Exhibit
10.52


 


 


 


 


 


 


AMENDED AND RESTATED MASTER LEASE AGREEMENT,


dated as of October 1, 2006,


by and among


HRES1
PROPERTIES TRUST,


AS LANDLORD,


AND


FS PATRIOT LLC


and


FS COMMONWEALTH LLC, JOINTLY AND SEVERALLY,


AS TENANT


 


















	
  ARTICLE 1

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  
	
   1.1

  	
   

  	
  “Additional Charges”

  	
   

  	
  1

  
	
   1.2

  	
   

  	
  “Affiliated Person”

  	
   

  	
  1

  
	
   1.3

  	
   

  	
  “Agreement”

  	
   

  	
  2

  
	
   1.4

  	
   

  	
  “Applicable Laws”

  	
   

  	
  2

  
	
   1.5

  	
   

  	
  “Award”

  	
   

  	
  2

  
	
   1.6

  	
   

  	
  “Business Day”

  	
   

  	
  3

  
	
   1.7

  	
   

  	
  “Capital Addition”

  	
   

  	
  3

  
	
   1.8

  	
   

  	
  “Capital Expenditure”

  	
   

  	
  3

  
	
   1.9

  	
   

  	
  “Change in Control”

  	
   

  	
  3

  
	
  1.10

  	
   

  	
  “Claim”

  	
   

  	
  3

  
	
  1.11

  	
   

  	
  “Code”

  	
   

  	
  4

  
	
  1.12

  	
   

  	
  “Commencement Date”

  	
   

  	
  4

  
	
  1.13

  	
   

  	
  “Condemnation”

  	
   

  	
  4

  
	
  1.14

  	
   

  	
  “Condemnor”

  	
   

  	
  4

  
	
  1.15

  	
   

  	
  “Consolidated Financials”

  	
   

  	
  4

  
	
  1.16

  	
   

  	
  “Date of Taking”

  	
   

  	
  4

  
	
  1.17

  	
   

  	
  “Default”

  	
   

  	
  4

  
	
  1.18

  	
   

  	
  “Disbursement Rate”

  	
   

  	
  4

  
	
  1.19

  	
   

  	
  “Distribution”

  	
   

  	
  5

  
	
  1.20

  	
   

  	
  “Easement Agreement”

  	
   

  	
  5

  
	
  1.21

  	
   

  	
  “Encumbrance”

  	
   

  	
  5

  
	
  1.22

  	
   

  	
  “Entity”

  	
   

  	
  5

  
	
  1.23

  	
   

  	
  “Environment”

  	
   

  	
  5

  
	
  1.24

  	
   

  	
  “Environmental Obligation”

  	
   

  	
  5

  
	
  1.25

  	
   

  	
  “Environmental Notice”

  	
   

  	
  5

  
	
  1.26

  	
   

  	
  “Event of Default”

  	
   

  	
  5

  
	
  1.27

  	
   

  	
  ““Extended Term”

  	
   

  	
  5

  
	
  1.28

  	
   

  	
  “Facility”

  	
   

  	
  5

  
	
  1.29

  	
   

  	
  “Facility Mortgage”

  	
   

  	
  6

  
	
  1.30

  	
   

  	
  “Facility Mortgagee”

  	
   

  	
  6

  
	
  1.31

  	
   

  	
  “Facility Trade Names”

  	
   

  	
  6

  
	
  1.32

  	
   

  	
  “Financial Officer’s Certificate”

  	
   

  	
  6

  
	
  1.33

  	
   

  	
  “Fiscal Year”

  	
   

  	
  6

  
	
  1.34

  	
   

  	
  “Five Star”

  	
   

  	
  6

  
	
  1.35

  	
   

  	
  “Fixed Term”

  	
   

  	
  6

  
	
  1.36

  	
   

  	
  “Fixtures”

  	
   

  	
  6

  
	
  1.37

  	
   

  	
  “GAAP”

  	
   

  	
  7

  
	
  1.38

  	
   

  	
  “Government Agencies”

  	
   

  	
  7

  
	
  1.39

  	
   

  	
  “Guarantor”

  	
   

  	
  7

  
	
  1.40

  	
   

  	
  “Guaranty”

  	
   

  	
  7

  
	
  1.41

  	
   

  	
  “Hazardous Substances”

  	
   

  	
  7

  
	
  1.42

  	
   

  	
  “Immediate Family”

  	
   

  	
  8

  
	
  1.43

  	
   

  	
  “Impositions”

  	
   

  	
  8

  
	
  1.44

  	
   

  	
  “Incidental Documents”

  	
   

  	
  9

  
	
  1.45

  	
   

  	
  “Indebtedness”

  	
   

  	
  9

  
	
  1.46

  	
   

  	
  “Insurance Requirements”

  	
   

  	
  10

  
	
  1.47

  	
   

  	
  “Interest Rate”

  	
   

  	
  10

  
	
  1.48

  	
   

  	
  “Land”

  	
   

  	
  10

  
	
  1.49

  	
   

  	
  “Landlord”

  	
   

  	
  10

  
	
  1.50

  	
   

  	
  “Landlord Default”

  	
   

  	
  10

  
	
  1.51

  	
   

  	
  “Landlord Liens”

  	
   

  	
  10

  



 



 i
 









 


	
  1.52

  	
   

  	
  “Leased Improvements”

  	
   

  	
  10

  
	
  1.53

  	
   

  	
  “Leased Intangible Property”

  	
   

  	
  10

  
	
  1.54

  	
   

  	
  “Leased Property”

  	
   

  	
  11

  
	
  1.55

  	
   

  	
  “Legal Requirements”

  	
   

  	
  11

  
	
  1.56

  	
   

  	
  “Lien”

  	
   

  	
  11

  
	
  1.57

  	
   

  	
  “Manager”

  	
   

  	
  11

  
	
  1.58

  	
   

  	
  “Management Agreement”

  	
   

  	
  11

  
	
  1.59

  	
   

  	
  “Minimum Rent”

  	
   

  	
  12

  
	
  1.60

  	
   

  	
  “Notice”

  	
   

  	
  12

  
	
  1.61

  	
   

  	
  “Officer’s Certificate”

  	
   

  	
  12

  
	
  1.62

  	
   

  	
  “Overdue Rate”

  	
   

  	
  12

  
	
  1.63

  	
   

  	
  “Parent”

  	
   

  	
  12

  
	
  1.64

  	
   

  	
  “Permitted Encumbrances”

  	
   

  	
  12

  
	
  1.65

  	
   

  	
  “Permitted Liens”

  	
   

  	
  12

  
	
  1.66

  	
   

  	
  “Permitted Use”

  	
   

  	
  12

  
	
  1.67

  	
   

  	
  “Person”

  	
   

  	
  12

  
	
  1.68

  	
   

  	
  “Pledge Agreement”

  	
   

  	
  12

  
	
  1.69

  	
   

  	
  “Property”

  	
   

  	
  13

  
	
  1.70

  	
   

  	
  “Provider Agreements”

  	
   

  	
  13

  
	
  1.71

  	
   

  	
  “Records”

  	
   

  	
  13

  
	
  1.72

  	
   

  	
  “Regulated Medical Wastes”

  	
   

  	
  13

  
	
  1.73

  	
   

  	
  “Rent”

  	
   

  	
  13

  
	
  1.74

  	
   

  	
  “SEC”

  	
   

  	
  13

  
	
  1.75

  	
   

  	
  “Security Agreement”

  	
   

  	
  13

  
	
  1.76

  	
   

  	
  “State”

  	
   

  	
  13

  
	
  1.77

  	
   

  	
  “Subordinated Creditor”

  	
   

  	
  13

  
	
  1.78

  	
   

  	
  “Subordination Agreement”

  	
   

  	
  13

  
	
  1.79

  	
   

  	
  “Subsidiary”

  	
   

  	
  13

  
	
  1.80

  	
   

  	
  “Successor Landlord”

  	
   

  	
  14

  
	
  1.81

  	
   

  	
  “Tenant”

  	
   

  	
  14

  
	
  1.82

  	
   

  	
  “Tenant’s Personal Property”

  	
   

  	
  14

  
	
  1.83

  	
   

  	
  “Term”

  	
   

  	
  14

  
	
  1.84

  	
   

  	
  “Third Party Payor Programs”

  	
   

  	
  14

  
	
  1.85

  	
   

  	
  “Third Party Payors”

  	
   

  	
  14

  
	
  1.86

  	
   

  	
  “Unsuitable for Its Permitted Use”

  	
   

  	
  14

  
	
  1.87

  	
   

  	
  “Work”

  	
   

  	
  15

  
	
  ARTICLE 2

  	
   

  	
  LEASED PROPERTY AND TERM

  	
   

  	
  15

  
	
   2.1

  	
   

  	
  Leased Property.

  	
   

  	
  15

  
	
   2.2

  	
   

  	
  Condition of Leased Property.

  	
   

  	
  16

  
	
   2.3

  	
   

  	
  Fixed Term.

  	
   

  	
  17

  
	
   2.4

  	
   

  	
  Extended Term.

  	
   

  	
  17

  
	
  ARTICLE 3

  	
   

  	
  RENT

  	
   

  	
  18

  
	
   3.1

  	
   

  	
  Rent.

  	
   

  	
  18

  
	
   3.2

  	
   

  	
  Late Payment of Rent, Etc.

  	
   

  	
  21

  
	
   3.3

  	
   

  	
  Net Lease.

  	
   

  	
  21

  
	
   3.4

  	
   

  	
  No Termination, Abatement, Etc.

  	
   

  	
  21

  
	
   3.5

  	
   

  	
  Prorations, Etc.

  	
   

  	
  22

  
	
  ARTICLE 4

  	
   

  	
  USE OF THE LEASED PROPERTY

  	
   

  	
  23

  
	
   4.1

  	
   

  	
  Permitted Use.

  	
   

  	
  23

  
	
   4.2

  	
   

  	
  Compliance with Legal/Insurance Requirements, Etc.

  	
   

  	
  25

  
	
   4.3

  	
   

  	
  Compliance with Medicaid and Medicare Requirements.

  	
   

  	
  25

  
	
   4.4

  	
   

  	
  Environmental Matters.

  	
   

  	
  25

  



 



 ii
 









 


	
  ARTICLE 5

  	
   

  	
  MAINTENANCE AND REPAIRS

  	
   

  	
  27

  
	
   5.1

  	
   

  	
  Maintenance and Repair.

  	
   

  	
  27

  
	
   5.2

  	
   

  	
  Tenant’s Personal Property.

  	
   

  	
  29

  
	
   5.3

  	
   

  	
  Yield Up.

  	
   

  	
  30

  
	
   5.4

  	
   

  	
  Management Agreement.

  	
   

  	
  31

  
	
  ARTICLE 6

  	
   

  	
  IMPROVEMENTS, ETC.

  	
   

  	
  31

  
	
   6.1

  	
   

  	
  Improvements to the Leased Property.

  	
   

  	
  31

  
	
   6.2

  	
   

  	
  Salvage.

  	
   

  	
  32

  
	
  ARTICLE 7

  	
   

  	
  LIENS

  	
   

  	
  32

  
	
   7.1

  	
   

  	
  Liens.

  	
   

  	
  32

  
	
   7.2

  	
   

  	
  Landlord’s Lien.

  	
   

  	
  33

  
	
  ARTICLE 8

  	
   

  	
  PERMITTED CONTESTS

  	
   

  	
  33

  
	
  ARTICLE 9

  	
   

  	
  INSURANCE AND INDEMNIFICATION

  	
   

  	
  34

  
	
   9.1

  	
   

  	
  General Insurance Requirements.

  	
   

  	
  34

  
	
   9.2

  	
   

  	
  Waiver of Subrogation.

  	
   

  	
  35

  
	
   9.3

  	
   

  	
  Form Satisfactory, Etc.

  	
   

  	
  35

  
	
   9.4

  	
   

  	
  No Separate Insurance; Self-Insurance.

  	
   

  	
  36

  
	
   9.5

  	
   

  	
  Indemnification of Landlord.

  	
   

  	
  36

  
	
  ARTICLE 10

  	
   

  	
  CASUALTY

  	
   

  	
  37

  
	
  10.1

  	
   

  	
  Insurance Proceeds.

  	
   

  	
  37

  
	
  10.2

  	
   

  	
  Damage or Destruction.

  	
   

  	
  38

  
	
  10.3

  	
   

  	
  Damage Near End of Term.

  	
   

  	
  40

  
	
  10.4

  	
   

  	
  Tenant’s Property.

  	
   

  	
  40

  
	
  10.5

  	
   

  	
  Restoration of Tenant’s Property.

  	
   

  	
  40

  
	
  10.6

  	
   

  	
  No Abatement of Rent.

  	
   

  	
  40

  
	
  10.7

  	
   

  	
  Waiver.

  	
   

  	
  41

  
	
  ARTICLE 11

  	
   

  	
  CONDEMNATION

  	
   

  	
  41

  
	
  11.1

  	
   

  	
  Total Condemnation, Etc.

  	
   

  	
  41

  
	
  11.2

  	
   

  	
  Partial Condemnation.

  	
   

  	
  41

  
	
  11.3

  	
   

  	
  Abatement of Rent.

  	
   

  	
  42

  
	
  11.4

  	
   

  	
  Temporary Condemnation.

  	
   

  	
  42

  
	
  11.5

  	
   

  	
  Allocation of Award.

  	
   

  	
  43

  
	
  ARTICLE 12

  	
   

  	
  DEFAULTS AND REMEDIES

  	
   

  	
  43

  
	
  12.1

  	
   

  	
  Events of Default.

  	
   

  	
  43

  
	
  12.2

  	
   

  	
  Remedies.

  	
   

  	
  46

  
	
  12.3

  	
   

  	
  Tenant’s Waiver.

  	
   

  	
  47

  
	
  12.4

  	
   

  	
  Application of Funds.

  	
   

  	
  48

  
	
  12.5

  	
   

  	
  Landlord’s Right to Cure Tenant’s Default.

  	
   

  	
  48

  
	
  12.6

  	
   

  	
  Trade Names.

  	
   

  	
  48

  
	
  ARTICLE 13

  	
   

  	
  HOLDING OVER

  	
   

  	
  49

  
	
  ARTICLE 14

  	
   

  	
  LANDLORD DEFAULT

  	
   

  	
  49

  
	
  ARTICLE 15

  	
   

  	
  PURCHASE RIGHTS

  	
   

  	
  50

  
	
  ARTICLE 16

  	
   

  	
  SUBLETTING AND ASSIGNMENT

  	
   

  	
  50

  
	
  16.1

  	
   

  	
  Subletting and Assignment.

  	
   

  	
  50

  
	
  16.2

  	
   

  	
  Required Sublease Provisions.

  	
   

  	
  52

  
	
  16.3

  	
   

  	
  Permitted Sublease.

  	
   

  	
  53

  
	
  16.4

  	
   

  	
  Sublease Limitation.

  	
   

  	
  54

  
	
  ARTICLE 17

  	
   

  	
  ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

  	
   

  	
  54

  
	
  17.1

  	
   

  	
  Estoppel Certificates.

  	
   

  	
  54

  
	
  17.2

  	
   

  	
  Financial Statements.

  	
   

  	
  55

  



 



 iii
 









 


	
  17.3

  	
   

  	
  Reimbursement, Licensure, Etc.

  	
   

  	
  56

  
	
  ARTICLE 18

  	
   

  	
  LANDLORD’S RIGHT TO INSPECT

  	
   

  	
  57

  
	
  ARTICLE 19

  	
   

  	
  EASEMENTS

  	
   

  	
  57

  
	
  19.1

  	
   

  	
  Grant of Easements.

  	
   

  	
  57

  
	
  19.2

  	
   

  	
  Exercise of Rights by Tenant.

  	
   

  	
  58

  
	
  19.3

  	
   

  	
  Permitted Encumbrances.

  	
   

  	
  58

  
	
  ARTICLE 20

  	
   

  	
  FACILITY MORTGAGES

  	
   

  	
  58

  
	
  20.1

  	
   

  	
  Landlord May Grant Liens.

  	
   

  	
  58

  
	
  20.2

  	
   

  	
  Subordination of Lease.

  	
   

  	
  58

  
	
  20.3

  	
   

  	
  Notice to Mortgagee and Superior Landlord.

  	
   

  	
  60

  
	
  ARTICLE 21

  	
   

  	
  ADDITIONAL COVENANTS OF TENANT

  	
   

  	
  60

  
	
  21.1

  	
   

  	
  Prompt Payment of Indebtedness.

  	
   

  	
  60

  
	
  21.2

  	
   

  	
  Conduct of Business.

  	
   

  	
  61

  
	
  21.3

  	
   

  	
  Maintenance of Accounts and Records.

  	
   

  	
  61

  
	
  21.4

  	
   

  	
  Notice of Litigation, Etc.

  	
   

  	
  61

  
	
  21.5

  	
   

  	
  Indebtedness of Tenant.

  	
   

  	
  62

  
	
  21.6

  	
   

  	
  Distributions, Payments to Affiliated Persons, Etc.

  	
   

  	
  63

  
	
  21.7

  	
   

  	
  Prohibited Transactions.

  	
   

  	
  63

  
	
  21.8

  	
   

  	
  Liens and Encumbrances.

  	
   

  	
  63

  
	
  21.9

  	
   

  	
  Merger; Sale of Assets; Etc.

  	
   

  	
  64

  
	
  21.10

  	
   

  	
  Bankruptcy Remote Entities.

  	
   

  	
  64

  
	
  21.11

  	
   

  	
  Notice of Change of Name, Etc.

  	
   

  	
  64

  
	
  ARTICLE 22

  	
   

  	
  ARBITRATION

  	
   

  	
  64

  
	
  ARTICLE 23

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  66

  
	
  23.1

  	
   

  	
  Limitation on Payment of Rent.

  	
   

  	
  66

  
	
  23.2

  	
   

  	
  No Waiver.

  	
   

  	
  66

  
	
  23.3

  	
   

  	
  Remedies Cumulative.

  	
   

  	
  66

  
	
  23.4

  	
   

  	
  Severability.

  	
   

  	
  67

  
	
  23.5

  	
   

  	
  Acceptance of Surrender.

  	
   

  	
  67

  
	
  23.6

  	
   

  	
  No Merger of Title.

  	
   

  	
  67

  
	
  23.7

  	
   

  	
  Conveyance by Landlord.

  	
   

  	
  67

  
	
  23.8

  	
   

  	
  Quiet Enjoyment.

  	
   

  	
  67

  
	
  23.9

  	
   

  	
  No Recordation.

  	
   

  	
  68

  
	
  23.10

  	
   

  	
  Notices.

  	
   

  	
  68

  
	
  23.11

  	
   

  	
  Construction.

  	
   

  	
  69

  
	
  23.12

  	
   

  	
  Counterparts; Headings.

  	
   

  	
  69

  
	
  23.13

  	
   

  	
  Applicable Law, Etc.

  	
   

  	
  70

  
	
  23.14

  	
   

  	
  Right to Make Agreement.

  	
   

  	
  70

  
	
  23.15

  	
   

  	
  Attorneys’ Fees.

  	
   

  	
  70

  
	
  23.16

  	
   

  	
  Nonliability of Trustees.

