LEASE
AGREEMENT
THIS AGREEMENT (the "Lease") is made and
entered into this 26th day of February, 1996 by
and between EMERITUS CORPORATION, a Washington
corporation ("Tenant"), and LM AUBURN ASSISTED
LIVING LLC, a Massachusetts limited liability
company ( " Landlord" ).
SECTION 1. THE PREMISES.
SECTION 1.1. FACILITY. Landlord hereby
demises and leases to Tenant and Tenant hereby
leases and takes from Landlord, the real property
described in Exhibit A hereto (the "Real
Property"), together with those certain
improvements (the "Improvements") to be
constructed by Landlord thereon consisting of a
senior housing facility with assisted living
services (the "Facility") as more particularly
described and provided for in the Construction
Work Letter attached hereto as Exhibit "B" and
incorporated herein by this reference (the "Work
Letter"), subject to those encumbrances and other
matters of record set forth on Exhibit " C "
attached hereto and incorporated herein by this
reference (the " Permitted Encumbrances"). The
Real Property, the Improvements and the Personal
Property (defined below) shall collectively
constitute the "Premises." Included within the
Improvements is that portion of that certain
access road as shown on Exhibit " D " attached
hereto which is located on the Real Property and
which shall provide vehicular access to and from
the Facility and Washington Street (Route 20) (the
"Access Road"). Tenant's right to use the Access
Road shall be shared only with those tenants and
occupants of the "Future Development" on the
" Adjacent Land " as described and defined in
Section 1. 5 below.
SECTION 1.2. PERSONAL PROPERTY. Landlord
hereby further demises and leases to Tenant, and
Tenant hereby leases and takes from Landlord, all
equipment, furniture, furnishings, and fixtures
which are to be installed as part of the
Improvements pursuant to the "Working Drawings and
Specifications" (as that term is defined in the
Work Letter) approved by Landlord and Tenant, as
provided for in the Work Letter, together with any
additional items added thereto from time to time
by written agreement between Landlord and Tenant
(such equipment, furniture, furnishings and
fixtures, together with all additions thereto or
replacements thereof will hereinafter be referred
to as the "Personal Property"). If any equipment,
in addition to the Personal Property, is necessary
or convenient to operate the Facility, all such
additional equipment shall be acquired by and at
the cost of Tenant and the same shall be and
remain the property of Tenant in accordance with
the terms of Section 1.2.1 below.
SECTION 1.2.1. Tenant shall keep all of the
Personal Property in good working order and
condition at Tenant's sole cost and expense, and
at the expiration or termination of the Lease Term
(as defined below) shall return and deliver all of
such property to Landlord in good working order
and condition, reasonable wear and tear excepted.
If necessary for the proper operation of the
Facility, Tenant shall, during the Lease Term,
replace part or all of the items of Personal
Property which have been damaged or destroyed or
become worn out or obsolete, and such replacement
shall be at the sole cost of Tenant, but any such
equipment which has been acquired for the purpose
of replacing Personal Property previously provided
by Landlord shall be and remain the
property of Landlord. Tenant may place additional
property on the Premises (not required for
replacement of property covered in this Lease),
and the same shall be and remain the property of
Tenant ("Tenant's Equipment").
SECTION 1.2.2. Landlord agrees upon request
of Tenant to subordinate any statutory or
Landlord's lien that Landlord may have to any
security interest granted by the Tenant to secure
a purchase money obligation or an acquisition
lease of any of Tenant's Equipment acquired by
Tenant pursuant to Section 1. 2.1.
SECTION 1.3. ACQUISITION OF PROPERTY. Tenant
hereby acknowledges and understands that Landlord
does not yet own the Real Property but is the
purchaser thereof pursuant to a purchase and sale
agreement (the "Purchase Agreement"). Landlord's
contractual agreement to purchase the Real
Property is subject to the satisfaction of certain
contingencies and conditions precedent, including
the procurement of financing and permits necessary
to construct the Improvements. Landlord covenants
and agrees to use its best efforts to acquire the
Real Property pursuant to the terms of the
Purchase Agreement; provided, however, if, despite
the exercise of Landlord's best efforts, Landlord
has not so acquired fee title interest to the Real
Property by the first anniversary of the date of
this Lease, either Landlord or Tenant shall have
the right to terminate this Lease by written
notice to the other delivered at any time prior to
the date Landlord actually acquires fee title to
the Real Property.
SECTION 1.4. INTENTIONALLY OMITTED.
SECTION 1. 5. FUTURE DEVELOPMENT.
SECTI0N 1.5.1. Tenant hereby acknowledges
that an affiliate of Landlord intends (but shall
not be obligated) to further develop land adjacent
to the Real Property identified on Exhibit "D"
attached hereto xx "Xxxxx 0" (xxx "Xxxxxxxx Xxxx")
by constructing thereon one or more buildings
together with associated parking areas, driveways,
utility installations and other related
improvements (the "Future Development"). Tenant
agrees to cooperate with Landlord's affiliate in
connection with any such Future Development by
providing any necessary temporary construction
easements, provided that said easements do not
interfere with the construction of the
Improvements, unreasonably interfere with the use
of the Access Road, or interfere with the
operation of Tenant's business from the Premises,
reduce the available parking for the Facility,
obstruct Tenant's access to the Facility and/or
interfere with the quiet enjoyment of Tenant's
residents. Landlord covenants and agrees that any
such Future Development shall (i) be of the same
or better quality of construction as the
Improvements constructed hereunder, (ii) consist
of an architectural style and appearance which
would be compatible and aesthetically consistent
with the appearance of the Improvements
constructed hereunder, (iii) not result in any
relocation or decrease in the parking facilities
constructed hereunder for the Improvements, all of
which parking hereunder shall remain for the
exclusive use of the Facility, (iv) not result in
any additional cost or expense to Tenant, and (v)
not create or result in, any noncompliance of the
Facility or associated improvements with any
statutes, codes, regulations, ordinances, or
orders of any agencies which regulate or are
responsible for approving or accrediting senior
housing with assisted living services (and
assisted living specifically) or which may be at
any time applicable to any portion of the
Premises, the Access Road or any use thereof.
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Landlord agrees that its affiliate shall not
deliver a substantially completed Future
Development to the occupant thereof within one
year of the Rent Commencement Date hereunder, nor
permit any marketing of said Future Development
facility within said one year period.
SECTION 1.5.2. From and after the Rent
Commencement Date, Tenant shall be responsible, at
its sole cost and expense, for maintaining and
repairing the portion of the Access Road located
on the Real Property (including repaving as
necessary) for snow removal and for maintaining
all landscaping for the Real Property, except that
from and after the commencement of construction of
the Future Development, Landlord shall cause its
affiliate to (i) promptly repair, at its sole cost
and expense, any damage caused to the Access Road
by any of Landlord's affiliate's construction
activities with respect to the Future Development,
and (ii) pay for any additional improvements to
the Access Road which may be necessary or required
in connection with the construction of the Future
Development. Tenant shall, at no time, have any
responsibility whatsoever with respect to the
maintenance of the Adjacent Land. Until such time
as the Adjacent Land has been improved with the
Future Development, Landlord covenants and agrees,
at Landlord's sole cost and expense, to perform
routine weed abatement and trash removal as
necessary to keep and maintain the Adjacent Land
in a clean and sightly condition. In connection
with Landlord's design and construction of the
Future Development, Landlord shall cause the
Future Development to be professionally landscaped
consistent with the quality of landscaping
installed for the Improvements hereunder. Upon
completion of the Future Development, Landlord
shall cause its affiliate to keep and maintain or
shall cause the occupant of the Future Development
or any successor to Landlord's affiliate's
interest therein, to keep and maintain, all such
landscaping installed at the Adjacent Land in a
good and sightly condition.
SECTION 1. 5. 3. In the event of any sale of
the Adjacent Land, Landlord shall cause its
affiliate to record in the county recorder's
office, prior to said sale, restrictive covenants
consistent with the provisions of this Section 1.5
and in form and substance reasonably approved by
Tenant. Any failure by the owner and/or operator
of the Adjacent Land to comply with the provisions
of Section 1.5 (it being the responsibility of the
Landlord to notify any such owner and operator of
the same), or by the ground lessor under the
ground lease to enforce the provisions of Section
1.5 through its ground lease of the Adjacent Land,
shall be deemed a default by Landlord hereunder.
SECTION 2. TERM.
SECTION 2.1. INITIAL LEASE TERM. Subject to
the provisions of Section 2.1.1, the term of this
Lease shall commence on the date of execution as
first set forth above (the "Commencement Date")
and shall continue for a period of twenty (20)
years following the "Rent Commencement Date" (as
that term is defined below), subject to (i) the
right of Tenant to extend the term as provided for
in Section 2. 1.1 below and (ii) any earlier
termination by either party, as permitted herein
(the "Initial Lease Term"). Notwithstanding the
foregoing, in the event the Lease Term expires on
any day other than the last day of a calendar
month, the Lease Term shall be automatically
extended by the number of days necessary to cause
the Lease Term to expire on the last day of the
month.
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SECTION 2.1.1. Tenant shall have the right to
renew this Lease beyond the Initial Lease Term for
two (2) successive ten (10) year renewal terms
(the "Renewal Terms" and together with the Initial
Lease Term, the "Lease Term") by giving notice of
the exercise of its renewal option at least
fifteen (15) months prior to the expiration of the
Initial Lease Term with respect to the exercise of
the first such renewal option, and prior to the
expiration of the first Renewal Term with respect
to the exercise of the second renewal option. In
the event Tenant is in default on the date of the
giving of notice of its intent to renew the Lease,
the notice shall be ineffective; in the event
Tenant is in default on the date the applicable
Renewal Term is to commence, then the Renewal Term
shall not commence and this Lease shall expire as
of the end of the Initial Lease Term or the
applicable Renewal Term. Tenant shall have no
right to renew this Lease beyond the expiration of
the final Renewal Term. During each Renewal Term
all of the terms and conditions of this Lease
shall continue to apply, except that there shall
be an adjustment to the amount of Basic Rent as
provided for in Section 3.4 below.
SECTION 2.2. RIGHT TO TERMINATE. Landlord
acknowledges and understands that it is Tenant's
intent that this Lease comply with Rule 13 of the
Financial Accounting Standards Board ("FASB 13")
in order to permit Tenant, for accounting
purposes, to treat this Lease as an operating
lease. For that purpose, Landlord hereby agrees
that, notwithstanding anything to the contrary
contained herein, Tenant may elect to terminate
this Lease effective as of the expiration of the
sixteenth (l6th) Lease Year of the Term by giving
Landlord written notice of its election not later
than the expiration of the ninth (9th) Lease Year
of the Term (the "Termination Notice"). Tenant
shall not, however, have the right to terminate
this Lease if Tenant shall be in default hereunder
either at the time of delivery of the Termination
Notice or as of the effective date of termination.
If Tenant fails for any reason to deliver the
Termination Notice by the expiration of the ninth
(9th) Lease Year, Tenant's right to so terminate
this Lease shall not have expired or be deemed to
have been waived until such time as (i) Landlord
notifies Tenant in writing that the date for the
delivery of the Termination Notice is past due
(the "Reminder Notice") and (ii) Tenant shall have
failed, within thirty (30) days following Tenant's
receipt of the Reminder Notice, to have delivered
to Landlord the Termination Notice. In the event
Tenant exercises its right to terminate this Lease
pursuant to the foregoing, Landlord shall have the
right, exercisable by written notice to Tenant, to
select an effective termination date earlier than
the expiration of the sixteenth (l6th) Lease Year
(the "Early Termination Effective Date"), provided
that the Early Termination Effective Date shall
not be early than the date one hundred twenty
(120) days following the date Tenant receives
Landlord's written notice designating said Early
Termination Effective Date. The parties further
acknowledge that this Lease is being entered into
in conjunction with those certain two (2) other
Lease Agreements, one of which relates to a parcel
of real property located in Rocky Hill,
Connecticut and is by and between Tenant and LM
Rocky Hill Assisted Living Limited Partnership, a
Delaware limited partnership (the "Rocky Hill
Lease") and the other of which relates to a parcel
of real property located in Louisville, Kentucky
and is by and between Tenant and LM Louisville
Assisted Living LLC, a Delaware limited liability
company (the
"Louisville Lease"). The Rocky Hill Lease and the
Louisville Lease each include a provision
comparable to this Section 2. 2 which permits
Tenant to terminate each such lease early. The
exercise by Tenant to terminate either the Rocky
Hill Lease and/or the
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Louisville Lease pursuant to any such comparable
provision thereof shall also be deemed an election
by Tenant to terminate the Term of this Lease
pursuant to the terms of this Section 2.2
regardless of whether or not Tenant has delivered
the Termination Notice hereunder.
