Exhibit 10.11
LEASE
SOUTH BAY SANITARIUM AND CONVALESCENT HOSPITAL,
A Partnership,
Landlord
GARNET CONVALESCENT HOSPITAL, INC.,
a California corporation, d.b.a.
BAY CREST CONVALESCENT HOSPITAL
Tenant
DATED: March 1, 1980
2. Term. The term of this Lease (the "Lease Term") shall be for ten
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(10) years expiring, unless sooner terminated, at midnight February 28, 1990.
The date on which this Lease commences is March 1, 1980.
3. Acceptance of Premises. Tenant acknowledges to Landlord that Tenant
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has inspected the Premises and all parts thereof and has reviewed all inspection
and other reports relating to the Premises supplied to Tenant by Landlord.
Tenant acknowledges to Landlord that Landlord has not made any representations
or warranties with respect to the condition of the Premises and its compliance
with any applicable state, federal or local ordinances, laws or regulations.
Based upon the above, Tenant agrees to accept possession of the Premises in its
"as-is, where-is" condition.
4. Rent
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A. Tenant shall pay to Landlord Six Thousand Dollars ($6,000) per
month as initial minimum monthly rent, without deduction, set off, prior notice
or demand ("the Minimum Monthly Rent").
B. The Minimum Monthly Rent shall be increased at the rate of One
Hundred Dollars ($100) commencing on each March 1st during the Lease Term. For
example, the monthly rent for the second lease year shall be the sum of Six
Thousand One Hundred Dollars ($6,100), and the monthly rent for the third lease
year shall be the sum of Six Thousand Two Hundred Dollars ($6,200).
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C. In addition, if pursuant to the Medi-Ca1 Act of the State of California,
Tenant receives an increase of Eight Percent (8%) or more (excluding any amounts
allocated to a specific program or for reimbursement of specific items of cost
or expense) in any one year of the Lease Term in the daily bed rate applicable
to a 79-bed skilled nursing facility, Tenant shall pay as rent an additional One
Hundred Dollars ($100) per month. If such increase is received on or before July
31, Tenant shall pay the additional rent commencing the first day of the month
following the increase. If such increase is received after July 31 and before
March 1, Tenant shall pay the additional rent commencing the following March
1st.
D. The monthly rent payments shall be made on the first day of each month.
Landlord acknowledges it has received from Tenant Six Thousand Dollars ($6,000)
for the first month of the Lease Term.
E. All rent shall be paid to Landlord at the address to which notices to
Landlord are to be given.
F. Tenant acknowledges that late payment of rent by Tenant will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult and impracticable to fix. Such costs include,
without limitation, processing and accounting charges and late charges that may
be imposed on Landlord by the terms of any encumbrance and note secured by the
Premises. There-fore, Tenant shall pay to Landlord an additional sum of five
percent (5%) of the overdue rent as a late charge. The parties agree that this
late charge represents a fair and
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reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. This late charge shall be in lieu of any recovery for actual
damages suffered by Landlord due to the late payment of rent. 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. No late charge shall accrue unless
and until Tenant is in default as provided in paragraph 13 hereof.
G. The rent shall be in addition to and over and above all other
payments to be made by Tenant as hereinafter provided. It is the purpose and
intent of Landlord and Tenant that the rent shall be absolutely net to Landlord
so that this Lease shall yield net to Landlord the rent specified above in each
month during the Lease Term. Excluding secured obligations of Landlord affecting
the Premises and Personal Property, and except as otherwise provided in this
Lease, all costs, expenses and obligations of every kind and nature whatsoever
relating to the Premises and Personal Property which may arise or become due
during or out of the Lease Term shall be paid by Tenant and Landlord shall be
indemnified and saved harmless by Tenant from and against the same.
5. Security Deposit. On or before May 30, 1980, Tenant shall deposit
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with Landlord the sum of Ten Thousand Dollars ($10,000), which shall serve as a
security deposit for the performance of Tenant's obligations hereunder. If
Tenant is in default under any provision of this Lease, Land-
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lord may use the security deposit, or any portion of it, to cure the default or
to compensate Landlord for any damage sustained by Landlord resulting from
Tenant's default. Tenant shall within five (5) days after notice and demand, pay
the Landlord a sum equal to the portion of the security deposit expended or
applied by Landlord as provided in this paragraph so as to maintain the security
deposit at the level set forth above. If Tenant is not in default at the
expiration or termination of this Lease, Landlord shall return the security
deposit to Tenant within ten (10) days of such expiration or termination.
Landlord's obligations with respect to the security deposit are those of a
debtor and not a trustee. Landlord may maintain the security deposit separate
and apart from Landlord's general funds, or may commingle the security deposit
with Landlord's general and other funds. Landlord shall not be required to pay
Tenant interest on the security deposit.
6. Taxes and Assessments
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A. Tenant shall pay before delinquency all taxes, assessments,
license fees and other charges ("Personal Property Taxes") that are levied and
assessed against the Personal Property and all personal property of Tenant
located on the Premises which become payable during the Lease Term.
B. Tenant shall pay all real property taxes and general and special
assessments ("Real Property Taxes") levied and assessed against the Premises
during the Lease Term.
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C. Landlord shall use its best efforts to cause all tax bills to be sent
directly to Tenant from the tax collector. Should Landlord not be able to make
such arrangements, Landlord shall each year notify Tenant of the Real Property
Taxes and Personal Property Taxes, and immediately on receipt of the tax bill(s)
shall furnish Tenant with a copy thereof. Tenant shall pay the respective taxes
not later than five (5) days before the taxing authority's delinquency date as
to each installment, and shall promptly furnish Landlord with satisfactory
evidence of such payments.
D. Tenant's liability to pay Real and Personal Property Taxes shall be
prorated on the basis of a 365-day year to account for any fractional portion of
a fiscal tax year included in the Lease Term at its commencement or expiration.
E. Tenant at its cost shall have the right, at any time, to seek a
reduction in the assessed valuation of the Premises or to contest any Real or
Personal Property Taxes that are to be paid by Tenant. If Tenant seeks a
reduction or contests the Real or Personal Property Taxes, the failure on
Tenant's part to pay the Real or Personal Property Taxes shall not constitute a
default as long as Tenant complies with the provisions of this subparagraph E.
(1) Landlord shall not be required to join in any proceeding or contest
brought by Tenant pursuant to this subparagraph E unless the provisions of any
law require that the proceeding or contest be brought by or in the name
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of Landlord or any owner of the Premises. In that case, Landlord shall join in
the proceeding or contest or permit it to be brought in Landlord's name as long
as Landlord is not required to bear any cost. Tenant, on final determination of
the proceeding or contest, shall immediately pay or discharge any decision or
judgment rendered, together with all costs, charges, interest and penalties
incidental to the decision or judgment.
(2) If Tenant does not pay the Real or Personal Property Taxes when
due and Tenant seeks a reduction or contests them as provided in this
subparagraph E, before the commencement of the proceeding or contest Tenant
shall furnish to Landlord a surety bond equal to one hundred twenty-five percent
(125%) of the total amount of Real or Personal Property Taxes in dispute. The
bond shall hold Landlord, the Premises and the Personal Property harmless from
any damage arising out of the proceeding or contest and shall insure the payment
of any judgment that may be rendered. In lieu of a surety bond, Tenant may
provide other security satisfactory to Landlord, in Landlord's reasonable
discretion.
F. Tenant shall, in addition to all other sums, pay all fees for
inspection and examination of the Premises during the Lease Term charged by any
public authority having jurisdiction over the Premises. In addition, Tenant
shall reimburse Landlord for any and all business taxes imposed upon Landlord by
the State of California and/or any political subdivision thereof, including
taxes which are based on or measured, in whole or in part, by rents received or
other amounts charged by Landlord under this Lease; pro-
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- -ivided, however, that Tenant shall only be responsible for the amount of such
business tax actually paid by Landlord. 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
transfer taxes of Landlord.