  	
   

  	
  70

  



 



 iv















AMENDED AND RESTATED MASTER LEASE AGREEMENT


THIS AMENDED AND RESTATED MASTER LEASE AGREEMENT is entered into as of October 1, 2006,
by and among (i) HRES1 PROPERTIES TRUST,
a Maryland real estate investment trust, as landlord (“Landlord”), and
(ii) FS PATRIOT LLC and FS COMMONWEALTH LLC, each a Maryland
limited liability company, jointly and severally, as tenant (“Tenant”).


W  I  T  N  E
S  S  E  T  H :


WHEREAS, Landlord and Tenant are
parties to that certain Master Lease Agreement, dated as of March 3, 2006 (as
amended, the “Original Lease”); and


WHEREAS, Landlord and Tenant wish
to amend and restate the Original Lease to make such modifications as are set
forth herein.


NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree that the Original Lease is hereby amended and restated in its entirety,
as follows:


ARTICLE 1


DEFINITIONS


For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (a) the terms defined in
this Article shall have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein shall have the meanings assigned to them in accordance
with GAAP, (c) all references in this Agreement to designated “Articles”, “Sections”
and other subdivisions are to the designated Articles, Sections and other subdivisions
of this Agreement, and (d) the words “herein”, “hereof”, “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.


1.1          “Additional Charges”  shall have the meaning
given such term in Section 3.1.3.


1.2          “Affiliated Person”  shall mean, with
respect to any Person, (a)  in the case
of any such Person which is a partnership, any partner in such partnership, (b)
in the case of 


 













any such Person which is a limited liability
company, any member of such company, (c) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one
or more of the Persons referred to in the preceding clauses (a) and (b), (d)
any other Person who is an officer, director, trustee or employee of, or
partner in or member of, such Person or any Person referred to in the preceding
clauses (a), (b) and (c), and (e) any other Person who is a member of the
Immediate Family of such Person or of any Person referred to in the preceding
clauses (a) through (d).


1.3          “Agreement”  shall mean this Amended and Restated
Master Lease Agreement, including all exhibits attached hereto, as it and they
may be amended from time to time as herein provided.


1.4          “Applicable Laws”  shall mean all
applicable laws, statutes, regulations, rules, ordinances, codes, licenses,
permits and orders, from time to time in existence, of all courts of competent
jurisdiction and Government Agencies, and all applicable judicial and administrative
and regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to injury to, or the protection of, real or personal
property or human health or the Environment, including, without limitation, all
valid and lawful requirements of courts and other Government Agencies
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of underground improvements (including, without limitation, treatment
or storage tanks, or water, gas or oil wells), or emissions, discharges,
releases or threatened releases of Hazardous Substances, chemical substances,
pesticides, petroleum or petroleum products, pollutants, contaminants or
hazardous or toxic substances, materials or wastes whether solid, liquid or
gaseous in nature, into the Environment, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances or Regulated Medical Wastes, underground
improvements (including, without limitation, treatment or storage tanks, or
water, gas or oil wells), or pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature.


1.5          “Award”  shall mean all
compensation, sums or other value awarded, paid or received by virtue of a
total or partial Condemnation of any Property (after deduction of all
reasonable legal fees and other reasonable costs and expenses, including,
without limitation, expert witness fees, incurred by Landlord, in connection
with obtaining any such award).


 



 2
 









 


1.6          “Business Day”  shall mean any day
other than Saturday, Sunday, or any other day on which banking institutions in
The Commonwealth of Massachusetts are authorized by law or executive action to
close.


1.7          “Capital Addition”  shall mean, with
respect to any Property, any renovation, repair or improvement to such
Property, the cost of which constitutes a Capital Expenditure.


1.8          “Capital Expenditure”  shall mean any
expenditure treated as capital in nature in accordance with GAAP.


1.9          “Change in Control”  shall mean (a) the acquisition by any Person,
or two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the SEC) of 9.8% or more, or rights, options or
warrants to acquire 9.8% or more, of the outstanding shares of voting stock or
other voting interests of either or both Entities comprising Tenant or any
Guarantor, as the case may be, or the power to direct the management and
policies of Tenant or any Guarantor, directly or indirectly, (b) the merger or
consolidation of either or both Entities comprising Tenant or any Guarantor
with or into any other Person (other than the merger or consolidation of any
Person into either or both Entities comprising Tenant or any Guarantor that
does not result in a Change in Control of either or both Entities comprising
Tenant or such Guarantor under clauses (a), (c) or (d) of this definition), (c)
any one or more sales or conveyances to any Person of all or any material
portion of its assets (including capital stock or other equity interests) or
business of either or both Entities comprising Tenant or any Guarantor, as the
case may be, or (d) the cessation, for any reason, of the individuals who at
the beginning of any twenty-four (24) consecutive month period (commencing on
the date hereof) constituted the board of directors of either or both Entities
comprising Tenant or any Guarantor (together with any new directors whose
election by such Board or whose nomination for election by the shareholders of
either or both Entities comprising Tenant or such Guarantor, as the case may
be, was approved by a vote of a majority of the directors then still in office
who were either directors at the beginning of any such period or whose election
or nomination for election was previously so approved) to constitute a majority
of the board of directors of either or both Entities comprising Tenant or any
Guarantor then in office.


1.10        “Claim”  shall have the
meaning given such term in Article 8.


 



 3
 









 


1.11        “Code”  shall mean the
Internal Revenue Code of 1986 and, to the extent applicable, the Treasury
Regulations promulgated thereunder, each as from time to time amended.


1.12        “Commencement Date”  shall mean October
1, 2006.


1.13        “Condemnation”  shall mean, with
respect to any Property, or any portion thereof, (a) the exercise of any
governmental power with respect to such Property, whether by legal proceedings
or otherwise, by a Condemnor of its power of condemnation, (b) a voluntary sale
or transfer of such Property by Landlord to any Condemnor, either under threat
of condemnation or while legal proceedings for condemnation are pending, or (c)
a taking or voluntary conveyance of such Property, or any interest therein, or
right accruing thereto or use thereof, as the result or in settlement of any
condemnation or other eminent domain proceeding affecting such Property,
whether or not the same shall have actually been commenced.


1.14        “Condemnor”  shall mean any
public or quasi-public Person, having the power of Condemnation.


1.15        “Consolidated Financials”  shall mean, for any Fiscal Year or other
accounting period of Five Star, annual audited and quarterly unaudited
financial statements of Five Star prepared on a consolidated basis, including
Five Star’s consolidated balance sheet and the related statements of income and
cash flows, all in reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal
Year, and prepared in accordance with GAAP throughout the periods reflected.


1.16        “Date of Taking”  shall mean, with
respect to any Property, the date the Condemnor has the right to possession of
such Property, or any portion thereof, in connection with a Condemnation.


1.17        “Default”  shall mean any event
or condition which with the giving of notice and/or lapse of time would ripen
into an Event of Default.


1.18        “Disbursement Rate”  shall mean an annual
rate of interest, as of the date of determination, equal to the greater of (i)
the Interest Rate,  and (ii) the per
annum rate for ten (10) year U.S. Treasury Obligations as published in The
Wall Street Journal plus four hundred (400) basis points; provided, however,
that in no event shall the Disbursement Rate exceed eleven and one-half percent
(11.5%).


 



 4
 









 


1.19        “Distribution”  shall mean (a) any
declaration or payment of any dividend (except ordinary cash dividends payable
in common stock or other equity interests of either or both Entities comprising
Tenant) on or in respect of any shares of any class of capital stock or other
equity interests of either or both Entities comprising Tenant, (b) any
purchase, redemption, retirement or other acquisition of any shares of any
class of capital stock of a corporation, (c) any other distribution on or in respect
of any shares of any class of capital stock of a corporation or (d) any return
of capital to shareholders.


1.20        “Easement Agreement”  shall mean any
conditions, covenants and restrictions, easements, declarations, licenses and
other agreements which are Permitted Encumbrances and such other agreements as
may be granted in accordance with Section 19.1.


1.21        “Encumbrance”  shall have the
meaning given such term in Section 20.1.


1.22        “Entity”  shall mean any
corporation, general or limited partnership, limited liability company or
partnership, stock company or association, joint venture, association, company,
trust, bank, trust company, land trust, business trust, cooperative, any
government or agency, authority or political subdivision thereof or any other
entity.


1.23        “Environment”  shall mean soil,
surface waters, ground waters, land, stream, sediments, surface or subsurface
strata and ambient air.


1.24        “Environmental Obligation”  shall have the
meaning given such term in Section 4.4.1.


1.25        “Environmental Notice”  shall have the
meaning given such term in Section 4.4.1.


1.26        “Event of Default”  shall have the
meaning given such term in Section 12.1.


1.27        “Extended Term”  shall have the
meaning given such term in Section 2.4.


1.28        “Facility”  shall mean, with
respect to any Property, the rehabilitation hospital being operated on such
Property, and, specifically including, without limitation, (i) with respect to
the Facility known as New England Rehabilitation Hospital, Woburn,
Massachusetts, the right to operate the 198 


 



 5
 









beds licensed at such Facility, (ii) with
respect to the Facility known as Braintree Rehabilitation Hospital, the right
to operate the 187 beds licensed at such Facility, and (iii) any other tangible
or intangible rights associated with, or incidental to, any licenses,
registrations and permits used by such hospitals in the conduct of their
business and provision of patient services.


1.29        “Facility Mortgage”  shall mean any
Encumbrance placed upon the Leased Property, or any portion thereof, in
accordance with Article 20.


1.30        “Facility Mortgagee”  shall mean the
holder of any Facility Mortgage.


1.31        “Facility Trade Names”  shall mean, with respect to any Property, any
of the names under which Tenant operates, or has operated, the Facility at such
Property at any time during the Term.


1.32        “Financial Officer’s Certificate”  shall mean, as to
any Person, a certificate of the chief executive officer, chief financial
officer or chief accounting officer (or such officers’ authorized designee) of
such Person, duly authorized, accompanying the financial statements required to
be delivered by such Person pursuant to Section 17.2, in which such
officer shall certify (a) that such statements have been properly prepared in
accordance with GAAP and are true, correct and complete in all material
respects and fairly present the consolidated financial condition of such Person
at and as of the dates thereof and the results of its and their operations for
the periods covered thereby, and (b), in the event that the certifying party is
an officer of Tenant and the certificate is being given in such capacity, that
no Event of Default has occurred and is continuing hereunder.


1.33        “Fiscal Year”  shall mean the
calendar year or such other annual period designated by Tenant and approved by
Landlord.


1.34        “Five Star”  shall mean Five Star Quality Care, Inc., a
Maryland corporation, and its permitted successors and assigns.


1.35        “Fixed Term”  shall have the
meaning given such term in Section 2.3.


1.36        “Fixtures”  shall have the
meaning given such term in Section 2.1(d).


 



 6
 









 


1.37        “GAAP”  shall mean generally
accepted accounting principles consistently applied.


1.38        “Government Agencies”  shall mean any
court, agency, authority, board (including, without limitation, environmental
protection, planning and zoning), bureau, commission, department, office or
instrumentality of any nature whatsoever of any governmental or
quasi-governmental unit of the United States or any State or any county or any
political subdivision of any of the foregoing, whether now or hereafter in
existence, having jurisdiction over Tenant or any Property, or any portion
thereof, or any Facility operated thereon.


1.39        “Guarantor”  shall mean Five Star and each and every other
guarantor of Tenant’s obligations under this Agreement, and each such guarantor’s
successors and assigns.


1.40        “Guaranty”  shall mean any guaranty agreement executed by
a Guarantor in favor of Landlord pursuant to which the payment or performance
of Tenant’s obligations under this Agreement are guaranteed, together with all
modifications, amendments and supplements thereto.


1.41        “Hazardous Substances”  shall mean any substance:


(a)           the presence of
which requires or may hereafter require notification, investigation or
remediation under any federal, state or local statute, regulation, rule,
ordinance, order, action or policy; or


(b)           which is or becomes
defined as a “hazardous waste”, “hazardous material” or “hazardous substance”
or “pollutant” or “contaminant” under any present or future federal, state or
local statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et  seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et  seq.)
and the regulations promulgated thereunder; or


(c)           which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is or becomes regulated by any governmental
authority, agency, department, commission, board, agency or instrumentality of
the United States, any state of the United States, or any political subdivision
thereof; or


 



 7
 









 


(d)           the presence of
which on any Property, or any portion thereof, causes or materially threatens
to cause an unlawful nuisance upon such Property, or any portion thereof, or to
adjacent properties or poses or materially threatens to pose a hazard to such
Property, or any portion thereof, or to the health or safety of persons on or
about such Property, or any portion thereof; or


(e)           without limitation,
which contains gasoline, diesel fuel or other petroleum hydrocarbons or
volatile organic compounds; or


(f)            without limitation,
which contains polychlorinated biphenyls (PCBs) or asbestos or urea
formaldehyde foam insulation; or


(g)           without limitation,
which contains or emits radioactive particles, waves or material; or


(h)           without limitation,
constitutes Regulated Medical Wastes.


1.42        “Immediate Family”  shall mean, with
respect to any individual, such individual’s spouse, parents, brothers,
sisters, children (natural or adopted), stepchildren, grandchildren,
grandparents, parents-in-law, brothers-in-law, sisters-in-law, nephews and
nieces.


1.43        “Impositions”  shall mean, collectively,
all taxes (including, without limitation, all taxes imposed under the laws of
any State, as such laws may be amended from time to time, and all ad valorem,
sales and use, or similar taxes as the same relate to or are imposed upon
Landlord, Tenant or the business conducted upon the Leased Property),
assessments (including, without limitation, all assessments for public
improvements or benefit, whether or not commenced or completed prior to the
date hereof), ground rents (including any minimum rent under any ground lease,
and any additional rent or charges thereunder), water, sewer or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), and all other governmental
charges, in each case whether general or special, ordinary or extraordinary,
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Tenant (including all interest and penalties
thereon due to any failure in payment by Tenant), which at any time prior to,
during or in respect of the Term hereof may be assessed or imposed on or in
respect of or be a lien upon (a) Landlord’s interest in the Leased Property,
(b) 


 



 8
 









the Leased Property or any part thereof or
any rent therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with the Leased Property or the leasing or use
of the Leased Property or any part thereof by Tenant; provided, however,
that nothing contained herein shall be construed to require Tenant to pay and
the term “Impositions” shall not include (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer
fee (but excluding any mortgage or similar tax payable in connection with a
Facility Mortgage) or other tax imposed with respect to the sale, exchange or
other disposition by Landlord of the Leased Property or the proceeds thereof, (iv)
any single business, gross receipts tax, transaction privilege, rent or similar
taxes as the same relate to or are imposed upon Landlord, (v) any interest or
penalties imposed on Landlord as a result of the failure of Landlord to file
any return or report timely and in the form prescribed by law or to pay any tax
or imposition, except to the extent such failure is a result of a breach by
Tenant of its obligations pursuant to Section 3.1.3, (vi) any
impositions imposed on Landlord that are a result of Landlord not being
considered a “United States person” as defined in Section 7701(a)(30) of the
Code, (vii) any impositions that are enacted or adopted by their express terms
as a substitute for any tax that would not have been payable by Tenant pursuant
to the terms of this Agreement or (viii) any impositions imposed as a result of
a breach of covenant or representation by Landlord in any agreement governing
Landlord’s conduct or operation or as a result of the negligence or willful
misconduct of Landlord.


1.44        “Incidental Documents”  shall mean the
Guaranty, the Security Agreement, the Pledge Agreement any and other pledge or
security agreement issued or executed by an assignee or transferee pursuant to Section
16.1.


1.45        “Indebtedness”  shall mean (without
duplication), (i) all obligations for borrowed money, (ii) the maximum amount
available to be drawn under all surety bonds, letters of credit and bankers’
acceptances issued or created for the account of Tenant and, without
duplication, all unreimbursed drafts drawn thereunder, (iii) all obligations to
pay the deferred purchase price of property or services, excluding trade
payables incurred in the ordinary course of business, but including all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by Tenant, (iv) all
leases required, in accordance with GAAP, to be recorded as capital leases on
Tenant’s balance sheet, (v) the principal balance outstanding and owing by
Tenant under any synthetic lease, tax retention operating lease or similar
off-balance 


 



 9
 









sheet financing product, and (vi) all
guaranties of or other liabilities with respect to the debt of another Person.


1.46        “Insurance Requirements”  shall mean all terms
of any insurance policy required by this Agreement and all requirements of the
issuer of any such policy and all orders, rules and regulations and any other
requirements of the National Board of Fire Underwriters (or any other body
exercising similar functions) binding upon Landlord, Tenant, any Manager or the
Leased Property.


1.47        “Interest Rate”  shall mean nine
percent (9%) per annum.


1.48        “Land”  shall have the
meaning given such term in Section 2.1(a).


1.49        “Landlord”  shall have the
meaning given such term in the preambles to this Agreement and shall also
include its permitted successors and assigns.


1.50        “Landlord Default”  shall have the
meaning given such term in Article 14.


1.51        “Landlord Liens”  shall mean liens on
or against the Leased Property or any payment of Rent (a) which result from any
act of, or any claim against, Landlord or any owner of a direct or indirect
interest in the Leased Property (other than the lessor under any ground lease
affecting any portion of the Leased Property), or which result from any
violation by Landlord of any terms of this Agreement, or (b) which result from
liens in favor of any taxing authority by reason of any tax owed by Landlord or
any fee owner of a direct or indirect interest in the Leased Property (other
than the lessor under any ground lease affecting any portion of the Leased
Property); provided, however, that “Landlord Lien” shall
not include any lien resulting from any tax for which Tenant is obligated to
pay or indemnify Landlord against until such time as Tenant shall have already
paid to or on behalf of Landlord the tax or the required indemnity with respect
to the same.


1.52        “Leased Improvements”  shall have the
meaning given such term in Section 2.1(b).


1.53        “Leased Intangible Property”  shall mean all
agreements, service contracts, equipment leases, booking agreements and other
arrangements or agreements affecting the ownership, repair, maintenance,
management, leasing or operation of the Leased Property, or any portion
thereof,  to which 


 



 10
 









Landlord is a party; all books, records and
files relating to the leasing, maintenance, management or operation of the
Leased Property, or any portion thereof, belonging to Landlord; all
transferable or assignable permits, certificates of occupancy, operating
permits, sign permits, development rights and approvals, certificates,
licenses, warranties and guarantees, rights to deposits, trade names, service
marks, telephone exchange numbers identified with the Leased Property, and all
other transferable intangible property, miscellaneous rights, benefits and
privileges of any kind or character belonging to Landlord with respect to the
Leased Property.


1.54        “Leased Property” 
shall have the meaning given such term in Section 2.1.


1.55        “Legal Requirements”  shall mean all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions affecting
the Leased Property or the maintenance, construction, alteration or operation
thereof, whether now or hereafter enacted or in existence, including, without
limitation, (a) all permits, licenses, authorizations, certificates of need,
authorizations and regulations necessary to operate any Property for its
Permitted Use, and (b) all covenants, agreements, restrictions and encumbrances
contained in any instruments at any time in force affecting any Property,
including those which may (i) require material repairs, modifications or
alterations in or to any Property or (ii) in any way materially and adversely
affect the use and enjoyment thereof, but excluding any requirements arising as
a result of Landlord’s status as a real estate investment trust.


