**Exhibit 10.7**

 

**AMENDEDAND RESTATED MASTER LEASE AGREEMENT(LEASE NO. 1),**

 

dated as of August4, 2009,

 

by and among

 

**CERTAIN AFFILIATES OF SENIORHOUSING PROPERTIES TRUST,**

** **

AS LANDLORD,

 

AND

 

**FIVESTAR QUALITY CARE TRUST,**

 

AS TENANT

 

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| **ARTICLE 1** | **DEFINITIONS**                       | **1** |
|---------------|---------------------------------------|-------|
| 1.1           | AAA                                   | 2     |
| 1.2           | Additional  Charges                   | 2     |
| 1.3           | Additional  Rent                      | 2     |
| 1.4           | Affiliated  Person                    | 2     |
| 1.5           | Agreement                             | 2     |
| 1.6           | Applicable  Laws                      | 2     |
| 1.7           | Arbitration  Award                    | 3     |
| 1.8           | Award                                 | 3     |
| 1.9           | Base  Gross Revenues                  | 3     |
| 1.10          | Business  Day                         | 3     |
| 1.11          | Capital  Addition                     | 3     |
| 1.12          | Capital  Expenditure                  | 4     |
| 1.13          | Change  in Control                    | 4     |
| 1.14          | Claim                                 | 5     |
| 1.15          | Code                                  | 5     |
| 1.16          | Commencement  Date                    | 5     |
| 1.17          | Condemnation                          | 5     |
| 1.18          | Condemnor                             | 5     |
| 1.19          | Consolidated  Financials              | 5     |
| 1.20          | Date  of Taking                       | 5     |
| 1.21          | Default                               | 5     |
| 1.22          | Disbursement  Rate                    | 6     |
| 1.23          | Disputes                              | 6     |
| 1.24          | Easement  Agreement                   | 6     |
| 1.25          | Encumbrance                           | 6     |
| 1.26          | Entity                                | 6     |
| 1.27          | Environment                           | 6     |
| 1.28          | Environmental Obligation              | 6     |
| 1.29          | Environmental  Notice                 | 6     |
| 1.30          | Event  of Default                     | 6     |
| 1.31          | Excess  Gross Revenues                | 6     |
| 1.32          | Extended  Term                        | 6     |
| 1.33          | Facility                              | 7     |
| 1.34          | Facility  Mortgage                    | 7     |
| 1.35          | Facility  Mortgagee                   | 7     |
| 1.36          | Financial  Officer’s Certificate | 7     |
| 1.37          | Fiscal  Year                          | 7     |
| 1.38          | Five  Star                            | 7     |
| 1.39          | Fixed  Term                           | 7     |
| 1.40          | Fixtures                              | 7     |
| 1.41          | GAAP                                  | 7     |
| 1.42          | Government  Agencies                  | 7     |
| 1.43          | Gross  Revenues                       | 8     |
| 1.44          | Guarantor                             | 9     |
| 1.45          | Guaranty                              | 9     |
| 1.46          | Hazardous  Substances                 | 9     |
| 1.47          | Immediate  Family                     | 10    |
| 1.48          | Impositions                           | 10    |
| 1.49          | Incidental  Documents                 | 11    |
| 1.50          | Indebtedness                          | 11    |
| 1.51          | Insurance  Requirements               | 11    |
| 1.52          | Interest  Rate                        | 12    |

 

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| 1.53          | LTA  GMAC Leases                  | 12     |
|---------------|-----------------------------------|--------|
| 1.54          | LTA  GMAC Property                | 12     |
| 1.55          | Land                              | 12     |
| 1.56          | Landlord                          | 12     |
| 1.57          | Landlord Default                  | 12     |
| 1.58          | Landlord Liens                    | 12     |
| 1.59          | Lease  Year                       | 12     |
| 1.60          | Leased  Improvements              | 12     |
| 1.61          | Leased  Intangible Property       | 13     |
| 1.62          | Leased  Personal Property         | 13     |
| 1.63          | Leased  Property                  | 13     |
| 1.64          | Legal  Requirements               | 13     |
| 1.65          | Lien                              | 13     |
| 1.66          | Manager                           | 14     |
| 1.67          | Management  Agreement             | 14     |
| 1.68          | Minimum  Rent                     | 14     |
| 1.69          | Notice                            | 14     |
| 1.70          | Officer’s  Certificate       | 14     |
| 1.71          | Original  Leases                  | 14     |
| 1.72          | Other  Leases                     | 14     |
| 1.73          | Overdue  Rate                     | 14     |
| 1.74          | Parent                            | 14     |
| 1.75          | Permitted  Encumbrances           | 15     |
| 1.76          | Permitted  Use                    | 15     |
| 1.77          | Person                            | 15     |
| 1.78          | Pledge  Agreement                 | 15     |
| 1.79          | Property                          | 15     |
| 1.80          | Provider  Agreements              | 15     |
| 1.81          | Regulated  Medical Wastes         | 15     |
| 1.82          | Rent                              | 15     |
| 1.83          | RMI  Lease                        | 15     |
| 1.84          | RMI  Property                     | 16     |
| 1.85          | Rules                             | 16     |
| 1.86          | SEC                               | 16     |
| 1.87          | Security  Agreement               | 16     |
| 1.88          | State                             | 16     |
| 1.89          | Subordinated  Creditor            | 16     |
| 1.90          | Subordination  Agreement          | 16     |
| 1.91          | Subsidiary                        | 16     |
| 1.92          | Successor  Landlord               | 16     |
| 1.93          | Tenant                            | 16     |
| 1.94          | Tenant’s  Personal Property  | 16     |
| 1.95          | Term                              | 17     |
| 1.96          | Third  Party Payor Programs       | 17     |
| 1.97          | Third  Party Payors               | 17     |
| 1.98          | Unsuitable  for Its Permitted Use | 17     |
| 1.99          | Work                              | 17     |
| **ARTICLE 2** | **LEASED  PROPERTY AND TERM**     | **18** |
| 2.1           | Leased  Property                  | 18     |
| 2.2           | Condition  of Leased Property     | 19     |
| 2.3           | Fixed  Term                       | 20     |
| 2.4           | Extended  Terms                   | 20     |

 

2

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| 2.5            | Limitations  on Term                                 | 21     |
|----------------|------------------------------------------------------|--------|
| **ARTICLE 3**  | **RENT**                                             | **21** |
| 3.1            | Rent                                                 | 21     |
| 3.2            | Late  Payment of Rent, Etc.                          | 27     |
| 3.3            | Net  Lease                                           | 28     |
| 3.4            | No  Termination, Abatement, Etc.                     | 28     |
| **ARTICLE 4**  | **USE OF THE  LEASED PROPERTY**                      | **29** |
| 4.1            | Permitted  Use                                       | 29     |
| 4.2            | Compliance  with Legal/Insurance Requirements, Etc.  | 31     |
| 4.3            | Compliance  with Medicaid and Medicare Requirements  | 31     |
| 4.4            | Environmental  Matters                               | 32     |
| **ARTICLE 5**  | **MAINTENANCE  AND REPAIRS**                         | **34** |
| 5.1            | Maintenance  and Repair                              | 34     |
| 5.2            | Tenant’s  Personal Property                     | 36     |
| 5.3            | Yield  Up                                            | 36     |
| 5.4            | Management  Agreement                                | 37     |
| **ARTICLE 6**  | **IMPROVEMENTS,  ETC.**                              | **37** |
| 6.1            | Improvements  to the Leased Property                 | 37     |
| 6.2            | Salvage                                              | 38     |
| **ARTICLE 7**  | **LIENS**                                            | **38** |
| **ARTICLE 8**  | **PERMITTED  CONTESTS**                              | **39** |
| **ARTICLE 9**  | **INSURANCE AND  INDEMNIFICATION**                   | **40** |
| 9.1            | General  Insurance Requirements                      | 40     |
| 9.2            | Waiver  of Subrogation                               | 40     |
| 9.3            | Form Satisfactory,  Etc.                        | 40     |
| 9.4            | No Separate  Insurance; Self-Insurance               | 41     |
| 9.5            | Indemnification  of Landlord                         | 42     |
| **ARTICLE 10** | **CASUALTY**                                         | **42** |
| 10.1           | Insurance  Proceeds                                  | 42     |
| 10.2           | Damage  or Destruction                               | 43     |
| 10.3           | Damage  Near End of Term                             | 45     |
| 10.4           | Tenant’s  Property                              | 45     |
| 10.5           | Restoration  of Tenant’s Property               | 46     |
| 10.6           | No  Abatement of Rent                                | 46     |
| 10.7           | Waiver                                               | 46     |
| **ARTICLE 11** | **CONDEMNATION**                                     | **46** |
| 11.1           | Total Condemnation, Etc.                             | 46     |
| 11.2           | Partial  Condemnation                                | 46     |
| 11.3           | Abatement  of Rent                                   | 48     |
| 11.4           | Temporary  Condemnation                              | 48     |
| 11.5           | Allocation  of Award                                 | 48     |
| **ARTICLE 12** | **DEFAULTS AND  REMEDIES**                           | **49** |
| 12.1           | Events  of Default                                   | 49     |
| 12.2           | Remedies                                             | 51     |
| 12.3           | Tenant’s  Waiver                                | 53     |
| 12.4           | Application  of Funds                                | 53     |
| 12.5           | Landlord’s  Right to Cure Tenant’s Default | 54     |

 

3

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| **ARTICLE 13** | **HOLDING OVER**                                    | **54** |
|----------------|-----------------------------------------------------|--------|
| **ARTICLE 14** | **LANDLORD  DEFAULT**                               | **54** |
| **ARTICLE 15** | **PURCHASE  RIGHTS**                                | **55** |
| **ARTICLE 16** | **SUBLETTING AND  ASSIGNMENT**                      | **56** |
| 16.1           | Subletting  and Assignment                          | 56     |
| 16.2           | Required  Sublease Provisions                       | 57     |
| 16.3           | Permitted  Sublease                                 | 59     |
| 16.4           | Sublease  Limitation                                | 59     |
| **ARTICLE 17** | **ESTOPPEL  CERTIFICATES AND FINANCIAL STATEMENTS** | **60** |
| 17.1           | Estoppel  Certificates                              | 60     |
| 17.2           | Financial  Statements                               | 60     |
| 17.3           | General  Operations                                 | 61     |
| **ARTICLE 18** | **LANDLORD’S  RIGHT TO INSPECT**               | **62** |
| **ARTICLE 19** | **EASEMENTS**                                       | **62** |
| 19.1           | Grant  of Easements                                 | 62     |
| 19.2           | Exercise  of Rights by Tenant                       | 63     |
| 19.3           | Permitted  Encumbrances                             | 63     |
| **ARTICLE 20** | **FACILITY  MORTGAGES**                             | **63** |
| 20.1           | Landlord  May Grant Liens                      | 63     |
| 20.2           | Subordination  of Lease                             | 63     |
| 20.3           | Notice  to Mortgagee and Superior Landlord          | 65     |
| **ARTICLE 21** | **ADDITIONAL  COVENANTS OF TENANT**                 | **66** |
| 21.1           | Prompt  Payment of Indebtedness                     | 66     |
| 21.2           | Conduct  of Business                                | 66     |
| 21.3           | Maintenance  of Accounts and Records                | 66     |
| 21.4           | Notice  of Litigation, Etc.                         | 67     |
| 21.5           | Prohibited  Transactions                            | 67     |
| **ARTICLE 22** | **ARBITRATION**                                     | **67** |
| 22.1           | Disputes                                            | 67     |
| 22.2           | Selection  of Arbitrators                           | 68     |
| 22.3           | Location  of Arbitration                            | 68     |
| 22.4           | Scope  of Discovery                                 | 68     |
| 22.5           | Arbitration  Award                                  | 68     |
| 22.6           | Costs                                               | 69     |
| 22.7           | Final  Judgment                                     | 69     |
| 22.8           | Payment                                             | 69     |
| **ARTICLE 23** | **MISCELLANEOUS**                                   | **69** |
| 23.1           | Limitation  on Payment of Rent                      | 69     |
| 23.2           | No  Waiver                                          | 70     |
| 23.3           | Remedies  Cumulative                                | 70     |
| 23.4           | Severability                                        | 70     |
| 23.5           | Acceptance  of Surrender                            | 70     |
| 23.6           | No  Merger of Title                                 | 71     |
| 23.7           | Conveyance  by Landlord                             | 71     |
| 23.8           | Quiet  Enjoyment                                    | 71     |
| 23.9           | No  Recordation                                     | 71     |
| 23.10          | Notices                                             | 72     |
| 23.11          | Construction                                        | 73     |
| 23.12          | Counterparts;  Headings                             | 73     |
| 23.13          | Applicable  Law, Etc.                               | 73     |

 

4

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| 23.14 | Right  to Make Agreement                            | 74 |
|-------|-----------------------------------------------------|----|
| 23.15 | Attorneys’  Fees                               | 74 |
| 23.16 | Nonliability  of Trustees                           | 74 |
| 23.17 | Addition  of LTA GMAC Properties and RMI Properties | 74 |
| 23.18 | Original  Leases                                    | 75 |

 

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**AMENDEDAND RESTATED MASTER LEASE AGREEMENT(LEASE NO. 1)**

 

**THISAMENDED AND RESTATED MASTER LEASE AGREEMENT** is entered into as of August 4, 2009 by and amongeach of the parties identified on the signature pages hereof as alandlord, (collectively, “Landlord”), and **FIVE STARQUALITY CARE TRUST**, as tenant (“Tenant”).

 

**W**** I T N E S S E T H :**

 

**WHEREAS,** Landlord andTenant are parties to certainAmended and Restated Master Lease Agreements, dated as of June 30, 2008(collectively, the “Original Leases”); and

 

**WHEREAS,**the landlordsand tenants under the Original Leases are conveying their interests in certainof the properties demised thereunder and, in connection therewith, Landlord andTenant and the landlords and tenants under the Original Leases wish to amendand restate the Original Leases into separate leases and to make certain othermodifications thereto as are set forth herein;

 

**NOW,THEREFORE,**inconsideration of the mutual covenants herein contained and for other good andvaluable consideration, the mutual receipt and legal sufficiency of which arehereby acknowledged, Landlord and Tenant hereby agree that, effective as of thedate hereof, the Original Leases are hereby amended and restated but only withrespect to the Leased Property (as hereinafter defined), as follows:

 

# **ARTICLE1**

 

# **DEFINITIONS**

 

Forall purposes of this Agreement, except as otherwise expressly provided orunless the context otherwise requires, (a) the terms defined in this Article shallhave the meanings assigned to them in this Article and include the pluralas well as the singular, (b) all accounting terms not otherwise definedherein shall have the meanings assigned to them in accordance with GAAP, (c) allreferences in this Agreement to designated “Articles”, “Sections” and other subdivisionsare to the designated Articles, Sections and other subdivisions of thisAgreement, and (d) the words “herein”, “hereof”, “hereunder” and otherwords of similar import refer to this Agreement as a whole and not to anyparticular Article, Section or other subdivision.

 

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## **1.1              ****“AAA”** shall have the meaning given such term in Section 22.1.

##  

## **1.2               “AdditionalCharges” **shallhave the meaning given such term in Section 3.1.3.

##  

## **1.3               “AdditionalRent” **shallhave the meaning given such term in Section 3.1.2(a).

##  

## **1.4               “AffiliatedPerson” **shallmean, with respect to any Person, (a)  in the case of any such Personwhich is a partnership, any partner in such partnership, (b) in the caseof 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 aParent with respect to such Person or to one or more of the Persons referred toin the preceding clauses (a) and (b), (d) any other Person who is anofficer, director, trustee or employee of, or partner in or member of, suchPerson 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 ofsuch Person or of any Person referred to in the preceding clauses (a) through(d).

##  

## **1.5               “Agreement” **shall mean thisAmended and Restated Master Lease Agreement (Lease No. 1), including allschedules and exhibits attached hereto, as it and they may be amended from timeto time as herein provided.

##  

## **1.6               “ApplicableLaws” **shallmean all applicable laws, statutes, regulations, rules, ordinances, codes,licenses, permits and orders, from time to time in existence, of all courts ofcompetent jurisdiction and Government Agencies, and all applicable judicial andadministrative and regulatory decrees, judgments and orders, including commonlaw 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 otherGovernment 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), oremissions, 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 whethersolid, liquid or gaseous in nature, into the Environment, or relating to themanufacture, processing, distribution, use, treatment, storage, disposal,transport or handling of Hazardous Substances or 

 

2

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## Regulated Medical Wastes, underground improvements(including, without limitation, treatment or storage tanks, or water, gas oroil wells), or pollutants, contaminants or hazardous or toxic substances,materials or wastes, whether solid, liquid or gaseous in nature.

##  

## **1.7              ****“Arbitration Award” **shall have the meaning given such term in Section 22.5.

##  

## **1.8               “Award” **shall mean allcompensation, sums or other value awarded, paid or received by virtue of atotal or partial Condemnation of any Property (after deduction of all reasonablelegal fees and other reasonable costs and expenses, including, withoutlimitation, expert witness fees, incurred by Landlord, in connection withobtaining any such award).

##  

## **1.9               “BaseGross Revenues” **shallmean the Gross Revenues with respect to each Property, for the respectivecalendar years or the respective dollar amount set forth on Schedule 1attached hereto and made a part hereof, as applicable; provided, however,that in the event that, with respect to any Lease Year, or portion thereof, forany reason (including, without limitation, a casualty or Condemnation) thereshall be a reduction in the number of units available at any Facility locatedat the applicable Property or in the services provided at such Facility fromthe number of such units or the services on the applicable Commencement Date,in determining Additional Rent payable for such Lease Year, Base Gross Revenuesshall be reduced as follows:  (a) inthe event of a partial closing of any Facility affecting the number of units,or the services provided, at such Facility, Gross Revenues attributable tounits or services at such Facility shall be ratably allocated among all unitsin service at such Facility on the applicable Commencement Date and all suchGross Revenues attributable to units no longer in service shall be subtractedfrom Base Gross Revenues throughout the period of such closing; and (b) inthe event of any other change in circumstances affecting any Facility, BaseGross Revenues shall be equitably adjusted in such manner as Landlord andTenant shall reasonably agree.

##  

## **1.10             “BusinessDay” **shall mean anyday other than Saturday, Sunday, or any other day on which banking institutionsin The Commonwealth of Massachusetts are authorized by law or executive actionto close.

##  

## **1.11             “CapitalAddition” **shallmean, with respect to any Property, any renovation, repair or improvement tosuch Property, the cost of which constitutes a Capital Expenditure.

 

3

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## **1.12             “CapitalExpenditure” **shallmean any expenditure treated as capital in nature in accordance with GAAP.

##  

## **1.13             “Change in Control”**  shall mean (a) theacquisition by any Person, or two or more Persons acting in concert, ofbeneficial 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 theoutstanding shares of voting stock or other voting interests of Tenant or anyGuarantor, as the case may be, or the power to direct the management andpolicies of Tenant or any Guarantor, directly or indirectly, (b) themerger or consolidation of Tenant or any Guarantor with or into any Person orthe merger or consolidation of any Person into Tenant or any Guarantor (otherthan the merger or consolidation of any Person into Tenant or any Guarantorthat does not result in a Change in Control of Tenant or such Guarantor underclauses (a), (c), (d), (e) or (f) of this definition), (c) anyone or more sales, conveyances, dividends or distributions to any Person of allor any material portion of the assets (including capital stock or other equityinterests) or business of Tenant or any Guarantor, whether or not otherwise aChange in Control, (d) the cessation, for any reason, of the individualswho at the beginning of any twenty-four (24) consecutive month period(commencing on the date hereof) constituted the board of directors of Tenant orany Guarantor (together with any new directors whose election by such board orwhose nomination for election by the shareholders of Tenant or such Guarantorwas approved by a vote of a majority of the directors then still in office whowere either directors at the beginning of any such period or whose election ornomination for election was previously so approved, but excluding anyindividual whose initial nomination for, or assumption of, office as a memberof such board of directors occurs as a result of an actual or threatenedsolicitation of proxies or consents for the election or removal of one or moredirectors by any Person other than a solicitation for the election of one ormore directors by or on behalf of the board of directors) to constitute amajority of the board of directors of Tenant or such Guarantor then in office,or (e) the adoption of any proposal (other than a precatory proposal) byTenant or any Guarantor not approved by vote of a majority of the directors ofTenant or any Guarantor, as the case may be, in office immediately prior to themaking of such proposal, or (f) the election to the board of directors ofTenant or any Guarantor of any individual not nominated or appointed by vote ofa majority of the directors of Tenant or such Guarantor in office immediatelyprior to the nomination or appointment of such individual.

