Exhibit 10.13

 

EXECUTION COPY

Prepared by, and after recording return to:

 

David L. Dubrow, Esq.

Arent Fox LLP

1675 Broadway

New York, New York 10019

 

SUBORDINATION, ASSIGNMENT

AND SECURITY AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

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SUBORDINATION, ASSIGNMENT

AND SECURITY AGREEMENT

 

THIS SUBORDINATION, ASSIGNMENT AND SECURITY AGREEMENT (this “Agreement”) is made
and entered into as of August 4, 2009 by and among (i) SNH FM Financing LLC, a
Delaware limited liability company (together with its successors and assigns,
the “Borrower”), (ii) Citibank, N.A., a national banking association (the
“Lender”), (iii) FS Tenant Pool III Trust, a Maryland business trust (together
with its successors and assigns, the “Operator”) and (iv) FVE FM
Financing, Inc., a Maryland corporation (together with its successors and
assigns, the “Master Tenant”).

 

Recitals

 

A.            Borrower is the owner of a Seniors Housing Facility commonly known
as Memorial Woods and located at 777 North Post Oak Road, Houston, TX 77024 (the
“Mortgaged Property”).  A legal description of the Mortgaged Property is
attached hereto as Exhibit A.

 

B.            Master Tenant is the tenant of the Mortgaged Property pursuant to
that certain Amended and Restated Master Lease Agreement dated August 4, 2009
among SNH FM Financing LLC, SNH FM Financing Trust, Ellicott City Land I, LLC
and Master Tenant (the “Master Lease”).

 

C.            Operator is the operator of the Mortgaged Property pursuant to
that certain Sublease Agreement between Operator and Master Tenant (the
“Operating Lease”) and is the holder of all of the required Licenses required to
operate the Mortgaged Property as a Seniors Housing Facility.

 

D.            Lender has made a loan to Borrower and related parties in the
amount of $512,934,000 (the “Loan”) pursuant to that certain Master Credit
Facility Agreement by and between Borrower and Lender dated as of the date
hereof (the “Master Agreement”).  The Loan will be evidenced by the Note and
will be secured by, among other things, a Multifamily Deed of Trust, Assignment
of Rents, Security Agreement and Fixture Filing of even date herewith executed
by the Borrower for the benefit of Lender, which will be recorded in the
official records of Recorder’s Office of the County of Harris, Texas and
assigned to Fannie Mae (the “Instrument”), which encumbers the Mortgaged
Property.

 

E.             Lender requires and each of Master Tenant and Operator is willing
to subordinate its right, title and interest to and under the Master Lease and
Operating Lease to the Instrument and to assign all Leases, Rents, Equipment,
Inventory, Contracts and Accounts to Lender subject to recognition by Lender of
Master Tenant’s and Operator’s rights under the Master Lease and the Operating
Lease so long as there shall exist no Event of Default thereunder or hereunder.

 

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

1

--------------------------------------------------------------------------------

 

F.             Each of Master Tenant and Operator is willing to attorn to Lender
upon an event of default by Borrower under the Loan Documents, to perform its
obligations under the Master Lease and Operating Lease and this Agreement for
Lender, or its successors and assigns in interest, and upon an Event of Default
to permit Lender to terminate the Master Lease and Operating Lease without
liability.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, Borrower,
Lender, Master Tenant and Operator agree as follows:

 

1.             DEFINITIONS.  Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings assigned to them in the Instrument. 
All terms used herein which are defined in the Uniform Commercial Code, as in
effect from time to time in the jurisdiction in which the Mortgaged Property is
located, shall have the same meanings when used herein.  The following terms,
when used in this Agreement, shall have the following meanings:

 

(a)           “Accounts” means all money, funds, investment property, accounts,
general intangibles, deposit accounts, chattel paper, documents, instruments,
judgments, claims, settlements of claims, causes of action, refunds, rebates,
reimbursements, reserves, deposits, subsidies, proceeds, products, rents and
profits, now or hereafter arising, received or receivable, from or on account of
Operator’s management and operation of the Mortgaged Property as a Seniors
Housing Facility.

 

(b)           “CERCLA” shall have the meaning as defined in Section 15(h) of
this Agreement.

 

(c)           “Certificate of Operator” means that certain Master Certificate of
Operator dated as of the date hereof among FS Tenant Pool I Trust, a Maryland
business trust, FS Tenant Pool II Trust, a Maryland business trust, FS Tenant
Pool III Trust, a Maryland business trust, Five Star Quality Care-CA, LLC, a
Delaware limited liability company, Five Star Quality Care-Savannah, LLC, a
Delaware limited liability company, Five Star Quality Care-MD, LLC, a Delaware
limited liability company, The Heartlands Retirement Community — Ellicott City
I, Inc., a Maryland corporation, Five Star Quality Care-NC, LLC, a Delaware
limited liability company, Morningside of Charlottesville, LLC, a Delaware
limited liability company, Five Star Quality Care-VA, LLC, a Delaware limited
liability company, Morningside of Bellgrade, Richmond, LLC, a Delaware limited
liability company, Morningside of Newport News, LLC, a Delaware limited
liability company, Five Star Quality Care-WI, LLC, a Delaware limited liability
company, and FVE FM Financing, Inc., a Maryland corporation.

 

(d)           “Contracts” means any contract or other agreement for the
provision of goods or services at or otherwise in connection with the operation,
use or management of the Mortgaged Property, including cash deposited to secure
performance by parties of their obligations. “Contracts” shall also include any
residency, occupancy, admission, and care agreements pertaining to residents of
the Mortgaged Property.

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

2

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(e)           “Equipment” means all right, title and interest of Operator in and
to all machinery, equipment, computer equipment (hardware and software), tools,
furniture, furnishings, kitchen or restaurant supplies and facilities, office
equipment, dining room supplies and facilities, medical supplies and facilities,
appliances, supplies, books, records, fixtures, leasehold improvements, all
tangible and intangible property, and goods now owned and hereafter acquired, in
each case used in connection with the operation of the Mortgaged Property,
together with all present and future parts, additions, accessories,
replacements, attachments, accessions, replacement parts and substitutions
therefor, and the proceeds thereof (cash and non-cash including insurance
proceeds).

 

(f)            “Event of Default” means (A) the occurrence of a breach by
Operator or Master Tenant of any representation, warranty or covenant under this
Agreement or the Operator Certificate or (B) any Event of Default by Operator
under the Operating Lease or by the Master Tenant under the Master Lease
provided, however, Master Tenant and Operator shall have the same time period
(if any) as is provided Borrower in the Designated Loan Documents up to a
maximum of 30 days to cure any breach of any Operating Covenant and shall have
30 days to cure the covenants set forth in Sections 4(e), 4(f), 4(g),
5(e) (except for subclause (4) therein), the second sentence of 14(t) or
15(h) of this Agreement before such breach becomes an Event of Default under
this Agreement (the “Cure Period”); provided, further, however there shall be no
Cure Period if Operator or Master Tenant was previously provided with notice and
opportunity to cure under the Master Lease or Operating Lease and the Cure
Period shall run concurrently with any cure period provided in the Master
Agreement, the Master Lease or Operating Lease.

 

(g)           “Event of Default has occurred and is continuing” shall mean that
an Event of Default has occurred which has not been cured to the satisfaction of
Lender, provided however, that nothing shall be construed to require Lender to
accept any cure, or grant any cure period not otherwise provided for in this
Agreement under which such Event of Default may arise.

 

(h)           “Healthcare Licenses” means all licenses necessary to operate the
Seniors Housing Facility as an assisted living facility, skilled nursing
facility, Alzheimer’s/dementia care facility, or independent living facility in
the State of Texas.

 

(i)            “Impositions” and “Imposition Deposits” shall have the meaning as
defined in Section 7(a) of the Instrument.

 

(j)            “Improvements” means the buildings, structures, improvements and
alterations now constructed or at any time in the future constructed or placed
upon the Land, including any future replacements and additions, which may now or
hereafter constitute the Mortgaged Property.

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

3

--------------------------------------------------------------------------------

 

(k)           “Indebtedness” means the principal of, interest on and all other
amounts due at any time under, the Note, the Master Agreement, the Instrument or
any other Loan Documents, including prepayment premiums, late charges, and
default interest.

 

(l)            “Instrument” shall have the meaning as defined in Recital D
above.

 

(m)          “Inventory” means all right, title and interest of Operator in and
to inventory of every type and description, now owned and hereafter acquired,
including, without limitation, raw materials, work in process, finished goods,
goods returned or repossessed or stopped in transit, goods used for
demonstration, promotion, marketing or similar purposes, property in, on or with
which any of the foregoing may be stored or maintained, all materials and
supplies usable or used or consumed, in each case, at the Mortgaged Property,
and all documents and documents of title relating to any of the foregoing,
together with all present and future parts, additions, accessories, attachments,
accessions, replacements, replacement parts and substitutions therefor or
thereto in any form whatsoever.

 

(n)           “Land” means the land described in Exhibit A.

 

(o)           “Leases” means all present and future leases, subleases, licenses,
concessions or grants or other possessory interests now or hereafter in force,
whether oral or written, covering or affecting the Mortgaged Property or any
portion of the Mortgaged Property (including proprietary leases or occupancy
agreements if Master Tenant or Operator is a cooperative housing corporation),
and all modifications, extensions or renewals thereof.  The term “Leases” shall
also include any residency, occupancy, admission, and care agreements pertaining
to residents of the Mortgaged Property and shall also specifically include,
without limitation, the Master Lease and Operating Lease.

 

(p)           “Loan” shall have the meaning as defined in Recital D above.

 

(q)           “Loan Documents” shall have the meaning set forth in the Master
Agreement.

 

(r)            “Master Agreement” shall have the meaning as defined in Recital D
above.

 

(s)           “Mortgaged Property” shall have the meaning as defined in Recital
A above.

 

(t)            “Note” means those certain Notes in the aggregate principal
amount of $512,934,000 executed by Borrower in favor of Lender and other notes
issued by Borrower pursuant to the Master Agreement and all schedules, riders,
allonges and addenda, as such Note may be amended, supplemented or modified from
time to time.

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

4

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(u)           “Operating Covenants” shall have the meaning as defined in
Section 14(a) of this Agreement.

 

(v)           “Operating Lease” shall have the meaning as defined in Recital C
above and shall include any master lease, operating agreement, operating lease
or similar document, between the Operator and Master Tenant, approved by Lender,
under which control of the occupancy, use, operation, maintenance and
administration of the Mortgaged Property as a Seniors Housing Facility has been
granted to the Operator.

 

(w)          “Operating Lease Rent” shall have the meaning as defined in
Section 14(l) of this Agreement.

 

(x)            “Rents” means all rents (whether from residential or
non-residential space), revenues and other income of the Land or the
Improvements, including subsidy payments received from any sources (including
but not limited to payments under any Housing Assistance Payments Contract),
parking fees, laundry and vending machine income and fees and charges for food,
healthcare and other services provided at the Mortgaged Property, whether now
due, past due, or to become due, resident and tenant security deposits, entrance
fees, application fees, processing fees, community fees and any other amounts or
fees deposited by any resident or tenant (whether forfeited or not) together
with and including all proceeds from any private insurance for residents to
cover rental charges and charges for services at or in connection with the
Mortgaged Property, and the right to third party payments due for the rents or
services of residents at the Mortgaged Property.  Each of the foregoing shall be
considered “Rents” for the purposes of the actions and rights set forth in
Section 3 of this Agreement.

