EXHIBIT 10.13
MASTER LEASE AGREEMENT
BETWEEN
EMERALD-CEDAR HILLS, INC. A FLORIDA CORPORATION,
EMERALD-GOLFVIEW, INC. A FLORIDA CORPORATION,
EMERALD-SOUTHERN PINES, INC. A FLORIDA CORPORATION
AND
EMERALD-GOLFCREST, INC., A FLORIDA CORPORATION
(COLLECTIVELY, LESSOR)
AND
SENIOR CARE FLORIDA LEASING, LLC
A DELAWARE LIMITED LIABILITY COMPANY
(LESSEE)
TABLE OF CONTENTS
PAGE
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ARTICLE 1........................................................................................................1
1.1 Lease and Leased Properties...........................................................................1
1.2 Master Lease of Leased Properties.....................................................................2
1.3 Definitions...........................................................................................3
ARTICLE 2........................................................................................................9
2.1 Term; Commencement Date...............................................................................9
ARTICLE 3........................................................................................................9
3.1 Representations, Warranties and Covenants of Lessor...................................................9
ARTICLE 4.......................................................................................................11
4.1 Base Rent............................................................................................11
4.2 Additional Rent......................................................................................11
4.3 Additional Charges...................................................................................11
4.4 Late Payment.........................................................................................11
4.5 Net Lease............................................................................................11
4.6 Method of Payment of Rent............................................................................12
4.7 Adjustment of Base Rent..............................................................................12
ARTICLE 5.......................................................................................................12
5.1 Property Taxes.......................................................................................12
5.2 Notice of Taxes......................................................................................13
5.3 Proration of Taxes...................................................................................13
5.4 License Fees and Business Taxes......................................................................13
5.5 Utility Charges......................................................................................13
5.6 Insurance Premiums...................................................................................13
ARTICLE 6.......................................................................................................14
6.1 Ownership of the Leased Properties...................................................................14
6.2 Lessee's Personal Property...........................................................................14
6.3 Grant of Security Interest in Lessee's Personal Property and Accounts................................14
ARTICLE 7.......................................................................................................15
7.1 Licenses and Permits.................................................................................15
7.2 Use of the Leased Properties.........................................................................15
7.3 Environmental Matters................................................................................16
ARTICLE 8.......................................................................................................17
8.1 Maintenance and Repair...............................................................................17
8.2 Surrender............................................................................................18
8.3 Replacement Property.................................................................................18
8.4 Signage..............................................................................................19
ARTICLE 9.......................................................................................................19
9.1 Improvements, Alterations and Additions by Lessee....................................................19
9.2 Liens................................................................................................19
ARTICLE 10......................................................................................................20
10.1 Permitted Contests...................................................................................20
ARTICLE 11......................................................................................................20
11.1 General Insurance Requirements.......................................................................20
11.2 Replacement Cost.....................................................................................21
11.3 Waiver of Subrogation................................................................................21
11.4 Lessee's Personal Property...........................................................................22
11.5 Blanket Policy.......................................................................................22
ARTICLE 12......................................................................................................22
12.1 Insurance Proceeds Payable on Damage or Destruction..................................................22
12.2 Restoration in the Event of Damage or Destruction Covered............................................22
12.3 Lessee's Personal Property; Business Interruption....................................................23
12.4 Excess Proceeds......................................................................................24
12.5 Standard of Work.....................................................................................24
12.6 Effect of Termination................................................................................24
12.7 Failure to Repair....................................................................................24
12.8 Unavoidable Delays...................................................................................24
ARTICLE 13......................................................................................................24
13.1 Condemnation.........................................................................................24
13.2 Awards...............................................................................................25
13.3 Standard of Work.....................................................................................25
13.4 Failure to Repair....................................................................................26
13.5 Unavoidable Delays...................................................................................26
ARTICLE 14......................................................................................................26
14.1 Event of Default.....................................................................................26
14.2 Remedies.............................................................................................27
14.3 Additional Expenses..................................................................................29
14.4 Legal Expenses.......................................................................................29
ARTICLE 15......................................................................................................29
15.1 Lessor's Right to Cure Lessee's Default..............................................................29
ARTICLE 16......................................................................................................29
16.1 Holding Over.........................................................................................29
ARTICLE 17......................................................................................................30
17.1 Subordination, Non-Disturbance and Attornment........................................................30
17.2 Facility Mortgage Agreements.........................................................................30
17.3 Estoppel Certificates................................................................................31
17.4 Relationship of Lessee to Existing Facility Mortgage.................................................31
ARTICLE 18......................................................................................................31
18.1 Indemnification......................................................................................31
ARTICLE 19......................................................................................................32
19.1 Assignment and Subletting............................................................................32
ARTICLE 20......................................................................................................33
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20.1 Lessor's Right to Inspect............................................................................33
ARTICLE 21......................................................................................................33
21.1 Quiet Enjoyment......................................................................................33
21.2 No Encumbrance by Lessor.............................................................................33
ARTICLE 22......................................................................................................33
22.1 Notices..............................................................................................33
ARTICLE 23. [INTENTIONALLY OMITTED].............................................................................34
ARTICLE 24......................................................................................................34
24.1 Lessor's Event of Default............................................................................34
24.2 Legal Expenses.......................................................................................35
ARTICLE 25......................................................................................................35
25.1 Miscellaneous........................................................................................35
ARTICLE 26......................................................................................................36
26.1 Arbitration..........................................................................................36
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MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT ("Lease") is made and entered into as of
the 1st day of May, 2003 by and between EMERALD-CEDAR HILLS, INC. a Florida
corporation, EMERALD-GOLFVIEW, INC. a Florida corporation, EMERALD-SOUTHERN
PINES, INC. a Florida corporation and EMERALD-GOLFCREST, INC., a Florida
corporation (herein collectively called the "Lessor") and SENIOR CARE FLORIDA
LEASING, LLC, a Delaware limited liability company (herein called the "Lessee").
RECITALS
WHEREAS, Lessor owns certain real property located in the State of
Florida as more particularly described on EXHIBITS A-1 THROUGH A-4 attached
hereto on which there are located four (4) existing fully licensed nursing home
facilities owned and operated by Lessor; and
WHEREAS, Lessor desires to lease said facilities to the Lessee, and
Lessee desires to lease the same from Lessor, upon the terms, covenants and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties to this Lease hereby covenant
and agree as follows:
ARTICLE 1.
1.1 LEASE AND LEASED PROPERTIES. Upon and subject to the
covenants, stipulations, terms and conditions hereinafter set forth, Lessor
hereby leases, demises and lets to Lessee, and Lessee hereby leases, rents and
hires from Lessor, for the Term hereof (beginning on the Commencement Date as
more particularly set forth herein) the following described property
(collectively, the "Leased Properties"):
1.1.1 the real property more particularly described in
EXHIBIT A-1 THROUGH A-4 attached hereto and made a part hereof,
together with all easements, rights, hereditaments and appurtenances
thereto belonging or otherwise benefiting such real property including
any easements, rights, rights of access, ingress and egress, parking or
traffic circulation, or other interests of Lessor in, on or to any
land, highway, street, road or avenue, open or proposed, in, on,
across, in front of, abutting or adjoining such real property and any
adjacent real property (the "Land").
1.1.2 the Facilities (as hereinafter defined) and all
structures, Fixtures (as hereinafter defined) and other improvements of
every kind now or hereafter situated on the Land including, but not
limited to, alleyways, crosswalks, sidewalks, utility pipes, conduits
and lines (on-site and off-site), drainage and all above-ground and
underground utility structures drives, parking areas and roadways
appurtenant to such improvements (collectively, the "Leased
Improvements");
1.1.3 to the extent owned and installed in the Leased
Improvements by Lessor, all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, so
permanently affixed or attached to or incorporated into the Land or
Leased Improvements such that an interest in them arises under
applicable real estate law and the same are deemed to be fixtures and
accessions to the land and a part thereof, including all components
thereof, now and hereafter located in, on or used in connection with,
and permanently affixed to or incorporated into the Land or 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 (other than individual units), sprinkler systems and fire and
theft protection equipment, and built-in oxygen and vacuum systems,
together with all replacements, modifications, alterations and
additions thereto (collectively, the "Fixtures"), but specifically
excluding all items included within the category of Lessee's Personal
Property as defined below;
1.1.4 to the extent owned and installed in the Leased
Improvements by Lessor, all equipment, machinery, furnishings,
furniture, trade fixtures, appliances, computers (and all associated
software) and other items of personal property, and all components
thereof, now or hereafter installed on the Land by Lessor and used,
maintained or operated in connection with the Leased Improvements
(collectively, "Lessor's Personal Property"), but specifically
excluding all items included within the category of Lessee's Personal
Property; and
1.1.5 to the extent permitted by law, all permits,
approvals and other intangible property or any interest therein now or
hereafter owned or held by Lessor in connection with the Leased
Properties or the use thereof or any business or businesses now or
hereafter conducted by Lessee therefrom, including all licenses,
permits, contract rights, agreements, water rights and reservations,
zoning rights, business licenses and warranties (including those
relating to construction or fabrication) related to the Leased
Properties, or any part thereof, specifically including the right to
use of, and Lessor hereby grants to Lessee the exclusive right to the
use of the names "Emerald-Golfview," "Emerald-Golfcrest,"
"Emerald-Southern Pines," "Emerald-Cedar Hills" and any combinations
and derivatives thereof (collectively, "Lessor's Permits and General
Intangibles").
1.2 MASTER LEASE OF LEASED PROPERTIES. The Leased Properties are
leased subject to all covenants, conditions, restrictions, easements and other
matters affecting each of the Leased Properties, whether or not of record,
including the Permitted Encumbrances and other matters which would be disclosed
by an inspection of the Leased Properties or by an accurate survey thereof,
provided, however, that the foregoing matters shall not materially interfere
with the Primary Intended Use of Leased Properties by Lessee as set forth in
this Lease.
This Lease constitutes one indivisible lease of the Leased Properties
to the Lessee, and not separate leases governed by similar terms. The Leased
Properties constitute one economic unit, and the Base Rent and all other
provisions have been negotiated and agreed to based on a demise of all of the
Leased Properties as a single, composite, inseparable transaction and would have
been substantially different had separate leases or a divisible lease been
intended. Except as expressly provided herein for specific, isolated purposes
(and then only to the extent expressly
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otherwise stated), all provisions of this Lease apply equally and uniformly to
all the Leased Properties as one unit. An Event of Default with respect to any
of the Leased Properties is an Event of Default as to all of the Leased
Properties. The parties intend that the provisions of this Lease shall at all
times be construed, interpreted and applied so as to carry out their mutual
objective to create an indivisible lease of all the Leased Properties and, in
particular but without limitation, that for purposes of any assumption,
rejection or assignment of this Lease under 11 U.S.C. 365, this instrument,
shall be one indivisible and non-severable lease and executory contract dealing
with one legal and economic unit which must be assumed, rejected or assigned as
a whole with respect to all and only all the Leased Properties covered hereby.
1.3 DEFINITIONS. For all purposes of this Lease, except as
otherwise expressly provided or unless the context otherwise requires, (i) the
terms defined in this Article have the meanings assigned to them in this Article
and include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as at the time applicable, consistently
applied, (iii) all references in this Lease to designated "Articles", "Sections"
and other subdivisions are to the designated Articles, Sections and other
subdivisions of this Lease and (iv) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Lease as a whole and not to any
particular Article, Section or other subdivision. For purposes of this Lease,
the following terms shall have the meanings indicated:
Additional Charges: All Impositions and other amounts, liabilities and
obligations which Lessee assumes or agrees to pay under this Lease.
Advocat: Advocat Inc. a Delaware corporation.
AmSouth: AmSouth Bank N.A.
AmSouth Loan Documents: The documents evidencing and securing the
indebtedness of Advocat and its Affiliates to AmSouth as of the effective date
of this Agreement.
Assessment: Any governmental assessment on any of the Leased Properties
or any part thereof for public or private improvements or benefits, whether or
not commenced or completed prior to the date hereof and whether or not to be
completed within the Term.
Affiliate: When used with respect to any corporation or partnership,
the term "Affiliate" shall mean any person which, directly or indirectly,
controls or is controlled by or is under common control with such corporation or
partnership. For the purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such person, through the ownership of voting shares, partnership
interests or other equity interests. The term "person" shall mean any natural
person, trust, partnership, corporation, joint venture or other legal entity.
Base Rent: During the Term, the base rent shall be calculated on the
basis of One Million Four Hundred Ninety-Eight Thousand and No/100 Dollars
($1,498,000.00) per annum, payable in equal monthly installments of One Hundred
Twenty-Four Thousand Eight Hundred Thirty-
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Three and 34/100 Dollars ($124,833.34) each; provided, however, that Base Rent
for any partial Lease Year shall be pro-rated based on the number of days
elapsed in such Lease Year.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which federally chartered banks located in the State of
Florida, are authorized, or obligated, by law or executive order, to close.
Charge: As defined in Article 10, Section 10.1.
Commencement Date: As defined in Article 2.1.
Cost of Operations: All costs and expenses of operation of the
Facilities, determined on an accrual basis using GAAP, including every cost or
expense incurred in the discharge of matters heretofore referred to as being the
responsibility of DMSC as manager under the February 20, 1996 Management
Agreements between DMSC and each of the Lessor entities as a part of the
obligation of DMSC to operate and manage the Facilities in a prudent manner, but
expressly excluding Base Rent hereunder, depreciation or amortization of real or
personal property used in the operation of the Facilities, management fees, if
any, debt service and capital expenditures.
DMSC: Diversicare Management Services Co., a Tennessee corporation.
Encumbrance: Any mortgage, deed of trust, lien, encumbrance or other
matter affecting title to the Leased Properties, or any portion thereof or
interest therein, securing any borrowing or other means of financing or
refinancing.
Existing Facilities Mortgage: As defined in Article 17, Section 17.1.
Facility and Facilities: A fully licensed nursing home or, plurally,
the fully licensed skilled nursing home facilities located on the Land.
Facility Mortgagee: The secured party to a Facility Mortgage, including
without limitation Omega.
Force Majeure: An event or condition beyond the control of a Person,
including without limitation a flood, earthquake, or other Act of God; a fire or
other casualty resulting in a complete or partial destruction of the Facility in
question; a war, revolution, riot, civil insurrection or commotion, terrorism,
or vandalism; unusual governmental action, delay, restriction, or regulation not
reasonably to be expected; a contractor or supplier delay or failure in
performance (not arising from a failure to pay any undisputed amount due), or a
delay in the delivery of essential equipment or materials; bankruptcy or other
insolvency of a contractor, subcontractor, or construction manager (not an
Affiliate of the party claiming Force Majeure); a strike, slowdown, or other
similar labor action; or any other similar event or condition beyond the
reasonable control of the party claiming that Force Majeure is delaying or
preventing such party from timely and fully performing its obligations under
this Lease.
