MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT is entered into as of the ___ day of
___________, 1997, by and between CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership, having its principal office at 000
Xxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxxx, Xxxxx 00000 ("Landlord"), CHARTER
BEHAVIORAL HEALTH SYSTEMS, LLC, a Delaware limited liability company, having its
principal office at Xxxxx 000, 0000 Xxxxxxxxx Xx., X.X., Xxxxxxx, XX 00000
("OpCo"), and each of the entities listed on Exhibit B attached hereto.
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Collective Leased
Properties (this and other capitalized terms used and not otherwise defined
herein having the meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Collective Leased Properties to
Tenant and Tenant wishes to lease the Collective Leased Properties from
Landlord, all subject to and upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article shall have the meanings assigned to them in this Article and include the
plural as well as the singular, (ii) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.1 "Additional Charges" shall have the meaning given such term in Section
3.1.3.
1.2 "Additional Rent" shall mean the monthly sum of One Million Six Hundred
and Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($1,666,667.00).
1.3 "Affiliated Person" shall mean, with respect to any Person, (a) in the
case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited
liability company, any member of such company, and (c) any other Person
which is a Parent, a Subsidiary, or a Subsidiary of a Parent with
respect to such Person or to one or more of the Persons referred to in
the preceding clauses (a) and (b).
1.4 "Agreement" shall mean this Master Lease Agreement, including Exhibits
A-1 to A-__, B and C hereto, as it and they may be amended from time to
time as herein provided.
1.5 "Allowance" shall mean an annual amount with respect to each Lease Year
not to exceed the additional rent for each such Lease Year. The
Allowance shall be paid by Landlord to Tenant pursuant to Section 3.5
hereof.
1.6 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders
(whether now existing or hereafter enacted or promulgated irrespective
of whether its enactment is foreseeable or contemplated), of all courts
of competent jurisdiction and Government Agencies, and all applicable
judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings, relating to injury to, or the
protection of, real or personal property or human health (except those
requirements which, by definition, are solely the responsibility of
employers) or the Environment, including, without limitation, all valid
requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and
removal of underground improvements (including, without limitation,
treatment or storage tanks, or water, gas or oil xxxxx), or emissions,
discharges, releases or threatened releases of Hazardous Substances,
chemical substances, pesticides, petroleum or petroleum products,
pollutants, contaminants or hazardous or toxic substances, materials or
wastes whether solid, liquid or gaseous in nature, into the
Environment, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances or Regulated Medical Wastes, underground improvements
(including, without limitation, treatment or storage tanks, or water,
gas or oil xxxxx), or pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in
nature.
1.7 "Award" shall mean all compensation, sums or other value awarded, paid
or received by virtue of a total or partial Condemnation of any of the
Collective Leased Properties (after deduction of all reasonable legal
fees and other reasonable costs and expenses, including, without
limitation, expert witness fees, incurred by Landlord, in connection
with obtaining any such award).
1.8 "Business Day" shall mean any day other 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.
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1.9 "Capital Addition" shall mean one or more new buildings, or one or more
additional structures annexed to any portion of any of the Leased
Improvements with respect to any of the Collective Leased Properties,
or the material expansion of existing improvements, which are
constructed on any parcel or portion of the Land during the Term,
including the construction of a new wing or new story, the renovation
of existing improvements on any of the Collective Leased Properties in
order to provide a functionally new facility needed to provide services
not previously offered, or any material expansion, construction,
renovation or conversion in order to increase by more than 10% the bed
capacity of any Facility, to change the purpose for which such beds are
utilized or to improve materially the quality of any Facility.
1.10 "Capital Additions Cost" shall mean the cost of any Capital Addition
proposed to be made by Tenant at any of the Collective Leased
Properties, whether paid for by Tenant or Landlord. Such cost shall
include (a) the cost of construction of the Capital Addition, including
site preparation and improvement, materials, labor, supervision,
developer and administrative fees, legal fees, and related design,
engineering and architectural services, the cost of any fixtures, the
cost of equipment and other personalty, the cost of construction
financing (including, but not limited to, capitalized interest) and
other miscellaneous costs approved by Landlord, (b) if agreed to by
Landlord in writing, in advance, the cost of any land (including all
related acquisition costs incurred by Tenant) contiguous to the
applicable Leased Property which is to become a part of such Leased
Property purchased for the purpose of placing thereon a Capital
Addition or any portion thereof or for providing means of access
thereto, or parking facilities therefor, including the cost of
surveying the same, (c) the cost of insurance, real estate taxes, water
and sewage charges and other carrying charges for such Capital Addition
during construction, (d) title insurance charges, (e) filing,
registration and recording taxes and fees, (f) documentary stamp or
transfer taxes, and (g) all actual and reasonable costs and expenses of
Landlord and Tenant and, if agreed to by Landlord in writing, in
advance, any Lending Institution committed to finance the Capital
Addition relating to financing for the Capital Addition, including, but
not limited to, all (i) reasonable attorneys' fees and expenses, (ii)
printing expenses, (iii) filing, registration and recording taxes and
fees, (iv) documentary stamp or transfer taxes, (v) title insurance
charges and appraisal fees, (vi) rating agency fees, and (vii)
commitment fees charged by any Lending Institution advancing or
offering to advance any portion of any financing to which Landlord has
consented in writing for such Capital Addition.
1.11 "Capital Expenditure" shall mean any expenditure with respect to the
Collective Leased Properties that is properly categorized as a capital
expenditure in accordance with GAAP.
1.12 "Change in Control" shall mean the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the SEC) of 50% or more, or rights, options or
warrants to acquire 50% or more, of the outstanding
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shares of voting stock of Tenant or any Facility Subsidiary, as the
case may be, or the merger or consolidation of Tenant or any Facility
Subsidiary (except with OpCo, a Facility Subsidiary or a wholly-owned
Subsidiary of OpCo), as the case may be with or into any other Person
or any one or a series of related sales or conveyances to any Person
(except to OpCo, a Facility Subsidiary or a wholly-owned subsidiary of
OpCo) of all or substantially all of the assets of Tenant or any
Facility Subsidiary, as the case may be. In the case of OpCo, only the
following shall constitute a Change in Control; (i) a sale or
conveyance in one or a related series of transactions of all or
substantially all the assets of OpCo to any Person and (ii) a merger or
consolidation in which OpCo is not the surviving or resulting entity or
of which the holders of the equity interests of OpCo immediately prior
to the merger or consolidation do not own more than 50% of the equity
interests in the surviving or resulting entity immediately after the
merger or consolidation.
1.13 "Code" shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as
from time to time amended.
1.14 "Collective Leased Properties" shall have the meaning given such term
in Section 2.1.
1.15 "Commencement Date" shall mean the date of this Agreement.
1.16 "Comparable Facility" shall mean a facility having as its primary use
the Primary Intended Use and which is reasonably acceptable to
Landlord, with an expected future profitability substantially
equivalent to or greater than that of the Designated Leased Property
which Tenant proposes that it replace, both immediately prior to such
substitution and as reasonably projected over the term of this
Agreement, taking into account any cash paid or received in connection
with the substitution and any other relevant factors.
1.17 "Condemnation" shall mean, with respect to any of the Collective
Leased Properties, (a) the exercise of any governmental power with
respect to such Leased Property, whether by legal proceedings or
otherwise, by a Condemnor of its power of condemnation, (b) a
voluntary sale or transfer of such Leased Property by Landlord to any
Condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending, and (c) a taking or
voluntary conveyance of all or part of such Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the
result or in settlement of any Condemnation or other eminent domain
proceeding affecting such Leased Property, whether or not the same
shall have actually been commenced.
1.18 "Condemnor" shall mean any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
1.19 "Contractor" shall have the meaning given such term in Section 9.8.
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1.20 "Contractor's" Insurance Certificate" shall have the meaning given such
term in Section 9.8.
1.21 "Default" shall mean any event or condition which with the giving of
notice and/or lapse of time may ripen into an Event of Default.
1.22 "Designated Leased Property" shall mean a property designated by Tenant
pursuant to Section 22.15 on which there exists a Comparable Facility
which Tenant proposes to substitute for a Leased Property.
1.23 "Encumbrance" shall have the meaning given such term in Section 20.1.
1.24 "Entity" shall mean any corporation, general or limited partnership,
limited liability company or partnership, stock company or association,
joint venture, association, company, trust, bank, trust company, land
trust, business trust, cooperative, any government or agency or
political subdivision thereof or any other entity.
1.25 "Environment" shall mean soil, surface waters, ground waters, land,
stream, sediments, surface or subsurface strata, ambient air, physical
structures and equipment, and where radon gas is present, the interior
air of buildings.
1.26 "Environmental Notice" shall have the meaning given such term in
Section 4.4.1.
1.27 "Environmental Obligation" shall have the meaning given such term in
Section 4.4.1.
1.28 "Environmental Report" shall have the meaning given such term in
Section 4.4.2.
1.29 "Event of Default" shall have the meaning given such term in Section
12.1.
1.30 "Extended Terms" shall have the meaning given such term in Section 2.4.
1.31 "Facility" shall mean, with respect to any of the Collective Leased
Properties, the facility offering health care or related services being
operated or proposed to be operated on such Leased Property.
1.32 "Facility Mortgage" shall mean, with respect to any of the Collective
Leased Properties, any Encumbrance placed upon such Leased Property in
accordance with Article 20.
1.33 "Facility Mortgagee" shall mean the holder of any Facility Mortgage.
1.34 "Facility Subsidiaries" shall mean the Entities listed on Exhibit B
attached hereto, each of which is a wholly owned Subsidiary of OpCo.
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1.35 "Facility Trade Name" shall mean, with respect to any Facility, any
name under which Tenant has conducted the business of operating such
Facility at any time during the Term.
1.36 "Fair Market Rental" shall mean, with respect to any of the Collective
Leased Properties, the rental which a willing tenant not compelled to
rent would pay a willing landlord not compelled to lease for the use
and occupancy of such Leased Property (including all Capital Additions)
on the terms and conditions of this Agreement for the term in question
, assuming Tenant is not in default hereunder and determined by
agreement between Landlord and Tenant or, failing agreement, in
accordance with the appraisal procedures set forth in Article 19.
1.37 "Fair Market Value" shall mean, with respect to any of the Collective
Leased Properties, the price that a willing buyer not compelled to buy
would pay a willing seller not compelled to sell for such Leased
Property (without taking into account any reduction in value resulting
from any indebtedness to which such Leased Property is subject),
assuming the same is unencumbered by this Agreement and determined by
agreement between Landlord and Tenant or, failing agreement, the
appraisal procedures set forth in Article 19.
1.38 "Financial Officer's Certificate" shall mean, as to any Person, a
certificate of the chief financial officer of such Person, duly
authorized, accompanying the financial statements required to be
delivered by such Person pursuant to Section 17.2, in which such
officer shall certify (a) that such statements have been properly
prepared in accordance with GAAP and fairly present in all material
respects the financial condition of such Person at and as of the dates
thereof and the results of its and their operations for the periods
covered thereby, (except that, in the case of financial statements
delivered pursuant to Sections 17.2(a) and 17.2(c), the certificate
shall state the extent to which such financial statements are not in
accordance with GAAP) and (b) certify that such officer has reviewed
this Agreement and has no knowledge of any Default or Event of Default
hereunder.
1.39 "Financials" shall mean, for any Fiscal Year or other accounting period
of OpCo, annual audited and quarterly unaudited financial statements
for OpCo, including OpCo's balance sheet and the related statements of
income and cash flows, all in reasonable detail, and setting forth in
comparative form the corresponding figures for the corresponding period
in the preceding Fiscal Year, and prepared in accordance with GAAP
throughout the periods reflected, except to the extent GAAP is
customarily not complied with by OpCo in preparing quarterly unaudited
financial statements.
1.40 "Fiscal Year" shall mean the twelve (12) month period from October 1 to
September 30.
1.41 "Fixed Term" shall have the meaning given such term in Section 2.3.
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1.42 "Fixtures" shall have the meaning given such term in Section 2.1(d).
1.43 "Franchise Agreement" shall mean, collectively, that certain Franchise
Agreement of even date herewith by and between Franchisor, as
franchisor, and OpCo, as franchisee, and those certain Franchise
Agreements of even date herewith by and between Franchisor, as
franchisor, and each of the Facility Subsidiaries, as franchisee.
1.44 "Franchise Fees" shall mean all amounts payable by Tenant to Franchisor
under the Franchise Agreement.
1.45 "Franchise Subordination Agreement" shall mean that certain
Subordination Agreement of even date herewith, as the same may be
amended from time to time, by and among OpCo, Landlord and Franchisor.
1.46 "Franchisor" shall mean Magellan Health Services, Inc., a Delaware
corporation.
1.47 "GAAP" shall mean generally accepted accounting principles consistently
applied.
1.48 "Government Agencies" shall mean any court, agency, authority, board
(including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of
any nature whatsoever of any governmental unit of the United States or
the State or any county or any political subdivision of any of the
foregoing, whether now or hereafter in existence, having jurisdiction
over Tenant or the Collective Leased Properties or any portion thereof
or the Facilities operated thereon.
1.49 "Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal,
state or local statute, regulation, rule, ordinance, order,
action or policy; or
(b) which is or becomes defined as a "hazardous waste," "hazardous
material" or "hazardous substance" or "pollutant" or
contaminant" under any present or future federal, state or
local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42
U.S.C, et seq.) and the Resource Conservation and Recovery Act
(42 U.S.C, section 6901 et seq.) and the regulations
promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous
and is or becomes regulated by any governmental authority,
agency, department, commission, board, agency or
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instrumentality of the United States, any state of the United
States, or any political subdivision thereof; or
(d) the presence of which on any of the Collective Leased
Properties causes or threatens to cause a nuisance upon such
Leased Property or to adjacent properties or poses or
threatens to pose a hazard to any of the Collective Leased
Properties or to the health or safety of persons on or about
any of the Collective Leased Properties; or
(e) without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated biphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes Regulated Medical Wastes.
1.50 "Impositions" shall mean, with respect to any of the Collective Leased
Properties, collectively, all taxes (including, without limitation, all
taxes imposed under the laws of the State, as such laws may be amended
from time to time, and all ad valorem, sales and use, single business,
gross receipts, transaction privilege, rent or similar taxes as the
same relate to or are imposed upon Landlord, Tenant or the business
conducted upon such Leased Property), assessments (including, without
limitation, all assessments for public improvements or benefit, whether
or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term), ground rents, water, sewer or
other rents and charges, excises, tax levies, fees (including, without
limitation, license, permit, inspection, authorization and similar
fees) and all other governmental charges, in each case whether general
or special, ordinary or extraordinary, or foreseen or unforeseen, of
every character in respect of such Leased Property or the business
conducted thereon by Tenant (including all interest and penalties
thereon due to any failure in payment by Tenant), which at any time
prior to, during or in respect of the Term hereof may be assessed or
imposed on or in respect of or be a lien upon (a) Landlord's interest
in such Leased Property, (b) such Leased Property or any part thereof
or any rent therefrom or any estate, right, title or interest therein,
or (c) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with such Leased Property or
the leasing or use of such Leased Property or any part thereof by
Tenant; provided, however, that nothing contained herein shall be
construed to require Tenant to pay (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any
transfer fee or other tax imposed with respect to the sale, exchange,
financing, mortgaging, or other disposition by Landlord of the
applicable Leased Property or the proceeds thereof (other than in
connection with the sale, exchange or other
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disposition to, or in connection with a transaction involving, Tenant),
or (iv) any single business, franchise fees, gross receipts (other than
a tax on any rent received by Landlord from Tenant), transaction
privilege, rent or similar taxes as the same relate to or are imposed
upon Landlord, except to the extent that any tax, assessment, tax levy
or charge that Tenant is obligated to pay pursuant to the first
sentence of this definition and that is in effect at any time during
the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (i) or (ii)
preceding is levied, assessed or imposed expressly in lieu thereof.
1.51 "Indebtedness" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's
balance sheet as debt.
1.52 "Insurance Requirements" shall mean all terms of any insurance policy
required by this Agreement and all requirements of the issuer of any
such policy.
1.53 "Land" shall have the meaning given such term in Section 2.1(a).
1.54 "Landlord" shall have the meaning given such term in the preamble to
this Agreement.
1.55 "Lease Year" shall mean any consecutive annual period starting on the
Commencement Date and ending on the day prior to the anniversary
thereof; provided that if the Commencement Date is not the first day of
a calendar month then the first (1st) Lease Year shall end on the last
day of the calendar month in which occurs the date which would
otherwise be the last day of such Lease Year.
1.56 "Leased Improvements" shall have the meaning given such term in Section
2.1(b).
1.57 "Leased Personal Property" shall have the meaning given such term in
Section 2.1(e).
1.58 "Leased Property" shall mean any one of the Collective Leased
Properties.
1.59 "Legal Requirements" shall mean, with respect to any of the Collective
Leased Properties, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting such Leased Property or
the maintenance, construction, alteration or operation thereof, whether
now or hereafter enacted or in existence, including, without
limitation, (a) all permits, licenses, certificates of need,
authorizations and regulations necessary to operate such Leased
Property for its Primary Intended Use, and (b) all covenants,
agreements, restrictions and encumbrances contained in any instruments
at any time in force affecting such Leased Property, including those
which may (i) require material repairs, modifications or alterations in
or to such Leased Property or (ii) in any way adversely affect the use
and enjoyment thereof.
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1.60 "Lending Institution" shall mean any insurance company, federally
insured commercial or savings bank, national banking association,
savings and loan association, employees' welfare, pension or
retirement fund or system, syndicated lenders' group, commercial
finance company, leasing company, corporate profit sharing or pension
trust, college or university, or real estate investment trust,
including any corporation qualified to be treated for federal tax
purposes as a real estate investment trust, such trust having a net
worth of at least $50,000,000.
1.61 "Lien" shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, or any
transfer of any property or assets for the purpose of subjecting the
same to the payment of Indebtedness or performance of any other
obligation in priority to payment of any Person's general creditors.
1.62 "Management Agreement" shall mean any agreement whether written or oral
entered into between Tenant and any other party (including any
Affiliated Person as to Tenant) pursuant to which management services
are provided to all or substantially all of any Facility, together with
all amendments, modifications or supplements thereto.
