SUB-SUBLEASE AGREEMENT
THIS SUB-SUBLEASE AGREEMENT made and entered into as of August 26,
1996, by and between YUBA NURSING HOMES, INC., an Illinois corporation
(hereinafter referred to as "Lessor"), and SUNRISE HEALTHCARE CORPORATION, a New
Mexico Corporation d/b/a Moonrise Healthcare Corporation ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor is the sublessee of that fifty nine (59) bed nursing
facility commonly known as Driftwood Care Center n/k/a Terrace Care Center
(hereinafter referred to as the "Facility") under a certain Sublease Agreement
dated as of September 1, 1987, by and between The Hillhaven Corporation, a
Tennessee corporation, as Sublessor, and Lessor, as Sublessee, as amended by a
First Amendment to Driftwood Sublease Agreement dated May 23, 1988, which
Sublease Agreement is subject to the terms of that certain Lease dated as of
August 29, 1986, by and between Health Care Property Investors, Inc., as Lessor,
and HH Holding Co., Inc. as Lessee (collectively, the "Underlying Leases"); and
WHEREAS, the Facility is situated on that certain tract of land located at
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EXHIBIT A attached hereto and made a part hereof (the "Land") (the Land and the
Facility, together with any other improvements now or hereafter located on the
Land and all easements, tenements, hereditaments and appurtenances thereto are
hereinafter referred to as the "Demised Premises"); and
WHEREAS, Lessor is also the sub-sublessee of the furnishings, furniture,
equipment and fixtures listed on EXHIBIT B attached hereto, to be used in or
about the Demised Premises (hereinafter collectively referred to as the
"Personal Property"); and
WHEREAS, Lessor desires to sub-sublease the Demised Premises and Personal
Property to Lessee and Lessee desires to sub-sublease the Demised Premises and
Personal Property from Lessor; and
WHEREAS, simultaneous with the execution of this Sub-Sublease, Lessor is
also entering a Sub-Sublease with Lessee for the eighty six (86) bed nursing
home facility located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and
commonly known as Marysville Care Center (hereinafter called the "Marysville
Lease"); and
WHEREAS, Lessee hereby acknowledges and agrees that Lessor, as
consideration and inducement for entering into this Sub-Sublease, requires that
this Sub-Sublease provide that a default under the Marysville Lease shall
constitute a default under this Sub-Sublease and that without such a "cross
default" provision Lessor would not execute this Sub-Sublease; and
WHEREAS, Sun Healthcare Group, Inc., a Delaware corporation (the
"Guarantor") will execute and deliver to Lessor that certain Unconditional
Guaranty of Lease (the "Lease Guaranty") dated of even date herewith,
guarantying the performance of all of the obligations of Lessee under this Sub-
Sublease; and
WHEREAS, the parties hereto have agreed to the terms and conditions of this
Sub-Sublease.
NOW THEREFORE, it is agreed that the use and occupancy of the Demised
Premises, and the use of the Personal Property shall be subject to and in
accordance with the terms, conditions and provisions of this Sub-Sublease.
ARTICLE I - DEFINITIONS
1.1 The terms defined in this Article, for all purposes this Sub-Sublease
and all agreements supplemental hereto, have the meaning herein specified.
(a) "Demised Premises" shall mean the real estate described in
EXHIBIT A and all improvements located thereon.
(b) "Personal Property" shall mean all furniture, fixtures and
equipment located on the Demised Premises (including, without
limitation, those items set forth on EXHIBIT B attached hereto and
made a part hereof), other than such furniture, fixtures, equipment
and supplies that persons other than the Lessor may own or that the
Lessee may lease from persons other than the Lessor, or that the
Lessee may place on the Demised Premises other than as replacements
for personal property unless such personal property is required for
the operation of the nursing home located on the Demised Premises, in
which case it shall be part of the Personal Property and be owned by
the Lessor.
(c) "Leased Property" shall mean the Demised Premises and the
Personal Property.
(d) "Lease Year" shall mean a twelve (12) month period
commencing on the Commencement Date as hereafter defined, and on each
anniversary of the Commencement Date thereafter, except that if the
Commencement Date is other than the first day of a calendar month,
then the first Lease Year shall be the period from the Commencement
Date through the date twelve (12) months after the last day of the
calendar month in which the Commencement Date occurs, and each
subsequent Lease Year shall be the period of twelve (12) months
following the last day of the prior Lease Year.
(e) All other terms shall be as defined in other sections of
this Sub-Sublease.
ARTICLE II - DEMISED PREMISES AND PERSONAL PROPERTY
2.1 Lessor, for and in consideration of the rents, covenants and
agreements hereinafter reserved, mentioned and contained on the part of the
Lessee, its successors and assigns, to be paid, kept and performed, does hereby
lease unto Lessee the Demised Premises together with the Personal Property to be
used in and upon the Demised Premises for the Term hereinafter specified, for
use and operation therein and thereon of a skilled and/or intermediate care
nursing home, in full compliance with all the rules and regulations and minimum
standards applicable thereto, as prescribed by the State of California and such
other governmental authorities having jurisdiction thereof and having no less
than fifty nine (59) beds and for any other purpose authorized by Lessor in
writing and for no other purpose.
ARTICLE III - TERM OF LEASE
3.1 Except as expressly provided below, the term of this Sub-Sublease
shall commence on the date Lessee obtains all appropriate state or other
governmental licenses and certifications required to operate the Demised
Premises as a Medicare and Medi-Cal certified nursing home (the "Commencement
Date"), and shall expire on August 26, 2006, unless sooner terminated or
extended as hereinafter provided (the "Initial Term").
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ARTICLE IV - RENT
4.1 Throughout the Term of this Sub-Sublease, Lessee shall pay to
Lessor, or as Lessor shall direct, as fixed annual rental ("Rent") for the
Demised Premises and the Personal Property over and above all other and
additional payments to be made by Lessee as provided in this Sub-Sublease the
following amounts:
(i) For the first Lease Year, an annual Rent of
$184,080.00 payable in equal monthly installments of
$15,340.00;
(ii) For the second Lease Year, an annual rent of
$204,022.00, payable in equal monthly installments of
$17,001.83;
(iii) For the third Lease Year an annual rent of
$209,122.55, payable in equal monthly installments of
$17,426.88;
(iv) For the fourth Lease Year, an annual Rent of
$214,350.61 payable in equal monthly installments of
$17,862.55;
(v) For the fifth Lease Year, an annual rent of
$219,709.38, payable in equal monthly installments of
$18,309.11;
(vi) For the sixth Lease Year an annual rent of
$225,202.11, payable in equal monthly installments of
$18,766.84;
(vii) For the seventh Lease Year an annual rent of
$230,832.17, payable in equal monthly installments of
$19,236.01;
(viii) For the eighth Lease Year, an annual Rent of
$218,813.27 payable in equal monthly installments of
$18,234.44;
(ix) For the ninth Lease Year, an annual rent of
$224,283.61, payable in equal monthly installments of
$18,690.30; and
(x) For the tenth Lease Year, an annual rent of
$229,890.70 payable in equal monthly installments of
$19,157.56.
Lessor and Lessee agree that in the event the Rent paid in any Lease
Year is more than the Rent paid in the immediately preceding Lease Year
multiplied by 1.5 times the increase, if any, in the Cost of Living Index (as
hereinafter defined) in effect on June 1st, of the preceding Lease Year, Lessee,
shall receive a credit against its rent payments coming due in the current Lease
Year in an amount equal to such difference. In the event the Rent paid during
the last Lease Year of the Initial Term is more than the Rent paid in the
immediately preceding Lease Year multiplied by 1.5 times the increase, if any,
in the Cost of Living Index in effect on June 1st of the preceding Lease Year,
Lessor shall refund the credit within thirty (30) days after the termination of
this Lease.
The Cost of Living Index is defined as the Consumer Price Index for
All Urban Consumers, U.S. City Average (1982-1984 = 100), published by the BLS,
or such other renamed index. If the BLS changes the publication frequency of
the Cost of Living Index so that a Cost of Living Index is not available to make
a cost-of-living adjustment as specified herein, the cost-of-living adjustment
shall be based on the percentage difference between the Cost of Living Index for
the closest preceding month for which a Cost of Living Index is available and
Cost of Living Index for the comparison month is required by this Lease. If the
BLS changes the base reference period for the Cost of Living Index from 1982-84
= 100, the cost-of-living adjustment shall be determined with the use of such
conversion formula or table as may be published by the BLS. If the BLS
otherwise substantially revises, or ceases publication of the Cost of Living
Index, then a substitute index for
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determining cost-of-living adjustments, issued by the BLS or by a reliable
governmental or other nonpartisan publication, shall be reasonably selected
by Lessor and Lessee.
In the event the Commencement Date shall be other than the first day
of the month, Lessee shall pay to Lessor a pro rata portion of the Rent for the
month and a pro rata portion of all tax, insurance and other deposits provided
for in this Sub-Sublease. All fixed annual rental payments shall be made in
equal monthly installments and shall be paid in advance on the first (1st) day
of each month (together with all tax and insurance deposits required in this
Lease). Unless otherwise notified in writing, all checks shall be made payable
to Lessor and shall be sent c/o Yuba Nursing Homes, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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4.2 This Sub-Sublease is and shall be deemed and construed to be a "pure
net" or "triple-net" lease and the Rent specified herein shall be net to the
Lessor in each year during the Term of this Sub-Sublease. The Lessee shall pay
all costs, expenses and obligations of every kind whatsoever relating to the
Demised Premises which may arise or become due during the Term of this Sub-
Sublease, except for any principal and interest payments and other costs owed by
Lessor relating to any Mortgage (defined below) (collectively, "Additional
Rent"). Lessee does hereby indemnify the Lessor against any and all such costs,
expenses and obligations.
ARTICLE V - LATE CHARGES
5.1 If payment of any sums required to be paid or deposited by Lessee
to Lessor under this Sub-Sublease, and payments made by Lessor under any
provision hereof for which Lessor is entitled to reimbursement by Lessee, shall
become overdue for a period of ten (10) days beyond the date on which they are
due and payable as in this Sub-Sublease provided, a late charge of 3% per month
on the sums so overdue shall become immediately due and payable to Lessor as
liquidated damages for Lessee's failure to make prompt payment and said late
charges shall be payable on the first day of the month next succeeding the month
during which such late charges become payable. If non-payment of any late
charges shall occur, Lessor shall have, in addition to all other rights and
remedies, all the rights and remedies provided for herein and by law in the case
of non-payment of Rent. No failure by Lessor to insist upon the strict
performance by Lessee of Lessee's obligations to pay late charges shall
constitute a waiver by Lessor of its rights to enforce the provisions of this
Article in any instance thereafter occurring.
ARTICLE VI- PAYMENT OF TAXES AND ASSESSMENTS
6.1 Lessee will pay or cause to be paid, as provided herein, as
additional Rent, before any fine, penalty, interest or cost may be added thereto
for the non-payment thereof, all taxes, assessments, licenses and permit fees,
charges for public utilities, and all governmental charges, general and special,
ordinary and extraordinary, foreseen and unforeseen, of any kind and nature
whatsoever which during the Term of this Sub-Sublease may have been, or may be
assessed, levied, confirmed, imposed upon or become due and payable out of or in
respect of, or become a lien on the Demised Premises and/or Personal Property or
any part thereof (hereinafter collectively referred to as "Taxes and
Assessments").