G. As used herein, Real Property Tax shall include any form of assessment,
license fee, license tax, business license fee, business license tax, commercial
rental tax, levy, charge, penalty tax or similar imposition imposed by any
authority having the direct power to tax, including any city, county, state or
federal government, or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, as against any legal or
equitable interest of Landlord in the Premises, including but not limited to the
following:
(a) any tax on Landlord's right to rent or other income from the
premises or as against Landlord's business of leasing the Premises;
(b) any assessment, tax, fee, levy or charge in substitution, partially
or totally, of any assessment, tax, fee, levy or charge previously included
within the definition of Real Property Tax, it being acknowledged by Tenant and
Landlord that Proposition 13 was adopted by the voters of the State of
California in the June 1978 election and that assessment, taxes, fees, levies
and charges may be imposed by governmental agencies for such services as fire
protection, street, sidewalk and road maintenance, refuse removal and for other
governmental services formerly provided without charge to property owners or
occupants;
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(c) any assessment, tax, fee, levy or charge measured by the area of
the Premises or the rent payable hereunder, including without limitation, any
gross income tax or excise tax levied by the state, city or federal government,
or any political subdivision thereof, upon or with respect to the possession,
operating, management, maintenance, alteration, repair, use or by Tenant of the
Premises, or any portion thereof; and
(d) any assessment, tax, fee, levy or charge, upon this transaction
or any document to which Tenant is a party, creating or transferring an interest
or an estate in the premises. "Real Property Tax" shall not include without
limitation Landlord's federal, state or local income, franchise, inheritance or
estate taxes.
7. Use
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A. Tenant shall use the Premises for a licensed skilled nursing facility
and for no other use without Landlord's consent, which consent shall not be
unreasonably withheld.
B. Tenant's use of the Premises as provided in this Lease shall be in
accordance with the following:
(1) Tenant shall not do, bring or keep anything on or about the
Premises that will cause a cancellation of any insurance covering the Premises.
(2) Tenant shall cause the Premises to be and remain licensed as
provided in paragraph 28 hereof. Tenant shall cause the Premises to conform to
the requirements
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and provisions of all applicable laws, rules, regulations and ordinances
concerning the Premises or Tenant's use of the Premises, including without
limitation, the obligation at Tenant's cost to alter, maintain or restore the
Premises in compliance and conformity with all laws relating to the condition,
use or occupancy of the Premises during the Lease Term. Tenant shall make
available for the inspection of Landlord copies of all inspection reports by
applicable governmental agencies and/or their intermediaries together with
Tenant's plan of correction (where applicable) as to each such report.
(3) Tenant shall not use the Premises in any manner that will continuously
constitute a waste, nuisance or unreasonable annoyance to owners or occupants of
adjacent properties, other than those incidental to the normal operation of a
skilled nursing facility.
(4) Tenant shall not do anything on the Premises that will cause damage to
the Premises. No machinery, apparatus or other appliance shall be used or
operated in or on the Premises that will in any manner injure, vibrate or shake
the Premises.
(5) Tenant shall make all payrolls promptly when due, respecting all
personnel at the Premises, and shall file all payroll tax returns and pay such
taxes promptly and before delinquency.
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8. Maintenance
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A. Except as expressly provided otherwise in this Lease, Tenant shall,
at its sole cost and expense, maintain the Premises including the building and
improvements thereon, walls and plumbing, the parking area and service areas,
the approaches thereto and appurtenances thereof (including all adjacent
sidewalks), but excluding the roof, in good order and repair during the Lease
Term. Landlord shall be responsible for and bear all expenses associated with
repair and maintenance of the roof on the Premises. Otherwise, Landlord shall
not have any responsibility to maintain the Premises. Tenant waives the
provisions of California Civil Code Sections 1941 and 1942 with respect to
Landlord's obligation for tenantability of the Premises and Tenant's right to
make repairs and deduct the expenses of such repairs from rent, except with
respect to expenses incurred in connection with repair or maintenance of the
roof.
B. Tenant shall, at its sole cost and expense, during the Lease Term,
keep and maintain the Personal Property in good order and repair. Tenant shall
have the right to install on the Premises any and all equipment and fixtures
Tenant may desire which are necessary or convenient to Tenant's use of the
Premises as a skilled nursing facility. All such property (other than
replacements for the Personal Property as provided below and other than
equipment and furniture installed by Tenant which are required to comply with
state and federal licensing requirements for a skilled nursing facility) shall
be and remain Tenant's property. Tenant shall not remove the Personal Property
or any part
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thereof from the Premises without the prior written consent of Landlord. Tenant
shall replace, at Tenant's expense, with suitable substitutes any worn out or
broken items of the Personal Property, as the same may occur from time to time
throughout the Lease Term. Items so replaced by Tenant shall become the property
of Landlord. Tenant agrees, upon written request from Landlord, to execute for
filing a Form UCC-l Financing Statement listing Tenant as "debtor" and Landlord
as "secured party" with respect to the Personal Property.
9. Alterations. Tenant shall not make any structural alterations to the
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Premises without Landlord's prior consent, which consent shall not be
unreasonably withheld. Any structural alterations made shall remain on and be
surrendered with the Premises on expiration or termination of the Lease. If
Tenant makes any structural alterations to the Premises as provided in this
paragraph, the alterations shall not be commenced until fifteen (15) days after
Landlord has received notice from Tenant stating the date alteration is to
commence to enable Landlord to post and record an appropriate notice of
nonresponsibility.
10. Mechanic's Liens. Tenant shall pay all costs of construction done
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by it or caused to be done by it on the Premises as permitted by this Lease.
Tenant shall keep the Premises free and clear of all mechanics' liens resulting
from construction done by or for Tenant. Tenant shall have the right to contest
the correctness or the validity of any such lien if, within thirty (30) days of
a demand by Landlord, Tenant procures and records a lien release bond in an
amount
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equal to one and one-half times the amount of the claim of lien. The bond shall
meet the requirements of California Civil Code Section 3143 or any successor
statutes thereto and shall provide for the payment of any sum that the claimant
may recover on the claim (together with any costs of suit awarded). Tenant shall
not be required to procure such a bond if the claim of lien is for an amount
less than Five Thousand Dollars ($5,000);
11. Utilities and Services. Tenant shall make all arrangements for and
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pay for all utilities and services furnished to or used by it, including without
limitation, gas, electricity, water, telephone service and trash collection, and
all connection charges.
12. Indemnity and Exculpation
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A. Landlord and Tenant expressly acknowledge that this is a new
Lease for the Premises and that Tenant shall be liable only for costs, expenses
and other liabilities incurred in connection with the Premises on or after March
1, 1980.
B. This Lease is made upon the express condition that Landlord is
to be free from all liability and claims for damages, except for breach of this
Lease by Landlord or its willful or negligent conduct or omission, by reason of
any injury to any person or persons, including Tenant, or property of any kind
whatsoever and to whomsoever belonging, including Tenant, from any cause or
causes, while in, upon or in any way connected with the Premises and all
portions thereof,
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the sidewalks adjacent thereto and the Personal Property during the Lease Term
or occupancy by Tenant. Subject to the terms of this Lease, and except for
breach of this Lease by Landlord or its willful or negligent conduct or
omission, Tenant hereby agrees, during the Lease Term to indemnify and save
Landlord harmless from and against any and all claims, demands, obligations,
liabilities and cause(s) of action by reason of the condition, the use or misuse
of the Personal Property and/or the condition of the Premises and the approaches
and appurtenances thereto, including all adjacent sidewalks, alleys and the
parking areas.
C. Tenant hereby agrees that Landlord shall not be liable, except for
Landlord's breach of this Lease or its willful or negligent conduct or omission,
for injury to Tenant's business, any loss of income therefrom or for damages to
the goods, wares, merchandise or other property of Tenant, Tenant's employees,
invitees, patients, customers or any other person in or about the Premises, nor
shall Landlord be liable, except for Landlord's breach of this Lease or its
willful or negligent conduct or omission, for injury to the person of Tenant,
Tenant's employees, agents, invitees or patients, 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 defect of the pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures
of the same, or from any other cause, whether such damage or injury results from
conditions arising upon the Premises or elsewhere and regardless of whether the
cause
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of such damage or injury or the means of repairing the same is inaccessible to
Tenant.
13. Insurance
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A. Tenant at its cost shall take out and keep in force during the
Lease Term, public liability and property damage insurance, malpractice
insurance and owned and non-owned automobile liability insurance in an amount
not less than Five Hundred Thousand Dollars ($500,000) combined single limits,
insuring against all liability of Tenant and its authorized representatives
arising out of and in connection with Tenant's use or occupancy of the Premises,
and insuring Landlord with respect to the ownership, maintenance, operation and
use or occupancy of the Premises, including the sole negligence and strict
liability of Landlord. All such insurance shall insure performance by Tenant of
the indemnity provisions of this Lease. Both parties shall be named as
additional insureds, and the policy shall contain cross-liability (if readily
obtainable in the market), personal injury and contractual liability
endorsements.