 

4

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## **1.14             “Claim” **shall have themeaning given such term in Article 8.

##  

## **1.15             “Code” **shall mean theInternal Revenue Code of 1986 and, to the extent applicable, the TreasuryRegulations promulgated thereunder, each as from time to time amended.

##  

## **1.16             “CommencementDate” **shallmean, with respect to each Property, the calendar date specified as theCommencement Date with respect to such Property on Schedule 1 attachedhereto and made a part hereof.

##  

## **1.17             “Condemnation” **shall mean, with respect to any Property, or any portionthereof, (a) the exercise of any governmental power with respect to suchProperty, whether by legal proceedings or otherwise, by a Condemnor of itspower of condemnation, (b) a voluntary sale or transfer of such Propertyby Landlord to any Condemnor, either under threat of condemnation or whilelegal proceedings for condemnation are pending, or (c) a taking orvoluntary conveyance of such Property, or any interest therein, or rightaccruing thereto or use thereof, as the result or in settlement of anycondemnation or other eminent domain proceeding affecting such Property,whether or not the same shall have actually been commenced.

##  

## **1.18             “Condemnor” **shall mean anypublic or quasi-public Person, having the power of Condemnation.

##  

## **1.19             “ConsolidatedFinancials”** shall mean, for any Fiscal Year or other accounting period of Five Star,annual audited and quarterly unaudited financial statements of Five Starprepared on a consolidated basis, including Five Star’s consolidated balancesheet and the related statements of income and cash flows, all in reasonabledetail, and setting forth in comparative form the corresponding figures for thecorresponding period in the preceding Fiscal Year, and prepared in accordancewith GAAP throughout the periods reflected.

##  

## **1.20             “Dateof Taking” **shallmean, with respect to any Property, the date the Condemnor has the right topossession of such Property, or any portion thereof, in connection with aCondemnation.

##  

## **1.21             “Default” **shall mean anyevent or condition which with the giving of notice and/or lapse of time wouldripen into an Event of Default.

 

5

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## **1.22             “DisbursementRate” **shallmean an annual rate of interest, as of the date of determination, equal to thegreater of (a) eight percent (8%) and (b) the per annum rate for ten (10) yearU.S. Treasury Obligations as published in The Wall Street Journal plusthree hundred (300) basis points; provided, however, that in noevent shall the Disbursement Rate exceed eleven and one-half percent (11.5%).

##  

## **1.23            ****“Disputes” **shallhave the meaning given such term in Section 22.1.

##  

## **1.24             “EasementAgreement” **shallmean any conditions, covenants and restrictions, easements, declarations,licenses and other agreements which are Permitted Encumbrances and such otheragreements as may be granted in accordance with Section 19.1.

##  

## **1.25             “Encumbrance” **shall have themeaning given such term in Section 20.1.

##  

## **1.26             “Entity” **shall mean anycorporation, general or limited partnership, limited liability company orpartnership, stock company or association, joint venture, association, company,trust, bank, trust company, land trust, business trust, cooperative, anygovernment or agency, authority or political subdivision thereof or any other entity.

##  

## **1.27             “Environment” **shall meansoil, surface waters, ground waters, land, stream, sediments, surface orsubsurface strata and ambient air.

##  

## **1.28             “EnvironmentalObligation” **shallhave the meaning given such term in Section 4.4.1.

##  

## **1.29             “EnvironmentalNotice” **shallhave the meaning given such term in Section 4.4.1.

##  

## **1.30             “Eventof Default” **shallhave the meaning given such term in Section 12.1.

##  

## **1.31             “ExcessGross Revenues” **shallmean, with respect to each Property, the amount of Gross Revenues for any LeaseYear, or portion thereof, in excess of Base Gross Revenues or the pro-ratedportion thereof in the case of a Lease Year which is not a full twelve-monthperiod.

##  

## **1.32             “ExtendedTerm” **shallhave the meaning given such term in Section 2.4.

 

6

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## **1.33             “Facility” **shall mean,with respect to any Property, the skilled nursing/intermediate care/independentliving/assisted living/special care/group home facility being operated orproposed to be operated on such Property.

##  

## **1.34             “FacilityMortgage” **shallmean any Encumbrance placed upon the Leased Property, or any portion thereof,in accordance with Article 20.

##  

## **1.35             “FacilityMortgagee” **shallmean the holder of any Facility Mortgage.

##  

## **1.36             “FinancialOfficer’s Certificate” **shallmean, as to any Person, a certificate of the chief executive officer, chieffinancial officer or chief accounting officer (or such officers’ authorizeddesignee) of such Person, duly authorized, accompanying the financialstatements required to be delivered by such Person pursuant to Section 17.2,in which such officer shall certify (a) that such statements have beenproperly prepared in accordance with GAAP and are true, correct and complete inall material respects and fairly present the consolidated financial conditionof such Person at and as of the dates thereof and the results of its and theiroperations for the periods covered thereby, and (b) in the event that thecertifying party is an officer of Tenant and the certificate is being given insuch capacity, that no Event of Default has occurred and is continuinghereunder.

##  

## **1.37             “FiscalYear” **shallmean the calendar year or such other annual period designated by Tenant andapproved by Landlord.

##  

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

##  

## **1.39             “FixedTerm” **shallhave the meaning given such term in Section 2.3.

##  

## **1.40             “Fixtures” **shall have themeaning given such term in Section 2.1(d).

##  

## **1.41             “GAAP” **shall meangenerally accepted accounting principles consistently applied.

##  

## **1.42             “GovernmentAgencies” **shallmean any court, agency, authority, board (including, without limitation,environmental protection, planning and zoning), bureau, commission, 

 

7

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## department, office or instrumentality of any naturewhatsoever of any governmental or quasi-governmental unit of the United Statesor 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 anyProperty, or any portion thereof, or any Facility operated thereon.

##  

## **1.43             “GrossRevenues”**  shall mean,with respect to each Property, for each Fiscal Year during the Term, in theaggregate, all revenues and receipts (determined on an accrual basis and in allmaterial respects in accordance with GAAP) of every kind derived from renting,using and/or operating such Property and parts thereof, including, but notlimited to:  all rents and revenuesreceived or receivable for the use of or otherwise by reason of all units, bedsand other facilities provided, meals served, services performed, space orfacilities subleased or goods sold on such Property, or any portion thereof,including, without limitation, any other arrangements with third partiesrelating to the possession or use of any portion of such Property; andproceeds, if any, from business interruption or other loss of income insurance;provided, however, that Gross Revenues shall not include thefollowing:  revenue from professionalfees or charges by physicians and unaffiliated providers of services, when andto the extent such charges are paid over to such physicians and unaffiliatedproviders of services, or are separately billed and not included incomprehensive fees; contractual allowances (relating to any period during theTerm) for billings not paid by or received from the appropriate governmentalagencies or third party providers; allowances according to GAAP for uncollectibleaccounts, including credit card accounts and charity care or otheradministrative discounts; all proper patient billing credits and adjustmentsaccording to GAAP relating to health care accounting; provider discounts forhospital or other medical facility utilization contracts and credit carddiscounts; any amounts actually paid by Tenant for the cost of any federal,state or local governmental programs imposed specially to provide or financeindigent patient care; federal, state or municipal excise, sales, use,occupancy or similar taxes collected directly from patients, clients orresidents or included as part of the sales price of any goods or services;insurance proceeds (other than proceeds from business interruption or otherloss of income insurance); Award proceeds (other than for a temporaryCondemnation); revenues attributable to services actually provided off-site orotherwise away from such Property, such as home health care, to persons thatare not patients, clients or residents at such Property; revenues 

 

8

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## attributable to child care services provided primarily toemployees of such Property; any proceeds from any sale of such Property or fromthe refinancing of any debt encumbering such Property; proceeds from thedisposition of furnishings, fixture and equipment no longer necessary for theoperation of the Facility located thereon; any security deposits and otheradvance deposits, until and unless the same are forfeited to Tenant or appliedfor the purpose for which they were collected; reimbursements for provider, bedor occupancy taxes charged by any Governmental Agency to the extent previouslyincluded in Gross Revenues; and interest income from any bank account orinvestment of Tenant.

##  

## **1.44            **“**Guarantor”**  shall mean Five Star and each and every otherguarantor of Tenant’s obligations under this Agreement, and each such guarantor’ssuccessors and assigns.

##  

## **1.45            **“**Guaranty”** shall mean any guaranty agreement executed bya Guarantor in favor of Landlord pursuant to which the payment or performanceof Tenant’s obligations under this Agreement are guaranteed, together with allmodifications, amendments and supplements thereto.

##  

## **1.46            **“**HazardousSubstances”**  shall meanany substance:

##  

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

####  

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

####  

#### (c)           whichis toxic, explosive, corrosive, flammable, infectious, radioactive,carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated byany governmental authority, agency, department, commission, board, agency orinstrumentality of the United States, any state of the United States, or anypolitical subdivision thereof; or

 

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#### (d)           thepresence of which on any Property, or any portion thereof, causes or materiallythreatens to cause an unlawful nuisance upon such Property, or any portionthereof, or to adjacent properties or poses or materially threatens to pose ahazard to such Property, or any portion thereof, or to the health or safety ofpersons on or about such Property, or any portion thereof; or

####  

#### (e)           withoutlimitation, which contains gasoline, diesel fuel or other petroleumhydrocarbons or volatile organic compounds; or

####  

#### (f)            withoutlimitation, which contains polychlorinated biphenyls (PCBs) or asbestos or ureaformaldehyde foam insulation; or

####  

#### (g)           withoutlimitation, which contains or emits radioactive particles, waves or material;or

####  

#### (h)           withoutlimitation, constitutes Regulated Medical Wastes.

####  

## **1.47             “ImmediateFamily” **shallmean, 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 andnieces.

##  

## **1.48             “Impositions” **shall mean,collectively, all taxes (including, without limitation, all taxes imposed underthe laws of any State, as such laws may be amended from time to time, and allad valorem, sales and use, or similar taxes as the same relate to or areimposed upon Landlord, Tenant or the business conducted upon the LeasedProperty), assessments (including, without limitation, all assessments forpublic improvements or benefit, whether or not commenced or completed prior tothe date hereof), ground rents (including any minimum rent under any groundlease, and any additional rent or charges thereunder), water, sewer or otherrents and charges, excises, tax levies, fees (including, without limitation,license, permit, inspection, authorization and similar fees), and all othergovernmental charges, in each case whether general or special, ordinary orextraordinary, foreseen or unforeseen, of every character in respect of theLeased Property or the business conducted thereon by Tenant (including allinterest and penalties thereon due to any failure in payment by Tenant), whichat any time prior to, during or in respect of the Term hereof may be assessedor imposed on or in respect of or be a 

 

10

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## lien upon (a) Landlord’s interest in the LeasedProperty, (b) the Leased Property or any part thereof or any renttherefrom or any estate, right, title or interest therein, or (c) anyoccupancy, operation, use or possession of, or sales from, or activityconducted on, or in connection with the Leased Property or the leasing or useof the Leased Property or any part thereof by Tenant; provided, however,that nothing contained herein shall be construed to require Tenant to pay andthe term “Impositions” shall not include (i) any tax based on net incomeimposed on Landlord, (ii) any net revenue tax of Landlord, (iii) anytransfer fee (but excluding any mortgage or similar tax payable in connectionwith a Facility Mortgage) or other tax imposed with respect to the sale,exchange or other disposition by Landlord of the Leased Property or theproceeds thereof, (iv) any single business, gross receipts tax,transaction privilege, rent or similar taxes as the same relate to or are imposedupon Landlord, (v) any interest or penalties imposed on Landlord as aresult of the failure of Landlord to file any return or report timely and inthe form prescribed by law or to pay any tax or imposition, except to theextent such failure is a result of a breach by Tenant of its obligationspursuant to Section 3.1.3, (vi) any impositions imposed onLandlord that are a result of Landlord not being considered a “United Statesperson” as defined in Section 7701(a)(30) of the Code, (vii) anyimpositions that are enacted or adopted by their express terms as a substitutefor any tax that would not have been payable by Tenant pursuant to the terms ofthis Agreement or (viii) any impositions imposed as a result of a breachof covenant or representation by Landlord in any agreement governing Landlord’sconduct or operation or as a result of the negligence or willful misconduct ofLandlord.

##  

## **1.49             “Incidental Documents” **shallmean, collectively, any Guaranty, any Security Agreement and any PledgeAgreement.

##  

## **1.50             “Indebtedness” **shall mean allobligations, contingent or otherwise, which in accordance with GAAP should bereflected on the obligor’s balance sheet as liabilities.

##  

## **1.51            ****“Insurance Requirements” **shall mean allterms of any insurance policy required by this Agreement and all requirementsof the issuer of any such policy and all orders, rules and regulations andany other requirements of the National Board of Fire Underwriters (or any otherbody exercising similar functions) binding upon Landlord, Tenant, any Manageror the Leased Property.

 

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## **1.52             “Interest Rate” **shall mean, with respect to eachProperty, the per annum interest rate specified as the Interest Rate withrespect to such Property on Schedule 1 attached hereto and made a parthereof.

##  

## **1.53            ****“LTA GMAC Leases” **shall mean, collectively, the Leases, dated as of November 19,2004, by and among certain Affiliated Persons of Landlord and certainAffiliated Persons of Tenant, together with all modifications, amendments andsupplements thereto.

##  

## **1.54             “LTAGMAC Property” **shall mean a “Property”, as defined therein, underthe LTA GMAC Leases.

##  

## **1.55             “Land” **shall have themeaning given such term in Section 2.1(a).

##  

## **1.56             “Landlord” **shall have themeaning given such term in the preambles to this Agreement and shall alsoinclude their respective successors and assigns.

##  

## **1.57             “LandlordDefault” **shallhave the meaning given such term in Article 14.

##  

## **1.58             “LandlordLiens” **shallmean liens on or against the Leased Property or any payment of Rent (a) whichresult from any act of, or any claim against, Landlord or any owner of a director indirect interest in the Leased Property (other than the lessor under anyground lease affecting any portion of the Leased Property), or which resultfrom any violation by Landlord of any terms of this Agreement, or (b) whichresult from liens in favor of any taxing authority by reason of any tax owed byLandlord 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 theLeased Property); provided, however, that “Landlord Lien”shall not include any lien resulting from any tax for which Tenant is obligatedto pay or indemnify Landlord against until such time as Tenant shall havealready paid to or on behalf of Landlord the tax or the required indemnity withrespect to the same.

##  

## **1.59             “LeaseYear” **shallmean any Fiscal Year or portion thereof during the Term.

##  

## **1.60             “LeasedImprovements” **shallhave the meaning given such term in Section 2.1(b).

 

12

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##  

## **1.61             “LeasedIntangible Property” **shallmean all agreements, service contracts, equipment leases, booking agreementsand other arrangements or agreements affecting the ownership, repair,maintenance, management, leasing or operation of the Leased Property, or anyportion thereof, to which Landlord is a party; all books, records and filesrelating to the leasing, maintenance, management or operation of the LeasedProperty, or any portion thereof, belonging to Landlord; all transferable orassignable permits, certificates of occupancy, operating permits, sign permits,development rights and approvals, certificates, licenses, warranties andguarantees, rights to deposits, trade names, service marks, telephone exchangenumbers identified with the Leased Property, and all other transferableintangible property, miscellaneous rights, benefits and privileges of any kindor character belonging to Landlord with respect to the Leased Property.

##  

## **1.62            ****“Leased Personal Property” **shall have the meaning given such term in Section 2.1(e).

##  

## **1.63             “Leased Property”**  shall havethe meaning given such term in Section 2.1.

##  

## **1.64             “LegalRequirements” **shallmean all federal, state, county, municipal and other governmental statutes,laws, rules, orders, regulations, ordinances, judgments, decrees andinjunctions affecting the Leased Property or the maintenance, construction,alteration or operation thereof, whether now or hereafter enacted or inexistence, including, without limitation, (a) all permits, licenses,authorizations, certificates of need, authorizations and regulations necessaryto operate any Property for its Permitted Use, and (b) all covenants,agreements, restrictions and encumbrances contained in any instruments at anytime in force affecting any Property, including those which may (i) requirematerial repairs, modifications or alterations in or to any Property or (ii) inany way materially and adversely affect the use and enjoyment thereof, butexcluding any requirements arising as a result of Landlord’s status as a realestate investment trust.

##  

## **1.65             “Lien” **shall mean anymortgage, security interest, pledge, collateral assignment, or otherencumbrance, lien or charge of any kind, or any transfer of property or assetsfor the purpose of subjecting the same to the payment of Indebtedness orperformance of any other obligation in priority to payment of generalcreditors.

 

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## **1.66            ****“Manager”**  shall mean, with respect to any Property, theoperator or manager under any Management Agreement from time to time in effectwith respect to such Property, and its permitted successors and assigns.

##  

## **1.67            **“**Management Agreement”**  shall mean, with respect to any Property, anyoperating or management agreement from time to time entered into by Tenant withrespect to such Property in accordance with the applicable provisions of thisAgreement, together with all amendments, modifications and supplements thereto.

##  

## **1.68             “MinimumRent” **shallmean the sum of Forty-Four Million One Hundred Forty-Three Thousand ThreeHundred Fifty-Three and 00/100s Dollars ($44,143,353.00) per annum.

##  

## **1.69             “Notice” **shall mean anotice given in accordance with Section 23.10.

##  

## **1.70             “Officer’sCertificate” **shallmean a certificate signed by an officer or other duly authorized individual ofthe certifying Entity duly authorized by the board of directors or othergoverning body of the certifying Entity.

##  

## **1.71             “OriginalLeases”**  shall have the meaning given such term in therecitals to this Agreement.

##  

## **1.72             “OtherLeases” **shallmean (i) that certain Amended and Restated Master Lease Agreement (Lease No. 2),dated as of the date hereof, by and among certain Affiliated Persons of SeniorHousing Properties Trust, as landlord, and certain Affiliated Persons of FiveStar, as tenant, and (ii) that certain Amended and Restated Master LeaseAgreement (Lease No. 4), dated as of the date hereof, by and among certainAffiliated Persons of Senior Housing Properties Trust, as landlord, and certainAffiliated Persons of Five Star, as tenant.

##  

## **1.73             “OverdueRate” **shallmean, on any date, a perannum rate of interest equal to thelesser of fifteen percent (15%) and the maximum rate then permitted underApplicable Laws.

##  

## **1.74             “Parent” **shall mean,with respect to any Person, any Person which owns directly, or indirectlythrough one or more Subsidiaries or Affiliated Persons, twenty percent (20%) ormore of the voting or beneficial interest in, or otherwise has the right orpower (whether by contract, through ownership of securities or otherwise) tocontrol, such Person.

 

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## **1.75             “PermittedEncumbrances” **shallmean, with respect to any Property, all rights, restrictions, and easements ofrecord set forth on Schedule B to the applicable owner’s or leasehold titleinsurance policy issued to Landlord with respect to such Property, plus anyother encumbrances as may have been granted or caused by Landlord or otherwiseconsented to in writing by Landlord from time to time.

##  

## **1.76             “PermittedUse” **shall mean,with respect to any Property, any use of such Property permitted pursuant to Section 4.1.1.

##  

## **1.77             “Person” **shall mean anyindividual or Entity, and the heirs, executors, administrators, legalrepresentatives, successors and assigns of such Person where the context soadmits.

##  

## **1.78            **“**Pledge Agreement”**  shall mean, collectively, any pledgeagreement made in favor of Landlord with respect to the stock or other equityinterests of Tenant or any assignee, subtenant or other transferee, as it orthey may be amended, restated, supplemented or otherwise modified from time totime.