 

(y)           “Special Use Permit” shall have the meaning as defined in
Section 15(k) of this Agreement.

 

(z)            “Taxes” shall have the meaning as defined in the Instrument.

 

(aa)         “UCC Collateral” shall have the meaning as defined in
Section 2(a) of this Agreement.

 

2.             UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.

 

(a)           This Agreement is also a security agreement under the Uniform
Commercial Code for any of the Contracts, Accounts, Equipment, Inventory, Leases
and Rents of Operator which, under applicable law, may be subject to a security
interest under the Uniform Commercial Code, whether acquired now or in the
future and all products and cash and non-cash proceeds thereof (collectively,
“UCC Collateral”).  Operator hereby assigns and grants to Lender a security
interest in the UCC Collateral to secure all Obligations of the Operator under
this Agreement and under the Operating Lease.  Operator hereby authorizes Lender
to file financing statements, continuation statements and financing statement
amendments in such form as Lender may require to perfect or continue the
perfection of this security interest and Operator

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

5

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agrees, if Lender so requests, to execute and deliver to Lender such financing
statements, continuation statements and amendments.  Borrower shall pay all
filing costs and all costs and expenses of any record searches for financing
statements that Lender may require.  Without the prior written consent of
Lender, Operator shall not create or permit to exist any other lien or security
interest in any of the UCC Collateral.  Operator represents and warrants that
Operator has delivered or has caused to be delivered to Lender copies, with
filing information, of all of the UCC financing statements, including any
amendments, naming Operator, as debtor, that pledge any of the Collateral under
the Loan Documents or any UCC Collateral under this  Agreement to any Person
other than Lender, including but not limited to, all of the UCC financing
statements naming Operator, as debtor, and Wachovia Bank, National Association,
as secured party, in connection with that certain Credit and Security Agreement
dated as of May 9, 2005, as the same has been amended (the “Operator UCC
Amendments”).  Operator hereby authorizes Lender to file the Operator UCC
Amendments with the appropriate Governmental Authority. Operator represents and
warrants that Operator has entered into the Seventh Amendment to Credit and
Security Agreement (the “Wachovia Agreement”) dated the date hereof with
Wachovia Bank, National Association (“Wachovia”) wherein Wachovia released all
of its Liens on certain property of Operator with respect to the Mortgaged
Properties.  Operator further represents and warrants that the property released
by Wachovia pursuant to the Wachovia Agreement represents all of the property of
Operator with respect to the Mortgaged Properties that had been pledged to
Wachovia.

 

(b)           If an Event of Default has occurred and is continuing, Lender
shall have the remedies of a secured party under the Uniform Commercial Code, in
addition to all remedies provided by this Agreement or existing under applicable
law.  In exercising any remedies, Lender may exercise its remedies against the
UCC Collateral separately or together, and in any order, without in any way
affecting the availability of Lender’s other remedies.

 

(c)           Upon an Event of Default, Lender or its designee may (in Lender’s
sole discretion) terminate Operator’s authority to collect Accounts and notify
the residents and account debtors that the Accounts have been assigned to Lender
or of Lender’s security interest therein and, either in its own name or that of
Operator or both, demand, collect (including, without limitation, through any
lockbox arrangement prescribed by Lender), receive, receipt for, sue for or give
acquittance for any or all amounts due or to become due in respect of the
Accounts, and may also, in its discretion, file any claim, institute any
proceeding or take any other action that Lender may deem necessary or
appropriate to protect and realize upon the security interest of Lender in the
Accounts.  All of Lender’s collection expenses shall be charged to the
Borrower’s account and added to the Indebtedness.  If Lender is collecting the
Accounts as above provided, Lender shall have the right to receive, endorse,
assign and deliver in Lender’s name or Operator’s name any and all checks,
drafts and other instruments for the payment of money relating to the Accounts,
and Operator hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed.  If Lender is collecting the Accounts directly as above
provided, Operator hereby constitutes Lender or Lender’s designee as Operator’s
attorney-in-fact with power with respect to the Accounts to:  (1) endorse
Operator’s name upon all notes, acceptances, checks, drafts, money orders or
other evidences of payment that may come into

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

6

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Lender’s possession; (2) notify the Post Office to change the address for
delivery of mail addressed to Operator for the Mortgaged Property to such
address as Lender may designate; and (3) receive, open, and dispose of all such
mail addressed to Operator.  Any amounts so received by Lender and not utilized
to pay for operating expenses of any Mortgaged Property shall be applied against
Operator’s obligations to Master Tenant under the Operating Lease and to Master
Tenant’s obligations under the Master Lease.

 

(d)           Upon an Event of Default, unless cured to Lender’s satisfaction,
Lender may, without demand and without advertisement or notice, at any time or
times, sell and deliver any or all Equipment or Inventory held by or for it at
public or private sale, for cash, upon credit or otherwise, at such prices and
upon such terms as Lender, in its sole discretion, deems advisable.  Subject to
the provisions of applicable law, Lender may postpone or cause the postponement
of the sale of all or any portion of the Equipment or Inventory by announcement
at the time and place of such sale, and such sale may, without further notice,
be made at the time and place to which the sale has been postponed or Lender may
further postpone such sale by announcement made at such time and place.  Without
in any way limiting the foregoing, Lender shall, following any Event of Default,
unless cured to Lender’s satisfaction, have the right, in addition to all other
rights provided herein or by law, to enter without legal process upon the
Mortgaged Property (provided that such entry be done lawfully) for the purpose
of taking possession of the Equipment or Inventory, and the right to maintain
such possession on the Mortgaged Property or to remove the Equipment or
Inventory or any part thereof to such other places as Lender may desire. 
Whether or not Lender exercises its right to take possession of the Equipment or
Inventory, Operator shall, upon Lender’s demand, promptly assemble the Equipment
or Inventory and make it available to Lender at the Mortgaged Property.

 

3.             ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN
POSSESSION.

 

(a)           To the extent permitted by applicable law, Operator absolutely and
unconditionally assigns and transfers to Lender Operator’s right, title and
interest in all Rents.  To the extent permitted by applicable law, it is the
intention of Operator to establish a present, absolute and irrevocable transfer
and assignment to Lender of Operator’s right, title and interest in all Rents
and to authorize and empower Lender to collect and receive all Rents owed to
Operator without the necessity of further action on the part of Operator. 
Promptly upon request by Lender, Operator agrees to execute and deliver further
confirmation of such assignments as Lender may from time to time require.  To
the extent permitted by applicable law, Operator and Lender intend this
assignment of Rents to be immediately effective and to constitute an absolute
present assignment and not an assignment for additional security only.  However,
if this present, absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the Property Jurisdiction (as that
term is defined in the Instrument), then it is the intention of Operator that in
this circumstance this Agreement create and perfect a lien on Operator’s right,
title and interest in all Rents in favor of Lender, which lien shall be
effective as of the date of this Agreement and shall secure all obligations of
Operator under this Agreement and under the Operating Lease.

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

7

--------------------------------------------------------------------------------

 

(b)           After the occurrence of an Event of Default, Operator authorizes
Lender to collect, sue for and compromise Rents and directs each resident and
tenant of the Mortgaged Property to pay all Rents to, or as directed by,
Lender.  However, until the occurrence of an Event of Default, Lender hereby
grants to Operator a revocable license to collect and receive all Rents, to hold
all Rents in trust for the benefit of Lender and subject to the terms of the
Operating Lease, to apply all Rents to pay the current costs and expenses of
managing, operating and maintaining the Mortgaged Property, including utilities,
Taxes and insurance premiums (to the extent not included in Imposition
Deposits), resident and tenant improvements and other capital expenditures and
otherwise to apply such Rents and retain them as its sole property, all to the
extent such Rents are attributable to periods during which an Event of Default
has not occurred (each a “Nondefault Period”).  Subject to the terms of the
Operating Lease, Rents attributable to Nondefault Periods may be retained by
Operator free and clear of, and released from, Lender’s rights with respect to
Rents under this Agreement.  From and after the occurrence of an Event of
Default, and without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, or by a receiver,
Operator’s license to collect Rents shall automatically terminate and Lender
shall without notice be entitled to all Rents as they become due and payable,
including Rents then due and unpaid.  Operator shall pay to Lender upon demand
all Rents to which Lender is entitled.  At any time on or after the date of
Lender’s demand for Rents, Lender may give, and Operator hereby irrevocably
authorizes Lender to give, notice to all residents and tenants of the Mortgaged
Property instructing them to pay all Rents to Lender.  No resident or tenant
shall be obligated to inquire further as to the occurrence or continuance of an
Event of Default, and no resident or tenant shall be obligated to pay to
Operator any amounts which are actually paid to Lender in response to such a
notice.  Any such notice by Lender shall be delivered to each resident and
tenant personally, by mail or by delivering such demand to each rental unit. 
Operator shall not interfere with and shall cooperate with Lender’s collection
of such Rents.  After an Event of Default, Lender is further authorized to give
notice to all third party payment payors (other than governmental entities) at
Lender’s option, instructing them to pay all third party payments which would be
otherwise paid to Operator to Lender, to the extent permitted by law.

 

(c)           Operator represents and warrants to Lender that Operator has not
executed any prior assignment of Rents or any such assignments have been
terminated and Operator covenants and agrees that it will not perform any acts
and has not executed, and shall not execute, any instrument which would prevent
Lender from exercising its rights under this Section 3, and that at the time of
execution of this Agreement there has been no anticipation or prepayment of any
Rents for more than two months prior to the due dates of such Rents.  Operator
shall not collect or accept payment of any Rents more than two months prior to
the due dates of such Rents.

 

(d)           If an Event of Default has occurred and is continuing, Lender may,
regardless of the adequacy of Lender’s security or the solvency of Operator and
even in the absence of waste, to the extent permitted by applicable law, enter
upon and take and maintain full control of the Mortgaged Property in order to
perform all acts that Lender in its discretion

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

8

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determines to be necessary or desirable for the operation and maintenance of the
Mortgaged Property, including the execution, cancellation or modification of
Leases, the collection of all Rents, the making of repairs to the Mortgaged
Property and the execution or termination of Contracts and Leases providing for
the management, operation or maintenance of the Mortgaged Property, for the
purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Agreement, or for such
other purposes as Lender in its discretion may deem necessary or desirable. 
Alternatively, if an Event of Default has occurred and is continuing, regardless
of the adequacy of Lender’s security, without regard to Operator’s solvency and
without the necessity of giving prior notice (oral or written) to Operator,
Lender may apply to any court having jurisdiction for the appointment of a
receiver for the Mortgaged Property to take any or all of the actions set forth
in the preceding sentence.  If Lender elects to seek the appointment of a
receiver for the Mortgaged Property at any time after an Event of Default has
occurred and is continuing, Operator, by its execution of this Agreement,
expressly consents to the appointment of such receiver, including the
appointment of a receiver ex parte if permitted by applicable law.  Lender or
the receiver, as the case may be, shall be entitled to receive a reasonable fee
for managing the Mortgaged Property.  Immediately upon appointment of a receiver
or immediately upon Lender’s entering upon and taking possession and control of
the Mortgaged Property, Operator shall, to the extent permitted by applicable
law, surrender possession of the Mortgaged Property to Lender or the receiver,
as the case may be, and shall deliver to Lender or the receiver, as the case may
be, all documents, records (including records on electronic or magnetic media),
accounts, surveys, plans, and specifications relating to the Mortgaged Property
and all security deposits and prepaid Rents.  In the event Lender takes
possession and control of the Mortgaged Property, Lender may exclude Operator
and its representatives from the Mortgaged Property.  Operator acknowledges and
agrees that the exercise by Lender of any of the rights conferred under this
Section 3 shall not be construed to make Lender a mortgagee-in-possession of the
Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and Improvements.

