Exhibit D(ii)
THIRD AMENDMENT TO LEASE AGREEMENT
(Lehigh)
This THIRD AMENDMENT TO LEASE AGREEMENT (this "Agreement") is dated as of
September______, 2003, by and among ET SUB-LEHIGH LIMITED PARTNERSHIP, a
Delaware limited partnership ("Landlord"), and ASSISTED LIVING ASSOCIATES OF
LEHIGH, INC., a Pennsylvania corporation ("Tenant").
BACKGROUND
WHEREAS, Landlord and Tenant are parties to that certain Lease Agreement
dated as of January 31, 2001, as amended by that certain First Amendment to
Lease Agreement dated July 17, 2002, and as further amended by that certain
Second Amendment to Lease dated August 5, 2002 (the "Lease"); and
WHEREAS, pursuant to the terms of the Lease, Tenant leases the land
located in Lower Macungie Township, Lehigh County, Pennsylvania, and the
improvements located thereon consisting of a skilled nursing facility operated
by Tenant and commonly known as Lehigh Commons a/k/a Park Lane Commons at
Lehigh (the "Facility"); and
WHEREAS, Genesis Health Ventures, Inc. and ElderTrust Operating Limited
Partnership have entered into that certain Master Agreement dated September
11, 2003 (the "Master Agreement"), pursuant to which, among other things,
Landlord and Tenant have agreed to modify and amend the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, Landlord and Tenant
agree as follows:
1. Definitions. All terms not otherwise defined herein shall have the
meaning ascribed to them in the Lease. The following are added to Article
1, Interpretations and Definitions:
"EBITDARM" means, for any Test Period, gross revenues from the
Facility without any deduction from such gross revenues for
interest, taxes, depreciation, amortization, Rent and any fees
payable to any manager of the Facility.
"Adjusted EBITDARM" means, for any Test Period, EBITDARM for
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the Facility for such Test Period less (i) a five percent (5%)
management fee, and (ii) an annualized $400 per bed capital
expenditure allowance."
"Effective Date" means _________, 2003.
"Fair Market Rent" means the fair market rental value of the Leased
Property as determined in accordance with Exhibit C to the Lease.
"Lease Coverage Ratio" means, for any Test Period, the ratio of (i)
Adjusted EBITDARM for such Test Period to (ii) the Minimum Rent
payable under the Lease during such Test Period.
"Test Period" means each period of twelve calendar months that ends
on June 30, September 30, December 31 and March 31.
2. The following definitions are deleted in their entirety and are
replaced with the following:
"Adjusted Minimum Rent: Means for the Lease Year commencing
February 1, 2009 and ending on January 31, 2010, the greater of
(i) the Minimum Rent for the immediately preceding Lease Year
plus the Incremental Minimum Rent, if any, determined with
respect to the immediately preceding Lease Year or (ii) the Fair
Market Rent of the Leased Property as of the Lease Year
commencing February 1, 2009.
Incremental Minimum Rent: Means for the Lease Year that
commences February 1, 2004 and ends on the next succeeding
January 31, 2005 and for each succeeding Lease Year
thereafter, an amount equal to the greater of :
(x) the product of (A) the Minimum Rent for such Lease
Year and (B) fifty percent (50%) of the percentage
increase, if any, in the CPI during such Lease Year, or
(y) the Minimum Rent for the immediately preceding Lease
Year multiplied by one and five-tenths percent (1.5%).
Minimum Rent: The Minimum Rent payable for the Lease Year that
commenced on February 1, 2003 and ends on January 31, 2004 shall
be equal to $201,043.08. The Minimum Rent for each subsequent
Lease Year that commences on February 1 and ends on the next
succeeding January 31, shall be an amount equal to the Minimum
Rent for the
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immediately preceding Lease Year plus the Incremental Minimum
Rent, provided that the Minimum Rent for the period commencing
February 1, 2009 and ending January 31, 2010, the Minimum Rent
shall be the Adjusted Minimum Rent. For the Lease Year Commencing
February 1, 2010 and ending January 31, 2011, and for each 12
month period thereafter, the Minimum Rent shall be the Minimum
Rent for the immediately preceding Lease Year increased by the
Incremental Minimum Rent.
