TRIPLE NET HOSPITAL AND MEDICAL
OFFICE BUILDING LEASE
between
PACIFIC COAST HOLDINGS INVESTMENT, LLC
(Landlord)
and
INTEGRATED HEALTHCARE HOLDINGS, INC.
(Tenant)
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TRIPLE NET HOSPITAL AND MEDICAL OFFICE BUILDING
LEASE
THIS TRIPLE NET HOSPITAL AND MEDICAL OFFICE BUILDING LEASE (the "Lease")
is made as of the 7th day of March 2005 by and between Pacific Coast Holdings
Investment, LLC, a California limited liability company ("Landlord") and
Integrated Healthcare Holdings, Inc. a Nevada corporation ("Tenant"), with
reference to the following facts:
RECITALS
A. Tenant is acquiring from ▇▇▇▇▇ Healthcare System the Property described
below pursuant to a certain Asset Sale Agreement incorporated by reference
herein ("▇▇▇▇▇ Transaction"). Concurrent with the closing of the ▇▇▇▇▇
Transaction, Tenant is transferring the Property to Landlord whereupon Landlord
shall lease back the Property to Tenant on the terms and conditions set forth
herein.
B. Upon the closing of the ▇▇▇▇▇ Transaction, Landlord shall be the owner
of the Property consisting of hospital properties ("Hospital Properties") and
medical office buildings and a long term acute care facility (collectively "MOB
Properties") more particularly described in Exhibit "A" attached hereto together
with the buildings, improvements and fixtures (hereinafter collectively referred
to as the "Property").
C. Tenant is willing to lease the Property from Landlord and Landlord is
willing to lease the Property to Tenant on the terms and conditions set forth in
this Lease.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
TERMS
1.1 Hospital Properties Lease Term. The term of this Lease for the
Hospital Properties shall be for approximately twenty-five (25) years,
commencing March 8, 2005 (the "Commencement Date") and which shall terminate on
February 28, 2030.
1.2 Option To Renew Hospital Properties Lease Term. Landlord hereby grants
to Tenant the option to extend the term of this Lease for the Hospital
Properties (the "Option") for one (1) additional term of twenty-five (25) years
commencing when the initial term expires (the "Option Period") upon each and all
of the following terms and conditions:
(a) This lease shall automatically renew for the Option Period
unless Tenant gives to Landlord, and Landlord actually receives, on a date which
is at least six (6) and not more than nine (9) months prior to the date that
such Option Period would commence (if exercised), a written notice that Tenant
has declined to exercise of the Option to extend this Lease. If said
notification of the exercise of the Option is not so given and received, the
Option shall automatically renew as herein provided.
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(b) Tenant shall not be in breach of this Lease at the time of
exercise of each of the Options.
(c) All of the terms and conditions of the Lease except where
specifically modified by this Option shall apply.
1.3 MOB Properties Lease Term. The term of this Lease for the MOB
Properties shall be for approximately one (1) year, commencing March 8, 2005
(the "Commencement Date") and which shall terminate on February 28, 2006.
ARTICLE II
RENT
2.1 Joint Financing. Landlord and Tenant are both sophisticated entities.
Tenant has requested and Landlord has agreed to permit Tenant to use the
Property as collateral for the purposes of joint financing of the Property and
Tenant's business operation for an initial period of time and, subject to the
terms herein, the operations of Tenant and the Property. Tenant's obligation for
base rent ("Base Rent") payments shall be set in relationship to said financing.
2.2 Initial Financing. Tenant has arranged for an initial financing
("Initial Financing") in the form of a loan with interest at the rate of
Fourteen percent (14%) per annum in the amount of Eighty Million Dollars
($80,000,000) of which Thirty Million Dollars ($30,000,000) will be in the form
of an operating loan ("Operating Loan") and Fifty Million Dollars ($50,000,000)
will be in the form of a real estate loan ("Real Estate Loan"). In addition
Tenant may borrow additional funds against accounts receivable ("A/R
Financing"). The Operating Loan, the Real Estate Loan and the A/R Financing will
be secured by both the Property and Tenant's operations.
2.3 Refinancing. Tenant and Landlord agree that the Initial Financing
should be replaced as soon as practical but in any event within two (2) years of
the Commencement Date of the lease term Tenant and Landlord covenant and agree
to work cooperatively to secure said refinancing meeting the following criteria:
(a) The refinancing shall be provided by an institutional
lender in an arms length transaction.
(b) The refinancing shall not exceed One Hundred Million
Dollars ($100,000,000) of which not more than Fifty
Million Dollars ($50,000,000) will be a Real Estate
Loan.
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(c) The terms of said refinancing shall not impair the
financial viability of either Tenant or Landlord.
(d) Neither Landlord, nor any of Landlord's members shall
be required to assume any personal liability or
obligation for said refinancing. The sole recourse of
the lender shall be to the Property and the Tenant's
assets.
(e) The loan shall be at commercially reasonable rates
and upon commercially reasonable terms including
reasonable amortization of principal.
(f) The loan will not include any contingent interest
provisions or any payments other than interest upon a
principal sum.
(g) The loan shall not limit the sale or transfer of all
or portions of the Property or of interests in
Landlord for a period greater than five (5) years.
2.4 Cross Payment Duties. So long as the Real Estate Loan, Operating Loan
and/or A/R Financing are cross collateralized, Tenant shall have an obligation
and duty to Landlord to pay when due all sums coming due under the Operating
Loan and A/R Financing and to otherwise fully comply with all terms and
conditions of the Operating Loan and A/R Financing and Landlord shall have an
obligation and duty to Tenant to pay when due all sums coming due under the Real
Estate Loan and to otherwise fully comply with all terms and conditions of the
Real Estate Loan.
2.5 Information and Notices. Tenant shall provide copies to Landlord of
all notices, reports, information and communications received from or provided
to any lender.
2.6 Time Limit on Cross Collateralization. Five (5) years after the
Commencement Date, Landlord shall have the right to terminate the cross
collateralization of Operating Loan and A/R Financing with the Real Estate Loan
and to refinance the Real Estate Loan as provided in Section 2.13.
2.8 Base Rent Definitions. The following definitions shall apply to the
determination of Base Rent:
(a) Principal Sum. The "Principal Sum" is Fifty Million
Dollars ($50,000,000).
(b) Cost of Landlord's Principal Sum. The "Cost of
Landlord's Principal Sum" is the average annual
interest rate charged on loan secured by the first
lien Deed of Trust (or Mortgage) on the Property for
the preceding month, as the same may vary from time
to time.
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(c) Landlord's Spread. The "Landlord's Spread" for the
first one (1) year of the lease term is the
difference between Twelve percent (12%) per annum and
the annual interest rate (which may vary monthly) of
the Real Estate Loan but in no event more than Two
and One-Half percent (2 1/2 %) per annum, thereafter
"Landlord's Spread" is Two and One-Half percent (2
1/2%) over the Cost of Landlord's Principal Sum.
(d) Amortization Expense. Commencing on the earlier of
(i) the refinancing contemplated by Section 2.3
hereof or (ii) two (2) years following the
Commencement Date, the "Amortization Expense" shall
be the annual sum of Two Million Five Hundred
Thousand Dollars ($2,500,000) until such time as a
total Amortization Expense of Fifty Million Dollars
($50,000,000) has been paid.
(e) Consumer Price Index. "Consumer Price Index" or "CPI"
shall refer to the "Consumer Price Index, Los
Angeles-Long Beach-Anaheim Average, All Items
(1982-1984=100)" as published by the United States
Department of Labor, Bureau of Labor Statistics
("Bureau"). In the event that the Bureau shall cease
to publish said Consumer Price Index, then the
national index shall apply and if the national index
is no longer published, then the successor or most
nearly comparable index thereto shall be used as
determined by Landlord.
2.9 Hospital Properties Base Rent Calculation. The monthly Hospital
Properties Base Rent shall equal the Principal Sum multiplied by the sum of the
Cost of the Landlord's Principal Sum plus the Landlord's Spread the product of
which shall be added to the Landlord's Amortization Expense, then divided by
twelve (12). Set forth as a formula this calculation is as follows:
Monthly Base Rent =
[Principal Sum x (Cost of Landlord's Principal Sum +Landlord's Spread)] + Amortization Expense
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2.10 Hospital Properties Base Rent Market Adjustment. On each five (5)
year anniversary of the Commencement Date the Hospital Base Rent shall be
increased (but not decreased) to an amount equal to the then current fair market
rental rate, but in no event increased by more than Five percent (5%) over the
preceding month's Hospital Base Rent (provided however that such time as the
Amortization Payment is no longer being made the Five percent (5%) limitation
shall cease to apply). Commencing not less than ninety (90) days prior to each
fifth (5th) anniversary of the Commencement Date, Landlord and Tenant shall
attempt to agree on the fair market rental rate for the Hospital Properties. If
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Landlord and Tenant are not able to agree to the fair market rental rate within
thirty (30) days, Landlord and Tenant shall each choose an independent, licensed
real estate broker, with not less than five (5) years experience in leasing
healthcare related facilities including hospitals. The two real estate brokers
so appointed shall appoint a third real estate broker, similarly qualified. Each
broker shall independently determine the fair market rental rate. The three
rates so determined will be averaged. The rate determined by the brokers which
varies the most from the average shall be discarded and the two remaining values
and the average value shall be averaged and said second average shall constitute
the fair market rental rate. Each party shall bear the costs of the real estate
broker appointed by that party and the parties shall equally divide the costs of
the third real estate broker. Notwithstanding the provisions of this Section
2.10, if at any time the monthly Hospital Base Rent determined in accordance
with Section 2.9 hereof would exceed the monthly Hospital Base Rent determined
in accordance with this Section 2.10, then this Section 2.10 shall be discarded
and the monthly Hospital Base Rent shall be determined in accordance with
Section 2.9.
