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Exhibit 10.21
OMNIBUS AMENDMENT AGREEMENT
NO. 1 TO LEASE AGREEMENTS
Dated as of October 25, 0000
XXXXXXXX XXXXXXX XX XXXXXXXXXXXX, INC., a Pennsylvania corporation
("Capstone Pennsylvania"), HR ACQUISITION I CORPORATION, f/k/a Capstone Capital
Corporation, a Maryland corporation ("HRAIC"), CAPSTONE CAPITAL OF VIRGINIA,
INC., an Alabama corporation ("Capstone Virginia" and, together with Capstone
Pennsylvania and HRAIC, the "Lessors"), EXTENDED CARE OPERATORS OF HARRISBURG,
L.L.C., a Delaware limited liability company ("ECO Harrisburg"), EXTENDED CARE
OPERATORS OF RAVENNA, L.L.C., a Delaware limited liability company ("ECO
Ravenna"), ALCO VI, L.L.C., a North Carolina limited liability company ("ALCO
Hampden"), ALCO XI, L.L.C., a North Carolina limited liability company ("ALCO
Danville"), ALCO IX, L.L.C., a North Carolina limited liability company ("ALCO
Harrisonburg"), ALCO X, L.L.C., a North Carolina limited liability company
("ALCO Roanoke"), EXTENDED CARE OPERATORS OF GREENSBORO, L.L.C., a Delaware
limited liability company ("ECO Greensboro" and, together with ECO Harrisburg,
ECO Ravenna, ALCO Hampden, ALCO Danville, ALCO Harrisonburg and ALCO Roanoke,
the "Lessees"), BCC AT GREENSBORO, INC., a Delaware corporation ("First
Assignor"), and BALANCED CARE CORPORATION, a Delaware corporation ("BCC"), agree
as follows:
1. Preliminary Statements. (a) Capstone Pennsylvania, as lessor, and
ECO Harrisburg, as lessee, entered into that certain Lease Agreement dated as of
March 28, 1997, which was assigned and assumed by Senior Care Operators, L.L.C.,
a Delaware limited liability company ("SCO"), pursuant to an Assignment and
Assumption Agreement dated as of December 30, 1997, which was subsequently
amended and assigned by SCO and assumed by ECO Harrisburg pursuant to an
Assignment, Assumption and Amendment to Lease dated as of February 6, 1998 (as
amended and assigned, the "Harrisburg Lease"), for the lease of an assisted
living facility in Harrisburg, Dauphin County, Pennsylvania (the "Harrisburg
Facility"). (b) HRIAC's predecessor-in-interest, Capstone Capital Corporation,
as lessor, and ECO Ravenna, as lessee, entered into that certain Lease Agreement
dated as of March 28, 1997, which was assigned and assumed by SCO pursuant to an
Assignment and Assumption Agreement dated as of December 30, 1997, which was
subsequently amended and assigned by SCO and assumed by ECO Ravenna pursuant to
an Assignment, Assumption and Amendment to Lease dated as of February 6, 1998,
(as amended and
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assigned, the "Ravenna Lease"), for the lease of an assisted living facility in
Ravenna, Portage County, Ohio (the "Ravenna Facility"). (c) Capstone
Pennsylvania, as lessor, and ALCO Hampden, as lessee, entered into that certain
Lease Agreement dated as of September 30, 1997, as amended and restated by that
certain First Amended and Restated Lease dated as of September 30, 1998 (as
amended and restated, the "Hampden Lease"), for the lease of an assisted living
facility in Hampden Township, Cumberland County, Pennsylvania (the "Hampden
Facility"). (d) Capstone Virginia, as lessor, and ALCO Danville, as lessee,
entered into that certain Lease Agreement dated as of June 15, 1998 (the
"Danville Lease"), for the lease of an assisted living facility in Danville,
Pittsylvania County, Virginia (the "Danville Facility"). (e) Capstone Virginia,
as lessor, and ALCO Harrisonburg, as lessee, entered into that certain Lease
Agreement dated as of June 15, 1998 (the "Harrisonburg Lease"), for the lease of
an assisted living facility in Harrisonburg, Rockingham County, Virginia (the
"Harrisonburg Facility"). (f) Capstone Virginia, as lessor, and ALCO Roanoke, as
lessee, entered into that certain Lease Agreement dated as of June 15, 1998 (the
"Roanoke Lease"), for the lease of an assisted living facility in Roanoke,
Roanoke County, Virginia (the "Roanoke Facility"). (g) HRIAC's
predecessor-in-interest, Capstone Capital Corporation, as lessor, and First
Assignor entered into that certain Lease Agreement dated as of March 28, 1997,
which was assigned and assumed by SCO pursuant to an Assignment and Assumption
Agreement dated December 30, 1997, which was subsequently amended and assigned
by SCO and assumed by ECO Greensboro pursuant to an Assignment, Assumption and
Amendment of Lease Agreement dated February 6, 1998 (as amended and assigned,
the "Greensboro Lease" and, together with the Harrisburg Lease, the Ravenna
Lease, the Hampden Lease, the Danville Lease, the Harrisonburg Lease and the
Roanoke Lease, the "Leases"), for the lease of an assisted living facility
located in the Guilford County, Greensboro, North Carolina (the "Greensboro
Facility" and, together with the Harrisburg Facility, the Ravenna Facility, the
Hampden Facility, the Danville Facility, the Harrisonburg Facility and the
Roanoke Facility, the "Facilities"). Lessors and Lessees have agreed to
recalculate the Minimum Rent due under the Leases after the reallocation of the
budgeted amounts for development and construction of each of the Facilities
pursuant to that certain Omnibus Amendment Agreement No. 1 to Development
Agreements executed as of even date herewith among Lessors, as owners, and BCC
Development and Management Co., a Delaware corporation, as
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developer, and to make further amendments to the Leases in the manner set forth
in this Omnibus Amendment Agreement No. 1 to Lease Agreements (this
"Amendment"), effective as of the date hereof, unless otherwise indicated. BCC
has entered into various agreements with respect to the Facilities, including
guaranties, shortfall funding agreements, working capital assurance agreements
and options to purchase the equity interests of the Lessees and joins in the
execution of this Amendment to acknowledge its consent to the transactions
contemplated hereby.
2. Definitions. As used herein, the term "Leases" means the Leases as
hereby amended and modified. Unless the context otherwise requires, all
capitalized terms used herein without definition shall have the definitions
provided therefor in the referenced Lease.
3. Amendment to the Harrisburg Lease. The Harrisburg Lease is amended,
effective as of the date hereof, as follows:
(a) The parties confirm that the Commencement Date was
January 1, 1998.
(b) The parties agree that the amount of the "Approved Budget
Costs" is equal to $3,834,706.
(c) The parties confirm that the Minimum Rent for the first
year of the Initial Term shall be $383,470.56, and the monthly
installments for the first year of the Initial Term shall be payable in
advance in monthly installments on the first day of each calendar month
beginning with the Commencement Date. The parties also confirm that the
current monthly installment of the Minimum Rent is $33,605.77.
(d) Sections 2.1(c) and 2.1(d) are deleted.
(e) The following Sections 2.7, 2.8 and 2.9 are added after
Section 2.6.
2.7 Capital Replacement Reserve.
(a) As used herein, the following terms shall have the
meanings indicated:
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"Capital Replacement Project" means repairs or
replacements to the Leased Improvements, the costs of which,
according to generally accepted accounting principles, must be
depreciated over periods of three years or more.
"Capital Replacement Reserve" means the reserve
established by Lessor and funded by Lessee pursuant to the
terms of Section 2.7(b).
"Disbursement" means a disbursement of the proceeds
of the Capital Replacement Reserve to or for the benefit of
Lessee in connection with a Capital Replacement.
"Disbursement Request" means a detailed written
request for a Disbursement prepared by Lessee in accordance
with the Disbursement Schedule.
"Disbursement Schedule" means the guidelines for
making Disbursements to Lessee from the Capital Replacement
Reserve as set forth in Schedule 1 attached hereto.
"Project Budget" means a line item budget for a
Capital Replacement Project, in form and substance reasonably
satisfactory to Lessor, setting forth in such detail as Lessor
may require the nature and amount of all the Project Costs.
"Project Costs" means the total costs of the
development and construction of a Capital Replacement Project.
