<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1997
COMMISSION FILE NO 1-13038
CRESCENT REAL ESTATE EQUITIES COMPANY
(formerly known as Crescent Real Estate Equities, Inc.)
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(Exact name of registrant as specified in its charter)
TEXAS 52-1862813
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
777 Main Street, Suite 2100, Fort Worth, Texas 76102
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(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code (817) 877-0477
Number of shares outstanding of each of the registrant's classes of common
shares, as of August 26, 1997
Common Shares, par value $.01 per share: 102,098,059
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the registrant was required to file such report) and (2) has been subject to
such filing requirements for the past ninety (90) days.
YES X NO
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The Form 10-Q of Crescent Real Estate Equities Company (the "Company") for the
quarter ended June 30, 1997 is being amended to update the information
contained in Item 6 to include additional exhibits required pursuant to Item
601 of Regulation S-K.
<PAGE> 3
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
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<S> <C>
3.03 Restated Declaration of Trust of Crescent Real Estate Equities
Company (filed as Exhibit No. 4.01 to the Registrant's
Registration Statement on Form S-3 (File No. 333-21905) (the
"1997 S-3") and incorporated herein by reference)
3.04 Amended and Restated Bylaws of Crescent Real Estate Equities
Company (filed as Exhibit No. 4.02 to the Registrant's
Registration Statement on Form S-3 (File No. 333-23005) and
incorporated herein by reference)
4.02 Registration Rights Agreement, dated February 16, 1996, by and
among the Registrant, Crescent Real Estate Equities Limited
Partnership and certain of the limited partners of Crescent Real
Estate Equities Limited Partnership named therein (filed as
Exhibit 4.02 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "1996 10-K") and
incorporated herein by reference)
4.03 Registration Rights Agreement dated January 20, 1997, by and
among the Registrant, Crescent Real Estate Equities Limited
Partnership and certain of the limited partners of Crescent Real
Estate Equities Limited Partnership named therein (filed as
Exhibit 4.03 to the 1996 10-K and incorporated herein by
reference)
4.04 Form of Registration Agreement relating to the acquisition of
the Greenway Plaza Portfolio (filed as Exhibit 4.01 to the
Registrant's Current Report on Form 8-K dated and filed
September 27,1996 (the "1996 Form 8-K") and incorporated herein
by reference)
4.05 Registration Rights Agreement, dated as of June 26, 1996,
relating to Canyon Ranch-Tucson (filed as Exhibit No. 4.02 to
the 1996 Form 8-K and incorporated herein by reference)
4.06 Form of Common Share Certificate (filed as Exhibit No. 4.03 to
the 1997 S-3 and incorporated herein by reference)
4.07 Purchase Agreement, dated as of August 11, 1997, relating to
registration rights granted to the purchaser named therein (filed
as Exhibit 4.01 to the Registrant's Current Report on Form 8-K
dated August 11, 1997 and filed August 13, 1997 and incorporated
herein by reference)
10.01 First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated May 5,
1994 (filed as Exhibit No. 10.01 to the Registrant's
Registration Statement on Form S-11 (File No. 33-75188) (the
"1994 S-11") and incorporated herein by reference)
10.03 Form of Noncompetition Agreement (Goff) (filed as Exhibit No.
10.03 to the Registrant's Registration Statement on Form S-11
(File No. 33-90226) (the "1995 S-11") and incorporated herein by
reference)
10.04 Form of Noncompetition Agreement (Haddock) (filed as Exhibit No.
10.04 to the 1995 S-11 and incorporated herein by reference)
10.05 Form of Employment Agreement (Goff) (filed as Exhibit No. 10.05
to the 1995 S-11 and incorporated herein by reference)
10.06 Form of Employment Agreement (Haddock) (filed as Exhibit No.
10.06 to the 1995 S-11 and incorporated herein by reference)
10.07 Form of Registration Rights, Lock-Up and Pledge Agreement (filed
as Exhibit No. 10.05 to the 1994 S-11 and incorporated herein by
reference)
10.08 Form of Officers' and Trust Managers' Indemnification Agreement
as entered into between the Registrant and each of its executive
officers and trust managers (filed as Exhibit No. 10.08 to the
1995 S-11 and incorporated herein by reference)
10.09 Crescent Real Estate Equities Company 1994 Stock Incentive Plan
(filed as Exhibit No. 10.07 to the 1994 S-11 and incorporated
herein by reference)
10.10 Crescent Real Estate Equities, Ltd. 401(k) Plan (filed as
Exhibit No. 10.10 to the 1995 S-11 and incorporated herein by
reference)
10.11 Agreement, dated as of August 15, 1996, relating to the
acquisition of the Greenway Plaza Portfolio (filed as Exhibit
No. 10.02 to the 1996 Form 8-K and incorporated herein by
reference)
10.12 Form of Amended and Restated Lease Agreement, dated January 1,
1996, among Crescent Real Estate Equities Limited Partnership,
Mogul Management, LLC and RoseStar Management, LLC, relating
to the Hyatt Regency Beaver Creek (filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "1995 10-K") and incorporated
herein by reference)
10.13 Real Estate Purchase and Sale Agreement, dated as of January 29,
1997, between Crescent Real Estate Equities Limited Partnership,
as purchaser, and Magellan Health Services, Inc., as seller,
relating to the acquisition of approximately 90 behavioral
healthcare facilities (the "Magellan Facilities"), as amended
effective February 28, 1997 and May 29, 1997 (filed herewith)
10.15 First Amended and Restated 1995 Crescent Real Estate Equities
Company Stock Incentive Plan (filed as Exhibit 10.15 to the 1996
10-K and incorporated herein by reference)
10.16 Lease Agreement, dated December 19, 1995 between Crescent Real
Estate Equities Limited Partnership and RoseStar Management,
LLC, relating to the Hyatt Regency Albuquerque (filed as Exhibit
10.16 to the 1995 10-K and incorporated herein by reference)
10.17 Amended and Restated Lease Agreement, dated June 30, 1995
between Crescent Real Estate Equities Limited Partnership and
RoseStar Management, LLC, relating to the Denver Marriott (filed
as Exhibit 10.17 to the 1995 10-K and incorporated herein by
reference)
10.18 Loan Agreement, dated August 24, 1995, including Form of Deed of
Trust, Assignment of Rents, Security Agreement and Fixture
Filing, and Amendment to Loan Agreement, dated October 19, 1995,
between Crescent Real Estate Funding I, L.P. and Nomura Asset
Capital Corporation (filed as Exhibit 10.15 to the 1995 10-K and
incorporated herein by reference)
10.19 Loan Agreement, dated August 24, 1995, including Form of Deed of
Trust, Assignment of Rents, Security Agreement and Fixture
Filing, between Crescent Real Estate Funding II, L.P. and Nomura
Asset Capital Corporation (filed as Exhibit 10.19 to the 1995
10-K and incorporated herein by reference)
10.20 Mortgage Loan Application and Agreement, dated October 3, 1995,
as amended by letter agreements dated October 10, 1995 and
October 30, 1995, between Crescent Real Estate Equities Limited
Partnership and CIGNA Investments, Inc. and Secured Promissory
Note dated December 11, 1995 (filed as Exhibit 10.20 to the 1995
10-K and incorporated herein by reference)
10.22 1995 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan (filed as Exhibit No. 99.01 to the Registrant's
Registration Statement on Form S-8 (File No. 333-3452) and
incorporated herein by reference)
10.23 1996 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan (filed as Exhibit No. 10.01 to the 1996 Form 8-K
and incorporated herein by reference)
10.24 Lease Agreement, dated July 26, 1996, between Canyon Ranch, Inc.
and Canyon Ranch Leasing, L.L.C., as assigned by Canyon Ranch,
Inc. to Crescent Real Estate Equities Limited Partnership
pursuant to the Assignment and Assumption of Master Lease, dated
July 26, 1996 (filed herewith)
10.25 Lease Agreement, dated November 18, 1996, between Crescent Real
Estate Equities Limited Partnership and Wine Country Hotel, LLC.
(filed as Exhibit 10.25 to the 1996 10-K and incorporated herein
by reference)
10.26 Lease Agreement, dated December 11, 1996, between Canyon
Ranch-Bellefontaine Associates, L.P., and Vintage Resorts, LLC
as assigned by Canyon Ranch-Bellefontaine Associates, L.P. to
Crescent Real Estate Funding VI, L.P. pursuant to the
Assignment and Assumption of Master Lease, dated December 11,
1996 (filed herewith)
10.27 Master Lease Agreement, dated June 16, 1997, between Crescent
Real Estate Funding VII, L.P. and Charter Behavioral Health
Systems, LLC and its subsidiaries, relating to the Magellan
Facilities (filed herewith)
10.28 Second Amended and Restated Revolving Credit Agreement, dated
June 6, 1997 among Crescent Real Estate Equties Limited
Partnership, BankBoston, N.A. and the other banks named therein
(filed herewith)
27.01 Financial Data Schedule (previously filed)
</TABLE>
25
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(b) Reports on Form 8-K.
The Company's Current Report on Form 8K/A dated January 29,
1997, as amended on April 9, 1997 and April 24, 1997,
describing the proposed Carter-Crowley transaction, the
proposed Magellan transaction, and the proposed spin-off of
Crescent Affiliate, and certain preliminary financial
information relating to certain properties included in the
Carter-Crowley transaction.
The Company's Current Report on Form 8K/A dated January 29,
1997, as amended on May 23, 1997, describing the completion
of the Carter-Crowley portfolio acquisition, the proposed
Magellan transaction, and the proposed spin-off of Crescent
Affiliate, and certain financial information and pro forma
financial information relating to the Carter-Crowley
transaction.
The Company's Current Report on Form 8K dated April 9, 1997
and filed April 10, 1997, containing certain pro forma
financial information filed in conjunction with the Company's
preliminary prospectus supplement dated April 9, 1997, for
the offering of 17,500,000 common shares, as amended April
24, 1997 to reflect the increase in the offering to 21,000,000
common shares.
The Company's Current Report on Form 8K dated April 22, 1997,
and filed April 24, 1997, for the purpose of filing certain
exhibits in connection with the Company's public offering of
21,000,000 common shares.
The Company's Current Report on Form 8K dated May 8, 1997,
and filed May 12, 1997, for the purpose of filing certain
exhibits in connection with the Company's additional offering
of 500,000 common shares.
26
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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 thereunto duly authorized.
CRESCENT REAL ESTATE EQUITIES COMPANY
/s/ Gerald W. Haddock
--------------------------------------
Date: August 28, 1997 Gerald W. Haddock, President and Chief
Executive Officer
/s/ Dallas E. Lucas
--------------------------------------
Date: August 28, 1997 Dallas E. Lucas, Senior Vice
President, Chief Financial Officer
and Chief Accounting Officer
27
<PAGE> 6
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
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<S> <C>
3.03 Restated Declaration of Trust of Crescent Real Estate Equities
Company (filed as Exhibit No. 4.01 to the Registrant's
Registration Statement on Form S-3 (File No. 333-21905) (the
"1997 S-3") and incorporated herein by reference)
3.04 Amended and Restated Bylaws of Crescent Real Estate Equities
Company (filed as Exhibit No. 4.02 to the Registrant's
Registration Statement on Form S-3 (File No. 333-23005) and
incorporated herein by reference)
4.02 Registration Rights Agreement, dated February 16, 1996, by and
among the Registrant, Crescent Real Estate Equities Limited
Partnership and certain of the limited partners of Crescent Real
Estate Equities Limited Partnership named therein (filed as
Exhibit 4.02 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "1996 10-K") and
incorporated herein by reference)
4.03 Registration Rights Agreement dated January 20, 1997, by and
among the Registrant, Crescent Real Estate Equities Limited
Partnership and certain of the limited partners of Crescent Real
Estate Equities Limited Partnership named therein (filed as
Exhibit 4.03 to the 1996 10-K and incorporated herein by
reference)
4.04 Form of Registration Agreement relating to the acquisition of
the Greenway Plaza Portfolio (filed as Exhibit 4.01 to the
Registrant's Current Report on Form 8-K dated and filed
September 27,1996 (the "1996 Form 8-K") and incorporated herein
by reference)
4.05 Registration Rights Agreement, dated as of June 26, 1996,
relating to Canyon Ranch-Tucson (filed as Exhibit No. 4.02 to
the 1996 Form 8-K and incorporated herein by reference)
4.06 Form of Common Share Certificate (filed as Exhibit No. 4.03 to
the 1997 S-3 and incorporated herein by reference)
4.07 Purchase Agreement, dated as of August 11, 1997, relating to
registration rights granted to the purchaser named therein (filed
as Exhibit 4.01 to the Registrant's Current Report on Form 8-K
dated August 11, 1997 and filed August 13, 1997 and incorporated
herein by reference)
10.01 First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated May 5,
1994 (filed as Exhibit No. 10.01 to the Registrant's
Registration Statement on Form S-11 (File No. 33-75188) (the
"1994 S-11") and incorporated herein by reference)
10.03 Form of Noncompetition Agreement (Goff) (filed as Exhibit No.
10.03 to the Registrant's Registration Statement on Form S-11
(File No. 33-90226) (the "1995 S-11") and incorporated herein by
reference)
10.04 Form of Noncompetition Agreement (Haddock) (filed as Exhibit No.
10.04 to the 1995 S-11 and incorporated herein by reference)
10.05 Form of Employment Agreement (Goff) (filed as Exhibit No. 10.05
to the 1995 S-11 and incorporated herein by reference)
10.06 Form of Employment Agreement (Haddock) (filed as Exhibit No.
10.06 to the 1995 S-11 and incorporated herein by reference)
10.07 Form of Registration Rights, Lock-Up and Pledge Agreement (filed
as Exhibit No. 10.05 to the 1994 S-11 and incorporated herein by
reference)
10.08 Form of Officers' and Trust Managers' Indemnification Agreement
as entered into between the Registrant and each of its executive
officers and trust managers (filed as Exhibit No. 10.08 to the
1995 S-11 and incorporated herein by reference)
10.09 Crescent Real Estate Equities Company 1994 Stock Incentive Plan
(filed as Exhibit No. 10.07 to the 1994 S-11 and incorporated
herein by reference)
10.10 Crescent Real Estate Equities, Ltd. 401(k) Plan (filed as
Exhibit No. 10.10 to the 1995 S-11 and incorporated herein by
reference)
10.11 Agreement, dated as of August 15, 1996, relating to the
acquisition of the Greenway Plaza Portfolio (filed as Exhibit
No. 10.02 to the 1996 Form 8-K and incorporated herein by
reference)
10.12 Form of Amended and Restated Lease Agreement, dated January 1,
1996, among Crescent Real Estate Equities Limited Partnership,
Mogul Management, LLC and RoseStar Management, LLC, relating
to the Hyatt Regency Beaver Creek (filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "1995 10-K") and incorporated
herein by reference)
10.13 Real Estate Purchase and Sale Agreement, dated as of January 29,
1997, between Crescent Real Estate Equities Limited Partnership,
as purchaser, and Magellan Health Services, Inc., as seller,
relating to the acquisition of approximately 90 behavioral
healthcare facilities (the "Magellan Facilities"), as amended
effective February 28, 1997 and May 29, 1997, (filed herewith)
10.15 First Amended and Restated 1995 Crescent Real Estate Equities
Company Stock Incentive Plan (filed as Exhibit 10.15 to the 1996
10-K and incorporated herein by reference)
10.16 Lease Agreement, dated December 19, 1995 between Crescent Real
Estate Equities Limited Partnership and RoseStar Management,
LLC, relating to the Hyatt Regency Albuquerque (filed as Exhibit
10.16 to the 1995 10-K and incorporated herein by reference)
10.17 Amended and Restated Lease Agreement, dated June 30, 1995
between Crescent Real Estate Equities Limited Partnership and
RoseStar Management, LLC, relating to the Denver Marriott (filed
as Exhibit 10.17 to the 1995 10-K and incorporated herein by
reference)
10.18 Loan Agreement, dated August 24, 1995, including Form of Deed of
Trust, Assignment of Rents, Security Agreement and Fixture
Filing, and Amendment to Loan Agreement, dated October 19, 1995,
between Crescent Real Estate Funding I, L.P. and Nomura Asset
Capital Corporation (filed as Exhibit 10.15 to the 1995 10-K and
incorporated herein by reference)
10.19 Loan Agreement, dated August 24, 1995, including Form of Deed of
Trust, Assignment of Rents, Security Agreement and Fixture
Filing, between Crescent Real Estate Funding II, L.P. and Nomura
Asset Capital Corporation (filed as Exhibit 10.19 to the 1995
10-K and incorporated herein by reference)
10.20 Mortgage Loan Application and Agreement, dated October 3, 1995,
as amended by letter agreements dated October 10, 1995 and
October 30, 1995, between Crescent Real Estate Equities Limited
Partnership and CIGNA Investments, Inc. and Secured Promissory
Note dated December 11, 1995 (filed as Exhibit 10.20 to the 1995
10-K and incorporated herein by reference)
10.22 1995 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan (filed as Exhibit No. 99.01 to the Registrant's
Registration Statement on Form S-8 (File No. 333-3452) and
incorporated herein by reference)
10.23 1996 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan (filed as Exhibit No. 10.01 to the 1996 Form 8-K
and incorporated herein by reference)
10.24 Lease Agreement, dated July 26, 1996, between Canyon Ranch, Inc.
and Canyon Ranch Leasing, L.L.C., as assigned by Canyon Ranch,
Inc. to Crescent Real Estate Equities Limited Partnership
pursuant to the Assignment and Assumption of Master Lease, dated
July 26, 1996 (filed herewith)
10.25 Lease Agreement, dated November 18, 1996, between Crescent Real
Estate Equities Limited Partnership and Wine Country Hotel, LLC.
(filed as Exhibit 10.25 to the 1996 10-K and incorporated herein
by reference)
10.26 Lease Agreement, dated December 11, 1996, between Canyon
Ranch-Bellefontaine Associates, L.P., as assigned by Canyon
Ranch-Bellefontaine Associates, L.P. to Crescent Real Estate
Funding VI, L.P. pursuant to the Assignment and Assumption of
Master Lease, dated December 11, 1996, and Vintage Resorts,
LLC (filed herewith)
10.27 Master Lease Agreement, dated June 16, 1997, between Crescent
Real Estate Funding VII, L.P. and Charter Behavioral Health
Systems, LLC and its subsidiaries, relating to the Magellan
Facilities (filed herewith)
10.28 Second Amended and Restated Revolving Credit Agreement
27.01 Financial Data Schedule (previously filed)
</TABLE>
<PAGE> 1
EXHIBIT 10.13
REAL ESTATE PURCHASE AND SALE AGREEMENT
Seller: MAGELLAN HEALTH SERVICES, INC., a Delaware
corporation, and its wholly owned
subsidiaries listed on Exhibit A attached
hereto
Purchaser: CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited
partnership
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C> <C>
1. Purchase and Sale of the Facilities.......................... 2
2. Consideration................................................ 2
3. Documents to be Provided by the Seller....................... 3
4. Access to Facilities, Records and Personnel.................. 6
5. Title........................................................ 7
6. Representations and Warranties............................... 9
7. Covenants.................................................... 16
8. Conditions................................................... 20
9. Damage, Destruction and Condemnation......................... 24
10. Closing...................................................... 24
11. Indemnifications............................................. 28
12. Remedies..................................................... 29
13. Brokers...................................................... 30
14. Changes in the Portfolio..................................... 31
15. Miscellaneous................................................ 33
</TABLE>
Exhibits
A -- List of Subsidiaries Selling Facilities
B -- Facility Descriptions and Names of Subsidiaries Owning Each Facility
C -- Form of Master Lease Agreement
D -- Schedule of Industrial Revenue Bonds and Encumbered Facilities
E -- List of Tenants under Leases at Each Facility
F -- Insurance Information
G -- Form of Subordination Agreement
H -- Form of Assignment of Leases
I -- Form of Blanket Bill of Sale
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Schedules
Schedule 1.1
Schedule 2.1 (to be attached after execution and not later than 30 days prior
to Closing)
Schedule 6.1(b)
Schedule 6.1(d)
Schedule 6.1(f)
Schedule 6.1(g)
Schedule 6.1(j)
Schedule 6.1(p)
Schedule 6.1(r)
Schedule 6.1(w)
<PAGE> 4
REAL ESTATE PURCHASE AND SALE AGREEMENT
This REAL ESTATE PURCHASE AND SALE AGREEMENT (this "Agreement") is made
and entered into as of January 29, 1997, by and between MAGELLAN HEALTH
SERVICES, INC., a Delaware corporation ("Magellan" or the "Seller") and
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Purchaser").
R E C I T A L S:
A. In connection with the transactions contemplated by this Agreement,
Magellan and the Purchaser have entered into (i) that certain Contribution
Agreement of even date herewith (the "OPCO CONTRIBUTION AGREEMENT") and (ii)
that certain Warrant Purchase Agreement of even date herewith (the "WARRANT
PURCHASE AGREEMENT"). Magellan and the Purchaser have also agreed that,
following the execution and pursuant to the terms of the foregoing agreements,
they will cause certain other agreements to be executed, including, without
limitation, that certain Operating Agreement of Charter Behavioral Health
Systems, LLC ("OpCo"), between Magellan and a designee of the Purchaser (the
"OPERATING AGREEMENT"), that certain Master Franchise Agreement between
Magellan and OpCo (the "MASTER FRANCHISE AGREEMENT") and certain additional
Franchise Agreements between Magellan and certain subsidiaries of OpCo (the
"SUBSIDIARY FRANCHISE AGREEMENTS, and collectively with the Master Franchise
Agreement, the "FRANCHISE AGREEMENT"), that certain Master Lease Agreement
between the Purchaser and OpCo (the "FACILITIES LEASE"), and that certain
Subordination Agreement by and among Magellan, the Purchaser and OpCo (the
"SUBORDINATION AGREEMENT") (this Agreement, the OpCo Contribution Agreement,
the Warrant Purchase Agreement, the Operating Agreement, the Franchise
Agreement, the Facilities Lease and the Subordination Agreement are referred to
collectively as the "TRANSACTION DOCUMENTS," and all of the transactions
contemplated thereby are referred to collectively as the "TRANSACTIONS").
B. The wholly owned (directly or indirectly) subsidiary corporations or
limited liability companies listed on Exhibit A attached hereto (each,
individually, a "Subco" and, collectively, the "Subcos") are the owners of the
real property and improvements thereon described on Exhibit B attached hereto
(each individually, a "FACILITY" and collectively, the "FACILITIES").
C. The Purchaser desires to acquire the Facilities, and Magellan, as
the sole shareholder of the sole shareholder of the Subcos, desires to cause
the Subcos to sell the Facilities to the Purchaser, all upon the terms and
conditions hereinafter set forth.
D. Immediately after the Purchaser acquires the Facilities, and as one
of the Transactions, the Purchaser intends to lease the Facilities to OpCo
pursuant to the Facilities Lease, the form of which is attached hereto as
Exhibit C.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the receipt
and sufficiency of which are hereby acknowledged, and in further consideration
of the mutual covenants and conditions set forth herein, the parties hereto
agree as follows:
<PAGE> 5
1 Purchase and Sale of the Facilities.
1.1 Real and Personal Property Included. Upon the terms and
conditions hereinafter set forth, Magellan agrees to cause each Subco to sell
and convey to the Purchaser the Facility listed beside such Subco's name on
Exhibit B, and the Purchaser agrees to purchase or cause to be purchased by a
permitted designee or assignee of the Purchaser from the Subcos, the
Facilities. As used herein, the term "FACILITIES" shall mean, collectively,
the following: (a) (i) those certain parcels of real property described in
Exhibit B, and any and all improvements thereon (whether now or hereafter
constructed), and all fixtures attached thereto, (ii) all right, title and
interest of Magellan and the Subcos to any mineral, oil and gas rights, water
rights, sewer rights and other utility rights allocated to said properties,
(iii) all appurtenances, and other property interests belonging or appurtenant
to said properties, and (iv) all right, title and interest of Magellan and the
Subcos in and to any streets and ways, public and private, serving said
properties (collectively, the "REAL PROPERTY"); together with (b) all
furniture, fixtures and equipment owned by Magellan or the Subcos and located
at or used in connection with the operation of the Real Property as acute care
psychiatric hospitals, site plans, surveys, plans and specifications, and floor
plans which relate to the Real Property, all right, title and interest of
Magellan and the Subcos in all transferable warranties, guaranties, bonds and
development rights related to any of the foregoing, and, subject to applicable
law and regulations, all transferable licenses, permits, authorizations,
approvals, certificates of occupancy and other consents and regulatory
approvals necessary for the current ownership, occupancy, construction (if any
is on-going) and leasing of the Real Property; and together with (c) all
furniture, fixtures and equipment and certain other assets generally described
on Schedule 1.1 attached hereto and owned by the entities listed on Schedule
1.1 (collectively, the "PERSONAL PROPERTY").
2 Consideration.
2.1 Purchase Price. The total purchase price to be paid for
the Facilities and the warrants to be issued pursuant to the Warrant Purchase
Agreement (the "WARRANTS") shall be Three Hundred Ninety-Five Million and
No/100 Dollars ($395,000,000), which shall be payable in accordance with this
Section 2. Notwithstanding the foregoing, if the Purchaser assumes at Closing
any or all of the Industrial Revenue Bonds as hereinafter described, the
purchase price set forth in the first sentence of this Section 2.1 shall be
reduced by the outstanding principal amount and any accrued and unpaid interest
and other accrued and outstanding costs and fees of such assumed Industrial
Revenue Bonds, excluding assumption fees and other costs relating to the
assumption of such assumed Industrial Revenue Bonds that the Purchaser is
required to pay pursuant to Section 10.4. The term "PURCHASE PRICE," as used
in this Agreement, shall mean the purchase price set forth in the first
sentence of this Section 2.1, as adjusted pursuant to the second sentence of
this Section 2.1. The Seller and the Purchaser agree that they shall use
commercially reasonable best efforts to agree, not later than thirty (30) days
prior to Closing, upon an allocation of the total purchase price set forth in
the first sentence of this Section 2.1 among (a) the Warrants and (b) the
Facilities, and the portion allocated to the Facilities shall be further
allocated among (i) the land comprising a part of the Real Property, (ii) the
land improvements (other than buildings) comprising a part of the Real
-2-
<PAGE> 6
Property (such as tennis courts, parking lots and swimming pools), (iii) the
buildings comprising a part of the Real Property, and (iv) the Personal
Property. Such agreed upon allocations shall be attached to this Agreement as
Schedule 2.1. The Seller shall initially propose an allocation to the
Purchaser, and the portion of the total purchase price allocated by the Seller
to the Personal Property shall be supported by an independent appraisal
obtained by the Seller and the Purchaser, the cost of which shall be shared
equally.
2.2 Allocation Among Facilities. The portion of the purchase price
allocable to the Facilities set forth in the first sentence of Section 2.1
shall generally be allocated among the Facilities on a pro rata basis based on
the relative net cash flow from operations of each Facility (excluding capital
expenditures and proceeds from borrowings and taking into account any other
factors mutually agreed upon by the parties) for the 1995 and 1996 full fiscal
years, which allocations shall be agreed upon by the parties not later than
thirty (30) days prior to Closing. The cash portion of such purchase price
allocable to any Facility encumbered by an Industrial Revenue Bond assumed by
the Purchaser shall be reduced by the outstanding principal amount and any
accrued and unpaid interest and other accrued and outstanding costs and fees of
such assumed Industrial Revenue Bond, excluding assumption fees and other costs
relating to the assumption of such assumed Industrial Revenue Bond that the
Purchaser is required to pay pursuant to Section 10.4.
2.3 Payment. At the Closing, the Purchaser shall pay or cause to be
paid to or at the direction of the Subcos, through a closing escrow established
with the Title Company (as defined in Section 8.1(b)), the Purchase Price, as
adjusted to reflect the closing adjustments and prorations provided for in this
Agreement, which adjusted balance shall be payable by bank wire transfer
pursuant to instructions given by the Seller to the Title Company not later
than two (2) business days prior to Closing.
2.4 Independent Contract Consideration. Within three (3) business
days after the execution of this Agreement by both parties hereto, the
Purchaser will deliver to Magellan the amount of One Hundred and No/100 Dollars
($100.00) (the "INDEPENDENT CONTRACT CONSIDERATION") which amount has been
bargained for and agreed to as consideration for Magellan's execution and
delivery of this Agreement. The Independent Contract Consideration is in
addition to and independent of all other consideration provided in this
Agreement, and is nonrefundable in all events.
3 Documents to be Provided by the Seller. As soon as reasonably
practicable but in any event within thirty (30) days after the date hereof
(except as otherwise provided in this Section 3 to the contrary, including
Sections 3.12 and 3.17), Magellan shall deliver to, cause to be delivered to,
or make available for review and inspection by the Purchaser at Magellan's
offices in Atlanta, Georgia, or Macon, Georgia, originals or true, complete and
accurate copies of all of the following items which affect or relate to any of
the Facilities ("SELLER'S DELIVERIES"), to the extent such items currently
exist and are in Magellan's or any of the Subco's possession or are readily
obtainable without material cost from third parties:
3.1 Tax Statements. The most recent real estate and personal
property tax bills for each of the Facilities, together with copies of all tax
assessment notices for the year
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immediately preceding the date hereof and evidence of payment of all taxes
currently due or past due.
3.2 Insurance Policies. All existing liability, property, rental
value and other insurance policies pertaining to the Facilities, and paid
receipts therefor.
3.3 Warranties. All material unexpired warranties and guaranties
covering the Personal Property and the roofs, elevators, heating and air
conditioning systems and any other components of the Real Property and a list
and description of any material third party bonds, warranties and guaranties
which will be in effect after Closing with respect to the Facilities.
3.4 Leases. All leases or occupancy agreements of any portion of the
Facilities (collectively, the "LEASES," and any such Lease with annual rent
payable thereunder in excess of $100,000 being hereinafter referred to as a
"MATERIAL LEASE"), together with copies of all occupancy inspection reports,
rental deposit agreements, lease guaranties, estoppels and subordination,
nondisturbance and attornment agreements relating to the Material Leases, and
all amendments and correspondence with respect to the Material Leases.
3.5 Rent Roll. A current "RENT ROLL" (herein so called), certified
by Magellan and containing (i) a complete list and description of the Material
Leases at each Facility, (ii) rental rate and deposits paid by each tenant
under each Material Lease, (iii) the term of each Material Lease, and (iv)
notations indicating whether, to the Seller's knowledge, the tenant under any
such Material Lease is in default.
3.6 Industrial Revenue Bonds. All documents evidencing, securing or
otherwise relating to the Industrial Revenue Bonds.
3.7 Plans, Specifications and Reports. The most recent plans,
specifications, drawings, surveys, title insurance policies or reports, and
engineering, inspection and structural reports relating to the Facilities
(including any current elevator inspections and any reports or audits with
respect to compliance of the Facilities with the Americans with Disabilities
Act (the "ADA")), and all soil reports and environmental reports and audits
relating to the Facilities prepared within the last ten (10) years, that were
prepared by or for the Seller or are in the Seller's possession or are
reasonably obtainable by the Seller from third parties who prepared such
reports, together with any plan in existence for compliance with ADA and
similar state or local laws or any Environmental Laws (as defined below).
3.8 Development Conditions. Copies of all unrecorded land use
restrictions, proffers and other conditions limiting development of any of the
Facilities, if any.
3.9 Permits. All licenses, permits, certificates of occupancy,
authorizations, consents, unrecorded easements and unrecorded rights of way,
and other approvals or instruments required in connection with any current
construction, occupancy, ownership or leasing of the Facilities (the
"PERMITS"), and all currently pending applications or requests submitted in
connection therewith.
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3.10 JCAHO Accreditation. The most recent survey reports on each of
the Facilities by the Joint Commission on the Accreditation of Healthcare
Organizations (the "JCAHO").
3.11 Personal Property Inventory. A complete, itemized and detailed
inventory of the Personal Property.
3.12 Operating Reports. Monthly (from October 1996 until the latest
available month end prior to Closing) unaudited statements of operation
relating to the operations of the Facilities prepared in the ordinary course of
business (the "OPERATING REPORTS"), which shall be delivered to the Purchaser
as soon as practical after such reports are prepared, and the Seller's 1997
budgets for each of the Facilities prepared in the ordinary course of business.
3.13 Capital Expenditures Information. A detailed list of all
material capitalized expenditures made at each of the Facilities since October
1, 1993. For purposes hereof, a material capitalized expenditure shall mean
any single capitalized expenditure in excess of $100,000.
3.14 Financial Statements. Magellan's audited financial statements
for the fiscal year ended September 30, 1996 (the "1996 FINANCIALS").
3.15 Disputes. Summaries of any and all material outstanding
litigation and material outstanding or asserted written claims by any third
party which concern or otherwise affect the Facilities or the business operated
therein received by the Seller during its ownership of the Facilities, together
with copies of any and all written notices of potential material litigation,
written notices from any governmental or quasi-governmental body alleging a
failure to comply with applicable Laws (as hereinafter defined in Section
6.1(g)), audit response letters prepared during the last five (5) years, and
any internal lists of claims or anticipated material litigation related to the
Facilities prepared by or on behalf of the Seller. For purposes of this
Section, "material" shall mean those claims and litigations involving amounts
or alleged liabilities in excess of $1,000,000.
3.16 Philadelphia Facility. All construction contracts, architects'
agreements, engineering reports, building permits, plans, specifications, and
other material agreements, information and materials relating to the
construction of the planned improvements currently underway at the Facility
located in Philadelphia, Pennsylvania (the "PHILADELPHIA FACILITY").
3.17 Other. Such other documents and materials as are reasonably
requested by the Purchaser (which documents and materials shall be delivered to
the Purchaser as soon as practical following such request), except for (i)
patient medical records, (ii) medical and professional staff records that are
either privileged or protected from discovery by a state law relating to
confidentiality of peer review activities, and (iii) all other records relating
to the provision of health care services that are made privileged, confidential
or protected from discovery under applicable state law.
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4 Access to Facilities, Records, and Personnel. The Purchaser
shall have the right, at its sole option, to undertake, at its cost and expense
except as otherwise provided in Section 10.4(a), a review and examination of
all aspects of the Facilities, including without limitation: (a) the physical
condition and state of repair of the Facilities; (b) the existence, now or at
any time in the past, of any Hazardous Substances (as defined below) at or in
the Facilities, and the extent of compliance of the Facilities with all
applicable Environmental Laws (as defined below); (c) the terms and conditions
of all Contracts, agreements, warranties, Leases and other materials relating
to the condition, occupancy, operation, management or use of the Facilities;
(d) books and records relating to the operation of the Facilities, and (e) such
other matters relating to the Facilities as the Purchaser deems appropriate.
Upon reasonable advance notice from the Purchaser, the Seller shall make all of
its books and records pertaining to the Facilities available during normal
business hours for review and/or audit by the Purchaser and its agents and
consultants, including, without limitation, correspondence and communications
with regulatory authorities, and shall promptly furnish to the Purchaser all
information pertaining to the Facilities reasonably requested by the Purchaser
or its representatives. In addition, the Purchaser and its agents and
consultants shall have the right to enter upon the Facilities to conduct such
review, inspections and tests as it deems appropriate (including taking soil
samples), provided that the Purchaser (i) shall exercise reasonable efforts to
coordinate such review, inspections and tests with Magellan and to minimize
disruption to Magellan's operations, (ii) shall repair any damage that may be
caused by such inspections and tests, (iii) shall not interfere with the
delivery of patient care, and (iv) shall not review any documents described in
the exceptions clause of Section 3.17. Notwithstanding anything in this
Agreement to the contrary, (x) the Purchaser will not do, cause or direct to be
done any subsurface testing or boring, or any testing of subsurface water, or
any coring, boring or other intrusive testing, or any other inspection of or
entry upon any of the Facilities, without giving Magellan at least two (2)
business days' prior notice thereof and an opportunity to have Magellan's
representative be present to accompany and observe all such inspections and
entries; (y) the Purchaser will not enter, or cause or direct any entry, upon
any premises which are leased to a tenant without giving Magellan at least two
(2) business days' prior notice thereof and an opportunity to have Magellan's
representative be present to accompany and observe all such inspections and
entries, and in carrying out any such entry the Purchaser will use its
commercially reasonable best efforts to minimize interference with the business
of any such tenant; and (z) the Purchaser hereby indemnifies the Seller, and
agrees to defend and hold the Seller harmless, from and against any and all
claims, losses, damages and liabilities that may be asserted against or
incurred by the Seller for or in connection with any injuries or damage to any
persons or property which directly or indirectly are caused by or result from
any entry, inspection, testing or other action done or caused or directed to be
done by the Purchaser or its representatives or contractors. The Purchaser
agrees to cause all parties entering any Facility at the Purchaser's instance
to maintain customary and appropriate insurance to cover all risks of the types
described in clause (z) above, and, upon the Seller's request, to deliver to
the Seller evidence establishing to the Seller's reasonable satisfaction that
adequate and appropriate insurance to cover risks of the types described in the
preceding clause (z) is being maintained. Notwithstanding anything in this
Agreement to the contrary, the Purchaser's obligation to repair such damage and
the Purchaser's indemnity of the Seller in this Section 4 shall survive any
termination of this Agreement. The Purchaser also shall have the right to
communicate with governmental officials and other regulatory authorities having
jurisdiction over the Facilities
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with respect to issues arising out of the ownership, use, leasing, and
condition of the Facilities, and with all architects and contractors who have
provided services for the benefit of the Facilities, provided, however, that
the Purchaser shall not have the right to communicate with governmental
officials and other regulatory authorities having jurisdiction over the
business operations at the Facilities with regard to regulatory issues arising
out of the operation of the Facilities as acute care psychiatric hospitals (or
such other business operations for which any of the Facilities is currently
used) without the prior written consent of Magellan, which consent may be
granted or withheld in Magellan's sole and absolute discretion. Magellan
agrees to provide the Purchaser with access to its regulatory legal counsel and
shall instruct such counsel to cooperate with the Purchaser in answering the
Purchaser's questions regarding compliance of the Facilities and business
operations conducted therein with applicable Laws, subject to attorney-client
privilege. Notwithstanding anything in this Agreement to the contrary, (A)
the Seller's representations and warranties made in this Agreement shall not be
limited or otherwise affected by any review or investigation of the Facilities
made by the Purchaser, and (B) nothing herein contained shall be deemed to
provide the Purchaser with the right to terminate this Agreement as a result
of any such review, inspections or tests, and the Purchaser's satisfaction with
the results of such review, inspections and tests shall not be a condition
precedent to Closing.
5 Title.
5.1 Condition of Title. Purchaser shall determine that title
to the Facilities is good and marketable of record and in fact. Title shall be
conveyed in fee simple, by the form of Warranty Deed customary in each of the
jurisdictions in which the Facilities are located, as reasonably determined by
the Title Company (as defined in Section 8) or the mutual agreement of the
parties, with limited or special warranty of title unless such form of warranty
is not customary in the relevant jurisdiction(s) or adversely affects the
insurability of title (collectively, the "DEEDS"), with customary covenants,
free and clear of any and all liens, tenancies, restrictions, easements,
options, unrecorded agreements, encroachments, or other encumbrances of any
kind whatsoever, except for the following (the "PERMITTED EXCEPTIONS"): (i)
those matters approved or deemed approved by the Purchaser pursuant to Section
5.2; (ii) liens securing the Industrial Revenue Bonds that the Purchaser
assumes at Closing, (iii) liens for ad valorem taxes and general or special
assessments not yet due and payable as of the Closing Date (as defined below),
(iv) building and zoning restrictions applicable to the Facilities, and (v)
other exceptions which in the reasonable judgment of the Purchaser do not
impair in any material respect the use or enjoyment of the Facilities as
currently operated or as proposed to be operated under the Transaction
Documents.
5.2 Title Objections. The Purchaser shall promptly after the
date hereof order a title commitment for and survey of each of the Facilities.
The Seller shall be obligated to pay the costs of title examinations, title
insurance and surveys, and, notwithstanding anything to the contrary in this
Agreement, such obligation shall survive any termination of this Agreement.
Within fifteen (15) business days after the Purchaser has received all of the
title commitments and surveys, the Purchaser shall notify Magellan in writing
of any matters listed in the title commitments or depicted (or not depicted) on
the surveys (including, without limitation, flood
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plains) of which the Purchaser disapproves except for the Permitted Exceptions
(the "OBJECTIONS"), provided, however, that in no event shall the Purchaser
have the right to disapprove or object to any flood plain matter with respect
to any Facility unless (i) an ordinance, law, rule or regulation applicable to
said Facility provides that such Facility may not be rebuilt following a
casualty because such Facility is located in a flood plain, or (ii) the
Purchaser reasonably determines that the uninsured cost to rebuild would be
unduly burdensome or the flood risk cannot be insured at reasonable rates. If
the Purchaser so notifies Magellan of any Objections, then, within a reasonable
period of time after such notice, the Seller shall take all action necessary to
eliminate or cure such Objections or to make arrangements, satisfactory to the
Purchaser, to have such Objections eliminated or cured prior to the Closing.
If the Seller is unable or unwilling to eliminate or cure all such Objections,
or to make satisfactory arrangements to have same eliminated or cured prior to
the Closing to the Purchaser's satisfaction, and the Purchaser does not waive
the Seller's failure to eliminate or cure such Objections as provided in
Section 8.1, then the Purchaser shall have the right, at its sole option, to
terminate this Agreement by giving written notice of such election to Magellan.
Upon the giving of any such termination notice, this Agreement shall terminate,
and all rights, obligations and liabilities of the parties hereunder shall be
released and discharged. If the Purchaser fails to object to any matter within
such fifteen (15) business day period or thereafter waives it Objections, such
matters shall be deemed approved and shall constitute Permitted Exceptions
hereunder. Without limiting the generality of the foregoing, the Seller shall
have the absolute obligation, whether or not the Purchaser objects, to cure or
remove of record or, with the Purchaser's consent, obtain affirmative coverage
over the following matters at or before the Closing: (a) all mortgages or
deeds of trust affecting the Facilities, except those securing the Industrial
Revenue Bonds that the Purchaser assumes at Closing; (b) all past due ad
valorem taxes and assessments of any kind constituting a lien against the
Facilities; (c) all mechanic's, materialmen's and similar liens; and (d) all
judgments constituting a lien against the Facilities. Notwithstanding the
foregoing to the contrary, the Purchaser shall use its commercially reasonable
bests efforts to deliver Objections to the Seller on a Facility by Facility
basis within fifteen (15) business days following the Purchaser's receipt of a
title commitment and survey for each Facility.
5.3 Option to Assume IRBs. The parties acknowledge that some of the
Facilities are encumbered by liens securing certain Industrial Revenue Bonds
(the "INDUSTRIAL REVENUE BONDS"). A schedule listing the outstanding principal
and accrued interest amounts of the Industrial Revenue Bond or Bonds associated
with each Facility is attached hereto as Exhibit D. The Purchaser shall have
the option to assume any or all of such Industrial Revenue Bonds if such
assumption is permissible under the documents governing the terms of any such
Industrial Revenue Bond proposed to be assumed and such assumption can be made
without adversely affecting the tax-exempt status of the Industrial Revenue
Bond to be assumed, provided that the Seller is completely released from all
liability thereunder and any letters of credit posted by the Seller as
additional security for repayment thereof are released and returned on behalf
of Magellan. Any Industrial Revenue Bonds that the Purchaser does not assume
at Closing shall be paid off or defeased by Magellan at Closing, the Facilities
encumbered thereby shall be conveyed free and clear of all liens securing same,
and Magellan shall be solely responsible for all prepayment penalties and other
costs associated with such repayment or defeasance. The
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Purchaser shall notify Magellan in writing by March 5, 1997, as to which
Industrial Revenue Bonds, if any, it wishes to assume. Failure by the
Purchaser to so notify Magellan by such date shall be deemed to be an election
by the Purchaser not to assume any of the Industrial Revenue Bonds.
6 Representations and Warranties.
6.1 Seller's Representations and Warranties. In order to
induce the Purchaser to execute this Agreement and the other Transaction
Documents and to proceed to Closing, Magellan hereby makes the following
representations and warranties to the Purchaser, all of which are true as of
the date hereof:
(a) Organization and Enforceability. Magellan is, and
each Subco is, a corporation or limited liability company, duly organized,
validly existing and in good standing under the laws of its state of
incorporation or formation and in any other jurisdiction where the nature of
its business or ownership of its properties would require such qualification.
Magellan and each Subco possess all requisite power and authority to own and
operate their respective properties and to carry on their respective businesses
as now conducted, to enter into and perform this Agreement and the other
Transaction Documents, and to carry out the Transactions. This Agreement and
the other Transaction Documents, and all instruments (to the extent the same
constitute agreements), documents (to the extent the same constitute
agreements) and agreements to be executed by Magellan and/or any of the Subcos
in connection herewith or therewith, are, or when delivered shall be, duly and
validly executed and delivered by Magellan and/or such Subco(s) to the
Purchaser and are, or when delivered shall be, legal, valid and binding
obligations of Magellan and/or such Subco(s), enforceable against Magellan
and/or such Subco(s) in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, conservatorship, receivership,
insolvency, moratorium or similar laws affecting creditors' rights generally or
by general principles of equity. The person or persons who have executed this
Agreement on behalf of Magellan and each Subco have full power and authority to
sign the Transaction Documents.
(b) Consents and Approvals. Except as described on
Schedule 6.1(b) attached hereto, there are no consents, approvals, or
authorizations that are material to the continued operation of the businesses
conducted at the Facilities required from any person, entity, governmental or
quasi-governmental authority, or required by law or agreement, with respect to
the Seller's execution, delivery or performance of this Agreement and the other
Transaction Documents and the consummation of the Transactions by Seller.
Notwithstanding the foregoing, it is understood and agreed that it shall be the
Purchaser's responsibility to obtain, or to obtain the transfer of, all Permits
required for the Purchaser to own, hold and lease the Facilities to OpCo, and
it shall be Magellan's responsibility to obtain, or to obtain the transfer of,
for and on behalf of OpCo, all Permits required for the continued operation by
OpCo of the businesses currently conducted at the Facilities.
(c) Title to Real Property. Except for Real Property
that will be conveyed by the Seller to the Purchaser as part of the Facilities,
neither Magellan nor any of the
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Subcos or their affiliates owns any parcel of land which is contiguous with any
of the Real Property of the Facilities.
(d) Title to Personal Property. None of the Personal
Property is held by Magellan or the Subcos under a lease or installment sale
contract, except for installment sales agreements entered into in the ordinary
course of business, and Magellan and/or the Subcos owns title to the Personal
Property reflected on the inventory to be delivered to the Purchaser pursuant
to Section 3 free and clear of any liens or claims, except for liens and claims
arising under or by virtue of the above-referenced installment sales agreements
and except as set forth on Schedule 6.1(d).
(e) Litigation; Other Proceedings. No portion of the
Real Property of any Facility has been condemned or taken in any condemnation
or similar proceeding. No action, suit, other proceeding or investigation
(including, but not limited to, condemnation actions) is pending in any court
or before any federal, state, county or municipal department, commission,
board, bureau or agency or other governmental or quasi-governmental
instrumentality or accrediting authority or before any arbitration tribunal or
panel, or to the Seller's knowledge has been threatened, that concerns or
involves (i) title, right to possession, or ownership of the Facilities, or
(ii) the Seller's ability to perform its obligations under this Agreement and
the other Transaction Documents. There are no proceedings pending, or to the
Seller's knowledge threatened, which may result in the revocation, cancellation
or suspension, or any adverse modification, of any Permit. No bankruptcy,
insolvency, reorganization or similar action involving any Facility or any
Subco or Magellan, whether voluntary or involuntary, is pending or to the
Seller's knowledge threatened, and neither any Subco nor Magellan has any
intention of filing any such action or proceeding.
(f) Violations of Agreements. None of the execution and
delivery of this Agreement and the other Transaction Documents by Magellan or
any Subco, the consummation by Magellan or any Subco of the Transactions or
compliance by Magellan or any Subco with any of the provisions hereof or
thereof will (i) conflict with or result in any breach of any provisions of the
formation documents of Magellan or such Subco; (ii) except as set forth on
Schedule 6.1(f), result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right to termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which
Magellan or any Subco is a party or by which any of them or any of the
Facilities may be bound; or (iii) except as set forth on Schedule 6.1(f),
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to any of them or any of the Facilities; except in the case of
clauses (ii) or (iii) above, for violations, breach or defaults (A) that would
not in the aggregate have a material adverse effect on the business or
financial condition of the Seller and on the effectiveness of the Transactions
or (B) for which waivers or consents have been or will be obtained on or prior
to the Closing Date.
(g) Compliance with Laws. The Facilities and the
current ownership, use, occupancy, leasing and construction (if any) thereof
comply in all material respects with all federal, state, county or municipal
laws, ordinances, rules, orders, regulations and material
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requirements ("LAWS") of all governmental and quasi-governmental authorities
having jurisdiction over the Facilities or affecting all or any part thereof or
bearing on their ownership, use, occupancy, leasing or construction (including,
without limitation, zoning, land use, building code, fire code, Environmental
Laws (as hereinafter defined), the Occupational Safety and Health Act, and the
Americans with Disabilities Act), and in all material respects with all private
covenants and restrictions. The Seller has no knowledge of material violations
of Laws relating to the ownership, use, occupancy, leasing or construction (if
any) of the Facilities and no written notice of any such violation of any such
law, regulation or ordinance has been received by the Seller, except for
violations or alleged violations set forth on Schedule 6.1(g) attached hereto,
which are being corrected in the ordinary course of business pursuant to an
approved plan of correction. Without limiting the generality of the foregoing,
the Seller has not paid or delivered or agreed to pay or deliver, directly or
indirectly, any fee, commission or other sum of money or item of property,
however characterized, to any person or entity pursuant to a transaction
believed by the Seller to be illegal under any federal, state or local law.
(h) Permits. All Permits have been obtained from all
governmental and quasi-governmental authorities having jurisdiction over the
Facilities and the ownership thereof or from private parties for the normal
use, maintenance, and occupancy of the Facilities and to ensure unimpeded
access, ingress and egress to and from the Facilities as required to permit
normal usage thereof (including, without limitation, building or other permits,
certificates of occupancy, concessions, grants, franchises, licenses, and other
governmental authorizations and approvals). All fees payable in connection
with such items have been paid in full, and all such Permits are in full force
and effect.
(i) Accreditation and Certification. The survey reports
on each of the Facilities by the Joint Commission on the Accreditation of
Healthcare Organizations (the "JCAHO") that have been provided to the Purchaser
pursuant to Section 3 are the most recent JCAHO survey reports received by the
Seller with respect to each of the Facilities other than (i) the medical office
buildings comprising a part of some of the Facilities and (ii) the Facilities
operated as corrections facilities. The Seller has taken all actions required
by such survey reports to be taken on or before the date hereof, including, but
not limited to, the submission of written progress reports. The Seller has
received no notice of any material, adverse change in accreditation status of
any of the Facilities.
(j) Medicare and Medicaid. Except as set forth on
Schedule 6.1(j) attached hereto, each Facility participates in the Medicare and
Medicaid programs, is eligible to receive payment under Title XVIII of the
Social Security Act, as amended (the "SOCIAL SECURITY ACT"), and is a
"provider" under a provider agreement with the Medicare program. With respect
to such provider agreements, neither Magellan nor any Subco has received a
notice of termination, is in default in any material respect, or has any
knowledge that any other party to such agreements is in default thereunder.
(k) Zoning; Subdivision. The current use of each
Facility is permitted under the zoning classification applicable to the
Facility. There are no proceedings pending or to Seller's knowledge threatened
to change the existing zoning classification as to any portion of
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any Facility. No portion of any subdivided lot or tax lot comprising the Real
Property of any Facility or any part thereof is owned by any person or entity
other than the Subco that owns such Facility. To the Seller's knowledge, there
are no unrecorded land use restrictions, unrecorded proffers or other
unrecorded conditions limiting development of any of the Facilities. Except as
may be disclosed in the title commitments and surveys of each of the
Facilities, no part of any Facility has been designated as an historical
landmark by any governmental authority, or is subject to any overlay or similar
zoning or other restriction or limitation, nor, to the best of the Seller's
knowledge, is any of the foregoing under consideration by any governmental
authority.
(l) Structure; Systems. There are no material
uncorrected structural, physical, mechanical or other defects or faults in the
design or construction of the improvements included as part of any Facility,
including without limitation the roofs, parking areas, HVAC, plumbing,
electrical, life safety and other mechanical systems. All such systems are in
good operating condition and repair, normal wear and tear excepted, and require
no special maintenance, repair or replacement (except due to normal wear and
tear and obsolescence) and are in compliance in all material respects with all
applicable Laws.
(m) Material Changes. The Seller has not received
written notice from any governmental or quasi-governmental authority of any
pending or contemplated change in any regulation, code, ordinance or law, or
private restriction applicable to any of the Facilities which would result in
any material adverse effect on the condition of any of the Facilities, or would
in any material respect limit or impede the operation of any of the Facilities.
(n) Parties in Possession. No portion of any Facility
is occupied or used in any manner by any person or entity other than the
Seller, tenants under the Leases, the patients of the Facilities, the employees
of the Seller, the medical staffs of the Facilities, other health care
professionals, members of the public participating in various programs and
events at the Facilities, volunteers, independent contractors providing
services pursuant to the Contracts, and other business invitees.
(o) Status of Leases. Exhibit E attached hereto
contains a full and complete listing of all tenants under all Leases. Magellan
has delivered to the Purchaser true and complete copies of each Material Lease.
With respect to each Material Lease, neither Magellan nor any Subco has
received a notice of termination, is in default, or has any knowledge that any
other party to such Material Lease is in default thereunder. The Seller is the
owner of the entire lessor's interest in and to the Leases, and neither the
lessor's interest in the Leases nor the rents payable thereunder have been
assigned, pledged or encumbered in any manner other than under collateral
assignments that will be released in connection with the Closing. No tenant
has any right or option to purchase or otherwise acquire any Facility or any
portion thereof. Except as indicated on the Rent Roll delivered to the
Purchaser as a part of the Seller's Deliveries pursuant to Section 3, (i) no
rentals or other amounts due under the Material Leases have been paid more than
one (1) month in advance, (ii) all security and other deposits of any type
required under the Material Leases have been paid in full and are being held by
the Seller, (iii) there exists no circumstance or state of facts that
constitutes a default by the Seller or to the Seller's knowledge any tenant
under the Material Leases, or that would, with the passage of time or the
giving of
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<PAGE> 16
notice, or both, constitute a default on the part of the Seller or by any
tenant under any of the Material Leases, or that entitles any tenant under the
Material Leases to defenses against the prompt, current payment and performance
of rent and/or other payments and obligations thereunder, and (iv) none of the
tenants under the Material Leases has asserted any defenses, set-offs or claims
in connection with any of the Material Leases, except in the case of clauses
(iii) or (iv) above, for violations, breaches or defaults which do not have a
material adverse effect on the Facilities. Seller has no knowledge of any
pending or threatened litigation by any tenant against the Seller with regard
to any Material Lease. There do not exist any unpaid leasing commissions due
with regard to any of the Material Leases. The Seller has performed in all
material respects all of the duties, liabilities and obligations imposed upon
Seller by the terms, provisions and conditions contained in the Material Leases
and accruing on or prior to the date hereof. The total amount of annual rent
payable under all Leases as of the date hereof is not greater than $3,000,000.
(p) Other Agreements Affecting Facilities. There are no
contracts or other material obligations (including, without limitation, options
and rights of first refusal under Leases) outstanding for the sale, exchange or
transfer of any of the Facilities or the business operated therein by the
Seller. Except as described on Schedule 6.1(p) and except for this Agreement,
the Material Leases, the management, maintenance, service, supply, commission,
parking, construction, architectural and other agreements entered into by the
Seller or any Subco with respect to the Facilities, the agreements included
among the Permitted Exceptions, and the other Transaction Documents, the Seller
has no knowledge of any contracts creating or imposing any liens, encumbrances,
material burdens, obligations or material restrictions on the use or operation
of any of the Facilities or the business conducted therein, other than (i) the
matters of title listed on the title insurance commitments for the Facilities
and (ii) security interests in the Personal Property that will be released as
of the Closing (or as to which the Purchaser agrees to take title subject).
(q) Special Assessments. There are no unpaid
assessments for public improvements against any of the Facilities, and Seller
has no knowledge of any pending or proposed assessments against any of the
Facilities. All sewer, water, gas, electric, telephone and drainage lines and
facilities required by law and for the normal operation and use of the
Facilities are fully installed, currently function, and service the Facilities
adequately for their current use, and there are no unpaid assessments, tap or
connection fees or charges for the installation of such utilities or for making
connection thereto.
(r) Taxes. To the Seller's knowledge, except as
described on Schedule 6.1(r), (i) the Seller has received no written notice of
any public plans or proposals for changes in road grade, access or other
municipal improvements which would affect any of the Facilities or result in
any assessment and that could have a material adverse effect on the Facilities
or the businesses conducted therein, and (ii) no tax proceeding is pending for
the reduction or increase of the assessed real estate tax evaluation of any of
the Facilities.
(s) FIRPTA. Neither Magellan nor any Subco is a
"foreign person," "foreign trust" or "foreign corporation" within the meaning
of the United States Foreign
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Investment and Real Property Tax Act of 1980 and the Internal Revenue Code of
1986, as subsequently amended.
(t) Environmental. As used herein, the term
"ENVIRONMENTAL LAW" means any law, statute, ordinance, rule, regulation, order
or material determination of any governmental authority or agency affecting any
of the Facilities and pertaining to health or the environment, including, but
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1982 and the Resource Conservation and Recovery Act of 1986.
Except as (i) disclosed in any of the environmental reports comprising a part
of the Seller's Deliveries or otherwise obtained by the Purchaser, or as
otherwise disclosed by Magellan to the Purchaser in writing, or (ii) would not
have a material adverse effect on the Facilities or the business of the Seller
operated thereon, to the Seller's knowledge (a) neither the Facilities nor the
Seller's operation thereof is in violation of any Environmental Law or is
subject to any pending or threatened litigation or inquiry by any governmental
authority or to any remedial action or obligations under any Environmental Law;
(b) no underground storage tanks have been or are now located at any Facility;
(c) none of the Facilities is now or ever has been used for industrial purposes
or for the storage, treatment or disposal of hazardous or toxic wastes or
materials, chemical wastes, or other toxic substances, except for the storage
and disposal of such wastes and materials in the ordinary course of the
business of the Facilities in accordance with applicable Environmental Laws,
nor has any Facility ever been listed by any federal, state or county agency or
governmental official as containing any oil, hazardous or toxic wastes or
materials, chemical wastes, or other toxic substances, and (d) no hazardous
substances or toxic wastes have been handled, packaged, generated,
manufactured, released, removed, stored, used, discharged, disposed of ,
treated, installed, transported or deposited over, beneath, in or on any
Facility or any portion thereof, from any source whatsoever, or are now located
at any Facility, in violation of applicable Environmental Laws (including,
without limitation, asbestos, radon, oil or other petroleum products, PCBs and
urea formaldehyde). Prior to Closing, Magellan agrees to notify the Purchaser
promptly of any fact of which the Seller acquires actual knowledge which would
cause this representation to become false and of any written notice that the
Seller receives regarding the matters set forth in this subsection (t).
(u) Soils; Flood Plain. There are no material defects,
faults or other problems in connection with the soils, subsoils, grading or
compaction of the Real Property, other than as set forth in any soil reports to
be delivered to the Purchaser. Except as noted on the surveys of the
Facilities, no portion of the Real Property is located inside a one hundred
(100) year flood plain, as such plain is determined by the Federal Emergency
Management Agency and published in a Flood Insurance Rate Map for the area
including the Real Property.
(v) Ownership of Subcos. Magellan holds, beneficially,
directly or indirectly, all voting and equity ownership of each Subco.
(w) No Other Owned Facilities. Except as described on
Schedule 6.1(w), no Subco owns or operates any facility other than the one(s)
being sold hereunder.
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<PAGE> 18
(v) Insurance. There is currently in full force and
effect public liability, property and casualty insurance in the amounts and
issued by the companies specified in Exhibit F (the "INSURANCE"). Each of such
policies is in full force and effect, and all premiums due and payable
thereunder have been, and on the Closing Date will be, fully paid when due. No
notice of cancellation has been received or threatened with respect thereto.
No insurance company insuring either the Facilities or the Personal Property,
nor the Board of Fire Underwriters, has delivered to the Seller oral or written
notice (i) that any insurance policy now in effect would not be renewed or (ii)
that the Seller or any tenant under the Leases has failed to comply with
insurance requirements or (iii) that defects or inadequacies exist in any of
the Facilities, or in any part thereof, which could adversely affect the
insurability thereof or the cost of such insurance.
(y) Philadelphia Facility. To Magellan's knowledge, the
total costs and expenses required for completion of the construction of the
improvements currently underway to the Philadelphia Facility will not exceed
$11,000,000, and upon completion of such improvements, the Philadelphia
Facility will be ready for occupancy and suitably equipped for the operation of
a behavioral healthcare facility similar to the other Facilities.
(z) Accuracy of Documents. All documents and records
delivered pursuant to Section 3 will be true, correct and complete copies of
the documents and records required to be delivered.
(aa) No Material Adverse Change. Since the date of the
1996 Financials, there has been no material adverse change in the business or
financial condition of (i) the Seller and the Subcos taken as a whole or (ii)
the Subcos taken as a whole.
6.2 Purchaser's Representations and Warranties. In order to
induce the Seller to execute this Agreement and the other Transaction Documents
and to proceed to Closing, the Purchaser hereby makes the following
representations and warranties to the Seller, all of which are true as of the
date hereof and all of which shall be true as of the Closing Date:
(a) Organization and Enforceability. The Purchaser is
duly organized, validly existing and in good standing under the laws of its
state of organization and in any other jurisdiction where the nature of its
business or ownership of its properties would require such qualification, and
is or will be by the Closing Date duly qualified to transact business in the
states in which the Facilities are situated. The Purchaser possesses all
requisite power and authority to own and operate its properties and to carry on
its business as now conducted, to enter into and perform this Agreement and the
other Transaction Documents, and to carry out the Transactions. This Agreement
and the other Transaction Documents, and all instruments (to the extent the
same constitute agreements), documents (to the extent the same constitute
agreements) and agreements to be executed by the Purchaser and/or its designees
in connection herewith or therewith, are, or when delivered shall be, duly and
validly executed and delivered by the Purchaser and/or its designees and are,
or when delivered shall be, legal, valid and binding obligations of the
Purchaser and/or such designees, enforceable against the Purchaser and/or such
designees in accordance with their respective terms, except as such enforcement
may be limited
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<PAGE> 19
by bankruptcy, conservatorship, receivership, insolvency, moratorium or similar
laws affecting creditors' rights generally or by general principles of equity.
The person or persons who have executed this Agreement on behalf of the
Purchaser have full power and authority to sign the Transaction Documents.
(b) Consents and Approvals. Except for approval by the
Board of Directors of the Purchaser's general partner, there are no consents,
approvals, and authorizations required from any person, entity, governmental or
quasi-governmental authority, or required by law or agreement, with respect to
the Purchaser's execution, delivery or performance of this Agreement and the
other Transaction Documents and the consummation of the Transactions by the
Purchaser, including, without limitation, shareholder approval.
Notwithstanding the foregoing, it is understood and agreed that it shall be the
Purchaser's responsibility to obtain, or to obtain the transfer of, all Permits
required for the Purchaser to own, hold and lease the Facilities to OpCo, and
it shall be Magellan's responsibility to obtain, or to obtain the transfer of,
for and on behalf of OpCo, all Permits required for the continued operation by
OpCo of the businesses currently conducted at the Facilities.
(c) Violations of Agreements. None of the execution and
delivery of this Agreement and the other Transaction Documents by the
Purchaser, the consummation by the Purchaser of the Transactions or compliance
by the Purchaser with any of the provisions hereof or thereof will (i) conflict
with or result in any breach of any provisions of the formation documents of
the Purchaser; (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right to termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Purchaser is a party or by which it may be bound; or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to it; except
in the case of clauses (ii) or (iii) above, for violations, breach or defaults
(A) that would not in the aggregate have a material adverse effect on the
business or financial condition of the Purchaser and on the effectiveness of
the Transactions or (B) for which waivers or consents have been or will be
obtained prior to the Closing Date.
6.3 Best Knowledge. For purposes of this Agreement, the
phrase "to the Seller's knowledge" or "to Magellan's knowledge" means the
actual knowledge of any executive officer (as defined in Rule 3b-7 of the
Securities Exchange Act of 1934) of a Subco, or actual knowledge of any officer
of Magellan, based upon the Seller's reasonable inquiry and investigation.
6.4 Survival. The representations and warranties set forth in
this Section 6 will survive the Closing for the period of the statute of
limitations applicable to breaches of contracts in Delaware, except for the
representations and warranties relating to claims against the Seller by
Medicare and Medicaid, which shall survive until the expiration of the
applicable statutes of limitations on the "Cost Reports" filed by the Seller
prior to the Closing Date.
7 Covenants.
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7.1 Seller's Covenants. Magellan hereby covenants and agrees
as follows:
(a) Operation. From the date hereof until the Closing
Date, the Seller will (i) continue to operate the Facilities in the ordinary
course, consistent with past practice, (ii) continue to offer services at the
Facilities in accordance with past practices, except for changes in services
deemed reasonably appropriate by management based upon changes in the market,
(iii) permit no material change in presently existing policies (excluding
on-going enhancements), except as required by applicable law and except for
changes in policies deemed reasonably appropriate by management based upon
changes in the market, without, in each instance, the prior written approval of
the Purchaser, and (iv) use commercially reasonable best efforts to maintain
the Facilities in as good a condition and substantially the same state of
repair as that existing on the date hereof.
(b) Leases. The Seller will not, without the prior
written consent of the Purchaser, (i) enter into any contract that will or
could be binding upon the Purchaser or other entity taking title to any of the
Facilities and that is not terminable upon at most thirty (30) days' notice,
unless such contract will be fully performed by the Seller on or before the
Closing Date, (ii) amend, modify or supplement any existing Permit in any
material respect, (iii) enter into any new lease for any of the Facilities or
any portion thereof, other than in the ordinary course of business, and in any
event, enter into any new lease that would constitute a Material Lease, or (iv)
amend, modify, supplement or terminate any of the Leases, other than in the
ordinary course of business, and in any event, amend, modify, supplement or
terminate any of the Leases in any manner that would convert any Lease into a
Material Lease. Any consent requested by Seller pursuant to this Section
7.1(b) will be deemed approved if the Purchaser does not respond by written
notice to Magellan within ten (10) business days after Magellan's written
notice to the Purchaser requesting such consent.
(c) Litigation. Magellan shall advise the Purchaser
promptly of any litigation, arbitration, investigation or other proceeding or
administrative hearing (including condemnation) before any governmental or
quasi-governmental agency, licensing or accrediting authority, or other
authority which concerns or affects any of the Facilities or the operation
thereof in any manner and which is instituted after the date hereof and which
involves a claim or alleged liability in excess of $1,000,000.
(d) Compliance with Laws. The Seller shall comply in
all material respects with all Laws, including without limitation all
Environmental Laws, applicable to the Facilities, and the Seller shall not
install in or remove from the Facilities any storage tanks except in compliance
with all applicable Laws. Magellan shall advise the Purchaser promptly in
writing of any notice or other communication, written or oral (and as to oral
notices or communications, only those of which the officers described in
Section 6.3 have knowledge), to the Seller from any federal, state or local
governmental authority with respect to (i) any alleged material violation of
any Law, including without limitation any Environmental Law, at or affecting
any Facility, or (ii) the handling, packaging, generating, transportation,
release, use, discharge, treatment, removal, storage, or disposal of Hazardous
Substances or storage tanks which is or may be in violation of applicable Laws.
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(e) Notification of Subsequent Events. Prior to
Closing, Magellan shall notify the Purchaser of any notice received by the
Seller of any material adverse change in or to the Facilities, as well as of
any material adverse changes in the business operated therein, operations and
assets related thereto, or financial condition of the Seller.
(f) Alterations; Encumbrances; Commitments. From the
date hereof until the Closing Date, the Seller shall not take any of the
following actions without the prior written consent of the Purchaser, which may
be granted or withheld in the Purchaser's sole discretion: (i) except as
hereinafter expressly provided with respect to the Philadelphia Facility, make
or permit to be made any material alterations to or upon the Facilities; (ii)
encumber or permit encumbrance of any of the Facilities in any manner; or (iii)
make any commitments or representations to any applicable governmental
authorities, any adjoining or surrounding property owners, any utility, or any
other person or entity that would in any manner be binding upon the Purchaser
or other entity taking title to the Facilities, or upon the Facilities, other
than in the ordinary course of business.
(g) Sale of Personal Property. The Seller will not
transfer or dispose of, or permit to be sold, transferred or otherwise disposed
of, any item or group of items constituting Personal Property, except for the
use and consumption of inventory and other supplies and spare parts, and the
replacement of worn out, obsolete and defective tools, equipment and
appliances, in the ordinary course of business.
(h) Insurance; Permits. Magellan will maintain in full
force and effect (i) the Seller's existing insurance coverage with respect to
the Facilities and the business operated therein and (ii) all Permits relating
to the Facilities or any part thereof.
(i) Taxes. Magellan shall (a) subject to Magellan's
right under applicable Laws to contest such taxes and other public charges, pay
or cause to be paid, in a timely fashion, all taxes and other public charges
against the Facilities for the period through Closing, and (b) provide the
Purchaser, within ten (10) days of receipt, with copies of any notices the
Seller receives with respect to any special assessments or proposed increases
in the valuation of the Facilities.
(j) Performance Under Leases. The Seller will perform
all material obligations of landlord or lessor under the Leases, including any
condition for a tenant's or lessee's occupancy of any Facility.
(k) Cooperation. Magellan will assist and cooperate
with the Purchaser (i) prior to Closing in obtaining all Permits which are
required by applicable Laws to be obtained or transferred, or which by custom
are obtained or transferred, prior to closing, (ii) after Closing, in obtaining
all Permits which by custom are obtained or transferred after closing (which
covenant shall survive Closing), and (iii) prior to Closing with any
evaluation, inspection, audit or study of the Facilities and the books and
records relating to the operation thereof conducted or prepared by, for, or at
the request of the Purchaser.
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(l) Consents. Except for the consents and approvals
which the Purchaser is required to obtain pursuant to Section 6.2(b), Magellan
will use its commercially reasonable best efforts to file or submit in a timely
manner and diligently prosecute any and all applications or notices with
federal, state and local authorities and all other requests with any private
persons or entities for consents, approvals, authorizations and permissions
which are reasonably considered necessary or appropriate (i) for consummation
by the Seller of the Transactions and (ii) to effect the transfer of, or
prevent the termination of, any Permit, Lease, or contract with respect to the
Facilities, including, without limitation, obtaining, or obtaining the transfer
of, for and on behalf of OpCo, all permits required for the continued operation
by OpCo of the business currently conducted at the Facilities.
(m) Financial Statements. Magellan will provide, upon
request by the Purchaser, (i) to the extent required by applicable federal
securities laws, audited financial statements in such form and for the periods
necessary to permit the Purchaser to satisfy applicable federal securities law
requirements, and (ii) such other unaudited financial statements relating to
the Facilities as may be prepared by Magellan through the date of Closing. The
Purchaser shall bear the costs of preparation of such audited financial
statements to the extent that (i) the costs of preparation of such financial
statements exceed the costs of preparation of the financial statements that
Magellan is required to prepare in order to satisfy its obligations under
applicable federal securities laws or (ii) Magellan incurs additional costs, at
the Purchaser's request, attributable to the preparation of such financial
statements prior to the date on which such financial statements are required to
be filed with the Securities and Exchange Commission.
(n) Hart-Scott-Rodino. Magellan will file, and will
cooperate with the Purchaser in the filing (if required by applicable Laws) of,
any documents required under the Hart-Scott-Rodino Antitrust Improvements Act.
(o) Magellan Stockholder Approval. On or prior to May
31, 1997, Magellan shall use commercially reasonable best efforts to obtain the
approval of its stockholders relating to the Transactions and to any changes in
its Certificate of Incorporation required in connection therewith, including
without limitation, (a) scheduling and holding a meeting of stockholders at
which such matters will be on the agenda, (b) recommending the approval of such
matters in any proxy or related materials for such meeting, subject, however,
to the fiduciary obligations of Magellan's Board of Directors to the
stockholders under Delaware Corporation Law, and (c) recommending the approval
of such matters at such meeting, subject, however, to the fiduciary obligations
of Magellan's Board of Directors to the stockholders under Delaware Corporation
Law.
(p) Satisfaction of Conditions. Magellan shall exercise
its commercially reasonable best efforts to satisfy all conditions precedent to
Closing, as set forth in Section 8, that are the Seller's responsibility to
satisfy.
(q) Completion of Philadelphia Facility. Magellan shall
continue the construction of the planned improvements currently underway at the
Philadelphia Facility and shall complete such construction in a timely manner
at Magellan's sole cost and expense, lien
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free, provided, however, that Magellan's total liability for such costs and
expenses shall not exceed $11,000,000. Notwithstanding anything set forth in
this Agreement to the contrary, this covenant shall survive Closing for the
period of the statute of limitations applicable to breaches of contracts in
Delaware.
(r) New Senior Credit Facility. Magellan shall use
commercially reasonable best efforts to close, prior to or simultaneously with
Closing hereunder, any new credit facility required to satisfy Magellan's
obligations under its existing financing arrangements and arising out of the
Transactions, or to obtain a loan commitment reasonably satisfactory to the
Purchaser for such new credit facility.
7.2 Purchaser's Covenants. The Purchaser hereby covenants and
agrees as follows:
(a) Satisfaction of Conditions. The Purchaser shall
exercise its commercially reasonable best efforts to satisfy all conditions
precedent to Closing, as set forth in Section 8, that are the Purchaser's
responsibility to satisfy.
(b) Hart-Scott-Rodino. The Purchaser will file (if
required by applicable Laws), and will cooperate with Magellan in the filing
of, any documents required under the Hart-Scott-Rodino Antitrust Improvements
Act.
(c) The Purchaser will assist and cooperate with
Magellan (i) prior to Closing in obtaining all Permits which are required by
applicable Laws to be obtained or transferred, or which by custom are obtained
or transferred, prior to Closing, (ii) after Closing, in obtaining all Permits
which by custom are obtained or transferred after closing (which covenant shall
survive Closing).
8 Conditions.
8.1 Purchaser's Conditions Precedent to Closing. The
obligations of the Purchaser under this Agreement are subject to the
satisfaction on or before the Closing Date of all conditions contained in this
Agreement, including each of the following (any of which may be waived by the
Purchaser, in the Purchaser's sole and absolute discretion, but only in
writing):
(a) The Seller shall have performed in all material
respects all of its covenants and other obligations contained in this
Agreement, and all of the Seller's representations and warranties contained in
this Agreement shall be true in all material respects on and as of the Closing
Date.
(b) The title insurance company(ies) conducting the
title examination, which shall be selected by the Purchaser and shall be
reasonably acceptable to Magellan (collectively, the "TITLE COMPANY"), shall be
prepared to issue to the Purchaser or the Purchaser's designee(s), at standard
rates, a Title Policy (as defined in Section 10.2) with respect
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<PAGE> 24
to each Facility or a marked title commitment unconditionally committing to
issue a Title Policy with respect to each Facility within a reasonable time
thereafter.
(c) From the date hereof until the Closing Date, there
shall not have occurred any material adverse change to, or deterioration of,
the physical condition of the Facilities taken as a whole, ordinary wear and
tear excepted.
(d) From the date hereof until the Closing Date, there
shall not have occurred any material adverse change in the business or
financial condition of the Seller from that disclosed in the Operating Reports
and 1996 Financials furnished by Magellan to the Purchaser as a part of the
Seller's Deliveries.
(e) The Purchaser or Magellan, as appropriate, shall
have obtained, or obtained the transfer of, all permits, licenses and approvals
necessary to allow the ownership of the Facilities by the Purchaser and the
continued lawful operation by OpCo of the business conducted therein, except
for those permits, licenses and approvals which by custom are not transferred
or obtained until after a conveyance of property, and except for such consents,
regulatory and other approvals, licenses, permits and other required
documentation the failure to obtain which would not, individually or in the
aggregate, have a material adverse effect on the operation of such business.
(f) The Facilities Lease in the form of Exhibit C
attached hereto shall have been executed by the Purchaser, as lessor, and OpCo,
as tenant.
(g) The Subordination Agreement in the form of Exhibit
G attached hereto shall have been executed by the Purchaser, Magellan and OpCo.
(h) There shall exist no material regulatory or
contractual impediment to, nor any litigation, governmental proceeding or
investigation seeking to enjoin, challenging or seeking damages in connection
with, the operation of the Facilities or the Transactions that, in Magellan's
or the Purchaser's reasonable judgment, would make it inadvisable to proceed
with the consummation of the Transactions.
(i) The Purchaser shall have received all necessary
shareholder approvals (if any) required by its governing documents.
(j) The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act after any necessary filing by the Purchaser shall
have expired.
(k) The Purchaser shall have received opinions of
counsel to Magellan regarding Magellan's authority to enter into the
transactions, due authorization, good standing, no conflicts with or defaults
under other material agreements, and other customary opinions.
(l) The allocations referenced in Sections 2.1 and 2.2
hereof shall have been agreed upon by the parties and Schedule 2.1 shall have
been attached hereto.
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(m) Receipt of all consents, regulatory and other
approvals, licenses, permits and other documentation required by state and
federal laws and regulations or any agreements to which the Purchaser is
subject necessary to consummate the Transactions and permit the Purchaser to
own the Facilities and OpCo to conduct the businesses operated at the
Facilities, except for such consents, regulatory and other approvals, licenses,
permits and other required documentation the failure to obtain which would not,
individually or in the aggregate, have a material adverse effect on the
operation of such businesses.
(n) The "fairness" opinion obtained by the Purchaser
from Merrill Lynch & Co. shall not have been withdrawn or revoked.
(o) All of the conditions of the other Transaction
Documents shall have been satisfied or waived by the party(ies) entitled to
insist upon satisfaction of same, and the closing of all of the Transactions
shall have occurred or shall occur simultaneously with the Closing hereunder.
8.2 Seller's Conditions Precedent to Closing. The obligations
of the Seller under this Agreement are subject to the satisfaction on or before
the Closing Date of the following conditions (any of which may be waived by
Magellan, in Magellan's sole and absolute discretion, but only in writing):
(a) Magellan shall have consummated a new credit
facility in the amount contemplated by Section 7.1 (r).
(b) Receipt of all consents, regulatory and other
approvals, licenses, permits and other documentation required by state and
federal laws and regulations or any agreements to which the Seller is subject
necessary to consummate the Transactions and permit the Purchaser to own the
Facilities and OpCo to conduct the businesses operated at the Facilities,
except for such consents, regulatory and other approvals, licenses, permits and
other required documentation the failure to obtain which would not,
individually or in the aggregate, have a material adverse effect on the
operation of such businesses.
(c) Magellan shall have received stockholder approval
relating to the Transactions pursuant to the proxy materials for Magellan's
1997 annual meeting.
(d) The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act after any necessary filing by the Seller shall have
expired.
(e) Magellan shall have complied with all federal and
state laws, rules and regulations applicable to the execution and delivery of
the Franchise Agreement.
(f) Magellan shall have received opinions of counsel to
the Purchaser regarding the Purchaser's authority to enter into the
transactions, due authorization, good standing, no conflicts with or defaults
under other material agreements, and other customary opinions.
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(g) The Master Facilities Lease in the form of Exhibit C
attached hereto shall have been executed by the Purchaser, as lessor, and OpCo,
as tenant.
(h) The Subordination Agreement in the form of Exhibit G
attached hereto shall have been executed by the Purchaser, Magellan and OpCo.
(i) The Purchaser shall have performed in all material
respects all of its covenants and other material obligations contained in this
Agreement, and all of the Purchaser's representations and warranties contained
in this Agreement shall be true in all material respects on and as of the
Closing Date.
(j) The allocations referenced in Sections 2.1 and 2.2
hereof shall have been agreed upon by the parties.
(k) There shall exist no material regulatory or
contractual impediment to, nor any litigation, governmental proceeding or
investigation seeking to enjoin, challenging or seeking damages in connection
with, the operation of the Facilities or the Transactions that, in Magellan's
or the Purchaser's reasonable judgment, would make it inadvisable to proceed
with the consummation of the Transactions.
(l) The "fairness" opinion obtained by Magellan from
Dean Witter Reynolds Inc. shall not have been withdrawn or revoked.
(m) All of the conditions of the other Transaction
Documents shall have been satisfied or waived by the party(ies) entitled to
insist upon satisfaction of same, and the closing of all of the Transactions
shall have occurred or shall occur simultaneously with the Closing hereunder.
8.3 Failure of Conditions. If any condition described in
Section 8.1 is not satisfied by the Closing Date, as such date may be extended
pursuant to Section 10.1, the Purchaser shall have the right to terminate this
Agreement by giving written notice of such action to Magellan. If any
condition referenced in Section 8.2 is not satisfied by the Closing Date, as
such date may be extended pursuant to Section 10.1, the Seller shall have the
right to terminate this Agreement by giving written notice of such action to
the Purchaser. Upon delivery of any such termination notice, this Agreement
shall terminate, and all rights and obligations of the parties hereunder shall
be released and discharged, except that Magellan and the Purchaser shall each
remain liable to the other for all damages suffered by the other if the
unsatisfied condition was due to a breach by one party of any of the covenants,
obligations, representations or warranties of such party in this Agreement or
any other failure by such party to use commercially reasonable best efforts to
satisfy conditions precedent to Closing that are within the control of such
party to satisfy.
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9 Damage, Destruction and Condemnation.
-------------------------------------
9.1 Damage; Destruction. In the event of any loss, damage or
destruction to any Facility prior to Closing, Magellan shall immediately notify
the Purchaser thereof and shall promptly commence and diligently prosecute to
completion the repair and restoration thereof to substantially its condition
prior to such casualty. If the damaged Facility is not fully restored prior to
Closing such that the Seller's representations and warranties in Section 7 with
respect thereto are not true at Closing, then the parties shall nevertheless
proceed to Closing hereunder without reduction of the Purchase Price, the
Seller shall assign all of its right, title and interest in and to any
remaining claims the Seller may have under the insurance policies covering the
damaged Facility(ies), as well as any remaining unused and unpaid insurance
proceeds, to OpCo at Closing, and the parties shall cause OpCo to complete such
restoration and repair work after Closing at Seller's sole cost and expense.
The Seller covenants to pay all such costs and expenses of completion to OpCo,
or to reimburse OpCo therefor, within five (5) business days after OpCo's
written request therefor, which covenant shall survive Closing. In addition,
the Seller shall pay OpCo after Closing any lost income from the damaged
Facility(ies) during the period from Closing through the date that business
interruption insurance proceeds under policies of insurance required to be
carried by OpCo pursuant to the Facilities Lease would have been payable had
such insurance been in effect at the time of the casualty. The Seller shall
not agree to or accept any settlement of its insurance claim(s) without
obtaining the Purchaser's prior written approval thereof.
9.2 Condemnation. If any condemnation proceedings are
instituted, or notice of intent to condemn is given, with respect to all or any
material portion of the Facilities, Magellan shall promptly notify the
Purchaser thereof, in which event the Purchaser shall have the option either
(i) to terminate this Agreement with respect to the Facility(ies) affected by
written notice to Magellan, in which event the Purchase Price shall be reduced
by the amount allocated to such Facility(ies) pursuant to Section 2.2, or (ii)
to consummate the purchase of the Facilities without reduction of the Purchase
Price, and the right to collect any condemnation award or compensation for such
condemnation shall be assigned by the Seller to the Purchaser or the
Purchaser's designee at Closing. The Seller shall not agree to or accept any
compromise or condemnation award without obtaining the Purchaser's prior
written approval thereof. For purposes of this Agreement, (i) a condemnation
shall be deemed to include any governmental action which could limit or render
inconvenient the current access to any Facility, and (ii) a "material portion"
of a Facility shall be any portion the taking of which would have a material
adverse effect on the operation of the business conducted at such Facility.
10 Closing.
--------
10.1 Closing Date. The consummation of the transactions
contemplated hereby (the "Closing") shall occur at the offices of King &
Spalding, 191 Peachtree Street, Atlanta, Georgia 30303-1763, or at such other
location upon which Magellan and the Purchaser agree, at 10:00 a.m. on May 31,
1997, or such earlier or later date upon which Magellan and the Purchaser agree
(the "Closing Date"); provided, however, that in the event that the Closing has
not occurred by June 30, 1997, either party shall have the right to terminate
this Agreement by
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written notice to the other. Upon delivery of such notice, this Agreement
shall terminate, and all rights and obligations of the parties hereunder shall
be released and discharged, except that Magellan and the Purchaser shall each
remain liable to the other for all damages suffered by the other if the failure
to close was due to a breach by one party of any of the covenants, obligations,
representations or warranties of such party in this Agreement or any other
failure by such party to use commercially reasonable best efforts to satisfy
conditions precedent to Closing that are within the control of such party to
satisfy.
10.2 Seller's Obligations at Closing. At the Closing, the
Seller will do, or cause to be done, the following:
(a) Documents. The Seller will, and will cause the
Subcos (as appropriate) to, execute, acknowledge (if necessary), and deliver
the following documents:
(i) the Deeds, subject only to the Permitted
Exceptions;
(ii) an Assignment of Leases in the form and
substance of Exhibit H;
(iii) a Bill of Sale in the form and substance of
Exhibit I;
(iv) an updated certificate executed by the
Seller remaking and reaffirming all representations and
warranties made by the Seller to the Purchaser in
accordance with the provisions of Section 6; and
(v) an opinion of the Seller's attorney to be
dated as of the Closing Date stating (i) that Magellan and
each Subco are authorized to convey its respective
Facility(ies) in accordance with this Agreement, and (ii)
that the Deeds and other documents, instruments, and
agreements executed by the Seller in connection with
Closing have been duly authorized and executed.
(b) Title Policies. For purposes of this Section
10.2(b), a "TYPICAL OWNER'S POLICY" shall mean a standard Extended Coverage
A.L.T.A. Form B Policy of Owner's Title Insurance (10-17-70 revision with '84
amendments), or other form of owner's title insurance policy reasonably
acceptable to the Purchaser available in a state where such A.L.T.A. Form B is
not available and most closely resembling such A.L.T.A. Form B. Magellan will
cause the Title Company to issue to the Purchaser a Typical Owner's Policy with
respect to each Facility, in the amount of the Purchase Price allocated to each
such Facility in accordance with Section 2.2, and insuring that the Purchaser
has fee simple title to each Facility, subject only to the Permitted Exceptions
(a "TITLE POLICY"). In addition, each Title Policy shall contain affirmative
coverage with respect to mechanics' liens (or any reference to such liens in
the general provisions or elsewhere shall be deleted), and each Title Policy
shall include the following endorsements to coverage to the extent available
and commonly used for title insurance covering real property in the state where
the applicable Facility is located: access, survey, contiguity, zoning (ALTA
3.1), subdivision, an endorsement deleting creditor's rights exceptions to
coverage, and such other
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endorsements as may be reasonably requested by Purchaser (the "ENDORSEMENTS").
The Seller shall execute and deliver to the Title Company a customary form of
affidavit and other documents and agreements (to the extent required by the
Title Company in order for the Title Company to issue the Title Policies)
certifying (a) the absence of claims which would give rise to mechanic's and
materialmen's liens, (b) that the Seller and the tenants under the Leases are
the only parties in possession of the Facilities, and (c) that there are no
pending or outstanding suits or judgments against either the Seller or the
Facilities, except as disclosed to the Title Company and for which the Title
Company has not taken exception. The Seller shall also deliver to the Title
Company such evidence as may be required with respect to the authority of the
person executing the deeds of conveyance and other items necessary to issue
title insurance to the Purchaser or the Purchaser's designee(s). In addition,
Magellan and each Subco shall furnish to the Purchaser and the Title Company a
certificate to the effect that none of them is a foreign person, corporation,
partnership, trust or estate under Section 1445 of the Internal Revenue Code.
If Magellan or any Subco fails or refuses to provide such certificate, the
Title Company or Escrow Agent shall have the right to make such deductions from
the Seller's proceeds at Closing and to remit such amounts to the Internal
Revenue Service as are required by the Federal Foreign Investment in Real
Property Tax Act and the regulations promulgated thereunder.
(c) Original Documents. Seller will deliver at the
corporate headquarters of OpCo or the Facilities, as appropriate, to Purchaser
or OpCo, as appropriate, originals within Seller's possession of all items
enumerated in Section 3 of this Agreement.
(d) Possession. Seller will deliver possession of the
Facilities, subject to the Leases.
(e) Keys. Seller shall furnish to OpCo duplicate keys
and master keys to all locks located on the Facilities, properly tagged for
identification, as well as combinations, card keys and cards for the security
systems, if any.
(f) Costs. The Seller will pay all costs allocated to
the Seller pursuant to Section 10.4.
10.3 Purchaser's Obligations at Closing. At the Closing, the
Purchaser will do, or cause to be done, the following:
(a) Payment of Consideration. The Purchaser will pay to
Magellan the Purchase Price, as adjusted in accordance with the provisions of
this Agreement.
(b) Documents. The Purchaser will execute, acknowledge
(if necessary), and deliver an Assignment of Leases in the form and substance
of Exhibit H and an updated certificate executed by the Purchaser remaking and
reaffirming all representations and warranties made by the Purchaser to the
Seller in accordance with the provisions of Section 6.
(c) Additional Documents. The Purchaser will execute
and deliver or obtain for delivery to the Title Company any instruments
reasonably necessary to consummate
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this Agreement, including by way of example, evidence of the authority of the
party executing instruments on behalf of the Purchaser.
(d) Costs. The Purchaser will pay all costs allocated
to the Purchaser pursuant to Section 10.4.
10.4 Costs and Adjustments at Closing. If the prorations and
adjustments provided for in this Section 10.4 impose post-Closing obligations
or liabilities on OpCo, Magellan covenants to use commercially reasonable best
efforts to cause OpCo to perform such obligations and satisfy such liabilities
in a timely manner, which covenant shall survive Closing.
(a) Expenses. The Purchaser shall pay or cause to be
paid all fees of consultants, appraisers, and engineers rendering reports or
opinions to the Purchaser, and all other costs incurred by the Purchaser, in
connection with the Purchaser's due diligence investigation of the Facilities,
except that the Seller shall pay the costs and fees of environmental
consultants and engineers retained to perform Phase I environmental audits and,
if necessary or advisable in the reasonable opinion of the Purchaser, Phase II
environmental audits and prepare environmental reports on the Facilities. The
Purchaser shall also pay all costs and fees associated with the assumption of
any Industrial Revenue Bonds that Purchaser assumes at Closing, including,
without limitation, assumption fees, mortgage fees, mortgage recordation fees,
and mortgagees' title insurance costs. The Seller shall pay the cost of
preparing the Deeds and other conveyancing documents, the costs associated with
releasing any encumbrances of record, all grantor's taxes, transfer taxes,
county taxes, clerks' fees, documentary stamps, release fees, recordation taxes
associated with the Deeds and other conveyancing documents, escrow fees charged
by the Escrow Agent or Title Company, and the costs and fees for the title
examinations, title insurance (including any affirmative coverages and
endorsements required by the Purchaser), and surveys. Each party shall pay its
own attorneys' fees, including local counsel fees.
