property and the rents, income, receipts,
revenues, issues and profits issuing from the Leased Property, (f)
responsible for the performance of any work to be done by the Landlord
under this Lease to render the Leased Property ready for occupancy by
Tenant, or (g) required to remove any person occupying the Leased
Property or any part thereof, except if such person claims by, through
or under the Successor Landlord. Tenant agrees at any time and from
time to time to execute a suitable instrument in confirmation of
Tenant's agreement to attorn, as aforesaid.
Tenant's obligation to subordinate this Lease and Tenant's rights
hereunder to any Superior Mortgage or Superior Lease shall be
conditioned upon Landlord obtaining from any Superior Mortgagee or
Superior Landlord, an agreement which shall be executed by Tenant and
such Superior Mortgagee or Superior Landlord which shall provide in
substance that so long as no Event of Default exists as would entitle
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Landlord or any such Superior Mortgagee or Superior Landlord to
terminate this Lease or would cause, without any further action of
Landlord or such Superior Mortgagee or Superior Landlord, the
termination of this Lease or would entitle Landlord or such Superior
Mortgagee or Superior Landlord to dispossess Tenant, this Lease shall
not be terminated, nor shall Tenant's use, possession or enjoyment of
the Leased Property, in accordance with the terms and provisions of this
Lease, be interfered with, nor shall the leasehold estate granted by
this Lease be affected in any other manner, in any foreclosure or any
action or proceeding instituted under or in connection with such
Superior Mortgage or Superior Lease, or in the event such Superior
Mortgagee or Superior Landlord takes possession of the Leased Property
pursuant to any provisions of such Superior Mortgage or Superior Lease,
unless Landlord or such Superior Mortgagee or Superior Landlord would
have had such right of termination pursuant to this Lease. Such
agreement shall be in form customarily used by the holder of any such
Superior Mortgage or Superior Lease.
21.3 Notice to Mortgagee and Ground Landlord. Subsequent to the
receipt by Tenant of notice from any person, firm or other entity that
it is a Facility Mortgagee, or that it is the ground lessor under a
lease with Landlord, as ground lessee, which includes the Leased
Property as part of the demised premises, no notice from Tenant to
Landlord shall be effective unless and until a copy of the same is given
to such Facility Mortgagee or ground lessor and the curing of any of
Landlord's defaults by such Facility Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 22
INVESTMENT TAX CREDIT
22.1 Investment Tax Credit. Landlord agrees to elect, in
accordance with Section 48(d) of the Code, to treat Tenant as having
purchased all such eligible property in the Leased Property as may be
designated by Tenant in order that Tenant may obtain the benefit of the
credit, if any, allowed or allowable with respect thereto under Section
38 of the Code. Landlord makes no representation or warranty with
respect to the availability of the credit to Tenant or the efficacy of
such election. Landlord's sole responsibility in this regard shall be
to execute such documents as are reasonably required to effect the
election, which documents Tenant shall prepare, at Tenant's sole cost
and expense, and to provide Tenant with such information as may be
reasonably requested by Tenant in connection therewith. In addition,
Landlord agrees it and its assignees will not claim the credit provided
by Section 38 of the Code for any property included in the Leased
Property.
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ARTICLE 23
ADDITIONAL COVENANTS OF TENANT
23.1 Notice of Change of Name, Administrator, Etc. Tenant shall
give prompt notice to Landlord of any change in (a) the name (operating
or otherwise) of Tenant or the Facility, (b) the individual licensed as
administrator of the Facility, (1) the number of beds in any bed
category for which the Facility is licensed or the number of beds in any
bed category available for use at the Facility (except for changes in
the number of certified distinct part beds made for reimbursement
maximization purposes), and (d) the patient and/or child care services
that are offered at the Facility.
23.2 Notice of Litigation, Potential Event of Default, Etc.
Tenant shall give prompt notice to Landlord of any litigation or any
administrative proceeding to which it may hereafter become a party which
involves a potential liability equal to or greater than $250,000, or
which may otherwise result in any material adverse change in the
business, operations, property, prospects, results of operation or
condition, financial or other, of Tenant. Forthwith upon Tenant
obtaining knowledge of any Default or Event of Default, or any event or
condition that would be required to be disclosed in a current report
filed by Tenant on Form 8-K or in Part II of a quarterly report on Form
10-Q if Tenant were required to file such reports under the Securities
Exchange Act of 1934, as amended, Tenant shall give Landlord notice
thereof, which notice shall set forth in reasonable detail the nature
and period of existence thereof and what action Tenant has taken or is
taking or proposes to take with respect thereto.