 

(e)           To the extent permitted by applicable law, Master Tenant
absolutely and unconditionally assigns and transfers to Lender Master Tenant’s
right, title and interest in all Rents.  To the extent permitted by applicable
law, it is the intention of Master Tenant to establish a present, absolute and
irrevocable transfer and assignment to Lender of Master Tenant’s right, title
and interest in all Rents and to authorize and empower Lender to collect and
receive all Rents owed to Master Tenant without the necessity of further action
on the part of Master Tenant.  Promptly upon request by Lender, Master Tenant
agrees to execute and deliver further confirmation of such assignment as Lender
may from time to time require.  To the extent permitted by applicable law,
Master Tenant and Lender intend this assignment of Rents to be immediately
effective and to constitute an absolute present assignment and not an assignment
for additional security only.  However, if this present, absolute and
unconditional assignment of Rents is not enforceable by its terms under the laws
of the Property Jurisdiction (as that term is defined in the Instrument), then
it is the intention of Master Tenant that in this circumstance this Agreement
create and perfect a lien on Master Tenants’ right, title and interest in all
Rents in favor of Lender, which lien shall be effective as of the date of this
Agreement and shall secure all obligations of Master Tenant under this Agreement
and under the Master Lease.

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

9

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(f)            After the occurrence of an Event of Default, Master Tenant
authorizes Lender to collect, sue for and compromise Rents and directs each
resident and tenant of the Mortgaged Property to pay all Rents to, or as
directed by, Lender.  However, until the occurrence of an Event of Default,
Lender hereby grants to Master Tenant a revocable license to collect and receive
all Rents, to hold all Rents in trust for the benefit of Lender and subject to
the terms of the Master Lease, to apply all Rents to pay the current costs and
expenses of managing, operating and maintaining the Mortgaged Property,
including utilities, Taxes and insurance premiums (to the extent not included in
Imposition Deposits), resident and tenant improvements and other capital
expenditures and otherwise to apply such Rents and retain them as its sole
property, all to the extent such Rents are attributable to Nondefault Periods. 
Subject to the terms of the Master Lease, Rents attributable to Nondefault
Periods may be retained by Master Tenant free and clear of, and released from,
Lender’s rights with respect to Rents under this Agreement.  From and after the
occurrence of an Event of Default, and without the necessity of Lender entering
upon and taking and maintaining control of the Mortgaged Property directly, or
by a receiver, Master Tenant’s license to collect Rents shall automatically
terminate and Lender shall without notice be entitled to all Rents as they
become due and payable, including Rents then due and unpaid.  Master Tenant
shall pay to Lender upon demand all Rents to which Lender is entitled.  At any
time on or after the date of Lender’s demand for Rents, Lender may give, and
Master Tenant hereby irrevocably authorizes Lender to give, notice to all
residents and tenants of the Mortgaged Property instructing them to pay all
Rents to Lender.  No resident or tenant shall be obligated to inquire further as
to the occurrence or continuance of an Event of Default, and no resident or
tenant shall be obligated to pay to Master Tenant any amounts which are actually
paid to Lender in response to such a notice.  Any such notice by Lender shall be
delivered to each resident and tenant personally, by mail or by delivering such
demand to each rental unit.  Master Tenant shall not interfere with and shall
cooperate with Lender’s collection of such Rents.  After an Event of Default,
Lender is further authorized to give notice to all third party payment payors
(other than governmental entities) at Lender’s option, instructing them to pay
all third party payments which would be otherwise paid to Master Tenant to
Lender, to the extent permitted by law.

 

(g)           Master Tenant represents and warrants to Lender that Master Tenant
has not executed any prior assignment of Rents or any such assignments have been
terminated, and Master Tenant covenants and agrees that it will not perform any
acts and has not executed, and shall not execute, any instrument which would
prevent Lender from exercising its rights under this Section 3, and that at the
time of execution of this Agreement there has been no anticipation or prepayment
of any Rents for more than two months prior to the due dates of such Rents. 
Master Tenant shall not collect or accept payment of any Rents more than two
months prior to the due dates of such Rents.

 

(h)           If an Event of Default has occurred and is continuing, Lender may,
regardless of the adequacy of Lender’s security or the solvency of Master Tenant
and even in the absence of waste, to the extent permitted by applicable law,
enter upon and take and maintain full control of the Mortgaged Property in order
to perform all acts that Lender in its discretion determines to be necessary or
desirable for the operation and maintenance of the Mortgaged Property, including
the execution, cancellation or modification of Leases, the collection of all
Rents, the making of repairs to the Mortgaged Property and the execution or
termination of Contracts and Leases providing for the management, operation or
maintenance of the Mortgaged

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

10

--------------------------------------------------------------------------------

 

Property, for the purposes of enforcing the assignment of Rents pursuant to
Section 3(a), protecting the Mortgaged Property or the security of this
Agreement, or for such other purposes as Lender in its discretion may deem
necessary or desirable.  Alternatively, if an Event of Default has occurred and
is continuing, regardless of the adequacy of Lender’s security, without regard
to Master Tenant’s solvency and without the necessity of giving prior notice
(oral or written) to Master Tenant, Lender may apply to any court having
jurisdiction for the appointment of a receiver for the Mortgaged Property to
take any or all of the actions set forth in the preceding sentence.  If Lender
elects to seek the appointment of a receiver for the Mortgaged Property at any
time after an Event of Default has occurred and is continuing, Master Tenant, by
its execution of this Agreement, expressly consents to the appointment of such
receiver, including the appointment of a receiver ex parte if permitted by
applicable law.  Lender or the receiver, as the case may be, shall be entitled
to receive a reasonable fee for managing the Mortgaged Property.  Immediately
upon appointment of a receiver or immediately upon Lender’s entering upon and
taking possession and control of the Mortgaged Property, Master Tenant shall, to
the extent permitted by applicable law, surrender possession of the Mortgaged
Property to Lender or the receiver, as the case may be, and shall deliver to
Lender or the receiver, as the case may be, all documents, records (including
records on electronic or magnetic media), accounts, surveys, plans, and
specifications relating to the Mortgaged Property and all security deposits and
prepaid Rents.  In the event Lender takes possession and control of the
Mortgaged Property, Lender may exclude Master Tenant and its representatives
from the Mortgaged Property.  Master Tenant acknowledges and agrees that the
exercise by Lender of any of the rights conferred under this Section 3 shall not
be construed to make Lender a mortgagee-in-possession of the Mortgaged Property
so long as Lender has not itself entered into actual possession of the Land and
Improvements.

 

(i)            If Lender enters the Mortgaged Property, Lender shall be liable
to account only to Borrower, Operator and Master Tenant and only for those Rents
actually received.  Lender shall not be liable to Operator, Master Tenant,
Borrower, anyone claiming under or through Master Tenant, Master Tenant or
Borrower, or anyone having an interest in the Mortgaged Property, by reason of
any act or omission of Lender under this Section 3, and Operator, Master Tenant
and Borrower hereby release and discharge Lender from any such liability to the
fullest extent permitted by law.

 

(j)            If the Rents are not sufficient to meet the costs of taking
control of and managing the Mortgaged Property and collecting the Rents
following an Event of Default, any funds expended by Lender for such purposes
shall become an additional part of the Indebtedness, as provided in Section 12
of the Instrument.

 

(k)           Any entering upon and taking of control of the Mortgaged Property
by Lender or the receiver, as the case may be, and any application of Rents as
provided in this

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

11

--------------------------------------------------------------------------------

 

Agreement shall not cure or waive any Event of Default or invalidate any other
right or remedy of Lender under applicable law or provided for in this Agreement
or in the Instrument.

 

(l)            Any Rents received by Lender hereunder and not utilized to pay
operating expenses of any Mortgaged Property shall be applied to Operator’s
obligations to Master Tenant under the Operating Lease and to Master Tenant’s
obligations to Borrower under the Master Lease.

 

4.             ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

 

(a)           To the extent permitted by applicable law, Operator absolutely and
unconditionally assigns and transfers to Lender all of Operator’s right, title
and interest in, to and under the Leases, including Operator’s right, power and
authority to modify the terms of any such Lease, or extend or terminate any such
Lease.  To the extent permitted by applicable law, it is the intention of
Operator to establish a present, absolute and irrevocable transfer and
assignment to Lender of all of Operator’s right, title and interest in, to and
under the Leases.  To the extent permitted by applicable law, Operator and
Lender intend this assignment of the Leases to be immediately effective and to
constitute an absolute present assignment and not an assignment for additional
security only.  However, if this present, absolute and unconditional assignment
of the Leases is not enforceable by its terms under the laws of the Property
Jurisdiction, then it is the intention of Operator that in this circumstance
this Agreement create and perfect a lien on the Leases in favor of Lender, which
lien shall be effective as of the date of this Agreement and shall secure all
obligations of Operator under this Agreement and under the Operating Lease. 
Notwithstanding the foregoing or (b) below, Operator and Master Tenant may,
except after the occurrence of any Event of Default, amend or modify the
Operating Lease in a manner consistent with Section 8.21 of the Master
Agreement, and Operator may terminate the Operating Lease in connection with a
release of the Mortgaged Property pursuant to the terms and conditions of the
Master Agreement.

 

(b)           Until Lender gives notice to Operator of Lender’s exercise of its
rights under this Section 4, Operator shall have all rights, power and authority
granted to Operator under any Lease (except as otherwise limited by this
Section or any other provision of this Agreement), including the right, power
and authority to modify the terms of any Lease or extend or terminate any Lease,
with the exception of the Operating Lease.  If an Event of Default has occurred
and is continuing and at the option of Lender, the permission given to Operator
pursuant to the preceding sentence to exercise all rights, power and authority
under Leases shall terminate.  Operator shall comply with and observe Operator’s
material obligations under all Leases, including Operator’s obligations
pertaining to the maintenance and disposition of resident or tenant security
deposits.