6.2 Any Taxes and Assessments relating to a fiscal period of any
authority, a part of which is included within the Term of this Sub-Sublease and
a part of which is included in a period of time after the Term of this Sub-
Sublease, shall be adjusted pro rata between Lessor and Lessee and each party
shall be responsible for its pro rata share of any such Taxes and Assessments.
6.3 Nothing herein contained shall require Lessee to pay income taxes
assessed against Lessor, or
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6.4 Lessee shall have the right to contest the amount or validity, in
whole or in part, of any Taxes and Assessments by appropriate proceedings
diligently conducted in good faith, but only after payment of such Taxes and
Assessments, unless such payment would operate as a bar to such contest or
interfere materially with the prosecution thereof, in which event, Lessee may
postpone or defer such payment only if:
(1) Neither the Demised Premises nor any part thereof
would by reason of such postponement or deferment be in
danger of being forfeited or lost; and
(2) Lessee shall have deposited with Lessor, to be
held in trust, cash or other security satisfactory to Lessor
in an amount equal to not less than the amount of such Taxes
and Assessments which at such time shall be actually due and
payable, and such additional amounts reasonably required by
Lessor and any Mortgagee (as hereinbelow defined) of Lessor
from time to time, together with all interest and penalties
in connection therewith and all charges that may or might be
assessed against or become a charge on the Demised Premises
or any part thereof in such proceedings.
Unless Lessor agrees otherwise, the cash so deposited shall not bear
interest and the cash or securities so deposited shall be held by Lessor until
the Demised Premises or any part thereof shall have been released and discharged
and shall thereupon be returned to the Lessee, less the amount of any loss,
cost, damage and reasonable expense that Lessor or any Mortgagee has sustained
in connection with the Taxes and Assessments so contested.
6.5 Upon the termination of any such proceedings, Lessee shall pay
the amount of such Taxes and Assessments or part thereof as finally determined
in such proceedings, the payment of which may have been deferred during the
prosecution of such proceedings, together with any costs, fees, interest,
penalties or other liabilities in connection therewith, and such payment, at
Lessee's request, shall be made by Lessor out of the amount deposited with
respect to such Taxes and Assessments as aforesaid. In the event such amount is
insufficient, then the balance due shall be paid by Lessee.
6.6 Lessor shall not be required to join in any proceedings referred
to in this Article, unless the provisions of any law, rule or regulation at the
time in effect shall require that such proceedings be brought by and/or in the
name of Lessor, in which event Lessor shall join in such proceedings or permit
the same to be brought in its name. Lessor shall not ultimately be subjected to
any liability for the payment of any costs or expenses in connection with any
such proceedings, and Lessee will indemnify and save harmless Lessor from any
such costs and expenses. Lessee shall be entitled to any refund of any Taxes
and Assessments and penalties or interest thereon received by Lessor but
previously reimbursed in full by Lessee.
6.7 If any income, profits or revenue tax shall be levied, assessed
or imposed upon the income, profits or revenue arising from rents payable
hereunder, whether partially or totally in lieu of or as a substitute for real
estate or personal property taxes imposed upon the Demised Premises or Personal
Property or otherwise, then Lessee shall be responsible for the payment of such
tax.
ARTICLE VII - TAX DEPOSITS
7.1 Lessee shall be required to make deposits for annual Taxes and
Assessments and, will make monthly deposits with Lessor, of an amount equal to
one twelfth (1/12) of the annual Taxes and Assessments or
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such greater amount as may be required by the Lessor, any Mortgagee (as
defined in Section 26.1) or the landlords under the Underlying Leases. Said
deposits shall be due and payable on the first day of each month as
additional Rent, shall not bear interest and shall be held by Lessor and/or
the landlords under the Underlying Leases, and/or a Mortgagee of the Lessor
to pay the real estate taxes as they become due and payable. If the total of
the monthly payments as made under this Article shall be insufficient to pay
the real estate taxes when due, then Lessee shall on demand pay Lessor the
amount necessary to make up the deficiency, and if appropriate, Lessee shall
receive a credit against the next monthly tax escrow payment coming due in an
amount equal to said deficiency payment.
ARTICLE VIII - OCCUPANCY
8.1 During the Term of this Sub-Sublease, the Demised Premises shall
be used and occupied by Lessee for and as a Medicare and Medi-Cal certified
skilled care and/or intermediate care nursing home and for no other purpose.
Lessee shall at all times maintain in good standing and full force all the
licenses, certifications and provider agreements issued by the State of
California and any other applicable state or federal governmental agencies,
permitting the operation on the Demised Premises of a Medicare and Medi-Cal
certified skilled and/or intermediate care nursing home facility with no less
than fifty nine (59) licensed, and Medi-Cal certified beds.
8.2 Lessee will not suffer any act to be done or any condition to
exist on the Demised Premises which may be dangerous or which may, in law,
constitute a public or private nuisance or which may void or make voidable any
insurance then in force on the Demised Premises.
8.3 Except as otherwise specifically provided in this Sub-Sublease,
upon termination of this Sub-Sublease for any reason, Lessee will return to
Lessor the Demised Premises qualified and sufficient for licensing and
certification by all governmental agencies having jurisdiction over the Demised
Premises as a Medicare and Medi-Cal certified skilled and/or intermediate care
nursing home having no less than fifty nine (59) licensed, and Medi-Cal
certified beds with licenses, certifications, and provider agreements in full
force and good standing. All the Demised Premises, with the improvements
located thereon, and all the Personal Property shall be surrendered in good
order, condition and repair, ordinary wear and tear excepted.
ARTICLE IX - INSURANCE
9.1 Lessee shall, at its sole cost and expense, during the Term of
this Sub-Sublease, maintain property insurance provided by a Causes of Loss-
Special Form or similar form. Such insurance shall include an endorsement for
increased cost of construction. Such insurance shall be obtained from a
responsible company or companies approved by Lessor. Such insurance shall, at
all times, be maintained in an amount equal to the full replacement cost of the
Demised Premises and the Personal Property or in such other amount as may be
required by Lessor, the landlords under the Underlying Leases and any Mortgagee
of the Demised Premises but at all times, in an amount sufficient to prevent
Lessor and Lessee from becoming co-insurers under applicable provisions of the
insurance policies. As used herein, the term "full replacement cost" shall mean
coverage for the actual replacement cost of the Demised Premises and the
Personal Property requiring replacement from time to time which, if not agreed
upon by Lessor and Lessee, shall be determined by an appraiser, engineer,
architect or contractor reasonably selected by Lessor. Such insurance shall at
all times be payable to Lessor and Lessee as their interests may appear, and
shall contain a loss-payable clause to the holder of any Mortgage to which this
Sub-Sublease shall be subject and subordinate, as said landlords' or Mortgagee's
interest may appear. All such policies of insurance shall provide that:
(a) They are carried in favor of the Lessor, Lessee, the
landlords under the Underlying Leases and any Mortgagee, as their
respective interests may appear, and any loss
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shall be payable as therein provided, notwithstanding any act or
negligence of Lessor or Lessee, which might otherwise result in
forfeiture of insurance; and
(b) A standard Mortgagee clause in favor of any Mortgagee, and
shall contain, if obtainable, a waiver of the insurer's right of
subrogation against funds paid under the standard Mortgagee
endorsement which are to be used to pay the cost of any repairing,
rebuilding, restoring or replacing.
9.2 Lessee shall also, at Lessee's sole cost and expense, cause to be
issued and shall maintain during the Term of this Sub-Sublease:
(a) Commercial general liability insurance, including the Lessor
as an additional insured, insuring against claims for bodily injury or
property damage occurring upon, in or about the Demised Premises.
Such insurance to have limits of not less than $1,000,000 each
occurrence and $3,000,000 general aggregate and an excess or umbrella
liability policy of not less than $5,000,000 each occurrence and
$5,000,000 aggregate;
(b) Hospital Professional Liability insurance in the amount of
$1,000,000 each occurrence and $3,000,000 aggregate; and
(c) Earthquake insurance in the amount of the full replacement
cost of the Leased Property, or in such greater amount as may be
required by any Mortgagee or the landlords under the Underlying
Leases. Notwithstanding the foregoing, Lessor acknowledges that
Lessee, commencing after the date of this Lease, may operate or manage
additional facilities in California, and accordingly, will procure a
blanket earthquake insurance policy in the aggregate amount of Twenty
Million and 00/100 Dollars ($20,000,000.00) (the "Blanket Policy"), to
be allocated to all of the facilities operated by Lessee in
California, which for purposes of this Lease, shall be deemed to be
adequate earthquake insurance; provided, however, in the event either
of the landlords under the Underlying Leases object to Lessee's
Blanket Policy or the amount of the Blanket Policy, Lessee agrees to
obtain a separate earthquake insurance policy in a form and amount
acceptable to Lessor and the landlords under the Underlying Leases
within a reasonable period of time after such request is made upon
Lessee.
Lessor may, from time to time, or any Mortgagee or the landlords under the
Underlying Leases may reasonably require Lessee to change the amount or type of
insurance, or to add or substitute additional coverages, required to be
maintained by Lessee hereunder.
9.3 All policies of insurance shall provide that they shall not be
canceled, terminated, reduced or materially modified without at least twenty
(20) days prior written notice to Lessor and any Mortgagee and landlords under
the Underlying Leases.
9.4 An original certificate of insurance for all insurance policies
required by this Article shall be delivered to Lessor and any Mortgagee and the
landlords under the Underlying Leases at least five (5) days prior to the
Commencement Date at any time and from time to time within ten (10) days after
Lessor's request therefore, Lessee shall deliver to Lessor copies of all
insurance policies then being carried by Lessee pursuant to this Article 9.
9.5 Lessee shall at all times keep in effect business interruption
insurance with a loss of rents endorsement naming Lessor and any Mortgagee and
the landlords under the Underlying Leases as insureds as an insured in an amount
at least sufficient to cover:
(a) The aggregate of the cost of all Taxes and Assessments due
during the period
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of the business interruption at the Facility (the "Business Interruption
Period");
(b) The cost of all insurance premiums for insurance required to
be carried by Lessee, with respect to the Demised Premises, for the
Business Interruption Period; and
(c) The aggregate of the amount of the fixed monthly rental for
the Business Interruption Period.
In lieu of the foregoing, Lessee may, at its option, obtain and
maintain a blanket insurance policy in an amount sufficient to provide the
coverage described in this Section 9.5.
All proceeds of any business interruption insurance shall be applied,
first, to the payment of any and all fixed rental payments for the Business
Interruption Period; second, to the payment of any Taxes and Assessments and
insurance deposits required to be deposited for the Business Interruption
Period; and, thereafter, after all necessary repairing, rebuilding, restoring or
replacing has been completed as required by the pertinent Articles of this Sub-
Sublease and the pertinent sections of any mortgage, any remaining balance of
such proceeds shall be paid over to the Lessee.
ARTICLE X - LESSOR'S RIGHT TO PERFORM
10.1 Should Lessee fail to perform any of its covenants herein agreed
to be performed, subject to applicable cure periods, if any, set forth in
Section 19.1 herein with respect to any such failure to perform, Lessor may
elect, but shall not be required, to make such payment or perform such
covenants, and all sums so expended by Lessor thereon shall immediately be
payable by Lessee to Lessor, with interest thereon at a rate which is the lesser
of fifteen percent (15%) per annum or the maximum rate permitted by law from
date thereof until paid, and in addition, Lessee shall reimburse Lessor for
Lessor's reasonable expenses in enforcing or performing such covenants,
including reasonable attorney's fees. Any such costs or expenses incurred or
payments made by the Lessor shall be deemed to be Additional Rent payable by
Lessee and collectible as such by Lessor.
