-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FfmMYcHHPbFPJw2sh0Js26ITipji3GqxD/6ZQb3w9+E3IEJKdMmd9qR0bezlVXdw Dt8eXOKm07OIwBjrYVu2hA== 0000912057-96-011160.txt : 19960531 0000912057-96-011160.hdr.sgml : 19960531 ACCESSION NUMBER: 0000912057-96-011160 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960517 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960530 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARACELSUS HEALTHCARE CORP CENTRAL INDEX KEY: 0000758722 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 953565943 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-67040 FILM NUMBER: 96574843 BUSINESS ADDRESS: STREET 1: 155 N LAKE AVE STE 1100 CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 8187928600 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): May 17, 1996 PARACELSUS HEALTHCARE CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 33-67040 95-3565943 - -------------------------------------------------------------------------------- (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation) 155 NORTH LAKE AVENUE, SUITE 1100 PASADENA, CA 91101 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (818) 792-8600 -------------- N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) The Exhibit Index is located on Page 3. The total number of pages of this Form 8-K is 5. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On May 17, 1996 (the "Event Date"), Paracelsus Healthcare Corporation, a California corporation (the "Company"), acquired Davis Hospital and Medical Center, a 120-bed general acute care hospital, formerly owned and operated by General Hospitals of Galen, a Utah corporation ("Galen") wholly-owned by Columbia/HCA Healthcare Corporation ("Columbia/HCA"), pursuant to a stock purchase agreement dated as of November 28, 1995, as amended, between the Company and Galen (the "Stock Purchase Agreement"). By the terms of the Stock Purchase Agreement, the Company acquired all the shares of Paracelsus Davis Hospital, Inc., the owner of substantially all assets of Davis Hospital and Medical Center, from Galen for approximately $38.5 million in cash. Also on the Event Date, pursuant to an asset exchange agreement dated as of November 28, 1995, as amended, among Paracelsus Halstead Hospital, a Kansas corporation wholly-owned by the Company ("PHH"), Paracelsus Elmwood Medical Center, a Louisiana corporation wholly-owned by the Company ("PEMC"), Paracelsus Peninsula Medical Center, a California corporation wholly-owned by the Company ("PPMC"), Paracelsus Real Estate Corporation, a California corporation wholly-owned by the Company ("PREC"), Pioneer Valley Hospital, Inc., a Utah corporation wholly-owned by Columbia/HCA ("PVH"), and Medical Center of Santa Rosa, Inc., a Florida corporation wholly-owned by Columbia/HCA ("MCSR") (the "Asset Exchange Agreement"), the Company acquired (i) Pioneer Valley Hospital, a 139-bed general acute care hospital, formerly owned and operated by PVH, and (ii) Santa Rosa Medical Center, a 129-bed general acute care hospital, formerly owned and operated by MCSR, in exchange for (a) Halstead Hospital, a 190-bed general acute care hospital, formerly owned and operated by PHH, (b) Elmwood Medical Center, a 135-bed general acute care hospital, formerly owned and operated by PEMC, and (c) Peninsula Medical Center, a 119-bed general acute care hospital, formerly owned and operated by PPMC. The transaction undertaken pursuant to the Asset Exchange Agreement and the Stock Purchase Agreement (the "Exchange Transaction") was structured as a like-kind exchange, as described in Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"), and as an exchange of assets under 42 U.S.C. 413.134(f)(4), designed to achieve favorable tax treatment. The Exchange Transaction was undertaken in compliance with an Order of the Federal Trade Commission (the "FTC"), FTC Docket No. C-3619 (October 3, 1995), whereby Columbia/HCA was required to divest its interest in Pioneer Valley Hospital, Santa Rosa Medical Center and Davis Hospital and Medical Center. None of the acquired hospital facilities or their affiliates, at the time of the negotiation of the Exchange Transaction had any material relationship to the Company, any affiliate of the Company, any director or officer of the Company or any associate of such director or officer. The Company intends to continue to operate the businesses of Davis Hospital, Pioneer Valley Hospital and Santa Rosa Medical Center. - 2 - ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Businesses Acquired. It is impracticable to provide the required financial statements for the acquired businesses at this point in time. The required financial statements will be filed as soon as practicable, but not later than 60 days from the date this Form 8-K is required to be filed. (b) Pro Forma Financial Information. It is impracticable to provide the required pro forma financial information at this point in time. The required pro forma financial information will be filed as soon as practicable, but not later than 60 days from the date this Form 8-K is required to be filed. (c) Exhibits. Exhibit Exhibit Sequential Number Description Page Number ------- ----------- ----------- 2.1(a) Stock Purchase Agreement by Incorporated by and between Paracelsus reference to the Healthcare Corporation and Company's 10-K for General Hospitals of Galen, the fiscal year Inc., dated as of November ended September 30, 28, 1995 1995 2.1(b) First Amendment to Stock Purchase Agreement by and between Paracelsus Healthcare Corporation and General Hospitals of Galen, Inc., dated as of April 24, 1996 2.2(a) Asset Exchange Agreement by Incorporated by and between Paracelsus reference to the Halstead Hospital, Inc., Company's 10-K for Paracelsus Elmwood Medical the fiscal year Center, Inc., Paracelsus ended September 30, Peninsula Medical Center, 1995 Inc., Paracelsus Real Estate Corporation and Pioneer Valley Hospital, Inc. and Medical Center of Santa Rosa, Inc., dated as of November 28, 1995 - 3 - 2.2(b) First Amendment to Asset Exchange Agreement by and between Paracelsus Halstead Hospital, Inc., Paracelsus Elmwood Medical Center, Inc., Paracelsus Peninsula Medical Center, Inc., Paracelsus Real Estate Corporation and Pioneer Valley Hospital, Inc. and Medical Center of Santa Rosa, Inc., dated as of February 20, 1996 2.2(c) Second Amendment to Asset Exchange Agreement by and between Paracelsus Halstead Hospital, Inc., Paracelsus Elmwood Medical Center, Inc., Paracelsus Peninsula Medical Center, Inc., Paracelsus Real Estate Corporation and Pioneer Valley Hospital, Inc., and Medical Center of Santa Rosa, Inc., dated as of April 24, 1996 2.3 Purchase and Sale Agreement by and between American Health Properties, Inc., AHP of Kansas, Inc., AHP of New Orleans, Inc., AHP of Utah, Inc., Paracelsus Healthcare Corporation and Paracelsus Pioneer Valley Hospital, Inc., dated as of May 15, 1996 2.4 Pioneer Hospital Lease by and between AHP of Utah, Inc. and Paracelsus Pioneer Valley Hospital, Inc., dated as of May 15, 1996 - 4 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PARACELSUS HEALTHCARE CORPORATION a California corporation By: /s/ James T. Rush ------------------------------------------ Name: James T. Rush Title: Vice President, Finance and Chief Financial Officer Date: May 30, 1996 - 5 - EX-2.1(B) 2 EX-2.1(B) EXHIBIT 2.1(b) FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT THIS AMENDMENT (the "Amendment") is made and entered into this 24th day of April, 1996 amends that certain Stock Purchase Agreement by and between Paracelsus Healthcare Corporation ("PHC") and General Hospitals of Galen, Inc. dated November 28, 1995 (the "Agreement"). RECITALS: A. The parties would like to amend the Agreement to amend certain covenants therein. B. The parties would like to amend the Agreement to amend and provide for the early termination of the Utah Provider Agreement (as defined in the Agreement). AGREEMENT NOW, THEREFORE, for the consideration recited in the Agreement and the promises and covenants contained therein and herein, the parties hereto agree as follows: 1. DELETION OF CERTAIN COVENANTS (SECTION 11.9). The last sentence of the first paragraph of Section 11.9 of the Agreement is hereby deleted in its entirety. 2. AMENDMENT AND EARLY TERMINATION OF UTAH PROVIDER AGREEMENT (SECTION 11.11 AND EXHIBIT A). (a) Section 11.11 of the Agreement is hereby amended by deleting "up to four (4) years after the Closing Date" and replacing therefor "up to two (2) years after the Closing Date" and by adding the following to the end of the last sentence thereof "provided, however upon the occurrence of the Merger Event (defined herein), then any obligation of Columbia/HCA Healthcare Corporation or PHC under this Section 11.11 and the Utah Provider Agreement executed at the Closing shall immediately terminate. As used herein, the "Merger Event" shall refer to the merger of PHC with Champion Healthcare Corporation ("Champion"), some other consolidation of PHC or Champion (or of their affiliates), the acquisition (directly or indirectly) by PHC or any of its affiliates of the hospitals in Utah owned by Champion or the acquisition (directly or indirectly) by Champion or any of its affiliates of the hospitals in Utah owned by PHC. (b) The Utah Provider Agreement attached to the Agreement as EXHIBIT A shall be amended by deleting from paragraph 10 the term "initial" from the first sentence and by deleting the second and third sentences entirely and by adding the following Section 12(e) to the Utah Provider Agreement "(e) This Agreement shall immediately terminate as of the effective date of the Merger Event, if any. As used herein, the "Merger Event" shall refer to the merger of Paracelsus with Champion Healthcare Corporation ("Champion"), some other consolidation of Paracelsus or Champion (or of their affiliates), the acquisition (directly or indirectly) by Paracelsus or any of its affiliates of the hospitals in Utah owned by Champion or the acquisition (directly or indirectly) by Champion or any of its affiliates of the hospitals in Utah owned by PHC." 3. CHAMPION UTAH PROVIDER AGREEMENTS. As a part of its proposed transaction with Champion, PHC shall cause the Utah Provider Agreement executed by and between Champion and Columbia/HCA Healthcare Corporation dated November 9, 1995 (executed in connection with Champion's acquisition of Jordan Valley Hospital in Utah) and the Utah Provider Agreement dated April 13, 1995 by and between Champion and Healthtrust, Inc. - The Hospital Company (executed in connection with Champion's acquisition of Salt Lake Regional Hospital in Utah) to be terminated effective as of the effective date of the Merger Event. Champion shall not have a right to participate any further in the Managed Care Contracts (as defined in the Utah Provider Agreements) and Champion's obligations under the Managed Care Contracts shall terminate as of such date. 4. COUNTERPART SIGNATURE. This amendment may be executed in one or more counterparts, each of which shall be an original but all of which shall constitute one agreement. 5. DEFINITIONS. Any terms left undefined in this Amendment will have the meaning ascribed to them as set forth in the Agreement. -2- IN WITNESS WHEREOF, each of the parties has signed this Amendment on the date first above written. PARACELSUS HEALTHCARE CORPORATION By: /s/ Robert C. Jay ----------------------------- Title: Vice President -------------------------- GENERAL HOSPITALS OF GALEN, INC. By: /s/ V. Carl George ----------------------------- Title: Vice President -------------------------- -3- EX-2.2(B) 3 EX-2.2(B) EXHIBIT 2.2(b) FIRST AMENDMENT TO ASSET EXCHANGE AGREEMENT THIS AMENDMENT (the "Amendment") is made and entered into this 20th day of February, 1996 amends that certain Asset Exchange Agreement by and between Paracelsus Halstead Hospital, Inc. ("PHH"), Paracelsus Elmwood Medical Center, Inc. ("PEMC"), Paracelsus Peninsula Medical Center, Inc. ("PPMC"), Paracelsus Real Estate Corporation ("PREC"), Pioneer Valley Hospital, Inc. ("PVH") and Medical Center of Santa Rosa, Inc. ("MCSR") dated November 28, 1995 (the "Agreement"). RECITALS: A. Other than letter amendments to the Agreement which establish deadlines for the parties to agree to the disclosure schedules to the Agreement and which extend the "drop dead" date, there have been no amendments to the Agreement as of the date hereof. B. The parties would like to add a provision to the Agreement which relates to the emergency services business associated with Santa Rosa Medical Center in Santa Rosa, Florida. C. The parties would like to clarify the Agreement so as to reflect their mutual agreement as to (i) the taking of physical inventory prior to the Closing and (ii) the procedure by which the real property associated with the Louisiana Hospital and the Kansas Hospital as currently held by AHP will be conveyed to C/HCA. AGREEMENT NOW, THEREFORE, for the consideration recited in the Agreement and the promises and covenants contained therein and herein, the parties hereto agree as follows: 1. NEW PROVISION. A new Section 11.24 shall be added to the Agreement as follows: "11.24.1 COVENANT RELATING TO AMBULANCE SERVICES. For a period of two (2) years from and after the date hereof (or such lesser period to the maximum extent permitted by applicable law), neither PPMC, PREC, MCSR, any affiliate thereof, nor any entity controlled (directly and indirectly) by such entities shall, directly or indirectly, within, into or from the Territory (as defined below), engage in any aspect of the ambulance, paramedic, emergency response transport service business (the "Ambulance Service Business") in competition with Rural/Metro Corporation (the parent of the corporation which is buying the emergency services business from an affiliate of MCSR) or any of its subsidiaries. For purposes of this Agreement, the term "Territory" shall mean the counties of Escambia and Santa Rosa, Florida. Notwithstanding the above, the Ambulance Service Business shall not be deemed to include inter-facility transports or non-emergency transports. For purposes of this Agreement, "inter-facility transports" shall mean those transports to or from the Santa Rosa Medical Center to or from such other health care facilities including but not limited to physician office buildings, skilled nursing facilities, rehabilitation facilities, nursing homes, boarding houses, etc. and "non-emergency transports" shall mean those transports of patients to Santa Rosa Medical Center for which an emergency transport vehicle is not required. If at any time during the two year term of this covenant, it is determined that the provider of the Ambulance Service Business in Santa Rosa County is in breach of its agreement with the Santa Rosa County for the provision of Ambulance Service Business, then the term of this covenant shall terminate effectively with such determination, and neither PPMC, PREC, MCSR, any affiliate thereof, nor any entity controlled (directly or indirectly) by such entities shall thereafter be bound by this Section 11.24 and the same shall no longer be effective. 11.24.2 REASONABLENESS AND REMEDIES. Each of the parties hereto specifically acknowledge that the geographic regions contained in Section 11.24.1 hereof, and the length of time restrictions in Section 11.24.1 hereof are necessary and reasonable. Each party hereby acknowledges and agrees that the restrictions set forth in this Amendment are reasonable and necessary, and that any violation thereof would result in substantial and irreparable injury to the other parties and such other parties may not have an adequate remedy at law with respect to any such violation. Accordingly, each party agrees that, in the event of any actual or threatened violation thereof, any party affected by such violation or threatened violation shall have the right and privilege to obtain, without the necessity of posting bond therefor, and in addition to any other remedies that may be available, equitable relief, including temporary and permanent injunctive relief, to cease or prevent any actual or threatened violation of any provision hereof. -2- 11.24.3 ASSIGNMENT. It is expressly agreed that any of the parties hereto may assign the benefits of this Section 11.24 (but not the obligations set forth in Section 11.24.1) to an affiliate or other third party giving valid consideration for such assignment without the prior written consent of the other parties and further that any such assignee shall have the right to enforce the obligations set forth in this Section 11.24. 11.24.4 INDULGENCES. Neither any failure nor any delay on the part of any of the parties hereto (or their assignees as set forth in Section 11.24.3) to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence." 2. SUPPLIES. The parties agree that the physical inventories contemplated by Section 2.10.1 and Section 2.11.1 may be completed at any time on or after December 31, 1995; provided that each party maintains a perpetual rolling count thereafter in sufficient detail to allow the party who will be receiving the supplies at the Closing to track the movement of the inventory from the date of its physical count to the Closing. 3. PROCEDURE TO CONVEY REAL PROPERTY. The Agreement is hereby amended as appropriate to effect the following amendment, provided, however, that nothing herein shall in any way diminish or limit the representations and warranties of the parties to the Agreement or the quality of title to the property exchanged by such parties pursuant to the terms of the Agreement. PHH and PEMC shall merge into PPVH, a newly formed corporation, immediately prior to Closing. PPVH shall acquire the Louisiana Real Property from AHPNO and the Kansas Real Property from AHPKS prior to Closing. At Closing PPVH, as the successor to PHH and PEMC and as the fee owner of the Louisiana Real Property and the Kansas Real Property, shall exchange the Louisiana Assets and the Kansas Assets with PVH for the Pioneer Assets. At the Closing, PPVH shall deliver the conveyance documents to PVH that PHH, PEMC, AHPNO and AHPKS were to provide under the terms of the Agreement. In addition, PPVH shall provide such other instruments and documents as C/HCA reasonably deems necessary to evidence the -3- merger of PHH and PEMC, its ownership of the Louisiana Assets and the Kansas Assets and to effect the transactions contemplated hereby. As a result of this revised structure, counsel for AHPNO and AHPKS shall not be required to deliver a legal opinion as contemplated by the Agreement. Attached hereto as EXHIBIT A is an outline of the amendment to the structure of this transaction. 4. COUNTERPART SIGNATURE. This amendment may be executed in one or more counterparts, each of which shall be an original but all of which shall constitute one agreement. 5. DEFINITIONS. Any terms left undefined in this Amendment will have the meaning ascribed to them as set forth in the Agreement. IN WITNESS WHEREOF, each of the parties has signed this Amendment on the date first above written. PARACELSUS HALSTEAD HOSPITAL, INC. By: /s/ Robert C. Jay ------------------- Title: Vice President ---------------- PARACELSUS ELMWOOD MEDICAL CENTER, INC. By: /s/ Robert C. Jay ------------------- Title: Vice President ---------------- PARACELSUS PENINSULA MEDICAL CENTER, INC. By: /s/ Robert C. Jay ------------------- Title: Vice President ---------------- PARACELSUS REAL ESTATE CORPORATION By: /s/ Robert C. Jay ------------------- Title: Vice President ---------------- -4- PIONEER VALLEY HOSPITAL, INC. By: /s/ V. Carl George ------------------- Title: Vice President ---------------- MEDICAL CENTER OF SANTA ROSA, INC. By: /s/ V. Carl George ------------------- Title: Vice President ---------------- -5- EXHIBIT A REAL AND PERSONAL PROPERTY TRANSFER STRUCTURE COLUMBIA -- PARACELSUS Asset Exchange Agreement Capitalized terms not defined herein but defined in the Asset Exchange Agreement shall have the same meaning herein as set forth therein. A. Kansas Business and Louisiana Business in exchange for Pioneer Business 1. Kansas Real Property and Kansas Business to be owned by Paracelsus Pioneer Valley Hospital, Inc., a Utah corporation and successor by merger to PHH and PEMC ("PPVH") as of Closing 2. Louisiana Real Property and Louisiana Business to be owned by PPVH as of Closing 3. Exchange of Pioneer Real Property, by Pioneer Valley Hospital, Inc., a Utah corporation ("Pioneer"), and remainder of Pioneer Business by Pioneer with PPVH for the Louisiana Real Property, Louisiana Business, Kansas Real Property and Kansas Business a. The Pioneer Real Property and Pioneer Business will be transferred by Pioneer as follows: (1) Conveyance of fee title from Pioneer by special warranty deed to PPVH of the following: (A) Parcels 2, 3, 4, 5, 6 and 7 (3449 and 3460 S. Pioneer Parkway, and 4052 W. Pioneer Parkway), all as set forth in Commitment No. 13985-A (B) Parcels 1 and 2 (vacant land at 3381 South 4000 West) as set forth in Commitment No. 13985-B (2) Assignment of the following leases (with consents of lessors) from Pioneer to PPVH: 1 (A) Lease by Pioneer of Parcel 1 (3336 S. Pioneer Parkway) as set forth in Commitment No. 13985-A between National Health Investors, Inc., a Maryland corporation ("NHI"), as lessor, and Pioneer, as lessee (B) Lease described in Commitment No. 14160 (Salt Lake Industrial Clinic), owned by Boyer-Salt Lake Industrial Partnership (C) Such other leases as are listed in Schedule 5.9 of the Asset Exchange Agreement (3) Conveyance of remainder of Pioneer Business by Pioneer to PPVH, as set forth in the Asset Exchange Agreement, from Pioneer to PPVH b. The Louisiana Real Property, Louisiana Business, Kansas Real Property and Kansas Business will be conveyed from PPVH(1) as follows: (1) Conveyance of fee title by special warranty deed from PPVH to Pioneer of the following: (a) A-1, A-2 and B (Elmwood Medical Center and Popeye's Building) as set forth in Commitment No. 1508.521 (b) The land described in Commitment No. T4145 (Halstead Hospital) (2) Assignment from PPVH to Pioneer of the leases for the Kansas Real Property and Louisiana Real Property set forth in Schedule 4.9 of the Asset Exchange Agreement (3) Conveyance of remainder of Louisiana Business and Kansas Business, as set - --------------- (1) The Exchange Agreement contemplates that AHPNO and AHPKS will convey these properties. 2 forth in the Asset Exchange Agreement, from PPVH to Pioneer B. Exchange of Santa Rosa Real Property for Florida Real Property between Paracelsus Real Estate Corporation, a California corporation ("PREC") and Medical Center of Santa Rosa, Inc., a Florida Corporation ("Santa Rosa"), and exchange of remainder of Santa Rosa Business for remainder of Florida Business between Paracelsus Peninsula Medical Center, Inc., a Florida corporation ("PPMC") (or Paracelsus Santa Rosa Medical Center, Inc. if PPMC's name is changed prior to Closing) and Santa Rosa 1. PREC leases the Florida Real Property to PPMC. Concurrently with the Closing, this lease will be terminated. 2. PREC and PPMC will transfer the Florida Real Property and Florida Business to Santa Rosa as follows: a. Conveyance by special warranty deed by PREC to Santa Rosa of the land described in Commitment No. FL014-10-N68806 (Peninsula Medical Center) b. Assignment of the PPMC leases described in Schedule 4.9 of the Asset Exchange Agreement c. Conveyance of Florida Business from PPMC to Santa Rosa as set forth in the Asset Exchange Agreement 3. Santa Rosa will transfer the Santa Rosa Real Property to PREC as follows: a. Assignment by Santa Rosa to PREC of lease relating to Parcel 3 as described in Commitment No. 95-3179-A-PF (Lots 1-6 of Berryhill Medical Park a/k/a 1540, 1550 and 1560 Berryhill Road) b. Assignment of lease with Santa Rosa County by Santa Rosa to PREC covering Parcel I as described in Commitment No. 95-3179-A-PF (the Santa Rosa Medical Center Building) 4. Santa Rosa will transfer the Santa Rosa Business to PPMC as follows: 3 a. Assignment of the Santa Rosa leases set forth in Schedule 5.9 of the Asset Exchange Agreement b. Conveyance of Santa Rosa Business from Santa Rosa to PPMC as set forth in the Asset Exchange Agreement 4 EX-2.2(C) 4 EX-2.2(C) EXHIBIT 2.2(c) SECOND AMENDMENT TO ASSET EXCHANGE AGREEMENT THIS SECOND AMENDMENT (the "Amendment") is made and entered into this 24 day of April, 1996 amends that certain Asset Exchange Agreement by and between Paracelsus Halstead Hospital, Inc. ("PHH"), Paracelsus Elmwood Medical Center, Inc. ("PEMC"), Paracelsus Peninsula Medical Center, Inc. (""PPMC''), Paracelsus Real Estate Corporation ("PREC"), Pioneer Valley Hospital, Inc. ("PVH") and Medical Center of Santa Rosa, Inc. ("MCSR") dated November 28, 1995 as subsequently amended as of February 20, 1996 by PHH, PEMC, PPMC, PREC, PVH and MCSR (the "Agreement"). RECITALS: A. The parties would like to amend the Agreement to shorten the term of the provision and reduce the Maximum Potential Payback relating to the Granger Provisions and to clarify certain matters relating thereto. B. The parties would like to amend the Agreement to provide for the contingency of Section 11.23 of the Agreement relating to the Granger Provisions and for the early termination of the Utah Provider Agreement. C. The parties would like to amend the Agreement to delete therefrom certain covenants of C/HCA. A G R E E M E N T NOW, THEREFORE, for the consideration recited in the Agreement and the promises and covenants contained therein and herein, the parties hereto agree as follows: 1. AMENDMENT TO THE PERIOD OF APPLICABILITY OF THE GRANGER PHYSICIAN PROVISION (SECTION 11.23). The title of Section 11.23 "Granger Physicians" is hereby changed to "Granger Provisions". The last sentence of the first introductory paragraph (preceding Section 11.23.1) shall be amended so that the defined term "Actual Payback Sum" appearing therein shall be replaced with the defined term "Granger Payment" and so that the phrase "(i) Recapture Payments, (ii) a Maximum Potential Payback and (iii) maximum term of four (4) years" shall be deleted and replaced with the phrase "(i) a Maximum Potential Payback and (ii) a maximum term of two (2) years". 2. AMENDMENT TO DEFINITIONS (SECTION 11.23.1). Section 11.23.1 of the Agreement shall be amended as follows: (a) The dollar amount reflected in subparagraph (c) shall be amended to read "$17,243,000". (b) Subparagraph (d), "Calculation Period" definition, shall be amended to read as follows: "shall mean the period commencing on the later of July 15, 1996 or the Closing Date and ending on the second anniversary thereof." (c) Subparagraph (e), "Maximum Potential Payback" definition, shall be amended to read as follows: "shall mean $20,000,000". (d) Subparagraph (h) shall be deleted in its entirety. 3. DELETION OF RECAPTURE PROVISION (SECTION 11.23.3). Section 11.23.3 shall be deleted in its entirety and replaced with the phrase "Reserved". 4. CONTINGENCY OF THE GRANGER PHYSICIAN PROVISION (SECTION 11.23). Section 11.23 of the Agreement shall be amended by adding the following to the end thereof: 11.23.9 APPLICATION OF THIS PROVISION. Notwithstanding any of the foregoing, this Section 11.23 will not become operative unless or until the occurrence of the PHC/Champion Abandonment (defined herein) at which time it will become applicable as of the later of July 15, 1996 or the Closing Date and shall continue for a period of two (2) years. In the event that the Merger Event (defined herein) occurs at any time within the Calculation Period, then this Section 11.23 shall have no force or effect and shall be void AB INITIO in all respects. If the Merger Event occurs after a PHC/Champion Abandonment, then PHC shall immediately repay to C/HCA any amount paid by C/HCA to PHC hereunder. As used herein, the "PHC/Champion Abandonment" shall mean the termination or other abandonment by Paracelsus Healthcare Corporation ("PHC") and Champion Healthcare Corporation ("Champion") (or their respective affiliates) of the proposed merger of PHC and Champion which termination or other abandonment is -2- evidenced by some form of written agreement to that effect between PHC and Champion and shall be effective for all intents and purposes to terminate any form of negotiation between the two companies (or their affiliates) with respect to a proposed combination or other transaction whereby PHC would acquire Champion assets in Utah or Champion would acquire PHC assets in Utah. As used herein, the "Merger Event" shall refer to the merger of PHC with Champion, some other consolidation of PHC or Champion (or of their affiliates), the acquisition (directly or indirectly) by PHC or any of its affiliates of the hospitals in Utah owned by Champion or the acquisition (directly or indirectly) by Champion or any of its affiliates of the hospitals in Utah owned by PHC. 5. TERM AND CONTINGENCY OF THE UTAH PROVIDER AGREEMENT (SECTION 11.14). Section 11.14 of the Agreement shall be amended by deleting "up to four (4) years after the Closing Date" and replacing therefor "up to two (2) years after the Closing Date with respect to the Utah Provider Agreement and four (4) years following the Closing Date with respect to the Florida Provider Agreement" and by adding the following to the end thereof "provided, however, upon the occurrence of the Merger Event (defined herein), any obligations of C/HCA or PHC under this Section 11.14 (with respect to the Utah Provider Agreement) and the Utah Provider Agreement executed at the Closing shall immediately terminate. As used herein, the "Merger Event" shall refer to the merger of Paracelsus Healthcare Corporation ("PHC") with Champion Healthcare Corporation ("Champion"), some other consolidation of PHC or Champion (or of their affiliates), the acquisition (directly or indirectly) by PHC or any of its affiliates of the hospitals in Utah owned by Champion or the acquisition (directly or indirectly) by Champion or any of its affiliates of the hospitals in Utah owned by PHC." The parties hereto hereby agree that the Utah Provider Agreement shall be amended to reflect this change. 6. AMENDMENT TO COVENANTS OF C/HCA (SECTION 11.9). Section 11.9 of the Agreement shall be amended as follows: (a) Subpart (a) of the last sentence of the first paragraph is hereby deleted in its entirety. (b) Effective as of the effective date of the Merger Event, if any, the Initial Covenant Term with respect to the Pioneer Hospital shall terminate. After such date the C/HCA entity and its affiliates shall be under no restrictive covenants with respect to the geographic area surrounding Pioneer Hospital. -3- 7. LIMITATION OF GRANGER CLINIC STAFFING (SECTION 11.23.7). Section 11.23.7 shall be amended by deleting the term "(maximum of four years)" from the fourth line of this section and replacing it with "(maximum of two years)". 8. CHAMPION UTAH PROVIDER AGREEMENTS. As a part of its proposed transaction with Champion, PHC shall cause the Utah Provider Agreement executed by and between Champion and C/HCA dated November 9, 1995 (executed in connection with Champion's acquisition of Jordan Valley Hospital in Utah) and the Utah Provider Agreement dated April 13, 1995 by and between Champion and Healthrust, Inc. - The Hospital Company (executed in connection with Champion's acquisition of Salt Lake Regional Hospital in Utah) to be terminated effective as of the effective date of the Merger Event. 9. COUNTERPART SIGNATURE. This amendment may be executed in one or more counterparts, each of which shall be an original but all of which shall constitute one agreement. 10. DEFINITIONS. Any terms left undefined in this Amendment will have the meaning ascribed to them as set forth in the Agreement. IN WITNESS WHEREOF, each of the parties has signed this Amendment on the date first above written. PARACELSUS HALSTEAD HOSPITAL, INC. By: /s/ ROBERT C. JAY ------------------------------------- Title: VICE PRESIDENT ---------------------------------- PARACELSUS ELMWOOD MEDICAL CENTER, INC. By: /s/ ROBERT C. JAY ------------------------------------- Title: VICE PRESIDENT ---------------------------------- PARACELSUS PENINSULA MEDICAL CENTER, INC. By: /s/ ROBERT C. JAY ------------------------------------- Title: VICE PRESIDENT ---------------------------------- -4- PARACELSUS REAL ESTATE CORPORATION By: /s/ ROBERT C. JAY ------------------------------------- Title: VICE PRESIDENT ---------------------------------- PIONEER VALLEY HOSPITAL, INC. By: /s/ V. CARL GEORGE ------------------------------------- Title: VICE PRESIDENT ---------------------------------- MEDICAL CENTER OF SANTA ROSA, INC. By: /s/ V. CARL GEORGE ------------------------------------- Title: VICE PRESIDENT ---------------------------------- EX-2.3 5 EX-2.3 - -------------------------------------------------------------------------------- PURCHASE AND SALE AGREEMENT BY AND AMONG AMERICAN HEALTH PROPERTIES, INC. AHP OF KANSAS, INC. AHP OF NEW ORLEANS, INC. AND AHP OF UTAH, INC. AND PARACELSUS HEALTHCARE CORPORATION AND PARACELSUS PIONEER VALLEY HOSPITAL, INC. DATED AS OF MAY 15, 1996 - -------------------------------------------------------------------------------- DISPUTES UNDER THIS AGREEMENT ARE SUBJECT TO ARBITRATION TABLE OF CONTENTS Page ---- RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 PURCHASE AND SALE OF ASSETS. . . . . . . . . . . . . . . . . . . . 11 2.1 Halstead Bonds and Halstead Equipment . . . . . . . . . . . . 11 2.2 Elmwood Fee Property. . . . . . . . . . . . . . . . . . . . . 11 2.3 Pioneer Fee Property. . . . . . . . . . . . . . . . . . . . . 11 ARTICLE 3 ASSIGNMENTS OF OTHER ASSETS. . . . . . . . . . . . . . . . . . . . 12 3.1 Halstead Facility Assignments . . . . . . . . . . . . . . . . 12 3.2 Elmwood Parking Lease Assignment. 3.3 Pioneer Lease . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 4 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.1 Halstead Purchase Price . . . . . . . . . . . . . . . . . . . 12 4.2 Elmwood Purchase Price. . . . . . . . . . . . . . . . . . . . 12 4.3 Pioneer Purchase Price. . . . . . . . . . . . . . . . . . . . 13 ARTICLE 5 TERMINATION OF CERTAIN AGREEMENTS. . . . . . . . . . . . . . . . . 13 5.1 Halstead Facility Terminations. . . . . . . . . . . . . . . . 13 5.2 Elmwood Facility Terminations . . . . . . . . . . . . . . . . 13 ARTICLE 6 DOCUMENTS OF CONVEYANCE. . . . . . . . . . . . . . . . . . . . . . 13 6.1 AHP Kansas - Halstead Facility Documents. . . . . . . . . . . 13 6.2 Paracelsus Utah - Halstead Facility Documents . . . . . . . . 14 6.3 AHP New Orleans - Elmwood Facility Documents. . . . . . . . . 14 6.4 Paracelsus Utah - Elmwood Facility Documents. . . . . . . . . 15 6.5 Paracelsus Utah - Pioneer Facility Documents. . . . . . . . . 15 6.6 AHP Utah - Pioneer Facility Documents . . . . . . . . . . . . 16 6.7 Additional Documents and Further Assurances . . . . . . . . . 16 ARTICLE 7 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 16 7.1 Paracelsus Entities Representations And Warranties. . . . . . 16 (A) Organization, Powers, Etc. . . . . . . . . . . . . . . . 16 (B) Due Authorization. . . . . . . . . . . . . . . . . . . . 17 (C) Governmental Approvals . . . . . . . . . . . . . . . . . 17 (D) Columbia Agreement . . . . . . . . . . . . . . . . . . . 17 (E) No Litigation. . . . . . . . . . . . . . . . . . . . . . 17 (F) No Conflicts . . . . . . . . . . . . . . . . . . . . . . 17 (G) Solvency . . . . . . . . . . . . . . . . . . . . . . . . 18 (H) Title. . . . . . . . . . . . . . . . . . . . . . . . . . 18 (I) Suitability. . . . . . . . . . . . . . . . . . . . . . . 18 (J) Regulatory Compliance. . . . . . . . . . . . . . . . . . 18 (K) Commitments. . . . . . . . . . . . . . . . . . . . . . . 18 (L) Condition. . . . . . . . . . . . . . . . . . . . . . . . 19 (M) Competing Uses; Access . . . . . . . . . . . . . . . . . 19 (N) Licensure. . . . . . . . . . . . . . . . . . . . . . . . 20 (O) Medicare Participation/Accreditation . . . . . . . . . . 20 (P) Environmental Matters. . . . . . . . . . . . . . . . . . 21 (Q) Asbestos . . . . . . . . . . . . . . . . . . . . . . . . 22 (R) Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 22 (S) Financial Statements . . . . . . . . . . . . . . . . . . 22 (T) No Misstatements . . . . . . . . . . . . . . . . . . . . 22 7.2 AHP Entities Representations And Warranties . . . . . . . . . 22 (A) Organization, Powers, Etc. . . . . . . . . . . . . . . . 22 (B) Due Authorization. . . . . . . . . . . . . . . . . . . . 23 (C) Governmental Approvals . . . . . . . . . . . . . . . . . 23 (D) No Litigation. . . . . . . . . . . . . . . . . . . . . . 23 (E) No Conflicts . . . . . . . . . . . . . . . . . . . . . . 23 (F) Solvency . . . . . . . . . . . . . . . . . . . . . . . . 24 (G) Title To Elmwood Real Property . . . . . . . . . . . . . 24 (H) Title to Halstead Real Property. . . . . . . . . . . . . 24 (I) Transfers on an "As Is" Basis. . . . . . . . . . . . . . 24 (J) Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 24 (K) No Misstatements . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF AHP ENTITIES. . . . . . . . 25 8.1 Representations and Warranties. . . . . . . . . . . . . . . . 25 8.2 Compliance with this Agreement. . . . . . . . . . . . . . . . 25 8.3 Consummation of the Columbia Agreement. . . . . . . . . . . . 25 8.4 Delivery and Effectiveness of Documents . . . . . . . . . . . 25 8.5 Pioneer Closing . . . . . . . . . . . . . . . . . . . . . . . 25 8.6 Payment of Purchase Price . . . . . . . . . . . . . . . . . . 25 8.7 Halstead Sublease Rents . . . . . . . . . . . . . . . . . . . 25 8.8 Elmwood Rents . . . . . . . . . . . . . . . . . . . . . . . . 26 8.9 Pioneer Leases. . . . . . . . . . . . . . . . . . . . . . . . 26 8.10 Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 26 8.11 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 8.12 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . 26 8.13 Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 8.14 Environmental Report. . . . . . . . . . . . . . . . . . . . . 27 8.15 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (ii) 8.16 Title to Collateral . . . . . . . . . . . . . . . . . . . . . 27 8.17 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . 27 8.18 Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 8.19 Good Standing Certificates. . . . . . . . . . . . . . . . . . 27 8.20 Certificates of Merger. . . . . . . . . . . . . . . . . . . . 28 8.21 Shareholder Resolutions . . . . . . . . . . . . . . . . . . . 28 8.22 Board Resolutions . . . . . . . . . . . . . . . . . . . . . . 28 8.23 Incumbency Certificates . . . . . . . . . . . . . . . . . . . 28 8.24 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . 28 8.25 Transaction Costs . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARACELSUS ENTITIES . . . . 29 9.1 Representations and Warranties. . . . . . . . . . . . . . . . 29 9.2 Compliance with this Agreement. . . . . . . . . . . . . . . . 29 9.3 Consummation of the Columbia Agreement. . . . . . . . . . . . 29 9.4 Delivery and Effectiveness of Documents . . . . . . . . . . . 29 9.5 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 29 9.6 Pioneer Closing . . . . . . . . . . . . . . . . . . . . . . . 29 9.7 Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . 29 9.8 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 29 9.9 Rent Credit . . . . . . . . . . . . . . . . . . . . . . . . . 30 9.10 Good Standing Certificates. . . . . . . . . . . . . . . . . . 30 9.11 Shareholder Resolutions . . . . . . . . . . . . . . . . . . . 30 9.12 Board Resolutions . . . . . . . . . . . . . . . . . . . . . . 30 9.13 Incumbency Certificates . . . . . . . . . . . . . . . . . . . 30 ARTICLE 10 CLOSINGS OF THE TRANSACTIONS CONTEMPLATED HEREBY. . . . . . . . . 30 10.1 Halstead Closing. . . . . . . . . . . . . . . . . . . . . . . 30 10.2 Elmwood Closing . . . . . . . . . . . . . . . . . . . . . . . 30 10.3 Failure of Pioneer Closing. . . . . . . . . . . . . . . . . . 30 ARTICLE 11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . 31 11.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 31 11.2 Indemnification By Paracelsus . . . . . . . . . . . . . . . . 31 11.3 Notice of Claims. . . . . . . . . . . . . . . . . . . . . . . 32 11.4 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 12 REMEDIES FOR BREACH . . . . . . . . . . . . . . . . . . . . . . . 33 12.1 Paracelsus Entity Default . . . . . . . . . . . . . . . . . . 33 12.2 AHP Entity Default. . . . . . . . . . . . . . . . . . . . . . 33 12.3 Failure to Close Columbia Agreement . . . . . . . . . . . . . 33 (iii) ARTICLE 13 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 33 13.1 Paracelsus Utah Undertakings Regarding Certain Rights Associated with the Pioneer Hospital . . . . . . . . . . . . 33 13.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . 34 13.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 13.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . 35 13.5 GOVERNING LAW; SUBMISSION TO JURISDICTION. . . . . . . . . . 35 13.6 Resolution of Disputes . . . . . . . . . . . . . . . . . . . 36 13.7 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 36 13.8 Divisions and Headings . . . . . . . . . . . . . . . . . . . 36 13.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 36 13.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . 36 (iv) LIST OF EXHIBITS AND SCHEDULES Exhibit A Boyer Clinic Leasehold Exhibit B California Facilities Exhibit C Elmwood Fee Property Exhibit D Elmwood Parking Leasehold Exhibit E Elmwood Permitted Encumbrances Exhibit F Granger Clinic Leasehold Exhibit G Halstead Permitted Encumbrances Exhibit H Halstead Real Property Exhibit I NHI MOB Leasehold Exhibit J Pioneer Fee Property Exhibit K Pioneer Permitted Encumbrances Exhibit L Halstead Bond Endorsement Exhibit M Assignment of Halstead Master Lease Exhibit N Termination of Halstead Sublease Exhibit O Notice of Assignment Exhibit P Consent to Assignment Exhibit Q Halstead Equipment Bill of Sale Exhibit R Halstead UCC-3 Termination Statements Exhibit S AHP Kansas Officers' Certificate Exhibit T Halstead Acceptance and Assumption Agreement Exhibit U Deed to Elmwood Fee Property Exhibit V Termination of Elmwood Lease Exhibit V-1 Assignment of Elmwood Parking Lease Exhibit W Elmwood UCC-3 Termination Statements Exhibit X AHP New Orleans Officers' Certificate Exhibit Y Deed to Pioneer Fee Property Exhibit Z Form of Owner's Affidavit Exhibit AA Lease of Pioneer Fee Property Exhibit BB Pioneer Security Agreement Exhibit CC California Facilities Security Agreement Exhibit DD Collateral Assignment of Leases and Rents Exhibit EE Pioneer UCC-1 Financing Statements Exhibit FF Certificate of Paracelsus Utah of Non-Foreign Status Exhibit GG Paracelsus Utah Officers' Certificate Exhibit HH AHP Utah Officers' Certificate Exhibit II Paracelsus Counsel Legal Opinion Exhibit JJ Arbitration Procedures Exhibit KK Form of Elmwood Promissory Note Exhibit LL Form of Elmwood Letter of Credit Exhibit MM Form of Pioneer Assignment and Assumption Agreement Schedule 4.1 Halstead Equipment Lease Payoff-Calculation (v) Schedule 8.9 Pioneer Fee Property Leases and Subleases Consented to By AHP Utah Schedule 13.1 Pioneer Hospital Related Rights (vi) PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of May 15, 1996 is by and among AMERICAN HEALTH PROPERTIES, INC., a Delaware corporation ("AHP"), AHP OF KANSAS, INC., a Kansas corporation ("AHP Kansas"), AHP OF NEW ORLEANS, INC., a Louisiana corporation ("AHP New Orleans"), AHP OF UTAH, INC., a Utah corporation ("AHP Utah"), PARACELSUS HEALTHCARE CORPORATION, a California corporation ("Paracelsus") and PARACELSUS PIONEER VALLEY HOSPITAL, INC., a Utah corporation ("Paracelsus Utah"). RECITALS A. Paracelsus New Orleans, a wholly-owned subsidiary of Paracelsus, operates the Elmwood Facility, as such terms, and the other capitalized terms referred to in these Recitals are defined in Article 1 hereof. B. AHP New Orleans, a wholly-owned subsidiary of AHP, owns the Elmwood Fee Property, and leases the Elmwood Fee Property to Paracelsus New Orleans pursuant to the Elmwood Lease. C. Paracelsus Kansas, a wholly-owned subsidiary of Paracelsus, operates the Halstead Facility. D. AHP Kansas, a wholly-owned subsidiary of AHP, leases the Halstead Real Property from the City of Halstead, and subleases the Halstead Real Property to Paracelsus Kansas pursuant to the Halstead Sublease. E. AHP Kansas owns the Halstead Equipment and leases the Halstead Equipment to Paracelsus Kansas pursuant to the Halstead Equipment Lease. F. AHP Kansas is the owner of the Halstead Bonds relating to the Halstead Facility. G. Certain of the Paracelsus Entities are parties to the Columbia Agreement, which, among other things, requires Paracelsus Kansas and Paracelsus New Orleans or their successors and assigns to exchange the Elmwood Real Property, the Halstead Real Property and the Halstead Equipment for the Pioneer Real Property in a transaction intended to qualify as a like-kind exchange transaction as described in Section 1031 of the Code and an exchange of assets under 42 U.S.C. Section 413.134(f)(4). H. The AHP Entities and the Paracelsus Entities have entered into this Agreement in order to enable the Paracelsus Entities to consummate the Columbia Agreement. I. As of the Closing Dates, Paracelsus Kansas and Paracelsus New Orleans will have been merged with and into Paracelsus Utah, with Paracelsus Utah remaining as the surviving corporation. J. Paracelsus Utah desires to convey the fee estates comprising the Pioneer Real Property to AHP Utah and to lease such fee estates from AHP Utah under the terms and conditions contained in the lease contained in EXHIBIT AA attached hereto (the "Pioneer Lease"). NOW THEREFORE, in consideration of the foregoing Recitals, and the agreements, covenants, representations and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS For all purposes of this Agreement, unless otherwise expressly provided for in this Agreement or unless the context in which such term is used indicates a contrary intent, (a) the terms defined in this Article shall have the meanings ascribed to them in this Article, (b) all accounting terms not otherwise defined in this Article shall have the meanings ascribed to them in accordance with GAAP, (c) all references in this Agreement to designated "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement and (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or other subdivision: "AGREEMENT" means this Purchase and Sale Agreement, and all amendments and modifications hereof. "AHP" shall mean American Health Properties, Inc., a Delaware corporation. "AHP ENTITIES" shall mean AHP, AHP Kansas, AHP New Orleans and AHP Utah, collectively. "AHP ENTITY" shall mean any one of the AHP Entities. "AHP KANSAS" shall mean AHP of Kansas, Inc., a Kansas corporation. "AHP NEW ORLEANS" shall mean AHP of New Orleans, Inc., a Louisiana corporation. "AHP UTAH" shall mean AHP of Utah, Inc., a Utah corporation. "BOYER CLINIC LEASE" shall mean that certain Lease Agreement dated as of March 25, 1991 by and between Boyer Salt Lake Industrial Clinic Associates as lessor and Holy Cross Professional Services as lessee, notice of which is given by an instrument denominated "Memorandum of Lease," which was recorded on August 15, 1994 as Entry No. 5898351, in Book 6999, at Page 2979 in the Official Records of Salt Lake County, Utah, which lessee's interest was subsequently assigned by Holy Cross Professional Services to HTI Physician 2 Services of Utah, Inc., notice of which was recorded on August 15, 1994 as Entry No. 5898352, in Book 6999, at Page 2982 in the Official Records of Salt Lake County, Utah. "BOYER CLINIC LEASEHOLD" shall mean the leasehold estate in the real property, as more particularly described on EXHIBIT A hereto, and improvements and structures erected thereon, and all appurtenances and rights thereto, conveyed pursuant to the Boyer Clinic Lease. "CERCLA" shall mean the federal Comprehensive Environmental Response, Compensation, and Liability Act, as amended. "CALIFORNIA AFFILIATE" shall mean Paracelsus Convalescent Hospitals, Inc., a California corporation, a wholly owned subsidiary of Paracelsus, doing business as Lafayette Convalescent Hospital, Oak Park Convalescent Hospital, Rheem Valley Convalescent Hospital and University Convalescent Hospital, which person is the operator of each of the California Facilities. "CALIFORNIA FACILITIES" shall mean the four skilled nursing facilities in Lafayette, California; Pleasant Hill, California; Moraga, California and Menlo Park, California; respectively, leased by Paracelsus Real Estate Corporation and operated by the California Affiliate, which California Facilities are more particularly identified in EXHIBIT B attached hereto. "CHARTER DOCUMENTS" of any person shall mean the articles of incorporation, certificate of incorporation, or limited liability company certificate and agreement or bylaws, as the case may be, of such person and bylaws along with any and all amendments thereto, restatements thereof, certificates of determination and designation thereto and thereof. "CITY OF HALSTEAD" shall mean the City of Halstead, Kansas. "CLOSING DATES" shall mean the dates on which the Halstead Closing, the Elmwood Closing and the Pioneer Closing shall occur, as set forth in Article 10 hereof. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COLUMBIA" shall mean Columbia/HCA Healthcare Corporation, a Delaware corporation. "COLUMBIA AGREEMENT" shall mean that certain Asset Exchange Agreement dated as of November 28, 1995 between and among Columbia, Paracelsus Kansas, Paracelsus Louisiana, Paracelsus Peninsula Medical Center, Inc., Paracelsus Real Estate Corporation, Pioneer, and Medical Center of Santa Rosa, Inc. "COLUMBIA CLOSING" shall mean the closing of the transactions contemplated by the Columbia Agreement. 3 "DISPOSED" or "DISPOSAL" shall have the meaning specified in RCRA, except to the extent that the applicable laws, ordinances, rules, regulations or common law of the state in which a particular parcel of real property is located establish a broader meaning of the term "disposed" or "disposal," in which case, such broader meaning shall apply. "ECI ASSIGNMENT" shall mean that certain Collateral Assignment of Subleases and Rents by and between Elmwood Care, Inc. and AHP New Orleans dated May 11, 1990 and recorded May 11, 1990 under Instrument No. 90-19401 in COB 2890, folio 165 in the official records of Jefferson Parish, Louisiana. "ELMWOOD ASSIGNMENT" shall mean that certain Collateral Assignment of Subleases and Rents dated as of March 1, 1993 by and between AHP New Orleans and Paracelsus New Orleans, recorded on March 1, 1993 as Instrument No. 393-10845 in COB 2855, folio 232 in the Official Records of Jefferson Parish, Louisiana, as amended by that certain First Amendment to Collateral Assignment of Subleases and Rents dated as of February 4, 1994 by and between AHP New Orleans and Paracelsus New Orleans, recorded on March 23, 1994 as Instrument No. 94-17313 in COB 2890, folio 609 in the Official Records of Jefferson Parish, Louisiana. "ELMWOOD CLOSING" shall mean the closing of the transactions contemplated by Sections 2.2, 3.2, 4.2, 5.2 and 6.3 hereof. "ELMWOOD FACILITY" shall mean the Elmwood Medical Center and the Elmwood Office Building. "ELMWOOD FEE PROPERTY" shall mean the fee estate in the real property and improvements and structures erected thereon, and all appurtenances and rights thereto, constituting in part the Elmwood Facility, as more particularly described in EXHIBIT C hereto, including, without limitation, the Elmwood Medical Center and the Elmwood Office Building, but excluding the Elmwood Parking Leasehold. "ELMWOOD LEASE" shall mean that certain Lease dated as of March 1, 1993 by and between AHP New Orleans as lessor and Paracelsus New Orleans as lessee, notice of which is given by an instrument denominated "Extract of Lease," which was recorded on March 1, 1993 under Instrument No. 93-10844 in COB 2855, folio 299 of the Parish of Jefferson, Louisiana, as amended by that certain First Amendment To Lease dated as of June 30, 1993 by and between AHP New Orleans and Paracelsus New Orleans, recorded on March 23, 1994 under Instrument No. 94-17312 in COB 2890, folio 608 of the Parish of Jefferson, Louisiana, as amended by that certain First [sic] Amendment to Lease dated as of February 4, 1994 by and between AHP New Orleans and Paracelsus New Orleans, as amended by that certain Third Amendment to Lease dated as of July 20, 1995 by and between AHP New Orleans and Paracelsus New Orleans. "ELMWOOD LETTER OF CREDIT" means an irrevocable standby letter of credit, in an amount equal to the principal amount of the Elmwood Promissory Note, issued by Bank of America, N.A. to AHP Utah, in the form of EXHIBIT LL hereto. 