<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 17, 1996
PARACELSUS HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-67040 95-3565943
- --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
155 NORTH LAKE AVENUE, SUITE 1100
PASADENA, CA 91101
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 792-8600
--------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
The Exhibit Index is located on Page 3.
The total number of pages of this Form 8-K is 5.
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 17, 1996 (the "Event Date"), Paracelsus Healthcare Corporation,
a California corporation (the "Company"), acquired Davis Hospital and Medical
Center, a 120-bed general acute care hospital, formerly owned and operated by
General Hospitals of Galen, a Utah corporation ("Galen") wholly-owned by
Columbia/HCA Healthcare Corporation ("Columbia/HCA"), pursuant to a stock
purchase agreement dated as of November 28, 1995, as amended, between the
Company and Galen (the "Stock Purchase Agreement"). By the terms of the Stock
Purchase Agreement, the Company acquired all the shares of Paracelsus Davis
Hospital, Inc., the owner of substantially all assets of Davis Hospital and
Medical Center, from Galen for approximately $38.5 million in cash.
Also on the Event Date, pursuant to an asset exchange agreement dated
as of November 28, 1995, as amended, among Paracelsus Halstead Hospital, a
Kansas corporation wholly-owned by the Company ("PHH"), Paracelsus Elmwood
Medical Center, a Louisiana corporation wholly-owned by the Company ("PEMC"),
Paracelsus Peninsula Medical Center, a California corporation wholly-owned by
the Company ("PPMC"), Paracelsus Real Estate Corporation, a California
corporation wholly-owned by the Company ("PREC"), Pioneer Valley Hospital, Inc.,
a Utah corporation wholly-owned by Columbia/HCA ("PVH"), and Medical Center of
Santa Rosa, Inc., a Florida corporation wholly-owned by Columbia/HCA ("MCSR")
(the "Asset Exchange Agreement"), the Company acquired (i) Pioneer Valley
Hospital, a 139-bed general acute care hospital, formerly owned and operated by
PVH, and (ii) Santa Rosa Medical Center, a 129-bed general acute care hospital,
formerly owned and operated by MCSR, in exchange for (a) Halstead Hospital, a
190-bed general acute care hospital, formerly owned and operated by PHH, (b)
Elmwood Medical Center, a 135-bed general acute care hospital, formerly owned
and operated by PEMC, and (c) Peninsula Medical Center, a 119-bed general acute
care hospital, formerly owned and operated by PPMC.
The transaction undertaken pursuant to the Asset Exchange Agreement
and the Stock Purchase Agreement (the "Exchange Transaction") was structured as
a like-kind exchange, as described in Section 1031 of the Internal Revenue Code
of 1986, as amended (the "Code"), and as an exchange of assets under 42 U.S.C.
413.134(f)(4), designed to achieve favorable tax treatment. The Exchange
Transaction was undertaken in compliance with an Order of the Federal Trade
Commission (the "FTC"), FTC Docket No. C-3619 (October 3, 1995), whereby
Columbia/HCA was required to divest its interest in Pioneer Valley Hospital,
Santa Rosa Medical Center and Davis Hospital and Medical Center.
None of the acquired hospital facilities or their affiliates, at the
time of the negotiation of the Exchange Transaction had any material
relationship to the Company, any affiliate of the Company, any director or
officer of the Company or any associate of such director or officer. The
Company intends to continue to operate the businesses of Davis Hospital, Pioneer
Valley Hospital and Santa Rosa Medical Center.
- 2 -
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
It is impracticable to provide the required financial statements for
the acquired businesses at this point in time. The required financial
statements will be filed as soon as practicable, but not later than 60 days
from the date this Form 8-K is required to be filed.
(b) Pro Forma Financial Information.
It is impracticable to provide the required pro forma financial
information at this point in time. The required pro forma financial
information will be filed as soon as practicable, but not later than 60
days from the date this Form 8-K is required to be filed.
(c) Exhibits.
Exhibit Exhibit Sequential
Number Description Page Number
------- ----------- -----------
2.1(a) Stock Purchase Agreement by Incorporated by
and between Paracelsus reference to the
Healthcare Corporation and Company's 10-K for
General Hospitals of Galen, the fiscal year
Inc., dated as of November ended September 30,
28, 1995 1995
2.1(b) First Amendment to Stock
Purchase Agreement by and
between Paracelsus
Healthcare Corporation and
General Hospitals of Galen,
Inc., dated as of April 24,
1996
2.2(a) Asset Exchange Agreement by Incorporated by
and between Paracelsus reference to the
Halstead Hospital, Inc., Company's 10-K for
Paracelsus Elmwood Medical the fiscal year
Center, Inc., Paracelsus ended September 30,
Peninsula Medical Center, 1995
Inc., Paracelsus Real
Estate Corporation and
Pioneer Valley Hospital,
Inc. and Medical Center of
Santa Rosa, Inc., dated as
of November 28, 1995
- 3 -
<PAGE>
2.2(b) First Amendment to Asset
Exchange Agreement by and
between Paracelsus Halstead
Hospital, Inc., Paracelsus
Elmwood Medical Center,
Inc., Paracelsus Peninsula
Medical Center, Inc.,
Paracelsus Real Estate
Corporation and Pioneer
Valley Hospital, Inc. and
Medical Center of Santa
Rosa, Inc., dated as of
February 20, 1996
2.2(c) Second Amendment to Asset
Exchange Agreement by and
between Paracelsus Halstead
Hospital, Inc., Paracelsus
Elmwood Medical Center,
Inc., Paracelsus Peninsula
Medical Center, Inc.,
Paracelsus Real Estate
Corporation and Pioneer
Valley Hospital, Inc., and
Medical Center of Santa
Rosa, Inc., dated as of
April 24, 1996
2.3 Purchase and Sale Agreement
by and between American
Health Properties, Inc.,
AHP of Kansas, Inc., AHP of
New Orleans, Inc., AHP of
Utah, Inc., Paracelsus
Healthcare Corporation and
Paracelsus Pioneer Valley
Hospital, Inc., dated as of
May 15, 1996
2.4 Pioneer Hospital Lease by
and between AHP of Utah,
Inc. and Paracelsus Pioneer
Valley Hospital, Inc.,
dated as of May 15, 1996
- 4 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PARACELSUS HEALTHCARE CORPORATION
a California corporation
By: /s/ James T. Rush
------------------------------------------
Name: James T. Rush
Title: Vice President, Finance and
Chief Financial Officer
Date: May 30, 1996
- 5 -
<PAGE>
EXHIBIT 2.1(b)
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT (the "Amendment") is made and entered into this 24th day of
April, 1996 amends that certain Stock Purchase Agreement by and between
Paracelsus Healthcare Corporation ("PHC") and General Hospitals of Galen, Inc.
dated November 28, 1995 (the "Agreement").
RECITALS:
A. The parties would like to amend the Agreement to amend certain
covenants therein.
B. The parties would like to amend the Agreement to amend and provide for
the early termination of the Utah Provider Agreement (as defined in the
Agreement).
AGREEMENT
NOW, THEREFORE, for the consideration recited in the Agreement and the
promises and covenants contained therein and herein, the parties hereto agree
as follows:
1. DELETION OF CERTAIN COVENANTS (SECTION 11.9). The last sentence of
the first paragraph of Section 11.9 of the Agreement is hereby deleted in its
entirety.
2. AMENDMENT AND EARLY TERMINATION OF UTAH PROVIDER AGREEMENT (SECTION
11.11 AND EXHIBIT A).
(a) Section 11.11 of the Agreement is hereby amended by deleting "up to
four (4) years after the Closing Date" and replacing therefor "up to two (2)
years after the Closing Date" and by adding the following to the end of the last
sentence thereof "provided, however upon the occurrence of the Merger Event
(defined herein), then any obligation of Columbia/HCA Healthcare Corporation or
PHC under this Section
<PAGE>
11.11 and the Utah Provider Agreement executed at the Closing shall immediately
terminate. As used herein, the "Merger Event" shall refer to the merger of PHC
with Champion Healthcare Corporation ("Champion"), some other consolidation of
PHC or Champion (or of their affiliates), the acquisition (directly or
indirectly) by PHC or any of its affiliates of the hospitals in Utah owned by
Champion or the acquisition (directly or indirectly) by Champion or any of its
affiliates of the hospitals in Utah owned by PHC.
(b) The Utah Provider Agreement attached to the Agreement as EXHIBIT A
shall be amended by deleting from paragraph 10 the term "initial" from the first
sentence and by deleting the second and third sentences entirely and by adding
the following Section 12(e) to the Utah Provider Agreement "(e) This Agreement
shall immediately terminate as of the effective date of the Merger Event, if
any. As used herein, the "Merger Event" shall refer to the merger of Paracelsus
with Champion Healthcare Corporation ("Champion"), some other consolidation of
Paracelsus or Champion (or of their affiliates), the acquisition (directly or
indirectly) by Paracelsus or any of its affiliates of the hospitals in Utah
owned by Champion or the acquisition (directly or indirectly) by Champion or
any of its affiliates of the hospitals in Utah owned by PHC."
3. CHAMPION UTAH PROVIDER AGREEMENTS. As a part of its proposed
transaction with Champion, PHC shall cause the Utah Provider Agreement executed
by and between Champion and Columbia/HCA Healthcare Corporation dated November
9, 1995 (executed in connection with Champion's acquisition of Jordan Valley
Hospital in Utah) and the Utah Provider Agreement dated April 13, 1995 by and
between Champion and Healthtrust, Inc. - The Hospital Company (executed in
connection with Champion's acquisition of Salt Lake Regional Hospital in Utah)
to be terminated effective as of the effective date of the Merger Event.
Champion shall not have a right to participate any further in the Managed Care
Contracts (as defined in the Utah Provider Agreements) and Champion's
obligations under the Managed Care Contracts shall terminate as of such date.
4. COUNTERPART SIGNATURE. This amendment may be executed in one or more
counterparts, each of which shall be an original but all of which shall
constitute one agreement.
5. DEFINITIONS. Any terms left undefined in this Amendment will have the
meaning ascribed to them as set forth in the Agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties has signed this Amendment on the
date first above written.
PARACELSUS HEALTHCARE CORPORATION
By: /s/ Robert C. Jay
-----------------------------
Title: Vice President
--------------------------
GENERAL HOSPITALS OF GALEN, INC.
By: /s/ V. Carl George
-----------------------------
Title: Vice President
--------------------------
-3-
<PAGE>
EXHIBIT 2.2(b)
FIRST AMENDMENT TO
ASSET EXCHANGE AGREEMENT
THIS AMENDMENT (the "Amendment") is made and entered into this 20th day of
February, 1996 amends that certain Asset Exchange Agreement by and between
Paracelsus Halstead Hospital, Inc. ("PHH"), Paracelsus Elmwood Medical Center,
Inc. ("PEMC"), Paracelsus Peninsula Medical Center, Inc. ("PPMC"), Paracelsus
Real Estate Corporation ("PREC"), Pioneer Valley Hospital, Inc. ("PVH") and
Medical Center of Santa Rosa, Inc. ("MCSR") dated November 28, 1995 (the
"Agreement").
RECITALS:
A. Other than letter amendments to the Agreement which establish
deadlines for the parties to agree to the disclosure schedules to the Agreement
and which extend the "drop dead" date, there have been no amendments to the
Agreement as of the date hereof.
B. The parties would like to add a provision to the Agreement which
relates to the emergency services business associated with Santa Rosa Medical
Center in Santa Rosa, Florida.
C. The parties would like to clarify the Agreement so as to reflect their
mutual agreement as to (i) the taking of physical inventory prior to the Closing
and (ii) the procedure by which the real property associated with the Louisiana
Hospital and the Kansas Hospital as currently held by AHP will be conveyed to
C/HCA.
AGREEMENT
NOW, THEREFORE, for the consideration recited in the Agreement and the
promises and covenants contained therein and herein, the parties hereto agree as
follows:
1. NEW PROVISION. A new Section 11.24 shall be added to the Agreement as
follows:
"11.24.1 COVENANT RELATING TO AMBULANCE SERVICES. For a period of two
(2) years from and after the date hereof (or such lesser period to the
maximum extent permitted by applicable law), neither PPMC, PREC, MCSR, any
affiliate thereof, nor
<PAGE>
any entity controlled (directly and indirectly) by such entities shall, directly
or indirectly, within, into or from the Territory (as defined below), engage in
any aspect of the ambulance, paramedic, emergency response transport service
business (the "Ambulance Service Business") in competition with Rural/Metro
Corporation (the parent of the corporation which is buying the emergency
services business from an affiliate of MCSR) or any of its subsidiaries. For
purposes of this Agreement, the term "Territory" shall mean the counties of
Escambia and Santa Rosa, Florida.
Notwithstanding the above, the Ambulance Service Business shall not be
deemed to include inter-facility transports or non-emergency transports. For
purposes of this Agreement, "inter-facility transports" shall mean those
transports to or from the Santa Rosa Medical Center to or from such other
health care facilities including but not limited to physician office
buildings, skilled nursing facilities, rehabilitation facilities, nursing
homes, boarding houses, etc. and "non-emergency transports" shall mean those
transports of patients to Santa Rosa Medical Center for which an emergency
transport vehicle is not required.
If at any time during the two year term of this covenant, it is
determined that the provider of the Ambulance Service Business in Santa Rosa
County is in breach of its agreement with the Santa Rosa County for the
provision of Ambulance Service Business, then the term of this covenant shall
terminate effectively with such determination, and neither PPMC, PREC, MCSR,
any affiliate thereof, nor any entity controlled (directly or indirectly) by
such entities shall thereafter be bound by this Section 11.24 and the same
shall no longer be effective.
11.24.2 REASONABLENESS AND REMEDIES. Each of the parties hereto
specifically acknowledge that the geographic regions contained in Section
11.24.1 hereof, and the length of time restrictions in Section 11.24.1 hereof
are necessary and reasonable. Each party hereby acknowledges and agrees that
the restrictions set forth in this Amendment are reasonable and necessary,
and that any violation thereof would result in substantial and irreparable
injury to the other parties and such other parties may not have an adequate
remedy at law with respect to any such violation. Accordingly, each party
agrees that, in the event of any actual or threatened violation thereof, any
party affected by such violation or threatened violation shall have the right
and privilege to obtain, without the necessity of posting bond therefor, and
in addition to any other remedies that may be available, equitable relief,
including temporary and permanent injunctive relief, to cease or prevent any
actual or threatened violation of any provision hereof.
-2-
<PAGE>
11.24.3 ASSIGNMENT. It is expressly agreed that any of the parties
hereto may assign the benefits of this Section 11.24 (but not the obligations
set forth in Section 11.24.1) to an affiliate or other third party giving
valid consideration for such assignment without the prior written consent of
the other parties and further that any such assignee shall have the right to
enforce the obligations set forth in this Section 11.24.
11.24.4 INDULGENCES. Neither any failure nor any delay on the part of
any of the parties hereto (or their assignees as set forth in Section 11.24.3)
to exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power or privilege, nor shall any waiver
of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect
to any other occurrence."
2. SUPPLIES. The parties agree that the physical inventories
contemplated by Section 2.10.1 and Section 2.11.1 may be completed at any time
on or after December 31, 1995; provided that each party maintains a perpetual
rolling count thereafter in sufficient detail to allow the party who will be
receiving the supplies at the Closing to track the movement of the inventory
from the date of its physical count to the Closing.
3. PROCEDURE TO CONVEY REAL PROPERTY. The Agreement is hereby amended as
appropriate to effect the following amendment, provided, however, that nothing
herein shall in any way diminish or limit the representations and warranties of
the parties to the Agreement or the quality of title to the property exchanged
by such parties pursuant to the terms of the Agreement.
PHH and PEMC shall merge into PPVH, a newly formed corporation,
immediately prior to Closing. PPVH shall acquire the Louisiana Real
Property from AHPNO and the Kansas Real Property from AHPKS prior to
Closing. At Closing PPVH, as the successor to PHH and PEMC and as the
fee owner of the Louisiana Real Property and the Kansas Real Property,
shall exchange the Louisiana Assets and the Kansas Assets with PVH for
the Pioneer Assets. At the Closing, PPVH shall deliver the conveyance
documents to PVH that PHH, PEMC, AHPNO and AHPKS were to provide under
the terms of the Agreement. In addition, PPVH shall provide such
other instruments and documents as C/HCA reasonably deems necessary to
evidence the
-3-
<PAGE>
merger of PHH and PEMC, its ownership of the Louisiana Assets and the
Kansas Assets and to effect the transactions contemplated hereby. As
a result of this revised structure, counsel for AHPNO and AHPKS shall
not be required to deliver a legal opinion as contemplated by the
Agreement. Attached hereto as EXHIBIT A is an outline of the
amendment to the structure of this transaction.
4. COUNTERPART SIGNATURE. This amendment may be executed in one or more
counterparts, each of which shall be an original but all of which shall
constitute one agreement.
5. DEFINITIONS. Any terms left undefined in this Amendment will have the
meaning ascribed to them as set forth in the Agreement.
IN WITNESS WHEREOF, each of the parties has signed this Amendment on the
date first above written.
PARACELSUS HALSTEAD HOSPITAL, INC.
By: /s/ Robert C. Jay
-------------------
Title: Vice President
----------------
PARACELSUS ELMWOOD MEDICAL CENTER, INC.
By: /s/ Robert C. Jay
-------------------
Title: Vice President
----------------
PARACELSUS PENINSULA MEDICAL CENTER,
INC.
By: /s/ Robert C. Jay
-------------------
Title: Vice President
----------------
PARACELSUS REAL ESTATE CORPORATION
By: /s/ Robert C. Jay
-------------------
Title: Vice President
----------------
-4-
<PAGE>
PIONEER VALLEY HOSPITAL, INC.
By: /s/ V. Carl George
-------------------
Title: Vice President
----------------
MEDICAL CENTER OF SANTA ROSA, INC.
By: /s/ V. Carl George
-------------------
Title: Vice President
----------------
-5-
<PAGE>
EXHIBIT A
REAL AND PERSONAL PROPERTY TRANSFER STRUCTURE
COLUMBIA -- PARACELSUS
Asset Exchange Agreement
Capitalized terms not defined herein but defined in the Asset Exchange
Agreement shall have the same meaning herein as set forth therein.
A. Kansas Business and Louisiana Business in exchange for Pioneer
Business
1. Kansas Real Property and Kansas Business to be owned by
Paracelsus Pioneer Valley Hospital, Inc., a Utah corporation and
successor by merger to PHH and PEMC ("PPVH") as of Closing
2. Louisiana Real Property and Louisiana Business to be owned by
PPVH as of Closing
3. Exchange of Pioneer Real Property, by Pioneer Valley Hospital,
Inc., a Utah corporation ("Pioneer"), and remainder of Pioneer
Business by Pioneer with PPVH for the Louisiana Real Property,
Louisiana Business, Kansas Real Property and Kansas Business
a. The Pioneer Real Property and Pioneer Business will be
transferred by Pioneer as follows:
(1) Conveyance of fee title from Pioneer by special
warranty deed to PPVH of the following:
(A) Parcels 2, 3, 4, 5, 6 and 7 (3449 and 3460 S. Pioneer
Parkway, and 4052 W. Pioneer Parkway), all as set forth
in Commitment No. 13985-A
(B) Parcels 1 and 2 (vacant land at 3381 South 4000 West)
as set forth in Commitment No. 13985-B
(2) Assignment of the following leases (with consents of
lessors) from Pioneer to PPVH:
1
<PAGE>
(A) Lease by Pioneer of Parcel 1 (3336 S. Pioneer Parkway)
as set forth in Commitment No. 13985-A between National
Health Investors, Inc., a Maryland corporation ("NHI"),
as lessor, and Pioneer, as lessee
(B) Lease described in Commitment No. 14160 (Salt Lake
Industrial Clinic), owned by Boyer-Salt Lake Industrial
Partnership
(C) Such other leases as are listed in Schedule 5.9 of the
Asset Exchange Agreement
(3) Conveyance of remainder of Pioneer Business by Pioneer
to PPVH, as set forth in the Asset Exchange Agreement,
from Pioneer to PPVH
b. The Louisiana Real Property, Louisiana Business, Kansas Real
Property and Kansas Business will be conveyed from PPVH(1)
as follows:
(1) Conveyance of fee title by special warranty deed from
PPVH to Pioneer of the following:
(a) A-1, A-2 and B (Elmwood Medical Center and
Popeye's Building) as set forth in Commitment No.
1508.521
(b) The land described in Commitment No. T4145
(Halstead Hospital)
(2) Assignment from PPVH to Pioneer of the leases for the
Kansas Real Property and Louisiana Real Property set
forth in Schedule 4.9 of the Asset Exchange Agreement
(3) Conveyance of remainder of Louisiana Business and
Kansas Business, as set
- ---------------
(1) The Exchange Agreement contemplates that AHPNO and AHPKS will convey
these properties.
2
<PAGE>
forth in the Asset Exchange Agreement, from PPVH to
Pioneer
B. Exchange of Santa Rosa Real Property for Florida Real Property between
Paracelsus Real Estate Corporation, a California corporation ("PREC")
and Medical Center of Santa Rosa, Inc., a Florida Corporation ("Santa
Rosa"), and exchange of remainder of Santa Rosa Business for remainder
of Florida Business between Paracelsus Peninsula Medical Center, Inc.,
a Florida corporation ("PPMC") (or Paracelsus Santa Rosa Medical
Center, Inc. if PPMC's name is changed prior to Closing) and Santa
Rosa
1. PREC leases the Florida Real Property to PPMC. Concurrently with
the Closing, this lease will be terminated.
2. PREC and PPMC will transfer the Florida Real Property and Florida
Business to Santa Rosa as follows:
a. Conveyance by special warranty deed by PREC to Santa Rosa of
the land described in Commitment No. FL014-10-N68806
(Peninsula Medical Center)
b. Assignment of the PPMC leases described in Schedule 4.9 of
the Asset Exchange Agreement
c. Conveyance of Florida Business from PPMC to Santa Rosa as
set forth in the Asset Exchange Agreement
3. Santa Rosa will transfer the Santa Rosa Real Property to PREC as
follows:
a. Assignment by Santa Rosa to PREC of lease relating to Parcel
3 as described in Commitment No. 95-3179-A-PF (Lots 1-6 of
Berryhill Medical Park a/k/a 1540, 1550 and 1560 Berryhill
Road)
b. Assignment of lease with Santa Rosa County by Santa Rosa to
PREC covering Parcel I as described in Commitment No.
95-3179-A-PF (the Santa Rosa Medical Center Building)
4. Santa Rosa will transfer the Santa Rosa Business to PPMC as
follows:
3
<PAGE>
a. Assignment of the Santa Rosa leases set forth in Schedule
5.9 of the Asset Exchange Agreement
b. Conveyance of Santa Rosa Business from Santa Rosa to PPMC as
set forth in the Asset Exchange Agreement
4
<PAGE>
EXHIBIT 2.2(c)
SECOND AMENDMENT TO
ASSET EXCHANGE AGREEMENT
THIS SECOND AMENDMENT (the "Amendment") is made and entered into this 24
day of April, 1996 amends that certain Asset Exchange Agreement by and between
Paracelsus Halstead Hospital, Inc. ("PHH"), Paracelsus Elmwood Medical Center,
Inc. ("PEMC"), Paracelsus Peninsula Medical Center, Inc. (""PPMC''), Paracelsus
Real Estate Corporation ("PREC"), Pioneer Valley Hospital, Inc. ("PVH") and
Medical Center of Santa Rosa, Inc. ("MCSR") dated November 28, 1995 as
subsequently amended as of February 20, 1996 by PHH, PEMC, PPMC, PREC, PVH and
MCSR (the "Agreement").
RECITALS:
A. The parties would like to amend the Agreement to shorten the term of
the provision and reduce the Maximum Potential Payback relating to the Granger
Provisions and to clarify certain matters relating thereto.
B. The parties would like to amend the Agreement to provide for the
contingency of Section 11.23 of the Agreement relating to the Granger Provisions
and for the early termination of the Utah Provider Agreement.
C. The parties would like to amend the Agreement to delete therefrom
certain covenants of C/HCA.
A G R E E M E N T
NOW, THEREFORE, for the consideration recited in the Agreement and the
promises and covenants contained therein and herein, the parties hereto agree as
follows:
1. AMENDMENT TO THE PERIOD OF APPLICABILITY OF THE GRANGER PHYSICIAN
PROVISION (SECTION 11.23). The title of Section 11.23 "Granger Physicians" is
hereby changed to "Granger Provisions". The last sentence of the first
introductory paragraph (preceding Section 11.23.1) shall be amended so that the
defined term "Actual Payback Sum" appearing therein shall be replaced with the
defined term "Granger Payment" and so that the phrase "(i) Recapture Payments,
(ii) a Maximum Potential Payback and (iii) maximum term of four (4) years"
shall be deleted and
<PAGE>
replaced with the phrase "(i) a Maximum Potential Payback and (ii) a maximum
term of two (2) years".
2. AMENDMENT TO DEFINITIONS (SECTION 11.23.1). Section 11.23.1 of the
Agreement shall be amended as follows:
(a) The dollar amount reflected in subparagraph (c) shall be amended to
read "$17,243,000".
(b) Subparagraph (d), "Calculation Period" definition, shall be amended to
read as follows: "shall mean the period commencing on the later of July 15,
1996 or the Closing Date and ending on the second anniversary thereof."
(c) Subparagraph (e), "Maximum Potential Payback" definition, shall be
amended to read as follows: "shall mean $20,000,000".
(d) Subparagraph (h) shall be deleted in its entirety.
3. DELETION OF RECAPTURE PROVISION (SECTION 11.23.3). Section 11.23.3
shall be deleted in its entirety and replaced with the phrase "Reserved".
4. CONTINGENCY OF THE GRANGER PHYSICIAN PROVISION (SECTION 11.23).
Section 11.23 of the Agreement shall be amended by adding the following to the
end thereof:
11.23.9 APPLICATION OF THIS PROVISION. Notwithstanding any of the
foregoing, this Section 11.23 will not become operative unless or until the
occurrence of the PHC/Champion Abandonment (defined herein) at which time
it will become applicable as of the later of July 15, 1996 or the Closing
Date and shall continue for a period of two (2) years. In the event that
the Merger Event (defined herein) occurs at any time within the Calculation
Period, then this Section 11.23 shall have no force or effect and shall be
void AB INITIO in all respects. If the Merger Event occurs after a
PHC/Champion Abandonment, then PHC shall immediately repay to C/HCA any
amount paid by C/HCA to PHC hereunder. As used herein, the "PHC/Champion
Abandonment" shall mean the termination or other abandonment by Paracelsus
Healthcare Corporation ("PHC") and Champion Healthcare Corporation
("Champion") (or their respective affiliates) of the proposed merger of PHC
and Champion which termination or other abandonment is
-2-
<PAGE>
evidenced by some form of written agreement to that effect between PHC and
Champion and shall be effective for all intents and purposes to terminate
any form of negotiation between the two companies (or their affiliates)
with respect to a proposed combination or other transaction whereby PHC
would acquire Champion assets in Utah or Champion would acquire PHC assets
in Utah. As used herein, the "Merger Event" shall refer to the merger of
PHC with Champion, some other consolidation of PHC or Champion (or of their
affiliates), the acquisition (directly or indirectly) by PHC or any of its
affiliates of the hospitals in Utah owned by Champion or the acquisition
(directly or indirectly) by Champion or any of its affiliates of the
hospitals in Utah owned by PHC.
5. TERM AND CONTINGENCY OF THE UTAH PROVIDER AGREEMENT (SECTION 11.14).
Section 11.14 of the Agreement shall be amended by deleting "up to four (4)
years after the Closing Date" and replacing therefor "up to two (2) years after
the Closing Date with respect to the Utah Provider Agreement and four (4) years
following the Closing Date with respect to the Florida Provider Agreement" and
by adding the following to the end thereof "provided, however, upon the
occurrence of the Merger Event (defined herein), any obligations of C/HCA or PHC
under this Section 11.14 (with respect to the Utah Provider Agreement) and the
Utah Provider Agreement executed at the Closing shall immediately terminate. As
used herein, the "Merger Event" shall refer to the merger of Paracelsus
Healthcare Corporation ("PHC") with Champion Healthcare Corporation
("Champion"), some other consolidation of PHC or Champion (or of their
affiliates), the acquisition (directly or indirectly) by PHC or any of its
affiliates of the hospitals in Utah owned by Champion or the acquisition
(directly or indirectly) by Champion or any of its affiliates of the hospitals
in Utah owned by PHC." The parties hereto hereby agree that the Utah Provider
Agreement shall be amended to reflect this change.
6. AMENDMENT TO COVENANTS OF C/HCA (SECTION 11.9). Section 11.9 of the
Agreement shall be amended as follows:
(a) Subpart (a) of the last sentence of the first paragraph is hereby
deleted in its entirety.
(b) Effective as of the effective date of the Merger Event, if any, the
Initial Covenant Term with respect to the Pioneer Hospital shall terminate.
After such date the C/HCA entity and its affiliates shall be under no
restrictive covenants with respect to the geographic area surrounding Pioneer
Hospital.
-3-
<PAGE>
7. LIMITATION OF GRANGER CLINIC STAFFING (SECTION 11.23.7). Section
11.23.7 shall be amended by deleting the term "(maximum of four years)" from the
fourth line of this section and replacing it with "(maximum of two years)".
8. CHAMPION UTAH PROVIDER AGREEMENTS. As a part of its proposed
transaction with Champion, PHC shall cause the Utah Provider Agreement executed
by and between Champion and C/HCA dated November 9, 1995 (executed in connection
with Champion's acquisition of Jordan Valley Hospital in Utah) and the Utah
Provider Agreement dated April 13, 1995 by and between Champion and Healthrust,
Inc. - The Hospital Company (executed in connection with Champion's acquisition
of Salt Lake Regional Hospital in Utah) to be terminated effective as of the
effective date of the Merger Event.
9. COUNTERPART SIGNATURE. This amendment may be executed in one or more
counterparts, each of which shall be an original but all of which shall
constitute one agreement.
10. DEFINITIONS. Any terms left undefined in this Amendment will have the
meaning ascribed to them as set forth in the Agreement.
IN WITNESS WHEREOF, each of the parties has signed this Amendment on the
date first above written.
PARACELSUS HALSTEAD HOSPITAL, INC.
By: /s/ ROBERT C. JAY
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
PARACELSUS ELMWOOD MEDICAL CENTER, INC.
By: /s/ ROBERT C. JAY
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
PARACELSUS PENINSULA MEDICAL CENTER, INC.
By: /s/ ROBERT C. JAY
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
-4-
<PAGE>
PARACELSUS REAL ESTATE CORPORATION
By: /s/ ROBERT C. JAY
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
PIONEER VALLEY HOSPITAL, INC.
By: /s/ V. CARL GEORGE
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
MEDICAL CENTER OF SANTA ROSA, INC.
By: /s/ V. CARL GEORGE
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
BY AND AMONG
AMERICAN HEALTH PROPERTIES, INC.
AHP OF KANSAS, INC.
AHP OF NEW ORLEANS, INC.
AND
AHP OF UTAH, INC.
AND
PARACELSUS HEALTHCARE CORPORATION
AND
PARACELSUS PIONEER VALLEY HOSPITAL, INC.
DATED AS OF MAY 15, 1996
- --------------------------------------------------------------------------------
DISPUTES UNDER THIS AGREEMENT ARE SUBJECT TO ARBITRATION
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 PURCHASE AND SALE OF ASSETS. . . . . . . . . . . . . . . . . . . . 11
2.1 Halstead Bonds and Halstead Equipment . . . . . . . . . . . . 11
2.2 Elmwood Fee Property. . . . . . . . . . . . . . . . . . . . . 11
2.3 Pioneer Fee Property. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3 ASSIGNMENTS OF OTHER ASSETS. . . . . . . . . . . . . . . . . . . . 12
3.1 Halstead Facility Assignments . . . . . . . . . . . . . . . . 12
3.2 Elmwood Parking Lease Assignment.
3.3 Pioneer Lease . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 4 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Halstead Purchase Price . . . . . . . . . . . . . . . . . . . 12
4.2 Elmwood Purchase Price. . . . . . . . . . . . . . . . . . . . 12
4.3 Pioneer Purchase Price. . . . . . . . . . . . . . . . . . . . 13
ARTICLE 5 TERMINATION OF CERTAIN AGREEMENTS. . . . . . . . . . . . . . . . . 13
5.1 Halstead Facility Terminations. . . . . . . . . . . . . . . . 13
5.2 Elmwood Facility Terminations . . . . . . . . . . . . . . . . 13
ARTICLE 6 DOCUMENTS OF CONVEYANCE. . . . . . . . . . . . . . . . . . . . . . 13
6.1 AHP Kansas - Halstead Facility Documents. . . . . . . . . . . 13
6.2 Paracelsus Utah - Halstead Facility Documents . . . . . . . . 14
6.3 AHP New Orleans - Elmwood Facility Documents. . . . . . . . . 14
6.4 Paracelsus Utah - Elmwood Facility Documents. . . . . . . . . 15
6.5 Paracelsus Utah - Pioneer Facility Documents. . . . . . . . . 15
6.6 AHP Utah - Pioneer Facility Documents . . . . . . . . . . . . 16
6.7 Additional Documents and Further Assurances . . . . . . . . . 16
ARTICLE 7 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 16
7.1 Paracelsus Entities Representations And Warranties. . . . . . 16
(A) Organization, Powers, Etc. . . . . . . . . . . . . . . . 16
(B) Due Authorization. . . . . . . . . . . . . . . . . . . . 17
(C) Governmental Approvals . . . . . . . . . . . . . . . . . 17
(D) Columbia Agreement . . . . . . . . . . . . . . . . . . . 17
(E) No Litigation. . . . . . . . . . . . . . . . . . . . . . 17
(F) No Conflicts . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
(G) Solvency . . . . . . . . . . . . . . . . . . . . . . . . 18
(H) Title. . . . . . . . . . . . . . . . . . . . . . . . . . 18
(I) Suitability. . . . . . . . . . . . . . . . . . . . . . . 18
(J) Regulatory Compliance. . . . . . . . . . . . . . . . . . 18
(K) Commitments. . . . . . . . . . . . . . . . . . . . . . . 18
(L) Condition. . . . . . . . . . . . . . . . . . . . . . . . 19
(M) Competing Uses; Access . . . . . . . . . . . . . . . . . 19
(N) Licensure. . . . . . . . . . . . . . . . . . . . . . . . 20
(O) Medicare Participation/Accreditation . . . . . . . . . . 20
(P) Environmental Matters. . . . . . . . . . . . . . . . . . 21
(Q) Asbestos . . . . . . . . . . . . . . . . . . . . . . . . 22
(R) Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 22
(S) Financial Statements . . . . . . . . . . . . . . . . . . 22
(T) No Misstatements . . . . . . . . . . . . . . . . . . . . 22
7.2 AHP Entities Representations And Warranties . . . . . . . . . 22
(A) Organization, Powers, Etc. . . . . . . . . . . . . . . . 22
(B) Due Authorization. . . . . . . . . . . . . . . . . . . . 23
(C) Governmental Approvals . . . . . . . . . . . . . . . . . 23
(D) No Litigation. . . . . . . . . . . . . . . . . . . . . . 23
(E) No Conflicts . . . . . . . . . . . . . . . . . . . . . . 23
(F) Solvency . . . . . . . . . . . . . . . . . . . . . . . . 24
(G) Title To Elmwood Real Property . . . . . . . . . . . . . 24
(H) Title to Halstead Real Property. . . . . . . . . . . . . 24
(I) Transfers on an "As Is" Basis. . . . . . . . . . . . . . 24
(J) Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 24
(K) No Misstatements . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF AHP ENTITIES. . . . . . . . 25
8.1 Representations and Warranties. . . . . . . . . . . . . . . . 25
8.2 Compliance with this Agreement. . . . . . . . . . . . . . . . 25
8.3 Consummation of the Columbia Agreement. . . . . . . . . . . . 25
8.4 Delivery and Effectiveness of Documents . . . . . . . . . . . 25
8.5 Pioneer Closing . . . . . . . . . . . . . . . . . . . . . . . 25
8.6 Payment of Purchase Price . . . . . . . . . . . . . . . . . . 25
8.7 Halstead Sublease Rents . . . . . . . . . . . . . . . . . . . 25
8.8 Elmwood Rents . . . . . . . . . . . . . . . . . . . . . . . . 26
8.9 Pioneer Leases. . . . . . . . . . . . . . . . . . . . . . . . 26
8.10 Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.11 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.12 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . 26
8.13 Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.14 Environmental Report. . . . . . . . . . . . . . . . . . . . . 27
8.15 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(ii)
<PAGE>
8.16 Title to Collateral . . . . . . . . . . . . . . . . . . . . . 27
8.17 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.18 Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.19 Good Standing Certificates. . . . . . . . . . . . . . . . . . 27
8.20 Certificates of Merger. . . . . . . . . . . . . . . . . . . . 28
8.21 Shareholder Resolutions . . . . . . . . . . . . . . . . . . . 28
8.22 Board Resolutions . . . . . . . . . . . . . . . . . . . . . . 28
8.23 Incumbency Certificates . . . . . . . . . . . . . . . . . . . 28
8.24 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 28
8.25 Transaction Costs . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARACELSUS ENTITIES . . . . 29
9.1 Representations and Warranties. . . . . . . . . . . . . . . . 29
9.2 Compliance with this Agreement. . . . . . . . . . . . . . . . 29
9.3 Consummation of the Columbia Agreement. . . . . . . . . . . . 29
9.4 Delivery and Effectiveness of Documents . . . . . . . . . . . 29
9.5 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 29
9.6 Pioneer Closing . . . . . . . . . . . . . . . . . . . . . . . 29
9.7 Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.9 Rent Credit . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.10 Good Standing Certificates. . . . . . . . . . . . . . . . . . 30
9.11 Shareholder Resolutions . . . . . . . . . . . . . . . . . . . 30
9.12 Board Resolutions . . . . . . . . . . . . . . . . . . . . . . 30
9.13 Incumbency Certificates . . . . . . . . . . . . . . . . . . . 30
ARTICLE 10 CLOSINGS OF THE TRANSACTIONS CONTEMPLATED HEREBY. . . . . . . . . 30
10.1 Halstead Closing. . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Elmwood Closing . . . . . . . . . . . . . . . . . . . . . . . 30
10.3 Failure of Pioneer Closing. . . . . . . . . . . . . . . . . . 30
ARTICLE 11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . 31
11.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.2 Indemnification By Paracelsus . . . . . . . . . . . . . . . . 31
11.3 Notice of Claims. . . . . . . . . . . . . . . . . . . . . . . 32
11.4 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 12 REMEDIES FOR BREACH . . . . . . . . . . . . . . . . . . . . . . . 33
12.1 Paracelsus Entity Default . . . . . . . . . . . . . . . . . . 33
12.2 AHP Entity Default. . . . . . . . . . . . . . . . . . . . . . 33
12.3 Failure to Close Columbia Agreement . . . . . . . . . . . . . 33
(iii)
<PAGE>
ARTICLE 13 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.1 Paracelsus Utah Undertakings Regarding Certain Rights
Associated with the Pioneer Hospital . . . . . . . . . . . . 33
13.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . 34
13.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . 35
13.5 GOVERNING LAW; SUBMISSION TO JURISDICTION. . . . . . . . . . 35
13.6 Resolution of Disputes . . . . . . . . . . . . . . . . . . . 36
13.7 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.8 Divisions and Headings . . . . . . . . . . . . . . . . . . . 36
13.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 36
13.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . 36
(iv)
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Boyer Clinic Leasehold
Exhibit B California Facilities
Exhibit C Elmwood Fee Property
Exhibit D Elmwood Parking Leasehold
Exhibit E Elmwood Permitted Encumbrances
Exhibit F Granger Clinic Leasehold
Exhibit G Halstead Permitted Encumbrances
Exhibit H Halstead Real Property
Exhibit I NHI MOB Leasehold
Exhibit J Pioneer Fee Property
Exhibit K Pioneer Permitted Encumbrances
Exhibit L Halstead Bond Endorsement
Exhibit M Assignment of Halstead Master Lease
Exhibit N Termination of Halstead Sublease
Exhibit O Notice of Assignment
Exhibit P Consent to Assignment
Exhibit Q Halstead Equipment Bill of Sale
Exhibit R Halstead UCC-3 Termination Statements
Exhibit S AHP Kansas Officers' Certificate
Exhibit T Halstead Acceptance and Assumption Agreement
Exhibit U Deed to Elmwood Fee Property
Exhibit V Termination of Elmwood Lease
Exhibit V-1 Assignment of Elmwood Parking Lease
Exhibit W Elmwood UCC-3 Termination Statements
Exhibit X AHP New Orleans Officers' Certificate
Exhibit Y Deed to Pioneer Fee Property
Exhibit Z Form of Owner's Affidavit
Exhibit AA Lease of Pioneer Fee Property
Exhibit BB Pioneer Security Agreement
Exhibit CC California Facilities Security Agreement
Exhibit DD Collateral Assignment of Leases and Rents
Exhibit EE Pioneer UCC-1 Financing Statements
Exhibit FF Certificate of Paracelsus Utah of Non-Foreign Status
Exhibit GG Paracelsus Utah Officers' Certificate
Exhibit HH AHP Utah Officers' Certificate
Exhibit II Paracelsus Counsel Legal Opinion
Exhibit JJ Arbitration Procedures
Exhibit KK Form of Elmwood Promissory Note
Exhibit LL Form of Elmwood Letter of Credit
Exhibit MM Form of Pioneer Assignment and Assumption Agreement
Schedule 4.1 Halstead Equipment Lease Payoff-Calculation
(v)
<PAGE>
Schedule 8.9 Pioneer Fee Property Leases and Subleases Consented to By
AHP Utah
Schedule 13.1 Pioneer Hospital Related Rights
(vi)
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of May 15,
1996 is by and among AMERICAN HEALTH PROPERTIES, INC., a Delaware corporation
("AHP"), AHP OF KANSAS, INC., a Kansas corporation ("AHP Kansas"), AHP OF NEW
ORLEANS, INC., a Louisiana corporation ("AHP New Orleans"), AHP OF UTAH, INC., a
Utah corporation ("AHP Utah"), PARACELSUS HEALTHCARE CORPORATION, a California
corporation ("Paracelsus") and PARACELSUS PIONEER VALLEY HOSPITAL, INC., a Utah
corporation ("Paracelsus Utah").
RECITALS
A. Paracelsus New Orleans, a wholly-owned subsidiary of Paracelsus,
operates the Elmwood Facility, as such terms, and the other capitalized terms
referred to in these Recitals are defined in Article 1 hereof.
B. AHP New Orleans, a wholly-owned subsidiary of AHP, owns the Elmwood
Fee Property, and leases the Elmwood Fee Property to Paracelsus New Orleans
pursuant to the Elmwood Lease.
C. Paracelsus Kansas, a wholly-owned subsidiary of Paracelsus, operates
the Halstead Facility.
D. AHP Kansas, a wholly-owned subsidiary of AHP, leases the Halstead Real
Property from the City of Halstead, and subleases the Halstead Real Property to
Paracelsus Kansas pursuant to the Halstead Sublease.
E. AHP Kansas owns the Halstead Equipment and leases the Halstead
Equipment to Paracelsus Kansas pursuant to the Halstead Equipment Lease.
F. AHP Kansas is the owner of the Halstead Bonds relating to the Halstead
Facility.
G. Certain of the Paracelsus Entities are parties to the Columbia
Agreement, which, among other things, requires Paracelsus Kansas and Paracelsus
New Orleans or their successors and assigns to exchange the Elmwood Real
Property, the Halstead Real Property and the Halstead Equipment for the Pioneer
Real Property in a transaction intended to qualify as a like-kind exchange
transaction as described in Section 1031 of the Code and an exchange of assets
under 42 U.S.C. Section 413.134(f)(4).
H. The AHP Entities and the Paracelsus Entities have entered into this
Agreement in order to enable the Paracelsus Entities to consummate the Columbia
Agreement.
I. As of the Closing Dates, Paracelsus Kansas and Paracelsus New Orleans
will have been merged with and into Paracelsus Utah, with Paracelsus Utah
remaining as the surviving corporation.
<PAGE>
J. Paracelsus Utah desires to convey the fee estates comprising the
Pioneer Real Property to AHP Utah and to lease such fee estates from AHP Utah
under the terms and conditions contained in the lease contained in EXHIBIT AA
attached hereto (the "Pioneer Lease").
NOW THEREFORE, in consideration of the foregoing Recitals, and the
agreements, covenants, representations and warranties contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, unless otherwise expressly provided for
in this Agreement or unless the context in which such term is used indicates a
contrary intent, (a) the terms defined in this Article shall have the meanings
ascribed to them in this Article, (b) all accounting terms not otherwise defined
in this Article shall have the meanings ascribed to them in accordance with
GAAP, (c) all references in this Agreement to designated "Articles," "Sections"
and other subdivisions are to the designated Articles, Sections and other
subdivisions of this Agreement and (d) the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section, or other subdivision:
"AGREEMENT" means this Purchase and Sale Agreement, and all amendments and
modifications hereof.
"AHP" shall mean American Health Properties, Inc., a Delaware corporation.
"AHP ENTITIES" shall mean AHP, AHP Kansas, AHP New Orleans and AHP Utah,
collectively.
"AHP ENTITY" shall mean any one of the AHP Entities.
"AHP KANSAS" shall mean AHP of Kansas, Inc., a Kansas corporation.
"AHP NEW ORLEANS" shall mean AHP of New Orleans, Inc., a Louisiana
corporation.
