Exhibit 10.6
LEASE REALIGNMENT
AGREEMENT
This Lease Realignment Agreement
(this “ Agreement ”) is made August 4,
2009, among Senior Housing Properties Trust (“ SNH
”) and its subsidiaries listed on the signature page to
this Agreement (together with SNH, the “ SNH Parties
”) and Five Star Quality Care, Inc. (“ Five
Star ”) and its subsidiaries listed on the signature
page to this Agreement (together with Five Star, the “
Five Star Parties ” and together with the SNH Parties,
the “ Parties ”).
RECITAL
Certain of the SNH Parties and
certain of the Five Star Parties are, respectively, landlords and
tenants under the leases listed on Schedule A (collectively,
the “ Leases ”) of skilled nursing, intermediate
care, independent living, assisted living, special care and group
home facilities, rehabilitation hospital, clinic or professional
level health or medical services facilities, and other healthcare
properties identified in the Leases (collectively, “
Leased Properties ”).
To facilitate a term loan (“
Term Loan ”) to be made to SNH FM Financing LLC, a
wholly owned subsidiary of SNH (“ SNH Financing
”), by Citibank, N.A. (“ Citibank ”), the
Parties have agreed to (a) amend and restate the Leases
numbered 1-4 on Schedule A (collectively, as amended and
restated, the “ Amended and Restated Leases ”)
to, inter alia , change the pools of Leased Properties
demised thereunder and to further amend (the “ First
Amendment ”) the Amended and Restated Lease under which
the Leased Properties identified on Schedule B (the “
Mortgaged Properties ”) will be leased (the “
Term Loan Lease ”), (b) amend and restate the
security agreements from the tenants under the Amended and Restated
Leases (collectively, the “ Amended and Restated Security
Agreements ”), (c) amend and restate certain of the
subleases under the Amended and Restated Leases, (collectively, the
“ Amended and Restated Subleases ”),
(d) amend and restate the security agreements from the
subtenants under the Amended and Restated Subleases (collectively,
the “ Amended and Restated Subtenant Security
Agreements ”), (e) amend and restate the Five Star
guarantees and the subtenants’ guarantees of the Amended and
Restated Leases (collectively, the “ Amended and Restated
Guarantys ”), (f) terminate all pledges of equity
interests of tenants and subtenants under the Leases and an
assignment and security agreement with respect to reserves for
furniture, fixtures and equipment thereunder (collectively, the
“ Termination Agreements ”), (g) the sale
by certain of the Five Star Parties to the SNH Party that is the
landlord under the Term Loan Lease of furniture, fixtures and
equipment (the “ FF&E ”) located at the
Mortgaged Properties, (h) the pledge by certain of the Five
Star Parties to Citibank of inventory and equipment used at the
Mortgaged Properties and leases, rents, contracts and accounts
receivable relating to or arising from operation of the Mortgaged
Properties pursuant to Subordination, Assignment and Security
Agreements (the “ SASAs ”) and certain further
amendments to the Term Loan Lease as provided therein, and
(i) conform certain reporting and operational obligations of
those Five Star Parties which are tenants and/or operators of the
Mortgaged Properties to those required by the Term Loan.
In addition, to facilitate the Term
Loan, certain of the Five Star Parties have been in negotiation
with Citibank with respect to agreements and instruments to be
executed and delivered by them in connection therewith and with
Wachovia Bank, National Association (“ Wachovia
”) with respect to amendments to their credit facility with
Wachovia.
In connection with all of the
foregoing, the Parties have agreed to certain accommodations to
facilitate the Term Loan.
Now, therefore, the Parties
agree:
1.
Execution and
Delivery . Contemporaneously
with the closing of the Term Loan, the Amended and Restated Leases,
the First Amendment, the Amended and Restated Security Agreements,
the Amended and Restated Subleases, the Amended and Restated
Subtenant Security Agreements, the Amended and Restated Guarantys,
the Termination Agreements, the SASAs, bills of sale for the
FF&E and all other agreements, instruments and documents
required in connection therewith will be executed and delivered by
the SNH Parties and the Five Star Parties which are parties thereto
in the forms agreed to by such Parties.
