SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made as of the 16th day of
June, 1997, among CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC, a Delaware limited
liability company ("OpCo"), CRESCENT REAL ESTATE FUNDING VII, L.P., a Delaware
limited partnership ("Crescent"), MAGELLAN HEALTH SERVICES, INC., a Delaware
corporation ("MHS"), and CHARTER FRANCHISE SERVICES, LLC, a Delaware limited
liability company ("Charter Franchise"). MHS and Charter Franchise are
hereinafter referred to collectively as "Magellan."
RECITALS:
A. Crescent, as landlord, and OpCo and each of certain wholly-owned subsidiaries
of OpCo (collectively, the "Initial OpCo Subs"), collectively as tenant, are
parties to that certain Master Lease Agreement of even date herewith (as the
same may be amended or modified, the "Lease").
B. Magellan, as franchisor, and OpCo, as franchisee, are parties to that certain
Master Franchise Agreement dated effective as of June 17, 1997, and each of the
Initial OpCo Subs, as a franchisee, and Magellan, as franchisor, is a party to
an individual franchise agreement as described in the Master Franchise Agreement
(the Master Franchise Agreement and such individual franchise agreements,
together with any new franchise agreements now or hereafter entered into between
Magellan, as franchisor, and OpCo, any Initial OpCo Sub, or any other subsidiary
of OpCo now or hereafter in existence, as such Master Franchise Agreement,
individual franchise agreements or other franchise agreements may be amended or
modified, are referred to herein collectively as the "Franchise Agreement").
C. OpCo and Magellan desire to subordinate, to the extent set forth herein, the
payment and performance of the Franchise Agreement to the payment and
performance of certain obligations under the Lease upon the terms and conditions
set forth below, and Magellan and Crescent desire to establish certain duties,
rights and responsibilities among themselves with respect to the obligations of
the OpCo, the Initial OpCo Subs, and any other subsidiary of OpCo now or
hereafter in existence that enters into a franchise agreement with MHS and/or
Charter Franchise (the Initial OpCo Subs and such other subsidiaries of OpCo
being hereinafter referred to collectively as the "OpCo Subs").
NOW, THEREFORE, in consideration of the foregoing and other valuable
consideration hereby acknowledged, and in order to induce Crescent to enter into
the Lease with OpCo, OpCo, Crescent and Magellan agree as follows:
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1
DEFINITIONS
1.1 "Additional Charges" hall have the meaning given such term in the Lease
payable with respect to the Term.
1.2"Additional Rent" shall have the meaning given such term in the Lease payable
with respect to the Term.
1.3 than Saturday, Sunday, or any other day
on which banking institutions in the states of Texas, Georgia, and the State are
authorized by law or executive action to close.
1.4Collective Leased Properties" shall have the meaning given such term in the
Lease.
1.5Debtor Relief Laws" shall mean any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
laws relating to the relief of debtors, readjustment of indebtedness or
composition, and affecting the rights of creditors generally, which may from
time to time be in effect.
1.6Franchise Agreement" shall have the meaning given such term in the Recitals
to this Agreement.
1.7Franchise Fees" shall mean, collectively, the franchise fees payable to
Magellan under the Franchise Agreement, including interest and late charges, as
well as any fees payable to Magellan by OpCo or any OpCo Sub with respect to
Joint Ventures and/or Managed Businesses (as such terms are defined in the
Master Franchise Agreement) pursuant to Section 10 of the Master Franchise
Agreement to the extent not already included in the calculation of "Franchise
Fees" as defined in the Master Franchise Agreement.
1.8Lease" shall have the meaning given such term in the Recitals to this
Agreement.
1.9Lease Year" shall have the meaning given such term in the Lease.
1.10Leased Property" shall have the meaning given such term in the Lease.
1.11Minimum Rent" shall have the meaning given such term in the Lease payable
with respect to the Term.
1.12 Additional Rent" shall mean the amount of additional rent with respect to
any Lease Year in excess of the Priority Additional Rent Base Amount.
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1.13 Additional Rent Monthly Amount" shall mean, for each month
in a Lease Year, the monthly installment of Additional Rent payable for such
month equal to one-twelfth (1/12th) of the difference between (a) the total
Additional Rent payable for such Lease Year minus (b) the Priority Additional
Rent Base Amount for such Lease Year calculated for such month as provided below
in the definition of "Priority Additional Rent Base Amount."
