EXHIBIT 10.28
1/15/98
COMANCHE TRAIL
LEASE
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT entered into this tenth day of April, 1990, by and
between LLOYD G. HOBBS, of Dallas, Texas, as LESSOR and SELECT CARE ENTERPRISES,
INC., P.O. BOX 202042 Austin, Texas 78720-2047, as LESSEE, WITNESSETH:
THAT for and in consideration of the covenants herein contained and the
rent hereby reserved, the Lessor has hereby let and rented to Lessee and Lessee
has hired and taken from the Lessor, the following described property,
consisting of one 120-bed nursing home, commonly known as Scenic Mountain
Nursing Center, Howard County, Big Spring, Texas, more particularly described in
Exhibit "A" attached hereto, including all furniture, fixtures and equipment
located therein, provided and installed by Lessee, more particularly described
in Exhibit "B" attached hereto, to have and to hold the same for the period of
years and upon the terms and conditions hereinafter stated:
1. The term of this Lease shall be for the period of fifteen (15) years,
commencing April 15, 1991 and ending April 14, 2006.
2. The rental shall be $22,000.00 per month for year one, $24,750.00 per
month for years two through fifteen per month, payable in advance on or before
the fifteenth day of each month. If the Lease shall commence on a day other than
the fifteenth day of the month, the rent will be pro-rated for the first month.
The rental payment will be mailed to Lloyd G. Hobbs, P.O. Box 126, Fort Smith,
Arkansas, 72902, or to such other address as may be directed in writing.
3. Lessee agrees to pay all taxes, general or special, assessed against the
land, buildings and personal property, from the time the property is deeded to
Lessor forward. An escrow for taxes is required; therefore, an escrow payment of
Seven hundred fifty dollars ($750) per month will be deposited with the Lessor
for payment of taxes. This escrow payment will be adjusted annually, to cover
the taxes as levied against the real and personal property by all taxing
authorities using the previous year as a guide.
4. The Lessee shall be responsible for and pay for fire and extended
coverage on the building and contents in such amount as shall be reasonably
requested by Lessor, being at least replacement value. The insurance policy
shall designate Lessor and Lessee as named insureds and loss payees, as their
interests may appear. If Lessee fails or neglects to provide this insurance as
required, Lessor may obtain same and add the premium cost to the next lease
payment due.
5. In the event of partial destruction of the building and contents (that
is, destruction of less than half, in value of the building and contents) by
fire or other casualty, then the Lessee shall be entitled to the insurance
proceeds and shall be obligated to restore the premises, including furniture,
furnishings, fixtures and equipment, to at least as good condition as it was,
prior to the des-
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truction. Any insurance proceeds, in the event of loss, will be escrowed with
Owner of the building. Owner will pay bills incurred, as directed by Lessee,
from insurance proceeds, to repair damages as presented by repair contractors.
If repairs cost more than insurance proceeds, Lessee will be obligated to pay
the difference from Lessee's own funds. If destruction is fifty per cent (50%)
or more, of value, Lessor shall be entitled to the insurance proceeds and shall,
at its option, restore the premises as above provided or cancel the Lease. In
the event of destruction of fifty per cent (50%) or more of value, Lessor shall
advise Lessee, within thirty (30) days following the destruction, of his
election in this regard.
6. In the event of a taking of all or of part of the land and buildings as
a result of eminent domain, condemnation or other governmental taking, the
consideration paid therefor shall be paid to the Lessor, and from the date of
payment of such consideration, the rental amount shall abate and be reduced in
proportion to the relation of the amount of the consideration to $2,200,000 in
value.
7. Lessee shall, as long as this Lease remains in effect, pro-cure and keep
in effect, general public liability insurance against claims for bodily injury
or death occurring upon, in or about the demised premises, and on, in or about
the adjoining streets and passageways, with limits of not less than $3,000,000
any one person or incident. Lessee shall also provide for malpractice
insurance. Lessor shall be a named insured on all policies.
8. Lessee agrees that it will at all times, during the term of this Lease
or any extension thereof, indemnify, protect, defend and save harmless, the
Lessor, against any and all claims, costs, charges, liabilities, or expenses
arising from damage or injury, actual or claimed, of whatever kind or character,
to property or persons occurring in or about the demised premises, streets,
sidewalks, passageways, parking lots, and alleys adjacent thereto, and agree to
resist or defend such action or proceedings, and cause the same to be defended
at its expense.
9. The premises shall be used as a licensed nursing home and for no other
purpose without the written consent of Lessor. Lessee agrees to maintain the
entire premises, including buildings, drives, parking area, furniture, fixtures,
equipment, and decoration in good and tenantable repair and condition. Lessee
shall, at its expense, repair or replace items as may be necessary to comply
with this covenant, and such that the premises shall at all times qualify for
and remain, licensed as, at least an ICF III for a 120-bed nursing home under
the laws and regulations of the United States and the State of Texas. A
reduction in, or loss of, this or equivalent license rating, in the event
license ratings are changed, will be considered a default in this Lease.
10. Lessee, with the prior written consent of the Lessor, which consent
shall not be unreasonably withheld, shall have the right to make such additions,
alterations, changes and improvements on the
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demised premised as Lessee shall deem necessary or desirable; provided that no
such addition, alteration, change or improvement shall be made which will weaken
the structural strength of the building, dimish its utility or value, and all
additions, alterations, changes and improvements shall be made in a workmanlike
manner in full compliance with all building laws and ordinances applicable
thereto, and shall become part thereto upon termination of this Lease. Lessee
may erect and maintain such signs upon the premises as they may desire, and as
may be permitted by laws or ordinances pertaining thereto, but at its sole
expense and responsibility.
