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Exhibit 10.21
LEASE AGREEMENT
THIS LEASE AGREEMENT, made as of June 30, 1997, by and between The Board of
Trustees of Needles Desert Communities Hospital, a board of trustees duly
appointed by the Mayor of the City of Needles, California pursuant to Section
37603 of Title 4, Division 3, Part 2, Chapter 5, Article 7 of the Government
Code of the State of California ("Lessor"), whose address is 0000 Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000, and Principal-Needles, Inc., a Tennessee corporation
("Lessee"), whose address is 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx
00000.
WITNESSETH:
1. Lease of Premises and Equipment. In consideration of the rents and
covenants herein stipulated to be paid and performed by Lessee and upon the
terms and conditions herein specified, Lessor hereby leases to Lessee, and
Lessee hereby leases from Lessor, the property commonly known as Needles Desert
Communities Hospital consisting of: (i) the parcel(s) of land located in
Needles, San Bernardino County, California, as described on Schedule A, Part I
attached hereto and made a part hereof for all purposes (the "Land"); (ii) all
buildings, structures, "Fixtures" (as hereinafter defined) and other
improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Land (collectively, the "Improvements");
(iii) all easements, rights and appurtenances relating to the Land and the
Improvements (collectively, the "Appurtenant Rights"); (iv) all equipment,
machinery, fixtures, and other items of property, including all components
thereof, now and hereafter permanently affixed to or incorporated into the
Improvements, including, without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, all of which to the greatest extent permitted by law, are
hereby deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, (collectively
the "Fixtures"); and (v) all equipment, furnishings, furniture, trade fixtures
and other personal property used in connection with medical-surgical hospital,
urgent care and medical office building operations and businesses on the
Premises, all as more particularly described on Schedule B (collectively the
"Equipment"). The Land, the Improvements, the Appurtenant Rights and the
Fixtures are hereinafter referred to collectively as the "Premises."
2. Term. The Premises and the Equipment are leased for a primary term (the
"Primary Term") and, at Lessee's option, three (3) additional extended terms
(the "Extended Terms"), unless and until the term of this Lease shall expire or
be terminated as hereinafter provided. The Primary Term shall be for fifteen
(15) years commencing at 12:01 a.m. on the day following the Closing Date (as
that term is defined in Annex A attached hereto and made a part hereof) (the
"Commencement Date"). Following the Primary Term, Lessee shall have an option to
extend the term of this Lease for up to three (3) additional terms of five (5)
years each. Such Extended Terms shall be on and subject to all of the same
terms, covenants and conditions
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as herein contained. The option for any Extended Term shall be exercised only by
written notice from Lessee to Lessor given no less than six (6) months prior to
the expiration of the Primary Term, the first Extended Term or the second
Extended Term, as the case may be. Unless specifically otherwise provided, the
terms and phrases "term," "term hereof" and "term of this Lease" shall include
the Primary Term and any Extended Term if exercised and in effect. "Lease Year"
shall mean the period beginning on the first day of the Primary Term and ending
at 12:00 midnight of the day prior to the first anniversary of the commencement
date of the Primary Term and each subsequent 12-month period within the term of
this Lease.
3. Amount and Manner of Payment of Rent. Lessee shall pay to Lessor in
lawful money of the United States, as partial payment of rent, Two Million
Dollars ($2,000,000) (the "Initial Rent"), One Million Two Hundred Twenty One
Thousand Dollars ($1,221,000) of which shall be paid by wire transfer to an
account designated by Lessor and Seven Hundred Seventy Nine Thousand Dollars
($779,000) of which shall be paid by wire transfer to First Union National Bank
(the "Escrow Agent") to be held and disbursed by the Escrow Agent pursuant to an
escrow agreement mutually satisfactory to Lessor, Lessee and the Escrow Agent
(the "Escrow Agreement"), for mechanical upgrades to the Premises, including
without limitation those items set forth in Exhibit A and other items required
to bring the Premises into compliance with Legal Requirements (as that term is
defined in Section 4.4) to the extent it is not in compliance with Legal
Requirements as of the Commencement Date ("the Required Improvements"). In
addition, the funds held in the Escrow Account may be used to pay the
approximately $190,000 cost of a generator previously ordered by Lessor and to
reimburse Lessor for any down payment made in connection therewith. At the
Closing (as that term is defined in Annex A), Lessor shall repay Brim Hospitals,
Inc. ("Brim"), an affiliate of Lessee, out of the Initial Rent, the outstanding
principal amount due under a $221,000 loan previously made by Brim to Lessee,
without interest thereon.
In the event that the amount held by the Escrow Agent is insufficient the
pay for the costs of the Required Improvements (including the generator referred
to in the preceding paragraph), Lessee shall pay any such deficiency, and Lessor
shall have no further obligation to pay for the remainder of the costs
associated therewith. In addition, Lessor shall not be required to spend on any
item set forth in Exhibit A more that the amount set forth opposite such item
therein.
In the event that, at anytime during the term of this Lease, Lessee
wrongfully terminates this Lease or defaults under this Lease and Lessor is
permitted and does terminate this Lease as a result of such default, Lessee
shall forfeit any claim it may have to the Initial Rent. In the event that, at
anytime during the first year of the term of this Lease, Lessor wrongfully
terminates this Lease or defaults under this Lease and Lessee is permitted and
does terminate this Lease as a result of such default, Lessor shall forfeit and
immediately repay the full amount of the Initial Rent to Lessee. In the event
that, at anytime after the first year of the term of this Lease, Lessor
wrongfully terminates this Lease or defaults under this Lease and Lessee is
permitted and does terminate this Lease as a result of such default, Lessor
shall forfeit and immediately repay a prorated portion of the Initial Rent to
Lessee, such prorated portion being equal to 180 minus the number of months (not
to exceed 180) which have elapsed from the Commencement Date to the date of such
termination multiplied by the Initial Rent.