1.63 "Manager" shall mean the management party under any Management
Agreement
1.64 "Minimum Rent" shall mean the following monthly sums with respect to
the Fixed Term:
Lease Year Minimum Rent
1 $___________
2 $___________
3 $___________
4 $___________
5 $___________
6 $___________
7 $___________
8 $___________
9 $___________
10 $___________
11 $___________
12 $___________
Initial Minimum Rent will be $40,000,000 per year, plus 10% of any
increase in the total consideration in excess of $400,000,000. The
Minimum Rent will be increased on the first day of the second Lease
Year, and each Lease Year thereafter, to an amount equal to the product
of the then Minimum Rent multiplied by 105%.
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With respect to each Extended Term, the Minimum Rent shall be an amount
determined in accordance with Section 2.5.
1.65 "Notice" shall mean a notice given in accordance with Section 22.11.
1.66 "Non-Priority Additional Rent" shall mean the installments of
additional rent with respect to any Lease Year in excess of the
Priority Additional Rent Base Amount.
1.67 "Officer's Certificate" shall mean a certificate signed by an officer
of Tenant.
1.68 "OpCo" shall have the meaning given such term in the preamble to this
Agreement.
1.69 "Overdue Rate" shall mean, on any date, a per annum rate of interest
equal to the lesser of the Prime Rate plus six (6) percentage points
and the maximum rate then permitted under applicable law.
1.70 "Parent" shall mean, with respect to any Person, any Person which owns
directly, or indirectly through one or more Subsidiaries, more than
fifty percent (50%) of beneficial equity interest in such Person.
1.71 "Permitted Encumbrances" shall mean, with respect to any of the
Collective Leased Properties, all rights, restrictions, and easements
of record set forth on Schedule B to the applicable owner's or
leasehold title insurance policy issued to Landlord on the date hereof,
plus any other such encumbrances as may have been consented to in
writing by Landlord from time to time, plus items that constitute
Permitted Exceptions under and as that term is defined in the Purchase
Agreement.
1.72 "Person" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such
Person where the context so admits.
1.73 "Philadelphia Facility" shall mean the "Charter Fairmount" Facility
currently under renovation and located in Philadelphia, Pennsylvania.
1.74 "Primary Intended Use" shall have the meaning given such term in
Section 4.1.1.
1.75 "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank (or its
successor) as its prime rate in effect at its principal office in New
York City, New York.
1.76 "Priority 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 Landlord funds, or makes an irrevocable
commitment to fund, Capital Expenditures for any Lease Year in an
amount in excess of Ten Million Dollars ($10,000,000) at Tenant's
request, then the Priority Additional Rent Base Amount for such Lease
Year shall be
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increased to the amount of Capital Expenditures funded or committed to
be funded by Landlord for such Lease Year. Notwithstanding the
foregoing, in the event that, and for so long as, the accrued and
unpaid Franchise Fees, including interest thereon, if any, 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 Landlord funds, or makes an
irrevocable commitment to fund, Capital Expenditures for any Lease Year
in any amount at Tenant'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
Landlord for such Lease Year. The Priority Additional Rent Base Amount
shall be computed monthly in advance of the payment of Rent due
hereunder 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 Tenant to
Landlord for a disbursement of the Allowance in any Fiscal Year is for
an amount in excess of the amount budgeted for capital expenditures in
Tenant's approved annual budget for such Fiscal Year, 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 Franchisor's consent to such
requested amount.
1.77 "Purchase Agreement" shall have the meaning given such term in Section
22.15 hereof.
1.78 "Qualified Affiliate" shall mean any (x) Parent or Subsidiary of OpCo,
or (y) partnership or limited liability company in which OpCo has an
ownership interest of not less than 25%, whether or not such interest
is controlling.
1.79 "Qualified Appraiser" shall mean an appraiser who is not in control of,
controlled by or under common control with either Landlord or Tenant
and has not been an employee of Landlord or Tenant or any Affiliated
Person with respect to either of Landlord or Tenant at any time, who is
qualified to appraise commercial real estate in the State and is a
member of the American Institute of Real Estate Appraisers (or any
successor association or body of comparable standing if such Institute
is not then in existence) and who has held his or her certificate as an
M.A.I, or its equivalent for a period of not less than three (3) years,
and has been actively engaged in the appraisal of commercial real
estate in such area for a period of not less than five (5) years,
immediately preceding his or her appointment hereunder.
1.80 "Regulated Medical Wastes" shall mean all materials generated by
Tenant, subtenants, patients, occupants or the operators of the
Collective Leased Properties which are now or may hereafter be subject
to regulation pursuant to the Material Waste Tracking Act of 1988, or
any Applicable Laws promulgated by any Government Agencies.
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1.81 "Rent" shall mean, collectively, the Minimum Rent, Additional Rent and
Additional Charges.
1.82 "SEC" shall mean the Securities and Exchange Commission.
1.83 "State" shall mean, as to each Leased Property, the state in which such
Leased Property is located.
1.84 "Subordinated Creditor" shall mean any creditor of Tenant which is a
party to a Subordination Agreement in favor of Landlord.
1.85 "Subordination Agreement" shall mean any agreement executed by a
Subordinated Creditor pursuant to which the payment and performance of
Tenant's obligations to such Subordinated Creditor are subordinated to
the payment and performance of Tenant's obligations to Landlord under
this Agreement.
1.86 "Subsidiary" shall mean, with respect to any Person, any Entity in
which such Person owns directly, or indirectly through one or more
Subsidiaries, more than fifty percent (50%) of the beneficial equity
interest of such Person.
1.87 "Substitute Leased Property" shall have the meaning given such term in
Section 22.15 hereof.
1.88 "Substitution Date" shall have the meaning given such term in Section
22.15 hereof.
1.89 "Tenant" shall mean OpCo and the Facility Subsidiaries listed in
Exhibit B, jointly and severally.
1.90 "Tenant's Personal Property" shall mean all tangible personal property
now owned or hereafter acquired by Tenant on or after the date hereof
and located at any of the Collective Leased Properties or used in
connection with Tenant's business at any of the Collective Leased
Properties, including, without limitation, all motor vehicles and
consumable inventory and supplies, furniture, furnishings, movable
walls and partitions, equipment and machinery and all other tangible
personal property of Tenant, and all modifications, replacements,
alterations and additions to such personal property installed at the
expense of Tenant.
1.91 "Term" shall mean, collectively, the Fixed Term and the Extended Terms,
to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this
Agreement.
1.92 "Unsuitable for Its Primary Intended Use" shall mean, with respect to
any Facility, a state or condition of such Facility such that (a)
following any damage or destruction
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involving such Leased Property, such Leased Property cannot reasonably
be expected to be restored to substantially the same condition as
existed immediately before such damage or destruction, and as otherwise
required by Section 10.2.3, within six (6) months following such damage
or destruction or such shorter period of time as to which business
interruption insurance is available to cover Rent and other costs
related to such Leased Property following such damage or destruction,
or (b) as the result of a partial taking by Condemnation, such Facility
cannot be operated, in the good faith judgment of OpCo, on a
commercially practicable basis for its Primary Intended Use taking into
account, among other relevant factors, the number of usable beds, the
amount of square footage, or the revenues affected by such damage or
destruction or partial taking.
1.93 "Work" shall have the meaning given such term in Section 10.2.3.
ARTICLE 2
COLLECTIVE LEASED PROPERTIES AND TERM
2.1 Collective Leased Properties.
Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord all of the following
(collectively, the "Collective Leased Properties"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibits A-1 to A-_ attached hereto
and made a part hereof (the "Land");
(b) all buildings, structures, Fixtures 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 and all Capital Additions
(collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or
incorporated into the Leased 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 maximum extent permitted by law, are hereby deemed by
the parties hereto to constitute real estate, together with
all replacements, modifications, alterations
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and additions thereto, but specifically excluding Tenant's
Personal Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other
personal property of any kind or description used or useful
in Tenant's business on or in the Leased Improvements, and
located on or in the Leased Improvements, including, without
limitation, all "Personal Property" as defined in the
Purchase Agreement, and all modifications, replacements,
alterations and additions to such personal property, except
items, if any, included within the category of Fixtures, but
specifically excluding Tenant's Personal Property
(collectively, the "Leased Personal Property"); and
(f) all leases of space (including any security deposits held by
Tenant pursuant thereto) in the Leased Improvements to tenants
thereof.
Landlord hereby assigns to Tenant, and Tenant hereby assumes, all of
the leases described in clause (f) immediately preceding, such assumption being
to the full extent set forth in the Assignment of Leases executed at the closing
pursuant to the Purchase Agreement. In connection therewith, Tenant agrees to
perform any and all covenants of landlord thereunder, past, present and future.
Notwithstanding the foregoing, such leases shall, without the necessity of
further documentation, be deemed reassigned to Landlord upon the expiration or
earlier termination of the Term. In connection with any reassignment thereof
occurring following an Event of Default hereunder, such reassignment shall not
release Tenant from any liability thereunder with respect to the period ending
prior to the expiration of the Term.
2.2 Condition of Collective Leased Properties.
Tenant acknowledges receipt and delivery of possession of the
Collective Leased Properties and Tenant accepts the Collective Leased Properties
in their "as is" condition, subject to the rights of all occupants and parties
in possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Collective Leased Properties, all
applicable Legal Requirements, the lien of financing instruments, mortgages and
deeds of trust, and such other matters which would be disclosed by an inspection
of the Collective Leased Properties and the record title thereto or by an
accurate survey thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE COLLECTIVE
LEASED PROPERTIES AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF
SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR
LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT THERETO, AND TENANT WAIVES ANY CLAIM
OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE COLLECTIVE LEASED
PROPERTIES. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN
RESPECT OF THE COLLECTIVE LEASED PROPERTIES OR ANY PART THEREOF, EITHER AS TO
ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
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PURPOSE OR OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE
BY TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any predecessor in title for breaches of warranties or representations
or for latent defects in the Collective Leased Properties. Landlord shall fully
cooperate with Tenant in the prosecution of any such claims, in Landlord's or
Tenant's name, all at Tenant's sole cost and expense. Tenant shall indemnify,
defend, and hold harmless Landlord from and against any loss, cost, damage or
liability (including reasonable attorneys' fees) incurred by Landlord in
connection with such cooperation.
2.3 Fixed Term.
The initial term of this Agreement (the "Fixed Term") shall commence on
the Commencement Date and shall expire on the last day of the twelfth (12th)
Lease Year.
2.4 Extended Term.
Provided that no Default or Event of Default shall have occurred and be
continuing and this Agreement shall be in full force and effect, Tenant shall,
subject to Section 2.5 below, have the right to extend the Term for each of four
(4) consecutive five (5)-year renewal terms (collectively, the "Extended Terms")
for all, and not less than all, of the Collective Leased Properties.
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement (including but not limited to
those with respect to Additional Rent and payments of the Allowance) shall apply
to each such Extended Term, except that (x) the Minimum Rent for each Extended
Term shall be the Fair Market Rental for such Extended Term and shall be
determined pursuant to Section 2.5 below and (y) Tenant shall have no right to
extend the Term beyond the expiration of the Extended Terms. If Tenant shall
elect to exercise any of the aforesaid options, it shall do so by giving
Landlord Notice thereof not later than one (1) year prior to the scheduled
expiration of the then current Term of this Agreement (Fixed Term or Extended
Term, as the case may be), it being understood and agreed that time shall be of
the essence with respect to the giving of such Notice. Tenant may not exercise
its option for more than one such Extended Term at a time. If Tenant shall fail
to give any such Notice, this Agreement shall automatically terminate at the end
of the Term then in effect and Tenant shall have no further option to extend the
Term of this Agreement. If Tenant shall give such Notice, the extension of this
Agreement shall be automatically effected without the execution of any
additional documents, it being understood and agreed, however, that Tenant and
Landlord shall execute such documents and agreements as either party shall
reasonably require to evidence the same. Notwithstanding the provisions of the
foregoing sentence, if, subsequent to the giving of such Notice, an Event of
Default shall occur and be continuing, unless Landlord shall otherwise consent
in writing, the extension of this Agreement shall cease to take effect and this
Agreement
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shall automatically terminate at the end of the Term then in effect and Tenant
shall have no further option to extend the Term of this Agreement.
2.5 Determination of Minimum Rent for Extended Terms.
The Minimum Rent for each Extended Term shall be equal to the amount
set forth in clause (x) in Section 2.4 above and shall be determined by the
mutual agreement of Landlord and Tenant within thirty (30) days after Landlord
receives Tenant's Notice exercising its option to extend with respect to such
Extended Term, but in no event earlier than twelve (12) months prior to the
commencement of the applicable Extended Term. In the event Landlord and Tenant
are unable to agree on the Minimum Rent for such Extended Term within such
period, such Minimum Rent shall be determined pursuant to appraisal in
accordance with Article 19.
ARTICLE 3
RENT
3.1 Rent.
Tenant shall pay to Landlord, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction, Minimum Rent, Additional Rent
and Additional Charges, during the Term, except as hereinafter expressly
provided. All payments to Landlord shall be made by wire transfer of immediately
available federal funds or by other means acceptable to Landlord and Tenant,
each in its sole discretion. Rent for any partial month shall be prorated on a
per diem basis based on a 365-day year and the actual number of days elapsed.
3.1.1 Minimum Rent.
Minimum Rent shall be paid in advance on the first day of each calendar
month; provided, however, that the first monthly installment of Minimum Rent
shall be payable on the Commencement Date.
3.1.2 Additional Rent.
Additional Rent shall be paid in advance on the first day of each
calendar month; provided, however, that the first monthly installment of
Additional Rent shall be payable on the Commencement Date. Except as otherwise
set forth in Section 12.1(a) hereof, Tenant's failure to pay Additional Rent
shall not constitute a Default or Event of Default hereunder.
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3.1.3 Additional Charges.
In addition to the Minimum Rent and Additional Rent payable hereunder,
Tenant shall pay and discharge as and when due and payable the following
(collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to Permitted Contests,
Tenant shall pay, or cause to be paid, all Impositions before any
fine, penalty, interest or cost (other than any opportunity cost
as a result of a failure to take advantage of any discount for
early payment) may be added for non-payment, such payments to be
made directly to the taxing authorities where feasible, and shall
promptly, upon request, furnish to Landlord copies of official
receipts or other satisfactory proof evidencing such payments. If
any such Imposition may, at the option of the taxpayer, lawfully
be paid in installments (whether or not interest shall accrue on
the unpaid balance of such Imposition), Tenant may exercise the
option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and, in such event,
shall pay such installments during the Term as the same become
due and before any fine, penalty, premium, further interest or
cost may be added thereto. Landlord, at its expense, shall, to
the extent required or permitted by applicable law, prepare and
file all tax returns in respect of Landlord's net income, gross
receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock,
and Tenant, at its expense, shall, to the extent required or
permitted by applicable laws and regulations, prepare and file
all other tax returns and reports in respect of any Imposition as
may be required by any government or Government Agency. Provided
no Default or Event of Default shall have occurred and be
continuing, if any refund shall be due from any taxing authority
in respect of any Imposition paid by Tenant, the same shall be
paid over to or retained by Tenant. Landlord and Tenant shall,
upon request of the other, provide such data as is maintained by
the party to whom the request is made with respect to the
Collective Leased Properties as may be necessary to prepare any
required returns and reports. In the event Government Agencies
classify any property covered by this Agreement as personal
property, Tenant shall file all personal property tax returns in
such jurisdictions where it may legally so file. Each party
shall, to the extent it possesses the same, provide the other,
upon request, with cost and depreciation records necessary for
filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal
property tax returns, Landlord shall provide Tenant with copies
of assessment notices in sufficient time for Tenant to file a
protest. All Impositions assessed against such personal property
shall be (irrespective of whether Landlord or Tenant shall file
the relevant return) paid by Tenant not later than the last date
on which the same may be made without interest or penalty. If the
provisions of any Facility Mortgage require deposits on account
of Impositions to be made with such Facility Mortgagee, provided
the Facility Mortgagee has not elected to waive such
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provision, Tenant shall either pay Landlord the monthly amounts
required at the time and place that payments of Minimum Rent are
required and Landlord shall transfer such amounts to such
Facility Mortgagee or, pursuant to written direction by Landlord,
Tenant shall make such deposits directly with such Facility
Mortgagee. Landlord shall, however, use commercially reasonable
best efforts to cause any Facility Mortgagee not to impose such
obligation on Tenant.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge; provided,
however, that Landlord's failure to give any such Notice shall in no way
diminish Tenant's obligation hereunder to pay such Impositions, except that
Landlord shall (unless Tenant itself knew, or should have known, about the
existence of such Impositions obligation) pay all penalties, fines and other
expenses arising out of Landlord's failure to give such Notice.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other
utilities used in connection with the Collective Leased
Properties.
(c) Insurance Premiums. Tenant shall pay or cause to be paid all
premiums for the insurance coverage required to be
maintained pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all other
amounts, liabilities and obligations which Tenant assumes or
agrees to pay under this Agreement, including, without
limitation, all agreements to indemnify Landlord under
Sections 4.4 and 9.7.
(e) Prorations. Tenant shall pay or cause to be paid all amounts
required to be paid by OpCo under Section 10.4 of the
Purchase Agreement.
(f) Reimbursement for Additional Charges. If Tenant pays or
causes to be paid property taxes or similar Additional
Charges attributable to periods after the end of the Term,
whether upon expiration or sooner termination of this
Agreement (other than termination following an Event of
Default), Tenant may, within sixty (60) days of the end of
the Term, provide Notice to Landlord of its estimate of such
amounts. Landlord shall promptly reimburse Tenant for all
payments of such taxes and other similar Additional Charges
that are attributable to any period after the Term of this
Agreement (unless this Agreement shall have been terminated
following an Event of Default). Tenant acknowledges that it
has no claims against Landlord for Additional Charges
attributable to the periods prior to the first day of the
Term.
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3.2 Late Payment of Rent.
If any installment of (i) Minimum Rent, (ii) Additional Rent (with
respect to which Landlord has made a disbursement of the Allowance) or (iii)
Additional Charges (but only as to those Additional Charges which are payable
directly to Landlord) shall not be paid on its due date, Tenant shall pay
Landlord, on demand, as Additional Charges, a late charge (to the extent
permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord or any Facility Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due.
In the event of any failure by Tenant to pay any Additional Charges
when due, Tenant shall promptly pay and discharge, as Additional Charges, every
fine, penalty, interest and cost which may be added for non-payment or late
payment of such items. Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in this Agreement or by statute or
otherwise in the case of non-payment of the Additional Charges as in the case of
non-payment of the Minimum Rent and Additional Rent, except as otherwise
specifically provided in this Agreement.