1.56        “Lien”  shall mean any
mortgage, security interest, pledge, collateral assignment, or other
encumbrance, lien or charge of any kind, or any transfer of property or assets
for the purpose of subjecting the same to the payment of Indebtedness or
performance of any other obligation in priority to payment of general
creditors.


1.57        “Manager” 
shall mean, with respect to any Property, the operator or manager under
any Management Agreement from time to time in effect with respect to such
Property, and its permitted successors and assigns.


1.58        “Management Agreement”  shall mean, with respect to any Property, any
operating or management agreement from time to time entered into by Tenant with
respect to such Property in accordance with the applicable provisions of this
Agreement, 


 



 11
 









together with all amendments, modifications
and supplements thereto.


1.59        “Minimum Rent”  shall mean the sum of Ten Million Two Hundred
Fifty Thousand Dollars ($10,250,000) per annum.


1.60        “Notice”  shall mean a notice given in accordance with Section
23.10.


1.61        “Officer’s Certificate”  shall mean a
certificate signed by an officer or other duly authorized individual of the
certifying Entity duly authorized by the board of directors or other governing
body of the certifying Entity.


1.62        “Overdue Rate”  shall mean, on any
date, a per  annum rate of interest equal to the lesser of fifteen
percent (15%) and the maximum rate then permitted under applicable law.


1.63        “Parent”  shall mean, with
respect to any Person, any Person which owns directly, or indirectly through
one or more Subsidiaries or Affiliated Persons, twenty percent (20%) or more of
the voting or beneficial interest in, or otherwise has the right or power
(whether by contract, through ownership of securities or otherwise) to control,
such Person.


1.64        “Permitted Encumbrances”  shall mean, with
respect to any Property, all rights, restrictions, and easements of record set
forth on Schedule B to the applicable owner’s or leasehold title insurance
policy issued to Landlord with respect to such Property, plus any other
encumbrances as may have been granted or caused by Landlord or otherwise
consented to in writing by Landlord from time to time.


1.65        “Permitted Liens”  shall mean any Liens
granted in accordance with Section 21.8(a).


1.66        “Permitted Use”  shall mean, with respect to any Property, any
use of such Property permitted pursuant to Section 4.1.1.


1.67        “Person”  shall mean any
individual or Entity, and the heirs, executors, administrators, legal
representatives, successors and assigns of such Person where the context so
admits.


1.68        “Pledge Agreement”  shall mean the Amended and Restated Pledge
Agreement, dated as of the date hereof, made by FSQ, Inc. in favor of Landlord
with respect to the stock or 


 



 12
 









other equity interests of Tenant, as amended,
restated, supplemented or otherwise modified from time to time.


1.69        “Property”  shall have the meaning
given such term in Section 2.1.


1.70        “Provider Agreements”  shall mean all participation, provider and
reimbursement agreements or arrangements now or hereafter in effect for the
benefit of Tenant or any Manager in connection with the operation of any
Facility relating to any right of payment or other claim arising out of or in
connection with Tenant’s participation in any Third Party Payor Program.


1.71        “Records”  shall have the
meaning given such term in Section 7.2.


1.72        “Regulated Medical Wastes”  shall mean all materials generated by
Tenant, subtenants, patients, occupants or the operators of the Leased Property
which are now or may hereafter be subject to regulation pursuant to the
Material Waste Tracking Act of 1988, or any Applicable Laws promulgated by any
Government Agencies.


1.73        “Rent”  shall mean,
collectively, the Minimum Rent and Additional Charges.


1.74        “SEC”  shall mean the
Securities and Exchange Commission.


1.75        “Security Agreement”  shall mean any
security agreement made by Tenant for the benefit of Landlord, as it may be
amended, restated, supplemented or otherwise modified from time to time.


1.76        “State”  shall mean The
Commonwealth of Massachusetts.


1.77        “Subordinated Creditor”  shall mean any
creditor of Tenant which is a party to a Subordination Agreement in favor of
Landlord.


1.78        “Subordination Agreement”  shall mean any
agreement (and any amendments thereto) executed by a Subordinated Creditor
pursuant to which the payment and performance of Tenant’s obligations to such
Subordinated Creditor are subordinated to the payment and performance of Tenant’s
obligations to Landlord under this Agreement.


1.79        “Subsidiary”  shall mean, with
respect to any Person, any Entity (a) in which such Person owns directly, or
indirectly 


 



 13
 









through one or more Subsidiaries, twenty
percent (20%) or more of the voting or beneficial interest or (b) which such
Person otherwise has the right or power to control (whether by contract,
through ownership of securities or otherwise).


1.80        “Successor Landlord”  shall have the
meaning given such term in Section 20.2.


1.81        “Tenant”  shall have the
meaning given such term in the preambles to this Agreement and shall also
include their respective permitted successors and assigns, and, in each case,
shall refer to each such Entity comprising Tenant hereunder, whether the
original Entities named herein or any of their successors or assigns, jointly
and severally with each and every other Entity or Entities then comprising
Tenant hereunder.


1.82         “Tenant’s Personal Property”  shall mean all motor
vehicles and consumable inventory and supplies, furniture, furnishings,
equipment, movable walls and partitions, equipment and machinery and all other
tangible personal property of Tenant and Tenant’s receivables, if any, acquired
by Tenant on and after the date hereof and located at the Leased Property or
used in Tenant’s business at the Leased Property and all modifications,
replacements, alterations and additions to such personal property installed at
the expense of Tenant, other than any items included within the definition of
Fixtures.


1.83        “Term”  shall mean,
collectively, the Fixed Term and the Extended Term, to the extent properly
exercised pursuant to the provisions of Section 2.4, unless sooner
terminated pursuant to the provisions of this Agreement.


1.84        “Third Party Payor Programs”  shall mean all third party payor programs in
which Tenant presently or in the future may participate, including, without
limitation, Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, Managed
Care Plans, other private insurance programs and employee assistance programs.


1.85        “Third Party Payors”  shall mean Medicare,
Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, private insurers and any
other Person which presently or in the future maintains Third Party Payor
Programs.


1.86        “Unsuitable for Its Permitted Use”  shall mean, with
respect to any Facility, a state or condition of such Facility such that (a)
following any damage or destruction involving a Facility, (i) such Facility
cannot be operated on a commercially practicable basis for its Permitted Use
and it cannot reasonably 


 



 14
 









be expected to be restored to substantially
the same condition as existed immediately before such damage or destruction,
and as otherwise required by Section 10.2.4, within twelve (12) months
following such damage or destruction or such longer period of time as to which
business interruption insurance is available to cover Rent and other costs
related to the applicable Property following such damage or destruction, (ii)
the damage or destruction, if uninsured, exceeds $1,000,000 or (iii) the cost
of such restoration exceeds ten percent (10%) of the fair market value of such
Property immediately prior to such damage or destruction, or (b) as the result
of a partial taking by Condemnation, such Facility cannot be operated, in the
good faith judgment of Tenant, on a commercially practicable basis for its
Permitted Use.


1.87        “Work”  shall have the
meaning given such term in Section 10.2.4.


ARTICLE 2


LEASED PROPERTY AND TERM


2.1          Leased
Property. 
Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord’s
right, title and interest in and to all of the following (each of items (a) through
(g) below which, as of the Commencement Date, relates to any single Facility, a
“Property” and, collectively, the “Leased Property”):


(a)           those certain tracts, pieces and
parcels of land, as more particularly described in Exhibits A-1 through A-2,
attached hereto and made a part hereof (the “Land”);


(b)           all buildings, structures and other
improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site
and off-site), parking areas and roadways appurtenant to such buildings
and structures presently situated upon the Land (collectively, the “Leased
Improvements”);


(c)           all easements, rights and
appurtenances relating to the Land and the Leased Improvements;


(d)           all equipment, machinery, fixtures,
and other items of property, now or hereafter permanently affixed to or
incorporated into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, 



 15















electrical
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, all of which, to the maximum extent permitted by law, are
hereby deemed by the parties hereto to constitute real estate, together with
all replacements, modifications, alterations and additions thereto, but
specifically excluding all items included within the category of Tenant’s
Personal Property (collectively, the “Fixtures”);


(e)           all machinery,
equipment, furniture, furnishings, moveable walls or partitions, computers or
trade fixtures or other personal property of any kind or description used or
useful in Tenant’s business on or in the Leased Improvements, and located on or
in the Leased Improvements, and all modifications, replacements, alterations
and additions to such personal property, except items, if any, included within
the category of Fixtures, but specifically excluding all items included within
the category of Tenant’s Personal Property;


(f)            all of the Leased
Intangible Property; and


(g)           any and all leases
of space in the Leased Improvements.


2.2          Condition of Leased Property.  Tenant acknowledges receipt and delivery of
possession of the Leased Property and Tenant accepts the Leased Property in its
“as is” condition, subject to the rights of parties in possession, the existing
state of title, including all covenants, conditions, restrictions, reservations,
mineral leases, easements and other matters of record or that are visible or
apparent on the Leased  Property, all
applicable Legal Requirements, the lien of any financing instruments, mortgages
and deeds of trust existing prior to the Commencement Date or permitted by the
terms of this Agreement, and such other matters which would be disclosed by an
inspection of the Leased Property and the record title thereto or by an
accurate survey thereof.  TENANT REPRESENTS
THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS
FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD’S AGENTS OR EMPLOYEES WITH
RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN
RESPECT OF THE CONDITION OF THE LEASED PROPERTY.  LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR 


 



 16
 









CONDITION FOR ANY PARTICULAR USE OR PURPOSE
OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT
OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.  To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord’s rights to proceed
against any predecessor in interest or insurer for breaches of warranties or
representations or for latent defects in the Leased Property.  Landlord shall fully cooperate with Tenant in
the prosecution of any such claims, in Landlord’s or Tenant’s name, all at
Tenant’s sole cost and expense.  Tenant
shall indemnify, defend, and hold harmless Landlord from and against any loss,
cost, damage or liability (including reasonable attorneys’ fees) incurred by
Landlord in connection with such cooperation.


2.3          Fixed Term.  The initial term of this Agreement (the “Fixed
Term”) shall commence on the Commencement Date and shall expire on June 30,
2026.


2.4          Extended Term.  Provided that no Event of Default shall have
occurred and be continuing, Tenant shall have the right to extend the Term for
one renewal term of twenty (20) years (the “Extended Term”).


The Extended Term shall commence on the day succeeding the expiration
of the Fixed Term.  All of the terms,
covenants and provisions of this Agreement shall apply to the Extended Term,
except that Tenant shall have no right to extend the Term beyond the expiration
of the Extended Term.  If Tenant shall
elect to exercise the aforesaid option, it shall do so by giving Landlord
Notice thereof not later than June 30, 2025, it being understood and agreed
that time shall be of the essence with respect to the giving of such
Notice.  If Tenant shall fail to give
such Notice, this Agreement shall automatically terminate at the end of the
Fixed Term and Tenant shall have no further option to extend the Term of this
Agreement.  If Tenant shall give such
Notice, the extension of this Agreement shall be automatically effected without
the execution of any additional documents; it being understood and agreed, however,
that Tenant and Landlord shall execute such documents and agreements as either
party shall reasonably require to evidence the same.  Notwithstanding the provisions of the
foregoing sentence, if, subsequent to the giving of such Notice, an Event of
Default shall occur, at Landlord’s option, the extension of this Agreement
shall cease to take effect and this Agreement shall automatically terminate at
the end of the Fixed Term, and Tenant shall have no further option to extend
the Term of this Agreement.


 



 17
 









ARTICLE 3


RENT


3.1          Rent.  Tenant shall pay, in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts, without offset, abatement, demand or deduction (unless
otherwise expressly provided in this Agreement), Minimum Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term.  All payments to
Landlord shall be made by wire transfer of immediately available federal funds
or by other means acceptable to Landlord in its sole discretion.  Rent for any partial calendar month shall be
prorated on a per diem basis.


3.1.1           Minimum Rent.


(a)           Payments.  Minimum Rent shall be paid in equal monthly
installments in arrears on the first Business Day of each calendar month during
the Term.


(b)           Allocation of Minimum Rent.  Minimum Rent may be allocated and
reallocated among the Properties comprising the Leased Property by agreement
among Landlord and Tenant; provided, however that in no event
shall the Minimum Rent allocated to any Property be less than the monthly
amount payable by Landlord on account of any Facility Mortgage and/or ground or
master lease with respect to such Property nor shall the aggregate amount of
Minimum Rent allocated among the Properties exceed the total amount payable for
the Leased Property.


(c)           Adjustments of Minimum Rent Following Disbursements
Under Sections 5.1.2(b), 10.2.3 and 11.2.  Effective on the date of each disbursement to
pay for the cost of any repairs, maintenance, renovations or replacements
pursuant to Sections 5.1.2(b), 10.2.3 or 11.2, the annual Minimum Rent
shall be increased by a per  annum amount equal to the
Disbursement Rate times the amount so disbursed.  If any such disbursement is made during any
calendar month on a day other than the first Business Day of such calendar
month, Tenant shall pay to Landlord on the first Business Day of the
immediately following calendar month (in addition to the amount of Minimum Rent
payable with respect to such calendar month, as adjusted pursuant to this
paragraph (c)) the amount by which Minimum Rent for the preceding calendar
month, as adjusted for such disbursement on a per diem basis, exceeded the
amount of 


 



 18
 









Minimum Rent
paid by Tenant for such preceding calendar month.


(d)           Adjustments of Minimum Rent Following Partial Lease
Termination.  Subject to Section
4.1.1(b), if this Agreement shall terminate with respect to any Property
but less than all of the Leased Property, Minimum Rent shall be reduced by the
affected Property’s allocable share of Minimum Rent determined in accordance
with the applicable provisions of this Agreement.


3.1.2           Intentionally Deleted.


3.1.3           Additional Charges.  In addition to the Minimum Rent payable
hereunder, Tenant shall pay (or cause to be paid) to the appropriate parties
and discharge (or cause to be discharged) as and when due and payable the
following (collectively, “Additional Charges”):


(a)           Impositions.  Subject to Article 8 relating to
permitted contests, Tenant shall pay, or cause to be paid, all Impositions
before any fine, penalty, interest or cost (other than any opportunity cost as
a result of a failure to take advantage of any discount for early payment) may
be added for non-payment, such payments to be made directly to the taxing authorities
where feasible, and shall promptly, upon request, furnish to Landlord copies of
official receipts or other reasonably satisfactory proof evidencing such
payments.  If any such Imposition may, at
the option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Tenant may
exercise the option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and, in such event, shall pay, or cause
to pay, such installments during the Term as the same become due and before any
fine, penalty, premium, further interest or cost may be added thereto.  Landlord, at its expense, shall, to the
extent required or permitted by Applicable Law, prepare and file, or cause to
be prepared and filed, all tax returns and pay all taxes due in respect of
Landlord’s net income, gross receipts, sales and use, single business,
transaction privilege, rent, ad valorem, franchise taxes and taxes on its
capital stock or other equity interests, and Tenant, at its expense, shall, to
the extent required or permitted by Applicable Laws and regulations, prepare
and file all other tax returns and reports in respect of any Imposition as may
be required by Government Agencies.  Provided
no Event of Default shall have occurred and be continuing, if any refund shall
be due 


 



 19
 









from any
taxing authority in respect of any Imposition paid by or on behalf of Tenant,
the same shall be paid over to or retained by Tenant.  Landlord and Tenant shall, upon request of
the other, provide such data as is maintained by the party to whom the request
is made with respect to the Leased Property as may be necessary to prepare any
required returns and reports.  In the
event Government Agencies classify any property covered by this Agreement as
personal property, Tenant shall file, or cause to be filed, all personal
property tax returns in such jurisdictions where it may legally so file.  Each party shall, to the extent it possesses
the same, provide the other, upon request, with cost and depreciation records
necessary for filing returns for any property so classified as personal
property.  Where Landlord is legally
required to file personal property tax returns for property covered by this
Agreement, Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to file a protest. 
All Impositions assessed against such personal property shall be
(irrespective of whether Landlord or Tenant shall file the relevant return)
paid by Tenant not later than the last date on which the same may be made
without interest or penalty, subject to the provisions of Article 8.


Landlord shall give
prompt Notice to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has knowledge; provided, however, that
Landlord’s failure to give any such notice shall in no way diminish Tenant’s
obligation hereunder to pay such Impositions.


(b)           Utility Charges.  Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in
connection with the Leased Property.


(c)           Insurance Premiums.  Tenant shall pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to Article
9.


(d)           Other Charges.  Tenant shall pay or cause to be paid all other
amounts, liabilities and obligations, including, without limitation, ground
rents, if any, and all amounts payable under any equipment leases and all
agreements to indemnify Landlord under Sections 4.4.2 and 9.5.


(e)           Reimbursement for Additional Charges.  If Tenant pays or causes to be paid property
taxes or similar or 


 



 20
 









other
Additional Charges attributable to periods after the end of the Term, whether
upon expiration or sooner termination of this Agreement (other than termination
by reason of an Event of Default), Tenant may, within a reasonable time after
the end of the Term, provide Notice to Landlord of its estimate of such
amounts.  Landlord shall promptly
reimburse Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this Agreement.


3.2          Late Payment of Rent, Etc.  If any installment of Minimum Rent or
Additional Charges (but only as to those Additional Charges which are payable directly
to Landlord) shall not be paid within ten (10) days after its due date, Tenant
shall pay Landlord, on demand, as Additional Charges, a late charge (to the
extent permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord or any Facility Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due.  If any payments due from Landlord to Tenant
shall not be paid within ten (10) days after its due date, Landlord shall pay
to Tenant, on demand, a late charge (to the extent permitted by law) computed
at the Overdue Rate on the amount of such installment from the due date of such
installment to the date of payment thereof.


In the event of any failure by Tenant to pay any Additional Charges
when due, Tenant shall promptly pay and discharge, as Additional Charges, every
fine, penalty, interest and cost which is added for non-payment or late payment
of such items.  Landlord shall have all
legal, equitable and contractual rights, powers and remedies provided either in
this Agreement or by statute or otherwise in the case of non-payment of the
Additional Charges as in the case of non-payment of the Minimum Rent.


3.3          Net Lease.  The Rent shall be absolutely net to Landlord
so that this Agreement shall yield to Landlord the full amount of the
installments or amounts of the Rent throughout the Term, subject to any other
provisions of this Agreement which expressly provide otherwise, including those
provisions for adjustment or abatement of such Rent.


3.4          No Termination, Abatement, Etc.   Except as
otherwise specifically provided in this Agreement, each of Landlord and 


 



 21
 









Tenant, to the maximum extent permitted by
law, shall remain bound by this Agreement in accordance with its terms and
shall not take any action without the consent of the other to modify, surrender
or terminate this Agreement.  In
addition, except as otherwise expressly provided in this Agreement, Tenant
shall not seek, or be entitled to, any abatement, deduction, deferment or reduction
of the Rent, or set-off against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a) any
damage to or destruction of the Leased Property, or any portion thereof, from
whatever cause or any Condemnation, (b) the lawful or unlawful prohibition of,
or restriction upon, Tenant’s use of the Leased Property, or any portion
thereof, or the interference with such use by any Person or by reason of
eviction by paramount title; (c) any claim which Tenant may have against
Landlord by reason of any default (other than a monetary default) or breach of
any warranty by Landlord under this Agreement or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties; (d) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord; or (e) for any other cause whether similar or
dissimilar to any of the foregoing (other than a monetary default by Landlord).  Except as otherwise specifically provided in
this Agreement, Tenant hereby waives all rights arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law (a) to
modify, surrender or terminate this Agreement or quit or surrender the Leased
Property, or any portion thereof, or (b) which would entitle Tenant to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
or other obligations to be performed by Tenant hereunder.  The obligations of Tenant hereunder shall be
separate and independent covenants and agreements, and the Rent and all other
sums payable by Tenant hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the express
provisions of this Agreement.