 

(c)           Operator acknowledges and agrees that the exercise by Lender,
either directly or by a receiver, of any of the rights conferred under this
Section 4 shall not be construed to make Lender a mortgagee-in-possession of the
Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and the Improvements.  The acceptance by

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

12

--------------------------------------------------------------------------------

 

Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any
time or in any event obligate Lender to take any action under this Agreement or
to expend any money or to incur any expenses.  Lender shall not be liable in any
way for any injury or damage to person or property sustained by any person or
persons, firm or corporation in or about the Mortgaged Property.  Prior to
Lender’s actual entry into and taking possession of the Mortgaged Property,
Lender shall not (i) be obligated to perform any of the terms, covenants and
conditions contained in any Lease (or otherwise have any obligation with respect
to any Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible for the
operation, control, care, management or repair of the Mortgaged Property or any
portion of the Mortgaged Property.  The execution of this Agreement by Operator
shall constitute conclusive evidence that all responsibility for the operation,
control, care, management and repair of the Mortgaged Property is and shall be
that of Operator, prior to such actual entry and taking of possession.

 

(d)           Upon delivery of notice by Lender to Operator of Lender’s exercise
of Lender’s rights under this Section 4 at any time after the occurrence of an
Event of Default, and without the necessity of Lender entering upon and taking
and maintaining control of the Mortgaged Property directly, by a receiver, or by
any other manner or proceeding permitted by the laws of the Property
Jurisdiction, Lender immediately shall have, to the extent permitted by
applicable law, all rights, powers and authority granted to Operator under any
Lease, including the right, power and authority to modify the terms of any such
Lease, or extend or terminate any such Lease.

 

(e)           Operator shall, promptly upon Lender’s request, deliver to Lender
an executed copy of each residential Lease then in effect. All Leases for
residential dwelling units shall be on forms approved by Lender (with such
changes thereto as shall be consistent with market practice), shall be on
initial terms of at least one month and not more than two years, and shall not
include options to purchase.  Each Lease in effect as of the date hereof, shall
be deemed to be on a form approved by Lender.

 

(f)            Operator shall not lease any portion of the Mortgaged Property
for non-residential use that is greater than one thousand five hundred (1,500)
square feet or that will eliminate any type of services provided to residents,
except with the prior written consent and approval of Lender with the exception
of the Operating Lease which has previously been approved by Lender.  Operator
shall not modify the terms of, extend or terminate(except due to tenant
default), any Lease for non-residential use (including any Lease in existence on
the date of the Instrument) that is greater than one thousand five hundred
(1,500) square feet or that results in the elimination of any type of services
provided to residents, without the prior written consent of Lender except that
Operator may, except after the occurrence of any Event of Default, modify,
extend or terminate any Lease for which consent is not required and Operator and
Master Tenant may, notwithstanding any provisions of this Agreement to the
contrary, terminate the Operating Lease in connection with any release of the
Mortgaged Property pursuant to the terms and conditions of the Master
Agreement.  Operator shall, without request by Lender, deliver an executed copy
of each non-residential Lease to Lender promptly after such Lease is signed. 
All

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

13

--------------------------------------------------------------------------------

 

non-residential Leases (including, without limitation, the Operating Lease) and
renewals or extensions of existing Leases, shall specifically provide that
(1) such Leases are subordinate to the lien of the Instrument (unless waived in
writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a
foreclosure sale, such attornment to be self-executing and effective upon
acquisition of title to the Mortgaged Property by any purchaser at a foreclosure
sale or by Lender in any manner; (3) the tenant agrees to execute such further
evidences of attornment as Lender or any purchaser at a foreclosure sale may
from time to time request; (4) the Lease shall not be terminated by foreclosure
or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of
the Mortgaged Property, Lender or any other purchaser at such foreclosure sale
may, at Lender’s or such purchaser’s option, accept or terminate such Lease; and
(6) the tenant shall, upon receipt after the occurrence of an Event of Default
of a written request from Lender, pay all Rents payable under the Lease to
Lender.

 

(g)           Operator shall not receive or accept Rents under any Lease
(whether residential or non-residential) for more than two months in advance.

 

(h)           To the extent permitted by applicable law, Master Tenant
absolutely and unconditionally assigns and transfers to Lender all of Master
Tenant’s right, title and interest in, to and under the Leases, including Master
Tenant’s right, power and authority to modify the terms of any such Lease, or
extend or terminate (other than due to tenant default) any such Lease.  To the
extent permitted by applicable law, it is the intention of Master Tenant to
establish a present, absolute and irrevocable transfer and assignment to Lender
of all of Master Tenant’s right, title and interest in, to and under the
Leases.  To the extent permitted by applicable law, Master Tenant and Lender
intend this assignment of the Leases to be immediately effective and to
constitute an absolute present assignment and not an assignment for additional
security only.  However, if this present, absolute and unconditional assignment
of the Leases is not enforceable by its terms under the laws of the Property
Jurisdiction, then it is the intention of Master Tenant that in this
circumstance this Agreement create and perfect a lien on the Leases in favor of
Lender, which lien shall be effective as of the date of this Agreement and shall
secure all obligations of Master Tenant under this Agreement and under the
Master Lease.  Notwithstanding the foregoing, Borrower and Master Tenant may,
except after the occurrence of any Event of Default, amend or modify the Master
Lease in a manner consistent with Section 8.21 of the Master Agreement. 
Notwithstanding any provision of this Agreement to the contrary, the Master
Lease may be amended in connection with any release of any Mortgaged Property
pursuant to the terms of the Master Agreement.

 

(i)            Until Lender gives notice to Master Tenant of Lender’s exercise
of its rights under this Section 4, Master Tenant shall have all rights, power
and authority granted to Master Tenant under any Lease (except as otherwise
limited by this Section or any other provision of this Agreement), including the
right, power and authority to modify the terms of any Lease or extend or
terminate any Lease, with the exception of the Master Lease (which may be
extended pursuant to its terms and may be modified as provided in
Section 4(h) above).  If an Event of Default has occurred and is continuing and
at the option of Lender, the permission given to Master Tenant pursuant to the
preceding sentence to exercise all rights, power and authority

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

14

--------------------------------------------------------------------------------

 

under Leases shall terminate.  Master Tenant shall comply with and observe
Master Tenant’s material obligations under all Leases and shall cause Operator
to comply with all obligations pertaining to the maintenance and disposition of
resident or tenant security deposits.

 

(j)            Master Tenant acknowledges and agrees that the exercise by
Lender, either directly or by a receiver, of any of the rights conferred under
this Section 4 shall not be construed to make Lender a mortgagee-in-possession
of the Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and the Improvements.  The acceptance by Lender of the
assignment of the Leases pursuant to Section 4(h) shall not at any time or in
any event obligate Lender to take any action under this Agreement or to expend
any money or to incur any expenses.  Lender shall not be liable in any way for
any injury or damage to person or property sustained by any person or persons,
firm or corporation in or about the Mortgaged Property.  Prior to Lender’s
actual entry into and taking possession of the Mortgaged Property, Lender shall
not (i) be obligated to perform any of the terms, covenants and conditions
contained in any Lease (or otherwise have any obligation with respect to any
Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible for the
operation, control, care, management or repair of the Mortgaged Property or any
portion of the Mortgaged Property.  The execution of this Agreement by Master
Tenant shall constitute conclusive evidence that all responsibility for the
operation, control, care, management and repair of the Mortgaged Property is and
shall be that of Master Tenant and Operator, prior to such actual entry and
taking of possession.

 

(k)           Upon delivery of notice by Lender to Master Tenant of Lender’s
exercise of Lender’s rights under this Section 4 at any time after the
occurrence of an Event of Default, and without the necessity of Lender entering
upon and taking and maintaining control of the Mortgaged Property directly, by a
receiver, or by any other manner or proceeding permitted by the laws of the
Property Jurisdiction, Lender immediately shall have, to the extent permitted by
applicable law, all rights, powers and authority granted to Master Tenant under
any Lease, including the right, power and authority to modify the terms of any
such Lease, or extend or terminate any such Lease.

 

5.             ASSIGNMENT OF CONTRACTS; CONTRACTS AFFECTING THE MORTGAGED
PROPERTY.

 

(a)           Operator has entered into the Contracts identified on Exhibit A of
the Certificate of Operator for the provision of goods or services, at or
otherwise in connection with the operation, use or management of the Mortgaged
Property.  Operator may in the future enter into Contracts for the provision of
additional goods or services at or otherwise in connection with the operation,
use or management of the Mortgaged Property.

 

(b)           To the extent permitted by applicable law, Operator absolutely and
unconditionally assigns and transfers to Lender all of Operator’s right, title
and interest in, to and under the Contracts, including Operator’s right, power
and authority to modify the terms of, extend or terminate any such Contract.  To
the extent permitted by applicable law, it is the

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

15

--------------------------------------------------------------------------------

 

intention of Operator to establish a present, absolute and irrevocable transfer
and assignment to Lender of all of Operator’s right, title and interest in, to
and under the Contracts.  To the extent permitted by applicable law, Operator
and Lender intend this assignment of the Contracts to be immediately effective
and to constitute an absolute present assignment and not an assignment for
additional security only.  However, if this present, absolute and unconditional
assignment of the Contracts is not enforceable by its terms under the laws of
the Property Jurisdiction, then it is the intention of Operator that in this
circumstance this Agreement create and perfect a lien on the Contracts in favor
of Lender, which lien shall be effective as of the date of this Agreement and
shall secure all obligations under this Agreement and under the Operating
Lease.  The acceptance by Lender of this assignment of the Contracts shall not
at any time or in any event obligate Lender to take any action under this
Agreement or to expend any money or to incur any expenses.

 

(c)           Until Lender gives notice to Operator of Lender’s exercise of its
rights under this Section 5, Operator shall have all rights, power and authority
granted to Operator under any Contract (except as otherwise limited by this
Section or any other provision of this Agreement), including the right, power
and authority to modify the terms of any Contract or extend or terminate any
Contract.  If an Event of Default has occurred and is continuing and at the
option of Lender, the permission given to Operator pursuant to the preceding
sentence to exercise all rights, power and authority under Contracts shall
terminate.

 

(d)           Upon Lender’s delivery of notice to Operator of an Event of
Default, Lender shall immediately have all rights, powers and authority granted
to Operator under any Contract, including the right, power and authority to
modify the terms of, extend or terminate any such Contract.

 

(e)           Except as set forth on the Disclosure Schedule, Operator hereby
represents and warrants and agrees with Lender that:  (1) the Contracts are
assignable and no previous assignment of Operator’s interest in the Contracts
has been made unless fully terminated; (2) the Contracts are in full force and
effect in accordance with their respective terms and there are no material
defaults thereunder; (3) Operator shall fully perform all of its material
obligations under the Contracts, (4) Operator agrees not to assign, sell,
pledge, transfer, mortgage or otherwise encumber its interests in any of the
Contracts so long as this Agreement is in effect, or consent to any transfer,
assignment or other disposition thereof without the written approval of Lender;
and (5) each Contract entered into by Operator subsequent to the date hereof,
the average annual consideration of which, directly or indirectly, is at least
$20,000, shall provide:  (i) that it shall be terminable for cause; and
(ii) that it shall be terminable, at Lender’s option, upon the occurrence of an
Event of Default.