2.11 MOB Properties Base Rent Calculation. The monthly MOB Properties Base
Rent shall equal the rent received from tenants of the MOB Properties, less the
actual monthly costs to operate said MOB Properties, and also less a monthly
charge for insurance and real property taxes equal to one-twelfth (12th) the
estimated annual cost thereof. In the event the estimated monthly charge for
insurance and real property taxes is in error at the end of the lease term, then
Landlord and Tenant shall make an appropriate adjustment so that the sum
deducted in order to calculate the MOB Properties Base Rent is correct.
2.12 Invoicing for Base Rent. Landlord shall invoice Tenant for the
monthly Base Rent due. Base Rent shall be due on or before tenth (10th) day of
the month. Any partial month shall be prorated on a daily basis at the rate of
1/30th of the monthly rent per day.
2.13 Landlord's Rights Regarding Financing. Upon termination of the cross
collateralization obligations as set forth above, Landlord shall have the right
in Landlord's commercially reasonable discretion to from time to time alter,
replace or revise the loan secured by the first lien Deed of Trust (or Mortgage)
on the Property and thereby change the Cost of Landlord's Principal Sum, but
such refinancing shall not increase Tenant's then prevailing rent over that of
the then prevailing fair market value rental rent for the Property. Any dispute
under this provision shall be referred to binding arbitration under the
provisions of Section 20.22. Tenant shall cooperate in all respects with
executing such documents as may be requested by Landlord's lender.
2.14 Hedging. Either Landlord or Tenant may at their individual options
elect to hedge interest rate exposure; however, such hedging shall be undertaken
at the sole risk of the party so electing to hedge. Hedging by Tenant shall in
no way restrict Landlord's right to alter, replace or revise the loan secured by
the first lien Deed of Trust (or Mortgage) on the Property.
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2.15 CPI Adjustment. On January 1st (or as soon thereafter as available)
of each year, the Consumer Price Index figure for the preceding year shall be
determined, and the portion of the Base Rent attributable to the Landlord's
Spread shall be increased (but not decreased) by the same percentage as the
percentage, if any, by which the Consumer Price Index for the January of the
preceding year shall have increased as compared with the Consumer Price Index
for the January of the current year. Landlord shall provide written notice of
the CPI adjustment to Tenant. In the event that the adjustment has not been
determined in time for any invoicing sent, then upon determination of the
adjustment, Landlord shall send out adjustment invoices.
2.16 Other Charges. Except as otherwise expressly provided herein, this
Lease is what is commonly called a net-net-net lease, it being understood that
Landlord shall receive the Base Rent free and clear of any and all impositions
of real and personal Property taxes, or other taxes (excepting Landlord's income
tax), insurance costs, costs of repair and maintenance, liens and all other
charges, costs, expenses and liabilities in connection with the ownership and
operation of the Property and the businesses conducted thereon.
2.17 Delinquent Rent. Tenant acknowledges that late payment of Base Rent
or any additional rent by Tenant to Landlord will cause Landlord to incur costs
not contemplated by this Lease, and the exact amount of such costs being
extremely difficult and impracticable to fix. Therefore, if any installment of
Base Rent or any additional rent is not received within ten (10) days of when
due, Tenant shall pay Landlord the additional sum of Five Thousand Dollars
($5,000) per late payment] as a late charge. The parties agree that this late
charge represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payments. Additionally, any payments of Base Rent and
any other sums payable by Tenant pursuant to the terms of this Lease shall bear
interest at the maximum legal rate.
2.18 Minimum Base Rent. Notwithstanding anything elsewhere provided, at
all times the minimum monthly Base Rent shall be equal to Landlord's payment
obligations under the Real Estate Loan.
2.19 MOB Rent Deferral. In the event Tenant is financially unable to pay
the monthly MOB Properties Base Rent as provided in Section 2.11 or any
additional rent on the MOB Properties as provided elsewhere in this Lease, it is
agreed that the unpaid amount shall be amortized together with interest at the
rate of four percent (4%) per annum and paid over the subsequent thirty-six (36)
months as additional rent.
ARTICLE III
AFTER ACQUIRED PROPERTY
3.1 ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Condominium Units. Originally, Landlord had intended
to acquire from Tenant and lease back to Tenant those condominium units located
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇ as more specifically set forth on
Exhibit A hereof. Said condominium units are subject to a right of first refusal
and so cannot immediately be acquired by Tenant and transferred to Landlord.
Therefore the parties have by separate agreement arranged for the acquisition of
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said condominium units by Tenant and the transfer thereof to Landlord (or so
many of said condominium units as are not taken by others through the exercise
of the right of first refusal, hereinafter the "Transferred Condominium Units").
Upon transfer said Transferred Condominium Units shall be added to the MOB
Properties and leased to Tenant by Landlord pursuant to the terms of this
Agreement. Landlord and Tenant agree to execute an addendum to this Agreement
reflecting the addition of said Transferred Condominium Units to the lease and
the commencement date of the lease thereof.
ARTICLE IV
TAXES
4.1 Real Property Taxes. Tenant shall pay, as additional rent, when and as
the same become due, and prior to delinquency, all taxes, both general and
special, and other charges, including transient occupancy taxes and rental
taxes, if any, lawfully imposed or assessed against the Property, including but
not limited to any and all licenses, fees or charges, improvement bonds,
ordinary and extraordinary, general and special, foreseen and unforeseen, which
may be lawfully levied, assessed or imposed during the term of this Lease upon
or against Tenant or the Property, and/or the businesses conducted thereon, and
including any future tax adopted in lieu of a Property tax, any and all general
and special taxes, including any increase in such taxes resulting from a "change
in ownership" of Landlord or Tenant (as defined in California Revenue and
Taxation Code Section 60, et seq.).
Where any assessment may, at the option of the taxpayer, be payable in
installments, Tenant shall have the right to exercise the option, and Tenant's
liability for the payment of the assessment shall be limited to the payment of
the installments which become due during the term of this Lease.
If separate bills are not sent directly to Tenant, Landlord shall furnish
Tenant, upon receipt by Landlord, with true copies of each ▇▇▇▇ to be paid by
Tenant in whole or in part.
4.2 Tax Contest. Upon written application, Tenant shall furnish to
Landlord for inspection, and for such use as may be proper for the protection of
Landlord's interest in the Property, written evidence duly certified that any
and all taxes, assessments or charges required to be paid by Tenant hereunder
have been paid, satisfied or otherwise discharged. Tenant, at its sole cost and
expense, shall have the right to employ and exhaust all available remedies to
protest and contest the amount of any liability for any taxes, assessments,
licenses, fees or charges imposed or assessed against the Property, or otherwise
to seek reduction or refund. Tenant shall post a bond (or, in lieu thereof,
equivalent cash collateral) to prevent enforcement of any lien resulting from
the foregoing.
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4.3 Personal Property Taxes. Tenant shall pay, before delinquency, all
taxes and assessments levied against any personal Property that is located on
the Property.
ARTICLE V
UTILITIES
5.1 Utilities. In addition to the rents, taxes, and other charges herein
provided, Tenant shall pay, or cause to be paid, as additional rent, all charges
for public or private utility services, including, but not limited to, those for
water, sewage, electricity, gas, telephone and other utility services, including
trash collection supplied to and used on the Property.
ARTICLE VI
USE OF THE PROPERTY
6.1 Use of the Property. Tenant shall use the Property for the purpose of
operation of an acute care hospital and delivery of health care services, and
any other uses reasonably related thereto (the "Permitted Uses"). Tenant shall
not use or permit the Property to be used for any other purpose without the
prior written consent of Landlord, which consent may be granted or withheld in
the sole and absolute discretion of the Landlord.
ARTICLE VII
MAINTENANCE, ALTERATIONS IMPROVEMENTS
7.1 Maintenance and Repair. Tenant shall, at Tenant's sole cost and
expense, keep and maintain the Property in good and sanitary order, condition
and repair, including, without limitation, interior and exterior walls, roof,
foundation, and equipment. Tenant hereby accepts the Property in its as-is
condition existing as of the Commencement Date, subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations governing
and regulating the use of the Property,
7.2 Alterations and Improvements.
(a) Tenant shall be responsible for making any alterations or
improvements to the Property required in order to enable Tenant to use the
Property for the Permitted Uses, including without limitation any and all
repairs, alterations, improvements of any nature or anything else which may be
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required for compliance with SB 1953, including without limitation any
structural or non-structural alterations. All alterations, improvements,
additions and installations (whether or not such installations constitute trade
fixtures of Tenant), which may be made to the Property by Tenant, including but
not limited to, floor coverings, paneling, doors, drapes, built-ins, moldings,
sound attenuation, lighting and telephone or communication systems, conduit,
wiring and outlets shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the Property of
Landlord and remain upon and be surrendered with the Property at the expiration
of the Lease.
(b) Tenant shall promptly pay and discharge all claims for work or
labor done, supplies furnished or services rendered and shall keep the Property
free and clear of all mechanic and materialman liens in connection therewith.
Landlord shall have the right to post or keep posted on the Property, or in the
immediate vicinity thereof, any notices of non-responsibility for any
construction, alteration, or repair of the Property by Tenant. If any such lien
is filed, Landlord may, but shall not be required to take such action or pay
such amount as may be necessary to remove such lien; and Tenant shall pay to
Landlord as additional rent any such amounts expended by Landlord within five
(5) days after notice is received by Tenant of the amount expended by Landlord.
ARTICLE VIII
COMPLIANCE WITH LAWS
8.1 Generally. Tenant, as additional rent, at its sole cost and expense,
shall make any and all additions to, repairs and alterations in, the buildings,
structures, landscaping and parking areas (hereinafter collectively the
"Improvements"), the Property which may be required by law or governmental
authority, and shall otherwise observe and comply with any and all public laws,
ordinances, regulations, agreements, and covenants, conditions and/or
restrictions of public record applicable to the Property. Tenant shall be
obligated to obtain, at its sole effort, cost and expense, all permits, approval
and licenses required for the operation, alteration, addition to or repair of
the Improvements.