Full Replacement Cost: As defined in Article 11, Section 11.2.
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GAAP: Generally accepted accounting principles in effect at the time in
question.
Gross Revenues: All revenues received or receivable from or by reason
of the operation of the Facilities, or any other use of the Leased Properties,
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 Properties and, except as provided below, any consideration received
for any sublease, license or other arrangement with an unrelated third party in
possession, or using, any portion of the Leased Properties. Gross Revenues shall
not, however, include:
(i) revenue from professional fees or charges by physicians when
and to the extent such charges are paid over to such physicians or are
accompanied by separate charges for use of a Facility or any portion
thereof,
(ii) non-operating revenues such as interest income or income from
the sale of assets not sold in the ordinary course of business,
(iii) contractual allowances and reasonable reserves (relating to
any period during the Term) for ▇▇▇▇▇▇▇▇ not paid by or received from
the appropriate governmental agencies, third party providers or other
payors,
(iv) all proper patient billing credits and adjustments according
to generally accepted accounting principles relating to health care
accounting, and
(v) federal, state or local sales or excise taxes and any tax
based upon or measured by said 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.
If any one or more of the Leased Properties or any part thereof is
subleased, or a license permitting the use thereof is granted to an Affiliate of
Lessee, Gross Revenues shall include all revenues received or receivable by the
sublessee or licensee from its use of the Leased Properties and any rent or
equivalent payment by the sublessee or licensee received or receivable by Lessee
from such sublease or licensee shall be excluded from Gross Revenues (provided,
however, that in the case of a sublease of space for the placement or erection
of antennae or similar device, the rent or equivalent payment shall be included
in Gross Revenues).
Guarantor(s): Advocat, DMSC and Advocat Finance Inc., a Delaware
corporation
Guaranty: The Guaranty of even date herewith executed by the
Guarantor(s).
Hazardous Materials: Any material or substance that is defined or
classified under any Hazardous Materials Laws as a hazardous or toxic substance,
material, waste or pollutant, or toxic or hazardous pursuant to regulations
promulgated now or hereafter under any Hazardous Materials Laws, or presents a
risk to human health or the environment under other applicable federal, state or
local laws, ordinances, or regulations, as now in effect or as may be passed or
promulgated in the future. "Hazardous Materials" specifically includes asbestos
or any substance containing asbestos, the group of organic compounds known as
polychlorinated biphenyls, flammable explosives, radioactive materials, medical
waste, chemicals known to cause cancer or
5
reproductive toxicity, pollutants, effluents, contaminants, emissions or
related materials, petroleum and petroleum based products, and urea
formaldehyde.
Hazardous Materials Law: Any federal, state or local law, regulation or
ordinance relating to environmental conditions, medical waste and industrial
hygiene, including the Resource Conservation and Recovery Act of 1976 ("RCRA"),
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of
1986 ("▇▇▇▇"), the Hazardous Materials Transportation Act, the Federal Water
Pollution Control Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, and all similar federal,
state and local environmental statutes and ordinances, whether heretofore or
hereafter enacted or effective and all regulations, orders, or decrees
heretofore or hereafter promulgated thereunder.
Impositions: Collectively, all taxes (including, without limitation,
all capital stock and franchise taxes of Lessor, and all ad valorem, sales and
use, single business, gross receipts, transaction privilege, rent or similar
taxes to the extent the same are assessed against Lessor on the basis of its
interest in the prospective Leased Properties), assessments (including
Assessments), ground rents, water, sewer or other rents and charges, excises,
tax levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Properties or the
businesses conducted thereon by Lessee and/or the Rent (including all interest
and penalties thereon), which at any time prior to, during or in respect of the
Term may be assessed or imposed on or in respect of or be a lien upon (i) Lessor
or Lessor's interest in the Leased Properties, (ii) Leased Properties or any
part thereof or any rent therefrom or any estate, right, title or interest
therein, (iii) any occupancy, operation, use or possession of, or sales from, or
activity conducted on, or in connection with the Leased Properties or the
leasing or use of the Leased Properties or any part thereof, or (iv) the Rent;
notwithstanding the foregoing, Impositions shall not include: (i) except as
provided above, any tax imposed on Lessor's gross and/or net income whether
generally or specifically arising in connection with the Leased Properties, or
(ii) any transfer or other tax imposed with respect to the sale, exchange or
other disposition by Lessor of the Leased Properties or any part thereof or the
proceeds thereof. If a tax is assessed against Lessor in part based on Lessor's
interest in the Leased Properties and in part based on Lessor's gross and/or net
income, the portion of the tax which is based on Lessor's interest in the Leased
Properties shall be treated as an Imposition.
Lessee's Incidental Personal Property: As defined in Article 6, Section
6.2.
Lease Year: A period of twelve (12) successive calendar months
commencing on the Commencement Date (as defined in Article 2 hereof) and on the
same date in each successive calendar year during the Term of this Lease.
Management Agreement: Any agreement pursuant to which management of a
Facility is delegated by Lessee to any person not an employee of Lessee;
provided, however, that at all times that the Lessee under this Lease is Senior
Care Florida Leasing, LLC, a Delaware limited liability company (or another
affiliate of Advocat), then the term "Management Agreement"
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shall mean collectively the four (4) separate Management Agreements of even date
with this Lease with DMSC as Manager of the Facilities.
Manager: The Person to which management of the operation of a Facility
is delegated pursuant to a Management Agreement; provided, however, that at all
times the Lessee under this Lease is Senior Care Florida Leasing, LLC a Delaware
limited liability company, (as another affiliate of Advocat), then the term
"Manager" shall mean DMSC as Manager of the Facilities.
Net Income: For any period, the net income (or loss) of Lessee and its
subsidiaries for such period, determined on a consolidated basis and in
accordance with GAAP, provided, however, that Lessee's Net Income shall not
include:
(a) any after-tax gains or losses attributable to
returned surplus assets of any pension-benefit plan;
(b) any extraordinary gains or nonrecurring gains;
(c) any gains or losses realized upon the sale or other
disposition of property which is not sold or
otherwise disposed of in the ordinary course of
business;
(d) any gains or losses realized upon the sale or other
disposition of any capital stock of any Person;
(e) any gains from the disposal of a discontinued
business;
(f) the cumulative effect on prior years of any change in
an accounting principle;
(g) the income or loss of any Person acquired by Lessee
or an Affiliate in a pooling of interests transaction
for any period prior to the date of such acquisition;
(h) the income from any sale of assets in which the book
value of such assets had been the book value of any
Person acquired in a pooling-of-interests transaction
prior to the date such Person became an Affiliate of
Lessee;
(i) the income (or loss) of any Person (other than a
subsidiary) in which Lessee has an ownership
interest; provided, however, that (i) Lessee's Net
Income shall include amounts in respect of the income
of such Person when actually received in cash by
Lessee in the form of dividends or similar
distributions and (ii) Lessee's Net Income shall be
reduced by the aggregate amount of all investments,
regardless of the form thereof, made by Lessee in
such Person for the purpose of funding any deficit or
loss of such Person;
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(j) the income of Lessee to the extent the payment of
such income is not permitted, whether on account of
any law, statute, judgment, decree or governmental
order, rule or regulation applicable to such Lessee;
(k) all amounts included in computing such net income (or
loss) in respect of the write-up of any asset or the
write-down of any Debt at less than face value after
the later of the Commencement Date or the date on
which such asset or Debt was first properly included
on Lessee's balance sheet.
(l) the reduction in income tax expense resulting from an
increase in a deferred income tax asset due to the
anticipation of future income tax benefits; or
(m) the reduction in income tax expense resulting from an
increase in a deferred income tax asset or from a
decrease in a deferred income tax liability due to a
change in a statutory tax rate.
New Sub: One or more subsidiaries of Senior Care Florida Leasing, LLC
established for the purpose of becoming a Sublessee hereunder.
Non Disturbance Agreement: As defined in Article 17, Section 17.1.
Notice: Any notice given hereunder in accordance with Article 22
hereof.
Omega: Omega Healthcare Investors, Inc., a Maryland corporation.
Overdue Rate: On any date, a rate of interest equal to three and
one-half percent (3 1/2%) above the Prime Rate, but in no event greater than the
maximum rate then permitted under applicable law.
Permitted Alteration: As defined in Article 9, Section 9.1.
Permitted Assignment: As defined in Article 19, Section 19.1.
Pledge Agreement or Pledge Agreements, as applicable, means one or more
of the Pledge Agreements executed by Diversicare Leasing Corp. respecting its
equity interests in the Lessee or by the Lessee respecting its equity interests
in the New Subs.
Primary Intended Use: As defined in Article 7, Section 7.2, Subsection
7.2.1.
Prime Rate: On any date, a rate of interest equal to the annual rate of
interest published by The Wall Street Journal, from time to time, as the Prime
Rate (such rate is currently published in the column "Money Rates" as the "base
rate on corporate loans posted by at least 75% of the nation's 30 largest
banks"). If a range of rates is published as the Prime Rate by The Wall Street
Journal, then the "Prime Rate", for the purposes of this Lease, shall be the
highest rate in such range. Each change in the Prime Rate as published by The
Wall Street Journal shall be effective, for the purposes of this Lease, to
change the Interest Rate as of the date that such change is published in The
Wall Street Journal.
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Rent: Collectively, the Base Rent, Additional Rent and Additional
Charges.
Replaced Property: As defined in Article 8, Section 8.1.
Replacement Property: As defined in Article 8, Section 8.1.
Security Agreement: The Security Agreement dated as of the date hereof
between Lessor as secured party and Lessee as debtor.
State: The State of Florida.
Sublessee: A permitted sublessee of Lessee pursuant to the conditions
of Section 19.1.
Taxes: As defined in Article 5, Section 5.1.
Term: Term of this Lease; Lease Term; Term hereof: As and when used in
this Lease, the foregoing defined terms each shall mean and include the initial
term of this Lease as defined in Article 2 hereof, and, to the extent this Lease
is extended and renewed, the renewal term of this Lease.
Term Expiration Date: December 31, 2005.
ARTICLE 2.
2.1 TERM; COMMENCEMENT DATE. The term of this Lease (the "Term")
and the payment of the Rent due hereunder shall commence on the 1st day of
April, 2003 (the "Commencement Date") and shall remain in effect until the Term
Expiration Date expiring at midnight on such date, unless terminated sooner
pursuant to the provisions of this Lease. In the event that the Commencement
Date is a date other than the first day of the month, all Rent otherwise due
shall be prorated based upon the number of days elapsed in such month.
ARTICLE 3.
3.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR. As a
material inducement to Lessee to enter into this Lease, Lessor represents,
warrants and covenants to Lessee that as of Commencement Date:
3.1.1 The Leased Improvements and Lessor's Personal
Property are free from any material structural, electrical or
mechanical defects and there is no physical condition of the Leased
Improvements or Lessor's Personal Property of which Lessor is aware
that could reasonably be expected to have a material adverse effect on
the Lessee's ability to use and operate the Leased Properties for their
Primary Intended Use (as defined in Section 7.2.1 hereof), unless
disclosed in writing by Lessor to Lessee prior to the Commencement Date
and acknowledged in writing by Lessee.
3.1.2 The Land is zoned or classified under applicable
zoning ordinances or other land use regulations to permit the use and
occupancy of the Lease Properties as skilled nursing facilities. The
Leased Improvements are in compliance with all zoning or
9
other land use regulations, public health, building code or other
similar laws applicable thereto.
3.1.3 Lessor is the sole owner of and will have good and
marketable fee simple title to the Leased Properties, free and clear of
all liens, encumbrances, rights or claims of other parties, limitations
or restrictions on use, or other matters, except for (i) Taxes (as
hereinafter defined) for the year 2003 which are not yet due and
payable, (ii) easements for the installation and maintenance of public
utilities serving the Leased Properties and such other easements that
do not adversely affect, impede or hinder the use, occupancy and
enjoyment of the Leased Properties by Lessee for its Primary Intended
Use and (iii) those matters set forth on EXHIBIT B attached hereto
("Permitted Exceptions"). Lessor has all easements and rights
necessary to allow Lessee to use the Leased Properties for its Primary
Intended Use.
3.1.4 There are no encroachments upon the Land and no
encroachments of any Leased Improvements onto adjacent property. None
of the Leased Improvements violates set-back, building or side lines
nor do they encroach on any easements located on any of the Leased
Properties. All utilities serving each of such Facilities are adequate
to operate each such Facility for its Primary Intended Use. Each of the
Leased Properties has direct access, ingress and egress to and from a
publicly dedicated street, road or highway, and there are located on
the Land an adequate number of parking spaces to operate each such
Facility for its Primary Intended Use.
3.1.5 Lessor has complied with, and to the best knowledge
of Lessor, all prior owners, operators and occupants of the Leased
Properties have complied with, all applicable Hazardous Materials Laws.
Except as duly licensed or authorized by appropriate governmental
authorities or otherwise permitted by such Hazardous Materials Laws,
neither Lessor, its affiliates or agents have allowed the use,
generation, treatment, handling, release, emission, manufacture,
discharge, voluntary transmission, storage or removal of any Hazardous
Materials on, at, over, in, from or upon any of the Leased Properties,
nor, to the best knowledge of Lessor, has any of the Leased Properties
ever been used for any of the foregoing. To the best knowledge of
Lessor, there are no polychlorinated biphenyls or friable asbestos or
any substance containing asbestos in condition or amount deemed
hazardous by any Hazardous Materials Laws present at any of the Leased
Properties. Lessor has not at any time engaged in nor permitted, nor to
the best knowledge of Lessor, has any prior owner or any tenant or
other occupant of any of the Leased Properties engaged in or permitted,
any dumping discharge, disposal, spillage or leakage, whether legal or
illegal, accidental or intentional, of Hazardous Materials at, on, in,
from or about any of the Leased Properties that would subject such
Leased Properties or Lessee to any clean-up obligations imposed by any
governmental authorities. Lessor has not received or been issued any
notice, demand, request for information, citation, summons, or
complaint regarding an alleged failure to comply with any Hazardous
Materials Laws. To the best knowledge of Lessor, none of the Leased
Properties is subject to any existing, pending or threatened
investigation or inquiry by any governmental authority for failure to
comply with any Hazardous Materials Laws. To the best knowledge of
Lessor, there are no underground storage tanks on the Leased
Properties, and, to the best knowledge of Lessor, each of the Leased
Properties is free of
10
dangerous levels of naturally emitted radon. To the best knowledge of
Lessor, no portion of any of the Leased Properties has ever been used
as a landfill, garbage or refuse dump site or waste disposal facility.