3.3 Net Lease.
The Minimum Rent shall be absolutely net to Landlord so that this
Agreement shall yield to Landlord the full amount of the installments or amounts
of Minimum Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide for adjustment of such Minimum Rent.
3.4 No Termination, Abatement, Etc.
Except as otherwise specifically provided in this Agreement, Tenant, to
the maximum extent permitted by law, shall remain bound by this Agreement in
accordance with its terms and shall neither take any action without the consent
of Landlord to modify, surrender or terminate this Agreement, nor seek, nor be
entitled to any abatement, deduction, deferment or reduction of the Rent, or
set-off against the Rent, nor shall the respective obligations of Landlord and
Tenant be otherwise affected by reason of (a) any damage to or destruction of
any of the Collective Leased Properties or any portion thereof from whatever
cause or any Condemnation; (b) the lawful or unlawful prohibition of, or
restriction upon, Tenant's use of any of the Collective Leased Properties, or
any portion thereof, or the interference with such use by any Person or by
reason of eviction by paramount title; (c) any claim which Tenant may have
against Landlord by reason of any default or breach of any warranty by Landlord
under this Agreement or any other agreement between Landlord and Tenant, or to
which Landlord and Tenant are parties; (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Landlord or any assignee or transferee of
Landlord; or (e) for any other cause whether similar or dissimilar to any of the
foregoing. Tenant hereby
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waives all rights arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law, to (i) modify, surrender or terminate
this Agreement or quit or surrender any of the Collective Leased Properties or
any portion thereof, or (ii) entitle Tenant to any abatement, reduction,
suspension or deferment of the Rent or other sums payable or other obligations
to be performed by Tenant hereunder, except as otherwise specifically provided
in this Agreement. The obligations of Tenant hereunder shall be separate and
independent covenants and agreements, and the Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Agreement.
3.5 Annual Allowance.
Provided no Default or Event of Default pursuant to Section 12.1(a)
hereof has occurred and is continuing and this Agreement shall be in full force
and effect, Landlord shall pay the Allowance to, or at the direction of, Tenant
during each Lease Year of the Term. At least Ten Million Dollars ($10,000,000)
of the Allowance shall be used to pay for Capital Expenditures made during such
Lease Year. At Tenant's election, Tenant shall have the right to use up to Ten
Million Dollars ($10,000,000) of the Allowance to pay for Impositions, premiums
for insurance required pursuant to Article 9 hereof and franchise fees due and
owing under the Franchise Agreement. Anything in this Agreement to the contrary
notwithstanding, any and all assets paid for (or which are the subject of
reimbursements to Tenant) by disbursements of the Allowance with respect to
Capital Expenditures shall immediately be the property of Landlord and
constitute part of the Collective Leased Properties. Any portion of the
Allowance not utilized in a particular Lease Year shall, subject to the sentence
immediately following, remain available for use in subsequent Lease Years.
Notwithstanding the foregoing (x) in the event less than $10,000,000 of the
Allowance for any Lease Year is used to pay for Capital Expenditures, then a
portion of any amount remaining to be used in subsequent Lease Years shall be
used only for Capital Expenditures, such portion being equal to the amount by
which Capital Expenditures funded with the Allowance for such Lease Year were
less than $10,000,000 and (y) in the event any portion of the Allowance
(including amounts accrued from prior Lease Years) is not utilized as of the
last day of the Term, such amount shall be deemed forfeited and Tenant will
receive no payment or credit with respect thereto.
In order to receive a disbursement of the Allowance, Tenant shall
submit to Landlord (but not more often than twice monthly) a statement,
certified pursuant to an Officer's Certificate transmitted therewith, setting
forth in reasonable detail a description of the Capital Expenditures,
impositions, premiums for insurance required pursuant to Article 9 hereof, and
Franchise Fees incurred or owing during such Lease Year and for which an
Allowance disbursement is sought. Such Officer's Certificate shall certify that
the expenditures for which reimbursement is sought are either within Tenant's
approved annual budget or have been approved by Franchisor. Within five (5)
Business Days after receipt thereof, Landlord shall reimburse to Tenant (or,
upon Tenant's written direction, included along with such certified statement,
pay third-party contractors or vendors identified therein) appropriate amounts
requested. Upon two (2) Business
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Days prior Notice Landlord shall have the right to audit Tenant's books and
records to confirm the accuracy of any such statement.
The foregoing provision hereof notwithstanding, in no event shall
Landlord be obligated (x) to make disbursements in any Lease Year in excess of
Ten Million Dollars ($10,000,000) with respect to impositions, premiums for
insurance required pursuant to Article 9 hereof, and Franchise Fees, except to
the extent that any amounts carry over from previous years pursuant to the first
paragraph of Section 3.5, (y) to make disbursements with respect to any Lease
Year in excess of the Additional Rent theretofore paid for such Lease Year,
except to the extent that any amounts carry over from previous years pursuant to
the first paragraph of Section 3.5 or (z) to make any disbursements of the
Allowance if Tenant has failed to pay any monthly installments of Additional
Rent at least equal to such disbursements.
ARTICLE 4
USE OF THE COLLECTIVE LEASED PROPERTIES
4.1 Permitted Use.
4.1.1 Primary Intended Use.
Tenant shall, at all times during the Term and at any other time that
Tenant shall be in possession of any Leased Property, subject to Section 4.5
hereof, continuously use each of the Collective Leased Properties for the
operation of a licensed acute or chronic care psychiatric hospital; licensed
residential treatment center; licensed subacute hospital; licensed substance
abuse, neurological, geriatric, correctional, juvenile justice or other
healthcare service facility providing inpatient care; outpatient facility; or
any combination of the foregoing; and the healthcare services provided by or at
a Leased Property may include inpatient hospitalization, partial hospitalization
programs, outpatient therapy, intensive outpatient therapy, ambulatory
detoxification, behavioral modification programs and related services (provided
such related services constitutes services intended to be provided as part of
the "Franchised Business," as such term is defined in the Franchise Agreement),
and for such other uses as may be incidental or necessary thereto, including the
operation of any medical office buildings located on any such Leased Property
(such use being hereinafter referred to as such Leased Property's "Primary
Intended Use"). Tenant shall not use any of the Collective Leased Properties or
any portion thereof for any other use without the prior written consent of
Landlord. No use shall be made or permitted to be made of any of the Collective
Leased Properties and no acts shall be done thereon which will cause the
cancellation of any insurance policy covering any of the Collective Leased
Properties or any part thereof (unless another adequate policy is available),
nor shall Tenant sell or otherwise provide to residents or patients therein, or
permit to be kept, used or sold in or about any of the Collective Leased
Properties any article which may be prohibited by law or by the standard form of
fire insurance policies, or any other insurance policies required to be carried
hereunder, or fire underwriter's regulations. Tenant shall, at its sole cost,
comply with all
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of the requirements pertaining to the Collective Leased Properties of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Collective Leased
Properties and Tenant's Personal Property, including, without limitation, the
Insurance Requirements. Tenant shall not take or omit to take any action, the
taking or omission of which materially impairs the value or the usefulness of
any of the Collective Leased Properties or any part thereof for its Primary
Intended Use.
4.1.2 Necessary Approvals.
Tenant shall proceed with all due diligence and exercise best efforts
to obtain and maintain all approvals necessary to use and operate, for its
Primary Intended Use, each of the Collective Leased Properties and each Facility
located thereon under applicable law and, without limiting the foregoing, shall
use its commercially reasonable best efforts to maintain appropriate licensure
and participation in those reimbursement programs for which a Facility is
eligible and in which management of the Facility desires to participate.
4.1.3 Lawful Use, Etc.
Tenant shall not use or suffer or permit the use of any of the
Collective Leased Properties or Tenant's Personal Property for any unlawful
purpose. Tenant shall not commit or suffer to be committed any waste on any of
the Collective Leased Properties, or in any Facility, nor shall Tenant cause or
permit any nuisance thereon or therein. Tenant shall neither suffer nor permit
any of the Collective Leased Properties or any portion thereof, including any
Capital Addition or Tenant's Personal Property, to be used in such a manner as
(i) might reasonably tend to impair Landlord's (or Tenant's, as the case may be)
title thereto or to any portion thereof, or (ii) may reasonably make possible a
claim or claims for adverse usage or adverse possession by the public, as such,
or of implied dedication of the applicable Leased Property or any portion
thereof.
4.2 Compliance with Legal and Insurance Requirements, Etc.
Subject to the provisions of Article 8, Tenant, at its sole expense,
shall (i) comply in all material respects with Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair, alteration
and restoration of all of the Collective Leased Properties, and (ii) procure,
maintain and comply in all material respects with all appropriate licenses,
certificates of need, permits, and other authorizations and agreements required
for any use of the Collective Leased Properties and Tenant's Personal Property
then being made, and for the proper erection, installation, operation and
maintenance of the Collective Leased Properties or any part thereof, including,
without limitation, any Capital Additions.
4.3 Compliance with Medicaid and Medicare Requirements.
Tenant shall, at its sole cost and expense, make whatever improvements
(capital or ordinary) as are required to conform each of the Collective Leased
Properties to such standards as may, from time to time, be required by Federal
Medicare (Title 18) or Medicaid (Title 19), to
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the extent Tenant is a participant in such programs, or any other applicable
programs or legislation, or capital improvements required by any other
governmental agency having jurisdiction over such Leased Property as a condition
of the continued operation of such Leased Property for its Primary Intended Use.
4.4 Environmental Matters.
4.4.1 Restriction on Use, Etc.
Tenant shall not store, spill upon, dispose of or transfer to or from
the Collective Leased Properties any Hazardous Substance, except that Tenant may
store, transfer and dispose of Hazardous Substances in compliance with all
Applicable Laws. Tenant shall maintain the Collective Leased Properties at all
times free of any Hazardous Substance (except such Hazardous Substances as are
maintained in compliance with all Applicable Laws). Tenant shall promptly: (a)
notify Landlord in writing of any material change in the nature or extent of
Hazardous Substances at any of the Collective Leased Properties, (b) transmit to
Landlord a copy of any Community Right to Know report which is required to be
filed by Tenant with respect to any of the Collective Leased Properties pursuant
to XXXX Title III or any other Applicable Law, (c) transmit to Landlord copies
of any demand letters, complaints or other documents initiating legal action,
citations, orders, notices or other material communications asserting claims by
private parties or government agencies with respect to Hazardous Substances
received by Tenant or its agents or representatives (collectively,
"Environmental Notice"), which Environmental Notice requires a written response
or any action to be taken and/or if such Environmental Notice gives notice of
and/or could give rise to a material violation of any Applicable Law and/or
could give rise to any material cost, expense, loss or damage (an "Environmental
Obligation"), (d) observe and comply with all Applicable Laws relating to the
use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction relating
to the use or maintenance or requiring the removal, treatment, containment or
other disposition thereof, and (e) pay or otherwise dispose of any fine, charge
or Imposition related thereto, unless Tenant shall contest the same in good
faith and by appropriate proceedings and the right to use and the value of any
of the Collective Leased Properties is not materially and adversely affected
thereby.
If at any time Hazardous Substances are discovered in violation of
Applicable Laws on any of the Collective Leased Properties, Tenant shall take
all actions and incur any and all expenses, as may be necessary or as may be
required by any Government Agency, (i) to clean up and remove from and about
such Leased Properties all Hazardous Substances thereon, (ii) to contain and
prevent any further release or threat of release of Hazardous Substances on or
about such Leased Properties and (iii) to use good faith efforts to eliminate
any further release or threat of release of Hazardous Substances on or about
such Leased Properties.
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4.4.2 Environment Report.
Six (6) months prior to expiration of the Term, Tenant shall designate
a qualified environmental engineer, satisfactory to Landlord in its sole
discretion, which engineer shall conduct an environmental investigation of the
Collective Leased Properties and prepare an environmental site assessment report
(the "Environmental Report") with respect thereto. The scope of such
Environmental Report shall include, without limitation, review of relevant
records, interviews with persons knowledgeable about the Collective Leased
Properties and relevant governmental agencies, a site inspection of the
Collective Leased Properties, any buildings, the fencelines of the Collective
Leased Properties and adjoining properties (Phase I) and shall otherwise be
reasonably satisfactory in form and substance to Landlord. If such
investigation, in the opinion of the performing engineer, indicates that any of
the Collective Leased Properties are not environmentally sound and free from
oil, asbestos, radon and other Hazardous Substances (except in compliance with
Applicable Laws), such investigation shall also include a more detailed physical
site inspection, appropriate testing, subsurface and otherwise, and review of
historical records (Phase II) to demonstrate the compliance of such of the
Collective Leased Properties with Applicable Laws and the absence of Hazardous
Substances except in compliance with Applicable Laws.
All Environmental Reports, and supplements and amendments thereto,
shall be provided to Landlord contemporaneously with delivery thereof to Tenant.
With respect to any recommendations contained in the Environmental Report,
violations of Applicable Laws and/or the existence of any conditions at any of
the Collective Leased Properties which could give rise to an Environmental
Obligation, Tenant shall promptly give Notice thereof to Landlord, together with
a description, setting forth in reasonable detail, all actions Tenant proposes
to take in connection therewith and Tenant shall promptly take all actions, and
incur any and all expenses, as may be required by Applicable Law or by any
Government Agency or, in the case of conditions that could give rise to an
Environmental Obligation, as may be reasonably required by Landlord, (i) to
clean up, remove or remediate from and about the Collective Leased Properties
all Hazardous Substances thereon, (ii) to contain, prevent and eliminate any
further release or threat of release of Hazardous Substances on or about the
Collective Leased Properties, and (iii) otherwise to eliminate such violation or
condition from the Collective Leased Properties in accordance with Applicable
Law .
Landlord shall, provided no Event of Default has occurred and is
continuing, Landlord shall, upon receipt of a xxxx, along with reasonable
substantiation thereof, promptly reimburse Tenant for the reasonable
out-of-pocket costs incurred in the preparation of the Phase I Environmental
Report. In no event shall Landlord be obligated to pay or reimburse Tenant for
the costs incurred in connection with any Phase II Report or in connection with
any actions taken or proposed to be taken by Tenant as described in the
immediately preceding paragraph.
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4.4.3 Indemnification of Landlord.
Tenant shall protect, indemnify and hold harmless Landlord and each
Facility Mortgagee, their trustees, officers, agents, employees and
beneficiaries, and any of their respective successors or assigns (hereafter the
"Indemnitees," and when referred to singly, an "Indemnitee") for, from and
against any and all debts, liens, claims, causes of action, administrative
orders or notices, costs, fines, penalties or expenses (including, without
limitation, reasonable attorneys' fees and expenses) imposed upon, incurred by
or asserted against any Indemnitee resulting from, either directly or
indirectly, the presence in, the Environment or any properties surrounding any
of the Collective Leased Properties of any Hazardous Substances. Tenant's duty
herein includes, but is not limited to, indemnification for costs associated
with personal injury or property damage claims as a result of the presence of
Hazardous Substances in, upon or under the soil or ground water of any of the
Collective Leased Properties in violation of any Applicable Law. Upon Notice
from Landlord, Tenant shall undertake the defense, at Tenant's sole cost and
expense, of any indemnification duties set forth herein. The foregoing
provisions hereof notwithstanding, Tenant's indemnification of any Facility
Mortgagee pursuant to this Section 4.4.3 shall not extend to or include the
investigation and defense expenses (including, but not limited to, legal and
consulting fees and expenses) incurred by such Facility Mortgagee.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage (including, without limitation, reasonable
attorneys' fees) incurred by Landlord in asserting any right under this Section
4.4, including without limitation any right of indemnity under this Section
4.4.3 or otherwise arising from a failure of Tenant strictly to observe and
perform the foregoing requirements, which amounts shall bear interest from the
date incurred until paid by Tenant to Landlord at the Overdue Rate.
4.4.4 Survival.
The provisions of this Section 4.4 shall survive the expiration or
sooner termination of this Agreement.
4.5 Tenant's Right to Close Facilities.
Provided that no Default or Event of Default (except pursuant to
Section 12.1(e)) shall have occurred and be continuing, Tenant shall have the
right at any time and from time to time, to cease its operations in any or all
of the Facilities. Nothing herein shall entitle Tenant to any reduction in Rent
or diminish any of Tenant's other obligations, including without limitation
obligations to (x) maintain and insure any and all facilities, and (y) surrender
each Facility upon expiration or sooner termination of the Term with all
Tenant's Personal Property in place.
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ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Tenant shall, at its sole cost and expense, keep each of the Collective
Leased Properties and all private roadways, sidewalks and curbs appurtenant
thereto (and Tenant's Personal Property) in good order and repair, reasonable
wear and tear excepted (whether or not the need for such repairs occurs as a
result of Tenant's use, any prior use, the elements or the age of the Collective
Leased Properties or Tenant's Personal Property, or any portion thereof), and
shall promptly make all necessary and appropriate repairs and replacements
thereto of every kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the commencement of the Term necessary
for the Primary Intended Use (concealed or otherwise); provided, however, that
Tenant shall be permitted to prosecute claims against Landlord's predecessors in
title for breach of any representation or warranty made to or on behalf of
Landlord or for any latent defects in the Collective Leased Properties. All
repairs shall be made in a good, workmanlike and first-class manner, in
accordance with all applicable federal, state and local statutes, ordinances,
by-laws, codes, rules and regulations relating to any such work. Except as
permitted by Section 4.5, Tenant shall not take or omit to take any action, the
taking or omission of which materially impairs the value or the usefulness of
any of the Collective Leased Properties or any part thereof for its respective
Primary Intended Use. Tenant's obligations under this Section 5.1.1 as to any of
the Collective Leased Properties shall be limited, in the event of any casualty
or Condemnation involving such Leased Property, as set forth in Sections 10.2
and 11.2. Notwithstanding any provisions of this Section 5.1 to the contrary,
Tenant's obligations with respect to Hazardous Substances are as set forth in
Section 4.4.
5.1.2 Landlord's Obligations.
Landlord shall not, under any circumstances, be required to build or
rebuild any improvement on the Collective Leased Properties, or to make any
repairs, replacements, alterations, restorations or renewals of any nature or
description to the Collective Leased Properties, whether ordinary or
extraordinary, structural or nonstructural, foreseen or unforeseen, or to make
any expenditure whatsoever with respect thereto, or to maintain the Collective
Leased Properties in any way, except as specifically provided herein. Tenant
hereby waives, to the maximum extent permitted by law, the right to make repairs
at the expense of Landlord pursuant to any law in effect on the date hereof or
hereafter enacted. Landlord shall have the right to give, record and post, as
appropriate, notices of nonresponsibility under any mechanic's lien laws now or
hereafter existing.