##  

## **1.79             “Property” **shall have themeaning given such term in Section 2.1.

##  

## **1.80             “ProviderAgreements”** shall mean all participation, provider andreimbursement agreements or arrangements now or hereafter in effect for thebenefit of Tenant or any Manager in connection with the operation of anyFacility relating to any right of payment or other claim arising out of or inconnection with Tenant’s participation in any Third Party Payor Program.

##  

## **1.81             “RegulatedMedical Wastes”** shall mean all materials generated by Tenant, subtenants, patients,occupants or the operators of the Leased Property which are now or mayhereafter be subject to regulation pursuant to the Material Waste Tracking Actof 1988, or any Applicable Laws promulgated by any Government Agencies.

##  

## **1.82             “Rent” **shall mean,collectively, the Minimum Rent, Additional Rent and Additional Charges.

##  

## **1.83            ****“RMI Lease” **shall mean, that certain Master Lease Agreement,dated as of September 1, 2008, by and among certain Affiliated Persons ofLandlord and Five Star Quality Care-RMI, LLC, together with all modifications,amendments and supplements thereto.

 

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##  

## **1.84             “RMIProperty” **shall mean a “Property”, as defined therein, underthe RMI Lease.

##  

## **1.85            ****“Rules” **shallhave the meaning given such term in Section 22.1.

##  

## **1.86             “SEC” **shall mean theSecurities and Exchange Commission.

##  

## **1.87             “SecurityAgreement” **shallmean, collectively, any security agreement made by Tenant or any assignee,subtenant or other transferee for the benefit of Landlord, as it or they may beamended, restated, supplemented or otherwise modified from time to time.

##  

## **1.88             “State” **shall mean,with respect to any Property, the state, commonwealth or district in which suchProperty is located.

##  

## **1.89             “SubordinatedCreditor” **shallmean any creditor of Tenant which is a party to a Subordination Agreement infavor of Landlord.

##  

## **1.90             “SubordinationAgreement” **shallmean any agreement (and any amendments thereto) executed by a SubordinatedCreditor pursuant to which the payment and performance of Tenant’s obligationsto such Subordinated Creditor are subordinated to the payment and performanceof Tenant’s obligations to Landlord under this Agreement.

##  

## **1.91             “Subsidiary” **shall mean,with respect to any Person, any Entity (a) in which such Person ownsdirectly, or indirectly through one or more Subsidiaries, twenty percent (20%)or more of the voting or beneficial interest or (b) which such Personotherwise has the right or power to control (whether by contract, throughownership of securities or otherwise).

##  

## **1.92             “SuccessorLandlord” **shallhave the meaning given such term in Section 20.2.

##  

## **1.93             “Tenant” **shallhave the meaning given such term in the preambles to this Agreement and shallalso include its permitted successors and assigns.

##  

## **1.94             “Tenant’sPersonal Property” **shallmean all motor vehicles and consumable inventory and supplies, furniture,furnishings, equipment, movable walls and partitions, equipment and machineryand all other tangible personal property of 

 

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## Tenant, if any, acquired by Tenant on and after theapplicable Commencement Date for any Property and located at such Property orused in Tenant’s business at the Leased Property and all modifications,replacements, alterations and additions to such personal property installed atthe expense of Tenant, other than any items included within the definitions ofFixtures and Leased Personal Property.

##  

## **1.95             “Term” **shall mean,collectively, the Fixed Term and the Extended Term, to the extent properlyexercised pursuant to the provisions of Section 2.4, unless soonerterminated pursuant to the provisions of this Agreement.

##  

## **1.96             “ThirdParty Payor Programs”** shall mean all third party payor programs in which Tenant presently orin the future may participate, including, without limitation, Medicare,Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, Managed Care Plans, otherprivate insurance programs and employee assistance programs.

##  

## **1.97             “ThirdParty Payors” **shallmean Medicare, Medicaid, CHAMPUS, Blue Cross and/or Blue Shield, privateinsurers and any other Person which presently or in the future maintains ThirdParty Payor Programs.

##  

## **1.98             “Unsuitablefor Its Permitted Use” **shallmean, with respect to any Facility, a state or condition of such Facility suchthat (a) following any damage or destruction involving a Facility, (i) suchFacility cannot be operated on a commercially practicable basis for itsPermitted Use and it cannot reasonably be expected to be restored tosubstantially the same condition as existed immediately before such damage ordestruction, and as otherwise required by Section 10.2.4, withintwelve (12) months following such damage or destruction or such longer periodof time as to which business interruption insurance is available to cover Rentand other costs related to the applicable Property following such damage ordestruction, (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 ordestruction, or (b) as the result of a partial taking by Condemnation,such Facility cannot be operated, in the good faith judgment of Tenant, on acommercially practicable basis for its Permitted Use.

##  

## **1.99             “Work” **shall have themeaning given such term in Section 10.2.4.

 

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# **ARTICLE2**

 

# **LEASED PROPERTYAND TERM**

 

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

##  

#### (a)           thosecertain tracts, pieces and parcels of land, as more particularly described in ExhibitsA-1 through A-53 attached hereto and made a part hereof (the “Land”);

####  

#### (b)           allbuildings, structures and other improvements of every kind including, but notlimited to, alleyways and connecting tunnels, sidewalks, utility pipes,conduits and lines (on-site and off-site), parking areas and roadwaysappurtenant to such buildings and structures presently situated upon the Land(collectively, the “Leased Improvements”);

####  

#### (c)           alleasements, rights and appurtenances relating to the Land and the LeasedImprovements;

####  

#### (d)           allequipment, machinery, fixtures, and other items of property, now or hereafterpermanently affixed to or incorporated into the Leased Improvements, including,without limitation, all furnaces, boilers, heaters, electrical equipment,heating, plumbing, lighting, ventilating, refrigerating, incineration, air andwater pollution control, waste disposal, air-cooling and air-conditioningsystems and apparatus, sprinkler systems and fire and theft protectionequipment, all of which, to the maximum extent permitted by law, are herebydeemed by the parties hereto to constitute real estate, together with allreplacements, modifications, alterations and additions thereto, butspecifically excluding all items included within the category of Tenant’sPersonal Property (collectively, the “Fixtures”);

####  

#### (e)           allmachinery, equipment, furniture, furnishings, moveable walls or partitions,computers or trade fixtures or other personal property of any kind ordescription used or useful in Tenant’s business on or in the LeasedImprovements, and located on or in the Leased Improvements, and allmodifications, replacements, alterations and 

 

18

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#### additions tosuch personal property, except items, if any, included within the category ofFixtures, but specifically excluding all items included within the category ofTenant’s Personal Property (collectively, the “Leased Personal Property”);

####  

#### (f)            allof the Leased Intangible Property; and

####  

#### (g)           anyand all leases of space in the Leased Improvements.

####  

## **2.2               Conditionof Leased Property.** Tenant acknowledges receipt and delivery ofpossession of the Leased Property and Tenant accepts the Leased Property in its“as is” condition, subject to the rights of parties in possession, the existingstate of title, including all covenants, conditions, restrictions,reservations, mineral leases, easements and other matters of record or that arevisible or apparent on the Leased Property, all applicable Legal Requirements,the lien of any financing instruments, mortgages and deeds of trust existingprior to the applicable Commencement Date for any Property or permitted by theterms of this Agreement, and such other matters which would be disclosed by aninspection of the Leased Property and the record title thereto or by anaccurate survey thereof.  TENANTREPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOINGAND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANYREPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD’S AGENTS OR EMPLOYEES WITHRESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD INRESPECT 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 CONDITION FOR ANY PARTICULAR USE ORPURPOSE 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 BYTENANT.  To the maximum extent permittedby law, however, Landlord hereby assigns to Tenant all of Landlord’s rights toproceed against any predecessor in interest or insurer for breaches ofwarranties or representations or for latent defects in the LeasedProperty.  Landlord shall fully cooperatewith Tenant in the prosecution of any such claims, in Landlord’s or Tenant’sname, all at Tenant’s sole cost and expense. Tenant shall indemnify, defend, and hold harmless Landlord from andagainst any loss, cost, damage or liability (including reasonable attorneys’fees) incurred by Landlord in connection with such cooperation.

 

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## **2.3               FixedTerm.** The initial term of this Agreement (the “FixedTerm”) with respect to each Property commenced on the Commencement Datewith respect to such Property and shall expire on December 31, 2024.

##  

## **2.4               ExtendedTerms.** Provided that no Event of Default shall haveoccurred and be continuing, Tenant shall have the right to extend the Term fortwo renewal terms of fifteen (15) years each (each an “Extended Term”).

##  

If andto the extent Tenant shall exercise the options, the first Extended Term shallcommence on January 1, 2025 and expire on December 31, 2039 and thesecond Extended Term shall commence on January 1, 2040 and expire on December 31,2054.  All of the terms, covenants andprovisions of this Agreement shall apply to each Extended Term, except thatTenant shall have no right to extend the Term beyond December 31,2054.  If Tenant shall elect to exercisethe option to extend the Term for the first Extended Term, it shall do so bygiving Landlord Notice thereof not later than December 31, 2022, and ifTenant shall elect to exercise its option to extend the Term for the secondExtended Term after having elected to extend the Term for the first ExtendedTerm, it shall do so by giving Landlord Notice not later than December 31,2037, it being understood and agreed that time shall be of the essence withrespect to the giving of any such Notice. If Tenant shall fail to give any such Notice, this Agreement shallautomatically terminate at the end of the Fixed Term or the first Extended Termas applicable and Tenant shall have no further option to extend the Term ofthis Agreement.  If Tenant shall givesuch Notice, the extension of this Agreement shall be automatically effectedwithout the execution of any additional documents; it being understood and agreed,however, that Tenant and Landlord shall execute such documents and agreementsas either party shall reasonably require to evidence the same.  Notwithstanding the provisions of theforegoing sentence, if, subsequent to the giving of such Notice, an Event ofDefault shall occur, at Landlord’s option, the extension of this Agreementshall cease to take effect and this Agreement shall automatically terminate atthe end of the Fixed Term or the Extended Term, as applicable, and Tenant shallhave no further option to extend the Term of this Agreement.

 

Notwithstandingthe foregoing, Tenant shall have no right to extend the Term for eitherExtended Term with respect to any Properties located in the State ofCalifornia.  If Tenant shall extend theTerm, the definition of Leased Property shall exclude any Properties located inthe State of California during the Extended Term(s), Minimum Rent shall bereduced by the Minimum 

 

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Rent allocated thereto by the parties, and Tenantshall surrender such Properties to Landlord at the expiration of the Fixed Termin the condition required by Section 5.3 and shall comply with allof its other obligations relating to such Properties as if the Term had expiredat the end of the Fixed Term.

 

## **2.5               Limitations on Term**.  Notwithstandinganything contained in Section 2.3 or Section 2.4 to thecontrary, the Term of this Agreement with respect to any Property shall notextend beyond the term of any ground lease (including renewals and extensionsthereof) pursuant to which Landlord leases such Property.

##  

# **ARTICLE3**

 

# **RENT**

 

## **3.1               Rent.** Tenant shall pay, inlawful money of the United States of America which shall be legal tender forthe payment of public and private debts, without offset, abatement, demand ordeduction (unless otherwise expressly provided in this Agreement), Minimum Rentand Additional Rent to Landlord and Additional Charges to the party to whomsuch Additional Charges are payable, during the Term.  All payments to Landlord shall be made bywire transfer of immediately available federal funds or by other meansacceptable to Landlord in its sole discretion. Rent for any partial calendar month shall be prorated on a per diembasis.

##  

### **3.1.1           MinimumRent.**

###  

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

####  

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

 

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#### (c)           **Adjustments of Minimum Rent Following Disbursements Under Sections5.1.2(b), 10.2.3 and 11.2****.**  Effective on the date of each disbursement topay for the cost of any repairs, maintenance, renovations or replacementspursuant to Sections 5.1.2(b), 10.2.3 or 11.2, the annual Minimum Rentshall be increased by a perannum amount equal to theDisbursement Rate times the amount so disbursed.  If any such disbursement is made during anycalendar month on a day other than the first Business Day of such calendarmonth, Tenant shall pay to Landlord on the first Business Day of theimmediately following calendar month (in addition to the amount of Minimum Rentpayable with respect to such calendar month, as adjusted pursuant to thisparagraph (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 ofMinimum 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), ifthis Agreement shall terminate with respect to any Property but less than allof the Leased Property, Minimum Rent shall be reduced by the affected Property’sallocable share of Minimum Rent determined in accordance with the applicableprovisions of this Agreement.

####  

### **3.1.2           AdditionalRent**.

###  

#### (a)           **Amount****.** Tenant shall pay additional rent (“AdditionalRent”) with respect to each Lease Year during the Term in an amount, notless than zero, equal to four percent (4%) of Excess Gross Revenues at eachProperty.

####  

#### (b)           **Quarterly Installments****.** Installments of Additional Rent for each LeaseYear during the Term, or portion thereof, shall be calculated and paidquarterly in arrears.  Quarterly paymentsof Additional Rent for each Property shall be calculated based on Gross Revenuesfor such quarter during the preceding year and shall be due and payable anddelivered to Landlord on the first Business Day of each calendar quarter, orportion thereof, thereafter occurring during the Term, together with an Officer’sCertificate setting forth the calculation of Additional Rent due and payablefor such quarter.

####  

#### (c)           **Reconciliation of Additional Rent****.** In addition, within seventy-five (75) daysafter the end of each Lease 

 

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#### Year (or anyportion thereof occurring during the Term), Tenant shall deliver, or cause tobe delivered, to Landlord (i) a financial report setting forth the GrossRevenues for each Property for such preceding Lease Year, or portion thereof,together with an Officer’s Certificate from Tenant’s chief financial oraccounting officer certifying that such report is true and correct, and (ii) astatement showing Tenant’s calculation of Additional Rent due for suchpreceding Lease Year, or portion thereof, based on the Gross Revenues set forthin such financial report, together with an Officer’s Certificate from Tenant’schief financial or accounting officer certifying that such statement is trueand correct.

####  

If the annual AdditionalRent for such preceding Lease Year as set forth in Tenant’s statement thereofexceeds the amount previously paid with respect thereto by Tenant, Tenant shallpay such excess to Landlord at such time as the statement is delivered,together with interest at the Interest Rate, which interest shall accrue fromthe close of such preceding Lease Year until the date that such statement isrequired to be delivered and, thereafter, such interest shall accrue at theOverdue Rate, until the amount of such difference shall be paid or otherwisedischarged.  If the annual AdditionalRent for such preceding Lease Year as shown in such statement is less than theamount previously paid with respect thereto by Tenant, provided that no Eventof Default shall have occurred and be continuing, Landlord shall grant Tenant acredit against the Additional Rent next coming due in the amount of suchdifference, together with interest at the Interest Rate, which interest shallaccrue from the date of payment by Tenant until the date such credit is appliedor paid, as the case may be.  If suchcredit cannot be made because the Term has expired prior to application in fullthereof, provided no Event of Default has occurred and is continuing, Landlordshall pay the unapplied balance of such credit to Tenant, together with interestat the Interest Rate, which interest shall accrue from the date of payment byTenant until the date of payment by Landlord.

 

#### (d)           **Confirmation of Additional Rent****.** Tenant shall utilize, or cause to be utilized,an accounting system for the Leased Property in accordance with its usual andcustomary practices and in all material respects in accordance with GAAP, whichwill accurately record all Gross Revenues and Tenant shall retain, for at leastthree 

 

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#### (3) yearsafter the expiration of each Lease Year, reasonably adequate records conformingto such accounting system showing all Gross Revenues for such Lease Year.  Landlord, at its own expense, except asprovided hereinbelow, shall have the right, exercisable by Notice to Tenant, byits accountants or representatives, to audit the information set forth in theOfficer’s Certificate referred to in subparagraph (c) above and, inconnection with such audits, to examine Tenant’s books and records with respectthereto (including supporting data and sales and excise tax returns).  Landlord shall begin such audit as soon asreasonably possible following its receipt of the applicable Officer’sCertificate and shall complete such audit as soon as reasonably possible thereafter.  All such audits shall be performed at thelocation where such books and records are customarily kept and in such a mannerso as to minimize any interference with Tenant’s business operations.  If any such audit discloses a deficiency inthe payment of Additional Rent and either Tenant agrees with the result of suchaudit or the matter is otherwise determined, Tenant shall forthwith pay toLandlord the amount of the deficiency, as finally agreed or determined,together with interest at the Interest Rate, from the date such payment shouldhave been made to the date of payment thereof, and if the amount of suchdeficiency exceeds five percent (5%) of the Additional Rent that should havebeen paid for any Lease Year, Tenant shall forthwith pay to Landlord theaggregate amount of all costs and expenses incurred by Landlord in connectionwith any such audit.  If any such auditdiscloses that Tenant paid more Additional Rent for any Lease Year than was duehereunder, and either Landlord agrees with the result of such audit or thematter is otherwise determined, provided no Event of Default has occurred andis continuing, Landlord shall, at Landlord’s option, either grant Tenant acredit or pay to Tenant an amount equal to the amount of such overpayment againstAdditional Rent next coming due in the amount of such difference, as finallyagreed or determined, together with interest at the Interest Rate, whichinterest shall accrue from the time of payment by Tenant until the date suchcredit is applied or paid, as the case may be; provided, however,that, upon the expiration or sooner termination of the Term, provided no Eventof Default has occurred and is continuing, Landlord shall pay the unappliedbalance of such credit to Tenant, together with interest at the Interest Rate,which interest shall accrue from the date of payment by Tenant until the dateof payment from Landlord.  

 

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#### Any disputeconcerning the correctness of an audit shall be settled by arbitration pursuantto the provisions of Article 22.

####  

Any proprietaryinformation obtained by Landlord with respect to Tenant pursuant to theprovisions of this Agreement shall be treated as confidential, except that suchinformation may be disclosed or used, subject to appropriate confidentialitysafeguards, pursuant to court order or in any litigation between the partiesand except further that Landlord may disclose such information to itsprospective lenders, provided that Landlord shall direct such lenders tomaintain such information as confidential. The obligations of Tenant and Landlord contained in this Section 3.1.2shall survive the expiration or earlier termination of this Agreement.

 

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

###  

#### (a)           **Impositions****.** Subject to Article 8 relating topermitted contests, Tenant shall pay, or cause to be paid, all Impositionsbefore any fine, penalty, interest or cost (other than any opportunity cost asa result of a failure to take advantage of any discount for early payment) maybe added for non-payment, such payments to be made directly to the taxingauthorities where feasible, and shall promptly, upon request, furnish toLandlord copies of official receipts or other reasonably satisfactory proofevidencing such payments.  If any such Impositionmay, at the option of the taxpayer, lawfully be paid in installments (whetheror not interest shall accrue on the unpaid balance of such Imposition), Tenantmay exercise the option to pay the same (and any accrued interest on the unpaidbalance of such Imposition) in installments and, in such event, shall pay, orcause to pay, such installments during the Term as the same become due andbefore any fine, penalty, premium, further interest or cost may be addedthereto.  Landlord, at its expense, shall,to the extent required or permitted by Applicable Laws, prepare and file, orcause to be prepared and filed, all tax returns and pay all taxes due inrespect of Landlord’s net income, gross receipts, sales and use, singlebusiness, transaction privilege, rent, ad valorem, franchise taxes and taxes onits capital stock or other equity interests, and Tenant, at its expense, shall,

 

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#### to the extentrequired or permitted by Applicable Laws and regulations, prepare and file allother tax returns and reports in respect of any Imposition as may be requiredby Government Agencies.  Provided noEvent of Default shall have occurred and be continuing, if any refund shall bedue from any taxing authority in respect of any Imposition paid by or on behalfof Tenant, the same shall be paid over to or retained by Tenant.  Landlord and Tenant shall, upon request ofthe other, provide such data as is maintained by the party to whom the requestis made with respect to the Leased Property as may be necessary to prepare anyrequired returns and reports.  In theevent Government Agencies classify any property covered by this Agreement aspersonal property, Tenant shall file, or cause to be filed, all personalproperty tax returns in such jurisdictions where it may legally so file.  Each party shall, to the extent it possessesthe same, provide the other, upon request, with cost and depreciation recordsnecessary for filing returns for any property so classified as personal property.  Where Landlord is legally required to filepersonal property tax returns for property covered by this Agreement, Landlordshall provide Tenant with copies of assessment notices in sufficient time forTenant to file a protest.  AllImpositions assessed against such personal property shall be (irrespective ofwhether Landlord or Tenant shall file the relevant return) paid by Tenant notlater than the last date on which the same may be made without interest orpenalty, subject to the provisions of Article 8.

