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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 or 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 1, 1996
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UNISON HEALTHCARE CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation)
0-27374 86-0684011
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(Commission File Number) (I.R.S. Employer Identification No.)
7272 EAST INDIAN SCHOOL ROAD, SUITE 214, SCOTTSDALE, ARIZONA 85251
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(Address of Principal Executives Offices) (Zip Code)
(602) 423-1954
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(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 1, 1996, Unison HealthCare Corporation ("Unison") acquired
the leasehold rights to two skilled nursing facilities, Enumclaw and Walla
Walla, in the State of Washington with an aggregate of 222 beds. Unison
previously operated these facilities under management contracts with Franciscan
ElderCare ("Franciscan").
In each restructuring, Franciscan sold the facility to a third party who
in turn leased the facility to SunQuest SPC, Inc. ("SunQuest"), a wholly owned
subsidiary of Unison. Pursuant to the terminated management agreements, at the
time of termination, Unison was paid monthly management fees of approximately
$8,500 and approximately $17,500 for Enumclaw and Walla Walla, respectively.
Following the restructuring, SunQuest retains all operating revenues from each
facility. Each lease sets a base monthly rent and contains provisions for
increasing the rent over the term of the lease. The initial term of the Enumclaw
lease expires May 1, 2006. SunQuest has the option to renew the lease for two
successive periods of five years each. The term of the lease for Walla Walla
expires on December 31, 2016.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
At the time of filing this report on Form 8-K, it is impracticable to
provide all of the financial statements and pro forma financial information
required by Item 7 of Form 8-K.
See Exhibit Index attached hereto.
SIGNATURE
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.
UNISON HEALTHCARE CORPORATION
By: /s/ JERRY M. WALKER
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Jerry M. Walker
President and Chief Executive Officer
August 15, 1996
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EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGINATED NO.
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<S> <C> <C>
10.1 Lease dated November 30, 1994 between Monica R. Salusky
and SunQuest SPC, Inc. (commencement date: August 1,
1996) .................................................
10.2 Modification of Lease dated as of July 31, 1996 between
Monica R, Salusky, SunQuest SPC, Inc. and Unison
HealthCare Corporation ................................
10.3 Lease dated June 19, 1996 between Walla Walla Partners,
L.P. and SunQuest SPC, Inc. (commencement date:
August 1, 1996) .......................................
10.4 First Amendment to Lease dated July 26, 1996 between
Walla Walla Partners, L.P. and SunQuest SPC, Inc. .....
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EXHIBIT 10.1
LEASE
This lease between dated November 30, 1994, is by and en MONICA R.
SALUSKY ("Landlord") and SUNQUEST SPC, INC. ("Tenant") .
R E C I T A L S
This Lease is made and entered into with reference to the following
facts:
A. Landlord has entered into a letter of intent to purchase the
"Franciscan Health care Center" 148 bed nursing facility in Enumclaw,
Washington, more particularly described in Exhibit "All attached hereto, and the
personal property, fixtures, equipment, business records, and supplies used in
connection therewith (the Demised Premises").
B. Landlord desires to lease to Tenant, and Tenant desires to hire from
Landlord, the Demised Premises.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, Landlord hereby lets the Demised Premises to
Tenant, and Tenant hereby hires the Demised Premises from Landlord, for the term
and upon the conditions and provisions hereinafter set forth.
1. Term:
1.1. The term of this Lease shall commence at close of escrow
for Landlord's purchase of the Demised Premises from Franciscan ElderCare
Corporation, and shall end on May 1, 2006. Landlord shall give Tenant at least
five (5) days prior written notice of the date of close of escrow for Landlord's
purchase of the Demised Premises.
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1.2. Provided that Tenant is not then in default under this
Lease, Tenant shall have the option to extend the term of this Lease for two (2)
successive periods of five (5) years each, by giving written notice of exercise
at least six (6) months prior to the expiration of the initial term or the
previously extended term of this Lease. Each and all of the provisions of this
Lease shall apply during the extended term(s) of this Lease.
2. Base Rent:
2.1. Tenant shall pay to Landlord monthly base rent in an
initial amount equal to the sum of Landlord's monthly debt service, with any
loan(s) secured by the Demised Premises to be payable accrued interest only or
in accordance with an amortization schedule of at least twenty-five (25) years,
and a monthly one percent (1%) return on Landlord's cash payments to purchase
the Demised Premises, including, without limitation, premiums for owner's and
lender's title insurance, real estate brokerage commissions (including a
commission payable to Landlord in an amount not to exceed $148,000), loan fees,
inspection charges, attorney's fees, other costs relating to Landlord's
acquisition of the Demised Premises, and any funds advanced to Tenant as manager
of the Demised Premises prior to the commencement of the term of this Lease for
repairs of or improvements to the Demised Premises. The initial base rent shall
be subject to adjustment under sections 2.2, 2.3, and 2.4, below.
2.2. On each anniversary of the commencement of the term of
this Lease, the monthly base rent under this Lease shall be increased by an
amount equal to three percent of the then monthly base rent.
2.3. The monthly base rent under this Lease shall be increased
by an amount equal to one percent of the money raised by Landlord to create the
improvement fund required by Section 10.2,
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below.
2.3.1. The increase in monthly base rent required by
Section 2.3, above, shall be effective on the first day of the first month
following the date money is raised and set aside for or deposited into the
improvement fund required by Section 10.2, below.
2.3.2. The monthly base rent as adjusted under Section
2.3, above, shall be subject to further adjustment under Section 2.2, above.
2.4. Commencing as of January 1, 1998, Tenant shall pay to
Landlord as additional rent for the Demised Premises, percentage rent in an
amount equal to twenty percent (20%) of the net profit from Tenant's operation
of the Demised Premises.
2.4.1. For purposes of this Lease, the term "net
profit" shall mean Tenant's actual net profit, if any, from Tenant's operation
of the Demised Premises, as determined for a January 1 to December 31 fiscal
year on an accrual basis and in accordance with generally accepted accounting
principles applied on a consistent basis, excluding, however, any depreciation
in excess of straight line depreciation, any salaries, management fees, or other
compensation paid to affiliates, partners or shareholders or to spouses, issue,
siblings, issue of siblings, or ancestors of affiliates of partners or
shareholders of Tenant, except for a management fee of six percent (6%) of gross
revenues which includes accounting, data processing, government relations,
nursing consulting, marketing, and other services provided as of the date hereof
by Tenant for other facilities, and any percentage rent paid during the year.
2.4.2. Within thirty (30) days after the end of
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each calendar quarter during the term hereof, Tenant shall provide Landlord with
a statement showing Tenant's revenues, expenses and estimated net profit, as
reasonably and in good faith determined by Tenant, for that calendar quarter.
Concurrent with the delivery of Tenant's statement for each calendar quarter
during the term hereof, Tenant shall pay to Landlord an amount equal to twenty
percent (20%) of Tenant's estimated net profit for that quarter.
2.4.3. Within ninety (90) days after the end of each
calendar year, and within ninety (90) days after the expiration or termination
hereof, Tenant shall provide Landlord with a statement showing Tenant's
revenues, expenses and profits for that year, in form and content reasonably
required by Landlord, certified by Tenant to be true, complete and correct in
all material respects. If Tenant's annual statement shows a balance due Landlord
for the year, Tenant shall promptly pay Landlord the amount due. If Tenant's
annual statement shows an overpayment to Landlord, the amount of the overpayment
shall be credited against the next payment or payments of percentage rent
hereunder.
2.4.4. Tenant shall furnish Landlord with a true and
accurate copy of Tenant's federal income tax return within thirty (30) days
after filing the same with the Internal Revenue service.
2.4.5. Receipt by Landlord of any statement or payment
of percentage rent for any period shall not bind Landlord as to the correctness
of the statement and/or payment.
2.5. If Tenant extends the term of this Lease pursuant to
Section 1.2, above, the monthly base rent hereunder as of the commencement of
the extended term(s) shall be increased by the sum of any increases in
Landlord's monthly debt service as of the commencement of the extended term(s)
over Landlord's initial debt service as of the commencement of the term of this
Lease and a
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monthly one percent (1%) return on Landlord's cost to obtain new financing of
the Demised Premises, including, without limitation, the premium for lender's
title insurance, loan fees, appraisal fees, and attorney's fees. Any such
increase shall be subject to further adjustment under Section 2.2, above.
2.6. Landlord and Tenant acknowledge and agree that it would
be extremely difficult or impossible to determine the amount of actual damages
Landlord would suffer as a result of Tenant's default in the timely payment of
base rent hereunder. Any base rent required to be paid by Tenant under this
Lease not paid within ten (10) days after the date when due shall automatically
and without notice bear a late payment charge in an amount equal to five percent
(5%) of the late payment.
2.7. All other payments of money required to be made by Tenant
pursuant to the terms of this Lease shall be deemed additional rent.
2.8. This Lease is intended to be a net lease in that it is
the intention of the parties hereto that the rent payable to Landlord shall not
be reduced by any cost or charge whatsoever, and that all expenses and charges,
whether for upkeep, maintenance, insurance, taxes, utilities, federal, state and
municipal requirements and other charges of a like nature or type or otherwise,
shall be paid by Tenant. This provision is not in derogation of the specific
provisions of this Lease, but in expansion thereof and as an indication of the
general intentions of the parties hereto.
3. Security Deposit:
3.1. On or before the commencement of the term of this Lease,
Tenant shall deliver to Landlord the sum of $50,000 as security for the full and
faithful performance of each and every
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provision of this Lease. Landlord shall give Tenant written notice of the amount
of Tenant's security deposit at or as soon as reasonably possible prior to the
commencement of the term of this Lease.
3.2. If Tenant defaults in the performance of any of its
obligations hereunder, Landlord may use, apply, or retain the whole or any part
of Tenant's security deposit to the extent of any sum due Landlord, to make any
required payment of Tenant's behalf, or to compensate Landlord for any expense
or damage caused by Tenant's default. On Landlord's demand, Tenant shall
promptly pay to Landlord a sum equivalent to the amount by which Tenant's
security deposit has been so depleted.
3.3. Within thirty (30) days of the expiration of the term of
this Lease, provided that Tenant is not then in default, Landlord shall refund
Tenant's security deposit, or such portion thereof as then remains, to Tenant.
3.4. Tenant's security deposit shall be paid directly to
Landlord. Tenant's security deposit shall bear no interest. The Landlord is not
the trustee of Tenant's security deposit, and Tenant's security deposit may be
commingled with Landlord's general funds.
3.5. Upon any sale or other transfer of the demised Premises
by Landlord, Landlord shall assign and deliver Tenant's security deposit to
Landlord's purchaser or other transferee, who or which shall assume Landlord's
obligations to Tenant with respect to Tenant's security deposit. The assumption
by Landlord's purchaser or other transferee of Landlord's obligations to Tenant
with respect to Tenant's security deposit shall relieve Landlord of all
obligations with respect thereto.
4. Taxes and Assessments:
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4.1. Tenant shall pay before delinquency any and all real and
personal property taxes and assessments levied or assessed against the Demised
Premises during the term of this Lease. Tenant shall provide Landlord with proof
reasonably satisfactory to landlord that all real and personal property taxes
and assessments have been timely paid.
4.2. At the commencement and at the end of the term of the
Lease, all real and personal property taxes and assessments shall be prorated.
4.3. Tenant shall have the right to protest the amount or
payment of any real or personal property taxes or assessments which it is
required to pay pursuant to this Lease, provided that Tenant adequately protects
Landlord's interest in the Demised Premises by bonding or by providing other
security satisfactory to Landlord. Tenant shall hold Landlord harmless and
defend Landlord from any and all claims, loss or damages resulting from
prosecution of such protest by Tenant.
4.4. Landlord shall promptly forward to Tenant copies of all
tax bills relating to the Demised Premises received by Landlord.
4.5. If at any time during the term hereof, the State of
Washington or any political subdivision or agency thereof, including any county,
city, city and county, public corporation, district, or any other political
entity or agency, levies or assesses against Landlord a tax, fee, or excise on
rents, on the square footage of the Demised Premises, on the act of entering
into this Lease, or on the occupancy of Tenant, or any other tax, fee, or
excise, however described, including a value added tax, as a substitution, in
whole or in part, for, or in addition to, any real or personal property taxes or
assessments, Tenant shall pay the same before delinquency, regardless of whether
the same is
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collectible by Landlord.
5. Insurance:
5.1. At all times during the term of this Lease, Tenant shall
keep and maintain, at its own cost and expense, the following policies of
insurance:
5.1.1. Comprehensive public liability insurance,
including hospital (professional malpractice) and owned and non-owned motor
vehicle coverage, with a combined single limit of at least $1,000,000 and with
not less than $3,000,000 excess coverage against bodily injury and property
damage, insuring Landlord and Tenant and, at Landlord's election, the
mortgagee(s) of any mortgage(s) of the Demised Premises, against claims for
bodily injuries and/or death and/or damage to property incurred while on or
about the Demised Premises and/or in connection with any act or omission by
Tenant or Tenant's members, agents, employees, officers, directors, guests,
invitees and licensees. Landlord and, at Landlord's election, the mortgagee(s)
of any mortgage(s) of the Demised Premises shall be named as additional
insured(s) on Tenant's policy of liability insurance.
5.1.2. Fire and extended peril insurance, with "all
risk" endorsement, covering the Demised Premises, including personal property,
sprinkler leakage, earthquake, and flood and windstorm damage, in an amount not
less than the full replacement value thereof. At Landlord's election, which
shall not be exercised more frequently than once every two (2) years, the full
replacement value of the Demised Premises shall be determined by appraisal by a
professional independent insurance appraiser selected by Landlord, subject to
Tenant's approval, which shall not be unreasonably withheld, whose fee shall be
paid one-half by Landlord and one-half by Tenant. Landlord shall be named as an
additional insured and the mortgagee(s) of any mortgage(s) of the
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Demised Premises shall be named as mortgagee(s) on such policy of fire and
extended peril insurance. The net proceeds of any such fire and extended peril
insurance shall be expended only as set forth in Section 34, below.
5.1.3. All worker's compensation insurance required under the
worker's compensation law of the State of Washington.
5.1.4. Business interruption insurance in an amount equal to
one (1) year advance rent under this Lease, covering Tenant's operation of its
business at the Demised Premises.
5.1.5. Any other or additional insurance required pursuant to
any mortgage(s) of the Demised Premises.
5.2. Tenant shall provide Landlord with certificates or other evidence
reasonably satisfactory to Landlord establishing that Tenant has obtained and
continues to hold the policies of insurance required under Section 5.1, above.
All such policies shall be in such form and shall be issued by such company or
companies as are approved by Landlord, which shall not be unreasonably
withheld, and, at Landlord's election, by the mortgagee(s) of any mortgage(s)
of the Demised Premises.
5.2.1. The policies of insurance required hereunder may be provided
under or by blanket or umbrella policy(ies) provided that such policy(ies)
specifically provide(s) that the amount of insurance required under this Lease
shall in no way be prejudiced by other losses covered by such policy(ies).
5.2.2. All policies of insurance required hereunder shall provide that
they may not be canceled, lapse, expire, or be materially altered except with
thirty (30) days prior written notice to Landlord and, in the case of the
insurance required under Sections 5.1.1, 5.1.2, and 5.1.5, above, to any
mortgagee(s) of any
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mortgage(s) of the Demised Premises.
5.2.3. All policies or certificates of the insurers or of
insurance agencies satisfactory to Landlord and to any mortgagee(s) of any
mortgage(s) of the Demised Premises showing that the policies required hereunder
are in force shall be delivered to Landlord and to any mortgagee(s) of any
mortgage(s) of the Demised Premises at least thirty (30) days prior to the
expiration of the then outstanding policies.
5.3. If this Lease is terminated, the insurance policies required
hereunder and all rights thereunder or to insurance proceeds shall be assigned
to Landlord, at Landlord's election.
5.4. Landlord and Tenant expressly waive any and all rights and
claims as against each other for losses and damages to the extent that such
losses and damages are covered by insurance.
6. Indemnification:
6.1. As a material part of the consideration to Landlord, Tenant
hereby expressly waives any and all claims against Landlord for damages or
liability for injury to persons or property in, on or about the Demised Premises
from any cause whatsoever except for the negligence or intentional malfeasance
of Landlord or Landlord's members, agents, or employees.
6.2. Tenant shall indemnify, defend and hold harmless Landlord, its
agents, members, employees, officers, and directors, and any mortgagee(s) of any
mortgage(s) of the Demised Premises, against each and every demand, claim,
assertion, damages, actions, fees, including, without limitation, attorneys'
fees, court costs and other expenses, paid, incurred or suffered arising or
alleged to have arisen out of any act or omission of Tenant, its agents,
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members, employees, officers, directors, guests, invitees or licensees, or in
connection with the use or occupation of the Demised Premises, including,
without limitation, injury, death or damage to Tenant's patients or resulting
from, or relating to, Tenant's introduction or use of hazardous materials, as
defined in Section 57.4, below, except for the negligence or intentional
malfeasance of Landlord or Landlord's members, agents, or employees.
7. Impound Account:
7.1. If and as required by any mortgage of the Demised Premises,
Tenant shall pay to Landlord or Landlord's mortgagee amounts necessary to create
an impound account sufficient to timely pay all real and personal property taxes
and assessments required to be paid by Tenant hereunder. If the impound account
is insufficient to timely pay all real and personal property taxes and
assessments payable by Tenant, Tenant shall pay the deficiency to Landlord or
Landlord's mortgagee within ten (10) days after Landlord's written request.
7.2. Provided that Tenant is not in default under this Lease, the
funds in any impound account held by Landlord or Landlord's mortgagee shall be
used for the payment of the real and personal property taxes and assessments
payable by Tenant under this Lease.
8. Use of Premises: The Demised Premises shall be used solely as a
licensed nursing facility and for no other purposes except with Landlord's prior
written consent, which shall not be unreasonably withheld.
9. Maintenance: Tenant shall maintain the Demised Premises in good
condition and repair, including, without limitation, the roof, structural and
mechanical elements and systems of the Demised
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Premises, exterior and interior painting, gardening and landscaping, and paving
and striping of driveways and parking areas. All maintenance and repair work
undertaken by Tenant shall be done in a workmanlike manner leaving the Demised
Premises free of liens for labor and materials. All replacements of capital
items shall be by items of like or better quality. Repairs shall be effected in
accordance with Sections 11.1 through 11.8, below.
10. Landlord Not to Maintain:
10.1. Except as expressly provided in Section 10.2, below, Landlord
shall not be required to repair or maintain, or pay for the repair or
maintenance of, the Demised Premises, or any part or portion thereof, and Tenant
hereby expressly waives the right to make repairs at the expense of Landlord as
provided by any statute or law in effect at the time of the execution of this
Lease, or any other statute or law which may be hereafter enacted.
10.2. Landlord shall use Landlord's best efforts to provide a total
of not more than $600,000, including any funds advanced to Tenant as manager of
the Demised Premises prior to the commencement of the term of this Lease, to pay
for Tenant's repairs and improvements to the Demised Premises and to purchase
equipment to be used in the operation of the Demised Premises in accordance with
the following:
10.2.1. The repairs and improvements and the equipment to be
paid for with funds from Landlord shall be subject to Landlord's and Tenant's
prior written consent, which shall not be unreasonably withheld.
10.2.2. After Landlord has approved the repairs and
improvements and the equipment to be paid for with funds from Landord, Landlord
shall use reasonable diligence to raise a total of not more than $600,000 for
the repairs and
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improvements to and to purchase the equipment for the Demised Premises. The
funds raised by Landlord shall be deposited into an interest bearing
"improvement account" in the names of Landlord and Tenant. The signatures of a
representative of Landlord and a representative of Tenant shall be required for
withdrawals from the account.
10.3. Tenant's contractor(s) shall be subject to Landlord's
approval, which shall not be unreasonably withheld.
10.4. Funds from the improvement account shall be disbursed at
Tenant's written request upon receipt and approval by Landlord of invoices and
liens waivers from the contractors, subcontractors or suppliers to be paid and,
at Landlord's election, inspection and approval of the partially or fully
completed work and receipt of proof satisfactory to Landlord that all government
permits and consents have been obtained and the partially or fully completed
work for which payment or reimbursement is requested has been duly inspected and
approved by the appropriate governmental agencies. At Landlord's election,
funds shall be disbursed directly to the contractors, subcontractors or
suppliers for which payment is requested or may be disbursed by joint check to
Tenant and the contractors, subcontractors or suppliers for which payment is
requested.
10. 5. Title to all repairs and improvements to the Demised
Premises and personal property and fixtures paid for out of the improvement
account shall automatically vest in Landlord.
10.6. Tenant shall be solely responsible for and shall pay the cost
of any repairs or improvements to the Demised Premises in excess of the funds in
the improvement account.
10.7. Landlord has no obligation to approve any particular repairs
or improvements to or equipment be purchased for
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the Demised Premises to be paid for out of the improvement fund. Landlord may
have, but had no obligation to, advance funds to Tenant as the manager of the
Demised Premises prior to the commencement of the term of this Lease. Any
amounts advanced by Landlord to Tenant shall be deducted from the maximum $600,
000 Landlord has agreed to use best efforts to provide.
11. Alterations: Tenant shall not reconstruct, remodel or alter the
Demised Premises without the prior written consent of Landlord, which shall not
be unreasonably withheld, and, if and to the extent required by any mortgage(s)
of the Demised Premises, the mortgagee(s) of the Demised Premises.
11.1. As a condition to Landlord's consent to any repair,
reconstruction, remodeling or alteration of the Demised Premises which is
reasonably projected to cost $25,000 or more, Landlord may require Tenant or
Tenant's contractor to post a payment and completion or other bond satisfactory
to Landlord insuring the proper and timely completion of such repair,
reconstruction, remodeling or alteration.
11. 2. Tenant agrees to fully pay and discharge all claims for
labor and materials furnished in connection with the repair, reconstruction,
remodeling or alteration of the Demised Premises, to obtain lien releases for
labor or materials for which payment has been made, and to take all other
reasonable steps to forestall the assertion of lien claims against the Demised
Premises.
11.3. All work done in connection with the repair, reconstruction,
remodeling or alteration of the Demised Premises shall be performed in
compliance with all applicable laws, ordinances, rules and regulations.
11.4. The repair, reconstruction, remodeling or
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alteration of the Demised Premises shall be performed in compliance with any
mortgage(s) of the Demised Premises.
