EXHIBIT 10.16
SECOND AMENDED AND RESTATED
LEASE AGREEMENT
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, LLC
a Delaware limited liability company
Lessor
AND
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ OPERATING
COMPANY, LLC,
a Delaware limited liability company
Lessee
VIBRA HEALTHCARE, LLC
(formerly known as Highmark Healthcare, LLC)
SENIOR REAL ESTATE HOLDINGS, LLC
(d/b/a The ▇▇▇▇▇▇▇▇▇ Group)
VIBRA MANAGEMENT, LLC
(formerly known as Highmark Management, LLC)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Guarantors
Property: Rehabilitation Hospital Facility
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
December ____, 2004
Table of Contents
Page
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LEASE AGREEMENT .............................................................................................. i
ARTICLE I LEASED PROPERTY; TERM....................................................................... 1
ARTICLE II DEFINITIONS................................................................................. 2
ARTICLE III RENT ....................................................................................... 10
3.1 Base Rent and Percentage Rent............................................................... 10
3.2 Additional Charges.......................................................................... 11
3.3 Absolute Triple Net Lease................................................................... 11
3.4 Lease Deposit............................................................................... 11
ARTICLE IV IMPOSITIONS................................................................................. 12
4.1 Payment of Impositions...................................................................... 12
4.2 Adjustment of Impositions................................................................... 12
4.3 Utility Charges............................................................................. 12
4.4 Insurance Premiums.......................................................................... 13
ARTICLE V NO TERMINATION.............................................................................. 13
5.1 Acknowledgement............................................................................. 13
ARTICLE VI OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY.......................................... 13
6.1 Ownership of the Leased Property............................................................ 13
6.2 Lessee's Personal Property.................................................................. 13
ARTICLE VII CONDITION AND USE OF LEASED PROPERTY........................................................ 14
7.1 Condition of the Leased Property............................................................ 14
7.2 Use of the Leased Property.................................................................. 14
7.3 Lessor to Grant Easements................................................................... 15
ARTICLE VIII LEGAL AND INSURANCE REQUIREMENTS............................................................ 15
8.1 Compliance with Legal and Insurance Requirements............................................ 15
8.2 Legal Requirement Covenants................................................................. 15
8.3 Hazardous Materials......................................................................... 16
8.4 Healthcare Laws............................................................................. 16
8.5 Representations and Warranties.............................................................. 16
ARTICLE IX REPAIRS; RESTRICTIONS....................................................................... 17
9.1 Maintenance and Repair...................................................................... 17
9.2 Encroachments; Restrictions................................................................. 18
ARTICLE X CAPITAL ADDITIONS........................................................................... 19
10.1 Construction of Capital Additions to the Leased Property.................................... 19
10.2 Capital Additions Financed by Lessee........................................................ 19
10.3 Capital Additions Financed by Lessor........................................................ 20
10.4 Remodeling and Non-Capital Additions........................................................ 22
10.5 Salvage..................................................................................... 22
ARTICLE XI LIENS ...................................................................................... 22
ARTICLE XII PERMITTED CONTESTS.......................................................................... 23
ARTICLE XIII INSURANCE................................................................................... 23
13.1 General Insurance Requirements.............................................................. 23
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Table of Contents
(continued)
Page
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13.2 Additional Insurance........................................................................ 25
13.3 Waiver of Subrogation....................................................................... 26
13.4 Form of Insurance........................................................................... 26
13.5 Increase in Limits.......................................................................... 26
13.6 Blanket Policy.............................................................................. 26
13.7 No Separate Insurance....................................................................... 27
ARTICLE XIV FIRE AND CASUALTY........................................................................... 27
14.1 Insurance Proceeds.......................................................................... 27
14.2 Reconstruction in the Event of Damage or Destruction Covered by Insurance................... 27
14.3 Reconstruction in the Event of Damage or Destruction Not Covered by Insurance............... 28
14.4 Lessee's Personal Property.................................................................. 29
14.5 Restoration of Lessee's Property............................................................ 29
14.6 No Abatement of Rent........................................................................ 29
14.7 Damage Near End of Term..................................................................... 29
14.8 Termination of Right of Purchase............................................................ 29
14.9 Waiver...................................................................................... 29
ARTICLE XV CONDEMNATION................................................................................ 29
15.1 Definitions................................................................................. 29
15.2 Parties' Rights and Obligations............................................................. 30
15.3 Total Taking................................................................................ 30
15.4 Partial Taking.............................................................................. 30
15.5 Restoration................................................................................. 30
15.6 Award Distribution.......................................................................... 30
15.7 Temporary Taking............................................................................ 31
ARTICLE XVI DEFAULT..................................................................................... 31
16.1 Events of Default........................................................................... 31
16.2 Events of Default in Financial Covenants.................................................... 35
16.3 Additional Expenses......................................................................... 35
16.4 Intentionally Omitted....................................................................... 35
16.5 Waiver...................................................................................... 35
16.6 Application of Funds........................................................................ 36
16.7 Notices by Lessor........................................................................... 36
16.8 Lessor's Contractual Security Interest...................................................... 36
ARTICLE XVII LESSOR'S RIGHT TO CURE...................................................................... 37
ARTICLE XVIII PURCHASE OF THE LEASED PROPERTY............................................................. 37
ARTICLE XIX HOLDING OVER................................................................................ 37
ARTICLE XX INTENTIONALLY OMITTED....................................................................... 38
ARTICLE XXI SUBSTITUTION OF PROPERTY.................................................................... 38
21.1 Substitution of Property for the Leased Property............................................ 38
21.2 Conditions to Substitution.................................................................. 40
21.3 Conveyance to Lessee........................................................................ 41
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Table of Contents
(continued)
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21.4 Expenses.................................................................................... 41
ARTICLE XXII RISK OF LOSS................................................................................ 41
ARTICLE XXIII INDEMNIFICATION............................................................................. 42
ARTICLE XXIV SUBLETTING AND ASSIGNMENT; SUBORDINATION.................................................... 42
24.1 Subletting and Assignment................................................................... 42
24.2 Attornment.................................................................................. 43
24.3 Sublease Limitation......................................................................... 43
24.4 Subordination............................................................................... 43
ARTICLE XXV OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS............................................. 43
ARTICLE XXVI INSPECTION.................................................................................. 44
ARTICLE XXVII NO WAIVER................................................................................... 44
ARTICLE XXVIII REMEDIES CUMULATIVE......................................................................... 45
ARTICLE XXIX SURRENDER................................................................................... 45
ARTICLE XXX NO MERGER OF TITLE.......................................................................... 45
ARTICLE XXXI TRANSFERS BY LESSOR......................................................................... 45
ARTICLE XXXII QUIET ENJOYMENT............................................................................. 45
ARTICLE XXXIII NOTICES..................................................................................... 46
ARTICLE XXXIV APPRAISAL................................................................................... 47
ARTICLE XXXV PURCHASE RIGHTS............................................................................. 48
35.1 Option to Purchase.......................................................................... 48
35.2 Lessor's Option to Purchase Lessee's Personal Property...................................... 48
ARTICLE XXXVI DEFAULT BY LESSOR........................................................................... 48
36.1 Default by Lessor........................................................................... 48
36.2 Lessee's Right to Cure...................................................................... 49
ARTICLE XXXVII FINANCING OF THE LEASED PROPERTY............................................................ 49
37.1 Financing by Lessor......................................................................... 49
ARTICLE XXXVIII SUBORDINATION AND NON-DISTURBANCE........................................................... 49
ARTICLE XXXIX LICENSES.................................................................................... 50
ARTICLE XL COMPLIANCE WITH HEALTHCARE LAWS............................................................. 51
ARTICLE XLI MISCELLANEOUS............................................................................... 52
41.1 General..................................................................................... 52
41.2 Transfer of Licenses........................................................................ 52
41.3 Lessor's Expenses........................................................................... 52
41.4 Entire Agreement; Modifications............................................................. 53
41.5 Guaranty.................................................................................... 53
41.6 Lessor's Right to Sell...................................................................... 53
41.7 Future Financing............................................................................ 53
41.8 Subordination of Lessee and Guarantors...................................................... 53
41.9 Lessor Securities Offering and Filings...................................................... 54
41.10 Lessee's Obligations Under Purchase Agreement............................................... 54
41.11 Counterparts................................................................................ 54
ARTICLE XLII MEMORANDUM OF LEASE......................................................................... 54
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SECOND
AMENDED AND RESTATED LEASE AGREEMENT
This SECOND AMENDED AND RESTATED LEASE AGREEMENT (the "Lease") is dated as
of the _____ day of December, 2004, and is between ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, LLC, a
Delaware limited liability company ("Lessor"), having its principal office at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ OPERATING COMPANY, LLC, a Delaware limited liability company ("Lessee"),
having its principal office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, Lessor is the current owner of that certain real property located
in Thornton, ▇▇▇▇▇ County, Colorado, which real property is more particularly
described on EXHIBIT A attached hereto and incorporated herein by reference, and
all improvements located thereon;
WHEREAS, Lessor and Lessee entered into that certain North Valley
Rehabilitation Hospital Lease dated as of May 28, 2003 (the "Original Lease");
WHEREAS, Lessor and Lessee entered into that certain Amended and Restated
Lease Agreement dated August 17, 2004, whereby the Original Lease was amended
and restated (the "Restated Original Lease"), and a Memorandum of Lease
Agreement dated August 17, 2004 (the "Memorandum") was executed in connection
with the Amended and Restated Lease Agreement, which Memorandum was recorded on
August 25, 2004, in the Office of the Clerk, ▇▇▇▇▇ County, Colorado, as Document
Number 20040825000815210;
WHEREAS, Lessor and Lessee amended the Restated Original Lease by a Letter
Amendment dated October 19, 2004, between Lessor, Lessee and Guarantors (the
"Restated Original Lease, as amended by the Letter Amendment is hereinafter
referred to as the "Amended and Restated Original Lease"); and
WHEREAS, Lessor and Lessee desire to further amend and restate the Amended
and Restated Original Lease as set forth herein.
NOW, THEREFORE, the parties hereto hereby agree to this Second Amended and
Restated Lease Agreement as follows:
ARTICLE I
LEASED PROPERTY; TERM
Upon and subject to the terms and conditions hereinafter set forth, Lessor
leases to Lessee and Lessee rents from Lessor all of Lessor's rights and
interest in and to the following property (collectively, the "Leased Property"):
(a) the real property described on EXHIBIT A attached hereto (the
"Land");
(b) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind, including, but not limited to, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and lines
(on-site and off-site), parking areas and roadways appurtenant to such
buildings and structures presently or hereafter situated upon the Land, and
Capital Additions (hereinafter defined) financed by Lessor (collectively,
the "Leased Improvements");
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(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements; and;
(d) all permanently affixed equipment, machinery, fixtures, and other
items of real and/or personal property, including all components thereof,
now and hereafter located in, on or used in connection with, and
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, and built-in oxygen and vacuum systems, all of
which, to the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically
excluding all items included within the category of Lessee's Personal
Property as defined in Article II below (collectively the "Fixtures").
SUBJECT, HOWEVER, to the matters set forth on EXHIBIT B attached hereto (the
"Permitted Exceptions"); Lessee shall have and hold the Leased Property for (a)
a fixed term (the "Fixed Term") commencing on August 17, 2004 (the "Commencement
Date") and ending at midnight on the last day of the one hundred and eightieth
(180th) month after the Commencement Date.
So long as Lessee is not in default under any of the terms and conditions
of this Lease, or under any of the terms and conditions of the Other Leases (as
hereinafter defined), Lessee shall have the option to extend the Fixed Term of
this Lease on the same terms and conditions set forth herein for three (3)
additional periods of five (5) years each (each an "Extension Term"). Lessee may
exercise each such option by giving written notice to the Lessor at least three
hundred sixty five (365) days prior to the expiration of the Fixed Term or
Extension Term, as applicable (the "Extension Notice"). If during the period
following the delivery of the Extension Notice to Lessor, Lessee shall fail to
comply with all of the terms and provisions of this Lease, or a default or
breach shall occur in this Lease or under any of the Other Leases, Lessee shall
be deemed to have forfeited all Extension Options.
ARTICLE II
DEFINITIONS
For all purposes of this Lease, except as otherwise expressly provided or
unless the context otherwise requires, (a) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular, (b) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP as at the time applicable,
(c) all references in this Lease to designated "Articles", "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease, and (d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:
Added Value Additional: As defined in Section 10.2.
Additional Charges: As defined in Section 3.2.
Affiliate: When used with respect to any corporation, limited liability
company, or partnership, the term "Affiliate" shall mean any person,
corporation, limited liability company, partnership or other legal entity,
which, directly or indirectly, controls or is controlled by or is under common
control with such corporation, limited liability company, or partnership. For
the purposes of this definition, "control" (including the correlative meanings
of the terms "controlled by" and "under common control with"), as used with
respect to any person, corporation, limited liability company, partnership or
other legal entity, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, corporation, limited liability company,
2
partnership or other legal entity, through the ownership of voting securities,
partnership interests or other equity interests.
Award: As defined in Section 15.1.
Base Rent: As defined in Section 3.1(a).
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which money centers in the City of New York, New York are
authorized, or obligated, by law or executive order, to close.
Capital Additions: One or more new buildings or one or more additional
structures annexed to any portion of any of the Leased 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.
Capital Addition Cost: The cost of any Capital Additions proposed to be
made by Lessee whether or not paid for by Lessee or Lessor. Such cost shall
include (a) the cost of construction of the Capital Additions, including site
preparation and improvement, materials, labor, supervision and certain related
design, engineering and architectural services, the cost of any fixtures, the
cost of construction financing and miscellaneous costs approved by Lessor, (b)
if agreed to by Lessor in writing in advance, the cost of any land contiguous to
the Leased Property purchased for the purpose of placing thereon the Capital
Additions 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 Additions during construction, (d) the cost of
title insurance, (e) reasonable fees and expenses of legal counsel, (f) filing,
registration and recording taxes and fees, (g) documentary stamp taxes, if any,
and (h) all reasonable costs and expenses of Lessor and any Lending Institution
which has committed to finance the Capital Additions, including, but not limited
to, (i) the reasonable fees and expenses of their respective legal counsel, (ii)
all printing expenses, (iii) the amount of any filing, registration and
recording taxes and fees, (iv) documentary stamp taxes, if any, (v) title
insurance charges, appraisal fees, if any, (vi) rating agency fees, if any, and
(vii) commitment fees, if any, charged by any Lending Institution advancing or
offering to advance any portion of the financing for such Capital Additions.
Capital Improvement Reserve: As defined in Section 9.1(e).
Cash Adjustment: As defined in Section 21.1(g).
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Article I.
Commitment Letter: The commitment letter between Lessor and Lessee (or
their Affiliates) executed on June 17, 2004.
Condemnation, Condemnor: As defined in Section 15.1.
Consolidated Net Worth: At any time, the sum of the following for
Guarantors or Lessee and their respective consolidated subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles.
(a) the amount of capital or stated capital (after deducting the cost
of any treasury shares), plus
(b) the amount of capital surplus and retained earnings (or, in the
case of a capital surplus or retained earnings deficit, minus the amount of
such deficit), minus
3
(c) the sum of the following (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained
earnings): (i) unamortized debt discount and expense and (ii) any write-up
in book value of assets resulting from a revaluation thereof pursuant to
generally accepted accounting principles subsequent to the most recent
Statements of Cash Flow prior to the date thereof, except any net write-up
in value of foreign currency in accordance with generally accepted
accounting principles; any write-up resulting from reversal of a reserve
for bad debts or depreciation; and any write-up resulting from a change in
methods of accounting for inventory.
Coverage Rent: The Initial Base Rent, increased beginning on January 1,
2006, by two and one-half percent (2.5%) per annum as provided in Section
3.1(c).
Credit Enhancements: All security deposits, security interests, letters of
credit, pledges, guaranties, prepaid rent or other sums, deposits or interests
held by Lessee, if any, with respect to the Leased Property, the Tenant Leases
or the Tenants.
Date of Taking: As defined in Section 15.1.
EBITDAR: Earnings before the deduction of interest, taxes, depreciation,
amortization and rent, as determined in accordance with GAAP.
Encumbrances: As defined in Article XXXVII.
Event of Default: As defined in Section 16.1.
Extension Notice: As defined in Article I.
Extension Term: As defined in Article I.
Facility: The licensed rehabilitation hospital facility and all
improvements in connection therewith operated on the Land.
Facility Mortgage: As defined in Section 13.1.
Facility Mortgagee: As defined in Section 13.1.
Fair Market Added Value: The Fair Market Value (as hereinafter defined) of
the Leased Property (including all Capital Additions) less the Fair Market Value
of the Leased Property determined as if no Capital Additions paid for by Lessee
had been constructed.
Fair Market Value: The Fair Market Value of the Leased Property or any
Substitute Property, including all Capital Additions, (a) and shall be
determined in accordance with the appraisal procedures set forth in Article
XXXIV or in such other manner as shall be mutually acceptable to Lessor and
Lessee, (b) and shall not take into account any reduction in value resulting
from any indebtedness to which the Leased Property or such Substitute Property
is subject and which encumbrance Lessee or Lessor is otherwise required to
remove pursuant to any provision of this Lease or agrees to remove at or prior
to the closing of the transaction as to which such Fair Market Value
determination is being made. The positive or negative effect on the value of the
Leased Property or Substitute Property attributable to the interest rate,
amortization schedule, maturity date, prepayment penalty and other terms and
conditions of any Encumbrance on the Leased Property or any Substitute Property,
as the case may be, which is not so required or agreed to be removed shall be
taken into account in determining such Fair Market Value. Notwithstanding
anything contained herein to the contrary, any appraisal of the Leased Property
shall assume the Lease is in place for a term of fifteen (15) years, and based
solely on the rents and other revenues generated and to be generated pursuant to
this Lease without any regard to the Lessee's operations.
4
Fair Market Value Purchase Price: The Fair Market Value of the Leased
Property less the Fair Market Added Value.
Fiscal Year: The fiscal year for this Lease shall be the twelve (12) month
period from January 1 to December 31.
Fixed Term: As defined in Article I.
Fixtures: As defined in Article I.
GAAP: Generally accepted accounting principles in the United States,
consistently applied.
Guarantors: Jointly and severally, Vibra Healthcare, LLC (formerly known as
Highmark Healthcare, LLC), Vibra Management, LLC (formerly known as Highmark
Management, LLC), Senior Real Estate Holdings, LLC, d/b/a The ▇▇▇▇▇▇▇▇▇ Group
and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
Guaranty: That certain Lease Guaranty to be effective the Commencement Date
executed and delivered by Guarantors in favor of Lessor, pursuant to the terms
of which Guarantors have unconditionally and irrevocably guaranteed the full,
faithful and complete performance of Lessee's obligations under this Lease and
any other obligations of Lessee, Guarantors or any Affiliate of Lessee or
Guarantors to Lessor.
Hazardous Materials: Any substance, including without limitation, asbestos
or any substance containing asbestos and deemed hazardous under any Hazardous
Materials Law, the group of organic compounds known as polychlorinated
biphenyls, flammable explosives, radioactive materials, infectious wastes,
biomedical and medical wastes, chemicals known to cause cancer or reproductive
toxicity, pollutants, effluents, contaminants, emissions or related materials
and any items included in the definition of hazardous or toxic wastes, materials
or substances under any Hazardous Materials Law.
Hazardous Materials Laws: All local, state and federal laws relating to
environmental conditions and industrial hygiene, including, without limitation,
the Resource Conservation and Recovery Act of 1976 ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("▇▇▇▇"),
the Hazardous Materials Transportation Act, the Federal Water Pollution Control
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act,
the Safe Drinking Water Act, and all similar federal, state and local
environmental statutes, ordinances and the regulations, orders, or decrees now
or hereafter promulgated thereunder.
Healthcare Laws: All rules and regulations under the False Claims Act (31
U.S.C. Section 3729 et seq.), the Anti-Kickback Act of 1986 (41 U.S.C. Section
51 et seq.), the Federal Health Care Programs Anti-Kickback statute (42 U.S.C.
Section 1320a-7a(b)), the Ethics in Patient Referrals Act of 1989, as amended
(▇▇▇▇▇ Law) (42 U.S.C. 1395nn), the Civil Money Penalties Law (42 U.S.C. Section
1320a-7a), or the Truth in Negotiations (10 U.S.C. Section 2304 et seq.), Health
Care Fraud (18 U.S.C. 1347), Wire Fraud (18 U.S.C. 1343), Theft or Embezzlement
(18 U.S.C. 669), False Statements (18 U.S.C. 1001), False Statements (19 U.S.C.
1035), and Patient Inducement Statute, and equivalent state statutes and any and
all rules or regulations promulgated by governmental entities with respect to
any of the foregoing.
Impositions: Collectively, all civil monetary penalties, fines and
overpayments imposed by state and federal regulatory authorities, all taxes
(including, without limitation, all capital stock and franchise taxes of Lessor,
all ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes), assessments (including, without limitation,
all assessments, charges and costs imposed under the Permitted Exceptions, all
assessments for public improvements or benefits, 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
5
other governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property and/or the Rent (including all interest and penalties thereon
due to any failure in payment by Lessee), 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) Lessor or Lessor's interest in the Leased Property, (b) the
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, sales from, or activity conducted on, or in connection with, the Leased
Property or the leasing or use of the Leased Property or any part thereof;
provided, however, nothing contained in this Lease shall be construed to require
Lessee to pay (1) any tax based on net income (whether denominated as a
franchise or capital stock, financial institutions or other tax) imposed on
Lessor, or (2) any transfer or net revenue tax of Lessor, or (3) any tax imposed
with respect to the sale, exchange or other disposition by Lessor of any portion
of the Leased Property or the proceeds thereof, or (4) except as expressly
provided elsewhere in this Lease, any principal or interest on any Encumbrance
on the Leased Property, except to the extent that any tax, assessment, tax levy
or charge which Lessee is obligated to pay pursuant to the first sentence of
this definition and which 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 (1) or (2) is levied, assessed or imposed expressly in lieu
thereof, in which case Lessee shall pay.