11. Lessee shall keep the demised premises in a clean, safe and sanitary
condition, and shall comply with all municipal, county, state and federal laws
and regulations governing the conduct of the activities conducted, suffered or
permitted by the Lessee on the demised premises and the Lessee shall obtain
appropriate permits from all such authorities required.
12. Lessee shall have the right to sub-lease, or assign, any or all of the
leased premises, with the prior written consent of Lessor, first obtained, which
consent will not be unreasonably withheld, provided that the Lessee will remain
liable for the performance of the covenants and obligations of this Lease.
13. Lessee agrees to permit Lessor, or his authorized representative to
enter the demised premises at all reasonable times during usual business hours
for the purpose of inspecting the same, provided that, this shall not be
construed to obligate Lessor to notify Lessee of any defect observed therein.
14. Lessee shall not do or suffer anything to be done whereby the demised
premises, or any part thereof, may be encumbered by a mechanic's or similar
lien, and in the event such a lien is filed against the demised premises, or any
part thereof, purporting to be for or on account of any labor done or material
or services furnished in connection with any work in or about the demised
premises, Lessee shall discharge the same of record within ten (10) days after
the date of such claim, or if Lessee desires to contest the validity or amount
of such claim, it may do so provided that it first posts security acceptable to
Lessor, fully indemnifying Lessor and the premises from any claim, charge, or
demand arising from such claim or expenses incurred in connection therewith.
15. The occurrence of any one or more of the following events shall
constitute an "event of default" in the performance of the covenants of the
Lessee:
a. The Lessee shall fail or neglect to pay the rentals when due, or to
pay any other sum of money which they are required by this Lease to pay, and
such non-payment shall continue on the tenth day after written notice of the
same has been posted to Lessee. In the event of default of this Lease, Lessee's
will forfeit any rights, or ownership of contracts and ownership of Certificate
of
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Need at this location, with the State of Texas or the United States Government,
to Lessor.
b. The Lessee shall fail, refuse or neglect to perform or observe any
other covenant required of them herein, and such non-performance or non-
observance shall continue on the thirtieth (30th) day (unless a later date be
stated in the notice) after written notice of the same has been posted to the
Lessee.
c. This Lease, or the premises itself, or any property of the Lessee is
levied upon by process of law, and such levy be not completely discharged, or
secured to the satisfaction of the Lessor, within fifteen (15) days after
service of the process.
d. Lessee becomes involved in financial difficulties as evidenced by
(1) an admission in writing of their inability to pay their debts generally as
they become due, (2) becoming petitioner in any voluntary debtor or bankruptcy
proceedings, whether asking arrangement, composition, reorganization,
liquidation, or other relief, suspension or modification of their obligations,
(3) becoming a party respondent to any involuntary proceeding the purpose of
which is to subject the assets of the Lessee to the control of a court of
creditor's committee, (4) making an assignment of all or of a substantial part
of their property for the benefit of their creditors, or (5) seeking,
consenting to or failing to avert the appointment of a receiver or a trustee for
all or a substantial part of their property, or of the demised premises, or of
their interest in this Lease.
16. If an event of default occurs, Lessor shall have the option to:
a. Terminate this Lease by service of written notice of termination,
and Lessee's right to the possession of the premises shall cease upon the date
stated in such notice, without prejudice to Lessor's right to recover all sums
due as of the date possession is surrendered, plus any damage or loss suffered
on or prior to such date, including any expenses such as court costs, attorneys'
fees and similar expenses incurred by Lessor in recovering possession, rent
and/or damages due from Lessee; or
b. Re-enter and take possession of the premises without further demand
or notice, and expel Lessee, or those claiming under it, and remove the effects
of both, or either (forcibly if necessary) without being deemed guilty of any
manner of trespass and without prejudice to Lessor's further rights under this
Lease. In such event, the obligations of the Lessee under this Lease shall
continue, but Lessor may from time to time upon such terms and conditions, and
for such bona fide rental as they may be able reasonably to negotiate, sublet
the premises for the account of Lessee, and all sums received by Lessor shall be
credited to the account of Lessee class all reasonable expenses actually
incurred by Lessor, including, but not limited to brokerage fees, advertising
expense, preparation including re-decoration of the premises for sub-letting,
legal expenses, cost of performing
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such of Lessees' obligations as Lessor finds it necessary to perform at it's
expense, and all other items necessary and proper to procure suitable tenants
for the premises. Lessee shall remain liable to Lessor for any deficiency
between the amounts properly credited to Lessee and the amount due Lessor under
this Lease.
c. If Lessor, after taking possession of the premises pursuant to
subparagraph (b) above, is unable to make a bona fide sub-lease with a new
tenant for a term which equals or exceeds the balance of the period for which
Lessee is then obligated, Lessor shall have the right forthwith to demand and
recover from Lessee, the present value of the difference between the amount to
be received by Lessor under the new sub-lease, and the amount which would have
been payable by Lessee under this Lease for the remainder of the term hereof,
plus the expenses of Lessor as defined above.
d. Notwithstanding any election by Lessor to retake possession pursuant
to subparagraph (b) above, Lessor may at any time thereafter, upon written
notice to Lessee, terminate this Agreement in all respects, and in such event,
Lessee shall have no further liability, obligation or responsibility after the
date of such termination.
e. In order that Lessor may be indulgent when it deems the
circumstances warrant without prejudicing it's right under this Lease, Lessee
now expressly agrees that no indulgence or extension, waiver or forgiveness,
variation by practice, nor any neglect or abstention by Lessor in strictly
enforcing the covenants of Lessee on any one or more occasions shall ever be
deemed a waiver of or estoppel against the right of Lessor to insist upon strict
compliance with each and every covenant herein, without any further or special
notice or warning, the existence of a covenant in this Lease and the provisions
of this paragraph, being deemed adequate notice of the rights of the Lessor. No
property belonging to the Lessee shall ever be removed from the premises at any
time when there exists any default in the payment of any part of the rent due
under this Lease, nor after notice of default in the performance of any other
covenant or obligation assumed herein by Lessee.