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5.1.3 Nonresponsibility of Landlord; No Mechanics Liens.
Landlord's interest in the Collective Leased Properties shall not be
subject to liens for Capital Additions made by Tenant, and Tenant shall have no
power or authority to create any lien or permit any lien to attach to any of the
Collective Leased Properties or the present estate, reversion or other estate of
Landlord in the Collective Leased Properties or on the building or other
improvements thereon as a result of Capital Additions made by Tenant or for any
other cause or reason. All materialmen, contractors, artisans, mechanics and
laborers and other persons contracting with Tenant with respect to the
Collective Leased Properties, or any part thereof, are hereby charged with
notice that such liens are expressly prohibited and that they must look solely
to Tenant to secure payment for any work done or material furnished for Capital
Additions by Tenant or for any other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to any of the Collective Leased
Properties or any part thereof or as giving Tenant any right, power or authority
to contract for or permit the rendering of any services or the furnishing of any
materials that would give rise to the filing of any lien against any of the
Collective Leased Properties or any part thereof nor to subject Landlord's
estate in any of the Collective Leased Properties or any part thereof to
liability under any Mechanic's Lien Law of the State in any way, it being
expressly understood that Landlord's estate shall not be subject to any such
liability.
5.2 Tenant's Personal Property.
Tenant may (and shall as provided hereinbelow), at its expense,
install, affix or assemble or place on any parcels of the Land or in any of the
Leased Improvements any items of Tenant's Personal Property, and Tenant may,
subject to Section 7.2 and the conditions set forth below, remove and replace
the same at any time in the ordinary course of business, provided that no
Default or Event of Default has occurred and is continuing. Tenant shall provide
and maintain throughout the Term all such Tenant's Personal Property as shall be
necessary in order to operate all of the Facilities located at the Collective
Leased Properties in compliance in all material respects with all applicable
licensure and certification requirements, in compliance with applicable Legal
Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for such Primary Intended Use. All of
Tenant's Personal Property (except that removed and replaced in the ordinary
course of business as permitted above, but including supplies and inventory that
are equivalent, on an aggregate basis, in amount and value similar to that
reasonably established for use by the Facilities in the immediately preceding
Lease Year) shall remain at the Collective Leased Properties at the expiration
or earlier termination of this Agreement without the necessity of any payment by
Landlord to Tenant and without any obligation to account therefor.
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If Tenant uses any material item of tangible personal property on, or
in connection with, any Leased Property which belongs to anyone other than
Tenant, Tenant shall use its commercially reasonable best efforts to require the
agreement permitting such use to provide that Landlord or its designee may
assume Tenant's rights under such agreement upon management or operation of the
applicable Facility by Landlord or its designee.
5.3 Yield Up.
Upon the expiration or sooner termination of this Agreement, Tenant
shall vacate and surrender each of the Collective Leased Properties to Landlord
in the condition in which each of the Collective Leased Properties was in on the
Commencement Date, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Agreement, reasonable wear and
tear excepted (and Condemnation, in the event that this Agreement is terminated
with respect to any of the Collective Leased Properties following a Condemnation
in accordance with Article 11). Rents, real estate taxes and utilities shall be
prorated in the same manner as set forth in Section 10.4 of the Purchase
Agreement. Along therewith Tenant shall surrender to Landlord any and all
records and documents related to the Collective Leased Properties and Tenant's
Personal Property (i.e., but not, subject to Section 12.6 hereof, documents
primarily related to Tenant's business operated therein) including documents and
records obtained by Tenant pursuant to Section 10.2 of the Purchase Agreement.
Landlord (or its designee) shall have the right, but not the obligation, to
assume any or all contracts relating to the Collective Leased Properties and
Tenant's Personal Property (i.e., contracts not primarily related to the
business operated therein). In no event shall Landlord (or its designee) have
any liability under such contracts for obligations or liabilities accruing under
such contracts prior to the date of such assumption by such party. Tenant shall
deliver to Landlord keys and security deposits (for assumed leases) in the same
fashion as described in Sections 10.2(e) and 10.4(d) of the Purchase Agreement.
In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its
commercially reasonable best efforts to transfer to and cooperate with Landlord
or Landlord's nominee in connection with the processing of all applications for
licenses, operating permits and other governmental authorizations and all
contracts, including contracts with governmental or quasi-governmental entities
which may be necessary for the operation of the Facilities located on the
Collective Leased Properties. If requested by Landlord, Tenant will continue to
manage any such Facility after the expiration or sooner termination of the Term
and for as long thereafter as is necessary (but not to exceed six (6) months
following the date of such expiration or sooner termination) to obtain all
necessary licenses, operating permits and other governmental authorizations, on
such reasonable terms as Landlord shall request, but in any event Landlord shall
pay to Tenant a management fee equal to the sum of (i) reasonable out-of-pocket
costs and expenses of Tenant in providing management services, (ii) reasonable
allocated internal costs of Tenant in providing management services (including
but not limited to a reasonably allocated portion of the salaries and benefits
costs of Tenant personnel who provide such services), and (iii) 10% of the sum
of (i) and (ii). In
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connection with any such management arrangement, Tenant will, use its
commercially reasonable best efforts to the extent reasonable necessary,
maintain in effect during the period of its management arrangement, those
contracts, including (for sixty (60) days after such expiration or sooner
termination, but after sixty (60) days, only if the Franchise Agreement has been
assumed pursuant to Section 12.6) the Franchise Agreement, necessary for the
performance of such management responsibilities and for the operation of the
Facilities for the Primary Intended Use.
5.4 Encroachments, Restrictions, Etc.
If any of the Leased Improvements shall, at any time, encroach upon any
property, street or right-of-way adjacent to the affected Leased Property, or
shall violate the agreements or conditions contained in any lawful restrictive
covenant or other agreement affecting any of the Collective Leased Properties,
or any part thereof, or shall impair the rights of others under any easement or
right-of-way to which any of the Collective Leased Properties is subject, upon
the request of Landlord (but only as to any encroachment, violation or
impairment that is not a Permitted Encumbrance) or of any Person affected by any
such encroachment, violation or impairment, Tenant shall, at its sole cost and
expense, subject to its right to contest the existence of any encroachment,
violation or impairment in accordance with the provisions of Article 8, either
(a) obtain valid and effective waivers or settlements of all claims, liabilities
and damages resulting from each such encroachment, violation or impairment,
whether the same shall affect Landlord or Tenant, or (b) make such changes in
the Leased Improvements and take such other actions as are reasonably
practicable to remove such encroachment and to end such violation or impairment,
including, if necessary, the alteration of any of the Leased Improvements and,
in any event, take all such actions as may be necessary in order to ensure the
continued operation of the affected Leased Improvements for their respective
Primary Intended Use substantially in the manner and to the extent such Leased
Improvements were operated prior to the assertion of such violation, impairment
or encroachment. Any such alteration shall be made in conformity with the
applicable requirements of this Article 5. Tenant's obligations under this
Section 5.4 shall be in addition to and shall in no way discharge or diminish
any obligation of any insurer under any policy of title or other insurance.
5.5 Landlord to Grant Easements, Etc.
Landlord shall from time to time, so long as no Default or Event of
Default shall have occurred and be continuing, at the request of Tenant and at
Tenant's sole cost and expense, (a) grant easements and other rights in the
nature of easements with respect to any of the Collective Leased Properties to
third parties, (b) release existing easements or other rights in the nature of
easements which are for the benefit of any of the Collective Leased Properties,
(c) dedicate or transfer unimproved portions of any of the Collective Leased
Properties for road, highway or other public purposes, (d) execute petitions to
have any of the Collective Leased Properties annexed to any municipal
corporation or utility district, (e) execute amendments to any covenants and
restrictions affecting any of the Collective Leased Properties and (f) execute
and deliver to any Person any instrument appropriate to confirm or effect such
grants, release,
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dedications, transfers, petitions and amendments (to the extent of its interests
in such Leased Property); provided, however, that Landlord shall have first
determined that such grant, release, dedication, transfer, petition or amendment
is not detrimental to the operation of the applicable Leased Property for its
Primary Intended Use and does not materially reduce the value of such Leased
Property, and Landlord shall have received an Officer's Certificate confirming
such determination, together with such additional information as Landlord may
request.
5.6 Philadelphia Facility.
In the event Franchisor does not complete the renovation/reconstruction
of the Philadelphia Facility in a timely manner as required by the Purchase
Agreement for any reason (whether or not such failure constitutes a breach of
covenant by Franchisor pursuant to Section 7.1(q) of the Purchase Agreement),
Tenant shall promptly do so at its sole cost. Tenant shall permit Franchisor to
have access to the property on which the Philadelphia Facility is to be
constructed for the purpose of performing such obligation.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property.
Tenant shall not construct or install Capital Additions on any of the
Collective Leased Properties without obtaining Landlord's prior written consent,
which consent shall not be unreasonably withheld, provided that no consent shall
be required for any Capital Addition so long as (a) the Capital Additions Costs
for such Capital Addition are less than $1,000,000, (b) such construction or
installation would not adversely affect or violate any Legal Requirement or
Insurance Requirement applicable to the applicable Leased Property and (c)
Landlord shall have received an Officer's Certificate certifying as to the
satisfaction of the conditions set out in clauses (a) and (b) above. If
Landlord's consent is required, prior to commencing construction of any Capital
Addition, Tenant shall submit to Landlord, in writing, a proposal setting forth,
in reasonable detail, any proposed Capital Addition and shall provide to
Landlord such plans and specifications, permits, licenses, contracts and other
information concerning the proposed Capital Addition as Landlord may reasonably
request. Landlord shall have thirty (30) days to review all materials submitted
to Landlord in connection with any such proposal. Failure of Landlord to respond
to Tenant's proposal within thirty (30) days after receipt of all information
and materials requested by Landlord in connection with the proposed Capital
Addition shall be deemed to constitute approval of such proposed Capital
Addition. Without limiting the generality of the foregoing, such proposal shall
indicate the approximate projected cost of constructing such Capital Addition
and the use or uses to which it will be put. No Capital Addition shall be made
which would tie in or connect any Leased Improvement on the applicable Leased
Property with any other improvements on property adjacent to such Leased
Property (and not part of the Land) including, without limitation, tie-ins of
buildings or other structures or utilities. Any Capital
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Additions shall, upon the expiration or sooner termination of this Agreement,
pass to and become the property of Landlord, free and clear of all encumbrances
other than Permitted Encumbrances.
6.2 Financing of Capital Additions.
Tenant may arrange for financing for Capital Additions from a Lending
Institution; provided, however, that (i) any security interests in any property
of Tenant, including, without limitation, Tenant's leasehold interest in the
Collective Leased Properties, shall be expressly and fully subordinated to this
Agreement and to the interest of Landlord in the Collective Leased Properties
and to the rights of any then or thereafter existing Facility Mortgagee; and
(ii) Landlord shall have a right of first refusal to provide financing for
Capital Additions in accordance with Section 6.6.
6.4 Capital Additions Financed by Landlord.
If Landlord shall, (i) at the request of Tenant and in Landlord's sole
discretion, or (ii) in the exercise of its rights of first refusal to provide
financing pursuant to Section 6.6 hereof, elect to finance any proposed Capital
Addition, Tenant shall provide Landlord with such information as Landlord may
from time to time request, including, without limitation, the following:
(a) Evidence that such Capital Addition will be and, upon
completion, has been, completed in compliance with the
applicable requirements of State and federal law with respect
to capital expenditures for health care facilities;
(b) Copies of all building, zoning and land use permits and
approvals and, upon completion of such Capital Addition, a
copy of the certificate of occupancy for such Capital
Addition, if required;
(c) Such information, certificates, licenses, permits or other
documents necessary to confirm that Tenant will be able to use
the Capital Addition upon completion thereof in accordance
with the Primary Intended Use, including all required federal,
State or local government licenses and approvals;
(d) An Officer's Certificate and a certificate from Tenant's
architect setting forth, in reasonable detail, the projected
(or actual, if available) Capital Additions Cost, and invoices
and lien waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land acquired for
the purpose of constructing the Capital Addition free and
clear of any liens or encumbrances, except those approved by
Landlord, and, upon completion of the Capital Addition, a
final as-built survey thereof reasonably satisfactory to
Landlord;
(f) Endorsements to any outstanding policy of title insurance
covering the applicable Leased Property, or a commitment
therefor, satisfactory in form and substance to
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Landlord, (i) updating such policy without any additional
exceptions except as approved by Landlord, and (ii) increasing
the coverage thereof by an amount equal to the Fair Market
Value of the Capital Addition (except to the extent covered by
the owner's policy of title insurance referred to in
subparagraph (g) below);
(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord
pursuant to subparagraph (e) above, free and clear of all
liens and encumbrances, except those approved by Landlord, and
(ii) a lender's policy of title insurance, reasonably
satisfactory in form and substance to Landlord and any
Facility Mortgagee;
(h) An appraisal of the applicable Leased Property by a Qualified
Appraiser, acceptable to Landlord, and/or an Officer's
Certificate stating that the value of the applicable Leased
Property upon completion of the Capital Addition exceeds the
Fair Market Value thereof prior to the commencement of such
Capital Addition by an amount not less than 80% of the Capital
Additions Cost; and
(i) Prints of architectural and engineering drawings relating to
such Capital Addition and such other certificates, documents,
opinions of counsel, appraisals, surveys, certified copies of
duly adopted resolutions of the board of directors of Tenant
authorizing the execution and delivery of any lease amendment,
or other instruments as may be reasonably required by
Landlord, any Facility Mortgagee and any Lending Institution
advancing or reimbursing Landlord or Tenant for any portion of
the Capital Additions Cost.
If Landlord shall finance the proposed Capital Addition, Landlord may
elect (with Tenant's consent, such consent not to be unreasonably withheld) to
obtain repayment of amounts so financed by an increase in the Rent payable
hereunder.
6.4 Non-Capital Additions.
Tenant shall have the right, at Tenant's sole cost and expense, to make
additions, modifications or improvements to the Collective Leased Properties
which are not Capital Additions ("Non-Capital Additions") from time to time as
Tenant, in its discretion, may deem desirable for the applicable Primary
Intended Use, provided that any such Non-Capital Addition will not materially
detract from the value, operating efficiency or revenue-producing capability of
the applicable Leased Property or adversely affect the ability of Tenant to
comply with the provisions of this Agreement, and, without limiting the
foregoing, will not violate any Legal Requirement or Insurance Requirement
applicable to the applicable Leased Property. All such Non-Capital Additions
shall, upon expiration or earlier termination of this Agreement, pass to and
become the property of Landlord, free and clear of all liens and encumbrances,
other than Permitted Encumbrances.
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6.5 Salvage.
All materials which are scrapped or removed in connection with the
making of either Capital Additions or Non-Capital Additions or repairs required
by Article 5 shall be the property of the Landlord.
6.6 Landlord's Right of First Refusal to Provide Financing for Capital
Additions.
In the event that at any time during the Term Tenant shall elect to
obtain construction financing in excess of $1,000,000 for any Capital Additions,
Tenant shall give Notice thereof to Landlord, which notice shall set forth in
reasonable detail the terms of such financing, shall identify the source thereof
and shall include a copy of a final form of commitment letter therefor. Landlord
shall have the right, exercisable by the giving of Notice to Tenant within
thirty (30) days after such notice from Tenant, to provide a final form of
commitment for such financing on the same terms and conditions as described in
the Notice given to Landlord. In the event that Landlord shall exercise such
option, Tenant shall be obligated to obtain such financing from Landlord on the
terms and conditions set forth in the Notice to Landlord. In the event that
Landlord shall decline to provide such financing or shall fail to give such
notice to Tenant, Tenant shall be free to obtain such financing from the party
identified in, and on the terms and conditions set forth in, the Notice given to
Landlord with respect thereto.
ARTICLE 7
LIENS
7.1 Liens.
Subject to Article 8 and Section 16.5, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the Collective Leased Properties or a non-consensual lien against Tenant's
leasehold interest therein or any attachment, levy, claim or encumbrance in
respect of the Rent, other than (a) Permitted Encumbrances, (b) restrictions,
liens and other encumbrances which are consented to in writing by Landlord, (c)
liens for those taxes of Landlord which Tenant is not required to pay hereunder,
(d) subleases permitted by Article 16, (e) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (i) the same are
not yet payable, or (ii) are being contested in accordance with Article 8, (f)
liens of mechanics, laborers, materialmen, suppliers or vendors incurred in the
ordinary course of business that are not yet due and payable or are for sums
that are being contested in accordance with Article 8, and (g) any Facility
Mortgages or other liens which are the responsibility of Landlord pursuant to
the provisions of Article 20.
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7.2 Landlord's Lien.
In addition to any statutory landlord's lien and in order to secure
payment of the Rent and all other sums payable hereunder by Tenant and the
performance of all of Tenant's other obligations hereunder, and to secure
payment of any loss, cost or damage which Landlord may suffer by reason of
Tenant's breach of this Agreement, Tenant hereby grants unto Landlord a security
interest in and an express contractual lien upon Tenant's Personal Property, and
all proceeds therefrom, subject to any Permitted Encumbrances; and such Tenant's
Personal Property shall not be removed from the Collective Leased Properties at
any time when a Default or an Event of Default has occurred and is continuing as
otherwise permitted pursuant to Section 5.2. In addition, Tenant hereby grants
unto Landlord a security interest in those contracts described in Section 12.6
hereof.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in (x) Tenant's Personal Property and the proceeds thereof, and (y) the
contracts described in Section 12.6 hereof, in accordance with the provisions of
the applicable laws of the State. The security interest herein granted is in
addition to any statutory lien for the Rent.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively, "Claims") as to any of the
Collective Leased Properties, by appropriate legal proceedings, conducted in
good faith and with due diligence, provided that (a) the foregoing shall in no
way be construed as relieving, modifying or extending Tenant's obligation to pay
any Claims as finally determined, (b) such contest shall not cause Landlord or
Tenant to be in default under any mortgage or deed of trust (except with respect
to any Facility Mortgage, the terms of which have not been fully disclosed to
Tenant) encumbering such Leased Property or any interest therein or result in or
reasonably be expected to result in a lien attaching to such Leased Property,
(c) no part of such Leased Property nor any Rent therefrom shall be in any
immediate danger of sale, forfeiture, attachment or loss, and (d) Tenant shall
indemnify and hold harmless Landlord from and against any cost, claim, damage,
penalty or reasonable expense, including reasonable attorneys' fees, incurred by
Landlord in connection therewith or as a result thereof. Upon Landlord's request
made as a result of a requirement of any Facility Mortgagee, Tenant shall either
(i) provide a bond or other assurance reasonably satisfactory to Landlord that
all Claims which may be assessed against any of the Collective Leased
Properties, together with all interest and penalties thereon will be paid, or
(ii) deposit within the time otherwise required for payment with a bank or trust
company, as trustee, as security for the payment of such Claims, an amount
sufficient to pay the same, together with interest and penalties in connection
therewith and all Claims which may be assessed against or become a Claim on any
of the Collective Leased
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Properties, or any part thereof, in connection with any such contest. Tenant
shall furnish Landlord and any Facility Mortgagee with reasonable evidence of
such deposit within five (5) days after request therefor. Landlord agrees,
however, to use commercially reasonable best efforts to cause any Facility
Mortgagee not to require any bond or deposit by Tenant as hereinabove provided.