Initial Base Rent: The sum of Seventy-Two Thousand Five Hundred Thirty-One
and 39/100 Dollars ($72,531.39) per month, being Eight Hundred Seventy Thousand
Three Hundred Seventy-Six and 66/100 Dollars ($870,376.66) per annum.
Initial Purchase Price: A price equal to the purchase price paid by Lessor
(and its Affiliates, including, without limitation, MPT Operating Partnership,
L.P.) for the Leased Property pursuant to the Purchase Agreement, plus all costs
and expenses incurred in association with the purchase and lease of such Leased
Property, including, but not limited to, legal, appraisal, title, survey,
environmental, engineering and other fees paid to advisors and brokers and site
visits, and any expenses incurred with respect to the THCI Transaction (as
defined in the Purchase Agreement and the Commitment Letter); provided, however,
that no such costs or expenses shall be included in the Initial Purchase Price
to the extent they are being paid by Lessee in cash or repaid by Lessee pursuant
to the Loans.
Insurance Requirements: All terms of any insurance policy required by this
Lease and all requirements of the issuer of any such policy, and such additional
insurance which the Lessor may reasonably require.
Land: As defined in Article I.
Lease: As defined in the Preamble.
Lease Deposit: As defined in Section 3.4.
Lease Assignment: That certain Assignment of Rents and Leases dated on or
about the Commencement Date executed by Lessee to Lessor, pursuant to the terms
of which Lessee has assigned to Lessor each of the Tenant Leases and Credit
Enhancements, if any, as security for the obligations of Lessee under this
Lease, the obligations of Guarantors under the Guaranty, and any other
obligations of Lessee to Lessor, any Guarantor or any Affiliate of Lessee or any
Guarantor to Lessor.
Lease Year: A twelve (12) month period commencing on the Commencement Date
or on each anniversary date thereof, as the case may be.
Leased Improvements; Leased Property: Each as defined in Article I.
Legal Requirements: All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting the Lessee's operation of its business on the
Leased Property, along with the Leased Property or the construction, use or
alteration thereof (including,
6
without limitation, the Americans With Disabilities Act and Section 504 of the
Rehabilitation Act of 1973) whether now or hereafter enacted and in force,
including any which may (a) require repairs, modifications, or alterations in or
to the Leased Property, or (b) in any way adversely affect the use and enjoyment
thereof, and all permits, licenses, authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
Lending Institution: Any insurance company, federally insured commercial or
savings bank, national banking association, savings and loan association,
employees' welfare, pension or retirement fund or system, 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, having a net worth of at least
$50,000,000.
Lessee: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Operating Company, a Delaware limited liability
company, and its successors and permitted assigns.
Lessee's Personal Property: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers, trade fixtures or other
personal property (but excluding accounts receivable), and consumable inventory
and supplies, used or useful in Lessee's business on the Leased Property for
which the Lessee has paid for out of its own funds, including without
limitation, all items of furniture, furnishings, equipment, supplies and
inventory, and Lessee's operating licenses.
Lessor: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, LLC, a Delaware limited liability company, and
its successors and assigns.
Letter Amendment: The Letter Amendment dated October 19, 2004, between
Lessor, Lessee and Guarantors.
Licenses: As defined in Article XXXIX.
Loan Guarantors: Senior Real Estate Holdings LLC d/b/a The ▇▇▇▇▇▇▇▇▇ Group,
Vibra Management, LLC (formerly known as Highmark Management, LLC) and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇.
Loan Guaranty: That certain Loan Guaranty to be effective the Commencement
Date executed and delivered by Loan Guarantors to MPT Development Services in
connection with the Loans.
Loans: The loans made by MPT Operating Partnership, L.P. and MPT
Development Services to Vibra and certain of its Affiliates, evidenced by
promissory notes and other security documents executed in connection therewith,
including any such loans made after the date hereof.
Management Agreement: Any contracts and agreements for the management of
any part of the Leased Property, including, without limitation, the real estate
and the Leased Improvements and the operations of the Facility.
Management Company: Any person, firm, corporation or other entity or
individual who or which will manage any part of the Leased Property pursuant to
a Management Agreement.
Medicaid : The medical assistance program established by Title XIX of the
Social Security Act (42 U.S.C. Sections 1396 et seq.) and any statute succeeding
thereto.
Medicare: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 U.S.C. Sections 1395
et seq.) and any statute succeeding thereto.
MPT: shall mean Medical Properties Trust, Inc., an Affiliate of Lessor.
7
MPT Development Services: MPT Development Services, Inc., an Affiliate of
Lessor.
Non-Capital Addition: As defined in Section 10.4.
Officer's Certificate: A certificate of Lessee signed by the Chairman of
the Board of Directors, the President, any Vice President or the Treasurer of
Lessee or another officer authorized to so sign by the Board of Directors or
other governing body of Lessee, or any other person whose power and authority to
act has been authorized by delegation in writing by any of the persons holding
the foregoing offices.
Other Leases: Any other leases entered into between Lessor or any Affiliate
of Lessor and Lessee or Guarantor, or any Affiliate of Lessee and any Guarantor.
Overdue Rate: On any date, a rate per annum equal to the highest rate
allowed by the laws of the State of Alabama.
Payment Date: Any due date for the payment of the installments of Base
Rent, Additional Rent, Percentage Rent or any other sums payable under this
Lease.
Percentage Rent: As defined in Section 3.1(b).
Permitted Exceptions: As defined in Article I.
Primary Intended Use: As defined in Section 7.2(b).
Prime Rate: The annual rate announced by Citibank in New York, New York, to
be the prime rate for 90-day unsecured loans to its United States corporate
borrowers of the highest credit standing, as in effect from time to time.
Purchase Agreement: That certain Purchase Agreement dated as of May 20,
2004, by and between THCI Company, LLC, THCI of California, LLC, THCI of
Massachusetts, LLC and THCI Mortgage Holding Company, LLC, as Seller, and MPT
Operating Partnership, L.P., as Purchaser, as Vibra as a permitted assignee
thereunder, as amended by those certain letter agreements dated June 3, June 4,
June 14, June 29, and August 2, 2004.
Purchase Price: The Initial Purchase Price plus all additional costs and
expenses incurred after the date of this Second Amended and Restated Lease
Agreement, in association with the purchase and lease of the Leased Property,
including, but not limited to, legal, appraisal, title, survey, environmental,
engineering and other fees paid to advisors and brokers and site visits, and any
expenses incurred with respect to the THCI Transaction (as defined in the
Purchase Agreement and the Commitment Letter); provided, however, that no such
costs or expenses shall be included in the Purchase Price to the extent they are
being paid by Lessee in cash or repaid by Lessee pursuant to the Loans
(collectively the "Purchase Price Adjustment").
Purchase Price Adjustment: As defined in the above definition of "Purchase
Price."
Rent: Collectively, the Base Rent (as increased in accordance with the
provisions of Section 3.1(c) hereof), the Percentage Rent and the Additional
Charges.
Revenue Threshold: The sum of One Hundred Ten Million and No/100 Dollars
($110,000,000.00).
Revenues: Collectively, all revenues generated by reason of the operation
of the Facility, whether or not directly received or to be received by the
Lessee, including, without limitation, all patient and/or resident revenues
received or receivable for the use of, or otherwise by reason of, all rooms,
beds, units and other facilities provided, meals served, services performed,
space or facilities subleased or goods sold on or from the Facility; provided,
however, that Revenues shall not include non-operating revenues such as interest
income or gain from the sale of
8
assets not sold in the ordinary course of business; and provided, further, that
there shall be excluded or deducted (as the case may be) from such revenues; (i)
contractual allowances for ▇▇▇▇▇▇▇▇ not paid by or received from the
governmental authorities or third party payors, (ii) allowances according to
GAAP for uncollectible accounts, (iii) all proper patient or resident billing
credits and adjustments according to GAAP related to health care accounting,
(iv) deposits refundable to patients/residents of the Facility and (v) provider
discounts for hospital or other medical facility utilization contracts.
Security Agreement: That certain Security Agreement to be dated on or about
the Commencement Date executed by Lessee to Lessor, pursuant to the terms of
which Lessee has granted to Lessor a first lien and security interest in all of
Lessee's rights under this Lease, to certain of Lessee's Personal Property and
to all of the Licenses.
Statements of Cash Flow: For any fiscal year or other accounting period for
Guarantors or Lessee and their respective consolidated subsidiaries, statements
of earnings and retained earnings and of changes in financial position for such
period and for the period from the beginning of the respective Fiscal Year to
the end of such period and the related balance sheet as at the end of such
period, together with the notes thereto, 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 generally accepted
accounting principles.
Substitution Date: As defined in Section 21.1.
Substitute Properties: As defined in Section 21.1.
Taking: A taking or voluntary conveyance during the Term hereof of all or
part of the Leased Property, or any interest therein or right accruing thereto
or use thereof, as the result of, or in settlement of, any Condemnation or other
eminent domain proceeding affecting the Leased Property whether or not the same
shall have actually been commenced.
Tenant: The lessees or tenants under the Tenant Leases, if any.
Tenant Leases: All leases, subleases and other rental agreements (written
or verbal, now or hereafter in effect), if any, that grant a possessory interest
in and to any space in the Leased Property, or that otherwise have rights with
regard to the Leased Property, and all Credit Enhancements, if any, held in
connection therewith.
Term: The actual duration of this Lease, including the Fixed Term and the
Extension Terms (if exercised by the Lessee) and taking into account any
termination.
Unavoidable Delays: Delays due to strikes, lockouts, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of either party
hereto unless such lack of funds is caused by the failure of the other party
hereto.
Unsuitable for Its Primary Intended Use: As used anywhere in this Lease,
the term "Unsuitable for Its Primary Intended Use" shall mean that, by reason of
damage or destruction, or a partial Taking by Condemnation, in the good faith
judgment of Lessee, reasonably exercised, the Facility cannot be operated on a
commercially practicable basis for its Primary Intended Use, taking into
account, all relevant factors, and the effect of such damage or destruction or
partial Taking.
Vibra: Vibra Healthcare, LLC (formerly known as Highmark Healthcare, LLC),
a Delaware limited liability company, an Affiliate of the Lessee.
9
ARTICLE III
RENT
3.1 BASE RENT AND PERCENTAGE RENT
Lessee shall pay to Lessor, in advance and without notice, demand, set off
or counterclaim, in lawful money of the United States of America, at Lessor's
address set forth herein or at such other place or to such other person, firms
or corporations as Lessor from time to time may designate in writing, Base Rent
and Percentage Rent during the Term as follows:
(a) BASE RENT: Subject to adjustment as provided herein, beginning on
the Commencement Date, Lessee shall pay Lessor base rent (the "Base Rent")
in an amount equal to the sum of Seventy-Two Thousand, Five Hundred
Thirty-One and 39/100 Dollars ($72,531.39) per month, being Eight Hundred
Seventy Thousand, Three Hundred Seventy-Six and 66/100 Dollars
($870,376.66) per annum. Base Rent shall be payable in advance in equal,
consecutive monthly installments on or before the tenth (10th) day of each
calendar month during the Term, commencing on the Commencement Date
(prorated as to any partial month); and
(b) PERCENTAGE RENT: So long as the Loans are outstanding, commencing
with the calendar year beginning January 1, 2005 and beginning with the
calendar month next succeeding the month in which Revenues for the
Associated Facilities (as herein defined) exceed the Revenue Threshold
(determined on an annualized basis), in addition to the Base Rent, Lessee
shall pay to Lessor, subject to adjustment as herein provided, percentage
rent (the "Percentage Rent") in an amount equal to two percent (the
"Percentage Rate") of Revenues for the preceding month. Rent shall be
payable on the tenth (10th) day following the end of the first fiscal
quarter for which such Percentage Rent is payable. Each January 1 during
the Term, the Percentage Rate shall be decreased pro rata from two percent
(2%) per annum to one percent (1%) per annum based upon the amount of
principal reduction made with respect to the Loans as of the end of the
previous calendar year, it being understood and agreed that in no event
shall the Percentage Rate be less than one percent (1%) per annum. For
purposes hereof, the term "Associated Facilities" shall mean this Facility
along with facilities leased by Lessor's Affiliates to Lessee's Affiliates
in Kentfield, California, Fresno California, Marlton, New Jersey, Bowling
Green, Kentucky and New Bedford, Massachusetts.
(c) ADJUSTMENT OF BASE RENT: Base Rent for the month of August, 2005,
shall be payable in advance in the amount of Seventy-Nine Thousand Three
Hundred Ten and 88/100 Dollars ($79,310.88) (being calculated by applying
10.25% for part of the month and applying 12.23% for the other part of the
month). Beginning on September 1, 2005, and continuing through December,
2005, Base Rent shall be payable in advance in equal, consecutive monthly
installments of Eighty Six Thousand, Five Hundred Forty-Two and 33/100
Dollars ($86,542.33) on or before the tenth (10th) day of each calendar
month. Commencing on January 1, 2006, and on each January 1 thereafter
during the term of this Lease, the Base Rent shall be increased by two and
one half percent (2.5%) per annum of the previous year's Base Rent. If the
previous year's Base Rent is for a partial year, Base Rent shall be
adjusted as if it were a full year. Notwithstanding anything contained
herein to the contrary, with respect to the adjustment of Base Rent for
calendar year 2006, the increased Base Rent for calendar year 2006 will be
calculated as if the annual rental rate of One Million, Thirty-Eight
Thousand, Five Hundred Seven and 96/00 Dollars ($1,038,507.96) applied to
the entire calendar year 2005. Notwithstanding anything contained herein to
the contrary, the parties hereto acknowledge and agree that all
calculations of Base Rent, including approximately seven and one-half
(7 1/2) months of Base Rent for the calendar year 2005, have been made by
multiplying the Initial Purchase Price by 10.25% per annum. In the event
the Initial Purchase Price is adjusted and increased by the Purchase Price
Adjustment, then all calculations of Base Rent shall be adjusted
accordingly (including
10
the Base Rent for calendar year 2005, if applicable) before adding and
calculating the 2.5% annual increases as set forth above.
3.2 ADDITIONAL CHARGES
In addition to the Base Rent and Percentage Rent, (a) Lessee will also
pay and discharge as and when due and payable all other amounts, liabilities,
obligations and Impositions which Lessee assumes or agrees to pay under this
Lease, including, without limitation, all licensure violations, civil monetary
penalties and fines, and (b) in the event of any failure on the part of Lessee
to pay any of those items referred to in clause (a) above, Lessee will also
promptly pay and discharge every fine, penalty, interest and cost which may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein collectively as the
"Additional Charges"), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided in this Lease, by statute or
otherwise, in the case of non-payment of the Additional Charges, as in the case
of the Base Rent or Percentage Rent. If any installment of Base Rent, Percentage
Rent or Additional Charges (but only as to those Additional Charges which are
payable directly to Lessor) shall not be paid within five (5) Business Days
after its due date, Lessee will pay Lessor on demand, as Additional Charges, a
late charge (to the extent permitted by law) computed at the Overdue Rate (or at
the maximum rate permitted by law, whichever is less) on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease, Lessee shall be relieved of its
obligation to pay such Additional Charges to the entity to which they would
otherwise be due.
3.3 ABSOLUTE TRIPLE NET LEASE
The Rent shall be paid absolutely net to Lessor, so that this Lease
shall yield to Lessor the full amount of the installments of Base Rent, and the
payments of Percentage Rent and Additional Charges throughout the Term, but
subject to any other provisions of this Lease which expressly provide for
adjustment of Rent or other charges. Lessee further acknowledges and agrees that
all charges, assessments or payments of any kind due and payable without notice,
demand, set off or counterclaim under the Permitted Exceptions shall be paid by
Lessee as they become due and payable.
3.4 LEASE DEPOSIT.
Upon the execution hereof, Lessor shall loan Lessee an amount equal to
twenty-five percent (25%) of the first full year's Base Rent (the "Lease
Deposit"). The Lease Deposit shall be held by Lessor as security for the
performance by Lessee of Lessee's covenants and obligations under the Lease. The
Lease Deposit shall not be considered an advance payment of rental or a measure
of Lessor's damages in case of default by Lessee. Lessor may, from time to time,
without prejudice to any other remedy, use the proceeds thereof to make good any
arrearages of Rent, to satisfy any other covenant or obligation of Lessee
hereunder or to compensate Lessor for any other loss or damage which Lessor may
suffer by reason of any default by Lessee. Following any such use of the Lease
Deposit by the Lessor, Lessee shall deliver to Lessor on demand an amount
sufficient to restore the aggregate amount held by Lessor, not including any
interest earned on the Lease Deposit, to the amount of the original Lease
Deposit. If Lessee is not in default at the termination of the Lease, and has
complied with all of the provisions of this Lease to be performed by Lessee,
including surrender of the Leased Property in accordance with the provisions
hereof and has repaid the loan of the Lease Deposit, the Lease Deposit, not
including any interest earned on such Lease Deposit, shall be returned by Lessor
to Lessee, subject to any draws which have previously been made by Lessor
against the Lease Deposit and not replenished by the Lessee. Lessee will not
assign or encumber Lessee's interest in the Lease Deposit, and neither Lessor
nor Lessor's successors or assigns will be bound by any such attempted
assignment or encumbrance of the Lease Deposit. Any interest earned on the Lease
Deposit will be for the sole benefit of the Lessor and shall not in any way
reduce any amounts owed by Lessee under the terms hereof.
11
ARTICLE IV
IMPOSITIONS
4.1 PAYMENT OF IMPOSITIONS
Subject to Article XII relating to permitted contests, Lessee will pay, or
cause to be paid, all Impositions before any fine, penalty, interest or cost may
be added for non-payment, such payments to be made directly to the taxing
authorities where feasible, and Lessee will promptly, upon request, furnish to
Lessor copies of official receipts or other satisfactory proof evidencing such
payments. Lessee's obligation to pay such Impositions shall be deemed absolutely
fixed upon the date such Impositions become a lien upon the Leased Property or
any part thereof. If any such Imposition may, at the option of the Lessor,
lawfully be paid in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), Lessee 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
hereof (subject to Lessee's right of contest pursuant to the provisions of
Article XII) as the same respectively become due and before any fine, penalty,
premium, further interest or cost may be added thereto. Lessor, at its expense,
shall, to the extent permitted by applicable law, prepare and file all tax
returns and reports as may be required by governmental authorities in respect of
Lessor's net income, gross receipts, franchise taxes and taxes on its capital
stock, and Lessee, at its expense, shall, to the extent 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 governmental authorities. If any
refund shall be due from any taxing authority in respect of any Imposition paid
by Lessee, the same shall be paid over to or retained by Lessee if no Event of
Default shall have occurred hereunder and be continuing. Any such funds retained
by Lessor due to an Event of Default shall be applied as provided in Article
XVI. Lessor and Lessee 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 Leased
Property as may be necessary to prepare any required returns and reports. In the
event governmental authorities classify any property covered by this Lease as
personal property, Lessee shall file all personal property tax returns in such
jurisdictions where it may legally so file. Lessor, to the extent it possesses
the same, and Lessee, to the extent it possesses the same, will provide the
other party, upon request, with cost and depreciation records necessary for
filing returns for any property so classified as personal property. Where Lessor
is legally required to file personal property tax returns, Lessee will be
provided with copies of assessment notices indicating a value in excess of the
reported value in sufficient time for Lessee to file a protest. Lessee may, upon
giving notice to Lessor, at Lessee's option and at Lessee's sole cost and
expense, protest, appeal, or institute such other proceedings as Lessee may deem
appropriate to effect a reduction of real estate or personal property
assessments and Lessor, at Lessee's expense as aforesaid, shall fully cooperate
with Lessee in such protest, appeal, or other action. ▇▇▇▇▇▇▇▇ for reimbursement
by Lessee to Lessor of personal property taxes shall be accompanied by copies of
a ▇▇▇▇ therefor and payments thereof which identify the personal property with
respect to which such payments are made.
4.2 ADJUSTMENT OF IMPOSITIONS
Impositions imposed in respect of the tax-fiscal period during which the
Term terminates shall be adjusted and prorated between Lessor and Lessee,
whether or not such Imposition is imposed before or after such termination, and
Lessee's obligation to pay its prorated share thereof shall survive such
termination.
4.3 UTILITY CHARGES
Lessee will contract for, in its own name, and will pay or cause to be paid
all charges for electricity, power, gas, oil, water and other utilities used in
the Leased Property during the Term.
12
4.4 INSURANCE PREMIUMS
Lessee will contract for in its own name and will pay or cause to be paid
all premiums for the insurance coverage required to be maintained pursuant to
Article XIII during the Term.
ARTICLE V
NO TERMINATION
5.1 ACKNOWLEDGEMENT
The parties hereto understand, acknowledge and agree that this is an
absolute triple net lease. Lessee shall remain bound by this Lease in accordance
with its terms and shall neither take any action without the consent of Lessor
to modify, surrender or terminate the same, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of Rent, or set-off against the
Rent, nor shall the respective obligations of Lessor and Lessee be otherwise
affected by reason of (a) any damage to, or destruction of, any Leased Property
or any portion thereof from whatever cause or any Taking of the Leased Property
or any portion thereof, (b) the lawful or unlawful prohibition of, or
restriction upon, Lessee's use of the Leased Property, or any portion thereof,
or the interference with such use by any person, corporation, partnership or
other entity, or by reason of eviction by paramount title; (c) any claim which
Lessee has or might have against Lessor or by reason of any default or breach of
any warranty by Lessor under this Lease or any other agreement between Lessor
and Lessee, or to which Lessor and Lessee are parties, (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Lessor or any assignee or transferee
of Lessor, or (e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Lessee from any such obligations as a
matter of law. Lessee hereby specifically 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 Lease or quit or surrender the Leased
Property or any portion thereof, or (ii) entitle Lessee to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Lessor and Lessee hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Lessee
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
Lease or by termination of this Lease other than by reason of an Event of
Default.