17. Lessee agrees to execute any instrument reasonably required by Lessor
reflecting attornment to their prior interest which may be required by Lessor
in-connection with mortgaging their interest in the demised premises, and/or
refunding or refinancing in the future of any mortgage which Lessor may place
upon the premises.
18. Upon any termination or expiration of this Lease, whether by lapse of
time, cancellation pursuant to an election provided for therein, forfeiture, or
otherwise, Lessee shall surrender immediately possession of the demised premises
and all buildings and improvements including FP&E, then on the same to Lessor
and enantable repair, reasonable wear and tear and damage from fire or other
casualty or peril excepted. If possession be not immediately surrendered, Lessor
with or without process of Law, may forthwith re-enter said premises and
repossess the same, and expel and remove therefrom, using such force as may be
necessary, all persons and property, without being deemed
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guilty of any unlawful act and without prejudice to any other legal remedy
available to Lessor.
19. Lessor has the right to assign all or any part of this Lease.
20. Lessee is hereby granted an option to purchase these facilities
including land, improvements, furniture and equipment and reassignment of one-
half interest in the Certificate of Need, ten years after commencement of Lease
and after one hundred twenty (120) rental payments have been made, and before
the Lease expires or is terminated, provided Lessee is not in default on the
Lease. The purchase price will be Two Million Five Hundred Thousand Dollars
($2,500,000), payable in cash at closing, unless a financing arrangement is
worked out. Upon notification to Lessor of exercise of this option, accompanied
by a $10,000 earnest money check, which will be applied to purchase price at
closing, Lessor will provide a title binder for inspection of Lessee, with
policy to follow at closing, showing property free and clear from all liens.
Closing will be within sixty (60) days of receipt of notice of exercise. If
option is exercised, purchaser agrees to accept the title with all easements as
shown on the survey or plat, and mineral rights previously conveyed.
21. A one-half (1/2) interest in the Certificate of Need, first issued to
Lessee, is hereby assigned to Lessor for as long as this Lease is in effect, to
be reassigned to Lessee if Option is exercised.
22. It is the intention of the parties that this is to be a net, net, net
Lease.
23. At the time of the execution of this Lease, Lessee agrees to assign an
undivided one-half interest in the Certificate of Need, to Lessor as part of the
consideration for leasing. Lessee agrees that if a default on this Lease occurs,
resulting in foreclosure or assignment, Lessee's remaining interest in the
Certificate of Need will be assigned to Lessor immediately and forthwith.
24. This Lease shall be construed and interpreted in accordance with the
laws of the state of Texas.
25. Any notice or demand required or permitted by law or by any provisions
of this Lease shall be in writing. All notices or demands by Lessor to or upon
Lessee shall be deemed to have been properly given when sent by Certified
Mail, addressed to Select Care Enterprises, Inc., P.O. Box 202042, Austin,
Texas 78720-2047, or at such other place as Lessee may from time to time
designate in a written notice to Lessor; and to Lessor by Lessee, addressed to
Lloyd G. Hobbs, P.O. Box 126, Fort Smith, Arkansas 72902, or at such other
place as Lessor may from time to time designate in a written notice to Lessee.
26. This Lease and all provisions herein shall be binding upon and inure to
the benefit of the parties hereto, their heirs, legal representatives,
successors and assigns.
27. Time is of the essence in this Lease.
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IN WITNESS WHEREOF, the parties have caused this instrument to be properly
executed this day and year first above written.
/s/ Lloyd G. Hobbs
-------------------------------------
Lloyd G. Hobbs, Lessor
/s/ Larry J.Voegtle, President
--------------------------------------
Select Care Enterprises, Inc., Lessee
Larry J. Voegtle, President
ATTEST:
/s/ Grady E. Wooldridge
- ------------------------------
Grady E. Wooldridge, Secretary
Performance of this Lease is hereby guaranteed, jointly and severally, by
the following stockholders of the Lessee corporation, being:
/s/ Larry J. Voegtle
- ------------------------
Larry J. Voegtle
/s/ Grady E. Wooldridge
- ------------------------
Grady E. Wooldridge
/s/ Delores J. Milligan
- ------------------------
Delores J. Milligan
FIRST ADDENDUM TO LEASE
-----------------------
This First Addendum to Lease is made to amend that certain Lease Agreement,
dated the Tenth day of April, 1990, between LLOYD G. HOBBS, of Dallas, Texas As
Lessor, and SELECT CARE ENTERPRISES, INC., of Austin, Texas as Lessee.
Paragraph Two, Page One of this Lease Agreement shall be changed to read as
follows:
"The lease rental shall be $24,135.00 per month, for the first twelve
(12) months, beginning May 15, 1991. Beginning May 15, 1992, the
monthly rental shall increase to $26,885.00 per month for Seventy-two
(72) months. Beginning May 15, 1998, the monthly rental will decrease
to $24,750.00 per month for the balance of the lease term. Rental
payments will be mailed to Lloyd Hobbs, P. O. Box 126, Fort Smith, AR
72902, or to such other address as may be directed in writing."
All other terms of the Lease to remain as originally written. This First
Addendum to Lease executed and attached to the original Lease, dated this 16th
day of May, 1991.
/s/ Lloyd G. Hobbs
------------------------------
Lloyd G. Hobbs - Lessor
SELECT CARE ENTERPRISES, INC.