11.5. No repair, reconstruction, remodeling or alteration of the
Demised Premises shall be effected unless and until Tenant has obtained all
required permits and consents from all governmental entities or agencies having
jurisdiction over the Demised Premises.
11.6. All alterations and improvements constructed by Tenant upon
the Demised Premises shall, upon termination of this Lease, belong to Landlord.
11.7. Tenant shall save and hold Landlord harmless from any and all
liability of any kind on account of the repair, reconstruction, remodeling or
alteration of the Demised Premises.
11.8. Prior to commencement of any work, alteration or repair to or
of the Demised Premises by anyone other than Tenant or the employees of Tenant,
Tenant shall give Landlord sufficient notice thereof to permit Landlord to
timely post or affix on or to the Demised Premises notices of nonresponsibility.
12. Right to Replace Property:
12.1. Notwithstanding any other provision of this Lease to the
contrary, Tenant shall have the right, subject to the provisions of any
mortgage(s) of the Demised Premises, to replace any or all of the personal
property, fixtures, equipment and supplies subject to this Lease with personal
property, fixtures, equipment or supplies of like or greater value. Tenant shall
have the obligation to promptly repair or replace any dilapidated, obsolete or
nonfunctional personal property. Replacement personal property, fixtures and
equipment, and any additional personal
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property, fixtures and equipment purchased by Tenant legally required to equip
the Demised Premises for the purposes permitted under this Lease, shall
automatically become the property of Landlord, subject to the terms of any
mortgage(s) of the Demised Premises, and thereafter subject to this Lease.
Tenant shall be entitled to any salvage value from any replaced personal
property, fixtures and equipment.
12.2. Title to any vehicles required to be registered may be
retained in the name of the Tenant. The vehicles and any replacement vehicles
shall remain the property of Landlord and subject to the terms of the Lease.
12.3. Tenant shall not acquire or finance the acquisition of any
replacement or additional personal property, fixture or equipment by conditional
sales agreements, leases, or lease/options except with Landlord's prior written
consent, which shall not be unreasonably withheld.
12.4. Upon the expiration or termination of this Lease, Tenant
shall provide Landlord with personal property, fixtures, equipment, and
consumable supplies of at least equal quantity and quality as those which
existed on the Demised Premises at the commencement of the term of this Lease.
13. Utilities, Etc.:
13.1. Tenant shall be solely responsible for and shall promptly and
before delinquency pay for all utilities, including, without limitation,
electricity, gas, water, garbage and telephone, and any and all other labor,
services, goods and supplies which may be used or furnished to or for Tenant,
including, without limitation, any payroll, business and opportunities,
withholding, employee, sales, excise and other taxes incurred in connection
therewith, incident to the use and occupation of the Demised
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Premises. Any account payable to a vendor of supplies to the Demised Premises
shall be conclusively deemed delinquent if not paid in full within 120 days
after Tenant's receipt of a bill from the vendor, unless Tenant is in good faith
contesting the validity or the amount payable.
13.2. Tenant shall provide all security deposits, bonds and other
collateral or requirements necessary for all utilities and other services
provided or supplied to, for or in connection with the operation of the Demised
Premises.
13.3. At Landlord's request, Tenant shall provide Landlord with
proof reasonably satisfactory to Landlord, including, at Landlord's request,
copies of Tenant's Internal Revenue Service form 941, that Tenant has complied
with the provisions of Sections 13.1 and 13.2, above.
14. Laws and Regulations: Tenant shall at its sole cost and expense
comply with all laws, statutes, ordinances and regulations of all governmental
agencies having jurisdiction over the Demised Premises, specifically including,
without limitation, any laws, rules and regulations regarding hazardous
materials.
15. Licensing Requirements:
15.1. Tenant shall maintain at all times during the term hereof and
any extensions or renewals hereof all governmental licenses, permits and
authorizations necessary for the establishment and operation of the Demised
Premises for the purposes permitted under this Lease. Tenant shall not, without
the prior written consent of Landlord, which shall not be unreasonably withheld,
effect any reduction in the number of licensed beds in the Demised Premises or
change the license or certification category or status of the Demised Premises
or any part thereof.
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15.2. Tenant shall, at its own cost and expense, promptly do and
provide or perform each and every requirement of any state or federal licensing
or certification authority having jurisdiction over the Demised Premises,
including, without limitation, the timely filing of cost reports and other
documents or information required to be filed, delivered or submitted. Tenant
shall have the right to appeal or protest any such requirement, provided that
Tenant complies with the same at or prior to the time when such requirement
becomes final and binding and no longer subject to appeal or protest.
15.3. Upon the expiration or termination of this Lease, Tenant
shall fully cooperate with Landlord in effecting a transfer of the Demised
Premises fully licensed and certified for the purposes permitted under this
Lease.
15.4. Notwithstanding any other provisions of this Lease to the
contrary, Tenant shall inform Landlord immediately by telephone and by letter or
telegraph of any action taken, commenced or instituted by any state or federal
authority having jurisdiction over the Demised Premises to terminate or revoke
any license or certification of or to impose any vendor hold or stop placement
order on Tenant. Such notice shall be given to Landlord at the address(es) and
telephone number(s) set forth in Section 45, below.
16. Inspection Reports: Tenant shall forward to Landlord legible copies
of all reports and documents relating to the Demised Premises received from any
state or federal licensing or certification authorities having jurisdiction over
the Demised Premises. Such copies shall be so forwarded forthwith upon receipt
of such reports and documents by Tenant.
17. Cost Reports: Tenant shall provide Landlord with legible copies of
Tenant's cost reports submitted for the Demised
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Premises, certified by Tenant to be true and correct in all material respects.
Such copies shall be so forwarded concurrent with the submission thereof by
Tenant.
18. Operating Statements:
17.1. Within 30 days after the end of each calendar month during
the term of this Lease, Tenant shall provide Landlord with an operating
statement for the Demised Premises for the preceding calendar month, including a
census report (with patient mix and average monthly census) and an accounts
payable aging report, in form and content satisfactory to Landlord, certified by
Tenant to be true and correct in all material respects.
17.2. Within 120 days after the end of each calendar year during
the term of this Lease, Tenant shall provide Landlord with an operating
statement for the Demised Premises for the preceding year, in form and content
satisfactory to Landlord, certified by Tenant to be true and correct in all
material respects.
19. Financial Statements: Within 120 days after the end of each
calendar year, and at Landlord's request at any other time in connection with
Landlord's refinancing of the Demised Premises, Tenant and any guarantor of this
Lease shall provide Landlord with a copy of its current financial statement,
prepared in accordance with generally accepted accounting principles and in form
and content reasonably required by Landlord, certified by Tenant or the
guarantor hereof, as applicable, to be true and correct in all material
respects.
20. Reports to Mortgagee(s): Tenant shall timely provide any reports or
other information or documents required by any mortgagee(s) of the Demised
Premises. Tenant shall provide Landlord with copies of any reports or other
information or
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documents given or provided to any mortgagee(s) of the Demised Premises. Tenant
shall permit the mortgagee(s) of the Demised Premises to inspect and audit
Tenant's books and records if and as required by the mortgage(s) of the Demised
Premises.
21. Books and Records:
21.1. At all times during the term of this Lease, Tenant shall keep
and maintain complete, true and accurate books and records of the operation of
the Demised Premises in accordance with generally accepted accounting principles
applied on a consistent basis. Tenant shall maintain Tenant's books and records
for at least four (4) years after the close of the accounting period to which
the books and records relate.
21.2. Landlord shall have the right to audit Tenant's books and
records regarding the Demised Premises. Landlord's audit shall be at Landlord's
expense, unless the audit shows that any material information previously
provided by Tenant is incorrect by three percent (3%) or more, in which case the
cost of the audit shall be borne by Tenant. At Landlord's request Tenant shall
provide appropriate supporting documentation for any item.
22. Waste and Nuisance: Tenant shall not commit, or allow to be
committed, any waste upon the Demised Premises, or any public or private
nuisance. Tenant shall not use, nor allow the Demised Premises to be used, for
any improper, immoral, unlawful or objectionable purpose. Tenant shall not allow
objectionable odors or excessive noise to emanate from the Demised Premises.
23. Continuous Operation: Tenant shall at all times during the entire
term of this Lease continuously operate the Demised Premises for the purposes
permitted under this Lease.
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24. Events of Default:
24.1. The occurrence of any of the following shall be deemed to
constitute an event of default on the part of Tenant hereunder:
24.1.1. The failure to pay rent, real or personal property taxes
and assessments, utilities, premiums for insurance, or other monetary
obligations under this Lease within ten (10) days after written notice of
default;
24.1.2. The failure to perform or comply with any term of this
Lease which causes or results in the imminent loss of Tenant's license to
operate the Demised Premises, the initiation of a "fast track" termination of
Tenant's Medicaid certification, or in imminent danger to the life or safety of
one or more of Tenant's patients;
24.1.3. The failure to perform or comply with any other term or
provision of this Lease within thirty (30) days after written notice of default,
except for defaults, other than the defaults specified in Section 24.1.2, above,
which cannot reasonably be cured within thirty (30) days, provided that Tenant
commences to cure the default within thirty (30) days after written notice and
thereafter diligently proceeds to cure the default;
24.1.4. An assignment by Tenant of its property for the benefit of
creditors;
24.1.5. The appointment of a receiver, trustee or liquidator for
Tenant, or any of the property of Tenant;
24.1.6. The levy of a writ of attachment against this Lease;
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24.1.7. Tenant or any assignee of this Lease or subtenant of the
Demised Premises files a voluntary petition under the federal Bankruptcy Act or
of the law of any state, to be adjudicated a bankrupt or for any arrangement or
other debtor's relief, or any such petition is filed against Tenant by any other
party and not dismissed within sixty (60) days after filing thereof;
24.1.8. The financial statements provided to Landlord by Tenant
prior to the execution of this Lease are determined to be materially false or
misleading;
24.1.9. Any financial statements provided to Landlord by Tenant
during the term of this Lease are known by Tenant to be materially false or
misleading; or
24.1.10. Any financial statement provided to Landlord for any
assignee of this Lease or subtenant of the Demised Premises is determined to be
materially false or misleading.
24.2. Any notice of default to Tenant shall specify Tenant's
default. In the event of the occurrence of any event of default mentioned in
this Section 24, Landlord shall have the right, at its election, by written
notice to Tenant, in addition to all other remedies, to terminate this Lease.
25. Landlord's Recovery From Tenant:
25.1. Upon termination of this Lease by Landlord under and in
accordance with the provisions of Section 24.2, above, Landlord shall be
entitled to recover from Tenant the unpaid rent that has been earned at the time
of the judgment, the discounted present value of the amount by which the rent
payable for the balance of the term of this Lease after the time of judgment
exceeds the amount of the loss of rent that Tenant proves could be
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reasonably avoided, any other amount, and court costs, reasonably necessary to
compensate Landlord for all detriment proximately caused by Tenant's default.
The present value of future rent shall be computed by discounting the amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
the judgment.
26. Right of Reentry: In the event of Tenant's default hereunder,
Landlord may then, or any time thereafter, reenter the Demised Premises, or any
part hereof, and expel or remove Tenant therefrom, and again repossess and enjoy
the Demised Premises, with or without terminating this Lease, and Tenant shall
not interfere with or obstruct Landlord's reentry and repossession of the
Demised Premises or Landlord's collection of the revenues and accounts
receivable derived from the Demised Premises.
27. Tenant's Continuing obligations:
27.1. In the event Landlord does not terminate this Lease as a
result of the default of Tenant, Tenant shall remain and continue to be liable
to Landlord under all of the terms of this Lease. Landlord may evict Tenant and
let or relet the Demised Premises or any or all parts thereof for the whole or
any part of the remainder of the term hereof, or for a period of time in excess
of the remainder of the term hereof, and out of any rent so collected or
received, Landlord shall:
27.1.1. First, pay to itself the actual costs or expenses of
retaking and repossessing the Demised Premises and removing all persons and
property therefrom;
27.1.2. Second, shall pay itself any actual costs or expenses
sustained in securing any new tenant or tenants, including, without limitation,
the cost of alterations or additions to the Demised Premises and any leasing
commissions incurred by Landlord; and
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27.1.3. Third, shall pay to itself any balance remaining, and
apply the whole thereof or so much thereof as may be required toward payment of
the liability of Tenant to Landlord then or thereafter unpaid by Tenant.
27.2. Any entry or reentry by Landlord, whether under summary
proceedings or otherwise, if this Lease is not terminated pursuant to Section
24.2 hereof, shall not absolve or discharge Tenant from liability hereunder. The
words "reenter" and "reentry" as used in this Lease are not restricted to their
technical legal meaning. The failure of Landlord to relet the Demised Premises
or any part thereof shall not release or affect Tenant's liability hereunder.
Should any rent so collected by Landlord after the foregoing payments be
insufficient to fully pay Landlord a sum equal to all rent and other charges
herein reserved, or should no rents be collected by Landlord, the deficiency
shall be calculated and paid by Tenant upon each of the dates for the payment of
rent as provided herein, and Tenant shall pay to Landlord the amount of said
deficiency then existing and shall remain liable for any portion thereof not so
paid.
28. Cure of Default: Landlord, at any time after Tenant commits a
default hereunder, may cure the default at Tenant's cost. If Landlord, at any
time, by reason of Tenant's default, pays any sum or does any act that requires
the payment of any sum, the sum paid by Landlord shall be due immediately from
Tenant to Landlord, shall bear a late payment charge in an amount equal to ten
percent (10%) of the sum paid by Landlord to cure Tenant's default, and shall
bear interest at the lesser of twelve percent (12%) per annum or the maximum
rate permitted by law, reckoned from the date the sum is paid until Landlord is
reimbursed in full.
29. Interest on Unpaid Rent: Any rent not paid within ten (10) days
after the date when due shall bear interest at the lesser of twelve percent
(12%) per annum or the maximum rate permitted by
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law, reckoned from the date when due.
30. Appointment of Receiver:
30.1. Tenant hereby assigns to Landlord all of Tenant's revenues
and accounts receivable derived from the Demised Premises specifically
including, without limitation, all Medicare, Medicaid and other reimbursement
payments to Tenant, as security for performance of Tenant's obligations
hereunder.
30.2. Provided that Tenant is not in default under this Lease,
Tenant shall have the right to collect Tenant's revenues and accounts receivable
derived from the Demised Premises. If Tenant is in default under this Lease,
Landlord shall have the absolute right, in person or by receiver duly appointed
by a court of competent jurisdiction, to take possession of the Demised
Premises, to conduct Tenant's business thereon, and to collect all revenues and
accounts receivable due thereon to Tenant both prior to and after the date of
Tenant's default.
30.3. Neither the filing of a petition for the appointment of a
receiver nor the appointment itself shall constitute an election by Landlord to
terminate this Lease.
30.4. Tenant shall execute and deliver to Landlord UCC-1's to
perfect Landlord's security interest in the revenues and accounts receivable
derived from the Demised Premises.
30.5. Landlord shall subordinate Landlord's security interest in
Tenant's revenues and accounts receivable to a security interest granted by
Tenant to an institutional lender, in the business of financing accounts
receivable, and financing Tenant's accounts receivable.
31. No Waiver: No waiver by Landlord of any breach of the
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covenants, conditions or agreements of this Lease shall be construed to be a
waiver of any succeeding breach of the same or of any other covenants, condition
or agreement hereof.
32. Remedies Cumulative: The remedies conferred by this Lease upon
Landlord are not intended to be exclusive, but are cumulative and in addition to
all other remedies provided by law.
33. Name: The name of the Demised Premises shall be determined by
Tenant, subject to Landlord's consent, which shall not be unreasonably withheld.
The name of the Demised Premises shall not be changed without Landlord's prior
consent, which shall not be unreasonably withheld.
34. Damage by Fire or Other Casualty:
34.1. In the event of the damage or destruction of the Demised
Premises, Tenant shall forthwith repair or reconstruct the same to a like or
better condition than existed prior to such damage or destruction. Subject to
any mortgage(s) of the Demised Premises, the net insurance proceeds payable to
Landlord and/or Tenant shall be used for the repair or reconstruction of the
Demised Premises.
34.2. The repair or reconstruction of the Demised Premises shall be
effected in accordance with Section 11, above.
34.3. In the event the damage or destruction of the Demised
Premises is covered by the fire and extended peril insurance Tenant is required
to carry pursuant to Section 5.1.2, above, Landlord may, but shall not be
required to, negotiate the insurance settlement with the insurer if Tenant fails
to diligently process and negotiate Tenant's claim with the insurer.
34.4. At the election of Landlord, fire and extended
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peril insurance proceeds (not including proceeds of business interruption
insurance, which shall be payable to Tenant except to the extent of rent due
under this Lease) shall not be payable to Tenant but shall instead be deposited
in escrow with a bank or other financial institution selected by Landlord on
terms and in accordance with procedures reasonably satisfactory to Landlord,
with funds released during the course and at completion of the repair or
reconstruction, upon inspection and approval by Landlord of the completed
portion of the repair or reconstruction, and receipt by Landlord of lien
waivers from the contractors, subcontractors, and suppliers.
34.5. If there remains any surplus of insurance proceeds after the
completion of the repair or reconstruction of the Demised Premises, such surplus
shall belong to and be paid to Tenant, subject, however, to the rights of any
mortgagee(s) under any mortgage(s) of the Demised Premises.
34.6. In any event during any time that Tenant is unable to use and
occupy the Demised Premises or any portion thereof as a result of damage or
destruction occurring without fault of Tenant, or as a result of any repairs
thereof, the rent hereunder shall be suspended to the extent, and only to the
extent, of the proceeds of Tenant's business interruption insurance made
available to Landlord.
34.7. Landlord shall have no liability whatsoever with respect to
any goods, fixtures, equipment or other personal property of Tenant, nor shall
Landlord have any liability for loss of revenues or income resulting from fire
or other casualty unless and to the extent resulting from the negligence or
intentional malfeasance of Landlord or Landlord's members, agents or employees.
35. Condemnation:
35.1. If during the term of this Lease, the whole of the Demised
Premises is taken or condemned by any competent public
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or quasi-public authority, this Lease shall, at the date of such taking,
terminate, and current rent shall be prorated as of the date of such
termination.
35.2. If during the term of this Lease, a portion of the Demised
Premises is taken or condemned and it is not practical or economical for Tenant
to retain and operate the remainder in accordance with this Lease, then Tenant
may, at Tenant's election, made within thirty (30) days of such taking or
condemnation, terminate this Lease, and current rent shall be prorated as of the
date of such termination.
35.3. All compensation upon any taking or condemnation of the
Demised Premises shall belong to Landlord, and Tenant shall have no claim
thereto.
35.4. Except as provided above, this Lease shall not terminate and
shall remain in full force and effect in the event of a taking or condemnation
of the Demised Premises, or any portion thereof; provided, however, that the
rent hereunder shall be adjusted for the remainder of the term of this Lease
proportionately to the resulting reduction in the number of licensed beds
permitted in the Demised Premises.
36. Assigning and Subletting:
36.1. Tenant may not assign this Lease or any portion of the term
hereof, or sublet the Demised Premises, or any portion thereof, except with the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, and, if and to the extent required by any mortgage(s) of the Demised
Premises, of the mortgagee(s) of the Demised Premises. Tenant's written request
for Landlord's consent to the assignment of this Lease or the subletting of the
Demised Premises must be given at least thirty (30) days prior to the proposed
effective date of the assignment or
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subletting.
36.2. Notwithstanding any assignment of this Lease or subletting of
the Demised Premises, Tenant and Tenant's guarantors shall remain liable for the
full, faithful and complete performance of this Lease as provided herein.
36.3. As a condition to Landlord's consent to the assignment of
this Lease or the subletting of the Demised Premises, Landlord may require
Tenant's proposed assignee or sublessee to provide such financial and other
information as Landlord reasonably deems appropriate, including, without
limitation, copies of any agreements between Tenant and Tenant's proposed
assignee or subtenant, resumes of the principal officers and employees of
Tenant's proposed assignee or subtenant, and a comprehensive description of the
operational experience of Tenant's proposed assignee or subtenant.
36.4. As a condition to Landlord's consent to the assignment of
this Lease or subletting of the Demised Premises, Landlord may also require the
principals of any assignee of this Lease or subtenant of the Demised Premises to
assume personal liability for compliance with each and every provision hereof.
36.5. If Tenant or Tenant's approved management company is a
corporation, partnership or other business entity then the following shall be
deemed an assignment of this Lease:
36.5.1. The sale of a majority of the shares of any class of
stock or other equity interest in Tenant or in an approved management company of
the Demised Premises, other than in an initial public offering registered with
the Securities and Exchange Commission or registered or qualified with
applicable state securities agency(ies);
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36.5.2. The dissolution or merger of Tenant;
36.5.3. The sale of all or substantially all of the assets
of Tenant; or
36.5.4. Any other transaction entered into for the purpose
of avoiding the applicability of the foregoing provisions.
36.6. The assignment of this Lease or subletting of the Demised
Premises to a subsidiary or affiliate of Tenant is not exempt from the
requirement for Landlord's consent, which shall not be unreasonably withheld.
36.7. The execution or termination of a management or other
agreement giving control of the day-to-day operation of the Demised Premises to
any person or party other than Tenant shall be deemed an assignment of this
Lease which shall require Landlord's prior written consent, which shall not be
unreasonably withheld.
36.8. The consent to any one (1) assignment or subletting shall
not be deemed a consent to a subsequent assignment or subletting.
36.9. Any purported assignment or subletting in violation of this
Section 36 shall be null and void and of no force or effect whatsoever.
36.10. Landlord shall have the right of first refusal to match any
offer for Tenant's assignment of this Lease or for subleasing the Demised
Premises. Landlord shall have thirty (30) days after receipt of a copy or notice
of any proposal to assign this Lease or sublet the Demised Premises within which
to exercise the right of first refusal. Landlord's failure to exercise the
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right of first refusal within the thirty (30) day period shall be deemed a
waiver thereof.
36.11. Tenant shall pay the cost of Landlord's attorney's review
of all documents relating to a proposed assignment or subletting up to a maximum
of $1,000 for each proposed assignment or subletting.
37. Covenants Against Liens:
37.1. Tenant shall not, during the term hereof, suffer or permit
any lien, including, without limitation, any mechanic's or judgment lien or
conditional sales agreement, to be attached to or upon the Demised Premises or
any part thereof by reason of any act or omission on the part of Tenant, and
hereby agrees to save and hold harmless Landlord from or against any such lien
or claim of lien.