 

6.             REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  Each of Borrower,
Master Tenant and Operator represent and warrant to Lender that (i) after the
Loan is made and while the Indebtedness is outstanding, the representing party
will have sufficient working capital, including cash flow from the Mortgaged
Property or other assets, to adequately own and/or maintain the Mortgaged
Property and pay all outstanding debts, (ii) the Operating

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

16

--------------------------------------------------------------------------------

 

Lease is unmodified and is in full force and effect and the Master Lease is
unmodified and in full force and effect, (iii) each of the Master Lease and the
Operating Lease is a valid and binding agreement enforceable against the parties
in accordance with its terms, and (iv) the representing party is not in default
in performing any of its obligations under the Master Lease or the Operating
Lease.  Each of Master Tenant and Operator further represents and warrants to
Lender that (A) it is duly organized and validly existing and its partner or
member is a duly organized and validly existing limited liability company,
limited partnership, corporation, or business trust, to the extent such partner,
shareholder or member is an entity rather than an individual; (B) it has the
requisite power and authority to operate or manage the Mortgaged Property (with
respect to Operator only) and to carry on its business as now conducted and as
contemplated to be conducted in connection with the performance of its
obligations under this Agreement; and (C) the execution, delivery and
performance of the Master Lease, Operating Lease and this Agreement have been
duly authorized by all necessary action and proceedings by or on behalf of
Master Tenant and Operator, and no further approvals or filings of any kind,
including any approval of or filing with any governmental authority, are
required by or on behalf of Operator or Master Tenant as a condition to the
valid execution, delivery and performance by Operator or Master Tenant of the
Operating Lease, the Master Lease  and this Agreement.

 

7.            BORROWER COVENANTS.  Except as permitted pursuant to the Loan
Documents, Borrower hereby covenants with Lender that during the term of this
Agreement: (a) Borrower shall not transfer or suffer or permit the transfer of
the responsibility for the operation and management of the Mortgaged Property
from Operator to any other person or entity without the prior written consent of
Lender; (b) Borrower shall not terminate or amend any of the terms or provisions
of the Master Lease and shall not suffer or permit the termination or any
amendment to the Operating Lease nor shall Borrower assign its rights under the
Master Lease or permit or allow any assignment of rights by Operator or Master
Tenant under the Master Lease or Operating Lease, without the prior written
consent of Lender; (c) within 5 days of Borrower’s receipt,  Borrower shall give
Lender written notice of any notice or information that Borrower receives which
indicates that either Borrower or Master Tenant is in default under the terms of
the Master Lease or Master Tenant or Operator is in default under the terms of
the Operating Lease, Operator is terminating the Operating Lease or that
Operator is otherwise discontinuing its operation and management of the
Mortgaged Property; and (d) Borrower agrees that after Borrower receives notice
(or otherwise has actual knowledge) of an Event of Default under the Instrument,
it will not make any payment of fees under or pursuant to the Master Lease
without Lender’s prior written consent.

 

8.             EVENT OF DEFAULT.  Upon receipt by Master Tenant or Operator of
written notice from Lender that an Event of Default has occurred, Lender shall
have the right to exercise all rights as owner of the Mortgaged Property under
the Master Lease.  After the occurrence of an Event of Default, Master Tenant
shall pay to Lender directly all Rent and other sums due under the Operating
Lease and Operator shall pay to Lender directly all Rent and other sums due
under the Operating Lease.  After the occurrence of an Event of Default, Lender
shall be entitled to mandate the use of a lockbox bank account or other
depositary account, to be maintained under the control and supervision of
Lender, for all income of the Mortgaged Property, including but

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

17

--------------------------------------------------------------------------------

 

not limited to Rents, service charges, insurance payments and third party
payments.  Borrower, Master Tenant and Operator hereby agree that upon the
occurrence of an Event of Default and at the option of Lender, Operator shall
continue to provide all necessary services required under any applicable
licensing or regulatory requirements and shall fully cooperate with Lender and
any receiver as may be appointed by a court, in performing these services until
such time as Lender has arranged for a replacement operator, and in arranging an
orderly transition to a replacement operator, manager or provider of the
necessary services subject to payment to Operator of a reasonable compensation
for such services.  In connection with such transition to a replacement
operator, Borrower, Master Tenant and Operator agree to cooperate with Lender in
arranging an orderly transfer to a replacement operator of all Licenses and
governmental approvals necessary or reasonably required to operate the Mortgaged
Property as a Seniors Housing Facility, and to execute promptly all
applications, assignments, consents and documents requested by Lender to
facilitate such transition.

 

9.             NON-DISTURBANCE.  In the event Lender takes possession of
Borrower’s interest in the Mortgaged Property, as mortgagee-in-possession or
otherwise, or forecloses the Instrument or otherwise causes Borrower’s interest
in the Mortgaged Property to be sold pursuant to the Instrument or exercises any
other right or remedy available under the Instrument or this Agreement, Lender
agrees not to affect, terminate or disturb Master Tenant’s or Operator’s right
to quiet enjoyment and possession of the Mortgaged Property under the terms of
the Master Lease and Operating Lease, or any of Master Tenant’s rights under the
Master Lease or Operator’s rights under the Operating Lease, and to recognize
all of Master Tenant’s other rights under the Master Lease and all of Operator’s
other rights under the Operating Lease, so long as there is no Event of Default.

 

In the event that Lender succeeds to the interest of the Borrower’s fee title to
the Mortgaged Property and as landlord under the Master Lease, (hereinafter
collectively referred to in this paragraph as “Successor Landlord”), Lender and
Master Tenant hereby agree to recognize one another as landlord and tenant,
respectively, under the Master Lease, and to be bound to one another under all
of the terms, covenants and conditions of the Master Lease.  Accordingly, from
and after such event, Successor Landlord and Master Tenant shall have the same
remedies against each other for the breach of an agreement contained in the
Master Lease as Master Tenant and Borrower, had before Successor Landlord
succeeded to the interest of the Borrower, provided, however, that Successor
Landlord shall not be:

 

a.             liable for any act or omission of any prior landlord; or

 

b.             subject to any offsets or defenses that Master Tenant might have
against any prior landlord; or

 

c.             bound by any rent or additional rent that Master Tenant might
have paid for more than one month in advance to any prior landlord; or

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

18

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d.             bound by any amendment or modification of the Master Lease or the
Operating Lease made after the date of this Assignment without Lender’s prior
written consent; or

 

e.             liable for return of any security deposit or reserve to the
extent not made available to Lender as successive landlord succeeding Master
Tenant and/or Borrower and becoming the Successor Landlord.

 

Notwithstanding any of the foregoing to the contrary, while an “Event of
Default” under the Instrument has occurred, (a) Lender shall have the right to
exercise all rights as owner of the Mortgaged Property under the Master Lease
and (b) Operator shall pay to Lender directly all Rent and other sums due to
Master Tenant under the Operating Lease which amounts shall be credited as set
forth in Section 3 of this Agreement.

 

10.           TURNOVER OF BOOKS AND RECORDS.  On the effective date of
termination of the Operating Lease and/or the Master Lease, Operator and Master
Tenant, as applicable, shall turn over to Lender all books and records relating
to the Mortgaged Property and the residents and tenants (copies of which may be
retained by Operator or Master Tenant, at their expense), together with such
authorizations and letters of direction addressed to residents, tenants,
suppliers, employees, banks and other parties as Lender may reasonably require. 
Operator and Master Tenant shall cooperate with Lender in the transfer of
operating and management responsibilities to Lender, any receiver, or their
designees.  A final accounting of unpaid fees (if any) due to Operator under the
Operating Lease and due to Master Tenant under the Master Lease, shall be made
within 60 days after the effective date of termination, but Lender shall not
have any liability or obligation to Operator or Master Tenant for unpaid fees or
other amounts payable under the Operating Lease or Master Lease, as applicable,
which accrue before Lender acquires title to the Mortgaged Property, or before
Lender becomes a mortgagee in possession.

 

11.           NOTICE.  Operator’s and Master Tenant’s address for Notice is c/o
Five Star Quality Care, Inc., 400 Centre Street, Newton, Massachusetts 02458. 
Borrower’s address for notice is c/o Senior Housing Properties Trust, 400 Centre
Street, Newton, Massachusetts 02458.  Lender’s addresses for notice are 325 E.
Hillcrest Drive, Suite 160, Thousand Oaks, CA 91360, Attn: Asset Management and
390 Greenwich St., 2nd Floor, New York, New York 10014, Attn: Middle Office. 
All notices to be given hereunder shall be given to all parties and in the same
manner as notices to Borrower pursuant to the notice provisions contained in the
Master Agreement.

 

12.           NO ASSUMPTION OF OBLIGATIONS.  The Borrower, Master Tenant and
Operator, by executing this Agreement, agree that Lender does not assume any
obligations or duties of the Borrower, Master Tenant and Operator concerning the
Operating Lease or Master Lease, as applicable, until and unless Lender shall
exercise its rights hereunder.

 

13.           POWER OF ATTORNEY.  During an Event of Default, Borrower, Master
Tenant and Operator hereby irrevocably constitute and appoint Lender as
Borrower’s, Master Tenant’s and

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

19

--------------------------------------------------------------------------------

 

Operator’s attorney-in-fact to demand, receive and enforce their rights with
respect to the provisions set forth in this Agreement, to give appropriate
receipts, releases and satisfactions for and on Borrower’s, Master Tenant’s and
Operator’s behalf and to do any and all acts in Borrower’s, Master Tenant’s or
Operator’s names or in the name of Lender with the same force and effect as
Borrower, Master Tenant or Operator could do if this Agreement had not been
made.  The foregoing appointment shall be deemed to be coupled with an interest
and irrevocable.

