ARTICLE 1	DEFINITIONS	1
1.1	AAA	2
1.2	Additional Charges	2
1.3	Additional Rent	2
1.4	Affiliated Person	2
1.5	Agreement	2
1.6	Applicable Laws	2
1.7	Arbitration Award	3
1.8	Award	3
1.9	Base Gross Revenues	3
1.10	Business Day	3
1.11	Capital Addition	3
1.12	Capital Expenditure	4
1.13	Change in Control	4
1.14	Claim	5
1.15	Code	5
1.16	Commencement Date	5
1.17	Condemnation	5
1.18	Condemnor	5
1.19	Consolidated Financials	5
1.20	Date of Taking	5
1.21	Default	5
1.22	Disbursement Rate	6
1.23	Disputes	6
1.24	Easement Agreement	6
1.25	Encumbrance	6
1.26	Entity	6
1.27	Environment	6
1.28	Environmental Obligation	6
1.29	Environmental Notice	6
1.30	Event of Default	6
1.31	Excess Gross Revenues	6
1.32	Existing Financing	7
1.33	Extended Term	7
1.34	Facility	7
1.35	Facility Mortgage	7
1.36	Facility Mortgagee	7
1.37	Financial Officer’s Certificate	7
1.38	Fiscal Year	7
1.39	Five Star	7
1.40	Fixed Term	7
1.41	Fixtures	7
1.42	GAAP	8
1.43	Government Agencies	8
1.44	Gross Revenues	8
1.45	Guarantor	9
1.46	Guaranty	9
1.47	Hazardous Substances	9
1.48	Immediate Family	10
1.49	Impositions	10
1.50	Incidental Documents	11
1.51	Indebtedness	11
1.52	Insurance Requirements	12

 

 

1.53	Interest Rate	12
1.54	Land	12
1.55	Landlord	12
1.56	Landlord Default	12
1.57	Landlord Liens	12
1.58	Lease Year	12
1.59	Leased Improvements	12
1.60	Leased Intangible Property	12
1.61	Leased Personal Property	13
1.62	Leased Property	13
1.63	Legal Requirements	13
1.64	Lien	13
1.65	Manager	13
1.66	Management Agreement	14
1.67	Minimum Rent	14
1.68	Notice	14
1.69	Officer’s Certificate	14
1.70	Original Leases	14
1.71	Overdue Rate	14
1.72	Parent	14
1.73	Permitted Encumbrances	14
1.74	Permitted Use	14
1.75	Person	15
1.76	Pledge Agreement	15
1.77	Property	15
1.78	Provider Agreements	15
1.79	Regulated Medical Wastes	15
1.80	Rent	15
1.81	Rules	15
1.82	SEC	15
1.83	Security Agreement	15
1.84	State	15
1.85	Subordinated Creditor	16
1.86	Subordination Agreement	16
1.87	Subsidiary	16
1.88	Successor Landlord	16
1.89	Tenant	16
1.90	Tenant’s Personal Property	16
1.91	Term	16
1.92	Third Party Payor Programs	16
1.93	Third Party Payors	17
1.94	Unsuitable for Its Permitted Use	17
1.95	Work	17
ARTICLE 2	LEASED PROPERTY AND TERM	17
2.1	Leased Property	17
2.2	Condition of Leased Property	18
2.3	Fixed Term	19
2.4	Extended Terms	19
ARTICLE 3	RENT	20
3.1	Rent	20
3.2	Late Payment of Rent, Etc.	26
3.3	Net Lease	27

 

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3.4	No Termination, Abatement, Etc.	27
ARTICLE 4	USE OF THE LEASED PROPERTY	28
4.1	Permitted Use	28
4.2	Compliance with Legal/Insurance Requirements, Etc.	30
4.3	Compliance with Medicaid and Medicare Requirements	30
4.4	Environmental Matters	31
ARTICLE 5	MAINTENANCE AND REPAIRS	33
5.1	Maintenance and Repair	33
5.2	Tenant’s Personal Property	35
5.3	Yield Up	35
5.4	Management Agreement	36
ARTICLE 6	IMPROVEMENTS, ETC.	36
6.1	Improvements to the Leased Property	36
6.2	Salvage	37
ARTICLE 7	LIENS	37
ARTICLE 8	PERMITTED CONTESTS	38
ARTICLE 9	INSURANCE AND INDEMNIFICATION	39
9.1	General Insurance Requirements	39
9.2	Waiver of Subrogation	39
9.3	Form Satisfactory, Etc.	39
9.4	No Separate Insurance; Self-Insurance	40
9.5	Indemnification of Landlord	41
ARTICLE 10	CASUALTY	42
10.1	Insurance Proceeds	42
10.2	Damage or Destruction	42
10.3	Damage Near End of Term	44
10.4	Tenant’s Property	45
10.5	Restoration of Tenant’s Property	45
10.6	No Abatement of Rent	45
10.7	Waiver	45
ARTICLE 11	CONDEMNATION	45
11.1	Total Condemnation, Etc.	45
11.2	Partial Condemnation	46
11.3	Abatement of Rent	47
11.4	Temporary Condemnation	47
11.5	Allocation of Award	48
ARTICLE 12	DEFAULTS AND REMEDIES	48
12.1	Events of Default	48
12.2	Remedies	51
12.3	Tenant’s Waiver	52
12.4	Application of Funds	52
12.5	Landlord’s Right to Cure Tenant’s Default	53
ARTICLE 13	HOLDING OVER	53
ARTICLE 14	LANDLORD DEFAULT	53
ARTICLE 15	PURCHASE RIGHTS	54
ARTICLE 16	SUBLETTING AND ASSIGNMENT	55
16.1	Subletting and Assignment	55
16.2	Required Sublease Provisions	56
16.3	Permitted Sublease	57

 

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16.4	Sublease Limitation	58
ARTICLE 17	ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS	58
17.1	Estoppel Certificates	58
17.2	Financial Statements	59
17.3	General Operations	60
ARTICLE 18	LANDLORD’S RIGHT TO INSPECT	61
ARTICLE 19	EASEMENTS	61
19.1	Grant of Easements	61
19.2	Exercise of Rights by Tenant	62
19.3	Permitted Encumbrances	62
ARTICLE 20	FACILITY MORTGAGES	62
20.1	Landlord May Grant Liens	62
20.2	Subordination of Lease	62
20.3	Notice to Mortgagee and Superior Landlord	64
ARTICLE 21	ADDITIONAL COVENANTS OF TENANT	65
21.1	Prompt Payment of Indebtedness	65
21.2	Conduct of Business	65
21.3	Maintenance of Accounts and Records	65
21.4	Notice of Litigation, Etc.	65
21.5	Prohibited Transactions	66
21.6	Existing Financing	66
ARTICLE 22	ARBITRATION	66
22.1	Disputes	66
22.2	Selection of Arbitrators	67
22.3	Location of Arbitration	67
22.4	Scope of Discovery	67
22.5	Arbitration Award	67
22.6	Costs	68
22.7	Final Judgment	68
22.8	Payment	68
ARTICLE 23	MISCELLANEOUS	68
23.1	Limitation on Payment of Rent	68
23.2	No Waiver	69
23.3	Remedies Cumulative	69
23.4	Severability	69
23.5	Acceptance of Surrender	69
23.6	No Merger of Title	70
23.7	Conveyance by Landlord	70
23.8	Quiet Enjoyment	70
23.9	No Recordation	70
23.10	Notices	71
23.11	Construction	72
23.12	Counterparts; Headings	72
23.13	Applicable Law, Etc.	72
23.14	Right to Make Agreement	73
23.15	Attorneys’ Fees	73
23.16	Nonliability of Trustees	73
23.17	Original Leases	73

 

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AMENDED AND RESTATED MASTER LEASE AGREEMENT

 

THIS AMENDED AND RESTATED MASTER LEASE AGREEMENT is entered into as of August 4, 2009 by and among SNH FM FINANCING LLC, a Delaware limited liability company, SNH FM FINANCING TRUST, a Maryland real estate investment trust, and ELLICOTT CITY LAND I, LLC, a Delaware limited liability company, collectively as landlord (“ Landlord ”), and FVE FM FINANCING, INC., a Maryland corporation, as tenant (“ Tenant ”).