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Lessee shall pay, as additional rent ("Additional Rent") for the Premises,
the following, in equal quarterly installments in advance on the first day of
each quarter (the "Payment Date"):
Years Annual Rent Quarterly Payment
----- ----------- -----------------
1 - 5 $310,000.00 $77,500.00
6 - 10 $319,300.00 $79,825.00
11 - 15 $328,879.00 $82,219.75
16 - 20* $338,745.37 $84,686.34
21 - 25* $348,907.73 $87,226.93
26 - 30* $359,374.96 $89,843.74
* if such Extended Term is exercised.
The Initial Rent and the Additional Rent are hereinafter referred to together as
"Rent." All Rent shall be paid to Lessor at Lessor's address set forth above or
at such other address or to such person as Lessor may designate in writing from
time to time. Any installment of Rent which is not paid within ten (10) days of
the Payment Date shall bear interest at the rate of ten percent (10%) per annum
from the day after such Payment Date until such installment is paid. The parties
agree that the Rent shall be allocable to and payable in respect to the Premises
(Land, Improvements, Appurtenant Rights and Fixtures) and the Equipment in such
percentages as may be reasonably determined by Lessor and disclosed to Lessee in
writing on or before the Commencement Date.
4. Covenants of Lessee and Lessor.
4.1 Payment of Rent. Lessee shall pay Rent in the manner provided in
Section 3 without notice or demand.
4.2 Maintenance and Repair.
(a) Lessee, at its own expense, will maintain all parts of the
Improvements in at least as good condition as they now are (or with respect to
any additional or replacement Improvements, as they then are), except for
ordinary wear, tear, deterioration and obsolescence and damage by fire or other
casualty.
(b) Lessee, at its own expense, will maintain the Equipment in at
least as good condition and repair as it now is. In the event that Lessee
decides for any reason that any item of Equipment is no longer required for its
use, and such item has a Book Value of less than Five Thousand Dollars ($5,000),
Lessee may dispose of the same in accordance with the provisions of Section 7.2,
and shall be entitled to retain the proceeds thereof. In the event that Lessee
decides for any reason that any item of Equipment is no longer required for its
use, and such item has a Book Value of Five Thousand Dollars ($5,000) or more,
Lessee shall so notify Lessor, and Lessor shall promptly remove such item from
the Premises at its expense. For the purposes of this Lease, the term "Book
Value" shall mean the greater of a) the value then shown on the books and
records maintained by Lessee on behalf of Lessor with respect to the
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Equipment using allowable depreciation in accordance with generally accepted
accounting principals consistently applied, or b) fair market value. Lessor may
store or dispose of such items at its election, shall bear all costs associated
therewith and shall be entitled to retain the proceeds, if any, from the sale
thereof. Lessor shall remove such item within thirty (30) days of Lessee's
notice to remove such item, or if such item is not capable of being removed
within thirty (30) days, Lessor shall commence removing such item within thirty
(30) days of Lessee's notice and thereafter diligently pursue such removal to
completion. In the event Lessor does not remove, or commence to remove, as the
case may be, such item within thirty (30) days of Lessee's notice that such item
is no longer required for its use, Lessee may dispose of the same in accordance
with the provisions of Section 7.2, and shall be entitled to retain the proceeds
thereof. If Lessee elects to replace any Equipment instead of repairing the
same, such replacement items of equipment (including the value of any Equipment
used as "trade-in" toward such items of replacement equipment) shall become the
property of Lessee, provided that the acquisition of any such replacement items
of equipment shall be subject to the provisions of Section 7. Upon the
expiration or earlier termination of this Lease, Lessee shall return to Lessor
all items of Equipment not previously returned to Lessor in such condition they
are required to be maintained hereunder, ordinary wear and tear, damage and
deterioration, and any loss or damage ordinarily covered by a policy of fire and
extended coverages excepted. As used throughout this Section 4.2(b), "ordinary
wear and tear" shall mean the wear, tear, damage and deterioration that would
typically and ordinarily occur if used for a period of time equivalent to the
term of this Lease in a medical-surgical hospital facility similar to the
Premises.
4.3 Taxes and Utilities. Lessee shall pay, prior to delinquency: all
taxes, assessments, levies, fees, water and sewer rents and charges, and all
other governmental charges, general and special, ordinary and extraordinary,
foreseen and unforeseen, which during the term hereof, (i) are imposed or
levied upon or assessed against the Premises and the Equipment, or (ii) arise
out of the operation, possession or use of the Premises. Lessee shall not be
required to pay any franchise, estate, inheritance, transfer, income or similar
tax of Lessor unless such tax is imposed, levied or assessed in substitution for
any other tax, assessment, charge or levy which Lessee is required to pay
pursuant to this Section 4.3. Lessee will furnish to Lessor, promptly after
demand therefor, proof of payment of all items referred to above which are
payable by Lessee. If any such assessment may legally be paid in installments
and is not delinquent, Lessee may pay such assessment in installments; in such
event, Lessee shall be liable only for installments which accrue during the
term hereof. Lessee shall promptly notify Lessor in writing that it has elected
to pay such assessment in installments. In the event of the sale of any item of
Equipment, the party entitled to retain the proceeds thereof under Section
4.2(b) shall be responsible for the payment of any sales tax payable by the
seller in connection with such sale.
4.4 Compliance With Laws. Lessee shall promptly cause the Premises to
be in conformity with all laws, ordinances and regulations, and other
governmental rules, orders and determinations now or hereafter enacted, made or
issued, whether or not presently contemplated, including without limitation the
provisions of Sections 37609.1 and 37615.4 of the Government Code of the State
of California (collectively "Legal Requirements"), applicable to the Premises or
the use thereof throughout the term of this Lease at its sole cost and expense.
In the event that the Premises are not now in conformity with all Legal
Requirements, Lessor
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shall be responsible for promptly causing the Premises to become in conformity
with all Legal Requirements, at its sole cost and expense.
