LEASE AGREEMENT
Dated as of December 18, 1998
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually,
but solely as Owner Trustee
under the HEALTHSOUTH Corporation Trust 1998-1,
as Lessor
and
HEALTHSOUTH CORPORATION, as Lessee
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This Lease Agreement is subject to a security interest in favor of NationsBank,
N.A., as Administrative Agent (the "Agent") under a Security Agreement dated as
of the date hereof among First Security Bank, National Association., not
individually except as expressly stated therein, but solely as Owner Trustee
under the HEALTHSOUTH Corporation Trust 1998-1, the Lenders and the Agent, as
amended, modified, supplemented, restated or replaced from time to time. This
Lease Agreement has been executed in several counterparts. To the extent, if
any, that this Lease Agreement constitutes chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease Agreement may be created
through the transfer or possession of any counterpart other than the original
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I........................................................................1
1.1 Definitions.......................................................1
ARTICLE II.......................................................................1
2.1 Properties........................................................1
2.2 Lease Term........................................................1
2.3 Title.............................................................2
2.4 Lease Supplements.................................................2
ARTICLE III......................................................................2
3.1 Rent..............................................................2
3.2 Payment of Basic Rent.............................................2
3.3 Supplemental Rent.................................................2
3.4 Performance on a Non-Business Day.................................3
3.5 Rent Payment Provisions...........................................3
ARTICLE IV.......................................................................3
4.1 Utility Charges; Taxes............................................3
ARTICLE V........................................................................4
5.1 Quiet Enjoyment...................................................4
ARTICLE VI.......................................................................4
6.1 Net Lease.........................................................4
6.2 No Termination or Abatement.......................................5
ARTICLE VII......................................................................5
7.1 Ownership of the Properties.......................................5
ARTICLE VIII.....................................................................7
8.1 Condition of the Properties.......................................7
8.2 Possession and Use of the Properties..............................7
ARTICLE IX.......................................................................8
9.1 Compliance with Legal Requirements and Insurance Requirements.....8
ARTICLE X........................................................................9
10.1 Maintenance and Repair; Return....................................9
10.2 Environmental Inspection.........................................10
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ARTICLE XI......................................................................10
11.1 Modifications....................................................10
ARTICLE XII.....................................................................11
12.1 Warranty of Title................................................11
ARTICLE XIII....................................................................12
13.1 Permitted Contests Other Than in Respect of Indemnities..........12
ARTICLE XIV.....................................................................12
14.1 Public Liability and Workers' Compensation Insurance.............12
14.2 Hazard and Other Insurance.......................................13
14.3 Coverage.........................................................13
ARTICLE XV......................................................................14
15.1 Casualty and Condemnation........................................14
15.2 Environmental Matters............................................16
15.3 Notice of Environmental Matters..................................16
ARTICLE XVI.....................................................................16
16.1 Termination Upon Certain Events..................................16
16.2 Procedures.......................................................17
ARTICLE XVII....................................................................17
17.1 Lease Events of Default..........................................17
17.2 Surrender of Possession..........................................19
17.3 Reletting........................................................20
17.4 Damages..........................................................20
17.5 Final Liquidated Damages.........................................21
17.6 Waiver of Certain Rights.........................................21
17.7 Assignment of Rights Under Contracts.............................21
17.8 Environmental Costs. ...........................................22
17.9 Remedies Cumulative..............................................22
17.10 Notice of Default or Event of Default............................22
ARTICLE XVIII...................................................................22
18.1 Lessor's Right to Cure Lessee's Lease Defaults...................22
ARTICLE XIX.....................................................................22
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option..22
19.2 No Termination With Respect to Less than All of the Properties...23
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ARTICLE XX......................................................................23
20.1 Early Purchase Option............................................23
20.2 Purchase or Sale Option..........................................23
ARTICLE XXI.....................................................................24
21.1 Renewal. .......................................................24
ARTICLE XXII....................................................................25
22.1 Sale Procedure...................................................25
22.2 Application of Proceeds of Sale..................................27
22.3 Indemnity for Excessive Wear.....................................27
22.4 Appraisal Procedure..............................................27
22.5 Certain Obligations Continue.....................................28
ARTICLE XXIII...................................................................28
23.1 Holding Over.....................................................28
ARTICLE XXIV....................................................................28
24.1 Risk of Loss.....................................................28
ARTICLE XXV.....................................................................28
25.1 Assignment.......................................................28
25.2 Subleases........................................................29
ARTICLE XXVI....................................................................30
26.1 No Waiver........................................................30
ARTICLE XXVII...................................................................30
27.1 Acceptance of Surrender..........................................30
27.2 No Merger of Title...............................................30
ARTICLE XXVIII..................................................................30
28.1 Incorporation of Covenants.......................................30
28.2 Additional Reporting Requirements................................31
ARTICLE XXIX....................................................................32
29.1 Notices..........................................................32
ARTICLE XXX.....................................................................33
30.1 Miscellaneous....................................................33
30.2 Amendments and Modifications.....................................33
30.3 Successors and Assigns...........................................33
30.4 Headings and Table of Contents...................................33
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30.5 Counterparts.....................................................33
30.6 Governing Law....................................................34
30.7 Calculation of Rent..............................................34
30.8 Memorandum of Lease..............................................34
30.9 Allocations between the Lenders and the Holders..................34
30.10 Limitations on Recourse..........................................34
30.11 Waivers of Jury Trial............................................34
30.12 Original Leases..................................................34
30.13 Power of Sale....................................................35
30.14 Exercise of Lessor Rights........................................35
</TABLE>
EXHIBITS
EXHIBIT A Description of Properties
EXHIBIT B Other Names And Locations of Lessee
EXHIBIT C Compliance Certificate
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LEASE AGREEMENT
THIS LEASE AGREEMENT (as amended, supplemented or modified from time to
time, this "Lease"), dated as of December 18, 1998, is between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, having its principal
office at 79 South Main Street, Salt Lake City, Utah 84111, not individually,
but solely as Owner Trustee under the HEALTHSOUTH Corporation Trust 1998-1, as
lessor (the "Lessor"), and HEALTHSOUTH CORPORATION, a Delaware corporation,
having its principal place of business at Birmingham, Alabama, as lessee (the
"Lessee").
W I T N E S S E T H:
A. WHEREAS, subject to the terms and conditions of the Participation
Agreement (defined below), Lessor will purchase or ground lease certain parcels
of real property, and will purchase the Improvements on such real property and
certain Equipment; and
B. WHEREAS, the Basic Term shall commence with respect to the
Properties as of the date hereof; and
C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to
lease from Lessor, the Properties;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 Definitions. Capitalized terms used but not otherwise defined in
this Lease have the respective meanings specified in Appendix A to the
Participation Agreement of even date herewith (as such may be amended, modified,
supplemented, restated and/or replaced from time to time, the "Participation
Agreement") among the Lessee, First Security Bank, National Association, not
individually, except as expressly stated therein, but as Owner Trustee under the
HEALTHSOUTH Corporation Trust 1998-1, the Holders party thereto, the Lenders
party thereto and the Agent.
ARTICLE II
2.1 Properties. Subject to the terms and conditions hereinafter set
forth and contained in the respective Lease Supplement relating to each
Property, Lessor hereby leases to Lessee and Lessee hereby leases from Lessor,
each Property described in Exhibit A and Schedule I-A, Schedule I-B and Schedule
I-C attached thereto.
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2.2 Lease Term. The term of this Lease with respect to each Property
(the "Basic Term") shall begin upon the Property Closing Date for such Property
(the "Basic Term Commencement Date" or the "Term Commencement Date" for such
Property) and shall end on December 17, 1999 (the "Basic Term Expiration Date"),
unless the Term is extended in accordance with Article XXI of this Lease or
earlier terminated in accordance with the provisions of this Lease.
2.3 Title. Each Property is leased to Lessee without any representation
or warranty, express or implied, by Lessor and subject to the rights of parties
in possession (if any), the existing state of title (including, without
limitation, the Permitted Exceptions) and all applicable Legal Requirements.
Lessee shall in no event have any recourse against Lessor for any defect in
title to any Property other than for Lessor Liens.
2.4 Lease Supplements. On or prior to the Basic Term Commencement Date,
Lessee and Lessor shall each execute and deliver a Lease Supplement for each
Property to be leased effective as of such Basic Term Commencement Date in
substantially the form of Exhibit C hereto. Lessee hereby irrevocably appoints
Lessor as Lessee's attorney-in-fact, with power of substitution, in the name of
Lessor or the name of Lessee or otherwise, to execute any Lease Supplement which
Lessee fails or refuses to sign in accordance with the terms of this Section
2.4.
ARTICLE III
3.1 Rent.
(a) Lessee shall pay Basic Rent on each Payment Date, and on
any date on which this Lease shall terminate.
(b) Basic Rent shall be due and payable in lawful money of the
United States and shall be paid in immediately available funds on the
due date therefor (or within the applicable grace period) to such
account or accounts at such bank or banks as Lessor shall from time to
time direct.
(c) Lessee's inability or failure to take possession of all or
any portion of any Property when delivered by Lessor, whether or not
attributable to any act or omission of the Lessor, the Lessee, or any
other Person, or for any other reason whatsoever, shall not delay or
otherwise affect Lessee's obligation to pay Rent for such Property in
accordance with the terms of this Lease.
3.2 Payment of Basic Rent. Basic Rent shall be paid absolutely net to
Lessor or its designee, so that this Lease shall yield to Lessor the full amount
of Basic Rent, without setoff, deduction or reduction.
3.3 Supplemental Rent. Lessee shall pay to Lessor or its designee or to
the Person entitled thereto any and all Supplemental Rent promptly as the same
shall become due and payable,
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and if Lessee fails to pay any Supplemental Rent, Lessor shall have all rights,
powers and remedies provided for herein or by law or equity or otherwise in the
case of nonpayment of Basic Rent. Without limiting the generality of the
definition of "Supplemental Rent," Lessee shall pay to Lessor as Supplemental
Rent, among other things, on demand, to the extent permitted by applicable Legal
Requirements, (a) any and all unpaid fees, charges, payments and other
obligations (except the obligations of Lessor to pay the principal amount of the
Loans and the Holder Amount) due and owing by Lessor under the Credit Agreement,
the Trust Agreement or any other Operative Agreement (including specifically
without limitation any amounts owing to the Lenders under Section 2.11 or
Section 2.12 of the Credit Agreement and any amounts owing to the Holders under
Section 3.9 or Section 3.10 of the Trust Agreement) and (b) interest at the
applicable Base Rate on any installment of Basic Rent not paid when due (subject
to the applicable grace period) for the period for which the same shall be
overdue and on any payment of Supplemental Rent not paid when due or demanded by
the appropriate Person for the period from the due date or the date of any such
demand, as the case may be, until the same shall be paid. The expiration or
other termination of Lessee's obligations to pay Basic Rent hereunder shall not
limit or modify the obligations of Lessee with respect to Supplemental Rent.
Unless expressly provided otherwise in this Lease, in the event of any failure
on the part of Lessee to pay and discharge any Supplemental Rent as and when
due, Lessee shall also promptly pay and discharge any fine, penalty, interest or
cost which may be assessed or added (a) by any party to an Operative Agreement
pursuant to the terms of such agreement or (b) by any Person that is not a party
to an Operative Agreement, in each case for nonpayment or late payment of such
Supplemental Rent, all of which shall also constitute Supplemental Rent.
3.4 Performance on a Non-Business Day. If any Basic Rent is required
hereunder on a day that is not a Business Day, then such Basic Rent shall be due
on the corresponding Scheduled Interest Payment Date. If any Supplemental Rent
is required hereunder on a day that is not a Business Day, then such
Supplemental Rent shall be due on the next succeeding Business Day.
3.5 Rent Payment Provisions. Lessee shall make payment of all Basic
Rent and Supplemental Rent when due regardless of whether any of the Operative
Agreements pursuant to which same is calculated and is owing shall have been
rejected, avoided or disavowed in any bankruptcy or insolvency proceeding
involving any of the parties to any of the Operative Agreements. Such provisions
of such Operative Agreements and their related definitions are incorporated
herein by reference and shall survive any termination, amendment or rejection of
any such Operative Agreements.
ARTICLE IV
4.1 Utility Charges; Taxes. Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on a Property and related
real property during the Term. Lessee shall be entitled to receive any credit or
refund with respect to any utility charge paid by Lessee. Unless a Lease Default
or Lease Event of Default shall have occurred and be continuing, the amount of
any credit or refund received
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by Lessor on account of any utility charges paid by Lessee, net of the costs and
expenses incurred by Lessor in obtaining such credit or refund, shall be
promptly paid over to Lessee. In addition, Lessee shall pay or cause to be paid
all taxes or tax assessments against a Property. All charges for utilities and
all taxes or tax assessments imposed with respect to a Property for a billing
period (or in the cases of tax assessments, a tax period) during which this
Lease expires or terminates shall be adjusted and prorated on a daily basis
between Lessor and Lessee, and each party shall pay or reimburse the other for
such party's pro rata share thereof.
ARTICLE V
5.1 Quiet Enjoyment. Subject to the rights of Lessor contained in
Sections 17.2 and 17.3 and the other terms of this Lease and the other Operative
Agreements and so long as no Lease Event of Default shall have occurred and be
continuing, Lessee shall peaceably and quietly have, hold and enjoy each
Property for the applicable Term, free of any claim or other action by Lessor or
anyone rightfully claiming by, through or under Lessor (other than Lessee) with
respect to any matters arising from and after the Basic Term Commencement Date.
