**Exhibit 10.5**

 

**EXECUTION COPY**

 

**KEY PRINCIPAL GUARANTY AND INDEMNITY AGREEMENT**

** **

ThisKey Principal Guaranty and Indemnity Agreement (the “**Guaranty**”)is made and entered into as of August 4, 2009, by Senior HousingProperties Trust, a Maryland real estate investment trust (the “**Guarantor**”),for the benefit of Citibank, N.A., a national banking association (togetherwith its successors and assigns, the “**Lender**”).

 

**RECITALS**

 

A.            Lender has agreed to enter into that certain MasterCredit Facility Agreement dated as of August 4, 2009 (as amended,restated, modified or supplemented from time to time, the “**MasterAgreement**”), pursuant to which, *inter alia*,Lender has agreed, subject to the terms, conditions and limitations of theMaster Agreement, to make a Term Loan (the “**Term Loan**”)to SNH FM FINANCING LLC, a Delaware limited liability company, (“**Borrower**”),which Term Loan is to be evidenced by, among other things, that certain FixedFacility Note and that certain Variable Facility Note, each dated of even dateherewith (collectively, the “**Note**”).

 

B.            The repayment of the Term Loan and all of the Obligationsof Borrower under the Master Agreement or the other Loan Documents areguaranteed by this Guaranty to the extent of Borrower’s personal liability asprovided under Section 14.01(a)(v) and 14.01(a)(vi)of the MasterAgreement.

 

C.            Guarantor owns, directly or indirectly, an ownershipinterest in Borrower and will receive a direct and material benefit from theTerm Loan made to Borrower.

 

D.            Lender is willing to make the Term Loan to Borrower onlyif Guarantor agrees to enter into this Guaranty.

 

NOW, THEREFORE, in order toinduce Lender to make the Term Loan to Borrower, and in consideration thereof,Guarantor hereby agrees as follows:

 

**Section 1.              Definitions**.  Allcapitalized terms used but not defined in this Guaranty shall have the meaningsascribed to such terms in the Master Agreement. In addition, the following terms shall have the following meanings:

 

“**DUS Guide**”means the Fannie Mae Delegated Underwriting and Servicing Guide in its presentform and as amended, modified, supplemented or reissued from time to time (allreferences to Parts, Chapters, Sections and other subdivisions of the DUS Guideshall be deemed references to (i) the Parts, Chapters, Sections and othersubdivisions in effect on the date of the Master Agreement and (ii) anysuccessor provisions to such Parts, Chapters, Sections and other subdivisions.

 

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**Section 2.              Obligations.**

 

(a)           Guaranty of Payment and Performance.  Guarantor irrevocably, absolutely andunconditionally guarantees to Lender all of the following (collectively, the “GuaranteedObligations”):  the due and punctualpayment when due, whether at maturity or earlier, by reason of acceleration orotherwise, at all times, of all amounts for which Borrower is personally liableunder Section 14.01(a)(v) and 14.01(a)(vi) of the MasterAgreement.

 

This Guaranty shall be anunconditional guaranty of payment and performance and not of collection, and isin no way conditioned upon any attempt by Lender to pursue or exhaust anyremedy against Borrower.  This Guarantyis a continuing guaranty which shall remain in full force and effect untilterminated in accordance with Section 25.

 

(b)           Indemnification. Guarantor hereby agrees to indemnify, hold harmless and defend FannieMae, Lender and their respective officers, members, directors, shareholders,officials, agents, independent contractors and employees and each of them (eachan “indemnified party”) from and against any and all losses, claims, suits,liabilities, actions, debts, damages, costs, obligations, judgments, chargesand expenses, including sums paid in settlement of claims and attorneys’ fees,of any nature whatsoever suffered or incurred by Fannie Mae or Lender in anymanner as a direct or indirect result of:

 

(i).           the failure of Master Tenant to payall (a) reasonable operating expenses of Master Tenant, (b) amountsowing to Borrower under the Master Lease and (c) obligations under the MasterLease and each Subordination, Assignment and Security Agreement (collectively, “MasterTenant Obligations”) prior to making intercompany affiliate loans ordistributing funds to its parent, except that such indemnity will not apply tointercompany affiliate loans made in the ordinary course of implementing parent’scash management system and distributions in any Calendar Quarter if MasterTenant has paid all Master Tenant Obligations in such Calendar Quarter; or

 

(ii).          the failure of each Operator to payall (a) reasonable operating expenses of each Mortgaged Property, (b) amountsowing under each Sub-Lease to Master Tenant and (c) obligations of eachOperator pursuant to each Sub-Lease and each Subordination, Assignment andSecurity Agreement (collectively, “Operator Obligations”) prior to makingintercompany Affiliate loans or distributing funds to its parent, except thatsuch indemnity will not apply to intercompany Affiliate loans made in theordinary course of implementing parent’s cash management system anddistributions in any Calendar Quarter if Master Tenant has paid all OperatorObligations in such Calendar Quarter.