ARTICLE VI
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY
6.1 OWNERSHIP OF THE LEASED PROPERTY
Lessee acknowledges that the Leased Property is the property of Lessor and
that Lessee has only the right to the possession and use of the Leased Property
upon the terms and conditions of this Lease.
6.2 LESSEE'S PERSONAL PROPERTY
Lessee 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 Lessee's Personal Property, and Lessee may, subject
to Section 35.2 hereof and the conditions set forth below, remove the same upon
the expiration or any prior termination of the Term. Lessee shall provide and
maintain during the entire Term all such Lessee's Personal Property as shall be
necessary in order to operate the Facility in compliance with all licensure and
certification requirements, in compliance with all applicable Legal Requirements
and Insurance Requirements and otherwise in accordance with customary practice
in the industry for the Primary Intended Use. All of Lessee's Personal Property
13
not removed by Lessee within seven (7) days following the expiration or earlier
termination of this Lease shall be considered abandoned by Lessee and may be
appropriated, sold, destroyed or otherwise disposed of by Lessor without first
giving notice thereof to Lessee, without any payment to Lessee and without any
obligation to Lessee to account therefor. Lessee will, at its expense, restore
the Leased Property at the expiration or earlier termination of this Lease to
the condition required by Section 9.1(d), including repair of all damage to the
Leased Property caused by the removal of Lessee's Personal Property, whether
effected by Lessee or Lessor.
ARTICLE VII
CONDITION AND USE OF LEASED PROPERTY
7.1 CONDITION OF THE LEASED PROPERTY
Lessee acknowledges receipt and delivery of possession of the Leased
Property and that Lessee has examined and otherwise has acquired knowledge of
the condition of the Leased Property prior to the execution and delivery of this
Lease and has found the same to be in good order and repair and satisfactory for
its purpose hereunder. Lessee is leasing the Leased Property "as is" in its
present condition. Lessee waives any claim or action against Lessor in respect
of the condition of the Leased Property. LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY
PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, SUITABILITY, DESIGN OR CONDITION
FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE
TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT THE LEASED PROPERTY HAS BEEN
INSPECTED BY LESSEE AND IS SATISFACTORY TO IT.
7.2 USE OF THE LEASED PROPERTY
Lessee covenants that it will obtain and maintain throughout the entire
Term all approvals needed to use and operate the Leased Property and the
Facility for the Primary Intended Use, as defined below, under applicable local,
state and federal law, including but not limited to licensure approvals,
Medicare and/or a Medicaid certifications, provider numbers, certificates of
need, governmental approvals, and full accreditation from all applicable
governmental authorities, if any, that are necessary for the operation of the
Facility as a rehabilitation hospital facility.
(a) Beginning on the Commencement Date and during the entire Term,
Lessee shall use the Leased Property and the improvements thereon as a
rehabilitation hospital facility and for such other uses as may be
necessary in connection with or incidental to such use (the "Primary
Intended Use"). Lessee shall not use the Leased Property or any portion
thereof for any other use without the prior written consent of Lessor,
which consent Lessee agrees may be withheld in Lessor's sole discretion,
provided however, that Lessee shall be permitted to sublease a portion of
the Leased Property for provision of therapy or physician office space
without Lessor's consent so long as the sublease otherwise complies with
the provisions of Article VIII, Article XXIV and Article XL hereof. No use
shall be made or permitted to be made of the Leased Property and no acts
shall be done which will cause the cancellation of any insurance policy
covering the Leased Property or any part thereof, nor shall Lessee sell or
otherwise provide to residents or patients therein, or permit to be kept,
used or sold in or about the Leased Property any article which may be
prohibited by law or by the standard form of fire insurance policies, any
other insurance policies required to be carried hereunder, or fire
underwriters regulations. Lessee shall, at its sole cost, comply with all
of the requirements, covenants and restrictions pertaining to the Leased
Property, including, without limitation, all of the Permitted Exceptions,
and other requirements of any insurance board, association, organization or
14
company necessary for the maintenance of the insurance, as herein provided,
covering the Leased Property and Lessee's Personal Property.
(b) Lessee covenants and agrees that during the Term it will
continuously operate the Leased Property only in accordance with its
Primary Intended Use and Lessee shall maintain its certifications for
reimbursement and licensure and all accreditations.
(c) Lessee shall not commit or suffer to be committed any waste on the
Leased Property, or in the Facility, nor shall Lessee cause or permit any
nuisance thereon.
(d) Lessee shall neither suffer nor permit the Leased Property or any
portion thereof, including any Capital Addition whether or not financed by
Lessor, or Lessee's Personal Property, to be used in such a manner as (i)
might reasonably tend to impair Lessor's (or Lessee's, as the case may be)
title thereto or to any portion thereof, or (ii) may reasonably make
possible a claim or claims of adverse usage or adverse possession by the
public, as such, or of implied dedication of the Leased Property or any
portion thereof.
7.3 LESSOR TO GRANT EASEMENTS
Lessor will, from time to time so long as no Event of Default has occurred
and is continuing, at the request of Lessee and at Lessee's cost and expense,
but subject to the reasonable approval of Lessor (a) grant easements and other
rights in the nature of easements, (b) release existing easements or other
rights in the nature of easements which are for the benefit of the Leased
Property, (c) dedicate or transfer unimproved portions of the Leased Property
for road, highway or other public purposes, (d) execute petitions to have the
Leased Property annexed to any municipal corporation or utility district, (e)
execute amendments to any covenants and restrictions affecting the Leased
Property and (f) execute and deliver to any person any instrument appropriate to
confirm or effect such grants, releases, dedications and transfers (to the
extent of its interest in the Leased Property), but only upon delivery to Lessor
of an Officer's Certificate stating (and such other information as Lessor may
reasonably require confirming) that such grant, release, dedication, transfer,
petition or amendment is required for and not detrimental to the proper conduct
of the Primary Intended Use on the Leased Property and does not reduce its
value.
ARTICLE VIII
LEGAL AND INSURANCE REQUIREMENTS
8.1 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS
Subject to Article XII relating to permitted contests, Lessee, at its
expense, will promptly (a) comply with all Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, whether or not compliance therewith shall
require structural change in any of the Leased Improvements or interfere with
the use and enjoyment of the Leased Property, and (b) procure, maintain and
comply with all licenses, certificates of need, provider agreements,
accreditations and other authorizations required for any use of the Leased
Property and Lessee's Personal Property then being made, and for the proper
erection, installation, operation and maintenance of the Leased Property or any
part thereof, including without limitation, any Capital Additions. Upon Lessor's
request, Lessee shall deliver copies of all such licenses, certificates of need,
agreements and other authorizations.
8.2 LEGAL REQUIREMENT COVENANTS
Lessee covenants and agrees that the Leased Property and Lessee's Personal
Property shall not be used for any unlawful purpose. Lessee shall use its best
efforts to have tenants acquire and maintain all licenses, certificates,
permits, provider agreements and other authorizations and approvals needed to
operate the Leased Property in its
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customary manner for the Primary Intended Use and any other use conducted on the
Leased Property as may be permitted from time to time hereunder. Lessee further
covenants and agrees that Lessee's use of the Leased Property and maintenance,
alteration, and operation of the same, and all parts thereof, shall at all times
conform to all applicable local, state and federal laws, ordinances, rules and
regulations.
8.3 HAZARDOUS MATERIALS
No Hazardous Materials shall be installed, used, generated, manufactured,
treated, handled, refined, produced, processed, stored or disposed of, or
otherwise present in, on or under the Property. No activity shall be undertaken
on the Property which would cause (i) the Property to become a treatment,
storage or disposal facility of hazardous waste, infectious waste, biomedical or
medical waste, within the meaning of, or otherwise bring the Property within the
ambit of RCRA or any Hazardous Material Laws, (ii) a release or threatened
release of Hazardous Material from the Property within the meaning of, or
otherwise bring the Property within the ambit of, CERCLA or ▇▇▇▇ or any
Hazardous Material Laws or (iii) the discharge of Hazardous Material into any
watercourse, surface or subsurface of body of water or wetland, or the discharge
into the atmosphere of any Hazardous Material which would require a permit under
any Hazardous Material Laws. No activity shall be undertaken with respect to the
Property which would cause a violation or support a claim under RCRA, CERCLA,
▇▇▇▇ or any Hazardous Material Laws. No investigation, administrative order,
litigation or settlement with respect to any Hazardous Material is, to the best
of the Lessee's knowledge, threatened or in existence with respect to the
Property. No notice has been served on Lessee from any entity, governmental body
or individual claiming any violation of any Hazardous Material Laws, or
requiring compliance with any Hazardous Material Laws, or demanding payment or
contribution for environmental damage or injury to natural resources. Lessee has
not obtained and Lessee has no knowledge of any reason Lessee will be required
to obtain any permits, licenses, or similar authorizations to occupy, operate or
use the Improvements or any part of the Property by reason of any Hazardous
Material Laws. Lessee hereby agrees to indemnify and defend, at its sole cost
and expense, and hold Lessor, its successors and assigns, harmless from and
against and to reimburse Lessor with respect to any and all claims, demands,
actions, causes of action, losses, damages, liabilities, costs and expenses
(including, without limitation, reasonable attorney's fees and court costs) of
any and every kind or character, known or unknown, fixed or contingent, asserted
against or incurred by Lessor at any time and from time to time by reason or
arising out of any breach or violation of the above.
8.4 HEALTHCARE LAWS
Lessee warrants and represents that this Lease and all subleases are, and
at all times during the term of this Lease will be, in compliance with all
Healthcare Laws. Lessee agrees to add to all of its third party agreements
relating to the Leased Property, including, without limitation, all subleases,
that in the event it is determined that such agreement and/or sublease is in
violation of the Healthcare Laws, such agreement and/or sublease shall be
renegotiated so that same are in compliance with all Healthcare Laws. Lessee
agrees promptly to notify Lessor in writing of receipt of any notice of
investigation of any alleged Healthcare Law violations.
Lessee hereby agrees to indemnify and defend, at its sole cost and expense,
and hold Lessor, its successors and assigns, harmless from and against and to
reimburse Lessor with respect to any and all claims, demands, actions, causes of
action, losses, damages, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' fees and court costs) of any and every kind or
character, known or unknown, fixed or contingent, asserted against or incurred
by Lessor at any time and from time to time by reason or arising out of any
breach or violation of any of the above representations and warranties.
8.5 REPRESENTATIONS AND WARRANTIES
Lessee and each Guarantor represents and warrants to the Lessor that as of
the date hereof as follows: (i) if applicable, such person or entity is a duly
organized and existing limited liability company or limited partnership
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and is duly authorized to enter into, deliver and perform this Lease and the
other documents referred to herein and such agreements constitute the valid and
binding obligations of such person or entity, enforceable in accordance with
their terms, (ii) neither the entering into this Lease nor the performance by
such person or entity of its obligations hereunder will violate any provision of
law or any agreement, indenture, note or other instrument binding upon such
person or entity, (iii) no authority from or approval by any governmental body,
commission or agency or consent of any third party is required in connection
with the making or validity of and the execution, delivery and performance of
this Lease or the other documents referred to herein, (iv) there are no actions,
suits or proceedings pending against or, to the knowledge of such person or
entity, threatened against or affecting, such person or entity or any of its
affiliates, in any court or before or by any governmental department, agency or
instrumentality, an adverse decision in which could materially and adversely
affect the financial condition, business or operations of such person or entity
or the ability of such person or entity to perform its obligations under this
Lease or the other documents referred to herein, and (v) such person or entity
and each of its affiliates is in compliance in all material respects with all
applicable laws, ordinances, rules, regulations and requirements of governmental
authorities.
ARTICLE IX
REPAIRS; RESTRICTIONS
9.1 MAINTENANCE AND REPAIR
(a) Lessee, at its expense, will keep the Leased Property and all
private roadways, sidewalks and curbs appurtenant thereto (and Lessee's
Personal Property) in good first class order and repair (whether or not the
need for such repairs occurs as a result of Lessee's use, any prior use,
the elements, the age of the Leased Property or any portion thereof) and,
except as otherwise provided in Articles XIV and XV, with reasonable
promptness, will make all necessary and appropriate repairs thereto of
every kind and nature, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen or
arising by reason of a condition existing prior to the commencement of the
Term of this Lease (concealed or otherwise). All repairs shall, to the
extent reasonably achievable, be at least equivalent in quality to the
original work. Lessee will not take or omit to take any action the taking
or omission of which might materially impair the value or the usefulness of
the Leased Property or any part thereof for the Primary Intended Use.
Lessee shall notify the Lessor of any and all repairs or improvements made
to the Leased Property in excess of Twenty-Five Thousand and 00/100 Dollars
($25,000.00).
(b) Lessor shall not under any circumstances be required to build or
rebuild any improvements on the Leased Property, or to make any repairs,
replacements, alterations, restorations, or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto in connection with this Lease,
or to maintain the Leased Property in any way.
(c) Nothing contained in this Lease and no action or inaction by
Lessor shall be construed as (i) constituting the consent or request of
Lessor, expressed or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or services or
the furnishing of any materials or other property for the construction,
alteration, addition, repair or demolition of or to the Leased Property or
any part thereof, or (ii) giving Lessee any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to make
any agreement that may create, or in any way be the basis for, any right,
title, interest, lien, claim or other encumbrance upon the estate of Lessor
in the Leased Property or any portion thereof.
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(d) Unless Lessor shall convey any of the Leased Property to Lessee
pursuant to the provisions of this Lease, Lessee will, upon the expiration
or prior termination of the Term, vacate and surrender the Leased Property
to Lessor in the condition in which the Leased Property was originally
received from Lessor, except as repaired, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Lease and
except for ordinary wear and tear (subject to the obligation of Lessee to
maintain the Leased Property in good order and repair during the entire
Term of the Lease), damage caused by the gross negligence or willful acts
of Lessor and damage or destruction described in Article XIV or resulting
from a Taking described in Article XV which Lessee is not required by the
terms of this Lease to repair or restore.
(e) Commencing on July 1, 2005, Lessee shall make quarterly deposits
to a Capital Improvement Reserve (the "Capital Improvement Reserve") at a
financial institution of the Lessor's choosing, provided, however, that the
first such deposit on July 1, 2005, shall be pro rated based upon one half
of a year. Subject to the immediately preceding sentence, each deposit to
be made quarterly thereafter through and including December 31, 2005, shall
be equal to the sum of One Thousand Five Hundred and 00/100 Dollars
($1,500.00) per bed per annum (the number of beds to be determined by the
actual number of beds certified to be available for use in the Hospital).
The account to which such payments are made shall require the signature of
an officer of Lessee and Lessor to make withdrawals. On each January 1
thereafter during the entire Lease Term, such payment into the Capital
Improvement Reserve shall be increased by 2.50% per annum. Notwithstanding
anything contained herein to the contrary, Lessee shall pay into the
Capital Improvement Reserve any amounts needed in excess of such required
payments as provided herein. The amount in the Capital Improvement Reserve,
including interest, may be used by Lessee with Lessor's approval, which
such approval will not be unreasonably withheld, or by Lessor with Lessee's
approval, which such approval will not be unreasonably withheld, to pay for
the repair and replacement of capital items on the Facility. Lessee hereby
grants to Lessor a security interest in all monies deposited into the
Capital Improvement Reserve and Lessee shall, within fifteen (15) days from
the Commencement Date, execute all documents necessary for Lessor to
perfect its security interest in the Capital Improvement Reserve. Lessor
and Lessee agree that the first dollars of all capital expenditures made in
each year during the Term shall be funded from the Capital Improvement
Reserve account to the full extent of such account; provided, however, that
if Lessor, in its reasonable discretion, determines at any time that the
balance then remaining in the Capital Improvement Reserve account is
insufficient to pay in full for the present and future anticipated repair
and replacement of capital items on the Facility, Lessor shall retain funds
in the Capital Improvement Reserve account in an amount sufficient to pay
in full for such repair and replacement and Lessee will deposit additional
sums into the account from time to time, upon the written request of
Lessor, in amounts equal to the difference between the then balance in the
Capital Improvement Reserve account and the cost to complete the present
and future such repair and replacement so that at all times there is an
adequate amount in the Capital Improvement Reserve account to pay for such
repair and replacement on a going forward basis.
9.2 ENCROACHMENTS; RESTRICTIONS
If any of the Leased Improvements shall, at any time, encroach upon any
property, street or right-of-way adjacent to the Leased Property, or shall
violate the agreements or conditions contained in any federal, state or local
law, lawful restrictive covenant or other agreement affecting the Leased
Property, or any part thereof, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, then promptly
upon the request of Lessor, Lessee shall, at its expense, subject to its right
to contest the existence of any encroachment, violation or impairment, (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 Lessor or Lessee or (b) make such changes in the Leased
Improvements, and take such other actions, as Lessor in the good faith exercise
of its judgment deems reasonably practicable, to remove such encroachment, or 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 be able to continue the operation of the Facility for the
Primary Intended Use
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substantially in the manner and to the extent the Facility was operated prior to
the assertion of such violation or encroachment. Any such alteration shall be
made in conformity with the applicable requirements of Article X. Lessee's
obligations under this Section 9.2 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 and Lessee shall be entitled to a credit for any sums recovered
by Lessor under any such policy of title or other insurance.
ARTICLE X
CAPITAL ADDITIONS
10.1 CONSTRUCTION OF CAPITAL ADDITIONS TO THE LEASED PROPERTY
(a) If no Event of Default shall have occurred or be continuing under
this Lease or the Other Leases, Lessee shall have the right, upon and
subject to the terms and conditions set forth below, to construct or
install Capital Additions on the Leased Property without the prior written
consent of Lessor, provided, however, except as expressly provided in
Section 10.2(d) hereof, Lessee shall not be permitted to create any
Encumbrance on the Leased Property, as defined in Article XXXVII, in
connection with such Capital Addition. Prior to commencing construction of
any Capital Addition, Lessee shall, at Lessee's sole cost and expense (i)
submit to Lessor in writing a proposal setting forth in reasonable detail
any proposed Capital Addition, (ii) provide to Lessor such plans and
specifications, certificates of need and other approvals, permits,
licenses, contracts and other information concerning the proposed Capital
Addition as Lessor may reasonably request, and (iii) obtain all necessary
certificates of need, state licensure surveys and all regulatory approvals
of architectural plans. 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.
(b) Prior to commencing construction of any Capital Addition, Lessee
shall first request Lessor to provide funds to pay for such Capital
Addition in accordance with the provisions of Section 10.3. If Lessor
declines or is unable to provide such financing on terms acceptable to
Lessee, the provisions of Section 10.2 shall apply. Notwithstanding any
other provision of this Article X to the contrary, no Capital Additions
shall be made without the consent of Lessor, which consent shall not be
unreasonably withheld or delayed, if the Capital Addition Cost of such
proposed Capital Addition, when aggregated with the costs of all Capital
Additions made by Lessee, would exceed twenty-five percent (25%) of the
then Fair Market Value of the Leased Property or would diminish the value
of the Leased Property. Furthermore, no Capital Addition shall be made
which would tie in or connect any Leased Improvements on the Leased
Property with any other improvements on property adjacent to the Leased
Property (and not part of the Land covered by this Lease) including,
without limitation, tie-ins of buildings or other structures or utilities,
unless Lessee shall have obtained the prior written approval of Lessor,
which approval in Lessor's sole discretion may be granted or withheld. All
proposed Capital Additions shall be architecturally integrated and
consistent with the Leased Property.
10.2 CAPITAL ADDITIONS FINANCED BY LESSEE
If Lessee provides or arranges to finance any Capital Addition, this
Lease shall be and hereby is amended to provide as follows:
(a) The above referenced proportion of the Fair Market Added Value of
Capital Additions paid for by Lessee to the Fair Market Value of the entire
Leased Property expressed as a percentage is referred to herein as the
"Added Value Additional". The Added Value Additional determined as provided
above for
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each Capital Addition financed or paid for by Lessee shall remain in effect
until any subsequent Capital Addition.
(b) There shall be no adjustment in the Base Rent by reason of any
such Capital Addition.
(c) Upon the expiration or earlier termination of this Lease, except
by reason of the default by Lessee hereunder, Lessor shall compensate
Lessee for all Capital Additions paid for or financed by Lessee in any of
the following ways, determined in the sole discretion of Lessor:
(i) By purchasing all Capital Additions paid for by Lessee from
Lessee for cash in the amount of the Fair Market Added Value of all
such Capital Additions paid for or financed by Lessee; or
(ii) By purchasing such Capital Additions from Lessee by
delivering to Lessee Lessor's purchase money promissory note in the
amount of said Fair Market Added Value, due and payable not later than
eighteen (18) months after the date of expiration or other termination
of this Lease, bearing interest at the test rate applicable under
Section 1272 of the Code or any successor section thereto ("Test
Rate") or, if no such Test Rate exists, at the Prime Rate, which
interest shall be payable monthly, and which note shall be secured by
a mortgage on the Leased Property, subject to all mortgages and
encumbrances on the Leased Property at the time of such purchase; or
(iii) Such other arrangement regarding such compensation as shall
be mutually acceptable to Lessor and Lessee.
(d) Lessor and Lessee agree that Lessee's construction lender for
Capital Additions shall have the right to secure its loan by a mortgage
upon the Leased Property provided such mortgage (i) shall not exceed the
cost of the Capital Additions, (ii) shall be subordinate to Lessor's
acquisition cost and any Capital Additions paid for by the Lessor of the
Leased Property, (iii) shall be subordinate to any mortgage or encumbrance
now existing or hereinafter created, and (iv) shall be limited solely to
Lessee's interest in the Leased Property.