ARTICLE VI
6.1 Net Lease. This Lease shall constitute a net lease. Any present or
future law to the contrary notwithstanding, this Lease shall not terminate, nor
shall Lessee be entitled to any abatement, suspension, deferment, reduction,
setoff, counterclaim, or defense with respect to the Rent, nor shall the
obligations of Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) by
reason of: (a) any damage to or destruction of any Property or any part thereof;
(b) any taking of any Property or any part thereof or interest therein by
Condemnation or otherwise; (c) any prohibition, limitation, restriction or
prevention of Lessee's use, occupancy or enjoyment of any Property or any part
thereof, or any interference with such use, occupancy or enjoyment by any Person
or for any other reason; (d) any title defect, Lien or any matter affecting
title to any Property; (e) any eviction by paramount title or otherwise; (f) any
default by Lessor hereunder; (g) any action for bankruptcy, insolvency,
reorganization, liquidation, dissolution or other proceeding relating to or
affecting the Agent, any Lender, Lessor, Lessee, any Holder or any Governmental
Authority; (h) the impossibility or illegality of performance by Lessor, Lessee
or both; (i) any action of any Governmental Authority or any other Person; (j)
Lessee's acquisition of ownership of all or part of any Property; (k) breach of
any warranty or representation with respect to any Property or any Operative
Agreement; (l) any defect in the condition, quality or fitness for use of any
Property or any part thereof; or (m) any other cause or circumstance whether
similar or dissimilar to the foregoing and whether or not Lessee shall have
notice or knowledge of any of the foregoing. The foregoing clause (j) shall not
prevent the termination of the Lease in accordance with the terms hereof if the
Lessee purchases all of the Properties pursuant to Section 20.1 or 20.2. The
parties intend that the obligations of Lessee hereunder shall be covenants,
agreements and obligations that are separate and independent from any
obligations of Lessor hereunder and shall continue unaffected unless such
covenants, agreements and obligations shall have been modified or terminated in
accordance with an express provision of this
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Lease. Lessor and Lessee acknowledge and agree that the provisions of this
Section 6.1 have been specifically reviewed and agreed to, and that this Lease
has been negotiated by the parties.
6.2 No Termination or Abatement. Lessee shall remain obligated under
this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting Lessor or any Governmental Authority, or any action with
respect to this Lease or any Operative Agreement which may be taken by any
trustee, receiver or liquidator of Lessor or any Governmental Authority or by
any court with respect to Lessor, Lessee, any Holder, or any Governmental
Authority. Lessee hereby waives all right (a) to terminate or surrender this
Lease (except as permitted under the terms of the Operative Agreements) or (b)
to avail itself of any abatement, suspension, deferment, reduction, setoff,
counterclaim or defense with respect to any Rent. Lessee shall remain obligated
under this Lease in accordance with its terms and Lessee hereby waives any and
all rights now or hereafter conferred by statute or otherwise to modify or to
avoid strict compliance with its obligations under this Lease. Notwithstanding
any such statute or otherwise, Lessee shall be bound by all of the terms and
conditions contained in this Lease.
ARTICLE VII
7.1 Ownership of the Properties.
(a) Lessor and Lessee intend that (i) for financial accounting
purposes with respect to Lessee (A) this Lease will be treated as an
"operating lease" pursuant to Statement of Financial Accounting
Standards No. 13, as amended, (B) Lessor will be treated as the owner
and lessor of the Properties and (C) Lessee will be treated as the
lessee of the Properties, but (ii) for federal and all state and local
income tax purposes, for bankruptcy purposes and all other purposes (A)
this Lease will be treated as a financing arrangement and (B) Lessee
will be treated as the owner of the Properties and will be entitled to
all tax benefits ordinarily available to owners of property similar to
the Properties for such tax purposes, and (C) all payments of Basic
Rent shall be deemed to be interest payments. Consistent with the
foregoing, Lessee intends to claim depreciation and cost recovery
deductions associated with the Properties, and Lessor agrees not to
take any inconsistent position on its income tax returns. Neither
Lessor, the Agent, any Lender, any Holder nor NMS makes any
representation or warranty with respect to the foregoing matters
described in this Section 7.1 and will assume no liability for the
Lessee's accounting treatment of this transaction.
(b) For all purposes other than as set forth in Section
7.1(a)(i), Lessor and Lessee intend this Lease to constitute a finance
lease and not a true lease. Lessor and Lessee further intend and agree
that, for the purpose of securing Lessee's obligations hereunder (i)
this Lease shall be deemed to be a security agreement and financing
statement within the meaning of Article 9 of the Uniform Commercial
Code respecting each of the Properties to the extent such is personal
property and an irrevocable grant and conveyance of each
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Property to the Lessor as security for the Lessee's obligations
hereunder to the extent such is real property; (ii) the acquisition of
title (or to the extent applicable, a leasehold interest) in the
Properties referenced in Article II shall be deemed to be (A) a grant
by Lessee to Lessor of a lien on and security interest in all of
Lessee's right, title and interest in and to each Property and all
proceeds (including without limitation insurance proceeds) of each
Property, whether in the form of cash, investments, securities or other
property, and (B) an assignment by Lessee to Lessor of all rents,
profits and income produced by each Property; and (iii) notifications
to Persons holding such Property, and acknowledgments, receipts or
confirmations from financial intermediaries, bankers or agents (as
applicable) of Lessee shall be deemed to have been given for the
purpose of perfecting such security interest under applicable law.
Lessor and Lessee shall promptly take such actions as may be necessary
or advisable in either party's opinion (including without limitation
the filing of Uniform Commercial Code Financing Statements or Uniform
Commercial Code Fixture Filings) to ensure that the lien and security
interest in the Properties will be deemed to be a perfected lien and
security interest of first priority under applicable law and will be
maintained as such throughout the Term.
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ARTICLE VIII
8.1 Condition of the Properties. LESSEE ACKNOWLEDGES AND AGREES THAT IT
IS LEASING THE PROPERTIES "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT
(EXPRESS OR IMPLIED) BY LESSOR AND IN EACH CASE SUBJECT TO (A) THE EXISTING
STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY),
(C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT
SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL
REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF. NEITHER LESSOR NOR THE AGENT
NOR ANY LENDER NOR ANY HOLDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO
HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE,
CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY
(OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART
THEREOF), AND NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER SHALL
BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE OF ANY
PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. THE LESSEE
HAS BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE IMPROVEMENTS
THEREON (IF ANY), IS (INSOFAR AS THE LESSOR, THE AGENT, EACH LENDER AND EACH
HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS INSPECTIONS AND IS
ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN
INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING
SENTENCE, AS BETWEEN THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS, ON THE
ONE HAND, AND THE LESSEE, ON THE OTHER HAND, ARE TO BE BORNE BY LESSEE.
8.2 Possession and Use of the Properties.
(a) At all times during the Term, the Properties shall be used
by Lessee or any sublessee permitted under Section 25.2 for the
provision of rehabilitation and other healthcare services and related
activities in the ordinary course of its business. Lessee shall pay, or
cause to be paid, all charges and costs required in connection with the
use of the Properties as contemplated by this Lease. Lessee shall not
commit or permit any waste of the Properties or any part thereof.
(b) Lessee represents and warrants that the address stated in
Section 29.1 of this Lease is the chief place of business and chief
executive office of Lessee (as such terms are used in Section 9-103 (or
other corresponding section) of the Uniform Commercial Code of any
applicable jurisdiction), and Lessee will provide Lessor with prior
written notice of any change of location of its chief place of business
or chief executive office. Regarding the
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Properties, Lessee represents and warrants that Schedules I-A and I-B
hereto correctly identify the initial location of the related Equipment
and Improvements, and Schedule I-C hereto contains an accurate legal
description for the Land. Lessee has no other places of business where
the Equipment or Improvements will be located other than those
identified on Schedule I-C.
(c) Lessee will not attach or incorporate any item of
Equipment to or in any other item of equipment or personal property or
to or in any real property (except the Land identified in Schedule I-C)
in a manner that could give rise to the assertion of any Lien on such
item of Equipment by reason of such attachment or the assertion of a
claim that such item of Equipment has become a fixture and is subject
to a Lien in favor of a third party that is prior to the Liens thereon
created by the Operative Agreements.
(d) Each Lease Supplement delivered under the terms of this
Lease shall contain, in regard to the relevant Property, an Equipment
Schedule that has a complete description of each item of Equipment, an
Improvement Schedule that has a complete description of each
Improvement and a legal description of the Land to be leased hereunder
as of such date. Simultaneously with the execution and delivery of each
Lease Supplement, such Equipment, Improvements and Land shall be deemed
to have been accepted by Lessee for all purposes of this Lease and to
be subject to this Lease.
(e) At all times during the Term, Lessee will comply with all
obligations under, and (to the extent no Event of Default has occurred
and is continuing and provided that such exercise will not impair the
value of any Property) shall be permitted to exercise all rights and
remedies under, all operation and easement agreements and related or
similar agreements applicable to each Property.
ARTICLE IX
9.1 Compliance with Legal Requirements and Insurance Requirements.
Subject to the terms of Article XIII relating to permitted contests, Lessee, at
its sole cost and expense, shall (i) comply with all material Legal Requirements
(including without limitation all Environmental Laws), and all Insurance
Requirements relating to the Properties, including the use, development,
construction, operation, maintenance, repair, refurbishment and restoration
thereof, whether or not compliance therewith shall require structural or
extraordinary changes in the Improvements or interfere with the use and
enjoyment of any Property, and (ii) procure, maintain and comply with all
material licenses, permits, orders, approvals, consents and other authorizations
required for the construction, use, maintenance and operation of any Property
and for the use, development, construction, operation, maintenance, repair and
restoration of the Improvements.
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ARTICLE X
10.1 Maintenance and Repair; Return.
(a) Lessee, at its sole cost and expense, shall maintain each
Property in good condition, repair and working order (ordinary wear and
tear excepted) and make all necessary repairs thereto, of every kind
and nature whatsoever, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural, or foreseen or unforeseen,
in each case as required by all Legal Requirements, Insurance
Requirements, and manufacturer's specifications and standards and on a
basis consistent with the operation and maintenance of properties or
equipment comparable in type and function to such Property and in
compliance with standard industry practice, subject, however, to the
provisions of Article XV with respect to Condemnation and Casualty.
(b) Lessee shall not move, use or relocate any component of
any Property beyond the boundaries of the Land described in the
applicable Lease Supplement without Lessor's prior written consent,
which consent shall not be unreasonably withheld or delayed.
(c) If any material component of any Property becomes worn
out, lost, destroyed, damaged beyond repair or otherwise permanently
rendered unfit for use, Lessee, at its own expense, will within a
reasonable time replace such component with a replacement component
which is free and clear of all Liens (other than Permitted Liens) and
has a value, utility and useful life at least equal to the component
replaced. All components which are added to any Property shall
immediately become the property of, and title thereto shall vest in,
Lessor, and shall be deemed incorporated in such Property and subject
to the terms of this Lease as if originally leased hereunder.
(d) Upon reasonable advance notice, Lessor and its agents
shall have the right to inspect each Property and all maintenance
records with respect thereto at any reasonable time during normal
business hours but shall not materially disrupt the business of Lessee.
(e) In addition to any Appraisal required by Section 5.3 of
the Participation Agreement, Lessee shall cause to be delivered to
Lessor (at Lessee's sole expense) any additional Appraisals (or
reappraisals) as Lessor or the Agent may deem appropriate (i) if an
Event of Default has occurred and is continuing, or (ii) if any one of
Lessor, the Agent, any Lender or any Holder is required pursuant to any
applicable Legal Requirement to obtain such an Appraisal (or
reappraisal).
(f) Lessor shall under no circumstances be required to build
any improvements on any Property, make any repairs, replacements,
alterations or renewals of any nature or description to such Property,
make any expenditure whatsoever in connection with this Lease or
maintain any Property in any way. Lessor shall not be required to
maintain, repair or rebuild all or any part of any Property, and Lessee
waives the right to (i) require Lessor to
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maintain, repair, or rebuild all or any part of any Property (unless
such repairs are needed to cure damage to a Property caused by the
gross negligence or wilful misconduct of the Lessor), or (ii) make
repairs at the expense of Lessor pursuant to any Legal Requirement,
Insurance Requirement, contract, agreement, covenants, condition or
restriction at any time in effect.
(g) Lessee shall, upon the expiration or earlier termination
of this Lease with respect to the Properties, if Lessee shall not have
exercised its Purchase Option with respect to the Properties, surrender
the Properties to Lessor, or the third party purchaser, as the case may
be, subject to Lessee's obligations under this Lease (including without
limitation Sections 9.1, 10.1(a)-(f), 10.2, 11.1, 12.1, 22.1 and 23.1)
and the other Operative Agreements.