SECTION 3. RENT.
SECTION 3.1. BASIC RENT. During the Initial
Lease Term, the annual rent due hereunder (the
"Basic Rent") shall be determined according to the
following formula:
Basic Rent =
TPC x CR x DC
"TPC" means the "Total Project Cost" as that
term is defined in the Work Letter.
"CR" means a coverage ratio of 1.20.
"DC" means a debt constant equal to
Landlord's cost of funds calculated at the time
Landlord secures a commitment for permanent
financing which meets the following criteria: (i)
interest shall be at a fixed rate, (ii) the loan
shall be non-recourse to Landlord, subject to
customary exceptions (e.g. recourse for
environmental liability and violations of the
American Disabilities Act), (iii) the term of the
loan shall be for 10 years, (iv) the loan shall be
amortized over a term of 22 years, (v) the
principal amount of the loan shall be not more
than one hundred percent (100% ) of the Total
Project Cost. Landlord shall keep Tenant apprised
with respect to its efforts to secure permanent
financing and Tenant may participate in the
process of obtaining such financing.
Pursuant to the above formula, (i) the Total
Project Cost has been determined to be $6,435,944,
based upon the project cost budget set forth on
Exhibit B-2 attached hereto, (ii) the debt
constant ("DC") has been set at ______ and (iii)
the Basic Rent is hereby set at $__________ per
year, subject to the provisions of Sections 3.3,
3.4 and
Section 3.1.2.
SECTION 3.1.1. The obligation to pay the
Basic Rent and Additional Rent shall
commence on the earlier of (i) the date of
Substantial Completion or (ii) the date upon which
Tenant moves into the Facility and commences to
occupy the Premises (other than for the purpose of
constructing any tenant improvements) (the "Rent
Commencement Date"). Basic Rent shall be paid in
advance in equal monthly installments on the tenth
day of each month; provided, however, that the
first monthly payment shall be due on the tenth
day after the Substantial Completion. For purposes
of this Lease, a Lease Year shall be the twelve
(12) month period commencing on the date of
Substantial Completion. In the event the date of
Substantial Completion shall be other than the
first day of the month, Tenant shall pay to
Landlord a pro rata portion of rent for the month.
SECTION 3.1.2. Notwithstanding any other
provisions of this Lease Agreement to the
contrary, from and after the Rent Commencement
Date until the Maturity Date of Landlord's
construction loan, to the extent that Tenant's Net
Operating Income from the Facility is less than
the monthly Basic Rent owed to Landlord (the
difference being the "Net Operating Deficiency"),
after Tenant demonstrates in writing to Landlord's
reasonable satisfaction that Tenant has used
$250,000 of Tenant's own funds to make up
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operating deficits, Tenant shall have the right to
pay to Landlord in full satisfaction of its
monthly Basic Rent obligation (subject to the
provisions of this Section 3. I.2), its monthly
Net Operating Income from the Facility for the
prior month and Landlord may draw down the balance
of its monthly Basic Rent from " Rent-up Reserve
Funds " (as hereinafter defined). The " Rent-up
Reserve Funds " shall mean the amount of Two
Hundred Fifty Thousand Dollars ($250,000), set
aside by Landlord's construction lender for such
purpose and funded on a monthly basis upon
requisitions by Landlord with proceeds from
Landlord's construction loan. Tenant's right
pursuant to this Section 3.1.2 to pay less than
the full monthly Basic Rent then due (a) shall be
contingent upon Landlord's construction lender's
actual funding of the Rent-up Reserve Funds and
the continued availability thereof based on the
construction lender's requirements and conditions
set forth in the pertinent loan documents and (b)
shall automatically terminate upon the depletion
of the Rent-up Reserve Funds or if for any other
reason any or all of such Rentup Reserve Funds
become unavailable to Landlord. If in any month,
Tenant has paid its monthly Net Operating Income
from the previous month but Landlord is unable to
draw the remaining Basic Rent due from the Rent-up
Reserve Funds, then Tenant shall pay to landlord
such remaining Basic Rent due within five (5) days
of written notice from Landlord. If such Rent-up
Reserve Funds become unavailable to Landlord as a
result of a default in its construction loan,
which default is not caused by the default of
Tenant hereunder, then Basic Rent shall be
adjusted prospectively (i.e., from the date such
funds become unavailable due to such Landlord
default) (but not retroactively) by reducing Total
Project Cost by such portion (or all) of the
$250,000 Rent-up Reserve Funds as are not
available to Tenant. If the Rent-up Reserve Funds
are temporarily unavailable due to a Landlord
default, but such funds become available again due
to Landlord's cure, then Basic Rent shall not be
adjusted. In the event that, during the term of
Landlord's construction loan, Net Operating Income
is equal to or greater than the monthly Basic Rent
so that there is no longer a monthly Net Operating
Deficiency, prior to the full disbursement of the
Rent-up Reserve Funds, then Tenant may direct
Landlord to, and upon receipt of said direction
from Tenant Landlord shall draw down any unfunded
amount of the Rent-up Reserve Funds to reimburse
Tenant for amounts expended by it for operating
deficits prior to its exercise of rights under
this Section 3.1.2. In the event that Tenant
elects not to draw down the full $250,000 Rent-up
Reserve Funds, then Tenant shall so notify
Landlord and Total Project Cost shall be reduced
by the amount which Tenant elects not to draw down
and Basic Rent shall be adjusted prospectively
(but not retroactively), provided that once Tenant
has so notified Landlord, it may not thereafter
have the benefit of this Section 3.1.2. In any
month where the Tenant exercises its rights under
this Section 3.1.2, its payment of its monthly Net
Operating Income from the previous month shall be
accompanied by an accounting of income and
expenses for such previous month, certified by the
President of Tenant as true and correct and
calculated in compliance with generally accepted
accounting principles, consistently applied. For
purposes of this Section, "Net Operating Income"
shall mean Tenant's net income from continuing
operations at the Facility before debt service
(which net income shall not include depreciation,
amortization, non cash expenses, or any
extraordinary or non-recurring items of income or
loss).
SECTION 3.2. PAYMENT OF BASIC RENT. Except as
specifically provided for herein, the Basic Rent
shall be payable without offset, abatement or
other deduction to Landlord at the address set
forth in Section 16, or to such other person, firm
or corporation at such other address as Landlord
may designate by notice in writing to Tenant.
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SECTION 3.2.1. This Lease is intended to be
triple net to Landlord, and Tenant shall pay to
Landlord, net throughout the Initial Lease Term
and any Renewal Term, the Basic Rent prescribed by
Section 3.1. , free of any offset, abatement, or
other deduction, except as may be expressly set
forth herein. Except as may otherwise be expressly
set forth herein, Landlord shall not be required
to make any payment of any kind with respect to
the Premises and Tenant agrees to pay as they
become due and payable all costs, expenses, and
obligations of every kind relating to the Premises
whether usual or unusual, ordinary or
extraordinary, foreseen or unforeseen, which may
arise or become due following the Rent
Commencement Date (the "Additional Rent"). (Basic
Rent and Additional Rent are sometimes referred to
collectively herein as "Rent"). Notwithstanding
the foregoing, Landlord shall be responsible for
making all payments due with respect to any
mortgage or deed of trust secured by the Premises
(the
"Facility Mortgage"), Landlord's costs associated
with the Adjacent Land, as provided herein, and
all income taxes assessed against Landlord, and
all estate, succession or inheritance taxes of
Landlord.
SECTION 3.2.2. This Lease shall continue in
full force and effect, and the obligations of
Tenant hereunder shall not be released, discharged
or otherwise affected except as specifically set
forth in (i) Section 10, regarding damage to or
destruction of the Premises or any part thereof,
(ii) Section 11, regarding the taking of the
Premises or any part thereof by condemnation,
requisition or otherwise for any reason, (iii)
Section 17.2, regarding curing of mortgage
defaults and (iv) such other provisions of this
Lease which expressly provided for any abatement
or termination rights granted in favor of Tenant.
SECTION 3. 2. 3. If any payment of any sums
required to be paid by Tenant to Landlord under
this Lease and payments made by Landlord under any
provision hereof for which Landlord is entitled to
reimbursement by Tenant is not paid when due or
within ten (10) days after written notice of
nonpayment from Landlord, interest at the "Prime
Rate" plus two percent (2%) per annum, to Landlord
from the original date due until actually paid. No
failure by Landlord to insist upon the strict
performance by Tenant of Tenant's obligation to
pay late charges shall constitute a waiver by
Landlord of its rights to enforce the provisions
of this Section in any instance thereafter
occurring.
SECTION 3. 3. RENT INCREASES. Effective as of
the expiration of each sixty (60) month period
during the Term commencing from the Rent
Commencement Date, the Basic Rent shall be
adjusted upward by an amount equal to the greater
of (i) one-half of the increase in the Consumer
Price Index (as that term is defined below)
determined in the manner provided for below, and
(ii) ten percent (10%) of the Basic Rent payable
by Tenant hereunder as of the date immediately
preceding the effective date of the rent
adjustment; provided, however, in no event shall
the Basic Rent be increased on any adjustment date
by more than fifteen percent (15% ) of the Basic
Rent in effect as of the date immediately
preceding the effective date of adjustment.
As used herein the term "Consumer Price
Increase" shall mean the United States Department
of Labor, Bureau of Labor Statistics Consumer
Price Index, All Urban Consumers, All Items, for
Northeast Urban (1982-1984=100). If at any time
there shall not exist the Consumer Price Index in
the same format as recited in this Section 3. 3,
Landlord shall substitute any official index
published by the Bureau of Labor Statistics or
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successor or similar governmental agency, as may
then be in existence and shall be most equivalent
thereto. The increase in the Consumer Price Index
shall be determined by according to the percentage
increase, if any, between the index published and
in effect ninety (90) days preceding the
adjustment date and the index published and in
effect ninety (90) days preceding the Rent
Commencement Date.
SECTION 3. 4. RENT DURING THE RENEWAL TERMS.
As of the commencement of each Renewal Term the
Basic Rent shall be adjusted to equal the greater
of (a) the Basic Rent payable during the last
Lease Year prior to the Renewal Term or (b) the
then prevailing Fair Market Rental (as defined
below) for the Premises. As used herein, the term
"Fair Market Rental" for the Premises shall mean
the rental that Landlord could obtain from a third
party desiring to lease the Premises for the
Renewal Term and shall be based on the Premises in
its "as is" condition, provided that the Facility
has been maintained in accordance with the terms
of this Lease. Landlord shall send to Tenant,
within fifteen (15) days following Landlord's
receipt of Tenant's notice exercising the renewal
option, written notice setting forth Landlord's
determination of the Fair Market Rental for the
Renewal Term. If Tenant objects to Landlord's
determination of the Fair Market Rental for the
Premises, Tenant shall notify Lessor within
fifteen (15) days of Tenant's receipt of
Landlord's notice. If Tenant fails to notify
Landlord within said fifteen (15) day period,
Tenant shall be deemed to have approved Landlord'
s determination of the Fair Market Rental.