 

W   I   T   N   E   S   S   E   T   H  :

 

WHEREAS, certain affiliates of Landlord and Tenant are parties to certain Amended and Restated Master Lease Agreements, dated as of June 30, 2008 (collectively, the “ Original Leases ”); and

 

WHEREAS, the landlords and tenants under the Original Leases are conveying their interests in certain of the properties demised thereunder and, in connection therewith, Landlord and Tenant and the landlords and tenants under the Original Leases wish to amend and restate the Original Leases into separate leases and to make certain other modifications thereto as are set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree that, effective as of the date hereof, the Original Leases are hereby amended and restated but only with respect to the Leased Property (as hereinafter defined), as follows:

 

ARTICLE 1

 

DEFINITIONS

 

For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) the terms defined in this Article shall have the meanings assigned to them in this Article and include the plural as well as the singular, (b) all accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with GAAP, (c) all references in this Agreement to designated “Articles”, “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement, and (d) the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.

 

 

1.1               “ AAA ”  shall have the meaning given such term in Section 22.1 .

 

1.2               “ Additional Charges ”  shall have the meaning given such term in Section 3.1.3 .

 

1.3               “ Additional Rent ”  shall have the meaning given such term in Section 3.1.2(a) .

 

1.4               “ Affiliated Person ”  shall mean, with respect to any Person, (a)  in the case of any such Person which is a partnership, any partner in such partnership, (b) in the case of any such Person which is a limited liability company, any member of such company, (c) any other Person which is a Parent, a Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or more of the Persons referred to in the preceding clauses (a) and (b), (d) any other Person who is an officer, director, trustee or employee of, or partner in or member of, such Person or any Person referred to in the preceding clauses (a), (b) and (c), and (e) any other Person who is a member of the Immediate Family of such Person or of any Person referred to in the preceding clauses (a) through (d).

 

1.5               “ Agreement ”  shall mean this Amended and Restated Master Lease Agreement, including all schedules and exhibits attached hereto, as it and they may be amended from time to time as herein provided.

 

1.6               “ Applicable Laws ”  shall mean all applicable laws, statutes, regulations, rules, ordinances, codes, licenses, permits and orders, from time to time in existence, of all courts of competent jurisdiction and Government Agencies, and all applicable judicial and administrative and regulatory decrees, judgments and orders, including common law rulings and determinations, relating to injury to, or the protection of, real or personal property or human health or the Environment, including, without limitation, all valid and lawful requirements of courts and other Government Agencies pertaining to reporting, licensing, permitting, investigation, remediation and removal of underground improvements (including, without limitation, treatment or storage tanks, or water, gas or oil wells), or emissions, discharges, releases or threatened releases of Hazardous Substances, chemical substances, pesticides, petroleum or petroleum products, pollutants, contaminants or hazardous or toxic substances, materials or wastes whether solid, liquid or gaseous in nature, into the Environment, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances or

 

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Regulated Medical Wastes, underground improvements (including, without limitation, treatment or storage tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature.

 

1.7               “ Arbitration Award ”  shall have the meaning given such term in Section 22.5 .

 

1.8               “ Award ”  shall mean all compensation, sums or other value awarded, paid or received by virtue of a total or partial Condemnation of any Property (after deduction of all reasonable legal fees and other reasonable costs and expenses, including, without limitation, expert witness fees, incurred by Landlord, in connection with obtaining any such award).

 

1.9               “ Base Gross Revenues ”  shall mean the Gross Revenues with respect to each Property, for the respective calendar years or the respective dollar amount set forth on Schedule 1 attached hereto and made a part hereof, as applicable; provided , however , that in the event that, with respect to any Lease Year, or portion thereof, for any reason (including, without limitation, a casualty or Condemnation) there shall be a reduction in the number of units available at any Facility located at the applicable Property or in the services provided at such Facility from the number of such units or the services on the applicable Commencement Date, in determining Additional Rent payable for such Lease Year, Base Gross Revenues shall be reduced as follows:  (a) in the event of a partial closing of any Facility affecting the number of units, or the services provided, at such Facility, Gross Revenues attributable to units or services at such Facility shall be ratably allocated among all units in service at such Facility on the applicable Commencement Date and all such Gross Revenues attributable to units no longer in service shall be subtracted from Base Gross Revenues throughout the period of such closing; and (b) in the event of any other change in circumstances affecting any Facility, Base Gross Revenues shall be equitably adjusted in such manner as Landlord and Tenant shall reasonably agree.

 

1.10             “ Business Day ”  shall mean any day other than Saturday, Sunday, or any other day on which banking institutions in The Commonwealth of Massachusetts are authorized by law or executive action to close.

 

1.11             “ Capital Addition ”  shall mean, with respect to any Property, any renovation, repair or improvement to such Property, the cost of which constitutes a Capital Expenditure.

 

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1.12             “ Capital Expenditure ”  shall mean any expenditure treated as capital in nature in accordance with GAAP.

 

1.13             “ Change in Control ”   shall mean (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC) of 9.8% or more, or rights, options or warrants to acquire 9.8% or more, of the outstanding shares of voting stock or other voting interests of Tenant or any Guarantor, as the case may be, or the power to direct the management and policies of Tenant or any Guarantor, directly or indirectly, (b) the merger or consolidation of Tenant or any Guarantor with or into any Person or the merger or consolidation of any Person into Tenant or any Guarantor (other than the merger or consolidation of any Person into Tenant or any Guarantor that does not result in a Change in Control of Tenant or such Guarantor under clauses (a), (c), (d), (e) or (f) of this definition), (c) any one or more sales, conveyances, dividends or distributions to any Person of all or any material portion of the assets (including capital stock or other equity interests) or business of Tenant or any Guarantor, whether or not otherwise a Change in Control, (d) the cessation, for any reason, of the individuals who at the beginning of any twenty-four (24) consecutive month period (commencing on the date hereof) constituted the board of directors of Tenant or any Guarantor (together with any new directors whose election by such board or whose nomination for election by the shareholders of Tenant or such Guarantor was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of any such period or whose election or nomination for election was previously so approved, but excluding any individual whose initial nomination for, or assumption of, office as a member of such board of directors occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any Person other than a solicitation for the election of one or more directors by or on behalf of the board of directors) to constitute a majority of the board of directors of Tenant or such Guarantor then in office, or (e) the adoption of any proposal (other than a precatory proposal) by Tenant or any Guarantor not approved by vote of a majority of the directors of Tenant or any Guarantor, as the case may be, in office immediately prior to the making of such proposal, or (f) the election to the board of directors of Tenant or any Guarantor of any individual not nominated or appointed by vote of a majority of the directors of Tenant or such Guarantor in office immediately prior to the nomination or appointment of such individual.

 

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1.14             “ Claim ”  shall have the meaning given such term in Article 8 .

 

1.15             “ Code ”  shall mean the Internal Revenue Code of 1986 and, to the extent applicable, the Treasury Regulations promulgated thereunder, each as from time to time amended.

 

1.16             “ Commencement Date ”  shall mean, with respect to each Property, the calendar date specified as the Commencement Date with respect to such Property on Schedule 1 attached hereto and made a part hereof.