Landlord agrees to join in any such proceedings if required legally to prosecute
such contest, provided that Landlord shall not thereby be subjected to any
liability therefor (including, without limitation, for the payment of any costs
or expenses in connection therewith). Tenant shall be entitled to any refund of
any Claims and such charges and penalties or interest thereon which have been
paid by Tenant or paid by Landlord and for which Landlord has been fully
reimbursed by Tenant. If Tenant shall fail (x) to pay any Claims when finally
determined, (y) to provide security therefor as provided in this Article 8, or
(z) to prosecute any such contest diligently and in good faith, Landlord may,
upon reasonable notice to Tenant (which notice may be oral and shall not be
required if Landlord shall reasonably determine that the same is not
practicable), pay such charges, together with interest and penalties due with
respect thereto, and Tenant shall reimburse Landlord therefor, upon demand, as
Additional Charges.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements.
Tenant shall, at all times during the Term and at any other time Tenant
shall be in possession of any of the Collective Leased Properties, keep each of
the Collective Leased Properties and Tenant's Personal Property insured against
the risks and in the amounts as follows and shall maintain (for so long as such
insurance is commercially available) the following insurance:
(a) "All-risk" property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief,
explosion of steamboilers, pressure vessels or other similar
apparatus, now or hereafter installed in the Facility
located at such Leased Property, extended coverage perils,
earthquake (providing annual aggregate limits of One Hundred
Million Dollars ($100,000,000) as to all locations outside
of California and annual aggregate limits of Fifty Million
Dollars ($50,000,000) as to all locations within California)
and all physical loss perils insurance, including, but not
limited to, sprinkler leakage, in an amount (subject to
Section 9.5) equal to one hundred percent (100%) of the then
full Replacement Cost thereof (as defined in Section 9.2),
with the usual extended coverage endorsements, including a
Replacement Cost Endorsement and Builder's Risk Coverage
during the continuance of any construction at such Leased
Property;
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(b) Business interruption and blanket earnings plus extra expense
under a rental value insurance policy covering risk of loss
during the lesser of the first twelve (12) months of
reconstruction or the actual reconstruction period
necessitated by the occurrence of any of the hazards described
in subparagraphs (a) and (b) above in such amounts as may be
customary for comparable properties in the area and in an
amount sufficient to prevent Landlord or Tenant from becoming
a co-insurer;
(c) Comprehensive general liability insurance, including bodily
injury and property damage (on the broadest form available,
including broad form contractual liability, fire legal
liability and completed operations coverage) having policy
limits as to claims with respect to the Collective Leased
Properties of at least One Million Dollars ($1,000,000) per
occurrence, Three Million Dollars ($3,000,000) aggregate per
location, subject to a Five Million Dollar ($5,000,000)
aggregate limit as to all locations, and with respect to
claims arising out of malpractice in an amount not less than
One Million Dollars ($1,000,000) per occurrence, subject to
a Five Million Dollars ($5,000,000) aggregate limit as to
all Facilities, provided that such limits shall be modified
to conform to any required underlying statutory coverage,
such as State Patient Compensation Funds, or the like, and
Umbrella coverage shall be provided having limits of Twenty
Million Dollars ($20,000,000) per occurrence and in the
aggregate and attaching in excess of policy limits as to
general liability, malpractice, Patient Compensation Fund
programs, where applicable, and employer's liability
coverage;
(d) Flood (when the applicable Leased Property is located in
whole or in part within an area identified as an area having
special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of
1968, as amended, or the Flood Disaster Protection Act of
1973, as amended (or any successor acts thereto)) and such
other hazards and in such amounts as may be customary for
comparable properties in the area, said coverage to be in an
amount equal to the lesser of the full Replacement Cost of
the applicable Leased Property or the maximum amount
available;
(e) Worker's compensation insurance coverage for all persons
employed by Tenant on the applicable Leased Property with
statutory limits and otherwise with limits of and provisions
in accordance with the requirements of applicable local, State
and federal law, and employer's liability insurance having a
limit of $1,000,000; and
(f) Such additional insurance and endorsements (and/or increased
amounts of insurance hereinabove required) as may be
reasonably required, from time to time, by Landlord.
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9.2 Replacement Cost.
"Replacement Cost" as used herein, shall mean the actual replacement
cost of the property requiring replacement from time to time, including an
increased cost of construction endorsement, less exclusions provided in the
standard form of fire insurance policy. In the event either party believes that
the then full Replacement Cost has increased or decreased at any time during the
Term, such party, at its own cost, shall have the right to have such full
Replacement Cost redetermined by an accredited appraiser approved by the other,
which approval shall not be unreasonably withheld or delayed. The party desiring
to have the full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such appraiser, give written notice thereof to the other.
The determination of such appraiser shall be final and binding on the parties
hereto, and Tenant shall forthwith conform the amount of the insurance carried
to the amount so determined by the appraiser.
9.3 Waiver of Subrogation.
Landlord and Tenant agree that (insofar as and to the extent that such
agreement may be effective without invalidating or making it impossible to
secure insurance coverage from responsible insurance companies doing business in
the State) with respect to any property loss which is covered by insurance then
being carried by Landlord or Tenant, respectively, the party carrying such
insurance and suffering said loss releases the other of and from any and all
claims with respect to such loss; and they further agree that their respective
insurance companies shall have no right of subrogation against the other on
account thereof, even though extra premium may result therefrom. In the event
that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra premium.
9.4 Form Satisfactory, Etc.
All insurance policies and endorsements required pursuant to this
Article 9 shall be fully paid for, nonassessable and shall contain such
provisions and expiration dates and be in such form and amounts and issued by
insurance carriers authorized to do business in the State, having a general
policy holder's rating of at least A-in Best's latest rating guide (or such
other comparable rating or such other customarily used rating agency as may be
required by any Facility Mortgagee), and otherwise as shall be approved by
Landlord. Without limiting the foregoing, such policies shall include only
deductibles reasonably approved by Landlord and shall name Landlord and any
Facility Mortgagee as additional insureds. All losses shall be payable to
Landlord or Tenant as provided in Article 10. Any loss adjustment shall require
the prior written consent of Landlord and Tenant. Tenant shall pay all insurance
premiums and deliver policies or certificates thereof to Landlord prior to their
effective date (and, with respect to any renewal policy, thirty (30) days prior
to the expiration of the existing policy), and, in the event Tenant shall fail
to effect such insurance as herein required, to pay the premiums therefor or to
deliver such policies or certificates to Landlord or any Facility Mortgagee at
the times required, Landlord shall have the right, but not the obligation, to
acquire such insurance and pay the premiums therefor, which amounts shall be
payable to Landlord, upon demand, as Additional
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Charges, together with interest accrued thereon at the Overdue Rate from the
date such payment is made until the date repaid. All such policies shall provide
Landlord (and any Facility Mortgagee, if required by the same) thirty (30) days'
prior written notice of any material modification, expiration or cancellation of
such policy. Tenant may satisfy its insurance obligations through the use of (i)
a risk retention group or purchasing group or captive insurance company with a
capital structure reasonably approved by Landlord or (ii) a self insurance
program with retention limits reasonably approved by Landlord and an excess
policy or policies provided by an insurer meeting the requirements of this
Agreement.
9.5 Blanket Policy.
Notwithstanding anything to the contrary contained in this Article 9,
Tenant's obligation to maintain the insurance herein required may be brought
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Tenant, provided that (a) the coverage thereby
afforded will not be reduced or diminished from that which would exist under a
separate policy meeting all other requirements of this Agreement, except that
the blanket all-risk policy may provide coverage as to the Collective Leased
Properties to a limit of Two Hundred Million Dollars ($200,000,000) per
occurrence and (b) the requirements of this Article 9 are otherwise satisfied.
9.6 No Separate Insurance.
Tenant shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required by this Article 9, or
increase the amount of any existing insurance by securing an additional policy
or additional policies, unless all parties having an insurable interest in the
subject matter of such insurance, including Landlord and all Facility
Mortgagees, are included therein as additional insureds and the loss is payable
under such insurance in the same manner as losses are payable under the
insurance required to be carried pursuant to this Agreement. In the event Tenant
shall take out any such separate insurance or increase any of the amounts of the
then existing insurance, Tenant shall give Landlord prompt Notice thereof.
9.7 Indemnification of Landlord.
Notwithstanding the existence of any insurance provided for herein and
without regard to the policy limits of any such insurance, Tenant shall protect,
indemnify and hold harmless Landlord for, from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and reasonable
expenses (including, without limitation, reasonable attorneys' fees), to the
maximum extent permitted by law, imposed upon or incurred by or asserted against
Landlord by reason of: (a) any accident, injury to or death of persons or loss
of or damage to property occurring on or about the Collective Leased Properties
or adjoining sidewalks or rights of way, including, without limitation, any
claims of malpractice, (b) any past, present or future use, misuse, non-use,
condition, management, maintenance or repair of the Collective Leased Properties
or Tenant's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which Landlord is made a party
or participant relating to the
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Collective Leased Properties or Tenant's Personal Property or such use, misuse,
non-use, condition, management, maintenance, or repair thereof, including
failure to perform obligations (other than Condemnation proceedings), to which
Landlord is made a party, (c) any Impositions (which are the obligations of
Tenant to pay pursuant to the applicable provisions of this Agreement), and (d)
any failure on the part of Tenant or anyone claiming under Tenant to perform or
comply with any of the terms of this Agreement. Tenant shall pay all amounts
payable under this Section 9.7 within ten (10) days after demand therefor and,
if not timely paid, such amounts shall bear interest at the Overdue Rate from
the date of determination to the date of payment. Tenant, at its expense, shall
contest, resist and defend any such claim, action or proceeding asserted or
instituted against Landlord or may compromise or otherwise dispose of the same,
with Landlord's prior written consent (which consent may not be unreasonably
withheld or delayed). The obligations of Tenant under this Section 9.7 are in
addition to the obligations set forth in Section 4.4 and shall survive the
termination of this Agreement.
9.8 Independent Contractor.
Tenant shall cause any person or company (each a "Contractor") entering
upon any of the Collective Leased Properties to provide any installation,
construction or repair which (x) constitutes a Capital Addition or (y) has an
anticipated cost in excess of $250,000 to: (a) have in full force and effect
Contractor's Liability Coverage (hereafter defined) effective throughout the
period said Contractor is upon said Leased Property and (b) deliver a
certificate ("Contractor's Insurance Certificate") evidencing compliance with
subpart (a) to Tenant prior to the Contractor's first entry upon said Leased
Property. As used herein the term Contractor's Liability Coverage means a
comprehensive general liability insurance policy meeting the requirements of
this Article 9 (as if required to be provided by Tenant) except the minimum
policy limit shall be $500,000 per occurrence and $1,000,000 in the aggregate.
Within thirty (30) days after delivery of Landlord's written request, Tenant
shall deliver copies of all Contractor's Certificates to Landlord.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds.
All proceeds payable by reason of any loss or damage to the Collective
Leased Properties, or any portion thereof, and insured under any policy of
property or casualty insurance required by Article 9 (other than proceeds of
business interruption insurance) in excess of $1,000,000 shall be paid directly
to Landlord and retained by Landlord (subject to the provisions of Section
10.2). If Tenant is required to reconstruct or repair any of the Collective
Leased Properties as provided herein, such proceeds shall be paid out by
Landlord from time to time for the reasonable costs of reconstruction or repair
of such Leased Property necessitated by such damage or destruction, subject to
the provisions of Section 10.2.3. Provided no Default or Event
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of Default has occurred and is continuing, any excess proceeds of insurance
remaining after the completion of the restoration shall be paid to Tenant. All
salvage resulting from any risk covered by insurance shall belong to Landlord.
10.2 Damage or Destruction.
10.2.1 Obligation to Restore. If, during the Term, any of the Collective
Leased Properties shall be totally or partially destroyed Tenant shall
promptly restore such Facility as provided in Section 10.2.3.
10.2.2 Insufficient Insurance Proceeds. If the cost of the repair or
restoration of the applicable Leased Property exceeds the amount of
insurance proceeds received by Landlord pursu ant to Article 10, upon
the demand of Landlord, Tenant shall contribute any excess amounts
needed to restore such Leased Property. Such difference shall be paid
by Tenant to Landlord and held by Landlord, together with any other
insurance proceeds, for appli cation to the cost of repair and
restoration.
10.2.3 Disbursement of Proceeds. Tenant shall, at its sole cost and
expense, commence promptly and continue diligently to perform the
repair and restoration of such Leased Property (hereinafter called the
"Work"), or shall cause the same to be done, so as to restore such
Leased Property in full compliance with all Legal Requirements and so
that such Leased Property shall be at least equal in value and general
utility to its general utility and value immediately prior to such
damage or destruction. Subject to the terms hereof, Landlord shall
advance such property and casualty insurance proceeds and the amounts
paid to it pursuant to Section 10.2.2 to Tenant regularly during the
repair and restoration period so as to permit payment for the cost of
any such restoration and repair. Any such advances shallbe for not
less than $100,000 (or such lesser amount as equals the entire balance
of the repair and restoration) and Tenant shall submit to Landlord a
written requisition and substantiation therefor on such form or forms
as may be reasonably acceptable to Land lord. Landlord may, at its
option, condition advancement of said insurance proceeds and other
amounts on (i) the absence of any Default or Event of Default, (ii)
its approval of plans and specifications of an architect satisfactory
to Landlord, (iii) general contractors' estimates, (iv) architect's
certificates, (v) unconditional lien waivers of general contrac tors,
(vi) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required and (vii) such other
certificates as Landlord may, from time to time, reasonably require.
Landlord's obligation to disburse insurance proceeds under this
Article 10 shall be subject to the release of such proceeds by the
applicable Facility Mortgagee to Landlord.
Tenant's obligation to restore the applicable Leased Property pursuant
to this Article 10 shall be subject to the release of available insurance
proceeds by the applicable Facility Mortgagee to Landlord; provided, however,
that Tenant shall be entitled to cease operations at such Facility pursuant to
and in accordance with Section 4.5 above. In the event Tenant elects to close
such Facility as aforesaid, Tenant shall, as Additional Charges, pay to Landlord
all property
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or casualty insurance proceeds received in connection therewith, along with any
deductible or retention, but in no event shall Tenant pay to Landlord less than
the full Replacement Cost of such Facility, including Tenant's Personal
Property.
10.3 Tenant's Property.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property shall be paid to Tenant, and, to the extent
necessary to repair or replace Tenant's Personal Property in accordance with
Section 10.4, Tenant shall hold such proceeds in trust to pay the cost of
repairing or replacing damaged Tenant's Personal Property.
10.4 Restoration of Tenant's Property.
If Tenant is required to restore the applicable Leased Property as
hereinabove provided, Tenant shall either (a) restore all alterations and
improvements made by Tenant and Tenant's Personal Property, or (b) replace such
alterations and improvements and Tenant's Personal Property with improvements or
items of the same or better quality and utility in the operation of such Leased
Property.
10.5 No Abatement of Rent.
This Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any damage involving any of the Collective Leased Properties
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any cause of damage or destruction
to the applicable Leased Property and, to the maximum extent permitted by law,
no local or State statute, laws, rules, regulation or ordinance in effect during
the Term which provide for such a contingency shall have any application in such
case.
10.6 Waiver.
Tenant hereby waives any statutory rights of termination which may
arise by reason of any damage or destruction of any of the Collective Leased
Properties.
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ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc.
If either (i) the whole of any of the Collective Leased Properties
shall be taken by Condemnation or (ii) a Condemnation of less than the whole of
any of the Collective Leased Properties renders such Leased Property Unsuitable
for Its Primary Intended Use, this Agreement shall terminate with respect to
such Leased Property, Tenant and Landlord shall seek the Award for their
interests in such Leased Property as provided in Section 11.5 and the Minimum
Rent thereafter payable shall be reduced by one-twelfth (1/12th) of the product
of (x) ten percent (10%), and (y) the Award received by Landlord with respect to
such Leased Property, net of all expenses incurred by Landlord in obtaining the
same, including reasonable attorneys' fees.
11.2 Partial Condemnation.
In the event of a Condemnation of less than the whole of any of the
Collective Leased Properties such that such Leased Property is still suitable
for its Primary Intended Use, Tenant shall, at its sole cost and expense,
commence promptly and continue diligently to restore the untaken portion of the
Leased Improvements on such Leased Property so that such Leased Improvements
shall constitute a complete architectural unit of the same general character and
condition (as nearly as may be possible under the circumstances) as the Leased
Improvements existing immediately prior to such Condemnation, in full compliance
with all Legal Requirements. Subject to the terms hereof, Landlord shall
contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements, to Tenant regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration. Landlord may, at its option, condition advancement of such Award
and other amounts on (i) the absence of any continuing Event of Default, (ii)
its approval of plans and specifications of an architect satisfactory to
Landlord (which approval shall not be unreasonably withheld or delayed), (iii)
general contractors' estimates, (iv) architect's certificates, (v) unconditional
lien waivers of general contractors, (vi) evidence of approval by all
governmental authorities and other regulatory bodies whose approval is required
and (vii) such other certificates as Landlord may, from time to time, reasonably
require. Landlord's obligation under this Section 11.2 to disburse the Award and
such other amounts shall be subject to (x) the collection thereof by Landlord
and (y) the satisfaction of any applicable requirements of any Facility
Mortgage, and the release of such Award by the applicable Facility Mortgagee.