"AHP UTAH" shall mean AHP of Utah, Inc., a Utah corporation.
"BOYER CLINIC LEASE" shall mean that certain Lease Agreement dated as of
March 25, 1991 by and between Boyer Salt Lake Industrial Clinic Associates as
lessor and Holy Cross Professional Services as lessee, notice of which is given
by an instrument denominated "Memorandum of Lease," which was recorded on August
15, 1994 as Entry No. 5898351, in Book 6999, at Page 2979 in the Official
Records of Salt Lake County, Utah, which lessee's interest was subsequently
assigned by Holy Cross Professional Services to HTI Physician
2
<PAGE>
Services of Utah, Inc., notice of which was recorded on August 15, 1994 as Entry
No. 5898352, in Book 6999, at Page 2982 in the Official Records of Salt Lake
County, Utah.
"BOYER CLINIC LEASEHOLD" shall mean the leasehold estate in the real
property, as more particularly described on EXHIBIT A hereto, and improvements
and structures erected thereon, and all appurtenances and rights thereto,
conveyed pursuant to the Boyer Clinic Lease.
"CERCLA" shall mean the federal Comprehensive Environmental Response,
Compensation, and Liability Act, as amended.
"CALIFORNIA AFFILIATE" shall mean Paracelsus Convalescent Hospitals, Inc.,
a California corporation, a wholly owned subsidiary of Paracelsus, doing
business as Lafayette Convalescent Hospital, Oak Park Convalescent Hospital,
Rheem Valley Convalescent Hospital and University Convalescent Hospital, which
person is the operator of each of the California Facilities.
"CALIFORNIA FACILITIES" shall mean the four skilled nursing facilities in
Lafayette, California; Pleasant Hill, California; Moraga, California and Menlo
Park, California; respectively, leased by Paracelsus Real Estate Corporation and
operated by the California Affiliate, which California Facilities are more
particularly identified in EXHIBIT B attached hereto.
"CHARTER DOCUMENTS" of any person shall mean the articles of incorporation,
certificate of incorporation, or limited liability company certificate and
agreement or bylaws, as the case may be, of such person and bylaws along with
any and all amendments thereto, restatements thereof, certificates of
determination and designation thereto and thereof.
"CITY OF HALSTEAD" shall mean the City of Halstead, Kansas.
"CLOSING DATES" shall mean the dates on which the Halstead Closing, the
Elmwood Closing and the Pioneer Closing shall occur, as set forth in Article 10
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLUMBIA" shall mean Columbia/HCA Healthcare Corporation, a Delaware
corporation.
"COLUMBIA AGREEMENT" shall mean that certain Asset Exchange Agreement dated
as of November 28, 1995 between and among Columbia, Paracelsus Kansas,
Paracelsus Louisiana, Paracelsus Peninsula Medical Center, Inc., Paracelsus Real
Estate Corporation, Pioneer, and Medical Center of Santa Rosa, Inc.
"COLUMBIA CLOSING" shall mean the closing of the transactions contemplated
by the Columbia Agreement.
3
<PAGE>
"DISPOSED" or "DISPOSAL" shall have the meaning specified in RCRA, except
to the extent that the applicable laws, ordinances, rules, regulations or common
law of the state in which a particular parcel of real property is located
establish a broader meaning of the term "disposed" or "disposal," in which case,
such broader meaning shall apply.
"ECI ASSIGNMENT" shall mean that certain Collateral Assignment of Subleases
and Rents by and between Elmwood Care, Inc. and AHP New Orleans dated May 11,
1990 and recorded May 11, 1990 under Instrument No. 90-19401 in COB 2890, folio
165 in the official records of Jefferson Parish, Louisiana.
"ELMWOOD ASSIGNMENT" shall mean that certain Collateral Assignment of
Subleases and Rents dated as of March 1, 1993 by and between AHP New Orleans and
Paracelsus New Orleans, recorded on March 1, 1993 as Instrument No. 393-10845 in
COB 2855, folio 232 in the Official Records of Jefferson Parish, Louisiana, as
amended by that certain First Amendment to Collateral Assignment of Subleases
and Rents dated as of February 4, 1994 by and between AHP New Orleans and
Paracelsus New Orleans, recorded on March 23, 1994 as Instrument No. 94-17313 in
COB 2890, folio 609 in the Official Records of Jefferson Parish, Louisiana.
"ELMWOOD CLOSING" shall mean the closing of the transactions contemplated
by Sections 2.2, 3.2, 4.2, 5.2 and 6.3 hereof.
"ELMWOOD FACILITY" shall mean the Elmwood Medical Center and the Elmwood
Office Building.
"ELMWOOD FEE PROPERTY" shall mean the fee estate in the real property and
improvements and structures erected thereon, and all appurtenances and rights
thereto, constituting in part the Elmwood Facility, as more particularly
described in EXHIBIT C hereto, including, without limitation, the Elmwood
Medical Center and the Elmwood Office Building, but excluding the Elmwood
Parking Leasehold.
"ELMWOOD LEASE" shall mean that certain Lease dated as of March 1, 1993 by
and between AHP New Orleans as lessor and Paracelsus New Orleans as lessee,
notice of which is given by an instrument denominated "Extract of Lease," which
was recorded on March 1, 1993 under Instrument No. 93-10844 in COB 2855, folio
299 of the Parish of Jefferson, Louisiana, as amended by that certain First
Amendment To Lease dated as of June 30, 1993 by and between AHP New Orleans and
Paracelsus New Orleans, recorded on March 23, 1994 under Instrument No. 94-17312
in COB 2890, folio 608 of the Parish of Jefferson, Louisiana, as amended by that
certain First [sic] Amendment to Lease dated as of February 4, 1994 by and
between AHP New Orleans and Paracelsus New Orleans, as amended by that certain
Third Amendment to Lease dated as of July 20, 1995 by and between AHP New
Orleans and Paracelsus New Orleans.
"ELMWOOD LETTER OF CREDIT" means an irrevocable standby letter of credit,
in an amount equal to the principal amount of the Elmwood Promissory Note,
issued by Bank of America, N.A. to AHP Utah, in the form of EXHIBIT LL hereto.
4
<PAGE>
"ELMWOOD MEDICAL CENTER" shall mean that certain general acute care
hospital located in Jefferson Parish, Louisiana and known as the Elmwood Medical
Center licensed by the Louisiana Department of Health and Hospitals to operate a
total of 135 acute care beds.
"ELMWOOD OFFICE BUILDING" shall mean the two medical office buildings
relating to the Elmwood Medical Center.
"ELMWOOD PARKING LEASE" shall mean that certain Lease dated as of April 1,
1988, by and between The Public Belt Railroad Commission for the City of New
Orleans, as lessor, and Elmwood Management Company, Inc., as lessee, recorded as
Instrument # 88-27807 in COB 1980, folio 224 of the Parish of Jefferson,
Louisiana, which was subsequently assigned by Elmwood Management Company, Inc.
to AHP New Orleans pursuant to that certain Assignment of Lease dated May 11,
1990, by and between Elmwood Management Company, Inc. and Elmwood Care, Inc.,
which was recorded on May 11, 1990 as Instrument # 90-19402 in COB 2322, folio
176 of the Parish of Jefferson, Louisiana, and which was subsequently further
assigned to Paracelsus New Orleans pursuant to the Elmwood Lease.
"ELMWOOD PARKING LEASEHOLD" shall mean the leasehold estate in the real
property and improvements and structures erected thereon, and all appurtenances
and rights thereto, conveyed pursuant to the Elmwood Parking Lease, as more
particularly described on EXHIBIT D hereto.
"ELMWOOD PERMITTED ENCUMBRANCES" shall mean those permitted liens, claims,
encumbrances, security interests or rights of third parties to the Elmwood Real
Property set forth on EXHIBIT E attached hereto.
"ELMWOOD PROMISSORY NOTE" means a promissory note in a principal amount
selected by Paracelsus Utah, but not to exceed $20,000,000 made by Paracelsus
Utah and payable to the order of AHP Utah, in the form of EXHIBIT KK hereto.
"ELMWOOD PURCHASE PRICE" shall mean the price set forth in Section 4.2
hereof.
"ELMWOOD REAL PROPERTY" shall mean the Elmwood Fee Property and the Elmwood
Parking Leasehold, collectively.
"ELMWOOD SECURITY AGREEMENT" shall mean that certain Security and Pledge
Agreement dated as of March 1, 1993 by and between AHP New Orleans and
Paracelsus New Orleans, as amended by that certain First Amendment to Security
and Pledge Agreement dated as of February 4, 1994 by and between AHP New Orleans
and Paracelsus New Orleans.
"ELMWOOD WARRANTY RIGHTS ASSIGNMENT" shall mean that certain Assignment of
Warranty Rights dated as of March 1, 1993 by and between AHP New Orleans and
Paracelsus New Orleans.
"ENVIRONMENTAL CONDITION" shall mean (a) any release or threatened release
of a Hazardous Material from, in, on, under, onto or affecting the Pioneer Fee
Property in
5
<PAGE>
violation of any Environmental Law or site conditions that constitute a current
violation of Environmental Law regardless of whether such conditions constituted
a violation of Environmental Law at the time of such release or threatened
release; (b) any releases or threatened release of a Hazardous Material from
Pioneer Fee Property in, on, under, onto or affecting any other property or
release or threatened release that results in site conditions that constitute a
current violation of Environmental Law regardless of whether such conditions
constituted a violation of Environmental Law at the time of such release or
threatened release; (c) any violation of any Environmental Law relating to the
manufacture, processing, distribution, transportation, storage, use, discharge,
handling, emission, or disposal of Hazardous Material by or in connection with
the Pioneer Business; or (d) any release or threatened release of a Hazardous
Material from, in, on, under, onto or affecting the Pioneer Fee Property
resulting in liability to nongovernmental third parties in tort.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state and local,
statutes, common law, ordinances, rules, regulations, requirements, criteria,
guidelines, permits, orders or determinations of any Governmental Authority,
whether now in existence or hereafter enacted and in each case as amended,
pertaining to health, safety, or the environment, including, without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Materials or otherwise relating to generation, processing,
distribution, use, storage, treatment, disposal, transport, handling of or
exposure to Hazardous Materials.
"GAAP" shall mean as of the time of determination generally accepted
accounting principles applicable to the accrual method of accounting applied on
a consistent basis from period to period.
"GOVERNMENTAL AUTHORITY" includes the United States, the state, county,
city and political subdivisions in which any of the Real Property is located or
that exercise jurisdiction over any of the Real Property or any business or
operations thereon, and any agency, court, department, commission, board, bureau
or instrumentality of them that exercises jurisdiction over any of the Real
Property or any business or operations thereon.
"GRANGER CLINIC" shall mean the Granger Medical Clinic South located at
2750 West 9000 South, West Jordan, Utah.
"GRANGER CLINIC LEASE" shall mean that certain Medical Office Building
Lease dated as of April 27, 1993 by and between M.O.B. Utah Partnership as
lessor and Healthtrust as lessee, as amended by that certain Amendment to
Medical Office Building Lease dated as of June 28, 1994 by and between M.O.B.
Utah Partnership as lessor and Healthtrust as lessee.
"GRANGER CLINIC LEASEHOLD" shall mean the leasehold estate in the real
property and improvements and structures erected thereon, and all appurtenances
and rights thereto, conveyed pursuant to the Granger Clinic Lease, as more
particularly described on EXHIBIT F hereto.
"GRANGER DEVELOPMENT AGREEMENT" shall mean that certain Development
Agreement dated as of April 28, 1993 by and between M.O.B. Utah Partnership and
Healthtrust.
6
<PAGE>
"HALSTEAD ASSIGNMENT" shall mean that certain Assignment and Assumption of
Contract Rights and Obligations dated as of June 30, 1993 by and between
Paracelsus and AHP Kansas.
"HALSTEAD BONDS" shall mean $14,250,000 in principal amount of City of
Halstead, Kansas Taxable Industrial Revenue Bonds, Series A, 1993, which were
issued pursuant to the Halstead Indenture.
"HALSTEAD CLOSING" shall mean the closing of the transactions contemplated
by Sections 2.1, 3.1, 4.1, 5.1, 6.1 and 6.2 hereof.
"HALSTEAD EQUIPMENT" shall mean those items of movable equipment, vehicles,
furniture and furnishings used in the operations of the Halstead Facility and
leased by AHP Kansas to Paracelsus Kansas pursuant to the Halstead Equipment
Lease.
"HALSTEAD EQUIPMENT LEASE" shall mean that certain Equipment Lease dated as
of June 30, 1993 by and between AHP Kansas and Paracelsus Kansas.
"HALSTEAD FACILITY" shall mean that certain general acute care hospital
located in Halstead, Kansas and known as the Halstead Hospital licensed by the
Kansas Department of Health to operate a total of 190 acute care, psychiatric
and skilled nursing beds.
"HALSTEAD FINANCING STATEMENTS" shall mean (i) that certain financing
statement No. 19763 filed on June 30, 1993 in the Register of Deeds Office of
Harvey County, Kansas, and (ii) that certain financing statement No. 19764 filed
on June 30, 1993 in the Register of Deeds Office of Harvey County, Kansas.
"HALSTEAD INDENTURE" shall mean that certain Trust Indenture dated June
30, 1993 by and between the City of Halstead as issuer and Bank IV Kansas, N.A.
as Trustee.
"HALSTEAD MASTER LEASE" shall mean that certain Lease dated as of June 30,
1993 by and between The City of Halstead as lessor and AHP Kansas as lessee,
notice of which is given by an instrument denominated "Memorandum of Lease and
Option to Purchase," which was recorded on June 30, 1993 in Book 338, Page 436
in the miscellaneous records of Harvey County, Kansas.
"HALSTEAD PERMITTED ENCUMBRANCES" shall mean those permitted liens, claims,
encumbrances, security interests or rights of third parties to the Halstead Real
Property set forth on EXHIBIT G attached hereto.
"HALSTEAD PURCHASE PRICE" shall mean the price set forth in Section 4.1
hereof.
"HALSTEAD REAL PROPERTY" shall mean the leasehold estate in the real
property, as more particularly described in EXHIBIT H hereto, and improvements
and structures erected thereon, and all appurtenances and rights thereto,
conveyed pursuant to the Halstead Master Lease.
7
<PAGE>
"HALSTEAD SECURITY AGREEMENT" shall mean that certain Security and Pledge
Agreement dated as of June 30, 1993 by and between AHP Kansas and Paracelsus
Kansas.
"HALSTEAD SUBLEASE" shall mean that certain Lease dated as of June 30, 1993
by and between AHP Kansas as lessor and Paracelsus Kansas as lessee.
"HAZARDOUS MATERIALS" shall mean (a) any radioactive materials or waste,
oil or petroleum products in any form, flammable explosives, urea formaldehyde
foam insulation, PCBs and transformers or other equipment that contain PCBs, and
radon gas; (b) any chemicals, materials, substances or wastes, which are now or
hereafter become defined as, or included in, the definition of "hazardous
wastes," "extremely hazardous substances," "contaminants," "pollutants," "toxic
substances," "toxic" or "hazardous pollutants," "toxic" or "hazardous
materials," or words of similar import under RCRA, CERCLA, the Hazardous
Materials Transportation Act, as amended, the Clean Water Act, as amended, the
Oil Pollution Act, as amended, the Toxic Substances Control Act, as amended, the
Safe Drinking Water Act, as amended, and their state and local counterparts or
equivalents, or any other Environmental Law; or (c) any friable asbestos as of
the date hereof.
"HEALTHTRUST" shall mean Healthtrust, Inc. - The Hospital Company, a
Delaware corporation.
"HDP" shall mean Hospital Development Properties, Inc., a Delaware
corporation.
"INCLUDING" shall be deemed to mean including, but not limited to.
"INDEMNIFIED PARTY" shall mean a person who may claim a right to
indemnification pursuant to Article 10 hereof.
"INDEMNIFYING PARTY" shall mean a person from whom a right of indemnity may
be claimed pursuant to Article 10 hereof.
"JCAHO" shall mean the Joint Commission on Accreditation of Healthcare
Organizations.
"NHI" shall mean National Health Investors, Inc., a Maryland corporation.
"NHI MOB LEASE" shall mean that certain Medical Office Building Lease dated
as of February 25, 1993 by and between NHI as lessor and Healthtrust as lessee,
notice of which is given by an instrument denominated "Memorandum of Lease,"
which was recorded on March 2, 1993 as Entry No. 5445235, in Book 6613, at Page
1070, and re-recorded on April 22, 1993 as Entry No. 5483109, in Book 6644, at
Page 1678 in the Official Records of Salt Lake County, Utah.
8
<PAGE>
"NHI MOB LEASEHOLD" shall mean the leasehold estate in the real property
and improvements and structures erected thereon, and all appurtenances and
rights thereto, conveyed pursuant to the NHI MOB Lease, as more particularly
described on EXHIBIT I hereto.
"PARACELSUS" shall mean Paracelsus Healthcare Corporation, a California
corporation.
"PARACELSUS ENTITIES" shall mean Paracelsus, Paracelsus Kansas, Paracelsus
New Orleans and Paracelsus Utah, collectively.
"PARACELSUS ENTITY" shall mean any one of the Paracelsus Entities.
"PARACELSUS KANSAS" shall mean Paracelsus Halstead Hospital, Inc., a Kansas
corporation.
"PARACELSUS NEW ORLEANS" shall mean Paracelsus Elmwood Medical Center,
Inc., a Louisiana corporation.
"PARACELSUS UTAH" shall mean Paracelsus Pioneer Valley Hospital, Inc., a
Utah corporation.
"PCBS" shall mean polychlorinated biphenyls.
"PERSON" shall mean any natural person, corporation, business trust,
limited liability company, association, company, partnership or government or
any agency or political subdivision thereof.
"PIONEER" shall mean Pioneer Valley Hospital, Inc., a Utah corporation.
"PIONEER ASSIGNMENT AND ASSUMPTION AGREEMENT" shall have the meaning set
forth in Section 8.9 hereto.
"PIONEER BUSINESS" shall mean the Pioneer Facility and the other assets and
operations associated with the Pioneer Facility.
"PIONEER CLOSING" shall mean the closing of the transactions contemplated
by Sections 2.3, 3.3, 4.3, 6.4 and 6.5 hereof.
"PIONEER EDUCATION CENTER" shall mean the Pioneer Medical Plaza and
Education Center located at 3460 South Pioneer Parkway, West Valley, Utah.
"PIONEER FACILITY" shall mean the Pioneer Hospital, the Pioneer Medical
Arts Building, the Pioneer Medical Plaza, the Pioneer Education Center, the Salt
Lake Clinic and the Granger Clinic, as well as all other offices, centers,
operations and facilities relating thereto.
9
<PAGE>
"PIONEER FEE PROPERTY" shall mean the fee estate in the real property, as
more particularly described in EXHIBIT J hereto, and improvements and structures
erected thereon, and all appurtenances and rights thereto, constituting in part
the Pioneer Facility including, without limitation, the Pioneer Hospital, the
Pioneer Medical Plaza and the Pioneer Education Center, but excluding the
Pioneer Leasehold Property.
"PIONEER FINANCIAL STATEMENTS" shall mean the balance sheets, income
statements and statements of cash flow indicated in Section 7.1(S) hereof.
"PIONEER HOSPITAL" shall mean that certain general acute care hospital
located in West Valley City, Utah and known as the Pioneer Valley Hospital
licensed by the Utah Health Facility Licensure Bureau to operate a total of 139
acute care beds.
"PIONEER HOSPITAL RELATED RIGHTS" shall have the meaning specified in
Section 13.1 hereto.
"PIONEER LEASE" shall mean the lease of the Pioneer Fee Property contained
in Exhibit AA attached hereto.
"PIONEER LEASEHOLD PROPERTY" shall mean the NHI MOB Leasehold, the Boyer
Clinic Leasehold and the Granger Clinic Leasehold, and any other leasehold
assigned to Paracelsus Utah as lessee pursuant to the Columbia Agreement,
collectively.
"PIONEER MEDICAL ARTS BUILDING" shall mean the Pioneer Medical Arts office
building located at 3336 South Pioneer Parkway, West Valley, Utah.
"PIONEER MEDICAL PLAZA" shall mean the Pioneer Medical Plaza office
building located at 4084 West Pioneer Parkway, West Valley, Utah.
"PIONEER PERMITTED ENCUMBRANCES" shall mean those permitted liens, claims,
encumbrances, security interests or rights of third parties to the Pioneer Real
Property set forth on EXHIBIT K attached hereto.
"PIONEER REAL PROPERTY" shall mean the Pioneer Fee Property and the Pioneer
Leasehold Property, collectively.
"PIONEER PURCHASE PRICE" shall mean the price set forth in Section 4.3
hereof.
"PIONEER RIGHT OF FIRST REFUSAL" shall mean that certain Right of First
Refusal Agreement dated as of March 13, 1991 by and between the Burton F. and
Laverne R. Brasher Charitable Remainder Units Trust and Healthtrust.
"PIONEER RIGHTS TO PURCHASE" shall mean all rights to purchase the fee
estate underlying any portion of the Pioneer Leasehold Property conveyed
pursuant to the NHI MOB Lease, the Boyer Clinic Lease or the Granger Clinic
Lease.
10
<PAGE>
"PROGRAMS" shall mean the Medicare and/or Medicaid programs.
"RCRA" shall mean the federal Resource Conservation Recovery Act, as
amended.
"REAL PROPERTY" shall mean all or any portion of the Halstead Real
Property, the Elmwood Real Property or the Pioneer Real Property.
"RELEASE" or "THREATENED RELEASE" shall have the meaning specified in
CERCLA, except to the extent that the applicable laws, ordinances, rules,
regulations or common law of the state in which a particular parcel of real
property is located establish a broader meaning of the term "release" or
"threatened release," in which case, such broader meaning shall apply.
"SALT LAKE CLINIC" shall mean the Salt Lake Industrial Clinic located at
441 South Redwood Road, Salt Lake City, Utah.
"SOLID WASTE" shall have the meaning specified in RCRA, except to the
extent that the applicable laws, ordinances, rules, regulations or common law of
the state in which a particular parcel of real property is located establish a
broader meaning of the term "solid waste," in which case, such broader meaning
shall apply.
"THIRD-PARTY CLAIM" shall mean a claim by a third party against any person
that may give rise to a claim of indemnity under Article 10 hereof.
"TITLE COMPANY" shall mean Stewart Title Guaranty Company.
"TRANSACTION DOCUMENTS" shall mean this Agreement, as well as each
instrument referred to in Article 6 hereof, as well as each instrument referred
to in such instruments.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 HALSTEAD BONDS AND HALSTEAD EQUIPMENT. Subject to all of the terms
and conditions of this Agreement, AHP Kansas shall sell and convey, and
Paracelsus Utah shall purchase and pay for, the Halstead Bonds and the Halstead
Equipment.
2.2 ELMWOOD FEE PROPERTY. Subject to all of the terms and conditions of
this Agreement, AHP New Orleans shall sell and convey, and Paracelsus Utah shall
purchase and pay for, the Elmwood Fee Property.
2.3 PIONEER FEE PROPERTY. Subject to all of the terms and conditions of
this Agreement, Paracelsus Utah shall sell and convey, and AHP Utah shall
purchase and pay for, the Pioneer Fee Property.
11
<PAGE>
ARTICLE 3
ASSIGNMENTS OF OTHER ASSETS
3.1 HALSTEAD FACILITY ASSIGNMENTS. On the terms and subject to the
conditions and exceptions set forth herein, AHP Kansas hereby agrees to assign
to Paracelsus Utah and Paracelsus Utah agrees to accept assignment from AHP
Kansas of all of AHP Kansas' right, title, claim and interest in the Halstead
Master Lease.
3.2 ELMWOOD PARKING LEASE ASSIGNMENT. On the terms and subject to the
conditions and exceptions set forth herein, AHP New Orleans hereby agrees to
assign to Paracelsus Utah and Paracelsus Utah agrees to accept assignment from
AHP New Orleans of all of AHP New Orleans' right, title, claim and interest in
the Elmwood Parking Lease.
3.3 PIONEER LEASE. On the terms and subject to the conditions and
exceptions set forth herein, concurrently with the Pioneer Closing, AHP Utah
shall lease to Paracelsus Utah the Pioneer Fee Property by executing and
delivering to Paracelsus Utah the Pioneer Lease, which Pioneer Lease also shall
be executed and delivered to AHP Utah by Paracelsus Utah and shall be evidenced
by a memorandum of lease executed by AHP Utah and Paracelsus Utah to be recorded
at the Pioneer Closing.
ARTICLE 4
PURCHASE PRICE
4.1 HALSTEAD PURCHASE PRICE. The total consideration for the purchase and
sale of the Halstead Bonds and the Halstead Equipment and the assignments set
forth in Section 3.1 above shall be $14,250,000 plus an amount determined in
accordance with SCHEDULE 4.1 hereto. Paracelsus Utah shall pay the Halstead
Purchase Price by wire transfer of same day funds to an account specified in
advance by AHP.
4.2 ELMWOOD PURCHASE PRICE. The total consideration for the purchase and
sale of the Elmwood Fee Property and the assignment set forth in Section 3.2
above shall be $37,440,000. Paracelsus Utah shall pay the Elmwood Purchase
Price in one of the following alternative manners, at Paracelsus Utah's
election: (a) by wire transfer of $37,440,000 in same day funds to an account
specified in advance by AHP, or (b) by delivery to AHP of the Elmwood Promissory
Note duly executed by Paracelsus Utah and the Elmwood Letter of Credit, and by
wire transfer of same day funds in the manner provided in CLAUSE (A) in an
amount equal to the difference between the principal amount of the Elmwood
Promissory Note and $37,440,000.
4.3 PIONEER PURCHASE PRICE. The total consideration for the purchase and
sale of the Pioneer Fee Property and the assignments set forth in Section 3.3
above shall be $51,690,000. AHP Utah shall pay the Pioneer Purchase Price by
wire transfer of same day funds to an account specified in advance by
Paracelsus.
12
<PAGE>
ARTICLE 5
TERMINATION OF CERTAIN AGREEMENTS
5.1 HALSTEAD FACILITY TERMINATIONS. On the terms and subject to the
conditions and exceptions set forth herein, AHP Kansas and Paracelsus Utah
hereby agree to terminate the Halstead Sublease, Halstead Equipment Lease, the
Halstead Assignment, and the Halstead Security Agreement and the Halstead
Financing Statements, and each shall execute and deliver such documents at the
Halstead Closing as are necessary to effectuate such terminations.
5.2 ELMWOOD FACILITY TERMINATIONS. On the terms and subject to the
conditions and exceptions set forth herein, AHP New Orleans and Paracelsus Utah
hereby agree to terminate or cancel the Elmwood Lease, the Elmwood Security
Agreement, the Elmwood Assignment, the Elmwood Warranty Rights Assignment and
the ECI Assignment, and each shall execute and deliver such documents at the
Elmwood Closing as are necessary to effectuate such terminations.
ARTICLE 6
DOCUMENTS OF CONVEYANCE
6.1 AHP KANSAS - HALSTEAD FACILITY DOCUMENTS. At the Halstead Closing,
AHP Kansas shall duly execute, acknowledge and deliver to Paracelsus Utah:
(A) the Halstead Bonds, assigned to Paracelsus Utah by endorsement
without recourse, as set forth in EXHIBIT L attached hereto;
(B) an Assignment of Halstead Master Lease substantially in the form
of EXHIBIT M attached hereto;
(C) a Termination of Halstead Sublease substantially in the form of
EXHIBIT N attached hereto;
(D) a Notice of Assignment substantially in the form of EXHIBIT O
attached hereto;
(E) a Consent to Assignment substantially in the form of EXHIBIT P
attached hereto;
(F) a Bill of Sale substantially in the form of EXHIBIT Q attached
hereto;
(G) Uniform Commercial Code Termination Statements (Form UCC-3)
substantially in the form of EXHIBIT R attached hereto; and
13
<PAGE>
(H) a certificate of the President or Vice President of AHP Kansas
substantially in the form of EXHIBIT S attached hereto.
6.2 PARACELSUS UTAH - HALSTEAD FACILITY DOCUMENTS. At the Halstead
Closing, Paracelsus Utah shall duly execute, acknowledge and deliver to AHP
Kansas:
(A) an Acceptance and Assumption Agreement substantially in the form
of EXHIBIT T attached hereto;
(B) an Assignment of Halstead Master Lease substantially in the form
of EXHIBIT M attached hereto; and
(C) a Termination of Halstead Sublease substantially in the form of
EXHIBIT N attached hereto.
6.3 AHP NEW ORLEANS - ELMWOOD FACILITY DOCUMENTS. At the Elmwood Closing,
AHP New Orleans shall duly execute, acknowledge and deliver to Paracelsus Utah:
(A) a Special Warranty Deed of the Elmwood Fee Property substantially
in the form of EXHIBIT U attached hereto, conveying to Paracelsus Utah good,
indefeasible, insurable and marketable title to the Elmwood Fee Property;
(B) a Termination of Elmwood Lease and an Assignment of Elmwood
Parking Lease substantially in the forms of EXHIBITS V AND V-1 attached hereto;
(C) Uniform Commercial Code Termination Statements (Form UCC-3)
substantially in the form of EXHIBIT W attached hereto;
(D) a Certificate of Non-Foreign Status and Taxpayer Identification
Number, in substantially the form of EXHIBIT FF attached hereto;
(E) an Owner's Affidavit, in substantially the form of EXHIBIT Z
attached hereto;
(F) a certificate of the President or Vice President of AHP New
Orleans substantially in the form of EXHIBIT X attached hereto;
(G) if necessary, the Elmwood Promissory Note substantially in the
form of EXHIBIT KK; and
(H) if necessary, the Elmwood Letter of Credit substantially in the
form of EXHIBIT LL.
6.4 PARACELSUS UTAH - ELMWOOD FACILITY DOCUMENTS. At the Elmwood Closing,
Paracelsus Utah shall duly execute, acknowledge and deliver to AHP New Orleans
an
14
<PAGE>
Assignment of Elmwood Parking Lease substantially in the form of EXHIBIT V-1
attached hereto, and a Termination of Elmwood Lease substantially in the form of
EXHIBIT V attached hereto.
6.5 PARACELSUS UTAH - PIONEER FACILITY DOCUMENTS. At the Pioneer Closing,
Paracelsus Utah shall duly execute, acknowledge and deliver to AHP Utah:
(A) a Special Warranty Deed to the Pioneer Fee Property,
substantially in the form of EXHIBIT Y attached hereto, conveying to AHP Utah
good, indefeasible, insurable and recordable title to the Pioneer Fee Property;
(B) the Pioneer Lease;
(C) opinions from counsel to Paracelsus pertaining to each of the
California Facilities in form contemplated by the Pioneer Lease;
(D) a security agreement in substantially the form of EXHIBIT BB
attached hereto;
(E) a security agreement in substantially the form of EXHIBIT CC
attached hereto;
(F) a Collateral Assignment of Leases and Rents substantially in the
form of EXHIBIT DD attached hereto;
(G) UCC-1 Financing Statements in substantially the form of
EXHIBIT EE attached hereto;
(H) a Certificate of Non-Foreign Status and Taxpayer Identification
Number in substantially the form of EXHIBIT FF attached hereto;
(I) a certificate of the President or Vice President of Paracelsus
Utah substantially in the form of EXHIBIT GG attached hereto; and
(J) a Pioneer Assignment and Assumption Agreement substantially in
the form of EXHIBIT MM attached hereto.
6.6 AHP UTAH - PIONEER FACILITY DOCUMENTS. At the Pioneer Closing, AHP
Utah shall duly execute, acknowledge and deliver to Paracelsus Utah:
(A) the Pioneer Lease;
(B) a certificate of the President or Vice President of AHP Utah
substantially in the form of EXHIBIT HH attached hereto; and
(C) a Pioneer Assignment and Assumption agreement substantially in
the form of EXHIBIT MM attached hereto.
15
<PAGE>
6.7 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. From time to time after
the date hereof, the AHP Entities and the Paracelsus Entities shall execute and
deliver such other instruments of conveyance and transfer, and take such other
actions as such party or the Title Company reasonably may request, to effect the
transactions contemplated hereby.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 PARACELSUS ENTITIES REPRESENTATIONS AND WARRANTIES. The Paracelsus
Entities each represent and warrant the following:
(A) ORGANIZATION, POWERS, ETC. Paracelsus is a California
corporation and Paracelsus Utah is a Utah corporation, and each is duly
organized, validly existing and in good standing under the laws of its
respective state of organization. Each of the Paracelsus Entities is authorized
to do business in each state or jurisdiction in which the nature of its business
requires such authorization except where a failure to be so qualified does not
have a material adverse effect on its business, properties, condition (financial
or otherwise) or operations. Each Paracelsus Entity has the requisite corporate
power, authority and legal right to (1) execute and deliver, and perform and
observe the provisions of, this Agreement, (2) execute and deliver, and perform
and observe the provisions of, the Transaction Documents to which such
Paracelsus Entity is a party, (3) to carry out the transactions contemplated
hereby and by the other Transaction Documents to be carried out by such
Paracelsus Entity, and (4) to conduct their respective businesses as such
businesses are now being conducted. Neither the execution nor delivery of the
Transaction Documents by any Paracelsus Entity is in contravention of law or of
the terms of any such Paracelsus Entity's charter documents. Paracelsus Utah
has full power, authority and legal right to transfer good, indefeasible,
insurable and marketable title to the Pioneer Fee Property to AHP Utah free and
clear of all liens, claims and encumbrances except for Pioneer Permitted
Encumbrances. Prior to their respective mergers with and into Paracelsus Utah,
Paracelsus Kansas was a Kansas corporation and Paracelsus New Orleans was a
Louisiana corporation. Each of Paracelsus Kansas and Paracelsus New Orleans
had, immediately prior to their respective mergers with and into Paracelsus
Utah, the requisite corporate power, authority and legal right to (a) execute
and deliver the agreement and plan of merger and all related documents pursuant
to which such entity was merged with and into Paracelsus Utah, (b) carry out the
transactions contemplated by such agreement and documents, and (c) conduct their
respective businesses as such businesses were being conducted immediately prior
to such mergers. Neither the execution nor delivery of such agreements and
plans of merger and all related documents by either Paracelsus Kansas or
Paracelsus New Orleans was in contravention of law or of the terms of such
entity's charter documents. The execution and delivery of such agreements and
plans of merger and all related documents by Paracelsus Kansas and Paracelsus
New Orleans were duly authorized by all necessary corporate and stockholder
action. Under the applicable laws of the States of Kansas, Louisiana and Utah,
Paracelsus Utah has good title to all assets of Paracelsus Kansas and Paracelsus
New Orleans, has acceded to all rights and obligations of Paracelsus Kansas and
Paracelsus New Orleans, and has assumed all liabilities of Paracelsus Kansas and
Paracelsus New Orleans.
16
<PAGE>
(B) DUE AUTHORIZATION. The Transaction Documents and each instrument
provided for herein or therein to which such Paracelsus Entity is a party will
be, when executed and delivered as contemplated hereby, duly authorized,
executed and delivered by such Paracelsus Entity, and the Transaction Documents
constitute, and each such instrument will constitute, when executed and
delivered as contemplated hereby, legal, valid and enforceable obligations of
such Paracelsus Entity. The execution and delivery of the Transaction Documents
have been duly authorized by all necessary corporate and stockholder action.
(C) GOVERNMENTAL APPROVALS. No consent, approval or other
authorization of, or registration, declaration or filing with, any court or
governmental agency or commission is required for the due execution and delivery
of the Transaction Documents to which any Paracelsus Entity is a party or for
the validity or enforceability thereof against each Paracelsus Entity that is a
party to such Transaction Document other than the recording or filing for
recordation of the Transaction Documents, which recordings shall be made as soon
as practicable after the date hereof.
(D) COLUMBIA AGREEMENT. None of the Paracelsus Entities party to the
Columbia Agreement, and to the knowledge of the Paracelsus Entities, none of the
other parties to the Columbia Agreement is in default in the observance or
performance of the Columbia Agreement, and the Columbia Agreement is in full
force and effect.
(E) NO LITIGATION. There are no actions, proceedings or
investigations pending or, to the best knowledge of the Paracelsus Entities,
threatened, against the Paracelsus Entities before or by any court, arbitrator,
administrative agency or other governmental authority, that call into question
the authority or right of any Paracelsus Entity to enter into and perform the
Transaction Documents, or that, individually or in the aggregate, are expected,
in the reasonable judgment of such Paracelsus Entity, to materially and
adversely affect such Paracelsus Entity's ability to carry out any of the
transactions contemplated by the Transaction Documents to be carried out by such
Paracelsus Entity.
(F) NO CONFLICTS. Neither the execution and delivery of the
Transaction Documents to which any Paracelsus Entity is a party, compliance with
the provisions hereof or thereof, nor the carrying out of the transactions
contemplated hereby or thereby to be carried out by such Paracelsus Entity will
result in (1) a breach or violation of (a) any material law or governmental rule
or regulation applicable to any such Paracelsus Entity now in effect, (b) any
provision of any of such Paracelsus Entity's charter documents, or (c) any
judgment, order or decree of any court, arbitrator, administrative agency of
other governmental authority binding upon such Paracelsus Entity; (2) the
acceleration of the obligations of such Paracelsus Entity; or (3) the creation
of any lien, claim or encumbrance upon any properties or assets of such
Paracelsus Entity except as provided in the Transaction Documents.
(G) SOLVENCY. Each Paracelsus Entity is solvent and will not be
rendered insolvent as a result of carrying out of the transactions required
hereunder to be carried out by it. Each Paracelsus Entity has filed all tax
returns that are required to be filed by it and is not in default in the payment
of any taxes levied or assessed against it or any of its assets, or under any
judgment, order, decree, rule or regulation of any court, arbitrator,
administrative
17
<PAGE>
agency or other governmental authority to which it may be subject that would, in
each case or in the aggregate, materially adversely affect the carrying out of
the transactions contemplated by any of the Transaction Documents. In agreeing
to carry out each transfer and obligation contemplated hereby and by each
instrument provided for herein to which such Paracelsus Entity is a party, such
Paracelsus Entity is not acting with actual intent to hinder, delay or defraud
any of its creditors or in the reasonable expectation of not receiving
reasonably equivalent value in exchange for such transfer or obligation.
(H) TITLE. Effective upon the Columbia Closing, Paracelsus Utah will
hold good, indefeasible, insurable and recordable fee simple title to the
Pioneer Fee Property, and there will exist no mortgages, liens, restrictions,
agreements, claims or other encumbrances that would cause title to the Pioneer
Fee Property to be unmarketable or that will materially interfere with any use
of the Pioneer Fee Property in a manner consistent with its current use.
(I) SUITABILITY. The Pioneer Facility includes all land,
improvements, fixtures, furniture and equipment that are materially related to
the operations of the Pioneer Facility as contemplated to be conducted and as
authorized to be conducted under all licenses and certificates required to be
granted to the Pioneer Facility.
(J) REGULATORY COMPLIANCE. Effective upon the happening of the
Columbia Closing, Paracelsus Utah will be in compliance in all material respects
with all applicable rules, regulations and requirements of all federal, state
and local commissions, boards, bureaus and agencies having jurisdiction over the
Pioneer Business and the operations of the Pioneer Business, including, without
limitation, the appropriate state licensing agencies and the Internal Revenue
Service. The Pioneer Facility has timely filed all reports, data and other
information required to be filed with such commissions, boards, bureaus and
agencies where a failure to file timely would have a material adverse effect on
the Pioneer Business.
(K) COMMITMENTS. Except for commitments, contracts, leases and
agreements listed on Schedules 5.9 and 5.13 to the Columbia Agreement, there are
no contracts or commitments materially affecting ownership of title to, use of,
or any material interest in real estate used or proposed to be used in
connection with the Pioneer Business. Paracelsus has provided AHP with a full
and correct copy of Schedules 5.9 and 5.13 to the Columbia Agreement and the
documents referred to therein.
(L) CONDITION. The Pioneer Facility is in good working order and
repair, and:
(1) all permits required for the continued use and occupancy of
the Pioneer Facility have been issued with respect thereto by the governmental
agencies having jurisdiction thereover;
(2) the Paracelsus Entities have no knowledge of (including
knowledge acquired pursuant to the Columbia Agreement) and have not received any
notice of any claim, requirement or demand of any licensing or certifying agency
supervising or having authority over the Pioneer Facility to rework or redesign
it in any material respect or to provide
18
<PAGE>
additional furniture, fixtures, equipment or inventory so as to conform to or
comply with any law that has not been materially satisfied;
(3) all utilities necessary for the use and operation of the
Pioneer Facility as contemplated are located within the boundaries of the
Pioneer Real Property (or by off-site connections approved by AHP Utah) and do
not cross lands of others adjoining the Pioneer Real Property except over
validly created and existing easements appurtenant to the Pioneer Real Property,
and there are no encroachments of buildings, structures, or improvements located
on the Pioneer Fee Property onto adjoining lands, nor are there any
encroachments onto the Pioneer Fee Property of buildings, structures or other
improvements located on adjoining lands;
(4) the Paracelsus Entities have no knowledge of any material
defects in the grading or drainage of the Pioneer Real Property;
(5) the Paracelsus Entities have no knowledge of any material
defect in the design, material or workmanship of the Pioneer Facility or that
the equipment and systems serving the Pioneer Facility, including the plumbing,
heating, air conditioning, electrical and sprinkler systems, are otherwise than
in good working order and condition for the conduct of the operations of the
Pioneer Facility in the ordinary course of business thereof as heretofore
conducted and as authorized to be conducted under all licenses and certificates
heretofore granted to the Pioneer Facility; and
(6) the Paracelsus Entities have no knowledge of any surface or
subsurface soil condition that may damage, disrupt or otherwise affect, the
Pioneer Facility or any underground utility line or other facility servicing the
Pioneer Facility.
(M) COMPETING USES; ACCESS. There are no parties in possession of
any portion of the Pioneer Fee Property as lessees, tenants at sufferance or
trespassers, except as approved by AHP Utah. There is no pending or, to the
best knowledge of the Paracelsus Entities, threatened condemnation or similar
proceeding or assessment affecting the Pioneer Real Property, nor, to the best
knowledge of the Paracelsus Entities, is any such proceeding or assessment
contemplated by any governmental authority. The streets abutting the Pioneer
Fee Property are (1) public roads to which the Pioneer Fee Property has direct
access by vehicle and by foot, or (2) private ways (with direct access by
vehicle or by foot to public roads) to which the Pioneer Fee Property has direct
access without charge or liability for maintenance or repair.
(N) LICENSURE. The Pioneer Hospital is duly licensed by the Utah
Department of Health as a 135-bed acute care hospital. The pharmacies,
laboratories and all other ancillary departments located at the Pioneer Facility
or operated for the benefit of the Pioneer Facility that are required to be
specially licensed are licensed by the appropriate licensing agency. The
Pioneer Facility has all other licenses, permits and approvals that are needed
or required by law to operate the Pioneer Business as it is presently conducted
and to use its assets as those assets are currently used except where the
failure to obtain and maintain any such licenses, permits or approvals would not
have a material adverse effect on the operations or financial condition of the
Pioneer Business. The Pioneer Facility is in conformance with all
19
<PAGE>
applicable insurance requirements. There is no action pending or, to the best
knowledge of the Paracelsus Entities, recommended by the appropriate state or
federal agency to revoke, withdraw or suspend any license to operate the Pioneer
Facility, or certification of the Pioneer Facility, or any action of any other
type with regard to licensure or certification.
(O) MEDICARE PARTICIPATION/ACCREDITATION. Paracelsus Utah is
eligible to receive payment under Titles XVIII and XIX of the Social Security
Act and is a "provider" under existing provider agreements with the Programs
through applicable intermediaries. The Pioneer Facility is in compliance with
the conditions of participation of the Programs and has received all approvals
or qualifications necessary for capital reimbursement on the assets of the
Pioneer Facility. There is not pending, nor to the best of the Paracelsus
Entities' knowledge, threatened, any proceeding or investigation under the
Programs involving the Pioneer Facility or any of the assets comprising the
Pioneer Facility. The Pioneer Facility's cost reports for the fiscal years
through December 31, 1994 have been filed and are complete and correct in all
material respects. The Pioneer Facility's cost reports were filed when due.
There are no claims, actions or appeals pending before any commission, board or
agency, including, without limitation, any intermediary or carrier, the Provider
Reimbursement Review Board or the Administrator of the Health Care Financing
Administration, with respect to any state or federal Medicare or Medicaid cost
reports or claims filed with respect to the Pioneer Facility on or before the
date hereof, or any disallowances by any commission, board or agency in
connection with any audit of such cost reports, except as specifically described
and set forth on Schedule 5.7 to the Columbia Agreement. Paracelsus has
provided AHP with a full and correct copy of Schedule 5.7 to the Columbia
Agreement. No validation review or program integrity review relating to the
Pioneer Facility, the operation thereof, or the consummation of the transactions
contemplated hereby, or relating to the assets comprising the Pioneer Facility
has been conducted by any commission, board or agency in connection with the
Programs, and to the best knowledge of the Paracelsus Entities,no such reviews
are scheduled, pending or threatened against or affecting the Pioneer Facility,
or any of the assets comprising the Pioneer Facility, or the consummation of the
transactions contemplated hereby. The Pioneer Facility is in full compliance in
all material respects with all rules, regulations and requirements of all
governmental agencies having jurisdiction over the Pioneer Facility or its
operations. The Pioneer Facility is accredited by the JCAHO, and has cured all
deficiencies, if any, noted in the most recent survey of the Pioneer Facility
conducted by the JCAHO or any state licensing or certification agency.