4 "ELMWOOD MEDICAL CENTER" shall mean that certain general acute care hospital located in Jefferson Parish, Louisiana and known as the Elmwood Medical Center licensed by the Louisiana Department of Health and Hospitals to operate a total of 135 acute care beds. "ELMWOOD OFFICE BUILDING" shall mean the two medical office buildings relating to the Elmwood Medical Center. "ELMWOOD PARKING LEASE" shall mean that certain Lease dated as of April 1, 1988, by and between The Public Belt Railroad Commission for the City of New Orleans, as lessor, and Elmwood Management Company, Inc., as lessee, recorded as Instrument # 88-27807 in COB 1980, folio 224 of the Parish of Jefferson, Louisiana, which was subsequently assigned by Elmwood Management Company, Inc. to AHP New Orleans pursuant to that certain Assignment of Lease dated May 11, 1990, by and between Elmwood Management Company, Inc. and Elmwood Care, Inc., which was recorded on May 11, 1990 as Instrument # 90-19402 in COB 2322, folio 176 of the Parish of Jefferson, Louisiana, and which was subsequently further assigned to Paracelsus New Orleans pursuant to the Elmwood Lease. "ELMWOOD PARKING LEASEHOLD" shall mean the leasehold estate in the real property and improvements and structures erected thereon, and all appurtenances and rights thereto, conveyed pursuant to the Elmwood Parking Lease, as more particularly described on EXHIBIT D hereto. "ELMWOOD PERMITTED ENCUMBRANCES" shall mean those permitted liens, claims, encumbrances, security interests or rights of third parties to the Elmwood Real Property set forth on EXHIBIT E attached hereto. "ELMWOOD PROMISSORY NOTE" means a promissory note in a principal amount selected by Paracelsus Utah, but not to exceed $20,000,000 made by Paracelsus Utah and payable to the order of AHP Utah, in the form of EXHIBIT KK hereto. "ELMWOOD PURCHASE PRICE" shall mean the price set forth in Section 4.2 hereof. "ELMWOOD REAL PROPERTY" shall mean the Elmwood Fee Property and the Elmwood Parking Leasehold, collectively. "ELMWOOD SECURITY AGREEMENT" shall mean that certain Security and Pledge Agreement dated as of March 1, 1993 by and between AHP New Orleans and Paracelsus New Orleans, as amended by that certain First Amendment to Security and Pledge Agreement dated as of February 4, 1994 by and between AHP New Orleans and Paracelsus New Orleans. "ELMWOOD WARRANTY RIGHTS ASSIGNMENT" shall mean that certain Assignment of Warranty Rights dated as of March 1, 1993 by and between AHP New Orleans and Paracelsus New Orleans. "ENVIRONMENTAL CONDITION" shall mean (a) any release or threatened release of a Hazardous Material from, in, on, under, onto or affecting the Pioneer Fee Property in 5 violation of any Environmental Law or site conditions that constitute a current violation of Environmental Law regardless of whether such conditions constituted a violation of Environmental Law at the time of such release or threatened release; (b) any releases or threatened release of a Hazardous Material from Pioneer Fee Property in, on, under, onto or affecting any other property or release or threatened release that results in site conditions that constitute a current violation of Environmental Law regardless of whether such conditions constituted a violation of Environmental Law at the time of such release or threatened release; (c) any violation of any Environmental Law relating to the manufacture, processing, distribution, transportation, storage, use, discharge, handling, emission, or disposal of Hazardous Material by or in connection with the Pioneer Business; or (d) any release or threatened release of a Hazardous Material from, in, on, under, onto or affecting the Pioneer Fee Property resulting in liability to nongovernmental third parties in tort. "ENVIRONMENTAL LAWS" shall mean any and all federal, state and local, statutes, common law, ordinances, rules, regulations, requirements, criteria, guidelines, permits, orders or determinations of any Governmental Authority, whether now in existence or hereafter enacted and in each case as amended, pertaining to health, safety, or the environment, including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Materials or otherwise relating to generation, processing, distribution, use, storage, treatment, disposal, transport, handling of or exposure to Hazardous Materials. "GAAP" shall mean as of the time of determination generally accepted accounting principles applicable to the accrual method of accounting applied on a consistent basis from period to period. "GOVERNMENTAL AUTHORITY" includes the United States, the state, county, city and political subdivisions in which any of the Real Property is located or that exercise jurisdiction over any of the Real Property or any business or operations thereon, and any agency, court, department, commission, board, bureau or instrumentality of them that exercises jurisdiction over any of the Real Property or any business or operations thereon. "GRANGER CLINIC" shall mean the Granger Medical Clinic South located at 2750 West 9000 South, West Jordan, Utah. "GRANGER CLINIC LEASE" shall mean that certain Medical Office Building Lease dated as of April 27, 1993 by and between M.O.B. Utah Partnership as lessor and Healthtrust as lessee, as amended by that certain Amendment to Medical Office Building Lease dated as of June 28, 1994 by and between M.O.B. Utah Partnership as lessor and Healthtrust as lessee. "GRANGER CLINIC LEASEHOLD" shall mean the leasehold estate in the real property and improvements and structures erected thereon, and all appurtenances and rights thereto, conveyed pursuant to the Granger Clinic Lease, as more particularly described on EXHIBIT F hereto. "GRANGER DEVELOPMENT AGREEMENT" shall mean that certain Development Agreement dated as of April 28, 1993 by and between M.O.B. Utah Partnership and Healthtrust. 6 "HALSTEAD ASSIGNMENT" shall mean that certain Assignment and Assumption of Contract Rights and Obligations dated as of June 30, 1993 by and between Paracelsus and AHP Kansas. "HALSTEAD BONDS" shall mean $14,250,000 in principal amount of City of Halstead, Kansas Taxable Industrial Revenue Bonds, Series A, 1993, which were issued pursuant to the Halstead Indenture. "HALSTEAD CLOSING" shall mean the closing of the transactions contemplated by Sections 2.1, 3.1, 4.1, 5.1, 6.1 and 6.2 hereof. "HALSTEAD EQUIPMENT" shall mean those items of movable equipment, vehicles, furniture and furnishings used in the operations of the Halstead Facility and leased by AHP Kansas to Paracelsus Kansas pursuant to the Halstead Equipment Lease. "HALSTEAD EQUIPMENT LEASE" shall mean that certain Equipment Lease dated as of June 30, 1993 by and between AHP Kansas and Paracelsus Kansas. "HALSTEAD FACILITY" shall mean that certain general acute care hospital located in Halstead, Kansas and known as the Halstead Hospital licensed by the Kansas Department of Health to operate a total of 190 acute care, psychiatric and skilled nursing beds. "HALSTEAD FINANCING STATEMENTS" shall mean (i) that certain financing statement No. 19763 filed on June 30, 1993 in the Register of Deeds Office of Harvey County, Kansas, and (ii) that certain financing statement No. 19764 filed on June 30, 1993 in the Register of Deeds Office of Harvey County, Kansas. "HALSTEAD INDENTURE" shall mean that certain Trust Indenture dated June 30, 1993 by and between the City of Halstead as issuer and Bank IV Kansas, N.A. as Trustee. "HALSTEAD MASTER LEASE" shall mean that certain Lease dated as of June 30, 1993 by and between The City of Halstead as lessor and AHP Kansas as lessee, notice of which is given by an instrument denominated "Memorandum of Lease and Option to Purchase," which was recorded on June 30, 1993 in Book 338, Page 436 in the miscellaneous records of Harvey County, Kansas. "HALSTEAD PERMITTED ENCUMBRANCES" shall mean those permitted liens, claims, encumbrances, security interests or rights of third parties to the Halstead Real Property set forth on EXHIBIT G attached hereto. "HALSTEAD PURCHASE PRICE" shall mean the price set forth in Section 4.1 hereof. "HALSTEAD REAL PROPERTY" shall mean the leasehold estate in the real property, as more particularly described in EXHIBIT H hereto, and improvements and structures erected thereon, and all appurtenances and rights thereto, conveyed pursuant to the Halstead Master Lease. 7 "HALSTEAD SECURITY AGREEMENT" shall mean that certain Security and Pledge Agreement dated as of June 30, 1993 by and between AHP Kansas and Paracelsus Kansas. "HALSTEAD SUBLEASE" shall mean that certain Lease dated as of June 30, 1993 by and between AHP Kansas as lessor and Paracelsus Kansas as lessee. "HAZARDOUS MATERIALS" shall mean (a) any radioactive materials or waste, oil or petroleum products in any form, flammable explosives, urea formaldehyde foam insulation, PCBs and transformers or other equipment that contain PCBs, and radon gas; (b) any chemicals, materials, substances or wastes, which are now or hereafter become defined as, or included in, the definition of "hazardous wastes," "extremely hazardous substances," "contaminants," "pollutants," "toxic substances," "toxic" or "hazardous pollutants," "toxic" or "hazardous materials," or words of similar import under RCRA, CERCLA, the Hazardous Materials Transportation Act, as amended, the Clean Water Act, as amended, the Oil Pollution Act, as amended, the Toxic Substances Control Act, as amended, the Safe Drinking Water Act, as amended, and their state and local counterparts or equivalents, or any other Environmental Law; or (c) any friable asbestos as of the date hereof. "HEALTHTRUST" shall mean Healthtrust, Inc. - The Hospital Company, a Delaware corporation. "HDP" shall mean Hospital Development Properties, Inc., a Delaware corporation. "INCLUDING" shall be deemed to mean including, but not limited to. "INDEMNIFIED PARTY" shall mean a person who may claim a right to indemnification pursuant to Article 10 hereof. "INDEMNIFYING PARTY" shall mean a person from whom a right of indemnity may be claimed pursuant to Article 10 hereof. "JCAHO" shall mean the Joint Commission on Accreditation of Healthcare Organizations. "NHI" shall mean National Health Investors, Inc., a Maryland corporation. "NHI MOB LEASE" shall mean that certain Medical Office Building Lease dated as of February 25, 1993 by and between NHI as lessor and Healthtrust as lessee, notice of which is given by an instrument denominated "Memorandum of Lease," which was recorded on March 2, 1993 as Entry No. 5445235, in Book 6613, at Page 1070, and re-recorded on April 22, 1993 as Entry No. 5483109, in Book 6644, at Page 1678 in the Official Records of Salt Lake County, Utah. 8 "NHI MOB LEASEHOLD" shall mean the leasehold estate in the real property and improvements and structures erected thereon, and all appurtenances and rights thereto, conveyed pursuant to the NHI MOB Lease, as more particularly described on EXHIBIT I hereto. "PARACELSUS" shall mean Paracelsus Healthcare Corporation, a California corporation. "PARACELSUS ENTITIES" shall mean Paracelsus, Paracelsus Kansas, Paracelsus New Orleans and Paracelsus Utah, collectively. "PARACELSUS ENTITY" shall mean any one of the Paracelsus Entities. "PARACELSUS KANSAS" shall mean Paracelsus Halstead Hospital, Inc., a Kansas corporation. "PARACELSUS NEW ORLEANS" shall mean Paracelsus Elmwood Medical Center, Inc., a Louisiana corporation. "PARACELSUS UTAH" shall mean Paracelsus Pioneer Valley Hospital, Inc., a Utah corporation. "PCBS" shall mean polychlorinated biphenyls. "PERSON" shall mean any natural person, corporation, business trust, limited liability company, association, company, partnership or government or any agency or political subdivision thereof. "PIONEER" shall mean Pioneer Valley Hospital, Inc., a Utah corporation. "PIONEER ASSIGNMENT AND ASSUMPTION AGREEMENT" shall have the meaning set forth in Section 8.9 hereto. "PIONEER BUSINESS" shall mean the Pioneer Facility and the other assets and operations associated with the Pioneer Facility. "PIONEER CLOSING" shall mean the closing of the transactions contemplated by Sections 2.3, 3.3, 4.3, 6.4 and 6.5 hereof. "PIONEER EDUCATION CENTER" shall mean the Pioneer Medical Plaza and Education Center located at 3460 South Pioneer Parkway, West Valley, Utah. "PIONEER FACILITY" shall mean the Pioneer Hospital, the Pioneer Medical Arts Building, the Pioneer Medical Plaza, the Pioneer Education Center, the Salt Lake Clinic and the Granger Clinic, as well as all other offices, centers, operations and facilities relating thereto. 9 "PIONEER FEE PROPERTY" shall mean the fee estate in the real property, as more particularly described in EXHIBIT J hereto, and improvements and structures erected thereon, and all appurtenances and rights thereto, constituting in part the Pioneer Facility including, without limitation, the Pioneer Hospital, the Pioneer Medical Plaza and the Pioneer Education Center, but excluding the Pioneer Leasehold Property. "PIONEER FINANCIAL STATEMENTS" shall mean the balance sheets, income statements and statements of cash flow indicated in Section 7.1(S) hereof. "PIONEER HOSPITAL" shall mean that certain general acute care hospital located in West Valley City, Utah and known as the Pioneer Valley Hospital licensed by the Utah Health Facility Licensure Bureau to operate a total of 139 acute care beds. "PIONEER HOSPITAL RELATED RIGHTS" shall have the meaning specified in Section 13.1 hereto. "PIONEER LEASE" shall mean the lease of the Pioneer Fee Property contained in Exhibit AA attached hereto. "PIONEER LEASEHOLD PROPERTY" shall mean the NHI MOB Leasehold, the Boyer Clinic Leasehold and the Granger Clinic Leasehold, and any other leasehold assigned to Paracelsus Utah as lessee pursuant to the Columbia Agreement, collectively. "PIONEER MEDICAL ARTS BUILDING" shall mean the Pioneer Medical Arts office building located at 3336 South Pioneer Parkway, West Valley, Utah. "PIONEER MEDICAL PLAZA" shall mean the Pioneer Medical Plaza office building located at 4084 West Pioneer Parkway, West Valley, Utah. "PIONEER PERMITTED ENCUMBRANCES" shall mean those permitted liens, claims, encumbrances, security interests or rights of third parties to the Pioneer Real Property set forth on EXHIBIT K attached hereto. "PIONEER REAL PROPERTY" shall mean the Pioneer Fee Property and the Pioneer Leasehold Property, collectively. "PIONEER PURCHASE PRICE" shall mean the price set forth in Section 4.3 hereof. "PIONEER RIGHT OF FIRST REFUSAL" shall mean that certain Right of First Refusal Agreement dated as of March 13, 1991 by and between the Burton F. and Laverne R. Brasher Charitable Remainder Units Trust and Healthtrust. "PIONEER RIGHTS TO PURCHASE" shall mean all rights to purchase the fee estate underlying any portion of the Pioneer Leasehold Property conveyed pursuant to the NHI MOB Lease, the Boyer Clinic Lease or the Granger Clinic Lease. 10 "PROGRAMS" shall mean the Medicare and/or Medicaid programs. "RCRA" shall mean the federal Resource Conservation Recovery Act, as amended. "REAL PROPERTY" shall mean all or any portion of the Halstead Real Property, the Elmwood Real Property or the Pioneer Real Property. "RELEASE" or "THREATENED RELEASE" shall have the meaning specified in CERCLA, except to the extent that the applicable laws, ordinances, rules, regulations or common law of the state in which a particular parcel of real property is located establish a broader meaning of the term "release" or "threatened release," in which case, such broader meaning shall apply. "SALT LAKE CLINIC" shall mean the Salt Lake Industrial Clinic located at 441 South Redwood Road, Salt Lake City, Utah. "SOLID WASTE" shall have the meaning specified in RCRA, except to the extent that the applicable laws, ordinances, rules, regulations or common law of the state in which a particular parcel of real property is located establish a broader meaning of the term "solid waste," in which case, such broader meaning shall apply. "THIRD-PARTY CLAIM" shall mean a claim by a third party against any person that may give rise to a claim of indemnity under Article 10 hereof. "TITLE COMPANY" shall mean Stewart Title Guaranty Company. "TRANSACTION DOCUMENTS" shall mean this Agreement, as well as each instrument referred to in Article 6 hereof, as well as each instrument referred to in such instruments. ARTICLE 2 PURCHASE AND SALE OF ASSETS 2.1 HALSTEAD BONDS AND HALSTEAD EQUIPMENT. Subject to all of the terms and conditions of this Agreement, AHP Kansas shall sell and convey, and Paracelsus Utah shall purchase and pay for, the Halstead Bonds and the Halstead Equipment. 2.2 ELMWOOD FEE PROPERTY. Subject to all of the terms and conditions of this Agreement, AHP New Orleans shall sell and convey, and Paracelsus Utah shall purchase and pay for, the Elmwood Fee Property. 2.3 PIONEER FEE PROPERTY. Subject to all of the terms and conditions of this Agreement, Paracelsus Utah shall sell and convey, and AHP Utah shall purchase and pay for, the Pioneer Fee Property. 11 ARTICLE 3 ASSIGNMENTS OF OTHER ASSETS 3.1 HALSTEAD FACILITY ASSIGNMENTS. On the terms and subject to the conditions and exceptions set forth herein, AHP Kansas hereby agrees to assign to Paracelsus Utah and Paracelsus Utah agrees to accept assignment from AHP Kansas of all of AHP Kansas' right, title, claim and interest in the Halstead Master Lease. 3.2 ELMWOOD PARKING LEASE ASSIGNMENT. On the terms and subject to the conditions and exceptions set forth herein, AHP New Orleans hereby agrees to assign to Paracelsus Utah and Paracelsus Utah agrees to accept assignment from AHP New Orleans of all of AHP New Orleans' right, title, claim and interest in the Elmwood Parking Lease. 3.3 PIONEER LEASE. On the terms and subject to the conditions and exceptions set forth herein, concurrently with the Pioneer Closing, AHP Utah shall lease to Paracelsus Utah the Pioneer Fee Property by executing and delivering to Paracelsus Utah the Pioneer Lease, which Pioneer Lease also shall be executed and delivered to AHP Utah by Paracelsus Utah and shall be evidenced by a memorandum of lease executed by AHP Utah and Paracelsus Utah to be recorded at the Pioneer Closing. ARTICLE 4 PURCHASE PRICE 4.1 HALSTEAD PURCHASE PRICE. The total consideration for the purchase and sale of the Halstead Bonds and the Halstead Equipment and the assignments set forth in Section 3.1 above shall be $14,250,000 plus an amount determined in accordance with SCHEDULE 4.1 hereto. Paracelsus Utah shall pay the Halstead Purchase Price by wire transfer of same day funds to an account specified in advance by AHP. 4.2 ELMWOOD PURCHASE PRICE. The total consideration for the purchase and sale of the Elmwood Fee Property and the assignment set forth in Section 3.2 above shall be $37,440,000. Paracelsus Utah shall pay the Elmwood Purchase Price in one of the following alternative manners, at Paracelsus Utah's election: (a) by wire transfer of $37,440,000 in same day funds to an account specified in advance by AHP, or (b) by delivery to AHP of the Elmwood Promissory Note duly executed by Paracelsus Utah and the Elmwood Letter of Credit, and by wire transfer of same day funds in the manner provided in CLAUSE (A) in an amount equal to the difference between the principal amount of the Elmwood Promissory Note and $37,440,000. 4.3 PIONEER PURCHASE PRICE. The total consideration for the purchase and sale of the Pioneer Fee Property and the assignments set forth in Section 3.3 above shall be $51,690,000. AHP Utah shall pay the Pioneer Purchase Price by wire transfer of same day funds to an account specified in advance by Paracelsus. 12 ARTICLE 5 TERMINATION OF CERTAIN AGREEMENTS 5.1 HALSTEAD FACILITY TERMINATIONS. On the terms and subject to the conditions and exceptions set forth herein, AHP Kansas and Paracelsus Utah hereby agree to terminate the Halstead Sublease, Halstead Equipment Lease, the Halstead Assignment, and the Halstead Security Agreement and the Halstead Financing Statements, and each shall execute and deliver such documents at the Halstead Closing as are necessary to effectuate such terminations. 5.2 ELMWOOD FACILITY TERMINATIONS. On the terms and subject to the conditions and exceptions set forth herein, AHP New Orleans and Paracelsus Utah hereby agree to terminate or cancel the Elmwood Lease, the Elmwood Security Agreement, the Elmwood Assignment, the Elmwood Warranty Rights Assignment and the ECI Assignment, and each shall execute and deliver such documents at the Elmwood Closing as are necessary to effectuate such terminations. ARTICLE 6 DOCUMENTS OF CONVEYANCE 6.1 AHP KANSAS - HALSTEAD FACILITY DOCUMENTS. At the Halstead Closing, AHP Kansas shall duly execute, acknowledge and deliver to Paracelsus Utah: (A) the Halstead Bonds, assigned to Paracelsus Utah by endorsement without recourse, as set forth in EXHIBIT L attached hereto; (B) an Assignment of Halstead Master Lease substantially in the form of EXHIBIT M attached hereto; (C) a Termination of Halstead Sublease substantially in the form of EXHIBIT N attached hereto; (D) a Notice of Assignment substantially in the form of EXHIBIT O attached hereto; (E) a Consent to Assignment substantially in the form of EXHIBIT P attached hereto; (F) a Bill of Sale substantially in the form of EXHIBIT Q attached hereto; (G) Uniform Commercial Code Termination Statements (Form UCC-3) substantially in the form of EXHIBIT R attached hereto; and 13 (H) a certificate of the President or Vice President of AHP Kansas substantially in the form of EXHIBIT S attached hereto. 6.2 PARACELSUS UTAH - HALSTEAD FACILITY DOCUMENTS. At the Halstead Closing, Paracelsus Utah shall duly execute, acknowledge and deliver to AHP Kansas: (A) an Acceptance and Assumption Agreement substantially in the form of EXHIBIT T attached hereto; (B) an Assignment of Halstead Master Lease substantially in the form of EXHIBIT M attached hereto; and (C) a Termination of Halstead Sublease substantially in the form of EXHIBIT N attached hereto. 6.3 AHP NEW ORLEANS - ELMWOOD FACILITY DOCUMENTS. At the Elmwood Closing, AHP New Orleans shall duly execute, acknowledge and deliver to Paracelsus Utah: (A) a Special Warranty Deed of the Elmwood Fee Property substantially in the form of EXHIBIT U attached hereto, conveying to Paracelsus Utah good, indefeasible, insurable and marketable title to the Elmwood Fee Property; (B) a Termination of Elmwood Lease and an Assignment of Elmwood Parking Lease substantially in the forms of EXHIBITS V AND V-1 attached hereto; (C) Uniform Commercial Code Termination Statements (Form UCC-3) substantially in the form of EXHIBIT W attached hereto; (D) a Certificate of Non-Foreign Status and Taxpayer Identification Number, in substantially the form of EXHIBIT FF attached hereto; (E) an Owner's Affidavit, in substantially the form of EXHIBIT Z attached hereto; (F) a certificate of the President or Vice President of AHP New Orleans substantially in the form of EXHIBIT X attached hereto; (G) if necessary, the Elmwood Promissory Note substantially in the form of EXHIBIT KK; and (H) if necessary, the Elmwood Letter of Credit substantially in the form of EXHIBIT LL. 6.4 PARACELSUS UTAH - ELMWOOD FACILITY DOCUMENTS. At the Elmwood Closing, Paracelsus Utah shall duly execute, acknowledge and deliver to AHP New Orleans an 14 Assignment of Elmwood Parking Lease substantially in the form of EXHIBIT V-1 attached hereto, and a Termination of Elmwood Lease substantially in the form of EXHIBIT V attached hereto. 6.5 PARACELSUS UTAH - PIONEER FACILITY DOCUMENTS. At the Pioneer Closing, Paracelsus Utah shall duly execute, acknowledge and deliver to AHP Utah: (A) a Special Warranty Deed to the Pioneer Fee Property, substantially in the form of EXHIBIT Y attached hereto, conveying to AHP Utah good, indefeasible, insurable and recordable title to the Pioneer Fee Property; (B) the Pioneer Lease; (C) opinions from counsel to Paracelsus pertaining to each of the California Facilities in form contemplated by the Pioneer Lease; (D) a security agreement in substantially the form of EXHIBIT BB attached hereto; (E) a security agreement in substantially the form of EXHIBIT CC attached hereto; (F) a Collateral Assignment of Leases and Rents substantially in the form of EXHIBIT DD attached hereto; (G) UCC-1 Financing Statements in substantially the form of EXHIBIT EE attached hereto; (H) a Certificate of Non-Foreign Status and Taxpayer Identification Number in substantially the form of EXHIBIT FF attached hereto; (I) a certificate of the President or Vice President of Paracelsus Utah substantially in the form of EXHIBIT GG attached hereto; and (J) a Pioneer Assignment and Assumption Agreement substantially in the form of EXHIBIT MM attached hereto. 6.6 AHP UTAH - PIONEER FACILITY DOCUMENTS. At the Pioneer Closing, AHP Utah shall duly execute, acknowledge and deliver to Paracelsus Utah: (A) the Pioneer Lease; (B) a certificate of the President or Vice President of AHP Utah substantially in the form of EXHIBIT HH attached hereto; and (C) a Pioneer Assignment and Assumption agreement substantially in the form of EXHIBIT MM attached hereto. 15 6.7 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. From time to time after the date hereof, the AHP Entities and the Paracelsus Entities shall execute and deliver such other instruments of conveyance and transfer, and take such other actions as such party or the Title Company reasonably may request, to effect the transactions contemplated hereby. ARTICLE 7 REPRESENTATIONS AND WARRANTIES 7.1 PARACELSUS ENTITIES REPRESENTATIONS AND WARRANTIES. The Paracelsus Entities each represent and warrant the following: (A) ORGANIZATION, POWERS, ETC. Paracelsus is a California corporation and Paracelsus Utah is a Utah corporation, and each is duly organized, validly existing and in good standing under the laws of its respective state of organization. Each of the Paracelsus Entities is authorized to do business in each state or jurisdiction in which the nature of its business requires such authorization except where a failure to be so qualified does not have a material adverse effect on its business, properties, condition (financial or otherwise) or operations. Each Paracelsus Entity has the requisite corporate power, authority and legal right to (1) execute and deliver, and perform and observe the provisions of, this Agreement, (2) execute and deliver, and perform and observe the provisions of, the Transaction Documents to which such Paracelsus Entity is a party, (3) to carry out the transactions contemplated hereby and by the other Transaction Documents to be carried out by such Paracelsus Entity, and (4) to conduct their respective businesses as such businesses are now being conducted. Neither the execution nor delivery of the Transaction Documents by any Paracelsus Entity is in contravention of law or of the terms of any such Paracelsus Entity's charter documents. Paracelsus Utah has full power, authority and legal right to transfer good, indefeasible, insurable and marketable title to the Pioneer Fee Property to AHP Utah free and clear of all liens, claims and encumbrances except for Pioneer Permitted Encumbrances. Prior to their respective mergers with and into Paracelsus Utah, Paracelsus Kansas was a Kansas corporation and Paracelsus New Orleans was a Louisiana corporation. Each of Paracelsus Kansas and Paracelsus New Orleans had, immediately prior to their respective mergers with and into Paracelsus Utah, the requisite corporate power, authority and legal right to (a) execute and deliver the agreement and plan of merger and all related documents pursuant to which such entity was merged with and into Paracelsus Utah, (b) carry out the transactions contemplated by such agreement and documents, and (c) conduct their respective businesses as such businesses were being conducted immediately prior to such mergers. Neither the execution nor delivery of such agreements and plans of merger and all related documents by either Paracelsus Kansas or Paracelsus New Orleans was in contravention of law or of the terms of such entity's charter documents. The execution and delivery of such agreements and plans of merger and all related documents by Paracelsus Kansas and Paracelsus New Orleans were duly authorized by all necessary corporate and stockholder action. Under the applicable laws of the States of Kansas, Louisiana and Utah, Paracelsus Utah has good title to all assets of Paracelsus Kansas and Paracelsus New Orleans, has acceded to all rights and obligations of Paracelsus Kansas and Paracelsus New Orleans, and has assumed all liabilities of Paracelsus Kansas and Paracelsus New Orleans. 16 (B) DUE AUTHORIZATION. The Transaction Documents and each instrument provided for herein or therein to which such Paracelsus Entity is a party will be, when executed and delivered as contemplated hereby, duly authorized, executed and delivered by such Paracelsus Entity, and the Transaction Documents constitute, and each such instrument will constitute, when executed and delivered as contemplated hereby, legal, valid and enforceable obligations of such Paracelsus Entity. The execution and delivery of the Transaction Documents have been duly authorized by all necessary corporate and stockholder action. (C) GOVERNMENTAL APPROVALS. No consent, approval or other authorization of, or registration, declaration or filing with, any court or governmental agency or commission is required for the due execution and delivery of the Transaction Documents to which any Paracelsus Entity is a party or for the validity or enforceability thereof against each Paracelsus Entity that is a party to such Transaction Document other than the recording or filing for recordation of the Transaction Documents, which recordings shall be made as soon as practicable after the date hereof. (D) COLUMBIA AGREEMENT. None of the Paracelsus Entities party to the Columbia Agreement, and to the knowledge of the Paracelsus Entities, none of the other parties to the Columbia Agreement is in default in the observance or performance of the Columbia Agreement, and the Columbia Agreement is in full force and effect. (E) NO LITIGATION. There are no actions, proceedings or investigations pending or, to the best knowledge of the Paracelsus Entities, threatened, against the Paracelsus Entities before or by any court, arbitrator, administrative agency or other governmental authority, that call into question the authority or right of any Paracelsus Entity to enter into and perform the Transaction Documents, or that, individually or in the aggregate, are expected, in the reasonable judgment of such Paracelsus Entity, to materially and adversely affect such Paracelsus Entity's ability to carry out any of the transactions contemplated by the Transaction Documents to be carried out by such Paracelsus Entity. (F) NO CONFLICTS. Neither the execution and delivery of the Transaction Documents to which any Paracelsus Entity is a party, compliance with the provisions hereof or thereof, nor the carrying out of the transactions contemplated hereby or thereby to be carried out by such Paracelsus Entity will result in (1) a breach or violation of (a) any material law or governmental rule or regulation applicable to any such Paracelsus Entity now in effect, (b) any provision of any of such Paracelsus Entity's charter documents, or (c) any judgment, order or decree of any court, arbitrator, administrative agency of other governmental authority binding upon such Paracelsus Entity; (2) the acceleration of the obligations of such Paracelsus Entity; or (3) the creation of any lien, claim or encumbrance upon any properties or assets of such Paracelsus Entity except as provided in the Transaction Documents. (G) SOLVENCY. Each Paracelsus Entity is solvent and will not be rendered insolvent as a result of carrying out of the transactions required hereunder to be carried out by it. Each Paracelsus Entity has filed all tax returns that are required to be filed by it and is not in default in the payment of any taxes levied or assessed against it or any of its assets, or under any judgment, order, decree, rule or regulation of any court, arbitrator, administrative 17 agency or other governmental authority to which it may be subject that would, in each case or in the aggregate, materially adversely affect the carrying out of the transactions contemplated by any of the Transaction Documents. In agreeing to carry out each transfer and obligation contemplated hereby and by each instrument provided for herein to which such Paracelsus Entity is a party, such Paracelsus Entity is not acting with actual intent to hinder, delay or defraud any of its creditors or in the reasonable expectation of not receiving reasonably equivalent value in exchange for such transfer or obligation. (H) TITLE. Effective upon the Columbia Closing, Paracelsus Utah will hold good, indefeasible, insurable and recordable fee simple title to the Pioneer Fee Property, and there will exist no mortgages, liens, restrictions, agreements, claims or other encumbrances that would cause title to the Pioneer Fee Property to be unmarketable or that will materially interfere with any use of the Pioneer Fee Property in a manner consistent with its current use. (I) SUITABILITY. The Pioneer Facility includes all land, improvements, fixtures, furniture and equipment that are materially related to the operations of the Pioneer Facility as contemplated to be conducted and as authorized to be conducted under all licenses and certificates required to be granted to the Pioneer Facility. (J) REGULATORY COMPLIANCE. Effective upon the happening of the Columbia Closing, Paracelsus Utah will be in compliance in all material respects with all applicable rules, regulations and requirements of all federal, state and local commissions, boards, bureaus and agencies having jurisdiction over the Pioneer Business and the operations of the Pioneer Business, including, without limitation, the appropriate state licensing agencies and the Internal Revenue Service. The Pioneer Facility has timely filed all reports, data and other information required to be filed with such commissions, boards, bureaus and agencies where a failure to file timely would have a material adverse effect on the Pioneer Business. (K) COMMITMENTS. Except for commitments, contracts, leases and agreements listed on Schedules 5.9 and 5.13 to the Columbia Agreement, there are no contracts or commitments materially affecting ownership of title to, use of, or any material interest in real estate used or proposed to be used in connection with the Pioneer Business. Paracelsus has provided AHP with a full and correct copy of Schedules 5.9 and 5.13 to the Columbia Agreement and the documents referred to therein. (L) CONDITION. The Pioneer Facility is in good working order and repair, and: (1) all permits required for the continued use and occupancy of the Pioneer Facility have been issued with respect thereto by the governmental agencies having jurisdiction thereover; (2) the Paracelsus Entities have no knowledge of (including knowledge acquired pursuant to the Columbia Agreement) and have not received any notice of any claim, requirement or demand of any licensing or certifying agency supervising or having authority over the Pioneer Facility to rework or redesign it in any material respect or to provide 18 additional furniture, fixtures, equipment or inventory so as to conform to or comply with any law that has not been materially satisfied; (3) all utilities necessary for the use and operation of the Pioneer Facility as contemplated are located within the boundaries of the Pioneer Real Property (or by off-site connections approved by AHP Utah) and do not cross lands of others adjoining the Pioneer Real Property except over validly created and existing easements appurtenant to the Pioneer Real Property, and there are no encroachments of buildings, structures, or improvements located on the Pioneer Fee Property onto adjoining lands, nor are there any encroachments onto the Pioneer Fee Property of buildings, structures or other improvements located on adjoining lands; (4) the Paracelsus Entities have no knowledge of any material defects in the grading or drainage of the Pioneer Real Property; (5) the Paracelsus Entities have no knowledge of any material defect in the design, material or workmanship of the Pioneer Facility or that the equipment and systems serving the Pioneer Facility, including the plumbing, heating, air conditioning, electrical and sprinkler systems, are otherwise than in good working order and condition for the conduct of the operations of the Pioneer Facility in the ordinary course of business thereof as heretofore conducted and as authorized to be conducted under all licenses and certificates heretofore granted to the Pioneer Facility; and (6) the Paracelsus Entities have no knowledge of any surface or subsurface soil condition that may damage, disrupt or otherwise affect, the Pioneer Facility or any underground utility line or other facility servicing the Pioneer Facility. (M) COMPETING USES; ACCESS. There are no parties in possession of any portion of the Pioneer Fee Property as lessees, tenants at sufferance or trespassers, except as approved by AHP Utah. There is no pending or, to the best knowledge of the Paracelsus Entities, threatened condemnation or similar proceeding or assessment affecting the Pioneer Real Property, nor, to the best knowledge of the Paracelsus Entities, is any such proceeding or assessment contemplated by any governmental authority. The streets abutting the Pioneer Fee Property are (1) public roads to which the Pioneer Fee Property has direct access by vehicle and by foot, or (2) private ways (with direct access by vehicle or by foot to public roads) to which the Pioneer Fee Property has direct access without charge or liability for maintenance or repair. (N) LICENSURE. The Pioneer Hospital is duly licensed by the Utah Department of Health as a 135-bed acute care hospital. The pharmacies, laboratories and all other ancillary departments located at the Pioneer Facility or operated for the benefit of the Pioneer Facility that are required to be specially licensed are licensed by the appropriate licensing agency. The Pioneer Facility has all other licenses, permits and approvals that are needed or required by law to operate the Pioneer Business as it is presently conducted and to use its assets as those assets are currently used except where the failure to obtain and maintain any such licenses, permits or approvals would not have a material adverse effect on the operations or financial condition of the Pioneer Business. The Pioneer Facility is in conformance with all 19 applicable insurance requirements. There is no action pending or, to the best knowledge of the Paracelsus Entities, recommended by the appropriate state or federal agency to revoke, withdraw or suspend any license to operate the Pioneer Facility, or certification of the Pioneer Facility, or any action of any other type with regard to licensure or certification. (O) MEDICARE PARTICIPATION/ACCREDITATION. Paracelsus Utah is eligible to receive payment under Titles XVIII and XIX of the Social Security Act and is a "provider" under existing provider agreements with the Programs through applicable intermediaries. The Pioneer Facility is in compliance with the conditions of participation of the Programs and has received all approvals or qualifications necessary for capital reimbursement on the assets of the Pioneer Facility. There is not pending, nor to the best of the Paracelsus Entities' knowledge, threatened, any proceeding or investigation under the Programs involving the Pioneer Facility or any of the assets comprising the Pioneer Facility. The Pioneer Facility's cost reports for the fiscal years through December 31, 1994 have been filed and are complete and correct in all material respects. The Pioneer Facility's cost reports were filed when due. There are no claims, actions or appeals pending before any commission, board or agency, including, without limitation, any intermediary or carrier, the Provider Reimbursement Review Board or the Administrator of the Health Care Financing Administration, with respect to any state or federal Medicare or Medicaid cost reports or claims filed with respect to the Pioneer Facility on or before the date hereof, or any disallowances by any commission, board or agency in connection with any audit of such cost reports, except as specifically described and set forth on Schedule 5.7 to the Columbia Agreement. Paracelsus has provided AHP with a full and correct copy of Schedule 5.7 to the Columbia Agreement. No validation review or program integrity review relating to the Pioneer Facility, the operation thereof, or the consummation of the transactions contemplated hereby, or relating to the assets comprising the Pioneer Facility has been conducted by any commission, board or agency in connection with the Programs, and to the best knowledge of the Paracelsus Entities,no such reviews are scheduled, pending or threatened against or affecting the Pioneer Facility, or any of the assets comprising the Pioneer Facility, or the consummation of the transactions contemplated hereby. The Pioneer Facility is in full compliance in all material respects with all rules, regulations and requirements of all governmental agencies having jurisdiction over the Pioneer Facility or its operations. The Pioneer Facility is accredited by the JCAHO, and has cured all deficiencies, if any, noted in the most recent survey of the Pioneer Facility conducted by the JCAHO or any state licensing or certification agency. (P) ENVIRONMENTAL MATTERS. Except as disclosed in such Phase I environmental site assessments delivered to AHP Utah pursuant to Section 8.14 hereof, the Paracelsus Entities represent to their actual knowledge the following: (1) each of the Paracelsus Entities are in compliance with all applicable Environmental Laws, except where the failure to be in compliance would not have a material adverse effect on any of their respective businesses; (2) there are not any Environmental Conditions resulting from the operations by Columbia or any of its affiliates of any portion of the Pioneer Real Property 20 that may give rise to any on-site or off-site remedial obligations or any other liability or obligation that shall have a material adverse effect on the Pioneer Business. (3) there are not any Environmental Conditions existing on or resulting from the operations of any portion of the Pioneer Real Property by any person that may give rise to any on-site or off-site remedial obligations or any other liability or obligation that shall have a material adverse effect on the Pioneer Business; (4) no portion of the Pioneer Real Property is subject to any existing, pending or threatened action, suit, investigation, inquiry or proceeding by or before any Governmental Authority or private party under any Environmental Law; (5) all notices, permits, licenses or similar authorizations, if any, required to be obtained or filed by Columbia or any of its affiliates under any Environmental Law in connection with any portion of the Pioneer Real Property, including without limitation those relating to the treatment, storage, disposal or release of a Hazardous Material or solid waste into the environment, have been duly obtained or filed and each such Columbia affiliate is in compliance with the terms and conditions of all notices, permits, licenses and similar authorizations, except where the failure to obtain such authorizations would not have a material adverse effect on the Pioneer Business. (6) without limiting the foregoing, there is no liability to any nongovernmental third party in connection with any release or threatened release of any Hazardous Material or solid wastes by any person into the environment as a result of or with respect to any portion of the Pioneer Real Property that shall have a material adverse effect on the Pioneer Business; and (7) neither Columbia or any of its affiliates nor Paracelsus or any of its affiliates has: (a) entered into or been subject to any consent decree, compliance order, or administrative order with respect to any portion of the Pioneer Real Property or any facilities or operations thereon; (b) received notice under the citizen suit provision of any Environmental Law in connection with any portion of the Pioneer Real Property or any facilities or operations thereon; (c) received any request for information, notice, demand letter, administrative inquiry, or formal or informal complaint or claim or suit with respect to any Environmental Condition relating to any portion of the Pioneer Real Property or any facilities or operations thereon; or (d) been subject to or threatened with any governmental or citizen action with respect to any portion of the Pioneer Real Property or any facilities or operations thereon. (Q) ASBESTOS. Except as disclosed in such Phase I environmental site assessments delivered to AHP Utah pursuant to Section 8.14 hereof, to the best knowledge of the Paracelsus Entities after engaging an outside consultant, the Pioneer Facility does not contain any friable asbestos in any form. (R) BROKERS. The Paracelsus Entities have not dealt with any broker or finder in connection with the transactions contemplated hereby. The AHP Entities shall not 21 be liable for any broker's or finder's fees on the basis of any agreement, undertaking or commitment of the Paracelsus Entities. (S) FINANCIAL STATEMENTS. Paracelsus has delivered to AHP copies of the Pioneer Financial Statements delivered to it by Columbia pursuant to the Columbia Agreement. To the best of the Paracelsus Entities' actual knowledge, such audited financial statements have been prepared in accordance with generally accepted accounting principles and practices consistently applied; such unaudited financial statements materially conform to GAAP; such balance sheets present fairly the financial condition of the Pioneer Business as of the dates indicated thereon, and such income statements and statements of cash flow present fairly the results of operations of the Pioneer Business for the periods indicated thereon; and since the date indicated on such balance sheets, there have occurred no material adverse changes in the financial condition or business of the Pioneer Business as reflect in the Pioneer Financial Statements. (T) NO MISSTATEMENTS. To the best knowledge of the each of the Paracelsus Entities, neither this Agreement, including the exhibits and schedules attached hereto, nor any certificate or instrument furnished or to be furnished to any AHP Entity by any Paracelsus Entity in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. 