By: /s/ Larry J. Voegtre
---------------------------
Larry J. Voegtre
President - Lessee
ATTEST:
/s/ [SIGNATURE ILLEGIBLE]
- ----------------------------
Secretary
ASSIGNMENT AND
--------------
ASSUMPTION OF LEASE
-------------------
This Assignment and Assumption of Lease Agreement ("Assignment") dated as
of the 1st day of September, 1997, is entered into by and between Summit Care
Corporation, a California corporation ("Assignor") and Summit Care Texas, L.P.,
a Texas limited partnership ("Assignee").
RECITALS
--------
WHEREAS, on September 1, 1997, Assignor conveyed all of its assets to
Assignee, in accordance with the terms and conditions of that certain
Conveyance, Contribution and Bill of Sale effective September 1, 1997;
WHEREAS, Assignor is a party to that certain Lease Agreement dated April
10, 1990 by and between Lloyd Hobbs, as lessor, and Select Care Enterprises,
Inc., as lessee, as amended by that certain First Addendum to Lease dated May
16, 1991 between Lloyd Hobbs and Select Care Enterprises, Inc., as assigned by
that certain Assignment of Lease with Option to Purchase dated December 1, 1994
between Select Care Enterprises, Inc., as assignor, and Summit Care Corporation,
as assignee, as consented to by Lloyd Hobbs, as landlord, and evidenced by that
certain Consent to Assignment of Lease dated December 2, 1994, and as further
assigned by Lloyd Hobbs, as landlord, to Hobbs & Curry Family Limited
Partnership ("Lease");
WHEREAS, the parties desire to enter into this Assignment to further
evidence the transfer by Assignor to Assignee and Assignee's assumption of all
rights and obligations of Assignor arising under the Lease; and
WHEREAS, pursuant to and in accordance with Section 12 of the Lease, Hobbs
& Curry Family Limited Partnership, as landlord, has consented to Assignor's
assignment of the Lease to
Assignee as evidenced by that certain Letter Agreement dated January 3, 1997
from Assignor and signed by Hobbs & Curry Family Limited Partnership on January
15, 1997.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
AGREEMENTS
----------
1. The recitals set forth above are incorporated herein for all purposes.
2. Assignor does hereby irrevocably transfer and assign to Assignee all of
its rights, interest, liabilities, obligations and duties arising under the
Lease and Assignee hereby assumes and agrees to pay, perform and discharge when
due all of the liabilities, obligations, and duties of Assignor arising under
the Lease.
3. The parties hereby agree to perform, execute and/or deliver or cause to
be performed, executed and/or delivered any and all such further agreements and
assurances as either of the parties hereto may reasonably require to consummate
the transaction contemplated hereunder.
4. All notices to Lessee under the Lease shall be addressed to Assignee at
the following address:
2600 W. Magnolia Boulevard,
P.O. Box 1486
Burbank, California 91505-3130
IN WITNESS WHEREOF, each party has caused this Assignment to be duly
executed and delivered in its name and on its behalf, as of the date first above
written.
2
SUMMIT CARE CORPORATION,
a California corporation
By: /s/ John Farber
---------------------------------------
Name: JOHN FARBER
-------------------------------------
Title: SECRETARY
------------------------------------
SUMMIT CARE TEXAS, L.P.,
a Texas limited partnership
By: Summit Care Texas Management, Inc.,
its general partner
By: /s/ John Farber
---------------------------------
Name: JOHN FARBER
-------------------------------
Title: SECRETARY
------------------------------
3
ASSIGNMENT OF LEASE with OPTION TO PURCHASE
and
LESSOR'S CONSENT TO ASSIGNMENT of LEASE
AGREEMENT OF LEASE WITH OPTION TO PURCHASE
This Agreement is made this 1st day of December, 1994, by and between
SELECT CARE ENTERPRISES, INC., a Texas corporation, hereinafter called
"Assignor", and SUMMIT CARE CORPORATION, hereinafter called "Assignee".
RECITALS
A. LLOYD G. HOBBS, as Lessor, and Assignor as Lessee, executed a
lease ("the Lease") on April 10, 1990 as amended by First Addendum to Lease
dated May 16, 1991. By the terms of the Lease as amended (copies of which
are attached hereto as Exhibit "A"), upon the property therein described
("Property") was leased to Assignor as Lessee for a term of fifteen (15)
years commencing on April 15, 1991 and ending on April 14, 2006, with an
option to purchase the property (the "Option to Purchase") on the terms set
forth in Section 20 of the Lease; and
B. Assignor now desires to assign the Lease and amendment and the
Option to Purchase to Assignee, and Assignee desires to accept the
assignment thereof.
THEREFORE, Assignor and Assignee agree as follows:
ASSIGNMENT
For value received, receipt of which is hereby acknowledged, effective
December 1, 1994 at 12:01 a.m., Assignor hereby assigns and transfers to
Assignee all of its right, title and interest in and to the Lease and First
Addendum thereto and the Option to Purchase hereinbefore described, and
Assignee hereby agrees to and does accept the assignment, and Assignee
expressly assumes and agrees to keep, perform, and fulfill all the terms,
covenants, conditions, and obligations required to be kept, performed, and
fulfilled by Assignor as Lessee thereunder, including the making of all
payments due to or payable on behalf of Lessor under said Lease when due
and payable.
Executed at Clyde, Texas on the day and year first above written.
ASSIGNOR
SELECT CARE ENTERPRISES, INC.
BY: /s/ Deloris Milligan
------------------------------
Deloris Milligan, President
ASSIGNEE
SUMMIT CARE CORPORATION
BY: /s/ Derwin L. Williams
------------------------------
Derwin L. Williams,
Vice President
THE STATE OF TEXAS S
COUNTY Of CALLAHAN S
This instrument was acknowledged before me on the 6th of December,
1994 by DELORIS MILLIGAN, President of Select Care Enterprises, Inc., a
Texas corporation, on behalf of said corporation.