3.5          Prorations, Etc.  It is understood and agreed that (i) all
items of revenue, cost and expense, rights, remedies, claims, losses, damages,
liabilities and obligations with respect to the period prior to the Commencement
Date shall be for the account of Landlord, (ii) Landlord shall retain its
right, title and interest in and to all unpaid accounts receivable with respect
to each Facility which relate to the period prior to the Commencement Date, and
Tenant shall promptly turn over any such amounts collected or received by
Tenant on account thereof, and (iii) in the event that Tenant shall assume 



 22















any liability for any period prior to the
Commencement Date in connection with its participation in any Third Party Payor
Program, Landlord shall indemnify and hold Tenant harmless from any such
liability only to the extent the same relates to the period commencing on
October 26, 2004 and ending on the Commencement Date.


 


ARTICLE 4


USE OF THE LEASED PROPERTY


4.1          Permitted Use.


4.1.1           Permitted Use.


(a)           Tenant shall, at all
times during the Term, and at any other time that Tenant shall be in possession
of any Property, continuously use and operate, or cause to be used and
operated, such Property as a rehabilitation hospital, clinic or professional
level health or medical services facility, and any uses necessary or incidental
thereto, subject to and in accordance with all applicable Legal
Requirements.  Tenant shall not use (and
shall not permit any Person to use) any Property, or any portion thereof, for
any other use without the prior written consent of Landlord, which approval
shall not be unreasonably withheld, delayed or conditioned.  No use shall be made or permitted to be made
of any Property and no acts shall be done thereon which will cause the
cancellation of any insurance policy covering such Property or any part thereof
(unless another adequate policy is available), nor shall Tenant sell or
otherwise provide to patients therein, or permit to be kept, used or sold in or
about any Property any article which may be prohibited by law or by the
standard form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriter’s regulations.  Tenant shall, at its sole cost (except as
expressly provided in Section 5.1.2(b)), comply or cause to be complied
with all Insurance Requirements.  Tenant
shall not take or omit to take, or permit to be taken or omitted to be taken,
any action, the taking or omission of which materially impairs the value or the
usefulness of any Property or any part thereof for its Permitted Use.


(b)           In the event that,
in the reasonable determination of Tenant, it shall no longer be economically
practical to operate any Property as currently operated,  


 



 23
 









Tenant shall
give Landlord Notice thereof, which Notice shall set forth in reasonable detail
the reasons therefor.  Thereafter,
Landlord and Tenant shall negotiate in good faith to agree on an alternative
use for such Property; provided, however, in no event shall the
Minimum Rent be reduced or abated as a result thereof.  If Landlord and Tenant fail to agree on an
alternative use for such Property within sixty (60) days after commencing
negotiations as aforesaid, Tenant may market such Property for sale to a third
party.  If Tenant receives a bona fide
offer (an “Offer”) to purchase such Property from a Person having the
financial capacity to implement the terms of such Offer, Tenant shall give
Landlord Notice thereof, which Notice shall include a copy of the Offer
executed by such third party.  In the
event that Landlord shall fail to accept or reject such Offer within thirty
(30) days after receipt of such Notice, such Offer shall be deemed to be
rejected by Landlord.  If Landlord shall
sell the Property pursuant to such Offer, then, effective as of the date of
such sale, this Agreement shall terminate with respect to such Property, and
the Minimum Rent shall be reduced by an amount equal to nine percent (9%) of
the net proceeds of sale received by Landlord in the case of an Additional
Property.  If Landlord shall reject (or
be deemed to have rejected) such Offer, then, effective as of the proposed date
of such sale, this Agreement shall terminate with respect to such Property, and
the Minimum Rent shall be reduced by an amount equal to nine percent (9%) of
the projected net proceeds determined by reference to such Offer.


4.1.2       Necessary Approvals.  Tenant shall proceed with all due diligence
and exercise reasonable efforts to obtain and maintain, or cause to be obtained
and maintained, all approvals necessary to use and operate, for its Permitted
Use, each Property and the Facility located thereon under applicable law and,
without limiting the foregoing, shall exercise reasonable efforts to maintain
(or cause to be maintained) appropriate certifications for reimbursement and
licensure.


4.1.3       Lawful Use, Etc.  Tenant shall not, and shall not permit any
Person to use or suffer or permit the use of any Property or Tenant’s Personal
Property, if any, for any unlawful purpose. 
Tenant shall not, and shall not permit any Person to, commit or suffer
to be committed any waste on any Property, or in any Facility, nor shall Tenant
cause or permit any unlawful nuisance thereon or therein.  Tenant shall not, and shall not permit any
Person to, suffer nor permit any Property, or any 


 



 24
 









portion thereof, to be used in such a manner
as (i) may materially and adversely impair Landlord’s title thereto or to any
portion thereof, or (ii) may reasonably allow a claim or claims for adverse
usage or adverse possession by the public, as such, or of implied dedication of
such Property, or any portion thereof.


4.2          Compliance with Legal/Insurance
Requirements, Etc.  Subject to the provisions of Section
5.1.2(b) and Article 8, Tenant, at its sole expense, shall (i)
comply with (or cause to be complied with) all material Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair,
alteration and restoration of any Property, and (ii) procure, maintain and
comply with (or cause to be procured, maintained and complied with) all
material licenses, certificates of need, permits, provider agreements and other
authorizations and agreements required for any use of any Property and Tenant’s
Personal Property, if any, then being made, and for the proper erection,
installation, operation and maintenance of the Leased Property or any part
thereof.


4.3          Compliance with Medicaid and
Medicare Requirements.  Tenant, at its sole cost and expense, shall
make (or shall cause to be made), whatever improvements (capital or ordinary)
as are required to conform each Property to such standards as may, from time to
time, be required by Federal Medicare (Title 18) or Medicaid (Title 19) for the
Facilities, to the extent Tenant is a participant in such programs with respect
to such Property, or any other applicable programs or legislation, or capital
improvements required by any other governmental agency having jurisdiction over
any Property as a condition of the continued operation of such Property for its
Primary Intended Use.


4.4          Environmental Matters.


4.4.1           Restriction on Use, Etc.  During the Term and any other time that Tenant
shall be in possession of any Property, Tenant shall not, and shall not permit
any Person to, store, spill upon, dispose of or transfer to or from such
Property any Hazardous Substance, except in compliance with all Applicable
Laws.  During the Term and any other time
that Tenant shall be in possession of any Property, Tenant shall maintain (or
shall cause to be maintained) such Property at all times free of any Hazardous
Substance (except in compliance with all Applicable Laws).  Tenant shall promptly:  (a) upon receipt of notice or knowledge,
notify Landlord in writing of any material change in the nature or extent of
Hazardous Substances at any Property, (b) transmit to Landlord a copy of any
report which is required to be filed by Tenant or any Manager with respect to 


 



 25
 









any Property pursuant to SARA Title III or
any other Applicable Law, (c) transmit to Landlord copies of any citations,
orders, notices or other governmental communications received by Tenant or any
Manager or their respective agents or representatives with respect thereto
(collectively, “Environmental Notice”), which Environmental Notice
requires a written response or any action to be taken and/or if such
Environmental Notice gives notice of and/or presents a material risk of any
material violation of any Applicable Law and/or presents a material risk of any
material cost, expense, loss or damage (an “Environmental Obligation”),
(d) observe and comply with (or cause to be observed and complied with) all
Applicable Laws relating to the use, maintenance and disposal of Hazardous
Substances and all orders or directives from any official, court or agency of
competent jurisdiction relating to the use or maintenance or requiring the
removal, treatment, containment or other disposition thereof, and (e) pay or
otherwise dispose (or cause to be paid or otherwise disposed) of any fine,
charge or Imposition related thereto, unless Tenant or any Manager shall
contest the same in good faith and by appropriate proceedings and the right to
use and the value of any of the Leased Property is not materially and adversely
affected thereby.


If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Applicable Laws) are
discovered on any Property, subject to Tenant’s right to contest the same in
accordance with Article 8, Tenant shall take (and shall cause to be
taken) all actions and incur any and all expenses, as are required by any
Government Agency and by Applicable Law, (i) to clean up and remove from and
about such Property all Hazardous Substances thereon, (ii) to contain and
prevent any further release or threat of release of Hazardous Substances on or
about such Property and (iii) to use good faith efforts to eliminate any further
release or threat of release of Hazardous Substances on or about such Property.


4.4.2           Indemnification of Landlord.  Tenant shall protect, indemnify and hold
harmless Landlord and each Facility Mortgagee, their trustees, officers,
agents, employees and beneficiaries, and any of their respective successors or
assigns with respect to this Agreement (collectively, the “Indemnitees”
and, individually, an “Indemnitee”) for, from and against any and all
debts, liens, claims, causes of action, administrative orders or notices,
costs, fines, penalties or expenses (including, without limitation, reasonable
attorney’s fees and expenses) imposed upon, incurred by or asserted against any
Indemnitee resulting from, either directly or indirectly, the 


 



 26
 









presence in, upon or under the soil or ground
water of any Property or any properties surrounding such Property of any
Hazardous Substances in violation of any Applicable Law, except to the extent
the same arise from the acts or omissions of Landlord or any other Indemnitee
or during any period that Landlord or a Person designated by Landlord (other
than Tenant) is in possession of such Property from and after the date
hereof.  Tenant’s duty herein includes,
but is not limited to, costs associated with personal injury or property damage
claims as a result of the presence prior to the expiration or sooner
termination of the Term and the surrender of such Property to Landlord in
accordance with the terms of this Agreement of Hazardous Substances in, upon or
under the soil or ground water of such Property in violation of any Applicable
Law.  Upon Notice from Landlord and any
other of the Indemnitees, Tenant shall undertake the defense, at Tenant’s sole
cost and expense, of any indemnification duties set forth herein, in which event,
Tenant shall not be liable for payment of any duplicative attorneys’ fees
incurred by any Indemnitee.


Tenant shall, upon demand, pay (or cause to be paid) to Landlord, as an
Additional Charge, any cost, expense, loss or damage (including, without limitation,
reasonable attorneys’ fees) reasonably incurred by Landlord and arising from a
failure of Tenant to observe and perform 
(or to cause to be observed and performed) the requirements of this Section
4.4, which amounts shall bear interest from the date ten (10) Business Days
after written demand therefor is given to Tenant until paid by Tenant to
Landlord at the Overdue Rate.


4.4.3           Survival.  The provisions of this Section 4.4
shall survive the expiration or sooner termination of this Agreement.


ARTICLE 5


MAINTENANCE AND REPAIRS


5.1          Maintenance and Repair.


5.1.1           Tenant’s General Obligations.  Tenant shall keep (or cause to be kept), at
Tenant’s sole cost and expense, the Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto (and Tenant’s Personal Property) in
good order and repair, reasonable wear and tear excepted (whether or not the
need for such repairs occurs as a result of Tenant’s or any Manager’s use, any
prior use, the elements or the age of the Leased Property or Tenant’s Personal
Property or any portion thereof), and shall promptly make or cause to be made
all 


 



 27
 









necessary and appropriate repairs and
replacements thereto of every kind and nature, whether interior or exterior,
structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the commencement of the
Term (concealed or otherwise).  All
repairs shall be made in a good, workmanlike manner, consistent with industry
standards for comparable Facilities in like locales, in accordance with all
applicable federal, state and local statutes, ordinances, codes, rules and
regulations relating to any such work. 
Tenant shall not take or omit to take (or permit any Person to take or
omit to take) any action, the taking or omission of which would materially and
adversely impair the value or the usefulness of the Leased Property or any
material part thereof for its Permitted Use. 
Tenant’s obligations under this Section 5.1.1 shall be limited in
the event of any casualty or Condemnation as set forth in Article 10 and
Article 11 and Tenant’s obligations with respect to Hazardous Substances
are as set forth in Section 4.4.


5.1.2           Landlord’s Obligations.


(a)           Except as otherwise
expressly provided in this Agreement, Landlord shall not, under any
circumstances, be required to build or rebuild any improvement on the Leased
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether ordinary
or extraordinary, structural or nonstructural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect thereto, or to maintain the Leased
Property in any way.  Except as otherwise
expressly provided in this Agreement, Tenant hereby waives, to the maximum
extent permitted by law, the right to make repairs at the expense of Landlord
pursuant to any law in effect on the date hereof or hereafter enacted.  Landlord shall have the right to give, record
and post, as appropriate, notices of nonresponsibility under any mechanic’s
lien laws now or hereafter existing.


(b)           If, pursuant to the
terms of this Agreement, Tenant is required to make any expenditures in
connection with any repair, maintenance or renovation with respect to any Property,
Tenant may, at its election, advance such funds or give Landlord Notice
thereof, which Notice shall set forth, in reasonable detail, the nature of the
required repair, renovation or replacement, the estimated cost thereof and such
other information with respect thereto as Landlord may reasonably require.  Provided that no Event of Default shall have
occurred and be continuing and Tenant 


 



 28
 









shall
otherwise comply with the applicable provisions of Article 6, Landlord
shall, within ten (10) Business Days after such Notice, subject to and in
accordance with the applicable provisions of Article 6, disburse such
required funds to Tenant (or, if Tenant shall so elect, directly to the Manager
or any other Person performing the required work) and, upon such disbursement,
the Minimum Rent shall be adjusted as provided in Section 3.1.1(c).  Notwithstanding the foregoing, Landlord may
elect not to disburse such required funds to Tenant; provided, however, that if
Landlord shall elect not to disburse such required funds as aforesaid, Tenant’s
obligation to make such required repair, renovation or replacement shall be
deemed waived by Landlord, and, notwithstanding anything contained in this
Agreement to the contrary, Tenant shall have no obligation to make such required
repair, renovation or replacement.


5.1.3       Nonresponsibility of Landlord, Etc.  All
materialmen, contractors, artisans, mechanics and laborers and other persons
contracting with Tenant with respect to the Leased Property, or any part
thereof, are hereby charged with notice that liens on the Leased Property or on
Landlord’s interest therein are expressly prohibited and that they must look
solely to Tenant to secure payment for any work done or material furnished to
Tenant or any Manager or for any other purpose during the term of this
Agreement.


Nothing contained in this Agreement shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or
materialmen for the performance of any labor or the furnishing of any materials
for any alteration, addition, improvement or repair to the Leased Property or
any part thereof or as giving Tenant any right, power or authority to contract
for or permit the rendering of any services or the furnishing of any materials
that would give rise to the filing of any lien against the Leased Property or
any part thereof nor to subject Landlord’s estate in the Leased Property or any
part thereof to liability under any mechanic’s lien law of any State in any
way, it being expressly understood Landlord’s estate shall not be subject to
any such liability.


5.2          Tenant’s Personal Property.  Tenant shall provide and maintain (or cause to
be provided and maintained) throughout the Term all such Tenant’s Personal
Property as shall be necessary in order to operate in compliance with
applicable material Legal Requirements and Insurance Requirements and otherwise
in accordance with customary practice in the industry for the 


 



 29
 









Permitted Use.  If, from and after the Commencement Date,
Tenant acquires an interest in any item of tangible personal property (other
than motor vehicles) on, or in connection with, the Leased Property, or any
portion thereof, which belongs to anyone other than Tenant, Tenant shall
require the agreements permitting such use to provide that Landlord or its
designee may assume Tenant’s rights and obligations under such agreement upon
Landlord’s purchase of the same in accordance with the provisions of Article
15 and the assumption of management or operation of the Facility by
Landlord or its designee.


5.3          Yield Up.  Upon the expiration or sooner termination of
this Agreement, Tenant shall, subject to the completion of a transfer of
ownership approved by the Massachusetts Department of Public Health, vacate and
surrender the Leased Property to Landlord in the condition in which the Leased
Property was on the Commencement Date, except as repaired, rebuilt, restored,
altered or added to as permitted or required by the provisions of this
Agreement, ordinary wear and tear excepted.


In addition, upon the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord’s reasonable cost and expense, use its
best efforts to complete the transfer of ownership of the hospital business and
the related hospital operations and records necessary for such operation to,
and cooperate with, Landlord or Landlord’s nominee in connection with the
processing of all applications for licenses, operating permits and other governmental
authorizations and all contracts, including contracts with governmental or
quasi-governmental entities, which may be necessary for the operation of the
hospitals at the Facilities.  Until the
transfer of ownership is approved by the Massachusetts Department of Public
Health, it is understood that Tenant shall continue as owner and licensee of
the hospital business and the related hospital operations conducted at the
Facilities after the termination of this Agreement and for so long thereafter as
is necessary for Landlord or Landlord’s nominee to obtain all necessary
licenses, operating permits and other governmental authorizations.  If a new tenant is not licensed upon the
expiration or termination of this Agreement in connection with a Default or
Event of Default by Tenant, then, during such post termination period, Tenant
shall pay hold over rent in accordance with Section 13.  Otherwise, during such period, Minimum Rent
shall be payable in an amount equal to 75% of the Minimum Rent payable for the
last month of the Term for the first six (6) months after the expiration date
and 50% of such Minimum Rent thereafter.


It is expressly understood and agreed that any transfer pursuant to
Section 5.3 or any other Section of this Agreement 



 30
 









is not a transfer of ownership of the hospital and is
not a transfer of the right, title and interest related to the licenses granted
by the Massachusetts Department of Public Health to operate the Facilities or
any other permit, license or certification used in the operation of the
Facilities that is otherwise by its terms non-transferable.  Any change in ownership and licensee shall be
subject, in all events, to the approval of each and every applicable Government
Agency, including, without limitation, the Massachusetts Department of Public
Health, and Applicable Law, Tenant being obligated to cooperate in and
facilitate such approval process.


5.4          Management Agreement.  Tenant shall not, without Landlord’s prior
written consent (which consent shall not be unreasonably withheld, delayed or
conditioned), enter into, amend or modify the provisions of any Management
Agreement with respect to any Property. 
Any Management Agreement entered into pursuant to the provisions of this
Section 5.4 shall be subordinate to this Agreement and shall provide, inter
alia, that all amounts due from Tenant to Manager thereunder shall be
subordinate to all amounts due from Tenant to Landlord (provided that, as long
as no Event of Default has occurred and is continuing, Tenant may pay all amounts
due to Manager thereunder pursuant to such Management Agreement) and for
termination thereof, at Landlord’s option, upon the termination of this
Agreement.  Tenant shall not take any
action, grant any consent or permit any action under any such Management
Agreement which might have a material adverse effect on Landlord, without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, delayed or conditioned.


ARTICLE 6


IMPROVEMENTS,
ETC.