(P) ENVIRONMENTAL MATTERS. Except as disclosed in such Phase I
environmental site assessments delivered to AHP Utah pursuant to Section 8.14
hereof, the Paracelsus Entities represent to their actual knowledge the
following:
(1) each of the Paracelsus Entities are in compliance with all
applicable Environmental Laws, except where the failure to be in compliance
would not have a material adverse effect on any of their respective businesses;
(2) there are not any Environmental Conditions resulting from
the operations by Columbia or any of its affiliates of any portion of the
Pioneer Real Property
20
<PAGE>
that may give rise to any on-site or off-site remedial obligations or any other
liability or obligation that shall have a material adverse effect on the Pioneer
Business.
(3) there are not any Environmental Conditions existing on or
resulting from the operations of any portion of the Pioneer Real Property by any
person that may give rise to any on-site or off-site remedial obligations or any
other liability or obligation that shall have a material adverse effect on the
Pioneer Business;
(4) no portion of the Pioneer Real Property is subject to any
existing, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any Governmental Authority or private party under any
Environmental Law;
(5) all notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed by Columbia or any of its affiliates under
any Environmental Law in connection with any portion of the Pioneer Real
Property, including without limitation those relating to the treatment, storage,
disposal or release of a Hazardous Material or solid waste into the environment,
have been duly obtained or filed and each such Columbia affiliate is in
compliance with the terms and conditions of all notices, permits, licenses and
similar authorizations, except where the failure to obtain such authorizations
would not have a material adverse effect on the Pioneer Business.
(6) without limiting the foregoing, there is no liability to any
nongovernmental third party in connection with any release or threatened release
of any Hazardous Material or solid wastes by any person into the environment as
a result of or with respect to any portion of the Pioneer Real Property that
shall have a material adverse effect on the Pioneer Business; and
(7) neither Columbia or any of its affiliates nor Paracelsus or
any of its affiliates has: (a) entered into or been subject to any consent
decree, compliance order, or administrative order with respect to any portion of
the Pioneer Real Property or any facilities or operations thereon; (b) received
notice under the citizen suit provision of any Environmental Law in connection
with any portion of the Pioneer Real Property or any facilities or operations
thereon; (c) received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim or suit with
respect to any Environmental Condition relating to any portion of the Pioneer
Real Property or any facilities or operations thereon; or (d) been subject to or
threatened with any governmental or citizen action with respect to any portion
of the Pioneer Real Property or any facilities or operations thereon.
(Q) ASBESTOS. Except as disclosed in such Phase I environmental site
assessments delivered to AHP Utah pursuant to Section 8.14 hereof, to the best
knowledge of the Paracelsus Entities after engaging an outside consultant, the
Pioneer Facility does not contain any friable asbestos in any form.
(R) BROKERS. The Paracelsus Entities have not dealt with any broker
or finder in connection with the transactions contemplated hereby. The AHP
Entities shall not
21
<PAGE>
be liable for any broker's or finder's fees on the basis of any agreement,
undertaking or commitment of the Paracelsus Entities.
(S) FINANCIAL STATEMENTS. Paracelsus has delivered to AHP copies of
the Pioneer Financial Statements delivered to it by Columbia pursuant to the
Columbia Agreement.
To the best of the Paracelsus Entities' actual knowledge, such audited
financial statements have been prepared in accordance with generally accepted
accounting principles and practices consistently applied; such unaudited
financial statements materially conform to GAAP; such balance sheets present
fairly the financial condition of the Pioneer Business as of the dates indicated
thereon, and such income statements and statements of cash flow present fairly
the results of operations of the Pioneer Business for the periods indicated
thereon; and since the date indicated on such balance sheets, there have
occurred no material adverse changes in the financial condition or business of
the Pioneer Business as reflect in the Pioneer Financial Statements.
(T) NO MISSTATEMENTS. To the best knowledge of the each of the
Paracelsus Entities, neither this Agreement, including the exhibits and
schedules attached hereto, nor any certificate or instrument furnished or to be
furnished to any AHP Entity by any Paracelsus Entity in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
7.2 AHP ENTITIES REPRESENTATIONS AND WARRANTIES. The AHP Entities each
represent and warrant the following:
(A) ORGANIZATION, POWERS, ETC. AHP is a Delaware corporation, AHP
Kansas is a Kansas corporation, AHP New Orleans is a Louisiana corporation and
AHP Utah is a Utah corporation, and each is duly organized, validly existing and
in good standing under the laws of its respective state of organization. Each
of the AHP Entities is authorized to do business in each state or jurisdiction
in which the nature of its business requires such authorization except where a
failure to be so qualified does not have a material adverse effect on its
business, properties, condition (financial or otherwise) or operations. Each
AHP Entity has the requisite corporate power, authority and legal right to (1)
execute and deliver, and perform and observe the provisions of, this Agreement,
(2) execute and deliver, and perform and observe the provisions of, the
Transaction Documents to which such AHP Entity is a party, (3) to carry out the
transactions contemplated hereby and by the other Transaction Documents to be
carried out by such AHP Entity, and (4) to conduct their respective businesses
as such businesses are now being conducted. Neither the execution nor delivery
of the Transaction Documents by any AHP Entity is in contravention of law or of
the terms of any such AHP Entity's charter documents. AHP Utah has full power,
authority and legal right to transfer good, indefeasible, insurable and
marketable title to the Elmwood Real Property to Paracelsus Utah free and clear
of all liens, claims and encumbrances except for Elmwood Permitted Encumbrances.
AHP Kansas has full power, authority and legal right to transfer good title to
22
<PAGE>
the Halstead Bonds and the Halstead Equipment to Paracelsus Utah free and clear
of all liens, claims and encumbrances.
(B) DUE AUTHORIZATION. The Transaction Documents and each instrument
provided for herein or therein to which such AHP Entity is a party will be, when
executed and delivered as contemplated hereby, duly authorized, executed and
delivered by such AHP Entity, and the Transaction Documents constitute, and each
such instrument will constitute, when executed and delivered as contemplated
hereby, legal, valid and enforceable obligations of such AHP Entity. The
execution and delivery of the Transaction Documents have been duly authorized by
all necessary corporate and stockholder action.
(C) GOVERNMENTAL APPROVALS. No consent, approval or other
authorization of, or registration, declaration or filing with, any court or
governmental agency or commission is required for the due execution and delivery
of the Transaction Documents to which any AHP Entity is a party or for the
validity or enforceability thereof against each AHP Entity that is a party to
such Transaction Document other than the recording or filing for recordation of
the Transaction Documents, which recordings shall be made as soon as practicable
after the date hereof.
(D) NO LITIGATION. There are no actions, proceedings or
investigations pending or, to the best knowledge of the AHP Entities, threatened
against the AHP Entities before or by any court, arbitrator, administrative
agency or other governmental authority, that call into question the authority or
right of any AHP Entity to enter into and perform the Transaction Documents, or
that, individually or in the aggregate, are expected, in the reasonable judgment
of such AHP Entity, to materially and adversely affect such AHP Entity's ability
to carry out any of the transactions contemplated by the Transaction Documents
to be carried out by such AHP Entity.
(E) NO CONFLICTS. Neither the execution and delivery of the
Transaction Documents to which an AHP Entity is a party, compliance with the
provisions hereof or thereof, nor the carrying out of the transactions
contemplated hereby or thereby to be carried out by such AHP Entity will result
in (1) a breach or violation of (a) any material law or governmental rule or
regulation applicable to any such AHP Entity now in effect, (b) any provision of
any of such AHP Entity's charter documents, (c) any judgment, order or decree of
any court, arbitrator, administrative agency of other governmental authority
binding upon such AHP Entity, or (d) any material agreement or instrument to
which such AHP Entity is a party or by which such AHP Entity or its properties
is bound; (2) the acceleration of the obligations of such AHP Entity; or (3) the
creation of any lien, claim or encumbrance upon any properties or assets of such
AHP Entity except as provided in the Transaction Documents.
(F) SOLVENCY. Each AHP Entity is solvent and will not be rendered
insolvent as a result of carrying out of the transactions required hereunder to
be carried out by it. Each AHP Entity has filed all tax returns that are
required to be filed by it and is not in default in the payment of any taxes
levied or assessed against it or any of its assets, or under any judgment,
order, decree, rule or regulation of any court, arbitrator, administrative
agency or other governmental authority to which it may be subject that would, in
each case or in the
23
<PAGE>
aggregate, materially adversely affect the carrying out of the transactions
contemplated by any of the Transaction Documents. In agreeing to carry out each
transfer and obligation contemplated hereby and by each instrument provided for
herein to which such AHP Entity is a party, such AHP Entity is not acting with
actual intent to hinder, delay or defraud any of its creditors or in the
reasonable expectation of not receiving reasonably equivalent value in exchange
for such transfer or obligation.
(G) TITLE TO ELMWOOD REAL PROPERTY. The Elmwood Fee Property is free
and clear of all liens, claims, encumbrances, security interests or rights of
third parties claiming by, through or under any of the AHP Entities. The
Elmwood Parking Leasehold has not been modified except as set forth in this
Agreement and is free and clear of all liens, claims, encumbrances, security
interests or rights of third parties claiming by, through or under any of the
AHP Entities. The AHP Entities know of no defaults by the lessees of any
portion of the Elmwood Real Property that are continuing as of the date hereof.
(H) TITLE TO HALSTEAD REAL PROPERTY. The Halstead Master Lease and
the Halstead Sublease have not been assigned or modified except as set forth in
this Agreement and are free and clear of all liens, claims, encumbrances,
security interests or rights of third parties claiming by, through or under any
of the AHP Entities. The AHP Entities have no actual knowledge of any defaults
by the lessees of any portion of the Halstead Real Property that are continuing
as of the date hereof.
(I) TRANSFERS ON AN "AS IS" BASIS. The AHP Entities make no
representations or warranties as to the physical condition of the assets
transferred or assigned by the AHP Entities to Paracelsus Utah pursuant to
Articles 2 and 3 hereof, and each such transfer or assignment is made by the AHP
Entity strictly on an "as is" basis.
(J) BROKERS. The AHP Entities have not dealt with any broker or
finder in connection with the transactions contemplated hereby. The Paracelsus
Entities shall not be liable for any broker's or finder's fees on the basis of
any agreement, undertaking or commitment of the AHP Entities.
(K) NO MISSTATEMENTS. To the best knowledge of each of the AHP
Entities, neither this Agreement, including the exhibits and schedules attached
hereto, nor any certificate or instrument furnished or to be furnished to any
Paracelsus Entity by any AHP Entity in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF AHP ENTITIES
The obligations of the AHP Entities to consummate the transactions provided
for herein on any of the Closing Dates are subject to the satisfaction or waiver
of the following conditions precedent:
24
<PAGE>
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Paracelsus Entities contained in Section 7.1 hereof shall be accurate in all
material respects as of each of the Closing Dates.
8.2 COMPLIANCE WITH THIS AGREEMENT. The Paracelsus Entities shall have
duly and timely observed and performed all covenants, agreements and conditions
contained herein that are required to be observed or performed by them as of
such Closing Date, and the Paracelsus Entities shall not be in default in the
observance or performance of any such covenant, agreement or condition.
8.3 CONSUMMATION OF THE COLUMBIA AGREEMENT. The Columbia Agreement shall
be fully consummated by all of the parties thereto concurrently with the Pioneer
Closing.
8.4 DELIVERY AND EFFECTIVENESS OF DOCUMENTS. The Paracelsus Entities
shall have duly executed, acknowledged and delivered the documents required to
be delivered by them pursuant to Article 6 hereof as of such Closing Date, and
such documents shall be in full force and effect.
8.5 PIONEER CLOSING. With respect to the Halstead Closing and the Elmwood
Closing, the AHP Entities shall have reasonably satisfied themselves that the
Pioneer Closing has been scheduled for a date that is no later than two (2)
business days after the earlier to occur of the Halstead Closing and the Elmwood
Closing and that the consummation of the Columbia Agreement will occur
concurrently with the Pioneer Closing.
8.6 PAYMENT OF PURCHASE PRICE. Paracelsus Utah shall have paid to the
appropriate AHP Entity by wire transfer of same day funds the amounts due to be
paid by Paracelsus Utah pursuant to Article 4 hereof as of such Closing Date.
8.7 HALSTEAD SUBLEASE RENTS. With respect to the Halstead Closing,
Paracelsus Utah shall have paid to AHP Kansas by wire transfer of same day funds
all amounts due, if any, under the terms of the Halstead Sublease, prorated to
the date of the Halstead Closing.
8.8 ELMWOOD RENTS. Paracelsus Utah shall have paid to AHP New Orleans by
wire transfer of same day funds all amounts due, if any, under the terms of the
Elmwood Lease, prorated to the date of the Elmwood Closing.
8.9 PIONEER LEASES. With respect to the Pioneer Closing, Paracelsus Utah
shall have delivered to AHP Utah satisfactory evidence that all unrecorded
leases or subleases of any portion of the Pioneer Fee Property have been
terminated, except for such leases or subleases identified in Schedule 8.9 (the
"Approved Leases"), to which AHP Utah has consented. Upon AHP Utah's
acquisition of fee title to the Pioneer Fee Property, AHP Utah shall acquire
Paracelsus Utah's interest as lessor under the Approved Leases. AHP Utah hereby
agrees to immediately assign all of its rights, title and interest in the
Approved Leases to Paracelsus Utah pursuant to that certain Pioneer Assignment
and Assumption Agreement in the form of EXHIBIT MM hereto.
25
<PAGE>
8.10 WARRANTIES. With respect to the Pioneer Closing, Paracelsus Utah
shall have assigned for the benefit of AHP Utah any and all title guaranties and
warranties Paracelsus Utah holds with respect to the Pioneer Fee Property.
8.11 CONSENTS. AHP Utah shall have received evidence, in form and
substance reasonably satisfactory to it, of the certifications, approvals and
consents to this Agreement and the transactions contemplated hereby of every
person whose consent is reasonably required by AHP Utah as of such Closing Date.
8.12 TITLE INSURANCE. With respect to the Pioneer Closing, the Title
Company shall have issued to AHP Utah either (a) an owner's policy of title
insurance ALTA Form 1970 in the amount of $51,690,000 insuring title to the
Pioneer Fee Property in AHP Utah, or (b) a commitment, reasonably satisfactory
in form and content to AHP Utah to issue to AHP Utah an owner's policy of title
insurance ALTA Form 1970 in the amount of $51,690,000 covering the Pioneer Fee
Property free of all liens, claims and encumbrances (except for the Pioneer
Permitted Encumbrances), in each case omitting any exception concerning matters
of survey and matters arising between the date of the Pioneer Closing and the
date of recording of the instruments of conveyance of the Pioneer Fee Property.
The title policy shall be in form reasonably acceptable to AHP Utah and shall
affirmatively insure that AHP Utah has good and indefeasible title to the
Pioneer Fee Property free and clear of all exceptions to title (except for the
Pioneer Permitted Encumbrances). If a commitment is presented, the Title
Company shall execute a Receipt and Agreement at closing agreeing to issue a
title policy in accordance with the provisions of the Title Commitment as
approved by AHP Utah. The Paracelsus Entities shall be responsible for and
shall pay any and all costs, premiums, charges and fees relating to the title
policies and the endorsements thereto.
8.13 SURVEY. With respect to the Pioneer Closing, AHP Utah shall have
received and approved an on-the-ground survey of the Pioneer Fee Property
certified by Larsen & Malmquist dated August 8, 1995 for the purpose of deleting
standard survey exceptions and sufficient to enable affirmative coverage to be
afforded regarding location, zoning, contiguity, parking, loading and other
matters. The survey shall reflect all improvements visible on the grounds and
all easements, rights of way, means of ingress or egress, encroachments and
drainage ditches, whether abutting or interior, of record or on the grounds.
The survey shall reflect whether and to the extent any portion of the Pioneer
Fee Property lies within the 100-year flood plain and shall otherwise be in a
form reasonably satisfactory to AHP. The survey shall be certified to the Title
Company and AHP Utah, in a form satisfactory to the Title Company and AHP Utah.
8.14 ENVIRONMENTAL REPORT. With respect to the Pioneer Closing, AHP Utah
shall have received and approved a Phase I environmental report dated
October 11, 1995 prepared by Dames & Moore, addressed to AHP Utah, concerning
the absence of Environmental Conditions at the Pioneer Fee Property.
8.15 LICENSES. With respect to the Pioneer Closing, AHP Utah shall have
received evidence of the issuance to Paracelsus Utah of all permits, licenses,
conditional use permits, variances and other certificates including, but not
limited to, a license from the Utah
26
<PAGE>
Department of Health to operate the Pioneer Facility as a 135-bed acute care
hospital as necessary to permit the full use of the Pioneer Real Property; the
same shall be in full force and effect, and any and all appeals periods shall
have expired, and there shall be no action pending or recommended by the
appropriate federal agency (or the staff thereof) to revoke, withdraw or suspend
any such permit, license, conditional use permit, variance or other certificate.
8.16 TITLE TO COLLATERAL. With respect to the Pioneer Closing, AHP Utah
shall have received and approved evidence that (A) Paracelsus Utah holds good
legal title to the Pioneer Leasehold Property and that enforceable, first and
prior liens on or security interests in the Pioneer Leasehold Property will be
granted to AHP Utah by Paracelsus Utah, and (B) the California Affiliate holds
good legal title to the California Facilities and that enforceable, first and
prior security interests in all accounts and revenues of the California
Facilities will be granted by the California Affiliate to AHP Utah.
Notwithstanding the foregoing, the parties hereto agree that neither of the
Paracelsus Entities nor the California Affiliate will be required to purchase
title insurance commitments or policies pertaining to the Pioneer Leasehold
Property or to the California Facilities.
8.17 APPRAISAL. With respect to the Pioneer Closing, AHP Utah shall have
received and approved an appraisal prepared by Valuation Counselors indicating
that, on the basis of a physical inspection and a review of the survey referred
to in Section 8.13 hereof and such other information as Valuation Counselors
deems necessary or appropriate, the fair market value (taking into account
income, market and cost approaches) of the Pioneer Fee Property is no less than
$51,690,000.
8.18 PLANS. With respect to the Pioneer Closing, AHP Utah shall have
received and approved final plans and specifications for the Pioneer Facility.
8.19 GOOD STANDING CERTIFICATES. The AHP Entities shall have received
certificates of existence and good standing of the Paracelsus Entities from the
state in which each such Paracelsus Entity is incorporated, each dated the most
recent practical date prior to the Closing Date.
8.20 CERTIFICATES OF MERGER. The AHP Entities shall have received copies
of the certificates of merger pursuant to which Paracelsus Kansas and Paracelsus
New Orleans were merged with and into Paracelsus Utah, certified by the
appropriate official of each state in which such certificates of merger were
filed.
8.21 SHAREHOLDER RESOLUTIONS. The AHP Entities shall have received copies
of resolutions duly adopted by the shareholders of (A) Paracelsus Utah
authorizing and approving such corporation's performance of the transactions
contemplated hereby and by the Columbia Agreement and the execution and delivery
of this Agreement and the Transaction Documents, and (B) Paracelsus Kansas and
Paracelsus New Orleans authorizing and approving such corporation's merger with
and into Paracelsus Utah, each such shareholders' resolution certified as true
and of full force and effect as of the Closing Date by the appropriate officers
of such corporation.
27
<PAGE>
8.22 BOARD RESOLUTIONS. The AHP Entities shall have received copies of
resolutions duly adopted by the board of directors of (A) each of the Paracelsus
Entities authorizing and approving such Paracelsus Entity's performance of the
transactions contemplated hereby and the execution and delivery of this
Agreement and the Transaction Documents, and (B) each of Paracelsus Kansas and
Paracelsus New Orleans and Paracelsus Utah authorizing and approving such
corporation's merger with and into Paracelsus Utah, each such board resolution
certified as true and of full force and effect as of the Closing Date by the
appropriate officers of such corporations.
8.23 INCUMBENCY CERTIFICATES. The AHP Entities shall have received
certificates of incumbency for the respective officers of each of the Paracelsus
Entities or their predecessors-in-interest executing this Agreement or the
Transaction Documents or making certifications dated as of a Closing Date.
8.24 LEGAL OPINION. The AHP Entities shall have received a legal opinion
of Robert C. Joyner, Paracelsus' General Counsel, substantially in the form of
EXHIBIT II attached hereto.
8.25 TRANSACTION COSTS. The Paracelsus Entities shall have paid all costs
and expenses of the transactions contemplated hereby or shall have provided for
the payment thereof to the extent that the Paracelsus Entities have received
invoices or statements therefor (with such statements and invoices, in the case
of expenses incurred by the AHP Entities, to be in reasonable detail). Such
costs and expenses shall include, without limitation (1) all taxes, including,
without limitation, documentary transfer taxes and documentary stamp taxes (in
either case whether imposed at the time of recordation of the instruments
provided for herein or thereafter), any roll-back taxes for change in land use,
sales gains and similar taxes, but excluding any income taxes of the AHP
Entities, (2) the cost of the environmental reports identified in Section 8.14,
(3) the survey and title examination costs and all premiums and other costs
relating to the survey identified in Section 8.13, and (4) the reasonable fees
and expenses of the AHP Entities' legal counsel.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARACELSUS ENTITIES
The obligations of the Paracelsus Entities to consummate the transactions
provided for herein on any of the Closing Dates are subject to the satisfaction
or waiver of the following conditions precedent:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the AHP Entities contained in Article 7 hereof shall be accurate in all material
respects as of each of the Closing Dates.
9.2 COMPLIANCE WITH THIS AGREEMENT. The AHP Entities shall have duly and
timely observed and performed all covenants, agreements and conditions contained
herein that
28
<PAGE>
are required to be observed or performed by them as of such Closing Date, and
the AHP Entities shall not be in default in the observance or performance of any
such covenant, agreement or condition.
9.3 CONSUMMATION OF THE COLUMBIA AGREEMENT. The Columbia Agreement shall
be fully consummated by all of the parties thereto concurrently with the Pioneer
Closing.
9.4 DELIVERY AND EFFECTIVENESS OF DOCUMENTS. The AHP Entities shall have
duly executed, acknowledged and delivered the documents required to be delivered
by them pursuant to Article 6 hereof as of such Closing Date, and such documents
shall be in full force and effect.
9.5 PURCHASE PRICE. AHP Utah shall have paid to Paracelsus Utah by wire
transfer of same day funds the amounts due to be paid by AHP Utah pursuant to
Section 4.3 hereof as of such Closing Date.
9.6 PIONEER CLOSING. With respect to the Halstead Closing and the Elmwood
Closing, the Paracelsus Entities shall have reasonably satisfied themselves that
if the Pioneer Closing is not occurring concurrently with the Halstead Closing
and the Elmwood Closing, that the Pioneer Closing has been scheduled for, and
will be consummated on, a date that is no later than two (2) business days after
the earlier to occur of the Halstead Closing and the Elmwood Closing and that
the consummation of the Columbia Closing will occur concurrently with the
Pioneer Closing.
9.7 WARRANTIES. With respect to the Halstead Closing and the Elmwood
Closing, the appropriate AHP Entity shall have assigned for the benefit of
Paracelsus Utah any and all contracts, guaranties and warranties of contractors
and vendors which such AHP Entity holds with respect to the Halstead Fee
Property and the Elmwood Fee Property.
9.8 CONSENTS. The Paracelsus Entities shall have received evidence, in
form and substance reasonably satisfactory to them, of the certifications,
approvals and consents to this Agreement and the transactions contemplated
hereby of every person whose consent is reasonably required by the Paracelsus
Entities as of such Closing Date, including the City of Halstead.
9.9 RENT CREDIT. Paracelsus Utah shall be entitled to a cash refund or a
credit against the Halstead Purchase Price or the Elmwood Purchase Price, at
Paracelsus Utah's option, to the extent any Paracelsus Entity has paid an amount
of rent in advance under the Elmwood Lease or the Halstead Sublease and is
entitled to a refund of such rent (less deductions therefrom for amounts due the
AHP Entity under the Elmwood Lease or Halstead Sublease) as of the Closing Dates
under the terms of the Elmwood Lease or the Halstead Sublease.
9.10 GOOD STANDING CERTIFICATES. The Paracelsus Entities shall have
received certificates of existence and good standing of the AHP Entities from
the state in which each such AHP Entity is incorporated, each dated the most
recent practical date prior hereto.
29
<PAGE>
9.11 SHAREHOLDER RESOLUTIONS. The Paracelsus Entities shall have received
copies of resolutions duly adopted by the shareholders of each of AHP Kansas,
AHP New Orleans and AHP Utah authorizing and approving such corporation's
performance of the transactions contemplated hereby and the execution and
delivery of this Agreement and the Transaction Documents, certified as true and
of full force and effect as of the Closing Date by the appropriate officers of
such corporations.
9.12 BOARD RESOLUTIONS. The Paracelsus Entities shall have received copies
of resolutions duly adopted by the board of directors of each of the AHP
Entities authorizing and approving such AHP Entity's performance of the
transactions contemplated hereby and the execution and delivery of this
Agreement and the Transaction Documents, certified as true and of full force and
effect as of the Closing Date by the appropriate officers of the AHP Entities.
9.13 INCUMBENCY CERTIFICATES. The Paracelsus Entities shall have received
certificates of incumbency for the respective officers of each of the AHP
Entities executing this Agreement or the Transaction Documents or making
certifications dated as of the Closing Date.
ARTICLE 10
CLOSINGS OF THE TRANSACTIONS CONTEMPLATED HEREBY
10.1 HALSTEAD CLOSING. The Halstead Closing may, upon the mutual agreement
of the AHP Entities and the Paracelsus Entities, occur on a date that is no more
than two (2) business days prior to the date on which the Pioneer Closing is
scheduled to occur.
10.2 ELMWOOD CLOSING. The Elmwood Closing may, upon the mutual agreement
of the AHP Entities and the Paracelsus Entities, occur on a date that is no more
than two (2) business days prior to the date on which the Pioneer Closing is
scheduled to occur.
10.3 FAILURE OF PIONEER CLOSING. If either the Halstead Closing or the
Elmwood Closing shall have occurred and if the Pioneer Closing shall have failed
to occur within five (5) business days after the date of the earlier to occur of
the Halstead Closing and the Elmwood Closing, the Paracelsus Entities shall, at
the request of AHP, take all actions necessary, including the execution and
delivery of any and all documents and instruments reasonably requested by AHP,
to reconvey and reassign all assets transferred or assigned by the AHP Entities
to the Paracelsus Entities in connection with the Halstead Closing or the
Elmwood Closing, to reinstate any and all agreements terminated in accordance
with Sections 5.1 or 5.2 hereof, and to generally place the AHP Entities and the
Paracelsus Entities in the same legal positions as such entities stood prior to
the Halstead Closing and the Elmwood Closing, provided, that the AHP Entities
return all of the Halstead Purchase Price and the Elmwood Purchase Price
concurrently therewith.
30
<PAGE>
ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 SURVIVAL. The representations, warranties, covenants and agreements
of the parties hereto contained in this Agreement, or in any of the documents
delivered pursuant to the provisions of this Agreement or the Transaction
Documents, shall survive the making of this Agreement and such documents. No
performance or execution of this Agreement in whole or in part by any party
hereto, no course of dealing between or among the parties hereto, no delay or
failure on the part of any party in exercising any rights hereunder at law or in
equity nor any investigation by any party shall operate as a waiver of any
rights of such party.
11.2 INDEMNIFICATION BY PARACELSUS. Each Paracelsus Entity shall jointly
and severally indemnify, defend and hold the AHP Entities and their respective
officers, directors, employees, agents and affiliates harmless from and against,
and shall pay to each such indemnified person the full amount of, any loss,
claim, damage, liability (including any federal, state or local tax liability)
or expense (including reasonable attorneys' fees, court costs and out-of-pocket
expenses) incurred by or resulting to any such indemnified person, either
directly or indirectly, by reason of or resulting from:
(A) any breach of or inaccuracy in the representations and
warranties, or breach, nonfulfillment or default in the performance of any of
the conditions, covenants and agreements, of the Paracelsus Entities contained
in this Agreement or in any certificate or document delivered by a Paracelsus
Entity pursuant to any of the provisions of this Agreement, including any of the
Transaction Documents;
(B) any Environmental Condition relevant to the Pioneer Fee Property
or any facilities or operations thereon, existing as of and/or prior to the date
hereof, even if not discovered until after the date hereof;
(C) any violation of an Environmental Law with respect to the Pioneer
Fee Property or any facilities or operations thereon, existing as of and/or
prior to the date hereof, even if not discovered until after the date hereof;
(D) any accident, injury to or death of persons, or loss of or damage
to property, occurring on or about the Pioneer Fee Property, or adjoining
sidewalks, alleys or roadways, including without limitation any claims of
malpractice;
(E) any fees, charges, taxes or impositions that are the obligation
of Paracelsus Utah or any of its predecessors-in-interest pursuant to the
applicable provisions of the Halstead Lease, the Halstead Sublease, the Elmwood
Lease and the Elmwood Parking Lease;
(F) any increased federal or state income tax liability incurred by
any AHP Entity by reason of the disposition of the interests of the AHP Entity
in the Halstead Facility and Elmwood Facility, respectively, and the acquisition
of the interests provided for herein in the Pioneer Facility; and
31
<PAGE>
(G) any sales or use taxes incurred because of the conveyance of the
Pioneer Fee Property or any other interests in the Pioneer Facility to AHP Utah.
11.3 NOTICE OF CLAIMS. If a third party shall make a Third-Party Claim
against an Indemnified Party, then the Indemnified Party shall, within ten
business days after receiving notice of such Third-Party Claim, give written
notice thereof to the Indemnifying Party, and shall immediately afford the
Indemnifying Party's counsel, at the Indemnifying Party's sole expense, the
opportunity to join and participate in discussing, defending or compromising
such Third-Party Claim. The Indemnifying Party may, within 30 days after
receipt of such notice of claim, by written notice to the Indemnified Party and
by executing a litigation indemnity in form acceptable to the Indemnified Party,
elect to undertake, at its own expense, the defense of such Third-Party Claim in
the name of the Indemnified Party and such undertaking to defend shall include
the right to appeal and the right to compromise or settle. If the Indemnifying
Party shall so elect to undertake the defense of any Third-Party Claim, the
Indemnified Party shall have the right to participate fully in such defense at
its own expense. In the event that the Indemnified Party declines to
participate in the defense, the Indemnified Party shall not be liable to the
Indemnifying Party for any legal or other expenses subsequently incurred by the
Indemnifying Party in connection with the defense of such Third-Party Claim.
11.4 COOPERATION. The parties, their successors and assigns shall
cooperate in the defense of any Third-Party Claim, including providing such
witnesses and documentary evidence as may be reasonably requested by the
Indemnifying Party and otherwise assisting in the litigation in appropriate
circumstances. The Indemnifying Party shall be responsible for all out-of-
pocket expenses reasonably incurred by the Indemnified Party in connection with
such cooperation. Claims for indemnity shall bear interest, during the period
between the date on which the related loss, damage, liability or expense was
incurred (which with respect to any Third-Party Claim shall be the date of
payment to such third party) until paid, at a rate equal to five percent (5%)
per annum.
ARTICLE 12
REMEDIES FOR BREACH
Upon the occurrence of any default hereunder, which default continues for
30 days after written notice is given to the defaulting party, the following
remedies will be available to the parties hereto, subject to Section 13.5
pertaining to resolution of disputes:
12.1 PARACELSUS ENTITY DEFAULT. If any Paracelsus Entity is in default,
the AHP Entities shall have the right to treat this Agreement as being in full
force and effect and obtain specific performance or recover such damages as may
be proper, or both.
12.2 AHP ENTITY DEFAULT. If any AHP Entity is in default, the Paracelsus
Entities shall have the right to treat this Agreement as being in full force and
effect and obtain specific performance or recover such damages as may be proper,
or both.
32
<PAGE>
12.3 FAILURE TO CLOSE COLUMBIA AGREEMENT. If for any reason the
transactions contemplated by the Columbia Agreement fail to take place, the
Paracelsus Entities shall nevertheless pay all costs and expenses of the AHP
Entities incurred in connection with the transactions contemplated hereby. Such
costs and expenses shall include, without limitation (1) all taxes, including,
without limitation, documentary transfer taxes and documentary stamp taxes (in
either case whether imposed at the time of recordation of the instruments
provided for herein or thereafter), any roll-back taxes for change in land use,
sales gains and similar taxes, together with interest and penalties (if any)
therein, but excluding any income taxes of the AHP Entities, (2) the cost of any
environmental reports prepared in connection with the transactions contemplated
herein, (3) the survey and title examination costs and all premiums and other
costs relating to any surveys prepared in connection with the transactions
contemplated herein, and (4) the reasonable fees and expenses of the AHP
Entities' legal counsel.
ARTICLE 13
MISCELLANEOUS
13.1 PARACELSUS UTAH UNDERTAKINGS REGARDING CERTAIN RIGHTS ASSOCIATED WITH
THE PIONEER HOSPITAL. The parties acknowledge that pursuant to the Columbia
Agreement Paracelsus Utah will acquire various real property leasehold
interests, purchase options, rights of first refusal and other rights and
interests associated with the Pioneer Hospital which it is not conveying to AHP
Utah pursuant hereto. Such rights and interests, which are identified in
SCHEDULE 13.1 hereto, are referred to herein as the "PIONEER HOSPITAL RELATED
RIGHTS". During the term of the Pioneer Lease, except insofar as AHP Utah may
grant its prior written consent otherwise (which consent will not be
unreasonably withheld), Paracelsus Utah agrees to use commercially reasonable
efforts to maintain all of the Pioneer Hospital Related Rights in effect in
accordance with their respective terms; to exercise all such rights held by
Paracelsus Utah in accordance with the terms thereof; and not to relinquish or
surrender, or create or suffer any liens or encumbrances on, any of the Pioneer
Hospital Related Rights, except liens and encumbrances: (i) in existence on the
date hereof; (ii) incurred in the ordinary course of business; or (iii)
otherwise permitted under the terms hereof. Upon termination of the Pioneer
Lease, if Paracelsus Utah does not exercise the option provided for therein to
purchase the Pioneer Hospital, upon request therefor from AHP Utah, Paracelsus
Utah will convey to AHP Utah all or any part of the Pioneer Hospital Related
Rights then in effect, and all or any part of the property rights and interests
theretofore acquired by Paracelsus Utah by reason of exercise of any of the
Pioneer Hospital Related Rights, if any, with warranties only against persons
claiming by, through or under Paracelsus Utah. Such conveyance shall be for a
nominal consideration, except that, if Paracelsus Utah has acquired any property
rights or interests upon exercise of any of the Pioneer Hospital Related Rights,
and if AHP Utah requests that any of such property rights or interests be
conveyed to AHP Utah, the consideration for transfer of any such property rights
or interests shall be equal to the amounts paid by Paracelsus Utah in connection
with its acquisition of any such property right or interest. If Paracelsus Utah
exercises the right to purchase the Pioneer Hospital pursuant to the Pioneer
Lease, the foregoing rights of AHP Utah to receive a conveyance of any of the
Pioneer Hospital Related Rights will automatically terminate.
33
<PAGE>
13.2 FURTHER ASSURANCES. Each party hereto shall execute all instruments
and take all actions as are necessary or desirable to effect the transactions
contemplated hereby.
13.3 NOTICES. All notices, demands, requests, offers, consents, approvals
and other communications required or permitted hereunder shall be in writing and
delivered by personal delivery, courier or messenger service, express or
overnight mail, or by registered or certified mail, return receipt requested and
postage prepaid, or by facsimile addressed to the respective parties as follows:
If to any of the Paracelsus Entities or their predecessors-in-
interest:
Paracelsus Healthcare Corporation
Suite 1100
155 N. Lake Avenue
Pasadena, California 91101
Attention: Robert C. Joyner
Facsimile: (818) 304-9588
with a copy to:
Milbank, Tweed, Hadley & McCloy
30th Floor
601 S. Figueroa Street
Los Angeles, California 90017
Attention: Eric H. Schunk, Esq.
Facsimile: (213) 629-5063
If to any of the AHP Entities:
American Health Properties, Inc.
Suite 1800
6400 South Fiddler's Green Circle
Englewood, Colorado 80111
Attention: Michael J. McGee
Facsimile: (303) 796-9708
with a copy to:
Davis, Graham & Stubbs, L.L.C.
Suite 4700
370 17th Street
Denver, Colorado 80202
Attention: Brian T. Dolan, Esq.
Facsimile: (303) 893-1379
34
<PAGE>
or to such other address or facsimile number as any party may hereafter
designate by notice to the other parties. Personally delivered notice and
notice sent by courier or messenger service or by express or overnight mail or
by facsimile transmission shall be effective upon receipt. Notice given by mail
shall be complete at the time of deposit in the U.S. mail system, but any
prescribed period of notice and any right or duty to do any act or make any
response within any prescribed period or on a date certain after the service of
such notice given by mail shall be extended by five days.
13.4 SUCCESSORS AND ASSIGNS. The rights and obligations of the Paracelsus
Entities under this Agreement may not be assigned or delegated (except by reason
of a merger of Paracelsus New Orleans and/or Paracelsus Kansas into Paracelsus
Utah) without the prior written consent of AHP. The rights and obligations of
the AHP Entities under this Agreement may only be assigned and delegated in
conjunction with current assignments or delegations of all agreements running
between AHP and its affiliates and Paracelsus and its affiliates. Any attempted
assignment hereof that fails to meet the foregoing requirements shall be void
and ineffective. Subject to the foregoing, this Agreement shall be binding upon
the parties hereto and their respective permitted successors and assigns.
13.5 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
UTAH, EXCEPT FOR ISSUES GOVERNED BY THE LAW OF REAL PROPERTY, WHICH SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE IN WHICH SUCH REAL PROPERTY AT ISSUE
IS LOCATED. THE PARACELSUS ENTITIES HEREBY CONSENT TO THE EXERCISE OF
JURISDICTION BY ANY FEDERAL OR STATE COURT SITTING IN SALT LAKE CITY, UTAH, FOR
THE PURPOSES OF ANY AND ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT. ANY LEGAL PROCEEDINGS BROUGHT BY ANY PARACELSUS ENTITY ARISING OUT
OF THIS AGREEMENT SHALL BE BROUGHT IN THE STATE OF UTAH. THE PARACELSUS
ENTITIES IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT ANY SUCH PARACELSUS ENTITY MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURT, ANY CLAIM
BASED ON THE CONSOLIDATION OF PROCEEDINGS IN SUCH COURTS IN WHICH PROPER VENUE
MAY BE IN DIVERGENT JURISDICTIONS, AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13.6 RESOLUTION OF DISPUTES. Notwithstanding Article 12 hereof, any
differences between any Paracelsus Entity, on one hand, and any AHP Entity, on
the other hand, which cannot be resolved by mutual agreement, will be resolved
by mandatory and binding arbitration in accordance with the Arbitration
Procedures appended hereto as EXHIBIT JJ.
13.7 WAIVERS. The waiver by either party of any breach of or condition to
this Agreement shall not operate as, or be construed to constitute, a waiver of
any subsequent breach or other condition to this Agreement.
35
<PAGE>
13.8 DIVISIONS AND HEADINGS. The division of this Agreement into sections
and subsections and the use of captions and headings in connection therewith are
solely for convenience and shall have no legal effect in construing the
provisions of this Agreement.
13.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be a valid and binding original, but all of
which together shall constitute one and the same instrument.
13.10 SEVERABILITY. If any provision of this Agreement is deemed to be
invalid, illegal or unenforceable, the remainder of this Agreement shall be
valid and enforceable.
[Balance of page intentionally left blank]
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple originals by their authorized officers, all as of the date
and year first above written.
AHP ENTITIES:
AMERICAN HEALTH PROPERTIES, INC.
By
------------------------------------
Joseph P. Sullivan, President
AHP OF KANSAS, INC.
By
------------------------------------
Joseph P. Sullivan, President
AHP OF NEW ORLEANS, INC.
By
------------------------------------
Joseph P. Sullivan, President
AHP OF UTAH, INC.
By
------------------------------------
Joseph P. Sullivan, President
37
<PAGE>
PARACELSUS ENTITIES:
PARACELSUS HEALTHCARE CORPORATION
By:
------------------------------------
Robert C. Joyner
Vice President and General
Counsel
PARACELSUS PIONEER VALLEY
HOSPITAL, INC.
By:
------------------------------------
Robert C. Joyner,
Vice President and General
Counsel
38
<PAGE>
EXHIBIT A
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
BOYER CLINIC LEASEHOLD
<PAGE>
EXHIBIT B
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
CALIFORNIA FACILITIES
The California Facilities consist of the following skilled nursing
facilities, with respect to which Paracelsus Real Estate Corporation is the
lessee of the real estate, and Paracelsus Convalescent Hospitals, Inc. is
the operator.
1. Lafayette Convalescent Hospital
1010 First Street
Lafayette, California 94549
2. Oak Park Convalescent Hospital
1625 Oak Park Boulevard
Pleasant Hill, California 94523
3. Rheem Valley Convalescent Hospital
348 Rheem Boulevard
Moraga, California 94556
4. University Convalescent Hospital
2122 Santa Cruz Avenue
Menlo Park, California 94025
<PAGE>
EXHIBIT C
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
ELMWOOD FEE PROPERTY
A CERTAIN TRACT OF LAND, together with all the buildings and improvements
thereon, and all the rights, ways, privileges and servitudes, thereunto
belonging or in anywise appertaining, situated in the State of Louisiana, Parish
of Jefferson, that part thereof known as CLEARVIEW COMMERCIAL PARK, all as per
plan of resubdivision made by J. J. Krebs & Sons, Inc., dated September 14,
1983, approved by the Jefferson Parish Council by Ordinance No. 15823 adopted on
January 4, 1984, recorded at Entry No. 8402051, in COB 1065, folio 968, and said
portion of ground is designated as LOT A-1 on the more recent plan by J. J.
Krebs & Sons, Inc., dated August 4, 1987, revised August 19, 1987, re-certified
October 29, 1988, resurveyed April 11, 1990, and May 7, 1990, and February 24,
1993, and is more particularly described as follows, to-wit:
Commence at the intersection of the Northerly right-of-way line of Bloomfield
Street and the Westerly right-of-way line of Webb Drive, the POINT OF BEGINNING.
From the POINT OF BEGINNING measure South 71 degrees 42 minutes 09 seconds West
along the Northerly right-of-way line of Bloomfield Street a distance of
238.37 feet to a point on the Easterly right-of-way line of Clearview Parkway;
thence North 18 degrees 17 minutes 51 seconds West along the Easterly right-of-
way line of Clearview Parkway a distance of 399.82 feet; thence North 71 degrees
42 minutes 09 seconds East a distance of 325.99 feet to a point on the Westerly
right-of-way line of Webb Drive; thence in a Southerly direction along the
Westerly right-of-way line of Webb Drive, along the arc of a curve to the left
having a radius of 1532.62 feet a distance of 410.53 feet to the POINT OF
BEGINNING.
A CERTAIN TRACT OF LAND, together with all the buildings and improvements
thereon, and all the rights, ways, privileges and servitudes, thereunto
belonging or in anywise appertaining, situated in the State of Louisiana, Parish
of Jefferson, that part thereof known as CLEARVIEW COMMERCIAL PARK, all as per
plan of resubdivision made by J. J. Krebs & Sons, Inc., dated September 14,
1983, approved by the Jefferson Parish Council by Ordinance No. 15823 adopted on
January 4, 1984, recorded at Entry No. 8402051, in COB 1065, folio 968, and said
portion of ground is designated as LOT A-2 on the plan by J. J. Krebs & Sons,
Inc., dated August 4, 1987, revised August 19, 1987, re-certified October 29,
1988, resurveyed April 11, 1990, and May 7, 1990 and February 24, 1993, which is
attached hereto and made a part hereof, and is more particularly described as
follows, to-wit:
Commence at the intersection of the Northerly right-of-way line of Bloomfield
Street and the Westerly right-of-way line of Webb Drive and measure thence along
said Westerly line of Webb Drive in a Northerly direction along the arc of a
curve to the right having a radius of 1532.62 feet a distance of 410.53 feet to
the intersection of the Northerly line of Lot A-1, the POINT OF BEGINNING.
<PAGE>
From the POINT OF BEGINNING measure along said Northerly line South 71 degrees
42 minutes 09 seconds West a distance of 325.99 feet to a point on the Easterly
right-of-way line of Clearview Parkway; thence along said Easterly line North
18 degrees 17 minutes 51 seconds West a distance of 450.18 feet; thence along
said Easterly line North 71 degrees 42 minutes 09 seconds East a distance of
15 feet; thence along said Easterly line in a Northerly direction along the arc
of a curve to the right having a radius of 793.51 feet a distance of 132.76 feet
to a point; thence leaving the Easterly line of Clearview Parkway measure South
70 degrees 30 minutes 01 seconds East a distance of 532.77 feet to a point on
the Westerly right-of-way line of Webb Drive; thence along said Westerly line in
a Southerly direction along the arc of a curve to the left having a radius of
1532.62 feet a distance of 283.42 feet to the intersection of the Northerly line
of Lot A-1, the POINT OF BEGINNING.