1.14 Payments" shall have the meaning given such term in Section 2.2.
1.15Plan" shall have the meaning given such term in Section 2.4(c).
1.16 Additional Rent Base Amount" for any Lease Year shall mean an
amount of Additional Rent equal to Ten Million Dollars ($10,000,000); provided,
however, that if Crescent, as landlord, funds, or makes an irrevocable
commitment to fund, Capital Expenditures (as defined in the Lease) for any Lease
Year in an amount in excess of Ten Million Dollars ($10,000,000) at OpCo's
request, then the Priority Additional Rent Base Amount for such Lease Year shall
be increased to the amount of Capital Expenditures funded or committed to be
funded by Crescent for such Lease Year. Notwithstanding the foregoing, in the
event that, and for so long as, the accrued and unpaid Franchise Fees equal or
exceed Fifteen Million Dollars ($15,000,000), then the Priority Additional Rent
Base Amount for any such Lease Year shall be reduced to $0.00; provided,
however, that if Crescent funds, or makes an irrevocable commitment to fund,
Capital Expenditures for any Lease Year in any amount at OpCo's request, then
the Priority Additional Rent Base Amount for such Lease Year shall be increased
from $0.00 to the amount of Capital Expenditures funded or committed to be
funded by Crescent for such Lease Year. The Priority Additional Rent Base Amount
shall be computed monthly in advance of the payment of Rent required to be made
under the Lease for the next succeeding month. Such calculation shall be made on
the 25th day of the month, unless the 25th day of the month is not a Business
Day, in which event such calculation for such month shall be made on the first
Business Day following such 25th day. Notwithstanding anything set forth above
to the contrary, if any request by OpCo to Crescent to fund Capital Expenditures
under the Lease is for an amount in excess of the amount budgeted therefor in
OpCo's approved Annual Budget (as defined in OpCo's Operating Agreement), then
the Priority Additional Rent Base Amount shall not be increased as provided
above to the extent that the amount of such request is above the budgeted amount
unless such request is accompanied by OpCo's certification that Magellan has
approved such requested amount. Magellan acknowledges and agrees that Crescent
shall be entitled to rely upon OpCo's certification that any amount requested
either (i) is within the approved Annual Budget of OpCo or (ii) has been
approved by Magellan, and in the latter event such certification by OpCo shall
be accompanied by Magellan's written consent to such requested amount.
1.17Rent" shall mean, collectively, all Minimum Rent, including late charges and
default rate interest, and Additional Rent, but shall exclude Additional Charges
except to the extent that Additional Charges include late charges and default
rate interest.
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1.18Rescission Event" shall have the meaning given such term in Section 3.4.
1.19Returned Payment" shall have the meaning given such term in Section 3.4.
1.20State" shall mean, as to each Leased Property, the state in which such
Leased Property is located.
1.21Term" shall have the meaning given such term in the Lease.
2
SUBORDINATION
2.1 Agreement to Subordinate. Notwithstanding any provision in the Franchise
Agreement or any other agreement between (i) MHS and/or Cha ter Franchise and
(ii) OpCo or between (i) MHS and/or Charter Franchise and (ii) any OpCo Sub to
the contrary, the Franchise Fees (including any increases thereto effected from
time to time by amendments to the Franchise Agreement adding new Leased
Properties to the facilities covered thereby) are and shall be, to the extent
and in the manner hereinafter set forth, subject, subordinate and junior in
right of payment and liquidation to the prior irrevocable payment in full of the
Rent (other than Non-Priority Additional Rent), as the Rent (other than
Non-Priority Additional Rent) may be increased from time to time by amendments
to the Lease adding new Leased Properties that are also covered by the Franchise
Agreement to the Collective Leased Properties. Magellan acknowledges receipt of
a true and complete copy of the Lease. Unless and until all Rent (other than
Non-Priority Additional Rent) shall have been fully paid and the Term shall have
expired, neither MHS nor Charter Franchise will, except as otherwise expressly
provided herein, take or receive, or retain, from OpCo, any OpCo Sub, or any
other person or entity, by setoff or in any other manner, payment of all or any
part of the Franchise Fees, or accept any security therefor, and neither OpCo
nor any OpCo Sub shall make, give or permit, directly or indirectly, any such
payment, and neither MHS nor Charter Franchise shall demand or xxx for any such
payment to the extent prohibited in Section 2.3. Notwithstanding the foregoing
payment subordination, but subject to the provisions of Sections 2.3 and 2.4,
OpCo may pay, and Magellan may receive, the Permitted Payments, as defined in
Section 2.2.