 

The obligationsunder this Section 2(b) are herein referred to as the “IndemnificationObligations.”  The IndemnificationObligations and the Guaranteed Obligations are herein referred to as the “GuaranteedObligations.”

 

**Section 3.              Form of Payment**.  Allpayments under this Guaranty shall be made to Lender in immediately availablefunds, without reduction by any recoupment, set-off, counterclaim orcross-claim against Lender.

 

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**Section 4.              Guarantor’s Obligations areAbsolute**.  The obligations of Guarantor under thisGuaranty shall be absolute and unconditional, shall not be subject to anycounterclaim, set-off, recoupment, deduction, or defense based upon any claimGuarantor may have against Lender or Borrower and shall remain in full forceand effect without regard to, and shall not be released, discharged orterminated or in any other way affected by, any circumstance or condition(whether or not Guarantor shall have any knowledge or notice thereof),including, without limitation:

 

(a)           any amendment or modification of, or extension of time forpayment of any of the principal of, interest on or other amounts payable underthe Loan Documents;

 

(b)           any exercise or non-exercise by Lender of any right, poweror remedy under or in respect of the Loan Documents, or any waiver, consent,forbearance, indulgence or other action, inaction or omission by Lender underor in respect of the Loan Documents;

 

(c)           any assignment, sale or other transfer of Borrower’sinterest in all or any part of the real or personal property which at any timeconstitutes collateral for the payment of the Guaranteed Obligations,including, without limitation, a conveyance of such property by Borrower toLender by deed in lieu of foreclosure;

 

(d)           any bankruptcy, insolvency, reorganization, adjustment,dissolution, liquidation or other like proceeding involving or affecting Borroweror Lender or their respective properties or creditors, or any action taken withrespect to the Loan Documents by any trustee or receiver of Borrower or Lender,or by any court, in any such proceeding;

 

(e)           any invalidity or unenforceability, in whole or in part,of any term or provision of the Loan Documents or Borrower’s incapacity or lackof authority to enter into the Loan Documents;

 

(f)            any release, compromise, settlement or discharge (otherthan for payment) with respect to all or any portion of Borrower’s Obligationsunder the Loan Documents;

 

(g)           any acceptance of additional or substituted collateral forpayment of the Guaranteed Obligations or any release or subordination of anycollateral held at any time by Lender as security for the payment of theGuaranteed Obligations; or

 

(h)           any resort to Guarantor for payment of all or any portionof the Guaranteed Obligations, whether or not Lender shall have resorted to anycollateral securing the Guaranteed Obligations, if any, or shall have proceededto pursue or exhaust its remedies against Borrower (or any other Person)primarily or secondarily liable for the Guaranteed Obligations.

 

No exercise, delay inexercise or non-exercise by Lender of any right hereby given it, no dealing byLender with Borrower, Guarantor or any other Person, no change, impairment orsuspension of any right or remedy of Lender, and no act or thing which, but forthis provision, could act as a release or exoneration of the liabilities ofGuarantor hereunder, shall in any way affect, decrease, diminish or impair anyof the obligations of Guarantor hereunder or give Guarantor or any other Personany recourse or defense against Lender.

 

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**Section 5.              Waiver**. Guarantor unconditionally waives the following:

 

(a)           notice of acceptance of this Guaranty and notice of any ofthe matters referred to in Section 4 hereof;

 

(b)           all notices which may be required by statute, rule oflaw or otherwise to preserve intact any rights which Lender may have againstGuarantor under this Guaranty, including, without limitation, any demand, proofor notice of non-payment of any of the principal of, interest on or otheramounts payable under the Loan Documents, and notice of any failure on the partof Borrower to perform and comply with any covenant, agreement, term orcondition of the Loan Documents;

 

(c)           any right to the enforcement, assertion or exercise of anyright, power or remedy conferred upon Lender in the Loan Documents orotherwise;

 

(d)           any requirement that Lender act with diligence inenforcing its rights under the Loan Documents or this Guaranty;

 

(e)           any right to require Lender to proceed against or exhaustits recourse against Borrower or any security or collateral held by Lender, ifany, at any time for the payment of the Guaranteed Obligations or to pursue anyother remedy in its power before being entitled to payment from Guarantor underthis Guaranty or before proceeding against Guarantor;

 

(f)            any failure by Lender to file or enforce a claim againstthe estate (either in administration, bankruptcy or any other proceeding) ofBorrower or any other Person;

 

(g)           any defense based upon an election of remedies by Lenderwhich destroys or otherwise impairs the subrogation rights of Guarantor or theright of Guarantor (after payment of the Guaranteed Obligations) to proceedagainst Borrower for reimbursement, or both;

 

(h)           any defense based upon any taking, modification or releaseof any collateral for the Guaranteed Obligations, if any, or any failure toperfect any security interest in, or the taking of, or failure to take anyother action with respect to, any collateral securing payment of the GuaranteedObligations, if any;

 

(i)            any defense based upon the addition, substitution orrelease, in whole or in part, of any Person(s), including, without limitation,another guarantor, primarily or secondarily liable for or in respect of theGuaranteed Obligations;

 

