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MEDICAL OFFICE BUILDING LEASE

Office Lease Agreement

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Title: MEDICAL OFFICE BUILDING LEASE
Date: 4/14/2006

MEDICAL OFFICE BUILDING LEASE, Parties:
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Exhibit 10.4(a)

 

MHS 2/00

 

(MOB Development

 

Expense Stop)

 

MEDICAL OFFICE BUILDING LEASE

 

THIS LEASE is made and entered into this 12 day of Nov, 2003 by and between Methodist Healthcare System of San Antonio, 3LTD., d/b/a Physician’s Plaza I or its assigns (“Landlord”), and, San Antonio Specialty Hospital, LTD, d/b/a Life Care Hospitals of San Antonio (“Tenant”).

 

Landlord, in consideration of the rents to be paid and the covenants and agreements to be performed by Tenant as hereinafter set forth, hereby leases to Tenant and Tenant hereby leases from Landlord Suite Nos. 460 consisting of 1,070 usable square feet of space (the “Premises”), on the fourth floor of the Physician’s Plaza 1 (“Building”) located at 8038 Wurzbach Road, San Antonio, Texas, 78229, for the term and upon the conditions and agreements hereinafter set forth (“Lease”) The Building is located upon (and more particularly described in Exhibit A-1 attached hereto and incorporated herein. This floor plan of the Premises is more particularly shown on Exhibit A-2 attached hereto and incorporated herein. This Lease shall constitute a binding agreement between the parties effective as of the date set forth above (“Effective Date”).

 

ARTICLE I. TERM

 

The term of this Lease shall be for approximately one year beginning on the “Commencement Date: (as defined hereinafter) and shall expire at 12:00 midnight of the last day of the month in which the first year anniversary of the Commencement Date occurs. The term “Commencement Date” shall mean ten (10) days after Landlord notifies Tenant that Landlord has received a certificate of substantial completion from Landlord’s architect with respect to the Premises and a certificate of occupancy (or the local equivalent) for the Premises from the governmental authority with authority to issue such certificate in the jurisdiction in which the Premises are located. Landlord estimates that the Commencement Date will occur on or about November 1, 2003. “ Lease Year ” shall be defined as each twelve consecutive month period throughout the Term, beginning on the Commencement Date and each anniversary thereof.

 

ARTICLE II. RENT

 

During the Term, Tenant shall pay to Landlord “Annual Base Rent” as determined pursuant to Schedule A or Schedule B below, whichever is applicable, multiplied by the number of rentable square feet of the Premises (such sum is hereafter referred to as “Base Rent”), together with “Tenant’s Proportionate Share” of “Excess Operating Costs” and “Additional Rent” (as those terms are hereinafter defined). Base Rent shall be payable in monthly installments in advance without notice, demand, setoff or deduction and all such installments shall be paid to Landlord in U.S. Dollars in cash or by check or wire transfer to an account designated by Landlord or its managing agent. No other form of payment will be accepted. The first installment for Base Rent shall be due on the Commencement Date and, thereafter, such monthly installments shall be due on the first day of each calendar month. If the Premises are occupied for a fraction of a month at the beginning or the end of the Term. Tenant shall pay a proportionate part of the applicable monthly installment.

 

Tenant shall pay and be liable for all rental, sales and use taxes or other similar taxes, if any, levied or imposed on Base Rent or Additional Rent payments by any city, county, state or other governmental body having authority. Such payments shall be in addition to all other payments required to be paid to Landlord by Tenant under the terms of this Lease. Any such payment shall be paid to Landlord concurrently with the payment of the Base Rent or Additional Rent upon which such tax is based.

 

Schedule B shall apply to this Lease.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE A

  

 

 

  

 

 

  

 

 

  

 

SCHEDULE B

  

 

 

  

 

 

 

 

 

 

 

 

 

Lease Year


 

  

Annual Base
Rent Rate


 

  

Annual Base
Rent


 

  

Monthly Rent
Installment


 

  

Annual Base Rent
Rate


 

  

Annual Base
Rent (1)


 

  

Monthly Rent
Installment (1)
(First Year Only)


 

 

 

 

 

 

 

 

 

  

$

            

  

$

            

  

$

            

  

$

16.68 u.s.f.