10.2 Environmental Inspection. If (a) Lessee has not given notice of
the exercise of its Purchase Option on the Expiration Date pursuant to Section
20.2, or (b) Lessee has given notice, pursuant to Section 20.2 of its election
to remarket the Properties pursuant to Section 22.1 then, in either case, not
more than 120 days nor less than 60 days prior to the Expiration Date, Lessee
shall, at its sole cost and expense, provide to Lessor and the Agent a report by
a reputable environmental consultant selected by Lessee, which report shall be
in form and substance reasonably satisfactory to Lessor and the Agent and shall
include without limitation a "Phase I" environmental report (or update of a
prior "Phase I" report that was previously delivered to the Lessor and the
Agent) on each of the Properties. If the report delivered pursuant to the
preceding sentence recommends that a "Phase II" report or other supplemental
report be obtained, the Lessee shall, at its own cost and expense, not less than
thirty (30) days prior to such Expiration Date or Payment Date, provide to
Lessor and the Agent such "Phase II" or other report, in form and substance
reasonably satisfactory to Lessor and the Agent. If Lessee fails to provide such
Phase I, Phase II or other supplemental reports with respect to any Property
within the time periods required by this Section 10.2, or if such report or
reports are not satisfactory in scope or content to the Agent or the Lessor (in
their sole discretion), then notwithstanding any other provision of this Lease,
Lessor may require Lessee to purchase all of the Properties on such Expiration
Date or Payment Date for the Termination Value thereof, plus all Rent due and
payable, and all other amounts due and owing under any Operative Agreement.
ARTICLE XI
11.1 Modifications. Lessee at its sole cost and expense, at any time
and from time to time without the consent of Lessor may make alterations,
renovations, improvements and additions to any Property or any part thereof and
substitutions and replacements therefor (collectively, "Modifications") and
shall make any Modifications required by all applicable Legal Requirements;
provided, that: (i) except for any Modification required to be made pursuant to
a Legal Requirement, no Modification shall materially impair the value, utility
or useful life of any Property from that which existed immediately prior to such
Modification; (ii) the Modification shall be done expeditiously and in a good
and workmanlike manner; (iii) Lessee shall comply with all
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material Legal Requirements (including all Environmental Laws) and Insurance
Requirements applicable to the Modification, including without limitation the
obtaining of all permits and certificates of occupancy, and the structural
integrity of any Property shall not be adversely affected; (iv) to the extent
required by Section 14.2(a), Lessee shall maintain builders' risk insurance at
all times when a Modification is in progress; (v) subject to the terms of
Article XIII relating to permitted contests, Lessee shall pay all costs and
expenses and discharge any Liens arising with respect to the Modification; (vi)
such Modification shall comply with the requirements of this Lease (including
without limitation Sections 8.2 and 10.1); and (vii) no Improvements shall be
demolished unless Lessee shall finance the proposed Modification outside of this
lease facility. Modifications that (y) are not required for any Property or any
part thereof pursuant to any Legal Requirement or otherwise and (z) are
severable from the applicable Property without damage or other loss of value to
such Property shall become property of the Lessee, and title to such
Modifications shall rest with the Lessee. Except as set forth in the immediately
preceding sentence, all Modifications shall become property of the Lessor and
shall be subject to this Lease, and title to any component of any Property
comprising any such Modifications shall immediately vest in Lessor.
ARTICLE XII
12.1 Warranty of Title.
(a) Lessee agrees that, except as otherwise provided herein
and subject to the terms of Article XIII relating to permitted
contests, Lessee shall not directly or indirectly create or allow to
remain, and shall promptly discharge at its sole cost and expense, (i)
any Lien, defect, attachment, levy, title retention agreement or claim
upon any Property or any Modifications or (ii) any Lien, attachment,
levy or claim with respect to the Rent or with respect to any amounts
held by the Agent pursuant to the Credit Agreement, in each case other
than Permitted Liens and Lessor Liens. Lessee shall promptly notify
Lessor in the event it receives actual knowledge that a Lien other than
a Permitted Lien or Lessor Lien has occurred with respect to any
Property, and Lessee represents and warrants to, and covenants with,
Lessor that the Liens in favor of the Lessor created by the Operative
Agreements are first priority perfected Liens subject only to Permitted
Liens.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied, to
or for the performance by any contractor, mechanic, laborer,
materialman, supplier or vendor of any labor or services or for the
furnishing of any materials for any construction, alteration, addition,
repair or demolition of or to any Property or any part thereof. NOTICE
IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR
TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER
LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR,
SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR
IN AND TO SUCH PROPERTY.
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ARTICLE XIII
13.1 Permitted Contests Other Than in Respect of Indemnities. Except to
the extent otherwise provided for in Section 13 of the Participation Agreement,
Lessee, on its own or on Lessor's behalf but at Lessee's sole cost and expense,
may contest, by appropriate administrative or judicial proceedings conducted in
good faith and with due diligence, the amount, validity or application, in whole
or in part, of any Legal Requirement, or utility charges payable pursuant to
Section 4.1 or any Lien, attachment, levy, encumbrance or encroachment, and
Lessor agrees not to pay, settle or otherwise compromise any such item, provided
that (a) the commencement and continuation of such proceedings shall suspend the
collection of any such contested amount from, and suspend the enforcement
thereof against, the subject Property, Lessor, each Holder, the Agent and each
Lender; (b) there shall not be imposed a Lien (other than Permitted Liens) on
any Property and no part of any Property nor any Rent shall be in any danger of
being sold, forfeited, lost or deferred; (c) at no time during the permitted
contest shall there be a risk of the imposition of criminal liability or
material civil liability on Lessor, any Holder, the Agent or any Lender for
failure to comply therewith; and (d) in the event that, at any time, there shall
be a material risk of extending the application of such item beyond the end of
the Term, then Lessee shall deliver to Lessor an Officer's Certificate
certifying as to the matters set forth in clauses (a), (b) and (c) of this
Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute and
deliver to Lessee such authorizations and other documents as may reasonably be
required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.
ARTICLE XIV
14.1 Public Liability and Workers' Compensation Insurance. During the
Term, Lessee shall procure and carry, at Lessee's sole cost and expense,
commercial general liability insurance for claims for injuries or death
sustained by persons or damage to property while on a Property or the premises
where the Equipment is located and such other public liability coverages as are
then customarily carried by similarly situated companies conducting business
similar to that conducted by Lessee. Such insurance shall be on terms and in
amounts that are no less favorable than insurance maintained by Lessee with
respect to similar properties and equipment that it owns and are then carried by
similarly situated companies conducting business similar to that conducted by
Lessee. The policies shall be endorsed to name Lessor, the Holders, the Agent
and the Lenders as additional insureds and, to the extent of their interest,
loss payees. The policies shall also specifically provide that such policies
shall be considered primary insurance which shall apply to any loss or claim
before any contribution by any insurance which Lessor, any Holder, the Agent or
any Lender may have in force. Lessee shall, in the operation of each Property,
comply with the applicable workers' compensation laws and protect Lessor, each
Holder, the Agent and each Lender against any liability under such laws.
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14.2 Hazard and Other Insurance.
(a) During the Term, Lessee shall keep, or cause to be kept,
each Property insured against loss or damage by fire and other risks
and shall maintain builders' risk insurance during construction of any
Improvements or Modifications in amounts not less than the replacement
value from time to time of such Property and on terms that (a) are no
less favorable than insurance covering other similar properties owned
by Lessee and (b) are then carried by similarly situated companies
conducting business similar to that conducted by Lessee. The policies
shall be endorsed to name Lessor, the Holders, the Agent and the
Lenders, to the extent of their respective interests, as additional
loss payees; provided, that so long as no Lease Event of Default has
occurred and is continuing, any loss payable under the insurance
policies required by this Section will be paid to Lessee.
(b) If, during the Term, the area in which a Property is
located is designated a "flood-prone" area pursuant to the Flood
Disaster Protection Act of 1973, or any amendments or supplements
thereto, then Lessee shall comply with the National Flood Insurance
Program as set forth in the Flood Disaster Protection Act of 1973. In
addition, Lessee will fully comply with the requirements of the
National Flood Insurance Act of 1968 and the Flood Disaster Protection
Act of 1973, as each may be amended from time to time, and with any
other Legal Requirement concerning flood insurance to the extent that
it may apply to any such Property.
14.3 Coverage.
(a) As of the date of this Lease and annually thereafter so
long as this Lease remains in effect, Lessee shall furnish Lessor and
the Agent with certificates prepared by the insurers or insurance
broker of Lessee showing the insurance required under Sections 14.1 and
14.2 to be in effect, naming (except with respect to workers'
compensation insurance) Lessor, the Holders, the Agent and the Lenders
as additional insureds and loss payees and evidencing the other
requirements of this Article XIV. All such insurance shall be at the
cost and expense of Lessee and provided by nationally recognized,
financially sound insurance companies. Such certificates shall include
a provision for thirty (30) days' advance written notice by the insurer
to Lessor and the Agent in the event of cancellation or material
alteration of such insurance. If a Lease Event of Default has occurred
and is continuing and Lessor so requests, Lessee shall deliver to
Lessor copies of all insurance policies required by Sections 14.1 and
14.2.
(b) Lessee agrees that any insurance policy required by
Sections 14.1, 14.2(a) and 14.2(b) shall include an appropriate
provision that such policy will not be invalidated should Lessee waive,
at any time, any or all rights of recovery against any party for losses
covered by such policy or due to any breach of warranty, fraud, action,
inaction or misrepresentation by Lessee or any Person acting on behalf
of Lessee. Lessee hereby waives any and all such rights against the
Lessor, the Holders, the Agent and the Lenders to the extent of
payments made to any such Person under any such policy.
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(c) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with
any insurance required under this Article XIV, except that Lessor may
carry separate liability insurance at Lessor's sole cost so long as (i)
Lessee's insurance is designated as primary and in no event excess or
contributory to any insurance Lessor may have in force which would
apply to a loss covered under Lessee's policy and (ii) each such
insurance policy will not cause Lessee's insurance required under this
Article XIV to be subject to a coinsurance exception of any kind.
(d) Lessee shall pay as they become due all premiums for the
insurance required by Section 14.1 and Section 14.2, shall renew or
replace each policy prior to the expiration date thereof, and shall
otherwise maintain the coverage required by such Sections without any
lapse in coverage.
(e) Notwithstanding anything to the contrary contained in this
Section, Lessee's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy
or policies of insurance carried or maintained by Lessee; provided,
however, that the coverage afforded Lessor will not be reduced or
diminished or otherwise be different from that which would exist under
separate policies meeting all other requirements of this Lease, and
that the requirements of this Article XIV are otherwise satisfied.
ARTICLE XV
15.1 Casualty and Condemnation.
(a) Subject to the provisions of this Article XV and Article
XVI (in the event Lessee delivers, or is obligated to deliver, a
Termination Notice), and prior to the occurrence and continuation of a
Lease Default or Lease Event of Default, Lessee shall be entitled to
receive (and Lessor hereby irrevocably assigns to Lessee all of
Lessor's right, title and interest in) any award, compensation or
insurance proceeds under Sections 14.2(a) or (b) hereof to which Lessee
or Lessor may become entitled by reason of their respective interests
in each Property (i) if all or a portion of such Property is damaged or
destroyed in whole or in part by a Casualty or (ii) if the use, access,
occupancy, easement rights or title to such Property or any part
thereof is the subject of a Condemnation; provided, however, that if a
Lease Default or Lease Event of Default shall have occurred and be
continuing, such award, compensation or insurance proceeds shall be
paid directly to Lessor or, if received by Lessee, shall be held in
trust for Lessor, and shall be paid over by Lessee to Lessor and held
in accordance with the terms of this paragraph (a). All amounts held by
Lessor hereunder on account of any award, compensation or insurance
proceeds either paid directly to Lessor or turned over to Lessor shall
be held as security for the performance of Lessee's obligations
hereunder.
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(b) Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At Lessee's reasonable
request, and at Lessee's sole cost and expense, Lessor and the Agent
shall participate in any such proceeding, action, negotiation,
prosecution or adjustment. Lessor and Lessee agree that this Lease
shall control the rights of Lessor and Lessee in and to any such award,
compensation or insurance payment.
(c) If Lessee shall receive notice of a Casualty or a possible
Condemnation of a Property or any interest therein where damage to such
Property is estimated to equal or exceed ten percent (10%) of the
Property Cost of such Property, Lessee shall give notice thereof to the
Lessor and to the Agent promptly after the receipt of such notice.
(d) In the event of a Casualty or a Condemnation (regardless
of whether notice thereof must be given pursuant to paragraph (c)),
this Lease shall terminate with respect to such Property in accordance
with Section 16.1 if Lessee, within thirty (30) days after such
occurrence, delivers to Lessor and the Agent a Termination Notice to
such effect.
(e) If, pursuant to this Section 15.1, this Lease shall
continue in full force and effect following a Casualty or Condemnation
with respect to a Property, Lessee shall, at its sole cost and expense
and using, if available, the proceeds of any award, compensation or
insurance with respect to such Casualty or Condemnation (including,
without limitation, any such award, compensation or insurance which has
been received by the Agent and which should be turned over to Lessee
pursuant to the terms of the Operative Agreements, and if not available
or sufficient, using its own funds), promptly and diligently repair any
damage to such Property caused by such Casualty or Condemnation in
conformity with the requirements of Sections 10.1 and 11.1, using the
as-built plans and specifications or manufacturer's specifications for
the applicable Improvements or Equipment (as modified to give effect to
any subsequent Modifications, any Condemnation affecting the Property
and all applicable Legal Requirements), so as to restore such Property
to substantially the same condition, operation, function and value as
existed immediately prior to such Casualty or Condemnation. In such
event, title to such Property shall remain with Lessor.
(f) In no event shall a Casualty or Condemnation with respect
to which this Lease remains in full force and effect under this Section
15.1 affect Lessee's obligations to pay Rent pursuant to Section 3.1.