If Tenant objects to Landlord's
determination, Landlord and Tenant shall each
appoint its own qualified MAI appraiser, with
nationally recognized credentials in the field of
senior housing with assisted living services, with
substantial experience in senior housing with
assisted living services, to appraise the Premises
within forty-five (45) days of Tenant's objection
(the "Landlord's Appraisal" and "Tenant's
Appraisal") for the purpose of determining the
Fair Market Rental. If either party fails to
employ and pay an MAI appraiser to determine the
Fair Market Rental and/or fails to submit its
appraisal to the other within said forty-five (45)
days together with a written summary of the
methods used and the data collected, the remaining
party's appraisal shall be accepted as the Fair
Market Rental. If Landlord's Appraisal and
Tenant's Appraisal differ by (i) less than ten
percent (10%), the average of the two shall be the
Fair Market Rental for the Premises, or (ii) more
than ten percent ( 10 % ), Landlord and Tenant
shall promptly instruct its respective appraiser
to jointly appoint a third MAI appraiser with
similar credentials and experience, who shall
within fifteen (15) days of his selection select
the one of the two appraisals which most
accurately defines Fair Market Rental. The third
appraiser shall not have the power to amend,
modify, compromise, or average the first two
appraisals. Landlord and Tenant shall each pay the
cost of its own appraiser and one-half (1/2) of
the cost of the third appraiser. In the event the
Basic Rent for the Renewal Term is determined by
the appraisal procedure described above, Tenant
shall have the right to terminate Tenant's
exercise of the renewal option by written notice
delivered to Landlord delivered at any time within
twenty (20) days following Tenant's receipt of
written notice regarding the third appraiser's
Fair Market Rental determination. Time is of the
essence for all of the time periods set forth in
this Section.
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SECTION 3. 5. TAXES.
SECTION 3. 5.1. Tenant shall pay directly to
the applicable taxing authority, by the applicable
due date, all "Taxes" (as that term is defined
below) for each fiscal period wholly included in
the Lease Term (and a prorated amount thereof for
partial years occurring during the first and last
Lease Years of the Lease Term) assessed with
respect to the Premises, which payments shall be
deemed additional rent hereunder, in addition to
the basic rent herein before set forth.
Any interest or penalties which accrue as a
result of Tenant's failure to make such payment
within the time required by this Article 5 shall
be the sole responsibility and obligation of
Tenant. In the event Landlord receives any xxxx
for Taxes with respect to the Premises, Landlord
shall promptly deliver to Tenant a copy of the
same. "Taxes" shall mean all real estate taxes,
general and special assessments, personal property
taxes, and other public charges which are
assessed, levied, confirmed, or imposed upon the
Premises during the Lease Term, and all sales
taxes and other taxes that are now or hereafter
may be payable in connection with the Basic Rent
payable hereunder during the Initial Lease Term
and any Renewal Term (other than income taxes
owing by Landlord as a result of Tenant's payment
of Basic Rent hereunder and principal and interest
payments owing to Landlord's Mortgagee).
SECTION 3. 5. 2. Any taxes and assessments
relating to a fiscal period of any authority, a
part of which is already included within the
Initial Lease Term or any Renewal Term and a part
of which is included in a period of time before or
after the Initial Lease Term or any Renewal Term,
shall be adjusted pro rata between Landlord and
Tenant and each party shall be responsible for its
pro rata share of any such taxes and assessments.
SECTION 3. 5. 3. Nothing herein shall require
Tenant to pay income taxes assessed against
Landlord, or estate, succession or inheritance
taxes of Landlord.
SECTION 3.5.4. Tenant may contest, in is own
name or in the name of Landlord, with Landlord's
cooperation, which Landlord agrees to give, the
legality or validity of any such tax or assessment
or of any law under which the same shall be
imposed. This must be done in good faith, with due
diligence, and at Tenant's own expense. If Tenant
does so contest such tax or assessment beyond the
time limit for payment thereof by Tenant, Tenant
shall either pay such amount under protest or
procure and maintain a stay of all proceedings
with adequate bond to enforce collection of such
tax or assessment. Once such action is taken by
Tenant, Tenant shall not be considered to be in
default hereunder with respect thereto.
Notwithstanding anything to the contrary, Tenant
shall not exercise its contest rights in
contravention of any of the terms and conditions
of any Facility Mortgage. Landlord shall also have
the right, at landlord's sole cost and expense, to
contest in good faith and with due diligence any
assessment with respect to the Real Property or
the Future Development.
9
SECTION 3. 5. 5. Tenant shall have, and
Landlord hereby irrevocably grants to Tenant, the
power and authority, at Tenant's cost to make and
file and prosecute any statement or report or
claim for refund which may be required or
permitted by law, as the basis of or in connection
with the assessment, determination, equalization,
reduction or payment of any and every tax or
assessment or license or charge which Tenant is
required to pay or discharge hereunder.
SECTION 3. 5. 6. Landlord shall not be
required to join in any proceedings referred to in
this Section, 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 Landlord, in which event Landlord
shall join in such proceedings or permit the same
to be brought in its name. Landlord shall not
ultimately be subjected to any liability for the
payment of any costs or expenses in connection
with any such proceedings, and Tenant will
indemnify, defend and save harmless Landlord from
any such costs and expenses. Tenant shall be
entitled to any refund of any taxes and
assessments and penalties or interest thereon
received by Landlord but previously paid or
reimbursed in full by Tenant.
SECTION 3. 5. 7. Upon the termination of any
such proceeding, Tenant 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.
SECTION 3. 5. 8. Notwithstanding any other
provision of Section 3. 5 to the contrary, in the
event that any Facility Mortgagee requires the
monthly escrow of estimated Taxes, then Tenant
shall cause such monthly payments to be made in to
an impound account as directed by said Facility
Mortgagee, provided that all interest accruing on
funds deposited in to said account shall accrue
for the benefit of Tenant.
SECTION 4. USE OF THE PREMISES/COMPLIANCE
WITH LAWS.
SECTION 4.1. PERMITTED USES. The Premises may
be used only for senior housing with assisted
living services and for no other purpose. Tenant
agrees that such use shall not change, for the
term of Landlord's construction loan and for the
term of any permanent loan, unless such change is
approved by the applicable Facility Mortgagee. The
approval of a Facility Mortgagee shall not be
unreasonably withheld, provided that, in
considering a request for a change in use, the
Facility Mortgagee may consider the market
feasibility of any proposed use, the existence of
competing projects, the demand for assisted living
housing, the operating history of the Facility and
similar criteria. Tenant assumes full
responsibility for confirming that such use is
permitted under all laws, statutes, ordinances,
regulations, and orders governing the Real
Property and for obtaining any certificate of
need, license or other authorization required to
operate such use and/or to provide assisted living
services within the Facility (provided that it
shall be Landlord's obligation to obtain the
necessary building permit and certificate of
occupancy for the Improvements and for assuring
that the Improvements constructed by Landlord
comply with all applicable laws, statutes,
ordinances, rules, regulations, orders,
restrictions and other governmental requirements
of any governmental entities and
10
divisions having regulatory authority over Tenant
and the Improvements by virtue of the health care
business conducted by Tenant). Landlord makes no
representation or warranty as to the compliance of
such use under any such laws, statutes,
ordinances, regulations, and orders governing the
Real Property and/or insurance requirements. Any
failure by Tenant to obtain or maintain any
required authorization or approval (other than by
reason of Landlord's failure to cause the
Improvements to be constructed so as to comply
with the licensure/approval requirements as
required of Landlord herein) shall not affect
Tenant's obligation to pay Rent or any other
obligation hereunder.
SECTION 4.2. OPERATING APPROVALS. Tenant
covenants upon execution of this Lease to proceed
with all due diligence to comply with all
notification and reporting requirements imposed on
an operator or proposed operator of an assisted
living residence and to use its best efforts to
obtain within thirty (30) days after the
Substantial Completion date the necessary
certification for the operation of the Facility as
an assisted living residence under applicable
state and federal law and shall maintain the same
in full force and effect throughout the Lease
Term. Landlord agrees to assist Tenant as
reasonably necessary to obtain said certification
at Tenant's expense. In addition, in the event
that any certification or license held by Tenant
lapses, expires or is canceled, revoked or
suspended, then Tenant shall immediately notify
Landlord. Notwithstanding the foregoing, Landlord
acknowledges and understands that the Executive
Office of Elder Affairs for the Commonwealth of
Massachusetts has only recently enacted
regulations governing the certification of
assisted living residences and that said
regulations have not been in place long enough so
as to permit the Executive Office of Elder Affairs
to establish definitive procedures for the
implementation of said regulations. Accordingly,
in the event Tenant is unable, despite its best
efforts, to obtain said certification within said
thirty (30) day period, Tenant shall not be deemed
in default hereunder, provided that Tenant is
proceeding with all necessary due diligence and is
continuing to exercise its best efforts, to obtain
said certification from the Executive Office of
Elder Affairs as soon as possible.
SECTION 4. 3. COMPLIANCE WITH INSURANCE.
After the Commencement Date, Tenant shall neither
use nor permit to be used the Premises, or any
part thereof for any purpose which will cause the
cancellation of any insurance policy covering the
Premises or any part thereof, nor shall Tenant
sell or permit to be kept, used or sold in or
about the Premises any article which may be
prohibited by the standard form of fire insurance
policies. Tenant shall, at its sole cost, comply
with all of the requirements pertaining to the
Premises of any insurance organization or company
necessary for the maintenance of insurance, as
herein provided, covering the Premises.
SECTION 4.4. WASTE/COMPLIANCE WITH LAWS.
Tenant covenants and agrees that the Premises
shall not be used for any unlawful purpose. Tenant
shall not commit or suffer to be committed any
waste on the Premises, nor shall Tenant cause or
permit any nuisance thereon. Tenant further
covenants and agrees that Tenant's use of the
Premises and maintenance, alteration, and
operation thereof shall at all times conform to
all applicable and lawful local, state, and
federal laws, ordinances, and regulations,
including orders of agencies which regulate or are
responsible for accrediting senior housing with
assisted living services. Tenant shall make such
alterations to the Premises (whether capital or
non-capital in nature) as may become necessary
after the Rent Commencement Date to maintain the
Premises in compliance with applicable laws. If a
11
change in law requires alterations of a capital
nature during the last three (3) years of the
Term, then Tenant shall pay the cost thereof but
may amortize same over its useful life under
generally accepted accounting principles and, upon
Lease termination, Landlord shall reimburse Tenant
for that portion of the cost attributable to the
remaining useful life. Tenant may, however,
contest the legality or applicability of any such
legal requirements. This must be done in good
faith, with due diligence, without prejudice to
Landlord's rights hereunder, and at Tenant's own
expense. While such a contest is pending Tenant
shall not be considered in default under this
Section 4.4. Notwithstanding anything to the
contrary, Tenant shall not exercise its rights to
contest under this Section in contravention of the
terms and conditions of any mortgage which may be
secured by the Facility.
SECTION 4.5. SURVEYRS AND INSPECTIONS. Upon
written request, Tenant shall deliver to Landlord
a copy of the results of all surveys,
investigations and inspections of the Facility and
its operation performed by state or federal
authorities.
SECTION 4.6. ENVIRONMENTAL COMPLIANCE.
SECTION 4.6.1. Tenant shall use the Premises
in compliance with all applicable Environmental
Laws (as defined below). Tenant shall not
generate, store or use any Hazardous Materials in
or on the Premises, nor permit any Person to do so
on the Premises, except those customarily
generated, stored and used in the operation of a
senior housing facility with assisted living
services, and then only in compliance with all
Environmental Laws (as defined below), insurance
requirements and applicable industry standards.
Tenant shall not dispose of Hazardous Materials on
the Premises (or permit any person to do so) to
any other location except a properly licensed
disposal facility and then only in compliance with
all applicable Environmental Laws. Tenant shall,
at its sole cost and expense, promptly remove or
clean up any hazardous substances introduced onto
the Premises by Tenant or with its permission or
at its sufferance. Such removal or cleanup shall
be in compliance with all applicable Environmental
Laws. Tenant hereby agrees to indemnify and hold
Landlord and any Facility Mortgagee harmless and
agrees to defend Landlord and any Facility
Mortgagee from all losses, damages, claims and
liabilities and fines, including costs and
reasonable attorneys' fees, of any nature
whatsoever in connection with the actual presence
upon the Premises of any hazardous substance
introduced by Tenant. For purposes hereof, the
term "Environmental Laws" shall mean any and all
applicable governmental laws, regulations and
requirements relating to environmental and
occupational health and safety matters and
hazardous materials, substances or wastes (as
defined from time to time under any applicable
federal, state or local laws, regulations or
ordinances). The provisions of this Section 4.6
shall survive the expiration or earlier
termination of this Lease.