10.3 CAPITAL ADDITIONS FINANCED BY LESSOR
(a) Lessee shall request that Lessor provide or arrange financing for
a Capital Addition by providing to Lessor such information about the
Capital Addition as Lessor may reasonably request (a "Request"), including
without limitation, all information referred to in Section 10.1 above.
Lessor may, but shall be under no obligation to, obtain the funds necessary
to meet the Request. Within thirty (30) days of receipt of a Request,
Lessor shall notify Lessee as to whether it will finance the proposed
Capital Addition and, if so, the terms and conditions upon which it would
do so, including the terms of any amendment to this Lease. In no event
shall the portion of the projected Capital Addition Cost comprised of land,
if any, materials, labor charges and fixtures be less than ninety percent
(90%) of the total amount of such cost. Lessee may withdraw its Request by
notice to Lessor at any time before or after receipt of Lessor's terms and
conditions.
(b) If Lessor agrees to finance the proposed Capital Addition, Lessee
shall provide Lessor with the following prior to any advance of funds:
(i) all customary or other required loan documentation;
20
(ii) any information, certificates of need, regulatory approvals
of architectural plans, other certificates, licenses, permits or
documents requested by either Lessor or any lender with whom Lessor
has agreed or may agree to provide financing which are necessary to
confirm that Lessee 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;
(iii) an Officer's Certificate and, if requested, a certificate
from Lessee's architect, setting forth in reasonable detail the
projected (or actual, if available) cost of the proposed Capital
Addition;
(iv) an amendment to this Lease, duly executed and acknowledged,
in form and substance satisfactory to Lessor (the "Lease Amendment"),
and containing such provisions as may be necessary or appropriate,
including without limitation, any appropriate changes in the legal
description of the Land, the Fair Market Value and the Rent, which
shall be increased in an amount at least equal to the principal and
interest on the debt incurred by Lessor to finance the Capital
Addition;
(v) a deed conveying title to Lessor to any land acquired for
the purpose of constructing the Capital Addition, free and clear of
any liens or encumbrances except those approved by Lessor and, both
prior to and following completion of the Capital Addition, an as-built
survey thereof satisfactory to Lessor;
(vi) endorsements to any outstanding policy of title insurance
covering the Leased Property and any additional land referred to in
10.3(b)(v) above, or a supplemental policy of title insurance covering
the Leased Property and any additional land referred to in 10.3(b)(v)
above, satisfactory in form and substance to Lessor (A) updating the
same without any additional exceptions, except as may be permitted by
Lessor; and (B) 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 (vii) below);
(vii) if required by Lessor, (A) an owner's policy of title
insurance insuring fee simple title to any land conveyed to Lessor
pursuant to subparagraph (v), free and clear of all liens and
encumbrances except those approved by Lessor and (B) a lender's policy
of title insurance satisfactory in form and substance to Lessor and
the Lending Institution advancing any portion of the Capital Addition
Cost;
(viii) if required by Lessor, prior to commencing the Capital
Addition, an M.A.I. appraisal of the Leased Property indicating that
the value of the Leased Property upon completion of the Capital
Addition will exceed the Fair Market Value of the Leased Property
prior thereto by an amount not less than one hundred percent (100%) of
the Capital Addition Cost; and
(ix) such other certificates (including, but not limited to,
endorsements increasing the insurance coverage, if any, at the time
required by Section 13.1), documents, opinions of counsel, appraisals,
surveys, certified copies of duly adopted resolutions of the Board of
Directors of Lessee authorizing the execution and delivery of the
Lease Amendment and any other instruments as may be reasonably
required by Lessor and any Lending Institution advancing or
reimbursing Lessee for any portion of the Capital Addition Cost.
(c) Upon making a Request to finance a Capital Addition, whether or
not such financing is actually consummated, Lessee shall pay or agree to
pay, upon demand, all reasonable costs and expenses of
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Lessor and any Lending Institution which has committed to finance such
Capital Addition which have been paid or incurred by them in connection
with the financing of the Capital Addition, including, but not limited to,
(i) the fees and expenses of their respective counsel, (ii) all printing
expenses, (iii) the amount of any filing, registration and recording taxes
and fees, (iv) documentary stamp taxes, if any, (v) title insurance
charges, appraisal fees, if any, rating agency fees, if any, and (vi)
commitment fees, if any, and (vii) costs of obtaining regulatory and
governmental approvals, including but not limited to any required
certificates of need, for the construction, operation, use or occupancy of
the Capital Addition.
10.4 REMODELING AND NON-CAPITAL ADDITIONS
Subject to Section 9.1(a), Lessee shall have the right and the obligation
to make additions, modifications or improvements to the Leased Property which
are not Capital Additions ("Non-Capital Additions") from time to time as it, in
its discretion, may deem to be desirable for the Primary Intended Use and to
permit the Lessee to comply fully with its obligations set forth in this Lease,
provided that such action will be undertaken expeditiously, in a workmanlike
manner and will not significantly alter the character or purpose or detract from
the value or operating efficiency of the Leased Property and will not
significantly impair the revenue producing capability of the Leased Property or
adversely affect the ability of the Lessee to comply with the provisions of this
Lease. The cost of Non-Capital Additions, modifications and improvements shall,
without payment by Lessor at any time, be included under the terms of this Lease
and, upon expiration or earlier termination of this Lease, shall pass to and
become the property of Lessor.
10.5 SALVAGE
All materials which are scrapped or removed in connection with the making
of either Capital Additions permitted by Section 10.1 or repairs required by
Article IX shall be or become the property of Lessor.
ARTICLE XI
LIENS
Subject to the provisions of Article XII relating to permitted contests,
Lessee will not directly or indirectly create or allow to remain and will
promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, not including, however, (a) this
Lease, (b) the matters, if any, set forth in EXHIBIT B, (c) restrictions, liens
and other encumbrances which are consented to in writing by Lessor, or any
easements granted pursuant to the provisions of Section 7.3 of this Lease, (d)
liens for those taxes of Lessor which Lessee is not required to pay hereunder,
(e) subleases permitted by Article XXIV, (f) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (1) the same are
not yet payable or are payable without the addition of any fine or penalty or
(2) such liens are in the process of being contested as permitted by Article
XII, (g) liens of mechanics, laborers, materialmen, suppliers or vendors for
sums either disputed or not yet due, provided that (1) the payment of such sums
shall not be postponed for more than sixty (60) days after the completion of the
action giving rise to such lien and such reserve or other appropriate provisions
as shall be required by law or generally accepted accounting principles shall
have been made therefor or (2) any such liens are in the process of being
contested as permitted by Article XII, and (h) any liens which are the
responsibility of Lessor pursuant to the provisions of Article XXXVII of this
Lease. Unless otherwise expressly provided herein, Lessee shall not mortgage or
grant any interest or security interest in, or otherwise assign, any part of
Lessee's rights and interests in this Lease, the Leased Property, or any
permits, licenses, certificates of need (if any) or any other approvals required
to operate the Leased Property during the Term without the prior written consent
of Lessor, which may be withheld at Lessor's sole discretion.
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ARTICLE XII
PERMITTED CONTESTS
Lessee, on its own or on Lessor's behalf (or in Lessor's name), but at
Lessee's expense, may contest, by appropriate legal proceedings conducted in
good faith and with due diligence, the amount, validity or application, in whole
or in part, of any Imposition, Legal Requirement, Insurance Requirement, lien,
attachment, levy, encumbrance, charge or claim not otherwise permitted by
Article XI, provided that (a) in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Lessor and from the Leased Property, (b) neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost, (c) in the case of
a Legal Requirement, Lessor would not be in any immediate danger of civil or
criminal liability for failure to comply therewith pending the outcome of such
proceedings, (d) in the event that any such contest shall involve a sum of money
or potential loss in excess of Fifty Thousand Dollars ($50,000), then, in any
such event, (i) provided the Consolidated Net Worth of Lessee and/or Guarantors
is then in excess of Fifty Million Dollars ($50,000,000), Lessee shall deliver
to Lessor an Officer's Certificate to the effect set forth in clauses (a), (b)
and (c), to the extent applicable, or (ii) in the event the Consolidated Net
Worth of Lessee and/or Guarantors is not then in excess of Fifty Million Dollars
($50,000,000), then Lessee shall deliver to Lessor and its counsel an opinion of
Lessee's counsel to the effect set forth in clauses (a), (b) and (c), to the
extent applicable, (e) in the case of a Legal Requirement and/or an Imposition,
lien, encumbrance or charge, Lessee shall give such reasonable security as may
be demanded by Lessor to insure ultimate payment of the same and to prevent any
sale or forfeiture of the affected portion of the Leased Property or the Rent by
reason of such non-payment or non-compliance; provided, however, the provisions
of this Article XII shall not be construed to permit Lessee to contest the
payment of Rent (except as to contests concerning the method of computation or
the basis of levy of any Imposition or the basis for the assertion of any other
claim) or any other sums payable by Lessee to Lessor hereunder, (f) in the case
of an Insurance Requirement, the coverage required by Article XIII shall be
maintained, and (g) if such contest be finally resolved against Lessor or
Lessee, Lessee shall, as Additional Charges due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties accrued
thereon, or comply with the applicable Legal Requirement or Insurance
Requirement. Lessor, at Lessee's expense, shall execute and deliver to Lessee
such authorizations and other documents as may reasonably be required in any
such contest and, if reasonably requested by Lessee or if Lessor so desires,
Lessor shall join as a party therein. Lessee shall indemnify and save Lessor
harmless against any liability, cost or expense of any kind that may be imposed
upon Lessor in connection with any such contest and any loss resulting
therefrom.
ARTICLE XIII
INSURANCE
13.1 GENERAL INSURANCE REQUIREMENTS
During the Term of this Lease, Lessee shall at all times keep the Leased
Property and all property located in or on the Leased Property, including
Lessee's Personal Property, insured against loss or damage from such causes as
are customarily insured against, by prudent owners of similar facilities.
Without limiting the generality of the foregoing, the Lessee shall obtain and
maintain in effect throughout the Lease Term, the kinds and amounts of insurance
deemed reasonably necessary by the Lessor and as described below. This insurance
shall be written by companies (i) reasonably acceptable to the Lessor, (ii) that
are rated at least an "A-XII" or better by Best's Insurance Guide and Key
Ratings and a claim payment rating by Standard & Poor's Corporation of AA or
better, and (iii) authorized, licensed and qualified to do insurance business in
the state in which the Leased Property is located. The aggregate amount of
coverage by a single company must not exceed five percent (5%) of the insurance
company's policyholders' surplus. The policies must name Lessor (and any other
entities as Lessor may deem necessary) as an additional insured and losses shall
be payable to Lessor and/or Lessee as provided in Article XIV. Each insurance
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policy required hereunder must (i) provide primary insurance without right of
contribution from any other insurance carried by Lessor, (ii) contain, unless
the Lessee provides to Lessor written confirmation and verification from the
insurer that such insurer will not subrogate against Lessor, an express waiver
by the insurer of any right of subrogation, setoff or counterclaim against any
insured party thereunder including Lessor (provided, however, that if such
insurance does not contain such waiver, Lessee shall use its best efforts to
obtain a policy which does contain such waiver, provided the same is obtainable
at commercially reasonable rates; and provided further, however, that Lessee, to
the extent it is able to obtain such waiver, shall not be required to replace
its existing insurance coverage until three (3) months following the
Commencement Date), (iii) permit Lessor to pay premiums at Lessor's discretion,
and (iv) as respects any third party liability claim brought against Lessor,
obligate the insurer to defend Lessor as an additional insured thereunder. In
the event Lessee is unable to obtain such waiver of subrogation, Lessee shall
use its best efforts to secure from the insurance company its agreement that all
claims and disputes concerning insurance coverage for the Lessee's Personal
Property shall be deemed contractual disputes and all litigation and proceedings
in connection therewith shall be tried by jury in Jefferson County, Alabama. In
addition, the policies shall name as an additional insured the holder ("Facility
Mortgagee") of any mortgage, deed of trust or other security agreement securing
any Encumbrance placed on the Leased Property in accordance with the provisions
of this Lease ("Facility Mortgage"), if any, by way of a standard form of
mortgagee's loss payable endorsement. Lessee shall use its best efforts to
secure from the insurance company its agreement that any disputes regarding loss
adjustment shall be deemed to be contractual disputes and all litigation and
proceedings in connection therewith shall be tried by jury in Jefferson County,
Alabama. Evidence of insurance and/or Impositions shall be deposited with Lessor
and, if requested, with any Facility Mortgagee(s). If any provision of any
Facility Mortgage which constitutes a first lien on the Leased Property requires
deposits of insurance to be made with such Facility Mortgagee, Lessee shall
either pay to Lessor monthly the amounts required and Lessor shall transfer such
amounts to such Facility Mortgagee or, pursuant to written direction by Lessor,
Lessee shall make such deposits directly with such Facility Mortgagee. The
policies on the Leased Property, including the Leased Improvements, the Fixtures
and Lessee's Personal Property, shall insure against the following risks:
(a) All Risks or Special Form Property insurance against loss or
damage to the building and improvements, including but not limited to,
perils of fire, lightning, water, wind, theft, vandalism and malicious
mischief, plate glass breakage, and perils typically provided under an
Extended Coverage Endorsement and other forms of broadened risk perils, and
insured on a "replacement cost" value basis to the extent of the full
replacement value of the Leased Property. The policy shall include coverage
for subsidence. The deductible amount thereunder shall be borne by the
Lessee in the event of a loss and the deductible must not exceed Fifty
Thousand and 00/100 Dollars ($50,000.00) per occurrence. Further, in the
event of a loss, the Lessee shall abide by all provisions of the insurance
contract, including proper and timely notice of the loss to the insurer,
and the Lessee further agrees that it will notify the Lessor of any loss in
the amount of Fifty Thousand and 00/100 Dollars ($50,000.00) or greater.
(b) Flood and earthquake insurance (rated A-VIII)shall be required
only in the event that the Leased Property is located in a flood plain or
earthquake zone in amounts as may be customary for comparable properties in
the geographic area of the Leased Property.
(c) Insurance against loss of earnings in an amount sufficient to
cover not less than twelve (12) months' lost earnings and written in an
"all risks" form, either as an endorsement to the insurance required under
subparagraph 13.1(a) above, or under a separate policy.
(d) Worker's compensation insurance covering all employees in amounts
that are customary for the Lessee's industry.
(e) Commercial General Liability in a primary amount of at least One
Million and 00/100 Dollars ($1,000,000.00) per occurrence, bodily injury
for injury or death of any one person and One Hundred Thousand and 00/100
Dollars ($100,000.00) for Property Damage for damage to or loss of
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property of others, subject to a Three Million and 00/100 Dollars
($3,000,000.00) annual aggregate with a Ten Million Dollar ($10,000,000.00)
policy aggregate limit for all Associated Facilities for all bodily injury
and property damage claims, occurring on or about the Leased Property or in
any way related to the Leased Property, including but not limited to, any
swimming pools or other rehabilitation and recreational facilities or areas
that are located on the Leased Property otherwise related to the Leased
Property. Such policy shall include coverages of a Broad Form nature,
including, but not limited to, Explosion, Collapse and Underground (XCU),
Products Liability, Completed Operations, Broad Form Contractual Liability,
Broad Form Property Damage, Personal Injury, Incidental Malpractice
Liability, and Host Liquor Liability.
(f) Automobile and vehicle liability insurance coverage for all owned,
non-owned, leased or hired automobiles and vehicles in a primary limit
amount of One Million and 00/100 Dollars ($1,000,000.00) per occurrence for
bodily injury; One Hundred Thousand and 00/100 Dollars ($100,000.00) per
occurrence for property damage; subject to an annual aggregate policy limit
of One Million and 00/100 Dollars ($1,000,000.00).
(g) Umbrella liability insurance in the minimum amount of Five Million
and 00/100 Dollars ($5,000,000.00) for each occurrence and aggregate
combined single limit for all liability, with a Ten Thousand and 00/100
Dollars ($10,000.00) self-insured retention for exposure not covered in
underlying primary policies. The umbrella liability policy shall name in
its underlying schedule the policies of commercial general liability,
garage keepers liability, automobile/vehicle liability and employer's
liability under the Worker's Compensation Policy.
(h) Professional liability insurance for any physician or other
employee or agent of the Lessee providing services at the Leased Property
in an amount not less than One Million and 00/100 Dollars ($1,000,000.00)
per individual claim and Three Million and 00/100 Dollars ($3,000,000.00)
annual aggregate with a Ten Million Dollar ($10,000,000.00) policy
aggregate limit for all Associated Facilities.
(i) A commercial blanket bond covering all employees of the Lessee,
including its officers and the individual owners of the insured business
entity, whether a joint-venture, partnership, proprietorship or
incorporated entity, against loss as a result of their dishonesty. Policy
limit shall be in an amount of at least One Million and 00/100 Dollars
($1,000,000.00) subject to a deductible of no more than Ten Thousand and
00/100 Dollars ($10,000.00) per occurrence.
The term "Full Replacement Cost" as used herein, shall mean the actual
replacement cost thereof from time to time, including increased cost of
construction endorsement, less exclusions provided in the normal fire
insurance policy. In the event either Lessor or Lessee believes that the
Full Replacement Cost has increased or decreased at any time during the
Term, it shall have the right to have such Full Replacement Cost
re-determined by the fire insurance company which is then providing the
largest amount of fire insurance carried on the Leased Property,
hereinafter referred to as the "impartial appraiser". The party desiring to
have the Full Replacement Cost so re-determined shall forthwith, on receipt
of such determination by such impartial appraiser, give written notice
thereof to the other party hereto. The determination of such impartial
appraiser shall be final and binding on the parties hereto, and Lessee
shall forthwith increase, or may decrease, the amount of the insurance
carried pursuant to this Article, as the case may be, to the amount so
determined by the impartial appraiser. Lessee shall pay one-half (1/2) the
fee, if any, of the impartial appraiser.
13.2 ADDITIONAL INSURANCE
In addition to the insurance described above, Lessee shall maintain such
additional insurance as may be reasonably required from time to time by any
Facility Mortgagee and shall further at all times maintain adequate
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worker's compensation insurance coverage for all persons employed by Lessee on
the Leased Property, in accordance with the requirements of applicable local,
state and federal law.
13.3 WAIVER OF SUBROGATION
All insurance policies carried by either party covering the Leased
Property, the Fixtures, the Facility and/or Lessee's Personal Property,
including without limitation, contents, fire and casualty insurance, shall
expressly waive any right of subrogation on the part of the insurer against the
other party. The parties hereto agree that their policies will include such a
waiver clause or endorsement so long as the same is obtainable without extra
cost, and in the event of such an extra charge the other party, at its election,
may pay the same, but shall not be obligated to do so.
13.4 FORM OF INSURANCE
All of the policies of insurance referred to in this Section shall be
written in form reasonably satisfactory to Lessor and by insurance companies
satisfactory to Lessor. Lessee shall pay all of the premiums therefor, and shall
deliver such original policies, or a certified copy thereof (which is certified
in writing by a duly authorized agent for the insurance company as a "true and
certified" copy of the policy), or in the case of a blanket policy, a copy of
the original policy, to the Lessor effective with the Commencement Date and
furnished annually thereafter (and, with respect to any renewal policy, at least
fifteen (15) days prior to the expiration of the existing policy) and in the
event of the failure of Lessee either to obtain such insurance in the names
herein called for or to pay the premiums therefor, or to deliver such policies
or certified copies of such policies to Lessor at the times required, Lessor
shall be entitled, but shall have no obligation, to obtain such insurance and
pay the premiums therefor, which premiums shall be repayable to Lessor upon
written demand therefor, and failure to repay the same shall constitute an Event
of Default within the meaning of Section 16.1(c). Each insurer mentioned in this
Section shall agree, by endorsement on the policy or policies issued by it, or
by independent instrument furnished to Lessor, that (i) it will give to Lessor
sixty (60) days' prior written notice (at Lessor's address as specified in
Article XXXIII hereof {the "Lessor's Notice Address")) before the policy or
policies in question shall be altered, allowed to expire or canceled, (ii) the
policy will not lapse, terminate, be canceled or be amended or modified to
reduce limits or coverage terms unless and until Lessor has received not less
than sixty (60) days' prior written notice at Lessor's Notice Address, (iii) in
the event of cancellation due to non-payment of premium, the insurer will
provide not less than ten (10) days' prior written notice to the Lessor at the
Lessor's Notice Address. Notwithstanding anything contained herein to the
contrary, all policies of insurance required to be obtained by Lessee hereunder
shall provide that such policies will not lapse, terminate, be canceled, or be
amended or modified to reduce limits or coverage terms unless and until Lessor
has received not less than thirty (30) days' prior written notice at the address
provided in Section XXXIII hereof.
13.5 INCREASE IN LIMITS
In the event that Lessor shall at any time in its reasonable discretion
deem the limits of the personal injury, property damage or general public
liability insurance then carried to be insufficient, the parties shall endeavor
to agree on the proper and reasonable limits for such insurance to be carried
and such insurance shall thereafter be carried with the limits thus agreed on
until further change pursuant to the provisions of this Section. If the parties
shall be unable to agree thereon, the proper and reasonable limits for such
insurance to be carried shall be determined by an impartial third party selected
by the parties. Nothing herein shall permit the amount of insurance to be
reduced below the amount or amounts required by any of the Facility Mortgages.
13.6 BLANKET POLICY
Notwithstanding anything to the contrary contained in this Section,
Lessee's obligations to carry the insurance provided for herein may be brought
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Lessee provided that
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(a) Any such blanket policy or policies are reasonably acceptable to
and have been approved by the Lessor, which approval shall not be
unreasonably withheld;
(b) Any such blanket policy or policies shall not be changed, altered
or modified without the prior written consent of the Lessor; and
(c) Any such blanket policy or policies shall otherwise satisfy the
insurance requirements of this Article XIII (including the requirement of
thirty (30) days' written notice before the expiration or cancellation of
such policies as required by Section 13.4 hereof) and shall provide for
deductibles in amounts reasonably acceptable to Lessor.