2.2 Permitted Payments. Notwithstanding any provision contained in this
Agreement to the contrary, so long no "Default" or "Event of Default" (as
defined therein) under or within the meaning of the Lease has occurred and is
continuing with respect to the payment of Rent (other than Non-Priority
Additional Rent), or would be created by making the payments to Magellan
hereinafter described, and so long as none of OpCo or any OpCo Sub is the
subject of any proceeding under any Debtor Relief Laws, OpCo may pay to
Magellan, and Magellan may accept from OpCo, the regularly scheduled monthly
installment of the Franchise Fees in any month, when due, as well as any accrued
and unpaid monthly installments of the Franchise Fees
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(collectively, the "Permitted Payments"), after payment by OpCo of all Rent due
for such month, excluding the Non-Priority Additional Rent Monthly Amount for
such month. Further, notwithstanding any provision contained in this Agreement
to the contrary, except in the case of a Rescission Event, Crescent shall not be
entitled to recover from Magellan any Permitted Payment or any portion thereof
that has been properly made to Magellan in accordance with the terms of this
Section 2.2.
2.3 Agreement Not to Enforce Payment or Commence Action.
(a) Notwithstanding any provision contained in this Agreement, the Franchise
Agreement or any other agreement to the contrary, prior to the payment in full
of all Rent (other than Non-Priority Additional Rent) payable un er the Lease
and the expiration of the Term, (i) neither MHS nor Charter Franchise shall
object to, challenge, hinder or delay the exercise by Crescent of any right or
remedy it may have under or with respect to the Lease or any other agreement, or
otherwise at law or in equity, against OpCo, any OpCo Sub or any of its or their
assets or properties, and (ii) neither MHS nor Charter Franchise shall have any
right to file an involuntary proceeding against OpCo or any OpCo Sub under any
Debtor Relief Laws or otherwise to enforce payment of any of the Permitted
Payments or any other portion of the Franchise Fees against OpCo or any OpCo
Sub, or to otherwise take any action against OpCo or any OpCo Sub (including,
without limitation, any proceeding under Debtor Relief Laws), or against any
property or assets of OpCo or any OpCo Sub, in order to collect the Permitted
Payments or any other portion of the Franchise Fees, without the prior written
consent of Crescent, if such action could reasonably be expected to lead to
OpCo's or any OpCo Sub's filing of a voluntary proceeding, or other creditors of
OpCo or any OpCo Sub filing an involuntary proceeding against OpCo or any OpCo
Sub, under any Debtor Relief Laws. However, so long as no "Default" or "Event of
Default" under the Lease has occurred and is continuing with respect to the
payment of Rent (other than Non-Priority Additional Rent), and so long as none
of OpCo or any OpCo Sub is the subject of any proceeding under any Debtor Relief
Laws, Magellan may pursue any default remedy available under the Franchise
Agreement or at law or in equity or otherwise, except as provided above in this
Section 2.3.
(b) Each of Crescent and Magellan covenants to the other that it shall use
commercially reasonable best efforts to provide in a timely fashion written
notice of the commencement and progress of any remedial actio undertaken against
OpCo or any OpCo Sub, including providing to such party copies of any and all
correspondence to OpCo or any OpCo Sub from such party with respect to any of
such party's rights or remedies and any pleadings or similar material; provided,
however, that failure to provide any such written notice or any such copies
shall not affect the validity of any action undertaken or render either Crescent
or Magellan liable to the other or to any other person or entity.
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2.4 In Furtherance of Subordination.