10.2 Performance of and/or payment to discharge said Lessee's
obligations shall be optional with Lessor and such performance and payment shall
in no way constitute a waiver of, or a limitation upon, Lessor's other rights
hereunder.
10.3 Lessee hereby acknowledges and agrees that the landlords under the
Underlying Leases and any Mortgagee shall have the right but not the obligation
to perform any covenants and pay any amounts which Lessee has failed to so
perform or pay as required under the terms of this Sub-Sublease but only to the
extent such landlords are entitled under the terms of the Underlying Lease or
such Mortgagee is entitled under the terms of its Mortgage.
ARTICLE XI - REPAIRS AND MAINTENANCE
11.1 Throughout the Term of this Sub-Sublease, Lessee, at its sole
cost and expense, will keep and maintain, or cause to be kept and maintained,
the Demised Premises (including the grounds, sidewalks and curbs abutting the
same) and the Personal Property in good order and condition without waste and in
suitable state of repair at least comparable to that which existed immediately
prior to the Commencement Date (ordinary wear and tear excepted, subject to
Lessee's obligation to repair and replace the same in accordance with the terms
of this Lease), and will make or cause to be made, as and when the same shall
become necessary, all structural and nonstructural, exterior and interior,
replacing, repairing and restoring necessary to that end. All replacing,
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repairing and restoring required of Lessee shall be (in the reasonable opinion
of Lessor) of quality at least equal to the original work and shall be in
compliance with all standards and requirements of law, licenses and municipal
ordinances necessary to operate the Demised Premises as a Medicare and Medi-Cal
certified skilled and/or intermediate care nursing home having no less than
fifty nine (59) licensed beds.
11.2 Any items of Personal Property that are uneconomical to repair shall
be replaced by new items of like kind and all replacement items shall become
part of the Personal Property. No items of Personal Property shall be removed
from the Demised Premises except in connection with repair or replacement of
such items. Lessee may place additional property on the Demised Premises (not
required for the replacement of the Personal Property) and such additional
property shall be and remain the property of Lessee. Lessee shall remove such
additional property upon termination or expiration of this Sub-Sublease provided
that Lessee shall make such necessary repairs or replacements as may be required
in order to return the Demised Premises to the condition which existed prior to
the removal of the additional property.
11.3 Provided that Lessee is not in default under the Lease, Lessee
shall have the right, at any time and from time to time, to remove and
dispose of any Personal Property which may have become obsolete or unfit for
use, or which is no longer useful in the operation of the Demised Premises,
provided Lessee promptly replaces any such Personal Property so removed or
disposed of with other personal property free of any security interest, lien
or encumbrance. Said personal property shall be of the same character and
shall be at least equal in usefulness and quality as any such Personal
Property so removed or disposed of, and such replacement property shall
automatically become the property of and shall belong to the Lessor, and
Lessee shall execute such bills of sale or other documents reasonably
requested by Lessor to vest the ownership of such personal property in
Lessor. Notwithstanding the foregoing, Lessee shall have the right to place
leased Personal Property on the Demised Premises provided that the payments
due under such leases do not exceed $4,000 per year. In the event Lessee
desires to place leased personal property on the Demised Premises having
annual payments in excess of the amount provided for herein, Lessee shall
advise Lessor in writing and Lessor shall use its reasonable best efforts to
seek the approval of the landlords under the Underlying Leases and Mortgagee
or an amendment of the Mortgage with respect thereto.
ARTICLE XIA - DAMAGE AND DESTRUCTION
11A.1 In the event that any part of the improvements located on the
Demised Premises or the Personal Property shall be damaged or destroyed by fire
or other casualty (any such event being called a "Casualty"), Lessee shall
promptly replace, repair and restore the same as nearly as possible to its
condition immediately prior to such Casualty, in accordance with all of the
terms, covenants and conditions and other requirements of this Sub-Sublease and
any applicable mortgage; provided, however, that in the event of a Casualty
occurring during the last six (6) months of the Term or a Casualty resulting
from an earthquake, flood, nuclear accident or war which is not covered by
insurance maintained by Lessee and which renders the Demised Premises unsuitable
for use as a nursing home, in the reasonable opinion of Lessor and Lessee, then
Lessee shall have the right to terminate this Sub-Sublease upon forty-five (45)
days written notice to Lessor. If applicable, the Demised Premises and the
Personal Property shall be so replaced, repaired and restored as to be of at
least equal value and substantially the same character as prior to such
Casualty. If the estimated cost of any such restoring, replacing or repairing
is Fifty Thousand Dollars and no/100 ($50,000.00) or more, the plans and
specifications for same shall be first submitted to and approved in writing by
Lessor, which approval shall not be unreasonably withheld, and, if reasonably
required by Lessor, Lessee shall immediately select an independent architect,
approved by Lessor who shall be in charge of such repairing, restoring or
replacing. Lessee covenants that it will give to Lessor prompt written notice of
any Casualty affecting the Demised Premises or the personal property or any
portion thereof.
11A.2 Within thirty (30) days after a casualty or within thirty (30)
days after approval of the plans and specifications whichever is later, Lessee
shall commence to restore the Demised Premises and Lessee shall
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complete the same within 180 days thereafter, provided, however, that in the
case of damage or destruction which cannot with due diligence be repaired
within said 180 day period, Lessee shall have an additional period of time,
not to exceed 180 additional days, to complete the reconstruction, provided
Lessee is proceeding promptly and with due diligence to complete the
restoration. Lessee may utilize all insurance proceeds available for any
such repair or restoration, subject to the terms of Section 11A.3 hereof and
any required approval of any Mortgagee. Lessee's obligation to make Rent
payments and to pay all other charges required by this Sub-Sublease shall not
be abated during the period of the repair or restoration.
11A.3 No sums shall be disbursed by Lessor toward such repairing,
rebuilding, restoring or replacing unless it shall be first made to appear to
the reasonable satisfaction of Lessor that either (i) the amount received from
such insurance proceeds is sufficient to complete such work or (ii) if there is
an amount required in excess of the amount received from such insurance
proceeds, either said excess amount has been expended by Lessee or that Lessee
has deposited such excess funds with Lessor or has satisfied Lessor that it has
such funds available to it so that, in either case, the total amount available
will be sufficient to complete such repairing, rebuilding, restoring or
replacing in accordance with the provisions of any Mortgage and any plans and
specifications submitted in connection therewith, free from any liens or
encumbrances of any kind whatsoever and the funds held by Lessor shall be
disbursed only upon the presentment of architect's or general contractor's
certificates, waivers of lien, contractor's sworn statements, and other evidence
of cost and payments as may be reasonably required by Lessor, the landlords
under the Underlying Leases or any Mortgagee.
ARTICLE XII - ALTERATIONS AND DEMOLITION
12.1 Lessee will not remove or demolish any improvement or building
which is part of the Demised Premises or any portion thereof or allow it to be
removed or demolished, without the prior written consent of the Lessor, which
consent shall not be unreasonably withheld. Lessee further agrees that it will
not make, authorize or permit to be made any changes or alterations in or to the
Demised Premises without first obtaining Lessor's written consent thereto, which
consent shall not be unreasonably withheld. All alterations, improvements and
additions to the Demised Premises shall be in quality and class at least equal
to the original work and shall become the property of the Lessor and shall meet
all building and fire codes, and all other applicable codes, rules, regulations,
laws and ordinances. Nothing herein shall be deemed or construed to require
Lessee to obtain Lessor's consent to non-structural changes or alterations such
as painting, the replacement of wallcoverings or the replacement of floor
coverings.
ARTICLE XIII - COMPLIANCE WITH LAWS
AND ORDINANCES/ENVIRONMENTAL COMPLIANCE
13.1 Throughout the Term of this Sub-Sublease, Lessee, at its sole
cost and expense, will obey, observe and promptly comply with all present and
future laws, ordinances, orders, rules, regulations and requirements of any
federal, state and municipal governmental agency or authority having
jurisdiction over the Demised Premises and the operation thereof as a Medicare
and Medi-Cal certified skilled and/or intermediate care nursing home having no
less than fifty nine (59) licensed, and Medi-Cal certified beds which may be
applicable to the Personal Property and the Demised Premises and including, but
not limited to, the sidewalks, alleyways, passageways, vacant land, parking
spaces, curb cuts, curbs adjoining the Demised Premises, which are under
Lessee's control, whether or not such law, ordinance, order, rules, regulation
or requirement shall necessitate structural changes or improvements.
13.2 Lessee shall likewise observe and comply with the requirements of all
policies of public liability and fire insurance and all other policies of
insurance at any time in force with respect to the Demised Premises.
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13.3 Lessee shall promptly apply for and procure and keep in good
standing and in full force and effect all necessary licenses, permits and
certifications required by any governmental authority for the purpose of
maintaining and operating on the Demised Premises a Medicare and Medi-Cal
certified skilled and/or intermediate care nursing home having no less than
fifty nine (59) licensed, and Medi-Cal certified beds, and the Demised Premises
shall be qualified to participate in the Medicare and Medi-Cal reimbursement
programs.
13.4 Upon request, Lessee will deliver or mail to Lessor wherever Rent
is then paid, in form required for notices, copies of all exit interviews,
inspection reports and surveys, administrative proceedings and/or court actions
from all state, federal and local governmental bodies regarding the Demised
Premises or the nursing home operated thereon. Lessee shall notify Lessor
within twenty-four (24) hours after receipt thereof of any notice from any
governmental agency terminating or suspending or threatening termination or
suspension of any license, permit, provider agreement or certification relating
to the Demised Premises or the nursing home operated thereon.
13.5 Lessee shall have the right upon written notice thereof to the
Lessor, to contest by appropriate legal proceedings, diligently conducted in
good faith, the validity or application of any law, regulation or rule mentioned
herein, and to delay compliance therewith pending the prosecution of such
proceedings; provided, however, that no civil or criminal liability would
thereby be incurred by Lessor and no lien or charge would thereby be imposed
upon or satisfied out of the Demised Premises and further provided that the
effectiveness and good standing of any license, certificate or permit affecting
the Demised Premises or the nursing home operated thereon would continue in full
force and effect during the period of such contest.
13.6 Lessee shall not generate, dispose of, release, use, handle,
possess or store any hazardous substances upon the Demised Premises except in
accordance with applicable laws, rules and regulations. Lessee shall at its
sole cost and expense promptly remove or clean up any hazardous substances
introduced onto the Demised Premises by Lessee or with its permission or at its
sufferance. Such removal or cleanup shall be in compliance with all applicable
laws and regulations. Lessee hereby agrees to indemnify and hold Lessor
harmless and agrees to defend Lessor from all losses, damages, claims,
liabilities and fines, including costs and reasonable attorneys' fees, of any
nature whatsoever in connection with the actual or alleged presence upon the
Demised Premises of any hazardous substances introduced by Lessee or with its
permission or at its sufferance.