Lessor will indemnify and hold harmless Lessee from and against all
liabilities, obligations, claims, penalties, costs and expenses
(including, without limitation, reasonable attorneys fees and expenses)
which may be imposed upon, or incurred, suffered by, or asserted
against Lessee by reason of the presence, use, maintenance, storage,
release, disposal or discharge of any Hazardous Materials on, in, under
or from any of the Leased Properties prior to the Commencement Date or
any violation of any Hazardous Materials Laws arising out of or
relating to conditions, circumstances or events prior to the
Commencement Date.
ARTICLE 4.
4.1 BASE RENT. Lessee covenants and agrees to pay as rent for the
Leased Properties during each Lease Year of the Term of this Lease, in lawful
money of the United States of America, Base Rent to be paid in twelve (12) equal
monthly installments (other than the installment due for the first month which
shall be prorated, if appropriate), each due and payable, in advance on the
first day of each month of the Term.
4.2 ADDITIONAL RENT. In addition to the Base Rent, Lessee shall
pay as rental under this Lease, on a quarterly basis, additional rent
("Additional Rent") equal to one half of an amount determined as Gross Revenues,
less (i) the Cost of Operation, (ii) Base Rent and (iii) a management fee
payable to DMSC pursuant to that certain Management Agreement with DMSC as
Manager of the Facilities equal to seven percent (7%) of Gross Revenue. An
example of the foregoing calculation of Additional Rent is attached hereto as
EXHIBIT C solely for illustration purposes. In connection such Additional Rent,
Lessee or each Sublessee, as applicable shall submit to Lessor (and to Omega, if
and so long as Omega remains a Facility Mortgagee), on or before the forty fifth
(45th) day following the end of a calendar quarter, a reconciliation statement,
certified as true and complete by an authorized officer of Lessee, setting forth
in detail the Cost of Operations incurred and paid during the prior quarter.
Failure to timely furnish the quarterly reconciliation statement and/or to
timely pay over the Additional Rent shall constitute an Event of Default.
4.3 ADDITIONAL CHARGES. In addition to Base Rent and Additional
Rent, Lessee shall pay as rental under this Lease as and when due all Additional
Charges.
4.4 LATE PAYMENT. If any installment of Rent owing by Lessee under
this Lease shall not be paid within five (5) days of written notice from Lessor,
such unpaid amount shall thereafter bear interest at the Overdue Rate from the
due date thereof until the date of payment, which Lessee shall pay on demand as
a late charge (to the extent permitted by law) and, in such event, the parties
hereby agree that such late charge will represent a fair and reasonable estimate
of the costs Lessor will incur by reason of the late payment by Lessee.
4.5 NET LEASE. The Rent shall be paid absolutely net to Lessor, so
that this Lease shall yield the full amount of the Rent payable hereunder
throughout the Term, subject only to any provisions of the Lease which expressly
provide for adjustment or abatement of Rent or other charges.
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4.6 METHOD OF PAYMENT OF RENT. Lessor hereby instructs Lessee to
make payment of all Rent due under this Lease directly to Omega as Facility
Mortgagee for application, as and when received, to amounts owed by Lessor under
the Existing Facility Mortgages. Such instruction by Lessor to make payment
directly to Omega as Facility Mortgagee shall be irrevocable during the Term of
this Lease. Notwithstanding the foregoing provisions for payment of Rent to
Omega as Facility Mortgagee, the first Ten Thousand and No/100 Dollars
($10,000.00) of Rent per Facility per Lease Year (for a total of Forty Thousand
and No/100 Dollars ($40,000.00) per Lease Year) shall be paid by Lessee directly
to the Lessor to pay certain expenses incurred by the Lessor related to its
ownership of the Facilities, including but not limited to income or intangible
taxes due and payable by the Lessor, accountant's fees and attorney's fees
related to this Lease and/or the preparation of financial statements and tax
returns related to ownership of the four (4) Facilities subject to this Lease
and any other out-of-pocket expenses for professional services actually incurred
by Lessor with regard to this Lease and any of the four (4) Facilities subject
to this Lease. Lessee shall be deemed to have discharged its obligations to pay
Rent as set forth in this Lease to the extent of any payments made pursuant to
these provisions.
4.7 ADJUSTMENT OF BASE RENT. In the event that this Lease is
terminated as to one or more of the Facilities due to a casualty loss as
provided under Section 12.2.1 or as a result of condemnation as provided under
Section 13.1.1 or in the event of a sale or other disposition of a Facility by
an assignment or subletting under this Lease, then the Base Rent otherwise due
and payable under this Lease shall be reduced by the same proportion as the debt
under the Facility Mortgage applicable to the affected Facility bears to the
entire indebtedness under all Facility Mortgages. Such reduction shall be
effective as of the date of the next installment of Base Rent which shall be due
and payable after such termination or such disposition.
ARTICLE 5.
5.1 PROPERTY TAXES. Subject to Article 10 relating to permitted
contests, Lessee will pay, or cause to be paid, all real and personal property
taxes and assessments levied or assessed against the Leased Properties and
applicable to the periods of time within the Term of this Lease (collectively
"Taxes") 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 or required, and will promptly, upon request, furnish to Lessor copies
of receipts or other satisfactory proof evidencing such payments. If any such
Taxes may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Taxes),
Lessee may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Taxes) in installments and in such event, shall pay such
installments during the Term hereof as the same respectively become due and
before any fine, penalty, premium, further interest or cost may be added
thereto.
Lessee may, at Lessee's sole cost and expense, protest, appeal or
institute such other proceedings as Lessee may deem appropriate to effect a
reduction of Taxes and Lessor, at Lessee's expense as aforesaid, shall cooperate
with Lessee in such protest, appeal or other action. Lessee shall reimburse
Lessor for Lessor's direct costs of cooperating with Lessor in such protest,
appeal or other action. If Lessee elects not to contest Taxes, Lessor shall have
the right to do so in its own name and at its sole cost and expense. If any
refund shall be due from any
12
taxing authority in respect of any Taxes paid by Lessee, the same shall be paid
over to or retained by Lessee. In case any person or entity to whom any sum is
directly payable by the Lessee under any of the provisions of this Lease shall
refuse to accept payment of such sum from the Lessee, the Lessee shall thereupon
give written notice of such fact to the Lessor and shall pay such sum directly
to Lessor, and Lessor shall thereupon pay such sum to such person or entity. To
the extent Lessee so pays any taxes to Lessor, Lessee shall be relieved of its
obligation under this Lease to pay such Taxes to the applicable taxing authority
to which such Taxes would otherwise be due and to the extent Lessee pays any
Taxes due to the applicable taxing authority, Lessee shall be relieved of its
obligation under this lease to pay such item as an Additional Charge under this
Lease. Lessor and Lessee shall, upon request of the other, provide such data and
information as is maintained by the party to whom the request is made with
respect to the Leased Properties as may be necessary to prepare any required
returns and reports with any taxing authorities.
5.2 NOTICE OF TAXES. Lessor shall give prompt Notice to Lessee of
all Taxes payable by Lessee hereunder of which Lessor at any time has knowledge,
but Lessor's failure to give any such Notice shall in no way diminish Lessee's
obligations hereunder to pay such Taxes, but such failure shall obviate any
default hereunder for a reasonable time after Lessee receives Notice of any
Taxes which it is obligated to pay.
5.3 PRORATION OF TAXES. Taxes imposed in respect of the tax-fiscal
period during which the Term of this Lease commences and terminates shall be
adjusted and prorated between Lessor and Lessee, whether or not such Taxes is
imposed before or after such commencement or termination, so that the Lessor
shall be responsible for Taxes assessed and imposed on the Leased Properties
prior to the Commencement Date and after the termination of the lease Term.
Lessee's obligation to pay its prorated share thereof after termination shall
survive such termination.
5.4 LICENSE FEES AND BUSINESS TAXES. Lessee shall pay directly to
the applicable taxing or governmental authority having jurisdiction all license
fees (including all application fees), business occupation taxes and sales
taxes, if any, charged or assessed by the State of Florida and any political
subdivision thereof for the licensing and operation of skilled nursing
facilities applicable to periods of time within the Term of this Lease which are
levied, rated, charged or assessed against or in respect of the business carried
on in the Leased Properties by Lessee or in respect of the use, operation or
occupancy thereof or any part thereof by the Lessee.
5.5 UTILITY CHARGES. Lessee will pay or cause to be paid when due,
to the appropriate supplier, all charges and deposits for electricity, power,
gas, oil, water and all other utilities used in, on or by the Leased Properties
during the Term.
5.6 INSURANCE PREMIUMS. Lessee will contract for, in its own name,
and will pay or cause to be paid all premiums for the insurance coverage
required to be maintained by Lessee pursuant to Article 11 during the Term.
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ARTICLE 6.
6.1 OWNERSHIP OF THE LEASED PROPERTIES. Lessee acknowledges that
each of the Leased Properties is the Property of Lessor and that Lessee has only
the right to the exclusive possession and use of the Leased Properties upon the
terms and conditions of this Lease. Lessee will not, at any time during the
Term: (i) file any income tax return or other associated documents; (ii) file
any other document with or submit any document to any governmental body or
authority; (iii) enter into any written contractual arrangement; or (iv) release
any financial statements of Lessee, in each case, that takes a position other
than that Lessor is the owner of the Leased Properties for federal, state and
local income tax purposes and that the Lease is a "true lease".
6.2 LESSEE'S PERSONAL PROPERTY. All machinery, equipment,
furniture, furnishings, inventory, supplies, movable walls or partitions,
computers (and all associated software), trade fixtures or other personal
property at the Leased Properties now or hereafter owned by Lessee (or leased by
Lessee from parties other than Lessor) and located at or used in connection with
the business operated by Lessee on the Leased Properties, together with all
replacements, alterations, additions and accessions thereto, shall belong to
Lessee and be a part of "Lessee's Personal Property." Lessee may, at its
expense, from time to time during the Term of this Lease install, affix or
assemble or place on the Land or in the Leased Improvements any items of the
Lessee's Personal Property and may remove, replace or substitute for the same,
from time to time, in the ordinary course of Lessee's business. Such property
shall at all times remain the personal property of Lessee. Except for those
items of Personal Property listed on EXHIBIT D attached hereto and subject,
however, to the prior rights, if any, held by AmSouth under the AmSouth Loan
Documents or any extensions, renewals, amendments, modifications or replacements
thereof, upon the expiration of the Term or the earlier termination of this
Lease, without the payment of any additional consideration by Lessor, Lessee
shall be deemed to have sold, assigned, transferred and conveyed to Lessor all
of Lessee's right, title and interest in and to any of Lessee's Personal
Property that, in Lessor's reasonable judgment, is necessary or integral to the
Primary Intended Use (or if some other use thereof has been approved by Lessor
as required herein, such other use as is then being made by Lessee) and Lessor
shall have the option to purchase any of Lessee's Personal Property that is not
then necessary or integral to such use ("Lessee's Incidental Personal Property")
for an amount equal to the then book value thereof. Such option shall be
exercised by written notice to Lessee not more than 120 days nor less than
ninety (90) days before expiration of the Term. In connection with any Personal
Property sold, assigned, transferred or conveyed to Lessor pursuant to the
preceding sentence, Lessor shall assume any lease or equipment financing
obligations of Lessee. Without Lessor's prior written consent, Lessee shall not
remove Lessee's Personal Property that is in use at the expiration or earlier
termination of the Term from the Leased Properties until such option to purchase
has expired or been sooner waived in writing by Lessor. Any of Lessee's
Incidental Personal Property that is not purchased by Lessor pursuant hereto,
together with the Personal Property listed on EXHIBIT D attached hereto, may be
removed by Lessee.
6.3 GRANT OF SECURITY INTEREST IN LESSEE'S PERSONAL PROPERTY AND
ACCOUNTS. Subject to the prior written consent of AmSouth (and subject further
to any terms conditions or limitations required for or arising from such consent
and approvals), the Lessee will grant to Lessor a security interest in the
Collateral as defined in the Security Agreement, which includes,
14
without limitation, Lessee's Personal Property as defined herein and Lessee's
Accounts as defined in the Security Agreement.
ARTICLE 7.
7.1 LICENSES AND PERMITS. Lessee shall make timely application to
such governmental regulatory bodies as may be required for the issuance of
licenses to operate the Facilities as skilled nursing homes and provide to
Lessor written confirmation of filing by the Lessee of its application for
licensure and status thereof. Lessee shall diligently pursue the issuance of
such licenses. Lessor shall cooperate with and use commercially reasonable
efforts, where necessary or required, to assist Lessee in obtaining licenses.
Lessor shall commit no act that would hinder Lessee's ability to obtain
licensure to operate the Facilities as a nursing homes. At no time during the
Term of this Lease shall Lessee surrender its license to operate the Leased
Properties as nursing homes, nor transfer or make any attempt to transfer its
licenses to operate the Leased Properties as skilled nursing homes either in
whole or in part, to any other location or facility. Lessor covenants that
during the Term of this Lease it will cooperate with Lessee and use commercially
reasonable efforts, where necessary or required from Lessor as the owner of the
Leased Properties, to enable Lessee to obtain and maintain any licenses, permits
and approvals needed by Lessee to use and operate the Leased Properties for
their Primary Intended Use under applicable local, state and federal law.
7.2 USE OF THE LEASED PROPERTIES.
7.2.1 PRIMARY INTENDED USE. Lessee shall use or cause the
Leased Properties to be used as skilled nursing home facilities
licensed by the State of Florida for the provision of skilled nursing
services to the elderly and/or other health-care oriented services for
the elderly, and, in connection therewith, may use the Leased
Properties for the provision of food services, recreational services,
rehabilitative and/or health care services and for such other uses as
may be necessary or incidental to such use (such use is herein referred
to as the "Primary Intended Use"). Lessee shall not use the Leased
Properties or any portion thereof for any other use without the prior
written consent of Lessor, which consent will not be unreasonably
withheld. No use shall be made or permitted to be made of the Leased
Properties by Lessee, and no acts shall be done, which will cause the
cancellation of any insurance policy covering any Leased Properties, or
any part thereof, nor shall Lessee sell or otherwise provide to
residents or patients therein, or permit to be kept, used or sold in or
about the Leased Properties 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. Lessee shall not use the Leased Properties
for any unlawful purposes.