(j)            any rights or defenses based upon an offset by Guarantoragainst any obligation now or hereafter owed to Guarantor by Borrower; and

 

(k)           all other notices which may or mightbe lawfully waived by Guarantor;

 

it being the intentionhereof that Guarantor shall remain liable as principal, to the extent set forthin this Guaranty, until the payment and performance in full of the GuaranteedObligations, notwithstanding any act, omission or thing which might otherwiseoperate as a legal or equitable discharge of Guarantor other than the paymentand performance in full of the Guaranteed 

 

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Obligations.  No delay by Lender in exercising any rightsand/or powers hereunder or in taking any action to enforce Borrower’sobligations under the Loan Documents shall operate as a waiver as to suchrights or powers or in any manner prejudice any and all of Lender’s rights andpowers hereunder against Guarantor.  Theintention of Guarantor under this Guaranty is that, so long as any of theGuaranteed Obligations remains unsatisfied, the obligations of Guarantorhereunder shall not be discharged except by payment or performance and thenonly to the extent of such payment or performance.  Guarantor agrees that Guarantor’s obligationshereunder shall not be affected by any circumstances, whether or not referred toin this Guaranty, which might constitute a legal or equitable discharge of asurety or guarantor.

 

**Section 6.              Election of Remedies.** ThisGuaranty may be enforced from time to time, as often as occasion therefor mayarise, and without any requirement that Lender must first pursue or exhaust anyremedies available to it against Borrower under the Loan Documents or againstany other Person or resort to any collateral at any time held by it forperformance of the Guaranteed Obligations, if any, or any other source or meansof obtaining payment of any of the Guaranteed Obligations.

 

**Section 7.              Representations and Warrantiesof Guarantor. **Guarantor hereby represents and warrants toLender as follows:

 

(a)           Due Organization; Qualification.  Guarantor is qualified to transact businessand is in good standing in the State in which it is organized and in each otherjurisdiction in which such qualification and/or standing is necessary to theconduct of its business and where the failure to be so qualified would adverselyaffect the validity of, the enforceability of, or the ability of Guarantor toperform the Guaranteed Obligations.

 

(b)           Power and Authority.  Guarantor has the requisite power andauthority (i) to own its properties and to carry on its business as now conductedand as contemplated to be conducted in connection with the performance of theGuaranteed Obligations, and (ii) to execute and deliver this Guaranty andto carry out the transactions contemplated by this Guaranty.

 

(c)           Due Authorization. The execution, delivery and performance of this Guaranty has been dulyauthorized by all necessary action and proceedings by or on behalf ofGuarantor, and no further approvals or filings of any kind, including anyapproval of or filing with any Governmental Authority, are required by or onbehalf of Guarantor as a condition to the valid execution, delivery andperformance by Guarantor of this Guaranty.

 

(d)           Valid and Binding Obligations.  This Guaranty has been duly executed anddelivered by Guarantor and constitutes the legal, valid and binding obligationsof Guarantor, enforceable against Guarantor in accordance with its terms,except as such enforceability may be limited by applicable bankruptcy,insolvency, reorganization, moratorium or similar laws or equitable principlesaffecting the enforcement of creditors’ rights generally or by equitableprinciples or by the exercise of discretion by any court.

 

(e)           Non-contravention: No Liens.  Neither the execution and delivery of thisGuaranty by Guarantor, nor the fulfillment of or compliance with the terms andconditions of this 

 

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Guaranty by Guarantor northe payment or performance of the Guaranteed Obligations by Guarantor, asapplicable:

 

(i)            does or will conflict with or result in any breachor violation of any Applicable Law enacted or issued by any GovernmentalAuthority or other agency having jurisdiction over Guarantor, any of theMortgaged Properties or any other portion of the Collateral or assets of Guarantor,or any judgment or order applicable to Guarantor or to which Guarantor issubject;

 

(ii)           does or will conflict with or resultin any material breach or violation of, or constitute a default under, any ofthe terms, conditions or provisions of Guarantor’s Organizational Documents,any indenture, existing agreement or other instrument to which Guarantor is aparty or to which Guarantor, any of the Mortgaged Properties or any otherportion of the Collateral or other assets of Guarantor is subject; or

 

(iii)          does or will require the consent orapproval of any creditor of Guarantor, any Governmental Authority or any otherPerson except such consents or approvals which have already been obtained.

 

(f)            Pending Litigation orOther Proceedings.  There is nopending or, to the knowledge of Guarantor, threatened action, suit, proceedingor investigation, at law or in equity, before any court, board, body orofficial of any Governmental Authority or arbitrator which, if decidedadversely to Guarantor, would have, or may reasonably be expected to have aMaterial Adverse Effect.