(b) Real Estate TaxeS. Real estate taxes on the Real
Property for the calendar year of the Closing will be prorated between Magellan
and OpCo as of the Closing Date. If the amount of such taxes is not known at
Closing, the proration of such real estate taxes will be based on the amount of
such taxes for the previous real estate tax fiscal period. As soon as the
actual amount of real estate taxes on the Facilities for the year of Closing is
known, the Seller and OpCo will readjust the amount of such taxes to be paid by
each party with the result that the Seller will pay for those taxes applicable
to the Real Property up to and including the date of Closing and OpCo will pay
for those taxes and assessments applicable to the Real Property after the date
of Closing. The provisions of this Section 10.4(b) will survive the Closing.
(c) Rents. All rents, additional rents and other sums
actually paid under the Leases for the month of Closing will be prorated
between Magellan and OpCo as of the Closing Date, provided that delinquent
amounts will not be considered in such calculation. All rents, percentage
rents, real estate taxes and other costs or charges paid by tenants under the
Leases after the Closing will first be applied to such charges as are then due
and then applied in
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their reverse order of accrual until applied in full. Any amounts that are to
be applied to periods prior to Closing will be delivered by OpCo to the Seller
within thirty (30) days after receipt, net of any costs incurred by OpCo in
collecting such amounts (including, without limitation, attorneys' fees). OpCo
will have no obligation to incur any cost or expense or institute any
litigation to collect delinquent rents, percentage rents, or other costs or
charges owed to the Seller, and the Seller will not exercise any right to
collect such amounts unless OpCo fails to use reasonable efforts to collect
same. In any event, the Seller will not institute suit against any tenant
under the Leases. The provisions of this Section 10.4(c) will survive the
Closing.
(d) Security Deposits. The Seller will pay to OpCo, in
cash at Closing or as a credit against the Purchase Price, the amount of any
security deposits paid pursuant to the Leases.
(e) Other Expenses. All other ordinary operating
expenses for or pertaining to the Facilities, including, but not limited to,
public utility charges, maintenance, service charges, and lease commissions,
will be prorated as of the Closing Date between the Seller and OpCo, it being
understood and agreed that revenues resulting from operation of the Facilities
prior to Closing will belong to Magellan and revenues resulting from operation
of the Facilities from and after Closing will belong to the Purchaser;
provided, however, that the Seller shall pay in full any and all special
assessments which have either been levied or are pending against the Facilities
or any part thereof as of the Closing Date, except if such assessments are due
in installments, in which event the Seller shall only be responsible for paying
such installments due prior to the Closing. OpCo shall be responsible for the
installments due after Closing. The Seller shall pay in full any and all
leasing commissions or other compensation with respect to all Leases and other
tenancies in effect as of the Closing Date, including commissions which are or
may become due on account of options, renewals or extensions.
(f) Adjustment. To the extent that errors are
discovered in, or additional information becomes available with respect to, the
prorations and allocations made at Closing, the Seller and OpCo shall make such
post-Closing adjustments as may be necessary to correct any inaccuracy;
however, all prorations (except for ad valorem taxes) will be final within
ninety (90) days after Closing. Magellan agrees to deliver to OpCo all
invoices and payments related to the Facilities received by the Seller after
Closing and relating to periods after the Closing. In addition, Magellan shall
give the Purchaser written notice of any payments received by the Seller (other
than from OpCo) after Closing relating to periods prior to the Closing in order
to facilitate OpCo's collection of and accounting for Magellan's receivables
after Closing in accordance with the OpCo Contribution Agreement.
10.5 Settlement Statement. At the Closing, the Purchaser and
the Seller shall execute and deliver duplicate originals of a settlement
statement (the "SETTLEMENT STATEMENT") showing all of the payments, adjustments
and prorations provided herein and otherwise agreed upon by them.
11 Indemnifications.
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11.1 Purchaser's Indemnity. The Purchaser hereby agrees to
indemnify the Seller against, and to hold the Seller harmless from, all claims,
demands, causes of action, losses, damages, obligations, debts, liabilities,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements actually incurred) (collectively, "CLAIMS") asserted against
or incurred by the Seller in connection with or arising out of (a) the
ownership, maintenance or operation of the Facilities and attributable to
events occurring on or after the Closing, during the Purchaser's ownership of
the Facilities, and at any time after the Purchaser or any of its affiliates
(other than OpCo) takes over the operation of the Facilities following an Event
of Default under the Facilities Lease, or (b) a breach of any representation,
warranty or covenant of the Purchaser contained in this Agreement not disclosed
to or actually known by the Seller at or before Closing. The Purchaser's
obligations under this Section 11.1 shall survive the Closing until the
expiration of any applicable statute of limitations for making or bringing such
claims, demands, or causes of action. Notwithstanding anything to the contrary
contained herein, the Purchaser's indemnity obligations hereunder (i) will not
extend to Claims arising out of the negligence, willful misconduct or fraud of
the Seller, and (ii) with respect to indemnification claims under clause (b) of
this Section 11.1, (x) for a period of two (2) years following the Closing
Date, shall not arise until the aggregate Claims arising during such period and
resulting from the breach exceed $1,000,000, at which time such indemnity
obligations shall cover all Claims, and (y) after two (2) years following the
Closing Date, shall not arise until the aggregate Claims arising during such
period and resulting from the breach exceed $10,000,000, at which time such
indemnity obligations shall cover all Claims.
11.2 Seller's Indemnity. The Seller hereby agrees to
indemnify the Purchaser against, and to hold the Purchaser harmless from all
Claims asserted against or incurred by the Purchaser in connection with or
arising out of (a) the ownership, maintenance or operation of the Facilities
and attributable to events occurring prior to the Closing and during the
Seller's ownership of the Facilities, or (b) a breach of any representation,
warranty or covenant of the Seller contained in this Agreement not disclosed to
or actually known by the Purchaser at or before Closing. Notwithstanding the
foregoing, the Seller shall not indemnify the Purchaser for any debts,
liabilities or obligations of the Seller expressly assumed by the Purchaser at
Closing pursuant to this Agreement or any of the other Transaction Documents.
The Seller's obligations under this Section 11.2 shall survive the Closing
until the expiration of any applicable statute of limitations for making or
bringing such claims, demands, or causes of action. Notwithstanding anything
to the contrary contained herein, the Seller's indemnity obligations hereunder
(i) will not extend to Claims arising out of the negligence, willful misconduct
or fraud of the Purchaser, and (ii) with respect to indemnification claims
under clause (b) of this Section 11.2, (x) for a period of two (2) years
following the Closing Date, shall not arise until the aggregate Claims arising
during such period and resulting from the breach exceed $1,000,000, at which
time such indemnity obligations shall cover all Claims, and (y) after two (2)
years following the Closing Date, shall not arise until the aggregate Claims
arising during such period and resulting from the breach exceed $10,000,000, at
which time such indemnity obligations shall cover all Claims.
12 Remedies.
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12.1 Default by Seller. If the Closing fails to occur as a
result of the Seller's material breach of this Agreement, then the Purchaser
may (i) enforce specific performance of the Seller's duties and obligations
under this Agreement, or (ii) terminate this Agreement by giving written notice
thereof to the Seller prior to or at the Closing, in which event the Purchaser
shall also be entitled to seek its direct, actual damages against the Seller
for such default as well as such other relief as may be available at law or in
equity. If prior to Closing the Seller defaults in any of its obligations,
representations or warranties hereunder, whether or not such obligation,
representation or warranty survives Closing, and such default is not disclosed
to or actually known by the Purchaser at or prior to Closing, then the
Purchaser may seek recovery of all of its direct, actual damages incurred as a
result of the Seller's default (subject to any applicable limitations set forth
in Section 11.2) as well as such other relief as may be available at law or in
equity, and the Purchaser will not be deemed to have waived its right to sue
for damages by having closed this transaction even though the accuracy of
representations and warranties was a condition precedent to the Purchaser's
obligation to close.
12.2 Default by Purchaser. If the Closing fails to occur as a
result of the Purchaser's material breach of this Agreement, then the Seller
may (i) enforce specific performance of the Purchaser's obligation to close
under this Agreement, or (ii) terminate this Agreement by giving written notice
thereof to the Purchaser prior to or at the Closing, in which event the Seller
shall also be entitled to seek its direct, actual damages against the Purchaser
for such default as well as such other relief as may be available at law or in
equity. If prior to Closing the Purchaser defaults in any of its obligations,
representations or warranties hereunder, whether or not such obligation,
representation or warranty survives Closing, and such default is not disclosed
to or actually known by the Seller at or prior to Closing, then the Seller may
seek recovery of all of its direct, actual damages incurred as a result of the
Purchaser's default (subject to any applicable limitations set forth in Section
11.2) as well as such other relief as may be available at law or in equity, and
the Seller will not be deemed to have waived its right to sue for damages by
having closed this transaction even though the accuracy of representations and
warranties was a condition precedent to the Seller's obligation to close.
12.3 Arbitration. Notwithstanding anything set forth herein
to the contrary, all claims and disputes between the parties arising after the
Closing hereunder shall be subject to resolution by binding arbitration in
Delaware before the American Arbitration Association and governed by the
Commercial Arbitration Rules then in effect.
12.4 Legal Fees. In the event either party to this Agreement
commences legal action of any kind or any arbitration proceeding to enforce the
terms and conditions of this Agreement, the prevailing party in such litigation
or arbitration will be entitled to collect from the other party all costs,
expenses and attorneys' fees incurred in connection with such action or
proceeding.
13 Brokers. Each party hereby represents and warrants to the other
that it has not engaged, dealt with or otherwise discussed this transaction
with any broker, agent or finder. Each party agrees to indemnify and hold the
other harmless from and against any claim arising out of a breach of the
foregoing agreement and representation and warranty.
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14 Changes in the Portfolio.
14.1 Pre-Closing.
(a) Addition of New Facilities. Except as set forth
below, in the event Magellan, any Subco, or any other subsidiary of Magellan at
any time after December 26, 1996, and prior to Closing desires to acquire any
additional behavioral healthcare in-patient facilities (the "NEW FACILITIES"),
which Magellan or such subsidiary intends to own and/or operate in a manner
substantially similar to the Facilities, the Purchaser shall have the right to
require Magellan or such subsidiary to add such New Facility to the Facilities
being acquired hereunder, in which event the Purchase Price shall be increased
by the amount actually paid or required to be paid by Magellan or such
subsidiary for such New Facility. The foregoing sentence shall not apply to
(i) the purchase by Magellan or any subsidiary of Magellan of Parkwood Hospital
in Olive Branch, Mississippi, (ii) acquisitions by Green Spring Health
Services, Inc., or (iii) acquisitions by Magellan or any subsidiary of Magellan
of facilities the primary purpose of which is to provide services pursuant to
contracts with federal, state and local governments and governmental agencies,
providing health and human services, including behavioral healthcare services,
to the mentally retarded, the developmentally disabled, the elderly, persons
under the control or supervision of criminal/juvenile justice systems and other
designated populations. If the Purchaser does not want to add the New Facility
to the Facilities being acquired hereunder, then, subject to compliance with
the provisions of other Transaction Documents, Magellan shall be entitled to
acquire such New Facility. If Magellan acquires such New Facility, then
simultaneously with Closing Magellan shall enter into a management agreement
with OpCo covering such New Facility, pursuant to which OpCo shall manage and
operate such New Facility in exchange for payment by Magellan to OpCo of OpCo's
costs plus a fair market value management fee. Magellan shall negotiate such
management fee with OpCo in good faith. If Magellan and OpCo are unable to
agree upon a fair market value management fee, then such dispute shall be
resolved by appraisal in the manner provided for determining the Fair Market
Value of the Franchise (as such terms are defined in the Franchise Agreement),
as set forth in Section 4.4 of the Franchise Agreement, except that the term
"Qualified Appraiser" used therein, for purposes of determining a fair market
value management fee pursuant to this Section 14.1(a), shall mean an appraiser
who is not in control of, controlled by or under common control with either the
Seller or OpCo and has not been an employee of the Seller or OpCo or any
Affiliate (as defined in the Franchise Agreement) of the Seller or OpCo at any
time, who is qualified to appraise the fair market value of the management fee
and has been actively engaged in the appraisal of assets, rights and
businesses, and, to the extent it is reasonably practicable to locate such an
appraiser, an appraiser who has been actively engaged in the appraisal of
management fee arrangements for healthcare operations, in the state in which
the New Facility is located and who has held his or her certificate as an
M.A.I. or its equivalent for a period of not less than five (5) years
immediately preceding his or her appointment hereunder.
(b) Substitution of Facilities. Magellan shall have the
right at any time not later than thirty (30) days prior to Closing to
substitute a Comparable Facility (as hereinafter defined) for any Facility it
designates (a "DESIGNATED FACILITY"), provided that such substitution will
satisfy the Purchaser's requirements related to taxation as a real estate
investment trust. The
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Purchaser may demand, at Magellan's expense, a reasonably acceptable opinion of
counsel or private letter ruling from the Internal Revenue Service indicating
that the substitution will have no material adverse tax consequences to the
Purchaser. As used herein, the term "COMPARABLE FACILITY" shall mean a
facility reasonably acceptable to the Purchaser, operated as the same type of
business as the Facilities, with an expected future profitability substantially
equivalent to or greater than that of the Designated Facility both immediately
prior to such substitution and as reasonably projected over the term of the
Facilities Lease, taking into account any relevant factors. Magellan shall pay
all costs and expenses incurred in connection with any substitution of
facilities, including reasonable attorneys' fees and expenses. After the
substitution, a Comparable Facility shall be treated as if it were a Facility
under this Agreement.
(c) Closed Facilities. If the Seller elects to close
and cease its business operations in one or more Facilities prior to Closing,
such closed Facility(ies) shall nevertheless be included in the Facilities to
be acquired hereunder, without adjustment in the Purchase Price, and at Closing
shall be included among the Collective Leased Properties (as defined in the
Facilities Lease) covered by the Facilities Lease, without adjustment to the
Rent (as defined in the Facilities Lease) payable thereunder.
14.2 Post-Closing. In the event Magellan, any Subco, or any
other subsidiary of Magellan other than Green Spring at any time or from time
to time from and after Closing desires to acquire any New Facilities, which
Magellan or such subsidiary intends to own and/or operate in a manner
substantially similar to the Facilities, the Purchaser shall have a right of
first refusal to acquire such New Facility upon the terms and conditions
hereinafter set forth. The Purchaser shall have thirty (30) days after receipt
from Magellan of a copy of an executed letter of intent with a seller of any
such New Facility to notify Magellan of its election to exercise such right of
first refusal. The Purchaser's failure so to notify Magellan shall be deemed
to be a waiver of the Purchaser's right to exercise its right of first refusal
with respect to the New Facility that was the subject of Magellan's notice;
however, the Purchaser's failure so to notify Magellan shall not be deemed to
be a waiver of any of the Purchaser's rights or remedies under the
noncompetition or other provisions of the Transaction Documents or a waiver of
its rights with respect to any future New Facility. If the Purchaser elects
not to exercise such right of first refusal, Magellan may close and consummate
such transaction on substantially the terms as set forth in the letter of
intent, subject to compliance with the applicable provisions of the other
Transaction Documents. If Magellan acquires any such New Facility, then
simultaneously with closing of such acquisition Magellan shall enter into a
management agreement with OpCo covering such New Facility, pursuant to which
OpCo shall manage and operate such New Facility in exchange for payment by
Magellan to OpCo of OpCo's costs plus a fair market value management fee.
Magellan shall negotiate such management fee with OpCo in good faith. If
Magellan and OpCo are unable to agree upon a fair market value management fee,
then such dispute shall be resolved by appraisal in the manner provided for
determining the Fair Market Value of the Franchise (as such terms are defined
in the Franchise Agreement), as set forth in Section 4.4 of the Franchise
Agreement, except that the term "Qualified Appraiser" used therein, for
purposes of determining a fair market value management fee pursuant to this
Section 14.2, shall have the meaning given such term in Section 14.1(a) hereof.
If the Purchaser exercises its right of first refusal, the Purchaser shall be
obligated to acquire the New Facility on the terms set
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forth in the letter of intent; provided, however, that the Purchaser's exercise
of such right shall be conditioned upon (1) the Purchaser's and OpCo's
execution at or as of the closing of the acquisition of such New Facility of an
amendment to the Master Facilities Lease adding such New Facility to the leased
premises thereunder and adjusting the rent payable thereunder appropriately
(with the rent payable for such New Facility to be determined on the same basis
as the rent payable for the Facilities during the initial Lease Year, as
defined in the Facilities Lease, escalating on the same basis as the rent
payable for the Facilities), and (2) Magellan's and OpCo's execution at or as
of the closing of the acquisition of such New Facility of (A) an amendment to
the Master Franchise Agreement adding such New Facility to the facilities
covered thereby and adjusting the franchise fee payable thereunder
appropriately (with the franchise fee payable for such New Facility to be
determined on the same basis as the franchise fee payable for the Facilities
during the first and second Contract Years (as defined in the Franchise
Agreement), escalating on the same basis as the franchise fee payable for the
Facilities), and (B) a Subsidiary Franchise Agreement covering such New
Facility, upon substantially the same terms and conditions as the Subsidiary
Franchise Agreement covering each of the other Facilities. Notwithstanding
anything set forth in this Agreement to the contrary, the provisions of this
Section 14.2 shall survive Closing for a period equal to the term of the
Facilities Lease, including all extensions and renewals thereof.
15 Miscellaneous.
15.1 Successors and Assigns. The terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors by operation of law and permitted
assigns; provided that neither party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the prior written
consent of the other party hereto, which consent may be granted or withheld in
such party's sole and absolute discretion. Notwithstanding the foregoing, the
Purchaser may assign its rights and obligations hereunder to a wholly owned
subsidiary of the Purchaser or the Purchaser's general partner, provided that
in no event shall the Purchaser be released from liability for performance of
all of its obligations hereunder.
15.2 Notices. Whenever any notice is required or permitted
hereunder, such notice shall be in writing and (a) sent by certified mail,
postage prepaid, return receipt requested, (b) given by established overnight
commercial courier for delivery on the next business day with delivery charges
prepaid or duly charged, (c) personally hand-delivered or (d) sent by facsimile
transmission with confirmation of receipt received, to the applicable address
or facsimile number set forth below:
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As to the Purchaser: Gerald W. Haddock
President and Chief Executive Officer
Crescent Real Estate Equities, Ltd.
777 Main Street
Suite 2100
Forth Worth, Texas 76102
Facsimile: (817) 878-0429
with copies to: David M. Dean, Esq.
Senior Vice President, Law
Crescent Real Estate Equities, Ltd.
777 Main Street
Suite 2100
Forth Worth, Texas 76102
Facsimile: (817) 878-0429
Wendelin A. White, Esq.
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, DC 20037
Facsimile: (202) 663-8007
As to Magellan: Steve J. Davis, Esq.
Executive Vice President,
Administrative Services and General Counsel
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Facsimile: (404) 814-5793
with copies to: Robert W. Miller, Esq.
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Facsimile: (404) 572-5100
Notices which are mailed shall be deemed effective upon receipt. Notices which
are hand-delivered shall be deemed effective upon tender to a natural person at
the address shown. Notices which are delivered by overnight courier shall be
deemed given on the next business day after delivery to such courier. Notices
which are delivered by facsimile transmission shall be deemed received upon
electronic confirmation of delivery.
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15.3 Further Assurances. The Seller and the Purchaser agree
to execute, acknowledge and deliver any further agreements, documents,
certificates or instruments that are reasonably necessary or desirable to carry
out the transactions contemplated by this Agreement.
15.4 Amendments; Waiver. No amendment or waiver of any
provision of this Agreement shall be effective unless in writing and signed by
the party or parties against whom enforcement is sought. No failure or delay
by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
15.5 Governing Law; No Rule of Construction. This Agreement
and all transactions hereunder shall be governed by the laws of the State of
Delaware, without regard to the application of choice of law principles. The
rule that an Agreement should be construed against the party drafting it shall
not apply to this Agreement because all parties have played a significant role
in negotiating and drafting this Agreement.
15.6 Captions. The captions used in connection with the
Articles, Sections and Subsections of this Agreement are for convenience only
and will not be deemed to expand or limit the meaning of the language of this
Agreement.
15.7 Exhibits. All exhibits, attachments, annexed instruments
and addenda referred to herein will be considered a part hereof for all
purposes with the same force and effect as if copied verbatim herein.
15.8 Entire Agreement. This Agreement, including all Exhibits
and Schedules hereto, together with all of the other Transaction Documents and
their respective exhibits and schedules, supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof, all of which are null, void and of no further force or
effect.
15.9 Time of Essence. Time is of the essence of each and
every provision of this Agreement. However, if the final date of any period
which is set out in any provision of this Agreement falls on a Saturday, Sunday
or legal holiday under the laws of the United States, the State of Texas or the
State of Georgia then, and in such event, such period shall be extended to the
next day that is not a Saturday, Sunday or legal holiday.
15.10 Severability. If any term, covenant or condition of
this Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other provision hereof, and
this Agreement shall be construed as if such invalid or unenforceable provision
had never been contained herein.
15.11 Risk of Loss. All risk of loss to the Facilities
occurring prior to the Closing will be on the Seller.
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<PAGE> 39
15.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original document, and all of
which together shall constitute one and the same instrument. Signatures may be
transmitted by facsimile and will be accepted and considered effective as long
as such signatures are followed up with signature pages with original signature
within two (2) business days thereafter.
15.13 WAIVER OF JURY TRIAL; SERVICE OF PROCESS. EACH PARTY
HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY EITHER PARTY IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES HEREUNDER.
EACH PARTY HEREBY CONSENTS TO SERVICE OF PROCESS AND ANY PLEADING RELATING TO
ANY SUCH ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM AT THE ADDRESS SET FORTH FOR
SUCH PARTY IN SECTION 15.2 HEREOF; PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL
BE CONSTRUED AS REQUIRING SUCH SERVICE AT SUCH ADDRESS.
15.14 Non-Solicitation. During the Exclusive Period (as
hereinafter defined), Magellan shall not, and shall not permit any of its
representatives, to offer, negotiate, consummate or solicit (including
furnishing any information concerning Magellan's business, properties or other
assets) any offer or proposal for a sale and lease-back of any or all of the
Facilities, a sale and/or lease of any or all of the Contributed Assets,
Purchased Assets, Working Capital Assets or Excluded Assets (to the extent such
Excluded Assets are necessary to provide the services to be provided under the
Franchise Agreement) except, in the case of the Contributed Assets, Purchased
Assets, Working Capital Assets or Excluded Assets (to the extent such Excluded
Assets are necessary to provide the services to be provided under the Franchise
Agreement), in the ordinary course of business or as otherwise permitted under
the OpCo Contribution Agreement, or any other transaction covering any or all
of the Facilities, Magellan's acute care psychiatric hospitals, Contributed
Assets, Purchased Assets, Working Capital Assets or Excluded Assets (to the
extent such Excluded Assets are necessary to provide the services to be
provided under the Franchise Agreement) that is proposed to be accomplished in
a manner similar to that for the Transactions, unless Magellan shall have
received an unsolicited written offer relating to such transaction, from a
reputable buyer, which offer, in the written opinion of Dean Witter Reynolds
Inc., Magellan's financial advisors, appears to be on terms financially
superior to those offered by the Transactions and which, in the written opinion
of legal counsel to Magellan reasonably acceptable to the Purchaser (which
would include King & Spalding, current legal counsel to Magellan), Magellan's
Board of Directors is legally obligated to consider by principles of fiduciary
duty to stockholders under Delaware Corporation Law. Magellan shall promptly
notify the Purchaser in the event it receives any unsolicited offers or
proposals. In addition, Magellan agrees to notify all other parties who have
expressed an interest in acquiring all of any of the Facilities and/or
Operational Assets that Magellan has entered into exclusive negotiations with
one party (without identifying the Purchaser) and that such other parties'
offers have therefore been rejected, except for any proposals or other
expressions of interest which the Board of Directors of Magellan is required to
consider by principles of fiduciary duty to stockholders under Delaware
Corporation Law. For purposes of this Agreement, the "EXCLUSIVE
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<PAGE> 40
PERIOD" began on December 26, 1996, and shall continue in effect until the
earlier of Closing or termination of this Agreement and the other Transaction
Documents.
15.15 Confidentiality; Public Announcement. The parties shall
maintain in strict confidence all discussions regarding the Transactions, as
well as the fact that such discussions have taken and are taking place;
provided, however, that each party may disclose such information to its
attorneys, consultants, affiliates, directors, officers, employees and
representatives, governmental authorities, lenders and any other parties
assisting a party to the Transaction Documents in conducting its due diligence
investigations. The provisions of this Section will not be applicable to
disclosures of information required by applicable law, rule or regulation and
will not survive the Closing. Neither of the parties hereto shall issue any
press release or make any public announcement of or relating to the
Transactions without the prior consent of the other party, except where a
public announcement is required by law. Where such announcement is required by
law, in the reasonable opinion of counsel to Magellan or the Purchaser, the
other party shall be given opportunity to review and comment upon the proposed
announcement. It is the intent of the parties to publicly announce the
Transactions upon execution of this Agreement and the other Transaction
Documents.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the dates set forth beneath their respective signatures below.
PURCHASER:
----------
ATTEST: CRESCENT REAL ESTATE EQUITIES LIMITED
- -------
PARTNERSHIP
By: Crescent Real Estate Equities, Ltd., a
Delaware corporation
By: /s/ By: /s/ GERALD HADDOCK
------------------ --------------------------------------
Name: Gerald Haddock, President and
-----------------------
Chief Executive Officer
Title:
----------------------
SELLER:
-------
MAGELLAN HEALTH SERVICES, INC.
By: /s/ By: /s/
------------------------- ------------------------------------------
Name: Name:
----------------------- ----------------------------------------
Title: Title:
---------------------- ---------------------------------------
[EXHIBITS OMITTED]
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<PAGE> 42
FIRST AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO REAL ESTATE PURCHASE AND SALE AGREEMENT (this
"Amendment") is made as of the 28th day of February, 1997, by and between
MAGELLAN HEALTH SERVICES, INC., a Delaware corporation ("Magellan" or the
"Seller"), and CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Purchaser").
R E C I T A L S:
A. The parties entered into that certain Real Estate Purchase and
Sale Agreement dated as of January 29, 1997 (the "AGREEMENT") and that certain
Contribution Agreement dated as of January 29, 1997 (the "CONTRIBUTION
AGREEMENT"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Agreement.
B. The parties desire to enter into this Amendment to evidence
their agreement to certain changes to the Agreement, as hereinafter set forth,
and to declare the Contribution Agreement null and void ab initio and of no
force and effect.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties hereby agree as follows:
1. Contribution Agreement. The parties hereby declare the
Contribution Agreement to be null and void ab initio and of no force and
effect, as though it had never been entered into by them.
2. Recitals in Agreement. Recital A of the Agreement is amended
and restated in its entirety as follows:
In connection with the transactions contemplated by this
Agreement, Magellan and the Purchaser have entered into that
certain Warrant Purchase Agreement of even date herewith (the
"WARRANT PURCHASE AGREEMENT"). Magellan and the Purchaser
have also agreed that, following the execution of the Warrant
Purchase Agreement and this Agreement and pursuant to the
terms hereof, they will cause certain other agreements to be
executed, including, without limitation, (i) that certain
Operating Agreement of Charter Behavioral Health Systems, LLC
("OPCO"), between Magellan and a designee of the Purchaser to
be formed as a Delaware limited partnership or corporation
("NEW CRESCENT") (the "OPERATING AGREEMENT"), (ii) that
certain Contribution Agreement among Magellan, OpCo
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<PAGE> 43
and New Crescent (the "OPCO CONTRIBUTION AGREEMENT"), (iii)
that certain Master Franchise Agreement between Magellan and
OpCo (the "MASTER FRANCHISE AGREEMENT") and certain additional
Franchise Agreements between Magellan and certain subsidiaries
of OpCo (the "SUBSIDIARY FRANCHISE AGREEMENTS, and
collectively with the Master Franchise Agreement, the
"FRANCHISE AGREEMENT"), (iv) that certain Master Lease
Agreement between the Purchaser and OpCo (the "FACILITIES
LEASE"), (v) that certain Subordination Agreement by and among
Magellan, the Purchaser and OpCo (the "SUBORDINATION
AGREEMENT"), (vi) that certain Warrant Purchase Agreement (the
"WARRANT AGREEMENT") between Magellan and New Crescent or
Crescent Corp. (as such term is defined in the OpCo
Contribution Agreement) and (vii) subject to certain
conditions set forth in the OpCo Contribution Agreement, that
certain Bridge Loan and Security Agreement and Promissory Note
between Magellan and OpCo (the "BRIDGE LOAN AGREEMENT") (the
Agreement, this Amendment, the Warrant Purchase Agreement, the
Operating Agreement, the OpCo Contribution Agreement, the
Franchise Agreement, the Facilities Lease, the Subordination
Agreement, the Warrant Agreement and the Bridge Loan Agreement
are referred to collectively as the "TRANSACTION DOCUMENTS,"
and all of the transactions contemplated hereby and thereby
are referred to collectively as the "TRANSACTIONS").
3. Seller's Representations and Warranties.
a. Section 6.1(b) of the Agreement is amended to add
the following new first sentence:
The execution and delivery of this Agreement and
the other Transaction Documents by Magellan and the
Magellan Subsidiaries (as defined in the OpCo
Contribution Agreement) and the performance by
Magellan and the Magellan Subsidiaries of all
obligations under this Agreement and the other
Transaction Documents, including, without
limitation, the sale and delivery of the
Contributed Assets, the Purchased Assets and the
Working Capital Assets (as each such term is
defined in the OpCo Contribution Agreement) as
contemplated under the OpCo Contribution Agreement,
have been duly authorized by all necessary
corporate action on the part of Magellan and the
Magellan Subsidiaries.
b. The following new Section 6.1(bb) is added to the
Agreement:
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<PAGE> 44
(bb) Magellan hereby makes the following representations and
warranties to the Purchaser with respect to the operation of
the businesses conducted at the Hospitals (as defined in the
OpCo Contribution Agreement), all of which are true as of the
date hereof:
i. Insurance. A complete and accurate schedule
of all insurance policies (including a
statement of policy limits and deductibles)
held by Magellan and the Magellan
Subsidiaries relating to the Hospitals or the
businesses conducted therein now in force,
including, without limitation, malpractice,
public liability, property damage and workers
compensation or other coverage, has been made
available to the Purchaser. All insurance
policies remain in full force and effect
except where such failure to remain in full
force and effect will not have a material
adverse effect on a Hospital or on the
business of the Hospitals taken as a whole.
ii. Litigation. Except as set forth in Schedule
5.1(f) to the OpCo Contribution Agreement,
there are no lawsuits, proceedings, actions,
arbitrations, claims or governmental
investigations, inquiries or proceedings
pending or, to the knowledge of Magellan,
threatened, against Magellan or any Magellan
Subsidiary seeking damages for an amount in
excess of $1 million, and there is no action,
suit or proceeding by any person or agency
pending or, to the knowledge of Magellan,
threatened which questions the legality or
validity of the transactions contemplated by
the OpCo Contribution Agreement.
iii. Licenses, Accreditation and Third-Party
Payors. Magellan and the Magellan
Subsidiaries hold all licenses, permits,
registrations, approvals, certificates,
contracts, consents, accreditations,
approvals and
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<PAGE> 45
franchises ("OPERATING LICENSES") necessary to
own or lease the Contributed Assets and to
conduct and operate the Hospitals in the
manner presently operated and for
participation in the Medicare and Medicaid
reimbursement programs, including, without
limitation, all licenses, certificates of need
and permits required by the state in which
they operate and by all other appropriate
health care facility licensing agencies,
federal, state, county or local governmental
authorities and regulatory agencies, except
where the failure to hold such Operating
Licenses would not have a material adverse
effect on a Hospital or on the business of the
Hospitals taken as a whole.
iv. The Business. Upon transfer to OpCo of the
Contributed Assets, the Purchased Assets and
the Working Capital Assets as contemplated in
the OpCo Contribution Agreement, and
consummation of the transactions contemplated
by the other Transactional Documents, (i)
OpCo will have or, through the Franchise
Agreement, will have access to all tangible
and intangible assets and all personnel
reasonably necessary to conduct a business
that is substantially the same as and that
operates in accordance with the same
standards of operation as the business of the
Hospitals prior to the Closing, and (ii) OpCo
will have the means to provide the services
specified in Section 7.9 of the OpCo
Contribution Agreement.
v. Contracts. Schedule 5.1(i) to the OpCo
Contribution Agreement contains a listing of
all contracts or series of related contracts
which are material to the business of the
Hospitals, taken as a whole ("MATERIAL
CONTRACTS"), including all amendments,
modifications and side letters thereto,
currently in existence. With respect to each
Material Contract, neither Magellan nor any
Magellan Subsidiary has received a notice of
termination, has sent a notice of
termination, is in default, or has any
knowledge that any other party to such
Material Contracts is in default thereunder.
vi. No Other Owned Hospitals. Except as described
on Schedule 5.1(j), no Magellan Subsidiary
owns or operates any Hospital other than the
Hospitals operated using the assets
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<PAGE> 46
which are being contributed or sold pursuant
to this Agreement and the OpCo Contribution
Agreement.
vii. Financial Statements. All books and records
relating to operating income and expenses of
the Hospitals made available to the Purchaser
by Magellan were and shall be those
maintained by Magellan in regard to the
Hospitals in the normal course of business.
The audited Financial Statements as of and
for the year ended September 30, 1996 (the
"1996 FINANCIAL STATEMENTS") furnished by
Magellan to the Purchaser as a part of the
Seller's Deliveries have been prepared from
the books and records of Magellan in the
ordinary course of business and present
fairly in all material respects the results
of operations of Magellan for the periods
then ended and the financial condition of
Magellan as of the date of the 1996 Financial
Statements.
viii. No Material Adverse Change. Since the date
of Magellan's 1996 Financial Statements,
there has been no material adverse change in
the business or results of operations of
Magellan and the Magellan Subsidiaries taken
as a whole or the business of the Hospitals
taken as a whole.
ix. SEC Reports. The periodic reports filed by
Magellan with the Securities and Exchange
Commission with respect to Magellan's
immediately preceding fiscal year and any
interim periods in its current fiscal year
did not as of their respective dates contain
any untrue statements of a material fact or
omit to state any material fact required to
be stated therein or necessary to make the
statements therein, in the light of the
circumstances under which they were made, not
misleading.
x. Compliance With Laws. Magellan has delivered
to the Purchaser a draft dated January 24,
1997 ("PROXY STATEMENT") of its proxy
statement to shareholders for its Annual
Meeting of Shareholders at which, among other
matters, shareholders of Magellan will
consider and vote on the transactions which
are the subject of the Transaction Documents.
Except as described in the Proxy Statement,
or in documents filed with the Securities and
Exchange Commission pursuant to applicable
law, Magellan is not aware of any material
risk that Magellan is, in the conduct of the
Business (as defined in the OpCo Contribution
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<PAGE> 47
Agreement) prior to the Closing, or that OpCo
will be, in the conduct of the Business after
the Closing, in violation of any applicable
federal law specifically designed to regulate
the healthcare industry, which violation will
have a material adverse effect on Magellan or
OpCo.
4. Representations and Warranties of the Purchaser.
a. Section 6.2(b) of the Agreement is amended to add the
following new first sentence:
The execution and delivery of this Agreement and the
other Transaction Documents by the Purchaser and the
consummation of the transactions contemplated hereby
and thereby have been duly authorized by all
necessary action on the part of the Purchaser,
including its general partner.
b. The following new Section 6.2(d) is added to the
Agreement:
d. SEC Reports. The periodic reports filed by Crescent
Real Estate Equities Company ("CEI") with the
Securities and Exchange Commission with respect to
CEI's immediately preceding fiscal year and any
interim periods in its current fiscal year did not as
of their respective dates contain any untrue
statements of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein, in the
light of the circumstances under which they were
made, not misleading.
5. Survival. Section 8.4 of the Agreement is amended to add, as the
new last sentence thereof, the following:
Notwithstanding the foregoing, the representations
and warranties set forth in (i) the first sentence of
Section 6.1(b), (ii) Section 6.1(bb), (iii) the first
sentence of Section 6.2(b), and (iv) Section 6.2(d)
(all as set forth in this Amendment) shall not
survive the Closing except to the extent set forth in
the same or similar form in the OpCo Contribution
Agreement.
6. Seller's Covenants.
a. Section 7.1(k) of the Agreement is amended to add the
following as the new last two sentences:
Magellan and the Purchaser shall cooperate in all
reasonable respects in OpCo's application to obtain
necessary licenses, permits and
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<PAGE> 48
governmental approvals. In connection with each such
application on the part of OpCo, Magellan will
promptly furnish OpCo with such information and data
as is reasonably necessary to obtain such license,
permit or approval.
b. The following new Sections 7.1(s) through 7.1(aa) are
added to the Agreement:
s. Magellan's Pre-Closing Covenants.
i. Preservation of Business. Magellan covenants
and agrees, and will cause each Magellan
Subsidiary to covenant and agree, that from
the date of this Agreement to the Closing
Date, except as otherwise specifically agreed
to in writing by the Purchaser, Magellan will
(i) preserve the business organization of the
Hospitals intact, and (ii) preserve for OpCo
the goodwill of suppliers, customers and
others with whom business relationships
exist.
ii. Access to Information and Personnel.
Magellan agrees that the Purchaser shall have
the right to speak to any Magellan personnel
and make such further review as it deems
necessary or advisable, provided that the
Purchaser shall exercise reasonable efforts
to coordinate such review with Magellan and
to minimize disruption to Magellan's
operations. Notwithstanding the foregoing,
nothing herein contained shall be deemed to
provide the Purchaser with the right to
terminate this Agreement or any Transaction
Document as a result of any such review, and
the results of such review shall not be a
condition to the Closing of the Transaction
Documents.
iii. Consents. Magellan shall use its
commercially reasonable best efforts to
obtain consent to the assignment of all of
the contracts assigned under Section 2.1 of
the OpCo Contribution Agreement.
iv. No Change in Assets. Except in the ordinary
course of business consistent with past
practice, Magellan will not and will cause
the Magellan Subsidiaries not to, in any
manner which would result in a material
adverse change in the Contributed Assets,
Purchased Assets or Working Capital Assets
(i) sell or transfer, (ii) create, incur or
assume any
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<PAGE> 49
indebtedness secured by, (iii) grant, create,
incur or suffer to exist any liens, charges
or encumbrances, which did not exist on the
date of this Agreement, on, (iv) incur any
liability or obligation (absolute, accrued or
contingent), with respect to, or (v)
write-down the value on the books and records
of Magellan or a Magellan Subsidiary.
v. No Change in Constitutive Documents. No
change shall be made in the Certificate or
Articles of Incorporation or bylaws of
Magellan or any of the Magellan Subsidiaries
which would result in any representation of
Magellan becoming untrue or in preventing
Magellan from full performance of this
Agreement and the other Transaction
Documents.
vi. Payment and Performance of Obligations.
Unless being disputed in good faith, Magellan
will not fail to pay and perform in its
ordinary course and consistent with past
practice any and all liabilities and
obligations in respect of any of the
Contributed Assets as the same mature and
become owing, or cause or permit any default
or penalty to exist or occur under any of its
contracts or commitments.
vii. No Amendment. Magellan will not amend, alter
or terminate any agreement to which it is a
party and which is to be assumed by OpCo
pursuant to this Agreement other than
renewals or amendments in the ordinary and
regular course of the Hospitals' business.
viii. Changes in Material Contracts. Magellan will
not, and Magellan will not permit a Magellan
Subsidiary to, without the prior written
consent of the Purchaser, (i) other than
Material Contracts entered into in the
ordinary course of business, enter into any
Material Contract that will or could be
binding upon OpCo or other entity operating
the Hospitals and that is not terminable upon
at most 30 days' notice, unless such contract
will be fully performed by Magellan or a
Magellan Subsidiary on or before the Closing,
or (ii) amend, modify, supplement or
terminate any Material Contract other than in
the ordinary course of business. Any consent
requested by Magellan pursuant to this
subparagraph (viii) will be deemed approved
if the Purchaser does not respond by written
notice to Magellan within ten Business Days
after written notice from Magellan.
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t. Bridge Financing. On the Closing Date, either (i)
Magellan shall provide OpCo with bridge financing for
a one-year term in the amount of up to $55 million as
requested by OpCo to fund its working capital needs,
including funding OpCo's acquisition of existing
supplies, inventory, prepaid expenses, and other
Working Capital Assets (the form of the Bridge Loan
Agreement is attached as Exhibit D and D-1 to the
OpCo Contribution Agreement) or (ii) OpCo shall have
obtained working capital financing of at least $55
million pursuant to a loan facility with a syndicate
of financial institutions.
u. Financial Statements. Magellan shall provide to the
Purchaser unaudited financial statements relating to
Magellan and the business of the Hospitals as may be
prepared by Magellan through the Closing Date.
v. Insurance Reserves. Magellan will cause Plymouth
Insurance Company Ltd. ("PLYMOUTH") to maintain
reserves in amounts that are reasonably actuarially
adequate to cover risks insured by Plymouth
associated with the operation of the business of the
Hospitals.
w. Trade Accounts. Except for amounts disputed in good
faith, Magellan will cause to be paid all trade
accounts and costs and expenses of operation and
maintenance of the Facilities incurred or
attributable to the period prior to the Closing, and
Magellan agrees to indemnify and hold the Purchaser
harmless from such costs and expenses.
x. Services Agreements. Prior to closing, Magellan, in
its capacity as a joint venturer, will or will cause
any Magellan Subsidiary which is a joint venturer in
any Joint Venture that owns or operates a domestic
Hospital, which Joint Ventures are set forth on
Schedule 7.9 to the OpCo Contribution Agreement and
defined in the Franchise Agreement as "Existing Joint
Ventures" (a "JOINT VENTURE"), to enter into a
services agreement with OpCo for each such Hospital
owned or operated by a Joint Venture, pursuant to
which OpCo will perform, to the extent agreed by
joint venture partners, all of Magellan's obligations
under the Joint Venture agreement in exchange for the
payment to OpCo by Magellan of all distributions and
fees paid to Magellan by or on behalf of the Joint
Venture. Magellan will use its commercially
reasonable best efforts to obtain the consent of
Magellan's joint venture partners to the performance,
by OpCo, of Magellan's obligations under the Joint
Venture Agreements. Each service agreement, as
referred to in this Section 7.1(x), shall be approved
by the Purchaser, which approval shall not be
unreasonably withheld. The services agreement(s)
shall continue in effect until termination of the
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Facilities Lease.
y. Third Party Consents; Further Assurances. Each of
Magellan and the Purchaser shall give (or shall cause
their respective subsidiaries to give) any notices to
third parties, and use, and cause their respective
subsidiaries to use, all commercially reasonable best
efforts to obtain any third party consents necessary,
proper or advisable for it to effect the consummation
of the transactions contemplated by the OpCo
Contribution Agreement.
z. Employee Solicitation. Magellan will not directly or
indirectly induce or attempt to influence any key
employee of the Purchaser to leave such employee's
position except as mutually agreed by the Purchaser
and Magellan. Prior to Closing, Magellan and the
Purchaser will mutually agree as to which employees
will be employed by OpCo, based on the contemplated
functions of OpCo, and which will be employed by
Magellan, based on the contemplated services to be
supplied by Magellan under the Franchise Agreement.
aa. Assets. Magellan agrees and covenants that, between
the date hereof and the Closing Date, there will be
no material change in the type of Working Capital
Assets or type or amount of Contributed Assets or
Purchased Assets.
7. Limitation on Survival of Covenants. Notwithstanding
anything to the contrary contained herein, Section 7.1(v) shall not survive the
Closing except to the extent set forth in the same or similar form in the OpCo
Contribution Agreement.
8. Purchaser's Conditions Precedent to Closing. Section 8.1 of
the Agreement is amended to add the following new subsections:
p. Purchaser shall have caused the formation of New
Crescent as an entity substantially conforming to the
description in Schedule 8.1(p) to the Agreement and
the distribution to the public of shares of New
Crescent (unless New Crescent is the operating
partnership, in which case the distribution of shares
will be from Crescent Corp.).
q. The OpCo Contribution Agreement in the form attached
hereto as Exhibit A, updated to reflect any change in
the name or form of organization of New Crescent
(and/or Crescent Corp.), shall have been executed by
New Crescent, Magellan and OpCo.
r. The Operating Agreement in the form attached to the
OpCo Contribution Agreement as Exhibit C, updated to
reflect any change in the name or form
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of organization of New Crescent, the names of the
Directors and the source of the initial bank
financing referred to therein, and with all missing
information completed prior to execution thereof,
shall have been executed by New Crescent and
Magellan.
s. Unless working capital financing has been obtained
from a financial institution as provided in Section
7.1(t) of the Agreement, the Bridge Loan Agreement in
the form of Exhibit D and D-1 to the OpCo
Contribution Agreement shall have been executed by
Magellan and OpCo.
9. Seller's Conditions Precedent to Closing. Section 8.2 of
the Agreement is amended to add the following new subsections:
n. Purchaser shall have caused the formation of New
Crescent as an entity substantially conforming to the
description in Schedule 8.1(p) to the Agreement and
the distribution to the public of shares of New
Crescent (unless New Crescent is the operating
partnership, in which case the distribution of shares
will be from Crescent Corp.).
o. The OpCo Contribution Agreement in the form attached
hereto as Exhibit A, updated to reflect any change in
the name or form of organization of New Crescent
(and/or Crescent Corp.), shall have been executed by
New Crescent, Magellan and OpCo.
p. The Operating Agreement in the form attached to the
OpCo Contribution Agreement as Exhibit C, updated to
reflect any change in the name or form of
organization of New Crescent, the names of the
Directors and the source of the initial bank
financing referred to therein, and with all missing
information completed prior to execution thereof,
shall have been executed by New Crescent and
Magellan.
q. The Franchise Agreement in the form of Exhibit B and
B-1 to the OpCo Contribution Agreement (except that
(i) the "Territory" for each Franchise Owner, as such
term is defined in the Franchise Agreement, shall be
specified prior to execution thereof in accordance
with the criteria set forth on Schedule 6.1(b) to the
OpCo Contribution Agreement and as reasonably
determined by Magellan with input from the
individuals who have been designated to be the
President and the Chairman of the Governing Board of
OpCo, (ii) the identities and fees payable by each
Franchise Owner shall be specified prior to execution
thereof and (iii) all other missing information shall
be completed prior to execution thereof and
reflecting any change in the amount of the Franchise
Fee thereunder as mutually agreed by the parties)
shall have been executed by Magellan and, as
applicable, OpCo or
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the appropriate subsidiary of OpCo.
r. The Warrant Agreement in the form of Exhibit E to the
OpCo Contribution Agreement (updated to reflect any
change in the name or form of organization of
Crescent Corp. and with the number of shares issuable
under the Warrant completed and the exercise price
completed, reflecting the same premium as used to
calculate the exercise price for the warrants under
the Warrant Purchase Agreement, and based upon a
valuation of Crescent Corp. conducted by a mutually
agreed upon independent appraiser) shall have been
executed by Magellan and Crescent Corp.
10. The following new Section is added to Article 8 of the
Agreement:
8.4 Ownership Limitation on Purchaser. Both parties recognize that if
the principal partner of the Purchaser, CEI, which is a real estate investment
trust under sections 856 to 859 of the Internal Revenue Code of 1986, as
amended (the "CODE") (a "REIT"), were considered to own, directly or by
operation of certain attribution rules, a specified interest in OpCo and/or
entities owned by OpCo which are the Tenant under the Facilities Lease, the
rents to be received by the Purchaser would not constitute "rents from real
property" under section 856(d) of the Code for purposes of determining CEI's
compliance with certain requirements of being a REIT. Both parties agree that,
notwithstanding anything to the contrary in this Agreement or any of the other
Transaction Documents, neither the Purchaser, nor any other entity the assets
of which would be attributed to CEI for federal income tax purposes in any
period during which such entity owned such assets, has the right, option, or
obligation, directly or indirectly, (i) to enter into the OpCo Contribution
Agreement or (ii) otherwise to own any entities constituting such Tenant, and
any attempt to do so will be null and void ab initio. Both parties agree that
the failure of the Purchaser to cause the formation and distribution of an
entity substantially conforming to the description in Schedule 8.1(p) of the
Agreement shall not be considered (i) a breach entitling Seller to enforce
specific performance under Section 12.2(i) of the Agreement or (ii) a breach or
a failure to use commercially reasonable best efforts entitling Seller to
recover damages under the last sentence of Section 8.3 or under Section
12.2(ii) of the Agreement, but only if such failure by the Purchaser occurs in
reliance upon an opinion of Shaw, Pittman, Potts & Trowbridge to the Purchaser
that, if the Purchaser were to form and distribute an entity substantially
conforming to the description in Schedule 8.1(p) of the Agreement, the rents to
be received by the Purchaser would likely not constitute "rents from real
property" or if such formation and distribution would likely expose the
Purchaser to a tax exceeding $10 million under section 857(b)(5) of the
Internal Revenue Code of 1986, as amended.
11. Continuation of Agreement. The Agreement shall continue in
full force and effect as modified hereby. In the event of any conflicts or
inconsistencies between this Amendment (including all exhibits and Schedules
attached hereto) and the Agreement, the provisions of this Amendment shall
control.
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<PAGE> 54
12. Counterparts. This Amendment may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatories thereto and hereto were upon the same instrument. Signatures
may be transmitted by facsimile and will be accepted and considered effective
as long as such signatures are followed up with signature pages with original
signatures within two (2) business days thereafter.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by the parties hereto effective as of the date first above written.
CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Crescent Real Estate Equities, Ltd.,
a Delaware corporation,
its sole general partner
By: /s/ DALLAS B. LUCAS
---------------------------------
Name: Dallas B. Lucas
-------------------------------
Title: Chief Financial Officer
------------------------------
MAGELLAN HEALTH SERVICES, INC.,
a Delaware corporation
By: /s/ CRAIG MCKNIGHT
------------------------------------------
Name: Craig McKnight
----------------------------------------
Title: Executive Vice President/ CFO
---------------------------------------
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<PAGE> 55
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of OpCo Contribution Agreement
Schedule 8.1(p) Structure of New Crescent
14
<PAGE> 56
EXHIBIT A
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT, dated as of _________, 1997 (the
"AGREEMENT"), is entered into by and among Magellan Health Services, Inc., a
Delaware corporation ("MAGELLAN"), Crescent [OPPORTUNITY LIMITED PARTNERSHIP],
a [DELAWARE] limited partnership or [CRESCENT CORP.] ("CRESCENT"), and Charter
Behavioral Health Systems, LLC, formed under the laws of the State of Delaware
("OPCO").
WHEREAS, Magellan and Crescent Real Estate Equities Limited Partnership,
a Delaware limited partnership ("CREELP"), have entered into a Real Estate
Purchase and Sale Agreement dated January 29, 1997, as amended by the First
Amendment to Real Estate Purchase and Sale Agreement dated as of February 28,
1997 ("REAL ESTATE PURCHASE AND SALE AGREEMENT"), pursuant to which Magellan
has agreed to cause certain of its subsidiaries listed on Exhibit A to the Real
Estate Purchase and Sale Agreement to sell to CREELP, and CREELP has agreed to
purchase from those subsidiaries, certain of the real property, related
improvements, furniture, equipment and fixtures owned by those subsidiaries
(the "FACILITIES") and used in the operation of Magellan's acute care
psychiatric hospitals;
WHEREAS, Magellan and Crescent desire to operate and maintain OpCo to
(i) operate the Facilities and certain leased facilities (together, the
"HOSPITALS"); and (ii) engage in the business of hospital-based behavioral
healthcare using OpCo as the operating entity;
WHEREAS, it is a condition to the consummation of the Real Estate
Purchase and Sale Agreement and the other Transaction Documents (as defined in
the Real Estate Purchase and Sale Agreement) that Magellan cause its
subsidiaries listed on Exhibit A to this Agreement (each a "MAGELLAN
SUBSIDIARY" and together the "MAGELLAN SUBSIDIARIES") to contribute certain
assets to OpCo, and that Crescent contribute certain assets to OpCo, in
exchange for all of the interests in OpCo (the "CONTRIBUTION");
WHEREAS, upon closing of the transactions contemplated by this Agreement
and the Real Estate Purchase and Sale Agreement, (i) OpCo and Magellan will
enter into that certain Franchise Agreement, attached as Exhibit B to this
Agreement (the "FRANCHISE AGREEMENT") and will cause each OpCo Subsidiary (as
hereafter defined) to enter into that certain Franchise Agreement attached as
Exhibit B-1 (the "SUBSIDIARY FRANCHISE AGREEMENT" and, collectively with the
Master Franchise Agreement, the "FRANCHISE AGREEMENT"), (ii) Magellan and
Crescent will enter into that certain Operating Agreement of OpCo attached as
Exhibit C to this Agreement (the "OPCO LLC AGREEMENT"), and (iii) unless
financing is provided by a financial
<PAGE> 57
institution, OpCo and Magellan will enter into that certain Bridge Loan and
Security Agreement and Promissory Note attached as Exhibits D and D-1 to this
Agreement (the "BRIDGE LOAN AGREEMENT");
WHEREAS, in connection therewith, Crescent [OPPORTUNITY CORP.,] a
[DELAWARE] corporation ("CRESCENT CORP.") and Magellan also will enter into
that certain Warrant Purchase Agreement, attached as Exhibit E to this
Agreement (the "WARRANT AGREEMENT");
A G R E E M E N T:
In consideration of the mutual covenants contained in this Agreement the
parties agree as follows:
SECTION 1.
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires:
"BUSINESS" shall mean the business of the operation of an acute care
psychiatric hospital, part of an acute care general hospital operating an acute
care psychiatric unit, a behavioral healthcare residential treatment center, a
part of a facility operating a behavioral healthcare residential treatment
center, or other similar facility providing 24-hour behavioral healthcare, and
the delivery of behavioral healthcare from such facility and other affiliated
facilities; such behavioral healthcare to include inpatient hospitalization,
partial hospitalization programs, outpatient therapy, intensive outpatient
therapy, ambulatory detoxification, behavioral modification programs and
related services.
"CONTRIBUTION DATE" shall mean the moment in time immediately prior to
the Closing Date.
1.2 OTHER DEFINED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings given them in the Real Estate
Purchase and Sale Agreement.
SECTION 2.
CONTRIBUTION
2.1 CONTRIBUTION OF ASSETS RELATING TO THE HOSPITALS BY MAGELLAN.
On the Contribution Date, on the terms and subject to the conditions set forth
in this Agreement, and in consideration for a 50% interest in OpCo, Magellan
will cause the relevant Magellan Subsidiary
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to (either directly or through Magellan) contribute or assign to OpCo or a
relevant, wholly owned subsidiary of OpCo (an "OPCO SUBSIDIARY") all of such
Magellan Subsidiary's right, title and interest in the following assets (the
"CONTRIBUTED ASSETS") related to the Hospitals:
(a) All patient medical records;
(b) All licenses and permits used in the operation of the
Hospitals, to the extent that such licenses and permits are transferable;
(c) All of the leasehold interests held by any Magellan Subsidiary
as lessee, in real or personal property including, but not limited to:
(i) the leasehold interests in those Hospitals set forth
on Schedule 2.1(c)(i) and
(ii) the leasehold interests in the medical office
buildings set forth on Schedule 2.1(c)(ii);
(d) All of the furniture, fixtures equipment and leasehold
improvements owned by Magellan or a Magellan Subsidiary and located at a
Hospital set forth on Schedule 2.1(c)(i) or a medical office building set forth
on Schedule 2.1(c)(ii);
(e) All contracts with physicians and other healthcare
professionals;
(f) All operating, service, maintenance and loaned employee
contracts;
(g) All payor contracts including but not limited to contracts
with employers, health maintenance organizations, preferred provider
organizations, managed care companies, and insurance companies but excluding
all national and regional contracts with vendors and payors, the benefits of
which will be provided to OpCo by Magellan pursuant to the Franchise Agreement;
(h) The employment contract between Magellan and John M.
DeStefanis;
(i) The stock of Charter Medical Executive Corporation ("CMEC");
and
(j) Employment files and records.
2.2 EXCLUDED ASSETS. Magellan and Crescent expressly understand
and agree that neither Magellan nor any Magellan Subsidiary is conveying or
contributing to OpCo or any OpCo Subsidiary pursuant to Section 2.1 any of the
following assets, rights or properties or any assets which are not used in the
conduct of the business of the Hospitals (the "EXCLUDED ASSETS"):
(a) Supplies and inventory relating to the Hospitals;
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(b) Notes receivable relating to the Hospitals;
(c) Prepaid assets relating to the Hospitals;
(d) Prepaid expenses relating to the Hospitals;
(e) Lease deposits paid by either Magellan or any Magellan
Subsidiary as tenant in any lease relating to the Hospitals;
(f) Utility deposits relating to the Hospitals;
(g) Cash held in escrow accounts relating to the Hospitals;
(h) The capital stock of any subsidiary of Magellan (other than
CMEC) or Magellan's interest in any joint venture including but not limited to
the joint ventures set forth on Schedule 2.2(h);
(i) Corporate seals, minute books, stock ledgers or other books
and records pertaining to the organization, issuance of stock and
capitalization of the Magellan Subsidiaries;
(j) All rights, properties, and assets used by Magellan primarily
in a business other than the Business and not reasonably necessary for the
operation of the Business;
(k) All rights, properties, and assets that shall have been
transferred or disposed of by Magellan or any of its subsidiaries prior to the
date of this Agreement or prior to Closing in the ordinary course of business;
(l) Trademarks, trade names (including the "Charter" name),
corporate names and logos owned by Magellan and any of its subsidiaries;
(m) All real estate, furniture, fixtures and equipment to be
transferred to Crescent under the Real Estate Purchase and Sale Agreement;
(n) Any deferred tax asset of a Magellan Subsidiary at the Closing
Date;
(o) The Cocoon System (as defined in the Franchise Agreement)
including but not limited to all treatment protocols, written or unwritten, and
future improvements and modifications, whether made by Magellan, a Magellan
Subsidiary, OpCo or an OpCo Franchisee as defined in the Franchise Agreement;
(p) Policy and procedure manuals, written or unwritten, and future
improvements and modifications to such manuals, whether made by Magellan, a
Magellan Subsidiary, OpCo or an OpCo Subsidiary;
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<PAGE> 60
(q) All cash, cash equivalents, short-term investments, marketable
securities, and accounts receivable of Magellan and each Magellan Subsidiary;
(r) Patient related software systems;
(s) TRIMS system;
(t) Purchasing/ordering systems;
(u) Accounting systems;
(v) Call center system;
(w) Intellectual property rights;
(x) Tax refunds, cost report adjustments and settlements relating
to periods prior to the Closing Date and liabilities or assets related to
depreciation recapture relating to periods prior to the Closing Date;
(y) Disproportionate Share Payments; and
(z) Assets (including business records) required in order to
provide the services to be provided by Magellan pursuant to the Franchise
Agreement.
2.3 ASSUMED OBLIGATIONS. Magellan and Crescent expressly
understand and agree that all of the debts, obligations, duties and
liabilities, liquidated or unliquidated, contingent or fixed, relating to or
arising out of the operation of the Hospitals and the business of OpCo after
the Closing (as well as those in subsections (c) and (d) below) but excluding
each and every liability and obligation for which Magellan has agreed to
indemnify OpCo pursuant to Section 8 of this Agreement (the "ASSUMED
OBLIGATIONS") shall be assumed by OpCo as of the Contribution Date regardless
of whether such liabilities are accrued on the books of Magellan or a Magellan
Subsidiary, (or OpCo shall otherwise be responsible for such debts,
liabilities, duties and liabilities), including, without limitation, the
following:
(a) All such liabilities and obligations relating to the
Contributed Assets;
(b) All such liabilities and obligations relating to the Purchased
Assets (as hereafter defined);
(c) All liabilities and obligations relating to paid days off and
accrued vacation arising prior to the Contribution Date;
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(d) All liabilities and obligations relating to sick days arising
prior to the Contribution Date;
(e) All such liabilities and obligations (excluding any payment
obligations) arising from the Consent Decrees and Settlements listed on
Schedule 6.1(p) to the Real Estate Purchase and Sale Agreement;
(f) All such liabilities and obligations arising from OpCo's
participation in the contracts excluded from Section 2.1(f); and
(g) All such liabilities and obligations related to software
sublicensed to OpCo pursuant to the Franchise Agreement which are licensed from
third parties.
2.4 EXCLUDED LIABILITIES. Any and all liabilities of Magellan or
a Magellan Subsidiary arising prior to the Closing, except as set forth in
Section 2.3(c) and (d) (the "EXCLUDED LIABILITIES"), shall not be assumed by
OpCo and shall remain the liabilities and obligations of Magellan or the
relevant Magellan Subsidiary except to the extent covered by insurance, subject
to Section 8.1. Without limiting the effect of the foregoing, the term
"Excluded Liabilities" includes the following liabilities which arose or were
incurred prior to the Closing:
(a) Any liability or obligation in respect of any federal, state,
local, foreign or other tax, levy, assessment or other governmental charge,
including, without limitation, income, business, occupation, franchise,
property, payroll, personal property, sales, transfer, employment, occupancy,
franchise or withholding taxes, and any premium, including, without limitation,
interest, penalties and additions in connection therewith;
(b) Any liability (to the extent not covered by insurance) arising
from any injury to or death of any person or damage to or destruction of any
property, whether based on negligence, breach of warranty, strict liability,
enterprise liability or any other legal or equitable theory, arising from the
ownership or operation of the Hospitals or the services performed by Magellan
or any of its subsidiaries prior to the Closing;
(c) The charges and taxes which Magellan has agreed to pay
pursuant to Section 9.1 of this Agreement;
(d) Adjustments or refunds of payments required by Medicare,
Medicaid or any other payor as a result of payments prior to the Contribution
Date; and
(e) Fines or penalties assessed and arising out of activities
occurring prior to the Contribution Date.
2.5 CONTRIBUTION OF CASH BY CRESCENT. On the Contribution Date,
on the terms and subject to the conditions set forth in this Agreement and in
consideration for a 50% interest in
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OpCo, Crescent shall contribute to OpCo cash in the amount of $5.0 million (the
"CRESCENT CONTRIBUTION"), which is equal to the purchase price of the Purchased
Assets (as defined below).
SECTION 3.
PURCHASE OF CERTAIN ASSETS BY OPCO
3.1 ASSET PURCHASE. On the Closing Date, OpCo shall purchase from
Charter Medical Information Systems ("CMIS") the assets of CMIS listed on the
computer printout (the "PURCHASED ASSETS") delivered by Magellan to Crescent on
the date hereof, which computer printout is separately bound.
3.2 PURCHASE OF WORKING CAPITAL. On the Closing Date, OpCo shall
purchase (with payment to be made within two business days of purchase) from
the Magellan Subsidiaries the following assets (the "WORKING CAPITAL ASSETS")
relating to or used in the Hospitals and as the same exist on the Closing Date:
(a) Supplies and inventory relating to the Hospitals;
(b) Notes receivable relating to the Hospitals;
(c) Prepaid assets relating to the Hospitals;
(d) Prepaid expenses relating to the Hospitals;
(e) Lease deposits paid by either Magellan or any Magellan
Subsidiary as tenant in any lease relating to the Hospitals; and
(f) Utility deposits relating to the Hospitals.
3.3 PURCHASE PRICE. The aggregate purchase price for the
Purchased Assets is $5.0 million, and for the Working Capital Assets is $8.0
million (in the aggregate, the "PURCHASE PRICE"). On the Closing Date, OpCo
shall pay to Magellan or its designated subsidiary cash equal to $5.0 million,
with payment for the Working Capital Assets to be made within two business days
of the Closing Date from the proceeds of the financing contemplated by Section
7.4.
3.4 POST-CLOSING ADJUSTMENT. Within sixty (60) days after the
Closing Date, Magellan shall deliver to OpCo a statement (the "STATEMENT")
setting forth the net book value of the Working Capital Assets as of the
Closing Date, together with appropriate supporting information. The net book
value of the Working Capital Assets shall be calculated from the books and
records of Magellan, in accordance with past practice. OpCo shall have thirty
(30) days to deliver to Magellan any objections ("OBJECTIONS") it has to the
Statement. If OpCo does
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not submit any such Objections, the Statement shall become final. If OpCo does
deliver any Objections, Magellan and OpCo shall negotiate in good faith to
resolve the Objections as promptly as practical. In the event Magellan and
OpCo are unable to resolve the Objections within thirty (30) days after such
Objections are delivered to Magellan, the matter shall be referred to Arthur
Andersen LLP for final resolution of the Objections, which resolution shall be
binding upon the parties. Arthur Andersen LLP shall resolve the Objections as
promptly as practical, but in any event within forty-five (45) days. If at
any time the Objections to the Statement are resolved in any manner set forth
above, the Statement shall become final (the "FINAL STATEMENT"). If the Final
Statement shows that the amount of Working Capital Assets as of the Closing
Date are less than $8.0 million (the difference, the "SHORTFALL"), Magellan
shall promptly pay OpCo the amount of the Shortfall. If the Final Statement
shows that the Working Capital Assets as of the Closing Date are greater than
$8.0 million (the "SURPLUS"), OpCo shall promptly pay Magellan the amount of
the Surplus.
SECTION 4.
CONSIDERATION AND CLOSING
4.1 AMOUNT AND FORM OF CONSIDERATION. On the Closing Date (i) in
consideration of Magellan's transfer and contribution of the Contributed Assets
to OpCo, OpCo shall deliver to Magellan fifty percent (50%) of the issued and
outstanding capital equity interests in OpCo (the "MAGELLAN INTEREST"), and
(ii) in consideration of Crescent's transfer and contribution of the Crescent
Contribution to OpCo, OpCo shall deliver to Crescent fifty percent (50%) of the
issued and outstanding capital equity interests in OpCo (the "CRESCENT
INTEREST").
4.2 THE CLOSING.
(a) The Contribution shall occur on the date, at the time and
place, and subject to the conditions set forth in the Real Estate Purchase and
Sale Agreement and herein.
(b) On the Closing Date, Magellan, Crescent, OpCo and each OpCo
Subsidiary (as applicable) shall execute and deliver the following documents:
(i) the OpCo LLC Agreement;
(ii) the Franchise Agreement;
(iii) subject to Section 7.1(t) of the Real Estate Purchase
and Sale Agreement, the Bridge Loan Agreement;
(iv) the Warrant Agreement;
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(v) subject to obtaining any required consent, assignments
of the contracts and leases included in the Contributed Assets, the
Purchased Assets and the Working Capital Assets; and
(vi) such other instruments and documents, in form
and substance reasonably acceptable to Magellan and Crescent, as may
be necessary to effect the closing of the transactions contemplated by
this Agreement or to evidence the Contribution.
(c) On the Closing Date, Magellan shall execute and deliver to
OpCo the following:
(i) Assignments, bills of sale or other documents
or instruments of transfer to transfer to OpCo all tangible and
intangible personal property included in the Contributed Assets, the
Purchased Assets and the Working Capital Assets (which documents shall
include a general warranty to title of such assets except for those
assets which are leased, purchased on an installment basis or
encumbered by an Assumed Obligation);
(ii) Such instruments of assumption and other instruments
or documents as may be necessary to effect OpCo's assumption of the
Assumed Obligations; and
(iii) Such other instruments or documents as may be necessary
to effect the closing of the transactions contemplated by this
Agreement.
(d) At the closing, Crescent shall deliver by wire transfer, to
an account number designated by OpCo, the Crescent Contribution in immediately
available funds.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF MAGELLAN. Magellan
represents and warrants to OpCo, as of the date hereof as follows:
(a) ORGANIZATION AND POWER. Magellan and the Magellan
Subsidiaries are corporations or limited liability companies duly organized,
validly existing and in good standing under the laws of their respective states
of incorporation or formation, with power and authority to conduct the
businesses in which they are engaged, to lease and own the properties leased or
owned by them and to enter into and perform their obligations under this
Agreement. Each of Magellan and the Magellan Subsidiaries is qualified to do
business and is in good standing as a foreign corporation or limited liability
company in each jurisdiction where each of them is required to be so qualified,
except where the failure to so qualify would not have a material adverse effect
on a Hospital or on the business of the Hospitals taken as a whole.
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(b) AUTHORIZATION. The execution and delivery of this Agreement
by Magellan and the Magellan Subsidiaries, the performance by Magellan and the
Magellan Subsidiaries of all obligations under this Agreement and the sale and
delivery of the Contributed Assets, the Purchased Assets and the Working
Capital Assets have been duly authorized by all necessary corporate action on
the part of Magellan and the Magellan Subsidiaries. This Agreement has been
duly executed and delivered by Magellan and the Magellan Subsidiaries and
constitutes the legal, valid and binding obligation of each of them,
enforceable against each of Magellan and the Magellan Subsidiaries in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditor's
rights generally.
(c) NO VIOLATION. The execution and delivery of this Agreement by
Magellan and the Magellan Subsidiaries, and the consummation by Magellan and
the Magellan Subsidiaries of the transactions contemplated in this Agreement
will not conflict with or result in the breach or violation of any of the terms
or conditions of, or constitute (or with notice or lapse of time or both would
constitute) a default under, (i) the Certificate or Articles of Incorporation
or Bylaws of Magellan or any Magellan Subsidiary, (ii) except as set forth on
Schedule 5.1(c), any material instrument, contract or other agreement to which
Magellan or any Magellan Subsidiary is a party or by which Magellan or any
Magellan Subsidiary is bound, (iii) any material provision of law, statute,
rule or regulation of any court or governmental authority to which Magellan or
any Magellan Subsidiary is subject (assuming applicable approvals and consents
in Schedule 5.1(d) are obtained), or (iv) except as set forth on Schedule
5.1(c), any judgment, decree, franchise, order, license or permit applicable to
Magellan or any Magellan Subsidiary, except where such conflict, breach,
violation or default would not have a material adverse effect on a Hospital or
on the business of the Hospitals taken as a whole.
(d) CONSENTS. Except as set forth in Schedule 5.1(d), no material
consent, approval, license or authorization of any third party, governmental
agency, commission, board or public authority is required in connection with
the execution, delivery and performance of this Agreement by Magellan or any
Magellan subsidiary.
(e) INSURANCE. A complete and accurate schedule of all insurance
policies (including a statement of policy limits and deductibles) held by
Magellan and the Magellan Subsidiaries relating to the Hospitals or the
Business now in force, including, without limitation, malpractice, public
liability, property damage and workers compensation or other coverage, has been
made available to Crescent. All insurance policies remain in full force and
effect except where such failure to remain in full force and effect will not
have a material adverse effect on a Hospital or on the business of the
Hospitals taken as a whole.
(f) LITIGATION. Except as set forth in Schedule 5.1(f), there are
no lawsuits, proceedings, actions, arbitrations, claims or governmental
investigations, inquiries or proceedings pending or, to the knowledge of
Magellan, threatened, against Magellan or any Magellan Subsidiary seeking
damages for an amount in excess of $1 million, and there is no action, suit or
proceeding by any person or agency pending or, to the knowledge of Magellan,
threatened which questions the legality or validity of the transactions
contemplated hereby.
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(g) LICENSES, ACCREDITATION AND THIRD-PARTY PAYORS. Magellan and
the Magellan Subsidiaries hold all licenses, permits, registrations, approvals,
certificates, contracts, consents, accreditations, approvals and franchises
("LICENSES AND PERMITS") necessary to own or lease the Contributed Assets and
to conduct and operate the Hospitals in the manner presently operated and for
participation in the Medicare and Medicaid reimbursement programs, including,
without limitation, all licenses, certificates of need and permits required by
the state in which they operate and by all other appropriate health care
facility licensing agencies, federal, state, county or local governmental
authorities and regulatory agencies, except where the failure to hold such
Licenses and Permits would not have a material adverse effect on a Hospital or
on the business of the Hospitals taken as a whole.
(h) THE BUSINESS. Upon transfer to OpCo of the Contributed
Assets, the Purchased Assets and the Working Capital Assets, and consummation
of the transactions contemplated by the other Transactional Documents, (i) OpCo
will have or, through the Franchise Agreement, will have access to all tangible
and intangible assets and all personnel reasonably necessary to conduct a
business that is substantially the same as and that operates in accordance with
the same standards of operation as the business of the Hospitals prior to the
Closing, and (ii) OpCo will have the means to provide the services specified in
Section 7.9.
(i) CONTRACTS. Schedule 5.1(i) contains a listing of all
contracts or series of related contracts which are material to the business of
the Hospitals, taken as a whole ("MATERIAL CONTRACTS"), including all
amendments, modifications and side letters thereto, currently in existence.
With respect to each Material Contract, neither Magellan nor any Magellan
Subsidiary has received a notice of termination, has sent a notice of
termination, is in default, or has any knowledge that any other party to such
Material Contracts is in default thereunder.
(j) NO OTHER OWNED HOSPITALS. Except as described on Schedule
5.1(j), no Magellan Subsidiary owns or operates any Hospital other than the
Hospitals operated using the assets which are being contributed or sold
pursuant to this Agreement.
(k) FINANCIAL STATEMENTS. All books and records relating to
operating income and expenses of the Hospitals made available to CREELP or
Crescent by Magellan were and shall be those maintained by Magellan in regard
to the Hospitals in the normal course of business. The audited Financial
Statements as of and for the year ended September 30, 1996 (the "1996 FINANCIAL
STATEMENTS") furnished by Magellan to CREELP as a part of Magellan's Deliveries
(as defined in the Real Estate Purchase and Sale Agreement) have been prepared
from the books and records of Magellan in the ordinary course of business and
present fairly in all material respects the results of operations of Magellan
for the periods then ended and the financial condition of Magellan as of the
date of the 1996 Financial Statements.
(l) NO MATERIAL ADVERSE CHANGE. Since the date of Magellan's 1996
Financial Statements, there has been no material adverse change in the business
or results of operations of
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Magellan and the Magellan Subsidiaries taken as a whole or the business of the
Hospitals taken as a whole.
(m) SEC REPORTS. The periodic reports filed by Magellan with the
Securities and Exchange Commission with respect to Magellan's immediately
preceding fiscal year and any interim periods in its current fiscal year did
not as of their respective dates contain any untrue statements of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(n) COMPLIANCE WITH LAWS. Magellan has delivered to Crescent or
CREELP a draft dated __________, 1997 ("Proxy Statement") of its proxy
statement to shareholders for its Annual Meeting of Shareholders at which,
among other matters, shareholders of Magellan will consider and vote on the
transactions which are the subject of the Transaction Documents. Except as
described in the Proxy Statement, or in documents filed with the Securities and
Exchange Commission pursuant to applicable law, Magellan is not aware of any
material risk that Magellan is, in the conduct of the Business prior to the
closing of the transactions contemplated by the Transaction Documents or that
OpCo will be, in the conduct of the Business after the closing of the
transactions contemplated by the Transaction Documents, in violation of any
applicable federal law specifically designed to regulate the healthcare
industry, which violation will have a material adverse effect on Magellan or
OpCo.
5.2 REPRESENTATIONS AND WARRANTIES OF CRESCENT. Crescent hereby
represents and warrants to OpCo as follows:
(a) AUTHORIZATIONS, ETC. The execution and delivery of this
Agreement by Crescent and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of
Crescent, including its General Partner. This Agreement has been duly executed
and delivered by Crescent and constitutes the valid and binding obligation of
Crescent, enforceable against Crescent in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws of affecting creditor's rights generally.
(b) NO VIOLATION. Neither the execution and delivery of this
Agreement, nor the consummation by Crescent of the transactions contemplated
hereby will conflict with or result in the breach or violation of any of the
terms or conditions of, or constitute (or with notice or lapse of time or both
would constitute) a default under, (i) organizational documents, including the
Partnership Agreement of Crescent, (ii) any material instrument, contract or
other agreement to which Crescent is a party or by which Crescent is bound,
(iii) any material provision of law, statute, rule or regulation of any court
or governmental authority to which Crescent is subject, including any provision
relating to the status of Crescent Real Estate Equities Company ("CEI") as a
real estate investment trust, or (iv) any judgment, decree, franchise, order,
license or permit applicable to Crescent, except where such conflict, breach,
violation or default would not have a material adverse effect on Crescent.
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(c) CONSENTS. Except as set forth in Schedule 5.2(c), no material
consent, approval, license or authorization of any third party, governmental
agency, commission, board or public authority is required in connection with
the execution, delivery and performance of this Agreement by Crescent.
(d) SEC REPORTS. The periodic reports filed by CEI with the
Securities and Exchange Commission with respect to CEI's immediately preceding
fiscal year and any interim periods in its current fiscal year did not as of
their respective dates contain any untrue statements of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
SECTION 6.
CONDITIONS TO CLOSING
6.1 PRE-CLOSING CONDITIONS. The consummation of the transactions
contemplated by this Agreement by each party is subject to satisfaction of the
following conditions, as applicable:
(a) Satisfaction of all of the conditions to closing set forth in
the Real Estate Purchase and Sale Agreement;
(b) Execution of the Franchise Agreement in the form of Exhibit B
and B-1 hereto (except that (i) the "Territory" for each Franchise Owner (as
defined in the Franchise Agreement) shall be specified prior to execution
thereof in accordance with the criteria set forth on Schedule 6.1(b) and as
reasonably determined by Magellan with input from the individuals who have been
designated to be the President and the Chairman of the Governing Board of OpCo,
(ii) the identities and fees payable by each Franchise Owner shall be specified
prior to execution thereof and (iii) all other missing information shall be
completed prior to execution thereof and reflecting any change in the amount of
the Franchise Fee thereunder as mutually agreed by the parties);
(c) Execution of the OpCo L.L.C. Agreement in the form of Exhibit
C hereto, updated to reflect any change in the name or form of organization of
Crescent, the names of the Directors and the source of the initial bank
financing referred to therein and with all missing information completed prior
to execution thereof;
(d) Unless working capital financing has been obtained from a
financial institution as provided in Section 7.1(t) of the Real Estate Purchase
and Sale Agreement, execution of the Bridge Loan Agreement in the form of
Exhibit D and D-1;
(e) Execution of the Warrant Agreement in the form of Exhibit E
hereto (updated to reflect any change in the name or form of organization of
Crescent Corp. and with the number of
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shares issuable under the Warrant completed and the exercise price completed,
reflecting the same premium as used to calculate the exercise price for the
warrants under the Magellan Warrant Agreement, and based upon a valuation of
Crescent Corp. conducted by a mutually agreed upon independent appraiser); and
(f) The truth and accuracy in all material respects of the
representations and warranties made herein and compliance in all material
respects with all covenants and the delivery by each party of an officer's
certificate so stating.
6.2 FAILURE OF CONDITIONS. If any condition described in
subsections (a) - (f) of Section 6.1 is not satisfied by the Closing Date,
Crescent shall have the right to terminate this Agreement by giving written
notice of such action to Magellan and Magellan shall have the right to
terminate by giving written notice to Crescent. Upon delivery of any such
termination notice, this Agreement shall terminate, and all rights and
obligations of the parties hereunder shall be released and discharged, except
that Magellan, on the one hand, and Crescent, on the other hand, shall each
remain liable to the other for all damages suffered by the other if the
unsatisfied condition was due to a breach by one party of any of the covenants,
obligations, representations or warranties of such party in this Agreement or
any other failure by such party to use its commercially reasonable best efforts
to satisfy conditions precedent to Closing that are within the control of such
party to satisfy.
SECTION 7.
COVENANTS AND AGREEMENTS
Magellan covenants and agrees, and will cause each Magellan Subsidiary
to covenant and agree, and, as applicable, Crescent and OpCo covenant and agree
as follows:
7.1 UNLISTED ASSETS. To the extent that, subsequent to Closing,
an asset or right that is used in the conduct of the business of the Hospitals
prior to Closing and that was not listed as a Contributed Asset, Purchased
Asset, Working Capital Asset or an Excluded Asset is discovered to exist,
either such asset or right shall be conveyed to OpCo without charge or OpCo
shall receive the benefits of ownership of such asset through the Franchise
Agreement at no additional charge (except to the extent that the asset results
in an increase in franchise fees due to the gross revenue component of the
franchise fees);
7.2 ASSIGNMENT OR TRANSFER OF CONTRIBUTED ASSETS. To the extent
that any of the Contributed Assets cannot be assigned or otherwise transferred
to OpCo, Magellan will use its commercially reasonable best efforts to create
an alternative structure that will provide OpCo with substantially the same
rights, and produce substantially the same economic effect, as that which would
have been provided or produced if the Contributed Assets had been transferred
or assigned.
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7.3 PARTIES' COMMERCIALLY REASONABLE BEST EFFORTS. Magellan and
Crescent agree to use their commercially reasonable best efforts to cause all
their covenants and agreements and all conditions precedent to the consummation
of the Transactions contemplated by this Agreement to be performed, satisfied
and fulfilled.
7.4 INSURANCE RESERVES. Magellan will cause Plymouth Insurance
Company Ltd. ("PLYMOUTH") to maintain reserves in amounts that are reasonably
actuarially adequate to cover risks insured by Plymouth associated with the
operation of the business of the Hospitals.
7.5 ACCOUNTS RECEIVABLE. OpCo shall pay to Magellan all amounts
actually received by OpCo in payment of receivables relating to the business of
the Hospitals, which receivables were existing as of (or accrued prior to) the
Closing Date, in exchange for a fee payable to OpCo by Magellan equal to 5% of
receivables collected by OpCo and received by OpCo or Magellan. The
receivables will be collected in accordance with the procedures (including the
level of effort to be expended) established by Charter Behavioral Health
Systems, Inc. prior to the Closing Date and disclosed to OpCo in writing on or
before the Closing Date. Any receivables remaining uncollected 120 days or
more after the Closing Date will be turned over to Magellan at its request and
OpCo shall have no further obligations as to such receivables but will continue
collection efforts for all receivables not so delivered to Magellan.
7.6 BROKERS. Each party represents and warrants to the other that
it has not engaged, dealt with or otherwise discussed this Agreement or the
Transactions with any broker, agent or finder.
7.7 SPECIFIC PERFORMANCE. The parties acknowledge and agree that
their respective rights and obligations that will arise out of this Agreement
are unique and irreplaceable, and that the failure of either party to perform
its obligations under this Agreement or any of the Transaction Documents would
result in damage to the other party that could not be adequately compensated by
a monetary award. Subject to Section 8.4 of the Real Estate Purchase and Sale
Agreement but notwithstanding anything else to the contrary, the parties
therefore agree that if either party fails to perform its obligations hereunder
or with respect to any of the Transaction Documents, the other party may, in
addition to all other remedies, seek an order of specific performance from a
court of appropriate jurisdiction.
7.8 THIRD PARTY CONSENTS; FURTHER ASSURANCES.
(a) If any party shall fail to obtain any third party consent
necessary, proper or advisable to effect the consummation of the Contribution,
the purchase of the Purchased Assets or the purchase of the Working Capital
Assets, such party shall use all commercially reasonable best efforts, and
shall take any such actions reasonably requested by the other parties hereto,
to minimize any adverse effect upon OpCo's business resulting, or that could
reasonably be expected to result after the date hereof, from the failure to
obtain such consent.
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<PAGE> 71
(b) In addition to the actions, contracts and other agreements and
documents and other papers specifically required to be taken or delivered
pursuant to this Agreement, each of the parties hereto shall execute such
contracts and other agreements and documents and take such further actions as
may be reasonably required or desirable to carry out the provisions of this
Agreement.
7.9 SERVICES AGREEMENTS. Prior to closing, Magellan, in its
capacity as a joint venturer, will or will cause any Magellan Subsidiary which
is a joint venturer in any Joint Venture that owns or operates a domestic
Hospital, which Joint Ventures are set forth on Schedule 7.9 and defined in the
Franchise Agreement as "Existing Joint Ventures" (a "JOINT VENTURE"), to enter
into a services agreement with OpCo for each such Hospital owned or operated by
a Joint Venture, pursuant to which OpCo will perform, to the extent agreed by
joint venture partners, all of Magellan's obligations under the Joint Venture
agreement in exchange for the payment to OpCo by Magellan of all distributions
and fees paid to Magellan by or on behalf of the Joint Venture. Magellan will
use its commercially reasonable best efforts to obtain the consent of
Magellan's joint venture partners to the performance, by OpCo, of Magellan's
obligations under the Joint Venture Agreements. Each service agreement, as
referred to in this Section 7.9, shall be approved by Crescent, which approval
shall not be unreasonably withheld. The services agreement(s) shall continue
in effect until termination of the Facilities Lease.
7.10 EMPLOYEE BENEFITS. The parties agree to establish employee
benefit plans for the employees of OpCo providing for overall benefits in an
amount similar to the benefits provided by the employee benefit plans in effect
on the date hereof at Magellan and the Magellan Subsidiaries.
7.11 TITLE TO PROPERTY. Magellan and the Magellan Subsidiaries
shall convey at the Closing pursuant to the form of bill of sale attached as
Exhibit I to the Real Estate Purchase and Sale Agreement, (i) good and
marketable title to the Contributed Assets, the Purchased Assets and the
Working Capital Assets (to OpCo or such OpCo Subsidiary as OpCo directs) owned
by Magellan or a Magellan Subsidiary, subject to no liens, encumbrances or
material claims whatsoever, except for the Assumed Obligations and except for
any liens, encumbrances and claims related to the purchase of property on an
installment basis in the ordinary course of business, and (ii) all of their
rights and interest in the Contributed Assets, the Purchased Assets, and the
Working Capital Assets leased by Magellan or a Magellan Subsidiary.
7.12 RIGHT TO INSPECT. Magellan shall grant OpCo the right to
inspect any and all business records retained by Magellan pursuant to Section
2.2(z) during reasonable business hours and upon reasonable prior notice. OpCo
shall grant Magellan access to any business records transferred to OpCo during
reasonable business hours and upon reasonable prior notice.
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SECTION 8.
INDEMNIFICATION
8.1 INDEMNIFICATION OBLIGATIONS OF MAGELLAN. Magellan shall
indemnify and hold harmless OpCo and its subsidiaries and affiliates, each of
their respective officers, directors, partners, employees, agents and
representatives and each of the permitted successors and assigns of any of the
foregoing (collectively, the "OPCO INDEMNIFIED PARTIES") from, against and in
respect of any and all claims, liabilities, obligations, losses, costs,
expenses, penalties, fines and other judgments (at equity or at law) and
damages (including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) (collectively,
"CLAIMS AND DAMAGES") arising out of or relating to (i) any breach of any
representation, warranty, covenant, agreement or undertaking made by Magellan
in this Agreement or in any certificate, agreement, exhibit or schedule
delivered pursuant to this Agreement, or (ii) the ownership, lease or operation
of the Hospitals and attributable to events arising prior to the Closing
(including claims made after Closing related to events occurring prior to
Closing) other than Assumed Liabilities or liabilities to the extent they are
covered by existing insurance, provided, however, that if the insurer does not
pay insured amounts under the terms of the policies, Magellan shall indemnify
the OpCo Indemnified Parties for such debts, liabilities and obligations. The
Claims and Damages of the OpCo Indemnified Parties described in this Section
8.1 as to which the OpCo Indemnified Parties are entitled to indemnification
are hereinafter collectively referred to as "OPCO LOSSES." Notwithstanding
anything to the contrary contained herein, Magellan's indemnity obligations
hereunder will not extend to claims arising out of willful misconduct or fraud
of OpCo.
8.2 INDEMNIFICATION OBLIGATIONS OF OPCO. OpCo shall indemnify
and hold harmless Magellan and its subsidiaries and affiliates and each of
their respective officers, directors, partners, employees, agents and
representatives and each of the permitted successors and assigns of any of the
foregoing (collectively, the "MAGELLAN INDEMNIFIED PARTIES") from, against and
in respect of any and all Claims and Damages arising out of or relating to any
debts, liabilities and obligations relating to (i) the ownership, lease or
operation of the Hospitals and attributable to events which arise after the
Closing or (ii) the Assumed Obligations. The Claims and Damages of the
Magellan Indemnified Parties described in this Section 8.2 as to which the
Magellan Indemnified Parties are entitled to indemnification are hereinafter
collectively referred to as "MAGELLAN LOSSES." Notwithstanding anything to the
contrary contained herein, OpCo's indemnity obligations hereunder will not
extend to claims arising out of willful misconduct or fraud of Magellan.
8.3 INDEMNIFICATION PROCEDURE.
(a) Promptly after receipt by an OpCo Indemnified Party or a
Magellan Indemnified Party (each an "INDEMNIFIED PARTY") of notice by a third
party of any complaint or the commencement of any action or proceeding with
respect to which indemnification is being sought hereunder, such Indemnified
Party shall notify OpCo, if the Indemnified Party is a
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Magellan Indemnified Party, or Magellan, if the Indemnified Party is a OpCo
Indemnified Party (the "INDEMNIFYING PARTY"), of such complaint or of the
commencement of such action or proceeding; provided, however, that the failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party
from liability for such claim arising otherwise than under this Agreement and
such failure to so notify the Indemnifying Party shall relieve the Indemnifying
Party from liability which the Indemnifying Party may have under this Agreement
with respect to such claim if, but only if, and only to the extent that, such
failure to notify the Indemnifying Party results in the forfeiture by the
Indemnifying Party of rights and defenses otherwise available to the
Indemnifying Party with respect to such claim. The Indemnifying Party shall
have the right, upon written notice to the Indemnified Party, to assume the
defense of such action or proceeding, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of the
reasonable fees and disbursements of such counsel. In the event, however, that
the Indemnifying Party declines or fails to assume the defense of the action or
proceeding or to employ counsel reasonably satisfactory to the Indemnified
Party, in either case in a timely manner, then such Indemnified Party may
employ counsel to represent or defend it in any such action or proceeding and
the Indemnifying Party shall pay the reasonable fees and disbursements of such
counsel as incurred; provided, however, that the Indemnifying Party shall not
be required to pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any jurisdiction in any single action or proceeding. In
any action or proceeding with respect to which indemnification is being sought
hereunder, the Indemnified Party or the Indemnifying Party, whichever is not
assuming the defense of such action, shall have the right to participate in
such litigation and to retain its own counsel at such party's own expense.
The Indemnifying Party or the Indemnified Party, as the case may be, shall at
all times use reasonable efforts to keep the Indemnifying Party or the
Indemnified Party, as the case may be, reasonably apprised of the status of the
defense of any action, the defense of which it is maintaining and to cooperate
in good faith with the Indemnifying Party or the Indemnified Party, as the case
may be, with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of the Indemnifying
Party, unless such settlement, compromise or consent includes an unconditional
release of the Indemnifying Party from all liability arising out of such claim.