Tenant's obligation to restore the applicable Leased Property shall be subject
to the release of the Award by the applicable Facility Mortgagee to Landlord. If
the cost of the restoration of the applicable Leased Property exceeds that part
of the Award necessary to complete such restoration, together with severance and
other damages awarded for the taken Leased Improvements, Tenant shall contribute
upon the demand of Landlord any excess amounts needed to restore such Leased
Property. Such difference shall be
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paid by Tenant to Landlord and held by Landlord, together with such part of the
Award and such severance and other damages, for application to the cost of
restoration.
11.3 Abatement of Rent.
Other than as specifically provided in this Agreement, this Agreement
shall remain in full force and effect and Tenant's obligation to make all
payments of Rent and to pay all other charges as and when required under this
Agreement shall remain unabated during the Term notwithstanding any Condemnation
involving the Collective Leased Properties. The provisions of this Article 11
shall be considered an express agreement governing any Condemnation involving
any or all of the Collective Leased Properties and, to the maximum extent
permitted by law, no local or State statute, law, rule, regulation or ordinance
in effect during the Term which provides for such a contingency shall have any
application in such case.
11.4 Temporary Condemnation.
In the event of any temporary Condemnation of all or any part of the
Collective Leased Properties or Tenant's interest therein, this Agreement shall
continue in full force and effect, and Tenant shall continue to pay, in the
manner and on the terms herein specified, the full amount of the Rent. Tenant
shall continue to perform and observe all of the other terms and conditions of
this Agreement on the part of Tenant to be performed and observed. Provided no
Default or Event of Default has occurred and is continuing, the entire amount of
any Award made for such temporary Condemnation allocable to the Term, whether
paid by way of damages, rent or otherwise, shall be paid to Tenant. Tenant
shall, promptly upon the termination of any such period of temporary
Condemnation, at its sole cost and expense, restore such Leased Property to the
condition that existed immediately prior to such Condemnation, in full
compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration. For purposes of this
Section 11.4, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twenty-four (24)
months.
11.5 Allocation of Award.
Except as provided in the second sentence of this Section 11.5, the
total Award shall be solely the property of and payable to Landlord. Any portion
of the Award made for the taking of Tenant's leasehold interest in the
applicable Leased Property, loss of business during the remainder of the Term,
or Tenant's removal and relocation expenses shall be the sole property of and
payable to Tenant (subject to the provisions of Section 11.2). In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
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ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(a) Tenant fails (i) to make any payment of the Rent payable
hereunder when due and such failure continues for a period
of ten (10) days after the date due, or (ii) to make any
required payments of real estate taxes by the earlier of (a)
ten (10) days following Notice from Landlord that such
payment is due and owing and unpaid, and (b) the date which
is 30 days prior to the date on which a Government Authority
has the right to sell or initiate the process for selling
the applicable Leased Property due to a failure to pay the
real estate taxes. The foregoing provisions hereof
notwithstanding, (x) Tenant's failure to pay Additional Rent
shall not constitute an Event of Default, except if Tenant
fails to pay Additional Rent in at least the amount of the
Allowance disbursed to date by Landlord, and (y) with
respect to the failure to pay Additional Charges that are
amounts owed to third parties (other than real estate
taxes), the failure to pay such amounts shall not constitute
an Event of Default under this Section 12.1(a) if Tenant
pays the same in full, along with all interest, penalties
and late charges due and owing to such third parties, no
later than ten (10) days following Notice from Landlord that
such sum is due and owing. In the event Landlord gives
Notice of such circumstances to Tenant twice in any Lease
Year, then on each subsequent occasion for the remainder of
such Lease Year when Landlord gives Tenant any such Notice,
Tenant shall pay to Landlord, as Additional Charges (whether
or not Tenant pays such third party within ten (10) days as
aforesaid), the sum of One Thousand Five Hundred Dollars
($1,500).
(b) Tenant fails to maintain the insurance coverages required
under Article 9 within five (5) days after Notice thereof from
Landlord.
(c) Tenant defaults in the due observance or performance of any
of the terms, covenants or agreements contained herein to be
performed or observed by it (other than as specified in
clauses (a) and (b) above), and, in either case, such
default continues for a period of thirty (30) days after
Notice thereof from Landlord to Tenant (provided that no
such Notice shall be required if Landlord reasonably
determines that immediate action is necessary to protect
person or property); provided, however, that if such default
is susceptible of cure but such cure cannot be accomplished
with due diligence within such period of time and if, in
addition, Tenant commences to cure such default within
thirty (30) days after Notice thereof from Landlord and
thereafter prosecutes the curing of such default with all
- 45 -
due diligence, such period of time shall be extended to such
period of time (not to exceed an additional one hundred eighty
(180) days in the aggregate) as may be necessary to cure such
default with all due diligence.
(d) Any obligation of Tenant in respect of any Indebtedness in a
principal amount in excess of $10,000,000 for money borrowed
or for the deferred purchase price of any material property or
services, is declared to be, or as a result of acceleration
becomes, due and payable prior to the stated maturity thereof.
(e) There occurs a final unappealable determination by
applicable federal or State authorities of the revocation or
limitation of any license, permit, certification,
certificate of need or approval required for the lawful
operation of any of the Facilities in accordance with its
Primary Intended Use or the loss or limitation of any
license, permit, certification, certificate of need or
approval under any other circumstances under which Tenant is
required to cease its operation of such Facility in
accordance with its Primary Intended Use at the time of such
loss or limitation, provided, however, that if Tenant ceases
its operations in such Facility pursuant to and in
accordance with its right to do so under Section 4.5 hereof,
the closing thereof shall cause such Event of Default to be
deemed no longer continuing.
(f) Any representation or warranty made by or on behalf of Tenant
under or in connection with this Agreement, or in any
document, certificate, or agreement delivered in connection
herewith proves to have been false or misleading in any
material respect on the date when made or deemed made.
(g) Tenant is generally not paying its debts as they become due,
or Tenant makes a general assignment for the benefit of
creditors.
(h) Any petition is filed by or against Tenant under the Federal
bankruptcy laws, or any other proceeding is instituted by or
against Tenant seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, reorganization,
arrangement, adjustment or composition of it or its debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for Tenant or
for any substantial part of the property of Tenant and such
proceeding is not dismissed within ninety (90) days after
institution thereof, or Tenant takes any action to authorize
or effect any of the actions set forth above in this
paragraph.
(i) Tenant causes or institutes any proceeding for its dissolution
or termination.
(j) subject to Section 4.5 hereof, Tenant voluntarily ceases
operation of any of the Collective Leased Properties for its
Primary Intended Use for a period in excess of
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thirty (30) consecutive days, except as a result of damage,
destruction or partial or complete Condemnation.
(k) The estate or interest of Tenant in any of the Collective
Leased Properties or any part thereof is levied upon or
attached in any proceeding and the same is not vacated or
discharged within the later of (x) one hundred and twenty
(120) days after commencement thereof, unless the amount in
dispute is less than $100,000 in which case Tenant shall
give notice to Landlord of the dispute but Tenant may defend
in any suitable way, and (y) thirty (30) days after receipt
by Tenant of Notice thereof from Landlord (unless Tenant
shall be contesting such lien or attachment in good faith in
accordance with Article 8).
(l) Any Change in Control of Tenant occurs.
In any such event, Landlord, in addition to all other remedies available to it,
may terminate this Agreement with respect to all but not less than all of the
Collective Leased Properties by giving Notice thereof to Tenant and upon the
expiration of the time, if any, fixed in such Notice, this Agreement shall
terminate and all rights of Tenant under this Agreement shall cease. Landlord
shall have and may exercise all rights and remedies available at law and in
equity to Landlord as a result of Tenant's breach of this Agreement.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Collective Leased
Properties and take possession of, and either (i) retain any and all of Tenant's
Personal Property on any such Leased Property, without liability for trespass or
conversion (Tenant hereby waiving any right to Notice or hearing prior to such
taking of possession by Landlord) or (ii) sell the same at public or private
sale, after giving Tenant reasonable Notice of the time and place of any public
or private sale, at which sale Tenant or its assigns may purchase all or any
portion of Tenant's Personal Property. Unless otherwise provided by law and
without intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable Notice shall be met if such Notice is
given at least five (5) days before the date of sale. The proceeds from any such
disposition shall belong to Landlord and shall not be applied as a credit
against the indebtedness which is secured by the security interest granted in
Section 7.2.
The foregoing provisions hereof notwithstanding, Landlord shall have no
right to assert any remedy hereunder, and an Event of Default shall be deemed to
no longer exist, if Tenant cures an Event of Default (A) under Section 12.1(a)
prior to the earlier of (x) the commencement by Landlord of the exercise of any
remedy under this Agreement by Landlord or (y) Landlord's Notice to Tenant
stating that an Event of Default exists and further stating Landlord's intention
to assert one or more remedies hereunder; and (B) under any of Section
12.(b)-(l), prior to the commencement by Landlord of the exercise of any remedy
under this Agreement by Landlord.
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12.2 Remedies.
None of (a) the termination of this Agreement pursuant to Section 12.1,
(b) the repossession of the Collective Leased Properties, (c) the failure of
Landlord to re-let any or all of the Collective Leased Properties, or (d) the
reletting of any or all of the Collective Leased Properties, shall relieve
Tenant of its liability and obligations hereunder, all of which shall survive
any such termination, repossession or re-letting. In the event of any such
termination, Tenant shall forthwith pay to Landlord all Rent due and payable
with respect to the Collective Leased Properties through and including the date
of such termination. Thereafter, Tenant, until the end of what would have been
the Term of this Agreement in the absence of such termination, and whether or
not any of the Collective Leased Properties or any portion thereof shall have
been re-let, shall be liable to Landlord for, and shall pay to Landlord, as
current damages, the Rent and other charges which would be payable hereunder for
the remainder of the Term had such termination not occurred, less the net
proceeds, if any, of any re-letting of the Collective Leased Properties, after
deducting all expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
attorneys' fees, advertising, expenses of employees, alteration costs and
expenses of preparation for such reletting. Tenant shall pay such current
damages to Landlord monthly on the days on which the Minimum Rent would have
been payable hereunder if this Agreement had not been so terminated.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord either
(a) an amount equal to the excess, if any, of the Rent and other charges which
would be payable hereunder from the date of such termination (assuming that, for
the purposes of this paragraph, annual payments by Tenant on account of
Impositions would be the same as payments required for the immediately preceding
twelve calendar months, or if less than twelve calendar months have expired
since the Commencement Date, the payments required for such lesser period
projected to an annual amount) for what would be the then unexpired term of this
Agreement if the same remained in effect, over the Fair Market Rental for the
same period, or (b) an amount equal to the lesser of (i) the Rent and other
charges that would have been payable for the balance of the Term had it not been
terminated, and (ii) the aggregate of the Rent and other charges accrued in the
twelve (12) months ended next prior to such termination (without reduction for
any free rent or other concession or abatement). In the event this Agreement is
so terminated prior to the expiration of the first full year of the Term, the
liquidated damages which Landlord may elect to recover pursuant to clause
(b)(ii) of this paragraph shall be calculated as if such termination had
occurred on the first anniversary of the Commencement Date. Nothing contained in
this Agreement shall, however, limit or prejudice the right of Landlord to prove
and obtain in proceedings for bankruptcy or insolvency an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.
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In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet any of the
Collective Leased Properties or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may, at Landlord's option, be
equal to, less than or exceed the period which would otherwise have constituted
the balance of the Term and may grant concessions or free rent to the extent
that Landlord considers advisable and necessary to relet the same, and (b) may
make such reasonable alterations, repairs and decorations in any applicable
Leased Property or any portion thereof as Landlord, in its sole and absolute
discretion, considers advisable and necessary for the purpose of reletting any
such Leased Property; and the making of such alterations, repairs and
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Landlord shall in no event be liable in any way
whatsoever for any failure to relet all or any portion of the Collective Leased
Properties, or, in the event that any of the Collective Leased Properties is
relet, for failure to collect the rent under such reletting. To the maximum
extent permitted by law, Tenant hereby expressly waives any and all rights of
redemption granted under any present or future laws in the event of Tenant being
evicted or dispossessed, or in the event of Landlord obtaining possession of any
of the Collective Leased Properties, by reason of the violation by Tenant of any
of the covenants and conditions of this Agreement.
12.3 Tenant's Waiver.
IF THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION 12.1 OR 12.2,
TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN
THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN THIS
ARTICLE 12 AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING
PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds.
Any payments received by Landlord under any of the provisions of this
Agreement during the existence or continuance of any Default or Event of Default
(and any payment made to Landlord rather than Tenant due to the existence of any
Default or Event of Default) shall be applied to Tenant's obligations under this
Agreement in such order as Landlord may determine or as may be prescribed by the
laws of the State.
12.5 Landlord's Right to Cure Tenant's Default.
If an Event of Default shall have occurred and be continuing, Landlord,
after Notice to Tenant (which Notice shall not be required if Landlord shall
reasonably determine immediate action is necessary to protect person or
property), without waiving or releasing any obligation of Tenant and without
waiving or releasing any Event of Default, may (but shall not be obligated to),
at any time thereafter, make such payment or perform such act for the account
and at the expense of Tenant, and may, to the maximum extent permitted by law,
enter upon any of the
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Collective Leased Properties or any portion thereof for such purpose and take
all such action thereon as, in Landlord's sole and absolute discretion, may be
necessary or appropriate therefor, including the management of the Facility
located thereon by Landlord or its designee, and Tenant hereby irrevocably
appoints, in the event of such election by Landlord, Landlord or its designee as
manager of any such Facility and its attorney in fact for such purpose,
irrevocably and coupled with an interest, in the name, place and stead of
Tenant. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Landlord's Right to Assume Contracts.
In the event Landlord elects to terminate this Agreement or otherwise
obtains possession of the Collective Leased Properties following an Event of
Default, Landlord (or its designee) shall have the right, at its sole and
absolute discretion, upon Notice to Tenant within sixty (60) days after Landlord
terminates this Agreement or otherwise obtains possession following an Event of
Default, to assume all (but not less than all) of the contracts utilized by
Tenant in the operation of its business, including the Franchise Agreement, and
Tenant will cooperate in effecting such assumption. In no event will Landlord
(or its designee) have any liability under such contracts for obligations or
liabilities accruing under such contracts prior to the date of such assumption
by such party.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to two (2) times the Minimum Rent then in effect plus Additional Charges
and other charges herein provided (prorated on a daily basis). Tenant shall also
pay to Landlord all damages (direct or indirect) sustained by reason of any such
holding over. Otherwise, such holding over shall be on the terms and conditions
set forth in this Agreement, to the extent applicable. Nothing contained herein
shall constitute the consent, express or implied, of Landlord to the holding
over of Tenant after the expiration or earlier termination of this Agreement.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in this Agreement and such default shall
continue for a period of thirty (30) days after Notice thereof from Tenant to
Landlord and any applicable Facility Mortgagee, or
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such additional period as may be reasonably required to correct the same, Tenant
may declare the occurrence of a "Landlord Default" by a second Notice to
Landlord and to such Facility Mortgagee. Thereafter, Tenant may forthwith cure
the same and, subject to the provisions of the following paragraph, invoice
Landlord for costs and expenses (including reasonable attorneys' fees and court
costs) incurred by Tenant in curing the same, together with interest thereon
from the date Landlord receives Tenant's invoice, at the Overdue Rate. Tenant
shall have no right to terminate this Agreement for any default by Landlord
hereunder and no right, for any such default, to offset or counterclaim against
any Rent or other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof. If Tenant and Landlord shall fail, in good faith, to resolve any such
dispute within ten (10) days after Landlord's Notice of dispute, either may
submit the matter for resolution to a court of competent jurisdiction.
ARTICLE 15
LANDLORD FINANCING
In the event that at any time during the Term, OpCo, or any Subsidiary
of OpCo, shall elect to obtain financing for any health care related facilities
owned or leased or to be owned or leased by OpCo, or such Subsidiary, OpCo shall
give (or cause such Subsidiary to give, as the case may be) Notice thereof to
Landlord, which notice shall set forth in reasonable detail the terms of such
financing, shall identify the source thereof and shall include a copy of an
applicable commitment letter. Landlord shall have the right, exercisable by the
giving of Notice to OpCo (or such Subsidiary, as the case may be) within thirty
(30) days after such Notice from OpCo (or such Subsidiary, as the case may be),
to provide such financing on the same terms and conditions as described in the
Notice given to Landlord. In the event that Landlord shall exercise such option,
OpCo (or such Subsidiary, as the case may be) shall be obligated to obtain such
financing from Landlord on the terms and conditions set forth in the Notice to
Landlord. In the event that Landlord shall decline to provide such financing or
shall fail to give such Notice to OpCo (or such Subsidiary, as the case may be),
OpCo (or such Subsidiary, as the case may be) shall be free to obtain such
financing from the party identified in, and on the terms and conditions set
forth in, the Notice given to Landlord with respect thereto. Notices to OpCo and
any Subsidiary shall be given as if a Notice to Tenant.
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ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment.
Except as provided in Sections 16.3 and 16.5 below, Tenant shall not,
without the prior written consent of Landlord (which consent may be given or
withheld in its sole and absolute discretion), assign, mortgage, pledge,
hypothecate, encumber or otherwise transfer this Agreement or sublease (which
term shall be deemed to include the granting of concessions, licenses and the
like), all or any part of the Collective Leased Properties or suffer or permit
this Agreement or the leasehold estate created hereby or any other rights
arising under this Agreement to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or occupancy of any of
the Collective Leased Properties by anyone other than Tenant, or any of the
Collective Leased Properties to be offered or advertised for assignment or
subletting. For purposes of this Section 16.1, an assignment of this Agreement
shall be deemed to include any Change in Control of Tenant.
If this Agreement is assigned or if any of the Collective Leased
Properties or any part thereof are sublet (or occupied by anybody other than
Tenant and its employees) in contravention of this Agreement, Landlord may
collect the rents from such assignee, subtenant or occupant, as the case may be,
and apply the net amount collected to the Rent herein reserved, but no such
collection shall be deemed a waiver of the provisions set forth in the first
paragraph of this Section 16.1, the acceptance by Landlord of such assignee,
subtenant or occupant, as the case may be, as a tenant, or a release of Tenant
from the future performance by Tenant of its covenants, agreements or
obligations contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder, and no consent to any subletting or
assignment in a particular instance shall be deemed to be a waiver of the
prohibition set forth in this Section 16.1. No assignment, subletting or
occupancy shall affect any Primary Intended Use. Any subletting, assignment or
other transfer of Tenant's interest under this Agreement in contravention of
this Section 16.1 shall be voidable at Landlord's option.