4.5 Insurance.
(a) Lessee will maintain insurance on the Premises of the following
character:
(i) Insurance against loss by earthquake, fire, flood,
lightning, vandalism, malicious mischief and other risks which at the
time are included under "extended coverage" endorsements with respect to
the Premises, in an amount not less than 100% of the actual replacement
value of the Improvements, exclusive of foundations, excavations,
parking areas, drives, underground utilities and all other land
improvements.
(ii) Comprehensive public liability insurance against claims
for bodily injury, death or property damage occurring on, in or about
the Premises and adjoining streets and sidewalks, in the amounts of
$3,000,000 for bodily injury or death in any one occurrence and
$1,000,000 for property damage.
(iii) Worker's compensation insurance (including employers'
liability insurance, if requested by Lessor) to the extent required by
the law of the state in which the Premises are located and to the extent
necessary to protect Lessor and the Premises against worker's
compensation claims.
(b) Lessee will maintain professional liability insurance in the
amount of at least $1,000,000 per occurrence and $3,000,000 in the aggregate.
The insurance referred to in subsections (a) and (b) above shall be written
by companies with not less than an A rating legally qualified to issue such
insurance, and shall name Lessor and Lessee as insured parties as their
interests may appear. Coverage for the items referred to in subsections (a)(ii),
(a)(iii) and (b) above may be provided through such combination of self
insurance and to "umbrella" policies maintained by Lessee or an Affiliate of
Lessee as Lessee deems advisable. Lessee shall provide copies of certificates of
insurance for such coverage to Lessor on or before the Commencement Date, and
shall maintain current copies of any such certificates with Lessor at all times
during the term of this Lease. Lessee shall notify Lessor of any change or lapse
in coverage. For the purpose of this Agreement, the term "Affiliate of Lessee"
shall mean any person or entity that directly or indirectly controls, is
controlled by, or is under common control with, Lessee, (ii) any entity of which
Lessee owns ten percent (10%) or more of the outstanding voting securities, or
(iii) any entity of which Lessee is a managing or controlling general partner or
joint venturer. As used in this definition of "Affiliate," the term "control"
means possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an entity whether through ownership
of voting securities, by contract or other written agreement.
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4.6 Surrender of Premises. Upon the expiration or termination of the of
this Lease, Lessee shall surrender the Premises to Lessor in at least the
condition in which the Premises were upon the commencement of this Lease, except
as repaired, rebuilt, restored, altered, added to, as permitted or required
hereby; except for ordinary wear and tear, normal deterioration and
obsolescence, and damage due to the negligent or willful acts or omissions of
Lessor and its members, and their respective agents and employees, and causes
excluded from coverage under the policies of insurance required to be maintained
under Section 4.5, and, if this Lease shall be terminated by Lessee pursuant to
Section 11.1, except any damage resulting from any fire or other casualty.
4.7 Use of Premises. Lessee may use and occupy the Premises for
operation of a medical surgical hospital or other health care facility or
facilities and the provision of such ancillary services and related, incidental
uses as are appropriate or desirable in conjunction with the operation of such
health care facilities.
4.8 Waiver of Subrogation. Lessor and Lessee on behalf of themselves and
all others claiming under them, including any insurer, waive all claims against
each other, including all rights of subrogation, for loss or damage to their
respective property (including, but not limited to, the Premises) arising from
fire, smoke damage, windstorm, hail, vandalism, theft, malicious mischief and
any of the other perils normally insured against in an "all risk" of physical
loss policy, regardless of whether insurance against those perils is in effect
with respect to such party's property and regardless of the negligence of either
party or their respective agents, employees, licensees and subtenants. If either
party so requests, the other party shall obtain from its insurer a written
waiver of all rights of subrogation that it may have against the other party.
4.9 Compliance with Accreditation Standards. Lessee shall at all times
at its own cost and expense maintain the Premises and operate the Hospital in
material compliance with the Accreditation Standards of the Joint Commission on
the Accreditation of Healthcare Organizations ("JCAHO"), as the same may be
amended from time to time. In the event that the Premises are not now in
conformity with all JCAHO Accreditation Standards, Lessor shall be responsible
for promptly causing the Premises to become in conformity with all JCAHO
Accreditation Standards at its own cost and expense.
5. Title and Condition of Premises.
5.1 Title to Premises. Lessor covenants, represents and warrants that
Lessor has full right and lawful authority to enter into this Lease for the term
hereof, is lawfully seized of the Premises and has good and marketable title
thereto, free and clear of all liens and encumbrances except those listed on
Schedule A, Part II (the "Permitted Encumbrances").
5.2 Condition of the Premises. The Premises and the Equipment are in
good operating condition and repair and are structurally sound and, except as
set forth in Schedule C, there are no material deferred maintenance items and
none of the Equipment nor any of the buildings, structures, fixtures or
improvements which are part of the Premises are in need of any maintenance,
repair or replacement, except for ordinary routine periodic maintenance of the
kind usually required from time to time at similar facilities.
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5.3 Quiet Enjoyment. So long as no Event of Default has occurred and is
continuing, Lessee shall peaceably and quietly have, hold, occupy and enjoy the
Premises and the Equipment and all the appurtenances thereto, without hindrance
or molestation from Lessor or any other persons and other entities whatsoever,
subject only to Permitted Encumbrances as set forth in Annex A.
6. Indemnification. Lessee shall indemnify and hold Lessor, its City
Council as it may be composed from time to time, and its agents and employees
harmless against any and all claims, liabilities, damages or losses resulting
from injury or death of any person or damage to any property occurring on or
about the Premises or in any manner in conjunction with the use or occupancy of
the Premises in whole or in part, unless the death, injury or damage was
sustained as a result of any willful or negligent acts or omissions of Lessor,
Lessor's City Council, or Lessor's agents or employees.