B. Not more frequently than each two (2) years of the Lease Term,
if, in the opinion of an independent licensed insurance consultant chosen by the
mutual consent of the parties, the amount of public liability and property
damage insurance coverage at that time is not adequate, Tenant shall increase
the insurance coverage as determined by such independent consultant.
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C. Tenant at its cost shall maintain on all Tenant's personal property,
improvements and alterations, in, on or about the Premises, a policy of standard
fire and extended coverage insurance, with vandalism and malicious mischief
endorsements, to the extent of at least one hundred percent (100%) of their full
replacement value. The proceeds from any such policy shall be used by Tenant for
the replacement of such personal property or the restoration of Tenant's
improvements or alterations.
D. Tenant at its cost shall maintain on all the Personal Property, and all
replacements therefor, and on the building and other improvements that are a
part of the Premises, during the Lease Term, a policy or policies of fire
insurance with vandalism and malicious mischief special extended coverage (not
applicable to Personal Property), sprinkler leakage and earthquake sprinkler
leakage endorsements. The property to be insured under this paragraph shall be
continually insured to value (not less than ninety percent (90%) average clause,
twenty-five percent (25%) for sprinkler leakage and earthquake sprinkler
leakage), and the policy or policies shall be written to provide replacement
cost insurance. The insurance policy or policies shall be issued in the names of
Landlord, Landlord's lender and Tenant as their interests appear. In the event
this Lease is terminated, the insurance policy and all rights under it or the
insurance proceeds shall be assigned to Landlord at Landlord's election, and
Tenant shall be credited with pro rata returned premiums and dividends. Tenant
shall pay the premiums for maintaining the insurance required hereunder while
the Lease is in force, so long as Tenant remains in possession of the Premises.
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E. In order to assure that the building and other improvements to
be insured hereunder are continually insured to 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 three (3) years of the
Lease Term either party shall have the right to notify the other party 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 the
rules and practices of the Board of Fire Underwriters, or a like board
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.
If the insurance company refuses to redetermine value upon request, the
parties shall engage a qualified appraiser to determine full replacement value
of the insurable improvements, the cost of which shall be paid by Tenant.
F. All insurance and bonds required under this Lease shall:
(1) Be issued by insurance companies authorized to do business
in the State of California, with a policyholders and financial rating of at
least A: Class XI status as rated in the most recent edition of Best's Key-
Rating Guide;
(2) Be issued as a primary policy; however, Tenant may carry the
insurance under 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
(3) Contain an endorsement requiring thirty (30) days' written
notice from the insurance company to both parties and Landlord's lender before
cancellation or change in the coverage, scope or amount of any policy; but if
not obtainable, ten (10) days' notice shall be acceptable.
G. Each policy, or a certificate of the policy together with evidence
of payment of premiums, shall be deposited with Landlord upon execution of this
Lease, and on renewal of the policy not less than twenty (20) days before
expiration of the term of the policy.
H. Deductible provisions contained in any insurance policy required by
this Lease shall be for the account of and payable by Tenant.
14. Destruction
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A. If, during the Lease Term, the Premises are totally or partially
destroyed, rendering the Premises totally or partially inaccessible or unusable,
Tenant shall restore the Premises to substantially the same condition as they
were in immediately before destruction, whether or not (if any), the insurance
proceeds/are sufficient to cover the actual cost
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of restoration. Such destruction shall not terminate this Lease. If the existing
laws do not permit the restoration, either party may terminate this Lease
immediately by giving notice to the other party.
B. If, during the term, the Premises are destroyed from a risk covered by
insurance, 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 this
paragraph.
C. If, during the term, the Premises are destroyed from a risk covered by
insurance, 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 on receipt pay the proceeds to a company furnishing
construction disbursement control services acceptable to the parties ("insurance
trustee") to act as insurance trustee hereunder.
D. If the Premises are destroyed from a risk not covered by insurance,
Tenant shall deposit with the insurance trustee the sum necessary for
restoration.
E. All sums 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:
(1) The sums shall be paid in installment by the insurance trustee to the
contractor retained by Tenant as construction progresses, for payment of the
cost of restoration. A ten percent (10%) retention fund shall be established to
be paid to the contractor on completion of restoration, payment of all costs,
expiration of all applicable lien periods and proof that the Premises are free
of all mechanics' liens and lienable claims.
(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 on
certificates or vouchers approved by such person. The reasonable expenses and
charges of the person retained by the Landlord or insurance trustee shall be
paid out of the trust fund.
(3) If after deposit by the parties of all sums required by this paragraph,
the sums held by the insurance trustee are not sufficient to pay the actual cost
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of restoration, Tenant shall deposit the amount of the deficiency with the
insurance trustee within twenty (20) days after request by the insurance trustee
indicating the amount of the deficiency.
(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 fifteen (15) days to Tenant;
(5) If the insurance trustee resigns or for any reason is unwilling to
act or continue to act, Landlord shall substitute a new trustee in the place of
the designated insurance trustee. The new trustee shall be a company engaged in
the business of construction disbursement control or a trust company doing
business in the county of Los Angeles.
F. Promptly following the date on which Tenant is obligated to
restore the Premises, Tenant at its cost shall prepare final plans and
specifications and working drawings complying with applicable laws that will be
necessary for restoration of the Premises. The plans and specifications and
working drawings shall be subject to approval by Landlord. Landlord shall have
thirty (30) days after receipt of the plans and specifications and working
drawings to either approve or disapprove the plans and specifications and
working drawings and return them to Tenant. If Landlord disapproves the plans
and specifications and working drawings, Landlord shall notify Tenant of its
objections and Landlord's proposed
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solution to each objection. Tenant acknowledges that the plans and
specifications and working drawings 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.
G. The restoration shall be accomplished as follows:
(1) Tenant shall complete the restoration as promptly as possible after
final plans and specifications and working drawings have been approved by the
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).
(2) Tenant shall retain a licensed contractor that is bondable. The
contractor shall be required to carry public liability and property damage
insurance, standard fire and extended coverage insurance, with vandalism and
malicious mischief endorsements, during the period of construction.
(3) Tenant shall notify Landlord of the date of commencement of the
restoration at least fifteen (15) days prior thereto to enable Landlord to post
and record notices of nonresponsibility. The contractor retained by Tenant shall
not commence construction until a completion bond and a labor and materials bond
have been delivered to Landlord to insure completion of the construction.
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(4) Tenant shall accomplish the restoration in a manner which will
cause the least inconvenience, annoyance and disruption of the Premises.
(5) On completion of the restoration Tenant shall immediately record a
notice of completion in the county in which the Premises are located.
(6) The restoration shall not be commenced until sums sufficient to
cover the cost of restoration are placed with the insurance trustee as provided
in this paragraph.
H. In case of damage or destruction, there shall be no abatement or
reduction of rent, except as expressly provided in this Lease.
I. If the Premises are damaged or destroyed during the last year of the
Lease Term, and the cost of restoration exceeds Twenty Five Thousand Dollars
($25,000), either party may terminate this Lease by giving notice to the other
not more than thirty (30) days after such damage or destruction occurs.
J. Tenant waives the provisions of Civil Code 1932(2) and Civil Code
1933(4) (or any successor statutes) with respect to any destruction of the
Premises.
K. The provisions of this paragraph assume that the insurance proceeds, in
the event of an insurable
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loss, are made available to the parties for the purpose of restorating of the
Premises. In the event that Landlord's lender refuses to make the proceeds
available for such purpose, having the right to do so, and/or as a condition of
making the proceeds available, alters the terms of any obligations secured by a
mortgage or deed of trust affecting the Premises so as to materially change the
cost of or the manner in which such obligation may be paid or discharged,
Landlord shall have the right to terminate this Lease by giving notice to Tenant
not more than fifteen (15) days after determination of such condition(s).