An Indemnifying Party may not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry of
any judgment with respect to which indemnification is being sought hereunder
unless such settlement, compromise or consent includes an unconditional release
of the Indemnified Party from all liability arising out of such claim and does
not contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Indemnified Party or any of
the Indemnified Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to
payment pursuant to this Agreement, such Indemnified Party shall send written
notice of such claim to the appropriate Indemnifying Party. Such notice shall
specify the basis for such claim. As promptly as possible after the
Indemnified Party has given such notice, such Indemnified Party and the
appropriate
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Indemnifying Party shall establish the merits and amount of such claim (by
mutual agreement, litigation, arbitration or otherwise) and, within five
business days of the final determination of the merits and amount of such
claim, the Indemnifying Party shall deliver to the Indemnified Party
immediately available funds in an amount equal to such claim as determined
hereunder.
(d) LIABILITY LIMITS. To the extent any claim for OpCo Losses
against Magellan is based upon the alleged inaccuracy of any representation or
warranty contained in Article 5 of this Agreement, then, for a period beginning
on the Closing Date and ending two years later, Magellan shall only be liable
for such OpCo Losses solely to the extent that any such OpCo Losses exceed in
the aggregate in any one year, one million dollars ($1,000,000.00). Beginning
two years after the Closing Date, Magellan shall be liable for such OpCo Losses
solely to the extent that any such OpCo Losses exceed in the aggregate during
such period, ten million dollars ($10,000,000.00); provided, however, that to
the extent a claim for OpCo Losses is not based on the inaccuracy of a
representation or warranty contained in Article 4 of this Agreement, then such
claim shall not be subject to the limitations above, nor shall the amount of
any such OpCo Losses be included with other OpCo Losses in determining whether
such basket amounts have been reached.
(e) CLAIM PERIODS. Indemnification obligations under this Article
7 for pre-closing and post-closing debts, liabilities or obligations and for a
breach of representations, warranties or covenants shall survive until
expiration of the applicable statute of limitations.
SECTION 9.
MISCELLANEOUS
9.1 FEES AND EXPENSES; TRANSFER COSTS. Fees and expenses incident
to the negotiation, preparation and execution of this Agreement and the
performance of the Contribution (including attorneys', accountants', financial
advisors' and other advisors' fees and disbursements) shall be borne by the
party incurring the expense. Magellan shall pay all sales, transfer and other
recording charges and conveyance taxes in connection with the transfer of the
Contributed Assets, the Purchased Assets and the Working Capital Assets to OpCo
and in connection with the transfer of any licenses or permits to OpCo.
9.2 NOTICES. Whenever any notice is required or permitted
hereunder, such notice shall be in writing and (a) sent by certified mail,
postage prepaid, return receipt requested, (b) given by established overnight
commercial courier for delivery on the next business day with delivery charges
prepaid or duly charged, (c) personally hand-delivered or (d) sent by
facsimile
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transmission with confirmation of receipt received, to the applicable address
or facsimile number set forth below:
(i) if to Crescent:
Gerald W. Haddock, Esq.
President and Chief Operating Officer
Crescent
777 Main Street
Suite 2100
Fort Worth, Texas 76102
Facsimile: (817) 878-0429
with a copy to:
David M. Dean, Esq.
Senior Vice President, Law
Crescent
777 Main Street
Suite 2100
Fort Worth, Texas 76102
Facsimile: (817) 878-0429
Wendelin A. White, Esq.
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Facsimile: (202) 663-8007
(ii) if to Magellan:
Steve J. Davis, Esq.
Executive Vice President,
Administrative Services and General Counsel
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Facsimile: (404) 814-5793
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<PAGE> 76
with a copy to:
Robert W. Miller, Esq.
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Facsimile:(404) 572-5100
Notices which are mailed shall be deemed effective upon receipt. Notices which
are hand-delivered shall be deemed effective upon tender to a natural person at
the address shown. Notices which are delivered by overnight courier shall be
deemed given on the next business day after delivery to such courier. Notices
which are delivered by facsimile transmission shall be deemed received upon
electronic confirmation of delivery.
9.3 ENTIRE AGREEMENT. This Agreement and the Transaction
Documents (together with the exhibits and schedules hereto and thereto)
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof, all of which are
null, void and of no force or effect.
9.4 WAIVERS AND AMENDMENTS. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions of this Agreement may be waived, only by a written instrument signed
by the parties hereto or, in the case of a waiver, by the party waiving
compliance.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware, without regard to the application of choice of law
principles. The rule that an Agreement should be construed against the party
drafting it shall not apply to this Agreement because all parties have played a
significant role in negotiating and drafting this Agreement.
9.6 SEVERABILITY. If any term, covenant or condition of this
Agreement is held to be invalid or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other provision, and this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained in this Agreement.
9.7 BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.8 NO ASSIGNMENT. This Agreement may not be assigned without the
prior written consent of the other party, except that Crescent shall assign all
of its rights and obligations hereunder to New Crescent.
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<PAGE> 77
9.9 ARBITRATION.
(a) Following Closing, any controversy, claim or question of
interpretation arising out of or relating to this Agreement or the breach
thereof shall be finally settled by arbitration in Delaware, under the
then-effective Commercial Arbitration Rules of the American Arbitration
Association as modified by this Agreement, and judgment on the award rendered
by the arbitrators may be entered in any court having jurisdiction. The award
rendered by the arbitrators shall be final and binding on the parties and not
subject to further appeal. Such arbitration can be initiated by written notice
by either party (the "CLAIMANT") to the other party, which notice shall
identify the Claimant's selected arbitrator. The party receiving such notice
(the "RESPONDENT") shall identify its arbitrator within ten (10) business days
following its receipt of such notice. The arbitrator selected by the Claimant
and the arbitrator selected by the Respondent shall, within ten (10) business
days of their appointment, select a third neutral arbitrator. In the event
that they are unable to do so, either party may request the American
Arbitration Association to appoint the third neutral arbitrator. The
arbitrators shall have the authority to award any remedy or relief that a court
in Delaware could order or grant, including, without limitation, specific
performance of any obligation created under this Agreement, the issuance of
injunctive or other provisional relief, or the imposition of sanctions for
abuse or frustration of the arbitration process. The arbitration award will be
in writing and specify the factual and legal basis for the award.
(b) The arbitrators shall instruct the non-prevailing party to pay
all costs of the proceedings, including the fees and expenses of the
arbitrators and the reasonable attorneys' fees and expenses of the prevailing
party. If the arbitrators determine that there is not a prevailing party, each
party shall be instructed to bear its own costs and to pay one-half of the fees
and expenses of the arbitrators.
9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
9.11 EXHIBITS AND SCHEDULES. The exhibits and schedules delivered
or to be delivered pursuant to this Agreement are a part of this Agreement as
if set forth in full within the Agreement.
9.12 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
- 22 -
<PAGE> 78
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CRESCENT
By:
-----------------------------------
Name:
Title:
MAGELLAN HEALTH SERVICES, INC.
By:
-----------------------------------
Name:
Title:
- 23 -
<PAGE> 79
SCHEDULE 8.1(P)
STRUCTURE OF NEW CRESCENT
Name: Crescent Opportunity Corp., or such other
name as Crescent Real Estate Equities Limited Partnership
("OPERATING PARTNERSHIP") shall approve ("NEW CRESCENT
CORP.").
Structure: Following the consummation of certain entity formation and
spin-off transactions, New Crescent Corp. shall be a
publicly held corporation, and may be the corporate parent
of a group of affiliated entities substantially similar to
the direct and indirect subsidiary of Crescent Real Estate
Equities Company ("CEI"). Without limiting the generality of
the foregoing, New Crescent Corp. may, directly or through a
wholly owned subsidiary, own a substantial (initially 99%)
limited partnership interest in an umbrella operating
partnership ("NEW CRESCENT OPERATING PARTNERSHIP") whose
sole general partner would be a second wholly owned
subsidiary ("NEW GENERAL PARTNER").
Management: New Crescent Corp.'s and New General Partner's senior
management to be same as CEI as follows:
Richard Rainwater Chairman
John C. Goff Vice Chairman
Gerald W. Haddock CEO
Rainwater, Goff and Haddock will also serve as directors of
New Crescent Corp. with three-year staggered terms.
Business: Long-term, strategic partnering with New Crescent Corp. and,
if applicable, New Crescent Operating Partnership provides
significant competitive advantage to CEI and Operating
Partnership to exploit large transactions with non-REIT
components. Shortly after the spin-off of New Crescent
Corp., New Crescent Corp. or New Crescent Operating
Partnership shall acquire (i) OpCo interest; (ii) tenant's
interest in six hotel and resort properties owned by
Operating Partnership, as well as tenant's interest in
subsequently acquired resort properties; and (iii) other
assets. The Operating Partnership will guarantee the
obligations of New Crescent Corp. or New Crescent Operating
Partnership (whichever entity holds the member interest in
OpCo) to (i) contribute $2.5 million in cash at closing and
(ii) make member loans up to the amount of $17.5 million.
<PAGE> 80
Capitalization: Capital structure and incentive compensation plans and
arrangements of New Crescent Corp. and, if applicable, New
Crescent Operating Partnership to be on an equivalent basis
with that of CEI and Operating Partnership (taken
together), subject to possible dilution for the acquisition
of the Hotel tenant assets described above, depending on
whether the hotel and resort tenants are acquired by
purchase or contribution.
Strategic As part of spin-off transaction, New Crescent Corp. or New
Partnering: Crescent Operating Partnership will enter into a long-term
(at least 15 years) investment opportunity and
non-competition agreement with Operating Partnership
providing for the following:
(i) a first right for Operating Partnership to participate
in the real estate component of all investment opportunity
generated by New Crescent Corp. or New Crescent Operating
Partnership.
(ii) a first right for New Crescent Corp. or New Crescent
Operating Partnership to lease resort and other properties
from Operating Partnership and provide management relating
thereto, and to participate in the operating/non-real
estate component of transactions developed by Operating
Partnership.
<PAGE> 81
SECOND AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS SECOND AMENDMENT TO REAL ESTATE PURCHASE AND SALE AGREEMENT (this
"AMENDMENT") is made as of the 29th day of May, 1997, by and between MAGELLAN
HEALTH SERVICES, INC., a Delaware corporation ("MAGELLAN" or the "SELLER"), and
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware limited
partnership (the "PURCHASER").
R E C I T A L S:
A. The parties entered into that certain Real Estate Purchase and Sale
Agreement dated as of January 29, 1997, as amended by First Amendment to Real
Estate Purchase and Sale Agreement dated as of February 28, 1997 (collectively,
the "AGREEMENT"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Agreement.
B. The parties desire to enter into this Amendment to evidence their
agreement to certain changes to the Agreement, as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
the parties hereby agree as follows:
1. Recitals in Agreement. Recital A of the Agreement is amended and
restated in its entirety as follows:
In connection with the transactions contemplated by this
Agreement, Magellan and the Purchaser have entered into that
certain Warrant Purchase Agreement of even date herewith pursuant
to which Magellan will issue warrants to Purchaser (the "WARRANT
PURCHASE AGREEMENT"). Magellan and the Purchaser have also agreed
that, following the execution of the Warrant Purchase Agreement
and this Agreement and pursuant to the terms hereof, they will
cause certain other documents to be executed, including, without
limitation, (i) that certain Operating Agreement of Charter
Behavioral Health Systems, LLC ("OPCO"), between Charter
Behavioral Health Systems, Inc., a Delaware corporation and a
wholly owned subsidiary of Magellan ("CHARTER INC."), and
Crescent Operating, Inc., a Delaware corporation ("NEW CRESCENT")
(the "OPERATING AGREEMENT"), (ii) that certain Contribution
Agreement among Magellan, OpCo and New Crescent (the "OPCO
CONTRIBUTION AGREEMENT"), (iii) that certain Master Franchise
Agreement among Magellan, Charter Franchise Services, LLC, a
Delaware corporation and a wholly owned subsidiary of Magellan
("CFS"), and OpCo (the "MASTER FRANCHISE AGREEMENT") and certain
additional Franchise Agreements among Magellan, CFS and certain
subsidiaries of OpCo (the "SUBSIDIARY FRANCHISE AGREEMENTS," and
collectively
<PAGE> 82
with the Master Franchise Agreement, the "FRANCHISE AGREEMENT"),
(iv) that certain Master Lease Agreement between Crescent Real
Estate Funding VII, L.P., a Delaware limited partnership and a
designee of the Purchaser ("Funding VII"), OpCo and certain
subsidiaries of OpCo (the "FACILITIES LEASE"), (v) that certain
Subordination Agreement by and among Magellan, CFS, Funding VII
and OpCo (the "SUBORDINATION AGREEMENT"), (vi) that certain
Warrant Purchase Agreement (the "WARRANT AGREEMENT") between
Magellan and New Crescent pursuant to which Magellan will issue
warrants to New Crescent, and (vii) that certain Warrant Purchase
Agreement (the "MAGELLAN WARRANT PURCHASE AGREEMENT") between
Magellan and New Crescent pursuant to which New Crescent will
issue warrants to Magellan (the Agreement, the First Amendment,
this Amendment, the Warrant Purchase Agreement, the Operating
Agreement, the OpCo Contribution Agreement, the Franchise
Agreement, the Facilities Lease, the Subordination Agreement, the
Warrant Agreement and the Magellan Warrant Purchase Agreement are
referred to collectively as the "TRANSACTION DOCUMENTS," and all
of the transactions contemplated hereby and thereby are referred
to collectively as the "TRANSACTIONS").
2. Addition of New Facility; Exclusion of Certain Facilities. (a) Magellan
has purchased two New Facilities, one located in Atlanta, Georgia, and
described on Exhibit A hereto (the "TALBOTT ANCHOR PROPERTY"), and the other
located in Olive Branch, Mississippi, and described on Exhibit B hereto (the
"OLIVE BRANCH PROPERTY"). Pursuant to Section 14.1(a) of the Agreement, the
Purchaser has elected to require Magellan to add such New Facilities to the
Facilities being acquired under the Agreement. Accordingly, from and after the
date hereof, the term the "Facilities" shall include, in addition to those
properties included within the definition thereof, the Talbott Anchor Property
and the Olive Branch Property (which terms shall include all real property and
rights and appurtenances thereto, and all tangible and intangible personal
property, including without limitation goodwill, acquired by Magellan in
connection with its acquisition of the Talbott Anchor Property and the Olive
Branch Property).
(b) In addition, Magellan has determined either that it desires to keep or
has disposed of those properties described on Exhibit B to the Agreement as (i)
GL# 558 LAUREL BROOK/Charter Laurel Heights Behavioral Health System, Inc.,
3920 North Peachford Road, Atlanta, Georgia, and (ii) GL#190 RIDGE/Charter
Ridge Behavioral Health System, Inc., Lake Herrington Lot #63 and #64,
Harrodsburg, Kentucky (collectively, the "EXCLUDED PROPERTIES"). Accordingly,
from and after the date hereof, the term the "FACILITIES" shall exclude the
Excluded Properties.
3. Adjustment of the Purchase Price. (a) In consideration of the addition
of the Talbott Anchor Property as described above, the Purchase Price shall be
increased by the sum of Twelve Million Four Hundred Thousand Dollars
($12,400,000), which Magellan hereby represents and warrants to be the amount
actually paid by Magellan for the Talbott Anchor Property. In consideration of
the addition of the Olive Branch Property as described above, the Purchase
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<PAGE> 83
Price shall be increased by the sum of Four Million Eight Hundred Thousand
Dollars ($4,800,000), which Magellan hereby represents and warrants to be the
amount actually paid by Magellan for the Olive Branch Property.
(b) There shall be no reduction of the Purchase Price in connection with
the exclusion of the Excluded Properties.
(c) As a result of the adjustments to the Purchase Price set forth above,
the Purchase Price is now Four Hundred Twelve Million Two Hundred Thousand
Dollars ($412,200,000).
4. Post-Closing Adjustments. Pursuant to Section 10.4 of the Agreement,
Magellan, Purchaser and OpCo agreed to apportion and pro-rate certain items
relating to the Facilities on and as of the Closing Date. However, the exact
dollar amount of a number of the items to be apportioned and pro-rated as of
the Closing Date will not be known until the exact Closing Date is determined
and bills and invoices received post-Closing have been received and reconciled.
Magellan, Purchaser and OpCo therefore agree that with respect to the items
provided for in subsections 10.4 (b) (Real Estate Taxes), (c) (Rents), (d)
(Security Deposits), and (e) (Other Expenses), Magellan and OpCo shall prorate
such amounts and pay and reconcile the same within forty-five (45) days
following the Closing Date in accordance with the provisions of the Agreement.
To the extent that errors are discovered in, or additional information becomes
available with respect to, the prorations and allocations made post-Closing
pursuant to this paragraph, the Seller and OpCo shall make such subsequent
adjustments as may be necessary to correct any inaccuracy; however, all
prorations (except for ad valorem taxes) shall be final within ninety (90) days
after Closing.
5. Covenants to Survive. The parties acknowledge and agree that due to
time constraints, certain of the covenants contained in the Agreement to have
been performed by Magellan prior to the Closing have not yet been fully
performed. The parties agree that the performance of certain of these covenants
will be an on-going process which will take place for a period of time
following the Closing. The parties thus agree that the covenants contained in
subsections 7.1 (k), (l), (s)(iii), (q) and (y) of the Agreement (the
"SURVIVING COVENANTS") shall survive the Closing. Magellan hereby covenants and
agrees to exercise its commercially reasonable best efforts to perform the
Surviving Covenants promptly following the Closing.
6. Cove Forge, Williamsburg, Pennsylvania Property. With respect to the
portion of the Facility located in Cove Forge, Williamsburg, Pennsylvania (the
"Former NME Cove Forge Parcel") which is owned in fee simple by a Magellan
Subsidiary (but excluding the real property and related improvements purchased
by a Magellan Subsidiary adjacent to such Facility on June 11, 1997), Magellan
agrees to cause the Magellan Subsidiary which owns the Former NME Cove Forge
Parcel to transfer and convey the Former NME Cove Forge Parcel to the Purchaser
or its affiliate at the Closing. There shall be no adjustment to the Purchase
Price in connection with the Former NME Cove Forge Parcel.
7. Allocations. The allocation of the Purchase Price required by Section
2.1 of the Agreement is attached hereto as Schedule 2.1.
-3-
<PAGE> 84
8. The Warrants. As provided in Section 2.1 of the Agreement and Section
1.2 of the Warrant Purchase Agreement, a portion of the Purchase Price has been
allocated to the Warrants. The amount of the Purchase Price allocated to the
Warrants is Twenty-Five Million Dollars ($25,000,000). The parties agree that
prior to the Closing, the Warrant Purchase Agreement will be amended, and the
Warrant Agreement entered into between Magellan and Crescent Operating, Inc.,
with the effect that one-half of the current rights under the Warrant Purchase
Agreement will inure to the benefit of each of (i) Crescent Real Estate
Equities Limited Partnership and (ii) New Crescent (collectively, the "WARRANT
PURCHASERS"). In connection with the Closing, each of the Warrant Purchasers
shall pay or cause to be paid to Magellan the sum of Twelve Million Five
Hundred Thousand Dollars ($12,500,000), for a total of Twenty-Five Million
Dollars ($25,000,000), as the Purchase Price for the Warrants, which amount
shall be credited against the Purchase Price payable pursuant to the Agreement.
9. Material Leases. The portion of Exhibit E to the Agreement entitled
List of and Rent Roll for Material Leases and List of Tenants under all Leases
is amended (i) to delete the fourth Material Lease listed thereon (Lease
Agreement dated September 23, 1996, by and between Charter Mission Viejo
Behavioral Health System, Inc., and Olive Crest Treatment Centers, Inc.), which
has been terminated since the execution date of the Agreement, and (ii) to add
one additional Material Lease, being that Lease Agreement dated December 29,
1986, between United Health Care of Kissimmee, Inc., d/b/a Park Place Hospital,
as landlord, and Mental Health Services of Osceola County, Inc., as tenant.
10. Amendment of First Amendment. Paragraph 5 of the First Amendment to
Real Estate Purchase and Sale Agreement is hereby deleted in its entirety and
the following substituted in lieu thereof:
Survival. Section 6.4 of the Agreement is amended to add, as the
new last sentence thereof, the following:
Notwithstanding the foregoing, the representations and warranties
set forth in (i) the first sentence of Section 6.1(b), (ii)
Section 6.1(bb), (iii) the first sentence of Section 6.2(b), and
(iv) Section 6.2(d) (all as set forth in this Amendment) shall
not survive the Closing except to the extent set forth in the
same or similar form in the OpCo Contribution Agreement. The
parties agree and acknowledge that Paragraph 10 of the First
Amendment to Real Estate Purchase and Sale Agreement shall not
survive the Closing.
11. Limitation of Right of First Refusal. In the event that Magellan makes
funds available for investment to OpCo pursuant to the terms of Section 3.1(b)
of any one or more of the Services Agreements to be entered into between
Magellan (or an affiliate of Magellan) and OpCo and to be dated June 17, 1997
(one Services Agreement for each of the nine joint ventures listed in Schedule
7.9 to the Contribution Agreement), Magellan and Purchaser agree that
Purchaser's right of first refusal pursuant to Section 14.2 of the Agreement
shall not be available with regard to any acquisition made with any such funds
that Magellan makes available for investment pursuant to Section 3.1 of any
such Services Agreement.
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<PAGE> 85
12. Effective Time on the Closing Date. The parties agree that all
prorations and adjustments shall be made as of 12:01 A.M. on June 17, 1997.
13. Continuation of Agreement. The Agreement shall continue in full force
and effect as modified hereby. In the event of any conflicts or inconsistencies
between this Amendment (including all exhibits and schedules attached hereto)
and the Agreement, the provisions of this Amendment shall control.
14. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatories thereto and hereto were upon the same instrument. Signatures
may be transmitted by facsimile and will be accepted and considered effective
as long as such signatures are followed up with signature pages with original
signatures within two (2) business days thereafter.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by
the parties hereto effective as of the date first above written.
CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, a Delaware limited
partnership
By: Crescent Real Estate Equities, Ltd.,
a Delaware corporation,
its sole general partner
By: /s/ David M. Dean
--------------------------------
Name: David M. Dean
------------------------------
Title: Senior Vice President,
Law and Secretary
-----------------------------
MAGELLAN HEALTH SERVICES, INC.,
a Delaware corporation
By: /s/ Linton Newlin
----------------------------------------
Name: Linton Newlin
----------------------------------------
Title: Secretary
----------------------------------------
Charter Behavioral Health Services, LLC, joins in this Amendment solely
for purposes of agreeing to be bound by the provisions of Paragraph 4 hereof.
CHARTER BEHAVIORAL HEALTH
SYSTEMS, LLC,
a Delaware limited liability company
By: /s/ Mark Ford
----------------------------------------
Name: Mark Ford
----------------------------------------
Title: Secretary
----------------------------------------
-5-
<PAGE> 86
EXHIBIT A
Description of the Talbott Anchor Property
[Exhibit omitted]
<PAGE> 1
EXHIBIT 10.24
LEASE AGREEMENT
BETWEEN
CANYON RANCH, INC.,
AN ARIZONA CORPORATION
AND
CANYON RANCH LEASING, L.L.C.,
AN ARIZONA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Demise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Percentage Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Net Lease Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 Place and Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Late Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Notice of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Adjustment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.4 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.5 Insurance Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.6 Definition of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.1 Condition of the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 Use of the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.3 Lessor to Grant Easements, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.4 Operating Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.5 FF&E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.6 Lessee's Obligation to Manage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.7 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.8 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.9 Limitation on Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.1 Compliance with Legal and Insurance Requirements, Etc . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Legal Requirement Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Environmental Matters and Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.1 Maintenance and Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.2 Encroachments, Restrictions, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<TABLE>
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ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.2 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.3 Worker's Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.4 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.6 Increase in Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.1 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.3 Damage During Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.2 Parties' Rights and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.3 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.4 Allocation of Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.5 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.6 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.2 Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16.4 Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Lessor's Right to Cure Lessee's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Subletting and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XXII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Officer's Certificates; Financial Statements; Lessor's
Estoppel Certificates and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XXIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Lessor's Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
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<S> <C>
ARTICLE XXIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XXV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XXVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Acceptance of Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XXVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XXVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conveyance by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XXIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Appraisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XXXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
31.1 Lessor May Grant Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
31.2 Breach by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XXXII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
32.1 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
32.2 Transfer of Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
32.3 Waiver of Presentment, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XXXIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XXXIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Compliance with Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XXXV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XXXVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
36.1 REIT Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
36.2 Personal Property Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
36.3 Sublease Rent Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
36.4 Sublease Tenant Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
36.5 Lessee Ownership Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XXXVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Lessor's Option to Terminate Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
(iii)
<PAGE> 5
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the
26th day of July 1996, by and between CANYON RANCH, INC., an Arizona corporation
("Lessor"), and CANYON RANCH LEASING, L.L.C., an Arizona limited liability
company ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor is the owner of certain "Leased Property" (as
hereinafter defined); and
WHEREAS, Lessee desires to lease the Leased Property for a term of one
hundred twenty (120) months; and
WHEREAS, Lessee has committed its capital and credit to the extent
described herein to allow Lessee to operate the Leased Property as a health and
fitness resort pursuant to the terms of this Lease and to comply with all the
provisions of the Management Agreement (as defined herein).
ARTICLE I
Demise. In consideration of the obligation of Lessee to pay rent as
herein provided and in consideration of the other terms, covenants, and
conditions of this Lease, Lessor does hereby LEASE, DEMISE, and LET unto
Lessee, and Lessee does hereby take and lease from Lessor, the Leased Property,
TO HAVE AND TO HOLD the Leased Property, together with all rights, privileges,
easements and appurtenances belonging to or in any way appertaining to the
Leased Property, for the term hereinafter provided, upon and subject to the
terms, conditions and agreements hereinafter contained.
ARTICLE II
Leased Property. The Leased Property is comprised of those certain
tracts or parcels of land situated in Pima County, Arizona, which are more
particularly described in Exhibit "A" attached hereto and made a part hereof
for all purposes, together with all and singular the rights and appurtenances
pertaining to such tracts and parcels, including any right, title and interest
of Lessor in and to adjacent strips or gores, streets, alleys or rights-of-way
and all rights of ingress and egress thereto (the foregoing properties are
hereinafter referred to collectively as the "Land"). The Leased Property shall
also include all buildings, fixtures and other improvements on the Land,
including specifically, without limitation, various guest accommodation units,
spa facilities, the life enhancement center, the health and healing center, an
office administration building, a dining lodge, and such other buildings and
improvements as are located thereon, all of which are commonly known as "Canyon
Ranch." The Land, together with the foregoing improvements, is hereinafter
referred to as the "Resort."
For and during the term of this Lease, but not thereafter, Lessor also
assigns unto Lessee all of Lessor's interest and estate in and to the following
items:
(a) All contracts for the use or occupancy of guest rooms
and/or the meeting, dining, spa or health facilities of the Resort;
(b) All service, maintenance, purchase orders and other
contracts pertaining to the ownership, maintenance, operation,
provisioning or equipping of the Resort, including warranties and
guaranties relating thereto (excluding, however, (i) any employment
agreements and (ii) any contracts with independent contractors who
perform medical, behavioral, spiritual, wellness or similar health-
related services at the Resort);
<PAGE> 6
(c) Lessor's interest as "Owner" under that certain
Management Agreement (the "Management Agreement") dated of even date
herewith, executed by and between Lessor, as owner, and Canyon Ranch
Management, L.L.C., an Arizona limited liability company, as Manager
(the "Manager");
(d) All licenses, franchises and permits used in or
relating to the ownership, occupancy or operation of any part of the
Resort;
(e) All software programs for accounting functions for
the general ledger, accounts payable, accounts receivable, and payroll
for the Resort;
(f) The owner's interest under all construction,
development and design contracts entered into in connection with the
construction of the Resort and all transferable warranties, guaranties
and bonds relating to the Resort or the acquisition, construction,
fabrication or installation thereof;
(g) All those certain Canyon Ranch Casitas Individual
Unit Management Agreements pertaining to the Canyon Ranch Casitas
(approximately 20);
(h) All those certain Canyon Ranch Casitas Property Owner
Membership Agreements (approximately 27);
(i) All those certain Canyon Ranch Estates Property Owner
Membership Agreements (approximately 29);
(j) That certain Canyon Ranch Casitas Common Element
Management Agreement;
(k) All Membership Agreements which entitle third-parties
to use the Resort;
(l) All oral or written agreements pursuant to which any
portion of the Land or Resort is used or occupied by anyone other than
Lessor (the property described in this clause does not include guest
occupancy agreements or membership agreements and is herein referred
to collectively as the "Leases");
(m) All engineering, maintenance and housekeeping
supplies, including soap, cleaning materials and matches; stationary
and printing; and other supplies of all kinds, whether used, unused or
held in reserve storage for future use in connection with the
maintenance and operation of the Resort;
(n) All food and beverage located at the Resort, whether
issued to the food and beverage department or held in reserve storage;
(o) All china, glassware, linens, silverware and
uniforms, whether in use or held in reserve storage for future use, in
connection with the operation of the Resort;
(p) All brochures, literature and other materials used in
connection with the marketing of the Resort;
(q) All of those certain Ten Year Membership Agreements
and Membership Agreements, related to the "Lifeshare" discount program,
of which approximately 167 "intervals" are outstanding;
(r) Certificate of grandfathered groundwater right Nos.
58-111555, 58-109687.0001 and 58-109352.0002; and
(s) All rights of Lessor as "Declarant" pursuant to that
certain (i) Amended and Restated Declaration of Covenants, Conditions
and Restrictions of
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<PAGE> 7
Canyon Ranch Estates; and (ii) Declaration of Covenants, Conditions
and Restrictions of Canyon Ranch Casitas.
All of Lessor's rights, benefits, and privileges with respect to the foregoing
items shall be vested in Lessee throughout the term of this Lease and, upon
termination of this Lease, for whatever reason, shall automatically revert to
Lessor without the necessity of any action on the part of Lessor hereunder.
This Lease is executed by Lessor and accepted by Lessee on the
understanding that Lessee will and does hereby assume and agree to perform all
of Lessor's obligations as owner under the Management Agreement.
ARTICLE III
Term. The term of this Lease shall commence on the effective date of
execution of this Lease (the "Commencement Date") and shall end on the last day
of the one hundred twentieth (120th) month following the month in which this
Lease commences, unless sooner terminated in accordance with the provisions
hereof.
ARTICLE IV
So long as this Lease remains in force and effect, Lessee promises to
pay to Lessor, in lawful money of the United States of America which shall be
legal tender for the payment of public and private debts, in immediately
available funds, rents, in the manner, at the time, and in the amounts
specified below:
4.1 Base Rent. The monthly base rent (the "Base Rent") payable
during the term of this Lease shall be as follows:
<TABLE>
<CAPTION>
MONTHLY BASE RENT
-----------------
YEAR JANUARY-MAY JUNE-AUGUST SEPTEMBER-DECEMBER
---- ----------- ----------- ------------------
<S> <C> <C> <C>
1 through 7 $482,760 $134,100 $301,725
8 through 10 $556,800 $154,667 $348,000
</TABLE>
Base Rent shall be payable in monthly installments in arrears in the amounts
set forth above with the first monthly installment due and payable on or before
the last day of August 1996, and a monthly installment to be due and payable on
the last day of each and every month thereafter through and including July 31,
2006. Base Rent for any period during the term of this Lease which is less
than one (1) month shall be a pro-rata portion of the applicable monthly
installment.
4.2 Percentage Rent.
(a) Pursuant to the terms and conditions of this Section
4.2, Lessee shall also pay Lessor Percentage Rent for each fiscal
year. For the first seven years of this lease, the term "Percentage
Rent," as used herein, shall mean the sum of:
(i) the product determined by multiplying (x) 15%, by (y) the
amount, if any, by which the Gross Receipts for the fiscal
year exceed $29,000,000.00 (provided, however, in no event
shall the amount determined under this subparagraph (y) exceed
$4,000,000.00);
-3-
<PAGE> 8
(ii) the product determined by multiplying (x) 11%, by (y) the
amount, if any, by which the Gross Receipts for the fiscal
year exceed $33,000,000.00 (provided, however, in no event
shall the amount determined under this subparagraph (y) exceed
$7,000,000.00); and
(iii) the product determined by multiplying (x) 8.5%, by (y)
the amount, if any, by which the Gross Receipts for the fiscal
year exceed $40,000,000.
For years eight through ten of this Lease, the term "Percentage Rent"
shall mean the sum of:
(i) the product determined by multiplying (x) 20%, by (y) the
amount, if any, by which the Gross Receipts for the fiscal
year exceed $29,000,000 (provided, however, in no event
shall the amount determined under this subparagraph (y) exceed
$4,000,000.00); and
(ii) the product determined by multiplying (x) 16%, by (y) the
amount, if any, by which the Gross Receipts for the fiscal
year exceed $33,000,000 (provided, however, in no event shall
the amount determined under this subparagraph (y) exceed
$7,000,000.00);and
(iii) the product determined by multiplying (x) 15%, by (y) the
amount, if any, by which the Gross Receipts for the fiscal
year exceed $40,000,000.00.
(b) For any fiscal year which has less than twelve (12)
full calendar months, the Percentage Rent for such partial fiscal year
shall be computed in the following manner:
(i) the Gross Receipts for such partial fiscal year shall be
multiplied by twelve (12), and such product shall be divided
by the actual number of calendar months (including a fraction
for any partial month) in said fiscal year;
(ii) using the formula set forth in paragraph (a) above,
Percentage Rent shall be calculated on the amount determined
in subparagraph (i) of this paragraph (b); and
(iii) the amount determined in subparagraph (ii) of this
paragraph (b) shall be multiplied by the number of calendar
months (including a fraction for any partial month) in such
fiscal year, and such product shall be divided by twelve (12).
(c) To the extent the Owner's Remittance Amounts received
by Lessee with respect to any calendar quarter exceed the Base Rent
paid or payable by Lessee to Lessor for such quarter, Lessee shall
remit and pay such amount to Lessor as an advance payment of
Percentage Rent; provided, however, in no event shall such payment
exceed the Ceiling Amount. Such advance payments, if any, of
Percentage Rent shall be paid to Lessor on a quarterly basis on the
last day of the month following each calendar quarter. The first such
advance payment of Percentage Rent shall be due on or before October
31, 1996, and each succeeding payment shall be due on the last day of
each and every January, April, July and October thereafter through and
including July 31, 2006.
(d) For any given quarter, the Ceiling Amount shall be
the amount determined by
(i) dividing Gross Receipts for the quarter in
question, by estimated annual Gross Receipts for the current
fiscal year;
-4-
<PAGE> 9
(ii) by multiplying the result in (i) by the Floor;
and
(iii) subtracting $37,500.00 from the product in
(ii), but in no event shall the Ceiling Amount be a negative
number.
The estimated annual Gross Receipts for the current fiscal year shall
be determined by adding (i) the actual cumulative Gross Receipts for
any previous quarters in such fiscal year as reported by the Manager;
(ii) the actual Gross Receipts for the quarter in question; and (iii)
the Manager's most current estimate of Gross Receipts for the
remaining quarters in the current fiscal year.
(e) (i) The term "fiscal year" shall have the same
meaning as set forth in the Management Agreement.
(ii) The term "Floor" shall mean the amount of
Percentage Rent as calculated pursuant to paragraph (a) above
based on the estimated annual Gross Receipts for the current
fiscal year.
(iii) The term "Gross Receipts" shall have the same
meaning as set forth in the Management Agreement.
(iv) The term "Owner's Remittance Amount" shall
have the same meaning as set forth in the Management
Agreement.
(f) Lessee shall submit to Lessor by the last day of each
month a written statement signed and certified by Lessee to be
correct, showing Gross Receipts during the preceding month. Lessee
shall submit to Lessor by the sixtieth (60th) day after the end of
each calendar year a written statement signed and certified by Lessee
to be correct, showing Gross Receipts during the preceding calendar
year (the "Annual Gross Receipts Report"). Lessee's monthly and
annual written statement of Gross Receipts shall contain such detail
and breakdown as Lessor may reasonably require. If, after notice from
Lessor and the expiration of the cure period provided for herein,
Lessee fails to submit the aforesaid statements to Lessor when due,
Lessor, in addition to any other remedies Lessor has, shall have the
right to retain a certified public accountant, at Lessee's sole
expense, to prepare such statements and to perform all inspections and
audits related thereto. In the event the Annual Gross Receipts Report
discloses that the actual Percentage Rent exceeds the advance payments
of Percentage Rate to Lessor with respect to such year, Lessee shall
within fifteen (15) days of notice from Lessor remit the difference to
Lessor. In the event the advance payments of Percentage Rent paid to
Lessor with respect to a calendar year exceed the actual Percentage
Rent based upon the Annual Gross Receipts Report, Lessor shall refund
the difference within fifteen (15) days of notice from Lessee. The
adjustments set forth in the preceding two grammatical sentences shall
be subject to any further adjustments that may be made pursuant to the
provisions of Section 4.2(h) below.
(g) Lessee shall maintain in a manner and form
satisfactory to Lessor, during the term of this Lease, and for a
period of three (3) consecutive years thereafter, complete and
accurate general books of account, which shall reflect Gross Receipts,
and which shall include, if used by Lessee, without limitation,
original invoices, sales records, sales slips, sales checks, sales
reports, cash register tapes, records of bank deposits, inventory
records prepared as of the close of the Lessee's accounting period,
sales and occupation tax returns and all other original records and
other pertinent papers which will enable Lessor to determine the Gross
Receipts derived by Lessee during the term of this Lease.
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Such records for the three (3) most recent years shall be maintained
at the Leased Property or Lessee's corporate headquarters.
(h) The acceptance by Lessor of the advance payments of
Percentage Rent (pursuant to paragraph (c) above) or any additional
payment of Percentage Rent (pursuant to paragraph (f) above) shall not
prejudice Lessor's right to an examination of Lessee's records of
Gross Receipts for any period for which Lessee is required to maintain
records to verify Gross Receipts. Lessor shall have the right to
examine Lessee's records during all regular business hours upon
reasonable prior notice. Lessee, upon reasonable prior notice, shall
make available to Lessor for examination any other records required to
be maintained hereunder. If the audit of the books and records by
Lessor discloses that Gross Receipts were underreported by Lessee by
two and one-half percent (2.5%) or more for any period covered by the
audit, Lessee shall promptly pay to Lessor, as Additional Rent, the
cost of the audit, in addition to any deficiency in Percentage Rent
that may be due. If the audit discloses that Gross Receipts were
underreported by Lessee by less than two and one-half percent (2.5%)
for such period, Lessee shall promptly pay to Lessor the deficiency,
and Lessor shall pay the cost of the audit. If the audit discloses
that Gross Receipts were underreported by Lessee by five percent (5%)
or more for such period, Lessor shall have the option, exercisable
within sixty (60) days of its discovery of the discrepancy, to
consider such event as an Event of Default. The provisions of this
Section shall survive the expiration of the term of this Lease or the
earlier termination hereof for a period of one (1) year thereafter.
4.3 Additional Charges. In addition to the Base Rent and the
Percentage Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions (as defined
hereinbelow) that Lessee assumes or agrees to pay under this Lease, and (b) in
the event of any failure on the part of Lessee to pay any of those items
referred to in clause (a) of this Section 4.3, Lessee also will promptly pay
and discharge every fine, penalty, interest and cost that may be added for
non-payment or late payment of such items (the items referred to in clauses (a)
and (b) of this Section 4.3 being additional rent hereunder and being referred
to herein collectively as the "Additional Charges") and Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided either in
this Lease or by statute or otherwise in the case of non-payment of the
Additional Charges as are available in the case of non-payment of the Base Rent
or the Percentage Rent. To the extent that Lessee pays any Additional Charges
to Lessor pursuant to any requirement of this Lease, Lessee shall be relieved
of its obligation to pay such Additional Charges to the entity to which they
would otherwise be due and Lessor shall pay same from monies received from
Lessee.
4.4 Net Lease Provisions. The rent shall be paid absolutely net
to Lessor so that this Lease shall yield to Lessor the full amount of the
installments of Base Rent, Percentage Rent, and all Additional Charges
throughout the term of this Lease, all as more fully set forth in Article V
hereinbelow, but subject to any other provisions of this Lease that expressly
provide for adjustment or abatement of rent or other charges or expressly
provide that certain expenses or maintenance shall be paid or performed by
Lessor.
4.5 Place and Manner of Payment. Subject to the further
provisions hereof, the rent hereunder shall be payable to Lessor at the
original or changed address of Lessor set forth in Article XXIX hereof or to
such other person at such address as Lessor may designate from time to time in
writing.
4.6 Late Charge. If Lessor fails to pay any regular monthly
installment of Base Rent, Percentage Rent, or any Additional Charges within
fifteen (15) days after Lessor has notified Lessee in writing that such
installment or charge is overdue, then in addition to the past due amount
Lessee shall pay to Lessor a late charge of five percent (5%) of the
installment or amount due in order to compensate Lessor for the extra
administrative expenses incurred.
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ARTICLE V
Quiet Enjoyment. Lessor has full right to make this Lease and,
subject to the terms and provisions of this Lease, Lessee shall have quiet and
peaceable enjoyment of the Leased Property during the term hereof. Except as
otherwise specifically provided in this Lease, Lessee, to the maximum extent
permitted by law, shall remain bound by this Lease in accordance with its terms
and shall neither take any action without the written consent of Lessor to
modify, surrender or terminate the same, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of the rent, or setoff against the
rent, nor shall the obligations of Lessee be otherwise affected by reason of
(a) any damage to or destruction of the Leased Property or any portion thereof
from whatever cause, (b) the lawful or unlawful prohibition of, or restriction
upon Lessee's use of the Leased Property, or any portion thereof, or the
interference with such use by any person, corporation, partnership or other
entity or by reason of eviction by paramount title, (c) any claim which Lessee
has or might have against Lessor by reason of any default or breach of any
warranty by Lessor under this Lease or any other agreement between Lessor and
Lessee, or to which Lessor and Lessee are parties, (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or any assignee
of or transferee of Lessor, or (e) for any other cause whether similar or
dissimilar to any of the foregoing other than a discharge of Lessee from any
such obligations as a matter of law. Lessee hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law to (i) modify, surrender or terminate this Lease or
quit or surrender the Leased Property or any portion thereof, or (ii) entitle
Lessee to any abatement, reduction, suspension or deferment of the rent or
other sums payable by Lessee hereunder, except as otherwise specifically
provided in this Lease. The obligations of Lessee hereunder shall be separate
and independent covenants and agreements and the rent and all other sums
payable by Lessee hereunder shall continue to be payable in all events unless
all the obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
ARTICLE VI
6.1 Payment of Impositions. Subject to Article XII relating to
permitted contests, Lessee will pay, or cause to be paid, all Impositions (as
defined hereinbelow) before any fine, penalty, interest or cost may be added
for non-payment, such payments to be made directly to the taxing or other
authorities where feasible, and will promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments. If any
such Imposition may, at the option of the obligor, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid balance of
such Imposition), Lessee may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in installments and
in such event, shall pay such installments during the term hereof (subject to
Lessee's right of contest pursuant to the provisions of Article XII) as the
same respectively become due and before any fine, penalty, premium, further
interest or cost may be added thereto. If any refund shall be due in respect
of any Imposition paid by Lessee, the same shall be paid over to or retained by
Lessee if no Event of Default shall have occurred hereunder and be continuing.
If an Event of Default shall have occurred and be continuing, any such refund
shall be paid over to or retained by Lessor. Any such funds retained by Lessor
due to an Event of Default shall be applied as provided in Article XVI. Lessor
and Lessee shall, upon request of the other, provide such data as is maintained
by the party to whom the request is made with respect to the Leased Property as
may be necessary to prepare any required returns and reports.
6.2 Notice of Impositions. Lessor shall give prompt Notice to
Lessee of all Impositions payable by Lessee hereunder of which Lessor at any
time has knowledge, provided that Lessor's failure to give any such Notice
shall in no way diminish Lessee's obligations
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hereunder to pay such Impositions, but such failure shall obviate any default
hereunder for a reasonable time after Lessee receives Notice of any Imposition
which it is obligated to pay.
6.3 Adjustment of Impositions. Impositions imposed in respect of
the tax-fiscal period during which the term of this Lease terminates shall be
adjusted and prorated between Lessor and Lessee, whether or not such Imposition
is imposed before or after such termination, and Lessee's obligation to pay its
prorated share thereof after termination shall survive such termination.
6.4 Utility Charges. Lessee will be solely responsible for
obtaining and maintaining utility services to the Leased Property and will pay
or cause to be paid all charges for electricity, gas, oil, water, sewer and
other utilities used in the Leased Property during the term of this Lease.
6.5 Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverages required to be maintained by it under
Article XIII.
6.6 Definition of Impositions. The term "Impositions," as used
herein, means, collectively, all taxes (including, without limitation, all ad
valorem, sales and use, single business, gross receipts, transaction privilege,
rent or similar taxes as the same relate to or are imposed upon Lessee or its
business conducted upon the Leased Property), assessments (including, without
limitation, all 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 and also any assessments imposed on the Leased
Property by any property owners' association, condominium association or other
such private association, or otherwise as a result of private deed restrictions
affecting the Leased Property), ground rents, water, sewer or other rents and
charges, excises, tax inspection, authorization and similar fees and all other
such charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Lessee (including all
interest and penalties thereon caused by any failure in payment by Lessee),
which at any time prior to, during or with respect to the term hereof may be
assessed or imposed on the Leased Property, or any part thereof or any rent
therefrom or any estate, right, title or interests therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity
conducted on or in connection with the Leased Property, or the leasing or use
of the Leased Property or any part thereof by Lessee. Nothing contained in
this definition of Impositions shall be construed to require Lessee to pay (1)
any tax based on net income (whether denominated as a franchise or capital
stock or other tax) imposed on Lessor or any other person, or (2) any net
revenue tax of Lessor or any other person, or (3) any tax imposed with respect
to the sale, exchange or other disposition by Lessor of any Leased Property or
the proceeds thereof, or (4) any single business, gross receipts (other than
tax on any rent received by Lessor from Lessee), transaction, privilege or
similar taxes as the same relate to or are imposed upon Lessor, except to the
extent that any tax, assessment, tax levy or charge that Lessee is obligated to
pay pursuant to the first sentence of the definition and that is in effect at
any time during the term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (1) or (2) is levied,
assessed or imposed expressly in lieu thereof.
ARTICLE VII
7.1 Condition of the Leased Property. Lessee acknowledges receipt
and delivery of possession of the Leased Property. Lessee has examined and
otherwise has knowledge of the condition of the Leased Property and has found
the same to be satisfactory for its purposes hereunder. Lessee is leasing the
Leased Property "as is" in its present condition. Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property.
LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
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OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE
ACKNOWLEDGES THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS
SATISFACTORY TO IT. Provided, however, to the extent permitted by law, Lessor
hereby assigns to Lessee all of Lessor's rights to proceed against any
predecessor-in-title, contractor, subcontractor or supplier for breaches of
warranties or representations or for latent defects in the Leased Property.
Lessor shall fully cooperate with Lessee in the prosecution of any such claim,
in Lessor's or Lessee's name, all at Lessee's sole cost and expense. Lessee
hereby agrees to indemnify, defend and hold harmless Lessor from and against
any claims, obligation and liabilities against or incurred by Lessor in
connection with such cooperation.
7.2 Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise its best efforts to obtain and to maintain
all approvals needed to use and operate the Leased Property under
applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased
Property only as a health and fitness resort, and for such other uses
as may be necessary or incidental to such use or such other use as
otherwise approved by Lessor (the "Primary Intended Use"). Lessee
shall not use the Leased Property or any portion thereof for any other
use without the prior written consent of Lessor, which consent may be
granted, denied or conditioned in Lessor's sole discretion. No use
shall be made or permitted to be made of the Leased Property, and no
acts shall be done, which will cause the cancellation or increase the
premium of any insurance policy covering the Leased Property or any
part thereof (unless another adequate policy satisfactory to Lessor is
available and Lessee pays any premium increase), nor shall Lessee sell
or permit to be kept, used or sold in or about the Leased Property any
article which may be prohibited by law or fire underwriter's
regulations. Lessee shall, at its sole cost, comply with all of the
requirements pertaining to the Leased Property of any insurance board,
association, organization or company necessary for the maintenance of
insurance, as herein provided, covering the Leased Property.
(c) Subject to the provisions of Articles XIV, XV, and
XXI, Lessee covenants and agrees that during the term of this Lease it
will (1) operate continuously the Leased Property as a health and
fitness resort, (2) keep in full force and effect and comply with all
the provisions of the Management Agreement, (3) not terminate or amend
the Management Agreement without the consent of Lessor, and (4)
maintain appropriate certifications and licenses for such use.
(d) Lessee shall not commit or suffer to be committed any
waste on the Leased Property (normal wear and tear excepted), nor
shall Lessee cause or permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased
Property or any portion thereof to be used in such a manner as (1)
might reasonably tend to impair Lessor's (or Lessee's, as the case may
be) title thereto or to any portion thereof, or (2) may reasonably
make possible a claim or claims of adverse usage or adverse possession
by the public, as such, or of implied dedication of the Leased
Property or any portion thereof, except as necessary in the ordinary
and prudent operation of the Resort on the Leased Property.
7.3 Lessor to Grant Easements, Etc. Lessor will, from time to
time, so long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost
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and expense (but subject to the approval of Lessor, which approval shall not
be unreasonably withheld or delayed), (a) grant easements and other rights in
the nature of easements with respect to the Leased Property to third parties,
(b) release existing easements or other rights in the nature of easements which
are for the benefit of the Leased Property, (c) dedicate or transfer unimproved
portions of the Leased Property for road, highway or other public purposes, (d)
execute petitions to have the Leased Property annexed to any municipal
corporation or utility district, (e) execute amendments to any covenants and
restrictions affecting the Leased Property and (f) execute and deliver to any
person any instrument appropriate to confirm or effect such grants, releases,
dedications, transfers, petitions and amendments (to the extent of its
interests in the Leased Property), but only upon delivery to Lessor of a
certificate from Lessee stating that such grant, release, dedication, transfer,
petition or amendment is not detrimental to the proper conduct of the business
of Lessee on the Leased Property and does not materially reduce the value of
the Leased Property.
7.4 Operating Supplies. On the Commencement Date, all Operating
Supplies (as defined below) shall be transferred from Lessor to Lessee so that
they accompany the Leased Property. During the term of this Lease, Lessee, at
its sole cost and expense, shall furnish and maintain at the Leased Property
all Operating Supplies necessary or desirable for the operation of the Leased
Property in accordance with the provisions of this Lease and the Management
Agreement. Lessee, at its sole cost and expense, shall maintain and replace
the Operating Supplies so that substantially the same quantities of such items
that existed on the Commencement Date shall be available to Lessor on the
termination of this Lease. Upon the termination of this Lease, the Operating
Supplies shall be transferred from Lessee to Lessor so that they accompany the
Leased Property. The term "Operating Supplies," as used herein, shall mean all
food, beverages and other consumable items used in the operation of the Resort
such as fuel, engineering, maintenance and housekeeping supplies, soap,
cleaning materials, matches, stationery and printing, brochures, literature,
folios and all other similar items, together with all substitutions and
replacements thereto.
7.5 FF&E. Throughout the term of this Lease, Lessee shall
establish and maintain a reserve account (the "Capital Improvement Reserve")
which at all times will have in it sufficient funds to satisfy the reserve
requirements set forth in Section 5.4 of the Management Agreement. If at any
time during the term of the Lease, any item of FF&E requires replacement, then
Lessee shall lease or purchase the required replacements from an unrelated
third-party. Any purchased additions to or replacements of furniture,
fixtures, and equipment located at the Leased Property shall become part of the
FF&E. Throughout the term of this Lease, Lessee shall, at its sole cost and
expense and in accordance with the requirements of the Management Agreement,
cause all of the items of FF&E to be in proper working order and in good
condition (ordinary wear and tear excepted). The term "FF&E" shall mean all
furniture and furnishings, vehicles, equipment (including office equipment,
exercise equipment, medical and/or health equipment and property management
equipment as necessary), but excluding uniforms, tools and utensils, and china,
glassware, linens, silverware and the like, all as set forth and defined in the
Management Agreement. At all times, Lessee shall own the purchased FF&E;
however, upon termination of this Lease, Lessee shall be obligated to transfer
and assign such FF&E pursuant to the following terms:
(a) In the event the Lease is terminated for any reason,
Lessee shall be obligated to sell, transfer, and assign the FF&E to
such person or entity designated by Lessor (the "Designee"), at a
purchase price equal to the then existing Fair Market Value of the
FF&E. Purchased FF&E includes both FF&E purchased by Lessee during the
term of this lease and FF&E purchased by Lessee from Lessor on the
commencement of the lease. No later than three calendar days after the
termination of the Lease Lessee shall assign, by Bill of Sale, the
FF&E to the Designee. If the Lessee and Designee agree on the Fair
Market Value of the FF&E, upon the delivery of the Bill of Sale, (i)
the Designee shall assume all remaining obligations of Lessee under
that certain Promissory Note which is secured by said FF&E, in the
original principal amount of $2,400,000.00 (as reduced by the payment
described in (iii) below, if applicable), and, whichever is applicable,
(ii) the Designee shall pay Lessee the amount by which the Fair
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Market Value of the FF&E exceeds the outstanding balance of the
Promissory Note, or (iii) the Lessee shall pay Lessor the amount by
which the outstanding balance of the Promissory Note exceeds the Fair
Market Value of the FF&E. If the Lessee and Designee have not agreed
on the Fair Market Value of the FF&E, then the purchase price shall be
paid to Lessee at the time and in the manner set forth in the
following paragraphs (b) and (c).
(b) If Designee and Lessee do not agree on the then
existing Fair Market Value of the FF&E, each party shall designate a
Qualified Appraiser to render a written opinion as to the then
existing fair market value of FF&E, which opinion of value shall be
delivered no later than forty-five (45) days after the termination of
the Lease. If either party fails to deliver its written appraisal of
value to the other within said forty-five (45) day period, the Fair
Market Value shall be the value set forth in the appraisal of the
party who did render and deliver such written appraisal within said
period. A Qualified Appraiser shall be a firm or person who has at
least ten (10) years of experience appraising personalty similar to
the FF&E. If the written appraisals of Lessee and Designee differ by
less than 10% (as determined by dividing the difference in the two
values by the lower of the two values), the Fair Market Value shall be
the average of Lessee's and Designee's appraised values. If the
difference between the two appraised values is greater than or equal
to 10% (as determined by dividing the difference in the two values by
the lower of the two values), the two designated appraisers shall
mutually agree on a third Qualified Appraiser who shall render a
written opinion as to the Fair Market Value of the FF&E within thirty
(30) days of its selection. In such case, the Fair Market Value of
the FF&E shall be the average of (a) the third Qualified Appraiser's
appraised value; and (b) the written appraisal of Lessee or Designee
which is closest in dollars to the third appraiser's written
appraisal.
(c) Within ten (10) days after the Fair Market Value is
determined under the preceding paragraph (b), the purchase price for
the FF&E shall be paid as follows:
(i) If the Fair Market Value of the FF&E exceeds the
outstanding balance of the Promissory Note as of the date of
the termination of the Lease, the Designee shall pay Lessee
such difference and shall assume the outstanding balance of
the Promissory Note; and
(ii) If the Fair Market Value of the FF&E is less
than the outstanding balance of the Promissory Note as of the
date of the termination of the Lease, the Lessee shall pay
such difference to Lessor, and the Designee shall assume the
outstanding balance of the Promissory Note.
(d) Any FF&E leased by Lessee shall be leased pursuant to
a lease that allows a successor lessee to assume such lease. Upon termination
of this Lease, Lessee shall assign such FF&E leases to the successor lessee.
7.6 Lessee's Obligation to Manage. At all times during the term
hereof, Lessee shall be responsible for the management and operation of the
Leased Property, and in no event shall Lessor have any obligation with respect
to the management or operation of the Leased Property.
7.7 Net Worth. Lessee covenants that it shall at all times during
the term of this Lease maintain a "net worth" which shall be equal to no less
than $200,000.00. For purposes hereof, "net worth" shall mean the sum of (i)
the aggregate cash and fair market value of any property (other than cash)
contributed to the capital of Lessee by its owners (net of amounts distributed
other than distributions out of earnings of Lessee), and (ii) the aggregate
balances of any line of credit (A) obtained by Lessee and guaranteed by one or
more of the owners of Lessee or (B) obtained by the owners of Lessee to fund
capital contributions to the Lessee (to the extent not already included in
(i)), to the extent such funds may be utilized by Lessee to
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perform its obligations under the Lease and to comply with the terms of the
Management Agreement, and (iii) any commitments of (A) the owners of Lessee, or
(B) any person with an option to acquire an interest in Lessee, to make
additional capital contributions to Lessee, and (iv) the guaranty by (A) the
owners of Lessee, or (B) any person with an option to acquire an interest in
Lessee, of the obligations of Lessee under the Lease. Lessee shall provide
Lessor with an annual written certification of its compliance with the
foregoing requirement on the Commencement Date and the first day of each
subsequent year of this Lease hereunder; provided, however, that Lessor may, in
addition, request more than once during any year of this Lease that Lessee
provide Lessor with a certification as of the date of such request of its
compliance with the foregoing requirement. Such certifications must be
reasonably satisfactory to Lessor as to matters certified therein and shall be
accompanied by such supporting financial information as Lessor may reasonably
request.
7.8 Ownership. Lessee covenants that neither it nor any person
owning any interest (or fraction thereof) in Lessee will acquire a greater than
6% ownership interest in Lessor (or any affiliate thereof), or any person
holding an ownership interest in Lessor (including by reason of the
constructive ownership rules described below), without Lessor's prior written
consent. For purposes of determining under this Section 7.8 ownership in
Lessor, in Lessee or in any other person, the constructive ownership rules
specified in Section 856(d)(5) of the Internal Revenue Code of 1986, as
amended, shall apply.
7.9 Limitation on Distributions. Lessee covenants that, until
such time as (i) Lessee has accumulated and is holding in reserve funds which
are sufficient in an amount to enable Lessee to pay (A) at least one (1) month
of Base Rent based on the largest monthly payment of Base Rent applicable to
such year as set forth in Article 4.1 hereof, plus (B) at least one (1) monthly
payment of Base Rent based on the largest monthly payment of Base Rent for such
lease year under all other leases between Lessor and Lessee, and (ii) any
Affiliate of Lessee has accumulated and is holding in reserve funds which are
sufficient in an amount to enable such Affiliate to pay at least one (1) monthly
payment of base rent under all leases between such Affiliate and Lessor, Lessee
shall retain all income generated by the Leased Property and shall not
distribute any earnings to its beneficial owners except as needed for federal
and state income taxes payable on taxable income from the Leased Property. In
no event, however, shall any amounts be payable to the beneficial owners of
Lessee if any such payment would result in a violation of Lessee's net worth
covenants set forth in Article 7.7 hereinabove. For purposes of this Section
7.9, an Affiliate of Lessee shall mean (i) any entity that directly or
indirectly owns, controls, or holds with power to vote, twenty percent (20%) or
more of the outstanding voting securities of the Lessee; (ii) any entity, twenty
percent (20%) or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by the Lessee; or
(iii) any entity which holds an option to acquire twenty percent (20%) or more
of the outstanding voting securities of the Lessee; or (iv) any entity, fifty
percent (50%) or made of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by the owners of
Lessee.
7.10 Transfer of Lifeshare Property. On or after the commencement
of this Lease, Lessee will acquire fee simple title to certain Casita and
Hacienda units which are used in connection with the operation of the Resort,
which units are described on Exhibit "B" attached hereto and are hereinafter
referred to as the "Lifeshare Units." At such time that Lessee acquires the
Lifeshare Units, Lessee will also acquire certain rights, contracts and
agreements which relate to the Lifeshare Units, which rights, contracts and
agreements are described on Exhibit "C" attached hereto and hereinafter
collectively referred to as the Lifeshare Agreements. The Lifeshare Units and
the Lifeshare Agreements are hereinafter collectively referred to as the
"Lifeshare Property." In the event that the Lease is terminated for any
reason, Lessee shall be obligated to sell, convey, transfer and assign the
Lifeshare Property to such person or entity designated by Lessor (the
"Designee"), at a purchase price (the "Purchase Price") equal to the product
determined by multiplying (a) ten (10), by (b) the Profit derived from the
Lifeshare Property for the twelve (12) month period ending in the month
immediately preceding the month in which the Lease is terminated. For purposes
of this Section 7.10, the term "Profit" shall have the same meaning as set
forth in Section 5.2 of the Management Agreement; provided, however, that only
such items of income and expense that relate directly to the operations of the
Lifeshare Property shall be used in computing Profit. No later than three (3)
calendar days after the
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termination of the Lease, (i) Lessee shall assign, by Bill of Sale and/or
Assignment of Contracts, the Lifeshare Agreements to the Designee; and (ii)
Lessee shall convey, by Special Warranty Deed, the Lifeshare Units to the
Designee; all of which Lifeshare Property shall be conveyed free and clear of
all liens, encumbrances, restrictions, rights of way, easements and any other
matters affecting title, except for certain permitted exceptions set forth on
Exhibit "D" attached hereto. Upon the delivery of the Special Warranty Deed,
Bill of Sale and/or Assignment of Contracts, (i) the Designee shall assume all
remaining obligations of Lessee under that certain Promissory Note secured by
said Lifeshare Property, in the original principal amount of Six Hundred
Forty-Eight Thousand Six Hundred Seventy-Two and No/100 Dollars ($648,672.00)
(as reduced by the payment described in (iii) below, if applicable), which note
is executed by Lessee in favor of Crescent Real Estate Equities Limited
Partnership ("Crescent"), and, whichever is applicable, (ii) the Designee shall
pay Lessee the amount by which the Purchase Price exceeds the outstanding
balance of the Promissory Note, or (iii) the Lessee shall pay Crescent the
amount by which the outstanding balance of the Promissory Note exceeds the
Purchase Price of the Lifeshare Property.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, Etc.
Subject to Article XII relating to permitted contests, Lessee, at its expense,
will promptly (a) comply with all applicable legal requirements and insurance
requirements in respect to the use, operation, maintenance, repair and
restoration of the Leased Property, and (b) procure, maintain and comply with
all appropriate licenses and other authorizations required for any use of the
Leased Property then being made, and for the proper erection, installation,
operation and maintenance of the Leased Property or any part thereof.
8.2 Legal Requirement Covenants. Lessee covenants and agrees that
the Leased Property shall not be used for any unlawful purpose, and that Lessee
shall not permit or suffer to exist any unlawful use of the Leased Property by
others. Lessee shall acquire and maintain all appropriate licenses,
certifications, permits and other authorizations and approvals needed to
operate the Leased Property in its customary manner for the Primary Intended
Use, and any other lawful use conducted on the Leased Property as may be
permitted from time to time hereunder. Lessee further covenants and agrees
that Lessee's use of the Leased Property and maintenance, alteration, and
operation of the same, and all parts thereof, shall at all times conform to all
legal requirements, unless the same are finally determined by a court of
competent jurisdiction to be unlawful (and Lessee shall cause all sub-tenants,
invitees or others to so comply with all legal requirements). Lessee may,
however, upon prior Notice to Lessor, contest the legality or applicability of
any such legal requirement or any licensure or certification decision if Lessee
maintains such action in good faith, with due diligence, without prejudice to
Lessor's rights hereunder, and at Lessee's sole expense. If by the terms of
any such legal requirement compliance therewith pending the prosecution of any
such proceeding may legally be delayed without the incurrence of any lien,
charge or liability of any kind against the Leased Property or Lessee's
leasehold interest therein and without subjecting Lessee or Lessor to any
liability, civil or criminal, for failure so to comply therewith, Lessee may
delay compliance therewith until the final determination of such proceeding.
If any lien, charge or civil or criminal liability would be incurred by reason
of any such delay, Lessee, on the prior written consent of Lessor, which
consent shall not be unreasonably withheld, may nonetheless contest as
aforesaid and delay as aforesaid provided that such delay would not subject
Lessor to criminal liability and Lessee both (a) furnishes to Lessor security
reasonably satisfactory to Lessor against any loss or injury by reason of such
contest or delay and (b) prosecutes the contest with due diligence and in good
faith.
8.3 Environmental Matters and Indemnities. Lessee must, at its
sole cost and expense, keep and maintain the Leased Property in compliance
with, and must not cause the Leased Property to be in violation of, any
federal, state, and local laws, regulations, rules, and orders including
without limitation those relating to zoning, health, safety, noise,
environmental
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protection, water quality, air quality, or the generation, processing, storage,
or disposal of any Hazardous Materials. Moreover, Lessee will not
intentionally cause or permit the storage, use, disposal, manufacture,
discharge, leakage, spillage or emission of any Hazardous Materials on, in, or
about the Leased Property. Lessee must immediately notify Lessor in writing of
its actual knowledge of: (a) any enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened in
connection with the Leased Property and any Hazardous Materials; or (b) any
claim made or threatened by any third party against Lessee or the Leased
Property relating to damage, contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Materials that could cause all or any
portion of the Leased Property to be subject to any restrictions on the
ownership, occupancy, transferability or use of the Leased Property under
Hazardous Materials Law (as hereinafter defined). Without Lessor's prior
written consent, which consent must not be unreasonably withheld or delayed,
Lessee will not take any remedial action in response to the presence of any
Hazardous Materials on, in, or under or about the Leased Property, nor enter
into any settlement agreement, consent decree or other compromise in respect to
any Hazardous Materials except as may be necessary to comply with all laws,
rules, regulations or orders of any applicable governmental authorities.
Lessee indemnifies and holds Lessor, its employees, agents, officers
and directors, harmless from and against any claim, action, suit, proceeding,
loss, cost, damage, liability, deficiency, fine, penalty, punitive damage or
expense (including, without limitation, attorneys' and consultant fees),
directly or indirectly resulting from, arising out of, or based upon (a) the
presence, release, use, manufacture, generation, discharge, storage or disposal
by Lessee (or its sublessees, contractors, licensees, concessionaires, guests,
invitees, employees, agents or representatives) of any Hazardous Material on,
under, in or about, or the transportation of any such materials to or from the
Leased Property occurring from and after the Commencement Date, or (b) the
violation, or alleged violation by Lessee (or its sublessee, contractors,
licensees, concessionaires, guests, invitees, employees, agents or
representatives) of any Hazardous Materials Law affecting the Leased Property,
or the transportation by Lessee (or its sublessees, contractors, licensees,
concessionaires, guests, invitees, employees, agents or representatives) of
Hazardous Materials to or from the Leased Property, save and except to the
extent that such violations, alleged violations or transportation of Hazardous
Materials occurred prior to the Commencement Date of this Lease, or were not
caused by Lessee (or its sublessees, contractors, licensees, concessionaires,
guests, invitees, employees, agents or representatives).
"Hazardous Materials Law", for purposes of this Lease, means any
federal, state, or local law, ordinance or regulation or any court judgment
applicable to Lessee or to the Leased Property relating to industrial hygiene
or to environmental conditions including, but not limited to, those relating to
the release, emission or discharge of Hazardous Materials, those in connection
with the construction, fuel supply, power generation and transmission, waste
disposal or any other operations or processes relating to the Leased Property.
"Hazardous Materials Law" includes, but is not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Hazardous
Materials Transportation Act, the Resources Conservation and Recovery Act, the
Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, and any
amendments to these laws or enactments of other laws occurring after the date
hereof.
"Hazardous Materials," for purposes of this Lease Agreement, includes
flammable explosives, radioactive materials, polychlorinated biphenyls,
asbestos in any form which is or could become friable, hazardous wastes, toxic
substances or other related material whether in the form of a chemical,
element, compound, solution, mixture or otherwise including, but not limited
to, those materials defined as "hazardous substances," "hazardous materials,"
"toxic substances," "air pollutants," "toxic pollutants," "hazardous wastes,"
"extremely hazardous wastes" or "restricted hazardous wastes" by Hazardous
Materials Law, other than common cleaning compounds, solvents and other
materials kept in de minimis amounts incidental to the use of the Leased
Property and in compliance with Hazardous Materials Law.
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<PAGE> 19
ARTICLE IX
9.1 Maintenance and Repair.
(a) Lessee, at its sole expense, will keep the Leased
Property in good order and repair, except for ordinary wear and tear
(whether or not the need for such repairs occurred as a result of
Lessee's use, any prior use, the elements or the age of the Leased
Property, or any portion thereof), and, except as otherwise provided
in Article XIV or Article XV, with reasonable promptness, make all
necessary and appropriate repairs, replacements, and improvements
thereto of every kind and nature, whether interior or exterior,
ordinary or extraordinary, foreseen or unforeseen or arising by reason
of a condition existing prior to the commencement of the term of this
Lease (concealed or otherwise), or required by any governmental agency
having jurisdiction over the Leased Property. Lessee, however, shall
be permitted to prosecute claims against Lessor's
predecessors-in-title, contractors, subcontractors and suppliers for
breach of any representation or warranty or for any latent defects in
the Leased Property to be maintained by Lessee unless Lessor is
already diligently pursuing such a claim. All repairs shall, to the
extent reasonably achievable, be at least equivalent in quality to the
original work. Lessee will not take or omit to take any action, the
taking or omission of which might materially impair the value or the
usefulness of the Leased Property or any part thereof for its Primary
Intended Use.
(b) Notwithstanding Lessee's obligations under Article
9.1(a) hereinabove, in the event that (i) repairs, replacements and/or
improvements of the Leased Property become necessary in order to
maintain the Resort in the same quality and condition as it currently
exists, (ii) such repairs, replacements and/or improvements are under
generally accepted accounting principles considered to be capital in
nature, and (iii) the funds then available to Lessee at the Leased
Property, either in the form of reserves or other income generated by
the Leased Property and available to Lessee under the terms of the
Management Agreement, are insufficient to enable Lessee to pay the
costs of making any such repairs, replacements and/or improvements,
then Lessor shall be required to bear the cost of making such repairs,
replacements and/or improvements. Except as set forth in the
preceding sentence, Lessor shall not under any circumstances be
required to build or rebuild any improvements on the Leased Property,
to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether
ordinary or extraordinary, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, in connection with this
Lease, or to maintain the Leased Property in any way. Lessee hereby
waives, to the extent permitted by law, the right to make repairs at
the expense of Lessor pursuant to any law in effect at the time of the
execution of this Lease or hereafter enacted. Lessor shall have the
right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter
existing.
(c) Nothing contained in this Lease and no action or
inaction by Lessor shall be construed as (1) constituting the request
of Lessor, expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the performance of any labor
or services or the furnishing of any materials or other property for
the construction, alteration, addition, repair or demolition of or to
the Leased Property or any part thereof, or (2) giving Lessee any
right, power or permission to contract for or permit the performance
of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim
against Lessor in respect thereof or to make any agreement that may
create, or in any way be the basis of any right, title, interest,
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<PAGE> 20
lien, claim or other encumbrance upon the estate of Lessor in the
Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination
of the term of this Lease, vacate and surrender the Leased Property to
Lessor in the condition in which the Leased Property was originally
received from Lessor, except as repaired, rebuilt, restored, altered
or added to as permitted or required by the provisions of this Lease
and except for ordinary wear and tear (subject to the obligation of
Lessee to maintain the Leased Property in good order and repair, as
would a prudent owner, during the entire term of the Lease), or damage
by casualty or condemnation (subject to the obligations of Lessee to
restore or repair as set forth in the Lease).
9.2 Encroachments, Restrictions, Etc. If any of the improvements
on the Leased Property, at any time, materially encroach upon any property,
street or right-of-way adjacent to the Leased Property, or violate the
agreements or conditions contained in any lawful restrictive covenant or other
agreement affecting the Leased Property, or any part thereof, or impair the
rights of others under any easement or right-of-way to which the Leased
Property is subject, then promptly upon the request of Lessor or at the behest
of any person affected by any such encroachment, violation or impairment,
Lessee shall, at its expense, subject to its right to contest the existence of
any encroachment, violation or impairment and in such case, in the event of an
adverse final determination, either (a) obtain valid and effective waivers or
settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee or (b) make such changes in the improvements on the Leased Property and
take such other actions, as Lessee in the good faith exercise of its judgment
deems reasonably practicable to remove such encroachment, and to end such
violation or impairment, including, if necessary, the alteration of any such
improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Property for the
Primary Intended Use substantially in the manner and to the extent the Leased
Property was operated prior to the assertion of such violation, impairment and
encroachment. Any such alteration shall be made in conformity with the
applicable requirements of Article X. Lessee's obligations under this Section
9.2 shall be in addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other insurance held by
Lessor. Notwithstanding anything to the contrary contained in this Section
9.2, so long as any encroachment, violation or impairment described above does
not materially interfere with the operation of the Resort, Lessor shall not
require Lessee to remedy or otherwise address the same.
ARTICLE X
Alterations. Lessee shall have the right to make additions,
modifications or improvements to the Leased Property from time to time as
Lessee, in its discretion, may deem to be desirable for its permitted uses and
purposes, provided that such action will not significantly alter the character
or purposes or significantly detract from the value or operating efficiency
thereof and will not significantly impair the revenue-producing capability of
the Leased Property or adversely affect the ability of the Lessee to comply
with the provisions of this Lease. The cost of such additions, modifications
or improvements to the Leased Property shall be paid by Lessee, and all such
additions, modifications or improvements shall, without payment by Lessor at
any time, be included under the terms of this Lease and upon expiration or
earlier termination of this Lease shall pass to and become the property of
Lessor. In no event shall any alterations, additions or other improvements
made by Lessee be removed from the Leased Property unless request is made by
Lessor to Lessee to remove such alterations, additions and other improvements
which were made without Lessor's approval where such approval was required
under this Lease.
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<PAGE> 21
ARTICLE XI
Liens. Subject to the provision of Article XII relating to permitted
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the rent payable hereunder, not including,
however, (a) this Lease, (b) the matters, if any, included as exceptions in the
title policy insuring Lessor's interest in the Leased Property, (c)
restrictions, liens and other encumbrances which are consented to in writing by
Lessor or any easements granted pursuant to the provisions of Section 7.3 of
this Lease, (d) liens for those taxes upon Lessor which Lessee is not required
to pay hereunder, (e) subleases permitted by Article XXI hereof, (f) liens for
Impositions or for sums resulting from noncompliance with legal requirements so
long as (1) the same are not yet payable or are payable without the addition of
any fine or penalty or (2) such liens are in the process of being contested as
permitted by Article XII, (g) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either disputed or not yet due provided that (1)
the payment of such sums shall not be postponed under any related contract for
more than 60 days after the completion of the action giving rise to such lien
and such reserve or other appropriate provisions as shall be required by law or
generally accepted accounting principles shall have been made therefor or (2)
any such liens are in the process of being contested as permitted by Article
XII hereof, and (h) any liens which are the responsibility of Lessor pursuant
to the provisions of Article XXXI of this Lease.
ARTICLE XII
Permitted Contests. Lessee shall have the right to contest the amount
or validity of any Imposition to be paid by Lessee or any legal requirement or
insurance requirement or any lien, attachment, levy, encumbrance, charge or
claim ("Claims") not otherwise permitted by Article XI, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of the Leased Property, or any
part thereof, or cause Lessor or Lessee to be in default under any mortgage,
deed of trust or security deed encumbering the Leased Property or any interest
therein. Upon the request of Lessor, Lessee shall either (a) provide a bond or
other assurance reasonably satisfactory to Lessor that all Claims which may be
assessed against the Leased Property together with interest and penalties, if
any, thereon will be paid, or (b) deposit within the time otherwise required
for payment with a bank or trust company as trustee upon terms reasonably
satisfactory to Lessor, as security for the payment of such Claims, money in an
amount sufficient to pay the same, together with interest and penalties in
connection therewith, as to all Claims which may be assessed against or become
a Claim on the Leased Property, or any part thereof, in said legal proceedings.
Lessee shall furnish Lessor and any lender of Lessor with reasonable evidence
of such deposit within five days of the same. Lessor agrees to join in any
such proceedings if the same be required to legally prosecute such contest of
the validity of such Claims; provided, however, that Lessor shall not thereby
be subjected to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and Lessee covenants to
indemnify and save harmless Lessor from any such costs or expenses. Lessee
shall be entitled to any refund of any Claims and such charges and penalties or
interest thereon which have been paid by Lessee or paid by Lessor and for which
Lessor has been fully reimbursed. In the event that Lessee fails to pay any
Claims when due or to provide the security therefor as provided in this
paragraph and to diligently prosecute any contest of the same, Lessor may, upon
ten days advance written notice to Lessee, pay such charges together with any
interest and penalties and the same shall be repayable by Lessee to Lessor at
the next rent payment date provided for in this Lease. Provided, however, that
should Lessor reasonably determine that the giving of such notice would risk
loss to the Leased Property or cause damage to Lessor, then Lessor shall give
such notice as is practical under the circumstances. Lessor reserves the right
to contest at its
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<PAGE> 22
expense any of the Claims not pursued by Lessee. Lessor and Lessee agree to
cooperate in coordinating the contest of any Claims.
ARTICLE XIII
13.1 General Insurance Requirements. During the term of this
Lease, Lessee shall at all times keep the Leased Property insured with the
kinds and amounts of insurance described below. This insurance shall be
written by companies authorized to issue insurance in the State of Arizona.
The policies must name Lessor as the insured or as an additional named insured,
as the case may be. Losses shall be payable to Lessor or Lessee as provided in
this Lease. Any loss adjustment shall require the written consent of Lessor
and Lessee, each acting reasonably, promptly and in good faith. Evidence of
insurance shall be deposited with Lessor. The policies on the Leased Property
shall include:
(a) Personal property insurance on the "Special Form"
(formerly "All Risk" form) in the full amount of the replacement cost
thereof;
(b) Loss of income insurance on the "Special Form", in
the amount of one year of Base Rent for the benefit of Lessor;
(c) Commercial general liability insurance, with amounts
not less than $10,000,000 covering each of the following: bodily
injury, death, or property damage liability per occurrence, personal
and advertising injury, general aggregate, products and completed
operations, with respect to Lessor, and "all risk legal liability"
(including liquor law or "dram shop" liability) with respect to Lessor
and Lessee;
(d) Insurance covering such other hazards and in such
amounts as may be customary for comparable properties in the area of
the Leased Property and is available from insurance companies,
insurance pools or other appropriate companies authorized to do
business in the State of Arizona at rates which are economically
practicable in relation to the risks covered as may be reasonably
requested by Lessor;
(e) Fidelity bonds with limits and deductions as may be
reasonably requested by Lessor, covering Lessee's employees in job
classifications normally bonded under prudent resort management
practices in the United States or otherwise required by law; and
(f) Such other insurance as Lessor may reasonably request
for facilities such as the Leased Property and the operation thereof.
Lessee shall keep in force the foregoing insurance coverages at its
expense.
13.2 Replacement Cost. The term "full replacement cost" as used
herein shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time. In the event either party believes that full
replacement cost (the then-replacement cost less such exclusions) has increased
or decreased at any time during the term of this Lease, it shall have the right
to have such full replacement cost re-determined.
13.3 Worker's Compensation. Lessee, at its sole cost, shall at all
times maintain adequate worker's compensation insurance coverage for all
persons employed by Lessee on the Leased Property. Such worker's compensation
insurance shall be in accordance with the requirements of applicable local,
state and federal law.
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<PAGE> 23
13.4 Waiver of Subrogation. All insurance policies carried by
Lessor or Lessee covering the Leased Property including, without limitation,
contents, fire and casualty insurance, shall expressly waive any right of
subrogation on the part of the insurer against the other party. The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
13.5 Form Satisfactory, Etc. All of the policies of insurance
referred to in this Article XIII shall be written in a form, with deductibles
and by insurance companies reasonably satisfactory to Lessor. Lessee shall pay
all of the premiums therefor, and deliver such policies or certificates thereof
to Lessor prior to their effective date (and, with respect to any renewal
policy, 30 days prior to the expiration of the existing policy), and in the
event of the failure of Lessee either to effect such insurance as herein called
for or to pay the premiums therefor, or to deliver such policies or
certificates thereof to Lessor at the times required, Lessor shall be entitled,
but shall have no obligation, to effect such insurance and pay the premiums
therefor, and Lessee shall reimburse Lessor for any premium or premiums paid by
Lessor for the coverages required under Section 13.1 upon written demand
therefor, and Lessee's failure to repay the same within 30 days after notice of
such failure from Lessor shall constitute an Event of Default within the
meaning of Section 16.1(b). Each insurer mentioned in this Article XIII shall
agree, by endorsement to the policy or policies issued by it, or by independent
instrument furnished to Lessor, that it will give to Lessor 30 days written
notice before the policy or policies in question shall be materially altered,
allowed to expire or canceled.
13.6 Increase in Limits. If either Lessor or Lessee at any time
deems the limits of the personal injury or property damage under the
comprehensive public liability insurance then carried to be either excessive or
insufficient, Lessor or Lessee shall endeavor in good faith to agree on the
proper and reasonable limits for such insurance to be carried and such
insurance shall thereafter be carried with the limits thus agreed on until
further change pursuant to the provisions of this Section.
ARTICLE XIV
14.1 Insurance Proceeds. Subject to the provisions of Section
14.3, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any policy of insurance
required by Article XIII of this Lease, shall be paid to Lessor and held in
trust by Lessor in an interest-bearing account, shall be made available, if
applicable, for replacement or repair, as the case may be, of any damage to or
destruction of the Leased Property, or any portion thereof, and, if applicable,
shall be paid out by Lessor from time to time for the reasonable costs of such
replacement or repair upon satisfaction of reasonable terms and conditions
specified by Lessor. Any excess proceeds of insurance remaining after
completion of the replacement or repair of the Leased Property shall be
retained by Lessor. All salvage resulting from any risk covered by insurance
shall belong to Lessor.
14.2 No Abatement of Rent. Any damage or destruction due to
casualty notwithstanding, this Lease shall remain in full force and effect, and
Lessee's obligation to make rental payments and to pay all other charges
required by this Lease shall remain unabated.
14.3 Damage During Term. Notwithstanding any provisions of Section
14.1 appearing to the contrary, if damage to or destruction of the Leased
Property occurring during the term of this Lease renders the Leased Property
unsuitable for its Primary Intended Use, then either Lessor or Lessee (but in
Lessee's case only if the Leased Property is rendered unsuitable for its
Primary Intended Use for a period in excess of one (1) year), shall have the
right to terminate this Lease by giving written notice to the other party, in
Lessor's case at any time after the occurrence of such damage or destruction,
or in Lessee's case within thirty (30) days after the expiration of such year,
whereupon all accrued rent shall be paid immediately, and this Lease shall
automatically terminate.
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ARTICLE XV
15.1 Definitions.
(a) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or
otherwise, by a Condemnor, and (2) a voluntary sale or transfer by
Lessor to any Condemnor, either under threat of condemnation or while
legal proceedings for condemnation are pending.
(b) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of
value awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public
authority, or private corporation or individual, having the power of
Condemnation.
15.2 Parties' Rights and Obligations. If during the term there is
any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV.
15.3 Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of Taking by the Condemnor. If title to the fee of less than the
whole of or substantially all of the Leased Property is so taken or condemned,
which nevertheless renders the Leased Property unsuitable or uneconomic for its
Primary Intended Use, Lessee and Lessor shall each have the option, by notice
to the other, at any time prior to the Date of Taking, to terminate this Lease
as of the Date of Taking. Upon such date, if such Notice has been given, this
Lease shall thereupon cease and terminate. All Base Rent and Additional
Charges paid or payable by Lessee hereunder shall be apportioned as of the Date
of Taking, and Lessee shall promptly pay Lessor such amounts.
15.4 Allocation of Award. The total Award made with respect to the
Leased Property or for loss of rent, or for Lessor's loss of business beyond
the term, shall be solely the property of and payable to Lessor. Any Award
made for loss of business during the remaining term, if any, or for removal and
relocation expenses of Lessee in any such proceedings shall be the sole
property of and payable to Lessee. In any Condemnation proceedings Lessor and
Lessee shall each seek its Award in conformity herewith, at its respective
expense; provided, however, Lessee shall not initiate, prosecute or acquiesce
in any proceedings that may result in a diminution of any Award payable to
Lessor.
15.5 Partial Taking. If title to less than the whole of or
substantially all of the Leased Property is condemned, and the Leased Property
is still suitable for its Primary Intended Use, and not uneconomic for its
Primary Intended Use, or if Lessee or Lessor is entitled but neither elects to
terminate this Lease as provided in Section 15.3, Lessee at its cost shall with
all reasonable dispatch restore the untaken portion of the Leased Property so
that such Leased Property contains the same architectural units of the same
general character and condition (as nearly as may be possible under the
circumstances) as the Leased Property existing immediately prior to the
Condemnation. Lessor shall contribute to the cost of restoration that part of
its Award specifically allocated to such restoration, if any, together with
severance and other damages awarded for the taken Leased Property; provided,
however, that the amount of such contributions shall not exceed such cost.
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15.6 Temporary Taking. If the whole or any part of the Leased
Property or of Lessee's interest under this Lease is condemned by any Condemnor
for its temporary use or occupancy, this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay, in the manner and at the terms
herein specified, the full amount of all Base Rent and Additional Charges.
Except only to the extent that Lessee may be prevented from so doing pursuant
to the terms of the order of the Condemnor, Lessee shall continue to perform
and observe all of the other terms, covenants, conditions and obligations
hereof on the part of the Lessee to be performed and observed, as though such
Condemnation had not occurred. In the event of any Condemnation as is in this
Section 15.6 described, the entire amount of any Award made for such
Condemnation allocable to the term of this Lease, whether paid by way of
damages, rent or otherwise, shall be paid to Lessee. Lessee covenants that
upon the termination of any such period of temporary use or occupancy it will,
at its sole cost and expense (subject to Lessor's contribution as set forth
below), restore the Leased Property as nearly as may be reasonably possible to
the condition in which the same was immediately prior to such Condemnation,
unless such period of temporary use or occupancy extends beyond the expiration
of the term, in which case Lessee shall not be required to make such
restoration. If restoration is required hereunder, Lessor shall contribute to
the cost of such restoration that portion of its entire Award that is
specifically allocated to such restoration in the judgment or order of the
court, if any, and Lessee shall fund the balance of such costs in advance of
restoration in a manner reasonably satisfactory to Lessor.
ARTICLE XVI
16.1 Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) if Lessee fails to pay any Base Rent, Percentage
Rent, Impositions or any other monies required to be paid by Lessee
under this Lease, and such failure continues for a period of fifteen
(15) days after written notice specifying such failure has been
provided Lessee by Lessor;
(b) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by
Lessee within a period of 30 days after receipt by the Lessee of
notice thereof from Lessor, unless such failure cannot with due
diligence be cured within a period of 30 days, in which case it shall
not be deemed an Event of Default if Lessee proceeds promptly and with
due diligence to cure the failure and diligently completes the curing
thereof provided, however, in no event shall such cure period extend
beyond 90 days after notice of such failure has been provided to
Lessee by Lessor; or
(c) if an event of default has occurred under the
Management Agreement with respect to the Resort at the Leased Property
and such default has not been cured by Lessee within a period of
fifteen (15) days after receipt by Lessee of notice of such default
from Lessor;
then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including but not limited to its right to
terminate this Lease by giving Lessee not less than ten days notice of such
termination.
If 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, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith.
16.2 Surrender. If an Event of Default occurs (and the event
giving rise to such Event of Default has not been cured within the curative
period relating thereto as set forth in Section
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16.1) and is continuing, whether or not this Lease has been terminated pursuant
to Section 16.1, Lessee shall, if requested by Lessor so to do, immediately
surrender to Lessor the Leased Property including, without limitation, any and
all books, records, files, licenses, permits and keys relating thereto, and
quit the same and Lessor may enter upon and repossess the Leased Property by
reasonable force, summary proceedings, ejectment or otherwise, and may remove
Lessee and all other persons and any and all personal property from the Leased
Property, subject to the rights of any Resort guests and to any requirement of
law. Lessee hereby waives any and all requirements of applicable laws for
service of notice to re-enter the Leased Property. Lessor shall be under no
obligation to, but may if it so chooses, relet the Leased Property or otherwise
mitigate Lessor's damages.
16.3 Damages. Neither (a) the termination of this Lease, (b) the
repossession of the Leased Property, (c) the failure of Lessor to relet the
Leased Property, nor (d) the reletting of all or any portion thereof, shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all rent due and payable
with respect to the Leased Property to and including the date of such
termination.
Lessee shall forthwith pay to Lessor, at Lessor's option, as
and for liquidated and agreed current damages for Lessee's default, either:
(1) Without termination of Lessee's right to possession
of the Leased Property, each installment of rent and other sums payable by
Lessee to Lessor under the Lease as the same becomes due and payable, which
rent and other sums shall bear interest at the rate of 12% per annum until
paid, and Lessor may enforce, by action or otherwise, any other term or
covenant of this Lease; or
(2) the sum of:
(A) the unpaid rent which had been
earned at the time of termination, repossession or
reletting, and
(B) the worth at the time of
termination, repossession or reletting of the amount
by which the unpaid rent for the balance of the term
of this Lease after the time of termination,
repossession or reletting, exceeds the amount of such
rental loss that Lessee proves could be reasonably
avoided, and
(C) any other amount necessary to
compensate Lessor for all the detriment proximately
caused by Lessee's failure to perform its obligations
under this Lease or which in the ordinary course of
things would be likely to result therefrom. The
worth at the time of termination, repossession or
reletting of the amount referred to in subparagraph
(B) is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of New York
at the time of award plus 1%.
Percentage Rent for the purposes of this Section 16.3 shall be a sum equal to
(i) the average of the annual amounts of Percentage Rent for the three calendar
years immediately preceding the calendar year in which the termination,
re-entry or repossession takes place, or (ii) if three calendar years shall not
have elapsed, the average of the Percentage Rent during the preceding calendar
year during which this Lease was in effect, or (iii) if one calendar year has
not elapsed, the amount derived by annualizing the Percentage Rent from the
effective date of this Lease.
16.4 Application of Funds. Any payments received by Lessor under
any of the provisions of this Lease during the existence or continuance of any
Event of Default shall be applied to Lessee's obligations in the order that
Lessor may determine or as may be prescribed by the laws of the State of
Arizona.
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ARTICLE XVII
Lessor's Right to Cure Lessee's Default. If Lessee fails to make any
payment or to perform any act required to be made or performed under this Lease
including, without limitation, Lessee's failure to comply with the terms of any
Management Agreement, and fails to cure the same within the relevant time
periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for
such purpose and take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction
of Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case to
the extent permitted by law) so incurred, together with a late charge thereon
(to the extent permitted by law) at the rate of 12% per annum from the date on
which such sums or expenses are paid or incurred by Lessor, shall be paid by
Lessee to Lessor on demand. The obligations of Lessee and rights of Lessor
contained in this Article shall survive the expiration or earlier termination
of this Lease.