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"Project Plans" means the detailed plans and
specifications for a Capital Replacement Project.
(b) Beginning on the first (1st) anniversary of the
Commencement Date, Lessee shall make an annual Facility upgrade
expenditure in an amount equal to $200 per bed for capital
improvements, such amount to be increased $50 per bed on each
Adjustment Date. If requested by Lessor, Lessee shall promptly provide
evidence of such capital expenditures. In the event Lessee fails to
make the required capital expenditure in any Lease Year, Lessee shall
deposit the same with Lessor as the "Capital Replacement Reserve." The
funds in the Capital Replacement Reserve shall be made available to
Lessee from time to time for Capital Replacement Projects as approved
by Lessor pursuant to the terms of the Disbursement Schedule and
Section 9.3. Lessee shall make detailed requests for such funds in
writing to Lessor in the same form as a Request pursuant Section 9.3
hereof. Within 30 days of such Request, Lessor shall reasonably approve
the amount of requested funds and make mutually agreeable arrangements
for the disbursement of the funds, or provide Lessee with written
notice in reasonable detail specifying Lessor's objections to such
Request.
(c) Lessee may from time to time request that Lessor release
some or all of the funds held by Lessor in the Capital Replacement
Reserve for a Capital Replacement Project, which Capital Replacement
Project shall be subject to Lessor's prior consent to be given or
withheld in its reasonable discretion. In the event that a request for
a Capital
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Replacement Project is approved by Lessor, Lessee shall submit the
Project Plans, together with the Project Budget, in form and substance
reasonably satisfactory to Lessor, setting forth in such detail as
Lessor may reasonably require regarding the nature and amount of the
Project Costs anticipated in connection with the Capital Replacement
Project, including payment of Lessor's construction inspector for no
more than one inspection per month during the period of construction.
Upon approval of each of the Capital Replacement Project, the Project
Plans and the Project Budget by Lessor, Lessee shall cause construction
of the Capital Replacement Project to be promptly commenced and
diligently and continuously prosecuted to completion, subject in each
case to the following requirements: (i) the Capital Replacement Project
shall be constructed in substantial conformity with the Project Plans
and in compliance in all material respects with all applicable Legal
Requirements, and in a good and workmanlike manner with new materials
of good quality; and (ii) the Capital Replacement Project shall be
constructed entirely on the Land and shall not encroach upon or
overhang any lot line, boundary, set-back, easement, right-of-way or
other land. If at any time Lessor notifies Lessee that construction of
the Capital Replacement Project does not conform to the requirements of
this Section 2.7(c) or the guidelines for any such nonconformity is
otherwise discovered by Lessee, Lessee shall immediately cause such
nonconforming construction to be stopped and all necessary corrective
work to be commenced and diligently and continuously prosecuted to
completion. Each Disbursement Request for a Disbursement, together with
the payment of any funds required to be paid by Lessee in connection
with such Capital Replacement
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Project, shall be made in accordance with the Disbursement Schedule.
2.8 Lease Deposit. On or before the date of this Amendment,
Lessee must deposit and maintain with Lessor a lease deposit (together
with any accrued interest pursuant to Section 2.9, the "Lease Deposit")
equal to approximately three (3) months' Minimum Rent, rounded upward
to the nearest $1,000. Lessor reserves the right to require additional
deposits if the Minimum Rent increases during the Term. Lessor, from
time to time, without prejudice to any other remedy, may apply funds
from the Lease Deposit to make good any arrearage of Rent or to satisfy
any other covenant or obligation of Lessee under the Lease, including
the payment of taxes and insurance, regardless of whether an Event of
Default shall have occurred and be continuing. In the event that Lessor
shall apply all or any part of the Lease Deposit pursuant to the
provisions of this Section, Lessee, within ten days after written
demand by Lessor to Lessee, shall replenish the Lease Deposit to its
required amount as calculated above, including any accrued interest or
late fees as of the date of such disbursement. No such application
shall be deemed to have been made by operation of law or otherwise
until actually made by the Lessor as herein provided, nor shall any
application be deemed to affect any right or remedy of the Lessor
hereunder, under any statute or rule of law, or in equity.
2.9 Provisions Governing the Reserves.
(a) As used herein, the following terms shall have
the meanings indicated:
"Lease Deposit Rate" means a per annum rate
of interest equal to the average rate, for the
previous twelve-month period,
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offered by Bank of America in Nashville, Tennessee,
for certificates of deposits with maturities of
90 days.
"Reserves" means, collectively, the Capital
Replacement Reserve and the Lease Deposit.
(b) The Reserves (A) shall be held by Lessor, but not
in escrow, (B) except for the Lease Deposit, shall not earn or
accrue any interest, and (C) shall not be considered an
advance payment of the Rent or a limit on the measure of
Lessor's damages in case of an Event of Default hereunder by
Lessee. Lessee hereby grants to Lessor an assignment of, a
security interest in and a right of setoff against each of the
Reserves to fund any shortfall in the payment or performance
by Lessee in the Rent, and Lessee shall not permit any other
voluntary or involuntary mortgage, security deed, deed of
trust, deed to secure debt, lien, pledge, assignment, security
interest, title retention agreement, financing lease, levy,
execution, seizure, judgment, attachment, garnishment, charge,
lien or other encumbrance of any kind to exist upon any of the
Reserves. The parties agree that Lessor shall keep track of
the Reserves on Lessor's accounting records and Lessor shall
not be required to segregate the Reserves or deposit the same
in an account (interest bearing or otherwise) with a bank or
other third party. Lessor shall accrue interest on the Lease
Deposit on its accounting records at the Lease Deposit Rate,
commencing on the date the Lease Deposit was funded and
continuing until such funds are either applied or disbursed by
Lessor pursuant to the terms of this Lease or returned to
Lessee. Lessor shall calculate the accrual of such interest in
arrears on
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an annual basis as of each Adjustment Date and shall prorate
such interest for any partial years.
(c) So long as no Event of Default shall have
occurred and be continuing, all funds remaining in the Lease
Deposit at the end of the Term shall be paid to Lessee upon
satisfaction of all of Lessee's obligations hereunder,
including the payment of all Rent and the surrender of the
Leased Property in accordance with the provisions hereof. In
the event that Lessee exercises any right to purchase the
Leased Property, any unused portion of the Capital Replacement
Reserve shall be delivered to Lessee when the title to the
Leased Property is transferred; otherwise, any unused portion
of the Capital Replacement Reserve shall be retained by Lessor
at the end of the Term.
(f) Section 2.5 is amended to provide that the Rent and
Adjusted Rent Coverage Ratios will be calculated commencing on December
31, 1999.
(g) The parties acknowledge that, simultaneously with the
execution of this Amendment, Lessor has disbursed the sum of $94,000
out of the Approved Budget Costs to fund the Lease Deposit on behalf of
Lessee.
(h) Section 35.9 of the Lease is deleted.
4. Amendment to the Ravenna Lease. The Ravenna Lease is amended,
effective as of the date hereof, as follows:
(a) The parties confirm that the Commencement Date was
February 1, 1998.
(b) The parties agree that the amount of the "Approved Budget
Costs" is equal to $3,709,656.
(c) The parties confirm that the Minimum Rent for the first
year of the Initial Term shall be $370,965.60, and the monthly
installments for the first year of the Initial Term shall be payable in
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monthly installments on the first day of each calendar month beginning
with the Commencement Date. The parties also confirm that the current
monthly installment of the Minimum Rent is $32,478.04.
(d) Sections 2.1(c) and 2.1(d) are deleted.
(e) The following Section 2.7 is added after Section 2.6.
2.7 Capital Replacement Reserve.
(a) As used herein, the following terms shall have
the meanings indicated:
"Capital Replacement Project" means repairs
or replacements to the Leased Improvements, the costs
of which, according to generally accepted accounting
principles, must be depreciated over periods of three
years or more.
"Capital Replacement Reserve" means the
reserve established by Lessor and funded by Lessee
pursuant to the terms of Section 2.7(b).
"Disbursement" means a disbursement of the
proceeds of the Capital Replacement Reserve to or for
the benefit of Lessee in connection with a Capital
Replacement.
"Disbursement Request" means a detailed
written request for a Disbursement prepared by Lessee
in accordance with the Disbursement Schedule.