7. Alterations, Additions and Removal.
7.1 Alterations, Additions and Removal. Lessee may, at its expense,
make additions to and alterations of the Improvements, and construct additional
Improvements, provided that (i) the market value of the Premises shall not be
materially lessened thereby; (ii) such work shall be completed in a good and
workmanlike manner and in compliance with all applicable Legal Requirements and
the requirements of all insurance policies required to be maintained by Lessee
hereunder; (iii) no material part of the Improvements shall be demolished unless
(A) Lessor's prior consent shall have been obtained, which consent shall not be
unreasonably withheld, and (B) unless Lessor otherwise consents in writing, the
same are replaced by other improvements which are consistent with the intended
use of the Premises. All such additions and alterations shall be and remain part
of the Premises and become the property of Lessor at the expiration or earlier
termination of this Lease. Lessee shall keep accurate contemporaneous records
with respect to the costs of such additions and alterations. Lessee may place
upon the Premises any trade fixtures, machinery, equipment, materials,
inventory, furniture and/or other personal property belonging to Lessee or third
parties and not otherwise contemplated under this Lease (collectively, "Lessee's
Personal Property"), whether or not the same shall be affixed to the Premises,
which are used in connection with any of Lessee's business operations on the
Premises. Lessee may remove any of Lessee's Personal Property at any time during
the term of this Lease. Lessee shall repair promptly any damage to the Premises
caused by such removal.
7.2 Disposal of Equipment. If Lessee shall determine at any time and
from time to time that any item or items of Equipment are obsolete or no longer
suitable for Lessee's use in connection with Lessee's business or operations at
the Premises, Lessee may sell, transfer, exchange, or otherwise dispose of such
item(s) in such manner as Lessee may deem appropriate in accordance with Section
4.2(b). If requested by Lessee, Lessor shall deliver to Lessee or to Lessee's
designee a xxxx of sale, in form and substance reasonably satisfactory to
Lessee, duly executed and acknowledged by Lessor, which shall be sufficient to
convey and transfer to Lessee or its designee all of Lessor's right, title and
interest in and to the item(s), free and clear of all liens and encumbrances
whatsoever other than Permitted Encumbrances. Lessee
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may retain as its sole and absolute property the proceeds, whether in cash or in
exchange property or otherwise, of any sale, transfer, exchange or other
disposition of any such items.
8. Lessee's Right to Mortgage Its Leasehold Interest.
8.1 Lessee's Right to Encumber and Mortgage this Leasehold. At any time
during the term of this Lease, Lessee may mortgage, hypothecate or otherwise
encumber Lessee's leasehold estate under this Lease in respect to both the
Premises and Equipment to secure indebtedness of Lessee under one or more
leasehold mortgages and may assign this Lease as security for such mortgage or
mortgages. Lessee shall notify Lessor of the amount of any such loan and the
nature of the security given to secure the repayment thereof.
8.2 Amendments Required By Leasehold Mortgages. Lessor and Lessee shall
cooperate in including in this Lease by suitable amendment from time to time any
provision which may reasonably be requested by any leasehold mortgagee for the
purpose of allowing such leasehold mortgagee reasonable means to protect or
preserve its lien upon Lessee's leasehold interest under this Lease on the
occurrence of a default under the terms of this Lease. Lessor and Lessee each
agree to execute and deliver (and to acknowledge, if necessary, for recording
purposes) any agreement necessary to effect any such amendment; provided,
however, that any such amendment shall not in any way affect Sections 2, 3 or
4.7 of this Lease, or without the prior written approval of Lessor, which will
not be unreasonably withheld, modify any other provision of this Lease in a
manner which materially adversely affects Lessor. Lessee shall pay the
reasonable expenses, including legal fees, actually incurred by Lessor in
connection with any consents requested hereunder.
9. Assignments and Subleases; Merger and Sale of Assets. Lessee and its
assigns shall have the right to assign this Lease, in whole or in part, and to
sublet the Premises, or any part thereof, from time to time without the prior
written consent of Lessor to any Affiliate of Lessee. In addition, Lessee may
transfer, convey, sell or assign all or any part of its interest in the Lease
without the consent of Lessor if the transaction involves the transfer of
interests in additional healthcare facilities owned, leased or managed by Lessee
or any Affiliate of Lessee and Lessee's most recent twelve (12) month revenues
from the operation of the Hospital are less than fifty percent (50%) of the
total revenues of the facilities to be so transferred. Except as otherwise set
forth herein, Lessee may not assign this Lease, in whole or in part, or sublet
the Premises, or any part thereof, without the prior written consent of Lessor,
which consent will not be unreasonably withheld. Lessor consent to any such
transfer on one occasion shall not constitute consent to any other or future
transfer. Lessee shall pay the reasonable expenses, including legal fees,
actually incurred by Lessor in connection with its consideration of granting any
consent required hereunder.
10. Permitted Contests. Notwithstanding any provision of this Lease to the
contrary, Lessee shall not be required, nor shall Lessor have the right, to pay,
discharge or remove any tax, assessment, levy, fee, rent (except Rent,
additional rent and any other sums due hereunder payable to or for the benefit
of Lessor), charge, lien or encumbrance, or to comply with any Legal Requirement
applicable to the Premises or the use thereof, as long as Lessee shall contest
the existence, amount or validity thereof by appropriate proceedings which shall
prevent
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the collection of or other realization upon the tax, assessment, levy, fee,
rent, charge, lien or encumbrance so contested, and which also shall prevent the
sale, forfeiture or loss of the Premises or any Rent, or to satisfy the same or
Legal Requirements, and which shall not affect the payment of any Rent, provided
that such contest shall not subject Lessor to the risk of any criminal liability
or any civil liability. Lessee shall give such reasonable security as may be
demanded by Lessor, or any mortgagee to insure ultimate payment of such tax,
assessment, levy, fee, rent, charge, lien, or encumbrance and compliance with
Legal Requirements and to prevent any sale or forfeiture of the Premises, any
Rent, any additional rent or any other sum required to be paid by Lessee
hereunder.