13.7 NO SEPARATE INSURANCE
Lessee shall not, on Lessee's own initiative or pursuant to the request or
requirement of any third party, take out separate insurance concurrent in form
or contributing in the event of loss with that required in this Article to be
furnished by, or which may reasonably be required to be furnished by, Lessee, or
increase the amounts of any then existing insurance by securing an additional
policy or additional policies, unless all parties having an insurable interest
in the subject matter of the insurance, including in all cases Lessor and all
Facility Mortgagees, are included therein as additional insureds and the loss is
payable under said insurance in the same manner as losses are required to be
payable under this Lease. Lessee shall immediately notify Lessor of the taking
out of any such separate insurance or of the increasing of any of the amounts of
the then existing insurance by securing an additional policy or additional
policies.
ARTICLE XIV
FIRE AND CASUALTY
14.1 INSURANCE PROCEEDS
All proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any policy of insurance
required by Article XIII of this Lease shall be paid to Lessor and held by
Lessor in trust (subject to the provisions of Section 14.7) and shall be made
available for reconstruction or repair, as the case may be, of any damage to or
destruction of the Leased Property, or any portion thereof, and shall be paid
out by Lessor from time to time for the reasonable cost of such reconstruction
or repair. Any excess proceeds of insurance remaining after the completion of
the restoration or reconstruction of the Leased Property (or in the event
neither Lessor nor Lessee is required or elects to repair and restore, all such
insurance proceeds) shall be retained by Lessor free and clear upon completion
of any such repair and restoration except as otherwise specifically provided
below in this Article XIV. All salvage resulting from any risk covered by
insurance shall belong to Lessor except that any salvage relating to Capital
Additions paid for by Lessee or to Lessee's Personal Property shall belong to
Lessee.
14.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED BY
INSURANCE
(a) Except as provided in Section 14.7, if during the Term, the Leased
Property is totally or partially destroyed from a risk covered by the
insurance described in Article XIII and the Facility thereby is rendered
Unsuitable for its Primary Intended Use, Lessee shall have the option, by
giving notice to Lessor within sixty (60) days following the date of such
destruction, to (i) restore the Facility to substantially the same
condition as existed immediately before the damage or destruction, or (ii)
offer (A) to acquire the Leased Property from Lessor for a purchase price
equal to the Fair Market Value Purchase Price of the Leased Property
immediately prior to such damage or destruction or (B) to substitute a new
property pursuant to and in accordance with the provisions of Article XXI.
In the event Lessor does not accept
27
Lessee's offer to so purchase or substitute for the Leased Property, within
thirty (30) days after the date of such offer, Lessee may, by giving notice
to Lessor within thirty (30) days after receipt of Lessor's notice, either
withdraw its offer to purchase or substitute for the Leased Property and
proceed to restore the Facility to substantially the same condition as
existed immediately before the damage or destruction or, unless Lessor is
excused or otherwise not required to accept such Substitute Property
pursuant to the provisions of Article XXI below, terminate this Lease and,
in the latter event, Lessor shall be entitled to retain the insurance
proceeds, and Lessee shall pay to Lessor on demand, the amount of any
deductible or uninsured loss arising in connection therewith.
(b) Except as provided in Section 14.7, if during the Term, the Leased
Improvements and/or the Fixtures are totally or partially destroyed from a
risk covered by the insurance described in Article XIII, but the Facility
is not thereby rendered Unsuitable for its Primary Intended Use, Lessee
shall restore the Facility to substantially the same condition as existed
immediately before the damage or destruction. Such damage or destruction
shall not terminate this Lease; provided, however, if Lessee cannot within
a reasonable time obtain all necessary governmental approvals, including
building permits, licenses, conditional use permits and any certificates of
need, after diligent efforts to do so, in order to be able to perform all
required repair and restoration work and to operate the Facility for its
Primary Intended Use in substantially the same manner as immediately prior
to such damage or destruction, Lessee may either (i) offer pursuant to
Article XXII to substitute a new property, substantially equivalent to the
Leased Property immediately before such damage or destruction, or (ii)
offer to purchase the Leased Property for a purchase price equal to the
Fair Market Value Purchase Price of the Leased Property immediately prior
to such damage or destruction.
(c) If the cost of the repair or restoration exceeds the amount of
proceeds received by Lessor from the insurance required under Article XIII,
Lessee shall be obligated to contribute any excess amount needed to restore
the Facility prior to use of the insurance proceeds. Such amount shall be
paid by Lessee to Lessor (or a Facility Mortgagee if required) to be held
in trust together with any other insurance proceeds for application to the
cost of repair and restoration.
(d) In the event Lessor accepts Lessee's offer to purchase the Leased
Property or to provide a Substitute Property, this Lease shall terminate
upon payment of the purchase price or execution and delivery of all
documents required in connection with a Substitute Property under Article
XXI and Lessor shall remit to Lessee all insurance proceeds being held in
trust by Lessor or the Facility Mortgagee if applicable.
14.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT COVERED BY
INSURANCE
Except as provided in Section 14.7 below, if during the Term, the Facility
is totally or materially destroyed from a risk not covered by the insurance
described in Article XIII but that would have been covered if Lessee carried the
insurance customarily maintained by, and generally available to, the operators
of reputable health care facilities in the region in which the Facility is
located, then, whether or not such damage or destruction renders the Facility
Unsuitable for its Primary Intended Use, Lessee at its option shall either (a)
restore the Facility to substantially the same condition it was in immediately
before such damage or destruction and such damage or destruction shall not
terminate this Lease, or (b) if all of the criteria for such substitution are
satisfied, offer to substitute a new property substantially equivalent to the
Leased Property immediately before such damage or destruction pursuant to the
provisions of Article XXII. Otherwise, if the Facility is totally or materially
destroyed by a risk not covered by such insurance, this Lease shall terminate
unless either party gives the other written notice within ninety (90) days of
the destruction that the notifying party elects to restore the Facility at the
notifying party's expense, in which event this Lease shall remain in full force
and effect. If such damage or destruction is not material, Lessee shall restore
the Leased Property at Lessee's expense.
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14.4 LESSEE'S PERSONAL PROPERTY
All insurance proceeds payable by reason of any loss of or damage to any of
Lessee's Personal Property or Capital Additions financed by Lessee shall be paid
to Lessor and Lessor shall hold such insurance proceeds in trust to pay the cost
of repairing or replacing the damage to Lessee's Personal Property or the
Capital Additions financed by Lessee.
14.5 RESTORATION OF LESSEE'S PROPERTY
If Lessee is required or elects to restore the Facility as provided in
Sections 14.2 or 14.3, Lessee shall also restore all alterations and
improvements made by Lessee, Lessee's Personal Property and all Capital
Additions paid for by Lessee.
14.6 NO ABATEMENT OF RENT
This Lease shall remain in full force and effect and Lessee's obligation to
make rental payments and to pay all other charges required by this Lease shall
remain unabated during any period required for repair and restoration.
14.7 DAMAGE NEAR END OF TERM
Notwithstanding any provisions of Sections 14.2 or 14.3 to the contrary, if
damage to or destruction of the Facility occurs during the last twenty-four (24)
months of the Term, and if such damage or destruction cannot be fully repaired
and restored within six (6) months immediately following the date of loss,
either party shall have the right to terminate this Lease by giving notice to
the other within thirty (30) days after the date of damage or destruction, in
which event Lessor shall be entitled to retain the insurance proceeds and Lessee
shall pay to Lessor on demand the amount of any deductible or uninsured loss
arising in connection therewith; provided, however, that any such notice given
by Lessor shall be void and of no force and effect if Lessee exercises an
available option to extend the Term for one Extended Term within thirty (30)
days following receipt of such termination notice.
14.8 TERMINATION OF RIGHT OF PURCHASE
Any termination of this Lease pursuant to this Article XIV or otherwise
shall cause any right to purchase granted to Lessee under this Lease to be
terminated and to be without further force or effect.
14.9 WAIVER
Lessee hereby waives any statutory or common law rights of termination
which may arise by reason of any damage or destruction of the Facility.
ARTICLE XV
CONDEMNATION
15.1 DEFINITIONS
"Condemnation" means (i) the exercise of any governmental power, whether by
legal proceedings or otherwise, by a Condemnor or (ii) a voluntary sale or
transfer by Lessor to any Condemnor, either under threat of Condemnation or
while legal proceedings for Condemnation are pending.
29
(a) "Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.
(b) "Award" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
(c) "Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
15.2 PARTIES' RIGHTS AND OBLIGATIONS
If during the Term there is any Taking of all or any part of the Leased
Property or any interest in this Lease by Condemnation, the rights and
obligations of the parties shall be determined by this Article XV.
15.3 TOTAL TAKING
If there is a Taking of all of the Leased Property by Condemnation, this
Lease shall terminate on the Date of Taking.
15.4 PARTIAL TAKING
If there is a Taking of a portion of the Leased Property by Condemnation,
this Lease shall remain in effect if the Facility is not thereby rendered
Unsuitable for its Primary Intended Use. If, however, the Facility is thereby
rendered Unsuitable for its Primary Intended Use, Lessee shall have the option
(a) to restore the Facility, at its own expense, to the extent possible, to
substantially the same condition as existed immediately before the partial
Taking, or (b) to offer (i) to acquire the Leased Property from Lessor for a
purchase price equal to the Fair Market Value Purchase Price of the Leased
Property immediately prior to such partial Taking, in which event this Lease
shall terminate upon payment of the purchase price, or (ii) to substitute a new
property pursuant to and in accordance with the provisions of Article XXI.
Lessee shall exercise its option by giving Lessor notice thereof within sixty
(60) days after Lessee receives notice of the Taking. In the event Lessor does
not accept Lessee's offer to so purchase or substitute for the Leased Property
within thirty (30) days after receipt of the notice described in the preceding
sentence, Lessee may either (a) withdraw its offer to purchase or substitute for
the Leased Property and proceed to restore the Facility, to the extent possible,
to substantially the same condition as existed immediately before the partial
Taking or (b) terminate this Lease by written notice to Lessor.
15.5 RESTORATION
If there is a partial Taking of the Leased Property and this Lease remains
in full force and effect pursuant to Section 15.4, Lessee shall accomplish all
necessary restoration.
15.6 AWARD DISTRIBUTION
In the event Lessor accepts Lessee's offer to purchase the Leased Property,
or to substitute a new property for the Leased Property, as described in clause
(b) of Section 15.4, the entire Award shall belong to Lessee provided no event
of default is continuing and Lessor agrees to assign to Lessee all of its rights
thereto. In any other event, the entire Award shall belong to and be paid to
Lessor, except that, if this Lease is terminated, and subject to the rights of
the Facility Mortgagee, Lessee shall be entitled to receive from the Award, if
and to the extent such Award specifically includes such items, the following:
30
(a) A sum attributable to the Capital Additions for which Lessee would
be entitled to reimbursement at the end of the Term pursuant to the
provisions of Section 10.2(c) and the value, if any, of the leasehold
interest of Lessee under this Lease; and
(b) A sum attributable to Lessee's Personal Property and any
reasonable removal and relocation costs included in the Award.
If Lessee is required or elects to restore the Facility, Lessor agrees that,
subject to the rights of the Facility Mortgagees, its portion of the Award shall
be used for such restoration and it shall hold such portion of the Award in
trust, for application to the cost of the restoration.
15.7 TEMPORARY TAKING
The Taking of the Leased Property, or any part thereof, by military or
other public authority shall constitute a Taking by Condemnation only when the
use and occupancy by the Taking authority has continued for longer than six (6)
months. During any such six (6) month period all the provisions of this Lease
shall remain in full force and effect and the Base Rent and Percentage Rent
shall not be abated or reduced during such period of Taking.
ARTICLE XVI
DEFAULT
16.1 EVENTS OF DEFAULT
The occurrence of any one or more of the following events (individually, an
"Event of Default") shall constitute Events of Default hereunder:
(a) a default or event of default shall occur under any of the Other
Leases, or
(b) if Lessee shall fail to make a payment of the Rent or any other
monetary payment due and payable by Lessee under this Lease when the same
becomes due and payable and such failure is not cured by Lessee or
Guarantors within a period of twenty (20) days (unless another period of
time is expressly provided for elsewhere in this Lease) after receipt by
Lessee of notice thereof from Lessor, or
(c) if Lessee or any of the Guarantors shall fail to observe or
perform any other term, covenant or condition of this Lease and such
failure is not cured by Lessee or Guarantors within a period of thirty (30)
days after receipt by Lessee of notice thereof from Lessor, unless such
failure cannot with due diligence be cured within a period of thirty (30)
days, in which case such failure shall not be deemed to continue if Lessee
or Guarantors proceed promptly and with due diligence to cure the failure
and diligently completes the curing thereof within sixty (60) days after
receipt by Lessee of Lessor's notice of default, or
(d) if Lessee or any Guarantor shall:
(i) admit in writing its inability to pay its debts generally as
they become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
31
(iv) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property, or
(v) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof,
or
(vi) if Guarantor's total debt is more than the greater of (i)
one hundred percent (100%) of the total capitalization of the
Guarantor, or (ii) 4.5 times the twelve (12) months' total EBITDAR of
the Guarantor, whichever is greater, or
(vii) if the Leased Property experiences six (6) consecutive
quarters of falling average daily census, or
(viii) if Lessee's license as defined in Article XXXIX or
participation or certification in Medicare, Medicaid or other
governmental payor programs is terminated, or
(ix) if Lessee admits in writing that it cannot meet its
obligations as they become due; or is declared insolvent according to
any law; or assignment of Lessee's property is made for the benefit of
creditors; or a receiver or trustee is appointed for Lessee or its
property; or the interest of Lessee under this Lease is levied on
under execution or other legal process; or any petition is filed by or
against Lessee to declare Lessee bankrupt or to delay, reduce or
modify Lessee's capital structure if Lessee be a corporation or other
entity (provided that no such levy, execution, legal process or
petition filed against Lessee shall constitute a breach of this Lease
if Lessee shall vigorously contest the same by appropriate proceedings
and shall remove or vacate the same within thirty (30) days from the
date of its creation, service or filing); or
(x) the abandonment or vacation of the Leased Property by
Lessee. Lessee's absence from the Leased Property for ninety (90)
consecutive days shall constitute abandonment.
(e) if the Lessee or any Guarantor shall, after a petition in
bankruptcy is filed against it, be adjudicated a bankrupt or if a court of
competent jurisdiction shall enter an order or decree appointing, without
the consent of Lessee or such Guarantor, as the case may be, a receiver of
Lessee or such Guarantor or of the whole or substantially all of its
property, or approving a petition filed against it seeking reorganization
or arrangement of Lessee or such Guarantor under the federal bankruptcy
laws or any other applicable law or statute of the United States of America
or any state thereof, and such judgment, order or decree shall not be
vacated or set aside or stayed within ninety (90) days from the date of the
entry thereof, or
(f) if Lessee or any Guarantor shall be liquidated or dissolved, or
shall begin proceedings toward such liquidation or dissolution, or shall,
in any manner, permit the sale or divestiture of substantially all of its
assets other than in connection with a merger or consolidation of Lessee or
such Guarantor into, or a sale of substantially all of Lessee's or such
Guarantor's assets to, another corporation, provided that if the survivor
of such merger or the purchaser of such assets shall assume all of Lessee's
obligations under this Lease by a written instrument, in form and substance
reasonably satisfactory to Lessor, accompanied by an opinion of counsel,
reasonably satisfactory to Lessor and addressed to Lessor stating that such
instrument of assumption is valid, binding and enforceable against the
parties thereto in accordance with its terms (subject to usual bankruptcy
and other creditors' rights exceptions), and provided, further, that if,
immediately after giving effect to any such merger, consolidation or sale,
Lessee or such other corporation (if not the Lessee) surviving the same,
together with Guarantors, shall have a Consolidated Net Worth not less than
the Consolidated Net Worth of Lessee or Guarantors immediately prior to
such merger,
32
consolidation or sale, all as to be set forth in an Officer's Certificate
delivered to Lessor within thirty (30) days of such merger, consolidation
or sale, an Event of Default shall not be deemed to have occurred, or
(g) if the estate or interest of Lessee in the Leased Property or any
part thereof shall be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of ninety (90)
days after commencement thereof or thirty (30) days after receipt by Lessee
of notice thereof from Lessor (unless Lessee shall be contesting such lien
or attachment in good faith in accordance with Article XII hereof), or
(h) if, except as a result of damage, destruction or a partial or
complete Condemnation, Lessee voluntarily ceases operations on the Leased
Property for a period in excess of ninety (90) days, or
(i) if any of the representations or warranties made by Lessee or
Vibra in the Purchase Agreement or in the certificates delivered in
connection therewith are or become untrue in any material respect, and
which is not cured within twenty (20) days after receipt by Lessee of
notice from Lessor thereof, or
(j) a default shall occur under the Guaranty executed by Guarantors
concurrently herewith, or
(k) a default or event of default shall occur under the Lease
Assignment, Security Agreement or any other agreement between Lessor or any
Affiliate of Lessor and Lessee or any Guarantor or any Affiliate of Lessee
or any Guarantor, or
(l) if Lessee defaults under the Tenant Leases or fails or refuses to
enforce the terms and conditions of the Tenant Leases, or
(m) if a default shall occur under any of the Loans, or
(n) if a default shall occur under the Loan Guaranty.
If an Event of Default shall have occurred, Lessor shall have the right at its
election, then or at any time thereafter, to pursue any one or more of the
following remedies, in addition to any remedies which may be permitted by law or
by other provisions of this Lease, without notice or demand, except as
hereinafter provided:
A. Without any notice or demand whatsoever, Lessor may take any one or
more of the actions permissible at law to insure performance by Lessee of
Lessee's covenants and obligations under this Lease. In this regard, it is
agreed that if Lessee deserts or vacates the Leased Property, Lessor may enter
upon and take possession of such Leased Property in order to protect it from
deterioration and continue to demand from Lessee the monthly rentals and other
charges provided in this Lease, without any obligation to relet; but that if
Lessor does, at its sole discretion, elect to relet the Leased Property, such
action by Lessor shall not be deemed as an acceptance of Lessee's surrender of
the Leased Property unless Lessor expressly notifies Lessee of such acceptance
in writing pursuant to subsection B of this Section 16.1., Lessee hereby
acknowledging that Lessor shall otherwise be reletting as Lessee's agent and
Lessee furthermore hereby agreeing to pay to Lessor on demand any deficiency
that may arise between the monthly rentals and other charges provided in this
Lease and that are actually collected by Lessor. It is further agreed in this
regard that in the event of any default described in this Section 16.1, Lessor
shall have the right to enter upon the Leased Property by force, if necessary,
without being liable for prosecution or any claim for damages therefor, and do
whatever Lessee is obligated to do under the terms of this Lease; and Lessee
agrees to reimburse Lessor on demand for any expenses which Lessor may incur in
thus effecting compliance with Lessee's obligations under this Lease, and Lessee
further agrees that Lessor shall not be liable for any damages resulting to the
Lessee from such action.
33
▇. ▇▇▇▇▇▇ may terminate this Lease by written notice to Lessee, in which
event Lessee shall immediately surrender the Leased Property to Lessor, and if
Lessee fails to do so, Lessor may, without prejudice to any other remedy which
Lessor may have for possession or arrearages in rent (including any interest
which may have accrued pursuant to Section 3.4 of this Lease), enter upon and
take possession of the Leased Property and expel or remove Lessee and any other
person who may be occupying said premises or any part thereof, by force, if
necessary, without being liable of prosecution or any claim for damages
therefor. Lessee hereby waives any statutory requirement of prior written notice
for filing eviction or damage suits for nonpayment of rent. In addition, Lessee
agrees to pay to Lessor on demand the amount of all loss and damage which Lessor
may suffer by reason of any termination effected pursuant to this subsection B,
said loss and damage to be determined, at Lessor's option, by either of the
following alternative measures of damages:
(i) Until Lessor is able, although Lessor shall be under no
obligation to attempt, to relet the Leased Property, Lessee shall pay
to Lessor on or before the first day of each calendar month, the
monthly rentals and other charges provided in this Lease. After the
Leased Property has been relet by Lessor, Lessee shall pay to Lessor
on the 10th day of each calendar month the difference between the
monthly rentals and other charges provided in this Lease for the
preceding calendar month and that actually collected by Lessor for
such month. If it is necessary for Lessor to bring suit in order to
collect any deficiency, Lessor shall have a right to allow such
deficiencies to accumulate and to bring an action on several or all of
the accrued deficiencies at one time. Any such suit shall not
prejudice in any way the right of Lessor to bring a similar action for
any subsequent deficiency or deficiencies. Any amount collected by
Lessor from subsequent tenants for any calendar month, in excess of
the monthly rentals and other charges provided in this Lease, shall be
credited to Lessee in reduction of Lessee's liability for any calendar
month for which the amount collected by Lessor will be less than the
monthly rentals and other charges provided in this Lease; but Lessee
shall have no right to such excess other than the above-described
credit.
(ii) When Lessor desires, Lessor may demand a final settlement.