"Disbursement Schedule" means the guidelines
for making Disbursements to Lessee from the
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Capital Replacement Reserve as set forth in Schedule
1 attached hereto.
"Project Budget" means a line item budget
for a Capital Replacement Project, in form and
substance reasonably satisfactory to Lessor, setting
forth in such detail as Lessor may require the nature
and amount of all the Project Costs.
"Project Costs" means the total costs of the
development and construction of a Capital Replacement
Project.
"Project Plans" means the detailed plans and
specifications for a Capital Replacement Project.
(b) Beginning on the first (1st) anniversary of the
Commencement Date, Lessee shall make an annual Facility
upgrade expenditure in an amount equal to $200 per bed for
capital improvements, such amount to be increased $50 per bed
on each Adjustment Date. If requested by Lessor, Lessee shall
promptly provide evidence of such capital expenditures. In the
event Lessee fails to make the required capital expenditure in
any Lease Year, Lessee shall deposit the same with Lessor as
the "Capital Replacement Reserve." The funds in the Capital
Replacement Reserve shall be made available to Lessee from
time to time for Capital Replacement Projects as approved by
Lessor pursuant to the terms of the Disbursement Schedule and
Section 9.3. Lessee shall make detailed requests for such
funds in writing to Lessor in the same form as a Request
pursuant Section 9.3 hereof. Within 30 days of such Request,
Lessor shall reasonably approve the amount of requested funds
and
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make mutually agreeable arrangements for the disbursement of
the funds, or provide Lessee with written notice in reasonable
detail specifying Lessor's objections to such Request.
(c) Lessee may from time to time request that Lessor
release some or all of the funds held by Lessor in the Capital
Replacement Reserve for a Capital Replacement Project, which
Capital Replacement Project shall be subject to Lessor's prior
consent to be given or withheld in its reasonable discretion.
In the event that a request for a Capital Replacement Project
is approved by Lessor, Lessee shall submit the Project Plans,
together with the Project Budget, in form and substance
reasonably satisfactory to Lessor, setting forth in such
detail as Lessor may reasonably require regarding the nature
and amount of the Project Costs anticipated in connection with
the Capital Replacement Project, including payment of Lessor's
construction inspector for no more than one inspection per
month during the period of construction. Upon approval of each
of the Capital Replacement Project, the Project Plans and the
Project Budget by Lessor, Lessee shall cause construction of
the Capital Replacement Project to be promptly commenced and
diligently and continuously prosecuted to completion, subject
in each case to the following requirements: (i) the Capital
Replacement Project shall be constructed in substantial
conformity with the Project Plans and in compliance in all
material respects with all applicable Legal Requirements, and
in a good and workmanlike manner with new materials of good
quality; and (ii) the Capital Replacement Project shall be
constructed entirely on the Land and shall not encroach upon
or overhang any lot line, boundary, set-back, easement,
right-of-way or other
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land. If at any time Lessor notifies Lessee that construction
of the Capital Replacement Project does not conform to the
requirements of this Section 2.7(c) or the guidelines for any
such nonconformity is otherwise discovered by Lessee, Lessee
shall immediately cause such nonconforming construction to be
stopped and all necessary corrective work to be commenced and
diligently and continuously prosecuted to completion. Each
Disbursement Request for a Disbursement, together with the
payment of any funds required to be paid by Lessee in
connection with such Capital Replacement Project, shall be
made in accordance with the Disbursement Schedule.
2.8 Lease Deposit. On or before the date of this Amendment,
Lessee must deposit and maintain with Lessor a lease deposit (together
with any accrued interest pursuant to Section 2.9, the "Lease Deposit")
equal to approximately three (3) months' Minimum Rent, rounded upward
to the nearest $1,000. Lessor reserves the right to require additional
deposits if the Minimum Rent increases during the Term. Lessor, from
time to time, without prejudice to any other remedy, may apply funds
from the Lease Deposit to make good any arrearage of Rent or to satisfy
any other covenant or obligation of Lessee under the Lease, including
the payment of taxes and insurance, regardless of whether an Event of
Default shall have occurred and be continuing. In the event that Lessor
shall apply all or any part of the Lease Deposit pursuant to the
provisions of this Section, Lessee, within ten days after written
demand by Lessor to Lessee, shall replenish the Lease Deposit to its
required amount as calculated above, including any accrued interest or
late fees as of the date of such disbursement. No such application
shall be deemed to have been made by operation of law
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or otherwise until actually made by the Lessor as herein provided, nor
shall any application be deemed to affect any right or remedy of the
Lessor hereunder, under any statute or rule of law, or in equity.
2.9 Provisions Governing the Reserves.
(a) As used herein, the following terms shall have
the meanings indicated:
"Lease Deposit Rate" means a per annum rate
of interest equal to the average rate, for the
previous twelve-month period, offered by Bank of
America in Nashville, Tennessee, for certificates of
deposits with maturities of 90 days.
"Reserves" means, collectively, the Capital
Replacement Reserve and the Lease Deposit.
(b) The Reserves (A) shall be held by Lessor, but not
in escrow, (B) except for the Lease Deposit, shall not earn or
accrue any interest, and (C) shall not be considered an
advance payment of the Rent or a limit on the measure of
Lessor's damages in case of an Event of Default hereunder by
Lessee. Lessee hereby grants to Lessor an assignment of, a
security interest in and a right of setoff against each of the
Reserves to fund any shortfall in the payment or performance
by Lessee in the Rent, and Lessee shall not permit any other
voluntary or involuntary mortgage, security deed, deed of
trust, deed to secure debt, lien, pledge, assignment, security
interest, title retention agreement, financing lease, levy,
execution, seizure, judgment, attachment, garnishment, charge,
lien or other encumbrance of any kind to exist upon any of
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the Reserves. The parties agree that Lessor shall keep track
of the Reserves on Lessor's accounting records and Lessor
shall not be required to segregate the Reserves or deposit the
same in an account (interest bearing or otherwise) with a bank
or other third party. Lessor shall accrue interest on the
Lease Deposit on its accounting records at the Lease Deposit
Rate, commencing on the date the Lease Deposit was funded and
continuing until such funds are either applied or disbursed by
Lessor pursuant to the terms of this Lease or returned to
Lessee. Lessor shall calculate the accrual of such interest in
arrears on an annual basis as of each Adjustment Date and
shall prorate such interest for any partial years.
(c) So long as no Event of Default shall have
occurred and be continuing, all funds remaining in the Lease
Deposit at the end of the Term shall be paid to Lessee upon
satisfaction of all of Lessee's obligations hereunder,
including the payment of all Rent and the surrender of the
Leased Property in accordance with the provisions hereof. In
the event that Lessee exercises any right to purchase the
Leased Property, any unused portion of the Capital Replacement
Reserve shall be delivered to Lessee when the title to the
Leased Property is transferred; otherwise, any unused portion
of the Capital Replacement Reserve shall be retained by Lessor
at the end of the Term.
(f) Section 2.5 is amended to provide that the Rent and
Adjusted Rent Coverage Ratios will be calculated commencing on March
31, 2000.
(g) The parties acknowledge that, simultaneously with the
execution of this Amendment, Lessor has disbursed the sum of $88,000
out of the Approved Budget Costs to fund the Lease Deposit on behalf of
Lessee.
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(h) Section 35.9 of the Lease is deleted.
5. Amendment to the Hampden Lease. The Hampden Lease is amended,
effective as of the date hereof, as follows:
(a) The parties confirm that the Commencement Date was January
20, 1999.
(b) The parties confirm that the amount of the "Project
Amount" is equal to $7,416,000.
(c) The parties confirm that the Minimum Rent for the first
year of the Initial Term shall be $591,591.37, and the monthly
installments for the first year of the Initial Term shall be payable in
advance in monthly installments on the first day of each calendar month
beginning with the first full month following the Commencement Date
(with the Minimum Rent to be prorated for the month during which the
Commencement Date occurred). The parties also confirm that the current
monthly installment of the Minimum Rent is $57,555.95.
(d) Section 2.1(c) is deleted.
(e) The following Sections 2.7, 2.8 and 2.9 are added after
Section 2.6.
2.7 Capital Replacement Reserve.
(a) As used herein, the following terms shall have
the meanings indicated:
"Capital Replacement Project" means repairs
or replacements to the Leased Improvements, the costs
of which, according to generally accepted accounting
principles, must be depreciated over periods of three
years or more.