ARTICLE XVIII
Holding Over. If Lessee for any reason remains in possession of the
Leased Property after the expiration or earlier termination of the term of this
Lease, such possession shall be as a tenant at sufferance during which time
Lessee shall pay as rental each month two times the aggregate of (a)
one-twelfth of the aggregate Base Rent and Percentage Rent payable with respect
to the last year of the term of this Lease, (b) all additional charges accruing
during the applicable month and (c) all other sums, if any, payable by Lessee
under this Lease with respect to the Leased Property. During such period,
Lessee shall be obligated to perform and observe all of the terms, covenants
and conditions of this Lease, but shall have no rights hereunder other than the
right, to the extent given by law to tenancies at sufferance, to continue its
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.
ARTICLE XIX
Risk of Loss. During the term of this Lease, the risk of loss or of
decrease in the enjoyment and beneficial use of the Leased Property in
consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of
foreclosures, attachments, levies or executions (other than those caused by
Lessor and those claiming from, through or under Lessor) is assumed by Lessee,
and, in the absence of gross negligence, willful misconduct or breach of this
Lease by Lessor pursuant to Section 31.2, Lessor shall in no event be
answerable or accountable therefor, nor shall any of the events mentioned in
this Section entitle Lessee to any abatement of rent except as specifically
provided in this Lease.
ARTICLE XX
Indemnification. Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance,
Lessee will protect, indemnify, hold harmless and defend Lessor from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses), to the extent permitted by law, imposed upon or
incurred by or
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asserted against Lessor by reason of: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Leased
Property, the Lifeshare Property, or adjoining sidewalks, including without
limitation any claims under liquor liability, "dram shop" or similar laws, (b)
any past, present or future use, misuse, non-use, condition, management,
maintenance or repair by Lessee or any of its agents, employees or invitees of
the Leased Property or any litigation, proceeding or claim by governmental
entities or other third parties to which Lessor is made a party or participant
related to such use, misuse, non-use, condition, management, maintenance, or
repair thereof by Lessee or any of its agents, employees or invitees, including
any failure of Lessee or any of its agents, employees or invitees to perform
any obligations under this Lease or imposed by applicable law (other than
arising out of condemnation proceedings), (c) any Impositions that are the
obligations of Lessee pursuant to the applicable provisions of this Lease, (d)
any failure on the part of Lessee to perform or comply with any of the terms of
this Lease, and (e) the non-performance of any of the terms and provisions of
any and all existing and future subleases of the Leased Property to be
performed by the landlord thereunder.
Lessor shall indemnify, save harmless and defend Lessee from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses imposed upon or incurred by or asserted against
Lessee as a result of (a) the gross negligence or willful misconduct of Lessor
arising in connection with this Lease or (b) any failure on the part of Lessor
to perform or comply with any of the terms of this Lease.
Any amounts that become payable by an indemnifying party under this
Section shall be paid within ten days after liability therefor on the part of
the indemnifying party is determined by litigation or otherwise, and if not
timely paid, shall bear a late charge (to the extent permitted by law) at the
rate of 12% per annum from the date of such determination to the date of
payment. An indemnifying party, at its expense, shall contest, resist and
defend any such claim, action or proceeding asserted or instituted against the
indemnified party. The indemnified party, at its expense, shall be entitled to
participate in any such claim, action, or proceeding, and the indemnifying
party may not compromise or otherwise dispose of the same without the consent
of the indemnified party, which may not be unreasonably withheld. Nothing
herein shall be construed as indemnifying Lessor against its own grossly
negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
ARTICLE XXI
Subletting and Assignment. Except for subleases to concessionaires
made in the ordinary course of operating the Resort, Lessee shall not sell,
assign or transfer all or any portion of its leasehold estate or sublet all or
any portion of the Leased Property without first obtaining the prior written
consent of Lessor. In the event of an assignment or subletting by Lessee which
is approved by Lessor, Lessee shall nevertheless remain fully liable for the
due performance of all obligations on Lessee's part to be performed under this
Lease. No permitted assignment, sale or transfer shall be effective until
there shall have been delivered to Lessor an undertaking in recordable form,
executed by the proposed assignee or sublessee, wherein such assignee or
sublessee assumes the due performance of all obligations on Lessee's part to be
performed under this Lease.
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ARTICLE XXII
Officer's Certificates; Financial Statements; Lessor's Estoppel Certificates
and Covenants.
(a) At any time and from time to time upon not less than 20 days
Notice by Lessor, Lessee will furnish to Lessor a statement 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 to the knowledge of Lessee there
is any existing default or Event of Default exists thereunder by Lessor or
Lessee, and such other information as may be reasonably requested by Lessor.
Any such certificate furnished pursuant to this Section may be relied upon by
Lessor, any lender and any prospective purchaser of the Leased Property.
(b) Lessee will furnish the following statements to Lessor:
(1) with reasonable promptness, such information
respecting the financial condition and affairs of Lessee
including financial statements prepared by Lessee as Lessor
may reasonably request from time to time; and
(2) the most recent financial statements of
Lessee within 60 days after each quarter of any fiscal year
(or, in the case of the final quarter in any fiscal year, the
most recent financial statements of Lessee within 120 days);
and
(3) on or about the 30th day of each month, a
detailed profit and loss statement of the Leased Property for
the preceding month, a balance sheet for the Leased Property
as of the end of the preceding month, and a detailed
accounting of revenues for the Leased Property for the
preceding month, each in form reasonably acceptable to Lessor.
(c) At any time and from time to time upon not less than 30 days
notice by Lessee, Lessor will furnish to Lessee or to any person designated by
Lessee an estoppel 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 rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee.
ARTICLE XXIII
Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining
thereto and make copies thereof, during usual business hours upon reasonable
advance notice, subject only to any business confidentiality requirements
reasonably requested by Lessee.
ARTICLE XXIV
No Waiver. No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
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ARTICLE XXV
Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
ARTICLE XXVI
Acceptance of Surrender. No surrender to Lessor of this Lease or of
the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXVII
No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person or
entity may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
ARTICLE XXVIII
Conveyance by Lessor. If Lessor or any successor owner of the Leased
Property conveys the Leased Property in accordance with the terms hereof other
than as security for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owners.
ARTICLE XXIX
Notices. All notices, demands, or other communications of any type
given by the Lessor to the Lessee, or by the Lessee to the Lessor, whether
required by this Lease or in any way related to the transaction contracted for
herein, shall be void and of no effect unless given in accordance with the
provisions of this paragraph. All notices shall be in writing and delivered to
the person to whom the notice is directed, either in person, by facsimile
transmission, or by United States Mail, as a registered or certified item,
return receipt requested. Notices delivered by mail shall be deemed given when
deposited in a post office or other depository under the care or custody of the
United States Postal Service, enclosed in a wrapper with proper postage
affixed, addressed as follows:
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Lessor: Canyon Ranch, Inc.
8600 E. Rockcliff Road
Tucson, Arizona 85750
Attn: Jerrold Cohen, President
Telephone No.: (520) 749-9655, Ext. 335
Facsimile No.: (520) 749-0662
with a copy to: W.J. Harrison & Associates, P.C.
3561 E. Sunrise Drive, Suite 201
Tucson, Arizona 85718
Attn: W. James Harrison, Esq.
Telephone No.: (520) 529-3700
Facsimile No.: (520) 529-8977
Lessee: Canyon Ranch Leasing, Inc.
8600 E. Rockcliff Road
Tucson, Arizona 85750
Attn: Jerrold Cohen, President
Telephone No.: (520) 529-3700
Facsimile No.: (520) 529-8977
ARTICLE XXX
Appraisers. If it becomes necessary to determine the fair market
value of the Leased Property for any purpose of this Lease, the party required
or permitted to give Notice of such required determination shall include in the
Notice the name of a person selected to act as appraiser on its behalf. Within
10 days after Notice, Lessor (or Lessee, as the case may be) shall by Notice to
Lessee (or Lessor, as the case may be) appoint a second person as appraiser on
its behalf. The appraisers thus appointed, each of whom must be a member of
the American Institute of Real Estate Appraisers (or any successor organization
thereto) with at least five years experience in the State of Arizona appraising
property similar to the Leased Property, shall, within 45 days after the date
of the Notice appointing the first appraiser, proceed to appraise the Leased
Property to determine the fair market value thereof as of the relevant date
(giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
shall have been so appointed, then the determination of such appraiser shall be
final and binding upon the parties. If two appraisers are appointed and if the
difference between the amounts so determined does not exceed 5% of the lesser
of such amounts, then the fair market value shall be an amount equal to 50% of
the sum of the amounts so determined. If the difference between the amounts so
determined exceeds 5% of the lesser of such amounts, then such two appraisers
shall have 20 days to appoint a third appraiser. If no such appraiser shall
have been appointed within such 20 days or within 90 days of the original
request for a determination of fair market value, whichever is earlier, either
Lessor or Lessee may apply to any court having jurisdiction to have such
appointment made by such court. Any appraiser appointed by the original
appraisers or by such court shall be instructed to determine the fair market
value or fair market rental within 45 days after appointment of such appraiser.
The determination of the appraiser 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 final and
binding upon Lessor and Lessee as the fair market value or fair market rental
of the Leased Property, as the case may be. This provision for determining by
appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law.
Lessor and Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.
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ARTICLE XXXI
31.1 Lessor May Grant Liens. Upon notice to but without the
consent of Lessee, Lessor may, from time to time, directly or indirectly,
create or otherwise cause to exist any lien, encumbrance or title retention
agreement ("Encumbrance") upon the Leased Property, or any portion thereon or
interest therein, whether to secure any borrowing or other means of financing
or refinancing. This Lease shall be subject and subordinate to the lien of any
Encumbrance that Lessor, its successors or assigns, has placed or may hereafter
place on or against all or any part of the Leased Property, and Lessee hereby
agrees to attorn to any such lienholder and any other purchaser at the
foreclosure of such lien (including obtaining of title by lender by deed in
lieu of foreclosure), upon demand. It is expressly provided and agreed that
any such lienholder shall not be required to agree not to disturb Lessee in the
event of a foreclosure or deed in lieu thereof and that, at the option of any
such lienholder or any other purchaser at foreclosure of such lien, this Lease
may be terminated and, upon such termination, Lessee shall have no further
rights hereunder.
31.2 Breach by Lessor. It shall be a breach of this Lease if
Lessor fails to observe or perform any term, covenant or condition of this
Lease on its part to be performed and such failure continues for a period of 30
days after Notice thereof from Lessee, unless such failure cannot with due
diligence be cured within a period of 30 days, in which case such failure shall
not be deemed to continue if Lessor, within such 30-day period, proceeds
promptly and with due diligence to cure the failure and diligently completes
the curing thereof.
ARTICLE XXXII
32.1 Miscellaneous. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease shall survive
such termination. If any term or provision of this Lease or any application
thereof is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable
law, the parties agree that such charges shall be fixed at the maximum
permissible rate. Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated except by a written instrument in recordable
form signed by Lessor and Lessee. All the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance
with the laws of the State of Arizona, but not including its conflicts of laws
rules.
32.2 Transfer of Licenses. Upon the expiration or earlier
termination of the term of this Lease, Lessee shall use its best efforts (i) to
transfer to Lessor or Lessor's nominee all licenses, operating permits and
other governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities, that may be necessary for the
operation of the Resort (collectively, "Licenses"), or (ii) if such transfer is
prohibited by law or Lessor otherwise elects, to cooperate with Lessor or
Lessor's nominee in connection with the processing by Lessor or Lessor's
nominee of any applications for, all Licenses; provided, in either case, that
the costs and expenses of any such transfer or the processing of any such
application shall be paid by Lessor or Lessor's nominee.
32.3 Waiver of Presentment, Etc. Lessee waives all presentments,
demands for payment and 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.
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ARTICLE XXXIII
Memorandum of Lease. Lessor and Lessee shall promptly upon the
request of either enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State of Arizona in which
reference to this Lease, and all options contained herein, shall be made.
Lessee shall pay all costs and expenses of recording such memorandum of this
Lease.
ARTICLE XXXIV
Compliance with Management Agreement. To the extent any of the
provisions of the Management Agreement impose a greater obligation on Lessee
than the corresponding provisions of the Lease, then Lessee shall be obligated
to comply with the provisions of the Management Agreement, it being the intent
of the parties hereto that Lessee comply in every respect with the provisions
of the Management Agreement so as to avoid any default thereunder.
ARTICLE XXXV
Financial Statements. Lessee shall deliver to Lessor (a) within 120
days after the end of each calendar year annual operating statements for
Lessee's business at the Leased Property and a copy of the balance sheet of
Lessee as of the end of such year, and related statements of income and
retained earnings and changes in financial position for such year, (b) within
30 days after the end of each month monthly operating statements for Lessee's
business at the Leased Property and a copy of the balance sheet of Lessee as of
the end of such month, and (c) such other information as Lessor may from time
to time reasonably request. The foregoing financial statements shall be
certified by a member or an authorized officer (as the case may be) of Lessee.
All financial statements of Lessee delivered to Lessor shall be true and
correct in all respects, shall be prepared in accordance with generally
accepted accounting principles, consistently applied, and fairly present the
financial condition of the subject thereof as of the dates thereof. Any
materially adverse change that occurs in the financial condition reflected
therein after the date thereof shall be reported to Lessor promptly. None of
the aforesaid financial statements, or any certificate or statement furnished
to Lessor by or on behalf of Lessee in connection with the transactions
contemplated hereby, shall contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
ARTICLE XXXVI
36.1 REIT Compliance. Lessee acknowledges that Lessor intends to
qualify as a real estate investment trust under the Internal Revenue Code of
1986, as amended. Lessee agrees that it will not knowingly or intentionally
take or omit any action, or permit any status to exist at the Leased Property,
which Lessee knows would or could result in Lessor being disqualified from
treatment as a real estate investment trust under the Tax Code as the
provisions exist on the date hereof.
36.2 Personal Property Limitation. Anything contained in this
Lease to the contrary notwithstanding, the average of the adjusted tax bases of
the items of personal property that are leased to the Lessee under this Lease
at the beginning and at the end of any calendar year shall not exceed fifteen
percent (15%) of the average of the aggregate adjusted tax bases of the Leased
Property at the beginning and at the end of each such calendar year. This
Section 36.2 is intended to insure that the rent payable hereunder qualifies as
"rents from real property," within the meaning of Section 856(d) of the
Internal Revenue Code of 1986, or any similar or successor provisions thereto,
and shall be interpreted in a manner consistent with such intent.
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36.3 Sublease Rent Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublet the Leased Property on
any basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the income of profits derived by the
business activities of the sublessee, or (b) any other formula such that any
portion of the rent payable hereunder would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Internal Revenue Code of
1986, or any similar or successor provisions thereto.
36.4 Sublease Tenant Limitation. Anything contained in this Lease
to the contrary notwithstanding, Lessee shall not sublease the Leased Property
to any person or entity in which Lessor owns, directly or indirectly, a ten
percent (10%) or more interest, within the meaning of Section 856(d)(2)(B) of
the Internal Revenue Code of 1986, or any similar or successor provisions
thereto.
36.5 Lessee Ownership Limitation. Anything contained in this Lease
to the contrary notwithstanding, neither Lessee nor any affiliate of the Lessee
shall acquire, directly or indirectly, a ten percent (10%) or more interest in
Lessor, within the meaning of Section 856(d)(2)(B) of the Internal Revenue Code
of 1986, or any similar or successor provisions thereto.
ARTICLE XXXVII
Lessor's Option to Terminate Lease. In the event Lessor enters into a
bonafide contract to sell the Leased Property to a non-affiliated party, Lessor
may terminate the Lease by giving not less than thirty (30) days prior Notice
to Lessee of Lessor's election to terminate the Lease effective upon the
closing of such contract. Effective upon such closing, this Lease shall
terminate and be of no further force and effect except as to any obligations of
the parties existing as of such date that survive termination of this Lease.
As compensation for the early termination of its leasehold estate under this
Article XXXVII, Lessor shall within ninety (90) days of such closing pay to
Lessee the fair market value of Lessee's leasehold estate hereunder as of the
closing of the sale of the Leased Property. In the event Lessor and Lessee are
unable to agree upon the fair market value of an original or replacement
leasehold estate, it shall be determined by appraisal using the appraisal
procedures set forth in Article XXX.
For the purposes of this Section, fair market value of the leasehold
estate means an amount equal to the present value of the net revenues to be
derived from this Lease during the remaining term of this Lease based on
current projections made by Lessee and Lessee with respect to future occupancy
of, and future revenues to be generated by, the Leased Property.
-30-
<PAGE> 35
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LESSOR:
CANYON RANCH, INC., an Arizona
corporation
By: /s/JERROLD COHEN
-------------------------------------
Name: Jerrold Cohen
-----------------------------------
Its: President
------------------------------------
LESSEE:
CANYON RANCH LEASING, L.L.C., an
Arizona limited liability company
By: /s/JERROLD COHEN
-------------------------------------
Name: Jerrold Cohen
-----------------------------------
Its: Authorized Member
------------------------------------
-31-
<PAGE> 36
EXHIBIT A
"Exhibit has been omitted"
<PAGE> 37
EXHIBIT B
"Exhibit has been omitted"
<PAGE> 38
EXHIBIT C
"Exhibit has been omitted"
<PAGE> 39
EXHIBIT D
"Exhibit has been omitted"
<PAGE> 40
ASSIGNMENT AND ASSUMPTION OF MASTER LEASE
KNOW ALL MEN BY THESE PRESENTS:
That CANYON RANCH - BELLEFONTAINE ASSOCIATES, L.P., a Delaware limited
partnership ("Canyon"), for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, hereby grants, assigns, transfers and delivers
unto CRESCENT REAL ESTATE FUNDING VI, L.P., a Delaware limited Partnership
("Crescent"), all of its right, title and interest as lessor in and to the
Lease Agreement described in Exhibit 1 ("Master lease").
By execution below, Crescent assumes and agrees to perform all
obligations of Canyon as Lessor owed under, or arising out of or related to,
the Master Lease. Crescent agrees to indemnify and hold Canyon harmless of and
from any and all liabilities, claims, demands, suits and judgments, of any kind
or nature, brought by third parties which in any way arise out of or relate to
Lessor's obligations under the master Lease.
This Assignment and the covenants and agreements contained herein shall
be binding upon and inure to the benefit of Crescent and Canyon and their
respective successors in interest and assigns. This Assignment shall be
construed and interpreted under the laws of the State of Massachusetts.
EXECUTED as of July 26, 1996.
CANYON:
CANYON RANCH INC., an Arizona corporation
By: /s/ JERROLD COHEN
----------------------------
Name: Jerrold Cohen
--------------------------
Its: President
---------------------------
<PAGE> 41
CRESCENT:
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: CRESCENT REAL ESTATE EQUITIES, LTD,
a Delaware corporation,
General Partner
By: /s/ DAVID M. DEAN
-----------------------------
Name: David M. Dean
---------------------------
Its: Senior Vice President, Law
----------------------------
STATE OF ARIZONA )
) ss.
COUNTY OF PIMA )
The foregoing instrument was acknowledged before me this 26th day of
July, 1996, by Jerrold Cohen the President of Canyon Ranch, Inc.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
OFFICIAL SEAL
SHIRLEY M. WELCH
NOTARY PUBLIC - ARIZONA
PIMA COUNTY
My Comm. Expires Aug. 18, 1999 /s/ SHIRLEY M. WELCH
---------------------------
Notary Public
<PAGE> 42
STATE OF ARIZONA )
) ss.
COUNTY OF PIMA )
The foregoing instrument was acknowledged before me this 26th day of
July, 1996, by David M. Dean the Senior Vice President, Law of Crescent Real
Estate Equities, Ltd., a Delaware corporation, General Partner of Crescent Real
Estate Equities Limited Partnership, a Delaware limited partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
OFFICIAL SEAL
SHIRLEY M. WELCH
NOTARY PUBLIC - ARIZONA
PIMA COUNTY
My Comm. Expires Aug. 18, 1999 /s/ SHIRLEY M. WELCH
---------------------------
Notary Public
<PAGE> 1
EXHIBIT 10.26
================================================================================
- --------------------------------------------------------------------------------
LEASE AGREEMENT
BETWEEN
CANYON RANCH - BELLEFONTAINE ASSOCIATES, L.P.,
A DELAWARE LIMITED PARTNERSHIP
AND
VINTAGE RESORTS, LLC
- --------------------------------------------------------------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Demise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Percentage Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Net Lease Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Place and Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Late Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Notice of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Adjustment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Insurance Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.6 Definition of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Condition of the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Use of the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Lessor to Grant Easements, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Operating Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 FF&E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 Lessee's Obligation to Manage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.7 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.8 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 Limitation on Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.10 Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 Use of Facilities by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.1 Compliance with Legal and Insurance Requirements, Etc . . . . . . . . . . . . . . . . . . . . . . . 14
8.2 Legal Requirement Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 Environmental Matters and Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.1 Maintenance and Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.2 Encroachments, Restrictions, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.2 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13.3 Worker's Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13.4 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13.5 Form Satisfactory, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13.6 Increase in Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.1 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.2 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.3 Damage During Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15.2 Parties' Rights and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15.3 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15.4 Allocation of Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15.5 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15.6 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
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----
<S> <C>
ARTICLE XVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
16.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
16.2 Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.4 Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Lessor's Right to Cure Lessee's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Subletting and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XXII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XXIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Lessor's Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XXIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XXV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XXVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Acceptance of Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XXVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XXVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conveyance by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XXIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Appraisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XXXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
31.1 Lessor May Grant Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
31.2 Breach by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XXXII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
32.1 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
32.2 Transfer of Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
32.3 Waiver of Presentment, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXXIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XXXIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Compliance with Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XXXV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XXXVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
36.1 REIT Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
36.2 Personal Property Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
36.3 Sublease Rent Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
36.4 Sublease Tenant Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
36.5 Lessee Ownership Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XXXVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Lessor's Option to Terminate Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
SIGNATURES
EXHIBIT "A" Legal Description of Leased Property
EXHIBIT "B"
(iv)
<PAGE> 6
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the
11th day of December, 1996, by and between CANYON RANCH - BELLEFONTAINE
ASSOCIATES, L.P., a Delaware limited partnership ("Lessor"), and VINTAGE
RESORTS, LLC ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor is the owner of certain "Leased Property" (as
hereinafter defined); and
WHEREAS, Lessee desires to lease the Leased Property for a term of one
hundred twenty (120) months; and
WHEREAS, Lessee has committed its capital and credit to the extent
described herein to allow Lessee to operate the Leased Property as a health and
fitness resort pursuant to the terms of this Lease and to comply with all the
provisions of the Management Agreement (as defined herein).
ARTICLE I
Demise. In consideration of the obligation of Lessee to pay rent as
herein provided and in consideration of the other terms, covenants, and
conditions of this Lease, Lessor does hereby LEASE, DEMISE, and LET unto
Lessee, and Lessee does hereby take and lease from Lessor, the Leased Property,
TO HAVE AND TO HOLD the Leased Property, together with all rights, privileges,
easements and appurtenances belonging to or in any way appertaining to the
Leased Property, for the term hereinafter provided, upon and subject to the
terms, conditions and agreements hereinafter contained.
ARTICLE II
Leased Property. The Leased Property is comprised of those certain
tracts or parcels of land situated in Lenox, Massachusetts, which are more
particularly described in Exhibit "A" attached hereto and made a part hereof
for all purposes, together with all and singular the rights and appurtenances
pertaining to such tracts and parcels, including any right, title and interest
of Lessor in and to adjacent strips or gores, streets, alleys or rights-of-way
and all rights of ingress and egress thereto (the foregoing properties are
hereinafter referred to collectively as the "Land"). The Leased Property shall
also include all buildings, fixtures and other improvements on the Land,
including specifically, without limitation, various guest and spa facilities,
and such other buildings and improvements as are located thereon, all of which
are commonly known as "Canyon Ranch in the Berkshires." The Land, together
with the foregoing improvements, is hereinafter referred to as the "Resort."
The Leased Property shall also include all personal property, tangible or
intangible, of any kind whatsoever owned by Lessor and used in connection with
the operation of the Resort, including, but not limited to the following items:
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(a) All engineering, maintenance and housekeeping
supplies, including soap, cleaning materials and matches; stationary
and printing; and other supplies of all kinds, whether used, unused or
held in reserve storage for future use in connection with the
maintenance and operation of the Resort;
(b) All food and beverage located at the Resort, whether
issued to the food and beverage department or held in reserve storage;
(c) All brochures, literature and other materials used in
connection with the marketing of the Resort;
(d) Any names, logos and designs used in the ownership or
operation of the Hotel including, without limitation, the names, logos
and designs now used in connection with the restaurants, cocktail
lounges, night clubs, banquet rooms and meeting rooms in and/or about
the Hotel, together with the goodwill appurtenant to each of such
names, logos and designs/Lessee's right to use the foregoing names,
logos, designs, etc. shall be subject to the terms of that certain
License Agreement between Crescent Real Estate Equities Limited
Partnership and Canyon Ranch, Inc. of even date herewith;
(e) All utility and similar deposits, all prepaid
insurance or other prepaid items, and all prepaid license and permit
fees pertaining to the Leased Property;
(f) All machinery, apparatus, vehicles, equipment,
artwork, furniture, fittings, fixtures and articles of personal
property of every kind and nature whatsoever, including reserve stock
and spare parts therefor, owned by Lessor which are located in the
Hotel or stored offsite and are used or usable in connection with any
present or future occupation or operation of the Hotel including, by
way of illustration and not limitation, all furnishings, pictures,
chinaware, glassware, silverware, ornaments, uniforms, kitchen
appliances and utensils, radios, television sets, mirrors, linens,
towels, sheets, blankets, telephones, and all similar and related
articles owned by Lessor and located in or upon or used in connection
with the operation or maintenance of the Hotel.
For and during the term of this Lease, but not thereafter, Lessor also
assigns unto Lessee all of Lessor's interest and estate in and to the following
items:
(a) All contracts for the use or occupancy of guest rooms
and/or the meeting, dining, spa or health facilities of the Resort;
(b) All service, maintenance, purchase orders and other
contracts pertaining to the ownership, maintenance, operation,
provisioning or equipping of the Resort, including warranties and
guaranties relating thereto (excluding, however, (i) any employment
agreements, (ii) any contracts with independent contractors who
perform medical, behavioral, spiritual, wellness or similar
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health-related services at the Resort, and (iii) any other
employee-related contract or medical-related contract);
(c) Lessor's interest as "Owner" under that certain
Management Agreement (the "Management Agreement") dated of even date
herewith, executed by and between Lessor, as owner, and Canyon Ranch
Management, L.L.C., an Arizona limited liability company, as Manager
(the "Manager");
(d) All licenses, franchises and permits used in or
relating to the ownership, occupancy or operation of any part of the
Resort;
(e) All software programs for accounting functions for
the general ledger, accounts payable, accounts receivable, and payroll
for the Resort;
(f) All construction, development and design contracts
entered into in connection with the construction of the Resort and all
transferable warranties, guaranties and bonds relating to the Resort
or the acquisition, construction, fabrication or installation thereof;
(g) All membership agreements (including Centennial and
Charter program memberships) which entitle third-parties to use the
Resort;
(h) All oral or written agreements pursuant to which any
portion of the Land or Resort is used or occupied by anyone other than
Lessor (the property described in this clause does not include guest
occupancy agreements or membership agreements and is herein referred
to collectively as the "Leases");
(i) Any developer's, declarant's, or owner's interests
under any operating agreements or reciprocal easement agreements or
other similar agreements affecting and/or benefiting the Hotel; and
(j) Any accounts or notes receivable pertaining to the
Centennial or Charter programs.
All of Lessor's rights, benefits, and privileges with respect to the foregoing
items shall be vested in Lessee throughout the term of this Lease and, upon
termination of this Lease, for whatever reason, shall automatically revert to
Lessor without the necessity of any action on the part of Lessor hereunder.
This Lease is executed by Lessor and accepted by Lessee on the
understanding that Lessee will and does hereby assume and agree to perform all
of Lessor's obligations as owner under the Management Agreement.
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ARTICLE III
Term. The term of this Lease shall commence on the effective date of
execution of this Lease (the "Commencement Date") and shall end on the last day
of the one hundred twentieth (120th) month following the month in which this
Lease commences, unless sooner terminated in accordance with the provisions
hereof.
ARTICLE IV
So long as this Lease remains in force and effect, Lessee promises to
pay to Lessor, in lawful money of the United States of America which shall be
legal tender for the payment of public and private debts, in immediately
available funds, rents, in the manner, at the time, and in the amounts
specified below:
4.1 Base Rent. The base rent (the "Base Rent") payable during the
term of this Lease shall be $200,000 per month. Base Rent shall be payable in
equal monthly installments in arrears with the first monthly installment due
and payable on or before the last day of January 1997, and a monthly
installment to be due and payable on the last day of each and every month
thereafter through and including December 31, 2006. Base Rent for any period
during the term of this Lease which is less than one (1) month shall be a
pro-rata portion of the applicable monthly installment. All payments by or on
behalf of Manager into the Debt Service Subaccount or Replacement Escrow
Subaccount during the term of this Lease shall be deemed payments of Base Rent.
The Debt Service Subaccount and Replacement Escrow Subaccount shall mean those
bank accounts established for the benefit of Nomura Asset Capital Corporation
("Nomura") pursuant to that certain Security and Disbursement Agreement,
entered into by and among Nomura, The First National Bank of Boston, Lessor,
and Bellefontaine Management Associates, dated June 28, 1995. Notwithstanding
anything to the contrary contained herein, if Lessee does not have sufficient
funds from operations to pay Base Rent accrued during the month of December
1996 by its due date (January 31, 1997), Lessee shall have until April 30,
1997, to make such rent payment; provided, however, Lessee shall pay such rent
beforehand as soon as funds are available if Lessee has sufficient funds from
operations prior to April 30, 1997 to pay such rent and its other obligations
hereunder.
4.2 Percentage Rent.
(a) Pursuant to the terms and conditions of this Section
4.2, Lessee shall also pay Lessor Percentage Rent for each calendar
year. The term "Percentage Rent," as used herein, shall mean the sum
of:
(i) the product determined by multiplying (x) 28%,
by (y) the amount, if any, by which the Gross Receipts for the
calendar year exceed $20,000,000.00 (provided, however, in no
event shall the amount determined under this subparagraph (y)
exceed $7,000,000.00);
(ii) the product determined by multiplying (x) 21%,
by (y) the amount, if any, by which the Gross Receipts for the
calendar year exceed
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$27,000,000.00 (provided, however, in no event shall the amount
determined under this subparagraph (y) exceed $8,000,000.00); and
(iii) the product determined by multiplying (x) 15%,
by (y) the amount, if any, by which the Gross Receipts for the
calendar year exceed $35,000,000.00.
(b) For any calendar year which has less than twelve (12)
full months, the Percentage Rent for such partial year shall be
computed in the following manner:
(i) the Gross Receipts for such partial year shall
be multiplied by twelve (12), and such product shall be
divided by the actual number of calendar months (including a
fraction for any partial month) in said year in which this
Lease was in effect;
(ii) using the formula set forth in paragraph (a)
above, Percentage Rent shall be calculated on the amount
determined in subparagraph (i) of this paragraph (b); and
(iii) the amount determined in subparagraph (ii) of
this paragraph (b) shall be multiplied by the actual number of
calendar months (including a fraction for any partial month)
in such year in which this Lease was in effect, and such
product shall be divided by twelve (12).
(c) To the extent the Owner's Remittance Amounts received
by Lessee with respect to any calendar quarter exceed the Base Rent
paid or payable by Lessee to Lessor for such quarter, Lessee shall
remit and pay such amount to Lessor as an advance payment of
Percentage Rent; provided, however, in no event shall such payment
exceed the Ceiling Amount. Such advance payments, if any, of
Percentage Rent shall be paid to Lessor on a quarterly basis on the
last day of the month following each calendar quarter. The first such
advance payment of Percentage Rent shall be due on or before January
31, 1997, and each succeeding payment shall be due on the last day of
each and every April, July, October, and January thereafter, with the
final payment due on December 31, 2006.
(d) For any given quarter, the Ceiling Amount shall be
the amount determined by
(i) dividing Gross Receipts for the quarter in
question, by estimated annual Gross Receipts for the current
calendar year;
(ii) by multiplying the result in (i) by the Floor;
and
(iii) subtracting $12,500.00 from the product in
(ii), but in no event shall the Ceiling Amount be a negative
number.
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The estimated annual Gross Receipts for any calendar year shall be
determined by adding (i) the actual cumulative Gross Receipts for any
previous quarters in such year as reported by the Manager; (ii) the
actual Gross Receipts for the quarter in question; and (iii) the
Manager's most current estimate of Gross Receipts for the remaining
quarters in the current year.
(e) (i) The term "Floor" shall mean the amount of
Percentage Rent as calculated pursuant to paragraph (a) above
based on the estimated annual Gross Receipts for the current
calendar year.
(ii) The term "Gross Receipts" shall have the same
meaning as set forth in the Management Agreement.
(iii) The term "Owner's Remittance Amount" shall
have the same meaning as set forth in the Management
Agreement.
(f) Lessee shall submit to Lessor by the last day of each
month a written statement signed and certified by Lessee to be
correct, showing Gross Receipts during the preceding month. Lessee
shall submit to Lessor by the sixtieth (60th) day after the end of
each calendar year a written statement signed and certified by Lessee
to be correct, showing Gross Receipts during the preceding calendar
year (the "Annual Gross Receipts Report"). Lessee's monthly and
annual written statement of Gross Receipts shall contain such detail
and breakdown as Lessor may reasonably require. If, after notice from
Lessor and the expiration of the cure period provided for herein,
Lessee fails to submit the aforesaid statements to Lessor when due,
Lessor, in addition to any other remedies Lessor has, shall have the
right to retain a certified public accountant, at Lessee's sole
expense, to prepare such statements and to perform all inspections and
audits related thereto. In the event the Annual Gross Receipts Report
discloses that the actual Percentage Rent exceeds the advance payments
of Percentage Rate to Lessor with respect to such year, Lessee shall
within fifteen (15) days of notice from Lessor remit the difference to
Lessor. In the event the advance payments of Percentage Rent paid to
Lessor with respect to a calendar year exceed the actual Percentage
Rent based upon the Annual Gross Receipts Report, Lessor shall refund
the difference within fifteen (15) days of notice from Lessee. The
adjustments set forth in the preceding two grammatical sentences shall
be subject to any further adjustments that may be made pursuant to the
provisions of Section 4.2(h) below.
(g) Lessee shall maintain in a manner and form
satisfactory to Lessor, during the term of this Lease, and for a
period of three (3) consecutive years thereafter, complete and
accurate general books of account, which shall reflect Gross Receipts,
and which shall include, if used by Lessee, without limitation,
original invoices, sales records, sales slips, sales checks, sales
reports, cash register tapes, records of bank deposits, inventory
records prepared as of the close of the Lessee's accounting period,
sales and occupation tax returns and all other original records and
other pertinent papers which will enable Lessor to
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determine the Gross Receipts derived by Lessee during the term of this
Lease. Such records for the three (3) most recent years shall be
maintained at the Leased Property or Lessee's corporate headquarters.
(h) The acceptance by Lessor of the advance payments of
Percentage Rent (pursuant to paragraph (c) above) or any additional
payment of Percentage Rent (pursuant to paragraph (f) above) shall not
prejudice Lessor's right to an examination of Lessee's records of
Gross Receipts for any period for which Lessee is required to maintain
records to verify Gross Receipts. Lessor shall have the right to
examine Lessee's records during all regular business hours upon
reasonable prior notice. Lessee, upon reasonable prior notice, shall
make available to Lessor for examination any other records required to
be maintained hereunder. If the audit of the books and records by
Lessor discloses that Gross Receipts were underreported by Lessee by
two and one-half percent (2.5%) or more for any period covered by the
audit, Lessee shall promptly pay to Lessor, as Additional Rent, the
cost of the audit, in addition to any deficiency in Percentage Rent
that may be due. If the audit discloses that Gross Receipts were
underreported by Lessee by less than two and one-half percent (2.5%)
for such period, Lessee shall promptly pay to Lessor the deficiency,
and Lessor shall pay the cost of the audit. If the audit discloses
that Gross Receipts were underreported by Lessee by five percent (5%)
or more for such period, Lessor shall have the option, exercisable
within sixty (60) days of its discovery of the discrepancy, to
consider such event as an Event of Default. The provisions of this
Section shall survive the expiration of the term of this Lease or the
earlier termination hereof for a period of one (1) year thereafter.
4.3 Additional Charges. In addition to the Base Rent and the
Percentage Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions (as defined
hereinbelow) that Lessee assumes or agrees to pay under this Lease, and (b) in
the event of any failure on the part of Lessee to pay any of those items
referred to in clause (a) of this Section 4.3, Lessee also will promptly pay
and discharge every fine, penalty, interest and cost that may be added for
non-payment or late payment of such items (the items referred to in clauses (a)
and (b) of this Section 4.3 being additional rent hereunder and being referred
to herein collectively as the "Additional Charges") and Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided either in
this Lease or by statute or otherwise in the case of non-payment of the
Additional Charges as are available in the case of non-payment of the Base Rent
or the Percentage Rent. To the extent that Lessee pays any Additional Charges
to Lessor pursuant to any requirement of this Lease, Lessee shall be relieved
of its obligation to pay such Additional Charges to the entity to which they
would otherwise be due and Lessor shall pay same from monies received from
Lessee.
4.4 Net Lease Provisions. The rent shall be paid absolutely net
to Lessor so that this Lease shall yield to Lessor the full amount of the
installments of Base Rent, Percentage Rent, and all Additional Charges
throughout the term of this Lease, all as more fully set forth in Article V
hereinbelow, but subject to any other provisions of this Lease that expressly
provide for adjustment or abatement of rent or other charges or expressly
provide that certain expenses or maintenance shall be paid or performed by
Lessor.
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4.5 Place and Manner of Payment. Subject to the further
provisions hereof, the rent hereunder shall be payable to Lessor at the
original or changed address of Lessor set forth in Article XXIX hereof or to
such other person at such address as Lessor may designate from time to time in
writing.
4.6 Late Charge. If Lessor fails to pay any regular monthly
installment of Base Rent, Percentage Rent, or any Additional Charges within
fifteen (15) days after Lessor has notified Lessee in writing that such
installment or charge is overdue, then in addition to the past due amount
Lessee shall pay to Lessor a late charge of five percent (5%) of the
installment or amount due in order to compensate Lessor for the extra
administrative expenses incurred.
ARTICLE V
Quiet Enjoyment. Lessor has full right to make this Lease and,
subject to the terms and provisions of this Lease, Lessee shall have quiet and
peaceable enjoyment of the Leased Property during the term hereof. Except as
otherwise specifically provided in this Lease, Lessee, to the maximum extent
permitted by law, shall remain bound by this Lease in accordance with its terms
and shall neither take any action without the written consent of Lessor to
modify, surrender or terminate the same, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of the rent, or setoff against the
rent, nor shall the obligations of Lessee be otherwise affected by reason of
(a) any damage to or destruction of the Leased Property or any portion thereof
from whatever cause, (b) the lawful or unlawful prohibition of, or restriction
upon Lessee's use of the Leased Property, or any portion thereof, or the
interference with such use by any person, corporation, partnership or other
entity or by reason of eviction by paramount title, (c) any claim which Lessee
has or might have against Lessor by reason of any default or breach of any
warranty by Lessor under this Lease or any other agreement between Lessor and
Lessee, or to which Lessor and Lessee are parties, (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or any assignee
of or transferee of Lessor, or (e) for any other cause whether similar or
dissimilar to any of the foregoing other than a discharge of Lessee from any
such obligations as a matter of law. Lessee hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law to (i) modify, surrender or terminate this Lease or
quit or surrender the Leased Property or any portion thereof, or (ii) entitle
Lessee to any abatement, reduction, suspension or deferment of the rent or
other sums payable by Lessee hereunder, except as otherwise specifically
provided in this Lease. The obligations of Lessee hereunder shall be separate
and independent covenants and agreements and the rent and all other sums
payable by Lessee hereunder shall continue to be payable in all events unless
all the obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
ARTICLE VI
6.1 Payment of Impositions. Subject to Article XII relating to
permitted contests, Lessee will pay, or cause to be paid, all Impositions (as
defined hereinbelow) before any fine,
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penalty, interest or cost may be added for non-payment, such payments to be
made directly to the taxing or other authorities where feasible, and will
promptly furnish to Lessor copies of official receipts or other satisfactory
proof evidencing such payments. If any such Imposition may, at the option of
the obligor, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Lessee may exercise the
option to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and in such event, shall pay such installments
during the term hereof (subject to Lessee's right of contest pursuant to the
provisions of Article XII) as the same respectively become due and before any
fine, penalty, premium, further interest or cost may be added thereto. If any
refund shall be due in respect of any Imposition paid by Lessee, the same shall
be paid over to or retained by Lessee if no Event of Default shall have
occurred hereunder and be continuing. If an Event of Default shall have
occurred and be continuing, any such refund shall be paid over to or retained
by Lessor. Any such funds retained by Lessor due to an Event of Default shall
be applied as provided in Article XVI. Lessor and Lessee shall, upon request
of the other, provide such data as is maintained by the party to whom the
request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports.
6.2 Notice of Impositions. Lessor shall give prompt Notice to
Lessee of all Impositions payable by Lessee hereunder of which Lessor at any
time has knowledge, provided that Lessor's failure to give any such Notice
shall in no way diminish Lessee's obligations hereunder to pay such
Impositions, but such failure shall obviate any default hereunder for a
reasonable time after Lessee receives Notice of any Imposition which it is
obligated to pay.
6.3 Adjustment of Impositions. Impositions imposed in respect of
the tax-fiscal period during which the term of this Lease terminates shall be
adjusted and prorated between Lessor and Lessee, whether or not such Imposition
is imposed before or after such termination, and Lessee's obligation to pay its
prorated share thereof after termination shall survive such termination.
6.4 Utility Charges. Lessee will be solely responsible for
obtaining and maintaining utility services to the Leased Property and will pay
or cause to be paid all charges for electricity, gas, oil, water, sewer and
other utilities used in the Leased Property during the term of this Lease.
6.5 Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverages required to be maintained by it under
Article XIII.
6.6 Definition of Impositions. The term "Impositions," as used
herein, means, collectively, all taxes (including, without limitation, all ad
valorem, sales and use, single business, gross receipts, transaction privilege,
rent or similar taxes as the same relate to or are imposed upon Lessee or its
business conducted upon the Leased Property), assessments (including, without
limitation, all 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 and also any assessments imposed on the Leased
Property by any property owners' association, condominium association or other
such private association, or otherwise as a result of private deed restrictions
affecting the Leased Property), ground rents, water, sewer or other rents and
charges, excises, tax inspection, authorization and similar fees and all other
such
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charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Lessee (including all interest and penalties
thereon caused by any failure in payment by Lessee), which at any time prior
to, during or with respect to the term hereof may be assessed or imposed on the
Leased Property, or any part thereof or any rent therefrom or any estate,
right, title or interests therein, or (c) any occupancy, operation, use or
possession of, or sales from, or activity conducted on or in connection with
the Leased Property, or the leasing or use of the Leased Property or any part
thereof by Lessee. Nothing contained in this definition of Impositions shall
be construed to require Lessee to pay (1) any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Lessor or
any other person, or (2) any net revenue tax of Lessor or any other person, or
(3) any tax imposed with respect to the sale, exchange or other disposition by
Lessor of any Leased Property or the proceeds thereof, or (4) any single
business, gross receipts (other than tax on any rent received by Lessor from
Lessee), transaction, privilege or similar taxes as the same relate to or are
imposed upon Lessor, except to the extent that any tax, assessment, tax levy or
charge that Lessee is obligated to pay pursuant to the first sentence of the
definition and that is in effect at any time during the term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied, assessed or imposed expressly in lieu thereof.
ARTICLE VII
7.1 Condition of the Leased Property. Lessee acknowledges receipt
and delivery of possession of the Leased Property. Lessee has examined and
otherwise has knowledge of the condition of the Leased Property and has found
the same to be satisfactory for its purposes hereunder. Lessee is leasing the
Leased Property "as is" in its present condition. Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property.
LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT
THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT.
Provided, however, to the extent permitted by law, Lessor hereby assigns to
Lessee all of Lessor's rights to proceed against any predecessor-in-title,
contractor, subcontractor or supplier for breaches of warranties or
representations or for latent defects in the Leased Property. Lessor shall
fully cooperate with Lessee in the prosecution of any such claim, in Lessor's
or Lessee's name, all at Lessee's sole cost and expense. Lessee hereby agrees
to indemnify, defend and hold harmless Lessor from and against any claims,
obligation and liabilities against or incurred by Lessor in connection with
such cooperation.
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7.2 Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise its best efforts to obtain and to maintain
all approvals needed to use and operate the Leased Property under
applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased
Property only as a health and fitness resort, and for such other uses
as may be necessary or incidental to such use or such other use as
otherwise approved by Lessor (the "Primary Intended Use"). Lessee
shall not use the Leased Property or any portion thereof for any other
use without the prior written consent of Lessor, which consent may be
granted, denied or conditioned in Lessor's sole discretion. No use
shall be made or permitted to be made of the Leased Property, and no
acts shall be done, which will cause the cancellation or increase the
premium of any insurance policy covering the Leased Property or any
part thereof (unless another adequate policy satisfactory to Lessor is
available and Lessee pays any premium increase), nor shall Lessee sell
or permit to be kept, used or sold in or about the Leased Property any
article which may be prohibited by law or fire underwriter's
regulations. Lessee shall, at its sole cost, comply with all of the
requirements pertaining to the Leased Property of any insurance board,
association, organization or company necessary for the maintenance of
insurance, as herein provided, covering the Leased Property.
(c) Subject to the provisions of Articles XIV, XV, and
XXI, Lessee covenants and agrees that during the term of this Lease it
will (1) operate continuously the Leased Property as a health and
fitness resort, (2) keep in full force and effect and comply with all
the provisions of the Management Agreement, (3) not terminate or amend
the Management Agreement without the consent of Lessor, and (4)
maintain appropriate certifications and licenses for such use.
(d) Lessee shall not commit or suffer to be committed any
waste on the Leased Property (normal wear and tear excepted), nor
shall Lessee cause or permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased
Property or any portion thereof to be used in such a manner as (1)
might reasonably tend to impair Lessor's (or Lessee's, as the case may
be) title thereto or to any portion thereof, or (2) may reasonably
make possible a claim or claims of adverse usage or adverse possession
by the public, as such, or of implied dedication of the Leased
Property or any portion thereof, except as necessary in the ordinary
and prudent operation of the Resort on the Leased Property.
7.3 Lessor to Grant Easements, Etc. Lessor will, from time to
time, so long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost and expense (but subject to the approval
of Lessor, which approval shall not be unreasonably withheld or delayed), (a)
grant easements and other rights in the nature of easements with
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respect to the Leased Property to third parties, (b) release existing easements
or other rights in the nature of easements which are for the benefit of the
Leased Property, (c) dedicate or transfer unimproved portions of the Leased
Property for road, highway or other public purposes, (d) execute petitions to
have the Leased Property annexed to any municipal corporation or utility
district, (e) execute amendments to any covenants and restrictions affecting
the Leased Property and (f) execute and deliver to any person any instrument
appropriate to confirm or effect such grants, releases, dedications, transfers,
petitions and amendments (to the extent of its interests in the Leased
Property), but only upon delivery to Lessor of a certificate from Lessee
stating that such grant, release, dedication, transfer, petition or amendment
is not detrimental to the proper conduct of the business of Lessee on the
Leased Property and does not materially reduce the value of the Leased
Property.
7.4 Operating Supplies. On the Commencement Date, all Operating
Supplies (as defined below) shall be transferred from Lessor to Lessee so that
they accompany the Leased Property. During the term of this Lease, Lessee, at
its sole cost and expense, shall furnish and maintain at the Leased Property
all Operating Supplies necessary or desirable for the operation of the Leased
Property in accordance with the provisions of this Lease and the Management
Agreement. Lessee, at its sole cost and expense, shall maintain and replace
the Operating Supplies so that substantially the same quantities of such items
that existed on the Commencement Date shall be available to Lessor on the
termination of this Lease. Upon the termination of this Lease, the Operating
Supplies shall be transferred from Lessee to Lessor so that they accompany the
Leased Property. The term "Operating Supplies," as used herein, shall mean all
food, beverages and other consumable items used in the operation of the Resort
such as fuel, engineering, maintenance and housekeeping supplies, soap,
cleaning materials, matches, stationery and printing, brochures, literature,
folios and all other similar items, together with all substitutions and
replacements thereto.
7.5 FF&E. Throughout the term of this Lease, and subject to the
rights of the first lienholder of the Leased Property, Lessor shall establish
and maintain a reserve account (the "FFE Reserve") which at all times will have
in it sufficient funds to satisfy the reserve requirements set forth in Article
5.4 of the Management Agreement. All payments by or on behalf of Manager into
the Replacement Escrow Account during the term of this Lease shall be deemed
contributions by Lessor to the FFE Reserve. If at any time during the term of
the Lease, any item of FFE requires replacement, upon a written request
therefor from Lessee (and the consent of Nomura with respect to funds in the
Replacement Escrow Account), Lessor shall promptly advance sufficient funds
from the FFE Reserve to enable either Manager or Lessee to purchase the
required replacements. Lessee shall make no expenditure for replacement of FFE
in excess of the amounts in the FFE Reserve without first obtaining the
approval of Lessor. Any additions to or replacements of furnitures, fixtures,
and equipment located at the Leased Property shall become part of the FFE,
which is owned by Lessor. Throughout the term of this Lease, Lessee shall, at
its sole cost and expense and in accordance with the requirements of the
Management Agreement, cause all of the items of FFE to be in proper working
order and in good condition (ordinary wear and tear excepted). The term "FFE"
shall mean all vehicles, furniture and furnishings, hotel equipment (including
office equipment, exercise equipment, medical and/or health equipment, and
property management equipment as necessary).
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7.6 Lessee's Obligation to Manage. At all times during the term
hereof, Lessee shall be responsible for the management and operation of the
Leased Property, and in no event shall Lessor have any obligation with respect
to the management or operation of the Leased Property.
7.7 Net Worth. Lessee covenants that it shall at all times during
the term of this Lease maintain a "net worth" which shall be equal to no less
than $200,000.00. For purposes hereof, "net worth" shall mean the sum of (i)
the aggregate cash and fair market value of any property (other than cash)
contributed to the capital of Lessee by its owners (net of amounts distributed
other than distributions out of earnings of Lessee), and (ii) the aggregate
balances of any loan (A) obtained by Lessee and guaranteed by one or more of
the owners of Lessee or (B) obtained by the owners of Lessee to fund capital
contributions to the Lessee (to the extent not already included in (i)), to the
extent such funds may be utilized by Lessee to perform its obligations under
the Lease, to comply with the terms of the Management Agreement, or to comply
with the terms of any other lease between Lessor (or a substitute lessor) or an
entity affiliated with Lessor (or a substitute lessor) and Lessee or an entity
owned substantially all by Lessee, and (iii) any commitments of the members of
Lessee to make additional capital contributions to Lessee, and (iv) the
guaranty by the members of Lessee of the obligations of Lessee under the Lease
or any other lease between Lessor (or a substitute lessor) or an entity
affiliated with Lessor (or a substitute lessor) and Lessee or an entity owned
substantially all by Lessee. Lessee shall provide Lessor with an annual
written certification of its compliance with the foregoing requirement on the
Commencement Date and the first day of each subsequent year of this Lease
hereunder; provided, however, that Lessor may, in addition, request more than
once during any year of this Lease that Lessee provide Lessor with a
certification as of the date of such request of its compliance with the
foregoing requirement. Such certifications must be reasonably satisfactory to
Lessor as to matters certified therein and shall be accompanied by such
supporting financial information as Lessor may reasonably request.
7.8 Ownership. Lessee covenants that neither it nor any person
owning any interest (or fraction thereof) in Lessee will acquire a greater than
6% ownership interest in Lessor (or any affiliate thereof), or any person
holding an ownership interest in Lessor (including by reason of the
constructive ownership rules described below), without Lessor's prior written
consent. For purposes of determining under this Section 7.8 ownership in
Lessor, in Lessee or in any other person, the constructive ownership rules
specified in Section 856(d)(5) of the Internal Revenue Code of 1986, as
amended, shall apply.
7.9 Limitation on Distributions. Lessee covenants that, until
such time as (i) Lessee has accumulated and is holding in reserve funds which
are sufficient in an amount to enable Lessee to pay (A) at least one (1) month
of Base Rent based on the average monthly payment of Base Rent applicable to
such year as set forth in Article 4.1 hereof, plus (B) at least one (1) month
of Base Rent based on the average monthly payment of Base Rent applicable to
such lease year under that certain Lease Agreement, dated November 18, 1996,
between Crescent Real Estate Equities Limited Partnership and Lessee, regarding
the Sonoma Mission Inn & Spa in Sonoma County, California, plus (C) at least
one (1) monthly payment of Base Rent based on the average monthly payment of
Base Rent for such lease year under all other leases between Lessor (or a
substitute lessor) or an entity affiliated with Lessor (or a substitute lessor)
and Lessee; provided, however, the sum of the amounts set forth in (A) and (B)
need not exceed $500,000.00, and (ii) any entity owned substantially all by
Lessee which has entered into a
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long-term lease of a hotel either with Lessor (or a substitute lessor) or an
affiliate of Lessor (or a substitute lessor) has accumulated and is holding in
reserve funds which are sufficient in an amount to enable such entity to pay at
least one (1) monthly payment of base rent based on the largest monthly payment
of base rent for such lease year under all leases between such entity and such
lessor, Lessee shall retain all income generated by the Leased Property and
shall not distribute any earnings to its beneficial owners except as needed for
federal and state income taxes payable on taxable income from the Leased
Property. In no event, however, shall any amounts be payable to the beneficial
owners of Lessee if any such payment would result in a violation of Lessee's
net worth covenants set forth in Article 7.7 hereinabove.
7.10 Working Capital. On the Commencement Date, Lessor shall
transfer to Lessee cash and funds deposited in banks ("Cash") in the amount set
forth on a Statement of Working Capital (the "Statement") to be initialed by
Lessor and Lessee and appended to this Lease as Exhibit "B" subsequent to the
execution of this Lease, which amount is advanced by Lessor to the Leased
Property in accordance with Sections 3.3 and 7.1 of the Management Agreement.
The Statement shall show the items of working capital ("Working Capital")
pertaining to the Leased Property. Upon the expiration or early termination of
this Lease, Lessee shall pay over to Lessor the same amount of Cash that
existed on the Commencement Date. Upon the expiration or early termination of
this Lease, Lessee shall return to Lessor approximately the same amount of
Working Capital that existed on the Commencement Date after taking into account
the Cash paid by Lessee to Lessor pursuant to this Section 7.10.
7.11 Use of Facilities by Lessor. Lessee covenants and agrees that
Lessor shall have the right to use guest rooms, facilities, and services at the
Leased Property on a space available basis, provided, however, Lessor shall be
obligated to pay Lessee for Lessee's direct operating cost for such rooms and
services.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, Etc.
Subject to Article XII relating to permitted contests, Lessee, at its expense,
will promptly (a) comply with all applicable legal requirements and insurance
requirements in respect to the use, operation, maintenance, repair and
restoration of the Leased Property, and (b) procure, maintain and comply with
all appropriate licenses and other authorizations required for any use of the
Leased Property then being made, and for the proper erection, installation,
operation and maintenance of the Leased Property or any part thereof.
8.2 Legal Requirement Covenants. Lessee covenants and agrees that
the Leased Property shall not be used for any unlawful purpose, and that Lessee
shall not permit or suffer to exist any unlawful use of the Leased Property by
others. Lessee shall acquire and maintain all appropriate licenses,
certifications, permits and other authorizations and approvals needed to
operate the Leased Property in its customary manner for the Primary Intended
Use, and any other lawful use conducted on the Leased Property as may be
permitted from time to time hereunder. Lessee further covenants and agrees
that Lessee's use of the Leased Property and maintenance, alteration, and
operation of the same, and all parts thereof, shall at all times conform to all
legal requirements, unless the same are finally determined by a court of
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competent jurisdiction to be unlawful (and Lessee shall cause all sub-tenants,
invitees or others to so comply with all legal requirements). Lessee may,
however, upon prior Notice to Lessor, contest the legality or applicability of
any such legal requirement or any licensure or certification decision if Lessee
maintains such action in good faith, with due diligence, without prejudice to
Lessor's rights hereunder, and at Lessee's sole expense. If by the terms of
any such legal requirement compliance therewith pending the prosecution of any
such proceeding may legally be delayed without the incurrence of any lien,
charge or liability of any kind against the Leased Property or Lessee's
leasehold interest therein and without subjecting Lessee or Lessor to any
liability, civil or criminal, for failure so to comply therewith, Lessee may
delay compliance therewith until the final determination of such proceeding.
If any lien, charge or civil or criminal liability would be incurred by reason
of any such delay, Lessee, on the prior written consent of Lessor, which
consent shall not be unreasonably withheld, may nonetheless contest as
aforesaid and delay as aforesaid provided that such delay would not subject
Lessor to criminal liability and Lessee both (a) furnishes to Lessor security
reasonably satisfactory to Lessor against any loss or injury by reason of such
contest or delay and (b) prosecutes the contest with due diligence and in good
faith.
8.3 Environmental Matters and Indemnities. Lessee must, at its
sole cost and expense, keep and maintain the Leased Property in compliance
with, and must not cause the Leased Property to be in violation of, any
federal, state, and local laws, regulations, rules, and orders including
without limitation those relating to zoning, health, safety, noise,
environmental protection, water quality, air quality, or the generation,
processing, storage, or disposal of any Hazardous Materials excluding any
conditions existing prior to the Commencement Date of this Lease or violations
caused by Lessor. Moreover, Lessee will not intentionally cause or permit the
storage, use, disposal, manufacture, discharge, leakage, spillage or emission
of any Hazardous Materials on, in, or about the Leased Property. Lessee must
immediately notify Lessor in writing of its actual knowledge of: (a) any
enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened in connection with the Leased Property and
any Hazardous Materials; or (b) any claim made or threatened by any third party
against Lessee or the Leased Property relating to damage, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous Materials
that could cause all or any portion of the Leased Property to be subject to any
restrictions on the ownership, occupancy, transferability or use of the Leased
Property under Hazardous Materials Law (as hereinafter defined).
Notwithstanding the foregoing, Lessee is not required by Lessor to remove any
Hazardous Materials located on, in, under or about the Leased Premises prior to
the Commencement Date of this Lease. Without Lessor's prior written consent,
which consent must not be unreasonably withheld or delayed, Lessee will not
take any remedial action in response to the presence of any Hazardous Materials
on, in, or under or about the Leased Property, nor enter into any settlement
agreement, consent decree or other compromise in respect to any Hazardous
Materials except as may be necessary to comply with all laws, rules,
regulations or orders of any applicable governmental authorities.
Lessee indemnifies and holds Lessor, its employees, agents, officers
and directors, harmless from and against any claim, action, suit, proceeding,
loss, cost, damage, liability, deficiency, fine, penalty, punitive damage or
expense (including, without limitation, attorneys' and consultant fees),
directly or indirectly resulting from, arising out of, or based upon (a) the
presence, release, use, manufacture, generation, discharge, storage or disposal
by Lessee (or its
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sublessee, contractors, licensees, concessionaires, guests, invitees,
employees, agents or representatives) of any Hazardous Material on, under, in
or about, or the transportation of any such materials to or from the Leased
Property occurring from and after the Commencement Date, or (b) the violation,
or alleged violation by Lessee (or its sublessee, contractors, licensees,
concessionaires, guests, invitees, employees, agents or representatives) of any
Hazardous Materials Law affecting the Leased Property, or the transportation by
Lessee (or its sublessees, contractors, licensees, concessionaires, guests,
invitees, employees, agents or representatives) of Hazardous Materials to or
from the Leased Property, save and except to the extent that such violations,
alleged violations or transportation of Hazardous Materials occurred prior to
the Commencement Date of this Lease, or were not caused by Lessee (or its
sublessees, contractors, licensees, concessionaires, guests, invitees,
employees, agents or representatives).
"Hazardous Materials Law", for purposes of this Lease, means any
federal, state, or local law, ordinance or regulation or any court judgment
applicable to Lessee or to the Leased Property relating to industrial hygiene
or to environmental conditions including, but not limited to, those relating to
the release, emission or discharge of Hazardous Materials, those in connection
with the construction, fuel supply, power generation and transmission, waste
disposal or any other operations or processes relating to the Leased Property.
"Hazardous Materials Law" includes, but is not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Hazardous
Materials Transportation Act, the Resources Conservation and Recovery Act, the
Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, and any
amendments to these laws or enactments of other laws occurring after the date
hereof.
"Hazardous Materials," for purposes of this Lease Agreement, includes
flammable explosives, radioactive materials, polychlorinated biphenyls,
asbestos in any form which is or could become friable, hazardous wastes, toxic
substances or other related material whether in the form of a chemical,
element, compound, solution, mixture or otherwise including, but not limited
to, those materials defined as "hazardous substances," "hazardous materials,"
"toxic substances," "air pollutants," "toxic pollutants," "hazardous wastes,"
"extremely hazardous wastes" or "restricted hazardous wastes" by Hazardous
Materials Law, other than common cleaning compounds, solvents and other
materials kept in de minimis amounts incidental to the use of the Leased
Property and in compliance with Hazardous Materials Law.
ARTICLE IX
9.1 Maintenance and Repair.
(a) Lessee, at its sole expense, will keep the Leased
Property in good order and repair, except for ordinary wear and tear
(whether or not the need for such repairs occurred as a result of
Lessee's use, any prior use, the elements or the age of the Leased
Property, or any portion thereof), and, except as otherwise provided
in Article XIV or Article XV, with reasonable promptness, make all
necessary and appropriate repairs, replacements, and improvements
thereto of every kind and nature, whether interior or exterior,
ordinary or extraordinary, foreseen or unforeseen or arising by reason
of a condition existing prior to the
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commencement of the term of this Lease (concealed or otherwise), or
required by any governmental agency having jurisdiction over the
Leased Property. Lessee, however, shall be permitted to prosecute
claims against Lessor's predecessors-in-title, contractors,
subcontractors and suppliers for breach of any representation or
warranty or for any latent defects in the Leased Property to be
maintained by Lessee unless Lessor is already diligently pursuing such
a claim. All repairs shall, to the extent reasonably achievable, be
at least equivalent in quality to the original work. Lessee will not
take or omit to take any action, the taking or omission of which might
materially impair the value or the usefulness of the Leased Property
or any part thereof for its Primary Intended Use.
(b) Notwithstanding Lessee's obligations under Article
9.1(a) hereinabove, in the event that (i) repairs, replacements and/or
improvements of the Leased Property become necessary in order to
maintain the Resort in the same quality and condition as it currently
exists, (ii) such repairs, replacements and/or improvements are under
generally accepted accounting principles considered to be capital in
nature, (iii) the funds then available to Lessee at the Leased
Property, either in the form of reserves (including without limitation
the FFE Reserve), insurance proceeds, or other income generated by the
Leased Property and available to Lessee or Manager under the terms of
the Management Agreement, are insufficient to enable Lessee to pay the
costs of making any such repairs, replacements and/or improvements,
and (iv) Nomura consents to such repairs, replacements, and/or
improvements (if such consent is required under the terms of the loan
documents with Nomura), then Lessor shall be required to bear the cost
of making such repairs, replacements and/or improvements.
Additionally, notwithstanding anything to the contrary contained in
Article 9.1(a) above, Lessor agrees to pay the costs of the
Anticipated Improvements (as defined in the Management Agreement)
pursuant to the terms of the Management Agreement, provided that such
costs are within the budget for the Anticipated Improvements; further
provided that all contracts, plans, specifications, and change orders
for the Anticipated Improvements must be submitted to Lessor in
advance for Lessor's approval. Except as set forth in the preceding
two sentences, Lessor shall not under any circumstances be required to
build or rebuild any improvements on the Leased Property, to make any
repairs, replacements, alterations, restorations or renewals of any
nature or description to the Leased Property, whether ordinary or
extraordinary, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto, in connection with this Lease, or to
maintain the Leased Property in any way. Lessee hereby waives, to the
extent permitted by law, the right to make repairs at the expense of
Lessor pursuant to any law in effect at the time of the execution of
this Lease or hereafter enacted. Lessor shall have the right to give,
record and post, as appropriate, notices of nonresponsibility under
any mechanic's lien laws now or hereafter existing.
(c) Nothing contained in this Lease and no action or
inaction by Lessor shall be construed as (1) constituting the request
of Lessor, expressed or implied, to any contractor, subcontractor,
laborer, materialman or vendor to or for the
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performance of any labor or services or the furnishing of any
materials or other property for the construction, alteration,
addition, repair or demolition of or to the Leased Property or any
part thereof, or (2) giving Lessee any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property in such fashion as would
permit the making of any claim against Lessor in respect thereof or to
make any agreement that may create, or in any way be the basis of any
right, title, interest, lien, claim or other encumbrance upon the
estate of Lessor in the Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination
of the term of this Lease, vacate and surrender the Leased Property to
Lessor in the condition in which the Leased Property was originally
received from Lessor, except as repaired, rebuilt, restored, altered
or added to as permitted or required by the provisions of this Lease
and except for ordinary wear and tear (subject to the obligation of
Lessee to maintain the Leased Property in good order and repair, as
would a prudent owner, during the entire term of the Lease), or damage
by casualty or condemnation (subject to the obligations of Lessee to
restore or repair as set forth in the Lease).
9.2 Encroachments, Restrictions, Etc. If any of the improvements
on the Leased Property, at any time, materially encroach upon any property,
street or right-of-way adjacent to the Leased Property, or violate the
agreements or conditions contained in any lawful restrictive covenant or other
agreement affecting the Leased Property, or any part thereof, or impair the
rights of others under any easement or right-of-way to which the Leased
Property is subject, then promptly upon the request of Lessor or at the behest
of any person affected by any such encroachment, violation or impairment,
Lessee shall, at its expense, subject to its right to contest the existence of
any encroachment, violation or impairment and in such case, in the event of an
adverse final determination, either (a) obtain valid and effective waivers or
settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee or (b) make such changes in the improvements on the Leased Property and
take such other actions, as Lessee in the good faith exercise of its judgment
deems reasonably practicable to remove such encroachment, and to end such
violation or impairment, including, if necessary, the alteration of any such
improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Property for the
Primary Intended Use substantially in the manner and to the extent the Leased
Property was operated prior to the assertion of such violation, impairment and
encroachment. Any such alteration shall be made in conformity with the
applicable requirements of Article X. Lessee's obligations under this Section
9.2 shall be in addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other insurance held by
Lessor. Notwithstanding anything to the contrary contained in this Section
9.2, so long as any encroachment, violation or impairment described above does
not materially interfere with the operation of the Resort, Lessor shall not
require Lessee to remedy or otherwise address the same.
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ARTICLE X
Alterations. Lessee shall have the right to make additions,
modifications or improvements to the Leased Property from time to time as
Lessee, in its discretion, may deem to be desirable for its permitted uses and
purposes, provided that such action will not significantly alter the character
or purposes or significantly detract from the value or operating efficiency
thereof and will not significantly impair the revenue-producing capability of
the Leased Property or adversely affect the ability of the Lessee to comply
with the provisions of this Lease. The cost of such additions, modifications
or improvements to the Leased Property shall be paid by Lessee, and all such
additions, modifications or improvements shall, without payment by Lessor at
any time, be included under the terms of this Lease and upon expiration or
earlier termination of this Lease shall pass to and become the property of
Lessor. In no event shall any alterations, additions or other improvements
made by Lessee be removed from the Leased Property unless request is made by
Lessor to Lessee to remove such alterations, additions and other improvements
which were made without Lessor's approval where such approval was required
under this Lease.
ARTICLE XI
Liens. Subject to the provision of Article XII relating to permitted
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the rent payable hereunder, not including,
however, (a) this Lease, (b) the matters, if any, included as exceptions in the
title policy insuring Lessor's interest in the Leased Property, (c)
restrictions, liens and other encumbrances which are consented to in writing by
Lessor or any easements granted pursuant to the provisions of Section 7.3 of
this Lease, (d) liens for those taxes upon Lessor which Lessee is not required
to pay hereunder, (e) subleases permitted by Article XXI hereof, (f) liens for
Impositions or for sums resulting from noncompliance with legal requirements so
long as (1) the same are not yet payable or are payable without the addition of
any fine or penalty or (2) such liens are in the process of being contested as
permitted by Article XII, (g) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either disputed or not yet due provided that (1)
the payment of such sums shall not be postponed under any related contract for
more than 60 days after the completion of the action giving rise to such lien
and such reserve or other appropriate provisions as shall be required by law or
generally accepted accounting principles shall have been made therefor or (2)
any such liens are in the process of being contested as permitted by Article
XII hereof, and (h) any liens which are the responsibility of Lessor pursuant
to the provisions of Article XXXI of this Lease.
ARTICLE XII
Permitted Contests. Lessee shall have the right to contest the amount
or validity of any Imposition to be paid by Lessee or any legal requirement or
insurance requirement or any lien, attachment, levy, encumbrance, charge or
claim ("Claims") not otherwise permitted by Article XI, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be
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deemed or construed in any way to relieve, modify or extend Lessee's covenants
to pay or its covenants to cause to be paid any such charges at the time and in
the manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of the Leased Property, or any
part thereof, or cause Lessor or Lessee to be in default under any mortgage,
deed of trust or security deed encumbering the Leased Property or any interest
therein. Upon the request of Lessor, Lessee shall either (a) provide a bond or
other assurance reasonably satisfactory to Lessor that all Claims which may be
assessed against the Leased Property together with interest and penalties, if
any, thereon will be paid, or (b) deposit within the time otherwise required
for payment with a bank or trust company as trustee upon terms reasonably
satisfactory to Lessor, as security for the payment of such Claims, money in an
amount sufficient to pay the same, together with interest and penalties in
connection therewith, as to all Claims which may be assessed against or become
a Claim on the Leased Property, or any part thereof, in said legal proceedings.
Lessee shall furnish Lessor and any lender of Lessor with reasonable evidence
of such deposit within five days of the same. Lessor agrees to join in any
such proceedings if the same be required to legally prosecute such contest of
the validity of such Claims; provided, however, that Lessor shall not thereby
be subjected to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and Lessee covenants to
indemnify and save harmless Lessor from any such costs or expenses. Lessee
shall be entitled to any refund of any Claims and such charges and penalties or
interest thereon which have been paid by Lessee or paid by Lessor and for which
Lessor has been fully reimbursed. In the event that Lessee fails to pay any
Claims when due or to provide the security therefor as provided in this
paragraph and to diligently prosecute any contest of the same, Lessor may, upon
ten days advance written notice to Lessee, pay such charges together with any
interest and penalties and the same shall be repayable by Lessee to Lessor at
the next rent payment date provided for in this Lease. Provided, however, that
should Lessor reasonably determine that the giving of such notice would risk
loss to the Leased Property or cause damage to Lessor, then Lessor shall give
such notice as is practical under the circumstances. Lessor reserves the right
to contest at its expense any of the Claims not pursued by Lessee. Lessor and
Lessee agree to cooperate in coordinating the contest of any Claims.
ARTICLE XIII
13.1 General Insurance Requirements. During the term of this
Lease, Lessee shall at all times keep the Leased Property insured with the
kinds and amounts of insurance described below. This insurance shall be
written by companies authorized to issue insurance in the State of
Massachusetts. The policies must name Lessor as the insured or as an
additional named insured, as the case may be. Losses shall be payable to
Lessor or Lessee as provided in this Lease. Any loss adjustment shall require
the written consent of Lessor and Lessee, each acting reasonably, promptly and
in good faith. Evidence of insurance shall be deposited with Lessor. The
policies on the Leased Property shall include:
(a) Personal property insurance on the "Special Form"
(formerly "All Risk" form) in the full amount of the replacement cost
thereof;
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(b) Loss of income insurance on the "Special Form", in
the amount of one year of Base Rent and Percentage Rent for the
benefit of Lessor;
(c) Commercial general liability insurance, with amounts
not less than $10,000,000 covering each of the following: bodily
injury, death, or property damage liability per occurrence, personal
and advertising injury, general aggregate, products and completed
operations, with respect to Lessor, and "all risk legal liability"
(including liquor law or "dram shop" liability) with respect to Lessor
and Lessee;
(d) Insurance covering such other hazards and in such
amounts as may be customary for comparable properties in the area of
the Leased Property and is available from insurance companies,
insurance pools or other appropriate companies authorized to do
business in the State of Massachusetts at rates which are economically
practicable in relation to the risks covered as may be reasonably
requested by Lessor;
(e) Fidelity bonds with limits and deductions as may be
reasonably requested by Lessor, covering Lessee's employees in job
classifications normally bonded under prudent resort management
practices in the United States or otherwise required by law; and
(f) Such other insurance as Lessor may reasonably request
for facilities such as the Leased Property and the operation thereof.
Lessee shall keep in force the foregoing insurance coverages at its
expense.
13.2 Replacement Cost. The term "full replacement cost" as used
herein shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time. In the event either party believes that full
replacement cost (the then-replacement cost less such exclusions) has increased
or decreased at any time during the term of this Lease, it shall have the right
to have such full replacement cost re-determined.
13.3 Worker's Compensation. Lessee, at its sole cost, shall at all
times maintain adequate worker's compensation insurance coverage for all
persons employed by Lessee on the Leased Property. Such worker's compensation
insurance shall be in accordance with the requirements of applicable local,
state and federal law.
13.4 Waiver of Subrogation. All insurance policies carried by
Lessor or Lessee covering the Leased Property including, without limitation,
contents, fire and casualty insurance, shall expressly waive any right of
subrogation on the part of the insurer against the other party. The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
13.5 Form Satisfactory, Etc. All of the policies of insurance
referred to in this Article XIII shall be written in a form, with deductibles
and by insurance companies reasonably
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satisfactory to Lessor. Lessee shall pay all of the premiums therefor, and
deliver such policies or certificates thereof to Lessor prior to their
effective date (and, with respect to any renewal policy, 30 days prior to the
expiration of the existing policy), and in the event of the failure of Lessee
either to effect such insurance as herein called for or to pay the premiums
therefor, or to deliver such policies or certificates thereof to Lessor at the
times required, Lessor shall be entitled, but shall have no obligation, to
effect such insurance and pay the premiums therefor, and Lessee shall reimburse
Lessor for any premium or premiums paid by Lessor for the coverages required
under Section 13.1 upon written demand therefor, and Lessee's failure to repay
the same within 30 days after notice of such failure from Lessor shall
constitute an Event of Default within the meaning of Section 16.1(b). Each
insurer mentioned in this Article XIII shall agree, by endorsement to the
policy or policies issued by it, or by independent instrument furnished to
Lessor, that it will give to Lessor 30 days written notice before the policy or
policies in question shall be materially altered, allowed to expire or
canceled.
13.6 Increase in Limits. If either Lessor or Lessee at any time
deems the limits of the personal injury or property damage under the
comprehensive public liability insurance then carried to be either excessive or
insufficient, Lessor or Lessee shall endeavor in good faith to agree on the
proper and reasonable limits for such insurance to be carried and such
insurance shall thereafter be carried with the limits thus agreed on until
further change pursuant to the provisions of this Section.
ARTICLE XIV
14.1 Insurance Proceeds. Subject to the provisions of Section
14.3, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any policy of insurance
required by Article XIII of this Lease, shall be paid to Lessor and held in
trust by Lessor in an interest-bearing account, shall be made available, if
applicable, for replacement or repair, as the case may be, of any damage to or
destruction of the Leased Property, or any portion thereof, and, if applicable,
shall be paid out by Lessor from time to time for the reasonable costs of such
replacement or repair upon satisfaction of reasonable terms and conditions
specified by Lessor. Any excess proceeds of insurance remaining after
completion of the replacement or repair of the Leased Property shall be
retained by Lessor. All salvage resulting from any risk covered by insurance
shall belong to Lessor.
14.2 No Abatement of Rent. Any damage or destruction due to
casualty notwithstanding, this Lease shall remain in full force and effect, and
Lessee's obligation to make rental payments and to pay all other charges
required by this Lease shall remain unabated.
14.3 Damage During Term. Notwithstanding any provisions of Section
14.1 appearing to the contrary, if damage to or destruction of the Leased
Property occurring during the term of this Lease renders the Leased Property
unsuitable for its Primary Intended Use, then either Lessor or Lessee (but in
Lessee's case only if the Leased Property is rendered unsuitable for its
Primary Intended Use for a period in excess of one (1) year), shall have the
right to terminate this Lease by giving written notice to the other party, in
Lessor's case at any time after the occurrence of such damage or destruction,
or in Lessee's case within thirty (30) days after the
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expiration of such year, whereupon all accrued rent shall be paid immediately,
and this Lease shall automatically terminate.
ARTICLE XV
15.1 Definitions.
(a) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or
otherwise, by a Condemnor, and (2) a voluntary sale or transfer by
Lessor to any Condemnor, either under threat of condemnation or while
legal proceedings for condemnation are pending.
(b) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of
value awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public
authority, or private corporation or individual, having the power of
Condemnation.
15.2 Parties' Rights and Obligations. If during the term there is
any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV.
15.3 Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of Taking by the Condemnor. If title to the fee of less than the
whole of or substantially all of the Leased Property is so taken or condemned,
which nevertheless renders the Leased Property unsuitable or uneconomic for its
Primary Intended Use, Lessee and Lessor shall each have the option, by notice
to the other, at any time prior to the Date of Taking, to terminate this Lease
as of the Date of Taking. Upon such date, if such Notice has been given, this
Lease shall thereupon cease and terminate. All Base Rent and Additional
Charges paid or payable by Lessee hereunder shall be apportioned as of the Date
of Taking, and Lessee shall promptly pay Lessor such amounts.
15.4 Allocation of Award. The total Award made with respect to the
Leased Property or for loss of rent, or for Lessor's loss of business beyond
the term, shall be solely the property of and payable to Lessor. Any Award
made for loss of business during the remaining term, if any, or for removal and
relocation expenses of Lessee in any such proceedings shall be the sole
property of and payable to Lessee. In any Condemnation proceedings Lessor and
Lessee shall each seek its Award in conformity herewith, at its respective
expense; provided, however, Lessee shall not initiate, prosecute or acquiesce
in any proceedings that may result in a diminution of any Award payable to
Lessor.
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15.5 Partial Taking. If title to less than the whole of or
substantially all of the Leased Property is condemned, and the Leased Property
is still suitable for its Primary Intended Use, and not uneconomic for its
Primary Intended Use, or if Lessee or Lessor is entitled but neither elects to
terminate this Lease as provided in Section 15.3, Lessee at its cost shall with
all reasonable dispatch restore the untaken portion of the Leased Property so
that such Leased Property contains the same architectural units of the same
general character and condition (as nearly as may be possible under the
circumstances) as the Leased Property existing immediately prior to the
Condemnation. Lessor shall contribute to the cost of restoration that part of
its Award specifically allocated to such restoration, if any, together with
severance and other damages awarded for the taken Leased Property; provided,
however, that the amount of such contributions shall not exceed such cost.
15.6 Temporary Taking. If the whole or any part of the Leased
Property or of Lessee's interest under this Lease is condemned by any Condemnor
for its temporary use or occupancy, this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay, in the manner and at the terms
herein specified, the full amount of all Base Rent, Percentage Rent, and
Additional Charges. Except only to the extent that Lessee may be prevented
from so doing pursuant to the terms of the order of the Condemnor, Lessee shall
continue to perform and observe all of the other terms, covenants, conditions
and obligations hereof on the part of the Lessee to be performed and observed,
as though such Condemnation had not occurred. In the event of any Condemnation
as is in this Section 15.6 described, the entire amount of any Award made for
such Condemnation allocable to the term of this Lease, whether paid by way of
damages, rent or otherwise, shall be paid to Lessee. Lessee covenants that
upon the termination of any such period of temporary use or occupancy it will,
at its sole cost and expense (subject to Lessor's contribution as set forth
below), restore the Leased Property as nearly as may be reasonably possible to
the condition in which the same was immediately prior to such Condemnation,
unless such period of temporary use or occupancy extends beyond the expiration
of the term, in which case Lessee shall not be required to make such
restoration. If restoration is required hereunder, Lessor shall contribute to
the cost of such restoration that portion of its entire Award that is
specifically allocated to such restoration in the judgment or order of the
court, if any, and Lessee shall fund the balance of such costs in advance of
restoration in a manner reasonably satisfactory to Lessor.
ARTICLE XVI
16.1 Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) if Lessee fails to pay any Base Rent, Percentage
Rent, Impositions or any other monies required to be paid by Lessee
under this Lease, and such failure continues for a period of fifteen
(15) days after written notice specifying such failure has been
provided Lessee by Lessor;
(b) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by
Lessee within a period of 30 days after receipt by the Lessee of
notice thereof from Lessor, unless such
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failure cannot with due diligence be cured within a period of 30 days,
in which case it shall not be deemed an Event of Default if Lessee
proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof provided, however, in no event
shall such cure period extend beyond 90 days after notice of such
failure has been provided to Lessee by Lessor; or
(c) if an event of default has occurred under the
Management Agreement with respect to the Resort at the Leased Property
and such default has not been cured by Lessee within a period of
fifteen (15) days after receipt by Lessee of notice of such default
from either Manager or Lessor;
then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including but not limited to its right to
terminate this Lease by giving Lessee not less than ten days notice of such
termination.
If 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, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith.
16.2 Surrender. If an Event of Default occurs (and the event
giving rise to such Event of Default has not been cured within the curative
period relating thereto as set forth in Section 16.1) and is continuing,
whether or not this Lease has been terminated pursuant to Section 16.1, Lessee
shall, if requested by Lessor so to do, immediately surrender to Lessor the
Leased Property including, without limitation, any and all books, records,
files, licenses, permits and keys relating thereto, and quit the same and
Lessor may enter upon and repossess the Leased Property by reasonable force,
summary proceedings, ejectment or otherwise, and may remove Lessee and all
other persons and any and all personal property from the Leased Property,
subject to the rights of any Resort guests and to any requirement of law.
Lessee hereby waives any and all requirements of applicable laws for service of
notice to re-enter the Leased Property. Lessor shall be under no obligation
to, but may if it so chooses, relet the Leased Property or otherwise mitigate
Lessor's damages.
16.3 Damages. Neither (a) the termination of this Lease, (b) the
repossession of the Leased Property, (c) the failure of Lessor to relet the
Leased Property, nor (d) the reletting of all or any portion thereof, shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all rent due and payable
with respect to the Leased Property to and including the date of such
termination.
Lessee shall forthwith pay to Lessor, at Lessor's option, as
and for liquidated and agreed current damages for Lessee's default, either:
(1) Without termination of Lessee's right to possession
of the Leased Property, each installment of rent and other sums payable by
Lessee to Lessor under the Lease as the same becomes due and payable, which
rent and other sums shall bear interest at the rate of 12% per
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annum until paid, and Lessor may enforce, by action or otherwise, any other
term or covenant of this Lease; or
(2) the sum of:
(A) the unpaid rent which had been
earned at the time of termination, repossession or
reletting, and
(B) the worth at the time of
termination, repossession or reletting of the amount
by which the unpaid rent for the balance of the term
of this Lease after the time of termination,
repossession or reletting, exceeds the amount of such
rental loss that Lessee proves could be reasonably
avoided, and
(C) any other amount necessary to
compensate Lessor for all the detriment proximately
caused by Lessee's failure to perform its obligations
under this Lease or which in the ordinary course of
things would be likely to result therefrom. The
worth at the time of termination, repossession or
reletting of the amount referred to in subparagraph
(B) is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of New York
at the time of award plus 1%.
Percentage Rent for the purposes of this Section 16.3 shall be a sum equal to
(i) the average of the annual amounts of Percentage Rent for the three calendar
years immediately preceding the calendar year in which the termination,
re-entry or repossession takes place, or (ii) if three calendar years shall not
have elapsed, the average of the Percentage Rent during the preceding calendar
year during which this Lease was in effect, or (iii) if one calendar year has
not elapsed, the amount derived by annualizing the Percentage Rent from the
effective date of this Lease.
16.4 Application of Funds. Any payments received by Lessor under
any of the provisions of this Lease during the existence or continuance of any
Event of Default shall be applied to Lessee's obligations in the order that
Lessor may determine or as may be prescribed by the laws of the State of
Massachusetts.
ARTICLE XVII
Lessor's Right to Cure Lessee's Default. If Lessee fails to make any
payment or to perform any act required to be made or performed under this Lease
including, without limitation, Lessee's failure to comply with the terms of any
Management Agreement, and fails to cure the same within the relevant time
periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for
such purpose and take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction
of Lessee. All sums so paid by Lessor and all costs and expenses
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(including, without limitation, reasonable attorneys' fees and expenses, in
each case to the extent permitted by law) so incurred, together with a late
charge thereon (to the extent permitted by law) at the rate of 12% per annum
from the date on which such sums or expenses are paid or incurred by Lessor,
shall be paid by Lessee to Lessor on demand. The obligations of Lessee and
rights of Lessor contained in this Article shall survive the expiration or
earlier termination of this Lease.
ARTICLE XVIII
Holding Over. If Lessee for any reason remains in possession of the
Leased Property after the expiration or earlier termination of the term of this
Lease, such possession shall be as a tenant at sufferance during which time
Lessee shall pay as rental each month two times the aggregate of (a)
one-twelfth of the aggregate Base Rent and Percentage Rent payable with respect
to the last year of the term of this Lease, (b) all additional charges accruing
during the applicable month and (c) all other sums, if any, payable by Lessee
under this Lease with respect to the Leased Property. During such period,
Lessee shall be obligated to perform and observe all of the terms, covenants
and conditions of this Lease, but shall have no rights hereunder other than the
right, to the extent given by law to tenancies at sufferance, to continue its
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.
ARTICLE XIX
Risk of Loss. During the term of this Lease, the risk of loss or of
decrease in the enjoyment and beneficial use of the Leased Property in
consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of
foreclosures, attachments, levies or executions (other than those caused by
Lessor and those claiming from, through or under Lessor) is assumed by Lessee,
and, in the absence of gross negligence, willful misconduct or breach of this
Lease by Lessor pursuant to Section 31.2, Lessor shall in no event be
answerable or accountable therefor, nor shall any of the events mentioned in
this Section entitle Lessee to any abatement of rent except as specifically
provided in this Lease.
ARTICLE XX
Indemnification. Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance,
Lessee will protect, indemnify, hold harmless and defend Lessor from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses), to the extent permitted by law, imposed upon or
incurred by or asserted against Lessor by reason of: (a) any accident, injury
to or death of persons or loss of or damage to property occurring on or about
the Leased Property or adjoining sidewalks, including without limitation any
claims under liquor liability, "dram shop" or similar laws, (b)
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any past, present or future use, misuse, non-use, condition, management,
maintenance or repair by Lessee or any of its agents, employees or invitees of
the Leased Property or any litigation, proceeding or claim by governmental
entities or other third parties to which Lessor is made a party or participant
related to such use, misuse, non-use, condition, management, maintenance, or
repair thereof by Lessee or any of its agents, employees or invitees, including
any failure of Lessee or any of its agents, employees or invitees to perform
any obligations under this Lease or imposed by applicable law (other than
arising out of condemnation proceedings), (c) any Impositions that are the
obligations of Lessee pursuant to the applicable provisions of this Lease, (d)
any failure on the part of Lessee to perform or comply with any of the terms of
this Lease, and (e) the non-performance of any of the terms and provisions of
any and all existing and future subleases of the Leased Property to be
performed by the landlord thereunder.
Lessor shall indemnify, save harmless and defend Lessee from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses imposed upon or incurred by or asserted against
Lessee as a result of (a) the gross negligence or willful misconduct of Lessor
arising in connection with this Lease or (b) any failure on the part of Lessor
to perform or comply with any of the terms of this Lease.
Any amounts that become payable by an indemnifying party under this
Section shall be paid within ten days after liability therefor on the part of
the indemnifying party is determined by litigation or otherwise, and if not
timely paid, shall bear a late charge (to the extent permitted by law) at the
rate of 12% per annum from the date of such determination to the date of
payment. An indemnifying party, at its expense, shall contest, resist and
defend any such claim, action or proceeding asserted or instituted against the
indemnified party. The indemnified party, at its expense, shall be entitled to
participate in any such claim, action, or proceeding, and the indemnifying
party may not compromise or otherwise dispose of the same without the consent
of the indemnified party, which may not be unreasonably withheld. Nothing
herein shall be construed as indemnifying Lessor against its own grossly
negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
ARTICLE XXI
Subletting and Assignment. Except for subleases to concessionaires
made in the ordinary course of operating the Resort, Lessee shall not sell,
assign or transfer all or any portion of its leasehold estate or sublet all or
any portion of the Leased Property without first obtaining the prior written
consent of Lessor. In the event of an assignment or subletting by Lessee which
is approved by Lessor, Lessee shall nevertheless remain fully liable for the
due performance of all obligations on Lessee's part to be performed under this
Lease. No permitted assignment, sale or transfer shall be effective until
there shall have been delivered to Lessor an undertaking in recordable form,
executed by the proposed assignee or sublessee, wherein such assignee or
sublessee assumes the due performance of all obligations on Lessee's part to be
performed under this Lease.
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ARTICLE XXII
Officer's Certificates; Financial Statements;
Lessor's Estoppel Certificates and Covenants.
(a) At any time and from time to time upon not less than 20 days
Notice by Lessor, Lessee will furnish to Lessor a statement 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 to the knowledge of Lessee there
is any existing default or Event of Default exists thereunder by Lessor or
Lessee, and such other information as may be reasonably requested by Lessor.
Any such certificate furnished pursuant to this Section may be relied upon by
Lessor, any lender and any prospective purchaser of the Leased Property.
(b) Lessee will furnish the following statements to Lessor:
(1) with reasonable promptness, such information
respecting the financial condition and affairs of Lessee
including financial statements prepared by Lessee as Lessor
may reasonably request from time to time; and
(2) the most recent financial statements of
Lessee within 60 days after each quarter of any fiscal year
(or, in the case of the final quarter in any fiscal year, the
most recent financial statements of Lessee within 120 days);
and
(3) on or about the 30th day of each month, a
detailed profit and loss statement of the Leased Property for
the preceding month, a balance sheet for the Leased Property
as of the end of the preceding month, and a detailed
accounting of revenues for the Leased Property for the
preceding month, each in form reasonably acceptable to Lessor.
(c) At any time and from time to time upon not less than 30 days
notice by Lessee, Lessor will furnish to Lessee or to any person designated by
Lessee an estoppel 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 rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee.
ARTICLE XXIII
Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining
thereto and make copies thereof, during usual business hours upon reasonable
advance notice, subject only to any business confidentiality requirements
reasonably requested by Lessee.