 

1.17             “ Condemnation ”  shall mean, with respect to any Property, or any portion thereof, (a) the exercise of any governmental power with respect to such Property, whether by legal proceedings or otherwise, by a Condemnor of its power of condemnation, (b) a voluntary sale or transfer of such Property by Landlord to any Condemnor, either under threat of condemnation or while legal proceedings for condemnation are pending, or (c) a taking or voluntary conveyance of such Property, or any interest therein, or right accruing thereto or use thereof, as the result or in settlement of any condemnation or other eminent domain proceeding affecting such Property, whether or not the same shall have actually been commenced.

 

1.18             “ Condemnor ”  shall mean any public or quasi-public Person, having the power of Condemnation.

 

1.19             “ Consolidated Financials ”   shall mean, for any Fiscal Year or other accounting period of Five Star, annual audited and quarterly unaudited financial statements of Five Star prepared on a consolidated basis, including Five Star’s consolidated balance sheet and the related statements of income and cash flows, all in reasonable detail, and setting forth in comparative form the corresponding figures for the corresponding period in the preceding Fiscal Year, and prepared in accordance with GAAP throughout the periods reflected.

 

1.20             “ Date of Taking ”  shall mean, with respect to any Property, the date the Condemnor has the right to possession of such Property, or any portion thereof, in connection with a Condemnation.

 

1.21             “ Default ”  shall mean any event or condition which with the giving of notice and/or lapse of time would ripen into an Event of Default.

 

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1.22             “ Disbursement Rate ”  shall mean an annual rate of interest, as of the date of determination, equal to the greater of (a) eight percent (8%) and (b) the per annum rate for ten (10) year U.S. Treasury Obligations as published in The Wall Street Journal plus three hundred (300) basis points; provided , however , that in no event shall the Disbursement Rate exceed eleven and one-half percent (11.5%).

 

1.23             “ Disputes ”  shall have the meaning given such term in Section 22.1 .

 

1.24             “ Easement Agreement ”  shall mean any conditions, covenants and restrictions, easements, declarations, licenses and other agreements which are Permitted Encumbrances and such other agreements as may be granted in accordance with Section 19.1 .

 

1.25             “ Encumbrance ”  shall have the meaning given such term in Section 20.1 .

 

1.26             “ Entity ”  shall mean any corporation, general or limited partnership, limited liability company or partnership, stock company or association, joint venture, association, company, trust, bank, trust company, land trust, business trust, cooperative, any government or agency, authority or political subdivision thereof or any other entity.

 

1.27             “ Environment ”  shall mean soil, surface waters, ground waters, land, stream, sediments, surface or subsurface strata and ambient air.

 

1.28             “ Environmental Obligation ”  shall have the meaning given such term in Section 4.4.1 .

 

1.29             “ Environmental Notice ”  shall have the meaning given such term in Section 4.4.1 .

 

1.30             “ Event of Default ”  shall have the meaning given such term in Section 12.1 .

 

1.31             “ Excess Gross Revenues ”  shall mean, with respect to each Property, the amount of Gross Revenues for any Lease Year, or portion thereof, in excess of Base Gross Revenues or the pro-rated portion thereof in the case of a Lease Year which is not a full twelve-month period.

 

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1.32             “ Existing Financing ”  shall mean the financing secured by one or more Encumbrances on the Leased Property in effect as of the date of this Agreement.

 

1.33             “ Extended Term ”  shall have the meaning given such term in Section 2.4 .

 

1.34             “ Facility ”  shall mean, with respect to any Property, the skilled nursing/intermediate care/independent living/assisted living/special care/group home facility being operated or proposed to be operated on such Property.

 

1.35             “ Facility Mortgage ”  shall mean any Encumbrance placed upon the Leased Property, or any portion thereof, in accordance with Article 20 .

 

1.36             “ Facility Mortgagee ”  shall mean the holder of any Facility Mortgage.

 

1.37             “ Financial Officer’s Certificate ”  shall mean, as to any Person, a certificate of the chief executive officer, chief financial officer or chief accounting officer (or such officers’ authorized designee) of such Person, duly authorized, accompanying the financial statements required to be delivered by such Person pursuant to Section 17.2 , in which such officer shall certify (a) that such statements have been properly prepared in accordance with GAAP and are true, correct and complete in all material respects and fairly present the consolidated financial condition of such Person at and as of the dates thereof and the results of its and their operations for the periods covered thereby, and (b) in the event that the certifying party is an officer of Tenant and the certificate is being given in such capacity, that no Event of Default has occurred and is continuing hereunder.

 

1.38             “ Fiscal Year ”  shall mean the calendar year or such other annual period designated by Tenant and approved by Landlord.

 

1.39             “ Five Star ”   shall mean Five Star Quality Care, Inc., a Maryland corporation, and its permitted successors and assigns.

 

1.40             “ Fixed Term ”  shall have the meaning given such term in Section 2.3 .

 

1.41             “ Fixtures ”  shall have the meaning given such term in Section 2.1(d) .

 

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1.42             “ GAAP ”  shall mean generally accepted accounting principles consistently applied.

 

1.43             “ Government Agencies ”  shall mean any court, agency, authority, board (including, without limitation, environmental protection, planning and zoning), bureau, commission, department, office or instrumentality of any nature whatsoever of any governmental or quasi-governmental unit of the United States or any State or any county or any political subdivision of any of the foregoing, whether now or hereafter in existence, having jurisdiction over Tenant or any Property, or any portion thereof, or any Facility operated thereon.

 

1.44             “ Gross Revenues ”   shall mean, with respect to each Property, for each Fiscal Year during the Term, in the aggregate, all revenues and receipts (determined on an accrual basis and in all material respects in accordance with GAAP) of every kind derived from renting, using and/or operating such Property and parts thereof, including, but not limited to:  all rents and revenues received or receivable for the use of or otherwise by reason of all units, beds and other facilities provided, meals served, services performed, space or facilities subleased or goods sold on such Property, or any portion thereof, including, without limitation, any other arrangements with third parties relating to the possession or use of any portion of such Property; and proceeds, if any, from business interruption or other loss of income insurance; provided , however , that Gross Revenues shall not include the following:  revenue from professional fees or charges by physicians and unaffiliated providers of services, when and to the extent such charges are paid over to such physicians and unaffiliated providers of services, or are separately billed and not included in comprehensive fees; contractual allowances (relating to any period during the Term) for billings not paid by or received from the appropriate governmental agencies or third party providers; allowances according to GAAP for uncollectible accounts, including credit card accounts and charity care or other administrative discounts; all proper patient billing credits and adjustments according to GAAP relating to health care accounting; provider discounts for hospital or other medical facility utilization contracts and credit card discounts; any amounts actually paid by Tenant for the cost of any federal, state or local governmental programs imposed specially to provide or finance indigent patient care; federal, state or municipal excise, sales, use, occupancy or similar taxes collected directly from patients, clients or residents or included as part of the sales price of any goods or services;

 

8

 

insurance proceeds (other than proceeds from business interruption or other loss of income insurance); Award proceeds (other than for a temporary Condemnation); revenues attributable to services actually provided off-site or otherwise away from such Property, such as home health care, to persons that are not patients, clients or residents at such Property; revenues attributable to child care services provided primarily to employees of such Property; any proceeds from any sale of such Property or from the refinancing of any debt encumbering such Property; proceeds from the disposition of furnishings, fixture and equipment no longer necessary for the operation of the Facility located thereon; any security deposits and other advance deposits, until and unless the same are forfeited to Tenant or applied for the purpose for which they were collected; reimbursements for provider, bed or occupancy taxes charged by any Governmental Agency to the extent previously included in Gross Revenues; and interest income from any bank account or investment of Tenant.