"Capital Replacement Reserve" means the
reserve established by Lessor and funded by Lessee
pursuant to the terms of Section 2.7(b).
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"Disbursement" means a disbursement of the
proceeds of the Capital Replacement Reserve to or for
the benefit of Lessee in connection with a Capital
Replacement.
"Disbursement Request" means a detailed
written request for a Disbursement prepared by Lessee
in accordance with the Disbursement Schedule.
"Disbursement Schedule" means the guidelines
for making Disbursements to Lessee from the Capital
Replacement Reserve as set forth in Schedule 1
attached hereto.
"Project Budget" means a line item budget
for a Capital Replacement Project, in form and
substance reasonably satisfactory to Lessor, setting
forth in such detail as Lessor may require the nature
and amount of all the Project Costs.
"Project Costs" means the total costs of the
development and construction of a Capital Replacement
Project.
"Project Plans" means the detailed plans and
specifications for a Capital Replacement Project.
(b) Beginning on the first (1st) anniversary of the
Commencement Date, Lessee shall make an annual Facility
upgrade expenditure in an amount equal to $200 per bed for
capital improvements, such amount to
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be increased $50 per bed on each Adjustment Date. If requested
by Lessor, Lessee shall promptly provide evidence of such
capital expenditures. In the event Lessee fails to make the
required capital expenditure in any Lease Year, Lessee shall
deposit the same with Lessor as the "Capital Replacement
Reserve." The funds in the Capital Replacement Reserve shall
be made available to Lessee from time to time for Capital
Replacement Projects as approved by Lessor pursuant to the
terms of the Disbursement Schedule and Section 9.3. Lessee
shall make detailed requests for such funds in writing to
Lessor in the same form as a Request pursuant Section 9.3
hereof. Within 30 days of such Request, Lessor shall
reasonably approve the amount of requested funds and make
mutually agreeable arrangements for the disbursement of the
funds, or provide Lessee with written notice in reasonable
detail specifying Lessor's objections to such Request.
(c) Lessee may from time to time request that Lessor
release some or all of the funds held by Lessor in the Capital
Replacement Reserve for a Capital Replacement Project, which
Capital Replacement Project shall be subject to Lessor's prior
consent to be given or withheld in its reasonable discretion.
In the event that a request for a Capital Replacement Project
is approved by Lessor, Lessee shall submit the Project Plans,
together with the Project Budget, in form and substance
reasonably satisfactory to Lessor, setting forth in such
detail as Lessor may reasonably require regarding the nature
and amount of the Project Costs anticipated in connection with
the Capital Replacement Project, including payment of Lessor's
construction inspector for no more than one inspection per
month during the period of construction. Upon approval of
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each of the Capital Replacement Project, the Project Plans and
the Project Budget by Lessor, Lessee shall cause construction
of the Capital Replacement Project to be promptly commenced
and diligently and continuously prosecuted to completion,
subject in each case to the following requirements: (i) the
Capital Replacement Project shall be constructed in
substantial conformity with the Project Plans and in
compliance in all material respects with all applicable Legal
Requirements, and in a good and workmanlike manner with new
materials of good quality; and (ii) the Capital Replacement
Project shall be constructed entirely on the Land and shall
not encroach upon or overhang any lot line, boundary,
set-back, easement, right-of-way or other land. If at any time
Lessor notifies Lessee that construction of the Capital
Replacement Project does not conform to the requirements of
this Section 2.7(c) or the guidelines for any such
nonconformity is otherwise discovered by Lessee, Lessee shall
immediately cause such nonconforming construction to be
stopped and all necessary corrective work to be commenced and
diligently and continuously prosecuted to completion. Each
Disbursement Request for a Disbursement, together with the
payment of any funds required to be paid by Lessee in
connection with such Capital Replacement Project, shall be
made in accordance with the Disbursement Schedule.
2.8 Lease Deposit. On or before the date of this Amendment,
Lessee must deposit and maintain with Lessor a lease deposit (together
with any accrued interest pursuant to Section 2.9, the "Lease Deposit")
equal to approximately three (3) months' Minimum Rent, rounded upward
to the nearest $1,000. Lessor reserves the right to require additional
deposits if the Minimum Rent increases during the Term. Lessor, from
20
time to time, without prejudice to any other remedy, may apply funds
from the Lease Deposit to make good any arrearage of Rent or to satisfy
any other covenant or obligation of Lessee under the Lease, including
the payment of taxes and insurance, regardless of whether an Event of
Default shall have occurred and be continuing. In the event that Lessor
shall apply all or any part of the Lease Deposit pursuant to the
provisions of this Section, Lessee, within ten days after written
demand by Lessor to Lessee, shall replenish the Lease Deposit to its
required amount as calculated above, including any accrued interest or
late fees as of the date of such disbursement. No such application
shall be deemed to have been made by operation of law or otherwise
until actually made by the Lessor as herein provided, nor shall any
application be deemed to affect any right or remedy of the Lessor
hereunder, under any statute or rule of law, or in equity.
2.9 Provisions Governing the Reserves.
(a) As used herein, the following terms shall have
the meanings indicated:
"Lease Deposit Rate" means a per annum rate
of interest equal to the average rate, for the
previous twelve-month period, offered by Bank of
America in Nashville, Tennessee, for certificates of
deposits with maturities of 90 days.
"Reserves" means, collectively, the Capital
Replacement Reserve and the Lease Deposit.
(b) The Reserves (A) shall be held by Lessor, but not
in escrow, (B) except for
21
the Lease Deposit, shall not earn or accrue any interest, and
(C) shall not be considered an advance payment of the Rent or
a limit on the measure of Lessor's damages in case of an Event
of Default hereunder by Lessee. Lessee hereby grants to Lessor
an assignment of, a security interest in and a right of setoff
against each of the Reserves to fund any shortfall in the
payment or performance by Lessee in the Rent, and Lessee shall
not permit any other voluntary or involuntary mortgage,
security deed, deed of trust, deed to secure debt, lien,
pledge, assignment, security interest, title retention
agreement, financing lease, levy, execution, seizure,
judgment, attachment, garnishment, charge, lien or other
encumbrance of any kind to exist upon any of the Reserves. The
parties agree that Lessor shall keep track of the Reserves on
Lessor's accounting records and Lessor shall not be required
to segregate the Reserves or deposit the same in an account
(interest bearing or otherwise) with a bank or other third
party. Lessor shall accrue interest on the Lease Deposit on
its accounting records at the Lease Deposit Rate, commencing
on the date the Lease Deposit was funded and continuing until
such funds are either applied or disbursed by Lessor pursuant
to the terms of this Lease or returned to Lessee. Lessor shall
calculate the accrual of such interest in arrears on an annual
basis as of each Adjustment Date and shall prorate such
interest for any partial years.
(c) So long as no Event of Default shall have
occurred and be continuing, all funds remaining in the Lease
Deposit at the end of the Term shall be paid to Lessee upon
satisfaction of all of Lessee's obligations hereunder,
including the payment of all Rent and the surrender of the
Leased Property in accordance with the provisions hereof. In
22
the event that Lessee exercises any right to purchase the
Leased Property, any unused portion of the Capital Replacement
Reserve shall be delivered to Lessee when the title to the
Leased Property is transferred; otherwise, any unused portion
of the Capital Replacement Reserve shall be retained by Lessor
at the end of the Term.
(f) Section 2.5 is amended to provide that the Rent and
Adjusted Rent Coverage Ratios will be calculated commencing on
September 30, 2000.
(g) The parties acknowledge that on May 15, 2000, Lessee
deposited with Lessor the sum of $173,000 to fund the Lease Deposit.
(h) Section 35.9 of the Lease is deleted.
6. Amendment to the Danville Lease. The Danville Lease is amended,
effective as of the date hereof, as follows:
(a) The parties confirm that the Commencement Date was July 1,
1998.
(b) The parties agree that the amount of the "Project Amount"
is equal to $4,690,815.
(c) The parties confirm that the Minimum Rent for the first
year of the Initial Term shall be $505,153.87, and the monthly
installments for the first year of the Initial Term shall be payable in
advance in monthly installments, on the first day of each calendar
month beginning with the Commencement Date. The parties also confirm
that the current monthly installment of the Minimum Rent is $44,399.66.
