EXHIBIT 10.38
LEASE AGREEMENT
DATED AS OF FEBRUARY 11, 1994
BY AND BETWEEN
HEALTH AND REHABILITATION PROPERTIES TRUST,
AS LANDLORD,
AND
HORIZON HEALTHCARE CORPORATION, AS TENANT.
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.....................................................................................1
1.1 "Added Value Percentage"...................................................................1
1.2 "Additional Rent"..........................................................................1
1.3 "Affiliated Person"........................................................................1
1.4 "Assumed Indebtedness" ....................................................................2
1.5 "Award" ...................................................................................2
1.6 "Base Net Patient Revenues" ...............................................................2
1.7 "Base Rate" ...............................................................................2
1.8 "Base Year" ...............................................................................2
1.9 "Business Day" ............................................................................2
1.10 "Capital Addition" .......................................................................2
1.11 "Capital Additions Cost" .................................................................3
1.12 "Capital Expenditure" ....................................................................3
1.13 "Cash Adjustment" ........................................................................4
1.14 "Claims" .................................................................................4
1.15 "Code" ...................................................................................4
1.16 "Commencement Date" ......................................................................4
1.17 "Condemnation" ...........................................................................4
1.18 ..........................................................................................4
1.19 "Consolidated Financials" ................................................................4
1.20 "Control" ................................................................................4
1.21 "Date of Taking" .........................................................................4
1.22 "Default" ................................................................................5
1.23 "Encumbrance" ............................................................................5
1.24 "Entity" .................................................................................5
1.25 "Environmental Laws" .....................................................................5
1.26 "Environmental Notice" ...................................................................5
1.27 "Environmental Obligation" ...............................................................5
1.28 "Event of Default" .......................................................................5
1.29 "Excess Net Patient Revenues" ............................................................5
1.30 "Extended Terms" .........................................................................5
1.31 "Facility" ...............................................................................5
1.32 "Facility Mortgage" ......................................................................5
1.33 "Facility Mortgagee" .....................................................................5
1.34 "Facility Trade Names" ...................................................................5
1.35 "Fair Market Added Value" ................................................................6
1.36 "Fair Market Rental" .....................................................................6
1.37 "Fair Market Value" ......................................................................6
1.38 "Fair Market Value Purchase Price" .......................................................6
1.39 "Fiscal Year" ............................................................................6
1.40 "Fixed Term" .............................................................................6
1.41 "Fixtures" ...............................................................................6
1.42 "Hazardous Substances" ...................................................................6
1.43 "Immediate Family" .......................................................................7
1.44 "Impositions" ............................................................................7
1.45 "Initiating Party" .......................................................................7
1.46 "Insurance Requirements" .................................................................7
1.47 "Land" ...................................................................................7
1.48 "Landlord" ...............................................................................8
1.49 "Landlord Default" .......................................................................8
1.50 "Lease" ..................................................................................8
1.51 "Leased Improvements" ....................................................................8
1.52 "Leased Personal Property" ...............................................................8
1.53 "Leased Property" ........................................................................8
1.54 "Legal Requirements" .....................................................................8
1.55 "Lending Institution" ....................................................................8
1.56 "Minimum Rent" ...........................................................................8
1.57 "Minimum Repurchase Price" ...............................................................8
1.58 "Net Patient Revenues" ...................................................................9
1.59 "Non-Capital Additions" .................................................................10
1.60 "Officer's Certificate" .................................................................10
1.61 "Other Leases" ..........................................................................10
1.62 "Other Obligations" .....................................................................10
1.63 "Overdue Rate" ..........................................................................10
1.64 "Parent" ................................................................................10
1.65 "Percentage Rent" .......................................................................10
1.66 "Permitted Encumbrances" ................................................................10
1.67 "Person" ................................................................................11
1.68 "Primary Intended Use" ..................................................................11
1.69 "Qualified Appraiser" ...................................................................11
1.70 "Records" ...............................................................................11
1.71 "Rent" ..................................................................................11
1.72 "Responding Party" ......................................................................11
1.73 "SEC" ...................................................................................11
1.74 "State" .................................................................................11
1.75 "Subsidiary" ............................................................................11
1.76 "Substitute Properties" .................................................................11
1.77 "Substitution Date" .....................................................................11
1.78 "Successor Landlord" ....................................................................11
1.79 "Superior Lease" ........................................................................11
1.80 "Superior Landlord" .....................................................................11
1.81 "Superior Mortgage" .....................................................................12
1.82 "Superior Mortgagee" ....................................................................12
1.83 "Tenant" ................................................................................12
1.84 "Tenant's Personal Property" ............................................................12
1.85 "Term" ..................................................................................12
1.86 "Test Rate" .............................................................................12
1.87 "Trustees" ..............................................................................12
1.88 "Unavoidable Delays" ....................................................................12
1.89 "Unsuitable for Its Primary Intended Use" ...............................................12
ARTICLE 2 PREMISES AND TERM..............................................................................13
2.1 Premises..................................................................................14
2.2 Condition of Premises.....................................................................14
2.3 Fixed Term................................................................................14
2.4 Extended Terms............................................................................14
ARTICLE 3 RENT...........................................................................................15
3.1 Rent......................................................................................15
3.1.1 Minimum Rent.......................................................................15
3.1.2 Percentage Rent....................................................................15
3.1.3 Additional Rent....................................................................17
3.2 Late Payment of Rent......................................................................19
3.3 Net Lease.................................................................................19
3.4 No Termination, Abatement, Etc............................................................20
ARTICLE 4 USE OF THE LEASED PROPERTY.....................................................................20
4.1 Permitted Use.............................................................................20
4.1.1 Primary Intended Use...............................................................20
4.1.2 Necessary Approvals................................................................21
4.1.3 Continuous Operation, Etc..........................................................21
4.1.4 Lawful Use, Etc....................................................................21
4.2 Compliance with Legal and Insurance
Requirements, Instruments, Etc..........................................................21
4.3 Compliance with Medicaid and Medicare
Requirements............................................................................22
4.4 Environmental Matters.....................................................................22
ARTICLE 5 MAINTENANCE AND REPAIRS, ETC...................................................................23
5.1 Maintenance and Repair....................................................................23
5.1.1 Tenant's Obligations...............................................................23
5.1.2 Landlord's Obligations.............................................................23
5.2 Capital Expenditure Cost Sharing..........................................................24
5.3 Tenant's Personal Property................................................................24
5.4 Yield Up..................................................................................25
5.5 Encroachments, Restrictions, Etc..........................................................25
ARTICLE 6 CAPITAL ADDITIONS, ETC.........................................................................26
6.1 Construction of Capital Additions to the Leased Property..................................26
6.2 Capital Additions Financed by Tenant......................................................27
6.3 Information Regarding Capital Additions...................................................29
6.4 Non-Capital Additions.....................................................................30
6.5 Salvage...................................................................................31
ARTICLE 7 LIENS..........................................................................................31
7.1 Liens.....................................................................................31
7.2 Landlord's Lien...........................................................................31
7.3 Mechanic's Liens..........................................................................32
ARTICLE 8 PERMITTED CONTESTS.............................................................................32
ARTICLE 9 INSURANCE AND INDEMNIFICATION..................................................................33
9.1 General Insurance Requirements............................................................33
9.2 Waiver of Subrogation.....................................................................35
9.3 Form Satisfactory, Etc....................................................................35
9.4 No Separate Insurance.....................................................................36
9.5 Indemnification of Landlord...............................................................36
9.6 Indemnification of Tenant.................................................................37
ARTICLE 10 CASUALTY.......................................................................................37
10.1 Insurance Proceeds.......................................................................37
10.2 Reconstruction in the Event of Damage or Destruction.....................................37
10.2.1 Tenant's Obligations.............................................................37
10.2.2 Tenant's Obligations.............................................................38
10.3 Insufficient Insurance Proceeds..........................................................37
10.4 Disbursement of Proceeds.................................................................39
10.5 Tenant's Property........................................................................39
10.6 Restoration of Tenant's Property.........................................................40
10.7 No Abatement of Rent.....................................................................40
10.8 Damage Near End of Term..................................................................40
ARTICLE 11 CONDEMNATION...................................................................................41
11.1 Total Condemnation.......................................................................41
11.2 Partial Condemnation.....................................................................41
11.3 Temporary Condemnation...................................................................41
11.4 Tenant's Option..........................................................................42
11.5 Allocation of Award......................................................................42
11.6 Abatement Procedures.....................................................................42
ARTICLE 12 DEFAULTS AND REMEDIES..........................................................................43
12.1 Events of Default........................................................................42
12.2 Remedies.................................................................................45
12.3 Waiver...................................................................................47
12.4 Application of Funds.....................................................................47
12.5 Failure to Conduct Business..............................................................47
12.6 Landlord's Right to Cure Tenant's Default................................................47
12.7 Trade Names..............................................................................48
ARTICLE 13 HOLDING OVER...................................................................................48
ARTICLE 14 LANDLORD'S DEFAULT.............................................................................48
ARTICLE 15 PURCHASE OF PREMISES...........................................................................49
ARTICLE 16 SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY...............................................50
16.1 Tenant's Substitution Option.............................................................51
16.2 Landlord's Substitution Option...........................................................51
16.3 Substitution Procedures..................................................................51
16.4 Conditions to Substitution...............................................................53
16.5 Conveyance to Tenant.....................................................................54
16.6 Expenses.................................................................................55
ARTICLE 17 SUBLETTING AND ASSIGNMENT......................................................................55
17.1 Subletting and Assignment................................................................55
17.2 Required Sublease Provisions.............................................................56
17.3 Sublease Limitation......................................................................57
17.4 Assignment and Subletting Procedure......................................................57
ARTICLE 18 CERTIFICATES AND FINANCIAL STATEMENTS..........................................................57
18.1 Estoppel Certificates....................................................................57
18.2 Financial Statements.....................................................................58
18.3 General Operations.......................................................................58
18.3.1 Reimbursement, Licensure, Etc....................................................58
18.3.2 Monthly Reports..................................................................59
ARTICLE 19 LANDLORD ACCESS................................................................................59
19.1 Landlord's Right to Inspect..............................................................59
19.2 Landlord's Option to Purchase the Tenant's Personal Property; Transfer of
Licenses.......................................................................................60
ARTICLE 20 APPRAISAL......................................................................................60
20.1 Appraisal Procedure......................................................................60
ARTICLE 21 MORTGAGES......................................................................................61
21.1 Landlord May Grant Liens.................................................................61
21.2 Subordination of Lease...................................................................61
21.3 Notice to Mortgagee and Ground Landlord..................................................63
ARTICLE 22 INVESTMENT TAX CREDIT..........................................................................64
22.1 Investment Tax Credit....................................................................64
ARTICLE 23 ADDITIONAL COVENANTS OF TENANT.................................................................64
23.1 Notice of Change of Name, Administrator, Etc.............................................64
23.2 Notice of Litigation, Potential Event of Default, Etc....................................64
23.3 Management of Leased Property............................................................65
23.4 Distributions, Payments to Affiliated Persons, Etc.......................................65
ARTICLE 24 MISCELLANEOUS..................................................................................65
24.1 No Waiver................................................................................65
24.2 Remedies Cumulative......................................................................65
24.3 Acceptance of Surrender..................................................................66
24.4 No Merger of Title.......................................................................66
24.5 Conveyance by Landlord...................................................................66
24.6 Quiet Enjoyment..........................................................................66
24.7 Landlord's Liability.....................................................................67
24.8 Landlord's Consent.......................................................................67
24.9 Memorandum of Lease......................................................................67
24.10 Notices.................................................................................67
24.11 Construction............................................................................67
24.12 Governing Law...........................................................................69
24.13 Purchase Option.........................................................................69
24.14 Purchase Option.........................................................................70
EXHIBITS
A - Other Leases
B - Permitted Encumbrances
C - The Land
D - Minimum Rent
LEASE AGREEMENT
THIS LEASE AGREEMENT, dated as of February 11, 1994, is made by and
between HEALTH AND REHABILITATION PROPERTIES TRUST, a Maryland real estate
investment trust, as landlord ("Landlord"), having its principal office at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, and HORIZON HEALTHCARE CORPORATION, a
Delaware corporation, as tenant ("Tenant"), having its principal office at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇.
W I T N E S S E T H :
WHEREAS, Landlord owns the Leased Property (this and other capitalized
terms used and not otherwise defined herein having the meanings ascribed to such
terms in Article 1) and Landlord wishes to lease the Leased Property to Tenant
and Tenant wishes to lease the Leased Property from Landlord, subject to and
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contain
and other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
ARTICLE 1
DEFINITIONS
Each reference in this Lease to any of the following terms shall be
construed to incorporate the definitions hereinafter set forth and include the
plural as well as the singular. All accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with generally
accepted accounting principles.
1.1 "Added Value Percentage" shall have the meaning given such term in
Section 6.2(a).
1.2 "Additional Rent" shall have the meaning given such term in Section
3.1.3.
1.3 "Affiliated Person" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership; (b) in the case of any such Person which is a limited liability
company, any member of such company; (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent o the Persons referred to in the
preceding clauses (a) and (b); (d) any other Person otherwise directly or
indirectly controlling or under common control with such Person or one or more
of the Persons referred to in the preceding clauses (a), (b) and (c); and (e)
any other
-2-
Person who is a member of the Immediate Family of such Person or any Person
referred to in the preceding clauses (a) through (d).
1.4 "Assumed Indebtedness" shall mean any indebtedness or other
obligations existing at the time of acquisition of the Leased Property by
Landlord secured by a mortgage, deed of trust or other security agreement
creating a lien on the Leased Property and assumed by Landlord, and any
indebtedness resulting from the refinancing thereof, and/or any subsequent
indebtedness resulting from Landlord's financing of, or Landlord's reimbursement
of Tenant's financing of, any Capital Additions during the Term, except any
indebtedness or other obligations of Tenant not assumed by Landlord prior to or
during the Term.
1.5 "Award" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of the Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses incurred by Landlord in connection with obtaining any such
award).
1.6 "Base Net Patient Revenues" shall mean Net Patient Revenues for the
Base Year.
1.7 "Base Rate" shall mean the rate of interest, determined daily and
expressed as a percentage, announced by Citibank, N.A., in New York, New York,
from time to time, as Citibank, N.A.'s "base rate" or "prime rate", so-called,
or, if at any time Citibank, N.A. ceases to announce such a rate, as announced
by the largest national or state chartered banking institution other than
Citibank, N.A. then having its principal office in New York, New York and
announcing such a rate. If at any time neither Citibank, N.A. nor any of the
five largest other national or state chartered banking institutions having their
principal offices in New York, New York is announcing such a floating rate,
"Base Rate" shall mean a rate of interest, determined daily, which is two (2)
percentage points above the 14-day moving average closing trading price of
90-day Treasury Bills.
1.8 "Base Year" shall mean the twelve-month period beginning June 1,
1999 and ending May 31, 2000.
1.9 "Business Day" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in The Commonwealth of Massachusetts
or in New York, New York are authorized by law or executive action to close.
1.10 "Capital Addition" shall mean one or more new buildings, or one or
more additional structures annexed to any portion of any of the Leased
Improvements, or the material expansion of existing improvements, which are
constructed on any parcel or portion of the Land during the Term, including, but
not
-3-
limited to, the construction of a new wing or new story, the renovation of
existing improvements on the Leased Property in order to provide a functionally
new facility needed to provide services not previously offered, or any
expansion, construction, renovation or conversion in order to increase the bed
capacity of the Facility, to change the purpose for which such beds are utilized
or to improve the quality of the Facility.
1.11 "Capital Additions Cost" shall mean the cost of any Capital
Addition proposed to be made by Tenant, whether paid for by Tenant or Landlord.
Such cost shall include (a) the cost of construction of the Capital Addition,
including, site preparation and improvement, materials, labor, supervision,
developer and administrative fees, legal fees, and related design, engineering
and architectural services, the cost of any fixtures, the cost of construction
financing (including, but not limited to, capitalized interest) and other
miscellaneous costs approved by Landlord, (b) if agreed to by Landlord in
writing, in advance, the cost of any land contiguous to the Leased Property
which is to become a part of the Leased Property purchased for the purpose of
placing thereon the Capital Addition or any portion thereof or for providing
means of access thereto, or parking facilities therefor, including the cost of
surveying the same, (c) the cost of insurance, real estate taxes, water and
sewage charges and other carrying charges for such Capital Addition during
construction, (d) title insurance charges, (e) reasonable attorneys, fees, (f)
filing and registration fees and recording taxes, (g) documentary stamp or
transfer taxes, and (h) all actual and reasonable costs and expenses of Landlord
and any Lending Institution committed to finance the Capital Addition,
including, but not limited to, (i) reasonable attorneys' fees, (ii) printing
expenses, (iii) filing, registration and recording taxes and fees, (iv)
documentary stamp or transfer taxes, (v) title insurance charges and appraisal
fees, (vi) rating agency fees, and (vii) loan commitment fees.
1.12 "Capital Expenditure" shall mean any single required improvement,
alteration, replacement or repair of the Leased Property, or any part thereof,
(a) having a cost in excess of one Hundred Thousand Dollars ($100,000.00) (which
amount shall be increased each year of the Lease by the product determined by
multiplying such amount by the percentage increase in the Consumer Price Index,
Urban Wage Earners and Clerical Workers, All Items, Base 1982- 84=100, published
by the U.S. Department of Labor, All Cities, or such comparable index published
by the U.S. Department of Labor or its successor agency), and (b) having a
useful life in excess of the longer of (i) twelve (12) months, or (ii) the
remaining period of the Term, except capital improvements necessitated by
destruction or Condemnation of the Leased Property, or any portion thereof.
-4-
1.13 "Cash Adjustment" shall have the meaning given such term in
Section 16.3 (d) .
1.14 "Claims" shall have the meaning given such term in Article 8.
1.15 "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.16 "Commencement Date" shall mean the date of this Lease.