 

1.45             “ Guarantor ”   shall mean Five Star and each and every other guarantor of Tenant’s obligations under this Agreement, and each such guarantor’s successors and assigns.

 

1.46             “ Guaranty ”  shall mean any guaranty agreement executed by a Guarantor in favor of Landlord pursuant to which the payment or performance of Tenant’s obligations under this Agreement are guaranteed, together with all modifications, amendments and supplements thereto.

 

1.47             “ Hazardous Substances ”   shall mean any substance:

 

(a)           the presence of which requires or may hereafter require notification, investigation or remediation under any federal, state or local statute, regulation, rule, ordinance, order, action or policy; or

 

(b)           which is or becomes defined as a “hazardous waste”, “hazardous material” or “hazardous substance” or “pollutant” or “contaminant” under any present or future federal, state or local statute, regulation, rule or ordinance or amendments thereto including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq .) and the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq .) and the regulations promulgated thereunder; or

 

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(c)           which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by any governmental authority, agency, department, commission, board, agency or instrumentality of the United States, any state of the United States, or any political subdivision thereof; or

 

(d)           the presence of which on any Property, or any portion thereof, causes or materially threatens to cause an unlawful nuisance upon such Property, or any portion thereof, or to adjacent properties or poses or materially threatens to pose a hazard to such Property, or any portion thereof, or to the health or safety of persons on or about such Property, or any portion thereof; or

 

(e)           without limitation, which contains gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic compounds; or

 

(f)            without limitation, which contains polychlorinated biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or

 

(g)           without limitation, which contains or emits radioactive particles, waves or material; or

 

(h)           without limitation, constitutes Regulated Medical Wastes.

 

1.48             “ Immediate Family ”  shall mean, with respect to any individual, such individual’s spouse, parents, brothers, sisters, children (natural or adopted), stepchildren, grandchildren, grandparents, parents-in-law, brothers-in-law, sisters-in-law, nephews and nieces.

 

1.49             “ Impositions ”  shall mean, collectively, all taxes (including, without limitation, all taxes imposed under the laws of any State, as such laws may be amended from time to time, and all ad valorem, sales and use, or similar taxes as the same relate to or are imposed upon Landlord, Tenant or the business conducted upon the Leased Property), assessments (including, without limitation, all assessments for public improvements or benefit, whether or not commenced or completed prior to the date hereof), ground rents (including any minimum rent under any ground lease, and any additional rent or charges thereunder), water, sewer or other rents and charges, excises, tax levies, fees (including, without limitation, license, permit,

 

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inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character in respect of the Leased Property or the business conducted thereon by Tenant (including all interest and penalties thereon due to any failure in payment by Tenant), which at any time prior to, during or in respect of the Term hereof may be assessed or imposed on or in respect of or be a lien upon (a) Landlord’s interest in the Leased Property, (b) the Leased Property or any part thereof or any rent therefrom or any estate, right, title or interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Leased Property or the leasing or use of the Leased Property or any part thereof by Tenant; provided , however , that nothing contained herein shall be construed to require Tenant to pay and the term “Impositions” shall not include (i) any tax based on net income imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer fee (but excluding any mortgage or similar tax payable in connection with a Facility Mortgage) or other tax imposed with respect to the sale, exchange or other disposition by Landlord of the Leased Property or the proceeds thereof, (iv) any single business, gross receipts tax, transaction privilege, rent or similar taxes as the same relate to or are imposed upon Landlord, (v) any interest or penalties imposed on Landlord as a result of the failure of Landlord to file any return or report timely and in the form prescribed by law or to pay any tax or imposition, except to the extent such failure is a result of a breach by Tenant of its obligations pursuant to Section 3.1.3 , (vi) any impositions imposed on Landlord that are a result of Landlord not being considered a “United States person” as defined in Section 7701(a)(30) of the Code, (vii) any impositions that are enacted or adopted by their express terms as a substitute for any tax that would not have been payable by Tenant pursuant to the terms of this Agreement or (viii) any impositions imposed as a result of a breach of covenant or representation by Landlord in any agreement governing Landlord’s conduct or operation or as a result of the negligence or willful misconduct of Landlord.

 

1.50             “ Incidental Documents ”  shall mean, collectively, any Guaranty, any Security Agreement and any Pledge Agreement.

 

1.51             “ Indebtedness ”  shall mean all obligations, contingent or otherwise, which in accordance with GAAP should be reflected on the obligor’s balance sheet as liabilities.

 

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1.52             “ Insurance Requirements ”  shall mean all terms of any insurance policy required by this Agreement and all requirements of the issuer of any such policy and all orders, rules and regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon Landlord, Tenant, any Manager or the Leased Property.

 

1.53             “ Interest Rate ”  shall mean, with respect to each Property, the per annum interest rate specified as the Interest Rate with respect to such Property on Schedule 1 attached hereto and made a part hereof.

 

1.54             “ Land ”  shall have the meaning given such term in Section 2.1(a) .

 

1.55             “ Landlord ”  shall have the meaning given such term in the preambles to this Agreement and shall also include its permitted successors and assigns.

 

1.56             “ Landlord Default ”  shall have the meaning given such term in Article 14 .

 

1.57             “ Landlord Liens ”  shall mean liens on or against the Leased Property or any payment of Rent (a) which result from any act of, or any claim against, Landlord or any owner of a direct or indirect interest in the Leased Property (other than the lessor under any ground lease affecting any portion of the Leased Property), or which result from any violation by Landlord of any terms of this Agreement, or (b) which result from liens in favor of any taxing authority by reason of any tax owed by Landlord or any fee owner of a direct or indirect interest in the Leased Property (other than the lessor under any ground lease affecting any portion of the Leased Property); provided , however , that “ Landlord Lien ” shall not include any lien resulting from any tax for which Tenant is obligated to pay or indemnify Landlord against until such time as Tenant shall have already paid to or on behalf of Landlord the tax or the required indemnity with respect to the same.

 

1.58             “ Lease Year ”  shall mean any Fiscal Year or portion thereof during the Term.

 

1.59             “ Leased Improvements ”  shall have the meaning given such term in Section 2.1(b) .

 

1.60             “ Leased Intangible Property ”  shall mean all agreements, service contracts, equipment leases, booking

 

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agreements and other arrangements or agreements affecting the ownership, repair, maintenance, management, leasing or operation of the Leased Property, or any portion thereof, to which Landlord is a party; all books, records and files relating to the leasing, maintenance, management or operation of the Leased Property, or any portion thereof, belonging to Landlord; all transferable or assignable permits, certificates of occupancy, operating permits, sign permits, development rights and approvals, certificates, licenses, warranties and guarantees, rights to deposits, trade names, service marks, telephone exchange numbers identified with the Leased Property, and all other transferable intangible property, miscellaneous rights, benefits and privileges of any kind or character belonging to Landlord with respect to the Leased Property.

 

1.61             “ Leased Personal Property ”  shall have the meaning given such term in Section 2.1(e) .

 

1.62             “ Leased Property ”   shall have the meaning given such term in Section 2.1 .

 

1.63             “ Legal Requirements ”  shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting the Leased Property or the maintenance, construction, alteration or operation thereof, whether now or hereafter enacted or in existence, including, without limitation, (a) all permits, licenses, authorizations, certificates of need, authorizations and regulations necessary to operate any Property for its Permitted Use, and (b) all covenants, agreements, restrictions and encumbrances contained in any instruments at any time in force affecting any Property, including those which may (i) require material repairs, modifications or alterations in or to any Property or (ii) in any way materially and adversely affect the use and enjoyment thereof, but excluding any requirements arising as a result of Landlord’s status as a real estate investment trust.