####  

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

 

Reference is made to thatcertain Development Agreement, dated as of 2003, between the City of Rogers,Minnesota (the “City of Rogers”) and SNH CHS Properties Trust, assuccessor by assignment from Dignified Assisted Living, Inc. (the “DevelopmentAgreement”).  Notwithstandinganything contained in this Agreement to the contrary, the Impositions payableby Tenant hereunder shall not include any of the Tax Increments described inthe Development Agreement.  So long asthe Development Agreement remains outstanding, (i) SNH CHS PropertiesTrust shall pay all of the Tax Increments directly to the City of 

 

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Rogers under theDevelopment Agreement; (ii) SNH CHS Properties Trust shall be entitled toreceive any portion of the Reimbursement Amount (as described in theDevelopment Agreement) paid by the City of Rogers under the DevelopmentAgreement, and (iii) Tenant shall pay to Landlord the fixed amount of$15,000 per year.

 

#### (b)           **Utility Charges****.** Tenant shall pay or cause to be paid allcharges for electricity, power, gas, oil, water and other utilities used inconnection with the Leased Property.

####  

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

####  

#### (d)           **Other Charges****.** Tenant shall pay or cause to be paid all otheramounts, liabilities and obligations, including, without limitation, groundrents, if any, and all amounts payable under any equipment leases and allagreements to indemnify Landlord under Sections 4.4.2 and 9.5.

####  

#### (e)           **Reimbursement for Additional Charges****.** If Tenant pays or causes to be paid propertytaxes or similar or other Additional Charges attributable to periods after theend of the Term, whether upon expiration or sooner termination of thisAgreement (other than termination by reason of an Event of Default), Tenantmay, within a reasonable time after the end of the Term, provide Notice toLandlord of its estimate of such amounts. Landlord shall promptly reimburse Tenant for all payments of such taxesand other similar Additional Charges that are attributable to any period afterthe Term of this Agreement.

####  

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

 

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## otherwise be due.  Ifany payments due from Landlord to Tenant shall not be paid within ten (10) daysafter its due date, Landlord shall pay to Tenant, on demand, a late charge (tothe extent permitted by law) computed at the Overdue Rate on the amount of suchinstallment from the due date of such installment to the date of paymentthereof.

##  

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

 

## **3.3               NetLease.** The Rent shall be absolutely net to Landlordso that this Agreement shall yield to Landlord the full amount of theinstallments or amounts of the Rent throughout the Term, subject to any otherprovisions of this Agreement which expressly provide otherwise, including thoseprovisions for adjustment or abatement of such Rent.

##  

## **3.4               NoTermination, Abatement, Etc.**  Except as otherwise specifically provided inthis Agreement, each of Landlord and Tenant, to the maximum extent permitted bylaw, shall remain bound by this Agreement in accordance with its terms andshall not take any action without the consent of the other to modify, surrenderor terminate this Agreement.  Inaddition, except as otherwise expressly provided in this Agreement, Tenantshall not seek, or be entitled to, any abatement, deduction, deferment orreduction of the Rent, or set-off against the Rent, nor shall the respectiveobligations of Landlord and Tenant be otherwise affected by reason of (a) anydamage to or destruction of the Leased Property, or any portion thereof, fromwhatever cause or any Condemnation, (b) the lawful or unlawful prohibitionof, or restriction upon, Tenant’s use of the Leased Property, or any portionthereof, or the interference with such use by any Person or by reason ofeviction by paramount title; (c) any claim which Tenant may have againstLandlord by reason of any default (other than a monetary default) or breach ofany warranty by Landlord under this Agreement or any other agreement betweenLandlord and Tenant, or to which Landlord and Tenant are parties; (d) anybankruptcy, insolvency, reorganization, composition, readjustment, liquidation,dissolution, winding up or other proceedings affecting Landlord or any assigneeor transferee of Landlord; or (e) for any other cause whether similar or 

 

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## dissimilar to any of the foregoing (other than a monetarydefault by Landlord).  Except asotherwise specifically provided in this Agreement, Tenant hereby waives allrights arising from any occurrence whatsoever, which may now or hereafter beconferred upon it by law (a) to modify, surrender or terminate thisAgreement or quit or surrender the Leased Property, or any portion thereof, or (b) whichwould entitle Tenant to any abatement, reduction, suspension or deferment ofthe Rent or other sums payable or other obligations to be performed by Tenanthereunder.  The obligations of Tenanthereunder shall be separate and independent covenants and agreements, and theRent and all other sums payable by Tenant hereunder shall continue to bepayable in all events unless the obligations to pay the same shall beterminated pursuant to the express provisions of this Agreement.

##  

# **ARTICLE 4**

 

# **USEOF THE LEASED PROPERTY**

 

## **4.1               Permitted Use.**

 

### **4.1.1           PermittedUse.**

 

#### (a)           Tenantshall, at all times during the Term, and at any other time that Tenant shall bein possession of any Property, continuously use and operate, or cause to beused and operated, such Property as a skilled nursing/ intermediatecare/independent living/assisted living/ special care/group home facility ascurrently operated, and any uses incidental thereto.  Tenant shall not use (and shall not permitany Person to use) any Property, or any portion thereof, for any other usewithout the prior written consent of Landlord, which approval shall not beunreasonably withheld, delayed or conditioned. No use shall be made or permitted to be made of any Property and no actsshall be done thereon which will cause the cancellation of any insurance policycovering such Property or any part thereof (unless another adequate policy isavailable) or which would constitute a default under any ground lease affectingsuch Property, nor shall Tenant sell or otherwise provide to residents orpatients therein, or permit to be kept, used or sold in or about any Propertyany article which may be prohibited by law or by the standard form of fireinsurance policies, or any other insurance policies required to be carriedhereunder, or fire underwriter’s regulations. Tenant shall, at its sole cost (except as expressly provided in Section 5.1.2(b)),

 

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#### comply or causeto be complied with all Insurance Requirements. Tenant shall not take or omit to take, or permit to be taken or omittedto be taken, any action, the taking or omission of which materially impairs thevalue or the usefulness of any Property or any part thereof for its PermittedUse.

####  

#### (b)           Inthe event that, in the reasonable determination of Tenant, it shall no longerbe economically practical to operate any Property as currently operated,****Tenant shall give Landlord Notice thereof, which Noticeshall set forth in reasonable detail the reasons therefor.  Thereafter, Landlord and Tenant shallnegotiate in good faith to agree on an alternative use for such Property,appropriate adjustments to the Additional Rent and other related matters; provided,however, in no event shall the Minimum Rent be reduced or abated as aresult thereof.  If Landlord and Tenantfail to agree on an alternative use for such Property within sixty (60) daysafter commencing negotiations as aforesaid, Tenant may market such Property forsale to a third party.  If Tenantreceives a bona fide offer (an “Offer”) to purchase such Property from aPerson having the financial capacity to implement the terms of such Offer,Tenant shall give Landlord Notice thereof, which Notice shall include a copy ofthe Offer executed by such third party. In the event that Landlord shall fail to accept or reject such Offerwithin thirty (30) days after receipt of such Notice, such Offer shall bedeemed to be rejected by Landlord.  IfLandlord shall sell the Property pursuant to such Offer, then, effective as ofthe date of such sale, this Agreement shall terminate with respect to suchProperty, and the Minimum Rent shall be reduced by an amount equal to theproduct of the net proceeds of sale received by Landlord multiplied by theInterest Rate.  If Landlord shall reject(or be deemed to have rejected) such Offer, then, effective as of the proposeddate of such sale, this Agreement shall terminate with respect to suchProperty, and the Minimum Rent shall be reduced by an amount equal to theproduct of the projected net proceeds determined by reference to such Offermultiplied by the Interest Rate.

####  

### **4.1.2           Necessary Approvals.** Tenant shall proceed with all due diligenceand exercise reasonable efforts to obtain and maintain, or cause to be obtainedand maintained, all approvals necessary to use and operate, for its PermittedUse, each Property and the Facility located thereon under Applicable Laws 

 

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### and, without limiting theforegoing, shall exercise reasonable efforts to maintain (or cause to bemaintained) appropriate certifications for reimbursement and licensure.

###  

### **4.1.3           Lawful Use, Etc.** Tenant shall not, and shall not permit anyPerson to use or suffer or permit the use of any Property or Tenant’s PersonalProperty, if any, for any unlawful purpose. Tenant shall not, and shall not permit any Person to, commit or sufferto be committed any waste on any Property, or in any Facility, nor shall Tenantcause or permit any unlawful nuisance thereon or therein.  Tenant shall not, and shall not permit anyPerson to, suffer nor permit any Property, or any portion thereof, to be usedin such a manner as (a) may materially and adversely impair Landlord’stitle thereto or to any portion thereof, or (b) may reasonably allow aclaim 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               Compliancewith Legal/Insurance Requirements, Etc.** Subject to the provisions of Section 5.1.2(b) andArticle 8, Tenant, at its sole expense, shall (a) comply with(or cause to be complied with) all material Legal Requirements and InsuranceRequirements in respect of the use, operation, maintenance, repair, alterationand restoration of any Property and with the terms and conditions of any groundlease affecting any Property, (b) perform (or cause to be performed) in atimely fashion all of Landlord’s obligations under any ground lease affectingany Property and (c) procure, maintain and comply with (or cause to beprocured, maintained and complied with) all material licenses, certificates ofneed, permits, provider agreements and other authorizations and agreementsrequired for any use of any Property and Tenant’s Personal Property, if any,then being made, and for the proper erection, installation, operation andmaintenance of the Leased Property or any part thereof.

##  

## **4.3               Compliancewith Medicaid and Medicare Requirements.**  Tenant, at its sole cost and expense, shallmake (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 totime, be required by Federal Medicare (Title 18) or Medicaid (Title 19) forskilled and/or intermediate care nursing programs, to the extent Tenant is aparticipant in such programs with respect to such Property, or any otherapplicable programs or legislation, or capital improvements required by anyother governmental agency having jurisdiction over any Property as a conditionof the continued operation of such Property for its Permitted Use.

 

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## **4.4               Environmental Matters**.

##  

### **4.4.1           Restriction on Use, Etc.** During the Term and any other time that Tenantshall be in possession of any Property, Tenant shall not, and shall not permitany Person to, store, spill upon, dispose of or transfer to or from suchProperty any Hazardous Substance, except in compliance with all Applicable Laws.  During the Term and any other time thatTenant shall be in possession of any Property, Tenant shall maintain (or shallcause to be maintained) such Property at all times free of any HazardousSubstance (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 ofHazardous Substances at any Property, (b) transmit to Landlord a copy ofany report which is required to be filed by Tenant or any Manager with respectto any Property pursuant to SARA Title III or any other Applicable Laws, (c) transmitto Landlord copies of any citations, orders, notices or other governmentalcommunications received by Tenant or any Manager or their respective agents orrepresentatives with respect thereto (collectively, “Environmental Notice”),which Environmental Notice requires a written response or any action to betaken and/or if such Environmental Notice gives notice of and/or presents amaterial risk of any material violation of any Applicable Laws and/or presentsa material risk of any material cost, expense, loss or damage (an “EnvironmentalObligation”), (d) observe and comply with (or cause to be observed andcomplied with) all Applicable Laws relating to the use, maintenance anddisposal of Hazardous Substances and all orders or directives from anyofficial, court or agency of competent jurisdiction relating to the use ormaintenance or requiring the removal, treatment, containment or otherdisposition thereof, and (e) pay or otherwise dispose (or cause to be paidor otherwise disposed) of any fine, charge or Imposition related thereto,unless Tenant or any Manager shall contest the same in good faith and byappropriate proceedings and the right to use and the value of any of the LeasedProperty is not materially and adversely affected thereby.

###  

If, atany time prior to the termination of this Agreement, Hazardous Substances(other than those maintained in accordance with Applicable Laws) are discoveredon any Property, subject to Tenant’s right to contest the same in accordancewith Article 8, Tenant shall take (and shall cause to be taken) allactions and incur any and all expenses, as are required by any GovernmentAgency and by Applicable Laws, (x) to clean up and remove from and aboutsuch Property all Hazardous Substances thereon, (y) to 

 

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contain and prevent any further release or threat ofrelease of Hazardous Substances on or about such Property and (z) to usegood faith efforts to eliminate any further release or threat of release ofHazardous Substances on or about such Property.

 

### **4.4.2           Indemnification of Landlord.** Tenant shall protect, indemnify and holdharmless Landlord and each Facility Mortgagee, their trustees, officers,agents, employees and beneficiaries, and any of their respective successors orassigns with respect to this Agreement (collectively, the “Indemnitees”and, individually, an “Indemnitee”) for, from and against any and alldebts, liens, claims, causes of action, administrative orders or notices,costs, fines, penalties or expenses (including, without limitation, reasonableattorney’s fees and expenses) imposed upon, incurred by or asserted against anyIndemnitee resulting from, either directly or indirectly, the presence in, uponor under the soil or ground water of any Property or any properties surroundingsuch Property of any Hazardous Substances in violation of any Applicable Laws,except to the extent the same arise from the acts or omissions of Landlord orany other Indemnitee or during any period that Landlord or a Person designatedby Landlord (other than Tenant) is in possession of such Property from andafter the Commencement Date for such Property. Tenant’s duty herein includes, but is not limited to, costs associatedwith personal injury or property damage claims as a result of the presenceprior to the expiration or sooner termination of the Term and the surrender ofsuch Property to Landlord in accordance with the terms of this Agreement ofHazardous Substances in, upon or under the soil or ground water of suchProperty in violation of any Applicable Laws. Upon Notice from Landlord and any other of the Indemnitees, Tenant shallundertake the defense, at Tenant’s sole cost and expense, of anyindemnification duties set forth herein, in which event, Tenant shall not beliable for payment of any duplicative attorneys’ fees incurred by anyIndemnitee.

###  

Tenantshall, upon demand, pay (or cause to be paid) to Landlord, as an AdditionalCharge, any cost, expense, loss or damage (including, without limitation,reasonable attorneys’ fees) reasonably incurred by Landlord and arising from afailure of Tenant to observe and perform (or to cause to be observed and performed)the requirements of this Section 4.4, which amounts shall bearinterest from the date ten (10) Business Days after written demandtherefor is given to Tenant until paid by Tenant to Landlord at the OverdueRate.

 

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###  

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

###  

# **ARTICLE 5**

 

# **MAINTENANCEAND REPAIRS**

 

## **5.1               Maintenance and Repair.**

##  

### **5.1.1           Tenant’s General Obligations.** Tenant shall keep (or cause to be kept), atTenant’s sole cost and expense, the Leased Property and all private roadways,sidewalks and curbs appurtenant thereto (and Tenant’s Personal Property) ingood order and repair, reasonable wear and tear excepted (whether or not theneed for such repairs occurs as a result of Tenant’s or any Manager’s use, anyprior use, the elements or the age of the Leased Property or Tenant’s PersonalProperty or any portion thereof), and shall promptly make or cause to be madeall necessary and appropriate repairs and replacements to each Property ofevery kind and nature, whether interior or exterior, structural ornonstructural, ordinary or extraordinary, foreseen or unforeseen or arising byreason of a condition existing prior to the Commencement Date for such Property(concealed or otherwise).  All repairsshall be made in a good, workmanlike manner, consistent with industry standardsfor comparable Facilities in like locales, in accordance with all applicablefederal, state and local statutes, ordinances, codes, rules andregulations relating to any such work. Tenant shall not take or omit to take (or permit any Person to take oromit to take) any action, the taking or omission of which would materially andadversely impair the value or the usefulness of the Leased Property or anymaterial part thereof for its Permitted Use. Tenant’s obligations under this Section 5.1.1 shall belimited in the event of any casualty or Condemnation as set forth in Article 10and Article 11 and Tenant’s obligations with respect to HazardousSubstances are as set forth in Section 4.4.

###  

### **5.1.2           Landlord’sObligations.**

###  

#### (a)           Exceptas otherwise expressly provided in this Agreement, Landlord shall not, underany circumstances, be required to build or rebuild any improvement on theLeased 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 orunforeseen, or to make any expenditure whatsoever with 

 

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#### respectthereto, or to maintain the Leased Property in any way.  Except as otherwise expressly provided inthis Agreement, Tenant hereby waives, to the maximum extent permitted by law,the right to make repairs at any Property at the expense of Landlord pursuantto any law in effect on the Commencement Date for such Property or thereafterenacted.  Landlord shall have the rightto give, record and post, as appropriate, notices of nonresponsibility underany mechanic’s lien laws now or hereafter existing.

####  

#### (b)           If,pursuant to the terms of this Agreement, Tenant is required to make anyexpenditures in connection with any repair, maintenance or renovation withrespect to any Property, Tenant may, at its election, advance such funds orgive Landlord Notice thereof, which Notice shall set forth, in reasonabledetail, the nature of the required repair, renovation or replacement, theestimated cost thereof and such other information with respect thereto asLandlord may reasonably require. Provided that no Event of Default shall have occurred and be continuingand Tenant shall otherwise comply with the applicable provisions of Article 6,Landlord shall, within ten (10) Business Days after such Notice, subjectto and in accordance with the applicable provisions of Article 6,disburse such required funds to Tenant (or, if Tenant shall so elect, directlyto the Manager or any other Person performing the required work) and, upon suchdisbursement, the Minimum Rent shall be adjusted as provided in Section 3.1.1(c).  Notwithstanding the foregoing, Landlord mayelect not to disburse such required funds to Tenant; provided, however, that ifLandlord shall elect not to disburse such required funds as aforesaid, Tenant’sobligation to make such required repair, renovation or replacement shall bedeemed waived by Landlord, and, notwithstanding anything contained in thisAgreement to the contrary, Tenant shall have no obligation to make suchrequired 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 respectto the Leased Property, or any part thereof, are hereby charged with noticethat liens on the Leased Property or on Landlord’s interest therein areexpressly prohibited and that they must look solely to Tenant to secure paymentfor any work done or material furnished to Tenant or any Manager or for anyother purpose during the term of this Agreement.

 

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Nothingcontained in this Agreement shall be deemed or construed in any way asconstituting the consent or request of Landlord, express or implied, by inferenceor otherwise, to any contractor, subcontractor, laborer or materialmen for theperformance of any labor or the furnishing of any materials for any alteration,addition, improvement or repair to the Leased Property or any part thereof oras giving Tenant any right, power or authority to contract for or permit therendering of any services or the furnishing of any materials that would giverise to the filing of any lien against the Leased Property or any part thereofnor to subject Landlord’s estate in the Leased Property or any part thereof toliability under any mechanic’s lien law of any State in any way, it beingexpressly understood Landlord’s estate shall not be subject to any suchliability.

 

## **5.2              Tenant’s Personal Property.** Tenant shall provide and maintain (or cause tobe provided and maintained) throughout the Term all such Tenant’s PersonalProperty as shall be necessary in order to operate in compliance withapplicable material Legal Requirements and Insurance Requirements and otherwisein accordance with customary practice in the industry for the PermittedUse.  If, from and after the CommencementDate with respect to any Property, Tenant acquires an interest in any item oftangible personal property (other than motor vehicles) on, or in connectionwith, the Leased Property, or any portion thereof, which belongs to anyoneother than Tenant, Tenant shall require the agreements permitting such use toprovide that Landlord or its designee may assume Tenant’s rights andobligations under such agreement upon Landlord’s purchase of the same inaccordance with the provisions of Article 15 and the assumption ofmanagement or operation of the Facility by Landlord or its designee.