7.2 AHP ENTITIES REPRESENTATIONS AND WARRANTIES. The AHP Entities each represent and warrant the following: (A) ORGANIZATION, POWERS, ETC. AHP is a Delaware corporation, AHP Kansas is a Kansas corporation, AHP New Orleans is a Louisiana corporation and AHP Utah is a Utah corporation, and each is duly organized, validly existing and in good standing under the laws of its respective state of organization. Each of the AHP Entities is authorized to do business in each state or jurisdiction in which the nature of its business requires such authorization except where a failure to be so qualified does not have a material adverse effect on its business, properties, condition (financial or otherwise) or operations. Each AHP Entity has the requisite corporate power, authority and legal right to (1) execute and deliver, and perform and observe the provisions of, this Agreement, (2) execute and deliver, and perform and observe the provisions of, the Transaction Documents to which such AHP Entity is a party, (3) to carry out the transactions contemplated hereby and by the other Transaction Documents to be carried out by such AHP Entity, and (4) to conduct their respective businesses as such businesses are now being conducted. Neither the execution nor delivery of the Transaction Documents by any AHP Entity is in contravention of law or of the terms of any such AHP Entity's charter documents. AHP Utah has full power, authority and legal right to transfer good, indefeasible, insurable and marketable title to the Elmwood Real Property to Paracelsus Utah free and clear of all liens, claims and encumbrances except for Elmwood Permitted Encumbrances. AHP Kansas has full power, authority and legal right to transfer good title to 22 the Halstead Bonds and the Halstead Equipment to Paracelsus Utah free and clear of all liens, claims and encumbrances. (B) DUE AUTHORIZATION. The Transaction Documents and each instrument provided for herein or therein to which such AHP Entity is a party will be, when executed and delivered as contemplated hereby, duly authorized, executed and delivered by such AHP Entity, and the Transaction Documents constitute, and each such instrument will constitute, when executed and delivered as contemplated hereby, legal, valid and enforceable obligations of such AHP Entity. The execution and delivery of the Transaction Documents have been duly authorized by all necessary corporate and stockholder action. (C) GOVERNMENTAL APPROVALS. No consent, approval or other authorization of, or registration, declaration or filing with, any court or governmental agency or commission is required for the due execution and delivery of the Transaction Documents to which any AHP Entity is a party or for the validity or enforceability thereof against each AHP Entity that is a party to such Transaction Document other than the recording or filing for recordation of the Transaction Documents, which recordings shall be made as soon as practicable after the date hereof. (D) NO LITIGATION. There are no actions, proceedings or investigations pending or, to the best knowledge of the AHP Entities, threatened against the AHP Entities before or by any court, arbitrator, administrative agency or other governmental authority, that call into question the authority or right of any AHP Entity to enter into and perform the Transaction Documents, or that, individually or in the aggregate, are expected, in the reasonable judgment of such AHP Entity, to materially and adversely affect such AHP Entity's ability to carry out any of the transactions contemplated by the Transaction Documents to be carried out by such AHP Entity. (E) NO CONFLICTS. Neither the execution and delivery of the Transaction Documents to which an AHP Entity is a party, compliance with the provisions hereof or thereof, nor the carrying out of the transactions contemplated hereby or thereby to be carried out by such AHP Entity will result in (1) a breach or violation of (a) any material law or governmental rule or regulation applicable to any such AHP Entity now in effect, (b) any provision of any of such AHP Entity's charter documents, (c) any judgment, order or decree of any court, arbitrator, administrative agency of other governmental authority binding upon such AHP Entity, or (d) any material agreement or instrument to which such AHP Entity is a party or by which such AHP Entity or its properties is bound; (2) the acceleration of the obligations of such AHP Entity; or (3) the creation of any lien, claim or encumbrance upon any properties or assets of such AHP Entity except as provided in the Transaction Documents. (F) SOLVENCY. Each AHP Entity is solvent and will not be rendered insolvent as a result of carrying out of the transactions required hereunder to be carried out by it. Each AHP Entity has filed all tax returns that are required to be filed by it and is not in default in the payment of any taxes levied or assessed against it or any of its assets, or under any judgment, order, decree, rule or regulation of any court, arbitrator, administrative agency or other governmental authority to which it may be subject that would, in each case or in the 23 aggregate, materially adversely affect the carrying out of the transactions contemplated by any of the Transaction Documents. In agreeing to carry out each transfer and obligation contemplated hereby and by each instrument provided for herein to which such AHP Entity is a party, such AHP Entity is not acting with actual intent to hinder, delay or defraud any of its creditors or in the reasonable expectation of not receiving reasonably equivalent value in exchange for such transfer or obligation. (G) TITLE TO ELMWOOD REAL PROPERTY. The Elmwood Fee Property is free and clear of all liens, claims, encumbrances, security interests or rights of third parties claiming by, through or under any of the AHP Entities. The Elmwood Parking Leasehold has not been modified except as set forth in this Agreement and is free and clear of all liens, claims, encumbrances, security interests or rights of third parties claiming by, through or under any of the AHP Entities. The AHP Entities know of no defaults by the lessees of any portion of the Elmwood Real Property that are continuing as of the date hereof. (H) TITLE TO HALSTEAD REAL PROPERTY. The Halstead Master Lease and the Halstead Sublease have not been assigned or modified except as set forth in this Agreement and are free and clear of all liens, claims, encumbrances, security interests or rights of third parties claiming by, through or under any of the AHP Entities. The AHP Entities have no actual knowledge of any defaults by the lessees of any portion of the Halstead Real Property that are continuing as of the date hereof. (I) TRANSFERS ON AN "AS IS" BASIS. The AHP Entities make no representations or warranties as to the physical condition of the assets transferred or assigned by the AHP Entities to Paracelsus Utah pursuant to Articles 2 and 3 hereof, and each such transfer or assignment is made by the AHP Entity strictly on an "as is" basis. (J) BROKERS. The AHP Entities have not dealt with any broker or finder in connection with the transactions contemplated hereby. The Paracelsus Entities shall not be liable for any broker's or finder's fees on the basis of any agreement, undertaking or commitment of the AHP Entities. (K) NO MISSTATEMENTS. To the best knowledge of each of the AHP Entities, neither this Agreement, including the exhibits and schedules attached hereto, nor any certificate or instrument furnished or to be furnished to any Paracelsus Entity by any AHP Entity in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF AHP ENTITIES The obligations of the AHP Entities to consummate the transactions provided for herein on any of the Closing Dates are subject to the satisfaction or waiver of the following conditions precedent: 24 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Paracelsus Entities contained in Section 7.1 hereof shall be accurate in all material respects as of each of the Closing Dates. 8.2 COMPLIANCE WITH THIS AGREEMENT. The Paracelsus Entities shall have duly and timely observed and performed all covenants, agreements and conditions contained herein that are required to be observed or performed by them as of such Closing Date, and the Paracelsus Entities shall not be in default in the observance or performance of any such covenant, agreement or condition. 8.3 CONSUMMATION OF THE COLUMBIA AGREEMENT. The Columbia Agreement shall be fully consummated by all of the parties thereto concurrently with the Pioneer Closing. 8.4 DELIVERY AND EFFECTIVENESS OF DOCUMENTS. The Paracelsus Entities shall have duly executed, acknowledged and delivered the documents required to be delivered by them pursuant to Article 6 hereof as of such Closing Date, and such documents shall be in full force and effect. 8.5 PIONEER CLOSING. With respect to the Halstead Closing and the Elmwood Closing, the AHP Entities shall have reasonably satisfied themselves that the Pioneer Closing has been scheduled for a date that is no later than two (2) business days after the earlier to occur of the Halstead Closing and the Elmwood Closing and that the consummation of the Columbia Agreement will occur concurrently with the Pioneer Closing. 8.6 PAYMENT OF PURCHASE PRICE. Paracelsus Utah shall have paid to the appropriate AHP Entity by wire transfer of same day funds the amounts due to be paid by Paracelsus Utah pursuant to Article 4 hereof as of such Closing Date. 8.7 HALSTEAD SUBLEASE RENTS. With respect to the Halstead Closing, Paracelsus Utah shall have paid to AHP Kansas by wire transfer of same day funds all amounts due, if any, under the terms of the Halstead Sublease, prorated to the date of the Halstead Closing. 8.8 ELMWOOD RENTS. Paracelsus Utah shall have paid to AHP New Orleans by wire transfer of same day funds all amounts due, if any, under the terms of the Elmwood Lease, prorated to the date of the Elmwood Closing. 8.9 PIONEER LEASES. With respect to the Pioneer Closing, Paracelsus Utah shall have delivered to AHP Utah satisfactory evidence that all unrecorded leases or subleases of any portion of the Pioneer Fee Property have been terminated, except for such leases or subleases identified in Schedule 8.9 (the "Approved Leases"), to which AHP Utah has consented. Upon AHP Utah's acquisition of fee title to the Pioneer Fee Property, AHP Utah shall acquire Paracelsus Utah's interest as lessor under the Approved Leases. AHP Utah hereby agrees to immediately assign all of its rights, title and interest in the Approved Leases to Paracelsus Utah pursuant to that certain Pioneer Assignment and Assumption Agreement in the form of EXHIBIT MM hereto. 25 8.10 WARRANTIES. With respect to the Pioneer Closing, Paracelsus Utah shall have assigned for the benefit of AHP Utah any and all title guaranties and warranties Paracelsus Utah holds with respect to the Pioneer Fee Property. 8.11 CONSENTS. AHP Utah shall have received evidence, in form and substance reasonably satisfactory to it, of the certifications, approvals and consents to this Agreement and the transactions contemplated hereby of every person whose consent is reasonably required by AHP Utah as of such Closing Date. 8.12 TITLE INSURANCE. With respect to the Pioneer Closing, the Title Company shall have issued to AHP Utah either (a) an owner's policy of title insurance ALTA Form 1970 in the amount of $51,690,000 insuring title to the Pioneer Fee Property in AHP Utah, or (b) a commitment, reasonably satisfactory in form and content to AHP Utah to issue to AHP Utah an owner's policy of title insurance ALTA Form 1970 in the amount of $51,690,000 covering the Pioneer Fee Property free of all liens, claims and encumbrances (except for the Pioneer Permitted Encumbrances), in each case omitting any exception concerning matters of survey and matters arising between the date of the Pioneer Closing and the date of recording of the instruments of conveyance of the Pioneer Fee Property. The title policy shall be in form reasonably acceptable to AHP Utah and shall affirmatively insure that AHP Utah has good and indefeasible title to the Pioneer Fee Property free and clear of all exceptions to title (except for the Pioneer Permitted Encumbrances). If a commitment is presented, the Title Company shall execute a Receipt and Agreement at closing agreeing to issue a title policy in accordance with the provisions of the Title Commitment as approved by AHP Utah. The Paracelsus Entities shall be responsible for and shall pay any and all costs, premiums, charges and fees relating to the title policies and the endorsements thereto. 8.13 SURVEY. With respect to the Pioneer Closing, AHP Utah shall have received and approved an on-the-ground survey of the Pioneer Fee Property certified by Larsen & Malmquist dated August 8, 1995 for the purpose of deleting standard survey exceptions and sufficient to enable affirmative coverage to be afforded regarding location, zoning, contiguity, parking, loading and other matters. The survey shall reflect all improvements visible on the grounds and all easements, rights of way, means of ingress or egress, encroachments and drainage ditches, whether abutting or interior, of record or on the grounds. The survey shall reflect whether and to the extent any portion of the Pioneer Fee Property lies within the 100-year flood plain and shall otherwise be in a form reasonably satisfactory to AHP. The survey shall be certified to the Title Company and AHP Utah, in a form satisfactory to the Title Company and AHP Utah. 8.14 ENVIRONMENTAL REPORT. With respect to the Pioneer Closing, AHP Utah shall have received and approved a Phase I environmental report dated October 11, 1995 prepared by Dames & Moore, addressed to AHP Utah, concerning the absence of Environmental Conditions at the Pioneer Fee Property. 8.15 LICENSES. With respect to the Pioneer Closing, AHP Utah shall have received evidence of the issuance to Paracelsus Utah of all permits, licenses, conditional use permits, variances and other certificates including, but not limited to, a license from the Utah 26 Department of Health to operate the Pioneer Facility as a 135-bed acute care hospital as necessary to permit the full use of the Pioneer Real Property; the same shall be in full force and effect, and any and all appeals periods shall have expired, and there shall be no action pending or recommended by the appropriate federal agency (or the staff thereof) to revoke, withdraw or suspend any such permit, license, conditional use permit, variance or other certificate. 8.16 TITLE TO COLLATERAL. With respect to the Pioneer Closing, AHP Utah shall have received and approved evidence that (A) Paracelsus Utah holds good legal title to the Pioneer Leasehold Property and that enforceable, first and prior liens on or security interests in the Pioneer Leasehold Property will be granted to AHP Utah by Paracelsus Utah, and (B) the California Affiliate holds good legal title to the California Facilities and that enforceable, first and prior security interests in all accounts and revenues of the California Facilities will be granted by the California Affiliate to AHP Utah. Notwithstanding the foregoing, the parties hereto agree that neither of the Paracelsus Entities nor the California Affiliate will be required to purchase title insurance commitments or policies pertaining to the Pioneer Leasehold Property or to the California Facilities. 8.17 APPRAISAL. With respect to the Pioneer Closing, AHP Utah shall have received and approved an appraisal prepared by Valuation Counselors indicating that, on the basis of a physical inspection and a review of the survey referred to in Section 8.13 hereof and such other information as Valuation Counselors deems necessary or appropriate, the fair market value (taking into account income, market and cost approaches) of the Pioneer Fee Property is no less than $51,690,000. 8.18 PLANS. With respect to the Pioneer Closing, AHP Utah shall have received and approved final plans and specifications for the Pioneer Facility. 8.19 GOOD STANDING CERTIFICATES. The AHP Entities shall have received certificates of existence and good standing of the Paracelsus Entities from the state in which each such Paracelsus Entity is incorporated, each dated the most recent practical date prior to the Closing Date. 8.20 CERTIFICATES OF MERGER. The AHP Entities shall have received copies of the certificates of merger pursuant to which Paracelsus Kansas and Paracelsus New Orleans were merged with and into Paracelsus Utah, certified by the appropriate official of each state in which such certificates of merger were filed. 8.21 SHAREHOLDER RESOLUTIONS. The AHP Entities shall have received copies of resolutions duly adopted by the shareholders of (A) Paracelsus Utah authorizing and approving such corporation's performance of the transactions contemplated hereby and by the Columbia Agreement and the execution and delivery of this Agreement and the Transaction Documents, and (B) Paracelsus Kansas and Paracelsus New Orleans authorizing and approving such corporation's merger with and into Paracelsus Utah, each such shareholders' resolution certified as true and of full force and effect as of the Closing Date by the appropriate officers of such corporation. 27 8.22 BOARD RESOLUTIONS. The AHP Entities shall have received copies of resolutions duly adopted by the board of directors of (A) each of the Paracelsus Entities authorizing and approving such Paracelsus Entity's performance of the transactions contemplated hereby and the execution and delivery of this Agreement and the Transaction Documents, and (B) each of Paracelsus Kansas and Paracelsus New Orleans and Paracelsus Utah authorizing and approving such corporation's merger with and into Paracelsus Utah, each such board resolution certified as true and of full force and effect as of the Closing Date by the appropriate officers of such corporations. 8.23 INCUMBENCY CERTIFICATES. The AHP Entities shall have received certificates of incumbency for the respective officers of each of the Paracelsus Entities or their predecessors-in-interest executing this Agreement or the Transaction Documents or making certifications dated as of a Closing Date. 8.24 LEGAL OPINION. The AHP Entities shall have received a legal opinion of Robert C. Joyner, Paracelsus' General Counsel, substantially in the form of EXHIBIT II attached hereto. 8.25 TRANSACTION COSTS. The Paracelsus Entities shall have paid all costs and expenses of the transactions contemplated hereby or shall have provided for the payment thereof to the extent that the Paracelsus Entities have received invoices or statements therefor (with such statements and invoices, in the case of expenses incurred by the AHP Entities, to be in reasonable detail). Such costs and expenses shall include, without limitation (1) all taxes, including, without limitation, documentary transfer taxes and documentary stamp taxes (in either case whether imposed at the time of recordation of the instruments provided for herein or thereafter), any roll-back taxes for change in land use, sales gains and similar taxes, but excluding any income taxes of the AHP Entities, (2) the cost of the environmental reports identified in Section 8.14, (3) the survey and title examination costs and all premiums and other costs relating to the survey identified in Section 8.13, and (4) the reasonable fees and expenses of the AHP Entities' legal counsel. ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARACELSUS ENTITIES The obligations of the Paracelsus Entities to consummate the transactions provided for herein on any of the Closing Dates are subject to the satisfaction or waiver of the following conditions precedent: 9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the AHP Entities contained in Article 7 hereof shall be accurate in all material respects as of each of the Closing Dates. 9.2 COMPLIANCE WITH THIS AGREEMENT. The AHP Entities shall have duly and timely observed and performed all covenants, agreements and conditions contained herein that 28 are required to be observed or performed by them as of such Closing Date, and the AHP Entities shall not be in default in the observance or performance of any such covenant, agreement or condition. 9.3 CONSUMMATION OF THE COLUMBIA AGREEMENT. The Columbia Agreement shall be fully consummated by all of the parties thereto concurrently with the Pioneer Closing. 9.4 DELIVERY AND EFFECTIVENESS OF DOCUMENTS. The AHP Entities shall have duly executed, acknowledged and delivered the documents required to be delivered by them pursuant to Article 6 hereof as of such Closing Date, and such documents shall be in full force and effect. 9.5 PURCHASE PRICE. AHP Utah shall have paid to Paracelsus Utah by wire transfer of same day funds the amounts due to be paid by AHP Utah pursuant to Section 4.3 hereof as of such Closing Date. 9.6 PIONEER CLOSING. With respect to the Halstead Closing and the Elmwood Closing, the Paracelsus Entities shall have reasonably satisfied themselves that if the Pioneer Closing is not occurring concurrently with the Halstead Closing and the Elmwood Closing, that the Pioneer Closing has been scheduled for, and will be consummated on, a date that is no later than two (2) business days after the earlier to occur of the Halstead Closing and the Elmwood Closing and that the consummation of the Columbia Closing will occur concurrently with the Pioneer Closing. 9.7 WARRANTIES. With respect to the Halstead Closing and the Elmwood Closing, the appropriate AHP Entity shall have assigned for the benefit of Paracelsus Utah any and all contracts, guaranties and warranties of contractors and vendors which such AHP Entity holds with respect to the Halstead Fee Property and the Elmwood Fee Property. 9.8 CONSENTS. The Paracelsus Entities shall have received evidence, in form and substance reasonably satisfactory to them, of the certifications, approvals and consents to this Agreement and the transactions contemplated hereby of every person whose consent is reasonably required by the Paracelsus Entities as of such Closing Date, including the City of Halstead. 9.9 RENT CREDIT. Paracelsus Utah shall be entitled to a cash refund or a credit against the Halstead Purchase Price or the Elmwood Purchase Price, at Paracelsus Utah's option, to the extent any Paracelsus Entity has paid an amount of rent in advance under the Elmwood Lease or the Halstead Sublease and is entitled to a refund of such rent (less deductions therefrom for amounts due the AHP Entity under the Elmwood Lease or Halstead Sublease) as of the Closing Dates under the terms of the Elmwood Lease or the Halstead Sublease. 9.10 GOOD STANDING CERTIFICATES. The Paracelsus Entities shall have received certificates of existence and good standing of the AHP Entities from the state in which each such AHP Entity is incorporated, each dated the most recent practical date prior hereto. 29 9.11 SHAREHOLDER RESOLUTIONS. The Paracelsus Entities shall have received copies of resolutions duly adopted by the shareholders of each of AHP Kansas, AHP New Orleans and AHP Utah authorizing and approving such corporation's performance of the transactions contemplated hereby and the execution and delivery of this Agreement and the Transaction Documents, certified as true and of full force and effect as of the Closing Date by the appropriate officers of such corporations. 9.12 BOARD RESOLUTIONS. The Paracelsus Entities shall have received copies of resolutions duly adopted by the board of directors of each of the AHP Entities authorizing and approving such AHP Entity's performance of the transactions contemplated hereby and the execution and delivery of this Agreement and the Transaction Documents, certified as true and of full force and effect as of the Closing Date by the appropriate officers of the AHP Entities. 9.13 INCUMBENCY CERTIFICATES. The Paracelsus Entities shall have received certificates of incumbency for the respective officers of each of the AHP Entities executing this Agreement or the Transaction Documents or making certifications dated as of the Closing Date. ARTICLE 10 CLOSINGS OF THE TRANSACTIONS CONTEMPLATED HEREBY 10.1 HALSTEAD CLOSING. The Halstead Closing may, upon the mutual agreement of the AHP Entities and the Paracelsus Entities, occur on a date that is no more than two (2) business days prior to the date on which the Pioneer Closing is scheduled to occur. 10.2 ELMWOOD CLOSING. The Elmwood Closing may, upon the mutual agreement of the AHP Entities and the Paracelsus Entities, occur on a date that is no more than two (2) business days prior to the date on which the Pioneer Closing is scheduled to occur. 10.3 FAILURE OF PIONEER CLOSING. If either the Halstead Closing or the Elmwood Closing shall have occurred and if the Pioneer Closing shall have failed to occur within five (5) business days after the date of the earlier to occur of the Halstead Closing and the Elmwood Closing, the Paracelsus Entities shall, at the request of AHP, take all actions necessary, including the execution and delivery of any and all documents and instruments reasonably requested by AHP, to reconvey and reassign all assets transferred or assigned by the AHP Entities to the Paracelsus Entities in connection with the Halstead Closing or the Elmwood Closing, to reinstate any and all agreements terminated in accordance with Sections 5.1 or 5.2 hereof, and to generally place the AHP Entities and the Paracelsus Entities in the same legal positions as such entities stood prior to the Halstead Closing and the Elmwood Closing, provided, that the AHP Entities return all of the Halstead Purchase Price and the Elmwood Purchase Price concurrently therewith. 30 ARTICLE 11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 11.1 SURVIVAL. The representations, warranties, covenants and agreements of the parties hereto contained in this Agreement, or in any of the documents delivered pursuant to the provisions of this Agreement or the Transaction Documents, shall survive the making of this Agreement and such documents. No performance or execution of this Agreement in whole or in part by any party hereto, no course of dealing between or among the parties hereto, no delay or failure on the part of any party in exercising any rights hereunder at law or in equity nor any investigation by any party shall operate as a waiver of any rights of such party. 11.2 INDEMNIFICATION BY PARACELSUS. Each Paracelsus Entity shall jointly and severally indemnify, defend and hold the AHP Entities and their respective officers, directors, employees, agents and affiliates harmless from and against, and shall pay to each such indemnified person the full amount of, any loss, claim, damage, liability (including any federal, state or local tax liability) or expense (including reasonable attorneys' fees, court costs and out-of-pocket expenses) incurred by or resulting to any such indemnified person, either directly or indirectly, by reason of or resulting from: (A) any breach of or inaccuracy in the representations and warranties, or breach, nonfulfillment or default in the performance of any of the conditions, covenants and agreements, of the Paracelsus Entities contained in this Agreement or in any certificate or document delivered by a Paracelsus Entity pursuant to any of the provisions of this Agreement, including any of the Transaction Documents; (B) any Environmental Condition relevant to the Pioneer Fee Property or any facilities or operations thereon, existing as of and/or prior to the date hereof, even if not discovered until after the date hereof; (C) any violation of an Environmental Law with respect to the Pioneer Fee Property or any facilities or operations thereon, existing as of and/or prior to the date hereof, even if not discovered until after the date hereof; (D) any accident, injury to or death of persons, or loss of or damage to property, occurring on or about the Pioneer Fee Property, or adjoining sidewalks, alleys or roadways, including without limitation any claims of malpractice; (E) any fees, charges, taxes or impositions that are the obligation of Paracelsus Utah or any of its predecessors-in-interest pursuant to the applicable provisions of the Halstead Lease, the Halstead Sublease, the Elmwood Lease and the Elmwood Parking Lease; (F) any increased federal or state income tax liability incurred by any AHP Entity by reason of the disposition of the interests of the AHP Entity in the Halstead Facility and Elmwood Facility, respectively, and the acquisition of the interests provided for herein in the Pioneer Facility; and 31 (G) any sales or use taxes incurred because of the conveyance of the Pioneer Fee Property or any other interests in the Pioneer Facility to AHP Utah. 11.3 NOTICE OF CLAIMS. If a third party shall make a Third-Party Claim against an Indemnified Party, then the Indemnified Party shall, within ten business days after receiving notice of such Third-Party Claim, give written notice thereof to the Indemnifying Party, and shall immediately afford the Indemnifying Party's counsel, at the Indemnifying Party's sole expense, the opportunity to join and participate in discussing, defending or compromising such Third-Party Claim. The Indemnifying Party may, within 30 days after receipt of such notice of claim, by written notice to the Indemnified Party and by executing a litigation indemnity in form acceptable to the Indemnified Party, elect to undertake, at its own expense, the defense of such Third-Party Claim in the name of the Indemnified Party and such undertaking to defend shall include the right to appeal and the right to compromise or settle. If the Indemnifying Party shall so elect to undertake the defense of any Third-Party Claim, the Indemnified Party shall have the right to participate fully in such defense at its own expense. In the event that the Indemnified Party declines to participate in the defense, the Indemnified Party shall not be liable to the Indemnifying Party for any legal or other expenses subsequently incurred by the Indemnifying Party in connection with the defense of such Third-Party Claim. 11.4 COOPERATION. The parties, their successors and assigns shall cooperate in the defense of any Third-Party Claim, including providing such witnesses and documentary evidence as may be reasonably requested by the Indemnifying Party and otherwise assisting in the litigation in appropriate circumstances. The Indemnifying Party shall be responsible for all out-of- pocket expenses reasonably incurred by the Indemnified Party in connection with such cooperation. Claims for indemnity shall bear interest, during the period between the date on which the related loss, damage, liability or expense was incurred (which with respect to any Third-Party Claim shall be the date of payment to such third party) until paid, at a rate equal to five percent (5%) per annum. ARTICLE 12 REMEDIES FOR BREACH Upon the occurrence of any default hereunder, which default continues for 30 days after written notice is given to the defaulting party, the following remedies will be available to the parties hereto, subject to Section 13.5 pertaining to resolution of disputes: 12.1 PARACELSUS ENTITY DEFAULT. If any Paracelsus Entity is in default, the AHP Entities shall have the right to treat this Agreement as being in full force and effect and obtain specific performance or recover such damages as may be proper, or both. 12.2 AHP ENTITY DEFAULT. If any AHP Entity is in default, the Paracelsus Entities shall have the right to treat this Agreement as being in full force and effect and obtain specific performance or recover such damages as may be proper, or both. 32 12.3 FAILURE TO CLOSE COLUMBIA AGREEMENT. If for any reason the transactions contemplated by the Columbia Agreement fail to take place, the Paracelsus Entities shall nevertheless pay all costs and expenses of the AHP Entities incurred in connection with the transactions contemplated hereby. Such costs and expenses shall include, without limitation (1) all taxes, including, without limitation, documentary transfer taxes and documentary stamp taxes (in either case whether imposed at the time of recordation of the instruments provided for herein or thereafter), any roll-back taxes for change in land use, sales gains and similar taxes, together with interest and penalties (if any) therein, but excluding any income taxes of the AHP Entities, (2) the cost of any environmental reports prepared in connection with the transactions contemplated herein, (3) the survey and title examination costs and all premiums and other costs relating to any surveys prepared in connection with the transactions contemplated herein, and (4) the reasonable fees and expenses of the AHP Entities' legal counsel. ARTICLE 13 MISCELLANEOUS 13.1 PARACELSUS UTAH UNDERTAKINGS REGARDING CERTAIN RIGHTS ASSOCIATED WITH THE PIONEER HOSPITAL. The parties acknowledge that pursuant to the Columbia Agreement Paracelsus Utah will acquire various real property leasehold interests, purchase options, rights of first refusal and other rights and interests associated with the Pioneer Hospital which it is not conveying to AHP Utah pursuant hereto. Such rights and interests, which are identified in SCHEDULE 13.1 hereto, are referred to herein as the "PIONEER HOSPITAL RELATED RIGHTS". During the term of the Pioneer Lease, except insofar as AHP Utah may grant its prior written consent otherwise (which consent will not be unreasonably withheld), Paracelsus Utah agrees to use commercially reasonable efforts to maintain all of the Pioneer Hospital Related Rights in effect in accordance with their respective terms; to exercise all such rights held by Paracelsus Utah in accordance with the terms thereof; and not to relinquish or surrender, or create or suffer any liens or encumbrances on, any of the Pioneer Hospital Related Rights, except liens and encumbrances: (i) in existence on the date hereof; (ii) incurred in the ordinary course of business; or (iii) otherwise permitted under the terms hereof. Upon termination of the Pioneer Lease, if Paracelsus Utah does not exercise the option provided for therein to purchase the Pioneer Hospital, upon request therefor from AHP Utah, Paracelsus Utah will convey to AHP Utah all or any part of the Pioneer Hospital Related Rights then in effect, and all or any part of the property rights and interests theretofore acquired by Paracelsus Utah by reason of exercise of any of the Pioneer Hospital Related Rights, if any, with warranties only against persons claiming by, through or under Paracelsus Utah. Such conveyance shall be for a nominal consideration, except that, if Paracelsus Utah has acquired any property rights or interests upon exercise of any of the Pioneer Hospital Related Rights, and if AHP Utah requests that any of such property rights or interests be conveyed to AHP Utah, the consideration for transfer of any such property rights or interests shall be equal to the amounts paid by Paracelsus Utah in connection with its acquisition of any such property right or interest. If Paracelsus Utah exercises the right to purchase the Pioneer Hospital pursuant to the Pioneer Lease, the foregoing rights of AHP Utah to receive a conveyance of any of the Pioneer Hospital Related Rights will automatically terminate. 33 13.2 FURTHER ASSURANCES. Each party hereto shall execute all instruments and take all actions as are necessary or desirable to effect the transactions contemplated hereby. 13.3 NOTICES. All notices, demands, requests, offers, consents, approvals and other communications required or permitted hereunder shall be in writing and delivered by personal delivery, courier or messenger service, express or overnight mail, or by registered or certified mail, return receipt requested and postage prepaid, or by facsimile addressed to the respective parties as follows: If to any of the Paracelsus Entities or their predecessors-in- interest: Paracelsus Healthcare Corporation Suite 1100 155 N. Lake Avenue Pasadena, California 91101 Attention: Robert C. Joyner Facsimile: (818) 304-9588 with a copy to: Milbank, Tweed, Hadley & McCloy 30th Floor 601 S. Figueroa Street Los Angeles, California 90017 Attention: Eric H. Schunk, Esq. Facsimile: (213) 629-5063 If to any of the AHP Entities: American Health Properties, Inc. Suite 1800 6400 South Fiddler's Green Circle Englewood, Colorado 80111 Attention: Michael J. McGee Facsimile: (303) 796-9708 with a copy to: Davis, Graham & Stubbs, L.L.C. Suite 4700 370 17th Street Denver, Colorado 80202 Attention: Brian T. Dolan, Esq. Facsimile: (303) 893-1379 34 or to such other address or facsimile number as any party may hereafter designate by notice to the other parties. Personally delivered notice and notice sent by courier or messenger service or by express or overnight mail or by facsimile transmission shall be effective upon receipt. Notice given by mail shall be complete at the time of deposit in the U.S. mail system, but any prescribed period of notice and any right or duty to do any act or make any response within any prescribed period or on a date certain after the service of such notice given by mail shall be extended by five days. 13.4 SUCCESSORS AND ASSIGNS. The rights and obligations of the Paracelsus Entities under this Agreement may not be assigned or delegated (except by reason of a merger of Paracelsus New Orleans and/or Paracelsus Kansas into Paracelsus Utah) without the prior written consent of AHP. The rights and obligations of the AHP Entities under this Agreement may only be assigned and delegated in conjunction with current assignments or delegations of all agreements running between AHP and its affiliates and Paracelsus and its affiliates. Any attempted assignment hereof that fails to meet the foregoing requirements shall be void and ineffective. Subject to the foregoing, this Agreement shall be binding upon the parties hereto and their respective permitted successors and assigns. 13.5 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF UTAH, EXCEPT FOR ISSUES GOVERNED BY THE LAW OF REAL PROPERTY, WHICH SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE IN WHICH SUCH REAL PROPERTY AT ISSUE IS LOCATED. THE PARACELSUS ENTITIES HEREBY CONSENT TO THE EXERCISE OF JURISDICTION BY ANY FEDERAL OR STATE COURT SITTING IN SALT LAKE CITY, UTAH, FOR THE PURPOSES OF ANY AND ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT. ANY LEGAL PROCEEDINGS BROUGHT BY ANY PARACELSUS ENTITY ARISING OUT OF THIS AGREEMENT SHALL BE BROUGHT IN THE STATE OF UTAH. THE PARACELSUS ENTITIES IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT ANY SUCH PARACELSUS ENTITY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURT, ANY CLAIM BASED ON THE CONSOLIDATION OF PROCEEDINGS IN SUCH COURTS IN WHICH PROPER VENUE MAY BE IN DIVERGENT JURISDICTIONS, AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 13.6 RESOLUTION OF DISPUTES. Notwithstanding Article 12 hereof, any differences between any Paracelsus Entity, on one hand, and any AHP Entity, on the other hand, which cannot be resolved by mutual agreement, will be resolved by mandatory and binding arbitration in accordance with the Arbitration Procedures appended hereto as EXHIBIT JJ. 13.7 WAIVERS. The waiver by either party of any breach of or condition to this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach or other condition to this Agreement. 35 13.8 DIVISIONS AND HEADINGS. The division of this Agreement into sections and subsections and the use of captions and headings in connection therewith are solely for convenience and shall have no legal effect in construing the provisions of this Agreement. 13.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be a valid and binding original, but all of which together shall constitute one and the same instrument. 13.10 SEVERABILITY. If any provision of this Agreement is deemed to be invalid, illegal or unenforceable, the remainder of this Agreement shall be valid and enforceable. [Balance of page intentionally left blank] 36 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in multiple originals by their authorized officers, all as of the date and year first above written. AHP ENTITIES: AMERICAN HEALTH PROPERTIES, INC. By ------------------------------------ Joseph P. Sullivan, President AHP OF KANSAS, INC. By ------------------------------------ Joseph P. Sullivan, President AHP OF NEW ORLEANS, INC. By ------------------------------------ Joseph P. Sullivan, President AHP OF UTAH, INC. By ------------------------------------ Joseph P. Sullivan, President 37 PARACELSUS ENTITIES: PARACELSUS HEALTHCARE CORPORATION By: ------------------------------------ Robert C. Joyner Vice President and General Counsel PARACELSUS PIONEER VALLEY HOSPITAL, INC. By: ------------------------------------ Robert C. Joyner, Vice President and General Counsel 38 EXHIBIT A TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 BOYER CLINIC LEASEHOLD EXHIBIT B TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 CALIFORNIA FACILITIES The California Facilities consist of the following skilled nursing facilities, with respect to which Paracelsus Real Estate Corporation is the lessee of the real estate, and Paracelsus Convalescent Hospitals, Inc. is the operator. 1. Lafayette Convalescent Hospital 1010 First Street Lafayette, California 94549 2. Oak Park Convalescent Hospital 1625 Oak Park Boulevard Pleasant Hill, California 94523 3. Rheem Valley Convalescent Hospital 348 Rheem Boulevard Moraga, California 94556 4. University Convalescent Hospital 2122 Santa Cruz Avenue Menlo Park, California 94025 EXHIBIT C TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 ELMWOOD FEE PROPERTY A CERTAIN TRACT OF LAND, together with all the buildings and improvements thereon, and all the rights, ways, privileges and servitudes, thereunto belonging or in anywise appertaining, situated in the State of Louisiana, Parish of Jefferson, that part thereof known as CLEARVIEW COMMERCIAL PARK, all as per plan of resubdivision made by J. J. Krebs & Sons, Inc., dated September 14, 1983, approved by the Jefferson Parish Council by Ordinance No. 15823 adopted on January 4, 1984, recorded at Entry No. 8402051, in COB 1065, folio 968, and said portion of ground is designated as LOT A-1 on the more recent plan by J. J. Krebs & Sons, Inc., dated August 4, 1987, revised August 19, 1987, re-certified October 29, 1988, resurveyed April 11, 1990, and May 7, 1990, and February 24, 1993, and is more particularly described as follows, to-wit: Commence at the intersection of the Northerly right-of-way line of Bloomfield Street and the Westerly right-of-way line of Webb Drive, the POINT OF BEGINNING. From the POINT OF BEGINNING measure South 71 degrees 42 minutes 09 seconds West along the Northerly right-of-way line of Bloomfield Street a distance of 238.37 feet to a point on the Easterly right-of-way line of Clearview Parkway; thence North 18 degrees 17 minutes 51 seconds West along the Easterly right-of- way line of Clearview Parkway a distance of 399.82 feet; thence North 71 degrees 42 minutes 09 seconds East a distance of 325.99 feet to a point on the Westerly right-of-way line of Webb Drive; thence in a Southerly direction along the Westerly right-of-way line of Webb Drive, along the arc of a curve to the left having a radius of 1532.62 feet a distance of 410.53 feet to the POINT OF BEGINNING. A CERTAIN TRACT OF LAND, together with all the buildings and improvements thereon, and all the rights, ways, privileges and servitudes, thereunto belonging or in anywise appertaining, situated in the State of Louisiana, Parish of Jefferson, that part thereof known as CLEARVIEW COMMERCIAL PARK, all as per plan of resubdivision made by J. J. Krebs & Sons, Inc., dated September 14, 1983, approved by the Jefferson Parish Council by Ordinance No. 15823 adopted on January 4, 1984, recorded at Entry No. 8402051, in COB 1065, folio 968, and said portion of ground is designated as LOT A-2 on the plan by J. J. Krebs & Sons, Inc., dated August 4, 1987, revised August 19, 1987, re-certified October 29, 1988, resurveyed April 11, 1990, and May 7, 1990 and February 24, 1993, which is attached hereto and made a part hereof, and is more particularly described as follows, to-wit: Commence at the intersection of the Northerly right-of-way line of Bloomfield Street and the Westerly right-of-way line of Webb Drive and measure thence along said Westerly line of Webb Drive in a Northerly direction along the arc of a curve to the right having a radius of 1532.62 feet a distance of 410.53 feet to the intersection of the Northerly line of Lot A-1, the POINT OF BEGINNING. From the POINT OF BEGINNING measure along said Northerly line South 71 degrees 42 minutes 09 seconds West a distance of 325.99 feet to a point on the Easterly right-of-way line of Clearview Parkway; thence along said Easterly line North 18 degrees 17 minutes 51 seconds West a distance of 450.18 feet; thence along said Easterly line North 71 degrees 42 minutes 09 seconds East a distance of 15 feet; thence along said Easterly line in a Northerly direction along the arc of a curve to the right having a radius of 793.51 feet a distance of 132.76 feet to a point; thence leaving the Easterly line of Clearview Parkway measure South 70 degrees 30 minutes 01 seconds East a distance of 532.77 feet to a point on the Westerly right-of-way line of Webb Drive; thence along said Westerly line in a Southerly direction along the arc of a curve to the left having a radius of 1532.62 feet a distance of 283.42 feet to the intersection of the Northerly line of Lot A-1, the POINT OF BEGINNING. THAT CERTAIN PIECE OR PORTION OF GROUND, together with all of the buildings and improvements thereon and all of the servitudes, rights and appurtenances thereunto belonging or in anywise appertaining situated in the State of Louisiana, Parish of Jefferson, in that part thereof known as Clearview Commercial Park, being a portion of St. Peter and Elmwood Plantations, all as per plan of resubdivision by J.J. Krebs & Sons, Inc., C.E.&S., dated December 28, 1976, approved by the Jefferson Parish Council under Ordinance No. 13285, adopted March 8, 1978, registered in the office of the Clerk of Court for the Parish of Jefferson, Louisiana in COB 921, folio 843, under Entry No. 813736, and according to which plan said portion of ground is designated as Lot "B", and is described as follows, to-wit: Commence at the intersection of the northerly right of way line of Bloomfield Street and the easterly right of way line of Webb Drive; measure thence in a northerly direction along the westerly right of way line of Webb Drive, along the arc of a curve to the right, having a radius of 1532.62 feet, a distance of 693.95 feet to a point, the point of beginning. From said point of beginning, measure N70DEG.30'01"W, a distance of 532.77 feet to a point on the easterly right of way line of Clearview Parkway; thence in a northerly direction along the easterly right of way line of Clearview Parkway, along the arc of a curve to the right, having a radius of 793.51 feet, a distance of 630.57 feet to a point; thence S552DEG.33'12"E a distance of 626.48 feet to a point on the westerly right of way line of Webb Drive, along the arc of a curve to the left, having a radius of 1,532.62 feet, a distance of 419.65 feet to a point, the point of beginning. All as more fully shown on a survey by J.J. Krebs & Sons, Inc., C.E.&S., dated May 26, 1978 resurveyed to show improvements November 14, 1979, and on January 16, 1980 to show utilities, revised February 24, 1989. According to survey of John E. Walker, C.E. & P.L.S., dated January 13, 1994, the Property has the same location and measurement. Improvements thereon bear the Municipal No. 1333 South Clearview Parkway. 2 EXHIBIT D TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 ELMWOOD PARKING LEASEHOLD Four (4) certain rectangular parcels of ground situated underneath the East still viaduct approach to the Huey P. Long Bridge, in the Parish of Jefferson, State of Louisiana, being part of St. Peter Plantation, situated North of Jefferson Highway, East of Souther Clearview Parkway, being that portion of right-of-way situated between the support towers between the Public Belt Railroad Commission for the City of New Orleans' communication pole line and Webb Drive, between Bent 99E-100E, 101E-102E, 107E-108E and between Bent 109E-110E, which land is required right-of-way for the Huey P. Long Bridge, containing 24,700 square feet more or less, but expressly excluding the steel viaduct approach, foundations and support towers connected therewith. EXHIBIT E TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 ELMWOOD PERMITTED ENCUMBRANCES EXHIBIT F TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 GRANGER CLINIC LEASEHOLD EXHIBIT G TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 HALSTEAD PERMITTED ENCUMBRANCES EXHIBIT H TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 HALSTEAD REAL PROPERTY Tract 1: Beginning at the Northwest Corner of Lot Ten (10), Block Eighteen (18), Supplemental Addition of 1880 to the City of Halstead, as recorded in Vol. 2, Page 46 of Plat Book, Harvey County, Kansas; thence North 300.0 feet to the Northwest Corner of Lot Sixteen (16) of said Block 18; thence East 150.0 feet to the Northeast Corner of Lot Sixteen (16) of said Block 18; thence South 300.00 feet to the Northeast Corner of Lot Ten (10) of said Block 18; thence East 20.0 feet to the Northwest Corner of Lot Seven (7) of said Block 18; thence North 300.0 feet to the Northwest Corner of Lot One (1) of said Block 18; thence East 150.0 feet to the Northeast Corner of Lot One (1) of said Block 18; thence South 100.0 feet to the Southeast Corner of Lot Two (2) of said Block 18; thence West 85.0 feet; thence South 50.0 feet; thence East 85.0 feet to the Northeast Corner of Lot Four (4) of said Block 18; thence South 217.3 feet to a point on the East line and 32.7 feet North of the Southeast Corner of Lot Eight (8) of said Block 18; thence West 149.0 feet; thence South 9.7 feet; thence East 3.0 feet; thence South 38.1 feet; thence West 44.2 feet; thence North 38.1 feet; thence East 3.3 feet; thence North 9.7 feet; thence West 11.4 feet; thence South 5.0 feet; thence West 15.1 feet; thence North 5.0 feet; thence West 15.3 feet; thence South 34.2 feet; thence West 40.9 feet; thence South 88.0 feet; thence East 109.6 feet to the centerline of the alley between Chestnut Street and Poplar Street; thence South 96.5 feet; thence West 10.0 feet to a point on the East line and 6.0 feet South of the Northeast Corner of Lot Twelve (12), Block Nineteen (19) of said Supplemental Addition of 1880; thence South 94.0 feet to the Southeast Corner of Lot Eleven (11) of said Block 19; thence West for 380.0 feet to the Southwest Corner of Lot Four (4), Block Twenty-two (22), of said Supplemental Addition of 1880; thence North 380.0 feet to the Northwest Corner of Lot Seven (7), Block Twenty-three (23), of said Supplemental Addition of 1880; thence East 230.0 feet to the point of beginning. Tract 2: The South 44 feet of Lot Three (3) and the North 10 feet of Lot Four (4), in Block Nineteen (19), Supplemental Addition of 1880 of the City of Halstead, as recorded in Vol. 2, Page 46, of Plat Book, Harvey County, Kansas. Tract 3: All of Lots Thirteen (13), Fourteen (14), Fifteen (15) and Sixteen (16), in Block Eight (8), Supplemental Addition of 1880, of the City of Halstead, as recorded in Vol. 2, Page 46, of Plat Book, Harvey County, Kansas. Tract 4: Lot Seven (7), Block Eight (8), Supplemental Addition of 1880, of the City of Halstead, as recorded in Vol. 2, Page 46 of the Plat Book, Harvey County, Kansas. Tract 5: Lot Five (5), Block Twenty-three (23), Supplemental Addition of 1880, of the City of Halstead, as recorded in Vol. 2, Page 46 of the Plat Book, Harvey County, Kansas. Tract 6: The West 80 feet of Lots Eight (8), Nine (9) and Ten (10) in Block Nineteen (19), Supplemental Addition of 1880, of the City of Halstead, as recorded in Vol. 2, Page 46 of the Plat Book, Harvey County, Kansas. Tract 7: Lots Nine (9) and Ten (10) in Block Twenty-three (23), Supplemental Addition of 1880, of the City of Halstead, as recorded in Vol. 2, Page 46 of the Plat Book, Harvey County, Kansas. Tract 8: Reciprocal easement appurtenant to Tract 1 for the purpose of maintaining encroachments, if any, of the existing building located on Tract 1, over a portion of the East boundary of the land, onto land adjacent thereto on the East, as created by the Party Wall Agreement dated June 28, 1993 and recorded in Book 338, Page 419, and Party Wall Agreement dated June 29, 1993 and recorded in Book 338, Page 423, Misc. Records. Tract 9: Easement for the benefit of Tract 3, to permit any protrusion of the building and sidewalk located on Tract 3, over and across the following described property as established by the instrument recorded in Book 338, Page 417, Misc. Records to wit: The North 8.3 feet of Lot Twelve (12) Block Eight (8), Supplemental Addition of 1880, of the City of Halstead, as recorded in Volume 2, Page 46 of Plat Book, Harvey County, Kansas. Tract 10: Easement appurtenant to Tract 1 for the purpose of maintaining existing encroachments of existing building located on Tract 1, over and across the following described property, as created by the instrument recorded in Book 338, Page 427 Misc. Records to wit: Beginning at the Southwest Corner of Lot Eleven, Block Eighteen of Supplemental Addition of 1880 of the City of Halstead, Harvey County, Kansas, thence North for 5.0 feet to a point on the West line of said lot Eleven; thence west for 28.43 feet; thence South for 5.0 feet; thence East for 28.43 feet to the point of beginning. 