 

(g)           Solvency.  Guarantor is not insolvent and will not berendered insolvent by the transaction contemplated by this Guaranty and aftergiving effect to such transaction, Guarantor will not be left with anunreasonably small amount of capital with which to engage in its business orundertakings, nor will Guarantor have incurred, have intended to incur, orbelieve that it has incurred, debts beyond its ability to pay such debts asthey mature. Guarantor did not receive less than a reasonably equivalent valuein exchange for incurrence of the Guaranteed Obligations.  There (i) is no contemplated, pendingor, to Guarantor’s knowledge, threatened bankruptcy, reorganization,receivership, insolvency or like proceeding, whether voluntary or involuntary,affecting Guarantor and (ii) has been no assertion or exercise ofjurisdiction over Guarantor by any court empowered to exercise bankruptcypowers.

 

(h)           No Contractual Defaults.  There are no defaults by Guarantor or, to theknowledge of Guarantor, by any other Person under any contract to whichGuarantor is a party other than defaults which do not have, and are notreasonably be expected to have, a Material Adverse Effect.  Neither Guarantor nor, to the knowledge ofGuarantor, any other Person, has received notice or has any knowledge of anyexisting circumstances in respect of which it could receive any notice ofdefault or breach in respect of any material contracts.

 

(i)            Representations True andCorrect.  The representations andwarranties made by Guarantor in this Guaranty are true, complete and correct inall material respects as of the Initial Closing Date and do not contain anyuntrue statement of material fact or omit to state a 

 

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material fact required tobe stated therein or necessary in order to make the statements made therein, inlight of the circumstances under which they were made, not misleading.

 

(j)            ERISA.  Guarantor is in compliance in all materialrespects with all applicable provisions of ERISA and has not incurred anyliability to the PBGC on a Plan under Title IV of ERISA.  None of the assets of Guarantor constituteplan assets (within the meaning of Department of Labor Regulation § 2510.3-101)of any employee benefit plan subject to Title I of ERISA.

 

(k)           Financial Information.  The financial statements of Guarantor whichhave been furnished to Lender are complete and accurate in all materialrespects and present fairly the financial condition of Guarantor, as of itsdate in accordance with GAAP, applied on a consistent basis, and since the dateof the most recent of such financial statements no event has occurred whichwould have, or may reasonably be expected to have a Material Adverse Effect ora material adverse effect on the financial condition of Guarantor, and therehas not been any material transaction entered into by Guarantor other than asdisclosed in public filings.  Guarantorhas no material contingent obligations which are not otherwise required to bedisclosed in accordance with GAAP in its most recent financial statements.

 

(l)            Accuracy of Information.No information, statement or report furnished in writing to Lender by Guarantorin connection with this Guaranty or any other Loan Document or in connectionwith the consummation of the transactions contemplated hereby and therebycontains any material misstatement of fact or omits to state a material factnecessary to make the statements contained therein, in light of the circumstancesunder which they were made, not misleading.

 

(m)          No Conflicts of Interest.  No member, officer, agent or employee ofLender has been or is in any manner interested, directly or indirectly, in thatPerson’s own name, or in the name of any other Person, in the Guaranty, theLoan Documents, or any Mortgaged Property, in any contract for property ormaterials to be furnished or used in connection with such Mortgaged Property orin any aspect of the transactions contemplated by the Loan Documents.

 

(n)           Governmental Approvals.  No Governmental Approval not already obtainedor made is required for the execution and delivery of this Guaranty or theperformance of the terms and provisions hereof by Guarantor.

 

(o)           Governmental Orders.  Guarantor is not presently under any cease ordesist order or other orders of a similar nature, temporary or permanent, ofany Governmental Authority which would have the effect of preventing orhindering performance of its duties hereunder, nor are there any proceedings presentlyin progress or to its knowledge contemplated which would, if successful, leadto the issuance of any such order.

 

(p)           No Reliance. Guarantoracknowledges, represents and warrants that it understands the nature andstructure of the transactions contemplated by this Guaranty and the other LoanDocuments; that it is familiar with the provisions of all of the documents andinstruments relating to such transactions; that it understands the risksinherent in such 

 

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transactions, includingthe risk of loss of all or any of the Mortgaged Properties; and that it has notrelied on Lender or Fannie Mae for any guidance or expertise in analyzing thefinancial or other consequences of the transactions contemplated by thisGuaranty or any other Loan Document or otherwise relied on Lender or Fannie Maein any manner in connection with interpreting, entering into or otherwise inconnection with this Guaranty, any other Loan Document or any of the matterscontemplated hereby or thereby.

 

(q)           Compliance with ApplicableLaw.  Guarantor is in compliance withApplicable Law, including all Governmental Approvals, if any, except for suchitems of noncompliance that, singly or in the aggregate, have not had and arenot reasonably expected to cause, a Material Adverse Effect.

 

(r)            Contracts with Affiliates.  Guarantor has not entered into and is not aparty to any contract, lease or other agreement with any Affiliate of Guarantorfor the provision of any service, materials or supplies relating to anyMortgaged Property.