37.2. Tenant and any guarantors of Tenant shall not suffer or
permit any federal or state tax lien to attach to any property of Tenant or
Tenant's guarantors.
37.3. In the event that any lien attaches in violation of Section
37.1 or Section 37.2, above, and is not released within thirty (30) days
thereafter, Landlord, in its sole discretion, may pay and/or discharge the same,
and Tenant agrees to repay and reimburse Landlord upon demand. for the amount so
paid by Landlord, together with interest thereon at the maximum rate permitted
by law, from the date the sum is paid by Landlord until Landlord is reimbursed
in full.
38. Subordination: This Lease is and shall be subordinate to any
mortgage(s) of the Demised Premises now of record. Such subordination is
effective without any further act of Tenant. This Lease shall be subordinated
to future mortgage(s) of the Demised
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Premises, provided that the lender executes a non-disturbance and attornment
agreement with, and on terms and conditions reasonably acceptable to, Tenant.
Tenant acknowledges that in refinancing the Demised Premises Landlord may be
required to agree to commercially reasonable loan terms which impose greater
burdens on Tenant than are required under the current mortgages of the Demised
Premises. If and when Landlord refinances the Demised Premises, Landlord shall
use reasonable ef forts to minimize any inspection, reporting or other
obligations which would be imposed upon Tenant under the terms of this Lease.
39. Relationship of Parties: Nothing contained in this Lease shall be
deemed to constitute Landlord and Tenant as partners or joint venturers, or any
other relationship other than that of lessor and lessee.
40. Further Assurances: Landlord and Tenant covenant and agree to
execute such further documents and instruments as shall be necessary or
appropriate to carry out the provisions of this Lease.
41. Joint and Several Liability: If more than one (1) person or party
is named as Tenant herein, the obligations of Tenant are joint and several.
42. Attornment: Subject to Section 38, above, in the case of mortgages
of the Demised Premises, Tenant agrees to attorn to any successor in interest to
Landlord entitled to possession of the Demised Premises. The provisions of this
Section 42 shall inure to the benefit of any such successor in interest, shall
be self-operative upon any demand by any such successor in interest, and no
further instrument shall be required to effect such attornment. Any successor in
interest to Landlord shall be bound by all of the terms and provisions of this
Lease.
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43. Estoppel Certificates: Landlord and Tenant shall, within ten (10)
days after written request from the other, execute and deliver to the other, in
recordable form, a certificate stating that this Lease is unmodified and in full
force and effect, or in full force and effect as modified, and stating the
modifications, and that the other party is not in default hereunder, or is in
default and specifying the nature and extent of the alleged default. Failure to
deliver the certificate within said ten (10) days shall be conclusive upon the
party to whom the request has been given that this Lease is in full force and
effect and has not been modified except as may be represented by the requesting
party and that the requesting party is not in default hereunder.
44. Surrender of Possession: Tenant shall, on or before the last day of
the term of this Lease, or any renewals hereof, surrender to Landlord the
Demised Premises (including all patient charts and records, subject, however, to
appropriate patient consents, if required, and except as prohibited by
applicable law or regulation) free and clear of sub-tenancies, broom clean and
in good condition and repair, ordinary wear and tear excepted.
45. Notices:
45.1. All notices or other documents required or permitted to be
given hereunder shall be personally delivered, sent by private overnight
courier, or sent by registered or certified mail, postage prepaid, return
receipt requested, addressed to the parties as follows:
Landlord: Monica R. Salusky
2033 North Main Street, Suite 700
Walnut Creek, CA 94596
Telephone: (510) 932-8500
Copy to: John K. Sutherland
2033 North Main Street, Suite 700
Walnut Creek, CA 94596
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Telephone: (510) 932-8500
Tenant: Sunquest SPC, Inc.
7272 East Indian School Road
Suite 214
Scottsdale, AZ 85251
Telephone: (602) 423-1954
45.2. Notices sent by registered or certified mail shall be deemed
given and effective the second day after posting and notices sent by private
overnight courier shall be deemed given and effective the first day after
delivering the same to the other private overnight courier during regular
business hours.
45.3. Landlord and Tenant may change their addresses and/or
telephone numbers for purposes of this Lease by giving notice thereof in
accordance with the provisions of Section 45.1, above.
46. Quiet Enjoyment: If and for so long as Tenant is not in default
hereunder, Landlord agrees that it will not interfere with the peaceful and
quiet occupation and enjoyment of the Demised Premises by Tenant.
47. Corporate Authority: Tenant shall deliver to Landlord upon
execution of this Lease a certified copy of a resolution of its board of
directors authorizing the execution of this Lease and naming the officer who is
authorized to execute this Lease on its behalf.
48. Inspection:
48.1. Landlord shall at all reasonable times have the right to go
upon and inspect the Demised Premises, to post any notice that may be required
or permitted by any law relating to or affecting the liability of Landlord for
labor performed or materials furnished in or for the Demised Premises, and to
show the
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Demised Premises to prospective purchasers, tenants and lenders.
48.2. The mortgagee(s) of the Demised Premises shall have the right
to inspect the Demised Premises if and to the extent set forth in any
mortgage(s) of the Demised Premises.
49. No Constructive Eviction: The exercise of any right reserved to
Landlord pursuant to Section 48 hereof shall not constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord except in the case of the
negligence or intentional malfeasance of Landlord or Landlord's members, agents
or employees.
50. No Representations:
50.1. Tenant acknowledges that Landlord has made no
representations or warranties whatsoever, express or implied, regarding the
physical condition of the Demised Premises except those contained in this Lease.
50.2. Landlord further hereby specifically disclaims any
representations or warranties, both express and implied, with respect to the
condition, habitability, or suitability of the Demised Premises, or any part
thereof, for the use and purposes permitted hereunder or for any other purpose,
and Landlord does not represent or warrant that the Demised Premises or any part
thereof complies with any laws, ordinances or regulations relating to the use
and occupancy thereof.
50.3. Tenant fully understands that there may be certain repairs
and alterations required for the continued licensing and/or certification of the
Demised Premises, and, except as expressly provided herein, Tenant shall be
fully responsible for
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the cost of and for effectuating any and all alterations, maintenance, repair
and replacements required to be made for the continued licensing and
certification of the Demised Premises and for any alterations, maintenance,
repair and replacements required to maintain and preserve the Demised Premises
in the condition provided for herein.
51. Applicable Law: This Lease shall be governed by, and construed in
accordance with, the laws of the State of Washington.
52. Headings: The descriptive headings used in this Lease are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
53. Attorneys' Fees: If Landlord or Tenant brings any action to
interpret or enforce this Lease, or for damages for any alleged breach hereof,
the prevailing party in any such action shall be entitled to reasonable
attorneys' fees as awarded by the court in addition to all other recoverable
damages and costs.
54. Exhibits: All exhibits attached hereto are incorporated herein by
reference as though set forth in full.
55. Definitions: As used in this Lease, following terms are defined as
follows:
55.1. The term "mortgage" shall include a mortgage, a deed of
trust, and a contract of sale or contract for deed.
55.2. The term "mortgagee" shall include a mortgagee under a
mortgage, a beneficiary under a deed of trust, and a vendor under a contract of
sale or contract for deed.
55.3. The term "days" shall refer to calendar days unless
otherwise specified.
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<PAGE> 37
55.4. The term "hazardous materials" as used in this Lease shall
mean any substance, material, or waste which has been or becomes regulated by
any local governmental authority, the State of Washington, or the United States
government, including, but not limited to, "petroleum" as defined in 42 U.S.C.
Section 6991(8), asbestos, polychlorinated biphenyls, designated as a "hazardous
substance" pursuant to Section 311 or listed pursuant to Section 307 of the
Clean Water Act, defined as a "hazardous waste" pursuant to Section 1004 of the
Resource Conservation and Recovery Act, defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, or defined as "underground storage tank" under
42 U.S.C. Section 6991.
55.5. The term "affiliate" shall mean a person or entity
controlled by, controlling, or under common control of, directly or indirectly,
another person or entity, an officer, director of employee or another person or
entity, any entity which employs another person or of which a person is a
director or officer, and any person or entity which owns or controls 10 percent
of the securities of an entity.
56. Severability: In the event any part or provision of this Lease
shall be determined to be invalid or unenforceable under the laws of the State
of Washington, the remaining portion of this Lease shall, nevertheless, continue
in full force and effect.
57. Time: Time is of the essence of each and every provision of this
Lease.
58. Counterparts: This Lease may be executed in any number of
counterparts, each of which shall be deemed an original, but all
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<PAGE> 38
of which shall constitute one and the same agreement.
59. Binding, Etc: This Lease shall be binding upon, and inure to the
benefit of, Landlord and Tenant, and their respective heirs, personal
representatives, successors in interest and assigns.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
Landlord: /s/ Monica R. Salusky
-------------------------------------
MONICA R. SALUSKY
Tenant: SUNQUEST SPC, INC.
By /s/ Jerry M. Walker
----------------------------------
President
By
----------------------------------
Secretary
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<PAGE> 1
EXHIBIT 10.2
MODIFICATION OF LEASE
This Modification of Lease (this "Modification"), dated as of July 31
1996, is entered into by and among MONICA R. SALUSKY ("Landlord"), SUNQUEST SPC,
INC. ("Tenant"), and UNISON HEALTHCARE CORPORATION, fka SUNQUEST HEALTHCARE
CORPORATION ("Guarantor").
R E C I T A L S:
A. Landlord and Tenant entered into the subject lease (the "Lease") on
or about November 30, 1994, for the Enumclaw Nursing Facility in Enumclaw,
Washington (the "Nursing Home").
B. Guarantor executed and provided to Landlord a guaranty (the
"Guaranty") of Tenant's obligations under the Lease on or about November 30,
1994.
C. The Lease is not scheduled to commence until Landlord closes escrow
with Franciscan Eldercare Corporation for the purchase of the Nursing Home. In
order to obtain financing (the "Acquisition Loan") to close the purchase of the
Nursing Home, Landlord desires to modify the Lease on the terms set forth
herein.
D. In order to facilitate Landlord's acquisition of the Nursing Home,
and the commencement of the Lease immediately thereafter, Tenant and Guarantor
are willing to modify the Lease on the terms set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord, Tenant and
Guarantor agree as follows:
1 . Definitions.
a. "Actual Management Fees" means management fees paid or incurred
(whichever is greater) by Landlord with respect to management of the Nursing
Home.
b. "Assumed Management Fees" means assumed management fees of five
percent (5%) of total patient revenues after Medicaid and Medicare contractual
adjustments.
C. "Debt Service Coverage for the Nursing Home" means a ratio in
which the first number is the sum of pre-tax income from normal nursing home
operations of the Nursing Home as set forth in the quarterly statements provided
to Landlord (without deduction for Actual Management Fees), calculated based
upon the preceding twelve (12) months, plus rent
<PAGE> 2
expense pursuant to the Lease to the extent deducted in determining net income,
and non-cash expenses or allowances for depreciation and amortization of the
Nursing Home for said period less either Assumed Management Fees or Actual
Management Fees (based upon the covenant to which such definition relates), and
the second number is the sum of the current portion of the long term debt
incurred for the benefit of the Nursing Home plus the interest expenses for the
Nursing Home for the applicable period. In calculating "pre-tax income, "
extraordinary income and extraordinary expenses shall be excluded.
d. "Effective Capacity" means the number of licensed nursing home
beds from time to time at the Nursing Home actually available for utilization
(which may be less than the number of beds licensed due to utilization of single
patient rooms or other reasonable and prudent operating decisions). Initially,
the Effective Capacity shall be not less than 125 beds and Tenant agrees to
obtain the approval of Landlord's mortgagee prior to reducing the Effective
Capacity below that amount.
2 . Financial and Other Information. Tenant and Guarantor shall provide
to Landlord the following financial statements and information on a continuing
basis:
a. Within thirty (30) days of filing, copies of the 10-K and 10-Q
Reports of Guarantor, as filed with the United States Securities and Exchange
Commission.
b. Within forty-five (45) days after the end of each fiscal
quarter, (i) unaudited interim financial statements of the Nursing Home,
prepared in accordance with GAAP, which shall include a balance sheet and a
statement of income and expenses for the quarter then ended, and which
statements shall be accompanied by a Summary of Financial Statements and Census
Data in the form attached hereto as Exhibit A, all of which statements shall be
certified by the chief financial officer of Tenant or Guarantor to be true and
correct, and (ii) if requested by Landlord, a summary of all responses, audit
reports, or inquiries with respect to the cost reports referred to in (c) below.
c . Within thirty (30) days of filing or receipt, all Medicaid cost
reports and any amendments thereto filed with respect to the Nursing Home.
d. Within thirty (30) days of receipt, copies of all licensure and
certification survey reports and statements of deficiencies (with plans of
correction attached thereto).
e. Within five (5) days of receipt, any and all notices (regardless
of form) from any and all licensing and/or certifying agencies that the Nursing
Home's license and/or the Medicare and/or Medicaid certification is being
downgraded to a substandard category, revoked, or suspended, or that action is
pending or being considered to downgrade to a substandard category, revoke, or
suspend the Nursing Home's license or certification.
f. If requested by Landlord, within forty-five (45) days of the end
of each fiscal quarter, an aged accounts receivable report from the Nursing Home
in sufficient detail to show amounts due from each class of patient-mix by the
account age classifications of thirty (30) days, sixty (60) days, ninety (90)
days, one hundred twenty (120) days, and over one hundred
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<PAGE> 3
twenty (120) days, certified by the chief financial officer of the Tenant or
Guarantor to be true and correct.
g. If requested by Landlord, evidence of payment of any applicable
provider bed taxes or similar taxes assessed against Tenant.
h. Within thirty (30) days of receipt, a copy of the Medicaid rate
calculation worksheet (or the equivalent thereof), if any, issued by the
applicable Medicaid agency.
i. Landlord reserves the right to require such other reasonable
financial information in such form (including tax returns) of Tenant, Guarantor
and the Nursing Home, at such other reasonable times (including monthly or more
frequently) as Landlord reasonably shall deem necessary, and Tenant and
Guarantor agree promptly to provide such information to Landlord. All financial
statements must be in the form and detail as Landlord from time to time
reasonably requests. At the time of furnishing the quarterly operating
statements required above in this Section, Tenant also shall furnish to Landlord
a compliance certificate in the form attached hereto as Exhibit B.
j. Pursuant to the Acquisition Loan, Landlord is to provide copies
of the above information from Tenant and/or Guarantor to Landlord's mortgagee on
a timely basis. Concurrently with the notice to Landlord's mortgagee, Landlord
shall provide Tenant with copies of such notices to Landlord's mortgagee or
provide Tenant with other proof of communication, in a form and manner
reasonably satisfactory to Tenant, to evidence that Landlord has satisfied its
obligation to Landlord's mortgagee.
3. Debt Service Coverage Ratios. Tenant shall:
a. Achieve and within forty-five (45) days of the end of each
quarter (commencing with the quarter ending June 30, 1997), provide evidence to
Landlord of the achievement of a Debt Service Coverage for the Nursing Home,
after deduction of Actual Management Fees, of not less than 1.0 to 1.0, based on
the operations of the Nursing Home for the same periods as set forth in
subsection 3(b) hereof.
b. Achieve and within forty-five (45) days of the end of each
calendar quarter, provide evidence to Landlord of the achievement of the
following Debt Service Coverages for the Nursing Home for the following periods,
after deduction of Assumed Management Fees, calculated based on the operation of
the Nursing Home during the following periods:
Period Required Debt Months Included in
Service Coverage Calculation
Ratio
1. Prior to date in 2 below No Requirement No Requirement
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<PAGE> 4
2. Calendar Quarter ending 1.0 to 1.0 Three (3) months ending
June 30, 1997 with such quarter
3. Calendar Quarter ending 1.15 to 1.0 Three (3) months ending
September 30, 1997 with such quarter
4. Calendar Quarter ending 1.20 to 1.0 Three (3) months ending
December 31, 1997 with such quarter
5. For all subsequent calendar 1.20 to 1.0 Twelve (12) months ending
quarters with such quarter
c. If (i) the Nursing Home fails to maintain the required Debt
Service Coverage ratios specified in (a) or (b) above or if Tenant fails to
provide evidence of the achievement thereof, Tenant and Landlord will each
deposit with Landlord's mortgagee within sixty (60) days of demand therefor,
cash or other liquid collateral in an amount equal to one-half of the amount
which, when added to the first number of the Debt Service Coverage calculation,
would have resulted in the noncomplying debt service coverage requirement having
been met. If such failure continues for two (2) consecutive quarters, on the
third consecutive quarter, if the Nursing Home again fails to achieve or the
Tenant fails to provide evidence of the achievement of the required Debt Service
Coverage ratios, Tenant and Landlord will each deposit with Landlord's
mortgagee, additional cash or liquid collateral (with credit for amounts
currently being held by Landlord's mortgagee) in an amount equal to one-half of
the amount which, if same had been applied on the first (1st) day of such twelve
(12) month period to reduce the outstanding principal balance of the first
mortgage loan covering the Nursing Home, would have resulted in the noncomplying
Debt Service Coverage requirements having been satisfied. The portion of such
cash or liquid collateral that is paid by Tenant will constitute additional
collateral for the Tenant's obligations under the Lease, and Tenant hereby
grants to Landlord an assignment of, and a security interest in all such
collateral. Such collateral will not be released until such time as the required
Debt Service Coverage ratios have been achieved for at least four (4)
consecutive calendar quarters.
4. Occupancy. Tenant will maintain a daily average occupancy for
the Nursing Home of seventy-five percent (75%) or higher for each quarter based
on the Effective Capacity of the Nursing Home. In the event that Tenant fails to
maintain such required minimum occupancy for any two consecutive quarters,
Tenant agrees that it will prepare and submit a written action plan to Landlord,
which plan shall be designed to increase the occupancy level to (or in excess
of) the required 75% minimum. If the Nursing Home still fails to comply with
the foregoing minimum occupancy requirement for two more consecutive quarters
immediately following the first two noncomplying quarters, then Tenant agrees
that it will engage a marketing consultant reasonably acceptable to the Landlord
and to the Landlord's mortgagee.
5 . Events of Default; Cure Periods. The failure of Tenant to
comply with the requirements of Section 2 shall not constitute an event of
default under the Lease unless such failure continues to exist after ten (10)
days written notice from Landlord specifying the financial statement(s) and/or
information that has not been timely provided and demanding delivery by Tenant
of the same.
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<PAGE> 5
6. Capital Expenses. Tenant will make minimum capital expenditures for
the Nursing Home in each calendar year, beginning with the calendar year 1996
(prorated for such year), of $300 per bed (based on the Effective Capacity of
the Nursing Home), and within forty-five (45) days of the end of such year, will
provide evidence thereof reasonably satisfactory to Landlord. In the event such
expenditures are not made, then within forty-five (45) days of the end of such
year, Tenant will deposit with Landlord (or, at Landlord's instructions, with
Landlord's mortgagee) the difference between the expenditures required and the
amount actually spent for such purposes. The escrow funds will be released to
Tenant from time to time provided no material event of default exists under the
Lease for capital expenditures for the Nursing Home in subsequent years to the
extent of capital expenditures in excess of the minimum required herein for such
subsequent year, upon receipt by Landlord of a request by Tenant and evidence
satisfactory to Landlord of such excess expenditure. Until released, such
escrowed funds shall constitute additional collateral for the Tenant's
obligations under the Lease, and Tenant hereby grants to Landlord an assignment
of, and a security interest in all such escrow funds.
7. Regulatory Agreement Obligations. During the term of this Lease,
Tenant shall timely comply and perform all of the obligations of Landlord under,
and provide all information and documentation required by, the Regulatory
Agreement dated May 1, 1991, between the Washington State Housing Finance
Commission and Franciscan ElderCare Corporation, as amended October 15, 1992,
and July ____, 1996.
8. Ownership of Certificate of Need. Tenant acknowledges that Landlord
is the owner of the certificate(s) of need, bed authorization, and/or other
rights to operate the Demised Premises. Tenant shall not attempt or purport to
transfer, assign, or otherwise alienate Landlord's certificate(s) of need, bed
authorization or other rights to operate the Demised Premises. Tenant shall
execute any and all documents reasonably requested by landlord to confirm that
the certificate(s) of need, bed authorization, and other rights to operate the
Demised Premises are owned by Landlord.
9. Termination Upon Payment of the Acquisition Loan. Except for
Sections 7 and 8 of this Modification, this Modification shall terminate, and
neither Tenant nor Guarantor shall have any further obligation to comply with
any provisions hereof upon payment in full by Landlord of the Acquisition Loan,
even if an event of noncompliance hereunder is in existence at the time of
termination.
10. Continuing Validity. All terms, conditions and provisions of the
Lease are continued in full force and effect and shall remain unaffected and
unchanged, except as modified hereby. Guarantor also acknowledges that the
Guaranty remains in full force and effect and constitutes a guarantee by
Guarantor of Tenant's obligations under the Lease, as modified hereby.
11. No Other Agreements. Notwithstanding anything to the contrary
contained herein or in any other instrument executed by Landlord, Tenant or
Guarantor, or in any other action or conduct undertaken by Landlord, Tenant or
Guarantor, the agreements, covenants and
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<PAGE> 6
provisions contained herein shall constitute the only agreement of Landlord,
Tenant and Guarantor to modify the terms and provisions of the Lease.
Accordingly, no express or implied consent to any further modifications
involving any of the matters set forth in this Modification or otherwise shall
be inferred or implied by the execution of this Modification.
12. Binding Effect. This Modification shall be binding upon, and shall
inure to the benefit of, the parties hereto and their heirs, personal
representatives, successors and assigns.
13. Counterparts. This Modification may be executed in several
counterparts, each of which shall, for all purposes, be deemed an original, and
all counterparts, taken together, shall constitute one and the same
Modification.
DATED as of the day and year first above written.
/s/ Monica R. Salusky
------------------------------------------
MONIICA R. SALUSKY
"LANDLORD"
SUNQUEST SPC, INC.