SECTION 4.6.2. HAZARDOUS MATERIALS. The term
"hazardous materials" shall mean any chemical,
substance, waste, material, gas or emission which
is deemed hazardous, toxic, a pollutant, or a
contaminant under any statute, ordinance, by-law,
rule, regulation, executive order or other
administrative order, judgment, decree, injunction
or other judicial order of or by any governmental
authority, now or hereafter in effect, relating to
pollution or protection of human health or the
environment. By way of illustration and not
limitation, "Hazardous Materials" includes
asbestos, radioactive materials, and "oil",
"hazardous materials", "hazardous waste",
"hazardous substance"
12
and "toxic material" as defined in the
Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601 et seq.
, as amended, the Resource Conservation and
Recovery Act of 1976, 42 U. S. C. Section 2601 et
seq. , as amended, the regulations promulgated
thereunder, the Massachusetts Oil and Hazardous
Material Release Prevention and Response Act,
M.G.L. c. 21E; and the Massachusetts Hazardous
Waste Management Act, M.G.L. c. 21C. and the
regulations promulgated thereunder.
SECTION 5. FACILITY MORTGAGEE REQUIREMENTS.
In order to satisfy the requirements of Landlord's
construction lender and/or permanent lender
holding a Facility Mortgage (collectively,
together with their successors and assigns,
"Facility Mortgagee") Tenant hereby agrees as
follows:
SECTION 5.1. From and after the Rent
Commencement Date, Tenant shall provide Landlord
with the following financial statements and
information on a continuing basis:
(a) Within ninety (90) days after the end of
each calendar year, a
statement of income and expenses for the year then
ended, and separate financial statements on the
operations of the Facility certified by the chief
financial officer of the Tenant to be true and
correct.
(b) Within forty-five (45) days after the end
of each calendar year quarter, and within fifteen
(15) days after the request of a Facility
Mortgagee (but not more often than monthly), in
either case after the Rent Commencement Date, a
certificate from the chief financial officer of
the Tenant, in form acceptable to the Facility
Mortgagee, providing occupancy data (including
unit rents) for the Facility.
(c) Within forty-five (45) days after the end
of each calendar quarter, following the Rent
Commencement Date, a current year-to-date
operating statement for the Facility as of the end
of such quarter and the quarterly financial
statement for the Facility in the form and detail
set forth in Exhibit H hereto, properly completed
and certified by the Tenant to be true and
correct.
(d) Within three (3) days of the receipt by
the Tenant or the Facility, any and all notices
(regardless of form) from any licensing and/or
certifying agency that such license or
certification (held by Tenant or other service
provider) is being revoked, downgraded or
suspended or that action is pending or being
considered to revoke or suspend the license,
certification, permits or any rights thereunder
(held by Tenant or other service provider) and any
license and certification survey reports or
statements of deficiencies (with plans of
correction attached thereto).
The Landlord reserves the right to require
from Tenant supporting or back-up information with
respect to items (a) through (d) above.
13
SECTION 5.2. CONDUCT OF BUSINESS. Upon the
Rent Commencement Date, Tenant shall cause the
Facility to be properly operated as a senior
housing with assisted living services facility and
for no other uses. Without limiting the foregoing,
Tenant shall:
(a) maintain the standard of care for the
residents of the Facility at all times at a level
necessary to insure quality care for the residents
of the Facility ;
(b) maintain sufficient inventory and
equipment of types and quantities at the Facility
to enable Tenant adequately to perform all
operations at the Facility.
SECTION 5. 3. RESIDENCE AGREEMENTS. Tenant
shall establish as policy and will request and use
its best efforts to require that any and all
residents or other persons for which the Tenant
(or an agency retained by Tenant) provides
services execute and deliver to the Tenant a
residency agreement. Tenant has submitted to
Landlord its form of residency agreement;
Landlord's consent shall not be required for
changes to or modifications of such residency
agreement over the term of this Lease.
SECTION 6. MAINTENANCE, REPAIR, ALTERATIONS
AND UTILITIES.
SECTION 6.1. TENANT'S MAINTENANCE. Tenant
shall, at its own cost, and without expense to the
Landlord, maintain the Premises, including all
sidewalks, buildings, building systems, water,
sewer and other utility lines on the Real Property
serving the Facility, surface parking lots,
exterior lighting and improvements of any kind
which may be a part thereof in good, sanitary and
neat order, condition and repair, ordinary wear
and tear, casualty, condemnation and acts of God
excepted. Tenant's obligations shall include,
without limitation, replacements of structural
components, roof and building systems, and other
necessary capital expenditures, as required by the
previous sentence. Tenant shall maintain the
Premises in such a manner as may be necessary to
operate the Facility in accordance with applicable
state and/or
federal laws or regulations. Tenant shall perform
all interior and exterior painting, and maintain
the grounds of the Facility in a good and sightly
appearance. Notwithstanding the foregoing, Tenant
shall not be responsible for any repairs or
alterations to the Improvements which are required
as a result of any patent or latent defects in
Landlord's construction of the Improvements, all
of which repairs and alterations shall be the
obligation of Landlord in accordance with and to
the extent set forth in Landlord's warranty as set
forth in the Work Letter.
SECTION 6.2. ALTERATIONS. Tenant will not
remove or demolish any improvement or building
which is part of the Premises or any portion
thereof or allow it to be removed or demolished,
without the prior written consent of Landlord,
which may be withheld at Landlord's sole
discretion. Notwithstanding the foregoing,
Landlord agrees that Tenant shall be permitted to
make any changes or alterations in or to the
Premises without the requirement of obtaining
Landlord's consent therefor, provided that such
Alterations do not constitute a "Major
Alteration". A "Major Alteration" shall mean an
alteration to the Improvements which is estimated
to cost more than $100,000 and involves: (a)
alteration, removal, cutting, or adding to any
structural component of the building (including,
without limitation, walls, exterior windows,
roofs, or floor slabs or any building system), (b)
an alteration to non-residential areas which has a
significant
14
adverse effect on services which are provided to
residents, or (c) changing any category within the
unit mix by more than twenty percent (20%). Tenant
agrees not to make any Major Alterations to the
Premises without first obtaining the Landlord's
written consent thereto, which consent shall not
be unreasonably withheld, and subject to Tenant's
compliance with all of the remaining
qualifications set forth in this Section 6.2. It
shall be deemed reasonable for Landlord to
withhold its consent to a Major Alteration for the
following reasons, among others: such Major
Alteration would (i) materially and adversely
affect the character, value, usefulness or
rentability of the building or the Premises or any
part thereof or any of the facilities, equipment
or improvements therein, (ii) weaken or impair
(temporarily or permanently) the structure of the
building, (iii) materially lessen the usable area
of the building, or (iv) not be consistent with
the use permitted hereunder by any future
occupant. Landlord shall respond to Tenant's
request for approval within thirty (30) days of
Landlord's receipt of complete plans and
specifications. Landlord's failure to respond
within the applicable time period set forth in the
preceding sentence shall be deemed to be approval
of the proposed Major Alterations. If Landlord
disapproves any proposed Major Alterations,
Landlord shall set forth in writing the reasons
for such disapproval with reasonable specificity.
If Tenant fails to obtain Landlord ' s prior
written consent for any Major Alteration, and such
consent is required under this Lease or Tenant
fails to notify Landlord in writing of any
Alteration, then such alteration must be
removed/restored at the end of the Lease Term.
With respect to any alteration for which Tenant
requests Landlord's consent (as required
hereunder) or of which Landlord is otherwise
notified, said alteration shall not be required to
be removed/restored by Tenant at the end of the
term unless Landlord reasonably specifies the same
for removal in a notice delivered to Tenant either
(i) within ten (10) days after receipt of Tenant's
notice of the alteration, or (ii) within the
applicable 30-day period during which Landlord
shall respond to Tenant's request for approval
of plans and specifications. Without limitation,
Landlord shall be deemed reasonable in requiring
removal/restoration for any of the reasons listed
as (i) through (iv) above. All
alterations, including any Major Alteration
consented to by Landlord, shall be in quality and
class at least equal to the original work and
shall meet all building and fire codes, and all
other applicable codes, rules, regulations, laws
and ordinances. Tenant also agrees to maintain
builder's risk insurance and shall cause its
contractors to carry the types of insurance as a
prudent owner or tenant would require. Landlord
shall have the right to approve the plans and
specifications for any Major Alteration, which
approval shall not be unreasonably withheld or
delayed. Regardless of whether the Landlord's
consent is required hereunder, Tenant agrees to
notify Landlord in writing of the proposed
alteration prior to the commencement of any
construction.
SECTION 6. 3. CAPITAL RESERVES. In order to
satisfy the requirements of the Facility
Mortgagee, Tenant shall pay, as additional rent
hereunder, from and after the Rent Commencement
Date, into a capital reserve fund, the amount of
$12.50 per unit per month, or $12,000 per year,
which funds shall be deposited into an interest
bearing escrow account to be disbursed from time
to time in accordance with an escrow agreement
approved by Tenant and such Facility Mortgagee to
pay for replacements and correction of deferred
maintenance items. Any funds remaining in the
account at Lease expiration shall be returned to
Tenant.
15
SECTION 6.4. UTILITIES. Tenant shall pay all
charges for water, electricity, gas, sewage,
waste, trash and garbage disposal, telephone,
cable television, and other services furnished to
the Premises from and after the Rent Commencement
Date. Except as set forth below, Landlord shall
not be responsible in any manner for any
suspension, interruption or curtailment of any
services or utilities to the Premises regardless
of the cause thereof, and no such suspension,
interruption or curtailment shall give rise to any
claim for abatement of Rent or other compensation
to Tenant from Landlord, nor may Tenant claim any
damages on account thereof, nor shall this Lease
or any obligation of Tenant hereunder be affected
thereby, nor shall Tenant claim the same as a
constructive eviction. Notwithstanding the
foregoing, Landlord shall be liable for any direct
damages due to an interruption of any services or
utilities caused by Landlord or its affiliate or
agents, and if such interruption caused by
Landlord or its affiliate or agents causes the
Premises to be untenantable for more than three
(3) days then the Rent shall xxxxx until such
services or utilities are restored. Landlord shall
cause its affiliate to make every reasonable
effort, when constructing the Future Development,
to avoid any interruption of services or utilities
to the Premises.
SECTION 7. L IENS AGAINST THE PREMISES.
SECTION 7.1. LIENS. Tenant will not permit
the Premises to become subject to any lien,
charge, or encumbrance. Tenant shall maintain the
Premises free from all orders, notices, and
violations filed or entered by any public or quasi-
public authorities. Notwithstanding the foregoing,
in the event any such lien, charge, or encumbrance
is imposed, Tenant may contest any such lien,
charge, encumbrance, order, notice or violation,
provided that Tenant causes same to be bonded
within forty-five (45) days of the filing of such
lien. This must be done in good faith, with due
diligence and at Tenant's own expense and Tenant
shall not be considered in default of the
provisions of this Section 7.1 as a result of such
contest.
SECTION 7.2. LANDLORD'S RIGHTS. Should a
judgment on any lien, charge, encumbrance, order,
notice or, violation be rendered against the
Premises for any work performed by or for Tenant
(other than the construction of the Improvements
by Landlord hereunder) or any person claiming
through or under Tenant and should Tenant fail to
discharge such judgment or take action to protest
such judgment, Landlord shall have the right, but
not the obligation, to discharge said judgment. If
Landlord exercises that option, any amounts paid
by Landlord shall be due from Tenant as additional
rent. Such additional rent shall be due and
payable on the next date after the expense is
incurred that Basic Rent is otherwise due.
SECTION 7.3 MECHANIC'S LIENS. Tenant shall
take all reasonable steps necessary to ensure that
no lien arising under Massachusetts law as a
result of construction done at the Premises at
Tenant's request shall extend to the interest of
Landlord in the Premises. Tenant shall pay all
costs incurred by Tenant in connection with the
construction, alteration, demolition, maintenance
and repair of any and all improvements on the
Premises. Should a lien or claim of lien be filed
against the Landlord's interest in the Premises by
any contractor, subcontractor, mechanic, laborer,
materialman or any other person whomsoever
retained by Tenant, Tenant shall, within sixty
(60) days after the filing thereof, cause the same
to be discharged of record.