2.
Common
Stock . Contemporaneously
with the closing of the Term Loan, SNH will purchase and Five Star
will sell 3,200,000 shares of Five Star’s common stock, par
value $0.01 (the “ FVE Common Stock ”), and Five
Star and SNH will enter into a Registration Rights Agreement in the
form of Exhibit A (the “ Registration Rights
Agreement ”); provided, however, that Five Star shall not
issue the FVE Common Stock to SNH until Five Star receives
notification from the NYSE Amex LLC of the NYSE Amex LLC’s
approval for listing with the NYSE Amex LLC the FVE Common Stock to
be issued by Five Star to SNH pursuant to this
Section 2. Five Star agrees to submit within five
business days of the date of this Agreement a listing application
with the NYSE Amex LLC for listing approval with the NYSE Amex LLC
of the FVE Common Stock.
3.
Consideration
. In
consideration for the purchase and sale of the FF&E, the FVE
Common Stock and certain other accommodations afforded the SNH
Parties by the FVE Parties as contemplated by this Agreement and
the other agreements, instruments and documents executed and
delivered in connection with the transactions contemplated hereby,
and as reimbursement for certain internal costs of the Five Star
Parties, contemporaneously with the closing of the Term Loan, SNH
will pay Five Star $18,600,000 in cash and effect the rent
reduction provided in Section 5 hereof.
4.
Expenses
. Upon
receipt of invoices and in addition to the payment provided in
Section 3 hereof, SNH will pay all past and future
out-of-pocket costs and expenses, including attorney’s fees,
incurred by the Five Star Parties in connection with or arising
from the negotiation and closing of the transactions contemplated
by this Agreement (but not costs and expenses of continued
maintenance or compliance) and the other agreements, instruments
and documents executed and delivered in connection with the
transactions contemplated hereby, including all past and future
costs and expenses in connection with or arising from the
organization (but not the continued maintenance) of additional
subsidiaries and licensing.
5.
Rent
Reduction . Minimum Rent (defined
in the Amended and Restated Leases) for the Amended and Restated
Lease which includes the Leased Properties known as the New England
Rehabilitation Hospital and the Braintree Rehabilitation Hospital
will, upon closing of the Term Loan, be reduced by an annual amount
equal to $2,000,000 until the expiration or sooner termination of
the Fixed Term (as defined in that Amended and Restated
Lease).
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6.
Uneconomic
Properties . So long as the First
Amendment is effective (as such amendment may be amended or
modified from time to time), if the tenant under the Term Loan
Lease reasonably determines that it is no longer economically
practical to operate a Mortgaged Property as it is then operated
and desires to market such Mortgaged Property for sale or to
replace such Mortgaged Property with another property which is not
then a Mortgaged Property, then upon notice to SNH with supporting
information, to the extent SNH Financing may then do so in
compliance with its covenants under the Term Loan, and so long as
SNH Financing would not be subject to any make-whole or similar
payment, the landlord under the Term Loan Lease will reasonably
cooperate with the tenant and negotiate in good faith with Citibank
(or its successors) to permit such a sale or replacement of such
Mortgaged Property, subject to any required prepayment of the Term
Loan not being in excess of the sale proceeds if the Mortgaged
Property is sold or, if the Mortgaged Property is to be replaced,
to no prepayment being required, and to permit an amendment of the
Term Loan Lease to reduce the Minimum Rent (defined in the Term
Loan Lease) upon such sale, consistent with the terms of the Term
Loan Lease as in effect immediately prior to the effectiveness of
the First Amendment, or upon such replacement, to adjust the
Minimum Rent, if appropriate, on terms acceptable to the landlord
and tenant. To the extent such sale or replacement could not
be done by SNH Financing in compliance with its covenants under the
Term Loan, SNH Financing shall negotiate in good faith with
Citibank (or its successors) to obtain the consent of Citibank (or
its successors) to such sale or replacement, subject to the other
qualifications of the immediately preceding sentence.