6.1          Improvements to the Leased Property.  Tenant shall not
make, construct or install (or permit to be made, constructed or installed) any
Capital Additions without, in each instance, obtaining Landlord’s prior written
consent, which consent shall not be unreasonably withheld, delayed or conditioned
provided that (a) construction or installation of the same would not adversely
affect or violate any material Legal Requirement or Insurance Requirement
applicable to any Property and (b) Landlord shall have received an Officer’s
Certificate certifying as to the satisfaction of the conditions set out in
clause (a) above; provided, however, that no such consent shall
be required in the event immediate action is required to prevent imminent harm
to person or property.  Prior to
commencing construction of any Capital Addition, Tenant shall submit to
Landlord, in 



 31















writing, a proposal setting forth, in reasonable detail, any such
proposed improvement and shall provide to Landlord such plans and
specifications, and such permits, licenses, contracts and such other
information concerning the same as Landlord may reasonably request.  Landlord shall have thirty (30) days to
review all materials submitted to Landlord in connection with any such
proposal.  Failure of Landlord to respond
to Tenant’s proposal within thirty (30) days after receipt of all information
and materials requested by Landlord in connection with the proposed improvement
shall be deemed to constitute approval of the same.  Without limiting the generality of the
foregoing, such proposal shall indicate the approximate projected cost of
constructing such proposed improvement and the use or uses to which it will be
put.  No Capital Addition shall be made
which would tie in or connect any Leased Improvements with any other
improvements on property adjacent to any Property (and not part of the Land)
including, without limitation, tie-ins of buildings or other structures
or utilities.  Except as permitted
herein, Tenant shall not finance the cost of any construction of such
improvement by the granting of a lien on or security interest in the Leased
Property or such improvement, or Tenant’s interest therein, without the prior
written consent of Landlord, which consent may be withheld by Landlord in
Landlord’s sole discretion.  Any such
improvements shall, upon the expiration or sooner termination of this
Agreement, remain or pass to and become the property of Landlord, free and
clear of all encumbrances other than Permitted Encumbrances.


6.2          Salvage.
 All materials
which are scrapped or removed in connection with the making of either Capital
Additions or non-Capital Additions or repairs required by Article 5
shall be or become the property of the party that paid for such work.


ARTICLE 7


LIENS


7.1          Liens.
 Subject to Article
8, Tenant shall use its best efforts not, directly or indirectly, to create
or allow to remain and shall promptly discharge (or cause to be discharged), at
its expense, any lien, encumbrance, attachment, title retention agreement or
claim upon the Leased Property, or any portion thereof, or Tenant’s leasehold
interest therein or any attachment, levy, claim or encumbrance in respect of
the Rent, other than (a) Permitted Encumbrances, (b) restrictions, liens and
other encumbrances which are consented to in writing by Landlord, (c) liens for
those taxes of Landlord which Tenant is not required to pay hereunder, (d)
subleases permitted by Article 16, (e) liens for Impositions or for sums
resulting from 



 32
 









noncompliance with Legal Requirements so long as (i) the same are not
yet due and payable, or (ii) are being contested in accordance with Article
8, (f) liens of mechanics, laborers, materialmen, suppliers or vendors
incurred in the ordinary course of business that are not yet due and payable or
are for sums that are being contested in accordance with Article 8, (g)
any Facility Mortgages or other liens which are the responsibility of Landlord
pursuant to the provisions of Article 20 and (h) Landlord Liens and any
other voluntary liens created by Landlord.


7.2          Landlord’s
Lien.  In
addition to any statutory landlord’s lien and in order to secure payment of the
Rent and all other sums payable hereunder by Tenant, and to secure payment of
any loss, cost or damage which Landlord may suffer by reason of Tenant’s breach
of this Agreement, Tenant hereby grants unto Landlord, to the maximum extent
permitted by Applicable Law, a security interest in and an express contractual
lien upon Tenant’s Personal Property (except motor vehicles), and Tenant’s
interest in all ledger sheets, files, records, documents and instruments
(including, without limitation, computer programs, tapes and related electronic
data processing) relating to the operation of the Facilities (the “Records”)
and all proceeds therefrom, subject to any Permitted Encumbrances; and such
Tenant’s Personal Property shall not be removed from the Leased Property at any
time when an Event of Default has occurred and is continuing.


Upon Landlord’s request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in Tenant’s Personal Property and the proceeds thereof in accordance
with the provisions of the applicable laws of the State.  During the continuance of an Event of
Default, Tenant hereby grants Landlord an irrevocable limited power of
attorney, coupled with an interest, to execute all such financing statements in
Tenant’s name, place and stead.  The
security interest herein granted is in addition to any statutory lien for the
Rent.


ARTICLE 8


PERMITTED
CONTESTS


Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, “Claims”)
as to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the 



 33
 









foregoing shall in no way be construed as relieving,
modifying or extending Tenant’s obligation to pay (or cause to be paid) any
Claims as finally determined, (b) such contest shall not cause Landlord or
Tenant to be in default under any mortgage or deed of trust encumbering the
Leased Property, or any portion thereof (Landlord agreeing that any such
mortgage or deed of trust shall permit Tenant to exercise the rights granted
pursuant to this Article 8) or any interest therein or result in or
reasonably be expected to result in a lien attaching to the Leased Property, or
any portion thereof, (c) no part of the Leased Property nor any Rent therefrom
shall be in any immediate danger of sale, forfeiture, attachment or loss, and
(d) Tenant shall indemnify and hold harmless Landlord from and against any
cost, claim, damage, penalty or reasonable expense, including reasonable
attorneys’ fees, incurred by Landlord in connection therewith or as a result
thereof.  Landlord agrees to join in any
such proceedings if required legally to prosecute such contest, provided that
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith) unless Tenant agrees by agreement in form and substance reasonably
satisfactory to Landlord, to assume and indemnify Landlord with respect to the
same.  Tenant shall be entitled to any
refund of any Claims and such charges and penalties or interest thereon which
have been paid by Tenant or paid by Landlord to the extent that Landlord has
been fully reimbursed by Tenant.  If
Tenant shall fail (x) to pay or cause to be paid any Claims when finally
determined, (y) to provide reasonable security therefor or (z) to prosecute or
cause to be prosecuted any such contest diligently and in good faith, Landlord
may, upon reasonable notice to Tenant (which notice shall not be required if
Landlord shall reasonably determine that the same is not practicable), pay such
charges, together with interest and penalties due with respect thereto, and
Tenant shall reimburse Landlord therefor, upon demand, as Additional Charges.


ARTICLE 9


INSURANCE AND INDEMNIFICATION


9.1          General
Insurance Requirements.  Tenant shall, at all times during the Term and
at any other time Tenant shall be in possession of any Property, or any portion
thereof, keep (or cause to be kept) such Property and all property located
therein or thereon, insured against the risks and in such amounts as is against
such risks and in such amounts as Landlord shall reasonably require and may be
commercially reasonable.  Tenant shall
prepare a proposal setting forth the insurance Tenant 



 34
 









proposes to be maintained with respect to each Property during the
ensuing Fiscal Year, and shall submit such proposal to Landlord on or before
December 1 of the preceding year, for Landlord’s review and approval, which
approval shall not be unreasonably withheld, delayed or conditioned.  In the event that Landlord shall fail to
respond within thirty (30) days after receipt of such proposal, such proposal
shall be deemed approved.


9.2          Waiver
of Subrogation.  Landlord and Tenant agree that (insofar as and
to the extent that such agreement may be effective without invalidating or
making it impossible to secure insurance coverage from responsible insurance
companies doing business in any State) with respect to any property loss which
is covered by insurance then being carried by Landlord or Tenant, the party
carrying such insurance and suffering said loss releases the others of and from
any and all claims with respect to such loss; and they further agree that their
respective insurance companies (and, if Landlord or Tenant shall self insure in
accordance with the terms hereof, Landlord or Tenant, as the case may be) shall
have no right of subrogation against the other on account thereof, even though
extra premium may result therefrom.  In
the event that any extra premium is payable by Tenant as a result of this provision,
Landlord shall not be liable for reimbursement to Tenant for such extra
premium.


9.3          Form
Satisfactory, Etc.  All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for,
nonassessable, and issued by reputable insurance companies authorized to do business
in the State and having a general policy holder’s rating of no less than A in
Best’s latest rating guide.  All
property, business interruption, liability and flood insurance policies with
respect to each Property shall include no deductible in excess of Two Hundred
Fifty Thousand Dollars ($250,000).  At
all times, all property, business interruption, liability and flood insurance
policies, with the exception of worker’s compensation insurance coverage, shall
name Landlord and any Facility Mortgagee as additional insureds, as their
interests may appear.  All loss
adjustments shall be payable as provided in Article 10, except that
losses under liability  and worker’s
compensation insurance policies shall be payable directly to the party entitled
thereto.  Tenant shall cause all
insurance premiums to be paid and shall deliver (or cause to be delivered)
policies or certificates thereof to Landlord prior to their effective date
(and, with respect to any renewal policy, prior to the expiration of the existing
policy).  All such policies shall provide
Landlord (and any Facility 



 35
 









Mortgagee if required by the same) thirty (30) days prior written
notice of any material change or cancellation of such policy.  In the event Tenant shall fail to effect (or
cause to be effected) such insurance as herein required, to pay (or cause to be
paid) the premiums therefor or to deliver (or cause to be delivered) such
policies or certificates to Landlord or any Facility Mortgagee at the times
required, Landlord shall have the right, upon Notice to Tenant, but not the
obligation, to acquire such insurance and pay the premiums therefor, which
amounts shall be payable to Landlord, upon demand, as Additional Charges,
together with interest accrued thereon at the Overdue Rate from the date such
payment is made until (but excluding) the date repaid.


9.4          No
Separate Insurance; Self-Insurance.  Tenant shall not take (or permit any Person to
take) out separate insurance, concurrent in form or contributing in the event
of loss with that required by this Article 9, or increase the amount of
any existing insurance by securing an additional policy or additional policies,
unless all parties having an insurable interest in the subject matter of such
insurance, including Landlord and all Facility Mortgagees, are included therein
as additional insureds and the loss is payable under such insurance in the same
manner as losses are payable under this Agreement.  In the event Tenant shall take out any such
separate insurance or increase any of the amounts of the then existing
insurance, Tenant shall give Landlord prompt Notice thereof.  Tenant shall not self-insure (or permit any
Person to self-insure).


9.5          Indemnification
of Landlord.  Notwithstanding the existence of any insurance
provided for herein and without regard to the policy limits of any such
insurance, Tenant shall protect, indemnify and hold harmless Landlord for, from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and reasonable expenses (including, without limitation,
reasonable attorneys’ fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of the following,
except to the extent caused by Landlord’s gross negligence or willful misconduct:  (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about any Property or
portion thereof or adjoining sidewalks or rights of way, (b) any past, present
or future use, misuse, non-use, condition, management, maintenance or repair by
Tenant, any Manager or anyone claiming under any of them or Tenant’s Personal
Property or any litigation, proceeding or claim by governmental entities or
other third parties to which Landlord is made a party or participant relating
to the any Property or portion thereof or 



 36
 









Tenant’s Personal Property or such use, misuse, non-use, condition,
management, maintenance, or repair thereof including, failure to perform
obligations (other than Condemnation proceedings) to which Landlord is made a
party, (c) any Impositions that are the obligations of Tenant to pay pursuant
to the applicable provisions of this Agreement, and (d) any failure on the part
of Tenant or anyone claiming under Tenant to perform or comply with any of the
terms of this Agreement.  Tenant, at its
expense, shall contest, resist and defend any such claim, action or proceeding
asserted or instituted against Landlord (and shall not be responsible for any
duplicative attorneys’ fees incurred by Landlord) or may compromise or
otherwise dispose of the same, with Landlord’s prior written consent (which
consent may not be unreasonably withheld, delayed or conditioned).  The obligations of Tenant under this Section
9.5 are in addition to the obligations set forth in Section 4.4 and
shall survive the termination of this Agreement.


ARTICLE
10


CASUALTY


10.1        Insurance
Proceeds.  Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to any Property,
or any portion thereof, and insured under any policy of insurance required by Article
9 (other than the proceeds of any business interruption insurance) shall be
paid directly to Landlord (subject to the provisions of Section 10.2)
and all loss adjustments with respect to losses payable to Landlord shall
require the prior written consent of Landlord, which consent shall not be
unreasonably withheld, delayed or conditioned; provided, however,
that, so long as no Event of Default shall have occurred and be continuing, all
such proceeds less than or equal to Two Hundred Fifty Thousand Dollars
($250,000) shall be paid directly to Tenant and such losses may be adjusted
without Landlord’s consent.  If Tenant is
required to reconstruct or repair any Property as provided herein, such
proceeds shall be paid out by Landlord from time to time for the reasonable
costs of reconstruction or repair of such Property necessitated by such damage
or destruction, subject to and in accordance with the provisions of Section
10.2.4.  Provided no Default or Event
of Default has occurred and is continuing, any excess proceeds of insurance
remaining after the completion of the restoration shall be paid to Tenant.  In the event that the provisions of Section
10.2.1 are applicable, the insurance proceeds shall be retained by the
party entitled thereto pursuant to Section 10.2.1.



 37
 









10.2        Damage
or Destruction.


10.2.1         Damage
or Destruction of Leased Property.  If, during the Term, any Property shall be
totally or partially destroyed and the Facility located thereon is thereby
rendered Unsuitable for Its Permitted Use, either Landlord or Tenant may, by
the giving of Notice thereof to the other, terminate this Agreement with
respect to such affected Property, whereupon, this Agreement shall terminate
with respect to such affected Property and Landlord shall be entitled to retain
the insurance proceeds payable on account of such damage.  In such event, Tenant shall pay to Landlord
the amount of any deductible under the insurance policies covering such
Facility, the amount of any uninsured loss and any difference between the
replacement cost of the affected Property and the casualty insurance proceeds
therefor.


10.2.2         Partial
Damage or Destruction.  If, during the Term, any Property shall be
totally or partially destroyed but the Facility is not rendered Unsuitable for
Its Permitted Use, Tenant shall, subject to Section 10.2.3, promptly
restore such Facility as provided in Section 10.2.4.


10.2.3         Insufficient
Insurance Proceeds.  If the cost of the repair or restoration of
the applicable Facility exceeds the amount of insurance proceeds received by
Landlord and Tenant pursuant to Section 9.1, Tenant shall give Landlord
Notice thereof which notice shall set forth in reasonable detail the nature of
such deficiency and whether Tenant shall pay and assume the amount of such
deficiency (Tenant having no obligation to do so, except that, if Tenant shall
elect to make such funds available, the same shall become an irrevocable
obligation of Tenant pursuant to this Agreement).  In the event Tenant shall elect not to pay
and assume the amount of such deficiency, Landlord shall have the right (but
not the obligation), exercisable at Landlord’s sole election by Notice to
Tenant, given within sixty (60) days after Tenant’s notice of the deficiency,
to elect to make available for application to the cost of repair or restoration
the amount of such deficiency; provided, however, in such event,
upon any disbursement by Landlord thereof, the Minimum Rent shall be adjusted
as provided in Section 3.1.1(c). 
In the event that neither Landlord nor Tenant shall elect to make such
deficiency available for restoration, either Landlord or Tenant may terminate
this Agreement with respect to the affected Property by Notice to the other,
whereupon, this Agreement shall so terminate and insurance proceeds shall be
distributed as provided in Section 10.2.1.  It is expressly understood and agreed,
however, that, notwithstanding anything in this Agreement to the contrary, 



 38
 









Tenant shall be strictly liable and solely responsible for the amount
of any deductible and shall, upon any insurable loss, pay over the amount of
such deductible to Landlord at the time and in the manner herein provided for
payment of the applicable proceeds to Landlord.


10.2.4         Disbursement
of Proceeds.  In the event Tenant is required to restore any
Property pursuant to Section 10.2 and this Agreement is not terminated
as to such Property pursuant to this Article 10, Tenant shall commence
(or cause to be commenced) promptly and continue diligently to perform (or
cause to be performed) the repair and restoration of such Property (hereinafter
called the “Work”), so as to restore (or cause to be restored) the
applicable Property in material compliance with all Legal Requirements and so
that such Property shall be, to the extent practicable, substantially
equivalent in value and general utility to its general utility and value
immediately prior to such damage or destruction.  Subject to the terms hereof, Landlord shall
advance the insurance proceeds and any additional amounts payable by Landlord
pursuant to Section 10.2.3 or otherwise deposited with Landlord to
Tenant regularly during the repair and restoration period so as to permit
payment for the cost of any such restoration and repair.  Any such advances shall be made not more than
monthly within ten (10) Business Days after Tenant submits to Landlord a
written requisition and substantiation therefor on AIA Forms G702 and G703 (or
on such other form or forms as may be reasonably acceptable to Landlord).  Landlord may, at its option, condition
advancement of such insurance proceeds and other amounts on (i) the absence of
any Event of Default, (ii) its approval of plans and specifications of an
architect satisfactory to Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned), (iii) general contractors’ estimates, (iv)
architect’s certificates, (v) conditional lien waivers of general contractors,
if available, (vi) evidence of approval by all governmental authorities and
other regulatory bodies whose approval is required, (vii), if Tenant has
elected to advance deficiency funds pursuant to Section 10.2.3, Tenant
depositing the amount thereof with Landlord and (viii) such other certificates
as Landlord may, from time to time, reasonably require.


Landlord’s obligation to disburse insurance proceeds under this Article
10 shall be subject to the release of such proceeds by any Facility
Mortgagee to Landlord.


Tenant’s obligation to restore the applicable Property pursuant to this
Article 10 shall be subject to the release of available insurance
proceeds by the applicable Facility 



 39
 









Mortgagee to Landlord or directly to Tenant and, in
the event such proceeds are insufficient, Landlord electing to make such
deficiency available therefor (and disbursement of such deficiency).


10.3        Damage
Near End of Term.  Notwithstanding any provisions of Section
10.1 or 10.2 to the contrary, if damage to or destruction of any Property
occurs during the last twelve (12) months of the Term and if such damage or
destruction cannot reasonably be expected to be fully repaired and restored
prior to the date that is six (6) months prior to the end of the Term, the
provisions of Section 10.2.1 shall apply as if such Property had
been totally or partially destroyed and the Facility thereon rendered
Unsuitable for its Permitted Use.


10.4        Tenant’s
Property.  All
insurance proceeds payable by reason of any loss of or damage to any of Tenant’s
Personal Property shall be paid to Tenant and, to the extent necessary to repair
or replace Tenant’s Personal Property in accordance with Section 10.5,
Tenant shall hold such proceeds in trust to pay the cost of repairing or
replacing damaged Tenant’s Personal Property.


10.5        Restoration
of Tenant’s Property.  If Tenant is required to restore any Property
as hereinabove provided, Tenant shall either (a) restore all alterations and
improvements made by Tenant and Tenant’s Personal Property, or (b) replace such
alterations and improvements and Tenant’s Personal Property with improvements
or items of the same or better quality and utility in the operation of such
Property.


10.6        No
Abatement of Rent.  This Agreement shall remain in full force and
effect and Tenant’s obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall remain unabated
during the Term notwithstanding any damage involving the Leased Property, or
any portion thereof (provided that Landlord shall credit against such payments
any amounts paid to Landlord as a consequence of such damage under any business
interruption insurance obtained by Tenant hereunder).  The provisions of this Article 10
shall be considered an express agreement governing any cause of damage or
destruction to the Leased Property, or any portion thereof, and, to the maximum
extent permitted by law, no local or State statute, laws, rules, regulation or
ordinance in effect during the Term which provide for such a contingency shall
have any application in such case.



 40
 









 


10.7        Waiver.
 Tenant hereby
waives any statutory rights of termination which may arise by reason of any
damage or destruction of the Leased Property, or any portion thereof.


