EXHIBIT 10.1
SECOND AMENDMENT TO CONSOLIDATED
AMENDED AND RESTATED MASTER LEASE
THIS SECOND AMENDMENT TO CONSOLIDATED AMENDED AND RESTATED MASTER LEASE
("Amendment") is executed and delivered as of this 15th day of June 2005 by and
between STERLING ACQUISITION CORP., a Kentucky corporation ("Lessor"), and
DIVERSICARE LEASING CORPORATION, a Tennessee corporation ("Lessee").
RECITALS:
A. Lessor and Lessee have entered into that certain Consolidated Amended
and Restated Master Lease dated as of November 8, 2000 to be effective as of
October 1, 2000, as amended by that certain First Amendment to Consolidated
Amended and Restated Master Lease dated as of September 30, 2001 (as amended,
the "Lease"), providing for the amendment, restatement and consolidation of the
"Existing Leases" as more particularly described therein.
X. Xxxxxx and Lessee desire to mutually amend and modify the Lease as more
particularly set forth herein.
X. Xxxxxx and Lessee agree that for and in consideration of the mutual
covenants of the parties hereto, and other good and valuable consideration to
the parties hereto, the receipt and sufficiency of which is hereby acknowledged
and confessed by the parties, and for the benefit which will inure to each party
from the execution of this Amendment, Lessor and Lessee hereby agree to amend
and modify the Lease as follows, with each amendment and modification to be
effective as of the date above.
The parties agree as follows:
1. Amendment Definitions. Any capitalized term used but not defined in
this Amendment will have the meaning assigned to such term in the Lease.
2. Capital Improvements. Lessor acknowledges that it has been advised by
Lessee that Lessee intends to perform certain capital improvements to the
Facilities (the "Capital Improvements"). Lessee shall select the architects,
engineers, contractors and subcontractors of its choice to complete the Capital
Improvements, subject to the reasonable approval of Lessor. Prior to commencing
construction of any Capital Improvements, Lessee shall have (a) submitted
complete plans and specifications prepared by such architects to Lessor for
Lessor's review and approval at least twenty (20) days before the planned start
of construction thereof, (b) obtained Lessor's written approval thereof and, if
required, the approval of any Facility Mortgagee (which Lessor shall use its
prompt and best efforts to obtain), which approval shall not be unreasonably
withheld, conditioned or delayed, and if no response has been received by Lessee
within fifteen (15) days after submission of the plans and specifications for
approval then such approval shall be deemed to have been given. Lessee shall be
responsible for the completion of such improvements in accordance with the plans
and specifications approved by Lessor, and shall promptly correct any failure
with respect thereto.
All alterations, improvements and additions shall be constructed in a
first class, workmanlike manner, in compliance with all Insurance Requirements
and Legal Requirements, be in keeping with the character of the Leased
Properties and the area in which the Leased Property in question is located and
be designed and constructed so that the value of the Leased Properties will not
be diminished or and that the primary Intended Use of the Leased Properties will
not be changed. All improvements, alterations and additions shall immediately
become a part of the Leased Properties.
Any Capital Improvements made by Lessee pursuant to this Paragraph 2,
other than expenditures for additions (as defined in the definition of Qualified
Capital Expenditures), the cost of which Capital Improvements are not paid for
by Lessor as part of the Improvement Allowance in accordance with Paragraph 3,
below, shall be included as capital expenditures for purposes of inclusion in
the capital expenditures budget for the Facilities and for measuring compliance
with the obligations of Lessee set forth in Section 8.3 of the Lease.
In connection with any alteration which involves the removal, demolition
or disturbance of any asbestos-containing material, Lessee shall cause such
removal, demolition or disturbance to be performed in accordance with, and shall
carry out such asbestos monitoring and maintenance program with respect thereto
as may be required by, all applicable Legal Requirements.
Anything herein or in the Lease to the contrary notwithstanding, in the
event of any conflict or inconsistency between this Paragraph 2 and Section 10.1
of the Lease, the terms and provisions of this Paragraph 2 shall be deemed to
control and govern the approval and construction of the Capital Improvements.