7.
Cooperation
. Each of
the Parties will use commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement and to
cooperate with each other in connection with the foregoing, whether
before or after the closing of the Term Loan. Additionally,
the Five Star Parties will timely provide the SNH Parties with
information and documentation reflecting the historical cost basis
of the Five Star Parties in the FF&E.
8.
Redemption and
Compliance . Five Star shall not
and shall cause its subsidiaries not to offer to redeem or redeem
any shares of Five Star common stock if as a result of such
redemption the FVE Common Stock issued to SNH by Five Star pursuant
to this Agreement would then represent more than 9.8% of the then
issued and outstanding shares of Five Star common stock; provided
for these purposes, shares issued to officers and employees which
are subject to vesting or similar restrictions shall not be deemed
to be issued and outstanding. Five Star will reasonably
cooperate with any SNH request involving SNH’s compliance
with section 856(d)(2)(B) of the Internal Revenue Code of
1986, as amended (including the applicable attribution
rules of section 856(d)(5)).
9.
Transfer
Restrictions . Subject to ownership
limitations in Five Star’s governing instruments, as they may
be in effect from time to time, for so long as Five Star may have
net operating loss carryforwards or similar tax benefits which may
be applied to Five Star’s future taxable income and the
application of such loss carryforwards or benefits may be limited
as a result of ownership changes in Five Star’s stock
pursuant to applicable tax law, regulations or rules, SNH shall not
sell, dispose or otherwise transfer, or offer to do the same,
without Five Star’s prior written consent (not to be
unreasonably withheld, conditioned or delayed), any shares of the
FVE Common Stock.
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10.
Indemnity
. Should
any of the Parties default in its obligations under the Term Loan
or any agreement, document or instrument executed in connection
therewith, such defaulting Parties will pay or reimburse any other
Party for any cost, expense, loss or damage suffered or incurred by
such other Party as a result of such default.
11.
Representations and
Warranties of Five Star Parties . The Five Star
Parties represent and warrant to the SNH Parties that:
(a)
Organization
. Each of
the Five Star Parties is duly organized, validly existing and in
good standing under the laws of its jurisdiction or organization
and has full corporate, trust, limited liability company or limited
partnership power and authority to conduct its business as it is
now being conducted and to own, operate or lease its properties and
assets.
(b)
Authorization
. Each of
the Five Star Parties has all requisite corporate, trust, limited
liability company or limited partnership power and authority to
execute and deliver this Agreement and the other agreements,
documents or instruments which it is required to execute and
deliver in connection with this Agreement and the transactions
contemplated hereby and to perform its respective obligations
hereunder and thereunder. The execution and delivery by each
of the Five Star Parties of this Agreement and the other
agreements, documents or instruments which they are required to
execute and deliver in connection with this Agreement and the
transactions contemplated hereby and the consummation by each of
the transactions contemplated hereby have been duly authorized by
all necessary corporate, trust, limited liability company or
limited partnership action. This Agreement and the other
agreements, documents or instruments required to be executed and
delivered by each of the Five Star Parties in connection this
Agreement and the transactions contemplated hereby has been duly
and validly executed and delivered by each of the Five Star Parties
party thereto and, assuming due authorization, execution and
delivery by each of the other Parties, constitutes the legal, valid
and binding obligation of such Five Star Parties, enforceable
against each of the Five Star Parties in accordance with its terms,
except as such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws relating to creditors’ rights generally,
(ii) general principles of equity (whether applied in a
proceeding at law or in equity) and (iii) any implied covenant
of good faith and fair dealing.