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ARTICLE XXIV
No Waiver. No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
ARTICLE XXV
Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
ARTICLE XXVI
Acceptance of Surrender. No surrender to Lessor of this Lease or of
the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXVII
No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person or
entity may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
ARTICLE XXVIII
Conveyance by Lessor. If Lessor or any successor owner of the Leased
Property conveys the Leased Property in accordance with the terms hereof other
than as security for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date
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of such conveyance or other transfer as to the Leased Property and all such
future liabilities and obligations shall thereupon be binding upon the new
owners.
ARTICLE XXIX
Notices. All notices, demands, or other communications of any type
given by the Lessor to the Lessee, or by the Lessee to the Lessor, whether
required by this Lease or in any way related to the transaction contracted for
herein, shall be void and of no effect unless given in accordance with the
provisions of this paragraph. All notices shall be in writing and delivered to
the person to whom the notice is directed, either in person, by facsimile
transmission, or by United States Mail, as a registered or certified item,
return receipt requested. Notices delivered by mail shall be deemed given when
deposited in a post office or other depository under the care or custody of the
United States Postal Service, enclosed in a wrapper with proper postage
affixed, addressed as follows:
Lessor: Canyon Ranch - Bellefontaine
Associates, L.P.
8600 E. Rockcliff Road
Tucson, Arizona 85750
Attn: Jerrold Cohen, President
Telephone No.: (520) 749-9655, Ext. 335
Facsimile No.: (520) 749-0662
with a copy to: W.J. Harrison & Associates, P.C.
3561 E. Sunrise Drive, Suite 201
Tucson, Arizona 85718
Attn: W. James Harrison, Esq.
Telephone No.: (520) 529-3700
Facsimile No.: (520) 529-8977
Lessee: Vintage Resorts, LLC
East West Properties, Ltd.
100 Thomas
Drawer 2770
Beaver Creek, Colorado 81620
Attn: Harry Frampton
Telephone No.: (970) 845-9200
Facsimile No.: (970) 845-7205
ARTICLE XXX
Appraisers. If it becomes necessary to determine the fair market
value of the Leased Property for any purpose of this Lease, the party required
or permitted to give Notice of such required determination shall include in the
Notice the name of a person selected to act as appraiser on its behalf. Within
10 days after Notice, Lessor (or Lessee, as the case may be) shall by Notice to
Lessee (or Lessor, as the case may be) appoint a second person as appraiser
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on its behalf. The appraisers thus appointed, each of whom must be a member of
the American Institute of Real Estate Appraisers (or any successor organization
thereto) with at least five years experience in the State of Massachusetts
appraising property similar to the Leased Property, shall, within 45 days after
the date of the Notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the fair market value thereof as of the relevant
date (giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
shall have been so appointed, then the determination of such appraiser shall be
final and binding upon the parties. If two appraisers are appointed and if the
difference between the amounts so determined does not exceed 5% of the lesser
of such amounts, then the fair market value shall be an amount equal to 50% of
the sum of the amounts so determined. If the difference between the amounts so
determined exceeds 5% of the lesser of such amounts, then such two appraisers
shall have 20 days to appoint a third appraiser. If no such appraiser shall
have been appointed within such 20 days or within 90 days of the original
request for a determination of fair market value, whichever is earlier, either
Lessor or Lessee may apply to any court having jurisdiction to have such
appointment made by such court. Any appraiser appointed by the original
appraisers or by such court shall be instructed to determine the fair market
value or fair market rental within 45 days after appointment of such appraiser.
The determination of the appraiser 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 final and
binding upon Lessor and Lessee as the fair market value or fair market rental
of the Leased Property, as the case may be. This provision for determining by
appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law.
Lessor and Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.
ARTICLE XXXI
31.1 Lessor May Grant Liens. Upon notice to but without the
consent of Lessee, Lessor may, from time to time, directly or indirectly,
create or otherwise cause to exist any lien, encumbrance or title retention
agreement ("Encumbrance") upon the Leased Property, or any portion thereon or
interest therein, whether to secure any borrowing or other means of financing
or refinancing. This Lease shall be subject and subordinate to the lien of any
Encumbrance that Lessor, its successors or assigns, has placed or may hereafter
place on or against all or any part of the Leased Property, and Lessee hereby
agrees to attorn to any such lienholder and any other purchaser at the
foreclosure of such lien (including obtaining of title by lender by deed in
lieu of foreclosure), upon demand. It is expressly provided and agreed that
any such lienholder shall not be required to agree not to disturb Lessee in the
event of a foreclosure or deed in lieu thereof and that, at the option of any
such lienholder or any other purchaser at foreclosure of such lien, this Lease
may be terminated and, upon such termination, Lessee shall have no further
rights hereunder.
31.2 Breach by Lessor. It shall be a breach of this Lease if
Lessor fails to observe or perform any term, covenant or condition of this
Lease on its part to be performed and such
-32-
<PAGE> 38
failure continues for a period of 30 days after Notice thereof from Lessee,
unless such failure cannot with due diligence be cured within a period of 30
days, in which case such failure shall not be deemed to continue if Lessor,
within such 30-day period, proceeds promptly and with due diligence to cure the
failure and diligently completes the curing thereof.
ARTICLE XXXII
32.1 Miscellaneous. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease shall survive
such termination. If any term or provision of this Lease or any application
thereof is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable
law, the parties agree that such charges shall be fixed at the maximum
permissible rate. Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated except by a written instrument in recordable
form signed by Lessor and Lessee. All the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance
with the laws of the State of Massachusetts, but not including its conflicts of
laws rules.
32.2 Transfer of Licenses. Upon the expiration or earlier
termination of the term of this Lease, Lessee shall use its best efforts (i) to
transfer to Lessor or Lessor's nominee all licenses, operating permits and
other governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities, that may be necessary for the
operation of the Resort (collectively, "Licenses"), or (ii) if such transfer is
prohibited by law or Lessor otherwise elects, to cooperate with Lessor or
Lessor's nominee in connection with the processing by Lessor or Lessor's
nominee of any applications for, all Licenses; provided, in either case, that
the costs and expenses of any such transfer or the processing of any such
application shall be paid by Lessor or Lessor's nominee.
32.3 Waiver of Presentment, Etc. Lessee waives all presentments,
demands for payment and 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.
ARTICLE XXXIII
Memorandum of Lease. Lessor and Lessee shall promptly upon the
request of either enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State of Massachusetts in which
reference to this Lease, and all options contained herein, shall be made.
Lessee shall pay all costs and expenses of recording such memorandum of this
Lease.
-33-
<PAGE> 39
ARTICLE XXXIV
Compliance with Management Agreement. To the extent any of the
provisions of the Management Agreement impose a greater obligation on Lessee
than the corresponding provisions of the Lease, then Lessee shall be obligated
to comply with the provisions of the Management Agreement, it being the intent
of the parties hereto that Lessee comply in every respect with the provisions
of the Management Agreement so as to avoid any default thereunder.
ARTICLE XXXV
Financial Statements. Lessee shall deliver to Lessor (a) within 120
days after the end of each calendar year annual operating statements for
Lessee's business at the Leased Property and a copy of the balance sheet of
Lessee as of the end of such year, and related statements of income and
retained earnings and changes in financial position for such year, (b) within
30 days after the end of each month monthly operating statements for Lessee's
business at the Leased Property and a copy of the balance sheet of Lessee as of
the end of such month, and (c) such other information as Lessor may from time
to time reasonably request. The foregoing financial statements shall be
certified by a member or an authorized officer (as the case may be) of Lessee.
All financial statements of Lessee delivered to Lessor shall be true and
correct in all respects, shall be prepared in accordance with generally
accepted accounting principles, consistently applied, and fairly present the
financial condition of the subject thereof as of the dates thereof. Any
materially adverse change that occurs in the financial condition reflected
therein after the date thereof shall be reported to Lessor promptly. None of
the aforesaid financial statements, or any certificate or statement furnished
to Lessor by or on behalf of Lessee in connection with the transactions
contemplated hereby, shall contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
ARTICLE XXXVI
36.1 REIT Compliance. Lessee acknowledges that Lessor intends to
qualify as a real estate investment trust under the Internal Revenue Code of
1986, as amended. Lessee agrees that it will not knowingly or intentionally
take or omit any action, or permit any status to exist at the Leased Property,
which Lessee knows would or could result in Lessor being disqualified from
treatment as a real estate investment trust under the Tax Code as the
provisions exist on the date hereof.
36.2 Personal Property Limitation. Anything contained in this
Lease to the contrary notwithstanding, the average of the adjusted tax bases of
the items of personal property that are leased to the Lessee under this Lease
at the beginning and at the end of any calendar year shall not exceed fifteen
percent (15%) of the average of the aggregate adjusted tax bases of the Leased
Property at the beginning and at the end of each such calendar year. This
Section 36.2 is intended to insure that the rent payable hereunder qualifies as
"rents from real property," within the meaning of Section 856(d) of the
Internal Revenue Code of 1986, or any similar or successor provisions thereto,
and shall be interpreted in a manner consistent with such intent.
-34-
<PAGE> 40
36.3 Sublease Rent Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublet the Leased Property on
any basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the income of profits derived by the
business activities of the sublessee, or (b) any other formula such that any
portion of the rent payable hereunder would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Internal Revenue Code of
1986, or any similar or successor provisions thereto.
36.4 Sublease Tenant Limitation. Anything contained in this Lease
to the contrary notwithstanding, Lessee shall not sublease the Leased Property
to any person or entity in which Lessor owns, directly or indirectly, a ten
percent (10%) or more interest, within the meaning of Section 856(d)(2)(B) of
the Internal Revenue Code of 1986, or any similar or successor provisions
thereto.
36.5 Lessee Ownership Limitation. Anything contained in this Lease
to the contrary notwithstanding, neither Lessee nor any affiliate of the Lessee
shall acquire, directly or indirectly, a ten percent (10%) or more interest in
Lessor, within the meaning of Section 856(d)(2)(B) of the Internal Revenue Code
of 1986, or any similar or successor provisions thereto.
ARTICLE XXXVII
Lessor's Option to Terminate Lease. In the event Lessor enters into a
bonafide contract to sell the Leased Property to a non-affiliated party, Lessor
may terminate the Lease by giving not less than thirty (30) days prior Notice
to Lessee of Lessor's election to terminate the Lease effective upon the
closing of such contract. Effective upon such closing, this Lease shall
terminate and be of no further force and effect except as to any obligations of
the parties existing as of such date that survive termination of this Lease.
As compensation for the early termination of its leasehold estate under this
Article XXXVII, Lessor shall within ninety (90) days of such closing pay to
Lessee the fair market value of Lessee's leasehold estate hereunder as of the
closing of the sale of the Leased Property. In the event Lessor and Lessee are
unable to agree upon the fair market value of an original or replacement
leasehold estate, it shall be determined by appraisal using the appraisal
procedures set forth in Article XXX.
For the purposes of this Section, fair market value of the leasehold
estate means an amount equal to the present value of the net revenues to be
derived from this Lease during the remaining term of this Lease based on
current projections made by Lessee and Manager with respect to future occupancy
of, and future revenues to be generated by, the Leased Property.
-35-
<PAGE> 41
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LESSOR:
CANYON RANCH - BELLEFONTAINE
ASSOCIATES, L.P., a Delaware limited
partnership
BY: Canyon Ranch Associates, a
Delaware general partnership,
its general partner
BY: JCBF, Inc., a Delaware
corporation, its general
partner
By: /s/JERROLD COHEN
----------------------------
Name: Jerrold Cohen
--------------------------
Its: President
---------------------------
LESSEE:
VINTAGE RESORTS, LLC
By: /s/HARRY FRAMPTON
-------------------------------------
Harry Frampton, Manager
-36-
<PAGE> 42
EXHIBIT A - LEGAL DESCRIPTION
OF LEASED PROPERTY
[Exhibit has been omitted]
<PAGE> 43
EXHIBIT B - STATEMENT
OF WORKING CAPITAL
[Exhibit has been omitted]
<PAGE> 44
ASSIGNMENT AND ASSUMPTION OF MASTER LEASE
KNOW ALL MEN BY THESE PRESENTS:
That CANYON RANCH - BELLEFONTAINE ASSOCIATES, L.P., a Delaware limited
partnership ("Canyon"), for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, hereby grants, assigns, transfers and delivers
unto CRESCENT REAL ESTATE FUNDING VI, L.P., a Delaware limited Partnership
("Crescent"), all of its right, title and interest as Lessor in and to the
Lease Agreement described on Exhibit 1 ("Master Lease").
By execution below, Crescent assumes and agrees to perform all
obligations of Canyon as Lessor owed under, or arising out of or related to,
the Master Lease. Crescent agrees to indemnify and hold Canyon harmless of and
from any and all liabilities, claims, demands, suits and judgments, of any kind
or nature, brought by third parties which in any way arise out of or relate to
Lessor's obligations under the Master Lease.
This Assignment and the covenants and agreements contained herein shall
be binding upon and inure to the benefit of Crescent and Canyon and their
respective successors in interest and assigns. This Assignment shall be
construed and interpreted under the laws of the State of Massachusetts.
EXECUTED as of December 11, 1996.
CANYON:
CANYON RANCH - BELLEFONTAINE
ASSOCIATES, L.P., a Delaware limited partnership
By: Canyon Ranch Associates, a Delaware
general partnership, its general partner
By: JCBF, Inc., a Delaware
corporation, its general partner
By: /s/ JERROLD COHEN
----------------------------
Name: Jerrold Cohen
--------------------------
Its: President
---------------------------
<PAGE> 45
CRESCENT:
CRESCENT REAL ESTATE FUNDING VI, L.P.,
a Delaware limited partnership
By: CRE Management VI Corp., a Delaware
corporation, General Partner
By: /s/ DAVID M. DEAN
-----------------------------
Name: David M. Dean
---------------------------
Its: Senior Vice President Law
----------------------------
2
<PAGE> 46
STATE OF ARIZONA )
) ss.
COUNTY OF PIMA )
The foregoing instrument was acknowledged before me December 10, 1996,
by Jerrold Cohen the President of JCBF, Inc., a Delaware corporation, general
partner of Canyon Ranch Associates, a Delaware partnership, the general partner
of Canyon Ranch - Bellefontaine Associates, L.P., a Delaware limited
partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[SEAL] OFFICIAL SEAL
SHIRLEY M. WELCH
NOTARY PUBLIC - ARIZONA
PIMA COUNTY
My Comm. Expires Aug. 18, 1999
/s/ SHIRLEY M. WELCH
---------------------------
Notary Public
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me December 3, 1996,
by David M. Dean the Sr. V.P., Law of CRE Management VI Corp., a Delaware
Corporation, General Partner of Crescent Real Estate Funding VI, L.P., a
Delaware limited partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ ELIZABETH ANN HAYS
---------------------------
Notary Public
[SEAL] ELIZABETH ANN HAYS
NOTARY PUBLIC
STATE OF TEXAS
Comm. Exp 07-30-2000
3
<PAGE> 47
EXHIBIT 1
That certain Lease Agreement by and between Canyon and Vintage Resorts,
LLC, a Delaware limited liability company ("Vintage"), dated of even date
herewith, pursuant to which Canyon agrees to lease to Vintage certain property
located in Lenox, Massachusetts, commonly known as Canyon Ranch in the
Berkshires, for a term of 120 months.
<PAGE> 1
EXHIBIT 10.27
MASTER LEASE AGREEMENT
DATED JUNE 16, 1997
BY AND BETWEEN
CRESCENT REAL ESTATE FUNDING VII, L.P.
AS LANDLORD,
AND
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
AND EACH OF THE FACILITY SUBSIDIARIES LISTED ON EXHIBIT B,
AS TENANT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 DEFINITIONS.....................................1
1.1 "Additional Charges".................................1
1.2 "Additional Rent"....................................1
1.3 "Affiliated Person"..................................1
1.4 "Agreement"..........................................2
1.5 "Allowance"..........................................2
1.6 "Applicable Laws"....................................2
1.7 "Award"..............................................2
1.8 "Business Day".......................................2
1.9 "Capital Addition"...................................2
1.10 "Capital Additions Cost"............................3
1.11 "Capital Expenditure"...............................3
1.12 "Change in Control".................................3
1.13 "Code"..............................................3
1.14 "Collective Leased Properties"......................4
1.15 "Commencement Date".................................4
1.16 "Comparable Facility"...............................4
1.17 "Condemnation"......................................4
1.18 "Condemnor".........................................4
1.19 "Contractor"........................................4
1.20 "Contractor's"......................................4
1.21 "Default"...........................................4
1.22 "Designated Leased Property"........................4
1.23 "Encumbrance".......................................4
1.24 "Entity"............................................4
1.25 "Environment".......................................5
1.26 "Environmental Notice"..............................5
1.27 "Environmental Obligation"..........................5
1.28 "Environmental Report"..............................5
1.29 "Event of Default"..................................5
1.30 "Extended Terms"....................................5
1.31 "Facility"..........................................5
1.32 "Facility Mortgage".................................5
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
1.33 "Facility Mortgagee"................................5
1.34 "Facility Subsidiaries".............................5
1.35 "Facility Trade Name"...............................5
1.36 "Fair Market Rental"................................5
1.37 "Fair Market Value".................................5
1.38 "Financial Officer's Certificate"...................6
1.39 "Financials"........................................6
1.40 "Fiscal Year".......................................6
1.41 "Fixed Term"........................................6
1.42 "Fixtures"..........................................6
1.43 "Franchise Agreement"...............................6
1.44 "Franchise Fees"....................................6
1.45 "Franchise Subordination Agreement".................6
1.46 "Franchisor"........................................6
1.47 "GAAP"..............................................6
1.48 "Government Agencies"...............................6
1.49 "Hazardous Substances"..............................7
1.50 "Impositions" ......................................7
1.51 "Indebtedness"......................................8
1.52 "Insurance Requirements"............................8
1.53 "Land"..............................................8
1.54 "Landlord"..........................................8
1.55 "Lease Year"........................................8
1.56 "Leased Improvements"...............................8
1.57 "Leased Personal Property"..........................8
1.58 "Leased Property"...................................9
1.59 "Legal Requirements"................................9
1.60 "Lending Institution"...............................9
1.61 "Lien"..............................................9
1.62 "Management Agreement"..............................9
1.63 "Manager"...........................................9
1.64 "Minimum Rent"......................................9
1.65 "Notice"...........................................10
1.66 "Non-Priority Additional Rent".....................10
1.67 "Officer's Certificate"............................10
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
1.68 "OpCo".............................................10
1.69 "Overdue Rate".....................................10
1.70 "Parent"...........................................10
1.71 "Permitted Encumbrances"...........................10
1.72 "Person"...........................................10
1.73 "Philadelphia Facility"............................10
1.74 "Primary Intended Use".............................10
1.75 "Prime Rate".......................................11
1.76 "Priority Additional Rent Base Amount".............11
1.77 "Purchase Agreement"...............................11
1.78 "Qualified Affiliate"..............................11
1.79 "Qualified Appraiser"..............................11
1.80 "Regulated Medical Wastes".........................12
1.81 "Rent".............................................12
1.82 "SEC"..............................................12
1.83 "State"............................................12
1.84 "Subordinated Creditor"............................12
1.85 "Subordination Agreement"..........................12
1.86 "Subsidiary".......................................12
1.87 "Substitute Leased Property".......................12
1.88 "Substitution Date"................................12
1.89 "Tenant"...........................................12
1.90 "Tenant's Personal Property".......................12
1.91 "Term".............................................13
1.92 "Unsuitable for Its Primary Intended Use"..........13
1.93 "Work".............................................13
ARTICLE 2 COLLECTIVE LEASED PROPERTIES AND TERM..........13
2.1 Collective Leased Properties........................13
2.2 Condition of Collective Leased Properties...........14
2.3 Fixed Term..........................................15
2.4 Extended Term.......................................15
2.5 Determination of Minimum Rent for Extended Terms....16
ARTICLE 3 RENT...........................................16
3.1 Rent................................................16
3.2 Late Payment of Rent................................18
</TABLE>
- iv -
<PAGE> 5
<TABLE>
<S> <C>
3.3 Net Lease...........................................19
3.4 No Termination, Abatement, Etc......................19
3.5 Annual Allowance....................................19
ARTICLE 4 USE OF THE COLLECTIVE LEASED PROPERTIES.......20
4.1 Permitted Use.......................................20
4.2 Compliance with Legal and Insurance
Requirements, Etc...................................22
4.3 Compliance with Medicaid and Medicare
Requirements........................................22
4.4 Environmental Matters...............................22
4.5 Tenant's Right to Close Facilities..................24
ARTICLE 5 MAINTENANCE AND REPAIRS........................25
5.1 Maintenance and Repair..............................25
5.2 Tenant's Personal Property..........................26
5.3 Yield Up............................................27
5.4 Encroachments, Restrictions, Etc....................28
5.5 Landlord to Grant Easements, Etc....................28
5.6 Philadelphia Facility...............................29
ARTICLE 6 CAPITAL ADDITIONS, ETC.........................29
6.1 Construction of Capital Additions to
the Leased Property.................................29
6.2 Financing of Capital Additions......................29
6.3 Capital Additions Financed by Landlord..............30
6.4 Non-Capital Additions...............................31
6.5 Salvage.............................................31
6.6 Landlord's Right of First Refusal to
Provide Financing for Capital Additions.............31
ARTICLE 7 LIENS..........................................32
7.1 Liens...............................................32
7.2 Landlord's Lien.....................................32
ARTICLE 8 PERMITTED CONTESTS.............................33
ARTICLE 9 INSURANCE AND INDEMNIFICATION..................34
9.1 General Insurance Requirements......................34
9.2 Replacement Cost....................................35
9.3 Waiver of Subrogation...............................35
9.4 Form Satisfactory, Etc..............................35
9.5 Blanket Policy......................................36
9.6 No Separate Insurance...............................36
9.7 Indemnification of Landlord.........................37
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
9.8 Independent Contractor..............................37
ARTICLE 10 CASUALTY......................................38
10.1 Insurance Proceeds.................................38
10.2 Damage or Destruction..............................38
10.3 Tenant's Property..................................39
10.4 Restoration of Tenant's Property...................39
10.5 No Abatement of Rent...............................39
10.6 Waiver.............................................39
ARTICLE 11 CONDEMNATION..................................40
11.1 Total Condemnation, Etc............................40
11.2 Partial Condemnation...............................40
11.3 Abatement of Rent..................................41
11.4 Temporary Condemnation.............................41
11.5 Allocation of Award................................41
ARTICLE 12 DEFAULTS AND REMEDIES.........................41
12.1 Events of Default..................................41
12.2 Remedies...........................................44
12.3 Tenant's Waiver....................................45
12.4 Application of Funds...............................46
12.5 Landlord's Right to Cure Tenant's Default..........46
12.6 Landlord's Right to Assume Contracts...............46
ARTICLE 13 HOLDING OVER..................................47
ARTICLE 14 LANDLORD'S DEFAULT............................47
ARTICLE 15 LANDLORD FINANCING............................47
ARTICLE 16 SUBLETTING AND ASSIGNMENT.....................48
16.1 Subletting and Assignment..........................48
16.2 Required Sublease Provisions.......................48
16.3 Permitted Assignments and Subleases................49
16.4 Sublease Limitation................................50
16.5 Tenant's Right to Mortgage its Leasehold...........50
ARTICLE 17 ESTOPPEL CERTIFICATES AND
FINANCIAL STATEMENTS....................................50
17.1 Estoppel Certificates..............................50
17.2 Financial Statements...............................51
17.3 General Operations.................................51
ARTICLE 18 LANDLORD'S RIGHT TO INSPECT...................52
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
ARTICLE 19 APPRAISAL.....................................53
ARTICLE 20 FACILITY MORTGAGES............................55
20.1 Landlord May Grant Liens...........................55
20.2 Subordination of Lease.............................55
20.3 Notice to Mortgagee and Ground Landlord............56
ARTICLE 21 ADDITIONAL COVENANTS OF TENANT................56
21.1 Conduct of Business................................56
21.2 Maintenance of Accounts and Records................56
21.3 Payments to Franchisor.............................57
21.4 Management of Collective Leased Properties.........57
21.5 Liens and Encumbrances.............................57
ARTICLE 22 MISCELLANEOUS.................................58
22.1 Limitation on Payment of Rent......................58
22.2 No Waiver..........................................58
22.3 Remedies Cumulative................................58
22.4 Severability.......................................58
22.5 Acceptance of Surrender............................59
22.6 No Merger of Title.................................59
22.7 Conveyance by Landlord.............................59
22.8 Quiet Enjoyment....................................59
22.9 Landlord's Consent.................................60
22.10 Memorandum of Lease...............................60
22.11 Notices...........................................60
22.12 Construction......................................61
22.13 Counterparts; Headings............................62
22.14 Applicable Law, Etc...............................62
22.15 Substitution of Leased Properties.................62
22.16 No Broker.........................................64
22.17 Confidentiality...................................65
</TABLE>
- vii -
<PAGE> 8
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT is entered into as of the 16th day of
June, 1997, by and between CRESCENT REAL ESTATE FUNDING VII, L.P., a Delaware
limited partnership, having its principal office at 777 Main Street, Suite
2100, Fort Worth, Texas 76102 ("LANDLORD"), CHARTER BEHAVIORAL HEALTH SYSTEMS,
LLC, a Delaware limited liability company, having its principal office at Suite
900, 3414 Peachtree Rd., N.E., Atlanta, GA 30326 ("OPCO"), and each of the
entities listed on Exhibit B attached hereto.
W I T N E S S E T H :
WHEREAS, Landlord owns fee simple title to the Collective Leased
Properties (this and other capitalized terms used and not otherwise defined
herein having the meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Collective Leased Properties to
Tenant and Tenant wishes to lease the Collective Leased Properties from
Landlord, all subject to and upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in
this Article shall have the meanings assigned to them in this Article and
include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein shall have the meanings assigned to them in accordance
with GAAP, (iii) 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 (iv) the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision.
1.1 "ADDITIONAL CHARGES" shall have the meaning given such term in
Section 3.1.3.
1.2 "ADDITIONAL RENT" shall mean the monthly sum of One Million Six
Hundred and Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($1,666,667.00).
1.3 "AFFILIATED PERSON" shall mean, with respect to any Person, (a)
in the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited liability
company, any member of such company, and (c) any other Person which is a
Parent, a Subsidiary, or a Subsidiary of a Parent with respect to such Person
or to one or more of the Persons referred to in the preceding clauses (a) and
(b).
<PAGE> 9
1.4 "AGREEMENT" shall mean this Master Lease Agreement, including
Exhibits A and B hereto, as it and they may be amended from time to time as
herein provided.
1.5 "ALLOWANCE" shall mean an annual amount with respect to each
Lease Year not to exceed the additional rent for each such Lease Year. The
Allowance shall be paid by Landlord to Tenant pursuant to Section 3.5 hereof.
1.6 "APPLICABLE LAWS" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders (whether
now existing or hereafter enacted or promulgated irrespective of whether its
enactment is foreseeable or contemplated), of all courts of competent
jurisdiction and Government Agencies, and all applicable judicial and
administrative and regulatory decrees, judgments and orders, including common
law rulings, relating to injury to, or the protection of, real or personal
property or human health (except those requirements which, by definition, are
solely the responsibility of employers) or the Environment, including, without
limitation, all valid requirements of courts and other Government Agencies
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of underground improvements (including, without limitation, treatment
or storage tanks, or water, gas or oil wells), or emissions, discharges,
releases or threatened releases of Hazardous Substances, chemical substances,
pesticides, petroleum or petroleum products, pollutants, contaminants or
hazardous or toxic substances, materials or wastes whether solid, liquid or
gaseous in nature, into the Environment, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances or Regulated Medical Wastes, underground
improvements (including, without limitation, treatment or storage tanks, or
water, gas or oil wells), or pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature.
1.7 "AWARD" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of any of the
Collective Leased Properties (after deduction of all reasonable legal fees and
other reasonable costs and expenses, including, without limitation, expert
witness fees, incurred by Landlord, in connection with obtaining any such
award).
1.8 "BUSINESS DAY" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in the states of Texas, Georgia and
the State are authorized by law or executive action to close.
1.9 "CAPITAL ADDITION" shall mean one or more new buildings, or one
or more additional structures annexed to any portion of any of the Leased
Improvements with respect to any of the Collective Leased Properties, or the
material expansion of existing improvements, which are constructed on any
parcel or portion of the Land during the Term, including the construction of a
new wing or new story, the renovation of existing improvements on any of the
Collective Leased Properties in order to provide a functionally new facility
needed to provide services not previously offered, or any material expansion,
construction, renovation or conversion in order to increase by more than 10%
the bed capacity of any Facility, to change the purpose for which such beds are
utilized or to improve materially the quality of any Facility.
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<PAGE> 10
1.10 "CAPITAL ADDITIONS COST" shall mean the cost of any Capital
Addition proposed to be made by Tenant at any of the Collective Leased
Properties, whether paid for by Tenant or Landlord. Such cost shall include
(a) the cost of construction of the Capital Addition, including site
preparation and improvement, materials, labor, supervision, developer and
administrative fees, legal fees, and related design, engineering and
architectural services, the cost of any fixtures, the cost of equipment and
other personalty, the cost of construction financing (including, but not
limited to, capitalized interest) and other miscellaneous costs approved by
Landlord, (b) if agreed to by Landlord in writing, in advance, the cost of any
land (including all related acquisition costs incurred by Tenant) contiguous to
the applicable Leased Property which is to become a part of such Leased
Property purchased for the purpose of placing thereon a Capital Addition or any
portion thereof or for providing means of access thereto, or parking facilities
therefor, including the cost of surveying the same, (c) the cost of insurance,
real estate taxes, water and sewage charges and other carrying charges for such
Capital Addition during construction, (d) title insurance charges, (e) filing,
registration and recording taxes and fees, (f) documentary stamp or transfer
taxes, and (g) all actual and reasonable costs and expenses of Landlord and
Tenant and, if agreed to by Landlord in writing, in advance, any Lending
Institution committed to finance the Capital Addition relating to financing for
the Capital Addition, including, but not limited to, all (i) reasonable
attorneys' fees and expenses, (ii) printing expenses, (iii) filing,
registration and recording taxes and fees, (iv) documentary stamp or transfer
taxes, (v) title insurance charges and appraisal fees, (vi) rating agency fees,
and (vii) commitment fees charged by any Lending Institution advancing or
offering to advance any portion of any financing to which Landlord has
consented in writing for such Capital Addition.
1.11 "CAPITAL EXPENDITURE" shall mean any expenditure with respect to
the Collective Leased Properties that is properly categorized as a capital
expenditure in accordance with GAAP.
1.12 "CHANGE IN CONTROL" shall mean the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the SEC) of 50% or more, or rights, options or
warrants to acquire 50% or more, of the outstanding shares of voting stock of
Tenant or any Facility Subsidiary, as the case may be, or the merger or
consolidation of Tenant or any Facility Subsidiary (except with OpCo, a
Facility Subsidiary or a wholly-owned Subsidiary of OpCo), as the case may be
with or into any other Person or any one or a series of related sales or
conveyances to any Person (except to OpCo, a Facility Subsidiary or a
wholly-owned subsidiary of OpCo) of all or substantially all of the assets of
Tenant or any Facility Subsidiary, as the case may be. In the case of OpCo,
only the following shall constitute a Change in Control; (i) a sale or
conveyance in one or a related series of transactions of all or substantially
all the assets of OpCo to any Person and (ii) a merger or consolidation in
which OpCo is not the surviving or resulting entity or of which the holders of
the equity interests of OpCo immediately prior to the merger or consolidation
do not own more than 50% of the equity interests in the surviving or resulting
entity immediately after the merger or consolidation.
1.13 "CODE" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as
from time to time amended.
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<PAGE> 11
1.14 "COLLECTIVE LEASED PROPERTIES" shall have the meaning given such
term in Section 2.1.
1.15 "COMMENCEMENT DATE" shall mean June 17, 1997.
1.16 "COMPARABLE FACILITY" shall mean a facility having as its
primary use the Primary Intended Use and which is reasonably acceptable to
Landlord, with an expected future profitability substantially equivalent to or
greater than that of the Designated Leased Property which Tenant proposes that
it replace, both immediately prior to such substitution and as reasonably
projected over the term of this Agreement, taking into account any cash paid or
received in connection with the substitution and any other relevant factors.
1.17 "CONDEMNATION" shall mean, with respect to any of the Collective
Leased Properties, (a) the exercise of any governmental power with respect to
such Leased Property, whether by legal proceedings or otherwise, by a Condemnor
of its power of condemnation, (b) a voluntary sale or transfer of such Leased
Property by Landlord to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending, and (c) a taking or
voluntary conveyance of all or part of such Leased Property, or any interest
therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting
such Leased Property, whether or not the same shall have actually been
commenced.
1.18 "CONDEMNOR" shall mean any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
1.19 "CONTRACTOR" shall have the meaning given such term in Section
9.8.
1.20 "CONTRACTOR'S" Insurance Certificate" shall have the meaning
given such term in Section 9.8.
1.21 "DEFAULT" shall mean any event or condition which with the
giving of notice and/or lapse of time may ripen into an Event of Default.
1.22 "DESIGNATED LEASED PROPERTY" shall mean a property designated by
Tenant pursuant to Section 22.15 on which there exists a Comparable Facility
which Tenant proposes to substitute for a Leased Property.
1.23 "ENCUMBRANCE" shall have the meaning given such term in Section
20.1.
1.24 "ENTITY" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency or political
subdivision thereof or any other entity.
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<PAGE> 12
1.25 "ENVIRONMENT" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata, ambient air, physical
structures and equipment, and where radon gas is present, the interior air of
buildings.
1.26 "ENVIRONMENTAL NOTICE" shall have the meaning given such term in
Section 4.4.1.
1.27 "ENVIRONMENTAL OBLIGATION" shall have the meaning given such
term in Section 4.4.1.
1.28 "ENVIRONMENTAL REPORT" shall have the meaning given such term in
Section 4.4.2.
1.29 "EVENT OF DEFAULT" shall have the meaning given such term in
Section 12.1.
1.30 "EXTENDED TERMS" shall have the meaning given such term in
Section 2.4.
1.31 "FACILITY" shall mean, with respect to any of the Collective
Leased Properties, the facility offering health care or related services being
operated or proposed to be operated on such Leased Property.
1.32 "FACILITY MORTGAGE" shall mean, with respect to any of the
Collective Leased Properties, any Encumbrance placed upon such Leased Property
in accordance with Article 20.
1.33 "FACILITY MORTGAGEE" shall mean the holder of any Facility
Mortgage.
1.34 "FACILITY SUBSIDIARIES" shall mean the Entities listed on
Exhibit B attached hereto, each of which is a wholly owned Subsidiary of OpCo.
1.35 "FACILITY TRADE NAME" shall mean, with respect to any Facility,
any name under which Tenant has conducted the business of operating such
Facility at any time during the Term.
1.36 "FAIR MARKET RENTAL" shall mean, with respect to any of the
Collective Leased Properties, the rental which a willing tenant not compelled
to rent would pay a willing landlord not compelled to lease for the use and
occupancy of such Leased Property (including all Capital Additions) on the
terms and conditions of this Agreement for the term in question , assuming
Tenant is not in default hereunder and determined by agreement between Landlord
and Tenant or, failing agreement, in accordance with the appraisal procedures
set forth in Article 19.
1.37 "FAIR MARKET VALUE" shall mean, with respect to any of the
Collective Leased Properties, the price that a willing buyer not compelled to
buy would pay a willing seller not compelled to sell for such Leased Property
(without taking into account any reduction in value resulting from any
indebtedness to which such Leased Property is subject), assuming the same is
unencumbered by this Agreement and determined by agreement between Landlord and
Tenant or, failing agreement, the appraisal procedures set forth in Article 19.
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<PAGE> 13
1.38 "FINANCIAL OFFICER'S CERTIFICATE" shall mean, as to any Person,
a certificate of the chief financial officer of such Person, duly authorized,
accompanying the financial statements required to be delivered by such Person
pursuant to Section 17.2, in which such officer shall certify (a) that such
statements have been properly prepared in accordance with GAAP and fairly
present in all material respects the financial condition of such Person at and
as of the dates thereof and the results of its and their operations for the
periods covered thereby, (except that, in the case of financial statements
delivered pursuant to Sections 17.2(a) and 17.2(c), the certificate shall state
the extent to which such financial statements are not in accordance with GAAP)
and (b) certify that such officer has reviewed this Agreement and has no
knowledge of any Default or Event of Default hereunder.
1.39 "FINANCIALS" shall mean, for any Fiscal Year or other accounting
period of OpCo, annual audited and quarterly unaudited financial statements for
OpCo, including OpCo's balance sheet and the related statements of income and
cash flows, all in reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal
Year, and prepared in accordance with GAAP throughout the periods reflected,
except to the extent GAAP is customarily not complied with by OpCo in preparing
quarterly unaudited financial statements.
1.40 "FISCAL YEAR" shall mean the twelve (12) month period from
October 1 to September 30.
1.41 "FIXED TERM" shall have the meaning given such term in Section
2.3.
1.42 "FIXTURES" shall have the meaning given such term in Section
2.1(d).
1.43 "FRANCHISE AGREEMENT" shall mean, collectively, that certain
Franchise Agreement of even date herewith by and between Franchisor, as
franchisor, and OpCo, as franchisee, and those certain Franchise Agreements of
even date herewith by and between Franchisor, as franchisor, and each of the
Facility Subsidiaries, as franchisee.
1.44 "FRANCHISE FEES" shall mean all amounts payable by Tenant to
Franchisor under the Franchise Agreement.
1.45 "FRANCHISE SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement of even date herewith, as the same may be amended from
time to time, by and among OpCo, Landlord and Franchisor.
1.46 "FRANCHISOR" shall mean, collectively, Magellan Health Services,
Inc., a Delaware corporation, and Charter Franchise Services, LLC, a Delaware
limited liability company.
1.47 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.48 "GOVERNMENT AGENCIES" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission,
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<PAGE> 14
department, office or instrumentality of any nature whatsoever of any
governmental unit of the United States or the State or any county or any
political subdivision of any of the foregoing, whether now or hereafter in
existence, having jurisdiction over Tenant or the Collective Leased Properties
or any portion thereof or the Facilities operated thereon.
1.49 "HAZARDOUS SUBSTANCES" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy;
or
(b) which is or becomes defined as a "hazardous waste," "hazardous
material" or "hazardous substance" or "pollutant" or contaminant"
under any present or future federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C, et seq.) and the Resource Conservation and
Recovery Act (42 U.S.C, section 6901 et seq.) and the regulations
promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, any
state of the United States, or any political subdivision thereof; or
(d) the presence of which on any of the Collective Leased
Properties causes or threatens to cause a nuisance upon such Leased
Property or to adjacent properties or poses or threatens to pose a
hazard to any of the Collective Leased Properties or to the health or
safety of persons on or about any of the Collective Leased Properties;
or
(e) without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated biphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes Regulated Medical Wastes.
1.50 "IMPOSITIONS" shall mean, with respect to any of the Collective
Leased Properties, collectively, all taxes (including, without limitation, all
taxes imposed under the laws of the State, as such laws may be amended from
time to time, and all ad valorem, sales and use, single business, gross
receipts, transaction privilege, rent or similar taxes as the same relate to or
are imposed upon Landlord, Tenant or the business conducted upon such Leased
Property), assessments (including, without limitation, all assessments for
public improvements or benefit,
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<PAGE> 15
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term), ground rents, water, sewer or other rents
and charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees) and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of such Leased Property
or the business conducted thereon by Tenant (including all interest and
penalties thereon due to any failure in payment by Tenant), which at any time
prior to, during or in respect of the Term hereof may be assessed or imposed on
or in respect of or be a lien upon (a) Landlord's interest in such Leased
Property, (b) such Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein, or (c) any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with such Leased Property or the leasing or use of such Leased Property or any
part thereof by Tenant; provided, however, that nothing contained herein shall
be construed to require Tenant to pay (i) any tax based on net income imposed
on Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer fee or
other tax imposed with respect to the sale, exchange, financing, mortgaging, or
other disposition by Landlord of the applicable Leased Property or the proceeds
thereof (other than in connection with the sale, exchange or other disposition
to, or in connection with a transaction involving, Tenant), or (iv) any single
business, franchise fees, gross receipts (other than a tax on any rent received
by Landlord from Tenant), transaction privilege, rent or similar taxes as the
same relate to or are imposed upon Landlord, except to the extent that any tax,
assessment, tax levy or charge that Tenant is obligated to pay pursuant to the
first sentence of this definition and that is in effect at any time during the
Term hereof is totally or partially repealed, and a tax, assessment, tax levy
or charge set forth in clause (i) or (ii) preceding is levied, assessed or
imposed expressly in lieu thereof.
1.51 "INDEBTEDNESS" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as debt.
1.52 "INSURANCE REQUIREMENTS" shall mean all terms of any insurance
policy required by this Agreement and all requirements of the issuer of any
such policy.
1.53 "LAND" shall have the meaning given such term in Section 2.1(a).
1.54 "LANDLORD" shall have the meaning given such term in the
preamble to this Agreement.
1.55 "LEASE YEAR" shall mean any consecutive annual period starting
on the Commencement Date and ending on the day prior to the anniversary
thereof; provided that if the Commencement Date is not the first day of a
calendar month then the first (1st) Lease Year shall end on the last day of the
calendar month in which occurs the date which would otherwise be the last day
of such Lease Year.
1.56 "LEASED IMPROVEMENTS" shall have the meaning given such term in
Section 2.1(b).
1.57 "LEASED PERSONAL PROPERTY" shall have the meaning given such
term in Section 2.1(e).
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<PAGE> 16
1.58 "LEASED PROPERTY" shall mean any one of the Collective Leased
Properties.
1.59 "LEGAL REQUIREMENTS" shall mean, with respect to any of the
Collective Leased Properties, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting such Leased Property or the maintenance,
construction, alteration or operation thereof, whether now or hereafter enacted
or in existence, including, without limitation, (a) all permits, licenses,
certificates of need, authorizations and regulations necessary to operate such
Leased Property for its Primary Intended Use, and (b) all covenants,
agreements, restrictions and encumbrances contained in any instruments at any
time in force affecting such Leased Property, including those which may (i)
require material repairs, modifications or alterations in or to such Leased
Property or (ii) in any way adversely affect the use and enjoyment thereof.
1.60 "LENDING INSTITUTION" shall mean any insurance company,
federally insured commercial or savings bank, national banking association,
savings and loan association, employees' welfare, pension or retirement fund or
system, syndicated lenders' group, commercial finance company, leasing company,
corporate profit sharing or pension trust, college or university, or real
estate investment trust, including any corporation qualified to be treated for
federal tax purposes as a real estate investment trust, such trust having a net
worth of at least $50,000,000.
1.61 "LIEN" shall mean any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind, or any
transfer of any property or assets for the purpose of subjecting the same to
the payment of Indebtedness or performance of any other obligation in priority
to payment of any Person's general creditors.
1.62 "MANAGEMENT AGREEMENT" shall mean any agreement whether written
or oral entered into between Tenant and any other party (including any
Affiliated Person as to Tenant) pursuant to which management services are
provided to all or substantially all of any Facility, together with all
amendments, modifications or supplements thereto.
1.63 "MANAGER" shall mean the management party under any Management
Agreement
1.64 "MINIMUM RENT" shall mean the following monthly sums with
respect to the Fixed Term:
<TABLE>
<CAPTION>
Lease Year Minimum Rent
<S> <C>
1 $3,476,666.67
2 $3,650,500.00
3 $3,833,025.00
4 $4,024,676.25
5 $4,225,910.06
</TABLE>
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<PAGE> 17
<TABLE>
<S> <C>
6 $4,437,205.56
7 $4,659,065.84
8 $4,892,019.13
9 $5,136,620.09
10 $5,393,451.09
11 $5,663,123.64
12 $5,946,279.82
</TABLE>
With respect to each Extended Term, the Minimum Rent shall be an amount
determined in accordance with Section 2.5.
1.65 "NOTICE" shall mean a notice given in accordance with Section
22.11.
1.66 "NON-PRIORITY ADDITIONAL RENT" shall mean the installments of
additional rent with respect to any Lease Year in excess of the Priority
Additional Rent Base Amount.
1.67 "OFFICER'S CERTIFICATE" shall mean a certificate signed by an
officer of Tenant.
1.68 "OPCO" shall have the meaning given such term in the preamble to
this Agreement.
1.69 "OVERDUE RATE" shall mean, on any date, a per annum rate of
interest equal to the lesser of the Prime Rate plus six (6) percentage points
and the maximum rate then permitted under applicable law.
1.70 "PARENT" shall mean, with respect to any Person, any Person
which owns directly, or indirectly through one or more Subsidiaries, more than
fifty percent (50%) of beneficial equity interest in such Person.
1.71 "PERMITTED ENCUMBRANCES" shall mean, with respect to any of the
Collective Leased Properties, all rights, restrictions, and easements of record
set forth on Schedule B to the applicable owner's or leasehold title insurance
policy issued to Landlord on the date hereof, plus any other such encumbrances
as may have been consented to in writing by Landlord from time to time, plus
items that constitute Permitted Exceptions under and as that term is defined in
the Purchase Agreement.
1.72 "PERSON" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of
such Person where the context so admits.
1.73 "PHILADELPHIA FACILITY" shall mean the "Charter Fairmount"
Facility currently under renovation and located in Philadelphia, Pennsylvania.
1.74 "PRIMARY INTENDED USE" shall have the meaning given such term in
Section 4.1.1.
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<PAGE> 18
1.75 "PRIME RATE" shall mean the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank (or its successor) as
its prime rate in effect at its principal office in New York City, New York.
1.76 "PRIORITY ADDITIONAL RENT BASE AMOUNT" for any Lease Year shall
mean an amount of Additional Rent equal to Ten Million Dollars ($10,000,000);
provided, however, that if Landlord funds, or makes an irrevocable commitment
to fund, Capital Expenditures for any Lease Year in an amount in excess of Ten
Million Dollars ($10,000,000) at Tenant's request, then the Priority Additional
Rent Base Amount for such Lease Year shall be increased to the amount of
Capital Expenditures funded or committed to be funded by Landlord for such
Lease Year. Notwithstanding the foregoing, in the event that, and for so long
as, the accrued and unpaid Franchise Fees, including interest thereon, if any,
equal or exceed Fifteen Million Dollars ($15,000,000), then the Priority
Additional Rent Base Amount for any such Lease Year shall be reduced to $0.00;
provided, however, that if Landlord funds, or makes an irrevocable commitment
to fund, Capital Expenditures for any Lease Year in any amount at Tenant's
request, then the Priority Additional Rent Base Amount for such Lease Year
shall be increased from $0.00 to the amount of Capital Expenditures funded or
committed to be funded by Landlord for such Lease Year. The Priority
Additional Rent Base Amount shall be computed monthly in advance of the payment
of Rent due hereunder for the next succeeding month. Such calculation shall be
made on the 25th day of the month, unless the 25th day of the month is not a
Business Day, in which event such calculation for such month shall be made on
the first Business Day following such 25th day. Notwithstanding anything set
forth above to the contrary, if any request by Tenant to Landlord for a
disbursement of the Allowance in any Fiscal Year is for an amount in excess of
the amount budgeted for capital expenditures in Tenant's approved annual budget
for such Fiscal Year, then the Priority Additional Rent Base Amount shall not
be increased as provided above to the extent that the amount of such request is
above the budgeted amount unless such request is accompanied by Franchisor's
consent to such requested amount.
1.77 "PURCHASE AGREEMENT" shall have the meaning given such term in
Section 22.15 hereof.
1.78 "QUALIFIED AFFILIATE" shall mean any (x) Parent or Subsidiary of
OpCo, or (y) partnership or limited liability company in which OpCo has an
ownership interest of not less than 25%, whether or not such interest is
controlling.
1.79 "QUALIFIED APPRAISER" shall mean an appraiser who is not in
control of, controlled by or under common control with either Landlord or
Tenant and has not been an employee of Landlord or Tenant or any Affiliated
Person with respect to either of Landlord or Tenant at any time, who is
qualified to appraise commercial real estate in the State and is a member of
the American Institute of Real Estate Appraisers (or any successor association
or body of comparable standing if such Institute is not then in existence) and
who has held his or her certificate as an M.A.I, or its equivalent for a period
of not less than three (3) years, and has been actively engaged in the
appraisal of commercial real estate in such area for a period of not less than
five (5) years, immediately preceding his or her appointment hereunder.
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<PAGE> 19
1.80 "REGULATED MEDICAL WASTES" shall mean all materials generated by
Tenant, subtenants, patients, occupants or the operators of the Collective
Leased Properties which are now or may hereafter be subject to regulation
pursuant to the Material Waste Tracking Act of 1988, or any Applicable Laws
promulgated by any Government Agencies.
1.81 "RENT" shall mean, collectively, the Minimum Rent, Additional
Rent and Additional Charges.
1.82 "SEC" shall mean the Securities and Exchange Commission.
1.83 "STATE" shall mean, as to each Leased Property, the state in
which such Leased Property is located.
1.84 "SUBORDINATED CREDITOR" shall mean any creditor of Tenant which
is a party to a Subordination Agreement in favor of Landlord.
1.85 "SUBORDINATION AGREEMENT" shall mean any agreement executed by a
Subordinated Creditor pursuant to which the payment and performance of Tenant's
obligations to such Subordinated Creditor are subordinated to the payment and
performance of Tenant's obligations to Landlord under this Agreement.
1.86 "SUBSIDIARY" shall mean, with respect to any Person, any Entity
in which such Person owns directly, or indirectly through one or more
Subsidiaries, more than fifty percent (50%) of the beneficial equity interest
of such Person.
1.87 "SUBSTITUTE LEASED PROPERTY" shall have the meaning given such
term in Section 22.15 hereof.
1.88 "SUBSTITUTION DATE" shall have the meaning given such term in
Section 22.15 hereof.
1.89 "TENANT" shall mean OpCo and the Facility Subsidiaries listed in
Exhibit B, jointly and severally.
1.90 "TENANT'S PERSONAL PROPERTY" shall mean all tangible personal
property now owned or hereafter acquired by Tenant on or after the date hereof
and located at any of the Collective Leased Properties or used in connection
with Tenant's business at any of the Collective Leased Properties, including,
without limitation, all motor vehicles and consumable inventory and supplies,
furniture, furnishings, movable walls and partitions, equipment and machinery
and all other tangible personal property of Tenant, and all modifications,
replacements, alterations and additions to such personal property installed at
the expense of Tenant.
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<PAGE> 20
1.91 "TERM" shall mean, collectively, the Fixed Term and the Extended
Terms, to the extent properly exercised pursuant to the provisions of Section
2.4, unless sooner terminated pursuant to the provisions of this Agreement.
1.92 "UNSUITABLE FOR ITS PRIMARY INTENDED USE" shall mean, with
respect to any Facility, a state or condition of such Facility such that (a)
following any damage or destruction involving such Leased Property, such Leased
Property cannot reasonably be expected to be restored to substantially the same
condition as existed immediately before such damage or destruction, and as
otherwise required by Section 10.2.3, within six (6) months following such
damage or destruction or such shorter period of time as to which business
interruption insurance is available to cover Rent and other costs related to
such Leased Property following such damage or destruction, or (b) as the result
of a partial taking by Condemnation, such Facility cannot be operated, in the
good faith judgment of OpCo, on a commercially practicable basis for its
Primary Intended Use taking into account, among other relevant factors, the
number of usable beds, the amount of square footage, or the revenues affected
by such damage or destruction or partial taking.
1.93 "WORK" shall have the meaning given such term in Section 10.2.3.
ARTICLE 2
COLLECTIVE LEASED PROPERTIES AND TERM
2.1 Collective Leased Properties.
Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord all of the following
(collectively, the "COLLECTIVE LEASED PROPERTIES"):
(a) those certain tracts, pieces and parcels of land conveyed to
Landlord pursuant to Deeds dated on or about the date hereof, the
common names and street addresses of which are set forth in Exhibit A
attached hereto (the "LAND");
(b) all buildings, structures, Fixtures and other improvements of
every kind including, but not limited to, alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas and roadways appurtenant to such buildings
and structures presently situated upon the Land and all Capital
Additions (collectively, the "LEASED IMPROVEMENTS");
(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of property,
now or hereafter permanently affixed to or incorporated into the
Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control,
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waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection
equipment, all of which, to the maximum extent permitted by law, are
hereby deemed by the parties hereto to constitute real estate,
together with all replacements, modifications, alterations and
additions thereto, but specifically excluding Tenant's Personal
Property (collectively, the "FIXTURES");
(e) all machinery, equipment, furniture, furnishings, moveable walls
or partitions, computers or trade fixtures or other personal property
of any kind or description used or useful in Tenant's business on or
in the Leased Improvements, and located on or in the Leased
Improvements, including, without limitation, all "Personal Property"
as defined in the Purchase Agreement, and all modifications,
replacements, alterations and additions to such personal property,
except items, if any, included within the category of Fixtures, but
specifically excluding Tenant's Personal Property (collectively, the
"LEASED PERSONAL PROPERTY"); and
(f) all leases of space (including any security deposits held by
Tenant pursuant thereto) in the Leased Improvements to tenants
thereof.
Landlord hereby assigns to Tenant, and Tenant hereby assumes, all of
the leases described in clause (f) immediately preceding, such assumption being
to the full extent set forth in the Assignment of Leases executed at the
closing pursuant to the Purchase Agreement. In connection therewith, Tenant
agrees to perform any and all covenants of landlord thereunder, past, present
and future. Notwithstanding the foregoing, such leases shall, without the
necessity of further documentation, be deemed reassigned to Landlord upon the
expiration or earlier termination of the Term. In connection with any
reassignment thereof occurring following an Event of Default hereunder, such
reassignment shall not release Tenant from any liability thereunder with
respect to the period ending prior to the expiration of the Term.
2.2 Condition of Collective Leased Properties.
Tenant acknowledges receipt and delivery of possession of the
Collective Leased Properties and Tenant accepts the Collective Leased
Properties in their "as is" condition, subject to the rights of all occupants
and parties in possession, the existing state of title, including all
covenants, conditions, restrictions, reservations, mineral leases, easements
and other matters of record or that are visible or apparent on the Collective
Leased Properties, all applicable Legal Requirements, the lien of financing
instruments, mortgages and deeds of trust, and such other matters which would
be disclosed by an inspection of the Collective Leased Properties and the
record title thereto or by an accurate survey thereof. TENANT REPRESENTS THAT
IT HAS INSPECTED THE COLLECTIVE LEASED PROPERTIES AND ALL OF THE FOREGOING AND
HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH
RESPECT THERETO, AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN
RESPECT OF THE CONDITION OF THE COLLECTIVE LEASED PROPERTIES. LANDLORD MAKES
NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE COLLECTIVE
LEASED PROPERTIES OR ANY PART THEREOF, EITHER AS TO ITS
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FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT
OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT. To
the maximum extent permitted by law, however, Landlord hereby assigns to Tenant
all of Landlord's rights to proceed against any predecessor in title for
breaches of warranties or representations or for latent defects in the
Collective Leased Properties. Landlord shall fully cooperate with Tenant in
the prosecution of any such claims, in Landlord's or Tenant's name, all at
Tenant's sole cost and expense. Tenant shall indemnify, defend, and hold
harmless Landlord from and against any loss, cost, damage or liability
(including reasonable attorneys' fees) incurred by Landlord in connection with
such cooperation.
2.3 Fixed Term.
The initial term of this Agreement (the "FIXED TERM") shall commence
at 12:01 a.m. on the Commencement Date and shall expire at 11:59 p.m. on the
last day of the twelfth (12th) Lease Year.
2.4 Extended Term.
Provided that no Default or Event of Default shall have occurred and
be continuing and this Agreement shall be in full force and effect, Tenant
shall, subject to Section 2.5 below, have the right to extend the Term for each
of four (4) consecutive five (5)-year renewal terms (collectively, the
"EXTENDED TERMS") for all, and not less than all, of the Collective Leased
Properties.
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of
the terms, covenants and provisions of this Agreement (including but not
limited to those with respect to Additional Rent and payments of the Allowance)
shall apply to each such Extended Term, except that (x) the Minimum Rent for
each Extended Term shall be the Fair Market Rental for such Extended Term and
shall be determined pursuant to Section 2.5 below and (y) Tenant shall have no
right to extend the Term beyond the expiration of the Extended Terms. If
Tenant shall elect to exercise any of the aforesaid options, it shall do so by
giving Landlord Notice thereof not later than one (1) year prior to the
scheduled expiration of the then current Term of this Agreement (Fixed Term or
Extended Term, as the case may be), it being understood and agreed that time
shall be of the essence with respect to the giving of such Notice. Tenant may
not exercise its option for more than one such Extended Term at a time. If
Tenant shall fail to give any such Notice, this Agreement shall automatically
terminate at the end of the Term then in effect and Tenant shall have no
further option to extend the Term of this Agreement. If Tenant shall give such
Notice, the extension of this Agreement shall be automatically effected without
the execution of any additional documents, it being understood and agreed,
however, that Tenant and Landlord shall execute such documents and agreements
as either party shall reasonably require to evidence the same. Notwithstanding
the provisions of the foregoing sentence, if, subsequent to the giving of such
Notice, an Event of Default shall occur and be continuing, unless Landlord
shall otherwise consent in writing, the extension of this Agreement shall cease
to take effect and this Agreement
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shall automatically terminate at the end of the Term then in effect and Tenant
shall have no further option to extend the Term of this Agreement.
2.5 Determination of Minimum Rent for Extended Terms.
The Minimum Rent for each Extended Term shall be equal to the amount
set forth in clause (x) in Section 2.4 above and shall be determined by the
mutual agreement of Landlord and Tenant within thirty (30) days after Landlord
receives Tenant's Notice exercising its option to extend with respect to such
Extended Term, but in no event earlier than twelve (12) months prior to the
commencement of the applicable Extended Term. In the event Landlord and Tenant
are unable to agree on the Minimum Rent for such Extended Term within such
period, such Minimum Rent shall be determined pursuant to appraisal in
accordance with Article 19.
ARTICLE 3
RENT
3.1 Rent.
Tenant shall pay to Landlord, in lawful money of the United States of
America which shall be legal tender for the payment of public and private
debts, without offset, abatement, demand or deduction, Minimum Rent, Additional
Rent and Additional Charges, during the Term, except as hereinafter expressly
provided. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord
and Tenant, each in its sole discretion. Rent for any partial month shall be
prorated on a per diem basis based on a 365-day year and the actual number of
days elapsed.
3.1.1 Minimum Rent.
Minimum Rent shall be paid in advance on the first day of each
calendar month; provided, however, that the first monthly installment of
Minimum Rent shall be payable on the Commencement Date.
3.1.2 Additional Rent.
Additional Rent shall be paid in advance on the first day of each
calendar month; provided, however, that the first monthly installment of
Additional Rent shall be payable on the Commencement Date. Except as otherwise
set forth in Section 12.1(a) hereof, Tenant's failure to pay Additional Rent
shall not constitute a Default or Event of Default hereunder.
3.1.3 Additional Charges.
In addition to the Minimum Rent and Additional Rent payable hereunder,
Tenant shall pay and discharge as and when due and payable the following
(collectively, "ADDITIONAL CHARGES"):
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(a) Impositions. Subject to Article 8 relating to Permitted
Contests, Tenant shall pay, or cause to be paid, all Impositions
before any fine, penalty, interest or cost (other than any opportunity
cost as a result of a failure to take advantage of any discount for
early payment) may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible, and shall promptly,
upon request, furnish to Landlord copies of official receipts or other
satisfactory proof evidencing such payments. If any such Imposition
may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such
Imposition), Tenant may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during
the Term as the same become due and before any fine, penalty, premium,
further interest or cost may be added thereto. Landlord, at its
expense, shall, to the extent required or permitted by applicable law,
prepare and file all tax returns in respect of Landlord's net income,
gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes and taxes on its capital stock, and
Tenant, at its expense, shall, to the extent required or permitted by
applicable laws and regulations, prepare and file all other tax
returns and reports in respect of any Imposition as may be required by
any government or Government Agency. Provided no Default or Event of
Default shall have occurred and be continuing, if any refund shall be
due from any taxing authority in respect of any Imposition paid by
Tenant, the same shall be paid over to or retained by Tenant.
Landlord and Tenant shall, upon request of the other, provide such
data as is maintained by the party to whom the request is made with
respect to the Collective Leased Properties as may be necessary to
prepare any required returns and reports. In the event Government
Agencies classify any property covered by this Agreement as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Each party shall, to the
extent it possesses the same, provide the other, upon request, with
cost and depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord is
legally required to file personal property tax returns, Landlord shall
provide Tenant with copies of assessment notices in sufficient time
for Tenant to file a protest. All Impositions assessed against such
personal property shall be (irrespective of whether Landlord or Tenant
shall file the relevant return) paid by Tenant not later than the last
date on which the same may be made without interest or penalty. If
the provisions of any Facility Mortgage require deposits on account of
Impositions to be made with such Facility Mortgagee, provided the
Facility Mortgagee has not elected to waive such provision, Tenant
shall either pay Landlord the monthly amounts required at the time and
place that payments of Minimum Rent are required and Landlord shall
transfer such amounts to such Facility Mortgagee or, pursuant to
written direction by Landlord, Tenant shall make such deposits
directly with such Facility Mortgagee. Landlord shall, however, use
commercially reasonable best efforts to cause any Facility Mortgagee
not to impose such obligation on Tenant.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge; provided,
however, that Landlord's failure to give any such Notice shall in no way
diminish Tenant's obligation hereunder to pay such Impositions, except that
Landlord shall (unless Tenant itself knew, or should have known,
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<PAGE> 25
about the existence of such Impositions obligation) pay all penalties, fines
and other expenses arising out of Landlord's failure to give such Notice.
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities
used in connection with the Collective Leased Properties.
(c) Insurance Premiums. Tenant shall pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant
to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all other
amounts, liabilities and obligations which Tenant assumes or agrees to
pay under this Agreement, including, without limitation, all
agreements to indemnify Landlord under Sections 4.4 and 9.7.
(e) Prorations. Tenant shall pay or cause to be paid all amounts
required to be paid by OpCo under Section 10.4 of the Purchase
Agreement.
(f) Reimbursement for Additional Charges. If Tenant pays or causes
to be paid property taxes or similar Additional Charges attributable
to periods after the end of the Term, whether upon expiration or
sooner termination of this Agreement (other than termination following
an Event of Default), Tenant may, within sixty (60) days of the end of
the Term, provide Notice to Landlord of its estimate of such amounts.
Landlord shall promptly reimburse Tenant for all payments of such
taxes and other similar Additional Charges that are attributable to
any period after the Term of this Agreement (unless this Agreement
shall have been terminated following an Event of Default). Tenant
acknowledges that it has no claims against Landlord for Additional
Charges attributable to the periods prior to the first day of the
Term.
3.2 Late Payment of Rent.
If any installment of (i) Minimum Rent, (ii) Additional Rent (with
respect to which Landlord has made a disbursement of the Allowance) or (iii)
Additional Charges (but only as to those Additional Charges which are payable
directly to Landlord) shall not be paid on its due date, Tenant shall pay
Landlord, on demand, as Additional Charges, a late charge (to the extent
permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord or any Facility Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due.
In the event of any failure by Tenant to pay any Additional Charges
when due, Tenant shall promptly pay and discharge, as Additional Charges, every
fine, penalty, interest and cost which may be added for non-payment or late
payment of such items. Landlord shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Agreement or by
statute or otherwise in the case of
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non-payment of the Additional Charges as in the case of non-payment of the
Minimum Rent and Additional Rent, except as otherwise specifically provided in
this Agreement.
3.3 Net Lease.
The Minimum Rent shall be absolutely net to Landlord so that this
Agreement shall yield to Landlord the full amount of the installments or
amounts of Minimum Rent throughout the Term, subject to any other provisions of
this Agreement which expressly provide for adjustment of such Minimum Rent.
3.4 No Termination, Abatement, Etc.
Except as otherwise specifically provided in this Agreement, Tenant,
to the maximum extent permitted by law, shall remain bound by this Agreement in
accordance with its terms and shall neither take any action without the consent
of Landlord to modify, surrender or terminate this Agreement, nor seek, nor be
entitled to any abatement, deduction, deferment or reduction of the Rent, or
set-off against the Rent, nor shall the respective obligations of Landlord and
Tenant be otherwise affected by reason of (a) any damage to or destruction of
any of the Collective Leased Properties or any portion thereof from whatever
cause or any Condemnation; (b) the lawful or unlawful prohibition of, or
restriction upon, Tenant's use of any of the Collective Leased Properties, or
any portion thereof, or the interference with such use by any Person or by
reason of eviction by paramount title; (c) any claim which Tenant may have
against Landlord by reason of any default or breach of any warranty by Landlord
under this Agreement or 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 proceedings affecting Landlord or any assignee or transferee of
Landlord; or (e) for any other cause whether similar or dissimilar to any of
the foregoing. Tenant hereby waives all rights arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law, to (i)
modify, surrender or terminate this Agreement or quit or surrender any of the
Collective Leased Properties or any portion thereof, or (ii) entitle Tenant to
any abatement, reduction, suspension or deferment of the Rent or other sums
payable or other obligations to be performed by Tenant hereunder, except as
otherwise specifically provided in this Agreement. The obligations of Tenant
hereunder shall be separate and independent covenants and agreements, and the
Rent and all other sums payable by Tenant hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be
terminated pursuant to the express provisions of this Agreement.
3.5 Annual Allowance.
Provided no Default or Event of Default pursuant to Section 12.1(a)
hereof has occurred and is continuing and this Agreement shall be in full force
and effect, Landlord shall pay the Allowance to, or at the direction of, Tenant
during each Lease Year of the Term. At least Ten Million Dollars ($10,000,000)
of the Allowance shall be used to pay for Capital Expenditures made during
such Lease Year. At Tenant's election, Tenant shall have the right to use up
to Ten Million Dollars ($10,000,000) of the Allowance to pay for Impositions,
premiums for insurance required pursuant to Article 9 hereof and franchise
fees due and owing under the Franchise
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<PAGE> 27
Agreement. Anything in this Agreement to the contrary notwithstanding, any and
all assets paid for (or which are the subject of reimbursements to Tenant) by
disbursements of the Allowance with respect to Capital Expenditures shall
immediately be the property of Landlord and constitute part of the Collective
Leased Properties. Any portion of the Allowance not utilized in a particular
Lease Year shall, subject to the sentence immediately following, remain
available for use in subsequent Lease Years. Notwithstanding the foregoing (x)
in the event less than $10,000,000 of the Allowance for any Lease Year is used
to pay for Capital Expenditures, then a portion of any amount remaining to be
used in subsequent Lease Years shall be used only for Capital Expenditures,
such portion being equal to the amount by which Capital Expenditures funded
with the Allowance for such Lease Year were less than $10,000,000 and (y) in
the event any portion of the Allowance (including amounts accrued from prior
Lease Years) is not utilized as of the last day of the Term, such amount shall
be deemed forfeited and Tenant will receive no payment or credit with respect
thereto.
In order to receive a disbursement of the Allowance, Tenant shall
submit to Landlord (but not more often than twice monthly) a statement,
certified pursuant to an Officer's Certificate transmitted therewith, setting
forth in reasonable detail a description of the Capital Expenditures,
impositions, premiums for insurance required pursuant to Article 9 hereof, and
Franchise Fees incurred or owing during such Lease Year and for which an
Allowance disbursement is sought. Such Officer's Certificate shall certify
that the expenditures for which reimbursement is sought are either within
Tenant's approved annual budget or have been approved by Franchisor. Within
five (5) Business Days after receipt thereof, Landlord shall reimburse to
Tenant (or, upon Tenant's written direction, included along with such certified
statement, pay third-party contractors or vendors identified therein)
appropriate amounts requested. Upon two (2) Business Days prior Notice Landlord
shall have the right to audit Tenant's books and records to confirm the
accuracy of any such statement.
The foregoing provision hereof notwithstanding, in no event shall
Landlord be obligated (x) to make disbursements in any Lease Year in excess of
Ten Million Dollars ($10,000,000) with respect to impositions, premiums for
insurance required pursuant to Article 9 hereof, and Franchise Fees, except to
the extent that any amounts carry over from previous years pursuant to the
first paragraph of Section 3.5, (y) to make disbursements with respect to any
Lease Year in excess of the Additional Rent theretofore paid for such Lease
Year, except to the extent that any amounts carry over from previous years
pursuant to the first paragraph of Section 3.5 or (z) to make any disbursements
of the Allowance if Tenant has failed to pay any monthly installments of
Additional Rent at least equal to such disbursements.
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ARTICLE 4
USE OF THE COLLECTIVE LEASED PROPERTIES
4.1 Permitted Use.
4.1.1 Primary Intended Use.
Tenant shall, at all times during the Term and at any other
time that Tenant shall be in possession of any Leased Property, subject to
Section 4.5 hereof, continuously use each of the Collective Leased Properties
for the operation of a licensed acute or chronic care psychiatric hospital;
licensed residential treatment center; licensed subacute hospital; licensed
substance abuse, neurological, geriatric, correctional, juvenile justice or
other healthcare service facility providing inpatient care; outpatient
facility; or any combination of the foregoing; and the healthcare services
provided by or at a Leased Property may include inpatient hospitalization,
partial hospitalization programs, outpatient therapy, intensive outpatient
therapy, ambulatory detoxification, behavioral modification programs and
related services (provided such related services constitutes services intended
to be provided as part of the "Franchised Business," as such term is defined in
the Franchise Agreement), and for such other uses as may be incidental or
necessary thereto, including the operation of any medical office buildings
located on any such Leased Property (such use being hereinafter referred to as
such Leased Property's "PRIMARY INTENDED USE"). Tenant shall not use any of
the Collective Leased Properties or any portion thereof for any other use
without the prior written consent of Landlord. No use shall be made or
permitted to be made of any of the Collective Leased Properties and no acts
shall be done thereon which will cause the cancellation of any insurance policy
covering any of the Collective Leased Properties or any part thereof (unless
another adequate policy is available), nor shall Tenant sell or otherwise
provide to residents or patients therein, or permit to be kept, used or sold in
or about any of the Collective Leased Properties any article which may be
prohibited by law or by the standard form of fire insurance policies, or any
other insurance policies required to be carried hereunder, or fire
underwriter's regulations. Tenant shall, at its sole cost, comply with all of
the requirements pertaining to the Collective Leased Properties of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Collective Leased
Properties and Tenant's Personal Property, including, without limitation, the
Insurance Requirements. Tenant shall not take or omit to take any action, the
taking or omission of which materially impairs the value or the usefulness of
any of the Collective Leased Properties or any part thereof for its Primary
Intended Use.
4.1.2 Necessary Approvals.
Tenant shall proceed with all due diligence and exercise best
efforts to obtain and maintain all approvals necessary to use and operate, for
its Primary Intended Use, each of the Collective Leased Properties and each
Facility located thereon under applicable law and, without limiting the
foregoing, shall use its commercially reasonable best efforts to maintain
appropriate licensure and participation in those reimbursement programs for
which a Facility is eligible and in which management of the Facility desires to
participate.
4.1.3 Lawful Use, Etc.
Tenant shall not use or suffer or permit the use of any of the
Collective Leased Properties or Tenant's Personal Property for any unlawful
purpose. Tenant shall not commit or suffer to be committed any waste on any of
the Collective Leased Properties, or in any Facility, nor shall Tenant cause or
permit any nuisance thereon or therein. Tenant shall neither suffer nor permit
any of the Collective Leased Properties or any portion thereof, including any
Capital Addition or Tenant's Personal Property, to be used in such a manner as
(i) might reasonably tend
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to impair Landlord's (or Tenant's, as the case may be) title thereto or to any
portion thereof, or (ii) may reasonably make possible a claim or claims for
adverse usage or adverse possession by the public, as such, or of implied
dedication of the applicable Leased Property or any portion thereof.
4.2 Compliance with Legal and Insurance Requirements, Etc.
Subject to the provisions of Article 8, Tenant, at its sole expense,
shall (i) comply in all material respects with Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair, alteration
and restoration of all of the Collective Leased Properties, and (ii) procure,
maintain and comply in all material respects with all appropriate licenses,
certificates of need, permits, and other authorizations and agreements required
for any use of the Collective Leased Properties and Tenant's Personal Property
then being made, and for the proper erection, installation, operation and
maintenance of the Collective Leased Properties or any part thereof, including,
without limitation, any Capital Additions.
4.3 Compliance with Medicaid and Medicare Requirements.
Tenant shall, at its sole cost and expense, make whatever improvements
(capital or ordinary) as are required to conform each of the Collective Leased
Properties to such standards as may, from time to time, be required by Federal
Medicare (Title 18) or Medicaid (Title 19), to the extent Tenant is a
participant in such programs, or any other applicable programs or legislation,
or capital improvements required by any other governmental agency having
jurisdiction over such Leased Property as a condition of the continued
operation of such Leased Property for its Primary Intended Use.
4.4 Environmental Matters.
4.4.1 Restriction on Use, Etc.
Tenant shall not store, spill upon, dispose of or transfer to
or from the Collective Leased Properties any Hazardous Substance, except that
Tenant may store, transfer and dispose of Hazardous Substances in compliance
with all Applicable Laws. Tenant shall maintain the Collective Leased
Properties at all times free of any Hazardous Substance (except such Hazardous
Substances as are maintained in compliance with all Applicable Laws). Tenant
shall promptly: (a) notify Landlord in writing of any material change in the
nature or extent of Hazardous Substances at any of the Collective Leased
Properties, (b) transmit to Landlord a copy of any Community Right to Know
report which is required to be filed by Tenant with respect to any of the
Collective Leased Properties pursuant to SARA Title III or any other Applicable
Law, (c) transmit to Landlord copies of any demand letters, complaints or other
documents initiating legal action, citations, orders, notices or other material
communications asserting claims by private parties or government agencies with
respect to Hazardous Substances received by Tenant or its agents or
representatives (collectively, "ENVIRONMENTAL NOTICE"), which Environmental
Notice requires a written response or any action to be taken and/or if such
Environmental Notice gives notice of and/or could give rise to a material
violation of any Applicable Law and/or could give rise to any material cost,
expense, loss or damage (an "ENVIRONMENTAL OBLIGATION"), (d)
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observe and comply with all Applicable Laws relating to the use, maintenance
and disposal of Hazardous Substances and all orders or directives from any
official, court or agency of competent jurisdiction relating to the use or
maintenance or requiring the removal, treatment, containment or other
disposition thereof, and (e) pay or otherwise dispose of any fine, charge or
Imposition related thereto, unless Tenant shall contest the same in good faith
and by appropriate proceedings and the right to use and the value of any of the
Collective Leased Properties is not materially and adversely affected thereby.
If at any time Hazardous Substances are discovered in violation of
Applicable Laws on any of the Collective Leased Properties, Tenant shall take
all actions and incur any and all expenses, as may be necessary or as may be
required by any Government Agency, (i) to clean up and remove from and about
such Leased Properties all Hazardous Substances thereon, (ii) to contain and
prevent any further release or threat of release of Hazardous Substances on or
about such Leased Properties and (iii) to use good faith efforts to eliminate
any further release or threat of release of Hazardous Substances on or about
such Leased Properties.
4.4.2 Environment Report.
Six (6) months prior to expiration of the Term, Tenant shall
designate a qualified environmental engineer, satisfactory to Landlord in its
sole discretion, which engineer shall conduct an environmental investigation of
the Collective Leased Properties and prepare an environmental site assessment
report (the "ENVIRONMENTAL REPORT") with respect thereto. The scope of such
Environmental Report shall include, without limitation, review of relevant
records, interviews with persons knowledgeable about the Collective Leased
Properties and relevant governmental agencies, a site inspection of the
Collective Leased Properties, any buildings, the fencelines of the Collective
Leased Properties and adjoining properties (Phase I) and shall otherwise be
reasonably satisfactory in form and substance to Landlord. If such
investigation, in the opinion of the performing engineer, indicates that any of
the Collective Leased Properties are not environmentally sound and free from
oil, asbestos, radon and other Hazardous Substances (except in compliance with
Applicable Laws), such investigation shall also include a more detailed
physical site inspection, appropriate testing, subsurface and otherwise, and
review of historical records (Phase II) to demonstrate the compliance of such
of the Collective Leased Properties with Applicable Laws and the absence of
Hazardous Substances except in compliance with Applicable Laws.
All Environmental Reports, and supplements and amendments thereto,
shall be provided to Landlord contemporaneously with delivery thereof to
Tenant. With respect to any recommendations contained in the Environmental
Report, violations of Applicable Laws and/or the existence of any conditions at
any of the Collective Leased Properties which could give rise to an
Environmental Obligation, Tenant shall promptly give Notice thereof to
Landlord, together with a description, setting forth in reasonable detail, all
actions Tenant proposes to take in connection therewith and Tenant shall
promptly take all actions, and incur any and all expenses, as may be required
by Applicable Law or by any Government Agency or, in the case of conditions
that could give rise to an Environmental Obligation, as may be reasonably
required by Landlord, (i) to clean up, remove or remediate from and about the
Collective Leased Properties all Hazardous Substances thereon, (ii) to contain,
prevent and eliminate any further release or
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threat of release of Hazardous Substances on or about the Collective Leased
Properties, and (iii) otherwise to eliminate such violation or condition from
the Collective Leased Properties in accordance with Applicable Law .
Landlord shall, provided no Event of Default has occurred and is
continuing, Landlord shall, upon receipt of a bill, along with reasonable
substantiation thereof, promptly reimburse Tenant for the reasonable
out-of-pocket costs incurred in the preparation of the Phase I Environmental
Report. In no event shall Landlord be obligated to pay or reimburse Tenant for
the costs incurred in connection with any Phase II Report or in connection with
any actions taken or proposed to be taken by Tenant as described in the
immediately preceding paragraph.
4.4.3 Indemnification of Landlord.
Tenant shall protect, indemnify and hold harmless Landlord and
each Facility Mortgagee, their trustees, officers, agents, employees and
beneficiaries, and any of their respective successors or assigns (hereafter the
"INDEMNITEES," and when referred to singly, an "INDEMNITEE") for, from and
against any and all debts, liens, claims, causes of action, administrative
orders or notices, costs, fines, penalties or expenses (including, without
limitation, reasonable attorneys' fees and expenses) imposed upon, incurred by
or asserted against any Indemnitee resulting from, either directly or
indirectly, the presence in, the Environment or any properties surrounding any
of the Collective Leased Properties of any Hazardous Substances. Tenant's duty
herein includes, but is not limited to, indemnification for costs associated
with personal injury or property damage claims as a result of the presence of
Hazardous Substances in, upon or under the soil or ground water of any of the
Collective Leased Properties in violation of any Applicable Law. Upon Notice
from Landlord, Tenant shall undertake the defense, at Tenant's sole cost and
expense, of any indemnification duties set forth herein. The foregoing
provisions hereof notwithstanding, Tenant's indemnification of any Facility
Mortgagee pursuant to this Section 4.4.3 shall not extend to or include the
investigation and defense expenses (including, but not limited to, legal and
consulting fees and expenses) incurred by such Facility Mortgagee.
Tenant shall, upon demand, pay to Landlord, as an Additional Charge,
any cost, expense, loss or damage (including, without limitation, reasonable
attorneys' fees) incurred by Landlord in asserting any right under this Section
4.4, including without limitation any right of indemnity under this Section
4.4.3 or otherwise arising from a failure of Tenant strictly to observe and
perform the foregoing requirements, which amounts shall bear interest from the
date incurred until paid by Tenant to Landlord at the Overdue Rate.
4.4.4 Survival.
The provisions of this Section 4.4 shall survive the
expiration or sooner termination of this Agreement.
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4.5 Tenant's Right to Close Facilities.
Provided that no Default or Event of Default (except pursuant to
Section 12.1(e)) shall have occurred and be continuing, Tenant shall have the
right at any time and from time to time, to cease its operations in any or all
of the Facilities. Nothing herein shall entitle Tenant to any reduction in
Rent or diminish any of Tenant's other obligations, including without
limitation obligations to (x) maintain and insure any and all facilities, and
(y) surrender each Facility upon expiration or sooner termination of the Term
with all Tenant's Personal Property in place.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Tenant shall, at its sole cost and expense, keep each of the
Collective Leased Properties and all private roadways, sidewalks and curbs
appurtenant thereto (and Tenant's Personal Property) in good order and repair,
reasonable wear and tear excepted (whether or not the need for such repairs
occurs as a result of Tenant's use, any prior use, the elements or the age of
the Collective Leased Properties or Tenant's Personal Property, or any portion
thereof), and shall promptly make all necessary and appropriate repairs and
replacements thereto of every kind and nature, whether interior or exterior,
structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the commencement of the
Term necessary for the Primary Intended Use (concealed or otherwise); provided,
however, that Tenant shall be permitted to prosecute claims against Landlord's
predecessors in title for breach of any representation or warranty made to or
on behalf of Landlord or for any latent defects in the Collective Leased
Properties. All repairs shall be made in a good, workmanlike and first-class
manner, in accordance with all applicable federal, state and local statutes,
ordinances, by-laws, codes, rules and regulations relating to any such work.
Except as permitted by Section 4.5, Tenant shall not take or omit to take any
action, the taking or omission of which materially impairs the value or the
usefulness of any of the Collective Leased Properties or any part thereof for
its respective Primary Intended Use. Tenant's obligations under this Section
5.1.1 as to any of the Collective Leased Properties shall be limited, in the
event of any casualty or Condemnation involving such Leased Property, as set
forth in Sections 10.2 and 11.2. Notwithstanding any provisions of this
Section 5.1 to the contrary, Tenant's obligations with respect to Hazardous
Substances are as set forth in Section 4.4.
5.1.2 Landlord's Obligations.
Landlord shall not, under any circumstances, be required to
build or rebuild any improvement on the Collective Leased Properties, or to
make any repairs, replacements, alterations, restorations or renewals of any
nature or description to the Collective Leased Properties, whether ordinary or
extraordinary, structural or nonstructural, foreseen or unforeseen, or to make
any expenditure whatsoever with respect thereto, or to maintain the Collective
Leased Properties in any way, except as specifically provided herein. Tenant
hereby waives, to the maximum extent permitted by law, the right to make
repairs at the expense of Landlord pursuant
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to any law in effect on the date hereof or hereafter enacted. Landlord shall
have the right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter existing.
5.1.3 Nonresponsibility of Landlord; No Mechanics Liens.
Landlord's interest in the Collective Leased Properties shall
not be subject to liens for Capital Additions made by Tenant, and Tenant shall
have no power or authority to create any lien or permit any lien to attach to
any of the Collective Leased Properties or the present estate, reversion or
other estate of Landlord in the Collective Leased Properties or on the building
or other improvements thereon as a result of Capital Additions made by Tenant
or for any other cause or reason. All materialmen, contractors, artisans,
mechanics and laborers and other persons contracting with Tenant with respect
to the Collective Leased Properties, or any part thereof, are hereby charged
with notice that such liens are expressly prohibited and that they must look
solely to Tenant to secure payment for any work done or material furnished for
Capital Additions by Tenant or for any other purpose during the term of this
Agreement.
Nothing contained in this Agreement shall be deemed or construed in
any way as constituting the consent or request of Landlord, express or implied,
by inference or otherwise, to any contractor, subcontractor, laborer or
materialmen for the performance of any labor or the furnishing of any materials
for any alteration, addition, improvement or repair to any of the Collective
Leased Properties or any part thereof or as giving Tenant any right, power or
authority to contract for or permit the rendering of any services or the
furnishing of any materials that would give rise to the filing of any lien
against any of the Collective Leased Properties or any part thereof nor to
subject Landlord's estate in any of the Collective Leased Properties or any
part thereof to liability under any Mechanic's Lien Law of the State in any
way, it being expressly understood that Landlord's estate shall not be subject
to any such liability.
5.2 Tenant's Personal Property.
Tenant may (and shall as provided hereinbelow), at its expense,
install, affix or assemble or place on any parcels of the Land or in any of the
Leased Improvements any items of Tenant's Personal Property, and Tenant may,
subject to Section 7.2 and the conditions set forth below, remove and replace
the same at any time in the ordinary course of business, provided that no
Default or Event of Default has occurred and is continuing. Tenant shall
provide and maintain throughout the Term all such Tenant's Personal Property as
shall be necessary in order to operate all of the Facilities located at the
Collective Leased Properties in compliance in all material respects with all
applicable licensure and certification requirements, in compliance with
applicable Legal Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for such Primary Intended
Use. All of Tenant's Personal Property (except that removed and replaced in
the ordinary course of business as permitted above, but including supplies and
inventory that are equivalent, on an aggregate basis, in amount and value
similar to that reasonably established for use by the Facilities in the
immediately preceding Lease Year) shall remain at the Collective Leased
Properties at the expiration or earlier termination of this Agreement without
the necessity of any payment by Landlord to Tenant and without any obligation
to account therefor.
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If Tenant uses any material item of tangible personal property on, or
in connection with, any Leased Property which belongs to anyone other than
Tenant, Tenant shall use its commercially reasonable best efforts to require
the agreement permitting such use to provide that Landlord or its designee may
assume Tenant's rights under such agreement upon management or operation of the
applicable Facility by Landlord or its designee.
5.3 Yield Up.
Upon the expiration or sooner termination of this Agreement, Tenant
shall vacate and surrender each of the Collective Leased Properties to Landlord
in the condition in which each of the Collective Leased Properties was in on
the Commencement Date, except as repaired, rebuilt, restored, altered or added
to as permitted or required by the provisions of this Agreement, reasonable
wear and tear excepted (and Condemnation, in the event that this Agreement is
terminated with respect to any of the Collective Leased Properties following a
Condemnation in accordance with Article 11). Rents, real estate taxes and
utilities shall be prorated in the same manner as set forth in Section 10.4 of
the Purchase Agreement. Along therewith Tenant shall surrender to Landlord any
and all records and documents related to the Collective Leased Properties and
Tenant's Personal Property (i.e., but not, subject to Section 12.6 hereof,
documents primarily related to Tenant's business operated therein) including
documents and records obtained by Tenant pursuant to Section 10.2 of the
Purchase Agreement. Landlord (or its designee) shall have the right, but not
the obligation, to assume any or all contracts relating to the Collective
Leased Properties and Tenant's Personal Property (i.e., contracts not primarily
related to the business operated therein). In no event shall Landlord (or its
designee) have any liability under such contracts for obligations or
liabilities accruing under such contracts prior to the date of such assumption
by such party. Tenant shall deliver to Landlord keys and security deposits
(for assumed leases) in the same fashion as described in Sections 10.2(e) and
10.4(d) of the Purchase Agreement.
In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its
commercially reasonable best efforts to transfer to and cooperate with Landlord
or Landlord's nominee in connection with the processing of all applications for
licenses, operating permits and other governmental authorizations and all
contracts, including contracts with governmental or quasi-governmental entities
which may be necessary for the operation of the Facilities located on the
Collective Leased Properties. If requested by Landlord, Tenant will continue
to manage any such Facility after the expiration or sooner termination of the
Term and for as long thereafter as is necessary (but not to exceed six (6)
months following the date of such expiration or sooner termination) to obtain
all necessary licenses, operating permits and other governmental
authorizations, on such reasonable terms as Landlord shall request, but in any
event Landlord shall pay to Tenant a management fee equal to the sum of (i)
reasonable out-of-pocket costs and expenses of Tenant in providing management
services, (ii) reasonable allocated internal costs of Tenant in providing
management services (including but not limited to a reasonably allocated
portion of the salaries and benefits costs of Tenant personnel who provide such
services), and (iii) 10% of the sum of (i) and (ii). In connection with any
such management arrangement, Tenant will, use its commercially reasonable best
efforts to the extent reasonable necessary, maintain in effect during the
period of its management arrangement, those contracts, including (for sixty
(60) days after such expiration
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or sooner termination, but after sixty (60) days, only if the Franchise
Agreement has been assumed pursuant to Section 12.6) the Franchise Agreement,
necessary for the performance of such management responsibilities and for the
operation of the Facilities for the Primary Intended Use.
5.4 Encroachments, Restrictions, Etc.
If any of the Leased Improvements shall, at any time, encroach upon
any property, street or right-of-way adjacent to the affected Leased Property,
or shall violate the agreements or conditions contained in any lawful
restrictive covenant or other agreement affecting any of the Collective Leased
Properties, or any part thereof, or shall impair the rights of others under any
easement or right-of-way to which any of the Collective Leased Properties is
subject, upon the request of Landlord (but only as to any encroachment,
violation or impairment that is not a Permitted Encumbrance) or of any Person
affected by any such encroachment, violation or impairment, Tenant shall, at
its sole cost and expense, subject to its right to contest the existence of any
encroachment, violation or impairment in accordance with the provisions of
Article 8, 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, or
(b) make such changes in the Leased Improvements and take such other actions as
are reasonably practicable to remove such encroachment and to end such
violation or impairment, including, if necessary, the alteration of any of the
Leased Improvements and, in any event, take all such actions as may be
necessary in order to ensure the continued operation of the affected Leased
Improvements for their respective Primary Intended Use substantially in the
manner and to the extent such Leased Improvements were operated prior to the
assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of this Article 5.
Tenant's obligations under this Section 5.4 shall be in addition to and shall
in no way discharge or diminish any obligation of any insurer under any policy
of title or other insurance.
5.5 Landlord to Grant Easements, Etc.
Landlord shall from time to time, so long as no Default or Event of
Default shall have occurred and be continuing, at the request of Tenant and at
Tenant's sole cost and expense, (a) grant easements and other rights in the
nature of easements with respect to any of the Collective Leased Properties to
third parties, (b) release existing easements or other rights in the nature of
easements which are for the benefit of any of the Collective Leased Properties,
(c) dedicate or transfer unimproved portions of any of the Collective Leased
Properties for road, highway or other public purposes, (d) execute petitions to
have any of the Collective Leased Properties annexed to any municipal
corporation or utility district, (e) execute amendments to any covenants and
restrictions affecting any of the Collective Leased Properties and (f) execute
and deliver to any Person any instrument appropriate to confirm or effect such
grants, release, dedications, transfers, petitions and amendments (to the
extent of its interests in such Leased Property); provided, however, that
Landlord shall have first determined that such grant, release, dedication,
transfer, petition or amendment is not detrimental to the operation of the
applicable Leased Property for its Primary Intended Use and does not materially
reduce the value of such
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Leased Property, and Landlord shall have received an Officer's Certificate
confirming such determination, together with such additional information as
Landlord may request.
5.6 Philadelphia Facility.
In the event Franchisor does not complete the
renovation/reconstruction of the Philadelphia Facility in a timely manner as
required by the Purchase Agreement for any reason (whether or not such failure
constitutes a breach of covenant by Franchisor pursuant to Section 7.1(q) of
the Purchase Agreement), Tenant shall promptly do so at its sole cost. Tenant
shall permit Franchisor to have access to the property on which the
Philadelphia Facility is to be constructed for the purpose of performing such
obligation.