(g) Notwithstanding anything to the contrary set forth in
Section 15.1(a) or Section 15.1(e), if during the Term, a Casualty
occurs with respect to any Property or Lessee receives notice of a
Condemnation with respect to any Property, and following such Casualty
or Condemnation, (i) such Property cannot reasonably be restored,
repaired or replaced on or before the 180th day prior to the Expiration
Date (if such Casualty or Condemnation occurs during the Term) to
substantially the same condition as existed immediately prior to
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such Casualty or Condemnation, or (ii) on or before such day such
Property is not in fact so restored, repaired or replaced, then Lessee
shall be required to purchase such Property on the next Payment Date
and pay Lessor the Termination Value for such Property, plus any and
all Rent then due and owing, plus all other amounts then due and owing
(including without limitation amounts described in clause FIRST of
Section 22.2).
15.2 Environmental Matters. Promptly upon Lessee's actual knowledge of
the presence of Hazardous Substances in any portion of a Property in
concentrations and conditions that constitute an Environmental Violation and as
to which, in the reasonable opinion of Lessee, the cost to undertake any legally
required response, clean up, remedial or other action might result in a cost to
Lessee of more than $100,000, Lessee shall notify Lessor in writing of such
condition. In the event of any Environmental Violation (regardless of whether
notice thereof must be given), Lessee shall, not later than thirty (30) days
after Lessee has actual knowledge of such Environmental Violation, either
deliver to Lessor a Termination Notice pursuant to Section 16.1, if applicable,
or, at Lessee's sole cost and expense, promptly and diligently undertake and
complete any response, clean up, remedial or other action necessary to remove,
cleanup or remediate the Environmental Violation in accordance with all
Environmental Laws. If Lessee does not deliver a Termination Notice pursuant to
Section 16.1, Lessee shall, upon completion of remedial action by Lessee, cause
to be prepared by a reputable environmental consultant acceptable to Lessor a
report describing the Environmental Violation and the actions taken by Lessee
(or its agents) in response to such Environmental Violation, and a statement by
the consultant that the Environmental Violation has been remedied in full
compliance with applicable Environmental Law.
15.3 Notice of Environmental Matters. Promptly, but in any event within
thirty (30) days from the date Lessee has actual knowledge thereof, Lessee shall
provide to Lessor written notice of any pending or threatened Environmental
Claim involving any Environmental Law or any Release on or in connection with
any Property. All such notices shall describe in reasonable detail the nature of
the claim, action or proceeding and Lessee's proposed response thereto. In
addition, Lessee shall provide to Lessor, within five (5) Business Days of
receipt, copies of all material written communications with any Governmental
Authority relating to any Environmental Law in connection with the Property.
Lessee shall also promptly provide such detailed reports of any such material
Environmental Claims as may reasonably be requested by Lessor.
ARTICLE XVI
16.1 Termination Upon Certain Events. If any of the following occur:
(i) if the requirements of Section 15.1(c) are satisfied, or (ii) if the
requirements of Section 15.1(d) are satisfied and Lessee has determined pursuant
to such section that following the applicable Casualty or Condemnation this
Lease shall terminate with respect to the affected Property, or (iii) Lessee has
determined pursuant to the second sentence of Section 15.2 that, due to the
occurrence of an Environmental Violation, this Lease shall terminate with
respect to the affected Property, then Lessee shall be obligated to deliver,
within thirty (30) days of its receipt of notice of the applicable Condemnation
or the occurrence of the applicable Casualty or Environmental Violation, a
written
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notice to the Lessor in the form described in Section 16.2(a) (a "Termination
Notice") of the termination of this Lease with respect to the affected Property.
16.2 Procedures.
(a) A Termination Notice shall contain: (i) notice of
termination of this Lease with respect to the affected Property on a
Payment Date not more than sixty (60) days after Lessor's receipt of
such Termination Notice (the "Termination Date"); and (ii) a binding
and irrevocable agreement of Lessee to pay the Termination Value for
the applicable Property, any and all Rent then due and owing and all
other amounts then due and owing from Lessee under any of the Operative
Agreements (including without limitation amounts described in clause
FIRST of Section 22.2) and purchase such Property on such Termination
Date.
(b) On the Termination Date, Lessee shall pay to Lessor the
Termination Value for the applicable Property, any and all Rent then
due and owing and all other amounts then due and owing from Lessee
under any of the Operative Agreements (including without limitation
amounts described in clause FIRST of Section 22.2), and Lessor shall
convey such Property, or the remaining portion thereof, if any, to
Lessee (or Lessee's designee), all in accordance with Section 19.1.
ARTICLE XVII
17.1 Lease Events of Default. If any one or more of the following
events (each a "Lease Event of Default") shall occur:
(a) Lessee shall fail to make payment of (i) any Basic Rent
(except as set forth in clause (ii)) within five (5) Business Days
after the same has become due and payable or (ii) any Termination
Value, on the date any such payment is due, or any payment of Basic
Rent or Supplemental Rent due on the due date of any such payment of
Termination Value, or any amount due on the Expiration Date;
(b) Lessee shall fail to make payment of any Supplemental Rent
(other than Supplemental Rent referred to in Section 17(a)(ii)) due and
payable within three (3) days after receipt of notice that such payment
is due;
(c) Lessee shall fail to maintain insurance as required by
Article XIV of this Lease;
(d) Lessee shall fail to observe or perform any term, covenant
or provision (including without limitation the Incorporated Covenants)
of Lessee under this Lease or any other Operative Agreement to which
Lessee is a party other than those set forth in Sections 17.1(a), (b)
(c) or (g) hereof, and such failure shall remain uncured for a period
of thirty (30)
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days after the earlier of receipt of written notice from Lessor thereof
or a Responsible Officer of Lessee becomes aware of such failure;
(e) Lessee shall default in the performance or observance of
any other provision of this Lease or any other Operative Agreement to
which Lessee is a party other than those set forth in Sections 17.1(a),
(b), (c) or (d) hereof, and shall not cure such default within thirty
days after the first to occur of (i) the date the Agent, Lenders or
Lessor gives written or telephonic notice of the default to Lessee, or
(ii) the date the Lessee otherwise has notice thereof;
(f) A default shall be made (i) in the payment of any
Indebtedness (other than obligations under the Operative Agreements) of
the Lessee or any Consolidated Entity when due or (ii) in the
performance, observance or fulfillment of any term or covenant
contained in any agreement or instrument under or pursuant to which any
such Indebtedness may have been issued, created, assumed, guaranteed or
secured by the Lessee or any Consolidated Entity, if the effect of such
default is to accelerate the maturity of such Indebtedness or to permit
the holder thereof to cause such Indebtedness to become due prior to
its stated maturity, and such default shall not be cured within 10 days
after the occurrence of such default, and the amount of the
Indebtedness involved exceeds $5,000,000;
(g) The liquidation or dissolution of Lessee, or the
suspension of the business of Lessee, or the filing by Lessee of a
voluntary petition or an answer seeking reorganization, arrangement,
readjustment of its debts or for any other relief under the United
States Bankruptcy Code, as amended, or under any other insolvency act
or law, state or federal, now or hereafter existing, or any other
action of Lessee indicating its consent to, approval of or acquiescence
in, any such petition or proceeding; the application by Lessee for, or
the appointment by consent or acquiescence of Lessee of a receiver, a
trustee or a custodian of Lessee for all or a substantial part of its
property; the making by Lessee of any assignment for the benefit of
creditors; the inability of Lessee or the admission by Lessee in
writing of its inability to pay its debts as they mature; or Lessee
taking any corporate action to authorize any of the foregoing;
(h) The filing of an involuntary petition against Lessee in
bankruptcy or seeking reorganization, arrangement, readjustment of its
debts or for any other relief under the United States Bankruptcy Code,
as amended, or under any other insolvency act or law, state or federal,
now or hereafter existing; or the involuntary appointment of a
receiver, a trustee or a custodian of Lessee for all or a substantial
part of its property; or the issuance of a warrant of attachment,
execution or similar process against any substantial part of the
property of Lessee, and the continuance of any of such events for
ninety (90) days undismissed or undischarged;
(i) The adjudication of Lessee as bankrupt or insolvent;
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(j) The entering of any order in any proceedings against
Lessee decreeing the dissolution, divestiture or split-up of Lessee,
and such order remains in effect for more than sixty (60) days;
(k) Any material report, certificate, financial statement or
other instrument delivered to Lessor by or on behalf of Lessee pursuant
to the terms of this Lease or any other Operative Agreement shall be
false or misleading in any material respect when made or delivered;
(l) A final judgment (after all avenues of appeal and all
applicable appeal periods have expired), which with other outstanding
final judgments against Lessee exceeds an aggregate of $500,000 shall
be rendered against Lessee, and if within thirty (30) days after entry
thereof such judgment shall not have been discharged, paid or bonded or
execution thereon stayed pending appeal, or if within thirty (30) days
after the expiration of any such stay such judgment shall not have been
discharged;
(m) Any "Event of Default" (as defined in the Existing
HEALTHSOUTH Credit Agreement, as such agreement may be amended,
supplemented or restated from time to time) (hereinafter referred to as
"Existing HEALTHSOUTH Corporation Credit Agreement Event of Default")
shall have occurred and be continuing beyond any applicable notice,
grace or cure period (if any) included within the definition of such
Existing HEALTHSOUTH Corporation Credit Agreement Event of Default;
(n) Any material Environmental Violation with respect to which
notice to the Lessor is required to be given in accordance with Section
15.2 shall have occurred and be continuing, unless (i) the Lessee shall
completely remediate such Environmental Violation to the reasonable
satisfaction of the Agent and the Lessor within 90 days following the
date the Lessee has actual knowledge of such Environmental Violation or
(ii) the Lessee shall consummate the purchase of the affected Property
in accordance with and at the price required by Section 16.2 by the
earlier of (A) 60 days after the Lessor's receipt of the respective
Termination Notice under Section 16.2(a) or (B) 90 days after the
Lessee has actual knowledge of such Environmental Violation;
(o) Any Operative Agreement shall cease to be in full force
and effect, other than due to its expiration or termination in
accordance with its terms.
then, in any such event, (i) Lessor may, in addition to the other rights and
remedies provided for in this Article XVII and in Section 18.1, terminate this
Lease by giving Lessee fifteen (15) days notice of such termination, and this
Lease shall terminate, and all rights of Lessee under this Lease shall cease.
Lessee shall, to the fullest extent permitted by law, pay as Supplemental Rent
all costs and expenses incurred by or on behalf of Lessor, including without
limitation reasonable fees and expenses of counsel, as a result of any Lease
Event of Default hereunder.
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17.2 Surrender of Possession. If a Lease Event of Default shall have
occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to Section 17.1, Lessee shall, upon thirty (30) days written
notice, surrender to Lessor possession of the Properties. Lessor may enter upon
and repossess the Properties by such means as are available at law or in equity,
and may remove Lessee and all other Persons and any and all personal property
and Lessee's equipment and personalty and severable Modifications from the
Properties. Lessor shall have no liability by reason of any such entry,
repossession or removal performed in accordance with applicable law. Upon the
written demand of Lessor, Lessee shall return the Properties promptly to Lessor,
in the manner and condition required by, and otherwise in accordance with the
provisions of, Section 22.1(c) hereof.
17.3 Reletting. If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant to
Section 17.1, Lessor may, but shall be under no obligation to, relet any
Property, for the account of Lessee or otherwise, for such term or terms (which
may be greater or less than the period which would otherwise have constituted
the balance of the Term) and on such conditions (which may include concessions
or free rent) and for such purposes as Lessor may determine, and Lessor may
collect, receive and retain the rents resulting from such reletting. Lessor
shall not be liable to Lessee for any failure to relet a Property or for any
failure to collect any rent due upon such reletting.
17.4 Damages. Neither (a) the termination of this Lease pursuant to
Section 17.1; (b) the repossession of any Property; nor (c) the failure of
Lessor to relet any Property, the reletting of all or any portion thereof, nor
the failure of Lessor to collect or receive any rentals due upon any such
reletting, shall relieve Lessee of its liabilities and obligations hereunder,
all of which shall survive any such termination, repossession or reletting. If
any Lease Event of Default shall have occurred and be continuing and
notwithstanding any termination of this Lease pursuant to Section 17.1, Lessee
shall forthwith pay to Lessor all Rent and other sums due and payable hereunder
to and including the date of such termination. Thereafter, on the days on which
the Basic Rent or Supplemental Rent, as applicable, are payable under this Lease
or would have been payable under this Lease if the same had not been terminated
pursuant to Section 17.1 and until the end of the Term hereof or what would have
been the Term in the absence of such termination, Lessee shall pay Lessor, as
current liquidated damages (it being agreed that it would be impossible
accurately to determine actual damages) an amount equal to the Basic Rent and
Supplemental Rent that are payable under this Lease or would have been payable
by Lessee hereunder if this Lease had not been terminated pursuant to Section
17.1, less the net proceeds, if any, which are actually received by Lessor with
respect to the period in question of any reletting of any Property or any
portion thereof; provided that Lessee's obligation to make payments of Basic
Rent and Supplemental Rent under this Section 17.4 shall continue only so long
as Lessor shall not have received the amounts specified in Section 17.5. In
calculating the amount of such net proceeds from reletting, there shall be
deducted all of Lessor's, any Holder's, the Agent's and any Lender's reasonable
expenses in connection therewith, including repossession costs, reasonable
brokerage or sales commissions, reasonable fees and expenses for counsel and any
necessary repair or alteration costs and expenses incurred in preparation for
such reletting. To the extent Lessor receives any damages pursuant to this
Section
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17.4, such amounts shall be regarded as amounts paid on account of Rent. Lessee
specifically acknowledges and agrees that its obligations under this Section
17.4 shall be absolute and unconditional under any and all circumstances and
shall be paid or performed, as the case may be, without notice or demand and
without any abatement, reduction, diminution, setoff, defense, counterclaim or
recoupment whatsoever.