16
SECTION 8. NON-I IABILITY AND
INDEMNIFICATION.
SECTION 8.1. TENANT'S INDEMNITY. During the
Term, Tenant agrees to defend, protect, indemnify
and save harmless Landlord and any Facility
Mortgagee from and against all claims arising out
of or connected with the use and occupancy of the
Premises by Tenant, any person claiming by,
through or under Tenant, or their respective
officers, directors, servants, agents, customers,
contractors, employees or invitees and shall pay
all costs and expenses incurred by Landlord and
any Facility Mortgagee in connection with such
claims, including without limitation, court costs
and reasonable attorney's fees for trial and
appellate proceedings. Landlord and any Facility
Mortgagee shall be protected hereby from all
claims arising during the Term from loss of or
damage to property, or death or personal or bodily
injury to persons except to the extent such loss,
damage, death or injury is caused by the
negligence or willful actions of Landlord or any
person claiming by, through or under Landlord, or
their respective officers, directors, servants,
agents, customers, contractors, employees or
invitees in which case Landlord shall be fully
responsible therefor and shall indemnify, defend
and hold harmless Tenant with respect thereto in
accordance with the terms of Section 8.2. The
provisions of this Section shall survive the
termination or expiration or earlier termination
of this Lease.
SECTION 8.2. LANDLORD. Landlord will
indemnify, defend and hold harmless Tenant from
any and all costs, expenses and liability,
including, without limitation, court costs and
reasonable attorney ' s fees for trial and
appellate proceedings, which it may incur in
connection with the performance by Landlord of its
obligations hereunder, including, without
limitation, the construction and completion of the
Improvements. The provisions of this Section shall
survive the expiration or earlier termination or
expiration of this Lease, provided that claims
also covered by Landlord's limited warranty set
forth in the Work Letter shall be subject to the
limitations set forth in such limited warranty.
SECTION 8. 3 LIMITATION ON LIABILITV. It is
expressly agreed by the parties that in no case
shall Landlord (or its partners any individuals or
entities comprising Landlord) be personally
liable, under any express or implied covenant,
agreement or provision of this Lease, for any
damages whatsoever to Tenant beyond Landlord's
interest in the Premises. Neither party hereto
shall be liable to the other for indirect or
consequential damages.
SECTION 9. INSURANCE.
SECTION 9.1. All insurance policies required
by this Section 9 shall be issued by a good and
solvent insurance company or companies licensed to
do business in the Commonwealth of Massachusetts,
with a rating of "A XII" or higher by Bests,
selected by Tenant and reasonably satisfactory to
Landlord, and shall include Landlord and each
mortgagee of which Landlord has notified Tenant as
additional insureds as their interests may appear.
Tenant shall provide a copy of binders for
insurance policies conforming to the requirements
of this Lease for Landlord's review at least
thirty (30) days prior to the estimated completion
date. Tenant agrees to deliver certificates of
such insurance to Landlord as of the Rent
Commencement Date and thereafter not less than
thirty (30) days prior to the expiration of any
such policy. Such insurance shall not be canceled,
17
materially changed, or non-renewed without thirty
(30) days' written notice to Landlord.
Landlord and Tenant shall each give prompt notice
to the other of all losses, damages or injuries to
any person or damage to any property which may in
any way be related to this Lease and for which a
claim might be made against the other party. Each
party shall promptly report to the other party all
such claims, whether related to matters insured or
uninsured. Landlord and Tenant shall assist and
cooperate with any insurance company in the
adjustment or litigation of all claims and losses
arising under this Lease.
SECTION 9.2. PROPERTY INSURANCE. From and
after the Rent Commencement Date, Tenant shall
obtain and keep in force throughout the Lease
Term, at its expense, "all-risk" property
insurance upon the Improvements against fire and
such other hazards, casualties and contingencies
(including boiler and machinery coverage on a
comprehensive basis) as are from time to time
customarily covered by all-risk policies for
similar buildings used for similar purposes as
Tenant is then making of the Facility with
endorsements insuring against earthquake and
subsidence. The limit of such insurance shall
never be less than 100% of the actual replacement
cost at the time and place of loss, and the policy
shall include an agreed amount endorsement. This
policy shall include coverage for increased cost
of construction, demolition and contingent
liability as a result of compliance with then
existing applicable legal requirements. Such
insurance will be subject only to such deductibles
as are from time to time reasonably approved by
Landlord based on the then current practice for
similar buildings used for senior housing with
assisted living services located within the
vicinity of the Real Property (Tenant agreeing to
pay to Landlord, upon demand as Additional Rent,
the amount of any such deductible following any
casualty loss). The policy shall include rent
continuation coverage payable to Landlord,
notwithstanding abatement of Tenant's Rent, of no
less than eighteen (18) months rent (including
Base Rent and Additional Rent). All such policies
shall name Landlord as the Named Insured and each
Facility Mortgagee as a loss payee as its interest
may appear.
In the event that Landlord receives a notice
of cancellation of such
insurance policy or policies without a
corresponding notice regarding the issuance of new
insurance prior to the effective date of such
cancellation, Landlord may, in addition to and
without thereby waiving any other remedies, pay
the premiums necessary to prevent such
cancellation and xxxx Tenant therefor. Tenant
shall reimburse Landlord therefor by paying such
amount, together with interest at the rate set
forth in Section 3.2.3, to Landlord, as Additional
Rent, within five (5) days after demand therefor
by Landlord.
SECTION 9.3. LIABILIY INSURANCE. Tenant shall
provide or cause to be provided at its expense,
and keep in force during the Lease Term:
(a) Commercial general liability insurance
(without any so-called employee exclusion or the
like) in an amount reasonably required by Landlord
from time to time based on the then current
practice for similar buildings used for senior
housing with assisted living services located
within the vicinity of the Real Property, but in
any event not less than the greater of (i) One
Million Dollars ($1,000,000.00) per occurrence,
$2,000,000 aggregate, or (ii) the liability
coverage typically carried by Tenant in similar
facilities, including contractual liability
coverage. Such policy shall name Tenant as a named
insured and Landlord and each Facility Mortgagee
of which Landlord has notified Tenant, as
additional insureds with respect to any claim
arising from Tenant's use, occupancy, repair or
operation of the Premises,
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(b) Comprehensive automobile liability
insurance including personal injury and property
damage in the amount of a combined single limit of
$1,000,000 each occurrence. Coverage must include
owned, leased, hired and non-owned vehicles;
(c) Worker's compensation and occupational
disease insurance with statutory limits ;
(d) Employer's liability insurance with a
limit not less than $500,000; and
(e) Excess liability policy in umbrella form
with a minimum limit of liability of $15,000,000,
applying in excess of the coverages listed in (a),
(b) and (d) above.
Professional liability insurance in the amount of
One Million Dollars ($1,000,000) per occurrence,
which shall be written on an occurrence basis.
All liability insurance shall be on an occurrence
basis. Tenant may not elect to carry claims made
commercial general liability insurance unless
occurrence coverage is generally unavailable at
commercially reasonable rates in the marketplace.
Tenant's insurance shall state that it is primary
and not contributing with any insurance purchased
by Landlord. Tenant's insurance shall also state
that it is severable with respect to all insureds
under the policy and that acts of one insured will
not abrogate coverage for other insureds.
SECTION 9.4 PERSONAL PROPERTY INSURANCE.
Tenant shall obtain and keep in force throughout
the Lease Term, at its expense, "all-risk"
property insurance on its personal property,
including but not limited to furniture, fixtures,
machinery and equipment, for the full replacement
cost.
SECTION 9.5. MORTGAGEE'S OTHER REQUIREMENTS.
Tenant shall maintain any other insurance
reasonably required by the holder of a Facility
Mortgagee, which reasonableness standard shall be
based on industry standards of lenders whose loans
are secured by senior housing with assisted living
services properties similar in nature to the
Premises, and on any such other insurance be
generally available at commercially reasonable
rates.
SECTION 9.6. BLANKET INSURANCE. Nothing
contained in this Section 9 shall prohibit
Landlord or Tenant from obtaining a policy or
policies of blanket insurance which may cover
other properties of Landlord or Tenant provided
that (a) any such blanket policy expressly
allocates to the Premises not less than the amount
of insurance required hereunder to be maintained
and (b) such blanket policy shall not diminish the
obligations to insure hereunder, so that proceeds
from such policies shall be an amount no less than
the proceeds that would be available under a
separate policy.
SECTION 9.7. WAIVER OF SUBROGATION. Landlord
and Tenant, each for itself and its insurer,
hereby waive all claims and rights against the
other and their respective officers, directors,
employees, contractors, servants, and agents, for
any damage to or destruction of real or personal
property of Landlord or Tenant to the extent
covered by the insurance required to be maintained
hereunder. All property insurance policies carried
at any time during the Lease Term by either party
covering the Premises shall include a clause to
the effect that such waiver of subrogation shall
not adversely
19
affect or impair such policies or prejudice the
rights of the insureds to recover thereunder. The
provisions of this Section 9.7 shall survive the
expiration or earlier termination of this Lease.
SECTION 10. DAMAGE AND DESTRUCTION.
SECTION 10.1. REPAIR OR RESTORATION AFTER
MAJOR CASUALTY. In the event that any part of the
Improvements or the Personal Property shall be
damaged or destroyed by fire or other casualty for
which Tenant is required to maintain insurance
hereunder and the cost to repair such casualty is
greater than $200,000, (any such event being
called a "Major Casualty"), Landlord shall
promptly replace, repair and restore the same as
nearly as possible to its condition immediately
prior to such Major Casualty, in accordance with
all of the terms, covenants and conditions and
other requirements of this Lease and any mortgage
applicable in the event of such Major Casualty.
If, pursuant to this Section 10, Landlord shall be
obligated to make repairs, the Premises shall be
so replaced, repaired and restored as to be
substantially the same character as prior to such
Major Casualty. The Plans and Specifications for
such restoration shall be first submitted to and
approved in writing by Tenant, which approval
shall
not be unreasonably withheld. Tenant may elect to
retain, at its expense, an independent architect,
reasonably approved by Landlord, who shall oversee
such repairing, restoring or replacing. Tenant
covenants that it will give to Landlord prompt
written notice of any casualty affecting the
Premises or any portion thereof.
SECTION 10.2. EXCEPTION FOR MAJOR CASUALTY
DURING LAST TWO LEASE YEARS AND UNINSURED
CASUALTTY. Lease Years and Uninsured
Casualty. Notwithstanding the foregoing, in the
event of (a) a Major Casualty occurring during the
last two Lease Years of the Initial Term or any
Renewal Term or (b) resulting from a flood,
nuclear accident, war or other event for which
Tenant is not obligated to maintain insurance
hereunder and which, in the reasonable opinion of
Landlord, Tenant and Facility Mortgagee, renders
the Premises unsuitable for Tenant's use as a
senior housing with assisted living services
facility as operated by Tenant prior to the
Casualty, then Landlord or Tenant shall have the
right to terminate this Lease upon written notice
to the other and, in such event, all insurance
proceeds attributable to the Real Property,
Improvements and Personal Property shall be
payable to the Facility Mortgagee or, if none, to
Landlord and all insurance proceeds attributable
to Tenant's Equipment shall be payable to Tenant.
Each party's termination rights under this Section
shall be exercised by written notice to the other
party sent within thirty (30) days after the
occurrence of the destruction or damage. Any
termination notice sent by Landlord or Tenant
shall take effect thirty (30) days after mailing
thereof. If, however, Landlord sends such
termination notice to Tenant during the last two
Lease years (other than for an uninsured
casualty), and within such 30-day period Tenant
sends Landlord written notice exercising Tenant's
next upcoming extension option, then (i)
Landlord's termination notice shall be void, (ii)
Tenant shall be deemed to have irrevocably
exercised its renewal option and waived any right
to terminate its renewal notice in connection
therewith, (iii) the next upcoming Renewal Term
shall automatically be added to the then current
portion of the Lease Term, and (iv) Landlord shall
make the repairs and restorations required by this
Section.
