NOTICE: THIS
AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO THE SOUTH CAROLINA
UNIFORM
ARBITRATION ACT, SECTION 15-48-10 ET SEQ. OF THE CODE OF LAWS OF
SOUTH CAROLINA
FUTURE DEVELOPMENT
AGREEMENT
THIS FUTURE DEVELOPMENT AGREEMENT
(this “ Agreement ”) is made as of
September 9, 2009 by and between HTA — GREENVILLE, LLC,
a Delaware limited liability company (“ REIT ”),
and GREENVILLE HOSPITAL SYSTEM, a political subdivision organized
under the laws of South Carolina (“ GHS ”). REIT
and GHS are sometimes collectively referred to herein as the
“ Parties ” and individually as a “
Party ”.
RECITALS
A. REIT, as buyer, and GHS
(along with certain of its affiliates), as seller, entered into
that certain Agreement of Sale and Purchase, dated as of
July 15, 2009 as amended by that certain First Amendment to
Agreement of Sale and Purchase dated as of August 14, 2009,
that certain Second Amendment to Agreement of Sale and Purchase
dated as of August 21, 2009 and that certain Third Amendment
to Agreement of Sale and Purchase dated as of August 26, 2009
and that certain Fourth Amendment to Agreement of Sale and Purchase
dated as of September 4, 2009 (as so amended, the “
Purchase Agreement ”), pursuant to which, on the date
hereof, REIT has purchased from GHS a portfolio of medical office
building properties located in Greenville, South Carolina, as more
particularly described therein (the “ Existing
Portfolio ”). All capitalized terms used herein which are
not defined herein shall have the meanings given to such terms in
the Purchase Agreement.
B. GHS is contemplating the
development of certain additional medical office buildings and/or
childcare facilities in Greenville, South Carolina, all of which
are listed on Exhibit A hereto, a portion of which may be
developed on property currently owned by GHS (but not included in
the Existing Portfolio) and a portion of which may be developed on
property to be subsequently acquired by GHS (each, a “
Development Property ” and collectively, the “
Development Properties ”).
C. As partial and mutual
consideration for the purchase and sale of the Existing Portfolio,
the Parties agree that, should GHS elect to develop or sell any of
the Development Properties with “Outside Funding” (as
hereinafter defined), REIT and GHS mutually agree to an arrangement
under which REIT will be provided with the opportunity (subject to
its approval) to either (i) own and fund the development of
such Development Property or (ii) purchase the developed
Development Properties at completion, in each case subject to a
lease back to GHS as set forth herein.
NOW THEREFORE, in consideration of
the foregoing recitals, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
AGREEMENT
1. General
Provisions .
(a) Notice of Intent to
Develop . If at any time during the Term, GHS desires to
develop or sell (or ground lease) any Development Property with
Outside Funding, GHS shall notify REIT in writing (a “
Development Notice ”) (i) of the specific
Development Property which GHS intends to develop and/or transfer;
(ii) of the desired location of such Development Property (and
whether such Development Property is located within a medical
campus owned by GHS as of the date hereof (an “ On-Campus
Development Property ”) or offsite of any existing campus
owned by GHS as of the date hereof (each, an “ Off-Campus
Development Property ”); (iii) whether GHS desires
for REIT to fund the development and/or acquisition of the
Development Property upon completion; and (iv) if GHS has
indicated that they would structure the transaction as a transfer,
whether GHS prefers to sell or ground lease such Development
Property to REIT. For purposes of this Agreement, “
Outside Funding ” shall mean funding for the
applicable development or transfer of a Development Property which
comes from sources other than (A) GHS itself, (B) joint
venture relationships with other healthcare providers or
(C) physicians or other tenants of space occupied by GHS.
(b) Conditions for Approval
of Funding or Purchase . Should GHS elect for the REIT to
provide funding for development costs (whether as development
funds, a construction loan or the purchase price for the completed
Development Property), all of the following provisions must have
been satisfied on or before ,
2011 (the “Term”):
(i) The maximum commitment
amounts (whether as development funds, a construction loan or the
purchase price for the completed Development Property) do not
exceed, for each Development Property, the amounts reflected for
such Development Property on Exhibit A hereto;
(ii) The total amount to be
funded by REIT pursuant to this Agreement (whether as development
funds, a construction loan or the purchase price for the completed
Development Property) does not exceed $5,500,000 in the
aggregate;
(iii) At GHS’ election,
the applicable Development Property will either be sold or ground
leased to REIT (a) prior to the commencement of construction
or (b) upon completion of development; provided, however, that
notwithstanding the foregoing, (A) each Off-Campus Development
Property shall be conveyed to REIT (whether by fee or a “
Development Property Ground Lease ” (as hereinafter
defined)) only upon completion of development thereof and
(B) with respect to any On-Campus Development Property, if GHS
desires to convey such property to REIT prior to commencement of
construction, then such property shall be conveyed by a Development
Property Ground Lease;
(iv) REIT shall have received
evidence satisfactory to REIT that all Development Properties (once
constructed) shall be first class medical office buildings and/or
childcare facilities of a quality consistent with the other
buildings located on or near the applicable campus, and shall be at
locations acceptable to REIT;
(v) GHS (or the applicable
affiliate thereof) shall have executed and delivered mutually
acceptable (a) “ Development Agreement ” (as
hereinafter defined), (b) “ Construction Loan
Documents ” or “ Construction Disbursement
Documents ” (each, as hereinafter defined), as
applicable, (c) “ Purchase Agreement ” (as
hereinafter defined) or Development Property Ground Lease, as
applicable, and (d) a “ Master Lease ” (as
hereinafter defined). The documents executed pursuant to this
clause (v) shall hereinafter, with respect to any given
Development Property, be referred to herein as the “
Development Property Documents ”.