8.2 Hazardous Substances - Reportable Uses; Required Consent. The terms
"Hazardous Substance" and "Hazardous Substances" shall mean any hazardous or
toxic materials, pollutants, effluents, contaminants, radioactive materials,
flammable explosives, chemicals known to cause cancer or reproductive toxicity,
emissions or wastes and any other chemical, material or substance, the handling,
storage, release, transportation, or disposal of which is or becomes prohibited,
limited or regulated by any federal, state, county, regional or local authority
or which, even if not so regulated, is or becomes known to pose a hazard to the
health and safety of the occupants of the Property, including, without
limitation, (i) petroleum and petroleum by-products, (ii) urea formaldehyde foam
insulation, (iii) polychlorinate biphenyls, (iv) all substances now or hereafter
designated as "hazardous substances, "hazardous materials" or "toxic substances"
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (CERCLA), 42 U.S.C. Section 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986 (▇▇▇▇), the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq., or the Resource, Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., or (vi) all substances now or hereafter designated
as hazardous substances, hazardous materials, or toxic substances under any
other federal, state or local laws or in any regulations adopted and
publications promulgated pursuant to said laws.
8.3 Reportable Use. Tenant shall not engage in any activity in, on or
about the Property that constitutes a Reportable Use (as hereinafter defined) of
Hazardous Substances without the express prior written consent of Landlord and
compliance in a timely manner, at Tenant's sole cost and expense, with all
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Applicable Law (as defined hereinafter). Reportable Use shall mean (i) the
installation or use of any above or below ground storage tank (ii) the
generation, possession, storage, use, transportation, or disposal of a Hazardous
Substance that requires a permit from, or with respect to which a report and
notice, registration or business plan is required to be filed with any
governmental authority. Reportable Use shall also include Tenant's being
responsible for the presence in, on or about the Property of a Hazardous
Substance with respect to which any Applicable Law requires that a notice be
given to persons entering or occupying the Property or neighboring properties.
Notwithstanding the foregoing, Tenant may, without Landlord's prior consent, but
in full compliance with all Applicable Law, use, generate and store any ordinary
and customary materials reasonably required to be used by Tenant in the normal
course of Tenant's business permitted on the Property by the terms of this
Lease, so long as such use does not expose the Property or neighboring
properties to any risk of contamination or damage or expose Landlord to any
liability therefore. In addition Landlord may (but without any obligation to do
so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Tenant upon Tenant's giving Landlord such additional
assurances as Landlord, in its sole discretion, deems necessary to protect
itself, the public, the Property, the Improvements and the environment against
damage, contamination or injury and/or liability therefrom or therefore,
including, but not limited to, the installation (and removal on or before the
expiration of the term of the Lease or earlier termination) of reasonably
necessary protective modifications to the Property and the Improvements and/or
the disposal and/or the deposit of a security deposit or increase thereof.
8.4 Duty to Inform Landlord. If Tenant's officers, directors or general
manager know, or have reasonable cause to believe, that a Hazardous Substance or
a condition involving or resulting from same, has come to be located on, in or
under the Property, the Improvements or adjoining properties, other than as
previously consented to by Landlord, Tenant shall immediately give written
notice of such fact to Landlord. Tenant shall also immediately give Landlord a
copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action or proceeding given to, or received from,
any governmental authority or private party, any persons entering or occupying
the Property concerning the presence, spill, release, discharge of, or exposure
to any hazardous substance or contamination in, on or about the Property,
including, but not limited to, all such documents as may be involved in any
reportable uses involving the Property.
8.5 Indemnification. Tenant shall indemnify, protect, defend and hold
Landlord, its agents, employees, members and lenders, if any, and the Property
harmless from and against any and all loss of rents and/or damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, permits and attorneys fees
and consultants fees arising out of or involving the presence, storage, use or
transport of any Hazardous Substance or storage tank, whenever arising, or out
of or as a result of Landlord's indemnification of Medical Provider Financial
Corporation II, Inc. pursuant to an Environmental Indemnity Agreement dated as
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of March 3, 2005 or any successor environmental indemnity which Landlord may
extend in connection with a financing secured by the real property leased to
Tenant hereby. Tenant's obligations under this Section shall include, but not be
limited to, the effects of any contamination or injury to person, Property or
the environment created or suffered by Landlord and for Tenant, and their
respective agents, employees, guests, invitees and other persons on the
Property, and the cost of investigation (including consultant's and attorney's
fees and testing), removal, remediation, restoration, and/or abatement thereof,
or of any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Landlord and Tenant shall release Tenant from its
obligations under this Lease with respect to the Hazardous Substances or storage
tanks, unless specifically so agreed by Landlord in writing at the time of such
release.
8.6 Tenant's Compliance With Applicable Laws. Tenant shall, at Tenant's
sole cost and expense, fully, diligently and in a timely manner comply with all
Applicable Law, which term is used in this Lease to include all laws, rules,
regulations, ordinances, directives, covenants, easements, and restrictions of
record, permits, the requirements of any applicable federal, state or municipal
governmental authority, applicable fire insurance, underwriter or rating bureau
and the recommendations of Landlord's engineers and/or consultants, relating, in
any manner, to the Property including, but not limited to, matters pertaining to
(i) industrial hygiene (ii) environmental conditions on, in, under, or about the
Property, including soil and ground water contamination, (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, signage, spill or release of any Hazardous Substances or storage
tank), (iv) the American with Disabilities Act of 1990, as amended, (v) OSHA,
(vi) the California Building Code, and (vii) Title 24 now in effect which may
hereinafter come into effect, and whether or not reflecting a change in policy
from any previous existing policy. Tenant shall, within five (5) days after
receipt of Landlord's written request, provide Landlord with copies of all
documents and information, including, but not limited to, permits,
registrations, notices, applications, reports and certificates, evidencing
Tenant's compliance with any Applicable Law specified by Landlord and shall
immediately upon receipt notify Landlord, in writing (with copies of any
documents involved), of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Tenant or the
Property to comply with any Applicable Law. In the event that as a result of any
alteration, addition or change to the Property, or any portion thereof or any
improvement constructed thereon, by Tenant which results in the violation of an
Applicable Law, then Tenant shall be responsible for compliance with such
Applicable Law, including any asbestos abatement or containment required as a
result of or in connection with such alteration, addition or change.
ARTICLE IX
INTENTIONALLY OMITTED
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ARTICLE X
EXCULPATION AND INDEMNITY
10.1 Waiver of Landlord Liability. Landlord shall not be liable for any
loss, damage or injury of any kind or character to any person or Property (a)
arising from any use and/or condition and extent of the Property, or any part
thereof including, without limitation, environmental contamination, (b) caused
by any defect in the equipment or other facility located therein, (c) caused by
or arising from any act or omission of Tenant, or any of its agents, employees,
licensees or invitees, (d) arising from or in connection with the conduct of any
business, occupation, transaction, event or other activity occurring on the
Property, (e) arising from any accident on the Property or any fire or casualty
thereon, (f) occasioned by the failure of Tenant to maintain the Property in a
safe condition, or (g) arising from any other cause whatsoever, except as
occasioned by the act or gross negligence of any duty by Landlord or its agents
or employees occurring after the Commencement Date. Tenant, as a material part
of the consideration of this Lease, hereby waives, on its behalf, all claims and
damages against Landlord for any such loss, damage or injury to Tenant.
10.2 Tenant Indemnification. Tenant, for itself and its successors and
assigns, hereby agrees to indemnify Landlord, and Landlord's members, managers,
agents, representatives, employees and attorneys, free and harmless from and
against any and all claims, actions, damages, liabilities and expenses,
including attorneys fees and costs, in connection with or arising out of (i) any
loss of life, personal injury and/or damage to Property arising from or out of
any occurrence in, upon or at the Property, (ii) the occupancy or use by Tenant
of the Property, or any part thereof, (iii) arising from or out of Tenant's
failure to comply with any provision of this Lease, and (iv) with respect to the
violation of any of the provisions of this Lease including but not limited to
Article VIII hereof, in the event Landlord shall, without fault on its part, be
made a party to any litigation, arbitration or other proceeding commenced by or
against Tenant, then Tenant shall protect and hold Landlord harmless, and shall
pay all costs, expenses and attorneys fees incurred or paid by Landlord in
connection with such litigation, arbitration or other proceeding. Landlord may,
at its option, require Tenant to assume Landlord's defense in any action covered
by this paragraph through counsel satisfactory to Landlord.
10.3 Survival of Indemnity Obligation. The obligations of Tenant under
this Article X shall survive the expiration of the term, or the termination, of
this Lease.
ARTICLE XI
INSURANCE
11.1 Liability. Tenant agrees to maintain, at its sole cost and expense,
as additional rent, during the term of this Lease comprehensive public liability
insurance insuring against liabilities related to the condition of or use of the
Property and the Improvements, bodily injury, employment related liability,
13
liquor liability, blanket contractual liability, garage liability, garage
keepers legal liability, non-owned auto liability and advertising injury, in
such amount as may be required by any beneficiary of any deed of trust
encumbering the Property, but in no event less than Ten Million Dollars
($10,000,000), combined single limit coverage, specifically insuring performance
by Tenant of the indemnity set forth in Article X above, and containing the
following provisions:
(a) Providing that the coverage is primary and that any
coverage Landlord may maintain shall be in excess thereto;
(b) Naming Landlord and any beneficiary under any deed of
trust encumbering the Property as additional insureds;
(c) Providing that the policy cannot be canceled or modified
without thirty (30) days prior written notice to Landlord and any beneficiary of
a deed of trust encumbering the Property;
(d) Providing for a cross liability or a severability of
interest endorsement or equivalent thereof;
(e) With respect to improvements, alterations, demolitions,
and changes required or permitted to be made by Tenant pursuant to the terms of
this Lease, contingent liability and builders- risk insurance;
(f) Workers' compensation coverage as required by law,
together with employer's liability coverage;
(g) A waiver by Tenant's insurers of any right to subrogation
against Landlord, its agents, members, managers, employees and representatives
which arises or might arise by reason of any payment under such policy or by
reason of any act or admission of Landlord, its agents, members, managers,
employees or representatives; and
11.2 Adjustments. The foregoing limits of coverage and the coverages may
be adjusted reasonably by Landlord and Tenant, with the consent of any
beneficiary of any deed of trust encumbering the Property, from time to time,
but not more often than once during any three (3) year period, during the term
of this Lease based upon changes in the amounts of judgments for personal injury
and Property damage, industry standards, inflation, and other relevant factors
in order to maintain insurance protection at least equivalent to the protection
afforded on the Commencement Date. In the event that the Landlord and Tenant are
unable to agree upon an adjustment then Landlord and Tenant, the issue shall be
resolved by arbitration in accordance with the binding arbitration provisions of
Section 20.22. The cost of such arbitration shall be born by the party whose
insurance proposal is closest to the insurance proposal decided upon by the
arbitration process.
