the first year of the first Extended Term,
multiplied by a fraction, the numerator of which is the CPI of the second to
last month of the first Extended Term (i.e., November 2024) and the denominator
is the CPI of November 2014.
III.
The Minimum Rent during the first year of the
third Extended Term shall be increased by the greater of (a) 2% over the final
Minimum Rent due during the last year of the second Extended Term, (b) the
Minimum Rent due during the first year of the second Extended Term, multiplied
by a fraction, the numerator of which is the CPI of the second to last month of
the second Extended Term (i.e., November 2034) and the denominator is the CPI of
November 2024, or (c) an amount necessary to cause such Minimum Rent to be equal
to Fair Market Rent, which shall be determined as set forth on Exhibit C
attached hereto.
1.2.4.
RIGHT OF SUBSTITUTION.
PROVIDED THAT THERE IS NO EVENT
OF DEFAULT EXISTING UNDER EITHER OF THE MASTER LEASES, THEN SUBJECT TO THE TERMS
AND CONDITIONS SET FORTH IN THIS SECTION 1.2.4, ALC MAY SUBSTITUTE INTO THE
APPLICABLE
5
MASTER LEASE ONE, OR MORE, OF THE 122 ASSISTED LIVING FACILITIES OWNED AND
OPERATED BY ALC/CHAL PRIOR TO EHSI'S ACQUISITION OF ALC, INC. (A "SUBSTITUTE
FACILITY"). ALC MAY EFFECT SUCH A SUBSTITUTION IN THE EVENT THAT (A) THE
FACILITY TO BE SUBSTITUTED UNDER THE APPLICABLE MASTER LEASE BECOMES
UNPROFITABLE TO OPERATE BY ALC BASED ON ALC'S REASONABLE COMMERCIAL JUDGMENT, OR
(B) THE FACILITY TO BE SUBSTITUTED LOSES ANY LICENSES NECESSARY TO OPERATE THE
SAME AS AN ASSISTED LIVING FACILITY UNDER APPLICABLE STATE LAWS (SUCH LOSS OF
LICENSURE NOT BEING DEEMED AN EVENT OF DEFAULT,
PROVIDED ALC CONSUMMATES A
SUBSTITUTION IN ACCORDANCE WITH THIS MOU WITH RESPECT TO SUCH UNLICENSED
FACILITY).
UPON A MINIMUM OF NINETY (90) DAYS PRIOR WRITTEN NOTICE TO LTC ( A "SUBSTITUTION
NOTICE", WHICH SUBSTITUTION NOTICE SHALL INCLUDE THE INFORMATION CALLED FOR IN
EXHIBIT B HERETO AND SHALL BE IN A FORM REASONABLY ACCEPTABLE TO LTC) OF ALC'S
INTENT TO EFFECT SUCH SUBSTITUTION, ALC SHALL HAVE THE RIGHT TO SUBSTITUTE INTO
THE APPLICABLE MASTER LEASE A SUBSTITUTE FACILITY PROVIDED THAT ALL OF THE
FOLLOWING ADDITIONAL CONDITIONS WITH REGARD TO SUCH SUBSTITUTE FACILITY ARE MET
BOTH AT THE TIME OF THE SUBSTITUTION
NOTICE AND AT THE TIME OF THE CLOSING OF
THE SUBSTITUTION (ANY SUBSTITUTE FACILITY SATISFYING SAID CONDITIONS SHALL BE
REFERRED TO AS A "QUALIFYING SUBSTITUTE FACILITY"):
(I) THE SUBSTITUTE FACILITY
HAS AN EQUAL OR GREATER NUMBER OF ASSISTED LIVING UNITS AS THE ORIGINAL FACILITY
BEING SUBSTITUTED OUT; (II) THE EBITDARM OF THE SUBSTITUTE FACILITY FOR EACH OF
THE TRAILING THREE (3) MONTHS AND THE TRAILING TWENTY-FOUR (24) MONTHS,
RESPECTIVELY, IS EQUAL TO OR GREATER THAN THAT OF FACILITY BEING SUBSTITUTED
OUT; (III) THE SUBSTITUTE FACILITY IS FREE OF ANY ENCUMBRANCES OR LIENS OTHER
THAN MUNICIPAL AND ZONING ORDINANCES AND AGREEMENTS ENTERED THEREUNDER, RECORDED
BUILDING AND USE RESTRICTIONS, RECORDED EASEMENTS AND