(d) Simultaneously herewith, the parties are executing a
Settlement Statement which sets forth amounts owed to either Lessor or
Lessee which amount reflects the difference between the Minimum Rent
and the amount of Minimum Rent actually paid by Lessee.
(d) Section 2.1(c) is deleted.
23
(e) The following Section 2.7 is added after Section 2.6.
2.7 Capital Replacement Reserve.
(a) As used herein, the following terms shall have
the meanings indicated:
"Capital Replacement Project" means repairs
or replacements to the Leased Improvements, the costs
of which, according to generally accepted accounting
principles, must be depreciated over periods of three
years or more.
"Capital Replacement Reserve" means the
reserve established by Lessor and funded by Lessee
pursuant to the terms of Section 2.7(b).
"Disbursement" means a disbursement of the
proceeds of the Capital Replacement Reserve to or for
the benefit of Lessee in connection with a Capital
Replacement.
"Disbursement Request" means a detailed
written request for a Disbursement prepared by Lessee
in accordance with the Disbursement Schedule.
"Disbursement Schedule" means the guidelines
for making Disbursements to Lessee from the Capital
Replacement Reserve as set forth in Schedule 1
attached hereto.
"Project Budget" means a line item budget
for a Capital Replacement Project, in form and
24
substance reasonably satisfactory to Lessor, setting
forth in such detail as Lessor may require the nature
and amount of all the Project Costs.
"Project Costs" means the total costs of the
development and construction of a Capital Replacement
Project.
"Project Plans" means the detailed plans and
specifications for a Capital Replacement Project.
(b) Beginning on the first (1st) anniversary of the
Commencement Date, Lessee shall make an annual Facility
upgrade expenditure in an amount equal to $200 per bed for
capital improvements, such amount to be increased $50 per bed
on each Adjustment Date. If requested by Lessor, Lessee shall
promptly provide evidence of such capital expenditures. In the
event Lessee fails to make the required capital expenditure in
any Lease Year, Lessee shall deposit the same with Lessor as
the "Capital Replacement Reserve." The funds in the Capital
Replacement Reserve shall be made available to Lessee from
time to time for Capital Replacement Projects as approved by
Lessor pursuant to the terms of the Disbursement Schedule and
Section 9.3. Lessee shall make detailed requests for such
funds in writing to Lessor in the same form as a Request
pursuant Section 9.3 hereof. Within 30 days of such Request,
Lessor shall reasonably approve the amount of requested funds
and make mutually agreeable arrangements for the disbursement
of the funds, or provide Lessee with written notice in
reasonable detail specifying Lessor's objections to such
Request.
25
(c) Lessee may from time to time request that Lessor
release some or all of the funds held by Lessor in the Capital
Replacement Reserve for a Capital Replacement Project, which
Capital Replacement Project shall be subject to Lessor's prior
consent to be given or withheld in its reasonable discretion.
In the event that a request for a Capital Replacement Project
is approved by Lessor, Lessee shall submit the Project Plans,
together with the Project Budget, in form and substance
reasonably satisfactory to Lessor, setting forth in such
detail as Lessor may reasonably require regarding the nature
and amount of the Project Costs anticipated in connection with
the Capital Replacement Project, including payment of Lessor's
construction inspector for no more than one inspection per
month during the period of construction. Upon approval of each
of the Capital Replacement Project, the Project Plans and the
Project Budget by Lessor, Lessee shall cause construction of
the Capital Replacement Project to be promptly commenced and
diligently and continuously prosecuted to completion, subject
in each case to the following requirements: (i) the Capital
Replacement Project shall be constructed in substantial
conformity with the Project Plans and in compliance in all
material respects with all applicable Legal Requirements, and
in a good and workmanlike manner with new materials of good
quality; and (ii) the Capital Replacement Project shall be
constructed entirely on the Land and shall not encroach upon
or overhang any lot line, boundary, set-back, easement,
right-of-way or other land. If at any time Lessor notifies
Lessee that construction of the Capital Replacement Project
does not conform to the requirements of this Section 2.7(c) or
the guidelines for any such nonconformity is otherwise
discovered by Lessee, Lessee shall
26
immediately cause such nonconforming construction to be
stopped and all necessary corrective work to be commenced and
diligently and continuously prosecuted to completion. Each
Disbursement Request for a Disbursement, together with the
payment of any funds required to be paid by Lessee in
connection with such Capital Replacement Project, shall be
made in accordance with the Disbursement Schedule.
(d) The Capital Replacement Reserve (A) shall be held
by Lessor, but not in escrow, (B) shall not earn or accrue any
interest, and (C) shall not be considered an advance payment
of the Rent or a limit on the measure of Lessor's damages in
case of an Event of Default hereunder by Lessee. Lessee hereby
grants to Lessor an assignment of, a security interest in and
a right of setoff against the Capital Replacement Reserve to
fund any shortfall in the payment or performance by Lessee in
the Rent, and Lessee shall not permit any other voluntary or
involuntary mortgage, security deed, deed of trust, deed to
secure debt, lien, pledge, assignment, security interest,
title retention agreement, financing lease, levy, execution,
seizure, judgment, attachment, garnishment, charge, lien or
other encumbrance of any kind to exist upon the Capital
Replacement Reserve. The parties agree that Lessor shall keep
track of the Capital Replacement Reserve on Lessor's
accounting records and Lessor shall not be required to
segregate the Capital Replacement Reserve or deposit the same
in an account (interest bearing or otherwise) with a bank or
other third party. In the event that Lessee exercises any
right to purchase the Leased Property, any unused portion of
the Capital
27
Replacement Reserve shall be delivered to Lessee when the
title to the Leased Property is transferred; otherwise, any
unused portion of the Capital Replacement Reserve shall be
retained by Lessor at the end of the Term.
(f) Section 2.5 is hereby amended to provide that the Rent and
Adjusted Rent Coverage Ratios will be calculated commencing on June 30,
2000.
(h) Section 35.9 of the Lease is deleted.
7. Amendment to the Harrisonburg Lease. The Harrisonburg Lease is
amended, effective as of the date hereof, as follows:
(a) The parties confirm that the Commencement Date was July 1,
1998.
(b) The parties agree that the amount of the "Project Amount"
is equal to $4,348,242.
(c) The parties confirm that the Minimum Rent for the first
year of the Initial Term shall be $468,262.18, and the monthly
installments for the first year of the Initial Term shall be payable in
advance in monthly installments, on the first day of each calendar
month beginning with the Commencement Date. The parties also confirm
that the current monthly installment of the Minimum Rent is $41,157.12.
(d) Section 2.1(c) is deleted.
(e) The following Section 2.7 is added after Section 2.6.
2.7 Capital Replacement Reserve.
(a) As used herein, the following terms shall have
the meanings indicated:
"Capital Replacement Project" means repairs
or replacements to the Leased Improvements, the costs
of which, according to generally accepted accounting
principles, must be depreciated over periods of three
years or more.
28
"Capital Replacement Reserve" means the
reserve established by Lessor and funded by Lessee
pursuant to the terms of Section 2.7(b).
"Disbursement" means a disbursement of the
proceeds of the Capital Replacement Reserve to or for
the benefit of Lessee in connection with a Capital
Replacement.
"Disbursement Request" means a detailed
written request for a Disbursement prepared by Lessee
in accordance with the Disbursement Schedule.
"Disbursement Schedule" means the guidelines
for making Disbursements to Lessee from the Capital
Replacement Reserve as set forth in Schedule 1
attached hereto.
"Project Budget" means a line item budget
for a Capital Replacement Project, in form and
substance reasonably satisfactory to Lessor, setting
forth in such detail as Lessor may require the nature
and amount of all the Project Costs.
"Project Costs" means the total costs of the
development and construction of a Capital Replacement
Project.
"Project Plans" means the detailed plans and
specifications for a Capital Replacement Project.