[STAMP APPEARS HERE] /s/ Leslie Lee
------------------------------------
Notary Public, State of Texas
Name Printed:
Comm. Exp.:
THE STATE 0F CALIFORNIA S
COUNTY OF ORANGE S
This instrument was acknowledged before me on the 2nd day of December,
1994 by DERWIN L. WILLIAMS, Vice President of Summit Care Corporation, a
California corporation, on behalf of said corporation.
[STAMP APPEARS HERE] /s/ Julia A. Judy
------------------------------------
Notary Public, State of California
Name Printed: Julia A. Judy
Comm. Exp.: 3-4-96
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT entered into this tenth day of April, 1990, by and
between LLOYD G. HOBBS, of Dallas, Texas, as LESSOR and SELECT CARE
ENTERPRISES, INC., P. O. Box 202042 Austin, Texas 78720-2047, as LESSEE,
WITNESSETH:
THAT for and in consideration of the covenants herein contained and the
rent hereby reserved, the Lessor has hereby let and rented to Lessee and
Lessee has hired and taken from the Lessor, the follow described property,
consisting of one 120-bed nursing home, commonly known as Scenic Mountain
Nursing Center, Howard County, Big Spring, Texas, more particularly
described in Exhibit "A" attached hereto, including all furniture, fixtures
and equipment located therein, provided and installed by Lessee, more
particularly described in Exhibit "B" attached hereto, to have and to hold
the same for the period of years and upon the terms and conditions
hereinafter stated:
1. The term of this Lease shall be for the period of fifteen (15)
years, commencing April 15, 1991 and ending April 14, 2006.
2. The rental shall be $22,000.00 per month for year one, $24,750.00
per month for years two through fifteen. per month, payable in advance on or
before the fifteenth day of each month. If the Lease shall commence on a day
other than the fifteenth day of the month, the rent will be pro-rated for
the first month. The rental payment will be mailed to Lloyd G. Hobbs, P. O.
Box 126, Fort Smith, Arkansas, 72902, or to such other address as may be
directed in writing.
3. Lessee agrees to pay all taxes, general or special, assessed
against the land, buildings and personal property, from the time the
property is deeded to Lessor forward. An escrow for taxes is required;
therefore, an escrow payment of Seven hundred fifty dollars ($750) per month
will be deposited with the Lessor for payment of taxes. This escrow payment
will be adjusted annually, to cover the taxes as levied against the real and
personal property by all taxing authorities using the previous year as a
guide.
4. The Lessee shall be responsible for and pay for fire and extended
coverage on the building and contents in such amount as shall be reasonably
requested by Lessor, being at least replacement value. The insurance policy
shall designate Lessor and Lessee as named insureds and loss payees, as
their interests may appear. If Lessee fails or neglects to provide this
insurance as required, Lessor may obtain same and add the premium cost to
the next lease payment due.
5. In the event of partial destruction of the building and contents
(that is, destruction of less than half, in value of the building and
contents) by fire or other casualty, then the Lessee shall be entitled to
the insurance proceeds and shall be obligated to restore the premises,
including furniture, furnishings, fixtures and equipment, to at least as
good condition as it was, prior to the des-
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truction. Any insurance proceeds, in the event of loss, will he escrowed
with Owner of the building. Owner will pay bills incurred, as directed by
Lessee, from insurance proceeds, to repair damages as presented by repair
contractors. If repairs cost more than insurance proceeds, Lessee will be
obligated to pay the difference from Lessee's own funds. If destruction is
fifty per cent (50%) or more, of value, Lessor shall be entitled to the
insurance proceeds and shall, at its option, restore the premises as above
provided or cancel the Lease. In the event of destruction of fifty per cent
(50%) or more of value, Lessor shall advise Lessee, within thirty (30) days
following the destruction, of his election in this regard.
6. In the event of a taking of all or of part of the land and
buildings as a result of eminent domain, condemnation or other governmental
taking, the consideration paid therefor shall be paid to the Lessor, and
from the date of payment of such consideration, the rental amount shall
abate and be reduced in proportion to the relation of the amount of the
consideration to $2,200,000 in value.
7. Lessee shall, as long as this Lease remains in effect, procure
and keep in effect, general public liability insurance against claims for
bodily injury or death occurring upon, in or about the demised premises,
and on, in or about the adjoining streets and passage-ways, with limits of
not less than $3,000,000 any one person or incident. Lessee shall also
provide for malpractice insurance. Lessor shall be a named insured on all
policies.
8. Lessee agrees that it will at all times, during the term of this
Lease or any extension thereof, indemnify, protect, defend and save
harmless, the Lessor, against any and all claims, costs, charges,
liabilities, or expenses arising from damage or injury, actual or claimed,
of whatever kind or character, to property or persons occurring in or about
the demised premises, streets, sidewalks, passageways, parking lots, and
alleys adjacent thereto, and agree to resist or defend such action or
proceedings, and cause the same to be defended at its expense.
9. The premises shall be used as a licensed nursing home and for no
other purpose without the written consent of Lessor. Lessee agrees to
maintain the entire premises, including buildings, drives, parking area,
furniture, fixtures, equipment, and decoration in good and tenantable
repair and condition. Lessee shall, at its expense, repair or replace items
as may be necessary to comply with this covenant, and such that the
premises shall at all times qualify for and remain, licensed as, at least
an ICF III for a 120-bed nursing home under the laws and regulations of the
United States and the State of Texas. A reduction in, or loss of, this or
equivalent license rating, in the event license ratings are changed, will
be considered a default in this Lease.