1.17 "Condemnation" shall mean (a) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a Condemnor, (b) a
voluntary sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, and (c) a
taking or voluntary conveyance of all or part of the Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting any
portion of the Leased Property, whether or not the same shall have actually been
commenced.
1.18 "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual having the power of Condemnation.
1.19 "Consolidated Financials" shall mean, for any Fiscal Year or other
accounting period of Tenant and its consolidated Subsidiaries, statements of
earnings, retained earnings and changes in financial position for such period
and for the period from the beginning of the applicable Fiscal Year to the end
of such period and the 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, consistently applied.
1.20 "Control" and any variations thereof shall mean, with respect to
any Person, the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, partnership interests or other equity interests.
1.21 "Date of Taking" shall mean the date the Condemnor has the right
to possession of the Leased Property, or any portion thereof, in connection with
a Condemnation.
-5-
1.22 "Default" shall mean any event, act or omission which with the
giving of notice and/or lapse of time could constitute an Event of Default.
1.23 "Encumbrance" shall have the meaning given such term in Section
21.l.
1.24 "Entity" shall mean any corporation, general or limited
partnership, limited liability company, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, any government or agency or political subdivision thereof or any other
entity.
1.25 "Environmental Laws" shall mean all applicable Federal, state or
local statutes, laws, ordinances, rules and regulations, licensing requirements
or conditions, whether now existing or hereafter arising, relating to Hazardous
Substances.
1.26 "Environmental Notice" shall have the meaning given such term in
Section 4.4.
1.27 "Environmental Obligation" shall mean any cost, expense, loss or
damage arising under any Environmental Law or in connection with any Hazardous
Substance.
1.28 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.29 "Excess Net Patient Revenues" shall mean the amount of Net Patient
Revenues for any measuring period in excess of the Base Net Patient Revenues for
the equivalent period of the Base Year.
1.30 "Extended Terms" shall have the meaning given such term in Section
2.4.
1.31 "Facility" shall mean the licensed nursing home being operated on
the Leased Property.
1.32 "Facility Mortgage" shall mean any mortgage, deed of trust or
other security agreement securing any Assumed Indebtedness or any other
encumbrance placed upon the Leased Property in accordance with Article 21.
1.33 "Facility Mortgagee" shall mean the holder of any Facility
Mortgage.
1.34 "Facility Trade Names" shall mean any of the names under which
Tenant operates, or has operated, the Facility at any time during the Term.
-6-
1.35 "Fair Market Added Value" shall mean the Fair Market Value of the
Leased Property (including all Capital Additions) less the Fair Market Value of
the Leased Property determined as if no Capital Additions financed by Tenant had
been constructed.
1.36 "Fair Market Rental" shall mean the rental which a willing tenant
not compelled to rent would pay a willing landlord not compelled to lease for
the use and occupancy of the Leased Property, or applicable portion thereof, on
the terms and conditions of this Lease, for the term in question, and determined
in accordance with the appraisal procedures set forth in Article 20 or in such
other manner as shall be mutually acceptable to Landlord and Tenant.
1.37 "Fair Market Value" shall mean the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for the Leased
Property, (a) assuming the same is unencumbered by this Lease, (b) determined in
accordance with the appraisal procedures set forth in Article 20 or in such
other manner as shall be mutually acceptable to Landlord and Tenant, (c)
assuming such seller shall pay the closing costs generally paid by a seller of
real property in the state in which such property is located and that such buyer
shall pay closing costs generally paid by a buyer of real property in the state
in which such property is located, and (d) not taking into account any reduction
in value resulting from any indebtedness to which such property is subject,
except the positive or negative effect on the value of such property
attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any lien or encumbrance
which is not removed at or prior to the closing of the transaction as to which
such Fair Market Value determination is being made.
1.38 "Fair Market Value Purchase Price" shall mean the Fair Market
Value of the Leased Property less the Fair Market Added Value.
1.39 "Fiscal Year" shall mean each twelve (12) month period from June 1
to May 31.
1.40 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.41 "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.42 "Hazardous Substances" shall mean hazardous substances (as defined
by the Comprehensive Environmental Response, Compensation and Liability Act, as
now in effect or as hereafter from time to time amended), hazardous wastes (as
defined by the Resource Conservation and Recovery Act, as now in effect or as
hereafter from time to time amended), any hazardous waste,
-7-
hazardous substance, pollutant or contaminant, oils, radioactive materials,
asbestos in any form or condition, or any pollutant or contaminant or hazardous,
dangerous or toxic chemicals, materials or substances within the meaning of any
other applicable Federal, state or local law, regulation, ordinance or
requirements relating to or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or materials, all
as now in effect or hereafter from time to time amended.
1.43 "Immediate Family" shall mean, with respect to any Person, his
spouse, parents, brothers, sisters, children (natural or adopted), stepchildren,
grandchildren, grandparents, parents-in-law, brothers-in-law, sisters-in-law,
nephews and nieces.
1.44 "Impositions" shall mean all taxes, assessments, and ad valorem,
sales, and use, single business, gross receipts, transaction privilege, rent or
similar taxes as the same are imposed on either Landlord or Tenant with respect
to the Leased Property and/or the business conducted thereon by Tenant and other
charges and impositions (including, but not limited to, fire protection service
fees and similar charges) levied, assessed or imposed at any time during the
Term by any governmental authority upon or against the Leased Property, or taxes
in lieu thereof, and additional types of taxes to supplement real estate taxes
due to legal limits imposed thereon. If, at any time during the Term, any tax or
excise on rents or other taxes, however described, are levied or assessed
against Landlord with respect to the rent reserved hereunder, either wholly or
partially in substitution for, or in addition to, real estate taxes assessed or
levied on the Leased Property, such tax of excise on rents shall be included in
Impositions; provided, however, that Impositions shall not include franchise,
estate, inheritance, succession, capital levy, transfer, income or excess
profits taxes assessed on Landlord. Impositions shall include any estimated
payment, whether voluntary or required, made by Landlord on account of a fiscal
tax period for which the actual and final amount of taxes for such period has
not been determined by the governmental authority as of the date of any such
estimated payment.
1.45 "Initiating Party" shall have the meaning given such term in
Section 20.1.
1.46 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Lease and all requirements of the issuer of any such
policy.
1.47 "Land" shall have the meaning given such term in Section 2.1(a).
-8-
1.48 "Landlord" shall have the meaning given such term in the preambles
to this Lease.
1.49 "Landlord Default" shall have the meaning given such term in
Article 14.
1.50 "Lease" shall mean this Lease Agreement, including Exhibits A
through D hereto, as it and they may be amended from time to time as herein
provided.
1.51 "Leased Improvements" shall have the meaning given such term in
Section 2.1(b).
1.52 "Leased Personal Property" shall have the meaning given such term
in Section 2.1(e).
1.53 "Leased Property" shall have the meaning given such term in
Section 2.1.
1.54 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions, including, but not limited to,
Environmental Laws, affecting the Leased Property or the maintenance,
construction, use or alteration thereof, whether now or hereafter enacted,
including those which may (a) require repairs, modifications or alterations in
or to the Leased Property or any portion thereof or (b) in any way adversely
affect the use and enjoyment thereof, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Tenant (other than encumbrances hereinafter created by Landlord without
the consent of Tenant), at any time in force affecting the Leased Property.
1.55 "Lending Institution" shall mean any insurance company, federally
insured commercial or savings bank, national banking association, savings and
loan association, employees, welfare, pension or retirement fund or system,
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
$10,000,000.
1.56 "Minimum Rent" shall mean the amount set forth in Exhibit D.
1.57 "Minimum Repurchase Price" shall mean that portion of the
aggregate purchase price of the Leased Property paid by Landlord in cash or in
kind, plus the aggregate of unpaid principal balance of all encumbrances against
the Leased Property at the time of purchase thereof by Tenant, plus any amounts
paid
-9-
by Landlord to reduce the principal balance of any Assumed Indebtedness, less
all proceeds received by Landlord from any refinancing of the Leased Property
(after payment of the debt refinanced and net of any costs and expenses incurred
in connection with such refinancing, including, without limitation, loan points,
commitment fees and commissions) and less the net amount (after deduction of all
reasonable legal fees and other costs and expenses, including, without
limitation, expert witness fees, incurred by Landlord in connection with
obtaining any such award) of all awards received by Landlord from any partial
Condemnation of the Leased Property or any portion thereof which are not applied
to restoration.
1.58 "Net Patient Revenues" shall mean all revenues received or
receivable from or by reason of the operation of the Facility, or any portion
thereof, or any other use of the Leased Property, or any portion thereof,
including, without limitation, all patient revenues received or receivable for
the use of or otherwise by reason of all rooms, beds and other facilities
provided, meals served, services performed, space or facilities subleased or
goods sold on the Leased Property, or any portion thereof, including, without
limitation, and except as provided below, any other arrangements with third
parties relating to the possession or use of any portion of any portion of the
Leased Property; provided, however, Net Patient Revenues shall not include: (a)
revenue from professional fees or charges by physicians and providers (other
than Tenant or Tenant's employees) of ancillary services, when and to the extent
such charges are paid over to such physicians or providers of ancillary
services, or are separately billed and not included in comprehensive fees; (b)
nonoperating revenues such as interest income or income from the sale of assets
not sold in the ordinary course of business; (c) contractual allowances
(relating to any period during the Term) for ▇▇▇▇▇▇▇▇ not paid by or received
from the appropriate governmental agencies or third party providers; (d)
allowances according to generally accepted accounting principles for
uncollectible accounts, including credit card accounts and charity care or other
administrative discounts; (e) all proper patient billing credits and adjustments
according to generally accepted accounting principles relating to health care
accounting; (f) federal, state or local sales or excise taxes and any tax based
on or measured by such revenues which is added to or made a part of the amount
billed to the patient or other recipient of such services or goods, whether
included in the billing or stated separately; (g) provider discounts for
hospital or other medical facility utilization contracts and credit card
discounts; (h) revenues attributable to Capital Additions financed by Tenant as
provided in Section 6.2; (i) revenues attributable to services actually,
provided off the Leased Property, such as home health care; and (j) any amounts
actually paid by Tenant for the cost of any federal, state or local governmental
programs imposed specially to provide or finance
-10-
indigent patient care. To the extent the Leased Property or any portion thereof
is subleased by Tenant, Net Patient Revenues shall include (x) the Net Patient
Revenues generated from the operations conducted on such subleased portion of
the Leased Property and (y) the rent received or receivable by Tenant from or
under any such sublease to the extent such rent is not based on Net Patient
Revenues and, therefore, has not already been included in the calculation of Net
Patient Revenues pursuant to clause (x) preceding.
1.59 "Non-Capital Additions" shall have the meaning given such term in
Section 6.4.
1.60 "Officer's Certificate" shall mean a certificate signed by the
chief financial officer or another officer of Tenant authorized by the board of
directors or by-laws of Tenant, or any other Person whose power and authority to
act has been so authorized.
1.61 "Other Leases" shall mean the Leases described in Exhibit A,
attached hereto and made a part hereof.
1.62 "Other Obligations" shall mean (i) the obligations of Tenant under
and with respect to the loan made by Landlord to Tenant and evidenced by that
certain promissory note of even date in the original principal amount of
$5,100,000; (ii) the obligations of Tenant under and with respect to the loan
made by Landlord to Tenant and evidenced by that certain promissory note of even
date in the original principal amount of $4,300,000; and (iii) the monetary
obligations of Tenant under and with respect to the Management Agreements, dated
as of the date hereof, between Connecticut Subacute Corporation II and Tenant,
including, without limitation, the guaranty of the payment of rent under the
Leases (as defined in the Management Agreements).
1.63 "Overdue Rate" shall mean a rate equal to the lesser of the Base
Rate plus two percent (2%) and the maximum rate then permitted under applicable
law.
1.64 "Parent" shall mean, with respect to any Person, any Person which
owns directly, or indirectly, through one or more Subsidiaries, twenty percent
(20%) or more of the voting or beneficial interests in such Person or otherwise
Controls such Person.
1.65 "Percentage Rent" shall have the meaning given such term in
Section 3.1.2(a).
1.66 "Permitted Encumbrances" shall mean the matters set forth in
Exhibit B, attached hereto and made a part hereof.
-11-
1.67 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives. successors and assigns of such
Person where the context so admits.
1.68 "Primary Intended Use" shall have the meaning given such term in
Section 4.1.1.
1.69 "Qualified Appraiser" shall mean any disinterested person who is a
member in good standing of the American Institute of Real Estate Appraisers or
the American Society of Real Estate Counselors (or the successor to either of
such organizations) and who has had not less than ten (10) years experience in
appraising and valuing, commercial buildings in the State.
1.70 "Records" shall have the meaning given such term in Section 7.2.
1.71 "Rent" shall mean, collectively, the Minimum Rent, Percentage Rent
and Additional Rent.
1.72 "Responding Party" shall have the meaning given such term in
Section 20.1.
1.73 "SEC" shall mean the Securities and Exchange commission.
1.74 "State" shall mean the State, Commonwealth, Possession or
Territory in which the Leased Property is located.
1.75 "Subsidiary" shall mean, with respect to any Person, any Entity in
which such Person shall own, directly or indirectly, through one or more
Subsidiaries, twenty percent (20%) or more of the voting or beneficial interests
or any other entity Controlled by such Person.
1.76 "Substitute Properties" shall have the meaning given such term in
Section 16.1.
1.77 "Substitution Date" shall have the meaning given such term in
Section 16.1.
1.78 "Successor Landlord" shall have the meaning given such term in
Section 21.2.
1.79 "Superior Lease" shall have the meaning given such term in Section
21.2.
1.80 "Superior Landlord" shall have the meaning given such term in
Section 21.2.
-12-
1.81 "Superior Mortgage" shall have the meaning given such term in
Section 21.2.
1.82 "Superior Mortgagee" shall have the meaning given such term in
Section 21.2.
1.83 "Tenant" shall have the meaning given such term in the preambles
to this Lease.
1.84 "Tenant's Personal Property" shall mean all motor vehicles and
consumable inventory and supplies, furniture, equipment and machinery and all
other personal property of Tenant located on the Leased Property or used in
Tenant's business on the Leased Property and all modifications, replacements,
alterations and additions to the Leased Personal Property installed at the
expense of Tenant, other than any items included within the definition of
Fixtures or Leased Personal Property and expressly excluding Tenant's accounts
receivable.
1.85 "Term" shall mean, collectively, the Fixed Term and any Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Lease.
1.86 "Test Rate" shall mean the minimum interest rate necessary to
avoid imputation of original issue discount income under Sections 483 or 1272 of
the Code or any similar provision.
1.87 "Trustees" shall mean the trustees of Landlord.
1.88 "Unavoidable Delays" shall mean delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the reasonable control of the party responsible for performing an
obligation hereunder, but in no event to exceed sixty (60) days so long as the
affected party shall use reasonable efforts to alleviate the cause of such delay
and thereafter promptly perform such obligation; provided, however, that (x) in
no event shall Tenant's obligation to pay the Rent be affected by Unavoidable
Delays, and (y) in no event shall lack of funds be deemed a cause beyond the
control of either party.
1.89 "Unsuitable for Its Primary Intended Use" shall mean a state or
condition of the Facility such that by reason of damage or destruction, or a
partial Condemnation,'.in the good faith judgment of Landlord and Tenant.,
reasonably exercised, the Facility cannot be operated on a commercially
practicable basis for its Primary Intended Use taking into account, among other
relevant factors, the number of usable beds, the amount of square footage, or
revenues affected by such damage or destruction or partial taking.
-13-
ARTICLE 2
PREMISES AND TERM
2.1 Premises. Upon and subject to the terms and conditions herein set
forth, Landlord leases to Tenant and Tenant leases from Landlord all of the
following (collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land as more
particularly described in Exhibit C, attached hereto and made a part
hereof (collectively, the "Land");
(b) all buildings, structures, Fixtures and other improvements
of every kind, including, but not limited to, alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Land and Capital Additions
financed by Landlord (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures and other items of
property, now or hereafter permanently affixed to or incorporated into
the Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment,
all of which, to the 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
Tenant's Personal Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures or other personal
property used or useful in Tenant's business on or in the Leased
Improvements, and'.located on or in the Leased Improvements on the
Commencement Date, except items, if any, included within the category
of Fixtures, but specifically excluding all items included within the
category of Tenant's Personal Property (collectively the "Leased
Personal Property"); and
-14-
(f) all existing leases of space (including any security
deposits held pursuant thereto), if any, in the Leased Improvements to
tenants thereof.
2.2 Condition of Premises. On the Commencement Date, Landlord shall
deliver and Tenant shall accept the Leased Property in "as is" condition,
subject to the rights of parties in possession, the existing state of title,
including all covenants, conditions, restrictions, easements and other matters
of record, all applicable Legal Requirements, the lien of financing instruments,
mortgages and deeds of trust, and such other matters which would have been
disclosed by an inspection of the Leased Property and the record title thereto
or by an accurate survey thereof. LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS THE FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF IT
BEING AGREED THAT ALL SUCH RISKS SHALL BE BORNE BY TENANT. To the extent
permitted by law, however, Landlord grants and assigns to Tenant all of
Landlord's rights to proceed against any predecessor in title for breaches of
warranties or representations or for latent defects in the Leased Property.
Landlord shall cooperate with Tenant in the prosecution of any such claims, in
Landlord's or Tenant's name, all at Tenant's sole cost and expense. Tenant shall
indemnify, and hold harmless Landlord from and against any loss, cost, damage or
liability (including attorneys, fees) incurred by Landlord in connection with
such cooperation.
2.3 Fixed Term. The initial term of this Lease (the "Fixed Term") shall
commence on the date hereof and, unless sooner terminated in accordance with the
terms and conditions of this Lease, shall expire on June 30, 2005.
2.4 Extended Terms. Provided no Default or Event of Default shall have
occurred and be continuing and Tenant shall simultaneously exercise its right to
extend the term of all of .the Other Leases, Tenant shall have the right to
extend the Fixed Term for two additional periods of ten (10) years each (the
"Extended Terms").