2 EXHIBIT I TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 NHI MOB LEASEHOLD BEGINNING at a point on the West line of the Southeast quarter of the Southeast quarter of Section 30, said point being South 89DEG.56'54" West along the Section line 1323.97 feet and North 0DEG.08'49" West 1093.53 feet from the Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and Meridian; and running thence North 0DEG.08'49" West along said West line 234.16 feet to the Northwest corner of the Southeast quarter of the Southeast quarter of said Section 30; thence North 89DEG.57'12" East along the North line of said Southeast quarter of the Southeast quarter 279.72 feet; thence South 0DEG.08'49" East 113.80 feet; thence South 45DEG.08'49" East 43.64 feet; thence South 00DEG.08'49" East 6.02 feet; thence North 89DEG.51'11" East 6.02 feet; thence South 45DEG.08'49" East 109.16 feet to a point on a curve to the right, the radius point of which bears North 53DEG.23'53" West 144.69 feet; thence Southwesterly along the arc of said curve 31.63 feet to a point of tangency; thence South 49DEG.07'42" West 38.22 feet to a point of a 205.32 foot radius curve to the left; thence Southwesterly along the arc of said curve 37.77 feet; thence North 45DEG.08'49" West 186.99 feet; thence South 89DEG.51'11" West 5.23 feet; thence South 0DEG.08'49" East 62.88 feet; thence South 89DEG.51'11" West 179.63 feet to the point of BEGINNING. EXHIBIT J TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 PIONEER FEE PROPERTY PARCEL 1: BEGINNING at a point South 89DEG.56'54" West 1054.1 feet and North 0DEG.04'58" West 173.0 feet from the Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and Meridian, (said point also being on the Westerly line of 4155 West Street), which point is also the Northeast corner of the HCA Properties, Inc. property contained in that certain Warranty Deed recorded September 11, 1981 as Entry No. 3603565, in Book 5291, at Page 153 of the Official Records; and running thence West along said HCA Properties, Inc., North boundary line, 100.00 feet to the Northwest corner of the HCA Properties, Inc. property; thence along the West boundary of the said HCA Properties, Inc. property South 0DEG.04'58" East 140.0 feet to the North line of 3500 South Street; thence along said North line of said 3500 South Street South 89DEG.56'54" West 171.0 feet to a point on the West line of the Southeast quarter of the Southeast quarter of said Section 30; thence along said West line North 1295 feet to the 1/16 Section line; thence East 425.88 feet, more or less, to a point on the West line of vacated 4155 West Street; thence along said West line South 0DEG.05' East 150.24 feet, more or less, to a point of tangency with a 144.69 foot radius curve to the right; thence Southwesterly 124.27 feet along said curve to a point of tangency; thence South 49'07'42" West 38.22 feet to a point of tangency with a 205.32 foot radius curve to the left; thence Southwesterly 175.79 feet along said curve to a point of tangency; thence South 723.44 feet to the point of BEGINNING. TOGETHER WITH the West one-half of the vacated street (4155 West Street) abutting a portion of the said property on the East. EXCEPTING THEREFROM the following described property conveyed to National Health Investors, Inc. in that certain Special Warranty Deed recorded March 2, 1993 as Entry No. 5445234, in Book 6613, at Page 1040 of the Official Records, to-wit: BEGINNING at a point on the West line of the Southeast quarter of the Southeast quarter of Section 30, said point being South 89DEG.56'54" West along the Section line 1323.97 feet and North 0DEG.08'49" West 1093.53 feet from the Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and Meridian; and running thence North 0DEG.08'49" West along said West line 234.16 feet to the Northwest corner of the Southeast quarter of the Southeast quarter of said Section 30; thence North 89DEG.57'12" East along the North line of said Southeast quarter of the Southeast quarter 279.72 feet; thence South 0DEG.08'49" East 113.80 feet; thence South 45DEG.08'49" East 43.64 feet; thence South 00DEG.08'49" East 6.02 feet; thence North 89DEG.51'11" East 6.02 feet; thence South 45DEG.08'49" East 109.16 feet to a point on a curve to the right, the radius point of which bears North 53DEG.23'53" West 144.69 feet; thence Southwesterly along the arc of said curve 31.63 feet to a point of tangency; thence South 49DEG.07'42" West 38.22 feet to a point of a 205.32 foot radius curve to the left; thence Southwesterly along the arc of said curve 37.77 feet; thence North 45DEG.08'49" West 186.99 feet; thence South 89DEG.51'11" West 5.23 feet; thence South 0DEG. 08'49" East 62.88 feet; thence South 89DEG. 51'11" West 179.63 feet to the point of BEGINNING. PARCEL 2: BEGINNING at a point on the North right of way line of 3500 South Street and the West right of way line of 4155 West Street, said point being South 89DEG.56'54" West 1057.25 feet, more or less, and North 0DEG.03'06" West 33 feet from the Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and Meridian; and running thence North 0DEG.03'06" West along said West right of way line 140.0 feet, more or less, to the Southerly boundary line of the Valley West Hospital, Inc. property as described in that certain Warranty Deed recorded January 26, 1979 as Entry No. 3229774, in Book 4806, at Page 585, Salt Lake County Recorder's Office; thence South 89DEG.56'54" West along said South boundary line 100.0 feet, more or less, to an Easterly boundary line of Valley West Hospital's property as described in the Warranty Deed described hereinabove; thence South 0DEG.03'06" East along said East boundary line 140.0 feet, more or less, to the North right of way line of 3500 South Street; thence North 89DEG.56'54" East along said North right of way line 100.00 feet, more or less, to the point of BEGINNING. PARCEL 3: BEGINNING at a point 885.275 feet West and 33 feet North from the Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and Meridian; and running thence West along the North line of 3500 South Street 108.525 feet, more or less, to the East line of 4155 West Street; thence North 0DEG.04'58" West along said East line 167 feet; thence North 89DEG.56'54" East 108.525 feet, more or less; thence South 167 feet to the point of BEGINNING. PARCEL 4: BEGINNING at a point South 89DEG.56'54" West 994.1 feet and North 0DEG.04'58" West 283.0 feet from the Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and Meridian, (which point of beginning is on the Easterly line of 4155 West Street); and running thence North 0DEG.04'58" West 365 feet; thence East 300 feet; thence North 0DEG.04'58" West 320.0 feet; thence West 275.99 feet to a point on a 145.32 foot radius curve to the right; thence Northeasterly 39.70 feet along said curve to a point of tangency; thence North 49DEG.07'42" East 38.22 feet to a point on a 204.69 foot radius curve to the left; thence Northeasterly 175.81 feet along said curve to a point of tangency; thence North 0DEG.05' West 150.28 feet, more or less, to the 1/16 Section line; thence East 343.88 feet, more or less; thence South 710.0 feet; thence West 32.88 feet; thence South 265.255 feet; thence South 89DEG.56'54" West 285.00 feet; thence South 0DEG.04'58" East 70.00 feet; thence South 89DEG.56'54" West 180.53 feet to the point of BEGINNING. EXCEPTING THEREFROM that portion located within the bounds of 3390 South Street (also known as Pioneer Parkway). TOGETHER WITH the East one-half of the vacated street (4155 West Street) abutting a portion of said property on the West. 2 PARCEL 5: BEGINNING at a point North along the Section line 796.505 feet and West 170.35 feet from the Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and Meridian; and running thence West 324.65 feet; thence North 178.25 feet; thence East 324.65 feet; thence South 178.25 feet to the point of BEGINNING. PARCEL 6: BEGINNING at point in the center of 4000 West Street 618.255 feet North of the Southeast corner of Section 30, Township 1 South, Range 1 West, Salt Lake Base and Meridian; and running thence North 178.25 feet; thence West 495 feet; thence South 178.25 feet; thence East 495 feet to the point of BEGINNING. EXCEPTING THEREFROM those portions located within the bounds of 4000 West Street and 3390 South Street (also known as Pioneer Parkway). PARCEL 7: BEGINNING at a point on the East line of 4000 West Street, said point being North 0DEG.02'10" West along the section line 788.49 feet and East 33.0 feet from the Southwest corner of Section 29, Township 1 South, Range 1 West, Salt Lake Base and Meridian; and running thence North 0DEG.02'10" West along said East line 200.00 feet; thence East 420.00 feet; thence South 0DEG.02'10" East 200.00 feet; thence West 420.00 feet to the point of BEGINNING. PARCEL 8: BEGINNING North 0DEG.02'10" West 788.1 feet and North 89DEG.57'50" East 40 feet from the Southwest corner of Section 29, Township 1 South, Range 1 West, Salt Lake Base and Meridian; and running thence North 0DEG.02'10" West 1.78 feet; thence East 413 feet; thence South to the North line of Rockwood Way; thence Westerly along said North line to the point of BEGINNING. 3 EXHIBIT K TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 PIONEER PERMITTED ENCUMBRANCES [To be supplied by MTHM] EXHIBIT L TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 HALSTEAD BOND ENDORSEMENT HEREBY ASSIGNED TO _________________________ AS SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 MADE BETWEEN AND AMONG PARACELSUS HEALTHCARE CORPORATION, PARACELSUS HALSTEAD HOSPITAL, INC., PARACELSUS ELMWOOD MEDICAL CENTER, INC., PARACELSUS PIONEER VALLEY HOSPITAL, INC., AMERICAN HEALTH PROPERTIES, INC., AHP OF KANSAS, INC., AHP OF NEW ORLEANS, INC. AND AHP OF UTAH, INC., WITHOUT RECOURSE, REPRESENTATION OR WARRANTY, EXCEPT AS SET FORTH IN SUCH PURCHASE AND SALE AGREEMENT. _______________________________ _______________________________ By_____________________________ STATE OF _____________ ) ) ss. COUNTY OF ____________ ) The foregoing instrument was acknowledged before me this ___ day of ________, 1996 by ________________________ for ______________________________, a _________ corporation. _______________________________ Notary Public Address:_______________________ _______________________________ My commission expires: _______________________ EXHIBIT M TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 ASSIGNMENT OF HALSTEAD MASTER LEASE Recording Requested by and ) When Recorded Return to ) ) DAVIS, GRAHAM & STUBBS LLP ) P.O. Box 185 ) Denver, CO 80201-0185 ) Attn: Joel Benson, Esq. ) ______________________________________________________________________________ ASSIGNMENT AND ASSUMPTION OF LEASE THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is made and entered into as of the 15th day of May, 1996 (the "Effective Date") by and between AHP OF KANSAS, INC., a Kansas corporation ("Assignor"), and PARACELSUS PIONEER VALLEY HOSPITAL, INC., a Utah corporation ("Assignee"). RECITALS A. Assignor and Assignee (together with other parties) have entered into that certain Purchase and Sale Agreement (the "Agreement"), whereby Assignor has agreed to sell to Assignee, and Assignee has agreed to purchase from Assignor, certain assets relating to a general acute care hospital located in Halstead, Kansas and known as the Halstead Hospital, including all of Assignor's right, title, and interest in, to, and under that certain Lease, dated as of June 30, 1993 by and between the City of Halstead as lessor (the "Landlord") and Assignor as lessee (referred to herein as the "Lease"), notice of which is given by an instrument denominated "Memorandum of Lease and Option to Purchase," which was recorded on June 30, 1993 in Book 338, Page 436 in the miscellaneous records of Harvey County, Kansas. B. The Lease covers the property (the "Property") described in EXHIBIT A attached hereto. C. Concurrently with the execution of this Assignment, the parties to the Agreement have consummated the closing of the transactions contemplated therein. Pursuant to the terms of the Agreement, Assignor and Assignee wish to effect the assignment of the Lease from Assignor to Assignee. ASSIGNMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, Assignor and Assignee each hereby promise and agree as follows: 1. ASSIGNMENT. As of the Effective Date, Assignor hereby assigns to Assignee, its successors and assigns forever, all of Assignor's right, title, interest, obligations and liabilities under the Lease. 2. ACCEPTANCE AND ASSUMPTION. As of the Effective Date, Assignee hereby accepts the foregoing assignment and hereby assumes and agrees to perform and discharge all liabilities and obligations in accordance with the terms of the Lease; provided however, that Assignee does not assume any obligations or liabilities which arose under the Lease prior to the Effective Date. 3. INDEMNIFICATION BY ASSIGNEE. Assignee hereby agrees to indemnify and hold Assignor harmless from any and all claims, demands, losses, expenses, causes of action or damages, including reasonable attorneys fees, arising under the Lease because of events that occur after the Effective Date and because of any failure of Assignee to perform obligations under the Lease after the Effective Date. 4. INDEMNIFICATION BY ASSIGNOR. Assignor hereby agrees to indemnify and hold Assignee harmless from any and all claims, demands, losses, expenses, causes of action or damages, including reasonable attorneys fees, arising under the Lease because of events that occurred before the Effective Date and because of any failure of Assignor to perform obligations under the Lease before the Effective Date. 5. REPRESENTATIONS AND WARRANTIES. Assignor hereby represents and warrants to Assignee, as of the Effective Date, as follows: A. The Lease has not been modified, amended, or assigned. B. All amounts payable by Assignor under the Lease through the Effective Date have been paid in full. C. Assignor has complied with all of its obligations under the Lease through the Effective Date. D. Assignor has received no notice claiming any default by Assignor under the Lease and Assignor is aware of no condition which, with the receipt of notice or the passage of time, or both, may constitute a default by Assignor under the Lease. E. There is no outstanding default by the Landlord under the Lease and Assignor is aware of no conditions which, with the giving of 2 notice or the passage of time, or both, may constitute a default by the Landlord under the Lease. DATED as of the date first above written. ASSIGNOR: AHP OF KANSAS, INC., a Kansas corporation By: ------------------------------------ Joseph P. Sullivan, President ASSIGNEE: PARACELSUS PIONEER VALLEY HOSPITAL, INC., a Utah corporation By: ------------------------------------ Robert C. Joyner, Vice President STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) The foregoing instrument was acknowledged before me this _____ day of May, 1996, by Joseph Sullivan, as President of AHP of Kansas, Inc., a Kansas corporation. Witness my hand and official seal. My commission expires: ______________________________________ _______________________________ Notary Public 3 STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) The foregoing instrument was acknowledged before me this _____ day of May, 1996, by Robert C. Joyner, as Vice President of Paracelsus Pioneer Valley Hospital, Inc., a Utah corporation. Witness my hand and official seal. My commission expires: _______________________________ _______________________________ Notary Public 4 EXHIBIT A TO ASSIGNMENT AND ASSUMPTION OF LEASE Legal Description of the Property: 5 EXHIBIT N TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 TERMINATION OF HALSTEAD SUBLEASE EXHIBIT O TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 NOTICE OF ASSIGNMENT See Separate Pages Attached. EXHIBIT P TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 CONSENT TO ASSIGNMENT See Separate Pages Attached. EXHIBIT Q TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 HALSTEAD EQUIPMENT BILL OF SALE See Separate Pages Attached. EXHIBIT R TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 HALSTEAD UCC-3 TERMINATION STATEMENTS See Separate Pages Attached. EXHIBIT S TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 AHP KANSAS OFFICER'S CERTIFICATE EXHIBIT T TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 HALSTEAD ACCEPTANCE AND ASSUMPTION AGREEMENT City of Halstead, Kansas 303 Main Halstead, Kansas 67056 Attention: City Clerk Ladies and Gentlemen: Pursuant to Section 9.3 of that certain Lease (the "Lease") dated June 30, 1993 by and between The City of Halstead, Kansas and AHP of Kansas, Inc. ("AHP"), please be advised that Paracelsus Pioneer Valley Hospital, Inc. ("Paracelsus"), successor by merge to Paracelsus Halstead Hospital, Inc., the proposed assignee of the Lease, expressly accepts the assignment of the Lease and assumes and agrees to perform all of the obligations of AHP under the Lease. Yours very truly, Paracelsus Pioneer Valley Hospital, Inc. EXHIBIT U TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 DEED TO ELMWOOD FEE PROPERTY See Separate Pages Attached. EXHIBIT V TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 TERMINATION OF ELMWOOD LEASE EXHIBIT V-1 TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 ASSIGNMENT OF ELMWOOD PARKING LEASE EXHIBIT W TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 ELMWOOD UCC-3 TERMINATION STATEMENTS See Separate Pages Attached. EXHIBIT X TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 AHP NEW ORLEANS OFFICER'S CERTIFICATE EXHIBIT Y TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 DEED TO PIONEER FEE PROPERTY EXHIBIT Z TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 FORM OF OWNER'S AFFIDAVIT EXHIBIT AA TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 LEASE OF PIONEER FEE PROPERTY See Separate Pages Attached. EXHIBIT BB TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 PIONEER SECURITY AGREEMENT See Separate Pages Attached. EXHIBIT CC TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 CALIFORNIA FACILITIES SECURITY AGREEMENT See Separate Pages Attached. EXHIBIT DD TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 COLLATERAL ASSIGNMENT OF LEASES AND RENTS See Absolute Assignment of Subleases and Rents Attached. EXHIBIT EE TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 PIONEER UCC-1 FINANCING STATEMENTS See Separate Pages Attached. EXHIBIT FF TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 CERTIFICATE OF PARACELSUS UTAH OF NON-FOREIGN STATUS EXHIBIT GG TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 PARACELSUS UTAH OFFICER'S CERTIFICATE EXHIBIT HH TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 AHP UTAH OFFICER'S CERTIFICATE EXHIBIT II TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 PARACELSUS COUNSEL LEGAL OPINION EXHIBIT JJ TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 ARBITRATION PROCEDURES EXHIBIT KK TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 FORM OF ELMWOOD PROMISSORY NOTE EXHIBIT LL TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 FORM OF ELMWOOD LETTER OF CREDIT EXHIBIT MM TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 FORM OF PIONEER ASSIGNMENT AND ASSUMPTION AGREEMENT SCHEDULE 4.1 TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 HALSTEAD EQUIPMENT LEASE PAYOFF CALCULATION 1. Assumed Closing Date of May 15, 1996 Principal Balance (after 5/1/96 scheduled payment) $1,484,493.86 Interest Accrual @ $399.06/day for 15 days 5,985.90 ------------- Total $1,490,479.76 2. Other Closing Dates in May For any other Closing Date during May, 1996, the payoff amount will consist of the sum of $1,484,493.86, plus $399.06 for each day in May to and including the Closing Date. SCHEDULE 8.9 TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 PIONEER FEE PROPERTY LEASES AND SUBLEASES CONSENTED TO BY AHP UTAH Katheryn Allen Jon Richard Aoki, M.D. Gregory P. Dupont, M.D. Shirl R. Graff, M.D. Granger Medical Clinic, Inc. Heart Care Lease David McCray, M.D. Thomas M. McNeilis, M.D. Mountain West Cardiology Associates Nighttime Pediatric Clinics, Inc. Philip V. Savia, Jr., M.D. Steven Shirts, M.D. Roy M. Slezak, M.D. Western Urological Clinic, P.C. J.D. Burrows, M.D. J. Wilmoth, M.D. National Health Advisors SCHEDULE 13.1 TO PURCHASE AND SALE AGREEMENT DATED AS OF MAY 15, 1996 PIONEER HOSPITAL RELATED RIGHTS Pioneer Right of First Refusal Pioneer Rights to Purchase Pioneer Leasehold Property EX-2.4 6 EX-2.4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PIONEER HOSPITAL LEASE BY AND BETWEEN AHP OF UTAH, INC. "LANDLORD" AND PARACELSUS PIONEER VALLEY HOSPITAL, INC. "TENANT" DATED AS OF MAY 15, 1996 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II LEASE OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE III TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . 12 3.1 Term of Lease . . . . . . . . . . . . . . . . . . . . . 12 3.2 Option to Extend Term of Lease. . . . . . . . . . . . . 12 ARTICLE IV RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.1 Payment of Landlord's Transaction Expenses. . . . . . . 13 4.2 Payment of Base Rent, Percentage Rent and Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . 13 4.3 Base Rent . . . . . . . . . . . . . . . . . . . . . . . 13 4.4 Percentage Rent . . . . . . . . . . . . . . . . . . . . 13 4.5 Confirmation of Percentage Rent . . . . . . . . . . . . 14 4.6 Certificates Regarding Percentage Rent. . . . . . . . . 15 4.7 Additional Charges. . . . . . . . . . . . . . . . . . . 15 4.8 Triple Net Lease. . . . . . . . . . . . . . . . . . . . 15 ARTICLE V IMPOSITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 18 5.1 Payment of Impositions. . . . . . . . . . . . . . . . . 18 5.2 Notice of Impositions . . . . . . . . . . . . . . . . . 19 5.3 Adjustment of Impositions . . . . . . . . . . . . . . . 19 5.4 Utility Charges . . . . . . . . . . . . . . . . . . . . 19 5.5 Insurance Premiums. . . . . . . . . . . . . . . . . . . 20 ARTICLE VI TERMINATION OR ABATEMENT OF LEASE . . . . . . . . . . . . . . 20 ARTICLE VII OWNERSHIP OF PROPERTY . . . . . . . . . . . . . . . . . . . . 20 7.1 Ownership of the Property . . . . . . . . . . . . . . . 20 7.2 Tenant's Personal Property; Security Interest . . . . . 20 ARTICLE VIII CONDITION AND USE OF PROPERTY . . . . . . . . . . . . . . . . 21 8.1 Condition of the Property . . . . . . . . . . . . . . . 21 8.2 Use of the Property . . . . . . . . . . . . . . . . . . 22 8.3 Landlord to Grant Easements . . . . . . . . . . . . . . 23 8.4 Hazardous Substances. . . . . . . . . . . . . . . . . . 23 8.5 Existing Leases . . . . . . . . . . . . . . . . . . . . 26 ARTICLE IX LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS . . . . . . . . 26 9.1 Compliance with Legal Requirements, Insurance Requirements and Instruments. . . . . . . . . . . . . . 26 9.2 Covenants Regarding Legal Requirements. . . . . . . . . 26 9.3 Representations and Warranties. . . . . . . . . . . . . 26 -i- Page ARTICLE X CONDITION OF THE PROPERTY . . . . . . . . . . . . . . . . . . 27 10.1 Maintenance and Repair. . . . . . . . . . . . . . . . . 27 10.2 Encroachments and Restrictions. . . . . . . . . . . . . 28 ARTICLE XI CAPITAL ADDITIONS . . . . . . . . . . . . . . . . . . . . . . 28 11.1 Construction of Capital Additions . . . . . . . . . . . 28 11.2 Capital Additions Financed or Paid for by Landlord. . . 29 11.3 Capital Additions Paid for by Tenant. . . . . . . . . . 31 11.4 Disposition of Capital Additions upon Expiration or Termination of Lease. . . . . . . . . . . . . . . . . . 31 11.5 Non-Capital Additions . . . . . . . . . . . . . . . . . 31 11.6 Salvage . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE XII LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE XIII CONTESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE XIV INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 33 14.1 General Insurance Requirements. . . . . . . . . . . . . 33 14.2 Replacement Cost. . . . . . . . . . . . . . . . . . . . 34 14.3 Additional Insurance. . . . . . . . . . . . . . . . . . 35 14.4 Waiver of Subrogation . . . . . . . . . . . . . . . . . 35 14.5 Form of Insurance . . . . . . . . . . . . . . . . . . . 35 14.6 Change in Limits. . . . . . . . . . . . . . . . . . . . 35 14.7 Blanket Policy. . . . . . . . . . . . . . . . . . . . . 35 14.8 No Separate Insurance . . . . . . . . . . . . . . . . . 36 ARTICLE XV INSURANCE PROCEEDS. . . . . . . . . . . . . . . . . . . . . . 36 15.1 Handling of Insurance Proceeds. . . . . . . . . . . . . 36 15.2 Reconstruction in the Event of Damage or Destruction Covered by Insurance. . . . . . . . . . . . . . . . . . 36 15.3 Reconstruction in the Event of Damage or Destruction Not Covered by Insurance. . . . . . . . . . . . . . . . . . 37 15.4 Payment of Proceeds on Tenant's Property and Capital Additions Paid by Tenant. . . . . . . . . . . . . . . . 38 15.5 Restoration of Tenant's Property. . . . . . . . . . . . 38 15.6 Abatement of Rent . . . . . . . . . . . . . . . . . . . 38 15.7 Damage Near End of Term . . . . . . . . . . . . . . . . 38 15.8 Termination of Option to Purchase . . . . . . . . . . . 39 15.9 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE XVI CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . 39 16.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 39 16.2 Parties' Rights and Obligations . . . . . . . . . . . . 39 16.3 Total Taking. . . . . . . . . . . . . . . . . . . . . . 39 16.4 Allocation of Portion of Award. . . . . . . . . . . . . 40 16.5 Partial Taking. . . . . . . . . . . . . . . . . . . . . 40 -ii- Page 16.6 Temporary Taking. . . . . . . . . . . . . . . . . . . . 40 ARTICLE XVII DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . 41 17.1 Events of Default . . . . . . . . . . . . . . . . . . . 41 17.2 Certain Remedies. . . . . . . . . . . . . . . . . . . . 43 17.3 Termination and Damages . . . . . . . . . . . . . . . . 43 17.4 Application of Funds. . . . . . . . . . . . . . . . . . 45 17.5 Failure to Conduct Business . . . . . . . . . . . . . . 45 17.6 Landlord's Right to Cure Tenant's Default . . . . . . . 45 17.7 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE XVIII CURE BY TENANT OF LANDLORD DEFAULTS . . . . . . . . . . . . . 45 ARTICLE XIX PURCHASE OF PROPERTY BY TENANT. . . . . . . . . . . . . . . . 46 19.1 Purchase of the Property. . . . . . . . . . . . . . . . 46 19.2 Failure to Close Purchase . . . . . . . . . . . . . . . 46 ARTICLE XX HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . 47 ARTICLE XXI RISK OF LOSS. . . . . . . . . . . . . . . . . . . . . . . . . 47 ARTICLE XXII LIABILITY OF PARTIES. . . . . . . . . . . . . . . . . . . . . 47 22.1 Indemnification by Tenant . . . . . . . . . . . . . . . 47 22.2 Indemnification by Landlord . . . . . . . . . . . . . . 48 22.3 Continuing Liability. . . . . . . . . . . . . . . . . . 48 ARTICLE XXIII ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . 48 23.1 Assignment and Subletting . . . . . . . . . . . . . . . 48 23.2 Attornment. . . . . . . . . . . . . . . . . . . . . . . 49 23.3 Sublease Limitation . . . . . . . . . . . . . . . . . . 49 ARTICLE XXIV INFORMATION FROM TENANT . . . . . . . . . . . . . . . . . . . 50 24.1 Officer's Certificates. . . . . . . . . . . . . . . . . 50 24.2 Financial Information . . . . . . . . . . . . . . . . . 50 24.3 Licensing Information . . . . . . . . . . . . . . . . . 51 ARTICLE XXV APPRAISALS OF THE PROPERTY AND OPTIONS. . . . . . . . . . . . 51 25.1 Appraisers. . . . . . . . . . . . . . . . . . . . . . . 51 25.2 Method of Appraisal . . . . . . . . . . . . . . . . . . 51 ARTICLE XXVI OPTIONS TO PURCHASE . . . . . . . . . . . . . . . . . . . . . 52 26.1 Landlord's Option to Purchase Tenant's Personal Property; Transfer of Licenses. . . . . . . . . . . . . 52 26.2 Tenant's Option to Purchase the Property. . . . . . . . 52 26.3 Specific Performance of Options . . . . . . . . . . . . 53 ARTICLE XXVII FACILITY MORTGAGES. . . . . . . . . . . . . . . . . . . . . . 53 -iii- Page ARTICLE XXVIII LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . 54 ARTICLE XXIX ADDITIONAL COVENANTS OF TENANT. . . . . . . . . . . . . . . . 54 29.1 Additional Negative Covenants . . . . . . . . . . . . . 54 29.2 Additional Affirmative Covenants. . . . . . . . . . . . 55 29.3 Security for the Lease. . . . . . . . . . . . . . . . . 57 ARTICLE XXX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 59 30.1 Landlord's Right to Inspect . . . . . . . . . . . . . . 59 30.2 No Waiver . . . . . . . . . . . . . . . . . . . . . . . 59 30.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . 59 30.4 Acceptance of Surrender . . . . . . . . . . . . . . . . 59 30.5 No Merger of Title . . . . . . . . . . . . . . . . . . 59 30.6 Conveyance by Landlord . . . . . . . . . . . . . . . . 59 30.7 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . 59 30.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . 60 30.9 Survival of Terms; Applicable Law . . . . . . . . . . . 60 30.10 Exculpation of Landlord's and Tenant's Officers and Agents. . . . . . . . . . . . . . . . . . . . . . . 61 30.11 Transfers Following Termination . . . . . . . . . . . . 61 30.12 Tenant's Waivers. . . . . . . . . . . . . . . . . . . . 61 30.13 Memorandum of Lease . . . . . . . . . . . . . . . . . . 61 30.14 Arbitration . . . . . . . . . . . . . . . . . . . . . . 61 30.15 Modifications . . . . . . . . . . . . . . . . . . . . . 62 30.16 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . 62 30.17 Time is of the Essence. . . . . . . . . . . . . . . . . 62 30.18 Counterparts. . . . . . . . . . . . . . . . . . . . . . 62 -iv- PIONEER HOSPITAL LEASE This LEASE is executed as of May 15, 1996, by and between AHP OF UTAH, INC., a Utah corporation, having its principal office at 6400 South Fiddler's Green Circle, Suite 1800, Englewood, Colorado 80111, as Landlord, ("LANDLORD") and PARACELSUS PIONEER VALLEY HOSPITAL, INC. a Utah Corporation, and a wholly owned subsidiary of Paracelsus Healthcare Corporation, a California corporation ("PHC"), having its principal office at 155 North Lake Avenue, Suite 1100, Pasadena, California 91101, as Tenant ("TENANT"). R E C I T A L S A. Landlord and Tenant have entered into the Purchase and Sale Agreement of even date herewith (the "PURCHASE AGREEMENT") pursuant to which Landlord has agreed to purchase from the Tenant certain real property utilized in connection with the operations of "Pioneer Valley Hospital," a general acute care hospital located in West Valley City, Utah and licensed by the Health Facility Licensure Bureau to operate 139 beds, and related facilities, including but not limited to, the Property (as defined in Article II). Landlord's interest in the Property will be subject to the terms and provisions of the Existing Leases. B. As an inducement to Landlord to enter into the Purchase Agreement, Tenant has agreed hereby to lease the land and improvements comprising the facility from Landlord and to secure its obligations to Landlord under this Lease as provided herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows: ARTICLE I DEFINITIONS For all purposes of this Lease, unless otherwise expressly provided in this Agreement or the context in which such term is used indicates a contrary intent, (a) the terms defined in this Article shall have the meanings ascribed to them in this Article, (b) all accounting terms not otherwise defined in this Article shall have the meanings ascribed to them in accordance with generally accepted accrual method accounting principles at the time applicable, (c) all references in this Lease to designated "Articles," Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Lease and (d) the words "herein," hereof" and "hereunder" and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or other subdivision. "ABSOLUTE ASSIGNMENT OF SUBLEASES AND RENTS" shall mean the Absolute Assignment of Subleases and Rents of even date herewith by and between Landlord and Tenant. "ADDITIONAL CHARGES" shall have the meaning ascribed to such term in Section 4.7. "AFFILIATE" of any person or entity (the "Subject") shall mean (a) any person which, directly or indirectly, controls or is controlled by or is under common control with the Subject, (b) any person owning, beneficially, directly or indirectly, ten percent (10%) or more of the outstanding capital stock, shares or equity interests of the Subject or (c) any officer, director, employee, general partner or trustee of the Subject or any person controlling, controlled by or under common control with the Subject (excluding trustees and persons serving in similar capacities who are not otherwise an Affiliate of the Subject). As used in this definition, the term "person" means and includes governmental agencies and authorities, political subdivisions, individuals, corporations, limited liability companies, general partnerships, limited partnerships, stock companies or associations, joint ventures, associations, trusts, banks, trust companies, land trusts, business trusts and any other entity of any form whatsoever, and "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person, through the ownership of voting securities, partnership interests or other equity interests, or through any other means. "AHP" shall mean American Health Properties, Inc., a Delaware corporation. "APPLICABLE CPI PERCENT" shall mean the percent equal to (x) the quotient of (i) the CPI most recently published as of the date that payment of Percentage Rent for the last Calendar Quarter of such Calculation Period is due, divided by (ii) the CPI as of the comparable prior year date; minus (y) one, but in no event less than 2.0%. "APPRECIATION AMOUNT" shall mean the amount, if any, by which the Fair Market Value of the Property exceeds Landlord's Total Investment. "AWARD" shall have the meaning ascribed to such term in Section 16.1(c). "BASE GROSS REVENUES" shall mean, for the Fixed Term, the Gross Revenues for the 12-month period commencing with the first full day of the first full calendar month of the Fixed Term and, for any Extended Term, the Gross Revenues for the Base Year. "BASE RENT" shall mean, for the Fixed Term, $7,050,750 per annum (prorated as of the date hereof) and, for each Extended Term, the amount determined pursuant to Section 3.2. "BASE RENTAL RATE" shall mean for any Calculation Period the quotient of (a) the Base Rent payable with respect to such Calculation Period divided by (b) the Landlord's Total Investment for such Calculation Period. "BASE YEAR" shall mean with respect to each Extended Term the 12-month period ending with the last day of the last full calendar month immediately preceding the commencement of such Extended Term. "BUSINESS DAY" shall mean any day on which banking institutions in Salt Lake City, Utah, New York, New York, Los Angeles, California and Denver, Colorado are open for the conduct of normal banking business. -2- "CALCULATION PERIOD" shall mean a period of 12 consecutive months commencing with the first day of the first full calendar month of the Fixed Term or any anniversary of such date. "CALENDAR QUARTER" shall mean the three-month periods in each calendar year ending on March 31st, June 30th, September 30th and December 31st, respectively. "CALIFORNIA AFFILIATE" shall mean Paracelsus Convalescent Hospitals, Inc., a California corporation which is a subsidiary of Paracelsus Healthcare Corporation, Inc., a California corporation. "CALIFORNIA FACILITIES" shall mean the Lafayette Convalescent Hospital, the Oak Park Convalescent Hospital, the Rheem Valley Convalescent Hospital and the University Convalescent Hospital, collectively. "CALIFORNIA FACILITIES SECURITY AGREEMENT" shall mean a Security Agreement from the California Affiliate, pertaining to the California Facilities, substantially in the form of EXHIBIT B hereto. "CAPITAL ADDITIONS" shall mean (a) one or more new buildings located on the Land or to be used, directly or indirectly, as part of the Facility, (b) one or more additional structures annexed to any portion of any of the Improvements, (c) the material expansion of existing Improvements, (d) the construction of a new wing or new story on existing Improvements, or (e) any expansion, construction, renovation or conversion of existing Improvements or the installation of new Fixtures therein to (i) increase the bed or service capacity of the Facility or (ii) change the purpose for which the Facility is utilized. Notwithstanding anything to the contrary contained in Article XI, in the event it is necessary to abate or otherwise take corrective action with respect to the existence of a Hazardous Substance (as hereinafter defined) located in, on or under the Property or in the Improvements, such abatement or corrective action shall not be deemed to be a Capital Addition and shall be the sole responsibility of Tenant at its sole cost and expense. "CAPITAL ADDITIONS COST" shall mean the cost of any Capital Additions. Such cost shall include (a) the costs of constructing the Capital Additions, including site preparation and improvement, materials, labor, supervision, developer and administrative fees, the costs of design, engineering and architectural services, the costs of fixtures, the costs of construction financing (including, if funded, by Landlord, capitalized interest at a rate equal to the Prime Rate plus 250 basis points) and other similar costs approved in writing by Landlord, (b) if agreed to by Landlord in writing in advance, the purchase price and other acquisition costs, or applicable ground lease rental payable for any period such ground lease is in effect to and including the date upon which such Capital Addition is completed and occupied or in operation, as the case may be, of any land which is acquired or leased for the purpose of placing thereon all or any portion of the Capital Additions or for providing means of access thereto, or parking facilities therefor (including the costs of surveying the same and recording, title insurance and escrow fees and charges), (c) insurance premiums, real estate taxes, water and sewage charges and other carrying charges for such Capital Additions during their construction, (d) fees and expenses of legal counsel, (e) any documentary transfer or similar taxes, (f) any applicable regulatory or administrative fees and charges, and any costs, charges, fees or expenses paid or incurred in connection with obtaining any applicable permits, licenses, franchises, authorizations, certificates of need, certificates of occupancy and similar authorizations and entitlements and (g) all other reasonable costs and expenses of Landlord or Tenant, as applicable, and any lending institution which has committed to finance the Capital Additions, including, but not limited to, (i) the fees and expenses of their respective legal counsel, (ii) any printing, duplicating and messenger expenses, (iii) any filing, registration and recording taxes and fees, (iv) any documentary transfer or similar taxes, (v) any title insurance charges and appraisal fees, (vi) any rating -3- agency fees and (vii) any commitment or similar fees charged by any lending institution financing or offering to finance any portion of such Capital Additions. "CAPITAL ADDITIONS DEPRECIATION" shall mean the depreciation schedule applicable to Capital Additions as mutually agreed by Landlord and Tenant. "CASH FLOW" shall mean, for any period of determination, an amount equal to the sum of the amounts for such period of (i) net income before income taxes and interest expense, (ii) depreciation, amortization and other similar non-cash charges, (iii) Base Rent and (iv) Percentage Rent. "CLAIMS" shall have the meaning specified in Section 22.1. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COMMENCEMENT DATE" shall have the meaning ascribed to such term in Section 3.1. "CONDEMNATION" shall have the meaning ascribed to such term in Section 16.1(a). "CONDEMNOR" shall have the meaning ascribed to such term in Section 16.1(d). "CONSOLIDATED FINANCIALS" shall mean, for any fiscal year (or other accounting period) for Tenant and Affiliates thereof statements of earnings, retained earnings and cash flows for such period and for the period from the beginning of the respective fiscal year to the end of such period and the related balance sheet as at the end of such period, together with the notes thereto, all in reasonable detail and setting forth in comparative form the corresponding figures for the corresponding period in the preceding fiscal year (or period), all of which shall be prepared in accordance with generally accepted accounting principles. "CPI" shall mean the Consumer Price Index for the region in which the Facility is located (All Urban Consumers, 1982-84=100). "DATE OF TAKING" shall have the meaning ascribed to such term in Section 16.1(b). "ELMWOOD LEASE" shall mean the Lease dated as of March 1, 1993, by and between AHP of New Orleans, Inc., a Louisiana corporation, as Landlord, and Paracelsus Elmwood Medical Center, Inc., a Louisiana corporation, as Tenant. "ENCUMBRANCE" shall have the meaning ascribed to such term in Article XXVII. "EVENT OF DEFAULT" shall have the meaning ascribed to such term in Section 17.1. "EXCESS REVENUE" shall mean, with respect to each Calculation Period, the difference between the Gross Revenues for such Calculation Period and the Base Gross Revenues. "EXISTING LEASES" shall mean those certain leases described in EXHIBIT C. "EXTENDED TERM" shall have the meaning ascribed to such term in Section 3.2. -4- "FACILITY" shall mean the 139 bed general acute care hospital presently operated on the Land, or with Landlord's consent, such other general health care facility, general health and rehabilitation hospital, nursing home, retirement center, congregate living facility, health care related apartments or hotel, medical office building or other medical facility with treatment, diagnostic or surgical facilities for inpatient or outpatient care (which may include, without limitation, acute care inpatient facilities, skilled nursing facilities, intermediate care facilities, home health care agencies, ambulatory care clinics or similar facilities) offering other related health care products and services being operated or proposed to be operated on the Land from time to time in accordance with the provisions of this Lease. "FACILITY MORTGAGE" shall have the meaning ascribed to such term in Section 14.1. "FACILITY MORTGAGEE" shall have the meaning ascribed to such term in Section 14.1. "FAIR MARKET RENTAL" shall mean, with respect to the Property (including any Capital Additions or portions thereof paid for by Landlord) the rental paid on a net basis as provided in Section 4.8 hereof which a willing tenant not compelled to rent would pay to a willing landlord not compelled to lease for the highest and best medical use and occupancy of such property permitted pursuant to this Lease for the term in question, assuming that Tenant is not in default under this Lease, but without taking into account Percentage Rent. For purposes of this Lease, Fair Market Rental shall be determined in accordance with the appraisal procedures set forth in Article XXV or as otherwise mutually agreed upon by Landlord and Tenant. "FAIR MARKET VALUE" shall mean, with respect to the Property, including all Capital Additions, the price that a willing buyer not compelled to buy would pay to a willing seller not compelled to sell for such property (except as otherwise provided below), assuming that (a) this Lease is not in effect with respect to the Property, (b) such seller must pay any closing costs and title insurance premiums with respect to such sale, and (c) the Property is fully licensed by all governmental agencies having jurisdiction thereof, and is and will continue to be operated for the Primary Intended Use and is otherwise a going concern. Notwithstanding the foregoing, the computation of Fair Market Value shall assume that this Lease is in effect with respect to the Property in the event that Tenant elects to acquire the Property pursuant to Section 15.2(b). For purposes of this Lease, Fair Market Value shall be determined in accordance with the appraisal procedures set forth in Article XXV or as otherwise mutually agreed upon by Landlord and Tenant. "FISCAL YEAR" shall mean the 12-month period commencing January 1 and terminating December 31. "FIXED TERM" shall have the meaning ascribed to such term in Section 3.1. "FIXTURES" shall have the meaning ascribed to such term in clause (c) of Article II. "GAAP" shall mean generally accepted accounting principles. "GROSS REVENUES" shall mean all revenues received or receivable from, in connection with, incidental to or by reason of the operation of the Facility or any other use of the Property by Tenant or any Affiliate thereof, including, without limitation, all revenues received or receivable from the Existing Leases, from the Facility and all patient revenues received or receivable from, in connection with or incidental to the use of or otherwise by reason of all rooms, beds and other facilities provided, meals served, services performed, space or facilities subleased or goods sold on the Property and including, -5- without limitation (except as provided below), arrangements with third parties relating to the possession or use of any portion of the Property; provided, however, that Gross Revenues shall not include: (i) any revenues from professional fees or charges by physicians or providers of ancillary services when and to the extent such charges are paid over to such physicians or providers of ancillary services, or are accompanied by separate charges for the use of the Facility or any portion thereof; (ii) non-operating revenues such as interest income or income from the sale of assets not sold in the ordinary course of business; (iii) contractual allowances or reserves (relating to any period during the Term) for billings not paid by or received from the applicable governmental agencies or third party providers; (iv) allowances according to generally accepted accounting principles for uncollectible accounts, including credit card accounts, uncompensated care, charity care or other administrative discounts and collection expenses; (v) all patient billing credits and adjustments that are appropriate according to generally accepted accounting principles relating to health care accounting; (vi) all federal, state or local sales or excise taxes and any tax based upon or measured by Gross Revenues which is added to or made a part of the amount billed to the patient or other recipient of such services or goods, whether included in the bill or stated separately; (vii) all provider discounts for hospital or other medical facility utilization contracts and credit card discounts; (viii) all costs of any federal, state or local governmental program imposed specially to provide or finance indigent patient care; (ix) all rental income, concession fees and other payments received by Tenant from any Affiliate of Tenant; provided, however, that any receipts of such Affiliate that would be deemed Gross Revenues if received by Tenant shall be considered to be part of Gross Revenues to the extent of Tenant's or any of its Affiliate's percentage interest in such receipts; (x) amounts received by Tenant pursuant to a sublease of any portion of the Property if the rental paid by the sublessee under the sublease is based, in whole or in part, on either (a) the income or profits derived by the business activities of the sublessee, or (b) any other formula such that any portion of the sublease rental would fail to qualify as 'rents from real property' under Section 856(d) of the Code, or any similar or successor provisions thereto, provided, however, that any receipts of such sublessee that would be deemed Gross Revenues if received by Tenant shall be considered to be part of Gross Revenues; and -6- (xi) revenues attributable to services actually provided at locations other than the Property, such as home health care and other services. "HALSTEAD LEASE" shall mean the Lease dated as of June 30, 1993, by and between AHP of Kansas, Inc., a Kansas corporation, as Landlord, and Paracelsus Halstead Hospital, Inc., a Kansas corporation, as Tenant. "HAZARDOUS SUBSTANCES" shall mean those substances, materials, and wastes listed in the United States Department of Transportation Table (49 CFR 172 101) or by the Environmental Protection Agency as hazardous substances (40 CFR Part 302) and amendments thereto, or such substances, materials and wastes which are or become regulated under any applicable local, state or federal law including, without limitation, any material, waste or substance which is (i) hydrocarbons, petroleum and petroleum products, (ii) asbestos, (iii) polychlorinated biphenyls, (iv) formaldehyde, (v) radioactive substances, (vi) flammables and explosives, (vii) described as a "hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321 or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317), (viii) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903), (ix) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C. Section 9601), as the same may be amended from time to time, or (x) any other substance, waste or material which could presently or at any time in the future cause a detriment to or impair the value or beneficial use of the Land or other Property (which, for purposes of this definition shall include all air, soils, ground water, surface water and soil vapor) or constitute or cause a health, safety or environmental hazard on, under or about the Land or other Property or to any person who may enter on, under, or about the Land or other Property or require remediation at the behest of any governmental agency. "IMPACTED FACILITY" shall have the meaning specified in Section 15.2. "IMPOSITIONS" shall mean all taxes (including without limitation all real property taxes imposed upon the Land, Improvements or other portions of the Property, including, but not limited to all tangible and intangible personal property, ad valorem, sales, use, single business, gross receipts, transaction privilege, documentary stamp (if any are associated with this Lease or the transactions contemplated hereby), rent or similar taxes relating to or imposed upon Landlord, any portion of the Property, Tenant or its business conducted upon the Land), assessments (including without limitation all supplemental real property tax assessments or assessments for public improvements or benefit, whether or not commenced or completed prior to the date hereof and whether or not to be completed within the Term), ground rents, water, sewer or other rents and charges, excises, tax levies, fees (including without limitation license, permit, franchise, inspection, authorization and similar fees) and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character or nature whatsoever with respect to or connected with the Property or the business conducted thereon by Tenant (including all interest, penalties and fines thereon due to any failure or delay in payment thereof) which at any time prior to, during or with respect to the Term hereof may be assessed or imposed on or with respect to, or may be a lien upon (a) Landlord's interest in the Property, (b) the Property or any part thereof or any Rent therefrom or any estate, right, title or interest therein, (c) Landlord's capital invested in the State as represented by the Property, or (d) any occupancy, operation, use or possession of, or sales from, or activity conducted on or in connection with the Property or the leasing or use of the Property or any part thereof by Tenant. -7- "IMPROVEMENTS" shall have the meaning ascribed to such term in clause (b) of Article II. "INITIAL INVESTMENT COST" shall mean $57,073,000. "INSURANCE REQUIREMENTS" shall mean all terms and conditions of any insurance policy required by this Lease and all requirements of the issuer of any such insurance policy. "LAFAYETTE CONVALESCENT HOSPITAL" shall mean the facility located at 1010 First Street, Lafayette, California 94549 of which Paracelsus Real Estate Corporation owns the real property and the California Affiliate operates the facility and owns the personal property. "LAND" shall mean all of that certain real property situated in the City of West Valley City, County of Salt Lake, State of Utah and more particularly described in EXHIBIT A attached hereto and incorporated herein by reference, and any other parcel of land acquired or leased and made subject to this Lease in connection with a Capital