ARTICLE XIV - DISCHARGE OF LIENS
14.1 Lessee will not create or permit to be created or to remain, and
Lessee will discharge, any lien, encumbrance or charge levied on account of any
mechanic's, laborer's or materialman's lien or, except as provided for in
Section 11.3 any conditional sale, security agreement or chattel mortgage, or
otherwise, which might be or become a lien, encumbrance or charge upon the
Demised Premises or any part thereof or the income therefrom or the Personal
Property, for work or materials or personal property furnished or supplied to,
or claimed to have been supplied to or at the request of Lessee.
14.2 If any mechanic's, laborer's or materialman's lien caused or
charged to Lessee shall at any time be filed against the Demised Premises or
Personal Property, Lessee shall have the right to contest such lien or charge,
provided, Lessee within thirty (30) days after notice of the filing thereof,
will cause the same to be discharged of record or in lieu thereof to secure
Lessor against said lien by deposit with Lessor of such security as may be
reasonably demanded by Lessor to protect against such lien. If Lessee shall
fail to cause such lien to be discharged within the period aforesaid, or to
otherwise secure Lessor as aforesaid, then in addition to any other right or
remedy, Lessor may, upon ten (10) days notice, but shall not be obligated to,
discharge the same either by paying the amount claimed to be due or by
processing the discharge of such lien by deposit or by bonding proceedings. Any
amount so paid by Lessor and all costs and expenses incurred by Lessor in
connection therewith, together with interest thereon at a rate which is the
lesser of fifteen percent (15%) per annum or the
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maximum rate permitted by law, shall constitute Additional Rent payable by
Lessee under this Sub-Sublease and shall be paid by Lessee to Lessor on
demand. Except as herein provided, nothing contained herein shall in any way
empower Lessee to do or suffer any act which can, may or shall cloud or
encumber Lessor's, the landlords under the Underlying Leases or any
Mortgagee's interest in the Demised Premises.
ARTICLE XV - INSPECTION OF PREMISES BY LESSOR
15.1 At any time, during reasonable business hours and upon reasonable
notice, Lessor and/or its authorized representatives shall have the right to
enter and inspect the Demised Premises and Personal Property.
15.2 Lessor agrees that the person or persons entering and inspecting
the Demised Premises and Personal Property will cause as little inconvenience to
the Lessee and to the residents of the Facility as may reasonably be possible
under the circumstances.
15.3 Lessee hereby acknowledges and agrees that the landlords under the
Underlying Leases and any Mortgagee shall have the right but not the obligation
to enter and inspect the Demised Premises to the extent the landlords and such
Mortgagee is entitled to do so under the terms of the Underlying Leases and
Mortgage respectively.
ARTICLE XVI - CONDEMNATION
16.1 In case all or substantially all of the Demised Premises leased
hereunder shall be taken or sold under the threat of such taking for any public
use by act of any public authorities, then this Sub-Sublease shall terminate as
of the date possession is taken by the condemnor. If all or substantially all
of the Demised Premises shall be taken, the net proceeds of any condemnation
award, settlement or compromise for the Demised Premises taken shall belong to
Lessor; provided, however, Lessee shall have the right to pursue a separate
award for the value of Lessee's interest in the Demised Premises as long as such
separate award does not diminish the award, settlement or compromise paid to
Lessor; and provided, further, that Lessee shall be solely entitled to any
amount awarded for the value of Lessee's property located on the Demised
Premises in accordance with Section 11.1. For the purposes of this paragraph
"substantially all of the Demised Premises leased hereunder" shall be deemed to
have been taken if upon the taking of less than the whole of the Demised
Premises that portion of the Demised Premises not so taken shall not by itself
be adequate for the conduct therein of Lessee's business, in the reasonable
judgment of Lessor and Lessee, subject further to the rights of the landlords
under the Underlying Leases and Lessor's Mortgagee.
In the event of a partial condemnation the result of which shall be a
reduction in the number of licensed beds on the Demised Premises to forty two
(42) or less, Lessee shall have the right to terminate this Sub-Sublease by
written notice to Lessor within thirty (30) days following the issuance of the
condemnation order or conveyance of the property, whichever is earlier. If
Lessee does not elect to terminate this Sub-Sublease, Lessor shall hold in trust
that portion, if any, of such award, settlement or compromise which shall be
allocable to consequential damage to buildings and improvements not taken, and
Lessor shall pay out such portion to Lessee to reimburse Lessee for the cost of
restoring the Demised Premises as a complete structural unit, as such
restoration work progresses in accordance with the procedure for making
insurance proceeds available for restoration, repair or rebuilding as set forth
in Article XIA hereof. In the event of a partial condemnation which does not
result in a termination of this Sub-Sublease, the annual Rent rate payable under
paragraph 4.1 hereof shall be reduced to such amount as Lessor and Lessee agree
is fair and equitable taking into consideration the number of operational beds
remaining after such taking as compared to the number of operational beds on the
Commencement Date.
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ARTICLE XVII - RENT ABSOLUTE
17.1 The Personal Property and the Demised Premises are let and leased
subject to the rights, if any of patients currently residing in the Demised
Premises and the state of the title thereof as of the date of this Lease, to any
state of facts which an accurate survey or physical inspection thereof might
show, and to all zoning regulations, restrictions, rules and ordinances,
building restrictions and other laws and regulations now in effect or hereafter
adopted by any governmental authority having jurisdiction thereover. Lessee has
examined the Personal Property and the Demised Premises and has found the same
satisfactory. Lessee acknowledges that the Personal Property and the Demised
Premises are the property of Lessor and that Lessee has the leasehold rights as
set forth in the terms and conditions of this Sub-Sublease.
As a material inducement to Lessor in the making of and entry into
this Sub-Sublease, Lessee hereby expressly agrees as follows:
(a) It is the responsibility of the Lessee to be fully
acquainted with the nature, in all respects, of the Demised Premises,
including (but not by way of limitation); the soil and geology
thereof, the waters thereof and thereunder; the drainage thereof; the
manner of construction and the condition and state of repair and lack
of repair of all improvements of every nature; the nature, provisions
and effect of all health, fire, zoning, building, subdivision and all
other use and occupancy laws, ordinances, and regulations applicable
thereto; and the nature and extent of the rights of others with
respect thereto, whether by way of reversion, easement, right of way,
prescription, adverse possession, profit, servitude, lease, tenancy,
lien, encumbrance, license, contract, reservation, condition, right of
re-entry, possibility of reverter, sufferance or otherwise. Lessor
makes no representation as to, and has no duty to be informed with
respect to, any of the matters set forth in the preceding sentence.
Lessee hereby accepts the Demised Premises as suitable and adequate in
all respects for the conduct of the business and the uses of the
Demised Premises contemplated under the provisions of the Lease.
Notwithstanding the foregoing, Lessor represents that it has no actual
knowledge of anything related to the foregoing which would cause the
Demised Premises to be materially inadequate for its permitted use
hereunder.
(b) Lessee expressly covenants and agrees that it hereby takes
this Sub-Sublease and the leasehold estate hereby established upon and
subject to Lessor's title as it was acquired from its seller,
including all rights, rights of way, easements, profits, servitudes,
reservations, restrictions, conditions, exceptions, reversions,
possibilities of reverter, liens, encumbrances, occupancies,
tenancies, licenses, clouds, claims and defects, known and unknown and
whether of record or not. In the event of any defect in Lessor's
title to the Demised Premises which shall require that Lessee vacate
the Demised Premises, then in such event this Sub-Sublease shall be
terminated.
(c) Lessee hereby expressly waives any and all rights which it
might otherwise have against Lessor by reason of any of the foregoing,
including (but not limited to) the requirements of any inspection or
examination by Lessee of the Demised Premises.
Except as otherwise expressly provided in this Sub-Sublease, this
Sub-Sublease shall continue in full force and effect, and the obligations of
Lessee hereunder shall not be released, discharged or otherwise affected, by
reason of: (i) any damage to or destruction of the Demised Premises or any
part thereof or the taking of the Demised Premises or any part thereof by
condemnation, requisition or otherwise for any reason; (ii) any restriction
or prevention of or interference with any use of the Demised Premises or any
part thereof including any restriction or interference with or circumstance
which prevents the use of the Demised Premises as
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contemplated by Paragraph 8.1; (iii) any frustration of Lessee's purposes
hereunder, or any claim which Lessee has or might have against Lessor; or
(iv) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing. However, nothing shall preclude Lessee from bringing a separate
action and Lessee is not waiving other rights and remedies not waived herein.
ARTICLE XVIII - ASSIGNMENT AND SUBLETTING
18.1 During the Term of the Lease, Lessee shall not assign this Sub-
Sublease or in any manner whatsoever sublet, assign or transfer all or any part
of the Demised Premises or in any manner whatsoever transfer or assign an
interest in the Demised Premises or any interest in the Lessee or sell or assign
a controlling number of the outstanding shares in Lessee, other than to ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ or an entity controlled by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or a wholly owned
subsidiary of Lessee or of Lessee's parent corporation Sun Healthcare Group,
Inc. without the prior written consent of the Lessor, which consent shall not be
unreasonably withheld. Any violation or breach or attempted violation or breach
of the provisions of this Article by Lessee, or any acts inconsistent herewith
shall vest no right, title or interest herein or hereunder or in the Demised
Premises, in any such transferee or assignee; and Lessor may, at its exclusive
option, terminate this Sub-Sublease and invoke the provisions of this Sub-
Sublease relating to default. Lessor acknowledges and agrees that the sale of
equity or debt securities in Lessee or Lessee's parent corporation shall in no
event constitute an assignment or transfer of this Sub-Sublease or of an
interest hereunder provided Lessee remains a wholly owed subsidiary of Sun
Healthcare Group, Inc.