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be, and shall
end on the day immediately preceding the tenth anniversary of the commencement
of such Extended Term. All of the terms, covenants and provisions of this Lease
shall apply to each such Extended Term, except that (a) the Minimum Rent-for the
second such Extended Term shall be the greater of (x) the Minimum Rent payable
during the first such Extended Term and (y) the Fair Market Rental for the
Leased Property determined
-15-
as of the commencement of such Extended Term, and (b) Tenant shall have no
further right to extend the Term beyond the Extended Terms hereinabove provided.
If Tenant shall elect to exercise either of the aforesaid options, it shall do
so by giving Landlord written notice thereof not later than one (1) year prior
to the expiration of the then current term of this Lease (Fixed or Extended, as
applicable); it being understood and agreed that time is of the essence with
respect to the giving of such notice. If Tenant shall fail to give any such
notice, this Lease shall automatically terminate at the end of the term then in
effect and Tenant shall have no further option to extend the term of this Lease.
If Tenant shall give such notice, the extension of this Lease shall be
automatically effected, without the execution of any additional documents.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay to Landlord, by check or wire transfer of
immediately available federal funds, as Tenant may elect, without offset,
abatement, demand or deduction, Minimum Rent, Percentage Rent and Additional
Rent, during the Term, as herein provided.
3.1.1 Minimum Rent. Tenant shall pay Minimum Rent in equal
monthly installments, in advance, on the first day of each and every calendar
month during the Term. Minimum Rent for any partial month shall be pro-rated on
a daily basis.
3.1.2 Percentage Rent.
(a) Amount. Commencing June 1, 2000, for each Fiscal Year
during the Term, Tenant shall pay to Landlord, as additional rent,
percentage rent ("Percentage Rent") in an amount equal to three percent
(3%) of Excess Net Patient Revenues for such Fiscal Year. Percentage
Rent shall be calculated and paid quarterly in arrears on the basis of
cumulative Excess Net Patient Revenues as the last day of each quarter
occurring during the applicable Fiscal Year, less the Percentage Rent,
if any, previously paid to Landlord for such Fiscal Year.
(b) Payment of Percentage Rent. Tenant shall calculate and
deliver Percentage Rent-to Landlord within forty-five (45) days after
the end of each quarter of any Fiscal Year (or, in the case of the
final quarter in any Fiscal Year, ninety (90) days thereafter),
together with an Officer's Certificate, setting forth the calculation
of Percentage Rent for such quarter.
-16-
(c) Reconciliation of Additional Rent. Within ninety (90) days
after the end of each Fiscal Year, Tenant shall deliver to Landlord an
Officer's Certificate, together with certified audits with respect to
Net Patient Revenues for the Facility and the facilities leased under
the Other Leases, in form and substance reasonably satisfactory to
Landlord, of Tenant's financial operations prepared by accountants
reasonably satisfactory to Landlord, setting forth the Net Patient
Revenues and Excess Net Patient Revenues for the immediately preceding
Fiscal Year, together with such additional information with respect
thereto as Landlord may reasonably request.
If the Percentage Rent for any Fiscal Year as shown in the
applicable officer's Certificate and accompanying financial statements
is less than the amount previously paid with respect thereto, Landlord
shall, at Landlord's option, refund any excess payment to Tenant or
grant Tenant a credit against the next due payment of Percentage Rent
in the amount of such difference. If the Percentage Rent for any Fiscal
Year as shown in the applicable Officer's Certificate exceeds the
amount previously paid with respect thereto, Tenant shall pay such
excess to Landlord at such time as such Officer's Certificate is
delivered.
Any difference between the Percentage Rent for any Fiscal Year
as shown in such Officer's Certificate and the total amount of
quarterly payments for such Fiscal Year previously paid, whether in
favor of Landlord or Tenant, shall bear interest at the Base Rate,
which interest shall accrue from the close of such Fiscal Year until
the amount of such difference shall be paid or otherwise discharged.
A final reconciliation of Percentage Rent, taking into account
among other relevant adjustments, any contractual allowances which are
accrued after the expiration or sooner termination of this Lease, but
which related to Net Patient Revenues accrued prior to such
termination, and Tenant's good faith best estimate of the amount of any
unresolved contractual allowances shall be made not later than two (2)
years after such termination and Tenant shall advise Landlord within
sixty (60) days after such termination of Tenant's best estimate at
that time of the approximate amount of such adjustments, which estimate
shall not be binding on Tenant.
(d) Confirmation of Percentage Rent. Tenant shall utilize, or
cause to be utilized, an accounting system for the conduct of its
business at the Leased Property in accordance with its usual and
customary practices and in accordance with generally accepted
accounting principles, consistently applied, which will accurately
record all Net
-17-
Patient Revenues, and shall employ independent accountants reasonably
acceptable to Landlord, and Tenant shall retain, for at least four (4)
years after the expiration of each Fiscal Year (and in any event until
the final reconciliation described in subparagraph (c) above for such
Fiscal Year has been made), reasonably adequate records conforming to
such accounting system showing all Net Patient Revenues for such Fiscal
Year. Landlord, at its own expense, except as provided below, shall
have the right, from time to time by its accountants or
representatives, to audit the information set forth in the Officer's
Certificate referred to in subparagraph (b) above and, in connection
with such audit, to examine Tenant's records with respect thereto
including supporting data and sales and excise tax returns), subject to
any prohibitions or limitations on disclosure of any such data under
applicable law or regulations, including, without limitation, any duly
enacted "Patients' ▇▇▇▇ of Rights" or similar legislation and such
other limitations as may be necessary to preserve the confidentiality
of the Facility patient relationship and the physician-patient
privilege. If any such audit shall disclose a deficiency in the payment
of Percentage Rent and either Tenant agrees with the result of such
audit or the matter is otherwise determined or compromised, Tenant
shall forthwith pay to Landlord the amount of the deficiency, as
finally agreed or determined, together with interest thereon at the
Base Rate. If any such audit discloses that the Net Patient Revenues
actually received by Tenant for any Fiscal Year exceed those reported
by Tenant by more than three percent (3%), Tenant shall pay the
reasonable cost of such audit. Any proprietary information obtained by
Landlord pursuant to the provisions of this section shall be treated as
confidential, except such information may be used, subject to
appropriate confidentiality safeguards, in any litigation between the
parties and Landlord may disclose such information to prospective
purchasers or lenders.
3.1.3 Additional Rent. In addition to the Minimum Rent and
Percentage Rent, Tenant shall pay and discharge as and when due and payable all
other amounts, liabilities, obligations and Impositions which Tenant assumes or
agrees to pay under this Lease (collectively, "Additional Rent"), including, but
not limited to the following:
(a) Impositions. Subject to Article 8, Tenant shall 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 shall promptly, upon
request, furnish to Landlord copies of official receipts or other
satisfactory proof evidencing such payments. If any such Imposition
may, at the option of the taxpayer, lawfully be paid in
-18-
installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any
fine, penalty, premium, further interest or cost may be added thereto.
Landlord, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of
Landlord's net income, gross receipts, sales and use, single business,
transaction privilege, rent, ad valorem, franchise taxes and taxes on
its capital stock, and Tenant, at its expense, shall, to the extent
required or permitted by applicable laws and regulations, prepare and
file all other tax returns and reports in respect of any Imposition as
may be required by governmental authorities. If any refund shall be due
from any taxing authority in respect of any Imposition paid by Tenant,
the same shall be paid over to or retained by Tenant if no Default or
Event of Default shall have occurred and be continuing. Landlord and
Tenant shall, upon request of the other, provide such data as is
maintained by the party to whom the request is made with respect to the
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, Tenant shall file all
personal property tax returns in such jurisdictions where it may
legally so file. Each party shall, to the extent it possesses the same,
provide the other, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property. Where Landlord is legally required to file personal property
tax returns, Landlord shall provide Tenant with copies of assessment
notices in sufficient time for Tenant to file a protest. All
Impositions assessed against such personal property shall be
(irrespective of whether Landlord or Tenant shall file the relevant
return) paid by Tenant not later than thirty (30) days prior to the
last date on which the same may be made without interest or penalty. If
the provisions of any Facility Mortgage requires deposits on account of
Impositions to be made with such Facility Mortgagee, provided the
Facility Mortgagee has not elected to waive such provision, Tenant
shall either pay Landlord the monthly amounts required and Landlord
shall transfer such amounts to such Facility Mortgagee or, pursuant to
written direction by Landlord, Tenant shall make such deposits directly
with such Facility Mortgagee.
Landlord shall give prompt written notice to Tenant of all
Impositions payable by Tenant hereunder of which Landlord at any time
has knowledge; provided, however, Landlord's failure to give any such
notice shall in no way
-19-
diminish Tenant's obligation hereunder to pay such Impositions.
Impositions imposed in respect of the tax-fiscal period during
which the Term commences and/or terminates shall be prorated between
Landlord and Tenant, whether or not such Imposition is imposed before
or after such termination.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities
used at the Leased Property during the Term.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained
pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations which Tenant assumes or
agrees to pay under this Lease.
3.2 Late Payment of Rent. If any installment of Minimum Rent,
Percentage Rent or Additional Rent (but only as to those items of Additional
Rent which are payable directly to Landlord) shall not be paid when due, Tenant
shall pay Landlord, on demand, as Additional Rent, a late charge (to the extent
permitted by law) computed, during the first ten (10) days such payment is
delinquent at the greater of the Base Rate and eleven and one-half percent
(11.5%) per annum and, thereafter, at the Overdue Rate, on the amount of
such-installment, from the date such installment was due until the date paid. To
the extent that Tenant pays any Additional Rent directly to Landlord pursuant to
any requirement of this Lease, Tenant shall be relieved of its obligation to pay
such Additional Rent to the entity to which they would otherwise be due.
In the event of any failure by Tenant to pay any Additional Rent when
due, Tenant shall promptly pay and discharge, as Additional Rent, every fine,
penalty, interest and cost which may be added for non-payment or late payment of
such items. Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of non-payment of the Additional Rent as in the case of non-payment of
the Minimum Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord, so that
this Lease shall yield to Landlord the full amount of the installments of
Minimum Rent, Percentage Rent and Additional Rent throughout the Term, subject
to any other provisions of this Lease which expressly provide for adjustment or
abatement of Rent or other charges.
-20-
3.4 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Tenant, to the maximum extent permitted by law, shall
remain bound by this Lease in accordance with its terms and shall neither take
any action without the consent of Landlord to modify, surrender or terminate the
same, nor seek, nor be entitled to any abatement, deduction, deferment or
reduction of the Rent, or set-off against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a) any
damage to, or destruction of, the Leased Property or any portion thereof from
whatever cause or any Condemnation; (b) the lawful or unlawful prohibition of,
or restriction upon Tenant's use of the Leased Property, or any portion thereof,
or the interference with such use by any Person or by reason of eviction by
paramount title; (c) any claim which Tenant may have against Landlord by reason
of any Landlord Default; (d) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Landlord or any assignee or transferee of Landlord; or (e)
for any other cause whether similar or dissimilar to any of the foregoing.
Tenant hereby waives all rights arising from any occurrence whatsoever, which
may now or hereafter be conferred upon it by law to modify, surrender or
terminate this Lease or quit or surrender the Leased Property or any portion
thereof or which may entitle Tenant to any abatement, reduction, suspension or
deferment of the Rent or other sums payable or other obligations to be performed
by Tenant hereunder, except as otherwise specifically provided in this Lease.
The obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use. Tenant shall continuously use or
cause to be used the Leased Property as a nursing home or subacute facility
and/or other facility offering any higher level health care services and for
such other uses as may be necessary or incidental thereto (the particular use to
which the Leased Property is put at any particular time, its "Primary Intended
Use"). Tenant shall not use the Leased Property or any portion thereof for other
than its Primary Intended Use without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed; provided, however,
that such consent shall not be deemed to be unreasonably withheld if, in
-21-
the reasonable opinion of Landlord, the proposed use will significantly alter
the character or purpose or detract from the value or operating efficiency of
the Leased Property or significantly impair the revenue-producing capability of
the Leased Property or adversely affect the ability of Tenant to comply with
this Lease. No use shall be made or permitted to be made of the Leased Property
and no acts shall be done thereon which will cause the cancellation of any
insurance policy covering the Leased Property or any part thereof, nor shall
Tenant sell or otherwise provide to residents or patients therein, or permit to
be kept, used or sold in or about the Leased Property, or any portion thereof,
any article which may be prohibited by law or by the standard form of fire
insurance policies, or any other insurance policies required to be carried
hereunder, or fire underwriter's regulations.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain all approvals
necessary to use and operate the Leased Property and the Facility for the
Primary Intended Use under applicable local, state and federal law and, without
limiting the generality of the foregoing, shall use its best efforts to maintain
appropriate certifications for reimbursement licensure.
4.1.3 Continuous Operation, Etc. Tenant shall use its best
efforts to operate continuously the Leased Property as a provider of health care
services in accordance with the Primary Intended Use. Tenant shall not take, or
omit to take, any action, the taking or omission of which may materially impair
the value or the usefulness of the Leased Property for the Primary Intended Use.
4.1.4 Lawful Use, Etc. Tenant shall not use or suffer or
permit the use of the Leased Property and Tenant's Personal Property for any
unlawful purpose. Tenant shall not commit or suffer to be committed any waste on
the Leased Property or the Facility, nor shall Tenant cause or permit any
nuisance thereon or therein. Tenant shall neither suffer nor permit the Leased
Property or any portion thereof, including any Capital Addition, whether or not
financed by Landlord, or Tenant's Personal Property, to be used in such a manner
as might reasonably tend to impair Landlord's (or Tenant's, as the case may be)
title thereto or to any portion thereof, or may reasonably make possible any
claim for adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Instruments, Etc.
Subject to the provisions of Article 8, Tenant, at its sole expense, shall
promptly (i) comply with all Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration and restoration
-22-
of the Leased Property and Tenant's Personal Property, and (ii) procure,
maintain and comply with all appropriate licenses, certificates of need,
permits, provider agreements and other authorizations required for any use of
the Leased Property and Tenant'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.
4.3 Compliance with Medicaid and Medicare Requirements. Tenant shall,
at its sole cost and expense, make whatever improvements (capital or ordinary)
as are required to conform the Leased Property to such standards as may, from
time to time, be required by Federal Medicare (Title 18) or Medicaid (Title 19)
skilled and/or intermediate care nursing programs, if applicable, or any other
applicable programs or legislation, or capital improvements required by any
other governmental agency having jurisdiction over the Leased Property as a
condition of the continued operation of the Leased Property for the Primary
Intended Use.
4.4 Environmental Matters. Tenant shall not store, spill upon, dispose
of or transfer to or from the Leased Property any Hazardous Substance, except
that Tenant may store, transfer and dispose of Hazardous Substances in
compliance with all Environmental Laws. Tenant shall maintain the Leased
Property at all times free of any Hazardous Substance (except such Hazardous
Substances as are maintained in compliance with all Environmental Laws). Tenant
shall promptly: (a) notify Landlord in writing of any change in the nature or
extent of such Hazardous Substances maintained, (b) transmit to Landlord a copy
of any report which is required to be filed with respect to the Leased Property
pursuant to any Environmental Law, (c) transmit to Landlord copies of any
citations, orders, notices or other governmental communications received by
Tenant or its agents or representatives with respect thereto (collectively,
"Environmental Notice"), (d) observe and comply with any and all Environmental
Laws relating to the use, maintenance and disposal of Hazardous Substances and
all orders or directives from any official, court or agency of competent
jurisdiction relating to the use or maintenance or requiring the removal,
treatment, containment or other disposition thereof, and (e) pay or otherwise
dispose of any fine, charge or Imposition related thereto, unless Tenant shall
contest the same in accordance with Article 8.
If at any time prior to the termination of this Lease, Hazardous
Substances are discovered on the Leased Property, Tenant hereby agrees to take
all actions, and to incur any and all expenses, as may be reasonably necessary
and as may be required by any municipal, State or Federal agency or other
governmental entity or agency having jurisdiction thereof, (a) to
-23-
clean up and remove from and about the Leased Property all Hazardous Substances
thereon, (b) to contain and prevent any further release or threat of release of
Hazardous Substances on or about the Leased Property and (c) to eliminate any
further release or threat of release of Hazardous Substances on or about the
Leased Property.
Tenant shall indemnify and hold harmless Landlord and each Facility
Mortgagee from and against all liabilities, obligations, claims, damages,
penalties, costs and expenses (including, without limitation, reasonable
attorney's fees and expenses) imposed upon, incurred by or asserted against any
of them by reason of any failure by Tenant or any Person claiming under Tenant
to perform or comply with any of the terms of this Section 4.4.
ARTICLE 5
MAINTENANCE AND REPAIRS, ETC.
5.1 Maintenance and Repair.
5.1.1 Tenant's obligations. Tenant shall, at its sole cost and
expense, keep the Leased Property and all private roadways, sidewalks and curbs
appurtenant thereto (and Tenant's Personal Property) in good order and repair,
reasonable wear and tear excepted, (whether or not the need for such repairs
occurs as a result of Tenant's use, any prior use, the elements or the age of
the Leased Property or Tenant's Personal Property, or any portion thereof), and
shall promptly make all necessary and appropriate repairs and replacements
thereto of every kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the commencement of the Term (concealed
or otherwise). All repairs shall be at least equivalent in quality to the
original work.
5.1.2 Landlord's Obligations. Landlord shall not, under any
circumstances, be required to build or rebuild any improvement 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, except as specifically
provided herein. Tenant hereby waives, to the extent permitted by law, the right
to make repairs at the expense of Landlord pursuant to any law in effect at the
time of the execution of this Lease or hereafter enacted. Landlord shall have
the right to give, record and post,
-24-
as appropriate, notices of nonresponsibility under any mechanic's lien laws now
or hereafter existing.
