EXHIBIT 10.10
THIRD
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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THIRD AMENDED AND RESTATED.............................................................................. i
LEASE AGREEMENT......................................................................................... i
THIRD AMENDED AND SECOND RESTATED LEASE AGREEMENT....................................................... 1
ARTICLE I LEASED PROPERTY; TERM................................................................... 2
ARTICLE II DEFINITIONS............................................................................. 3
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............................................................. 13
4.3 Utility Charges....................................................................... 13
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.................................................. 21
10.5 Salvage............................................................................... 22
ARTICLE XI LIENS................................................................................... 22
ARTICLE XII PERMITTED CONTESTS...................................................................... 22
ARTICLE XIII INSURANCE............................................................................... 23
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Table of Contents
(continued)
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13.1 General Insurance Requirements........................................................ 23
13.2 Additional Insurance.................................................................. 25
13.3 Waiver of Subrogation................................................................. 25
13.4 Form of Insurance..................................................................... 25
13.5 Increase in Limits.................................................................... 26
13.6 Blanket Policy........................................................................ 26
13.7 No Separate Insurance................................................................. 26
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............................................................ 28
14.5 Restoration of Lessee's Property...................................................... 28
14.6 No Abatement of Rent.................................................................. 28
14.7 Damage Near End of Term............................................................... 28
14.8 Termination of Right of Purchase...................................................... 28
14.9 Waiver................................................................................ 29
ARTICLE XV CONDEMNATION............................................................................ 29
15.1 Definitions........................................................................... 29
15.2 Parties' Rights and Obligations....................................................... 29
15.3 Total Taking.......................................................................... 29
15.4 Partial Taking........................................................................ 29
15.5 Restoration........................................................................... 29
15.6 Award Distribution.................................................................... 29
15.7 Temporary Taking...................................................................... 30
ARTICLE XVI DEFAULT................................................................................. 30
16.1 Events of Default..................................................................... 30
16.2 Events of Default in Financial Covenants.............................................. 34
16.3 Additional Expenses................................................................... 34
16.4 Intentionally Omitted................................................................. 34
16.5 Waiver................................................................................ 34
16.6 Application of Funds.................................................................. 34
16.7 Notices by Lessor..................................................................... 34
16.8 Lessor's Contractual Security Interest................................................ 35
ARTICLE XVII LESSOR'S RIGHT TO CURE.................................................................. 35
ARTICLE XVIII PURCHASE OF THE LEASED PROPERTY......................................................... 36
ARTICLE XIX HOLDING OVER............................................................................ 36
ARTICLE XX INTENTIONALLY OMITTED................................................................... 37
ARTICLE XXI SUBSTITUTION OF PROPERTY................................................................ 37
21.1 Substitution of Property for the Leased Property...................................... 37
21.2 Conditions to Substitution............................................................ 39
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Table of Contents
(continued)
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21.3 Conveyance to Lessee.................................................................. 40
21.4 Expenses.............................................................................. 40
ARTICLE XXII RISK OF LOSS............................................................................ 40
ARTICLE XXIII INDEMNIFICATION......................................................................... 40
ARTICLE XXIV SUBLETTING AND ASSIGNMENT; SUBORDINATION................................................ 41
24.1 Subletting and Assignment............................................................. 41
24.2 Attornment............................................................................ 41
24.3 Sublease Limitation................................................................... 41
24.4 Subordination......................................................................... 42
ARTICLE XXV OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS......................................... 42
ARTICLE XXVI INSPECTION.............................................................................. 43
ARTICLE XXVII NO WAIVER............................................................................... 43
ARTICLE XXVIII REMEDIES CUMULATIVE..................................................................... 43
ARTICLE XXIX SURRENDER............................................................................... 43
ARTICLE XXX NO MERGER OF TITLE...................................................................... 44
ARTICLE XXXI TRANSFERS BY LESSOR..................................................................... 44