ARTICLE
11


CONDEMNATION


11.1        Total
Condemnation, Etc. 
If either (i) the whole of any Property shall be taken by Condemnation
or (ii) a Condemnation of less than the whole of any Property renders any
Property Unsuitable for Its Permitted Use, this Agreement shall terminate with
respect to such Property, Tenant and Landlord shall seek the Award for their
interests in the applicable Property as provided in Section 11.5.


11.2        Partial
Condemnation.  In the event of a Condemnation of less than
the whole of any Property such that such Property is still suitable for its
Permitted Use, Tenant shall, to the extent of the Award and any additional
amounts disbursed by Landlord as hereinafter provided, commence (or cause to be
commenced) promptly and continue diligently to restore (or cause to be
restored) the untaken portion of the applicable Leased Improvements so that
such Leased Improvements shall constitute a complete architectural unit of the
same general character and condition (as nearly as may be possible under the
circumstances) as such Leased Improvements existing immediately prior to such
Condemnation, in material compliance with all Legal Requirements, subject to
the provisions of this Section 11.2.  If
the cost of the repair or restoration of the affected Property exceeds the
amount of the Award, Tenant shall give Landlord Notice thereof which notice
shall set forth in reasonable detail the nature of such deficiency and whether
Tenant shall pay and assume the amount of such deficiency (Tenant having no
obligation to do so, except that if Tenant shall elect to make such funds
available, the same shall become an irrevocable obligation of Tenant pursuant
to this Agreement).  In the event Tenant
shall elect not to pay and assume the amount of such deficiency, Landlord shall
have the right (but not the obligation), exercisable at Landlord’s sole
election by Notice to Tenant given within sixty (60) days after Tenant’s Notice
of the deficiency, to elect to make available for application to the cost of
repair or restoration the amount of such deficiency; provided, however, in such
event, upon any disbursement by Landlord thereof, the Minimum Rent shall be
adjusted as provided in Section 3.1.1(c). 
In the event that neither Landlord nor Tenant shall elect to make such
deficiency available for restoration, either Landlord or Tenant may terminate
this 



 41















Agreement with respect to the affected Property and the entire Award
shall be allocated as set forth in Section 11.5.


Subject to the terms hereof, Landlord shall contribute to the cost of
restoration that part of the Award necessary to complete such repair or
restoration, together with severance and other damages awarded for the taken
Leased Improvements and any deficiency Landlord has agreed to disburse, to
Tenant regularly during the restoration period so as to permit payment for the
cost of such repair or restoration. 
Landlord may, at its option, condition advancement of such Award and
other amounts on (a) the absence of any Event of Default, (b) its approval of
plans and specifications of an architect satisfactory to Landlord (which
approval shall not be unreasonably withheld, delayed or conditioned), (c)
general contractors’ estimates, (iv) architect’s certificates, (d) conditional
lien waivers of general contractors, if available, (e) evidence of approval by
all governmental authorities and other regulatory bodies whose approval is
required, (f), if Tenant has elected to advance deficiency funds pursuant to
the preceding paragraph, Tenant depositing the amount thereof with Landlord and
(g) such other certificates as Landlord may, from time to time, reasonably
require.  Landlord’s obligation under
this Section 11.2 to disburse the Award and such other amounts shall be
subject to (x) the collection thereof by Landlord and (y) the satisfaction of
any applicable requirements of any Facility Mortgage, and the release of such
Award by the applicable Facility Mortgagee. 
Tenant’s obligation to restore the Leased Property shall be subject to
the release of the Award by the applicable Facility Mortgagee to Landlord.


11.3        Abatement
of Rent.  Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant’s
obligation to make all payments of Rent and to pay all other charges as and
when required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property, or any portion
thereof.  The provisions of this Article
11 shall be considered an express agreement governing any Condemnation
involving the Leased Property and, to the maximum extent permitted by law, no
local or State statute, law, rule, regulation or ordinance in effect during the
Term which provides for such a contingency shall have any application in such
case.


11.4        Temporary
Condemnation.  In
the event of any temporary Condemnation of any Property or Tenant’s interest
therein, this Agreement shall continue in full force and effect and Tenant
shall continue to pay (or cause to be paid), in the manner and on the terms
herein specified, the full amount of the Rent. 




 42
 









Tenant shall continue to perform and observe (or cause to be performed
and observed) all of the other terms and conditions of this Agreement on the
part of the Tenant to be performed and observed.  Provided no Event of Default has occurred and
is continuing, the entire amount of any Award made for such temporary
Condemnation allocable to the Term, whether paid by way of damages, rent or
otherwise, shall be paid to Tenant. 
Tenant shall, promptly upon the termination of any such period of
temporary Condemnation, at its sole cost and expense, restore the affected
Property to the condition that existed immediately prior to such Condemnation,
in material compliance with all applicable Legal Requirements, unless such
period of temporary Condemnation shall extend beyond the expiration of the Term,
in which event Tenant shall not be required to make such restoration.


11.5        Allocation
of Award.  Except as provided in Section 11.4 and
the second sentence of this Section 11.5, the total Award shall be
solely the property of and payable to Landlord. 
Any portion of the Award made for the taking of Tenant’s leasehold
interest in the Leased Property, loss of business during the remainder of the
Term, the taking of Tenant’s Personal Property, the taking of Capital Additions
paid for by Tenant and Tenant’s removal and relocation expenses shall be the
sole property of and payable to Tenant (subject to the provisions of Section
11.2).  In any Condemnation
proceedings, Landlord and Tenant shall each seek its own Award in conformity
herewith, at its own expense.


ARTICLE 12


DEFAULTS AND REMEDIES


12.1        Events
of Default.  The occurrence of any one or more of the
following events shall constitute an “Event of Default” hereunder:


(a)           should Tenant fail to make any
payment of the Rent or any other sum payable hereunder when due; or


(b)           should Tenant fail to maintain the
insurance coverages required under Article 9; or


(c)           should Tenant default in the due
observance or performance of any of the terms, covenants or agreements
contained herein to be performed or observed by it (other than as specified in
clauses (a) and (b) above) and should such default continue for a period of
thirty (30) days after Notice thereof from Landlord to Tenant; provided,




 43
 









however,
that if such default is susceptible of cure but such cure cannot be
accomplished with due diligence within such period of time and if, in addition,
Tenant commences to cure or cause to be cured such default within thirty (30)
days after Notice thereof from Landlord and thereafter prosecutes the curing of
such default with all due diligence, such period of time shall be extended to
such period of time (not to exceed an additional ninety (90) days in the
aggregate) as may be necessary to cure such default with all due diligence; or


(d)           should any obligation of Tenant in respect
of any Indebtedness for money borrowed or for any material property or
services, or any guaranty relating thereto, be declared to be or become due and
payable prior to the stated maturity thereof, or should there occur and be
continuing with respect to any such Indebtedness any event of default under any
instrument or agreement evidencing or securing the same, the effect of which is
to permit the holder or holders of such instrument or agreement or a trustee,
agent or other representative on behalf of such holder or holders, to cause any
such obligations to become due prior to its stated maturity; or


(e)           should an event of default by Tenant,
any Guarantor or any Affiliated Person as to Tenant or any Guarantor occur and
be continuing beyond the expiration of any applicable cure period under any of
the Incidental Documents; or


(f)            should Tenant or any Guarantor
generally not be paying its debts as they become due or should Tenant or any
Guarantor make a general assignment for the benefit of creditors; or


(g)           should any petition be filed by or
against Tenant or any Guarantor under the Federal bankruptcy laws, or should
any other proceeding be instituted by or against Tenant or any Guarantor
seeking to adjudicate Tenant or any Guarantor a bankrupt or insolvent, or
seeking liquidation, reorganization, arrangement, adjustment or composition of
Tenant’s debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other similar
official for Tenant or any Guarantor or for any substantial part of the
property of Tenant or any Guarantor and such proceeding is not dismissed within
one hundred eighty (180) days after institution thereof; or



 44
 









(h)           should Tenant or any Guarantor cause
or institute any proceeding for its dissolution or termination; or


(i)            should the estate or interest of
Tenant in the Leased Property or any part thereof be levied upon or attached in
any proceeding and the same shall not be vacated or discharged within the later
of (x) ninety (90) days after commencement thereof, unless the amount in
dispute is less than $250,000, in which case Tenant shall give notice to
Landlord of the dispute but Tenant may defend in any suitable way, and (y) two
hundred seventy (270) days after receipt by Tenant of Notice thereof from
Landlord (unless Tenant shall be contesting such lien or attachment in good
faith in accordance with Article 8); or


(j)            should there occur any direct or
indirect Change in Control of either or both of the Entities comprising Tenant
or any Guarantor, except as otherwise permitted by Article 16; or


(k)           should a final unappealable
determination be made by the applicable Government Agency that Tenant shall
have failed to comply with applicable Medicare and/or Medicaid regulations in
the operation of any Facility, as a result of which failure Tenant is declared
ineligible to receive reimbursements under the Medicare and/or Medicaid
programs for such Facility;


then, and in any such event, Landlord, in addition to
all other remedies available to it, may terminate this Agreement with respect
to any or all of the Leased Property by giving Notice thereof to Tenant and
upon the expiration of the time, if any, fixed in such Notice, this Agreement
shall terminate with respect to all or the designated portion of the Leased
Property and all rights of Tenant under this Agreement with respect thereto
shall cease.  Landlord shall have and may
exercise all rights and remedies available at law and in equity to Landlord as
a result of Tenant’s breach of this Agreement.


Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Leased Property, or any
portion thereof, and take possession of any and all of Tenant’s Personal
Property, if any, and the Records, without liability for trespass or conversion
(Tenant hereby waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or any portion of
Tenant’s 



 45
 









Personal Property, if any, unless otherwise prohibited
by law.  Unless otherwise provided by law
and without intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable Notice shall be met if such Notice is
given at least ten (10) days before the date of sale.  The proceeds from any such disposition, less
all expenses incurred in connection with the taking of possession, holding and
selling of such property (including, reasonable attorneys’ fees) shall be
applied as a credit against the indebtedness which is secured by the security
interest granted in Section 7.2. 
Any surplus shall be paid to Tenant or as otherwise required by law and
Tenant shall pay any deficiency to Landlord, as Additional Charges, upon
demand.


12.2        Remedies.
 None of (a) the
termination of this Agreement pursuant to Section 12.1, (b) the
repossession of the Leased Property, or any portion thereof, (c) the failure of
Landlord to relet the Leased Property, or any portion thereof, nor (d) the
reletting of all or any of portion of the Leased Property, shall relieve Tenant
of its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. 
In the event of any such termination, Tenant shall forthwith pay to
Landlord all Rent due and payable with respect to the Leased Property, or
terminated portion thereof, through and including the date of such
termination.  Thereafter, Tenant, until
the end of what would have been the Term of this Agreement in the absence of
such termination, and whether or not the Leased Property, or any portion
thereof, shall have been relet, shall be liable to Landlord for, and shall pay
to Landlord, as current damages, the Rent and other charges which would be
payable hereunder for the remainder of the Term had such termination not occurred,
less the net proceeds, if any, of any reletting of the Leased Property, or any
portion thereof, after deducting all reasonable expenses in connection with
such reletting, including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys’ fees, advertising, expenses
of employees, alteration costs and expenses of preparation for such
reletting.  Tenant shall pay such current
damages to Landlord monthly on the days on which the Minimum Rent would have been
payable hereunder if this Agreement had not been so terminated with respect to
such of the Leased Property.


At any time after such termination, whether or not Landlord shall have
collected any such current damages, as liquidated final damages beyond the date
of such termination, at Landlord’s election, Tenant shall pay to Landlord an
amount equal to the present value (as reasonably determined by Landlord) of the




 46
 









excess, if any, of the Rent and other charges which
would be payable hereunder from the date of such termination (assuming that,
for the purposes of this paragraph, annual payments by Tenant on account of
Impositions would be the same as payments required for the immediately
preceding twelve calendar months, or if less than twelve calendar months have
expired since the Commencement Date, the payments required for such lesser
period projected to an annual amount) for what would be the then unexpired term
of this Agreement if the same remained in effect, over the fair market rental
for the same period.  Nothing contained
in this Agreement shall, however, limit or prejudice the right of Landlord to
prove and obtain in proceedings for bankruptcy or insolvency an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, the damages are to be proved, whether
or not the amount be greater than, equal to, or less than the amount of the
loss or damages referred to above.


In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may, (a) relet the
Leased Property or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may at Landlord’s option, be equal to,
less than or exceed the period which would otherwise have constituted the
balance of the Term and may grant concessions or free rent to the extent that
Landlord considers advisable and necessary to relet the same, and (b) may make
such reasonable alterations, repairs and decorations in the Leased Property, or
any portion thereof, as Landlord, in its sole and absolute discretion,
considers advisable and necessary for the purpose of reletting the Leased
Property; and the making of such alterations, repairs and decorations shall not
operate or be construed to release Tenant from liability hereunder as
aforesaid.  Landlord shall in no event be
liable in any way whatsoever for any failure to relet all or any portion of the
Leased Property, or, in the event that the Leased Property is relet, for failure
to collect the rent under such reletting. 
To the maximum extent permitted by law, Tenant hereby expressly waives
any and all rights of redemption granted under any present or future laws in
the event of Tenant being evicted or dispossessed, or in the event of Landlord
obtaining possession of the Leased Property, by reason of the occurrence and
continuation of an Event of Default hereunder.


12.3        Tenant’s
Waiver.  IF
THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION 12.1 OR 12.2, TENANT
WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN THE
EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN THIS 



 47
 









ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR
HEREAFTER IN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.


12.4        Application
of Funds.  Any payments received by Landlord under any of
the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to
the existence of any Event of Default) shall be applied to Tenant’s current and
past due obligations under this Agreement in such order as Landlord may
determine or as may be prescribed by the laws of the State.  Any balance shall be paid to Tenant.


12.5        Landlord’s
Right to Cure Tenant’s Default.  If an Event of Default shall have occurred and
be continuing, Landlord, after written notice to Tenant (provided that no such
notice shall be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or
releasing any obligation of Tenant and without waiving or releasing any Event
of Default, may (but shall not be obligated to), at any time thereafter, make
such payment or perform such act for the account and at the expense of Tenant,
and may, to the extent permitted by law, enter upon the Leased Property, or any
portion thereof, for such purpose and take all such action thereon as, in
Landlord’s opinion, may be necessary or appropriate therefor, including the
management of any Facility by Landlord or its designee, and Tenant hereby
irrevocably appoints, in the event of such election by Landlord, Landlord or
its designee as manager of any such Facility and its attorney in fact for such
purpose, irrevocably and coupled with an interest in the name and stead of
Tenant.  All costs and expenses
(including, without limitation, reasonable attorneys’ fees) incurred by
Landlord in connection therewith, together with interest thereon (to the extent
permitted by law) at the Overdue Rate from the date such sums are paid by
Landlord until repaid, shall be paid by Tenant to Landlord, on demand.


12.6        Trade Names.  If this Agreement is terminated with respect
to any Property for any reason, Landlord shall, upon the request of Tenant,
cause the name of the business conducted upon such Property to be changed to a
name other than a Facility Trade Name or any approximation or abbreviation
thereof and sufficiently dissimilar to such name as to be unlikely to cause
confusion with such name; provided, however, that Tenant shall
not thereafter use a Facility Trade Name in the same market in which such
Property is located in connection with any business that competes with such
Property or the Facility located thereon.



 48
 









 


ARTICLE
13


HOLDING
OVER


Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to two (2) times the Minimum Rent and other charges herein provided
(prorated on a daily basis).  Tenant
shall also pay to Landlord all damages (direct or indirect) sustained by reason
of any such holding over.  Otherwise,
such holding over shall be on the terms and conditions set forth in this
Agreement, to the extent applicable. 
Nothing contained herein shall constitute the consent, express or
implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Agreement.


ARTICLE
14


LANDLORD
DEFAULT


If Landlord shall default in the performance or observance of any of
its covenants or obligations set forth in this Agreement or any obligation of
Landlord, if any, under any agreement affecting the Leased Property, the
performance of which is not Tenant’s obligation pursuant to this Agreement, and
any such default shall continue for a period of thirty (30) days after Notice
thereof from Tenant to Landlord and any applicable Facility Mortgagee, or such
additional period as may be reasonably required to correct the same, Tenant may
declare the occurrence of a “Landlord Default” by a second Notice to
Landlord and to such Facility Mortgagee. 
Thereafter, Tenant may forthwith cure the same and, subject to the
provisions of the following paragraph, invoice Landlord for costs and expenses
(including reasonable attorneys’ fees and court costs) incurred by Tenant in
curing the same, together with interest thereon (to the extent permitted by
law) from the date Landlord receives Tenant’s invoice until paid, at the
Overdue Rate.  Tenant shall have no right
to terminate this Agreement for any default by Landlord hereunder and no right,
for any such default, to offset or counterclaim against any Rent or other
charges due hereunder.


If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period,
shall give Notice thereof to Tenant, setting forth, in reasonable detail, the
basis therefor, no Landlord Default shall be deemed to have occurred and
Landlord shall have no obligation with respect thereto until final adverse
determination thereof.  If Tenant and
Landlord shall fail, in good faith, to resolve any such dispute within ten (10)




 49
 









days after Landlord’s Notice of dispute, either may
submit the matter for resolution in accordance with Article 22.


ARTICLE
15


PURCHASE
RIGHTS


Landlord shall have the option to purchase Tenant’s Personal Property,
at the expiration or sooner termination of this Agreement, for an amount equal
to the then fair market value thereof (current replacement cost as determined
by agreement of the parties or, in the absence of such agreement, appraisal),
subject to, and with appropriate price adjustments for, all equipment leases,
conditional sale contracts, UCC-1 financing statements and other
encumbrances to which such Personal Property is subject.  Upon the expiration or sooner termination of
this Agreement, Tenant shall use its reasonable efforts to transfer and assign,
or cause to be transferred and assigned, to Landlord or its designee, or assist
Landlord or its designee in obtaining, any contracts, licenses, and
certificates required for the then operation of the Leased Property.  Notwithstanding the foregoing, Tenant
expressly acknowledges and agrees that nothing contained in this Article 15
shall diminish, impair or otherwise modify Landlord’s rights under the Security
Agreement and that any amounts paid by Landlord in order to purchase Tenant’s
Personal Property in accordance with this Article 15 shall be applied first to
Tenant’s current and past due obligations under this Agreement in such order as
Landlord may reasonably determine or as may be prescribed by the laws of the
State and any balance shall be paid to Tenant.


ARTICLE
16


SUBLETTING
AND ASSIGNMENT


16.1        Subletting
and Assignment.  Except as provided in Section 16.3,
Tenant shall not, without Landlord’s prior written consent (which consent may
be given or withheld in Landlord’s sole and absolute discretion), assign,
mortgage, pledge, hypothecate, encumber or otherwise transfer this Agreement or
sublease or permit the sublease (which term shall be deemed to include the
granting of concessions, licenses and the like), of the Leased Property, or any
portion thereof, or suffer or permit this Agreement or the leasehold estate
created hereby or any other rights arising under this Agreement to be assigned,
transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in
part, whether voluntarily, involuntarily or by operation of law, or permit the
use or operation of the Leased Property, or any portion thereof, by anyone
other than Tenant, 



 50
 









any Manager approved by Landlord pursuant to the applicable provisions
of this Agreement or residents and patients of Tenant, or the Leased Property,
or any portion thereof, to be offered or advertised for assignment or
subletting.