15. Condemnation
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A. Wherever used in this paragraph, the following words shall have the
definitions and meanings hereafter set forth:
(1) "Condemnation" - Any action or proceeding brought for the
purpose of any taking of the fee of the Premises or any part thereof by
competent authority as a result of the exercise of the power of eminent domain,
including a voluntary sale to such authority either under threat of condemnation
or while such action or proceeding is pending.
(2) "Vesting Date": The event and date of vesting of title to the
fee of the Premises or any part thereof in the competent authority pursuant to
condemnation.
B. If twenty-five percent (25%) or more of the floor space of the
Premises or of the licensed beds shall
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be taken in condemnation, this Lease shall terminate, at the option of Tenant,
at the Vesting Date and the Minimum Monthly Rent and additional rent under this
Lease shall be apportioned to the date of such termination.
C. If less than twenty-five percent (25%) of the floor space of the
Premises or of the licensed beds shall be taken in condemnation, Landlord and
Tenant shall mutually determine, within a reasonable time after the Vesting
Date, whether the remaining buildings and improvements and building equipment
(after necessary repairs and reconstruction to constitute them a complete
architectural unit) can economically and feasibly be used by Tenant. If it is
determined by mutual agreement or by arbitration that the remaining buildings
and improvements and building equipment cannot economically and feasible be used
by Tenant, either party may elect to terminate this Lease upon five (5) days'
notice to the other party to such effect, given within thirty (30) days after
such determination, and the Minimum Monthly Rent and additional rent under this
Lease shall be apportioned to the date of termination.
D. If this Lease shall terminate pursuant to the provisions of subparagraph
B or C above, the entire condemnation award, except any award made for Tenant's
personal property shall be paid to the Landlord.
E. If, in the case of a partial taking, this Lease shall not terminate, as
provided in subparagraph C, it shall continue in full force and effect as to the
portion of
-25-
the Premises not taken and Tenant, at Tenant's expense, shall commence and
proceed with reasonable promptness and diligence to repair or reconstruct the
remaining buildings, improvements and building equipment to a complete
architectural unit, and the entire condemnation award shall be to Tenant.
F. If this Lease shall not terminate, as provided in subparagraph C,
the Minimum Monthly Rent and additional rent thereafter required to be paid
hereunder shall be reduced in the same ratio as the floor space or licensed beds
taken. Any controversy arising out of, or relating to, this paragraph 15 shall
be settled by arbitration in accordance with the then prevailing rules of the
American Arbitration Association.
G. Each party waives the provisions of California Code of Civil
Procedure Section 1265.130 allowing either party to petition the superior court
to terminate this Lease in the event of a partial taking of the Premises, and
waives such other provisions of law as may be in conflict herewith.
16. Assignment and Subletting
-------------------------
A. Tenant shall not voluntarily assign or encumber its interest in this
Lease, the option granted pursuant to paragraph 30, the Premises or Personal
Property, or sublease all or any part of the Premises or Personal Property, 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 or Personal Property, without
first obtaining Landlord's consent,
-26-
which consent shall not be unreasonably withheld. Any such assignment,
encumbrance or sublease without Landlord's consent shall be voidable, and, at
Landlord's election, shall constitute a default. No consent to any assignment,
encumbrance or sublease shall constitute a further waiver of the provisions of
this paragraph. 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 twenty-five (25%) 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 twenty-five (25%) 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. Notwithstanding
the foregoing, Tenant may assign or sublet this Lease or its interest therein to
its parent, Summit Health Ltd., or to any other corporation that is wholly-
owned, directly or indirectly, by its parent, provided that such assignee agrees
to perform and be bound by all the terms and provisions of this Lease.
Similarly, a dissolution, merger, consolidation or reorganization of Tenant or
sale or transfer of a controlling percentage of its capital stock or assets to
or among its parent or any other corporation that is wholly-owned, directly or
indirectly, by its parent shall not be deemed a voluntary assignment for
purposes of this subparagraph A. Tenant shall, in connection with any request to
Landlord for its consent to any assignment or subletting, deliver to Landlord a
copy of the proposed sublease, assignment agreement or any other agreements
between Tenant and
-27-
its assignee or sublessee, and a descriptive resume of the experience of the
proposed assignee or sublessee. Within a fifteen (15) days of the receipt of the
information set forth above, Landlord shall notify Tenant whether it refuses to
consent to the assignment or subletting and the reasons for such refusal or
whether it will consent to the proposed assignment or sublease. No such consent
shall relieve Tenant of its liability under this Lease.
B. Tenant immediately and irrevocably assigns to Landlord, as security for
Tenant's obligations under this Lease, all rent from any subletting of all or a
part of the Premises as permitted by this Lease, and Landlord, as assignee 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; except that, until the occurrence of an act of
default by Tenant, Tenant shall have the right to collect such rent.
C. No interest of Tenant in this Lease shall be assignable by operation of
law except as permitted under subparagraph A. Each of the following acts shall
be considered an involuntary assignment:
(1) If Tenant is or becomes bankrupt or insolvent, makes an assignment
for the benefit of creditors, or institutes a proceeding under the Bankruptcy
Act in which Tenant is the bankrupt;
-28-
(2) If a writ of attachment or execution is levied on this Lease;
(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.
D. 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, or if any involuntary proceeding in
bankruptcy is brought against Tenant, or if a receiver is appointed, Tenant
shall have sixty (60) days in which to have the involuntary proceeding dismissed
or the receiver removed.
17. Termination. Tenant shall use its best efforts to obtain a health
-----------
facilities license for the Premises from the California Department of Health on
or before June 30, 1980. In the event Tenant should fail to do so, Landlord
may elect to terminate this Lease, in which case Tenant shall have no further
obligations under this Lease, or Landlord may elect to continue this Lease in
force.
18. Defaults, Remedies
------------------
A. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant:
-29-
(1) Failure to pay rent when due, if the failure continues for five
(5) days after notice has been given to Tenant;
(2) Abandonment of the Premises (failure to occupy and operate the
Premises for twelve (12) hours shall be demand an abandonment unless such
failure is due to acts of God);
(3) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Tenant,
other than described in subparagraph (1) or (2) above where such failure shall
continue for a period of thirty (30) days after notice thereof from Landlord to
Tenant; provided, however, that if the nature of Tenant's default is such that
more than thirty (30) days are reasonably required for its cure, then 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;
(4) The filing of, execution or occurrence of:
(a) a petition in bankruptcy by or against the Tenant, unless cured
or removed within sixty (60) days;
(b) a petition or answer by Tenant seeking a reorganization,
arrangement, composition, readjustment,
-30-
liquidation, dissolution or other relief of the same or different kind under any
provision of the Bankruptcy Act;
(c) adjudication of Tenant as a bankrupt or insolvent;
(d) an assignment of all or substantially all of Tenant's assets for
the benefit of its creditors;
(e) a petition or other proceeding, except by Landlord, its agents or
affiliates, by or against Tenant, for the appointment of a trustee, receiver or
liquidator of Tenant with respect to all or substantially all of its property;
provided, however, that Tenant shall not be in default if Tenant cures or
removes such a petition or proceeding within sixty (60) days;
(f) a petition or other proceeding by or against Tenant for its
dissolution or liquidation, or the taking of possession of the property of
Tenant by any governmental authority in connection with Tenant's dissolution or
liquidation; provided, however, that Tenant shall not be in default if Tenant
cures or removes such a petition or proceeding within sixty (60) days;
(g) the taking by any person, except by Landlord or its agents or
affiliates, of the leasehold created hereby or any part thereof upon execution,
or other process of law or equity.
-31-
(5) Notwithstanding any other provisions of this Lease, and
without additional notice to Tenant, the failure of Tenant to comply with any of
the provisions of the Lease, if such failure (in the reasonable and good faith
judgment of Landlord) places in imminent jeopardy the continued licensing of
the Premises as a skilled nursing facility and/or its certification as either a
Medi-Cal or Medicare provider, and if, within twenty-four (24) hours after
notice thereof from Landlord to Tenant, Tenant shall not have either (a) cured
such failure, (b) obtained an injunction or other order preventing revocation or
suspension of licensing and/or decertification of the Premises by virtue of such
failure or alleged failure, or (c) provided Landlord with other reasonable
assurances that the Premises will not be subject to license suspension or
revocation and/or decertification as a result of such failure or alleged
failure.