THAT CERTAIN PIECE OR PORTION OF GROUND, together with all of the buildings and
improvements thereon and all of the servitudes, rights and appurtenances
thereunto belonging or in anywise appertaining situated in the State of
Louisiana, Parish of Jefferson, in that part thereof known as Clearview
Commercial Park, being a portion of St. Peter and Elmwood Plantations, all as
per plan of resubdivision by J.J. Krebs & Sons, Inc., C.E.&S., dated
December 28, 1976, approved by the Jefferson Parish Council under Ordinance
No. 13285, adopted March 8, 1978, registered in the office of the Clerk of Court
for the Parish of Jefferson, Louisiana in COB 921, folio 843, under Entry
No. 813736, and according to which plan said portion of ground is designated as
Lot "B", and is described as follows, to-wit:
Commence at the intersection of the northerly right of way line of Bloomfield
Street and the easterly right of way line of Webb Drive; measure thence in a
northerly direction along the westerly right of way line of Webb Drive, along
the arc of a curve to the right, having a radius of 1532.62 feet, a distance of
693.95 feet to a point, the point of beginning. From said point of beginning,
measure N70DEG.30'01"W, a distance of 532.77 feet to a point on the easterly
right of way line of Clearview Parkway; thence in a northerly direction along
the easterly right of way line of Clearview Parkway, along the arc of a curve to
the right, having a radius of 793.51 feet, a distance of 630.57 feet to a point;
thence S552DEG.33'12"E a distance of 626.48 feet to a point on the westerly
right of way line of Webb Drive, along the arc of a curve to the left, having a
radius of 1,532.62 feet, a distance of 419.65 feet to a point, the point of
beginning. All as more fully shown on a survey by J.J. Krebs & Sons, Inc.,
C.E.&S., dated May 26, 1978 resurveyed to show improvements November 14, 1979,
and on January 16, 1980 to show utilities, revised February 24, 1989. According
to survey of John E. Walker, C.E. & P.L.S., dated January 13, 1994, the Property
has the same location and measurement.
Improvements thereon bear the Municipal No. 1333 South Clearview Parkway.
2
<PAGE>
EXHIBIT D
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
ELMWOOD PARKING LEASEHOLD
Four (4) certain rectangular parcels of ground situated underneath the East
still viaduct approach to the Huey P. Long Bridge, in the Parish of
Jefferson, State of Louisiana, being part of St. Peter Plantation, situated
North of Jefferson Highway, East of Souther Clearview Parkway, being that
portion of right-of-way situated between the support towers between the
Public Belt Railroad Commission for the City of New Orleans' communication
pole line and Webb Drive, between Bent 99E-100E, 101E-102E, 107E-108E and
between Bent 109E-110E, which land is required right-of-way for the Huey P.
Long Bridge, containing 24,700 square feet more or less, but expressly
excluding the steel viaduct approach, foundations and support towers
connected therewith.
<PAGE>
EXHIBIT E
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
ELMWOOD PERMITTED ENCUMBRANCES
<PAGE>
EXHIBIT F
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
GRANGER CLINIC LEASEHOLD
<PAGE>
EXHIBIT G
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
HALSTEAD PERMITTED ENCUMBRANCES
<PAGE>
EXHIBIT H
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
HALSTEAD REAL PROPERTY
Tract 1: Beginning at the Northwest Corner of Lot Ten (10), Block Eighteen
(18), Supplemental Addition of 1880 to the City of Halstead, as recorded in Vol.
2, Page 46 of Plat Book, Harvey County, Kansas; thence North 300.0 feet to the
Northwest Corner of Lot Sixteen (16) of said Block 18; thence East 150.0 feet to
the Northeast Corner of Lot Sixteen (16) of said Block 18; thence South 300.00
feet to the Northeast Corner of Lot Ten (10) of said Block 18; thence East 20.0
feet to the Northwest Corner of Lot Seven (7) of said Block 18; thence North
300.0 feet to the Northwest Corner of Lot One (1) of said Block 18; thence East
150.0 feet to the Northeast Corner of Lot One (1) of said Block 18; thence South
100.0 feet to the Southeast Corner of Lot Two (2) of said Block 18; thence West
85.0 feet; thence South 50.0 feet; thence East 85.0 feet to the Northeast Corner
of Lot Four (4) of said Block 18; thence South 217.3 feet to a point on the East
line and 32.7 feet North of the Southeast Corner of Lot Eight (8) of said
Block 18; thence West 149.0 feet; thence South 9.7 feet; thence East 3.0 feet;
thence South 38.1 feet; thence West 44.2 feet; thence North 38.1 feet; thence
East 3.3 feet; thence North 9.7 feet; thence West 11.4 feet; thence South 5.0
feet; thence West 15.1 feet; thence North 5.0 feet; thence West 15.3 feet;
thence South 34.2 feet; thence West 40.9 feet; thence South 88.0 feet; thence
East 109.6 feet to the centerline of the alley between Chestnut Street and
Poplar Street; thence South 96.5 feet; thence West 10.0 feet to a point on the
East line and 6.0 feet South of the Northeast Corner of Lot Twelve (12),
Block Nineteen (19) of said Supplemental Addition of 1880; thence South 94.0
feet to the Southeast Corner of Lot Eleven (11) of said Block 19; thence West
for 380.0 feet to the Southwest Corner of Lot Four (4), Block Twenty-two (22),
of said Supplemental Addition of 1880; thence North 380.0 feet to the Northwest
Corner of Lot Seven (7), Block Twenty-three (23), of said Supplemental Addition
of 1880; thence East 230.0 feet to the point of beginning.
Tract 2: The South 44 feet of Lot Three (3) and the North 10 feet of Lot Four
(4), in Block Nineteen (19), Supplemental Addition of 1880 of the City of
Halstead, as recorded in Vol. 2, Page 46, of Plat Book, Harvey County, Kansas.
Tract 3: All of Lots Thirteen (13), Fourteen (14), Fifteen (15) and Sixteen
(16), in Block Eight (8), Supplemental Addition of 1880, of the City of
Halstead, as recorded in Vol. 2, Page 46, of Plat Book, Harvey County, Kansas.
Tract 4: Lot Seven (7), Block Eight (8), Supplemental Addition of 1880, of the
City of Halstead, as recorded in Vol. 2, Page 46 of the Plat Book, Harvey
County, Kansas.
Tract 5: Lot Five (5), Block Twenty-three (23), Supplemental Addition of 1880,
of the City of Halstead, as recorded in Vol. 2, Page 46 of the Plat Book, Harvey
County, Kansas.
<PAGE>
Tract 6: The West 80 feet of Lots Eight (8), Nine (9) and Ten (10) in
Block Nineteen (19), Supplemental Addition of 1880, of the City of Halstead, as
recorded in Vol. 2, Page 46 of the Plat Book, Harvey County, Kansas.
Tract 7: Lots Nine (9) and Ten (10) in Block Twenty-three (23), Supplemental
Addition of 1880, of the City of Halstead, as recorded in Vol. 2, Page 46 of the
Plat Book, Harvey County, Kansas.
Tract 8: Reciprocal easement appurtenant to Tract 1 for the purpose of
maintaining encroachments, if any, of the existing building located on Tract 1,
over a portion of the East boundary of the land, onto land adjacent thereto on
the East, as created by the Party Wall Agreement dated June 28, 1993 and
recorded in Book 338, Page 419, and Party Wall Agreement dated June 29, 1993 and
recorded in Book 338, Page 423, Misc. Records.
Tract 9: Easement for the benefit of Tract 3, to permit any protrusion of the
building and sidewalk located on Tract 3, over and across the following
described property as established by the instrument recorded in Book 338, Page
417, Misc. Records to wit: The North 8.3 feet of Lot Twelve (12) Block Eight
(8), Supplemental Addition of 1880, of the City of Halstead, as recorded in
Volume 2, Page 46 of Plat Book, Harvey County, Kansas.
Tract 10: Easement appurtenant to Tract 1 for the purpose of maintaining
existing encroachments of existing building located on Tract 1, over and across
the following described property, as created by the instrument recorded in Book
338, Page 427 Misc. Records to wit: Beginning at the Southwest Corner of Lot
Eleven, Block Eighteen of Supplemental Addition of 1880 of the City of Halstead,
Harvey County, Kansas, thence North for 5.0 feet to a point on the West line of
said lot Eleven; thence west for 28.43 feet; thence South for 5.0 feet; thence
East for 28.43 feet to the point of beginning.
2
<PAGE>
EXHIBIT I
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
NHI MOB LEASEHOLD
BEGINNING at a point on the West line of the Southeast quarter of the Southeast
quarter of Section 30, said point being South 89DEG.56'54" West along the
Section line 1323.97 feet and North 0DEG.08'49" West 1093.53 feet from the
Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base
and Meridian; and running thence North 0DEG.08'49" West along said West line
234.16 feet to the Northwest corner of the Southeast quarter of the Southeast
quarter of said Section 30; thence North 89DEG.57'12" East along the North line
of said Southeast quarter of the Southeast quarter 279.72 feet; thence South
0DEG.08'49" East 113.80 feet; thence South 45DEG.08'49" East 43.64 feet;
thence South 00DEG.08'49" East 6.02 feet; thence North 89DEG.51'11" East 6.02
feet; thence South 45DEG.08'49" East 109.16 feet to a point on a curve to the
right, the radius point of which bears North 53DEG.23'53" West 144.69 feet;
thence Southwesterly along the arc of said curve 31.63 feet to a point of
tangency; thence South 49DEG.07'42" West 38.22 feet to a point of a 205.32 foot
radius curve to the left; thence Southwesterly along the arc of said curve 37.77
feet; thence North 45DEG.08'49" West 186.99 feet; thence South 89DEG.51'11"
West 5.23 feet; thence South 0DEG.08'49" East 62.88 feet; thence South
89DEG.51'11" West 179.63 feet to the point of BEGINNING.
<PAGE>
EXHIBIT J
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
PIONEER FEE PROPERTY
PARCEL 1:
BEGINNING at a point South 89DEG.56'54" West 1054.1 feet and North
0DEG.04'58" West 173.0 feet from the Southeast corner of Section 30, Township
1 South, Range 1 West, Salt Lake Base and Meridian, (said point also being on
the Westerly line of 4155 West Street), which point is also the Northeast
corner of the HCA Properties, Inc. property contained in that certain
Warranty Deed recorded September 11, 1981 as Entry No. 3603565, in Book 5291,
at Page 153 of the Official Records; and running thence West along said HCA
Properties, Inc., North boundary line, 100.00 feet to the Northwest corner of
the HCA Properties, Inc. property; thence along the West boundary of the said
HCA Properties, Inc. property South 0DEG.04'58" East 140.0 feet to the North
line of 3500 South Street; thence along said North line of said 3500 South
Street South 89DEG.56'54" West 171.0 feet to a point on the West line of the
Southeast quarter of the Southeast quarter of said Section 30; thence along
said West line North 1295 feet to the 1/16 Section line; thence East 425.88
feet, more or less, to a point on the West line of vacated 4155 West Street;
thence along said West line South 0DEG.05' East 150.24 feet, more or less, to
a point of tangency with a 144.69 foot radius curve to the right; thence
Southwesterly 124.27 feet along said curve to a point of tangency; thence
South 49'07'42" West 38.22 feet to a point of tangency with a 205.32 foot
radius curve to the left; thence Southwesterly 175.79 feet along said curve
to a point of tangency; thence South 723.44 feet to the point of BEGINNING.
TOGETHER WITH the West one-half of the vacated street (4155 West Street)
abutting a portion of the said property on the East.
EXCEPTING THEREFROM the following described property conveyed to National
Health Investors, Inc. in that certain Special Warranty Deed recorded March
2, 1993 as Entry No. 5445234, in Book 6613, at Page 1040 of the Official
Records, to-wit: BEGINNING at a point on the West line of the Southeast
quarter of the Southeast quarter of Section 30, said point being South
89DEG.56'54" West along the Section line 1323.97 feet and North 0DEG.08'49"
West 1093.53 feet from the Southeast corner of Section 30, Township 1 South,
Range 1 West, Salt Lake Base and Meridian; and running thence North
0DEG.08'49" West along said West line 234.16 feet to the Northwest corner of
the Southeast quarter of the Southeast quarter of said Section 30; thence
North 89DEG.57'12" East along the North line of said Southeast quarter of the
Southeast quarter 279.72 feet; thence South 0DEG.08'49" East 113.80 feet;
thence South 45DEG.08'49" East 43.64 feet; thence South 00DEG.08'49" East
6.02 feet; thence North 89DEG.51'11" East 6.02 feet; thence South
45DEG.08'49" East 109.16 feet to a point on a curve to the right, the radius
point of which bears North 53DEG.23'53" West 144.69 feet; thence
Southwesterly along the arc of said curve 31.63 feet to a point of tangency;
thence South 49DEG.07'42" West 38.22 feet to a point of a 205.32 foot radius
curve to the left; thence Southwesterly along the arc of said curve 37.77
feet; thence North 45DEG.08'49" West 186.99 feet; thence South 89DEG.51'11"
West 5.23 feet; thence South
<PAGE>
0DEG. 08'49" East 62.88 feet; thence South 89DEG. 51'11" West 179.63 feet to the
point of BEGINNING.
PARCEL 2:
BEGINNING at a point on the North right of way line of 3500 South Street and the
West right of way line of 4155 West Street, said point being South 89DEG.56'54"
West 1057.25 feet, more or less, and North 0DEG.03'06" West 33 feet from the
Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base
and Meridian; and running thence North 0DEG.03'06" West along said West right
of way line 140.0 feet, more or less, to the Southerly boundary line of the
Valley West Hospital, Inc. property as described in that certain Warranty Deed
recorded January 26, 1979 as Entry No. 3229774, in Book 4806, at Page 585, Salt
Lake County Recorder's Office; thence South 89DEG.56'54" West along said South
boundary line 100.0 feet, more or less, to an Easterly boundary line of Valley
West Hospital's property as described in the Warranty Deed described
hereinabove; thence South 0DEG.03'06" East along said East boundary line 140.0
feet, more or less, to the North right of way line of 3500 South Street; thence
North 89DEG.56'54" East along said North right of way line 100.00 feet, more or
less, to the point of BEGINNING.
PARCEL 3:
BEGINNING at a point 885.275 feet West and 33 feet North from the Southeast
corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and
Meridian; and running thence West along the North line of 3500 South Street
108.525 feet, more or less, to the East line of 4155 West Street; thence North
0DEG.04'58" West along said East line 167 feet; thence North 89DEG.56'54" East
108.525 feet, more or less; thence South 167 feet to the point of BEGINNING.
PARCEL 4:
BEGINNING at a point South 89DEG.56'54" West 994.1 feet and North 0DEG.04'58"
West 283.0 feet from the Southeast corner of Section 30, Township 1 South,
Range 1 West, Salt Lake Base and Meridian, (which point of beginning is on the
Easterly line of 4155 West Street); and running thence North 0DEG.04'58" West
365 feet; thence East 300 feet; thence North 0DEG.04'58" West 320.0 feet;
thence West 275.99 feet to a point on a 145.32 foot radius curve to the right;
thence Northeasterly 39.70 feet along said curve to a point of tangency; thence
North 49DEG.07'42" East 38.22 feet to a point on a 204.69 foot radius curve to
the left; thence Northeasterly 175.81 feet along said curve to a point of
tangency; thence North 0DEG.05' West 150.28 feet, more or less, to the 1/16
Section line; thence East 343.88 feet, more or less; thence South 710.0 feet;
thence West 32.88 feet; thence South 265.255 feet; thence South 89DEG.56'54"
West 285.00 feet; thence South 0DEG.04'58" East 70.00 feet; thence South
89DEG.56'54" West 180.53 feet to the point of BEGINNING.
EXCEPTING THEREFROM that portion located within the bounds of 3390 South Street
(also known as Pioneer Parkway).
TOGETHER WITH the East one-half of the vacated street (4155 West Street)
abutting a portion of said property on the West.
2
<PAGE>
PARCEL 5:
BEGINNING at a point North along the Section line 796.505 feet and West 170.35
feet from the Southeast corner of Section 30, Township 1 South, Range 1 West,
Salt Lake Base and Meridian; and running thence West 324.65 feet; thence North
178.25 feet; thence East 324.65 feet; thence South 178.25 feet to the point of
BEGINNING.
PARCEL 6:
BEGINNING at point in the center of 4000 West Street 618.255 feet North of the
Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base
and Meridian; and running thence North 178.25 feet; thence West 495 feet; thence
South 178.25 feet; thence East 495 feet to the point of BEGINNING.
EXCEPTING THEREFROM those portions located within the bounds of 4000 West Street
and 3390 South Street (also known as Pioneer Parkway).
PARCEL 7:
BEGINNING at a point on the East line of 4000 West Street, said point being
North 0DEG.02'10" West along the section line 788.49 feet and East 33.0 feet
from the Southwest corner of Section 29, Township 1 South, Range 1 West, Salt
Lake Base and Meridian; and running thence North 0DEG.02'10" West along said
East line 200.00 feet; thence East 420.00 feet; thence South 0DEG.02'10" East
200.00 feet; thence West 420.00 feet to the point of BEGINNING.
PARCEL 8:
BEGINNING North 0DEG.02'10" West 788.1 feet and North 89DEG.57'50" East 40
feet from the Southwest corner of Section 29, Township 1 South, Range 1 West,
Salt Lake Base and Meridian; and running thence North 0DEG.02'10" West 1.78
feet; thence East 413 feet; thence South to the North line of Rockwood Way;
thence Westerly along said North line to the point of BEGINNING.
3
<PAGE>
EXHIBIT K
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
PIONEER PERMITTED ENCUMBRANCES
[To be supplied by MTHM]
<PAGE>
EXHIBIT L
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
HALSTEAD BOND ENDORSEMENT
HEREBY ASSIGNED TO _________________________ AS SET FORTH IN THAT CERTAIN
PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 MADE BETWEEN AND AMONG
PARACELSUS HEALTHCARE CORPORATION, PARACELSUS HALSTEAD HOSPITAL, INC.,
PARACELSUS ELMWOOD MEDICAL CENTER, INC., PARACELSUS PIONEER VALLEY HOSPITAL,
INC., AMERICAN HEALTH PROPERTIES, INC., AHP OF KANSAS, INC., AHP OF NEW ORLEANS,
INC. AND AHP OF UTAH, INC., WITHOUT RECOURSE, REPRESENTATION OR WARRANTY, EXCEPT
AS SET FORTH IN SUCH PURCHASE AND SALE AGREEMENT.
_______________________________
_______________________________
By_____________________________
STATE OF _____________ )
) ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ___ day of
________, 1996 by ________________________ for ______________________________, a
_________ corporation.
_______________________________
Notary Public
Address:_______________________
_______________________________
My commission expires: _______________________
<PAGE>
EXHIBIT M
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
ASSIGNMENT OF HALSTEAD MASTER LEASE
Recording Requested by and )
When Recorded Return to )
)
DAVIS, GRAHAM & STUBBS LLP )
P.O. Box 185 )
Denver, CO 80201-0185 )
Attn: Joel Benson, Esq. )
______________________________________________________________________________
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is made and
entered into as of the 15th day of May, 1996 (the "Effective Date") by and
between AHP OF KANSAS, INC., a Kansas corporation ("Assignor"), and PARACELSUS
PIONEER VALLEY HOSPITAL, INC., a Utah corporation ("Assignee").
RECITALS
A. Assignor and Assignee (together with other parties) have entered into
that certain Purchase and Sale Agreement (the "Agreement"), whereby Assignor has
agreed to sell to Assignee, and Assignee has agreed to purchase from Assignor,
certain assets relating to a general acute care hospital located in Halstead,
Kansas and known as the Halstead Hospital, including all of Assignor's right,
title, and interest in, to, and under that certain Lease, dated as of June 30,
1993 by and between the City of Halstead as lessor (the "Landlord") and Assignor
as lessee (referred to herein as the "Lease"), notice of which is given by an
instrument denominated "Memorandum of Lease and Option to Purchase," which was
recorded on June 30, 1993 in Book 338, Page 436 in the miscellaneous records of
Harvey County, Kansas.
B. The Lease covers the property (the "Property") described in EXHIBIT A
attached hereto.
C. Concurrently with the execution of this Assignment, the parties to the
Agreement have consummated the closing of the transactions contemplated therein.
Pursuant to the terms of the Agreement, Assignor and Assignee wish to effect the
assignment of the Lease from Assignor to Assignee.
<PAGE>
ASSIGNMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, Assignor and
Assignee each hereby promise and agree as follows:
1. ASSIGNMENT. As of the Effective Date, Assignor hereby assigns to
Assignee, its successors and assigns forever, all of Assignor's right, title,
interest, obligations and liabilities under the Lease.
2. ACCEPTANCE AND ASSUMPTION. As of the Effective Date, Assignee hereby
accepts the foregoing assignment and hereby assumes and agrees to perform and
discharge all liabilities and obligations in accordance with the terms of the
Lease; provided however, that Assignee does not assume any obligations or
liabilities which arose under the Lease prior to the Effective Date.
3. INDEMNIFICATION BY ASSIGNEE. Assignee hereby agrees to indemnify and
hold Assignor harmless from any and all claims, demands, losses, expenses,
causes of action or damages, including reasonable attorneys fees, arising under
the Lease because of events that occur after the Effective Date and because of
any failure of Assignee to perform obligations under the Lease after the
Effective Date.
4. INDEMNIFICATION BY ASSIGNOR. Assignor hereby agrees to indemnify and
hold Assignee harmless from any and all claims, demands, losses, expenses,
causes of action or damages, including reasonable attorneys fees, arising under
the Lease because of events that occurred before the Effective Date and because
of any failure of Assignor to perform obligations under the Lease before the
Effective Date.
5. REPRESENTATIONS AND WARRANTIES. Assignor hereby represents and
warrants to Assignee, as of the Effective Date, as follows:
A. The Lease has not been modified, amended, or assigned.
B. All amounts payable by Assignor under the Lease through the
Effective Date have been paid in full.
C. Assignor has complied with all of its obligations under the Lease
through the Effective Date.
D. Assignor has received no notice claiming any default by Assignor
under the Lease and Assignor is aware of no condition which, with
the receipt of notice or the passage of time, or both, may
constitute a default by Assignor under the Lease.
E. There is no outstanding default by the Landlord under the Lease
and Assignor is aware of no conditions which, with the giving of
2
<PAGE>
notice or the passage of time, or both, may constitute a default
by the Landlord under the Lease.
DATED as of the date first above written.
ASSIGNOR: AHP OF KANSAS, INC., a Kansas corporation
By:
------------------------------------
Joseph P. Sullivan, President
ASSIGNEE: PARACELSUS PIONEER VALLEY HOSPITAL, INC., a Utah
corporation
By:
------------------------------------
Robert C. Joyner, Vice President
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
The foregoing instrument was acknowledged before me this _____ day of May,
1996, by Joseph Sullivan, as President of AHP of Kansas, Inc., a Kansas
corporation.
Witness my hand and official seal.
My commission expires: ______________________________________
_______________________________
Notary Public
3
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
The foregoing instrument was acknowledged before me this
_____ day of May, 1996, by Robert C. Joyner, as Vice President of Paracelsus
Pioneer Valley Hospital, Inc., a Utah corporation.
Witness my hand and official seal.
My commission expires: _______________________________
_______________________________
Notary Public
4
<PAGE>
EXHIBIT A
TO
ASSIGNMENT AND ASSUMPTION OF LEASE
Legal Description of the Property:
5
<PAGE>
EXHIBIT N
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
TERMINATION OF HALSTEAD SUBLEASE
<PAGE>
EXHIBIT O
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
NOTICE OF ASSIGNMENT
See Separate Pages Attached.
<PAGE>
EXHIBIT P
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
CONSENT TO ASSIGNMENT
See Separate Pages Attached.
<PAGE>
EXHIBIT Q
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
HALSTEAD EQUIPMENT BILL OF SALE
See Separate Pages Attached.
<PAGE>
EXHIBIT R
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
HALSTEAD UCC-3 TERMINATION STATEMENTS
See Separate Pages Attached.
<PAGE>
EXHIBIT S
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
AHP KANSAS OFFICER'S CERTIFICATE
<PAGE>
EXHIBIT T
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
HALSTEAD ACCEPTANCE AND ASSUMPTION AGREEMENT
City of Halstead, Kansas
303 Main
Halstead, Kansas 67056
Attention: City Clerk
Ladies and Gentlemen:
Pursuant to Section 9.3 of that certain Lease (the "Lease") dated June 30,
1993 by and between The City of Halstead, Kansas and AHP of Kansas, Inc.
("AHP"), please be advised that Paracelsus Pioneer Valley Hospital, Inc.
("Paracelsus"), successor by merge to Paracelsus Halstead Hospital, Inc., the
proposed assignee of the Lease, expressly accepts the assignment of the Lease
and assumes and agrees to perform all of the obligations of AHP under the Lease.
Yours very truly,
Paracelsus Pioneer Valley Hospital, Inc.
<PAGE>
EXHIBIT U
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
DEED TO ELMWOOD FEE PROPERTY
See Separate Pages Attached.
<PAGE>
EXHIBIT V
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
TERMINATION OF ELMWOOD LEASE
<PAGE>
EXHIBIT V-1
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
ASSIGNMENT OF ELMWOOD PARKING LEASE
<PAGE>
EXHIBIT W
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
ELMWOOD UCC-3 TERMINATION STATEMENTS
See Separate Pages Attached.
<PAGE>
EXHIBIT X
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
AHP NEW ORLEANS OFFICER'S CERTIFICATE
<PAGE>
EXHIBIT Y
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
DEED TO PIONEER FEE PROPERTY
<PAGE>
EXHIBIT Z
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
FORM OF OWNER'S AFFIDAVIT
<PAGE>
EXHIBIT AA
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
LEASE OF PIONEER FEE PROPERTY
See Separate Pages Attached.
<PAGE>
EXHIBIT BB
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
PIONEER SECURITY AGREEMENT
See Separate Pages Attached.
<PAGE>
EXHIBIT CC
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
CALIFORNIA FACILITIES SECURITY AGREEMENT
See Separate Pages Attached.
<PAGE>
EXHIBIT DD
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
COLLATERAL ASSIGNMENT OF LEASES AND RENTS
See Absolute Assignment of Subleases and Rents Attached.
<PAGE>
EXHIBIT EE
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
PIONEER UCC-1 FINANCING STATEMENTS
See Separate Pages Attached.
<PAGE>
EXHIBIT FF
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
CERTIFICATE OF PARACELSUS UTAH OF NON-FOREIGN STATUS
<PAGE>
EXHIBIT GG
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
PARACELSUS UTAH OFFICER'S CERTIFICATE
<PAGE>
EXHIBIT HH
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
AHP UTAH OFFICER'S CERTIFICATE
<PAGE>
EXHIBIT II
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
PARACELSUS COUNSEL LEGAL OPINION
<PAGE>
EXHIBIT JJ
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
ARBITRATION PROCEDURES
<PAGE>
EXHIBIT KK
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
FORM OF ELMWOOD PROMISSORY NOTE
<PAGE>
EXHIBIT LL
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
FORM OF ELMWOOD LETTER OF CREDIT
<PAGE>
EXHIBIT MM
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
FORM OF PIONEER ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
SCHEDULE 4.1
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
HALSTEAD EQUIPMENT LEASE PAYOFF CALCULATION
1. Assumed Closing Date of May 15, 1996
Principal Balance
(after 5/1/96 scheduled payment) $1,484,493.86
Interest Accrual @ $399.06/day
for 15 days 5,985.90
-------------
Total $1,490,479.76
2. Other Closing Dates in May
For any other Closing Date during May, 1996, the payoff amount will consist
of the sum of $1,484,493.86, plus $399.06 for each day in May to and including
the Closing Date.
<PAGE>
SCHEDULE 8.9
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
PIONEER FEE PROPERTY LEASES AND SUBLEASES
CONSENTED TO BY AHP UTAH
Katheryn Allen
Jon Richard Aoki, M.D.
Gregory P. Dupont, M.D.
Shirl R. Graff, M.D.
Granger Medical Clinic, Inc.
Heart Care Lease
David McCray, M.D.
Thomas M. McNeilis, M.D.
Mountain West Cardiology Associates
Nighttime Pediatric Clinics, Inc.
Philip V. Savia, Jr., M.D.
Steven Shirts, M.D.
Roy M. Slezak, M.D.
Western Urological Clinic, P.C.
J.D. Burrows, M.D.
J. Wilmoth, M.D.
National Health Advisors
<PAGE>
SCHEDULE 13.1
TO PURCHASE AND SALE AGREEMENT
DATED AS OF MAY 15, 1996
PIONEER HOSPITAL RELATED RIGHTS
Pioneer Right of First Refusal
Pioneer Rights to Purchase
Pioneer Leasehold Property
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PIONEER HOSPITAL LEASE
BY AND BETWEEN
AHP OF UTAH, INC.
"LANDLORD"
AND
PARACELSUS PIONEER VALLEY HOSPITAL, INC.
"TENANT"
DATED AS OF MAY 15, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II LEASE OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Term of Lease . . . . . . . . . . . . . . . . . . . . . 12
3.2 Option to Extend Term of Lease. . . . . . . . . . . . . 12
ARTICLE IV RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Payment of Landlord's Transaction Expenses. . . . . . . 13
4.2 Payment of Base Rent, Percentage Rent and Additional
Charges . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Base Rent . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Percentage Rent . . . . . . . . . . . . . . . . . . . . 13
4.5 Confirmation of Percentage Rent . . . . . . . . . . . . 14
4.6 Certificates Regarding Percentage Rent. . . . . . . . . 15
4.7 Additional Charges. . . . . . . . . . . . . . . . . . . 15
4.8 Triple Net Lease. . . . . . . . . . . . . . . . . . . . 15
ARTICLE V IMPOSITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Payment of Impositions. . . . . . . . . . . . . . . . . 18
5.2 Notice of Impositions . . . . . . . . . . . . . . . . . 19
5.3 Adjustment of Impositions . . . . . . . . . . . . . . . 19
5.4 Utility Charges . . . . . . . . . . . . . . . . . . . . 19
5.5 Insurance Premiums. . . . . . . . . . . . . . . . . . . 20
ARTICLE VI TERMINATION OR ABATEMENT OF LEASE . . . . . . . . . . . . . . 20
ARTICLE VII OWNERSHIP OF PROPERTY . . . . . . . . . . . . . . . . . . . . 20
7.1 Ownership of the Property . . . . . . . . . . . . . . . 20
7.2 Tenant's Personal Property; Security Interest . . . . . 20
ARTICLE VIII CONDITION AND USE OF PROPERTY . . . . . . . . . . . . . . . . 21
8.1 Condition of the Property . . . . . . . . . . . . . . . 21
8.2 Use of the Property . . . . . . . . . . . . . . . . . . 22
8.3 Landlord to Grant Easements . . . . . . . . . . . . . . 23
8.4 Hazardous Substances. . . . . . . . . . . . . . . . . . 23
8.5 Existing Leases . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IX LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS . . . . . . . . 26
9.1 Compliance with Legal Requirements, Insurance
Requirements and Instruments. . . . . . . . . . . . . . 26
9.2 Covenants Regarding Legal Requirements. . . . . . . . . 26
9.3 Representations and Warranties. . . . . . . . . . . . . 26
-i-
<PAGE>
Page
ARTICLE X CONDITION OF THE PROPERTY . . . . . . . . . . . . . . . . . . 27
10.1 Maintenance and Repair. . . . . . . . . . . . . . . . . 27
10.2 Encroachments and Restrictions. . . . . . . . . . . . . 28
ARTICLE XI CAPITAL ADDITIONS . . . . . . . . . . . . . . . . . . . . . . 28
11.1 Construction of Capital Additions . . . . . . . . . . . 28
11.2 Capital Additions Financed or Paid for by Landlord. . . 29
11.3 Capital Additions Paid for by Tenant. . . . . . . . . . 31
11.4 Disposition of Capital Additions upon Expiration or
Termination of Lease. . . . . . . . . . . . . . . . . . 31
11.5 Non-Capital Additions . . . . . . . . . . . . . . . . . 31
11.6 Salvage . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XII LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XIII CONTESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XIV INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.1 General Insurance Requirements. . . . . . . . . . . . . 33
14.2 Replacement Cost. . . . . . . . . . . . . . . . . . . . 34
14.3 Additional Insurance. . . . . . . . . . . . . . . . . . 35
14.4 Waiver of Subrogation . . . . . . . . . . . . . . . . . 35
14.5 Form of Insurance . . . . . . . . . . . . . . . . . . . 35
14.6 Change in Limits. . . . . . . . . . . . . . . . . . . . 35
14.7 Blanket Policy. . . . . . . . . . . . . . . . . . . . . 35
14.8 No Separate Insurance . . . . . . . . . . . . . . . . . 36
ARTICLE XV INSURANCE PROCEEDS. . . . . . . . . . . . . . . . . . . . . . 36
15.1 Handling of Insurance Proceeds. . . . . . . . . . . . . 36
15.2 Reconstruction in the Event of Damage or Destruction
Covered by Insurance. . . . . . . . . . . . . . . . . . 36
15.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance. . . . . . . . . . . . . . . . . . 37
15.4 Payment of Proceeds on Tenant's Property and Capital
Additions Paid by Tenant. . . . . . . . . . . . . . . . 38
15.5 Restoration of Tenant's Property. . . . . . . . . . . . 38
15.6 Abatement of Rent . . . . . . . . . . . . . . . . . . . 38
15.7 Damage Near End of Term . . . . . . . . . . . . . . . . 38
15.8 Termination of Option to Purchase . . . . . . . . . . . 39
15.9 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XVI CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . 39
16.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 39
16.2 Parties' Rights and Obligations . . . . . . . . . . . . 39
16.3 Total Taking. . . . . . . . . . . . . . . . . . . . . . 39
16.4 Allocation of Portion of Award. . . . . . . . . . . . . 40
16.5 Partial Taking. . . . . . . . . . . . . . . . . . . . . 40
-ii-
<PAGE>
Page
16.6 Temporary Taking. . . . . . . . . . . . . . . . . . . . 40
ARTICLE XVII DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . 41
17.1 Events of Default . . . . . . . . . . . . . . . . . . . 41
17.2 Certain Remedies. . . . . . . . . . . . . . . . . . . . 43
17.3 Termination and Damages . . . . . . . . . . . . . . . . 43
17.4 Application of Funds. . . . . . . . . . . . . . . . . . 45
17.5 Failure to Conduct Business . . . . . . . . . . . . . . 45
17.6 Landlord's Right to Cure Tenant's Default . . . . . . . 45
17.7 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE XVIII CURE BY TENANT OF LANDLORD DEFAULTS . . . . . . . . . . . . . 45
ARTICLE XIX PURCHASE OF PROPERTY BY TENANT. . . . . . . . . . . . . . . . 46
19.1 Purchase of the Property. . . . . . . . . . . . . . . . 46
19.2 Failure to Close Purchase . . . . . . . . . . . . . . . 46
ARTICLE XX HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XXI RISK OF LOSS. . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XXII LIABILITY OF PARTIES. . . . . . . . . . . . . . . . . . . . . 47
22.1 Indemnification by Tenant . . . . . . . . . . . . . . . 47
22.2 Indemnification by Landlord . . . . . . . . . . . . . . 48
22.3 Continuing Liability. . . . . . . . . . . . . . . . . . 48
ARTICLE XXIII ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . 48
23.1 Assignment and Subletting . . . . . . . . . . . . . . . 48
23.2 Attornment. . . . . . . . . . . . . . . . . . . . . . . 49
23.3 Sublease Limitation . . . . . . . . . . . . . . . . . . 49
ARTICLE XXIV INFORMATION FROM TENANT . . . . . . . . . . . . . . . . . . . 50
24.1 Officer's Certificates. . . . . . . . . . . . . . . . . 50
24.2 Financial Information . . . . . . . . . . . . . . . . . 50
24.3 Licensing Information . . . . . . . . . . . . . . . . . 51
ARTICLE XXV APPRAISALS OF THE PROPERTY AND OPTIONS. . . . . . . . . . . . 51
25.1 Appraisers. . . . . . . . . . . . . . . . . . . . . . . 51
25.2 Method of Appraisal . . . . . . . . . . . . . . . . . . 51
ARTICLE XXVI OPTIONS TO PURCHASE . . . . . . . . . . . . . . . . . . . . . 52
26.1 Landlord's Option to Purchase Tenant's Personal
Property; Transfer of Licenses. . . . . . . . . . . . . 52
26.2 Tenant's Option to Purchase the Property. . . . . . . . 52
26.3 Specific Performance of Options . . . . . . . . . . . . 53
ARTICLE XXVII FACILITY MORTGAGES. . . . . . . . . . . . . . . . . . . . . . 53
-iii-
<PAGE>
Page
ARTICLE XXVIII LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . 54
ARTICLE XXIX ADDITIONAL COVENANTS OF TENANT. . . . . . . . . . . . . . . . 54
29.1 Additional Negative Covenants . . . . . . . . . . . . . 54
29.2 Additional Affirmative Covenants. . . . . . . . . . . . 55
29.3 Security for the Lease. . . . . . . . . . . . . . . . . 57
ARTICLE XXX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 59
30.1 Landlord's Right to Inspect . . . . . . . . . . . . . . 59
30.2 No Waiver . . . . . . . . . . . . . . . . . . . . . . . 59
30.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . 59
30.4 Acceptance of Surrender . . . . . . . . . . . . . . . . 59
30.5 No Merger of Title . . . . . . . . . . . . . . . . . . 59
30.6 Conveyance by Landlord . . . . . . . . . . . . . . . . 59
30.7 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . 59
30.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . 60
30.9 Survival of Terms; Applicable Law . . . . . . . . . . . 60
30.10 Exculpation of Landlord's and Tenant's Officers
and Agents. . . . . . . . . . . . . . . . . . . . . . . 61
30.11 Transfers Following Termination . . . . . . . . . . . . 61
30.12 Tenant's Waivers. . . . . . . . . . . . . . . . . . . . 61
30.13 Memorandum of Lease . . . . . . . . . . . . . . . . . . 61
30.14 Arbitration . . . . . . . . . . . . . . . . . . . . . . 61
30.15 Modifications . . . . . . . . . . . . . . . . . . . . . 62
30.16 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . 62
30.17 Time is of the Essence. . . . . . . . . . . . . . . . . 62
30.18 Counterparts. . . . . . . . . . . . . . . . . . . . . . 62
-iv-
<PAGE>
PIONEER HOSPITAL LEASE
This LEASE is executed as of May 15, 1996, by and between AHP OF UTAH,
INC., a Utah corporation, having its principal office at 6400 South Fiddler's
Green Circle, Suite 1800, Englewood, Colorado 80111, as Landlord, ("LANDLORD")
and PARACELSUS PIONEER VALLEY HOSPITAL, INC. a Utah Corporation, and a wholly
owned subsidiary of Paracelsus Healthcare Corporation, a California corporation
("PHC"), having its principal office at 155 North Lake Avenue, Suite 1100,
Pasadena, California 91101, as Tenant ("TENANT").
R E C I T A L S
A. Landlord and Tenant have entered into the Purchase and Sale
Agreement of even date herewith (the "PURCHASE AGREEMENT") pursuant to which
Landlord has agreed to purchase from the Tenant certain real property utilized
in connection with the operations of "Pioneer Valley Hospital," a general acute
care hospital located in West Valley City, Utah and licensed by the Health
Facility Licensure Bureau to operate 139 beds, and related facilities, including
but not limited to, the Property (as defined in Article II). Landlord's
interest in the Property will be subject to the terms and provisions of the
Existing Leases.
B. As an inducement to Landlord to enter into the Purchase
Agreement, Tenant has agreed hereby to lease the land and improvements
comprising the facility from Landlord and to secure its obligations to Landlord
under this Lease as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Lease, unless otherwise expressly provided in
this Agreement or the context in which such term is used indicates a contrary
intent, (a) the terms defined in this Article shall have the meanings ascribed
to them in this Article, (b) all accounting terms not otherwise defined in this
Article shall have the meanings ascribed to them in accordance with generally
accepted accrual method accounting principles at the time applicable, (c) all
references in this Lease to designated "Articles," Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision.
"ABSOLUTE ASSIGNMENT OF SUBLEASES AND RENTS" shall mean the Absolute
Assignment of Subleases and Rents of even date herewith by and between Landlord
and Tenant.
<PAGE>
"ADDITIONAL CHARGES" shall have the meaning ascribed to such term in
Section 4.7.
"AFFILIATE" of any person or entity (the "Subject") shall mean (a) any
person which, directly or indirectly, controls or is controlled by or is under
common control with the Subject, (b) any person owning, beneficially, directly
or indirectly, ten percent (10%) or more of the outstanding capital stock,
shares or equity interests of the Subject or (c) any officer, director,
employee, general partner or trustee of the Subject or any person controlling,
controlled by or under common control with the Subject (excluding trustees and
persons serving in similar capacities who are not otherwise an Affiliate of the
Subject). As used in this definition, the term "person" means and includes
governmental agencies and authorities, political subdivisions, individuals,
corporations, limited liability companies, general partnerships, limited
partnerships, stock companies or associations, joint ventures, associations,
trusts, banks, trust companies, land trusts, business trusts and any other
entity of any form whatsoever, and "control" (including the correlative meanings
of the terms "controlled by" and "under common control with"), as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, through the ownership of voting securities, partnership interests or
other equity interests, or through any other means.
"AHP" shall mean American Health Properties, Inc., a Delaware
corporation.
"APPLICABLE CPI PERCENT" shall mean the percent equal to (x) the
quotient of (i) the CPI most recently published as of the date that payment of
Percentage Rent for the last Calendar Quarter of such Calculation Period is due,
divided by (ii) the CPI as of the comparable prior year date; minus (y) one, but
in no event less than 2.0%.
"APPRECIATION AMOUNT" shall mean the amount, if any, by which the Fair
Market Value of the Property exceeds Landlord's Total Investment.
"AWARD" shall have the meaning ascribed to such term in
Section 16.1(c).
"BASE GROSS REVENUES" shall mean, for the Fixed Term, the Gross
Revenues for the 12-month period commencing with the first full day of the first
full calendar month of the Fixed Term and, for any Extended Term, the Gross
Revenues for the Base Year.
"BASE RENT" shall mean, for the Fixed Term, $7,050,750 per annum
(prorated as of the date hereof) and, for each Extended Term, the amount
determined pursuant to Section 3.2.
"BASE RENTAL RATE" shall mean for any Calculation Period the quotient
of (a) the Base Rent payable with respect to such Calculation Period divided by
(b) the Landlord's Total Investment for such Calculation Period.
"BASE YEAR" shall mean with respect to each Extended Term the 12-month
period ending with the last day of the last full calendar month immediately
preceding the commencement of such Extended Term.
"BUSINESS DAY" shall mean any day on which banking institutions in
Salt Lake City, Utah, New York, New York, Los Angeles, California and Denver,
Colorado are open for the conduct of normal banking business.
-2-
<PAGE>
"CALCULATION PERIOD" shall mean a period of 12 consecutive months
commencing with the first day of the first full calendar month of the Fixed Term
or any anniversary of such date.
"CALENDAR QUARTER" shall mean the three-month periods in each calendar
year ending on March 31st, June 30th, September 30th and December 31st,
respectively.
"CALIFORNIA AFFILIATE" shall mean Paracelsus Convalescent Hospitals,
Inc., a California corporation which is a subsidiary of Paracelsus Healthcare
Corporation, Inc., a California corporation.
"CALIFORNIA FACILITIES" shall mean the Lafayette Convalescent
Hospital, the Oak Park Convalescent Hospital, the Rheem Valley Convalescent
Hospital and the University Convalescent Hospital, collectively.
"CALIFORNIA FACILITIES SECURITY AGREEMENT" shall mean a Security
Agreement from the California Affiliate, pertaining to the California
Facilities, substantially in the form of EXHIBIT B hereto.
"CAPITAL ADDITIONS" shall mean (a) one or more new buildings located
on the Land or to be used, directly or indirectly, as part of the Facility, (b)
one or more additional structures annexed to any portion of any of the
Improvements, (c) the material expansion of existing Improvements, (d) the
construction of a new wing or new story on existing Improvements, or (e) any
expansion, construction, renovation or conversion of existing Improvements or
the installation of new Fixtures therein to (i) increase the bed or service
capacity of the Facility or (ii) change the purpose for which the Facility is
utilized. Notwithstanding anything to the contrary contained in Article XI, in
the event it is necessary to abate or otherwise take corrective action with
respect to the existence of a Hazardous Substance (as hereinafter defined)
located in, on or under the Property or in the Improvements, such abatement or
corrective action shall not be deemed to be a Capital Addition and shall be the
sole responsibility of Tenant at its sole cost and expense.
"CAPITAL ADDITIONS COST" shall mean the cost of any Capital Additions.
Such cost shall include (a) the costs of constructing the Capital Additions,
including site preparation and improvement, materials, labor, supervision,
developer and administrative fees, the costs of design, engineering and
architectural services, the costs of fixtures, the costs of construction
financing (including, if funded, by Landlord, capitalized interest at a rate
equal to the Prime Rate plus 250 basis points) and other similar costs approved
in writing by Landlord, (b) if agreed to by Landlord in writing in advance, the
purchase price and other acquisition costs, or applicable ground lease rental
payable for any period such ground lease is in effect to and including the date
upon which such Capital Addition is completed and occupied or in operation, as
the case may be, of any land which is acquired or leased for the purpose of
placing thereon all or any portion of the Capital Additions or for providing
means of access thereto, or parking facilities therefor (including the costs of
surveying the same and recording, title insurance and escrow fees and charges),
(c) insurance premiums, real estate taxes, water and sewage charges and other
carrying charges for such Capital Additions during their construction, (d) fees
and expenses of legal counsel, (e) any documentary transfer or similar taxes,
(f) any applicable regulatory or administrative fees and charges, and any costs,
charges, fees or expenses paid or incurred in connection with obtaining any
applicable permits, licenses, franchises, authorizations, certificates of need,
certificates of occupancy and similar authorizations and entitlements and
(g) all other reasonable costs and expenses of Landlord or Tenant, as
applicable, and any lending institution which has committed to finance the
Capital Additions, including, but not limited to, (i) the fees and expenses of
their respective legal counsel, (ii) any printing, duplicating and messenger
expenses, (iii) any filing, registration and recording taxes and fees, (iv) any
documentary transfer or similar taxes, (v) any title insurance charges and
appraisal fees, (vi) any rating
-3-
<PAGE>
agency fees and (vii) any commitment or similar fees charged by any lending
institution financing or offering to finance any portion of such Capital
Additions.