 

1.64             “ Lien ”  shall mean any mortgage, security interest, pledge, collateral assignment, or other encumbrance, lien or charge of any kind, or any transfer of property or assets for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of general creditors.

 

1.65             “ Manager ”   shall mean, with respect to any Property, the operator or manager under any Management Agreement from time

 

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to time in effect with respect to such Property, and its permitted successors and assigns.

 

1.66             “ Management Agreement ”   shall mean, with respect to any Property, any operating or management agreement from time to time entered into by Tenant with respect to such Property in accordance with the applicable provisions of this Agreement, together with all amendments, modifications and supplements thereto.

 

1.67             “ Minimum Rent ”  shall mean the sum of Sixty Million Two Hundred Seventeen Thousand One Hundred Twenty and 00/100s Dollars ($60,217,120.00) per annum.

 

1.68             “ Notice ”  shall mean a notice given in accordance with Section 23.10 .

 

1.69             “ Officer’s Certificate ”  shall mean a certificate signed by an officer or other duly authorized individual of the certifying Entity duly authorized by the board of directors or other governing body of the certifying Entity.

 

1.70             “ Original Leases ”   shall have the meaning given such term in the recitals to this Agreement.

 

1.71             “ Overdue Rate ”  shall mean, on any date, a per annum rate of interest equal to the lesser of fifteen percent (15%) and the maximum rate then permitted under Applicable Laws.

 

1.72             “ Parent ”   shall mean, with respect to any Person, any Person which owns directly, or indirectly through one or more Subsidiaries or Affiliated Persons, twenty percent (20%) or more of the voting or beneficial interest in, or otherwise has the right or power (whether by contract, through ownership of securities or otherwise) to control, such Person.

 

1.73             “ Permitted Encumbrances ”  shall mean, with respect to any Property, all rights, restrictions, and easements of record set forth on Schedule B to the applicable owner’s or leasehold title insurance policy issued to Landlord with respect to such Property, plus any other encumbrances as may have been granted or caused by Landlord or otherwise consented to in writing by Landlord from time to time.

 

1.74             “ Permitted Use ”  shall mean, with respect to any Property, any use of such Property permitted pursuant to Section 4.1.1 .

 

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1.75             “ Person ”  shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so admits.

 

1.76             “ Pledge Agreement ”   shall mean, collectively, any pledge agreement made in favor of Landlord with respect to the stock or other equity interests of Tenant or any assignee, subtenant or other transferee, as it or they may be amended, restated, supplemented or otherwise modified from time to time.

 

1.77             “ Property ”  shall have the meaning given such term in Section 2.1 .

 

1.78             “ Provider Agreements ”  shall mean all participation, provider and reimbursement agreements or arrangements now or hereafter in effect for the benefit of Tenant or any Manager in connection with the operation of any Facility relating to any right of payment or other claim arising out of or in connection with Tenant’s participation in any Third Party Payor Program.

 

1.79             “ Regulated Medical Wastes ”   shall mean all materials generated by Tenant, subtenants, patients, occupants or the operators of the Leased Property which are now or may hereafter be subject to regulation pursuant to the Material Waste Tracking Act of 1988, or any Applicable Laws promulgated by any Government Agencies.

 

1.80             “ Rent ”  shall mean, collectively, the Minimum Rent, Additional Rent and Additional Charges.

 

1.81             “ Rules ”  shall have the meaning given such term in Section 22.1 .

 

1.82             “ SEC ”  shall mean the Securities and Exchange Commission.

 

1.83             “ Security Agreement ”  shall mean, collectively, any security agreement made by Tenant or any assignee, subtenant or other transferee for the benefit of Landlord, as it or they may be amended, restated, supplemented or otherwise modified from time to time.

 

1.84             “ State ”  shall mean, with respect to any Property, the state, commonwealth or district in which such Property is located.

 

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1.85             “ Subordinated Creditor ”  shall mean any creditor of Tenant which is a party to a Subordination Agreement in favor of Landlord.

 

1.86             “ Subordination Agreement ”  shall mean any agreement (and any amendments thereto) executed by a Subordinated Creditor pursuant to which the payment and performance of Tenant’s obligations to such Subordinated Creditor are subordinated to the payment and performance of Tenant’s obligations to Landlord under this Agreement.

 

1.87             “ Subsidiary ”  shall mean, with respect to any Person, any Entity (a) in which such Person owns directly, or indirectly through one or more Subsidiaries, twenty percent (20%) or more of the voting or beneficial interest or (b) which such Person otherwise has the right or power to control (whether by contract, through ownership of securities or otherwise).

 

1.88             “ Successor Landlord ”  shall have the meaning given such term in Section 20.2 .

 

1.89             “ Tenant ”  shall have the meaning given such term in the preambles to this Agreement.

 

1.90             “ Tenant’s Personal Property ”  shall mean all motor vehicles and consumable inventory and supplies, furniture, furnishings, equipment, movable walls and partitions, equipment and machinery and all other tangible personal property of Tenant, if any, acquired by Tenant on and after the applicable Commencement Date for any Property and located at such Property or used in Tenant’s business at the Leased Property and all modifications, replacements, alterations and additions to such personal property installed at the expense of Tenant, other than any items included within the definitions of Fixtures and Leased Personal Property.

 

1.91             “ Term ”  shall mean, collectively, the Fixed Term and the Extended Term, to the extent properly exercised pursuant to the provisions of Section 2.4 , unless sooner terminated pursuant to the provisions of this Agreement.

 

1.92             “ Third Party Payor Programs ”   shall mean all third party payor programs in which Tenant presently or in the future may participate, including, without limitation, Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, Managed Care Plans, other private insurance programs and employee assistance programs.

 

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1.93             “ Third Party Payors ”  shall mean Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, private insurers and any other Person which presently or in the future maintains Third Party Payor Programs.

 

1.94             “ Unsuitable for Its Permitted Use ”  shall mean, with respect to any Facility, a state or condition of such Facility such that (a) following any damage or destruction involving a Facility, (i) such Facility cannot be operated on a commercially practicable basis for its Permitted Use and it cannot reasonably be expected to be restored to substantially the same condition as existed immediately before such damage or destruction, and as otherwise required by Section 10.2.4 , within twelve (12) months following such damage or destruction or such longer period of time as to which business interruption insurance is available to cover Rent and other costs related to the applicable Property following such damage or destruction, (ii) the damage or destruction, if uninsured, exceeds $1,000,000 or (iii) the cost of such restoration exceeds ten percent (10%) of the fair market value of such Property immediately prior to such damage or destruction, or (b) as the result of a partial taking by Condemnation, such Facility cannot be operated, in the good faith judgment of Tenant, on a commercially practicable basis for its Permitted Use.

 

1.95             “ Work ”  shall have the meaning given such term in Section 10.2.4 .

 

ARTICLE 2

 

LEASED PROPERTY AND TERM

 

2.1               Leased Property .   Upon and subject to the terms and conditions hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord all of Landlord’s right, title and interest in and to all of the following (each of items (a) through (g) below which relates to any single Facility, a “ Property ” and, collectively, the “ Leased Property ”):

 

(a)           those certain tracts, pieces and parcels of land, as more particularly described in Exhibits A-1 through A-27 attached hereto and made a part hereof (the “ Land ”);

 

(b)           all buildings, structures and other improvements of every kind including, but not limited to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and off-site), parking areas and roadways appurtenant to such buildings and structures presently

 

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situated upon the Land (collectively, the “ Leased Improvements ”);

 

(c)           all easements, rights and appurtenances relating to the Land and the Leased Improvements;

 

(d)           all equipment, machinery, fixtures, and other items of property, now or hereafter permanently affixed to or incorporated into the Leased Improvements, including, without limitation, all furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting, ventilating, refrigerating, incineration, air and water pollution control, waste disposal, air-cooling and air-conditioning systems and apparatus, sprinkler systems and fire and theft protection equipment, all of which, to the maximum extent permitted by law, are hereby deemed by the parties hereto to constitute real estate, together with all replacements, modifications, alterations and additions thereto, but specifically excluding all items included within the category of Tenant’s Personal Property (collectively, the “ Fixtures ”);

 

(e)           all machinery, equipment, furniture, furnishings, moveable walls or partitions, computers or trade fixtures or other personal property of any kind or description used or useful in Tenant’s business on or in the Leased Improvements, and located on or in the Leased Improvements, and all modifications, replacements, alterations and additions to such personal property, except items, if any, included within the category of Fixtures, but specifically excluding all items included within the category of Tenant’s Personal Property (collectively, the “ Leased Personal Property ”);

 

(f)            all of the Leased Intangible Property; and

 

(g)           any and all leases of space in the Leased Improvements.