3. Tenant Improvement Allowance. In connection with the completion of the
Capital Improvements, Lessor agrees to make available to Lessee an improvement
allowance equal to Five Million and 00/100 Dollars ($5,000,000.00) (the
"Improvement Allowance"). The Improvement Allowance shall only be used for the
completion of the Capital Improvements. The Improvement Allowance shall be
disbursed not more often than monthly and for a minimum amount of Two Hundred
Thousand and 00/100 Dollars ($200,000.00) per disbursement. The Improvement
Allowance shall only be available for Capital Improvements completed on or
before December 31, 2006, and the final request for disbursement shall be no
later than February 28, 2007. Any qualifying installment of the Improvement
Allowance requested by Lessee shall be paid and disbursed by Lessor to Lessee on
the first business day of the calendar month (an "Adjustment Month") following
the date that is fifteen (15) days after the date Lessor receives written
request for payment of such installment from Lessee, so long as such request is
accompanied by invoices, sworn statements and lien waivers (partial or full, as
applicable) with respect to the work for which such request is made. Lessor and
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Lessee agree to cooperate in good faith in attempting to resolve any disputed
portions of any installment payment request. In the event such dispute cannot be
so resolved, Lessor and Lessee shall submit the matter to the architect approved
by Lessor pursuant to Paragraph 2, above for resolution, whose decision shall be
binding on both parties.
4. Increase in Base Rent. The annual Base Rent payable under the Lease
shall be increased by One Hundred Two and 50/100 Dollars ($102.50) per $1,000 of
the Improvement Allowance disbursed pursuant to Paragraph 3 above, effective
immediately as of the first day of the respective Adjustment Month. The
increases in the annual Base Rent as a result of this Paragraph 4 of this
Amendment shall be collectively referred to as the "Improvement Allowance
Adjustment Amount." Lessor shall provide Lessee with written notice of the then
current annual Base Rent, as adjusted by the "Improvement Allowance Adjustment
Amount", at or prior to each disbursement made pursuant to Paragraph 3, above.
To the extent such written notice of the then current Base Rent is not received
by Lessee prior to the payment by Lessee of Base Rent for an Adjustment Month,
then Lessee shall include any increased differential in Base Rent with the
payment of the following month's installment of Base Rent.
5. Insurance. Lessor acknowledges that the liability insurance coverage
and the malpractice insurance coverage required pursuant to Sections 13.2.4 and
13.2.5 of the Lease, are currently unavailable generally in the nursing home
industry at commercially affordable rates and that Lessee currently maintains
and has in place general liability and malpractice insurance with single limit
coverage of Two Hundred Fifty Thousand Dollars ($250,000.00) per occurrence and
Five Hundred Thousand Dollars ($500,000.00) cumulative, with a deductible of
Twenty Five Thousand Dollars (25,000.00). Lessor hereby agrees that, the
provisions of Sections 13.2.4 and 13.2.5 of the Lease to the contrary
notwithstanding, until such time as the insurance coverage required therein is
generally available in the nursing home industry at commercially affordable
rates, Lessee shall not be required obtain the coverages required therein and
Lessor agrees to accept Lessee's current coverage in lieu thereof for the
remainder of the Initial Term of the Lease. Lessee shall not be deemed to be in
default of the provisions of Article XIII of the Lease as a result thereof.
Lessee shall provide Lessor, on an annual basis, information from its insurance
carrier and from comparable insurance carriers of the costs of insurance
premiums to meet Lessor's insurance requirements. At such time as the premium
amounts quoted are commercially affordable, Lessee shall immediately purchase
any and all insurance policies necessary to meet the requirements of Sections
13.2.4 and 13.2.5 of the Lease. This provision does not relieve Lessee from its
agreement of indemnity under Article XXI of the Lease nor does it modify the
provisions thereof. Notwithstanding the foregoing, Lessee acknowledges and
agrees that the provisions of this Paragraph 5 shall (i) be applicable only
during the Initial Term of the Lease and not any Renewal Term and (ii) not be
applicable in the event of any Transfer. Lessee acknowledges and agrees that
Lessor shall have the right to (i) require that the Lessee provide the insurance
coverages required by the provisions of Sections 13.2.4, and 13.2.5 during any
Renewal Term of the Lease and (ii) withhold its consent to any proposed Transfer
unless the Transferee
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agrees to provide the insurance coverage required by the provisions of Section
13.2.4 and 13.2.5 of the Lease.