Addition. "LANDLORD LENDER" shall have the meaning ascribed to that term in Section 14.1. "LANDLORD'S TOTAL INVESTMENT" shall mean an amount equal to the sum of (y) the Initial Investment Cost and (z) all Capital Additions Costs pertaining to the Property paid for by Landlord pursuant to Section 11.2 of the Lease. "LANDLORD'S TRANSACTION EXPENSES" shall mean all out-of-pocket expenses reasonably incurred by Landlord in connection with (i) the preparation of this Lease, the Purchase Agreement and any Substitute Lease and the instruments contemplated hereunder and thereunder, and any other instruments required to be executed and delivered by Tenant to Landlord in connection, herewith or therewith (whether or not the transactions hereby or thereby contemplated shall be consummated) and (ii) the transactions contemplated to be performed hereunder and thereunder, including but not limited to the reasonable fees and disbursements of Landlord's legal counsel, title insurance premiums, recording taxes and fees, survey fees, valuation or appraisal fees, engineering fees and architects' fees. "LEASE" shall mean this document, as the same may be amended from time to time in accordance herewith. "LEGAL REQUIREMENTS" shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, common law, decrees and injunctions affecting the Property or the maintenance, construction, use, alteration, occupancy or operation thereof, whether now or hereafter enacted and in force (including any of the foregoing which may require repairs, modifications or alterations in or to the Property), all permits, licenses, certificates, franchises, authorizations, land use entitlements, zoning and regulations relating thereto, and all covenants, conditions, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Tenant (other than encumbrances created by Landlord without the consent of Tenant), at any time in force affecting the Property. "MINIMUM REPURCHASE PRICE" shall mean the Landlord's Total Investment less the net amount (after deduction of all reasonable legal fees and other costs and expenses, including without limitation expert witness fees, incurred by Landlord in connection with obtaining any such proceeds or awards) of any proceeds of insurance paid to and retained by Landlord in accordance with Article XV -8- of this Lease and of any Awards received by Landlord and not applied to restoration of the Property in accordance with Article XVI of this Lease. "NOTICE" shall mean a notice given pursuant to Section 30.8 hereof. "OAK PARK CONVALESCENT HOSPITAL" shall mean the facility located at 1625 Oak Park Boulevard, Pleasant Hill, California 94523, of which Paracelsus Real Estate Corporation owns the real property and the California Affiliate operates the facility and owns the personal property. "OFFICER'S CERTIFICATE" shall mean a certificate of Tenant signed by the chief financial officer or another officer authorized so to sign by resolutions adopted by the board of directors or the articles of incorporation or by-laws of the general partner of the Tenant or by any other person whose power and authority to act has been authorized by delegation in writing by the chief financial officer of the general partner of the Tenant. "OVERDUE RATE" shall mean, as of a specified date, a rate of interest equal to the Prime Rate plus five percent per annum, but in no event greater than the maximum rate of interest then permitted under applicable law. "PAYMENT DATE" shall mean any due date for the payment of any installment of Base Rent. "PERCENTAGE RENT" shall mean the percentage rent payable by Tenant to Landlord pursuant to Section 4.4. "PERCENTAGE RENT COMMENCEMENT DATE" shall mean with respect to the Fixed Term, the first day of the first full calendar month of the Fixed Term, and with respect to each Extended Term, the one year anniversary of the first day of such Extended Term. "PERMITTED ENCUMBRANCES" shall mean the matters, if any, set forth in EXHIBIT D attached hereto and incorporated herein by reference. A "PERSON" shall mean any natural person, corporation, limited liability company, business trust, association, company, partnership or government (or any agency or political subdivision thereof) or, for purposes of the definition of "Change of Control" herein, any group acting in concert (within the meaning of Section 13(d) of the Securities Exchange Act of 1934). "PHC" shall mean Paracelsus Healthcare Corporation, a California corporation. "PIONEER ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the Pioneer Assignment and Assumption Agreement of even date herewith, by and between Landlord and Tenant. "PRIMARY INTENDED USE" shall mean a general acute care hospital licensed by the State, and such additional uses which are licensed or applied for on the date hereof or are permitted by Landlord from time to time hereunder. "PRIME RATE" shall mean the fluctuating rate of interest most recently announced by Wells Fargo at its principal office in San Francisco, California as its "Prime Rate." The "Prime Rate" is one of Wells Fargo's base rates and serves as the basis upon which effective rates of interest are calculated -9- for those loans making reference thereto. The "Prime Rate" is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate and may not be the lowest of Wells Fargo's base rates. Any change in any of the interest rates chargeable hereunder resulting from a change in the Prime Rate shall become effective as of the Business Day on which each change in the "Prime Rate" is announced. "PROPERTY" shall have the meaning ascribed to such term in Article II. "PURCHASE AGREEMENT" shall have the meaning given to that term in the Recitals to this Lease. "REMEDIAL WORK" shall have the meaning specified in Section 8.4. "RENT" shall mean the Base Rent, Percentage Rent and Additional Charges. "RHEEM VALLEY CONVALESCENT HOSPITAL" shall mean the facility located at 348 Rheem Boulevard, Moraga, California 94556 of which Karl J. and Gertrude Niederer own the real property and the California Affiliate operates the facility and owns the personal property. "SECURITY AGREEMENT" shall mean the Security Agreement of even date between Tenant, as Debtor, and Landlord, as Secured Party. "SECURITY LETTER OF CREDIT" shall have the meaning ascribed thereto in Section 29.3. "STATE" shall mean the State of Utah. "TAKING" shall mean a taking or voluntary conveyance during the Term hereof of all or any part of the Property, or any interest therein, right with respect thereto or use thereof, as a result of, incidental to, or in settlement of any condemnation or other eminent domain proceedings affecting such Property, regardless of whether such Proceedings shall have actually been commenced. "TANGIBLE NET WORTH" shall mean, as of the date of determination, the sum of the following for Tenant and its consolidated subsidiaries, if any, on a consolidated basis, determined in accordance with generally accepted accounting principles (a) the amount of capital or stated capital (after deducting the cost of any shares held in the applicable entity's treasury); (b) plus the amount of capital surplus and retained earnings; or (c) in the case of a capital or retained earnings deficit, minus the amount of such deficit, (d) less the amount, if any, carried on the books of the entity and any consolidated subsidiaries of the entity for goodwill, patents, trademarks, copyrights, licenses, and other assets which are properly classified as intangible assets under generally accepted accounting principles. "TEN-YEAR TREASURY RATE" shall mean, as of the date of determination, the monthly average yield to maturity of actively traded marketable United States Treasury securities bearing a fixed rate of interest, adjusted for a constant maturity of ten years, as calculated by the Federal Reserve Board for the four preceding calendar weeks and published in said board's Statistical Release H. 15. "TENANT'S CAPITAL INVESTMENT" shall mean, for any period of determination, the lesser of (x) the aggregate amount of the increase, during the applicable period, of the original cost of (a) property, plant and equipment, (b) capitalized development expenses and (c) investments which, at the time made, are reasonably likely to contribute to the business of the Facility, and (y) the aggregate -10- amount of the increase, during the applicable period, of capital stock, paid-in surplus, retained earnings and advances from PHC (to the extent subordinated, to Landlord's satisfaction, to the prior payment in full of Tenant's obligation to Landlord under this Lease). "TENANT'S PERSONAL PROPERTY" shall mean all machinery, equipment, furniture, furnishings, movable walls or partitions, computers or other personal property, and consumable inventory and supplies, including, without limiting the generality of the foregoing, mail boxes, desks, lamps, chairs, beds, bedstands, non-affixed cabinetry, tables, and similar movable equipment, owned by Tenant and used on the Land, but in no event any items included within the definition of Fixtures. "TERM" shall mean the Fixed Term and any Extended Terms, as the context may require, unless earlier terminated pursuant to the Provisions of this Lease. "TERMINATION DATE" shall mean January 31, 2004. "TOTAL RENT" shall mean the sum of Base Rent, Percentage Rent and Additional Charges. "UNAVOIDABLE DELAYS" shall mean delays due to strikes, lockouts, inability to procure materials, power failures, acts of God, governmental restrictions, enemy action, civil commotion, unavoidable casualty and other causes beyond the control of the party responsible for performing an obligation hereunder, provided that lack of funds shall not be deemed a cause beyond the control of either party hereto. "UNIVERSITY CONVALESCENT HOSPITAL" shall mean the facility located at 2122 Santa Cruz Avenue, Menlo Park, California 94025, of which Paracelsus Real Estate Corporation owns the real property and the California Affiliate operates the facility and owns the personal property. "WELLS FARGO" shall mean Wells Fargo Bank, N.A., a national banking association. ARTICLE II LEASE OF PROPERTY Landlord hereby leases, demises and lets to Tenant, and Tenant hereby hires, takes and leases from Landlord, upon the terms and subject to the conditions hereinafter set forth, TO HAVE AND TO HOLD, all of Landlord's right, title and interest in and to all of the following (the "PROPERTY"): (a) the Land; (b) all buildings, structures and other improvements of every kind, including but not limited to the Facility, all buildings and structures hereafter constructed upon the Land and all alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and off-site), parking areas, roadways and other related on-site and off-site improvements appurtenant to such buildings and structures presently or hereafter situated upon the Land, and any and all Capital Additions paid for by Landlord pursuant to Section 11.2 of this Lease (the "IMPROVEMENTS"); (c) all "fixtures" as that term is defined in the State now and hereafter located in, on or used and incorporated into the Land or Improvements; all equipment (including non-movable medical equipment), machinery, fixtures and other items of property, including all components thereof, now and -11- hereafter located in, on or used and incorporated into the Property, in all cases so as to constitute component parts thereof, including, without limitation, any and all furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting, ventilating, refrigerating, incineration, air and water pollution control, waste disposal, air-cooling and air conditioning systems, equipment and apparatus, sprinkler systems and fire and theft protection equipment, built-in oxygen and vacuum systems, wiring, tubing, central clock systems, doctor register systems, elevators, dumb waiters, intercom systems, nurse call systems, affixed cabinetry and counters, pneumatic tube systems, vacuum cleaning systems, conveyor systems, paging systems, mill work, x-ray protection, pass-through boxes, exhaust systems, laboratory plumbing and piping, medical gas systems, nurse station counters, emergency generators and similar items incorporated into and made a component part of the Property, all of which to the greatest extent permitted by law are hereby deemed by the parties hereto to constitute component parts of real estate, together with all replacements, modifications, alterations and additions thereto, but specifically excluding Tenant's Personal Property (the "FIXTURES"); and (d) all easements, licenses, rights-of-way and appurtenances relating to the Land and the Improvements. ARTICLE III TERM OF LEASE 3.1 TERM OF LEASE. The initial term of this Lease shall commence on the date hereof (the "Commencement Date"), and, unless extended or terminated earlier in accordance with the provisions of this Lease, shall remain in effect until January 31, 2004 (the "Fixed Term"). If for any reason Landlord cannot deliver possession of the Property (or any portion thereof) to Tenant on the Commencement Date, Landlord shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Tenant hereunder or extend the Term hereof, but in such case, Tenant shall not be obligated to pay Rent until possession of the Property is tendered to Tenant. 3.2 OPTION TO EXTEND TERM OF LEASE. Landlord hereby grants to Tenant an option to extend the term of this Lease for three consecutive ten-year renewal terms (the "Extended Terms"). Each Extended Term shall be on the same terms and conditions as those set forth herein for the Fixed Term (including, but not limited to, Tenant's obligation to pay Percentage Rent), except that Base Rent shall be paid at a rate equal to the then current Fair Market Rental which, unless otherwise mutually agreed to by Landlord and Tenant, shall be determined by appraisal pursuant to the provisions of Article XXV. In no event, however, shall the Base Rent for any Extended Term be less than 102%, nor more than 107%, of the total amount of Base Rent and Percentage Rent reserved under this Lease for the Base Year for such Extended Term. Tenant shall pay to Landlord, on the first day of each Extended Term, an Additional Charge equal to 0.5% of the Landlord's Total Investment. Each such option may only be exercised by Tenant if, at the time such option is exercised, (a) this Lease has not expired or been sooner terminated and (b) an Event of Default is not continuing, and shall be exercised by Tenant by delivery of Notice to that effect to Landlord not less than 180 nor more than 360 days prior to the expiration of the then current Term. Tenant's exercise of any option to extend the term of this Lease for an Extended Term pursuant to this Section 3.2 shall constitute Tenant's irrevocable and binding commitment to lease the Property on the terms stated in this Lease for the whole of such Extended Term. If Tenant is unable to exercise any option due to the provisions of this Lease, the time during which such option may be exercised shall not be extended or enlarged. Time is strictly of the essence with respect to the requirement that Tenant give timely Notice -12- of its exercise of any options hereunder, and Tenant's failure timely to exercise any option strictly in accordance with its terms shall constitute a material, irredeemable and incurable failure to satisfy a condition precedent to the vesting of any rights in Tenant pursuant to the option, and Tenant hereby expressly waives any right to claim relief from forfeiture or any other form of equitable relief from the consequences of any untimely exercise of any such option strictly in accordance with its terms. The implied covenant of good faith and fair dealing, if any, under this Lease shall not be construed to impose upon Landlord any obligation to notify Tenant in advance of the impending deadline for the exercise of any option hereunder, nor shall it obligate Landlord to excuse the tardy exercise of any option, however slight. The failure of Tenant to exercise any of the options for the Extended Terms within the respective times specified in this Section shall thereby terminate any remaining such options. ARTICLE IV RENT 4.1 PAYMENT OF LANDLORD'S TRANSACTION EXPENSES. Tenant shall pay to Landlord all Landlord's Transaction Expenses within 30 days of Landlord's transmittal to Tenant of written invoices for all Landlord's Transaction Expenses, in a form reasonably acceptable to Tenant. 4.2 PAYMENT OF BASE RENT, PERCENTAGE RENT AND ADDITIONAL CHARGES. During the Term, Tenant shall pay to Landlord at the times specified herein, in lawful money of the United States of America, without right of offset or deduction, by wire transfer of immediately available funds to such account or accounts as Landlord may designate from time-to-time in a Notice, the Rent. 4.3 BASE RENT. Commencing on the first Business Day of the first full calendar month occurring coincident with or after the Commencement Date and, thereafter, on the first day of each calendar month occurring during the Term hereof, Tenant shall pay to Landlord Base Rent in an amount determined by dividing (x) the then annual Base Rent by (y) 12, provided that the first payment of Base Rent shall include an additional amount for any partial calendar month occurring between the Commencement Date and the date of the first payment of Base Rent. Any payment of Base Rent for a period of less than one calendar month shall be prorated based upon a 30-day month and the actual number of days elapsed. 4.4 PERCENTAGE RENT. (a) "Percentage Rent" shall accrue, in the manner and at the times set forth in this Section 4.4, in an amount equal to six percent of the Excess Revenues for any Calculation Period commencing during the Fixed Term and in an amount equal to five percent of the Excess Revenues for any Calculation Period commencing during any of the Extended Terms; provided, however, that no Percentage Rent shall accrue during the first Calculation Period commencing during any Extended Term. On August 14, 1996, and thereafter on the 45th day after the last day of every Calendar Quarter commencing during the Term of this Lease, Tenant shall pay Percentage Rent on a quarterly basis. The quarterly payment shall be determined by (i) annualizing the Gross Revenues for the portion of the Calculation Period ended (prorated for any partial period) as of the end of the last Calendar Quarter, (ii) subtracting from such annualized Gross Revenues the Base Gross Revenues to arrive at the Excess Revenues for such completed portion of the Calculation Period, (iii) multiplying such Excess Revenues by six percent or five percent, as the case may be, to arrive at annualized Percentage Rent, (iv) multiplying such annualized Percentage Rent by a fraction the numerator of which is the number of days elapsed in the Calculation Period through the end of the last Calendar Quarter and the denominator -13- of which is 360 and (v) subtracting from the product thus obtained any Percentage Rent payments previously made with respect to such Calculation Period. (b) Notwithstanding subsection (a) of this Section 4.4 to the contrary, in no event shall the increase in Percentage Rent due and payable under this Lease with respect to any Calculation Period during the Fixed Term be less than an amount equal to two percent of aggregate Base Rent and Percentage Rent reserved hereunder for the immediately preceding Calculation Period, nor shall it be greater than the amount determined by multiplying (i) the Applicable CPI Percent by (ii) the aggregate Base Rent and Percentage Rent reserved hereunder for the immediately preceding Calculation Period. In no event, however, shall the Percentage Rent due and payable under this Lease with respect to any Calculation Period during the Fixed Term be greater than the amount which when added to the Base Rent reserved for such Calculation Period equals $8,914,180. For purposes of this Section 4.2(b), and only for the first Calculation Period during the Fixed Term, Base Rent and Percentage Rent shall mean the aggregate amount of Base Rent and the aggregate amount of Percentage Rent that was or should have been paid and/or accrued during the last 12 consecutive month period of the Halstead Lease and the Elmwood Lease. (c) Notwithstanding subsection (a) of this Section 4.4 to the contrary, in no event shall the increase in Percentage Rent due and payable under this Lease with respect to any Calculation Period during any Extended Term be less than an amount equal to two percent of aggregate Base Rent and Percentage Rent reserved hereunder for the immediately preceding Calculation Period, nor shall it be greater than the amount determined by multiplying (i) the Applicable CPI Percent by (ii) the aggregate Base Rent and Percentage Rent reserved hereunder for the immediately preceding Calculation Period. (d) Notwithstanding subsection (a) and (c) of this Section 4.4 to the contrary, if the aggregate amount of Base Rent and Percentage Rent for any Calculation Period commencing during an Extended Term reaches a level (the "Pause Point") at which Landlord realizes a percentage return on the Landlord's Total Investment for such Calculation Period equal to the sum of (x) the Base Rental Rate for such Calculation Period and (y) 325 basis points, Percentage Rent shall cease to accrue for the remainder of such Calculation Period. 4.5 CONFIRMATION OF PERCENTAGE RENT. Tenant shall utilize or cause to be utilized, an accounting system for the Property in accordance with GAAP, which will accurately record and reflect all Gross Revenues for each Calculation Period and each Calendar Quarter ending during such Calculation Period. Tenant shall retain, for at least six years following the end of each Calculation Period (and in all events until the reconciliation described in Section 4.6 for such Calculation Period has been made), reasonably adequate records conforming to the aforementioned accounting system showing all Gross Revenues for such Calculation Period. Landlord, at its own expense, except as provided hereinbelow, shall have the right, from time to time, to audit or cause to be audited by its independent accountants or other independent authorized representatives the information set forth in the Officer's Certificate regarding Percentage Rent referred to in Section 4.6. In connection with such audits, Landlord (or such accountants or authorized representatives, as the case may be) may examine, audit and copy Tenant's records with respect thereto (including supporting data and sales and excise tax returns), subject to any prohibitions or limitations on disclosure of any such data under applicable law or regulations, including, without limitation, any duly enacted "Patients' Bill of Rights" or similar legislation and such reasonable limitations as may be necessary to preserve the confidentiality of the hospital-patient relationship and the physician-patient privilege. If any such audit discloses a deficiency in the payment of Percentage Rent, Tenant shall forthwith pay to Landlord the amount of the deficiency, together with interest at the Overdue -14- Rate, for the period from the date when such payment should have been made to the date when such payment is made. If any such audit discloses that Gross Revenues actually received by Tenant for the Calculation Period to which such audit relates exceed those reported by Tenant by more than five percent, Tenant shall pay all of Landlord's costs, charges, fees and expenses related to such audit. Any proprietary information obtained by Landlord pursuant to the provisions of this Section 4.5 shall be treated as confidential, except that, subject to appropriate confidentiality safeguards, such information may be used in any litigation between Landlord and Tenant and may be disclosed by Landlord to Owner, Landlord's lenders or prospective lenders. The obligations of Tenant contained in this Section shall survive the expiration or earlier termination of this Lease. 4.6 CERTIFICATES REGARDING PERCENTAGE RENT. Each payment of Percentage Rent shall be delivered to Landlord, together with an Officer's Certificate setting forth the calculation for the most recently completed Calendar Quarter and the Calculation Period to date (except in the event no payment is due, in which case such Officer's Certificate shall be delivered to Landlord at such time as such payment would otherwise be due). In addition, within 90 days after each Calculation Period, Tenant shall deliver to Landlord an Officer's Certificate reasonably acceptable to Landlord setting forth the Gross Revenues, together with Tenant's computation of Percentage Rent paid (or payable) for such Calculation Period. If the Percentage Rent due for any Calculation Period, as shown in any such certificate, exceeds the sum of the quarterly payments of Percentage Rent previously made by Tenant with respect to such Calculation Period, Tenant promptly shall remit to Landlord the amount of such deficit. If the Percentage Rent for such Calculation Period, as shown in such certificate, is less than the sum of the quarterly payments of Percentage Rent previously made by Tenant with respect to such Calculation Period, Landlord shall credit such sum to the payment of Percentage Rent next due. The obligation of Tenant to pay to Landlord Percentage Rent shall survive the expiration or earlier termination of the Term, and a final reconciliation (taking into account, among other relevant adjustments, any contractual allowances which are accrued after such expiration or termination date but which relate to Gross Revenues accrued prior to such expiration or termination date and Tenant's good faith best estimate of the amount of any unresolved contractual allowances) shall be made not later than seven years after expiration or termination. Tenant shall advise Landlord within 60 days after such expiration or termination date of Tenant's best estimate at that time of the approximate amount of such adjustments, which estimate shall not be binding on Tenant. 4.7 ADDITIONAL CHARGES. Subject to Article XIII hereof, Tenant shall pay and discharge as and when due and payable all Impositions and other amounts, liabilities and obligations which Tenant assumes or agrees to pay under this Lease. If Tenant fails or refuses to pay any of the items referred to in the immediately preceding sentence, Tenant shall promptly pay and discharge every fine, penalty, interest and cost which may arise or accrue for the non- payment or late payment of such items. The aforementioned amounts, liabilities, obligations, Impositions, fines, penalties, interest and costs are referred to herein as "ADDITIONAL CHARGES." The Additional Charges shall constitute Rent hereunder. If any Rent (but as to Additional Charges, only those which are payable directly to Landlord) shall not be paid on its due date, Tenant shall pay to Landlord on demand, as an Additional Charge, a late charge to the extent permitted by law, computed at the Overdue Rate on the amount of such overdue Rent from the due date of such Rent to the date such Rent is paid. Any payment by Tenant of Additional Charges to Landlord pursuant to any requirement of this Lease shall relieve Tenant of its obligation to pay such Additional Charges to the entity to which they would otherwise be paid. -15- 4.8 TRIPLE NET LEASE. (a) TRIPLE NET LEASE. This Lease is what is commonly called a "net net net lease," it being understood that Landlord shall receive all Rent as provided in this Article free and clear of any and all Impositions, encumbrances, charges, obligations or expenses of any nature whatsoever in connection with the ownership and operation of the Property. In addition to the Rent reserved by this Article, except as expressly provided herein to the contrary, Tenant shall pay to the parties respectively entitled thereto all Impositions, insurance premiums, operating charges, maintenance charges, construction costs and any other charges, costs and expenses which arise or may be contemplated under any provisions of this Lease during the Term hereof. All of such charges, costs and expenses shall constitute Rent, and upon the failure of Tenant to pay any such costs, charges or expenses, Landlord shall have the same rights and remedies as otherwise provided in this Lease for the failure of Tenant to pay Rent. It is the intention of the parties hereto that this Lease shall not be terminable for any reason by the Tenant and that Tenant shall in no event be entitled to any abatement of or reduction in Rent payable under this Lease except as herein expressly provided. Any present or future law to the contrary shall not alter this agreement of the parties. (b) BANKRUPTCY. Provided that there has been no rejection hereof by Landlord or any trustee or receiver of Landlord, Tenant covenants and agrees that it shall remain obligated under this Lease in accordance with its terms, and that Tenant shall not take any action to terminate, rescind or avoid this Lease, notwithstanding the bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding-up or other proceeding affecting Landlord or any assignee of Landlord in any such proceeding and notwithstanding any action with respect to this Lease which may be taken by any trustee or receiver of Landlord or any such assignee in any such proceeding or by any court in any such proceeding. (i) In the event that Tenant shall file a petition, or an order for relief is entered against Tenant, under Chapter 7, 9, 11 or 13 of the Bankruptcy Code, 11 U.S.C.S. 101 et seq. (the "BANKRUPTCY CODE") and the trustee of Tenant shall elect to assume this Lease for the purpose of assigning the same, such assumption or assignment may only be made if all the conditions of subsections (ii) and (iii) of this Section 4.8(b) are satisfied. If Tenant's trustee or debtor-in-possession, as the case may be, shall fail to elect to assume this Lease within 60 days (or additional time fixed by the court) after such trustee shall have been appointed, or the date of filing of the petition, at Landlord's election (and in its sole and absolute discretion) this Lease shall be deemed to have been rejected and, in such event, Landlord shall thereupon immediately be entitled to possession of the Property without further obligation to the trustee or Tenant, and this Lease shall be cancelled, but Landlord's right to be compensated for damages in the bankruptcy proceedings shall survive such cancellation. (ii) No election to assume this Lease shall be effective unless in writing and addressed to Landlord and unless, in Landlord's business judgment, all the following conditions, which Landlord and Tenant acknowledge to be commercially reasonable, have been satisfied: (A) The trustee (or Tenant, as debtor-in- possession) has cured or has provided Landlord adequate assurance that: (I) within ten days from the date of such assumption, the trustee (or debtor-in-possession) will cure all monetary defaults under this Lease; and -16- (II) within 30 days from the date of such assumption, the trustee (or debtor-in-possession) will cure all non- monetary defaults under this Lease or commence to cure within 30 days and thereafter diligently pursue to completion. (B) The trustee (or debtor-in-possession) has compensated, or has provided to Landlord adequate assurance that within ten days from the date of assumption Landlord will be compensated, for any pecuniary loss incurred by Landlord arising from the default of the Tenant or the trustee (or the debtor-in-possession) as recited in Landlord's written statement of pecuniary loss sent to the trustee (or debtor-in-possession); (C) The trustee (or debtor-in-possession) has provided Landlord with adequate assurance of the future performance of each of Tenant's obligations under this Lease, provided that: (I) the trustee (or debtor-in- possession) shall also deposit with Landlord, as security for the timely payment of Rent, an amount equal to (w) three months' Base Rent and (x) the last quarterly payment of Percentage Rent and (y) the other monetary charges accruing under this Lease; and (II) the obligations imposed upon the trustee (or debtor-in-possession) shall continue with respect to Tenant after completion of bankruptcy proceedings. (D) Landlord has determined that the assumption of the Lease will not: (I) breach any provision in any agreement by which Landlord is bound relating to the Property; or (II) disrupt, in Landlord's reasonable judgment, the reputation and profitability of the Property. (E) For purposes of this subsection, "adequate assurance" shall mean: (I) Landlord shall determine that the trustee (or debtor-in-possession) has and will continue to have sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to assure Landlord that the trustee (or debtor-in- possession) will have sufficient funds to fulfill the obligations of Tenant under this Lease; and (II) an order shall have been entered segregating sufficient cash payable to Landlord, or there shall have been granted a valid and perfected first lien and security interest in property of the Tenant or trustee (or debtor-in-possession), acceptable as to value and kind to Landlord, to secure to Landlord the obligation of the Trustee (or debtor-in- possession) to cure the monetary or non-monetary defaults under this Lease within the time periods set forth above. (iii) If the trustee (or debtor-in-possession) has assumed the Lease pursuant to all the provisions of subsections (i) and (ii) of this Section 4.8(b), for the purpose of assigning (or electing to assign) Tenant's interest under this Lease or the estate created thereby to any other person, such interest or estate may be so assigned only if Landlord shall acknowledge in writing that the intended -17- assignee has provided adequate assurance of future performance of all the terms, covenants and conditions of this Lease to be performed by Tenant. For purposes of this subsection (iii), "adequate assurance of future performance" means that Landlord shall have ascertained that each of the following conditions has been satisfied: (A) the assignee has submitted a current financial statement audited by a certified public accountant which shows tangible net worth and working capital in amounts determined to be sufficient by Landlord to assure the future performance by such assignee of Tenant's obligations under this Lease; (B) if requested by Landlord, the assignee shall have obtained guarantees in form and substance satisfactory to Landlord from one or more persons who satisfy Landlord's standards of creditworthiness; (C) Landlord has obtained all consents to waivers from any third parties required under any lease, mortgage, financing arrangement or other agreement by which Landlord is bound to enable Landlord to permit such assignment; (D) the assignee has deposited an adequate security deposit with Landlord; and (E) the assignee has demonstrated that its intended use of the Property is consistent with the terms of this Lease and will not diminish the reputation of the Facility, or violate any "exclusive" which has been granted by Tenant to any permitted subtenant in the Property. (iv) When, pursuant to the Bankruptcy Code, the trustee (or debtor-in-possession) shall be obligated to pay reasonable use and occupancy charges for the use of the Property or any portion thereof, such charges shall not be less than the Rent. (v) Neither Tenant's interest in the Lease, nor any lesser interest of Tenant herein, nor any estate of Tenant hereby created, shall pass to any trustee, receiver, assignee for the benefit of creditors or any other person by operation of law or otherwise unless Landlord shall consent to such transfer in writing. No acceptance by Landlord of rent or any other payments from any such trustee, receiver, assignee or person shall be deemed to have waived, nor shall it waive the need to obtain Landlord's consent to, or Landlord's right to terminate this Lease for, any transfer of Tenant's interest under this Lease without such consent. (vi) Any person to whom this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all the obligations arising under this Lease on or after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an instrument confirming such assumption. ARTICLE V IMPOSITIONS 5.1 PAYMENT OF IMPOSITIONS. Tenant shall pay, or cause to be paid, all Impositions prior to delinquency and before any fine, penalty, interest or cost may be added for non-payment (subject to Tenant's rights of contest pursuant to the provisions of Article XIII). Such payments shall be made -18- directly to the authorities levying such Impositions, if possible. Tenant shall, promptly upon request by Landlord, furnish to Landlord original or certified copies of receipts or other reasonably satisfactory evidence of such payments. Tenant's obligation to pay Impositions shall be deemed absolutely fixed upon the date such Impositions become a lien upon the Property or any part thereof. Notwithstanding the foregoing, if any such Imposition may, at the option of the payor, lawfully be paid in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Tenant may pay the same (and shall pay any accrued interest on the unpaid balance of such Imposition) in installments, and in such event shall pay such installments (subject to Tenant's right of contest pursuant to the provisions of Article XIII) as the same become due and before any fine, penalty, premium, further interest or cost is added thereto. Landlord shall, at its expense and to the extent required or permitted by applicable laws and regulations, prepare and file all returns with respect to Landlord's net income, gross receipts, sales, use, single business, transaction privilege, rent, ad valorem and franchise taxes (without waiving Landlord's right to reimbursement therefore from Tenant to the extent that the same constitutes Impositions), and with respect to taxes on Landlord's capital stock. Tenant shall, at its expense, and to the extent required or permitted by applicable laws and regulations, prepare and file all other tax returns and reports with respect to any Imposition as may be required of Tenant by governmental agencies or authorities. If any refund shall be due from any taxing authority with respect to any Imposition paid by Tenant, the same shall be paid over to and retained by Tenant unless an Event of Default shall have occurred hereunder and be continuing, in which case such refund shall be paid over to and retained by Landlord. Any such funds retained by Landlord due to an Event of Default shall be applied as provided in Article XVII. Landlord and Tenant shall, each upon a request by the other, provide such information as is maintained by the party to whom the request is made with respect to the Property as may be reasonably necessary to prepare any required returns or reports. If any governmental agency or authority classifies any property covered by this Lease personal property, Tenant shall file all personal property tax returns in such jurisdictions where it may legally so file. Landlord, to the extent it possesses the same, and Tenant, to the extent it possesses the same, will provide to the other party, promptly upon request, cost and depreciation records reasonably necessary for filing returns for any property so classified as personal property. If Landlord is legally required to file any personal property tax returns, Landlord shall provide Tenant with copies of any assessment notices with respect thereto in sufficient time for Tenant to file a protest with respect thereto if it so elects pursuant to Article XIII. If no Event of Default is then continuing, Tenant may at its option and sole cost and expense, upon Notice to Landlord, protest, appeal or institute such other proceedings as Tenant reasonably may deem appropriate to effect a reduction of real estate or personal property assessments so long as such action is conducted in good faith and with due diligence. In such event, Landlord, at Tenant's sole cost and expense, shall fully cooperate with Tenant in such protest, appeal, or other action. Tenant hereby agrees to indemnify, defend, save and hold Landlord harmless from and against any and all losses, demands, claims, obligations and liabilities against or incurred by Landlord in connection with such cooperation by Landlord. Billings by either party to the other for reimbursement of personal property taxes shall be accompanied by copies of a bill therefor and evidence of payments thereof which identify the personal property with respect to which such payments have been made. 5.2 NOTICE OF IMPOSITIONS. Landlord shall give prompt Notice to Tenant of all Impositions payable by Tenant hereunder of which Landlord at any time has knowledge. Notwithstanding the foregoing, however, Landlord's failure to give any such Notice shall in no way diminish Tenant's obligations hereunder to pay such Impositions, but Landlord shall be responsible for any fine, penalty or interest resulting from its failure to give such notice and any default by Tenant hereunder shall be obviated for a reasonable time (which shall not exceed fifteen (15) Business Days) after Tenant receives Notice of any Imposition which it is obligated to pay. -19- 5.3 ADJUSTMENT OF IMPOSITIONS. Impositions imposed with respect to the tax period during which the Term expires or terminates shall be adjusted and prorated between Landlord and Tenant, whether or not such Imposition is imposed before or after such expiration or termination, so that Tenant is only obligated to pay that portion of such Imposition(s) pertaining to the tax period within the Term. The obligation of Tenant to pay its prorated share of Impositions shall survive expiration or earlier termination of this Lease. 5.4 UTILITY CHARGES. Tenant shall pay or cause to be paid all charges for all utilities, including but not limited to electricity, power, gas, oil and water, used in the Property during the Term. 5.5 INSURANCE PREMIUMS. Tenant shall pay or cause to be paid all premiums for insurance coverage required to be maintained pursuant to Article XIV. ARTICLE VI TERMINATION OR ABATEMENT OF LEASE Without limiting the provisions of Section 4.8, Tenant, to the full extent permitted by law, shall remain bound by this Lease in accordance with its terms. Tenant shall not take any action without the prior written consent of Landlord to modify, surrender or terminate this Lease. The obligations of Landlord and Tenant hereunder shall be separate and independent covenants and agreements, and Rent and all other sums shall continue to be payable by Tenant hereunder in any event unless the obligation of Tenant to pay the same terminates pursuant to the express provisions of this Lease or by termination of this Lease (other than by reason of an Event of Default). Without limiting the generality of the immediately preceding sentence, Tenant shall not seek or be entitled to any abatement, deduction, deferment or reduction of Rent, or set-off against Rent, nor shall the respective obligations of Landlord and Tenant be otherwise affected (except as set forth in this Lease) by reason of: (a) any damage to, or destruction of, all or any portion of the Property from whatever cause or any Taking of all or any portion of the Property; (b) the lawful or unlawful prohibition of, or restriction upon, Tenant's use of all or any portion of the Property, or the interference with such use or with Tenant's quiet enjoyment of the Property by any person or entity other than Landlord, or by reason of eviction by paramount title; (c) any claim which Tenant has or may have against Landlord by reason of any default or breach of any warranty by Landlord under this Lease or under any other agreement between Landlord and Tenant or to which Landlord and Tenant are parties; (d) any bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding up or other proceeding affecting Landlord or any assignee or transferee of Landlord; or (e) any other cause, whether similar or dissimilar to any of the foregoing (other than a discharge of Tenant from any such obligations as a matter of law). Except as specifically set forth in this Lease to the contrary, Tenant hereby specifically waives all rights, arising from any occurrence whatsoever, which (i) may now or hereafter be conferred upon it by law to modify, surrender or terminate this Lease or quit or surrender all or any portion of the Property or (ii) entitle Tenant to any abatement, reduction, suspension or deferment of Rent or other sums payable by Tenant hereunder. ARTICLE VII OWNERSHIP OF PROPERTY 7.1 OWNERSHIP OF THE PROPERTY. As between Landlord and Tenant the Property is, and throughout the Term shall continue to be, the property of Landlord. Tenant has only the right to the -20- exclusive possession and use of the Property, upon the terms and subject to the conditions set forth in this Lease. 7.2 TENANT'S PERSONAL PROPERTY; SECURITY INTEREST. Tenant may, at its expense, install, affix, assemble or place on the Property any items of Tenant's Personal Property and may, subject to the conditions set forth below, remove Tenant's Personal Property upon the expiration or earlier termination of this Lease or in the ordinary course of business so long as any damage caused by such removal shall be promptly repaired by Tenant. Notwithstanding the foregoing, in order to secure the payment and the performance of all of Tenant's obligations under this Lease, Tenant hereby grants to Landlord a security interest in (and hereby pledges and collaterally assigns to Landlord) all of Tenant's rights, title and interest in and to Tenant's Personal Property, all whether now existing or hereafter acquired and hereby further agrees to execute and deliver to Landlord, forthwith after demand by Landlord from time to time, any security agreement in a form reasonably acceptable to Landlord and Tenant and such additional writings and instruments, including without limitation financing statements, as may be reasonably required by Landlord for the purpose of effectuating the intent of this sentence and Tenant agrees that Landlord shall have with respect to all Personal Property all rights and remedies of a secured party under the Uniform Commercial Code as adopted in the State, including, but not limited to, the right after the occurrence of an Event of Default (and the expiration of any applicable cure periods, if any) to use or sell Tenant's Personal Property, and Landlord shall not be required to remove any of Tenant's Personal Property from the Property and in no event shall Landlord be liable to Tenant for use of Tenant's Personal Property. Pending disposition of Tenant's Personal Property by Landlord, Landlord shall be entitled to use Tenant's Personal Property in connection with the operation (if any) of the Facility. Tenant shall not permit the Property or Personal Property to become subject to any liens or encumbrances of any kind without first obtaining the prior written consent of Landlord, except for liens or encumbrances permitted by Section 29.1(a). This Lease and the security interest granted Landlord hereby shall be subordinate to any purchase money security interest or capital lease permitted under Section 29.1(a). Landlord further agrees that Tenant may lease Tenant's Personal Property, and Landlord shall execute and deliver such agreements as may be reasonably required by any permitted equipment lessor or the holder of a permitted purchase money security interest to confirm that Landlord's lien on Tenant's Personal Property in question is subordinate to the rights of such equipment lessor or lender and in each case Tenant shall use commercially reasonable efforts to obtain from the holder of the purchase money debt or lessor of Tenant's Personal Property, as the case may be, its agreement to (i) notify Landlord or its successors and assigns of any default by Tenant, (ii) allow Landlord or its successors and assigns an opportunity to cure any default, (iii) recognize Landlord or its successors and assigns as succeeding to Tenant's rights under the agreement in question and to the undisturbed use of the equipment, provided that Landlord fully complies with the terms of such agreement, PROVIDED, THAT the failure by Tenant, using reasonable efforts, to obtain the aforementioned agreements shall not impair or deny Tenant's right to enter into leases involving Tenant's Personal Property. Tenant shall provide and maintain on the Property during the entire Term such Tenant's Personal Property as shall be necessary to operate the Facility in compliance with all licensure and certification requirements, in substantial compliance with all Legal Requirements and Insurance Requirements and otherwise in accordance with customary practice in the health care industry with respect to the Primary Intended Use or other uses then conducted on the Property by Tenant and permitted hereunder. All Tenant's Personal Property not removed by Tenant within thirty days following the expiration or earlier termination of this Lease shall be considered abandoned by Tenant and may be appropriated, sold, destroyed or otherwise disposed of by Landlord without first giving Notice thereof to Tenant and without any payment or obligation to account to Tenant. Tenant shall, at its sole cost and expense, restore the Property to the condition required by Section 10.1(d), including repair of all damage to the Property caused by the -21- removal of Tenant's Personal Property, whether effected by Tenant or Landlord, except that caused by the gross negligence or willful misconduct of Landlord. ARTICLE VIII CONDITION AND USE OF PROPERTY 8.1 CONDITION OF THE PROPERTY. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AND SHALL BE SUBJECT TO NO LIABILITY WITH RESPECT TO, NOR SHALL THE VALIDITY OF THIS LEASE BE AFFECTED BY ANY CLAIM, DEMAND OR CAUSE OF ACTION REGARDING THE PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS DESIGN, CONDITION OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT. TENANT ACKNOWLEDGES AND AGREES THAT THE PROPERTY HAS BEEN INSPECTED BY TENANT, HAS BEEN APPROVED FOR OCCUPANCY BY ALL GOVERNMENT AGENCIES HAVING JURISDICTION THEREOVER AND IS SATISFACTORY TO IT IN ALL RESPECTS, INCLUDING FOR ITS PRIMARY INTENDED USE, AND THAT TENANT IS LEASING THE PROPERTY "AS IS" IN ITS PRESENT CONDITION, AND SUBJECT TO (A) THE EXISTING STATE OF TITLE, INCLUDING ALL COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS, LICENSES, LEGAL REQUIREMENTS, MORTGAGES, DEEDS OF TRUST, ASSIGNMENTS OF LEASES, FIXTURE FILINGS AND OTHER FINANCING INSTRUMENTS AND ANY AND ALL OTHER MATTERS OF RECORD AND OTHERWISE EXCEPT TO THE EXTENT ANY OF THE FOREGOING WERE CAUSED OR CREATED BY LANDLORD, AND (B) MATTERS WHICH WOULD BE DISCLOSED BY AN INSPECTION OF THE PROPERTY OR BY AN ACCURATE SURVEY OF THE LAND. TENANT WAIVES ANY AND ALL CLAIMS, DEMANDS AND CAUSE OR CAUSES OF ACTION HERETOFORE OR HEREAFTER ARISING AGAINST LANDLORD WITH RESPECT TO THE CONDITION OF THE PROPERTY. 