ARTICLE 6
CAPITAL ADDITIONS, ETC.
6.1 Construction of Capital Additions to the Leased Property.
Tenant shall not construct or install Capital Additions on any of the
Collective Leased Properties without obtaining Landlord's prior written
consent, which consent shall not be unreasonably withheld, provided that no
consent shall be required for any Capital Addition so long as (a) the Capital
Additions Costs for such Capital Addition are less than $1,000,000, (b) such
construction or installation would not adversely affect or violate any Legal
Requirement or Insurance Requirement applicable to the applicable Leased
Property and (c) Landlord shall have received an Officer's Certificate
certifying as to the satisfaction of the conditions set out in clauses (a) and
(b) above. If Landlord's consent is required, 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. Landlord shall have thirty (30) days to
review all materials submitted to Landlord in connection with any such
proposal. Failure of Landlord to respond to Tenant's proposal within thirty
(30) days after receipt of all information and materials requested by Landlord
in connection with the proposed Capital Addition shall be deemed to constitute
approval of such proposed Capital Addition. Without limiting the generality of
the foregoing, such proposal shall indicate the approximate projected cost of
constructing such Capital Addition and the use or uses to which it will be put.
No Capital Addition shall be made which would tie in or connect any Leased
Improvement on the applicable Leased Property with any other improvements on
property adjacent to such Leased Property (and not part of the Land) including,
without limitation, tie-ins of buildings or other structures or utilities. Any
Capital Additions shall, upon the expiration or sooner termination of this
Agreement, pass to and become the property of Landlord, free and clear of all
encumbrances other than Permitted Encumbrances.
6.2 Financing of Capital Additions.
Tenant may arrange for financing for Capital Additions from a Lending
Institution; provided, however, that (i) any security interests in any property
of Tenant, including, without
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limitation, Tenant's leasehold interest in the Collective Leased Properties,
shall be expressly and fully subordinated to this Agreement and to the interest
of Landlord in the Collective Leased Properties and to the rights of any then
or thereafter existing Facility Mortgagee; and (ii) Landlord shall have a right
of first refusal to provide financing for Capital Additions in accordance with
Section 6.6.
6.3 Capital Additions Financed by Landlord.
If Landlord shall, (i) at the request of Tenant and in Landlord's sole
discretion, or (ii) in the exercise of its rights of first refusal to provide
financing pursuant to Section 6.6 hereof, elect to finance any proposed Capital
Addition, Tenant shall provide Landlord with such information as Landlord may
from time to time request, including, without limitation, the following:
(a) Evidence that such Capital Addition will be and, upon
completion, has been, completed in compliance with the applicable
requirements of State and federal law with respect to capital
expenditures for health care facilities;
(b) Copies of all building, zoning and land use permits and
approvals and, upon completion of such Capital Addition, a copy of the
certificate of occupancy for such Capital Addition, if required;
(c) Such information, certificates, licenses, permits or other
documents necessary to confirm that Tenant will be able to use the
Capital Addition upon completion thereof in accordance with the
Primary Intended Use, including all required federal, State or local
government licenses and approvals;
(d) An Officer's Certificate and a certificate from Tenant's
architect setting forth, in reasonable detail, the projected (or
actual, if available) Capital Additions Cost, and invoices and lien
waivers from Tenant's contractors for such work;
(e) A deed conveying to Landlord title to any land acquired for the
purpose of constructing the Capital Addition free and clear of any
liens or encumbrances, except those approved by Landlord, and, upon
completion of the Capital Addition, a final as-built survey thereof
reasonably satisfactory to Landlord;
(f) Endorsements to any outstanding policy of title insurance
covering the applicable Leased Property, or a commitment therefor,
satisfactory in form and substance to Landlord, (i) updating such
policy without any additional exceptions except as approved by
Landlord, and (ii) increasing the coverage thereof by an amount equal
to the Fair Market Value of the Capital Addition (except to the extent
covered by the owner's policy of title insurance referred to in
subparagraph (g) below);
(g) If appropriate, (i) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Landlord pursuant to
subparagraph (e) above, free and clear of all liens and encumbrances,
except those approved by Landlord, and (ii) a lender's policy
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of title insurance, reasonably satisfactory in form and substance to
Landlord and any Facility Mortgagee;
(h) An appraisal of the applicable Leased Property by a Qualified
Appraiser, acceptable to Landlord, and/or an Officer's Certificate
stating that the value of the applicable Leased Property upon
completion of the Capital Addition exceeds the Fair Market Value
thereof prior to the commencement of such Capital Addition by an
amount not less than 80% of the Capital Additions Cost; and
(i) Prints of architectural and engineering drawings relating to
such Capital Addition and such other certificates, documents, opinions
of counsel, appraisals, surveys, certified copies of duly adopted
resolutions of the board of directors of Tenant authorizing the
execution and delivery of any lease amendment, or other instruments as
may be reasonably required by Landlord, any Facility Mortgagee and any
Lending Institution advancing or reimbursing Landlord or Tenant for
any portion of the Capital Additions Cost.
If Landlord shall finance the proposed Capital Addition, Landlord may
elect (with Tenant's consent, such consent not to be unreasonably withheld) to
obtain repayment of amounts so financed by an increase in the Rent payable
hereunder.
6.4 Non-Capital Additions.
Tenant shall have the right, at Tenant's sole cost and expense, to
make additions, modifications or improvements to the Collective Leased
Properties which are not Capital Additions ("NON-CAPITAL ADDITIONS") from time
to time as Tenant, in its discretion, may deem desirable for the applicable
Primary Intended Use, provided that any such Non-Capital Addition will not
materially detract from the value, operating efficiency or revenue-producing
capability of the applicable Leased Property or adversely affect the ability of
Tenant to comply with the provisions of this Agreement, and, without limiting
the foregoing, will not violate any Legal Requirement or Insurance Requirement
applicable to the applicable Leased Property. All such Non-Capital Additions
shall, upon expiration or earlier termination of this Agreement, pass to and
become the property of Landlord, free and clear of all liens and encumbrances,
other than Permitted Encumbrances.
6.5 Salvage.
All materials which are scrapped or removed in connection with the
making of either Capital Additions or Non-Capital Additions or repairs required
by Article 5 shall be the property of the Landlord.
6.6 Landlord's Right of First Refusal to Provide Financing for
Capital Additions.
In the event that at any time during the Term Tenant shall elect to
obtain construction financing in excess of $1,000,000 for any Capital
Additions, Tenant shall give Notice thereof to Landlord, which notice shall set
forth in reasonable detail the terms of such financing, shall
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identify the source thereof and shall include a copy of a final form of
commitment letter therefor. Landlord shall have the right, exercisable by the
giving of Notice to Tenant within thirty (30) days after such notice from
Tenant, to provide a final form of commitment for such financing on the same
terms and conditions as described in the Notice given to Landlord. In the
event that Landlord shall exercise such option, Tenant shall be obligated to
obtain such financing from Landlord on the terms and conditions set forth in
the Notice to Landlord. In the event that Landlord shall decline to provide
such financing or shall fail to give such notice to Tenant, Tenant shall be
free to obtain such financing from the party identified in, and on the terms
and conditions set forth in, the Notice given to Landlord with respect thereto.
ARTICLE 7
LIENS
7.1 Liens.
Subject to Article 8 and Section 16.5, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or claim
upon the Collective Leased Properties or a non-consensual lien against Tenant's
leasehold interest therein or any attachment, levy, claim or encumbrance in
respect of the Rent, other than (a) Permitted Encumbrances, (b) restrictions,
liens and other encumbrances which are consented to in writing by Landlord, (c)
liens for those taxes of Landlord which Tenant is not required to pay
hereunder, (d) subleases permitted by Article 16, (e) liens for Impositions or
for sums resulting from noncompliance with Legal Requirements so long as (i)
the same are not yet payable, or (ii) are being contested in accordance with
Article 8, (f) liens of mechanics, laborers, materialmen, suppliers or vendors
incurred in the ordinary course of business that are not yet due and payable or
are for sums that are being contested in accordance with Article 8, and (g) any
Facility Mortgages or other liens which are the responsibility of Landlord
pursuant to the provisions of Article 20.
7.2 Landlord's Lien.
In addition to any statutory landlord's lien and in order to secure
payment of the Rent and all other sums payable hereunder by Tenant and the
performance of all of Tenant's other obligations hereunder, and to secure
payment of any loss, cost or damage which Landlord may suffer by reason of
Tenant's breach of this Agreement, Tenant hereby grants unto Landlord a
security interest in and an express contractual lien upon Tenant's Personal
Property, and all proceeds therefrom, subject to any Permitted Encumbrances;
and such Tenant's Personal Property shall not be removed from the Collective
Leased Properties at any time when a Default or an Event of Default has
occurred and is continuing as otherwise permitted pursuant to Section 5.2. In
addition, Tenant hereby grants unto Landlord a security interest in those
contracts described in Section 12.6 hereof.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in (x) Tenant's Personal Property and the proceeds thereof, and (y)
the contracts described in Section 12.6 hereof, in
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accordance with the provisions of the applicable laws of the State. The
security interest herein granted is in addition to any statutory lien for the
Rent.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively, "CLAIMS") as to any of the
Collective Leased Properties, by appropriate legal proceedings, conducted in
good faith and with due diligence, provided that (a) the foregoing shall in no
way be construed as relieving, modifying or extending Tenant's obligation to
pay any Claims as finally determined, (b) such contest shall not cause Landlord
or Tenant to be in default under any mortgage or deed of trust (except with
respect to any Facility Mortgage, the terms of which have not been fully
disclosed to Tenant) encumbering such Leased Property or any interest therein
or result in or reasonably be expected to result in a lien attaching to such
Leased Property, (c) no part of such Leased Property nor any Rent therefrom
shall be in any immediate danger of sale, forfeiture, attachment or loss, and
(d) Tenant shall indemnify and hold harmless Landlord from and against any
cost, claim, damage, penalty or reasonable expense, including reasonable
attorneys' fees, incurred by Landlord in connection therewith or as a result
thereof. Upon Landlord's request made as a result of a requirement of any
Facility Mortgagee, Tenant shall either (i) provide a bond or other assurance
reasonably satisfactory to Landlord that all Claims which may be assessed
against any of the Collective Leased Properties, together with all interest and
penalties thereon will be paid, or (ii) deposit within the time otherwise
required for payment with a bank or trust company, as trustee, as security for
the payment of such Claims, an amount sufficient to pay the same, together with
interest and penalties in connection therewith and all Claims which may be
assessed against or become a Claim on any of the Collective Leased Properties,
or any part thereof, in connection with any such contest. Tenant shall furnish
Landlord and any Facility Mortgagee with reasonable evidence of such deposit
within five (5) days after request therefor. Landlord agrees, however, to use
commercially reasonable best efforts to cause any Facility Mortgagee not to
require any bond or deposit by Tenant as hereinabove provided. Landlord agrees
to join in any such proceedings if required legally to prosecute such contest,
provided that Landlord shall not thereby be subjected to any liability therefor
(including, without limitation, for the payment of any costs or expenses in
connection therewith). Tenant shall be entitled to any refund of any Claims
and such charges and penalties or interest thereon which have been paid by
Tenant or paid by Landlord and for which Landlord has been fully reimbursed by
Tenant. If Tenant shall fail (x) to pay any Claims when finally determined,
(y) to provide security therefor as provided in this Article 8, or (z) to
prosecute any such contest diligently and in good faith, Landlord may, upon
reasonable notice to Tenant (which notice may be oral and shall not be required
if Landlord shall reasonably determine that the same is not practicable), pay
such charges, together with interest and penalties due with respect thereto,
and Tenant shall reimburse Landlord therefor, upon demand, as Additional
Charges.
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ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements.
Tenant shall, at all times during the Term and at any other time
Tenant shall be in possession of any of the Collective Leased Properties, keep
each of the Collective Leased Properties and Tenant's Personal Property insured
against the risks and in the amounts as follows and shall maintain (for so long
as such insurance is commercially available) the following insurance:
(a) "All-risk" property insurance, including insurance against loss
or damage by fire, vandalism and malicious mischief, explosion of
steamboilers, pressure vessels or other similar apparatus, now or
hereafter installed in the Facility located at such Leased Property,
extended coverage perils, earthquake (providing annual aggregate
limits of One Hundred Million Dollars ($100,000,000) as to all
locations outside of California and annual aggregate limits of Fifty
Million Dollars ($50,000,000) as to all locations within California)
and all physical loss perils insurance, including, but not limited to,
sprinkler leakage, in an amount (subject to Section 9.5) equal to one
hundred percent (100%) of the then full Replacement Cost thereof (as
defined in Section 9.2), with the usual extended coverage
endorsements, including a Replacement Cost Endorsement and Builder's
Risk Coverage during the continuance of any construction at such
Leased Property;
(b) Business interruption and blanket earnings plus extra expense
under a rental value insurance policy covering risk of loss during the
lesser of the first twelve (12) months of reconstruction or the actual
reconstruction period necessitated by the occurrence of any of the
hazards described in subparagraphs (a) and (b) above in such amounts
as may be customary for comparable properties in the area and in an
amount sufficient to prevent Landlord or Tenant from becoming a
co-insurer;
(c) Comprehensive general liability insurance, including bodily
injury and property damage (on the broadest form available, including
broad form contractual liability, fire legal liability and completed
operations coverage) having policy limits as to claims with respect to
the Collective Leased Properties of at least One Million Dollars
($1,000,000) per occurrence, Three Million Dollars ($3,000,000)
aggregate per location, subject to a Five Million Dollar ($5,000,000)
aggregate limit as to all locations, and with respect to claims
arising out of malpractice in an amount not less than One Million
Dollars ($1,000,000) per occurrence, subject to a Five Million
Dollars ($5,000,000) aggregate limit as to all Facilities, provided
that such limits shall be modified to conform to any required
underlying statutory coverage, such as State Patient Compensation
Funds, or the like, and Umbrella coverage shall be provided having
limits of Twenty Million Dollars ($20,000,000) per occurrence and in
the aggregate and attaching in excess of policy limits as to general
liability, malpractice, Patient Compensation Fund programs, where
applicable, and employer's liability coverage;
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(d) Flood (when the applicable Leased Property is located in whole
or in part within an area identified as an area having special flood
hazards and in which flood insurance has been made available under the
National Flood Insurance Act of 1968, as amended, or the Flood
Disaster Protection Act of 1973, as amended (or any successor acts
thereto)) and such other hazards and in such amounts as may be
customary for comparable properties in the area, said coverage to be
in an amount equal to the lesser of the full Replacement Cost of the
applicable Leased Property or the maximum amount available;
(e) Worker's compensation insurance coverage for all persons
employed by Tenant on the applicable Leased Property with statutory
limits and otherwise with limits of and provisions in accordance with
the requirements of applicable local, State and federal law, and
employer's liability insurance having a limit of $1,000,000; and
(f) Such additional insurance and endorsements (and/or increased
amounts of insurance hereinabove required) as may be reasonably
required, from time to time, by Landlord.
9.2 Replacement Cost.
"REPLACEMENT COST" as used herein, shall mean the actual replacement
cost of the property requiring replacement from time to time, including an
increased cost of construction endorsement, less exclusions provided in the
standard form of fire insurance policy. In the event either party believes
that the then full Replacement Cost has increased or decreased at any time
during the Term, such party, at its own cost, shall have the right to have such
full Replacement Cost redetermined by an accredited appraiser approved by the
other, which approval shall not be unreasonably withheld or delayed. The party
desiring to have the full Replacement Cost so redetermined shall forthwith, on
receipt of such determination by such appraiser, give written notice thereof to
the other. The determination of such appraiser shall be final and binding on
the parties hereto, and Tenant shall forthwith conform the amount of the
insurance carried to the amount so determined by the appraiser.
9.3 Waiver of Subrogation.
Landlord and Tenant agree that (insofar as and to the extent that such
agreement may be effective without invalidating or making it impossible to
secure insurance coverage from responsible insurance companies doing business
in the State) with respect to any property loss which is covered by insurance
then being carried by Landlord or Tenant, respectively, the party carrying such
insurance and suffering said loss releases the other of and from any and all
claims with respect to such loss; and they further agree that their respective
insurance companies shall have no right of subrogation against the other on
account thereof, even though extra premium may result therefrom. In the event
that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra
premium.
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9.4 Form Satisfactory, Etc.
All insurance policies and endorsements required pursuant to this
Article 9 shall be fully paid for, nonassessable and shall contain such
provisions and expiration dates and be in such form and amounts and issued by
insurance carriers authorized to do business in the State, having a general
policy holder's rating of at least A-in Best's latest rating guide (or such
other comparable rating or such other customarily used rating agency as may be
required by any Facility Mortgagee), and otherwise as shall be approved by
Landlord. Without limiting the foregoing, such policies shall include only
deductibles reasonably approved by Landlord and shall name Landlord and any
Facility Mortgagee as additional insureds. All losses shall be payable to
Landlord or Tenant as provided in Article 10. Any loss adjustment shall
require the prior written consent of Landlord and Tenant. Tenant shall pay all
insurance premiums and deliver policies or certificates thereof to Landlord
prior to their effective date (and, with respect to any renewal policy, thirty
(30) days prior to the expiration of the existing policy), and, in the event
Tenant shall fail to effect such insurance as herein required, to pay the
premiums therefor or to deliver such policies or certificates to Landlord or
any Facility Mortgagee at the times required, Landlord shall have the right,
but not the obligation, to acquire such insurance and pay the premiums
therefor, which amounts shall be payable to Landlord, upon demand, as
Additional Charges, together with interest accrued thereon at the Overdue Rate
from the date such payment is made until the date repaid. All such policies
shall provide Landlord (and any Facility Mortgagee, if required by the same)
thirty (30) days' prior written notice of any material modification, expiration
or cancellation of such policy. Tenant may satisfy its insurance obligations
through the use of (i) a risk retention group or purchasing group or captive
insurance company with a capital structure reasonably approved by Landlord or
(ii) a self insurance program with retention limits reasonably approved by
Landlord and an excess policy or policies provided by an insurer meeting the
requirements of this Agreement.
9.5 Blanket Policy.
Notwithstanding anything to the contrary contained in this Article 9,
Tenant's obligation to maintain the insurance herein required may be brought
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Tenant, provided that (a) the coverage thereby
afforded will not be reduced or diminished from that which would exist under a
separate policy meeting all other requirements of this Agreement, except that
the blanket all-risk policy may provide coverage as to the Collective Leased
Properties to a limit of Two Hundred Million Dollars ($200,000,000) per
occurrence and (b) the requirements of this Article 9 are otherwise satisfied.
9.6 No Separate Insurance.
Tenant shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required by this Article 9, or
increase the amount of any existing insurance by securing an additional policy
or additional policies, unless all parties having an insurable interest in the
subject matter of such insurance, including Landlord and all Facility
Mortgagees, are included therein as additional insureds and the loss is payable
under such insurance in the same manner as losses are payable under the
insurance required to be carried pursuant to this Agreement. In the event
Tenant shall take out any such separate insurance or increase any of the
amounts of the then existing insurance, Tenant shall give Landlord prompt
Notice thereof.
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9.7 Indemnification of Landlord.
Notwithstanding the existence of any insurance provided for herein and
without regard to the policy limits of any such insurance, Tenant shall
protect, indemnify and hold harmless Landlord for, from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and reasonable expenses (including, without limitation, reasonable attorneys'
fees), to the maximum extent permitted by law, imposed upon or incurred by or
asserted against Landlord by reason of: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Collective
Leased Properties or adjoining sidewalks or rights of way, including, without
limitation, any claims of malpractice, (b) any past, present or future use,
misuse, non-use, condition, management, maintenance or repair of the Collective
Leased Properties or Tenant's Personal Property or any litigation, proceeding
or claim by governmental entities or other third parties to which Landlord is
made a party or participant relating to the Collective Leased Properties or
Tenant's Personal Property or such use, misuse, non-use, condition, management,
maintenance, or repair thereof, including failure to perform obligations (other
than Condemnation proceedings), to which Landlord is made a party, (c) any
Impositions (which are the obligations of Tenant to pay pursuant to the
applicable provisions of this Agreement), and (d) any failure on the part of
Tenant or anyone claiming under Tenant to perform or comply with any of the
terms of this Agreement. Tenant shall pay all amounts payable under this
Section 9.7 within ten (10) days after demand therefor and, if not timely paid,
such amounts shall bear interest at the Overdue Rate from the date of
determination to the date of payment. Tenant, at its expense, shall contest,
resist and defend any such claim, action or proceeding asserted or instituted
against Landlord or may compromise or otherwise dispose of the same, with
Landlord's prior written consent (which consent may not be unreasonably
withheld or delayed). The obligations of Tenant under this Section 9.7 are in
addition to the obligations set forth in Section 4.4 and shall survive the
termination of this Agreement.
9.8 Independent Contractor.
Tenant shall cause any person or company (each a "CONTRACTOR")
entering upon any of the Collective Leased Properties to provide any
installation, construction or repair which (x) constitutes a Capital Addition
or (y) has an anticipated cost in excess of $250,000 to: (a) have in full
force and effect Contractor's Liability Coverage (hereafter defined) effective
throughout the period said Contractor is upon said Leased Property and (b)
deliver a certificate ("CONTRACTOR'S INSURANCE CERTIFICATE") evidencing
compliance with subpart (a) to Tenant prior to the Contractor's first entry
upon said Leased Property. As used herein the term Contractor's Liability
Coverage means a comprehensive general liability insurance policy meeting the
requirements of this Article 9 (as if required to be provided by Tenant) except
the minimum policy limit shall be $500,000 per occurrence and $1,000,000 in the
aggregate. Within thirty (30) days after delivery of Landlord's written
request, Tenant shall deliver copies of all Contractor's Certificates to
Landlord.
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ARTICLE 10
CASUALTY
10.1 Insurance Proceeds.
All proceeds payable by reason of any loss or damage to the Collective
Leased Properties, or any portion thereof, and insured under any policy of
property or casualty insurance required by Article 9 (other than proceeds of
business interruption insurance) in excess of $1,000,000 shall be paid directly
to Landlord and retained by Landlord (subject to the provisions of Section
10.2). If Tenant is required to reconstruct or repair any of the Collective
Leased Properties as provided herein, such proceeds shall be paid out by
Landlord from time to time for the reasonable costs of reconstruction or repair
of such Leased Property necessitated by such damage or destruction, subject to
the provisions of Section 10.2.3. Provided no Default or Event of Default has
occurred and is continuing, any excess proceeds of insurance remaining after
the completion of the restoration shall be paid to Tenant. All salvage
resulting from any risk covered by insurance shall belong to Landlord.
10.2 Damage or Destruction.
10.2.1 Obligation to Restore. If, during the Term, any of
the Collective Leased Properties shall be totally or partially destroyed Tenant
shall promptly restore such Facility as provided in Section 10.2.3.
10.2.2 Insufficient Insurance Proceeds. If the cost of the
repair or restoration of the applicable Leased Property exceeds the amount of
insurance proceeds received by Landlord pursuant to Article 10, upon the demand
of Landlord, Tenant shall contribute any excess amounts needed to restore such
Leased Property. Such difference shall be paid by Tenant to Landlord and held
by Landlord, together with any other insurance proceeds, for application to the
cost of repair and restoration.
10.2.3 Disbursement of Proceeds. Tenant shall, at its sole
cost and expense, commence promptly and continue diligently to perform the
repair and restoration of such Leased Property (hereinafter called the "WORK"),
or shall cause the same to be done, so as to restore such Leased Property in
full compliance with all Legal Requirements and so that such Leased Property
shall be at least equal in value and general utility to its general utility and
value immediately prior to such damage or destruction. Subject to the terms
hereof, Landlord shall advance such property and casualty insurance proceeds
and the amounts paid to it pursuant to Section 10.2.2 to Tenant regularly
during the repair and restoration period so as to permit payment for the cost
of any such restoration and repair. Any such advances shall be for not less
than $100,000 (or such lesser amount as equals the entire balance of the repair
and restoration) and Tenant shall submit to Landlord a written requisition and
substantiation therefor on such form or forms as may be reasonably acceptable
to Landlord. Landlord may, at its option, condition advancement of said
insurance proceeds and other amounts on (i) the absence of any Default or Event
of Default, (ii) its approval of plans and specifications of an architect
satisfactory to Landlord, (iii) general contractors' estimates, (iv)
architect's certificates, (v) unconditional lien waivers of general
contractors, (vi) evidence of approval by all governmental authorities and
other regulatory
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bodies whose approval is required and (vii) such other certificates as Landlord
may, from time to time, reasonably require. Landlord's obligation to disburse
insurance proceeds under this Article 10 shall be subject to the release of
such proceeds by the applicable Facility Mortgagee to Landlord.
Tenant's obligation to restore the applicable Leased Property pursuant
to this Article 10 shall be subject to the release of available insurance
proceeds by the applicable Facility Mortgagee to Landlord; provided, however,
that Tenant shall be entitled to cease operations at such Facility pursuant to
and in accordance with Section 4.5 above. In the event Tenant elects to close
such Facility as aforesaid, Tenant shall, as Additional Charges, pay to
Landlord all property or casualty insurance proceeds received in connection
therewith, along with any deductible or retention, but in no event shall Tenant
pay to Landlord less than the full Replacement Cost of such Facility, including
Tenant's Personal Property.
10.3 Tenant's Property.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property shall be paid to Tenant, and, to the extent
necessary to repair or replace Tenant's Personal Property in accordance with
Section 10.4, Tenant shall hold such proceeds in trust to pay the cost of
repairing or replacing damaged Tenant's Personal Property.
10.4 Restoration of Tenant's Property.
If Tenant is required to restore the applicable Leased Property as
hereinabove provided, Tenant shall either (a) restore all alterations and
improvements made by Tenant and Tenant's Personal Property, or (b) replace
such alterations and improvements and Tenant's Personal Property with
improvements or items of the same or better quality and utility in the
operation of such Leased Property.
10.5 No Abatement of Rent.
This Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and
when required under this Agreement shall remain unabated during the Term
notwithstanding any damage involving any of the Collective Leased Properties
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10
shall be considered an express agreement governing any cause of damage or
destruction to the applicable Leased Property and, to the maximum extent
permitted by law, no local or State statute, laws, rules, regulation or
ordinance in effect during the Term which provide for such a contingency shall
have any application in such case.
10.6 Waiver.
Tenant hereby waives any statutory rights of termination which may
arise by reason of any damage or destruction of any of the Collective Leased
Properties.
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ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc.
If either (i) the whole of any of the Collective Leased Properties
shall be taken by Condemnation or (ii) a Condemnation of less than the whole of
any of the Collective Leased Properties renders such Leased Property Unsuitable
for Its Primary Intended Use, this Agreement shall terminate with respect to
such Leased Property, Tenant and Landlord shall seek the Award for their
interests in such Leased Property as provided in Section 11.5 and the Minimum
Rent thereafter payable shall be reduced by one-twelfth (1/12th) of the product
of (x) ten percent (10%), and (y) the Award received by Landlord with respect
to such Leased Property, net of all expenses incurred by Landlord in obtaining
the same, including reasonable attorneys' fees.
11.2 Partial Condemnation.
In the event of a Condemnation of less than the whole of any of the
Collective Leased Properties such that such Leased Property is still suitable
for its Primary Intended Use, Tenant shall, at its sole cost and expense,
commence promptly and continue diligently to restore the untaken portion of the
Leased Improvements on such Leased Property so that such Leased Improvements
shall constitute a complete architectural unit of the same general character
and condition (as nearly as may be possible under the circumstances) as the
Leased Improvements existing immediately prior to such Condemnation, in full
compliance with all Legal Requirements. Subject to the terms hereof, Landlord
shall contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements, to Tenant regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration. Landlord may, at its option, condition advancement of such Award
and other amounts on (i) the absence of any continuing Event of Default, (ii)
its approval of plans and specifications of an architect satisfactory to
Landlord (which approval shall not be unreasonably withheld or delayed), (iii)
general contractors' estimates, (iv) architect's certificates, (v)
unconditional lien waivers of general contractors, (vi) evidence of approval by
all governmental authorities and other regulatory bodies whose approval is
required and (vii) such other certificates as Landlord may, from time to time,
reasonably require. Landlord's obligation under this Section 11.2 to disburse
the Award and such other amounts shall be subject to (x) the collection thereof
by Landlord and (y) the satisfaction of any applicable requirements of any
Facility Mortgage, and the release of such Award by the applicable Facility
Mortgagee. Tenant's obligation to restore the applicable Leased Property shall
be subject to the release of the Award by the applicable Facility Mortgagee to
Landlord. If the cost of the restoration of the applicable Leased Property
exceeds that part of the Award necessary to complete such restoration, together
with severance and other damages awarded for the taken Leased Improvements,
Tenant shall contribute upon the demand of Landlord any excess amounts needed
to restore such Leased Property. Such difference shall be paid by Tenant to
Landlord and held by Landlord, together with such part of the Award and such
severance and other damages, for application to the cost of restoration.
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11.3 Abatement of Rent.
Other than as specifically provided in this Agreement, this Agreement
shall remain in full force and effect and Tenant's obligation to make all
payments of Rent and to pay all other charges as and when required under this
Agreement shall remain unabated during the Term notwithstanding any
Condemnation involving the Collective Leased Properties. The provisions of
this Article 11 shall be considered an express agreement governing any
Condemnation involving any or all of the Collective Leased Properties and, to
the maximum extent permitted by law, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such a
contingency shall have any application in such case.
11.4 Temporary Condemnation.
In the event of any temporary Condemnation of all or any part of the
Collective Leased Properties or Tenant's interest therein, this Agreement shall
continue in full force and effect, and Tenant shall continue to pay, in the
manner and on the terms herein specified, the full amount of the Rent. Tenant
shall continue to perform and observe all of the other terms and conditions of
this Agreement on the part of Tenant to be performed and observed. Provided no
Default or Event of Default has occurred and is continuing, the entire amount
of any Award made for such temporary Condemnation allocable to the Term,
whether paid by way of damages, rent or otherwise, shall be paid to Tenant.
Tenant shall, promptly upon the termination of any such period of temporary
Condemnation, at its sole cost and expense, restore such Leased Property to the
condition that existed immediately prior to such Condemnation, in full
compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration. For purposes of this
Section 11.4, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twenty-four (24)
months.
11.5 Allocation of Award.
Except as provided in the second sentence of this Section 11.5, the
total Award shall be solely the property of and payable to Landlord. Any
portion of the Award made for the taking of Tenant's leasehold interest in the
applicable Leased Property, loss of business during the remainder of the Term,
or Tenant's removal and relocation expenses shall be the sole property of and
payable to Tenant (subject to the provisions of Section 11.2). In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "EVENT OF DEFAULT" hereunder:
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(a) Tenant fails (i) to make any payment of the Rent payable
hereunder when due and such failure continues for a period of ten (10)
days after the date due, or (ii) to make any required payments of real
estate taxes by the earlier of (a) ten (10) days following Notice
from Landlord that such payment is due and owing and unpaid, and (b)
the date which is 30 days prior to the date on which a Government
Authority has the right to sell or initiate the process for selling
the applicable Leased Property due to a failure to pay the real estate
taxes. The foregoing provisions hereof notwithstanding, (x) Tenant's
failure to pay Additional Rent shall not constitute an Event of
Default, except if Tenant fails to pay Additional Rent in at least the
amount of the Allowance disbursed to date by Landlord, and (y) with
respect to the failure to pay Additional Charges that are amounts owed
to third parties (other than real estate taxes), the failure to pay
such amounts shall not constitute an Event of Default under this
Section 12.1(a) if Tenant pays the same in full, along with all
interest, penalties and late charges due and owing to such third
parties, no later than ten (10) days following Notice from Landlord
that such sum is due and owing. In the event Landlord gives Notice of
such circumstances to Tenant twice in any Lease Year, then on each
subsequent occasion for the remainder of such Lease Year when Landlord
gives Tenant any such Notice, Tenant shall pay to Landlord, as
Additional Charges (whether or not Tenant pays such third party within
ten (10) days as aforesaid), the sum of One Thousand Five Hundred
Dollars ($1,500).
(b) Tenant fails to maintain the insurance coverages required under
Article 9 within five (5) days after Notice thereof from Landlord.
(c) Tenant defaults in the due observance or performance of any of
the terms, covenants or agreements contained herein to be performed or
observed by it (other than as specified in clauses (a) and (b) above),
and, in either case, such default continues for a period of thirty
(30) days after Notice thereof from Landlord to Tenant (provided that
no such Notice shall be required if Landlord reasonably determines
that immediate action is necessary to protect person or property);
provided, however, that if such default is susceptible of cure but
such cure cannot be accomplished with due diligence within such period
of time and if, in addition, Tenant commences to cure such default
within thirty (30) days after Notice thereof from Landlord and
thereafter prosecutes the curing of such default with all due
diligence, such period of time shall be extended to such period of
time (not to exceed an additional one hundred eighty (180) days in the
aggregate) as may be necessary to cure such default with all due
diligence.
(d) Any obligation of Tenant in respect of any Indebtedness in a
principal amount in excess of $10,000,000 for money borrowed or for
the deferred purchase price of any material property or services, is
declared to be, or as a result of acceleration becomes, due and
payable prior to the stated maturity thereof.
(e) There occurs a final unappealable determination by applicable
federal or State authorities of the revocation or limitation of any
license, permit, certification, certificate of need or approval
required for the lawful operation of any of the Facilities in
accordance with its Primary Intended Use or the loss or limitation of
any license, permit,
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certification, certificate of need or approval under any other
circumstances under which Tenant is required to cease its operation of
such Facility in accordance with its Primary Intended Use at the time
of such loss or limitation, provided, however, that if Tenant ceases
its operations in such Facility pursuant to and in accordance with its
right to do so under Section 4.5 hereof, the closing thereof shall
cause such Event of Default to be deemed no longer continuing.
(f) Any representation or warranty made by or on behalf of Tenant
under or in connection with this Agreement, or in any document,
certificate, or agreement delivered in connection herewith proves to
have been false or misleading in any material respect on the date when
made or deemed made.
(g) Tenant is generally not paying its debts as they become due, or
Tenant makes a general assignment for the benefit of creditors.
(h) Any petition is filed by or against Tenant under the Federal
bankruptcy laws, or any other proceeding is instituted by or against
Tenant seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, reorganization, arrangement, adjustment or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, custodian or
other similar official for Tenant or for any substantial part of the
property of Tenant and such proceeding is not dismissed within ninety
(90) days after institution thereof, or Tenant takes any action to
authorize or effect any of the actions set forth above in this
paragraph.
(i) Tenant causes or institutes any proceeding for its dissolution
or termination.
(j) subject to Section 4.5 hereof, Tenant voluntarily ceases
operation of any of the Collective Leased Properties for its Primary
Intended Use for a period in excess of thirty (30) consecutive days,
except as a result of damage, destruction or partial or complete
Condemnation.
(k) The estate or interest of Tenant in any of the Collective
Leased Properties or any part thereof is levied upon or attached in
any proceeding and the same is not vacated or discharged within the
later of (x) one hundred and twenty (120) days after commencement
thereof, unless the amount in dispute is less than $100,000 in which
case Tenant shall give notice to Landlord of the dispute but Tenant
may defend in any suitable way, and (y) thirty (30) days after receipt
by Tenant of Notice thereof from Landlord (unless Tenant shall be
contesting such lien or attachment in good faith in accordance with
Article 8).
(l) Any Change in Control of Tenant occurs.
In any such event, Landlord, in addition to all other remedies available to it,
may terminate this Agreement with respect to all but not less than all of the
Collective Leased Properties by giving Notice thereof to Tenant and upon the
expiration of the time, if any, fixed in such Notice, this
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Agreement shall terminate and all rights of Tenant under this Agreement shall
cease. Landlord shall have and may exercise all rights and remedies available
at law and in equity to Landlord as a result of Tenant's breach of this
Agreement.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Collective Leased
Properties and take possession of, and either (i) retain any and all of
Tenant's Personal Property on any such Leased Property, without liability for
trespass or conversion (Tenant hereby waiving any right to Notice or hearing
prior to such taking of possession by Landlord) or (ii) sell the same at public
or private sale, after giving Tenant reasonable Notice of the time and place of
any public or private sale, at which sale Tenant or its assigns may purchase
all or any portion of Tenant's Personal Property. Unless otherwise provided by
law and without intending to exclude any other manner of giving Tenant
reasonable notice, the requirement of reasonable Notice shall be met if such
Notice is given at least five (5) days before the date of sale. The proceeds
from any such disposition shall belong to Landlord and shall not be applied as
a credit against the indebtedness which is secured by the security interest
granted in Section 7.2.
The foregoing provisions hereof notwithstanding, Landlord shall have
no right to assert any remedy hereunder, and an Event of Default shall be
deemed to no longer exist, if Tenant cures an Event of Default (A) under
Section 12.1(a) prior to the earlier of (x) the commencement by Landlord of
the exercise of any remedy under this Agreement by Landlord or (y) Landlord's
Notice to Tenant stating that an Event of Default exists and further stating
Landlord's intention to assert one or more remedies hereunder; and (B) under
any of Section 12.(b)-(l), prior to the commencement by Landlord of the
exercise of any remedy under this Agreement by Landlord.
12.2 Remedies.
None of (a) the termination of this Agreement pursuant to Section
12.1, (b) the repossession of the Collective Leased Properties, (c) the failure
of Landlord to re-let any or all of the Collective Leased Properties, or (d)
the reletting of any or all of the Collective Leased Properties, shall relieve
Tenant of its liability and obligations hereunder, all of which shall survive
any such termination, repossession or re-letting. In the event of any such
termination, Tenant shall forthwith pay to Landlord all Rent due and payable
with respect to the Collective Leased Properties through and including the date
of such termination. Thereafter, Tenant, until the end of what would have been
the Term of this Agreement in the absence of such termination, and whether or
not any of the Collective Leased Properties or any portion thereof shall have
been re-let, shall be liable to Landlord for, and shall pay to Landlord, as
current damages, the Rent and other charges which would be payable hereunder
for the remainder of the Term had such termination not occurred, less the net
proceeds, if any, of any re-letting of the Collective Leased Properties, after
deducting all expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
attorneys' fees, advertising, expenses of employees, alteration costs and
expenses of preparation for such reletting. Tenant shall pay such current
damages to Landlord monthly on the days on which the Minimum Rent would have
been payable hereunder if this Agreement had not been so terminated.
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At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord's election, Tenant shall pay to Landlord
either (a) an amount equal to the excess, if any, of the Rent and other charges
which would be payable hereunder from the date of such termination (assuming
that, for the purposes of this paragraph, annual payments by Tenant on account
of Impositions would be the same as payments required for the immediately
preceding twelve calendar months, or if less than twelve calendar months have
expired since the Commencement Date, the payments required for such lesser
period projected to an annual amount) for what would be the then unexpired term
of this Agreement if the same remained in effect, over the Fair Market Rental
for the same period, or (b) an amount equal to the lesser of (i) the Rent and
other charges that would have been payable for the balance of the Term had it
not been terminated, and (ii) the aggregate of the Rent and other charges
accrued in the twelve (12) months ended next prior to such termination (without
reduction for any free rent or other concession or abatement). In the event
this Agreement is so terminated prior to the expiration of the first full year
of the Term, the liquidated damages which Landlord may elect to recover
pursuant to clause (b)(ii) of this paragraph shall be calculated as if such
termination had occurred on the first anniversary of the Commencement Date.
Nothing contained in this Agreement shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency an amount equal to the maximum allowed by any statute or rule of law
in effect at the time when, and governing the proceedings in which, the damages
are to be proved, whether or not the amount be greater than, equal to, or less
than the amount of the loss or damages referred to above.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (a) relet any
of the Collective Leased Properties or any part or parts thereof, either in the
name of Landlord or otherwise, for a term or terms which may, at Landlord's
option, be equal to, less than or exceed the period which would otherwise have
constituted the balance of the Term and may grant concessions or free rent to
the extent that Landlord considers advisable and necessary to relet the same,
and (b) may make such reasonable alterations, repairs and decorations in any
applicable Leased Property or any portion thereof as Landlord, in its sole and
absolute discretion, considers advisable and necessary for the purpose of
reletting any such Leased Property; and the making of such alterations, repairs
and decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Landlord shall in no event be liable in any
way whatsoever for any failure to relet all or any portion of the Collective
Leased Properties, or, in the event that any of the Collective Leased
Properties is relet, for failure to collect the rent under such reletting. To
the maximum extent permitted by law, Tenant hereby expressly waives any and all
rights of redemption granted under any present or future laws in the event of
Tenant being evicted or dispossessed, or in the event of Landlord obtaining
possession of any of the Collective Leased Properties, by reason of the
violation by Tenant of any of the covenants and conditions of this Agreement.
12.3 Tenant's Waiver.
IF THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION 12.1 OR 12.2,
TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN
THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE
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REMEDIES SET FORTH IN THIS ARTICLE 12 AND THE BENEFIT OF ANY LAWS NOW OR
HEREAFTER IN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds.
Any payments received by Landlord under any of the provisions of this
Agreement during the existence or continuance of any Default or Event of
Default (and any payment made to Landlord rather than Tenant due to the
existence of any Default or Event of Default) shall be applied to Tenant's
obligations under this Agreement in such order as Landlord may determine or as
may be prescribed by the laws of the State.
12.5 Landlord's Right to Cure Tenant's Default.
If an Event of Default shall have occurred and be continuing,
Landlord, after Notice to Tenant (which Notice shall not be required if
Landlord shall reasonably determine immediate action is necessary to protect
person or property), without waiving or releasing any obligation of Tenant and
without waiving or releasing any Event of Default, may (but shall not be
obligated to), at any time thereafter, make such payment or perform such act
for the account and at the expense of Tenant, and may, to the maximum extent
permitted by law, enter upon any of the Collective Leased Properties or any
portion thereof for such purpose and take all such action thereon as, in
Landlord's sole and absolute discretion, may be necessary or appropriate
therefor, including the management of the Facility located thereon by Landlord
or its designee, and Tenant hereby irrevocably appoints, in the event of such
election by Landlord, Landlord or its designee as manager of any such Facility
and its attorney in fact for such purpose, irrevocably and coupled with an
interest, in the name, place and stead of Tenant. No such entry shall be
deemed an eviction of Tenant. All reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees) incurred by Landlord in
connection therewith, together with interest thereon (to the extent permitted
by law) at the Overdue Rate from the date such sums are paid by Landlord until
repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Landlord's Right to Assume Contracts.
In the event Landlord elects to terminate this Agreement or otherwise
obtains possession of the Collective Leased Properties following an Event of
Default, Landlord (or its designee) shall have the right, at its sole and
absolute discretion, upon Notice to Tenant within sixty (60) days after
Landlord terminates this Agreement or otherwise obtains possession following an
Event of Default, to assume all (but not less than all) of the contracts
utilized by Tenant in the operation of its business, including the Franchise
Agreement, and Tenant will cooperate in effecting such assumption. In no event
will Landlord (or its designee) have any liability under such contracts for
obligations or liabilities accruing under such contracts prior to the date of
such assumption by such party.
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ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to two (2) times the Minimum Rent then in effect plus Additional Charges
and other charges herein provided (prorated on a daily basis). Tenant shall
also pay to Landlord all damages (direct or indirect) sustained by reason of
any such holding over. Otherwise, such holding over shall be on the terms and
conditions set forth in this Agreement, to the extent applicable. 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
this Agreement.
ARTICLE 14
LANDLORD'S DEFAULT
If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in this Agreement and such default shall
continue for a period of thirty (30) days after Notice thereof from Tenant to
Landlord and any applicable Facility Mortgagee, or such additional period as
may be reasonably required to correct the same, Tenant may declare the
occurrence of a "Landlord Default" by a second Notice to Landlord and to such
Facility Mortgagee. Thereafter, Tenant may forthwith cure the same and,
subject to the provisions of the following paragraph, invoice Landlord for
costs and expenses (including reasonable attorneys' fees and court costs)
incurred by Tenant in curing the same, together with interest thereon from the
date Landlord receives Tenant's invoice, at the Overdue Rate. Tenant shall
have no right to terminate this Agreement for any default by Landlord hereunder
and no right, for any such default, to offset or counterclaim against any Rent
or other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period,
shall give Notice thereof to Tenant, setting forth, in reasonable detail, the
basis therefor, no Landlord Default shall be deemed to have occurred and
Landlord shall have no obligation with respect thereto until final adverse
determination thereof. If Tenant and Landlord shall fail, in good faith, to
resolve any such dispute within ten (10) days after Landlord's Notice of
dispute, either may submit the matter for resolution to a court of competent
jurisdiction.
ARTICLE 15
LANDLORD FINANCING
In the event that at any time during the Term, OpCo, or any Subsidiary
of OpCo, shall elect to obtain financing for any health care related facilities
owned or leased or to be owned or leased by OpCo, or such Subsidiary, OpCo
shall give (or cause such Subsidiary to give, as the case may be) Notice
thereof to Landlord, which notice shall set forth in reasonable detail the
terms of such financing, shall identify the source thereof and shall include a
copy of an applicable commitment letter. Landlord shall have the right,
exercisable by the giving of Notice to OpCo (or such Subsidiary, as the case
may be) within thirty (30) days after such Notice from
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OpCo (or such Subsidiary, as the case may be), to provide such financing on the
same terms and conditions as described in the Notice given to Landlord. In the
event that Landlord shall exercise such option, OpCo (or such Subsidiary, as
the case may be) shall be obligated to obtain such financing from Landlord on
the terms and conditions set forth in the Notice to Landlord. In the event
that Landlord shall decline to provide such financing or shall fail to give
such Notice to OpCo (or such Subsidiary, as the case may be), OpCo (or such
Subsidiary, as the case may be) shall be free to obtain such financing from the
party identified in, and on the terms and conditions set forth in, the Notice
given to Landlord with respect thereto. Notices to OpCo and any Subsidiary
shall be given as if a Notice to Tenant.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment.
Except as provided in Sections 16.3 and 16.5 below, Tenant shall not,
without the prior written consent of Landlord (which consent may be given or
withheld in its sole and absolute discretion), assign, mortgage, pledge,
hypothecate, encumber or otherwise transfer this Agreement or sublease (which
term shall be deemed to include the granting of concessions, licenses and the
like), all or any part of the Collective Leased Properties or suffer or permit
this Agreement or the leasehold estate created hereby or any other rights
arising under this Agreement to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, or permit the use or occupancy of any of
the Collective Leased Properties by anyone other than Tenant, or any of the
Collective Leased Properties to be offered or advertised for assignment or
subletting. For purposes of this Section 16.1, an assignment of this Agreement
shall be deemed to include any Change in Control of Tenant.
If this Agreement is assigned or if any of the Collective Leased
Properties or any part thereof are sublet (or occupied by anybody other than
Tenant and its employees) in contravention of this Agreement, Landlord may
collect the rents from such assignee, subtenant or occupant, as the case may
be, and apply the net amount collected to the Rent herein reserved, but no such
collection shall be deemed a waiver of the provisions set forth in the first
paragraph of this Section 16.1, the acceptance by Landlord of such assignee,
subtenant or occupant, as the case may be, as a tenant, or a release of Tenant
from the future performance by Tenant of its covenants, agreements or
obligations contained in this Agreement.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder, and no consent to any subletting or
assignment in a particular instance shall be deemed to be a waiver of the
prohibition set forth in this Section 16.1. No assignment, subletting or
occupancy shall affect any Primary Intended Use. Any subletting, assignment or
other transfer of Tenant's interest under this Agreement in contravention of
this Section 16.1 shall be voidable at Landlord's option.
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16.2 Required Sublease Provisions.
Any sublease of all or any portion of any of the Collective Leased
Properties shall provide (a) that it is subject and subordinate to this
Agreement and to the matters to which this Agreement is or shall be subject or
subordinate; (b) that in the event of termination of this Agreement or reentry
or dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Facility
Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or
omission of Tenant under such sublease, (ii) be subject to any credit,
counterclaim, offset or defense which theretofore accrued to such subtenant
against Tenant, (iii) be bound by any previous modification of such sublease
not consented to in writing by Landlord or by any previous prepayment of more
than one (1) month's Rent, (iv) be bound by any covenant of Tenant to undertake
or complete any construction of such Leased Property or any portion thereof,
(v) be required to account for any security deposit of the subtenant other than
any security deposit actually delivered to Landlord by Tenant, (vi) be bound by
any obligation to make any payment to such subtenant or grant any credits,
except for services, repairs, maintenance and restoration provided for under
the sublease that are to be performed after the date of such attornment, (vii)
be responsible for any monies owing by Tenant to the credit of such subtenant,
or (viii) be required to remove any Person occupying any portion of the
Collective Leased Properties; and (c), in the event that such subtenant
receives a written Notice from Landlord or any Facility Mortgagee stating that
an Event of Default has occurred and is continuing, such subtenant shall
thereafter be obligated to pay all rentals accruing under such sublease
directly to the party giving such Notice or as such party may direct. All
rentals received from such subtenant by Landlord or the Facility Mortgagee, as
the case may be, shall be credited against the amounts owing by Tenant under
this Agreement and such sublease shall provide that the subtenant thereunder
shall, at the request of Landlord, execute a suitable instrument in
confirmation of such agreement to attorn. An original counterpart of each such
sublease and assignment and assumption, duly executed by Tenant and such
subtenant or assignee, as the case may be, in form and substance reasonably
satisfactory to Landlord, shall be delivered promptly to Landlord upon request
and (a) in the case of an assignment, the assignee shall assume in writing and
agree to keep and perform all of the terms of this Agreement on the part of
Tenant to be kept and performed and shall be, and become, jointly and severally
liable with Tenant for the performance thereof and (b) in case of either an
assignment or subletting, Tenant shall remain primarily liable, as principal
rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver of
the provisions set forth in the first paragraph of Section 16.1.
16.3 Permitted Assignments and Subleases.
Notwithstanding the requirements set forth in Section 16.1 that
Landlord's prior written consent be obtained in connection with any assignment,
mortgage, pledge, encumbrance or other transfer of this Lease or any sublease
of all or any part of the Collective Leased Properties, but subject to the
provisions of Section 16.4 and any other express conditions or limitations set
forth
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in this Article 16, Tenant may, in each instance, (x) after Notice to Landlord,
sublease any or all of the Collective Leased Properties, or assign this
Agreement, to any Qualified Affiliate and (y) sublease space at any of the
Collective Leased Properties for laundry, commissary, child care or medical
office or other purposes in furtherance of the applicable Primary Intended Use,
so long as such sublease will not violate or affect any Legal Requirement or
Insurance Requirement, and Tenant shall provide such additional insurance
coverage applicable to the activities to be conducted in such subleased space
as Landlord may require. In connection with any sublease of any Leased
Property, or assignment of this Agreement, any and all Facilities affected by
or the subject of such transaction shall continue to be operated under and
pursuant to the Franchise Agreement, and Tenant shall provide to Landlord, upon
request, documentation confirming that the operation thereof, in such manner,
has the approval and consent of Franchisor.
16.4 Sublease Limitation.
Anything contained in this Agreement to the contrary notwithstanding,
Tenant shall not sublet any of the Collective Leased Properties on any basis
such that all or any part of the Rent 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. This limitation shall include, but not be limited
to, situations where (a) the rental to be paid by any sublessee thereunder
would be based, in whole or in part, on the income or profits derived by the
business activities of such sublessee, or (b) the sublessee would have a
relationship to Crescent Real Estate Equities, Inc., described in Section
856(d)(2)(B) of the Code, or any similar or successor provision thereto.
16.5 Tenant's Right to Mortgage its Leasehold.
Tenant may, subject to Article 15 and Section 6.6 hereof, assign its
interest in this Agreement to a Lending Institution as collateral for
Indebtedness, provided, however, any security interests in any property of
Tenant, including without limitation Tenant's leasehold interest in the
Collective Leased Properties, shall be expressly and fully subordinated to this
Agreement and to the interest of Landlord in the Collective Leased Properties
and to the rights of any then or thereafter existing Facility Mortgagee.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates.
At any time and from time to time, upon not less than ten (10) days
prior Notice by Landlord, Tenant shall furnish to Landlord an Officer's
Certificate certifying that this Agreement is unmodified and in full force and
effect (or that this Agreement is in full force and effect as modified and
setting forth the modifications), the date to which the Rent has been paid,
that no Default or an Event of Default has occurred and is continuing or, if a
Default or an Event of Default shall exist, specifying in reasonable detail the
nature thereof, and the steps being taken to remedy the same, and such
additional information as Landlord may reasonably request. Any such
certificate furnished pursuant to this Section 17.1 may be relied upon by
Landlord, any
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Facility Mortgagee and any prospective purchaser or mortgagee of any of the
Collective Leased Properties.
17.2 Financial Statements.
OpCo shall furnish the following statements to Landlord:
(a) within forty-five (45) days after each of the first three
quarters of any Fiscal Year, the most recent Financials and the most
recent unaudited financial statements of OpCo accompanied by the
Financial Officer's Certificate;
(b) within one hundred twenty (120) days after the end of each
Fiscal Year, the most recent Financials for such Fiscal Year,
including the most recent financial statements of OpCo audited and
reported upon by an independent certified public accountant reasonably
satisfactory to Landlord and accompanied by a Financial Officer's
Certificate;
(c) within thirty (30) days after the end of each calendar month,
an unaudited statement of income of OpCo, accompanied by a Financial
Officer's Certificate;
(d) promptly after the sending or filing thereof, copies of all
periodic reports which OpCo files with the SEC or any stock exchange
on which its shares are listed or traded;
(e) promptly after the delivery thereof to OpCo, a copy of any
management letter or written report prepared by the certified public
accountants with respect to the financial condition, operations,
business or prospects of OpCo, as the case may be; and
(f) at the expense of Landlord, at any time and from time to time
upon not less than forty-five (45) days Notice from Landlord, any
Financials or any other financial reporting information required to be
filed by Landlord with any securities and exchange commission, the SEC
or any successor agency, or any other governmental authority, or
required pursuant to any order issued by any court, governmental
authority or arbitrator in any litigation to which Landlord is a
party, for purposes of compliance therewith, promptly, upon Notice
from Landlord, such other information concerning the business,
financial condition and affairs of Tenant as Landlord may reasonably
request from time to time.
Landlord may at any time, and from time to time, provide any Facility
Mortgagee with copies of any of the foregoing statements, provided that such
Facility Mortgagee has executed and delivered a confidentiality agreement
reasonably satisfactory to Tenant.
17.3 General Operations.
Tenant covenants and agrees to furnish to Landlord within thirty (30)
days after written request therefor:
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17.3.1 Reimbursement, Licensure, Etc.
Within thirty (30) days after receipt or modification thereof:
(a) copies of all material licenses and certificates of need
authorizing Tenant to operate each Facility for its Primary Intended
Use;
(b) a list of all Medicare and Medicaid certifications and all
related participating provider agreements; and
(c) copies of all reports of surveys, statements of deficiencies,
plans of correction, and all material correspondence relating thereto,
including, without limitation, all reports and material correspondence
concerning compliance with or enforcement of licensure,
Medicare/Medicaid, and accreditation requirements, including physical
environment and Life Safety Code survey reports (excluding, however,
correspondence which may be subject to any attorney-client privilege).
Upon Notice from Landlord from time to time, Tenant shall make
available for inspection and copying by Landlord, where such records
are kept and maintained in the normal course of business:
(d) all Medicare and Medicaid certifications, together with all
participating provider agreements and all material correspondence
relating thereto with respect to each Facility (excluding, however,
correspondence which may be subject to any attorney-client privilege);
and
(e) such other confirmation as to the licensure and Medicare and
Medicaid participation of Tenant as Landlord may reasonably request
from time to time.
17.3.2 Annual Budgets.
Not less than sixty (60) days after the commencement of any
Fiscal Year, proposed annual income and ordinary expense and capital
improvement budgets setting forth projected income and costs and expenses
projected to be incurred by Tenant in managing, owning, maintaining and
operating the Facilities during the next succeeding Fiscal Year.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Collective Leased Properties during usual business hours upon not
less than twenty-four (24) hours' notice (provided that no such notice shall be
required if Landlord shall reasonably determine immediate action is necessary
to protect person or property), and to make such repairs as Landlord is
permitted or required to make pursuant to the terms of this Agreement, provided
that any inspection or repair by Landlord or its representatives will not
unreasonably interfere with
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Tenant's use and operation of the applicable Leased Property and further
provided that in the event of an emergency, as determined by Landlord in its
sole discretion, prior Notice shall not be necessary.
ARTICLE 19
APPRAISAL
In the event that it becomes necessary to determine the Fair Market
Value or Fair Market Rental of any of the Collective Leased Properties for any
purpose of this Agreement and the parties cannot agree thereon, such Fair
Market Value or Fair Market Rental, as the case may be, shall be determined
upon the written demand of either party in accordance with the following
procedure.
The party requesting an appraisal, by Notice given to the other, shall
propose and unilaterally approve a Qualified Appraiser. The other party, by
Notice given within fifteen (15) days after receipt of such Notice appointing
the first Qualified Appraiser, may appoint a second Qualified Appraiser. If
the other party fails to appoint the second Qualified Appraiser within such
fifteen (15)-day period, such party shall have waived its right to appoint a
Qualified Appraiser, the first Qualified Appraiser shall appoint a second
Qualified Appraiser within fifteen (15) days thereafter, and the Fair Market
Value or Fair Market Rental, as the case may be, shall be determined by the
Qualified Appraisers as set forth below.
The two Qualified Appraisers shall thereupon endeavor to agree upon
the Fair Market Value or Fair Market Rental, as the case may be. If the two
Qualified Appraisers so named cannot agree upon such value or rental, as the
case may be, within thirty (30) days after the designation of the second such
appraiser, each such appraiser shall, within five (5) days after the expiration
of such thirty (30)-day period, submit his appraisal of fair market value to
the other appraiser in writing, and if the fair market values set forth in such
appraisals vary by five percent (5%) or less of the greater value, the fair
market value shall be determined by calculating the average of the two fair
market values determined by the two appraisers.
If the fair market values set forth in the two appraisals vary by more
than five percent (5%) of the greater value, the two Qualified Appraisers shall
select a third Qualified Appraiser within an additional fifteen (15) days
following the expiration of the aforesaid five (5)-day period. If the two
appraisers are unable to agree upon the appointment of a third appraiser within
such fifteen (15)-day period, either party may, upon written notice to the
other, request that such appointment be made by the then President (or
equivalent officer) of the State's Chapter of the American Institute of Real
Estate Appraisers, or his or her designee or, if there is no such organization
or if such individual declines to make such appointment, by any state or
Federal court of competent jurisdiction for the State.
In the event that all three of the appraisers cannot agree upon Fair
Market Value or Fair Market Rental, as the case may be, within twenty (20) days
following the selection of the third appraiser, each appraiser shall, within
ten (10) days thereafter, submit his appraisal of fair market value to the
other two appraisers in writing, and the fair market value shall be determined
by
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calculating the average of the two numerically closest values (or, if the
values are equidistant, the average of all three values) determined by the
three appraisers.
In the event that any appraiser appointed hereunder does not or is
unable to perform his or her obligation hereunder, then the party or the
appraisers appointing such appraiser shall have the right to propose and
approve unilaterally a substitute Qualified Appraiser, but if the party or the
appraisers who have the right to appoint a substitute Qualified Appraiser fail
to do so within ten (10) days after written notice from the other party (or
either party in the event such appraiser was appointed by the other
appraisers), either party may, upon written notice to the party having the
right to appoint a substitute Qualified Appraiser, request that such
appointment be made by such officer of the American Institute of Real Estate
Appraisers or court of competent jurisdiction as described above; provided,
however, that a party who has the right to appoint an appraiser or a substitute
appraiser shall have the right to make such appointment only up until the time
such appointment is made by such officer or court.
In connection with the appraisal process, Tenant shall provide the
appraisers full access during normal business hours to examine the applicable
Leased Property, the books, records and files of Tenant and all agreements,
leases and other operating agreements relating to the applicable Leased
Property.
The costs (other than Landlord's counsel fees) of each such appraisal
shall be borne by Tenant and shall be included as part of the Additional
Charges. Upon determining such value, the appraisers shall promptly notify
Landlord and Tenant in writing of such determination. If any party shall fail
to appear at the hearings appointed by the appraisers, the appraisers may act
in the absence of such party.
The determination of the Qualified Appraisers made in accordance with
the foregoing provisions shall be final and binding upon the parties, such
determination may be entered as an award in arbitration in a court of competent
jurisdiction, and judgment thereon may be entered.
Notwithstanding anything in this Agreement to the contrary, (x) the
parties agree that the Minimum Rent for the Fixed Term provided for in Section
1.64 hereof shall not be evidence of the Fair Market Rental for any Extended
Term, and (y) if Minimum Rent for any Extended Term as determined by appraisal
pursuant to this Article 19 is not satisfactory to Landlord, in Landlord's sole
discretion, or Franchisor elects to void Tenant's extension of the Franchise
Agreement with respect to such Extended Term pursuant to the Franchise
Agreement, then Landlord shall have the right to render void Tenant's election
to extend the Term with respect to such Extended Term upon Notice given to
Tenant no later than thirty (30) days following the later of the determination
of the Minimum Rent pursuant to this Article 19, or Franchisor's election to
render void the extension of the Franchise Agreement pursuant to the Franchise
Agreement, in which event this Agreement shall expire on the last day of the
Fixed Term or the then current Extended Term, as applicable.
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ARTICLE 20
FACILITY MORTGAGES
20.1 Landlord May Grant Liens.
Without the consent of Tenant, Landlord may, subject to the terms and
conditions set forth in this Section 20.1, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance or title
retention agreement ("ENCUMBRANCE") upon any of the Collective Leased
Properties, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Any such Encumbrance
shall include the right to prepay (whether or not subject to a prepayment
penalty) and shall provide (subject to Section 20.2 below) that it is subject
to the rights of Tenant under this Agreement.
20.2 Subordination of Lease.
Subject to Section 20.1, this Agreement, any and all rights of Tenant
hereunder, are and shall be subject and subordinate to any ground or master
lease, and all renewals, extensions, modifications and replacements thereof,
and to all mortgages and deeds of trust, which may now or hereafter affect the
Collective Leased Properties, or any of them, or any improvements thereon
and/or any of such leases, whether or not such mortgages or deeds of trust
shall also cover other lands and/or buildings and/or leases, to each and every
advance made or hereafter to be made under such mortgages and deeds of trust,
and to all renewals, modifications, replacements and extensions of such leases
and such mortgages and deeds of trust and all consolidations of such mortgages
and deeds of trust. This section shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, (i) Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any deed of trust or any of
their respective successors in interest may reasonably request to evidence such
subordination, and (ii) the lessor under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any such deed of trust shall
execute and deliver to Tenant a Non-Disturbance Agreement reasonably
satisfactory to Tenant (taking into account, however, the reasonable
requirements of the lessor or lender, including a lender becoming such in
connection with a non-recourse securitized loan), including provisions with
respect to insurance and casualty matters.
Any lease to which this Agreement is, at the time referred to, subject
and subordinate is herein called "SUPERIOR LEASE" and the lessor of a Superior
Lease or its successor in interest at the time referred to, is herein called
"SUPERIOR LANDLORD" and any mortgage or deed of trust to which this Agreement
is, at the time referred to, subject and subordinate, is herein called
"SUPERIOR MORTGAGE" and the holder, trustee or beneficiary of a Superior
Mortgage is herein called "SUPERIOR MORTGAGEE."
If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Agreement with respect to one or more of the
Collective Leased Properties, whether through possession or foreclosure action
or delivery of a new lease or deed, or otherwise, then at the
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request of such party so succeeding to Landlord's rights (herein called
"SUCCESSOR LANDLORD") and upon such Successor Landlord's written agreement to
accept Tenant's attornment, Tenant shall attorn to and recognize such Successor
Landlord as Tenant's landlord under this Agreement with respect to one or more
of the Collective Leased Properties, and shall promptly execute and deliver any
instrument that such Successor Landlord may reasonably request to evidence such
attornment. Upon such attornment, this Agreement shall continue in full force
and effect as a direct lease between the Successor Landlord and Tenant upon all
of the terms, conditions and covenants as are set forth in this Agreement,
except that the Successor Landlord (unless formerly the landlord under this
Agreement or its nominee or designee) shall not be (a) liable in any way to
Tenant for any act or omission, neglect or default on the part of Landlord
under this Agreement, (b) responsible for any monies owing by or on deposit
with Landlord to the credit of Tenant, (c) subject to any counterclaim or
setoff which theretofore accrued to Tenant against Landlord, (d) bound by any
modification of this Agreement subsequent to such Superior Lease or Mortgage,
or by any previous prepayment of Minimum Rent or Additional Rent for more than
one (1) month, which was not approved in writing by the Superior Landlord or
the Superior Mortgagee thereto, (e) liable to Tenant beyond the Successor
Landlord's interest in the applicable Leased Property and the rents, income,
receipts, revenues, issues and profits issuing from such Leased Property, (f)
responsible for the performance of any work to be done by the Landlord under
this Agreement to render the applicable Leased Property ready for occupancy by
Tenant, or (g) required to remove any Person occupying the applicable Leased
Property or any part thereof, except if such person claims by, through or under
the Successor Landlord. Tenant agrees at any time and from time to time to
execute a suitable instrument in confirmation of Tenant's agreement to attorn,
as aforesaid.
20.3 Notice to Mortgagee and Ground Landlord.
Subsequent to the receipt by Tenant of notice from any Person that it
is a Facility Mortgagee or that it is the ground lessor under a lease with
Landlord, as ground lessee, which includes the applicable Leased Property as
part of the demised premises, no notice from Tenant to Landlord as to the
applicable Leased Property shall be effective unless and until a copy of the
same is given to such Facility Mortgagee or ground lessor, and the curing of
any of Landlord's defaults by such Facility Mortgagee or ground lessor shall be
treated as performance by Landlord.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Conduct of Business.
Tenant shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect and in good standing its corporate
existence and its rights and licenses necessary to conduct such business.
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21.2 Maintenance of Accounts and Records.
Tenant shall keep records and books of account in which full, true and
correct entries in all material respects will be made of dealings and
transactions in relation to the business and affairs of Tenant.
21.3 Payments to Franchisor.
All payments by Tenant of Franchise Fees under the Franchise Agreement
shall be subordinated to payments of Rent (other than Non-Priority Additional
Rent) due to Landlord to the extent and on the terms provided in the Franchise
Subordination Agreement, and Tenant shall not make any payment of the Franchise
Fees, directly or indirectly, or set apart any sum or property therefor, or
agree to do so, other than as permitted in and by the Franchise Subordination
Agreement.
21.4 Management of Collective Leased Properties.
Tenant shall not enter into any Management Agreement unless the terms
thereof have been previously approved in writing by Landlord, which approval
may be given or withheld in Landlord's sole and absolute discretion, except for
Management Agreements between OpCo and a Facility Subsidiary. All management
fees, payments in connection with any extension of credit and fees for services
provided in connection with the operation of the applicable Leased Property,
payable by Tenant or any Affiliated Person as to Tenant shall be subordinated
to all of the obligations of Tenant due under this Agreement pursuant to a
Subordination Agreement. Tenant shall not agree to any change in the Manager
of any of the Collective Leased Properties and/or any Facility, to any change
in any Management Agreement, terminate any Management Agreement or permit any
Manager to assign any Management Agreement without the prior written approval
of Landlord in each instance, which approval may be given or withheld in
Landlord's sole and absolute discretion. Any Management Agreement shall
provide that Landlord shall be provided notice of any defaults thereunder and,
at Landlord's option, an opportunity to cure such defaults and shall otherwise
be in form and substance satisfactory to Landlord in its sole and absolute
discretion. If Landlord shall cure any of Tenant's defaults under any
Management Agreement, the cost of such cure shall be payable upon demand by
Tenant to Landlord with interest accruing from the demand date at the Overdue
Rate and Landlord shall have the same rights and remedies for failure to pay
such costs on demand as for Tenant's failure to pay Minimum Rent. Tenant shall
deliver to Landlord any instrument requested by Landlord to implement the
intent of the foregoing provision.
21.5 Liens and Encumbrances.
Except as permitted by Sections 7.1 and 16.5, Tenant shall not create
or incur or suffer to be created or incurred or to exist any Lien on this
Agreement or Tenant's Personal Property now or at any time hereafter owned,
other than:
(a) Security interests securing the purchase price of equipment or
personal property acquired after the Commencement Date; provided,
however, that (i) such Lien shall at all times be confined solely to
the asset in question; and (ii) the aggregate
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principal amount of Indebtedness secured by any such Lien shall not
exceed the cost of acquisition or construction of the property subject
thereto; and
(b) Permitted Encumbrances.
ARTICEL 22
MISCELLANEOUS
22.1 Limitation on Payment of Rent.
All agreements between Landlord and Tenant herein are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of Rent, or otherwise, shall the Rent or any other amounts payable
to Landlord under this Agreement exceed the maximum permissible under
applicable law, the benefit of which may be asserted by Tenant as a defense,
and if, from any circumstance whatsoever, fulfillment of any provision of this
Agreement, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, or if from any
circumstances Landlord should ever receive as fulfillment of such provision
such an excessive amount, then, ipso facto, the amount which would be excessive
shall be applied to the reduction of the installment(s) of Minimum Rent next
due and not to the payment of such excessive amount. This provision shall
control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
22.2 No Waiver.
No failure by Landlord to insist upon the strict performance of any
term hereof or to exercise any right, power or remedy consequent upon a breach
thereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term. To the maximum extent permitted by law, no waiver of any
breach shall affect or alter this Agreement, which shall continue in full force
and effect with respect to any other then existing or subsequent breach.
22.3 Remedies Cumulative.
To the maximum extent permitted by law, each legal, equitable or
contractual right, power and remedy of Landlord, now or hereafter provided
either in this Agreement or by statute or otherwise, shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy and
the exercise or beginning of the exercise by Landlord of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Landlord of any or all of such other rights, powers and
remedies.
22.4 Severability.
Any clause, sentence, paragraph, section or provision of this
Agreement held by a court of competent jurisdiction to be invalid, illegal or
ineffective shall not impair, invalidate or nullify the remainder of this
Agreement, but rather the effect thereof shall be confined to the clause,
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sentence, paragraph, section or provision so held to be invalid, illegal or
ineffective, and this Agreement shall be construed as if such invalid, illegal
or ineffective provisions had never been contained therein.
22.5 Acceptance of Surrender.
No surrender to Landlord of this Agreement or of any of the Collective
Leased Properties or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Landlord and no
act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
22.6 No Merger of Title.
It is expressly acknowledged and agreed that it is the intent of the
parties that there shall be no merger of this Agreement or of the leasehold
estate created hereby by reason of the fact that the same Person may acquire,
own or hold, directly or indirectly this Agreement or the leasehold estate
created hereby and the fee estate or ground landlord's interest in any of the
Collective Leased Properties.
22.7 Conveyance by Landlord.
If Landlord or any successor owner of all or any portion of any of the
Collective Leased Properties shall convey all or any portion of the Collective
Leased Properties in accordance with the terms hereof other than as security
for a debt, and the grantee or transferee of such of the Collective Leased
Properties shall expressly assume 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, shall thereupon be released from all
future liabilities and obligations of Landlord under this Agreement with
respect to such of the Collective Leased Properties arising or accruing from
and after the date of such conveyance or other transfer and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
22.8 Quiet Enjoyment.
So long as Tenant shall pay the Rent as the same becomes due and shall
comply with all of the terms of this Agreement, Tenant shall peaceably and
quietly have, hold and enjoy the Collective Leased Properties for the Term,
free of hindrance or molestation by Landlord or anyone claiming by, through or
under Landlord, but subject to (a) any Encumbrance permitted under Article 20
or otherwise permitted to be created by Landlord hereunder, (b) all Permitted
Encumbrances, (c) liens as to obligations of Landlord that are either not yet
due or which are being contested in good faith and by proper proceedings, and
(d) liens that have been consented to in writing by Tenant. Except as
otherwise provided in this Agreement, no failure by Landlord to comply with the
foregoing covenant shall give Tenant any right to cancel or terminate this
Agreement or abate, reduce or make a deduction from or offset against the Rent
or any other sum payable under this Agreement, or to fail to perform any other
obligation of Tenant hereunder.
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22.9 Landlord's Consent.
Where provision is made in this Agreement for Landlord's consent and
Landlord shall fail or refuse to give such consent, Tenant shall not be
entitled to any damages for any withholding by Landlord of its consent, it
being intended that Tenant's sole remedy shall be an action for specific
performance or injunction, and that such remedy shall be available only in
those cases where Landlord has expressly agreed in writing not unreasonably to
withhold its consent.
22.10 Memorandum of Lease.
Neither Landlord nor Tenant shall record this Agreement. However,
Landlord and Tenant shall promptly, upon the request of the other, enter into a
short form memorandum of this Agreement, in form suitable for recording under
the laws of the State in which reference to this Agreement, and all options
contained herein, shall be made. Tenant shall pay all costs and expenses of
recording such memorandum.
22.11 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same
shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the
notice, postpaid and registered or certified with return receipt
requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the
date of acknowledged receipt, in the case of a notice by telecopier,
and, in all other cases, upon the date of receipt or refusal, except
that whenever under this Agreement a notice is either received on a
day which is not a Business Day or is required to be delivered on or
before a specific day which is not a Business Day, the day of receipt
or required delivery shall automatically be extended to the next
Business Day.
(c) All such notices shall be addressed:
if to Landlord to:
Gerald W. Haddock, Esq.
Chief Executive Officer and President
CRE Management VII Corp.
777 Main Street
Suite 2100
Forth Worth, Texas 76102
Facsimile: (817) 878-0429
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<PAGE> 68
with copies to:
David M. Dean, Esq.
Senior Vice President, Law
CRE Management VII Corp.
777 Main Street
Suite 2100
Forth Worth, Texas 76102
Facsimile: (817) 878-0429
and
Wendelin A. White, Esq.
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, DC 20037
Facsimile: (202) 663-8007
If to Tenant to:
Steve J. Davis, Esq.
Executive Vice President,
Administrative Services and General Counsel
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Facsimile: (404) 814-5793
with a copy to:
Robert W. Miller, Esq.
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Facsimile: (404) 572-5100
(d) By notice given as herein provided, the parties hereto and
their respective successor and assigns shall have the right from time
to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address
any other address within the United States of America.
22.12 Construction.
Anything contained in this Agreement to the contrary notwithstanding,
all claims against, and liabilities of, Tenant or Landlord arising prior to any
date of termination or expiration of this
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Agreement with respect to any of the Collective Leased Properties shall survive
such termination or expiration. In no event shall Landlord be liable for any
consequential damages suffered by Tenant as the result of a breach of this
Agreement by Landlord. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated except by an instrument in writing
signed by the party to be charged. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Each term or provision of this
Agreement to be performed by Tenant shall be construed as an independent
covenant and condition. Time is of the essence with respect to the exercise of
any rights of Tenant under this Agreement. Except as otherwise set forth in
this Agreement, any obligations of Tenant and Landlord (including without
limitation, any monetary, repair and indemnification obligations) shall survive
the expiration or sooner termination of this Agreement.
22.13 Counterparts; Headings.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but which, when taken together, shall
constitute but one instrument and shall become effective as of the date hereof
when copies hereof, which, when taken together, bear the signatures of each of
the parties hereto shall have been signed. Headings in this Agreement are for
purposes of reference only and shall not limit or affect the meaning of the
provisions hereof.
22.14 Applicable Law, Etc.
This Agreement shall be interpreted, construed, applied and enforced
in accordance with the laws of the State of Delaware applicable to contracts
between residents of Delaware which are to be performed entirely within
Delaware, regardless of (i) where this Agreement is executed or delivered; or
(ii) where any payment or other performance required by this Agreement is made
or required to be made; or (iii) where any breach of any provision of this
Agreement occurs, or any cause of action otherwise accrues; or (iv) where any
action or other proceeding is instituted or pending; or (v) the nationality,
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State of Delaware; or (vii) any combination of the foregoing.
Notwithstanding the foregoing, the laws of the State shall apply to the
perfection and priority of liens upon and the disposition of and disposition
with respect to any of the Collective Leased Properties.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of Delaware as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of Delaware and to
service of process by registered mail, return receipt requested, or by any
other manner provided by law.
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22.15 Substitution of Leased Properties.
Provided no Default or Event of Default has occurred and is continuing
at the time of exercise of the right provided for in this Section 22.15, Tenant
shall have the right, from time to time, to substitute for a Designated Leased
Property another parcel of improved real property meeting criteria hereinafter
set forth and otherwise acceptable to Landlord (the "SUBSTITUTE LEASED
PROPERTY"). If Tenant makes such election, Tenant shall give Notice to
Landlord of Tenant's intention proposing a substitution closing date (the
"SUBSTITUTION DATE") not less than sixty (60) days or more than one-hundred
twenty (120) days from the date of such Notice and offering to Landlord a
proposed Substitute Leased Property meeting the following criteria: the
Substitute Leased Property shall be improved with a Comparable Facility; shall
have a total value equal to or greater than the total value of the Designated
Leased Property to Landlord (each as reasonably determined by Landlord); shall
be freely transferable to Landlord unencumbered by any existing lease,
mortgage, or other encumbrance; and shall be subject to no other exceptions to
title except those approved by Landlord, which approval shall not be
unreasonably withheld. Tenant shall convey the Substitute Leased Property to
Landlord in exchange for the Designated Leased Property, Landlord shall
simultaneously exchange the Designated Leased Property, for the Substitute
Leased Property, and the parties shall simultaneously execute and deliver an
amendment to this Lease. The Landlord shall have thirty (30) days following
receipt of such Notice within which to accept or reject such offer; provided,
however, that Landlord shall have at least ten (10) days following receipt of
any appraisal of the Substitute Leased Property or the Designated Leased
Property (or both) requested by Landlord within which to accept or reject such
offer. If Landlord accepts the proposed Substitute Leased Property, the
substitution shall proceed in a manner (a) intended to qualify such
substitution as a "like-kind" exchange within the meaning of Section 1031 of
the Internal Revenue Code of 1986, as amended (the "CODE") with respect to
Landlord, and (b) which will satisfy Landlord's requirements related to
taxation as a real estate investment trust. Landlord may demand, at Tenant's
expense, a reasonably acceptable opinion of counsel or private letter ruling
from the Internal Revenue Service indicating that the substitution will have no
material adverse tax consequences to Landlord. After closing, the Substitute
Leased Property shall be deemed a Leased Property for all purposes.
Substitution hereunder and the closing shall be made on the following terms and
shall be subject to the following conditions:
(a) on the Substitution Date, Tenant shall execute, acknowledge and
deliver to Landlord a warranty deed in the customary form for the
relevant jurisdiction conveying to Landlord, free and clear of any
title exceptions except those approved by Landlord as set forth above,
title to the Substitute Leased Property, and Landlord shall
simultaneously execute, acknowledge and deliver to Tenant a warranty
deed conveying to Tenant, free and clear of title exceptions, except
Permitted Encumbrances and those approved by Tenant (based on the same
criteria for approval as for Landlord), title to the Designated Leased
Property; provided, however, that in no event shall Landlord have any
obligation to cure or remove title exceptions affecting the Designated
Leased Property, Tenant's only recourse being to designate an
alternative Designated Leased Property for substitution or to rescind
its Notice of election to substitute a Substitute Leased Property.
(b) on or prior to the Substitution Date, Landlord and Tenant shall
have executed, acknowledged and delivered an amendment to this Lease
(the "AMENDMENT TO LEASE") (the Lease, as amended, herein referred to
as the "AMENDED LEASE") which shall provide
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for the deletion of the legal description of the Designated Leased
Property and the substitution of the legal description of the
Substitute Leased Property therefor.
(c) Tenant shall have provided Landlord, at Tenant's sole cost,
with a title insurance policy satisfactory in form and substance to
Landlord, effective on the date of exchange, covering the Substitute
Leased Property and containing no exceptions to title to the
Substitute Leased Property other than encumbrances approved by
Landlord as provided herein, and having such affirmative insurance and
endorsements as may be required by Landlord.
(d) Tenant shall have provided Landlord with representations and
warranties with respect to the Substitute Leased Property reasonably
satisfactory to Landlord (unless otherwise reasonably required,
generally similar to the representations and warranties contained in
Section 6.1 of that certain Real Estate Purchase and Sale Agreement
dated as of January 29, 1997, as amended through the date hereof by
and between Magellan Health Services, Inc., as seller, and Crescent
Real Estate Equities Limited Partnership, predecessor in interest of
Landlord, as purchaser (the "PURCHASE AGREEMENT")), such
representations and warranties shall survive the closing and Landlord
shall have the same remedies for breach thereof as are provided for in
the Purchase Agreement.
(e) Tenant shall provide Landlord with documentation satisfactory
to Landlord confirming that Tenant has the right to operate the
Substitute Leased Property in accordance with the Primary Intended Use
and under and pursuant to the Franchise Agreement.
(f) Tenant shall reimburse Landlord, as Additional Charges, for any
and all costs and expenses incurred by Landlord, including Landlord's
reasonable attorneys' fees, in effecting the substitution proposed
(whether or not closing occurs).
Landlord and Tenant hereby covenant that once the Notice of intent to
substitute a Substitute Leased Property for the Designated Leased Property
described therein has been delivered and Landlord accepts the Substitute Leased
Property identified therein, each party will promptly perform all acts and
deliver all documents required on its part to be delivered or to satisfy the
conditions of closing set forth herein. In the event that the Substitute
Leased Property has not been exchanged for the Designated Leased Property
within thirty (30) days after the Substitution Date specified in Tenant's
Notice of its intention to substitute by reason of the acts or omissions of one
party, then the other party shall have the right to elect not to proceed with
the substitution.
Tenant covenants that, following the closing of the exchange of the
Substitute Leased Property, neither it nor any of its Affiliated Persons will
use the Designated Leased Property as a facility having as its primary use the
Primary Intended Use for at least one year after the Substitution Date.
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22.16 No Broker.
Each party hereby represents and warrants to the other that it has not
engaged, dealt with or otherwise discussed this transaction with any broker,
agent or finder. Each party agrees to indemnify and hold the other harmless
from and against any claim arising out of a breach of the foregoing agreement
and representation and warranty.
22.17 Confidentiality.
Landlord shall maintain the confidentiality of information provided by
Tenant pursuant to Sections 17.2 and 17.3 hereof or otherwise under this
Agreement. Landlord may, however, disclose such information to its attorneys,
consultants, partners, directors, officers and employees, and lenders and
purchasers (actual and potential). As a condition of such disclosure to any
lender or purchaser (actual or potential), such lender or purchaser shall be
obligated to execute a Confidentiality Agreement reasonably satisfactory to
Tenant. The provisions of this Section 22.18 shall not be applicable to
disclosure of information required by applicable law, rule or regulation or the
order of any court.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
CRESCENT REAL ESTATE FUNDING VII, L.P.
Attest: By: CRE Management VII Corp.
/s/ Sylvia M. Mahaffey By: /s/David M. Dean
Name: Sylvia M. Mahaffey David M. Dean
Title: Assistant Secretary Senior Vice President, Law
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TENANT:
Attest: CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
/s/ Jay P. Moran By: /s/ Mark Ford
Name: Jay P. Moran Name: Mark Ford
Title: Title: Secretary
Attest: FACILITY SUBSIDIARIES
/s/ Jay P. Moran By: /s/ John R. Hamilton III
Name: Jay P. Moran John R. Hamilton III
Title: Executive Vice President of each
of the Limited Liability Companies
and of each Sole General Partner
of each of the Limited Partnerships
listed on Exhibit B attached
hereto, on behalf of each of the
said Limited Liability Companies
and Limited Partnerships
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EXHIBIT A
The Land
[Exhibit omitted]
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EXHIBIT B
Facility Subsidiaries
[Exhibit omitted]
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EXHIBIT 10.28
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED JUNE 6, 1997
among
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
and
BANKBOSTON, N.A.,
THE OTHER BANKS WHICH ARE A
PARTY TO THIS AGREEMENT
and
OTHER BANKS WHICH MAY BECOME
PARTIES TO THIS AGREEMENT
and
BANKBOSTON, N.A., AS AGENT
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SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION......................... -1-
Section 1.1. Definitions................................................ -1-
Section 1.2. Rules of Interpretation....................................-16-
SECTION 2. THE REVOLVING CREDIT FACILITY...................................-17-
Section 2.1. Commitment to Lend.........................................-17-
Section 2.2. Facility Fee...............................................-17-
Section 2.3. Reduction of Commitment....................................-17-
Section 2.4. Notes......................................................-18-
Section 2.5. Interest on Loans..........................................-18-
Section 2.6. Requests for Loans.........................................-18-
Section 2.7. Funds for Loans............................................-19-
Section 2.8. Intentionally Omitted......................................-20-
Section 2.9. Use of Proceeds............................................-20-
SECTION 3. REPAYMENT OF THE LOANS..........................................-21-
Section 3.1. Stated Maturity............................................-21-
Section 3.2. Mandatory Prepayments......................................-21-
Section 3.3. Optional Prepayments.......................................-21-
Section 3.4. Partial Prepayments........................................-22-
Section 3.5. Effect of Prepayments......................................-22-
Section 3.6. Proceeds from Debt or Equity Offering......................-22-
SECTION 4. CERTAIN GENERAL PROVISIONS......................................-22-
Section 4.1. Conversion Options.........................................-22-
Section 4.2. Closing Fee................................................-23-
Section 4.3. Agent's Fee................................................-23-
Section 4.4. Funds for Payments.........................................-23-
Section 4.5. Computations...............................................-24-
Section 4.6. Inability to Determine Eurodollar Rate.....................-24-
Section 4.7. Illegality.................................................-24-
Section 4.8. Additional Interest........................................-25-
Section 4.9. Additional Costs, Etc......................................-25-
Section 4.10. Capital Adequacy..........................................-26-
Section 4.11. Indemnity of Borrower.....................................-27-
Section 4.12. Interest on Overdue Amounts; Late Charge..................-27-
Section 4.13. Certificate...............................................-27-
Section 4.14. Limitation on Interest....................................-27-
SECTION 5. COLLATERAL SECURITY AND GUARANTY................................-28-
Section 5.1. Security...................................................-28-
Section 5.2. Intentionally Omitted......................................-28-
SECTION 6. REPRESENTATIONS AND WARRANTIES..................................-28-
Section 6.1. Corporate Authority, Etc...................................-28-
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Section 6.2. Governmental Approvals.....................................-29-
Section 6.3. Title to Properties; Leases................................-29-
Section 6.4. Financial Statements.......................................-30-
Section 6.5. No Material Changes........................................-30-
Section 6.6. Franchises, Patents, Copyrights, Etc.......................-30-
Section 6.7. Litigation.................................................-30-
Section 6.8. No Materially Adverse Contracts, Etc.......................-31-
Section 6.9. Compliance with Other Instruments, Laws, Etc...............-31-
Section 6.10. Tax Status................................................-31-
Section 6.11. No Event of Default.......................................-31-
Section 6.12. Holding Company and Investment Company Acts...............-32-
Section 6.13. Absence of UCC Financing Statements, Etc..................-32-
Section 6.14. Certain Transactions......................................-32-
Section 6.15. Employee Benefit Plans....................................-32-
Section 6.16. Regulations U and X.......................................-33-
Section 6.17. Environmental Compliance..................................-33-
Section 6.18. Subsidiaries..............................................-35-
Section 6.19. Loan Documents............................................-35-
Section 6.20. Property..................................................-35-
Section 6.21. Brokers...................................................-35-
Section 6.22. Partners and the Guarantor................................-35-
Section 6.23. Solvency..................................................-36-
Section 6.24. Other Debt................................................-36-
Section 6.25. Magellan Transaction......................................-36-
SECTION 7. AFFIRMATIVE COVENANTS OF THE BORROWER...........................-36-
Section 7.1. Punctual Payment...........................................-36-
Section 7.2. Maintenance of Office......................................-36-
Section 7.3. Records and Accounts.......................................-37-
Section 7.4. Financial Statements, Certificates and Information.........-37-
Section 7.5. Notices....................................................-39-
Section 7.6. Existence; Maintenance of Properties.......................-40-
Section 7.7. Insurance..................................................-41-
Section 7.8. Taxes......................................................-41-
Section 7.9. Inspection of Properties and Books.........................-41-
Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits....-42-
Section 7.11. Further Assurances........................................-42-
Section 7.12. Ownership of Real Estate..................................-42-
Section 7.13. Investment Advisor........................................-42-
Section 7.14. Non-Competition Agreements................................-42-
Section 7.15. Business Operations.......................................-42-
Section 7.16. Intentionally Omitted.....................................-42-
Section 7.17. Limiting Agreements.......................................-42-
Section 7.18. More Restrictive Agreements...............................-43-
Section 7.19. Applicability of Covenants to Residential Corporations....-43-
Section 7.20. Distributions of Income to the Borrower...................-43-
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SECTION 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER......................-43-
Section 8.1. Restrictions on Indebtedness...............................-43-
Section 8.2. Restrictions on Liens, Etc. ...............................-45-
Section 8.3. Restrictions on Investments................................-46-
Section 8.4. Merger, Consolidation......................................-48-
Section 8.5. Sale and Leaseback.........................................-48-
Section 8.6. Compliance with Environmental Laws.........................-48-
Section 8.7. Distributions..............................................-49-
Section 8.8. Asset Sales................................................-50-
Section 8.9. Development Activity.......................................-50-
Section 8.10. Investment Opportunities..................................-51-
Section 8.11. Refinancing of Assets.....................................-51-
Section 8.12. Variable Rate Debt........................................-51-
Section 8.13. Restriction on Prepayment of Indebtedness.................-51-
SECTION 9. FINANCIAL COVENANTS OF THE BORROWER.............................-51-
Section 9.1. Liabilities to Worth Ratio.................................-51-
Section 9.2. Debt Service Coverage. ....................................-51-
Section 9.3. Intentionally Omitted......................................-51-
Section 9.4. Tangible Net Worth.........................................-51-
Section 9.5. Secured Debt to Assets Ratio...............................-51-
Section 9.6. Fixed Charge Coverage......................................-51-
Section 9.7. Total Liabilities..........................................-51-
Section 9.8. Real Estate Assets.........................................-52-
Section 9.9. Value Adjustment...........................................-52-
Section 9.10. CBHS......................................................-52-
Section 9.11. Unencumbered Operating Properties.........................-52-
SECTION 10. CLOSING CONDITIONS.............................................-53-
Section 10.1. Loan Documents............................................-53-
Section 10.2. Certified Copies of Organizational Documents..............-53-
Section 10.3. Bylaws; Resolutions.......................................-53-
Section 10.4. Incumbency Certificate; Authorized Signers................-53-
Section 10.5. Opinion of Counsel........................................-53-
Section 10.6. Payment of Fees...........................................-54-
Section 10.7. Performance; No Default...................................-54-
Section 10.8. Representations and Warranties............................-54-
Section 10.9. Proceedings and Documents.................................-54-
Section 10.10. Intentionally Omitted....................................-54-
Section 10.11. Compliance Certificate...................................-54-
Section 10.12. Real Estate Spreadsheet..................................-54-
Section 10.13. Other....................................................-55-
SECTION 11. CONDITIONS TO ALL BORROWINGS...................................-55-
Section 11.1. Prior Conditions Satisfied................................-55-
Section 11.2. Representations True; No Default..........................-55-
Section 11.3. No Legal Impediment.......................................-55-
Section 11.4. Governmental Regulation...................................-55-
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Section 11.5. Proceedings and Documents.................................-55-
Section 11.6. Borrowing Documents.......................................-55-
SECTION 12. EVENTS OF DEFAULT; ACCELERATION; ETC...........................-56-
Section 12.1. Events of Default and Acceleration........................-56-
Section 12.2. Limitation of Cure Periods................................-59-
Section 12.3. Termination of Commitments................................-60-
Section 12.4. Remedies..................................................-60-
Section 12.5. Distribution of Proceeds..................................-60-
SECTION 13. SETOFF.........................................................-61-
SECTION 14. THE AGENT......................................................-62-
Section 14.1. Authorization.............................................-62-
Section 14.2. Employees and Agents......................................-62-
Section 14.3. No Liability..............................................-62-
Section 14.4. No Representations........................................-62-
Section 14.5. Payments..................................................-63-
Section 14.6. Holders of Notes..........................................-64-
Section 14.7. Indemnity.................................................-64-
Section 14.8. Agent as Bank.............................................-64-
Section 14.9. Resignation...............................................-64-
Section 14.10. Duties in the Case of Enforcement........................-65-
SECTION 15. EXPENSES.......................................................-65-
SECTION 16. INDEMNIFICATION................................................-66-
SECTION 17. SURVIVAL OF COVENANTS, ETC. ...................................-67-
SECTION 18. ASSIGNMENT AND PARTICIPATION...................................-67-
Section 18.1. Conditions to Assignment by Banks.........................-67-
Section 18.2. Register..................................................-69-
Section 18.3. New Notes.................................................-69-
Section 18.4. Participations............................................-69-
Section 18.5. Pledge by Bank............................................-69-
Section 18.6. No Assignment by Borrower.................................-70-
Section 18.7. Disclosure................................................-70-
SECTION 19. NOTICES........................................................-70-
SECTION 20. RELATIONSHIP...................................................-71-
SECTION 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.............-71-
SECTION 22. HEADINGS.......................................................-72-
SECTION 23. COUNTERPARTS...................................................-72-
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SECTION 24. ENTIRE AGREEMENT, ETC..........................................-72-
SECTION 25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.................-72-
SECTION 26. DEALINGS WITH THE BORROWER.....................................-73-
SECTION 27. CONSENTS, AMENDMENTS, WAIVERS, ETC.............................-73-
SECTION 28. SEVERABILITY...................................................-73-
SECTION 29. NO UNWRITTEN AGREEMENTS........................................-74-
SECTION 30. TIME OF THE ESSENCE............................................-74-
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LIST OF EXHIBITS:
A FORM OF NOTE
B FORM OF LOAN REQUEST
C FORM OF COMPLIANCE CERTIFICATE
LIST OF SCHEDULES:
Schedule 1 Banks and Commitments
Schedule 6.3 Title to Properties
Schedule 6.7 Litigation
Schedule 6.18 Subsidiaries of Borrower
Schedule 8.1(h) Existing Indebtedness
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SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made the
6th day of June, 1997, by and among CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP (the "Borrower"), a Delaware limited partnership having its
principal place of business at 777 Main Street, Suite 2100, Fort Worth, Texas
76102, and BANKBOSTON, N.A., a national banking association, formerly known as
The First National Bank of Boston, the other Banks which are a party hereto,
and the other lending institutions which may become parties hereto pursuant to
Section 18 (the "Banks"), and BANKBOSTON, N.A., a national banking association,
formerly known as The First National Bank of Boston, as Administrative and
Syndication Agent for the Banks (the "Agent"), and BANKERS TRUST COMPANY, as
Documentation Agent for the Banks, and NATIONSBANK OF TEXAS, N.A., as
Documentation Agent for the Banks.