(a) In the event (i) of any distribution, division or application, voluntary or
involuntary, by operation of law or otherwise, of all or any substantial part of
the assets or business of OpCo or any OpCo Sub to creditors of OpCo or any OpCo
Sub, or (ii) upon any indebtedness of Op o or any OpCo Sub becoming due and
payable by reason of any dissolution, liquidation or other winding up of OpCo or
any OpCo Sub or its business, or by reason of any sale, receivership,
insolvency, reorganization or bankruptcy proceedings, assignment for the benefit
of creditors, or any arrangement or proceeding by or against OpCo or any OpCo
Sub for any relief under any Debtor Relief Laws (whether voluntary or
involuntary), or any other marshaling of the assets and liabilities of OpCo or
any OpCo Sub, until the Rent (other than Non-Priority Additional Rent) has been
paid in full (subject, however, to the terms of Section 3.4 below) (A) all
payments and distributions of any kind or character (whether in cash, property
or securities) in respect of the Franchise Fees to which Magellan would be
entitled if the Franchise Fees were not subordinated as provided herein shall be
made directly to Crescent for application in accordance with the terms of the
Lease, and (B) neither MHS nor Charter Franchise shall seek the lifting, for its
own benefit, of any automatic stay or similar restriction imposed by reason of
any such arrangement or proceeding.
(b) All payments or distributions on or with respect to the Franchise Fees which
are received by MHS and/or Charter Franchise contrary to the provisions of this
Agreement, whether in cash, properties or securities (including without
limitation any distributions received on a count of any security interests,
liens, or other encumbrances), shall be received in trust for the benefit of
Crescent, shall be segregated from other funds and property held by Magellan and
shall be forthwith paid over to Crescent in the same form as so received (with
any necessary endorsement) to be applied (in the case of cash) to, or held as
collateral (in the case of non-cash property or securities) for, the payment or
prepayment of the Rent (other than Non-Priority Additional Rent) in accordance
with the terms of the Lease. In the event of any failure by MHS and/or Charter
Franchise to make any such endorsement or assignment, Crescent is hereby
irrevocably authorized to make the same.
(c) Magellan shall file in a timely manner a claim or claims, in the form
required in any proceeding described in subsection (a) above, for the full
outstanding am unt of the Franchise Fees and shall use commercially reasonable
best efforts to cause said claim or claims to be approved and all payments and
other distributions in respect thereof to be made directly to Crescent until all
Rent (other than Non-Priority Additional Rent) payable under the Lease has been
paid in full. MHS and Charter Franchise each irrevocably authorizes and empowers
Crescent, in connection with any proceeding or distribution described in
subsection (a) above, in the name of MHS and Charter Franchise, respectively, or
otherwise, to demand, xxx for, collect and receive and receipt for any and all
such payments or distributions, and file, prove, and vote or consent in any such
proceedings with respect to any and all claims of MHS and/or Charter Franchise
relating to the Franchise Fees if MHS and/or Charter Franchise shall not have
duly filed such claim or proof of claim at least ten (10) days prior to the last
day on which such
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claim or proof of claim may be filed. Magellan agrees that (i) without the prior
written consent of Crescent, which consent shall not be unreasonably withheld,
it will not vote such claim in favor of any plan of reorganization or similar
structure (a "Plan") under which the terms of the Lease are changed in any way,
and (ii) it will not vote against any Plan if Crescent votes in favor of the
same unless, under such Plan, the Franchise Fees, or any portion thereof, would
not be subordinate in right of payment to distributions to Crescent on account
of the Rent (other than Non-Priority Additional Rent). Magellan further agrees
that, in view of the difficulty of estimating damages from any violation by MHS
and/or Charter Franchise of the terms of this subsection (c), Crescent shall be
entitled to injunctive relief to prevent or rescind any action taken by MHS
and/or Charter Franchise in violation of this subsection (c), as well as damages
and other forms of relief available for breach of contract.
(d) Crescent shall be entitled to enforce specific performance of this Agreement
at any time when MHS and/or Charter Franchise shall have failed to comply with
any of the provisions of this Agreement applicable to it. Magellan hereby
irrevocably waives any defense based on the adequacy of a remedy at law which
might be asserted as a bar to such remedy of specific performance. (e) Nothing
provided in this Agreement is intended to relieve OpCo of its obligation to pay
Franchise Fees due under the Franchise Agreement.
2.5 Application of Payments Received. All payments and distributions received by
Crescent in respect of the Franchise Fees, to the extent received in or
converted into cash, may be applied by Crescent first to the payment of any and
all expenses (including reasonable attorneys' fees and legal expenses) paid or
incurred by Crescent in enforcing this Agreement or in endeavoring to collect or
realize upon any of the Franchise Fees or any security therefore, and any
balance shall, solely as between Magellan and Crescent, be applied by Crescent,
in such order of application as Crescent may from time to time select, toward
the payment of Rent (other than Non-Priority Additional Rent) remaining unpaid,
but as between OpCo or any OpCo Sub and its creditors, no such payments or
distributions of any kind or character shall be deemed to be payments or
distributions in respect of Rent.