(6) Notices given hereunder shall specify the alleged default
and the applicable Lease provisions, shall demand that Tenant perform the
provisions of this Lease or pay the rent that is in arrears, as the case may be,
within the applicable period of time, or quit the Premises, and shall be given
as provided in paragraph 22. No such notice shall be deemed a forfeiture or a
termination of this Lease unless Landlord so elects in the notice.
B. Landlord shall have the following remedies without further notice
to Tenant if Tenant commits a default. These remedies are not exclusive; they
are cumula-
-32-
tive and in addition to any remedies now or later allowed by law:
(1) Landlord may continue this Lease in full force and effect.
The Lease shall continue in effect as long as Landlord does not terminate
Tenant's right to possession, and Landlord shall have the right to collect rent
when due. During the period Tenant is in default, Landlord may enter the
Premises and relet them, or any part of them, to third parties for Tenant's
account. Tenant shall be liable immediately to Landlord for expenses Landlord
incurs in no reletting the Premises to another tenant for use as a 79-bed
skilled nursing facility, nursing home, convalescent hospital or similar
institution, including without limitation brokers' commissions, expenses of
remodeling the Premises required by the reletting and like costs. Reletting may
be for a period shorter or longer than the period remaining in the Lease Term.
Tenant shall pay to Landlord the rent hereunder as due, less the rent Landlord
receives or could have received from any reletting, had Landlord diligently
relet the Premises.
(2) Landlord may terminate Tenant's right to possession of the
Premises at any time. No act by Landlord other than giving notice to Tenant or
terminating Tenant's right to possession shall terminate this Lease. Acts of
maintenance, efforts to relet the Premises or the appointment of a receiver on
Landlord's initiative to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's right to possession. On termination,
Landlord has the right to recover from Tenant:
-33-
(a) The worth, at the time of the award of the unpaid rent that
had been earned at the time of termination of this Lease;
(b) The worth, at the time of the award, of the amount by which
the unpaid rent that would have been earned after the date of termination of
this Lease until the time of award exceeds the amount of the loss of rent that
Tenant proves could have been reasonably avoided;
(c) The worth, at the time of the award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds the
amount of the loss of rent that Tenant proves could have been reasonably
avoided.
"The worth, at the time of the award," as used in (a) and (b) of
this subparagraph B(2) is to be computed by allowing interest at the rate of ten
percent (10%) per annum. "The worth, at the time of the award," as referred to
in (c) of this subparagraph B(2) is to be computed by discounting the amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
the award, plus one percent (1%).
(3) Landlord shall have the right to have a receiver appointed
to collect rent and conduct Tenant's business. 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.
-34-
(4) Landlord, at any time after Tenant commits a default, 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 from Tenant to Landlord at the same
time the sum is paid, and if repaid at a later date, shall bear interest at the
rate of ten percent (10%) per annum from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant. The sum, together with interest thereon,
shall be additional rent.
19. Signs. 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 such sign shall comply with all laws and Tenant shall obtain any
approval required by such laws. Landlord makes no representation with respect to
Tenant's ability to obtain such approval.
20. Right of Entry
--------------
A. Landlord and its authorized representatives shall have the right
to enter the Premises at all reasonable times, so long as such entry does not
disrupt the operation of Tenant's business, for any of the following purposes:
(1) To determine whether the Premises are in good condition and
whether Tenant is complying with its obligations under this Lease;
-35-
(2) To do any necessary maintenance or restoration to the
Premises that Landlord has the right or obligation to perform; nothing herein
sha1l constitute an obligation on the part of Landlord to maintain or restore
the Premises or any part thereof;
(3) To serve, post or keep posted any notices required or
allowed under the provisions of this Lease;
(4) To show the Premises to prospective brokers, agents,
buyers, tenants or persons interested in an exchange, at any time during the
Lease Term;
(5) To remove the baby grand piano, three pictures and metal
bookcase; and
(6) To shore the foundations, footings and walls of the building
and other improvements that are a part of the Premises, to erect scaffolding and
protective barricades around and about the Premises (but not so as to prevent
entry to the Premises) and to do any other act or thing necessary for the safety
or preservation of the Premises, if any excavation or other construction is
undertaken or is about to be undertaken on any adjacent property or nearby
street. Landlord's right under this provision extends to the owner of the
adjacent property on which excavation or construction is to take place and to
the adjacent property owner's authorized representatives. Nothing herein shall
constitute an obligation on the part of Landlord to maintain or restore the
Premises or any part thereof.
-36-
B. Landlord sha1l 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 paragraph, except
damage resulting from Landlord's breach of this Lease or willful or negligent
conduct or omission of Landlord or its authorized representatives.
C. Tenant shall not be entitled to an abatement or reduction
of rent if Landlord exercises any rights reserved in this paragraph. Landlord
shall conduct its activities on the Premises as allowed in this paragraph in a
manner that will cause no unreasonable inconvenience, annoyance, or disturbance
to Tenant.
21. Subordination; Estoppel
-----------------------
A. This Lease is and sha1l be prior to any encumbrance recorded
after the date of this Lease, and any encumbrance now of record affecting the
Premises. If, however, a lender requires that this Lease be subordinate to any
such encumbrance, this Lease shall be subordinate to that encumbrance, if
Landlord first obtains from the lender a written agreement that provides
substantially the following:
"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, and no steps or procedures taken under the
encumbrance, shall affect Tenant's rights under this Lease."
-37-
B. 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 to accomplish the purposes of this paragraph.
C. Each party, within ten (10) days after notice from the other
party, shall execute and deliver to the other party, 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. The
certificate also shall state the amount of monthly rent then applicable, the
dates to which the 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 the party failing to deliver the certificate for
the benefit of the party requesting the certificate and any successor thereto
that this Lease is in full force and effect and has not been modified, except as
may be represented by the party requesting the certificate. If a party fails to
deliver the certificate within the ten (10) days, the party failing to deliver
the certificate irrevocably constitutes and appoints to other party as its
special attorney-in-fact to execute and deliver the certificate to any third
party.
22. Notices. All written notices, demands or requests of any kind
-------
which either party may be required or may desire to serve on the other in
connection with this Lease may be served personally or by registered or
certified mail.
-38-
Any such notice or demand served by registered or certified mail shall be
deposited in the United States mail with postage and fees thereon fully prepaid,
and addressed to the parties as follows:
To South Bay Sanitarium Southbay Sanitarium
---------------------------
and Convalescent Hospital: c/o Dr. Steve Brodie
---------------------------
792 Linda Flora Drive
---------------------------
Los Angeles, CA 90049
with a copy thereof to: Martin H. Blank, Jr., Esq.
---------------------------
10850 Wilshire Blvd., 11th Fl.
---------------------------
Los Angeles, CA 90024
---------------------------
To Garnet Convalescent Summit Health Ltd.
Hospital Inc.: 4070 Laurel Canyon Blvd.
Studio City, California 91604
with a copy thereof to: Kindel & Anderson
555 South Flower Street
26th Floor
Los Angeles, California 90071
Attn: Patricia T. Mulryan, Esq.
Service of any such notice or demand so made by mail shall be deemed complete on
the day of actual delivery as shown by the addressee's registry or certification
receipt or at the expiration of the fifth (5th) day after the date of mailing,
whichever is earlier in time. Either party hereto may from by time to time, by
notice in writing served upon the other as aforesaid, designate a different
mailing address, or a different or additional person(s) to which all such
notices or demands are thereafter to be addressed:
23. Waiver
------
A. No delay or omission in the exercise of any right or
remedy of Landlord for any default by Tenant shall impair such a right or remedy
or be construed as a waiver.
-39-
B. The receipt and acceptance by Landlord of delinquent rent
shall not constitute a waiver of any other default; it shall constitute only a
waiver of timely payment for the particular rent payment involved.
C. 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 Lease Term.
Except as otherwise expressly provided herein, only a notice from Landlord to
Tenant shall constitute acceptance of the surrender of the Premises and
accomplish a termination of the Lease.
D. Landlord' s consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
E. Any waiver by any party hereto must be in writing and shall
not be a waiver of any other default concerning the same or any other provision
of the Lease.
24. Recordation; Quitclaim. This Lease shall not be recorded, however
----------------------
the parties shall execute a Memorandum of Lease in recordable form which shall
be recorded with the Los Angeles County Recorder. Tenant shall execute and
deliver to Landlord on the expiration or termination of this Lease, immediately
on Landlord's request, a quitclaim deed to the Premises in recordable form
designating Landlord's transferee.