10. Lessee, with the prior written consent of the Lessor, which
consent shall not be unreasonably withheld, shall have the right to make
such additions, alterations, changes and improvements on the
-3-
demised premises as Lessee shall deem necessary or desirable; provided that
no such addition, alteration, change or improvement shall be made which
will weaken the structural strength of the building, dimish its utility or
value, and all additions, alterations, changes and improvements shall be
made in a workmanlike manner in full compliance with all building laws and
ordinances applicable thereto, and shall become part thereto upon
termination of this Lease. Lessee may erect and maintain such signs upon
the premises as they may desire, and as may be permitted by laws or
ordinances pertaining thereto, but at its sole expense and responsibility.
11. Lessee shall keep the demised premises in a clean, safe and
sanitary condition, and shall comply with all municipal, county, state and
federal laws and regulations governing the conduct of the activities
conducted, suffered or permitted by the Lessee on the demised premises and
the Lessee shall obtain appropriate permits from all such authorities
required.
12. Lessee shall have the right to sub-lease, or assign, any or all
of the leased premises, with the prior written consent of Lessor, first
obtained, which consent will not be unreasonably withheld, provided that
the Lessee will remain liable for the performance of the covenants and
obligations of this Lease.
13. Lessee agrees to permit Lessor, or his authorized representative
to enter the demised premises at all reasonable times during usual business
hours for the purpose of inspecting the same, provided that this shall not
be construed to obligate Lessor to notify Lessee of any defect observed
therein.
14. Lessee shall not do or suffer anything to be done whereby the
demised premises, or any part thereof, may be encumbered by a mechanic's or
similar lien, and in the event such a lien is filed against the demised
premises, or any part thereof, purporting to be for or on account of any
labor done or material or services furnished in connection with any work in
or about the demised premises, Lessee shall discharge the same of record
within ten (10) days after the date of such claim, or if Lessee desires to
contest the validity or amount of such claim, it may do so provided that it
first posts security acceptable to Lessor, fully indemnifying Lessor and
the premises from any claim, charge, or demand arising from such claim or
expenses incurred in connection therewith.
15. The occurrence of any one or more of the following events shall
constitute an "event of default" in the performance of the covenants of the
Lessee:
a. The Lessee shall fail or neglect to pay the rentals when
due, or to pay any other sum of money which they are required by this Lease
to pay, and such non-payment shall continue on the tenth day after written
notice of the same has been posted to Lessee. In the event of default of
this Lease, Lessee's will forfeit any rights, or ownership of contracts and
ownership of Certificate of
-4-
Need at this location, with the State of Texas or the United States
Government, to Lessor.
b. The Lessee shall fail, refuse or neglect to perform or observe
any other covenant required of them herein, and such non-performance or
non-observance shall continue on the thirtieth (30th) day (unless a later
date be stated in the notice) after written notice of the same has been
posted to the Lessee.
c. This Lease, or the premises itself, or any property of the Lessee
is levied upon by process of law, and such levy be not completely
discharged, or secured to the satisfaction of the Lessor, within fifteen
(15) days after service of the process.
d. Lessee becomes involved in financial difficulties as evidenced by
(1) an admission in writing of their inability to pay their debts generally
as they become due, (2) becoming petitioner in any voluntary debtor or
bankruptcy proceedings, whether asking arrangement, composition,
reorganization, liquidation, or other relief, suspension or modification of
their obligations, (3) becoming a party respondent to any involuntary
proceeding the purpose of which is to subject the assets of the Lessee to
the control of a court of creditor's committee, (4) making an assignment of
all or of a substantial part of their property for the benefit of their
creditors, or (5) seeking, consenting to or failing to avert the
appointment of a receiver or a trustee for all or a substantial part of
their property, or of the demised premises, or of their interest in this
Lease.
16. If an event of default occurs, Lessor shall have the option to:
a. Terminate this Lease by service of written notice of
termination, and Lessee's right to the possession of the premises shall
cease upon the date stated in such notice, without prejudice to Lessor's
right to recover all sums due as of the date possession is surrendered,
plus any damage or loss suffered on or prior to such date, including any
expenses such as court costs, attorneys' fees and similar expenses
incurred by Lessor in recovering possession, rent and/or damages due from
Lessee; or
b. Re-enter and take possession of the premises without further
demand or notice, and expel Lessee, or those claiming under it, and remove
the effects of both, or either (forcibly if necessary) without being deemed
guilty of any manner of trespass and without prejudice to Lessor's further
rights under this Lease. In such event, the obligations of the Lessee
under this Lease shall continue, but Lessor may from time to time upon such
terms and conditions, and for such bona fide rental as they may be able
reasonably to negotiate, sublet the premises for the account of Lessee, and
all sums received by Lessor shall be credited to the account of Lessee,
less all reasonable expenses actually incurred by Lessor, including, but
not limited to brokerage fees, advertising expense, preparation including
re-decoration of the premises for sub-letting, legal expenses, cost of
performing
-5-
such of Lessees' obligations as Lessor finds it necessary to perform at
it's expense, and all other items necessary and proper to procure suitable
tenants for the premises. Lessee shall remain liable to Lessor for any
deficiency between the amounts properly credited to Lessee and the amount
due Lessor under this Lease.
c. If Lessor, after taking possession of the premises pursuant
to subparagraph (b) above, is unable to make a bona fide sublease with a
new tenant for a term which equals or exceeds the balance of the period for
which Lessee is then obligated, Lessor shall have the right forthwith to
demand and recover from Lessee, the present value of the difference between
the amount to be received by Lessor under the new sub-lease, and the amount
which would have been payable by Lessee under this Lease for the remainder
of the term hereof, plus the expenses of Lessor as defined above.
d. Notwithstanding any election by Lessor to retake possession
pursuant to subparagraph (b) above, Lessor may at any time thereafter, upon
written notice to Lessee, terminate this Agreement in all respects, and
in such event, Lessee shall have no further liability, obligation or
responsibility after the date of such termination.
e. In order that Lessor may be indulgent when it deems the
circumstances warrant without prejudicing it's right under this Lease,
Lessee now expressly agrees that no indulgence or extension, waiver or
forgiveness, variation by practice, nor any neglect or abstention by Lessor
in strictly enforcing the covenants of Lessee on any one or more occasions
shall ever be deemed a waiver of or estoppel against the right of Lessor to
insist upon strict compliance with each and every covenant herein, without
any further or special notice or warning, the existence of a covenant in
this Lease and the provisions of this paragraph, being deemed adequate
notice of the rights of the Lessor. No property belonging to the Lessee
shall ever be removed from the premises at any time when there exists any
default in the payment of any part of the rent due under this Lease, nor
after notice of default in the performance of any other covenant or
obligation assumed herein by Lessee.