11. Casualty and Condemnation.
11.1 Casualty.
(a) Except as hereinafter provided, if any of the Improvements
shall be damaged or destroyed by fire or any other casualty covered by a
standard policy of fire and extended coverage insurance, as required pursuant to
Section 4.5 hereof, Lessee shall thereafter commence and diligently prosecute to
completion, at Lessee's sole expense, the repair or rebuilding of the
Improvements or portion thereof which was damaged, in a good and workmanlike
manner, in accordance with plans and specifications satisfactory to Lessee and
Lessor, which Lessor shall not unreasonably disapprove, provided that the
Improvements upon completion of such repair or rebuilding shall have a value
which is not substantially less than the value of the Improvements immediately
prior to the damage or destruction. All proceeds remaining after payment of the
costs of collection and recovery, if any ("Net Proceeds") shall be paid over to
Lessee for the sole purpose of funding the costs of repair and rebuilding.
Lessee shall be accountable for the Net Proceeds and shall maintain adequate
contemporaneous records relating to such repair and rebuilding for the purpose
thereof.
(b) In the event that either (i) the damage or destruction with
respect to any building ("Building") which is a part of the Improvements is so
extensive that it cannot be rebuilt, restored or repaired as required in Section
11.1(a) within one hundred twenty (120) days after such occurrence, as
determined by Lessee in its judgment reasonably based upon written professional
opinion of licensed engineers, building contractors, inspectors or the like, or
(ii) any such damage or destruction occurs during the last two years of the term
of this Lease, then Lessee shall have the right to terminate this Lease with
respect to the damaged or destroyed Building, but no other part of the Premises,
by giving written notice thereof to Lessor within forty-five (45) days after the
occurrence of such damage or destruction and such termination will be effective
retroactively as of the date of such damage or destruction; provided that, if
the Building which suffered such damage or destruction is the main hospital
building located on Tract 1 of the Premises, then Lessee shall have the right to
terminate this Lease by giving written notice thereof to Lessor within
forty-five (45) days after the occurrence of such damage or destruction and such
termination will be effective retroactively as of the date of such damage or
destruction. In addition, if any Building is materially damaged or destroyed by
any casualty not covered by the standard policy of fire and extended coverage
insurance, then Lessee may terminate this Lease effective as of the date of such
damage or destruction by giving the other party written notice thereof within
forty-five (45) days after the occurrence of such damage or
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destruction. If Lessee exercises its option to terminate this Lease in part on
account of damage or destruction to a Building, the parties shall promptly
thereafter execute an amendment to this Lease which shall provide that such
Building will be excised from the Premises, and that Rent will be
proportionately and equitably reduced. In the event of a termination of this
Lease, either in whole or in part, pursuant to Section 11.1(b), the Net Proceeds
of insurance shall be paid over to Lessor, except that Lessee shall be entitled
to receive such portion of such proceeds which represents the amount allocable
to the then fair market value of Lessee's Personal Property, if any, provided
Lessee maintained adequate contemporaneous records thereof.
11.2 Condemnation.
(a) If (i) the Premises are taken by an entity with the power of
eminent domain ("Condemning Authority") or if the Premises are conveyed to a
Condemning Authority by a negotiated sale, or if part of the Premises is so
taken or conveyed such that any of the Improvements cannot be rebuilt so that
upon completion Lessee may again use the Premises without substantial
interference, or (ii) due to any such taking or conveyances, access to the
Premises or any part thereof by motor vehicles and trucks as operated by Lessee,
its contractors, employees, patients and invitees in the course of Lessee's
business as theretofore conducted, is substantially impaired or terminated; then
in any such event, Lessee may terminate this Lease by giving Lessor written
notice any time after the occurrence of any of the foregoing and such
termination shall be effective thirty (30) days from the date possession is
taken by the Condemning Authority.
(b) If part of the Premises or any Building or a substantial part
thereof is so taken or conveyed without substantially interfering with the use
of the Premises as a whole, but only one or more of the Buildings thereon, this
Lease shall not terminate, except to the extent hereinafter provided. In such
event, however, (i) Lessee shall have the option to terminate this Lease in
respect to any Building which is subject to such taking or conveyance by
notifying within thirty (30) days after the title is transferred to the
Condemning Authority, and Lessor shall be entitled to all awards and payments
made or to be made by the Condemning Authority, and (ii) if Lessee exercises
such termination option, Lessor shall apply such portions of any award or
payment made to Lessor for such taking or conveyance as is necessary to pay the
cost of restoring the Building and/or the Premises to a complete architectural
unit suitable for Lessee's use and business on the Premises prior to the date of
such taking. If Lessee exercises its option to terminate this Lease in part on
account of a taking or conveyance of a Building or any substantial part thereof
as provided in clause (i) above, the parties shall promptly thereafter execute
an amendment to this Lease which shall provide that the Building will be excised
from the Premises, and that Rent will be proportionately and equitably reduced.
(c) Except as provided below and in Section 11.2(b), all
payments made for any such taking or conveyance shall be the property of Lessor;
provided, however, Lessor shall have no interest in any award or payment or any
portion of any such award or payment which is attributable to the taking or
conveyance of any of Lessee's Personal Property, all of which shall be paid to
Lessee. Lessee shall maintain adequate contemporaneous records as to the value
of Lessee's Personal Property for purposes of determining what portion, if any,
of such award or payment shall be paid to Lessee hereunder.
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(d) If this Lease is terminated pursuant to this Section 11, Lessor
and Lessee shall be released and discharged from all liabilities arising or
accruing under this Lease subsequent to the effective date of termination.
12. Right of Entry.
Upon not less than twenty-four (24) hours prior written notice
received by Lessee on a weekday, which written notice may be hand delivered or
telecopied to Lessee, Lessor and its agents and designees may enter upon and
examine the Premises on weekdays from 8:00 a.m. to 5:00 p.m, excluding legal
holidays, for the purpose of determining the condition of the Premises, and may
show the Premises to prospective purchasers, mortgagees or lessees as long as
such examination or showing shall not unreasonably interfere with the business
operations of Lessee on the Premises.