 

2.2               Condition of Leased Property .  Tenant acknowledges receipt and delivery of possession of the Leased Property and Tenant accepts the Leased Property in its “as is” condition, subject to the rights of parties in possession, the existing state of title, including all covenants, conditions, restrictions, reservations, mineral leases, easements and other matters of record or that are visible or apparent on the Leased Property, all applicable Legal Requirements, the lien of any financing instruments, mortgages and deeds of trust existing

 

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prior to the applicable Commencement Date for any Property or permitted by the terms of this Agreement, and such other matters which would be disclosed by an inspection of the Leased Property and the record title thereto or by an accurate survey thereof.  TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD’S AGENTS OR EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY.  LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.  To the maximum extent permitted by law, however, Landlord hereby assigns to Tenant all of Landlord’s rights to proceed against any predecessor in interest or insurer for breaches of warranties or representations or for latent defects in the Leased Property.  Landlord shall fully cooperate with Tenant in the prosecution of any such claims, in Landlord’s or Tenant’s name, all at Tenant’s sole cost and expense.  Tenant shall indemnify, defend, and hold harmless Landlord from and against any loss, cost, damage or liability (including reasonable attorneys’ fees) incurred by Landlord in connection with such cooperation.

 

2.3               Fixed Term .  The initial term of this Agreement (the “ Fixed Term ”) with respect to each Property commenced on the Commencement Date with respect to such Property and shall expire on December 31, 2028.

 

2.4               Extended Terms .  Provided that no Event of Default shall have occurred and be continuing, Tenant shall have the right to extend the Term for two renewal terms of fifteen (15) years each (each an “ Extended Term ”).

 

If and to the extent Tenant shall exercise the options, the first Extended Term shall commence on January 1, 2029 and expire on December 31, 2043 and the second Extended Term shall commence on January 1, 2044 and expire on December 31, 2058.  All of the terms, covenants and provisions of this Agreement shall apply to each Extended Term, except that Tenant shall have no right to extend the Term beyond December 31, 2058.  If Tenant shall elect to exercise the option to extend the Term for the first Extended Term, it shall do so by giving Landlord Notice thereof not later than December 31, 2026, and if Tenant shall elect to exercise

 

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its option to extend the Term for the second Extended Term after having elected to extend the Term for the first Extended Term, it shall do so by giving Landlord Notice not later than December 31, 2041, it being understood and agreed that time shall be of the essence with respect to the giving of any such Notice.  If Tenant shall fail to give any such Notice, this Agreement shall automatically terminate at the end of the Fixed Term or the first Extended Term as applicable and Tenant shall have no further option to extend the Term of this Agreement.  If Tenant shall give such Notice, the extension of this Agreement shall be automatically effected without the execution of any additional documents; it being understood and agreed, however, that Tenant and Landlord shall execute such documents and agreements as either party shall reasonably require to evidence the same.  Notwithstanding the provisions of the foregoing sentence, if, subsequent to the giving of such Notice, an Event of Default shall occur, at Landlord’s option, the extension of this Agreement shall cease to take effect and this Agreement shall automatically terminate at the end of the Fixed Term or the Extended Term, as applicable, and Tenant shall have no further option to extend the Term of this Agreement.

 

Notwithstanding the foregoing, Tenant shall have no right to extend the Term for either Extended Term with respect to any Properties located in the State of California.  If Tenant shall extend the Term, the definition of Leased Property shall exclude any Properties located in the State of California during the Extended Term(s), Minimum Rent shall be reduced by the Minimum Rent allocated thereto by the parties, and Tenant shall surrender such Properties to Landlord at the expiration of the Fixed Term in the condition required by Section 5.3 and shall comply with all of its other obligations relating to such Properties as if the Term had expired at the end of the Fixed Term.

 

ARTICLE 3

 

RENT

 

3.1               Rent .  Tenant shall pay, in lawful money of the United States of America which shall be legal tender for the payment of public and private debts, without offset, abatement, demand or deduction (unless otherwise expressly provided in this Agreement), Minimum Rent and Additional Rent to Landlord and Additional Charges to the party to whom such Additional Charges are payable, during the Term.  All payments to Landlord shall be made by wire transfer of immediately available federal funds or by other means acceptable to Landlord in its sole discretion. 

 

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Rent for any partial calendar month shall be prorated on a per diem basis.

 

3.1.1           Minimum Rent .

 

(a)           Payments .  Minimum Rent shall be paid in equal monthly installments in arrears on the first Business Day of each calendar month during the Term.

 

(b)           Allocation of Minimum Rent .  Minimum Rent may be allocated and reallocated among the Properties comprising the Leased Property by agreement among Landlord and Tenant; provided , however that in no event shall the Minimum Rent allocated to any Property be less than the monthly amount payable by Landlord on account of any Facility Mortgage and/or ground or master lease with respect to such Property nor shall the aggregate amount of Minimum Rent allocated among the Properties exceed the total amount payable for the Leased Property.

 

(c)           Adjustments of Minimum Rent Following Disbursements Under Sections 5.1.2(b), 10.2.3 and 11.2 .   Effective on the date of each disbursement to pay for the cost of any repairs, maintenance, renovations or replacements pursuant to Sections 5.1.2(b), 10.2.3 or 11.2 , the annual Minimum Rent shall be increased by a per annum amount equal to the Disbursement Rate times the amount so disbursed.  If any such disbursement is made during any calendar month on a day other than the first Business Day of such calendar month, Tenant shall pay to Landlord on the first Business Day of the immediately following calendar month (in addition to the amount of Minimum Rent payable with respect to such calendar month, as adjusted pursuant to this paragraph (c)) the amount by which Minimum Rent for the preceding calendar month, as adjusted for such disbursement on a per diem basis, exceeded the amount of Minimum Rent paid by Tenant for such preceding calendar month.

 

(d)           Adjustments of Minimum Rent Following Partial Lease Termination .  Subject to Section 4.1.1(b) , if this Agreement shall terminate with respect to any Property but less than all of the Leased Property, Minimum Rent shall be reduced by the affected Property’s allocable share of Minimum Rent determined in accordance with the applicable provisions of this Agreement.

 

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3.1.2           Additional Rent .

 

(a)           Amount .  Tenant shall pay additional rent (“ Additional Rent ”) with respect to each Lease Year during the Term in an amount, not less than zero, equal to four percent (4%) of Excess Gross Revenues at each Property.

 

(b)           Quarterly Installments .  Installments of Additional Rent for each Lease Year during the Term, or portion thereof, shall be calculated and paid quarterly in arrears.  Quarterly payments of Additional Rent for each Property shall be calculated based on Gross Revenues for such quarter during the preceding year and shall be due and payable and delivered to Landlord on the first Business Day of each calendar quarter, or portion thereof, thereafter occurring during the Term, together with an Officer’s Certificate setting forth the calculation of Additional Rent due and payable for such quarter.