ARTICLE XIX - ACTS OF DEFAULT
19.1 The following acts or events shall be deemed to be an Event of
Default (herein an "Event of Default") on the part of the Lessee:
(1) The failure of Lessee to pay when due any Rent, or
any part thereof, or any other sum or sums of money due or
payable to the Lessor under the provisions of this Sub-
Sublease, when such failure shall continue for a period of
ten (10) days;
(2) The failure of Lessee to perform, or the violation
by Lessee of, any of the other covenants, terms, conditions
or provisions of this Sub-Sublease (other than as set forth
in Sections 19.1(3) and 19.1(4), if such failure or
violation shall not be cured within thirty (30) days after
notice thereof by Lessor to Lessee, subject, however, to the
provisions of Section 19.2 hereof;
(3) The removal by any local, state or federal agency
having jurisdiction over the operation of the nursing home
located on the Demised Premises of fifty percent (50%) or
more of the patients located in the nursing home;
(4) The failure of Lessee to comply, or the violation
by Lessee of, any of the terms, conditions or provisions of
either of the Underlying Leases or any Mortgage relating to
the Demised Premises of which Lessee has been made aware and
with which Lessee has agreed to comply if such failure or
violation shall not be cured within twenty (20) days (or
such lesser period as may be provided in the mortgage) after
notice thereof by Lessor to Lessee, subject, however, to the
provisions of Section 19.2 hereof;
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(5) The voluntary transfer by Lessee of 10 or more
patients located in the Demised Premises if such transfer is
not for reasons relating to the health and well being of the
patients that were transferred or such other reasons as may
be permitted by state or federal law, such as nonpayment of
stay or the welfare of other residents of the Facility;
(6) The failure of Lessee to replace, within thirty
(30) days after notice by Lessor to Lessee, a substantial
portion of the Personal Property previously removed by
Lessee;
(7) The making by Lessee of an assignment for the
benefit of creditors;
(8) The levying of a writ of execution or attachment
on or against the property of Lessee which is not discharged
or stayed by action of Lessee contesting same, within ninety
(90) days after such levy or attachment (provided if the
stay is vacated or ended, this paragraph shall again apply);
(9) If proceedings are instituted in a court of
competent jurisdiction for the reorganization, liquidation
or involuntary dissolution of the Lessee or for its
adjudication as a bankrupt or insolvent, or for the
appointment of a receiver of the property of Lessee, and
said proceedings are not dismissed and any receiver, trustee
or liquidator appointed therein is not discharged within
ninety (90) days after the institution of said proceedings;
(10) The sale of the interest of Lessee in the Demised
Premises or any portion thereof under execution or other
legal process;
(11) The failure of Lessee to give notice to Lessor not
less than ten (10) days after receipt by Lessee of any
notice, claim or demand from any governmental authority, or
any officer acting on behalf thereof, of any violation of
any law, order, ordinance, rule or regulation with respect
to the operation of the nursing home located on the Demised
Premises;
(12) The failure on the part of Lessee during the Term
of this Sub-Sublease to cure or ▇▇▇▇▇ any violation claimed
by any governmental authority, or any officer acting on
behalf thereof, of any law, order, ordinance, rule or
regulation pertaining to the operation of the nursing home
located on Demised Premises, and within ten (10) days prior
to the expiration of any time permitted by such authority
for such cure or abatement;
(13) institution of any proceedings against Lessee by
any governmental authority either (i) to revoke any license
granted to Lessee for the operation of a skilled and/or
intermediate care nursing home within the Demised Premises,
having no less than fifty nine (59) licensed beds, or (ii)
decertify the nursing home operated in the Demised Premises
from participation in the Medi-Cal reimbursement program,
which is not either appealed by Lessee and stayed while
Lessee's appeal thereof is pending, or revoked or rescinded
by the applicable governmental authority;
(14) The abandonment of the Demised Premises by Lessee,
other than as a result of the damage or destruction or
taking thereof;
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(15) The failure of the Guarantor to perform, or the
violation by the Guarantor of, any of the covenants set
forth in the Lease Guaranty; or
(16) An "Event of Default" occurs under the Marysville
Lease.
19.2 Except for default by Lessee in the payment of Rent or any
additional payment required hereunder, in any case where Lessor shall have given
to Lessee a written notice specifying a situation which, as hereinbefore
provided, must be remedied by Lessee within a certain time period, and, if for
causes beyond Lessee's control, it would not reasonably be possible for Lessee
to remedy such situation within such period, then, provided Lessee immediately
upon receipt of such notice shall advise Lessor in writing of Lessee's intention
to institute, and shall, as soon as reasonably possible thereafter, duly
institute, and thereafter diligently prosecute to completion, all steps
necessary to remedy such situation and shall remedy the same, and provided that
any license or certification necessary for the operation of the Demised
Premises, as a nursing facility is not affected thereby, this Sub-Sublease and
the Term and estate hereby granted shall not expire and terminate at the
expiration of such time period as otherwise hereinbefore provided, except that
in no event shall Lessee have more than sixty (60) additional days to remedy any
such situation in the manner set forth herein, or such longer period of time
granted by any governmental agency having jurisdiction over the Facility.
ARTICLE XX - (INTENTIONALLY OMITTED)
ARTICLE XXI - LESSOR'S REMEDIES UPON DEFAULT
21.1 In the event of any Event of Default on the part of Lessee,
Lessor may, if it so elects, upon ten (10) days prior written notice to Lessee
of such election, and with or without any demand whatsoever upon Lessee,
forthwith terminate this Sub-Sublease and Lessee's right to possession of the
Demised Premises, or, at the option of the Lessor, terminate Lessee's right to
possession of the Demised Premises without terminating this Sub-Sublease. Upon
any such termination of this Sub-Sublease, or upon any such termination of
Lessee's right to possession without termination of this Sub-Sublease, Lessee
shall vacate the Demised Premises immediately, and shall quietly and peaceably
deliver possession thereof to the Lessor, and Lessee hereby grants to the Lessor
full and free license to enter into and upon the Demised Premises in such event
with or without process of law and to repossess the Demised Premises and
Personal Property as the Lessor's former estate. In the event of any such
termination of this Sub-Sublease, the Lessor shall again have possession and
enjoyment of the Demised Premises and Personal Property to the extent as if this
Sub-Sublease had not been made, and thereupon this Sub-Sublease and everything
herein contained on the part of Lessee to be done and performed shall cease and
terminate, all, however, without prejudice to and without relinquishing the
rights of the Lessor to Rent (which, upon such termination of this Sub-Sublease
and entry of Lessor upon the Demised Premises, shall, in any event, be the right
to receive Rent due up to the time of such entry) or any other right given to
the Lessor hereunder or by operation of law.
21.2 In the event of any Event of Default and Lessor's election either
to terminate this Sub-Sublease or to terminate Lessee's right to possession of
the Demised Premises, then all licenses, certifications, permits and
authorizations issued by any governmental agency, body or authority in
connection with or relating to the Demised Premises and the nursing home
operated thereon shall be deemed to be assigned to Lessor, to the extent
permitted by law. Lessor shall also have the right to continue to utilize the
telephone number and name (other than the name "Sunrise Healthcare") used by
Lessee in connection with the operation of the nursing home located on the
Demised Premises. This Lease shall be deemed and construed as an assignment for
purposes of vesting in Lessor, all right, title and interest in and to: (i) all
licenses, certifications, permits and authorizations obtained in connection with
the operation of the nursing home located on the Demised Premises; and (ii) the
name and telephone number used in connection with the operation of the nursing
home located on the Demised Premises
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(other than the name "Sunrise Healthcare"). Lessee hereby agrees to take such
other action and execute such other documents as may be necessary in order to
vest in Lessor all right, title and interest to the items specified herein,
to the extent permitted by law.
21.3 If Lessee abandons the Demised Premises or otherwise entitles
Lessor so to elect, and the Lessor elects to terminate Lessee's right to
possession only, without terminating this Sub-Sublease, Lessor may, at its
option, enter into the Demised Premises, remove Lessee's signs and other
evidences of tenancy and take and hold possession thereof as in the foregoing
paragraph 21.2 of this Article provided, without such entry and possession
terminating this Sub-Sublease or releasing Lessee, in whole or in part, from
Lessee's obligation to pay the Rent hereunder for the full remaining Term of
this Sub-Sublease, and in any such case, Lessee shall pay to Lessor a sum equal
to the entire amount of the Rent reserved hereunder and required to be paid by
Lessee up to the time of such termination of the right of possession plus any
other sums then due hereunder. Upon and after entry into possession without
termination of this Sub-Sublease, Lessor may attempt to relet the Demised
Premises or any part thereof for the account of Lessee for such Rent, or shall
operate the nursing home located on the Demised Premises for such time and upon
such terms as Lessor in its sole discretion shall determine. In any such case,
Lessor may make repairs, alterations and additions in or to the Demised
Premises, and redecorate the same to the extent deemed desirable by Lessor, and
Lessee shall, upon demand, pay the reasonable cost thereof, together with
Lessor's reasonable expenses of reletting. If the consideration collected by
Lessor upon any such reletting is not sufficient to pay monthly the full amount
of Rent reserved in this Sub-Sublease, together with the reasonable costs of
repairs, alterations, additions, redecorating and Lessor's expenses, Lessee
shall pay to the Lessor the amount of each monthly deficiency upon demand.
21.4 Lessee's liability to Lessor for damages for default in payment
of Rent or otherwise hereunder shall in all events survive the termination by
Lessor of the Lease or the termination by Lessor of Lessee's right to possession
only, as hereinabove provided. Upon such termination of the Lease or at any time
after such termination of Lessee's right to possession, Lessor may recover from
Lessee and Lessee shall pay to Lessor as damages, whether or not Lessor shall
have collected any current monthly deficiencies under the foregoing paragraph,
and in lieu of such current deficiencies after the date of demand for such
damages, the amount thereof found to be due by a court of competent
jurisdiction, which amount thus found may be equal to:
(a) the remainder, if any, of Rent and charges due from Lessee
for the period up to and including the date of the termination of the
Lease or Lessee's right to possession;
(b) the amount of any current monthly deficiencies accruing and
unpaid by Lessee up to and including the date of Lessor's demand for
final damages hereunder; and
(c) the excess, if any, of:
(i) the present value, discounted at the rate of 10%
per annum, of the Rent reserved for what would have been the
remainder of the Term of this Sub-Sublease together with
charges to be paid by Lessee under the Lease; over
(ii) the present value, discounted at the rate of 10%
per annum of the then fair rental value of the Demised
Premises and the Personal Property.
If any statute or rule governing a proceeding in which such damages
are to be proved shall validly limit the amount thereof to an amount less than
the amount above agreed upon, Lessor shall be entitled to the maximum amount
allowable under such statute or rule of law.
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ARTICLE XXII - LIABILITY OF LESSOR
22.1 It is expressly agreed by the parties that in no case shall Lessor,
any shareholders, officers, directors, managers, members, agents or employees of
Lessor be liable under any express or implied covenant, agreement or provisions
of this Sub-Sublease, for any damages whatsoever to Lessee beyond Lessor's
interest in the Demised Premises.
ARTICLE XXIII - CUMULATIVE REMEDIES OF LESSOR
23.1 The specific remedies to which Lessor may resort under the terms
of this Sub-Sublease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which Lessor may be lawfully entitled in
case of any breach or threatened breach by Lessee of any provision or provisions
of this Sub-Sublease. The failure of Lessor to insist, in any one or more
cases, upon the strict performance of any of the terms, covenants, conditions,
provisions or agreements of this Sub-Sublease, or to exercise any option herein
contained, shall not be construed as a waiver or relinquishment for the future
of any such term, covenant, condition, provisions, agreement or option.
ARTICLE XXIV - SECURITY FOR RENT
24.1 Lessor shall have a first lien paramount to all others on every
right and interest of Lessee in and to this Sub-Sublease, and on any
furnishings, equipment, fixtures, accounts receivable or other property of any
kind belonging to Lessee and located at or related to the Demised Premises.
Such lien is granted for the purpose of securing the payments of rents, charges,
penalties, and damages herein covenanted to be paid by Lessee, and for the
purpose of securing the performance of all of Lessee's obligations under this
Sub-Sublease. Such lien shall be in addition to all rights to Lessor given and
provided by law but shall only be exercised by Lessor after the occurrence of an
Event of Default which is not cured within any applicable cure period. This
Lease shall constitute a security agreement under the Uniform Commercial Code
granting Lessor a security interest in any furnishings, equipment, fixtures,
accounts receivable or other personal property of any kind belonging to Lessee
and located at or related to the Demised Premises. If required by Lessor,
Lessee shall execute financing statements for filing under the Uniform
Commercial Code reflecting the security interest granted under this section.
Upon Lessee's or Guarantor's written request, Lessor shall subordinate its lien
under this Section 24.1, solely as to accounts receivable, to a lien granted by
Lessee or Guarantor to a third party lender securing a loan made by such lender
to Lessee to provide working capital for the operation of the Leased Property as
a nursing home in accordance with this Sub-Sublease.