7.2.2 NO WASTE. Lessee shall not commit or suffer to be
committed any waste on the Leased Properties, or in the Facilities, nor
shall Lessee cause or permit any nuisance thereon.
7.2.3 NO TITLE. Lessee shall neither suffer nor permit the
Leased Properties or any portion thereof, to be used in such a manner
as (i) might reasonably tend to impair
15
Lessor's title thereto or to any portion thereof, or (ii) may
reasonably make possible a claim or claims for adverse possession.
7.2.4 COMPLIANCE. Except as otherwise provided and
described in EXHIBIT E, Lessee shall, at all times during the Term
hereof, comply with the rules and regulations of the State of Florida,
with regard to the operation of the nursing home facilities on the
Leased Properties. In conjunction with Lessee's compliance, it agrees
to promptly upon its receipt thereof provide Lessor with copies of all
annual surveys, follow-up surveys, special surveys and all
correspondence between Lessee and the State of Florida concerning
surveys of the Leased Properties. Lessee shall notify Lessor within
three (3) Business Days of its receipt in writing from any federal or
state governmental or regulatory agency having jurisdiction of any
termination or enforcement notice of any kind pertaining to the
operation of the Facilities as a nursing home facilities.
7.2.5 EASEMENTS. Lessor will, from time to time, at the
request of Lessee and at Lessee's cost and expense, but subject to the
approval of Lessor and any Facility Mortgagee (a) grant easements and
other rights in the nature of easements, (b) release existing easements
or other rights in the nature of easements which are for the benefit of
the Leased Properties, (c) dedicate or transfer unimproved portions of
the Leased Properties for road, highway or other public purposes, (d)
execute petitions to have the Leased Properties annexed to any
municipal corporation or utility district, (e) execute amendments to
any covenants and restrictions affecting the Leased Properties, and (f)
execute and deliver to any person such instruments as may be necessary
or appropriate to conform or effect such grants, releases, dedications
and transfers (to the extent of its interest in the Leased Properties),
provided that such grant, release, dedication, transfer, petition or
amendment is required or beneficial for and not detrimental to the
properties conduct of the business of Lessee on the Leased Properties
and does not reduce the value thereof.
7.3 ENVIRONMENTAL MATTERS. Lessee will not store (except in
compliance with all statutes, laws, ordinances, rules and regulations) and will
not dispose of any medical waste, hazardous waste, contaminants, oil,
radioactive or other material ("Hazardous Materials") the removal of which is
required or the maintenance of which is prohibited or penalized by any
applicable federal, state or municipal statutes, laws, ordinances, rules or
regulations ("Hazardous Materials Laws") on the Leased Properties or otherwise,
(except in compliance with all statutes, laws, ordinances, rules and
regulations) and will not directly or indirectly transport or arrange for the
transportation of any Hazardous Materials (except in compliance with all
statutes, laws, ordinances, rules and regulations). Lessee covenants and agrees
to maintain all of the Leased Properties at all times free of any Hazardous
Materials, (except in compliance with all statutes, laws, ordinances, rules and
regulations). As to the Leased Properties, Lessee agrees promptly: (i) to
observe and comply with any and all statutes, laws, ordinances, rules and
regulations, licensing requirements or conditions relating to the use,
maintenance and disposal of Hazardous Materials 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, remediation, containment or
other disposition thereof, and (ii) to pay or otherwise dispose of any fine or
charge related thereto which, if unpaid, would constitute a lien on the Leased
Properties (other than any fine or charge that Lessee establishes was caused by
Lessor, its predecessors in interest or those for
16
whom the Lessor is in law responsible), unless contested in good faith by
appropriate proceedings and in accordance with the provisions of Article 10, and
the right to use and the value of the Leased Properties is not materially and
adversely affected thereby.
Lessee will protect, indemnify and save harmless Lessor, its
principals, officers, directors, agents and employees from and against all
liabilities, obligations, claims, damages, penalties, costs and expenses
(including, without limitation, reasonable attorneys fees and expenses) which
may be imposed upon or incurred by or asserted against any of them by reason of
any failure on the part of Lessee to perform or comply with any of the terms of
this Section 7.3. Anything herein to the contrary notwithstanding, Lessor
acknowledges and agrees that the terms of this Section 7.3, and the
representations, warranties, agreements and indemnity set forth herein, shall
not be deemed to apply to (i) any Hazardous Materials present or suspected to be
present in, on or under the Leased Properties, or any portion thereof, including
the soil, groundwater or soil vapor, as a result of any use, maintenance,
storage, discharge, dumping, release or spillage (accidental or otherwise) of
any Hazardous Materials on, upon or onto the Leased Properties, or any portion
thereof, prior to the Commencement Date, or (ii) any violation of any Hazardous
Materials Laws by Lessor or Lessor's predecessors in interest or those for whom
the Lessor is in law responsible, their respective officers, employees,
contractors and agents, prior to the Commencement Date or (iii) any violation of
any Hazardous Materials Laws occurring during the Term of this Lease which
arises out of the presence, release or discharge of Hazardous Materials in, on,
under or from the Leased Properties prior to the Commencement Date (each a
"Prior Environmental Condition"). Lessor agrees to promptly observe and comply
with all orders or directives from any official, court or agency of competent
jurisdiction requiring the removal treatment, remediation, containment or other
disposition of any Prior Environmental Condition and to pay or otherwise dispose
of any fine or charge related to any Prior Environmental Condition which, if
unpaid, would constitute a lien on the Leased Properties, unless contested in
good faith by appropriate proceedings and the right to use and the value of the
Leased Properties is not materially and adversely affected thereby.
ARTICLE 8.
8.1 MAINTENANCE AND REPAIR. Exclusive of the matters described on
EXHIBIT E ("Excluded Physical Plant Obligations") Lessee, at its expense, will
keep the Leased Properties and all fixtures thereon and all landscaping, private
roadways, sidewalks and curbs appurtenant thereto and which are under Lessee's
control in good order and repair, whether or not the need for such repairs
occurs as a result of Lessee's use, the elements or the age of the Leased
Properties, or any portion thereof, or any cause whatever, and, except as
otherwise provided in Article 12 and Article 13, Lessee will make all necessary
and appropriate repairs thereto of every kind and nature, whether interior or
exterior, structural or non-structural, ordinary or extraordinary, foreseen or
unforeseen. Lessee's repair and maintenance obligations provided for hereunder
shall include, without limitation, the roof, foundation, plumbing and utility
service lines within the Facilities, air conditioning, and heating equipment,
ceiling, floors, floor coverings, plate glass and walls, whether structural or
non-structural and whether exterior or interior, of the Facilities, excluding,
however matters described on EXHIBIT E. Anything herein to the contrary
notwithstanding, Lessor acknowledges and agrees that (i) the terms of this
Section 8.1 shall not be deemed to be breached by Lessee's maintaining the
Leased Properties in good order and repair in at least the same condition in all
material respects as on the
17
Commencement Date, ordinary wear and tear excepted and (ii) Lessee's repair and
maintenance obligations hereunder shall not include matters described on EXHIBIT
E, or any maintenance or repair caused or necessitated by the negligence or
willful misconduct of or breach of this Lease by Lessor or those for whom it may
in law be responsible, or repairs necessitated by the failure of Lessor or
Lessor's predecessors in interest to keep the Leased Properties in good working
order and repair, reasonable wear and tear excepted, prior to the Commencement
Date, all of which shall be the obligation of Lessor to correct. Except for such
deficiencies, non-conformance, non-compliance or improvements or repairs which
are the result of (i) any such items described on EXHIBIT E, or (ii) the
negligence or willful misconduct of, or breach of this Lease by Lessor or those
for whom it may in law be responsible, or (iii) failure of Lessor or Lessor's
predecessors in interest to keep the Leased Properties in good working order and
repair, Lessee covenants and agrees to keep, maintain and repair the Leased
Properties in such a manner that the Facilities will continue to be serviceable
for their Primary Intended Use.
8.2 SURRENDER. Upon termination of this Lease other than as a
result of the purchase of one or more of the Leased Properties by Lessee in
accordance with the purchase rights, if any, contained in this Lease, Lessee
shall peaceably vacate and surrender the Leased Properties to Lessor in the
state of repair required of it pursuant to this Lease, ordinary wear and tear,
loss or damage due to casualty or taking by condemnation, excepted. To the
extent not then prohibited by applicable law, upon such vacation and surrender
of the Leased Properties, Lessee shall, to the extent allowed by law, execute
all documents reasonably necessary or required to transfer the nursing home
license for the Leased Properties to Lessor, or its designee, provided that the
reasonable out of pocket costs and expenses of any such transfer or the
processing of any application shall be paid by Lessor or its designee.
8.3 REPLACEMENT PROPERTY. Lessee may, from time to time, replace
with other operational equipment or parts or property (the "Replacement
Property") any of the Fixtures and Lessor's Personal Property (the "Replaced
Property") which shall have (a) become worn out, obsolete or unusable for the
purposes for which it is intended, (b) been taken by Condemnation, in which
event Lessee shall be entitled to that portion of any award made therefore, or
(c) been lost, stolen damaged or destroyed, in which event Lessee shall be
entitled to that portion of any insurance proceeds paid with respect thereto;
provided, however, that the Replacement Property shall (1) be in good operating
condition, (2) have a then value and useful life at least equal to the value and
estimated useful life of the Replaced Property as of the date thereof for
Replaced Property specified in subparagraph (a), above, or have a then value and
useful life at least equal to the value and estimated useful life of the
Replaced Property immediately prior to the time that the Replaced Property
specified in subparagraphs (b) and (c), above, had become so taken or so lost,
stolen, damaged or destroyed, and (3) be suitable for a use which is the same or
similar to that of the Replaced Property. All Replacement Property will be and
remain Lessor's Personal Property and shall be a part of the Leased Properties
under this Lease. All Replaced Property may be removed and shall become the
property of Lessee. The proceeds from the sale of any Replaced Property shall be
paid to Lessee and Lessee may trade in any worn out or obsolete Replaced
Property on the purchase of any Replacement Property. Lessor shall execute, upon
written request from Lessee, any and all bills of sale, assignments or other
documents necessary or required to dispose of any Replaced Property in
accordance with this Section 8.3. Anything herein to the contrary
notwithstanding, Lessee shall have no obligation to replace, and Lessee may from
time to time during the Term of this Lease discard and not replace, any
inadequate,
18
obsolete, worn out, unsuitable, undesirable or unnecessary Fixtures or Lessor's
Personal Property forming a non-essential part of the Leased Properties if in
the reasonable business judgment of Lessee it is not cost effective to do so.
8.4 SIGNAGE. Lessee may, at its own expense, erect and maintain
identification signs at the Leased Properties, provided such signs comply with
all applicable laws, ordinances and regulations and further provided that Lessee
shall restore any damage to the Leased Properties caused by the removal of such
signs.
ARTICLE 9.
9.1 IMPROVEMENTS, ALTERATIONS AND ADDITIONS BY LESSEE. Lessee
shall have the right to and may make, at its sole cost and expense, such
alterations, additions and improvements to the Leased Properties from time as it
may, in its reasonable business judgment, determine are necessary or reasonably
desirable for the continuing and proper use, operation and maintenance of the
Leased Properties for their Primary Intended Use, provided however, alterations
which effect a structural change in any Facility shall not be made, unless and
until Lessee shall have caused plans and specifications therefor to have been
prepared, at Lessee's expense, by a licensed architect, and shall have obtained
the prior written approval of Lessor, which approval Lessor shall not
unreasonably withhold. Lessor shall, within ten (10) Business Days of request
therefore, advise Lessee of its approval or disapproval of the proposed
alteration, improvement or addition. If not approved, then Lessor shall specify
such alternative conditions, if any, upon which Lessor will approve of the
proposed alteration, improvement or addition. Lessee shall cause the work on any
alterations, improvements or additions permitted to be made hereunder (the
"Permitted Alteration") to be performed, at its expense, promptly, in a good and
workmanlike manner by a licensed general contractor, in accordance with good
construction practices, and in compliance with all existing codes and
regulations applicable to the Leased Properties, which improvements shall, in
any event, constitute a complete architectural unit in keeping with the
character of the Leased Properties and the area in which the Leased Properties
are located and which will not change the Primary Intended Use of the Leased
Properties. Each and every such improvement, alteration or addition shall
immediately become a part of the affected Leased Properties and shall belong to
Lessor subject, to the terms and conditions of this Lease. All materials which
are scrapped or removed in connection with the making of any Permitted
Alteration, or any other alteration, addition or improvement to any Leased
Property shall be removed from the affected Leased Property at Lessee's expense
and disposed of by Lessee in accordance with all applicable laws.
9.2 LIENS. The Lessee shall ensure that no construction liens or
other liens or encumbrances shall be registered against or shall otherwise
affect any of the Leased Properties or any part thereof or the Lessor's interest
therein in respect of material supplied or work done or to be done by the Lessee
or on behalf of the Lessee. Lessee agrees to obtain and deliver to Lessor
written waivers of mechanic's
19
liens against the Leased Properties for all work, labor and services performed
and materials furnished in connection with any alternations, additions or
improvements made to any of the Leased Properties by the Lessee or on behalf of
the Lessee, in form reasonably satisfactory to Lessor's attorney, the same to be
executed by all contractors, subcontractors, materialmen, laborers and workmen
involved in such work having a right or claim of lien therefore under applicable
law. Notwithstanding the foregoing if any mechanic's lien is filed against any
of the Leased Properties, Lessee shall be responsible for the reasonably timely
payment and/or discharge of such lien. If the Lessee fails to discharge or cause
any such lien to be discharged (by filing any bond required by law, payment or
otherwise) within thirty (30) Business Days after receipt of Notice from the
Lessor of the filing of the lien, then, in addition to any other rights or
remedies of the Lessor, the Lessor may (shall not be obligated to) discharge the
lien by paying the amount claimed into court and the amount so paid and all
costs and expenses (including attorneys costs and expenses) plus interest at the
Overdue Rate, shall be immediately due and payable by the Lessee to the Lessor
forthwith upon demand.
ARTICLE 10.