 

(c)           Reconciliation of Additional Rent .  In addition, within seventy-five (75) days after the end of each Lease Year (or any portion thereof occurring during the Term), Tenant shall deliver, or cause to be delivered, to Landlord (i) a financial report setting forth the Gross Revenues for each Property for such preceding Lease Year, or portion thereof, together with an Officer’s Certificate from Tenant’s chief financial or accounting officer certifying that such report is true and correct, and (ii) a statement showing Tenant’s calculation of Additional Rent due for such preceding Lease Year, or portion thereof, based on the Gross Revenues set forth in such financial report, together with an Officer’s Certificate from Tenant’s chief financial or accounting officer certifying that such statement is true and correct.

 

If the annual Additional Rent for such preceding Lease Year as set forth in Tenant’s statement thereof exceeds the amount previously paid with respect thereto by Tenant, Tenant shall pay such excess to Landlord at such time as the statement is delivered, together with interest at the Interest Rate, which interest shall accrue from the close of such preceding Lease Year until the date that such statement is required to be delivered and, thereafter, such interest shall accrue at the Overdue Rate, until the amount of such difference shall be paid or otherwise discharged.  If the annual Additional Rent for such preceding Lease Year as shown in such statement is less than the amount previously paid with respect thereto by Tenant, provided

 

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that no Event of Default shall have occurred and be continuing, Landlord shall grant Tenant a credit against the Additional Rent next coming due in the amount of such difference, together with interest at the Interest Rate, which interest shall accrue from the date of payment by Tenant until the date such credit is applied or paid, as the case may be.  If such credit cannot be made because the Term has expired prior to application in full thereof, provided no Event of Default has occurred and is continuing, Landlord shall pay the unapplied balance of such credit to Tenant, together with interest at the Interest Rate, which interest shall accrue from the date of payment by Tenant until the date of payment by Landlord.

 

(d)           Confirmation of Additional Rent .  Tenant shall utilize, or cause to be utilized, an accounting system for the Leased Property in accordance with its usual and customary practices and in all material respects in accordance with GAAP, which will accurately record all Gross Revenues and Tenant shall retain, for at least three (3) years after the expiration of each Lease Year, reasonably adequate records conforming to such accounting system showing all Gross Revenues for such Lease Year.  Landlord, at its own expense, except as provided hereinbelow, shall have the right, exercisable by Notice to Tenant, by its accountants or representatives, to audit the information set forth in the Officer’s Certificate referred to in subparagraph (c) above and, in connection with such audits, to examine Tenant’s books and records with respect thereto (including supporting data and sales and excise tax returns).  Landlord shall begin such audit as soon as reasonably possible following its receipt of the applicable Officer’s Certificate and shall complete such audit as soon as reasonably possible thereafter.  All such audits shall be performed at the location where such books and records are customarily kept and in such a manner so as to minimize any interference with Tenant’s business operations.  If any such audit discloses a deficiency in the payment of Additional Rent and either Tenant agrees with the result of such audit or the matter is otherwise determined, Tenant shall forthwith pay to Landlord the amount of the deficiency, as finally agreed or determined, together with interest at the Interest Rate, from the date such payment should have been made to the date of payment thereof, and if the amount of such deficiency exceeds five percent (5%) of the Additional Rent that should have been paid for any Lease Year, Tenant shall forthwith pay to Landlord the

 

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aggregate amount of all costs and expenses incurred by Landlord in connection with any such audit.  If any such audit discloses that Tenant paid more Additional Rent for any Lease Year than was due hereunder, and either Landlord agrees with the result of such audit or the matter is otherwise determined, provided no Event of Default has occurred and is continuing, Landlord shall, at Landlord’s option, either grant Tenant a credit or pay to Tenant an amount equal to the amount of such overpayment against Additional Rent next coming due in the amount of such difference, as finally agreed or determined, together with interest at the Interest Rate, which interest shall accrue from the time of payment by Tenant until the date such credit is applied or paid, as the case may be; provided , however , that, upon the expiration or sooner termination of the Term, provided no Event of Default has occurred and is continuing, Landlord shall pay the unapplied balance of such credit to Tenant, together with interest at the Interest Rate, which interest shall accrue from the date of payment by Tenant until the date of payment from Landlord.  Any dispute concerning the correctness of an audit shall be settled by arbitration pursuant to the provisions of Article 22 .

 

Any proprietary information obtained by Landlord with respect to Tenant pursuant to the provisions of this Agreement shall be treated as confidential, except that such information may be disclosed or used, subject to appropriate confidentiality safeguards, pursuant to court order or in any litigation between the parties and except further that Landlord may disclose such information to its prospective lenders, provided that Landlord shall direct such lenders to maintain such information as confidential.  The obligations of Tenant and Landlord contained in this Section 3.1.2 shall survive the expiration or earlier termination of this Agreement.

 

3.1.3           Additional Charges .  In addition to the Minimum Rent and Additional Rent payable hereunder, Tenant shall pay (or cause to be paid) to the appropriate parties and discharge (or cause to be discharged) as and when due and payable the following (collectively, “ Additional Charges ”):

 

(a)           Impositions .  Subject to Article 8 relating to permitted contests, Tenant shall pay, or cause to be paid, all Impositions before any fine, penalty, interest or cost (other than any opportunity cost as a result of a failure to take advantage of any discount for early payment) may be

 

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added for non-payment, such payments to be made directly to the taxing authorities where feasible, and shall promptly, upon request, furnish to Landlord copies of official receipts or other reasonably satisfactory proof evidencing such payments.  If any such Imposition may, at the option of the taxpayer, lawfully be paid in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Tenant may exercise the option to pay the same (and any accrued interest on the unpaid balance of such Imposition) in installments and, in such event, shall pay, or cause to pay, such installments during the Term as the same become due and before any fine, penalty, premium, further interest or cost may be added thereto.  Landlord, at its expense, shall, to the extent required or permitted by Applicable Laws, prepare and file, or cause to be prepared and filed, all tax returns and pay all taxes due in respect of Landlord’s net income, gross receipts, sales and use, single business, transaction privilege, rent, ad valorem, franchise taxes and taxes on its capital stock or other equity interests, and Tenant, at its expense, shall, to the extent required or permitted by Applicable Laws and regulations, prepare and file all other tax returns and reports in respect of any Imposition as may be required by Government Agencies.  Provided no Event of Default shall have occurred and be continuing, if any refund shall be due from any taxing authority in respect of any Imposition paid by or on behalf of Tenant, the same shall be paid over to or retained by Tenant.  Landlord and Tenant shall, upon request of the other, provide such data as is maintained by the party to whom the request is made with respect to the Leased Property as may be necessary to prepare any required returns and reports.  In the event Government Agencies classify any property covered by this Agreement as personal property, Tenant shall file, or cause to be filed, all personal property tax returns in such jurisdictions where it may legally so file.  Each party shall, to the extent it possesses the same, provide the other, upon request, with cost and depreciation records necessary for filing returns for any property so classified as personal property.  Where Landlord is legally required to file personal property tax returns for property covered by this Agreement, Landlord shall provide Tenant with copies of assessment notices in sufficient time for Tenant to file a protest.  All Impositions assessed against such personal property shall be (irrespective of whether Landlord or Tenant shall file the relevant return) paid by Tenant not later than the last

 

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date on which the same may be made without interest or penalty, subject to the provisions of Article 8 .

 

Landlord shall give prompt Notice to Tenant of all Impositions payable by Tenant hereunder of which Landlord at any time has knowledge; provided , however , that Landlord’s failure to give any such notice shall in no way diminish Tenant’s obligation hereunder to pay such Impositions.