##  

## **5.3                 Yield Up.** Upon the expiration or sooner termination ofthis Agreement (or the termination of this Agreement with respect to anyProperty), Tenant shall vacate and surrender the Leased Property or suchProperty (as applicable) to Landlord in substantially the same condition inwhich such Property was in on its Commencement Date, except as repaired,rebuilt, restored, altered or added to as permitted or required by theprovisions of this Agreement, reasonable wear and tear excepted (and casualtydamage and Condemnation, in the event that this Agreement is terminated followinga casualty or Condemnation in accordance with Article 10 or Article 11excepted).

##  

Inaddition, upon the expiration or earlier termination of this Agreement, Tenantshall, at Landlord’s sole cost and expense, use its good faith efforts totransfer (or cause to be 

 

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transferred) to and cooperate with Landlord orLandlord’s nominee in connection with the processing of all applications forlicenses, operating permits and other governmental authorizations and allcontracts, including contracts with governmental or quasi-governmental Entitieswhich may be necessary for the use and operation of the Facility as thenoperated.  If requested by Landlord,Tenant shall continue to manage one or more of the Facilities after theexpiration of the Term for up to one hundred eighty (180) days, on suchreasonable terms (which shall include an agreement to reimburse Tenant for itsreasonable out-of-pocket costs and expenses, and reasonable administrativecosts), as Landlord shall reasonably request.

 

## **5.4              Management Agreement**.  Tenant shall not, without Landlord’s priorwritten consent (which consent shall not be unreasonably withheld, delayed orconditioned), enter into, amend or modify the provisions of any Management Agreementwith respect to any Property.  AnyManagement Agreement entered into pursuant to the provisions of this Section 5.4shall be subordinate to this Agreement and shall provide, interalia,that all amounts due from Tenant to Manager thereunder shall be subordinate toall amounts due from Tenant to Landlord (provided that, as long as no Event ofDefault has occurred and is continuing, Tenant may pay all amounts due toManager thereunder pursuant to such Management Agreement) and for terminationthereof, at Landlord’s option, upon the termination of this Agreement.  Tenant shall not take any action, grant anyconsent or permit any action under any such Management Agreement which mighthave a material adverse effect on Landlord, without the prior written consentof Landlord, which consent shall not be unreasonably withheld, delayed orconditioned.

##  

# **ARTICLE 6**

 

# **IMPROVEMENTS,ETC.**

 

## **6.1               Improvementsto the Leased Property. **Tenantshall not make, construct or install (or permit to be made, constructed orinstalled) any Capital Additions without, in each instance, obtaining Landlord’sprior written consent, which consent shall not be unreasonably withheld,delayed or conditioned provided that (a) construction or installation ofthe same would not adversely affect or violate any material Legal Requirementor Insurance Requirement applicable to any Property and (b) Landlord shallhave received an Officer’s Certificate certifying as to the satisfaction of theconditions set out in clause (a) above; provided, however, thatno such consent shall be required in the event immediate action is 

 

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##  

## required to prevent imminent harm to person orproperty.  No Capital Addition shall bemade which would tie in or connect any Leased Improvements with any otherimprovements on property adjacent to any Property (and not part of the Land)including, without limitation, tie-ins of buildings or other structures orutilities.  Except as permitted herein,Tenant shall not finance the cost of any construction of such improvement bythe granting of a lien on or security interest in the Leased Property or suchimprovement, or Tenant’s interest therein, without the prior written consent ofLandlord, which consent may be withheld by Landlord in Landlord’s solediscretion.  Any such improvements shall,upon the expiration or sooner termination of this Agreement, remain or pass toand become the property of Landlord, free and clear of all encumbrances otherthan Permitted Encumbrances.

##  

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

##  

# **ARTICLE 7**

 

# **LIENS**

 

Subjectto Article 8, Tenant shall use its best efforts not, directly orindirectly, to create or allow to remain and shall promptly discharge (or causeto be discharged), at its expense, any lien, encumbrance, attachment, titleretention agreement or claim upon the Leased Property, or any portion thereof,or Tenant’s leasehold interest therein or any attachment, levy, claim orencumbrance in respect of the Rent, other than (a) Permitted Encumbrances,(b) restrictions, liens and other encumbrances which are consented to inwriting by Landlord, (c) liens for those taxes of Landlord which Tenant isnot required to pay hereunder, (d) subleases permitted by Article 16,(e) liens for Impositions or for sums resulting from noncompliance withLegal Requirements so long as (i) the same are not yet due and payable, or(ii) are being contested in accordance with Article 8, (f) liensof mechanics, laborers, materialmen, suppliers or vendors incurred in theordinary course of business that are not yet due and payable or are for sumsthat are being contested in accordance with Article 8, (g) anyFacility Mortgages or other liens which are the responsibility of Landlordpursuant to the provisions of Article 20 and (h) LandlordLiens and any other voluntary liens created by Landlord.

 

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# **ARTICLE 8**

 

# **PERMITTEDCONTESTS**

 

Tenantshall have the right to contest the amount or validity of any Imposition, LegalRequirement, Insurance Requirement, Environmental Obligation, lien, attachment,levy, encumbrance, charge or claim (collectively, “Claims”) as to theLeased Property, by appropriate legal proceedings, conducted in good faith andwith due diligence, provided that (a) the foregoing shall in no way beconstrued as relieving, modifying or extending Tenant’s obligation to pay (orcause to be paid) any Claims as finally determined, (b) such contest shallnot cause Landlord or Tenant to be in default under any mortgage or deed oftrust encumbering the Leased Property, or any portion thereof (Landlordagreeing that any such mortgage or deed of trust shall permit Tenant toexercise the rights granted pursuant to this Article 8) or anyinterest therein or result in or reasonably be expected to result in a lienattaching to the Leased Property, or any portion thereof, (c) no part ofthe Leased Property nor any Rent therefrom shall be in any immediate danger ofsale, forfeiture, attachment or loss, and (d) Tenant shall indemnify andhold harmless Landlord from and against any cost, claim, damage, penalty orreasonable expense, including reasonable attorneys’ fees, incurred by Landlordin connection therewith or as a result thereof. Landlord agrees to join in any such proceedings if required legally toprosecute such contest, provided that Landlord shall not thereby be subjectedto any liability therefor (including, without limitation, for the payment ofany costs or expenses in connection therewith) unless Tenant agrees byagreement in form and substance reasonably satisfactory to Landlord, to assumeand indemnify Landlord with respect to the same.  Tenant shall be entitled to any refund of anyClaims and such charges and penalties or interest thereon which have been paidby Tenant or paid by Landlord to the extent that Landlord has been fully reimbursedby Tenant.  If Tenant shall fail (x) topay or cause to be paid any Claims when finally determined, (y) to providereasonable security therefor or (z) to prosecute or cause to be prosecutedany such contest diligently and in good faith, Landlord may, upon reasonablenotice to Tenant (which notice shall not be required if Landlord shallreasonably determine that the same is not practicable), pay such charges,together with interest and penalties due with respect thereto, and Tenant shallreimburse Landlord therefor, upon demand, as Additional Charges.

 

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# **ARTICLE 9**

 

# **INSURANCEAND INDEMNIFICATION**

 

## **9.1               GeneralInsurance Requirements.** Tenant shall, at all times during the Term andat any other time Tenant shall be in possession of any Property, or any portionthereof, keep (or cause to be kept) such Property and all property locatedtherein or thereon, insured against the risks and in such amounts as is againstsuch risks and in such amounts as Landlord shall reasonably require and may becommercially reasonable.  Tenant shallprepare a proposal setting forth the insurance Tenant proposes to be maintainedwith respect to each Property during the ensuing Fiscal Year and shall submitsuch proposal to Landlord on or before December 1 of the preceding LeaseYear for Landlord’s review and approval, which approval shall not beunreasonably withheld, delayed or conditioned. In the event that Landlord shall fail to respond within thirty (30) daysafter receipt of such proposal, such proposal shall be deemed approved.

##  

## **9.2               Waiverof Subrogation.** Landlord and Tenant agree that (insofar as andto the extent that such agreement may be effective without invalidating ormaking it impossible to secure insurance coverage from responsible insurancecompanies doing business in any State) with respect to any property loss which iscovered by insurance then being carried by Landlord or Tenant, the partycarrying such insurance and suffering said loss releases the others of and fromany and all claims with respect to such loss; and they further agree that theirrespective insurance companies (and, if Landlord or Tenant shall self insure inaccordance with the terms hereof, Landlord or Tenant, as the case may be) shallhave no right of subrogation against the other on account thereof, even thoughextra premium may result therefrom.  Inthe event that any extra premium is payable by Tenant as a result of thisprovision, Landlord shall not be liable for reimbursement to Tenant for suchextra premium.

##  

## **9.3               Form Satisfactory,Etc.** All insurance policies and endorsementsrequired pursuant to this Article 9 shall be fully paid for,nonassessable, and issued by reputable insurance companies authorized to dobusiness in the State and having a general policy holder’s rating of no lessthan A in Best’s latest rating guide. All property, business interruption, liability and flood insurancepolicies with respect to each Property shall include no deductible in excess ofTwo Hundred Fifty Thousand Dollars ($250,000). At all times, all property, 

 

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## business interruption, liability and flood insurancepolicies, with the exception of worker’s compensation insurance coverage, shallname Landlord and any Facility Mortgagee as additional insureds, as theirinterests may appear.  All lossadjustments shall be payable as provided in Article 10, except thatlosses under liability and worker’s compensation insurance policies shall bepayable directly to the party entitled thereto. Tenant shall cause all insurance premiums to be paid prior to theeffective date of any policy, if required by such policy, or pursuant to aninstallment payment plan if permissible under such policy.  Not more than twenty five (25) days nor lessthan five (5) days prior to the effective date of the policies or renewalpolicies (which, for renewal policies, shall be prior to the expiration of theexisting policy), Tenant shall deliver to Landlord copies of enforceablebinders for such insurance coverage. Tenant shall deliver (or cause to be delivered) to Landlord certificatesevidencing such insurance coverage within five (5) days after theeffective date of such policies, and thereafter Tenant shall deliver toLandlord the policies or renewal policies promptly upon receipt by Tenant.  All such policies shall provide Landlord (andany Facility Mortgagee if required by the same) thirty (30) days prior writtennotice of any material change or cancellation of such policy.  In the event Tenant shall fail to effect (orcause to be effected) such insurance as herein required, to pay (or cause to bepaid) the premiums therefor or to deliver (or cause to be delivered) suchpolicies or certificates to Landlord or any Facility Mortgagee at the timesrequired, Landlord shall have the right, but not the obligation, upon Notice toTenant, to acquire such insurance and pay the premiums therefor, which amountsshall be payable to Landlord, upon demand, as Additional Charges, together withinterest accrued thereon at the Overdue Rate from the date such payment is madeuntil (but excluding) the date repaid.

##  

## **9.4               NoSeparate Insurance; Self-Insurance.** Tenant shall not take (or permit any Person totake) out separate insurance, concurrent in form or contributing in the eventof loss with that required by this Article 9, or increase theamount of any existing insurance by securing an additional policy or additionalpolicies, unless all parties having an insurable interest in the subject matterof such insurance, including Landlord and all Facility Mortgagees, are includedtherein as additional insureds and the loss is payable under such insurance inthe same manner as losses are payable under this Agreement.  In the event Tenant shall take out any suchseparate insurance or increase any of the amounts of the then existinginsurance, Tenant shall give Landlord prompt Notice thereof.  Tenant shall 

 

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## not self-insure (or permit any Person to self-insure) withrespect to any insurance required to be carried hereunder by Tenant.

##  

## **9.5               Indemnificationof Landlord.** Notwithstanding the existence of any insuranceprovided for herein and without regard to the policy limits of any suchinsurance, Tenant shall protect, indemnify and hold harmless Landlord for, fromand against all liabilities, obligations, claims, damages, penalties, causes ofaction, costs and reasonable expenses (including, without limitation,reasonable attorneys’ fees), to the maximum extent permitted by law, imposedupon or incurred by or asserted against Landlord by reason of the following,except to the extent caused by Landlord’s gross negligence or willfulmisconduct:  (a) any accident,injury to or death of persons or loss of or damage to property occurring on orabout any Property or portion thereof or adjoining sidewalks or rights of way, (b) anypast, present or future use, misuse, non-use, condition, management,maintenance or repair by Tenant, any Manager or anyone claiming under any ofthem or Tenant’s Personal Property or any litigation, proceeding or claim bygovernmental entities or other third parties to which Landlord is made a partyor participant relating to any Property or portion thereof or Tenant’s PersonalProperty or such use, misuse, non-use, condition, management, maintenance, orrepair thereof including, failure to perform obligations (other thanCondemnation proceedings) to which Landlord is made a party, (c) anyImpositions that are the obligations of Tenant to pay pursuant to theapplicable provisions of this Agreement, and (d) any failure on the partof Tenant or anyone claiming under Tenant to perform or comply with any of theterms of this Agreement.  Tenant, at itsexpense, shall contest, resist and defend any such claim, action or proceedingasserted or instituted against Landlord (and shall not be responsible for any duplicativeattorneys’ fees incurred by Landlord) or may compromise or otherwise dispose ofthe same, with Landlord’s prior written consent (which consent may not beunreasonably withheld, delayed or conditioned). The obligations of Tenant under this Section 9.5 are inaddition to the obligations set forth in Section 4.4 and shallsurvive the termination of this Agreement.

##  

# **ARTICLE10**

 

# **CASUALTY**

 

## **10.1             InsuranceProceeds.** Except as provided in the last clause of thissentence, all proceeds payable by reason of any loss or damage to any Property,or any portion thereof, and 

 

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## insured under any policy of insurance required by Article 9(other than the proceeds of any business interruption insurance) shall be paiddirectly to Landlord (subject to the provisions of Section 10.2)and all loss adjustments with respect to losses payable to Landlord shallrequire the prior written consent of Landlord, which consent shall not beunreasonably withheld, delayed or conditioned; provided, however,that, so long as no Event of Default shall have occurred and be continuing, allsuch 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 withoutLandlord’s consent.  If Tenant isrequired to reconstruct or repair any Property as provided herein, suchproceeds shall be paid out by Landlord from time to time for the reasonablecosts of reconstruction or repair of such Property necessitated by such damageor destruction, subject to and in accordance with the provisions of Section 10.2.4.  Provided no Default or Event of Default hasoccurred and is continuing, any excess proceeds of insurance remaining afterthe completion of the restoration shall be paid to Tenant.  In the event that the provisions of Section 10.2.1are applicable, the insurance proceeds shall be retained by the party entitledthereto pursuant to Section 10.2.1.

##  

## **10.2             Damage or Destruction**.

##  

### **10.2.1         Damage or Destruction of LeasedProperty**. If, during the Term, any Property shall be totally or partiallydestroyed and the Facility located thereon is thereby rendered Unsuitable forIts Permitted Use, either Landlord or Tenant may, by the giving of Noticethereof to the other, terminate this Agreement with respect to such affectedProperty, whereupon, this Agreement shall terminate with respect to suchaffected Property and Landlord shall be entitled to retain the insuranceproceeds payable on account of such damage. In such event, Tenant shall pay to Landlord the amount of any deductibleunder the insurance policies covering such Facility, the amount of anyuninsured loss and any difference between the replacement cost of the affectedProperty and the casualty insurance proceeds therefor.

###  

### **10.2.2         Partial Damage or Destruction.** If, during the Term, any Property shall betotally or partially destroyed but the Facility is not rendered Unsuitable forIts 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 ofthe applicable Facility exceeds the 

 

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### amount of insurance proceedsreceived by Landlord and Tenant pursuant to Section 9.1, Tenantshall give Landlord Notice thereof which notice shall set forth in reasonabledetail the nature of such deficiency and whether Tenant shall pay and assumethe amount of such deficiency (Tenant having no obligation to do so, exceptthat, if Tenant shall elect to make such funds available, the same shall becomean irrevocable obligation of Tenant pursuant to this Agreement).  In the event Tenant shall elect not to payand assume the amount of such deficiency, Landlord shall have the right (butnot the obligation), exercisable at Landlord’s sole election by Notice toTenant, 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 restorationthe amount of such deficiency; provided, however, in such event,upon any disbursement by Landlord thereof, the Minimum Rent shall be adjustedas provided in Section 3.1.1(c). In the event that neither Landlord nor Tenant shall elect to make such deficiencyavailable for restoration, either Landlord or Tenant may terminate thisAgreement with respect to the affected Property by Notice to the other,whereupon, this Agreement shall so terminate and insurance proceeds shall bedistributed as provided in Section 10.2.1.  It is expressly understood and agreed,however, that, notwithstanding anything in this Agreement to the contrary,Tenant shall be strictly liable and solely responsible for the amount of anydeductible and shall, upon any insurable loss, pay over the amount of suchdeductible to Landlord at the time and in the manner herein provided forpayment of the applicable proceeds to Landlord.

###  

### **10.2.4         Disbursement of Proceeds.** In the event Tenant is required to restore anyProperty pursuant to Section 10.2 and this Agreement is notterminated as to such Property pursuant to this Article 10, Tenantshall commence (or cause to be commenced) promptly and continue diligently toperform (or cause to be performed) the repair and restoration of such Property(hereinafter called the “Work”), so as to restore (or cause to berestored) the applicable Property in material compliance with all LegalRequirements and so that such Property shall be, to the extent practicable,substantially equivalent in value and general utility to its general utilityand value immediately prior to such damage or destruction.  Subject to the terms hereof, Landlord shalladvance the insurance proceeds and any additional amounts payable by Landlordpursuant to Section 10.2.3 or otherwise deposited with Landlord toTenant regularly during the repair and restoration period so as to permitpayment for the cost of any such restoration and repair.  Any such 

 

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### advances shall be made not morethan monthly within ten (10) Business Days after Tenant submits toLandlord a written requisition and substantiation therefor on AIA Forms G702and G703 (or on such other form or forms as may be reasonably acceptable toLandlord).  Landlord may, at its option,condition advancement of such insurance proceeds and other amounts on (a) theabsence of any Event of Default, (b) its approval of plans andspecifications of an architect satisfactory to Landlord (which approval shallnot be unreasonably withheld, delayed or conditioned), (c) generalcontractors’ estimates, (d) architect’s certificates, (e) conditionallien waivers of general contractors, if available, (f) evidence ofapproval by all governmental authorities and other regulatory bodies whoseapproval is required, (g), if Tenant has elected to advance deficiency fundspursuant to Section 10.2.3, Tenant depositing the amount thereofwith Landlord and (h) such other certificates as Landlord may, from timeto time, reasonably require.

###  

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

 

Tenant’sobligation to restore the applicable Property pursuant to this Article 10shall be subject to the release of available insurance proceeds by theapplicable Facility Mortgagee to Landlord or directly to Tenant and, in theevent such proceeds are insufficient, Landlord electing to make such deficiencyavailable therefor (and disbursement of such deficiency).

 

## **10.3             DamageNear End of Term.** Notwithstanding any provisions of Section 10.1or 10.2 to the contrary, if damage to or destruction of any Property occursduring the last twelve (12) months of the Term and if such damage ordestruction cannot reasonably be expected to be fully repaired and restoredprior to the date that is six (6) months prior to the end of the Term, theprovisions of Section 10.2.1 shall apply as if such Property hadbeen totally or partially destroyed and the Facility thereon renderedUnsuitable for its Permitted Use.

##  

## **10.4             Tenant’sProperty. **Allinsurance proceeds payable by reason of any loss of or damage to any of Tenant’sPersonal Property shall be paid to Tenant and, to the extent necessary torepair 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 orreplacing damaged Tenant’s Personal Property.

 

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##  

## **10.5             Restorationof Tenant’s Property.** If Tenant is required to restore any Propertyas hereinabove provided, Tenant shall either (a) restore all alterationsand improvements made by Tenant and Tenant’s Personal Property, or (b) replacesuch alterations and improvements and Tenant’s Personal Property withimprovements or items of the same or better quality and utility in theoperation of such Property.