13. Default.
13.1 Default; Notice and Cure; Remedies. In the event Lessee shall
default in the payment of Rent or any other sums payable by Lessee hereunder,
and such default shall continue for a period of ten (10) days after Lessee
receives written notice thereof from Lessor; or, if Lessee shall default in the
performance of any other covenants or agreements hereunder and such default
shall continue for thirty (30) days after written notice thereof, or, if the
default is of such a nature that it could not reasonably be cured within such
thirty (30) day period and Lessee does not, within said thirty (30) day period
commence to cure it and thereafter proceed, with due diligence, to cure it; or,
if Lessee shall fail to cause the Premises to be in conformity with the Legal
Requirements as set forth in Section 4.4 hereof and all other contracts,
agreements, covenants, conditions and restrictions applicable to the ownership,
occupancy or use of the Premises, and such failure shall continue for thirty
(30) days after written notice thereof, or if the failure is of such a nature
that it could not reasonably be cured within such thirty (30) day period and
Lessee does not, within such thirty (30) day period commence to cure it and
thereafter proceed, with due diligence, to cure it; then, and in addition to any
and all other legal remedies and rights, Lessor may perform such covenant or
agreement and to the extent sums are expended in connection therewith, and add
such sums to the Rent due from Lessee to Lessor and, at the election of Lessor,
may terminate this Lease and retake possession of the Premises by eviction,
reentry or otherwise. Such re-entry shall not bar the right or recovery of Rent
or damages for breach of covenants, nor shall the receipt of Rent after a
default and/or re-entry be deemed a waiver of Lessor's remedies.
13.2 Obligation to Relet. After a dispossession or removal in
accordance with Section 13.1, Rent shall be paid to the date of such
dispossession or removal, (i) Lessor shall use its reasonable best efforts to
re-let the Premises or portions thereof, either in the name of Lessor, Lessee
or otherwise, for a term or terms which may, at the option of Lessor, be less
than or exceed the period which would otherwise have constituted the balance of
the term of this Lease, (ii) Lessee shall pay Lessor quarterly any deficiency
between Rent due hereunder and the amount, if any, of rent collected on account
of the new lease or leases of the Premises for each quarter of the period which
would otherwise have constituted the balance of the term of this Lease (not
including any renewal or extension the execution of which shall not have
occurred
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prior to such dispossession or removal), and (iii) Lessor shall have any and all
other rights and remedies available to it.
13.3 Costs and Expenses. If Lessee should fail to make any payment or
cure any default hereunder within the time herein permitted, Lessor, without
being under any obligation to do so and without thereby waiving such default,
may make such payment and/or remedy such other default for the account of
Lessee, and thereupon Lessee shall be obligated to, and hereby agrees, to pay
Lessor, upon demand, all costs, expenses and disbursements (including reasonable
attorneys' fees and costs) incurred by Lessor in taking such remedial action,
and any interest thereon actually incurred and paid by Lessor to third parties.
14. Environmental Matters.
14.1 Warranty of Lessor. Except as set forth in Schedule D, Lessor
represents and warrants to Lessee that as of the date hereof no "Hazardous
Substances" (as hereafter defined) or any other toxic material or medical waste
are present on or in the Improvements or Land, except for Hazardous Substances
or other toxic materials or medical waste brought, kept or used in the Premises
in commercial quantities similar to those quantities usually kept on similar
premises by others in the same business or profession or who operate medical
facilities similar to those located in and on the Premises, and which are used
and kept in compliance with applicable public health, safety and environmental
laws; and Lessor shall indemnify Lessee against any and all claims, demands,
liabilities, losses and expenses, including consultant fees, court costs and
reasonable attorneys' fees, arising out of any breach of the foregoing warranty.
14.2 Covenant of Lessee. Except for Hazardous Substances or other toxic
materials or medical waste brought, kept or used in the Premises in commercial
quantities similar to those quantities usually kept on similar premises by
others in the same business or profession or who operate medical facilities
similar to those located in and on the Premises, medical specialty, and which
are used and kept in compliance with applicable public health, safety and
environmental laws, Lessee shall not allow any Hazardous Substance, or other
toxic material or medical waste to be located in, on or under the Premises or
allow the Premises to be used for the disposal of any Hazardous Substance or
other toxic material; and Lessee shall indemnify Lessor, its City Council and
its agents and employees against any and all claims, demands, liabilities,
losses and expenses, including consultant fees, court costs and reasonable
attorneys' fees arising out of any breach of the foregoing covenant.
14.3 Compliance with Laws. Lessee shall at all times and in all
respects comply with all Legal Requirements applicable to the Premises or the
use thereof relating to industrial hygiene, the handling, storage and disposal
of medical waste, environmental protection, or the use, analysis, generation,
manufacture, storage, disposal or transportation of any Hazardous Substance,
toxic material or medical waste.
14.4 Remediation. If Lessee becomes aware of the presence of any
Hazardous Substance in or on the Premises (except for those Hazardous Substances
or other toxic material or medical waste brought, kept or used in the Premises
by Lessee in commercial
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quantities similar to those quantities usually kept on similar premises by
others in the same business, profession or medical specialty and which are used
and kept in compliance with applicable public health, safety and environmental
laws) or if Lessee, or the Premises become subject to any order of any federal,
state or local agency to repair, close, detoxify, decontaminate or otherwise
cleanup the Premises, Lessee shall, at its own cost and expense, carry out and
complete any repair, closure, detoxification, decontamination or other cleanup
of the Premises; provided that Lessee shall not be responsible for any of the
foregoing relating to any Hazardous Substance, or other toxic materials or
medical waste located on, in or under the Premises on the date of this Lease,
all of which shall be the responsibility of Lessor pursuant to and as otherwise
limited by Section 14.1 and Lessor shall promptly execute and complete any
required repair, closure, detoxification, decontamination or other clean-up of
the Premises. If either party fails to implement and diligently pursue any such
repair, closure, detoxification, decontamination other cleanup of the Premises
which it is required to do hereunder, the other party shall have the right, but
not the obligation, to carry out such action and to recover all of the costs and
expenses from the other.