11.3 Property. Tenant agrees to maintain, at its sole cost and expense, as
additional rent, during the term of this Lease (a) standard form fire, extended
coverage, vandalism, malicious mischief, boiler and machinery coverage, and
building ordinance and law coverage endorsements, and special extended
insurance, including all risk insurance, and other Property insurance coverage
(except earthquake coverage which shall not be required) as may be required by
any beneficiary of any deed of trust encumbering the Property, with respect to
the Improvements and the personal property located upon and used in connection
with the Property (hereinafter referred to as the "Assets") in amounts at least
equal to the greater of full replacement costs thereof or the amount required by
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any beneficiary of a deed of trust encumbering the Property, (b) with respect to
the construction, demolition, additions, alterations and the like required or
permitted to be constructed by Tenant hereunder, builders all-risk insurance
insuring the full replacement value of all construction in process on the
Property, and (c) business interruption insurance, in an amount satisfactory to
Landlord. Tenant shall also maintain, at Tenant's expense, earthquake insurance,
including sprinkler leakage coverage, building, contents and loss of income,
with a limit no less than the probable maximum loss limit as valued either
through Landlord or any beneficiary under a deed of trust encumbering the
Property. Each policy shall specifically (i) name the beneficiary under any deed
of trust encumbering the Property and then Landlord as additional insureds, (ii)
provide that all payments shall be made as provided in Article XII above, and
that the beneficiary of a deed of trust encumbering the Property shall have
first priority and claim to any payments as provided in its deed of trust, and
(iii) provide that it cannot be canceled or modified by the insurer without
thirty (30) days prior written notice to Landlord and such beneficiary.
11.4 Personal Property Insurance. Tenant, at Tenant's sole cost and
expense, shall maintain a policy of standard fire and extended coverage
insurance (with vandalism and malicious mischief endorsements) on all Tenant's
personal Property and alterations to the extent of at least their full
replacement value. Tenant shall use the proceeds from any such policy for the
replacement of personal Property or the restoration of Tenant's improvements or
alterations.
11.5 Rental Loss and Business Interruption. Tenant shall, at its sole cost
and expense, as additional rent, at all times during the term of this Lease,
maintain in force a policy of rental loss or business interruption insurance in
an amount at least sufficient to pay, for a period of twelve (12) months
following any applicable loss, the sum of the following: (a) the then applicable
Base Rent as provided in Article II above; (b) all additional rent as provided
in this Lease; and (c) the insurance premiums provided in this Article XI.
11.6 Quality of Policies. The minimum limits of policies of insurance
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance policy shall be issued by an insurance
company having a rating of not less than A (or equivalent) in Bests Insurance
Guide or which is otherwise acceptable to Landlord, and licensed to do business
in the State of California. Upon execution of this Lease and thereafter not less
than thirty (30) days prior to the expiration date of each insurance policy
required to be furnished hereunder, Tenant shall deliver to Landlord a
certificate of the insurer reasonably satisfactory to Landlord bearing a
notation evidencing the payment of the premium or accompanied by other evidence
of payment reasonably satisfactory to Landlord.
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11.7 Adjustments. All policies of insurance required or permitted under
this Article XI shall provide for loss thereunder to be adjusted by and payable
to the beneficiary under any deed of trust encumbering the Property and then to
Landlord or its designee.
11.8 Payment of Loss. All policies of insurance shall provide for payment
of loss to the holder of any security interest in the Property and Landlord,
jointly, and if there is no such security interest, or as to any excess, the
proceeds shall be paid to Landlord and Tenant, jointly, in trust or if Tenant so
elects, to a mutually approved corporate trustee, to be held in trust and
applied to the repair and restoration of the Property. When the Improvements
have been fully repaired and restored, any excess shall be paid to Tenant.
Landlord and Tenant shall use due diligence to cause the holder of any security
interest in the Property to make the proceeds of such insurance available for
repair and restoration following any casualty or loss covered thereby.
11.9 Cancellation. Each policy or certificate therefore issued by the
insurer shall to the extent obtainable contain a provision that no act or
omission of Tenant which would otherwise result in forfeiture or reduction of
the insurance therein provided shall affect or limit the obligation of the
insurance company to pay the amount of any loss sustained.
11.10 Compliance with Insurance Requirements. Tenant shall observe and
comply with the requirements of all policies of public liability, fire and other
policies of insurance in force with respect to the Property.
11.11 Failure to Obtain Insurance. In the event that Tenant fails to
maintain and pay for any of the insurance required by this Article XI, Landlord
may (but without obligation to do so) procure such insurance and pay the
premiums therefore, in which event Tenant shall repay Landlord all sums so paid
by Landlord within ten (10) days following Landlords written demand to Tenant
for such payment.
11.12 Subrogation. The parties release each other, and their respective
authorized representatives, from any claims for damage to any person or to the
Property and to the fixtures, personal Property, Tenant's improvements, and
alterations of either Landlord or Tenant in or on the Property that are caused
by or result from risks insured against any insurance policies carried by the
parties and in force at the time of any such damage. Each party shall cause each
insurance policy obtained by it to provide that the insurance company waives all
right of recovery by way of subrogation against either party in connection with
any damage covered by any policy. Neither party shall be liable to the other for
any damages caused by fire or any of the risks insured against under any
insurance policy required by this Lease.
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ARTICLE XII
DESTRUCTION
12.1 Rent Continues. In case of damage to or destruction of the Property
by fire or any other casualty whatsoever, Tenant's rental obligations shall
continue as provided in Article III above (and elsewhere in this Lease), and
Tenant shall, at no cost or expense to Landlord, restore, repair, replace or
rebuild improvements of comparable value, use, design, size and utility as
existed immediately prior to such damage or destruction. Such obligation of
Tenant to restore, repair or rebuild is not conditioned upon the recovery of any
insurance proceeds for such damage or destruction. Such restoration, repairs,
replacements or rebuilding shall be commenced within a reasonable period of time
following such damage and destruction and thereafter diligently prosecuted to
completion. All work required to be performed by Tenant under this Article shall
be performed in accordance with the provisions of Article VII above and may be
performed by Tenant's agents, employees or subtenants.
12.2 Insurance Available. All insurance proceeds paid as provided in
Section 11.9, less Landlord's actual costs, fees, and expenses, if any, incurred
in connection with adjustment of the loss, shall be applied to pay or reimburse
Tenant for the payment of the cost of the repair or restoration of the
Improvements (including the cost of temporary repairs for the protection of the
Improvements pending the completion of the permanent repair or restoration of
the Improvements) and shall be paid out from time to time as such restoration
progresses upon the written request of Tenant, which request shall be
accompanied by a certificate signed by Tenant and Tenant's architect or engineer
in charge of the restoration, dated not more than thirty (30) days prior to such
request, setting forth the following:
(a) That the sum then requested either has been paid by Tenant or is
justly due to contractors, subcontractors, materialmen, engineers, architects,
or other persons who have rendered services or furnished materials for the
restoration; that no part of such request covers expenditures for which a
request for payment has previously been made; and that to the best of Tenant's
knowledge, the sum requested does not exceed the value of the services and
materials described in the certificate; and
(b) That, except for the amounts, if any, stated (pursuant to
Subsection (a) above) in such certificate to be due for services and materials
and except for work in progress on the restoration and materials and supplies
ordered and services rendered but not yet billed, there is no outstanding
indebtedness known to Tenant, after due inquiry, that is then due and payable
for labor, wages, materials, supplies, or services in connection with the
restoration.
12.3 Proceeds Payment. Upon compliance with the foregoing provisions of
this Article XII, the person or persons holding the proceeds shall pay from such
proceeds to Tenant or the persons named in Tenant's certificate the respective
amounts stated in the certificate to have been paid by Tenant or to be due to
them as the case may be.
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12.4 Deficiencies. If the insurance proceeds received as a result of the
damage or destruction, less the actual costs, fees, and expenses, if any,
incurred in connection with the adjustment of the loss, are insufficient to pay
the entire cost of restoration, Tenant shall promptly pay the deficiency.
12.5 Landlord Cure. Notwithstanding any of the foregoing provisions of
this Article XII, if Tenant has not commenced construction or has not notified
Landlord that it intends to promptly commence construction within thirty (30)
days from the date of the damage or destruction which under the provisions of
this Article XII Tenant is obligated to repair, Landlord may thereupon, and
without further notice to Tenant, commence such work, or Landlord may exercise
any of the rights or remedies provided in this Lease for a default by Tenant. If
Landlord elects to undertake the work, all insurance proceeds payable under
Article XII as a result of the damage or destruction to the Improvements shall
then be held by Landlord for use by Landlord in doing such work. If Landlord
undertakes such work, Tenant shall be liable to Landlord for any and all costs
and expenses incurred by Landlord in connection therewith in excess of the
insurance proceeds.
12.6 No Rent Abatement. There shall be no abatement of Base Rent or
additional rent, or any other sums or obligations of Tenant under this Lease, by
reason of any such damage or destruction.