##  

## **10.6             NoAbatement of Rent.** This Agreement shall remain in full force andeffect and Tenant’s obligation to make all payments of Rent and to pay allother charges as and when required under this Agreement shall remain unabatedduring the Term notwithstanding any damage involving the Leased Property, orany portion thereof (provided that Landlord shall credit against such paymentsany amounts paid to Landlord as a consequence of such damage under any businessinterruption insurance obtained by Tenant hereunder).  The provisions of this Article 10shall be considered an express agreement governing any cause of damage ordestruction to the Leased Property, or any portion thereof, and, to the maximumextent permitted by law, no local or State statute, laws, rules, regulation orordinance in effect during the Term which provide for such a contingency shallhave any application in such case.

##  

## **10.7             Waiver.** Tenant hereby waivesany statutory rights of termination which may arise by reason of any damage ordestruction of the Leased Property, or any portion thereof.

##  

# **ARTICLE11**

 

# **CONDEMNATION**

 

## **11.1             TotalCondemnation, Etc.** If either (a) the whole of any Property shall be taken byCondemnation or (b) a Condemnation of less than the whole of any Propertyrenders any Property Unsuitable for Its Permitted Use, this Agreement shallterminate with respect to such Property, and Tenant and Landlord shall seek theAward for their interests in the applicable Property as provided in Section 11.5.

##  

## **11.2             PartialCondemnation.** In the event of a Condemnation of less thanthe whole of any Property such that such Property is still suitable for itsPermitted Use, Tenant shall, to the extent of the Award and any additionalamounts disbursed by Landlord as hereinafter provided, commence (or cause to becommenced) promptly and continue diligently to restore (or cause to berestored) the untaken portion of the applicable Leased Improvements so thatsuch Leased Improvements shall constitute a 

 

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## complete architectural unit of the same general characterand condition (as nearly as may be possible under the circumstances) as suchLeased Improvements existing immediately prior to such Condemnation, inmaterial compliance with all Legal Requirements, subject to the provisions ofthis Section 11.2.  If thecost of the repair or restoration of the affected Property exceeds the amountof the Award, Tenant shall give Landlord Notice thereof which notice shall setforth in reasonable detail the nature of such deficiency and whether Tenantshall pay and assume the amount of such deficiency (Tenant having no obligationto do so, except that if Tenant shall elect to make such funds available, thesame shall become an irrevocable obligation of Tenant pursuant to thisAgreement).  In the event Tenant shallelect not to pay and assume the amount of such deficiency, Landlord shall havethe right (but not the obligation), exercisable at Landlord’s sole election byNotice to Tenant given within sixty (60) days after Tenant’s Notice of thedeficiency, to elect to make available for application to the cost of repair orrestoration the amount of such deficiency; provided, however, insuch event, upon any disbursement by Landlord thereof, the Minimum Rent shallbe adjusted as provided in Section 3.1.1(c).  In the event that neither Landlord nor Tenantshall elect to make such deficiency available for restoration, either Landlordor Tenant may terminate this Agreement with respect to the affected Propertyand the entire Award shall be allocated as set forth in Section 11.5.

##  

Subjectto the terms hereof, Landlord shall contribute to the cost of restoration thatpart of the Award necessary to complete such repair or restoration, togetherwith severance and other damages awarded for the taken Leased Improvements andany deficiency Landlord has agreed to disburse, to Tenant regularly during therestoration period so as to permit payment for the cost of such repair orrestoration.  Landlord may, at itsoption, condition advancement of such Award and other amounts on (a) theabsence of any Event of Default, (b) its approval of plans andspecifications of an architect satisfactory to Landlord (which approval shallnot be unreasonably withheld, delayed or conditioned), (c) generalcontractors’ estimates, (d) architect’s certificates, (e) conditionallien waivers of general contractors, if available, (f) evidence ofapproval by all governmental authorities and other regulatory bodies whoseapproval is required, (g), if Tenant has elected to advance deficiency fundspursuant to the preceding paragraph, Tenant depositing the amount thereof withLandlord and (h) such other certificates as Landlord may, from time totime, reasonably require.  Landlord’sobligation under this Section 11.2 to 

 

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disburse the Award and such other amounts shall besubject to (x) the collection thereof by Landlord and (y) thesatisfaction of any applicable requirements of any Facility Mortgage, and therelease of such Award by the applicable Facility Mortgagee.  Tenant’s obligation to restore the LeasedProperty shall be subject to the release of the Award by the applicableFacility Mortgagee to Landlord.

 

## **11.3             Abatementof Rent.** Other than as specifically provided in thisAgreement, this Agreement shall remain in full force and effect and Tenant’sobligation to make all payments of Rent and to pay all other charges as andwhen required under this Agreement shall remain unabated during the Termnotwithstanding any Condemnation involving the Leased Property, or any portionthereof.  The provisions of this Article 11shall be considered an express agreement governing any Condemnation involvingthe Leased Property and, to the maximum extent permitted by law, no local orState statute, law, rule, regulation or ordinance in effect during the Termwhich provides for such a contingency shall have any application in such case.

##  

## **11.4             TemporaryCondemnation. **Inthe event of any temporary Condemnation of any Property or Tenant’s interesttherein, this Agreement shall continue in full force and effect and Tenantshall continue to pay (or cause to be paid), in the manner and on the termsherein specified, the full amount of the Rent. Tenant shall continue to perform and observe (or cause to be performedand observed) all of the other terms and conditions of this Agreement on the partof the Tenant to be performed and observed. Provided no Event of Default has occurred and is continuing, the entireamount of any Award made for such temporary Condemnation allocable to the Term,whether paid by way of damages, rent or otherwise, shall be paid toTenant.  Tenant shall, promptly upon thetermination of any such period of temporary Condemnation, at its sole cost andexpense, restore the affected Property to the condition that existedimmediately prior to such Condemnation, in material compliance with allapplicable Legal Requirements, unless such period of temporary Condemnationshall extend beyond the expiration of the Term, in which event Tenant shall notbe required to make such restoration.

##  

## **11.5             Allocationof Award.** Except as provided in Section 11.4and the second sentence of this Section 11.5, the total Award shallbe solely the property of and payable to Landlord.  Any portion of the Award made for the takingof Tenant’s leasehold interest in the Leased Property, loss of business duringthe remainder of the Term, the taking of Tenant’s 

 

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## Personal Property, the taking of Capital Additions paid forby Tenant and Tenant’s removal and relocation expenses shall be the soleproperty of and payable to Tenant (subject to the provisions of Section 11.2).  In any Condemnation proceedings, Landlord andTenant shall each seek its own Award in conformity herewith, at its ownexpense.

##  

# **ARTICLE 12**

 

# **DEFAULTSAND REMEDIES**

 

## **12.1             Eventsof Default.** The occurrence of any one or more of thefollowing events shall constitute an “Event of Default” hereunder:

##  

#### (a)           shouldTenant fail to make any payment of the Rent or any other sum payable hereunderwhen due, which failure shall continue for at least five (5) Business Daysafter Notice from Landlord to Tenant; or

####  

#### (b)           shouldTenant fail to maintain the insurance coverages required under Article 9;or

####  

#### (c)           shouldTenant 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 shouldsuch default continue for a period of thirty (30) days after Notice thereoffrom Landlord to Tenant; provided, however, that if such defaultis susceptible of cure but such cure cannot be accomplished with due diligencewithin such period of time and if, in addition, Tenant commences to cure orcause to be cured such default within thirty (30) days after Notice thereoffrom Landlord and thereafter prosecutes the curing of such default with all duediligence, such period of time shall be extended to such period of time (not toexceed an additional ninety (90) days in the aggregate) as may be necessary tocure such default with all due diligence; or

####  

#### (d)           shouldany material obligation of Tenant in respect of any Indebtedness for moneyborrowed or for any material property or services, or any guaranty relatingthereto, be declared to be or become due and payable prior to the statedmaturity thereof, or should there occur and be continuing with respect to anysuch Indebtedness any event of default under any instrument or agreementevidencing or securing the same, the effect of which is to

 

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#### permit theholder or holders of such instrument or agreement or a trustee, agent or otherrepresentative on behalf of such holder or holders, to cause any suchobligations to become due prior to its stated maturity; or

####  

#### (e)           shouldan event of default by Tenant, any Guarantor or any Affiliated Person as toTenant or any Guarantor occur and be continuing beyond the expiration of anyapplicable cure period under any of the Incidental Documents; or

####  

#### (f)            shouldTenant or any Guarantor generally not be paying its debts as they become due orshould Tenant or any Guarantor make a general assignment for the benefit ofcreditors; or

####  

#### (g)           shouldany petition be filed by or against Tenant or any Guarantor under the Federalbankruptcy laws, or should any other proceeding be instituted by or againstTenant or any Guarantor seeking to adjudicate Tenant or any Guarantor abankrupt 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 anorder for relief or the appointment of a receiver, trustee, custodian or othersimilar official for Tenant or any Guarantor or for any substantial part of theproperty of Tenant or any Guarantor and such proceeding is not dismissed withinone hundred eighty (180) days after institution thereof; or

####  

#### (h)           shouldTenant or any Guarantor cause or institute any proceeding for its dissolutionor termination; or

####  

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

####  

#### (j)            shouldthere occur any direct or indirect Change in Control of Tenant or anyGuarantor; or

 

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####  

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

####  

#### (l)            shouldthere occur an “Event of Default”, as defined therein, under the RMI Lease oreither of the LTA GAMC Leases;

####  

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

 

Uponthe occurrence of an Event of Default, Landlord may, in addition to any otherremedies provided herein, enter upon the Leased Property, or any portionthereof, and take possession of any and all of Tenant’s Personal Property, ifany, without liability for trespass or conversion (Tenant hereby waiving anyright to notice or hearing prior to such taking of possession by Landlord) andsell the same at public or private sale, after giving Tenant reasonable Noticeof the time and place of any public or private sale, at which sale Landlord orits assigns may purchase all or any portion of Tenant’s Personal Property, ifany, unless otherwise prohibited by law. Unless otherwise provided by law and without intending to exclude anyother manner of giving Tenant reasonable notice, the requirement of reasonableNotice shall be met if such Notice is given at least ten (10) days beforethe date of sale.  The proceeds from anysuch disposition, less all expenses incurred in connection with the taking ofpossession, holding and selling of such property (including, reasonableattorneys’ fees) shall be applied as a credit against the indebtedness which issecured by any Security Agreement granted by Tenant.  Any surplus shall be paid to Tenant or asotherwise required by law and Tenant shall pay any deficiency to Landlord, asAdditional Charges, upon demand.

 

## **12.2             Remedies.** None of (a) thetermination of this Agreement pursuant to Section 12.1, (b) therepossession of the 

 

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## Leased Property, or any portion thereof, (c) thefailure of Landlord to relet the Leased Property, or any portion thereof, nor (d) thereletting of all or any of portion of the Leased Property, shall relieve Tenantof its liability and obligations hereunder, all of which shall survive any suchtermination, repossession or reletting. In the event of any such termination, Tenant shall forthwith pay toLandlord all Rent due and payable with respect to the Leased Property, orterminated portion thereof, through and including the date of suchtermination.  Thereafter, Tenant, untilthe end of what would have been the Term of this Agreement in the absence ofsuch termination, and whether or not the Leased Property, or any portionthereof, shall have been relet, shall be liable to Landlord for, and shall payto Landlord, as current damages, the Rent (Additional Rent to be reasonablycalculated by Landlord based on historical Gross Revenues) and other charges whichwould be payable hereunder for the remainder of the Term had such terminationnot occurred, less the net proceeds, if any, of any reletting of the LeasedProperty, or any portion thereof, after deducting all reasonable expenses inconnection with such reletting, including, without limitation, all repossessioncosts, brokerage commissions, legal expenses, attorneys’ fees, advertising,expenses of employees, alteration costs and expenses of preparation for suchreletting.  Tenant shall pay such currentdamages to Landlord monthly on the days on which the Minimum Rent would havebeen payable hereunder if this Agreement had not been so terminated withrespect to such of the Leased Property.

##  

At anytime after such termination, whether or not Landlord shall have collected anysuch current damages, as liquidated final damages beyond the date of suchtermination, at Landlord’s election, Tenant shall pay to Landlord an amountequal to the present value (as reasonably determined by Landlord) of theexcess, if any, of the Rent and other charges which would be payable hereunderfrom the date of such termination (assuming that, for the purposes of thisparagraph, annual payments by Tenant on account of Impositions and AdditionalRent would be the same as payments required for the immediately precedingtwelve calendar months, or if less than twelve calendar months have expiredsince the applicable Commencement Date for any Property, the payments requiredfor such lesser period projected to an annual amount) for what would be thethen unexpired term of this Agreement if the same remained in effect, over thefair market rental for the same period. Nothing contained in this Agreement shall, however, limit or prejudicethe right of Landlord to prove and obtain in proceedings for bankruptcy or 

 

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insolvency an amount equal to the maximum allowed byany statute or rule of law in effect at the time when, and governing theproceedings in which, the damages are to be proved, whether or not the amountbe greater than, equal to, or less than the amount of the loss or damagesreferred to above.

 

Incase of any Event of Default, re-entry, expiration and dispossession by summaryproceedings or otherwise, Landlord may (a) relet the Leased Property orany part or parts thereof, either in the name of Landlord or otherwise, for aterm or terms which may at Landlord’s option, be equal to, less than or exceedthe period which would otherwise have constituted the balance of the Term andmay grant concessions or free rent to the extent that Landlord considersadvisable and necessary to relet the same, and (b) make such reasonablealterations, repairs and decorations in the Leased Property, or any portionthereof, as Landlord, in its sole and absolute discretion, considers advisableand necessary for the purpose of reletting the Leased Property; and the makingof such alterations, repairs and decorations shall not operate or be construedto release Tenant from liability hereunder as aforesaid.  Landlord shall in no event be liable in anyway whatsoever for any failure to relet all or any portion of the LeasedProperty, or, in the event that the Leased Property is relet, for failure tocollect the rent under such reletting. To the maximum extent permitted by law, Tenant hereby expressly waivesany and all rights of redemption granted under any present or future laws inthe event of Tenant being evicted or dispossessed, or in the event of Landlordobtaining possession of the Leased Property, by reason of the occurrence andcontinuation of an Event of Default hereunder.

 

## **12.3             Tenant’sWaiver.** IF THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION 12.1OR 12.2, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO ATRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SETFORTH IN THIS ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTERIN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.

##  

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

 

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## **12.5             Landlord’sRight to Cure Tenant’s Default.** If an Event of Default shall have occurred andbe continuing, Landlord, after Notice to Tenant (which Notice shall not berequired if Landlord shall reasonably determine immediate action is necessaryto protect person or property), without waiving or releasing any obligation ofTenant and without waiving or releasing any Event of Default, may (but shallnot be obligated to), at any time thereafter, make such payment or perform suchact for the account and at the expense of Tenant, and may, to the maximumextent permitted by law, enter upon the Leased Property, or any portionthereof, for such purpose and take all such action thereon as, in Landlord’ssole and absolute discretion, may be necessary or appropriate therefor.  No such entry shall be deemed an eviction ofTenant.  All reasonable costs andexpenses (including, without limitation, reasonable attorneys’ fees) incurredby Landlord in connection therewith, together with interest thereon (to theextent permitted by law) at the Overdue Rate from the date such sums are paidby Landlord until repaid, shall be paid by Tenant to Landlord, on demand.

##  

# **ARTICLE 13**

 

# **HOLDINGOVER**

 

Anyholding over by Tenant after the expiration or sooner termination of thisAgreement shall be treated as a daily tenancy at sufferance at a rate equal totwo (2) times the Minimum Rent and other charges herein provided (proratedon a daily basis).  Tenant shall also payto Landlord all damages (direct or indirect) sustained by reason of any suchholding over.  Otherwise, such holdingover shall be on the terms and conditions set forth in this Agreement, to theextent applicable.  Nothing containedherein shall constitute the consent, express or implied, of Landlord to theholding over of Tenant after the expiration or earlier termination of thisAgreement.

 

# **ARTICLE 14**

 

# **LANDLORDDEFAULT**

 

IfLandlord shall default in the performance or observance of any of its covenantsor obligations set forth in this Agreement or any obligation of Landlord, ifany, under any agreement affecting the Leased Property, the performance ofwhich is not Tenant’s obligation pursuant to this Agreement, and any suchdefault shall continue for a period of thirty (30) days after Notice thereoffrom Tenant to Landlord and any applicable 

 

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Facility Mortgagee, or such additional period as maybe reasonably required to correct the same, Tenant may declare the occurrenceof a “Landlord Default” by a second Notice to Landlord and to suchFacility Mortgagee.  Thereafter, Tenantmay forthwith cure the same and, subject to the provisions of the followingparagraph, invoice Landlord for costs and expenses (including reasonableattorneys’ fees and court costs) incurred by Tenant in curing the same,together with interest thereon (to the extent permitted by law) from the dateLandlord receives Tenant’s invoice until paid, at the Overdue Rate.  Tenant shall have no right to terminate thisAgreement for any default by Landlord hereunder and no right, for any suchdefault, to offset or counterclaim against any Rent or other charges duehereunder.

 

IfLandlord shall in good faith dispute the occurrence of any Landlord Default andLandlord, before the expiration of the applicable cure period, shall giveNotice thereof to Tenant, setting forth, in reasonable detail, the basistherefor, no Landlord Default shall be deemed to have occurred and Landlordshall have no obligation with respect thereto until final adverse determinationthereof.  If Tenant and Landlord shallfail, in good faith, to resolve any such dispute within ten (10) daysafter Landlord’s Notice of dispute, either may submit the matter for resolutionin accordance with Article 22.

 

# **ARTICLE 15**

 

# **PURCHASERIGHTS**

 

Landlord shall have the option to purchase Tenant’sPersonal Property, at the expiration or sooner termination of this Agreement,for an amount equal to the then fair market value thereof (current replacementcost as determined by agreement of the parties or, in the absence of suchagreement, appraisal), subject to, and with appropriate price adjustments for,all equipment leases, conditional sale contracts, UCC-1 financing statementsand other encumbrances to which Tenant’s Personal Property is subject.  Upon the expiration or sooner termination ofthis Agreement, Tenant shall use its reasonable efforts to transfer and assign,or cause to be transferred and assigned, to Landlord or its designee, or assistLandlord or its designee in obtaining, any contracts, licenses, andcertificates required for the then operation of the Leased Property.  Notwithstanding the foregoing, Tenantexpressly acknowledges and agrees that nothing contained in this Article 15shall diminish, impair or otherwise modify Landlord’s rights under the SecurityAgreement and that any amounts paid by Landlord in order to purchase Tenant’sPersonal Property in accordance with this 

 

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Article 15 shall be applied first to Tenant’scurrent and past due obligations under this Agreement in such order as Landlordmay reasonably determine or as may be prescribed by the laws of the applicableState and any balance shall be paid to Tenant.

 

# **ARTICLE16**

 

# **SUBLETTING ANDASSIGNMENT**

 

## **16.1             Sublettingand Assignment.** Except as provided in Section 16.3,Tenant shall not, without Landlord’s prior written consent (which consent maybe given or withheld in Landlord’s sole and absolute discretion), assign,mortgage, pledge, hypothecate, encumber or otherwise transfer this Agreement orsublease or permit the sublease (which term shall be deemed to include thegranting of concessions, licenses and the like), of the Leased Property, or anyportion thereof, or suffer or permit this Agreement or the leasehold estatecreated hereby or any other rights arising under this Agreement to be assigned,transferred, mortgaged, pledged, hypothecated or encumbered, in whole or inpart, whether voluntarily, involuntarily or by operation of law, or permit theuse or operation of the Leased Property, or any portion thereof, by anyoneother than Tenant, any Manager approved by Landlord pursuant to the applicableprovisions of this Agreement or residents and patients of Tenant, or the LeasedProperty, or any portion thereof, to be offered or advertised for assignment orsubletting.

##  

Forpurposes of this Section 16.1, an assignment of this Agreementshall be deemed to include, without limitation, any direct or indirect Changein Control of Tenant.