 

(s)           UCC Amendment.                Guarantor represents andwarrants that the entities listed on Schedule 1 attached hereto (the “UCCAffiliates”) are Affiliates of Guarantor and that the UCC Affiliates are theonly Affiliates of Guarantor that are named as secured parties on UCC financingstatements that name Operator, as debtor, and that pledge any of the Collateralunder the Loan Documents or any UCC Collateral under the Subordination,Assignment and Security Agreement. Guarantor represents and warrants that it has the power and authority toauthorize, on behalf of the UCC Affiliates, the filing of terminations and/oramendments, as applicable, relating to such UCC financing statements (the “AffiliateUCC Amendments”) with the appropriate Governmental Authorities.  Guarantor hereby authorizes Lender to filethe Affiliate UCC Amendments with the appropriate Governmental Authority.

 

**Section 8.              Affirmative Covenants ofGuarantor**.Guarantor agrees and covenants with Lender that, at all times during the Termof this Guaranty:

 

(a)           Maintenance of Existence.  Guarantor shall maintain its existence andcontinue to be a real estate investment trust organized under the laws of thestate of its organization (other than as permitted under Section 8.12(b) ofthe Master Agreement).  Guarantor shallcontinue to be duly qualified to do business in each jurisdiction in which suchqualification is necessary to the conduct of its business and where the failureto be so qualified would adversely affect the validity of, the enforceabilityof, or the ability to perform, its obligations under this Guaranty.

 

(b)           Financial Statements; Accountants’ Reports: OtherInformation. Guarantor shall keep and maintain at all times complete andaccurate books of accounts and records in sufficient detail to correctlyreflect all of Guarantor’s financial transactions and assets as required byGAAP. In addition, Guarantor shall furnish, or cause to be furnished, to Lenderthe financial statements required of Guarantor by ***Section 8.03(a) ***ofthe Master Agreement.  In addition,Guarantor shall provide Lender with the following:

 

(i)            Accountants’ Reports.  Promptly upon receipt thereof, copies of anyreports or management letters submitted to Guarantor by its independent certifiedpublic 

 

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accountants in connectionwith the examination of its financial statements made by such accountants.

 

(ii)           Other Reports.  All schedules, financial statements or othersimilar reports reasonably requested by Lender with respect to Guarantor’sbusiness affairs or condition (financial or otherwise).

 

(c)           Maintain Licenses.  Guarantor shall procure and maintain in fullforce and effect all licenses, Permits, charters and registrations which arematerial to the conduct of its business and shall abide by and satisfy allterms and conditions of all such licenses, Permits, charters and registrations.

 

(d)           Access to Records and Discussionswith Officers and Accountants. To the extent permitted by law, Guarantorshall permit Lender to:

 

(i)            inspect, make copies and abstractsof, and have reviewed or (after an Event of Default) audited Guarantor’s booksand records related to Borrower and the Mortgaged Properties;

 

(ii)           discuss Guarantor’s affairs, financesand accounts with any of Guarantor’s officers, partners and employees and  (provided that an officer of Guarantor hasbeen given the opportunity by Lender to be a party to such discussion)Guarantor’s independent public accountants;

 

(iii)          discuss the Mortgaged Properties’conditions, operations or maintenance with the Operators of such MortgagedProperties and the officers of Guarantor; and

 

(iv)          receive any other information thatLender deems reasonably necessary or relevant in connection with the Guaranty,any Loan Document or the Guaranteed Obligations.

 

Notwithstandingthe foregoing, prior to an Event of Default and so long as no Potential Eventof Default has occurred and is continuing, all inspections shall be conductedat reasonable times during normal business hours and upon reasonable notice toGuarantor.

 

(e)           Inform Lender of MaterialEvents.  Guarantor shall promptly,but in any event within five (5) Business Days, inform Lender in writingof any of the following (and shall deliver to Lender copies of any relatedwritten communications, complaints, orders, judgments and other documentsrelating to the following) of which Guarantor has actual knowledge:

 

(i)            Defaults. The occurrence ofany Event of Default or any Potential Event of Default under any Loan Document;

 

(ii)           Regulatory Proceedings. Thecommencement of any rulemaking or disciplinary proceeding or the promulgationof any proposed or final rule which would have, or may reasonably beexpected to have, a Material Adverse Effect;

 

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(iii)          Legal Proceedings. Thecommencement or threat of, or amendment to, any proceedings by or againstGuarantor in any Federal, state or local court or before any GovernmentalAuthority, or before any arbitrator, which, if adversely determined, would have,or at the time of determination may reasonably be expected to have, a MaterialAdverse Effect;

 

(iv)          Bankruptcy Proceedings. Thecommencement of any proceedings by or against Guarantor as debtor under anyapplicable bankruptcy, reorganization, liquidation, insolvency or other similarlaw now or hereafter in effect or of any proceeding in which a receiver,liquidator, trustee or other similar official is sought to be appointed for it;

 

(v)           Regulatory Supervision or Penalty.The receipt of notice from any Governmental Authority having jurisdiction overGuarantor that (A) Guarantor is being placed under regulatory supervision,(B) any license, Permit, charter, membership or registration material tothe conduct of Guarantor’s business or the Mortgaged Properties has been or isto be suspended or revoked or (C) Guarantor is to cease and desist anypractice, procedure or policy employed by Guarantor, as the case may be, in theconduct of its business, and such cessation would have, or may reasonably beexpected to have, a Material Adverse Effect;