5.2 Capital Expenditure Cost Sharing. Replacement of or major repairs
to all structural or mechanical systems shall be undertaken by Tenant, at its
sole cost and expense in the exercise of its reasonable business judgment,
pursuant to and in accordance with plans and specifications approved in advance
by Landlord; provided, however, that if the useful life of any improvement or
repair for which a Capital Expenditure is made extends beyond the termination of
the Term (other than any early termination resulting from the occurrence of an
Event of Default), provided Tenant shall have obtained Landlord's prior written
consent with respect to the making thereof, the cost of such replacement or
repair shall be apportioned between Landlord and Tenant so that Landlord shall
pay for that portion of the useful life of such item occurring on or after such
termination date. Landlord shall have no obligation to reimburse Tenant for
Landlord's share of the cost of such replacement or repair until the date of the
termination of this Lease. Notwithstanding the foregoing, Landlord agrees to
make any such payment to Tenant within sixty (60) days after Tenant's written
request therefor.
5.3 Tenant's Personal Property. Tenant may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of Tenant's Personal
Property, and Tenant may, subject to the conditions set forth below, remove the
same upon the expiration or sooner termination of the Term. Tenant shall provide
and maintain during the entire Term all such Tenant's Personal Property as shall
be necessary in order to operate the Facility in compliance with all licensure
and certification requirements, applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the industry
for the Primary Intended Use. All of Tenant's Personal Property not removed by
Tenant on or prior to the expiration or earlier termination of this Lease shall
be considered abandoned by Tenant and may be appropriated, sold, destroyed or
otherwise disposed of by Landlord without the necessity of first giving notice
thereof to Tenant, without any payment to Tenant and without any obligation to
account therefor. Tenant shall, at its expense, restore the Leased Property to
the condition required by Section 5.4, including repair of all damage to the
Leased Property caused by the removal of Tenant's Personal Property, whether
effected by Tenant or Landlord.
If Tenant uses any item of tangible personal property (other than motor
vehicles) on, or in connection with, the Leased Property which belongs to anyone
other than Tenant, Tenant shall use its best efforts to require the agreement
permitting such use to provide that Landlord or its designee may assume Tenant's
-25-
rights under such agreement upon management of the Facility by Landlord or its
designee.
5.4 Yield Up. Upon the expiration or sooner termination of this Lease,
Tenant shall vacate and surrender the Leased Property to Landlord in the
condition in which the Leased Property was on the Commencement Date, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease, ordinary wear and tear excepted.
In addition, upon the expiration or earlier termination of this Lease,
Tenant shall, at Landlord's reasonable cost and expense, use its best efforts to
transfer to and cooperate with Landlord or Landlord's nominee in connection with
the processing of all applications for licenses, operating permits and other
governmental authorizations and all contracts, including, contracts with
governmental or quasi-governmental entities, which may be necessary for the
operation of the Facility. If requested by Landlord, Tenant shall continue to
manage the Facility after the termination of this Lease and for so long
thereafter as is necessary to obtain all necessary licenses, operating permits
and other governmental authorizations, on such reasonable terms (which shall
include an agreement to reimburse Tenant for its reasonable out-of-pocket costs
and expenses and reasonable administrative costs) as Landlord shall request.
5.5 Encroachments, Restrictions, Etc. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any 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, upon the
request of Landlord or of any person affected by any such encroachment,
violation or impairment, Tenant shall, at its sole cost and expense, subject to
its right to contest the existence of any encroachment, violation or impairment
and in such case, in the event of an adverse final determination, either (a)
obtain, in form and substance satisfactory to Landlord, valid and effective
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation or impairment, whether the same shall affect
Landlord or Tenant, or (b), subject to Landlord's approval (which shall not be
unreasonably withheld or delayed), make such changes in the Leased Improvements
and take such other actions, as Tenant, in the good faith exercise of its
judgment, deems reasonably practicable, to remove such encroachment, and to end
such violation or impairment, including, if necessary, the alteration of any of
the Leased Improvements and, in any event, take all such actions as may be
necessary in order to ensure the continued operation of the Leased Improvements
for the Primary Intended Use substantially in the
-26-
manner and to the extent the Leased Improvements were operated prior to the
assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of this Article 5.
Tenant's obligations under this Section 5.5 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 Tenant shall be entitled to a credit for any sums
recovered by Landlord under any such policy of title or other insurance.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property. Provided
no Default or Event of Default shall have occurred and be continuing, Tenant
shall have the right, subject to obtaining Landlord's prior written consent
(which consent shall not be unreasonably withheld or delayed), upon and subject
to the terms and conditions set forth below, to construct or install Capital
Additions on the Leased Property. Landlord's consent shall not be deemed to be
unreasonably withheld if such Capital Addition will significantly alter the
character or purpose or detract from the value or operating efficiency or the
revenue-producing capability of the Leased Property, or adversely affect the
ability of Tenant to comply with this Lease. Any withholding of consent shall be
express and shall be effected within thirty (30) days after receipt by Landlord
of such documents or information as Landlord may reasonably require, notice of
which requirements shall be sent to Tenant within thirty (30) days after
Tenant's request. Failure to give notice of the withholding of such consent
within such thirty (30) day period shall be deemed approval. Prior to commencing
construction of any Capital Addition, Tenant shall submit to Landlord, in
writing, a proposal setting forth, in reasonable detail, any proposed Capital
Addition and shall provide Landlord with such plans and specifications, permits,
licenses, contracts and other information concerning the proposed Capital
Addition as Landlord may reasonably request. Without limiting the generality of
the foregoing, such proposal shall indicate the approximate projected cost of
constructing such Capital Addition, the use or uses to which it will be put and
a good faith estimate of the change, if any, in the Net Patient Revenues that
Tenant anticipates will result from such Capital Addition. Prior to commencing
construction of any Capital Addition, Tenant shall request in writing that
Landlord provide funds to pay for such Capital Addition. If, within sixty (60)
days after receipt of such request, Landlord shall not elect to provide such
financing on terms reasonably acceptable to Tenant (and, for purposes of this
Section 6.1, the failure of Landlord to respond within such 60 day period shall
be deemed an election not to provide such
-27-
funding), the provisions of Section 6.2 shall apply. Landlord's notice of its
election to provide such financing shall set forth the terms and conditions of
such proposed financing, including the terms of any amendment to this Lease
(including, without limitation, an increase in Minimum Rent to compensate
Landlord for the additional funds advanced). In no event shall the portion of
the projected Capital Additions Cost comprised of land, if any, materials, labor
charges and fixtures be less than eighty percent (80%) of the total amount of
such cost. Tenant may withdraw its request by written notice to Landlord at any
time before Tenant's written acceptance of Landlord's terms and conditions. If
Landlord declines to finance a Capital Addition or if Landlord's proposed
financing terms are unacceptable to Tenant, Tenant may solicit and negotiate a
commitment for such financing from another Person, provided Landlord shall
approve all the terms and conditions of such financing (which approval shall not
be unreasonably withheld or delayed). If Landlord shall finance the proposed
Capital Addition, Tenant shall pay to Landlord, as Additional Rent, all
reasonable costs and expenses paid or incurred by Landlord and any Lending
Institution which has committed to provide financing for such Capital Addition
to Landlord in connection therewith, including, but not limited to, (a) the
reasonable attorneys, fees and expenses, (b) all printing expenses, (c) all
filing, registration and recording taxes and fees, (d) documentary stamp taxes,
(e) title insurance charges, appraisal fees, and rating agency fees, and (f)
commitment fees.
No Capital Addition shall be made which would tie in or connect any
Leased Improvement or any Leased Property with any other improvements on
property adjacent to such Leased Property (and not part of the Land) including,
without limitation, tie-ins of buildings or other structures or utilities,
unless Tenant shall have obtained the prior written approval of Landlord, which
approval may be withheld by Landlord in Landlord's sole, discretion. Any Capital
Additions shall, upon the expiration or sooner termination of this Lease, become
the property of Landlord, free and clear of all encumbrances, subject to the
provisions of Section 6.2.
6.2 Capital Additions Financed by Tenant. Provided that Tenant has
obtained the prior written consent of Landlord in each instance (which approval
shall not be unreasonably withheld or delayed), Tenant may arrange for financing
for Capital Additions from third party lenders; provided, however that (i) the
terms and conditions of any such financing shall be subject to the prior
approval of Landlord and (ii) any security interests in any property of Tenant,
including, without limitation, the Leased Property, shall be expressly and fully
subordinated to this Lease and to the interest of Landlord in the Leased
Property and to the rights of any Facility Mortgagee. If, pursuant to the
provisions of this Lease, Tenant provides or arranges financing with respect
-28-
to any Capital Addition, this Lease shall be and hereby is amended to provide as
follows:
(a) Upon completion of any such Capital Addition, Net Patient
Revenues attributable to such Capital Addition shall be excluded from
Net Patient Revenues of the Leased Property for purposes of calculating
Percentage Rent. The Net Patient Revenues attributable to any such
Capital Addition shall be deemed to be an amount (the "Added Value
Percentage ") which bears the same proportion to the total Net Patient
Revenues from the entire Leased Property (including all Capital
Additions) as the Fair Market Added value of such Capital Addition
bears to the Fair Market Value of the entire Leased Property (including
all Capital Additions) immediately after completion of such Capital
Addition. The Added Value Percentage for Capital Additions financed by
Tenant shall remain in effect until any subsequent Capital Addition
financed by Tenant is completed.
(b) There shall be no adjustment in the Minimum Rent by reason
of any such Capital Addition.
(c) Upon the expiration or earlier termination of this Lease
(but if this Lease is terminated by reason of an Event of Default, only
after Landlord is fully compensated for all damages resulting
therefrom), Landlord shall compensate Tenant for all Capital Additions
financed by Tenant in any of the following ways determined in
Landlord's sole discretion:
(i) By purchasing such Capital Additions from Tenant for cash in
the amount of the then Fair Market Added Value of such Capital
Additions;
(ii) By purchasing such Capital Additions from Tenant by delivering
to Tenant Landlord's purchase money promissory note in the
amount of the Fair Market Added Value, which note shall be due
and payable as to both principal and interest on the second
anniversary of the making thereof, shall be on then
commercially reasonable terms and shall be secured by a
mortgage on the Leased Property and such Capital Additions
subject to all existing mortgages and encumbrances on the
Leased Property and such Capital Additions at the time of such
purchase;
(iii) By assigning to Tenant the right to receive an amount equal to
the Added Value Percentage (determined as of the date of the
expiration or earlier termination of this Lease) of all rent
and other consideration receivable by Landlord under any
re-letting or other disposition of the Leased Property and
such Capital
-29-
Additions, after deducting from such rent all costs and
expenses incurred by Landlord in connection with such
re-letting or other disposition of the Leased Property and
such Capital Additions and all costs and expenses of operating
and maintaining the Leased Property and such Capital Additions
during the term of any such new lease which are not borne by
the tenant thereunder, with the provisions of this Section
6.2(c) to remain in effect until the sale or other final
disposition of the Leased Property and such Capital Additions,
at which time the Fair Market Added Value of such Capital
Addition shall be immediately due and payable, such obligation
to be secured by a mortgage on the Leased Property and such
Capital Additions, subject to all existing mortgages and
encumbrances on the Leased Property at the time of such
purchase and assignment; or
(iv) By making such other arrangement regarding such compensation
as shall be mutually acceptable to Landlord and Tenant.
6.3 Information Regarding Capital Additions. Regardless of the source
of financing of any proposed Capital Addition, Tenant shall provide Landlord
with such information as Landlord may from time to time reasonably request with
respect to such Capital Addition, including, without limitation, the following:
(a) Evidence that such Capital Addition will be, and upon
completion has been, completed in compliance with the applicable
requirements of State and federal law with respect to capital
expenditures for nursing facilities;
(b) Upon completion of such Capital Addition, a copy of the
certificate of occupancy for the Facility updated, if required;
(c) Such information, certificates, licenses, permits or other
documents necessary to confirm that Tenant will be able to use the
Capital Addition upon completion thereof in accordance with the Primary
Intended Use, including all required federal, State or local government
licenses and approvals;
(d) An Officer's Certificate and a certificate from Tenant's
architect setting forth, in reasonable detail, the projected (or
actual, if available) Capital Additions Cost and invoices and lien
waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land acquired
for the purpose of constructing the Capital
-30-
Addition free and clear of any liens or encumbrances, except those
approved by Landlord and, upon completion of the Capital Addition, a
final as-built survey thereof reasonably satisfactory to Landlord;
(f) Endorsements to any outstanding policy of title insurance
covering the Leased Property or commitments therefor, satisfactory in
form and substance to Landlord, (i) updating the same without any
additional exceptions except as approved by Landlord, and (ii)
increasing the coverage thereof by an amount equal to the Fair Market
Value of the Capital Addition (except to the extent covered by the
owner's policy of title insurance referred to in subparagraph (g)
below);
(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord pursuant to
subparagraph (e) above, free and clear of all liens and encumbrances,
except those approved by Landlord, and (ii) a lender's policy of title
insurance, reasonably satisfactory in form and substance to Landlord
and the Lending Institution advancing any portion of the Capital
Additions Cost;
(h) An appraisal of the Leased Property by a Qualified
Appraiser, acceptable to Landlord, and an officer's Certificate stating
that the value of the Leased Property upon completion of the Capital
Addition exceeds the Fair Market Value thereof prior to the
commencement of such Capital Addition by an amount not less than 80% of
the Capital Additions Cost; and
(i) Prints of architectural and engineering drawings relating
to such Capital Addition and such other certificates , documents,
opinions of counsel, appraisals, surveys, certified copies of duly
adopted resolutions of the board of directors of Tenant authorizing the
execution and delivery of any lease amendment or other instruments
reasonably required by Landlord and any Lending Institution advancing
or reimbursing Tenant for any portion of the Capital Additions Cost.
6.4 Non-Capital Additions. Tenant shall have the right, at Tenant's
sole cost and expense, to make additions, modifications or improvements to the
Leased Property which are not Capital Additions ("Non-Capital Additions") from
time to time as Tenant, in its reasonable discretion, may deem desirable for the
Primary Intended Use, provided that such action will not adversely alter the
character or purpose or detract from the value, operating efficiency or revenue-
producing capability of the Leased Property, or adversely affect the ability of
Tenant to comply with the provisions of this Lease. All such Non-Capital
-31-
Additions shall, upon expiration or earlier termination of this Lease, become
the property of Landlord, free and clear of all encumbrances other than
Permitted Encumbrances.
6.5 Salvage. All materials which are scrapped or removed in connection
with the making of either Capital Additions or repairs required by Article 5
shall be the property of the party paying or providing the financing for such
work.
ARTICLE 7
LIENS
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the Leased Property or any attachment, levy, claim or encumbrance in
respect of the Rent, other than (a) this Lease, (b) the Permitted Encumbrances,
(c) restrictions, liens and other encumbrances which are consented to in writing
by Landlord, (d) liens for those taxes of Landlord which Tenant is not required
to pay hereunder, (e) subleases permitted by Article 17, (f) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (i) the same are not yet payable, or (ii) are payable without fine or
penalty and such liens are being contested in accordance with Article 8, (g)
liens of mechanics, laborers, materialmen, suppliers or vendors for sums
disputed, provided that (i) the payment of such sums shall not be postponed
under any related contract for more than sixty (60) days after the completion of
the action giving rise to such lien and a re-serve or another appropriate
provision as shall be required by law or generally accepted accounting
principles shall have been made therefor, and (ii) any such liens are being
contested in accordance with Article 8, and (h) any liens which are the
responsibility of Landlord pursuant to Article 21.
7.2 Landlord's Lien. In addition to any statutory landlord's lien and
in order to secure payment of the Rent and all other sums payable hereunder by
Tenant, and to secure payment of any loss, cost or damage which Landlord may
suffer by reason of Tenant's breach of this Lease, Tenant hereby grants unto
Landlord a security interest in and an express contractual lien upon Tenant's
Personal Property (except motor vehicles sold from time to time in the ordinary
course of Tenant's operations), and all ledger sheets, files, records, documents
and instruments (including, without limitation, computer programs, tapes and
related electronic data processing) relating to the operation of the Facility
(collectively, the "Records") and all proceeds therefrom; and Tenant's Personal
Property shall not be removed from the Leased Property without the Landlord's
prior written
-32-
consent, unless no Default or Event of Default shall have occurred and be
continuing.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
security agreements and financing statements in form sufficient to perfect the
security interests of Landlord in Tenant's Personal Property and the proceeds
thereof in accordance with the provisions of the applicable laws of the State
and otherwise in form and substance reasonably satisfactory to Landlord. Tenant
hereby grants Landlord an irrevocable limited power of attorney, coupled with an
interest, to execute all such financing statements in Tenant's name, place and
stead. The security interest herein granted is in addition to any statutory lien
for the Rent.
Landlord agrees, at Tenant's request, to execute such documents as
Tenant may reasonably require to subordinate the lien granted pursuant to this
Section 7.2 in Tenant's Personal Property (but not the Records) to the lien of
any Person providing purchase money financing with respect thereto.
7.3 Mechanic's Liens. Except as permitted with respect to Capital
Additions, nothing contained in this Lease and no action or inaction by Landlord
shall be construed as (a) constituting the consent or request of Landlord,
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 (b)
giving Tenant 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
Landlord 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 Leased Property, or any portion thereof.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively "Claims") by appropriate legal
proceedings conducted in good faith and with due diligence, provided that (a)
the foregoing shall in no way be construed as relieving, modifying or extending
Tenant's obligation to pay any Claims as finally determined or prior to the time
the Leased Property may be sold in satisfaction thereof, (b) such contest shall
not cause
-33-
Landlord or Tenant to be in default under any mortgage or deed of trust
encumbering the Leased Property or any interest therein or result in or
reasonably be expected to result in a lien attaching to the Leased Property, and
(c) Tenant shall indemnify and hold harmless Landlord from and against any cost,
claim, damage, penalty or expense, including reasonable attorneys, fees,
incurred by Landlord in connection therewith or as a result thereof. Upon
Landlord's request, Tenant shall either (a) provide a bond or other assurance
reasonably satisfactory to Landlord that all Claims which may be assessed
against the Leased Property, together with all interest and penalties thereon
will be paid, or (b) deposit within the time otherwise required for payment with
a bank or trust company, as trustee, as security for the payment of such Claims,
an amount sufficient to pay the same, together with interest and penalties in
connection therewith and all Claims which may be assessed against or become a
Claim against the Leased Property, or any part thereof, in connection with any
such contest. Tenant shall furnish Landlord and any Facility Mortgagee with
reasonable evidence of such deposit within five (5) days after request therefor.