17.5 Final Liquidated Damages. If a Lease Event of Default shall have
occurred and be continuing, whether or not this Lease shall have been terminated
pursuant to Section 17.1 and whether or not Lessor shall have collected any
current liquidated damages pursuant to Section 17.4, Lessor shall have the right
to recover, by demand to Lessee and at Lessor's election, and Lessee shall pay
to Lessor, as and for final liquidated damages, but exclusive of the indemnities
payable under Section 13 of the Participation Agreement, and in lieu of all
current liquidated damages beyond the date of such demand (it being agreed that
it would be impossible accurately to determine actual damages) the sum of (a)
the Termination Value of all Properties plus (b) all other amounts owing in
respect of Rent and Supplemental Rent heretofore accruing under this Lease and
all other amounts then due and owing by the Lessee under any Operative
Agreement. Upon payment of the amount specified pursuant to the first sentence
of this Section 17.5, Lessee shall be entitled to receive from Lessor, either at
Lessee's request or upon Lessor's election, in either case at Lessee's cost, an
assignment of Lessor's entire right, title and interest in and to the
Properties, the Improvements, Fixtures, Modifications and Equipment, in each
case in recordable form and otherwise in conformity with local custom and free
and clear of the Lien of this Lease (including the release of any memorandum of
Lease recorded in connection therewith) and any Lessor Liens. The Properties
shall be conveyed to Lessee "AS IS" "WHERE IS" and in their then present
physical condition. If any statute or rule of law shall limit the amount of such
final liquidated damages to less than the amount agreed upon, Lessor shall be
entitled to the maximum amount allowable under such statute or rule of law;
provided, however, Lessee shall not be entitled to receive an assignment of
Lessor's interest in the Property, the Improvements, Fixtures, Modifications or
Equipment or documents unless Lessee shall have paid in full the Termination
Value and all other amounts due and owing hereunder and under the other
Operative Agreements. Lessee specifically acknowledges and agrees that its
obligations under this Section 17.5 shall be absolute and unconditional under
any and all circumstances and shall be paid or performed, as the case may be,
without notice or demand (except as otherwise specifically provided herein) and
without any abatement, reduction, diminution, setoff, defense, counterclaim or
recoupment whatsoever.
17.6 Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 17.1, Lessee waives, to the fullest extent permitted by law,
(a) any notice of re-entry or the institution of legal proceedings to obtain
re-entry or possession; provided, however, that the Lessor or the Agent shall
make a good faith effort to provide notice to the Lessee of any such action, but
the failure to provide such notice for any reason shall not result in the
invalidity of any action so taken and shall not give rise to any rights on the
part of the Lessee; (b) any right of redemption, re-entry or possession; (c) the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt; and (d) any other rights which might otherwise limit or
modify any of Lessor's rights or remedies under this Article XVII.
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17.7 Assignment of Rights Under Contracts. If a Lease Event of Default
shall have occurred and be continuing, and whether or not this Lease shall have
been terminated pursuant to Section 17.1, Lessee shall upon Lessor's demand
immediately assign, transfer and set over to Lessor all of Lessee's right, title
and interest in and to each agreement executed by Lessee in connection with the
purchase, construction, development, use or operation of all Properties
(including, without limitation, all right, title and interest of Lessee with
respect to all warranty, performance, service and indemnity provisions), as and
to the extent that the same relate to the purchase, construction, use and
operation of any Property.
17.8 Environmental Costs. If a Lease Event of Default shall have
occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to Section 17.1, Lessee shall pay directly to any third
party (or at Lessor's election, reimburse Lessor) for the cost of any
environmental testing or remediation work undertaken respecting any Property as
such testing or work is deemed appropriate in the reasonable judgment of Lessor,
Lessee shall pay all amounts referenced in the immediately preceding sentence
within ten (10) days of any request by Lessor such payment.
17.9 Remedies Cumulative. The remedies herein provided shall be
cumulative and in addition to (and not in limitation of) any other remedies
available at law, equity or otherwise, including, without limitation, any
mortgage foreclosure remedies.
17.10 Notice of Default or Event of Default. Lessee shall promptly
notify the Lessor and the Agent if any Responsible Officer of Lessee has
received notice, or has actual knowledge, of any Default or Event of Default.
ARTICLE XVIII
18.1 Lessor's Right to Cure Lessee's Lease Defaults. Lessor, without
waiving or releasing any obligation or Lease Event of Default, may (but shall be
under no obligation to) remedy any Lease Event of Default for the account and at
the sole cost and expense of Lessee, including the failure by Lessee to maintain
the insurance required by Article XIV, and may, to the fullest extent permitted
by law, and notwithstanding any right of quiet enjoyment in favor of Lessee,
enter upon any Property, or real property owned or leased by Lessee and take all
such action thereon as may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of any lessee. All reasonable out-of-pocket costs
and expenses so incurred (including without limitation reasonable fees and
expenses of counsel), together with interest thereon at the Base Rate from the
date on which such sums or expenses are paid by Lessor, shall be paid by Lessee
to Lessor on demand.
ARTICLE XIX
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option.
Subject to Section 19.2, in connection with any termination of this Lease
pursuant to the terms of Section 16.2, or in connection with Lessee's exercise
of its Purchase Option or its option to purchase all Properties
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pursuant to Section 20.1, upon the date on which this Lease is to terminate, and
upon tender by Lessee of the amounts set forth in Sections 16.2(b), 20.1 or
20.2, as applicable, Lessor shall execute and deliver to Lessee (or to Lessee's
designee) at Lessee's cost and expense a deed and an assignment of Lessor's
entire interest in the Properties, in recordable form and otherwise in
conformity with local custom and free and clear of the Lien of this Lease and
any Lessor Liens attributable to Lessor but without any other warranties (of
title or otherwise) from the Lessor. All Property shall be conveyed to Lessee
"AS IS" "WHERE IS" and in then present physical condition.
19.2 No Termination With Respect to Less than All of the Properties.
Lessee shall not be entitled to exercise its Purchase Option separately with
respect to less than all of the Properties or that portion of any Property
consisting of Land, Equipment and Improvements but shall be required to exercise
its Purchase Option with respect to all Properties and each entire Property.
ARTICLE XX
20.1 Early Purchase Option. Provided that no Lease Default of the types
specified in Sections 17.1(a), (b), (h), (i) or (j) or any Lease Event of
Default shall have occurred and be continuing and provided that the Election
Notice referred to in Section 20.2 has not been delivered, Lessee shall have the
option, exercisable by giving the Agent and Lessor no more than one hundred
twenty (120) days and no less than sixty (60) days irrevocable written notice of
Lessee's election to exercise such option, to purchase all (but not less than
all) of the Properties on a Scheduled Interest Payment Date as identified in
such written notice, at a price equal to the Termination Value for the
Properties (which the parties do not intend to be a "bargain" purchase price),
and Lessee at such time shall also pay any and all Rent then due and owing and
all other amounts then due and owing by Lessee under this Lease and under any
other Operative Agreement (including without limitation amounts, if any,
described in clause FIRST of Section 22.2). If Lessee exercises its option to
purchase the Properties free and clear of the Lien of this Lease and any Lessor
Liens with respect to the Property pursuant to this Section 20.1, Lessor shall
transfer to Lessee all of Lessor's right, title and interest in and to each
Property as of the Scheduled Interest Payment Date on which such purchase
occurs.
20.2 Purchase or Sale Option. Not less than 120 days and no more than
180 days prior to the Expiration Date, Lessee may give Lessor and Agent
irrevocable written notice (the "Election Notice") that Lessee is electing to
exercise either (a) the option to purchase all, but not less than all, of the
Properties on the Expiration Date (the "Purchase Option") or (b) the option to
remarket all of the Properties and cause a sale of all of the Properties
pursuant to the terms of Section 22.1 (the "Sale Option"), such sale to occur on
the Expiration Date. If Lessee does not give an Election Notice indicating the
Sale Option at least 120 days and not more than 180 days prior to the then
current Expiration Date, then Lessee shall be deemed to have elected the
Purchase Option for the Expiration Date. Lessor shall have no obligation to sell
any Property unless all of the Properties are sold on the Expiration Date. If
Lessee shall (i) elect (or be deemed to elect) to exercise the Purchase Option,
or (ii) elect to remarket all of the Properties pursuant to Section 22.1 and
fail to deliver the environmental report required by Section 10.2 at the time
specified in such Section, or (iii) elect to
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remarket all of the Properties pursuant to Section 22.1 and fail to cause all of
the Properties to be sold in accordance with the terms of Section 22.1 on the
Expiration Date on which such a sale of all of the Properties is required in
connection with such election, then in each case, Lessee shall pay to Lessor on
the Expiration Date an amount equal to the Termination Value for all the
Properties (which the parties do not intend to be a "bargain" purchase) plus all
Rent and other amounts then due and payable under this Lease or under any other
Operative Agreement (including without limitation the amounts described in
clause FIRST of Section 22.2), and, upon receipt of such amount, Lessor shall
transfer to Lessee all of Lessor's right, title and interest in and to the
Properties in accordance with Section 19.1. If the Lessee elects the Purchase
Option or the Sale Option and fails to perform its obligations under this Lease
with respect to such option, a Lease Event of Default shall be deemed to occur.
ARTICLE XXI
21.1 Renewal.
(a) Provided that no Lease Event of Default shall have
occurred and be continuing and provided that the Maturity Date under
the Credit Agreement shall be simultaneously extended (in accordance
with the terms of the Credit Agreement) to a date that is identical to
the final day of the Extended Term, at the Basic Term Expiration Date
or at the expiration of any Extended Term, Lessee, with the unanimous
consent of the Agent and all Lenders and Holders (which consent the
Agent and each such Lender and Holder may withhold in its sole and
absolute discretion), may renew this Lease (the "Renewal Options") for
up to two successive Extended Terms of 364 days each with respect to
all, but not less than all Properties; provided, however, the Term
shall not be extended pursuant to this Section 21.1(a) beyond December
14, 2001. In order to exercise the first Renewal Option to extend the
Term through December 15, 2000, Lessee must give written notice of its
request for such extension to Lessor not less than one hundred twenty
(120) days and not more than one hundred eighty (180) days prior to
December 17, 1999, and must have obtained the necessary consents of the
Agent, Lenders and Holders not later than December 17, 1999. In order
to exercise the second Renewal Option to extend the Term through
December 14, 2001, Lessee must give written notice of its request for
such extension to Lessor not less than one hundred twenty (120) days
and not more than one hundred eighty (180) days prior to December 15,
2000, must have obtained the necessary consents of the Agent, Lenders
and Holders not later than December 15, 2000, and must have previously
renewed the Term through December 15, 2000 in accordance with clause
(i) above.
(b) If Lessee shall fail to obtain the necessary consents to
any renewal of the Term by any date required by this Section, then
Lessee shall be deemed to have elected the option to purchase all of
the Properties on such date in accordance with Section 20.2.
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(c) Each renewal of this Lease for an Extended Term pursuant
to Section 21.1(a) shall be on the same terms and conditions as those
set forth in this Lease for the original Basic Term (which the parties
do not intend to be "bargain" renewals).
ARTICLE XXII
22.1 Sale Procedure.
(a) During the Marketing Period, Lessee, on behalf of the
Lessor, shall obtain bids for the cash purchase of all of the
Properties in connection with a sale to one or more purchasers to be
consummated on the Expiration Date for the highest price available,
shall notify Lessor promptly of the name and address of each
prospective purchaser and the cash price which each prospective
purchaser shall have offered to pay for the Properties and shall
provide Lessor with such additional information about the bids and the
bid solicitation procedure as Lessor may reasonably request from time
to time. Lessor may reject any and all bids and may assume sole
responsibility for obtaining bids by giving Lessee written notice to
that effect; provided, however, that notwithstanding the foregoing,
Lessor may not reject the highest bid for the Properties submitted by
the Lessee if such bid is greater than or equal to the sum of the
Limited Recourse Amount for the Properties, plus all reasonable costs
and expenses referred to in clause FIRST of Section 22.2 and represent
bona fide offers from one or more third party purchasers and provided
further, that Lessor may not reject a bid from the Houston Purchaser
(defined below) with respect to all Property located in Houston, Texas,
or a bid from the Topeka Purchaser (defined below) with respect to all
Property located in Topeka, Kansas in each case if and only if each of
the following conditions in clauses (y) and (z) are met: (y) such bid
is at least equal to the Termination Value of such Property (whether or
not it is the highest bid for such Property), plus all reasonable costs
and expenses referred to in clause FIRST of Section 22.2 and represents
a bona fide offer from such purchaser and (z) with respect to all
Properties other than such Property (the "Other Properties"), the
Lessee has received (and the Lessor has accepted) bids from one or more
prospective purchasers, such bids are greater than or equal to the sum
of the Limited Recourse Amounts for the Other Properties, plus all
reasonable costs and expenses referred to in clause FIRST of Section
22.2 and such bids represent bona fide offers from such third party
purchasers. If the price which a prospective purchaser or purchasers
shall have offered to pay for the Properties is less than the sum of
the Limited Recourse Amount plus all reasonable costs and expenses
referred to in clause FIRST of Section 22.2, Lessor may elect to retain
the Properties by giving Lessee prior written notice of Lessor's
election to retain the Properties, and upon receipt of such notice,
Lessee shall surrender the Properties to Lessor pursuant to Section
10.1. Unless Lessor shall have elected to retain the Properties
pursuant to the preceding sentence, Lessee shall arrange for Lessor to
sell the Properties free and clear of the Lien of this Lease and any
Lessor Liens attributable to it, without recourse or warranty (of title
or otherwise), for cash on the last day of the Marketing Period (such
date being hereafter referred to as the "Sale Date") to the purchaser
or purchasers identified by Lessee or Lessor, as the case may be;
provided, however, solely as
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to Lessor or the Trust Company, in its individual capacity, any Lessor
Lien shall not constitute a Lessor Lien so long as Lessor or the Trust
Company, in its individual capacity, is diligently contesting such
Lessor Lien by appropriate proceedings in good faith. Lessee shall
surrender the Properties so sold or subject to such documents to the
purchaser in the condition specified in Section 10.1. Lessee shall not
take or fail to take any action which would have the effect of
unreasonably discouraging bona fide third party bids for the Property.