By /s/ Jerry M. Walker
---------------------------------------
Its
--------------------------------------
"TENANT"
UNISON HEALTHCARE CORPORATION
By /s/ Jerry M. Walker
---------------------------------------
Its
--------------------------------------
"GUARANTOR"
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<PAGE> 1
EXHIBIT 10.3
LEASE
for
FRANCISCAN HEALTH CARE CENTER AT WALLA WALLA
1865 E. Alder
Walla Walla, Washington 99362
between
Walla Walla Partners, L.P.,
a California limited partnership
"Landlord"
and
SunQuest, SPC, Inc.,
an Arizona corporation
"Tenant"
Commencement Date: August 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1 DEFINITIONS ..................................................... 1
ARTICLE 2 DESCRIPTION ..................................................... 2
ARTICLE 3 TERM ............................................................ 2
ARTICLE 4 WARRANTIES ...................................................... 3
ARTICLE 5 RENT ............................................................ 3
ARTICLE 6 SECURITY DEPOSIT ................................................ 6
ARTICLE 7 TAXES AND ASSESSMENTS ........................................... 6
ARTICLE 8 USE ............................................................. 8
ARTICLE 9 MAINTENANCE .....................................................10
ARTICLE 10 ALTERATIONS .....................................................11
ARTICLE 11 MECHANIC'S LIENS ................................................12
ARTICLE 12 UTILITIES AND SERVICES ..........................................12
ARTICLE 13 INDEMNITY AND EXCULPATION .......................................12
ARTICLE 14 INSURANCE .......................................................13
ARTICLE 15 CONDEMNATION ....................................................16
ARTICLE 16 DESTRUCTION .....................................................18
ARTICLE 17 ASSIGNMENT AND SUBLETTING .......................................21
ARTICLE 18 DEFAULTS; REMEDIES ..............................................24
ARTICLE 19 SIGNS ...........................................................27
ARTICLE 20 RIGHT OF ENTRY ..................................................27
ARTICLE 21 SUBORDINATION; ESTOPPEL; CERTIFICATION ..........................27
ARTICLE 22 WAIVER ..........................................................27
ARTICLE 23 SALE OR TRANSFER OF PREMISES ....................................29
ARTICLE 24 FINANCIAL STATEMENTS AND OPERATING INFORMATION ..................29
ARTICLE 25 LICENSING .......................................................30
ARTICLE 26 SURRENDER OF PREMISES; HOLDING OVER .............................30
ARTICLE 27 PRESERVATION OF PATIENT RECORDS .................................30
ARTICLE 28 PATIENT CARE; CENSUS ............................................30
ARTICLE 29 MISCELLANEOUS ...................................................31
</TABLE>
<PAGE> 3
EXHIBITS:
Exhibit A -- Description of Real Property
Exhibit B -- Description of Personal Property
Exhibit C -- Contracts and/or Leases to be Assumed by Tenant
<PAGE> 4
L E A S E
FRANCISCAN HEALTH CARE CENTER AT WALLA WALLA
This Lease ("Lease") is entered into as of June 19, 1996 between Walla
Walla Partners, L.P., a California limited partnership ("Landlord"), and
SunQuest SPC, Inc., an Arizona corporation ("Tenant"), with reference to the
following facts:
I. Landlord has entered into an agreement to purchase the premises
hereinafter described, together with the fixtures and equipment therein.
II. Tenant is experienced in the management and operation of healthcare
facilities.
III. Tenant desires to lease the premises and personal property from
Landlord pursuant to the provisions of this Lease, for the purpose of operating
a skilled care nursing facility.
IV. Landlord is entering into this Lease in reliance upon the
particular skills, knowledge and experience of Tenant in the operation of
healthcare facilities.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
As used in this Lease, the following words and phrases shall have the
following meanings:
1.1 "Alteration" - any addition, change or modification, structural and
nonstructural, to the Premises (as such term is defined in Section 2.1 below)
made by Tenant including, without limitation, fixtures, but excluding Tenant's
personal property.
1.2 "Authorized Representative" - any officer, agent, employee or
independent contractor retained or employed by either party, acting within
authority, actual or apparent, given him by that party.
1.3 "Encumbrance" - any land sale contract, deed of trust, mortgage, or
other written security device or agreement affecting the Premises and/or
Personal Property (as such term is defined in Section 2.1 below), and the note
or other obligation secured by it, that constitutes security for the payment of
a debt or performance of an obligation.
1.4 "Hazardous Substances" as defined in Section 8.2.6 of this Lease.
1.5 "Hold harmless" - to defend and indemnify from all liability,
losses, penalties, damages, costs, expenses (including, without limitation,
attorneys' fees), causes of action, claims, or judgments arising out of or
related to any damage to any person or property.
1.6 "Landlord" - Walla Walla Partners, L.P. a California limited
partnership, its successors, and any person or entity succeeding to the rights
of Landlord by reason of an ownership interest or a security interest in the
Facility (as defined in Section 2.1 below) including, without limitation, any
Lender of Landlord.
1.7 "Law" - any judicial decision, statute, constitution, ordinance,
resolution, regulation, rule, administrative order, or other requirement of any
municipal, county, state, federal, other government agency or authority or
having jurisdiction over the
1
<PAGE> 5
parties or the Facility, or both, in effect whether at the time of execution of
the Lease or at any time during the term, including, without limitation, any
regulation or order of a quasi-official entity or body, including any Medicare
or Medicaid fiscal intermediary.
1.8 "Lease Year" - the twelve-month period commencing on the
Commencement Date (as defined in Section 3.1 below) and on each succeeding
anniversary of the Commencement Date during the term (and any extended term) of
the Lease.
1.9 "Lender" - a beneficiary, mortgagee, secured party, or other holder
of an Encumbrance in the Facility or any part thereof.
1.10 "Rent" - monthly rent, additional rent, late fees, security
deposit, utility charges, real and personal property taxes and assessments,
insurance premiums, and all other charges payable by Tenant to Landlord or any
third person pursuant to the provisions of this Lease.
1.11 "Restoration" - the reconstruction, rebuilding, rehabilitation and
repairs that are necessary to return damaged or destroyed portions of the
Facility and other property to substantially the same physical condition as they
were in immediately before the damage or destruction.
1.12 "Successor" - any assignee, transferee, personal representative,
heir, or other person or entity succeeding lawfully, and pursuant to the
provisions of this Lease, to the rights and obligations of either party.
1.13 "Tenant's Improvements" - any addition to or modification of the
Premises made by Tenant during the term, including, without limitation,
fixtures.
ARTICLE 2
DESCRIPTION
2.1 Subject to the terms and conditions contained herein, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord the real property
located at 1865 E. Alder, Walla Walla, Washington 99362 and more fully described
in Exhibit A attached hereto, together with all improvements now or hereafter
located thereon, commonly known as the Franciscan Health Care Center at Walla
Walla (the "Premises") and that certain personal property located or hereafter
located in the Premises and described in Exhibit B attached hereto and any
replacements thereof (the "Personal Property") The Premises and Personal
Property are sometimes hereinafter collectively referred to as the "Facility."
2.2 Landlord is informed that the Facility is presently licensed by the
state of Washington to operate 74 skilled care beds and is certified and
participates as a provider under Medicare and Medicaid legislation and
regulations. Reference hereinafter to the "Licensed Facility" shall mean the
Facility as so licensed and certified.
ARTICLE 3
TERM
3. 1 The term of this Lease shall commence on the day Landlord acquires
title to the Facility ("Commencement Date") and shall terminate at midnight on
December 31, 2016. Upon the Commencement Date being ascertained, it shall be
inserted in the space provided below and initialed by the parties:
Commencement Date: August 1, 1996
-------------------------------------
GW Landlord
-------------------
JMW Tenant
-------------------
2
<PAGE> 6
3.2 If Landlord has not acquired the Facility by December 1, 1996, then
this Lease shall be void and of no effect unless the parties extend the
Commencement Date by written amendment to this Lease. Should this Lease become
void by virtue of the foregoing provision, Landlord shall return to Tenant any
advance rent and security deposit previously paid to Landlord.
ARTICLE 4
WARRANTIES
4.1 LANDLORD HAS MADE NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, NOR DOES LANDLORD MAKE ANY HEREIN REGARDING THE CONDITION OF THE
FACILITY OR ANY PART THEREOF INCLUDING WITHOUT LIMITATION THE STRUCTURAL
SOUNDNESS THEREOF, THE PRESENCE OR ABSENCE OF HAZARDOUS SUBSTANCES OR THE
FACILITY'S FITNESS FOR ANY PARTICULAR USE OR OCCUPANCY. LANDLORD SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS AND/OR WARRANTIES WITH RESPECT TO THE VACATION OF
THE FACILITY BY THE PRIOR OPERATOR AS DEFINED BELOW. LANDLORD FURTHER HEREBY
SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS AND/OR WARRANTIES, BOTH EXPRESS AND
IMPLIED IN LAW, WITH RESPECT TO THE CONDITION, HABITABILITY, OR SUITABILITY OF
THE FACILITY, OR ANY PART THEREOF, FOR THE USE AND PURPOSES PERMITTED HEREUNDER
OR ANY OTHER PURPOSE, AND LANDLORD DOES NOT REPRESENT OR WARRANT THAT THE
FACILITY OR ANY PART THEREOF COMPLIES WITH ANY LAWS RELATING TO THE USES AND
OCCUPANCY THEREOF. TENANT FULLY UNDERSTANDS THAT THERE MAY BE CERTAIN
ALTERATIONS, REPAIRS AND REPLACEMENTS REQUIRED TO CAUSE THE FACILITY TO COMPLY
WITH APPLICABLE LAW (AS THE SAME MAY BE MODIFIED FROM TIME TO TIME THROUGHOUT
THE TERM HEREOF) AND FOR THE CONTINUED LICENSING AND/OR CERTIFICATION OF THE
FACILITY, AND TENANT SHALL BE FULLY RESPONSIBLE FOR THE COST OF AND FOR
EFFECTUATING ANY AND ALL ALTERATIONS, REPAIRS AND REPLACEMENTS REQUIRED TO BE
MADE TO CAUSE THE FACILITY TO COMPLY WITH APPLICABLE LAW AND FOR THE CONTINUED
LICENSING AND CERTIFICATION OF THE FACILITY AS WELL AS ALL ALTERATIONS, REPAIRS
AND REPLACEMENTS REQUIRED TO MAINTAIN AND PRESERVE THE FACILITY IN THE CONDITION
CALLED FOR HEREIN. TENANT ACKNOWLEDGES THAT LANDLORD IS NOT RESPONSIBLE FOR AND
TENANT SHALL HOLD LANDLORD HARMLESS IN CONNECTION WITH ANY SUCH ALTERATIONS,
REPAIRS AND REPLACEMENTS TO THE FACILITY FOR ANY REASON WHATSOEVER.
Initials of Tenant: JMW
--------------------------
ARTICLE 5
RENT
5.1 Tenant shall pay to Landlord a monthly rent ("Base Monthly Rent")
during each month of the term hereof, without deduction, setoff, prior notice or
demand. Base Monthly Rent for the first Lease Year (sometimes referred to herein
as "Initial Base Monthly Rent") is Eighteen Thousand Two Hundred Seventy-Eight
Dollars ($18,278), and is subject to increase as set forth below.
5.2 Base Monthly Rent shall be paid on the first day of each month
commencing with the month in which the term of this Lease commences. If the
Commencement Date is on a day other than the first day of a month, Base Monthly
Rent for such partial month shall be prorated at the rate of 1/30th of the Base
Monthly Rent per day.
5.3 All Rent shall be paid to Landlord in care of Nigro, Karlin & Segal,
10100 Santa Monica Boulevard, 13th Floor, Los Angeles, California 90067 or at
such other address as may be designated by Landlord from time to time in writing
to Tenant. Rent not paid when due shall bear interest from the date due until
paid at the maximum rate permitted by law, or if no maximum rate is applicable,
at the rate of 18% per annum.
5.4 Tenant acknowledges that late payment of Rent will cause Landlord
to incur damages and costs not contemplated by this Lease, the exact amount of
which would be extremely difficult and
3
<PAGE> 7
impracticable to ascertain. Such costs include, without limitation, processing
and accounting charges, administrative costs, loss of use of funds and late
charges that may be imposed on Landlord by the terms of any Encumbrance.
Therefore, if any installment of Rent is not received by Landlord within ten
(10) days after its due date, Tenant shall pay to Landlord an additional sum
equal to five percent (5%) of the overdue Rent as a late charge, unless
applicable law requires a lesser late charge, in which case Tenant shall pay the
maximum late charge permitted by law. The parties agree that this late charge
represents a fair and reasonable estimate of the additional costs that Landlord
will incur by reason of late payment by Tenant. Acceptance of any late charge
shall not constitute a waiver of Tenant's default with respect to the overdue
amount, nor prevent Landlord from exercising any of the other rights and
remedies available to Landlord hereunder, at law or in equity.
5.5 Tenant hereby agrees that if Tenant fails to pay Rent or any other
sum required to be paid by Tenant hereunder within the ten-day grace period for
any two consecutive months, or for any three months during a Lease Year, Rent
hereunder for the remaining term of the Lease shall be automatically adjusted to
be quarterly rental, payable in advance, commencing on the first day of the
month following such consecutive late month, or the third late month in a Lease
Year quarter, and continuing thereafter for the remaining term of the Lease on a
quarterly basis in advance. Time is strictly of the essence with respect to
the provisions of this Article.
5.6 Base Monthly Rent provided in this Lease, as the same may be
increased pursuant to the terms hereof, shall be in addition to all other
payments to be made by Tenant as provided herein. It is the purpose and intent
of Landlord and Tenant that the Base Monthly Rent provided herein shall be
absolutely net to Landlord so that this Lease shall yield net to Landlord the
Base Monthly Rent specified in this Lease in each month during the term of this
Lease and, except as otherwise specifically provided herein, Landlord shall have
no obligation or liability to pay any amounts in connection with the ownership,
operation and/or management of the Facility or any part thereof, including but
not limited to real and personal property taxes, insurance premiums,
maintenance, including but not limited to structural or exterior maintenance,
license fees, and any costs incurred by Landlord or for which Landlord is
responsible by virtue of the existence of any financing on the Facility
(including but not limited to any tax imposed on a Lender by reason of its
having made a loan to Landlord but not including points, fees, or other costs
incurred in making a new loan or refinancing an existing loan), of any kind or
nature whatsoever. Excluding Encumbrances for which Landlord is liable, all
costs and expenses including, without limitation, taxes, assessments, insurance
premiums, maintenance, license fees and obligations of every kind and nature
whatsoever relating to the use and/or management of the Facility by Tenant which
may accrue or become due during or out of the term or any renewal thereof shall
be paid by Tenant and Landlord shall be indemnified and held harmless by Tenant
from and against the same.
5.7 As used herein:
5.7.1 "Index" shall mean the Consumer Price Index for All
Urban Consumers, Los Angeles/Anaheim/Riverside Metropolitan Area, 1982-1984=100,
published by the Bureau of Labor Statistics of the U.S.Department of Labor.
5.7.2 "Adjustment Date" shall mean September 1, 1996 and each
September I thereafter during the term of the Lease.
5.7.3 "Percentage Increase of Index" shall mean the percentage
of increase in the Index on the Adjustment Date equal to a fraction, the
numerator of which shall be the Index for the month
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which is three (3) months prior to the month in which the Adjustment Date occurs
less the Index for the month which is three (3) months prior to the month in
which the Commencement Date occurs and the denominator of which shall be the
Index for the month which is three (3) prior to the month in which the
Commencement Date occurs. In the event the Index shall hereafter be converted to
a different standard reference base or otherwise revised, the Index for each
Adjustment Date shall be the one reported in the U.S. Department of Labor's
newest comprehensive official index then in use and most nearly answering the
description of the foregoing Index. If it is calculated from a base different
from 1982-1984=100, the determination of Percentage Increase of Index shall be
made using a formula supplied by the Bureau of Labor Statistics, or if the
Bureau shall not publish the same, it shall be determined by using any other
nationally recognized publisher of similar statistical information on which the
parties may agree. If they are unable to agree within thirty (30) days after
demand by either party, a substitute index shall, on application of either
party, be selected by the chief officer of the San Francisco regional office of
the Bureau, or its successor.
5.8 Base Monthly Rent shall be increased as follows:
5.8.1 Base Monthly Rent shall be increased, but in no event
decreased, on each Adjustment Date for the Lease Year commencing on such
Adjustment Date by an amount equal to the Initial Base Monthly Rent set forth in
Section 5.1 (to be first adjusted pursuant to Section 5.8.2 below) multiplied by
the Percentage Increase of Index (the "Increase Amount") . The Initial Base
Monthly Rent (as adjusted pursuant to Section 5.8.2) plus the Increase Amount
shall be the Base Monthly Rent for the Lease Year commencing on such Adjustment
Date. In no event shall Base monthly Rent be less than the Base Monthly Rent in
effect immediately prior to the Adjustment Date then occurring.
Below is set forth an example for calculating Base Monthly
Rent, with certain assumed information set forth.
Commencement Date: June 1, 1996
1st Adjustment Date: June 1, 1997
Index for March 1996 = 152.7
Index for March 1997 = 154.6
Percentage Increase of Index = 154.6 - 152.7=.01
-------------
154.6
Increase Amount: $18,278.00 times .01 = $182.78
Base Monthly Rent for Lease Year commencing on Adjustment
Date: $18,278.00 and $182.78 = $18,460.78
5.8.2 The parties agree that the Initial Base Monthly Rent has
been determined by taking into account the number of beds ("Licensed Beds") for
which the Facility is licensed as of the date of this Lease. If and so often as
the number of Licensed Beds increases during the term of this Lease, then,
effective as of the date of each such increase, (i) then current Base Monthly
Rent (as the same may have previously increased under this Lease, whether as the
result of any prior increase in Licensed Beds or otherwise) shall be increased
by a percentage equal to such percentage increase in Licensed Beds, and (ii) for
purposes of determining Base Monthly Rent for succeeding Lease Years in
accordance with Section 5.8.1 above, the Initial Base Monthly Rent shall first
be adjusted to reflect all increases in Licensed Beds since the Commencement
Date. In no event shall any subsequent decreases in the number of Licensed Beds
be taken into account in adjusting Base Monthly Rent hereunder or Initial Base
Monthly Rent for purposes of Section 5. 8. 1. The increases in Base Monthly Rent
contemplated by this Section 5.8.2 shall be in addition to and not in lieu of
the increases contemplated by Section 5.7.1 above.
5.8.3 Tenant acknowledges that the Initial Base Monthly Rent
has been determined by taking into account, among other factors, the aggregate
monthly principal and interest ("Base Monthly Debt Service") payable by Landlord
to its Lender during the first Lease Year on the debt ("Purchase Money Debt")
incurred by Landlord in connection with Landlord's purchase of the Facility.
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As a material inducement to Landlord to enter into this Lease upon the terms and
conditions hereof, Tenant agrees that it shall pay, each month, as additional
rent hereunder together with the installment of Base Monthly Rent for such
month, the amount by which the aggregate monthly principal and interest payable
by Landlord on account of the Purchase Money Debt for such month ("Actual
Monthly Debt Service") exceeds the Base Monthly Debt Service. In no event shall
Base Monthly Rent decrease as a result of any decrease in Actual Monthly Debt
Service below Base Monthly Debt Service.
ARTICLE 6
SECURITY DEPOSIT
INTENTIONALLY OMITTED.
ARTICLE 7
TAXES AND ASSESSMENTS
7. 1 Tenant shall be responsible for the payment of all taxes,
assessments, license fees, and other charges ("Personal Property Taxes") that
are levied and assessed against all personal property, including but not limited
to leasehold improvements, furniture, fixtures and equipment installed, whether
by Landlord or Tenant, or located in or about the Premises, which taxes accrue
during the term, regardless of when the same may be payable.
7.2 Tenant shall be responsible for the payment of all real property
taxes, assessments and levies, both general and special ("Real Property Taxes")
which are or are hereafter levied, assessed, or are otherwise imposed, against
the Premises during the term, regardless of when the same may be payable.
7. 3 Tenant shall pay to Landlord .(or to Landlord's Lender, as
Landlord may direct), together with and in addition to the monthly payments of
rental and other payments payable under the terms of this Lease, on the dates
set forth herein for the making of monthly rental payments, until the end of the
term, a sum, as estimated by Landlord, equal to the Personal Property Taxes and
Real Property Taxes (collectively "Taxes") next due on the Facility and any
personal property located therein divided by the number of months to elapse
before one month prior to the date when such Taxes will become delinquent, such
sums to be held by Landlord to pay such Taxes. Such payments, hereinafter
referred to as "Reserves", are to be held without any allowance of interest or
dividend to Tenant and need not be kept separate and apart from other funds of
Landlord. All payments mentioned in this section and all payments to be made
under the Lease shall be added together and the aggregate amount thereof shall
be paid by Tenant each month in a single payment. The arrangement provided for
in this section is solely for the added protection of Landlord and entails no
responsibility on Landlord's part beyond the allowing of due credit, without
interest, for the sums actually received by it. Upon assignment of the Lease by
Landlord, any funds on hand shall be turned over to the successor and any
responsibility of the assignor with respect thereto shall terminate. If the
total of the Reserves hereof shall exceed the amount of payments actually
applied by Landlord, such excess may be credited by Landlord on subsequent
payments to be made by Tenant or, at the option of Landlord, refunded to Tenant
or its successors. If, however, the Reserves shall not be sufficient to pay the
sums required when the same shall become due and payable, Tenant shall
immediately deposit with Landlord the full amount of any such deficiency. If
there shall be a default under any of the provisions of this Lease, Landlord may
use, apply or retain, to cure such default and to compensate Landlord for all
damage sustained by Landlord as a result of such default, at any time, all or
any part of the Reserves held by Landlord, and upon demand of Landlord, Tenant
shall immediately deposit with Landlord a sum equal to the portion of the
Reserves so used, applied or retained by Landlord. If there shall be a default
under any of the provisions of this Lease, Landlord may apply, at any time, the
balance then remaining in the funds accumulated under this Section 7.3, less
such sums as will
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become due and payable for the upcoming tax liability, against the amounts due
and payable under the Lease.
7.4 Tenant's liability to pay Taxes shall be prorated on the basis of a
365-day year to account for any fractional portion of a tax year included in the
term at its commencement and expiration. Prorations shall be based on
assessments and Tenant shall pay such prorations when the prorated tax
installment becomes due.
7.5 Tenant shall have the right to contest or review by legal
proceeding, or in such other manner as it may deem suitable (which, if
instituted, Tenant shall conduct promptly at its own expense, and free of any
expense to Landlord, and if necessary, in the name of Landlord) any Taxes.