20
SECTION 10. 3. FAILURE BY LANDLORD TO
COMPLETE REPAIRS. In the event that (a) Landlord
as not procured the necessary permits and
approvals for the restoration and/or has not
commenced repair and restoration of the Premises
within 180 days of the date of the Major Casualty,
or (b) Landlord's work is not thereafter
substantially completed within twelve (12) months
following commencement of repair and restoration,
then, in either event, Tenant may give written
notice to Landlord and any Facility Mortgagee of
Tenant's intention to terminate this Lease or
assume responsibility for completion of such
repair and restoration of the Premises unless the
same is commenced or substantially completed (as
the case may be) within thirty (30) days of the
date on which such notice is given. If Landlord or
any Facility Mortgagee fails to so commence or to
substantially complete (as the case may be) such
repair and restoration within such 30-day period,
then immediately upon the expiration of such 30-
day period, Tenant shall have the right to either
terminate this Lease by written notice to Landlord
or the right, but not the obligation, to assume
responsibility for such repair and restoration and
Landlord shall make available to Tenant use of all
insurance proceeds available therefor, subject to
the terms of Section 6 hereof and the terms of any
Facility Mortgage
governing insurance proceeds. Landlord agrees to
use its best efforts to negotiate as part of the
loan documents with any mortgagee, the right to
apply insurance proceeds to the repair and
restoration of the Improvements. If, despite such
best efforts, the prior approval of any Facility
Mortgagee or other Mortgagee is required for
conducting any repair or restoration hereunder
(whether by Landlord or by Tenant), Landlord
agrees to use its best efforts to secure such
approval and the right to apply the insurance
proceeds thereto.
SECTION 10.4. TERMINATION. Notwithstanding
anything to the contrary contained in this Section
10, Landlord shall not be obligated to rebuild
following a Major Casualty if the repairs or
reconstruction of the damage cannot be made under
existing laws, ordinances, statutes or regulations
of any governmental authority applicable thereto.
In the event Landlord is unable to rebuild in
accordance with the provisions hereof, and such
casualty causes the premises to be rendered
unsuitable for use as a senior housing with
assisted living services facility, then this Lease
shall terminate effective thirty (30) days after
the damage occurs and Tenant shall remit insurance
proceeds in its possession to any Facility
Mortgagee or, if none, to Landlord within ten (10)
days of said Lease termination date free and clear
of all liens or claims and shall promptly, at its
own expense, remove from the Premises any of
Tenant's Equipment not so damaged or destroyed.
SECTION 10.5. RENDERED UNSUITABLE. For the
purposes of this Section 10, the Facility shall be
deemed to have been rendered unsuitable for use as
a senior housing with assisted living services
facility if, in the good faith judgment of
Landlord, Tenant and any Facility Mortgagee,
reasonably exercised, the Facility cannot after
any such loss be operated on a commercially
practicable basis as a senior housing with
assisted living services facility of the type and
quality existing and licensed immediately prior to
such loss, taking into account, among other
relevant factors, the number of licensed and
operational beds, dining and kitchen facilities,
parking lots, driveways, or walkways affected by
such loss.
21
SECTION 10.6. REPAIR OR RESTORATION AFTER MINOR
CASUALTY. In the event that any part of the
Improvements or Personal Property shall be damaged
or destroyed by fire or other casualty and the
cost to repair such casualty is $200,000 or less
(a "Minor Casualty"), then Tenant shall promptly
repair and restore the same as nearly as possible
to its condition immediately prior to such Minor
Casualty, in accordance with all of the applicable
terms, covenants and conditions and other
requirements of this Lease and the requirements of
any Facility Mortgagee in the event of such Minor
Casualty, and Tenant shall be entitled to the use
of all insurance proceeds available therefor,
subject to the terms of such Facility Mortgage.
SECTION 10.7. ABATEMENT OF RENT. This Lease
shall remain in full force and effect during the
period of any repair and restoration; provided,
however, Tenant's obligation to pay Rent shall be
equitably abated to reflect the nature and extent
to which such casualty event has rendered the
Premises unusable by Tenant. For purposes of
applying the foregoing abatement provision, the
parties shall take into account the impact of the
casualty (and subsequent repairs) on Tenant's
ability to provide to its residents any services
which are significant to Tenant's operations of a
senior housing facility with assisted living
services of the type and quality which was
operated prior to the Casualty.
SECTION 10.8. Tenant hereby acknowledges
that, notwithstanding any provision in this
Section 10, the terms and provisions of any
Facility Mortgagee shall govern with respect to
the settlement of insurance claims and
availability of insurance proceeds for
restoration.
SECTION 11. CONDEMNATION.
SECTION 11.1. TAKING OF WHOLE.
SECTION 11.1.1. If, during the Lease Term, so
much of the Premises are taken or condemned in fee
for a public or quasi-public use that in the
reasonable judgment of Landlord, Tenant and
Facility Mortgagee the Premises are rendered
unsuitable for use as senior housing with assisted
living services, this Lease shall terminate.
Termination will be effective without entry or
notice. Termination shall occur as of the day when
possession is required to be surrendered to the
taking or condemning authority.
SECTION 11.1.2. For purposes of this Section
11, the Premises shall be deemed to have been
rendered unsuitable for use as a senior housing
with assisted living services facility if, in the
good faith judgment of Landlord, Tenant and any
Facility Mortgagee reasonably exercised, the
Premises after such loss cannot be operated on a
commercially practicable basis as a senior housing
with assisted living services facility of the type
and quality existing and licensed immediately
prior to such loss taking into account, among
other relevant factors, the number of licensed
beds and/or parking lots, driveways, dining and
kitchen facilities, or walkways affected by such
loss.
SECTION 11.2. TAKING OF A PORTION. If during
the Lease Term, a portion of the Premises and/or
the Facility is taken or condemned in fee for a
public or quasi-public use such that the Facility
is not rendered unsuitable for use as a senior
housing with assisted living services facility,
this Lease shall not terminate. If, however, as a
result of the taking, the number of beds available
for operation of the Facility as a senior
22
housing with assisted living services facility of
the type and quality existing and licensed prior
to the taking has been or must be reduced, Tenant
shall be entitled to an abatement of rent. The
rent abatement shall be to the extent that is
fair, just and equitable to both Tenant and
Landlord, taking into consideration, among other
relevant factors, the number of licensed beds
and/or parking lots, driveways, dining and kitchen
facilities or walkways affected by such loss.
SECTION 11. 3. DAMAGES FOR TAKING. All
damages awarded in connection with the taking of
the Premises shall vest in Landlord but the
immediate payment and use of such damage award
shall be governed by the provisions of any
Facility Mortgage. In the event of a partial
taking where the Lease is not terminated, subject
to the provisions of any Leasehold Mortgage,
Landlord shall apply or make available to Tenant
that portion of the proceeds reasonably necessary
for the repair or reconstruction of the Premises.
Notwithstanding anything to the contrary contained
in any Facility Mortgage or related document, all
damages awarded (or otherwise sought by Tenant) in
connection with the taking of Tenant's Equipment,
and all moving and relocation costs, shall vest in
Tenant.
SECTION 12. DEFAULT. The occurrence of any of
the events, acts or circumstances described in
this Section 12.1 shall constitute an Event of
Default under this Lease.
SECTION 12.1.1. EVENTS OF DEFAULT. Failure by
Tenant to pay in full any rent payable under this
Lease when due and the continuance of such failure
for ten (10) days after Landlord has given Tenant
written notice of such failure.
SECTION 12.1.2. Failure by Tenant to observe,
perform or comply with any of the terms, covenant,
agreements or conditions contained in this Lease
(other than as specified in Section 12.1.1.12.1.4
and 12.1.6), and the continuance of such failure
for thirty (30) days after Landlord has given
Tenant written notice of such failure. If Tenant
has promptly commenced and diligently pursued
remedial action within said thirty (30) day period
but has been unable to cure its default (except
for any default that can be reasonably cured by
the payment of money) prior to the expiration
thereof, said thirty (30) day period shall be
extended for the minimum time reasonably required
for the completion of Tenant's remedial action.
SECTION 12.1.3. The making by Tenant of an
assignment for the benefit of its creditors or the
commencement of proceedings in a court of
competent jurisdiction for the reorganization,
liquidation or involuntary dissolution of Tenant
or for the adjudication of Tenant as a bankrupt or
insolvent or for the appointment of a receiver of
the property of Tenant which, with respect to any
involuntary proceedings, are not dismissed and any
receiver, trustee or liquidator appointed therein
is not discharged, within ninety (90) days after
the institution thereof.
SECTION 12.1.4. The abandonment of the
Premises by Tenant other than as a result of the
damage, destruction or taking thereof.
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SECTION 12.1.5. The involuntary, imposed or
required revocation, suspension, termination,
probation, restriction, limitation or refusal to
renew, or pending revocation, suspension,
termination, probation, restriction, limitation
of, or refusal to renew, any certification which
materially affects the ability of the Tenant to
operate the Facility in the absence of the
submittal by Tenant of any corrective or remedial
plan the effect of which is to stay any such
revocation, suspension, termination, probation,
restriction, time limitation or refusal to renew
any certification within ten (10) days of
revocation or other such action on such
certification.
SECTION 12.1.6. The failure to obtain the
necessary certification to operate and actually
open the Facility for business within thirty (30)
days after the Substantial Completion date.
SECTION 13. LANDLORD'S REMEDIES. DAMAGES ON
DEFAULT.
SECTION 13. 1. LANDLORD'S REMEDIES. If an
Event of Default shall occur, Landlord may, at its
option, give to Tenant a written notice
terminating this Lease upon a date specified in
such notice, which date shall be not less than ten
(10) business days after the date of receipt by
Tenant of such notice from Landlord, and upon the
date specified in said notice, the term and estate
hereby vested in Tenant shall cease and any and
all other right, title and interest of Tenant
hereunder shall likewise cease without further
notice or lapse of time, as fully and with like
effect as if the entire Lease Term had elapsed,
but Tenant shall continue to be liable to Landlord
as hereinafter provided.
SECTION 13. 2. SURRENDER. Upon any
termination of this Lease as the result of an
Event of Default, Tenant shall quit and peacefully
surrender the Premises to Landlord, and Landlord,
upon or at any time after any such termination,
may without further notice, enter the Premises and
possess itself thereof by summary proceedings or
otherwise, and may dispossess Tenant and remove
Tenant and all other personal property from the
premises and may have, hold and enjoy the Premises
and the right to receive all rental income of and
from the same.
SECTION 13. 3. RIGHT TO RELET. At any time or
from time to time after any such termination,
Landlord may relet the premises or any part
thereof, in the name of Landlord or otherwise, for
such term or terms (which may be greater or less
than the period which would otherwise have
constituted the balance of the Lease Term) and on
such conditions (which may include concessions or
free rent) as Landlord, in its reasonable
discretion, may determine and may collect and
receive the rents therefor. Landlord shall in no
way be responsible or liable for any failure to
relet the Premises or any part thereof, or for any
failure to collect any rent due upon any such
reletting.
SECTION 13. 4. . SURVIVAL OF FCOVENANTS.
DAMAGES. In the event of any such termination
Tenant shall pay to Landlord the Rent up to the
date of such termination. No such termination of
this Lease shall relieve Tenant of its liability
and obligations under this Lease and such
liability and obligations shall survive any such
termination. Tenant shall indemnify and hold
Landlord harmless from all loss, cost, expense,
damage or liability arising out of or in
connection with such termination, including
reasonable attorney's fees.
24
If this Lease is terminated for Tenant's
Event of Default, then unless and until Landlord
elects lump sum damages described in the
succeeding paragraphs of this Section, Tenant
shall pay on the last day of each calendar month
until the stated expiration date all Basic Rent
and Additional Rent which would have been due for
such month if this Lease had not been terminated.
If, however, Landlord re-lets the Premises, there
shall be credited against such obligation each
month the amount actually received by Landlord
from such reletting during such month on account
of such month, after first deducting all expenses
incurred in connection with such reletting,
including, without limitation, all repossession
costs, brokerage commissions, legal expenses,
reasonable attorneys' fees, alteration costs, and
expenses of preparation for such reletting.