(c)
No
Violation . The execution and
delivery by each of the Five Star Parties of this Agreement and the
agreements, documents or instruments required to be executed and
delivered by them in connection with the transactions contemplated
hereby does not, and the consummation by each of them of the
transactions contemplated hereby will not, (i) conflict with,
or result in any violation of or default under, any provision of
the governing instruments of the Five Star Parties;
(ii) conflict with or result in any violation of or default
under, any law or judgment applicable to any such entity, or to
which any of their respective properties are subject; or
(iii) conflict with, or, with or without notice or the lapse
of time, result in a breach, termination (or right of termination)
or violation of or default under the terms of any agreement,
contract, indenture or other instrument to
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which any such
entity is a party or subject, or to which any of its respective
properties are subject.
(d)
Approvals
. The
execution and delivery by each of the Five Star Parties of this
Agreement and the agreements, documents or instruments required to
executed and delivered by them in connection with this Agreement
and the other transactions contemplated hereby and the consummation
by it of the transactions contemplated hereby do not require the
consent, approval, order, or authorization of any person under any
agreement, contract, indenture or other instrument or laws to which
any Five Star Party is a party or subject or to which any of its
respective properties are subject, and no declaration, filing or
registration with any governmental entity is required by any such
entity in connection with the execution and delivery of this
Agreement and the consummation by it of the transactions
contemplated by this Agreement, except for consents which have been
obtained and filings required under securities laws.
(e)
FF&E
. The Five
Star Parties have, or will have at the closing of the Term Loan,
title to all of the FF&E, free and clear of any liens or
encumbrances, subject to SNH’s right and obligation to
acquire the FF&E pursuant to this Agreement.
(f)
Common
Shares . The FVE Common Stock
to be issued to SNH, when issued in accordance with the terms of
this Agreement, will be duly authorized, validly issued, fully paid
and non-assessable and not subject to any preemptive rights and
issued in compliance with all applicable laws. As of the date
of this Agreement and after giving effect to the issuance of the
FVE Common Stock, the FVE Common Stock to be issued to SNH by Five
Star will represent approximately 9.03% of the issued and
outstanding shares of common stock of Five Star.
12.
Representations and
Warranties of SNH . The SNH Parties
represent and warrant to the Five Star Parties:
(a)
Organization
. Each of
the SNH Parties is duly organized, validly existing and in good
standing under the laws of its jurisdiction or organization and has
full corporate, real estate investment trust, limited liability
company or limited partnership power and authority to conduct its
business as it is now being conducted and to own, operate or lease
its properties and assets.
(b)
Authorization
. Each of
the SNH Parties has all requisite corporate, trust, limited
liability company or limited partnership power and authority to
execute and deliver this Agreement and the other agreements,
documents or instruments which it is required to execute and
deliver in connection with this Agreement and the transactions
contemplated hereby and to perform its respective obligations
hereunder and thereunder. The execution and delivery by each
of the SNH Parties of this Agreement and the other agreements,
documents or instruments which they are required to execute and
deliver in connection with this Agreement and the transactions
contemplated hereby and the consummation by each of the
transactions contemplated hereby have been duly authorized by all
necessary corporate, trust, limited liability company or limited
partnership action. This Agreement and the other agreements,
documents or instruments required to be executed and delivered by
each of the SNH Parties in connection this
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Agreement and the
transactions contemplated hereby has been duly and validly executed
and delivered by each of the SNH Parties party thereto and,
assuming due authorization, execution and delivery by each of the
other Parties, constitutes the legal, valid and binding obligation
of such SNH Parties, enforceable against each of the SNH Parties in
accordance with its terms, except as such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to
creditors’ rights generally, (ii) general principles of
equity (whether applied in a proceeding at law or in equity) and
(iii) any implied covenant of good faith and fair
dealing.
(c)
No
Violation . The execution and
delivery by each of the SNH Parties of this Agreement and the
agreements, documents or instruments required to be executed and
delivered by them in connection with the transactions contemplated
hereby does not, and the consummation by each of them of the
transactions contemplated hereby will not, (i) conflict with,
or result in any violation of or default under, any provision of
the g
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