Landlord agrees to join in any such proceedings if required legally to prosecute
such contest; provided, however, that Landlord shall not thereby be subjected to
any liability therefor (including, for the payment of any costs or expenses in
connection therewith). Tenant shall be entitled to any refund of any Claims and
such charges and penalties or interest thereon which have been paid by Tenant or
paid by Landlord and for which Landlord has been fully reimbursed by Tenant. If
Tenant shall fail (a) to pay any Claims when due, (b) to provide security
therefor as provided in this Article 8, or (c) to prosecute any such contest
diligently and in good faith, Landlord may, upon reasonable notice to Tenant
(which notice may be oral and shall not be required if Landlord shall determine
the same is not practicable), pay such charges, together with interest and
penalties due with respect thereto, and Tenant shall reimburse Landlord
therefor, upon demand, as Additional Rent.
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements. Tenant shall at all times during
the Term and any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property, and all property located in or on the Leased
Property, including Tenant's Personal Property, insured against the risks in the
amounts as follows:
(a) Comprehensive general liability insurance, including
bodily injury and property damage (on an occurrence basis and in the
broadest form available,
-34-
including without limitation broad form contractual liability, fire
legal liability independent contractor's hazard and completed
operations coverage) under which Tenant is named as an insured and
Landlord and any Facility Mortgagee (and such others as are in privity
of estate with Landlord, as set out in a notice from time to time) are
named as additional insureds as their interests may appear, in an
amount which shall, at the beginning of the Term, be at least equal to
$5,000,000 per occurrence in respect of bodily injury and death and
$1,000,000 per occurrence in respect of property damage, and which,
from time to time during the Term, shall be for such higher limits, if
any, as are customarily carried in the area in which the Leased
Property is located at property similar to the Leased Property and used
for similar purposes;
(b) "All-risk" property insurance on a "replacement cost"
basis with the usual extended coverage endorsements covering the Leased
Property and Tenant's Personal Property;
(c) Business interruption and loss of rental under a rental
value insurance policy covering risk of loss during the lesser of the
first twelve (12) months of reconstruction or the actual reconstruction
period necessitated by the occurrence of any of the hazards described
in paragraphs (a) and (b) above, in such amounts as may be customary
for comparable properties in the area and in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer;
(d) Claims arising out of malpractice in an amount not less
than Five Million Dollars ($5,000,000) for each person and for each
occurrence with respect to the Leased Property, provided the same is
available at rates which are economically practical in relation to the
risk covered, as determined by Tenant and approved by Landlord (it
being agreed that, in the event the same is not available at rates
which are economically practical in relation to the risks covered,
Tenant shall provide such malpractice insurance by means of the
maintenance of a program of self insurance, which, in accordance with
generally accepted accounting principles consistently applied,
satisfies the insurance requirements of this paragraph (d) and, in such
event, Tenant shall submit to Landlord such records and other evidence
thereof as Landlord may from time to time reasonably request to confirm
the maintenance of such a program);
(e) Flood (if the Leased Property which is located in whole or
in part within a designated flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in
the area, provided the same is
-35-
available at rates which are economically practical in relation to the
risks covered, as determined by Tenant and approved by Landlord;
(f) Worker's compensation insurance coverage for all persons
employed by Tenant on the Leased Property with statutory limits and
otherwise with limits of and provisions in accordance with the
requirements of applicable local, state and federal law; and
(g) Such additional insurance as may be reasonably required,
from time to time, by Landlord or any Facility Mortgagee.
9.2 Waiver of Subrogation. Landlord and Tenant agree that (insofar as
and to the extent that such agreement may be effective without invalidating or
making it impossible to secure insurance coverage from responsible insurance
companies doing business in the State) with respect to any property loss which
is covered by insurance then being carried by Landlord or Tenant or would be
covered by insurance if insurance were maintained in accordance with the
applicable provisions of this Lease, respectively, the party carrying such
insurance and suffering said loss releases the other of and from any and all
claims with respect to such loss; and they further agree that their respective
insurance companies shall have no right of subrogation against the other on
account thereof, even though extra premium may result therefrom. In the event
that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra premium.
9.3 Form Satisfactory, Etc. All policies of insurance required under
this Article 9 shall be written in a form reasonably satisfactory to Landlord
and by insurance companies authorized to do business in the State, insurance,
which companies shall be reasonably satisfactory to Landlord. All policies of
insurance required under this Article 9 shall include no deductible in excess of
$250,000 and shall name Landlord and any Facility Mortgagee as additional
insureds, as their interests may appear. Losses shall be payable to Landlord or
Tenant as provided in Article 10. Any loss adjustment shall require the written
consent of Landlord, Tenant and each Facility Mortgagee. Evidence of insurance
shall be deposited with Landlord and, if requested, any Facility Mortgagee. If
any provisions of any Facility Mortgage requires deposits of premiums for
insurance to be made with such Facility Mortgagee, provided that the Facility
Mortgagee has not elected to waive such provision, Tenant shall either pay
Landlord monthly the amounts required and Landlord shall transfer such amounts
to such Facility Mortgagee, or, pursuant to written direction by Landlord,
Tenant shall make such deposits directly with such Facility Mortgagee. Tenant
shall pay all insurance premiums, and deliver policies or certificates
-36-
thereof to Landlord prior to their effective date (and, with respect to any
renewal policy, ten (10) days prior to the expiration of the existing policy),
and in the event Tenant shall fail either to effect such insurance as herein
required, to pay the premiums therefor or to deliver such policies or
certificates to Landlord at the times required Landlord shall have the right,
but not the obligation, to effect such insurance and pay the premiums therefor,
which amounts shall be payable to Landlord, upon demand, as Additional Rent,
together with interest accrued thereon at the Base Rate from the date such
payment is made until the date repaid. All such policies shall provide Landlord
(and any Facility Mortgagee, if required by the same) thirty (30) days, prior
written notice of any materially alter on, expiration or cancellation of such
policy.
9.4 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with that
required by this Article 9 or increase the amount of any existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of such insurance, including,
Landlord and all Facility Mortgagees, are included therein as additional
insureds, and the loss is payable under such insurance in the same manner as
losses are payable under this Lease. In the event Tenant shall take out any such
separate insurance or increase any of the amounts of the then existing
insurance, Tenant shall give Landlord prompt written notice thereof.
9.5 Indemnification of Landlord. Tenant shall indemnify and hold
harmless Landlord from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees), to the maximum extent permitted by law,
imposed upon or incurred by or asserted against Landlord by reason of: (a) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Property or adjoining sidewalks, including,
without limitation, any claims of malpractice, (b) any past, present or future
use, misuse, non-use, condition, management, maintenance or repair by Tenant or
anyone claiming under Tenant of the Leased Property or Tenant's Personal
Property or any litigation, proceeding or claim by governmental entities or
other third parties to which Landlord is made a party or participant related to
the Leased Property or Tenant's Personal Property or such use, misuse, non-use,
condition, management, maintenance, or repair thereof including, failure to
perform obligations (other than Condemnation proceedings) to which Landlord is
made a party, (c) any Impositions (which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease), and (d) any failure on the
part of Tenant or anyone claiming under Tenant to perform or comply with any of
the terms of this Lease. Tenant shall pay
-37-
all amounts payable under this Section 9.5 within ten (10) days after demand
therefor, and if not timely paid, such amounts shall bear interest at the
overdue rate from the date of determination to the date of payment. Tenant, at
its expense, shall contest, resist and defend any such claim, action or
proceeding asserted or instituted against Landlord or may compromise or
otherwise dispose of the same as Tenant sees fit.
9.6 Indemnification of Tenant. Landlord shall indemnify and hold
harmless Tenant from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses imposed upon or incurred by or
asserted against Tenant as a result of the gross negligence or willful
misconduct of Landlord.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. All proceeds payable by reason of any loss or
damage to the Leased Property and insured under any policy of insurance required
by Article 9 shall be paid to Landlord and held in trust by Landlord in an
interest- bearing account (subject to the provisions of Section 10.2) and shall
be paid out by Landlord from time to time for the reasonable costs of
reconstruction or repair of the Leased Property necessitated by damage or
destruction. Any excess proceeds of insurance remaining after the completion of
the restoration shall be paid to Tenant. In the event neither Landlord nor
Tenant is required or elects to restore the Leased Property and this Lease is
terminated without purchase or substitution by Tenant pursuant to Section 10.2,
all insurance proceeds therefrom shall be retained by Landlord. All salvage
resulting from any risk covered by insurance shall belong to Landlord, except
any salvage related to Capital Additions paid for by Tenant or Tenant's Personal
Property shall belong to Tenant.
10.2 Reconstruction in the Event of Damage or Destruction.
10.2.1 Material Damage or Destruction of Premises. Except as
provided in Section 10.8, if, during the Term, the Leased Property shall be
totally or partially damaged or destroyed by fire or other casualty and the
Facility is thereby rendered Unsuitable for Its Primary Intended Use, Tenant
shall, at Tenant's option, exercisable by written, notice to Landlord within
thirty (30) days after the date of such damage or destruction, elect either (a)
to restore the Facility to substantially the same condition as existed
immediately before such damage or destruction, or (b) to offer (i) to purchase
the Leased Property from Landlord for a purchase price equal to the greater of
the Minimum Repurchase Price or the Fair Market Value
-38-
Purchase Price of the Leased Property immediately prior to such damage or
destruction, or (ii) to substitute a new property for the Leased Property in
accordance with the provisions of Article 16. Failure of Tenant to give Landlord
written notice of any such election within such 30-day period shall be deemed an
election by Tenant to restore the Facility. In the event Tenant shall proceed in
accordance with clause (b) preceding and Landlord does not accept Tenant's offer
to purchase the Leased Property or substitute another property for the Leased
Property within thirty (30) days after receipt of Tenant's notice thereof,
Tenant may either (a) withdraw such offer and proceed promptly to restore the
Facility to substantially the same conditions as existed immediately before the
damage or destruction, or (b) terminate this Lease without further liability
hereunder and Landlord shall be entitled to retain the insurance proceeds. In
the event Tenant shall acquire the Leased Property or substitute a new property
therefor, the insurance proceeds payable on account of such damage shall be paid
to Tenant.
10.2.2 Partial Damage or Destruction. Except as provided in
Section 10.8, if, during the Term, all or any portion of the Leased Property
shall be totally or partially destroyed by fire or other casualty and the
Facility is not thereby rendered Unsuitable for its Primary Intended Use, Tenant
shall promptly restore the Facility to substantially the same condition as
existed immediately before such damage or destruction; provided, however, that
if Tenant cannot, using diligent efforts, obtain all government approvals,
including building permits, licenses, conditional use permits and certificates
of need, necessary to perform all required repair and restoration and to operate
the Facility for its Primary Intended Use in substantially the same manner as
existed immediately prior to such damage or destruction within one hundred
eighty (180) days after the date of such fire or casualty, Tenant shall, within
thirty (30) days thereafter elect, by written notice to Landlord, either (a) to
substitute a new property or properties for the Leased Property in accordance
with the provisions of Article 16, or (b) purchase the Leased Property for a
purchase price equal to the greater of the then Minimum Repurchase Price or the
Fair Market Value Purchase Price of the Leased Property immediately prior to
such damage or destruction. Failure of Tenant to give such notice within such
period shall be deemed an election by Tenant to purchase the Leased Property.
Within thirty (30) days after receipt of Tenant's notice, Landlord shall give
Tenant written notice as to whether Landlord accepts such offer. Failure of
Landlord to give such notice shall be deemed an election by Landlord to accept
Tenant's offer. If Landlord shall reject such offer, Tenant shall elect, by
written notice to Landlord, given within thirty (30) days thereafter, either (a)
to withdraw such offer, in which event this Lease shall remain in full force and
effect with and Tenant shall proceed to restore the Facility as soon as
reasonably practicable to substantially the same condition as
-39-
existed immediately before such damage or destruction, or (b) terminate this
Lease. Failure of Tenant to give such notice within such period shall be deemed
an election by Tenant to restore the Leased Property.
In the event Landlord shall accept Tenant's offer to purchase the
Leased Property, this Lease shall terminate with respect thereto upon payment of
the purchase price. In the event Landlord shall accept Tenant's offer to
substitute a new property or properties, this Lease shall be deemed modified to
substitute such new property for the Leased Property (effective as of the date
of such substitution pursuant to Article 16) and all insurance proceeds
pertaining to the Leased Property shall be paid to Tenant. Landlord and Tenant
shall promptly execute appropriate instruments to confirm the foregoing,
although the failure to do so shall not affect this Lease.
10.3 Insufficient Insurance Proceeds. If the cost of the repair or
restoration exceeds the amount of insurance proceeds received by Landlord
pursuant to Article 9, Tenant shall contribute any excess amounts needed to
complete such restoration. Such difference shall be paid by Tenant to Landlord
and held by Landlord in trust in an interest bearing account, together with any
other insurance proceeds, for application to the cost of repair and restoration
in accordance with Section 10.4.
10.4 Disbursement of Proceeds. In the event Tenant is required to
restore the Leased Property pursuant to Sections 10.1 or 10.2, Tenant shall, at
its sole cost and expense, commence promptly and continue diligently to perform,
or cause to be performed, the repair and restoration of the Leased Property so
as to restore the Leased Property in full compliance with all Legal Requirements
and otherwise in compliance with any other applicable provisions of this Lease,
so that the Leased Property shall be at least equal in-value and general utility
to its general utility and value immediately prior to such damage or
destruction. Subject to the terms hereof, Landlord shall advance the insurance
proceeds (other than proceeds of business interruption insurance which shall be
advanced as provided below) and the amounts paid to it pursuant to Section 10.3
to Tenant regularly during the repair and restoration period so as to permit
payment for the cost of such restoration and repair. Any such advances shall be
for not less than $50,000 (or such lesser amount as equals the entire balance of
the repair and restoration costs) and Tenant shall submit to Landlord, a written
requisition and substantiation therefor on AIA Forms G702 and G703 (or on such
other form or forms as may be acceptable to Landlord). Landlord may, at its
option, condition advancement of such insurance proceeds and other amounts on
(i) the absence of any Default or Event of Default, (ii) its approval of plans
and specifications of an architect satisfactory to Landlord (which
-40-
approval shall not be unreasonably withheld or delayed), (iii) general
contractors' estimates, (iv) architect's certificates, (v) unconditional lien
waivers of general contractors, (vi) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required and (vii)
such other certificates as Landlord may, from time to time, reasonably require.
Provided no Default or Event of Default has occurred and is continuing, on the
first day of each calendar month during which proceeds of business interruption
insurance are disbursed to Landlord under the policy of business interruption
insurance maintained pursuant to Article 9, Landlord shall disburse proceeds of
business interruption insurance received by it to Tenant upon notice from Tenant
accompanied by a certification from Tenant that such moneys will be used for
costs or expenses of owning or operating the Leased Property.
Landlord's obligation to disburse insurance proceeds under this Article
10 shall be subject to the release of such proceeds by any Facility Mortgagee.
10.5 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property or Capital Additions
financed by Tenant shall be paid to Tenant and Tenant shall hold such proceeds
in trust to pay the cost of repairing or replacing damaged Tenant's Personal
Property or Capital Additions paid for or financed by Tenant.
10.6 Restoration of Tenant's Property. If Tenant shall be required or
elect to restore the Facility as hereinabove provided, Tenant shall either (a)
restore all alterations and improvements made by Tenant, Tenant's Personal
Property and all Capital Additions paid for or financed by Tenant, or (b)
replace such alterations and improvements, Tenant's Personal Property, and/or
Capital Additions with improvements or items of the same or better quality and
utility in the operation of the Facility.
10.7 No Abatement of Rent. Unless this Lease shall be terminated as
herein provided, during the first twelve (12) months of any period required for
repair or restoration, this Lease shall remain in full force and effect and
Tenant's obligation to make rental payments and to pay all other charges
required by this Lease shall remain unabated during the Term notwithstanding any
damage affecting the Leased Property. Thereafter, payments of Minimum Rent shall
be adjusted in the manner provided in Section 11.6. If any fire or other
casualty impairs the revenue producing capacity of the Facility, projected Net
Patient Revenues attributable to the Facility shall be determined by Landlord in
its reasonable discretion.
10.8 Damage Near End of Term. Notwithstanding any provisions of this
Article 10 to the contrary, if (a) damage to or destruction of the Facility
occurs during the last twelve (12)
-41-
months of the Term, (b) Tenant has not elected to extend the Term, (c) no
Default or Event of Default shall have occurred and be continuing, and (d) such
damage or destruction cannot be fully repaired and restored within one hundred
eighty (180) days immediately following the date of loss, Tenant shall have the
right to terminate this Lease by the giving of written notice thereof to
Landlord within thirty (30) days after the date of casualty. Failure of Tenant
to give such notice within such 30-day period shall be a waiver of Tenant's
right to terminate this Lease pursuant to this section.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation. If the whole of the Leased Property shall be
taken by Condemnation, this Lease shall terminate as of the Date of Taking. In
the event a Condemnation of less than the whole of the Leased Property renders
the Leased Property Unsuitable for Its Primary Intended Use, Tenant and Landlord
shall each have the option, by written notice to the other, given at any time
prior to the date title vests in a third party, to terminate this Lease as of
the Date of Taking, whereupon this Lease shall terminate as of such date.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of the Leased Property such that Leased Property is still suitable for
its Primary Intended Use, or if neither Tenant nor Landlord shall terminate this
Lease as provided in Section 11.1, Tenant, at its sole cost and expense, shall,
with all reasonable dispatch, restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to such Condemnation. Landlord shall, subject to and in
accordance with the applicable provisions of Section 10.4, contribute to the
cost of restoration that part of its Award allocable to such restoration. In
such event, the Minimum Rent shall be permanently reduced as set forth in
Section 11.6.