Lessor shall have no obligation to sell any Property on the Sale Date
unless all of the Properties are sold on the Sale Date. If the
Properties are not either (i) sold on the Sale Date in accordance with
the terms of this Section 22.1, or (ii) retained by the Lessor pursuant
to an affirmative election made by the Lessor pursuant to the third
sentence of this Section 22.1(a), then the Lessee shall be obligated to
pay the Lessor on the Sale Date an amount equal to the Termination
Value for the Properties (plus all Rent and other amounts then due and
payable under this Lease and any other Operative Agreements) in
accordance with the terms of Section 20.2. For the purposes of this
paragraph, "Houston Purchaser" shall mean Houston Rehabilitation
Associates, a Delaware general partnership; and "Topeka Purchaser"
shall mean Kansas Rehabilitation Hospital, Inc., a Delaware
corporation.
(b) If the Properties are sold on the Sale Date to a third
party purchaser or purchasers in accordance with the terms of Section
22.1(a) and the aggregate purchase price paid for the Properties minus
the sum of all costs and expenses referred to in clause FIRST of
Section 22.2 is less than the sum of the Termination Value for the
Properties plus all Rent and other amounts then due and payable under
this Lease and under any other Operative Agreements (hereinafter such
difference shall be referred to as the "Deficiency Balance"), then the
Lessee hereby unconditionally promises to pay to the Lessor on the Sale
Date the lesser of (i) the Deficiency Balance, or (ii) the Maximum
Residual Guarantee Amount for the Properties. If the Properties are
retained by the Lessor pursuant to an affirmative election made by the
Lessor pursuant to the third sentence of Section 22.1(a), then the
Lessee hereby unconditionally promises to pay to the Lessor on the Sale
Date an amount equal to the Maximum Residual Guarantee Amount for the
Properties.
(c) In the event that the Properties are either sold to a
third party purchaser or purchasers on the Sale Date or retained by the
Lessor in connection with an affirmative election made by the Lessor
pursuant to the third sentence of Section 22.1(a), then in either case
on the Sale Date the Lessee shall provide Lessor or such third party
purchaser or purchasers with (i) all permits, certificates of
occupancy, governmental licenses and authorizations necessary to use
and operate the Properties for their intended purposes, (ii) such
easements, licenses, rights-of-way and other rights and privileges in
the nature of an easement as are reasonably necessary or desirable in
connection with the use, repair, access to or maintenance of the
Properties for its intended purpose or otherwise as the Lessor shall
reasonably request, (iii) a services agreement covering such services
as Lessor or such third party purchaser may reasonably request and
having a reasonable duration, in order to use and operate the
Properties for their intended purposes at such rates (not in excess of
arm's-length fair market rates) as shall be acceptable to Lessee and
Lessor or such third party purchaser or purchasers, and (iv) an
assignment to the Lessor or such third party purchaser or
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purchasers (as the case may be) of any existing service agreements
relating to the Properties, to the extent such agreements are
assignable. All assignments, licenses, easements, agreements and other
deliveries required by clauses (i) and (ii) of this paragraph (c) shall
be in form reasonably satisfactory to the Lessor or such third party
purchaser or purchasers, as applicable, and shall be fully assignable
(including both primary assignments and assignments given in the nature
of security) without payment of any fee, cost or other charge.
22.2 Application of Proceeds of Sale. The Lessor shall apply the
proceeds of sale of the Properties in the following order of priority:
(a) FIRST, to pay or to reimburse Lessor for the
payment of all reasonable costs and expenses incurred by
Lessor in connection with the sale;
(b) SECOND, so long as the Participation
Agreement, the Credit Agreement or the Trust Agreement is in
effect and any Loan, Holder Advance or any amount is owing to
the Lenders, the Holders or any other Person under any
Operative Agreement, to the Agent to be applied pursuant to
the terms in the Operative Agreements; and
(c) THIRD, to the Lessee.
22.3 Indemnity for Excessive Wear. If the proceeds of the sale
described in Section 22.1 with respect to the Properties, less all expenses
incurred by Lessor in connection with such sale, shall be less than the Limited
Recourse Amount with respect to the Properties, and at the time of such sale it
shall have been reasonably determined (pursuant to the Appraisal Procedure) that
the Fair Market Sales Value of the Properties, shall have been impaired by
greater than expected wear and tear during the term of the Lease, Lessee shall
pay to Lessor within ten (10) days after receipt of Lessor's written statement
(i) the amount of such excess wear and tear determined by the Appraisal
Procedure or (ii) the amount of the Net Sale Proceeds Shortfall, whichever
amount is less.
22.4 Appraisal Procedure. For determining the Fair Market Sales Value
of the Properties or any other amount which may, pursuant to any provision of
any Operative Agreement, be determined by an appraisal procedure, Lessor and
Lessee shall use the following procedure (the "Appraisal Procedure"). Lessor and
Lessee shall endeavor to reach a mutual agreement as to such amount for a period
of ten (10) days from commencement of the Appraisal Procedure under the
applicable section of the Lease, and if they cannot agree within ten (10) days,
then two qualified appraisers, one chosen by Lessee and one chosen by Lessor,
shall mutually agree thereupon, but if either party shall fail to choose an
appraiser within twenty (20) days after notice from the other party of the
selection of its appraiser, then the appraisal by such appointed appraiser shall
be binding on Lessee and Lessor. If the two appraisers cannot agree within
twenty (20) days after both shall have been appointed, then a third appraiser
shall be selected by the two appraisers or, failing agreement as to such third
appraiser within (30) days after both shall have been appointed, by the American
Arbitration Association. The decisions of the three appraisers shall be given
within twenty (20) days
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of the appointment of the third appraiser and the decision of the appraiser most
different from the average of the other two shall be discarded and such average
shall be binding on Lessor and Lessee; provided that if the highest appraisal
and the lowest appraisal are equidistant from the third appraisal, the third
appraisal shall be binding on Lessor and Lessee. The fees and expenses of each
appraiser shall be paid by Lessee.
22.5 Certain Obligations Continue. During the Marketing Period, the
obligation of Lessee to pay Rent with respect to the Properties (including the
installment of Basic Rent due on the Expiration Date) shall continue
undiminished until payment in full to Lessor of the sale proceeds, if any, the
Maximum Residual Guarantee Amount, the amount due under Section 22.3, if any,
and all other amounts due to Lessor with respect to the Properties. Lessor shall
have the right, but shall be under no duty, to solicit bids, to inquire into the
efforts of Lessee to obtain bids or otherwise to take action in connection with
any such sale, other than as expressly provided in this Article XXII.
ARTICLE XXIII
23.1 Holding Over. If Lessee shall for any reason remain in possession
of the Properties after the expiration or earlier termination of this Lease
(unless Properties are conveyed to Lessee), such possession shall be as a
tenancy at sufferance during which time Lessee shall continue to pay
Supplemental Rent that would be payable by Lessee hereunder were the Lease then
in full force and effect with respect to the Properties and Lessee shall
continue to pay Basic Rent at 110% of the Basic Rent that would otherwise be due
and payable at such time. Such Basic Rent shall be payable from time to time
upon demand by Lessor and such additional 10% amount shall be applied by the
Lessor to the payment of the Loans pursuant to the Credit Agreement and the
Holder Advances pursuant to the Trust Agreement pro rata between the Loans and
the Holder Advances. During any period of tenancy at sufferance, Lessee shall,
subject to the first sentence of this paragraph, 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 tenants
at sufferance, to continue their occupancy and use of the Properties. Nothing
contained in this Article XXIII shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease as to the Properties (unless the Properties is
conveyed to Lessee) and nothing contained herein shall be read or construed as
preventing Lessor from maintaining a suit for possession of the Properties or
exercising any other remedy available to Lessor at law or in equity.
ARTICLE XXIV
24.1 Risk of Loss. During the Term, unless Lessee shall not be in
actual possession of the Properties solely by reason of Lessor's exercise of its
remedies of dispossession under Article XVII, the risk of loss or decrease in
the enjoyment and beneficial use of the Properties as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise is assumed by Lessee, and Lessor shall in no event be answerable or
accountable therefor.
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ARTICLE XXV
25.1 Assignment.
(a) Lessee may not assign, mortgage, pledge or encumber this
Lease or any of its rights or obligations hereunder in whole or in part
to any Person without the prior written consent of the Agent, the
Lessor, each Lender and each Holder, with such consent to be given or
withheld in the sole discretion of each such party.
(b) No such assignment or other relinquishment of possession
to the Properties shall in any way discharge or diminish any of the
obligations of Lessee to Lessor hereunder and Lessee shall remain
directly and primarily liable under this Lease.
25.2 Subleases.
(a) Except as set forth in this Section 25.2, Lessee may not
sublet any Property or portion thereof without first obtaining the
prior written consent of the Lessor and the Agent, which consent may be
given or withheld in the sole discretion of each such party.
(b) Lessee may, without the consent of Lessor or the Agent,
sublet a Property to a Subsidiary of Lessee, or sublet professional
space constituting a portion of a Property to healthcare providers, in
each case if and only if:
(i) Lessee remains fully liable for all obligations
(including without limitation all Rent and other obligations
with respect to such subleased Properties and any other
Properties) under this Lease, each Lease Supplement and the
other Operative Agreements;
(ii) Such sublease is in writing and is expressly
subject and subordinate to the rights of the Lessor, the
Agent, the Lenders and the Holders under this Lease, the
Security Agreement, each Mortgage Instrument and all other
Operative Agreements; and
(iii) Such sublease is on commercially reasonable
terms and at market rates, and has a term that does not extend
past the Expiration Date, and such Property is at all times
used for the purposes set forth in this paragraph and in the
definition of "Property."
(c) No sublease or other relinquishment of possession to any
Property shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder and Lessee shall remain directly and
primarily liable under this Lease as to the Property so sublet.
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(d) Each insurance policy carried by Lessee pursuant to
Article XIV hereof shall be endorsed to name each sublessee under any
such sublease as an additional insured. Prior to the effectiveness of
any such sublease, Lessee shall deliver a copy thereof to the Lessor
and the Agent.
(e) Promptly but in any event at least thirty (30) days prior
to the execution and delivery of any sublease permitted by this Article
XXV, Lessee shall notify Lessor and the Agent of the execution of such
sublease. As of the date of each Lease Supplement, Lessee shall lease
the respective Properties described in such Lease Supplement from
Lessor, and (without limiting the generality of Sections 25.2(a) - (d))
any existing tenant respecting such Property shall automatically be
deemed to be a subtenant of Lessee and not a tenant of Lessor.
ARTICLE XXVI
26.1 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
upon a default hereunder, and no acceptance of full or partial payment of Rent
during the continuance of any such default, shall constitute a waiver of any
such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
ARTICLE XXVII
27.1 Acceptance of Surrender. No surrender to Lessor of this Lease or
of all or any portion of the Properties or of any interest therein shall be
valid or effective unless agreed to and accepted in writing by Lessor and the
Agent and, prior to the payment or performance of all obligations under the
Credit Documents, the Agent, and no act by Lessor or the Agent or any
representative or agent of Lessor or the Agent, other than a written acceptance,
shall constitute an acceptance of any such surrender.
27.2 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
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) any right, title or interest in any Property, (c) any
Notes, or (d) a beneficial interest in Lessor.
ARTICLE XXVIII
28.1 Incorporation of Covenants.
(a) Reference is made to that certain Credit Agreement dated
as of June 23, 1998 (the "Existing HEALTHSOUTH Corporation Credit
Agreement") among the Lessee,
30
<PAGE>
NationsBank, N.A., as agent, and the other financial institutions party
thereto. Further reference is made to the covenants contained in
Articles VII and VIII of the Existing HEALTHSOUTH Corporation Credit
Agreement (hereinafter referred to as the "Incorporated Covenants").