8.2 USE OF THE PROPERTY. (a) Throughout the entire Term, Tenant shall obtain and shall maintain in effect all permits, licenses, authorizations and approvals needed to use and operate the Property and the Facility for Tenant's Primary Intended Use in accordance with all Legal Requirements. (b) Throughout the entire Term, Tenant shall use or cause to be used the Property in accordance with its Primary Intended Use and for such other uses as may be necessary in connection with or incidental to such use. Tenant shall not use the Property or any portion thereof for any other purpose whatsoever without the prior written consent of Landlord. The parties agree that Landlord's consent will not be deemed to be unreasonably withheld if, in the reasonable opinion of Landlord, the Tenant's proposed use of the Property will significantly alter the character or purpose or detract from the value or operating efficiency of the Property, or significantly impair the revenue-producing capability of the Property. No use shall be made or permitted to be made of the Property and no acts shall be done which violate any Legal Requirements or Insurance Requirements or which will cause the cancellation of any insurance policy covering the Property or any part thereof, nor shall Tenant sell or otherwise provide to patients therein, or permit to be kept, used or sold in, about or under the Property any Hazardous Substance (except in strict compliance with all Legal Requirements, but only as may be necessary to the operation of the Facility, with respect to such substances other than asbestos and hydrocarbons) or any other article which may be prohibited by the Legal Requirements or Insurance -22- Requirements. Tenant shall, at its sole cost, comply with all of the requirements pertaining to the Property of any insurance board, association, organization or company necessary for the maintenance of the insurance required pursuant to this Lease, (c) Tenant shall not commit or suffer to be committed any waste nor shall Tenant cause or permit any nuisance on the Property. (d) Tenant shall neither suffer nor permit all or any portion of Tenant's Personal Property or the Property, including any Capital Addition whether or not financed or paid for by Landlord, to be used in such a manner as (i) may impair the owner's title thereto or to any portion thereof or (ii) may make possible a claim or claims of adverse usage, adverse possession or implied dedication of all or any portion of the Property to the public, except as is necessary in the ordinary and prudent operation of the Property. 8.3 LANDLORD TO GRANT EASEMENTS. Subject to the provisions of this Section 8.3, Landlord shall, from time to time so long as no Event of Default has occurred and is continuing, at the request of Tenant and at Tenant's sole cost and expense (but subject to the approval of Landlord, which approval shall not be unreasonably withheld or delayed), (a) grant easements and other rights in the nature of easements burdening the Property for the benefit of real property adjacent to the Land or for the exclusive use and enjoyment of persons or entities specified by Tenant in such request but only as may be necessary for the operations of the Facility; (b) dedicate or transfer unimproved portions of the Property for road, highway or other public purposes but only as may be necessary for the operation of the Facility; (c) execute petitions to have the Property annexed to any municipal corporation or utility district; and (d) execute amendments to any covenants, conditions, restrictions and equitable servitudes affecting the Property, but only if each such grant, dedication, transfer, petition or amendment is not detrimental to the proper conduct of the business of Tenant on the Property and does not materially reduce the value of the Property in Landlord's reasonable discretion. 8.4 HAZARDOUS SUBSTANCES. (a) All operations or activities upon, or any use or occupancy of the Property, or any portion thereof, by Tenant, or any agent, contractor, employee or subtenant of Tenant shall at all times during the Term be in all respects in strict compliance with any and all Legal Requirements and Insurance Requirements relating to Hazardous Substances, including, but not limited to, the discharge and removal of Hazardous Substances. Tenant shall not sell or otherwise provide to patients therein or permit to be kept, used or sold in, about, on or under the Property any Hazardous Substances or any other article which may be prohibited by the Legal Requirements or Insurance Requirements, except that Tenant may store, handle, process, maintain or dispose of any Hazardous Substances necessary to the Primary Intended Use in strict compliance with the Legal Requirements and the Insurance Requirements. Tenant shall pay all costs required properly to use, handle and dispose of all Hazardous Substance and shall keep the Property free and clear of any lien relating to Hazardous Substances which may be imposed pursuant to the Legal Requirements and Insurance Requirements. Neither Tenant, nor any agent, contractor, employee or subtenant of Tenant shall allow the manufacture, storage, voluntary transmission or presence of any Hazardous Substances over or upon the Property (except in strict compliance with the Legal Requirements and Insurance Requirements). Landlord, at its sole cost and expense, shall have the right at any time with notice to Tenant (but not more often than once in any calendar year) to conduct an environmental audit of the Property and Tenant shall cooperate in the conduct of such environmental audit. Furthermore, neither Tenant, nor any agent, contractor, employee or any subtenant of Tenant shall install or permit to be installed in or on the Property friable asbestos or any substance containing asbestos -23- or similarly deemed hazardous by governmental authorities or the Legal Requirements respecting such materials, and with respect to any such materials currently present in the Property, shall promptly either (x) remove any material which such Legal Requirements deem hazardous and require be removed, at its sole cost and expense, or (y) otherwise comply with the Legal Requirements. Tenant shall promptly notify Landlord in writing of any order, receipt of any notice of violation or noncompliance with any applicable law, rule, regulation, standard or order, any threatened or pending action by any regulatory agency or other governmental authority or any claims made by any third party relating to Hazardous Substances on, emanations on or from, releases on or from, or threats of releases on or from any of the Property and shall promptly furnish Landlord with copies of any correspondence, notices or legal pleadings in connection therewith. Landlord shall have the right, but shall not be obligated, to notify any governmental authority of any state of facts which may come to its attention with respect to Hazardous Substances on, released from or emanating on or from any part of the Property. (b) Without limiting Section 22.1, Tenant shall, with the right to participate in the applicable proceedings, indemnify, protect, defend (with counsel reasonably approved by Landlord) and hold Landlord, and the directors, officers, shareholders, employees and agents of Landlord, harmless from any claims (including, but not limited to, third party claims for personal injury or real or personal property damage), or natural resources damage, actions, administrative proceedings (including informal proceedings), judgments, damages, punitive damages, penalties, fines, costs, liabilities (including sums paid in settlements of claims), interest or losses, including reasonable attorneys' and paralegals' fees and expenses (including any such fees and expenses incurred in enforcing the covenants and obligations of Tenant under this Lease or collecting any sums due hereunder), consultant fees, and expert fees, together with all other costs and expenses of any kind or nature ("Costs") that arise directly or indirectly from or in connection with the presence, suspected presence, release or threatened release of any Hazardous Substance in or into or at, on, about, under or within the Property, to the extent that such Costs are not attributable to the gross negligence or willful misconduct of Landlord. The indemnification provided in this Section 8.4(b) shall specifically apply to and include claims or actions brought by or on behalf of employees or contractors of Tenant or employees or contractors of Tenant, and Tenant hereby expressly waives any immunity to which Tenant may otherwise be entitled under any industrial or workers' compensation laws. In the event Landlord shall suffer or incur any such Costs, Tenant shall pay to Landlord the total of all such Costs suffered or incurred by Landlord upon demand therefor by Landlord; PROVIDED, THAT the Landlord shall not settle any claims for such Costs or confess judgment thereto without the approval of Tenant, which approval shall not unreasonably be withheld, and, provided, further, that in the event Tenant fails to approve any such settlement or confession of judgment, Tenant shall provide the Landlord with sufficient security for such Costs, as determined by the Landlord in its sole discretion. Without limiting the generality of the foregoing, the indemnification provided by this Section 8.4(b) shall specifically cover Costs, including capital, operating and maintenance costs, incurred in connection with any investigation or monitoring of site conditions, any cleanup, containment, remedial, removal or restoration work required or performed by any federal, state or local governmental agency or political subdivision or performed by any non-governmental entity or person because of the presence, suspected presence, release or suspected release of any Hazardous Substance in or into the air, soil, groundwater, surface water or soil vapor at, on, about, under or within the Property (or any portion thereof), and any claims of third parties for loss or damage due to such Hazardous Substance, to the extent that such Costs are not attributable to the gross negligence or willful misconduct of Landlord. In addition, such indemnification shall include, but not be limited to, all loss or damage sustained by Landlord or any third party to whom Landlord may be liable due to any Hazardous Substance (i) that is present or suspected to be present on, about, under or within the Property or (ii) that migrates, flows, percolates, diffuses or in any way moves onto, into or under the air, soil, groundwater, surface water or soil vapor at, on, about, under or within the Property, irrespective of whether such Hazardous Substance shall be present -24- or suspected to be present on, about, under or within the Property as a result of any release, discharge, disposal, dumping, spilling or leaking (accidental or otherwise) onto the Property or caused by any person or entity; provided, however, that the indemnification obligation arising out of clauses (i) and (ii) above shall apply solely to the extent that such loss or damage results from events occurring during the Term of this Lease and are not attributable to the gross negligence or willful misconduct of Landlord. (c) In the event any investigation or monitoring of site conditions or any clean-up, containment, restoration, removal or other such work ("REMEDIAL WORK") is required under any applicable Legal Requirements, including, but not limited to, any judicial order or order of any governmental entity, or in order to comply with any agreements affecting the Property because of, or in connection with, any occurrence or event described in Section 8.4(b), Tenant shall perform or cause to be performed the Remedial Work in compliance with such law, regulation, order or agreement and subject to the final review and approval of Landlord, which approval shall not be unreasonably withheld or delayed; provided, however, that Tenant may withhold such performance pursuant to a good faith dispute regarding the application, interpretation or validity of the law, regulation, order, or agreement, subject to the requirements of Section 8.4(d); provided, further, however, that Landlord shall reasonably cooperate with Tenant to the extent necessary to deliver such authorizations as may be required in order for Tenant to perform its obligations under this Section 8.4(c). All Remedial Work shall be performed by one or more contractors, selected by Tenant and approved in advance in writing by Landlord, which approval shall not be unreasonably withheld or delayed, and under the supervision of a consulting engineer, selected by Tenant and approved in advance in writing by Landlord, which approval shall not be unreasonably withheld or delayed. All costs and expenses of Remedial Work shall be paid by Tenant, including, but not limited to, the charges of such contractors and consulting engineer, and Landlord's reasonable attorneys' and paralegals' fees and other costs incurred in connection with the monitoring or review of such Remedial Work. In performing its obligations hereunder, Tenant shall be subrogated to any rights Landlord may have under any indemnifications or warranties from any present, future or former owners, tenants or occupants or users of the Property, to the extent available. In the event Tenant shall fail timely to commence, diligently to prosecute to completion or to complete to Landlord's reasonable satisfaction any necessary Remedial Work, Landlord may, but shall not be required to, cause such Remedial Work to be performed, and all costs and expenses thereof paid or incurred by Landlord in connection therewith shall be Costs within the meaning of Section 8.4(b). Landlord's disapproval of or dissatisfaction with any Remedial Work shall be deemed to be reasonable so long as Landlord's requirements for any Remedial Work are consistent with the then current requirements and standards imposed by prudent institutional investors in connection with their management of real property. All such Costs shall be due and payable upon demand therefor by Landlord. If Tenant fails to perform its obligations hereunder, Landlord shall be subrogated to any rights Tenant may have under any indemnifications from any present, future or former owners, tenants or other occupants or users of the Property relating to the matters covered by this Section 8.4. (d) Notwithstanding any provision of this Section 8.4 to the contrary, but without limiting the provisions of Article XIII, Tenant shall be permitted to contest or cause to be contested, subject to compliance with the requirements of this Section 8.4(d) and Article XIII, by appropriate action any Remedial Work requirement, and Landlord shall not perform such requirement on its behalf, so long as Tenant has given Landlord written notice that Tenant is contesting or shall contest or cause to be contested the same, and Tenant actually contests or causes to be contested the application, interpretation or validity of the law, regulation, order or agreement pertaining to the Remedial Work by appropriate proceedings conducted in good faith with due diligence, provided that such contest shall not subject Landlord to civil liability whatsoever. Tenant shall give such security or assurances as may be reasonably required by Landlord to insure compliance with the Legal Requirements -25- pertaining to the Remedial Work (and payment of all costs, expenses, interest and penalties in connection therewith) and to prevent any sale, forfeiture or loss by reason of such nonpayment or noncompliance. (e) All of the obligations of Tenant under this Section 8.4 shall survive expiration or earlier termination of this Lease. The provisions of this Section may be enforced by Landlord without regard to any other rights and remedies Landlord may have against Tenant under this Lease and without regard to any limitations on Landlord's recourse as may be otherwise provided in this Lease. Tenant agrees that, notwithstanding any provision in this Lease to the contrary, a separate action or actions to enforce Tenant's obligations under this Section 8.4 may be brought and prosecuted against Tenant. Any costs and other payments required to be paid by Tenant to Landlord under this Section 8.4 which are not paid within fifteen days of demand therefor shall thereupon be considered delinquent. Tenant shall pay to Landlord immediately upon demand therefor interest on such overdue amounts, from the date when due until paid, at the Overdue Rate. 8.5 EXISTING LEASES. On or before the Commencement date, Landlord and Tenant shall execute the Pioneer Assignment and Assumption Agreement of even date herewith whereby Landlord shall assign and transfer to Tenant all of Landlord's right, title and interest in, to and under the Existing Leases, and, subject to the provisions of the Absolute Assignment of Subleases and Rents of even date herewith between Tenant, as assignor, and Landlord, as assignee, all rents, income, issues and profits owing thereunder. Tenant assumes and covenants to keep, perform and fulfill all of the terms, covenants, conditions and obligations of Landlord under the Existing Leases. ARTICLE IX LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS 9.1 COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND INSTRUMENTS. Subject to the rights of Tenant as provided in Article XIII relating to permitted contests, Tenant, at its sole cost and expense, shall promptly (a) comply with all applicable Legal Requirements and Insurance Requirements with respect to the use, operation, maintenance, repair and restoration of the Property, whether or not compliance therewith shall require structural change in any of the Improvements or interfere with the use and enjoyment of the Property, and (b) procure, maintain and comply with all appropriate licenses, certificates of need, provider agreements and other permits, licenses, franchises and authorizations required for any use of the Property and Tenant's Personal Property then being made, and for the proper erection, installation, operation and maintenance of the Property or any part thereof, including without limitation any Capital Additions. 9.2 COVENANTS REGARDING LEGAL REQUIREMENTS. Tenant covenants and agrees that it shall not use the Property or Tenant's Personal Property for any purpose which violates the Legal Requirements. Tenant has obtained or duly applied for and shall maintain all appropriate licenses, certificates, permits, provider agreements, franchises, authorizations and approvals necessary to operate the Property in its customary manner for the Primary Intended Use, and any other use conducted on the Property by Tenant and permitted by Landlord hereunder. Tenant may, however, contest the legality or applicability of any such Legal Requirement as provided in Article XIII hereof. 9.3 REPRESENTATIONS AND WARRANTIES. As a material inducement to Landlord to enter into this Lease with Tenant, Tenant hereby makes the following representations and warranties to Landlord that: -26- (a) Tenant is a corporation duly organized and validly existing under the laws of the State of Utah, and has all requisite and necessary power and authority to execute and deliver this Lease to Landlord, and any other documents referenced or required herein to be executed and delivered by Tenant to Landlord hereunder; (b) that this Lease, and any other documents referenced or required herein to be executed and delivered by Tenant to Landlord hereunder do not and shall not violate any instrument, judgment, decree or order to which Tenant is a party or by which Tenant is bound; and (c) that to the best of Tenant's knowledge, and after reasonable and due inquiry and diligence, none of the representations and warranties of Seller contained in the Purchase Agreement are untrue or misleading in any material respect. ARTICLE X CONDITION OF THE PROPERTY 10.1 MAINTENANCE AND REPAIR. (a) Tenant, at its sole cost and expense, shall keep the Property and all private roadways, sidewalks and curbs appurtenant thereto and which are under Tenant's control in good order, condition and repair and, except as otherwise expressly provided to the contrary in Article XIV, XV, or XVI with reasonable promptness, shall make all necessary and appropriate repairs and replacements thereto of every kind and nature, whether interior or exterior, structural or nonstructural, ordinary or extraordinary, patent or latent, foreseen or unforeseen, or arising by reason of a condition existing prior to the commencement of the Term of this Lease and regardless of the cause necessitating repair. Tenant shall also be obligated at its expense to make all repairs, modifications and renovations necessary to comply with all licensing, safety and health and building code, regulations applicable to the Property so that it can be legally operated for its Primary Intended Use. All repairs by Tenant shall, to the extent reasonably achievable, be at least equal in quality to the original work. Tenant shall not take or omit to take any action, the taking or omission of which might materially impair the value or the usefulness of all or any portion of the Property for the Primary Intended Use. Tenant shall give Landlord ten days prior Notice of any repair, replacement, modification or renovation pursuant to this Section the cost of which exceeds $100,000 and, prior to commencing any such repair, replacement, modification or renovation, shall provide to Landlord either (i) a lien payment and completion bond in form and substance and issued by a surety reasonably acceptable to Landlord or (ii) a payment and completion guaranty in form and substance and executed by a guarantor reasonably acceptable to Landlord, as Tenant may elect. (b) Landlord shall not under any circumstances be required to make any repairs, replacements, alterations, restorations or renewals of any nature or description to the Property, whether interior or exterior, structural or non-structural, ordinary or extraordinary, patent or latent, foreseen or unforeseen, or to make any expenditure whatsoever with respect thereto, in connection with this Lease, nor shall Landlord under any circumstances be required to maintain the Property in any other way, except as specifically provided herein. Tenant hereby waives, to the fullest extent permitted by law, the right to make repairs at the expense of Landlord pursuant to any law or equitable principle in effect at the time of the execution of this Lease or hereafter enacted. Landlord shall have the right to give, record and post, as appropriate, notices of non-responsibility under any mechanic's lien laws now or hereafter existing, and any other notices of a similar nature that Landlord may reasonably elect to give, -27- record or post from time to time during the Term. If reasonably possible, any such notices shall be posted so as not to interfere with Tenant's business. (c) Nothing contained in this Lease, and no action or inaction by Landlord, shall be deemed or construed in any manner as (i) constituting the consent or request of Landlord, expressed or implied, to any contractor, subcontractor, laborer, materialman or vendor to or for the performance of any labor or services or the furnishing of any materials or other property for the construction, alteration, addition, repair or demolition of or to all or any portion of the Property or (ii) giving Tenant any right, power or permission to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such a manner as would permit the making of any claim against Landlord with respect thereto, or to make any agreement that may create, or in any way may be the basis for the assertion of any right, title, interest, lien, claim or other encumbrance upon the estate of Landlord in all or any portion of the Property. (d) Unless Landlord conveys title to any of the Property to Tenant pursuant to the provisions of this Lease, Tenant shall, upon the expiration or earlier termination of this Lease, vacate and surrender the Property to Landlord in the condition in which the Property was originally received from Landlord, except as repaired, rebuilt, restored, altered or added to as permitted or required by the provisions of this Lease, and except for ordinary wear and tear (but subject to the obligation of Tenant under this Section to maintain the Property in good order, condition and repair during the entire Term of this Lease) and except for damage or destruction by casualty or condemnation which Tenant is not required to repair by the provisions of this Lease. 10.2 ENCROACHMENTS AND RESTRICTIONS. Tenant has reviewed and approved the Title Commitment and the Survey. If any of the Improvements shall at any time during the Term violate any agreement or condition contained in any lawful covenant, condition, restriction, equitable servitude or other agreement affecting all or any portion of the Property, or shall impair the rights of others under any easement or right-of-way burdening the Property, provided that such agreement, covenant, condition, restriction or easement has not been created by Landlord, then promptly upon the request of Landlord, or at the behest of any person affected by violation or impairment and in such case, in the event of an adverse final determination, Tenant shall either (a) obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting from each such encroachment, violation or impairment, whether the same shall affect Landlord or Tenant, provided that Landlord shall consent to all such settlements or waivers or (b) make such changes in the Improvements and take such other actions as Tenant in the reasonable and good faith exercise of its judgment deems practicable to remove such encroachment and to end such violation or impairment, including, if necessary, the alteration of any of the Improvements provided that Landlord shall consent to all such alterations and the changes are not the result of any condition created solely by Landlord. With respect to any encroachments identified on the ALTA surveys of the Property delivered by Tenant to Landlord pursuant to the Purchase Agreement, Landlord agrees that it shall not require Tenant to obtain a waiver of or otherwise correct any such encroachment unless and until an affected third party notifies Landlord of its objection to any such encroachment. In any event Tenant shall, subject to Landlord's consent, take all such actions as may be necessary in order to be able to continue the operation of the Improvements for the Primary Intended Use substantially in the manner and to the extent the Improvements were operated prior to the assertion of such violation or impairment. Tenant shall not be responsible for any claims covered by Landlord's title insurance policy, and Landlord agrees that any proceeds recovered under such title insurance policy shall be made available to Tenant to remedy the claimed violation or restriction. -28- ARTICLE XI CAPITAL ADDITIONS 11.1 CONSTRUCTION OF CAPITAL ADDITIONS. (a) If no Event of Default shall have occurred and be continuing, Tenant may, subject to the terms and conditions contained in this Article, construct or install Capital Additions on the Property. All Capital Additions costing in excess of $100,000 shall require the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed as expressly provided herein. It shall not be unreasonable for the Landlord to withhold its consent if any appraisal obtained by Landlord shows that the fair market value of the Capital Addition as proposed to be built is less than the cost of the Capital Additions. Tenant shall not be permitted to create any Encumbrance on the Property in connection with any such Capital Addition, without Landlord's prior written consent (which consent shall not be unreasonably withheld or delayed). (b) Prior to commencing construction of any Capital Addition, Tenant shall submit to Landlord in writing a proposal setting forth in reasonable detail any proposed Capital Addition and shall provide to Landlord such plans and specifications, permits, licenses, contracts and other information concerning the proposed Capital Addition as Landlord may reasonably request. Without limiting the generality of the foregoing, such proposal shall indicate the approximate projected cost of constructing such Capital Addition, the use or uses to which it will be put and a good faith estimate of the change, if any, in the Gross Revenues that Tenant anticipates will be caused by such Capital Addition. Tenant shall not commence to build any Capital addition unless Tenant shall first have provided Landlord with either (i) a lien payment and completion bond in form and substance and issued by a surety reasonably acceptable to Landlord in an amount equal to 150% of the reasonably anticipated cost of such Capital Additions or (ii) a payment and completion guaranty in form and substance and executed by a guarantor reasonably acceptable to Landlord. (c) No Capital Addition shall be made which would tie in or connect any Improvements with any other improvements on property adjacent to the Property (and not part of the Property), including without limitation, tie-ins of buildings or other structures or utilities unless Tenant shall have obtained the prior written consent of Landlord, which consent Landlord may grant, withhold or delay in its sole discretion. All proposed Capital Additions shall be architecturally integrated and consistent with the Property. 11.2 CAPITAL ADDITIONS FINANCED OR PAID FOR BY LANDLORD. (a) Tenant may request that Landlord provide or arrange financing for any Capital Addition expected to cost in excess of $100,000 by providing to Landlord such information about such Capital Addition as Landlord may reasonably request. Landlord may, but shall be under no obligation to, meet the request, and within 30 days of receipt of such information, Landlord shall notify Tenant as to whether it will finance the proposed Capital Addition and, if so, the terms and conditions upon which it would do so, including the terms of any amendment to this Lease (including, without limitation, the increase in Base Rent to compensate Landlord for the additional funds advanced by it). Notwithstanding the foregoing, Landlord shall not finance the cost of any proposed Capital Addition if such cost is less than $100,000. In no event shall the portion of the material, labor charges and fixtures of the Capital Additions Cost be less than seventy-five percent (75%) of the total amount of such cost. Tenant shall, within thirty (30) days of Tenant's receipt of Landlord's Notice that Landlord will finance -29- the proposed Capital Addition, give Landlord a notice accepting or rejecting Landlord's proposed financing. (b) If Landlord finances the Capital Additions Cost of the proposed Capital Addition, Tenant shall provide Landlord with the following (unless waived by Landlord in writing): (i) prior to any disbursement of funds, such information, certificates, licenses, permits, authorizations, evidence of zoning and other documents reasonably requested by Landlord, or by any third party lender with whom Landlord has agreed or may agree to provide financing, as necessary to confirm that Tenant will be able to use the Capital Addition upon completion thereof in accordance with the Primary Intended Use for such Capital Addition, including all required federal, state or local government licenses, permits, authorizations and approvals; (ii) prior to any disbursement of funds, an Officer's Certificate and, if requested, a certificate from Tenant's architect, setting forth in reasonable detail the projected (or actual, if available) Capital Additions Cost; (iii) prior to or coincident with the first disbursement of funds, an amendment to this Lease (together with a memorandum thereof in recordable form), duly executed and acknowledged, in form and substance reasonably satisfactory to Landlord and Tenant, providing for an increase in the Base Rent on the terms and conditions determined in accordance with Section 11.2(a), along with the legal description of any land obtained in connection with such Capital Addition and such other provisions as may be necessary or appropriate; (iv) prior to or coincident with the first disbursement of funds, a construction and development agreement setting forth the terms for Landlord's financing and Tenant's construction of such Capital Additions; (v) prior to or coincident with payment for any land obtained in connection with such Capital Addition, a deed conveying to Landlord title to such land, or, if applicable, a ground lease on terms acceptable to Landlord, which title or leasehold shall be free and clear of any liens, encumbrances or other exceptions to or matters affecting title except those approved by Landlord, and, upon completion of the Capital Addition, a final as- built survey thereof reasonably satisfactory to Landlord; (vi) during construction and following completion of the Capital Addition, endorsements to any outstanding policy of title insurance covering the Property, or commitments therefor reasonably satisfactory in form and content to Landlord (x) updating the same without any additional exception except such as may be reasonably permitted by Landlord and (y) adding to its coverage any land acquired or leased in connection with such Capital Addition and increasing the coverage thereof by an amount equal to the Fair Market Value of the Capital Addition (except to the extent covered by the owner's policy of title insurance referred to in subparagraph (vii) below); (vii) following the advance of funds, if appropriate, (x) an extended coverage owner's policy of title insurance insuring fee simple title to any land conveyed to Landlord pursuant to subparagraph (v), free and clear of all liens and encumbrances except those approved by Landlord, and (y) a lender's policy of title insurance reasonably satisfactory in form and substance to Landlord and to any Lender with whom Landlord has agreed or may agree to provide financing; and -30- (viii) during or following the advancement of funds, prints of architectural and engineering drawings relating to the Capital Addition and such other certificates (including, but not limited to, endorsements increasing the insurance coverage, if any, at the time required by Section 14.1), documents, opinions of counsel, appraisals, surveys, certified copies of duly adopted resolutions of the board of directors of Tenant authorizing the execution and delivery of the lease amendment, construction and development agreement and any other instruments as may be reasonably required by Landlord and any lender from whom Landlord has agreed or may agree to obtain financing. (c) Any new mortgage or supplement to any existing mortgage entered into by Landlord with any lending institution covering the Property or any land referred to in subparagraph (iv) above shall be subject to the rights of Tenant under this Lease, as this Lease may be amended from time to time. (d) If Landlord finances the cost of any such Capital Addition, Tenant will reimburse Landlord for all reasonable fees, costs and expenses (including fees and costs of in-house and outside attorneys) incurred by Landlord in connection therewith. 11.3 CAPITAL ADDITIONS PAID FOR BY TENANT. If Landlord does not finance the cost of a Capital Addition under the terms of Section 11.2 and Tenant elects nevertheless to construct or cause to be constructed such Capital Addition, (i) Tenant shall not commence any construction with respect to such Capital Addition without first obtaining the lien payment and completion bond or payment and completion guaranty required by Section 11.1, (ii) Tenant shall pay the cost of such Capital Addition, and there shall be no adjustment in the Rent, the Pause Point or Landlord's Total Investment by reason of any such Capital Addition, and (iii) Tenant shall elect Tenant's Capital Addition Depreciation and shall notify Landlord of such determination. 11.4 DISPOSITION OF CAPITAL ADDITIONS UPON EXPIRATION OR TERMINATION OF LEASE. Upon the expiration or earlier termination of this Lease, all Capital Additions shall pass to and become the property of Landlord, free and clear of all encumbrances. With respect to Capital Additions paid for by Tenant, Landlord shall pay to Tenant, within 90 days following the expiration or earlier termination of this Lease, an amount equal to the Capital Additions Cost of such Capital Additions (provided that at least 80% of the total amount of such Capital Additions Cost represents charges for material, labor and fixtures) less Tenant's Capital Addition Depreciation. 11.5 NON-CAPITAL ADDITIONS. Tenant shall have the right to make additions, modifications or improvements to the Property which are not Capital Additions from time to time as it, in its reasonable discretion, may deem to be desirable for the Property's uses and purposes permitted hereunder, provided that such action does not (i) significantly and adversely alter the character or purpose or detract in any manner from the value or operating efficiency of the Property, (ii) significantly impair the revenue-producing capability of the Property, or (iii) materially and adversely affect the ability of Tenant to comply with the provisions of this Lease, and provided that, if the cost of such non-capital additions, modifications or improvements exceed $200,000, Tenant gives Landlord ten days' prior Notice of such addition, modification or improvement. The cost of such non-capital additions, modifications or improvements to the Property shall be paid by Tenant, and all such non-capital additions, modifications and improvements shall, without payment by Landlord at any time, be included under the terms of this Lease, and upon expiration or earlier termination of this Lease shall pass to and become the property of Landlord. -31- 11.6 SALVAGE. All materials which are scrapped or removed in connection with the construction of either Capital Additions permitted by Section 11.1, non-capital additions permitted by Section 11.5, or repairs required by Article X shall be or become the property of the party which paid for, or provided the financing for such work. ARTICLE XII LIENS Subject to the provisions of Article XIII relating to permitted contests, Tenant shall not directly or indirectly create or allow to remain and shall promptly discharge at its expense any lien, encumbrance, security interest, attachment, title retention agreement or claim upon the Property or any attachment, levy, claim or encumbrance in respect of Rent, not including, however, (a) this Lease, (b) Permitted Encumbrances, (c) restrictions, liens and other encumbrances which are created by, in favor of, or consented to in writing by Landlord or expressly permitted under Section 29.1(a) hereof, (d) liens for taxes or assessments or other governmental charges and levies if not yet delinquent, or if in good faith being contested or litigated, provided that Tenant maintains a reserve against such taxes, assessments, charges or levies in an amount deemed adequate by Landlord and furnishes security reasonably satisfactory to Landlord for the payment of such taxes, assessments, charges and levies, (e) the Existing Leases and other subleases in existence on the date hereof and subleases permitted by Article XXIII, (f) liens for Impositions or for sums resulting from noncompliance with Legal Requirements so long as the same are not yet payable or are payable without the addition of any fine or penalty and are in the process of being contested as permitted by Article XIII, (g) liens of mechanics, laborers, materialmen, suppliers or vendors for sums either disputed or not yet due, provided that (i) the payment of such sums shall not be postponed for more than five days after the completion of the action giving rise to such lien and such reserve or other appropriate provisions as shall be required by law or generally accepted accounting principles shall have been made therefor or (ii) any such liens are in the process of being contested as permitted by Article XIII, (h) any liens which are the responsibility of Landlord pursuant to the provisions of Article XXVII, are directly created or permitted by Landlord, or are filed against the Property as a result of Landlord's acts or omissions and not related to or a consequence of Tenant's acts or omissions (i) purchase money security interests on equipment constituting Tenant's Personal Property and leases of such equipment, (j) judgment and other similar liens, provided that the execution or other enforcement of such liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings in accordance with the requirements of this Lease, (k) liens constituting renewals, extensions or replacements of liens described in the foregoing clauses, but only, in the case of each such renewal, extension or replacement lien, to the extent of the original principal amount of the obligation so secured, and to the extent that such renewal, extension or replacement lien is limited to all or part of the property that secured the lien extended, renewed or replaced. ARTICLE XIII CONTESTS Tenant, on its own or on Landlord's behalf (or in Landlord's name ), but at Tenant's sole cost and expense, upon Notice to Landlord, may contest, by appropriate legal proceedings conducted in good faith and with due diligence, without prejudice to Landlord's rights hereunder the amount, validity or application, in whole or in part, of any Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy, encumbrance, charge or claim not otherwise permitted by Article XII, provided that (a) in the case of an unpaid Imposition, lien, attachment, levy, encumbrance, charge or claim, the -32- commencement and continuation of such proceedings shall suspend the collection thereof from Landlord and from the Property, (b) neither the Property nor any Rent therefrom nor any part thereof or interest therein would be subject to any risk of being sold, forfeited, attached, foreclosed, or lost, (c) in the case of a Legal Requirement, Landlord would not be in any danger of incurring any lien, charge, fine, penalty, or other civil or criminal liability for failure to comply therewith pending the outcome of such proceedings, (d) in the event that any such contest shall involve a sum of money or potential loss in excess of $100,000 then, in any such event, Tenant shall deliver to Landlord an Officer's Certificate to the effect set forth in clauses (a), (b) and (c), to the extent applicable, (e) in the case of a Legal Requirement or an Imposition, lien, encumbrance or charge, Tenant shall give such reasonable security as may be demanded by Landlord to insure ultimate payment of the same and to prevent any sale or forfeiture of the affected portion of the Property or the Rent by reason of such non-payment or non-compliance, which security may be a guaranty in form and substance acceptable to Landlord and executed by a guarantor acceptable to Landlord; provided, however, the provisions of this Article shall not be construed to permit Tenant to contest the payment of Rent (except as to contests concerning the method of computation or the basis of levy of any Imposition) or any other sums payable by Tenant to Landlord hereunder, (f) in the case of an Insurance Requirement, the coverage required by Article XIV shall be maintained, and (g) if such contest be finally resolved against Landlord or Tenant, Tenant shall, as Additional Charges due hereunder, promptly pay the amount required to be paid, together with all interest and penalties accrued thereon, or comply with the applicable Legal Requirement or Insurance Requirement. Landlord, at Tenant's expense, shall execute and deliver to Tenant such authorizations and other documents as may reasonably be required in any such contest and, if reasonably requested by Tenant or if Landlord so desires, Landlord shall join as a party therein. Tenant shall indemnify and save Landlord harmless against any liability, cost or expense of any kind that may be imposed upon Landlord in connection with any such contest and any loss resulting therefrom. ARTICLE XIV INSURANCE 14.1 GENERAL INSURANCE REQUIREMENTS. Tenant shall at all times maintain policies of insurance insuring the Property, and all property located in or on the Property including, without limitation, all Capital Additions, Tenant's Personal Property and all other property located in or on the Property, all satellite clinics operated by Tenant whether on or off the Property; and the business operated by Tenant, against the kind of risks and in the amounts of coverage described below. All such insurance shall be written by companies of recognized responsibility authorized to conduct an insurance business in the State. All such insurance (other than insurance with respect to Tenant's Personal Property) shall name Tenant as the insured and Landlord as an additional insured. Proceeds of insurance policies payable to compensate any loss shall be payable to Landlord or Tenant as provided in Article XV. All such insurance shall name as an additional insured or loss payee, as appropriate, the holder (a "FACILITY MORTGAGEE") of any mortgage, deed of trust or other security agreement securing any Encumbrance placed on the Property in accordance with the provisions of Article XXVII ("FACILITY MORTGAGES") by way of a standard form of mortgagee's loss payable endorsement. Any loss adjustment or other settlement in excess of $250,000 shall require the written consent of Landlord and each Facility Mortgagee and any other lender of Landlord or its Affiliates ("LANDLORD LENDER") having any contractual insurance requirements which would impact on the insurance requirements of this Lease to the extent so required and Landlord has given Tenant written notice thereof. Originals or certified copies of all insurance policies obtained pursuant to this Article shall be deposited with Landlord and, if requested, with any Facility Mortgagee(s) or Landlord Lender(s). The policies on the Property, including the Improvements, Fixtures and Tenant's Personal Property, shall insure against the following risks: -33- (a) loss or damage by fire, vandalism and malicious mischief, extended coverage perils ("all risk"), and all physical loss perils insurance including but not limited to sprinkler leakage, in an amount not less than 100% of the then full replacement cost thereof (as defined below in Section 14.2) or such lesser amount as is approved by Landlord in writing; (b) loss or damage by explosion of steam boilers, pressure vessels or similar apparatus, now or hereafter installed in the Facility in such amounts with respect to any one accident as may be reasonably requested by Landlord from time to time of not less than $57,073,000; (c) business interruption or loss of rental under a rental value insurance policy covering risk of loss during the lesser of the first 12 months of reconstruction or the actual reconstruction period necessitated by the occurrence of any of the hazards described in Sections 14.1(a) or 14.1(b), in an amount sufficient to prevent Landlord from becoming a coinsurer; (d) claims for personal injury or property damage under a policy of comprehensive general public liability insurance or commercial general liability insurance. Such insurance shall include Broad Form Contractual Liability insurance coverage insuring all of Tenant's indemnity obligations pursuant to Section 8.3(b) (if obtainable at a reasonable cost) and pursuant to Section 22.1 of this Lease. Such coverage shall have a minimum combined single limit of liability of at least $5 million and a general aggregate limit of at least $5 million, with $5 million umbrella coverage. Any such policy shall be written to apply to all bodily injury, property damage, personal injury and other covered losses, however occasioned, subject to standard policy exclusions, occurring during the policy term, and shall be endorsed to provide that such coverage shall be primary and that any insurance maintained by Landlord shall be excess insurance only. Such coverage shall also contain endorsements: (i) deleting any employee exclusion on personal injury coverage; (ii) including employees as additional insureds; (iii) deleting any liquor liability exclusion; and (iv) providing for coverage of employers automobile non-ownership liability. All such insurance shall provide for severability of interests; shall provide that an act or omission of one of the named insureds shall not reduce or avoid coverage to the other named insureds; and shall afford coverage for all claims based on acts, omissions, injury and damage, which claims occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period. Tenant shall also maintain employers liability insurance with a limit of no less than $1 million per employee and $1 million per occurrence and workers' compensation insurance as required by law; (e) claims arising out of medical malpractice in an amount not less than $2 million for each person and $2 million for each occurrence; (f) flood (when the Property is located in whole or in part within an area designated by an appropriate agency or authority of the United States as a flood plain) and such other hazards and in such amounts as may be customary for comparable properties in the area and as may be available from insurance companies, insurance pools, or other appropriate companies authorized to do business in the State; (g) during any period during which any Capital Addition is under construction, course of construction insurance and all risks insurance in such amounts as Landlord shall reasonably require; (h) such other hazards and in such amounts as may be customary for comparable properties in Salt Lake City, Utah and as may be available from insurance companies, -34- insurance pools, or other appropriate companies authorized to do business in the State at rates which are economically practicable in relation to the risks covered; and (i) any other insurance in such form and in such amounts as Landlord may reasonably request. 14.2 REPLACEMENT COST. The term "full replacement cost" as used herein shall mean the actual replacement cost of the Property requiring replacement from time to time, less exclusions provided in a normal fire insurance policy (which, on the Commencement Date is agreed to be not more than $60,000,000). If either party believes that full replacement cost (the then replacement cost less such exclusions) has increased or decreased at any time during the Lease Term, it may have such full replacement cost redetermined by the insurer then providing the largest amount of fire insurance coverage carried on the Property. 14.3 ADDITIONAL INSURANCE. In addition to the insurance described in Section 14.1, throughout the Term Tenant shall maintain such additional insurance as may be required from time to time by Landlord provided that the types and amounts of any such additional insurance required by Landlord is then customarily maintained by the operators of similar health care facilities in Salt Lake County, Utah. Tenant shall further maintain adequate workers' compensation insurance coverage for all persons employed by Tenant on the Property. Such workers' compensation insurance shall be in accordance with the requirements of applicable local, state and federal law. 14.4 WAIVER OF SUBROGATION. All insurance policies carried by Landlord or Tenant covering the Property, the Fixtures, the Facility or Tenant's Personal Property shall expressly waive any right of subrogation on the part of the insurer against the other party. Landlord and Tenant agree that the respective policies of insurance carried by them will include such waiver clauses or endorsements so long as the same are obtainable without extra cost. If such clauses and endorsements are only available upon the payment of an extra charge, the other party, at its election, may pay the same, but shall not be obligated to do so; provided that the Tenant shall at all times be obligated to carry the policies of insurance required under this Article regardless of whether the waiver of subrogation required under this Section 14.4 is available. 