ARTICLE XXV - INDEMNIFICATION
25.1 To the extent insurance proceeds do not cover same, Lessee agrees
to protect, indemnify, defend and save harmless the Lessor from and against any
and all claims, demands and causes of action of any nature whatsoever for injury
to or death of persons or loss of or damage to property, occurring during the
Term on the Demised Premises or, to the extent the same are under Lessee's
control, any adjoining sidewalks, streets or ways, or in any manner growing out
of or connected with the use and occupation of the Demised Premises by Lessee,
its officers, agents, employees or invitees, or Lessee's maintenance of the
condition thereof, or the use of any existing or future sewer system, or the use
of any adjoining sidewalks, streets or ways which are under Lessee's
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control during the Term of this Sub-Sublease, and Lessee further agrees to
pay any reasonable attorneys' fees and expenses incident to the defense by
Lessor of any such claims, demands or causes of action.
ARTICLE XXVI - SUBORDINATION PROVISIONS
26.1 This Sub-Sublease (and Lessee's interest in the Demised Premises
and Personal Property) shall be subject and subordinate to any and all mortgages
or deeds of trust now or hereafter in force and affecting the Demised Premises
(or any portion thereof) and/or the Personal Property, and to all renewals,
modifications, consolidations, replacements and extensions thereof (any such
Mortgage or deed of trust, as it may be renewed, modified, consolidated,
replaced or extended is hereinafter referred to as a "Mortgage", and the holder
or beneficiary of a Mortgage is hereinafter referred to as a "Mortgagee".
Lessee agrees to execute, acknowledge and deliver upon demand such further
instruments subordinating this Sub-Sublease to any such Mortgage, or other liens
or encumbrances as shall be desired by Lessor; provided, that Lessor shall use
all due diligence to deliver to Lessee a nondisturbance agreement from any such
Mortgagee, in form reasonably satisfactory to such Mortgagee. Lessee further
agrees that promptly after receipt of a request from any Mortgagee made at any
time prior to foreclosure of its Mortgage, Lessee shall execute, acknowledge and
deliver to such Mortgagee any instrument as such Mortgagee may reasonably
request whereby Lessee agrees to subordinate and attorn to such Mortgagee, at
such Mortgagee's election, after the foreclosure of its Mortgage or its
acceptance of a deed in lieu of foreclosure. Lessee agrees further that any
Mortgagee shall have the right to subordinate its Mortgage and its rights
thereunder to this Sub-Sublease, except that such Mortgagee shall be entitled to
expressly exclude from such subordination the Mortgagee's rights, if any, to
insurance proceeds and eminent domain awards in the event of a loss or casualty
or eminent domain taking of the Demised Premises or any portion thereof. If
such Mortgagee executes and records an instrument which purports to effect a
partial or complete subordination of its Mortgage to this Sub-Sublease, any
rights of such Mortgagee to insurance proceeds or eminent domain awards which
are expressly excluded from such subordination shall remain superior to the
rights of Lessee.
ARTICLE XXVII - LESSEE'S FAITHFUL COMPLIANCE WITH UNDERLYING LEASE/MORTGAGE
27.1 Anything in this Sub-Sublease contained to the contrary
notwithstanding, Lessee shall at all times and in all respects fully, timely and
faithfully comply with and observe each and all of the conditions, covenants,
and provisions required on the part of the Lessor and of which Lessee has
received notice under any of the Underlying Leases (and any Mortgage to which
this Sub-Sublease is subordinate or to which it later may become subordinate,
including, without limitation, such conditions, covenants and provisions thereof
as relate to the care, maintenance, repair, insurance, restoration, preservation
and condemnation of the Demised Premises, notwithstanding that such conditions,
covenants and provisions may require compliance and observance to a standard or
degree in excess of that required by the provisions of this Sub-Sublease, or may
require performance not required by the provisions of this Sub-Sublease, and
shall not do or permit to be done anything which would constitute a breach of or
default under any obligation of the Lessor under the Underlying Leases (or any
Mortgage) it being the intention hereof that Lessee shall so comply with and
observe each and all of such covenants, conditions and provisions of the
Underlying Leases (and any Mortgage) affecting the Demised Premises so that it
will at all times be in good standing and there will not be any default on the
part of the Lessor thereunder. However, nothing in this Article contained shall
be construed to obligate Lessee to pay any part of the rent due under the
Underlying Leases (or the principal or interest secured by any Mortgage) or to
perform any obligation imposed on Lessor thereunder which is not delegable by
Lessor by the terms thereof. Lessee further covenants and agrees that Lessee
shall give the landlords under the Underlying Leases and the holder of any such
Mortgage notice of any Lessor default under this Sub-Sublease, and if Lessor
fails to cure such default, such holder shall have an additional reasonable time
to cure any such default on Lessor's behalf.
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ARTICLE XXVIII - MORTGAGE RESERVES
28.1 Any tax, insurance or other reserve required by the holder of any
Mortgage against the Demised Premises during the Term of this Sub-Sublease, and
not otherwise paid by Lessee to Lessor pursuant to Section 7.1, shall be paid by
the Lessee or as directed by Lessor.
ARTICLE XXIX - LESSEE'S ATTORNMENT
29.1 Lessee covenants and agrees that, if by reason of a default upon
the part of the Lessor herein in the performance of any of the terms and
conditions of any Mortgage or any of the Underlying Leases which results in the
estate of the Lessor thereunder being terminated by summary dispossession
proceedings or otherwise, Lessee will attorn to the then holder of such
Mortgage, or either of the landlords under the Underlying Leases or the
purchaser in such foreclosure proceedings, as the case may be, and will
recognize such holder of the Mortgage, or either of the landlords under the
Underlying Leases or such purchaser as the Lessor under this Sub-Sublease.
Lessee covenants and agrees to execute and deliver, at any time and from time to
time, upon the request of Lessor or of the holder of such Mortgage, or either of
the landlords under the Underlying Leases or the purchaser in foreclosure
proceedings, any instrument which may be necessary or appropriate to evidence
such attornment. Lessee further waives the provisions of any statute or rule of
law now or hereafter in effect which may terminate this Sub-Sublease or give or
purport to give Lessee any right of election to terminate this Sub-Sublease or
to surrender possession of the Demised Premises in the event any such
proceedings are brought against the Lessor under such Mortgage, or either of the
landlords under the Underlying Leases or the holder of any such Mortgage, and
agrees that this Sub-Sublease shall not be affected in any way whatsoever by any
such proceedings.
29.2 If Lessor shall default in the performance of any of the terms,
provisions, covenants or conditions under any Mortgage, or fails to pay the
amounts due thereunder when due, then immediately upon notice of such default or
failure on the part of Lessor, Lessee shall have the right to cure such
defaults, and to make such payments as are due from Lessor, directly to the
holder of the Mortgage, as the case may be, and to the extent such payments are
accepted by the holder of the Mortgage, to deduct the amounts expended by Lessee
to cure such defaults, together with interest thereon from the date of payment
by Lessee at a rate which is the lesser of fifteen percent (15%) per annum or
the maximum rate permitted by law, from the next succeeding rental payment or
payments due under this Sub-Sublease, and such deductions shall not constitute a
default under this Sub-Sublease
ARTICLE XXX - REPRESENTATIONS AND WARRANTIES
30.1 Lessee represents, warrants and covenants to Lessor as follows:
(a) Lessee is a corporation organized and validly existing under
the laws of the State of New Mexico, and is authorized to transact
business in the State of California d/b/a Moonrise Healthcare
Corporation; and
(b) Lessee has full corporate right and power to enter into, or
perform its obligations under this Sub-Sublease and has taken all
requisite corporate action to authorize the execution, delivery and
performance of this Sub-Sublease.
30.2 Lessor represents, warrants and covenants to Lessee as follows:
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(a) Lessor is a corporation duly organized and validly existing
under the laws of the State of Illinois; and
(b) Subject to the conditions set forth in Section 34.1, Lessor
has full power and authority to enter into this Sub-Sublease and to
carry out the transactions contemplated herein.
ARTICLE XXXI - SECURITY DEPOSIT
31.1 As additional security for the faithful and prompt performance of
its obligations hereunder, Lessee shall concurrently with the execution of this
Sub-Sublease pay to Lessor, as a security deposit the sum of Forty Six Thousand
Twenty and 00/100 Dollars ($46,020.00), payable on the first day of the Term.
Said security deposit may be applied by Lessor for the purpose of curing any
default or defaults of Lessee hereunder, in which event Lessee shall replenish
said deposit in full by promptly paying to Lessor the amount so applied. Lessor
shall not pay any interest on said deposit, except as required by law. If
Lessee has not defaulted hereunder and Lessor has not applied said deposit to
cure a default, then said deposit, or such applicable portion thereof, shall be
paid to Lessee within thirty (30) days after the termination of this Sub-
Sublease. Said deposit shall not be deemed an advance payment of Rent or a
measure of Lessor's damages for any default hereunder by Lessee.
ARTICLE XXXII - FINANCIAL STATEMENTS
32.1 Within 120 days after the end of each of its fiscal years, Lessee
shall furnish to Lessor full and complete financial statements of the operations
of the Demised Premises and nursing home operated thereon for such annual fiscal
period which shall be prepared by or on behalf of Lessee, and which shall
contain a balance sheet and detailed income and expense statement (collectively
called "Financial Statements"), and copies of all Medi-Cal and Medicare cost
reports as filed with the governmental authority, as of the end of the fiscal
year. In addition, Lessee shall furnish Lessor, within 10 days following
filing, a copy of its or its parent corporation's federal income tax return if
it does not file separate returns for the preceding year. Each such statement
shall be certified as being true and correct by an officer of Lessee.
32.2 Within thirty (30) days after each calendar quarter, Lessee shall
furnish to Lessor copies of all Financial Statements for the Demised Premises
prepared by Lessee for the preceding calendar quarter.
32.3 At all times, Lessee shall keep and maintain full and correct
records and books of account of the operations of Lessee in the Demised Premises
and records and books of account of the entire business operations of Lessee in
accordance with sound accounting practices. Upon request by Lessor, Lessee shall
make available for inspection by Lessor or its designee, during reasonable
business hours, the said records and books of account covering the entire
business operations of Lessee on the Demised Premises.