-40-
25. Sale or Transfer of Premises
----------------------------
A. If Landlord determines to sell fifty percent (50%) or more
of the Premises or of the Personal Property Landlord shall notify Tenant of the
terms on which Landlord will be willing to sell. Tenant shall have a right of
first refusal and may notify Landlord, within fifteen (15) days after receipt of
Landlord's notice, in writing of Tenant's agreement to purchase that being
offered for sale by Landlord on the terms stated in Landlord' s notice. If
Tenant so exercises its right of first refusal, Landlord shall sell and convey
same to Tenant on the terms stated in the notice. If Tenant does not indicate
its agreement within fifteen (15) days, Landlord thereafter shall have the right
to sell and convey said property to a third party on the same terms stated in
the notice. If Landlord does not sell and convey said prop within ninety (90)
days, any further transaction shall be deemed a new determination by Landlord to
sell and convey same and the provisions of this paragraph shall be applicable.
B. If Landlord sells or transfers the Premises, on consummation
of the sale or transfer the transferee shall take subject to this Lease and
assume all obligations hereunder. If any security deposit or prepaid rent has
been paid by Tenant, Landlord shall transfer the security deposit or prepaid
rent to Landlord's successor and shall promptly notify Tenant of such transfer.
C. If Tenant purchases all of the Premises and Personal
Property, this Lease shall terminate on the date
-41-
title vests in Tenant, and Landlord shall remit to Tenant all prepaid and
unearned rent and the remaining security deposit. If Tenant purchases a part of
the Premises and/or Personal Property, this Lease, as to the part purchased,
shall terminate on the date title vests in Tenant, and the Minimum Monthly Rent
and additional rent shall be reduced in the same ratio that the value of the
Premises and Personal Property before the purchase bears to the value of the
Premises and Personal Property covered by the Lease immediately after the
purchase.
26. Attorneys' Fees. In the event any action is commenced for
---------------
any breach of or default in any of the terms or conditions of this Lease, then
the party in whose favor judgment shall be entered shall be entitled to have and
recover from the other party all costs and expenses (including reasonable
attorneys' fees) of such suit.
27. Financial Statements. Curing the Lease Term, Tenant shall
--------------------
provide Landlord with copies of (a) semi-annually, the profit and loss
statement of Tenant; and (b) annually, the consolidated financial statements of
Summit Health Ltd. as certified by its certified public accountants.
28. Licensing. Except as may be otherwise permitted hereunder,
---------
Tenant shall maintain at all times during the Lease Term all governmental
licenses, permits and authorizations necessary for the establishment and
operation of a seventy-nine (79) bed skilled nursing facility in the city of
Torrance, County of Los Angeles, State of California, in-
-42-
including qualification as a provider under Medi-Cal and Medicare legislation.
Tenant shall not, without the prior consent of Landlord, which consent shall not
be unreasonably withheld, effect any change in the license category or license
status of the Premises or any part thereof.
29. Surrender of Premises; Holding Over
-----------------------------------
A. On expiration of the Lease Term, Tenant shall surrender
to Landlord the Personal Property and the Premises, and all Tenant's
improvements and alterations thereto, in good condition (except for ordinary
wear and tear occurring after the last necessary maintenance made by Tenant and
destruction of the Premises covered by paragraph 14), except for alterations
that Tenant has the right to remove or is obligated to remove under the
provisions of paragraph 9.
B. If Tenant fails to surrender the Premises at the
expiration of the Lease Term as required by this paragraph, Tenant shall hold
Landlord harmless from all damages resulting from Tenant's failure to surrender
the Premises and/or Personal Property, including without limitation, claims made
by a succeeding tenant resulting from Tenant's failure to surrender the Premises
and/or the Personal Property.
C. If Tenant, with Landlord's consent, remains in
possession of the Premises and/or the Personal Property after expiration or
termination of the Lease Term, or after the date in any notice terminating this
Lease, such possession by Tenant shall be deemed to be a month-to-month
-43-
tenancy terminable on thirty (30) days' notice given at any time by either
party. All provisions of this Lease except those pertaining to term shall apply
to the month-to-month tenancy.
30. Option to Renew. Provided Tenant is not then in default
---------------
hereunder, Tenant is hereby granted an option to renew this Lease for an
additional period of five (5) years from and after February 28, 1990 under the
same terms, conditions and covenants (so far as applicable) as herein contained,
including rental adjustment as provided in paragraph 4. The option shall be
exercised by notice, setting forth Tenant's election to exercise the option,
delivered to Landlord not less than one hundred eighty (180) days prior to the
expiration of the Lease Term. Upon exercise, such additional five (5) year
period shall be deemed to be an extension of the Lease Term for the purposes of
this Lease.
31. Miscellaneous.
-------------
A. Time is of the essence of each provision of this Lease.
B. Each party represents that it has not had dealings with
any real estate broker, finder or other person with respect to this Lease in any
manner. Each party shall hold harmless the other party from all damages
resulting from any claims that may be asserted against the other party by any
broker, finder or other person with whom the other party has or purportedly has
dealt.
-44-
C. All exhibits referred to are attached to this Lease and
incorporated by reference.
D. All provisions, whether covenants or conditions, on the
part of Tenant shall be deemed to be both covenants and conditions.
E. This Lease includes the entire agreement of the parties
with respect to the subject matter hereof, and may not be amended or modified
except by written agreement of the parties.
F. Tenant shall provide to Landlord a certified resolution
of Tenant's Board of Directors authorizing Tenant to enter into this Lease.
32. Definitions. As used in this Lease, the following words and
-----------
phrases shall have the following meanings:
A. "Alteration" - any structural addition or structural
change to, or modification of, the Premises made by Tenant including without
limitation fixtures, but excluding Tenant's personal property.
B. "Authorized representative" - any officer, agent,
employee or independent contractor retained or employed by either party, acting
within authority given him by that party.
-45-
C. "Encumbrance" - any deed of trust, mortgage or other
written security device or agreement affecting the Premises and/or Personal
Property, and the note or other obligation secured by it, that constitutes
security for the payment of a debt or performance of an obligation.
D. "Hold harmless" - to defend and indemnify from all
liability, losses, penalties, damages as defined herein, costs, expenses
(including without limitation, attorneys' fees), causes of action, claims or
judgments arising out of or related to any damage, as defined herein, to any
person or property.
E. "Law" - any judicial decision, statute, constitution,
ordinance, resolution, regulation, rule, administrative order or other
requirement of any local, state, federal or other government agency or authority
having jurisdiction over the parties or the Premises, or both, in effect either
at the time of execution of the Lease or at any time during the Lease Term,
including without limitation, any regulation or order of a quasi-official entity
or body.
F. "Lender" - the beneficiary, mortgagee, secured party or
other holder of an encumbrance, as defined above.
G. "Rent" - Minimum Monthly Rent, additional rent, security
deposit, Real and Personal Property Taxes and assessments, insurance, utilities
and other similar charges
-46-
payable by Tenant to Landlord or payable by Tenant to a third person and
required by the provisions of this Lease.
H. "Restoration" - the reconstruction, rebuilding,
rehabilitation and repairs that are necessary to return destroyed portions of
the Premises and Personal Property to substantially the same physical condition
as they were in immediately before the destruction.
I. "Successor" - assignee, transferee, personal
representative, heir or other person or entity succeeding lawfully, and
pursuant to the provisions of this Lease, to the rights or obligations of either
party.
J. "Tenant's improvements" - any addition to or modification
of the Premises made by Tenant during the Lease Term, including without
limitation, fixtures.
33. Captions. The captions of this Lease are for convenience only
--------
shall have no effect on its interpretation.
34. Singular and Plural. When required by the context of this
-------------------
Lease, the singular shall include plural.
35. Severability. The unenforceability, invalidity or illegality
------------
of any provision shall not render any other provision unenforceable, invalid or
illegal.
-47-
36. Legal Impossibility. Should performance hereunder by Tenant
-------------------
be rendered legally impossible at any time during the term hereof by reason of
governmental action not precipitated by or in any way resulting from acts or
omissions of Tenant, Tenant shall be excused from further performance hereunder.