The Lessee agrees with the Lessor that, effective as of the date hereof
(whether or not the Basic Term has commenced), the Incorporated
Covenants (and all other relevant provisions of the Existing
HEALTHSOUTH Corporation Credit Agreement related thereto) are hereby
incorporated by reference into this Lease to the same extent and with
the same effect as if set forth fully herein and shall inure to the
benefit of the Lessor, without giving effect to any waiver, amendment,
modification or replacement of the Existing HEALTHSOUTH Corporation
Credit Agreement or any term or provision of the Incorporated Covenants
occurring subsequent to the date of this Lease, except to the extent
otherwise specifically provided in the following provisions of this
paragraph. In the event a waiver is granted under the Existing
HEALTHSOUTH Corporation Credit Agreement or an amendment or
modification is executed with respect to the Existing HEALTHSOUTH
Corporation Credit Agreement, and such waiver, amendment or
modification affects the Incorporated Covenants, then such waiver,
amendment or modification shall be effective with respect to the
Incorporated Covenants as incorporated by reference into this Lease
only if consented to in writing by the Majority Lenders. In the event
of any replacement of the Existing HEALTHSOUTH Corporation Credit
Agreement with a similar credit facility (the "New Facility") the
covenants contained in the New Facility which correspond to the
covenants contained in Articles VII and VIII of the Existing
HEALTHSOUTH Corporation Credit Agreement shall become the Incorporated
Covenants hereunder only if consented to in writing by the Majority
Lenders and, if such consent is not granted, then the covenants
contained in Articles VII and VIII of the Existing HEALTHSOUTH
Corporation Credit Agreement (together with any modifications or
amendments approved in accordance with this paragraph) shall continue
to be the Incorporated Covenants hereunder. If the Existing HEALTHSOUTH
Corporation Credit Agreement (or any such New Facility, as the case may
be) is terminated and not replaced, then the covenants contained in
Articles VII and VIII of the Existing HEALTHSOUTH Corporation Credit
Agreement (together with any modifications or amendments thereto, or to
covenants of the New Facility, in each case approved in accordance with
this paragraph) shall continue to be the Incorporated Covenants
hereunder.
(b) Financial Statements, Reports, etc. Without limiting the
generality of the foregoing, from and after the date hereof (whether or
not the Basic Term has commenced with respect to any Property), to the
extent that the Incorporated Covenants require the Lessee or any of its
Subsidiaries to deliver any financial statement, certificate, notice,
report, or other document or information to the Existing Credit Agent
(or any other agent or lender under the applicable credit facility),
the Lessee shall, and shall cause the Lessee to, simultaneously deliver
a copy of such financial statement, certificate, notice, report,
document or information to the Agent, each Lender, each Holder and
(upon Lessor's request) the Lessor.
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<PAGE>
28.2 Additional Reporting Requirements. Without limiting the generality
of the foregoing, from and after the date hereof, the Lessee will deliver, or
will cause to be delivered, to the Agent, each Lender, each Holder and (upon the
Lessor's request) the Lessor:
(i) Such other information regarding the financial
condition or operations of the Lessee or its Subsidiaries as
the Agent shall reasonably request from time to time or at any
time;
(ii) Promptly after the same shall have become known
to any officer of the Lessee, a notice describing any action,
suit or proceeding at law or in equity or by or before any
Governmental Authority that, if adversely determined, might
impair the ability of the Lessee to perform its obligations
under this Agreement or any other Operating Agreement or might
materially and adversely affect the business or condition,
financial or otherwise, of the Lessee;
(iii) Prompt notice in writing of the occurrence of
any Lease Default or Lease Event of Default.
ARTICLE XXIX
29.1 Notices. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing and delivered personally or
by a nationally recognized overnight courier service or mailed (by registered or
certified mail, return receipt requested, postage prepaid) or telecopied with a
confirming notice, addressed to the respective parties, as follows:
If to Lessee:
HEALTHSOUTH Corporation
One HealthSouth Parkway
Birmingham, Alabama 35243
Attention: Michael D. Martin
Telephone No.: (205) 969-4712
Telecopy No.: (205) 969-4620
With a copy to:
Leif Murphy
HEALTHSOUTH Corporation
One HealthSouth Parkway
Birmingham, Alabama 35243
Telephone No.: (205) 969-6056
Telecopy No.: (205) 969-6837
32
<PAGE>
If to Lessor:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Val T. Orton
Telephone No.: (801) 246-5630
Telecopy No.: (801) 246-5053
with a copy to the Agent:
NationsBank, N.A.
NationsBank Corporate Center
8th Floor
Charlotte, North Carolina 28255
Attention: Philip. S. Durand
Telephone No.: (704) 386-4955
Telecopy No.: (704) 388-0960
or such additional parties or other address as such party may hereafter
designate, and shall be effective upon receipt or refusal thereof.
ARTICLE XXX
30.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against and liabilities of Lessee or Lessor arising
from events commencing prior to the expiration or earlier termination of this
Lease shall survive such expiration or earlier termination. If any provision of
this Lease shall be held to be unenforceable in any jurisdiction, such
unenforceability shall not affect the enforceability of any other provision of
this Lease in such jurisdiction or of such provision or of any other provision
hereof in any other jurisdiction.
30.2 Amendments and Modifications. Neither this Lease nor any provision
hereof may be amended, waived, discharged or terminated except by an instrument
in writing in recordable form signed by Lessor and Lessee.
30.3 Successors and Assigns. All the terms and provisions of this Lease
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
30.4 Headings and Table of Contents. The headings and table of contents
in this Lease are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
30.5 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
33
<PAGE>
30.6 GOVERNING LAW. AS TO MATTERS RELATING TO THE CREATION, PERFECTION,
AND FORECLOSURE OF LIENS, AND ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST ANY
LEASED PROPERTY, THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE IN WHICH THE APPLICABLE LEASED PROPERTY IS LOCATED
WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THIS
LEASE SHALL IN ALL OTHER RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
30.7 Calculation of Rent. All calculation of Rent payable hereunder
shall be computed based on the actual number of days elapsed over a year of 360
days.
30.8 Memorandum of Lease and Lease Supplements. This Lease shall not be
recorded; provided Lessor and Lessee shall promptly record a Memorandum of this
Lease and of the applicable Lease Supplement (in substantially the form of
Exhibit C attached hereto) regarding each Property promptly after the
acquisition thereof in the local filing office with respect thereto in all cases
at Lessee's cost and expense, and as required under applicable law to
sufficiently evidence this Lease or any such Lease Supplement in the applicable
real estate filing records.
30.9 Allocations between the Lenders and the Holders. Notwithstanding
any other term or provision of this Lease to the contrary, the allocations of
the proceeds of the Properties and any and all other Rent and other amounts
received hereunder shall be subject to the inter-creditor provisions between the
Lenders and the Holders contained in the Operative Agreements (or as otherwise
agreed among the Lenders and the Holders from time to time).
30.10 Limitations on Recourse. Notwithstanding anything contained in
this Lease to the contrary, Lessee agrees to look solely to Lessor's estate and
interest in the Properties for the collection of any judgment requiring the
payment of money by Lessor in the event of liability by Lessor, and no other
property or assets of Lessor or any shareholder, owner or partner (direct or
indirect) in or of Lessor, or any director, officer, employee, beneficiary,
Affiliate of any of the foregoing shall be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Lessee under or
with respect to this Lease, the relationship of Lessor and Lessee hereunder or
Lessee's use of the Properties or any other liability of Lessor to Lessee.
Nothing in this Section shall be interpreted so as to limit the terms of
Sections 6.1 or 6.2.
30.11 WAIVERS OF JURY TRIAL. THE LESSOR AND THE LESSEE IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS LEASE OR ANY COUNTERCLAIM THEREIN.
30.12 Original Leases. The single executed original of this Lease
marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature
page thereof and containing the receipt of the Agent therefor on or following
the signature page thereof shall be the original executed counterpart of this
Lease (the "Original Executed Counterpart"). To
34
<PAGE>
the extent that this Lease constitutes chattel paper, as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Lease may be created through the transfer or
possession of any counterpart other than the Original Executed Counterpart.
30.13 Power of Sale. Without limiting any other remedies set forth in
this Lease, in the event that a court of competent jurisdiction rules that this
Lease constitutes a mortgage, deed of trust or other secured financing as is the
intent of the parties, then the Lessor and the Lessee agree that the Lessee
hereby grants, bargains, sells, conveys, mortgages, and grants a security
interest in the Properties (and any additional property described in Exhibit A)
WITH POWER OF SALE, and that, upon the occurrence of any Event of Default, the
Lessor shall have the power and authority, to the extent provided by law or the
Operative Agreements, after prior notice and lapse of such time as may be
required by law, to foreclose its interest (or cause such interest to be
foreclosed) in all or any part of any Property, to appoint or obtain the
appointment of a receiver for all or any part of the Property, and to exercise
any other right or remedy that may be available under applicable law to the
holder of a mortgage, deed of trust, security deed or other secured financing.
30.14 Exercise of Lessor Rights. The Lessee hereby acknowledges and
agrees that the rights and powers of the Lessor under this Lease have been
collaterally assigned to the Agent pursuant to the terms of the Security
Agreement and the other Operative Agreements, and that the Lessor has encumbered
the Properties by various Mortgage Instruments made by the Lessor in favor of
the Agent, all as security for certain indebtedness and obligations described
therein of the Lessor to the Agent, the Lenders and the Holders under the
Operative Agreements. Lessee hereby consents to said assignment and said
Mortgage Instruments in favor of the Agent and further acknowledges and agrees
as follows:
(a) In the event that a court of competent jurisdiction rules
that this Lease constitutes a mortgage, deed of trust, security deed or
other secured financing as is the intent of the parties, then the
Lessor and the Lessee agree that the Lessor's collateral assignment of
this Lease to the Agent shall be deemed to be a collateral assignment
of such mortgage, deed of trust, security deed or other secured
financing, and the Agent as such collateral assignee shall be entitled
to exercise any and all rights and remedies of the Lessor set forth
herein during the existence of any Event of Default, including without
limitation the Lessor's rights to obtain a receiver, to obtain
possession of the Properties and the rents and revenues thereof, to
foreclose this Lease, to sell the Lessee's interest in the Properties,
and to exercise any other rights or remedies that may then be available
to the Lessor under applicable law on account of such Event of Default.
(b) Lessee's interest in the Properties is junior and
subordinate to the lien of any Mortgage Instruments made by the Lessor
in favor of the Agent against the respective Properties from time to
time in connection with the Operative Agreements; provided, however,
that for so long as no Event of Default shall have occurred and be
continuing, (i) the Agent shall not disturb Lessee's possession of the
Properties through any foreclosure or
35
<PAGE>
other remedial action against the Properties under any Mortgage
Instrument, and (ii) if Lessor's interest in any Property shall be
transferred to any Person other than the Lessee as the result of the
Agent's foreclosure or other remedial action under any Mortgage
Instrument, the Lessee shall (upon request of the Agent) attorn to such
transferee and recognize the transferee as the Lessee's landlord under
this Lease.
(c) During the existence of an Event of Default, the Agent as
holder of the Mortgage Instruments and as collateral assignee of this
Lease may exercise any and all rights and remedies that may then be
available under applicable law to the Agent in either or both
capacities, whether exercised singly, successively or concurrently.
Without limiting the generality of the foregoing, the Agent as
collateral assignee may enforce the Lessee's payment obligations under
this Lease (regardless of whether this Lease shall be deemed a
mortgage, deed of trust, security deed or other secured financing) even
if Lessee's interest and estate in any Property under this Lease shall
have been extinguished or forfeited under applicable law through the
foreclosure or other enforcement of any Mortgage Instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
36
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.
HEALTHSOUTH CORPORATION, as Lessee
By: /s/ William W. Horton
-------------------------------
Name: William W. Horton
Title: Senior Vice President
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as Owner
Trustee under the HEALTHSOUTH Corporation
Trust 1998-1, as Lessor
By: /s/ Janeen R. Higgs
--------------------------------
Name: Janeen R. Higgs
------------------------------
Title: Trust Officer
------------------------------
37
<PAGE>
Receipt of this original
counterpart of the foregoing
Lease is hereby acknowledged
as the date hereof
NATIONSBANK, N.A.,
as Agent
By: /s/ Philip S. Durand
-------------------------
Name: Philip S. Durand
Title: Vice President
38
<PAGE>
EXHIBIT A TO THE LEASE
Description of Properties
The Properties subject to this Lease includes the Land described on
Schedule I-C attached hereto, and all Equipment on and Improvements to such
Land, including without limitation the Equipment described on Schedule I-B
attached hereto and the Improvements described on Schedule I-C attached hereto.