ARTICLE XXXII QUIET ENJOYMENT......................................................................... 44
ARTICLE XXXIII NOTICES................................................................................. 45
ARTICLE XXXIV APPRAISAL............................................................................... 45
ARTICLE XXXV PURCHASE RIGHTS......................................................................... 46
35.1 Option to Purchase.................................................................... 46
35.2 Lessor's Option to Purchase Lessee's Personal Property................................ 46
ARTICLE XXXVI DEFAULT BY LESSOR....................................................................... 47
36.1 Default by Lessor..................................................................... 47
36.2 Lessee's Right to Cure................................................................ 47
ARTICLE XXXVII FINANCING OF THE LEASED PROPERTY........................................................ 47
37.1 Financing by Lessor................................................................... 47
ARTICLE XXXVIII SUBORDINATION AND NON-DISTURBANCE....................................................... 48
ARTICLE XXXIX LICENSES................................................................................ 48
ARTICLE XL COMPLIANCE WITH HEALTHCARE LAWS......................................................... 50
ARTICLE XLI MISCELLANEOUS........................................................................... 50
41.1 General............................................................................... 50
41.2 Transfer of Licenses.................................................................. 50
41.3 Lessor's Expenses..................................................................... 51
41.4 Entire Agreement; Modifications....................................................... 51
41.5 Guaranty.............................................................................. 51
41.6 Lessor's Right to Sell................................................................ 51
41.7 Future Financing...................................................................... 51
41.8 Subordination of Lessee and Guarantors................................................ 51
41.9 Lessor Securities Offering and Filings................................................ 52
41.10 Lessee's Obligations Under Purchase Agreement......................................... 52
41.11 Counterparts.......................................................................... 52
ARTICLE XLII MEMORANDUM OF LEASE..................................................................... 53
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THIRD
AMENDED AND SECOND RESTATED LEASE AGREEMENT
This THIRD 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 Bowling ▇▇▇▇▇, ▇▇▇▇▇▇ County, Kentucky, which real property is more
particularly described on EXHIBIT A attached hereto and incorporated herein by
reference, and all improvements located thereon;
WHEREAS, Meditrust of Kentucky, Inc., as Lessor, and Mediplex of Kentucky,
Inc. (d/b/a Mediplex Rehab-Bowling Green), as Lessee, entered into a Lease as
evidenced by the Short Form Lease dated June 23, 1994 (the "Meditrust/Mediplex
Lease"), and recorded in Deed Book 690, Page 263 in the Office of the Clerk of
▇▇▇▇▇▇ County, Kentucky;
WHEREAS, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ Operating Company, LLC entered into that
certain Operations and Transfer Agreement with Mediplex of Kentucky, Inc. d/b/a
Mediplex Rehab of Bowling Green whereby in accordance with that certain
Stipulation and Order re Resolution of "Motion of THCI Company, LLC to enforce
Stipulation and Order and for Emergency Relief" [Docket No. 8320] in the United
States Bankruptcy Court for the District of Delaware, Chapter 11, Case No.
99-3657 (JKF), Docket No. 8320, In Re Sun Healthcare Group, Inc., Reorganized
Debtor, filed April 21, 2003, Order dated April 28, 2003, the Meditrust/Mediplex
Lease was terminated;
WHEREAS, THCI Company, LLC and Tenant entered into that certain Southern
Kentucky Rehabilitation Hospital Lease Agreement dated as of May 1, 2003 (the
"Original Lease"), which was amended and restated by that certain First Amended
and Restated Southern Kentucky Rehabilitation Hospital Lease between THCI
Company, LLC and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ Operating Company, LLC, dated as of August
1, 2003 (the "First Amended and Restated Original Lease");
WHEREAS, THCI Company, LLC, a Delaware limited liability Company, as
successor in interest to Meditrust of Kentucky, Inc., conveyed the Property to
Lessor by Special Warranty Deed dated August 1, 2003, recorded in Deed Book 871,
Page 691, in the aforesaid Office;
WHEREAS, Lessor and Lessee entered into that certain Second Amended and
Restated Lease Agreement dated July 1, 2004, whereby the First Amended and
Restated Original Lease was amended in certain respects (the "Second Amended and
Restated Original Lease"), and a Memorandum of Lease Agreement dated July 1,
2004 (the "Memorandum") was executed in connection with such Second Amended and
Restated Lease Agreement, which Memorandum was recorded in the Office of the
County Clerk, ▇▇▇▇▇▇ County, Kentucky, on July 9, 2004, in Book D885, Page 872;
WHEREAS, Lessor and Lessee amended the Second Amended and Restated
Original Lease by (i) a First Amendment to Second Amended and Restated Lease
Agreement dated August 2, 2004, between Lessor and Lessee, and (ii) a Letter
Amendment dated October 19, 2004, between Lessor, Lessee and Guarantors (the
Second Amended and Restated Original Lease, as amended by the First Amendment
and the Letter Amendment, is hereinafter referred to as the "Amended and
Restated Original Lease"); and
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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 Third 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");
(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 July 1, 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.
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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, 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.
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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
(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.
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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.
Fair Market Value Purchase Price: The Fair Market Value of the Leased
Property less the Fair Market Added Value.
First Amendment: The First Amendment to the Second Amended and Restated
Lease Agreement dated August 2, 2004.
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.