10.1 PERMITTED CONTESTS. Lessee, after ten (10) days' prior written
notice to Lessor, on its own or on Lessor's behalf (or in Lessor's name), but at
Lessee's expense, may contest, protest or appeal by appropriate legal or
administrative proceedings conducted in good faith and with due diligence, the
amount, determination, validity, assessment, imposition or application, in whole
or in part, of any Florida law, Imposition, legal requirements, lien,
attachment, levy, encumbrance, charge or claim (collectively "Charge") which is
required to be paid, discharged, observed or complied with by Lessee under this
Lease; provided that (a) in the case of an unpaid Charge, the commencement and
continuation of such proceedings or the posting of a bond as may be permitted by
applicable law shall suspend the collection thereof from Lessor and from the
Leased Properties; (b) none of the Leased Properties nor any Rent therefrom nor
any part thereof or interest therein would be in any immediate danger of being
sold, forfeited, attached or lost; (c) Lessor would not be in any immediate
danger of civil or criminal liability for failure to comply therewith pending
the outcome of such proceedings; and (d) if such contest be finally resolved
against Lessor or Lessee, Lessee shall promptly pay the amount required to be
paid, together with all interest and penalties accrued thereon, or otherwise
comply with the applicable Charge. Lessor, at Lessee's expense, shall execute
and deliver to Lessee such authorizations and other documents as may reasonably
be required in any such action and, if reasonably requested by Lessee or if
Lessor so desires and then at its own expense, Lessor shall join as a party
therein. Lessor will cooperate fully and in good faith with Lessee in such
contest and shall do all things reasonably requested by Lessee in connection
with any such action. Lessee shall indemnify and save Lessor harmless against
any liability, cost or expense of any kind that may be imposed upon Lessor in
connection with any such action.
ARTICLE 11.
11.1 GENERAL INSURANCE REQUIREMENTS. During the Term of this Lease,
Lessee, at its sole cost and expense, shall at all times keep the Leased
Properties insured with the kinds and amounts of insurance described below. This
insurance shall be written by reputable companies authorized to do insurance
business in the State of Florida, with a rating as measured by Best's Key Rating
Insurance Guide of not less than "A-". The policies must name Lessor as an
additional insured. Losses shall be payable to Lessor and Lessee as provided in
Article XII. In addition, the policies shall name as an additional insured the
holder of any mortgage, charge, deed of trust or other security agreement or
encumbrance on the Leased Properties or the Lessor's interest therein as to
which Lessee has been given written notice identifying such holder and the
nature of its interest (all of the aforesaid being referred to as a "Facility
Mortgage" and the holder thereof being referred to as a "Facility Mortgagee") by
way of a standard form of
20
mortgagee's loss payable clause. If available, each of the insurance policies
required of Lessee hereunder shall contain an agreement, by endorsement on the
policy or by independent instrument furnished to Lessor, that the insurer will
endeavor to give to Lessor (and to any Facility Mortgagee, if required by the
same) at least thirty (30) days written notice before the policy or policies in
question shall be materially altered, allowed to expire or canceled. Evidence of
insurance shall be deposited with Lessor and, if requested of Lessee in writing,
with any Facility Mortgagee. The policies on the Leased Properties, including
the Leased Improvements, shall insure against the following risks:
11.1.1 Loss of or damage to the Leased Improvements and
Lessor's Personal Properties by fire, vandalism and malicious mischief,
extended coverage perils known as "Special Risk" and all physical loss
perils normally included in such Special Risk insurance, including but
not limited to sprinkler leakage, in an amount not less than one
hundred percent (100%) of the then full replacement cost thereof (as
defined in Section 11.2, below);
11.1.2 Loss of rental under a blanket earnings and expense
coverage endorsement covering risk of loss during reconstruction
necessitated by the occurrence of any of the hazards described in
Section 11.1.1. (but in no event for a period more than twelve (12)
months) in an amount sufficient to prevent Lessor and Lessee from
becoming a co-insurer;
11.1.3 Claims for personal injury, including death, and
property damage occurring upon, in or about any of the Leased
Properties under one or more policies of comprehensive general
liability insurance, written on a broad form comprehensive basis
including limits, in accordance with the minimum requirements of the
State of Florida for skilled nursing homes;
11.1.4 Claims arising out of professional malpractice in
accordance with the minimum requirements of the State of Florida for
skilled nursing homes;
11.1.5 Lessee shall at all times during the Term of this
Lease maintain adequate worker's compensation insurance coverage for
all persons employed by Lessee on the Leased Properties, if required by
law. Such worker's compensation insurance shall be in accordance with
the requirements of applicable local, state, and federal law. Lessee
may self insure for worker's compensation in strict compliance with the
laws of the State of Florida.
11.2 REPLACEMENT COST. The term "Full Replacement Cost" as used
herein, shall mean the actual replacement cost of the Leased Improvements
requiring replacement, from time to time, of like kind and quality, less
exclusions normally provided in the standard form of All Risk Broad Form Policy.
In all events full replacement cost shall be an amount sufficient that neither
Lessor nor Lessee is deemed a co-insurer of the Leased Properties.
11.3 WAIVER OF SUBROGATION. Each party hereto waives any and every
claim which arises or may arise in its favor against the other party hereto
during the Term of this Lease for any and all loss of or damage to any of its
property located within or upon or constituting a part
21
of the Leased Properties, which loss or damage is required by terms of this
Lease to be covered by valid and collectible fire and extended coverage
insurance policies to the extent that such loss or damage is recoverable under
said insurance policies. Said mutual waivers shall be in addition to, and not in
limitation or derogation of, any other waiver or release contained in this Lease
with respect to any loss of, or damage to, property of the parties hereto.
Inasmuch as the above mutual waivers will preclude the assignment of the
aforesaid claim by way of subrogation, or otherwise, to an insurance company, or
to any other person, each party hereby agrees immediately to give each insurance
company which has issued to it or them policies of fire and extended coverage
insurance, written notice of the terms of said mutual waivers. All fire and
casualty and property damage insurance policies required to be carried by Lessee
covering the Leased Properties shall expressly waive any right of subrogation on
the part of the insurer against the other party.
11.4 LESSEE'S PERSONAL PROPERTY. Lessee shall be solely responsible
for keeping Lessee's Personal Property located upon the Leased Properties
insured against loss or damage by fire or other casualty.
11.5 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article 11, Lessee's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Lessee; provided,
however, that the coverage afforded Lessor will not be reduced or diminished or
otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 11 are otherwise satisfied and provided further that Lessee maintains
specific allocations acceptable to Lessor.
ARTICLE 12.
12.1 INSURANCE PROCEEDS PAYABLE ON DAMAGE OR DESTRUCTION. Except as
provided in Section 12.3 below, all proceeds payable by reason of any loss or
damage to one or more of the Leased Properties, or any portion thereof, and
insured under any policy of insurance required by Article 11 of this Lease shall
be paid to Lessor and held by Lessor in accordance with the provisions of this
Article 12. Lessor shall, unless this Lease is terminated by the Lessee pursuant
to this Article 12 (in which event the Lessor shall be entitled to retain such
proceeds), apply the proceeds solely to the construction and completion of any
restoration or repair, as the case may be, of any damage to or destruction of
the affected Leased Properties, or any portion thereof, as provided herein.
12.2 RESTORATION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED.
12.2.1 In the event one or more of the Leased Properties, or
any part thereof, is totally or partially destroyed or damaged by fire
or other casualty such that the affected Facility is rendered
untenantable or otherwise cannot be operated on a commercially
practicable basis for its Primary Intended Use ("Unsuitable for its
Primary Intended Use"), and it is reasonably anticipated that the
necessary repair or restoration of such damage or destruction cannot be
sufficiently completed within one hundred fifty (150) days after the
date of the destruction or damage so as to make the affected Leased
22
Property or Leased Properties fully tenantable and allow Lessee to use
and occupy the same for its Primary Intended Use with at least the same
number of licensed nursing home beds as existed immediately prior to
such damage or destruction, then Lessee shall have the option to
terminate this Lease as to the affected Facility or Facilities upon
such date as is set forth in a Notice given to Lessor within sixty (60)
days after the date of such destruction or damage, which termination
shall be deemed effective, and Rent shall ▇▇▇▇▇ as of the date of such
casualty. Lessee shall promptly pay to Lessor any Rent or other charges
due Lessor under this Lease, and Lessor shall promptly refund to Lessee
any Rent or other charges theretofore paid by Lessee, each prorated as
of such date. As soon as possible, but not later than forty-five (45)
days after the destruction or damage, Lessor shall furnish to Lessee
its good faith estimate of the cost and time required to so restore or
repair the affected Leased Property or Leased Properties and the
failure or inability of Lessor to do so may be deemed by Lessee to be
reasonable anticipation that the necessary repair or restoration cannot
be completed in the time and manner required hereunder. In addition to
Lessee's termination rights set forth above, Lessor shall have the
right to terminate this Lease upon thirty (30) days written notice to
Lessee in the event insurance proceeds payable in respect of a casualty
are retained by Lessor's Facility Mortgagee for payment of the
indebtedness secured by the Facility Mortgage.
12.2.2 In all other events in which one or more of the
Leased Properties, or any part thereof, is destroyed or damaged by fire
or other casualty, this Lease shall continue in full force and effect,
and Lessor, at Lessor's cost and expense, shall within thirty (30) days
of such casualty commence and proceed with reasonable diligence to
restore the affected Leased Properties so damaged to substantially the
same or better condition with at least the same number of licensed
nursing home beds as existed immediately prior to such casualty and
complete such repair or restoration within one hundred fifty (150) days
of the casualty. In performing such restoration or repair, and as a
condition to Lessor's obligation to restore and repair the affected
Leased Property or Leased Properties, Lessor (or its Facility
Mortgagee) shall receive insurance proceeds payable as the result of
such fire or other casualty, in an amount sufficient to effect such
restoration and repair, and Lessee shall promptly deliver to Lessor (or
its Facility Mortgagee) any insurance proceeds it receives pertaining
to the affected Leased Properties, except as provided in Section 12.3.
12.2.3 If the Lease is not terminated pursuant to Section
12.2.1, then the Rent payable under this Lease thereafter shall be
reduced during the period required for repair or restoration in direct
proportion that the number of licensed nursing home beds remaining
useable by the Lessee bears to the number of licensed nursing home beds
existing at the time of such fire or other casualty until such time as
the required repairs to the affected Leased Properties have been
completed.
12.3 LESSEE'S PERSONAL PROPERTY; BUSINESS INTERRUPTION. All
insurance proceeds payable by reason of any loss of or damage to any of Lessee's
Personal Property shall be paid to Lessee, and Lessee shall hold such proceeds
in trust to be used to restore and replace Lessee's Personal Property in the
event that Lessor repairs or restores the affected Leased Property or Leased
Properties as herein provided. All insurance proceeds payable by reason of the
interruption of Lessee's business during repair or restoration of the Leased
Properties shall be
23
paid to and belong to Lessee, provided that Lessee shall use such proceeds to
pay Rent to the extent due hereunder.
12.4 EXCESS PROCEEDS. If there remains any surplus of insurance
proceeds after completion of the repair or restoration of the affected Leased
Properties, such surplus shall belong and be paid to Lessee.
12.5 STANDARD OF WORK. All work commenced by Lessor under this
Article 12 to repair or restore the affected Facility or Facilities or other
Leased Improvements shall be diligently prosecuted to completion in a good and
workmanlike manner, using materials of comparable quality as used in the
original construction of such Facilities or other Leased Improvements requiring
repair or restoration.
12.6 EFFECT OF TERMINATION. Anything herein to the contrary
notwithstanding, in the event of any termination of this Lease as to one or more
of the Facilities as a result of fire or other casualty as provided in this
Article 12, any and all insurance proceeds payable as a result of such fire or
other casualty in respect of the Leased Improvements and Lessor's Personal
Property shall belong to and be the property of Lessor, and the Rent and other
charges payable under this Lease shall be adjusted as of the date of such damage
or destruction. Lessee shall promptly pay to Lessor any Rent or other charges
due Lessor under this Lease and Lessor shall promptly refund to Lessee any Rent
or other charges theretofore paid by Lessee, each prorated as of such date.
12.7 FAILURE TO REPAIR. Anything herein to the contrary
notwithstanding, in the event that any damage or destruction to one or more of
the Leased Properties, total or partial, the repair or restoration of which is
commenced by Lessor hereunder, cannot be or is not repaired or restored so as to
make the affected Leased Properties fully tenantable and allow the Lessee to use
and occupy the same for its Primary Intended Use with the same number of
licensed nursing home beds as existed immediately prior to such damage or
destruction within one hundred fifty (150) days of the occurrence of the damage
or destruction, then the Lessee may elect to terminate this Lease upon thirty
(30) days Notice to Lessor as to the affected Facility or Facilities.
12.8 UNAVOIDABLE DELAYS. Provided that Lessor is proceeding
diligently and in good faith, all periods of time for restoration and repair of
the Leased Properties shall be extended for any delays caused by acts or
omissions to act of Lessee and for any Unavoidable Delays, provided that any
such extension shall not extend the time for completion of restoration and
repair of the Leased Properties beyond twelve (12) months from the date of the
damage or destruction requiring such restoration and repair.
ARTICLE 13.
13.1 CONDEMNATION.
13.1.1 If during the Term of this Lease, the whole of any of
the Leased Properties or a substantial portion thereof rendering the
remaining portion Unsuitable for Its Primary Intended Use, is taken or
condemned by any competent public or quasi-public authority, this Lease
shall terminate upon such taking by the condemning authority as to the
24
affected Facility or Facilities. Lessee's obligations for the payment
of Rent under this Lease shall be prorated as to the date of such
termination.
13.1.2 In the event such taking or condemnation results in a
taking of less than a substantial part of the affected Leased Property
or Leased Properties so that such Leased Property can continue to be
licensed as a skilled nursing facility and used for its Primary
Intended Use, this Lease shall continue in full force and effect,
excepting that Rent shall be reduced from the date of such taking in
direct proportion that the number of licensed nursing home beds
remaining useable by the Lessee after such taking bears to the number
of licensed nursing home beds existing at the time of the taking. In
such case, Lessor, shall, within thirty (30) days of such taking,
commence and proceed with reasonable diligence to repair or restore the
affected Leased Property or Leased Properties to a complete
architectural unit of the same general character and condition (as
nearly as may be practical under the circumstances) as existed
immediately prior to such taking such that such Leased Properties can
be occupied and used for its Primary Intended Use. Lessor shall
complete such repair or restoration within one hundred fifty (150) days
of such taking. In the event that during such repair or restoration the
number of licensed skilled nursing facility rooms usable by Lessee is
reduced, the Rent shall be reduced during the period of such repair or
restoration in the proportion that the reduction bears to the number of
licensed skilled nursing facility rooms existing at the time of the
taking. Lessor shall refund to Lessee any Rent paid by Lessee to which
Lessee may be entitled as a result of the abatement provided for
herein. Lessor shall contribute to the cost of restoration and repair
the amount of any and all awards of damages resulting from such taking
payable to Lessor. Anything herein to the contrary notwithstanding, if
the expense of repair and restoration exceeds the condemnation award
received by Lessor, then Lessor shall have thirty (30) days after such
partial taking within which to decide whether to make the repair and
restoration or terminate this Lease. If, within this period, Lessor
gives written notice of termination to Lessee, then this Lease shall
terminate as of the date of such taking as to such affected Facility or
Facilities and Lessee's obligations for the payment of Rent shall be
prorated as of the date of such termination. If Lessor fails to give
Lessee written notice of termination within this period, then Lessor
shall proceed to make the required restoration and repair as herein
provided.