3. Extension of Lease Term. The Initial Lease Term is hereby extended
until 11:59 p.m. on September 30, 2012.
4. Modification of Extension Option. Section 2.3 of the Lease is
deleted in its entirety and is replaced with the following:
"2.3 Extended Term. Provided that no Event of Default
shall have occurred and be continuing, and that the Lease
shall be in full force and effect, Tenant shall have the right
to extend the Term for one extended term of ten (10) years
(the "Extended Term"); provided, however, that Tenant shall
exercise such right no later than ten (10) months prior to the
end of the then current term (i.e. Tenant must give notice of
exercise on or before November 30, 2011).
The Extended Term shall commence on the day succeeding the
expiration of the Initial Term (the "Extended Term
Commencement Date"), and shall expire on the day prior to the
tenth (10th) anniversary of such Extended Term Commencement
Date. During the Extended Term the Minimum Rent shall continue
to increase as provided in Section 3.1 herein. All of the
other terms, conditions, covenants and provisions of this
Lease Document shall apply for such Extended Term. If Tenant
shall fail to give any such notice, this Lease shall
automatically terminate at the end of the then current Term,
and Tenant shall have no further right to extend the Term of
this Lease. If Tenant shall give such notice, the extension of
the Lease shall be automatically effected without the
execution of any additional documents; it being understood and
agreed, however, that Tenant and Landlord shall execute such
documents and agreements as either party shall reasonably
require to evidence the same"
5. Lease Coverage Ratio. The Lease hereby is further amended by the
addition of the following as Section 3.8 of the Lease:
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"3.8 Lease Coverage Ratio.
Commencing with the Test Period that ends on September 30,
2004, if the Facility fails to maintain a Lease Coverage Ratio
of 1.25 to 1.00 ("Minimum Lease Coverage Ratio") for any Test
Period, the Tenant shall deliver to Landlord a letter of
credit ("LC") from a financial institution reasonably
acceptable to Landlord and in form reasonably acceptable to
Landlord in an amount representing the difference between (x)
Adjusted EBITDARM for such Test Period and (y) the product of
(i) the Minimum Rent payable during such Test Period and (ii)
1.25 (the "Shortfall"). Tenant's obligation to deliver a LC to
Landlord for failure to meet the Minimum Lease Coverage Ratio
is subject to the following conditions:
(a) At any time when Landlord does not hold an LC pursuant
to this Section 3.8, if the Shortfall for any Test Period is
less than $50,000.00, then Tenant shall not be required to
deliver an LC;
(b) In the event Landlord holds an LC pursuant to this
Section 3.8 and a Shortfall occurs for a subsequent Test
Period, Tenant shall be required to increase the amount of the
LC (or deliver to Landlord an additional LC) in the amount, if
any, by which the Shortfall for such Test Period exceeds the
amount of the LC or LCs then held by Landlord.
(c) Landlord shall be obligated to release any LCs held by
Landlord in the event Tenant meets or exceeds the Minimum
Lease Coverage Ratio as of the end of any subsequent Test
Period.
(d) In the event Tenant is obligated to deliver an LC to
Landlord (or increase the amount of the LC then held by
Landlord), Tenant shall deliver the LC (or increase the LC)
not later than forty-five (45) days following the end of the
applicable Test Period.
(e) Any LC or LCs delivered by Tenant pursuant to this
Section 3.8 shall (x) be for a term not less than the balance
of the Initial Term of the Lease and shall be automatically
extended in the event this Lease is extended for the Extended
Term and (y) provide that, upon advance notice to Tenant,
Landlord may draw upon the LC upon notice from Landlord to the
issuer that an Event
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of Default involving the payment of Rent or the other sums due
under this Lease has occurred under the Lease provided that
the amount drawn upon the LC by Landlord shall not exceed the
amount of the payment default by Tenant."
6. Management Agreements. Section 7.5 of the Lease is deleted in its
entirety and is replaced with the following:
"7.5 Management Agreements.