For purposes of this Section 16.1, an assignment of this
Agreement shall be deemed to include, without limitation, any direct or
indirect Change in Control of either or both of the Entities comprising Tenant.


If this Agreement is assigned or if the Leased Property, or any
portion, thereof is sublet (or occupied by anybody other than Tenant or any
Manager, their respective employees or residents or patients of Tenant),
Landlord may collect the rents from such assignee, subtenant or occupant, as
the case may be, and apply the net amount collected to the Rent herein
reserved, but no such collection shall be deemed a waiver of the provisions set
forth in the first paragraph of this Section 16.1, the acceptance by
Landlord of such assignee, subtenant or occupant, as the case may be, as a tenant,
or a release of Tenant from the future performance by Tenant of its covenants,
agreements or obligations contained in this Agreement.


Any assignment or transfer of Tenant’s interest under this Agreement
(including any sublease which is permitted pursuant to the terms of Section
16.3 below) shall be subject to such assignee’s or transferee’s delivery to
Landlord of (i) a Guaranty, which Guaranty shall be in form and substance
satisfactory to Landlord in its sole discretion and which Guaranty shall constitute
an Incidental Document hereunder; (ii) a pledge of the stock, partnership,
membership or other ownership interests of such assignee or other transferee to
secure Tenant’s obligations under this Agreement and the Incidental Documents,
which pledge shall be in form and substance satisfactory to Landlord in its
sole discretion and which pledge shall constitute an Incidental Document
hereunder; (iii) a security agreement granting Landlord a security interest in
all of such assignee’s or transferee’s right, title and interest in and to any
personal property, intangibles and fixtures (other than accounts receivable)
with respect to any Property which is subject to any such assignment or
transfer to secure Tenant’s obligations under this Agreement and the Incidental
Documents, which security agreement shall be in form and substance satisfactory
to Landlord in its sole discretion and which security agreement shall
constitute an Incidental Document hereunder; and (iv) in the case of a
sublease, an assignment which assigns all of such subtenant’s right, title and
interest in such sublease to Landlord to secure Tenant’s obligations under this
Agreement and the Incidental Documents, 



 51
 









which assignment shall be in form and substance
satisfactory to Landlord in its sole discretion and which assignment shall
constitute an Incidental Document hereunder.


No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder (unless Landlord and Tenant expressly
otherwise agree that Tenant shall be released from all obligations hereunder),
and no consent to any subletting or assignment in a particular instance shall
be deemed to be a waiver of the prohibition set forth in this Section 16.1.  No assignment, subletting or occupancy shall
affect any Permitted Use.  Any
subletting, assignment or other transfer of Tenant’s interest under this
Agreement in contravention of this Section 16.1 shall be voidable at
Landlord’s option.


16.2        Required
Sublease Provisions.  Any sublease of all or any portion of the
Leased Property entered into on or after the date hereof shall provide (a) that
it is subject and subordinate to this Agreement and to the matters to which
this Agreement is or shall be subject or subordinate; (b) that in the event of
termination of this Agreement or reentry or dispossession of Tenant by Landlord
under this Agreement, Landlord may, at its option, terminate such sublease or
take over all of the right, title and interest of Tenant, as sublessor under
such sublease, and such subtenant shall, at Landlord’s option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except
that neither Landlord nor any Facility Mortgagee, as holder of a mortgage or as
Landlord under this Agreement, if such mortgagee succeeds to that position,
shall (i) be liable for any act or omission of Tenant under such sublease, (ii)
be subject to any credit, counterclaim, offset or defense which theretofore
accrued to such subtenant against Tenant, (iii) be bound by any previous
modification of such sublease not consented to in writing by Landlord or by any
previous prepayment of more than one (1) month’s rent, (iv) be bound by any
covenant of Tenant to undertake or complete any construction of the applicable
Property, or any portion thereof, (v) be required to account for any security
deposit of the subtenant other than any security deposit actually delivered to
Landlord by Tenant, (vi) be bound by any obligation to make any payment to such
subtenant or grant any credits, except for services, repairs, maintenance and
restoration provided for under the sublease that are performed after the date
of such attornment, (vii) be responsible for any monies owing by Tenant to the
credit of such subtenant unless actually delivered to Landlord by Tenant, or
(viii) be required to remove any Person occupying any portion of the Leased
Property; and (c), in the 



 52
 









event that such subtenant receives a written Notice from Landlord or
any Facility Mortgagee stating that an Event of Default has occurred and is continuing,
such subtenant shall thereafter be obligated to pay all rentals accruing under
such sublease directly to the party giving such Notice or as such party may
direct.  All rentals received from such
subtenant by Landlord or the Facility Mortgagee, as the case may be, shall be
credited against the amounts owing by Tenant under this Agreement and such
sublease shall provide that the subtenant thereunder shall, at the request of
Landlord, execute a suitable instrument in confirmation of such agreement to
attorn.  An original counterpart of each
such sublease and assignment and assumption, duly executed by Tenant and such
subtenant or assignee, as the case may be, in form and substance reasonably
satisfactory to Landlord, shall be delivered promptly to Landlord and (a) in
the case of an assignment, the assignee shall assume in writing and agree to
keep and perform all of the terms of this Agreement on the part of Tenant to be
kept and performed and shall be, and become, jointly and severally liable with Tenant
for the performance thereof and (b) in case of either an assignment or
subletting, Tenant shall remain primarily liable, as principal rather than as
surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Tenant
hereunder.


                The provisions of this Section 16.2
shall not be deemed a waiver of the provisions set forth in the first paragraph
of Section 16.1.


                16.3        Permitted Sublease.  Notwithstanding the foregoing, including,
without limitation, Section 16.2, but subject to the provisions of Section
16.4 and any other express conditions or limitations set forth herein,
Tenant may, in each instance after Notice to Landlord, (a) sublease space at
any Property for laundry, commissary or child care purposes or other
concessions in furtherance of the Permitted Use, so long as such subleases will
not reduce the number of units at any Facility, will not violate or affect any
Legal Requirement or Insurance Requirement, and Tenant shall provide such
additional insurance coverage applicable to the activities to be conducted in
such subleased space as Landlord and any Facility Mortgagee may reasonably
require, and (b) enter into one or more subleases with wholly owned
subsidiaries of Tenant with respect to the Leased Property, or any portion
thereof, provided Tenant gives Landlord Notice of the material terms and
conditions thereof, and provided  further that any and all such
sublease are transferred and assigned to Landlord as additional Security for 



 53
 









Tenant’s obligations hereunder. 
Landlord and Tenant acknowledge and agree that if Tenant enters into one
(1) or more subleases with wholly owned subsidiaries of Tenant with respect to
any Property, or any portion thereof, in accordance with the preceding clause
(b), Tenant may allocate the rent and other charges with respect to the
affected Property in any reasonable manner; provided, however,
that such allocation shall not affect Tenant’s (nor any Guarantor’s) liability
for the Rent and other obligations of Tenant under this Agreement; and, provided,
further, that Tenant shall give Landlord prompt written notice of any
allocation or reallocation of the rent and other charges with respect to the
affected Property and, in any event, Tenant shall give Landlord written notice
of the amount of such allocations at least ten (10) Business Days prior to the
date that Landlord or Senior Housing Properties Trust is required to file any
tax returns in any State where such affected Lease Property is located.


16.4        Sublease
Limitation.  Anything contained in this Agreement to the
contrary notwithstanding, Tenant shall not sublet the Leased Property, or any
portion thereof, on any basis such that the rental to be paid by any sublessee
thereunder would be based, in whole or in part, on the net income or profits
derived by the business activities of such sublessee, any other formula such
that any portion of such sublease rental would fail to qualify as “rents from
real property within the meaning of Section 856(d) of the Code, or any similar
or successor provision thereto or would otherwise disqualify Landlord for
treatment as a real estate investment trust.


ARTICLE 17


ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS


17.1        Estoppel
Certificates.  At any time and from time to time, but not
more than a reasonable number of times per year, upon not less than ten (10)
Business Days prior Notice by either party, the party receiving such Notice
shall furnish to the other an Officer’s Certificate certifying that this Agreement
is unmodified and in full force and effect (or that this Agreement is in full
force and effect as modified and setting forth the modifications), the date to
which the Rent has been paid, that no Default or an Event of Default has
occurred and is continuing or, if a Default or an Event of Default shall exist,
specifying in reasonable detail the nature thereof, and the steps being taken
to remedy the same, and such additional information as the requesting party may
reasonably request.  Any such certificate
furnished pursuant to this Section 17.1 may be relied upon by the
requesting party, its lenders and any prospective purchaser 



 54
 









or mortgagee of the Leased Property, or any portion thereof, or the
leasehold estate created hereby.


17.2        Financial
Statements.  Tenant shall furnish or cause Five Star to
furnish, as applicable, the following statements to Landlord:


(a)           within forty-five (45) days after
each of the first three fiscal quarters of any Fiscal Year, the most recent
Consolidated Financials, accompanied by the Financial Officer’s Certificate;


(b)           within ninety (90) days after the end
of each Fiscal Year, the most recent Consolidated Financials and financials of
Tenant for such year, certified by an independent certified public accountant
reasonably satisfactory to Landlord and accompanied by a Financial Officer’s
Certificate;


(c)           Intentionally Deleted;


(d)           at any time and from time to time
upon not less than twenty (20) days Notice from Landlord or such additional
period as may be reasonable under the circumstances, any Consolidated
Financials, Tenant financials or any other audited or unaudited financial
reporting information required to be filed by Landlord with any securities and
exchange commission, the SEC or any successor agency, or any other governmental
authority, or required pursuant to any order issued by any court, governmental
authority or arbitrator in any litigation to which Landlord is a party, for
purposes of compliance therewith;


(e)           promptly, after receipt or sending
thereof, copies of all notices given or received by Tenant under any Management
Agreement; and


(f)            promptly, upon Notice from Landlord,
such other information concerning the business, financial condition and affairs
of Tenant or any Guarantor as Landlord reasonably may request from time to
time.


Landlord may at any time, and from time to time, provide any Facility
Mortgagee with copies of any of the foregoing statements, subject to Landlord
obtaining the agreement of such Facility Mortgagee to maintain such statements
and the information therein as confidential.



 55
 









17.3        Reimbursement,
Licensure, Etc.  Tenant covenants and agrees to furnish to
Landlord, within thirty (30) days after receipt or modification thereof, copies
of:


(a)           all licenses authorizing Tenant or
any Manager to operate any Facility for its Primary Intended Use;


(b)           all Medicare and Medicaid
certifications, together with provider agreements and all material
correspondence relating thereto with respect to each Facility (excluding,
however, correspondence which may be subject to any attorney client privilege);


(c)           if required under Applicable Law with
respect to any Facility, a license for each individual employed as
administrator with respect to such Facility;


(d)           all reports of surveys, statements of
deficiencies, plans of correction, and all material correspondence relating
thereto, including, without limitation, all reports and material correspondence
concerning compliance with or enforcement of licensure, Medicare/Medicaid, and
accreditation requirements, including physical environment and Life Safety Code
survey reports (excluding, however, correspondence which may be subject to any
attorney client privilege); and


(e)           with reasonable promptness, such
other confirmation as to the licensure and Medicare and Medicaid participation
of Tenant as Landlord may reasonably request from time to time.


17.3.2     Monthly Reports.  Tenant shall prepare and furnish to Landlord
for each Property, within thirty (30) days after the end of each calendar month
during the term of this Agreement, a monthly report, such report to include (i)
a balance sheet and a current month and year to date income statement, showing
each item of actual and projected income and expense, reflecting the operating
results of the Facility located at such Property, in each case prepared in
accordance with GAAP, (ii) a statement of capital expenditures prepared on a
Facility by Facility basis and on a combined basis, (iii) occupancy
percentages, payor mix and average rate on a Facility by Facility basis and on
a combined basis, and (iv) such additional information as Landlord may from
time to time reasonably require.  Each
monthly report shall be accompanied by a Financial Officer’s Certificate.


 



 56















ARTICLE 18



LANDLORD’S RIGHT TO INSPECT


Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property, or any portion thereof, during usual business
hours upon not less than forty-eight (48) hours’ notice and to make such repairs
as Landlord is permitted or required to make pursuant to the terms of this
Agreement, provided that any inspection or repair by Landlord or its
representatives will not unreasonably interfere with Tenant’s use and operation
of the Leased Property and further provided that in the event of an emergency,
as determined by Landlord in its reasonable discretion, prior Notice shall not
be necessary.


ARTICLE
19



EASEMENTS


19.1        Grant
of Easements.  Provided no Event of Default has occurred and
is continuing, Landlord will join in granting and, if necessary, modifying or
abandoning such rights-of-way, easements and other interests as may be
reasonably requested by Tenant for ingress and egress, and electric, telephone,
gas, water, sewer and other utilities so long as:


(a)           the instrument creating, modifying or
abandoning any such easement, right-of-way or other interest is satisfactory to
and approved by Landlord (which approval shall not be unreasonably withheld,
delayed or conditioned);


(b)           Landlord receives an Officer’s
Certificate from Tenant stating (i) that such grant, modification or
abandonment is not detrimental to the proper conduct of business on such
Property, (ii) the consideration, if any, being paid for such grant,
modification or abandonment (which consideration shall be paid by Tenant),
(iii) that such grant, modification or abandonment does not impair the use or
value of such Property for the Permitted Use, and (iv) that, for as long as
this Agreement shall be in effect, Tenant will perform all obligations, if any,
of Landlord under any such instrument; and


(c)           Landlord receives evidence
satisfactory to Landlord that the Manager has granted its consent to such
grant, modification or abandonment in accordance with the 



 57
 









requirements
of such Manager’s Management Agreement or that such consent is not required.


19.2        Exercise
of Rights by Tenant.  So long as no Event of Default has occurred
and is continuing, Tenant shall have the right to exercise all rights of
Landlord under the Easement Agreements and, in connection therewith, Landlord
shall execute and promptly return to Tenant such documents as Tenant shall
reasonably request.  Tenant shall perform
all obligations of Landlord under the Easement Agreements.


19.3        Permitted
Encumbrances.  Any agreements entered into in accordance with
this Article 19 shall be deemed a Permitted Encumbrance.


ARTICLE
20


FACILITY
MORTGAGES


20.1        Landlord
May Grant Liens.  Without the consent of Tenant, Landlord may,
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title retention agreement (“Encumbrance”) upon
the Leased Property, or any portion thereof, or interest therein, whether to
secure any borrowing or other means of financing or refinancing.


20.2        Subordination
of Lease.  This Agreement and any and all rights of
Tenant hereunder are and shall be subject and subordinate to any ground or
master lease, and all renewals, extensions, modifications and replacements
thereof, and to all mortgages and deeds of trust, which may now or hereafter
affect the Leased Property, or any portion thereof, or any improvements thereon
and/or any of such leases, whether or not such mortgages or deeds of trust
shall also cover other lands and/or buildings and/or leases, to each and every
advance made or hereafter to be made under such mortgages and deeds of trust,
and to all renewals, modifications, replacements and extensions of such leases
and such mortgages and deeds of trust and all consolidations of such mortgages
and deeds of trust.  This section shall
be self-operative and no further instrument of subordination shall be
required.  In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any deed of trust or any of
their respective successors in interest may reasonably request to evidence such
subordination.  Any lease to which this
Agreement is, at the time referred to, subject and subordinate is herein called




 58
 









“Superior Lease” and the lessor of a Superior Lease or its
successor in interest at the time referred to is herein called “Superior
Landlord” and any mortgage or deed of trust to which this Agreement is, at
the time referred to, subject and subordinate is herein called “Superior
Mortgage” and the holder, trustee or beneficiary of a Superior Mortgage is
herein called “Superior Mortgagee”. 
Tenant shall have no obligations under any Superior Lease or Superior
Mortgage other than those expressly set forth in this Section 20.2.


If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Agreement (any such person, “Successor
Landlord”), whether through possession or foreclosure action or delivery of
a new lease or deed, or otherwise, at such Successor Landlord’s request, Tenant
shall attorn to and recognize the Successor Landlord as Tenant’s landlord under
this Agreement and Tenant shall promptly execute and deliver any instrument
that such Successor Landlord may reasonably request to evidence such attornment
(provided that such instrument does not alter the terms of this Agreement),
whereupon, this Agreement shall continue in full force and effect as a direct
lease between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Agreement, except that the
Successor Landlord (unless formerly the landlord under this Agreement or its
nominee or designee) shall not be (a) liable in any way to Tenant for any act
or omission, neglect or default on the part of any prior Landlord under this
Agreement, (b) responsible for any monies owing by or on deposit with any prior
Landlord to the credit of Tenant (except to the extent actually paid or
delivered to the Successor Landlord), (c) subject to any counterclaim or setoff
which theretofore accrued to Tenant against any prior Landlord, (d) bound by
any modification of this Agreement subsequent to such Superior Lease or
Mortgage, or by any previous prepayment of Rent for more than one (1) month in
advance of the date due hereunder, which was not approved in writing by the
Superior Landlord or the Superior Mortgagee thereto, (e) liable to Tenant
beyond the Successor Landlord’s interest in the Leased Property and the rents,
income, receipts, revenues, issues and profits issuing from the Leased
Property, (f) responsible for the performance of any work to be done by the
Landlord under this Agreement to render the Leased Property ready for occupancy
by Tenant (subject to Landlord’s obligations under Section 5.1.2(b) or
with respect to any insurance or Condemnation proceeds), or (g) required to
remove any Person occupying the Leased Property or any part thereof, except if
such person claims by, through or under the Successor Landlord.  



 59
 









Tenant agrees at any time and from time to time to execute a suitable
instrument in confirmation of Tenant’s agreement to attorn, as aforesaid and
Landlord agrees to provide Tenant with an instrument of nondisturbance and
attornment from each such Superior Mortgagee and Superior Landlord (other than
the lessors under any ground leases with respect to the Leased Property, or any
portion thereof) in form and substance reasonably satisfactory to Tenant.  Notwithstanding the foregoing, any Successor
Landlord shall be liable (a) to pay to Tenant any amounts owed under Section
5.1.2(b), and (b) to pay to Tenant any portions of insurance proceeds or
Awards received by Landlord or the Successor Landlord required to be paid to
Tenant pursuant to the terms of this Agreement, and, as a condition to any
mortgage, lien or lease in respect of the Leased Property, or any portion
thereof, and the subordination of this Agreement thereto, the mortgagee,
lienholder or lessor, as applicable, shall expressly agree, for the benefit of
Tenant, to make such payments, which agreement shall be embodied in an
instrument in form reasonably satisfactory to Tenant.


20.3        Notice
to Mortgagee and Superior Landlord.  Subsequent to the receipt by Tenant of Notice
from Landlord as to the identity of any Facility Mortgagee or Superior Landlord
under a lease with Landlord, as ground lessee, which includes the Leased
Property, or any portion thereof, as part of the demised premises and which
complies with Section  20.1 (which Notice shall be accompanied by
a copy of the applicable mortgage or lease), no Notice from Tenant to Landlord
as to a default by Landlord under this Agreement shall be effective with
respect to a Facility Mortgagee or Superior Landlord unless and until a copy of
the same is given to such Facility Mortgagee or Superior Landlord at the
address set forth in the above described Notice, and the curing of any of
Landlord’s defaults within the applicable notice and cure periods set forth in Article 14
by such Facility Mortgagee or Superior Landlord shall be treated as performance
by Landlord.