12.7 No Surrender. Except as otherwise provided in this Lease, no
destruction of or damage to the Property, or any part thereof, by fire or any
other casualty shall terminate or permit Tenant to surrender this Lease, or
relieve Tenant of its obligations to pay the full Base Rent, additional rent and
other sums and charges payable under this Lease, or from any of its other
obligations under this Lease, and Tenant waives any rights now or hereafter
conferred upon it by statute or otherwise, to quit or surrender this Lease or
the Property, or any part thereof, or to any suspension, diminution, abatement
or reduction of rent, or other charges payable under this Lease on account of
such destruction or damage.
ARTICLE XIII
CONDEMNATION
13.1 Lease Governs. If, during the term or during the period of time
between the execution of this Lease and the Commencement Date, there is any
taking by condemnation of all or any part of the Property, the rights of the
parties shall be determined pursuant to the provisions of this Article XIII.
13.2 Total Taking. If the Property is totally taken by condemnation, this
Lease shall terminate on the date of taking and the entire award shall be
payable to Landlord.
13.3 Partial Taking. If only a portion of the Property is taken by
condemnation, this Lease shall continue in effect. Provided, however, Tenant can
elect to terminate this Lease if the remaining portion of the Property, other
improvements or parking areas are rendered unsuitable for Tenant's continued use
18
of the Property. If Tenant elects to terminate this Lease, Tenant must exercise
such right by giving written notice to Landlord within ninety (90) days after
the nature and the extent of the taking have been fully determined. Such
termination date shall not be earlier than ninety (90) days nor later than one
hundred eighty (180) days after Tenant has given termination notice. If Tenant
does not terminate this Lease within the time period set forth above, the Lease
shall continue in force, except that the base monthly rent shall be reduced by
an amount that is in the same ratio to base monthly rent as the value of the
area of the portion of the Property taken bears the total value of the Property
immediately before the date of taking.
13.4 Distribution of Award. The condemnation award shall belong to
Landlord.
ARTICLE XIV
ASSIGNMENT
14.1 Assignment. Except for an assignment or sublease to an affiliated
company, including, but not limited to, a wholly owned subsidiary or parent
entity, Tenant shall not assign, mortgage or encumber this Lease, nor sublet,
nor suffer or permit the Property or any part thereof to be used by others,
without the prior written consent of Landlord in each instance, which consent,
which may be granted or withheld in Landlord's reasonable discretion. Landlord
shall be under no obligation to consider a request for Landlord's consent to an
assignment until Tenant shall have submitted in writing to Landlord a request
for Landlord's consent to such assignment together with audited financial
statements of Tenant and the proposed assignee, a history of the proposed
assignee's business experience and such other information as required by
Landlord to verify that the creditworthiness and business background of the
proposed assignee Tenant reimburse Landlord for its time and expense in
considering such request. Notwithstanding any other provision of the Lease,
Landlord shall have the right to condition Landlord's approval of the assignment
or sublease of the Lease by Tenant to a third party on the payment to Landlord
of any rent payable under said assignment or sublease in excess of the then
current rent payable under the Lease.
14.2 No Release of Tenant. Regardless of Landlord's consent, no subletting
or assignment shall release Tenant of Tenant's obligation or alter the primary
liability of Tenant to pay the rent or to perform all other obligations to be
performed by Tenant hereunder. The acceptance of rent by Landlord from any other
person shall not be deemed to be a waiver by Landlord of any provision hereof.
19
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Tenant or any successor of Tenant, in the performance of any of the terms
hereof, Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against said assignee. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant or the successor of
Tenant, and without obtaining its or their consent thereto and such action shall
not relieve Tenant of liability under this Lease.
14.3 Involuntary Assignment. No interest of Tenant in this Lease shall be
assignable by operation of law. Each of the following acts shall be considered
an involuntary assignment:
(a) If Tenant becomes bankrupt or insolvent, makes an assignment for
the benefit of creditors, or is the debtor " as defined in 11 U.S.C. Section 101
or any successor statute thereto; or, if Tenant is a partnership or consists of
more than one person or entity, if any partner or other person or entity becomes
bankrupt or insolvent, or makes an assignment for the benefit of others.
Provided that in the event of an involuntary bankruptcy proceeding, Tenant shall
have sixty (60) days in which to have the proceeding dismissed, before such
proceedings shall be considered an involuntary transfer.
(b) If a writ of attachment or execution if levied on this Lease and
Tenant has not caused the same to be released or discharged within sixty (60)
days. Any such involuntary assignment shall constitute a default by Tenant and
Landlord shall have the right to elect to terminate this Lease upon fifteen (15)
days prior written notice, if such event giving rise to the notice is not
removed or cured within the notice period.
ARTICLE XV
DEFAULT
15.1 Default by Tenant. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by Tenant:
(a) The vacating or abandonment of the Property by Tenant;
(b) The failure by Tenant to make any payment of Base Rent,
additional rent or any other payment required to be made by Tenant hereunder, as
and when due, where such failure shall continue for a period of fifteen (15)
days after notice by Landlord to Tenant of the failure to receive payment;
(c) The failure by Tenant to observe or perform any of the
covenants, conditions, or provisions of any franchise agreement affecting the
Property or the business operated thereon, or under this Lease to be observed or
performed by Tenant, where such failure shall continue for a period of thirty
(30) days after written notice thereof, from Landlord to Tenant; provided,
however, that if the nature of Tenant's default is such that more than thirty
(30) days are reasonably required for its cure, than Tenant shall not be deemed
to be in default if Tenant commenced the cure within the thirty (30) day period
and thereafter diligently prosecutes the cure to completion;
20
(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors without the consent of Landlord or the
beneficiary under any deed of trust encumbering the Property;
(e) The filing by or against Tenant, or any guarantor of this
Lease, of a petition to have Tenant, or any guarantor of this Lease, adjudicated
a bankrupt or a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
or any guarantor of this Lease, the same is dismissed within sixty (60) days);
(f) The appointment of a trustee or receiver to take
possession of substantially all of Tenant's, or any guarantor's of this Lease,
assets located at the Property or of Tenant's, or any guarantor's of this Lease,
interest in this Lease, where possession is not restored to Tenant, or any
guarantor of this Lease, within ninety (90) days; or
(g) The attachment, execution or judicial seizure of
substantially all of Tenant's, or any guarantor's of this Lease, assets located
at the Property or of Tenant's, or any guarantor's of this Lease, interest in
this Lease, if not discharged within ninety (90) days.
15.2 Termination Remedies. Subject to Section 15.7 below, should Tenant
breach this Lease or abandon the Property before the end of the term of this
Lease, Landlord may terminate this Lease. Upon termination, Tenant shall
immediately surrender the Property, the Improvements and the Assets to Landlord,
and if Tenant fails to do so, Landlord may, without prejudice to any of the
remedy which it may have for possession or arrearages in rent, enter upon and
take possession of the Property, the Improvements and the Assets, and expel or
remove Tenant and any other person who may be occupying the Property, or any
part thereof, without being liable for prosecution or any claim or damages
therefore, and Landlord may recover from Tenant the following:
(a) The worth at the time of award of the unpaid Base Rent and
additional rent which had been earned at the time of termination; plus
(b) The worth at the time of award of the amount by which the
unpaid Base Rent and additional rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided, subject to the provisions of
this Section 15.2; plus
(c) The worth at the time of award of the amount by which the
unpaid Base Rent and additional rent for the balance of the term after time of
award exceeds the amount of such rental loss for such period Tenant proves could
be reasonably avoided, subject to the provisions of this Section 15.6; plus
The worth at the time of award of the amount referred to in Subsections
15.2(a) and (b) above, is computed by allowing interest at ten percent (10%) per
annum. The worth at the time of award of the amount referred to in Subsection
15.2(c) above is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award, plus one percent
(1%).
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For purposes of this Section 15.2, the Property shall be deemed to be
abandoned by Tenant, and this Lease shall terminate, if Landlord gives written
notice of its belief of abandonment to Tenant, personally delivered or sent by
first class mail, postage prepaid to Tenant at Tenant's last known address and
Tenant thereafter fails to give Landlord written notice, prior to the date of
termination specified in Landlord's notice, stating that Tenant does not intend
to abandon the Property and stating an address at which Tenant may be served by
certified mail in any action for unlawful detainer. Landlord may give notice of
belief of abandonment to Tenant only where the rent on the Property has been due
and unpaid for at least twenty (20) consecutive days and Landlord reasonably
believes that Tenant has abandoned the Property. The date of termination of this
Lease shall be specified in Landlord's notice and shall not be less than fifteen
(15) days after notice is personally served or not less than eighteen (18) days
after notice is deposited in the mail. Nothing contained herein shall preclude
Landlord from otherwise proving that the Property has been abandoned by Tenant
within the meaning of this Section.
15.3 Breach Without Termination. Even though Tenant has breached this
Lease or abandoned the Property, this Lease continues in effect for so long as
Landlord does not terminate Tenant's right to possession, and Landlord may, from
time to time, enforce all or any of its rights and remedies under this Lease,
including the right to recover the rental amounts as they become due. For
purposes of this Section 15.3, acts of maintenance or preservation, or efforts
to relet the Property, or the appointment of a receiver on initiative of
Landlord to protect its interest in this Lease, shall not constitute acts of
termination of Tenant's right of possession of the Property.
15.4 Right of Landlord to Perform. In the event of any default of Tenant,
including the payment of money, other than rent, or the performance of
obligations required of Tenant under this Lease, then in addition to the other
remedies herein granted to Landlord, Landlord may, but shall not be obligated
to, and without waiving or releasing Tenant from any obligations of this Lease,
make any payment and perform any other acts on Tenant's part to be made or
performed. All sums paid by Landlord and all necessary costs incident thereto
shall be deemed additional rent.
15.5 Remedies Not Exclusive. Except as otherwise provided herein, no right
or remedy herein conferred on or reserved to Landlord is intended to be
exclusive of any other remedy or right, and each and every right or remedy shall
be cumulative and in addition to any right or remedy given hereunder or now or
hereafter existing at law, in equity or by statute.