  

$

17,847.60

  

$

1,487.30

 

1)

The Base Rent set forth in Schedule B is subject to increases as a result of increases in the cost of living during the term. On each anniversary of the Commencement Date (each an “Adjustment Date”), Base Rent shall be adjusted to reflect the increase, if any, in the cost of living over the preceding anniversary year Base Rent due as a result of an increase in the cost of living shall be calculated in accordance with the terms set forth below. The basis for computing the cost of living shall be the unadjusted Consumer Price Index for all Urban Consumers. All items (1982-84 __ 100) published by the Bureau of Labor Statistics of the United States Department of Labor (the “index”). The index for the month immediately preceding the Commencement Date shall be the “Base Index Number”. The index for the month immediately preceding the Adjustment Date shall be the “Current Index Number”. The Base Rent for the anniversary year commencing on such Adjustment Date shall be the product obtained from multiplying the Initial Base Rent (annualized) by the fraction whose numerator is equal to the Current Index Number and whose denominator is equal to the Base Index Number, provided that in no event will Base Rent for such anniversary year be less than the greater of the amount set forth in Schedule B or Base Rent for the anniversary year immediately preceding the Adjustment Date. If the Index is not in existence at the time the determination is to be made, the parties shall use such equivalent price index as is published by a successor government agency in lieu of the Index, or, if no such price index is published, then the parties shall use a mutually acceptable equivalent price index as is published by a non-governmental agency.

 

ARTICLE III. ADDITIONAL RENT

 

In addition to the Base Rent as set forth in Article II herein, Tenant shall pay Landlord “Additional Rent” , which term shall be defined to include the following:

 

(1) any sum owed for separately metered utilities, including, without limitation, electricity, or as a “Surcharge” (as defined in Article V);

 

(2) any other sums owed by Tenant pursuant to the terms of this Lease or otherwise arising in connection with Tenant’s occupancy of the Premise; and

 

(3) any sum owed for costs incurred by Landlord which are in excess of the sum of any tenant improvement allowance upon which Landlord and Tenant have agreed;

 

(4) “Tenant’s Proportionate Share” of “Excess Operating Costs”.

 

Medical Office Building Lease

 

For purposes of this Lease, Base Rent and Additional Rent shall hereinafter be collectively referred to as “Rent”

 

1


MHS 2/00

 

(MOB Development

 

Expense Stop)

 

For purposes of this Lease, Base Rent and Additional Rent shall hereinafter be collectively referred to as “Rent”.

 

1

Operating Costs Defined . Intentionally Omitted

 

2

Excess Operating Costs Defined . Intentionally Omitted

 

3

Proportionate Share . Intentionally Omitted

 

4

Payment of Excess Operating Costs . Intentionally Omitted

 

5

Security Deposit . Intentionally Omitted

 

ARTICLE IV. USE OF PREMISES

 

The Premises shall continuously and at all times during the Term be used and occupied by Tenant only as medical offices for licensed physicians (“Physicians ”) to engage in the private practice of medicine and other related activities incidental thereto, and for no other purpose. Ancillary medical care services, including but not limited in clinical/pathological laboratory services and imaging services, provided to patients of physicians occupying the premises shall be permitted if: (a) such patients were not referred to such Physicians for the purpose of obtaining such services or procedures; (b) such services are incidental to and a necessary part of the examination or diagnosis rendered to Tenant’s patients ( i.e., no provision of services to third parties), so long as such clinical/pathological laboratory and radiological services are merely ancillary and incidental to such Tenant’s primary medical practice and neither constitute Tenant’s primary medical practice or specialty, or constitute the predominant services rendered by Tenant to Tenant’s patients; and (c) prior to providing such services, Tenant shall have submitted to Landlord a detailed description of the laboratory or x-ray services Tenant desires to provide or perform and Landlord shall have consented in writing to the provision or performance of such services, which consent may be denied in Landlord’s sole and absolute discretion (the provision of such services and procedures shall be strictly limited to those services and procedures to which Landlord has expressly consented in writing and the terms of this paragraph shall be strictly construed to prohibit any expansion or addition to such services or procedures without Landlord’s written consent). Tenant shall not dispense any drugs or medicines to persons other than Tenant’s own patients. Prior to the installation of any diagnostic, laboratory or radiology equipment for services permitted hereunder, Tenant shall provide Landlord with a list of such equipment; a list of any hazardous substances, wastes or materials, as hereinafter defined, which will be used or generated in connection with the use of such diagnostic, laboratory or radiology equipment; and Tenant’s proposed procedures for the use, storage and disposal of any hazardous substances, wastes or materials, including but not limited to the procedure for silver recover for any radiology equipment.

 

All Physicians who conduct a medical practice and related activities upon the Premises (a “Practice” ) must be and remain active members and associates in good standing on the active medical staff of Southwest Texas Methodist Hospital (the “ Hospital ”). Nothing in this Article IV or elsewhere in this Lease requires or shall require any Physician or any person associated with a Physician to refer any patient to or order or purchase any item of service from Hospital, Landlord or any of their affiliates.