"CAPITAL ADDITIONS DEPRECIATION" shall mean the depreciation schedule
applicable to Capital Additions as mutually agreed by Landlord and Tenant.
"CASH FLOW" shall mean, for any period of determination, an amount
equal to the sum of the amounts for such period of (i) net income before income
taxes and interest expense, (ii) depreciation, amortization and other similar
non-cash charges, (iii) Base Rent and (iv) Percentage Rent.
"CLAIMS" shall have the meaning specified in Section 22.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMENCEMENT DATE" shall have the meaning ascribed to such term in
Section 3.1.
"CONDEMNATION" shall have the meaning ascribed to such term in
Section 16.1(a).
"CONDEMNOR" shall have the meaning ascribed to such term in
Section 16.1(d).
"CONSOLIDATED FINANCIALS" shall mean, for any fiscal year (or other
accounting period) for Tenant and Affiliates thereof statements of earnings,
retained earnings and cash flows for such period and for the period from the
beginning of the respective fiscal year to the end of such period and the
related balance sheet as at the end of such period, together with the notes
thereto, all in reasonable detail and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year
(or period), all of which shall be prepared in accordance with generally
accepted accounting principles.
"CPI" shall mean the Consumer Price Index for the region in which the
Facility is located (All Urban Consumers, 1982-84=100).
"DATE OF TAKING" shall have the meaning ascribed to such term in
Section 16.1(b).
"ELMWOOD LEASE" shall mean the Lease dated as of March 1, 1993, by and
between AHP of New Orleans, Inc., a Louisiana corporation, as Landlord, and
Paracelsus Elmwood Medical Center, Inc., a Louisiana corporation, as Tenant.
"ENCUMBRANCE" shall have the meaning ascribed to such term in
Article XXVII.
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in
Section 17.1.
"EXCESS REVENUE" shall mean, with respect to each Calculation Period,
the difference between the Gross Revenues for such Calculation Period and the
Base Gross Revenues.
"EXISTING LEASES" shall mean those certain leases described in
EXHIBIT C.
"EXTENDED TERM" shall have the meaning ascribed to such term in
Section 3.2.
-4-
<PAGE>
"FACILITY" shall mean the 139 bed general acute care hospital
presently operated on the Land, or with Landlord's consent, such other general
health care facility, general health and rehabilitation hospital, nursing home,
retirement center, congregate living facility, health care related apartments or
hotel, medical office building or other medical facility with treatment,
diagnostic or surgical facilities for inpatient or outpatient care (which may
include, without limitation, acute care inpatient facilities, skilled nursing
facilities, intermediate care facilities, home health care agencies, ambulatory
care clinics or similar facilities) offering other related health care products
and services being operated or proposed to be operated on the Land from time to
time in accordance with the provisions of this Lease.
"FACILITY MORTGAGE" shall have the meaning ascribed to such term in
Section 14.1.
"FACILITY MORTGAGEE" shall have the meaning ascribed to such term in
Section 14.1.
"FAIR MARKET RENTAL" shall mean, with respect to the Property
(including any Capital Additions or portions thereof paid for by Landlord) the
rental paid on a net basis as provided in Section 4.8 hereof which a willing
tenant not compelled to rent would pay to a willing landlord not compelled to
lease for the highest and best medical use and occupancy of such property
permitted pursuant to this Lease for the term in question, assuming that Tenant
is not in default under this Lease, but without taking into account Percentage
Rent. For purposes of this Lease, Fair Market Rental shall be determined in
accordance with the appraisal procedures set forth in Article XXV or as
otherwise mutually agreed upon by Landlord and Tenant.
"FAIR MARKET VALUE" shall mean, with respect to the Property,
including all Capital Additions, the price that a willing buyer not compelled to
buy would pay to a willing seller not compelled to sell for such property
(except as otherwise provided below), assuming that (a) this Lease is not in
effect with respect to the Property, (b) such seller must pay any closing costs
and title insurance premiums with respect to such sale, and (c) the Property is
fully licensed by all governmental agencies having jurisdiction thereof, and is
and will continue to be operated for the Primary Intended Use and is otherwise a
going concern. Notwithstanding the foregoing, the computation of Fair Market
Value shall assume that this Lease is in effect with respect to the Property in
the event that Tenant elects to acquire the Property pursuant to
Section 15.2(b). For purposes of this Lease, Fair Market Value shall be
determined in accordance with the appraisal procedures set forth in Article XXV
or as otherwise mutually agreed upon by Landlord and Tenant.
"FISCAL YEAR" shall mean the 12-month period commencing January 1 and
terminating December 31.
"FIXED TERM" shall have the meaning ascribed to such term in
Section 3.1.
"FIXTURES" shall have the meaning ascribed to such term in clause
(c) of Article II.
"GAAP" shall mean generally accepted accounting principles.
"GROSS REVENUES" shall mean all revenues received or receivable from,
in connection with, incidental to or by reason of the operation of the Facility
or any other use of the Property by Tenant or any Affiliate thereof, including,
without limitation, all revenues received or receivable from the Existing
Leases, from the Facility and all patient revenues received or receivable from,
in connection with or incidental to the use of or otherwise by reason of all
rooms, beds and other facilities provided, meals served, services performed,
space or facilities subleased or goods sold on the Property and including,
-5-
<PAGE>
without limitation (except as provided below), arrangements with third parties
relating to the possession or use of any portion of the Property; provided,
however, that Gross Revenues shall not include:
(i) any revenues from professional fees or
charges by physicians or providers of ancillary services when and to
the extent such charges are paid over to such physicians or providers
of ancillary services, or are accompanied by separate charges for the
use of the Facility or any portion thereof;
(ii) non-operating revenues such as interest
income or income from the sale of assets not sold in the ordinary
course of business;
(iii) contractual allowances or reserves (relating
to any period during the Term) for billings not paid by or received
from the applicable governmental agencies or third party providers;
(iv) allowances according to generally accepted
accounting principles for uncollectible accounts, including credit
card accounts, uncompensated care, charity care or other
administrative discounts and collection expenses;
(v) all patient billing credits and adjustments
that are appropriate according to generally accepted accounting
principles relating to health care accounting;
(vi) all federal, state or local sales or excise
taxes and any tax based upon or measured by Gross Revenues which is
added to or made a part of the amount billed to the patient or other
recipient of such services or goods, whether included in the bill or
stated separately;
(vii) all provider discounts for hospital or other
medical facility utilization contracts and credit card discounts;
(viii) all costs of any federal, state or local
governmental program imposed specially to provide or finance indigent
patient care;
(ix) all rental income, concession fees and other
payments received by Tenant from any Affiliate of Tenant; provided,
however, that any receipts of such Affiliate that would be deemed
Gross Revenues if received by Tenant shall be considered to be part of
Gross Revenues to the extent of Tenant's or any of its Affiliate's
percentage interest in such receipts;
(x) amounts received by Tenant pursuant to a
sublease of any portion of the Property if the rental paid by the
sublessee under the sublease is based, in whole or in part, on either
(a) the income or profits derived by the business activities of the
sublessee, or (b) any other formula such that any portion of the
sublease rental would fail to qualify as 'rents from real property'
under Section 856(d) of the Code, or any similar or successor
provisions thereto, provided, however, that any receipts of such
sublessee that would be deemed Gross Revenues if received by Tenant
shall be considered to be part of Gross Revenues; and
-6-
<PAGE>
(xi) revenues attributable to services
actually provided at locations other than the Property, such as home
health care and other services.
"HALSTEAD LEASE" shall mean the Lease dated as of June 30, 1993, by
and between AHP of Kansas, Inc., a Kansas corporation, as Landlord, and
Paracelsus Halstead Hospital, Inc., a Kansas corporation, as Tenant.
"HAZARDOUS SUBSTANCES" shall mean those substances, materials, and
wastes listed in the United States Department of Transportation Table (49 CFR
172 101) or by the Environmental Protection Agency as hazardous substances (40
CFR Part 302) and amendments thereto, or such substances, materials and wastes
which are or become regulated under any applicable local, state or federal law
including, without limitation, any material, waste or substance which is
(i) hydrocarbons, petroleum and petroleum products, (ii) asbestos,
(iii) polychlorinated biphenyls, (iv) formaldehyde, (v) radioactive substances,
(vi) flammables and explosives, (vii) described as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq.
(33 U.S.C. Section 1321 or listed pursuant to Section 307 of the Clean Water Act
(33 U.S.C. Section 1317), (viii) defined as a "hazardous waste" pursuant to
Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq. (42 U.S.C. Section 6903), (ix) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C.
Section 9601), as the same may be amended from time to time, or (x) any other
substance, waste or material which could presently or at any time in the future
cause a detriment to or impair the value or beneficial use of the Land or other
Property (which, for purposes of this definition shall include all air, soils,
ground water, surface water and soil vapor) or constitute or cause a health,
safety or environmental hazard on, under or about the Land or other Property or
to any person who may enter on, under, or about the Land or other Property or
require remediation at the behest of any governmental agency.
"IMPACTED FACILITY" shall have the meaning specified in Section 15.2.
"IMPOSITIONS" shall mean all taxes (including without limitation all
real property taxes imposed upon the Land, Improvements or other portions of the
Property, including, but not limited to all tangible and intangible personal
property, ad valorem, sales, use, single business, gross receipts, transaction
privilege, documentary stamp (if any are associated with this Lease or the
transactions contemplated hereby), rent or similar taxes relating to or imposed
upon Landlord, any portion of the Property, Tenant or its business conducted
upon the Land), assessments (including without limitation all supplemental real
property tax assessments or assessments for public improvements or benefit,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term), ground rents, water, sewer or other rents
and charges, excises, tax levies, fees (including without limitation license,
permit, franchise, inspection, authorization and similar fees) and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every character or nature whatsoever
with respect to or connected with the Property or the business conducted thereon
by Tenant (including all interest, penalties and fines thereon due to any
failure or delay in payment thereof) which at any time prior to, during or with
respect to the Term hereof may be assessed or imposed on or with respect to, or
may be a lien upon (a) Landlord's interest in the Property, (b) the Property or
any part thereof or any Rent therefrom or any estate, right, title or interest
therein, (c) Landlord's capital invested in the State as represented by the
Property, or (d) any occupancy, operation, use or possession of, or sales from,
or activity conducted on or in connection with the Property or the leasing or
use of the Property or any part thereof by Tenant.
-7-
<PAGE>
"IMPROVEMENTS" shall have the meaning ascribed to such term in clause
(b) of Article II.
"INITIAL INVESTMENT COST" shall mean $57,073,000.
"INSURANCE REQUIREMENTS" shall mean all terms and conditions of any
insurance policy required by this Lease and all requirements of the issuer of
any such insurance policy.
"LAFAYETTE CONVALESCENT HOSPITAL" shall mean the facility located at
1010 First Street, Lafayette, California 94549 of which Paracelsus Real Estate
Corporation owns the real property and the California Affiliate operates the
facility and owns the personal property.
"LAND" shall mean all of that certain real property situated in the
City of West Valley City, County of Salt Lake, State of Utah and more
particularly described in EXHIBIT A attached hereto and incorporated herein by
reference, and any other parcel of land acquired or leased and made subject to
this Lease in connection with a Capital Addition.
"LANDLORD LENDER" shall have the meaning ascribed to that term in
Section 14.1.
"LANDLORD'S TOTAL INVESTMENT" shall mean an amount equal to the sum of
(y) the Initial Investment Cost and (z) all Capital Additions Costs pertaining
to the Property paid for by Landlord pursuant to Section 11.2 of the Lease.
"LANDLORD'S TRANSACTION EXPENSES" shall mean all out-of-pocket
expenses reasonably incurred by Landlord in connection with (i) the preparation
of this Lease, the Purchase Agreement and any Substitute Lease and the
instruments contemplated hereunder and thereunder, and any other instruments
required to be executed and delivered by Tenant to Landlord in connection,
herewith or therewith (whether or not the transactions hereby or thereby
contemplated shall be consummated) and (ii) the transactions contemplated to be
performed hereunder and thereunder, including but not limited to the reasonable
fees and disbursements of Landlord's legal counsel, title insurance premiums,
recording taxes and fees, survey fees, valuation or appraisal fees, engineering
fees and architects' fees.
"LEASE" shall mean this document, as the same may be amended from time
to time in accordance herewith.
"LEGAL REQUIREMENTS" shall mean all federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, common law, decrees and injunctions affecting the Property or the
maintenance, construction, use, alteration, occupancy or operation thereof,
whether now or hereafter enacted and in force (including any of the foregoing
which may require repairs, modifications or alterations in or to the Property),
all permits, licenses, certificates, franchises, authorizations, land use
entitlements, zoning and regulations relating thereto, and all covenants,
conditions, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Tenant (other than encumbrances
created by Landlord without the consent of Tenant), at any time in force
affecting the Property.
"MINIMUM REPURCHASE PRICE" shall mean the Landlord's Total Investment
less the net amount (after deduction of all reasonable legal fees and other
costs and expenses, including without limitation expert witness fees, incurred
by Landlord in connection with obtaining any such proceeds or awards) of any
proceeds of insurance paid to and retained by Landlord in accordance with
Article XV
-8-
<PAGE>
of this Lease and of any Awards received by Landlord and not applied to
restoration of the Property in accordance with Article XVI of this Lease.
"NOTICE" shall mean a notice given pursuant to Section 30.8 hereof.
"OAK PARK CONVALESCENT HOSPITAL" shall mean the facility located at
1625 Oak Park Boulevard, Pleasant Hill, California 94523, of which Paracelsus
Real Estate Corporation owns the real property and the California Affiliate
operates the facility and owns the personal property.
"OFFICER'S CERTIFICATE" shall mean a certificate of Tenant signed by
the chief financial officer or another officer authorized so to sign by
resolutions adopted by the board of directors or the articles of incorporation
or by-laws of the general partner of the Tenant or by any other person whose
power and authority to act has been authorized by delegation in writing by the
chief financial officer of the general partner of the Tenant.
"OVERDUE RATE" shall mean, as of a specified date, a rate of interest
equal to the Prime Rate plus five percent per annum, but in no event greater
than the maximum rate of interest then permitted under applicable law.
"PAYMENT DATE" shall mean any due date for the payment of any
installment of Base Rent.
"PERCENTAGE RENT" shall mean the percentage rent payable by Tenant to
Landlord pursuant to Section 4.4.
"PERCENTAGE RENT COMMENCEMENT DATE" shall mean with respect to the
Fixed Term, the first day of the first full calendar month of the Fixed Term,
and with respect to each Extended Term, the one year anniversary of the first
day of such Extended Term.
"PERMITTED ENCUMBRANCES" shall mean the matters, if any, set forth in
EXHIBIT D attached hereto and incorporated herein by reference.
A "PERSON" shall mean any natural person, corporation, limited
liability company, business trust, association, company, partnership or
government (or any agency or political subdivision thereof) or, for purposes of
the definition of "Change of Control" herein, any group acting in concert
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934).
"PHC" shall mean Paracelsus Healthcare Corporation, a California
corporation.
"PIONEER ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the Pioneer
Assignment and Assumption Agreement of even date herewith, by and between
Landlord and Tenant.
"PRIMARY INTENDED USE" shall mean a general acute care hospital
licensed by the State, and such additional uses which are licensed or applied
for on the date hereof or are permitted by Landlord from time to time hereunder.
"PRIME RATE" shall mean the fluctuating rate of interest most recently
announced by Wells Fargo at its principal office in San Francisco, California as
its "Prime Rate." The "Prime Rate" is one of Wells Fargo's base rates and
serves as the basis upon which effective rates of interest are calculated
-9-
<PAGE>
for those loans making reference thereto. The "Prime Rate" is evidenced by the
recording thereof after its announcement in such internal publication or
publications as Wells Fargo may designate and may not be the lowest of Wells
Fargo's base rates. Any change in any of the interest rates chargeable
hereunder resulting from a change in the Prime Rate shall become effective as of
the Business Day on which each change in the "Prime Rate" is announced.
"PROPERTY" shall have the meaning ascribed to such term in Article II.
"PURCHASE AGREEMENT" shall have the meaning given to that term in the
Recitals to this Lease.
"REMEDIAL WORK" shall have the meaning specified in Section 8.4.
"RENT" shall mean the Base Rent, Percentage Rent and Additional
Charges.
"RHEEM VALLEY CONVALESCENT HOSPITAL" shall mean the facility located
at 348 Rheem Boulevard, Moraga, California 94556 of which Karl J. and Gertrude
Niederer own the real property and the California Affiliate operates the
facility and owns the personal property.
"SECURITY AGREEMENT" shall mean the Security Agreement of even date
between Tenant, as Debtor, and Landlord, as Secured Party.
"SECURITY LETTER OF CREDIT" shall have the meaning ascribed thereto in
Section 29.3.
"STATE" shall mean the State of Utah.
"TAKING" shall mean a taking or voluntary conveyance during the Term
hereof of all or any part of the Property, or any interest therein, right with
respect thereto or use thereof, as a result of, incidental to, or in settlement
of any condemnation or other eminent domain proceedings affecting such Property,
regardless of whether such Proceedings shall have actually been commenced.
"TANGIBLE NET WORTH" shall mean, as of the date of determination, the
sum of the following for Tenant and its consolidated subsidiaries, if any, on a
consolidated basis, determined in accordance with generally accepted accounting
principles (a) the amount of capital or stated capital (after deducting the cost
of any shares held in the applicable entity's treasury); (b) plus the amount of
capital surplus and retained earnings; or (c) in the case of a capital or
retained earnings deficit, minus the amount of such deficit, (d) less the
amount, if any, carried on the books of the entity and any consolidated
subsidiaries of the entity for goodwill, patents, trademarks, copyrights,
licenses, and other assets which are properly classified as intangible assets
under generally accepted accounting principles.
"TEN-YEAR TREASURY RATE" shall mean, as of the date of determination,
the monthly average yield to maturity of actively traded marketable United
States Treasury securities bearing a fixed rate of interest, adjusted for a
constant maturity of ten years, as calculated by the Federal Reserve Board for
the four preceding calendar weeks and published in said board's Statistical
Release H. 15.
"TENANT'S CAPITAL INVESTMENT" shall mean, for any period of
determination, the lesser of (x) the aggregate amount of the increase, during
the applicable period, of the original cost of (a) property, plant and
equipment, (b) capitalized development expenses and (c) investments which, at
the time made, are reasonably likely to contribute to the business of the
Facility, and (y) the aggregate
-10-
<PAGE>
amount of the increase, during the applicable period, of capital stock, paid-in
surplus, retained earnings and advances from PHC (to the extent subordinated, to
Landlord's satisfaction, to the prior payment in full of Tenant's obligation to
Landlord under this Lease).
"TENANT'S PERSONAL PROPERTY" shall mean all machinery, equipment,
furniture, furnishings, movable walls or partitions, computers or other personal
property, and consumable inventory and supplies, including, without limiting the
generality of the foregoing, mail boxes, desks, lamps, chairs, beds, bedstands,
non-affixed cabinetry, tables, and similar movable equipment, owned by Tenant
and used on the Land, but in no event any items included within the definition
of Fixtures.
"TERM" shall mean the Fixed Term and any Extended Terms, as the
context may require, unless earlier terminated pursuant to the Provisions of
this Lease.
"TERMINATION DATE" shall mean January 31, 2004.
"TOTAL RENT" shall mean the sum of Base Rent, Percentage Rent and
Additional Charges.
"UNAVOIDABLE DELAYS" shall mean delays due to strikes, lockouts,
inability to procure materials, power failures, acts of God, governmental
restrictions, enemy action, civil commotion, unavoidable casualty and other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto.
"UNIVERSITY CONVALESCENT HOSPITAL" shall mean the facility located at
2122 Santa Cruz Avenue, Menlo Park, California 94025, of which Paracelsus Real
Estate Corporation owns the real property and the California Affiliate operates
the facility and owns the personal property.
"WELLS FARGO" shall mean Wells Fargo Bank, N.A., a national banking
association.
ARTICLE II
LEASE OF PROPERTY
Landlord hereby leases, demises and lets to Tenant, and Tenant hereby
hires, takes and leases from Landlord, upon the terms and subject to the
conditions hereinafter set forth, TO HAVE AND TO HOLD, all of Landlord's right,
title and interest in and to all of the following (the "PROPERTY"):
(a) the Land;
(b) all buildings, structures and other improvements of every kind,
including but not limited to the Facility, all buildings and structures
hereafter constructed upon the Land and all alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and off-site), parking
areas, roadways and other related on-site and off-site improvements appurtenant
to such buildings and structures presently or hereafter situated upon the Land,
and any and all Capital Additions paid for by Landlord pursuant to Section 11.2
of this Lease (the "IMPROVEMENTS");
(c) all "fixtures" as that term is defined in the State now and
hereafter located in, on or used and incorporated into the Land or Improvements;
all equipment (including non-movable medical equipment), machinery, fixtures and
other items of property, including all components thereof, now and
-11-
<PAGE>
hereafter located in, on or used and incorporated into the Property, in all
cases so as to constitute component parts thereof, including, without
limitation, any and all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air conditioning
systems, equipment and apparatus, sprinkler systems and fire and theft
protection equipment, built-in oxygen and vacuum systems, wiring, tubing,
central clock systems, doctor register systems, elevators, dumb waiters,
intercom systems, nurse call systems, affixed cabinetry and counters, pneumatic
tube systems, vacuum cleaning systems, conveyor systems, paging systems, mill
work, x-ray protection, pass-through boxes, exhaust systems, laboratory plumbing
and piping, medical gas systems, nurse station counters, emergency generators
and similar items incorporated into and made a component part of the Property,
all of which to the greatest extent permitted by law are hereby deemed by the
parties hereto to constitute component parts of real estate, together with all
replacements, modifications, alterations and additions thereto, but specifically
excluding Tenant's Personal Property (the "FIXTURES"); and
(d) all easements, licenses, rights-of-way and appurtenances relating
to the Land and the Improvements.
ARTICLE III
TERM OF LEASE
3.1 TERM OF LEASE. The initial term of this Lease shall commence
on the date hereof (the "Commencement Date"), and, unless extended or terminated
earlier in accordance with the provisions of this Lease, shall remain in effect
until January 31, 2004 (the "Fixed Term"). If for any reason Landlord cannot
deliver possession of the Property (or any portion thereof) to Tenant on the
Commencement Date, Landlord shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease or the obligations of
Tenant hereunder or extend the Term hereof, but in such case, Tenant shall not
be obligated to pay Rent until possession of the Property is tendered to Tenant.
3.2 OPTION TO EXTEND TERM OF LEASE.
Landlord hereby grants to Tenant an option to extend the term
of this Lease for three consecutive ten-year renewal terms (the "Extended
Terms"). Each Extended Term shall be on the same terms and conditions as those
set forth herein for the Fixed Term (including, but not limited to, Tenant's
obligation to pay Percentage Rent), except that Base Rent shall be paid at a
rate equal to the then current Fair Market Rental which, unless otherwise
mutually agreed to by Landlord and Tenant, shall be determined by appraisal
pursuant to the provisions of Article XXV. In no event, however, shall the Base
Rent for any Extended Term be less than 102%, nor more than 107%, of the total
amount of Base Rent and Percentage Rent reserved under this Lease for the Base
Year for such Extended Term. Tenant shall pay to Landlord, on the first day of
each Extended Term, an Additional Charge equal to 0.5% of the Landlord's Total
Investment. Each such option may only be exercised by Tenant if, at the time
such option is exercised, (a) this Lease has not expired or been sooner
terminated and (b) an Event of Default is not continuing, and shall be exercised
by Tenant by delivery of Notice to that effect to Landlord not less than 180 nor
more than 360 days prior to the expiration of the then current Term. Tenant's
exercise of any option to extend the term of this Lease for an Extended Term
pursuant to this Section 3.2 shall constitute Tenant's irrevocable and binding
commitment to lease the Property on the terms stated in this Lease for the whole
of such Extended Term. If Tenant is unable to exercise any option due to the
provisions of this Lease, the time during which such option may be exercised
shall not be extended or enlarged. Time is strictly of the essence with respect
to the requirement that Tenant give timely Notice
-12-
<PAGE>
of its exercise of any options hereunder, and Tenant's failure timely to
exercise any option strictly in accordance with its terms shall constitute a
material, irredeemable and incurable failure to satisfy a condition precedent to
the vesting of any rights in Tenant pursuant to the option, and Tenant hereby
expressly waives any right to claim relief from forfeiture or any other form of
equitable relief from the consequences of any untimely exercise of any such
option strictly in accordance with its terms. The implied covenant of good
faith and fair dealing, if any, under this Lease shall not be construed to
impose upon Landlord any obligation to notify Tenant in advance of the impending
deadline for the exercise of any option hereunder, nor shall it obligate
Landlord to excuse the tardy exercise of any option, however slight. The
failure of Tenant to exercise any of the options for the Extended Terms within
the respective times specified in this Section shall thereby terminate any
remaining such options.
ARTICLE IV
RENT
4.1 PAYMENT OF LANDLORD'S TRANSACTION EXPENSES. Tenant shall pay
to Landlord all Landlord's Transaction Expenses within 30 days of Landlord's
transmittal to Tenant of written invoices for all Landlord's Transaction
Expenses, in a form reasonably acceptable to Tenant.
4.2 PAYMENT OF BASE RENT, PERCENTAGE RENT AND ADDITIONAL CHARGES.
During the Term, Tenant shall pay to Landlord at the times specified herein, in
lawful money of the United States of America, without right of offset or
deduction, by wire transfer of immediately available funds to such account or
accounts as Landlord may designate from time-to-time in a Notice, the Rent.
4.3 BASE RENT. Commencing on the first Business Day of the first
full calendar month occurring coincident with or after the Commencement Date
and, thereafter, on the first day of each calendar month occurring during the
Term hereof, Tenant shall pay to Landlord Base Rent in an amount determined by
dividing (x) the then annual Base Rent by (y) 12, provided that the first
payment of Base Rent shall include an additional amount for any partial calendar
month occurring between the Commencement Date and the date of the first payment
of Base Rent. Any payment of Base Rent for a period of less than one calendar
month shall be prorated based upon a 30-day month and the actual number of days
elapsed.
4.4 PERCENTAGE RENT.
(a) "Percentage Rent" shall accrue, in the manner and at
the times set forth in this Section 4.4, in an amount equal to six percent of
the Excess Revenues for any Calculation Period commencing during the Fixed Term
and in an amount equal to five percent of the Excess Revenues for any
Calculation Period commencing during any of the Extended Terms; provided,
however, that no Percentage Rent shall accrue during the first Calculation
Period commencing during any Extended Term. On August 14, 1996, and thereafter
on the 45th day after the last day of every Calendar Quarter commencing during
the Term of this Lease, Tenant shall pay Percentage Rent on a quarterly basis.
The quarterly payment shall be determined by (i) annualizing the Gross Revenues
for the portion of the Calculation Period ended (prorated for any partial
period) as of the end of the last Calendar Quarter, (ii) subtracting from such
annualized Gross Revenues the Base Gross Revenues to arrive at the Excess
Revenues for such completed portion of the Calculation Period, (iii) multiplying
such Excess Revenues by six percent or five percent, as the case may be, to
arrive at annualized Percentage Rent, (iv) multiplying such annualized
Percentage Rent by a fraction the numerator of which is the number of days
elapsed in the Calculation Period through the end of the last Calendar Quarter
and the denominator
-13-
<PAGE>
of which is 360 and (v) subtracting from the product thus obtained any
Percentage Rent payments previously made with respect to such Calculation
Period.
(b) Notwithstanding subsection (a) of this Section 4.4 to
the contrary, in no event shall the increase in Percentage Rent due and payable
under this Lease with respect to any Calculation Period during the Fixed Term be
less than an amount equal to two percent of aggregate Base Rent and Percentage
Rent reserved hereunder for the immediately preceding Calculation Period, nor
shall it be greater than the amount determined by multiplying (i) the Applicable
CPI Percent by (ii) the aggregate Base Rent and Percentage Rent reserved
hereunder for the immediately preceding Calculation Period. In no event,
however, shall the Percentage Rent due and payable under this Lease with respect
to any Calculation Period during the Fixed Term be greater than the amount which
when added to the Base Rent reserved for such Calculation Period equals
$8,914,180. For purposes of this Section 4.2(b), and only for the first
Calculation Period during the Fixed Term, Base Rent and Percentage Rent shall
mean the aggregate amount of Base Rent and the aggregate amount of Percentage
Rent that was or should have been paid and/or accrued during the last 12
consecutive month period of the Halstead Lease and the Elmwood Lease.
(c) Notwithstanding subsection (a) of this Section 4.4 to
the contrary, in no event shall the increase in Percentage Rent due and payable
under this Lease with respect to any Calculation Period during any Extended Term
be less than an amount equal to two percent of aggregate Base Rent and
Percentage Rent reserved hereunder for the immediately preceding Calculation
Period, nor shall it be greater than the amount determined by multiplying
(i) the Applicable CPI Percent by (ii) the aggregate Base Rent and Percentage
Rent reserved hereunder for the immediately preceding Calculation Period.
(d) Notwithstanding subsection (a) and (c) of this
Section 4.4 to the contrary, if the aggregate amount of Base Rent and Percentage
Rent for any Calculation Period commencing during an Extended Term reaches a
level (the "Pause Point") at which Landlord realizes a percentage return on the
Landlord's Total Investment for such Calculation Period equal to the sum of
(x) the Base Rental Rate for such Calculation Period and (y) 325 basis points,
Percentage Rent shall cease to accrue for the remainder of such Calculation
Period.
4.5 CONFIRMATION OF PERCENTAGE RENT. Tenant shall utilize or cause
to be utilized, an accounting system for the Property in accordance with GAAP,
which will accurately record and reflect all Gross Revenues for each Calculation
Period and each Calendar Quarter ending during such Calculation Period. Tenant
shall retain, for at least six years following the end of each Calculation
Period (and in all events until the reconciliation described in Section 4.6 for
such Calculation Period has been made), reasonably adequate records conforming
to the aforementioned accounting system showing all Gross Revenues for such
Calculation Period. Landlord, at its own expense, except as provided
hereinbelow, shall have the right, from time to time, to audit or cause to be
audited by its independent accountants or other independent authorized
representatives the information set forth in the Officer's Certificate regarding
Percentage Rent referred to in Section 4.6. In connection with such audits,
Landlord (or such accountants or authorized representatives, as the case may be)
may examine, audit and copy Tenant's records with respect thereto (including
supporting data and sales and excise tax returns), subject to any prohibitions
or limitations on disclosure of any such data under applicable law or
regulations, including, without limitation, any duly enacted "Patients' Bill of
Rights" or similar legislation and such reasonable limitations as may be
necessary to preserve the confidentiality of the hospital-patient relationship
and the physician-patient privilege. If any such audit discloses a deficiency
in the payment of Percentage Rent, Tenant shall forthwith pay to Landlord the
amount of the deficiency, together with interest at the Overdue
-14-
<PAGE>
Rate, for the period from the date when such payment should have been made to
the date when such payment is made. If any such audit discloses that Gross
Revenues actually received by Tenant for the Calculation Period to which such
audit relates exceed those reported by Tenant by more than five percent, Tenant
shall pay all of Landlord's costs, charges, fees and expenses related to such
audit. Any proprietary information obtained by Landlord pursuant to the
provisions of this Section 4.5 shall be treated as confidential, except that,
subject to appropriate confidentiality safeguards, such information may be used
in any litigation between Landlord and Tenant and may be disclosed by Landlord
to Owner, Landlord's lenders or prospective lenders. The obligations of Tenant
contained in this Section shall survive the expiration or earlier termination of
this Lease.
4.6 CERTIFICATES REGARDING PERCENTAGE RENT. Each payment of
Percentage Rent shall be delivered to Landlord, together with an Officer's
Certificate setting forth the calculation for the most recently completed
Calendar Quarter and the Calculation Period to date (except in the event no
payment is due, in which case such Officer's Certificate shall be delivered to
Landlord at such time as such payment would otherwise be due). In addition,
within 90 days after each Calculation Period, Tenant shall deliver to Landlord
an Officer's Certificate reasonably acceptable to Landlord setting forth the
Gross Revenues, together with Tenant's computation of Percentage Rent paid (or
payable) for such Calculation Period. If the Percentage Rent due for any
Calculation Period, as shown in any such certificate, exceeds the sum of the
quarterly payments of Percentage Rent previously made by Tenant with respect to
such Calculation Period, Tenant promptly shall remit to Landlord the amount of
such deficit. If the Percentage Rent for such Calculation Period, as shown in
such certificate, is less than the sum of the quarterly payments of Percentage
Rent previously made by Tenant with respect to such Calculation Period, Landlord
shall credit such sum to the payment of Percentage Rent next due. The
obligation of Tenant to pay to Landlord Percentage Rent shall survive the
expiration or earlier termination of the Term, and a final reconciliation
(taking into account, among other relevant adjustments, any contractual
allowances which are accrued after such expiration or termination date but which
relate to Gross Revenues accrued prior to such expiration or termination date
and Tenant's good faith best estimate of the amount of any unresolved
contractual allowances) shall be made not later than seven years after
expiration or termination. Tenant shall advise Landlord within 60 days after
such expiration or termination date of Tenant's best estimate at that time of
the approximate amount of such adjustments, which estimate shall not be binding
on Tenant.
4.7 ADDITIONAL CHARGES. Subject to Article XIII hereof, Tenant
shall pay and discharge as and when due and payable all Impositions and other
amounts, liabilities and obligations which Tenant assumes or agrees to pay under
this Lease. If Tenant fails or refuses to pay any of the items referred to in
the immediately preceding sentence, Tenant shall promptly pay and discharge
every fine, penalty, interest and cost which may arise or accrue for the non-
payment or late payment of such items. The aforementioned amounts, liabilities,
obligations, Impositions, fines, penalties, interest and costs are referred to
herein as "ADDITIONAL CHARGES." The Additional Charges shall constitute Rent
hereunder. If any Rent (but as to Additional Charges, only those which are
payable directly to Landlord) shall not be paid on its due date, Tenant shall
pay to Landlord on demand, as an Additional Charge, a late charge to the extent
permitted by law, computed at the Overdue Rate on the amount of such overdue
Rent from the due date of such Rent to the date such Rent is paid. Any payment
by Tenant of Additional Charges to Landlord pursuant to any requirement of this
Lease shall relieve Tenant of its obligation to pay such Additional Charges to
the entity to which they would otherwise be paid.
-15-
<PAGE>
4.8 TRIPLE NET LEASE.
(a) TRIPLE NET LEASE. This Lease is what is commonly
called a "net net net lease," it being understood that Landlord shall receive
all Rent as provided in this Article free and clear of any and all Impositions,
encumbrances, charges, obligations or expenses of any nature whatsoever in
connection with the ownership and operation of the Property. In addition to the
Rent reserved by this Article, except as expressly provided herein to the
contrary, Tenant shall pay to the parties respectively entitled thereto all
Impositions, insurance premiums, operating charges, maintenance charges,
construction costs and any other charges, costs and expenses which arise or may
be contemplated under any provisions of this Lease during the Term hereof. All
of such charges, costs and expenses shall constitute Rent, and upon the failure
of Tenant to pay any such costs, charges or expenses, Landlord shall have the
same rights and remedies as otherwise provided in this Lease for the failure of
Tenant to pay Rent. It is the intention of the parties hereto that this Lease
shall not be terminable for any reason by the Tenant and that Tenant shall in no
event be entitled to any abatement of or reduction in Rent payable under this
Lease except as herein expressly provided. Any present or future law to the
contrary shall not alter this agreement of the parties.
(b) BANKRUPTCY. Provided that there has been no rejection
hereof by Landlord or any trustee or receiver of Landlord, Tenant covenants and
agrees that it shall remain obligated under this Lease in accordance with its
terms, and that Tenant shall not take any action to terminate, rescind or avoid
this Lease, notwithstanding the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting Landlord or any assignee of Landlord in any such proceeding
and notwithstanding any action with respect to this Lease which may be taken by
any trustee or receiver of Landlord or any such assignee in any such proceeding
or by any court in any such proceeding.
(i) In the event that Tenant shall file a petition, or
an order for relief is entered against Tenant, under Chapter 7, 9, 11 or 13 of
the Bankruptcy Code, 11 U.S.C.S. 101 et seq. (the "BANKRUPTCY CODE") and the
trustee of Tenant shall elect to assume this Lease for the purpose of assigning
the same, such assumption or assignment may only be made if all the conditions
of subsections (ii) and (iii) of this Section 4.8(b) are satisfied. If Tenant's
trustee or debtor-in-possession, as the case may be, shall fail to elect to
assume this Lease within 60 days (or additional time fixed by the court) after
such trustee shall have been appointed, or the date of filing of the petition,
at Landlord's election (and in its sole and absolute discretion) this Lease
shall be deemed to have been rejected and, in such event, Landlord shall
thereupon immediately be entitled to possession of the Property without further
obligation to the trustee or Tenant, and this Lease shall be cancelled, but
Landlord's right to be compensated for damages in the bankruptcy proceedings
shall survive such cancellation.
(ii) No election to assume this Lease shall be
effective unless in writing and addressed to Landlord and unless, in Landlord's
business judgment, all the following conditions, which Landlord and Tenant
acknowledge to be commercially reasonable, have been satisfied:
(A) The trustee (or Tenant, as debtor-in-
possession) has cured or has provided Landlord adequate assurance that:
(I) within ten days from the date of
such assumption, the trustee (or debtor-in-possession) will cure all monetary
defaults under this Lease; and
-16-
<PAGE>
(II) within 30 days from the date of
such assumption, the trustee (or debtor-in-possession) will cure all non-
monetary defaults under this Lease or commence to cure within 30 days and
thereafter diligently pursue to completion.
(B) The trustee (or debtor-in-possession) has
compensated, or has provided to Landlord adequate assurance that within ten days
from the date of assumption Landlord will be compensated, for any pecuniary loss
incurred by Landlord arising from the default of the Tenant or the trustee (or
the debtor-in-possession) as recited in Landlord's written statement of
pecuniary loss sent to the trustee (or debtor-in-possession);
(C) The trustee (or debtor-in-possession) has
provided Landlord with adequate assurance of the future performance of each of
Tenant's obligations under this Lease, provided that:
(I) the trustee (or debtor-in-
possession) shall also deposit with Landlord, as security for the timely payment
of Rent, an amount equal to (w) three months' Base Rent and (x) the last
quarterly payment of Percentage Rent and (y) the other monetary charges accruing
under this Lease; and
(II) the obligations imposed upon the
trustee (or debtor-in-possession) shall continue with respect to Tenant after
completion of bankruptcy proceedings.
(D) Landlord has determined that the assumption
of the Lease will not:
(I) breach any provision in any
agreement by which Landlord is bound relating to the Property; or
(II) disrupt, in Landlord's reasonable
judgment, the reputation and profitability of the Property.
(E) For purposes of this subsection, "adequate
assurance" shall mean:
(I) Landlord shall determine that the
trustee (or debtor-in-possession) has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations and
administrative expenses to assure Landlord that the trustee (or debtor-in-
possession) will have sufficient funds to fulfill the obligations of Tenant
under this Lease; and
(II) an order shall have been entered
segregating sufficient cash payable to Landlord, or there shall have been
granted a valid and perfected first lien and security interest in property of
the Tenant or trustee (or debtor-in-possession), acceptable as to value and kind
to Landlord, to secure to Landlord the obligation of the Trustee (or debtor-in-
possession) to cure the monetary or non-monetary defaults under this Lease
within the time periods set forth above.
(iii) If the trustee (or debtor-in-possession) has
assumed the Lease pursuant to all the provisions of subsections (i) and (ii) of
this Section 4.8(b), for the purpose of assigning (or electing to assign)
Tenant's interest under this Lease or the estate created thereby to any other
person, such interest or estate may be so assigned only if Landlord shall
acknowledge in writing that the intended
-17-
<PAGE>
assignee has provided adequate assurance of future performance of all the terms,
covenants and conditions of this Lease to be performed by Tenant. For purposes
of this subsection (iii), "adequate assurance of future performance" means that
Landlord shall have ascertained that each of the following conditions has been
satisfied:
(A) the assignee has submitted a current
financial statement audited by a certified public accountant which shows
tangible net worth and working capital in amounts determined to be sufficient by
Landlord to assure the future performance by such assignee of Tenant's
obligations under this Lease;
(B) if requested by Landlord, the assignee shall
have obtained guarantees in form and substance satisfactory to Landlord from one
or more persons who satisfy Landlord's standards of creditworthiness;
(C) Landlord has obtained all consents to waivers
from any third parties required under any lease, mortgage, financing arrangement
or other agreement by which Landlord is bound to enable Landlord to permit such
assignment;
(D) the assignee has deposited an adequate
security deposit with Landlord; and
(E) the assignee has demonstrated that its
intended use of the Property is consistent with the terms of this Lease and will
not diminish the reputation of the Facility, or violate any "exclusive" which
has been granted by Tenant to any permitted subtenant in the Property.
(iv) When, pursuant to the Bankruptcy Code, the trustee
(or debtor-in-possession) shall be obligated to pay reasonable use and occupancy
charges for the use of the Property or any portion thereof, such charges shall
not be less than the Rent.
(v) Neither Tenant's interest in the Lease, nor any
lesser interest of Tenant herein, nor any estate of Tenant hereby created, shall
pass to any trustee, receiver, assignee for the benefit of creditors or any
other person by operation of law or otherwise unless Landlord shall consent to
such transfer in writing. No acceptance by Landlord of rent or any other
payments from any such trustee, receiver, assignee or person shall be deemed to
have waived, nor shall it waive the need to obtain Landlord's consent to, or
Landlord's right to terminate this Lease for, any transfer of Tenant's interest
under this Lease without such consent.
(vi) Any person to whom this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all the obligations arising under this Lease on or after
the date of such assignment. Any such assignee shall, upon demand, execute and
deliver to Landlord an instrument confirming such assumption.
ARTICLE V
IMPOSITIONS
5.1 PAYMENT OF IMPOSITIONS. Tenant shall pay, or cause to be paid,
all Impositions prior to delinquency and before any fine, penalty, interest or
cost may be added for non-payment (subject to Tenant's rights of contest
pursuant to the provisions of Article XIII). Such payments shall be made
-18-
<PAGE>
directly to the authorities levying such Impositions, if possible. Tenant
shall, promptly upon request by Landlord, furnish to Landlord original or
certified copies of receipts or other reasonably satisfactory evidence of such
payments. Tenant's obligation to pay Impositions shall be deemed absolutely
fixed upon the date such Impositions become a lien upon the Property or any part
thereof. Notwithstanding the foregoing, if any such Imposition may, at the
option of the payor, lawfully be paid in installments (whether or not interest
shall accrue on the unpaid balance of such Imposition), Tenant may pay the same
(and shall pay any accrued interest on the unpaid balance of such Imposition) in
installments, and in such event shall pay such installments (subject to Tenant's
right of contest pursuant to the provisions of Article XIII) as the same become
due and before any fine, penalty, premium, further interest or cost is added
thereto. Landlord shall, at its expense and to the extent required or permitted
by applicable laws and regulations, prepare and file all returns with respect to
Landlord's net income, gross receipts, sales, use, single business, transaction
privilege, rent, ad valorem and franchise taxes (without waiving Landlord's
right to reimbursement therefore from Tenant to the extent that the same
constitutes Impositions), and with respect to taxes on Landlord's capital stock.
Tenant shall, at its expense, and to the extent required or permitted by
applicable laws and regulations, prepare and file all other tax returns and
reports with respect to any Imposition as may be required of Tenant by
governmental agencies or authorities. If any refund shall be due from any
taxing authority with respect to any Imposition paid by Tenant, the same shall
be paid over to and retained by Tenant unless an Event of Default shall have
occurred hereunder and be continuing, in which case such refund shall be paid
over to and retained by Landlord. Any such funds retained by Landlord due to an
Event of Default shall be applied as provided in Article XVII. Landlord and
Tenant shall, each upon a request by the other, provide such information as is
maintained by the party to whom the request is made with respect to the Property
as may be reasonably necessary to prepare any required returns or reports. If
any governmental agency or authority classifies any property covered by this
Lease personal property, Tenant shall file all personal property tax returns in
such jurisdictions where it may legally so file. Landlord, to the extent it
possesses the same, and Tenant, to the extent it possesses the same, will
provide to the other party, promptly upon request, cost and depreciation records
reasonably necessary for filing returns for any property so classified as
personal property. If Landlord is legally required to file any personal
property tax returns, Landlord shall provide Tenant with copies of any
assessment notices with respect thereto in sufficient time for Tenant to file a
protest with respect thereto if it so elects pursuant to Article XIII. If no
Event of Default is then continuing, Tenant may at its option and sole cost and
expense, upon Notice to Landlord, protest, appeal or institute such other
proceedings as Tenant reasonably may deem appropriate to effect a reduction of
real estate or personal property assessments so long as such action is conducted
in good faith and with due diligence. In such event, Landlord, at Tenant's sole
cost and expense, shall fully cooperate with Tenant in such protest, appeal, or
other action. Tenant hereby agrees to indemnify, defend, save and hold Landlord
harmless from and against any and all losses, demands, claims, obligations and
liabilities against or incurred by Landlord in connection with such cooperation
by Landlord. Billings by either party to the other for reimbursement of
personal property taxes shall be accompanied by copies of a bill therefor and
evidence of payments thereof which identify the personal property with respect
to which such payments have been made.