15.6 Default by Landlord. Landlord shall not be deemed to be in default of
the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform within thirty (30) days after written
notice by Tenant to Landlord specifying therein that Landlord has failed to
22
perform its obligations; provided, however, that if the nature of Landlord's
obligations are such that more than thirty (30) days are required for
performance, then Landlord shall not be deemed to be in default if Landlord
shall commence performance within the thirty (30) day period and thereafter
diligently prosecute the same until completion.
15.7 Expenses of Reletting. Tenant shall be immediately liable to pay
Landlord, in addition to any other indebtedness hereunder, the costs and
expenses of retaking possession and reletting of the Property and of alterations
or repairs to the Property incurred by Landlord for the purposes of reletting
the Property after any default of Tenant.
15.8 Application of Rentals and Receipts. The rentals and receipts
received by Landlord shall be applied.
(a) First to the payment of any indebtedness other than rent
due hereunder from Tenant to Landlord; and
(b) Second, to the payment of any costs and expenses of
retaking and reletting, and of all alterations and repairs as are expended by
Landlord; and
(c) Third, to the payment of Base Rent and additional rent due
and unpaid hereunder.
ARTICLE XVI
WAIVER
16.1 Waiver. No delay or omission in the exercise of any remedies of a
party upon the default of the other party shall be construed as a waiver.
Landlord's approval of any of Tenant's acts which require Landlord's approval
shall not be deemed to waive or render unnecessary Landlord's consent to any
subsequent acts by Tenant.
ARTICLE XVII
LANDLORD'S ENTRY ONTO PROPERTY
17.1 Landlord's Entry onto Property. Landlord, and Landlord's agents,
representatives and other acting on behalf of or with Landlord's authority,
shall have the right to enter the Property at any time, upon reasonable notice
and from time to time for purposes of inspection of the Property, to assure
Tenant's performance of Tenant's obligations under this Lease, and for such
other purposes as Landlord may reasonably determine.
ARTICLE XVIII
SURRENDER OF PROPERTY AND HOLDING OVER
18.1 Surrender of Property. On expiration of this Lease Tenant shall
surrender the Property to Landlord (along with all Tenants improvements except
those which Tenant has the right or obligation to remove) in good condition,
23
reasonable wear and tear excepted. Tenant shall also perform all restorations
made necessary by the removal of Tenant's improvements and/or personal Property
within the time periods stated in this Paragraph.
18.2 Holding Over. If Tenant remains in possession of the Property after
expiration of the term, or after the date in any notice given by Landlord to
Tenant to terminate this Lease, such possession by Tenant shall be deemed to be
a month-to-month tenancy terminable on thirty (30) days' written notice given at
any time by either party. During any such month-to-month tenancy, Tenant shall
pay all rent required by this Lease, except that Base Rent shall be equal to the
last month of the then term Base Rent multiplied by One Hundred Ten percent
(110%). All provisions of this Lease, except those pertaining to the term and
option to extend, shall apply to the month-to-month tenancy.
XIX
ESTOPPEL CERTIFICATES
19.1 Estoppel Certificates. At any time and from time to time, but not
more frequently than twice per calendar year, Landlord, on fourteen (14) days'
prior written request by Tenant, and Tenant, on fourteen (14) days' prior
written request by Landlord, will deliver to the party making the request, and
such designees specified by the requesting party, a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there shall have been modifications, stating the modifications), the current
monthly Base Rent, the dates to which the rent and any other deposits or charges
have been paid, and stating whether or not, to the best knowledge of the party
executing the certificate, the party requesting the statement is in default in
the performance of any covenant, agreement or condition contained in this Lease
and, if so, specifying each default of which the executing party may have
knowledge. In addition, Tenant shall provide to Landlord such additional
information, confirmations and/or statements as may reasonably be requested by
Landlord or Landlord's lender.
ARTICLE XX
GENERAL PROVISIONS
20.1 Attorneys' Fees. If either party commences an action against the
other party arising out of or in connection with this Lease, the prevailing
party shall be entitled to recover from the other party their reasonable
attorneys' fees and costs.
20.2 Notice. Any notice the parties are required to give under this Lease
shall be in writing and either served personally or sent by prepaid, first-class
mail addressed as follows:
If to Landlord: Pacific Coast Holdings Investment, LLC
c/o ▇▇▇▇ ▇▇▇▇, Co-Manager
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
24
And
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Co-Manager
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
With Copies to: ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to Tenant: Integrated Healthcare Holdings, Inc.
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Notice shall be deemed communicated within forty-eight (48) hours from the
time of mailing if mailed as provided in this Section.
20.3 Corporate Authority. If either party is a corporation, that party
shall deliver to the other party on execution of this Lease a certified copy of
a resolution of its board of directors authorizing the execution of this Lease
and naming the officers that are authorized to execute this Lease on behalf of
the corporation.
20.4 Headings. The word titles underlying the Article and Section
designations contained herein are inserted solely for convenience and under no
circumstances are they to be treated or construed as any part of this
instrument.
20.5 Covenants and Conditions. Each term and each provision of this Lease
performable by Tenant and/or Landlord shall be deemed both a covenant and a
condition.
25
20.6 Successors and Assigns. Subject to the provisions hereof, this Lease
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.
20.7 Partial Invalidity. If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease shall be valid and
enforced to the fullest extent permitted by law.
20.8 Amendment. This Lease may be amended only by a writing signed by all
the parties hereto.
20.9 Entire Agreement. This Lease contains the entire agreement of the
parties hereto with respect to the matters set forth herein with respect to the
leasing of the Property and the Improvements, and supersedes any prior written
or oral agreement between them respecting the subject matter contained herein.
20.10 Construction of Lease. In determining the meaning of, or resolving
any ambiguity with respect to, any word, phrase or provision of this Lease, no
uncertainty or ambiguity shall be construed or resolved against any party under
any rule of construction, including the party primarily responsible for the
drafting and preparation of this Lease.
20.11 Currency. All sums payable hereunder shall be determined and paid in
United States Dollars.
20.12 Quitclaim Deed. At the expiration or earlier termination of this
Lease, Tenant shall, upon request of Landlord, execute, acknowledge and deliver
to Landlord within thirty (30) days, any quitclaim deeds or other documents to
remove the cloud of this Lease from the Property.
20.13 Recording of Memorandum of Lease. At the request of Tenant, Landlord
shall execute and Tenant may record a Memorandum of Lease referencing the Lease
in the Official Records of the County Recorder for the County in which the
Property is located.
20.14 Financial Information. During the term of this Lease, Tenant shall
provide to Landlord, monthly, quarterly and annual financial statements (audited
annually) for the businesses conducted on the Property prepared by an
independent certified public accountant using generally accepted accounting
principles consistently applied. Landlord shall retain such financial statements
in confidence, but may, nevertheless, deliver copies thereof to its advisors,
lenders, buyers, investors, attorney, and accountants. In the event of default,
Tenant shall provide Landlord full and complete access to all financial
information. Provided however, that so long as Tenant is a "reporting company"
under the Securities Exchange Act of 1934 ("1934 Act"), and so long as Tenant
makes the 1934 Act filings required of a public reporting company in a timely
manner, then the financial information required to be reported under this
Section 20.14 shall be waived.
26
20.15 Relationship of the Parties. Nothing herein shall create between the
parties hereto, or be relied upon by others as creating, any relationship of
partnership, association, joint venture, or otherwise. The sole relationship of
the parties hereto shall be that of Landlord and Tenant.
20.16 Time of Essence. Time is of the essence of each provision of this
Lease.
20.17 Successors. Subject to the limitations on assignment, this Lease
shall be binding on and inure to the benefit of the parties and their
successors.
20.18 Integrated Agreement, Modification. This Lease contains all the
agreements of the parties pertaining to the lease of the Property and cannot be
amended or modified except by another written agreement.
20.19 Severability. The unenforceability, invalidity or illegality of any
provision of this Lease shall not render the other provisions unenforceable,
invalid or illegal.
20.20 Real Estate Brokers, Finders. Each party represents that it has not
had dealings with any real estate broker, finder, or other person, with respect
to this Lease in any manner. Each party shall hold harmless the other party from
all damages resulting from any claims that may be asserted against the other
party by any broker, finder, or other person, with whom the other party has or
purportedly has dealt.
20.21 State Law. This Lease shall be construed and interpreted in
accordance with the laws of the State of California.
20.22 Dispute Resolution. All disputes under this Agreement shall be
resolved by arbitration in accordance with the Judicial Arbitration and
Mediation Service Comprehensive Arbitration Rules and Procedures before the
Judicial Arbitration and Mediation Service ("JAMS"). The arbitration shall be
held in Orange County, California (or any place agreed to by the Parties and the
arbitrator). The decision of the arbitrator shall be final and binding as to any
matters submitted hereunder; provided, however, the Superior Court for the
County of Orange shall have jurisdiction for the purpose of compelling
arbitration, awarding provisional or equitable relief, confirming the award of
the arbitrator, enforcing judgment and similar matters.
Notwithstanding any provision of the California Code of Civil
Procedure or the applicable rules of the JAMS to the contrary, each Party will
have all of the rights of discovery pertaining to civil litigation as provided
in the California Code of Civil Procedure. Unless the Parties otherwise agree in
writing, any arbitration hereunder will be conducted in accordance with the
rules of evidence existing in the State of California at the time of the
arbitration.
20.23 Landlord Authority. The parties recognize that Landlord is a
manager managed California limited liability company operated by co-managers.
Any approval, disapproval or other action by Landlord shall require a writing
executed by both co-managers.