Upon demand for a final settlement, Lessor shall have a right to, and
Lessee hereby agrees to pay, the difference between the total of all
monthly rentals and other charges provided in this Lease for the
remainder of the Lease Term and the reasonable rental value of the
Leased Property for such period, such difference to be discounted to
present value at a rate equal to the lowest rate of capitalization
(highest present worth) reasonably applicable at the time of such
determination and allowed by applicable law. If Lessor elects to
exercise the remedy prescribed in subsection A above, this election
shall in no way prejudice Lessor's right at any time thereafter to
cancel said election in favor of the remedy prescribed in subsection B
above. Similarly, if Lessor elects to compute damages in the manner
prescribed by subsection B(i) above, this election shall in no way
prejudice Lessor's right at any time thereafter to demand a final
settlement in accordance with this subsection B(ii) above. Pursuit of
any of the above remedies shall not preclude pursuit of any other
remedies prescribed in other sections of this Lease and any other
remedies provided by law or equity. Forbearance by Lessor to enforce
one or more of the remedies herein provided upon an Event of Default
shall not be deemed or construed to constitute a waiver of such
default.
C. In addition to other rights and remedies Lessor may have hereunder and
at law and in equity, in the event Lessee defaults under this Lease, (i) Lessor
shall have the right, but not the obligation or responsibility to hire all or
some of the employees of the Lessee, and Lessee hereby acknowledges that no
non-compete or non-solicitation agreement is either implied or expressed
hereunder relating to such employees; (ii) Lessee is deemed to have assigned to
Lessor, at Lessor's sole option, all service agreements (including, without
limitation, all medical director agreements); (iii) Lessee is deemed to have
assigned and transferred to Lessor, at Lessor's sole option, all supplies and
inventory used or usable in the operation of the Leased Property, and (iv)
Lessee is deemed, at Lessor's sole discretion, to have transferred and assigned
to Lessor all Licenses and agreements, including, without limitation, all
Medicare and Medicaid provider numbers, or is hereby deemed, at Lessor's sole
discretion, to agree to
34
transfer to the Lessor all of the Licenses, including, without limitation, all
Medicare and Medicaid provider numbers.
16.2 EVENTS OF DEFAULT IN FINANCIAL COVENANTS
The occurrence of any one or more of the following shall constitute a
material default and breach of this Section 16.2 and the Lessor shall have the
rights and remedies provided for herein:
(a) If the total required payments with respect to the total
indebtedness of the Lessee when added to the Coverage Rent generates a
coverage ratio to the Leased Property's EBITDAR of less than one hundred
twenty-five percent (125%) for two consecutive fiscal quarters determined
on an annualized basis, or
(b) The Lessee generates a Coverage Rent lease coverage from EBITDAR
of less than one hundred fifty percent (150%) for two consecutive fiscal
quarters determined on an annualized basis, or
(c) If the Leased Property experiences six (6) consecutive quarters of
falling average daily census, or
(d) If the parent company of the Lessee makes a payment default on any
of its corporate debt or other leases and such default is not cured within
the cure periods provided for therein.
then the Lessor shall have the right to foreclose on the interest of the Lessee
and proceed with any remedy the Lessor deems needed, including, but not limited
to, selling the Lessee's interest to a third party.
Upon the occurrence of any of the items in Section 16.1 or this Section
16.2, Lessor may, at its option, require Lessee to cancel the Management
Agreement and to replace the Management Company with a company of Lessor's
choosing.
16.3 ADDITIONAL EXPENSES
It is further agreed that, in addition to payments required pursuant to
subsections A and B of Section 16.1 above, Lessee shall compensate Lessor for
(i) all administrative expenses, (ii) all expenses incurred by Lessor in
repossessing the Leased Property (including among other expenses, any increase
in insurance premiums caused by the vacancy of the Leased Property), (iii) all
expenses incurred by Lessor in reletting (including among other expenses,
repairs, remodeling, replacements, advertisements and brokerage fees), (iv) all
concessions granted to a new tenant or tenants upon reletting (including among
other concessions, renewal options), (v) Lessor's reasonable attorneys' fees and
expenses, (vi) all losses incurred by Lessor as a direct or indirect result of
Lessee's default (including among other losses any adverse action by
mortgagees), and (vii) a reasonable allowance for Lessor's administrative
efforts, salaries and overhead attributable directly or indirectly to Lessee's
default and Lessor's pursuing the rights and remedies provided herein and under
applicable law.
16.4 INTENTIONALLY OMITTED.16.5 WAIVER.
If this Lease is terminated pursuant to Section 16.1, Lessee waives,
to the extent permitted by applicable law, (a) any right of redemption, re-entry
or repossession, (b) any right to a trial by jury in the event of summary
proceedings to enforce the remedies set forth in this Article XVI, and (c) the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt.
35
16.6 APPLICATION OF FUNDS
Any payments otherwise payable to Lessee which are received by Lessor under
any of the provisions of this Lease during the existence or continuance of any
Event of Default shall be applied to Lessee's obligations in the order which
Lessor may reasonably determine or as may be prescribed by the laws of the state
in which the Facility is located.
16.7 NOTICES BY LESSOR
The provisions of this Article XVI concerning notices shall be liberally
construed insofar as the contents of such notices are concerned, and any such
notice shall be sufficient if reasonably designed to apprise Lessee of the
nature and approximate extent of any default, it being agreed that Lessee is in
good or better position than Lessor to ascertain the exact extent of any default
by Lessee hereunder.
16.8 LESSOR'S CONTRACTUAL SECURITY INTEREST
Lessee hereby gives to Lessor an express first and prior contract lien and
security interest in all property which may be placed on the Leased Property
(including fixtures, equipment, chattels and merchandise) and also upon all
proceeds of any insurance which may accrue to Lessee by reason of destruction of
or damage to any such property and also upon all of Lessee's interest as lessee
and rights and options to purchase fixtures, equipment and chattels placed on
the Leased Property (in case of fixtures, equipment and chattels leased to
Lessee which are placed on the Leased Property). All exemption laws are hereby
waived in favor of such lien and security interest and in favor of Lessor's
statutory landlord lien. This lien and security interest are given in addition
to any statutory landlord lien and shall be cumulative thereto. Lessor shall
have at all times a valid security interest to secure payment of all rentals and
other sums of money becoming due hereunder from Lessee, and to secure payment of
any damages or loss which Lessor may suffer by reason of the breach by Lessee of
any covenant, agreement or condition contained herein, upon all inventory,
merchandise, goods, wares, equipment, fixtures, furniture, improvements and
other tangible personal property of Lessee presently, or which may hereafter be,
situated in or about the Leased Property, and all proceeds therefrom and
accessions thereto and, except as a result of sales made in the ordinary course
of Lessee's business, such property shall not be removed without the consent of
Lessor until all arrearages in rent as well as any and all other sums of money
then due to Lessor or to become due to Lessor hereunder shall first have been
paid and discharged and all the covenants, agreements and conditions hereof have
been fully complied with and performed by Lessee. Upon the occurrence of an
Event of Default by Lessee, Lessor may, in addition to any other remedies
provided herein, enter upon the Leased Property and take possession of any and
all inventory, merchandise, goods, wares, equipment, fixtures, furniture,
improvements and other personal property of Lessee situated in or about the
Leased Property, without liability for trespass or conversion, and sell the same
at public or private sale, with or without having such property at the sale,
after giving Lessee reasonable notice of the time and place of any public sale
of the time after which any private sale is to be made, at which sale the Lessor
or its assigns may purchase unless otherwise prohibited by law. Unless otherwise
provided by law, and without intending to exclude any other manner of giving
Lessee reasonable notice, the requirement of reasonable notice shall be met, if
such notice is given in the manner prescribed in this Lease at least ten (10)
days before the time of sale. Any sale made pursuant to the provision of this
paragraph shall be deemed to have been a public sale conducted in commercially
reasonable manner if held in the above-described premises or where the property
is located after the time, place and method of sale and a general description of
the types of property to be sold have been advertised in a daily newspaper
published in the county in which the property is located, for five (5)
consecutive days before the date of the sale. The proceeds from any such
disposition, less any and all expenses connected with the taking of possession,
holding and selling of the property (including reasonable attorney's fees and
legal expenses), shall be applied as a credit against the indebtedness secured
by the security interest granted in this paragraph. Any surplus shall be paid to
Lessee or as otherwise required by law; the Lessee shall pay any deficiencies
forthwith. Upon request by Lessor, Lessee agrees to execute and deliver to
Lessor a financing statement in form sufficient to perfect the security interest
of Lessor in the aforementioned property and proceeds thereof under the
provision of the
36
Uniform Commercial Code (or corresponding state statute or statutes) in force in
the state in which the Leased Property is located, as well as any other state
the laws of which Lessor may at any time consider to be applicable.
ARTICLE XVII
LESSOR'S RIGHT TO CURE
If Lessee shall fail to make any payment, or to perform any act required to
be made or performed under this Lease and to cure the same within the relevant
time periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation or Event of Default, may (but shall be under no obligation to) at any
time thereafter make such payment or perform such act for the account and at the
expense of Lessee, and may, to the extent permitted by law, enter upon the
Leased Property for such purpose and take all such action thereon as, in
Lessor's reasonable opinion, may be necessary or appropriate therefor. No such
entry shall be deemed an eviction of Lessee. All sums so paid by Lessor and all
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses, in each case, to the extent permitted by law) so incurred,
together with a late charge thereon (to the extent permitted by law) at the
Overdue Rate from the date on which such sums or expenses are paid or incurred
by Lessor, shall be paid by Lessee to Lessor on demand. The obligations of
Lessee and rights of Lessor contained in this Article shall survive the
expiration or earlier termination of this Lease.
ARTICLE XVIII
PURCHASE OF THE LEASED PROPERTY
In the event Lessee purchases the Leased Property from Lessor pursuant to
any of the terms of this Lease, including, without limitation Article XXXV,
Lessor shall, upon receipt from Lessee of the applicable purchase price,
together with full payment of any unpaid Rent due and payable with respect to
any period ending on or before the date of the purchase, deliver to Lessee an
appropriate special warranty deed or other instrument of conveyance conveying
the entire interest of Lessor in and to the Leased Property to Lessee in the
condition as received from Lessee, free and clear of all encumbrances other than
(a) those that Lessee has agreed hereunder to pay or discharge, (b) those
mortgage liens, if any, which Lessee has agreed in writing to accept and to take
title subject to, (c) any other Encumbrances permitted to be imposed on the
Leased Property under the provisions of Article XXXVII which are assumable at no
cost to Lessee or to which Lessee may take subject without cost to Lessee, and
(d) any matters affecting the Leased Property on or as of the Commencement Date.
The difference between the applicable purchase price and the total of the
encumbrances assigned or taken subject to shall be paid in cash to Lessor, or as
Lessor may direct, in federal or other immediately available funds except as
otherwise mutually agreed by Lessor and Lessee. The closing of any such sale
shall be contingent upon and subject to Lessee obtaining all required
governmental consents and approvals for such transfer and if such sale shall
fail to be consummated by reason of the inability of Lessee to obtain all such
approvals and consents, any options to extend the Term of this Lease which
otherwise would have expired during the period from the date when Lessee elected
or became obligated to purchase the Leased Property until Lessee's inability to
obtain the approvals and consents is confirmed shall be deemed to remain in
effect for thirty (30) days after the end of such period. All expenses of such
conveyance, including, without limitation, the cost of title examination or
standard coverage title insurance, survey, attorneys' fees incurred by Lessor in
connection with such conveyance, transfer taxes, recording fees and similar
charges shall be paid for by Lessee.
ARTICLE XIX
HOLDING OVER
If Lessee shall for any reason remain in possession of the Leased Property
after the expiration of the Term or any earlier termination of the Term hereof,
such possession shall be as a tenancy at will during which time Lessee
37
shall pay as rental each month, one and one-half times the aggregate of (a)
one-twelfth of the aggregate Base Rent and Percentage Rent payable with respect
to the last complete Lease Year prior to the expiration of the Term; (b) all
Additional Charges accruing during the month and (c) all other sums, if any,
payable by Lessee pursuant to the provisions of this Lease with respect to the
Leased Property. During such period of tenancy, Lessee shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to tenancies at will, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease.
ARTICLE XX
INTENTIONALLY OMITTED
ARTICLE XXI
SUBSTITUTION OF PROPERTY
21.1 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY
(a) If, in the good faith judgment of Lessee reasonably exercised, the
Leased Property becomes uneconomic or Unsuitable for its Primary Intended
Use, or by reason of eviction or other material interference caused by any
claim of paramount title, or for other prudent business reasons, Lessee
desires to terminate this Lease, Lessee, if no Event of Default shall have
occurred and be continuing, at any time prior to the expiration of the
Term, shall have the right, subject to the conditions set forth below in
this Article XXI, upon written notice to Lessor, to substitute one or more
properties (collectively referred to as "Substitute Properties" or
individually as a "Substitute Property") on a monthly Base Rent Payment
Date specified in such notice (the "Substitution Date") occurring not less
than ninety (90) days after receipt by Lessor of such notice, except if
Lessee is required by court order or administrative action to divest or
otherwise dispose of the Leased Property within a shorter time period, in
which case if Lessee shall have informed Lessor in writing of the filing of
such court order or administrative action and kept Lessor reasonably
appraised of the status thereof, the time period shall be shortened
appropriately to meet the reasonable needs of Lessee, but in no event less
than fifteen (15) Business Days after the receipt by Lessor of such notice.
The notice shall be in the form of an Officer's Certificate and shall
specify the reason(s) for the substitution and the proposed Substitution
Date. For purposes of this paragraph, the desire of Lessee to reduce the
payment of Rent with respect to the Leased Property whose operation
(considering the Rent) is uneconomic to Lessee shall not be deemed to be a
reason for substitution.
(b) If Lessee voluntarily or involuntarily, for any reason, has
discontinued use of the Leased Property in its business operations for a
period in excess of one year, and Lessor has not exercised its right to
terminate this Lease pursuant to Section 16.1 hereof, Lessee shall have the
obligation, upon notice given as set forth in paragraph (a) above, to
substitute a Substitute Property or, if applicable, invoke the procedure
set forth in Article XXI.
(c) If Lessee gives the notice referred to in Section 21.1(a) or (b)
above, Lessee shall present to Lessor three properties (or groups of
properties) each of which property (or groups of properties) shall provide
Lessor with a yield (i.e., an annual return on its equity in such property)
substantially equivalent to Lessor's yield from the Leased Property at the
time of such proposed substitution (or in the case of substitution because
of damage or destruction, the yield immediately prior to such damage or
destruction) and as reasonably projected over the remaining Term of this
Lease. Lessor shall have a period of ninety
38
(90) days within which to review such information and either accept one or
reject all the Substitute Properties so presented unless Lessee is required
by a court order or administrative action to divest or otherwise dispose of
the Leased Property within a shorter time period, in which case the time
period shall be shortened appropriately to meet the reasonable needs of
Lessee, but in no event shall said period be less than fifteen (15)
Business Days after Lessor's receipt of said notice (subject to further
extension for any period of time in which Lessor is not timely provided
with the information provided for in Section 21.2 and Section 21.3 below)
provided, however, that if Lessor shall contend that the Substitute
Properties fail to meet all the conditions for substitution set forth in
this Article XXI, including without limitation the provisions of Sections
21.1(d), (e) and (f) below, the matter shall be submitted to arbitration at
Lessor's discretion and the time periods for Lessor's approval or rejection
shall be tolled during the period of such arbitration.
(d) In the event that, on or before the expiration of the applicable
time period for Lessor's review, Lessor has rejected all of the Substitute
Properties so presented, then Lessee shall, for a period of sixty (60) days
after the expiration of such period, have the right to terminate this Lease
as to the Leased Property upon notice to Lessor accompanied by an offer to
purchase the Leased Property on the first Base Rent Payment Date occurring
at least ninety (90) days after the date of such notice, as specified in
such notice, for a purchase price equal to the Fair Market Value Purchase
Price, and this Lease shall terminate on the purchase date provided no
Event of Default shall have occurred and be continuing.
(e) If Lessor accepts such offer, or fails to reject the same by
written notification within the applicable time period for Lessor's review,
Lessor shall, upon receipt from Lessee of the purchase price provided for
above and any Rent due and payable hereunder (excluding the installment of
Base Rent due on the purchase date), convey the Leased Property to Lessee
on the purchase date, in accordance with the provisions of Article XVIII
and this Lease shall thereupon terminate as to the Leased Property. Upon
completion of the purchase of the Leased Property, no Rent shall thereafter
accrue with respect thereto.
(f) Lessee's right (and obligation) to offer substitution as set forth
in this Article is subject to the conditions set forth in Section 21.2
below, and to the delivery of an opinion of counsel for Lessor confirming
that (i) the substitution of the Substitute Property for the Leased
Property will qualify as an exchange solely of property of a like-kind
under Section 1031 of the Code, in which, generally, except for "boot" such
as cash needed to equalize exchange values or discharge indebtedness, no
gain or loss is recognized to Lessor, (ii) the substitution or sale will
not result in ordinary recapture income to Lessor pursuant to Code Section
1245 or 1250 or any other Code provision, (iii) the substitution or sale
will result in income, if any, to Lessor of a type described in Code
Section 856(c)(2) or (3) and will not result in income of the types
described in Code Section 856(c)(4) or result in the tax imposed under Code
Section 857(b)(6), and (iv) the substitution or sale, together with all
other substitutions and sales made or requested by Lessee or any Affiliate
pursuant to any other leases with Lessor of the properties, any other
transfers of the Leased Property or the properties leased under other such
operating leases, during the relevant time period, will not jeopardize the
qualification of Lessor as a real estate investment trust under Code
Sections 856-860.
(g) In the event that the equity value of the Substitute Property or
group of Substitute Properties (i.e., the Fair Market Value of the
Substitute Property or group of Substitute Properties minus the
encumbrances to which Lessor will take the Substitute Property or group of
Substitute Properties subject) as of the Substitution Date is greater than
the equity value of the Leased Property (i.e., the Fair Market Value of the
Leased Property minus the encumbrances to which Lessee will take the Leased
Property subject) as of the Substitution Date (or in the case of damage or
destruction, the Fair Market Value immediately prior to such damage or
destruction), Lessor shall pay an amount equal to the difference, subject
to the limitation set forth below, to Lessee; in the event that said equity
value of the Substitute Property or group of Substitute Properties is less
than said equity value of the Leased Property, Lessee shall
39
pay an amount equal to the difference, subject to the limitation set forth
below, to Lessor; provided, however, that neither Lessor nor Lessee shall
be obligated to consummate such substitution if such party would be
required to make a payment to the other in excess of an amount equal to ten
percent (10%) of said Fair Market Value of the Leased Property (the amount
of cash paid by one party to the other being hereinafter referred to as the
"Cash Adjustment"). Without limiting the generality or effect of the
preceding sentence, in the event that, on the Substitution Date, Lessor is
obligated to pay a Cash Adjustment to Lessee and Lessor does not have
sufficient funds available, or elects not to make such payment in cash,
Lessor shall provide Lessee with (and Lessee shall accrue) a purchase money
note and mortgage for a term not to exceed eighteen (18) months from the
Substitution Date and bearing interest, payable monthly, at the rate per
annum described in Section 10.2 as the Test Rate, or if no such Test Rate
exists, then at the Prime Rate.
(h) The Rent for such Substitute Property in all respects shall
provide Lessor with a substantially equivalent yield at the time of such
substitution (i.e., annual return on its equity in such Substitute
Property) to that received (and reasonably expected to be received
thereafter) from the Leased Property, taking into account the Cash
Adjustment paid or received by Lessor and any other relevant factors.
(i) The Fair Market Value of the Substitute Property shall be an
amount equal to the Fair Market Value of the Leased Property (i) increased
by any Cash Adjustment paid by Lessor pursuant to paragraph (g) above, or
(ii) decreased by any Cash Adjustment paid by Lessee pursuant to paragraph
(g) above.
21.2 CONDITIONS TO SUBSTITUTION
On the Substitution Date, the Substitute Property will become the Leased
Property hereunder upon delivery by Lessee to Lessor of the following:
(a) an Officer's Certificate certifying that (i) the Substitute
Property has been accepted by Lessee for all purposes of this Lease and
there has been no material damage to the improvements located on the
Substitute Property nor is any condemnation or eminent domain proceeding
pending with respect thereto; (ii) all permits, licenses and certificates
(including, but not limited to, a permanent, unconditional certificate of
occupancy and all certificates of need, licenses and provider agreements)
which are necessary to permit the use of the Substitute Property in
accordance with the provisions of this Lease have been obtained and are in
full force and effect; (iii) under applicable zoning and use laws,
ordinances, rules and regulations the Substitute Property may be used for
the purposes contemplated by Lessee and all necessary subdivision approvals
have been obtained; (iv) there are no mechanics' or materialmen's liens
outstanding or threatened to the knowledge of Lessee against the Substitute
Property arising out of or in connection with the construction of the
improvements thereon, other than those being contested by Lessee pursuant
to Article XII; (v) any mechanics' or materialmen's liens being contested
by Lessee will be promptly paid by Lessee if such contest is resolved in
favor of the mechanic or materialman; (vi) to the best knowledge of Lessee,
there exists no Event of Default under this Lease, and no defense, offset
or claim exists with respect to any sums to be paid by Lessee hereunder,
and (vii) any exceptions to Lessor's title to the Substitute Property do
not materially interfere with the intended use of the Substitute Property
by Lessee;
(b) a deed with full warranties conveying to Lessor title to the
Substitute Property free and clear of any liens and encumbrances except
those approved or assumed by Lessor;
(c) a lease duly executed, acknowledged and delivered by Lessee,
containing the same terms and conditions as are contained herein except
that (i) the legal description of the land shall refer to the Substitute
Property, (ii) the Fair Market Value, Rent and any Additional Charges for
the Substitute Property shall be consistent with the requirements of
Section 21.1 and (iii) such other changes therein as may be necessary or
appropriate under the circumstances shall be made;
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(d) counterparts of a standard owner's or lessee's (as applicable)
policy of title insurance covering the Substitute Property (or a valid,
binding, unconditional commitment therefor), dated the Substitution Date,
in current form and including mechanics' and materialmen's lien coverage,
issued to Lessor by a title insurance company satisfactory to Lessor. Such
policy shall (i) insure (A) Lessor's fee title to the Substitute Property,
subject to no liens or encumbrances except those approved or assumed by
Lessor, and (B) that any restrictions affecting the Substitute Property
have not been violated and that a fixture violation thereof will not result
in a forfeiture or reversion of title, (ii) be in an amount at least equal
to the Fair Market Value of the Substitute Property, and (iii) contain such
endorsements as may be reasonably requested by Lessor;
(e) certificates of insurance with respect to the Substitute Property
fulfilling the requirements of Article XIII;
(f) current appraisals or other evidence satisfactory to Lessor, in
its sole discretion, as to the current Fair Market Values of such
Substitute Property and the Leased Property;
(g) all available revenue data relating to the Substitute Property for
the period from the date of opening for business of the facility on such
Substitute Property to the date of Lessee's most recent fiscal year end, or
for the most recent three (3) years, whichever is less; and
such other certificates, documents, opinions of counsel, and other
instruments as may be reasonably required by Lessor.