RECITALS.
WHEREAS, Borrower, BankBoston and Agent have entered into that certain
Revolving Credit Agreement dated June 18, 1996 (the "Original Credit
Agreement"), as amended and restated pursuant to that certain First Amended and
Restated Revolving Credit Agreement among Borrower, BankBoston and certain
other Banks and Agent dated August 14, 1996 (the "Amended Credit Agreement");
and
WHEREAS, Borrower has requested that BankBoston increase the Total
Commitment and that certain additional lending institutions be included as
Banks; and
WHEREAS, the Borrower, the Banks and the Agent desire to amend and
restate the Amended Credit Agreement in its entirety;
NOW, THEREFORE, in consideration of the recitals herein and the mutual
covenants contained herein, the parties hereto hereby amend and restate the
Amended Credit Agreement in its entirety as follows:
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1. Definitions. The following terms shall have the meanings
set forth in this Section l or elsewhere in the provisions of this Agreement
referred to below:
Agent. BankBoston, N.A., acting as agent for the Banks, its successors
and assigns.
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Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time by notice to the Borrower and the Banks.
Agent's Special Counsel. Long Aldridge Norman LLP or such other
counsel as may be approved by the Agent.
Agreement. This Second Amended and Restated Revolving Credit
Agreement, including the Schedules and Exhibits hereto.
Applicable Margin. On any date that (a) the lower of the Implied Ratings
issued from time to time by either of the Rating Agencies for the Borrower is
an Investment Grade Rating or (b) the Borrower has a Private Letter Rating, the
Applicable Margin for Eurodollar Rate Loans shall be one and one-fifth percent
(1.20%). In the event that the Borrower has a Private Letter Rating, or in the
event that the indebtedness with respect to which a Private Letter Rating was
obtained is satisfied, or in the event that either of the Rating Agencies
issues an Implied Rating for the Borrower that is an Investment Grade Rating,
or in the event of any change in an Implied Rating of the Borrower by either of
the Rating Agencies, or if the Borrower's Implied Rating, after having obtained
an Investment Grade Rating, shall cease at any time to be an Investment Grade
Rating by either of the Rating Agencies (but subject to the provisions within
the definition of the term "Investment Grade Rating"), such change shall effect
a change in the Applicable Margin on the first Business Day after the Rating
Notice Date. On any date that the lower of the Implied Ratings for the Borrower
is not an Investment Grade Rating, or the Borrower has not obtained an
Investment Grade Rating from either of the Rating Agencies, or the Borrower
does not have a Private Letter Rating, the Applicable Margin for Eurodollar
Rate Loans shall be one and three-eighths percent (1.375%). It is the intention
of the parties that if the Borrower shall only obtain an Investment Grade
Rating from one of the Rating Agencies without seeking an Investment Grade
Rating from the other of the Rating Agencies or a Private Letter Rating, or if
the Borrower shall obtain a Private Letter Rating without seeking an Investment
Grade Rating from either of the Rating Agencies, the Borrower shall be entitled
to the benefit of the rate reductions described above; provided that if the
Borrower shall have obtained an Investment Grade Rating from both of the Rating
Agencies, the lower of the two ratings (or the loss of the Investment Grade
Rating from one of the Rating Agencies thereafter) shall control, or in the
event that the Borrower has a Private Letter Rating and shall have obtained an
Investment Grade Rating from either or both of the Rating Agencies, the lowest
of the Implied Ratings (or the loss of the Investment Grade Rating from any of
the Rating Agencies thereafter) shall control.
Asset Value. The purchase price of Real Estate (including improvements and
related fixtures, personal property and intangibles) and ordinary related
purchase transaction costs without deduction for depreciation, or if the Real
Estate has been developed by such Person, the completed construction costs
determined in accordance with generally accepted accounting principles without
deduction for depreciation. If the Real Estate is purchased as a part of a
group
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of properties, the Asset Value shall be calculated based upon a reasonable
allocation by the Borrower of the aggregate purchase price among all Real
Estate purchased in such transaction.
Balance Sheet Date. December 31, 1996 (as adjusted for purchases
subsequent to such date and prior to the date hereof).
BankBoston. BankBoston, N.A., a national banking association, formerly
known as The First National Bank of Boston.
Banks. BankBoston, the other Banks that are a party to this Agreement and
any other Person who becomes an assignee of any rights of a Bank pursuant to
Section 18.
Base Rate. The greater of (a) the annual rate of interest announced from
time to time by BankBoston at its head office in Boston, Massachusetts as its
"base rate" or (b) one-half of one percent (0.5%) above the Federal Funds
Effective Rate (rounded upwards, if necessary, to the next one-eighth of one
percent). Any change in the rate of interest payable hereunder resulting from a
change in the Base Rate shall become effective as of the opening of business on
the day on which such change in the Base Rate becomes effective.
Base Rate Loans. Those Loans bearing interest calculated by reference to
the Base Rate.
Behavioral Healthcare Facilities. The "Collective Leased Properties", as
such term is defined in the Master Lease Agreement.
Borrower. As defined in the preamble hereto.
Business Day. Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, which also is a Eurodollar Business Day.
Capitalized Lease. A lease under which a Person is the lessee or obligor,
the discounted future rental payment obligations under which are required to be
capitalized on the balance sheet of the lessee or obligor in accordance with
generally accepted accounting principles; provided that if the total of such
future rental payment obligations is less than $250,000.00, then such lease
shall be treated as an expense of such Person and not as a Capitalized Lease.
Cash. At any time, the sum of the Borrower's cash, marketable securities
and other cash equivalents, including restricted cash.
CBHS. Charter Behavioral Health Systems, LLC, a Delaware limited liability
company.
CERCLA. See Section 6.17.
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Closing Date. The first date on which all of the conditions set forth in
Section 10 and Section 11 have been satisfied.
Code. The Internal Revenue Code of 1986, as amended.
Commitment. With respect to each Bank, the amount set forth on Schedule 1
hereto as the amount of such Bank's Commitment to make or maintain Loans to the
Borrower, as the same may be reduced from time to time in accordance with the
terms of this Agreement.
Commitment Percentage. With respect to each Bank, the percentage set forth
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
all of the Banks.
Compliance Certificate. See Section 7.4(d).
Consolidated or combined. With reference to any term defined herein, that
term as applied to the accounts of a Person and its Subsidiaries, consolidated
or combined in accordance with generally accepted accounting principles.
Consolidated Cash Flow. With respect to any period of the Borrower or
CBHS, as applicable, an amount equal to the sum of the following amounts of the
Borrower and its Subsidiaries or CBHS, as applicable: (a) the Net Income of
such Person for such period plus (b) depreciation and amortization, interest
expense, and any extraordinary or non-recurring losses deducted in calculating
such Net Income minus (c) any extraordinary or nonrecurring gains included in
calculating such Net Income, all as determined in accordance with generally
accepted accounting principles.
Consolidated Tangible Net Worth. The amount by which Consolidated Total
Assets exceeds Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of a Person and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as goodwill, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and rights with respect to the foregoing; plus
(b) all amounts representing any write-up in the book value of any
assets of such Person or its Subsidiaries resulting from a revaluation
thereof subsequent to the Balance Sheet Date.
Consolidated Total Assets. All assets of a Person and its Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles. All real estate assets shall be valued on an
undepreciated cost basis, except as otherwise shown on the financial statements
provided pursuant to Section 6.4 or as adjusted pursuant to Section 9.9. The
assets of the Borrower
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and its Subsidiaries on the consolidated financial statements of the Borrower
and its Subsidiaries shall be adjusted to reflect the Borrower's allocable
share of such asset, for the relevant period or as of the date of
determination, taking into account (a) the relative proportion of each such
item derived from assets directly owned by the Borrower and from assets owned
by the respective Subsidiaries, and (b) the Borrower's respective ownership
interest in its Subsidiaries.
Consolidated Total Liabilities. All liabilities of a Person and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and all Indebtedness of such Person and its
Subsidiaries, whether or not so classified. In the event that Borrower has an
ownership or other equity interest in any Person, which investment is not
consolidated in accordance with generally accepted accounting principles (that
is, such interest is a "minority interest"), then the liabilities of Borrower
and its Subsidiaries shall include Borrower's or its Subsidiaries' allocable
share of all indebtedness of such Person based on the Borrower's or its
Subsidiaries' respective ownership interest in such Person.
Conversion Request. A notice given by the Borrower to the Agent of its
election to convert or continue a Loan in accordance with Section 4.1.
Debt Offering. The issuance and sale to the general public or as a private
placement by the Borrower or the Guarantor subsequent to the date of this
Agreement of any debt securities of the Borrower or Guarantor for cash or the
right to receive payment in the future.
Debt Service. For any period, the sum of all interest (including
capitalized interest) and mandatory principal payments due and payable during
such period excluding any balloon payments due upon maturity of any
indebtedness.
Default. See Section 12.1.
Distribution. With respect to Guarantor, the declaration or payment of any
dividend or distribution on or in respect of any shares of any class of capital
stock or beneficial interest of Guarantor, other than dividends or
distributions payable solely in equity securities of Guarantor; the purchase,
redemption, exchange or other retirement of any shares of any class of capital
stock or beneficial interest of Guarantor, directly or indirectly through a
Subsidiary of Guarantor or otherwise; the return of capital by Guarantor to its
shareholders as such; or any other distribution on or in respect of any shares
of any class of capital stock or beneficial interest of Guarantor. With respect
to the Borrower, the declaration or payment of any distribution of cash or cash
flow to the partners of the Borrower; the return of capital by the Borrower to
its partners; or any other distribution on or in respect of any partnership
interests in the Borrower. A Distribution shall not include the distribution of
shares in Crescent Operating, Inc. to the shareholders of Guarantor in
connection with the initial creation of Crescent Operating, Inc. as
contemplated in Crescent Operating, Inc.'s S-1 statement filed April 15, 1997.
Dollars or $. Dollars in lawful currency of the United States of America.
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Domestic Lending Office. Initially, the office of each Bank designated as
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
located within the United States that will be making or maintaining Base Rate
Loans.
Drawdown Date. The date on which any Loan is made or is to be made, and
the date on which any Loan which is made prior to the Maturity Date is
converted or combined in accordance with Section 4.1.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws. See Section 6.17(a).
Equity Offering. The issuance and sale to the general public or as a
private placement by the Borrower or Guarantor subsequent to the date of this
Agreement of any partnership interests or equity securities of the Borrower or
Guarantor, as applicable, for cash or the right to receive payment in the
future (it being acknowledged that an Equity Offering shall not include (a) the
issuance of limited partnership interests in the Borrower other than for cash
to a seller or partner thereof in connection with the acquisition of Real
Estate or the conversion thereof into equity securities of Guarantor, or (b)
the exercise or conversion of options to acquire equity securities of Guarantor
or the Borrower or the issuance of restricted stock under incentive
compensation plans maintained by Borrower or Guarantor for itself or its
Subsidiaries, directors, officers and employees).
ERISA. The Employee Retirement Income Security Act of 1974, as amended and
in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with the
Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D or any successor or similar
regulation), if such liabilities were outstanding. The Eurocurrency Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in the Eurocurrency Reserve Rate.
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Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or
such other eurodollar interbank market as may be selected by the Agent and the
Banks in their sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank designated
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate
Loan, the rate per annum equal to the quotient (rounded upwards to the nearest
1/16 of one percent) of (a) the rate at which the Reference Bank's Eurodollar
Lending Office is offered Dollar deposits two Eurodollar Business Days prior to
the beginning of such Interest Period in whatever interbank eurodollar market
may be selected by the Reference Bank in its sole discretion, acting in good
faith, for delivery on the first day of such Interest Period for the number of
days comprised therein and in an amount comparable to the amount of the
Eurodollar Rate Loan to which such Interest Period applies, divided by (b) a
number equal to 1.00 minus the Eurocurrency Reserve Rate.
Eurodollar Rate Loans. Loans bearing interest calculated by reference to a
Eurodollar Rate.
Event of Default. See Section 12.1.
Existing Fixed Rate Indebtedness. Collectively, (i) the long term fixed
rate debt provided to Crescent Real Estate Funding I, L.P. ("Funding I") by
Nomura Asset Capital Corporation ("Nomura") in the principal face amount of
$239,000,000 which matures on August 11, 2027, as evidenced by that certain
Promissory Note dated August 24, 1995 made by Funding I to the order of Nomura
in the principal face amount of $239,000,000 which has been assigned to LaSalle
National Bank, as Trustee under that certain Pooling and Servicing Agreement
dated October 1, 1995; (ii) the long term fixed rate debt provided to Crescent
Real Estate Funding II, L.P. ("Funding II") by Nomura in the original principal
face amount of $161,000,000, which matures on March 11, 2028, as evidenced by
that certain Promissory Note dated August 24, 1995, made by Funding II to the
order of Nomura in the principal face amount of $161,000,000, which has been
assigned to LaSalle National Bank, as Trustee under that certain Pooling and
Servicing Agreement dated April 1, 1996; (iii) the long term fixed rate debt
provided to Borrower in the principal face amount of $63,500,000 which matures
on December 31, 2002, as evidenced by that certain Note dated December 11, 1995
made by Borrower to the order of Connecticut General Life Insurance Company in
the principal face amount of $63,500,000; (iv) the long term fixed rate debt
provided to The Woodlands Corporation ("Woodlands") in the principal face
amount of $13,000,000, which matures on September 1, 2001, as evidenced by that
certain Promissory Note dated August 10, 1994, made by Woodlands to the order
of Hartford Life Insurance Company; (v) the long term fixed rate debt provided
to 301 Congress Avenue, L.P. ("301 Congress") by Northwestern Mutual Life
Insurance Company ("Northwestern") in the
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<PAGE> 14
original principal face amount of $26,000,000, which matures on January 1,
2004, as evidenced by that certain Promissory Note dated December 26, 1996 made
by 301 Congress to the order of Northwestern in the principal face amount of
$26,000,000; (vi) the debt maturing on July 1, 1999, in the original face
amount of $115,000,000, assumed by Crescent Real Estate Funding III, L.P.
("Funding III"), Crescent Real Estate Funding IV, L.P. ("Funding IV"), and
Crescent Real Estate Funding V, L.P. ("Funding V") pursuant to an Assumption
Agreement dated October 7, 1996, as evidenced by that certain Promissory Note
Secured by Deed of Trust dated June 30, 1994 made by Greenway Plaza, Ltd. and
Nine Greenway, Ltd. to the order of Nomura in the principal face amount of
$115,000,000, which has been assigned to LaSalle National Bank, as Trustee
under that certain Pooling and Servicing Agreement dated as of August 1, 1994;
and (vii) the debt maturing on July 1, 2020, in the original face amount of
$8,900,000.00, assumed by Crescent Real Estate Funding VI, L.P. ("Funding VI")
pursuant to a Consent and Assumption Agreement dated December 5, 1996, as
evidenced by that certain Promissory Note dated June 28, 1995 made by Canyon
Ranch-Bellefontaine Associates, L.P. to the order of Nomura in the principal
face amount of $8,900,000.00 which has been assigned to LaSalle National Bank,
as Trustee under that certain Pooling and Servicing Agreement dated as of
August 1, 1995.
Federal Funds Effective Rate. For any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
(3) Federal funds brokers of recognized standing selected by the Agent.
Fixed Charges. With respect to any Person for any fiscal period, an amount
equal to Debt Service plus Non-Incremental Revenue Generating Capital
Expenditures plus/minus Rent Adjustments, all as determined in accordance with
generally accepted accounting principles.
Funds Available for Distribution. With respect to any Person for any
fiscal period, an amount equal to Funds from Operations plus non-real estate
depreciation and the amortization of deferred financing costs plus/minus Rent
Adjustments minus Non-Incremental Revenue Generating Capital Expenditures
(excluding any extraordinary or nonrecurring non-tenant related capital
expenditures).
Funds from Operations. With respect to any Person for any fiscal period,
the net income (or deficit) of such Person computed in accordance with
generally accepted accounting principles, excluding financing costs and gains
(or losses) from debt restructuring and sales of property, plus depreciation
(except non-real estate depreciation) and amortization (except the amortization
of deferred financing costs), and after adjustments for unconsolidated
partnerships and joint ventures.
generally accepted accounting principles. Principles that are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its
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predecessors, as in effect from time to time and (b) consistently applied with
past financial statements of the Borrower adopting the same principles;
provided that a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
General Partner. Crescent Real Estate Equities, Ltd., a Delaware
corporation.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower
or any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
Guarantor. Crescent Real Estate Equities Company, a Texas real estate
investment trust, having a usual place of business at 777 Main Street, Suite
2100, Fort Worth, Texas 76102.
Guarantor's Compliance Certificate. The compliance certificate which
Guarantor is required to provide to the Agent pursuant to the terms of the
Guaranty.
Guaranty. The Unconditional Guaranty of Payment and Performance, dated of
even date herewith, made by Guarantor in favor of the Agent and the Banks, as
the same may be modified or amended, such Guaranty to be in form and substance
satisfactory to the Agent and the Majority Banks.
Hazardous Substances. See Section 6.17(b).
Implied Rating. With respect to a Person, the most recent rating issued
from time to time by a Rating Agency as is applicable to such Person's senior
unsecured long-term debt, or if no such senior unsecured long-term debt is
outstanding, then the most recent rating issued from time to time by a Rating
Agency as would hypothetically be applicable to such Person's senior unsecured
long-term debt (i.e., an implied rating).
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should
be made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest directly
or indirectly in a Person, to purchase indebtedness, or to assure the owner of
indebtedness against loss through an agreement to purchase goods, supplies or
services for the purpose of enabling the debtor to make payment
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<PAGE> 16
of the indebtedness held by such owner or otherwise, the obligation to
reimburse the issuer in respect of any letter of credit, and obligations under
interest rate swaps and similar agreements; (d) any obligation as a lessee or
obligor under a Capitalized Lease; (e) all subordinated debt; (f) all
obligations to purchase under agreements to acquire, or otherwise to contribute
money with respect to, properties under "development" within the meaning of
Section 8.9; and (g) a Person's pro rata share of any of the above-described
obligations of its unconsolidated affiliates.
Interest Payment Date. (a) As to each Loan, the first day of each calendar
month during the term of such Loan, and (b) also as to each Eurodollar Rate
Loan, the last day of the Interest Period relating thereto.
Interest Period. With respect to each Eurodollar Rate Loan (a) initially,
the period commencing on the Drawdown Date of such Loan and ending one, two,
three, six or twelve months thereafter, and (b) thereafter, each period
commencing on the day following the last day of the next preceding Interest
Period applicable to such Loan and ending on the last day of one of the periods
set forth above, as selected by the Borrower in a Conversion Request; provided
that all of the foregoing provisions relating to Interest Periods are subject
to the following:
(A) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall end and the next Interest Period shall commence on
the next preceding or succeeding Eurodollar Business Day as determined
conclusively by the Reference Bank in accordance with the then current
bank practice in the Eurodollar interbank market;
(B) if the Borrower shall fail to give notice as provided in Section
4.1, the Borrower shall be deemed to have requested a conversion of the
affected Eurodollar Rate Loan to a Base Rate Loan on the last day of the
then current Interest Period with respect thereto; and
(C) no Interest Period relating to any Eurodollar Rate Loan shall
extend beyond the Maturity Date.
Investment Grade Rating. With respect to any Person, an Implied Rating
equal to or more favorable than BBB- with respect to a rating issued by
Standard & Poors Corporation (or in the case of a rating issued by Moody's
Investor Service, Inc., a rating of Baa3). If, at any time after a Person
obtains an Investment Grade Rating, (a) no Implied Rating for such Person's
senior unsecured long-term debt shall have been issued or confirmed in writing
by either of the Rating Agencies within the previous 365 days, or (b) the
rating system of either of the Rating Agencies (as opposed to the rating of a
Person) shall change, or (c) either of the Rating Agencies shall no longer
perform the functions of a securities rating agency, then the Borrower and the
Agent shall promptly negotiate in good faith to amend the reference to the
specific ratings in this definition for the determination of the Investment
Grade Rating, and pending such amendment, the applicable rating in effect as of
the date the event described in this paragraph occurred shall continue to
apply.
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<PAGE> 17
Investments. With respect to any Person, all shares of capital stock, evidences
of Indebtedness and other securities issued by any other Person, all loans,
advances, or extensions of credit to, or contributions to the capital of, any
other Person, all purchases of the securities or business or integral part of
the business of any other Person and commitments and options to make such
purchases, all interests in real property, and all other investments; provided,
however, that the term "Investment" shall not include (i) equipment, inventory
and other tangible personal property acquired in the ordinary course of
business, or (ii) current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms. In determining the aggregate amount of Investments
outstanding at any particular time: (a) the amount of any investment
represented as a guaranty shall be taken at not less than the principal amount
of the obligations guaranteed and still outstanding; (b) there shall be
included as an Investment all interest accrued with respect to Indebtedness
constituting an Investment unless and until such interest is paid; (c) there
shall be deducted in respect of each such Investment any amount received as a
return of capital (but only by repurchase, redemption, retirement, repayment,
liquidating dividend or liquidating distribution); (d) there shall not be
deducted in respect of any Investment any amounts received as earnings on such
Investment, whether as dividends, interest or otherwise, except that accrued
interest included as provided in the foregoing clause (b) may be deducted when
paid; and (e) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
Leases. Leases, licenses and agreements whether written or oral, relating
to the use or occupation of space in or on the Real Estate by persons other
than the Borrower.
Liens. See Section 8.2.
Limited Partner. Guarantor, successor by merger with CRE Limited Partner,
Inc., a Delaware corporation.
Loan Documents. This Agreement, the Notes, the Guaranty and all other
documents, instruments or agreements now or hereafter executed or delivered by
or on behalf of the Borrower or a Guarantor in connection with the Loans.
Loan or Loans. An individual loan or the aggregate loans, as the case may
be, to be made by the Banks hereunder.
Loan Request. See Section 2.6.
Magellan. Magellan Health Services, Inc., a Delaware corporation.
Majority Banks. As of any date, the Bank or Banks whose aggregate
Commitment Percentage is equal to or greater than the required percentage, as
determined by the Banks, required to approve such matter, as disclosed by the
Agent to the Borrower from time to time.
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<PAGE> 18
Master Lease Agreement. That certain Master Lease Agreement appended to
the Sale Agreement, to be entered into between the Borrower, as Landlord, and
CBHS and certain other parties, as Tenant.
Maturity Date. June 6, 2000, or such earlier date on which the Loans shall
become due and payable pursuant to the terms hereof.
Modified Book Asset Value. For each type of direct or indirect interest in
real estate (undeveloped land, hotels/resorts, behavioral healthcare facilities
and Class A institutional quality office buildings), an amount equal to the sum
of the aggregate net book value of assets of that type (determined in
accordance with the acquisition cost of such assets and as shown on the books
and records of the Borrower), plus that type of Real Estate's applicable share
of real estate depreciation since the date of the Borrower's initial public
offering, plus that type of Real Estate's applicable share of the one-time
market value adjustment described in Section 9.9.
Multiemployer Plan. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Net Income (or Deficit). With respect to any Person (or any asset of any
Person) for any fiscal period, the net income (or deficit) of such Person (or
attributable to such asset), after deduction of all expenses, taxes and other
proper charges, determined in accordance with generally accepted accounting
principles.
Non-Competition Agreements. Noncompetition Agreements dated May 5, 1994,
from Richard E. Rainwater, John C. Goff and Gerald W. Haddock.
Non-Incremental Revenue Generating Capital Expenditures. With respect to
any Person for any fiscal period, an amount equal to the sum of the amount of
capital expenditures paid in cash by such Person or with respect to such asset
(other than tenant related building improvements) during such fiscal period and
considered to be "Non-Incremental Revenue Generating", as such term is defined
by industry standards and as applied by the Borrower historically, plus the
amount of leasing costs (including leasing commission and tenant improvements)
paid in cash by such Person or with respect to such asset during such fiscal
period and considered to be "Non-Incremental Revenue Generating", as such term
is defined by industry standards and as applied by the Borrower historically.
Non-Recourse Indebtedness. Indebtedness of the Borrower or a Subsidiary
which is secured by one or more parcels of Real Estate and related personal
property or interests therein and Short-term Investments and is not a general
obligation of the Borrower or any Subsidiary, the holder of such Indebtedness
having recourse solely to the parcels of Real Estate securing such
Indebtedness, the improvements and leases thereon and the rents and profits
thereof and the Short-term Investments securing such Indebtedness.
Notes. See Section 2.4.
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<PAGE> 19
Notice. See Section 19.
Obligations. All indebtedness, obligations and liabilities of the Borrower
to any of the Banks and the Agent, individually or collectively, under this
Agreement or any of the other Loan Documents or in respect of any of the Loans
or the Notes, or other instruments at any time evidencing any of the foregoing,
whether existing on the date of this Agreement or arising or incurred
hereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise.
Outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of
ERISA and any successor entity or entities having similar responsibilities.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 8.2.
Person. Any individual, corporation, partnership, limited liability
company, trust, unincorporated association, business, or other legal entity,
and any government or any governmental agency or political subdivision thereof.
Private Letter Rating. With respect to a Person, the rating issued from
time to time by a Rating Agency (or in the event that the Borrower obtains a
rating from two or more nationally recognized rating agencies, the lowest of
the ratings issued from time to time by two or more of such rating agencies (at
least one of which shall be a Rating Agency)) as is applicable to the most
recently issued privately placed unsecured long-term debt issuance of such
Person that remains outstanding; provided that each of such ratings shall be
equal to or more favorable than BBB-with respect to a rating issued by Standard
& Poors Corporation, Baa3 in the case of a rating issued by Moody's Investor
Service, Inc., or a comparable rating as reasonably determined by the Agent in
the case of a rating issued by another rating agency.
Prospectus. The 10-K of Guarantor, dated December 31, 1996 and filed with
the SEC.
Rating Agencies. Standard & Poor's Corporation and Moody's Investors
Service, Inc.
Rating Notice. See Section 7.4(i).
Rating Notice Date. The earlier of (a) the date a Rating Notice or notice
of the issuance of a Private Letter Rating, as applicable, is received by the
Agent, or (b) the date the Agent, having received actual notice of a change by
the Rating Agency of the Borrower's Implied Rating, sends notice to the
Borrower of such change, provided that nothing contained herein shall imply any
obligation of the Agent to monitor such rating changes.
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<PAGE> 20
Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to any Note, or the continuation of such grid,
or any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Reference Bank. BankBoston.
Register. See Section 18.2.
REIT Status. With respect to Guarantor, its status as a real estate
investment trust as defined in Section 856(a) of the Code.
Release. See Section 6.17(c)(iii).
Rent Adjustments. For any Person, straight line adjustments to rent
payable under Leases, as determined in accordance with generally accepted
accounting principles.
Rent Payments. For any period, the "Rent" as such term is defined in the
Master Lease Agreement.
Required Behavioral Healthcare Facilities Capital Expenditures. With
respect to any fiscal period, an amount equal to the capital expenditures
incurred by CBHS with respect to the Behavioral Healthcare Facilities pursuant
to the Master Lease Agreement during such fiscal period, determined in
accordance with generally accepted accounting principles.
Residential Corporations. Collectively Mira Vista Development Corp.,
Houston Area Development Corp. and Crescent Development Management Corp.
Revocation Costs. See Section 2.6.
Sale Agreement. That certain Real Estate Purchase and Sale Agreement dated
as of January 29, 1997, between the Borrower, as Purchaser, and Magellan, as
Seller, as amended by that certain First Amendment to Real Estate Purchase and
Sale Agreement dated as of February 28, 1997, between the Borrower and
Magellan, with respect to the purchase of the Behavioral Healthcare Facilities.
SEC. The federal Securities and Exchange Commission.
Secured Indebtedness. Indebtedness of a Person that is pursuant to a
Capitalized Lease or is directly or indirectly secured by a Lien.
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Short-term Investments. Investments described in subsections (a) through
(g), inclusive, of Section 8.3.
State. A state of the United States of America.
Subsidiary. (a) Any corporation, association, partnership, trust, or other
business entity of which the designated parent shall at any time own directly
or indirectly through a Subsidiary or Subsidiaries at least a majority (by
number of votes or controlling interests) of the outstanding Voting Interests,
(b) any other entity the accounts of which are consolidated with the accounts
of the Borrower, and (c) the Residential Corporations.
Test Period. See Section 9.2.
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.
Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate
Loan.
Unencumbered Operating Property. An Unencumbered Operating Property shall
mean Real Estate (a) which is owned one hundred percent (100%) in fee simple by
the Borrower, or (b) in which the Borrower owns a leasehold interest pursuant
to a mortgageable ground lease having a remaining term of not less than fifty
(50) years (calculated from the date of acquisition of such interest), or (c)
which is owned by an entity which is controlled by the Borrower or in which the
Borrower is the general partner or managing member provided that (i) the
Borrower has control over all major and day-to-day decisions with respect to
the operation of such entity (including, without limitation, the decision to
sell or encumber the assets of such entity), (ii) the organizational agreements
of such entity specifically authorize the Borrower to pledge the assets of such
entity as security for the Obligations, and (iii) the Borrower certifies to the
Agent that applicable law does not preclude such entity from pledging its
assets to secure the Obligations; and in any case which satisfies all of the
following conditions:
(x) such Unencumbered Operating Property shall be free and clear of all
Liens other than the Liens permitted in Section 8.2(i), (iii) and (vi); and
(y) such Unencumbered Operating Property shall consist solely of Real
Estate which is an income producing operating property.
Variable Interest Rate. A rate of interest payable with respect to
Indebtedness that may vary, float or change during the term of such
Indebtedness (that is, a rate of interest that is not fixed for the entire term
of such Indebtedness).
Voting Interests. Stock or similar ownership interests, of any class or
classes (however designated), the holders of which are at the time entitled, as
such holders, (a) to vote for the election of a majority of the directors (or
persons performing similar functions) of the
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<PAGE> 22
corporation, association, partnership, trust or other business entity involved,
or (b) to control, manage, or conduct the business of the corporation,
partnership, association, trust or other business entity involved.
Section 1.2. Rules of Interpretation.
1.2.1. A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Agreement.
1.2.2. The singular includes the plural and the plural includes the
singular.
1.2.3. A reference to any law includes any amendment or modification
to such law.
1.2.4. A reference to any Person includes its permitted successors
and permitted assigns.
1.2.5. Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
1.2.6. The words "include", "includes" and "including" are not
limiting.
1.2.7. The words "approval" and "approved", as the context so
determines, means an approval in writing given to the party seeking
approval after full and fair disclosure to the party giving approval of
all material facts necessary in order to determine whether approval should
be granted.
1.2.8. All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have
the meanings assigned to them therein.
1.2.9. Reference to a particular "Section ", refers to that section
of this Agreement unless otherwise indicated.
1.2.10. The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
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SECTION 2. THE REVOLVING CREDIT FACILITY.
Section 2.1. Commitment to Lend. Subject to the terms and conditions set
forth in this Agreement, each of the Banks severally agrees to lend to the
Borrower, and the Borrower may borrow (and repay and reborrow) from time to
time between the Closing Date and the Maturity Date, upon notice by the
Borrower to the Agent given in accordance with Section 2.6, such sums as are
requested by the Borrower for the purposes set forth in Section 2.9 (but
subject to the limitations set forth in Section 2.9) up to a maximum aggregate
principal amount outstanding (after giving effect to all amounts requested) at
any one time equal to such Bank's Commitment; provided, that, in all events no
Default or Event of Default shall have occurred and be continuing and the
Borrower's financial statements as required pursuant to Section 2.6(iii) shall
demonstrate compliance with all covenants set forth therein; and provided,
further, that the outstanding principal amount of the Loans (after giving
effect to all amounts requested) shall not at any time exceed the Total
Commitment. The Loans shall be made pro rata in accordance with each Bank's
Commitment Percentage. Each request for a Loan hereunder shall constitute a
representation and warranty by the Borrower that all of the conditions set
forth in Section 10 and Section 11, in the case of the initial Loan, and
Section 11, in the case of all other Loans, have been satisfied on the date of
such request (except as otherwise permitted in Paragraph 4 of the form of Loan
Request with respect to warranties and representations). No Bank shall have any
obligation to make Loans to the Borrower in the maximum aggregate principal
amount outstanding of more than the principal face amount of its Note.
Section 2.2. Facility Fee. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Commitment
Percentages a facility fee calculated at the rate of one-fourth of one percent
(0.25%) per annum on the daily amount by which the Total Commitment exceeds the
outstanding principal amount of Loans during each calendar quarter or portion
thereof commencing on the date hereof and ending on the Maturity Date. The
facility fee shall be payable quarterly in arrears on the fifth day of each
calendar quarter for the immediately preceding calendar quarter or portion
thereof, or on any earlier date on which the Commitments shall be reduced or
shall terminate as provided in Section 2.3, with a final payment on the
Maturity Date. Any payment due under this Section 2.2 shall be prorated for any
partial calendar quarter.
Section 2.3. Reduction of Commitment. The Borrower shall have the right at
any time and from time to time upon five Business Days' prior written notice to
the Agent to reduce by $5,000,000 or an integral multiple of $100,000 in excess
thereof or to terminate entirely the unborrowed portion of the Commitments,
whereupon the Commitments of the Banks shall be reduced pro rata in accordance
with their respective Commitment Percentages of the amount specified in such
notice or, as the case may be, terminated, any such reduction to be without
penalty (unless such reduction requires repayment of a Eurodollar Rate Loan).
Promptly after receiving any notice of the Borrower delivered pursuant to this
Section 2.3, the Agent will notify the Banks of the substance thereof. Upon the
effective date of any such reduction or termination, the Borrower shall pay to
the Agent for the respective accounts of the Banks the full amount of any
facility fee under Section 2.2 then accrued on the amount of the reduction. No
reduction or termination of the Commitment may be reinstated.
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<PAGE> 24
Section 2.4. Notes. The Loans shall be evidenced by separate promissory
notes of the Borrower in substantially the form of Exhibit A hereto
(collectively, the "Notes"), dated of even date with this Agreement and
completed with appropriate insertions. One Note shall be payable to the order
of each Bank in the principal amount equal to such Bank's Commitment or, if
less, the outstanding amount of all Loans made by such Bank, plus interest
accrued thereon, as set forth below. The Borrower irrevocably authorizes each
Bank to make or cause to be made, at or about the time of the Drawdown Date of
any Loan or at the time of receipt of any payment of principal thereof, an
appropriate notation on such Bank's Record reflecting the making of such Loan
or (as the case may be) the receipt of such payment. The outstanding amount of
the Loans set forth on such Bank's Record shall be prima facie evidence of the
principal amount thereof owing and unpaid to such Bank, but the failure to
record, or any error in so recording, any such amount on such Bank's Record
shall not limit or otherwise affect the obligations of the Borrower hereunder
or under any Note to make payments of principal of or interest on any Note when
due.
Section 2.5. Interest on Loans.
2.5.1. Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the date on which
such Base Rate Loan is paid in full or is converted to a Eurodollar Rate
Loan from a Base Rate Loan at the Base Rate.
2.5.2. Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate per annum equal to
the sum of the Applicable Margin plus the Eurodollar Rate determined for
such Interest Period.
2.5.3. The Borrower promises to pay interest on each Loan in arrears
on each Interest Payment Date with respect thereto.
2.5.4. Base Rate Loans and Eurodollar Rate Loans may be converted to
Loans of the other Type as provided in Section 4.1.
Section 2.6. Requests for Loans. The Borrower (i) shall notify the Agent
of a potential request for a Loan as soon as possible prior to the Borrower's
proposed Drawdown Date, and (ii) shall give to the Agent written notice in the
form of Exhibit B hereto (or telephonic notice confirmed in writing in the form
of Exhibit B hereto) of each Loan requested hereunder (a "Loan Request") no
later than 10:00 a.m. three (3) Business Days prior to the proposed Drawdown
Date. The Agent shall promptly notify each of the Banks following the receipt
of a Loan Request, but in any event no later than 2:00 p.m. three (3) Business
Days prior to the proposed Drawdown Date. Borrower shall not make a Loan
Request more frequently than three times each month. Each such notice shall
specify with respect to the requested Loan the proposed principal amount,
Drawdown Date, Interest Period (if applicable) and Type. Each such notice shall
also contain (i) a statement as to the purpose for which such advance shall be
used (which purpose shall be in accordance with the terms of Section 2.9), (ii)
a certification by the chief financial or chief accounting
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<PAGE> 25
officer of the General Partner that the Borrower is and will be in compliance
with all covenants under the Loan Documents after giving effect to the making
of such Loan, (iii) a Compliance Certificate prepared using the financial
statements of the Borrower most recently provided or required to be provided to
the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith
estimate of the Borrower to give effect to the proposed advance and
incorporating the operating performance of any asset to be acquired, and (iv)
the Guarantor's Compliance Certificate prepared using the financial statements
of Guarantor most recently provided or required to be provided to the Agent
pursuant to the Guaranty adjusted in the best good faith estimate of Guarantor
to the date of the proposed advance. Promptly upon receipt of any such notice,
the Agent shall notify each of the Banks thereof. Except as provided in this
Section 2.6, each such Loan Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Loan requested from the
Banks on the proposed Drawdown Date, provided that, in addition to the
Borrower's other remedies against any Bank which fails to advance its
proportionate share of a requested Loan, such Loan Request may be revoked by
the Borrower by notice received by the Agent no later than the Drawdown Date if
any Bank fails to advance its proportionate share of the requested Loan in
accordance with the terms of this Agreement, provided further that the Borrower
shall be liable in accordance with the terms of this Agreement to any Bank
which is prepared to advance its proportionate share of the requested Loan for
any costs, expenses or damages incurred by such Bank as a result of the
Borrower's election to revoke such Loan Request (the "Revocation Costs").
Nothing herein shall prevent the Borrower from seeking recourse against any
Bank that fails to advance its proportionate share of a requested Loan as
required by this Agreement. The Borrower may, without any liability for the
payment of the Revocation Costs or other cost or penalty, revoke a Loan Request
by delivering notice thereof to each of the Banks no later than 3:00 p.m. three
(3) Business Days prior to the Drawdown Date. Each Loan Request shall be (a)
for a Base Rate Loan in a minimum aggregate amount of $1,000,000 or an integral
multiple of $100,000 in excess thereof, or (b) for a Eurodollar Rate Loan in a
minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in
excess thereof; provided, however, that there shall be no more than five (5)
Eurodollar Rate Loans outstanding at any one time.
Section 2.7. Funds for Loans.
(a) Not later than 11:00 a.m. (Boston time) on the proposed Drawdown Date
of any Loans, each of the Banks will make available to the Agent, at the
Agent's Head Office, in immediately available funds, the amount of such Bank's
Commitment Percentage of the amount of the requested Loans which may be
disbursed pursuant to Section 2.1. Upon receipt from each Bank of such amount,
and upon receipt of the documents required by Section 10 and Section 11 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrower the aggregate amount
of such Loans made available to the Agent by the Banks by wire transfer in
accordance with Borrower's instructions. The failure or refusal of any Bank to
make available to the Agent at the aforesaid time and place on any Drawdown
Date the amount of its Commitment Percentage of the requested Loans to the
extent it is obligated to fund such Loan hereunder shall not relieve any other
Bank from its several obligation hereunder to make available to the Agent the
amount of such other Bank's Commitment Percentage of any requested
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Loans, including any additional Loans that may be requested by the Borrower
subject to the terms and conditions hereof to provide funds to replace those
not advanced by the Bank so failing or refusing, provided that the Borrower may
by notice received by the Agent no later than the Drawdown Date refuse to
accept any Loan which is not fully funded in accordance with the Borrower's
Loan Request subject to the terms of Section 2.6 (except that such refusal
shall not relieve the Borrower of its obligation to pay the Revocation Costs);
provided further that no Bank shall be obligated to advance any amount in
excess of the limits set forth in Section 2.1. In the event of any such failure
or refusal, the Banks not so failing or refusing shall be entitled to a
priority position as against the Bank or Banks so failing or refusing for such
Loans as provided in Section 12.4.
(b) Unless Agent shall have been notified by any Bank prior to the
applicable Drawdown Date that such Bank will not make available to Agent such
Bank's pro rata share of a proposed Loan, Agent may in its discretion assume
that such Bank has made such Loan available to Agent in accordance with the
provisions of this Agreement and Agent may, if it chooses, in reliance upon
such assumption make such Loan available to Borrower, and such Bank shall be
liable to the Agent for the amount of such advance.
Section 2.8. Intentionally Omitted.
Section 2.9. Use of Proceeds. The Borrower will use the proceeds of the
Loans solely to provide short-term financing (a) for the acquisition of fee
interests in Real Estate which is utilized principally for Class A office
space, behavioral healthcare facilities and/or hotel/resort properties which
are of institutional quality or other income-producing real estate reasonably
satisfactory to the Majority Banks, subject to the limitations in Section 9.8,
(b) for working capital purposes, (c) for the acquisition of non-income
producing land assets or real estate assets which are held in fee simple or in
any form other than undivided fee simple ownership (such as cotenancy
interests, leasehold interests, partnership interests, shares of stock in
corporations owning real estate, or through mortgages or participation
interests in or assignments of mortgages), subject however to the limitations
in Section 9.8, and (d) for such other purposes as the Majority Banks in their
discretion from time to time may agree to in writing. Without the consent of
the Majority Banks, in no event may any amount advanced under the Loan be used
directly or indirectly (i) to pay dividends or other distributions to any
partner or member of the Borrower, the Guarantor or the shareholders of the
Guarantor or (ii) except as expressly permitted in Section 8.9, with respect to
the obligations described in Schedule 8.1(h) or with respect to the Investments
described in Section 8.3(k) and (m), to make advances, loans, Investments or
other contributions to, or in any other manner "downstream" into, Crescent Real
Estate Funding I, L.P., Crescent Real Estate Funding II, L.P., Crescent Real
Estate Funding III, L.P., Crescent Real Estate Funding IV, L.P., Crescent Real
Estate Funding V, L.P., Crescent Real Estate Funding VI, L.P. or any other
Subsidiary of the Borrower whether now existing or hereafter formed. Without
the consent of the Majority Banks, except with respect to the development of
Phase II at the project commonly referred to as "The Avallon" (and the
potential development of Phase III at the Avallon), tenant improvements and the
renovation or demolition and construction of the "Frost Bank Garage" to be
constructed at the northeast corner of the intersection of Lavaca Street and
Ninth Street in Austin, Texas, on land acquired by the Borrower in connection
with the acquisition of the Frost Bank Plaza Building, and the Surtran
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Garage at Continental Plaza as permitted pursuant to Section 8.9, no portion of
the proceeds of the Loan shall be used to develop or construct new commercial
real estate projects or for the substantial renovation or rehabilitation of
commercial real estate projects.
SECTION 3. REPAYMENT OF THE LOANS.
Section 3.1. Stated Maturity. The Borrower promises to pay on the Maturity
Date and there shall become absolutely due and payable on the Maturity Date,
all of the Loans outstanding on such date, together with any and all accrued
and unpaid interest thereon.
Section 3.2. Mandatory Prepayments. The Borrower promises to pay principal
of the Loans prior to stated maturity, as follows:
3.2.1. If at any time the aggregate outstanding principal amount of
the Loans exceeds the Total Commitment, then the Borrower shall
immediately upon demand from Agent pay the amount of such excess to the
Agent for the respective accounts of the Banks for application to the
Loans (it being acknowledged that in the event the Borrower makes such
payment as provided herein, the Borrower shall not be in default of
Section 9.3).
3.2.2. All of Borrower's interest in the gross proceeds of each and
every sale or refinancing of real estate assets of the Borrower and its
Subsidiaries (whether held directly or indirectly), less all reasonable
costs, expenses and commissions paid to unrelated parties and less any
Indebtedness (other than the Obligations) secured by such asset to be
satisfied as a part of such sale or refinance, shall be promptly paid by
the Borrower to the Agent for the account of the Banks as a prepayment of
the Loans to the extent of the outstanding balance of the Loans; provided
that, (x) so long as (i) there has been no acceleration of the maturity of
the Obligations pursuant to Section 12.1, (ii) no Event of Default under
Section 12.1(a), (b), (d), (g), (h), (i), (j), (k), (l), (m), (n), and (o)
has occurred and is continuing, or (iii) no breach of the covenants
contained in Section 8.1, Section 8.2, Section 8.3 or Section 8.7 has
occurred and is continuing, the Borrower shall not as a result of this
Section 3.2(b) be required to reduce the principal balance of the Loans to
less than $50,000,000.00; and (y) with respect to the Borrower's interest
in the gross proceeds of a sale or refinancing of real estate assets of a
Subsidiary in which the Borrower does not own a majority (by number of
votes or controlling interests) of the outstanding Voting Interests, the
Borrower shall pay such gross proceeds to the Agent for the account of the
Banks as soon as distributed to the Borrower by such Subsidiary.
Section 3.3. Optional Prepayments. The Borrower shall have the right, at
its election, to prepay the outstanding amount of the Loans, as a whole or in
part, at any time without penalty or premium; provided, that the full or
partial prepayment of the outstanding amount of any Eurodollar Rate Loans
pursuant to this Section 3.3 may be made only on the last day of the Interest
Period relating thereto except as otherwise required pursuant to Section 4.7.
The Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at
least three (3) Business Days prior written notice
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of any prepayment pursuant to this Section 3.3, in each case specifying the
proposed date of payment of Loans and the principal amount to be paid.
Section 3.4. Partial Prepayments. Each partial prepayment of the Loans
under Section 3.2 and Section 3.3 shall be in the minimum amount of $500,000.00
or an integral multiple of $100,000 in excess thereof (unless the Loans are
being prepaid in full), shall be accompanied by the payment of accrued interest
on the principal prepaid to the date of payment and, after payment of such
interest, shall be applied, in the absence of instruction by the Borrower,
first to the principal of Base Rate Loans and then to the principal of
Eurodollar Rate Loans.
Section 3.5. Effect of Prepayments. Amounts of the Loans prepaid under
Section 3.2 and Section 3.3 prior to the Maturity Date may be reborrowed as
provided in Section 2. Except as otherwise expressly provided herein, all
payments shall first be applied to accrued but unpaid interest and then to
principal.
Section 3.6. Proceeds from Debt or Equity Offering. The Borrower shall
cause all gross proceeds of each and every Debt Offering and Equity Offering,
less all reasonable costs, fees, expenses, underwriting commissions, fees and
discounts incurred in connection therewith, to be promptly paid by the Borrower
to the Agent for the account of the Banks as a prepayment of the Loans to the
extent of the outstanding balance of the Loans; provided that, subject to the
limitations contained in Section 3.2(b) above, the Borrower shall not as a
result of this Section 3.6 be required to reduce the principal balance of the
Loans to less than $50,000,000.00.
SECTION 4. CERTAIN GENERAL PROVISIONS.
Section 4.1. Conversion Options.
4.1.1. The Borrower may elect from time to time to convert any
outstanding Loan to a Loan of another Type and such Loan shall thereafter
bear interest as a Base Rate Loan or a Eurodollar Rate Loan, as
applicable; provided that (i) with respect to any such conversion of a
Eurodollar Rate Loan to a Base Rate Loan, the Borrower shall give the
Agent at least three Business Days' prior written notice of such election,
and such conversion shall only be made on the last day of the Interest
Period with respect to such Eurodollar Rate Loan; (ii) with respect to any
such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the
Borrower shall give the Agent at least four Eurodollar Business Days'
prior written notice of such election and the Interest Period requested
for such Loan, the principal amount of the Loan so converted shall be in a
minimum aggregate amount of $2,000,000 or an integral multiple of $100,000
in excess thereof and, after giving effect to the making of such Loan,
there shall be no more than five (5) Eurodollar Rate Loans outstanding at
any one time; and (iii) no Loan may be converted into a Eurodollar Rate
Loan when any Default or Event of Default has occurred and is continuing.
All or any part of the outstanding Loans of any Type may be converted as
provided herein, provided that no partial conversion shall result in a
Base Rate Loan in an aggregate principal amount of less than $1,000,000 or
a Eurodollar Rate Loan in an aggregate principal amount of less than
$2,000,000 and that the aggregate principal
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amount of each Loan shall be in an integral multiple of $100,000. On the
date on which such conversion is being made, each Bank shall take, to the
extent it deems it necessary to do so, such action as is necessary to
transfer its Commitment Percentage of such Loans to its Domestic Lending
Office or its Eurodollar Lending Office, as the case may be. Each
Conversion Request relating to the conversion of a Base Rate Loan to a
Eurodollar Rate Loan shall be irrevocable by the Borrower.
4.1.2. Any Loan may be continued as such Type upon the expiration of
an Interest Period with respect thereto by compliance by the Borrower with
the terms of Section 4.1; provided that no Eurodollar Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on
the last day of the Interest Period relating thereto ending during the
continuance of any Default or Event of Default.
4.1.3. In the event that the Borrower does not notify the Agent of
its election hereunder with respect to any Loan, such Loan shall be
automatically converted to a Base Rate Loan at the end of the applicable
Interest Period.
Section 4.2. Closing Fee. Upon the execution of this Agreement, the
Borrower shall pay to BankBoston closing fees pursuant to an Agreement
Regarding Fees among the Borrower and BankBoston. Upon the execution of this
Agreement, BankBoston shall pay to the Banks a closing fee in accordance with
their separate agreement.
Section 4.3. Agent's Fee. The Borrower shall pay to the Agent, for the
Agent's own account, an Agent's fee calculated at the rate of $50,000.00 per
year. The Agent's fee shall be payable quarterly in arrears on the first day of
each calendar quarter for the immediately preceding calendar quarter or portion
thereof. The Agent's fee for any partial calendar quarter shall be prorated.
Section 4.4. Funds for Payments.
4.4.1. All payments of principal, interest, facility fees, Agent's
fees, closing fees and any other amounts due hereunder or under any of the
other Loan Documents shall be made to the Agent, for the respective
accounts of the Banks and the Agent, as the case may be, at the Agent's
Head Office, not later than 3:00 p.m. (Boston time) on the day when due,
in each case in immediately available funds. To the extent funds are
available in such account, the Agent is hereby authorized to charge the
account of the Borrower with BankBoston, on the dates when the amount
thereof shall become due and payable, with the amounts of the principal of
and interest on the Loans and all fees, charges, expenses and other
amounts owing to the Agent and/or the Banks under the Loan Documents.
4.4.2. All payments by the Borrower hereunder and under any of the
other Loan Documents shall be made without setoff or counterclaim and free
and clear of and
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without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of
any nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein unless
the Borrower is compelled by law to make such deduction or withholding. If
any such obligation is imposed upon the Borrower with respect to any
amount payable by it hereunder or under any of the other Loan Documents,
the Borrower will pay to the Agent, for the account of the Banks or (as
the case may be) the Agent, on the date on which such amount is due and
payable hereunder or under such other Loan Document, such additional
amount in Dollars as shall be necessary to enable the Banks or the Agent
to receive the same net amount which the Banks or the Agent would have
received on such due date had no such obligation been imposed upon the
Borrower. The Borrower will deliver promptly to the Agent certificates or
other valid vouchers for all taxes or other charges deducted from or paid
with respect to payments made by the Borrower hereunder or under such
other Loan Document.
Section 4.5. Computations. All computations of interest on the Loans and
of other fees to the extent applicable shall be based on a 360-day year and
paid for the actual number of days elapsed. Except as otherwise provided in the
definition of the term "Interest Period" with respect to Eurodollar Rate Loans,
whenever a payment hereunder or under any of the other Loan Documents becomes
due on a day that is not a Business Day, the due date for such payment shall be
extended to the next succeeding Business Day, and interest shall accrue during
such extension. The outstanding amount of the Loans as reflected on the records
of the Agent from time to time shall be considered prima facie evidence of such
amount.
Section 4.6. Inability to Determine Eurodollar Rate. In the event that,
prior to the commencement of any Interest Period relating to any Eurodollar
Rate Loan, the Agent shall determine in the exercise of its good faith business
judgment that adequate and reasonable methods do not exist for ascertaining the
Eurodollar Rate for such Interest Period, the Agent shall forthwith give notice
of such determination (which shall be conclusive and binding on the Borrower
and the Banks) to the Borrower and the Banks. In such event (a) any Loan
Request with respect to Eurodollar Rate Loans shall be automatically withdrawn
and shall be deemed a request for Base Rate Loans and (b) each Eurodollar Rate
Loan will automatically, on the last day of the then current Interest Period
thereof, become a Base Rate Loan, and the obligations of the Banks to make
Eurodollar Rate Loans shall be suspended until the Agent determines in the
exercise of its good faith business judgment that the circumstances giving rise
to such suspension no longer exist, whereupon the Agent shall so notify the
Borrower and the Banks.
Section 4.7. Illegality. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or the
interpretation or application thereof shall make it unlawful, or any central
bank or other governmental authority having jurisdiction over a Bank or its
Eurodollar Lending Office shall assert that it is unlawful, for any Bank to
make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice
of such circumstances to the Agent and the Borrower and thereupon (a) the
commitment of the Banks to make Eurodollar Rate Loans or convert Loans of
another type to Eurodollar Rate Loans shall forthwith be suspended
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and (b) the Eurodollar Rate Loans then outstanding shall be converted
automatically to Base Rate Loans on the last day of each Interest Period
applicable to such Eurodollar Rate Loans or within such earlier period as may
be required by law.
Section 4.8. Additional Interest. If any Eurodollar Rate Loan or any
portion thereof is repaid or is converted to a Base Rate Loan for any reason on
a date which is prior to the last day of the Interest Period applicable to such
Eurodollar Rate Loan, the Borrower will pay to the Agent upon demand for the
account of the Banks in accordance with their respective Commitment
Percentages, in addition to any amounts of interest otherwise payable
hereunder, any amounts required to compensate the Banks for any losses, costs
or expenses which may reasonably be incurred as a result of such payment or
conversion, including, without limitation, an amount equal to daily interest
for the unexpired portion of such Interest Period on the Eurodollar Rate Loan
or portion thereof so repaid or converted at a per annum rate equal to the
excess, if any, of (a) the interest rate calculated on the basis of the
Eurodollar Rate applicable to such Eurodollar Rate Loan (including any spread
over such Eurodollar Rate) minus (b) the yield obtainable by the Agent upon the
purchase of debt securities customarily issued by the Treasury of the United
States of America which have a maturity date most closely approximating the
last day of such Interest Period (it being understood that the purchase of such
securities shall not be required in order for such amounts to be payable).
Section 4.9. Additional Costs, Etc. Notwithstanding anything herein to the
contrary, if any present or future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and legally binding
interpretations thereof by any competent court or by any governmental or other
regulatory body or official with appropriate jurisdiction charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon
or otherwise issued to any Bank or the Agent by any central bank or other
fiscal, monetary or other authority (whether or not having the force of law),
shall:
4.9.1. subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan Documents, such Bank's Commitment or the Loans
(other than taxes based upon or measured by the income or profits of such
Bank or the Agent), or
4.9.2. materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Loans or any other amounts payable to any Bank under
this Agreement or the other Loan Documents, or
4.9.3. impose or increase or render applicable any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or commitments of
an office of any Bank, or
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4.9.4. impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, such Bank's Commitment, or any class of loans or commitments of
which any of the Loans or such Bank's Commitment forms a part; and the
result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Bank's Commitment, or
(ii) to reduce the amount of principal, interest or other amount
payable to such Bank or the Agent hereunder on account of such Bank's
Commitment or any of the Loans, or
(iii) to require such Bank or the Agent to make any payment or
to forego any interest or other sum payable hereunder, the amount of
which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed
received by such Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, within thirty (30) days of
demand made by such Bank or (as the case may be) the Agent at any time and from
time to time and as often as the occasion therefor may arise, pay to such Bank
or the Agent such additional amounts as such Bank or the Agent shall determine
in good faith to be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or other sum. Each
Bank and the Agent in determining such amounts may use any reasonable averaging
and attribution methods, generally applied by such Bank or the Agent.
Notwithstanding the foregoing, the Borrower shall have the right, in lieu of
making the payment referred to in this Section 4.9, to prepay the Loan of the
applicable Bank within thirty (30) days of such demand and avoid the payment of
the amounts otherwise due under this Section 4.9, provided, however, that the
Borrower shall be required to pay together with such prepayment of the Loan all
other costs, damages and expenses otherwise due under Section 4.8 of this
Agreement as a result of such prepayment, and following such prepayment, the
Total Commitment shall be reduced by the amount of the Loan so prepaid, and the
Commitment Percentages of the remaining Banks shall be adjusted based on the
percentage that each Bank's Commitment bears to the adjusted Total Commitment.
Section 4.10. Capital Adequacy. If after the date hereof any Bank
reasonably determines that (a) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for banks or bank
holding companies or any change in the interpretation or application thereof by
any governmental authority charged with the administration thereof, or (b)
compliance by such Bank or its parent bank holding company with any guideline,
request or directive of any such entity regarding capital adequacy (whether or
not having the force of law), has the effect of reducing the return on such
Bank's or such holding company's capital as a consequence of such Bank's
commitment to make Loans hereunder to a level below that which such Bank or
holding company could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's or such holding company's then existing
policies with respect to capital adequacy and assuming the full utilization of
such entity's capital) by any
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amount deemed by such Bank to be material, then such Bank may notify the
Borrower thereof. The Borrower agrees to pay to such Bank the amount of such
reduction in the return on capital as and when such reduction is determined,
upon presentation by such Bank of a statement of the amount setting forth the
Bank's calculation thereof. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
Section 4.11. Indemnity of Borrower. The Borrower agrees to indemnify each
Bank and to hold each Bank harmless from and against any loss, cost or expense
that such Bank may sustain or incur as a consequence of (a) default by the
Borrower in payment of the principal amount of or any interest on any
Eurodollar Rate Loans as and when due and payable, including any such loss or
expense arising from interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain its Eurodollar Rate Loans, or (b) default
by the Borrower in making a borrowing or conversion after the Borrower has
given (or is deemed to have given) a Loan Request or a Conversion Request
(excluding, however, any Loan Request that pursuant to Section 2.6 may be
revoked without penalty and the deemed withdrawal of a Loan Request pursuant to
Section 4.6), or (c) default by the Borrower in making the payments or
performing its obligations under Section Section 4.8, 4.9, 4.10, 4.12 or 4.13.
Section 4.12. Interest on Overdue Amounts; Late Charge. Overdue principal
and (to the extent permitted by applicable law) interest on the Loans and all
other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest payable on demand at a rate per annum equal to
four percent (4.0%) above the Base Rate until such amount shall be paid in full
(after as well as before judgment), or if such rate shall exceed the maximum
rate permitted by law, then at the maximum rate permitted by law. In addition,
the Borrower shall pay a late charge equal to three percent (3%) of any amount
of interest and/or principal payable on the Loans or any other amounts payable
hereunder or under the Loan Documents, which is not paid within ten days of the
date when due.
Section 4.13. Certificate. A certificate, prepared in good faith by a Bank
consistent with such Bank's practice in calculating such amounts, setting forth
any amounts payable pursuant to Section 4.8, Section 4.9, Section 4.10, Section
4.11 or Section 4.12 and a brief explanation of such amounts which are due,
submitted by any Bank or the Agent to the Borrower, shall be conclusive in the
absence of manifest error.
Section 4.14. Limitation on Interest. Notwithstanding anything in this
Agreement to the contrary, all agreements between the Borrower and the Banks
and the Agent, whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by reason of
acceleration of the maturity of any of the Obligations or otherwise, shall the
interest contracted for, charged or received by the Banks exceed the maximum
amount permissible under applicable law. If, from any circumstance whatsoever,
interest would otherwise be payable to the Banks in excess of the maximum
lawful amount, the interest payable to the Banks shall be reduced to the
maximum amount permitted under applicable law; and if from any circumstance the
Banks shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal balance of the Obligations
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and to the payment of interest or, if such excessive interest exceeds the
unpaid balance of principal of the Obligations, such excess shall be refunded
to the Borrower. All interest paid or agreed to be paid to the Banks shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full period until payment in full of the principal of the
Obligations (including the period of any renewal or extension thereof) so that
the interest thereon for such full period shall not exceed the maximum amount
permitted by applicable law. This section shall control all agreements between
the Borrower and the Banks and the Agent.
SECTION 5. COLLATERAL SECURITY AND GUARANTY.
Section 5.1. Security. The Banks have agreed to make the Loans to the
Borrower on an unsecured basis. Notwithstanding the foregoing, the Obligations
shall be guaranteed by Guarantor pursuant to the Guaranty.
Section 5.2. Intentionally Omitted.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent and the Banks as
follows.
Section 6.1. Corporate Authority, Etc.
6.1.1. Organization; Good Standing. The Borrower is a Delaware
limited partnership duly organized pursuant to a Limited Partnership
Agreement and a Limited Partnership Certificate dated February 9, 1994
filed with the Secretary of State of Delaware and is validly existing and
in good standing under the laws of Delaware. The General Partner is a
Delaware corporation duly organized pursuant to its Articles of
Incorporation and amendments thereto filed with the Secretary of State of
Delaware and is validly existing and in good standing under the laws of
Delaware. Guarantor is a Texas real estate investment trust duly organized
pursuant to its Declaration of Trust and amendments thereto filed with the
Secretary of State of Texas and is validly existing and in good standing
under the laws of the State of Texas. Each of the Borrower, the General
Partner and the Guarantor (i) has all requisite power to own its
respective properties and conduct its respective business as now conducted
and as presently contemplated, and (ii) as to the Borrower, is in good
standing as a foreign entity and is duly authorized to do business in the
jurisdictions where its respective Real Estate is located to the extent
required, and as to the Borrower, the General Partner and the Guarantor,
in each other jurisdiction where a failure to be so qualified in such
other jurisdiction could have a materially adverse effect on the business,
assets or financial condition of such Person. Guarantor is a real estate
investment trust in full compliance with and entitled to the benefits of
Section 856 of the Code. The Borrower is a qualified subsidiary of a real
estate investment trust within the meaning of the Code.
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6.1.2. Subsidiaries. Each of the Subsidiaries of the Borrower (i) is
a corporation, limited partnership, limited liability company or trust
duly organized under the laws of its State of organization and is validly
existing and in good standing under the laws thereof, (ii) has all
requisite power to own its property and conduct its business as now
conducted and as presently contemplated and (iii) is in good standing and
is duly authorized to do business in each jurisdiction where a failure to
be so qualified could have a materially adverse effect on the business,
assets or financial condition of the Borrower or such Subsidiary.
6.1.3. Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower, the General
Partner or the Guarantor is or is to become a party and the transactions
contemplated hereby and thereby (i) are within the authority of such
Person, (ii) have been duly authorized by all necessary proceedings on the
part of such Person, (iii) do not and will not conflict with or result in
any breach or contravention of any provision of law, statute, rule or
regulation to which such Person is subject or any judgment, order, writ,
injunction, license or permit applicable to such Person, (iv) do not and
will not conflict with or constitute a default (whether with the passage
of time or the giving of notice, or both) under any provision of the
articles of incorporation, partnership agreement, declaration of trust or
other charter documents or bylaws of, or any agreement or other instrument
binding upon, such Person or any of its properties, and (v), except as
provided in the Loan Documents, do not and will not result in or require
the imposition of any lien or other encumbrance on any of the properties,
assets or rights of such Person.
6.1.4. Enforceability. The execution and delivery of this Agreement
and the other Loan Documents to which the Borrower, the General Partner or
the Guarantor is or is to become a party are valid and legally binding
obligations of such Person enforceable in accordance with the respective
terms and provisions hereof and thereof, except as enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting generally the enforcement of creditors'
rights and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of
the court before which any proceeding therefor may be brought.
Section 6.2. Governmental Approvals. The execution, delivery and
performance of this Agreement and the other Loan Documents to which the
Borrower, the General Partner or the Guarantor is or is to become a party and
the transactions contemplated hereby and thereby do not require the approval or
consent of, or filing with, any governmental agency or authority other than
those already obtained.
Section 6.3. Title to Properties; Leases. Except as set forth on Schedule
6.3 hereto, the Borrower and its Subsidiaries own all of the assets reflected
in the consolidated balance sheet of the Borrower as at the Balance Sheet Date
or acquired since that date (except property and assets sold or otherwise
disposed of in the ordinary course of business since that date), subject to no
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rights of others, including any mortgages, leases, conditional sales
agreements, title retention agreements, liens or other encumbrances except
Liens permitted by this Agreement. Without limiting the foregoing, the Borrower
and its Subsidiaries have good and marketable (or with respect to any
properties in Texas, good and indefeasible) fee simple title to or leasehold
estate in all real property reasonably necessary for the operation of its
business, free from all liens or encumbrances of any nature whatsoever, except
for Permitted Liens. The Borrower or its Subsidiaries is the insured under
owners' policies of title insurance covering all real property owned by it, in
each case in an amount not less than the purchase price for such real property.
Section 6.4. Financial Statements. The Borrower has furnished or caused
Guarantor to furnish to each of the Banks: (a) the consolidated balance sheet
of the Borrower and its Subsidiaries and of Guarantor and its Subsidiaries as
of the Balance Sheet Date certified by the chief financial or accounting
officer of the General Partner and Guarantor, respectively, as fairly
presenting the balance sheet of such Persons for such period, and (b) certain
other financial information relating to the Borrower, Guarantor and their
Subsidiaries requested by the Agent. Guarantor has furnished to each of the
Banks the consolidated balance sheet of Guarantor and its Subsidiaries as of
the Balance Sheet Date. Such balance sheet and statements have been prepared in
accordance with generally accepted accounting principles and fairly present the
financial condition of the Borrower and Guarantor and their respective
Subsidiaries as of such dates and the results of the operations of the Borrower
and Guarantor and their respective Subsidiaries for such periods. There are no
liabilities, contingent or otherwise, of the Borrower, Guarantor or any of
their respective Subsidiaries involving material amounts not disclosed in said
financial statements and the related notes thereto.
Section 6.5. No Material Changes. Since the Balance Sheet Date, there has
occurred no materially adverse change in the financial condition or business of
the Borrower, the Guarantor and their respective Subsidiaries taken as a whole
as shown on or reflected in the consolidated balance sheet of the Borrower and
the Guarantor as of the Balance Sheet Date, or its consolidated statement of
income or cash flows for the fiscal year then ended, other than changes in the
ordinary course of business that have not had any materially adverse effect
either individually or in the aggregate on the business or financial condition
of such Person and changes reflected in the consolidated balance sheet,
consolidated statement of income or cash flows, or other financial information
submitted to the Agent after the Balance Sheet Date.
Section 6.6. Franchises, Patents, Copyrights, Etc. The Borrower and its
Subsidiaries and the General Partner possess all franchises, patents,
copyrights, trademarks, trade names, servicemarks, licenses and permits, and
rights in respect of the foregoing, adequate for the conduct of their business
substantially as now conducted without known violation of any rights of others,
except where a failure to possess such rights could not have a materially
adverse effect on the business, assets or financial condition of such Person.
Section 6.7. Litigation. Except as stated on Schedule 6.7 there are no
actions, suits, proceedings or investigations of any kind pending or to the
best of the Borrower's knowledge and belief threatened against the Borrower,
the General Partner, the Guarantor or any of the Borrower's
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Subsidiaries before any court, tribunal or administrative agency or board that,
if adversely determined, might, either in any case or in the aggregate,
materially adversely affect the properties, assets, financial condition or
business of such Person or materially impair the right of such Person to carry
on business substantially as now conducted by it, or result in any liability
not adequately covered by insurance, or for which adequate reserves are not
maintained on the balance sheet of such Person, or which question the validity
of this Agreement or any of the other Loan Documents, any action taken or to be
taken pursuant hereto or thereto or any lien or security interest created or
intended to be created pursuant hereto or thereto, or which will adversely
affect the ability of such Person to pay and perform the Obligations in the
manner contemplated by this Agreement and the other Loan Documents.
Section 6.8. No Materially Adverse Contracts, Etc. Neither the Borrower,
the General Partner, the Guarantor nor any of the Borrower's Subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation that has or is expected in the future to have
a materially adverse effect on the business, assets or financial condition of
such Person. Neither the Borrower, the General Partner, the Guarantor nor any
of the Borrower's Subsidiaries is a party to any contract or agreement that has
or is expected, in the judgment of the partners or officers of such Person, to
have any materially adverse effect on the business of any of them.
Section 6.9. Compliance with Other Instruments, Laws, Etc. Neither the
Borrower, the General Partner, the Guarantor nor any of the Borrower's
Subsidiaries is in violation of any provision of its partnership agreement,
charter or other organizational documents, bylaws, or any agreement or
instrument to which it may be subject or by which it or any of its properties
may be bound or any decree, order, judgment, statute, license, rule or
regulation, in any of the foregoing cases in a manner that could result in the
imposition of substantial penalties or materially and adversely affect the
financial condition, properties or business of such Person.
Section 6.10. Tax Status. The Borrower, the General Partner, the Guarantor
and each of the Borrower's Subsidiaries (a) has made or filed all federal and
state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject, if applicable or required, except to
the extent such Person has obtained an extension of the deadline to file such
return, (b) has paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations, if
applicable or required, except those being contested in good faith and by
appropriate proceedings or where a failure to so pay could not have a
materially adverse effect on the business, assets or financial condition of
such Person and (c) has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply, if applicable or required. There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction except for those that are being contested as
permitted by this Agreement, and the partners or officers of such Person know
of no basis for any such claim.
Section 6.11. No Event of Default. No Default or Event of Default has
occurred and is continuing.
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Section 6.12. Holding Company and Investment Company Acts. Neither the
Borrower, the General Partner, the Guarantor nor any of the Borrower's
Subsidiaries is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company", as such terms are defined
in the Public Utility Holding Company Act of 1935; nor is it an "investment
company", or an "affiliate company" or a "principal underwriter" of an
"investment company", as such terms are defined in the Investment Company Act
of 1940.
Section 6.13. Absence of UCC Financing Statements, Etc. Except with
respect to Liens permitted by Section 8.2, there is no financing statement,
security agreement, chattel mortgage, real estate mortgage or other document
filed or recorded with any filing records, registry, or other public office,
that purports to cover, affect or give notice of any present or possible future
lien on, or security interest or security title in, any property of the
Borrower or its Subsidiaries or rights thereunder.
Section 6.14. Certain Transactions. Except as set forth in the Prospectus,
none of the partners, officers, trustees, directors, or employees of the
Borrower, the General Partner, the Guarantor or any of the Borrower's
Subsidiaries is a party to any material transaction with the Borrower or any of
its Subsidiaries (other than for services as partners, employees, officers,
trustees and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
partner, officer, trustee, director or such employee or, to the knowledge of
the Borrower, any corporation, partnership, trust or other entity in which any
partner, officer, trustee, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, unless such contract,
agreement or other arrangement is an arms-length arrangement with terms
comparable to those which would be obtained from an unaffiliated Person or is
otherwise approved by the Agent. For the purposes of this Section 6.14, a
transaction shall be deemed "material" to the extent such transaction would be
required to be disclosed to the shareholders of Guarantor pursuant to
applicable securities laws (including, without limitation, Item 404 of
Regulation SK promulgated by the SEC).
Section 6.15. Employee Benefit Plans. The Borrower and each ERISA
Affiliate has fulfilled its obligations under the minimum funding standards of
ERISA and the Code with respect to each Employee Benefit Plan, Multiemployer
Plan or Guaranteed Pension Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan.
Neither the Borrower nor any ERISA Affiliate has (a) sought a waiver of the
minimum funding standard under Section 412 of the Code in respect of any
Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, (b)
failed to make any contribution or payment to any Employee Benefit Plan,
Multiemployer Plan or Guaranteed Pension Plan, or made any amendment to any
Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, which has
resulted or could result in the imposition of a Lien or the posting of a bond
or other security under ERISA or the Code, or (c) incurred any liability under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA. None of the Real Estate constitutes a "plan asset" of any
Employee Plan, Multiemployer Plan or Guaranteed Pension Plan.
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Section 6.16. Regulations U and X. No portion of any Loan is to be used by
Borrower for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
Section 6.17. Environmental Compliance. The Borrower has taken all
commercially reasonable steps necessary to investigate the past and present
conditions and usage of the Real Estate and the operations conducted thereon
and, based upon such investigation, makes the following representations and
warranties. All of the representations and warranties in this Section 6.17 with
respect to the Real Estate shall be deemed to except to the matters
specifically set forth in the written environmental site assessment reports
with respect thereto provided to the Agent on or before thirty (30) days after
receipt of written notice from the Agent of those environmental reports that
are in Agent's possession with respect to existing Real Estate, or within sixty
(60) days of the acquisition of Real Estate with respect to Real Estate
acquired after the date hereof, provided that, except for any such exceptions
approved by the Majority Banks, none of such exceptions may individually or in
the aggregate have a materially adverse effect on the business, assets or
financial condition of the Borrower, the General Partner or any of the
Borrower's Subsidiaries.
6.17.1. To the best of the Borrower's knowledge, none of the
Borrower, the General Partner or the Borrower's Subsidiaries or any
operator of the Real Estate, or any operations thereon is in violation, or
alleged violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state or
local statute, regulation, ordinance, order or decree relating to the
environment (hereinafter "Environmental Laws"), which violation involves
the Real Estate and would have a material adverse effect on the
environment or the business, assets or financial condition of the
Borrower, the General Partner or any of the Borrower's Subsidiaries.
6.17.2. Neither the Borrower, the General Partner nor any of the
Borrower's Subsidiaries has received notice from any third party
including, without limitation, any federal, state or local governmental
authority, (i) that it has been identified by the United States
Environmental Protection Agency ("EPA") as a potentially responsible party
under CERCLA with respect to a site listed on the National Priorities
List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste,
as defined by 42 U.S.C. Section 9601(5), any hazardous substances as
defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as
defined by 42 U.S.C. Section 9601(33) or any toxic substances, oil or
hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which it has generated,
transported or disposed of have been found at any site at which a federal,
state or local agency or other third party has
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conducted or has ordered that the Borrower, the General Partner or any of
the Borrower's Subsidiaries conduct a remedial investigation, removal or
other response action pursuant to any Environmental Law; or (iii) that it
is or shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding (in each case, contingent
or otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances.
6.17.3. To the best of the Borrower's knowledge, or in the case of
Real Estate acquired after the date hereof, to the best of the Borrower's
knowledge except as may be disclosed to Agent in writing upon the
acquisition of the same: (i) no portion of the Real Estate has been used
as a landfill or for dumping or for the handling, processing, storage or
disposal of Hazardous Substances except in accordance with applicable
Environmental Laws, and no underground tank or other underground storage
receptacle for Hazardous Substances is located on any portion of the Real
Estate; (ii) in the course of any activities conducted by the Borrower,
the General Partner, the Borrower's Subsidiaries or the operators of any
of their properties, no Hazardous Substances have been generated or are
being used on the Real Estate except in the ordinary course of business
and in accordance with applicable Environmental Laws; (iii) there has been
no past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, disposing or dumping
(a "Release") or threatened Release of Hazardous Substances on, upon, into
or from the Real Estate, which Release would have a material adverse
effect on the value of any of the Real Estate or adjacent properties or
the environment; (iv) there have been no Releases on, upon, from or into
any real property in the vicinity of any of the Real Estate which, through
soil or groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of, the Real
Estate; and (v) any Hazardous Substances that have been generated on any
of the Real Estate have been transported off-site only by carriers having
an identification number issued by the EPA or approved by a state or local
environmental regulatory authority having jurisdiction regarding the
transportation of such substance and treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under all applicable Environmental Laws, which transporters and facilities
have been and are, to the best of the Borrower's knowledge, operating in
compliance with such permits and applicable Environmental Laws.
6.17.4. Neither the Borrower, the General Partner, the Borrower's
Subsidiaries, nor any Real Estate is subject to any applicable
Environmental Law requiring the performance of Hazardous Substances site
assessments, or the removal or remediation of Hazardous Substances, or the
giving of notice to any governmental agency or the recording or delivery
to other Persons of an environmental disclosure document or statement by
virtue of the transactions set forth herein and contemplated hereby, or to
the effectiveness of any other transactions contemplated hereby.
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Section 6.18. Subsidiaries. Schedule 6.18 sets forth, as of the date
hereof, all of the Subsidiaries of the Borrower, the form and jurisdiction of
organization of each of the Subsidiaries, and the Borrower's ownership interest
therein.
Section 6.19. Loan Documents. All of the representations and warranties
made by or on behalf of the Borrower, the General Partner, the Guarantor and
the Borrower's Subsidiaries made in this Agreement and the other Loan Documents
or any document or instrument delivered to the Agent or the Banks pursuant to
or in connection with any of such Loan Documents are true and correct in all
material respects, and neither the Borrower nor the Guarantor has failed to
disclose such information as is necessary to make such representations and
warranties not misleading.
Section 6.20. Property. All of the Borrower's and its Subsidiaries' Real
Estate are in good condition and working order subject to ordinary wear and
tear, other than with respect to deferred maintenance existing as of the date
of acquisition of such property which is being corrected or repaired in the
ordinary course of business. The Borrower further has completed an appropriate
investigation of the environmental condition of each such property owned or
leased by the Borrower or its Subsidiaries as of the later of the date of the
Borrower's or such Subsidiaries' purchase thereof or the date upon which such
property was last security for Indebtedness of the Borrower or such Subsidiary,
including preparation or updating of a "Phase I" report and, if recommended by
the "Phase I" report, a "Phase II" report, in each case prepared by a
recognized environmental engineer in accordance with customary standards which
discloses that such property is not in violation of the representations and
covenants set forth in this Agreement, unless satisfactory remediation actions
are being taken. There are no unpaid or outstanding real estate or other taxes
or assessments on or against any property of the Borrower or any of its
Subsidiaries which are payable by the Borrower or its Subsidiaries (except only
real estate or other taxes or assessments, that are not yet due and payable or
are being protested as permitted by this Agreement). There are no pending
eminent domain proceedings against any property of the Borrower or its
Subsidiaries or any part thereof, and, to the knowledge of the Borrower, no
such proceedings are presently threatened or contemplated by any taking
authority which may individually or in the aggregate have any materially
adverse effect on the business or financial condition of the Borrower. None of
the property of Borrower or its Subsidiaries is now damaged as a result of any
fire, explosion, accident, flood or other casualty in any manner which
individually or in the aggregate would have any materially adverse effect on
the business or financial condition of the Borrower.
Section 6.21. Brokers. Neither the Borrower nor any of its Subsidiaries
has engaged or otherwise dealt with any broker, finder or similar entity in
connection with this Agreement or the Loans contemplated hereunder.
Section 6.22. Partners and the Guarantor. General Partner is the sole
general partner of the Borrower and owns a 1% partnership interest in the
Borrower. Guarantor is the sole shareholder of the General Partner. Guarantor
is a limited partner of the Borrower and as of the date of this Agreement owns
approximately an 87% limited partnership interest in the Borrower. Guarantor
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owns no assets other than its stock in the General Partner, its interest in the
Borrower as the Limited Partner, Cash and Short-Term Investments.
Section 6.23. Solvency. As of the Closing Date and after giving effect to
the transactions contemplated by this Agreement and the other Loan Documents,
including all of the Loans to be made hereunder, neither the Borrower nor the
Guarantor is insolvent on a balance sheet basis such that the sum of such
Person's assets exceeds the sum of such Person's liabilities, the Borrower and
the Guarantor are able to pay their respective debts as they become due, and
the Borrower and the Guarantor have sufficient capital to carry on their
respective businesses.
Section 6.24. Other Debt. None of the Borrower, the Guarantor nor any of
their respective Subsidiaries is in default of the payment of any Indebtedness
or the terms of any other mortgage, deed of trust, security agreement,
financing agreement, indenture or other material lease or agreement to which
any of them is a party which relates to Indebtedness or other obligations which
individually or in the aggregate exceed $1,000,000.00. None of the Borrower or
the Guarantor is a party to or bound by any agreement, instrument or indenture
that may require the subordination in right or time of payment of any of the
Obligations to any other indebtedness or obligation of the Borrower or the
Guarantor. The Borrower and the Guarantor have made available to the Agent
copies of all agreements, mortgages, deeds of trust, financing agreements or
other material agreements binding upon the Borrower and the Guarantor and their
Subsidiaries or their respective properties and entered into by the Borrower or
the Guarantor and their Subsidiaries as of the date of this Agreement with
respect to any Indebtedness of such Borrower or Guarantor and their
Subsidiaries.
Section 6.25. Magellan Transaction. As of the date hereof, the Borrower
has provided the Agent with correct and complete copies of all documentation
relating to the Borrower's acquisition of the Behavioral Healthcare Facilities
from Magellan.
SECTION 7. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans:
Section 7.1. Punctual Payment. The Borrower will duly and punctually pay
or cause to be paid the principal and interest on the Loans and all interest
and fees provided for in this Agreement, all in accordance with the terms of
this Agreement and the Notes as well as all other sums owing pursuant to the
Loan Documents.
Section 7.2. Maintenance of Office. The Borrower will maintain its chief
executive office at 777 Main Street, Suite 2100, Tarrant County, Fort Worth,
Texas, or at such other place in the United States of America as the Borrower
shall designate upon prior written notice to the Agent and the Banks, where
notices, presentations and demands to or upon the Borrower in respect of the
Loan Documents may be given or made.
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Section 7.3. Records and Accounts. The Borrower will (a) keep, and cause
each of its Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in accordance with
generally accepted accounting principles and (b) maintain reasonably adequate
accounts and reserves for all taxes (including income taxes), depreciation and
amortization of its properties and the properties of its Subsidiaries,
contingencies and other reserves.
Section 7.4. Financial Statements, Certificates and Information. The
Borrower will deliver to the Agent:
7.4.1. as soon as practicable, but in any event not later than 95
days after the end of each fiscal year of the Borrower and the Guarantor,
the audited consolidated balance sheet of the Borrower and its
Subsidiaries and the Guarantor at the end of such year, and the related
audited consolidated statements of income, changes in capital and cash
flows for such year, each setting forth in comparative form the figures
for the previous fiscal year and all such statements to be in reasonable
detail, prepared in accordance with generally accepted accounting
principles, and accompanied by an auditor's report prepared without
qualification by Arthur Andersen & Co. or by another "Big Six" accounting
firm, and any other information the Banks may need to complete a financial
analysis of the Borrower, together with a written statement from such
accountants to the effect that they have read a copy of this Agreement,
and that, in making the examination necessary to said certification, they
have obtained no knowledge of any Default or Event of Default, or, if such
accountants shall have obtained knowledge of any then existing Default or
Event of Default they shall disclose in such statement any such Default or
Event of Default; provided that such accountants shall not be liable to
the Agent or the Banks for failure to obtain knowledge of any Default or
Event of Default;
7.4.2. as soon as practicable, but in any event not later than 45
days after the end of each fiscal quarter of the Borrower (including the
fourth fiscal quarter in each year), copies of the unaudited consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such
quarter, and the related unaudited consolidated statements of income,
changes in capital and cash flows for the portion of the Borrower's fiscal
year then elapsed, all in reasonable detail and prepared in accordance
with generally accepted accounting principles, together with a
certification by the principal financial or accounting officer of the
General Partner that the information contained in such financial
statements fairly presents the financial position of the Borrower and its
Subsidiaries on the date thereof (subject to year-end adjustments);
7.4.3. contemporaneously with the delivery of the financial
statements referred to in clause (a) above, a statement of all contingent
liabilities of the Borrower and its Subsidiaries which are not reflected
in such financial statements or referred to in the notes thereto
(including, without limitation, all guarantees, endorsements and other
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contingent obligations in respect of indebtedness of others, and
obligations to reimburse the issuer in respect of any letters of credit);
7.4.4. simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement (a "Compliance
Certificate") certified by the principal financial or accounting officer
of the General Partner in the form of Exhibit C hereto setting forth in
reasonable detail computations evidencing compliance with the covenants
contained in Section 9 and the other covenants described therein, and (if
applicable) reconciliations to reflect changes in generally accepted
accounting principles since the Balance Sheet Date;
7.4.5. simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above and the Compliance
Certificate referred to in subsection (d) above, a spreadsheet listing
each parcel of Real Estate and its location, date of acquisition, size
(square footage for office and retail assets; number of rooms for
hotel/resort assets; and number of beds for behavioral healthcare
facilities), occupancy level for the quarter most recently ended, cost
(appraised value if acquired prior to October, 1995), rolling four quarter
Net Income (actual lease payments received by the Borrower for
hotel/resort assets and behavioral healthcare facilities) and for office
building assets, the major tenants and percentage of gross leasable area
occupied;
7.4.6. not later than 60 days following each acquisition of an
interest in Real Estate by the Borrower or any of its Subsidiaries (which
for the purposes of this Section 7.4(f) shall include the Investments
described in Section 8.3(i)), each of the following (provided that with
respect to the Investments described in Section 8.3(i), the following
items shall be provided to the extent the same are reasonably available to
the Borrower or its Subsidiaries): (i) a description of the property
acquired, and (ii) a Compliance Certificate prepared using the financial
statements of the Borrower most recently provided or required to be
provided to the Banks under Section 6.4 or this Section 7.4 adjusted in
the best good-faith estimate of the Borrower to give effect to such
acquisition and demonstrating that no Default or Event of Default with
respect to the covenants referred to therein shall exist after giving
effect to such acquisition;
7.4.7. promptly after they are filed with the Internal Revenue
Service, copies of all annual federal income tax returns and amendments
thereto of the Borrower, the General Partner and the Limited Partner;
7.4.8. prior to the acquisition by the Borrower of any Real Estate or
interest therein costing in excess of $1,000,000.00, a statement of
Borrower that no Default or Event of Default exists or would be caused as
a result of such acquisition;
7.4.9. not later than five (5) Business Days after the Borrower
receives notice of the same from either of the Rating Agencies or
otherwise learns of the same, notice of the issuance of any change in the
rating by either of the Rating Agencies in respect of any
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debt of the Borrower (including any change in an Implied Rating), together
with the details thereof, and of any announcement by either of the Rating
Agencies that any such rating is "under review" or that any such rating
has been placed on a watch list or that any similar action has been taken
by either of the Rating Agencies (collectively a "Rating Notice");
7.4.10. such financial statements and other information with respect
to CBHS as shall be reasonably required by the Agent to test compliance
with the covenants contained in Section 9.10; and
7.4.11. from time to time such other financial data and information
in the possession of the Borrower or its Subsidiaries (including without
limitation auditors' management letters, property inspection and
environmental reports and information as to zoning and other legal and
regulatory changes affecting the Borrower or its Subsidiaries) as the
Agent may reasonably request.
Section 7.5. Notices.
7.5.1. Defaults. The Borrower will promptly notify the Agent in
writing of the occurrence of any Default or Event of Default. If any
Person shall give any notice or take any other action in respect of a
claimed default (whether or not constituting an Event of Default) under
this Agreement or under any note, obligation or other evidence of
indebtedness to which or with respect to which the Borrower, the General
Partner, the Guarantor or any of the Borrower's Subsidiaries is a party or
obligor, whether as principal or surety, and such default would permit the
holder of such note or obligation or other evidence of indebtedness to
accelerate the maturity thereof, which acceleration would have a material
adverse effect on the Borrower, the General Partner, the Guarantor or any
of the Borrower's Subsidiaries, the Borrower shall forthwith give written
notice thereof to the Agent describing the notice or action and the nature
of the claimed default.