ARTICLE XXXIII -
TRANSFER OF OPERATIONS UPON TERMINATION OF LEASE
33.1 The date on which this Sub-Sublease either terminates pursuant to
its Terms or is terminated by either party whether pursuant to a right granted
to it hereunder or otherwise shall be referred to as the "Closing Date" in this
Article. On the Closing Date, this Sub-Sublease shall be deemed and construed
as an absolute assignment for purposes of vesting in Lessor or Lessor's designee
all of Lessee's right, title and interest in and to the following intangible
property which is now or hereafter used in connection with the operation of the
Demised
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Premises (the "Intangibles") and an assumption by Lessor of Lessee's
obligations under the Intangibles other Intangibles from and after the Closing
Date; provided that from and after the Closing Date, Lessee shall indemnify,
defend and hold harmless Lessor against any claims, losses, costs or damages,
including reasonable attorneys' fees incurred or arising by reason of Lessee's
obligations under the Intangibles prior to the Closing Date:
(a) service contracts for the benefit of the Demised Premises to
which Lessee is a party, and which can be terminated without penalty
within sixty (60) or fewer days' notice or which Lessor requests be
assigned to Lessor or its designee pursuant to this Article 33;
(b) any provider agreements with Medicare, Medi-Cal or any other
third-party payor programs (excluding the right to any reimbursement
for periods on or prior to the Closing Date) entered in connection
with the Demised Premises to the extent assignable by Lessee;
(c) all licenses, permits, accreditations, and certificates of
occupancy issued by any federal, state, municipal or quasi-
governmental authority for the use, maintenance or operation of the
Demised Premises, running to or in favor of Lessee, to the extent
assignable by Lessee;
(d) all documents, charts, personnel records, property manuals,
resident/patient records and lists maintained with respect to the
Demised Premises (subject to the resident's rights to access to
his/her medical records as provided by law and confidentiality
requirements), books, records, files and other business records
attributable to the business or operations of the Demised Premises to
the extent assignable by Lessee;
(e) all existing agreements with residents and any guarantors
thereof of the Demised Premises, to the extent assignable by Lessee
(excluding the right to any payments for periods prior to the Closing
Date) any and all patient trust fund accounts;
(f) all assignable guaranties and warranties in favor of Lessee
with respect to the Demised Premises and/or the Personal Property;
(g) all other assignable intangible property not enumerated
herein which is now or hereafter used in connection with the operation
of the Demised Premises as a long-term care facility; and
(h) At Lessor's option, the business of the Lessee as conducted
at the Demised Premises as a going concern, including but not limited
to the name of the business conducted thereon and all telephone
numbers presently in use therein but specifically excluding the name
"Sunrise Healthcare" or any Sunrise policy or procedure manuals, forms
or systems.
33.2 Lessee shall be responsible for, and pay all accrued expenses
with respect to the Demised Premises and Personal Property accruing before 12:00
a.m. on the Closing Date and shall be entitled to all revenues from the Demised
Premises for the period through 12:00 a.m. on the Closing Date. Lessor shall be
responsible for and pay all accrued expenses with respect to the Demised
Premises accruing on or after 12:01 a.m. on the day after the Closing Date and
shall be entitled to receive and retain all revenues from the Demised Premises
accruing on or after the Closing Date. Within fifteen (15) business days after
the Closing Date, the following adjustments and prorations shall be determined
as of the Closing Date and the party to whom payment is owed shall receive said
payment within said fifteen (15) day period:
(a) Real estate taxes, ad valorem taxes, school taxes,
assessments and personal property, intangible and use taxes, if any.
If the actual ad valorem taxes are not available on the Closing Date
for the tax year in which the Closing Date occurs, the proration of
such taxes shall be estimated at the Closing Date based upon
reasonable information available to the parties,
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including information disclosed by the local tax office or other
public information, and an adjustment shall be made when actual
figures are published or otherwise become available.
(b) Lessee will terminate the employment of all employees on the
Closing Date. The obligation for wages and the obligation, if any, to
pay to employees of the Demised Premises accrued vacation and sick
leave pay or employee severance pay or other accrued benefits which
may be payable as the result of any termination of any employee on or
prior to the Closing Date for the period prior to the Closing Date
shall remain the Lessee's obligation after the Closing Date.
(c) Lessor shall receive a credit equal to any advance payments
received by Lessee from patients of the Demised Premises to the extent
attributable to periods following the Closing Date.
(d) The present insurance coverage on the Demised Premises shall
be terminated as of the Closing Date and there shall be no proration
of insurance premiums.
(e) All other income from, and expenses of, the Demised Premises
(other than Mortgage interest and principal), including but not
limited to public utility charges and deposits, maintenance charges
and service charges shall be prorated between Lessee and Lessor as of
the Closing Date. Lessee shall, if possible, obtain final utility
meter readings as of the Closing Date. To the extent that information
for any such proration is not available on the Closing Date, Lessee
and Lessor shall effect such proration within ninety (90) days after
the Closing Date or as soon thereafter as such information becomes
available.
(f) Lessee shall receive a credit equal to (i) any sums held in
escrow by Lessor or the holder of any Mortgage for taxes or insurance
premiums; and (ii) any other sums being held by Lessor for the benefit
of Lessee provided that any such sums are not needed to pay costs and
expenses which relate to the period prior to the Closing Date, in
accordance with the applicable provisions of this Sub-Sublease.
(g) Subject to the terms of Article XXXI hereof, Lessee shall
receive a credit for any security deposit made pursuant to this Sub-
Sublease.
(h) Lessor shall receive a credit for any amounts due from
Lessee pursuant to the terms of this Sub-Sublease, including payments
due to third party vendors, which are paid by Lessor on behalf of
Lessee.
(i) Lessee shall be and will remain responsible for any
employee's severance pay and accrued benefits which may be payable as
a result of any termination of an employee's employment on or prior to
the Closing Date.
33.3 All necessary arrangements shall be made to provide possession of
the Demised Premises to Lessor on the Closing Date, at which time of possession
Lessee shall, to the extent permitted by law, deliver to Lessor all medical
records, patient records and other personal information concerning all patients
residing at the Demised Premises as of the Closing Date and other relevant
records used or developed in connection with the business conducted at the
Demised Premises other than Lessee's corporate business records, manuals, forms
and systems documentation. Such transfer and delivery shall be in accordance
with all applicable laws, rules and regulations concerning the transfer of
medical records and other types of patient records.
33.4 Within fifteen (15) days following the Closing Date, Lessee shall
provide Lessor with an accounting of all funds belonging to patients at the
Demised Premises which are held by Lessee in a custodial
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capacity. Such accounting shall set forth the names of the patients for whom
such funds are held, the amounts held on behalf of each such patient and the
Lessee's warranty that, to the actual current knowledge of Lessee, the
accounting is true, correct and complete. Additionally, Lessee, in accordance
with all applicable rules and regulations, shall make all necessary
arrangements to transfer such funds to a bank account designated by Lessor,
and Lessor shall in writing acknowledge receipt of and expressly assume all
the Lessee's financial and custodial obligations with respect thereto.
Notwithstanding the foregoing, Lessee will indemnify and hold Lessor harmless
from all liabilities, claims and demands, including reasonable attorney's
fees, in the event the amount of funds, if any, transferred to Lessor's bank
account as provided above, did not represent the full amount of the funds
then or thereafter shown to have been delivered to Lessee as custodian that
remain undisbursed for the benefit of the patient for whom such funds were
deposited, or with respect to any matters relating to patient funds which
accrue during the Term of this Sub-Sublease.
33.5 For the period commencing upon an Event of Default hereunder and
Lessor's election to terminate this Sub-Sublease as provided in ARTICLE XXI and
ending on the date Lessor or its designee obtains all appropriate state or other
governmental licenses and certifications required to operate the Demised
Premises as a Medicare and Medi-Cal certified nursing home, Lessee shall enter
into a management agreement with Lessor or Lessor's designee whereby Lessor or
its designee shall have the right to operate the Demised Premises, on a triple
net basis, and shall be entitled to all revenues of the Demised Premises during
such period, and to use any and all licenses, certifications and provider
agreements issued to Lessee by any federal, state or other governmental
authority for such operation of the Demised Premises, if permitted by such
governmental authorities.
33.6 All cash, checks and cash equivalents at the Demised Premises and
deposits in bank accounts (other than patient trust accounts) relating to the
Demised Premises on the Closing Date shall remain Lessee's property after the
Closing Date. All accounts receivable, loans receivable and other receivables
of Lessee, whether derived from operation of the Demised Premises or otherwise,
shall remain the property of Lessee after the Closing Date. Lessee shall retain
full responsibility for the collection thereof. Lessor shall assume
responsibility for the billing and collection of payment on account of services
rendered by it on and after the Closing Date. In order to facilitate Lessee's
collection efforts, Lessee agrees to deliver to Lessor, within a reasonable time
after the Closing Date, a schedule identifying all of those private pay balances
owing for the month prior to the Closing Date and Lessor agrees to apply any
payments received which are specifically designated as being applicable to
services rendered prior to the Closing Date to reduce the pre-Closing balances
of said patients by promptly remitting said payments to Lessee. In the event
payments specifically indicate that they relate to services rendered post-
Closing, such payments shall be retained by Lessor. In the event no designation
is made, such payments shall be applied one-half to Lessee's accounts receivable
and one-half to Lessor's accounts receivable. Lessor shall cooperate with
Lessee in Lessee's collection of its pre-Closing accounts receivable. Lessor
shall have no liability for uncollectible receivables and shall not be obligated
to bear any expense as a result of such activities on behalf of Lessee. Subject
to the provisions of Article 24 hereof, Lessor shall remit to Lessee or its
assignee those portions of any payments received by Lessor which are
specifically designated as repayment or reimbursement received by Lessor arising
out of cost reports filed for the cost reporting periods ending prior to the
Closing Date.
33.7 With respect to residents in the Demised Premises on the Closing
Date, Lessor and Lessee agree as follows:
(a) With respect to Medicare and Medi-Cal residents, Lessor and
Lessee agree that payment for in-house residents covered by Medicare
or Medi-Cal on the Closing Date will, under current regulations, be
paid by Medicare or Medi-Cal directly to Lessee for services rendered
at the Demised Premises prior to the Closing Date allocated on the per
diem basis. Said payments shall be the sole responsibility of Lessee
and, except as provided in Section 33.6(b) below, Lessor shall in no
way be liable therefore. After the Closing Date, Lessor and Lessee
shall each have the right to review supporting books, records and
documentation that are
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in the possession of the other relating to Medi-Cal or Medicare payments.
(b) If, following the Closing Date, Lessor receives payment from
any state or federal agency or third-party payor which represents
reimbursement with respect to services provided at the Demised
Premises prior to the Closing Date, Lessor agrees that it shall remit
such payments to Lessee. Payments by Lessor to Lessee shall be
accompanied by a copy of the appropriate remittance advice.
33.8 In addition to the obligations required to be performed hereunder
by Lessee and Lessor at the Closing Date, Lessee and Lessor agree to perform
such other acts, and to execute, acknowledge, and/or deliver subsequent to the
Closing Date such other instruments, documents and materials, as the other may
reasonably request in order to effectuate the consummation of the transaction
contemplated herein. The obligations hereunder shall survive termination or
expiration of the Lease.
33.9 Lessee and Lessor each, for itself, its successors and assigns
hereby indemnifies and agrees to defend and hold the other and its successors
and assigns harmless from any and all claims, demands, obligations, losses,
liabilities, damages, recoveries and deficiencies (including interest, penalties
and reasonable attorney's fees, costs and expenses) (hereinafter collectively
"the Claims") which any of them may suffer as a result of the breach by the
other party in the performance of any of its commitments, covenants, or
obligations under this Article 33. Lessee does further agree to indemnify,
defend and hold harmless Lessor from any such Claims or with respect to any
suits, arbitration proceedings, administrative actions or investigations which
relate to the use by Lessee of the Demised Premises prior to the Closing Date or
any liability which may arise from operation by Lessee of the Demised Premises
as a nursing home prior to the Closing Date or any amounts recaptured under
Title XVIII and Title XIX based upon applicable Medicare/Medi-Cal Recapture
Regulations. Lessor does further agree to indemnify, defend and hold harmless
Lessee from any such Claims or with respect to any suits, arbitration
proceedings, administrative actions or investigations which relate to the
ownership of the Demised Premises by Lessor or the use of the Demised Premises
by Lessor or the operation by Lessor of the nursing home located thereon after
the Closing Date. The rights of Lessor under this paragraph are without
prejudice to any other remedies not inconsistent herewith which Lessor may have
against Lessee pursuant to the terms of this Sub-Sublease and the rights of
Lessee hereunder are subject to Section 22.1 hereof.