Throughout the Term, Tenant shall not enter into any
Management Agreement except with a Manager that satisfies the
definition of "Manager" herein, or such other party approved
by Landlord in Landlord's reasonable discretion, and, if
required, the prior written approval of a Facility Mortgagee,
in each instance, which approval of Landlord and a Facility
Mortgagee shall not be unreasonably withheld, conditioned or
delayed; provided, however, that Tenant shall provide Landlord
with a copy of any such proposed Management Agreement and any
other documents relating thereto which Landlord may reasonably
request. Tenant shall not, without the prior written consent
of Landlord or such Facility Mortgagee, which consent may not
be unreasonably withheld or delayed, agree to: (i) any change
in the Manager under any Management Agreement; (ii) any
material change in any Management Agreement or any material
change in the ownership or control of any Manager; (iii) the
termination of any Management Agreement; or (iv) the
assignment of any Management Agreement by any Manager. Each
Management Agreement shall provide that Landlord shall receive
notice of any defaults thereunder and, at Landlord's option,
an opportunity to cure any such defaults. If Landlord shall
cure any of Tenant's defaults under any Management Agreement,
the cost of any such cure shall be payable upon demand by
Landlord to Tenant as Additional Rent. All management fees,
payments in connection with any extension of credit and fees
for services provided in connection with the operation of the
Facility, and all other payments and fees, payable by Tenant
to any Affiliate of Tenant, shall be subordinated to the
obligations of Tenant under this Lease. Tenant shall deliver
to Landlord any instrument requested by Landlord to implement
the intent of the foregoing provision."
7. Flood Insurance. Section 14.1.3 is deleted in its entirety and is
replaced with the following:
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"Flood (when the Leased Property is located in whole or in
material part in a designated flood plain area) and such other
hazards and in such amounts as may be customary for comparable
properties in the area; provided however, that Tenant shall
not be required to participate in the National Flood Insurance
Program. Any flood insurance obtained by Tenant may be
obtained as part of Tenant's property insurance policy or, it
Tenant so elects, through the National Flood Insurance
Program."
8. Insurance Company Satisfactory. Section 14.4 is deleted in its
entirety and is replaced with the following:
"All of the policies of insurance referred to in Section 14.1
shall comply with applicable legal requirements of the State
in which the Leased Property is located. Any insurance, other
than self-insurance or insurance maintained by an off-shore
insurance company wholly-owned by an Affiliate of Tenant,
shall be maintained with a company rated not less than A:X by
A.M. Best Co. All insurance carried by Tenant hereunder shall
have deductible amounts which are reasonably acceptable to
Landlord. Tenant shall pay all premiums for the policies of
insurance referred to in Section 14.1 and shall deliver
certificates thereof to Landlord prior to their effective date
(and with respect to any renewal policy, at least five (5)
days prior to the expiration of the existing policy). In the
event Tenant fails to satisfy its obligations under this
Section 14.4, Landlord shall be entitled, but shall have no
obligation, to effect such insurance and pay the premiums
therefor, which premiums shall be repayable to Landlord upon
written demand as Additional Rent. Tenant shall use its best
efforts to cause each insurer mentioned in Section 14.1 to
agree, by endorsement on the policy or policies issued by it,
or by independent instrument furnished to Landlord, that it
will give to Landlord thirty (30) days' written notice before
the policy or policies in question shall be altered, allowed
to expire or canceled. Each such policy shall also provide
that any loss otherwise payable thereunder shall be payable
notwithstanding (i) any act or omission of Landlord or Tenant
which might, absent such provision, result in a forfeiture of
all or a part of such insurance payment, (ii) the occupation
or use of the Leased Property for purposes more hazardous than
those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by the
Facility Mortgagee pursuant to any provision of a mortgage,
note, assignment or other document
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evidencing or securing a loan upon the happening of an event
of default therein or (iv) any change in title to or ownership
of the Leased Property."
9. Failure to Deliver LC. Section 17.1 of the Lease hereby is amended
by the addition of the following subparagraph (n):
"(n) if Tenant shall fail to deliver to Landlord an LC (or an
increase to an LC held by Landlord) when required to do so
pursuant to Section 3.8."