Tenant may defer payment of a contested item upon condition that, before
instituting any such proceeding, Tenant shall furnish to Landlord, or to any
Lender Landlord may designate, security reasonably satisfactory to Landlord and
such Lender sufficient to cover the amount of any Taxes. Notwithstanding the
furnishing of any such security, Tenant shall promptly pay such contested item
if at any time the Facility or any part thereof shall be in danger of being sold
or forfeited. The legal proceeding herein referred to shall include an
appropriate proceeding to review tax assessments and appeals from any judgment,
decree, or order in connection therewith, but such proceeding shall be commenced
as soon as possible after the assessment of any contested item and shall be
prosecuted to final adjudication with dispatch. If there shall be any refund
with respect to any contested item based on a payment by Tenant, Tenant shall be
entitled to such refund to the extent of such payment.
7.6 Tenant shall, in addition to all other sums, pay all fees for
inspection and examination of the Facility during the term hereof which are
charged by any public authority having jurisdiction therein.
7.7 Tenant shall not be required to pay any municipal, county, state,
or federal income or franchise taxes of Landlord, or any municipal, county,
state, or federal estate, succession, inheritance, or (except as provided below)
transfer taxes of Landlord. If at any time during the term, the state in which
the Facility is located or any political subdivision of such state, including
any county, city, public corporation, district, or any other political entity or
public corporation of such state, levies or assesses against Landlord a tax,
fee, or excise on (1) rents, (2) the square footage of the Premises, (3) the act
of entering into this Lease, or (4) the occupancy of Tenant, or levies or
assesses against Landlord any other tax, fee, or excise, however described,
including, without limitation, a so-called value added tax, as a direct
substitution in whole or in part for, or in addition to, any Real Property
Taxes, Tenant shall pay before delinquency that tax, fee, or excise.
Notwithstanding the above, if a transfer tax is payable to any governmental
agency or agencies as a result of this Lease, Tenant shall, to the extent
permitted by law, pay the same directly to the taxing authority or authorities
when it is due, or at Landlord's election, Tenant shall pay same to Landlord
within ten (10) days after notice to Tenant from Landlord, and in such event,
Landlord shall pay the tax following receipt from Tenant.
ARTICLE 8
USE
8.1 Tenant shall use the Facility for a licensed skilled care nursing
facility and for no other use without Landlord's prior written consent, which
consent may be withheld in Landlord's sole and absolute discretion.
8.2 Tenant's use of the Facility as provided in this Lease shall be in
accordance with the following:
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8.2.1 Tenant shall not do, bring, or keep, or permit to be
done, brought or kept, anything in, on or about the Premises that may cause an
invalidation or cancellation of any insurance covering the Facility, and Tenant
shall comply with all requirements imposed by any company issuing such
insurance.
8.2.2 Tenant shall cause the Facility to be and remain
licensed and certified by the applicable state and/or local governmental
agencies as the Licensed Facility, and shall maintain such license(s) and
certifications during the term of this Lease. At Tenant's sole expense, Tenant
shall cause the Facility to conform to the requirements and provisions of all
applicable laws concerning the use of the Facility as licensed including,
without limitation, the obligation at Tenant's sole cost to alter, maintain,
replace or restore the Facility or any part thereof in compliance and conformity
with all laws relating to the condition, use or occupancy of the Facility as
licensed. Tenant shall deliver to Landlord, promptly following receipt thereof,
copies of all inspection reports respecting the Facility issued during the term
hereof by any and all governmental agencies which conduct inspections thereof.
8.2.3 Tenant shall not use the Facility in any manner that
will constitute nuisance, waste to the Facility, or cause unreasonable annoyance
to owners or occupants of adjacent properties.
8.2.4 Tenant shall not do or permit to be done anything on the
Premises that will cause damage to the Facility or any part thereof. The
Premises shall not be overloaded with furniture, equipment or machinery in such
manner that damage is caused to the Premises or any part thereof. No machinery,
apparatus or other appliance shall be used or operated in, on or about the
Premises that will in any manner injure the Facility or any part thereof.
8.2.5 Tenant shall pay all payrolls promptly when due
respecting all personnel at the Facility, and shall file all governmental
reports required pursuant thereto (including, without limitation, payroll tax
returns) and shall pay such taxes promptly and before delinquency.
8. 2. 6 (a) Tenant shall not bring, release, use, generate,
manufacture, store or dispose of, or permit to be brought, released, used,
generated, manufactured, stored or disposed of, on, under or about the
Facility, or transfer or permit to be transferred to or from the Facility, any
asbestos, asbestos containing materials, flammable explosives, radioactive
materials, hazardous wastes, toxic substances or related materials (collectively
"Hazardous Substances"). There is excluded from this prohibition Hazardous
Substances of the type commonly used in nursing homes in the state in which the
Facility is located, subject to the condition that they are used, stored and
disposed of in accordance with all applicable law. As used in this Lease,
Hazardous Substances shall include, but not be limited to, substances defined as
"hazardous substances, "hazardous materials", or "toxic substances" in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq.; the Clean Water Act, 33 U.S.C. Section 466 et
seq.; the Safe Drinking Water Act, 14 U.S.C. Section 1401 et seq.; the Superfund
Amendment and Reauthorization Act of 1986, Public Law 99-499, 100 Stat. 1613;
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., as amended;
and those materials and substances of a similar nature regulated or restricted
under any other laws now existing or hereafter adopted, and in regulations
adopted and publications promulgated pursuant to said laws, and under all
applicable laws in the state of Washington.
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(b) If Tenant knows, or has reasonable cause to believe, that
a Hazardous Substance, or a condition involving or relating to has come to be
located in, on or about the Facility, the same, other than as previously
consented to by Landlord, Tenant shall immediately give written notice of such
fact to Landlord.
(c) Tenant shall, at its sole cost and expense, promptly take
all investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the clean-up of any contamination of, and for
the maintenance, security and or monitoring of, the Facility, the elements
surrounding the same, or neighboring properties, that was caused or materially
contributed to by Tenant, relating to or involving any Hazardous Substances
brought onto and/or released from the Facility.
(d) Prior to the Commencement Date, Landlord may provide
Tenant with copies of certain reports ("Asbestos and Environmental Reports")
concerning the presence of Hazardous Substances on or about the Facility. Tenant
agrees to strictly follow all recommendations made in the Asbestos and
Environmental Reports and all provisions of applicable law concerning the
monitoring, maintenance and/or abatement of Hazardous Substances on or about the
Facility, including but not limited to implementation of an inspection program
and any Operations and Maintenance Programs to properly manage asbestos
containing materials.
(e) Tenant shall indemnify, protect, defend and hold Landlord,
its agents, employees, partners (including, in the case of a corporate partner,
such corporation's shareholders, officers and directors) and Lenders, and the
Facility, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties and attorneys, and consultants' fees
arising out of or involving (i) any Hazardous Substances presently existing or
brought onto and/or released or threatened to be released from or onto the
Facility by any person during the term of the Lease and/or (ii) Tenant's failure
to perform any of its obligations under this Section 8.2.6. Tenant's obligations
hereunder shall include, but not be limited to, the effects of any contamination
or injury to person, property or the environment created or suffered by Tenant,
and the cost of investigation, removal, remediation, restoration and/or
abatement thereof, or of any contamination therein involved, and shall survive
the expiration or earlier termination of this Lease. No termination,
cancellation or release agreement entered into by Landlord and Tenant shall
release Tenant from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Landlord in writing at the time of
such agreement.
8.2.7 Tenant shall comply with, and the leasehold created by'
this Lease is subject to, all covenants, conditions, restrictions, easements and
rights of way affecting the Premises-.
8.3 Concurrently with commencement of the term, Landlord is acquiring
the Facility from Franciscan ElderCare Corporation, a non-profit Delaware
corporation (collectively "Seller") The Facility has been operated by Seller
("Prior Operator"). Tenant agrees that it will arrange for the following at or
prior to the commencement of the term:
8.3.1 Tenant shall arrange for all inventory of food, drugs,
laundry supplies, and other supplies for the Facility.
8.3.2 Tenant shall post new utility deposits or purchase Prior
Operator's deposits, as may be required.
8.3.3 Tenant shall adjust and prorate directly with Prior
Operator all matters dealing with patient accounts and operating expenses and
shall hold harmless Landlord from and against all matters pertaining thereto.
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8. 3 4 Tenant shall assume the contracts and/or equipment
leases listed in Exhibit C hereto (if any)
8.3.5 Tenant shall take a physical inventory of the furniture,
fixtures and equipment prior to commencement of the term, and report any
shortages or discrepancies to Landlord immediately. Failure to report shortages
or discrepancies prior to commencement of the term shall constitute a waiver by
Tenant of any shortages or discrepancies in furniture, fixtures and equipment.
8.3.6 Tenant shall furnish to Landlord promptly upon receipt
by Tenant, copies of all surveys and inspection reports relating to the
Facility, together with copies of all correspondence received by Tenant from any
and all regulatory authorities having cognizance or authority over operation at
the Facility, including but not limited to the Department of Health Services and
the agencies regulating Medicare and Medicaid certification of the Facility, and
its reimbursement and/or provider programs. Tenant shall also furnish to
Landlord copies of all plans of correction submitted to any such agency
concurrently with such submission. Tenant shall notify Landlord immediately each
time a survey or inspection of the Facility is commenced by any regulatory body
or authority.
8.3.7 Tenant shall arrange with Prior Operator for the
transfer of patients' trust funds and the accounting thereof, and shall furnish
any bond which may be required by law in correction therewith. Tenant shall hold
harmless Landlord from and against any liability, losses, damages, costs,
expenses (including, without limitation attorneys' fees and costs), causes of
action, claims, or judgments arising out of or related to the transfer of any
patients' trust funds and the accounting thereof.
ARTICLE 9
MAINTENANCE
9.1 Tenant shall, at its sole cost and expense, at all times during the
term of this Lease, maintain the Premises and every part thereof in good, clean
working order, condition and repair including, without limitation, the
structural portions of the building and improvements thereon, the interior and
exterior thereof, foundations, roofs, plate glass, wiring, plumbing, heat and
air conditioning units, mechanical systems, parking and service areas,
landscaping, the approaches thereto and appurtenances thereof, including all
adjacent sidewalks and alleys. Tenant's obligation to maintain the Premises
shall specifically include, without limitation, the obligation to make any and
all repairs and to repaint and/or restain all painted and wood surfaces and
restripe the parking areas as required. Landlord shall not have any
responsibility to maintain the Premises or any part thereof including, without
limitation, any structural or mechanical maintenance, repair or replacement.
Tenant waives all rights under any laws which may provide for Tenant's right to
make repairs and deduct the expenses of such repairs from rent or to withhold
rent or terminate the Lease based upon the condition of the Premises.
9.2 Tenant shall, at its sole cost and expense, at all times during the
term of this Lease, keep and maintain all the Personal Property including
furniture, fixtures and equipment, in good working order, condition and repair.
Tenant shall have the right to install on the Premises any and all equipment and
fixtures which Tenant desires to install thereon and which are necessary or
convenient to Tenant's use of the Premises as permitted herein, without the
consent of Landlord. All such property so installed by Tenant shall remain
Tenant's property (other than replacements for Personal Property as provided
below) and, provided Tenant is not in default hereunder, may be removed by
Tenant as provided in this Lease. Except as provided below, Tenant shall not
remove the Personal Property described in Exhibit B, and/or replacements
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thereof or any part thereof from the Premises, without the prior written consent
of Landlord. Tenant shall purchase and replace with substitutes of equal or
higher quality any worn out or broken items of Personal Property required to be
on the Premises for continued licensing and/or certification as the same may
occur from time to time throughout the term of this Lease at Tenant's sole cost
and expense. Items being replaced by Tenant may be removed without Landlord's
prior consent and shall become the property of Tenant, and items replacing same
shall be and remain the property of Landlord subject to removal only with
consent until in turn replaced. Tenant agrees, upon written request from
Landlord, to execute any and all documents necessary to assist Landlord to fully
evidence Landlord's ownership of the Personal Property.
9.3 Tenant shall, throughout the term of this Lease, make all repairs,
alterations, replacements and additions to the Facility required by law and/or
as necessary to obtain and maintain licensing and certification as the Licensed
Facility.
9.4 If any Lender requires the imposition of a replacement reserve, or
similar reserve for purposes of maintaining the Facility or portions thereof,
by requiring monthly or other such periodic payments to an escrow account for
such purposes, Tenant, on notice from Landlord indicating this requirement,
shall make such payments in accordance with the Lender's requirements.
ARTICLE 10
ALTERATIONS
10.1 Tenant shall not make or allow to be made any Alterations to the
Premises or any part thereof in excess of $25,000.00 during any Lease Year
without Landlord's prior written consent. Any Alterations made shall remain on
and be surrendered with the Premises on expiration or termination of the term.
Failure of Landlord to respond within ten (10) days after Tenant notifies
Landlord of its request for Landlord's consent to Alterations shall be deemed
consent. Landlord's consent shall not be necessary for emergency repairs, or
Alterations required for continued licensing and/or certification of the
Facility.
10.2 Except in the event of emergency Alteration, if Tenant makes any
Alterations to the Premises as provided in this Article, the Alterations shall
not be commenced until at least ten (10) days after Landlord has received notice
from Tenant stating the date the installation of the Alterations is to commence.
If any structural modifications are to be made, then to the extent applicable,
the provisions of Sections 16.9 and 16.10 shall apply to any requested
Alterations as if the Alteration project was a Restoration. Landlord may impose
such further conditions to its consent as it deems reasonably necessary.
ARTICLE 11
MECHANIC'S LIENS
11.1 Tenant shall pay, when due, all costs for construction done by it
or caused to be done by it on the Premises. Tenant shall keep the Premises free
and clear of all mechanic's liens and other liens by reason of work, labor,
services or materials supplied or claimed to have been supplied to or for
Tenant, or anyone holding the Premises or any part thereof through or under
Tenant.
11.2 If Tenant shall, in good faith, contest the validity of any such
lien, then Tenant shall, at its sole cost and expense, indemnify, defend and
hold harmless Landlord, its agents, employees, partners (including, in the case
of a corporate partner, such corporation's shareholders, officers and directors)
and Lenders, and the Facility against the same and shall pay and satisfy any
adverse judgment that may be rendered thereon before the enforcement thereof
against such parties or the Facility.
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Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an
amount equal to one and one-half times the amount of the contested lien,
indemnifying Landlord against liability for the same, as required by law for the
holding of the Facility free from the effect of such lien or claim, or such
other reasonable security as may be required by Landlord or its Lender. In
addition, Landlord may require Tenant to pay Landlord's attorneys' fees and
costs in participating in such action if Landlord shall decide it is in its best
interest to do so.
11.3 If Tenant shall fail to discharge any such lien within ten (10)
days of its being filed or fails to furnish reasonable security therefor as may
be required by Landlord or Landlord's Lender, then, in addition to any other
right or remedy of Landlord resulting from Tenant's said default, Landlord may,
but shall not be obligated to, discharge the same either by paying the amount
claimed to be due or by procuring the discharge of such lien by giving security
or in such other manner as is or may be prescribed by law or practice of the
state in which the Facility is located. Tenant shall repay to Landlord, as
additional rent, on demand, all sums disbursed or deposited by Landlord pursuant
to the foregoing provisions of this section plus interest thereon at the then
maximum rate of interest permitted by law, or if no maximum rate then applies,
at the rate of 18% per annum. Nothing contained herein shall imply any consent
or agreement on the part of Landlord to subject Landlord's estate to liability
under any mechanic's or other lien law.
ARTICLE 12
UTILITIES AND SERVICES
12.1 Tenant shall make all arrangements for, and prior to delinquency
pay for, all utilities and services furnished to the Facility or used by it,
including, without limitation, gas, electricity, water, telephone service, and
trash collection, and for all connection charges and deposits required by any of
said utilities. Landlord shall not be liable for any interruption in the
provision of any such utility services to the Facility.
ARTICLE 13
INDEMNITY AND EXCULPATION
13.1 Tenant hereby agrees to defend, indemnify and hold harmless
Landlord, its partners (including the shareholders, officers and directors of
any corporate partner) agents, employees, successors and Lenders (for purposes
of this Article, the foregoing shall be referred to collectively as "Landlord")
and the Facility from each and every claim, demand, lien, loss, penalty, cost
(including attorneys' fees and costs of litigation) judgment and damage of any
kind or nature whatsoever at any time made by reason of any injury or death to
any person or persons, including Tenant, or damage or destruction to property of
any kind whatsoever and to whomsoever belonging including, without limitation,
Tenant, from any cause or causes, (including without limitation Tenant's
arranging or failure to arrange for competent medical care, or to render
competent dietary and sanitary care to patients and occupants), resulting or
arising directly or indirectly, out of Tenant's possession, occupancy,
maintenance, repair and/or use of the Facility, the conduct of Tenant's
business at the Facility, any act, omission or neglect of Tenant, its agents,
contractors, employees or invitees, any default or breach by Tenant in the
performance of its obligations hereunder, or the condition, use or misuse of the
Facility and the approaches and appurtenances thereto, including, without
limitation, all adjacent sidewalks, alleys, and the parking area. The foregoing
shall include without limitation the defense or pursuit of any claim or any
action or proceeding involved therein, and whether or not (in the case of claims
made against Landlord) litigated and/or reduced to judgment, and whether well
founded or not. Excluded from Tenant's obligations set forth in this section are
damages which
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are the sole, direct and proximate result of Landlord's gross negligence,
willful acts or omissions, or Landlord's material breach of this Lease, except
to the extent that insurance coverage for Landlord's protection is required by
the provisions of Article 14.
13.2 Tenant hereby agrees that Landlord (as such term is defined for
purposes of Section 13.1 above) and the Facility shall not be liable for, and
Tenant hereby agrees during the term of this Lease to defend, indemnify and hold
harmless Landlord and the Facility from and against any and all claims, demands,
obligations, liabilities, penalties, cause or causes of action and any and all
costs and expenses, including, without limitation, attorneys' fees and costs of
litigation, which arise out of or are incurred in connection with, injury to
Tenant's business or any loss of income therefrom or for damages to the goods,
wares, merchandise or other property of Tenant, Tenant's employees, agents,
invitees, patients, occupants, or any other person in or about the Facility,
whether such damage or injury is caused by or results from fire, steam,
electricity, gas, water or rain, or from the breakage, leakage, obstruction or
other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures of the same, or from any other cause, whether
the said damage or injury results from conditions arising at the Facility or
elsewhere and regardless of whether the cause of such damage or injury or the
means of repairing the same is inaccessible to Tenant. Excluded from Tenant's
obligations set forth in this section are damages which are the sole, direct and
proximate result of Landlord's negligence, willful acts or omissions, or
Landlord's material breach of this Lease, except to the extent that insurance
coverage for Landlord's protection is required by the provisions of Article 14.
ARTICLE 14
INSURANCE
14.1 Tenant, at its sole cost and expense, shall maintain at all times
during the term of this Lease bodily injury and property damage insurance to
include personal injury and contractual liability, hospital (professional)
liability, and owned and non-owned automobile liability in an amount of not less
than $5,000,000 per occurrence. Such insurance shall protect against claims
arising out of Tenant's use or occupancy of the Facility and insure Landlord and
its Lender(s) (if required by Lender(s)) with respect to the ownership,
maintenance, operation and use or occupancy of the Facility, including without
limitation, the sole negligence and strict liability of Landlord. A "claims
made" insuring form shall, to the extent commercially available, not be used.
14.2 Not more frequently than semi-annually, if in the reasonable
discretion of any Lender, or the reasonable and good faith opinion of Landlord,
the amount of any insurance required hereunder should be increased, or if the
insurance requirements of this Lease should be expanded or otherwise modified,
Tenant shall increase or modify the insurance coverage as required by any Lender
or Landlord and, in such event, Tenant's monthly impound amount, if any, shall
be increased accordingly.
14.3 Tenant, at its sole cost and expense, shall maintain at all times
during the term of this Lease on all Tenant's personal property, Improvements
and Alterations in, on, or about the Premises, a policy of insurance with "all
risks" or "special form" coverage of direct physical loss, including flood (if
the Premises are located within a flood plain), but excluding earthquake. Such
insurance shall contain a replacement cost endorsement to the extent of 100% of
their full replacement value. The proceeds from any such policy shall be used by
Tenant for the replacement of personal property or the restoration of Tenant's
Improvements or Alterations, subject to the rights of any lender.
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14.4 At all times during the term of this Lease, Tenant at its sole
cost and expense shall maintain on all the Personal Property described in
Exhibit B, and all replacements thereof, and on the Real Property that are a
part of the Premises, during the term of this Lease a policy or policies of
insurance with "all risks" or "special form" coverage of direct physical loss,
including flood (if the Premises are located within a flood plain) and
earthquake. such insurance shall contain sprinkler leakage coverage and
earthquake sprinkler leakage endorsements. The property to be insured under this
section shall be continually insured in an amount not less than 100% current
replacement cost, provide for replacement cost valuation in the event of an
insured loss, and contain not less than a 90% average clause, 25% for earthquake
sprinkler leakage. Tenant shall obtain a "stipulated or agreed amount"
endorsement from the insurance carrier if such endorsement is available. The
policy shall also contain provisions for, or endorsements shall be obtained for,
earthquake sprinkler leakage, demolition cost coverage of not less that ten
percent (10%) of the face amount of hazard insurance carried on the building and
other improvements, contingent liability from operation of building laws
coverage (to cover an undamaged portion of an insured improvements that is
required to be removed), and increased cost of construction coverage (for
upgrading to current building codes, if necessary). The insurance policy or
policies shall insure both Landlord and Tenant, as their interests appear, with
lender endorsements as required by any Lender. In case this Lease is terminated,
the insurance policy (if other than blanket) and all rights under it or the
insurance proceeds shall be assigned to Landlord or its Lender(s) at Landlord's
or any Lender's election subject to insurance company approval. Tenant shall pay
the premiums for maintaining the insurance required hereunder while the Lease is
in force. If (1) any Lender requires Landlord to escrow (impound) insurance
premiums on a periodic basis during the term, or (2) in the event Tenant has
defaulted in performance of any material provisions of this Article 14, Tenant,
on notice from Landlord indicating this requirement shall pay sums of money
toward its liability under this Article 14 to Landlord on a periodic basis in
accordance with (1) the Lender's requirements, or (2) Landlord's requirements,
as applicable.