23.3 Management of Leased Property. Tenant shall not enter into
any management or similar agreement in respect of the Leased Property
without the express prior written consent of Landlord.
23.4 Distributions, Payments to Affiliated Persons, Etc. Tenant
will not declare, order, pay or make, directly or indirectly, any
distribution or any payment to any Affiliated Person as to Tenant
(including payments in the ordinary course of business and payment
pursuant to management agreements with any such Affiliated Person) or
set apart any sum or property therefor, or agree to do so, if, at the
time of such proposed action, or immediately after giving effect
thereto, any event or condition shall exist which constitutes a Default
or an Event of Default.
ARTICLE 24
MISCELLANEOUS
24.1 No Waiver. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right,
power or remedy consequent upon a breach thereof, and no acceptance of
full or partial payment of rent during the continuance of any such
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breach, shall constitute a waiver of any such breach or of any such
term. To the extent permitted by law, no waiver of any breach shall
affect or alter this Lease, which shall continue in full force and
effect with respect to any other then existing or subsequent breach.
24.2 Remedies Cumulative. To the extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord, now
or hereafter provided either in this Lease or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every
other right, power and remedy and the exercise or beginning of the
exercise by Landlord or Tenant of any one or more of such rights, powers
and remedies shall not preclude the simultaneous or subsequent exercise
by Landlord or Tenant of any or all of such other rights, powers and
remedies.
24.3 Acceptance of Surrender. No surrender to Landlord of this
Lease or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in
writing by Landlord and no act by Landlord or any representative or
agent of Landlord, other than such a written acceptance by Landlord,
shall constitute an acceptance of any such surrender.
24.4 No Merger of Title. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the
same person, firm, corporation or other entity may acquire, own or hold,
directly or indirectly (a) this Lease or the leasehold estate created
hereby or any interest in this Lease or such leasehold estate and (b)
the fee estate or ground landlord's interest in the Leased Property.
24.5 Conveyance by Landlord. If Landlord or any successor owner of
the Leased Property shall convey the Leased Property in accordance with
the terms hereof other than as security for a debt, and the grantee or
transferee of the Leased Property shall expressly assume all obligations
of Landlord hereunder arising or accruing from and after the date of
such conveyance or transfer and shall be reasonably capable of
performing the obligations of Landlord hereunder, Landlord or such
successor owner, as the case may be, shall thereupon be released from
all future liabilities and obligations of Landlord under this Lease
arising or accruing from and after the date of such conveyance or other
transfer as to the Leased Property and all such future liabilities and
obligations shall thereupon be binding upon the new owner.
24.6 Quiet Enjoyment. So long as Tenant shall pay the Rent as the
same becomes due and shall substantially comply with all of the terms of
this Lease and perform its obligations hereunder, Tenant shall peaceably
and quietly have, hold and enjoy the Leased Property for the Term
hereof, free of any claim or other action by Landlord or anyone claiming
by, through or under Landlord, but subject to all liens and encumbrances
of record as of the date hereof or hereafter consented to by Tenant.
Except as otherwise provided in this Lease, no failure by Landlord to
comply with the foregoing covenant shall give Tenant any right to cancel
or terminate this Lease or abate, reduce or make a deduction from or
offset against the Rent or any other sum payable under this Lease, or to
fail to perform any other obligation of Tenant hereunder.
Notwithstanding the foregoing, Tenant shall have the right, by separate
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and independent action to pursue any claim it may have against Landlord
as a result of a breach by Landlord of the covenant of quiet enjoyment
contained in this Section.
24.7 Landlord's Liability. THE DECLARATION OF TRUST ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED WITH THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,
PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES,
BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD, IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION. Tenant, its successors and assigns,
shall not assert nor seek to enforce any claim for breach of this Lease
against any of Landlord's assets other than Landlord's interest in the
Leased Property and in the rents, issues and profits thereof, and Tenant
agrees to look solely to such interest for the satisfaction of any
liability or claim against Landlord under this Lease, it being
specifically agreed that in no event whatsoever shall Landlord (which
term shall include, without limitation, any general or limited partner,
trustees, beneficiaries, officers, directors, or stockholders of
Landlord) ever be personally liable for any such liability. In no event
shall Landlord ever be liable to Tenant for any indirect or
consequential damages.