11.3 Temporary Condemnation. In the event of any temporary Condemnation
of all or any part of the Leased Property or Tenant's interest under this Lease,
this Lease shall continue in full force and effect and Tenant shall continue to
pay, in the manner and on the terms herein specified, the full amount of the
Rent. To the extent reasonably practicable, Tenant shall continue to perform and
observe all of the other terms and conditions thereof, on the part of Tenant to
be performed and observed. The entire amount of any Award made for such
temporary Taking or Condemnation allocable to the Term, whether paid by way
-42-
of damages, rent or otherwise, shall be paid to Tenant. Tenant shall, upon the
termination of any such period of temporary condemnation, at its sole cost and
expense (but only to the extent of the Award payable to Tenant), restore the
Leased Property as nearly as may be reasonably possible, to the condition that
existed immediately prior to such Condemnation, unless such period of temporary
use or occupancy shall extend beyond the expiration of the Term, in which case
Tenant shall not be required to make such restoration.
11.4 Tenant's Option. In the event of the termination of this Lease as
provided in Section 11.1, Tenant shall have the right, exercisable by written
notice to Landlord given within thirty (30) days after receipt by Tenant of
notice of Condemnation, to elect (a) to acquire the Leased Property from
Landlord for a purchase price equal to the greater of its Minimum Repurchase
Price or the Fair Market Value Purchase Price of the Leased Property immediately
prior to such Condemnation, in which event, upon the closing of such
acquisition, Tenant shall have the right to receive the entire Award, or (b) to
substitute a new property therefor in accordance with the provisions of Article
16, in which event Tenant shall receive the entire Award. Failure of Tenant to
give such notice within such 30-day period shall be deemed a waiver of Tenant's
rights pursuant to this Section 11.4. In the event Landlord shall, by written
notice to Tenant given within thirty (30) days after receipt of Tenant's
election notice, reject Tenant's offer so to purchase or substitute, Tenant
shall restore the Leased Property to substantially the same condition as existed
immediately before such Condemnation in accordance with the applicable
provisions of this Lease and, in such event, Landlord shall, subject to and in
accordance with the applicable provisions of Section 10.4, contribute to the
cost of restoration that part of its Award allocable to such restoration.
11.5 Allocation of Award. Except as provided in the second sentence of
this Section 11.5, the total Award shall be solely the property of and payable
to Landlord. Any portion of the Award made for the taking of Tenant's leasehold
interest in the Leased Property, Capital Additions paid for or financed by
Tenant, loss of business at the Leased Property during the remainder of the
Term, the taking of Tenant's Personal Property, or Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
11.6 Abatement Procedures. In the event of a partial Condemnation as
described in Section 11.2, this Lease shall not terminate, but the Minimum Rent
shall be abated and Base Net Patient Revenues shall be reduced in the manner and
to the extent that is fair, just and equitable to both Tenant and Landlord,
-43-
taking into consideration, among other relevant factors, the number of usable
beds, the amount of square footage, or the revenues affected by such partial or
temporary taking or damage or destruction. If Landlord and Tenant are unable to
agree upon the amount of such abatement within thirty (30) days after such
Condemnation or damage, the matter may be submitted by either party to a court
of competent jurisdiction for resolution or, if the parties so agree, the matter
may be submitted by the parties for resolution by arbitration in accordance with
the rules of the American Arbitration Association.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Lease:
(a) Should there occur and be continuing beyond the expiration
of any applicable cure period a default by Tenant under any document,
instrument or agreement evidencing or securing the other Obligations or
should there occur an Event of Default (as defined therein) under any
of the Other Leases;
(b) Should Tenant fail to make any payment of the Rent or any
other sum payable hereunder when due and such failure shall continue
for ten (10) days after written notice thereof;
(c) Should Tenant fail to observe or perform any other term,
covenant or condition of this Lease and such failure shall continue for
thirty (30) days after written notice thereof; provided, however, if
such failure cannot with due diligence be cured within such thirty (30)
day period, an Event of Default shall not be deemed to have occurred
for such additional period (not to exceed 120 days in the aggregate)
required to cure the same so long as Tenant commences sure cure within
such thirty (30) day period and thereafter diligently prosecutes such
cure to completion;
(d) Should Tenant: (i) admit in writing its inability, or be
unable, to pay its debts generally as they become due; (ii) file a
petition in bankruptcy or a petition to take advantage of any
insolvency law; (iii) make a general 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 (v) file a
petition or answer seeking reorganization or arrangement under the
federal bankruptcy laws or any other applicable
-44-
law or statute of the United States of America or any state thereof;
(e) Should Tenant be adjudicated a bankrupt or have an order
for relief thereunder entered against it or a court of competent
jurisdiction shall enter an order or decree appointing a receiver of
Tenant or of the whole or substantially all of its property, or
approving a petition filed against Tenant seeking reorganization or
arrangement of Tenant 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 within sixty (60) days from the date of entry thereof;
(f) Should Tenant be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution, or, in any manner,
permit the sale or divestiture of substantially all of its assets;
(g) Should the estate or interest of Tenant 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
thirty (30) days after commencement thereof (unless Tenant shall be
contesting such lien or attachment in accordance with Article 8);
(h) Except as a result of damage, destruction, strikes,
lock-outs or a partial or complete Condemnation, should Tenant
voluntarily cease operations on the Leased Property for a period in
excess of thirty (30) days; or
(i) Should any representation or warranty of Tenant contained
in this Lease or any certificate or document delivered in connection
herewith be untrue when made or at any time during the Term in any
material respect which materially and adversely affects Landlord, and
the same shall not be cured within ninety (90) days after written
notice thereof.
Upon the occurrence of any Event of Default, Landlord and the agents and
servants of Landlord lawfully may, in addition to and not in derogation of any
remedies for any preceding breach of covenant, immediately or at any time
thereafter, without demand or notice and with or without process of law
(forcibly, if necessary), enter into and upon the Leased Property or any part
thereof in the name of the whole or mail a notice of termination addressed to
Tenant, and repossess the same and expel Tenant and those claiming through or
under Tenant and remove its and their effects (forcibly, if necessary), without
being deemed guilty of any manner of trespass and without prejudice to any
remedies which might otherwise be used for arrears of rent or prior breach
-45-
of covenant, and, upon such entry or mailing as aforesaid, this Lease shall
terminate, Tenant hereby waiving all statutory rights to the Leased Property
(including, without limitation, rights of redemption, if any, to the extent such
rights may be lawfully waived) and Landlord, without notice to Tenant, may store
Tenant's effects, and those of any person claiming through or under Tenant, at
Tenant's sole expense and risk, and, if Landlord so elects, may sell such
effects at public auction or private sale and apply the net proceeds to the
payment of all sums due to Landlord from Tenant, if any, and pay over the
balance, if any, to Tenant.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Leased Property and take
possession of any and all of Tenant's Personal Property and the Records (subject
to any prohibitions or limitations to disclosure of any such data as described
in Section 3.1.2(d)) on the Leased Property, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same at public or private sale,
after giving Tenant reasonable notice of the time and place of any public or
private sale, at which sale Landlord or its assigns may purchase all or any
portion of such Personal Property unless otherwise prohibited by law. Unless
otherwise provided by law, and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable notice shall be
met if such notice is given in the manner prescribed in this Lease at least ten
(10) days before the day of sale. The proceeds from any such disposition, less
all expenses incurred in connection with the taking of possession, holding and
selling of such property (including, reasonable attorneys' fees) shall be
deducted from the proceeds of such sale. Any surplus shall be paid to Tenant or
as otherwise required by law and Tenant shall pay any deficiency to Landlord, as
Additional Rent, upon demand.
12.2 Remedies. In the event of any termination pursuant to Section
12.1, Tenant shall pay the Rent and other charges payable hereunder up to the
time of such termination and, thereafter, Tenant, until the end of what would
have been the Term of this Lease in the absence of such termination, and whether
or not the Leased Property, or any portion thereof, shall have been re-let,
shall be liable to Landlord for, and shall pay to Landlord, as current damages,
the Rent and other charges which would be payable hereunder for the remainder of
the Term had such termination not occurred, less the net proceeds, if any, of
any reletting of the Leased Property, after deducting all expenses in connection
with such re- letting, including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alteration costs and expenses of preparation for such reletting.
Tenant shall pay such current damages to Landlord monthly on the days on
-46-
which the Minimum Rent would have been payable hereunder if this Lease had not
been terminated. Percentage Rent for the purposes of this Section 12.2 shall be
deemed to be a sum equal to the amount of the Percentage Rent (determined on an
annualized basis) payable for the Fiscal Year immediately preceding the Fiscal
Year in which the termination, re-entry or repossession takes place. If,
however, such termination, re-entry or repossession occurs during the first full
Fiscal Year after the Base Year, the Percentage Rent shall be an amount
reasonably determined by Landlord.
At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages and in lieu of
all such current damages beyond the date of such demand, at Landlord's election,
Tenant shall pay to Landlord either (a) an amount equal to the excess, if any,
of the Rent and other charges which would be payable hereunder from the date of
such demand (assuming that, for the purposes of this paragraph, annual payments
by Tenant on account of Impositions would be the same as payments required for
the immediately preceding twelve calendar months, or if less than twelve
calendar months have expired since the Commencement Date, the payments required
for such lesser period projected to an annual amount and Percentage Rent shall
be determined in the manner set forth above) for what would be the then
unexpired term of this Lease if the same remained in effect, over the Fair
Market Rental for the same period, or (b) an amount equal to the lesser of (i)
the Rent and other charges that would have been payable for the balance of the
Term had it not been terminated, or (ii) the aggregate of the Minimum Rent,
Percentage Rent and other charges accrued in the twelve (12) months ended next
prior to such termination (without reduction for any free rent or other
concession or abatement). In the event this Lease is so terminated prior the
expiration of the first full year of the Term, the liquidated damages which
Landlord may elect to recover pursuant to clause (b) (ii) of this paragraph
shall be calculated as if such termination had occurred on the first anniversary
of the Commencement Date. Nothing contained in this Lease shall, however, limit
or prejudice the right of Landlord to prove and obtain in proceedings for
bankruptcy or insolvency an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the proceedings in
which, the damages are to be proved, whether or not the amount be greater than,
equal to, or less than the amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and dispossession
by summary proceedings or otherwise, Landlord may (a) relet the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise; for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of
-47-
the Term and may grant concessions or free rent to the extent that Landlord
considers advisable and necessary to relet the same, and (b) may make such
reasonable alterations, repairs and decorations in the Leased Property as
Landlord, in its sole judgment, considers advisable and necessary for the
purpose of reletting the Leased Property; and the making of such alterations,
repairs and decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Landlord shall in no event be liable in any
way whatsoever for failure to relet the Leased Property, or any portion thereof,
or, in the event that the Leased Property is relet, for failure to collect the
rent under such reletting. To the fullest extent permitted by law, Tenant hereby
expressly waives any and all rights of redemption granted under any present or
future laws in the event of Tenant being evicted or dispossessed, or in the
event of Landlord obtaining possession of the Leased Property, by reason of the
violation by Tenant of any of the covenants and conditions of this Lease.
12.3 Waiver. If this Lease is terminated pursuant to Section 12.1 or
12.2, Tenant waives, to the extent permitted by law, (a) any right to a trial by
jury in the event of summary proceedings to enforce the remedies set forth in
this Article 12, and (b) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt.
12.4 Application of Funds. Any payments received by Landlord under any
of the provisions of this Lease during the existence or continuance of any Event
of Default (and any payment made to Landlord rather than Tenant due to the
existence of an Event of Default) shall be applied to Tenant's obligations in
such order as Landlord may determine or as may be prescribed by the laws of the
State.
12.5 Failure to Conduct Business. For the purpose of determining rental
loss damages or Percentage Rent, in the event Tenant shall fail to conduct its
business at the Leased Property for its Primary Intended Use, exact damages or
the amount of Percentage Rent being unascertainable, the Percentage Rent for
such period shall be deemed to by an amount reasonably determined by Landlord.
12.6 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after written notice to Tenant
(provided that no such notice shall be required if Landlord shall reasonably
determine immediate action is necessary to protect person or property), without
waiving or releasing any obligation of Tenant, and without waiving or releasing
any Event of Default, may (but shall not be obligated to), at any time
thereafter, make such payment or perform such act for the account and at the
expense of Tenant, and may, to the extent permitted by law, enter upon the
Leased Property, or any
-48-
portion thereof, for such purpose and take all such action thereon as, in
Landlord's opinion, may be necessary or appropriate therefor, including, the
management of the Facility by Landlord or its designee, and Tenant hereby
irrevocably appoints, in the event of such election by Landlord, Landlord or its
designee as manager of the Facility and its attorney in fact for such purpose,
irrevocably and coupled with an interest, in the name, place and stead of
Tenant. All costs and expenses (including, without limitation, reasonable
attorneys' fees) incurred by Landlord in connection therewith, together with
interest thereon (to the extent permitted by law) at the Overdue Rate from the
date such sums are paid by Landlord until repaid, shall be paid by Tenant to
Landlord, on demand.
12.7 Trade Names. If this Lease is terminated for any reason, Landlord
shall, upon the request of Tenant, cause the name of the business conducted upon
the Leased Property to be changed to a name other than a Facility Trade Name or
any approximation or abbreviation thereof and sufficiently dissimilar to such
name as to be unlikely to cause confusion with such name; provided, however,
that Tenant shall not thereafter use a Facility Trade Name in the same market in
which the Facility is located in connection with any business that competes with
the Facility.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration of the Term shall be
treated as a daily tenancy at sufferance at a rate equal to two (2) times the
Minimum Rent and Percentage Rent then in effect plus Additional Rent and other
charges herein provided (prorated on a daily basis). Tenant shall also pay to
Landlord all damages, direct and/or consequential (foreseeable and
unforeseeable), sustained by reason of any such holding over. Otherwise, such
holding over shall be on the terms and conditions set forth in this Lease, to
the extent applicable.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in this Lease and such default shall
continue for a period of thirty (30) days after written notice thereof, or such
additional period as may be reasonably required to correct the same (except if
such default shall constitute an immediate threat to life or property, five (5)
Business Days) Tenant may declare the occurrence of a
-49-
"Landlord Default" by a second notice to Landlord. Thereafter, Tenant may
forthwith cure the same and, subject to the provisions of the following
paragraph, invoice Landlord for costs and expenses (including reasonable
attorneys, fees and court costs) incurred by Tenant in curing the same, together
with interest from the date Landlord receives Tenant's invoice, at a rate equal
to the Base Rate. In addition, upon the occurrence and during the continuance of
any Landlord Default, Tenant shall have the right to purchase the Leased
Property from the Landlord on the terms and conditions of that certain Purchase
Option Agreement of even date, between Landlord and Tenant, notwithstanding the
provisions of Section 2 thereof and notwithstanding the limitations regarding
timing and order of exercise of the right to purchase therein set forth. Tenant
shall have no right to terminate this Lease for any default by Landlord
hereunder and no right, for any such default, to offset or counterclaim against
any rent or other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give written notice thereof to Tenant, setting forth, in reasonable detail, the
basis therefor, no Landlord Default shall be deemed to have occurred and
Landlord shall have no obligation with respect thereto until final adverse
determination thereof. If Tenant and Landlord shall fail, in good faith, to
resolve the dispute within five (5) days after Landlord's notice of dispute,
either may submit the matter to arbitration for resolution in accordance with
the commercial arbitration rules of the American Arbitration Association. Such
arbitration shall be final and binding on Landlord and Tenant and judgment
thereon may be entered into any court of competent jurisdiction. within five (5)
days after submission to arbitration, Landlord and Tenant shall submit all
information required for such arbitration and shall take all other actions
required for such arbitration to proceed and the arbitrators shall be instructed
to render a determination as soon as possible and in any event not later than
thirty (30) days after submission.
ARTICLE 15
PURCHASE OF PREMISES
In the event Tenant shall purchase the Leased Property from Landlord
pursuant to any of the terms of this Lease, Landlord shall, upon receipt from
Tenant of the applicable purchase price, together with full payment of any
unpaid Rent and other charges due and payable with respect to any period ending
on or before the date of the purchase, deliver to Tenant a title insurance
policy, together with an appropriate deed or other instruments, conveying the
entire interest of Landlord in and to the Leased
-50-
Property to Tenant, free and clear of all encumbrances other than (a) those
Tenant has agreed hereunder to pay or discharge, (b) those liens, if any, which
Tenant has agreed in writing to accept and take title subject to, (c) the
Permitted Encumbrances, and (d) any other encumbrances permitted to be imposed
on the Leased Property (x) pursuant to the terms of this Lease or (y) otherwise
permitted to be imposed under the provisions of Section.21.1 which are assumable
at no cost to Tenant or to which Tenant may take subject without cost to Tenant.
The difference between the applicable purchase price and the total of the
encumbrances assumed or taken subject to shall be paid in cash to Landlord or as
Landlord may direct, in federal or other immediately available funds. The
closing of any such sale shall be contingent upon and subject to Tenant's
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 Tenant
to obtain all such approvals and consents, any options to extend the Term of
this Lease which otherwise would have expired during the escrow period of such
proposed sale shall be deemed to remain in effect for 30 days after termination
thereof. All expenses of such conveyance, including, without limitation, the
cost of title examination or standard coverage title insurance, usually paid by
a purchaser of real property in the State shall be paid by Tenant; all expenses
of such conveyance usually paid by a seller of real property in the State shall
be paid by Landlord.