10. LC Draw. The following new Section 17.10 hereby is added to the
Lease.
"17.10 Letter of Credit. Following the occurrence of an Event
of Default, Landlord may draw upon any LC held by Landlord
pursuant to Section 3.8 to recover any damages incurred by
Landlord and Tenant shall promptly thereafter restore the LC
to its amount immediately prior to such draw."
11. Default. Section 17.1(a) of the Lease is deleted in its entirety
and is replaced with the following:
"(a)(x) if Tenant shall fail to make payment of the Minimum
Rent payable by Tenant under this Lease when the same becomes
due and payable and such failure is not cured by Tenant within
a period of five (5) business days after the due date, or,
(y) if Tenant shall fail to make payment of any Impositions on
or before the due date thereof, or (z) if Tenant shall fail to
make payment of any other Rent payable by Tenant under this
Lease and if the failure shall continue uncured beyond the
period, if any, allowed for such payment by the terms of this
Lease or if no period or any lesser period is specified, then
for more than ten (10) days after receipt of written notice
from Landlord; provided, however, that with respect to the
first time within any calendar year that Tenant shall fail to
make payment of Minimum Rent by the due date, Tenant shall not
be deemed to be in default until Landlord has furnished
written notice of such default to Tenant, and unless Tenant
has failed to make the payment in question within three (3)
business days after Tenant receives such notice."
12. Subletting and Assignment. Section 23.1 is deleted in its entirety
and is replaced with the following:
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"23.1 Prohibition Against Subletting and Assignment.
Except as provided in Section 23.3 or Section 23.4 and where
required pursuant to Section 23.2, Tenant shall not, without
the prior written consent of Landlord (which consent may not
be unreasonably withheld, conditioned or delayed except that
Landlord may grant or withhold its consent in its sole
discretion for a proposed mortgage, pledge, hypothecation or
encumbrance), assign, mortgage, pledge, hypothecate, encumber
or otherwise transfer (except to an Affiliate of Tenant) this
Lease or any interest in this Lease, all or any part of the
Leased Property or suffer or permit this Lease or the
leasehold estate created hereby 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. For
purposes of this Section 23.1, an assignment of this Lease
shall be deemed to include any Change of Control of Tenant, as
if such Change of Control were an assignment of this Lease."
The first paragraph of Section 23.4 is deleted in its entirety and is
replaced with the following:
"23.4 Assignment.
Except as expressly provided in this Section 23.4 and Section
23.2, Tenant may not assign this Lease (including, without
limitation, upon a Change of Control of Tenant as provided in
Section 23.2) without the written consent of Landlord, which
consent may not be unreasonably withheld or delayed. Landlord
may base its consent, among other criteria, on the experience,
creditworthiness and reputation of the assignee or its
Affiliates. If Tenant desires at any time to assign this
Lease, it shall first notify Landlord of its desire to do so
and shall submit in writing to Landlord: (i) the name of the
proposed assignee; (ii) the terms and provisions of the
proposed assignment; and (iii) such financial information as
Landlord reasonably may request concerning the proposed
assignee. Except as provided in Section 23.4.3 below, any
assignment by Tenant of this Lease shall be solely of Tenant's
entire interest in and under this Lease. The consent by
Landlord to any assignment shall not constitute a consent to
any subsequent or successive assignment by the assignee. Any
purported assignment or other transfer of all or any portion
of Tenant's interest in this Lease in contravention of this
Section 23.4 shall be void and, at
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the option of Landlord, shall terminate this Lease."
The last sentence of Section 23.4.7 is deleted and is replaced with
the following:
"Notwithstanding the foregoing, Tenant and any guarantor of
Tenant's obligations shall be fully released from their
obligations under and with respect to this Lease in the event
of an assignment of this Lease that satisfies the following
conditions (i) the assignee or its affiliates owns, operates
or manages hospitals, assisted living facilities or nursing
homes (ii) the assignee or any proposed substitute guarantor
of this Lease has sufficient creditworthiness in the
reasonable judgment of Landlord, and (iii) Landlord has
consented to the assignment in accordance with the consent
standards of this Lease."