 

(vi)          Material Adverse Effect.  The occurrence of any act, omission, changeor event which has a Material Adverse Effect subsequent to the date of the mostrecent audited financial statements delivered to Lender pursuant to ***Section 8.03*** of the MasterAgreement;

 

(vii)         Restructuring of Guarantor.  Any restructuring or reorganization ofGuarantor;

 

(viii)        Accounting Changes. Any materialchange in Guarantor’s accounting policies or financial reporting practices;

 

(ix)           Legal and Regulatory Status.The occurrence of any material act, omission, change or event, including anyGovernmental Approval, the result of which is to change or alter in any way thelegal or regulatory status of Guarantor; and

 

(x)            Default on Indebtedness.  The occurrence of any event that results inor, with the giving of notice, if applicable, or the passing of time, or both,would result in (i) any default in respect of any Indebtedness ofGuarantor, (ii) the failure of Guarantor to pay when due or within anyapplicable grace period any Indebtedness of Guarantor, or (iii) anyIndebtedness of Guarantor becoming due and payable before its normal maturityby reason of a default or event of default, however described, or any otherevent of default shall occur and continue after the applicable grace period, ifany, specified in the agreement or instrument relating to such Indebtedness ifany such event would, or reasonably could be expected to, result in a MaterialAdverse Effect.

 

(xi)           Changes in Senior Management.  Any change in the identity of the members ofSenior Management.

 

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(f)            ERISA.  Guarantor shall at all times remain incompliance in all material respects with all applicable provisions of ERISA andsimilar requirements of the PBGC.

 

(g)           Further Assurances.  Guarantor, at the request of Lender, butwithout incurring any liability beyond the Guaranteed Obligations, shallexecute and deliver and, if necessary, file or record such statements,documents, agreements and take such further action as Lender from time to timemay request as reasonably necessary, desirable or proper to carry out moreeffectively the purposes of this Guaranty or any of the other Loan Documents orin order to exercise or enforce its rights under the Loan Documents.

 

(h)           Monitoring Compliance. Uponthe request of Lender, but without incurring any liability beyond theGuaranteed Obligations, from time to time, Guarantor shall promptly provide toLender such documents, certificates and other information as may be deemedreasonably necessary to enable Lender to perform its functions under the DUSGuide as the same relates to Guarantor.

 

(i)            Compliance with Net Worth Test.  Until the date upon which all of theconditions set forth in Section 8.25 are satisfied in full, Guarantor shall at all times maintain itsNet Worth so that it is not less than $515,000,000.

 

(j)            Compliance with Liquidity Test.  Until the date upon which all of theconditions set forth in Section 8.25 are satisfied in full, Guarantor shall at all times ensurethat the sum of (i) cash and Cash Equivalents maintained by it and (ii) theamount available to be drawn by it under its lines of credit (including,without limitation, under the Amended and Restated Credit Agreement dated as ofJuly 29, 2005, as amended, with certain lenders and Wachovia Bank,National Association, as administrative agent) is not less than $21,000,000.

 

**Section 9.              NegativeCovenants of Guarantor**.

 

(a)           Other Activities.  Guarantor shall not dissolve or liquidate inwhole or in part.

 

(b)           Material Adverse Effect.  Guarantor shall not take or permit any actionwhich could reasonably be expected to have any Material Adverse Effect.

 

(c)           Principal Place of Business.  Guarantor shall not change its principalplace of business or the location of its books and records without first givingten (10) days’ prior written notice to Lender.

 

(d)           Transfer.  Guarantor shall not, and shall cause Borrowernot to cause or permit:

 

(i)            any Transfer prohibited by *Sections 8.12* and *8.13* of theMaster Agreement; or

 

(ii)           any Change of Control;

 

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except,in each case, as otherwise permitted pursuant to the provisions of *Sections**8.12*, *8.13* and *8.14* of theMaster Agreement.

 

**Section 10.            Expenses**. Guarantor agrees to pay all reasonableout-of-pocket costs and expenses, including court costs and expenses and thereasonable fees and disbursements of legal counsel within thirty (30) daysafter demand by Lender, incurred by or on behalf of Lender in connection withthe enforcement of Guarantor’s obligations under this Guaranty or theprotection of Lender’s rights under this Guaranty. The covenants contained inthis Section shall survive the payment of the Guaranteed Obligations.

 

**Section 11.            Condition of Borrower**. Guarantor is fully aware of the financial condition****ofBorrower and is executing and delivering this Guaranty based solely uponGuarantor’s own independent investigation of all matters pertinent hereto andis not relying in any manner upon any representation or statement made byLender. Guarantor represents and warrants that Guarantor is in a position toobtain, and Guarantor hereby assumes full responsibility for obtaining, anyadditional information concerning Borrower’s financial condition and any othermatters pertinent hereto as Guarantor may desire and Guarantor is not relyingupon or expecting Lender to furnish to Guarantor any information now orhereafter in Lender’s possession concerning the same or any other matter. Byexecuting this Guaranty, Guarantor knowingly accepts the full range of risksencompassed within a contract of this type, which risks Guarantor acknowledges.