5.2 NOTICE OF IMPOSITIONS. Landlord shall give prompt Notice to
Tenant of all Impositions payable by Tenant hereunder of which Landlord at any
time has knowledge. Notwithstanding the foregoing, however, Landlord's failure
to give any such Notice shall in no way diminish Tenant's obligations hereunder
to pay such Impositions, but Landlord shall be responsible for any fine, penalty
or interest resulting from its failure to give such notice and any default by
Tenant hereunder shall be obviated for a reasonable time (which shall not exceed
fifteen (15) Business Days) after Tenant receives Notice of any Imposition which
it is obligated to pay.
-19-
<PAGE>
5.3 ADJUSTMENT OF IMPOSITIONS. Impositions imposed with respect to
the tax period during which the Term expires or terminates shall be adjusted and
prorated between Landlord and Tenant, whether or not such Imposition is imposed
before or after such expiration or termination, so that Tenant is only obligated
to pay that portion of such Imposition(s) pertaining to the tax period within
the Term. The obligation of Tenant to pay its prorated share of Impositions
shall survive expiration or earlier termination of this Lease.
5.4 UTILITY CHARGES. Tenant shall pay or cause to be paid all
charges for all utilities, including but not limited to electricity, power, gas,
oil and water, used in the Property during the Term.
5.5 INSURANCE PREMIUMS. Tenant shall pay or cause to be paid all
premiums for insurance coverage required to be maintained pursuant to
Article XIV.
ARTICLE VI
TERMINATION OR ABATEMENT OF LEASE
Without limiting the provisions of Section 4.8, Tenant, to the full
extent permitted by law, shall remain bound by this Lease in accordance with its
terms. Tenant shall not take any action without the prior written consent of
Landlord to modify, surrender or terminate this Lease. The obligations of
Landlord and Tenant hereunder shall be separate and independent covenants and
agreements, and Rent and all other sums shall continue to be payable by Tenant
hereunder in any event unless the obligation of Tenant to pay the same
terminates pursuant to the express provisions of this Lease or by termination of
this Lease (other than by reason of an Event of Default). Without limiting the
generality of the immediately preceding sentence, Tenant shall not seek or be
entitled to any abatement, deduction, deferment or reduction of Rent, or set-off
against Rent, nor shall the respective obligations of Landlord and Tenant be
otherwise affected (except as set forth in this Lease) by reason of: (a) any
damage to, or destruction of, all or any portion of the Property from whatever
cause or any Taking of all or any portion of the Property; (b) the lawful or
unlawful prohibition of, or restriction upon, Tenant's use of all or any portion
of the Property, or the interference with such use or with Tenant's quiet
enjoyment of the Property by any person or entity other than Landlord, or by
reason of eviction by paramount title; (c) any claim which Tenant has or may
have against Landlord by reason of any default or breach of any warranty by
Landlord under this Lease or under any other agreement between Landlord and
Tenant or to which Landlord and Tenant are parties; (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceeding affecting Landlord or any assignee or transferee
of Landlord; or (e) any other cause, whether similar or dissimilar to any of the
foregoing (other than a discharge of Tenant from any such obligations as a
matter of law). Except as specifically set forth in this Lease to the contrary,
Tenant hereby specifically waives all rights, arising from any occurrence
whatsoever, which (i) may now or hereafter be conferred upon it by law to
modify, surrender or terminate this Lease or quit or surrender all or any
portion of the Property or (ii) entitle Tenant to any abatement, reduction,
suspension or deferment of Rent or other sums payable by Tenant hereunder.
ARTICLE VII
OWNERSHIP OF PROPERTY
7.1 OWNERSHIP OF THE PROPERTY. As between Landlord and Tenant the
Property is, and throughout the Term shall continue to be, the property of
Landlord. Tenant has only the right to the
-20-
<PAGE>
exclusive possession and use of the Property, upon the terms and subject to the
conditions set forth in this Lease.
7.2 TENANT'S PERSONAL PROPERTY; SECURITY INTEREST. Tenant may, at
its expense, install, affix, assemble or place on the Property any items of
Tenant's Personal Property and may, subject to the conditions set forth below,
remove Tenant's Personal Property upon the expiration or earlier termination of
this Lease or in the ordinary course of business so long as any damage caused by
such removal shall be promptly repaired by Tenant. Notwithstanding the
foregoing, in order to secure the payment and the performance of all of Tenant's
obligations under this Lease, Tenant hereby grants to Landlord a security
interest in (and hereby pledges and collaterally assigns to Landlord) all of
Tenant's rights, title and interest in and to Tenant's Personal Property, all
whether now existing or hereafter acquired and hereby further agrees to execute
and deliver to Landlord, forthwith after demand by Landlord from time to time,
any security agreement in a form reasonably acceptable to Landlord and Tenant
and such additional writings and instruments, including without limitation
financing statements, as may be reasonably required by Landlord for the purpose
of effectuating the intent of this sentence and Tenant agrees that Landlord
shall have with respect to all Personal Property all rights and remedies of a
secured party under the Uniform Commercial Code as adopted in the State,
including, but not limited to, the right after the occurrence of an Event of
Default (and the expiration of any applicable cure periods, if any) to use or
sell Tenant's Personal Property, and Landlord shall not be required to remove
any of Tenant's Personal Property from the Property and in no event shall
Landlord be liable to Tenant for use of Tenant's Personal Property. Pending
disposition of Tenant's Personal Property by Landlord, Landlord shall be
entitled to use Tenant's Personal Property in connection with the operation (if
any) of the Facility. Tenant shall not permit the Property or Personal Property
to become subject to any liens or encumbrances of any kind without first
obtaining the prior written consent of Landlord, except for liens or
encumbrances permitted by Section 29.1(a). This Lease and the security interest
granted Landlord hereby shall be subordinate to any purchase money security
interest or capital lease permitted under Section 29.1(a). Landlord further
agrees that Tenant may lease Tenant's Personal Property, and Landlord shall
execute and deliver such agreements as may be reasonably required by any
permitted equipment lessor or the holder of a permitted purchase money security
interest to confirm that Landlord's lien on Tenant's Personal Property in
question is subordinate to the rights of such equipment lessor or lender and in
each case Tenant shall use commercially reasonable efforts to obtain from the
holder of the purchase money debt or lessor of Tenant's Personal Property, as
the case may be, its agreement to (i) notify Landlord or its successors and
assigns of any default by Tenant, (ii) allow Landlord or its successors and
assigns an opportunity to cure any default, (iii) recognize Landlord or its
successors and assigns as succeeding to Tenant's rights under the agreement in
question and to the undisturbed use of the equipment, provided that Landlord
fully complies with the terms of such agreement, PROVIDED, THAT the failure by
Tenant, using reasonable efforts, to obtain the aforementioned agreements shall
not impair or deny Tenant's right to enter into leases involving Tenant's
Personal Property. Tenant shall provide and maintain on the Property during the
entire Term such Tenant's Personal Property as shall be necessary to operate the
Facility in compliance with all licensure and certification requirements, in
substantial compliance with all Legal Requirements and Insurance Requirements
and otherwise in accordance with customary practice in the health care industry
with respect to the Primary Intended Use or other uses then conducted on the
Property by Tenant and permitted hereunder. All Tenant's Personal Property not
removed by Tenant within thirty days following the expiration or earlier
termination of this Lease shall be considered abandoned by Tenant and may be
appropriated, sold, destroyed or otherwise disposed of by Landlord without first
giving Notice thereof to Tenant and without any payment or obligation to account
to Tenant. Tenant shall, at its sole cost and expense, restore the Property to
the condition required by Section 10.1(d), including repair of all damage to the
Property caused by the
-21-
<PAGE>
removal of Tenant's Personal Property, whether effected by Tenant or Landlord,
except that caused by the gross negligence or willful misconduct of Landlord.
ARTICLE VIII
CONDITION AND USE OF PROPERTY
8.1 CONDITION OF THE PROPERTY. LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AND SHALL BE SUBJECT TO NO LIABILITY WITH
RESPECT TO, NOR SHALL THE VALIDITY OF THIS LEASE BE AFFECTED BY ANY CLAIM,
DEMAND OR CAUSE OF ACTION REGARDING THE PROPERTY OR ANY PART THEREOF, EITHER AS
TO ITS DESIGN, CONDITION OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT
OR PATENT. TENANT ACKNOWLEDGES AND AGREES THAT THE PROPERTY HAS BEEN INSPECTED
BY TENANT, HAS BEEN APPROVED FOR OCCUPANCY BY ALL GOVERNMENT AGENCIES HAVING
JURISDICTION THEREOVER AND IS SATISFACTORY TO IT IN ALL RESPECTS, INCLUDING FOR
ITS PRIMARY INTENDED USE, AND THAT TENANT IS LEASING THE PROPERTY "AS IS" IN ITS
PRESENT CONDITION, AND SUBJECT TO (A) THE EXISTING STATE OF TITLE, INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS, LICENSES, LEGAL REQUIREMENTS,
MORTGAGES, DEEDS OF TRUST, ASSIGNMENTS OF LEASES, FIXTURE FILINGS AND OTHER
FINANCING INSTRUMENTS AND ANY AND ALL OTHER MATTERS OF RECORD AND OTHERWISE
EXCEPT TO THE EXTENT ANY OF THE FOREGOING WERE CAUSED OR CREATED BY LANDLORD,
AND (B) MATTERS WHICH WOULD BE DISCLOSED BY AN INSPECTION OF THE PROPERTY OR BY
AN ACCURATE SURVEY OF THE LAND. TENANT WAIVES ANY AND ALL CLAIMS, DEMANDS AND
CAUSE OR CAUSES OF ACTION HERETOFORE OR HEREAFTER ARISING AGAINST LANDLORD WITH
RESPECT TO THE CONDITION OF THE PROPERTY.
8.2 USE OF THE PROPERTY.
(a) Throughout the entire Term, Tenant shall obtain and
shall maintain in effect all permits, licenses, authorizations and approvals
needed to use and operate the Property and the Facility for Tenant's Primary
Intended Use in accordance with all Legal Requirements.
(b) Throughout the entire Term, Tenant shall use or
cause to be used the Property in accordance with its Primary Intended Use and
for such other uses as may be necessary in connection with or incidental to
such use. Tenant shall not use the Property or any portion thereof for any
other purpose whatsoever without the prior written consent of Landlord. The
parties agree that Landlord's consent will not be deemed to be unreasonably
withheld if, in the reasonable opinion of Landlord, the Tenant's proposed use
of the Property will significantly alter the character or purpose or detract
from the value or operating efficiency of the Property, or significantly
impair the revenue-producing capability of the Property. No use shall be
made or permitted to be made of the Property and no acts shall be done which
violate any Legal Requirements or Insurance Requirements or which will cause
the cancellation of any insurance policy covering the Property or any part
thereof, nor shall Tenant sell or otherwise provide to patients therein, or
permit to be kept, used or sold in, about or under the Property any Hazardous
Substance (except in strict compliance with all Legal Requirements, but only
as may be necessary to the operation of the Facility, with respect to such
substances other than asbestos and hydrocarbons) or any other article which
may be prohibited by the Legal Requirements or Insurance
-22-
<PAGE>
Requirements. Tenant shall, at its sole cost, comply with all of the
requirements pertaining to the Property of any insurance board, association,
organization or company necessary for the maintenance of the insurance
required pursuant to this Lease,
(c) Tenant shall not commit or suffer to be committed any
waste nor shall Tenant cause or permit any nuisance on the Property.
(d) Tenant shall neither suffer nor permit all or any
portion of Tenant's Personal Property or the Property, including any Capital
Addition whether or not financed or paid for by Landlord, to be used in such a
manner as (i) may impair the owner's title thereto or to any portion thereof or
(ii) may make possible a claim or claims of adverse usage, adverse possession or
implied dedication of all or any portion of the Property to the public, except
as is necessary in the ordinary and prudent operation of the Property.
8.3 LANDLORD TO GRANT EASEMENTS. Subject to the provisions of this
Section 8.3, Landlord shall, from time to time so long as no Event of Default
has occurred and is continuing, at the request of Tenant and at Tenant's sole
cost and expense (but subject to the approval of Landlord, which approval shall
not be unreasonably withheld or delayed), (a) grant easements and other rights
in the nature of easements burdening the Property for the benefit of real
property adjacent to the Land or for the exclusive use and enjoyment of persons
or entities specified by Tenant in such request but only as may be necessary for
the operations of the Facility; (b) dedicate or transfer unimproved portions of
the Property for road, highway or other public purposes but only as may be
necessary for the operation of the Facility; (c) execute petitions to have the
Property annexed to any municipal corporation or utility district; and
(d) execute amendments to any covenants, conditions, restrictions and equitable
servitudes affecting the Property, but only if each such grant, dedication,
transfer, petition or amendment is not detrimental to the proper conduct of the
business of Tenant on the Property and does not materially reduce the value of
the Property in Landlord's reasonable discretion.
8.4 HAZARDOUS SUBSTANCES.
(a) All operations or activities upon, or any use or
occupancy of the Property, or any portion thereof, by Tenant, or any agent,
contractor, employee or subtenant of Tenant shall at all times during the Term
be in all respects in strict compliance with any and all Legal Requirements and
Insurance Requirements relating to Hazardous Substances, including, but not
limited to, the discharge and removal of Hazardous Substances. Tenant shall not
sell or otherwise provide to patients therein or permit to be kept, used or sold
in, about, on or under the Property any Hazardous Substances or any other
article which may be prohibited by the Legal Requirements or Insurance
Requirements, except that Tenant may store, handle, process, maintain or dispose
of any Hazardous Substances necessary to the Primary Intended Use in strict
compliance with the Legal Requirements and the Insurance Requirements. Tenant
shall pay all costs required properly to use, handle and dispose of all
Hazardous Substance and shall keep the Property free and clear of any lien
relating to Hazardous Substances which may be imposed pursuant to the Legal
Requirements and Insurance Requirements. Neither Tenant, nor any agent,
contractor, employee or subtenant of Tenant shall allow the manufacture,
storage, voluntary transmission or presence of any Hazardous Substances over or
upon the Property (except in strict compliance with the Legal Requirements and
Insurance Requirements). Landlord, at its sole cost and expense, shall have the
right at any time with notice to Tenant (but not more often than once in any
calendar year) to conduct an environmental audit of the Property and Tenant
shall cooperate in the conduct of such environmental audit. Furthermore,
neither Tenant, nor any agent, contractor, employee or any subtenant of Tenant
shall install or permit to be installed in or on the Property friable asbestos
or any substance containing asbestos
-23-
<PAGE>
or similarly deemed hazardous by governmental authorities or the Legal
Requirements respecting such materials, and with respect to any such materials
currently present in the Property, shall promptly either (x) remove any material
which such Legal Requirements deem hazardous and require be removed, at its sole
cost and expense, or (y) otherwise comply with the Legal Requirements. Tenant
shall promptly notify Landlord in writing of any order, receipt of any notice of
violation or noncompliance with any applicable law, rule, regulation, standard
or order, any threatened or pending action by any regulatory agency or other
governmental authority or any claims made by any third party relating to
Hazardous Substances on, emanations on or from, releases on or from, or threats
of releases on or from any of the Property and shall promptly furnish Landlord
with copies of any correspondence, notices or legal pleadings in connection
therewith. Landlord shall have the right, but shall not be obligated, to notify
any governmental authority of any state of facts which may come to its attention
with respect to Hazardous Substances on, released from or emanating on or from
any part of the Property.
(b) Without limiting Section 22.1, Tenant shall, with the
right to participate in the applicable proceedings, indemnify, protect, defend
(with counsel reasonably approved by Landlord) and hold Landlord, and the
directors, officers, shareholders, employees and agents of Landlord, harmless
from any claims (including, but not limited to, third party claims for personal
injury or real or personal property damage), or natural resources damage,
actions, administrative proceedings (including informal proceedings), judgments,
damages, punitive damages, penalties, fines, costs, liabilities (including sums
paid in settlements of claims), interest or losses, including reasonable
attorneys' and paralegals' fees and expenses (including any such fees and
expenses incurred in enforcing the covenants and obligations of Tenant under
this Lease or collecting any sums due hereunder), consultant fees, and expert
fees, together with all other costs and expenses of any kind or nature ("Costs")
that arise directly or indirectly from or in connection with the presence,
suspected presence, release or threatened release of any Hazardous Substance in
or into or at, on, about, under or within the Property, to the extent that such
Costs are not attributable to the gross negligence or willful misconduct of
Landlord. The indemnification provided in this Section 8.4(b) shall
specifically apply to and include claims or actions brought by or on behalf of
employees or contractors of Tenant or employees or contractors of Tenant, and
Tenant hereby expressly waives any immunity to which Tenant may otherwise be
entitled under any industrial or workers' compensation laws. In the event
Landlord shall suffer or incur any such Costs, Tenant shall pay to Landlord the
total of all such Costs suffered or incurred by Landlord upon demand therefor by
Landlord; PROVIDED, THAT the Landlord shall not settle any claims for such Costs
or confess judgment thereto without the approval of Tenant, which approval shall
not unreasonably be withheld, and, provided, further, that in the event Tenant
fails to approve any such settlement or confession of judgment, Tenant shall
provide the Landlord with sufficient security for such Costs, as determined by
the Landlord in its sole discretion. Without limiting the generality of the
foregoing, the indemnification provided by this Section 8.4(b) shall
specifically cover Costs, including capital, operating and maintenance costs,
incurred in connection with any investigation or monitoring of site conditions,
any cleanup, containment, remedial, removal or restoration work required or
performed by any federal, state or local governmental agency or political
subdivision or performed by any non-governmental entity or person because of the
presence, suspected presence, release or suspected release of any Hazardous
Substance in or into the air, soil, groundwater, surface water or soil vapor at,
on, about, under or within the Property (or any portion thereof), and any claims
of third parties for loss or damage due to such Hazardous Substance, to the
extent that such Costs are not attributable to the gross negligence or willful
misconduct of Landlord. In addition, such indemnification shall include, but
not be limited to, all loss or damage sustained by Landlord or any third party
to whom Landlord may be liable due to any Hazardous Substance (i) that is
present or suspected to be present on, about, under or within the Property or
(ii) that migrates, flows, percolates, diffuses or in any way moves onto, into
or under the air, soil, groundwater, surface water or soil vapor at, on, about,
under or within the Property, irrespective of whether such Hazardous Substance
shall be present
-24-
<PAGE>
or suspected to be present on, about, under or within the Property as a result
of any release, discharge, disposal, dumping, spilling or leaking (accidental or
otherwise) onto the Property or caused by any person or entity; provided,
however, that the indemnification obligation arising out of clauses (i) and (ii)
above shall apply solely to the extent that such loss or damage results from
events occurring during the Term of this Lease and are not attributable to the
gross negligence or willful misconduct of Landlord.
(c) In the event any investigation or monitoring of site
conditions or any clean-up, containment, restoration, removal or other such work
("REMEDIAL WORK") is required under any applicable Legal Requirements,
including, but not limited to, any judicial order or order of any governmental
entity, or in order to comply with any agreements affecting the Property because
of, or in connection with, any occurrence or event described in Section 8.4(b),
Tenant shall perform or cause to be performed the Remedial Work in compliance
with such law, regulation, order or agreement and subject to the final review
and approval of Landlord, which approval shall not be unreasonably withheld or
delayed; provided, however, that Tenant may withhold such performance pursuant
to a good faith dispute regarding the application, interpretation or validity of
the law, regulation, order, or agreement, subject to the requirements of
Section 8.4(d); provided, further, however, that Landlord shall reasonably
cooperate with Tenant to the extent necessary to deliver such authorizations as
may be required in order for Tenant to perform its obligations under this
Section 8.4(c). All Remedial Work shall be performed by one or more
contractors, selected by Tenant and approved in advance in writing by Landlord,
which approval shall not be unreasonably withheld or delayed, and under the
supervision of a consulting engineer, selected by Tenant and approved in advance
in writing by Landlord, which approval shall not be unreasonably withheld or
delayed. All costs and expenses of Remedial Work shall be paid by Tenant,
including, but not limited to, the charges of such contractors and consulting
engineer, and Landlord's reasonable attorneys' and paralegals' fees and other
costs incurred in connection with the monitoring or review of such Remedial
Work. In performing its obligations hereunder, Tenant shall be subrogated to
any rights Landlord may have under any indemnifications or warranties from any
present, future or former owners, tenants or occupants or users of the Property,
to the extent available. In the event Tenant shall fail timely to commence,
diligently to prosecute to completion or to complete to Landlord's reasonable
satisfaction any necessary Remedial Work, Landlord may, but shall not be
required to, cause such Remedial Work to be performed, and all costs and
expenses thereof paid or incurred by Landlord in connection therewith shall be
Costs within the meaning of Section 8.4(b). Landlord's disapproval of or
dissatisfaction with any Remedial Work shall be deemed to be reasonable so long
as Landlord's requirements for any Remedial Work are consistent with the then
current requirements and standards imposed by prudent institutional investors in
connection with their management of real property. All such Costs shall be due
and payable upon demand therefor by Landlord. If Tenant fails to perform its
obligations hereunder, Landlord shall be subrogated to any rights Tenant may
have under any indemnifications from any present, future or former owners,
tenants or other occupants or users of the Property relating to the matters
covered by this Section 8.4.
(d) Notwithstanding any provision of this Section 8.4 to
the contrary, but without limiting the provisions of Article XIII, Tenant shall
be permitted to contest or cause to be contested, subject to compliance with the
requirements of this Section 8.4(d) and Article XIII, by appropriate action any
Remedial Work requirement, and Landlord shall not perform such requirement on
its behalf, so long as Tenant has given Landlord written notice that Tenant is
contesting or shall contest or cause to be contested the same, and Tenant
actually contests or causes to be contested the application, interpretation or
validity of the law, regulation, order or agreement pertaining to the Remedial
Work by appropriate proceedings conducted in good faith with due diligence,
provided that such contest shall not subject Landlord to civil liability
whatsoever. Tenant shall give such security or assurances as may be reasonably
required by Landlord to insure compliance with the Legal Requirements
-25-
<PAGE>
pertaining to the Remedial Work (and payment of all costs, expenses, interest
and penalties in connection therewith) and to prevent any sale, forfeiture or
loss by reason of such nonpayment or noncompliance.
(e) All of the obligations of Tenant under this Section 8.4
shall survive expiration or earlier termination of this Lease. The provisions
of this Section may be enforced by Landlord without regard to any other rights
and remedies Landlord may have against Tenant under this Lease and without
regard to any limitations on Landlord's recourse as may be otherwise provided in
this Lease. Tenant agrees that, notwithstanding any provision in this Lease to
the contrary, a separate action or actions to enforce Tenant's obligations under
this Section 8.4 may be brought and prosecuted against Tenant. Any costs and
other payments required to be paid by Tenant to Landlord under this Section 8.4
which are not paid within fifteen days of demand therefor shall thereupon be
considered delinquent. Tenant shall pay to Landlord immediately upon demand
therefor interest on such overdue amounts, from the date when due until paid, at
the Overdue Rate.
8.5 EXISTING LEASES. On or before the Commencement date, Landlord
and Tenant shall execute the Pioneer Assignment and Assumption Agreement of even
date herewith whereby Landlord shall assign and transfer to Tenant all of
Landlord's right, title and interest in, to and under the Existing Leases, and,
subject to the provisions of the Absolute Assignment of Subleases and Rents of
even date herewith between Tenant, as assignor, and Landlord, as assignee, all
rents, income, issues and profits owing thereunder. Tenant assumes and
covenants to keep, perform and fulfill all of the terms, covenants, conditions
and obligations of Landlord under the Existing Leases.
ARTICLE IX
LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS
9.1 COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND
INSTRUMENTS. Subject to the rights of Tenant as provided in Article XIII
relating to permitted contests, Tenant, at its sole cost and expense, shall
promptly (a) comply with all applicable Legal Requirements and Insurance
Requirements with respect to the use, operation, maintenance, repair and
restoration of the Property, whether or not compliance therewith shall require
structural change in any of the Improvements or interfere with the use and
enjoyment of the Property, and (b) procure, maintain and comply with all
appropriate licenses, certificates of need, provider agreements and other
permits, licenses, franchises and authorizations required for any use of the
Property and Tenant's Personal Property then being made, and for the proper
erection, installation, operation and maintenance of the Property or any part
thereof, including without limitation any Capital Additions.
9.2 COVENANTS REGARDING LEGAL REQUIREMENTS. Tenant covenants and
agrees that it shall not use the Property or Tenant's Personal Property for any
purpose which violates the Legal Requirements. Tenant has obtained or duly
applied for and shall maintain all appropriate licenses, certificates, permits,
provider agreements, franchises, authorizations and approvals necessary to
operate the Property in its customary manner for the Primary Intended Use, and
any other use conducted on the Property by Tenant and permitted by Landlord
hereunder. Tenant may, however, contest the legality or applicability of any
such Legal Requirement as provided in Article XIII hereof.
9.3 REPRESENTATIONS AND WARRANTIES. As a material inducement to
Landlord to enter into this Lease with Tenant, Tenant hereby makes the following
representations and warranties to Landlord that:
-26-
<PAGE>
(a) Tenant is a corporation duly organized and validly
existing under the laws of the State of Utah, and has all requisite and
necessary power and authority to execute and deliver this Lease to Landlord, and
any other documents referenced or required herein to be executed and delivered
by Tenant to Landlord hereunder;
(b) that this Lease, and any other documents referenced or
required herein to be executed and delivered by Tenant to Landlord hereunder do
not and shall not violate any instrument, judgment, decree or order to which
Tenant is a party or by which Tenant is bound; and
(c) that to the best of Tenant's knowledge, and after
reasonable and due inquiry and diligence, none of the representations and
warranties of Seller contained in the Purchase Agreement are untrue or
misleading in any material respect.
ARTICLE X
CONDITION OF THE PROPERTY
10.1 MAINTENANCE AND REPAIR.
(a) Tenant, at its sole cost and expense, shall keep the
Property and all private roadways, sidewalks and curbs appurtenant thereto and
which are under Tenant's control in good order, condition and repair and, except
as otherwise expressly provided to the contrary in Article XIV, XV, or XVI with
reasonable promptness, shall make all necessary and appropriate repairs and
replacements thereto of every kind and nature, whether interior or exterior,
structural or nonstructural, ordinary or extraordinary, patent or latent,
foreseen or unforeseen, or arising by reason of a condition existing prior to
the commencement of the Term of this Lease and regardless of the cause
necessitating repair. Tenant shall also be obligated at its expense to make all
repairs, modifications and renovations necessary to comply with all licensing,
safety and health and building code, regulations applicable to the Property so
that it can be legally operated for its Primary Intended Use. All repairs by
Tenant shall, to the extent reasonably achievable, be at least equal in quality
to the original work. Tenant shall not take or omit to take any action, the
taking or omission of which might materially impair the value or the usefulness
of all or any portion of the Property for the Primary Intended Use. Tenant
shall give Landlord ten days prior Notice of any repair, replacement,
modification or renovation pursuant to this Section the cost of which exceeds
$100,000 and, prior to commencing any such repair, replacement, modification or
renovation, shall provide to Landlord either (i) a lien payment and completion
bond in form and substance and issued by a surety reasonably acceptable to
Landlord or (ii) a payment and completion guaranty in form and substance and
executed by a guarantor reasonably acceptable to Landlord, as Tenant may elect.
(b) Landlord shall not under any circumstances be required
to make any repairs, replacements, alterations, restorations or renewals of any
nature or description to the Property, whether interior or exterior, structural
or non-structural, ordinary or extraordinary, patent or latent, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease, nor shall Landlord under any circumstances be
required to maintain the Property in any other way, except as specifically
provided herein. Tenant hereby waives, to the fullest extent permitted by law,
the right to make repairs at the expense of Landlord pursuant to any law or
equitable principle in effect at the time of the execution of this Lease or
hereafter enacted. Landlord shall have the right to give, record and post, as
appropriate, notices of non-responsibility under any mechanic's lien laws now or
hereafter existing, and any other notices of a similar nature that Landlord may
reasonably elect to give,
-27-
<PAGE>
record or post from time to time during the Term. If reasonably possible, any
such notices shall be posted so as not to interfere with Tenant's business.
(c) Nothing contained in this Lease, and no action or
inaction by Landlord, shall be deemed or construed in any manner as
(i) constituting the consent or request of Landlord, expressed or implied, to
any contractor, subcontractor, laborer, materialman or vendor to or for the
performance of any labor or services or the furnishing of any materials or other
property for the construction, alteration, addition, repair or demolition of or
to all or any portion of the Property or (ii) giving Tenant any right, power or
permission to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such a manner as would
permit the making of any claim against Landlord with respect thereto, or to make
any agreement that may create, or in any way may be the basis for the assertion
of any right, title, interest, lien, claim or other encumbrance upon the estate
of Landlord in all or any portion of the Property.
(d) Unless Landlord conveys title to any of the Property to
Tenant pursuant to the provisions of this Lease, Tenant shall, upon the
expiration or earlier termination of this Lease, vacate and surrender the
Property to Landlord in the condition in which the Property was originally
received from Landlord, except as repaired, rebuilt, restored, altered or added
to as permitted or required by the provisions of this Lease, and except for
ordinary wear and tear (but subject to the obligation of Tenant under this
Section to maintain the Property in good order, condition and repair during the
entire Term of this Lease) and except for damage or destruction by casualty or
condemnation which Tenant is not required to repair by the provisions of this
Lease.
10.2 ENCROACHMENTS AND RESTRICTIONS. Tenant has reviewed and
approved the Title Commitment and the Survey. If any of the Improvements shall
at any time during the Term violate any agreement or condition contained in any
lawful covenant, condition, restriction, equitable servitude or other agreement
affecting all or any portion of the Property, or shall impair the rights of
others under any easement or right-of-way burdening the Property, provided that
such agreement, covenant, condition, restriction or easement has not been
created by Landlord, then promptly upon the request of Landlord, or at the
behest of any person affected by violation or impairment and in such case, in
the event of an adverse final determination, Tenant shall either (a) obtain
valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same shall affect Landlord or Tenant, provided that Landlord shall consent
to all such settlements or waivers or (b) make such changes in the Improvements
and take such other actions as Tenant in the reasonable and good faith exercise
of its judgment deems practicable to remove such encroachment and to end such
violation or impairment, including, if necessary, the alteration of any of the
Improvements provided that Landlord shall consent to all such alterations and
the changes are not the result of any condition created solely by Landlord.
With respect to any encroachments identified on the ALTA surveys of the Property
delivered by Tenant to Landlord pursuant to the Purchase Agreement, Landlord
agrees that it shall not require Tenant to obtain a waiver of or otherwise
correct any such encroachment unless and until an affected third party notifies
Landlord of its objection to any such encroachment. In any event Tenant shall,
subject to Landlord's consent, take all such actions as may be necessary in
order to be able to continue the operation of the Improvements for the Primary
Intended Use substantially in the manner and to the extent the Improvements were
operated prior to the assertion of such violation or impairment. Tenant shall
not be responsible for any claims covered by Landlord's title insurance policy,
and Landlord agrees that any proceeds recovered under such title insurance
policy shall be made available to Tenant to remedy the claimed violation or
restriction.
-28-
<PAGE>
ARTICLE XI
CAPITAL ADDITIONS
11.1 CONSTRUCTION OF CAPITAL ADDITIONS.
(a) If no Event of Default shall have occurred and be
continuing, Tenant may, subject to the terms and conditions contained in this
Article, construct or install Capital Additions on the Property. All Capital
Additions costing in excess of $100,000 shall require the prior written approval
of Landlord, which approval shall not be unreasonably withheld or delayed as
expressly provided herein. It shall not be unreasonable for the Landlord to
withhold its consent if any appraisal obtained by Landlord shows that the fair
market value of the Capital Addition as proposed to be built is less than the
cost of the Capital Additions. Tenant shall not be permitted to create any
Encumbrance on the Property in connection with any such Capital Addition,
without Landlord's prior written consent (which consent shall not be
unreasonably withheld or delayed).
(b) Prior to commencing construction of any Capital
Addition, Tenant shall submit to Landlord in writing a proposal setting forth in
reasonable detail any proposed Capital Addition and shall provide to Landlord
such plans and specifications, permits, licenses, contracts and other
information concerning the proposed Capital Addition as Landlord may reasonably
request. Without limiting the generality of the foregoing, such proposal shall
indicate the approximate projected cost of constructing such Capital Addition,
the use or uses to which it will be put and a good faith estimate of the change,
if any, in the Gross Revenues that Tenant anticipates will be caused by such
Capital Addition. Tenant shall not commence to build any Capital addition
unless Tenant shall first have provided Landlord with either (i) a lien payment
and completion bond in form and substance and issued by a surety reasonably
acceptable to Landlord in an amount equal to 150% of the reasonably anticipated
cost of such Capital Additions or (ii) a payment and completion guaranty in form
and substance and executed by a guarantor reasonably acceptable to Landlord.
(c) No Capital Addition shall be made which would tie in or
connect any Improvements with any other improvements on property adjacent to the
Property (and not part of the Property), including without limitation, tie-ins
of buildings or other structures or utilities unless Tenant shall have obtained
the prior written consent of Landlord, which consent Landlord may grant,
withhold or delay in its sole discretion. All proposed Capital Additions shall
be architecturally integrated and consistent with the Property.
11.2 CAPITAL ADDITIONS FINANCED OR PAID FOR BY LANDLORD.
(a) Tenant may request that Landlord provide or arrange
financing for any Capital Addition expected to cost in excess of $100,000 by
providing to Landlord such information about such Capital Addition as Landlord
may reasonably request. Landlord may, but shall be under no obligation to, meet
the request, and within 30 days of receipt of such information, Landlord shall
notify Tenant as to whether it will finance the proposed Capital Addition and,
if so, the terms and conditions upon which it would do so, including the terms
of any amendment to this Lease (including, without limitation, the increase in
Base Rent to compensate Landlord for the additional funds advanced by it).
Notwithstanding the foregoing, Landlord shall not finance the cost of any
proposed Capital Addition if such cost is less than $100,000. In no event shall
the portion of the material, labor charges and fixtures of the Capital Additions
Cost be less than seventy-five percent (75%) of the total amount of such cost.
Tenant shall, within thirty (30) days of Tenant's receipt of Landlord's Notice
that Landlord will finance
-29-
<PAGE>
the proposed Capital Addition, give Landlord a notice accepting or rejecting
Landlord's proposed financing.
(b) If Landlord finances the Capital Additions Cost of the
proposed Capital Addition, Tenant shall provide Landlord with the following
(unless waived by Landlord in writing):
(i) prior to any disbursement of funds, such
information, certificates, licenses, permits, authorizations, evidence of zoning
and other documents reasonably requested by Landlord, or by any third party
lender with whom Landlord has agreed or may agree to provide financing, as
necessary to confirm that Tenant will be able to use the Capital Addition upon
completion thereof in accordance with the Primary Intended Use for such Capital
Addition, including all required federal, state or local government licenses,
permits, authorizations and approvals;
(ii) prior to any disbursement of funds, an Officer's
Certificate and, if requested, a certificate from Tenant's architect, setting
forth in reasonable detail the projected (or actual, if available) Capital
Additions Cost;
(iii) prior to or coincident with the first disbursement
of funds, an amendment to this Lease (together with a memorandum thereof in
recordable form), duly executed and acknowledged, in form and substance
reasonably satisfactory to Landlord and Tenant, providing for an increase in the
Base Rent on the terms and conditions determined in accordance with
Section 11.2(a), along with the legal description of any land obtained in
connection with such Capital Addition and such other provisions as may be
necessary or appropriate;
(iv) prior to or coincident with the first disbursement
of funds, a construction and development agreement setting forth the terms for
Landlord's financing and Tenant's construction of such Capital Additions;
(v) prior to or coincident with payment for any land
obtained in connection with such Capital Addition, a deed conveying to Landlord
title to such land, or, if applicable, a ground lease on terms acceptable to
Landlord, which title or leasehold shall be free and clear of any liens,
encumbrances or other exceptions to or matters affecting title except those
approved by Landlord, and, upon completion of the Capital Addition, a final as-
built survey thereof reasonably satisfactory to Landlord;
(vi) during construction and following completion of
the Capital Addition, endorsements to any outstanding policy of title insurance
covering the Property, or commitments therefor reasonably satisfactory in form
and content to Landlord (x) updating the same without any additional exception
except such as may be reasonably permitted by Landlord and (y) adding to its
coverage any land acquired or leased in connection with such Capital Addition
and increasing the coverage thereof by an amount equal to the Fair Market Value
of the Capital Addition (except to the extent covered by the owner's policy of
title insurance referred to in subparagraph (vii) below);
(vii) following the advance of funds, if appropriate,
(x) an extended coverage owner's policy of title insurance insuring fee simple
title to any land conveyed to Landlord pursuant to subparagraph (v), free and
clear of all liens and encumbrances except those approved by Landlord, and (y) a
lender's policy of title insurance reasonably satisfactory in form and substance
to Landlord and to any Lender with whom Landlord has agreed or may agree to
provide financing; and
-30-
<PAGE>
(viii) during or following the advancement of funds,
prints of architectural and engineering drawings relating to the Capital
Addition and such other certificates (including, but not limited to,
endorsements increasing the insurance coverage, if any, at the time required by
Section 14.1), documents, opinions of counsel, appraisals, surveys, certified
copies of duly adopted resolutions of the board of directors of Tenant
authorizing the execution and delivery of the lease amendment, construction and
development agreement and any other instruments as may be reasonably required by
Landlord and any lender from whom Landlord has agreed or may agree to obtain
financing.
(c) Any new mortgage or supplement to any existing mortgage
entered into by Landlord with any lending institution covering the Property or
any land referred to in subparagraph (iv) above shall be subject to the rights
of Tenant under this Lease, as this Lease may be amended from time to time.
(d) If Landlord finances the cost of any such Capital
Addition, Tenant will reimburse Landlord for all reasonable fees, costs and
expenses (including fees and costs of in-house and outside attorneys) incurred
by Landlord in connection therewith.
11.3 CAPITAL ADDITIONS PAID FOR BY TENANT. If Landlord does not
finance the cost of a Capital Addition under the terms of Section 11.2 and
Tenant elects nevertheless to construct or cause to be constructed such Capital
Addition, (i) Tenant shall not commence any construction with respect to such
Capital Addition without first obtaining the lien payment and completion bond or
payment and completion guaranty required by Section 11.1, (ii) Tenant shall pay
the cost of such Capital Addition, and there shall be no adjustment in the Rent,
the Pause Point or Landlord's Total Investment by reason of any such Capital
Addition, and (iii) Tenant shall elect Tenant's Capital Addition Depreciation
and shall notify Landlord of such determination.
11.4 DISPOSITION OF CAPITAL ADDITIONS UPON EXPIRATION OR TERMINATION
OF LEASE. Upon the expiration or earlier termination of this Lease, all Capital
Additions shall pass to and become the property of Landlord, free and clear of
all encumbrances. With respect to Capital Additions paid for by Tenant,
Landlord shall pay to Tenant, within 90 days following the expiration or earlier
termination of this Lease, an amount equal to the Capital Additions Cost of such
Capital Additions (provided that at least 80% of the total amount of such
Capital Additions Cost represents charges for material, labor and fixtures) less
Tenant's Capital Addition Depreciation.
11.5 NON-CAPITAL ADDITIONS. Tenant shall have the right to make
additions, modifications or improvements to the Property which are not Capital
Additions from time to time as it, in its reasonable discretion, may deem to be
desirable for the Property's uses and purposes permitted hereunder, provided
that such action does not (i) significantly and adversely alter the character or
purpose or detract in any manner from the value or operating efficiency of the
Property, (ii) significantly impair the revenue-producing capability of the
Property, or (iii) materially and adversely affect the ability of Tenant to
comply with the provisions of this Lease, and provided that, if the cost of such
non-capital additions, modifications or improvements exceed $200,000, Tenant
gives Landlord ten days' prior Notice of such addition, modification or
improvement. The cost of such non-capital additions, modifications or
improvements to the Property shall be paid by Tenant, and all such non-capital
additions, modifications and improvements shall, without payment by Landlord at
any time, be included under the terms of this Lease, and upon expiration or
earlier termination of this Lease shall pass to and become the property of
Landlord.
-31-
<PAGE>
11.6 SALVAGE. All materials which are scrapped or removed in
connection with the construction of either Capital Additions permitted by
Section 11.1, non-capital additions permitted by Section 11.5, or repairs
required by Article X shall be or become the property of the party which paid
for, or provided the financing for such work.
ARTICLE XII
LIENS
Subject to the provisions of Article XIII relating to permitted
contests, Tenant shall not directly or indirectly create or allow to remain and
shall promptly discharge at its expense any lien, encumbrance, security
interest, attachment, title retention agreement or claim upon the Property or
any attachment, levy, claim or encumbrance in respect of Rent, not including,
however, (a) this Lease, (b) Permitted Encumbrances, (c) restrictions, liens and
other encumbrances which are created by, in favor of, or consented to in writing
by Landlord or expressly permitted under Section 29.1(a) hereof, (d) liens for
taxes or assessments or other governmental charges and levies if not yet
delinquent, or if in good faith being contested or litigated, provided that
Tenant maintains a reserve against such taxes, assessments, charges or levies in
an amount deemed adequate by Landlord and furnishes security reasonably
satisfactory to Landlord for the payment of such taxes, assessments, charges and
levies, (e) the Existing Leases and other subleases in existence on the date
hereof and subleases permitted by Article XXIII, (f) liens for Impositions or
for sums resulting from noncompliance with Legal Requirements so long as the
same are not yet payable or are payable without the addition of any fine or
penalty and are in the process of being contested as permitted by Article XIII,
(g) liens of mechanics, laborers, materialmen, suppliers or vendors for sums
either disputed or not yet due, provided that (i) the payment of such sums shall
not be postponed for more than five days after the completion of the action
giving rise to such lien and such reserve or other appropriate provisions as
shall be required by law or generally accepted accounting principles shall have
been made therefor or (ii) any such liens are in the process of being contested
as permitted by Article XIII, (h) any liens which are the responsibility of
Landlord pursuant to the provisions of Article XXVII, are directly created or
permitted by Landlord, or are filed against the Property as a result of
Landlord's acts or omissions and not related to or a consequence of Tenant's
acts or omissions (i) purchase money security interests on equipment
constituting Tenant's Personal Property and leases of such equipment,
(j) judgment and other similar liens, provided that the execution or other
enforcement of such liens is effectively stayed and the claims secured thereby
are being actively contested in good faith and by appropriate proceedings in
accordance with the requirements of this Lease, (k) liens constituting renewals,
extensions or replacements of liens described in the foregoing clauses, but
only, in the case of each such renewal, extension or replacement lien, to the
extent of the original principal amount of the obligation so secured, and to the
extent that such renewal, extension or replacement lien is limited to all or
part of the property that secured the lien extended, renewed or replaced.
ARTICLE XIII
CONTESTS
Tenant, on its own or on Landlord's behalf (or in Landlord's name ),
but at Tenant's sole cost and expense, upon Notice to Landlord, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
without prejudice to Landlord's rights hereunder the amount, validity or
application, in whole or in part, of any Imposition, Legal Requirement,
Insurance Requirement, lien, attachment, levy, encumbrance, charge or claim not
otherwise permitted by Article XII, provided that (a) in the case of an unpaid
Imposition, lien, attachment, levy, encumbrance, charge or claim, the
-32-
<PAGE>
commencement and continuation of such proceedings shall suspend the collection
thereof from Landlord and from the Property, (b) neither the Property nor any
Rent therefrom nor any part thereof or interest therein would be subject to any
risk of being sold, forfeited, attached, foreclosed, or lost, (c) in the case of
a Legal Requirement, Landlord would not be in any danger of incurring any lien,
charge, fine, penalty, or other civil or criminal liability for failure to
comply therewith pending the outcome of such proceedings, (d) in the event that
any such contest shall involve a sum of money or potential loss in excess of
$100,000 then, in any such event, Tenant shall deliver to Landlord an Officer's
Certificate to the effect set forth in clauses (a), (b) and (c), to the extent
applicable, (e) in the case of a Legal Requirement or an Imposition, lien,
encumbrance or charge, Tenant shall give such reasonable security as may be
demanded by Landlord to insure ultimate payment of the same and to prevent any
sale or forfeiture of the affected portion of the Property or the Rent by reason
of such non-payment or non-compliance, which security may be a guaranty in form
and substance acceptable to Landlord and executed by a guarantor acceptable to
Landlord; provided, however, the provisions of this Article shall not be
construed to permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any Imposition) or
any other sums payable by Tenant to Landlord hereunder, (f) in the case of an
Insurance Requirement, the coverage required by Article XIV shall be maintained,
and (g) if such contest be finally resolved against Landlord or Tenant, Tenant
shall, as Additional Charges due hereunder, promptly pay the amount required to
be paid, together with all interest and penalties accrued thereon, or comply
with the applicable Legal Requirement or Insurance Requirement. Landlord, at
Tenant's expense, shall execute and deliver to Tenant such authorizations and
other documents as may reasonably be required in any such contest and, if
reasonably requested by Tenant or if Landlord so desires, Landlord shall join as
a party therein. Tenant shall indemnify and save Landlord harmless against any
liability, cost or expense of any kind that may be imposed upon Landlord in
connection with any such contest and any loss resulting therefrom.