27
20.24 Subordination. This Lease shall be subject and subordinate at all
times to the lien of any mortgage or deed of trust or other encumbrance(s) which
may now or which may at any time hereafter be made upon the Property or any
portion thereof, or upon Landlord's interest therein. This clause shall be
self-operative, and no further instrument of subordination shall be required to
effect the subordination of this Lease. Nonetheless, in confirmation of such
subordination, Tenant shall execute and deliver such further instrument(s)
subordinating this Lease to the lien of any such mortgage or deed of trust
thereby, and Tenant hereby appoints Landlord the attorney-in-fact of Tenant,
irrevocably, to execute and deliver any such instrument(s) for Tenant. If the
interests of Landlord under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any mortgage or deed of
trust on the Property, Tenant shall be bound to the transferee at the option of
the transferee, under the terms, covenants and conditions of this Lease for the
remaining term, including any extensions or renewals, with the same force and
effect as if the transferee were Landlord under this Lease, and, if requested by
such transferee, Tenant agrees to attorn to the transferee as its Landlord. The
holder of any mortgage or deed of trust encumbering the Property shall have the
right, unilaterally, at any time to subordinate fully or partially its mortgage
or deed of trust or other security instrument to this Lease on such terms and
subject to such conditions as such holder may consider appropriate in its
discretion. Upon request, Tenant shall execute and deliver an instrument
confirming any such full or partial subordination.
20.25 Sale by Landlord. In the event the original Landlord hereunder, or
any successor owner of the Property or any portion thereof, shall sell or convey
same, all liabilities and obligations on the part of the original Landlord, or
such successor owner, under this Lease accruing thereafter shall terminate, and
thereupon all such liabilities and obligations shall be binding upon the new
owner. Tenant agrees to attorn to each such new owner.
ARTICLE XXI
TRANSFER OF OPERATIONS UPON TERMINATION OF LEASE
21.1. Closing Date. The date on which this Lease either terminates or
expires pursuant to its terms or is terminated by either party whether pursuant
to a right granted to it hereunder or otherwise shall be referred to as the
"Closing Date" in this Article. On the Closing Date, this Lease shall be deemed
and construed as an absolute assignment for purposes of vesting in Landlord (or
Landlord's designee) all of Tenant's right, title and interest in and to the
following intangible Property which is now or hereafter used in connection with
the operation of the Property (the "Intangibles") and an assumption by Landlord
of Tenant's obligations under the Intangibles from and after the Closing Date;
provided that, from and after the Closing Date, Tenant shall indemnify, defend
and hold harmless Landlord against any claims, losses, costs or damages,
including reasonable attorneys' fees incurred or arising by reason of Tenant's
obligations under the Intangibles prior to the Closing Date:
28
(a) service contacts and equipment leases for the benefit of
the Property to which Tenant is a party, and which can be terminated without
penalty by Tenant within sixty (60) or fewer days' notice or which Landlord
requests be assigned to Landlord pursuant to this Article XXI;
(b) any provider agreements with Medicare, Medicaid or any
other third-party payor programs (excluding the right to any reimbursement for
periods prior to the Closing Date, as defined above) entered in connection with
the Property to the extent assignable by Tenant;
(c) all existing agreements with residents and any guarantors
thereof of the Property, to the extent assignable by Tenant (excluding the right
to any payments for periods prior to the Closing Date) and any and all patient
trust fund accounts; and
(d) at Landlord's option, the business of Tenant as conducted
at the Property as a going concern, including but not limited to the name of the
business conducted thereon and all telephone numbers presently in use therein.
21.2. Proration. Landlord shall be responsible for and shall pay all
accrued expenses with respect to the Property accruing on or after 12:01 a.m. on
the day of the Closing Date and shall be entitled to receive and retain all
revenues from the Property accruing on or after the Closing Date. Within fifteen
(15) business days after the Closing Date, the following adjustments and
prorations shall be determined as of the Closing Date:
(a) Real estate taxes, ad valorem taxes, school taxes,
assessments and personal Property, intangible and use taxes, if any. If the
information as to the actual amount of any of the foregoing taxes and
assessments are not available for the tax year in which the Closing Date occurs,
the proration of such taxes shall be estimated based upon reasonable information
available to the parties, including information disclosed by the local tax
office or other public information, and an adjustment shall be made when actual
figures are published or otherwise become available.
(b) Tenant will terminate the employment of all employees on
the Closing Date and shall be and remain liable for any and all wages, accrued
vacation and sick leave pay for employees of the Property with respect to the
period prior to and including the Closing Date.
(c) Landlord shall receive a credit equal to any advance
payments by patients at the Property to the extent attributable to periods on
and after the Closing Date.
(d) The present insurance coverage on the Property shall be
terminated as of the Closing Date and there shall be no proration of insurance
premiums.
29
(e) All other income from, and expenses of, the Property
(other than mortgage interest and principal), including but not limited to
public utility charges and deposits, maintenance charges and service charges
shall be prorated between Tenant and Landlord as of the Closing Date. Tenant
shall, if possible, obtain final utility meter readings as of the Closing Date.
To the extent that information for any such proration is not available, Tenant
and Landlord shall effect such proration within ninety (90) days after the
Closing Date.
(f) Tenant shall be and remain responsible for any employee
severance pay and accrued benefits which may be payable as the result of any
termination of an employee's employment on or prior to the Closing Date.
21.3. Possession. All necessary arrangements shall be made to provide
possession of all personal property located upon or used in the operation of the
Property (hereinafter the "Leased Property") to Landlord on the Closing Date, at
which time Tenant shall also deliver to Landlord all medical records, patient
records and other personal information concerning all patients residing at the
Property as of the Closing Date and other relevant records used or developed in
connection with the business conducted at the Property. Such transfer and
delivery shall be in accordance with all applicable laws, rules and regulations
concerning the transfer of medical records and other types of patient records.
21.4. Interim Operation. For the period commencing on the Closing Date and
ending on the date Landlord, or its designee, obtains any and all appropriate
state or other governmental licenses and certifications required to operate the
hospitals located on the Property , Tenant hereby agrees that Landlord, or
Landlord's designee, shall have the right, but not the obligation, to manage and
operate the Property, on a triple net basis, and shall be entitled to all
revenues of the Property during such period, and to use any and all licenses,
certifications and provider agreements issued to Tenant by any federal, state or
other governmental authority for such operation of the Property, if permitted by
any such governmental authorities. If Landlord or its designee exercises the
right described above in this Section 21.4, the provisions of this Section 21.4
shall be self-operative and shall constitute a management agreement between
Tenant, on the one hand, and Landlord or its designee, on the other hand, on the
terms set forth above in this Section 21.4 provided, however, that upon the
request of Landlord or its designee, Tenant shall enter into a separate
management agreement on the terms set forth in this Section 21.4 and on such
other terms and provisions as may be specified by Landlord or its designee.
21.5. Patient Funds. Tenant shall provide Landlord with an accounting
within fifteen (15) days after the Closing Date of all funds belonging to
patients at the Property, which are held by Tenant in a custodial capacity. Such
accounting shall set forth the names of the patients for whom such funds are
held, the amounts held on behalf of each such patient and Tenant's warranty that
the accounting is true, correct and complete. Additionally, Tenant, in
accordance with all applicable rules and regulations, shall make all necessary
arrangements to transfer such funds to a bank account designated by Landlord,
and Landlord shall in writing acknowledge receipt of and expressly assume all
Tenant's financial and custodial obligations with respect thereto.
Notwithstanding the foregoing, Tenant will indemnify, defend and hold Landlord
harmless from all liabilities, claims and demands, including reasonable
attorney's fees, in the event the amount of funds, if any, transferred to
Landlord's bank account as provided above, did not represent the full amount of
the funds then or thereafter shown to have been delivered to Tenant as custodian
that remain undisbursed for the benefit of the patient for whom such funds were
deposited, or with respect to any matters relating to patient funds which
accrued prior to the Closing Date.
30
21.6. Cash and Cash Equivalents. All cash, checks and cash equivalent at
the Property and deposits in bank accounts (other than patient trust accounts)
relating to the Property on the Closing Date shall remain Tenant's Property
after the Closing Date. All accounts receivable, loans receivable and other
receivables of Tenant, whether derived from operation of the Property or
otherwise, shall remain the Property of Tenant after the Closing Date. Tenant
shall retain full responsibility for the collection thereof. Landlord shall
assume responsibility for the billing and collection of payments on account of
services rendered by it on and after the Closing Date. In order to facilitate
Tenant's collection efforts, Tenant agrees to deliver to Landlord, within a
reasonable time after the Closing Date, a schedule identifying all of those
private pay balances owing for the month prior to the Closing Date and Landlord
agrees to apply any payments received which are specifically designated as being
applicable to services rendered prior to the Closing Date to reduce the
pre-Closing Date balances of said patients by promptly remitting said payments
to Tenant. Landlord shall retain all other payments received as being applicable
to services rendered after the Closing Date. Landlord shall cooperate with
Tenant in Tenant's collection of its pre-Closing accounts receivable. Landlord
shall have no liability for uncollectible receivables and shall not be obligated
to bear any expense as a result of such activities on behalf of Tenant. Landlord
shall remit to Tenant or its assignee those portions of any payments received by
Landlord which are specifically designated as repayment or reimbursement arising
out of cost reports filed for the cost reporting periods ending on or prior to
the Closing Date.
21.7. Residents. With respect to residents at the Property on the Closing
Date, Landlord and Tenant agree as follows:
(a) With respect to Medicare and Medicaid residents, Landlord
and Tenant agree payment for in-house residents covered by Medicare or Medicaid
on the Closing Date will be made (on a per diem basis) by Medicare or Medicaid
under current regulations directly to Tenant for services rendered at the
Property prior to the Closing Date. Said payments shall be the sole
responsibility of Tenant and Landlord shall in no way be liable therefore. After
the Closing Date, Landlord and Tenant shall each have the right to review
supporting books, records and documentation that are in the possession of the
other relating to Medicaid or Medicare payments.
(b) If, following the Closing Date, Landlord receives payment
from any state or federal agency or third-party provider that represents
reimbursement with respect to services provided at the Property prior to the
Closing Date, Landlord agrees that it shall remit such payments to Tenant. A
copy of the appropriate remittance shall accompany payments by Landlord to
Tenant.
31
21.8. Additional Documents. In addition to the obligations required to be
performed hereunder by Tenant and Landlord on and after the Closing Date, Tenant
and Landlord agree to perform such other acts, and to execute, acknowledge,
and/or deliver subsequent to the Closing Date such other instruments, documents
and materials, as the other may reasonably request in order to effectuate the
consummation of the transaction contemplated herein.