 

Each Practice conducted upon the Premises shall at all times be conducted under the supervision and authority of a Physician and, except with Landlord’s prior written consent, which may be withheld in Landlord’s sole and absolute discretion, no such Physician shall (1) allow any other person or entity to purchase, manage or operate its Practice or (2) conduct the Practice while serving as an agent or employee of any other person or entity.

 

Tenant shall act in accordance with and not violate any restrictions or covenants of record affecting the Premises or the Building. Tenant shall not use or occupy the Premises in violation of law or of the Certificate of Use of Occupancy issued for the Building of which the Premises are a part, and shall immediately discontinue any use of the Premises which is declared by either any governmental authority having jurisdiction or the Landlord to be a violation of any law, code, regulation or a violation of said Certificate of Use or Occupancy. Tenant shall comply with any direction of any governmental authority having jurisdiction which shall, by reason of the nature of Tenant’s use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupancy thereof.

 

Tenant shall not do nor permit to be done anything which will invalidate or increase the cost of any casualty and extended coverage insurance policy covering the Building and/or property located therein, and shall comply with all rules, orders, regulations and requirements of the appropriate Fire Rating Bureau or any other organization performing a similar function. Tenant shall promptly upon demand reimburse Landlord for any additional premium charged for such policy by reason of Tenant’s failure to comply with the provisions of this paragraph. Tenant shall not do nor permit anything to be done in, on or about the Premises which would in any way obstruct or interfere with the rights of other tenants or occupants of the Building, or use or allow the Premises to be used for any immoral, unlawful or objectionable purpose, nor shall Tenant maintain or permit any nuisance or commit or suffer to be committed any waste in, on or about the Premises.

 

Tenant shall not cause or permit the release or disposal of any hazardous substances, wastes or materials, or any medical, special or infectious wastes, on or about the premise or the Building of which they are a part and Tenant shall be solely responsible for and shall promptly pay the cost of removing all such hazardous substances, wastes and materials and any such medical, special and infectious waste from the Premises, which removal shall be in accordance with all applicable governmental requirements. Hazardous substances, wastes or materials shall include those which are defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 USC Section 6901 et seq; the Resource Conservation and Recovery Act, as amended, 42 USC Section 9601 et seq; the Toxic Substances Control Act, as amended 15 USC Section 2601 et seq; and medical, special or infectious wastes shall include those which are defined pursuant to the medical waste regulations which have been promulgated by the Federal Government or the state in which the Premises are located, and as further set forth in any state or local laws and ordinances, and their corresponding regulations. Tenant shall comply with all rules and policies set by Landlord, and with all federal, state and local laws, regulations and ordinances which govern the use, storage handling and disposal of hazardous substances, wastes or materials and medical, special or infectious wastes. Tenant shall indemnify, defend and hold Landlord harmless from and against any claims or liability arising out of or connected with Tenant’s failure to comply with the terms of this Article IV, which terms shall survive the expiration or earlier termination of this Lease.

 

Landlord, may at its option, terminate this Lease in the event Tenant engages in a prohibited use or otherwise violates the terms of this Article IV and fails to cure such violation within thirty (30) days following Tenant’s receipt of written notice thereof from Landlord.

 

ARTICLE V. BUILDING SERVICES AND MAINTENANCE

 

All utilities for the Premises which are not separately metered as well as all utilities for the common areas of the Building will be paid for by Landlord (subject to reimbursement as an Operating Cost). Heat and air-conditioning required to be furnished by Landlord will be furnished for Tenant’s comfortable use and occupancy of the Premises during reasonable business hours. The term “reasonable business hours” shall mean the hours of 7:00 a.m. to 7:00 p.m. Monday through Friday and 7:00 a.m. to 1:00 p.m. on Saturday, excluding legal holidays. If Tenant requires or utilizes more water or electric power than is considered reasonable or normal by Landlord, Landlord may reasonably determine and require Tenant to pay as Additional Rent, the cost incurred as a result of such additional usage ( “Surcharge” ). Tenant agrees to pay all separately metered utilities required and used by Tenant in the Premises Landlord reserves the privilege of stopping any or all utility services in case of accident or breakdown, or for the purpose of making alterations, repairs or improvements, and shall not be liable for the failure to furnish or delay in furnishing any or all of such services when same is caused by or is the result of strikes, labor disputes, labor, fuel or material scarcity, or governmental or other lawful regulations or requirements, or the failure of any corporation, firm or person with whom the Landlord may contract for any such service, or for any service incident thereto, to furnish some, or is due to any cause other than the gross negligence of the Landlord; and the failure to furnish any of such service in such event shall not be deemed or construed as an eviction or relieve Tenant from the performance of any of the obligations imposed upon Tenant by this Lease. Landlord shall not be responsible to the Tenant for loss of property in or from the Premises, or for any damage done to furniture, furnishings or effects therein, however occurring, except where such damages occur through the gross negligence of Landlord, nor shall Landlord be responsible should any equipment or machinery break down or for any cause

 

2


MHS 2/00

 

(MOB Development

 

Expense Stop)

 

cease to function properly on account of any such interruption of service. Tenant shall be solely responsible for and shall promptly pay all charges for telephone and other communication services.