14.5 In order to assure that the building and other improvements that
are part of the Premises and the Personal Property are continually insured to
their full value with replacement cost insurance, the full replacement value of
the insurable improvements shall be determined by the company issuing the
insurance policy at the time the policy is initially obtained. Not more
frequently than once every two (2) years, or sooner if required by any Lender,
Landlord shall have the right to notify Tenant that it elects to have the
replacement value redetermined by an insurance company, or by appraisal. The
redetermination shall be made promptly and in accordance with Marshall & Swift
or similar appraisal company recognized and generally accepted by the insurance
industry, and each party shall be promptly notified of the results by the
company. The insurance policy shall be adjusted according to the determination.
Tenant shall be obligated to forthwith increase the insurance coverage and pay
the premiums therefor in accordance with any such determination.
14.6 At all times during the term of this Lease, Tenant at its sole
cost and expense shall maintain loss of rental income coverage protecting
against the "all risk" perils or "special form" perils, as the case may be,
including earthquake and flood (if in a flood plain). Earthquake sprinkler
leakage coverage is to be specifically included in addition to any earthquake
coverage, the intent being to provide this coverage at the lowest possible
deductible in an amount equal to twelve (12) months' Base Monthly Rent, as the
same may be adjusted from time to time, plus the estimated annual cost of real
and personal property taxes and policies required assessments and the annual
premiums for insurance to be carried by Tenant hereunder. Such insurance shall
name
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Landlord and Tenant as insureds as their respective interests may appear and
shall provide for monthly payments to Landlord to the extent of Tenant's monthly
obligations hereunder plus such amounts of taxes and insurance premiums as would
be payable to Landlord if the same were being impounded monthly. Such insurance
shall provide for 60% contribution or coinsurance, or stipulated amount if this
clause if reasonably available.
14.7 The parties release each other and their respective owners,
officers, directors, partners (including the shareholders, officers and
directors of any corporate partners) and agents, from any claims for damage to
any person or to the Facility or any part thereof, Tenant's Improvements, and
alterations of either Landlord or Tenant in, on or about the Premises, that are
caused by or result from risks insured against under any insurance policies
carried by the parties and in force at the time of any such damage. Each party
shall cause each insurance policy obtained by it to provide that the insurance
company waives all right of recovery by way of subrogation against either party
in connection with any damage covered by any policy. Neither party shall be
liable to the other for any damage caused by fire or any of the risks insured
against under any insurance policy required by this Lease. If any insurance
policy cannot be obtained with a waiver of subrogation, or is obtainable only by
the payment of an additional premium charge above that charged by insurance
companies issuing policies without waiver of subrogation, the party undertaking
to obtain the insurance shall notify the other party of this fact. The other
party shall have a period of ten (10) days after receiving the notice either to
place the insurance with a company that is reasonably satisfactory to the other
party (and, in the case of insurance required to be carried by Tenant hereunder,
complying with the provisions of Section 14.8 below) and that will carry the
insurance with a waiver of subrogation, or to agree to pay the additional
premium if such a policy is obtainable at additional cost. If the insurance
cannot be obtained or the party in whose favor a waiver of subrogation is
desired refuses to pay the additional premium charged, the other party is
relieved of the obligation to obtain a waiver of subrogation rights with respect
to the particular insurance involved.
14.8 All insurance policies required under this Lease shall:
14.8.1 Be issued by insurance companies authorized to do
business in the state in which the Facility is located with a policyholders and
financial rating of at least A:Class X status (or such other status as may be
acceptable to Landlord in Landlord's sole discretion) as rated in the most
recent edition of Best's Reports Guide;
14.8.2 Be issued as a primary policy; however, Tenant may
carry the insurance under a blanket policy if the policy specifically provides
that the amount of insurance required under this Lease. will be in no way
prejudiced by other losses covered by the policy; and
14.8.3 Contain an endorsement requiring thirty (30) days
written notice from the insurance company to all parties including, without
limitation, Landlord's Lenders, before cancellation or material change in the
coverage, scope, or amount of any policy.
14.9 The policy, or a certificate of the policy itemizing all coverages
and extensions of coverage along with a copy (not a certified copy) of the
policy together with evidence of payment of premiums, shall be deposited with
Landlord at the Commencement Date, and on renewal of the policy, not less than
twenty (20) days before expiration of the term of the policy. Landlord (and
Landlord's Lenders, if required) shall be named as an insured (or additional
insured) in the policy and all renewals and replacements thereof.
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14.10 Deductible or retention provisions per loss contained for all
insurance policies required by this Lease shall be for the account of and
payable by Tenant and shall not exceed an aggregate amount of ten thousand
dollars ($10,000).
14.11 Subject to the provisions of Article 16, the proceeds from any
and all hazard insurance policies carried by Landlord shall be used solely for
the purpose of repair, reconstruction, remodeling and replacement of the
Facility or any part thereof damaged or destroyed, and shall be held by Landlord
in trust for such purposes.
14.12 In the event Tenant does not maintain any of the foregoing
policies of insurance, Landlord may, but shall not be obligated to, pay the
premiums therefor, and such amounts plus interest at the maximum rate permitted
by law, or if no maximum rate applies, at the rate of 18% per annum, from the
date Landlord paid until the date of reimbursement shall be additional rent due
hereunder and payable on the next payment date for monthly rent. Landlord's
election to make said payments shall not be deemed a waiver of any other
remedies, or an election of remedies by Landlord, nor as liquidated damages.
14.13 Tenant, at its sole cost and expense, shall obtain and maintain
worker's compensation insurance (or evidence of a qualified self insurance
program if permitted by the law) in the state in which the Facility is located.
ARTICLE 15
CONDEMNATION
15.1 Definitions:
15.1.1 "Condemnation" means (1) the exercise of any
governmental or governmentally-derived power, whether by legal proceedings or
otherwise, by a Condemnor (as defined below), and (2) a voluntary sale or
transfer by Landlord to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending.
15.1.2 "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
15.1.3 "Award" means all compensation, sums, or anything of
value awarded, paid, or received on a total or partial Condemnation.
15.1.4 "Condemnor" means any public or quasi-public authority,
or private entity or individual, having the power of Condemnation.
15.2 If during the term there is any taking of all or any part of the
Premises or any interest in this Lease by Condemnation, the rights and
obligations of the parties shall be determined pursuant to the provisions of
this Article 15.
15.3 if the Premises are totally taken by Condemnation, this Lease
shall terminate on the Date of Taking.
15.4 If the Premises are partially taken by Condemnation, this Lease
shall remain in effect, except that Tenant can elect to terminate this Lease if
the remaining portion of the building or other improvements or the parking area
that are a part of the Premises is rendered unsuitable for Tenant's continued
use of the Premises. If Tenant elects to terminate this Lease, Tenant must
exercise its right to terminate by giving notice ("Termination Notice") to
Landlord within thirty (30) days after the nature and extent of the taking have
been finally determined. The Termination Notice shall state the date of
termination, which date shall not be
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earlier than thirty (30) days nor later than ninety (90) days after Tenant has
notified Landlord of its election to terminate (except that this Lease shall
terminate on the Date of Taking if the Date of Taking falls on a date before the
date of termination as designated by Tenant in the Termination Notice). If
Tenant does not terminate this Lease within the thirty (30) day period, this
Lease shall continue in full force and effect, except that Base monthly Rent
shall be reduced pursuant to Section 15.5 below.
15.5 If any portion of the Premises (other than that portion consisting
of land upon which no buildings, improvements, parking areas, driveways,
walkways or recreation areas are located, hereinafter referred to as Excluded
Premises) is taken by Condemnation and this Lease remains in full force and
effect, on the date of Award, the Base Monthly Rent shall be reduced by an
amount that is in the same ratio to Base Monthly Rent as the amount that the
Award bears to the total value of the Premises immediately before the Date of
Award.
15.6 If there is a partial taking of the Premises and this Lease
remains in full force and effect, Landlord at its cost shall accomplish all
necessary restoration. Base Monthly Rent shall be abated or reduced during the
period from the date of taking until the completion of restoration, but all
other obligations of Tenant under this Lease shall remain in full force and
effect. The abatement or reduction of Base Monthly Rent shall be based on the
extent to which the restoration interferes with Tenant's use of the Premises. If
the award is not sufficient to pay for restoration, Landlord may elect to
furnish the deficiency, or Landlord may elect to terminate this Lease, at
Landlord's discretion, in which latter event, Tenant may elect to furnish the
deficiency by written notice to Landlord within ten (10) days following
Landlord's notice to Tenant of Landlord's election to terminate hereunder.
15.7 If the Lease remains in full force and effect, the entire Award
shall belong to and be paid to Landlord. If the Lease terminates, the Award
shall belong to and be paid to Landlord, except that Tenant shall receive from
the award any sum awarded for relocation, plus any sum awarded for Tenant's
Improvements or Alterations made to the Premises by Tenant in accordance with
this Lease, which Tenant's Improvements or Alterations Tenant has the right to
remove from the Premises pursuant to the provisions of this Lease but elects not
to remove.
ARTICLE 16
DESTRUCTION
16.1 If during the term the Premises or any part thereof are totally or
partially destroyed from a risk required to be covered by the insurance
described in Article 14 of this Lease, Tenant shall restore the Premises to
substantially the same condition as they were in immediately before destruction,
whether or not the insurance proceeds are sufficient to cover the actual cost of
restoration. Such destruction shall not terminate this Lease. If the existing
laws do not permit the restoration, either party can terminate this Lease
immediately by giving notice to the other party.
16.2 Subject to the provisions set forth below, if during the term the
Premises or any part thereof are totally or partially destroyed from a risk not
required to be covered by the insurance described in Article 14 of this Lease,
Tenant shall restore the Premises to substantially the same condition as they
were in immediately before destruction. Such destruction shall not terminate
this Lease. If the existing laws do not permit the either party can terminate
this Lease immediately by restoration, giving notice to the other party. If the
cost of restoration exceeds $2,000,000 (the "Replacement Limit"), Tenant can
elect to terminate this Lease by giving notice to Landlord within twenty (20)
days after determining the restoration cost or replacement
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cost, which Tenant agrees to promptly and diligently obtain. if Tenant elects to
terminate this Lease, Landlord, within thirty (30) days after receiving Tenant's
notice to terminate can elect to pay the actual cost of restoration in excess of
the Replacement Limit, in which case Tenant shall restore the Premises. On
Landlord's making its election to contribute, each party shall deposit
immediately the amount of its contribution with the Insurance Trustee provided
for in Section 16.6 below. If the cost of restoration does not exceed the
Replacement Limit, Tenant shall immediately deposit the cost of restoration with
the Insurance Trustee.
16.3 As used in Sections 16.4 and 16.12 hereof:
16.3.1 "Index" shall mean the Consumer Price Index for All
Urban Consumers, Los Angeles/Anaheim/Riverside Metropolitan Area, 1982-1984 =
100, published by the Bureau of Labor Statistics of the U.S. Department of
Labor.
16.3.2 "Adjustment Date" shall mean each anniversary of the
Commencement Date during the term of this Lease.
16.3.3 "Percentage Increase of Index" shall mean the
percentage of increase in the Index on the Adjustment Date equal to a fraction,
the numerator of which shall be the Index an such Adjustment Date less the Index
on the Commencement Date, and the denominator of which shall be the Index on the
Commencement Date. In the event the Index shall hereafter be converted to a
different standard reference base or otherwise revised, the Index for each
Adjustment Date shall be the one reported in the U.S. Department of Labor's
newest comprehensive official index then in use and most nearly answering the
description of the foregoing Index. If it is calculated from a base different
from 1982-1984 = 100, the determination of Percentage Increase of Index shall be
made using a formula supplied by the Bureau of Labor Statistics, or if the
Bureau shall not publish the same, it shall be determined by using any other
nationally recognized publisher of similar statistical information on which the
parties may agree. If they are unable to agree within thirty (30) days after
demand by either party, a substitute index shall, on application of either
party, be selected by the chief officer of the San Francisco regional office of
the Bureau, or its successor.
16.4 The Replacement Limit figure set forth above in Section 16.2 shall
be increased on each Adjustment Date for the Lease Year commencing on such
Adjustment Date by an amount equal to such figure multiplied by the Percentage
Increase of Index.
16.5 If during the term any portion of the Premises are damaged or
destroyed from a risk covered by the insurance described in Article 14 of this
Lease, and the total amount of loss does not exceed ten thousand dollars
($10,000), Tenant shall make the loss adjustment with the insurance company
insuring the loss. The proceeds shall be paid directly to Tenant for the sole
purpose of making the restoration of the Premises in accordance with Sections
16.9 et seq. of this Lease.
16.6 If during the term any portion of the Premises are damaged or
destroyed from a risk covered by the insurance described in Article 14 of this
Lease, and the total amount of loss exceeds ten thousand dollars ($10,000),
Tenant shall, with Landlord's approval, make the loss adjustment with the
insurance company insuring the loss, and on receipt of the proceeds, the parties
shall immediately pay them to a bank, savings and loan association, or other
person or company furnishing construction disbursement control services
acceptable to Landlord ("Insurance Trustee") to act as insurance trustee
hereunder.
16.7 All sums ("Trust Funds") deposited with the Insurance Trustee
(including insurance proceeds) shall be held for the
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following purposes and the Insurance Trustee shall have the following powers and
duties:
16.7.1 The Trust Funds shall be paid in installments by the
Insurance Trustee to the contractor retained by Tenant as construction
progresses, for payment of the cost of restoration. A 10% retention fund shall
be established that will be paid to the contractor on the last to occur of (i)
completion of restoration, (ii) payment of all costs thereof, (iii) receipt of
all necessary governmental inspection approvals, (iv) expiration of all
applicable lien periods, and (v) proof that the Premises are free of all
mechanics' liens and lienable claims.
16.7.2 Payments shall be made on presentation of certificates
or vouchers from the architect, engineer, or other inspection agency retained by
the Insurance Trustee or Tenant showing the amount due. If the Insurance
Trustee, or Landlord, in its reasonable discretion, determines that the
certificates or vouchers are being improperly approved, either shall have the
right to appoint an architect, engineer, or. inspection agency to supervise
construction and to make payments only on certificates or vouchers approved by
such person. The expenses and charges of the person retained by Landlord or
Insurance Trustee shall be paid out of the Trust Funds.
16.7.3 If after deposit by the parties of all sums required by
this Article 16, the sums held by the Insurance Trustee are not sufficient to
pay the actual cost of restoration, Tenant and/or Landlord (as applicable) shall
deposit the amount of the deficiency with the Insurance Trustee within seven (7)
days after request by the Insurance Trustee indicating the amount of the
deficiency.
16.7.4 Insurance proceeds not disbursed by the Insurance
Trustee after restoration has been completed and final payment has been made to
Tenant's contractor shall be delivered within seven (7) days (after demand made
by either party an the Insurance Trustee, with a copy to Landlord's Lender) by
the Insurance Trustee to Landlord' s Lender and shall be applied by Landlord's
Lender to reduce the balance of the loan held by the Lender.
16.7.5 Any undisbursed funds after compliance with the
provisions of this Article 16 shall be delivered to Landlord. All actual costs
and charges of the Insurance Trustee shall be paid by Tenant.
16.7.6 If the Insurance Trustee resigns or for any reason is
unwilling to act or continue to act, the parties shall jointly substitute a new
trustee meeting the requirements of Section 16.6 above in the place of the
designated Insurance Trustee.
16.8 If Landlord is required to or elects to restore the Premises as
provided in this Article 16, Landlord shall not be required to restore Tenant's
Improvements, Alterations, trade fixtures, equipment or personal property, such
excluded items being the sole responsibility of Tenant to restore.
16.9 Promptly following the date that Tenant is obligated to restore
the Premises, Tenant at its cost shall prepare final plans and specifications
and working drawings (collectively "Plans") complying with applicable laws that
will be necessary for restoration of the Premises. The Plans shall be subject to
approval by Landlord. Landlord shall have twenty (20) days after receipt of the
Plans to either approve or disapprove the Plans and return them to Tenant. If
Landlord disapproves the Plans, Landlord shall notify Tenant of its objections,
and Tenant shall submit required Plans responding to Landlord's objections. The
process shall continue until Landlord has approved the Plans. Any
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unresolved controversy arising out of or relating to this Section 16.9 shall be
settled by arbitration in accordance with the then-prevailing rules of the
American Arbitration Association, and judgment upon the award may be entered in
any Court having jurisdiction thereof. Tenant acknowledges that the Plans shall
be subject to approval of the appropriate government bodies and that they will
be prepared in such a manner as to obtain that approval.
16.10 The restoration shall be accomplished as follows:
16.10.1 Tenant shall complete the restoration as promptly as
possible after final Plans have been approved by Landlord and all appropriate
government bodies and all required permits have been obtained (subject to a
reasonable extension for delays resulting from causes beyond Tenant's reasonable
control).
16.10.2 Tenant shall retain a licensed general contractor that
is bondable. The contractor shall be required to carry public liability and
workers compensation insurance, and such other coverages as may be reasonably
required by Landlord or its Lender, during the period of construction. Landlord,
Landlord's Lender if required and Tenant shall be named as additional insured's
on the contractor's general liability insurance policy. Such insurance shall
contain a waiver of subrogation clause in favor of Landlord and Tenant. The
contract for restoration between Tenant and its contractor shall be approved by
Landlord, in advance, which approval shall not be unreasonably withheld. During
restoration, Tenant, at its sole cost and expense, shall take out a course of
construction policy that includes Landlord (and Landlord's Lender, if required)
as an insured. Such policy shall provide for "special form" perils coverage, but
shall exclude earthquake, in an amount sufficient to protect an estimated amount
to complete the restoration, including transit and installation coverage.
16.10.3 Tenant shall notify Landlord of the date of
commencement of the restoration at least ten (10) days before commencement of
the restoration. The contractor retained by Tenant shall not commence
construction until a performance bond and a labor and material payment bond in
the full amount of the cost of restoration have been delivered to Landlord to
insure completion of the construction.
16.10.4 Tenant shall accomplish the restoration in a manner
that will cause the least inconvenience, annoyance, and disruption to the
Premises.
16.10.5 Prior to commencement of construction of the
restoration and upon completion of the restoration, Tenant shall immediately
furnish Landlord evidence satisfactory to Landlord that the restoration complies
with all applicable statutes, ordinances, codes and law and that all necessary
and applicable permits and approvals have been obtained for the restoration.
16.10.6 The restoration shall not be commenced until sums
sufficient to cover the cost of restoration are placed with the Insurance
Trustee.
16.11 In case of damage or destruction to the Premises or any part
thereof, there shall be no abatement or reduction of Rent.
16.12 If damage or destruction to the Premises occurs during the last
Lease Year of the term, the cost of repairing which exceeds $50,000 (the
"Termination Limit"), either party may terminate this Lease by giving notice to
the other not more than thirty (30) days after the event of damage or
destruction. The Termination Limit figure set forth herein shall be increased on
each Adjustment Date by an amount equal to such figure multiplied by the
Percentage increase in Index (as defined in Section 16.3 above).
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16.13 The provisions of this Article 16 assume that the insurance
proceeds, in the event of an insurable loss, are made available to the parties
for the purpose of restoration of the Premises. In the event that Landlord's
Lender(s) refuse(s) to make the proceeds available for such purpose, having the
right to do so, and/or as a condition of making the proceeds available alter(s)
the terms of any obligations secured by encumbrances) affecting the Premises so
as to materially change the cost of or the manner in which such obligations)
is/are to be paid or discharged, Landlord shall have the right to terminate this
Lease by giving notice to Tenant not later than thirty (30) days after
determination of such conditions).
ARTICLE 17
ASSIGNMENT AND SUBLETTING
17.1 Tenant shall not voluntarily assign or otherwise transfer or
encumber its interest in this Lease or in the Premises, including but not
limited to, entering into a management agreement or contract with anyone to
operate the Facility (collectively an "assignment") , or sublease all or any
part of the Premises or allow any other person or entity (except Tenant's
agents, invitees and patients) to occupy or use all or any part of the Premises
(collectively a "sublease"), without first obtaining Landlord's written consent.
Any assignment or sublease without Landlord's written consent shall be voidable
and, at Landlord's election, shall constitute a default under this Lease. No
consent to any assignment or sublease shall constitute consent to any future
assignment, encumbrance or sublease or a further waiver of the provisions of
this Article 17. If Tenant is a partnership, a withdrawal or change, voluntary,
involuntary, or by operation of law, of a partner or partners owning 51% or more
of the partnership, or the dissolution of the partnership, shall be deemed a
voluntary assignment. If Tenant consists of more than one person, a purported
assignment, voluntary, involuntary, or by operation of law, from a majority of
persons to the others shall be deemed a voluntary assignment. If Tenant is a
corporation, any dissolution, merger, consolidation, or other reorganization of
Tenant, or (except by the voluntary act of Landlord) the sale or other transfer
of a controlling percentage of the capital stock of Tenant, or the sale of 51%
of the value of the assets of Tenant, shall be deemed a voluntary assignment.
The phrase "controlling percentage" means the ownership of, and the right to
vote, stock possessing at least 51% of the total combined voting power of all
classes of Tenant's capital stock issued, outstanding, and entitled to vote for
the election of directors. Consent of Landlord to an assignment or sublease
shall not be unreasonably withheld, provided that it shall be reasonable for
Landlord to condition its consent upon any of the following factors:
17.1.1 At the time of Tenant's request for Landlord's consent
to such assignment or subletting, and upon the effective date of such assignment
or subletting, Tenant is not in default in the performance and observance of any
of the covenants and conditions of this Lease;
17.1.2 The proposed assignee or sublessee of Tenant shall
expressly assume in writing all of Tenant's obligations under this Lease; and
17.1.3 The proposed assignee or sublessee shall be reputable
person or entity of good character, having sufficient experience, assets and
income, in Landlord's reasonable judgment, to bear the financial
responsibilities of Tenant under this Lease. Tenant shall provide Landlord with
data on the proposed assignee or sublessee sufficient to enable Landlord to
evaluate and consider such proposed assignee's or sublessee's background,
experience, reputation, ability to perform its obligations, financial
responsibility, credit rating, capitalization and such other factors as Landlord
shall deem relevant. Tenant shall also furnish
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to Landlord in writing all of the terms and conditions upon which the proposed
assignment or sublease is to be made.