13.2 AWARDS. All compensation awarded upon any taking or
condemnation of any one or more of the Leased Properties, or any part thereof
shall belong to Lessor, and Lessee shall have no claim thereto, except that if
and only to the extent that the award includes such items, Lessee may make its
claim against the condemning authority and shall be entitled to receive and
retain that portion of the award, if any, for moving expenses, business
dislocation damages, the cost of Lessee's Personal Property and leasehold
improvements. Nothing contained herein, however, shall be construed to preclude
Lessee from prosecuting any claim directly against the condemning authority for
any award to which Lessee may at law be entitled provided that any such claim
does not diminish the award to Lessor.
13.3 STANDARD OF WORK. All work commenced by Lessor under this
Section 13 to repair or restore the affected Leased Property or Leased
Properties shall be diligently prosecuted to completion in a good and
workmanlike manner using materials of comparable quality as used in the original
construction of the Leased Properties.
25
13.4 FAILURE TO REPAIR. Anything herein to the contrary
notwithstanding, in the event that any partial taking of one or more of the
Leased Properties, the repair or restoration of which as been commenced by
Lessor hereunder, cannot be restored within one hundred fifty (150) days of the
date of such partial taking so as to make the portion of such Leased Property
not so taken fully tenantable and allow the Lessee to occupy and use the
affected Leased Property or Leased Properties for the Primary Intended Use with
the same number of licensed skilled nursing home beds as existed immediately
prior to such taking, then Lessee may elect to terminate this Lease as to the
affected Facility or Facilities upon thirty (30) days Notice given to Lessor.
13.5 UNAVOIDABLE DELAYS. Provided that Lessor is proceeding
diligently and in good faith, all periods of time for restoration and repair of
the affected Leased Properties shall be extended for any delays caused by acts
or omissions to act of Lessee and for any Unavoidable Delays, provided that any
such extension shall not extend the time for completion of any required
restoration and repair of such Leased Properties beyond twelve (12) months from
the date of taking by the condemning authority.
ARTICLE 14.
14.1 EVENT OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an "Event
of Default" and, collectively or more than one, "Events of Default") under this
Lease:
14.1.1 If Lessee shall fail to make payment of Rent payable
by Lessee under this Lease when the same becomes due and payable and
such failure is not cured by Lessee within a period of five (5) days
after Notice thereof from Lessor; or
14.1.2 If Lessee shall:
14.1.2.1 admit in writing its inability to pay its
debts generally as they become due,
14.1.2.2 file a petition seeking reorganization or
relief under any applicable laws relating to
the bankruptcy or insolvency,
14.1.2.3 make a general assignment for the benefit of
its creditors,
14.1.2.4 consent to the appointment of a receiver of
itself or of the whole or any substantial
part of its property,
14.1.2.5 institute proceedings to be adjudicated a
bankrupt or insolvent, or
14.1.2.6 consent to the institution of bankruptcy or
insolvency proceedings against it, or
14.1.3 If Lessee shall, on a petition in bankruptcy filed
against it, 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, without the consent of
Lessee, a
26
receiver of Lessee, or of the whole or substantially all of its
property, or approving a petition filed against Lessee, seeking
reorganization or arrangement of Lessee, under the federal bankruptcy
laws or any other applicable law, and such judgment, order or decree
shall not be vacated or set aside or stayed within sixty (60) days from
the date of the entry thereof; or
14.1.4 If Lessee shall voluntarily surrender or attempt to
surrender its license to operate one or more of the Leased Properties
as a nursing home; transfer or attempt to transfer the license to
operate one or more of the Leased Properties as a nursing home to any
other location; or
14.1.5 If Lessee shall fail to observe or perform any other
term, covenant or condition of this Lease, and such failure is not
cured by Lessee within a period of thirty (30) days after Notice
thereof from Lessor, unless such failure, by its nature, cannot with
due diligence be cured within a period of thirty (30) days, in which
case such failure shall not be deemed to continue if Lessee proceeds
promptly and with due diligence to cure the failure within said thirty
(30) day period and diligently prosecutes such cure to completion;
14.1.6 Failure of Lessee to cure, ▇▇▇▇▇, stay, clear,
correct, or cause to be cured, abated, stayed, cleared or corrected,
any violation or deficiency of which Lessee has been given written
notice by the State of Florida or any other applicable governmental or
regulatory agency having jurisdiction, within the applicable time
deadlines set by the State of Florida or such agency documenting such
violation or deficiency, and which if not so cured, abated, stayed,
cleared and/or corrected causes or results in:
A. a termination or revocation of the
license(s) and/or certification(s) of the Facility or
Facilities to operate as a nursing home;
B. the removal of patients from such Facility
or Facilities by order of such agency.
No notice shall be required to immediately terminate this Lease in the Event of
Default under this subsection 14.1.6.
14.1.7 A default occurs under the Guaranty, under the
Security Agreement or under one or more of the Pledge Agreements which
default is not cured within the applicable cure period.
14.1.8 Lessee or an Affiliate of the Lessee defaults beyond
any applicable grace period in the payment of any material amount or
the performance of any material act required of the Lessee or such
Affiliate by the terms of any other lease or other agreement between
the Lessee or any Affiliate of the Lessee and Omega.
14.2 REMEDIES. If an Event of Default shall have occurred and be
continuing past any applicable grace period, Lessor shall have the right, at its
election, then or at any time thereafter, to pursue any one or more of the
following remedies, in addition to any remedies which may be
27
permitted by law or by other provisions of this Lease, without further notice or
demand, except as hereinafter provided:
14.2.1 Without any notice or demand whatsoever, Lessor may
take any one or more actions permissible at law to ensure performance
by Lessee of Lessee's covenants and obligations under this Lease. In
this regard, it is agreed that Lessor may enter upon and take
possession of such Leased Properties with or without terminating this
Lease and thereupon continue to demand from Lessee the monthly rentals
and other charges provided in this Lease. Lessor shall use its best
efforts to relet the Leased Properties. If Lessor does relet the Leased
Property such action by Lessor shall not be deemed as an acceptance of
Lessee's surrender of the Leased Properties, unless Lessor expressly
notifies Lessee of such acceptance in writing pursuant to subsection
14.2.2 of this Section 14.2, Lessee hereby acknowledging that Lessor
shall otherwise be reletting as Lessee's agent. It is further agreed in
this regard that in the event of any Event of Default described in
Section 14.1.5, Lessor shall have the right to enter upon the Leased
Properties and do whatever Lessee is obligated to do under the terms of
this Lease, and Lessee agrees to reimburse Lessor on demand for any
reasonable expenses which Lessor may incur in thus effecting compliance
with Lessee's obligations under this Lease, and further agrees that
Lessor shall not be liable for any damages resulting to the Lessee from
such action provided that Lessor is not negligent in its actions.
14.2.2 Lessor may terminate this Lease by Notice to Lessee,
in which event Lessee shall immediately surrender the Leased Properties
to Lessor, and if Lessee fails to do so, Lessor may, without prejudice
to any other remedy which Lessor may have for possession or arrearage
in Rent, enter upon and take possession of the Leased Properties, expel
or remove Lessee, and, at Lessor's option, or if required by law in
mitigation of Lessor's damages, relet or operate the Leased Properties.
In addition, Lessee agrees to pay to Lessor, on demand, the amount of
all loss and damage which Lessor may suffer by reason of any
termination effected pursuant to subsection 14.1.5. Lessee shall pay to
Lessor the difference between the Rent provided in this Lease for each
calendar month and the monthly rentals and other charges or net income
from the operation of the Leased Properties actually collected by
Lessor for such month. If it is necessary for Lessor to bring suit in
order to collect any deficiency, Lessor shall have a right to allow
such deficiencies to accumulate and to bring an action on several or
all of the accrued deficiencies at one time. Any such suit shall not
prejudice in any way the right of Lessor to bring a similar action for
any subsequent deficiency or deficiencies. Any amount collected by
Lessor from subsequent tenants for any calendar month or from the
operation of the Leased Properties in excess of the Rent and other
charges provided in this Lease shall be credited to Lessee in reduction
of Lessee's liability for any calendar month for which the amount
collected by Lessor will be less than the monthly rentals and other
charges provided in this Lease; but Lessee shall have no right to such
excess other than the above described credit.
14.2.3 The rights and remedies of Lessor hereunder are
cumulative, and pursuit of any of the above remedies shall not preclude
pursuit of any other of the above remedies, any other remedies
prescribed in other Sections of this Lease, or any other remedies
provided by law or equity. Forbearance by Lessor to enforce one or more
of the
28
remedies herein provided upon an Event of Default shall not be deemed
or construed to constitute a waiver of such Event of Default.
14.3 ADDITIONAL EXPENSES. In addition to payments required pursuant
to subsections 14.2.3 and 14.2.2 above, Lessee shall compensate Lessor for all
reasonable expenses incurred by Lessor in repossessing the Leased Properties and
all reasonable expenses incurred by Lessor in reletting (including repairs,
remodeling, replacements, advertisements and brokerage fees).
14.4 LEGAL EXPENSES. In case suit shall be brought for recovery of
possession of the Leased Properties, for the recovery of Rent or any other
amount due under the provisions of this Lease, or because of the breach of any
other covenant herein contained on the part of the Lessee to be kept or
performed and a breach shall be established, Lessor shall be entitled to recover
from Lessee its attorneys' fees and other legal expenses incurred in connection
therewith.
ARTICLE 15.
15.1 LESSOR'S RIGHT TO CURE LESSEE'S DEFAULT. If Lessee shall fail
to make any payment or to perform any act required to be made or performed under
this Lease, and to cure the same within the relevant time periods provided in
Section 14.1, Lessor, without further Notice to or demand upon Lessee, and
without waiving or releasing any obligation of Lessee, and without waiving or
releasing any obligation or default, may (but shall be under no obligation to)
at any time thereafter make such payment or perform such act for the account and
at the expense of Lessee, and may, to the extent permitted by law, enter upon
the Leased Properties for such purpose and take all such action thereon as, in
Lessor's sole opinion, reasonably exercised, may be necessary or appropriate
therefor. No such entry shall be deemed an actual or constructive eviction of
Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case, to
the extent permitted by law) so incurred, together with a late charge thereon
(to the extent permitted by law) at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessor, shall be paid by Lessee to
Lessor on demand. The obligations of Lessee and rights of Lessor contained in
this Article shall survive the expiration or earlier termination of this Lease.
ARTICLE 16.
16.1 HOLDING OVER. If Lessee shall, for any reason hold over and
remain in possession of a Leased Property or the Leased Properties after the
expiration of the Term hereof, such possession shall be as a month-to-month
tenant during which time Lessee shall pay as rental each month an amount equal
to one hundred twenty five per cent (125%) of the then prevailing monthly Rent
under this Lease pursuant to the provisions of this Lease with respect to the
particular Leased Property or Leased Properties; provided, however, that any
holding over at the request of or with the acquiescence of the Lessor or of a
Facility Mortgagee including Omega shall be at the prevailing monthly Rent under
this Lease. During such period of month-to-month tenancy, Lessee shall be
obligated to perform and observe all of the terms, covenants and conditions of
this Lease, and shall have such rights hereunder to continue its occupancy and
use of the Leased Properties as afforded under the terms of this Lease. Nothing
contained herein, however, shall constitute the consent, express or implied, of
Lessor to the holding over of Lessee after the expiration or earlier termination
of this Lease.
29
ARTICLE 17.
17.1 SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT. Lessor may,
subject to the terms and conditions set forth in this Article 17, from time to
time, create or otherwise cause to exist any Facility Mortgage upon the Leased
Properties to secure any borrowing or other means of financing or refinancing
from or with a commercial bank or savings and loan association, trust company,
insurance company, pension or retirement fund, real estate investment trust,
college, university, charitable or religious organization or other similar
institutional lenders authorized to make loans in the State of Florida. The
parties acknowledge that, as of the Commencement Date, the Leased Property will
be subject to an existing Facility Mortgage in favor of Omega (the "Existing
Facility Mortgage"). Provided that Lessor shall have first obtained and
delivered to Lessee a Non-Disturbance Agreement (as hereinafter defined and
described) from the Facility Mortgagee of any such Facility Mortgage, this Lease
and all the rights of Lessee hereunder will be subordinate to such Facility
Mortgage and to all modifications, extensions, substitutions and refinancings
thereof and all advances made or hereafter to be made thereunder. This clause
shall be self-operative and no further instrument of subordination shall be
required in order to effect such subordination. In connection with and as a
condition precedent to such subordination on the part of Lessee to such Facility
Mortgage, Lessor shall provide Lessee with a non-disturbance agreement (the "Non
Disturbance Agreement") reasonably acceptable to Lessee executed by the Facility
Mortgagee and providing that should such Facility Mortgagee (or a purchaser at a
judicial or non-judicial sale or foreclosure) acquire title or control of or
sell the Land and Leased Improvements, or any part thereof, of which a Leased
Property or the Leased Properties are a part by way of the exercise of a power
of sale, foreclosure or deed in lieu of power of sale or foreclosure, or
otherwise, that such Facility Mortgagee, or any purchaser at such sale or other
grantee or transferee of the Land and Leased Improvements, or any part thereof,
(unless, at Lessee's option, Lessee elects otherwise) shall acquire or hold the
same subject to this Lease and will not disturb Lessee's possession under this
Lease for the remainder of the Term hereof and will recognize Lessee's rights
under this Lease. In such event, Lessee hereby agrees to attorn to and
reorganize such purchaser or other grantee or transferee as Lessor under this
Lease. Lessee acknowledges that, as of the Commencement Date, it has made,
executed, delivered and entered into a non-disturbance agreement acceptable to
both Lessee and the Existing Facility Mortgagee in satisfaction of the
requirements of this Section 17.1.