However, laws or other governmental acts making performance hereunder
unprofitable, more difficult or more expensive shall not excuse performance by
Tenant.
IN WITNESS WHEREOF, the undersigned have executed the Lease as of
the date and year first above written.
South Bay Sanitarium &
Convalescent Hospital
By [SIGNATURE APPEARS HERE]
---------------------------------
, General Partner
-----------
Garnet Convalescent Hospital,
Inc., dba Bay Crest
Convalescent Hospital
By /s/ William L. Pierpoint
---------------------------------
William L. Pierpoint, President
/s/ Thomas Konig Vice Pres.
Summit Health, Ltd. hereby guaranties
the obligations of Tenant hereunder.
Summit Health, Ltd.,
a California Corporation
By /s/ Thomas Konig
--------------------------------
Thomas Konig, President
Skilled Nursing/Resident Hotels
Division
By /s/ William Pierpoint
--------------------------------
William Pierpoint
President
-48-
AMENDMENT TO LEASE
This Amendment to Lease ("Amendment") is entered into as of the First day
of March, 1994, by and between SOUTH BAY SANITARIUM AND CONVALESCENT HOSPITAL, a
partnership ("Landlord") and SUMMIT CARE-CALIFORNIA, INC., a California
corporation doing business as Bay Crest Care Center and the successor in
interest to GARNET CONVALESCENT HOSPITAL, INC., a California corporation
("Tenant"), for the purpose of amending and modifying that certain lease dated
March 1, 1980 (the "Lease") , between Landlord and Tenant.
The terms and provisions of the Lease except as hereby amended are hereby
incorporated herein by reference, as if fully set forth herein. All capitalized
undefined terms used herein shall have the same meanings as set forth in the
Lease.
RECITALS
--------
The parties acknowledge that the Lease is in full force and effect and wish
to amend the Lease to extend the term, provide for rental payments and grant to
Tenant rights of renewal and a right of first refusal, all as hereinafter set
forth.
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
AMENDMENT
---------
1. Term
----
Section 2, "Term", is hereby deleted and amended to provide as follows:
-----
"The term of this Lease, as hereby amended ("Lease Term"),
shall commence April 1, 1994 and shall expire, unless sooner
terminated, at midnight February 28, 2010."
2. Options to Renew
----------------
Section 30, "Option to Renew" is hereby deleted and amended to provide as
follows:
"Provided Tenant is not then in default hereunder, Tenant is hereby granted
an option to renew this Lease under the same terms, provisions and
covenants (so far as applicable) as herein contained, including rental
adjustment as provided in paragraph 4, as amended, for an additional term
of five (5)
1
years (the "Extended Term") to commence on March 1, 2010 and end on
February 28, 2015. The option shall be exercised by notice, setting forth
Tenant's election to exercise the option, delivered to Landlord not less
than sixty (60) days prior to the expiration of the Term. Upon exercise,
such additional period shall be deemed to be an extension of the Lease Term
for the purposes of this Lease."
3. Rent
----
Paragraphs 4(A) , 4(B) , 4(C) and 4(D) of Section 4, "Rent", are hereby deleted
and amended to provide as follows:
A. During the period commencing on April 1, 1994 and ending on February
28, 1995 (the "First Adjustment Period"), Tenant shall pay Landlord as
Minimum Monthly Rent for the Premises a sum equal to Eleven Thousand
Eight Hundred Dollars and 00/100 ($11,800.00) before the first day of
each and every month during the First Adjustment Period.
B. During the period commencing on March 1, 1995 and ending on February
27, 1997 (the "Second Adjustment Period") Tenant shall pay Landlord as
Minimum Monthly Rent for the Premises a sum equal to Sixteen Thousand
Nine Hundred Sixty Six Dollars and 67/100 ($16,966.67) before the first
day of each and every month during the Second Adjustment Period.
C. During the period commencing on March 1, 1997 and ending on February
28, 2010 (the "Third Adjustment Period") Tenant shall pay Landlord as
Minimum Monthly Rent for the Premises a sum equal to Eighteen Thousand
Eight Hundred Dollars and 00/100 ($18,800.00) before the first day of
each and every month of the Third Adjustment Period, subject to annual
increases as set forth in subparagraph 4(D) below.
D. The Minimum Monthly Rent provided for in Paragraph C above shall be
subject to adjustment effective March 1, 1996 and annually each first
day of March thereafter (the "adjustment date") as follows:
The base for computing the adjustment is the Consumer Price Index (All
Items) for the Los Angeles-Long Beach Metropolitan Area, published by the
United States Department of Labor, Bureau of Labor Statistics ("Index"),
which is published for the closest date on or before March 1, 1995
("Beginning Index"). If the Index for the closest date on or before the
adjustment date ("Extension Index") has
2
increased over the Beginning Index, the Minimum Monthly Rent for the next
twelve (12) months until the next annual adjustment shall be set by
multiplying the then-current monthly rent by a fraction, the numerator of
which is the Extension Index and the denominator of which is the Beginning
Index. Provided, however, that in no event shall the annual adjustment to
the Minimum Monthly Rent be less than three percent (3%) nor more than six
percent (6%) of the then-current Minimum Monthly Rent. On adjustment of
the Minimum Monthly Rent as provided for in this Amendment, the parties
shall immediately confirm to each other in writing the new Minimum Monthly
Rent.
If the Index is discontinued or revised during the Lease Term, such
other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained
if the Index had not been discontinued or revised."
This lease is what is commonly called a "triple net lease", it being
understood that Landlord shall receive the Rent set forth in this paragraph free
and clear of any and all impositions, taxes, liens, charges, or expenses of any
nature whatsoever in connection with its ownership and leasing of the Premises.
Tenant at its cost shall maintain the premises in good condition and Landlord
shall have no responsibility to maintain the premises. In addition to the Rent
provided in this paragraph, Tenant shall pay to the parties respectively
entitled thereto all impositions, taxes, insurance premiums and operating
charges, including maintenance and repairs charges.
4. Section 13, Insurance, is hereby amended to provide that the policies of
---------
insurance maintained pursuant to this section shall have deductible provisions
(a) in amounts reasonable for and in accordance with the Tenant's financial
capability, (b) subject to the deductible levels established by the insurance
industry marketplace at the time of inception of said insurance policies and
renewals thereof, and (c) which shall be for the account of and payable by
Tenant.
In addition, Tenant, at its sole cost and expense, shall purchase and
maintain earthquake insurance to cover the physical premises and contents.
Coverage is to be written on a replacement cost basis.
5. Section 16, Assignment and Subletting, is hereby amended to delete
-------------------------
reference to the merger or consolidation of Tenant or to the transfer or sale of
a controlling percentage of the capital stock of Tenant as requiring the consent
of Landlord. Landlord hereby acknowledges that Tenant is a publicly held
corporation, and that the merger or consolidation of Tenant or changes in the
3
ownership of the outstanding capital stock of Tenant shall not require
Landlord's consent.
6. Right of First Refusal.
----------------------
If Landlord at any time determines to sell all or any part of the Premises
(whether or not in response to an offer from a third party), Landlord shall
notify Tenant of the terms on which Landlord will be willing to sell.
If Tenant, within thirty (30) days after Landlord's notice, indicates in
writing its agreement to purchase the Premises or a part of the Premises on the
terms stated in the Landlord's notice, Landlord shall sell and convey the
Premises or a part of the Premises to Tenant on the terms stated in the notice.
If Tenant does not indicate its agreement within thirty (30) days, Landlord
thereafter shall have the right to sell and convey the Premises or a part of the
Premises to third party on the same terms stated in the notice. If Landlord
does not thereafter sell and convey the Premises to a third party on the same
terms stated in the Landlord's notice to Tenant, within ninety (90) days, any
further transaction will be deemed to be a new determination by Landlord to sell
and convey the premises or a part of the Premises and the provisions of this
Section shall apply.
If Tenant purchases all of the Premises, this Lease shall terminate on the
date title vests in Tenant. If Tenant shall purchase a part of the Premises,
this Lease as to the part purchased shall terminate on the date title vests in
Tenant, and the Minimum Monthly Rent shall be reduced in the same ratio that the
value of the Premises before the purchase bears to the value of the Premises
covered by the Lease immediately after the purchase.
III. EFFECT OF AMENDMENT
Except as expressly amended or modified herein the Lease shall remain in
full force and effect.