(vi) REIT shall have approved
the applicable plans and specifications and project budget. The
approved budget shall be the basis for the amount (as applicable)
(a) to be funded by the REIT pursuant to Construction Loan
Documents or Construction Disbursement Documents (as applicable),
(b) the purchase price for such Development Property to be sold
under an applicable Purchase Agreement, or (c) the ground
lease rent under the Ground Lease in the event the REIT acquires
the Development Property after completion;
(vii) REIT shall have approved
the selection of the general contractor, architect and engineering
teams;
(viii) All conditions precedent
to REIT’s funding obligations in the applicable Development
Property Documents have been satisfied; and
(ix) GHS shall have a credit
rating consistent with REIT’s underwriting requirements.
(x) GHS and all affiliates of
GHS shall be in compliance with the terms of all other agreements
between GHS (and/or its affiliates) and REIT (and/or its
affiliates).
(c) Memorandum . On the
Closing Date, with respect to those Development Properties that are
owned by GHS on the Closing Date, GHS shall record a Memorandum of
Development Agreement, in the form attached hereto as
Exhibit B, with the official recorder of the applicable county
where each prospective Development Property is located. With
respect to any Development Property which is not yet owned by GHS,
upon GHS’ acquisition of such property, GHS shall record a
Memorandum of Development Agreement with the official recorder of
the applicable municipality or county where such prospective
Development Property is located.
2. Documentation
. It is a condition precedent to REIT’s obligation to fund
any construction costs (pursuant to Construction Loan Documents or
Construction Disbursement Documents, as applicable) and/or purchase
any Development Property that GHS and REIT shall have executed and
delivered each of the following documents:
(a) Development
Agreement . A mutually acceptable development management
agreement or other mutually agreed upon document which governs the
development of such Development Property (each, a “
Development Agreement ”). Each Development Agreement
shall provide, among other things, as follows:
(i) REIT shall have the right
to approve any changes to the plans and specifications and project
budget for each Development Property;
(ii) The general contractor
shall have casualty, liability, automobile liability and
worker’s compensation insurance policies in form and
substance, with carriers, and with policy limits reasonably
adequate for a construction project of this type and reasonably
acceptable to REIT, and REIT shall be named as an additional
insured/loss payee on all such policies (other than the
worker’s compensation policy);
(iii) The general contractor
shall be required to indemnify, defend and hold harmless REIT to
the fullest extent permitted by law from and against any and all
liabilities, losses, demands, claims, costs, damages and expenses
(including court costs and expert witnesses’ and
attorneys’ fees) arising from, or in connection with the
development of the applicable Development Property. In addition to
the indemnity by the general contractor, GHS shall provide REIT
with reimbursement obligations and other protective provisions
consistent with the types of protections and agreements provided by
GHS in the Purchase Agreement;
(iv) The general contractor
shall provide bonding or other security or protections (with REIT
as a dual obligee) acceptable to REIT;
(v) The architect shall have
professional errors and omissions insurance policies in form and
substance, with carriers and with policy limits reasonably
acceptable to REIT;
(vi) In the event that GHS
fails to “substantially complete” the construction of
any Development Property by the “Lease Certain Date”
(as defined in Section 2(d) below) in accordance with the approved
plans and specifications and budget, then in addition to
REIT’s other rights and remedies set forth in any other
applicable Development Property Document: (a) if the
construction of such Development Property is funded by REIT as
contemplated by Section 2(e) below (the “ Funded
Development Properties ”), REIT shall have the right, but
not the obligation, to take over completion of such Development
Properties at GHS’ sole cost and expense, and (b) if the
Development Property is not one of the Funded Development
Properties (a “ Non-Funded Development Property
”), REIT may terminate the applicable Development
Agreement;
(vii) REIT shall be an express
third party beneficiary of any contracts or subcontracts relating
to the design and construction of each Development Property;
and
(viii) GHS will provide REIT
with a guaranteed maximum cost based on an agreed upon budget for
the Development Property such that REIT will not be responsible for
any cost overruns related to such Development Property, regardless
of the reason for such cost overruns.
For purposes of