 

Landlord will provide general janitorial services in and about the common areas of this Building as necessary or desirable in Landlord’s reasonable judgement Landlord shall also be responsible for providing daily general janitorial and cleaning services for the Premises Tenant, at Tenant’s sole cost and expense, shall be responsible for medical, special and infectious waste removal for the Premises in accordance with all applicable laws, regulations and orders, and shall not permit undue accumulations of garbage, trash, rubbish or other refuse within the Premises and shall keep all refuse in proper containers until disposal of such refuse. Tenant shall not permit the mixing or disposal of any hazardous substances, wastes or materials or any medical, special or infectious waste (as such terms are defined in Article IV) with the general office refuse and Landlord shall have no duty or obligation to remove any hazardous substances, wastes or materials or any medical, special or infectious waste from the Premises.

 

Landlord shall maintain in good repair the Building and the Premises in good repair and condition and shall make all repairs and replacements and perform all maintenance necessary to keep the Building and Premises in such condition, including all mechanical, plumbing and electrical systems.

 

Tenant shall promptly repair, in good and workmanlike manner, any damage to the Premises or other part of the Building caused by any breach of this agreement to maintain the Premises or by any willful or negligent act or omission of Tenant, or of any employee, agent or invitee of Tenant. If Tenant fails to do so, Landlord shall have the right to repair any such damage and Tenant shall pay Landlord for the cost of all such repairs, plus interest at the Interest Rate (as defined in paragraph viii of Article XXI).

 

ARTICLE VI. ALTERATIONS

 

Tenant may not make my changes, additions, alterations, improvements or additions to the Premises or attach or affix any articles thereto without Landlord’s prior written consent. All alterations, additions, or improvements which may be made upon the Premises by Landlord or Tenant (except unattached trade fixtures and office furniture and equipment owned by Tenant) shall not be removed by Tenant, but shall become and remain the property of Landlord. All alterations, improvements, and additions to the Premises (as permitted by Landlord) shall be done only by Landlord or contractors or mechanics approved by Landlord, and shall be at Tenant’s sole expense and at such times and in such manner as Landlord may approve. If Tenant shall make any alterations, improvements or additions to the Premises, Landlord may require Tenant, at the expiration of this Lease, to restore the Premises to substantially the some condition as existed at the commencement of the Term. Any mechanics or materialmen’s lien for which Landlord has received a notice of intent to file or which has been filed against the Premises or the Building arising out of work done for, or materials furnished to or on behalf of Tenant, its contractors or subcontractors shall be discharged, bonded over, or otherwise satisfied by Tenant within ten (10) days following the earlier of the date Landlord receives (1) notice of intern to file a lien or (2) notice that the lien has been filed. If Tenant fails to discharge, bond over, or otherwise satisfy any such lien, Landlord may do so at Tenant’s expense, and the amount expended by Landlord, including reasonable attorneys’ fees, shall be paid by Tenant within ten (10) days following Tenant’s receipt of a bill from Landlord.

 

ARTICLE VII. DAMAGE TO PROPERTY - INJURY TO PERSONS; INSURANCE

 

Tenant shall and hereby does indemnify and hold Landlord harmless from and against any and all claims arising form: 1) Tenant’s use of the Premises or the conduct of Tenant’s business or profession; 2) any activity, work or thing done, permitted or suffered by the Tenant in or about the Premises, the Building or the common areas; 3) any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease; or 4) any negligent acts or omissions of Tenant, or of Tenant’s agents, employees, contractors or invitees. Tenant shall and hereby does further indemnify, defend and hold Landlord harmless from and against all costs, attorneys’ fees expenses and liabilities incurred in connection with any such claim or any action or proceeding brought thereon. In case any action or proceeding is brought against Landlord by reason of any such claim, Tenant upon notice from Landlord, shall defend same at Tenant’s expense by counsel reasonably satisfactory to Landlord Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property or injury to persons in, upon or about the Premises from any cause other than Landlord’s gross negligence, and Tenant hereby waives all claims in respect thereof against Landlord.