16.2 Required Sublease Provisions.
Any sublease of all or any portion of any of the Collective Leased
Properties shall provide (a) that it is subject and subordinate to this
Agreement and to the matters to which this Agreement is or shall be subject or
subordinate; (b) that in the event of termination of this Agreement or reentry
or dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord
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nor any Facility Mortgagee, as holder of a mortgage or as Landlord under this
Agreement, if such mortgagee succeeds to that position, shall (i) be liable for
any act or omission of Tenant under such sublease, (ii) be subject to any
credit, counterclaim, offset or defense which theretofore accrued to such
subtenant against Tenant, (iii) be bound by any previous modification of such
sublease not consented to in writing by Landlord or by any previous prepayment
of more than one (1) month's Rent, (iv) be bound by any covenant of Tenant to
undertake or complete any construction of such Leased Property or any portion
thereof, (v) be required to account for any security deposit of the subtenant
other than any security deposit actually delivered to Landlord by Tenant, (vi)
be bound by any obligation to make any payment to such subtenant or grant any
credits, except for services, repairs, maintenance and restoration provided for
under the sublease that are to be performed after the date of such attornment,
(vii) be responsible for any monies owing by Tenant to the credit of such
subtenant, or (viii) be required to remove any Person occupying any portion of
the Collective Leased Properties; and (c), in the event that such subtenant
receives a written Notice from Landlord or any Facility Mortgagee stating that
an Event of Default has occurred and is continuing, such subtenant shall
thereafter be obligated to pay all rentals accruing under such sublease directly
to the party giving such Notice or as such party may direct. All rentals
received from such subtenant by Landlord or the Facility Mortgagee, as the case
may be, shall be credited against the amounts owing by Tenant under this
Agreement and such sublease shall provide that the subtenant thereunder shall,
at the request of Landlord, execute a suitable instrument in confirmation of
such agreement to attorn. An original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such subtenant or
assignee, as the case may be, in form and substance reasonably satisfactory to
Landlord, shall be delivered promptly to Landlord upon request and (a) in the
case of an assignment, the assignee shall assume in writing and agree to keep
and perform all of the terms of this Agreement on the part of Tenant to be kept
and performed and shall be, and become, jointly and severally liable with Tenant
for the performance thereof and (b) in case of either an assignment or
subletting, Tenant shall remain primarily liable, as principal rather than as
surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Tenant
hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of the
provisions set forth in the first paragraph of Section 16.1.
16.3 Permitted Assignments and Subleases.
Notwithstanding the requirements set forth in Section 16.1 that
Landlord's prior written consent be obtained in connection with any assignment,
mortgage, pledge, encumbrance or other transfer of this Lease or any sublease of
all or any part of the Collective Leased Properties, but subject to the
provisions of Section 16.4 and any other express conditions or limitations set
forth in this Article 16, Tenant may, in each instance, (x) after Notice to
Landlord, sublease any or all of the Collective Leased Properties, or assign
this Agreement, to any Qualified Affiliate and (y) sublease space at any of the
Collective Leased Properties for laundry, commissary, child care or medical
office or other purposes in furtherance of the applicable Primary Intended Use,
so long as such sublease will not violate or affect any Legal Requirement or
Insurance Requirement, and
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Tenant shall provide such additional insurance coverage applicable to the
activities to be conducted in such subleased space as Landlord may require. In
connection with any sublease of any Leased Property, or assignment of this
Agreement, any and all Facilities affected by or the subject of such transaction
shall continue to be operated under and pursuant to the Franchise Agreement, and
Tenant shall provide to Landlord, upon request, documentation confirming that
the operation thereof, in such manner, has the approval and consent of
Franchisor.
16.4 Sublease Limitation.
Anything contained in this Agreement to the contrary notwithstanding,
Tenant shall not sublet any of the Collective Leased Properties on any basis
such that all or any part of the Rent would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or any similar or
successor provision thereto. This limitation shall include, but not be limited
to, situations where (a) the rental to be paid by any sublessee thereunder would
be based, in whole or in part, on the income or profits derived by the business
activities of such sublessee, or (b) the sublessee would have a relationship to
Crescent Real Estate Equities, Inc., described in Section 856(d)(2)(B) of the
Code, or any similar or successor provision thereto.
16.5 Tenant's Right to Mortgage its Leasehold.
Tenant may, subject to Article 15 and Section 6.6 hereof, assign its
interest in this Agreement to a Lending Institution as collateral for
Indebtedness, provided, however, any security interests in any property of
Tenant, including without limitation Tenant's leasehold interest in the
Collective Leased Properties, shall be expressly and fully subordinated to this
Agreement and to the interest of Landlord in the Collective Leased Properties
and to the rights of any then or thereafter existing Facility Mortgagee.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates.
At any time and from time to time, upon not less than ten (10) days
prior Notice by Landlord, Tenant shall furnish to Landlord an Officer's
Certificate certifying that this Agreement is unmodified and in full force and
effect (or that this Agreement is in full force and effect as modified and
setting forth the modifications), the date to which the Rent has been paid, that
no Default or an Event of Default has occurred and is continuing or, if a
Default or an Event of Default shall exist, specifying in reasonable detail the
nature thereof, and the steps being taken to remedy the same, and such
additional information as Landlord may reasonably request. Any such certificate
furnished pursuant to this Section 17.1 may be relied upon by Landlord, any
Facility Mortgagee and any prospective purchaser or mortgagee of any of the
Collective Leased Properties.
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17.2 Financial Statements.
OpCo shall furnish the following statements to Landlord:
(a) within forty-five (45) days after each of the first three
quarters of any Fiscal Year, the most recent Financials and
the most recent unaudited financial statements of OpCo
accompanied by the Financial Officer's Certificate;
(b) within one hundred twenty (120) days after the end of each
Fiscal Year, the most recent Financials for such Fiscal Year,
including the most recent financial statements of OpCo audited
and reported upon by an independent certified public
accountant reasonably satisfactory to Landlord and accompanied
by a Financial Officer's Certificate;
(c) within thirty (30) days after the end of each calendar
month, an unaudited statement of income of OpCo, accompanied
by a Financial Officer's Certificate;
(d) promptly after the sending or filing thereof, copies of all
periodic reports which OpCo files with the SEC or any stock
exchange on which its shares are listed or traded;
(e) promptly after the delivery thereof to OpCo, a copy of any
management letter or written report prepared by the certified
public accountants with respect to the financial condition,
operations, business or prospects of OpCo, as the case may be;
and
(f) at the expense of Landlord, at any time and from time to
time upon not less than forty-five (45) days Notice from
Landlord, any Financials or any other financial reporting
information required to be filed by Landlord with any
securities and exchange commission, the SEC or any successor
agency, or any other governmental authority, or required
pursuant to any order issued by any court, governmental
authority or arbitrator in any litigation to which Landlord
is a party, for purposes of compliance therewith, promptly,
upon Notice from Landlord, such other information concerning
the business, financial condition and affairs of Tenant as
Landlord may reasonably request from time to time.
Landlord may at any time, and from time to time, provide any Facility
Mortgagee with copies of any of the foregoing statements, provided that such
Facility Mortgagee has executed and delivered a confidentiality agreement
reasonably satisfactory to Tenant.
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17.3 General Operations.
Tenant covenants and agrees to furnish to Landlord within thirty (30)
days after written request therefor:
17.3.1 Reimbursement, Licensure, Etc.
Within thirty (30) days after receipt or modification thereof :
(a) copies of all material licenses and certificates of need
authorizing Tenant to operate each Facility for its Primary
Intended Use;
(b) a list of all Medicare and Medicaid certifications and all
related participating provider agreements; and
(c) copies of all reports of surveys, statements of deficiencies,
plans of correction, and all material correspondence relating
thereto, including, without limitation, all reports and
material correspondence concerning compliance with or
enforcement of licensure, Medicare/Medicaid, and accreditation
requirements, including physical environment and Life Safety
Code survey reports (excluding, however, correspondence which
may be subject to any attorney-client privilege).
Upon Notice from Landlord from time to time, Tenant shall make
available for inspection and copying by Landlord, where such records are kept
and maintained in the normal course of business:
(d) all Medicare and Medicaid certifications, together with all
participating provider agreements and all material
correspondence relating thereto with respect to each Facility
(excluding, however, correspondence which may be subject to
any attorney-client privilege); and
(e) such other confirmation as to the licensure and Medicare and
Medicaid participation of Tenant as Landlord may reasonably
request from time to time.
17.3.2 Annual Budgets.
Not less than sixty (60) days after the commencement of any Fiscal
Year, proposed annual income and ordinary expense and capital improvement
budgets setting forth projected income and costs and expenses projected to be
incurred by Tenant in managing, owning, maintaining and operating the Facilities
during the next succeeding Fiscal Year.
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ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Collective Leased Properties during usual business hours upon not
less than twenty-four (24) hours' notice (provided that no such notice shall be
required if Landlord shall reasonably determine immediate action is necessary to
protect person or property), and to make such repairs as Landlord is permitted
or required to make pursuant to the terms of this Agreement, provided that any
inspection or repair by Landlord or its representatives will not unreasonably
interfere with Tenant's use and operation of the applicable Leased Property and
further provided that in the event of an emergency, as determined by Landlord in
its sole discretion, prior Notice shall not be necessary.
ARTICLE 19
APPRAISAL
In the event that it becomes necessary to determine the Fair Market
Value or Fair Market Rental of any of the Collective Leased Properties for any
purpose of this Agreement and the parties cannot agree thereon, such Fair Market
Value or Fair Market Rental, as the case may be, shall be determined upon the
written demand of either party in accordance with the following procedure.
The party requesting an appraisal, by Notice given to the other, shall
propose and unilaterally approve a Qualified Appraiser. The other party, by
Notice given within fifteen (15) days after receipt of such Notice appointing
the first Qualified Appraiser, may appoint a second Qualified Appraiser. If the
other party fails to appoint the second Qualified Appraiser within such fifteen
(15)-day period, such party shall have waived its right to appoint a Qualified
Appraiser, the first Qualified Appraiser shall appoint a second Qualified
Appraiser within fifteen (15) days thereafter, and the Fair Market Value or Fair
Market Rental, as the case may be, shall be determined by the Qualified
Appraisers as set forth below.
The two Qualified Appraisers shall thereupon endeavor to agree upon the
Fair Market Value or Fair Market Rental, as the case may be. If the two
Qualified Appraisers so named cannot agree upon such value or rental, as the
case may be, within thirty (30) days after the designation of the second such
appraiser, each such appraiser shall, within five (5) days after the expiration
of such thirty (30)-day period, submit his appraisal of fair market value to the
other appraiser in writing, and if the fair market values set forth in such
appraisals vary by five percent (5%) or less of the greater value, the fair
market value shall be determined by calculating the average of the two fair
market values determined by the two appraisers.
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If the fair market values set forth in the two appraisals vary by more
than five percent (5%) of the greater value, the two Qualified Appraisers shall
select a third Qualified Appraiser within an additional fifteen (15) days
following the expiration of the aforesaid five (5)-day period. If the two
appraisers are unable to agree upon the appointment of a third appraiser within
such fifteen (15)-day period, either party may, upon written notice to the
other, request that such appointment be made by the then President (or
equivalent officer) of the State's Chapter of the American Institute of Real
Estate Appraisers, or his or her designee or, if there is no such organization
or if such individual declines to make such appointment, by any state or Federal
court of competent jurisdiction for the State.
In the event that all three of the appraisers cannot agree upon Fair
Market Value or Fair Market Rental, as the case may be, within twenty (20) days
following the selection of the third appraiser, each appraiser shall, within ten
(10) days thereafter, submit his appraisal of fair market value to the other two
appraisers in writing, and the fair market value shall be determined by
calculating the average of the two numerically closest values (or, if the values
are equidistant, the average of all three values) determined by the three
appraisers.
In the event that any appraiser appointed hereunder does not or is
unable to perform his or her obligation hereunder, then the party or the
appraisers appointing such appraiser shall have the right to propose and approve
unilaterally a substitute Qualified Appraiser, but if the party or the
appraisers who have the right to appoint a substitute Qualified Appraiser fail
to do so within ten (10) days after written notice from the other party (or
either party in the event such appraiser was appointed by the other appraisers),
either party may, upon written notice to the party having the right to appoint a
substitute Qualified Appraiser, request that such appointment be made by such
officer of the American Institute of Real Estate Appraisers or court of
competent jurisdiction as described above; provided, however, that a party who
has the right to appoint an appraiser or a substitute appraiser shall have the
right to make such appointment only up until the time such appointment is made
by such officer or court.
In connection with the appraisal process, Tenant shall provide the
appraisers full access during normal business hours to examine the applicable
Leased Property, the books, records and files of Tenant and all agreements,
leases and other operating agreements relating to the applicable Leased
Property.
The costs (other than Landlord's counsel fees) of each such appraisal
shall be borne by Tenant and shall be included as part of the Additional
Charges. Upon determining such value, the appraisers shall promptly notify
Landlord and Tenant in writing of such determination. If any party shall fail to
appear at the hearings appointed by the appraisers, the appraisers may act in
the absence of such party.
The determination of the Qualified Appraisers made in accordance with
the foregoing provisions shall be final and binding upon the parties, such
determination may be entered as an award in arbitration in a court of competent
jurisdiction, and judgment thereon may be entered.
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Notwithstanding anything in this Agreement to the contrary, (x) the
parties agree that the Minimum Rent for the Fixed Term provided for in Section
1.64 hereof shall not be evidence of the Fair Market Rental for any Extended
Term, and (y) if Minimum Rent for any Extended Term as determined by appraisal
pursuant to this Article 19 is not satisfactory to Landlord, in Landlord's sole
discretion, or Franchisor elects to void Tenant's extension of the Franchise
Agreement with respect to such Extended Term pursuant to the Franchise
Agreement, then Landlord shall have the right to render void Tenant's election
to extend the Term with respect to such Extended Term upon Notice given to
Tenant no later than thirty (30) days following the later of the determination
of the Minimum Rent pursuant to this Article 19, or Franchisor's election to
render void the extension of the Franchise Agreement pursuant to the Franchise
Agreement, in which event this Agreement shall expire on the last day of the
Fixed Term or the then current Extended Term, as applicable.
ARTICLE 20
FACILITY MORTGAGES
20.1 Landlord May Grant Liens.
Without the consent of Tenant, Landlord may, subject to the terms and
conditions set forth in this Section 20.1, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance or title
retention agreement ("Encumbrance") upon any of the Collective Leased
Properties, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Any such Encumbrance shall
include the right to prepay (whether or not subject to a prepayment penalty) and
shall provide (subject to Section 20.2 below) that it is subject to the rights
of Tenant under this Agreement.
20.2 Subordination of Lease.
Subject to Section 20.1, this Agreement, any and all rights of Tenant
hereunder, are and shall be subject and subordinate to any ground or master
lease, and all renewals, extensions, modifications and replacements thereof, and
to all mortgages and deeds of trust, which may now or hereafter affect the
Collective Leased Properties, or any of them, or any improvements thereon and/or
any of such leases, whether or not such mortgages or deeds of trust shall also
cover other lands and/or buildings and/or leases, to each and every advance made
or hereafter to be made under such mortgages and deeds of trust, and to all
renewals, modifications, replacements and extensions of such leases and such
mortgages and deeds of trust and all consolidations of such mortgages and deeds
of trust. This section shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination, (i)
Tenant shall promptly execute, acknowledge and deliver any instrument that
Landlord, the lessor under any such lease or the holder of any such mortgage or
the trustee or beneficiary of any deed of trust or any of their respective
successors in interest may reasonably request to evidence such subordination,
and (ii) the lessor under any such lease or the holder of any such mortgage or
the trustee or
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beneficiary of any such deed of trust shall execute and deliver to Tenant a
Non-Disturbance Agreement reasonably satisfactory to Tenant (taking into
account, however, the reasonable requirements of the lessor or lender, including
a lender becoming such in connection with a non-recourse securitized loan),
including provisions with respect to insurance and casualty matters.
Any lease to which this Agreement is, at the time referred to, subject
and subordinate is herein called "Superior Lease" and the lessor of a Superior
Lease or its successor in interest at the time referred to, is herein called
"Superior Landlord" and any mortgage or deed of trust to which this Agreement
is, at the time referred to, subject and subordinate, is herein called "Superior
Mortgage" and the holder, trustee or beneficiary of a Superior Mortgage is
herein called "Superior Mortgagee."
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Agreement with respect to one or more of the
Collective Leased Properties, whether through possession or foreclosure action
or delivery of a new lease or deed, or otherwise, then at the request of such
party so succeeding to Landlord's rights (herein called "Successor Landlord")
and upon such Successor Landlord's written agreement to accept Tenant's
attornment, Tenant shall attorn to and recognize such Successor Landlord as
Tenant's landlord under this Agreement with respect to one or more of the
Collective Leased Properties, and shall promptly execute and deliver any
instrument that such Successor Landlord may reasonably request to evidence such
attornment. Upon such attornment, this Agreement shall continue in full force
and effect as a direct lease between the Successor Landlord and Tenant upon all
of the terms, conditions and covenants as are set forth in this Agreement,
except that the Successor Landlord (unless formerly the landlord under this
Agreement or its nominee or designee) shall not be (a) liable in any way to
Tenant for any act or omission, neglect or default on the part of Landlord under
this Agreement, (b) responsible for any monies owing by or on deposit with
Landlord to the credit of Tenant, (c) subject to any counterclaim or setoff
which theretofore accrued to Tenant against Landlord, (d) bound by any
modification of this Agreement subsequent to such Superior Lease or Mortgage, or
by any previous prepayment of Minimum Rent or Additional Rent for more than one
(1) month, which was not approved in writing by the Superior Landlord or the
Superior Mortgagee thereto, (e) liable to Tenant beyond the Successor Landlord's
interest in the applicable Leased Property and the rents, income, receipts,
revenues, issues and profits issuing from such Leased Property, (f) responsible
for the performance of any work to be done by the Landlord under this Agreement
to render the applicable Leased Property ready for occupancy by Tenant, or (g)
required to remove any Person occupying the applicable Leased Property or any
part thereof, except if such person claims by, through or under the Successor
Landlord. Tenant agrees at any time and from time to time to execute a suitable
instrument in confirmation of Tenant's agreement to attorn, as aforesaid.