33.10 Anything to the contrary contained in this Article 33
notwithstanding, in the event the termination of this Sub-Sublease is due to a
default by Lessee, none of the provisions of this Article 33 shall in any way
limit, reduce, restrict or modify the rights granted to Lessor pursuant to
Articles 21, 23, and 24 of this Sub-Sublease. If the termination of this Sub-
Sublease is a result of an Event of Default, then to the extent any monies are
due to Lessee pursuant to this Article 33, such sums shall be applied by Lessor
to any damages suffered by Lessor as a result of Lessee's Event of Default.
ARTICLE XXXIV - MISCELLANEOUS
34.1 Lessee, upon paying the fixed Rent, Additional Rent including
Taxes and Assessments and all other charges herein provided, and upon observing
and keeping the covenants, agreements, terms and conditions of this Sub-Sublease
on its part to be performed, shall lawfully and quietly hold, occupy and enjoy
the Demised Premises during the Term of this Sub-Sublease, and subject to its
terms, without hindrance by Lessor or by any other person or persons claiming
under Lessor.
34.2 All payments to be made by the Lessee hereunder, whether or not
designated as Rent, shall be deemed Additional Rent, so that in the event of a
default of payment when due, the Lessor shall be entitled to all of the remedies
available at law or equity, or under this Sub-Sublease, for the nonpayment of
Rent.
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34.3 It is understood and agreed that the granting of any consent by
Lessor to Lessee to perform any act of Lessee requiring Lessor's consent under
the terms of this Sub-Sublease, or the failure on the part of Lessor to object
to any such action taken by Lessee without Lessor's consent, shall not be deemed
a waiver by Lessor of its rights to require such consent for any further similar
act by Lessee, and Lessee hereby expressly covenants and warrants that as to all
matters requiring Lessor's consent under the terms of this Sub-Sublease, Lessee
shall secure such consent for each and every happening of the event requiring
such consent, and shall not claim any waiver on the part of Lessor of the
requirement to secure such consent.
34.4 Lessee and Lessor each represent to the other party that it did
not deal with any broker in connection with this Sub-Sublease, and hereby
indemnifies the other party against the claims or demands of any broker claimed
through a relationship with it.
34.5 If an action shall be brought to recover any rental under this
Sub-Sublease, or for or on account of any breach of or to enforce or interpret
any of the terms, covenants or conditions of this Sub-Sublease or for the
recovery of possession of the Demised Premises, the prevailing party shall be
entitled to recover from the other party, as part of the prevailing party's
costs, reasonable attorney's fees, the amount of which shall be fixed by the
court and shall be made a part of any judgment rendered.
34.6 Should Lessee hold possession hereunder after the expiration of
the Term this Sub-Sublease with the consent of Lessor, Lessee shall become a
tenant on a month-to-month basis upon all the terms, covenants and conditions
herein specified, excepting however that Lessee shall pay Lessor a monthly
rental, for the period of such month-to-month tenancy, in an amount equal to
twice the last rental specified.
34.7 Any notice, or demand required to be given by either party to the
other shall be in writing and shall be sent by (a) personal delivery, (b)
expedited delivery service with proof of delivery, (c) United States
registered/certified mail, return receipt requested or (d) prepaid telecopy,
telegram, telex or fax, addressed to the other party hereto at the address set
forth below:
If to Lessor: Yuba Nursing Homes, Inc.
c/▇ ▇▇▇▇▇▇ Capital Ventures, Inc.
Suite ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lessee: Sunrise Healthcare Corporation
▇▇▇ ▇▇▇ ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
or if written notification of a change of address has been sent, to such other
party and/or to such other address as may be designated in that written
notification. Any such notice or demand shall be deemed to have been given
either at the time of personal delivery or in the case of service by mail, as of
the date of first attempted delivery at the address and in the manner provided
herein, or in the case of telecopy, telegram or telex, upon receipt.
34.8 Upon demand by either party, Lessor and Lessee agree to execute
and deliver a Memorandum of Lease in recordable form so that the same may be
recorded by either party.
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34.9 Each party agrees any time, and from time to time, upon not less
than ten (10) days prior written request from the other party, to execute,
acknowledge and deliver to the other party a statement in writing, certifying
that this Sub-Sublease is unmodified and in full force and effect (or if there
have been modifications, that the same is in full force and effect as modified,
and stating the modifications), the dates to which Rent has been paid, the
amount of the Security Deposit held by Lessor, and whether the Lease is then in
default or whether any events have occurred which, with the giving of notice or
the passage of time, or both, could constitute a default hereunder, it being
intended that any such statement delivered pursuant to this paragraph may be
relied upon by any prospective assignee, Mortgagee or purchaser of the fee
interest in the Demised Premises or of this Sub-Sublease.
34.10 All of the provisions of this Sub-Sublease shall be deemed and
construed to be "conditions" and "covenants" as though the words specifically
expressing or importing covenants and conditions were used in each separate
provision hereof.
34.11 Any reference herein to the termination of this Sub-Sublease
shall be deemed to include any termination thereof by expiration or pursuant to
Articles referring to earlier termination.
34.12 The headings and titles in this Sub-Sublease are inserted only as
a matter of convenience and for reference and in no way define, limit or
describe the scope or intent of this Sub-Sublease nor in any way affect this
Sub-Sublease.
34.13 This Lease contains the entire agreement between the parties and
any executory agreement hereafter made shall be ineffective to change, modify or
discharge it in whole or in part unless such executory agreement is in writing
and signed by the party against whom enforcement of the change, modification or
discharge is sought. This Lease cannot be changed orally or terminated orally.
34.14 Except as otherwise herein expressly provided, the covenants,
conditions and agreements in this Sub-Sublease shall bind and inure to the
benefit of the Lessor and Lessee and their respective successors and assigns.
34.15 All nouns and pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural as the identity
of the person or persons, firm or firms, corporation or corporations, entity or
entities or any other thing or things may require.
34.16 If any term or provision of this Sub-Sublease shall to any extent
be held invalid or unenforceable, the remaining terms and provisions of this
Sub-Sublease shall not be affected thereby, but each term and provision shall be
valid and be enforceable to the fullest extent permitted by law.
34.17 In the event of any conveyance or other divestiture of title to
the Demised Premises, the grantor or the person who is divested of title shall
be entirely freed and relieved of all covenants and obligations thereafter
accruing hereunder, and the grantee or the person who otherwise succeeds to
title shall be deemed to have assumed the covenants and obligations of the
grantor or the person who is divested of title thereafter accruing hereunder and
shall then be the Lessor under this Sub-Sublease Notwithstanding anything to the
contrary provided in this Sub-Sublease, if Lessor or any successor in interest
of Lessor shall be an individual, partnership, corporation, trust, tenant in
common or Mortgagee, there shall be absolutely no personal liability on the part
of any individual or member of Lessor or any stockholder, director, officer,
employee, partner or trustee of Lessor with respect to the terms, covenants or
conditions of this Sub-Sublease, and Lessee shall look solely to the interest of
Lessor in the Demised Premises for the satisfaction of each and every remedy
which Lessee may have for the breach of this Sub-Sublease; such exculpation from
personal liability to be absolute and without any exception, whatsoever.
34.18 The failure of either party to insist on strict performance of
any of the covenants, agreements,
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terms, and conditions of this Sub-Sublease or to exercise any option
conferred herein in any one or more instances shall not be construed to be a
waiver or relinquishment of any such covenant, agreement, term, condition or
option and the same shall be and remain in full force and effect.
34.19 This Lease may be executed in counterparts, each of which shall
be deemed to be an original but all of which taken together shall constitute but
one and the same instrument.
34.20 This Lease shall be governed by and construed in accordance with
the laws of the State of California.
34.21 This Sub-Sublease is conditioned upon Lessor obtaining all
consents or approvals required in connection with this Sub-Sublease, including
the consent of the landlords, to the extent required, under the Underlying
Leases (and the lender under any mortgage), which Lessor shall use reasonable
efforts to obtain following the execution hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Sub-Sublease to be
signed by persons authorized so to do on behalf of each of them respectively the
day and year just above written.
LESSOR: LESSEE:
YUBA NURSING HOMES, INC. SUNRISE HEALTHCARE CORPORATION,
an Illinois corporation a New Mexico corporation d/b/a
Moonrise Healthcare Corporation
By: By:
----------------------------- ----------------------------
Its: Its:
----------------------------- ----------------------------
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EXHIBIT A
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE CITY OF YUBA CITY, COUNTY OF
▇▇▇▇▇▇ STATE OF CALIFORNIA, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCE AT THE QUARTER SECTION CORNER BETWEEN SECTIONS 10 AND 15, TOWNSHIP
15 NORTH, RANGE 3 EAST, MOUNT DIABLO BASE AND MERIDIAN, AND RUN THENCE (MAG.
VAR. 16" 40' EAST) EAST 23 CHAINS AND 64 LINKS; THENCE SOUTH 25" EAST 3
CHAINS AND 43-LINKS: THENCE SOUTH 19" WEST 5 CHAINS AND 50 LINKS: THENCE
SOUTH 15 3/4 WEST 4 CHAINS AND 59 LINKS THENCE SOUTH 14 1/4" WEST 1 CHAIN AND
63 LINKS; THENCE SOUTH 1 1/4' WEST 42 CHAINS AND 52 LINKS TO AN IRON PIN IN
THE CENTER OF THE COUNTY ROAD, SAID PIN BEING THE NORTHWEST CORNER OF THE ▇.
▇. ▇▇▇▇▇▇ PROPERTY DESCRIBED IN DEED DATED APRIL 12, 1943 RECORDED IN BOOK
183 OF OFFICIAL RECORDS, PAGE 469, ▇▇▇▇▇▇ COUNTY RECORDS: THENCE NORTH 65
DEG. 00' EAST, ALONG THE NORTH LINE OF SAID ▇▇▇▇▇▇ PROPERTY 985.37 FEET TO
THE CENTER LINE OF PLUMAS STREET EXTENDED NORTHERLY; THENCE SOUTH 1 DEG. 09'
57" WEST, 40.90 FEET ALONG SAID CENTER LINE; THENCE SOUTH 65 DEG. 00' WEST
33.43 FEET TO A POINT IN THE WEST RIGHT OF WAY LINE OF PLUMAS STREET EXTENDED
AND THE POINT OF BEGINNING FOR THE PARCEL OF LAND HEREIN DESCRIBED; THENCE
CONTINUING SOUTH 65 DEG. 00' WEST 420.35 FEET; THENCE SOUTH 25 DEG. 00' EAST
190.00 FEET TO THE SOUTH LINE OF SAID ▇▇▇▇▇▇ PROPERTY; THENCE SOUTH 65 DEG.
00' WEST 269.57 FEET ALONG THE SOUTH LINE OF SAID PROPERTY; THENCE NORTH 11
DEG. 01' 52" WEST 233.65 FEET TO THE NORTH LINE OF SAID ▇▇▇▇▇▇ PROPERTY;
THENCE NORTH 65 DEG. 00' EAST 651.57 FEET ALONG SAID NORTH LINE; THENCE SOUTH
1 DEG. 09' 57" WEST 40.90 FEET TO THE POINT OF BEGINNING.
EXHIBIT B
To be completed within thirty (30) days of Commencement Date