29
(b) Beginning on the first (1st) anniversary of the
Commencement Date, Lessee shall make an annual Facility
upgrade expenditure in an amount equal to $200 per bed for
capital improvements, such amount to be increased $50 per bed
on each Adjustment Date. If requested by Lessor, Lessee shall
promptly provide evidence of such capital expenditures. In the
event Lessee fails to make the required capital expenditure in
any Lease Year, Lessee shall deposit the same with Lessor as
the "Capital Replacement Reserve." The funds in the Capital
Replacement Reserve shall be made available to Lessee from
time to time for Capital Replacement Projects as approved by
Lessor pursuant to the terms of the Disbursement Schedule and
Section 9.3. Lessee shall make detailed requests for such
funds in writing to Lessor in the same form as a Request
pursuant Section 9.3 hereof. Within 30 days of such Request,
Lessor shall reasonably approve the amount of requested funds
and make mutually agreeable arrangements for the disbursement
of the funds, or provide Lessee with written notice in
reasonable detail specifying Lessor's objections to such
Request.
(c) Lessee may from time to time request that Lessor
release some or all of the funds held by Lessor in the Capital
Replacement Reserve for a Capital Replacement Project, which
Capital Replacement Project shall be subject to Lessor's prior
consent to be given or withheld in its reasonable discretion.
In the event that a request for a Capital Replacement Project
is approved by Lessor, Lessee shall submit the Project Plans,
together with the Project Budget, in form and substance
reasonably satisfactory to Lessor, setting forth in such
detail as Lessor may reasonably require regarding the nature
and amount of the Project Costs
30
anticipated in connection with the Capital Replacement
Project, including payment of Lessor's construction inspector
for no more than one inspection per month during the period of
construction. Upon approval of each of the Capital Replacement
Project, the Project Plans and the Project Budget by Lessor,
Lessee shall cause construction of the Capital Replacement
Project to be promptly commenced and diligently and
continuously prosecuted to completion, subject in each case to
the following requirements: (i) the Capital Replacement
Project shall be constructed in substantial conformity with
the Project Plans and in compliance in all material respects
with all applicable Legal Requirements, and in a good and
workmanlike manner with new materials of good quality; and
(ii) the Capital Replacement Project shall be constructed
entirely on the Land and shall not encroach upon or overhang
any lot line, boundary, set-back, easement, right-of-way or
other land. If at any time Lessor notifies Lessee that
construction of the Capital Replacement Project does not
conform to the requirements of this Section 2.7(c) or the
guidelines for any such nonconformity is otherwise discovered
by Lessee, Lessee shall immediately cause such nonconforming
construction to be stopped and all necessary corrective work
to be commenced and diligently and continuously prosecuted to
completion. Each Disbursement Request for a Disbursement,
together with the payment of any funds required to be paid by
Lessee in connection with such Capital Replacement Project,
shall be made in accordance with the Disbursement Schedule.
(d) The Capital Replacement Reserve (A) shall be held
by Lessor, but not in escrow, (B) shall not earn or accrue any
interest, and (C) shall not be considered an advance payment
of the Rent or a limit on
31
the measure of Lessor's damages in case of an Event of Default
hereunder by Lessee. Lessee hereby grants to Lessor an
assignment of, a security interest in and a right of setoff
against the Capital Replacement Reserve to fund any shortfall
in the payment or performance by Lessee in the Rent, and
Lessee shall not permit any other voluntary or involuntary
mortgage, security deed, deed of trust, deed to secure debt,
lien, pledge, assignment, security interest, title retention
agreement, financing lease, levy, execution, seizure,
judgment, attachment, garnishment, charge, lien or other
encumbrance of any kind to exist upon the Capital Replacement
Reserve. The parties agree that Lessor shall keep track of the
Capital Replacement Reserve on Lessor's accounting records and
Lessor shall not be required to segregate the Capital
Replacement Reserve or deposit the same in an account
(interest bearing or otherwise) with a bank or other third
party. In the event that Lessee exercises any right to
purchase the Leased Property, any unused portion of the
Capital Replacement Reserve shall be delivered to Lessee when
the title to the Leased Property is transferred; otherwise,
any unused portion of the Capital Replacement Reserve shall be
retained by Lessor at the end of the Term.
(f) Section 2.5 is hereby amended to provide that the Rent and
Adjusted Rent Coverage Ratios will be calculated commencing on March
31, 2000.
(h) Section 35.9 of the Lease is deleted.
8. Amendment to the Roanoke Lease. The Roanoke Lease is amended,
effective as of the date hereof, as follows:
(a) The parties confirm that the Commencement Date was
July 1, 1998.
32
(b) The parties agree that the amount of the "Project Amount"
is equal to $4,719,736.
(c) The parties confirm that the Minimum Rent for the first
year of the Initial Term shall be $508,268.37, and the monthly
installments for the first year of the Initial Term shall be payable in
advance in monthly installments, on the first day of each calendar
month beginning with the Commencement Date. The parties also confirm
that the current monthly installment of the Minimum Rent is $44,498.90.
(d) Section 2.1(c) is deleted.
(e) The following Section 2.7 is added after Section 2.6.
2.7 Capital Replacement Reserve.
(a) As used herein, the following terms shall have
the meanings indicated:
"Capital Replacement Project" means repairs
or replacements to the Leased Improvements, the costs
of which, according to generally accepted accounting
principles, must be depreciated over periods of three
years or more.
"Capital Replacement Reserve" means the
reserve established by Lessor and funded by Lessee
pursuant to the terms of Section 2.7(b).
"Disbursement" means a disbursement of the
proceeds of the Capital Replacement Reserve to or for
the benefit of Lessee in connection with a Capital
Replacement.
"Disbursement Request" means a detailed
written request for a
33
Disbursement prepared by Lessee in accordance with
the Disbursement Schedule.
"Disbursement Schedule" means the guidelines
for making Disbursements to Lessee from the Capital
Replacement Reserve as set forth in Schedule 1
attached hereto.
"Project Budget" means a line item budget
for a Capital Replacement Project, in form and
substance reasonably satisfactory to Lessor, setting
forth in such detail as Lessor may require the nature
and amount of all the Project Costs.
"Project Costs" means the total costs of the
development and construction of a Capital Replacement
Project.
"Project Plans" means the detailed plans and
specifications for a Capital Replacement Project.
(b) Beginning on the first (1st) anniversary of the
Commencement Date, Lessee shall make an annual Facility
upgrade expenditure in an amount equal to $200 per bed for
capital improvements, such amount to be increased $50 per bed
on each Adjustment Date. If requested by Lessor, Lessee shall
promptly provide evidence of such capital expenditures. In the
event Lessee fails to make the required capital expenditure in
any Lease Year, Lessee shall deposit the same with Lessor as
the "Capital Replacement Reserve." The funds in the Capital
Replacement Reserve shall be made available to Lessee from
time to time for Capital Replacement Projects as approved by
Lessor
34
pursuant to the terms of the Disbursement Schedule and Section
9.3. Lessee shall make detailed requests for such funds in
writing to Lessor in the same form as a Request pursuant
Section 9.3 hereof. Within 30 days of such Request, Lessor
shall reasonably approve the amount of requested funds and
make mutually agreeable arrangements for the disbursement of
the funds, or provide Lessee with written notice in reasonable
detail specifying Lessor's objections to such Request.
(c) Lessee may from time to time request that Lessor
release some or all of the funds held by Lessor in the Capital
Replacement Reserve for a Capital Replacement Project, which
Capital Replacement Project shall be subject to Lessor's prior
consent to be given or withheld in its reasonable discretion.
In the event that a request for a Capital Replacement Project
is approved by Lessor, Lessee shall submit the Project Plans,
together with the Project Budget, in form and substance
reasonably satisfactory to Lessor, setting forth in such
detail as Lessor may reasonably require regarding the nature
and amount of the Project Costs anticipated in connection with
the Capital Replacement Project, including payment of Lessor's
construction inspector for no more than one inspection per
month during the period of construction. Upon approval of each
of the Capital Replacement Project, the Project Plans and the
Project Budget by Lessor, Lessee shall cause construction of
the Capital Replacement Project to be promptly commenced and
diligently and continuously prosecuted to completion, subject
in each case to the following requirements: (i) the Capital
Replacement Project shall be constructed in substantial
conformity with the Project Plans and in compliance in all
material respects with all
35
applicable Legal Requirements, and in a good and workmanlike
manner with new materials of good quality; and (ii) the
Capital Replacement Project shall be constructed entirely on
the Land and shall not encroach upon or overhang any lot line,
boundary, set-back, easement, right-of-way or other land. If
at any time Lessor notifies Lessee that construction of the
Capital Replacement Project does not conform to the
requirements of this Section 2.7(c) or the guidelines for any
such nonconformity is otherwise discovered by Lessee, Lessee
shall immediately cause such nonconforming construction to be
stopped and all necessary corrective work to be commenced and
diligently and continuously prosecuted to completion. Each
Disbursement Request for a Disbursement, together with the
payment of any funds required to be paid by Lessee in
connection with such Capital Replacement Project, shall be
made in accordance with the Disbursement Schedule.