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20.3 Notice to Mortgagee and Ground Landlord.
Subsequent to the receipt by Tenant of notice from any Person that it
is a Facility Mortgagee or that it is the ground lessor under a lease with
Landlord, as ground lessee, which includes the applicable Leased Property as
part of the demised premises, no notice from Tenant to Landlord as to the
applicable Leased Property shall be effective unless and until a copy of the
same is given to such Facility Mortgagee or ground lessor, and the curing of any
of Landlord's defaults by such Facility Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Conduct of Business.
Tenant shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect and in good standing its corporate
existence and its rights and licenses necessary to conduct such business.
21.2 Maintenance of Accounts and Records.
Tenant shall keep records and books of account in which full, true and
correct entries in all material respects will be made of dealings and
transactions in relation to the business and affairs of Tenant.
21.3 Payments to Franchisor.
All payments by Tenant of Franchise Fees under the Franchise Agreement
shall be subordinated to payments of Rent (other than Non-Priority Additional
Rent) due to Landlord to the extent and on the terms provided in the Franchise
Subordination Agreement, and Tenant shall not make any payment of the Franchise
Fees, directly or indirectly, or set apart any sum or property therefor, or
agree to do so, other than as permitted in and by the Franchise Subordination
Agreement.
21.4 Management of Collective Leased Properties.
Tenant shall not enter into any Management Agreement unless the terms
thereof have been previously approved in writing by Landlord, which approval may
be given or withheld in Landlord's sole and absolute discretion, except for
Management Agreements between OpCo and a Facility Subsidiary. All management
fees, payments in connection with any extension of credit and fees for services
provided in connection with the operation of the applicable Leased Property,
payable by Tenant or any Affiliated Person as to Tenant shall be subordinated to
all of the obligations of Tenant due under this Agreement pursuant to a
Subordination Agreement.
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Tenant shall not agree to any change in the Manager of any of the Collective
Leased Properties and/or any Facility, to any change in any Management
Agreement, terminate any Management Agreement or permit any Manager to assign
any Management Agreement without the prior written approval of Landlord in each
instance, which approval may be given or withheld in Landlord's sole and
absolute discretion. Any Management Agreement shall provide that Landlord shall
be provided notice of any defaults thereunder and, at Landlord's option, an
opportunity to cure such defaults and shall otherwise be in form and substance
satisfactory to Landlord in its sole and absolute discretion. If Landlord shall
cure any of Tenant's defaults under any Management Agreement, the cost of such
cure shall be payable upon demand by Tenant to Landlord with interest accruing
from the demand date at the Overdue Rate and Landlord shall have the same rights
and remedies for failure to pay such costs on demand as for Tenant's failure to
pay Minimum Rent. Tenant shall deliver to Landlord any instrument requested by
Landlord to implement the intent of the foregoing provision.
21.5 Liens and Encumbrances.
Except as permitted by Sections 7.1 and 16.5, Tenant shall not create
or incur or suffer to be created or incurred or to exist any Lien on this
Agreement or Tenant's Personal Property now or at any time hereafter owned,
other than:
(a) Security interests securing the purchase price of equipment or
personal property acquired after the Commencement Date;
provided, however, that (i) such Lien shall at all times be
confined solely to the asset in question; and (ii) the
aggregate principal amount of Indebtedness secured by any such
Lien shall not exceed the cost of acquisition or construction
of the property subject thereto; and
(b) Permitted Encumbrances.
ARTICLE 22
MISCELLANEOUS
22.1 Limitation on Payment of Rent.
All agreements between Landlord and Tenant herein are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of Rent, or otherwise, shall the Rent or any other amounts payable
to Landlord under this Agreement exceed the maximum permissible under applicable
law, the benefit of which may be asserted by Tenant as a defense, and if, from
any circumstance whatsoever, fulfillment of any provision of this Agreement, at
the time performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by law, or if from any circumstances Landlord
should ever receive as fulfillment of such provision such an excessive amount,
then, ipso facto, the amount which would be excessive shall be applied to the
reduction of the installment(s) of Minimum Rent next
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due and not to the payment of such excessive amount. This provision shall
control every other provision of this Agreement and any other agreements between
Landlord and Tenant.
22.2 No Waiver.
No failure by Landlord to insist upon the strict performance of any
term hereof or to exercise any right, power or remedy consequent upon a breach
thereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term. To the maximum extent permitted by law, no waiver of any
breach shall affect or alter this Agreement, which shall continue in full force
and effect with respect to any other then existing or subsequent breach.
22.3 Remedies Cumulative.
To the maximum extent permitted by law, each legal, equitable or
contractual right, power and remedy of Landlord, now or hereafter provided
either in this Agreement or by statute or otherwise, shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy and
the exercise or beginning of the exercise by Landlord of any one or more of such
rights, powers and remedies shall not preclude the simultaneous or subsequent
exercise by Landlord of any or all of such other rights, powers and remedies.
22.4 Severability.
Any clause, sentence, paragraph, section or provision of this Agreement
held by a court of competent jurisdiction to be invalid, illegal or ineffective
shall not impair, invalidate or nullify the remainder of this Agreement, but
rather the effect thereof shall be confined to the clause, sentence, paragraph,
section or provision so held to be invalid, illegal or ineffective, and this
Agreement shall be construed as if such invalid, illegal or ineffective
provisions had never been contained therein.
22.5 Acceptance of Surrender.
No surrender to Landlord of this Agreement or of any of the Collective
Leased Properties or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Landlord and no
act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
22.6 No Merger of Title.
It is expressly acknowledged and agreed that it is the intent of the
parties that there shall be no merger of this Agreement or of the leasehold
estate created hereby by reason of the fact that the same Person may acquire,
own or hold, directly or indirectly this Agreement or the
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leasehold estate created hereby and the fee estate or ground landlord's interest
in any of the Collective Leased Properties.
22.7 Conveyance by Landlord.
If Landlord or any successor owner of all or any portion of any of the
Collective Leased Properties shall convey all or any portion of the Collective
Leased Properties in accordance with the terms hereof other than as security for
a debt, and the grantee or transferee of such of the Collective Leased
Properties shall expressly assume all obligations of Landlord hereunder arising
or accruing from and after the date of such conveyance or transfer, Landlord or
such successor owner, as the case may be, shall thereupon be released from all
future liabilities and obligations of Landlord under this Agreement with respect
to such of the Collective Leased Properties arising or accruing from and after
the date of such conveyance or other transfer and all such future liabilities
and obligations shall thereupon be binding upon the new owner.
22.8 Quiet Enjoyment.
So long as Tenant shall pay the Rent as the same becomes due and shall
comply with all of the terms of this Agreement, Tenant shall peaceably and
quietly have, hold and enjoy the Collective Leased Properties for the Term, free
of hindrance or molestation by Landlord or anyone claiming by, through or under
Landlord, but subject to (a) any Encumbrance permitted under Article 20 or
otherwise permitted to be created by Landlord hereunder, (b) all Permitted
Encumbrances, (c) liens as to obligations of Landlord that are either not yet
due or which are being contested in good faith and by proper proceedings, and
(d) liens that have been consented to in writing by Tenant. Except as otherwise
provided in this Agreement, no failure by Landlord to comply with the foregoing
covenant shall give Tenant any right to cancel or terminate this Agreement or
xxxxx, reduce or make a deduction from or offset against the Rent or any other
sum payable under this Agreement, or to fail to perform any other obligation of
Tenant hereunder.
22.9 Landlord's Consent.
Where provision is made in this Agreement for Landlord's consent and
Landlord shall fail or refuse to give such consent, Tenant shall not be entitled
to any damages for any withholding by Landlord of its consent, it being intended
that Tenant's sole remedy shall be an action for specific performance or
injunction, and that such remedy shall be available only in those cases where
Landlord has expressly agreed in writing not unreasonably to withhold its
consent.
22.10 Memorandum of Lease.
Neither Landlord nor Tenant shall record this Agreement. However,
Landlord and Tenant shall promptly, upon the request of the other, enter into a
short form memorandum of this Agreement, in form suitable for recording under
the laws of the State in which reference to this Agreement, and all options
contained herein, shall be made. Tenant shall pay all costs and expenses of
recording such memorandum.
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22.11 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under
this Agreement shall be deemed adequately given if in writing
and the same shall be delivered either in hand, by telecopier
with written acknowledgment of receipt, or by mail or Federal
Express or similar expedited commercial carrier, addressed to
the recipient of the notice, postpaid and registered or
certified with return receipt requested (if by mail), or with
all freight charges prepaid (if by Federal Express or similar
carrier).
(b) All notices required or permitted to be sent hereunder shall
be deemed to have been given for all purposes of this
Agreement upon the date of acknowledged receipt, in the case
of a notice by telecopier, and, in all other cases, upon the
date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a
Business Day or is required to be delivered on or before a
specific day which is not a Business Day, the day of receipt
or required delivery shall automatically be extended to the
next Business Day.
(c) All such notices shall be addressed:
if to Landlord to:
Xxxxxx X. Xxxxxxx, Esq.
President and Chief Executive Officer
Crescent Real Estate Equities, Ltd.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxx Xxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
with copies to:
Xxxxx X. Xxxx, Esq.
Senior Vice President, Law
Crescent Real Estate Equities, Ltd.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxx Xxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
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and
Xxxxxxxx X. Xxxxx, Esq.
Shaw, Pittman, Xxxxx & Xxxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to Tenant to:
Xxxxx X. Xxxxx, Esq.
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, Esq.
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right
from time to time and at any time during the term of this
Agreement to change their respective addresses effective upon
receipt by the other parties of such notice and each shall
have the right to specify as its address any other address
within the United States of America.
22.12 Construction.
Anything contained in this Agreement to the contrary notwithstanding,
all claims against, and liabilities of, Tenant or Landlord arising prior to any
date of termination or expiration of this Agreement with respect to any of the
Collective Leased Properties shall survive such termination or expiration. In no
event shall Landlord be liable for any consequential damages suffered by Tenant
as the result of a breach of this Agreement by Landlord. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated except
by an instrument in writing signed by the party to be charged. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and
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assigns. Each term or provision of this Agreement to be performed by Tenant
shall be construed as an independent covenant and condition. Time is of the
essence with respect to the exercise of any rights of Tenant under this
Agreement. Except as otherwise set forth in this Agreement, any obligations of
Tenant and Landlord (including without limitation, any monetary, repair and
indemnification obligations) shall survive the expiration or sooner termination
of this Agreement.
22.13 Counterparts; Headings.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but which, when taken together, shall
constitute but one instrument and shall become effective as of the date hereof
when copies hereof, which, when taken together, bear the signatures of each of
the parties hereto shall have been signed. Headings in this Agreement are for
purposes of reference only and shall not limit or affect the meaning of the
provisions hereof.
22.14 Applicable Law, Etc.
This Agreement shall be interpreted, construed, applied and enforced in
accordance with the laws of the State of Delaware applicable to contracts
between residents of Delaware which are to be performed entirely within
Delaware, regardless of (i) where this Agreement is executed or delivered; or
(ii) where any payment or other performance required by this Agreement is made
or required to be made; or (iii) where any breach of any provision of this
Agreement occurs, or any cause of action otherwise accrues; or (iv) where any
action or other proceeding is instituted or pending; or (v) the nationality,
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State of Delaware; or (vii) any combination of the foregoing.
Notwithstanding the foregoing, the laws of the State shall apply to the
perfection and priority of liens upon and the disposition of and disposition
with respect to any of the Collective Leased Properties.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of Delaware as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of Delaware and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
22.15 Substitution of Leased Properties.
Provided no Default or Event of Default has occurred and is continuing
at the time of exercise of the right provided for in this Section 22.15, Tenant
shall have the right, from time to time, to substitute for a Designated Leased
Property another parcel of improved real property meeting criteria hereinafter
set forth and otherwise acceptable to Landlord (the "Substitute Leased
Property"). If Tenant makes such election, Tenant shall give Notice to Landlord
of
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Tenant's intention proposing a substitution closing date (the "Substitution
Date") not less than sixty (60) days or more than one-hundred twenty (120) days
from the date of such Notice and offering to Landlord a proposed Substitute
Leased Property meeting the following criteria: the Substitute Leased Property
shall be improved with a Comparable Facility; shall have a total value equal to
or greater than the total value of the Designated Leased Property to Landlord
(each as reasonably determined by Landlord); shall be freely transferable to
Landlord unencumbered by any existing lease, mortgage, or other encumbrance; and
shall be subject to no other exceptions to title except those approved by
Landlord, which approval shall not be unreasonably withheld. Tenant shall convey
the Substitute Leased Property to Landlord in exchange for the Designated Leased
Property, Landlord shall simultaneously exchange the Designated Leased Property,
for the Substitute Leased Property, and the parties shall simultaneously execute
and deliver an amendment to this Lease. The Landlord shall have thirty (30) days
following receipt of such Notice within which to accept or reject such offer;
provided, however, that Landlord shall have at least ten (10) days following
receipt of any appraisal of the Substitute Leased Property or the Designated
Leased Property (or both) requested by Landlord within which to accept or reject
such offer. If Landlord accepts the proposed Substitute Leased Property, the
substitution shall proceed in a manner (a) intended to qualify such substitution
as a "like-kind" exchange within the meaning of Section 1031 of the Internal
Revenue Code of 1986, as amended (the "Code") with respect to Landlord, and (b)
which will satisfy Landlord's requirements related to taxation as a real estate
investment trust. Landlord may demand, at Tenant's expense, a reasonably
acceptable opinion of counsel or private letter ruling from the Internal Revenue
Service indicating that the substitution will have no material adverse tax
consequences to Landlord. After closing, the Substitute Leased Property shall be
deemed a Leased Property for all purposes. Substitution hereunder and the
closing shall be made on the following terms and shall be subject to the
following conditions:
(a) on the Substitution Date, Tenant shall execute, acknowledge
and deliver to Landlord a warranty deed in the customary
form for the relevant jurisdiction conveying to Landlord,
free and clear of any title exceptions except those approved
by Landlord as set forth above, title to the Substitute
Leased Property, and Landlord shall simultaneously execute,
acknowledge and deliver to Tenant a warranty deed conveying
to Tenant, free and clear of title exceptions, except
Permitted Encumbrances and those approved by Tenant (based
on the same criteria for approval as for Landlord), title to
the Designated Leased Property; provided, however, that in
no event shall Landlord have any obligation to cure or
remove title exceptions affecting the Designated Leased
Property, Tenant's only recourse being to designate an
alternative Designated Leased Property for substitution or
to rescind its Notice of election to substitute a Substitute
Leased Property.
(b) on or prior to the Substitution Date, Landlord and Tenant
shall have executed, acknowledged and delivered an amendment
to this Lease (the "Amendment to Lease") (the Lease, as
amended, herein referred to as the "Amended Lease") which
shall provide for the deletion of the legal description of the
Designated
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Leased Property and the substitution of the legal description
of the Substitute Leased Property therefor.
(c) Tenant shall have provided Landlord, at Tenant's sole cost,
with a title insurance policy satisfactory in form and
substance to Landlord, effective on the date of exchange,
covering the Substitute Leased Property and containing no
exceptions to title to the Substitute Leased Property other
than encumbrances approved by Landlord as provided herein, and
having such affirmative insurance and endorsements as may be
required by Landlord.
(d) Tenant shall have provided Landlord with representations and
warranties with respect to the Substitute Leased Property
reasonably satisfactory to Landlord (unless otherwise
reasonably required, generally similar to the
representations and warranties contained in Section 6.1 of
that certain Real Estate Purchase and Sale Agreement dated
as of ____________, 1997, by and between Magellan Health
Services, Inc., as seller, and Landlord, as purchaser (the
"Purchase Agreement")), such representations and warranties
shall survive the closing and Landlord shall have the same
remedies for breach thereof as are provided for in the
Purchase Agreement.
(e) Tenant shall provide Landlord with documentation satisfactory
to Landlord confirming that Tenant has the right to operate
the Substitute Leased Property in accordance with the Primary
Intended Use and under and pursuant to the Franchise
Agreement.
(f) Tenant shall reimburse Landlord, as Additional Charges, for
any and all costs and expenses incurred by Landlord, including
Landlord's reasonable attorneys' fees, in effecting the
substitution proposed (whether or not closing occurs).
Landlord and Tenant hereby covenant that once the Notice of intent to
substitute a Substitute Leased Property for the Designated Leased Property
described therein has been delivered and Landlord accepts the Substitute Leased
Property identified therein, each party will promptly perform all acts and
deliver all documents required on its part to be delivered or to satisfy the
conditions of closing set forth herein. In the event that the Substitute Leased
Property has not been exchanged for the Designated Leased Property within thirty
(30) days after the Substitution Date specified in Tenant's Notice of its
intention to substitute by reason of the acts or omissions of one party, then
the other party shall have the right to elect not to proceed with the
substitution.
Tenant covenants that, following the closing of the exchange of the
Substitute Leased Property, neither it nor any of its Affiliated Persons will
use the Designated Leased Property as a facility having as its primary use the
Primary Intended Use for at least one year after the Substitution Date.
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22.16 No Broker.
Each party hereby represents and warrants to the other that it has not
engaged, dealt with or otherwise discussed this transaction with any broker,
agent or finder. Each party agrees to indemnify and hold the other harmless from
and against any claim arising out of a breach of the foregoing agreement and
representation and warranty.
22.17 Confidentiality.
Landlord shall maintain the confidentiality of information provided by
Tenant pursuant to Sections 17.2 and 17.3 hereof or otherwise under this
Agreement. Landlord may, however, disclose such information to its attorneys,
consultants, partners, directors, officers and employees, and lenders and
purchasers (actual and potential). As a condition of such disclosure to any
lender or purchaser (actual or potential), such lender or purchaser shall be
obligated to execute a Confidentiality Agreement reasonably satisfactory to
Tenant. The provisions of this Section 22.18 shall not be applicable to
disclosure of information required by applicable law, rule or regulation or the
order of any court.
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date above first written.
LANDLORD:
Crescent Real Estate Equities
Limited Partnership
Attest: By: Crescent Real Estate Equities, Ltd.
General Partner
________________________ By: ______________________________
Name: Xxxxxx Xxxxxxx
Title: President and Chief Executive Officer
TENANT:
Attest: CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
______________________ By:____________________________________
Name: Name:
Title: Title:
[Add Signature Blocks for all Facility
Subsidiaries]
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