21.9. Tenant Indemnity. Tenant for itself, its successors and assigns
hereby indemnifies and agrees to defend and hold Landlord and its successors and
assigns harmless from any and all claims, demands, obligations, losses,
liabilities, damages, recoveries and deficiencies (including interest, penalties
and reasonable attorney's fees, costs and expenses) which any of them may suffer
as a result of the breach by Tenant in the performance of any of its
commitments, covenants or obligations under this Article XXI, or with respect to
any suits, arbitration proceedings, administrative actions or investigations
which relate to the use by Tenant of the Property during the term of this Lease
or for any liability which may arise from operation of the Property as an acute
care hospital during the term of this Lease, including without limitation, any
amounts due or to be reimbursed to any governmental authority based upon any
audit or review of Tenant or of the hospitals or the operation thereof and
pertaining to the period prior to the Closing Date or any amounts recaptured
under Title XIX based upon applicable Medicaid/Medicare recapture regulations.
The rights of Landlord under this paragraph are without prejudice to any other
remedies not inconsistent herewith which Landlord may have against Tenant
pursuant to the terms of this Lease. The foregoing indemnity shall survive the
expiration or termination of this Lease, whether due to lapse of time or
otherwise.
21.10. Landlord Indemnity. So long as the termination of this Lease is not
due to a default by Tenant hereunder, Landlord for itself, its successors and
assigns hereby indemnifies and agrees to defend and hold Tenant and its
successors and assigns harmless from any and all claims, demands, obligations,
losses, liabilities, damages, recoveries and deficiencies (including interest,
penalties and reasonable attorney's fees, costs and expenses) which any of them
may suffer as a result of the breach by Landlord in the performance of any of
its commitments, covenants or obligations under this Article XXI, or with
respect to any suits, arbitration proceedings, administrative actions or
investigations which relate to the use of the Property after the term of this
Lease or for any liability which may arise from operation of the Property as an
acute care hospital after the term of this Lease. The rights of Tenant under
this paragraph are without prejudice to any other remedies not inconsistent
herewith which Tenant may have against Landlord pursuant to the terms of this
Lease or otherwise.
21.11. Offset Rights. Landlord shall have the right to offset against any
monies due Tenant pursuant to the terms of this Article XXI, any amounts due by
Tenant to Landlord pursuant to this Lease or due by Tenant to any third party,
including without limitation any amounts due for, utilities, insurance premiums,
payroll obligations or any other obligation arising from the Property.
32
21.12. No Waiver. Anything to the contrary contained in this Article XXI
notwithstanding, in the event of termination of this Lease is due to a default
by Tenant hereunder, none of the provisions of this Article XXI shall in any way
limit, reduce, restrict or modify the rights granted to Landlord.
21.13. Cooperation. Landlord and Tenant agree to cooperate with each other
in order to effectuate the terms and provisions of this Article XXI.
ARTICLE XXII
LIMITATION OF LANDLORD'S LIABILITY
22.1. Limitation of Landlord's Liability. In the event of any conveyance
or other divestiture of title to the Property the grantor or the person who is
divested of title shall be entirely freed and relieved of all covenants and
obligations thereafter accruing hereunder, and the grantee or the person who
otherwise succeeds to title shall be deemed to have assumed the covenants and
obligations of Landlord thereafter accruing hereunder and shall then be Landlord
under this Lease. Notwithstanding anything to the contrary provided in this
Lease, if Landlord or any successor in interest of Landlord shall be an
individual, partnership, limited liability company, corporation, trust, tenant
in common or mortgagee, there shall be absolutely no personal, corporate or
entity liability on the part of Landlord or any individual or member of Landlord
or any manager, stockholder, director, officer, employee, partner or trustee of
Landlord with respect to the terms, covenants or conditions of this Lease, and
Tenant shall look solely to the interest of Landlord in the Leased Property for
the satisfaction of each and every remedy which Tenant may have for the breach
of this Lease; such exculpation from personal, corporate or entity liability to
be absolute and without any exception, whatsoever.
ARTICLE XXIII
TENANT OPTION TO PURCHASE
Upon the condition that Tenant has exercised Tenant's option to renew as
provided in Section 1.2 hereof, and provided that Tenant is not in default
hereunder, Tenant shall have the option to purchase the Hospital Properties
(this "Option") upon each and all of the following terms:
(a) Tenant gives to Landlord, and Landlord actually receives, on a date
which is at least six (6) and not more than nine (9) months prior to
expiration of the Lease term as extended by the exercise of the
renewal option. If said notification of the exercise of this Option
is not so given and received, this Option shall automatically
terminate and be of no further force and effect.
(b) The purchase price for the Hospital Properties shall be the fair
market value thereof. The parties agree to meet within thirty (30)
days of the exercise of notice of the exercise of this Option and
attempt to agree upon the fair market value of the Hospital
Properties, which if agreed upon shall constitute the purchase
price. If the parties are unable to agree, then each shall appoint
an appraiser with not less than five (5) years experience in the
33
valuation of hospital properties, the two appraisers shall appoint a
third appraiser. Each appraiser shall separately appraise the
Hospital Properties. The three appraisals shall then be averaged,
the appraisal which deviates the most from the average shall be
disregarded and the remaining two appraisals and the average of the
three appraisals shall then be averaged, the resulting average shall
be deemed the fair market value and shall constitute the purchase
price.
(c) The Hospital Properties shall be transferred in "As Is" "Where Is"
condition free of any liens other than for real estate taxes and
installments of special assessments not yet due and payable and any
other lien which is the obligation of the Tenant under this Lease.
(d) The closing date for the sale of the Hospital Properties shall be
the date of expiration of the Lease term as extended by the exercise
of the renewal option, or such other date as the parties may agree
upon.
(e) Any dispute with respect to this Option shall be resolved in
accordance with Section 20.22 hereof.
34
EXECUTION
IN WITNESS THEREOF, Landlord and Tenant have executed this Lease in one or
more counterparts which, taken together, shall constitute one agreement.
TENANT
Integrated Healthcare Holdings, Inc.
/s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇
Its: Chief Executive Officer
LANDLORD
Pacific Coast Holdings Investment, LLC
/s/ ▇▇. ▇▇▇▇ ▇▇▇▇
------------------------------------------
By: ▇▇. ▇▇▇▇ ▇▇▇▇
Its: Co-manager
35
EXHIBIT A
HOSPITAL PROPERTIES
Western Medical Center-Santa ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Together with the Administrative Building located at
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇, ▇▇
Western Medical Center-Anaheim
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Together with the parking lot located at ▇▇▇ ▇, ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Coastal Communities Hospital
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
MEDICAL OFFICE BUILDING PROPERTIES
Doctor's Hospital MOB (Coastal)
▇▇▇▇/▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
AFTER ACQUIRED MOB PROPERTY TO BE ADDED TO LEASE
(SEE ARTICLE III)
Hospital Department (WMCSA)
Condo ▇▇▇▇▇ ▇, ▇, ▇, ▇, ▇, ▇, ▇, ▇, 11, 12, 118, 120, 121, 201, 202, 203, 204,
213, 214, 216, 218, and 225 located in ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
36
AMENDMENT NO. 1 TO TRIPLE NET HOSPITAL
AND MEDICAL OFFICE BUILDING LEASE
THIS AMENDMENT NO. 1 TO TRIPLE NET HOSPITAL AND MEDICAL OFFICE BUILDING
LEASE ("AMENDMENT #1") is made to be effective as of March 8, 2005 ("EFFECTIVE
DATE") by and among PACIFIC COAST HOLDINGS, LLC, a California limited liability
company ("LANDLORD") and INTEGRATED HEALTHCARE HOLDINGS, INC., a Nevada
corporation ("TENANT").
RECITALS
A. Landlord and Tenant are parties to that certain TRIPLE NET HOSPITAL
AND MEDICAL OFFICE BUILDING LEASE dated March 7, 2005 ("LEASE"). Capitalized
terms not defined in this Amendment #1 have the same meaning as set forth in the
Lease.
B. Tenant (as "BORROWER") intends to borrow the Operating Loan and Real
Estate Loan from Medical Provider Financial Corporation II ("LENDER"). The
Operating Loan and the Real Estate Loan are each due and payable in full on that
date which is two (2) years from closing (for each Loan, the "MATURITY DATE").
As part of its securitization package for the Operating Loan and Real Estate
Loan, Lender requires that the term of the Lease with respect to the MOB
Properties extend be for a period of at least two (2) years beyond the Maturity
Date.
C. Landlord and Tenant desire to amend the Lease, on the terms and
conditions set forth hereinbelow.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, and for other good and valuable
consideration, the undersigned agree as follows:
1. Recitals. The foregoing Recitals are incorporated by reference as if
fully set forth herein.
2. Amendment to Lease. Section 1.3 is hereby deleted in its entirety
and replaced with the following new Section 1.3:
1.3 MOB Properties Lease Term. The term of this Lease for the MOB
Properties shall be four (4) years, commencing upon the closing of the
Tenent Transaction and acquisition of the MOB Properties by Landlord
(the "MOB Commencement Date") and shall terminate ("MOB Termination
Date") on the last day of the month following expiration of the fourth
(4th) anniversary from the MOB Commencement Date.
3. Lease to Remain in Force and Effect. Except as amended by this
Amendment #1, the Lease shall remain in force and effect. In the event of any
inconsistency between this Amendment #1 and the Lease, this Amendment #1 shall
prevail.
1
IN WITNESS WHEREOF, the parties hereto have executed this Amendment #1
on the Effective Date in Los Angeles, California.
LANDLORD TENANT
PACIFIC COAST HOLDINGS, INTEGRATED HEALTHCARE
LLC, a California limited HOLDINGS, INC., a Nevada
company, limited liability company,
By: /s/ ▇▇. ▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
Name:___________________ Name:_____________________
Title:____________________ Title:______________________
2