17. Lessee agrees to execute any instrument reasonably required by
Lessor reflecting attornment to their prior interest which may be required
by Lessor in connection with mortgaging their interest in the demised
premises, and/or refunding or refinancing in the future of any mortgage
which Lessor may place upon the premises.
18. Upon any termination or expiration of this Lease, whether
by lapse of time, cancellation pursuant to an election provided for
therein, forfeiture, or otherwise, Lessee shall surrender immediately,
possession of the demised premises and all buildings and improvements
including FF&E, then on the same to Lessor in good and tenantable repair,
reasonable wear and tear and damage from fire or other casualt or peril
excepted. If possession be not immediately surrendered, Less with or
without process of Law, may forthwith re-enter said premises and reposses
the same, and expel and remove therefrom, using such force as may be
necessary, all persons and property, without being deemed
-6-
guilty of any unlawful act and without prejudice to any other legal remedy
available to Lessor.
19. Lessor has the right to assign all or any part of this Lease.
20. Lessee is hereby granted an option to purchase these facilities
including land, improvements, furniture and equipment and reassignment of
one-half interest in the Certificate of Need, ten years after commencement
of Lease and after one hundred twenty (120) rental payments have been made,
and before the Lease expires or is terminated, provided Lessee is not in
default on the Lease. The purchase price will be Two Million Five Hundred
Thousand Dollars ($2,500,000), payable in cash at closing, unless a
financing arrangement is worked out. Upon notification to Lessor of
exercise of this option, accompanied by a $10,000 earnest money check,
which will be applied to purchase price at closing, Lessor will provide a
title binder for inspection of Lessee, with policy to follow at closing,
showing property free and clear from all liens. Closing will be within
sixty (60) days of receipt of notice of exercise. If option is exercised,
purchaser agrees to accept the title with all easements as shown on the
survey or plat, and mineral rights previously conveyed.
21. A one-half (1/2) interest in the Certificate of Need, first
issued to Lessee, is hereby assigned to Lessor for as long as this Lease is
in effect, to be reassigned to Lessee if Option is exercised.
22. It is the intention of the parties that this is to be a net, net,
net Lease.
23. At the time of the execution of this Lease, Lessee agrees to
assign an undivided one-half interest in the Certificate of Need, to Lessor
as part of the consideration for leasing. Lessee agrees that if a default
on this Lease occurs, resulting in foreclosure or assignment, Lessee's
remaining interest in the Certificate of Need will be assigned to Lessor
immediately and forthwith.
24. This Lease shall be construed and interpreted in accordance with
the laws of the state of Texas.
25. Any notice or demand required or permitted by law or by any
provisions of this Lease shall be in writing. All notices or demands by
Lessor to or upon Lessee shall be deemed to have been properly given when
sent by Certified Mail, address Box 202047, Austin, Texas Care
Enterprises, Inc., P. O. or at such other place as Lessee may from time to
time designate in a written notice to Lessor; and to Lessor by Lessee,
addressed to Lloyd G. Hobbs, P. O. Box 126, Fort Smith, Arkansas 72902, or
at such other place as Lessor may from time to time designate in a written
notice to Lessee.
26. This Lease and all provisions herein shall be binding upon
and inure to the benefit of the parties hereto, their heirs, legal
representatives, successors and assigns.
27. Time is of the essence in this Lease.
-7-
IN WITNESS WHEREOF, the parties have caused this instrument to be
properly executed this day and year first above written.
/s/ Lloyd G. Hobbs
----------------------------------------
Lloyd G. Hobbs, Lessor
/s/ Larry J. Voegtle President
----------------------------------------
Select Care Enterprises, Inc., Lessee
Larry J. Voegtle, President
ATTEST:
/s/ Grady E. Wooldridge
- -------------------------------
Grady E. Wooldridge, Secretary
Performance of this Lease is hereby guaranteed, jointly and severally,
by the following stockholders the Lessee corporation, being:
/s/ Larry J. Voegtle
- -------------------------------
Larry J. Voegtle
/s/ Grady E. Wooldridge
- -------------------------------
Grady E. Wooldridge
/s/ Delores J. Milligan
- -------------------------------
Delores J. Milligan
FIRST ADDENDUM TO LEASE
-----------------------
This First Addendum to Lease is made to amend that certain Lease
Agreement, dated the Tenth day of April, 1990, between LLOYD G. HOBBS, of
Dallas, Texas As Lessor, and SELECT CARE ENTERPRISES, INC., of Austin,
Texas as Lessee.
Paragraph Two, Page One of this Lease Agreement shall be changed to
read as follows:
"The lease rental shall be $24,135.00 per month, for the first
twelve (12) months, beginning May 15, 1991. Beginning May 15,
1992, the monthly rental shall increase to $26,885.00 per month
for Seventy-two (72) months. Beginning May 15, 1998, the monthly
rental will decrease to $24,750.00 per month for the balance of
the lease term. Rental payments will be mailed to Lloyd Hobbs, P.