3
MISCELLANEOUS
3.1 Notices. Whenever any notice is required or permitted hereunder, such notice
shall be in writing and (a) sent by certified mail, postage prepaid, return
receipt requested, (b) given by established overnight commercial courier for
delivery on the next Business Day with delivery charges prepaid or duly charged,
(c) personally hand-delivered or (d) sent by facsimile transmission with
confirmation of receipt received, to the applicable addre s or facsimile number
set forth below:
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As to Crescent: Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
CRE Management VII Corp.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
with copies to: Xxxxx X. Xxxx, Esq.
Senior Vice President, Law
Crescent Real Estate Equities Company
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Xxxxxxxx X. Xxxxx, Esq.
Shaw, Pittman, Xxxxx & Xxxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
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As to OpCo or any Charter Behavioral Health Systems, LLC
OpCo Sub: 0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Chief Legal Counsel
Facsimile: (404)
As to MHS and/or Xxxxx X. Xxxxx, Esq.
Charter Franchise Executive Vice President, Administrative
Services and General Counsel
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to: Xxxxxx X. Xxxxxx
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
Notices which are mailed shall be deemed effective upon receipt.
Notices which are hand-delivered shall be deemed effective upon tender to a
natural person at the address shown. Notices which are delivered by overnight
courier shall be deemed given on the next Business Day after delivery to such
courier. Notices which are delivered by facsimile transmission shall be deemed
received upon electronic confirmation of delivery.
0.Xx Waivers. No failure or delay on the part of any party to exercise, and no
course of dealing with respect to, any right, power or privilege under this
Agreement or any document or instrument relating to the Lease or the Franchise
Agreement shall operate as a
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waiver thereof. No single or partial exercise of any such right, power or
privilege shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
2. Amendments, Supplements and Waivers. The provisions of this Agreement may
not be amended, modified or waived except by the written agreement of Magellan
and Crescent (without any necessity for notice to or consent by OpCo or any OpCo
Sub, which notice and consent are expressly WAIVED by OpCo). The provisions of
this Agreement shall be solely for the benefit of Crescent and Magellan and may
not be relied upon or enforced by OpCo, any OpCo Sub or any other person or
entity other than Crescent and Magellan.
3. Continuing Agreement; Successors and Assigns. This Agreement is a continuing
agreement and shall be binding upon and, except as provided in Section 3.3,
inure to the benefit of each of the parties hereto, and their respective
successors and assigns. Further, this Agreement shall remain in full force and
effect until the Rent shall have been irrevocably paid in full and shall
continue to be effective, or be reinstated, as the case may be, if at any time
any payment of all or any part of the Rent (a "Returned Payment") is rescinded
or must otherwise be returned upon the insolvency, bankruptcy or reorganization
of OpCo or any OpCo Sub, or by reason of the operation of any other applicable
law or order of court (a "Rescission Event"), all as though such payment had not
been made. No party hereto shall sell, assign, pledge, encumber or otherwise
dispose of the Franchise Agreement or the Lease, as the case may be, or any
amounts payable thereunder, unless such sale, assignment, pledge, encumbrance or
disposition is made expressly subject to the terms and provisions of this
Agreement. Nothing herein is intended or shall be construed to give any other
person any right, remedy or claim with respect to this Agreement, the Lease, or
the Franchise Agreement. Notwithstanding the foregoing, Magellan shall be
entitled to collaterally assign its rights but not its obligations under the
Franchise Agreement, subject to the terms and provisions of this Agreement, as
well as its rights but not its obligations under this Agreement, to any of its
lenders.
4. Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws during the term hereof,
such provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to the illegal, invalid or unenforceable provision
as may be possible.
5. Counterparts. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument. In
making proof of this Agreement it shall not be necessary to produce or account
for more than one such counterpart.
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6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND GOVERNED BY THE LAWS OF
THE STATE OF DELAWARE AND THE UNITED STATES OF AMERICA.
7. WAIVER OF JURY TRIAL. EACH OF OPCO, MAGELLAN AND CRESCENT hereby irrevocably
waives, to the full extent permitted by applicable law, any right to have a jury
participate in resolving any dispute arising out of, in connection with, related
to, or incidental to this Agreement.
8. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT AMONG
THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
9. Amendment of Franchise Agreement. Magellan agrees that, unless and until all
Rent (other than Non-Priority Additional Rent) shall have been irrevocably paid
in full (subject, however, to the terms of Section 3.4 above) and the Term shall
have expired, without Crescent's prior written consent the Franchise Agreement
shall not be amended, modified, or supplemented by any of the parties thereto in
any manner that would increase or accelerate payment of the Franchise Fees or
any installment thereof, except for an increase in the Franchise Fees in
connection with the addition of a new Leased Property to the facilities covered
by the Franchise Agreement or in connection with the implementation of New
Products (as defined in the Franchise Agreement). If the Franchise Agreement is
amended without Crescent's prior written consent in a manner that violates the
provisions of this Section 3.10, then the increased or accelerated portion of
the Franchise Fees shall be subordinate and junior in right of payment and
liquidation to the prior irrevocable payment in full of all Rent, Additional
Rent (including all Non-Priority Additional Rent), and all Additional Charges.
10. No Subrogation Until Payment in Full. Without Crescent's prior written
consent, Magellan shall not be entitled to be subrogated to any of the rights of
Crescent against OpCo, any OpCo Sub, or any other person or entity, or any
liens, security interests or assignments now or hereafter securing the Lease,
until all of the Rent (other than Non-Priority Additional Rent) shall have been
irrevocably paid in full (subject, however, to the terms of Section 3.4 above)
and the Term shall have expired.
11. Amendment of Lease. Crescent may, at any time and from time to time, without
the consent of or notice to Magellan, and without impairing or releasing the
obligations of Magellan hereunder, (a) enter into any amendment or modification
of the Lease, including, without limitation, any amendment which extends the
maturity of the Fixed Term or any Extended Term, except the fourth Extended Term
(as such terms are defined in the Lease), of the Lease (whether or not in
accordance with the renewal options set forth therein) or extends or
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reduces any installment of Rent or waives any Default or Event of Default
thereunder; (b) exercise or refrain from exercising any rights against OpCo, any
OpCo Sub or any other person or entity; (c) subject to the terms and provisions
of Section 2.5 hereof, apply any sums by whomsoever paid or however realized to
the Lease; (d) sell, exchange, release, surrender, realize upon or otherwise
deal with, in any manner and in any order, any property whatsoever and by
whomsoever at any time pledged or mortgaged to secure the Lease; (e) release
anyone liable in any manner for the payment or collection of any Rent, and (f)
settle or compromise all or any part of the Rent and subordinate the payment of
any part of the Rent to the payment of any other indebtedness. Notwithstanding
the foregoing, Crescent shall not, without prior notice to and written consent
of Magellan, amend or modify the Lease in any manner that would increase the
amount or accelerate the payment of Rent or any installment thereof (other than
Non-Priority Additional Rent and other than an increase in Rent in connection
with the addition of new Leased Properties to the Collective Leased Properties)
or that would extend the Term beyond the fourth Extended Term. In the event that
Crescent, OpCo and the OpCo Subs amend the Lease to increase the amount or
accelerate the payment of the Rent or any installment thereof (other than
Non-Priority Additional Rent and other than an increase in Rent in connection
with the addition of new Leased Properties to the Collective Leased Properties)
payable thereunder, or to extend the Term beyond the fourth Extended Term, this
Agreement shall remain in full force and effect and the Franchise Fees shall
continue to be subject, subordinate and junior in right of payment and
liquidation to the prior irrevocable payment of the Rent (other than
Non-Priority Additional Rent) to the extent and in the manner set forth herein
as though the Rent payable under the Lease had not been so increased or the Term
so extended beyond the fourth Extended Term; provided, however, that in the
event that Crescent, OpCo and the OpCo Subs, without the prior written consent
of Magellan, so amend the Lease to increase the amount or accelerate the payment
of Minimum Rent or Additional Rent (other than Non-Priority Additional Rent),
then the portion of the Rent constituting such increase or the portion of the
Rent or any installment thereof so accelerated, as applicable, shall be
subordinate and junior in right of payment and liquidation to the prior
irrevocable payment of the Franchise Fees to the extent and in the manner that
the Franchise Fees are subordinated pursuant to this Agreement.