7.5.2. Environmental Events. The Borrower will promptly give notice
to the Agent (i) upon the Borrower obtaining knowledge of any potential or
known Release, or threat of Release, of any Hazardous Substances at or
from any Real Estate of the Borrower or its Subsidiaries; (ii) of any
violation of any Environmental Law that the Borrower or any of its
Subsidiaries reports in writing or is reportable by such Person in writing
(or for which any written report supplemental to any oral report is made)
to any federal, state or local environmental agency and (iii) upon
becoming aware thereof, of any inquiry, proceeding, investigation, or
other action, including a notice from any agency of potential
environmental liability, of any federal, state or local environmental
agency or board, that in either case involves any Real Estate of the
Borrower or its Subsidiaries or has the potential to materially affect the
assets, liabilities, financial conditions or operations of the Borrower or
any Subsidiary.
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7.5.3. Notice of Litigation and Judgments. The Borrower will give
notice to the Agent in writing within 15 days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Borrower, the General Partner, any of the
Borrower's Subsidiaries or the Guarantor or to which any of such persons
is or is to become a party involving an uninsured claim against any of
such Persons that could reasonably be expected to have a materially
adverse effect on such Person and stating the nature and status of such
litigation or proceedings. The Borrower will give notice to the Agent, in
writing, in form and detail satisfactory to the Agent and each of the
Banks, within ten days of any judgment not covered by insurance, whether
final or otherwise, against the Borrower, the General Partner, any of the
Borrower's Subsidiaries or the Guarantor in an amount in excess of
$500,000.00.
7.5.4. Notice of Proposed Sales, Encumbrances, Refinance or Transfer
of Property. The Borrower will give notice to the Agent of any proposed or
completed sale, encumbrance, refinance or transfer by the Borrower or its
Subsidiaries of any Real Estate or any other Investment described in
Section 8.3(i) within any fiscal quarter of the Borrower, such notice to
be submitted together with the Compliance Certificate provided or required
to be provided to the Banks under Section 7.4 with respect to such fiscal
quarter. The Compliance Certificate shall with respect to any proposed or
completed sale, encumbrance, refinance or transfer be adjusted in the best
good-faith estimate of the Borrower to give effect to such sale,
encumbrance, refinance or transfer and demonstrate that no Default or
Event of Default with respect to the covenants referred to therein shall
exist after giving effect to such sale, encumbrance, refinance or
transfer. Notwithstanding the foregoing, in the event of any sale,
encumbrance, refinance or transfer by the Borrower or its Subsidiaries of
any Real Estate or any other Investment described in Section 8.3(i)
involving an amount in excess of $35,000,000.00, the Borrower shall
promptly give notice to the Agent of such transaction, which notice shall
be accompanied by a Compliance Certificate prepared using the financial
statements of the Borrower most recently provided or required to be
provided to the Banks under Section 6.4 or Section 7.4 adjusted as
provided in the preceding sentence.
Section 7.6. Existence; Maintenance of Properties.
7.6.1. The Borrower will do or cause to be done all things necessary
to preserve and keep in full force and effect its existence as a Delaware
limited partnership. The Borrower will cause each of its Subsidiaries to
do or cause to be done all things necessary to preserve and keep in full
force and effect its legal existence. The Borrower will do or cause to be
done all things necessary to preserve and keep in full force all of its
material rights and franchises and those of its Subsidiaries. The Borrower
will, and will cause each of its Subsidiaries to, continue to engage
primarily in the businesses now conducted by it and in related businesses,
unless otherwise consented to by the Majority Banks.
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7.6.2. Irrespective of whether proceeds of the Loans are available
for such purpose, the Borrower (i) will cause all of its properties and
those of its Subsidiaries used or useful in the conduct of its business or
the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted) and
supplied with all necessary equipment, and (ii) will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof in all cases in which the failure so to do would have a material
adverse effect on the condition of its properties or on the financial
condition, assets or operations of the Borrower and its Subsidiaries.
Section 7.7. Insurance. The Borrower will procure and maintain or cause to
be procured and maintained insurance covering the Borrower and the Guarantor
and their respective Subsidiaries and their respective properties (the cost of
such insurance to be borne by the insured thereunder) in such amounts and
against such risks and casualties as are customary for properties of similar
character and location, due regard being given to the type of improvements
thereon, their construction, location, use and occupancy.
Section 7.8. Taxes. The Borrower and each Subsidiary will duly pay and
discharge, or cause to be paid and discharged, before the same shall become
overdue, all taxes, assessments and other governmental charges imposed upon it
and upon the Real Estate, sales and activities, or any part thereof, or upon
the income or profits therefrom, as well as all claims for labor, materials, or
supplies that if unpaid might by law become a lien or charge upon any of its
property; provided that any such tax, assessment, charge, levy or claim need
not be paid if the validity or amount thereof shall currently be contested in
good faith by appropriate proceedings and if the Borrower or such Subsidiary
shall have set aside on its books reasonably adequate reserves with respect
thereto; and provided, further, that forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor,
the Borrower and each Subsidiary of the Borrower either (i) will provide a bond
issued by a surety reasonably acceptable to the Agent and sufficient to stay
all such proceedings or (ii) if no such bond is provided, will pay each such
tax, assessment, charge, levy or claim.
Section 7.9. Inspection of Properties and Books. The Borrower shall permit
the Banks, through the Agent or any representative designated by the Agent, to
visit and inspect any of the properties of the Borrower or any of its
Subsidiaries, to examine the books of account of the Borrower and its
Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss
the affairs, finances and accounts of the Borrower and its Subsidiaries with,
and to be advised as to the same by, its officers, all at such reasonable times
and intervals as the Agent or any Bank may reasonably request. The Agent shall
use good faith efforts to coordinate such visits and inspections so as to
minimize the interference with and disruption to the Borrower's normal business
operations. From and after the occurrence of an Event of Default which is
continuing, the Borrower shall bear the costs and expenses incurred by Agent or
its representatives in conducting such visits or inspections.
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Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits. The
Borrower will comply with, and will cause each of its Subsidiaries to comply in
all respects with (i) all applicable laws and regulations now or hereafter in
effect wherever its business is conducted, including all Environmental Laws,
(ii) the provisions of its corporate charter, partnership agreement or
declaration of trust, as the case may be, and other charter documents and
bylaws, (iii) the Prospectus, (iv) all agreements and instruments (other than
the Loan Documents) to which it is a party or by which it or any of its
properties may be bound, (v) all applicable decrees, orders, and judgments, and
(vi) all licenses and permits required by applicable laws and regulations for
the conduct of its business or the ownership, use or operation of its
properties, except when a failure to so comply with the foregoing (i) - (vi)
would not have a material adverse effect on the business, assets or financial
condition of the Borrower or such Subsidiary. If at any time while any Loan or
Note is outstanding or the Banks have any obligation to make Loans hereunder,
any authorization, consent, approval, permit or license from any officer,
agency or instrumentality of any government shall become necessary or required
in order that the Borrower may fulfill any of its obligations hereunder, the
Borrower will immediately take or cause to be taken all steps necessary to
obtain such authorization, consent, approval, permit or license.
Section 7.11. Further Assurances. The Borrower will cooperate with, and
will cause each of its Subsidiaries to cooperate with the Agent and the Banks
and execute such further instruments and documents as the Banks or the Agent
shall reasonably request to carry out to their satisfaction the transactions
contemplated by this Agreement and the other Loan Documents.
Section 7.12. Ownership of Real Estate. All interests (whether direct or
indirect) of the Borrower, the General Partner or the Guarantor or their
respective Subsidiaries in income-producing real estate assets acquired after
the date hereof shall be owned directly by the Borrower (other than interests
in residential real estate developments held by the Residential Corporations
and other than as specifically permitted in Section 8.14); provided that, if
the Real Estate cannot be owned directly by the Borrower for a compelling
reason, as determined by the Agent in the exercise of its sole discretion, the
Borrower may hold Real Estate in other forms (such as cotenancy interests,
leasehold interests, partnership interests, membership interests in limited
liability companies, shares of stock in corporations owning real estate, or
through mortgages or participations in or assignments of mortgages) under this
Agreement so long as the Borrower holds at least ninety percent (90%) of the
Voting Interests of the entity owning the assets and has full control of the
operation of such entity, including, without limitation, the right to sell,
encumber, convey or otherwise transfer such entity's assets, to arrange and
refinance such entity's debt and to effect distributions of such entity's
income.
Section 7.13. Investment Advisor. The Borrower shall be self-directed and
the Borrower shall not retain or otherwise rely on any other Person for
investment advisory services.
Section 7.14. Non-Competition Agreements. The Non-Competition Agreements
have been duly executed and delivered, are in full force and effect, and are
the legal, valid and binding obligations of the parties thereto, enforceable in
accordance with their terms. Without the prior written consent of the Agent,
the Borrower shall not (a) amend or modify any of the Non-Competition
Agreements, (b) terminate or surrender any of the Non-Competition Agreements,
or (c) waive or release any other party thereto from the performance or
observation by such Person of any obligation or condition of any of the
Non-Competition Agreements (provided that the foregoing shall not prohibit
Richard E. Rainwater, Gerald W. Haddock or John C. Goff from obtaining waivers
to specific transactions from a majority of the independent directors of
Guarantor as provided therein). The Borrower shall, at no cost or expense to
the Agent, enforce, short of termination, the performance and observance of
each and every term, condition and covenant of each of the Non-Competition
Agreements to be performed or observed by the other parties thereunder, and
appear in and defend any action arising out of, or in any manner connected
with, any of the Non-Competition Agreements, and give prompt notice to the
Agent of any claim of default under any of the Non-Competition Agreements,
whether given by the Borrower to the other party thereto, or given by the other
party thereto to the Borrower.
Section 7.15. Business Operations. The Borrower shall operate its business
substantially as described in the Prospectus and in compliance with the terms
and conditions of this Agreement and the Loan Documents.
Section 7.16. Intentionally Omitted.
Section 7.17. Limiting Agreements.
7.17.1. Neither Borrower, the Guarantor, nor any of their respective
Subsidiaries shall enter into any agreement, instrument or transaction
which has or may have the effect of prohibiting or limiting Borrower's
ability to pledge to Agent Real Estate which is owned by the Borrower and
is free and clear of all Liens other than the Liens permitted in Section
8.2(i), (iii) and (vi) or any other assets of the Borrower as security for
the Loans. Borrower shall take, and shall cause Guarantor and their
respective Subsidiaries to take, such actions as are necessary to preserve
the right and ability of Borrower to pledge those Real Estate and other
assets as security for the Loans without any such pledge after the date
hereof causing or permitting the acceleration (after the giving of notice
or the passage of time, or otherwise) of any other Indebtedness of
Borrower, Guarantor, or any of their respective Subsidiaries.
7.17.2. Borrower shall, upon demand, provide to the Agent such
evidence as the Agent may reasonably require to evidence compliance with
this Section 7.17, which evidence shall include, without limitation,
copies of any agreements or instruments which would in any way restrict or
limit the Borrower's ability to pledge assets as security for
Indebtedness, or which provide for the occurrence of a default (after the
giving of notice or the passage of time, or otherwise) if assets are
pledged in the future as security for Indebtedness of the Borrower or any
of its Subsidiaries.
Section 7.18. More Restrictive Agreements. Should the Borrower or the
Guarantor enter into or modify any agreements or documents pertaining to any
existing or future Indebtedness, Debt Offering or Equity Offering, which
agreements or documents include covenants, whether
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affirmative or negative (or any other provision which may have the same
practical effect as any of the foregoing), which are individually or in the
aggregate more restrictive against the Borrower, the Guarantor or their
respective Subsidiaries than those set forth in Articles 8 or 9 of this
Agreement or Paragraph 11 of the Guaranty, the Borrower shall promptly notify
the Agent and, if requested by the Majority Banks, the Borrower, the Agent, and
the Majority Banks shall promptly amend this Agreement and the other Loan
Documents to include some or all of such more restrictive provisions as
determined by the Majority Banks in their sole discretion.
Section 7.19. Applicability of Covenants to Residential Corporations. By
acceptance of this Agreement, the Banks agree that the Borrower's obligations
to cause the Residential Corporations to comply with the covenants set forth in
Articles 7 and 8 of this Agreement shall be limited to the full extent that the
Borrower has the legal right, whether by contract, at law or in equity, to
cause compliance by the Residential Corporations with such covenants.
Section 7.20. Distributions of Income to the Borrower. The Borrower shall
cause all of its Subsidiaries to promptly distribute to the Borrower (but not
less frequently than once each fiscal quarter of the Borrower), whether in the
form of dividends, distributions or otherwise, all profits, proceeds or other
income relating to or arising from its Subsidiaries' use, operation, financing,
refinancing, sale or other disposition of their respective assets and
properties after (a) the payment by each Subsidiary of its Debt Service and
operating expenses for such quarter and (b) the establishment of reasonable
reserves for the payment of operating expenses not paid on at least a quarterly
basis and capital improvements to be made to such Subsidiary's assets and
properties approved by such Subsidiary in the ordinary course of business
consistent with its past practices. Notwithstanding the foregoing, the Borrower
shall enforce its rights at law and in equity to receive distributions from (i)
the Residential Corporations at the same time that distributions are made to
other shareholders of the Residential Corporations, and (ii) Subsidiaries of
the Borrower in which the Borrower owns less than a majority (by number of
votes or controlling interests) of the outstanding Voting Interests.
SECTION 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any of the Banks has any obligation to make any Loans:
Section 8.1. Restrictions on Indebtedness. Subject to the provisions of
Section 9, the Borrower will not, and will not permit any of its Subsidiaries
to, create, incur, assume, guarantee or be or remain liable, contingently or
otherwise, with respect to any Indebtedness other than:
8.1.1. Indebtedness to the Banks arising under any of the Loan
Documents;
8.1.2. Current liabilities of the Borrower or its Subsidiaries
incurred in the ordinary course of business but not incurred through (i)
the borrowing of money, or (ii) the obtaining of credit except for credit
on an open account basis customarily extended and in fact extended in
connection with normal purchases of goods and services;
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8.1.3. Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of Section 7.8;
8.1.4. Indebtedness in respect of judgments or awards that have been
in force for less than the applicable period for taking an appeal so long
as execution is not levied thereunder or in respect of which the Borrower
shall at the time in good faith be prosecuting an appeal or proceedings
for review and in respect of which a stay of execution shall have been
obtained pending such appeal or review;
8.1.5. Endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;
8.1.6. Non-recourse Indebtedness of the Borrower or any Subsidiary of
the Borrower, provided that neither the Borrower nor any of its
Subsidiaries shall incur any Non-recourse Indebtedness in excess of
$10,000,000.00 in any single transaction unless it shall have provided to
the Agent a statement that no Default or Event of Default exists and a
Compliance Certificate demonstrating that the Borrower will be in
compliance with its covenants referred to therein after giving effect to
such incurrence;
8.1.7. Indebtedness in respect of reverse repurchase agreements
having a term of not more than 180 days with respect to Investments
described in Section 8.3(d) or (e);
8.1.8. Indebtedness existing on the date of this Agreement and listed
and described on Schedule 8.1(h) hereto;
8.1.9. Other recourse Indebtedness of the Borrower and its
Subsidiaries in an aggregate outstanding principal amount (excluding the
Obligations) not exceeding $100,000,000.00; provided that neither the
Borrower nor any of its Subsidiaries shall incur any recourse Indebtedness
described in this Section 8.1(i) in excess of $10,000,000.00 in any single
transaction unless it shall have provided to the Agent a statement that no
Default or Event of Default exists and a Compliance Certificate
demonstrating that the Borrower will be in compliance with its covenants
referred to therein after giving effect to such incurrence;
8.1.10. Indebtedness of Subsidiaries of the Borrower to the Borrower;
and
8.1.11. unsecured Debt Offerings which have been granted an
Investment Grade Rating by either of the Rating Agencies at the time of
issuance, or has received an NAIC 1 rating at the time of issuance, or
which in the reasonable judgment of the Majority Banks would likely
receive an Investment Grade Rating or an NAIC 1 rating at the time of
issuance in the event that such a rating was sought from either of the
Rating Agencies or NAIC, as applicable, in an aggregate outstanding
principal amount not exceeding
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$300,000,000.00; provided (i) at the time such Indebtedness is issued the
scheduled maturity date of such Indebtedness is not earlier than two (2)
years after the Maturity Date (after giving effect to any extension of the
Maturity Date which may have been requested by the Borrower prior to the
issuance of such Indebtedness or approved by the Banks, whether or not the
same has become effective), and (ii) if any covenants or restrictions
imposed upon the Borrower or its Subsidiaries or the Guarantor in
connection with such Indebtedness are individually or in the aggregate
more restrictive against the Borrower, its Subsidiaries and the Guarantor
than the covenants and restrictions imposed pursuant to this Agreement or
the other Loan Documents, the Borrower shall promptly notify the Agent and
if requested by the Majority Banks, the Borrower, the Agent, and the
Majority Banks shall promptly amend this Agreement and the other Loan
Documents to include some or all of such more restrictive provisions as
determined by the Majority Banks in their sole discretion; and provided
further that neither the Borrower, its Subsidiaries nor the Guarantor
shall incur any of the Indebtedness described in this Section 8.1(k)
unless it shall have provided to the Banks prior written notice of the
proposed issuance of such Indebtedness, a statement that no Default or
Event of Default exists and a Compliance Certificate that the Borrower
will be in compliance with its covenants referred to herein after giving
effect to such incurrence.
Section 8.2. Restrictions on Liens, Etc. The Borrower will not, and will
not permit any of its Subsidiaries to, (a) create or incur or suffer to be
created or incurred or to exist any lien, encumbrance, mortgage, pledge,
negative pledge, charge, restriction or other security interest of any kind
upon any of its property or assets of any character whether now owned or
hereafter acquired, or upon the income or profits therefrom; (b) transfer any
of its property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (c) acquire, or
agree or have an option to acquire, any property or assets upon conditional
sale or other title retention or purchase money security agreement, device or
arrangement; (d) suffer to exist for a period of more than 60 days after the
same shall have been incurred any Indebtedness or claim or demand against it
that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be
given any priority whatsoever over its general creditors; (e) pledge or
otherwise encumber any accounts, contract rights, general intangibles, chattel
paper or instruments, with or without recourse; or (f) incur or maintain any
obligation to any holder of Indebtedness of the Borrower or such Subsidiary
which prohibits the creation or maintenance of any lien securing the
Obligations (collectively "Liens"); provided that the Borrower and any
Subsidiary of the Borrower may create or incur or suffer to be created or
incurred or to exist:
(i) liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in respect
of obligations not overdue;
(ii) liens on properties in respect of judgments, awards or
indebtedness, the Indebtedness with respect to which is permitted by
Section 8.1(d), Section 8.1(f) or Section 8.1(i);
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(iii) encumbrances on properties consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property,
landlord's or lessor's liens under leases to which the Borrower or a
Subsidiary of the Borrower is a party, and other minor non-monetary liens
or encumbrances none of which interferes materially with the use of the
property affected in the ordinary conduct of the business of the Borrower
and its Subsidiaries, which encumbrances or liens do not individually or
in the aggregate have a materially adverse effect on the business of the
Borrower individually or of the Borrower and its Subsidiaries on a
consolidated basis;
(iv) [intentionally omitted];
(v) liens on Real Estate and Short-term Investments securing
Non-recourse Indebtedness permitted by Section 8.1(f) or recourse
Indebtedness permitted by Section 8.1(i);
(vi) liens in favor of the Agent and the Banks under the Loan
Documents; and
(vii) liens on office equipment, vehicles, furnishings or equipment
incurred in the ordinary course of business securing a maximum aggregate
outstanding Indebtedness of not more than $1,000,000.00.
Section 8.3. Restrictions on Investments. The Borrower will not, and will
not permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except Investments in:
8.3.1. marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of
purchase by the Borrower or its Subsidiary;
8.3.2. marketable direct obligations of any of the following: Federal
Home Loan Mortgage Corporation, Student Loan Marketing Association,
Federal Home Loan Banks, Federal National Mortgage Association, Government
National Mortgage Association, Bank for Cooperatives, Federal Intermediate
Credit Banks, Federal Financing Banks, Export-Import Bank of the United
States, Federal Land Banks, or any other agency or instrumentality of the
United States of America;
8.3.3. demand deposits, certificates of deposit, bankers acceptances
and time deposits of United States banks having total assets in excess of
$100,000,000; provided, however, that the aggregate amount at any time so
invested with any single bank having total assets of less than
$1,000,000,000 will not exceed $200,000;
8.3.4. securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any State which at the time of purchase are rated by Moody's
Investors Service, Inc. or by
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Standard & Poor's Corporation at not less than "P 2" if then rated by
Moody's Investors Service, Inc., and not less than "A 2", if then rated by
Standard & Poor's Corporation;
8.3.5. mortgage-backed securities guaranteed by the Government
National Mortgage Association, the Federal National Mortgage Association
or the Federal Home Loan Mortgage Corporation and other mortgage-backed
bonds which at the time of purchase are rated by Moody's Investors
Service, Inc. or by Standard & Poor's Corporation at not less than "Aa" if
then rated by Moody's Investors Service, Inc. and not less than "AA" if
then rated by Standard & Poor's Corporation;
8.3.6. repurchase agreements having a term not greater than 90 days
and fully secured by securities described in the foregoing subsection (a),
(b) or (e) with banks described in the foregoing subsection (c) or with
financial institutions or other corporations having total assets in excess
of $500,000,000;
8.3.7. shares of so-called "money market funds" registered with the
SEC under the Investment Company Act of 1940 which maintain a level
per-share value, invest principally in investments described in the
foregoing subsections (a) through (f) and have total assets in excess of
$50,000,000;
8.3.8. Subject to the provisions of Section 9.8, Investments in fee
interests or mortgageable ground leases having a remaining term
(calculated from the date of acquisition of such interest) of not less
than fifty (50) years in Real Estate utilized principally for behavioral
healthcare facilities, Class A office space and/or hotel/resort properties
which are of institutional quality or other income-producing real estate
approved by the Majority Banks, including earnest money deposits relating
thereto and transaction costs;
8.3.9. Subject to the provisions of Section 9.8, Investments in
undeveloped land and Real Estate which are held in a form other than
undivided fee simple ownership or mortgageable ground leases having a
remaining term (calculated from the date of acquisition of such interest)
of not less than fifty (50) years (such as, without limitation, cotenancy
interests, leasehold interests, partnership interests, membership in a
limited liability company, shares of stock in corporations owning real
estate, or through mortgages or participation interests in or assignments
of mortgages);
8.3.10. Investments in stock of other real estate investment
companies; provided, however, that the aggregate amount at any time so
invested shall not exceed $20,000,000.00;
8.3.11. Investments in convertible non-voting preferred stock and/or
voting common stock of Fresh Choice, Inc.; provided, however, that the
aggregate amount at any time so invested shall not exceed $14,000,000.00;
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8.3.12. Investments in Subsidiaries of the Borrower or affiliates of
such Subsidiaries; and
8.3.13. Investments in HBCLP, Inc.; provided, however, that the
aggregate amount at any time so invested shall not exceed $50,000,000.00.
Section 8.4. Merger, Consolidation. The Borrower will not, and will not
permit any of its Subsidiaries to, become a party to any merger, consolidation
or other business combination except (i) the merger or consolidation of one or
more of the Subsidiaries of the Borrower with and into the Borrower and (ii)
the merger or consolidation of two or more Subsidiaries of the Borrower.
Section 8.5. Sale and Leaseback. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell
or transfer any Real Estate owned by it in order that then or thereafter the
Borrower or any Subsidiary shall lease back such Real Estate.
Section 8.6. Compliance with Environmental Laws. The Borrower will not,
and will not permit any of its Subsidiaries or any tenants or other occupants
of any of the Real Estate, to do any of the following: (a) use any of the Real
Estate or any portion thereof as a facility for the handling, processing,
storage or disposal of Hazardous Substances, except for small quantities of
Hazardous Substances used in the ordinary course of business and in compliance
with all applicable Environmental Laws, (b) cause or permit to be located on
any of the Real Estate any underground tank or other underground storage
receptacle for Hazardous Substances except in full compliance with
Environmental Laws, (c) generate any Hazardous Substances on any of the Real
Estate except in full compliance with Environmental Laws, (d) conduct any
activity at any Real Estate or use any Real Estate in any manner so as to cause
a Release of Hazardous Substances on, upon or into the Real Estate or any
surrounding properties or any threatened Release of Hazardous Substances which
might give rise to liability under CERCLA or any other Environmental Law, or
(e) directly or indirectly transport or arrange for the transport of any
Hazardous Substances (except in compliance with all Environmental Laws).
The Borrower shall:
(i) in the event of any change in Environmental Laws governing the
assessment, release or removal of Hazardous Substances, which change would
lead a prudent lender to require additional testing to avail itself of any
statutory insurance or limited liability, take all action (including,
without limitation, the conducting of engineering tests at the sole
expense of the Borrower) to confirm that no Hazardous Substances are or
ever were Released or disposed of on the Real Estate; and
(ii) if any Release or disposal of Hazardous Substances shall occur
or shall have occurred on the Real Estate (including without limitation
any such Release or disposal occurring prior to the acquisition of such
Real Estate by the Borrower or its Subsidiary), cause
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the prompt containment and removal of such Hazardous Substances and
remediation of the Real Estate in full compliance with all applicable laws
and regulations and to the reasonable satisfaction of the Majority Banks;
provided, that the Borrower shall be deemed to be in compliance with
Environmental Laws for the purpose of this clause (ii) so long as it or a
responsible third party with sufficient financial resources is taking
reasonable action to remediate or manage any event of noncompliance to the
reasonable satisfaction of the Majority Banks and no action shall have
been commenced by any enforcement agency. The Majority Banks may engage
their own environmental engineer to review the environmental assessments
and the Borrower's compliance with the covenants contained herein.
At any time after an Event of Default shall have occurred hereunder, or,
whether or not an Event of Default shall have occurred, at any time that the
Agent or the Majority Banks shall have reasonable grounds to believe that a
Release or threatened Release of Hazardous Substances may have occurred,
relating to any Real Estate, or that any of the Real Estate is not in
compliance with the Environmental Laws, the Agent may at its election (and will
at the request of the Majority Banks) obtain such environmental assessments of
such Real Estate prepared by an environmental engineer as may be necessary or
advisable for the purpose of evaluating or confirming (i) whether any Hazardous
Substances are present in the soil or water at or adjacent to such Real Estate
and (ii) whether the use and operation of such Real Estate comply with all
Environmental Laws. Environmental assessments may include detailed visual
inspections of such Real Estate including, without limitation, any and all
storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil samples, as well as such other investigations or analyses as are
necessary or appropriate for a complete determination of the compliance of such
Real Estate and the use and operation thereof with all applicable Environmental
Laws. All such environmental assessments shall be at the sole cost and expense
of the Borrower.
Section 8.7. Distributions.
8.7.1. The Borrower shall not pay any Distribution to the partners of
the Borrower which for any four (4) successive quarters is in excess of
(i) ninety percent (90%) of its Funds from Operations for such fiscal
quarters, or (ii) one hundred percent (100%) of its Funds Available for
Distribution for such fiscal quarters; provided that the limitation
contained in this Section 8.7(a) shall not preclude the Borrower from
making Distributions to Guarantor in an amount equal to the minimum
distributions required under the Code to maintain the REIT Status of
Guarantor, as evidenced by a certification of the principal financial or
accounting officer of the General Partner containing calculations in
detail reasonably satisfactory in form and substance to the Agent.
8.7.2. In the event that a Default under Section 12.1(a) or (b) or an
Event of Default shall have occurred and be continuing, the Borrower shall
make no Distributions other than Distributions to Guarantor in an amount
equal to the minimum distributions required under the Code to maintain the
REIT Status of Guarantor, as evidenced by a certification of the principal
financial or accounting officer of the General Partner
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containing calculations in detail reasonably satisfactory in form and
substance to the Agent.
8.7.3. Notwithstanding the foregoing, at any time when an Event of
Default shall have occurred and the maturity of the Obligations has been
accelerated, at the option of the Majority Banks the Borrower shall not
make any Distributions whatsoever, directly or indirectly.
Section 8.8. Asset Sales. Except for sales by the Residential Corporations
in the ordinary course of development of residential developments with related
amenities, neither the Borrower nor any Subsidiary shall sell, transfer or
otherwise dispose of any Real Estate (except as the result of a condemnation or
casualty and except for the granting of Permitted Liens) involving an amount in
excess of $5,000,000.00 in any single transaction unless there shall have been
delivered to the Agent a statement that no Default or Event of Default exists
or will exist after giving effect to such sale, transfer or other disposition.
Section 8.9. Development Activity. Without the consent of the Majority
Banks, neither the Borrower nor any Subsidiary shall engage, directly or
indirectly, in the development, construction or substantial renovation or
rehabilitation of commercial real estate (provided that the foregoing shall not
be deemed to be breached by the residential real estate development activities
by the Residential Corporations nor the restoration or rehabilitation of
commercial real estate following damage by casualty or condemnation). The
Borrower acknowledges that the decision of the Majority Banks to grant or
withhold such consent shall be based on such factors as the Majority Banks deem
relevant in their sole discretion, including without limitation, evidence of
sufficient funds both from borrowings (other than from the Loans) and equity to
complete such development and evidence that the Borrower or its Subsidiary has
the resources and expertise necessary to complete such project. Notwithstanding
the foregoing, the Borrower is currently developing for its own account an
office building not exceeding 110,000 square feet on Phase II of the land owned
by Borrower in Austin, Texas known as "The Avallon" and may develop an office
building not exceeding 80,000 square feet on Phase III of the land owned by
Borrower in Austin, Texas known as "The Avallon", provided that with respect to
each such building (a) BMC Software or an affiliate thereof shall have executed
and delivered to Borrower a lease to occupy not less than sixty-five percent
(65%) of such building within one (1) year of completion of the same, and (b)
the actual cost of developing improvements thereon with respect to each such
building shall not exceed $15,000,000.00. Notwithstanding the foregoing,
Borrower can engage in, and proceeds of the Loans may be used for, the
construction of tenant improvements within space to be occupied by tenants of
buildings owned by the Borrower or its Subsidiaries, and for the renovation or
demolition and reconstruction of the Surtran Garage at Continental Plaza,
provided that the cost of such renovation or demolition and reconstruction
shall not exceed $20,000,000.00, and for the construction of the Frost Bank
Garage in Austin, Texas. Nothing herein shall prohibit the Borrower or any
Subsidiary from acquiring Real Estate which has been developed and initially
leased by another Person.
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Section 8.10. Investment Opportunities. During the term of the
Non-Competition Agreements, the Borrower shall cause each of Richard E.
Rainwater, Gerald W. Haddock and John C. Goff to offer to the Borrower all real
estate investment opportunities that are presented to any of such individuals,
and if the Borrower elects not to participate in such opportunity, the Borrower
shall not permit any of such individuals, or any Person controlling, controlled
by or under common control with any of such individuals, to participate in such
investment, unless such transaction is approved by a majority of the
independent directors of Guarantor as permitted in the Non-Competition
Agreements.
Section 8.11. Refinancing of Assets. No asset of the Borrower or its
Subsidiaries shall be financed or refinanced unless the gross proceeds
therefrom equal or exceed fifty-five percent (55%) of the original acquisition
cost by Borrower or such Subsidiary of such asset; provided that such
percentage shall be reduced to forty percent (40%) for hotel/resort assets.
Section 8.12. Variable Rate Debt.
(a) Borrower shall not permit all or any portion of the Existing
Fixed Rate Indebtedness to be refinanced or otherwise replaced by
Indebtedness (i) which has a Variable Interest Rate (unless such Variable
Interest Rate is hedged or otherwise capped pursuant to an interest rate
swap, cap or other agreement acceptable to the Agent that provides that
such Variable Interest Rate shall not through the maturity date of such
Indebtedness exceed a rate equal to the sum of (x) the then-current yield
on obligations of the United States Treasury having a maturity date the
same as (to the extent practicable) such Indebtedness, determined by the
Agent as of the date of the incurrence of such Indebtedness, plus (y)
three percent (3.0%), or (ii) has a scheduled maturity date which is
earlier than the maturity date with respect to the portion of the Existing
Fixed Rate Indebtedness that is being refinanced or replaced, or (iii)
which provides for any principal amortization or other scheduled payments
of principal, other than the payment of principal at maturity.
(b) Notwithstanding Section 8.12(a)(i), no more than thirty percent
(30%) of the total Indebtedness (excluding Indebtedness described in
Section 8.1(b)-(e), but including the Obligations) of Borrower and its
Consolidated Subsidiaries may be Indebtedness that is payable with respect
to a Variable Interest Rate that is not hedged or otherwise capped as
described in Section 8.12(a)(i).
Section 8.13. Restriction on Prepayment of Indebtedness. The Borrower
shall not prepay the principal amount, in whole or in part, of any Indebtedness
other than the Obligations after the occurrence of any Event of Default;
provided, however, that this Section 8.13 shall not prohibit the prepayment of
Indebtedness which is financed solely from the proceeds of a new loan which
would otherwise be permitted by the terms of Section 8.1.
Section 8.14. Bankruptcy Remote Subsidiaries. Without the prior written
consent of the Majority Banks, Borrower shall not create any new single
purpose, special purpose or other so-called bankruptcy remote subsidiaries
(such as a REMIC), as determined by the Agent in its reasonable discretion,
other than in connection with the acquisition of the Behavioral Healthcare
Facilities (provided that its debt shall not exceed $350,000,000.00).
Section 8.15. Magellan Transaction. Without the prior written consent of
the Majority Banks, the Borrower will not materially modify or alter the terms
or structure of its transaction with Magellan and CBHS as contained in (i) the
Sale Agreement; (ii) that certain Warrant Purchase Agreement dated January 29,
1997 between the Borrower and Magellan; and (iii) any and all other agreements,
documents and instruments relating to the acquisition of the Behavioral
Healthcare Facilities by the Borrower.
SECTION 9. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans it will comply
with the following:
Section 9.1. Liabilities to Worth Ratio. The Borrower will not permit
the ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth
of the Borrower to exceed 1 to 1.
Section 9.2. Debt Service Coverage. The Borrower will not permit the
Consolidated Cash Flow of the Borrower and its Subsidiaries for any period of
four consecutive fiscal quarters (treated as a single accounting period) (the
"Test Period") to be less than 2.5 times the Debt Service of the Borrower and
its Subsidiaries for the Test Period.
Section 9.3. Intentionally Omitted.
Section 9.4. Tangible Net Worth. Borrower will not permit its Consolidated
Tangible Net Worth (as adjusted pursuant to Section 9.9) to be less than
$1,000,000,000.00 plus seventy percent (70%) of the net proceeds from each
Equity Offering subsequent to the date hereof.
Section 9.5. Secured Debt to Assets Ratio. The Borrower will not permit
the ratio of the Secured Indebtedness of the Borrower and its Subsidiaries to
the Consolidated Total Assets of the Borrower and its Subsidiaries to exceed
.40 to 1.
Section 9.6. Fixed Charge Coverage. Borrower will not permit the
Consolidated Cash Flow for the Test Period to be less than 2 times the Fixed
Charges of the Borrower and its Subsidiaries for the Test Period.
Section 9.7. Total Liabilities. The Borrower shall not permit the
Consolidated Total Liabilities of the Borrower and its Subsidiaries to be
greater than 5 times the Consolidated Cash Flow of the Borrower and its
Subsidiaries. In the event that a parcel of Real Estate has only been owned by
the Borrower or a Subsidiary for a portion of the period for which data is
needed to test compliance with this covenant, the Borrower shall annualize the
data which is available in such
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manner as the Agent determines in its sole discretion so as to allow the test
to be performed with respect to the full period.
Section 9.8. Real Estate Assets. The Borrower shall not permit (i) the
ratio of the Modified Book Asset Value of its direct and indirect interests in
non-income producing land assets and mortgages secured by non-income producing
land to the Consolidated Total Assets of the Borrower and its Subsidiaries to
exceed .05 to 1 ; (ii) the ratio of the Modified Book Asset Value of its direct
and indirect interests in hotels/resorts to the Consolidated Total Assets of
the Borrower and its Subsidiaries to exceed .20 to 1; (iii) the ratio of the
Modified Book Asset Value of its direct and indirect interests in behavioral
healthcare facilities to the Consolidated Total Assets of the Borrower and its
Subsidiaries to exceed .20 to 1; and (iv) the ratio of the Modified Book Asset
Value of its direct and indirect interests in Class A institutional quality
office buildings to the Consolidated Total Assets of the Borrower and its
Subsidiaries to be less than .60 to 1. For the purposes of this Section 9.8(a),
the interest of Spectrum Mortgage Associates, L.P. in the land at the project
commonly known as Spectrum Center shall be excluded from the calculation in (i)
above.
Section 9.9. Value Adjustment. The Borrower and the Banks have agreed to a
one-time market value adjustment increase in the amount of $63,500,000.00 to
the value of the assets of the Borrower as of the date of this Agreement, and
the financial covenants set forth in Section 9.1, Section 9.4, Section 9.5 and
Section 9.8 (including without limitation the Borrower's Consolidated Tangible
Net Worth and the value of the Borrower's Consolidated Total Assets) shall for
the term of this Agreement be tested against the market value of the Borrower's
assets, based on such one-time market value adjustment, plus all real estate
depreciation to such assets since the date of the Borrower's initial public
offering.
Section 9.10. CBHS. The Borrower will not permit the Consolidated Cash
Flow of CBHS for the Test Period to be less than (i) 2 times the Rent Payments
payable to the Borrower for the Test Period, and (ii) 1.75 times the sum of the
Rent Payments payable to the Borrower for the Test Period plus the Required
Behavioral Healthcare Facilities Capital Expenditures for the Test Period. In
the event that data needed to test compliance with this covenant is not
available for a portion of the Test Period, the Borrower shall annualize the
data which is available in such manner as the Agent determines in its sole
discretion so as to allow the test to be performed with respect to the full
Test Period. For the purpose of testing compliance with this covenant, the
Consolidated Cash Flow of CBHS shall be calculated without deduction for
franchise fees payable by CBHS to Magellan.
Section 9.11. Unencumbered Operating Properties. The Borrower shall at all
times own Unencumbered Operating Properties with an aggregate Asset Value of at
least one hundred fifty percent (150%) of the Borrower's unsecured Indebtedness
(including without limitation the Obligations) outstanding from time to time.
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SECTION 10. CLOSING CONDITIONS.
The obligations of the Agent and the Banks to make the initial Loans shall
be subject to the satisfaction of the following conditions precedent on or
prior to June 6, 1997:
Section 10.1. Loan Documents. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance reasonably satisfactory to
the Majority Banks in their good faith determination. The Agent shall have
received a fully executed copy of each such document, except that each Bank
shall have received a fully executed counterpart of its Note.
Section 10.2. Certified Copies of Organizational Documents. The Agent
shall have received from the Borrower a copy, certified as of a recent date by
the appropriate officer of each State in which the Borrower, the General
Partner or Guarantor, as applicable, is organized or in which the Real Estate
is located and a duly authorized partner or officer of such Person, as
applicable, to be true and complete, of the partnership agreement or corporate
charter of the Borrower, the General Partner or such Guarantor, as applicable,
or its qualification to do business, as applicable, as in effect on such date
of certification.
Section 10.3. Bylaws; Resolutions. All action on the part of the Borrower,
the General Partner and the Guarantor necessary for the valid execution,
delivery and performance by the Borrower, the General Partner and the Guarantor
of this Agreement and the other Loan Documents to which such Person is or is to
become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Agent shall have been provided to the Agent. The Agent
shall have received from the General Partner and Guarantor true copies of their
respective bylaws and the resolutions adopted by their respective board of
directors authorizing the transactions described herein, each certified by its
secretary as of a recent date to be true and complete.
Section 10.4. Incumbency Certificate; Authorized Signers. The Agent shall
have received from the General Partner and Guarantor an incumbency certificate,
dated as of the Closing Date, signed by a duly authorized officer of the
General Partner and Guarantor and giving the name and bearing a specimen
signature of each individual who shall be authorized to sign, in the name and
on behalf of the General Partner and Guarantor, each of the Loan Documents to
which such Person is or is to become a party. The Agent shall have also
received from the Borrower a certificate, dated as of the Closing Date, signed
by a duly authorized partner of the Borrower and giving the name and specimen
signature of each individual who shall be authorized to make Loan and
Conversion Requests, and give notices and to take other action on behalf of the
Borrower under the Loan Documents.
Section 10.5. Opinion of Counsel. The Agent shall have received a
favorable opinion addressed to the Banks and the Agent and dated as of the
Closing Date, in form and substance reasonably satisfactory to the Agent, from
counsel of the Borrower, the General Partner and the Guarantor (a) stating that
all Loan Documents have been duly authorized, executed and delivered by
Borrower and Guarantor are valid, binding and enforceable against Borrower and
Guarantor
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including, without limitation, the choice of law provisions of the Loan
Documents, (b) indicating the due organization, legal existence and good
standing of Borrower, General Partner and Guarantor in the state of its
formation, (c) stating that the Loan is not usurious under Massachusetts law
(without resort to any "usury savings" clause in the Loan Documents), (d)
stating that to Borrower's counsel's current actual knowledge there is no
material action, suit or proceeding pending or threatened against or affecting
Borrower, General Partner and Guarantor before any court, administrative
agency, arbitrator or governmental authority, and (e) such other matters as are
reasonably requested by Agent's Special Counsel.
Section 10.6. Payment of Fees. The Borrower shall have paid to BankBoston
the fees required to be paid pursuant to Section 4.2.
Section 10.7. Performance; No Default. The Borrower shall have performed
and complied with all terms and conditions herein required to be performed or
complied with by it on or prior to the Closing Date, and on the Closing Date
there shall exist no Default or Event of Default.
Section 10.8. Representations and Warranties. The representations and
warranties made by the Borrower, the General Partner and the Guarantor in the
Loan Documents or otherwise made by or on behalf of the Borrower, the General
Partner, the Guarantor or the Borrower's Subsidiaries in connection therewith
or after the date thereof shall have been true and correct in all material
respects when made and shall also be true and correct in all material respects
on the Closing Date.
Section 10.9. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be reasonably satisfactory to the Agent and the Agent's Special
Counsel in form and substance, and the Agent shall have received all
information and such counterpart originals or certified copies of such
documents and such other certificates, opinions or documents as the Agent and
the Agent's Special Counsel may reasonably require.
Section 10.10. Intentionally Omitted.
Section 10.11. Compliance Certificate. A Compliance Certificate and a
Guarantor's Compliance Certificate dated as of the date of the Closing Date
demonstrating compliance with each of the covenants calculated therein as of
the most recent fiscal quarter end for which the Borrower or Guarantor has
provided financial statements under Section 6.4 or the Guaranty, as applicable,
adjusted in the best good faith estimate of the Borrower or Guarantor, as
applicable, dated as of the date of the Closing Date shall have been delivered
to the Agent.
Section 10.12. Real Estate Spreadsheet. The Agent shall have received the
spreadsheet on the Real Estate described in Section 6.4 above.
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Section 10.13. Other. The Agent shall have reviewed such other documents,
instruments, certificates, opinions, assurances, consents and approvals as the
Agent or the Agent's Special Counsel may reasonably have requested.
SECTION 11. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, whether on or after the
Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
Section 11.1. Prior Conditions Satisfied. All conditions set forth in
Section 10 shall continue to be satisfied as of the date upon which any Loan is
to be made.
Section 11.2. Representations True; No Default. Each of the
representations and warranties made by or on behalf of the Borrower, the
General Partner, the Guarantor and the Borrower's Subsidiaries contained in
this Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Agreement shall be true as of
the date as of which they were made and shall also be true at and as of the
time of the making of such Loan, with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Agreement and the other Loan Documents and
changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and except to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
Section 11.3. No Legal Impediment. No change shall have occurred in any
law or regulations thereunder or interpretations thereof that in the reasonable
opinion of any Bank would make it illegal for such Bank to make such Loan.
Section 11.4. Governmental Regulation. Each Bank shall have received such
statements in substance and form reasonably satisfactory to such Bank as such
Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
Section 11.5. Proceedings and Documents. All proceedings in connection
with the Loan shall be satisfactory in substance and in form to the Majority
Banks, and the Majority Banks shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Majority Banks may reasonably request.
Section 11.6. Borrowing Documents. In the case of any request for a Loan,
the Agent shall have received a copy of each of the following:
11.6.1. the request for a Loan required by Section 2.6 in the form of
Exhibit I hereto, fully completed; and
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11.6.2. the Compliance Certificate and the Guarantor's Compliance
Certificate required by clauses (iii) and (iv) of Section 2.6 prepared in
a manner reasonably acceptable to the Agent.
SECTION 12. EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 12.1. Events of Default and Acceleration. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults")
shall occur:
12.1.1. the Borrower shall fail to pay any principal of the Loans
when the same shall become due and payable, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed
for payment;
12.1.2. the Borrower shall fail to pay any interest on the Loans or
any other sums due hereunder or under any of the other Loan Documents,
when the same shall become due and payable, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed
for payment;
12.1.3. the Borrower shall fail to comply with any covenant contained
in Section 7.17;
12.1.4. the Borrower shall fail to comply with any covenant contained
in Section 9, and such failure shall continue for 30 days after written
notice thereof shall have been given to the Borrower by the Agent;
12.1.5. the Borrower or any of its Subsidiaries or the Guarantor
shall fail to perform any other term, covenant or agreement contained
herein or in any of the other Loan Documents (other than those specified
above in this Section 12);
12.1.6. any representation or warranty made by or on behalf of the
Borrower, its General Partner, the Guarantor or any of the Borrower's
Subsidiaries in this Agreement or any other Loan Document, report,
certificate, financial statement, request for a Loan, or in any other
document or instrument delivered pursuant to or in connection with this
Agreement, any advance of a Loan or any of the other Loan Documents shall
prove to have been false in any material respect upon the date when made
or deemed to have been made or repeated;
12.1.7. the Borrower, any of its general partners, the Guarantor or
any of the Borrower's Subsidiaries shall fail to pay at maturity, or
within any applicable period of grace, any obligation for borrowed money
or credit received, or fail to observe or perform any material term,
covenant or agreement contained in any agreement by which it is bound,
evidencing or securing any such borrowed money or credit received for such
period of time as would permit (assuming the giving of appropriate notice
if required) the
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holder or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof;
12.1.8. the Borrower, any of its general partners, the Guarantor or
any of the Borrower's Subsidiaries, (1) shall make an assignment for the
benefit of creditors, or admit in writing its general inability to pay or
generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Borrower, any of its general partners, the
Guarantor or any of the Borrower's Subsidiaries or of any substantial part
of the assets of any thereof, (2) shall commence any case or other
proceeding relating to the Borrower, any of its general partners, the
Guarantor or any of the Borrower's Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or (3) shall take any action to authorize or in furtherance of any
of the foregoing;
12.1.9. a petition or application shall be filed for the appointment
of a trustee or other custodian, liquidator or receiver of the Borrower,
any of its general partners, the Guarantor or any of the Borrower's
Subsidiaries or any substantial part of the assets of any thereof, or a
case or other proceeding shall be commenced against the Borrower, any of
its general partners, the Guarantor or any of the Borrower's Subsidiaries
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, and the Borrower, any of its
general partners, the Guarantor or any of the Borrower's Subsidiaries
shall indicate its approval thereof, consent thereto or acquiescence
therein or such petition, application, case or proceeding shall not have
been dismissed within 90 days following the filing or commencement
thereof;
12.1.10. a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower, any of its
general partners, the Guarantor or any of the Borrower's Subsidiaries
bankrupt or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of the
Borrower, any of its general partners, the Guarantor or any of the
Borrower's Subsidiaries, in an involuntary case under federal bankruptcy
laws as now or hereafter constituted;
12.1.11. there shall remain in force, undischarged, unsatisfied and
unstayed, for more than 60 days, whether or not consecutive, any uninsured
final judgment against the Borrower, any of its general partners, the
Guarantor or any of the Borrower's Subsidiaries that, with other
outstanding uninsured final judgments, undischarged, against the Borrower,
any of its general partners, the Guarantor or any of the Borrower's
Subsidiaries exceeds in the aggregate $10,000,000.00;
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12.1.12. if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof
or with the express prior written agreement, consent or approval of the
Banks, or any action at law, suit in equity or other legal proceeding to
cancel, revoke or rescind any of the Loan Documents shall be commenced by
or on behalf of the Borrower, any of its general partners, the Guarantor,
any of the Borrower's Subsidiaries or any of their respective
stockholders, partners or beneficiaries, or any court or any other
governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order, decree or
ruling to the effect that, any one or more of the Loan Documents is
illegal, invalid or unenforceable in accordance with the terms thereof;
12.1.13. any dissolution, termination, partial or complete
liquidation, merger or consolidation of the Borrower, any of its general
partners or the Guarantor, or any sale, transfer or other disposition of
the assets of the Borrower, any of its general partners or the Guarantor,
other than as permitted under the terms of this Agreement or the other
Loan Documents;
12.1.14. any suit or proceeding shall be filed against the Borrower,
the Guarantor or any of their respective assets, which in the good faith
business judgment of the Majority Banks after giving consideration to the
likelihood of success of such suit or proceeding and the availability of
insurance to cover any judgment with respect thereto and based on the
information available to them, if adversely determined, would have a
materially adverse affect on the ability of the Borrower or the Guarantor
to perform each and every one of its respective obligations under and by
virtue of the Loan Documents;
12.1.15. the Borrower, any of its general partners, the Guarantor or
any of the Borrower's or the Guarantor's Subsidiaries shall be indicted
for a federal crime, a punishment for which could include the forfeiture
of any assets of such Person;
12.1.16. with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall have
determined in their reasonable discretion that such event reasonably could
be expected to result in liability of the Borrower, any of its general
partners, the Guarantor or any of the Borrower's Subsidiaries to the PBGC
or such Guaranteed Pension Plan in an aggregate amount exceeding
$1,000,000 and such event in the circumstances occurring reasonably could
constitute grounds for the termination of such Guaranteed Pension Plan by
the PBGC or for the appointment by the appropriate United States District
Court of a trustee to administer such Guaranteed Pension Plan; or a
trustee shall have been appointed by the United States District Court to
administer such Plan; or the PBGC shall have instituted proceedings to
terminate such Guaranteed Pension Plan;
12.1.17. the Guarantor denies that it has any liability or obligation
under the Guaranty, or shall notify the Agent or any of the Banks of the
Guarantor's intention to
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attempt to cancel or terminate the Guaranty, or shall fail to observe or
comply with any term, covenant, condition or agreement under the Guaranty;
12.1.18. (1) at least two of Richard Rainwater, John C. Goff and
Gerald Haddock shall not collectively occupy two of the following
positions: Chairman of the Board, Chief Executive Officer, Vice-Chairman
and President of Guarantor, or (2) Richard Rainwater, John C. Goff and
Gerald Haddock in the aggregate shall no longer own units in the Borrower
or shares in Guarantor which, on a combined basis, equal to at least a ten
percent (10%) economic interest in the Borrower (provided, however, in the
event that the circumstances described in (1) or (2) have occurred as a
result of the death or mental incapacity of any of such Persons, the same
shall not constitute an Event of Default hereunder so long as within six
(6) months from the date of such death or mental incapacitation the
Majority Banks shall have approved the individual or individuals who shall
replace such Person as the Chairman of the Board, Chief Executive Officer,
Vice-Chairman or President, as applicable, of Guarantor and who shall own
such interests in the Borrower and Guarantor), or (3) without the prior
written approval of the Majority Banks there shall be any other material
change in the management of Guarantor or the Borrower; or
12.1.19. any default or Event of Default, as defined in any of the
other Loan Documents, shall occur;
then, and in any such event, the Agent may, and upon the request of the
Majority Banks shall, by notice in writing to the Borrower declare all amounts
owing with respect to this Agreement, the Notes and the other Loan Documents to
be, and they shall thereupon forthwith become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower; provided that in the event of any
Event of Default specified in Section 12.1(h), Section 12.1(i) or Section
12.1(j), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from any of the Banks or
the Agent.
Section 12.2. Limitation of Cure Periods.
(a) Notwithstanding anything contained in Section 12.1 to the
contrary, (i) no Event of Default shall exist hereunder upon the
occurrence of any failure described in Section 12.1(a) or Section 12.1(b)
in the event that the Borrower cures such default within five (5) days
following receipt of written notice of such default, provided, however,
that Borrower shall not be entitled to receive more than two (2) notices
in the aggregate pursuant to this clause (i) in any period of 365 days
ending on the date of any such occurrence of default, and provided further
that no such cure period shall apply to any payments due upon the maturity
of the Notes, and (ii) no Event of Default shall exist hereunder upon the
occurrence of any failure described in Section 12.1(e) in the event that
the Borrower cures such default with thirty (30) days following receipt of
written notice of such default, provided that the provisions of this
clause shall not pertain to defaults consisting of a failure to
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comply with Section 7.4(d) or to any default excluded from any provision
of cure of defaults contained in any other of the Loan Documents.
(b) Notwithstanding the provisions of Section 12.1(d), the cure
period provided therein shall not be allowed and the occurrence of a
Default thereunder immediately shall constitute an Event of Default for
all purposes of this Agreement and the other Loan Documents if, within the
period of twelve months immediately preceding the occurrence of such
Default, there shall have occurred two periods of cure or portions thereof
under said subsection.
Section 12.3. Termination of Commitments. If any one or more Events of
Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j) shall
occur, then immediately and without any action on the part of the Agent or any
Bank any unused portion of the credit hereunder shall terminate and the Banks
shall be relieved of all obligations to make Loans to the Borrower. If any
other Event of Default shall have occurred, the Agent, upon the election of the
Majority Banks, may by notice to the Borrower terminate the obligation to make
Loans to the Borrower. No termination under this Section 12.3 shall relieve the
Borrower of its obligations to the Banks arising under this Agreement or the
other Loan Documents. Nothing in this Section 12.3 shall limit or impair the
terms of this Agreement (including Section 2.1) which provide that the Banks
shall have no obligation to make Loans upon the occurrence of a Default or
Event of Default.
Section 12.4. Remedies. In case any one or more of the Events of Default
shall have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to Section 12.1, the Agent on
behalf of the Banks, may, with the consent of the Majority Banks but not
otherwise, proceed to protect and enforce their rights and remedies under this
Agreement, the Notes or any of the other Loan Documents by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations are
evidenced, including to the full extent permitted by applicable law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right. No remedy herein conferred upon
the Agent or the holder of any Note is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or any other provision of law. In the event that all or
any portion of the Obligations is collected by or through an attorney-at-law,
the Borrower shall pay all reasonable costs of collection including, but not
limited to, reasonable attorney's fees.
Section 12.5. Distribution of Proceeds. In the event that, following the
occurrence or during the continuance of any Event of Default, any monies are
received in connection with the enforcement of any of the Loan Documents, or
otherwise with respect to the realization upon any of the assets of the
Borrower or the Guarantor, such monies shall be distributed for application as
follows:
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12.5.1. First, to the payment of, or (as the case may be) the
reimbursement of, the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent to protect or preserve any collateral or in
connection with the collection of such monies by the Agent, for the
exercise, protection or enforcement by the Agent of all or any of the
rights, remedies, powers and privileges of the Agent under this Agreement
or any of the other Loan Documents or in support of any provision of
adequate indemnity to the Agent against any taxes or liens which by law
shall have, or may have, priority over the rights of the Agent to such
monies;
12.5.2. Second, to all other Obligations in such order or preference
as the Majority Banks shall determine; provided, however, that (i)
distributions in respect of such other Obligations shall be made pari
passu among Obligations with respect to the Agent's fee payable pursuant
to Section 4.3 and all other Obligations, (ii) in the event that any Bank
shall have wrongfully failed or refused to make an advance under Section
2.7 and such failure or refusal shall be continuing, advances made by
other Banks during the pendency of such failure or refusal shall be
entitled to be repaid as to principal and accrued interest in priority to
the other Obligations described in this subsection (b), and (iii)
Obligations owing to the Banks with respect to each type of Obligation
such as interest, principal, fees and expenses, shall be made among the
Banks pro rata; and provided further that the Majority Banks may in their
discretion make proper allowance to take into account any Obligations not
then due and payable; and
12.5.3. Third, the excess, if any, shall be returned to the Borrower
or to such other Persons as are entitled thereto.
SECTION 13. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch of where
such deposits are held) or other sums credited by or due from any of the Banks
to the Borrower or the Guarantor and any securities or other property of the
Borrower or the Guarantor in the possession of such Bank may be applied to or
set off against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, of the Borrower to such Bank. Each of the Banks agrees
with each other Bank that if such Bank shall receive from the Borrower or the
Guarantor, whether by voluntary payment, exercise of the right of setoff, or
otherwise, and shall retain and apply to the payment of the Note or Notes held
by such Bank any amount in excess of its ratable portion of the payments
received by all of the Banks with respect to the Notes held by all of the
Banks, such Bank will make such disposition and arrangements with the other
Banks with respect to such excess, either by way of distribution, pro tanto
assignment of claims, subrogation or otherwise as shall result in each Bank
receiving in respect of the Notes held by it its proportionate payment as
contemplated by this Agreement; provided that if all or any part of such excess
payment is thereafter recovered from such Bank, such
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disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest.
SECTION 14. THE AGENT.
Section 14.1. Authorization. The Agent is authorized to take such action
on behalf of each of the Banks and to exercise all such powers as are hereunder
and under any of the other Loan Documents and any related documents delegated
to the Agent, together with such powers as are reasonably incident thereto,
provided that no duties or responsibilities not expressly assumed herein or
therein shall be implied to have been assumed by the Agent. The obligations of
Agent hereunder are primarily administrative in nature, and nothing contained
in this Agreement, or any of the other Loan Documents shall be construed to
constitute the Agent as a trustee for any Bank or to create an agency or
fiduciary relationship. The Borrower and any other Person shall be entitled to
conclusively rely on a statement from the Agent that it has the authority to
act for and bind the Banks pursuant to this Agreement and the other Loan
Documents.
Section 14.2. Employees and Agents. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent may reasonably
determine, and all reasonable fees and expenses of any such Persons shall be
paid by the Borrower.
Section 14.3. No Liability. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent, or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, shall be liable for losses due to its willful
misconduct or gross negligence.
Section 14.4. No Representations. The Agent shall not be responsible for
the execution or validity or enforceability of this Agreement, the Notes, any
of the other Loan Documents or any instrument at any time constituting, or
intended to constitute, collateral security for the Notes, or for the value of
any such collateral security or for the validity, enforceability or
collectibility of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or representations made herein, or any
agreement, instrument or certificate delivered in connection therewith or in
any of the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of the Borrower or any of its Subsidiaries or
the Guarantor, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or
in any other of the Loan Documents. The Agent shall not be bound to ascertain
whether any notice, consent, waiver or request delivered to it by the Borrower
or the Guarantor or any of their respective Subsidiaries or any holder of any
of the Notes shall have been duly authorized or is true, accurate and complete.
The Agent has not made nor does it
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now make any representations or warranties, express or implied, nor does it
assume any liability to the Banks, with respect to the creditworthiness or
financial condition of the Borrower or any of its Subsidiaries or the
Guarantor. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it
will, independently and without reliance upon the Agent or any other Bank,
based upon such information and documents as it deems appropriate at the time,
continue to make its own credit analysis and decisions in taking or not taking
action under this Agreement and the other Loan Documents.
Section 14.5. Payments.
14.5.1. A payment by the Borrower or the Guarantor to the Agent
hereunder or under any of the other Loan Documents for the account of any
Bank shall constitute a payment to such Bank. The Agent agrees to
distribute to each Bank not later than one Business Day after the Agent's
receipt of good funds, determined in accordance with the Agent's customary
practices, such Bank's pro rata share of payments received by the Agent
for the account of the Banks except as otherwise expressly provided herein
or in any of the other Loan Documents. In the event that the Agent fails
to distribute such amounts within one Business Day as provided above, the
Agent shall pay interest on such amount at a rate per annum equal to the
Federal Funds Effective Rate from time to time in effect.
14.5.2. If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of
the other Loan Documents might involve it in liability, it may refrain
from making distribution until its right to make distribution shall have
been adjudicated by a court of competent jurisdiction. If a court of
competent jurisdiction shall adjudge that any amount received and
distributed by the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay
over the same in such manner and to such Persons as shall be determined by
such court.
14.5.3. Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Bank that fails (i) to
make available to the Agent its pro rata share of any Loan or (ii) to
comply with the provisions of Section 13 with respect to making
dispositions and arrangements with the other Banks, where such Bank's
share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all of
the Banks, in each case as, when and to the full extent required by the
provisions of this Agreement, shall be deemed delinquent (a "Delinquent
Bank") and shall be deemed a Delinquent Bank until such time as such
delinquency is satisfied. A Delinquent Bank shall be deemed to have
assigned any and all payments due to it from the Borrower and the
Guarantor, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Banks for
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application to, and reduction of, their respective pro rata shares of all
outstanding Loans. The Delinquent Bank hereby authorizes the Agent to
distribute such payments to the nondelinquent Banks in proportion to their
respective pro rata shares of all outstanding Loans. A Delinquent Bank
shall be deemed to have satisfied in full a delinquency when and if, as a
result of application of the assigned payments to all outstanding Loans of
the nondelinquent Banks or as a result of other payments by the Delinquent
Banks to the nondelinquent Banks, the Banks' respective pro rata shares of
all outstanding Loans have returned to those in effect immediately prior
to such delinquency and without giving effect to the nonpayment causing
such delinquency.
Section 14.6. Holders of Notes. Subject to the terms of Article 18, the
Agent may deem and treat the payee of any Note as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.
Section 14.7. Indemnity. The Banks ratably agree hereby to indemnify and
hold harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrower as
required by Section 15), and liabilities of every nature and character arising
out of or related to this Agreement, the Notes or any of the other Loan
Documents or the transactions contemplated or evidenced hereby or thereby, or
the Agent's actions taken hereunder or thereunder, except to the extent that
any of the same shall be directly caused by the Agent's willful misconduct or
gross negligence.
Section 14.8. Agent as Bank. In its individual capacity, BankBoston shall
have the same obligations and the same rights, powers and privileges in respect
to its Commitment and the Loans made by it, and as the holder of any of the
Notes as it would have were it not also the Agent.
Section 14.9. Resignation. Subject to the terms of Section 18.1, the Agent
may resign at any time by giving 30 calendar days' prior written notice thereof
to the Banks and the Borrower. Upon any such resignation, the Majority Banks,
subject to the terms of Section 18.1, shall have the right to appoint as a
successor Agent any Bank or any bank whose senior debt obligations are rated
not less than "A" or its equivalent by Moody's Investors Service, Inc. or not
less than "A" or its equivalent by Standard & Poor's corporation and which has
a net worth of not less than $500,000,000. Unless a Default or Event of Default
shall have occurred and be continuing, such successor Agent shall be reasonably
acceptable to the Borrower. If no successor Agent shall have been appointed and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a bank whose debt
obligations are rated not less than "A" or its equivalent by Moody's Investors
Service, Inc. or not less than "A" or its equivalent by Standard & Poor's
Corporation and which has a net worth of not less than $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights,
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powers, privileges and duties of the retiring or removed Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder as
Agent. After any retiring Agent's resignation, the provisions of this Agreement
and the other Loan Documents shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as Agent. Upon any change in the Agent under this Agreement, the resigning
Agent shall execute such assignments of and amendments to the Loan Documents as
may be necessary to substitute the successor Agent for the resigning Agent.
Section 14.10. Duties in the Case of Enforcement. In case one or more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a) so
requested by the Majority Banks and (b) the Banks have provided to the Agent
such additional indemnities and assurances against expenses and liabilities as
the Agent may reasonably request, proceed to exercise all or any legal and
equitable and other rights or remedies as it may have. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such
exercise, the Banks hereby agreeing to indemnify and hold the Agent harmless
from all liabilities incurred in respect of all actions taken or omitted in
accordance with such directions, provided that the Agent need not comply with
any such direction to the extent that the Agent reasonably believes the Agent's
compliance with such direction to be unlawful or commercially unreasonable in
any applicable jurisdiction.
SECTION 15. EXPENSES.
The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Agreement, the other Loan Documents and the other agreements
and instruments mentioned herein, (b) except as otherwise specifically provided
herein, any taxes (including any interest and penalties in respect thereto)
payable by the Agent or any of the Banks, including any recording, mortgage,
documentary or intangibles taxes in connection with the Loan Documents, or
other taxes payable on or with respect to the transactions contemplated by this
Agreement (other than taxes based upon the Agent's or any Bank's gross or net
income), (c) the reasonable fees, expenses and disbursements of the counsel to
the Agent and any local counsel to the Agent incurred in connection with the
preparation, administration or interpretation of the Loan Documents and other
instruments mentioned herein (excluding, however, the preparation of agreements
evidencing participations granted under Section 18.4), each closing hereunder,
and amendments, modifications, approvals, consents or waivers hereto or
hereunder (it being understood and agreed that the Borrower shall pay to the
Agent for the account of the Banks a fee in the amount of $10,000.00 for each
material amendment or waiver (as determined by the Agent in its sole
discretion) requested by Borrower and granted by the Agent or the Banks, with
such fee to be split equally among the Banks), (d) the reasonable fees,
expenses and disbursements of the Agent incurred by the Agent in connection
with the preparation, administration or interpretation of the Loan Documents
and other instruments mentioned herein, and the making of each advance
hereunder, (e) all reasonable out-of-pocket expenses (including reasonable
attorneys' fees and costs, which attorneys may be employees of any Bank or the
Agent and the fees and costs of appraisers, engineers, investment bankers or
other experts retained by any Bank or the Agent) incurred by any Bank or the
Agent in connection with (i) the
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enforcement of or preservation of rights under any of the Loan Documents
against the Borrower, any of its general partners or the Guarantor or the
administration thereof after the occurrence of a Default or Event of Default
and (ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to the Agent's or any of the Bank's relationship
with the Borrower, any of its general partner, the Guarantor or any of their
respective Subsidiaries unless the Borrower, such general partner, such
Guarantor or such Subsidiary is the prevailing party in such litigation,
proceeding or dispute, and (f) all reasonable fees, expenses and disbursements
of the Agent incurred in connection with UCC searches, UCC filings, title
rundowns, title searches or mortgage recordings. The covenants of this Section
15 shall survive payment or satisfaction of payment of amounts owing with
respect to the Notes.
SECTION 16. INDEMNIFICATION.
The Borrower agrees to indemnify and hold harmless the Agent and the Banks
and each director, officer, employee, agent and Person who controls the Agent
or any Bank from and against any and all claims, actions and suits, whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of or relating
to this Agreement or any of the other Loan Documents or the transactions
contemplated hereby and thereby including, without limitation, (a) any leasing
fees and any brokerage, finders or similar fees asserted against any Person
indemnified under this Section 16 based upon any agreement, arrangement or
action made or taken, or alleged to have been made or taken, by the Borrower,
any of its general partners, the Guarantor or any of the Borrower's
Subsidiaries (provided that the Borrower shall not be required to indemnify a
Bank from and against any agreement that is proven to have been made by a Bank
to pay any brokerage fees or commissions), (b) any condition of the Real Estate
first occurring prior to the Agent or the Banks or their nominee acquiring
title to the applicable Real Estate by the exercise of any applicable
foreclosure remedies or by deed in lieu of foreclosure, (c) any actual or
proposed use by the Borrower of the proceeds of any of the Loans, (d) any
actual or alleged infringement of any patent, copyright, trademark, service
mark or similar right of the Borrower, any of its general partners, the
Guarantor or any of the Borrower's Subsidiaries, (e) the Borrower, the
Guarantor or any Subsidiary of the Borrower entering into or performing this
Agreement or any of the other Loan Documents, (f) any actual or alleged
violation of any law, ordinance, code, order, rule, regulation, approval,
consent, permit or license relating to the Real Estate which violation first
occurred prior to the Agent or the Banks or their nominee acquiring title to
the applicable Real Estate by the exercise of any applicable foreclosure
remedies or by deed in lieu of foreclosure, or (g) with respect to the
Borrower, each of its general partners, the Guarantor, the Borrower's
Subsidiaries and their respective properties and assets, the violation of any
Environmental Law, the Release or threatened Release of any Hazardous
Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to claims with respect to wrongful death, personal injury or damage to
property), first occurring prior to the Agent or the Banks or their nominee
acquiring title to the applicable Real Estate by the exercise of any applicable
foreclosure remedies or by deed in lieu of foreclosure, in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation
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or other proceeding; provided, however, that the Borrower shall not be
obligated under this Section 16 to indemnify any Person for liabilities arising
from such Person's own gross negligence or willful misconduct. In litigation,
or the preparation therefor, the Banks and the Agent shall be entitled to
select a single law firm as their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that the obligations of the Borrower
under this Section 16 are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The provisions of this
Section 16 shall survive the repayment of the Loans and the termination of the
obligations of the Banks hereunder.
SECTION 17. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower, any of its general partners,
the Guarantor or any of the Borrower's Subsidiaries pursuant hereto or thereto
shall be deemed to have been relied upon by the Banks and the Agent,
notwithstanding any investigation heretofore or hereafter made by any of them,
and shall survive the making by the Banks of any of the Loans, as herein
contemplated, and shall continue in full force and effect so long as any amount
due under this Agreement or the Notes or any of the other Loan Documents
remains outstanding or any Bank has any obligation to make any Loans. The
indemnification obligations of the Borrower provided herein and the other Loan
Documents shall survive the full repayment of amounts due and the termination
of the obligations of the Banks hereunder and thereunder to the extent provided
herein and therein. All statements contained in any certificate or other paper
delivered to any Bank or the Agent at any time by or on behalf of the Borrower,
any of its general partners, the Guarantor or any of the Borrower's
Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower, its general partners, the Guarantor or such Subsidiary hereunder.
SECTION 18. ASSIGNMENT AND PARTICIPATION.
Section 18.1. Conditions to Assignment by Banks. Except as provided
herein, each Bank may assign to one or more banks or other entities all or a
portion of its interests, rights and obligations under this Agreement
(including all or a portion of its Commitment Percentage and Commitment and the
same portion of the Loans at the time owing to it, and the Notes held by it);
provided that (a) the Agent shall have given its prior written consent to such
assignment, which consent shall not be unreasonably withheld (provided that
such consent shall not be required for any assignment to another Bank or to a
wholly-owned subsidiary of such Bank provided that such assignee shall remain a
wholly-owned subsidiary of such Bank), (b) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Agreement, (c) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register (as hereinafter
defined), a notice of such assignment, together with any Notes subject to such
assignment, (d) in no event shall any voting, consent or approval rights
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<PAGE> 74
of a Bank be assigned to any Person controlling, controlled by or under common
control with, or which is not otherwise free from influence or control by, the
Borrower, any of its general partners, the Guarantor or their respective
Subsidiaries, which rights shall instead be allocated pro rata among the other
remaining Banks, (e) such assignee shall have a net worth as of the date of
such assignment of not less than $500,000,000 unless such requirement is waived
in writing by the Borrower and the Agent, (f) such assignment is subject to the
terms of any intercreditor agreement among the Banks and the Agent, and (g)
such assignee shall acquire an interest in the Loans of not less than
$10,000,000.00. Upon such execution, delivery, acceptance and recording, of
such notice of assignment, (i) the assignee thereunder shall be a party hereto
and all other Loan Documents executed by the Banks and, to the extent provided
in such assignment, have the rights and obligations of a Bank hereunder, (ii)
the assigning Bank shall, to the extent provided in such assignment and upon
payment to the Agent of the registration fee referred to in Section 18.2, be
released from its obligations under this Agreement, and (iii) the Agent may
unilaterally amend Schedule 1 to reflect such assignment. In connection with
each assignment, the assignee shall represent and warrant to the Agent, the
assignor and each other Bank as to whether such assignee is controlling,
controlled by, under common control with or is not otherwise free from
influence or control by, the Borrower, its general partners, and the Guarantor
or their respective Subsidiaries. Notwithstanding anything herein to the
contrary, in the event that BankBoston shall at any time hold a Commitment
equal to or less than $20,000,000.00 then BankBoston shall first provide
written notice thereof to the Banks and shall offer to resign as Agent, which
offer must be accepted in writing by the Majority Banks within fifteen (15)
days of delivery of such notice by Agent (for the purposes of this sentence
only BankBoston shall be deemed to have accepted its own offer to resign). A
failure to accept such offer within such period shall be deemed a rejection of
such offer. NationsBank shall have a period of fifteen (15) calendar days
following the acceptance by the Majority Banks of BankBoston's offer to resign
within which to elect to replace BankBoston as Agent (provided, however, that
the option of NationsBank to replace BankBoston as Agent shall be null and void
in the event that NationsBank has at such time, without regard to any
assignment to be made by BankBoston, a Commitment which is not greater than or
equal to the Commitment of each other Bank other than BankBoston or in the
event that within such thirty (30) calendar day period the Majority Banks do
not approve NationsBank so acting as Agent). In the event that the Majority
Banks have accepted BankBoston's offer to resign and NationsBank declines to
replace BankBoston as Agent, is not eligible to replace BankBoston as Agent or
is not approved by the Majority Banks as the successor Agent as provided above,
BankBoston shall thereafter resign as Agent as provided in this Agreement in
the event that a successor Agent from among the Banks is not selected by the
Majority Banks or does not accept such appointment within fifteen (15) calendar
days following receipt of notice from Agent that NationsBank has declined to
replace BankBoston as Agent or a determination or vote that NationsBank is
ineligible or not approved. Except with respect to the rights of NationsBank as
provided above to succeed BankBoston as Agent, each Agent, as a condition to
any resignation of its position as Agent shall be required to provide written
notice thereof to the other Banks and provide the Majority Banks an opportunity
to designate a successor Agent within thirty (30) calendar days following
receipt of such notice in the same manner as provided above. Upon any change in
the Agent under this Agreement, the resigning or
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removed Agent shall execute such assignments of and amendments to the Loan
Documents as may be necessary to substitute the successor Agent for the
resigning or removed Agent.
Section 18.2. Register. The Agent shall maintain a copy of each assignment
delivered to it and a register or similar list (the "Register") for the
recordation of the names and addresses of the Banks and the Commitment
Percentages of, and principal amount of the Loans owing to the Banks from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
and the Banks at any reasonable time and from time to time upon reasonable
prior notice. Upon each such recordation, the assigning Bank agrees to pay to
the Agent a registration fee in the sum of $5,000.
Section 18.3. New Notes. Upon its receipt of an assignment executed by the
parties to such assignment, together with each Note subject to such assignment,
the Agent shall (a) record the information contained therein in the Register,
and (b) give prompt notice thereof to the Borrower and the Banks (other than
the assigning Bank). Within five Business Days after receipt of such notice,
the Borrower, at its own expense, shall execute and deliver to the Agent, in
exchange for each surrendered Note, a new Note to the order of such assignee in
an amount equal to the amount assumed by such assignee pursuant to such
assignment and, if the assigning Bank has retained some portion of its
obligations hereunder, a new Note to the order of the assigning Bank in an
amount equal to the amount retained by it hereunder, and shall cause the
Guarantor to deliver to the Agent an acknowledgment in form and substance
reasonably satisfactory to the Agent to the effect that the Guaranty extends to
and is applicable to each new Note. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such assignment and shall otherwise be in
substantially the form of the assigned Notes. The surrendered Notes shall be
canceled and returned to the Borrower.
Section 18.4. Participations. Each Bank may sell participations to one or
more banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; provided that
(a) any such sale or participation shall not affect the rights and duties of
the selling Bank hereunder to the Borrower, (b) such participation shall not
entitle such participant to any rights or privileges under this Agreement or
the Loan Documents, including, without limitation, the right to approve
waivers, amendments or modifications, (c) such participant shall have no direct
rights against the Borrower, any of its general partners, the Guarantor or any
of their respective Subsidiaries except the rights granted to the Banks
pursuant to Section 13, (d) such sale is effected in accordance with all
applicable laws, and (e) such participant shall not be a Person controlling,
controlled by or under common control with, or which is not otherwise free from
influence or control by, the Borrower, any of its general partners, the
Guarantor or any of their respective Subsidiaries.
Section 18.5. Pledge by Bank. Any Bank may at any time pledge all or any
portion of its interest and rights under this Agreement (including all or any
portion of its Note) to any of the twelve
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<PAGE> 76
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof shall release the
pledgor Bank from its obligations hereunder or under any of the other Loan
Documents.
Section 18.6. No Assignment by Borrower. The Borrower shall not assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Banks.
Section 18.7. Disclosure. The Borrower agrees that in addition to
disclosures made in accordance with standard banking practices any Bank may
disclose information obtained by such Bank pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder.
Section 18.8. Restrictions on Assignment. Notwithstanding anything in this
Agreement to the contrary, no Bank other than BankBoston shall be permitted to
assign all or any portion of its interests, rights and obligations under this
Agreement (including all or a portion of its Commitment Percentage and
Commitment and the same portion of the Loans at the time owing to it, and the
Notes held by it) or the other Loan Documents prior to the date that is one
hundred eighty days (180) following the Closing Date without the prior written
consent of BankBoston, which consent maybe withheld by BankBoston in its sole
and absolute discretion. Nothing herein shall prevent the sale by a Bank of a
participation pursuant to Section 18.4 of this Agreement during such period.
SECTION 19. NOTICES.
Each notice, demand, election or request provided for or permitted to be
given pursuant to this Agreement (hereinafter in this Section 19 referred to as
"Notice"), but specifically excluding to the maximum extent permitted by law
any notices of the institution or commencement of foreclosure proceedings, must
be in writing and shall be deemed to have been properly given or served by
personal delivery or by sending same by overnight courier or by depositing same
in the United States Mail, postpaid and registered or certified, return receipt
requested, or as expressly permitted herein, by telegraph, telecopy, telefax or
telex, and addressed as follows:
If to the Agent or any Bank, at the address set forth on the signature
page for the Agent or such Bank; and
If to the Borrower:
Crescent Real Estate Equities Limited Partnership
777 Main Street
Suite 2100
Fort Worth, Texas 76102
Attn: Dallas E. Lucas
Telecopy No.: 817/878-0429
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<PAGE> 77
with a copy to:
Crescent Real Estate Equities Limited Partnership
777 Main Street
Suite 2100
Fort Worth, Texas 76102
Attn: David M. Dean, Esq.
Telecopy No.: 817/878-0429
and to each other Bank which may hereafter become a party to this Agreement at
such address as may be designated by such Bank. Each Notice shall be effective
upon being personally delivered or upon being sent by overnight courier or upon
being deposited in the United States Mail as aforesaid. The time period in
which a response to such Notice must be given or any action taken with respect
thereto (if any), however, shall commence to run from the date of receipt if
personally delivered or sent by overnight courier, or if so deposited in the
United States Mail, the earlier of three (3) Business Days following such
deposit or the date of receipt as disclosed on the return receipt. Rejection or
other refusal to accept or the inability to deliver because of changed address
for which no notice was given shall be deemed to be receipt of the Notice sent.
By giving at least fifteen (15) days prior Notice thereof, the Borrower, a Bank
or Agent shall have the right from time to time and at any time during the term
of this Agreement to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America.
SECTION 20. RELATIONSHIP.
The relationship between each Bank and the Borrower is solely that of a
lender and borrower, and nothing contained herein or in any of the other Loan
Documents shall in any manner be construed as making the parties hereto
partners, joint venturers or any other relationship other than lender and
borrower.
SECTION 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.
THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS
OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS
SPECIFIED IN SECTION 19. THE BORROWER HEREBY WAIVES ANY
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OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
SECTION 22. HEADINGS.
The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.
SECTION 23. COUNTERPARTS.
This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
SECTION 24. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to
the transactions contemplated hereby. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
Section 27.
SECTION 25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.
EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, THE
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGES THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG
OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS Section 25.
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SECTION 26. DEALINGS WITH THE BORROWER.
The Banks and their affiliates may accept deposits from, extend credit to
and generally engage in any kind of banking, trust or other business with the
Borrower, its Subsidiaries or any of their affiliates regardless of the
capacity of the Bank hereunder.
SECTION 27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term of
this Agreement or of any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower of any terms
of this Agreement or such other instrument or the continuance of any Default or
Event of Default may be waived (either generally or in a particular instance
and either retroactively or prospectively) with, but only with, the written
consent of the Majority Banks. Notwithstanding the foregoing, none of the
following may occur without the written consent of each Bank: a change in the
rate of interest on and the term of the Notes; except as provided in Section
18, a change in the amount of the Commitments of the Banks; a reduction or
waiver of the principal of any unpaid Loan or any interest thereon; a change in
the amount of any fee payable to a Bank hereunder; an extension of Maturity
Date; the release of the Borrower, the Guarantor, any Subsidiary which has
executed any of the Loan Documents except as otherwise provided herein; any
modification to require a Bank to fund a pro rata share of a request for an
advance of the Loans made by the Borrower other than based on its Commitment
Percentage; a change to this Section 27; any postponement of any date fixed for
any payment of principal of or interest on the Loan; any change in the manner
of distribution of any payments to the Banks or Agent; a change to the
provisions of Section 2.1 which provide that the Banks shall not be required to
make an advance of proceeds of the Loan following a Default or Event of Default
(provided that the foregoing shall not limit the ability of the Majority Banks
to waive a Default or Event of Default or agree to make an advance
notwithstanding such Default of Event of Default); or an amendment of the
definition of Majority Banks or of any requirement for consent by all of the
Banks. The amount of the Agent's fee payable for the Agent's account and the
provisions of Section 14 may not be amended without the written consent of the
Agent. The Borrower agrees to enter into such modifications or amendments of
this Agreement or the other Loan Documents as reasonably may be requested by
BankBoston in connection with the syndication by BankBoston of its Commitment,
provided that no such amendment or modification materially affects or increases
any of the obligations of the Borrower hereunder. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.
SECTION 28. SEVERABILITY.
The provisions of this Agreement are severable, and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction,
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<PAGE> 80
and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
SECTION 29. NO UNWRITTEN AGREEMENTS.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 30. TIME OF THE ESSENCE.
Time is of the essence with respect to each and every covenant, agreement
and obligation of the Borrower under this Agreement and the other Loan
Documents.
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<PAGE> 81
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument the date first set forth above.
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership,
by its sole general partner
By: Crescent Real Estate Equities, Ltd., a
Delaware corporation
By: /s/
----------------------------------
Name:
-----------------------------
Title:
----------------------------
[CORPORATE SEAL]
[Signatures continued on next page]
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<PAGE> 82
BANKBOSTON, N.A., a national banking
association, formerly known as The
First National Bank of Boston,
individually and as Agent
By: /s/
-----------------------------------
Its:
----------------------------------
BankBoston, N.A.
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Dan Sullivan
Facsimile: 770/390-8434
and
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Facsimile: 617/434-7108
[Signatures continued on next page]
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<PAGE> 83
NATIONSBANK OF TEXAS, N.A., individually
and as Documentation Agent
By: /s/
-----------------------------------
Its:
----------------------------------
NationsBank of Texas, N.A.
901 Main Street
NationsBank Plaza
51st Floor
Dallas, Texas 75202
Attn: Real Estate Administration
Facsimile: 214/508-1571
[Signatures continued on next page]
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<PAGE> 84
BANKERS TRUST COMPANY, individually and
as Documentation Agent
By: /s/
-----------------------------------
Its:
----------------------------------
Bankers Trust Company
130 Liberty Street
25th Floor
New York, New York 10006
Attn: Alexander B. Johnson
Facsimile: 212/669-0752
[Signatures continued on next page]
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<PAGE> 85
FIRST AMERICAN BANK, S.S.B.
By: /s/
-----------------------------------
Its:
----------------------------------
First American Bank, S.S.B.
14651 Dallas Parkway
Suite 400
Dallas, Texas 75240
Attn: Jeff Schultz
Facsimile: 214/419-3308
[Signatures continued on next page]
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<PAGE> 86
COMERICA BANK-TEXAS
By: /s/
-----------------------------------
Its:
----------------------------------
Comerica Bank-Texas
1601 Elm Street
Thanksgiving Tower, 2nd Floor
Dallas, Texas 75201
Attn: Scott Gosslee
Facsimile: 214/979-8383
[Signatures continued on next page]
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<PAGE> 87
KREDIETBANK N.V.
By: /s/
-----------------------------------
Its:
----------------------------------
Kredietbank N.V.
2 Midtown Plaza
Suite 1440
1360 Peachtree Street
Atlanta, Georgia 30309
Attn: Kojo Asakura
Facsimile: 404/876-3212
[Signatures continued on next page]
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<PAGE> 88
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/
-----------------------------------
Its:
----------------------------------
Texas Commerce Bank National
Association
2200 Ross Avenue
7th Floor
Dallas, Texas 75201
Attn: Randy Lieberman
Facsimile: 214/965-2290
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<PAGE> 89
EXHIBIT A
FORM NOTE
$______________ June ___, 1997
FOR VALUE RECEIVED, the undersigned CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership, hereby promises to pay to
_______________________________________ or order, in accordance with the terms
of that certain Second Amended and Restated Revolving Credit Agreement dated
June 6, 1997 (the "Credit Agreement"), as from time to time in effect, among
the undersigned, BankBoston, N.A., for itself and as Agent, and such other
Banks as may be from time to time named therein, to the extent not sooner paid,
on or before the Maturity Date, the principal sum of _______________________
DOLLARS ($______________), or such amount as may be advanced by the payee
hereof under the Credit Agreement with daily interest from the date hereof,
computed as provided in the Credit Agreement, on the principal amount hereof
from time to time unpaid, at a rate per annum on each portion of the principal
amount which shall at all times be equal to the rate of interest applicable to
such portion in accordance with the Credit Agreement, and with interest on
overdue principal and, to the extent permitted by applicable law, on overdue
installments of interest and late charges at the rates provided in the Credit
Agreement. Interest shall be payable on the dates specified in the Credit
Agreement, except that all accrued interest shall be paid at the stated or
accelerated maturity hereof or upon the prepayment in full hereof. Capitalized
terms used herein and not otherwise defined herein shall have the meanings set
forth in the Credit Agreement.
Payments hereunder shall be made to BankBoston, N.A., as Agent for the
payee hereof, 100 Federal Street, Boston, Massachusetts 02110.
This Note is one of one or more Notes evidencing borrowings under and is
entitled to the benefits and subject to the provisions of the Credit Agreement.
The principal of this Note may be due and payable in whole or in part prior to
the maturity date stated above and is subject to mandatory prepayment in the
amounts and under the circumstances set forth in the Credit Agreement, and may
be prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement.
Notwithstanding anything in this Note to the contrary, all agreements
between the Borrower and the Banks and the Agent, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of any of the
Obligations or otherwise, shall the interest contracted for, charged or
received by the Banks exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, interest would otherwise be payable
to the Banks in excess of the maximum lawful amount, the interest payable to
the Banks shall be reduced to the maximum amount permitted under applicable
law; and if from any circumstance the Banks shall ever
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<PAGE> 90
receive anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal balance of the Obligations and to the
payment of interest or, if such excessive interest exceeds the unpaid balance
of principal of the Obligations, such excess shall be refunded to the Borrower.
All interest paid or agreed to be paid to the Banks shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full period until payment in full of the principal of the
Obligations (including the period of any renewal or extension thereof) so that
the interest thereon for such full period shall not exceed the maximum amount
permitted by applicable law. This paragraph shall control all agreements
between the Borrower and the Banks and the Agent.
In case an Event of Default shall occur, the entire principal amount of
this Note may become or be declared due and payable in the manner and with the
effect provided in said Credit Agreement.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts (without giving effect to the conflict of
laws rules of any jurisdiction).
The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest, notice of intention to accelerate the
indebtedness evidenced hereby, notice of acceleration of the indebtedness
evidenced hereby and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically otherwise provided in the Credit Agreement, and assent to
extensions of time of payment or forbearance or other indulgence without
notice.
This Note is a note executed in amendment and restatement in part of the
"Notes" as defined in the Amended Credit Agreement.
IN WITNESS WHEREOF the undersigned has by its duly authorized officers,
executed this Note under seal as of the day and year first above written.
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership,
by its sole general partner
By: Crescent Real Estate Equities, Ltd., a
Delaware corporation
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
[CORPORATE SEAL]
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<PAGE> 91
EXHIBIT B
FORM OF REQUEST FOR LOAN
[Exhibit Omitted]
<PAGE> 92
EXHIBIT C
FORM OF
COMPLIANCE CERTIFICATE
[Exhibit Omitted]
<PAGE> 93
SCHEDULE 1
BANKS AND COMMITMENTS
<TABLE>
<CAPTION>
Name and Address Commitment Commitment Percentage
- ---------------- ---------- ---------------------
<S> <C> <C>
BankBoston, N.A. $170,000,000.00 48.571429%
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Eurodollar Lending Office
Same as above
NationsBank of Texas, N.A. $ 50,000,000.00 14.285714%
901 Main Street
NationsBank Plaza
51st Floor
Dallas, Texas 75202
Attn: Real Estate Administration
Eurodollar Lending Office
Same as above
Bankers Trust Company $ 50,000,000.00 14.285714%
280 Park Avenue , 21 West
New York, New York 10017
Attn: David Genovese
Eurodollar Lending Office
Same as above
Texas Commerce Bank National $ 25,000,000.00 7.142857%
Association
2200 Ross Avenue
7th Floor
Dallas, Texas 75201
Attn: Randy Lieberman
Eurodollar Lending Office
Same as above
First American Bank, S.S.B. $ 20,000,000.00 5.714286%
14651 Dallas Parkway
Suite 400
Dallas, Texas 75240
Attn: Jeff Schultz
</TABLE>
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<PAGE> 94
<TABLE>
Eurodollar Lending Office
Same as above
<S> <C> <C>
Comerica Bank-Texas $ 20,000,000.00 5.714286%
1601 Elm Street
Thanksgiving Tower, 2nd Floor
Dallas, Texas 75201
Attn: Scott Gosslee
Eurodollar Lending Office
Same as above
Kredietbank N.V. $ 15,000,000.00 4.285714%
2 Midtown Plaza
Suite 1440
1360 Peachtree Street
Atlanta, Georgia 30309
Attn: Kojo Asakura
Eurodollar Lending Office
Same as above
--------------- --------
$350,000,000.00 100.00%
</TABLE>
Percentages may not equal 100% due to rounding.
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<PAGE> 95
SCHEDULE 6.3
TITLE TO PROPERTIES
NO CHANGES TO REFLECT
<PAGE> 96
SCHEDULE 6.7
LITIGATION
[Exhibit Omitted]
<PAGE> 97
SCHEDULE 6.18
SUBSIDIARIES OF THE BORROWER
[Exhibit Omitted]
<PAGE> 98
SCHEDULE 8.1(h)
EXISTING INDEBTEDNESS
[Exhibit Omitted]