 

(b)           Utility Charges .  Tenant shall pay or cause to be paid all charges for electricity, power, gas, oil, water and other utilities used in connection with the Leased Property.

 

(c)           Insurance Premiums .  Tenant shall pay or cause to be paid all premiums for the insurance coverage required to be maintained pursuant to Article 9 .

 

(d)           Other Charges .  Tenant shall pay or cause to be paid all other amounts, liabilities and obligations, including, without limitation, ground rents, if any, and all amounts payable under any equipment leases and all agreements to indemnify Landlord under Sections 4.4.2 and 9.5 .

 

(e)           Reimbursement for Additional Charges .  If Tenant pays or causes to be paid property taxes or similar or other Additional Charges attributable to periods after the end of the Term, whether upon expiration or sooner termination of this Agreement (other than termination by reason of an Event of Default), Tenant may, within a reasonable time after the end of the Term, provide Notice to Landlord of its estimate of such amounts.  Landlord shall promptly reimburse Tenant for all payments of such taxes and other similar Additional Charges that are attributable to any period after the Term of this Agreement.

 

3.2               Late Payment of Rent, Etc.   If any installment of Minimum Rent, Additional Rent or Additional Charges (but only as to those Additional Charges which are payable directly to Landlord) shall not be paid within ten (10) days after its due date, Tenant shall pay Landlord, on demand, as Additional Charges, a late charge (to the extent permitted by law) computed at the Overdue Rate on the amount of such installment, from the due date of such installment to the date of payment thereof. To the extent that Tenant pays any Additional Charges directly to

 

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Landlord or any Facility Mortgagee pursuant to any requirement of this Agreement, Tenant shall be relieved of its obligation to pay such Additional Charges to the Entity to which they would otherwise be due.  If any payments due from Landlord to Tenant shall not be paid within ten (10) days after its due date, Landlord shall pay to Tenant, on demand, a late charge (to the extent permitted by law) computed at the Overdue Rate on the amount of such installment from the due date of such installment to the date of payment thereof.

 

In the event of any failure by Tenant to pay any Additional Charges when due, Tenant shall promptly pay and discharge, as Additional Charges, every fine, penalty, interest and cost which is added for non-payment or late payment of such items.  Landlord shall have all legal, equitable and contractual rights, powers and remedies provided either in this Agreement or by statute or otherwise in the case of non-payment of the Additional Charges as in the case of non-payment of the Minimum Rent and Additional Rent.

 

3.3               Net Lease .  The Rent shall be absolutely net to Landlord so that this Agreement shall yield to Landlord the full amount of the installments or amounts of the Rent throughout the Term, subject to any other provisions of this Agreement which expressly provide otherwise, including those provisions for adjustment or abatement of such Rent.

 

3.4               No Termination, Abatement, Etc.   Except as otherwise specifically provided in this Agreement, each of Landlord and Tenant, to the maximum extent permitted by law, shall remain bound by this Agreement in accordance with its terms and shall not take any action without the consent of the other to modify, surrender or terminate this Agreement.  In addition, except as otherwise expressly provided in this Agreement, Tenant shall not seek, or be entitled to, any abatement, deduction, deferment or reduction of the Rent, or set-off against the Rent, nor shall the respective obligations of Landlord and Tenant be otherwise affected by reason of (a) any damage to or destruction of the Leased Property, or any portion thereof, from whatever cause or any Condemnation, (b) the lawful or unlawful prohibition of, or restriction upon, Tenant’s use of the Leased Property, or any portion thereof, or the interference with such use by any Person or by reason of eviction by paramount title; (c) any claim which Tenant may have against Landlord by reason of any default (other than a monetary default) or breach of any warranty by Landlord under this Agreement or any other agreement between Landlord and Tenant, or to which Landlord and Tenant are parties; (d) any bankruptcy, insolvency, reorganization, composition,

 

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readjustment, liquidation, dissolution, winding up or other proceedings affecting Landlord or any assignee or transferee of Landlord; or (e) for any other cause whether similar or dissimilar to any of the foregoing (other than a monetary default by Landlord).  Except as otherwise specifically provided in this Agreement, Tenant hereby waives all rights arising from any occurrence whatsoever, which may now or hereafter be conferred upon it by law (a) to modify, surrender or terminate this Agreement or quit or surrender the Leased Property, or any portion thereof, or (b) which would entitle Tenant to any abatement, reduction, suspension or deferment of the Rent or other sums payable or other obligations to be performed by Tenant hereunder.  The obligations of Tenant hereunder shall be separate and independent covenants and agreements, and the Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events unless the obligations to pay the same shall be terminated pursuant to the express provisions of this Agreement.

 

ARTICLE 4

 

USE OF THE LEASED PROPERTY

 

4.1               Permitted Use .

 

4.1.1           Permitted Use .

 

(a)           Tenant shall, at all times during the Term, and at any other time that Tenant shall be in possession of any Property, continuously use and operate, or cause to be used and operated, such Property as a skilled nursing/ intermediate care/independent living/assisted living/ special care/group home facility as currently operated, and any uses incidental thereto.  Tenant shall not use (and shall not permit any Person to use) any Property, or any portion thereof, for any other use without the prior written consent of Landlord, which approval shall not be unreasonably withheld, delayed or conditioned.  No use shall be made or permitted to be made of any Property and no acts shall be done thereon which will cause the cancellation of any insurance policy covering such Property or any part thereof (unless another adequate policy is available) or which would constitute a default under any ground lease affecting such Property, nor shall Tenant sell or otherwise provide to residents or patients therein, or permit to be kept, used or sold in or about any Property any article which may be prohibited by law or by the standard form of fire insurance policies, or any other

 

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insurance policies required to be carried hereunder, or fire underwriter’s regulations.  Tenant shall, at its sole cost (except as expressly provided in Section 5.1.2(b) ), comply or cause to be complied with all Insurance Requirements.  Tenant shall not take or omit to take, or permit to be taken or omitted to be taken, any action, the taking or omission of which materially impairs the value or the usefulness of any Property or any part thereof for its Permitted Use.

 

(b)           In the event that, in the reasonable determination of Tenant, it shall no longer be economically practical to operate any Property as currently operated, Tenant shall give Landlord Notice thereof, which Notice shall set forth in reasonable detail the reasons therefor.  Thereafter, Landlord and Tenant shall negotiate in good faith to agree on an alternative use for such Property, appropriate adjustments to the Additional Rent and other related matters; provided , however , in no event shall the Minimum Rent be reduced or abated as a result thereof.  If Landlord and Tenant fail to agree on an alternative use for such Property within sixty (60) days after commencing negotiations as aforesaid, Tenant may market such Property for sale to a third party.  If Tenant receives a bona fide offer (an “ Offer ”) to purchase such Property from a Person having the financial capacity to implement the terms of such Offer, Tenant shall give Landlord Notice thereof, which Notice shall include a copy of the Offer executed by such third party.  In the event that Landlord shall fail to accept or reject such Offer within thirty (30) days after receipt of such Notice, such Offer shall be deemed to be rejected by Landlord.  If Landlord shall sell the Property pursuant to such Offer, then, effective as of the date of such sale, this Agreement shall terminate with respect to such Property, and the Minimum Rent shall be reduced by an amount equal to the product of the net proceeds of sale received by Landlord multiplied by the Interest Rate.  If Landlord shall reject (or be deemed to have rejected) such Offer, then, effective as of the proposed date of such sale, this Agreement shall terminate with respect to such Property, and the Minimum Rent shall be reduced by an amount equal to the product of the projected net proceeds determined by reference to such Offer multiplied by the Interest Rate.

 

4.1.2           Necessary Approvals .  Tenant shall proceed with all due diligence and exercise reasonable efforts to obtain and

 

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