12. Further Assurances. Each of Magellan and OpCo will, at its expense and at
any time and from time to time, promptly execute and deliver all further
instruments and documents (including without limitation assignments and proofs
of claim), and promptly take all further action (including, without limitation,
filing proofs of claim and taking other actions to collect the Franchise Fees),
or cause such instruments and documents to be executed and delivered and such
actions to be taken, that may be necessary or desirable, or that Crescent may
reasonably request, in order to protect any right or interest granted or
purported to be granted hereby or to enable Crescent to exercise and enforce its
rights and remedies hereunder. For purposes of this Section 3.13, "promptly"
shall be deemed to mean within five (5) Business Days after written request
therefor unless in the judgment of Crescent, exercised in good faith, faster
action is required to achieve the intended purpose.
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13. Representations and Warranties. Each of Magellan, Crescent and OpCo hereby
represents and warrants as to itself that (i) the execution, delivery and
performance by such party of this Agreement have been duly and validly
authorized by all necessary action and (ii) this Agreement has been duly and
validly executed and delivered by such party and constitutes the legal, valid
and binding obligation of such party, enforceable against such party in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, conservatorship, receivership, insolvency, moratorium or similar
laws affecting creditors' rights generally or by general principles of equity.
14. Expenses, Etc. OpCo agrees to pay, upon demand, to Crescent the amount of
any and all losses, costs and expenses, including the fees and expenses of
Crescent's counsel, which Crescent may incur as a result of any breach by OpCo
of its obligations hereunder or in connection with the exercise or enforcement
of any of Crescent's rights or interests hereunder, which exercise or
enforcement results directly or indirectly from, or arises by reason of, any
action or any failure to take an action required of OpCo hereunder. Magellan
agrees to pay, upon demand, to Crescent the amount of any and all losses, costs
and expenses, including the fees and expenses of Crescent's counsel, which
Crescent may incur as a result of any breach by MHS and/or Charter Franchise of
its obligations hereunder or in connection with the exercise or enforcement of
any of Crescent's rights or interests hereunder, which exercise or enforcement
results directly or indirectly from, or arises by reason of, any action or any
failure to take any action required of MHS and/or Charter Franchise hereunder.
Crescent shall not have any obligation to make demand of, or take any action
against, OpCo under this Section 3.15 prior to making demand of, or taking
action against, MHS and/or Charter Franchise pursuant to this Section 3.15.
15. Arbitration in Some Events. Disputes between Magellan and Crescent relating
to amounts owing to Magellan or Crescent under the Franchise Agreement or the
Lease, as such agreements are affected by this Agreement, will be subject to
resolution by binding arbitration in Delaware before the American Arbitration
Association and governed by the Commercial Arbitration Rules then in effect.
Nothing set forth in this Section 3.16, however, shall impair or restrict in any
way either party's right to seek equitable relief in connection with the
enforcement of this Agreement.
16. Consent to Assumption of Franchise Agreement. Magellan hereby consents to
the assumption by Crescent or Crescent's designee of the Franchise Agreement and
all rights and obligations of the franchisee thereunder from the date of such
assumption in the event of an Event of Default by OpCo under the Lease and
exercise by Crescent of its election, in its sole and absolute discretion, under
the remedies provisions of the Lease to assume or have its d esignee assume all
of the revenue producing contracts relating to the Collective Leased Properties.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
CRESCENT REAL ESTATE FUNDING VII, L.P.
WITNESS: CRE Management VII Corp., a Delaware corporation
By: \s\ Xxxxxx X. Xxxxxxxx By: \s\ Xxxxx X. Xxxx
----------------------- --------------------------------
Name: Xxxxxx X. Xxxxxxxx Name: Xxxxx X. Xxxx
--------------------- ------------------------------
Title: Assistant Secretary Title: Senior Vice President, Law
-------------------- -----------------------------
CHARTER BEHAVIORAL HEAL SYSTEMS, LLC
By: \s\ W. Xxxxxxx Xxxx
--------------------------------
Name: W. Xxxxxxx Xxxx
------------------------------
Title: Senior Vice President and CFO
-----------------------------
MAGELLAN HEALTH SERVICES, INC.
By: \s\ Xxxxx X. Xxxxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxxxx
------------------------------
Title: Vice President and Treasurer
-----------------------------
CHARTER FRANCHISE SERVICES, LLC
By: \s\ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------
Title: Vice President and Secretary
-----------------------------
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