(d) The Capital Replacement Reserve (A) shall be held
by Lessor, but not in escrow, (B) shall not earn or accrue any
interest, and (C) shall not be considered an advance payment
of the Rent or a limit on the measure of Lessor's damages in
case of an Event of Default hereunder by Lessee. Lessee hereby
grants to Lessor an assignment of, a security interest in and
a right of setoff against the Capital Replacement Reserve to
fund any shortfall in the payment or performance by Lessee in
the Rent, and Lessee shall not permit any other voluntary or
involuntary mortgage, security deed, deed of trust, deed to
secure debt, lien, pledge, assignment, security interest,
title retention agreement, financing lease, levy, execution,
seizure, judgment, attachment, garnishment, charge, lien or
other encumbrance of any kind to exist upon the Capital
Replacement Reserve. The parties
36
agree that Lessor shall keep track of the Capital Replacement
Reserve on Lessor's accounting records and Lessor shall not be
required to segregate the Capital Replacement Reserve or
deposit the same in an account (interest bearing or otherwise)
with a bank or other third party. In the event that Lessee
exercises any right to purchase the Leased Property, any
unused portion of the Capital Replacement Reserve shall be
delivered to Lessee when the title to the Leased Property is
transferred; otherwise, any unused portion of the Capital
Replacement Reserve shall be retained by Lessor at the end of
the Term.
(f) Section 2.5 is hereby amended to provide that the Rent and
Adjusted Rent Coverage Ratios will be calculated commencing on March
31, 2000.
(h) Section 35.9 of the Lease is deleted.
9. Amendment to the Greensboro Lease. The Greensboro Lease is amended,
effective as of the date hereof, as follows:
(a) The parties confirm that the Commencement Date was
October 1, 1998.
(b) The parties agree that the amount of the "Approved Budget
Costs" is $4,172,763.
(c) The parties confirm that the Minimum Rent for the first
year of the Initial Term shall be $412,276.30, and the monthly
installments for the first year of the Initial Term shall be payable in
advance in monthly installments on the first day of each calendar month
beginning with the Commencement Date. The parties also confirm that the
current monthly installment of the Minimum Rent is $35,875.14.
(d) Sections 2.1(c) and 2.1(d) are deleted.
(e) The following Sections 2.7, 2.8 and 2.9 are added after
Section 2.6.
37
2.7 Capital Replacement Reserve.
(a) As used herein, the following terms shall have
the meanings indicated:
"Capital Replacement Project" means repairs
or replacements to the Leased Improvements, the costs
of which, according to generally accepted accounting
principles, must be depreciated over periods of three
years or more.
"Capital Replacement Reserve" means the
reserve established by Lessor and funded by Lessee
pursuant to the terms of Section 2.7(b).
"Disbursement" means a disbursement of the
proceeds of the Capital Replacement Reserve to or for
the benefit of Lessee in connection with a Capital
Replacement.
"Disbursement Request" means a detailed
written request for a Disbursement prepared by Lessee
in accordance with the Disbursement Schedule.
"Disbursement Schedule" means the guidelines
for making Disbursements to Lessee from the Capital
Replacement Reserve as set forth in Schedule 1
attached hereto.
"Project Budget" means a line item budget
for a Capital Replacement Project, in form and
substance reasonably satisfactory to Lessor, setting
forth in such detail as Lessor may require the
38
nature and amount of all the Project Costs.
"Project Costs" means the total costs of the
development and construction of a Capital Replacement
Project.
"Project Plans" means the detailed plans and
specifications for a Capital Replacement Project.
(b) Beginning on the first (1st) anniversary of the
Commencement Date, Lessee shall make an annual Facility
upgrade expenditure in an amount equal to $200 per bed for
capital improvements, such amount to be increased $50 per bed
on each Adjustment Date. If requested by Lessor, Lessee shall
promptly provide evidence of such capital expenditures. In the
event Lessee fails to make the required capital expenditure in
any Lease Year, Lessee shall deposit the same with Lessor as
the "Capital Replacement Reserve." The funds in the Capital
Replacement Reserve shall be made available to Lessee from
time to time for Capital Replacement Projects as approved by
Lessor pursuant to the terms of the Disbursement Schedule and
Section 9.3. Lessee shall make detailed requests for such
funds in writing to Lessor in the same form as a Request
pursuant Section 9.3 hereof. Within 30 days of such Request,
Lessor shall reasonably approve the amount of requested funds
and make mutually agreeable arrangements for the disbursement
of the funds, or provide Lessee with written notice in
reasonable detail specifying Lessor's objections to such
Request.
(c) Lessee may from time to time request that Lessor
release some or all of the funds held by Lessor in the Capital
Replacement Reserve for a Capital
39
Replacement Project, which Capital Replacement Project shall
be subject to Lessor's prior consent to be given or withheld
in its reasonable discretion. In the event that a request for
a Capital Replacement Project is approved by Lessor, Lessee
shall submit the Project Plans, together with the Project
Budget, in form and substance reasonably satisfactory to
Lessor, setting forth in such detail as Lessor may reasonably
require regarding the nature and amount of the Project Costs
anticipated in connection with the Capital Replacement
Project, including payment of Lessor's construction inspector
for no more than one inspection per month during the period of
construction. Upon approval of each of the Capital Replacement
Project, the Project Plans and the Project Budget by Lessor,
Lessee shall cause construction of the Capital Replacement
Project to be promptly commenced and diligently and
continuously prosecuted to completion, subject in each case to
the following requirements: (i) the Capital Replacement
Project shall be constructed in substantial conformity with
the Project Plans and in compliance in all material respects
with all applicable Legal Requirements, and in a good and
workmanlike manner with new materials of good quality; and
(ii) the Capital Replacement Project shall be constructed
entirely on the Land and shall not encroach upon or overhang
any lot line, boundary, set-back, easement, right-of-way or
other land. If at any time Lessor notifies Lessee that
construction of the Capital Replacement Project does not
conform to the requirements of this Section 2.7(c) or the
guidelines for any such nonconformity is otherwise discovered
by Lessee, Lessee shall immediately cause such nonconforming
construction to be stopped and all necessary corrective work
to be commenced and diligently and continuously prosecuted to
40
completion. Each Disbursement Request for a Disbursement,
together with the payment of any funds required to be paid by
Lessee in connection with such Capital Replacement Project,
shall be made in accordance with the Disbursement Schedule.
2.8 Lease Deposit. On or before the date of this Amendment,
Lessee must deposit and maintain with Lessor a lease deposit (together
with any accrued interest pursuant to Section 2.9, the "Lease Deposit")
equal to approximately three (3) months' Minimum Rent, rounded upward
to the nearest $1,000. Lessor reserves the right to require additional
deposits if the Minimum Rent increases during the Term. Lessor, from
time to time, without prejudice to any other remedy, may apply funds
from the Lease Deposit to make good any arrearage of Rent or to satisfy
any other covenant or obligation of Lessee under the Lease, including
the payment of taxes and insurance, regardless of whether an Event of
Default shall have occurred and be continuing. In the event that Lessor
shall apply all or any part of the Lease Deposit pursuant to the
provisions of this Section, Lessee, within ten days after written
demand by Lessor to Lessee, shall replenish the Lease Deposit to its
required amount as calculated above, including any accrued interest or
late fees as of the date of such disbursement. No such application
shall be deemed to have been made by operation of law or otherwise
until actually made by the Lessor as herein provided, nor shall any
application be deemed to affect any right or remedy of the Lessor
hereunder, under any statute or rule of law, or in equity.
2.9 Provisions Governing the Reserves.
(a) As used herein, the following terms shall have
the meanings indicated:
41
"Lease Deposit Rate" means a per annum rate
of interest equal to the average rate, for the
previous twelve-month period, offered by Bank of
America in Nashville, Tennessee, for certificates of
deposits with maturities of 90 days.