 

14.           OPERATOR AND MASTER TENANT REPRESENTATIONS AND OBLIGATIONS. 
Operator and Master Tenant, as applicable, represent, warrant and agree to the
following:

 

(a)           Each of Operator and Master Tenant will use its best efforts to
cooperate with Lender, including attendance at any meetings requested by Lender
(after reasonable prior notice), allowing Lender to undertake inspections of the
Mortgaged Property and furnishing financial statements of Master Tenant and
Operator and operating statements for the Mortgaged Property.  As soon as
available, and in any event within ninety (90) days after the close of its
fiscal year during the Term of this Agreement,  Five Star Quality Car Inc.’s
Chief Financial Officer will provide to Lender, a letter as of January 1 of each
year, to the effect that such officer has reviewed the records and systems of
the Operator, Master Tenant and Five Star Quality Car Inc. and that each of
Operator and Master Tenant is in compliance with subsections (v), (vi) and (xvi)
of the Single- Purpose requirements (as set forth in the definition of
Single-Purpose herein) (the “Compliance Letter”).  If Five Star Quality Car Inc.
is no longer a publicly traded entity, such Compliance Letter will be provided
by Operator, Master Tenant and Five Star Quality Car Inc.’s independent
certified public accounting firm or any other nationally recognized accounting
firm and such Compliance Letter will be based upon agreed upon procedures
satisfactory to Lender.  In addition both Master Tenant and Operator acknowledge
that each has received from Borrower and reviewed a fully executed copy of the
Instrument, the Master Completion/Repair and Security Agreement, Master
Replacement Reserve and Security Agreement, the Expansion Security Agreement, if
any and Master Agreement (the “Designated Loan Documents) and covenants
therein.  Each of Operator and Master Tenant agrees to comply with all
provisions and covenants in the Designated Loan Documents applicable to the use,
repair and operation of the Mortgaged Property (the “Operating Covenants”),
including without limitation, arranging for the escrow of Taxes and insurance
with Lender and, if necessary, providing insurance coverage in accordance with
Lender’s requirements and assigning contracts relating to repairs.  In the event
Master Tenant or Operator fails to so use, repair and operate the Mortgaged
Property, Lender shall have the right to enforce the Operating Covenants
directly against Master Tenant and Operator upon Borrower’s failure to do so, in
accordance with the provisions of the Instrument and this Agreement.  An Event
of Default by Master Tenant under this Agreement shall constitute an event of
default by it under the Master Lease and an Event of Default by Operator under
this Agreement shall constitute an event of default by it under the Operating
Lease.  Any Event of Default under this Agreement shall be an Event of Default
under the Loan Documents.  Master Tenant agrees to comply with all of its
obligations under the Master Lease and Operator agrees to comply with all of its
obligations under the Operating Lease, in each case, pertaining to its payment
and performance of any repairs and capital improvements at the Mortgaged
Property;

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

20

--------------------------------------------------------------------------------

 

(b)           the Operating Lease and Master Lease are and shall be subordinate
in all respects to the liens, terms, covenants and conditions of the Instrument
and the other Loan Documents, and to all renewals, modifications,
consolidations, replacements and extensions thereof, and to all advances
heretofore made or which may hereafter be made pursuant to the Instrument
(including all sums advanced for the purposes of (x) protecting or further
securing the lien of the Instrument, curing defaults by Borrower under the Loan
Documents or for any other purposes expressly permitted by the Instrument, or
(y) constructing, renovating, repairing, furnishing, fixturing or equipping the
Mortgaged Property), all subject to the provisions of Section 9 hereof;

 

(c)           Any fees payable to Operator by Master Tenant pursuant to the
Operating Lease and to Master Tenant by Borrower pursuant to the Master Lease
are and shall be subordinated in right of payment to the prior payment in full
of monthly debt service and funding of escrows and reserves as required under
the Loan Documents, and the payment of all operating expenses and capital
expenditures incurred in connection with the operation and management of the
Mortgaged Property;

 

(d)           if, by reason of its exercise of any other right or remedy under
the Operating Lease or Master Lease, Operator or Master Tenant acquires by right
of subrogation or otherwise a lien on the Mortgaged Property which (but for this
subsection) would be senior to the lien of the Instrument, then, in that event,
such lien shall be subject and subordinate to the lien of the Instrument;

 

(e)           until Operator, Master Tenant or Borrower receives notice (or
otherwise acquires actual knowledge) of an Event of Default, Operator shall be
entitled to retain for its own account all payments made under or pursuant to
the Operating Lease and Master Tenant shall be entitled to retain for its own
account all payments made under or pursuant to the Master Lease, subject to the
terms of this Agreement;

 

(f)            after Operator, Master Tenant or Borrower receives notice (or
otherwise acquires actual knowledge) of an Event of Default, Operator will not
accept or retain any payment of fees under or pursuant to the Operating Lease,
and Master Tenant will not accept or retain any payment of fees under or
pursuant to the Master Lease without Lender’s prior written consent;

 

(g)           if, after Operator, Master Tenant or Borrower receives notice (or
otherwise acquires actual knowledge) of an Event of Default, Operator receives
any payment of fees under the Operating Lease or Master Tenant receives any
payment of fees under the Master Lease other than from Lender, or if either
party receives any other payment or distribution of any kind from Borrower or
from any other person or entity other than from Lender in connection with the
Operating Lease which Master Tenant or Operator is not permitted by this
Agreement to retain for its own account, such payment or other distribution will
be received and held in trust for Lender and unless Lender otherwise notifies
Master Tenant or Operator, will be promptly remitted, in cash or readily
available funds, to Lender, properly endorsed to Lender, to be applied to the
principal of,

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

21

--------------------------------------------------------------------------------

 

interest on and other amounts due under the Loan Documents in such order and in
such manner as Lender shall determine in its sole and absolute discretion.  Each
of Master Tenant and Operator hereby irrevocably designates, makes, constitutes
and appoints Lender (and all persons or entities designated by Lender) as its
true and lawful attorney in fact with power to endorse its name upon any checks
representing payments referred to in this subsection;

 

(h)           during the term of this Agreement, neither Master Tenant nor
Operator will commence, or join with any other creditor in commencing any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
with respect to Borrower, without Lender’s prior written consent, and neither
Master Tenant nor Operator has filed or is subject to any filing for bankruptcy
or reorganization under any applicable bankruptcy or insolvency laws;

 

(i)            Operator and Master Tenant will deliver to Lender at the address
indicated above and at the same time as such notice is given to Master Tenant or
Borrower, any notice of default under the Operating Lease or Master Lease as
applicable;

 

(j)            Operator will not assign any interest now or hereafter created by
the Operating Lease without Lender’s prior written approval;

 

(k)           Master Tenant will not assign any interest now or hereafter
created by the Master Lease without Lender’s prior written approval;

 

(l)            Operator will not seek to terminate the Operating Lease by reason
of any default of Master Tenant without prior written notice thereof to Lender
and the lapse thereafter of such time as under the Operating Lease was offered
to Master Tenant in which to remedy the default, and the lapse of 30 days after
the expiration of such time as Master Tenant was permitted to cure such default;
provided, however, that with respect to any default of Master Tenant under the
Operating Lease which cannot be remedied within such time, if Lender commences
to cure such default within such time and thereafter diligently proceeds with
such efforts and pursues the same to completion, Lender shall have such time as
is reasonably necessary to complete curing such default.  Notwithstanding the
foregoing, in the event either Lender or Master Tenant do not cure or commence
curing such default within the time provided to Borrower under the Operating
Lease and the nature of the default threatens Operator’s ability to conduct its
daily business or threatens to materially or adversely damage its property
located on the Mortgaged Property, Operator shall be permitted to exercise its
rights under the Operating Lease;

 

(m)          Master Tenant will not seek to terminate the Master Lease by reason
of any default of Borrower without prior written notice thereof to Lender and
the lapse thereafter of such time as under the Master Lease was offered to
Borrower in which to remedy the default, and the lapse of 30 days after the
expiration of such time as Borrower was permitted to cure such default;
provided, however, that with respect to any default of Borrower under the Master
Lease which cannot be remedied within such time, if Lender commences to cure
such default within such time and thereafter diligently proceeds with such
efforts and pursues the same to completion, Lender shall have such time as is
reasonably necessary to complete curing such default.  Notwithstanding

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

22

--------------------------------------------------------------------------------

 

the foregoing, in the event either Lender or Borrower do not cure or commence
curing such default within the time provided to Borrower under the Master Lease
and the nature of the default threatens Master Tenant’s ability to conduct its
daily business or threatens to materially or adversely damage its property
located on the Mortgaged Property, Master Tenant shall be permitted to exercise
its rights under the Master Lease;

 

(n)           Operator will not pay any rent, fees or other sums due or to
become due under the Operating Lease (“Operating Lease Rent”) more than 30 days
in advance of the date on which the same are due or to become due under the
Operating Lease; and

 

(o)           Operator will certify promptly in writing to Lender in connection
with any proposed assignment of the Instrument, whether or not any default on
the part of Master Tenant then exists under the Operating Lease, and will
execute such estoppel certificates and, subject to the provisions of Section 9
hereof, subordination agreements as Lender shall reasonably require.

 

(p)           Master Tenant will certify promptly in writing to Lender in
connection with any proposed assignment of the Instrument, whether or not any
default on the part of Operator then exists under the Operating Lease, and will
execute such estoppel certificates, and subject to the provisions of Section 9
hereof, and subordination agreements as Lender shall reasonably require.

 

(q)           Within twelve (12) months of the date hereof, Operator shall
transfer its Licenses and all Licenses relating to the operation of the
Mortgaged Property to a Single-Purpose entity wholly owned, directly or
indirectly, by Five Star Quality Care Inc. or cause the Licenses to be reissued
or issued to such Single Purpose entity.  The Organizational Documents of each
Single Purpose Entity shall be in form and content satisfactory to Lender.  Such
Single-Purpose entity will (i) become the tenant under the Operating Lease by
assuming all obligations of Operator under the Operating Lease (notwithstanding
any prohibition on assignment contained in this Agreement or any Loan Documents
to the contrary), (ii) become an Operator under the Master Agreement,
(iii) become a party to this Agreement by assuming all of the obligations and
liabilities (as it relates to the Mortgaged Property and this Agreement) of the
existing Operator under this Agreement, (iv) hold in its name all Licenses
pertaining to the operation of the Mortgaged Property which are required to be
held in the Operator’s name under Applicable Law and (v) cooperate with Lender
in effectuating these transactions including by delivery of  customary corporate
legal opinions satisfactory to lender and by cooperating in the perfection of
the UCC Collateral.  Upon the complete transfer and assumption of all
obligations in connection with this Agreement to the Single-Purpose entity
Operator, the previous Operator will be released of its obligations under this
Agreement.

 

(r)            In the event that Five Star Quality Care Inc. is no longer a
publicly traded company, Operator and Master Tenant shall cause Five Star
Quality Care Inc. to promptly furnish annual financial statements to Lender upon
request.

 

(s)           Five Star Quality Care, Inc. is the parent of the Operator and has
developed a system-wide set of policies and procedures for the purpose of
complying with the Health Insurance

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

23

--------------------------------------------------------------------------------

 

Portability and Accountability Act of 1996 and the regulations promulgated
thereunder (collectively, “HIPAA”) including those policies, procedures and
related templates listed on Schedule 11 of the Disclosure Schedule (the “HIPAA
Compliance Program”). Five Star Quality Care, Inc. requires Operator whether or
not it constitutes a “Covered Entity” as defined under HIPAA to implement the
HIPAA Compliance Program.  Five Star Quality Care, Inc. and Operator have
implemented a HIPAA Compliance Program, have designated a privacy officer and
have otherwise materially complied with all HIPAA privacy, and security
requirements, as well as those billing requirements related to transaction and
code set standards.

 

(t)            Five Star Quality Care, Inc. will continue to require Operator to
treat itself as a “Covered Entity” under HIPAA and Operator will continue to
implement a HIPAA Compliance Program unless and until Operator delivers a legal
opinion satisfactory to Lender to the effect that Operator (i) is not a “Covered
Entity” under HIPAA or (ii) will be in compliance with HIPAA.  Five Star Quality
Care, Inc. and Operator will continue to designate a privacy officer and comply
in all material respects with HIPAA privacy, and security requirements, as well
as those billing requirements related to transaction and code set standards
unless and until Operator delivers a legal opinion satisfactory to Lender to the
effect that Operator (i) is not a “Covered Entity” under HIPAA or (ii) will be
in compliance with HIPAA.