 

Ifthis Agreement is assigned or if the Leased Property, or any portion thereof,is sublet (or occupied by anybody other than Tenant or any Manager, theirrespective employees or residents or patients of Tenant), Landlord may collectthe rents from such assignee, subtenant or occupant, as the case may be, andapply the net amount collected to the Rent herein reserved, but no suchcollection shall be deemed a waiver of the provisions set forth in the firstparagraph of this Section 16.1, the acceptance by Landlord of suchassignee, subtenant or occupant, as the case may be, as a tenant, or a releaseof Tenant from the future performance by Tenant of its covenants, agreements orobligations contained in this Agreement.

 

Anyassignment or transfer of Tenant’s interest under this Agreement shall besubject to such assignee’s or transferee’s 

 

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delivery to Landlord of (a) a Guaranty, whichGuaranty shall be in form and substance satisfactory to Landlord in its solediscretion and which Guaranty shall constitute an Incidental Documenthereunder; (b) a pledge of the stock, partnership, membership or otherownership interests of such assignee or other transferee to secure Tenant’sobligations under this Agreement and the Incidental Documents, which pledgeshall be in form and substance satisfactory to Landlord in its sole discretionand which pledge shall constitute an Incidental Document hereunder; (c) asecurity agreement granting Landlord a security interest in all of suchassignee’s or transferee’s right, title and interest in and to any personalproperty, intangibles and fixtures (other than accounts receivable) withrespect to any Property which is subject to any such assignment or transfer tosecure Tenant’s obligations under this Agreement and the Incidental Documents,which security agreement shall be in form and substance satisfactory toLandlord in its sole discretion and which security agreement shall constitutean Incidental Document hereunder; and (d) in the case of a sublease, anassignment which assigns all of such subtenant’s right, title and interest insuch sublease to Landlord to secure Tenant’s obligations under this Agreementand the Incidental Documents, which assignment shall be in form and substancesatisfactory to Landlord in its sole discretion and which assignment shallconstitute an Incidental Document hereunder.

 

Nosubletting or assignment shall in any way impair the continuing primaryliability of Tenant hereunder (unless Landlord and Tenant expressly otherwiseagree that Tenant shall be released from all obligations hereunder), and noconsent to any subletting or assignment in a particular instance shall bedeemed to be a waiver of the prohibition set forth in this Section 16.1.  No assignment, subletting or occupancy shallaffect any Permitted Use.  Anysubletting, assignment or other transfer of Tenant’s interest under thisAgreement in contravention of this Section 16.1 shall be voidableat Landlord’s option.

 

## **16.2             RequiredSublease Provisions.** Any sublease of all or any portion of theLeased Property shall provide (a) that it is subject and subordinate tothis Agreement and to the matters to which this Agreement is or shall besubject or subordinate; (b) that in the event of termination of thisAgreement or reentry or dispossession of Tenant by Landlord under thisAgreement, Landlord may, at its option, terminate such sublease or take overall of the right, title and interest of Tenant, as sublessor under suchsublease, and such subtenant shall, at 

 

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## Landlord’s option, attorn to Landlord pursuant to the thenexecutory provisions of such sublease, except that neither Landlord nor anyFacility Mortgagee, as holder of a mortgage or as Landlord under thisAgreement, if such mortgagee succeeds to that position, shall (i) beliable for any act or omission of Tenant under such sublease, (ii) besubject to any credit, counterclaim, offset or defense which theretoforeaccrued to such subtenant against Tenant, (iii) be bound by any previousmodification of such sublease not consented to in writing by Landlord or by anyprevious prepayment of more than one (1) month’s rent, (iv) be boundby any covenant of Tenant to undertake or complete any construction of theapplicable Property, or any portion thereof, (v) be required to accountfor any security deposit of the subtenant other than any security depositactually delivered to Landlord by Tenant, (vi) be bound by any obligationto make any payment to such subtenant or grant any credits, except forservices, repairs, maintenance and restoration provided for under the subleasethat are performed after the date of such attornment, (vii) be responsiblefor any monies owing by Tenant to the credit of such subtenant unless actuallydelivered to Landlord by Tenant, or (viii) be required to remove anyPerson occupying any portion of the Leased Property; and (c) in the eventthat such subtenant receives a written Notice from Landlord or any FacilityMortgagee stating that an Event of Default has occurred and is continuing, suchsubtenant shall thereafter be obligated to pay all rentals accruing under suchsublease directly to the party giving such Notice or as such party maydirect.  All rentals received from suchsubtenant by Landlord or the Facility Mortgagee, as the case may be, shall becredited against the amounts owing by Tenant under this Agreement and suchsublease shall provide that the subtenant thereunder shall, at the request ofLandlord, execute a suitable instrument in confirmation of such agreement toattorn.  An original counterpart of eachsuch sublease and assignment and assumption, duly executed by Tenant and suchsubtenant or assignee, as the case may be, in form and substance reasonablysatisfactory to Landlord, shall be delivered promptly to Landlord and (x) inthe case of an assignment, the assignee shall assume in writing and agree tokeep and perform all of the terms of this Agreement on the part of Tenant to bekept and performed and shall be, and become, jointly and severally liable withTenant for the performance thereof and (y) in the case of either an assignmentor subletting, Tenant shall remain primarily liable, as principal rather thanas surety, for the prompt payment of the Rent and for the performance andobservance of all of the covenants and conditions to be performed by Tenanthereunder.

 

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

 

## **16.3             PermittedSublease.** Notwithstanding the foregoing, including, without limitation, Section 16.2,but subject to the provisions of Section 16.4 and any other expressconditions or limitations set forth herein, Tenant may, in each instance afterNotice to Landlord, (a) enter into third party residency agreements withrespect to the units located at the Facilities, (b) sublease space at anyProperty for laundry, commissary or child care purposes or other concessions infurtherance of the Permitted Use, so long as such subleases will not reduce thenumber of units at any Facility, will not violate or affect any Legal Requirementor Insurance Requirement, and Tenant shall provide such additional insurancecoverage applicable to the activities to be conducted in such subleased spaceas Landlord and any Facility Mortgagee may reasonably require, and (c) enterinto one or more subleases with Affiliated Persons of Tenant with respect tothe Leased Property, or any portion thereof, provided Tenant givesLandlord Notice of the material terms and conditions thereof.  Landlord and Tenant acknowledge and agreethat if Tenant enters into one (1) or more subleases with AffiliatedPersons of Tenant with respect to any Property, or any portion thereof, inaccordance with the preceding clause (c), Tenant may allocate the rent andother charges with respect to the affected Property in any reasonable manner; provided,however, that such allocation shall not affect Tenant’s (nor anyGuarantor’s) liability for the Rent and other obligations of Tenant under thisAgreement; and, provided, further, that Tenant shall giveLandlord prompt written notice of any allocation or reallocation of the rentand other charges with respect to the affected Property and, in any event,Tenant shall give Landlord written notice of the amount of such allocations atleast ten (10) Business Days prior to the date that Landlord or SeniorHousing Properties Trust is required to file any tax returns in any State wheresuch affected Property is located.

##  

## **16.4             SubleaseLimitation.** Anything contained in this Agreement to thecontrary notwithstanding, Tenant shall not sublet the Leased Property, or anyportion thereof, on any basis such that the rental to be paid by any sublesseethereunder would be based, in whole or in part, on the net income or profitsderived by the business activities of such sublessee, any other formula suchthat any portion of such sublease rental would fail to qualify as “rents fromreal property” within the meaning of Section 856(d) of the Code, orany similar or 

 

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## successor provision thereto or would otherwise disqualifyLandlord for treatment as a real estate investment trust.

 

# **ARTICLE 17**

 

# **ESTOPPELCERTIFICATES AND FINANCIAL STATEMENTS**

 

## **17.1             EstoppelCertificates.** At any time and from time to time, but notmore than a reasonable number of times per year, upon not less than ten (10) BusinessDays prior Notice by either party, the party receiving such Notice shallfurnish to the other an Officer’s Certificate certifying that this Agreement isunmodified and in full force and effect (or that this Agreement is in fullforce and effect as modified and setting forth the modifications), the date towhich the Rent has been paid, that no Default or an Event of Default hasoccurred 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 takento remedy the same, and such additional information as the requesting party mayreasonably request.  Any such certificatefurnished pursuant to this Section 17.1 may be relied upon by therequesting party, its lenders and any prospective purchaser or mortgagee of theLeased Property, or any portion thereof, or the leasehold estate createdhereby.

##  

## **17.2             FinancialStatements.** Tenant shall furnish or cause Five Star tofurnish, as applicable, the following statements to Landlord:

##  

#### (a)           withinforty-five (45) days after each of the first three fiscal quarters of anyFiscal Year, the most recent Consolidated Financials, accompanied by aFinancial Officer’s Certificate;

####  

#### (b)           withinninety (90) days after the end of each Fiscal Year, the most recentConsolidated Financials and financials of Tenant for such year, certified by anindependent certified public accountant reasonably satisfactory to Landlord andaccompanied by a Financial Officer’s Certificate;

####  

#### (c)           withinforty-five (45) days after the end of each month, an unaudited operatingstatement and statement of capital expenditures prepared on a Facility byFacility basis and a combined basis, including occupancy percentages andaverage rate, accompanied by a Financial Officer’s Certificate;

 

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####  

#### (d)           atany time and from time to time upon not less than twenty (20) days Notice fromLandlord or such additional period as may be reasonable under the circumstances,any Consolidated Financials, Tenant financials or any other audited orunaudited financial reporting information required to be filed by Landlord withany securities and exchange commission, the SEC or any successor agency, or anyother governmental authority, or required pursuant to any order issued by anycourt, governmental authority or arbitrator in any litigation to which Landlordis a party, for purposes of compliance therewith; provided, however,that, except as to calculations pertaining to Gross Revenues, Tenant shall notbe required to provide audited financials with respect to any individualFacility unless Landlord shall agree to pay for the cost thereof;

####  

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

####  

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

####  

Landlordmay at any time, and from time to time, provide any Facility Mortgagee withcopies of any of the foregoing statements, subject to Landlord obtaining theagreement of such Facility Mortgagee to maintain such statements and theinformation therein as confidential.

 

## **17.3             GeneralOperations. **Tenantcovenants and agrees to furnish to Landlord, promptly upon request of Landlord,copies of:

##  

#### (a)           alllicenses authorizing Tenant or any Manager to operate any Facility for itsPermitted Use;

####  

#### (b)           allMedicare and Medicaid certifications, together with provider agreements and allmaterial correspondence relating thereto with respect to any Facility(excluding, however, correspondence which may be subject to any attorney clientprivilege);

####  

#### (c)           ifrequired under Applicable Laws with respect to any Facility, a license for eachindividual employed as administrator with respect to such Facility;

 

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

####  

#### (e)           withreasonable promptness, such other confirmation as to the licensure and Medicareand Medicaid participation of Tenant as Landlord may reasonably request fromtime to time.

####  

# **ARTICLE 18**

 

# **LANDLORD’SRIGHT TO INSPECT**

 

Tenantshall permit Landlord and its authorized representatives to inspect the LeasedProperty, or any portion thereof, during usual business hours upon not lessthan forty-eight (48) hours’ notice and to make such repairs as Landlord ispermitted or required to make pursuant to the terms of this Agreement, providedthat any inspection or repair by Landlord or its representatives will not unreasonablyinterfere with Tenant’s use and operation of the Leased Property and furtherprovided that in the event of an emergency, as determined by Landlord in itsreasonable discretion, prior Notice shall not be necessary.

 

# **ARTICLE19**

 

# **EASEMENTS**

 

## **19.1             Grantof Easements.** Provided no Event of Default has occurred andis continuing, Landlord will join in granting and, if necessary, modifying orabandoning such rights-of-way, easements and other interests as may bereasonably requested by Tenant for ingress and egress, and electric, telephone,gas, water, sewer and other utilities so long as:

##  

#### (a)           theinstrument creating, modifying or abandoning any such easement, right-of-way orother interest is satisfactory to and approved by Landlord (which approval shallnot be unreasonably withheld, delayed or conditioned);

 

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####  

#### (b)           Landlordreceives an Officer’s Certificate from Tenant stating (i) that such grant,modification or abandonment is not detrimental to the proper conduct ofbusiness on such Property, (ii) the consideration, if any, being paid forsuch grant, modification or abandonment (which consideration shall be paid byTenant), (iii) that such grant, modification or abandonment does notimpair 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 allobligations, if any, of Landlord under any such instrument; and

####  

#### (c)           Landlordreceives evidence satisfactory to Landlord that the Manager has granted itsconsent to such grant, modification or abandonment in accordance with therequirements of such Manager’s Management Agreement or that such consent is notrequired.

####  

## **19.2             Exerciseof Rights by Tenant.** So long as no Event of Default has occurredand is continuing, Tenant shall have the right to exercise all rights ofLandlord under the Easement Agreements and, in connection therewith, Landlordshall execute and promptly return to Tenant such documents as Tenant shallreasonably request.  Tenant shall performall obligations of Landlord under the Easement Agreements.

##  

## **19.3             PermittedEncumbrances.** Any agreements entered into in accordance withthis Article 19 shall be deemed a Permitted Encumbrance.

##  

# **ARTICLE 20**

 

# **FACILITYMORTGAGES**

 

## **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 existany lien, encumbrance or title retention agreement (“Encumbrance”) uponthe Leased Property, or any portion thereof, or interest therein, to secure anyborrowing or other means of financing or refinancing, provided that any suchEncumbrance shall comply with the provisions of Article 8 and Section 20.2.

##  

## **20.2             Subordinationof Lease.** This Agreement and any and all rights ofTenant hereunder are and shall be subject and subordinate to any ground ormaster lease, and to all mortgages and deeds of trust, which may now orhereafter affect the Leased Property, or any portion thereof, or anyimprovements thereon 

 

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## and/or any of such leases, whether or not such mortgages ordeeds of trust shall also cover other lands and/or buildings and/or leases, toeach and every advance made or hereafter to be made under such mortgages anddeeds of trust, and to all renewals, modifications, replacements and extensionsof such leases and such mortgages and deeds of trust and all consolidations ofsuch mortgages and deeds of trust.  Thissection shall be self-operative and no further instrument of subordinationshall be required.  In confirmation ofsuch subordination, Tenant shall promptly execute, acknowledge and deliver anyinstrument that Landlord, the lessor under any such lease or the holder of anysuch mortgage or the trustee or beneficiary of any deed of trust or any oftheir respective successors in interest may reasonably request to evidence suchsubordination.  Any such subordination,however, shall be subject to the provisions of, and conditioned upon receipt byTenant of the nondisturbance agreement described in, the penultimate sentenceof this Section 20.2.  Anylease to which this Agreement is, at the time referred to, subject andsubordinate is herein called “Superior Lease” and the lessor of aSuperior Lease or its successor in interest at the time referred to is hereincalled “Superior Landlord” and any mortgage or deed of trust to whichthis Agreement is, at the time referred to, subject and subordinate is hereincalled “Superior Mortgage” and the holder, trustee or beneficiary of aSuperior Mortgage or any successor in interest thereto is herein called “SuperiorMortgagee”.  Tenant shall have noobligations under any Superior Lease or Superior Mortgage other than thoseexpressly set forth in this Section 20.2, unless Tenant shall agreeotherwise pursuant to any agreement between Tenant and such Superior Landlordor Superior Mortgagee, as applicable.

##  

If anySuperior Landlord or Superior Mortgagee shall succeed to the rights of Landlordunder this Agreement (any such person, “Successor Landlord”), whetherthrough possession, termination of lease, foreclosure action, assignment oflease or grant of deed, or otherwise, Tenant shall attorn to and recognize theSuccessor Landlord as Tenant’s landlord under this Agreement and Tenant shallpromptly execute and deliver any instrument that such Successor Landlord mayreasonably request to evidence such attornment (provided that such instrumentdoes not alter the terms of this Agreement), whereupon, this Agreement shall continuein full force and effect as a direct lease between the Successor Landlord andTenant upon all of the terms, conditions and covenants as are set forth in thisAgreement, except that the Successor Landlord (unless formerly the landlordunder this Agreement or its nominee or designee) 

 

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shall not be (a) liable in any way to Tenant forany act or omission, neglect or default on the part of any prior Landlord underthis Agreement, (b) responsible for any monies owing by or on deposit withany prior Landlord to the credit of Tenant (except to the extent actually paidor delivered to the Successor Landlord), (c) subject to any counterclaimor setoff which theretofore accrued to Tenant against any prior Landlord, (d) boundby any modification of this Agreement subsequent to such Superior Lease orSuperior Mortgage, or by any previous prepayment of Rent for more than one (1) monthin advance of the date due hereunder, which was not approved in writing by the SuperiorLandlord or the Superior Mortgagee thereto, (e) liable to Tenant beyondthe Successor Landlord’s interest in the Leased Property and the rents, income,receipts, revenues, issues and profits issuing from the Leased Property, (f) responsiblefor the performance of any work to be done by the Landlord under this Agreementto render the Leased Property ready for occupancy by Tenant (subject toLandlord’s obligations under Section 5.1.2(b) or with respectto any insurance proceeds or Awards), or (g) required to remove any Personoccupying the Leased Property or any part thereof, except if such person claimsby, through or under the Successor Landlord. Tenant agrees at any time and from time to time to execute a suitableinstrument in confirmation of Tenant’s agreement to attorn, as aforesaid andLandlord agrees to provide Tenant with an instrument of nondisturbance andattornment from each such Superior Mortgagee and Superior Landlord (other thanthe lessors under any ground leases with respect to the Leased Property, or anyportion thereof) in form and substance reasonably satisfactory to Tenantwhereby such Superior Mortgagee or Superior Lessor, as applicable, shall agreeto recognize Tenant’s possessory and other rights under this Agreementnotwithstanding any foreclosure or lease termination, subject to the provisionsof this Section 20.2. Notwithstanding the foregoing, any Successor Landlord shall be liable (a) topay to Tenant any amounts owed under Section 5.1.2(b), (b) topay to Tenant any portions of insurance proceeds or Awards received by Landlordor the Successor Landlord required to be paid to Tenant pursuant to the termsof this Agreement, and (c) to recognize any reduction in Minimum Rentattributable to the provisions of Section 4.1.1(b).

 

## **20.3             Noticeto Mortgagee and Superior Landlord.** Subsequent to the receipt by Tenant of Noticefrom Landlord as to the identity of any Facility Mortgagee or Superior Landlordunder a lease with Landlord, as ground lessee, which includes the LeasedProperty, or any portion thereof, as part of the demised premises and whichcomplies with Section 20.1 (which 

 

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## Notice shall be accompanied by a copy of the applicablemortgage or lease), no Notice from Tenant to Landlord as to a default byLandlord under this Agreement shall be effective with respect to a FacilityMortgagee or Superior Landlord unless and until a copy of the same is given tosuch Facility Mortgagee or Superior Landlord at the address set forth in theabove described Notice, and the curing of any of Landlord’s defaults within theapplicable notice and cure periods set forth in Article 14 by suchFacility Mortgagee or Superior Landlord shall be treated as performance byLandlord.

##  

# **ARTICLE21**

 

# **ADDITIONALCOVENANTS OF TENANT**

 

## **21.1             PromptPayment of Indebtedness.** Tenant shall (a) pay or cause to be paidwhen due all payments of principal of and premium and interest on Tenant’sIndebtedness for money borrowed and shall not permit or suffer any such Indebtednessto become or remain in default beyond any applicable grace or cure period, (b) payor cause to be paid when due all lawful claims for labor and rents with respectto the Leased Property, (c) pay or cause to be paid when due all tradepayables and (d) pay or cause to be paid when due all other of Tenant’sIndebtedness upon which it is or becomes obligated, except, in each case, otherthan that referred to in clause (a), to the extent payment is being contestedin good faith by appropriate proceedings in accordance with Article 8and if Tenant shall have set aside on its books adequate reserves with respectthereto in accordance with GAAP, if appropriate, or unless and untilforeclosure, distraint sale or other similar proceedings shall have been commenced.

##  

## **21.2             Conductof Business.** Tenant shall not engage in any business otherthan the leasing and operation of the Leased Property (including any incidentalor ancillary business relating thereto) and the leasing and operation of theleased property under the Other Leases (including any incidental or ancillarybusiness relating thereto).  Tenant shalldo or cause to be done all things necessary to preserve, renew and keep in fullforce and effect and in good standing its corporate existence and its rightsand licenses necessary to conduct such business.