 

Tenant shall, throughout the Term at its sole cost and expense, provide and keep in force, with responsible insurance companies reasonably acceptable to Landlord. Insurance in respect to this Lease and the Premises in the following amounts for any one accident or occurrence: (a) comprehensive general public liability insurance with limits for property damage claims of not less than $100,000 and limits for personal injury or death not less than $1,000,000 per person and $1,000,000 per occurrence; and (b) casualty insurance insuring Tenant against loss or damage to its equipment and other personal property in the Premises by fire and all other casualties usually covered under an “all risk” policy of casualty insurance. The policies described herein shall name both Tenant and Landlord as insureds. Tenant shall furnish the Landlord with proof of all such insurance at least annually and upon demand of the Landlord.

 

Neither Landlord nor its agents shall be liable for any damage to property entrusted to employees of the Building, nor for loss of or damage to any property by theft or otherwise, nor for any injury or damage to persons or properly resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works therein or from the roof, street or subsurface, or from any other place or resulting from dampness or any other cause whatsoever, unless caused by or due to the gross negligence of Landlord, its agents, servants or employees. Tenant shall give prompt notice to landlord in case of fire or accidents in the Premises or in the Building or of defects therein or in the fixtures or equipment. Tenant hereby acknowledges that Landlord shall not be liable for any interruption to Tenant’s business for any cause whatsoever, and that Tenant shall obtain Business interruption insurance coverage should Tenant desire to provide coverage for such risk.

 

ARTICLE VIII. DAMAGE OR DESTRUCTION

 

If the Premises are damaged by fire or other casualty (collectively “ Casualty ”), the damage shall be repaired by and at the expense of Landlord, provided such repairs can, in Landlord’s opinion, be made within sixty (60) days after the occurrence of such Casualty without the payment of overtime or other premiums. If such repairs cannot, in Landlord’s opinion, be made within sixty (60) days, Landlord may, at its option, make them within a reasonable time, and in such event this Lease shall continue in effect. Landlord’s election to make such repairs must be evidenced by written notice to Tenant within thirty (30) days after the occurrence of the damage. If Landlord does not elect to make such repairs which cannot be made within sixty (60) days, then either party may, by written notice to the other, cancel this lease as of the date of the Casualty. A total destruction of the Building in which the Premises are located shall automatically terminate this Lease. In the event Landlord make such repairs, then until such repairs are completed, the Rent shall be abated in proportion to the part of the Premises which is unusable by Tenant in the conduct of Tenant’s practice of medicine. However, there shall be no abatement of Rent if the Casualty is due to the negligent acts or omissions of Tenant or Tenant’s employees or contractors.

 

3


MHS 2/00

 

(MOB Development

 

Expense Stop)

 

ARTICLE IX. EMINENT DOMAIN

 

If the Building, the Premises or a material part of either shall be taken by any authorized entity by eminent domain or by negotiated purchase under threat thereof, so that the Premises shall become totally untenantable, this lease shall terminate as of the earlier of the date when title or possession thereof is acquired or taken by the condemning authority and all rights of Tenant in this Lease shall immediately cease and terminate If a part of the Building or a portion of the Premises shall be taken such that the Premises becomes only partially untenantable. Base Rent shall be proportionately abated. All compensation awarded for any taking (or the proceeds of negotiated sale under threat thereof) whether for the whole or a part of the Building or the Premises, shall be the property of Landlord, whether such proceeds or award is compensation for loss or damage to Landlord’s or Tenant’s property or their respective interests in the Premises, the Tenant hereby assigns all of its interest in any such award to Landlord. However, nothing contained herein shall be deemed to give Landlord any interest in or require Tenant to assign to Landlord any separate award expressly made to tenant for. 1.) the taking of personal property and fixtures belonging to Tenant; 2.) the interruption of or damage to Tenant’s business or profession; 3.) the cost relocation expenses incurred by Tenant; and 4.) Tenant’s unamortized cost of leasehold improvements; provided that the making of any such award to Tenant shall not reduce or diminish Landlord’s award relating to such condemnation. Landlord may without an obligation or liability to Tenant stipulate with any condemning authority for a judgment of condemnation without the necessity of a formal suit or judgment of condemnation, and the date of taking under this clause shall then be deemed the date agreed to under the terms of said agreement or stipulation.

 

ARTICLE X ASSIGNMENT AND SUBLETTING

 

Tenant shall not, either voluntarily or by operation of law, directly or indirectly, sell, assign or transfer this Lease, in whole or in part, or sublet the Premises or any part thereof, or permit the Premises or any part thereof to be occupied by any persons, corporation, partnership, or other entity except Tenant or Tenant’s employees, without the prior written


 
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