6. Failure to Pay. In the event Lessor fails to pay Lessee any installment
request when and as provided in Paragraph 3, above, and Lessor does not cure
such failure within ten (10) days after written notice from Lessee, then Lessee
shall have the right to and may set off against and deduct from each one of the
next successive monthly installments of Base Rent due under the Lease the amount
of such installment payment, together with interest thereon at the Overdue Rate
until paid, until such time as the entire amount, together with interest has
been paid to Lessee in full. The amount of any such installment request
(exclusive of the interest thereon) deducted by Lessee from the monthly
installments of Base Rent due under the Lease pursuant to this Paragraph 6 shall
be credited against the amount of the Improvement Allowance made available to
Lessee hereunder and shall result in a corresponding increase in the Base Rent
pursuant to Paragraph 4 of this Amendment.
7. Execution and Counterparts. This Amendment may be executed in any
number of counterparts, each of which, when so executed and delivered, shall be
deemed to be an original, but when taken together shall constitute one and the
same Amendment.
8. Headings. Section headings used in this Amendment are for convenience
of reference only and shall not affect the construction of the Amendment.
9. Enforceability of Transaction Documents. Except as expressly and
specifically set forth herein, the Transaction Documents remain unmodified and
in full force and effect. In the event of any discrepancy between any other
Transaction Document and this Amendment, the terms and conditions of this
Amendment will control and such other Transaction Document is deemed amended to
conform hereto.
SIGNATURES PAGE FOLLOWS.
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IN WITNESS WHEREOF, the parties have executed this Amendment by their duly
authorized officers as of the date first above written.
LESSOR:
STERLING ACQUISITION CORP., a Kentucky
corporation
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Operating Officer
LESSEE:
DIVERSICARE LEASING CORPORATION,
a Tennessee corporation
By: /s/ Xxxxxxx X. Council III
---------------------------------------
Name: Xxxxxxx X. Council III
Title: President
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THE STATE OF MARYLAND )
:ss
COUNTY OF BALTIMORE )
This instrument was acknowledged before me on the 15th day of June, 2005, by
Xxxxxx X. Xxxxx, the COO of Sterling Acquisition Corp., a Delaware corporation,
on behalf of the corporation.
/s/ Xxxxxx Xxxxxx
------------------------------
Notary Public
Baltimore, County, Maryland
My commission expires: May 1, 0000
XXX XXXXX XX XXXXXXXXX )
:ss
COUNTY OF XXXXXXXXXX )
This instrument was acknowledged before me on the 15th day of June, 2005, by
Xxxxxxx X. Council III, the President of Diversicare Leasing Corporation., a
Tennessee corporation, on behalf of the corporation.
/s/ Xxxxxxxxxx X. Xxxx
------------------------------
Notary Public
Xxxxxxxxxx, County
My commission expires: 2/20/2006
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ACKNOWLEDGMENT
The undersigned consents to the transactions contemplated by this
Amendment, ratifies and affirms its Guaranty dated as of November 8, 2000 and
acknowledges and agrees that the performance of the Transaction Documents,
including the Lease, is secured by its Guaranty on the same terms and conditions
in effect prior to this Amendment.
GUARANTORS:
ADVOCAT, INC., a Delaware corporation
By: /s/ Xxxxxxx X. Council III
---------------------------------------
Name: Xxxxxxx X. Council III
Title: President
ADVOCAT FINANCE, INC., a Delaware
corporation
By: /s/ Xxxxxxx X. Council III
--------------------------------------
Name: Xxxxxxx X. Council III
Title: President
DIVERSICARE MANAGEMENT SERVICES
CO.,, a Tennessee corporation
By: /s/ Xxxxxxx X. Council III
-------------------------------------
Name: Xxxxxxx X. Council III
Title: President
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