 

**Section 12.            Further Assurances.**Guarantor agrees at any time and from time totime upon request by Lender to take, or cause to be taken, any action and toexecute and deliver any****additionaldocuments which, in the reasonable opinion of Lender, may be necessary in orderto assure to Lender the full benefits of this Guaranty.

 

**Section 13.            Subordination.**Guarantor hereby irrevocably andunconditionally agrees that****any claims,direct or indirect, Guarantor may have by subrogation or other form ofreimbursement**,**against Borrower or to anysecurity or any interest therein, by virtue of this Guaranty or as aconsequence of any payment made by Guarantor pursuant to this Guaranty, shallbe fully subordinated in time and right of payment to the payment in full ofthe Guaranteed Obligations and all other obligations of Guarantor to Lenderunder this Guaranty.

 

**Section 14.            No Subrogation**. Guarantor shall not have any right ofsubrogation against Borrower by reason of any payment by Guarantor under thisGuaranty until such time as all of the Guaranteed Obligations have beensatisfied in full. Nothing in the foregoing shall affect any claim whichGuarantor has against Borrower under the terms of the Organizational Documentsof Borrower.

 

**Section 15.            Insolvency and Liability ofBorrower**. So longas any of the Guaranteed Obligations is unpaid and this Guaranty is in effect,and to the extent not prohibited by the applicable bankruptcy court, Guarantoragrees to file all claims against Borrower in any bankruptcy or otherproceeding in which the filing of claims is required by law in connection withIndebtedness owed by Borrower to Guarantor and to assign to Lender all rightsof Guarantor thereunder up to the lesser of (i) the amount of suchIndebtedness or (ii) the amount of the Guaranteed Obligations.  In all such cases the Person or Personsauthorized to pay such 

 

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claims shall pay to Lenderthe full amount thereof to the full extent necessary to pay the GuaranteedObligations, and Guarantor hereby assigns to Lender all of Guarantor’s rightsto all such payments to which Guarantor would otherwise be entitled.Notwithstanding the foregoing, and except to the extent that any sums owed byBorrower to Lender under the Loan Documents shall have been fully satisfiedthereby, the liability of Guarantor hereunder shall in no way be affected by

 

(a)           the release or discharge of Borrower in any creditors’,receivership, bankruptcy or other proceedings; or

 

(b)           the impairment, limitation or modification of theliability of Borrower or the estate of Borrower in bankruptcy resulting fromthe operation of any present or future provisions of the Bankruptcy Code orother statute or from the decision in any court.

 

**Section 16.            Preferences, FraudulentConveyances, Etc.**IfLender is required to refund, or voluntarily refunds, any payment received fromBorrower because such payment is or may be avoided, invalidated, declaredfraudulent, set aside or determined to be void or voidable as a preference,fraudulent conveyance, impermissible setoff or a diversion of trust funds underthe bankruptcy laws or for any similar reason, including, without limitation,any judgment, order or decree of any court or administrative body havingjurisdiction over Lender or any of its property, or any settlement orcompromise of any claim effected by Lender with Borrower or other claimant (a “**Rescinded Payment**”), then Guarantor’sliability to Lender shall continue in full force and effect, or Guarantor’sliability to Lender shall be reinstated, as the case may be, with the sameeffect and to the same extent as if the Rescinded Payment had not been receivedby Lender, notwithstanding the cancellation or termination of any Note or anyof the other Loan Documents. In addition, Guarantor shall pay, or reimburseLender for, all expenses (including all reasonable attorneys’ fees, court costsand related disbursements) incurred by Lender in the defense of any claim thata payment received by Lender in respect of all or any part of the GuaranteedObligations from Guarantor must be refunded. The provisions of this Section shallsurvive the termination of this Guaranty and any satisfaction and discharge ofBorrower by virtue of any payment, court order or any federal or state law.

 

**Section 17.            Waiver**. Neither this Guaranty nor any term hereofmay be changed, waived, discharged or terminated except by an instrument inwriting signed by Lender and Guarantor expressly referring to this Guaranty andto the provisions so changed or limited. No such waiver shall extend to oraffect any obligation not expressly waived or impair any right consequentthereon. No course of dealing or delay or omission on the part of Lender inexercising any right under this Guaranty shall operate as a waiver thereof orotherwise by prejudice thereto.