ARTICLE
21


ADDITIONAL
COVENANTS OF TENANT


21.1        Prompt
Payment of Indebtedness.  Tenant shall (a) pay or cause to be paid when
due all payments of principal of and premium and interest on Tenant’s
Indebtedness for money borrowed and shall not permit or suffer any such
Indebtedness to become or remain in default beyond any applicable grace or cure
period, (b) pay or cause to be paid when due all lawful claims for labor and
rents with respect to the Leased Property, (c) pay or cause to be paid when due
all trade payables and (d) pay or cause to 



 60
 









be paid when due all other of Tenant’s Indebtedness upon which it is or
becomes obligated, except, in each case, other than that referred to in clause
(a), to the extent payment is being contested in good faith by appropriate
proceedings in accordance with Article 8 and if Tenant shall have set
aside on its books adequate reserves with respect thereto in accordance with
GAAP, if appropriate, or unless and until foreclosure, distraint sale or other
similar proceedings shall have been commenced.


21.2        Conduct
of Business.  Tenant shall not engage in any business other
than the leasing and operation of the Leased Property (including any incidental
or ancillary business relating thereto) and shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect and in
good standing its corporate existence and its rights and licenses necessary to
conduct such business.


21.3        Maintenance
of Accounts and Records.  Tenant shall keep true records and books of
account of Tenant in which full, true and correct entries will be made of
dealings and transactions in relation to the business and affairs of Tenant in
accordance with GAAP.  Tenant shall apply
accounting principles in the preparation of the financial statements of Tenant
which, in the judgment of and the opinion of its independent public accountants,
are in accordance with GAAP, where applicable, except for changes approved by
such independent public accountants. 
Tenant shall provide to Landlord either in a footnote to the financial
statements delivered under Section 17.2 which relate to the period in
which such change occurs, or in separate schedules to such financial
statements, information sufficient to show the effect of any such changes on
such financial statements.


21.4        Notice
of Litigation, Etc.  Tenant
shall give prompt Notice to Landlord of any litigation or any administrative
proceeding to which it may hereafter become a party of which Tenant has notice
or actual knowledge which involves a potential liability equal to or greater
than Two Hundred Fifty Thousand Dollars ($250,000) or which may otherwise
result in any material adverse change in the business, operations, property,
prospects, results of operation or condition, financial or other, of
Tenant.  Forthwith upon Tenant obtaining
knowledge of any Default, Event of Default or any default or event of default
under any agreement relating to Indebtedness for money borrowed in an aggregate
amount exceeding, at any one time, Two Hundred Fifty Thousand Dollars
($250,000), or any event or condition that would be required to be disclosed in
a current report filed by Tenant on Form 8-K or in Part II of a quarterly
report on Form 10-Q if Tenant were required to file such reports under
the 



 61
 









Securities Exchange Act of 1934, as amended, Tenant shall furnish
Notice thereof to Landlord specifying the nature and period of existence
thereof and what action Tenant has taken or is taking or proposes to take with
respect thereto.


21.5        Indebtedness
of Tenant.  Tenant shall not create, incur, assume or
guarantee, or permit to exist, or become or remain liable directly or
indirectly upon, any Indebtedness except the following:


(a)           Indebtedness of Tenant to Landlord;


(b)           Indebtedness of Tenant for
Impositions, to the extent that payment thereof shall not at the time be
required to be made in accordance with the provisions of Article 8;


(c)           Indebtedness of Tenant in respect of
judgments or awards (i) which have been in force for less than the applicable
appeal period and in respect of which execution thereof shall have been stayed
pending such appeal or review, or (ii) which are fully covered by insurance
payable to Tenant, or (iii) which are for an amount not in excess of $250,000
in the aggregate at any one time outstanding and (x) which have been in force
for not longer than the applicable appeal period, so long as execution is not
levied thereunder or (y) in respect of which an appeal or proceedings for
review shall at the time be prosecuted in good faith in accordance with the
provisions of Article 8, and in respect of which execution thereof shall
have been stayed pending such appeal or review;


(d)           Unsecured borrowings of Tenant from
its Affiliated Persons which are by their terms expressly subordinate pursuant
to a Subordination Agreement to the payment and performance of Tenant’s
obligations under this Agreement; or


(e)           Indebtedness for purchase money
financing in accordance with Section 21.8 (a) and other operating
liabilities incurred in the ordinary course of Tenant’s business;


(f)            Indebtedness of Tenant as guarantor
or borrower secured by Liens permitted under Section 21.8(c); or


(g)           A guaranty of Five Star’s obligations
under its revolving line of credit.



 62
 









21.6        Distributions,
Payments to Affiliated Persons, Etc.  Tenant shall not declare, order, pay or make,
directly or indirectly, any Distributions or any payment to any Affiliated
Person of Tenant (including payments in the ordinary course of business) or set
apart any sum or property therefor, or agree to do so, if, at the time of such
proposed action, or immediately after giving effect thereto, any Event of
Default shall have occurred and be continuing. 
Otherwise, as long as no Event of Default shall have occurred and be
continuing, Tenant may make Distributions and payments to Affiliated Persons; provided,
however, that any such payments shall at all times be subordinate to
Tenant’s obligations under this Agreement.


21.7        Prohibited
Transactions.  Tenant
shall not permit to exist or enter into any agreement or arrangement whereby it
engages in a transaction of any kind with any Affiliated Person as to Tenant or
any Guarantor, except on terms and conditions which are commercially
reasonable.


21.8        Liens
and Encumbrances.  Except as permitted by Section 7.1 and Section
21.5, Tenant shall not create or incur or suffer to be created or incurred
or to exist any Lien on this Agreement or any of Tenant’s assets, properties,
rights or income, or any of its interest therein, now or at any time hereafter
owned, other than:


(a)           Security interests securing the
purchase price of equipment or personal property whether acquired before or
after the Commencement Date; provided, however, that (i) such
Lien shall at all times be confined solely to the asset in question and (ii)
the aggregate principal amount of Indebtedness secured by any such Lien shall
not exceed the cost of acquisition or construction of the property subject
thereto;


(b)           Permitted Encumbrances;


(c)           Security
interests in Accounts or Chattel Paper, in Support Obligations, General
Intangibles or Deposit Accounts relating to such Accounts or Chattel Paper, in
any Instruments or Investment Property evidencing or arising from such Accounts
or Chattel Paper, in any documents, books, records or other information
(including, without limitation, computer programs, tapes, discs, punch cards,
data processing software and related property and rights) maintained with
respect to any property described in this Section 21.8(c) or in any Proceeds of
any of the foregoing (capitalized terms used in this Section 21.8(c) without
definition being used as defined in or for purposes of 



 63
 









Article 9 of the Uniform Commercial Code as in effect in the
Commonwealth of Massachusetts); and


(d)           As permitted pursuant to Section
21.5.


21.9        Merger;
Sale of Assets; Etc.  Without Landlord’s prior written consent
(which consent may be given or withheld in Landlord’s sole discretion), neither
Entity comprising Tenant shall (i) sell, lease (as lessor or sublessor),
transfer or otherwise dispose of, or abandon, all or any material portion of
its assets (including capital stock or other equity interests) or business to
any Person, (ii) merge into or with or consolidate with any other Entity, or
(iii) sell, lease (as lessor or sublessor), transfer or otherwise dispose of,
or abandon, any personal property or fixtures or any real property; provided,
however, that, notwithstanding the provisions of clause (iii) preceding,
Tenant may dispose of equipment or fixtures which have become inadequate,
obsolete, worn-out, unsuitable, undesirable or unnecessary, provided
substitute equipment or fixtures having equal or greater value and utility (but
not necessarily having the same function) have been provided.


21.10      Bankruptcy
Remote Entities. 
At Landlord’s request, Tenant shall make such amendments, modifications
or other changes to its charter documents and governing bodies (including,
without limitation, Tenant’s board of directors), and take such other actions,
as may from time to time be necessary to qualify Tenant as a “bankruptcy remote
entity”, provided  that Landlord shall reimburse Tenant for all
costs and expenses reasonably incurred by Tenant in connection with the making
of such amendments or modifications.


21.11      Notice of Change of Name, Etc.  Tenant shall give prompt notice to Landlord
of any change in (a) the name (operating or otherwise) of Tenant or any
Facility, (b) the number of beds in any bed category for which any Facility is
licensed or the number of beds in any bed category available for use at any
Facility (except for changes in the election made with respect to the beds for
reimbursement maximization purposes), and (c) the patient and/or child care
services that are offered at any Facility.


ARTICLE
22


ARBITRATION


Landlord or Tenant may elect to submit any dispute hereunder that has
an amount in controversy in excess of 



 64
 









$250,000 to arbitration hereunder.  Any such arbitration shall be conducted in
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of
the American Association then pertaining and the decision of the arbitrators
with respect to such dispute shall be binding, final and conclusive on the
parties.


In the event Landlord or Tenant shall elect to submit any such dispute
to arbitration hereunder, Landlord and Tenant shall each appoint and pay all
fees of a fit and impartial person as arbitrator with at least ten (10) years’
recent professional experience in the general subject matter of the
dispute.  Notice of such appointment
shall be sent in writing by each party to the other, and the arbitrators so
appointed, in the event of their failure to agree within thirty (30) days after
the appointment of the second arbitrator upon the matter so submitted, shall
appoint a third arbitrator.  If either
Landlord or Tenant shall fail to appoint an arbitrator, as aforesaid, for a
period of twenty (20) days after written notice from the other party to make
such appointment, then the arbitrator appointed by the party having made such
appointment shall appoint a second arbitrator and the two (2) so appointed
shall, in the event of their failure to agree upon any decision within thirty
(30) days thereafter, appoint a third arbitrator.  If such arbitrators fail to agree upon a
third arbitrator within forty five (45) days after the appointment of the
second arbitrator, then such third arbitrator shall be appointed by the
American Arbitration Association from its qualified panel of arbitrators, and
shall be a person having at least ten (10) years’ recent professional
experience as to the subject matter in question.  The fees of the third arbitrator and the
expenses incident to the proceedings shall be borne equally between Landlord
and Tenant, unless the arbitrators decide otherwise.  The fees of respective counsel engaged by the
parties, and the fees of expert witnesses and other witnesses called for the
parties, shall be paid by the respective party engaging such counsel or calling
or engaging such witnesses.


The decision of the arbitrators shall be rendered within thirty (30)
days after appointment of the third arbitrator. 
Such decision shall be in writing and in duplicate, one counterpart
thereof to be delivered to Landlord and one to Tenant.  A judgment of a court of competent
jurisdiction may be entered upon the award of the arbitrators in accordance
with the rules and statutes applicable thereto then obtaining.


Landlord and Tenant acknowledge and agree that, to the extent any such
dispute shall involve any Manager and be subject to arbitration pursuant to
such Manager’s Management Agreement, 



 65
 









Landlord and Tenant shall cooperate to consolidate any such arbitration
hereunder and under such Management Agreement into a single proceeding.


ARTICLE 23


 


MISCELLANEOUS


 


3.1          Limitation on Payment of Rent.  All agreements between Landlord and Tenant
herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under applicable law, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment
of any provision of this Agreement, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, or if from any circumstances Landlord should ever receive as fulfillment
of such provision such an excessive amount, then, ipso  facto, the
amount which would be excessive shall be applied to the reduction of the
installment(s) of Minimum Rent next due and not to the payment of such
excessive amount.  This provision shall
control every other provision of this Agreement and any other agreements
between Landlord and Tenant.


 


23.2        No Waiver.  No failure by Landlord or Tenant to insist
upon the strict performance of any term hereof or to exercise any right, power
or remedy consequent upon a breach thereof, and no acceptance of full or
partial payment of Rent during the continuance of any such breach, shall
constitute a waiver of any such breach or of any such term.  To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.


 


23.3        Remedies Cumulative. 
To the maximum extent permitted by law, each legal,
equitable or contractual right, power and remedy of Landlord or Tenant, now or
hereafter provided either in this Agreement or by statute or otherwise, shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy and the exercise or beginning of the exercise by Landlord or
Tenant (as applicable) of any one or more of such rights, powers and remedies
shall not preclude the simultaneous or subsequent exercise by Landlord of any
or all of such other rights, powers and remedies.



 66
 









23.4        Severability.  Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or  nullify the remainder of this Agreement, but
rather the effect thereof shall be confined to the clause, sentence, paragraph,
section or provision so held to be invalid, illegal or ineffective, and this
Agreement shall be construed as if such invalid, illegal or ineffective
provisions had never been contained therein.


 


23.5        Acceptance
of Surrender.  No surrender to Landlord of this Agreement or
of the Leased Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such
a written acceptance by Landlord, shall constitute an acceptance of any such
surrender.


23.6        No
Merger of Title.  It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord’s
interest in the Leased Property.


23.7        Conveyance
by Landlord.  If Landlord or any successor owner of all or
any portion of the Leased Property shall convey all or any portion of the
Leased Property in accordance with the terms hereof other than as security for
a debt, and the grantee or transferee of such of the Leased Property shall
expressly assume all obligations of Landlord hereunder arising or accruing from
and after the date of such conveyance or transfer, Landlord or such successor
owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Landlord under this Agreement with respect to
such of the Leased Property arising or accruing from and after the date of such
conveyance or other transfer and all such future liabilities and obligations
shall thereupon be binding upon the new owner.


23.8        Quiet
Enjoyment.  Tenant shall peaceably and quietly have, hold
and enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be
created by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being
contested in good faith and by proper proceedings, provided the same do not
materially interfere with 



 67
 









Tenant’s ability to operate any Facility and (d) liens that have been
consented to in writing by Tenant. 
Except as otherwise provided in this Agreement, no failure by Landlord
to comply with the foregoing covenant shall give Tenant any right to cancel or
terminate this Agreement or abate, reduce or make a deduction from or offset
against the Rent or any other sum payable under this Agreement, or to fail to
perform any other obligation of Tenant hereunder.


23.9        No
Recordation. 
Neither Landlord nor Tenant shall record this Agreement.


23.10      Notices.


(a)           Any and all notices, demands,
consents, approvals, offers, elections and other communications required or
permitted under this Agreement shall be deemed adequately given if in writing
and the same shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar expedited
commercial carrier, addressed to the recipient of the notice, postpaid and
registered or certified with return receipt requested (if by mail), or with all
freight charges prepaid (if by Federal Express or similar carrier).


(b)           All notices required or permitted to
be sent hereunder shall be deemed to have been given for all purposes of this
Agreement upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or refusal,
except that whenever under this Agreement a notice is either received on a day
which is not a Business Day or is required to be delivered on or before a
specific day which is not a Business Day, the day of receipt or required
delivery shall automatically be extended to the next Business Day.


(c)           All such notices shall be addressed,


if to Landlord:


c/o Senior Housing
Properties Trust

400 Centre Street

Newton, Massachusetts  02458

Attn:  Mr. David J. Hegarty

[Telecopier No. (617) 796-8349]



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if to Tenant to:


c/o Five Star Quality Care, Inc.

400 Centre Street

Newton, Massachusetts  02458

Attn:  Evrett W. Benton

[Telecopier No. (617) 796-8385]


(d)           By notice given as herein provided,
the parties hereto and their respective successors and assigns shall have the
right from time to time and at any time during the term of this Agreement to
change their respective addresses effective upon receipt by the other parties
of such notice and each shall have the right to specify as its address any
other address within the United States of America.


23.11      Construction.
 Anything
contained in this Agreement to the contrary notwithstanding, all claims
against, and liabilities of, Tenant or Landlord arising prior to any date of
termination or expiration of this Agreement with respect to the Leased Property
shall survive such termination or expiration. 
In no event shall Landlord be liable for any consequential damages
suffered by Tenant as the result of a breach of this Agreement by Landlord.  Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated except by an instrument
in writing signed by the party to be charged. 
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Each term or provision of this Agreement to be performed by Tenant
shall be construed as an independent covenant and condition.  Time is of the essence with respect to the
provisions of this Agreement.  Except as
otherwise set forth in this Agreement, any obligations of Tenant (including
without limitation, any monetary, repair and indemnification obligations) and
Landlord shall survive the expiration or sooner termination of this
Agreement.  Each Entity comprising Tenant
hereunder shall be jointly and severally liable for the payment and performance
of with each and every obligation and liability of Tenant hereunder.


23.12      Counterparts;
Headings.  This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but which, when taken
together, shall constitute but one instrument and shall become effective as of
the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed.  Headings in this Agreement are for purposes
of reference only and shall not limit or affect the meaning of the provisions
hereof.



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23.13      Applicable
Law, Etc. 
This Agreement shall be interpreted, construed, applied and enforced in
accordance with the laws of The Commonwealth of Massachusetts applicable to
contracts between residents of Massachusetts which are to be performed entirely
within Massachusetts, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required by this
Agreement is made or required to be made; or (iii) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues;
or (iv) where any action or other proceeding is instituted or pending; or (v)
the nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; or (vi) whether the
laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction
other than Massachusetts; or (vii) any combination of the foregoing.  Notwithstanding the foregoing, the laws of
the State shall apply to the perfection and priority of liens upon and the
disposition of any Property.


23.14      Right
to Make Agreement.  Each party warrants, with respect to itself, that
neither the execution of this Agreement, nor the consummation of any
transaction contemplated hereby, shall violate any provision of any law, or any
judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or
approval which has not been given or taken, or at the time of the transaction
involved shall not have been given or taken. 
Each party covenants that it has and will continue to have throughout
the term of this Agreement and any extensions thereof, the full right to enter
into this Agreement and perform its obligations hereunder.


23.15      Attorneys’
Fees.  If
any lawsuit or arbitration or other legal proceeding arises in connection with
the interpretation or enforcement of this Agreement, the prevailing party
therein shall be entitled to receive from the other party the prevailing party’s
costs and expenses, including reasonable attorneys’ fees incurred in connection
therewith, in preparation therefor and on appeal therefrom, which amounts shall
be included in any judgment therein.


23.16      Nonliability
of Trustees.  THE DECLARATIONS OF TRUST ESTABLISHING CERTAIN
ENTITIES COMPRISING LANDLORD, COPIES OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO (COLLECTIVELY, THE “DECLARATIONS”), ARE DULY FILED WITH THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDE THAT 


 



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THE NAMES OF SUCH ENTITIES REFER TO THE TRUSTEES UNDER
SUCH DECLARATIONS COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY,
AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SUCH ENTITIES
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SUCH ENTITIES. 
ALL PERSONS DEALING WITH SUCH ENTITIES, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF SUCH ENTITIES FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION.


IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date above first written.


	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  HRES1 PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ David
  J. Hegarty

  
	
   

  	
   

  	
  David J. Hegarty, President

  
	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  FS PATRIOT LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Evrett
  W. Benton

  
	
   

  	
   

  	
  Evrett W. Benton

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FS COMMONWEALTH LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Evrett
  W. Benton

  
	
   

  	
   

  	
  Evrett W. Benton

  
	
   

  	
   

  	
  President

  



 



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The following
exhibits have been omitted and will be supplementally furnished to the
Securities and Exchange Commission upon request:


EXHIBITS A-1
through A-2