14.5 Definition. "Hazardous Substances" as such term is used in this
Lease means any hazardous or toxic substance, material or waste, regulated or
listed pursuant to any federal, state or local environmental law, including
without limitation, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conversation and Recovery Act, the Federal Insecticide,
Fungicide, Rodenticide Act, the Safe Drinking Water Act and the Occupational
Safety and Health Act.
15. Notices, Demands and Other Instruments. All notices, offers, consents
and other instruments given pursuant to this Lease shall be in writing and shall
be validly given when personally delivered or when placed in the United States
mail, registered or certified with return receipt requested, when sent by
prepaid telegram or facsimile followed by confirmatory letter actually delivered
or when sent by a courier or express service guaranteeing overnight delivery,
(i) if to Lessor, addressed to it at its address set forth above, (ii) if to
Lessee, addressed to Lessee at its address set forth above. Lessor and Lessee
each may from time to time specify, by giving fifteen (15) days notice to each
other party, (i) any other address in the United States as its address for
purposes of this Lease and (ii) any other person or entity that is to receive
copies of notices, offers, consents and other instruments hereunder.
16. Separability; Binding Effect. Each provision hereof shall be separate
and independent and, the breach of any such provision by Lessor shall not
discharge or relieve Lessee from its obligations to perform each and every
covenant to be performed by Lessee hereunder. If any provision hereof or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remaining provisions hereof, or the application of such
provision to persons or circumstances other than those as to which it is invalid
or unenforceable, shall not be affected thereby, and each provision hereof shall
be valid and shall be enforceable to the extent permitted by law. All provisions
contained in this Lease shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of Lessor and Lessee to
the same extent as if each such successor and assign were named as a party
hereto. This Lease may not be changed, modified or discharged except by a
writing signed by Lessor and
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Lessee. Any such change, modification or discharge made otherwise than as
expressly permitted by this paragraph shall be void. This Lease shall be
governed by and interpreted in accordance with the laws of the State of
California.
17. Headings and Table of Contents. The table of contents and the headings
of the various Sections and Schedules of this Lease have been inserted for
reference only and shall not to any extent have the effect of modifying,
amending or changing the expressed terms and provisions of this Lease.
18. Counterparts. This Lease may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
19. Memorandum of Lease. Upon request of either party hereto, the parties
shall execute and deliver to each other duplicate originals of a Memorandum of
this Lease, in recordable form, containing the information required by law for
recording the same.
20. Assignment of Scheduled Leases. Lessor hereby assigns to Lessee all of
its right, title and interest as lessor under those certain leases affecting the
Premises which are existing and in effect as of the date of execution of this
Lease listed on Schedule 4.6 of Annex A (hereinafter the "Scheduled Leases"),
and Lessee hereby agrees to assume all Lessor's obligations, covenants and
agreements as lessor under the Scheduled Leases. Lessee shall be entitled to
collect and receive all such rents and other sums from the lessees under the
Scheduled Leases accruing on and after the Commencement Date, and Lessee and
Lessor agree that the Scheduled Leases shall upon this assignment become
subleases subject and subordinate to this Lease. Lessee shall notify each of the
lessees under the Scheduled Leases of this assignment.
21. No Partnership. The parties hereto intend the relationship created by
this Lease to be that of lessor and lessee and do not intend for the arrangement
between them to be a partnership.
22. Right of First Refusal.
22.1 Exercise of Right. During the Term hereof, and for a period of
(120) days thereafter, Lessor shall, prior to any proposed sale, transfer or
assignment of all or any part of the Premises or the Equipment, provide Lessee
with written notice of the terms and conditions of the proposed sale, transfer
or assignment, including the identity of the proposed transferee and the
proposed purchase price. Lessee have a right of first refusal for thirty (30)
days from the receipt of such notice in which to agree to consummate such sale,
transfer or assignment on the same price, terms and conditions contained in the
notice. If Lessee elects to acquire the same on such price, terms and
conditions, Lessee shall have one hundred twenty (120) days from the date on
which it received notice of the transaction in which to consummate such
transaction. If Lessee fails to consummate such transaction within such one
hundred twenty (120) day period, Lessor shall be entitled to proceed with the
sale, transfer or assignment of the same as originally intended, provided that
if Lessor does not consummate such transaction within one
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hundred twenty (120) days thereafter, then the provisions hereof shall apply
again to any proposed transaction.
22.2 Conveyance Requirements. In the event of the purchase of the
Premises and/or the Equipment by Lessee as provided in Section 22.1, Lessor
shall convey to Lessee or its designee by its general warranty deed and xxxx of
sale, good, record and marketable title to the Premises and the Equipment,
subject only to Permitted Encumbrances, real estate taxes which are not
delinquent and liens caused or created by Lessee, but free and clear of all
mortgages, security deeds, liens, encumbrances and security interests securing
any indebtedness of Lessor. The purchase price shall be paid in cash by wire
transfer of immediately available funds at the time of the closing; provided
that if the Premises has suffered any damage covered by the insurance described
in Section 4.5, Lessor and the holders of any mortgages on the Premises shall
pay to Lessee all of the proceeds of such insurance not previously paid to
Lessee, or to the extent such proceeds have not been collected, assign to Lessee
all of their respective rights and interests therein to Lessee; or at its
election Lessee may reduce the purchase price paid by the amount of such
proceeds and deduct such sum from the purchase price payable at the closing.
Lessor shall be responsible for and shall pay one-half of all closing costs.
Closing costs shall include the costs of title insurance, a survey, any escrow
charges, costs of recording deeds and all documentary stamps and similar taxes
on the recordation of the deeds. Each party shall be responsible for the fees
of its respective counsel in connection with the transactions contemplated by
this Section 22.
22.3 Termination of Lease. Upon the completion of any such purchase,
but not prior thereto (whether or not any delay in the completion of or the
failure to complete such purchase shall be the fault of Lessor), this Lease and
all obligations hereunder (including, but not limited to, the obligations to pay
rent and additional rent) shall terminate, provided that neither party shall be
released with respect to obligations and liabilities of Lessee and Lessor,
actual or contingent, under this Lease which arose on or prior to the date of
the closing of the purchase, unless specific provision therefor shall be made in
the instruments and agreements relating to such purchase.