ARTICLE XIV
INSURANCE
14.1 GENERAL INSURANCE REQUIREMENTS. Tenant shall at all times
maintain policies of insurance insuring the Property, and all property located
in or on the Property including, without limitation, all Capital Additions,
Tenant's Personal Property and all other property located in or on the Property,
all satellite clinics operated by Tenant whether on or off the Property; and the
business operated by Tenant, against the kind of risks and in the amounts of
coverage described below. All such insurance shall be written by companies of
recognized responsibility authorized to conduct an insurance business in the
State. All such insurance (other than insurance with respect to Tenant's
Personal Property) shall name Tenant as the insured and Landlord as an
additional insured. Proceeds of insurance policies payable to compensate any
loss shall be payable to Landlord or Tenant as provided in Article XV. All such
insurance shall name as an additional insured or loss payee, as appropriate, the
holder (a "FACILITY MORTGAGEE") of any mortgage, deed of trust or other security
agreement securing any Encumbrance placed on the Property in accordance with the
provisions of Article XXVII ("FACILITY MORTGAGES") by way of a standard form of
mortgagee's loss payable endorsement. Any loss adjustment or other settlement
in excess of $250,000 shall require the written consent of Landlord and each
Facility Mortgagee and any other lender of Landlord or its Affiliates ("LANDLORD
LENDER") having any contractual insurance requirements which would impact on the
insurance requirements of this Lease to the extent so required and Landlord has
given Tenant written notice thereof. Originals or certified copies of all
insurance policies obtained pursuant to this Article shall be deposited with
Landlord and, if requested, with any Facility Mortgagee(s) or Landlord
Lender(s). The policies on the Property, including the Improvements, Fixtures
and Tenant's Personal Property, shall insure against the following risks:
-33-
<PAGE>
(a) loss or damage by fire, vandalism and malicious
mischief, extended coverage perils ("all risk"), and all physical loss perils
insurance including but not limited to sprinkler leakage, in an amount not less
than 100% of the then full replacement cost thereof (as defined below in
Section 14.2) or such lesser amount as is approved by Landlord in writing;
(b) loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus, now or hereafter installed in the Facility in such
amounts with respect to any one accident as may be reasonably requested by
Landlord from time to time of not less than $57,073,000;
(c) business interruption or loss of rental under a rental
value insurance policy covering risk of loss during the lesser of the first 12
months of reconstruction or the actual reconstruction period necessitated by the
occurrence of any of the hazards described in Sections 14.1(a) or 14.1(b), in an
amount sufficient to prevent Landlord from becoming a coinsurer;
(d) claims for personal injury or property damage under a
policy of comprehensive general public liability insurance or commercial general
liability insurance. Such insurance shall include Broad Form Contractual
Liability insurance coverage insuring all of Tenant's indemnity obligations
pursuant to Section 8.3(b) (if obtainable at a reasonable cost) and pursuant to
Section 22.1 of this Lease. Such coverage shall have a minimum combined single
limit of liability of at least $5 million and a general aggregate limit of at
least $5 million, with $5 million umbrella coverage. Any such policy shall be
written to apply to all bodily injury, property damage, personal injury and
other covered losses, however occasioned, subject to standard policy exclusions,
occurring during the policy term, and shall be endorsed to provide that such
coverage shall be primary and that any insurance maintained by Landlord shall be
excess insurance only. Such coverage shall also contain endorsements:
(i) deleting any employee exclusion on personal injury coverage; (ii) including
employees as additional insureds; (iii) deleting any liquor liability exclusion;
and (iv) providing for coverage of employers automobile non-ownership liability.
All such insurance shall provide for severability of interests; shall provide
that an act or omission of one of the named insureds shall not reduce or avoid
coverage to the other named insureds; and shall afford coverage for all claims
based on acts, omissions, injury and damage, which claims occurred or arose (or
the onset of which occurred or arose) in whole or in part during the policy
period. Tenant shall also maintain employers liability insurance with a limit
of no less than $1 million per employee and $1 million per occurrence and
workers' compensation insurance as required by law;
(e) claims arising out of medical malpractice in an amount
not less than $2 million for each person and $2 million for each occurrence;
(f) flood (when the Property is located in whole or in part
within an area designated by an appropriate agency or authority of the United
States as a flood plain) and such other hazards and in such amounts as may be
customary for comparable properties in the area and as may be available from
insurance companies, insurance pools, or other appropriate companies authorized
to do business in the State;
(g) during any period during which any Capital Addition is
under construction, course of construction insurance and all risks insurance in
such amounts as Landlord shall reasonably require;
(h) such other hazards and in such amounts as may be
customary for comparable properties in Salt Lake City, Utah and as may be
available from insurance companies,
-34-
<PAGE>
insurance pools, or other appropriate companies authorized to do business in the
State at rates which are economically practicable in relation to the risks
covered; and
(i) any other insurance in such form and in such amounts as
Landlord may reasonably request.
14.2 REPLACEMENT COST. The term "full replacement cost" as used
herein shall mean the actual replacement cost of the Property requiring
replacement from time to time, less exclusions provided in a normal fire
insurance policy (which, on the Commencement Date is agreed to be not more than
$60,000,000). If either party believes that full replacement cost (the then
replacement cost less such exclusions) has increased or decreased at any time
during the Lease Term, it may have such full replacement cost redetermined by
the insurer then providing the largest amount of fire insurance coverage carried
on the Property.
14.3 ADDITIONAL INSURANCE. In addition to the insurance described
in Section 14.1, throughout the Term Tenant shall maintain such additional
insurance as may be required from time to time by Landlord provided that the
types and amounts of any such additional insurance required by Landlord is then
customarily maintained by the operators of similar health care facilities in
Salt Lake County, Utah. Tenant shall further maintain adequate workers'
compensation insurance coverage for all persons employed by Tenant on the
Property. Such workers' compensation insurance shall be in accordance with the
requirements of applicable local, state and federal law.
14.4 WAIVER OF SUBROGATION. All insurance policies carried by
Landlord or Tenant covering the Property, the Fixtures, the Facility or Tenant's
Personal Property shall expressly waive any right of subrogation on the part of
the insurer against the other party. Landlord and Tenant agree that the
respective policies of insurance carried by them will include such waiver
clauses or endorsements so long as the same are obtainable without extra cost.
If such clauses and endorsements are only available upon the payment of an extra
charge, the other party, at its election, may pay the same, but shall not be
obligated to do so; provided that the Tenant shall at all times be obligated to
carry the policies of insurance required under this Article regardless of
whether the waiver of subrogation required under this Section 14.4 is available.
14.5 FORM OF INSURANCE. All of the policies of insurance referred
to in this Article shall be written in a form, and issued by insurance
companies, reasonably satisfactory to Landlord. Landlord agrees that it will
not unreasonably withhold or delay its approval as to the form of the policies
or the insurance companies selected by Tenant. Tenant shall pay all of the
premiums therefor, and shall deliver an original or certified copy of any
policy, or renewal thereof, to Landlord, any Facility Mortgagee and any Landlord
Lender at least 10 days prior to the expiration of the existing policy to which
such renewal policy relates. If Tenant either fails to effect such insurance as
herein required or to pay the premiums therefor, or to deliver such policies or
certified copies thereof to Landlord at the times required, Landlord shall be
entitled, but shall have no obligation, to effect such insurance and pay the
premiums therefor, which premiums shall be repayable to Landlord upon demand
therefor in a Notice, and failure by Tenant to repay the same shall constitute
an Event of Default within the meaning of Section 17.1(d). Each insurer
mentioned in this Article shall agree, by endorsement on the policy or policies
issued by it, or by independent instrument furnished to Landlord, that it will
give to Landlord (and to any Facility Mortgagee and Landlord Lender of which
Tenant has notice, if required) 30 days prior written notice before such policy
or policies expire, are altered or are cancelled.
-35-
<PAGE>
14.6 CHANGE IN LIMITS. If either party shall at any time deem the
limits of the personal injury or property damage public liability insurance or
malpractice insurance then carried by Tenant to be insufficient or excessive,
the parties shall endeavor in good faith to agree promptly upon the proper and
reasonable limits for such insurance to be carried, and such insurance shall
thereafter be carried with the limits thus agreed upon until further change
pursuant to the provisions of this Section.
14.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article, Tenant's obligations to carry the insurance provided
for herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Tenant so long as (a) the
coverage afforded to Landlord is not reduced or diminished or otherwise altered
from that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance and (b) the requirements of this Article are otherwise satisfied.
14.8 NO SEPARATE INSURANCE. Tenant shall not obtain separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article XIV to be furnished by, or which may reasonably be
required to be furnished by Tenant, nor shall Tenant increase the amount of any
then existing insurance by securing an additional policy or additional policies,
unless all parties having an insurable interest in the subject matter of the
insurance, including in all cases Landlord and all Facility Mortgagees, are
named therein as additional insureds, and the loss is payable under said
insurance in the same manner as losses are payable under this Lease. Tenant
shall immediately notify Landlord of the obtaining of any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance.
ARTICLE XV
INSURANCE PROCEEDS
15.1 HANDLING OF INSURANCE PROCEEDS. Subject to Section 15.4
hereof, all proceeds from any policy of insurance required by Article XIV of
this Lease shall be paid to Landlord and held in trust by Landlord (subject to
the provisions of Section 15.7) and shall be made available for reconstruction,
repair or replacement, as the case may be, of any damage to or destruction of
all or any portion of the Property to which such proceeds relate, and shall be
paid out by Landlord from time to time subject to the provisions hereof for the
cost of such reconstruction, repair or replacement. Any unused portion shall be
retained by Landlord free and clear upon completion of such repair and
restoration but shall be applied by Landlord against Tenant's obligations for
Rent next coming due under this Lease. If neither Landlord nor Tenant is
required or elects to repair and restore, and the Lease is terminated without
purchase by Tenant as described in Section 15.2(a), then all such insurance
proceeds shall be retained by Landlord. All salvage resulting from any risk
covered by insurance shall belong to Landlord, except that any salvage relating
to Tenant's Personal Property shall be the property of Tenant.
15.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED BY
INSURANCE.
(a) Except as provided in Section 15.7, if during the Term
a portion of the Property is totally destroyed or materially damaged by a risk
covered by the insurance described in Article XIV so that the Facility is
rendered unsuitable for its Primary Intended Use (taking into account all
relevant factors, including but not limited to the number of useable beds, the
amount of square footage reasonably available for use by Tenant and the type and
amount of Gross Revenues lost) (the "IMPACTED FACILITY"), Tenant shall at its
option either (i) restore the Impacted Facility to substantially the same
condition as existed immediately before the damage or destruction and this Lease
shall continue in full
-36-
<PAGE>
force and effect or (ii) offer to purchase the Property from Landlord for a
purchase price equal to the greater of the Minimum Repurchase Price or the Fair
Market Value of the Property immediately prior to such damage or destruction.
If Tenant restores the Impacted Facility, the insurance proceeds shall be paid
out by Landlord to Tenant or its designee from time to time as reasonably
requested by Tenant to pay for the reasonable costs of such restoration and any
excess proceeds remaining after such restoration shall be retained by Tenant.
(b) Except as provided in Section 15.7, if during the Term,
the Improvements or Fixtures are partially destroyed due to a risk covered by
the insurance described in Article XIV but the Impacted Facility is not thereby
rendered unsuitable for the Primary Intended Use, in Tenant's reasonable opinion
(taking into account all relevant factors, including but not limited to the
number of useable beds, the amount of square footage reasonably available for
use by Tenant and the type and amount of Gross Revenues lost), Tenant shall
restore the Impacted Facility to substantially the same condition as existed
immediately before the damage or destruction. Such damage or destruction shall
not terminate this Lease; provided, however, that if Tenant cannot, with
reasonable diligence and within a reasonable time, obtain all government
approvals, including building permits, licenses, conditional use permits and any
certificates of need, necessary to perform all required repair and restoration
work and to operate the Impacted Facility in substantially the same manner and
for the Primary Intended Use, Tenant shall either (i) offer to purchase the
Property for a purchase price equal to the greater of the Minimum Repurchase
Price or the Fair Market Value immediately prior to such damage or destruction
or (ii) continue to operate under the Lease which shall remain in full force and
effect and Landlord shall be entitled to retain the insurance proceeds, less the
amount needed to restore the Property so that the portion of the Facility
unaffected by the casualty can be used as a complete architectural unit. If
Tenant shall make such offer and Landlord does not accept the same within
120 days of Landlord's receipt of such offer, Tenant may either (x) withdraw
such offer, in which case this Lease shall remain in full force and effect and
Tenant shall proceed to restore the Impacted Facility as soon as reasonably
practicable to substantially the same condition as existed immediately before
such damage or destruction, or (y) terminate this Lease after recovery by
Landlord of all insurance proceeds and the payment by Tenant of any Shortfall in
cash. If Tenant so restores the Impacted Facility, insurance proceeds shall be
paid out by Landlord from time to time to pay for the reasonable costs of such
restoration, and any excess proceeds remaining after such restoration shall be
retained by Landlord.
(c) If Tenant elects to repair or restore any damage or
destruction to the Property and the cost of any such repair or restoration
exceeds the amount of proceeds received by Landlord from the insurance required
under Article XIV, Tenant shall contribute any and all excess amounts necessary
to repair or restore the Facility. Tenant shall provide Landlord with a payment
or completion guaranty in form and substance reasonably acceptable to Landlord.
If no acceptable guarantor is available, Tenant shall pay Landlord the amount of
such difference, which amount shall be held in trust, together with any other
insurance proceeds, for application to the cost of repair and restoration as
such repair and restoration progresses.
(d) If Landlord accepts Tenant's offer to purchase the
Property as set forth in this Section 15 this Lease shall terminate as to the
Property upon payment of the purchase price therefor and Landlord shall
thereupon remit to Tenant all insurance proceeds pertaining to the Property less
Landlord's reasonable expenses, including attorneys' fees, and assign Landlord's
rights in any uncollected insurance proceeds to Tenant.
15.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT
COVERED BY INSURANCE. Except as provided in Section 15.7 below, if during the
Term the Facility is totally destroyed
-37-
<PAGE>
or materially damaged (i) from a risk not covered by insurance described in
Article XIV but that would have been covered if Tenant carried the insurance
customarily maintained by, and generally available to, the operators of
reputable facilities which are used for the Primary Intended Use in the region
in which the Facility is located, (ii) from a risk for which insurance coverage
is voided due to any act or omission by Tenant, or (iii) as result of an
earthquake, whether or not such damage or destruction renders the Impacted
Facility unsuitable for their Primary Intended Use (taking into account all
relevant factors, including but not limited to the number of useable beds, the
amount of square footage reasonably available for use by Tenant and the type and
amount of Gross Revenues lost), Tenant shall restore the Impacted Facility to
substantially the same condition as existed immediately before such damage or
destruction and not terminate this Lease. Except as provided in Section 15.7
below, if during the Term either Facility is totally destroyed or materially
damaged from a risk not covered by insurance described in Article XIV and not
described in clause (i), (ii) or (iii) of the immediately preceding sentence,
whether or not such Facility is thereby rendered unusable for its Primary
Intended Use (taking into account all relevant factors, including, but not
limited to, the number of useable beds, the amount of square footage reasonably
available for use by Tenant and the type and amount of Gross Revenues lost),
Tenant shall, at its option, either (i) restore the Facility to substantially
the same condition as existed immediately prior to such damage or destruction
and this Lease shall continue in full force and effect or (ii) offer to purchase
the Property from Landlord for a purchase price equal to the greater of the
Minimum Repurchase Price or the Fair Market Value of the Property immediately
prior to such damage or destruction. If this Lease continues in full force and
effect, Tenant shall continue to pay Rent, in the manner and at the times herein
specified, including the full amounts of Base Rent, Percentage Rent and
Additional Charges, provided that during the period of restoration when the
Facility is not suitable for its Primary Intended Use, Tenant shall pay
Percentage Rent at a rate equal to the Percentage Rent for the immediately
preceding Fiscal Year during which Percentage Rent accrued.
15.4 PAYMENT OF PROCEEDS ON TENANT'S PROPERTY AND CAPITAL ADDITIONS
PAID BY TENANT. Notwithstanding any provision herein, all insurance proceeds
payable by reason of any loss of or damage to any of Tenant's Personal Property
or Capital Additions paid for by Tenant shall be paid to Tenant and Tenant shall
hold such insurance in trust to pay the cost of repairing or replacing damaged
Tenant's Personal Property or Capital Additions paid for by Tenant; PROVIDED,
HOWEVER, that if the damaged Tenant's Personal Property or Capital Additions
paid for by Tenant were no longer necessary to Tenant's operations prior to
their destruction, Tenant shall not be obligated to repair or replace them.
15.5 RESTORATION OF TENANT'S PROPERTY. Upon any restoration of the
Impacted Facility as provided in Section 15.2 or 15.3, Tenant shall either
(i) at Tenant's sole cost and expense, restore all alterations and improvements
made by Tenant, Tenant's Personal Property and all Capital Additions paid for by
Tenant, or (ii) at Tenant's sole cost and expense, replace such alterations and
improvements, Tenant's Personal Property or Capital Additions with improvements
or items of the same or better quality and utility in the operation of the
Property; provided, however, that if the damaged Tenant's Personal Property or
Capital Additions paid for by Tenant were no longer necessary to Tenant's
operations prior to their destruction, Tenant shall not be obligated to replace
them.
15.6 ABATEMENT OF RENT. Unless and until Tenant shall pay the
purchase price for the Property to Landlord in accordance with this Article XV
(and this Lease is thereby terminated or otherwise terminated as provided in
this Article XV), in the event of any damage or destruction of the Property,
this Lease shall remain in full force and effect and Tenant's obligation to make
rental payments and to pay all other charges required by this Lease shall not be
abated by reason of any damage or destructions to the Property or the subsequent
loss of Landlord's entitlement to the Property.
-38-
<PAGE>
15.7 DAMAGE NEAR END OF TERM. Notwithstanding any provisions of
this Article XV to the contrary, if damage to or destruction of the Facility
occurs during the last 12 months of the then applicable term (whether Fixed or
Extended), if Tenant has not elected to extend such term, and if such damage or
destruction cannot be fully repaired and restored within six months immediately
following the date of loss, then Tenant shall have the right to terminate this
Lease by giving written Notice thereof to Landlord within 30 days after the date
of such damage or destruction, in which event, Landlord shall collect any
insurance proceeds to which it is entitled, and Tenant shall assign Tenant's
rights in any additional insurance proceeds. In the event that the Facility is
totally destroyed or damaged (i) from a risk not covered by insurance described
in Article XIV but that would have been covered if Tenant carried the insurance
customarily maintained by, and generally available to, the operators of
reputable facilities which are used for the Primary Intended Use in the region
in which the Facility is located, (ii) from a risk for which insurance coverage
is voided due to any act or omission by Tenant, or (iii) as a result of an
earthquake, whether or not such damage or destruction renders the Facility
unsuitable for its Primary Intended Use (taking into account all relevant
factors, including but not limited to the number of useable beds, the amount of
square footage reasonably available for use by Tenant and the type and amount of
Gross Revenues lost), then Tenant shall pay to Landlord a sum equal to the
amount reasonably necessary to repair such damage or destruction if Tenant
elects to terminate the Lease.
15.8 TERMINATION OF OPTION TO PURCHASE. Any termination of this
Lease pursuant to this Article shall cause any option to purchase granted to
Tenant under this Lease and the right to extend the Term by any Extended Term to
be terminated and to be without further force or effect.
15.9 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Facility which Landlord is obligated to restore or may restore under any of the
provisions of this Lease.
ARTICLE XVI
CONDEMNATION
16.1 DEFINITIONS.
For purposes of this Article XVI the following terms have the meanings
specified in this Section 16.1.
(a) "CONDEMNATION" means (a) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor,
or (b) a voluntary sale or transfer by Landlord with Tenant's consent (provided
no Event of Default has occurred and is continuing at such time) to any
Condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending.
(b) "DATE OF TAKING" means the earlier of: (i) the first
date the Condemnor has the right to immediate possession of the property being
condemned, or (ii) the date on which Tenant's quiet possession is materially
disturbed by a Condemnation proceeding such that it is impractical to continue
operations of the Facility.
(c) "AWARD" means all compensation, sums and any other
value awarded, paid or received on a total or partial condemnation.
-39-
<PAGE>
(d) "CONDEMNOR" means any public or quasi-public authority,
or private corporation or individual, having the power of condemnation
16.2 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is
any Taking of all or any part of the Property or of any interest in this Lease
by Condemnation, the rights and obligations of the parties with respect to such
Condemnation shall be determined by this Article.
16.3 TOTAL TAKING. If title to the whole of Tenant's interest in
the Property shall be taken or condemned by any Condemnor, this Lease shall
cease and terminate as of the Date of Taking. If title to less than the whole
of the Property shall be so taken or condemned, which nevertheless renders the
Property unsuitable for its Primary Intended Use, in Tenant's reasonable opinion
(taking into account all relevant factors, including but not limited to the
number of useable beds, the amount of square footage reasonably available for
use by Tenant, and the type and amount of Gross Revenues lost), Tenant and
Landlord each shall have the option by Notice to the other, at any time prior to
the taking of possession by, or the date of vesting of title in, such Condemnor,
whichever first occurs, to terminate this Lease as of such earlier to occur
date. Upon such earlier to occur date, if such Notice has been given, this
Lease shall cease and terminate. In either of such events, all Rent paid or
payable by Tenant hereunder shall be apportioned as of the date the Lease shall
have been so terminated as aforesaid.
16.4 ALLOCATION OF PORTION OF AWARD. Subject to the rights of any
Facility Mortgagee, the total Condemnation Award made with respect to all or any
portion of the Property shall be distributed to Landlord and Tenant ratably in
accordance with the value of their respective interests in and to such Property
as hereafter set forth in this Section 16.4. All of the Award shall be the sole
and exclusive property of Landlord and shall be payable to Landlord, subject to
the rights of any Facility Mortgagee; provided that any portion of such
Condemnation Award which is expressly allocated by the Condemnor to the taking
of Tenant's leasehold interest in the Property, Tenant's Share of Appreciation
Amount (if any), the taking of any Capital Additions (or any portion thereof)
paid for by Tenant, any loss of business by Tenant during the remaining Term of
this Lease, the taking of Tenant's Personal Property, or any removal and
relocation expenses of Tenant in any such proceedings shall be the sole property
of and payable to Tenant. In any Condemnation proceedings Landlord and Tenant
each shall seek their own Award in conformity herewith, at their own expense.
16.5 PARTIAL TAKING. If title to less than the whole of the
Property shall be taken or condemned, and the Property is still suitable for its
then Primary Intended Use, in Tenant's reasonable opinion, or if Tenant or
Landlord shall be entitled (but shall not elect) to terminate this Lease as
provided in Section 16.3 hereof, Tenant at its own cost and expense shall with
all reasonable diligence restore the untaken portion of any Improvements so that
such improvements shall constitute a complete architectural unit of the same
general character and condition (as nearly as may be possible under the
circumstances) as the Improvements existing immediately prior to such
Condemnation or Taking. Landlord and Tenant shall each contribute to the cost
of restoration that part of their Award specifically allocated to such
restoration, if any (or if no such specific allocation is made, a just, fair and
reasonable portion of its Award as reasonably determined by Landlord and Tenant
or by arbitration in accordance with Section 28.14 if Landlord and Tenant are
unable to agree within 30 days of the Award), together with any and all
severance and other damages awarded for any taken Improvements; provided,
however, the amount of such contribution shall not exceed such cost. If such
amounts are not sufficient to cover the cost of restoration Landlord and Tenant
shall contribute any additional amounts needed for restoration in proportion to
the amounts already contributed by them, provided that in no event shall
Landlord contribute any amount to such restoration in excess of its Award.
Thereafter, any excess restoration cost shall be borne solely by Tenant.
Landlord agrees that Tenant shall be entitled to an equitable abatement
-40-
<PAGE>
of Base Rent in the event of a partial taking of the Property, but such
abatement shall be strictly limited to any amount of excess Award paid to
Landlord after the restoration cost has been paid.
16.6 TEMPORARY TAKING. If the whole or any part of the Property or
of Tenant's interest under this Lease shall be taken or condemned by any
Condemnor for its temporary use or occupancy for a period of not more than one
hundred-eighty (180) days, this Lease shall not terminate, and Tenant shall
continue to pay, in the manner and at the times herein specified, the full
amounts of Base Rent, Percentage Rent, if any, and Additional Charges, provided
that during any such Temporary Taking Tenant shall pay Percentage Rent at a rate
equal to the average Percentage Rent during the three immediately preceding
Fiscal Years (or if three Fiscal Years shall not have elapsed, the average
during the last preceding Fiscal Years occurring during the Term). Except to
the extent Tenant may be prevented from so doing pursuant to the terms of the
order of the Condemnor, Tenant shall continue to perform and observe all of the
other terms, covenants, conditions and obligations hereof on the part of the
Tenant to be performed and observed as though such Taking or Condemnation had
not occurred. Upon any such Taking or Condemnation described in this Section,
the entire amount of any such Award made for such Taking or Condemnation
allocable to the Term of this Lease, whether paid by way of damages, Rent or
otherwise, shall be paid to Tenant. Tenant covenants that upon the termination
of any such Taking or Condemnation set forth in this Section, Tenant will, at
its sole cost and expense (subject to any contribution by Landlord as set forth
in Section 16.5), restore the Property as nearly as may be reasonably possible
to the condition in which the same was immediately prior to such Taking or
Condemnation, unless such period of temporary use or occupancy shall expire less
than six months prior to termination of this Lease or extend beyond the
expiration of the Term, in which case Tenant shall not be required to make such
restoration.
ARTICLE XVII
DEFAULTS AND REMEDIES
17.1 EVENTS OF DEFAULT. Any one or more of the following events
shall be deemed an "EVENT OF DEFAULT" hereunder:
(a) Tenant shall fail to pay Rent payable by Tenant under
this Lease when the same becomes due and payable;
(b) Any representation or warranty made by the Tenant in
connection with this Lease or the Security Agreement or the Absolute Assignment
of Subleases and Rents, or in any report, certificate, financial statement or
other instrument furnished in connection herewith or therewith, from time to
time, whether under Article XXIV of this Lease or otherwise, shall prove to be
false or misleading in any material respect, PROVIDED, THAT Tenant shall have a
period of 15 days after Notice thereof from Landlord to take whatever action
that may be necessary such that the subject representation or warranty would no
longer be false or misleading;
(c) Tenant shall fail to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of 15 days after Notice thereof from Landlord, unless such
failure cannot with due diligence be cured within a period of 15 days, in which
case such failure shall not be deemed to continue if Tenant proceeds promptly
and with due diligence to cure the failure and diligently completes the curing
thereof;
-41-
<PAGE>
(d) Tenant shall: (i) admit in writing its inability to
pay its debts generally as they mature, (ii) make a general assignment for the
benefit of its creditors, (iii) have appointed a trustee, receiver or liquidator
pursuant to an order of a court of competent jurisdiction of itself or of the
whole or any part of its property which is not discharged in sixty (60) days,
(iv) terminate or suspend its business, (v) have any of its assets executed
upon, attached or judicially seized and such execution, attachment or seizure is
not vacated or set aside within sixty (60) days;
(e) Tenant shall: (i) file a voluntary case under any
applicable bankruptcy, insolvency, debtor relief or other similar law or statute
of the United States of America or any State thereof now or hereinafter in
effect ("BANKRUPTCY LAWS"), or (ii) consent to or acquiesce in the appointment
of a receiver, liquidator, assignee, trustee, custodian or sequestrator (or
similar official of itself or of the whole or any part of its property) which is
not discharged in sixty (60) days;
(f) Tenant shall, on a petition filed under any applicable
Bankruptcy Laws against any of them, be adjudicated a bankrupt or have an order
for relief thereunder entered against it or fail to oppose any such proceeding
or if a court of competent jurisdiction shall enter an order or decree
appointing, without its consent, a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of itself or of the whole or any
part of its property and such judgment, order or decree shall not be vacated or
set aside or stayed within sixty (60) days from the date of the entry thereof;
(g) Tenant shall be liquidated or dissolved, or shall
voluntarily begin proceedings toward such liquidation or dissolution, or shall,
in any manner, permit the sale or divestiture of substantially all of its
assets;
(h) an Event of Default under the terms of the Security
Agreement, the California Facilities Security Agreements or the Absolute
Assignment of Subleases and Rents shall occur and be continuing (after the
expiration of any cure periods, if any, set forth therein);
(i) Tenant shall fail to make when due any scheduled
payment with respect to indebtedness unless such failure is being diligently
contested in good faith and such failure shall continue for five days following
its receipt of written advice with respect thereto, if the effect of such
failure could reasonably be anticipated to have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise)
of Tenant;
(j) any Notification Event described in Section 29.2(f)
shall occur, which is reasonably likely to result in liability to the Tenant
having a material adverse effect on the business, operations, properties or
condition (financial or otherwise) of Tenant and Tenant shall fail to cure (to
Landlord's reasonable satisfaction) the events or state of affairs constituting
such Notification Event within thirty days after notice thereof was due from
Tenant pursuant to Section 29.2(f);
(k) the estate or interest of Tenant in the Property or any
part thereof shall be levied upon or attached in any proceeding and the same
shall not be vacated or discharged within the later of 60 days after
commencement thereof or 30 days after Notice thereof from Landlord (unless
Tenant shall be contesting such lien or attachment in good faith in compliance
with this Lease;
(l) except as a result of damage, destruction or a partial,
temporary or complete Condemnation, Tenant voluntarily ceases operations on the
Property; or
-42-
<PAGE>
(m) PHC should undergo a change of ownership control,
including without limitation, any transfer of fifty percent or more of all of
the issued and outstanding stock of PHC, or PHC should cease to own,
beneficially or as of record, directly or indirectly through one or more
subsidiaries, all of the capital stock of Tenant.
No Event of Default (other than a failure to make a payment of money)
shall be deemed to exist under clause (c) above during any time the curing
thereof is prevented by an Unavoidable Delay, provided that upon the cessation
of such Unavoidable Delay, Tenant immediately shall remedy such default.
Tenant shall immediately notify Landlord of the occurrence of any
event set forth in subsections 17.1(b) through (m) of which Tenant has actual
knowledge and the failure to do so shall constitute an immediate Event of
Default.
17.2 CERTAIN REMEDIES. Upon any Event of Default, Landlord shall
have all legal, equitable and contractual rights, powers and remedies provided
either in this Lease, at common law or in equity, or by statute or otherwise.
Without limiting the foregoing, if an Event of Default occurs, is not
cured within the period, if any, for any such cure provided in Section 17.1, and
is continuing, Tenant shall, to the extent permitted by law and if required by
Landlord so to do, immediately surrender to Landlord the Property and quit the
same. To the extent permitted by applicable law, Landlord may enter upon and
repossess the Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Tenant and all other persons and any and all personal
property from the Property subject to rights of any residents or patients and to
any requirement of law. Tenant hereby assents to and waives all legal notice to
vacate the Property. Landlord may so terminate Tenant's right of possession and
may repossess the Premises without liability for trespass or conversion, without
demand or notice of any kind to Tenant and without terminating this Lease, in
which event Landlord may, but shall be under no obligation to, relet the same
for the account of Tenant for such rent and upon such terms as shall be
satisfactory to Landlord. Neither the repossession of the Property, the failure
of Landlord to relet the Property, nor the reletting of all or any portion of
the Property, shall relieve Tenant of its liability and obligation hereunder,
all of which shall survive any such repossession or reletting.
FURTHER, TENANT RECOGNIZES THAT ITS FAILURE TO INVEST AN AGGREGATE OF
AT LEAST $3,400,000 AS TENANT'S CAPITAL INVESTMENT DURING THE PERIOD COMMENCING
ON THE COMMENCEMENT DATE AND ENDING ON FEBRUARY 28, 1999, WOULD DEPRIVE LANDLORD
OF IMPORTANT CONSIDERATION FOR THIS LEASE. ACCORDINGLY, IF ANY EVENT OF DEFAULT
SHALL OCCUR ON OR BEFORE FEBRUARY 28, 1999, AND LANDLORD SHALL THEREAFTER
TERMINATE THIS LEASE ON ACCOUNT THEREOF OR DURING THE CONTINUANCE THEREOF,
TENANT AGREES THAT, WITHOUT PREJUDICE TO ANY OTHER REMEDY LANDLORD MAY HAVE
HEREUNDER OR UNDER APPLICABLE LAW, TENANT SHALL PAY TO LANDLORD AS LIQUIDATED
DAMAGES (AND NOT AS A PENALTY) AN AMOUNT EQUAL TO THE EXCESS OF (X) $3,400,000
OVER (Y) THE SUM OF THE AGGREGATE AMOUNT OF TENANT'S CAPITAL INVESTMENT DURING
THE PERIOD COMMENCING ON THE COMMENCEMENT DATE AND ENDING ON FEBRUARY 28, 1999.
TENANT AND LANDLORD ACKNOWLEDGE AND AGREE THAT, SINCE IT WOULD BE IMPRACTICAL
AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES THAT LANDLORD MAY SUFFER AS A
RESULT OF TENANT'S FAILURE TO INVEST SUCH $3,400,000 AS TENANT'S CAPITAL
INVESTMENT WITHIN SUCH PERIOD OF
-43-
<PAGE>
TIME, SUCH EXCESS AMOUNT IS A REASONABLE ESTIMATE OF THE DAMAGES THAT LANDLORD
WOULD SUSTAIN IN THE EVENT OF SUCH FAILURE.
17.3 TERMINATION AND DAMAGES. (a) Upon the occurrence of any Event
of Default, Landlord shall have the right, to the extent permitted by applicable
law, (i) to terminate this Lease and Tenant's right to possession of the
Property by any lawful means, upon ten days' Notice of such termination (which
Notice shall run concurrent with any Notice required to be given by Section 17.1
and during which time Tenant shall have the opportunity to cure any such Event
of Default), in which case, if Tenant shall fail to cure all Events of Default
within the foregoing ten-day period, this Lease shall terminate and all of
Tenant's rights hereunder shall cease and Tenant shall immediately surrender
possession of the Property to Landlord and, in such event, Landlord shall be
entitled to recover form Tenant all damages incurred by reason of Tenant's
default, and (ii) to enforce all of Landlord's rights and remedies under this
Lease, including the right to recover the Rent and other sums owed as such
become due hereunder together with interest on such overdue Rent and any other
overdue amount owed by Tenant, from the date when due until paid, at the lesser
of the Overdue Rate or the maximum rate permitted by applicable law. Tenant
further covenants, as an additional and cumulative obligation after any
termination by reason of any Event of Default, to pay punctually to Landlord (or
such other person entitled thereto) all Rent and punctually to perform all of
the obligations which Tenant covenants in this Lease to pay and perform in the
same manner and to the same extent and at the same time as if this Lease had not
been terminated; provided, however, that in calculating the amounts so to be
paid by Tenant, Tenant shall be credited with any amount actually paid to
Landlord as damages pursuant to clause (i) above and also with any rent actually
obtained by Landlord by reletting the Property, after deducting all expenses of
such reletting and of collecting such rent, with the exception that Tenant shall
in no event be entitled to receive any such credit in excess of the amount
otherwise payable to Landlord pursuant to this Section. Furthermore, Landlord
shall also have all rights and remedies provided in Section 17.2. If any
litigation is commenced with respect to any alleged default under this Lease,
the prevailing party in such litigation shall receive, in addition to its
damages incurred, its reasonable attorneys' fees, and all costs and expenses
incurred in connection therewith. Neither the termination of this Lease
pursuant to this Section 17.3, the repossession of the Property, the failure of
Landlord, notwithstanding reasonable good faith efforts to relet the Property,
nor the reletting of all or any portion of the Property, shall relieve Tenant of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. Upon any such termination, Tenant shall
forthwith pay to Landlord all Rent due and payable with respect to the Property
to and including the date of such termination. Thereafter Tenant shall promptly
pay to Landlord the full amount of Landlord's damages suffered by reason of
Tenant's breach of this Lease, which damages shall include, but are not limited
to the sum of:
(i) the worth at the time of the award of the unpaid
Rent earned at the time of such termination, repossession or reletting;
(ii) the worth at the time of the award, of the amount
by which the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided;
(iii) the worth at the time of the award of the amount
by which the unpaid Rent for the balance of the Term after the time of the award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided; and
-44-
<PAGE>
(iv) any other amount necessary to compensate Landlord
for the costs incurred in regaining possession and reletting the Property,
including, but not limited to, brokerage fees and commissions, construction
costs, rent concessions, and all legal costs and expenses.
(b) the "worth at the time of the award" of the amounts
referred to in clauses (i) and (ii) of subsection (a) of this Section 17.3 shall
be computed by allowing interest at the Overdue Rate. The "worth at the time of
the award" of the amount referred to in clause (iii) of subsection (a) of this
Section 17.3 shall be determined by a Court having jurisdiction thereof using
the lowest rate of capitalization (highest present worth) reasonably applicable
at the time of such determination and allowed by applicable law.
(c) Percentage Rent, for the purposes of this Section 17.3,
shall be a sum equal to the Percentage Rent for the Fiscal Year immediately
preceding the Fiscal Year in which the termination, re-entry or repossession
takes place and during which Percentage Rent accrued.
17.4 APPLICATION OF FUNDS. Any payments which are made to and
received by Landlord under any of the provisions of this Lease during the
continuance of any Event of Default shall be applied to Tenant's obligations in
the order which Landlord may determine or as may be prescribed by applicable
laws.
17.5 FAILURE TO CONDUCT BUSINESS. For the purpose of determining
rental loss damages or Percentage Rent, if Tenant fails to conduct business upon
the Property, and thereby causes the exact damages or the amount of Percentage
Rent to be unascertainable, Percentage Rent for such period shall be deemed to
be the Percentage Rent during the immediately preceding Fiscal Year during which
Percentage Rent accrued.
17.6 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If an Event of
Default occurs under this Lease and is not cured within the time provided under
this Lease with respect to such Event of Default, Landlord, without waiving or
releasing any obligation of Tenant, and without waiving any such Event of
Default, may (but shall be under no obligation to) at any time thereafter cure
such default for the account and at the expense of Tenant, and may, to the
extent permitted by law, enter upon the Property for such purpose and take all
such action thereon as, in Landlord's sole judgment, may be necessary or
appropriate with respect thereto. No such entry by Landlord on the Property
shall be deemed an eviction of Tenant. All sums so paid by Landlord and all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses, in each case as permitted by law) so incurred,
together with a late charge thereon (to the extent permitted by law) computed at
the Overdue Rate from the date on which such sums or expenses are paid or
incurred by Landlord until the date reimbursed, shall be reimbursed by Tenant to
Landlord on demand. The obligations of Tenant and rights of Landlord contained
in this Article shall survive the expiration or earlier termination of this
Lease.
17.7 WAIVER. If this Lease is terminated pursuant to the provisions
of this Article, Tenant waives, to the extent permitted by applicable law,
(a) any right of redemption, re-entry or repossession, (b) any right to trial by
jury in the event of summary proceedings to enforce the remedies set forth in
this Article, and (c) the benefit of any laws now or hereafter enforced
exempting property from liability for rent or for debt.
-45-
<PAGE>
ARTICLE XVIII
CURE BY TENANT OF LANDLORD DEFAULTS
Landlord shall be in default of its obligations under this Lease if
Landlord shall fail to observe or perform any term, covenant or condition of
this Lease on its part to be performed, and such failure shall continue for a
period of 30 days after Notice thereof from Tenant (or such shorter time as may
be necessary in order to protect the health or welfare of any patient or other
resident of the Property), unless such failure cannot be cured with due
diligence within a period of 30 days (or the above described shorter time, as
applicable), in which case such failure shall not be deemed to continue if
Landlord, within said 30 day period (or the above described shorter time, as
applicable), proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof. The time within which Landlord shall
be obligated to cure any such failure shall also be subject to extension of time
due to the occurrence of any Unavoidable Delay. If Landlord fails to commence
or complete such cure as provided herein, Tenant may cure such default, and for
so long as Tenant continues to pay Rent, Tenant shall have the right by separate
and independent action to pursue any claim it may have against Landlord for
monetary damages for Landlord's failure to cure such default, including, without
limitation, all costs and expenses of Tenant (including attorneys' fees and
expenses). In the event Tenant acquires the Property pursuant to the option
granted hereunder, Tenant, at its option, shall be entitled to offset against
the purchase price the amount of any damages owing from Landlord to Tenant.
ARTICLE XIX
PURCHASE OF PROPERTY BY TENANT
19.1 PURCHASE OF THE PROPERTY. If Tenant purchases the Property
from Landlord pursuant to any of the terms of this Lease, Landlord shall, except
as otherwise expressly provided, upon receipt from Tenant of the applicable
purchase price, together with full payment of any unpaid Rent due and payable
with respect to any period ending on or before the date of such purchase,
deliver to Tenant an ALTA Owner Policy of Title Insurance or such equivalent
policy of title insurance as may be available in the State and which is
reasonably acceptable to Tenant, together with such endorsements, reinsurance
agreements and direct access agreements as Tenant may reasonably request,
together with an appropriate special warranty deed or other conveyance conveying
marketable fee simple title in and to the Property to Tenant in the condition
set forth in Article XXVI, except that the Property shall be free and clear of
all mortgages and encumbrances other than (a) those Tenant has agreed hereunder
to pay or discharge, (b) those mortgages which Tenant has agreed in writing to
accept and to take title subject to on the date the Property was originally
conveyed to Landlord and which are not in default, (c) encumbrances required to
be imposed on the Property under Section 8.3, and (d) any other encumbrances
permitted to be imposed on the Property under the provisions of Article XXVII
which are assumable at no cost or expense to Tenant or to which Tenant may take
subject without cost or expense to Tenant. The difference between the
applicable purchase price and the total amount of the encumbrances assumed or
taken subject to, if a positive number, shall be paid in cash to Landlord or as
Landlord may direct, in federal or other immediately available funds, unless
otherwise mutually agreed by Landlord and Tenant; PROVIDED, THAT Landlord shall
be obligated to pay to Tenant in cash any negative difference between the
applicable purchase price and the total amount of the encumbrances so assumed or
taken subject to by Tenant. All reasonable expenses of conveying the Property
to Tenant, including, without limitation, the cost of the aforementioned title
insurance and attorneys' fees incurred by Landlord in connection with such
conveyance and release, and documentary transfer and similar taxes, recording
fees and expenses of Tenant's counsel, shall be paid by Tenant.
-46-
<PAGE>
19.2 FAILURE TO CLOSE PURCHASE. The closing of any such sale shall
be contingent upon and subject to Tenant obtaining all required governmental
consents and approvals for such transfer. If such sale shall fail to be
consummated by reason of the inability of Tenant to obtain all such approvals
and consents and if the Term would otherwise expire, then this Lease shall
remain in effect on a month-to-month basis (on the terms of the Lease in effect
upon the expiration of such Term and notwithstanding any provision of
Article XX) until the earlier of: (i) the consummation of the purchase or
(ii) the 90th day following the end of the Term. In the event Tenant is unable
to consummate the purchase during the Term or such 90 day extension of the Term
for any reason which is beyond the control of the Tenant, Tenant's option under
Section 3.2 herein to elect Extended Terms shall be reinstated during the last
90 days of the Term or, such 90 day extension, as applicable, to prevent
Tenant's forfeiture of its leasehold under this Lease due to the failure to
close the Purchase of the Property, provided Tenant exercises such option by
delivering a Notice to Landlord prior to the expiration of the Term, or such 90
day extension, as applicable, and such Extended Term shall commence or shall be
deemed to have commenced immediately following the last day of the Term.
ARTICLE XX
HOLDING OVER
If Tenant for any reason remains in possession of the Property after
the expiration or earlier termination of the Term, such possession shall be a
month-to-month tenancy during which time Tenant shall pay to Landlord as rental
each month the aggregate of (i) one and one half (1-1/2) times one-twelfth of
the aggregate total Base Rent and Percentage Rent payable with respect to the
last 12-month period of the Term just expired or terminated, (ii) all Additional
Charges accruing during the month with respect to which such payment relates,
and (iii) all other sums, if any, payable by Tenant pursuant to the provisions
of this Lease with respect to the Property. During such period of month-to-
month tenancy, Tenant shall be obligated to perform and observe all of the
terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to month-to-month
tenancies, to continue its occupancy and use of the Property. Nothing contained
herein shall constitute the consent, express or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of the Term.
ARTICLE XXI
RISK OF LOSS
During the Term of this Lease, Tenant shall bear the risk of loss or
of decrease in the enjoyment and beneficial use of the Property resulting from
the damage or destruction thereof by fire, the elements, casualties, thefts,
riots, wars or any other cause, or resulting from foreclosures, attachments,
levies or executions (other than those caused by Landlord and those claiming
from, through or under Landlord) and, in the absence of the gross negligence,
willful misconduct or breach of this Lease by Landlord, Landlord shall in no
event be responsible therefor nor shall any of the events mentioned in this
Section entitle Tenant to any abatement of Rent except as specifically provided
in this Lease.