21.3 CONVEYANCE TO LESSEE
On the Substitution Date or the date specified in the notice given pursuant
to Section 21.1. Lessor will convey the Leased Property to Lessee in accordance
with the provisions of Article XVIII (except as to payment of any expenses in
connection therewith which shall be governed by Section 21.4 below) upon either
(a) payment in cash therefor or (b) conveyance to Lessor of the Substitute
Property, as appropriate.
21.4 EXPENSES
Lessee shall pay or cause to be paid, on demand, all reasonable costs and
expenses of Lessor paid or incurred by it in connection with the substitution
and conveyance of the Leased Property and the Substitute Property, including but
not limited to (a) fees and expenses of its counsel and consultants, (b) all
printing expenses, (c) the amount of any filing, registration and recording
taxes and fees, (d) reasonable fees and expenses, if any, incurred in qualifying
and maintaining Lessor as a foreign corporation authorized to do business in the
state of which the Substitute Property is located, (e) the cost of preparing and
recording, if appropriate, a release of the Leased Property from the lien of any
mortgage, (f) broker's fees and commissions, if any, (g) documentary stamp and
transfer taxes, if any, (h) title insurance charges, and (i) escrow fees. Lessee
shall also pay for and obtain all necessary regulatory approvals including
licensing, surveys and certificates of need for the Substitute Property.
ARTICLE XXII
RISK OF LOSS
During the Term of this Lease, the risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Property in consequence of the damage
or destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than by Lessor and those claiming from, through or under Lessor) is
assumed by Lessee and, Lessor shall in no event be answerable or
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accountable therefor nor shall any of the events mentioned in this Section
entitle Lessee to any abatement of Rent except as specifically provided in this
Lease.
ARTICLE XXIII
INDEMNIFICATION
Notwithstanding the existence of any insurance or self insurance provided
for in Article XIII, and without regard to the policy limits of any such
insurance or self insurance, Lessee will protect, indemnify, save harmless and
defend Lessor from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses), to the extent permitted by law,
imposed upon or incurred by or asserted against Lessor by reason of: (a) any
accident, injury to or death of persons or loss of percentage to property
occurring on or about the Leased Property or adjoining sidewalks, including
without limitation any claims of malpractice, (b) any use, misuse, no use,
condition, maintenance or repair by Lessee of the Leased Property, (c) any
Impositions (which are the obligations of Lessee to pay pursuant to the
applicable provisions of this Lease), (d) any failure on the part of Lessee to
perform or comply with any of the terms of this Lease, and (e) the
non-performance of any of the terms and provisions of any and all existing and
future subleases of the Leased Property to be performed by the landlord (Lessee)
thereunder. Any amounts which become payable by Lessee under this Section shall
be paid within fifteen (15) days after liability therefor on the part of Lessor
is determined by litigation or otherwise and, if not timely paid, shall bear a
late charge (to the extent permitted by law) at the Overdue Rate from the date
of such determination to the date of payment. Lessee, at its expense, shall
contest, resist and defend any such claim, action or proceeding asserted or
instituted against Lessor or may compromise or otherwise dispose of the same as
Lessee sees fit. Nothing herein shall be construed as indemnifying Lessor
against its own negligent acts or omissions or willful misconduct. Lessee's
liability for a breach of the provisions of this Article shall survive any
termination of this Lease.
ARTICLE XXIV
SUBLETTING AND ASSIGNMENT; SUBORDINATION
24.1 SUBLETTING AND ASSIGNMENT
Lessee shall not assign the Lease or sublease the Leased Property or engage
any Management Company, or allow any tenants of the Facility to engage any
Management Company, without Lessor's prior written consent, which consent shall
not be unreasonably withheld; provided, however, that Lessee shall have the
right to assign the Lease or sublease the Leased Property to an Affiliate
without Lessor's prior written consent. Any sublease approved by Lessor shall be
subordinate to this Lease and may be terminated or left in place by Lessor in
the event of a termination of this Lease. Lessor shall not unreasonably withhold
its consent to any other or further subletting or assignment, provided that (a)
in the case of a subletting, the sublessee shall comply with the provisions of
this Article XXIV, (b) in the case of an assignment, the assignee shall assume
in writing and agree to keep and perform all of the terms of this Lease on the
part of Lessee to be kept and performed and shall be and become jointly and
severally liable with Lessee for the performance thereof, (c) an original
counterpart of each such sublease and assignment and assumption, duly executed
by Lessee and such sublessee or assignee, as the case may be, in form and
substance reasonably satisfactory to Lessor, shall be delivered promptly to
Lessor, and (d) in case of either an assignment or subletting, Lessee 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 Lessee hereunder. Lessor and Lessee
acknowledge that there currently exists certain leases or subleases on the
Leased Property as described in Article XXXII hereof and such leases and
subleases are deemed approved by Lessor under this paragraph.
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24.2 ATTORNMENT
Lessee shall insert in each sublease permitted under Section 24.1
provisions to the effect that (a) such sublease is subject and subordinate to
all of the terms and provisions of this Lease and to the rights of Lessor
hereunder, (b) in the event this Lease shall terminate before the expiration of
such sublease, the sublessee thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder, as a result of the termination of this
Lease, (c) that sublessee shall from time to time upon request of Lessee or
Lessor furnish within ten (10) days an estoppel certificate relating to the
sublease, and (d) in the event the sublessee receives a written notice from
Lessor or Lessor's assignees, if any, stating that Lessee is in default under
this Lease, the sublessee shall thereafter be obligated to pay all rentals
accruing under said sublease directly to the party giving such notice, or as
such party may direct. All rentals received from the sublessee by Lessor or
Lessor's assignees, if any, as the case may be, shall be credited against the
amounts owing by Lessee under this Lease.
24.3 SUBLEASE LIMITATION
Anything contained in this Lease to the contrary notwithstanding, Lessee
shall not sublet the Leased Property on any basis such that the rental to be
paid by the sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of the sublessee,
or (b) any other formula such that any portion of the sublease rental received
by Lessor 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.
Provided also, Lessee shall not sublet any portion of the Leased Property for a
term extending beyond the Fixed Term hereof without the express consent of
Lessor. In addition, all subleases shall comply with the Healthcare Laws.
24.4 SUBORDINATION
Any sublease approved by Lessor shall be subordinate to this Lease and may
be terminated or left in place by Lessor in the event of a termination of this
Lease. Lessee hereby agrees that all payments and fees payable under the
Management Agreements are subordinate to the payment of the obligations under
this Lease and all other documents executed in connection with the Purchase
Agreement. Lessee agrees to execute and cause the Management Company to execute
(and cause the tenants to execute, if applicable) a subordination agreement
relating to the Management Agreements, which subordination agreement shall be in
such form and content as is reasonably acceptable to Lessor.
ARTICLE XXV
OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS
(a) At any time and from time to time within twenty (20) days
following written request by Lessor, Lessee will furnish to Lessor an
Officer's Certificate certifying that this Lease is unmodified and in full
force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications) and the dates to which the
Rent has been paid. Any such Officer's Certificate furnished pursuant to
this Article may be relied upon by Lessor and any prospective purchaser of
the Leased Property.
(b) Lessee will furnish and cause Guarantors to furnish the following
statements to Lessor, which must be in such form and detail as Lessor may
from time to time, but not unreasonably, request:
(i) within ninety (90) days after the end of each of
Lessee's fiscal years, a copy of the Statements of Cash Flow for the
preceding fiscal year and an Officer's Certificate stating that to the best
of the signer's knowledge and belief after making due inquiry, Lessee is
not in default in the performance or
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observance of any of the terms of this Lease and no condition currently
exists that would, but for the giving of any required notice or expiration
of any applicable cure period, constitute an Event of Default, or, if
Lessee shall be in default to its knowledge, specifying all such defaults,
the nature thereof and the steps being taken to remedy the same, and
(ii) within ninety (90) days after the end of each year,
audited financial statements of Lessee, the Guarantors (excluding ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇) and the operations performed in the Facility, prepared by a
nationally recognized accounting firm or an independent certified public
accounting firm acceptable to Lessor, which statements shall include a
balance sheet and statement of income and expenses and changes in cash flow
all in accordance with generally accepted accounting principles, and
(iii) within forty-five (45) days after the end of each
quarter, current financial statements of Lessee, the Guarantors and the
operations performed in the Facility, certified to be true and correct by
an officer of Lessee and the Guarantors, as applicable, and
(iv) within thirty (30) days after the end of each month
current operating statements of the Leased Property, including, but not
limited to operating statistics, certified to be true and correct by an
officer of the Lessee and the Guarantors, as applicable, and
(v) within ten (10) days of receipt, any and all notices
(regardless of form) from any and all licensing and/or certifying agencies
that the license and/or the Medicare and/or Medicaid certification and/or
managed care contract of the Facility is being downgraded to a substandard
category, revoked, or suspended, or that action is pending or being
considered to downgrade to a substandard category, revoke, or suspend such
Facility's license or certification, and
(vi) with reasonable promptness, such other information
respecting the financial condition and affairs of Lessee and the Guarantors
as Lessor may reasonably request from time to time.
ARTICLE XXVI
INSPECTION
Lessee shall permit Lessor and its authorized representatives to inspect
the Leased Property during usual business hours subject to any security, health,
safety or confidentiality requirements of Lessee, any governmental agency, any
Insurance Requirements relating to the Leased Property, or imposed by law or
applicable regulations. Lessee shall pay to Lessor on the Commencement Date an
amount equal to Five Thousand and 00/100 Dollars ($5,000.00) to cover the cost
of the physical inspections of the Leased Property. Commencing on January 1,
2005, and continuing on January 1 of each year thereafter throughout the Term of
this Lease, the inspection fee to be paid by Lessee to Lessor shall increase at
a rate equal to two and one-half percent (2.5%) per annum.
ARTICLE XXVII
NO WAIVER
No failure by Lessor or Lessee 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
any such term. To the extent permitted by law, no waiver of any breach shall
affect or alter this Lease, which shall continue in full force and effect with
respect to any other then existing or subsequent breach.
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ARTICLE XXVIII
REMEDIES CUMULATIVE
To the extent permitted by law, each legal, equitable or contractual right,
power and remedy of Lessor or Lessee now or hereafter provided either in this
Lease 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 Lessor or Lessee of any one or more of such rights, powers
and remedies shall not preclude the simultaneous or subsequent exercise by
Lessor or Lessee of any or all of such other rights, powers and remedies.
ARTICLE XXIX
SURRENDER
No surrender to Lessor of this Lease or of the Leased Property or any part
of any thereof, or of any interest therein, shall be valid or effective unless
agreed to and accepted in writing by Lessor and no act by Lessor or any
representative or agent of Lessor, other than such a written acceptance by
Lessor, shall constitute an acceptance of any such surrender.
ARTICLE XXX
NO MERGER OF TITLE
There shall be no merger of this Lease or of the leasehold estate created
hereby by reason of the fact that the same person, firm, corporation or other
entity may acquire, own or hold, directly or indirectly, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
ARTICLE XXXI
TRANSFERS BY LESSOR
If Lessor or any successor owner of the Leased Property shall convey the
Leased Property in accordance with the terms hereof, other than as security for
a debt, and the grantee or transferee of the Leased Property shall expressly
assume all obligations of Lessor hereunder arising or accruing from and after
the date of such conveyance or transfer, and shall be reasonably capable of
performing the obligations of Lessor hereunder, Lessor or such successor owner,
as the case may be, shall thereupon be released from all future liabilities and
obligations of the Lessor under this Lease arising or accruing from and after
the date of such conveyance or other transfer as to the Leased Property and all
such future liabilities and obligations shall thereupon be binding upon the new
owner.
ARTICLE XXXII
QUIET ENJOYMENT
So long as Lessee shall pay all Rent as the same becomes due and shall
fully comply with all of the terms of this Lease and fully perform its
obligations hereunder and under the Other Leases, Lessee shall peaceably and
quietly have, hold and enjoy the Leased Property for the Term hereof, free of
any claim or other action by Lessor or anyone claiming by, through or under
Lessor, but subject to all liens and encumbrances of record as of the date
hereof or hereafter consented to by Lessee. No failure by Lessor to comply with
the foregoing covenant shall give Lessee any right to cancel or terminate this
Lease, or to fail to pay any other sum payable under this Lease, or to fail to
perform any other obligation of Lessee hereunder. Notwithstanding the foregoing,
Lessee shall have the right by
45
separate and independent action to pursue any claim it may have against Lessor
as a result of a breach by Lessor of the covenant of quiet enjoyment contained
in this Article.
Notwithstanding anything contained herein to the contrary, Lessor and
Lessee acknowledge that there currently exist certain leases and subleases on
the Leased Property (the "Tenant Leases") which are more particularly listed on
EXHIBIT C attached hereto and made a part thereof by reference and
incorporation, copies of which Tenant Leases the Lessee has received and
reviewed. Lessee agrees that it will not disturb the rights of the tenants under
the Tenant Leases and will enforce all of the obligations of the tenants under
such Tenant Leases and will pay and perform all of the obligations to be
performed under the Tenant Leases as if Lessee is the lessor or landlord
thereunder. In addition, Lessor and Lessee acknowledge that the Lessee has taken
an assignment of certain contracts relating to the operation of the facility
located on the Leased Property (the "Contracts"), which Contracts require that
certain space in the Leased Property be provided as more particularly described
in the Contracts. Lessee agrees to abide by the terms and perform the
obligations under the Contracts. Lessee hereby agrees to indemnify and hold
Lessor harmless from any liabilities and damages incurred by the Lessor as a
result of the Lessee's default under the Tenant Leases and the Contracts.
ARTICLE XXXIII
NOTICES
All notices, demands, consents, approvals, requests and other
communications under this Lease shall be in writing and shall be either (a)
delivered in person, (b) sent by certified mail, return receipt requested, (c)
delivered by a recognized over-night delivery service or (d) sent by facsimile
transmission and addressed as follows:
(a) if to Lessee: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Operating Company, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Lessor: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Baker, Donelson, Bearman, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
46
or to such other address as either party may hereafter designate, and shall be
effective upon receipt. A notice, demand, consent, approval, request and other
communication shall be deemed to be duly received if delivered in person or by a
recognized delivery service, when left at the address of the recipient and if
send by facsimile, upon receipt by the sender of an acknowledgment or
transmission report generated by the machine from which the facsimile was sent
indicating that the facsimile was sent in its entirety to the recipient's
facsimile number; provided that if a notice, demand, consent, approval, request
or other communication is served by hand or is received by facsimile on a day
which is not a Business Day, or after 5:00 p.m. on any Business Day at the
addressee's location, such notice or communication shall be deemed to be duly
received by the recipient at 9:00 a.m. on the first Business Day thereafter.
ARTICLE XXXIV
APPRAISAL
In the event that it becomes necessary to determine the Fair Market Value,
Fair Market Value Purchase Price or Fair Market Added Value of the Leased
Property or a Substitute Property for any purpose of this Lease, the party
required or permitted to give notice of such required determination shall
include in the notice the name of a person selected to act as an appraiser on
its behalf. Lessor and Lessee agree that any appraisal of the Leased Property
shall be without regard to the termination of this Lease and shall assume the
Lease is in place for a term of fifteen (15) years, and based solely on the
rents and other revenues generated and to be generated pursuant to this Lease
without any regard to Lessee's operations. Within ten (10) days after receipt of
any such notice, Lessor (or Lessee, as the case may be) shall by notice to
Lessee (or Lessor, as the case may be) appoint a second person as an appraiser
on its behalf. The appraisers thus appointed (each of whom must be a member of
the American Institute of Real Estate Appraisers or any successor organization
thereto) shall, within forty-five (45) days after the date of the notice
appointing the first appraiser, proceed to appraise the Leased Property or
Substitute Property, as the case may be, to determine the Fair Market Value,
Fair Market Value Purchase Price or Fair Market Added Value thereof as of the
relevant date (giving effect to the impact, if any, of inflation from the date
of their decision to the relevant date); provided, however, that if only one (1)
appraiser shall have been so appointed, or if two (2) appraisers shall have been
so appointed but only one (1) such appraiser shall have made such determination
within fifty (50) days after the making of Lessee's or Lessor's request, then
the determination of such appraiser shall be final and binding upon the parties.
If two (2) appraisers shall have been appointed and shall have made their
determinations within the respective requisite periods set forth above and if
the difference between the amounts so determined shall not exceed ten percent
(10%) of the lesser of such amounts, then the Fair Market Value, Fair Market
Value Purchase Price or Fair Market Added Value shall be an amount equal to
fifty percent (50%) of the sum of the amounts so determined. If the difference
between the amounts so determined shall exceed ten percent (10%) of the lesser
of such amounts, then such two appraisers shall have twenty (20) days to appoint
a third (3rd) appraiser, but if such appraisers fail to do so, then either party
may request the American Arbitration Association or any successor organization
thereto to appoint an appraiser within twenty (20) days of such request, and
both parties shall be bound by any appointment so made within such 20-day
period. If no such appraiser shall have been appointed within such twenty (20)
days or within ninety (90) days of the original request for a determination of
Fair Market Value, Fair Market Value Purchase Price or Fair Market Added Value,
whichever is earlier, either Lessor or Lessee may apply to any court having
jurisdiction to have appointment made by such court. Any appraiser appointed, by
the American Arbitrator Association or by such court shall be instructed to
determine the Fair Market Value, Fair Market Value Purchase Price or Fair Market
Added Value within thirty (30) days after appointment of such appraiser. The
determination of the appraiser which differs most in terms of dollar amount from
the determinations of the other two (2) appraisers shall be excluded, and fifty
percent (50%) of the sum of the remaining two determinations shall be final and
binding upon Lessor and Lessee as the Fair Market Value, Fair Market Value
Purchase Price or Fair Market Added Value for such interest. This provision for
determination by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by applicable
law. Lessor and Lessee shall each pay the fees and expenses of
47
the appraiser appointed by it and each shall pay one-half of the fees and
expenses of the third appraiser and one-half of all other costs and expenses
incurred in connection with each appraisal.
ARTICLE XXXV
PURCHASE RIGHTS
35.1 OPTION TO PURCHASE
So long as Lessee is not in default under the terms of this Lease or the
Other Leases, at the expiration of this Lease, the Lessee shall have the option,
to be exercised by written notice to the Lessor within three hundred sixty-five
(365) days prior to the expiration of this Lease, to purchase the Leased
Property at a purchase price equal to the greater of (i) the Fair Market Value
of the Leased Property, or (ii) the Purchase Price (increased at the rate of two
and one-half percent (2.5%) per annum from the Commencement Date). Unless
expressly otherwise provided in this Section 35.1, in the event the Lessee
exercises such option to purchase the Leased Property, the terms set forth in
Article XVIII shall apply. If Lessee does not exercise Lessee's option to
purchase within said three hundred sixty-five (365) day period, Lessor shall be
free after the expiration of said three hundred sixty-five (365) day period to
sell the Leased Property to any party.
35.2 LESSOR'S OPTION TO PURCHASE LESSEE'S PERSONAL PROPERTY
Effective on not less than ninety (90) days' prior written notice given at
any time within one hundred eighty (180) days prior to the expiration of the
Term of this Lease, but not later than ninety (90) days prior to such
expiration, or such shorter notice as shall be appropriate if this Lease is
terminated prior to its expiration date, Lessor shall have the option to
purchase all (but not less than all) of Lessee's Personal Property, if any, at
the expiration or termination of this Lease, for an amount equal to the net
sound insurable value thereof (current replacement cost less accumulated
depreciation on the books of Lessee pertaining thereto), subject to, and with
appropriate price adjustments for, all equipment leases, conditional sale
contracts, security interests and other encumbrances to which Lessee's Personal
Property is subject.
ARTICLE XXXVI
DEFAULT BY LESSOR
36.1 DEFAULT BY LESSOR
Lessor shall be in default of its obligations under this Lease if Lessor
shall fail to observe or perform any term, covenant or condition of this Lease
on its part to be performed and such failure shall continue for a period of
forty-five (45) days after written notice thereof from Lessee, unless such
failure cannot with due diligence be cured within a period of forty-five (45)
days, in which case such failure shall not be deemed to continue if Lessor,
within said forty-five (45) day period, proceeds promptly and with due diligence
to cure the failure and diligently completes the curing thereof. The time within
which Lessor shall be obligated to cure any such failure shall also be subject
to extension of time due to the occurrence of any Unavoidable Delay. In the
event Lessor fails to cure any such default within the grace period described
above, Lessee, without waiving or releasing any obligations hereunder, and in
addition to all other remedies available to Lessee hereunder or at law or in
equity, may, after twenty (20) Business Days' prior written notice to Lessor,
purchase the Leased Property from Lessor for a purchase price equal to the Fair
Market Value Purchase Price of the Leased Property. In the event Lessee elects
to purchase the Leased Property, it shall deliver a notice thereof to Lessor
specifying a payment date occurring no less than one
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hundred eighty (180) days subsequent to the date of such notice on which it
shall purchase the Leased Property, and the same shall be thereupon conveyed in
accordance with the provisions of Article XVIII.