17.2 Notwithstanding anything to the contrary contained herein,
Landlord's acceptance of rent from any person or entity other than Tenant shall
not be deemed, in and of itself, to be a waiver of any of the provisions of this
Lease or a consent to an assignment or subletting.
17.3 No sublease entered into by Tenant shall be effective unless and
until it has been approved in writing by Landlord. In entering into any
sublease, Tenant shall use only such form of sublease as is satisfactory to
Landlord, and once approved by Landlord, such sublease shall not be changed or
modified without Landlord's prior written consent.
17.4 Any assignee or sublessee shall, by reason of entering into an
assignment or sublease under this Lease, be deemed, for the benefit of Landlord,
to have assumed and agreed to conform and comply with each and every obligation
under this Lease to be performed by Tenant other than such obligations as are
contrary to or inconsistent with provisions contained in an assignment or
sublease to which Landlord has expressly consented in writing.
17.5 If Tenant's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease (and Landlord's consent thereto)
shall not be effective unless said guarantors give their written consent to such
assignment or sublease and the terms thereof and acknowledge their continued
liability hereunder.
17.6 The consent by Landlord to any assignment or sublease shall not
release Tenant or guarantor(s) (if any) from their obligations under this Lease
and/or any guaranties or alter the primary liability of Tenant or guarantor(s)
to pay the Rent and perform and comply with all of the obligations of Tenant to
be performed under this Lease.
17.7 If Tenant requests Landlord to consent to a proposed assignment or
sublease, Tenant shall pay to Landlord (whether or not consent is ultimately
given) a reasonable sum not exceeding one-half of one month's then-current Base
Monthly Rent on account of Landlord's costs, expenses and attorneys, fees in
connection with such request.
17.8 No interest of Tenant in this Lease shall be assignable by
operation of law (including, without limitation, the transfer of this Lease by
testacy or intestacy). Each of the following acts shall be considered an
involuntary assignment:
17.8.1 If Tenant is or becomes bankrupt or insolvent, makes
an assignment for the benefit of creditors, or institutes a proceeding under the
Bankruptcy Code in which Tenant is the debtor;
17.8.2 If a writ of attachment or execution is levied on this
Lease;
17.8.3 If, in any proceeding or action to which Tenant is a
party, a receiver is appointed with authority to take possession of the
Premises.
17.9 An involuntary assignment shall constitute a default by Tenant and
Landlord shall have the right to elect to terminate this Lease, in which case
this Lease shall not be treated as an asset of Tenant. If a writ of attachment
or execution is levied on this Lease, Tenant shall have forty-five (45) days in
which to cause the attachment or execution to be removed.
17.10 Bankruptcy:
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17. 10. 1 If this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq.
(the "Bankruptcy Code"), any and all monies or to other considerations payable
or otherwise to be delivered in connection with such assignment shall be paid or
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code.
17.10.2 If Tenant assumes this Lease and proposes to assign
the same pursuant to the provisions of the Bankruptcy Code to any person or
entity who shall have made a bona fide offer to accept an assignment of this
Lease on terms acceptable to Tenant, then notice of such proposed assignment
setting forth (i) the name and address of such person, (ii) all of the terms and
conditions of such offer, and (iii) the adequate assurance to be provided
Landlord to assure such person's further performance under the Lease, including,
without limitation, the assurance referred to in Section 365(f) (3) (B) of the
Bankruptcy Code, shall be given to Landlord by Tenant no later than twenty (20)
days after receipt by Tenant, but in any event no later than ten (10) days prior
to the date that Tenant shall make application to a court of competent
jurisdiction for authority and approval to enter into such assignment and
assumption, and Landlord shall thereupon have the prior right and option, to be
exercised by notice to Tenant given at any time prior to the effective date of
such proposed assignment, to accept an assignment of this Lease upon the same
terms and conditions and for the same consideration, if any, as the bona fide
offer made by such person, less any brokerage commissions which may be payable
out of the consideration to be paid by such person for the assignment of this
Lease.
17.10.3 Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations arising under this
Lease on and after the date of such assignment. Any such assignee shall upon
demand execute and deliver to Landlord an instrument confirming such assumption.
17.11 Tenant immediately and irrevocably assigns to Landlord, as
security for Tenant's obligations under this Lease, all payments of Rent from
any subletting of all or part of the Premises as permitted by this Lease;
however, Landlord's security interest in such Rent payments is limited to the
extent of Tenant's payment obligations under this Lease. Landlord, as successor
and as attorney-in-fact for Tenant, or a receiver for Tenant appointed on
Landlord's application, may collect such Rent and apply it toward Tenant's
obligations under this Lease. However, until the occurrence of an act of default
by Tenant, Tenant shall have the right to collect such Rent. Nothing herein is
intended to abrogate or affect the provisions of Section 17.8.
17.12 Following the consent to an assignment or sublease, Landlord may,
but shall not be obligated to, consent to subsequent subleases or assignments of
the sublease or any amendments or modifications thereto without notifying
Tenant, any guarantors, or any other persons liable on the Lease or any sublease
and without obtaining their consent, and such action shall not relieve such
persons from liability under this Lease or any sublease.
ARTICLE 18
DEFAULTS; REMEDIES
18.1 Defaults. The occurrence of any one or more of the following
events shall constitute a default and breach of this Lease by Tenant:
18.1.1 Failure to pay Rent or any other sums required to be
paid under this Lease when due if the failure continues for
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fifteen (15) days after its due date for Monthly Base Rent or five (5) days
after its due date for all other sums.
18.1.2 Abandonment, except for emergencies, of the Facility
(failure to maintain legally-required staff for the operation of the Facility
for eight (8) consecutive hours shall be deemed an abandonment). Vacation of the
Facility due to acts of God, natural catastrophes, war, riot or other similar
events beyond Tenant's control, shall not be deemed an abandonment.
18.1.3 Tenant or any guarantor of Tenant's obligations
hereunder fails to pay its debts as they become due, or admits in writing its
inability to pay its debts, or makes a general assignment for the benefit of
creditors.
18.1.4 Commencement by Tenant or any guarantor of Tenant's
obligations hereunder of any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property.
18.1.5 Tenant or any guarantor of Tenant Is obligations
hereunder taking any corporate action to authorize any of the actions set forth
above.
18.1.6 Commencement of any case, proceeding or other action
against Tenant or any guarantor of Tenant's obligations hereunder seeking to
have an order for relief entered against it as debtor, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding or other action (i)
results in the entry of an order for relief against it which is not fully stayed
within seven (7) business days after entry thereof or (ii) remains undismissed
for a period of forty-five (45) days.
18.1.7 Notwithstanding any other provisions of this Lease, the
failure of Tenant to comply with any of the provisions of the Lease or any other
act or omission by Tenant (whether occurring at the Facility or elsewhere)
which, in the reasonable and good faith judgment of Landlord, places in imminent
jeopardy the continued licensing and/or certification of the Facility as then
currently licensed, and/or its certification as either a Medicare or Medicaid
provider (if then currently certified as such) , and if, within twenty-four (24)
hours after written notice thereof from Landlord to Tenant, Tenant shall not
have either (1) cured such failure, or (2) obtained an injunction or other order
preventing revocation or suspension of licensing and/or decertification of the
Facility by virtue of such failure or alleged failure, or (3) provided Landlord
with assurances satisfactory to Landlord that the Facility will not be subject
to license suspension or revocation and/or decertification as a result of such
failure or alleged failure.
18.1.8 Notwithstanding any other provisions of this Lease, a
release, generation or disposal of Hazardous Substances from the Premises or
onto the Premises, except in accordance with law.
18.1.9 Failure by Tenant to observe or perform any other
covenants, conditions, or provisions of this Lease to be observed or performed
by Tenant (except where a different period of time is specified in this Lease)
where such failure shall continue for a period of thirty (30) days after written
notice thereof from
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Landlord to Tenant. If the nature of Tenant's default is such that more than
thirty (30) days are reasonably required for its cure, Tenant shall not be
deemed to be in default if Tenant commences such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion.
18.2 Remedies. Landlord shall have the following remedies without
further notice to Tenant if Tenant commits a default. These remedies are not
exclusive and are in addition to any other remedies provided hereunder or
allowed at law or equity:
18.2.1 Landlord may reenter and resume possession of the
Facility, and remove Tenant and Tenant's property therefrom, and at its option
either terminate this Lease or, without terminating it, lease the Facility for
the account of Tenant for the remainder of the term or for such term or terms as
Landlord shall see fit. Should Landlord elect to lease the Facility for the
account of Tenant, Tenant shall pay Landlord an demand the cost of renovating,
repairing and altering the Facility for a new tenant or tenants, expenses of
relicensing and/or recertification which may be incurred by Landlord or a new
tenant, and also pay Landlord each month of Tenant's unexpired term the Rent
hereinbefore agreed to be paid, less such part, if any, thereof as Landlord
shall have been able to collect from a new tenant or tenants. Should default be
made by Tenant, as aforesaid, Landlord may, on the other hand, should it so
desire, without reentering or resuming possession of the Facility and without
terminating this Lease, enforce, by all proper and legal suits and other means,
its rights hereunder, including the collection of Rent. Should it be necessary
for Landlord to take any legal action hereunder, Tenant shall pay Landlord all
reasonable attorneys' fees and all other costs and expenses incurred by
Landlord in connection with such action. Landlord may, in its sole and absolute
discretion, elect to have a receiver appointed to affect any of the remedies set
forth in this Section 18.2. If a receiver is appointed, Tenant shall pay,
without limitation, all the associated direct and indirect costs of such
appointment.
18.2.2 If Landlord elects to relet the Facility as provided in
this Section 18.2, Rent that Landlord receives from reletting shall be applied
to the payment of: First, any indebtedness from Tenant to Landlord other than
Rent due from Tenant; second, all costs, including for maintenance, incurred by
Landlord in reletting; and third, Rent due and unpaid under this Lease. After
deducting the payments referred to in this paragraph, any sum remaining from the
Rent Landlord receives from reletting shall be held by Landlord and applied in
payment of future Rent as Rent becomes due under this Lease. In no event shall
Tenant be entitled to any excess Rent received by Landlord. If, on the date Rent
is due under this Lease, the Rent received from the reletting is less than the
Rent due on that date, Tenant shall pay to Landlord, in addition to the
remaining Rent due, all costs, including for maintenance, Landlord incurred in
reletting that remain after applying the Rent received from reletting as
provided in this Section 18.2.
18.2.3 In the event of a default under Section 18.1.8 above,
Landlord may, in addition to all other remedies which it may pursue, elect to
shut down Tenant's operations and require cleanup of the contamination at
Tenant's expense while still enforcing the remaining terms of this Lease. In
such event, Landlord shall have no liability to Tenant for any damages arising
out of the shutdown of operation. If Landlord elects to terminate the Lease on
account of such default, Landlord shall be entitled to collect as an item of its
damages cost of cleanup of the contamination.
18.2.4 Landlord, at any time after Tenant commits a default,
can cure the default at Tenant's cost. If Landlord at any time, by reason of
Tenant's default, pays any sum or does any act that requires the payment of any
sum, the sum paid by Landlord
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shall be due immediately from Tenant to Landlord at the time the sum is paid,
and if repaid at a later date, shall bear interest at the maximum rate permitted
by law, or if no maximum rate applies, then 18% per annum, from the date the sum
is paid by Landlord until Landlord is reimbursed by Tenant.
18.2.5 In the event that the Facility is excluded from
participating in the Medicaid program for the state in which the Facility is
located, such exclusion shall be deemed a breach of this Lease. In addition to
all remedies available to Landlord under the Lease and under applicable law,
Landlord shall have the right, following written demand to Tenant, to require
Tenant to deliver possession of the Facility to Landlord or to a nursing home
operator of Landlord's choice, and Tenant agrees to promptly comply with any
such demand. Unless expressly set forth by Landlord in writing, no such demand,
nor change of possession pursuant thereto, shall be deemed a termination of this
Lease or a release of Tenant from any of its obligations under the Lease. Unless
and until this Lease (or the Guaranty, as the case may be) is terminated by
Landlord, Tenant and each guarantor of Tenant's performance, shall remain liable
under the terms of this Lease and such Guaranty respectively. It is agreed that
an action excluding the Facility from participation in a Medicaid program shall
not be deemed to have occurred until such action is final in the sense that all
appeal rights have expired. No action to exclude shall be deemed to have
occurred unless the period of exclusion exceeds sixty (60) days.
18.2.6 Should Landlord require Tenant to deliver possession of
the Facility to Landlord or to another nursing home operator following a breach
of the Lease by Tenant, Tenant agrees to fully cooperate with Landlord and/or
such new operator in effecting a transition in the operation of the Facility
that will least disrupt the continuing operation and the comfort and welfare of
the patients. Such cooperation shall include, to the extent deemed necessary by
Landlord and permitted under applicable law, permission by Tenant for such new
operator (1) to operate for his own account under Tenant's license pursuant to
a management agreement, and (2) to bill under Tenant's Medicare and Medicaid
numbers, until new licenses and provider agreements are obtained.
18.3 If Landlord is in default of this Lease, and as a consequence
Tenant recovers a money judgment against Landlord, the judgment shall be
satisfied only out of (1) the proceeds of sale received by voluntary sale of, or
on execution of the judgment against, the right, title and interest of Landlord
in the Facility or (2) Rent or other income from the Facility receivable by
Landlord. Neither Landlord nor any of the partners comprising any partnership
designated as Landlord (including, in the case of a corporate partner, the
shareholders, directors and officers thereof) shall be personally liable for any
deficiency.
ARTICLE 19
SIGNS
19.1 Subject to Landlord's prior written approval, Tenant at its cost
shall have the right to place, construct, and maintain on the Premises one or
more signs advertising its business at the Premises. Any sign that Tenant has
the right to place, construct, and maintain shall comply with all laws,
ordinances, regulations and covenants, conditions and restrictions affecting the
Premises, and Tenant shall obtain any approval required thereby. Landlord makes
no representation with respect to Tenant's ability to obtain such approval. Upon
the expiration or sooner termination of this Lease, Tenant shall, at the option
of Landlord, either remove any signs erected by Tenant and repair the Premises
to the same condition it was in prior to the installation or construction of the
sign(s), or leave such signs in place for Landlord's benefit. Upon expiration
or termination of this Lease, Tenant hereby consents to the use by Landlord, at
Landlord's election, of the
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name of the Facility and Tenant hereby presently assigns to Landlord the right,
title and interest of Tenant in the name of the Facility, provided that as long
as Tenant is not in default hereunder and/or until the expiration or termination
of this Lease, Landlord consents to Tenant's use of said name and signs for the
benefit of the Facility. Said name shall not be changed without Landlord's prior
written consent.
ARTICLE 20
RIGHT OF ENTRY
20.1 Landlord and its authorized representatives shall have the right
to enter the Premises at all reasonable times in order to:
20.1.1 Determine whether the Facility is in good condition and
whether Tenant is complying with its obligations under this Lease;
20.1.2 Do any necessary maintenance and to make any
restoration to the Premises that Landlord has the right or may have the
obligation to perform; provided, that nothing herein contained shall constitute
an obligation on the part of Landlord or its designated representative to
maintain or restore the Premises or any part thereof;
20.1.3 Serve, post, or keep posted any notices required or
allowed under the provisions of this Lease or applicable law;
20.1.4 Post "for rent" or "for lease" signs during the last
six (6) months of the term, or during any period while Tenant is in default; and
20.1.5 Show the Premises to prospective brokers, interested in
an exchange, at agents, buyers, tenants, or persons any time during the term.
20.2 Landlord shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance, or other damage arising out of
Landlord's entry on the Premises as provided in this Article 20, except damage
resulting from the negligent or intentional acts or omissions of. Landlord or
its authorized representatives.
20.3 Tenant shall not be entitled to an abatement or reduction of Rent
or any part thereof if Landlord exercises any rights reserved in this Article
20. Landlord shall conduct its activities on the Premises as allowed in this
Article 20 in a manner that will cause as little inconvenience, annoyance, or
disturbance to Tenant as reasonably practicable.
ARTICLE 21
SUBORDINATION; ESTOPPEL; CERTIFICATION
21.1 This Lease is and shall be subordinate to any Encumbrance now or
hereafter recorded affecting all or any part of the Premises including all
advances made or to be made thereunder, and all renewals, replacements,
consolidations and extensions thereof. Such subordination is effective without
any further act of Tenant. Tenant shall from time to time, on request of
Landlord, execute and deliver any documents or instruments that may be required
by a Lender to effectuate any subordination. If Tenant fails to execute and
deliver any such documents or instruments, Tenant irrevocably constitutes and
appoints Landlord as Tenant's special attorney-in-fact to execute and deliver
any such documents or instruments.
21.2 Notwithstanding the above, if a Lender requires that this Lease be
subordinate to any such encumbrance, this Lease shall be subordinate to that
Encumbrance if Landlord obtains from the Lender
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a written agreement providing, substantially, that as long as Tenant performs
its obligations under this Lease, no foreclosure of, deed given in lieu of
foreclosure of, or sale under the Encumbrance shall affect Tenant's rights under
this Lease. Such agreement shall further provide that the provisions of this
Lease concerning disposition of insurance proceeds on damage or destruction of
Premises, and disposition of condemnation awards, shall prevail over any
conflicting provisions in the Encumbrance.
21.3 Tenant shall attorn to any purchaser at any foreclosure sale, or
to any grantee or transferee designated in any deed given in lieu of
foreclosure. Tenant shall execute upon demand any and all documents required by
Lender(s) to accomplish the purpose of this Article 21.
21.4 Tenant, within ten (10) days after notice from Landlord, shall
execute and deliver to Landlord a certificate in recordable form stating that
this Lease is unmodified and in full force and effect, or in full force and
effect as modified, and stating the modifications. The certificate also shall
state the amount of Base Monthly Rent then applicable, the dates to which the
Base Monthly Rent has been paid in advance, and the amount of any security
deposit or prepaid Rent. Failure to deliver the certificate within the ten (10)
days shall be conclusive upon Tenant that this Lease is in full force and
effect and has not been modified, that no Base Monthly Rent other than for the
current month has been paid in advance, that the security deposit is in the
amount set forth in this Lease and that there is no other prepaid Rent, all
except as may be represented otherwise by Landlord in the certificate. if Tenant
fails to deliver the certificate within the ten (10) days, Tenant irrevocably
constitutes and appoints Landlord as its special attorney-in-fact to execute and
deliver the certificate to any third party.
ARTICLE 22
WAIVER
22.1 No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant shall impair such right or remedy or be
construed as a waiver.
22.2 The receipt and acceptance by Landlord of delinquent Rent or any
other amounts due hereunder shall not constitute a waiver of such default or any
other default or a waiver to demand timely performance in the future.
22.3 No act or conduct of Landlord including, without limitation, the
acceptance of the keys to the Premises, shall constitute an acceptance of the
surrender of the Premises by Tenant before the expiration of the term. Only a
written notice from Landlord to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish a termination of the Lease.
22.4 Either party's consent to or approval of any act by the other
requiring such party' s consent or approval shall not be deemed to waive or
render unnecessary such party's consent to or approval of any subsequent act by
the other.
22.5 Any waiver by Landlord or Tenant of any default must be in writing
and shall not be a waiver of any other default concerning the same or any other
provision of the Lease.
22.6 In the event Tenant defaults under any provisions of this Lease
and Landlord elects to reenter and resume possession of the Premises and remove
Tenant therefrom, Tenant hereby waives the notice to vacate prior to filing an
eviction suit.
ARTICLE 23
SALE OR TRANSFER OF PREMISES
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23.1 If Landlord sells or transfers the Facility or any interests
therein, Landlord, on consummation of the sale or transfer, shall be released
from any liability thereafter accruing under this Lease provided the transferee
assumes all obligations of Landlord hereunder.
ARTICLE 24
FINANCIAL STATEMENTS AND OPERATING INFORMATION
24.1 During the term of this Lease, Tenant shall provide Landlord a
copy of Tenant's true and complete income statement, prepared by an independent
certified public accountant in accordance with generally accepted accounting
principles, reflecting Tenant's operations both at the Premises and as a whole,
for each fiscal year of Tenant falling totally or partially within the term of
this Lease, and a balance sheet as of the end of each fiscal year prepared in
like manner for the Premises and for Tenant as a whole, which statements shall
be delivered to Landlord within ninety (90) days following the expiration of
Tenant's fiscal year. Notwithstanding the foregoing, in the event that Tenant
does not regularly employ its independent certified public accountants to
prepare, audit or review the financial statements for the Premises, Tenant shall
deliver its internally prepared financial statements for the Premises prepared
in accordance with generally accepted accounting principles and certified as
true and correct by Tenant. In addition, Tenant shall provide Landlord a copy of
Tenant's quarterly income statement reflecting Tenant's operations both at the
Premises and as a whole for each calendar quarter falling totally or partially
within the term of this Lease together with a balance sheet as of the end of
each such quarter for the Premises and for Tenant as a whole, which shall be
delivered to Landlord within thirty (30) days following the expiration of each
calendar quarter and which statements shall be prepared in accordance with
generally accepted accounting principles and certified as true and correct by
Tenant. With each of the foregoing income statements and balance sheets
furnished by Tenant, statements of cash flow for the same periods for the
Premises and for Tenant as a whole shall also be provided to Landlord.
24.2 For any period that Tenant is not operating the Premises, and the
same are being operated by a permitted subtenant or successor of Tenant, Tenant
shall obtain financial statements of such subtenant/successor equivalent to
those required of Tenant pursuant to Section 24.1 above not less often than
quarterly, and shall forward copies of same to Landlord promptly upon receipt.
Nothing herein shall relieve Tenant from the obligation to furnish the financial
statements required pursuant to Section 24.1 above.
24 . 3 During the term of this Lease, Tenant shall provide Landlord
quarterly with a census report detailing current and projected occupancy for the
Facility including information regarding Medicare and Medicaid reimbursements.
Such reports shall be delivered to Landlord within thirty (30) days following
the expiration of each calendar quarter.
ARTICLE 25
LICENSING
25.1 Tenant shall maintain at all times during the term hereof and any
extensions or holdover period all governmental licenses, permits and
authorizations necessary for the establishment and operation of the Licensed
Facility in the city, county and state in which the Facility is located, and
shall qualify and comply with all applicable laws as they may from time to time
exist, including those applicable to certification and participation as a
provider under Medicare and Medicaid legislation and regulations. Tenant shall
not, without the prior written consent of Landlord (which it agrees not to
unreasonably withhold), effect any change in the license category or status of
the Facility or any part thereof.