"Reserves" means, collectively, the Capital
Replacement Reserve and the Lease Deposit.
(b) The Reserves (A) shall be held by Lessor, but not
in escrow, (B) except for the Lease Deposit, shall not earn or
accrue any interest, and (C) shall not be considered an
advance payment of the Rent or a limit on the measure of
Lessor's damages in case of an Event of Default hereunder by
Lessee. Lessee hereby grants to Lessor an assignment of, a
security interest in and a right of setoff against each of the
Reserves to fund any shortfall in the payment or performance
by Lessee in the Rent, and Lessee shall not permit any other
voluntary or involuntary mortgage, security deed, deed of
trust, deed to secure debt, lien, pledge, assignment, security
interest, title retention agreement, financing lease, levy,
execution, seizure, judgment, attachment, garnishment, charge,
lien or other encumbrance of any kind to exist upon any of the
Reserves. The parties agree that Lessor shall keep track of
the Reserves on Lessor's accounting records and Lessor shall
not be required to segregate the Reserves or deposit the same
in an account (interest bearing or otherwise) with a bank or
other third party. Lessor shall accrue interest on the Lease
Deposit on its accounting records at the Lease Deposit Rate,
commencing on the date the Lease Deposit was
42
funded and continuing until such funds are either applied or
disbursed by Lessor pursuant to the terms of this Lease or
returned to Lessee. Lessor shall calculate the accrual of such
interest in arrears on an annual basis as of each Adjustment
Date and shall prorate such interest for any partial years.
(c) So long as no Event of Default shall have
occurred and be continuing, all funds remaining in the Lease
Deposit at the end of the Term shall be paid to Lessee upon
satisfaction of all of Lessee's obligations hereunder,
including the payment of all Rent and the surrender of the
Leased Property in accordance with the provisions hereof. In
the event that Lessee exercises any right to purchase the
Leased Property, any unused portion of the Capital Replacement
Reserve shall be delivered to Lessee when the title to the
Leased Property is transferred; otherwise, any unused portion
of the Capital Replacement Reserve shall be retained by Lessor
at the end of the Term.
(f) Section 2.5 is amended to provide that the Rent and
Adjusted Rent Coverage Ratios will be calculated commencing on March
31, 2000.
(g) The parties acknowledge that on August 17, 1998, Lessee
deposited with Lessor the sum of $89,000 to fund the Lease Deposit.
(h) Section 35.9 of the Lease is deleted.
10. Modification to Addresses for Notices. The address for notices to
Lessors set forth in the Leases is modified as follows:
43
c/o HEALTHCARE REALTY TRUST INCORPORATED
0000 Xxxx Xxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: X.X. Xxxxxx Xxxxxx,
Vice President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
With a copy to:
Xx. Xxxxxx X. Xxxxxx
Sirote & Permutt
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
11. Settlement of Overpayment/Past Due Minimum Rent. The Lessors and
Lessees hereby acknowledge that (i) some of Lessees have made payments in excess
of the amount of the Minimum Rent that was due under the applicable Lease, and
(ii) some of Lessees have made payments in amounts less than the amount of
Minimum Rent due under the applicable Lease. Simultaneously herewith, the
parties are executing a Settlement Statement which reflects the difference for
each Lease between the Minimum Rent and other charges due to the Lessors and the
construction draws and other amounts due to Lessees, in all cases through
October 31, 2000. The parties recognize that the net amount due from any Lessee
to the applicable Lessor is due to be paid promptly in immediately available
funds and that the net amount due from any Lessor to the applicable Lessee is to
be credited against the monthly payment of the Minimum Rent due by such Lessee
for the month of November, 2000, and the months following, if applicable. The
parties also acknowledge that the combined total due to Lessees exceeds the
combined total due to the Lessors (such excess amount, the "Combined Credit").
Notwithstanding the terms of the Leases, Lessees request that the Lessors apply
the Combined Credit, as reflected in the Settlement Statement, to the
installments of Minimum Rent due under the Leases on November 1, 2000, and
Lessees shall pay to Lessors the balance of any installment of the Minimum Rent
under the Leases that remains owing after such application of the Combined
Credit. Lessees shall make or accept such payments among themselves as is
necessary or appropriate to reflect the
44
use of the Combined Credit for the benefit of all of Lessees in the manner and
to the extent set forth in the Settlement Statement.
12. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be an original and taken together shall
constitute one and the same document. Signature and acknowledgment pages, if
any, may be detached from the counterparts and attached to a single copy of this
document to physically form one document. The failure of any party hereto to
execute this Amendment or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.
13. Waiver. Developer hereby (i) acknowledges that there is no default
on the part of Lessors under the Leases, (ii) acknowledges that there are no
offsets or defenses to payment or performance of the obligations of the
Developer under the Leases, and (iii) waives any defense, claim or counterclaim
of the Developer regarding the obligations of the Lessors under the Leases.
14. Entire Agreement. This Amendment sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter.
15. Force and Effect of Amendment. Except as specifically amended,
modified or supplemented as set forth in this Amendment, the Leases remain in
full force and effect.
- SIGNATURES ARE ON THE FOLLOWING PAGES -
45
IN WITNESS WHEREOF, the parties hereto have caused this Amendment be
executed as of the day and year first above written.
"Capstone Pennsylvania:"
CAPSTONE CAPITAL OF
PENNSYLVANIA, INC.
By/s/X.X. Xxxxxx Xxxxxx
X.X. Xxxxxx Xxxxxx
Vice President
"HRAIC:"
HR ACQUISITION I CORPORATION
By/s/X.X. Xxxxxx Xxxxxx
X.X. Xxxxxx Xxxxxx
Vice President
"Capstone Virginia:"
CAPSTONE CAPITAL OF VIRGINIA, INC.
By/s/X.X. Xxxxxx Xxxxxx
X.X. Xxxxxx Xxxxxx
Vice President
46
"ECO Harrisburg:"
EXTENDED CARE OPERATORS OF
HARRISBURG, L.L.C.
By:/s/Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
Title:Vice President and Secretary
"ECO Ravenna:"
EXTENDED CARE OPERATORS OF
RAVENNA, L.L.C.
By: EXTENDED CARE OPERATORS, L.L.C.,
Manager
By: RETIREMENT OPERATORS FUNDING, L.L.C.,
Manager
By: RETIREMENT OPERATORS MANAGEMENT,
INC., Manager
By:/s/ F. Xxxxx Xxxx
Name: F. Xxxxx Xxxx
Title: President
47
"ALCO Hampden:"
ALCO VI, L.L.C.
By:/s/Xxxxxxx X. Xxxxxxxx, Xx
Name: Xxxxxxx X. Xxxxxxxx, Xx
Title:Manager
"ALCO Danville:"
ALCO IX, L.L.C.
By:/s/Xxxxxxx X. Xxxxxxxx, Xx
Name: Xxxxxxx X. Xxxxxxxx, Xx
Title:Manager
"ALCO Harrisonburg:"
ALCO XI, L.L.C.
By:/s/Xxxxxxx X. Xxxxxxxx, Xx
Name: Xxxxxxx X. Xxxxxxxx, Xx
Title:Manager
48
"ALCO Roanoke:"
ALCO X, L.L.C.
By:/s/Xxxxxxx X. Xxxxxxxx, Xx
Name: Xxxxxxx X. Xxxxxxxx, Xx
Title:Manager
"ECO Greensboro:"
EXTENDED CARE OPERATORS
OF GREENSBORO, LLC
By: EXTENDED CARE OPERATORS, L.L.C.,
Manager
By: RETIREMENT OPERATORS FUNDING, L.L.C.,
Manager
By: RETIREMENT OPERATORS MANAGEMENT,
INC., Manager
By:/s/F. Xxxxx Xxxx
Name: F. Xxxxx Xxxx
Title: President
49
CONSENT TO AMENDMENT
The undersigned First Assignor and BCC join in the execution of this
Amendment for the purpose of consenting to the foregoing terms of this
Amendment.
"First Assignor:"
BCC AT GREENSBORO, INC.
By:/s/Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
Title:Vice President and Secretary
"BCC:"
BALANCED CARE CORPORATION
By:/s/Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
Title:Senior Vice President,
Legal Counsel & Assistant Secretary