 

**Section 18.            Notices**. All notices or other communicationshereunder shall be sufficiently given and shall be deemed given when sent inthe manner prescribed by the Master Agreement addressed to the parties asfollows:

 

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| As to Guarantor: | Senior Housing Properties Trust                                   |
|------------------|-------------------------------------------------------------------|
|             | 400 Centre Street                                                 |
|             | Newton, MA 02458                                                  |
|             | Attention David J. Hegarty                                        |
|             | Telecopy: (617) 796-8349                                          |
|             |                                                              |
| with a copy to:  | Sullivan Worcester, LLP                                           |
|             | One Post Office Square                                            |
|             | Boston, MA 02109                                                  |
|             | Attention: Warren Heilbronner                                     |
|             | Telecopy: (617) 338-2880                                          |
|             |                                                              |
| If to Lender or  |                                                              |
| to Fannie Mae:   | As provided in ***Section 15.08*** of the Master  Agreement. |

 

**Section 19.            Assignability by Lender**. Lender may, without notice to Guarantor,assign or transfer the Term Loan and the Loan Documents, in whole or in part.In such event, each and every immediate and successive assignee, transferee orholder of all or any part of the Term Loan and the Loan Documents shall havethe right to enforce this Guaranty, by legal action or otherwise, as fully asif such assignee, transferee, or holder were by name specifically given suchright and power in this Guaranty. Lender shall have an unimpaired right toenforce this Guaranty for its benefit as to so much of the Term Loan and theLoan Documents as Lender has not sold, assigned or transferred.

 

**Section 20.            Guarantor Bound by JudgmentAgainst Borrower**.Guarantor shall be conclusively bound, in any jurisdiction, by the judgment inany action by Lender against Borrower in connection with the Loan Documents(wherever instituted) as if Guarantor were a party to such action even if notso joined as a party.

 

**Section 21.            Governing Law.**The provisions of***Section 15.06*** of the Master Agreement(entitled “Choice of Law; Consent to Jurisdiction; Waiver of Jury Trial”)are hereby incorporated into this Agreement by this reference to the fullestextent as if the text of such Section were set forth in its entiretyherein.

 

**Section 22.            Invalid Provisions.**If any provision of this Guaranty or theapplication thereof to Guarantor or any circumstance in any jurisdiction whoselaws govern this Guaranty shall, to any extent, be invalid or unenforceableunder any applicable statute, regulation or rule of law, then suchprovision shall be deemed inoperative to the extent of such invalidity orunenforceability and shall be deemed modified to conform to such statute,regulation or rule or law. The remainder of this Guaranty and theapplication of any such invalid or unenforceable provision to parties,jurisdictions or circumstances other than those to whom or to which it is heldinvalid or unenforceable, shall not be affected by such invalidity orunenforceability nor shall such invalidity or unenforceability affect thevalidity or enforceability of any other provision of this Guaranty.

 

**Section 23.            General Provisions**. This Guaranty shall be binding upon therespective successors and assigns of Guarantor, and shall inure to the benefitof Lender and its successors 

 

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and assigns, including,without limitation, each successive holder of the Note. The descriptiveheadings of the Sections of the Guaranty have been inserted herein forconvenience of reference only and shall not define or limit the provisionshereof.

 

**Section 24.            Obligations Joint and Several**.  Theobligations of Guarantor hereunder shall be joint and several with theobligations of any other guarantors under this and any other guaranty and theobligations of Borrower under the Loan Documents.

 

**Section 25.            Term of Guaranty**. Guarantor’s obligations under this Guaranty with respect to Section 14.01(a)(vi) ofthe Master Agreement shall remain in effect until all obligations set forth in Section 8.26of the Master Agreement are satisfied in full. The Indemnification Obligations, the Guaranteed Obligations with respectto Section 14.01(a)(v) and all other obligations under this Guarantyshall remain in effect until all Obligations under the Master Agreement aresatisfied in full.

 

*[Remainder of page intentionally left blank.]*

 

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IN WITNESS WHEREOF,Guarantor has signed this Guaranty under seal as of the day and year firstabove written.

 

 
|   | **GUARANTOR:**                                                                 |
|--------|--------------------------------------------------------------------------------|
|   |                                                                           |
|   |                                                                           |
|   | **Senior Housing Properties Trust,**  a Maryland real estate  investment trust |
|   | ** **                                                                     |
|   | By:                                                                            | /s/ David J. Hegarty |
|   | Name:                                                                          | David J. Hegarty |
|   | Title:                                                                         | President |

 

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**SCHEDULE1**

 

UCC Affiliates

 

CCCFINANCING I TRUST

CCCFINANCING LIMITED, L.P.

CCCINVESTMENTS I, L.L.C.

CCCOF KENTUCKY TRUST

CCC OHIO HEALTHCARE TRUST

CCCPUEBLO NORTE TRUST

CCCRETIREMENT COMMUNITIES II, L.P.

CCCPSENIOR LIVING LLC

CCDESENIOR LIVING LLC

CCFLSENIOR LIVING LLC

CCOPSENIOR LIVING LLC

CCSLSENIOR LIVING LLC

ELLICOTT CITY LAND I LLC

ELLICOTT CITY LAND II LLC

HRES2PROPERTIES TRUST

LEISUREPARK VENTURE LIMITED PARTNERSHIP

LTJ SENIOR COMMUNITIESLLC

PANTHER HOLDINGS LEVEL I,L.P.

SNH CHS PROPERTIES TRUST

SNH/LTA PROPERTIES TRUST

SNH/LTA PROPERTIES GA LLC

SPT-MICHIGAN TRUST

SPTMNR PROPERTIES TRUST

 

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