At any time after such termination, and regardless
of whether Tenant has made any payments to
Landlord pursuant to the preceding provisions of
this Section, Tenant shall pay to Landlord, on
demand, as damages for Tenant's Event of Default,
the difference between
(1) the aggregate Rent which would have been
payable under this
Lease by Tenant from the date Landlord last
received full Rent payments from Tenant (whether
pursuant to the preceding paragraph or earlier)
until the stated expiration date, minus
(2) the fair and reasonable rental value of
the Premises for the same period determined as of
the date Landlord elects such damages, taking into
account market conditions and the likelihood of
reletting the premises, less Landlord's reasonable
estimate of expenses to be incurred in connection
with reletting the Premises, including, without
limitation, all repossession costs, brokerage
commissions, legal expenses, reasonable attorneys'
fees, alternation costs, and expenses of
preparation for such reletting with the amounts in
the preceding clauses (1) and (2) discounted to
present value using the Federal Reserve discount
rate as in effect on the date on which Landlord
makes such demand.
If the Premises or any part thereof are relet
by Landlord for the period prior to the stated
expiration date, or any part thereof, before
presentation of proof of such damage any court,
commission or tribunal, the amount of rent
reserved upon such reletting shall be, prima
facie, the fair and reasonable rental value for
the part or the whole of the Premises so relet
during the term of the reletting.
SECTION 13. 5. 1 LIQUIDATED DAMAGES. In lieu
of recovery by Landlord of sums payable under the
foregoing provisions of Section 13.4 or any other
damages resulting from Tenant's Event of Default,
Landlord may by written notice to Tenant, at any
time after this Lease is terminated, elect to
recover, and Tenant shall thereupon pay, as
liquidated damages, an amount equal to the
aggregate of the Rent accrued during the twenty-
four (24) months prior to such termination plus
the amount of Rent accrued and unpaid at the time
of termination and less the amount of any recovery
by Landlord under the foregoing provisions of this
Section up to the date of payment of such
liquidated damages; provided, however, if such
notice is given less than twenty-four (24) months
before the stated expiration date, then liquidated
damages shall be measured by the number of months
remaining until the stated expiration date.
25
Except as to the terms of the liquidated
damages provision set forth above, nothing herein
shall limit or prejudice the right of Landlord to
prove and obtain an amount equal to the maximum
allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in
which, such damages are to be proved, whether or
not such amount be greater, equal to, or less than
the amount of the difference referred to above.
SECTION 13. 6. RIGHT TO EQUITABLE RELIEF. In
the event there shall occur an Event of Default or
threatened Event of Default Landlord shall be
entitled to enjoin such Event of Default or
threatened Event of Default.
SECTION 13. 7. RIGHT TO SELF HELP. If an
Event of Default shall occur and be continuing,
Landlord shall have the right, but shall not be
obligated, to enter upon the Premises and to
perform such obligation notwithstanding the fact
that no specific provision for such substituted
performance by Landlord is made in this Lease with
respect to such Event of Default. In the event
Tenant fails to comply with Section 4.2, or there
occurs an Event of Default under Section 12.1. 5
hereof, then Landlord shall have the right to
submit on behalf of Tenant to any licensing
authority a corrective or remedial plan in order
to stay a license revocation or similar
proceeding. In performing such obligation,
Landlord may make any payment of money or perform
any other act. The aggregate of (i) all sums so
paid by Landlord, (ii) interest on such sums at
the "Prime Rate" as published in The Wall Street
Journal on the day on which demand for payment is
made by Landlord as hereinafter provided plus two
percent (2%) per annum, and (iii) all necessary
incidental costs and expenses in connection with
the performance of any such act by Landlord, shall
be deemed to be Rent under this Lease and shall be
payable to Landlord immediately upon demand.
Landlord may exercise the foregoing rights without
waiving any other of its rights or releasing
Tenant from any of its obligations under this
Lease.
SECTION 13. 8. FURTHER REMEDIES. Except as
otherwise provided in this Lease, Landlord shall
have the right to invoke any right and remedy
allowed at law or in equity or by statute or
otherwise, and nothing in this Lease shall require
Landlord to elect any remedy for an Event of
Default by Tenant hereunder, and all rights herein
provided shall be cumulative with one another and
with any other rights and remedies which Landlord
may have at law or in equity in the case of such
an Event of Default. Landlord's remedies under
this Section 13 shall survive
the early termination of this Lease.
SECTION 14. QUIET ENJOYMENT.
Landlord covenants and agrees that, so long as
Tenant observes and performs all of the covenants,
conditions, and stipulations of this Lease, Tenant
may lawfully and quietly hold, occupy and enjoy
the Premises during the Lease Term.
Notwithstanding the foregoing, Landlord and Tenant
hereby acknowledge that the kinds of
inconveniences or disruptions to Tenant which
would normally be associated with a nearby
construction project, if caused by the
construction of the Future Development, shall not
constitute a breach of the covenant of quiet
enjoyment, provided that Landlord shall take all
reasonable measures to minimize disruptions to
Tenant and to Tenant's residents, taking into
account the nature of Tenant's use of the
Premises.
26
Section 15. ASSIGNMENT AND SUBLETTING
SECTION 15.1. AFFILIATES. Tenant may, without
prior approval from Landlord, assign its rights
and obligations under this Lease to any parent
corporation or any sister or subsidiary
corporation whose ownership is at least 51 % in
common with Tenant and of which Tenant has control
(an "Affiliate"). Tenant shall give Landlord
notice of any such assignment or subletting, and
shall give to Landlord, concurrently with such
assignment, an executed original assignment and
assumption agreement wherein such assignee agrees
to be bound by the terms and conditions of this
Lease. The initial public offering of stock by
Tenant and any subsequent sale or transfer of any
stock of Tenant shall not be deemed to be an
assignment hereunder requiring Landlord ' s
consent pursuant to this Section 15. Tenant shall
not be required to
obtain the consent of Landlord with respect to a
merger, consolidation or other reorganization
provided that, in any of such events (i) the
successor to Tenant has a net worth computed in
accordance with GAAP at least equal to the net
worth of the Tenant named herein and (ii) the
successor to Tenant has experience in the assisted
living housing industry at least comparable to
that of the named Tenant.
SECTION 15.2. LANDLORD'S CONSENT. Provided
that there is then no outstanding Event of
Default, Tenant may sublease the Premises or
assign its rights and obligations under this Lease
to a person or entity that is not an Affiliate
with the prior written consent of Landlord; such
consent shall not be unreasonably withheld, unless
a Facility Mortgagee has approval rights in its
loan documents over such assignment rights and the
Facility Mortgagee retains the right to exercise
its sole discretion, in which case the standard
for Landlord shall also be "at its sole
discretion". If Tenant wishes to assign this Lease
and Landlord's consent is required hereunder,
Tenant shall deliver to Landlord (i) a true and
complete copy of the proposed instrument of
assignment containing all of the terms and
conditions of such proposed assortment, (ii)
information as to the identity and experience of
the assignee as Landlord may reasonably require,
(iii) such financial information concerning the
proposed assignee as Landlord may reasonably
require, and (iv) a written agreement, in form
reasonably approved by Landlord, between such
proposed assignee and Landlord in which such
proposed assignee agrees with Landlord to perform
and observe all of the terms, covenants and
conditions of this Lease from and after the date
of such assignment, all of which Landlord may
consider in determining whether to grant its
consent. Landlord agrees to notify Tenant within
fifteen (15)
days following delivery of the foregoing
information, as to whether or not Landlord shall
grant its consent. If Landlord fails to notify
Tenant in writing within said 15 day period,
Landlord shall be deemed to have consented to said
assignment or sublease.
If Landlord consents to an assignment, then prior
to such assignee taking occupancy of the Premises,
Tenant shall deliver to Landlord an original of
the fully-executed instrument of assignment and of
the agreement described in clause (iv) of the
preceding paragraph of this Section.
SECTION 15.3. I ANDLORD'S ASSIGNMENT RIGHTS.
Landlord may at any time assign its rights and
obligations under this Lease, provided, however,
that Landlord shall furnish to Tenant a written
statement from Landlord's assignee that such
assignee recognizes all of Tenant's rights under
this Lease. Notwithstanding the failure of
Landlord to obtain said recognition from
Landlord's assignee, any assignment of Landlord's
rights and obligations shall be subject to
Tenant's rights under this Lease.
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SECTION 15.4. SUBSEQUENT ASSIGNMENT OF SUBLEASES.
No assignment or subletting that is approved
pursuant to this Section 15 shall be deemed to
remove any subsequent assignment or subletting
from the provisions of this Section 15, it being
the intent hereof that every assignment and
subletting, whenever occurring, shall require the
same approval as is set forth herein for an
original assignment or subletting.
SECTION 15. 5. RESIDENTIAL LEASES.
Notwithstanding anything to the contrary contained
herein, Tenant shall be permitted, without
obtaining Landlord's consent, to sublease
individual assisted living units. Tenant shall
provide to Landlord a copy of Tenant's standard
form residential lease and any subsequent changes
which may be made to the standard form.
SECTION 15. 6. COMMERCIAL LEASES. Landlord
acknowledges and understands that Tenant may enter
into one or more commercial subleases covering
portions of the Premises with subtenants who shall
provide certain specialized services and amenities
to the residents of the Facility (e.g. beauty
parlor, convenience store, bank outlet).
Notwithstanding anything to the contrary contained
herein, Tenant shall be permitted to enter
subleases for such purposes without obtaining
Landlord's consent, provided that (i) the term of
such sublease is not greater than five (5) years,
(ii) the square footage to be subleased does not
exceed three thousand (3,000) square feet (iii)
such sublease shall be terminated by the
termination or expiration of this Lease and (iv)
such Sublessees shall carry appropriate liability,
including malpractice insurance, if applicable,
naming Landlord, Tenant and any mortgagee as
additional insureds. Any such commercial sublease
which does not meet the foregoing qualifications
shall require Landlord's prior consent, which
shall not be unreasonably withheld or delayed.
Upon the request of Landlord, Tenant shall provide
copies of any such executed subleases to Landlord.
SECTION 15.7. EFFECT OF ASSIGNMENT OR
SUBLETTING. In all events, notwithstanding any
assignment or subletting permitted hereunder,
Tenant's liability to Landlord shall remain direct
and primary. Any assignee of Tenant's interest in
the Premises shall be deemed to have agreed
directly with Landlord to be jointly and severally
liable with Tenant for the performance of Tenant's
obligations hereunder and such assignee shall upon
request execute and deliver such instruments as
Landlord reasonably requests in confirmation
thereof (and agrees that its failure to do so
shall be subject to the default provisions of this
Lease). At any time after the occurrence of an
Event of Default hereunder, Landlord may collect
rent and other charges from any assignee or
sublessee (and upon notice any assignee or
sublessee shall pay such sums directly to
Landlord) and apply the amount collected to the
rent and other charges herein reserved. No consent
to assignment or collection of rent by Landlord
directly from any assignee or sublessee or failure
so to collect such rent shall be deemed a waiver
of the provisions of this Section 15, an
acceptance of such assignee or sublessee as a
tenant hereunder, or a release of Tenant from
direct and primary liability for the performance
of all of the covenants of this Lease.
SECTION 16. NOTICES. All notices provided for
in this Lease or related to this Lease shall be in
writing and shall be delivered to the parties at
the addresses set forth below. All such notices or
other papers or instruments related to this Lease
shall be deemed sufficiently served or delivered
on the date of receipt or refusal of delivery,
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provided that they are sent by United States
Registered or Certified Mail, postage prepaid
return receipt requested, by hand delivery, by
overnight courier or by facsimile transmission:
To Landlord: LM
Auburn Assisted Living LLC
c/o LMP Retirement Properties, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn. : Xx. Xxxx X. Xxxxxx, Xx. , President
with a copy to:
Xxxxxxx, Procter & Xxxx Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No. : (000) 000-0000
Attn: Xxxxxxxxx XxXxxxxxx, Esq.
with a copy to:
Fleet National Bank
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xx. Xxxxx X. Xxxxx
To Tenant:
Emeritus Corporation
Market Place One
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone No. : 000-000-0000
Facsimile No. : 000-000-0000
Attn: Xx. Xxx Xxxxxxxxxx, President
Both Landlord and Tenant may change the
address or the name of the addressee
applicable to subsequent notices by giving notice
as provided above.