##  

## **21.3             Maintenanceof Accounts and Records.** Tenant shall keep true records and books ofaccount of Tenant in which full, true and correct entries will be made ofdealings and transactions in relation to the business and affairs of Tenant inaccordance with GAAP.  Tenant shall applyaccounting 

 

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## principles in the preparation of the financial statements ofTenant which, in the judgment of and the opinion of its independent publicaccountants, are in accordance with GAAP, where applicable, except for changesapproved by such independent public accountants.  Tenant shall provide to Landlord either in afootnote to the financial statements delivered under Section 17.2which relate to the period in which such change occurs, or in separateschedules to such financial statements, information sufficient to show theeffect of any such changes on such financial statements.

##  

## **21.4             Noticeof Litigation, Etc. **Tenantshall give prompt Notice to Landlord of any litigation or any administrativeproceeding to which it may hereafter become a party of which Tenant has noticeor actual knowledge which involves a potential liability equal to or greaterthan Two Hundred Fifty Thousand Dollars ($250,000) or which may otherwiseresult in any material adverse change in the business, operations, property,prospects, results of operation or condition, financial or other, ofTenant.  Forthwith upon Tenant obtainingknowledge of any Default, Event of Default or any default or event of defaultunder any agreement relating to Indebtedness for money borrowed in an aggregateamount exceeding, at any one time, Two Hundred Fifty Thousand Dollars($250,000), or any event or condition that would be required to be disclosed ina current report filed by Tenant on Form 8-K or in Part II of aquarterly report on Form 10-Q if Tenant were required to file such reportsunder the Securities Exchange Act of 1934, as amended, Tenant shall furnishNotice thereof to Landlord specifying the nature and period of existencethereof and what action Tenant has taken or is taking or proposes to take withrespect thereto.

##  

## **21.5             ProhibitedTransactions. **Tenantshall not permit to exist or enter into any agreement or arrangement whereby itengages in a transaction of any kind with any Affiliated Person as to Tenant orany Guarantor, except on terms and conditions which are commerciallyreasonable.

##  

# **ARTICLE22**

 

# **ARBITRATION**

 

## **22.1       ****Disputes**.  Any disputes, claims or controversies betweenor among the parties hereto arising out of or relating to this Agreement or thetransactions contemplated hereby, including disputes, claims or controversiesrelating to the meaning, interpretation, effect, validity, performance orenforcement of this Agreement (all of which are referred to as 

 

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## “Disputes”)or relating in any way to such a Dispute or Disputes, shall on the demand ofany party to such Dispute be resolved through binding and final arbitration inaccordance with the Commercial Arbitration Rules (the “Rules”) ofthe American Arbitration Association (“AAA”) then in effect, except asmodified herein.  For the avoidance ofdoubt, a Dispute shall include a Dispute made derivatively on behalf of oneparty against another party.

##  

## **22.2            ****Selection of Arbitrators**.  There shall bethree arbitrators.  If there are (a) onlytwo parties to the Dispute, each party shall select one arbitrator within 15days after receipt by respondent of a copy of the demand for arbitration and (b) morethan two parties to the Dispute, all claimants, on the one hand, and allrespondents, on the other hand, shall each select, by the vote of a majority ofthe claimants or the respondents, as the case may be, one arbitrator.  The two party-nominated arbitrators shalljointly nominate the third and presiding arbitrator within 15 days of thenomination of the second arbitrator.  Ifany arbitrator has not been nominated within the time limit specified herein,then the AAA shall provide a list of proposed arbitrators in accordance withthe Rules, and the arbitrator shall be appointed by the AAA in accordance witha listing, striking and ranking procedure, with each party having a limitednumber of strikes, excluding strikes for cause. For the avoidance of doubt, the arbitrators appointed by the parties tosuch Dispute may be affiliates or interested persons of such parties but thethird arbitrator elected by the party arbitrators or by the AAA shall beunaffiliated with either party.

##  

## **22.3            ****Location of Arbitration**.  The place of arbitration shall be Boston,Massachusetts unless otherwise agreed by the parties.

##  

## **22.4            ****Scope of Discovery**.  There shall be only limited documentarydiscovery of documents directly related to the issues in dispute, as may beordered by the arbitrators.

##  

## **22.5             ArbitrationAward**.  In rendering an award or decision (the “ArbitrationAward”), the arbitrators shall be required to follow the laws of theCommonwealth of Massachusetts.  Anyarbitration proceedings or Arbitration Award rendered hereunder and thevalidity, effect and interpretation of this arbitration agreement shall begoverned by the Federal Arbitration Act, 9 U.S.C. §1 et seq.  The Arbitration Award shall be in writing andmay, but shall not be required to, briefly state the findings of fact andconclusions of law on which it is based.

 

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## **22.6            ****Costs**.  Except to the extent expressly provided bythis Agreement or as otherwise agreed between the parties, each party involvedin a Dispute shall bear its own costs and expenses (including attorneys’ fees),and the arbitrators shall not render an award that would include shifting ofany such costs or expenses (including attorneys’ fees) or, in a derivative caseor class action by a holder of any party, award any portion of such party’saward to the claimant or the claimant’s attorneys.  Each party (or, if there are more than twoparties to the Dispute, all claimants, on the one hand, and all respondents, onthe other hand, respectively) shall bear the costs and expenses of its (ortheir) selected arbitrator and the parties (or, if there are more than twoparties to the Dispute, all claimants, on the one hand, and all respondents, onthe other hand) shall equally bear the costs and expenses of the thirdappointed arbitrator.

##  

## **22.7            ****Final Judgment**.  The Arbitration Award shall be final andbinding upon the parties thereto and shall be the sole and exclusive remedybetween such parties relating to the Dispute, including any claims,counterclaims, issues or accounting presented to the arbitrators.  Judgment upon the Arbitration Award may beentered in any court having jurisdiction. To the fullest extent permitted by law, no application or appeal to anycourt of competent jurisdiction may be made in connection with any question oflaw arising in the course of arbitration or with respect to any award made exceptfor actions relating to enforcement of this agreement to arbitrate or anyarbitral award issued hereunder and except for actions seeking interim or otherprovisional relief in aid of arbitration proceedings in any court of competentjurisdiction.

##  

## **22.8            ****Payment**.  Any monetary award shall be made and payablein U.S. dollars free of any tax, deduction or offset.  The party against which the Arbitration Awardassesses a monetary obligation shall pay that obligation on or before the 30th day following the dateof the Arbitration Award or such other date as the Arbitration Award mayprovide.

##  

# **ARTICLE23**

 

# **MISCELLANEOUS**

 

## **23.1             Limitationon Payment of Rent.** All agreements between Landlord and Tenantherein are hereby expressly limited so that in no contingency or eventwhatsoever, whether by reason of acceleration of Rent, or otherwise, shall theRent or any other amounts payable to Landlord under this Agreement exceed 

 

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## the maximum permissible under Applicable Laws, the benefitof which may be asserted by Tenant as a defense, and if, from any circumstancewhatsoever, fulfillment of any provision of this Agreement, at the timeperformance of such provision shall be due, shall involve transcending thelimit of validity prescribed by law, or if from any circumstances Landlordshould ever receive as fulfillment of such provision such an excessive amount,then, ipsofacto, the amount which would be excessive shall beapplied to the reduction of the installment(s) of Minimum Rent next dueand not to the payment of such excessive amount.  This provision shall control every otherprovision of this Agreement and any other agreements between Landlord andTenant.

##  

## **23.2             NoWaiver.** No failure by Landlord or Tenant to insistupon the strict performance of any term hereof or to exercise any right, poweror remedy consequent upon a breach thereof, and no acceptance of full orpartial payment of Rent during the continuance of any such breach, shallconstitute a waiver of any such breach or of any such term.  To the maximum extent permitted by law, nowaiver of any breach shall affect or alter this Agreement, which shall continuein full force and effect with respect to any other then existing or subsequentbreach.

##  

## **23.3             RemediesCumulative. **Tothe maximum extent permitted by law, each legal, equitable or contractualright, power and remedy of Landlord or Tenant, now or hereafter provided eitherin this Agreement or by statute or otherwise, shall be cumulative andconcurrent and shall be in addition to every other right, power and remedy andthe 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 thesimultaneous or subsequent exercise by Landlord of any or all of such otherrights, powers and remedies.

##  

## **23.4             Severability.** Any clause, sentence,paragraph, section or provision of this Agreement held by a court of competentjurisdiction to be invalid, illegal or ineffective shall not impair, invalidateor nullify the remainder of this Agreement, but rather the effect thereof shallbe confined to the clause, sentence, paragraph, section or provision so held tobe invalid, illegal or ineffective, and this Agreement shall be construed as ifsuch invalid, illegal or ineffective provisions had never been containedtherein.

##  

## **23.5             Acceptanceof Surrender.** No surrender to Landlord of this Agreement orof the Leased Property or any part thereof, or 

 

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## of any interest therein, shall be valid or effective unlessagreed to and accepted in writing by Landlord and no act by Landlord or anyrepresentative or agent of Landlord, other than such a written acceptance byLandlord, shall constitute an acceptance of any such surrender.

##  

## **23.6             NoMerger of Title.** It is expressly acknowledged and agreed thatit is the intent of the parties that there shall be no merger of this Agreementor of the leasehold estate created hereby by reason of the fact that the samePerson may acquire, own or hold, directly or indirectly this Agreement or theleasehold estate created hereby and the fee estate or ground landlord’sinterest in the Leased Property.

##  

## **23.7             Conveyanceby Landlord.** If Landlord or any successor owner of all orany portion of the Leased Property shall convey all or any portion of theLeased Property in accordance with the terms hereof other than as security fora debt, and the grantee or transferee of such of the Leased Property shallexpressly assume all obligations of Landlord hereunder arising or accruing fromand after the date of such conveyance or transfer, Landlord or such successorowner, as the case may be, shall thereupon be released from all futureliabilities and obligations of Landlord under this Agreement with respect tosuch of the Leased Property arising or accruing from and after the date of suchconveyance or other transfer and all such future liabilities and obligationsshall thereupon be binding upon the new owner.

##  

## **23.8             QuietEnjoyment.** Tenantshall peaceably and quietly have, hold and enjoy the Leased Property for theTerm, free of hindrance or molestation by Landlord or anyone claiming by,through or under Landlord, but subject to (a) any Encumbrance permittedunder Article 20 or otherwise permitted to be created by Landlordhereunder, (b) all Permitted Encumbrances, (c) liens as toobligations of Landlord that are either not yet due or which are beingcontested in good faith and by proper proceedings, provided the same do notmaterially interfere with Tenant’s ability to operate any Facility and (d) liensthat have been consented to in writing by Tenant.  Except as otherwise provided in thisAgreement, no failure by Landlord to comply with the foregoing covenant shallgive Tenant any right to cancel or terminate this Agreement or abate, reduce ormake a deduction from or offset against the Rent or any other sum payable underthis Agreement, or to fail to perform any other obligation of Tenant hereunder.

##  

## **23.9             NoRecordation.** Neither Landlord nor Tenant shall record this Agreement.

 

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## **23.10           Notices.**

##  

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

####  

#### (b)           Allnotices required or permitted to be sent hereunder shall be deemed to have beengiven 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 dateof receipt or refusal, except that whenever under this Agreement a notice iseither received on a day which is not a Business Day or is required to bedelivered on or before a specific day which is not a Business Day, the day ofreceipt or required delivery shall automatically be extended to the nextBusiness Day.

####  

#### (c)           All suchnotices shall be addressed,

####  

if to Landlord:

 

c/oSenior Housing Properties Trust

400Centre Street

Newton,Massachusetts 02458

Attn:  Mr. David J. Hegarty

[Telecopier No. (617)796-8349]

 

if to Tenant to:

 

c/o Five Star Quality Care, Inc.

400Centre Street

Newton,Massachusetts 02458

Attn:  Mr. Bruce J. Mackey Jr.

[Telecopier No. (617)796-8385]

 

#### (d)           Bynotice given as herein provided, the parties hereto and their respectivesuccessors and assigns shall have the right from time to time and at any timeduring the term of this Agreement to change their respective addresses 

 

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#### effective uponreceipt by the other parties of such notice and each shall have the right tospecify as its address any other address within the United States of America.

####  

## **23.11           Construction.** Anything contained inthis Agreement to the contrary notwithstanding, all claims against, andliabilities of, Tenant or Landlord arising prior to any date of termination orexpiration of this Agreement with respect to the Leased Property shall survivesuch termination or expiration.  In noevent shall Landlord be liable for any consequential damages suffered by Tenantas the result of a breach of this Agreement by Landlord.  Neither this Agreement nor any provisionhereof may be changed, waived, discharged or terminated except by an instrumentin writing signed by the party to be charged. All the terms and provisions of this Agreement shall be binding upon andinure to the benefit of the parties hereto and their respective successors andassigns.  Each term or provision of thisAgreement to be performed by Tenant shall be construed as an independentcovenant and condition.  Time is of theessence with respect to the provisions of this Agreement.  Except as otherwise set forth in thisAgreement, any obligations of Tenant (including without limitation, anymonetary, repair and indemnification obligations) and Landlord shall survivethe expiration or sooner termination of this Agreement.

##  

## **23.12           Counterparts;Headings.** This Agreement may be executed in two or morecounterparts, each of which shall constitute an original, but which, when takentogether, shall constitute but one instrument and shall become effective as ofthe date hereof when copies hereof, which, when taken together, bear thesignatures of each of the parties hereto shall have been signed.  Headings in this Agreement are for purposesof reference only and shall not limit or affect the meaning of the provisionshereof.

##  

## **23.13           ApplicableLaw, Etc.** This Agreement shall be interpreted, construed, applied and enforced inaccordance with the laws of The Commonwealth of Massachusetts applicable tocontracts between residents of Massachusetts which are to be performed entirelywithin Massachusetts, regardless of (a) where this Agreement is executedor delivered; or (b) where any payment or other performance required bythis Agreement is made or required to be made; or (c) where any breach ofany provision of this Agreement occurs, or any cause of action otherwiseaccrues; or (d) where any action or other proceeding is instituted orpending; or (e) the nationality, citizenship, domicile, principal place ofbusiness, or jurisdiction of organization or domestication of any party; or (f) whetherthe 

 

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## laws of the forum jurisdiction otherwise would apply thelaws of a jurisdiction other than Massachusetts; or (g) any combination ofthe foregoing.  Notwithstanding theforegoing, the laws of the State shall apply to the perfection and priority ofliens upon and the disposition of any Property.

##  

## **23.14           Rightto Make Agreement.** Each party warrants, with respect to itself,that neither the execution of this Agreement, nor the consummation of anytransaction contemplated hereby, shall violate any provision of any law, or anyjudgment, writ, injunction, order or decree of any court or governmentalauthority having jurisdiction over it; nor result in or constitute a breach ordefault under any indenture, contract, other commitment or restriction to whichit is a party or by which it is bound; nor require any consent, vote orapproval which has not been given or taken, or at the time of the transactioninvolved shall not have been given or taken. Each party covenants that it has and will continue to have throughoutthe term of this Agreement and any extensions thereof, the full right to enterinto this Agreement and perform its obligations hereunder.

##  

## **23.15           Attorneys’Fees**. If any lawsuit or arbitration or other legal proceeding arises in connectionwith the interpretation or enforcement of this Agreement, the prevailing partytherein shall be entitled to receive from the other party the prevailing party’scosts and expenses, including reasonable attorneys’ fees incurred in connectiontherewith, in preparation therefor and on appeal therefrom, which amounts shallbe included in any judgment therein.

##  

## **23.16           Nonliability of Trustees**.  THE DECLARATIONS OFTRUST 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 OFMARYLAND, PROVIDE THAT THE NAMES OF SUCH ENTITIES REFER TO THE TRUSTEES UNDERSUCH DECLARATIONS COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY,AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SUCH ENTITIESSHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANYOBLIGATION OF, OR CLAIM AGAINST, SUCH ENTITIES. ALL PERSONS DEALING WITH SUCH ENTITIES, IN ANY WAY, SHALL LOOK ONLY TOTHE ASSETS OF SUCH ENTITIES FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OFANY OBLIGATION.

##  

## **23.17           Addition of LTA GMAC Properties and RMI Properties**.  Landlord and Tenantexpressly acknowledge and agree that, effective automatically upon the releaseof any LTA GMAC 

 

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## Property or RMI Property fromthe financing which is secured by such Property, as applicable, such Propertyshall be added to and demised under this Agreement in accordance with the termsand conditions hereof, the Minimum Rent payable hereunder shall be increased byan amount equal to the Minimum Rent payable under the LTA GMAC Lease withrespect to such LTA GMAC Property or under the RMI Lease with respect to suchRMI Property, as applicable (as reasonably determined by Landlord and Tenant),and the Additional Rent payable hereunder shall be increased by the AdditionalRent payable under the LTA GMAC Lease with respect to such LTA GMAC Property orunder the RMI Lease with respect to such RMI Property, as applicable.  The addition of such Property in accordancewith the terms hereof shall be automatic without any requirement that Landlordor Tenant take any action or execute any document, instrument, amendment orconfirmation with respect thereto. Notwithstanding the foregoing, Landlord and Tenant shall execute anddeliver such documents, instruments, agreements and confirmations as the otherparty shall reasonably request with respect to the foregoing.

##  

## **23.18          ****Original Leases****.**  Landlord and Tenant acknowledge and agreethat this Agreement amends and restates the Original Leases in their entiretywith respect to the Leased Property as of the date of this Agreement and thatthis Agreement shall govern the rights and obligations of the parties withrespect to the Leased Property from and after the date of this Agreement.  Notwithstanding the foregoing, the OriginalLeases shall continue to govern the rights and obligations of the parties withrespect to the Leased Property prior to the date of this Agreement.

 

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

 

 
|   | **LANDLORD:**                      |
|--------|------------------------------------|
|   | ** **                         | ** ** |
|   | **SNH SOMERFORD PROPERTIES TRUST** |
|   | ** **                         | ** ** |
|   | ** **                         | ** ** |
|   | By:                                | /s/ David J. Hegarty |
|   |                               | David J. Hegarty |
|   |                               | President |
|   |                               |   |
|   |                               |   |
|   | **SPTMNR PROPERTIES TRUST**        |
|   | ** **                         |
|   | ** **                         |
|   | By:                                | /s/ David J. Hegarty |
|   |                               | David J. Hegarty |
|   |                               | President |
|   |                               |   |
|   |                               |   |
|   | **SNH/LTA PROPERTIES TRUST**       |
|   | ** **                         |
|   | ** **                         |
|   | By:                                | /s/ David J. Hegarty |
|   |                               | David J. Hegarty |
|   |                               | President |
|   |                               |   |
|   |                               |   |
|   | **SPTIHS PROPERTIES TRUST**        |
|   | ** **                         |
|   | ** **                         |
|   | By:                                | /s/ David J. Hegarty |
|   |                               | David J. Hegarty |
|   |                               | President |
|   |                               |   |
|   |                               |   |
|   | **SNH CHS PROPERTIES TRUST**       |
|   | ** **                         |
|   | ** **                         |
|   | By:                                | /s/ David J. Hegarty |
|   |                               | David J. Hegarty |
|   |                               | President |

 

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|   | **SNH/LTA PROPERTIES GA LLC**    |
|--------|----------------------------------|
|   | ** **                       |
|   | ** **                       |
|   | By:                              | /s/ David J. Hegarty |
|   |                             | David J. Hegarty |
|   |                             | President |
|   |                             |   |
|   |                             |   |
|   | **TENANT:**                      |
|   | ** **                       |
|   | **FIVE STAR QUALITY CARE TRUST** |
|   | ** **                       |
|   | ** **                       |
|   | By:                              | /s/ Bruce J. Mackey Jr. |
|   |                             | Bruce J. Mackey Jr. |
|   |                             | President |

 

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**SCHEDULE1**

 

Schedule omitted.

 

----

 

**EXHIBITSA-1 THROUGH A-53**

 

**LAND**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certain Schedules and Exhibitsto this agreement have been omitted and will be furnished supplementally to theSecurities and Exchange Commission upon request.

 

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