36.2 LESSEE'S RIGHT TO CURE
Subject to the provisions of Section 36.1, if Lessor shall breach any
covenant to be performed by it under this Lease, Lessee, after twenty (20)
Business Days' prior written notice to and demand upon Lessor in accordance with
Section 36.1, without waiving or releasing any obligation of Lessor hereunder,
and in addition to all other remedies available hereunder and at law or in
equity to Lessee, may (but shall be under no obligation at any time thereafter
to) make such payment or perform such act for the account and at the expense of
Lessor. All reasonable sums so paid by Lessee and all reasonable out-of-pocket
costs and expenses (including without limitation, reasonable attorneys' fees) so
incurred, together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid or incurred by Lessee, shall be paid by
Lessor to Lessee on demand. The rights of Lessee hereunder to cure and to secure
payment from Lessor in accordance with this Section 36.2 shall survive the
termination of this Lease.
ARTICLE XXXVII
FINANCING OF THE LEASED PROPERTY
37.1 FINANCING BY LESSOR
Lessor agrees that, if it grants or creates any mortgage, lien, encumbrance
or other title retention agreement ("Encumbrances") upon the Leased Property,
Lessor will use its good faith reasonable efforts to obtain an agreement from
the holder of each such Encumbrance whereby such holder agrees (a) to give
Lessee the same notice, if any, given to Lessor of any default or acceleration
of any obligation underlying any such Encumbrance or any sale in foreclosure of
such Encumbrance, (b) to permit Lessee, after thirty (30) days prior written
notice, to cure any such default on Lessor's behalf within any applicable cure
period, in which event Lessor agrees to reimburse Lessee for any and all
reasonable out-of-pocket costs and expenses incurred to effect any such cure
(including reasonable attorneys' fees), (c) to permit Lessee to appear with its
representatives and to bid at any foreclosure sale with respect to any such
Encumbrance, (d) that, if subordination by Lessee is requested by the holder of
each such Encumbrance, to enter into an agreement with Lessee containing the
provisions described in Article XXXVIII of this Lease, and (e) Lessor further
agrees that no such Encumbrance shall in any way prohibit, derogate from, or
interfere with Lessee's right and privilege to collaterally assign its leasehold
and contract rights hereunder provided such collateral assignment and rights
granted to the assignee thereunder shall be subordinate to the rights of the
holder of an Encumbrance as provided in Article XXXVIII hereof.
ARTICLE XXXVIII
SUBORDINATION AND NON-DISTURBANCE
At the request from time to time by one or more holders of a mortgage or
deed of trust that may hereafter be placed by Lessor upon the Leased Property or
any part thereof, and any and all renewals, replacements, modifications,
consolidations, spreaders and extensions thereof, within thirty (30) days from
the date of request, Lessee shall execute and deliver and shall have all
subtenants or sublessees of the Leased Property execute and deliver, to such
holders a written agreement in a form reasonably acceptable to such holder
whereby Lessee and such subtenants and sublessees subordinate this Lease and all
of their rights and estate hereunder to each such
49
mortgage or deed of trust that encumbers the Leased Property or any part thereof
and agree with each such holder that Lessee and such subtenants and sublessees
will attorn to and recognize such holder or the purchaser at any foreclosure
sale or any sale under a power of sale contained in any such mortgage or deed of
trust, as the case may be, as Lessor under this Lease for the balance of the
Term then remaining, subject to all of the terms and provisions of this Lease;
provided, however, that each such holder simultaneously executes and delivers a
written agreement (a) consenting to this Lease and agreeing that,
notwithstanding any such other mortgage, deed of trust, right, title or
interest, or any default, expiration, termination, foreclosure, sale, entry or
other act or omission under, pursuant to or affecting any of the foregoing,
Lessee and such subtenants and sublessees shall not be disturbed in peaceful
enjoyment of the Leased Property or the subleased property (as applicable) nor
shall this Lease (nor the applicable subleases) be terminated or canceled at any
time, except in the event Lessee or such applicable subtenant or sublessee is in
default under this Lease or any of the Other Leases, Lessor shall have the right
to terminate this Lease or the applicable subleases under the terms and
provisions expressly set forth herein; (b) agreeing that for any period while it
is Lessor hereunder, it will perform, fulfill and observe all of Lessor's
representations, warranties and agreements set forth herein or therein; and (c)
agreeing, unless otherwise expressly provided in the mortgage or deed of trust,
that all proceeds of the casualty insurance described in Article XIV of this
Lease and all Awards described in Article XV will be made available for
restoration of the Leased Property as and to the extent required by this Lease,
subject only to reasonable regulation regarding the disbursement and application
thereof.
ARTICLE XXXIX
LICENSES
Lessee shall maintain at all times during the Term hereof and any holdover
period all federal, state and local governmental licenses, approvals,
qualifications, variances, certificates of need, franchises, accreditations,
certificates, certifications, consents, permits and other authorizations
necessary for the operation of the Facility (collectively, the "Licenses'), and
shall qualify and comply with all applicable laws as they may from time to time
exist, including those applicable to certification and participation as a
provider under Medicare and Medicaid legislation and regulations.
Lessee shall not, without the prior written consent of Lessor, which may be
granted or withheld in its sole discretion, effect or attempt to effect any
change in the license category or status of the Facility or any part thereof.
Under no circumstances shall Lessee have the right to transfer any of the
Licenses to any location other than the Facility or to any other person or
entity (except to Lessor as contemplated herein), whether before, during or
after the Term hereof. Following the termination of this Lease, Lessee shall
retain no rights whatsoever to the Licenses, and Lessee will not move or attempt
to move the Licenses to any other location. To the extent that Lessee has or
will extend any right, title, or claim of right whatsoever in and to the
Licenses or the right to operate the Facility, all such right, title, or claim
of right shall automatically revert to the Lessor or to Lessor's designee upon
termination of this Lease, to the extent allowed by law. Upon any termination of
this Lease or any breach or default by Lessee hereunder (which breach or default
is not cured within any applicable grace period and which results in Lessor
terminating this Lease), Lessor shall have the sole, complete, unilateral,
absolute and unfettered right to cause all Licenses to be reissued in Lessor's
name or in the name of Lessor's designee upon application therefor to the
issuing authority, and to further have the right to have any and all provider
and/or third party payor agreements as a provider in the Medicare and/or
Medicaid and other federal healthcare programs issued in Lessor's name or in the
name of Lessor's designee.
Upon termination of this Lease and for reasonable periods of time
immediately before and after such termination, Lessee shall use its best efforts
to facilitate an orderly transfer of the operation and occupancy of the Facility
to Lessor or any new lessee or operator selected by Lessor, it being understood
and agreed that such cooperation shall include, without limitation, (a) Lessee's
assignment. if and to the extent allowed by law, to Lessor or Lessor's new
lessee or operator of any and all Licenses, (b) Lessee's use of best efforts to
maintain, to the maximum extent allowed by applicable law, the effectiveness of
any and all such Licenses until such time as any new Licenses necessary for any
new Lessee or operator to operate the Facility have been issued, and (c) the
taking of
50
such other actions as are required by applicable law or as are reasonably
requested by Lessor. Upon any termination of this Lease or any breach or default
by Lessee hereunder (which breach or default is not cured within any applicable
grace period and which results in Lessor terminating this Lease), Lessor shall
have the sole, complete, unilateral, absolute and unfettered right to cause any
and all Licenses to be reissued in Lessor's name or in the name of Lessor's
designee upon application therefor to the appropriate authority, if required,
and to further have the right to have any and all Medicare and Medicaid and any
other provider and/or third party payor agreements issued in Lessor's name or in
the name of Lessor's designee. The provisions of this Section are in addition to
the other provisions of this Lease.
It is an integral condition of this Lease that Lessee covenants and agrees
not to sell, move, modify, cancel, surrender, transfer, assign, sell, relocate,
pledge, secure, convey or in any other manner encumber any License or any
governmental or regulatory approval, consent or authorization of any kind to
operate the Facility.
Lessee shall immediately (within two (2) business days) notify Lessor in
writing of any notice, action or other proceeding or inquiry of any governmental
agency, bureau or other authority whether federal, state, or local, of any kind,
nature or description, which could adversely affect any material License or
Medicare and/or Medicaid-certification status, or accreditation status of the
Facility, or the ability of Lessee to maintain its status as the licensed and
accredited operator of the Facility or which alleges noncompliance with any law.
Lessee shall immediately (within two (2) business days) upon Lessee's receipt,
furnish Lessor with a copy of any and all such notices and Lessor shall have the
right, but not the obligation, to attend and/or participate, in Lessor's sole
and absolute discretion, in any such actions or proceedings. Lessee shall act
diligently to correct any deficiency or deal effectively with any "adverse
action" or other proceedings, inquiry or other governmental action, so as to
maintain the licensure and Medicare and/or Medicaid-certification status stated
herein in good standing at all times. Lessee shall not agree to any settlement
or other action with respect to such proceedings or inquiry which affects the
use of the Leased Property or any portion thereof as provided herein without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld or delayed. Lessee agrees to provide documentation and sign, and if
Lessee fails to do so upon request of Lessor, Lessee hereby irrevocably appoints
Lessor, as agent of Lessee for the express purpose of signing, acknowledging
and/or delivering any and all documents, instruments or other writings which are
or may become necessary, proper and/or advisable to cause any and all
rehabilitation hospital licenses, Department of Human Services of the State of
Kentucky ("DHS") provider agreements, and/or state or federal Title XVIII and/or
Title XIX provider agreements to be obtained (either in total or individually)
in the name of Lessor or the name of Lessor's designee in the event that Lessor
reasonably determines in good faith that (irrespective of any claim, dispute or
other contention or challenge of Lessee) there is any breach, default or other
lapse in any representation, warranty, covenant or other delegation of duty to
Lessee (beyond any applicable grace or cure period) and the issuing government
agency has threatened or asserted that such license or provider agreement will
terminate or has lapsed or that Lessee's license or certification or
accreditation status is in jeopardy. This power is coupled with the ownership
interest of Lessor in and to the Facility and all incidental rights attendant to
any and all of the foregoing rights.
ARTICLE XL
COMPLIANCE WITH HEALTHCARE LAWS
Lessee hereby covenants, warrants and represents to Lessor that as of the
Commencement Date and throughout the Term: (i) Lessee shall be, and shall
continue to be validly licensed, Medicare and/or Medicaid certified, and, if
required, accredited to operate the Facility in accordance with the applicable
rules and regulations of the State of Kentucky, federal governmental authorities
and accrediting bodies, including, but not limited to, the United States
Department of Health and Human Services, DHSS, DHS and CMS; and/or (ii) Lessee
shall be, and shall continue to be, certified by and the holder of valid
provider agreements with Medicare/Medicaid issued by DHHS, DHS and/or CMS and
shall remain so certified and shall remain such a holder in connection with its
51
operation of the Leased Property as a licensed and Medicare and/or Medicaid
certified rehabilitation hospital facility; (iii) Lessee shall be, and shall
continue to be in substantial compliance with and shall remain in substantial
compliance with all state and federal laws, rules, regulations and procedures
with regard to the operation of the Facility, including, without limitation,
substantial compliance under HIPAA; (iv) Lessee shall operate the Facility in a
manner consistent with high quality rehabilitation services and sound
reimbursement principles under the Medicare and/or Medicaid programs and as
required under state and federal law; and (v) Lessee shall not abandon,
terminate, vacate or fail to renew any license, certification, accreditation,
certificate, approval, permit, waiver, provider agreement or any other
authorization which is required for the lawful and proper operation of the
Facility or in any way commit any act which will or may cause any such license,
certification, accreditation, certificate, approval, permit, waiver, provider
agreement or other authorization to be revoked by any federal, state or local
governmental authority or accrediting body having jurisdiction thereof.
ARTICLE XLI
MISCELLANEOUS
41.1 GENERAL
Anything contained in this Lease to the contrary notwithstanding, all
claims against, and liabilities of, Lessee or Lessor arising prior to any date
of expiration or termination of this Lease shall survive such expiration or
termination. If any term or provision of this Lease or any application thereof
shall be invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. If any late
charges provided for in any provision of this Lease are based upon a rate in
excess of the maximum rate permitted by applicable law, the parties agree that
such charges shall be fixed at the maximum permissible rate. Neither this Lease
nor any provision hereof may be changed, waived, discharged or terminated except
by an instrument in writing and in recordable form signed by Lessor and Lessee.
All the terms and provisions of this Lease shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
The headings in this Lease are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof. This Lease shall be governed by
and construed in accordance with the laws of Alabama but not including its
conflict of laws rules.
41.2 TRANSFER OF LICENSES
Upon the expiration or earlier termination of the Term, Lessee shall , if
and to the extent allowed by law, transfer to Lessor or Lessor's nominee,
without additional consideration to Lessee, all licenses (except Lessee's
operating licenses), operating permits, licenses and other governmental
authorizations and all contracts, including contracts with governmental or
quasi-governmental entities which may be necessary or useful in the operation of
the Facility. Lessee hereby grants to Lessor a landlord's lien on such operating
permits and licenses and other governmental authorizations and all contracts,
including contracts with governmental or quasi-governmental entities which may
be necessary or useful in the operation of the Facility.
41.3 LESSOR'S EXPENSES
In addition to other provisions herein, Lessee agrees and shall pay and/or
reimburse Lessor's reasonable costs and expenses, including reasonable legal
fees, incurred or resulting from and relating to (a) requests by Lessee for
approval or consent under this Lease Agreement; or (b) any circumstances or
developments which give rise to Lessor's right of consent or approval; or (c)
circumstances resulting from any action or inaction by Lessee contrary to the
lease provisions; or (d) a request for changes including, but not limited to,
(i) the permitted use of the Leased Property, (ii) alterations and improvements
to the Leased Improvements, (iii) subletting or assignment, or (iv) any
52
other changes in the terms, conditions or provisions of this Lease. Such
expenses and fees shall be paid by Lessee within thirty (30) days of the
submission of a statement for the same or such amount(s) shall become Additional
Charges and subject to the Overdue Rate after the 30 days.
41.4 ENTIRE AGREEMENT; MODIFICATIONS
This Lease embodies and constitutes the entire understanding between the
parties with respect to the transactions contemplated herein, and all prior to
contemporaneous agreements, understandings, representations and statements (oral
or written), including, without limitation, the Letter Amendment, are merged
into this Lease. Neither this Lease nor any provision hereof may be modified or
amended except by an instrument in writing signed by Lessor and Lessee.
41.5 GUARANTY
At the time of the execution and delivery of this Lease by Lessee to
Lessor, Lessee shall simultaneously therewith deliver to the Lessor a Lease
Guaranty in a form satisfactory to Lessor, whereby the Guarantors shall
absolutely and irrevocably guarantee the full payment and performance of all of
Lessee's obligations under this Lease.
41.6 LESSOR'S RIGHT TO SELL
Lessee understands that Lessor may sell its interest in the Leased Property
in whole or in part. The Lessee agrees that any purchaser may exercise any and
all rights of Lessor, as fully as if such had made the purchase of the Leased
Property directly from the Lessee as set out in the Purchase Agreement. Lessor
may divulge to any such purchaser all information, reports, financial
statements, certificates and documents obtained by it from Lessee.
Notwithstanding anything contained herein to the contrary, so long as Lessee is
not in default under the terms of this Lease, Lessor shall not sell the Leased
Property to a direct competitor of Lessee, without the consent of Lessee, which
consent shall not be unreasonably withheld. For the purposes of this Section
41.6, the term "direct competitor" shall mean an entity operating a
rehabilitation hospital.
41.7 FUTURE FINANCING
Lessee hereby agrees that if at any time during the Term the Lessee
purchases or contemplates the purchase of a facility, or property to be used,
for the operation of a business for the Primary Intended Use, or if Lessee
wishes to expand or renovate the Leased Property or any other facilities leased
to the Lessee under the Other Leases, Lessee shall notify Lessor in writing of
such purchase or contemplated purchase, and Lessor shall have the first
opportunity to provide financing for such purchase, expansion or renovation upon
terms mutually agreeable to Lessor and Lessee.
41.8 SUBORDINATION OF LESSEE AND GUARANTORS
Lessee and Guarantors agree that (a) all indebtedness owed by Lessee under
all agreements executed in connection with the Lessee's financing of certain
personal property to be used in connection with the operation of the Facility,
and (b) all fees due and payable under any Management Agreements, shall be
subordinate to all monetary obligations under this Lease. All Management
Agreements entered into shall expressly contain an acknowledgment of such
subordination. At the request of the Lessor from time to time, Lessee shall
execute, and obtain from all parties subject to such Management Agreements
executed written confirmation of such subordination, which shall be delivered to
Lessor within twenty (20) days from Lessor's request.
53
41.9 LESSOR SECURITIES OFFERING AND FILINGS
Notwithstanding anything contained herein to the contrary, Lessee agrees to
cooperate with Lessor and MPT in connection with any securities offerings and
filings and in connection therewith, the Lessee shall furnish Lessor with such
financial and other information as Lessor shall request and Lessor and MPT shall
have the right of access at reasonable business hours and upon advance notice to
the Facility and all documentation and information relating to the Facility and
have the right to disclose any information regarding this Lease, the Commitment
Letter, the Lessee, the Guarantors, the Leased Property, the Facility, and such
other additional information which Lessor and/or MPT may reasonably deem
necessary.
41.10 LESSEE'S OBLIGATIONS UNDER PURCHASE AGREEMENT
Lessee shall perform all of its obligations under Sections 6.3, 6.4, 6.5,
6.6, 7.1(b), 7.4, 7.5, 7.8, 8.4(c) and 11.3 of the Purchase Agreement and, if
requested to do so by Lessor, shall respond timely to all requests regarding
such performance by the selling parties under the Purchase Agreement.
41.11 COUNTERPARTS
This Lease may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
ARTICLE XLII
MEMORANDUM OF LEASE
Lessor and Lessee shall, promptly upon the request of either, enter into a
short form memorandum of this Lease, in form suitable for recording under the
laws of the state in which the Leased Property is located in which reference to
this Lease, and all options contained herein, shall be made.
[ SIGNATURES APPEAR ON FOLLOWING PAGES ]
54
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and their respective corporate seals to be hereunto affixed and attested by
their respective officers thereunto duly authorized.
LESSOR:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, LLC,
a Delaware limited liability company
BY: MPT OPERATING PARTNERSHIP, L.P.
ITS: SOLE MEMBER
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------
Its: President and CEO
1
LESSEE:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ OPERATING
COMPANY, LLC, a Delaware limited liability
company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President
GUARANTORS:
VIBRA HEALTHCARE, LLC
(formerly known as Highmark Healthcare, LLC),
a Delaware limited liability company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President
SENIOR REAL ESTATE HOLDINGS, LLC
(d/b/a The ▇▇▇▇▇▇▇▇▇ Group), a Delaware limited
liability company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President
VIBRA MANAGEMENT, LLC
(formerly known as Highmark Management, LLC),
a Delaware limited liability company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
STATE OF _____________
COUNTY OF ____________
The foregoing instrument was acknowledged before me on this ________ day of
________, 2004, by ______________________, the
___________________________________ of MPT Operating Partnership, L.P., the Sole
Member of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, LLC, a Delaware limited liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
the day and year in this certificate first above written.
________________________________________
NOTARY PUBLIC
Printed Name:___________________________
My Commission Expires:__________________
[ AFFIX NOTARY SEAL ]
STATE OF _____________
COUNTY OF ____________
The foregoing instrument was acknowledged before me on this ________ day of
________, 2004, by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as the President of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
OPERATING COMPANY, LLC, a Delaware limited liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on the
day and year in this certificate first above written.
________________________________________
NOTARY PUBLIC
Printed Name:___________________________
My Commission Expires:__________________
[ AFFIX NOTARY SEAL ]
STATE OF _____________
COUNTY OF ____________
The foregoing instrument was acknowledged before me on this ________ day of
____________, 2004, by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as the President of VIBRA HEALTHCARE,
LLC (FORMERLY KNOWN AS HIGHMARK HEALTHCARE, LLC), a Delaware limited liability
company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on the
day and year in this certificate first above written.
________________________________________
NOTARY PUBLIC
Printed Name:___________________________
My Commission Expires:__________________
[ AFFIX NOTARY SEAL ]
STATE OF _____________
COUNTY OF ___________
The foregoing instrument was acknowledged before me on this ________ day of
_________, 2004, by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as the President of SENIOR REAL ESTATE
HOLDINGS, LLC (D/B/A THE ▇▇▇▇▇▇▇▇▇ GROUP).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on the
day and year in this certificate first above written.
________________________________________
NOTARY PUBLIC
Printed Name:___________________________
My Commission Expires:__________________
[ AFFIX NOTARY SEAL ]
STATE OF _____________
COUNTY OF ____________
The foregoing instrument was acknowledged before me on this ________ day of
____________, 2004, by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as the President of VIBRA MANAGEMENT,
LLC (FORMERLY KNOWN AS HIGHMARK MANAGEMENT, LLC), a Delaware limited liability
company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on the
day and year in this certificate first above written.
________________________________________
NOTARY PUBLIC
Printed Name:___________________________
My Commission Expires:__________________
[ AFFIX NOTARY SEAL ]
STATE OF _____________
COUNTY OF ____________
The foregoing instrument was acknowledged before me on this ________ day of
___________, 2004, by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on the
day and year in this certificate first above written.
________________________________________
NOTARY PUBLIC
Printed Name:___________________________
My Commission Expires:__________________
[ AFFIX NOTARY SEAL ]
EXHIBIT A
PROPERTY DESCRIPTION
EXHIBIT B
PERMITTED EXCEPTIONS
EXHIBIT C