-47-
<PAGE>
ARTICLE XXII
LIABILITY OF PARTIES
22.1 INDEMNIFICATION BY TENANT. Notwithstanding the existence of
any insurance provided for in Article XIV, and notwithstanding the policy limits
of any such insurance, Tenant shall, subject to applicable law, indemnify,
defend, save and hold Landlord harmless from and against any and all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses ("CLAIMS") (including, without limitation, reasonable attorneys'
fees and expenses), to the extent permitted by law, imposed upon, incurred by or
asserted against Landlord arising out of, connected with or incidental to:
(a) any Hazardous Substance located at, in, on, under or
about the Property due to the act or omission of Tenant, including any
improvements, repairs, handling, removal or other actions taken by Tenant in
order to comply with all rules and regulations promulgated by any applicable
federal, state, or local government rule and regulation with respect to any such
Hazardous Substance or related problems that Landlord or Tenant becomes aware
of;
(b) any accident, injury to or death of persons, or loss of
or damage to property, occurring on or about the Property or adjoining
sidewalks, alleys or roadways, including without limitation any claims of
malpractice;
(c) any past, present or future use, misuse, non-use,
condition, management, maintenance or repair by Tenant of the Property or
Tenant's Personal Property and any litigation, proceeding or claim by
governmental entities or other third parties to which Landlord is made a party
or other participant related to the Property or Tenant's Personal Property or
such use, misuse, non-use, condition, management, maintenance or repair thereof,
including but not limited to any failure to perform obligations (other than
condemnation proceedings) to which Landlord is made a party;
(d) any Impositions which are the obligations of Tenant to
pay pursuant to the applicable provisions of this Lease:
(e) any failure on the part of Tenant to perform or comply
with any of the terms of this Lease; and
(f) the non-performance of any of the terms and provisions
of any and all existing and future subleases of the Property to be performed by
Tenant thereunder.
Any amounts payable by Tenant under this Section shall be paid within
ten days after Tenant's liability therefor is determined by litigation or
otherwise. If such amounts are not timely paid, they shall bear a late charge
(to the extent permitted by law) at the Overdue Rate from the date of such
determination to the date paid. Tenant, at its expense, shall contest, resist
and defend any such claim, action or proceeding asserted or instituted against
Landlord, or may compromise or otherwise dispose of the same as Tenant sees fit.
Nothing herein shall be construed as requiring Tenant to indemnify, defend or
hold Landlord harmless against Landlord's own sole, gross negligence or willful
misconduct.
22.2 INDEMNIFICATION BY LANDLORD. Landlord shall indemnify, defend,
save and hold Tenant harmless from and against any and all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) imposed
upon, incurred by or asserted against Tenant arising out of, connected with or
incidental to the
-48-
<PAGE>
sole or gross negligence or willful misconduct of Landlord; provided, however,
that Tenant's right to indemnification as provided herein, shall be subject to
the limitation set forth in Article XXVIII.
22.3 CONTINUING LIABILITY. Tenant's and Landlord's liability under
this Article shall survive any termination of this Lease and shall continue for
the term provided herein or as permitted by the laws of the State, whichever is
longer.
ARTICLE XXIII
ASSIGNMENT AND SUBLETTING
23.1 ASSIGNMENT AND SUBLETTING. Subject to the provisions of
Section 23.3 below and any other express conditions or limitations set forth in
this Lease, Tenant may, without the consent of Landlord, and in addition to the
Existing Leases, (a) sublet up to an aggregate of 25% of the rentable square
footage of the Facility, to concessionaires or other third party users or
operators thereof, provided that (i) any subletting to any party shall not
individually as to any one such subletting, or in the aggregate, materially
diminish the actual or potential Percentage Rent payable under this Lease and
(ii) Tenant, at the request of Landlord, executes a Collateral Assignment of
Subleases and Rents in favor of Landlord in a form reasonably acceptable to
Landlord as security for the obligations of Tenant hereunder, or (b) transfer or
assign its rights hereunder (iii) to a joint venture, partnership or other
entity in which Tenant holds a controlling interest and, in the case of a
partnership, Tenant is the general partner, or (iv) in connection with a public
offering of equity interests in an Affiliate of Tenant, to such Affiliate,
provided that Landlord reasonably determines that such Affiliate has a Tangible
Net Worth at least equal to that of Tenant. Except as otherwise permitted in
the immediately preceding sentence, an assignment or subletting of all or any
portion of the Property shall not be permitted unless the consent of Landlord is
first obtained. Among the factors which Landlord may consider in determining
whether or not to grant its consent to any subletting or assignment are the
following: (s) whether the assignee assumes all obligations of Tenant under the
Lease in a writing in form and content reasonably acceptable to Landlord,
(t) whether such assignee meets the financial covenants applicable to Tenant
hereunder and demonstrates such fact to Landlord's reasonable satisfaction,
(u) if no Event of Default is in effect and continuing hereunder, (v) whether
the assignee or sublessee has a financial condition comparable to the greater of
(i) Tenant's financial condition as of the Commencement Date or (ii) Tenant's
financial condition as of the date of the proposed assignment or subletting and
(w) in the case of a subletting the sublessee shall comply with the provisions
of Section 23.2, (x) in the case of an assignment, (i) the assignee assumes in
writing and agrees to keep and perform all of the terms of this Lease on the
part of Tenant to be kept and performed, (ii) the assignee complies with the
covenants set forth in Section 28 hereof, (iii) the assignment causes no
violation of any other covenants under this Lease by Tenant or the assignee, and
(iv) the assignee becomes jointly and severally liable with Tenant for the
performance thereof, (y) an original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such sublessee or
assignee, as the case may be, in form and substance satisfactory to Landlord, is
delivered promptly to Landlord, and (z) in case of either an assignment or
subletting, Tenant remains primarily liable, as principal rather than as surety,
for the prompt payment of Rent and for the performance and observance of all
covenants and agreements to be performed by Tenant hereunder.
23.2 ATTORNMENT. Tenant shall insert in each sublease permitted
under Section 23.1 provisions reasonably satisfactory to Landlord which provide
for the benefit of Landlord that (a) such sublease is subject and subordinate to
all of the terms and provisions of this Lease and to the rights of Landlord
hereunder, (b) in the event this Lease shall terminate before the expiration of
such sublease, the sublessee thereunder will, at Landlord's option, either
attorn to Landlord and waive any right the
-49-
<PAGE>
sublessee may have to terminate the sublease or surrender possession under such
sublease, and (c) in the event the sublessee receives Notice from Landlord or
Landlord's assignees, if any, stating that Tenant is in default under this
Lease, the sublessee shall thereafter be obligated to pay all rentals accruing
under said sublease directly to the party giving such Notice, or as such party
may otherwise direct. All rentals received from the sublessee by Landlord or
Landlord's assignees, if any, as the case may be, shall be credited against the
amounts owed to Landlord under this Lease.
23.3 SUBLEASE LIMITATION. Anything contained in this Lease to the
contrary notwithstanding, Tenant shall not sublet the Property on any basis such
that the rental to be paid by the sublessee thereunder would be based, in whole
or in part, on either (a) the income or profits derived by the business
activities of the sublessee, or (b) any other formula such that any portion of
the sublease rental would fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto.
ARTICLE XXIV
INFORMATION FROM TENANT
24.1 OFFICER'S CERTIFICATES. At any time and from time to time,
upon not less than 20 days Notice by Landlord, Tenant shall furnish to Landlord
an Officer's Certificate certifying that this Lease is unmodified and in full
force and effect (or that this Lease is in full force and effect as modified and
setting forth the modifications), the date to which the Rent has been paid,
whether there exists any Event of Default or any situation which, with the
giving of notice, passage of time, or both, would constitute an Event of Default
hereunder based upon Tenant's current knowledge, whether Tenant contends that
Landlord is in default hereunder, and if Tenant so contends, the basis for such
contention, the date upon which the Term terminates, and such other information
as Landlord reasonably may request. The failure by Tenant to deliver such
estoppel certificate to Landlord within 20 days of Landlord's request therefor
shall be conclusively deemed to be Tenant's certification (i) that this Lease is
in full force and effect, without modification except as represented by
Landlord; (ii) that there are no uncured defaults in Landlord's performance
hereunder, and (iii) that not more than one month's rent has been paid in
advance. Any such certificate furnished pursuant to this Section 24.1 may be
relied upon by Landlord, any prospective purchaser of the Property, and any
Facility Mortgagee or Landlord Lender.
24.2 FINANCIAL INFORMATION. Tenant shall furnish, the following
statements to Landlord:
(a) within 120 days after the end of each Fiscal Year (i) a
balance sheet and statements of revenues and expenses and changes in retained
earnings and cash flows for Tenant, all certified by independent public
accountants of recognized standing reasonably acceptable to Landlord, such
statements to be prepared in accordance with generally accepted accounting
principles consistently applied, to be for such Fiscal Year and the immediately
preceding Fiscal Year and to be in comparative columnar form and (ii) a schedule
of capital expenditures or reserves therefor for such Fiscal Year;
(b) within 45 days after the end of each of the first three
fiscal quarters of each Fiscal Year, financial statements similar to those
referred to in clause (a) above, but only certified by the principal financial
or other appropriate officer of Tenant as having been prepared in accordance
with generally accepted accounting principles consistently applied (but which
may exclude footnote disclosures), such financial statements to be for the
period from the beginning of such Fiscal Year (and immediately preceding Fiscal
Year) to the end of such quarter (and comparable quarter);
-50-
<PAGE>
(c) concurrent with the statements furnished pursuant to
clauses (a) and (b) above, an Officer's Certificate stating that, after making
due inquiry, no Event of Default has occurred and is continuing under this
Lease, or if such Event of Default has occurred, to such officer's knowledge,
specifying all such Events of Default, the nature of such Events of Default, and
the steps being taken to remedy the same;
(d) within 45 days after the end of each fiscal quarter,
quarterly and year-to-date operating statistics;
(e) as requested in a Notice by Landlord, within 30 days
after the end of each month during the Term or Extended Term, any and all
operational, statistical and/or financial statements, as prepared and
distributed by Tenant in the ordinary course of business;
(f) on the first, second and third anniversary of the
Commencement Date hereof, an Officer's Certificate setting forth the Tenant's
Capital Investment to date;
(g) with respect to the California Facilities, annual and
quarterly financial information in reasonable form, and, as requested by
Landlord in a Notice, such other financial information and operating statistics
in the form prepared for the California Facilities in the ordinary course of
business; and
(h) with reasonable promptness, such other information
respecting the financial condition and affairs of Tenant as Landlord may
reasonably request from time to time.
24.3 LICENSING INFORMATION. Tenant shall promptly furnish to
Landlord complete copies of all surveys, examinations, inspections, compliance
certificates and similar reports of any kind issued to Tenant by any
governmental agencies or authorities having jurisdiction over the licensing of
the operation of the Property which are material to the Property or the
Facility, their ownership or operation.
ARTICLE XXV
APPRAISALS OF THE PROPERTY AND OPTIONS
25.1 APPRAISERS. If at any time it becomes necessary to determine
the Fair Market Value or Fair Market Rental of the Property for any purpose
under this Lease, and the parties are unable to agree thereupon, the party
required or permitted to give Notice of such required determination shall
include in the Notice the name of a person selected to act as appraiser on its
behalf. Within ten days after such Notice, Landlord or Tenant, as the case may
be, shall by Notice to Tenant or Landlord, as the case may be, either agree to
the appointment of the appraiser identified in such initial Notice, in which
case such appraiser shall be the sole appraiser for purposes of determining the
Fair Market Value or Fair Market Rental, as the case may be, or shall appoint a
second person as an appraiser on its behalf. Any appraiser appointed pursuant
to this Section must (i) be a member of the American Institute of Real Estate
Appraisers (or any successor organization thereto), (ii) have at least five
years' experience in the valuation of private hospitals and (iii) be neither an
employee nor former employee of Landlord or Tenant or their Affiliates. The
appraiser(s) thus appointed shall, within 45 days after the date of the Notice
appointing the first appraiser, proceed to appraise the Property to determine
the Fair Market Value or Fair Market Rental thereof (as the case may be) as of
the relevant date (giving effect to the impact, if any, of inflation from the
date of their decision to the relevant date). In the case of two appraisers,
except as provided in Section 25.2, the two appraisals shall be averaged to
determine the Fair Market Value, Fair Market
-51-
<PAGE>
Value Purchase Price or Fair Market Rental, as the case may be. In any event,
the appraised value determined in accordance with this Section shall be final
and binding on Landlord and Tenant.
25.2 METHOD OF APPRAISAL. Any appraisal required or permitted by
the terms of this Lease shall be conducted in a manner consistent with sound
appraisal practice, taking into account the market, cost and business enterprise
(income) approaches. Notwithstanding the provisions of Section 25.1, if the
difference between the appraisal amounts determined by the appraisers appointed
pursuant to Section 25.1 exceeds ten percent of the lesser of such appraisal
amounts, then the two appraisers shall have 20 days to appoint a third
appraiser. If no such appraiser is appointed within such 20 days or within
90 days of the original request for a determination of Fair Market Value or Fair
Market Rental (as the case may be), whichever is earlier, either Landlord or
Tenant may refer the matter to arbitration as set forth in Section 30.14. Any
appraiser appointed by the original appraisers or through arbitration shall be
instructed to determine the Fair Market Value or Fair Market Rental (as the case
may be) within 45 days after the appointment of such appraiser. The
determination of the three appraisers which differs most in the terms of dollar
amount from the determinations of the other two appraisers shall be excluded,
and 50% of the sum of the remaining two determinations shall be the appraised
value, which appraised value shall be final and binding upon Landlord and Tenant
as the Fair Market Value or Fair Market Rental of the Property, as the case may
be. If the lowest and highest appraised values are equidistant in amount from
the middle appraised value, then such middle appraised value shall be the Fair
Market Value or Fair Market Rental (as the case may be). The provisions of this
Article shall be specifically enforceable to the extent such remedy is available
under applicable law, and any determination hereunder shall be final and binding
upon the parties except as otherwise provided by applicable law. Landlord and
Tenant each shall pay the fees and expenses of the appraiser appointed by it,
and each shall pay one-half of the fees and expenses of the third appraiser and
one-half of all other costs and expenses incurred in connection with each
appraisal.
ARTICLE XXVI
OPTIONS TO PURCHASE
26.1 LANDLORD'S OPTION TO PURCHASE TENANT'S PERSONAL PROPERTY;
TRANSFER OF LICENSES. Provided Tenant has not exercised its option pursuant to
Section 26.2 hereof, effective upon not less than ninety (90) days prior notice
given at any time within one hundred eighty (180) days prior to the expiration
of the Term of this Lease, or upon such shorter Notice as shall be reasonable if
this Lease is terminated prior to its expiration date, Landlord shall have the
option to purchase all (but not less than all) of Tenant's Personal Property, if
any, at the expiration or termination of this Lease, for an amount equal to the
then fair market value thereof (as determined by the appraisal process set forth
in Section 25), taking into account and with appropriate price adjustments for,
all equipment leases, conditional sale contracts, UCC-1 financing statements and
other encumbrances to which such Tenant's Personal Property is subject. Upon
the expiration or termination of the Lease and such purchase by Landlord, Tenant
shall use good faith efforts, at Landlord's sole cost and expense, to transfer
and assign to Landlord or its designee, or assist Landlord or its designee in
obtaining, any contracts, licenses, and certificates required for the then
operation of the Facility.
26.2 TENANT'S OPTION TO PURCHASE THE PROPERTY. Provided no Event of
Default specified in Sections 17.1 (a), (e), (f) or (g) hereof has occurred and
is continuing, Tenant shall have the option, exercisable on not less than one
hundred eighty (180) days nor more than three hundred sixty (360) days' prior
Notice, to purchase the Property at the expiration of the Fixed Term, or at the
expiration of any Extended Term, at the greater of (y) the Fair Market Value, or
(z) an amount equal to
-52-
<PAGE>
the sum of (i) $63,250,000 plus (ii) all Capital Additions Costs pertaining to
the Property paid for by Landlord. Tenant shall also have the right, during any
Extended Term, to exercise such option in the event that, during any Extended
Term, Landlord defaults with respect to its agreements, covenants, obligations,
representations or warranties under this Lease and such default is not cured
within any applicable cure period. Upon exercise by Tenant of its option to
purchase the Property, Landlord shall, at the election of Tenant, either convey
the Property as a sale of assets or as a sale of the stock of a corporation
whose sole assets consist of the Property.
If Tenant shall timely and properly exercise the foregoing option, the
sale of the Property shall be consummated through an escrow to be opened with a
mutually acceptable title or escrow company and shall close within ten Business
Days following the expiration of the Fixed Term or Extended Term (unless earlier
exercised due to a Landlord default) in connection with which Tenant exercised
such purchase option. The purchase price of the Property (net of the principal
balance of any Facility Mortgages placed on the Property by Landlord and
expressly assumed by Tenant and the amount of any damages owing by Landlord to
Tenant) shall be deposited into escrow by wire transfer of immediately available
funds at least two business days prior to close of escrow and shall be paid to
Landlord at close of escrow by wire transfer of immediately available funds to
such account as Landlord shall designate. Tenant acknowledges and agrees that
it shall purchase the Property from Landlord "AS IS" and subject to all faults,
defects in title and other matters whatsoever, including, but not limited to,
all matters of record, other than (a) Facility Mortgages not expressly assumed
by Tenant and (b) any other liens, encumbrances, attachments, levies or claims
encumbering the Property to the extent Landlord is responsible for creation of
same, all of which shall be removed of record prior to purchase. Landlord shall
make no warranty or representation except (i) with respect to its corporate
authority and (ii) that it has removed all liens and encumbrances referenced in
clauses (a) and (b) in the preceding sentence. All title insurance premiums and
other closing costs associated with the purchase of the Property by Tenant
pursuant to this Section shall be paid by Tenant.
26.3 SPECIFIC PERFORMANCE OF OPTIONS. The parties acknowledge that:
(i) The irrevocable right and options herein granted
by one party to the other is a moving consideration and a principal cause of
this transaction without which neither party would have entered it.
(ii) The parties hereto agree that damages for breach
of the option provisions hereof are insusceptible of reasonable measure, and
accordingly they agree that specific performance and injunctive relief are
appropriate remedies for nonperformance.
If either party shall fail or refuse to consummate the sale and
transfer of Tenant's Personal Property or the Property, as the case may be,
pursuant to the options granted by Section 26.1 or 26.2 or extend the Term
hereof under Section 19.2, then the aggrieved party may forthwith apply to a
court of competent jurisdiction for a decree of specific performance ordering
the transfer of Tenant's Personal Property or the Property, as the case may be,
upon payment of the applicable purchase price therefor, or the extension of the
Term hereof upon payment of the applicable monthly rent. If Landlord rejects
Tenant's tender of the applicable purchase price or the applicable monthly rent,
as the case may be, then Tenant's tender of such funds into the court registry
shall be deemed equivalent to payment.
-53-
<PAGE>
ARTICLE XXVII
FACILITY MORTGAGES
Without the consent of Tenant, Landlord may, subject to the terms and
conditions set forth below in this Section, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance, security
interest or title retention agreement ("ENCUMBRANCE") upon the Property, or any
portion thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing provided that the principal amount of such
borrowing, financing or refinancing does not exceed 80% of the then Fair Market
Value of the Property. Any such Encumbrance (i) shall contain the right to
prepay (whether or not subject to a prepayment penalty, which penalty shall be
paid by Landlord); (ii) shall provide that it is subject to the rights of Tenant
under this Lease, including the rights of Tenant to acquire the Property
pursuant to the applicable provisions of this Lease; (iii) shall be paid in full
and released and reconveyed in the event Tenant purchases the Property pursuant
to this Lease, unless Tenant elects to assume such Encumbrance; and (iv) shall
not provide for negative amortization or capitalization of interest; PROVIDED,
however, that Tenant agrees that it shall subordinate this Lease to any
mortgage, security interest or deed of trust that may hereafter from time to
time be recorded on Landlord's interest in the Property, and to any and all
advances made or to be made thereunder, and to renewals, replacements and
extensions thereof. Tenant's failure to deliver any reasonable written
subordination document requested by Landlord in accordance with the preceding
sentence within ten Business Days after Notice thereof shall constitute an Event
of Default hereunder. Any such subordination, however, shall be subject to the
condition precedent that the mortgagee under such mortgage or the beneficiary
under such deed of trust enter into a written non-disturbance and attornment
agreement with Tenant, in form and content satisfactory to Tenant, whereunder it
is agreed that in the event of a sale or foreclosure under such mortgage or deed
of trust, the purchaser of the Property (including the mortgagee or beneficiary
under such mortgage or deed of trust), shall acquire or hold the Property
subject to this Lease so long as no Event of Default has occurred and is
continuing hereunder, and so long as Tenant recognizes such purchaser as the
landlord under this Lease and agrees, if requested to do so, to attorn to such
purchaser and, if instructed to do so by such purchaser, to make rental payments
directly to it.
ARTICLE XXVIII
LIMITATION OF LIABILITY
Tenant specifically agrees that neither AHP nor Landlord nor any
officer, shareholder, employee or agent of AHP or Landlord (each of which shall,
for purposes of this Article XXVII, be considered an Affiliate of Landlord)
shall be held to any personal liability, jointly or severally, for any
obligation of, or claims against Landlord, Tenant agreeing to look solely to
Landlord's equity interest in the Property or to Landlord's interests or
interests of subsidiaries of Landlord in other properties leased to Tenant or
Affiliates of Tenant for recovery of any judgment from Landlord, except that
Landlord's obligations under Section 19.1 and Article XXVII, clause (iii) shall
be a general and unlimited liability of Landlord. The provisions contained in
the foregoing sentence are not intended to, and shall not, limit any right that
Tenant might otherwise have to obtain injunctive relief against Landlord or
Landlord's successors in interest, or any action not involving the personal
liability of Landlord (original or successor). In no event shall Landlord
(original or successor) or any Affiliate of Landlord be required to respond in
monetary damages from Landlord's assets other than Landlord's equity interest in
the Property. Furthermore, except as otherwise expressly provided herein, in no
event shall Landlord or any Affiliate of Landlord (original or successor) ever
be liable to Tenant for any indirect or consequential damages suffered by Tenant
from whatever cause. Landlord specifically acknowledges and agrees that
-54-
<PAGE>
neither PHC, nor any officer, shareholder, employee, agent or Affiliate thereof
nor their successors or assigns has guaranteed the payment or performance of any
of Tenant's obligations hereunder.
ARTICLE XXIX
ADDITIONAL COVENANTS OF TENANT
29.1 ADDITIONAL NEGATIVE COVENANTS. Tenant covenants and agrees
with Landlord that, during the Term hereof, Tenant shall not, either directly or
indirectly:
(a) FIXED CHARGE COVERAGE RATIO. Commencing on the first
day of the month which is at least six full months after the effective date
hereof, permit the ratio of: (i) (a) Tenant's Cash Flow to (b) the sum of Total
Rent payable hereunder and principal and interest payments payable by Tenant for
any calendar quarter to be less than 2.0 to 1.0; PROVIDED, HOWEVER, that the
failure of Tenant to comply with the foregoing ratio shall not constitute an
Event of Default if a Security Letter of Credit in the amount of twelve monthly
installments of Base Rent is in effect or is obtained within ten Business Days
after such failure.
(b) SALE OF ASSETS. Other than in the ordinary course of
business, sell, lease, transfer or otherwise dispose of all or any substantial
part of its properties, equipment or assets, except for (x) equipment or
properties which are no longer useful in its business or have been replaced and
(y) during any 12-month period, equipment or property with an aggregate market
value not exceeding $250,000.
(c) CONSOLIDATION OR MERGER. Consolidate with or merge
into any other entity or permit any other corporation to merge into it unless
(i) it is the survivor or (ii) after giving pro forma effect to the merger,
based on its financial statements and the financial statements of the other
entity or entities participating in the merger, for, in each case, its most
recently completed fiscal year or quarter, there is no violation of any of the
covenants of this Lease to be observed or performed by Tenant.
(d) DIVIDENDS. Declare or pay any dividend or make any
distribution or make any redemption with respect to any capital stock of Tenant
unless and until Tenant's obligation to maintain the Security Letter of Credit
as provided in Section 29.3(c) hereof has been extinguished.
(e) TRANSACTIONS WITH AFFILIATES. Commencing as of the
date hereof, unless and until Tenant's obligation to maintain the Security
Letter of Credit as provided in Section 29.3 hereof has been extinguished, sell,
lease, transfer or otherwise dispose of any of its properties or assets
(relating to the Property), or enter into any contract, agreement,
understanding, loan, advance or guaranty with, or for the benefit of, any
Affiliate of Tenant, except (i) in the ordinary course of business and on terms
that are no less favorable than those that could have been obtained in a
comparable transaction with an unrelated person and (ii) involving an aggregate
amount not exceeding $250,000 for all Affiliates of Tenant in any twelve month
period.
(f) ADDITIONAL FINANCIAL COVENANT. Permit the ratio of its
current assets, excluding any encumbered (other than in favor of Landlord) and
legally restricted current assets, to current liabilities (both determined in
accordance with GAAP) to be less than one-to-one; PROVIDED, HOWEVER, that the
failure of Tenant to comply with the foregoing ratio shall not constitute an
Event of
-55-
<PAGE>
Default if a Security Letter of Credit in the amount of twelve monthly
installments of Base Rent is in effect or is obtained within ten Business Days
after such failure.
(g) LIMITATION ON BUSINESS. Change or alter the operations
of the Facility as presently conducted if the effect thereof could reasonably be
anticipated to have a material adverse effect on the business, properties,
condition (financial or otherwise) or operations of the Facility.
(h) NON-COMPLYING USES. With such exceptions as are not
material in the aggregate, use the Property or permit the Property to be used in
violation of any Legal Requirements or Insurance Requirements or in a manner
which will cause the cancellation of any insurance policy covering the Property
or any part thereof or any provider agreement.
29.2 ADDITIONAL AFFIRMATIVE COVENANTS. Tenant covenants and agrees
with Landlord that, during the Term hereof, Tenant shall:
(a) MAINTENANCE OF PROPERTIES AND INTANGIBLE ASSETS.
(i) Maintain its corporate existence in good standing.
(ii) Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence and, with such
exceptions, if any, as are not material in the aggregate, to obtain and, having
obtained, preserve, renew and keep in full force and effect all customary
accreditation, rights, licenses and permits and, with such exceptions, if any,
as are not material in the aggregate, comply with all laws and regulations
applicable to it and conduct and operate the Facility in substantially the
manner, with such changes as may from time to time be considered by management
as necessary or appropriate, in which it is presently conducted and operated,
and at all times, with such exceptions as are not material in the aggregate, to
obtain, maintain, preserve and protect all necessary franchises, provide
agreements, contract rights, trademarks and trade names used or useful in its
operations and preserve all its assets which are used or useful in the conduct
of its operations, and keep the same in working order and condition, and, with
such exceptions as are not material in the aggregate, from time to time to make,
or cause to be made, all necessary repairs, renewals, replacements, betterments
and improvements thereto, so that the operation of the Facility may be properly
and advantageously conducted at all times. Without limiting the generality of
the foregoing, Tenant shall use or cause the Property to be used for the Primary
Intended Use and only for such other uses as may be necessary in connection with
or incidental to said use or as may be agreed to by Landlord in its sole and
absolute determination. With such exceptions as are not material in the
aggregate, no use shall be made or permitted to be made of the Property and no
acts shall be done which violate any Legal Requirements or Insurance
Requirements or which will cause the cancellation of any insurance policy
covering the Property or any part thereof or any provider agreements. Tenant
shall comply in all material respects with all Legal Requirements and all
Insurance Requirements.
(iii) Tenant, immediately upon obtaining knowledge of
facts which are reasonably likely to result in an action by any Federal, state
or local agency (or the staff thereof) to revoke, withdraw or suspend any
permit, license, conditional use permit, variance certificate, certificate of
need, letter of nonreviewability, provider agreement or other governmental
approval, or an action of any other type, which would have a material adverse
effect on the Tenant or the operations of the Facility, shall notify the
Landlord thereof immediately.
-56-
<PAGE>
(b) OBLIGATIONS AND TAXES. With such exceptions as are not
material individually or in the aggregate, none of which exceptions results in
the creation of a lien prohibited by this Lease on any property of Tenant, pay
all indebtedness and obligations in accordance with customary trade practices
and pay and discharge promptly all taxes, assessments and governmental charges
or levies imposed on it or upon its income and profit, or upon any of its
property, real, personal or mixed, or upon any part thereof, before the same
shall become in default, as well as pay before they shall become in default all
lawful claims for labor, material and supplies or otherwise which, if unpaid,
might become a lien or charge upon such Property or any part thereof.
(c) LITIGATION NOTICE. Give Landlord prompt notice of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency which, if adversely determined, would materially
adversely affect the business, operations, properties, assets or condition
(financial or otherwise) of Tenant.
(d) NOTICE OF CERTAIN EVENTS. Give Landlord prompt Notice
of any Event of Default which it has actual knowledge or any event of which it
has actual knowledge which, with the passage of time or the giving of notice, or
both, would constitute an Event of Default.
(e) TENANT'S CAPITAL INVESTMENT. Tenant shall, during the
period commencing on the Commencement Date and ending on February 28, 1999, make
Tenant's Capital Investment in an aggregate amount equal to at least $3,400,000.
(f) PENSION PLANS. Tenant shall notify Landlord within ten
business days of the occurrence of any of the following events ("NOTIFICATION
EVENTS") with respect to Tenant's Plans (as defined in ERISA) and within ten
days of obtaining knowledge of any Notification Event with respect to Plans of
its Affiliates: (i) the termination of a Plan, unless such Plan can be
terminated without material adverse effect on the business, properties or
condition (financial or otherwise) of Tenant; (ii) the failure to make
contributions to any of Tenant's Plans (including any Multiemployer Plans) in a
timely manner and in sufficient amount to comply with the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (iii) the
failure to comply with all material requirements of ERISA and the Code which
relate to such Plans and Multiemployer Plans (as defined by ERISA), where such
failure to comply would have a material adverse effect on the business,
properties or condition (financial or otherwise) of Tenant; (iv) receipt by
Tenant of any notice of the institution of any proceeding or other action which
may directly result in the termination of any Plans or Multiemployer Plans;
(v) a Termination Event or Reportable Event (as defined by ERISA) with respect
to a Plan; and (vi) any event or condition which would cause the lien provided
for under Section 4068 of ERISA to attach to the assets of Tenant. Tenant shall
not fail to make any payments to any Multiemployer Plan that Tenant may be
required to make under any agreement relating to any Multiemployer Plan, ERISA
or any other law pertaining thereto, except for any payments being contested in
good faith in accordance with Article XIII with respect to which Tenant has
established adequate reserves or which, if not made, would not have a material
adverse effect on the business, properties or condition (financial or otherwise)
of Tenant.
29.3 SECURITY FOR THE LEASE.
(a) SECURITY AGREEMENT. On or before the Commencement
Date, Tenant shall execute and deliver to Landlord the Security Agreement.
(b) ADDITIONAL COLLATERAL SECURITY FROM CALIFORNIA
AFFILIATE. Concurrently with its execution hereof, Tenant will cause the
California Affiliate to execute and deliver to Landlord
-57-
<PAGE>
(i) a Security Agreement substantially in the form of the California Facilities
Security Agreement, pertaining to the assisted living facilities owned and
operated by such California Affiliate, (ii) such financing statements and other
instruments as Landlord may reasonably request in order to perfect the security
interests or encumbrances established by such Security Agreement, and (iii) an
opinion of counsel to such California Affiliate, in form reasonably acceptable
to Landlord, to the effect that the California Facilities Security Agreement is
binding on and enforceable against the California Affiliate signatory thereto.
Such Security Agreement will be effective upon delivery thereof to Landlord, and
will be binding upon and enforceable against the California Affiliate. However,
Landlord agrees not to file any of the financing statements associated with such
Security Agreement unless (i) an Event of Default occurs hereunder, (ii) a
default occurs under the California Security Agreement, or (iii) the California
Affiliate challenges or disavows the Security Agreement to which it is a party.
Tenant shall have the right to have the security interests and encumbrances
created by the California Facilities Security Agreement released by Landlord if
Tenant provides equivalent collateral security in substitution therefor, which
shall be determined by Landlord in its discretion, reasonably exercised.
(c) SECURITY LETTER OF CREDIT. As security for the timely
and faithful performance by Tenant of each and every one of Tenant's obligations
under this Lease, Tenant shall, on the Commencement Date and thereafter as
provided herein, deliver and maintain an irrevocable standby letter of credit
which (A) is issued or confirmed by a bank having capital or surplus of at least
$1 billion and whose senior unsecured debt securities are rated "A2" or better
by Moody's or "A" or better by S&P, provided none of such securities is subject
to a "credit watch with negative implications," (B) is payable, in whole or in
part, "at sight" upon Landlord's presentation to the issuing or confirming bank
of a draft or other document in the amount therein stated to be due and (C) is
otherwise in form and substance reasonably satisfactory to Landlord (such
security letter of credit, as the same may be augmented, increased, renewed or
replaced as hereinafter provided, is referred to herein as the "Security Letter
of Credit"), and which contains the undertaking of such bank in the amount of
the sum of twelve monthly installments of Base Rent. If Landlord shall draw any
amount, representing an amount equal to the obligation or obligations of Tenant
hereunder, against the Security Letter of Credit, which it shall be entitled to
do if an Event of Default has occurred and is continuing (and any applicable
cure period, if any, has expired), and apply the proceeds of such drawing
against any obligation or obligations of Tenant hereunder in such amount or
amounts as Landlord, in its sole discretion, shall decide, Tenant shall cause
either (i) an additional Security Letter of Credit to be issued or (ii) the
bank's undertaking under the original Security Letter of Credit to be increased,
in either case, in an amount equal to the amount of such drawing within five
Business Days following Tenant's receipt of notice of such drawing. Tenant
shall (x) renew the Security Letter of Credit at least annually and shall
deliver to Landlord such renewal Security Letter of Credit at least 30 days
prior to the expiration of the previous Security Letter of Credit and
(y) replace the Security Letter of Credit with a new Security Letter of Credit
in favor of any permitted assignee of Landlord's interest under this Lease
(provided Tenant shall have received 30 days' prior notice of such assignment)
and shall deliver to Landlord's assignee such replacement Security Letter of
Credit in time for the scheduled closing of Landlord's assignment of its
interest under this Lease. After the Security Letter of Credit is established,
Tenant may reduce the amount of the Security Letter of Credit to six monthly
installments of Base Rent if, for the period of four consecutive calendar
quarters most recently completed as of the date of determination, Tenant is in
compliance with Sections 29.1(b) and 29.1(g) hereof, as reflected in financial
statements prepared in accordance with generally accepted accounting principals
as set forth in an Officer's Certificate delivered not later than sixty
(60) days after the end of such most recent quarter. Such Officer's Certificate
shall be accompanied by an appropriate cash flow statement and a compilation
report thereon, without material qualification, of Tenant's independent public
accountants. If and after Tenant's obligation to maintain the Security Letter
of Credit has been so reduced, Tenant will be obligated to increase such letter
to twelve monthly installments of
-58-
<PAGE>
Base Rent within ten (10) business days after each time it delivers financial
information to Landlord pursuant to Section 24.2 hereof which indicates that
Tenant has failed to comply with any requirement of Sections 29.1(b) or 29.1(g)
for the most recent period of two consecutive calendar quarters and such
obligation will remain in effect until Tenant has subsequently satisfied the
requirements of Sections 29.1(b) and 29.1(g) for another period of four
consecutive calendar quarters.
Tenant's failure to timely deliver or maintain any Security Letter of
Credit in accordance with this Section 29.3(b) shall constitute an immediate
Event of Default (which shall not require the giving of Notice) and, in such
event, Landlord shall have the right to draw the entire balance of the Security
Letter of Credit, as the case may be, and apply the proceeds against any
obligation or obligations of Tenant hereunder in such amount or amounts as
Landlord, in its sole discretion, shall decide and exercise any other remedies
permitted Landlord hereunder, at law or in equity. Landlord shall not be deemed
to hold any funds drawn under the Security Letter of Credit in trust but shall
not commingle such funds with other assets of Landlord. Tenant shall not be
entitled to any interest with respect to any such funds held by Landlord.
ARTICLE XXX
MISCELLANEOUS
30.1 LANDLORD'S RIGHT TO INSPECT. Landlord and its authorized
representatives may, at any time and from time to time, upon reasonable notice
to Tenant, inspect the Property during usual business hours subject to any
security, health, safety or patient business confidentiality requirements of
Tenant or any governmental agency, or created by any Insurance Requirement or
Legal Requirement relating to the Property.
30.2 NO WAIVER. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
provided hereunder, and no acceptance of full or partial payment of Rent during
the continuance of any such breach, shall constitute a waiver of any such breach
or of any such term. To the extent permitted by applicable law, no waiver of
any breach shall affect or alter this Lease, which shall continue in full force
and effect with respect to any other then existing or subsequent breach.
30.3 REMEDIES CUMULATIVE. To the extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy the exercise or beginning of the exercise by Landlord or Tenant
of any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Landlord or Tenant of any or all of such
other rights, powers and remedies.
30.4 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this
Lease or of all or any portion of or interest in the Property shall be valid or
effective unless agreed to and accepted in writing by Landlord, and no act by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, shall constitute an acceptance of any such surrender by
Tenant.
30.5 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby if the same person, firm, corporation or
other entity acquires, owns or holds, directly or indirectly, this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate, and the fee estate in the Property.
-59-
<PAGE>
30.6 CONVEYANCE BY LANDLORD. Simultaneously with any transfer of
interest in the Property (except pursuant to Article XXVII), Landlord shall
cause to be transferred to the same transferee a similar interest in all
properties owned by Landlord or its Affiliates and leased to Tenant or its
Affiliates. If Landlord or any successor owner of the Property conveys the
Property in accordance with the terms hereof (other than as security for a
debt), and the grantee or transferee of the Property expressly assumes all
obligations of Landlord hereunder arising or accruing from and after the date of
such conveyance or transfer, Landlord or such successor owner, as the case may
be, thereupon shall be released from all liabilities and obligations of Landlord
under this Lease.
30.7 QUIET ENJOYMENT. So long as Tenant pays all Rent as the same
becomes due and fully complies with all of the terms of this Lease and fully
performs its obligations hereunder, Landlord warrants, represents and covenants
that Tenant shall peaceably and quietly have, hold and enjoy the Property for
the Term hereof, free of any claim or other action by Landlord or anyone
claiming by, through or under Landlord, but subject to all liens and
encumbrances of record as of the date hereof or hereafter consented to by
Tenant. Except as otherwise provided in this Lease, no failure by Landlord to
comply with the foregoing covenant shall give Tenant any right to cancel or
terminate this Lease or abate, reduce or make a deduction from or offset against
the Rent or any other sum payable under this Lease, or to fail or refuse to
perform any other obligation of Tenant hereunder. Notwithstanding the
foregoing, Tenant shall have the right, by separate and independent action, to
pursue any claim it may have against Landlord as a result of a breach by
Landlord of the covenant of quiet enjoyment contained in this Section and, in
the event Tenant acquires the Property pursuant to the option granted hereunder,
offset, at Tenant's option, against the purchase price the amount of any damages
owing from Landlord to Tenant.
30.8 NOTICES. All notices, demands, requests, consents, approvals
and other communications ("Notice" or "Notices") hereunder shall be in writing
and delivered by personal delivery, courier or messenger service, express or
overnight mail, or by registered or certified mail, return receipt requested and
postage prepaid, or by facsimile, addressed to the respective parties as
follows:
If to Tenant: Paracelsus Pioneer Valley Hospital, Inc.
c/o Paracelsus Healthcare Corporation
155 North Lake Avenue
Suite 1100
Pasadena, California 91101
Attention: Robert C. Joyner, Esq.
FAX: (818) 304-9588
Phone: (818) 792-8600
with a copy to: Milbank, Tweed, Hadley & McCloy
601 S. Figueroa Street, 30th Floor
Los Angeles, California 90017
Attention: Eric H. Schunk, Esq.
FAX: (213) 629-5063
Phone: (213) 892-4000
-60-
<PAGE>
If to Landlord: AHP of Utah, Inc.
c/o American Health Properties, Inc.
6400 South Fiddler's Green Circle
Suite 1800
Englewood, Colorado 80111
Attention: General Counsel
FAX: (303) 796-9708
Phone: (303) 796-9793
or to such other address as either party may hereafter designate. Personally
delivered Notices sent by courier or messenger service or by express or
overnight mail or by facsimile shall be effective upon receipt, and Notices
given by mail shall be complete at the time of deposit in the U.S. mail system,
but any prescribed period of Notice and any right or duty to do any act or make
any response within any prescribed period or on a date certain after the service
of such Notice given by mail shall be extended five (5) days.
30.9 SURVIVAL OF TERMS; APPLICABLE LAW. Anything contained in this
Lease to the contrary notwithstanding, all claims against, and liabilities of,
Tenant or Landlord arising prior to any date of termination of this Lease shall
survive such termination for two years, except for third party claims based on
alleged tortious actions and omissions of Tenant during the term of this Lease,
which third party claims shall survive the term of this Lease. If any term or
provision of this Lease or any application thereof shall be invalid or
unenforceable for any reason whatsoever, the remainder of this Lease and any
other application of such term or provisions shall not be affected thereby. If
any late charge or any interest rate provided for in any provision of this Lease
based upon a rate in excess of the maximum rate permitted by applicable law,
such charges shall be fixed at the maximum permissible rate. Neither this Lease
nor any provision hereof may be changed, waived, discharged, modified or
terminated except by an instrument in writing and in recordable form, signed by
Landlord and Tenant. Subject to any limitations on assignment contained in this
Lease, all the terms and provisions of this Lease shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. The headings in this Lease are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. THIS LEASE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH, BUT
NOT INCLUDING ITS CONFLICTS OF LAWS RULES.
30.10 EXCULPATION OF LANDLORD'S AND TENANT'S OFFICERS AND AGENTS.
This Lease is made on behalf of Landlord and Tenant by an officer thereof, not
individually, but solely in such officer's capacity in such office as authorized
by the directors of Landlord or Tenant. The obligations of this Lease are not
binding upon, nor shall resort be had to, the private property of any of the
directors, shareholders, members, officers, employees or agents of Landlord or
Tenant personally, but bind only Landlord's and Tenant's property. The
provision contained in the foregoing sentence is not intended to, and shall not,
limit any right that Landlord or Tenant might otherwise have to obtain
injunctive relief against the other party or its successors in interest, or any
action not involving the personal liability of the directors, shareholders,
members, officers, employees or agents of Landlord or Tenant. Except as
otherwise expressly provided herein, in no event shall either party ever be
liable to the other party for any indirect or consequential damages suffered by
a party from whatever cause.
30.11 TRANSFERS FOLLOWING TERMINATION. Upon the expiration or
earlier termination of the Term, Tenant shall use good faith efforts to transfer
to Landlord or Landlord's nominee, or to cooperate with Landlord or Landlord's
nominee in connection with the processing by Landlord or
-61-
<PAGE>
Landlord's nominee of any applications for, all licenses, operating permits and
other governmental authorizations and all contracts (including contracts with
governmental or quasi-governmental entities) which may be necessary for the
operation of the Facility; provided, however, that the costs and expenses of any
such transfer or the processing of any such application shall be paid by
Landlord or Landlord's nominee.
30.12 TENANT'S WAIVERS. Tenant waives all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance and waives all notices of the existence,
creation, or incurring of new or additional obligations, except as expressly
granted herein.
30.13 MEMORANDUM OF LEASE. Landlord and Tenant shall, concurrently
herewith, enter into a short form memorandum of this Lease and all options
contained herein, in form suitable for recording under the laws of the State in
which the Property is located. Tenant shall pay all costs and expenses of
recording such memorandum of this Lease.
30.14 ARBITRATION. Any controversy arising out of, connected with or
incidental to this Lease (except disputes concerning determinations of Fair
Market Value which shall be resolved exclusively as provided in Article XXI)
shall be decided by binding arbitration in Denver, Colorado under the expedited
procedures of the American Arbitration Association, provided that claim is made
within the applicable period of limitation. Depositions to obtain discovery may
be taken upon good cause, upon leave to do so granted by the arbitrator.
30.15 MODIFICATIONS. No provision of this Lease may be amended,
supplemented or otherwise modified except by an agreement in writing signed by
the parties hereto or their respective successors in interest.
30.16 ATTORNEYS' FEES. If either party commences an action against
the other to interpret or enforce any of the terms of this Lease or because of
the breach by the other party of any of the terms hereof, the losing or
defaulting party shall pay to the prevailing party reasonable attorneys' fees,
costs and expenses incurred in connection with the prosecution or defense of
such action.
30.17 TIME IS OF THE ESSENCE. Time is hereby expressly made of the
essence with respect to each and every term and provision of this Lease,
including, but in no way limiting the generality of the foregoing, each and
every time constraint and deadline imposed by the terms of this Lease and the
obligation of the Tenant to exercise the options set forth in this Lease,
including, without limitation, the rights and options set forth in Articles III,
XIX and XXV within the respective time periods set forth herein. The parties
intend that they be strictly bound by the provisions concerning the timing of
performance of their respective obligations contained in this Lease. Further,
if any attempt is made by either party to perform an obligation required by it
to be performed or comply with a provision of this Lease required by it to be
complied with, in any manner, other than in strict compliance with the time
constraints applicable thereto, even if such purported attempt is but one day
late, then such purported attempt at performance or compliance shall be deemed
(i) violative of this "Time is of the Essence" clause, (ii) in contravention of
the intent of the parties hereto, and (iii) null and void and of no force and
effect.
30.18 COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original but when taken together
shall constitute one and the same instrument.
-62-
<PAGE>
IN WITNESS WHEREOF, Tenant and Landlord have executed this Lease as of
the date first above written.
PARACELSUS PIONEER VALLEY HOSPITAL, INC.
By:
-------------------------------------
Robert C. Joyner,
Vice President
AHP OF UTAH, INC.
By:
-------------------------------------
Joseph P. Sullivan
President
-63-