 

(u)           Operator has sent a formal request or caused to be sent a formal
request directing the appropriate governmental authority not to send Medicare or
Medicaid payments relating to services provided at any Mortgaged Property to the
account to which it has previously been sent but rather to a new account in
which no Person has a security interest, pledge or lien.  Operator has
established or caused to be established a new account into which revenues
collected from the Mortgaged Property will be deposited together with the
revenues collected by other Operators at other Mortgaged Properties.  Operator
will use commercially reasonable efforts to not permit its own funds to be
deposited into any account in which any Person has a security interest, pledge
or lien.

 

15.                                 OPERATOR CERTIFICATIONS.  Operator certifies
as follows:

 

(a)           Operator has unconditionally accepted delivery of the Mortgaged
Property pursuant to the terms of the Operating Lease and is operating the
Mortgaged Property as a Seniors Housing Facility;

 

(b)           The Operating Lease does not provide for free Operating Lease
Rent, partial Operating Lease Rent, Operating Lease Rent concessions of any
kind, for the advance payment of Operating Lease Rent other than as set forth in
Section 14(n) above, Operating Lease Rent abatement or offsetting of Operating
Lease Rent and no Operating Lease Rent has been paid for more than 30 days in
advance;

 

(c)           Operator has fully inspected the Mortgaged Property and found the
same to be as required by the Operating Lease in good order and repair, and all
conditions and duties of an inducement nature under the Operating Lease to be
performed by the Borrower have been satisfied,

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

24

--------------------------------------------------------------------------------

 

including but not limited to payment to Operator of any Borrower contributions
for improvements, completion by Borrower of the construction of any improvements
to be constructed by the Borrower, and payment to Operator of any consulting
fees;

 

(d)           the primary term of the Operating Lease commenced on the date
hereof and continues until the expiration or earlier termination of the Master
Lease with respect to the Mortgaged Property.  Operator has no rights or options
of purchase or first refusal under the Operating Lease or with respect to the
Mortgaged Property or any part thereof;

 

(e)           payment of monthly rent commences on September 1, 2009;

 

(f)            as of the date of this Agreement, to the best of Operator’s
knowledge, neither the Master Tenant nor Operator is in default under any of the
terms, conditions, provisions or agreements of the Operating Lease and Operator
has no offsets, claims or defenses against the Master Tenant with respect to the
Operating Lease;

 

(g)           Operator has not paid a security or other deposit to Master
Tenant, pursuant to the terms of the Operating Lease;

 

(h)           Operator does not, has not and will not use the Mortgaged Property
for the storage, treatment, manufacturing, generation, disposal or release into
the environment of any petroleum product or substance which is classified as a
hazardous substance, pollutant or contaminant under the Federal Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”) or other
applicable federal, state and local laws and regulations except (i) in
compliance with applicable laws, and (ii) for the safe and lawful use and
storage of quantities of supplies, cleaning materials and petroleum products
customarily used in the operation and maintenance of comparable Senior Housing
Facilities;

 

(i)            Operator shall not look to Lender, any mortgagee in possession,
or successor in title to the Mortgaged Property for accountability for any
security deposit or other deposit held by Master Tenant or Borrower;

 

(j)            Operator currently holds the Licenses identified on Exhibit B of
the Certificate of Operator with regard to the Mortgaged Property, and is
unaware of any other Licenses required to lawfully operate the Mortgaged
Property as an assisted living facility, skilled nursing facility,
Alzheimer’s/dementia care units and independent living units.  Except as
disclosed on Exhibit B of the Certificate of Operator, each of the items listed
on Exhibit B of the Certificate of Operator have been lawfully issued to
Operator or the Mortgaged Property and are in full force and effect.  Exhibit B
of the Certificate of Operator will set forth which Licenses are issued to the
Operator and which Licenses are issued to the Mortgaged Property.  There is no
legal action pending or to the best of Operator’s knowledge threatened which
would adversely affect the Licenses or the operations at the Mortgaged
Property.  Operator is not currently operating under a consent order or decree,
or any other agreement or decree mandated by the courts or a governmental entity
that restricts or otherwise affects the operation of the Mortgaged Property;

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

25

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(k)           [Reserved]

 

(l)            the Mortgaged Property is operated as an assisted living
facility, skilled nursing facility, Alzheimer’s/dementia care units and
independent living units pursuant to its Certificate of Occupancy and pursuant
to its Licenses.  The Certificate of Occupancy and Licenses are current and
there are no violations of record except as disclosed on Exhibit B of the
Certificate of Operator.  The operations at the Mortgaged Property comply with
the terms and conditions of the Certificate of Occupancy and the Licenses except
as disclosed on Exhibit B of the Certificate of Operator.  The Certificate of
Occupancy has no termination date.  The Healthcare Licenses are valid until the
date shown on Exhibit B of the Certificate of Operator.  The Licenses must be
renewed at the intervals set forth on Exhibit B of the Certificate of Operator;

 

(m)          renewal of the Healthcare Licenses must be applied for no later
than the time period set forth on Exhibit B of the Certificate of Operator.  The
Healthcare Licenses require a renewal fee equal to the amount set forth on
Exhibit B of the Certificate of Operator; and

 

(n)           to the best of Operator’s knowledge, there currently exist no
grounds for the revocation, suspension or limitation of the Certificate of
Occupancy or any of the Licenses for the Mortgaged Property.

 

16.           RESERVED.

 

17.           CONSIDERATION.  As consideration for the material financial
benefit to be derived by Operator, Master Tenant and Borrower as a result of
Lender’s approval of the Operating Lease and Master Lease and making the Loan to
the Borrower, Operator, Master Tenant and Borrower each acknowledge receipt of
good and valuable consideration for Operator’s, Master Tenant’s and Borrower’s
entry into this Agreement.

 

18.           COLLECTIONS.  Operator agrees that all monies collected on behalf
of the Master Tenant as it relates to the Operating Lease and Master Tenant
agrees that all monies collected on behalf of Borrower as it relates to the
Master Lease (if any) shall be deposited in one or more bank accounts in the
name of Operator or Master Tenant, as applicable and Operator and Master Tenant
both hereby pledge a security interest in the bank accounts to Lender, so that
such bank accounts are security for Operator’s and Master Tenant’s obligations
under the Operating Lease and Master Lease.

 

19.           MODIFICATIONS TO LOAN DOCUMENTS.  Any amendments heretofore or
hereafter made to any of the Loan Documents, other than this Agreement, shall
not require the consent of Operator or Master Tenant, provided, however, any
amendment to the “Operating Covenants” as defined in Section 14(a) will not be
binding upon Operator without Operator’s written consent.

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

26

--------------------------------------------------------------------------------

 

20.         LENDER REQUESTS.  Within 10 Business Days of written request of
Lender, Operator and Master Tenant will promptly furnish to Lender copies of all
Leases, Contracts, Licenses, books, records, monthly reports, statements of
account, budgets, third party payment documentation including but not limited to
reimbursement agreements, surveys, statements of deficiencies and plans of
correction, and cost reports related to any payments or the right to receive
payments from federal, state or local programs, boards, bureaus or agencies, and
other items which Operator and Master Tenant are required to maintain or
otherwise maintains under the Operating Lease or Master Lease, as applicable, or
which Operator or Master Tenant maintains for its own purposes with respect to
the Mortgaged Property.  Upon an Event of Default under the Instrument, Operator
and Master Tenant will furnish promptly to Lender evidence of deposits and
withdrawals from any account held or controlled by Operator or Master Tenant, as
the case may be, relating to the Mortgaged Property.

 

21.           OPERATOR ASSIGNMENT.  As additional collateral security for the
observance and performance by Operator of the terms, covenants and conditions of
this Agreement, Operator to the extent permissible under applicable law and
regulations, hereby transfers, sets over and assigns to Lender all of Operator’s
right, title and interest in and to all Licenses and any other agreements or
permits of any nature whatsoever now or hereafter obtained or entered into by
Operator with respect to the occupancy, use, operation, maintenance and
administration of the Mortgaged Property as a Seniors Housing Facility.

 

22.           COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which shall be considered an original for all purposes;
provided, however, that all such counterparts shall constitute one and the same
instrument.

 

23.           GOVERNING LAW.  The provisions of Section 15.06 of the Master
Agreement (entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury
Trial”) are hereby incorporated into this Agreement by this reference to the
fullest extent as if such text of such section were set forth in its entirety
herein.

 

24.           SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon
Borrower, Operator and Lender and their respective successors, transferees and
assigns, and shall inure to the benefit of and may be enforced by Borrower,
Master Tenant, Operator and Lender and their successors, transferees and
assigns.  Except as permitted or required under the Loan Documents, Borrower and
Operator shall not assign any of their respective rights and obligations under
this Agreement without the prior written consent of Lender.

 

25.           ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.  This Agreement contains
the complete and entire understanding of the parties as to its subject matter. 
No amendment to this Agreement will be valid unless it is made in writing and
executed by the parties to this Agreement.  No specific waiver or forbearance
for any breach of any of the terms of this Agreement shall be considered as a
general waiver of that or any other term of this Agreement.  For purposes of
this Agreement, where Operator and Master Tenant purports to have knowledge and
without limiting the scope of the meaning of Operator or Master Tenant having
actual knowledge,

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

27

--------------------------------------------------------------------------------

 

each of Operator and Master Tenant will automatically and immediately be deemed
to have actual knowledge:

 

(i) of written public disclosure; or

(ii) in the event that Five Star Quality Care, Inc. or REIT Management Research
LLC or its successors and assigns has actual knowledge.

 

The obligations under this Agreement will no longer be in full force and effect
in the event that the obligations under the Master Agreement are no longer
outstanding and if Fannie Mae, its successors and or assigns, is not the
Successor Landlord pursuant to the Master Lease.

 

26.           RELATIONSHIP OF PARTIES.  Nothing contained in this Agreement
shall constitute Lender as a joint venturer, partner or agent of Borrower,
Master Tenant or Operator, or render Lender liable for any debts, obligations,
acts, omissions or representations of Borrower, Master Tenant or Operator except
as provided herein.

 

27.           ENFORCEABILITY. The determination of invalidity, illegality, or
unenforceability of any provision of this Agreement, pursuant to judicial
decree, shall not affect the validity or enforceability of any other provision
of this Agreement, each of which shall remain in full force and effect.

 

28.           ASSIGNMENT TO FANNIE MAE.  If Lender assigns its rights under this
Agreement to Fannie Mae, all references in this Agreement to Lender shall be
deemed to be references to Fannie Mae.

 

29.           LOAN SERVICER.  The parties to this Agreement acknowledge and
agree that, except as otherwise provided below, in connection with any provision
of this Agreement under which Fannie Mae is granted the right to (a) request
that the Borrower, Master Tenant, Operator or another party (i) take or refrain
from taking certain action, or (ii) collect or deliver certain payments,
information, documents or instruments, (b) give any instructions or directions
or perform any work or inspections, or (c) exercise remedies under this
Agreement, Loan Servicer is hereby authorized to act on behalf of, and in the
place and stead of, Fannie Mae.  Any rights of Loan Servicer to act on behalf of
Fannie Mae pursuant to the preceding sentence shall be terminated as and to the
extent determined by Fannie Mae upon delivery by Fannie Mae to the parties to
this Agreement of notice of such termination.  Loan Servicer is neither
affiliated with, nor acting as an agent for, the Borrower, Master Tenant,
Operator or Fannie Mae.