17.2 FACILITY MORTGAGE AGREEMENTS. Lessor covenants and agrees to
use commercially reasonable efforts to induce each Facility Mortgagee to permit
insurance proceeds or condemnation awards, as the case may be, to be used for
any restoration or repair required by the provisions of this Lease as set forth
in Articles 12 and 13 hereof. So long as Lessee has timely paid all Rent due
hereunder, Lessor covenants that it will timely and properly remit all mortgage
payments (or otherwise cause such payments to be made directly by Lessee to the
Facility Mortgage) in accordance with the terms and provisions of any Facility
Mortgage. Lessor will utilize its best efforts to obtain a commitment from each
Facility Mortgagee to notify Lessee of any default under its Facility Mortgage
and to grant Lessee the same opportunity to cure any default as that afforded to
Lessor (but Lessee shall not be obligated to do so). If Lessor is unable to
obtain such a commitment, Lessor will give Lessee notice of each such default
and afford Lessee an opportunity to cure such default (but Lessee shall not be
obligated to do so) if Lessor is unable to cure the same within the applicable
cure period, if any. Provided that Lessee is given the Non-Disturbance Agreement
provided for herein, Lessee, will afford the Facility
30
Mortgagee a party thereto with a copy of any Notice of default given by Lessee
to Lessor and an opportunity to cure any default of Lessor under this Lease,
such cure right to be the same as that afforded to Lessor and to run
concurrently with the cure rights of Lessor under this Lease.
17.3 ESTOPPEL CERTIFICATES. In contemplation of the sale or
mortgage of the Leased Properties, Lessee agrees to deliver an estoppel
certificate which shall, at a minimum, state to the extent true: (1) that the
Lease provided to the lender or purchaser is a true and correct copy of the
Lease and that it has not been modified or terminated, except as set forth, (2)
that the Rent in the Lease has not been modified, (3) that there are no disputes
between Lessor and Lessee existing as to the Lease, (4) that to the best of
Lessee's knowledge, Lessor has complied with the terms of this Lease to the date
of the certificate, (5) that there has been no Rental paid more than thirty (30)
days in advance, and (6) such other statements, acknowledgments and information
as is customarily called for in estoppel certificates delivered in connection
with commercial tenancies.
17.4 RELATIONSHIP OF LESSEE TO EXISTING FACILITY MORTGAGE. Lessee
further acknowledges that, as of the Commencement Date, it has been provided
with a copy of that certain Loan Agreement made as of February 22, 1996 by and
between Omega as lender and the respective entities comprising the Lessor,
together with the form of the Mortgage, Security Agreement and Fixture Filing
executed by each such Lessor's entity to secure the obligations of the Lessor to
Omega (the "Omega Lending Documents"). To the extent that the Omega Lending
Documents impose operating restrictions related solely to the use and operation
of the Leased Properties, Lessee hereby covenants and agrees, on behalf of the
Lessor, to use reasonable efforts to perform and to comply with such
requirements, excluding, however, any requirement relating to items described on
EXHIBIT E hereto, except as and to the extent provided in EXHIBIT E. In
addition, the Lessee also expressly acknowledges and agrees to comply with the
reporting requirements contained in Section 23.1 of that certain Consolidated
Amended and Restated Master Lease dated November 8, 2000, effective October 1,
2002 by and between Sterling Acquisition Corp. and Diversicare Leasing
Corporation (the "Existing Master Lease") as and fully to the extent such
provisions would pertain to the Leased Properties as if incorporated therein.
Lessee further expressly acknowledges that Omega is a third party beneficiary of
the covenants of Lessee set forth in the Section 17.4 and elsewhere in this
Lease to the extent that such covenants make reference to Omega or the "Facility
Mortgage", and that all such covenants represent a material inducement to Omega
to permit this Lease under the Omega Lending Documents.
ARTICLE 18.
18.1 INDEMNIFICATION. Lessee will protect, indemnify, save harmless
and defend Lessor, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses), to the extent permitted by
law, imposed upon or incurred by or asserted against Lessor by reason of: (i)
any accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Properties during the Lease Term, (ii) any
failure on the part of Lessee to perform or comply with any of the terms of this
Lease to be performed or complied with by Lessee and (iii) any business or other
activity carried on, permitted or suffered with respect to the Leased Properties
by Lessee during the Term or thereafter during any time in which Lessee is in
31
possession of the Leased Properties; provided, however, that such indemnity will
not apply to the extent that any of the foregoing is caused by or attributable
to the negligence or willful misconduct of Lessor or those for whom it may in
law be responsible, or the breach or default by Lessor of its covenants,
agreements or obligations under this Lease
Lessor will protect, indemnify, save harmless and defend Lessee, from
and against any and all liabilities, obligations, claims (including, without
limitation, professional malpractice claims), damages, penalties, causes of
action, costs and expenses (including reasonable attorneys' fees and expenses)
imposed upon, suffered or incurred by, or asserted against Lessee by reason of,
or arising out of, or related to: (i) the use or operation of, or any activity
conducted on or from, the Leased Properties prior to the Commencement Date, (ii)
the breach or untruth of the representations, warranties and covenants as to the
condition of the Leased Properties made in Article 3 hereof, (iii) any accident,
injury to or death of persons or loss of property occurring on or about the
Leased Properties, prior to the Commencement Date, or (iv) any breach by Lessor
or failure on the part of Lessor to perform or comply with any of its
obligations, covenants or agreements under this Lease; provided, however, that
such indemnity will not apply to the extent that any of the foregoing is caused
by or attributable to the negligence or willful misconduct of Lessee or those
for whom it may in law be responsible, or the breach or default by Lessee of its
covenants agreements or obligations under this Lease.
ARTICLE 19.
19.1 ASSIGNMENT AND SUBLETTING. Lessee shall not be entitled to
assign all or any part of Lessee's interest in this Lease or sublet or part with
the possession of the whole or any part of any one or more of Leased Properties
without the prior written consent of the Lessor, which consent shall not be
unreasonably withheld, conditioned, or delayed. A sublease of rooms to residents
of the Facilities or public areas shall not be considered a sublease for
purposes of this Article 19. As a condition to any permitted assignment or
sublease, Lessee shall remain and continue to be obligated for all of the terms
and provisions of this Lease, including the payment of Rent, unless specifically
released therefrom in writing by Lessor. In the event of any permitted
assignment of this Lease, said assignee shall assume in writing all obligations
of the Lessee under this Lease which shall accrue after such assignment.
Anything in this Section 19.1 to the contrary notwithstanding, Lessor's
consent to an assignment or subletting shall not be required for (i) an
assignment of all (but not a portion) of Lessee's right, title and interest in
and to this Lease to an Affiliate of Lessee including a subletting to one or
more New Subs, or (ii) a transfer, in a single transaction, of all (but not a
portion) of the ownership and voting interests in Lessee to an Affiliate of
Lessee or (iii) an assignment or subletting of the Lessee's interest in one or
more of the Facilities to a successor operator provided that such successor (1)
has prior experience operating similar healthcare facilities having the same
Primary Intended Use, (2) is able to obtain all licenses, permits and approvals
necessary to operate the affected Facility or Facilities for their Primary
Intended Use and (3) is reasonably acceptable to Omega or any successor Facility
Mortgagee (each of (i), (ii), and (iii) herein a "Permitted Assignment"),
provided that (a) at the time that such assignment becomes effective, no Event
of Default on the part of Lessee then exists under the Lease, (b) such
assignment is made by a written assignment and assumption agreement in form
reasonably satisfactory to Lessor. Upon a Permitted Assignment, the Lessee and
its Affiliates shall all be
32
released from all obligations under this Lease and under all documents related
to this Lease by virtue of such assignment.
ARTICLE 20.
20.1 LESSOR'S RIGHT TO INSPECT. Lessee shall permit Lessor and its
authorized representatives, upon reasonable prior notice and subject to any
privacy and security requirements of the residents of the Facilities the right
to inspect the Leased Properties during usual business hours, subject to any
security, health, safety or confidentiality requirements of any governmental
agency or insurance requirement relating to the Leased Properties, or imposed by
law or applicable regulations. Lessor agrees to exercise its privilege in such a
way that there will be no unreasonable interference with the business conducted
by Lessee from the Leased Properties. Lessee shall have the right to have a
representative present at all times during any such inspection.
ARTICLE 21.
21.1 QUIET ENJOYMENT. Lessor covenants that Lessor is lawfully
seized and possessed of the Leased Properties, has the full power, right and
authority to execute and deliver this Lease and to perform its obligations
hereunder without the necessity of the consent or joinder of any other person or
party, and that the Leased Properties are free and clear of any liens,
encumbrances, rights, interests or claims of any other parties or limitations or
restrictions on its use, of any kind or nature, other than the Permitted
Exceptions listed on EXHIBIT B attached hereto. So long as there is no Event of
Default on the part of Lessee hereunder which has not been timely cured, Lessor
covenants and agrees that Lessee shall peaceably and quietly have, hold and
enjoy the exclusive right to the Leased Properties for the full Term of this
Lease, free from any hindrance, disturbance, interference, or claim by any other
person or party.
21.2 NO ENCUMBRANCE BY LESSOR. In furtherance of Lessee's right to
quiet enjoyment of the Leased Properties during the Term hereof, Lessor agrees
that it will not grant, convey, create, suffer, or permit or allow to be created
or incurred or to exist, any lien, restriction, encumbrance or other exception
to its title to and interest in the Leased Properties, or any part thereof,
other than the Permitted Exceptions listed on EXHIBIT B attached hereto and
Facility Mortgages in compliance with Article 17 hereof.
ARTICLE 22.
22.1 NOTICES. All notices, demands, requests, consents, approvals
and other communications required or permitted to be made or given hereunder
shall be in writing and (i) personally delivered or (ii) sent by facsimile
transmission or by certified or registered mail (postage prepaid), return
receipt requested, or by a recognized national courier service, addressed to the
respective parties as follows:
22.1.1 if to the Lessee:
Senior Care Florida Leasing, LLC
c/o Advocat Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telefax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ & Manner, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇ Manner
Telefax No.: (▇▇▇) ▇▇▇-▇▇▇▇
22.1.2 if to the Lessor:
c/o Emerald Healthcare, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇ ▇▇▇▇▇▇, President
Telefax No.: 904/432-8557
with a copy to:
Shell, Fleming, ▇▇▇▇▇ and ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
226 ▇▇▇▇▇▇▇ Place
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telefax No.: 850/435-1074
or to such other address as any party may hereafter designate in writing to the
other party. Notice shall be deemed effectively delivered when personally
delivered, when actually received by facsimile transmission or overnight courier
if such facsimile transmission or delivery is made on a Business Day, or if not,
on the first Business Day after delivery or facsimile transmission, or four (4)
Business Days after being deposited in the United States mail, with postage
prepaid, by certified or registered mail, return receipt requested. If the
postal service is interrupted or is substantially delayed, any Notice must be
given by personal delivery, courier service or facsimile transmission.
ARTICLE 23. [INTENTIONALLY OMITTED]
ARTICLE 24.
24.1 LESSOR'S EVENT OF DEFAULT. Lessor shall be in default
("Lessor's Event of Default") under this Lease if Lessor shall breach or fail to
keep, observe or perform any term, provision, agreement, representation,
warranty or covenant of this Lease to be kept, observed or performed by Lessor,
and Lessor does not cure such breach or failure within thirty (30) days
34
after Notice thereof from Lessee to Lessor and any Facility Mortgagee with
respect to which Lessor has notified Lessee (or if such breach or failure cannot
be cured within thirty (30) days, Lessor does not commence to cure said breach
or failure prior to the expiration of said thirty (30) day period and diligently
pursue such cure to completion). In the event of such a default on the part of
Lessor under this Lease, in addition to any other rights or remedies to which it
may be entitled under applicable law, all of which shall be cumulative, Lessee
shall have the right upon further Notice to Lessor and any such Facility
Mortgagee to (a) cure or attempt to cure such Lessor's Event of Default and
Lessor shall reimburse Lessee for all reasonable costs and expenses actually
incurred and paid by Lessee on written demand therefor failing which Lessee
shall have the right to and may set off against and deduct from each one of the
next successive monthly installments of Rent due under this Lease the amount of
such costs and expenses, together with interest thereon at the Overdue Rate from
the due date until paid, until such time as the entire amount, together with
interest, has been paid to Lessee in full; or (b) if (i) the cost and expense to
cure such breach or failure on the part of Lessor exceeds more than three (3)
months Rent or (ii) such breach or failure on the part of Lessor renders or
causes the Leased Properties to be Unsuitable for its Primary Intended Use, and
such breach or failure remains uncured for a period of sixty (60) days, then
Lessee may terminate this Lease by giving Lessor and any such Facility Mortgagee
at least thirty (30) days' prior Notice of such termination on or after the
sixty-first (61st) day of such breach or failure; provided however, no such
notice of termination shall be effective if Lessor or any such Facility
Mortgagee cures such failure prior to the expiration of such thirty (30) day
period.
24.2 LEGAL EXPENSES. In the event it becomes necessary for Lessee
to employ an attorney to enforce the terms, covenants and conditions of this
Lease to be observed or performed by Lessor, or to cure any default by Lessor
with respect thereto, then Lessor will pay and reimburse Lessee, on demand
therefore, the reasonable attorney's fees, costs and expenses, including court
costs, incurred by Lessee in connection therewith.
ARTICLE 25.
25.1 MISCELLANEOUS
25.1.1 CHOICE OF LAW. This Lease shall be governed by and
construed in accordance with the laws of the State of Florida.
25.1.2 CONSENTS. Whenever the consent or approval of Lessor
or Lessee is required hereunder, such consent or approval shall, unless
otherwise specifically provided for herein, not be unreasonably
withheld or delayed.
25.1.3 ENTIRE AGREEMENT; AMENDMENTS IN WRITING. This Lease
set forth the entire agreement between the parties hereto as to the
leasing of the Leased Properties and supersedes and cancels any and all
prior negotiations, arrangements, representations, agreements and
understandings, oral or written, between the parties hereto and any
Affiliate of either of them as to the leasing of the Leased Properties.
No amendment or modification of this Lease shall be binding or valid,
unless expressed in a writing executed by both parties hereto.
35
25.1.4 SEVERABILITY. If any provision of this Lease or the
application of such provision to any person, entity or circumstance is
found invalid or unenforceable by a court of competent jurisdiction,
such determination shall not affect the other provisions of this Lease
and all other provisions of this Lease shall be deemed valid and
enforceable.
25.1.5 SUCCESSORS. All rights and obligations of the parties
under this Lease shall extend to and bind the respective legal
representatives, successors and permitted assigns of the parties
hereto.
25.1.6 NO WAIVER. No failure by Lessor or Lessee 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 breach, shall constitute a waiver of any such breach or of any
such term.