13. Financial Statements. Section 24.2 is deleted in its entirety and
is replaced with the following:
"Tenant will furnish to Landlord, within one hundred twenty
(120) days after the end of Tenant's fiscal year, a copy of
its financial statements, which shall, if requested or
required by a Facility Mortgagee, be audited by a certified
public accountant. Within thirty (30) days after the end of
each quarter, Tenant shall provide to Landlord internally
generated financial statements, which statements shall include
a calculation of the Lease Coverage Ratio. All financial
statements shall be accompanied by a certificate of an officer
and the chief accounting officer of Tenant delivered with such
report, stating (i) that the officers know of no Event of
Default, or event which, upon notice or the passage of time or
both, would become an Event of Default, which has occurred and
is continuing under this Lease or, if any such event has
occurred or is continuing, specifying the nature and period of
existence thereof and what action Tenant has taken or proposes
to take with respect thereto, and (ii) except as otherwise
specified in such certificate, that to the best of such
officers' knowledge, Tenant has fulfilled all of its,
obligations under this Lease which are required to be
fulfilled on a prior date to such certificate."
14. Security Deposit. With reference to Section 8.1 of the Lease, the
parties confirm that the Security Deposit held by Landlord in the amount
of $65,540.00, plus accrued interest, has been returned to Tenant upon
execution of this Agreement and Tenant shall have no further obligation to
Landlord with respect to the Security Deposit.
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15. Guaranty. Landlord acknowledges and agrees that, pursuant to a
corporate Reorganization (as that term is defined in the Master Agreement)
contemplated by Genesis Health Ventures, Inc. ("GHV"), parent corporation of
Tenant, Genesis HealthCare Corporation ("GHC") shall become the parent entity
of Tenant, and, contemporaneously therewith, GHC shall replace GHV as
guarantor of the Lease. Upon the execution and delivery by the parties of the
this Amendment, GHC shall execute and deliver to Landlord a Guaranty (the "GHC
Guaranty") in the form attached hereto as Exhibit A which shall be effective
only upon the date of the Reorganization, and Landlord hereby (i) consents to
the Reorganization as described in the Master Agreement, and (ii) agrees that
upon the effective date of the Reorganization, the GHV Guaranty shall be
automatically terminated and the GHC Guaranty shall be automatically
effective.
16. Inspection Fee. Tenant shall pay to Landlord, as an item of Additional
Rent, an annual fee for Landlord's cost of inspecting the Facility (the
"Inspection Fee"). The Inspection Fee shall be payable on November 1 of each
Lease Year, including the Extended Term. The amount of the Inspection Fee
shall be $2,000.00 for the payment due on November 1, 2004 for the first Lease
Year, which amount shall increase each Lease Year by multiplying the
Inspection Fee for the immediately preceding year by the increase in the CPI.
17. Effectiveness of this Agreement. Except as expressly modified by this
Agreement, all other terms and provisions of the Lease are hereby ratified and
confirmed and shall remain in full force and effect. Each of Landlord and
Tenant confirms to the other that there are not presently outstanding any
defaults or Events of Default of the other under the Lease and hereby waives
and releases the other from any prior defaults or Events of Default.
18. Counterparts; Facsimile Execution. The parties hereto agree that: (a)
this Agreement may be executed in counterparts, each of which shall be deemed
an original and all of which counterparts together shall constitute one and
the same instruments, and that executed counterpart originals shall be
satisfactory for purposes of enforcing this Agreement; and (b) original
signatures transmitted via facsimile shall be acceptable for purposes of
executing this Agreement. If counterpart originals are executed and/or
original signatures are transmitted by facsimile, the parties hereto shall
endeavor in good faith to deliver to each other executed counterpart originals
within ten (10) days from the date hereof.
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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EXECUTED as sealed instrument the day and year first above written.
TENANT:
ASSISTED LIVING ASSOCIATES OF LEHIGH,
INC., a Pennsylvania corporation
By:________________________________________
Name:
Title:
LANDLORD
ET SUB-LEHIGH LIMITED PARTNERSHIP, a
Delaware limited partnership
By:________________________________________
Name:
Title:
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Exhibit A
Lease Guaranty
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