SECTION 17. MORTGAGEE PROTECTIONS.
SECTION 17.1. ATTORNMENT. Tenant covenants
and agrees that, if by reason of a default upon
the part of the Landlord in the performance of any
of the terms and conditions of any mortgage, the
estate of Landlord thereunder is terminated by
summary disposition proceedings or otherwise,
Tenant will attorn to the then Facility Mortgagee
or the purchaser in such foreclosure proceedings,
as the case may be, and will recognize such
Facility Mortgagee or such purchaser as the
Landlord under this Lease; provided, however, that
the holder of such mortgage or the purchaser in
foreclosure proceedings agrees in writing not to
disturb Tenant's quiet enjoyment of the Premises
so long as Tenant is not in default hereunder
beyond applicable notice and cure periods. Tenant
covenants and agrees to execute and deliver, at
any time and from time to time, upon reasonable
request of Landlord or the holder of such mortgage
or the purchaser in foreclosure, any instrument
which may be necessary to evidence such
attornment.
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SECTION 17. 2. CURE RIGHTS. Tenant shall have
the right to cure any default by Landlord in the
payment of any amounts due under any mortgage
secured by the Premises, provided that Tenant
shall not have the right to offset any such sums
against rent due later under the terms of this
Lease.
SECTION 17. 3. ESTOPPEL STATEMENTS. The
parties hereto shall, at any time and from time to
time upon not less than ten (10) days prior
written notice from the other party, execute,
acknowledge and deliver to such other party, in
form reasonably satisfactory to such other party
or to such other party's mortgagee, a written
statement certifying (if true) that this Lease is
unmodified and in fall force and effect (or if
there have been modifications stating the nature
thereof, that such other party is not in default
hereunder (or specifying the nature of any
default), the date to which rental and other
charges have been paid and such other information
as may be reasonably required by such other party.
It is intended that any such statement delivered
pursuant to this subsection may be relied upon by
any prospective purchaser or mortgagee of the
Premises and their respective successors and
assigns.
SECTION 17.4. SUBORDINATION. This Lease
shall, at the request and option of the holder of
any Facility Mortgage, be subordinated to the lien
of any Facility Mortgage, so long as Landlord
shall provide Tenant at Landlord's expense with a
Non-Disturbance Agreement from Landlord's
mortgagee providing that Tenant's tenancy under
this Lease Agreement will not be disturbed so long
as Tenant is not in default under this Lease and
in the event of a default by Landlord and
foreclosure under the Facility Mortgage,
Landlord's mortgagee or any purchaser at a
foreclosure sale will take title to the Premises
subject to Tenant's rights under this Lease and
will not disturb Tenant's possession of the
Premises as long as Tenant is not then or
thereafter in default hereunder
SECTION 17.5. RENT ASSIGNMENT. If from time
to time Landlord assigns this Lease or the rents
payable hereunder to any person or entity, whether
such assignment is conditional in nature or
otherwise, such assignment shall not be deemed an
assumption by the assignee of any obligations of
Landlord; but the assignee shall be responsible
only for non-performance of Landlord's obligations
which occur after it succeeds to and only while it
holds Landlord's interest in the Premises or is a
mortgagee in possession of the Premises.
SECTION 17. 6. NOTICE TO MORTGAGEE. No act or
failure to act on the part of Landlord which would
entitle Tenant under the terms of this Lease, or
by law, to be relieved of Tenant's obligations
hereunder or to terminate this Lease, shall result
in a release or termination of such obligations or
a termination of this Lease unless (i) Tenant
shall have first given written notice of
Landlord's act or failure to act to each of the
holders under any Facility Mortgage specifying the
act or failure to act on the part of Landlord
which could or would give basis to Tenant's
rights; and (ii) such mortgage holder, after
receipt of such notice, has failed or refused to
correct or cure the condition complained of within
a reasonable time thereafter; but nothing
contained in this Section shall be deemed to
impose any obligation on any such mortgage holder
to correct or cure any such condition. Tenant's
obligation to send a notice to _ Landlord' s
mortgagee in the preceding sentence shall be
limited to mortgagees of which
Landlord has supplied Tenant with names and
addresses. "Reasonable time" as used
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above shall mean a period of not less than thirty
(30) days and shall include (but not be limited To
reasonable time to obtain possession of the
Premises if the mortgagee elects to do so and a
reasonable time to correct or cure the condition
if such condition is determined to exist. The
agreements in this Lease with respect to the
rights and powers of a mortgagee constitute a
continuing offer to any such third party
beneficiary which may be accepted by taking a
mortgage of the Premises.
SECTION 18. LANDLORD INSPECTION. Landlord
may, enter upon the Premises during normal
business hours and upon prior reasonable notice
for the purpose of inspecting the same.
SECTION 19. REPRESENTATIONS AND WARRANTIES.
SECTION 19.1 TENANT'S REPRESENTATIONS AND
WARRANTIES. Tenant represents, warrants and
covenants to Landlord as follows:
(a) Tenant is a corporation duly organized
and validly existing under the laws of the State
of Washington, is duly authorized to transact
business in the Commonwealth of Massachusetts and
is in good standing under the laws of the State of
Washington.
(b) Tenant has full right and power to enter
into, or perform its obligations under this Lease
and has taken all requisite action to authorize
the execution, delivery and performance of this
Lease.
SECTION 19.2. LANDLORD'S REPRESENTATION AND
WARRANTIES. Landlord represents, warrants and
covenants to Tenant as follows:
(a) Landlord is a limited liability company
duly organized and validly existing under the laws
of the Commonwealth of Massachusetts.
(b) Landlord has full right and power to
enter into this Lease and has taken all requisite
action to authorize the execution, delivery and
performance of this Lease and to carry out the
transactions contemplated herein.
SECTION 20. FINANCIAL STATEMENTS. Tenant
shall furnish to Landlord, from time to time,
within a reasonable time after its demand, (a)
current financial statements of Tenant and (b)
current financial statements for the operations of
the Facility.
SECTION 21. SURRENDER. Upon Lease
termination, Tenant shall quit and surrender the
Premises free and clear of all tenants, occupants,
liens, and encumbrances whatsoever except (i)
Permitted Exceptions and (ii) encumbrances
restrictions or reservations caused by or
consented to in writing by Landlord. Tenant shall,
subject to the provisions of Sections 10 and 11
hereof, surrender the Premises to Landlord broom
clean and in good order, condition and repair
reasonable wear and tear excepted with all Tenant
s signs, furniture, trade fixtures, equipment and
other personal property removed. Any of Tenant's
furniture, trade fixtures, equipment or other
personal property which is not removed from the
Premises by the termination date shall be deemed
abandoned to Landlord and landlord may dispose of
the same as it sees fit, at Tenant's expense. All
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alterations which Landlord has designated in
writing for removal by Tenant pursuant to Section
6.2 shall be removed by Tenant except that if
having so designated an alteration for removal,
Landlord thereafter gives notice to Tenant at
least six (6) months before the expiration of the
Lease Term that Landlord would be willing to let
such alteration remain after the expiration of the
Lease Term, then Tenant may elect whether to
remove such alteration or leave it as part of the
Premises upon the expiration of the Lease Term.
Tenant shall repair any damage caused by the
removal of any alterations or any of Tenant's
furniture, trade fixtures, equipment or other
personal property and restore the building or the
surface of the Real Property, as the case may be,
to substantially the condition in which it was
prior to such removal.
SECTION 22 MISCELLANEOUS.
SECTION 22.1. CAPTIONS. The captions in this
Lease are for convenience of reference only. In no
way do those captions define, limit or describe
the scope or intent of this Lease.
SECTION 22.2. INTERPRETATION. Words showing
number shall be taken to include both the singular
and the plural forms. Words showing gender shall
be taken to include masculine, feminine and
neuter.
SECTION 22.3. SUCCESSORS AND ASSIGNS. Subject
to the restrictions on transfers set forth herein,
this Lease shall inure to the benefit of and be
binding upon Landlord and Tenant and their
respective successors and assigns. The definition
of "Landlord" and "Tenant" herein refer to the
Landlord and Tenant at the time in question.
SECTION 22.4. GOVERNING LAW. This Lease shall
be governed, construed, and enforced in accordance
with the laws of the Commonwealth of
Massachusetts.
SECTION 22. 5. ENTIRE AGREEMENT. This Lease
represents the entirety of the agreement among the
parties hereto and shall be deemed to supersede
any prior discussions or agreements among the
parties hereto. This Lease may not be amended or
modified except by written instrument signed by
the parties hereto.
SECTION 22. 6. WAIVER. The failure of either
party to insist upon strict performance of any of
the covenants, agreements, terms and conditions of
this Lease in any one or snore instances shall not
be construed as a waiver or relinquishment of any
such covenant, agreement, terms, or condition and
the same shall remain in full force and effect.
SECTION 22.7. ATTORNEY'S FEES. In the event
either party brings an action to enforce any of
the terms hereof or in connection herewith, the
prevailing party in such action shall be entitled
to and the losing party agrees to pay the
reasonable attorneys' fees and expenses, including
attorneys' fees and expenses of appellate
proceedings, of the prevailing party.
SECTION 22. 8. MEMORANDUM. Landlord and Tenant
shall execute a Memorandum of this Lease in a form
acceptable to Landlord and Tenant. The Memorandum
shall be recorded in the public records of
Worcester County, Massachusetts. Landlord and
Tenant shall share the cost of recording.
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SECTION 22.9. UNENFORCEABLE PROVISION. Each
term and provision of this Lease shall be enforced
to the fullest extent permitted by law. Should any
term or provision of this Lease, or the
application thereof, prove illegal or
unenforceable, the remainder of this Lease shall
still be valid and enforced.
SECTION 22.10. BROKER. Landlord and Tenant
each represent to the other that there are no
claims for brokerage or other commissions or
finder's or other similar fees in connection with
the transactions contemplated by this Lease
insofar as such claims shall be based on
arrangements or agreements made by or on behalf of
the party so representing.
SECTION 22.11. AMENDMENT. Neither this Lease
nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by an
instrument in writing signed by the parties hereto
and approved in writing by Landlord's Mortgagee if
required under the terms of the Facility Mortgage.
SECTION 22.12. COUNTERPARTS. This Lease may
be executed in any number of counterparts, each of
which shall be deemed to be an original and all of
which together shall comprise but a single
instrument.
SECTION 22.13. APPLYING PROVISIONS. No
provision of this Lease shall be construed against
or interpreted to the disadvantage of either
Landlord or Tenant by any court or other
governmental or judicial authority by reason of
such party's having or being deemed to have
structured, written, drafted or dictated such
provisions.
SECTION 22.14. TIME OF ESSENCE. Time is of
the essence of this Lease.
SECTION 2215. RELATIONSHIP OF PARTIES.
Nothing in this Lease shall be construed to render
or constitute Landlord in any way or for any
purpose a partner, joint venturer or associate in
any relationship with Tenant other than that as
Landlord and Tenant, nor shall this Lease be
construed to authorize either party to act as
agent for the other party except as expressly
provided to the contrary in this Lease.
SECTION 22.16. HOLDING OVER. If Tenant
occupies the Premises after the Lease expiration
date without having entered into a new Lease of
the Premises with Landlord, Tenant shall be a
tenant-at-sufferance only subject to all of the
terms and provisions of this Lease except that,
after a holdover of sixty (60) days after Lease
expiration, the Basic Rent shall be one hundred
fifty percent (150% ) of the Basic Rent during the
last Lease Year. Such a holding over, even if with
the consent of Landlord, shall not constitute an
extension or renewal of this Lease.
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IN WITNESS WHEREOF, the parties hereby
execute this Lease Agreement on the day and year
first written above.
LANDLORD:
LM AUBURN ASSISTED LIVING LLC
By: /s/ Xxxx X. Xxxxxx, Xx.
Its: Managing Member
TENANT:
EMERITUS CORPORATION,
a Washington corporation,
f.k.a Assisted Living of America, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
Its: President
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