14.5 FORM OF INSURANCE. All of the policies of insurance referred to in this Article shall be written in a form, and issued by insurance companies, reasonably satisfactory to Landlord. Landlord agrees that it will not unreasonably withhold or delay its approval as to the form of the policies or the insurance companies selected by Tenant. Tenant shall pay all of the premiums therefor, and shall deliver an original or certified copy of any policy, or renewal thereof, to Landlord, any Facility Mortgagee and any Landlord Lender at least 10 days prior to the expiration of the existing policy to which such renewal policy relates. If Tenant either fails to effect such insurance as herein required or to pay the premiums therefor, or to deliver such policies or certified copies thereof to Landlord at the times required, Landlord shall be entitled, but shall have no obligation, to effect such insurance and pay the premiums therefor, which premiums shall be repayable to Landlord upon demand therefor in a Notice, and failure by Tenant to repay the same shall constitute an Event of Default within the meaning of Section 17.1(d). Each insurer mentioned in this Article shall agree, by endorsement on the policy or policies issued by it, or by independent instrument furnished to Landlord, that it will give to Landlord (and to any Facility Mortgagee and Landlord Lender of which Tenant has notice, if required) 30 days prior written notice before such policy or policies expire, are altered or are cancelled. -35- 14.6 CHANGE IN LIMITS. If either party shall at any time deem the limits of the personal injury or property damage public liability insurance or malpractice insurance then carried by Tenant to be insufficient or excessive, the parties shall endeavor in good faith to agree promptly upon the proper and reasonable limits for such insurance to be carried, and such insurance shall thereafter be carried with the limits thus agreed upon until further change pursuant to the provisions of this Section. 14.7 BLANKET POLICY. Notwithstanding anything to the contrary contained in this Article, Tenant's obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Tenant so long as (a) the coverage afforded to Landlord is not reduced or diminished or otherwise altered from that which would exist under a separate policy meeting all other requirements of this Lease by reason of the use of such blanket policy of insurance and (b) the requirements of this Article are otherwise satisfied. 14.8 NO SEPARATE INSURANCE. Tenant shall not obtain separate insurance concurrent in form or contributing in the event of loss with that required in this Article XIV to be furnished by, or which may reasonably be required to be furnished by Tenant, nor shall Tenant increase the amount of any then existing insurance by securing an additional policy or additional policies, unless all parties having an insurable interest in the subject matter of the insurance, including in all cases Landlord and all Facility Mortgagees, are named therein as additional insureds, and the loss is payable under said insurance in the same manner as losses are payable under this Lease. Tenant shall immediately notify Landlord of the obtaining of any such separate insurance or of the increasing of any of the amounts of the then existing insurance. ARTICLE XV INSURANCE PROCEEDS 15.1 HANDLING OF INSURANCE PROCEEDS. Subject to Section 15.4 hereof, all proceeds from any policy of insurance required by Article XIV of this Lease shall be paid to Landlord and held in trust by Landlord (subject to the provisions of Section 15.7) and shall be made available for reconstruction, repair or replacement, as the case may be, of any damage to or destruction of all or any portion of the Property to which such proceeds relate, and shall be paid out by Landlord from time to time subject to the provisions hereof for the cost of such reconstruction, repair or replacement. Any unused portion shall be retained by Landlord free and clear upon completion of such repair and restoration but shall be applied by Landlord against Tenant's obligations for Rent next coming due under this Lease. If neither Landlord nor Tenant is required or elects to repair and restore, and the Lease is terminated without purchase by Tenant as described in Section 15.2(a), then all such insurance proceeds shall be retained by Landlord. All salvage resulting from any risk covered by insurance shall belong to Landlord, except that any salvage relating to Tenant's Personal Property shall be the property of Tenant. 15.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED BY INSURANCE. (a) Except as provided in Section 15.7, if during the Term a portion of the Property is totally destroyed or materially damaged by a risk covered by the insurance described in Article XIV so that the Facility is rendered unsuitable for its Primary Intended Use (taking into account all relevant factors, including but not limited to the number of useable beds, the amount of square footage reasonably available for use by Tenant and the type and amount of Gross Revenues lost) (the "IMPACTED FACILITY"), Tenant shall at its option either (i) restore the Impacted Facility to substantially the same condition as existed immediately before the damage or destruction and this Lease shall continue in full -36- force and effect or (ii) offer to purchase the Property from Landlord for a purchase price equal to the greater of the Minimum Repurchase Price or the Fair Market Value of the Property immediately prior to such damage or destruction. If Tenant restores the Impacted Facility, the insurance proceeds shall be paid out by Landlord to Tenant or its designee from time to time as reasonably requested by Tenant to pay for the reasonable costs of such restoration and any excess proceeds remaining after such restoration shall be retained by Tenant. (b) Except as provided in Section 15.7, if during the Term, the Improvements or Fixtures are partially destroyed due to a risk covered by the insurance described in Article XIV but the Impacted Facility is not thereby rendered unsuitable for the Primary Intended Use, in Tenant's reasonable opinion (taking into account all relevant factors, including but not limited to the number of useable beds, the amount of square footage reasonably available for use by Tenant and the type and amount of Gross Revenues lost), Tenant shall restore the Impacted Facility to substantially the same condition as existed immediately before the damage or destruction. Such damage or destruction shall not terminate this Lease; provided, however, that if Tenant cannot, with reasonable diligence and within a reasonable time, obtain all government approvals, including building permits, licenses, conditional use permits and any certificates of need, necessary to perform all required repair and restoration work and to operate the Impacted Facility in substantially the same manner and for the Primary Intended Use, Tenant shall either (i) offer to purchase the Property for a purchase price equal to the greater of the Minimum Repurchase Price or the Fair Market Value immediately prior to such damage or destruction or (ii) continue to operate under the Lease which shall remain in full force and effect and Landlord shall be entitled to retain the insurance proceeds, less the amount needed to restore the Property so that the portion of the Facility unaffected by the casualty can be used as a complete architectural unit. If Tenant shall make such offer and Landlord does not accept the same within 120 days of Landlord's receipt of such offer, Tenant may either (x) withdraw such offer, in which case this Lease shall remain in full force and effect and Tenant shall proceed to restore the Impacted Facility as soon as reasonably practicable to substantially the same condition as existed immediately before such damage or destruction, or (y) terminate this Lease after recovery by Landlord of all insurance proceeds and the payment by Tenant of any Shortfall in cash. If Tenant so restores the Impacted Facility, insurance proceeds shall be paid out by Landlord from time to time to pay for the reasonable costs of such restoration, and any excess proceeds remaining after such restoration shall be retained by Landlord. (c) If Tenant elects to repair or restore any damage or destruction to the Property and the cost of any such repair or restoration exceeds the amount of proceeds received by Landlord from the insurance required under Article XIV, Tenant shall contribute any and all excess amounts necessary to repair or restore the Facility. Tenant shall provide Landlord with a payment or completion guaranty in form and substance reasonably acceptable to Landlord. If no acceptable guarantor is available, Tenant shall pay Landlord the amount of such difference, which amount shall be held in trust, together with any other insurance proceeds, for application to the cost of repair and restoration as such repair and restoration progresses. (d) If Landlord accepts Tenant's offer to purchase the Property as set forth in this Section 15 this Lease shall terminate as to the Property upon payment of the purchase price therefor and Landlord shall thereupon remit to Tenant all insurance proceeds pertaining to the Property less Landlord's reasonable expenses, including attorneys' fees, and assign Landlord's rights in any uncollected insurance proceeds to Tenant. 15.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT COVERED BY INSURANCE. Except as provided in Section 15.7 below, if during the Term the Facility is totally destroyed -37- or materially damaged (i) from a risk not covered by insurance described in Article XIV but that would have been covered if Tenant carried the insurance customarily maintained by, and generally available to, the operators of reputable facilities which are used for the Primary Intended Use in the region in which the Facility is located, (ii) from a risk for which insurance coverage is voided due to any act or omission by Tenant, or (iii) as result of an earthquake, whether or not such damage or destruction renders the Impacted Facility unsuitable for their Primary Intended Use (taking into account all relevant factors, including but not limited to the number of useable beds, the amount of square footage reasonably available for use by Tenant and the type and amount of Gross Revenues lost), Tenant shall restore the Impacted Facility to substantially the same condition as existed immediately before such damage or destruction and not terminate this Lease. Except as provided in Section 15.7 below, if during the Term either Facility is totally destroyed or materially damaged from a risk not covered by insurance described in Article XIV and not described in clause (i), (ii) or (iii) of the immediately preceding sentence, whether or not such Facility is thereby rendered unusable for its Primary Intended Use (taking into account all relevant factors, including, but not limited to, the number of useable beds, the amount of square footage reasonably available for use by Tenant and the type and amount of Gross Revenues lost), Tenant shall, at its option, either (i) restore the Facility to substantially the same condition as existed immediately prior to such damage or destruction and this Lease shall continue in full force and effect or (ii) offer to purchase the Property from Landlord for a purchase price equal to the greater of the Minimum Repurchase Price or the Fair Market Value of the Property immediately prior to such damage or destruction. If this Lease continues in full force and effect, Tenant shall continue to pay Rent, in the manner and at the times herein specified, including the full amounts of Base Rent, Percentage Rent and Additional Charges, provided that during the period of restoration when the Facility is not suitable for its Primary Intended Use, Tenant shall pay Percentage Rent at a rate equal to the Percentage Rent for the immediately preceding Fiscal Year during which Percentage Rent accrued. 15.4 PAYMENT OF PROCEEDS ON TENANT'S PROPERTY AND CAPITAL ADDITIONS PAID BY TENANT. Notwithstanding any provision herein, all insurance proceeds payable by reason of any loss of or damage to any of Tenant's Personal Property or Capital Additions paid for by Tenant shall be paid to Tenant and Tenant shall hold such insurance in trust to pay the cost of repairing or replacing damaged Tenant's Personal Property or Capital Additions paid for by Tenant; PROVIDED, HOWEVER, that if the damaged Tenant's Personal Property or Capital Additions paid for by Tenant were no longer necessary to Tenant's operations prior to their destruction, Tenant shall not be obligated to repair or replace them. 15.5 RESTORATION OF TENANT'S PROPERTY. Upon any restoration of the Impacted Facility as provided in Section 15.2 or 15.3, Tenant shall either (i) at Tenant's sole cost and expense, restore all alterations and improvements made by Tenant, Tenant's Personal Property and all Capital Additions paid for by Tenant, or (ii) at Tenant's sole cost and expense, replace such alterations and improvements, Tenant's Personal Property or Capital Additions with improvements or items of the same or better quality and utility in the operation of the Property; provided, however, that if the damaged Tenant's Personal Property or Capital Additions paid for by Tenant were no longer necessary to Tenant's operations prior to their destruction, Tenant shall not be obligated to replace them. 15.6 ABATEMENT OF RENT. Unless and until Tenant shall pay the purchase price for the Property to Landlord in accordance with this Article XV (and this Lease is thereby terminated or otherwise terminated as provided in this Article XV), in the event of any damage or destruction of the Property, this Lease shall remain in full force and effect and Tenant's obligation to make rental payments and to pay all other charges required by this Lease shall not be abated by reason of any damage or destructions to the Property or the subsequent loss of Landlord's entitlement to the Property. -38- 15.7 DAMAGE NEAR END OF TERM. Notwithstanding any provisions of this Article XV to the contrary, if damage to or destruction of the Facility occurs during the last 12 months of the then applicable term (whether Fixed or Extended), if Tenant has not elected to extend such term, and if such damage or destruction cannot be fully repaired and restored within six months immediately following the date of loss, then Tenant shall have the right to terminate this Lease by giving written Notice thereof to Landlord within 30 days after the date of such damage or destruction, in which event, Landlord shall collect any insurance proceeds to which it is entitled, and Tenant shall assign Tenant's rights in any additional insurance proceeds. In the event that the Facility is totally destroyed or damaged (i) from a risk not covered by insurance described in Article XIV but that would have been covered if Tenant carried the insurance customarily maintained by, and generally available to, the operators of reputable facilities which are used for the Primary Intended Use in the region in which the Facility is located, (ii) from a risk for which insurance coverage is voided due to any act or omission by Tenant, or (iii) as a result of an earthquake, whether or not such damage or destruction renders the Facility unsuitable for its Primary Intended Use (taking into account all relevant factors, including but not limited to the number of useable beds, the amount of square footage reasonably available for use by Tenant and the type and amount of Gross Revenues lost), then Tenant shall pay to Landlord a sum equal to the amount reasonably necessary to repair such damage or destruction if Tenant elects to terminate the Lease. 15.8 TERMINATION OF OPTION TO PURCHASE. Any termination of this Lease pursuant to this Article shall cause any option to purchase granted to Tenant under this Lease and the right to extend the Term by any Extended Term to be terminated and to be without further force or effect. 15.9 WAIVER. Tenant hereby waives any statutory rights of termination which may arise by reason of any damage or destruction of the Facility which Landlord is obligated to restore or may restore under any of the provisions of this Lease. ARTICLE XVI CONDEMNATION 16.1 DEFINITIONS. For purposes of this Article XVI the following terms have the meanings specified in this Section 16.1. (a) "CONDEMNATION" means (a) the exercise of any governmental power, whether by legal proceedings or otherwise, by a Condemnor, or (b) a voluntary sale or transfer by Landlord with Tenant's consent (provided no Event of Default has occurred and is continuing at such time) to any Condemnor, either under threat of condemnation or while legal proceedings for condemnation are pending. (b) "DATE OF TAKING" means the earlier of: (i) the first date the Condemnor has the right to immediate possession of the property being condemned, or (ii) the date on which Tenant's quiet possession is materially disturbed by a Condemnation proceeding such that it is impractical to continue operations of the Facility. (c) "AWARD" means all compensation, sums and any other value awarded, paid or received on a total or partial condemnation. -39- (d) "CONDEMNOR" means any public or quasi-public authority, or private corporation or individual, having the power of condemnation 16.2 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any Taking of all or any part of the Property or of any interest in this Lease by Condemnation, the rights and obligations of the parties with respect to such Condemnation shall be determined by this Article. 16.3 TOTAL TAKING. If title to the whole of Tenant's interest in the Property shall be taken or condemned by any Condemnor, this Lease shall cease and terminate as of the Date of Taking. If title to less than the whole of the Property shall be so taken or condemned, which nevertheless renders the Property unsuitable for its Primary Intended Use, in Tenant's reasonable opinion (taking into account all relevant factors, including but not limited to the number of useable beds, the amount of square footage reasonably available for use by Tenant, and the type and amount of Gross Revenues lost), Tenant and Landlord each shall have the option by Notice to the other, at any time prior to the taking of possession by, or the date of vesting of title in, such Condemnor, whichever first occurs, to terminate this Lease as of such earlier to occur date. Upon such earlier to occur date, if such Notice has been given, this Lease shall cease and terminate. In either of such events, all Rent paid or payable by Tenant hereunder shall be apportioned as of the date the Lease shall have been so terminated as aforesaid. 16.4 ALLOCATION OF PORTION OF AWARD. Subject to the rights of any Facility Mortgagee, the total Condemnation Award made with respect to all or any portion of the Property shall be distributed to Landlord and Tenant ratably in accordance with the value of their respective interests in and to such Property as hereafter set forth in this Section 16.4. All of the Award shall be the sole and exclusive property of Landlord and shall be payable to Landlord, subject to the rights of any Facility Mortgagee; provided that any portion of such Condemnation Award which is expressly allocated by the Condemnor to the taking of Tenant's leasehold interest in the Property, Tenant's Share of Appreciation Amount (if any), the taking of any Capital Additions (or any portion thereof) paid for by Tenant, any loss of business by Tenant during the remaining Term of this Lease, the taking of Tenant's Personal Property, or any removal and relocation expenses of Tenant in any such proceedings shall be the sole property of and payable to Tenant. In any Condemnation proceedings Landlord and Tenant each shall seek their own Award in conformity herewith, at their own expense. 16.5 PARTIAL TAKING. If title to less than the whole of the Property shall be taken or condemned, and the Property is still suitable for its then Primary Intended Use, in Tenant's reasonable opinion, or if Tenant or Landlord shall be entitled (but shall not elect) to terminate this Lease as provided in Section 16.3 hereof, Tenant at its own cost and expense shall with all reasonable diligence restore the untaken portion of any Improvements so that such improvements shall constitute a complete architectural unit of the same general character and condition (as nearly as may be possible under the circumstances) as the Improvements existing immediately prior to such Condemnation or Taking. Landlord and Tenant shall each contribute to the cost of restoration that part of their Award specifically allocated to such restoration, if any (or if no such specific allocation is made, a just, fair and reasonable portion of its Award as reasonably determined by Landlord and Tenant or by arbitration in accordance with Section 28.14 if Landlord and Tenant are unable to agree within 30 days of the Award), together with any and all severance and other damages awarded for any taken Improvements; provided, however, the amount of such contribution shall not exceed such cost. If such amounts are not sufficient to cover the cost of restoration Landlord and Tenant shall contribute any additional amounts needed for restoration in proportion to the amounts already contributed by them, provided that in no event shall Landlord contribute any amount to such restoration in excess of its Award. Thereafter, any excess restoration cost shall be borne solely by Tenant. Landlord agrees that Tenant shall be entitled to an equitable abatement -40- of Base Rent in the event of a partial taking of the Property, but such abatement shall be strictly limited to any amount of excess Award paid to Landlord after the restoration cost has been paid. 16.6 TEMPORARY TAKING. If the whole or any part of the Property or of Tenant's interest under this Lease shall be taken or condemned by any Condemnor for its temporary use or occupancy for a period of not more than one hundred-eighty (180) days, this Lease shall not terminate, and Tenant shall continue to pay, in the manner and at the times herein specified, the full amounts of Base Rent, Percentage Rent, if any, and Additional Charges, provided that during any such Temporary Taking Tenant shall pay Percentage Rent at a rate equal to the average Percentage Rent during the three immediately preceding Fiscal Years (or if three Fiscal Years shall not have elapsed, the average during the last preceding Fiscal Years occurring during the Term). Except to the extent Tenant may be prevented from so doing pursuant to the terms of the order of the Condemnor, Tenant shall continue to perform and observe all of the other terms, covenants, conditions and obligations hereof on the part of the Tenant to be performed and observed as though such Taking or Condemnation had not occurred. Upon any such Taking or Condemnation described in this Section, the entire amount of any such Award made for such Taking or Condemnation allocable to the Term of this Lease, whether paid by way of damages, Rent or otherwise, shall be paid to Tenant. Tenant covenants that upon the termination of any such Taking or Condemnation set forth in this Section, Tenant will, at its sole cost and expense (subject to any contribution by Landlord as set forth in Section 16.5), restore the Property as nearly as may be reasonably possible to the condition in which the same was immediately prior to such Taking or Condemnation, unless such period of temporary use or occupancy shall expire less than six months prior to termination of this Lease or extend beyond the expiration of the Term, in which case Tenant shall not be required to make such restoration. ARTICLE XVII DEFAULTS AND REMEDIES 17.1 EVENTS OF DEFAULT. Any one or more of the following events shall be deemed an "EVENT OF DEFAULT" hereunder: (a) Tenant shall fail to pay Rent payable by Tenant under this Lease when the same becomes due and payable; (b) Any representation or warranty made by the Tenant in connection with this Lease or the Security Agreement or the Absolute Assignment of Subleases and Rents, or in any report, certificate, financial statement or other instrument furnished in connection herewith or therewith, from time to time, whether under Article XXIV of this Lease or otherwise, shall prove to be false or misleading in any material respect, PROVIDED, THAT Tenant shall have a period of 15 days after Notice thereof from Landlord to take whatever action that may be necessary such that the subject representation or warranty would no longer be false or misleading; (c) Tenant shall fail to observe or perform any other term, covenant or condition of this Lease and such failure is not cured by Tenant within a period of 15 days after Notice thereof from Landlord, unless such failure cannot with due diligence be cured within a period of 15 days, in which case such failure shall not be deemed to continue if Tenant proceeds promptly and with due diligence to cure the failure and diligently completes the curing thereof; -41- (d) Tenant shall: (i) admit in writing its inability to pay its debts generally as they mature, (ii) make a general assignment for the benefit of its creditors, (iii) have appointed a trustee, receiver or liquidator pursuant to an order of a court of competent jurisdiction of itself or of the whole or any part of its property which is not discharged in sixty (60) days, (iv) terminate or suspend its business, (v) have any of its assets executed upon, attached or judicially seized and such execution, attachment or seizure is not vacated or set aside within sixty (60) days; (e) Tenant shall: (i) file a voluntary case under any applicable bankruptcy, insolvency, debtor relief or other similar law or statute of the United States of America or any State thereof now or hereinafter in effect ("BANKRUPTCY LAWS"), or (ii) consent to or acquiesce in the appointment of a receiver, liquidator, assignee, trustee, custodian or sequestrator (or similar official of itself or of the whole or any part of its property) which is not discharged in sixty (60) days; (f) Tenant shall, on a petition filed under any applicable Bankruptcy Laws against any of them, be adjudicated a bankrupt or have an order for relief thereunder entered against it or fail to oppose any such proceeding or if a court of competent jurisdiction shall enter an order or decree appointing, without its consent, a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of itself or of the whole or any part of its property and such judgment, order or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of the entry thereof; (g) Tenant shall be liquidated or dissolved, or shall voluntarily begin proceedings toward such liquidation or dissolution, or shall, in any manner, permit the sale or divestiture of substantially all of its assets; (h) an Event of Default under the terms of the Security Agreement, the California Facilities Security Agreements or the Absolute Assignment of Subleases and Rents shall occur and be continuing (after the expiration of any cure periods, if any, set forth therein); (i) Tenant shall fail to make when due any scheduled payment with respect to indebtedness unless such failure is being diligently contested in good faith and such failure shall continue for five days following its receipt of written advice with respect thereto, if the effect of such failure could reasonably be anticipated to have a material adverse effect on the business, operations, properties, assets or condition (financial or otherwise) of Tenant; (j) any Notification Event described in Section 29.2(f) shall occur, which is reasonably likely to result in liability to the Tenant having a material adverse effect on the business, operations, properties or condition (financial or otherwise) of Tenant and Tenant shall fail to cure (to Landlord's reasonable satisfaction) the events or state of affairs constituting such Notification Event within thirty days after notice thereof was due from Tenant pursuant to Section 29.2(f); (k) the estate or interest of Tenant in the Property or any part thereof shall be levied upon or attached in any proceeding and the same shall not be vacated or discharged within the later of 60 days after commencement thereof or 30 days after Notice thereof from Landlord (unless Tenant shall be contesting such lien or attachment in good faith in compliance with this Lease; (l) except as a result of damage, destruction or a partial, temporary or complete Condemnation, Tenant voluntarily ceases operations on the Property; or -42- (m) PHC should undergo a change of ownership control, including without limitation, any transfer of fifty percent or more of all of the issued and outstanding stock of PHC, or PHC should cease to own, beneficially or as of record, directly or indirectly through one or more subsidiaries, all of the capital stock of Tenant. No Event of Default (other than a failure to make a payment of money) shall be deemed to exist under clause (c) above during any time the curing thereof is prevented by an Unavoidable Delay, provided that upon the cessation of such Unavoidable Delay, Tenant immediately shall remedy such default. Tenant shall immediately notify Landlord of the occurrence of any event set forth in subsections 17.1(b) through (m) of which Tenant has actual knowledge and the failure to do so shall constitute an immediate Event of Default. 17.2 CERTAIN REMEDIES. Upon any Event of Default, Landlord shall have all legal, equitable and contractual rights, powers and remedies provided either in this Lease, at common law or in equity, or by statute or otherwise. Without limiting the foregoing, if an Event of Default occurs, is not cured within the period, if any, for any such cure provided in Section 17.1, and is continuing, Tenant shall, to the extent permitted by law and if required by Landlord so to do, immediately surrender to Landlord the Property and quit the same. To the extent permitted by applicable law, Landlord may enter upon and repossess the Property by reasonable force, summary proceedings, ejectment or otherwise, and may remove Tenant and all other persons and any and all personal property from the Property subject to rights of any residents or patients and to any requirement of law. Tenant hereby assents to and waives all legal notice to vacate the Property. Landlord may so terminate Tenant's right of possession and may repossess the Premises without liability for trespass or conversion, without demand or notice of any kind to Tenant and without terminating this Lease, in which event Landlord may, but shall be under no obligation to, relet the same for the account of Tenant for such rent and upon such terms as shall be satisfactory to Landlord. Neither the repossession of the Property, the failure of Landlord to relet the Property, nor the reletting of all or any portion of the Property, shall relieve Tenant of its liability and obligation hereunder, all of which shall survive any such repossession or reletting. FURTHER, TENANT RECOGNIZES THAT ITS FAILURE TO INVEST AN AGGREGATE OF AT LEAST $3,400,000 AS TENANT'S CAPITAL INVESTMENT DURING THE PERIOD COMMENCING ON THE COMMENCEMENT DATE AND ENDING ON FEBRUARY 28, 1999, WOULD DEPRIVE LANDLORD OF IMPORTANT CONSIDERATION FOR THIS LEASE. ACCORDINGLY, IF ANY EVENT OF DEFAULT SHALL OCCUR ON OR BEFORE FEBRUARY 28, 1999, AND LANDLORD SHALL THEREAFTER TERMINATE THIS LEASE ON ACCOUNT THEREOF OR DURING THE CONTINUANCE THEREOF, TENANT AGREES THAT, WITHOUT PREJUDICE TO ANY OTHER REMEDY LANDLORD MAY HAVE HEREUNDER OR UNDER APPLICABLE LAW, TENANT SHALL PAY TO LANDLORD AS LIQUIDATED DAMAGES (AND NOT AS A PENALTY) AN AMOUNT EQUAL TO THE EXCESS OF (X) $3,400,000 OVER (Y) THE SUM OF THE AGGREGATE AMOUNT OF TENANT'S CAPITAL INVESTMENT DURING THE PERIOD COMMENCING ON THE COMMENCEMENT DATE AND ENDING ON FEBRUARY 28, 1999. TENANT AND LANDLORD ACKNOWLEDGE AND AGREE THAT, SINCE IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES THAT LANDLORD MAY SUFFER AS A RESULT OF TENANT'S FAILURE TO INVEST SUCH $3,400,000 AS TENANT'S CAPITAL INVESTMENT WITHIN SUCH PERIOD OF -43- TIME, SUCH EXCESS AMOUNT IS A REASONABLE ESTIMATE OF THE DAMAGES THAT LANDLORD WOULD SUSTAIN IN THE EVENT OF SUCH FAILURE. 17.3 TERMINATION AND DAMAGES. (a) Upon the occurrence of any Event of Default, Landlord shall have the right, to the extent permitted by applicable law, (i) to terminate this Lease and Tenant's right to possession of the Property by any lawful means, upon ten days' Notice of such termination (which Notice shall run concurrent with any Notice required to be given by Section 17.1 and during which time Tenant shall have the opportunity to cure any such Event of Default), in which case, if Tenant shall fail to cure all Events of Default within the foregoing ten-day period, this Lease shall terminate and all of Tenant's rights hereunder shall cease and Tenant shall immediately surrender possession of the Property to Landlord and, in such event, Landlord shall be entitled to recover form Tenant all damages incurred by reason of Tenant's default, and (ii) to enforce all of Landlord's rights and remedies under this Lease, including the right to recover the Rent and other sums owed as such become due hereunder together with interest on such overdue Rent and any other overdue amount owed by Tenant, from the date when due until paid, at the lesser of the Overdue Rate or the maximum rate permitted by applicable law. Tenant further covenants, as an additional and cumulative obligation after any termination by reason of any Event of Default, to pay punctually to Landlord (or such other person entitled thereto) all Rent and punctually to perform all of the obligations which Tenant covenants in this Lease to pay and perform in the same manner and to the same extent and at the same time as if this Lease had not been terminated; provided, however, that in calculating the amounts so to be paid by Tenant, Tenant shall be credited with any amount actually paid to Landlord as damages pursuant to clause (i) above and also with any rent actually obtained by Landlord by reletting the Property, after deducting all expenses of such reletting and of collecting such rent, with the exception that Tenant shall in no event be entitled to receive any such credit in excess of the amount otherwise payable to Landlord pursuant to this Section. Furthermore, Landlord shall also have all rights and remedies provided in Section 17.2. If any litigation is commenced with respect to any alleged default under this Lease, the prevailing party in such litigation shall receive, in addition to its damages incurred, its reasonable attorneys' fees, and all costs and expenses incurred in connection therewith. Neither the termination of this Lease pursuant to this Section 17.3, the repossession of the Property, the failure of Landlord, notwithstanding reasonable good faith efforts to relet the Property, nor the reletting of all or any portion of the Property, shall relieve Tenant of its liability and obligations hereunder, all of which shall survive any such termination, repossession or reletting. Upon any such termination, Tenant shall forthwith pay to Landlord all Rent due and payable with respect to the Property to and including the date of such termination. Thereafter Tenant shall promptly pay to Landlord the full amount of Landlord's damages suffered by reason of Tenant's breach of this Lease, which damages shall include, but are not limited to the sum of: (i) the worth at the time of the award of the unpaid Rent earned at the time of such termination, repossession or reletting; (ii) the worth at the time of the award, of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; (iii) the worth at the time of the award of the amount by which the unpaid Rent for the balance of the Term after the time of the award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and -44- (iv) any other amount necessary to compensate Landlord for the costs incurred in regaining possession and reletting the Property, including, but not limited to, brokerage fees and commissions, construction costs, rent concessions, and all legal costs and expenses. (b) the "worth at the time of the award" of the amounts referred to in clauses (i) and (ii) of subsection (a) of this Section 17.3 shall be computed by allowing interest at the Overdue Rate. The "worth at the time of the award" of the amount referred to in clause (iii) of subsection (a) of this Section 17.3 shall be determined by a Court having jurisdiction thereof using the lowest rate of capitalization (highest present worth) reasonably applicable at the time of such determination and allowed by applicable law. (c) Percentage Rent, for the purposes of this Section 17.3, shall be a sum equal to the Percentage Rent for the Fiscal Year immediately preceding the Fiscal Year in which the termination, re-entry or repossession takes place and during which Percentage Rent accrued. 17.4 APPLICATION OF FUNDS. Any payments which are made to and received by Landlord under any of the provisions of this Lease during the continuance of any Event of Default shall be applied to Tenant's obligations in the order which Landlord may determine or as may be prescribed by applicable laws. 17.5 FAILURE TO CONDUCT BUSINESS. For the purpose of determining rental loss damages or Percentage Rent, if Tenant fails to conduct business upon the Property, and thereby causes the exact damages or the amount of Percentage Rent to be unascertainable, Percentage Rent for such period shall be deemed to be the Percentage Rent during the immediately preceding Fiscal Year during which Percentage Rent accrued. 17.6 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If an Event of Default occurs under this Lease and is not cured within the time provided under this Lease with respect to such Event of Default, Landlord, without waiving or releasing any obligation of Tenant, and without waiving any such Event of Default, may (but shall be under no obligation to) at any time thereafter cure such default for the account and at the expense of Tenant, and may, to the extent permitted by law, enter upon the Property for such purpose and take all such action thereon as, in Landlord's sole judgment, may be necessary or appropriate with respect thereto. No such entry by Landlord on the Property shall be deemed an eviction of Tenant. All sums so paid by Landlord and all reasonable costs and expenses (including, without limitation, reasonable attorneys' fees and expenses, in each case as permitted by law) so incurred, together with a late charge thereon (to the extent permitted by law) computed at the Overdue Rate from the date on which such sums or expenses are paid or incurred by Landlord until the date reimbursed, shall be reimbursed by Tenant to Landlord on demand. The obligations of Tenant and rights of Landlord contained in this Article shall survive the expiration or earlier termination of this Lease. 17.7 WAIVER. If this Lease is terminated pursuant to the provisions of this Article, Tenant waives, to the extent permitted by applicable law, (a) any right of redemption, re-entry or repossession, (b) any right to trial by jury in the event of summary proceedings to enforce the remedies set forth in this Article, and (c) the benefit of any laws now or hereafter enforced exempting property from liability for rent or for debt. -45- ARTICLE XVIII CURE BY TENANT OF LANDLORD DEFAULTS Landlord shall be in default of its obligations under this Lease if Landlord shall fail to observe or perform any term, covenant or condition of this Lease on its part to be performed, and such failure shall continue for a period of 30 days after Notice thereof from Tenant (or such shorter time as may be necessary in order to protect the health or welfare of any patient or other resident of the Property), unless such failure cannot be cured with due diligence within a period of 30 days (or the above described shorter time, as applicable), in which case such failure shall not be deemed to continue if Landlord, within said 30 day period (or the above described shorter time, as applicable), proceeds promptly and with due diligence to cure the failure and diligently completes the curing thereof. The time within which Landlord shall be obligated to cure any such failure shall also be subject to extension of time due to the occurrence of any Unavoidable Delay. If Landlord fails to commence or complete such cure as provided herein, Tenant may cure such default, and for so long as Tenant continues to pay Rent, Tenant shall have the right by separate and independent action to pursue any claim it may have against Landlord for monetary damages for Landlord's failure to cure such default, including, without limitation, all costs and expenses of Tenant (including attorneys' fees and expenses). In the event Tenant acquires the Property pursuant to the option granted hereunder, Tenant, at its option, shall be entitled to offset against the purchase price the amount of any damages owing from Landlord to Tenant. ARTICLE XIX PURCHASE OF PROPERTY BY TENANT 19.1 PURCHASE OF THE PROPERTY. If Tenant purchases the Property from Landlord pursuant to any of the terms of this Lease, Landlord shall, except as otherwise expressly provided, upon receipt from Tenant of the applicable purchase price, together with full payment of any unpaid Rent due and payable with respect to any period ending on or before the date of such purchase, deliver to Tenant an ALTA Owner Policy of Title Insurance or such equivalent policy of title insurance as may be available in the State and which is reasonably acceptable to Tenant, together with such endorsements, reinsurance agreements and direct access agreements as Tenant may reasonably request, together with an appropriate special warranty deed or other conveyance conveying marketable fee simple title in and to the Property to Tenant in the condition set forth in Article XXVI, except that the Property shall be free and clear of all mortgages and encumbrances other than (a) those Tenant has agreed hereunder to pay or discharge, (b) those mortgages which Tenant has agreed in writing to accept and to take title subject to on the date the Property was originally conveyed to Landlord and which are not in default, (c) encumbrances required to be imposed on the Property under Section 8.3, and (d) any other encumbrances permitted to be imposed on the Property under the provisions of Article XXVII which are assumable at no cost or expense to Tenant or to which Tenant may take subject without cost or expense to Tenant. The difference between the applicable purchase price and the total amount of the encumbrances assumed or taken subject to, if a positive number, shall be paid in cash to Landlord or as Landlord may direct, in federal or other immediately available funds, unless otherwise mutually agreed by Landlord and Tenant; PROVIDED, THAT Landlord shall be obligated to pay to Tenant in cash any negative difference between the applicable purchase price and the total amount of the encumbrances so assumed or taken subject to by Tenant. All reasonable expenses of conveying the Property to Tenant, including, without limitation, the cost of the aforementioned title insurance and attorneys' fees incurred by Landlord in connection with such conveyance and release, and documentary transfer and similar taxes, recording fees and expenses of Tenant's counsel, shall be paid by Tenant. -46- 19.2 FAILURE TO CLOSE PURCHASE. The closing of any such sale shall be contingent upon and subject to Tenant obtaining all required governmental consents and approvals for such transfer. If such sale shall fail to be consummated by reason of the inability of Tenant to obtain all such approvals and consents and if the Term would otherwise expire, then this Lease shall remain in effect on a month-to-month basis (on the terms of the Lease in effect upon the expiration of such Term and notwithstanding any provision of Article XX) until the earlier of: (i) the consummation of the purchase or (ii) the 90th day following the end of the Term. In the event Tenant is unable to consummate the purchase during the Term or such 90 day extension of the Term for any reason which is beyond the control of the Tenant, Tenant's option under Section 3.2 herein to elect Extended Terms shall be reinstated during the last 90 days of the Term or, such 90 day extension, as applicable, to prevent Tenant's forfeiture of its leasehold under this Lease due to the failure to close the Purchase of the Property, provided Tenant exercises such option by delivering a Notice to Landlord prior to the expiration of the Term, or such 90 day extension, as applicable, and such Extended Term shall commence or shall be deemed to have commenced immediately following the last day of the Term. ARTICLE XX HOLDING OVER If Tenant for any reason remains in possession of the Property after the expiration or earlier termination of the Term, such possession shall be a month-to-month tenancy during which time Tenant shall pay to Landlord as rental each month the aggregate of (i) one and one half (1-1/2) times one-twelfth of the aggregate total Base Rent and Percentage Rent payable with respect to the last 12-month period of the Term just expired or terminated, (ii) all Additional Charges accruing during the month with respect to which such payment relates, and (iii) all other sums, if any, payable by Tenant pursuant to the provisions of this Lease with respect to the Property. During such period of month-to- month tenancy, Tenant shall be obligated to perform and observe all of the terms, covenants and conditions of this Lease, but shall have no rights hereunder other than the right, to the extent given by law to month-to-month tenancies, to continue its occupancy and use of the Property. Nothing contained herein shall constitute the consent, express or implied, of Landlord to the holding over of Tenant after the expiration or earlier termination of the Term. ARTICLE XXI RISK OF LOSS During the Term of this Lease, Tenant shall bear the risk of loss or of decrease in the enjoyment and beneficial use of the Property resulting from the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or any other cause, or resulting from foreclosures, attachments, levies or executions (other than those caused by Landlord and those claiming from, through or under Landlord) and, in the absence of the gross negligence, willful misconduct or breach of this Lease by Landlord, Landlord shall in no event be responsible therefor nor shall any of the events mentioned in this Section entitle Tenant to any abatement of Rent except as specifically provided in this Lease. -47- ARTICLE XXII LIABILITY OF PARTIES 22.1 INDEMNIFICATION BY TENANT. Notwithstanding the existence of any insurance provided for in Article XIV, and notwithstanding the policy limits of any such insurance, Tenant shall, subject to applicable law, indemnify, defend, save and hold Landlord harmless from and against any and all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses ("CLAIMS") (including, without limitation, reasonable attorneys' fees and expenses), to the extent permitted by law, imposed upon, incurred by or asserted against Landlord arising out of, connected with or incidental to: (a) any Hazardous Substance located at, in, on, under or about the Property due to the act or omission of Tenant, including any improvements, repairs, handling, removal or other actions taken by Tenant in order to comply with all rules and regulations promulgated by any applicable federal, state, or local government rule and regulation with respect to any such Hazardous Substance or related problems that Landlord or Tenant becomes aware of; (b) any accident, injury to or death of persons, or loss of or damage to property, occurring on or about the Property or adjoining sidewalks, alleys or roadways, including without limitation any claims of malpractice; (c) any past, present or future use, misuse, non-use, condition, management, maintenance or repair by Tenant of the Property or Tenant's Personal Property and any litigation, proceeding or claim by governmental entities or other third parties to which Landlord is made a party or other participant related to the Property or Tenant's Personal Property or such use, misuse, non-use, condition, management, maintenance or repair thereof, including but not limited to any failure to perform obligations (other than condemnation proceedings) to which Landlord is made a party; (d) any Impositions which are the obligations of Tenant to pay pursuant to the applicable provisions of this Lease: (e) any failure on the part of Tenant to perform or comply with any of the terms of this Lease; and (f) the non-performance of any of the terms and provisions of any and all existing and future subleases of the Property to be performed by Tenant thereunder. Any amounts payable by Tenant under this Section shall be paid within ten days after Tenant's liability therefor is determined by litigation or otherwise. If such amounts are not timely paid, they shall bear a late charge (to the extent permitted by law) at the Overdue Rate from the date of such determination to the date paid. Tenant, at its expense, shall contest, resist and defend any such claim, action or proceeding asserted or instituted against Landlord, or may compromise or otherwise dispose of the same as Tenant sees fit. Nothing herein shall be construed as requiring Tenant to indemnify, defend or hold Landlord harmless against Landlord's own sole, gross negligence or willful misconduct. 22.2 INDEMNIFICATION BY LANDLORD. Landlord shall indemnify, defend, save and hold Tenant harmless from and against any and all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) imposed upon, incurred by or asserted against Tenant arising out of, connected with or incidental to the -48- sole or gross negligence or willful misconduct of Landlord; provided, however, that Tenant's right to indemnification as provided herein, shall be subject to the limitation set forth in Article XXVIII. 