25.1.7 REMEDIES CUMULATIVE. To the extent permitted by law,
each legal, equitable or contractual right, power and remedy of Lessor
or Lessee 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 Lessor or Lessee of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Lessor or Lessee of any or all of such other
rights, powers and remedies.
25.1.8 NO PARTNERSHIP. Nothing contained in this Lease shall
be deemed or construed to create a partnership or joint venture between
Lessor and Lessee or to cause either party to be responsible in any way
for the debts or obligations of the other or any other party, it being
the intention of the parties that the only relationship hereunder is
that of lessor and lessee.
25.1.9 RECORDATION OF LEASE. Upon the request of either
party hereto, the other party shall join in the execution of a
memorandum of this Lease for the purpose of registration. Said
memorandum shall be prepared and registered at the expense of the party
requesting registration and shall be in substantially the form as
attached as EXHIBIT F hereto.
25.1.10 TIME. Time is of the essence of this Lease.
25.1.11 HEADINGS. The descriptive headings used in this Lease
are for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
ARTICLE 26.
26.1 ARBITRATION. In case any controversy or dispute shall arise
between the parties hereto as to any of the requirements of this Lease or the
performance thereof, which the parties shall be unable to settle by agreement or
as otherwise provided herein, such controversy shall be determined by
arbitration. Such arbitration shall be conducted by three (3) arbitrators
selected in accordance with the procedures of the American Arbitration
Association and in accordance with
36
its rules and procedures. The arbitration shall be conducted in a location
mutually agreeable to both Lessor and Lessee and, failing agreement upon such
location, the arbitration shall be conducted in Atlanta, Georgia. Any party may
be represented by counsel or other authorized representative. The parties may
offer such evidence as is relevant and material to the dispute. In rendering
their decision, the arbitrators shall determine the rights and obligations shall
determine the rights and obligations of the parties according to the substantive
and procedural laws of the State of Florida and the terms and provisions of this
Lease. The decision of the arbitrators shall be final and binding, and
enforceable in any court of competent jurisdiction. Such decision shall set
forth in writing the basis for the decision. In rendering such decision and
award, the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Lease. The arbitrators may award costs, including reasonable
attorneys fees to the prevailing party, if any, as determined by the arbitrators
in accordance with the terms and provisions of this Lease. The fees and costs of
the arbitrators shall be paid by the non-prevailing party as determined by the
arbitrators in their discretion.
SIGNATURES ON FOLLOWING PAGE.
37
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LESSOR:
EMERALD-CEDAR HILLS, INC.
By: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Its: President
EMERALD-GOLFVIEW, INC.
By: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Its: President
EMERALD-SOUTHERN PINES, INC.
By: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Its: President
EMERALD-GOLF CREST, INC.
By: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Its: President
LESSEE:
SENIOR CARE FLORIDA LEASING, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. Council III
---------------------------------------
Its: CEO
--------------------------------------
38
EXHIBIT A-1
(RECITALS, P.1)
DESCRIPTION OF LAND
LEGAL DESCRIPTION OF MORTGAGE PROPERTY - CEDAR HILLS
All of ▇▇▇ ▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇▇, according to the Plat thereof recorded in
Plat Book 3, Page 79, Public Records of ▇▇▇▇▇ County, Florida.
39
EXHIBIT A-2
(RECITALS, P.1)
DESCRIPTION OF LAND
LEGAL DESCRIPTION OF MORTGAGE PROPERTY - GOLFCREST
Lots 7, 8, 9, 10, 11 and 12, in Block 51, of the Town of Hollywood, according to
the plat thereof recorded in Plat Book 1, at Page 21, of the Public Records of
Broward County, Florida.
40
EXHIBIT A-3
(RECITALS, P.1)
DESCRIPTION OF LAND
LEGAL DESCRIPTION OF MORTGAGE PROPERTY - GOLFVIEW
▇▇▇▇ ▇, ▇, ▇, ▇, ▇, ▇, ▇ (▇▇▇▇ the easterly two feet of Lot 7) and 23, Block 7,
▇▇▇▇▇ ▇▇▇▇▇ Park, according to plat thereof recorded in Plat Book 9, Page 150,
Public Records of Pinellas County, Florida.
41
EXHIBIT A-4
(RECITALS, P.1)
DESCRIPTION OF LAND
LEGAL DESCRIPTION OF MORTGAGE PROPERTY - SOUTHERN PINES
The South 316.10 feet of the North 589.53 feet of ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇▇ Land
Company Subdivision of ▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ 16 East as shown on a
plat thereof recorded in Plat Book 1, Page 61, Public Records of Pasco County,
Florida, less and except that portion taken for right of way for Congress
Street.
Together with easements appurtenant thereto over part of the South 70 feet of
said Tract 41 as granted by instrument recorded in Official Records Book 3439,
Page 651, Public Records of Pasco County, Florida; and also together with an
easement appurtenant thereto over an existing driveway leading off the above
described property to the Northwest, as granted be deed recorded in Official
Records Book 730, Page 468 (Docket #373813) Public Records of Pasco County,
Florida, subject to the rights of Grantors therein to relocate said driveway at
their expense.
42
EXHIBIT B
(SECTION 3.1.3)
PERMITTED EXCEPTIONS
Permitted Encumbrances - Southern Pines
Taxes for 1996 and matters set forth in Schedule B-II, items 5, 6 and 7
of Attorney Title Insurance Fund Commitment No. C2262507.
Permitted Encumbrances - Golfview
Taxes for 1996 and matters set forth in Schedule B-II, items 5A thru E
of Attorneys Title Insurance Fund Commitment No. C2262509.
Permitted Encumbrances - Golfcrest
Taxes for 1996
Permitted Encumbrances - Cedar Hills
Taxes for 1996 and matters set forth in Schedule B-II, items 4, 5, 6
and 7 of Attorneys Title Insurance Fund Commitment No. C2262506.
[THESE NEED TO BE UPDATED]
43
EXHIBIT C
(SECTION 4.2)
EXAMPLE OF ADDITIONAL RENT COMPUTATION
Assumed Gross Revenue for Quarter Ending 03/31/03 $4,500,000.00
Cost of Operations Ending 03/31/03 <$3,000,000.00>
Base Rent <$ 450,000.00>
Fee Payable to DMSC <$ 315,000.00>
=============
$ 735,000.00
(.50) ($735,000.00) = $367,500.00
44
EXHIBIT D
(SECTION 6.2)
LESSEE'S PERSONAL PROPERTY ITEMS REMOVABLE FROM FACILITY UPON TERMINATION
EXCLUDED PERSONAL PROPERTY OF LESSEE
1. Lessee's continuous quality improvement program, manuals and
materials; management information systems; policy, procedure and educational
manuals and materials and similar proprietary property.
2. Computer hardware, and related equipment which is integrated
with the computer system maintained by Advocat, and computer software, provided,
however, that Lessee shall cause all data that is reasonably necessary for the
continuing operation of one or more of the Facilities, and which may be accessed
through such computers or software, to be made available to Lessor in a
reasonably accessible form without material cost to Lessee.
45
EXHIBIT E
(SECTION 8.1)
EXCLUDED PHYSICAL PLANT OBLIGATIONS
Lessee's Obligations for Recommended Physical Plant Improvements
Lessee is aware that certain existing circumstances or conditions of
one or more of the Leased Properties have been reviewed by licensing, building
code, state fire marshal, other third parties with competent authority over the
Leased Properties, or one or more insurance inspectors (collectively the
"Inspectors"). The Inspectors have, from time to time, required corrective
actions for certain of such matters as have been identified to Lessor and
Lessor's mortgagee ("Mortgagee") with respect to the Lease Properties (the
"Recommended Improvements").
The Lessee expects that Inspectors may, during the Term of the Lease,
identify one or more other improvements to the physical plant of the Leased
Properties which improvements as of the Commencement Date are unknown to the
Lessee and which are required by the Inspectors for the continued operation of
the Leased Properties for their Primary Intended Purposes, or for their
continued operation with commercially reasonable insurance premiums
(collectively, "Future Physical Plant Improvements").
Prior to the Commencement Date of the Lease, the Lessor has been able
to obtain waivers, exceptions or other relief (collectively "Waivers") from
various Inspectors so that the Leased Properties could continue to operate on an
interim basis in compliance with applicable legal and insurance requirements
without implementing the Recommended Improvements. After the Commencement Date,
the Lessee will use all necessary and reasonable efforts to maintain such
Waivers, and to obtain such further and additional Waivers (or, in the case of
insurance related Waivers, to find alternative coverage) as may be necessary to
permit the continued operation of the Leased Premises without implementing any
Future Physical Plant Improvements, but no assurance can be given as to the
availability, extent or duration or the continued effectiveness of such Waivers
after the Commencement Date.
In light of the foregoing circumstances, the Lessee shall not be
required under this Lease to commence, prosecute or complete such Recommended
Improvements or to fund or finance any or all such Recommended Improvements
and/or Future Physical Plant Improvements in excess of One Hundred Sixty-nine
Thousand and No/100 Dollars ($169,000.00) per year, on a cumulative basis, in
the aggregate allocated on a pro-rata basis per bed per facility during the Term
of the Lease (the "Threshold Amount").
In connection with the foregoing, Lessee shall provide prompt written
notice to Lessor and Mortgagee of any Recommended Improvements and/or Future
Physical Plant Improvements for which Waivers have been withdrawn or terminated,
or for which Waivers have not been obtained, in either event after Lessee has
used best reasonable efforts to have such Waivers continued, extended or
obtained, together with a good faith estimate of the cost to implement such
Recommended Improvements and/or Future Physical Plant Improvements.
46
If (1) any Recommended Improvements and/or Future Physical Plant
Improvements are required in writing to be performed by an Inspector, (2) unless
such improvements are performed (a "Required Improvement"), either (a) the
Facility will no longer be permitted under applicable law to operate for their
Primary Intended Use, (b) the Facility will lose 25% or more of its licensed
beds, or (c) the cost of fire or casualty insurance will be so high that it
would be commercially unreasonable to continue to operate the Facility, and (3)
there is a Funding Shortfall (as defined below), then Lessee shall promptly
notify Lessor and Mortgagee of such Required Improvement, the reasonable
estimated cost of performing such Required Improvement, and the amount of the
Funding Shortfall. Within the earlier of (a) thirty (30) days of receipt of
notice from Lessee or (b) the date the Facility would no longer be entitled
under applicable law to operator for its Primary Intended Use, Lessor may, at
its option, either (i) fund the Funding Shortfall (which funding may, with the
consent of the Mortgagee, be in the form of an agreement to ▇▇▇▇▇ rent for a
period of time); or (ii) provide written notice to Lessee and Mortgagee that it
is unable or unwilling to fund such Funding Shortfall. If Lessor provides
written notice that it is unable or unwilling to fund the Funding Shortfall,
then within the earlier of (a) thirty (30) days of receipt of notice from Lessor
or (b) the date the Facility would no longer be entitled under applicable law to
operator for its Primary Intended Use, Mortgagee may, at its option, either (i)
commit to fund the Funding Shortfall; or (ii) provide written notice to Lessee
and Mortgagee that it is unable or unwilling to fund such Funding Shortfall. If
neither Lessor nor Mortgagee elect to fund the Funding Shortfall, then, within
thirty (30) days of such determination by Mortgagee, Lessee may either (i)
perform the Required Improvement at its own cost and expense, or (ii) terminate
this Lease as to the particular Leased Property to which the Required
Improvements pertain by written notice to Lessor and Mortgagee. If the Lessee
terminates this Lease pursuant to this Exhibit E as to a Leased Property, the
Base Rent under this Lease shall be reduced in the same proportion as the number
of licensed beds in the applicable Leased Property bears to the total number of
licensed beds for all Leased Properties.
As used in this Exhibit E, a "Funding Shortfall" means
(1) If the Required Improvement relates to a legal requirement,
the amount by which the estimated cost of such Required
Improvement exceeds the sum of (i) the amount required to be
expended by Lessee pursuant to the Lease for such
improvements, plus (ii) the accrued amounts of Additional Rent
as computed in Section 4.2 of this Lease as of the date the
Required Improvement is to be made; or
(2) If the Required Improvement relates to an insurance
requirement, the amount by which the lesser of (a) the
estimated cost of such Required Improvement or (b) the
increase in insurance premium, exceeds the sum of (i) the
amount required to be expended by Lessee pursuant to the Lease
for such improvements, plus (ii) the accrued amounts of
Additional Rent as computed in Section 4.2 of this Lease as of
the date the Required Improvement is to be made.
47
EXHIBIT F
(SECTION 25.1.9)
FORM OF MEMORANDUM OF LEASE
THIS INSTRUMENT PREPARED BY,
AND AFTER RECORDING, RETURN TO:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
MEMORANDUM OF CONSOLIDATED, AMENDED AND RESTATED LEASE
THIS MEMORANDUM OF MASTER LEASE, made and entered into as of April ___
2003, by and between _____________, a Florida corporation, having its principal
office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ as Lessor and Senior
Care Florida Leasing, LLC, a Delaware limited liability company, having its
principal office at c/o. Advocat, Inc. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ as Lessee with respect to the real property identified
in Exhibit "A" attached hereto and located in ________________ Florida.
WITNESSETH:
1. Lessor and Lessee have entered into a Master Lease of even date
herewith (the "Lease").
2. For and in consideration of the rents reserved and the other covenants
contained in the Lease, Lessor has and does hereby continue to lease to
Lessee, and Lessee has and does hereby continue to take and rent from
Lessor, all of Lessor's rights and interest in and to the parcel of
real property described in Exhibit "A" and the improvements, fixtures,
personal and other property included within the definition of "Leased
Properties" as set forth in the Lease.
3. The Initial Term of the Lease is approximately _______(___) years,
commencing April ___, 2003 (the "Commencement Date") and ending on
December 31, 2005.
4. This instrument is executed and recorded for the purpose of giving
notice of Lessee's interest in the Leased Properties and giving notice
of the existence of the Lease, to which reference is made for a full
statement of the terms and conditions thereof. The respective addresses
of the parties hereto are:
Lessee:
------
c/o Advocat, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Lessor:
------
c/o Emerald Healthcare, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: R. ▇▇▇▇▇ ▇▇▇▇▇▇, President
Telephone:
Telecopier:
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed by their duly authorized officer or officers and general partners, as
applicable, all as of the day and date first above written.
LESSOR: LESSOR:
------ ------
-------------------------------- Senior Care Florida Leasing, LLC
a Florida corporation Delaware limited liability company
By: By:
-------------------------- ------------------------------
Name: Name:
-------------------------- ------------------------------
Its: Its:
-------------------------- ------------------------------
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