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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 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 Three Hundred Twenty-Six Thousand Three
Hundred Ninety-One and 25/100 Dollars ($326,391.25) per month, being Three
Million Nine Hundred Sixteen Thousand Six Hundred Ninety-Four and 98/100 Dollars
($3,916,694.98)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.
6
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, 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
Fifty Million Dollars ($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.
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
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
7
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.
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,
8
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 costs and expenses
incurred after the date of this Third 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 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.
9
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.
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, Lessee
shall pay Lessor base rent (the "Base Rent") in an amount equal to the sum
of Three Hundred Twenty-Six Thousand, Three Hundred Ninety-One and 25/100
Dollars ($326,391.25) per month, being Three Million, Nine Hundred Sixteen
Thousand, Six Hundred Ninety-Four and 98/100 Dollars ($3,916,694.98) 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. Percentage 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
10
mean this Facility along with facilities leased by Lessor's Affiliates to
Lessee's Affiliates in Kentfield, California, Fresno California, Marlton,
New Jersey, New Bedford, Massachusetts, and Thornton Colorado.
(c) ADJUSTMENT OF BASE RENT: Beginning on July 1, 2005, and
continuing through December, 2005, Base Rent shall be payable in advance
in equal, consecutive monthly installments of Three Hundred Eight-Nine
Thousand, Four Hundred Forty and 49/100 Dollars ($389,440.49) 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 Four Million, Six Hundred Seventy-Three Thousand, Two Hundred
Eighty-Five and 82/100 Dollars ($4,673,285.82) 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 six (6) months of the Base Rent during 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 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
11
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.
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
12
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.
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,
13
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 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
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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 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
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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 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
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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.
(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
17
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 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.
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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 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:
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(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;
(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;
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(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 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
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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.
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
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($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
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
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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
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).
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(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 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
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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
(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.
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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 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
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(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.
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.
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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.
(b) "Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(d) "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:
29
(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,
(iv) consent to the appointment of a receiver of itself or of
the whole or any substantial part of its property, or
30
(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, 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
31
(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.
▇. ▇▇▇▇▇▇ 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
32
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 transfer to the Lessor all of the Licenses, including,
without limitation, all Medicare and Medicaid provider numbers.
33
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.
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
34
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 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
35
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 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.
36
ARTICLE XX
INTENTIONALLY OMITTED
ARTICLE XXI
SUBSTITUTION OF PROPERTY
21.1 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY
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 (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
37
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 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
38
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;
(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;
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(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 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
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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.
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.
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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 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,
42
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.
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.
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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 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.
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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: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Welsh, Esq.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Lessor: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Baker, Donelson, Bearman, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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
45
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 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
46
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 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,
47
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 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
48
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 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
49
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
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
50
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 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 First Amendment and 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
51
executed written confirmation of such subordination, which shall be delivered to
Lessor within twenty (20) days from Lessor's request.
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.
52
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 ]
53
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 Chief Executive Officer
Signed and Acknowledged
in the presence of:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Printed: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
1
LESSEE:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ OPERATING
COMPANY, LLC, a Delaware limited liability
company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President
Signed and Acknowledged
in the presence of:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Printed: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
GUARANTORS:
VIBRA HEALTHCARE, LLC
(formerly known as Highmark Healthcare, LLC),
a Delaware limited liability company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President
Signed and Acknowledged
in the presence of:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Printed: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
SENIOR REAL ESTATE HOLDINGS, LLC
(d/b/a The ▇▇▇▇▇▇▇▇▇ Group), a Delaware
limited liability company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President
Signed and Acknowledged
in the presence of:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Printed: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
VIBRA MANAGEMENT, LLC
(formerly known as Highmark Management, LLC),
a Delaware limited liability company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President
Signed and Acknowledged
in the presence of:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Printed: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Signed and Acknowledged
in the presence of:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Printed: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
STATE OF ALABAMA
JEFFERSON COUNTY
The foregoing instrument was acknowledged before me on this ________ day
of _______________, 2004, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., the President and Chief
Executive Officer of MPT Operating Partnership, L.P., the Sole Member of ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, LLC, a Delaware limited liability company, who did acknowledge
that the same was his free act and deed individually and as such officer, and
the same act and deed and said limited liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal 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, who did
acknowledge that the same was his free act and deed individually and as such
officer, and the same act and deed of said limited liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal 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, who did acknowledge that the same was his free act and deed
individually and as such officer, and the same act and deed of said limited
liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal 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), a Delaware limited liability
company, who did acknowledge that the same was his free act and deed
individually and as such officer, and the same act and deed of said limited
liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal 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, who did acknowledge that the same was his free act and deed
individually and as such officer, and the same act and deed of said limited
liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal 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 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ who did acknowledge that the same
was his free act and deed individually.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal 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