22.3 CONTINUING LIABILITY. Tenant's and Landlord's liability under this Article shall survive any termination of this Lease and shall continue for the term provided herein or as permitted by the laws of the State, whichever is longer. ARTICLE XXIII ASSIGNMENT AND SUBLETTING 23.1 ASSIGNMENT AND SUBLETTING. Subject to the provisions of Section 23.3 below and any other express conditions or limitations set forth in this Lease, Tenant may, without the consent of Landlord, and in addition to the Existing Leases, (a) sublet up to an aggregate of 25% of the rentable square footage of the Facility, to concessionaires or other third party users or operators thereof, provided that (i) any subletting to any party shall not individually as to any one such subletting, or in the aggregate, materially diminish the actual or potential Percentage Rent payable under this Lease and (ii) Tenant, at the request of Landlord, executes a Collateral Assignment of Subleases and Rents in favor of Landlord in a form reasonably acceptable to Landlord as security for the obligations of Tenant hereunder, or (b) transfer or assign its rights hereunder (iii) to a joint venture, partnership or other entity in which Tenant holds a controlling interest and, in the case of a partnership, Tenant is the general partner, or (iv) in connection with a public offering of equity interests in an Affiliate of Tenant, to such Affiliate, provided that Landlord reasonably determines that such Affiliate has a Tangible Net Worth at least equal to that of Tenant. Except as otherwise permitted in the immediately preceding sentence, an assignment or subletting of all or any portion of the Property shall not be permitted unless the consent of Landlord is first obtained. Among the factors which Landlord may consider in determining whether or not to grant its consent to any subletting or assignment are the following: (s) whether the assignee assumes all obligations of Tenant under the Lease in a writing in form and content reasonably acceptable to Landlord, (t) whether such assignee meets the financial covenants applicable to Tenant hereunder and demonstrates such fact to Landlord's reasonable satisfaction, (u) if no Event of Default is in effect and continuing hereunder, (v) whether the assignee or sublessee has a financial condition comparable to the greater of (i) Tenant's financial condition as of the Commencement Date or (ii) Tenant's financial condition as of the date of the proposed assignment or subletting and (w) in the case of a subletting the sublessee shall comply with the provisions of Section 23.2, (x) in the case of an assignment, (i) the assignee assumes in writing and agrees to keep and perform all of the terms of this Lease on the part of Tenant to be kept and performed, (ii) the assignee complies with the covenants set forth in Section 28 hereof, (iii) the assignment causes no violation of any other covenants under this Lease by Tenant or the assignee, and (iv) the assignee becomes jointly and severally liable with Tenant for the performance thereof, (y) an original counterpart of each such sublease and assignment and assumption, duly executed by Tenant and such sublessee or assignee, as the case may be, in form and substance satisfactory to Landlord, is delivered promptly to Landlord, and (z) in case of either an assignment or subletting, Tenant remains primarily liable, as principal rather than as surety, for the prompt payment of Rent and for the performance and observance of all covenants and agreements to be performed by Tenant hereunder. 23.2 ATTORNMENT. Tenant shall insert in each sublease permitted under Section 23.1 provisions reasonably satisfactory to Landlord which provide for the benefit of Landlord that (a) such sublease is subject and subordinate to all of the terms and provisions of this Lease and to the rights of Landlord hereunder, (b) in the event this Lease shall terminate before the expiration of such sublease, the sublessee thereunder will, at Landlord's option, either attorn to Landlord and waive any right the -49- sublessee may have to terminate the sublease or surrender possession under such sublease, and (c) in the event the sublessee receives Notice from Landlord or Landlord's assignees, if any, stating that Tenant is in default under this Lease, the sublessee shall thereafter be obligated to pay all rentals accruing under said sublease directly to the party giving such Notice, or as such party may otherwise direct. All rentals received from the sublessee by Landlord or Landlord's assignees, if any, as the case may be, shall be credited against the amounts owed to Landlord under this Lease. 23.3 SUBLEASE LIMITATION. Anything contained in this Lease to the contrary notwithstanding, Tenant shall not sublet the Property on any basis such that the rental to be paid by the sublessee thereunder would be based, in whole or in part, on either (a) the income or profits derived by the business activities of the sublessee, or (b) any other formula such that any portion of the sublease rental would fail to qualify as "rents from real property" within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto. ARTICLE XXIV INFORMATION FROM TENANT 24.1 OFFICER'S CERTIFICATES. At any time and from time to time, upon not less than 20 days Notice by Landlord, Tenant shall furnish to Landlord an Officer's Certificate certifying that this Lease is unmodified and in full force and effect (or that this Lease is in full force and effect as modified and setting forth the modifications), the date to which the Rent has been paid, whether there exists any Event of Default or any situation which, with the giving of notice, passage of time, or both, would constitute an Event of Default hereunder based upon Tenant's current knowledge, whether Tenant contends that Landlord is in default hereunder, and if Tenant so contends, the basis for such contention, the date upon which the Term terminates, and such other information as Landlord reasonably may request. The failure by Tenant to deliver such estoppel certificate to Landlord within 20 days of Landlord's request therefor shall be conclusively deemed to be Tenant's certification (i) that this Lease is in full force and effect, without modification except as represented by Landlord; (ii) that there are no uncured defaults in Landlord's performance hereunder, and (iii) that not more than one month's rent has been paid in advance. Any such certificate furnished pursuant to this Section 24.1 may be relied upon by Landlord, any prospective purchaser of the Property, and any Facility Mortgagee or Landlord Lender. 24.2 FINANCIAL INFORMATION. Tenant shall furnish, the following statements to Landlord: (a) within 120 days after the end of each Fiscal Year (i) a balance sheet and statements of revenues and expenses and changes in retained earnings and cash flows for Tenant, all certified by independent public accountants of recognized standing reasonably acceptable to Landlord, such statements to be prepared in accordance with generally accepted accounting principles consistently applied, to be for such Fiscal Year and the immediately preceding Fiscal Year and to be in comparative columnar form and (ii) a schedule of capital expenditures or reserves therefor for such Fiscal Year; (b) within 45 days after the end of each of the first three fiscal quarters of each Fiscal Year, financial statements similar to those referred to in clause (a) above, but only certified by the principal financial or other appropriate officer of Tenant as having been prepared in accordance with generally accepted accounting principles consistently applied (but which may exclude footnote disclosures), such financial statements to be for the period from the beginning of such Fiscal Year (and immediately preceding Fiscal Year) to the end of such quarter (and comparable quarter); -50- (c) concurrent with the statements furnished pursuant to clauses (a) and (b) above, an Officer's Certificate stating that, after making due inquiry, no Event of Default has occurred and is continuing under this Lease, or if such Event of Default has occurred, to such officer's knowledge, specifying all such Events of Default, the nature of such Events of Default, and the steps being taken to remedy the same; (d) within 45 days after the end of each fiscal quarter, quarterly and year-to-date operating statistics; (e) as requested in a Notice by Landlord, within 30 days after the end of each month during the Term or Extended Term, any and all operational, statistical and/or financial statements, as prepared and distributed by Tenant in the ordinary course of business; (f) on the first, second and third anniversary of the Commencement Date hereof, an Officer's Certificate setting forth the Tenant's Capital Investment to date; (g) with respect to the California Facilities, annual and quarterly financial information in reasonable form, and, as requested by Landlord in a Notice, such other financial information and operating statistics in the form prepared for the California Facilities in the ordinary course of business; and (h) with reasonable promptness, such other information respecting the financial condition and affairs of Tenant as Landlord may reasonably request from time to time. 24.3 LICENSING INFORMATION. Tenant shall promptly furnish to Landlord complete copies of all surveys, examinations, inspections, compliance certificates and similar reports of any kind issued to Tenant by any governmental agencies or authorities having jurisdiction over the licensing of the operation of the Property which are material to the Property or the Facility, their ownership or operation. ARTICLE XXV APPRAISALS OF THE PROPERTY AND OPTIONS 25.1 APPRAISERS. If at any time it becomes necessary to determine the Fair Market Value or Fair Market Rental of the Property for any purpose under this Lease, and the parties are unable to agree thereupon, the party required or permitted to give Notice of such required determination shall include in the Notice the name of a person selected to act as appraiser on its behalf. Within ten days after such Notice, Landlord or Tenant, as the case may be, shall by Notice to Tenant or Landlord, as the case may be, either agree to the appointment of the appraiser identified in such initial Notice, in which case such appraiser shall be the sole appraiser for purposes of determining the Fair Market Value or Fair Market Rental, as the case may be, or shall appoint a second person as an appraiser on its behalf. Any appraiser appointed pursuant to this Section must (i) be a member of the American Institute of Real Estate Appraisers (or any successor organization thereto), (ii) have at least five years' experience in the valuation of private hospitals and (iii) be neither an employee nor former employee of Landlord or Tenant or their Affiliates. The appraiser(s) thus appointed shall, within 45 days after the date of the Notice appointing the first appraiser, proceed to appraise the Property to determine the Fair Market Value or Fair Market Rental thereof (as the case may be) as of the relevant date (giving effect to the impact, if any, of inflation from the date of their decision to the relevant date). In the case of two appraisers, except as provided in Section 25.2, the two appraisals shall be averaged to determine the Fair Market Value, Fair Market -51- Value Purchase Price or Fair Market Rental, as the case may be. In any event, the appraised value determined in accordance with this Section shall be final and binding on Landlord and Tenant. 25.2 METHOD OF APPRAISAL. Any appraisal required or permitted by the terms of this Lease shall be conducted in a manner consistent with sound appraisal practice, taking into account the market, cost and business enterprise (income) approaches. Notwithstanding the provisions of Section 25.1, if the difference between the appraisal amounts determined by the appraisers appointed pursuant to Section 25.1 exceeds ten percent of the lesser of such appraisal amounts, then the two appraisers shall have 20 days to appoint a third appraiser. If no such appraiser is appointed within such 20 days or within 90 days of the original request for a determination of Fair Market Value or Fair Market Rental (as the case may be), whichever is earlier, either Landlord or Tenant may refer the matter to arbitration as set forth in Section 30.14. Any appraiser appointed by the original appraisers or through arbitration shall be instructed to determine the Fair Market Value or Fair Market Rental (as the case may be) within 45 days after the appointment of such appraiser. The determination of the three appraisers which differs most in the terms of dollar amount from the determinations of the other two appraisers shall be excluded, and 50% of the sum of the remaining two determinations shall be the appraised value, which appraised value shall be final and binding upon Landlord and Tenant as the Fair Market Value or Fair Market Rental of the Property, as the case may be. If the lowest and highest appraised values are equidistant in amount from the middle appraised value, then such middle appraised value shall be the Fair Market Value or Fair Market Rental (as the case may be). The provisions of this Article shall be specifically enforceable to the extent such remedy is available under applicable law, and any determination hereunder shall be final and binding upon the parties except as otherwise provided by applicable law. Landlord and Tenant each shall pay the fees and expenses of the appraiser appointed by it, and each shall pay one-half of the fees and expenses of the third appraiser and one-half of all other costs and expenses incurred in connection with each appraisal. ARTICLE XXVI OPTIONS TO PURCHASE 26.1 LANDLORD'S OPTION TO PURCHASE TENANT'S PERSONAL PROPERTY; TRANSFER OF LICENSES. Provided Tenant has not exercised its option pursuant to Section 26.2 hereof, effective upon not less than ninety (90) days prior notice given at any time within one hundred eighty (180) days prior to the expiration of the Term of this Lease, or upon such shorter Notice as shall be reasonable if this Lease is terminated prior to its expiration date, Landlord shall have the option to purchase all (but not less than all) of Tenant's Personal Property, if any, at the expiration or termination of this Lease, for an amount equal to the then fair market value thereof (as determined by the appraisal process set forth in Section 25), taking into account and with appropriate price adjustments for, all equipment leases, conditional sale contracts, UCC-1 financing statements and other encumbrances to which such Tenant's Personal Property is subject. Upon the expiration or termination of the Lease and such purchase by Landlord, Tenant shall use good faith efforts, at Landlord's sole cost and expense, to transfer and assign to Landlord or its designee, or assist Landlord or its designee in obtaining, any contracts, licenses, and certificates required for the then operation of the Facility. 26.2 TENANT'S OPTION TO PURCHASE THE PROPERTY. Provided no Event of Default specified in Sections 17.1 (a), (e), (f) or (g) hereof has occurred and is continuing, Tenant shall have the option, exercisable on not less than one hundred eighty (180) days nor more than three hundred sixty (360) days' prior Notice, to purchase the Property at the expiration of the Fixed Term, or at the expiration of any Extended Term, at the greater of (y) the Fair Market Value, or (z) an amount equal to -52- the sum of (i) $63,250,000 plus (ii) all Capital Additions Costs pertaining to the Property paid for by Landlord. Tenant shall also have the right, during any Extended Term, to exercise such option in the event that, during any Extended Term, Landlord defaults with respect to its agreements, covenants, obligations, representations or warranties under this Lease and such default is not cured within any applicable cure period. Upon exercise by Tenant of its option to purchase the Property, Landlord shall, at the election of Tenant, either convey the Property as a sale of assets or as a sale of the stock of a corporation whose sole assets consist of the Property. If Tenant shall timely and properly exercise the foregoing option, the sale of the Property shall be consummated through an escrow to be opened with a mutually acceptable title or escrow company and shall close within ten Business Days following the expiration of the Fixed Term or Extended Term (unless earlier exercised due to a Landlord default) in connection with which Tenant exercised such purchase option. The purchase price of the Property (net of the principal balance of any Facility Mortgages placed on the Property by Landlord and expressly assumed by Tenant and the amount of any damages owing by Landlord to Tenant) shall be deposited into escrow by wire transfer of immediately available funds at least two business days prior to close of escrow and shall be paid to Landlord at close of escrow by wire transfer of immediately available funds to such account as Landlord shall designate. Tenant acknowledges and agrees that it shall purchase the Property from Landlord "AS IS" and subject to all faults, defects in title and other matters whatsoever, including, but not limited to, all matters of record, other than (a) Facility Mortgages not expressly assumed by Tenant and (b) any other liens, encumbrances, attachments, levies or claims encumbering the Property to the extent Landlord is responsible for creation of same, all of which shall be removed of record prior to purchase. Landlord shall make no warranty or representation except (i) with respect to its corporate authority and (ii) that it has removed all liens and encumbrances referenced in clauses (a) and (b) in the preceding sentence. All title insurance premiums and other closing costs associated with the purchase of the Property by Tenant pursuant to this Section shall be paid by Tenant. 26.3 SPECIFIC PERFORMANCE OF OPTIONS. The parties acknowledge that: (i) The irrevocable right and options herein granted by one party to the other is a moving consideration and a principal cause of this transaction without which neither party would have entered it. (ii) The parties hereto agree that damages for breach of the option provisions hereof are insusceptible of reasonable measure, and accordingly they agree that specific performance and injunctive relief are appropriate remedies for nonperformance. If either party shall fail or refuse to consummate the sale and transfer of Tenant's Personal Property or the Property, as the case may be, pursuant to the options granted by Section 26.1 or 26.2 or extend the Term hereof under Section 19.2, then the aggrieved party may forthwith apply to a court of competent jurisdiction for a decree of specific performance ordering the transfer of Tenant's Personal Property or the Property, as the case may be, upon payment of the applicable purchase price therefor, or the extension of the Term hereof upon payment of the applicable monthly rent. If Landlord rejects Tenant's tender of the applicable purchase price or the applicable monthly rent, as the case may be, then Tenant's tender of such funds into the court registry shall be deemed equivalent to payment. -53- ARTICLE XXVII FACILITY MORTGAGES Without the consent of Tenant, Landlord may, subject to the terms and conditions set forth below in this Section, from time to time, directly or indirectly, create or otherwise cause to exist any lien, encumbrance, security interest or title retention agreement ("ENCUMBRANCE") upon the Property, or any portion thereof or interest therein, whether to secure any borrowing or other means of financing or refinancing provided that the principal amount of such borrowing, financing or refinancing does not exceed 80% of the then Fair Market Value of the Property. Any such Encumbrance (i) shall contain the right to prepay (whether or not subject to a prepayment penalty, which penalty shall be paid by Landlord); (ii) shall provide that it is subject to the rights of Tenant under this Lease, including the rights of Tenant to acquire the Property pursuant to the applicable provisions of this Lease; (iii) shall be paid in full and released and reconveyed in the event Tenant purchases the Property pursuant to this Lease, unless Tenant elects to assume such Encumbrance; and (iv) shall not provide for negative amortization or capitalization of interest; PROVIDED, however, that Tenant agrees that it shall subordinate this Lease to any mortgage, security interest or deed of trust that may hereafter from time to time be recorded on Landlord's interest in the Property, and to any and all advances made or to be made thereunder, and to renewals, replacements and extensions thereof. Tenant's failure to deliver any reasonable written subordination document requested by Landlord in accordance with the preceding sentence within ten Business Days after Notice thereof shall constitute an Event of Default hereunder. Any such subordination, however, shall be subject to the condition precedent that the mortgagee under such mortgage or the beneficiary under such deed of trust enter into a written non-disturbance and attornment agreement with Tenant, in form and content satisfactory to Tenant, whereunder it is agreed that in the event of a sale or foreclosure under such mortgage or deed of trust, the purchaser of the Property (including the mortgagee or beneficiary under such mortgage or deed of trust), shall acquire or hold the Property subject to this Lease so long as no Event of Default has occurred and is continuing hereunder, and so long as Tenant recognizes such purchaser as the landlord under this Lease and agrees, if requested to do so, to attorn to such purchaser and, if instructed to do so by such purchaser, to make rental payments directly to it. ARTICLE XXVIII LIMITATION OF LIABILITY Tenant specifically agrees that neither AHP nor Landlord nor any officer, shareholder, employee or agent of AHP or Landlord (each of which shall, for purposes of this Article XXVII, be considered an Affiliate of Landlord) shall be held to any personal liability, jointly or severally, for any obligation of, or claims against Landlord, Tenant agreeing to look solely to Landlord's equity interest in the Property or to Landlord's interests or interests of subsidiaries of Landlord in other properties leased to Tenant or Affiliates of Tenant for recovery of any judgment from Landlord, except that Landlord's obligations under Section 19.1 and Article XXVII, clause (iii) shall be a general and unlimited liability of Landlord. The provisions contained in the foregoing sentence are not intended to, and shall not, limit any right that Tenant might otherwise have to obtain injunctive relief against Landlord or Landlord's successors in interest, or any action not involving the personal liability of Landlord (original or successor). In no event shall Landlord (original or successor) or any Affiliate of Landlord be required to respond in monetary damages from Landlord's assets other than Landlord's equity interest in the Property. Furthermore, except as otherwise expressly provided herein, in no event shall Landlord or any Affiliate of Landlord (original or successor) ever be liable to Tenant for any indirect or consequential damages suffered by Tenant from whatever cause. Landlord specifically acknowledges and agrees that -54- neither PHC, nor any officer, shareholder, employee, agent or Affiliate thereof nor their successors or assigns has guaranteed the payment or performance of any of Tenant's obligations hereunder. ARTICLE XXIX ADDITIONAL COVENANTS OF TENANT 29.1 ADDITIONAL NEGATIVE COVENANTS. Tenant covenants and agrees with Landlord that, during the Term hereof, Tenant shall not, either directly or indirectly: (a) FIXED CHARGE COVERAGE RATIO. Commencing on the first day of the month which is at least six full months after the effective date hereof, permit the ratio of: (i) (a) Tenant's Cash Flow to (b) the sum of Total Rent payable hereunder and principal and interest payments payable by Tenant for any calendar quarter to be less than 2.0 to 1.0; PROVIDED, HOWEVER, that the failure of Tenant to comply with the foregoing ratio shall not constitute an Event of Default if a Security Letter of Credit in the amount of twelve monthly installments of Base Rent is in effect or is obtained within ten Business Days after such failure. (b) SALE OF ASSETS. Other than in the ordinary course of business, sell, lease, transfer or otherwise dispose of all or any substantial part of its properties, equipment or assets, except for (x) equipment or properties which are no longer useful in its business or have been replaced and (y) during any 12-month period, equipment or property with an aggregate market value not exceeding $250,000. (c) CONSOLIDATION OR MERGER. Consolidate with or merge into any other entity or permit any other corporation to merge into it unless (i) it is the survivor or (ii) after giving pro forma effect to the merger, based on its financial statements and the financial statements of the other entity or entities participating in the merger, for, in each case, its most recently completed fiscal year or quarter, there is no violation of any of the covenants of this Lease to be observed or performed by Tenant. (d) DIVIDENDS. Declare or pay any dividend or make any distribution or make any redemption with respect to any capital stock of Tenant unless and until Tenant's obligation to maintain the Security Letter of Credit as provided in Section 29.3(c) hereof has been extinguished. (e) TRANSACTIONS WITH AFFILIATES. Commencing as of the date hereof, unless and until Tenant's obligation to maintain the Security Letter of Credit as provided in Section 29.3 hereof has been extinguished, sell, lease, transfer or otherwise dispose of any of its properties or assets (relating to the Property), or enter into any contract, agreement, understanding, loan, advance or guaranty with, or for the benefit of, any Affiliate of Tenant, except (i) in the ordinary course of business and on terms that are no less favorable than those that could have been obtained in a comparable transaction with an unrelated person and (ii) involving an aggregate amount not exceeding $250,000 for all Affiliates of Tenant in any twelve month period. (f) ADDITIONAL FINANCIAL COVENANT. Permit the ratio of its current assets, excluding any encumbered (other than in favor of Landlord) and legally restricted current assets, to current liabilities (both determined in accordance with GAAP) to be less than one-to-one; PROVIDED, HOWEVER, that the failure of Tenant to comply with the foregoing ratio shall not constitute an Event of -55- Default if a Security Letter of Credit in the amount of twelve monthly installments of Base Rent is in effect or is obtained within ten Business Days after such failure. (g) LIMITATION ON BUSINESS. Change or alter the operations of the Facility as presently conducted if the effect thereof could reasonably be anticipated to have a material adverse effect on the business, properties, condition (financial or otherwise) or operations of the Facility. (h) NON-COMPLYING USES. With such exceptions as are not material in the aggregate, use the Property or permit the Property to be used in violation of any Legal Requirements or Insurance Requirements or in a manner which will cause the cancellation of any insurance policy covering the Property or any part thereof or any provider agreement. 29.2 ADDITIONAL AFFIRMATIVE COVENANTS. Tenant covenants and agrees with Landlord that, during the Term hereof, Tenant shall: (a) MAINTENANCE OF PROPERTIES AND INTANGIBLE ASSETS. (i) Maintain its corporate existence in good standing. (ii) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence and, with such exceptions, if any, as are not material in the aggregate, to obtain and, having obtained, preserve, renew and keep in full force and effect all customary accreditation, rights, licenses and permits and, with such exceptions, if any, as are not material in the aggregate, comply with all laws and regulations applicable to it and conduct and operate the Facility in substantially the manner, with such changes as may from time to time be considered by management as necessary or appropriate, in which it is presently conducted and operated, and at all times, with such exceptions as are not material in the aggregate, to obtain, maintain, preserve and protect all necessary franchises, provide agreements, contract rights, trademarks and trade names used or useful in its operations and preserve all its assets which are used or useful in the conduct of its operations, and keep the same in working order and condition, and, with such exceptions as are not material in the aggregate, from time to time to make, or cause to be made, all necessary repairs, renewals, replacements, betterments and improvements thereto, so that the operation of the Facility may be properly and advantageously conducted at all times. Without limiting the generality of the foregoing, Tenant shall use or cause the Property to be used for the Primary Intended Use and only for such other uses as may be necessary in connection with or incidental to said use or as may be agreed to by Landlord in its sole and absolute determination. With such exceptions as are not material in the aggregate, no use shall be made or permitted to be made of the Property and no acts shall be done which violate any Legal Requirements or Insurance Requirements or which will cause the cancellation of any insurance policy covering the Property or any part thereof or any provider agreements. Tenant shall comply in all material respects with all Legal Requirements and all Insurance Requirements. (iii) Tenant, immediately upon obtaining knowledge of facts which are reasonably likely to result in an action by any Federal, state or local agency (or the staff thereof) to revoke, withdraw or suspend any permit, license, conditional use permit, variance certificate, certificate of need, letter of nonreviewability, provider agreement or other governmental approval, or an action of any other type, which would have a material adverse effect on the Tenant or the operations of the Facility, shall notify the Landlord thereof immediately. -56- (b) OBLIGATIONS AND TAXES. With such exceptions as are not material individually or in the aggregate, none of which exceptions results in the creation of a lien prohibited by this Lease on any property of Tenant, pay all indebtedness and obligations in accordance with customary trade practices and pay and discharge promptly all taxes, assessments and governmental charges or levies imposed on it or upon its income and profit, or upon any of its property, real, personal or mixed, or upon any part thereof, before the same shall become in default, as well as pay before they shall become in default all lawful claims for labor, material and supplies or otherwise which, if unpaid, might become a lien or charge upon such Property or any part thereof. (c) LITIGATION NOTICE. Give Landlord prompt notice of any action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency which, if adversely determined, would materially adversely affect the business, operations, properties, assets or condition (financial or otherwise) of Tenant. (d) NOTICE OF CERTAIN EVENTS. Give Landlord prompt Notice of any Event of Default which it has actual knowledge or any event of which it has actual knowledge which, with the passage of time or the giving of notice, or both, would constitute an Event of Default. (e) TENANT'S CAPITAL INVESTMENT. Tenant shall, during the period commencing on the Commencement Date and ending on February 28, 1999, make Tenant's Capital Investment in an aggregate amount equal to at least $3,400,000. (f) PENSION PLANS. Tenant shall notify Landlord within ten business days of the occurrence of any of the following events ("NOTIFICATION EVENTS") with respect to Tenant's Plans (as defined in ERISA) and within ten days of obtaining knowledge of any Notification Event with respect to Plans of its Affiliates: (i) the termination of a Plan, unless such Plan can be terminated without material adverse effect on the business, properties or condition (financial or otherwise) of Tenant; (ii) the failure to make contributions to any of Tenant's Plans (including any Multiemployer Plans) in a timely manner and in sufficient amount to comply with the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (iii) the failure to comply with all material requirements of ERISA and the Code which relate to such Plans and Multiemployer Plans (as defined by ERISA), where such failure to comply would have a material adverse effect on the business, properties or condition (financial or otherwise) of Tenant; (iv) receipt by Tenant of any notice of the institution of any proceeding or other action which may directly result in the termination of any Plans or Multiemployer Plans; (v) a Termination Event or Reportable Event (as defined by ERISA) with respect to a Plan; and (vi) any event or condition which would cause the lien provided for under Section 4068 of ERISA to attach to the assets of Tenant. Tenant shall not fail to make any payments to any Multiemployer Plan that Tenant may be required to make under any agreement relating to any Multiemployer Plan, ERISA or any other law pertaining thereto, except for any payments being contested in good faith in accordance with Article XIII with respect to which Tenant has established adequate reserves or which, if not made, would not have a material adverse effect on the business, properties or condition (financial or otherwise) of Tenant. 29.3 SECURITY FOR THE LEASE. (a) SECURITY AGREEMENT. On or before the Commencement Date, Tenant shall execute and deliver to Landlord the Security Agreement. (b) ADDITIONAL COLLATERAL SECURITY FROM CALIFORNIA AFFILIATE. Concurrently with its execution hereof, Tenant will cause the California Affiliate to execute and deliver to Landlord -57- (i) a Security Agreement substantially in the form of the California Facilities Security Agreement, pertaining to the assisted living facilities owned and operated by such California Affiliate, (ii) such financing statements and other instruments as Landlord may reasonably request in order to perfect the security interests or encumbrances established by such Security Agreement, and (iii) an opinion of counsel to such California Affiliate, in form reasonably acceptable to Landlord, to the effect that the California Facilities Security Agreement is binding on and enforceable against the California Affiliate signatory thereto. Such Security Agreement will be effective upon delivery thereof to Landlord, and will be binding upon and enforceable against the California Affiliate. However, Landlord agrees not to file any of the financing statements associated with such Security Agreement unless (i) an Event of Default occurs hereunder, (ii) a default occurs under the California Security Agreement, or (iii) the California Affiliate challenges or disavows the Security Agreement to which it is a party. Tenant shall have the right to have the security interests and encumbrances created by the California Facilities Security Agreement released by Landlord if Tenant provides equivalent collateral security in substitution therefor, which shall be determined by Landlord in its discretion, reasonably exercised. (c) SECURITY LETTER OF CREDIT. As security for the timely and faithful performance by Tenant of each and every one of Tenant's obligations under this Lease, Tenant shall, on the Commencement Date and thereafter as provided herein, deliver and maintain an irrevocable standby letter of credit which (A) is issued or confirmed by a bank having capital or surplus of at least $1 billion and whose senior unsecured debt securities are rated "A2" or better by Moody's or "A" or better by S&P, provided none of such securities is subject to a "credit watch with negative implications," (B) is payable, in whole or in part, "at sight" upon Landlord's presentation to the issuing or confirming bank of a draft or other document in the amount therein stated to be due and (C) is otherwise in form and substance reasonably satisfactory to Landlord (such security letter of credit, as the same may be augmented, increased, renewed or replaced as hereinafter provided, is referred to herein as the "Security Letter of Credit"), and which contains the undertaking of such bank in the amount of the sum of twelve monthly installments of Base Rent. If Landlord shall draw any amount, representing an amount equal to the obligation or obligations of Tenant hereunder, against the Security Letter of Credit, which it shall be entitled to do if an Event of Default has occurred and is continuing (and any applicable cure period, if any, has expired), and apply the proceeds of such drawing against any obligation or obligations of Tenant hereunder in such amount or amounts as Landlord, in its sole discretion, shall decide, Tenant shall cause either (i) an additional Security Letter of Credit to be issued or (ii) the bank's undertaking under the original Security Letter of Credit to be increased, in either case, in an amount equal to the amount of such drawing within five Business Days following Tenant's receipt of notice of such drawing. Tenant shall (x) renew the Security Letter of Credit at least annually and shall deliver to Landlord such renewal Security Letter of Credit at least 30 days prior to the expiration of the previous Security Letter of Credit and (y) replace the Security Letter of Credit with a new Security Letter of Credit in favor of any permitted assignee of Landlord's interest under this Lease (provided Tenant shall have received 30 days' prior notice of such assignment) and shall deliver to Landlord's assignee such replacement Security Letter of Credit in time for the scheduled closing of Landlord's assignment of its interest under this Lease. After the Security Letter of Credit is established, Tenant may reduce the amount of the Security Letter of Credit to six monthly installments of Base Rent if, for the period of four consecutive calendar quarters most recently completed as of the date of determination, Tenant is in compliance with Sections 29.1(b) and 29.1(g) hereof, as reflected in financial statements prepared in accordance with generally accepted accounting principals as set forth in an Officer's Certificate delivered not later than sixty (60) days after the end of such most recent quarter. Such Officer's Certificate shall be accompanied by an appropriate cash flow statement and a compilation report thereon, without material qualification, of Tenant's independent public accountants. If and after Tenant's obligation to maintain the Security Letter of Credit has been so reduced, Tenant will be obligated to increase such letter to twelve monthly installments of -58- Base Rent within ten (10) business days after each time it delivers financial information to Landlord pursuant to Section 24.2 hereof which indicates that Tenant has failed to comply with any requirement of Sections 29.1(b) or 29.1(g) for the most recent period of two consecutive calendar quarters and such obligation will remain in effect until Tenant has subsequently satisfied the requirements of Sections 29.1(b) and 29.1(g) for another period of four consecutive calendar quarters. Tenant's failure to timely deliver or maintain any Security Letter of Credit in accordance with this Section 29.3(b) shall constitute an immediate Event of Default (which shall not require the giving of Notice) and, in such event, Landlord shall have the right to draw the entire balance of the Security Letter of Credit, as the case may be, and apply the proceeds against any obligation or obligations of Tenant hereunder in such amount or amounts as Landlord, in its sole discretion, shall decide and exercise any other remedies permitted Landlord hereunder, at law or in equity. Landlord shall not be deemed to hold any funds drawn under the Security Letter of Credit in trust but shall not commingle such funds with other assets of Landlord. Tenant shall not be entitled to any interest with respect to any such funds held by Landlord. ARTICLE XXX MISCELLANEOUS 30.1 LANDLORD'S RIGHT TO INSPECT. Landlord and its authorized representatives may, at any time and from time to time, upon reasonable notice to Tenant, inspect the Property during usual business hours subject to any security, health, safety or patient business confidentiality requirements of Tenant or any governmental agency, or created by any Insurance Requirement or Legal Requirement relating to the Property. 30.2 NO WAIVER. No failure by Landlord or Tenant to insist upon the strict performance of any term hereof or to exercise any right, power or remedy provided hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such breach, shall constitute a waiver of any such breach or of any such term. To the extent permitted by applicable law, no waiver of any breach shall affect or alter this Lease, which shall continue in full force and effect with respect to any other then existing or subsequent breach. 30.3 REMEDIES CUMULATIVE. To the extent permitted by law, each legal, equitable or contractual right, power and remedy of Landlord or Tenant now or hereafter provided either in this Lease or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power and remedy the exercise or beginning of the exercise by Landlord or Tenant of any one or more of such rights, powers and remedies shall not preclude the simultaneous or subsequent exercise by Landlord or Tenant of any or all of such other rights, powers and remedies. 30.4 ACCEPTANCE OF SURRENDER. No surrender to Landlord of this Lease or of all or any portion of or interest in the Property shall be valid or effective unless agreed to and accepted in writing by Landlord, and no act by Landlord or any representative or agent of Landlord, other than such a written acceptance by Landlord, shall constitute an acceptance of any such surrender by Tenant. 30.5 NO MERGER OF TITLE. There shall be no merger of this Lease or of the leasehold estate created hereby if the same person, firm, corporation or other entity acquires, owns or holds, directly or indirectly, this Lease or the leasehold estate created hereby or any interest in this Lease or such leasehold estate, and the fee estate in the Property. -59- 30.6 CONVEYANCE BY LANDLORD. Simultaneously with any transfer of interest in the Property (except pursuant to Article XXVII), Landlord shall cause to be transferred to the same transferee a similar interest in all properties owned by Landlord or its Affiliates and leased to Tenant or its Affiliates. If Landlord or any successor owner of the Property conveys the Property in accordance with the terms hereof (other than as security for a debt), and the grantee or transferee of the Property expressly assumes all obligations of Landlord hereunder arising or accruing from and after the date of such conveyance or transfer, Landlord or such successor owner, as the case may be, thereupon shall be released from all liabilities and obligations of Landlord under this Lease. 30.7 QUIET ENJOYMENT. So long as Tenant pays all Rent as the same becomes due and fully complies with all of the terms of this Lease and fully performs its obligations hereunder, Landlord warrants, represents and covenants that Tenant shall peaceably and quietly have, hold and enjoy the Property for the Term hereof, free of any claim or other action by Landlord or anyone claiming by, through or under Landlord, but subject to all liens and encumbrances of record as of the date hereof or hereafter consented to by Tenant. Except as otherwise provided in this Lease, no failure by Landlord to comply with the foregoing covenant shall give Tenant any right to cancel or terminate this Lease or abate, reduce or make a deduction from or offset against the Rent or any other sum payable under this Lease, or to fail or refuse to perform any other obligation of Tenant hereunder. Notwithstanding the foregoing, Tenant shall have the right, by separate and independent action, to pursue any claim it may have against Landlord as a result of a breach by Landlord of the covenant of quiet enjoyment contained in this Section and, in the event Tenant acquires the Property pursuant to the option granted hereunder, offset, at Tenant's option, against the purchase price the amount of any damages owing from Landlord to Tenant. 30.8 NOTICES. All notices, demands, requests, consents, approvals and other communications ("Notice" or "Notices") hereunder shall be in writing and delivered by personal delivery, courier or messenger service, express or overnight mail, or by registered or certified mail, return receipt requested and postage prepaid, or by facsimile, addressed to the respective parties as follows: If to Tenant: Paracelsus Pioneer Valley Hospital, Inc. c/o Paracelsus Healthcare Corporation 155 North Lake Avenue Suite 1100 Pasadena, California 91101 Attention: Robert C. Joyner, Esq. FAX: (818) 304-9588 Phone: (818) 792-8600 with a copy to: Milbank, Tweed, Hadley & McCloy 601 S. Figueroa Street, 30th Floor Los Angeles, California 90017 Attention: Eric H. Schunk, Esq. FAX: (213) 629-5063 Phone: (213) 892-4000 -60- If to Landlord: AHP of Utah, Inc. c/o American Health Properties, Inc. 6400 South Fiddler's Green Circle Suite 1800 Englewood, Colorado 80111 Attention: General Counsel FAX: (303) 796-9708 Phone: (303) 796-9793 or to such other address as either party may hereafter designate. Personally delivered Notices sent by courier or messenger service or by express or overnight mail or by facsimile shall be effective upon receipt, and Notices given by mail shall be complete at the time of deposit in the U.S. mail system, but any prescribed period of Notice and any right or duty to do any act or make any response within any prescribed period or on a date certain after the service of such Notice given by mail shall be extended five (5) days. 30.9 SURVIVAL OF TERMS; APPLICABLE LAW. Anything contained in this Lease to the contrary notwithstanding, all claims against, and liabilities of, Tenant or Landlord arising prior to any date of termination of this Lease shall survive such termination for two years, except for third party claims based on alleged tortious actions and omissions of Tenant during the term of this Lease, which third party claims shall survive the term of this Lease. If any term or provision of this Lease or any application thereof shall be invalid or unenforceable for any reason whatsoever, the remainder of this Lease and any other application of such term or provisions shall not be affected thereby. If any late charge or any interest rate provided for in any provision of this Lease based upon a rate in excess of the maximum rate permitted by applicable law, such charges shall be fixed at the maximum permissible rate. Neither this Lease nor any provision hereof may be changed, waived, discharged, modified or terminated except by an instrument in writing and in recordable form, signed by Landlord and Tenant. Subject to any limitations on assignment contained in this Lease, all the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The headings in this Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH, BUT NOT INCLUDING ITS CONFLICTS OF LAWS RULES. 30.10 EXCULPATION OF LANDLORD'S AND TENANT'S OFFICERS AND AGENTS. This Lease is made on behalf of Landlord and Tenant by an officer thereof, not individually, but solely in such officer's capacity in such office as authorized by the directors of Landlord or Tenant. The obligations of this Lease are not binding upon, nor shall resort be had to, the private property of any of the directors, shareholders, members, officers, employees or agents of Landlord or Tenant personally, but bind only Landlord's and Tenant's property. The provision contained in the foregoing sentence is not intended to, and shall not, limit any right that Landlord or Tenant might otherwise have to obtain injunctive relief against the other party or its successors in interest, or any action not involving the personal liability of the directors, shareholders, members, officers, employees or agents of Landlord or Tenant. Except as otherwise expressly provided herein, in no event shall either party ever be liable to the other party for any indirect or consequential damages suffered by a party from whatever cause. 30.11 TRANSFERS FOLLOWING TERMINATION. Upon the expiration or earlier termination of the Term, Tenant shall use good faith efforts to transfer to Landlord or Landlord's nominee, or to cooperate with Landlord or Landlord's nominee in connection with the processing by Landlord or -61- Landlord's nominee of any applications for, all licenses, operating permits and other governmental authorizations and all contracts (including contracts with governmental or quasi-governmental entities) which may be necessary for the operation of the Facility; provided, however, that the costs and expenses of any such transfer or the processing of any such application shall be paid by Landlord or Landlord's nominee. 30.12 TENANT'S WAIVERS. Tenant waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance and waives all notices of the existence, creation, or incurring of new or additional obligations, except as expressly granted herein. 30.13 MEMORANDUM OF LEASE. Landlord and Tenant shall, concurrently herewith, enter into a short form memorandum of this Lease and all options contained herein, in form suitable for recording under the laws of the State in which the Property is located. Tenant shall pay all costs and expenses of recording such memorandum of this Lease. 30.14 ARBITRATION. Any controversy arising out of, connected with or incidental to this Lease (except disputes concerning determinations of Fair Market Value which shall be resolved exclusively as provided in Article XXI) shall be decided by binding arbitration in Denver, Colorado under the expedited procedures of the American Arbitration Association, provided that claim is made within the applicable period of limitation. Depositions to obtain discovery may be taken upon good cause, upon leave to do so granted by the arbitrator. 30.15 MODIFICATIONS. No provision of this Lease may be amended, supplemented or otherwise modified except by an agreement in writing signed by the parties hereto or their respective successors in interest. 30.16 ATTORNEYS' FEES. If either party commences an action against the other to interpret or enforce any of the terms of this Lease or because of the breach by the other party of any of the terms hereof, the losing or defaulting party shall pay to the prevailing party reasonable attorneys' fees, costs and expenses incurred in connection with the prosecution or defense of such action. 30.17 TIME IS OF THE ESSENCE. Time is hereby expressly made of the essence with respect to each and every term and provision of this Lease, including, but in no way limiting the generality of the foregoing, each and every time constraint and deadline imposed by the terms of this Lease and the obligation of the Tenant to exercise the options set forth in this Lease, including, without limitation, the rights and options set forth in Articles III, XIX and XXV within the respective time periods set forth herein. The parties intend that they be strictly bound by the provisions concerning the timing of performance of their respective obligations contained in this Lease. Further, if any attempt is made by either party to perform an obligation required by it to be performed or comply with a provision of this Lease required by it to be complied with, in any manner, other than in strict compliance with the time constraints applicable thereto, even if such purported attempt is but one day late, then such purported attempt at performance or compliance shall be deemed (i) violative of this "Time is of the Essence" clause, (ii) in contravention of the intent of the parties hereto, and (iii) null and void and of no force and effect. 30.18 COUNTERPARTS. This Lease may be executed in any number of counterparts, each of which shall be deemed an original but when taken together shall constitute one and the same instrument. -62- IN WITNESS WHEREOF, Tenant and Landlord have executed this Lease as of the date first above written. PARACELSUS PIONEER VALLEY HOSPITAL, INC. By: ------------------------------------- Robert C. Joyner, Vice President AHP OF UTAH, INC. By: ------------------------------------- Joseph P. Sullivan President -63- -----END PRIVACY-ENHANCED MESSAGE-----