23. Purchase of Assets and Retransfer of Certain Items at End of Term. Upon
expiration or earlier termination of this Lease (other than in accordance with
Sections 22 hereof), Lessor, at its option, may purchase (i) all of Lessee's
Personal Property, and (ii) the items similar to those items described in
Section 1.3 of Annex A. The purchase price paid by Lessor for such assets shall
be the lesser of (i) the then net book value of such assets at the time of
expiration or earlier termination of this Lease, based on Lessee's books and
records, which books and records shall be maintained in accordance with
generally accepted accounting principals consistently applied, or (ii) the then
fair market value of such assets. Lessee shall transfer and convey the same by
xxxx of sale, free of all liens and Lessor shall pay the purchase price in cash
with delivery of the xxxx of sale.
24. Department of Health and Human Services Regulation. Until the
expiration of four years after the expiration or earlier termination of the Term
of this Lease, Lessor will make available to the Secretary, U.S. Department of
Health and Human Services, and the U.S. Comptroller General, and their
representatives, this Lease and all books, documents, and records
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necessary to certify the nature and extent of Lessor's costs with respect to
this Lease and the Premises. If Lessor carries out any of its duties under this
Lease through a subcontract worth $10,000 or more over a 12-month period with a
related organization, the subcontract will also contain an access clause to
permit access by the Secretary, Comptroller General, and their representatives
to the related organization's books and records.
25. Annex, Exhibits and Schedules. Annex A and the Exhibits and Schedules
referred to in this Lease are hereby incorporated by reference herein.
26. Due Diligence. The parties acknowledge and agree that they have
executed this Lease (i) prior to Lessee having completed its due diligence with
respect to the transactions described in this Lease, and (ii) without there
being attached hereto all of the Schedules required by this Lease, or, in the
case where a Schedule has been attached, it may not contain all of the
information required to make it complete. Lessor shall provide full and complete
Schedules on or before July 24, 1997, and may amend or supplement any
theretofore submitted Schedules on or before such date. Such finally submitted
complete Schedules submitted on or before July 24, 1997, shall be deemed a part
of this Lease and incorporated herein as of the date hereof as if originally
submitted to Lessee and attached hereto as of the date hereof. Lessee shall have
until July 31, 1997 (the "Due Diligence Period") to review the Schedules and
complete its due diligence. The Due Diligence Period may be modified by mutual
written agreement of Lessor and Lessee, and shall be extended a reasonable
period of time to allow Lessee to consider and conduct due diligence with
respect to the Schedules. Notwithstanding the foregoing, if for any reason in
its sole discretion, Lessee is dissatisfied with the result of its due
diligence, whether it relates to the Schedules or otherwise, Lessee may
terminate this Lease and Annex A, and thereafter this Lease and Annex A, and the
rights and obligations of the parties under this Lease and Annex A shall be null
and void.
27. Fair Market Value Opinion. The parties acknowledge and agree that
Lessor has executed this Lease prior to receiving a written fair market value
opinion from Xxxxxx Xxxxxxxx LLP covering the transactions contemplated by this
Lease and the Annex A. Notwithstanding any other provision in this Lease and the
Annex A, if, for any reason in its sole discretion, Lessor is dissatisfied with
the written fair market value opinion obtained from Xxxxxx Xxxxxxxx LLP, then
Lessor may terminate this Lease and Annex A, and, thereafter, this Lease and the
Annex A, and the rights and obligations of the parties under this Lease and the
Annex A, shall be null and void.
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IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date and year first written above.
LESSOR:
THE BOARD OF TRUSTEES OF NEEDLES
DESERT COMMUNITIES HOSPITAL
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
----------------------------------
Title: President
---------------------------------
Signed, sealed and delivered
on the 30th day of June,
1997, in the presence of:
[signature illegible]
---------------------------
Witness
/s/ Xxxxx Xxxx
---------------------------
Notary Public
San Bernardino County, California
APPROVED BY AND CONSENTED TO
BY THE CITY COUNCIL OF THE CITY
OF NEEDLES, CALIFORNIA
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Name: Xxxx X. Xxxxxx
-------------------------------
Title: Mayor
------------------------------
Signed, sealed and delivered
on the 31 day of July,
1997, in the presence of:
/s/ Xxxxxx X. Xxxxxx
---------------------------
Witness
/s/ Xxxxxxxx Xx Xxxx
---------------------------
Notary Public
San Bernardino County, California
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APPROVED AS TO FORM BY THE CITY
ATTORNEY FOR THE CITY OF NEEDLES,
CALIFORNIA
By: /s/ Xxxxxx X. Hargreaver
--------------------------------
Name: Xxxxxx X. Hargreaver
------------------------------
Title: City Attorney
-----------------------------
Signed, sealed and delivered
on the 31 day of July,
1997, in the presence of:
___________________________
Witness
/s/ Naughn Xxxxxxx
---------------------------
Notary Public
San Bernardino County, California
LESSEE:
PRINCIPAL-NEEDLES, INC.
By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxxxx X. Xxxxx
-------------------------------
Title: Vice President, Acquisitions
and Development
------------------------------
Signed, sealed and delivered
on the 2nd day of July,
1997, in the presence of:
/s/ Dahyn Hood
---------------------------
Witness
/s/ Xxxxx X. Xxxxxx
---------------------------
Notary Public
______________ County, Oregon
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SCHEDULE A
(PART I)
Legal Description
A-I-1
20
SCHEDULE A
(PART II)
Permitted Encumbrances
A-II-1
21
SCHEDULE B
Equipment
B-1
22
SCHEDULE C
Deferred Maintenance Items
C-1
23
SCHEDULE D
Environmental Matters
E-1
24
EXHIBIT A
Mechanical Upgrades
E-2