24.8 Landlord's Consent. Where provisions are made in this Lease
for Landlord's consent and Landlord shall fail or refuse to give such
consent, Tenant shall not be entitled to any damages for any withholding
by Landlord of its consent, it being intended that Tenant's sole remedy
shall be an action for specific performance or injunction, and that such
remedy shall be available only in those cases where Landlord has
expressly agreed in writing not to unreasonably withhold its consent.
24.9 Memorandum of Lease. Neither Landlord nor Tenant shall
record this Lease. However, Landlord and Tenant shall promptly, upon
the request of either, enter into a short form memorandum of this Lease,
in form suitable for recording under the laws of the State in which
reference to this Lease, and all options contained herein, shall be
made. Tenant shall pay all costs and expenses of recording such
memorandum of this Lease.
24.10 Notices. (a) Any and all notices, demands, consents,
approvals, offers, elections and other communications required or
permitted under this Lease shall be deemed adequately given if in
writing and the same shall be delivered either in hand, by telecopier
with written acknowledgment of receipt, or by mail or Federal Express or
similar expedited commercial carrier, addressed to the recipient of the
notice, postpaid and registered or certified with return receipt
requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
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(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Lease
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Lease a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day,
the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
Health and Rehabilitation Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. David J. Hegarty
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attn: Lena G. Goldberg, Esq.
[Telecopier No. (617) 338-2880]
if to Tenant to:
Connecticut Subacute Corporation II
400 Centre Street
Newton, Massachusetts 02158
Attn: Mr. Mark Finklestein
[Telecopier No. (617) 332-2261]
with a copy to:
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Attn: Lena G. Goldberg, Esq.
[Telecopier No. (617) 338-2880]
(d) By notice given as herein provided, the parties hereto
and their respective successor and assigns shall have the right
from time to time and at any time during the term of this Agreement
to change their respective addresses effective upon receipt by the
other parties of such notice and each shall have the right to
specify as its address any other address within the United States
of America.
24.11 Construction. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant
or Landlord arising prior to any date of termination of this Lease shall
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survive such termination. If any term or provision of this Lease or any
application thereof shall be invalid or unenforceable, the remainder of
this Lease and any other application of such term or provisions shall
not be affected thereby. If any late charges or any interest rate
provided for in any provision of this Lease are based upon a rate in
excess of the maximum rate permitted by applicable law, the parties
agree that such charges shall be fixed at the maximum permissible rate.
Neither this Lease nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by
the party to be charged. All the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. The headings in this Lease are
for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. This Lease represents the entire agreement
among the parties and amends and restates the Original Leases in their
entirety. This Lease may not be amended or modified in any respect
except by the written agreement of Landlord and Tenant.
24.12 Governing Law. This Lease shall be interpreted, construed,
applied and enforced in accordance with the laws of the State applicable
to contracts between residents of the State which are to be performed
entirely within the State, regardless of (i) where this Lease is
executed or delivered; or (ii) where any payment or other performance
required by this Lease is made or required to be made; or (iii) where
any breach of any provision of this Lease occurs, or any cause of action
otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile,
principle place of business, or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum
jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the
provisions of this Lease may be brought and prosecuted in such court or
courts located in the State as is provided by law; and the parties
consent to the jurisdiction of said court or courts located in the State
and to service of process by registered mail, return receipt requested,
or by any other manner provided by law.
IN WITNESS WHEREOF, the parties have executed this Lease, as a
sealed instrument, as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION PROPERTIES TRUST
By: John G. Murray
Its: Treasurer
TENANT:
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CONNECTICUT SUBACUTE CORPORATION II
By: Barry M. Portnoy
Its: Secretary
EXHIBIT A
Other Leases
[See attached copy.]
EXHIBIT B
Permitted Encumbrances
[See attached copy.]
EXHIBIT C
The Land
[See attached copy.]
EXHIBIT D
Minimum Rent
[See attached copy.]