ARTICLE 16
SUBSTITUTION OF PROPERTY FOR THE LEASED PROPERTY
16.1 Tenant's Substitution Option. Provided (a) in the good faith
judgment of Tenant, the Leased Property shall become Unsuitable for its Primary
Intended Use, (b) no Default or Event of Default shall have occurred and be
continuing, and (c) not less than one (1) year shall remain in the Term, Tenant
shall have the right, subject to the conditions set forth in this Article 16,
upon not less than thirty (30) days prior written notice to Landlord, to
substitute one or more properties (collectively, the "Substitute Properties" or
individually, "Substitute Property") on the date specified in such notice (the
"Substitution Date"); provided, however, that if Tenant is required by court
order or administrative action to divest or otherwise dispose of the Leased
Property in less than thirty (30) days and Tenant shall have given Landlord
prior written notice of the filing of such court or administrative action and
kept Landlord reasonably apprised of the status thereof, the time period shall
be shortened appropriately to meet the reasonable needs of Tenant, but in no
event less than ten (10) Business Days after the receipt by Landlord of such
notice. Such notice shall include (a) an officer's Certificate, setting forth in
reasonable detail the reason(s) for the substitution and the proposed
-51-
Substitution Date, and (b) designate not less than two properties (or groups of
properties), each of which properties (or groups of properties) shall provide
Landlord with a yield (i.e., annual return on its equity in such property)
substantially equivalent to Landlord'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.
16.2 Landlord's Substitution Option. If Tenant shall have voluntarily
or involuntarily discontinued use of the Leased Property for its business
operations for a period in excess of one year, Landlord shall have the right,
exercisable by thirty (30) days prior written notice to Tenant, to require
Tenant to substitute a Substitute Property for the Leased Property, (in which
event, Tenant shall comply with the applicable provisions of Section 16.1 within
thirty (30) days thereafter).
16.3 Substitution Procedures. (a) If either Landlord or Tenant shall
initiate a substitution pursuant to Section 16.1 or 16.2, Landlord shall have a
period of thirty (30) days within which to review the designated properties and
such additional information and either accept or reject the Substitute
Properties so presented, unless Tenant 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 Tenant, but in no event shall such
period be less than five (5) Business Days after Landlord's actual receipt of
Tenant's notice (subject to further extension for any period of time in which
Landlord is not timely provided with the information provided for in this
Section 16.3 and Section 16.4 below). Landlord and Tenant shall use good faith
efforts to agree on a Substitute Property.
(b) In the event that, on or before the expiration of the
applicable time period for Landlord's review, Landlord has rejected
both of the Substitute Properties so presented, Tenant shall, for a
period of sixty (60) days after the expiration of such period, have the
right to terminate this Lease, by the giving of written notice thereof
to Landlord, accompanied by an offer to purchase the Leased Property on
the date set forth in such notice, but in no event less than ninety
(90) days thereafter, for a purchase price equal to the greater of the
then Fair Market Value Purchase Price or the Minimum Repurchase Price,
and, subject to the provisions of Article 15, this Lease shall
terminate on such purchase date.
(c) Landlord shall not unreasonably withhold its consent to an
offer by Tenant to substitute a property as
-52-
set forth in this Article provided (i) Landlord shall determine the
Substitute Property shall provide Landlord with a yield substantially
equivalent to Landlord's yield from the Leased Property immediately
before such substitution or such damage or destruction, as the case may
be, and as projected over the remainder of the Term, and (ii) the
delivery of an opinion of counsel for Landlord confirming that (w) 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", no gain or
loss will be recognized by Landlord, (x) the substitution will not
result in ordinary recapture income to Landlord pursuant to Section
1250(d)(4) of the Code or any other provision of the Code, (y) the
substitution will result in income, if any, to Landlord of a type
described in Section 856(c)(2) or (3) of the Code and will not result
in income of the types described in Section 856(c)(4) of the Code or
result in the tax imposed under Section 857(b)(6) of the Code, and (z)
the substitution, together with all other substitutions made or
requested by Tenant or an Affiliated Person pursuant to the Other
Leases or other transfers of all or any portion of the Leased Property
or properties leased under the Other Leases, during the relevant time
period, will not jeopardize the qualification of Landlord as a real
estate investment trust under Sections 856-860 of the Code.
(d) In the event that the then Fair Market Value of the
Substitute Property or group of Substitute Properties minus the
encumbrances assumed by Landlord, or as to which Landlord will take the
Substitute Property or group of Substitute Properties subject, as of
the Substitution Date is greater than the then Fair Market Value of the
Leased Property minus the encumbrances assumed by Tenant, or as to
which the Tenant 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), Landlord
shall pay to Tenant an amount equal to the difference, subject to the
limitation set forth below; in the event that such value of the
Substitute Property or group of Substitute Properties is less than such
value of the Leased Property, Tenant shall pay to Landlord an amount
equal to the difference, subject to the limitation set forth below;
provided, however, neither Landlord nor Tenant shall be obligated to
consummate such substitution if such party would be required to make a
payment (the "Cash Adjustment") to the other in excess of an amount
equal to five percent (5%) of the Fair Market Value of the Leased
Property.
-53-
(e) The Rent for such Substitute Property shall, in all
respects, provide Landlord with a yield (i.e., annual return on its
equity in such property) substantially equivalent to Landlord's yield
from the Leased Property at the time of such 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, taking into account the Cash
Adjustment paid or received by Landlord and any other relevant factors,
as reasonably determined by Landlord.
(f) The Minimum Repurchase Price of the Substitute Property
shall be an amount equal to the Minimum Repurchase Price of the Leased
Property (i) increased by any Cash Adjustment paid by Landlord pursuant
to Paragraph (d) above, or (ii) decreased by any Cash Adjustment paid
by Tenant pursuant to paragraph (d) above.
16.4 Conditions to Substitution. On the Substitution Date, the
Substitute Property shall become the Leased Property hereunder, upon delivery by
Tenant to Landlord of the following:
(a) an Officer's Certificate certifying that (i) the
Substitute Property has been accepted by Tenant for all purposes of
this Lease and there has been no material damage to the improvements
located thereon, nor is any Condemnation pending or threatened with
respect thereto; (ii) all appropriate 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 this
Lease and all necessary subdivision approvals, if any, have been
obtained; (iv) there are no mechanics, or materialmen's liens
outstanding or threatened to the knowledge of Tenant against the
Substitute Property arising out of or in connection with the
construction of the improvements thereon, other than those being
contested by Tenant pursuant to Article 8; (v) to the best knowledge of
Tenant, there exists no Default or Event of Default, and no defense,
offset or claim with respect to any sums payable by Tenant hereunder;
and (vi) any exceptions to Landlord's title to the Substitute Property
do not materially interfere with the intended use of the Substitute
Property by Tenant;
(b) a deed with full warranties or assignment of a leasehold
estate with full warranties (as applicable)
-54-
conveying to Landlord title to the Substitute Property free and clear
of any liens or encumbrances, except those approved by Landlord;
(c) an amendment duly executed, acknowledged and delivered by
Tenant, in form and substance satisfactory to Landlord, amending this
Lease to correct the legal description of the Land and make such other
changes herein as may be necessary or appropriate under the
circumstances;
(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 as of
the Substitution Date, in current form and including mechanics, and
materialmen's lien coverage, issued to Landlord by a title insurance
company and in the form reasonably satisfactory to Landlord, which
policy shall (i) insure (x) Landlord's fee title or leasehold estate to
the Substitute Property, subject to no liens or encumbrances except
those approved by Landlord and (y) that any restrictions affecting the
Substitute Property have not been violated; (ii) be in an amount at
least equal to the Fair Market Value of the Substitute Property; and
(iii) contain such affirmative coverage endorsements as Landlord shall
reasonably request;
(e) certificates of insurance with respect to the Substitute
Property fulfilling the requirements of Article 9;
(f) current appraisals or other evidence satisfactory to
Landlord, in its sole discretion, as to the then current Fair Market
Values and the projected residual values of such Substitute Property
and the Leased Property as to which such substitution is being made;
(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 Tenant's most
recent Fiscal Year end, or for the most recent three (3) years,
whichever is less; and
(h) such other certificates, documents, opinions of counsel
and other instruments as may be reasonably required by Landlord.
16.5 Conveyance to Tenant. On the Substitution Date, Landlord shall
convey the Leased Property to Tenant in accordance with the provisions of
Article 15 (except as to payment of any expenses in connection therewith which
shall be governed by Section 16.6) upon either (a) payment in cash therefor or
(b)
-55-
conveyance to Landlord of the Substitute Property, as appropriate.
16.6 Expenses. Tenant shall pay or cause to be paid, on demand, all
reasonable costs and expenses paid or incurred by Landlord in connection with
the substitution and conveyance of the Leased Property and Substitute Property,
including, but not limited to, (a) reasonable fees and expenses of counsel, (b)
all printing expenses, (c) the amount of filing, registration and recording
taxes and fees, (d) the cost of preparing and recording, if appropriate, a
release of the Leased Property from the lien of any mortgage, (e) brokers' fees
and commissions, (f) documentary stamp and transfer taxes, (g) title insurance
charges and premiums, and (h) escrow fees.
ARTICLE 17
SUBLETTING AND ASSIGNMENT
17.1 Subletting and Assignment. Except as hereinafter provided, Tenant
shall not assign, mortgage, pledge, hypothecate, encumber or otherwise transfer
this Lease or sublease (which term shall be deemed to include the granting of
concessions and licenses and the like) all or any part of the Leased Property or
suffer or permit this Lease or the leasehold estate hereby created or any other
rights arising under this Lease to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or occupancy of the
Leased Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting except as hereinafter
provided. For purposes of this Section 17.1, an assignment of this Lease shall
be deemed to include any transaction pursuant to which Tenant is merged or
consolidated with another entity or pursuant to which all or substantially all
of Tenant's assets are transferred to any other entity, as if such or
transaction were an assignment of this Lease.
If this Lease is assigned or if the Leased Property or any part thereof
are sublet (or occupied by anybody other than Tenant and its employees)
Landlord, after default by Tenant hereunder, may collect the rents from such
assignee, subtenant or occupant, as the case may be, and apply the net amount
collected to the Rent herein reserved, but no such collection shall be deemed a
waiver of the provisions set forth in the first paragraph of this Section 17.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its covenants, agreements or obligations contained in this Lease.
-56-
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder, and no consent to any subletting or
assignment in a particular instance shall be deemed to be a waiver of the
obligation to obtain the Landlord's written approval in the case of any other
subletting or assignment. No assignment, subletting or occupancy shall affect
the Primary Intended Use. Any subletting, assignment or other transfer of
Tenant's interest in this Lease in contravention of this Section 17.1 shall be
voidable at Landlord's option.
If the rent and other sums (including, without limitation, the
reasonable value of any services performed by any assignee or subtenant in
consideration of such assignment or sublease) either initially or over the term
of any assignment or sublease, payable by such assignee or subtenant on account
of an assignment or sublease exceed the Rent called for hereunder with respect
to the space assigned or sublet, Tenant shall pay to Landlord as Additional Rent
one hundred percent (100%) of such excess net of the costs and expenses incurred
by Tenant in procuring such sublease payable monthly at the time for payment
Minimum Rent.
17.2 Required Sublease Provisions. Any sublease of all or any portion
of the Leased Property shall provide that it is subject and subordinate to this
Lease and to the matters to which this Lease is or shall be subject or
subordinate, and that in the event of termination of this Lease or reentry or
dispossession of Tenant by Landlord under this Lease, Landlord may, at its
option,. take over all of the right, title and interest of Tenant, as sublessor
under such sublease, and such subtenant shall, at Landlord's option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except that
neither Landlord nor any Facility Mortgagee, as holder of a mortgage or as
Landlord under this Lease, if such mortgagee succeeds to that position, shall
(a) be liable for any act or omission of Tenant under such sublease, (b) be
subject to any credit, counterclaim, offset or defense which theretofore accrued
to such subtenant against Tenant, (c) be bound by any previous modification of
such sublease or by any previous prepayment of more than one (1) month's rent,
(d) be bound by any covenant of Tenant to undertake or complete any construction
of the Leased Property or any portion thereof, (e) be required to account for
any security deposit of the subtenant other than any security deposit actually
delivered to Landlord by Tenant, (f) be bound by any obligation to make any
payment to such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease to be performed
after the date of such attornment, (g) be responsible for any monies owing by
Tenant to the credit of such Subtenant, or (h) be required to remove any person
occupying the Leased Property or any part thereof; and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. The
-57-
provisions of this paragraph shall not be deemed a waiver of the provisions
set forth in the first paragraph of Section 17.1.
17.3 Sublease Limitation. Anything contained in this Lease to the
contrary notwithstanding, Tenant 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 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.
17.4 Assignment and Subletting Procedure. Anything contained in this
Lease to the contrary notwithstanding, if Tenant wishes to enter into a sublease
with respect to any portion of the Leased Property or an assignment of this
Lease, Tenant shall give Landlord notice of such intent, which notice ("Tenant's
Notice") shall state, in the event of a proposed sublease, the location and
amount of area intended to be covered by such sublease and the term of the
proposed sublease, the proposed effective date of such sublease or assignment,
and the identity of such proposed subtenant or assignee and such other
information with respect thereto as Landlord may reasonably require. Landlord
shall not unreasonably withhold its consent to any proposed assignment or
sublease provided Tenant shall deliver to Landlord a written instrument, in form
and substance reasonably satisfactory to Landlord, pursuant to which such
assignee agrees directly with Landlord to be bound by all the terms of this
Lease and to be jointly and severally liable with Tenant for all of Tenant's
obligations under this Lease.
ARTICLE 18
CERTIFICATES AND FINANCIAL STATEMENTS
18.1 Estoppel Certificates. At any time and from time to time, upon not
less than twenty (20) days prior written notice by Landlord, Tenant shall
furnish to Landlord 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), the date to which the
Rent has been paid, that, to the best of Tenant's knowledge and belief after
making due inquiry, Tenant is not in default in the performance or observance of
any of the terms of this Lease and that no event exists which with the giving of
notice, lapse of time, or both, would constitute a default hereunder, or if
Tenant shall be in default or any such event shall exist, specifying in
reasonable detail all such defaults or events, and the steps being taken to
remedy the same, and such additional information as Landlord may reasonably
request. Any
-58-
such certificate furnished pursuant to this section may be relied upon by
Landlord and any prospective purchaser or mortgagee of the Leased Property.
18.2 Financial Statements. Tenant shall furnish the following
statements to Landlord:
(a) Within forty-five (45) days after each of the first three
quarters of each Fiscal Year, the most recent Consolidated Financials
of Tenant, together with an Officer's Certificate certifying to the
accuracy of such Consolidated Financials;
(b) Within one hundred twenty (120) days after the end of each
Fiscal Year, the most recent Consolidated Financials of Tenant for such
year, certified by an independent certified public accountant
satisfactory to Landlord;
(c) Promptly after the sending or filing thereof, copies of
all reports which Tenant sends to its security holders generally, and
copies of all periodic reports which Tenant files with the SEC or any
stock exchange on which its shares are listed or traded;
(d) Promptly after the delivery thereof to Tenant, or its
management, a copy of any management letter or written report prepared
by Tenant's certified public accountants with respect to the financial
condition, operations, business or prospects of Tenant;
(e) At any time and from time to time upon not less than
twenty (20) days notice from Landlord, any Consolidated Financials or
any other financial reporting information required to be filed by
Landlord with any securities and exchange commission, the SEC or any
successor agency, or any other governmental authority, or required
pursuant to any order issued by any court governmental authority or
arbitrator in any litigation to which Landlord is a party, for purposes
of compliance therewith; and
(f) With reasonable promptness, such other information as to
the financial condition and affairs of Tenant as Landlord may
reasonably request.
18.3 General Operations. Tenant covenants and agrees to furnish to
Landlord:
18.3.1 Reimbursement, Licensure etc. Within thirty (30) days
after receipt or modification thereof, copies of
(a) All licenses authorizing Tenant to operate the
Facility for its Primary Intended Use;
-59-
(b) All Medicare and Medicaid certifications,
together with provider agreements and all material
correspondence relating thereto with respect to the Facility
(excluding, however, correspondence which may be subject to
any attorney-client privilege);
(c) A Nursing Home Administrator License for the
individuals employed in such capacity with respect to the
Facility;
(d) All reports of surveys, statements of
deficiencies, plans of correction, and all material
correspondence relating thereto, including, without
limitation, all reports and material correspondence concerning
compliance with or enforcement of licensure,
Medicare/Medicaid, and accreditation requirements, including
physical environment and Life Safety Code survey reports
(excluding, however, correspondence which may be subject to
any attorney-client privilege);and
(e) With reasonable promptness, such other
confirmation as to the Licensure and Medicare and Medicaid
participation of Tenant as Landlord may reasonably request
from time to time.
18.3.2 Monthly Reports. Tenant shall prepare and furnish to
Landlord for the Leased Property, within thirty (30) days after the end of each
calendar month during the term of this Agreement, a monthly report, such report
to include a balance sheet, a current month and year to date income statement,
showing each item of actual and projected income and expense, prepared on an
accrual basis and a current month and year to date cash flow statement,
reflecting the operating results of the Facility; a statement of Net Patient
Revenues for such month; and such additional information as the Company may from
time to time reasonably require.
ARTICLE 19
LANDLORD ACCESS
19.1 Landlord's Right to Inspect. Tenant shall permit Landlord and its
authorized representatives to inspect the Leased Property during usual business
hours, and to do and make such repairs as Landlord is permitted or required to
make pursuant to the terms of this Lease, subject to any security, health,
safety or patient or business confidentiality requirements of Tenant or any
governmental agency or Insurance Requirement relating to the Leased Property or
imposed by law.