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25.2 Nothing in this Lease shall be construed as granting Tenant any
right, title or interest in or to the beds which are located at the Facility or
granting Tenant any right to move the beds to another facility owned or
operated by Tenant, it being understood and agreed that Tenant's only right
hereunder is to operate the Facility during the term hereof as the Licensed
Facility in accordance with the terms hereof.
ARTICLE 26
SURRENDER OF PREMISES; HOLDING OVER
26.1 On the earlier to occur of the expiration of the term hereof or
ten (10) days after sooner termination of the term, Tenant shall surrender to
Landlord the Facility and all Tenant's Improvements and Alterations thereto in
good condition, free of all violations and citations, and fit for use by
Landlord as the Licensed Facility (except for ordinary wear and tear and insured
casualty) , excluding alterations that Tenant has the right to remove or is
obligated to remove under the provisions of Article 10, but including, without
limitation, any and all patients, patient records, and any and all documents of
every kind whatsoever necessary to enable Landlord to continue operation and
including at least a three (3) day supply of necessary inventory and operational
items.
26.2 If Tenant fails to surrender the Facility as required by this
Article 26, Tenant shall hold Landlord harmless from all damages resulting from
Tenant's failure to surrender the Facility, including, without limitation,
claims made by a succeeding tenant resulting from Tenant's failure to surrender
the Facility.
26.3 The Base Monthly rent for such month to month tenancy shall be one
hundred twenty-five percent (125%) of the Base Monthly Rent for the month
immediately preceding the date on which Tenant was required to surrender
possession under the term of this Lease.
26.4 Tenant shall fully cooperate with Landlord in turning the Facility
over to Landlord so as to assure to Landlord and patients uninterrupted patient
care.
ARTICLE 27
PRESERVATION OF PATIENT RECORDS
27.1 Tenant shall preserve all patient charts and records as required
by applicable law and deliver them to Landlord on expiration or sooner
termination of this Lease.
ARTICLE 28
PATIENT CARE; CENSUS
28.1 Tenant shall take all steps appropriate to maintain a high level
of quality patient care, and to promote and maintain a high patient census at
the Facility consistent with law and ethical standards governing the operation
of nursing homes. Except as otherwise permitted by law, Tenant shall not
transfer patients from the Facility except for reasons of health, family request
and/or convenience or request of the patient, and shall not transfer patients to
another facility or facilities owned or operated directly or indirectly by
Tenant, or in which Tenant has any interest, except in cases where an
alternative facility is not available, or pursuant to a request by the patient
or family.
ARTICLE 29
MISCELLANEOUS
29.1 Time is of the essence of each provision of this Lease.
29.2 Each party represents that it has not had dealings with any real
estate broker, finder, or other person, with respect to
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this Lease in any manner. Each party shall hold harmless the other party from
all damages resulting from any misrepresentations hereunder.
29.3 All exhibits referred to are attached to this Lease and
incorporated by reference.
29.4 All provisions, whether covenants or conditions on the part of
Tenant, shall be deemed to be both covenants and conditions.
29.5 This Lease together with the Lease Guaranty attached hereto (if
any) contains all the agreements of the parties and cannot be amended or
modified except by a written agreement, signed by Landlord, Tenant and
Guarantor(s).
29.6 Any notice, demand, request, consent, approval or communication
that either party desires or is required to give to the other party or any other
person shall be in writing and either served personally or sent by registered or
certified United States mail, or by courier mail or by facsimile. Any notice,
demand, request, consent, approval or communication that either party desires or
is required to give to the other party shall be addressed to the other party at
the address appearing on the signature page of this Lease. Either party may
change its address by notifying the other party of the change of address. Notice
shall be deemed communicated within three (3) business days from the time of
deposit in the United States mail if mailed as provided in this section, or upon
delivery if delivered personally or by courier mail or by facsimile.
29.7 In the event of default hereunder by either party, and the other
party engages an attorney to prepare a notice or notices and/or to otherwise
communicate with the defaulting party, then the defaulting party shall be liable
to the other party for its reasonable attorneys' fees incurred by it for such
services.
29.8 If any party brings an action or proceeding to enforce the terms
hereof or declare rights hereunder, the prevailing party (as hereinafter
defined) in any such proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys' fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term "prevailing party" shall include,
without limitation, a party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other party of its claim or defense. The attorneys' fee award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. Landlord
shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such default or resulting breach. If either party or its authorized
representatives ("Passive Party") becomes a party to any litigation concerning
the Lease, or the Facility, by reason of any act or omission of the other party
or its authorized representatives ("Active Party") and not by any act or
omission of the Passive Party or any act or omission of its authorized
representatives, the Active Party shall be liable to the Passive Party for
reasonable attorneys' fees and court costs incurred by the Passive Party in that
litigation.
29.9 This document shall, in all respects, be governed by the laws of
the state in which the Facility is located applicable to agreements executed and
to be wholly performed within such state. Nothing contained herein shall be
construed so as to require the commission of any act contrary to law, and
wherever there is any conflict between any provision contained herein and any
present or
31
<PAGE> 35
future statute, law, ordinance or regulation contrary to which the parties have
no legal right to contract, the latter shall prevail, but the provision of this
Lease which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law without invalidating or
affecting the remaining provisions of this Lease.
29.10 Each of the parties hereto shall execute and deliver any and all
additional papers, documents, and other assurances, and shall do any and all
acts and things reasonably necessary in connection with the performance of their
obligations hereunder and to carry out the intent of the parties hereto.
29.11 No amendment, change or modification of this document shall be
valid unless in writing and signed by all of the parties hereto.
29.12 All of the terms and provisions contained herein shall inure to
the benefit of and shall be binding upon the parties hereto and their successors
except as provided in Article 17.
29.13 This document may be executed in one or more separate
counterparts, each of which, when so executed, shall be deemed to be an
original. Such counterparts shall together constitute and be one and the same
instrument.
29.14 The captions appearing at the commencement of the articles hereof
are descriptive only and for convenience in reference. Should there be any
conflict between any such caption and the article, the article and not such
caption shall control and govern in the construction of this document.
29.15 As long as Tenant is not in default of any of the terms,
covenants and conditions of this Lease, Landlord covenants that Tenant, during
the term hereof, shall have the quiet use and enjoyment of the Facility.
29.16 In the event that this Lease or any other financial obligation
owed at present or in the future by Tenant to Landlord shall have been or will
be guaranteed, such guaranty (the "Guaranty") shall be in the form attached
hereto and shall be delivered to Landlord concurrently with the execution and
delivery of this Lease by Tenant. Any guaranty executed concurrently herewith or
subsequent to the date hereof shall be deemed a material part of the
consideration for Landlord's execution of this Lease. In the event that any
guarantor under the Guaranty is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors, or institutes or is the subject of any
proceeding under the Bankruptcy Act or other similar law for the protection of
creditors (or, if the guarantor is a partnership or consists of more than one
person or entity, if any partner or the partnership or other such person or
entity is or becomes bankrupt or insolvent, institutes any such proceeding, or
makes an assignment for the benefit of creditors), then Landlord shall have the
option to terminate this Lease upon thirty (30) days written notice unless
Tenant, within such thirty-day period, provides Landlord with either (1) a
substitute or additional guarantor satisfactory to Landlord and Landlord's
Lender(s), or (2) adequate assurance of the performance of each and every
obligation of Tenant hereunder, satisfactory to Landlord and Landlord's Lender.
29.17 In the event that Tenant is not an individual(s), the persons
executing this Lease on behalf of Tenant represent and warrant to Landlord that
(1) if Tenant is a partnership, Tenant's partnership agreement authorizes such
persons to execute this Lease on behalf of Tenant, and (2) if Tenant is a
corporation, such persons are executing this Lease pursuant to a resolution of
Tenant's board of directors. Concurrently with Tenant's execution of this
Lease, Tenant shall deliver to Landlord a copy of Tenant's partnership
agreement, or statement of partnership, or certificate
32
<PAGE> 36
of limited partnership, or certified copy of a board of directors resolution, as
the case may be, confirming the foregoing authority.
29.18 Whenever under any provision of this Lease or any exhibit
thereto, Tenant shall be obligated to make any payment or expenditure, or to do
any act or thing, or to incur any liability whatsoever, and Tenant fails,
refuses or neglects to perform as herein provided, Landlord shall be entitled
but shall not be obligated to make such payment or expenditure, or do any such
act or thing, or to incur any such liability, all on behalf of and at the cost
and for the account of Tenant, together with interest at the maximum rate of
interest permitted by law, or if no maximum rate then applies, at the rate of
18% per annum.
SIGNATURE PAGE FOLLOWS
33
<PAGE> 37
SIGNATURE PAGE FOR LEASE OF FRANCISCAN HEALTH CARE CENTER AT WALLA WALLA DATED
JUNE 19, 1996, BETWEEN WALLA WALLA PARTNERS, L.P. (LANDLORD) AND SUNQUEST SPC,
INC. (TENANT)
"Landlord"
Walla Walla Partners, L.P.,
a California Limited Partnership
By: K&Y Investments, Inc.,
a California corporation,
its General Partner
By:_______________________________________
Gary Kading, President
Address: c/o Nigro, Karlin and Segal
10100 Santa Monica Boulevard
13th Floor
Los Angeles, CA 90067
Attention: Michael D. Karlin, CPA
With a copy to:
Christensen, White, Miller,
Fink & Jacobs
2121 Avenue of the Stars
18th Floor
Los Angeles, CA 90067
Attention: Carolyn C. Jordan, Esq.
"Tenant"
SunQuest, Inc.
an Arizona Corporation
By: _____________________________________
Jerry Walker, President
Tenant's Address: 727 E. Indian School Road, Suite 214
Scottsdale, Arizona 85251
Fax (602) 482-6479
PLEASE ATTACH NOTARIZATIONS FOR ALL SIGNATURES
34
<PAGE> 38
STATE OF CALIFORNIA )
)SS.
COUNTY OF LOS ANGELES )
On ______________, 1996, before me, _________________________________
(name and title of officer), personally appeared ___________________________ who
is personally known to me (or proved to me on the oath of who is personally
known to me to be the person whose name is subscribed to the within instrument,
as a witness thereto, who, being by me duly sworn, deposes and says that he/she
was present and saw the same person described in and whose name is subscribed to
the within and annexed instrument as a party thereto, execute the same, and that
said affiant subscribed his/her name to the within instrument as a witness at
the request of ______________________.
WITNESS my hand and official seal.
Signature _________________________________ (seal)
STATE OF ARIZONA )
)SS.
COUNTY OF MARICOPA )
On July 18, 1996, before me, LISA C. TURNER, NOTARY PUBLIC (name and
title of officer), personally appeared JERRY M. WALKER who is personally known
to me (or proved to me on the oath of who is personally known to me to be the
person whose name is subscribed to the within instrument, as a witness thereto,
who, being by me duly sworn, deposes and says that he/she was present and saw
the same person described in and whose name is subscribed to the within and
annexed instrument as a party thereto, execute the same, and that said affiant
subscribed his/her/their name to the within instrument as a witness at the
request of
WITNESS my hand and official seal.
Signature /s/ LISA C. TURNER (seal)
-------------------------
NEE LISA C. RHEAD
35
<PAGE> 39
STATE OF CALIFORNIA )
)SS.
COUNTY OF LOS ANGELES )
On July 19, 1996, before me, BARBARA FISHER (name and title of
officer), personally appeared GARY KADING, personally known to me to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same in his authorized capacity, and that by his signature
on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
Signature /s/ BARBARA FISHER (seal)
--------------------------
STATE OF CALIFORNIA )
)SS.
COUNTY OF LOS ANGELES )
On ______________, 1996, before me, _________________________________
(name and title of officer), personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity, and that by his signature(s) on the instrument the person,
or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _________________________________ (seal)
<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO LEASE
FRANCISCAN HEALTH CARE CENTER AT WALLA WALLA
WALLA WALLA, WASHINGTON
July 26, 1996
In connection with that certain lease ("Lease") for the Franciscan
Health Care Center at Walla Walla ("Facility") dated June 19, 1996 between Walla
Walla Partners, L.P., a California limited partnership ("Landlord") and SunQuest
SPC, Inc., an Arizona corporation ("Tenant"), Landlord and Tenant hereby agree
as follows:
RECITALS
A. Unless otherwise specified herein, all capitalized words in this
First Amendment to Lease ("First Amendment") shall have the same meanings given
them in the Lease.
B. Landlord and Tenant are in receipt of a copy of (i) the Regulatory
Agreement between Washington State Housing Finance Commission and Franciscan
Eldercare Corporation dated May 1, 1991, and recorded as No. 9103475 in Vol 189
page 1324, and (ii) the First Amendment to Regulatory Agreement dated October
15, 1992 recorded as No. 9502404. In addition, Landlord and Tenant will have
executed as of August 1, 1996, a Second Amendment to Regulatory Agreement. The
Regulatory Agreement, First Amendment to Regulatory Agreement and Second
Amendment to Regulatory Agreement are hereinafter collectively referred to as
the "Regulatory Agreements".
C. Landlord and Tenant are also in receipt of a Survey ("Survey")
prepared by Paul Tomkins, issued July 9, 1996, concerning the Property that
discloses, among others, various wandering fences, sheds on neighboring property
or vice-versa, and other minor encroachments (collectively, the
"Encroachments").
D. Landlord and Tenant are in receipt of certain Restrictive Covenants
dated June 9, 1949 (the "CCRs") affecting Parcel B as described in Chicago Title
Commitment Y-35918 and shown on the Survey. Parcel B is currently being used as
a parking lot which provides parking for residents, guests and employees of the
Facility. Tenant hereby acknowledges that the use of Parcel B as a parking lot
may be a violation of the CCRs (the "Parking Lot Violations"). In the event a
benefitted party of the CCRs enforced the CCRs restrictions, it is possible that
Tenant would not be able to use Parcel B as a parking lot. In that event, Tenant
would be required to provide alternative parking for the Facility.
E. Landlord and Tenant are in receipt of a letter from the Walla Walla
County Regional Planning dated July 2, 1996, which identifies that the use of
Lot 9 and 18 of Valley Homes are zoned R-72. As shown on the Survey, there are
currently three (3) single story structures on Lot 9 of the Valley Homes. The
current use of these three (3) single story structures is not in compliance with
the current zoning (the "Zoning Violations"). The Walla
<PAGE> 2
First Amendment to Lease
Franciscan Health Care Center at Walla Walla
July 26, 1996
Page 2
County Regional Planning has orally indicated that it might be willing to rezone
Lots 9 and 18 of Valley Homes to R-60 which would change the current use of the
three single story structures on Lot 9 to a conforming use.
F. The matters described in Recitals B, C, D and E are sometimes
collectively referred to herein as the "Closing Matters."
G. Tenant acknowledges that Landlord's Lender is unwilling to enter
into a loan agreement with Landlord without proper assurance that the Tenant
will satisfy the Closing Matters in a timely fashion.
H. In order to provide for the timely satisfaction of the Closing
Matters, Tenant agrees to perform the Closing Matters pursuant to this First
Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledge, the parties hereby agree as follows:
1. Regulatory Agreements. The Regulatory Agreements require the owner
and the operator of the Facility to comply with certain operating requirements,
compliance requirements and paying of certain ongoing fees. Tenant acknowledges
and agrees that Tenant shall be solely and entirely responsible for complying
with the Regulatory Agreements on behalf of both itself and Landlord. Tenant
assumes all of the legal and responsibility of Landlord under the Regulatory
Agreements. Tenant is solely responsible for paying any and all fees required
under the Regulatory Agreements.
Tenant shall indemnify, defend and hold harmless Landlord from
and against any and all liability, loss, damages, claims, obligations, costs and
expenses of every nature and description, including costs of litigation and
attorneys' fees, which Landlord may suffer and/or incur, directly or indirectly,
on account of or resulting from the Regulatory Agreements.
2. Encroachments. The Survey for the Facility has disclosed various
Encroachments into adjoining land as mentioned in Recital C.
A. Tenant hereby represents, warrants and covenants to
Landlord that the Encroachments do not and will not interfere with the
use or operation of the Facility, or the ability to use the Facility in
a manner consistent with its current use.
B. Notwithstanding the representation provided in Section 2(A)
above, Tenant agrees that in the event that any of the Encroachments
are required by to be
<PAGE> 3
First Amendment to Lease
Franciscan Health Care Center at Walla Walla
July 26, 1996
Page 3
removed or destroyed, Tenant shall, at Tenant's sole cost and expense,
remove, move or otherwise correct the Encroachments to the satisfaction
of Landlord and its lender.
C. In the event that any of the Encroachments are, during the
term of the Lease, required to be removed or is destroyed, Tenant shall
remedy such encroachments to Landlord's reasonable satisfaction and in
accordance with applicable laws.
Tenant shall indemnify, defend and hold harmless Landlord from
and against any and all damages, claims, obligations, costs and expenses of
every nature and description, including costs of litigation and attorneys' fees,
which Landlord may suffer and/or incur, directly or indirectly, on account of or
resulting from the Encroachments.
3. Parking Lot Violations. Tenant hereby acknowledges and agrees that
in the event the CCRs are enforced and Parcel B is no longer available for
parking for the Facility, Tenant shall, at Tenant's sole cost and expense,
provide alternative parking for the Facility in compliance with applicable law.
Tenant shall indemnify, defend and hold harmless Landlord from and against any
and all liability, losses, damages, claims, obligations, costs and expenses of
every nature and description, including costs of litigation and attorneys' fees,
which Landlord may suffer and/or incur, directly or indirectly, on account of or
resulting from the Parking Lot Violations and any legal or practical requirement
to find alternative parking for the Facility.
4. Zoning Issues. Tenant hereby agrees, at Tenant's sole cost and
expense, to attempt to have Lots 9 and 18 of the Valley Homes Addition rezoned
from R-72 to R-60. In the event Tenant is unable to have Lots 9 and 18 rezoned
to R-60, Tenant agrees to use the structures located on Lot 9 in a manner
consistent with the current zoning laws and for no other use whatsoever. Tenant
shall indemnify, defend and hold harmless Landlord from and against any and all
liability, losses, damages, claims, obligations, costs and expenses of every
nature and description, including costs of litigation and attorneys' fees, which
Landlord may suffer and/or incur, directly or indirectly, on account of or
resulting from the Zoning Violations and the attempt by Tenant to have Lots 9
and 18 rezoned.
5. Default. The failure to perform the covenants in the time and manner
required hereunder, shall constitute default and breach under the Lease.
6. Integrated with Lease. This First Amendment is entered into in
conjunction with the Lease and it is intended by the parties hereto that it be
integrated into the Lease as required by, and in accordance with the Lease.
<PAGE> 4
First Amendment to Lease
Franciscan Health Care Center at Walla Walla
July 26, 1996
Page 4
7. Counterparts. This First Amendment may be executed in one or more
counterparts, each of which shall be an original, but all of which shall
together constitute but one in the same instrument.
8. Facsimile Signatures. Facsimile signatures of this First Amendment
shall have the same binding affect as original signatures.
9. Time is of the Essence. Tenant agrees that time is of the essence in
this First Amendment.
10. No Other Modification. Except as expressly amended hereby, the
Lease remains unmodified and is in full force and effect.
Executed by the undersigned as of the date first set forth above.
LANDLORD: Walla Walla Partners, L.P., a California
limited partnership
By: K & Y Investments, Inc., a
California corporation,
its General Partner
By: /s/ Gary Kading
-------------------------------------
Gary Kading, President
BORRROWER: SunQuest SPC, Inc.,
an Arizona corporation
By:______________________________________
Jerry M. Walker, President
<PAGE> 5
First Amendment to Lease
Franciscan Health Care Center at Walla Walla
July 26, 1996
Page 4
7. Counterparts. This First Amendment may be executed in one or more
counterparts, each of which shall be an original, but all of which shall
together constitute but one in the same instrument.
8. Facsimile Signatures. Facsimile signatures of this First Amendment
shall have the same binding affect as original signatures.
9. Time is of the Essence. Tenant agrees that time is of the essence in
this First Amendment.
10. No Other Modification. Except as expressly amended hereby, the
Lease remains unmodified and is in full force and effect.
Executed by the undersigned as of the date first set forth above.
LANDLORD: Walla Walla Partners, L.P., a California
limited partnership
By: K & Y Investments, Inc., a
California corporation,
its General Partner
By:_____________________________________
Gary Kading, President
BORROWER: SunQuest SPC, Inc.,
an Arizona corporation
By: /s/ Jerry M. Walker
_____________________________________
Jerry Walker, President
<PAGE> 6
First Amendment to Lease
Franciscan Health Care Center at Walla Walla
July 26, 1996
Page 5
Consent of Guarantor:
The undersigned Covenantor to the above referenced Lease pursuant to
that certain Lease Guaranty dated as of June 19, 1996 hereby consents to the
foregoing First Amendment to Lease and confirms it shall remain fully liable
under, and agrees to be bound by, the terms and conditions of the Lease as
amended by this First Amendment to Lease.
Unison Healthcare Corporation,
a Delaware corporation
By: /s/ Jerry M. Walker
__________________________________________
Jerry Walker, President
<PAGE> 7
First Amendment to Lease
Franciscan Health Care Center at Walla Walla
July 26, 1996
Page 6
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On July 29, 1996, before me Laura V. Leszt, Notary Public (name and
title of officer), personally appeared Gary Kading, personally known to me to be
the person whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his authorized capacity, and that by his
signature on the instrument the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Laura V. Leszt (seal)
STATE OF )
) SS.
COUNTY OF )
On ______________, 1996, before me ________________________________,
(name and title of officer), personally appeared ______________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________________ (seal)
<PAGE> 8
First Amendment to Lease
Franciscan Health Care Center at Walla Walla
July 26, 1996
Page 6
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On ______________, 1996, before me __________________________________,
(name and title of officer), personally appeared ____________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature _________________________ (seal)
STATE OF ARIZONA )
- ------------------ ) SS.
COUNTY OF MARICOPA )
- ------------------
On July 29, 1996, before me, Lisa C. Turner (name and title of
officer), personally appeared Jerry M. Walker, personally known to me
(or proved to me on the basis or satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
Signature /s/ Lisa C. Turner (seal)
------------------
Nee: Lisa C. Rhead