O. Box 126, Fort Smith, AR 72902, or to such other address as may
be directed in writing."
All other terms of the Lease to remain as originally written. This
First Addendum to Lease executed and attached to the original Lease,
dated this 16th day of May, 1991.
/s/ Lloyd G. Hobbs
--------------------------------
Lloyd G. Hobbs - Lessor
SELECT CARE ENTERPRISES, INC.
By: /s/ Larry J. Voegtle
----------------------------
Larry J. Voegtle
President - Lessee
ATTEST:
[SIGNATURE ILLEGIBLE]
- ------------------------------
Secretary
BEING ? 4.02 core tract of land out of the SW/4 of Section 12, Block 33, T-1-S.
?? P. RR. Co. Survey, Howard County, Texas, described by metes one bounds as
follows:
BEGINNING at o RR spike set in the intersection of the West Right-Of-Way line of
Parkway Road (60.0 Right-Of-Way) one the North line of o 15.0 inches wide
East-West ??ey. City of Big Spring in the SW/4 of Section 12, Block 33, T-1-S,
T.& P. RR. Co. Survey, Howard County, Texas for the SE corner of this tract from
???? the SW corner of said Section 12 bears S. 15 inches 16 inches E. 1640.0
inches and S. 74 inches 44 inches W.2550.0 inches
HENCE S. 74 inches 44 inches W. ???? the North line of said East-West, ??ey.
357.? to a 1/2 inches ?? found for the SE corner of a 2.0 ?ccre tract one for
the SW corner of the tract
HENCE N. 5?? ?? W. 424.5? to a concrete rail found in the South Right-Of-Way
line of Wesson Road 75? Right-Of-Way) ?? NE corner of said 2.0 core tract and
for ??? NW corner of this tract
HENCE N. 65 inches 51 inches E. along the South Right-Of-Way line of said Wesson
Road, 3915 to a 5/8 ?? ?? in the West Right-Of-Way line of said Parkway Road,
for the NE corner of this tract.
HENCE S. 15 inches 16 inches E. along the West Right-Of-Way line of said Parkway
Road ??5 inches to the PLACE OF BEGINNING
Containing 175111.2 Source Feet ?? 4.02 Acres of Land
CONSENT TO ASSIGNMENT OF LEASE
WHEREAS, on or about April 10, 1990, LLOYD G. HOBBS entered into a Lease
Agreement with SELECT CARE ENTERPRISES, INC. as amended by "First Addendum to
Lease" dated May 16, 1991 covering the Nursing Home and certain contents thereof
located in Big Spring, Howard County, Texas, located on certain Real Property
attached hereto as Exhibit "A" .
AND WHEREAS, SELECT CARE ENTERPRISES, INC. desires to assign all of its
right, title, and interest in and to said Lease and purchase option contained
therein to SUMMIT CARE CORPORATION.
AND WHEREAS, LLOYD G. HOBBS desires to express his consent to said
assignment and purchase option contained therein; it is, therefore agreed as
follows:
THAT in and for the value of - - TEN AND NO/100 DOLLARS - -($10.00) and
other good and valuable consideration, LLOYD G. HOBBS agrees and consents to
SELECT CARE ENTERPRISES, INC. is assignment of the Lease with purchase option
dated April 10, 1990, as amended by "First Addendum to Lease" dated May 16, 1991
on the above referenced property, both real and personal, between LLOYD G. HOBBS
and SELECT CARE ENTERPRISES, INC., attached hereto as Exhibit "A", to SUMMIT
CARE CORPORATION effective as of 12:01 a.m. on December 1, 1994.
****
- ----
EXECUTED this 2nd day of December, 1994.
/s/ Lloyd G. Hobbs
---------------------------
Lloyd G. Hobbs
THE STATE OF ARKANSAS S
COUNTY OF SEBASTIAN S
-----------
This instrument was acknowledged before me on the 2nd day of December, 1994
by LLOYD G. HOBBS.
/s/ Shirley S. Wolfe
--------------------------------
Notary Public State of Arkansas
Name Printed: Shirley S. Wolfe
Comm. Exp.: November 1, 2000
**** The next rental payment is due December 15, 1994 in the
---- amount of $26,885.00, plus $3,422.00 escrow for taxes, or a
total of $30,307.00 due December 15 and monthly thereafter.
ALAMO TITLE INSURANCE
OF TEXAS
G.F. No. 1676-94
-------
Policy No. COMMITMENT
----------
Continuation of Schedule A:
-
EXHIBIT "A"
A 4.02 acre tract, more or less, out of SW/4 of Section 12, Block 33. T-1-S, T&P
RR Co. Survey, Howard County, Texas, described by metes and bounds as follows:
Beginning at a 1/2 inch I.R. in the intersection of the West right-of-way line
of Parkway Road and the North line of a 15.0 foot wide East-West alley out of
said Section 12, for the SE corner Of this tract; from whence the SW corner of
said Section 12 bears S 15"16' E. 1640.0 feet and S 74"44' W 2580.0 feet;
THENCE S 74"44' W with the North line of said East-West alley, 387.9 feet to a
1/2 inch I.R. the SE corner of a 2.0 acre tract in the name of Church of Jesus
Christ of Latter Day Saints; and the SW corner of this tract;
THENCE N 15"16' W 424.8 feet to a 1/2 inch I.R. in the South right-of-way line
of Wasson Road, the NE corner of said 2.0 acre tract and the NW corner of this
tract;
THENCE N 66"51' E with the South right-of-way line of said Wasson Road, 391.6
feet to a 1/2 inch I.R. in the West right-of-way line of said Parkway Road,
for the NE corner of this tract;
THENCE S 15"16' E 478.5 feet to the PLACE OF BEGINNING.