-60-
19.2 Landlord's Option to Purchase the Tenant's Personal Property;
Transfer of Licenses. Effective on not less than ninety (90) days' prior notice
given at any time within one hundred eighty (180) days after the expiration of
the Term (or such shorter period as shall be appropriate if this Lease is
terminated prior to its expiration date), Landlord shall have the option to
purchase all (but not less than all) of Tenant's Personal Property (except motor
vehicles), if any, at the expiration or termination of this Lease, for an amount
equal to the then net market value thereof (current replacement cost as
determined by appraisal less accumulated depreciation on Tenant's books
pertaining thereto), subject to, and with appropriate price adjustments for, all
equipment leases, conditional sale contracts, UCC-1 financing statements and
other encumbrances to which such Personal Property is subject; provided,
however, Landlord shall not have the right to purchase any Facility Trade Name
or logo.
ARTICLE 20
APPRAISAL
20.1 Appraisal Procedure. In the event that it becomes necessary to
determine the Fair Market Value, Fair Market Value Purchase Price or Fair Market
Rental 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 (the "Initiating Party") shall include in such notice the name of
a designated Qualified Appraiser (hereinafter defined) on its behalf. Within 10
(ten) days after notice, the party receiving such notice (the "Responding
Party") shall, by written notice to the other, appoint a second Qualified
Appraiser. If the Responding Party shall fail, neglect or refuse within said
ten-day period to designate another appraiser willing so to act, the appraiser
designated by the Initiating Party shall designate the second Qualified
Appraiser within ten (10) days thereafter. The two appraisers so designated
shall meet within ten (10) days after the second appraiser is designated, and,
if within ten (10) days after the second appraiser is designated, the two
appraisers do not agree upon the Fair Market Value, Fair Market Value Purchase
Price or Fair Market Rental, as the case may be, of the applicable property as
of the relevant date, the two appraisers shall designate a third Qualified
Appraiser, within ten (10) days thereafter. In the event that the two appraisers
are unable to agree upon the appointment of a third Qualified Appraiser, within
such ten (10) day period, either Landlord or Tenant, on behalf of both, may then
request appointment of such appraiser the then president of the American
Arbitration Association. In the event of a failure, refusal or inability of any
appraiser to act, a new
-61-
appraiser shall be appointed in his stead, which appointment shall be made in
the same manner as hereinabove provided for the appointment of such appraiser so
failing, refusing or being unable to act. In the event that all appraisers
cannot agree upon such value ten (10) days as aforesaid, each appraiser shall
submit his appraisal of such value to the other two appraisers in writing, and
such value shall be determined by calculating the average of the two numerically
closest (or, if the values are equidistant, all three) values determined by the
three appraisers.
The costs, other than counsel fees, of such appraisal shall be borne
equally by the parties. Upon determining such value, the appraisers shall
promptly notify Landlord and Tenant in writing of such determination. If any
party shall fail to appear at the hearings appointed by the appraisers, the
appraisers may act in the absence of such party.
The determination of the board of appraisers (or the single additional
Qualified Appraiser, as appropriate) made in accordance with the foregoing
provisions shall be final and binding upon the parties, such determination may
be entered as an award in arbitration in a court of competent jurisdiction, and
judgment thereon may be entered.
ARTICLE 21
MORTGAGES
21.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord
may, subject to the terms and conditions set forth in this Section 21.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Any such Encumbrance,
other than one the proceeds of which are used to finance construction of a
Capital Addition pursuant to the provisions of Sections 6.1 and 6.3, shall
include the right to prepay (whether or not subject to a prepayment penalty) and
shall provide (subject to Section 21.2) that it is subject to the rights of
Tenant under this Lease.
21.2 Subordination of Lease. Subject to Section 21.1 and the last
paragraph of this Section 21.2, this Lease, and all rights of Tenant hereunder,
are and shall be subject and subordinate to any ground or master lease, and all
renewals, extensions, modifications and replacements thereof, and to all
mortgages and deeds of trust, which may now or hereafter affect
-62-
the Leased Property or any improvements thereon and/or any of such leases,
whether or not such mortgages or deeds of trust shall also cover other lands
and/or buildings and/or leases, to each and every advance made or hereafter to
be made under such mortgages and deeds of trust, and to all renewals,
modifications, replacements and extensions of such leases and such mortgages and
deeds of trust and all consolidations of such mortgages and deeds of trust. This
section shall be self-operative and no further instrument of subordination shall
be required. In confirmation of such subordination, Tenant shall promptly
execute, acknowledge and deliver any instrument that Landlord, the lessor under
any such lease or the holder of any such mortgage or the trustee or beneficiary
of any deed of trust or any of their respective successors in interest may
reasonably request to evidence such subordination. Any lease to which this Lease
is, at the time referred to, subject and subordinate is herein called "Superior
Lease" and the lessor of a Superior Lease or its successor in interest at the
time referred to, is herein called "Superior Landlord" and any mortgage or deed
of trust to which this Lease is, at the time referred to, subject and
subordinate, is herein called "Superior Mortgage" and the holder, trustee or
beneficiary of a Superior Mortgage is herein called "Superior Mortgagee".
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Lease, whether through possession or foreclosure
action or delivery of a new lease or deed, or otherwise, then at the request of
such party so succeeding to Landlord's rights (herein called ("Successor
Landlord") and upon such Successor Landlord's written agreement to accept
Tenant's attornment, Tenant shall attorn to and recognize such Successor
Landlord as Tenants landlord under this Lease and shall promptly execute and
deliver any instrument that such Successor Landlord may reasonably request to
evidence such attornment. Upon such attornment, this Lease shall continue in
full force and effect as a direct lease between the Successor Landlord and
Tenant upon all of the terms, conditions and covenants as are set forth in this
Lease, except that the Successor Landlord (unless formerly the landlord under
this Lease or its nominee or designee) shall not be (a) liable in any way to
Tenant for any act or omission, neglect or default on the part of Landlord under
this Lease, (b) responsible for any monies owing by or on deposit with Landlord
to the credit of Tenant, (c) subject to any counterclaim or setoff which
theretofore accrued to Tenant against Landlord, (d) bound by any modification of
this Lease subsequent to such Superior Lease or mortgage, or by any previous
prepayment of Minimum Rent or Percentage Rent for more than one (1) month, which
was not approved in writing by the Superior Landlord or the Superior
-63-
Mortgagee thereto, (e) liable to the Tenant beyond the Successor Landlord's
interest in the Leased Property and the rents, income, receipts, revenues,
issues and profits issuing from the Leased Property, (f) responsible for the
performance of any work to be done by the Landlord under this Lease to render
the Leased Property ready for occupancy by Tenant, or (g) required to remove any
person occupying the Leased Property or any part thereof, except if such person
claims by, through or under the Successor Landlord. Tenant agrees at any time
and from time to time to execute a suitable instrument in confirmation of
Tenant's agreement to attorn, as aforesaid.
Tenant's obligation to subordinate this Lease and Tenant's rights
hereunder to any Superior Mortgage or Superior Lease shall be conditioned upon
Landlord obtaining from any Superior Mortgagee or Superior Landlord, an
agreement which shall be executed by Tenant and such Superior Mortgagee or
Superior Landlord which shall provide in substance that so long as no Event of
Default exists as would entitle Landlord or any such Superior Mortgagee or
Superior Landlord to terminate this Lease or would cause, without any further
action of Landlord or such Superior Mortgagee or Superior Landlord, the
termination of this Lease or would entitle Landlord or such Superior Mortgagee
or Superior Landlord to dispossess Tenant, this Lease shall not be terminated,
nor shall Tenant's use, possession or enjoyment of the Leased Property, in
accordance with the terms and provisions of this Lease, be interfered with, nor
shall the leasehold estate granted by this Lease be affected in any other
manner, in any foreclosure or any action or proceeding instituted under or in
connection with such Superior Mortgage or Superior Lease, or in the event such
Superior Mortgagee or Superior Landlord takes possession of the Leased Property
pursuant to any provisions of such Superior Mortgage or Superior Lease, unless
Landlord or such Superior Mortgagee or Superior Landlord would have had such
right of termination pursuant to this Lease. Such agreement shall be in form
customarily used by the holder of any such Superior Mortgage or Superior Lease.
21.3 Notice to Mortgagee and Ground Landlord. Subsequent to the receipt
by Tenant of notice from any person, firm or other entity that it is a Facility
Mortgagee, or that it is the ground lessor under a lease with Landlord, as
ground lessee, which includes the Leased Property as part of the demised
premises, no notice from Tenant to Landlord shall be effective unless and until
a copy of the same is given to such Facility Mortgagee or
-64-
ground lessor and the curing of any of Landlord's defaults by such Facility
Mortgagee or ground lessor shall be treated as performance by Landlord.
ARTICLE 22
INVESTMENT TAX CREDIT
22.1 Investment Tax Credit. Landlord agrees to elect, in accordance
with Section 48(d) of the Code, to treat Tenant as having purchased all such
eligible property in the Leased Property as may be designated by Tenant in order
that Tenant may obtain the benefit of the credit, if any, allowed or allowable
with respect thereto under Section 38 of the Code. Landlord makes no
representation or warranty with respect to the availability of the credit to
Tenant or the efficacy of such election. Landlord's sole responsibility in this
regard shall be to execute such documents as are reasonably required to effect
the election, which documents Tenant shall prepare, at Tenant's sole cost and
expense, and to provide Tenant with such information as may be reasonably
requested by Tenant in connection therewith. In addition, Landlord agrees it and
its assignees will not claim the credit provided by Section 38 of the Code for
any property included in the Leased Property.
ARTICLE 23
ADDITIONAL COVENANTS OF TENANT
23.1 Notice of Change of Name, Administrator, Etc. Tenant shall give
prompt notice to Landlord of any change in (a) the name (operating or otherwise)
of Tenant or the Facility, (b) the individual licensed as administrator of the
Facility, (c) the number of beds in any bed category for which the Facility is
licensed or the number of beds in any bed category available for use at the
Facility (except for changes in the number of certified distinct part beds made
for reimbursement maximization purposes), and (d) the patient and/or child care
services that are offered at the Facility.
23.2 Notice of Litigation, Potential Event of Default, Etc. Tenant
shall give prompt notice to Landlord of any litigation or any administrative
proceeding to which it may hereafter become a party which involves a potential
liability equal to or greater than $250,000, or which may otherwise result in
any material adverse change in the business, operations, property, prospects,
results of operation or condition, financial or other, of Tenant.
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ obtaining knowledge of any Default or Event of Default, or
any event or condition that would be required to be disclosed in a current
report filed by Tenant on Form 8- K or in Part II of a quarterly report on Form
10-Q if Tenant were required to file such reports under the Securities Exchange
Act of 1934, as amended, Tenant shall give Landlord notice thereof, which notice
shall set forth in reasonable detail the nature and period of existence thereof
and what action Tenant has taken or is taking or proposes to take with respect
thereto.
23.3 Management of Leased Property. Tenant shall not enter into any
management or similar agreement in respect of the Leased Property without the
express prior written consent of Landlord.
23.4 Distributions, Payments to Affiliated Persons, Etc. Tenant will
not declare, order, pay or make, directly or indirectly, any distribution or any
payment to any Affiliated Person as to Tenant (including payments in the
ordinary course of business and payment pursuant to management agreements with
any such Affiliated Person) or set apart any sum or property therefor, or agree
to do so, if, at the time of such proposed action, or immediately after giving
effect thereto, any event or condition shall exist which constitutes a Default
or an Event of Default.
ARTICLE 24
MISCELLANEOUS
24.1 No Waiver. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the 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.
24.2 Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Landlord, 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 Landlord or Tenant of any one
or more of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Landlord or Tenant of any or all of such other rights,
powers and remedies.
-66-
24.3 Acceptance of Surrender. No surrender to Landlord of this Lease or
of the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Landlord and no
act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
24.4 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 or ground
landlord's interest in the Leased Property.
24.5 Conveyance by Landlord. If Landlord 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 Landlord hereunder
arising or accruing from and after the date of such conveyance or transfer and
shall be reasonably capable of performing the obligations of Landlord hereunder,
Landlord or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of Landlord 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.
24.6 Quiet Enjoyment. So long as Tenant shall pay the Rent as the same
becomes due and shall substantially comply with all of the terms of this Lease
and perform its obligations hereunder, Tenant shall peaceably and quietly have,
hold and enjoy the Leased Property for the Term hereof, free of any claim or
other action by Landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or
hereafter consented to by Tenant. Except as otherwise provided in this Lease, no
failure by Landlord to comply with the foregoing covenant shall give Tenant any
right to cancel or terminate this Lease or ▇▇▇▇▇, reduce or make a deduction
from or offset against the Rent or any other sum payable under this Lease, or to
fail to perform any other obligation of Tenant hereunder. Notwithstanding the
foregoing, Tenant shall have the right, by separate and independent action to
pursue any claim it may have against Landlord as a result of a breach by
Landlord of the covenant of quiet enjoyment contained in this Section.
-67-
24.7 Landlord's Liability. THE DECLARATION OF TRUSTEES ESTABLISHING
LANDLORD, DATED OCTOBER 9, 1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS
AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND
REHABILITATION PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF LANDLORD SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, LANDLORD. ALL PERSONS DEALING WITH LANDLORD, IN ANY WAY, SHALL LOOK
ONLY TO THE ASSETS OF LANDLORD FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION. Tenant, its successors and assigns, shall not assert nor seek to
enforce any claim for breach of this Lease against any of Landlord's assets
other than Landlord's interest in the Leased Property and in the rents, issues
and profits thereof, and Tenant agrees to look solely to such interest for the
satisfaction of any liability or claim against Landlord under this Lease, it
being specifically agreed that in no event whatsoever shall Landlord (which term
shall include, without limitation, any general or limited partner, trustees,
beneficiaries, officers, directors, or stockholders of Landlord) ever be
personally liable for any such liability. In no event shall Landlord ever be
liable to Tenant for any indirect or consequential damages.
24.8 Landlord's Consent. Where provisions are made in this Lease for
Landlord's consent and Landlord shall fail or refuse to give such consent,
Tenant shall not be entitled to any damages for any withholding by Landlord of
its consent, it being intended that Tenant's sole remedy shall be an action for
specific performance or injunction, and that such remedy shall be available only
in those cases where Landlord has expressly agreed in writing not to
unreasonably withhold its consent.
24.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Lease. However, Landlord and Tenant 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 reference to this Lease, and all options
contained herein, shall be made. Tenant shall pay all costs and expenses of
recording such memorandum of this Lease.
24.10 Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Lease shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with
-68-
all freight charges prepaid (if by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Lease upon
the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Lease a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
Health and Rehabilitation Properties Trust
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇]
with a copy to:
▇▇▇▇▇▇▇▇ & Worcester
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
[Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇]
if to Tenant to:
Horizon Healthcare Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
[Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇]
with a copy to:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
[Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇]
-69-
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time
to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address
any other address within the United States of America.
24.11 Construction. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Tenant or Landlord
arising prior to any date of termination of this Lease shall survive such
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 provisions shall not be affected thereby. If any
late charges or any interest rate 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 signed by the party
to be charged. 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
represents the entire agreement among the parties and amends and restates the
original Leases in their entirety. This Lease may not be amended or modified in
any respect except by the written agreement of Landlord and Tenant.
24.12 Governing Law. This Lease shall be interpreted, construed,
applied and enforced in accordance with the laws of the State applicable to
contracts between residents of the State which are to be performed entirely
within the State, regardless of (i) where this Lease is executed or delivered;
or (ii) where any payment or other performance required by this Lease is made or
required to be made; or (iii) where any breach of any provision of this Lease
occurs, or any cause of action otherwise accrues; or (iv) where any action or
other proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principle place of business, or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum jurisdiction
otherwise would apply the laws of a jurisdiction other than the State; or (vii)
any combination of the foregoing.
-70-
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Lease may be brought and prosecuted in such court or courts located in the
State as is provided by law; and the parties consent to the jurisdiction of said
court or courts located in the State and to service of process by registered
mail, return receipt requested, or by any other manner provided by law.
24.13 Purchase Option. It is acknowledged and agreed by the parties
that Tenant has the option to purchase the Leased Property subject to and upon
the terms and conditions set forth in the Purchase Option Agreement, dated as of
the date hereof, between Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Lease, as a sealed
instrument, as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Treasurer
TENANT:
HORIZON HEALTHCARE CORPORATION
By:___________________________________
Its: (Vice) President
-70-
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Lease may be brought and prosecuted in such court or courts located in the
State as is provided by law; and the parties consent to the jurisdiction of said
court or courts located in the State and to service of process by registered
mail, return receipt requested, or by any other manner provided by law.
24.13 Purchase Option. It is acknowledged and agreed by the parties
that Tenant has the option to purchase the Leased Property subject to and upon
the terms and conditions set forth in the Purchase Option Agreement, dated as of
the date hereof, between Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Lease, as a sealed
instrument, as of the date first above written.
LANDLORD:
HEALTH AND REHABILITATION
PROPERTIES TRUST
By:___________________________________
Its:_____________________________
TENANT:
HORIZON HEALTHCARE CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
Its: President
EXHIBIT A
Other Leases
[See attached copy.]
EXHIBIT B
Permitted Encumbrances
[See attached copy.]
EXHIBIT C
The Land
[See attached copy.]
Omitted Exhibits
----------------
The following exhibits to the Lease Agreement have been omitted:
Exhibit Letter Exhibit Title
-------------- -------------
A Other Leases
B Permitted Encumbrances
C The Land
The registrant agrees to furnish supplementally a copy of the foregoing
omitted exhibits to the Securities and Exchange Commission upon request.
EXHIBIT D
Minimum Rent
[See attached copy.]
EXHIBIT D
Monthly Rent Allocation
Hyannis, MA $86,517
SCHEDULE TO EXHIBIT 10.38
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the following
Lease Agreements, which are substantially identical in all material respects to
the Lease Agreement filed herewith, are omitted. The following list sets forth
the material differences in the Leased Premises and Monthly Rent Allocation.
Leased Premises Monthly Rent Allocation
---------------------------------------------------------------------
Boston, MA $260,594
Middleboro, MA $177,204
Worcester, MA $182,416
Cannonsburg, PA $162,611