4
IN WITNESS WHEREOF, the undersigned have executed this Lease as of the date
first set forth above.
LANDLORD
SOUTH BAY SANITARIUM AND
CONVALESCENT HOSPITAL
a partnership
By: [signature]
---------------------------
Its:
TENANT
SUMMIT CARE-CALIFORNIA
a California corporation
By: /s/ Derwin L. Williams
--------------------------
Its: Vice President Finance
5
Exhibit 10.11
AMENDMENT TO LEASE
This Amendment to Lease ("Amendment") is entered into as of the First day
of March, 1994, by and between SOUTH BAY SANITARIUM AND CONVALESCENT HOSPITAL, a
partnership ("Landlord") and SUMMIT CARE-CALIFORNIA, INC., a California
corporation doing business as Bay Crest Care Center and the successor in
interest to GARNET CONVALESCENT HOSPITAL, INC., a California corporation
("Tenant"), for the purpose of amending and modifying that certain lease dated
March 1, 1980 (the "Lease") , between Landlord and Tenant.
The terms and provisions of the Lease except as hereby amended are hereby
incorporated herein by reference, as if fully set forth herein. All capitalized
undefined terms used herein shall have the same meanings as set forth in the
Lease.
RECITALS
--------
The parties acknowledge that the Lease is in full force and effect and wish
to amend the Lease to extend the term, provide for rental payments and grant to
Tenant rights of renewal and a right of first refusal, all as hereinafter set
forth.
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
AMENDMENT
---------
1. Term
----
Section 2, "Term", is hereby deleted and amended to provide as follows:
-----
"The term of this Lease, as hereby amended ("Lease Term"),
shall commence April 1, 1994 and shall expire, unless sooner
terminated, at midnight February 28, 2010."
2. Options to Renew
----------------
Section 30, "Option to Renew" is hereby deleted and amended to provide as
follows:
"Provided Tenant is not then in default hereunder, Tenant is hereby granted
an option to renew this Lease under the same terms, provisions and
covenants (so far as applicable) as herein contained, including rental
adjustment as provided in paragraph 4, as amended, for an additional term
of five (5)
1
years (the "Extended Term") to commence on March 1, 2010 and end on
February 28, 2015. The option shall be exercised by notice, setting forth
Tenant's election to exercise the option, delivered to Landlord not less
than sixty (60) days prior to the expiration of the Term. Upon exercise,
such additional period shall be deemed to be an extension of the Lease Term
for the purposes of this Lease."
3. Rent
----
Paragraphs 4(A) , 4(B) , 4(C) and 4(D) of Section 4, "Rent", are hereby deleted
and amended to provide as follows:
A. During the period commencing on April 1, 1994 and ending on February
28, 1995 (the "First Adjustment Period"), Tenant shall pay Landlord as
Minimum Monthly Rent for the Premises a sum equal to Eleven Thousand
Eight Hundred Dollars and 00/100 ($11,800.00) before the first day of
each and every month during the First Adjustment Period.
B. During the period commencing on March 1, 1995 and ending on February
27, 1997 (the "Second Adjustment Period") Tenant shall pay Landlord as
Minimum Monthly Rent for the Premises a sum equal to Sixteen Thousand
Nine Hundred Sixty Six Dollars and 67/100 ($16,966.67) before the first
day of each and every month during the Second Adjustment Period.
C. During the period commencing on March 1, 1997 and ending on February
28, 2010 (the "Third Adjustment Period") Tenant shall pay Landlord as
Minimum Monthly Rent for the Premises a sum equal to Eighteen Thousand
Eight Hundred Dollars and 00/100 ($18,800.00) before the first day of
each and every month of the Third Adjustment Period, subject to annual
increases as set forth in subparagraph 4(D) below.
D. The Minimum Monthly Rent provided for in Paragraph C above shall be
subject to adjustment effective March 1, 1996 and annually each first
day of March thereafter (the "adjustment date") as follows:
The base for computing the adjustment is the Consumer Price Index (All
Items) for the Los Angeles-Long Beach Metropolitan Area, published by the
United States Department of Labor, Bureau of Labor Statistics ("Index"),
which is published for the closest date on or before March 1, 1995
("Beginning Index"). If the Index for the closest date on or before the
adjustment date ("Extension Index") has
2
increased over the Beginning Index, the Minimum Monthly Rent for the next
twelve (12) months until the next annual adjustment shall be set by
multiplying the then-current monthly rent by a fraction, the numerator of
which is the Extension Index and the denominator of which is the Beginning
Index. Provided, however, that in no event shall the annual adjustment to
the Minimum Monthly Rent be less than three percent (3%) nor more than six
percent (6%) of the then-current Minimum Monthly Rent. On adjustment of
the Minimum Monthly Rent as provided for in this Amendment, the parties
shall immediately confirm to each other in writing the new Minimum Monthly
Rent.
If the Index is discontinued or revised during the Lease Term, such
other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained
if the Index had not been discontinued or revised."
This lease is what is commonly called a "triple net lease", it being
understood that Landlord shall receive the Rent set forth in this paragraph free
and clear of any and all impositions, taxes, liens, charges, or expenses of any
nature whatsoever in connection with its ownership and leasing of the Premises.
Tenant at its cost shall maintain the premises in good condition and Landlord
shall have no responsibility to maintain the premises. In addition to the Rent
provided in this paragraph, Tenant shall pay to the parties respectively
entitled thereto all impositions, taxes, insurance premiums and operating
charges, including maintenance and repairs charges.
4. Section 13, Insurance, is hereby amended to provide that the policies of
---------
insurance maintained pursuant to this section shall have deductible provisions
(a) in amounts reasonable for and in accordance with the Tenant's financial
capability, (b) subject to the deductible levels established by the insurance
industry marketplace at the time of inception of said insurance policies and
renewals thereof, and (c) which shall be for the account of and payable by
Tenant.
In addition, Tenant, at its sole cost and expense, shall purchase and
maintain earthquake insurance to cover the physical premises and contents.
Coverage is to be written on a replacement cost basis.
5. Section 16, Assignment and Subletting, is hereby amended to delete
-------------------------
reference to the merger or consolidation of Tenant or to the transfer or sale of
a controlling percentage of the capital stock of Tenant as requiring the consent
of Landlord. Landlord hereby acknowledges that Tenant is a publicly held
corporation, and that the merger or consolidation of Tenant or changes in the
3
ownership of the outstanding capital stock of Tenant shall not require
Landlord's consent.
6. Right of First Refusal.
----------------------
If Landlord at any time determines to sell all or any part of the Premises
(whether or not in response to an offer from a third party), Landlord shall
notify Tenant of the terms on which Landlord will be willing to sell.
If Tenant, within thirty (30) days after Landlord's notice, indicates in
writing its agreement to purchase the Premises or a part of the Premises on the
terms stated in the Landlord's notice, Landlord shall sell and convey the
Premises or a part of the Premises to Tenant on the terms stated in the notice.
If Tenant does not indicate its agreement within thirty (30) days, Landlord
thereafter shall have the right to sell and convey the Premises or a part of the
Premises to third party on the same terms stated in the notice. If Landlord
does not thereafter sell and convey the Premises to a third party on the same
terms stated in the Landlord's notice to Tenant, within ninety (90) days, any
further transaction will be deemed to be a new determination by Landlord to sell
and convey the premises or a part of the Premises and the provisions of this
Section shall apply.
If Tenant purchases all of the Premises, this Lease shall terminate on the
date title vests in Tenant. If Tenant shall purchase a part of the Premises,
this Lease as to the part purchased shall terminate on the date title vests in
Tenant, and the Minimum Monthly Rent shall be reduced in the same ratio that the
value of the Premises before the purchase bears to the value of the Premises
covered by the Lease immediately after the purchase.
III. EFFECT OF AMENDMENT
Except as expressly amended or modified herein the Lease shall remain in
full force and effect.
4
IN WITNESS WHEREOF, the undersigned have executed this Lease as of the date
first set forth above.
LANDLORD
SOUTH BAY SANITARIUM AND
CONVALESCENT HOSPITAL
a partnership
By: [signature]
---------------------------
Its:
TENANT
SUMMIT CARE-CALIFORNIA
a California corporation
By: /s/ Derwin L. Williams
--------------------------
Its: Vice President Finance
5