 

30.           NON-RECOURSE.  The obligations of Operator and Master Tenant under
this Agreement are solely those of the Operator and Master Tenant and are not
the obligations of Five Star Quality Care Inc.

 

[The remainder of this page is intentionally left blank.]

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

28

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Borrower, Lender, Operator and Master Tenant have executed
this Agreement as of the day and year first above written.

 

 

SNH FM Financing LLC, a Delaware limited liability company

 

 

 

By:

/s/ David J. Hegarty

 

Name:

David J. Hegarty

 

Title:

President

 

 

STATE OF MASSACHUSETTS

)

 

 

)

ss.:

COUNTY OF MIDDLESEX

)

 

 

On August 4, 2009, before me, Brandi Larea Thomas, personally appeared David J.
Hegarty, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

 

Signature

/s/ Brandi Larea Thomas

 

 

 

(Seal)

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

S-1

--------------------------------------------------------------------------------

 

 

Citibank, N.A., a national banking association

 

 

 

By:

/s/ Kathy Millhouse

 

Name:

Kathy Millhouse

 

Title:

Vice President

 

 

STATE OF CALIFORNIA

)

 

 

)

ss.:

COUNTY OF VENTURA

)

 

 

On August 4, 2009, before me, Cynthia K. Martinez, personally appeared Kathy
Millhouse, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

 

Signature

/s/ Cynthia K. Martinez

 

 

 

(Seal)

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

S-2

--------------------------------------------------------------------------------

 

 

FS Tenant Pool III Trust, a Maryland business trust

 

 

 

By:

/s/ Bruce J. Mackey Jr.

 

Name:

Bruce J. Mackey Jr.

 

Title:

President

 

 

STATE OF MASSACHUSETTS

)

 

 

)

ss.:

COUNTY OF MIDDLESEX

)

 

 

On August 4, 2009, before me, Brandi Larea Thomas, personally appeared Bruce J.
Mackey Jr., personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

 

Signature

/s/ Brandi Larea Thomas

 

 

 

(Seal)

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

S-3

--------------------------------------------------------------------------------

 

 

FVE FM Financing, Inc., a Maryland corporation

 

 

 

By:

/s/ Bruce J. Mackey Jr.

 

Name:

Bruce J. Mackey Jr.

 

Title:

President

 

 

STATE OF MASSACHUSETTS

)

 

 

)

ss.:

COUNTY OF MIDDLESEX

)

 

 

On August 4, 2009, before me, Brandi Larea Thomas, personally appeared Bruce J.
Mackey Jr., personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.

 

WITNESS my hand and official seal.

 

 

Signature

/s/ Brandi Larea Thomas

 

 

 

(Seal)

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

S-4

--------------------------------------------------------------------------------

 

EXHIBIT A

 

Legal Description

 

Forum at Memorial Woods Tract VI:

 

5.6764 acres of land, more or less out of POST OAK JOINT VENTURE, a Replat of
POST OAK JOINT VENTURE, according to the plat thereof filed at Volume 344,
Page 28, of the Harris County Map Records and being more particularly described
by metes and bounds as follows:

 

All that remaining 5.6764 acres of land out of the 5.6883 acres of land out of
Post Oak Joint Venture, a Replat of Post Oak Joint Venture according to the plat
thereof filed at Volume 344, Page 28, of the Harris County Map Records, and
being more particularly described by metes and bounds as follows:

 

Beginning at a set 5/8” iron rod with cap in the west right-of-way line of North
Post Oak Road (120’ wide) marking the southeast corner of said 5.6883 acre
tract: Thence S 87° 33’ 55” W - 673.56’ along the north line of that certain
3.1791 acres called Parcel I described in a deed dated 03-20-1979, from
Lafayette, Ltd. to The Count Group, filed in the Official Public Records of Real
Property of Harris County, Texas at Clerk’s File No.G-015108, Film Code
No.123-89-1492, to a set 5/8” iron, rod with cap for corner;

 

THENCE N 02°34’ 11” W- 194.33’ with the west line of Pine Wood Estates according
to the plat thereof filed at Volume 35, Page 11, of the Harris County Map
Records, to a set 5/8” iron rod with cap for corner,

 

THENCE N 87°25’41”E - 192.82’ with the south line of Memorial Woods Unrestricted
Reserve, according to the plat thereof filed at Volume 256, Page 99, of the
Harris County Map Records to a found 1/2” iron pipe for corner;

 

THENCE 02° 05’ 36” W - 243.65” with the east line of said Memorial Woods
Unrestricted Reserve, to a found 1” iron pipe for corner;

 

THENCE N 87°09”41” E - 432.01’ with the south line of Memorial Woods Plaza,
Block Two, Unrestricted Reserve “B”, according to the plat thereof filed at
Volume 198, Page 113, of the Harris County Map Records to a set 5/8” iron rod
with cap for corner,

 

THENCE S 43°38’06” E -58.80’ with the southeasterly right-of-way line of
Interstate Highway 10, being the southeasterly line of a 0.012 acre tract of
land described in a Donation Deed dated June 06, 198 9, from Post Oak Joint
Venture to The State of Texas, filed in the Official Public Records of Real
Property of Harris County, Texas at Clerk File No. M-407792 Film Code
No. 162-69-0545, to set 5/8” iron rod with cap for corner;

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

A-1

--------------------------------------------------------------------------------

 

THENCE S 23°12’48” E - 18.74’ continuing with the said southeasterly
right-of-way line of Interstate Highway 10 and said 0.012 acre tract to a set
5/8” iron rod with cap for corner,-

 

THENCE S 02°47 31” E -379.72 with said west right-of-way line of North Post Oak
Road to the

 

POINT OF BEGINNING and containing (247,264 square feet) 5.6764 acres of land
more or less.

 

Together with easement rights recorded under Clerk’s File No. M-00-7204, Deed
Records, Harris County, Texas.

 

 

 

 

 

Subordination, Assignment and Security Agreement

Form 4079

 

(Seniors Housing) (Memorial Woods)

05-05

Ó 2000-2005 Fannie Mae

 

A-2

--------------------------------------------------------------------------------

 

Schedule to Exhibit 10.13

 

The following entities are parties to Subordination, Assignment and Security
Agreements (“SASAs”) which are substantially identical in all material respects
to the representative SASA filed herewith and are dated as of the respective
dates listed below. There are immaterial differences among the SASAs relating to
representations as to the specific level of care, contracts and licenses at each
property.  In addition, for the Maryland properties, each SASA also includes an
acknowledgement that any assignment of leases and rents in favor of Senior
Housing Properties Trust is subordinate to any assignment of leases and rents
contained in the SASA. The other SASAs are omitted pursuant to Instruction 2 to
Item 601 of Regulation S-K.

 

 

 

Names of Signatories

 

Date

1.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool I Trust and
Citibank, N.A. (Wilmington, Delaware)

 

August 4, 2009

2.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool I Trust and
Citibank, N.A. (Coral Springs, Florida)

 

August 4, 2009

3.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool I Trust and
Citibank, N.A. (Albuquerque, New Mexico)

 

August 4, 2009

4.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool I Trust and
Citibank, N.A. (San Antonio, Texas)

 

August 4, 2009

5.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FVE Tenant Pool II and Citibank,
N.A. (San Diego, California)

 

August 4, 2009

6.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool II Trust and
Citibank, N.A. (Palm Harbor, Florida)

 

August 4, 2009

7.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool II Trust and
Citibank, N.A. (Indianapolis, Indiana)

 

August 4, 2009

8.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool II Trust and
Citibank, N.A. (Winchester, Massachusetts)

 

August 4, 2009

9.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool II Trust and
Citibank, N.A. (The Woodlands, Texas)

 

August 4, 2009

10.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool III Trust and
Citibank, N.A. (Peoria, Arizona)

 

August 4, 2009

11.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool III Trust and
Citibank, N.A. (Tucson, Arizona)

 

August 4, 2009

12.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool III Trust and
Citibank, N.A. (Overland Park, Kansas)

 

August 4, 2009

13.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool III Trust and
Citibank, N.A. (Louisville, Kentucky)

 

August 4, 2009

14.

 

SNH FM Financing LLC, FVE FM Financing, Inc., FS Tenant Pool III Trust and
Citibank, N.A. (Columbus, Ohio)

 

August 4, 2009

 

 

--------------------------------------------------------------------------------

 

15.

 

SNH FM Financing Trust, FVE FM Financing, Inc., Five Star Quality Care-MD, LLC
and Citibank, N.A. (Easton, Maryland)

 

August 4, 2009

16.

 

SNH FM Financing Trust, FVE FM Financing, Inc., Five Star Quality Care-MD, LLC
and Citibank, N.A. (Severna Park, Maryland)

 

August 4, 2009

17.

 

SNH FM Financing Trust, FVE FM Financing, Inc., Five Star Quality Care-MD, LLC
and Citibank, N.A. (Silver Springs, Maryland)

 

August 4, 2009

18.

 

SNH FM Financing LLC, FVE FM Financing, Inc., Five Star Quality Care-CA, LLC and
Citibank, N.A. (Stockton, California)

 

August 4, 2009

19.

 

SNH FM Financing LLC, FVE FM Financing, Inc., Five Star Quality Care-NC, LLC and
Citibank, N.A. (Cary, North Carolina)

 

August 4, 2009

20.

 

SNH FM Financing LLC, FVE FM Financing, Inc., Five Star Quality Care-Savannah,
LLC and Citibank, N.A. (Savannah, Georgia)

 

August 4, 2009

21.

 

SNH FM Financing LLC, FVE FM Financing, Inc., Five Star Quality Care-VA, LLC and
Citibank, N.A. (Fredericksburg, Virginia)

 

August 4, 2009

22.

 

SNH FM Financing LLC, FVE FM Financing, Inc., Five Star Quality Care-WI, LLC and
Citibank, N.A. (Mequon, Wisconsin)

 

August 4, 2009

23.

 

SNH FM Financing LLC, FVE FM Financing, Inc., Morningside of Bellgrade,
Richmond, LLC and Citibank, N.A. (Midlothian, Virginia)

 

August 4, 2009

24.

 

SNH FM Financing LLC, FVE FM Financing, Inc., Morningside of Charlottesville,
LLC and Citibank, N.A. (Charlottesville, Virginia)

 

August 4, 2009

25.

 

SNH FM Financing LLC, FVE FM Financing, Inc., Morningside of Newport News, LLC
and Citibank, N.A. (Newport News, Virginia)

 

August 4, 2009

26.

 

Ellicott City Land I, LLC, FVE FM Financing, Inc., The Heartlands Retirement
Community-Ellicott City I, Inc. and Citibank, N.A. (Ellicott City, Maryland)

 

August 4, 2009

 

 

--------------------------------------------------------------------------------