In addition, to the extent that a court of competent jurisdiction rules
that this Lease constitute a mortgage, deed of trust or other secured financing,
the Lessee hereby grants, bargains, sells, conveys, mortgage and grants a
security interest WITH POWER OF SALE in each of the following:
1. All buildings, structures, fixtures, and other improvements of every
kind existing at any time and from time to time on or under the real property
described on Schedule I-C (such real property, together with any other Land (as
defined in the Participation Agreement) now or hereafter owned, leased or
acquired by Lessee being referred to collectively as the "Land"), purchased,
leased or otherwise acquired by the Lessee, together with any and all
appurtenances to such buildings, structures or improvements, including
sidewalks, utility pipes, conduits and lines, parking areas and roadways, and
including all Lease Modifications and other additions to or changes in the Lease
Improvements at any time (all of the foregoing in this paragraph 1 being
referred to as the "Lease Improvements");
2. All easements, rights-of-way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water rights and passages, sewer
rights, waters, water courses, water rights and powers, and all estate, rights,
title, interests, privileges, liberties, tenements, hereditaments and
appurtenances whatsoever, in any way belonging, relating or appertaining to any
of the Properties hereinabove described, or which hereafter shall in any way
belong, relate or be appurtenant thereto, whether now owned or hereafter
acquired by Lessee, and the reversion and reversions, remainder and remainders,
rents, issues and profits thereof, and all the estate, right, title, interest,
property, possession, claim and demand whatsoever, at law as well as in equity,
of Lessee in and to the same, including but not limited to all judgments, awards
of damages and settlements hereafter made resulting from condemnation
proceedings involving Lessee taking the Properties described in Paragraphs 1 and
2 hereof, or any part thereof, under the power of eminent domain, or for any
damage (whether caused by such taking or otherwise) to the Properties
hereinabove described or any part thereof, or to any rights appurtenant thereto,
and all proceeds of any sales or other dispositions of the Properties or any
part thereof (all of the foregoing in this paragraph 2 being referred to as the
"Lease Easements");
3. All equipment, apparatus, furnishings, fittings and personal
property of every kind and nature whatsoever purchased, leased or otherwise
acquired by the Lessee, whether or not now or subsequently attached to,
contained in or used or usable in any way in connection with any operation of
any Lease Improvements or other improvements to the Land, including without
<PAGE>
limitation, all equipment described in any appraisal, all heating, electrical,
and mechanical equipment, lighting, switchboards, plumbing, ventilation, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading equipment and systems,
sprinkler systems and other fire prevention and extinguishing apparatus and
materials, security systems, motors, engines, machinery, pipes, pumps, tanks,
conduits, fittings and fixtures of every kind and description (all of the
foregoing in this paragraph 3 being referred to as the "Lease Equipment");
4. All fixtures relating to the Lease Improvements, including all
components thereof, located in or on the Lease Improvements, together with all
replacements, modifications, alterations and additions thereto (all of the
foregoing in this paragraph 4 being referred to as the "Lease Fixtures");
5. All alterations, renovations, improvements and additions to the
Land, any Lease Improvements or any Lease Equipment or any part thereof and
substitutions and replacements therefor (all of the foregoing in this paragraph
5 being referred to as the "Lease Modifications");
6. All right, title and interest of the Lessee in and to all of the
fixtures, chattels, business machines, machinery, apparatus, equipment,
furnishings, fittings and articles of personal property of every kind and nature
whatsoever, and all appurtenances and additions thereto and substitutions or
replacements thereof (together with, in each case, attachments, components,
parts and accessories) currently owned or subsequently acquired by the Lessee
and now or subsequently attached to, or contained in, comprising a portion of or
used or usable in any way in connection with the Properties, including but
without limiting the generality of the foregoing, all equipment referred to in
the Appraisals and the Equipment Schedules pursuant to the Lease or the
Participation Agreement, all computer hardware, and all heating, electrical, and
mechanical equipment, lighting, switchboards, plumbing, ventilation, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading equipment and systems,
cleaning systems (including without limitation window cleaning apparatus),
telephones, communication systems (including without limitation satellite dishes
and antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems, motors,
engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and
fixtures of every kind and description (all of the foregoing in this paragraph 6
being referred to as the "Lease Equipment");
7. All right, title and interest of the Lessee in and to all of the
fixtures, furnishings and fittings of every kind and nature whatsoever, and all
appurtenances and additions thereto and substitutions or replacements thereof
(together with, in each case, attachments, components, parts and accessories)
currently owned or subsequently acquired by the Lessee and now or subsequently
attached to, or contained in or used or usable in any way in connection with any
of the Properties; together with (i) all property affixed to or located on the
Properties which to the fullest extent permitted by law, shall be deemed
fixtures and a part of the real property, (ii) all materials delivered to the
Properties for use in any construction being conducted thereon, and owned by
Lessee, (iii) all contract rights, general intangibles, actions and rights in
action including all rights to insurance
<PAGE>
proceeds, arising out of or related to any of the foregoing property described
in subparagraphs (i) and (ii) of this paragraph 7 and paragraphs 1, 2 and 12,
and (iv) all products, replacements, additions, substitutions, renewals and
accessions of any of the foregoing (all of the foregoing in this paragraph 7
being referred to as the "Lease Fixtures"; all Land, Lease Fixtures, Lease
Equipment, the Lease Improvements, Lease Easements, the Lease Equipment, the
Lease Fixtures, the Lease Modifications and the Lease Easements are being
collectively referred to herein as the "Property");
8. All estate, right, title, claim or demand whatsoever of the Lessee,
in possession or expectancy, in and to the Properties or any part thereof;
9. All right, title and interest of the Lessee in and to all
substitutes, modifications and replacements of, and all additions, accessions
and improvements to the Properties, subsequently acquired by the Lessee or
constructed, assembled or placed by the Lessee on the Land, immediately upon
such acquisition, release, construction, assembling or placement, and in each
such case, without any further conveyance, assignment or other act by the
Lessee;
10. All right, title and interest of the Lessee in and to all unearned
premiums under insurance policies now or subsequently obtained by the Lessee
relating to the Properties and the Lessee's interest in and to all proceeds of
any such insurance policies, including without limitation the right to collect
and receive such proceeds; and all awards and other compensation, including
without limitation the interest payable thereon and the right to collect and
receive the same, made to the present or any subsequent owner of the Properties
for the taking by eminent domain, condemnation or otherwise, of all or any part
of the Properties or any easement or other right therein;
11. All right, title and interest of the Lessee in and to (i) all
consents, licenses, certificates and other governmental approvals relating to
construction, use or operation of the Properties or any part thereof and (ii)
all Plans and Specifications relating to the Properties;
12. All rents, royalties, issues, profits, revenue, income and other
benefits from the Properties; together with all right, title and interest of
Lessee in and to any and all leases now or hereafter on or affecting the
Properties, together with all security therefor and monies payable thereunder;
and
13. All proceeds, both cash and noncash, of any of the foregoing.
<PAGE>
EXHIBIT B TO THE LEASE
OTHER NAMES AND LOCATIONS OF LESSEE
None.
<PAGE>
EXHIBIT C TO THE LEASE
FORM OF
LEASE SUPPLEMENT
[MAY BE MODIFIED, IF AGREEABLE TO LESSEE, LESSOR AND AGENT TO CONFORM
TO REQUIREMENTS OF LOCAL LAW WHERE PROPERTY IS LOCATED]
LEASE SUPPLEMENT NO.
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of
[__________] between FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, but solely as Owner Trustee under the HEALTHSOUTH Corporation
Trust 1998-1, as lessor (the "Lessor"), and HEALTHSOUTH CORPORATION, as lessee
(the "Lessee") under the Lease Agreement dated as of December 18, 1998, between
Lessor and Lessee (as same may have been or may hereafter be amended, modified,
extended, supplemented, restated and/or replaced, the "Lease").
WHEREAS, the Lessor is the owner or will be the owner of the Property
described on Schedule I hereto (the "Leased Property") and wishes to lease the
same to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A to the Participation Agreement,
dated as of December 18, 1998, among the Lessee, the Lessor, not individually,
except as expressly stated therein, but solely as Owner Trustee under the
HEALTHSOUTH Corporation Trust 1998-1, the Holders party thereto, the Lenders
party thereto, and NationsBank, National Association, as Agent for the Lenders
(as such agreement may be amended, modified, supplemented or restated from time
to time).
SECTION 2. THE PROPERTIES. Attached hereto as Schedule I is the
description of the Leased Property, with an Equipment Schedule attached hereto
as Schedule I-A, an Improvement Schedule attached hereto as Schedule I-B and a
legal description of the Land for such Project attached hereto as Schedule I-C.
Effective upon the execution and delivery of this Lease Supplement by the Lessor
and the Lessee, the Leased Property shall be subject to the terms and provisions
of the Lease.
SECTION 3. USE OF PROPERTY. At all times during the Term with respect
to each Property, Lessee will comply with all obligations under and (to the
extent no Event of Default has occurred and is continuing and provided that such
exercise will not impair the value of such Property) shall
<PAGE>
be permitted to exercise all rights and remedies under, all operation and
easement agreements and related or similar agreements applicable to such
Property.
SECTION 4. RATIFICATION. Except as specifically modified hereby, the
terms and provisions of the Lease and the Operative Agreements are hereby
ratified and confirmed and remain in full force and effect.
SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF _____________________
WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICT OF LAWS.
SECTION 7. MORTGAGE GRANT AND REMEDIES. Without limiting any other
remedies set forth in the Lease, in the event that a court of competent
jurisdiction rules that the Lease constitutes a mortgage, deed of trust,
security deed or other secured financing as is the intent of the parties, then
the Lessor and the Lessee agree that the Lessee hereby grants, bargains, sells,
conveys, mortgages, and grants a security interest in each Property (including
the Leased Property) to Lessor WITH POWER OF SALE to secure the payment of all
sums due and owing by Lessee hereunder or under any other Operative Agreement,
and that, upon the occurrence of any Event of Default, the Lessor shall have the
power and authority, to the extent provided by law or the Operative Agreements,
after prior notice and lapse of such time as may be required by law, to
foreclose its interest (or cause such interest to be foreclosed) in all or any
part of any Property, to appoint or obtain the appointment of a receiver for all
or any part of the Property, and to exercise any other right or remedy that may
be available under applicable law to the holder of a mortgage, deed of trust,
security deed or other secured financing.
SECTION 8. EXERCISE OF LESSOR RIGHTS. The Lessee hereby acknowledges
and agrees that the rights and powers of the Lessor under the Lease have been
collaterally assigned to the Agent pursuant to the terms of the Security
Agreement and the other Operative Agreements, and that the Lessor has encumbered
the Properties (including the Leased Property) by various Mortgage Instruments
made by the Lessor in favor of the Agent, all as security for certain
indebtedness and obligations described therein of the Lessor to the Agent, the
Lenders and the Holders under the Operative Agreements. Lessee hereby consents
to said assignment and said Mortgage Instruments in favor of the Agent and
further acknowledges and agrees as follows:
<PAGE>
i. In the event that a court of competent jurisdiction rules
that the Lease constitutes a mortgage, deed of trust, security deed or
other secured financing as is the intent of the parties, then the
Lessor and the Lessee agree that the Lessor's collateral assignment of
the Lease to the Agent shall be deemed to be a collateral assignment of
such mortgage, deed of trust, security deed or other secured financing,
and the Agent as such collateral assignee shall be entitled to exercise
any and all rights and remedies of the Lessor set forth herein during
the existence of any Event of Default, including without limitation the
Lessor's rights to obtain a receiver, to obtain possession of the
Properties (including the Leased Property) and the rents and revenues
thereof, to foreclose the Lease, to sell the Lessee's interest in the
Properties (including the Leased Property), and to exercise any other
rights or remedies that may then be available to the Lessor under
applicable law on account of such Event of Default.
ii. Lessee's interest in the Properties (including the Leased
Property) is junior and subordinate to the lien of any Mortgage
Instruments made by the Lessor in favor of the Agent against the
respective Properties (including the Leased Property) from time to time
in connection with the Operative Agreements; provided, however, that
for so long as no Lease Event of Default shall have occurred and be
continuing, (i) except to the extent permitted by Section 5.1 of the
Lease, the Agent shall not disturb Lessee's possession of the
Properties (including the Leased Property) through any foreclosure or
other remedial action against the Properties (including the Leased
Property) under any Mortgage Instrument, and (ii) if Lessor's interest
in any Property (including the Leased Property) shall be transferred to
any Person other than the Lessee as the result of the Agent's
foreclosure or other remedial action under any Mortgage Instrument, the
Lessee shall (upon request of the Agent) attorn to such transferee and
recognize the transferee as the Lessee's landlord under the Lease.
iii. During the existence of an Event of Default, the Agent as
holder of the Mortgage Instruments and as collateral assignee of the
Lease may exercise any and all rights and remedies that may then be
available under applicable law to the Agent in either or both
capacities, whether exercised singly, successively or concurrently.
Without limiting the generality of the foregoing, the Agent as
collateral assignee may enforce the Lessee's payment obligations under
the Lease (regardless of whether the Lease shall be deemed a mortgage,
deed of trust, security deed or other secured financing) even if
Lessee's interest and estate in any Property under this Lease shall
have been extinguished or forfeited under applicable law through the
foreclosure or other enforcement of any Mortgage Instrument.
SECTION 9. COUNTERPART EXECUTION. This Lease Supplement may be executed
in any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
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[IF NECESSARY, MODIFY TO PUT IN RECORDABLE FORM.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as Owner
Trustee under the HEALTHSOUTH Corporation
Trust 1998-1, as Lessor
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
LESSEE:
HEALTHSOUTH CORPORATION, as Lessee
By:
-------------------------------------
Name: William W. Horton
Title: Senior Vice President
<PAGE>
Receipt of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged as the date hereof.
NATIONSBANK, NATIONAL ASSOCIATION, as
Agent
By:
-------------------------------------
Name: Philip S. Durand
Title: Vice President
<PAGE>
STATE OF ________________ )
) ss:
COUNTY OF ____________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County and State aforesaid of this ____ day of
___________, 199_, by _________ ______________, as __________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as Owner Trustee under the HEALTHSOUTH Corporation Trust 1998-1, on
behalf of the Owner Trustee.
[Notarial Seal] ----------------------------------
Notary Public
My commission expires:__________
STATE OF ________________ )
) ss:
COUNTY OF ____________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County and State aforesaid this ____ day of
__________, 199_, by ____________ ________________, as _____________ of
HEALTHSOUTH CORPORATION, a Florida corporation, on behalf of the corporation.
[Notarial Seal] ----------------------------------
Notary Public
My commission expires:__________
STATE OF _________________ )
) ss:
COUNTY OF _____________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County and State aforesaid this ____ day of
__________, 199_, by ____________ _________________, as _______________ of
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent.
[Notarial Seal] ----------------------------------
Notary Public
My commission expires:__________