Exhibit
10.13


 


AMENDED AND RESTATED MASTER LEASE AGREEMENT


(LEASE NO. 3),


 


dated as of June 30, 2008,


 


by and among


 


CERTAIN AFFILIATES OF SENIOR HOUSING PROPERTIES TRUST,


 


AS LANDLORD,


 


AND


 


FIVE STAR QUALITY CARE TRUST,


 


AS TENANT


 

















 


	
  ARTICLE 1

  	
  DEFINITIONS

  	
  1

  
	
  1.1

  	
  “Additional Charges”

  	
  1

  
	
  1.2

  	
  “Additional Rent”

  	
  2

  
	
  1.3

  	
  “Affiliated Person”

  	
  2

  
	
  1.4

  	
  “Agreement”

  	
  2

  
	
  1.5

  	
  “Applicable Laws”

  	
  2

  
	
  1.6

  	
  “Award”

  	
  3

  
	
  1.7

  	
  “Base Gross
  Revenues”

  	
  3

  
	
  1.8

  	
  “Base Year”

  	
  3

  
	
  1.9

  	
  “Business Day”

  	
  3

  
	
  1.10

  	
  “Capital Addition”

  	
  3

  
	
  1.11

  	
  “Capital Expenditure”

  	
  4

  
	
  1.12

  	
  “Change in Control”

  	
  4

  
	
  1.13

  	
  “Claim”

  	
  4

  
	
  1.14

  	
  “Code”

  	
  4

  
	
  1.15

  	
  “Commencement Date”

  	
  4

  
	
  1.16

  	
  “Condemnation”

  	
  5

  
	
  1.17

  	
  “Condemnor”

  	
  5

  
	
  1.18

  	
  “Consolidated
  Financials”

  	
  5

  
	
  1.19

  	
  “Date of Taking”

  	
  5

  
	
  1.20

  	
  “Default”

  	
  5

  
	
  1.21

  	
  “Disbursement Rate”

  	
  5

  
	
  1.22

  	
  “Distribution”

  	
  5

  
	
  1.23

  	
  “Easement Agreement”

  	
  6

  
	
  1.24

  	
  “Encumbrance”

  	
  6

  
	
  1.25

  	
  “Entity”

  	
  6

  
	
  1.26

  	
  “Environment”

  	
  6

  
	
  1.27

  	
  “Environmental
  Obligation”

  	
  6

  
	
  1.28

  	
  “Environmental
  Notice”

  	
  6

  
	
  1.29

  	
  “Event of Default”

  	
  6

  
	
  1.30

  	
  “Excess Gross
  Revenues”

  	
  6

  
	
  1.31

  	
  “Extended Term”

  	
  6

  
	
  1.32

  	
  “Facility”

  	
  6

  
	
  1.33

  	
  “Facility Mortgage”

  	
  6

  
	
  1.34

  	
  “Facility Mortgagee”

  	
  7

  
	
  1.35

  	
  “Financial Officer’s
  Certificate”

  	
  7

  
	
  1.36

  	
  “Fiscal Year”

  	
  7

  
	
  1.37

  	
  “Five Star”

  	
  7

  
	
  1.38

  	
  “Fixed Term”

  	
  7

  
	
  1.39

  	
  “Fixtures”

  	
  7

  
	
  1.40

  	
  “GAAP”

  	
  7

  
	
  1.41

  	
  “Government
  Agencies”

  	
  7

  
	
  1.42

  	
  “Gross Revenues”

  	
  7

  
	
  1.43

  	
  “Guarantor”

  	
  9

  
	
  1.44

  	
  “Guaranty”

  	
  9

  
	
  1.45

  	
  “Hazardous
  Substances”

  	
  9

  
	
  1.46

  	
  “Immediate Family”

  	
  10

  
	
  1.47

  	
  “Impositions”

  	
  10

  
	
  1.48

  	
  “Incidental
  Documents”

  	
  11

  
	
  1.49

  	
  “Indebtedness”

  	
  11

  
	
  1.50

  	
  “Insurance
  Requirements”

  	
  11

  
	
  1.51

  	
  “Interest Rate”

  	
  11

  
	
  1.52

  	
  “Land”

  	
  11

  



 

















 


	
  1.53

  	
  “Landlord”

  	
  11

  
	
  1.54

  	
  “Landlord Default”

  	
  11

  
	
  1.55

  	
  “Landlord Liens”

  	
  12

  
	
  1.56

  	
  “Lease Year”

  	
  12

  
	
  1.57

  	
  “Leased
  Improvements”

  	
  12

  
	
  1.58

  	
  “Leased Intangible
  Property”

  	
  12

  
	
  1.59

  	
  “Leased Property”

  	
  12

  
	
  1.60

  	
  “Legal Requirements”

  	
  12

  
	
  1.61

  	
  “Lien”

  	
  13

  
	
  1.62

  	
  “Manager”

  	
  13

  
	
  1.63

  	
  “Management
  Agreement”

  	
  13

  
	
  1.64

  	
  “Master Lease
  Agreement No. 1”

  	
  13

  
	
  1.65

  	
  “Minimum Rent”

  	
  13

  
	
  1.66

  	
  “Notice”

  	
  13

  
	
  1.67

  	
  “Officer’s
  Certificate”

  	
  13

  
	
  1.68

  	
  “Original Lease”

  	
  14

  
	
  1.69

  	
  “Overdue Rate”

  	
  14

  
	
  1.70

  	
  “Parent”

  	
  14

  
	
  1.71

  	
  “Permitted Encumbrances”

  	
  14

  
	
  1.72

  	
  “Permitted Liens”

  	
  14

  
	
  1.73

  	
  “Permitted Use”

  	
  14

  
	
  1.74

  	
  “Person”

  	
  14

  
	
  1.75

  	
  “Pledge Agreement”

  	
  14

  
	
  1.76

  	
  “Property”

  	
  14

  
	
  1.77

  	
  “Provider
  Agreements”

  	
  14

  
	
  1.78

  	
  “Records”

  	
  15

  
	
  1.79

  	
  “Regulated Medical
  Wastes”

  	
  15

  
	
  1.80

  	
  “Rent”

  	
  15

  
	
  1.81

  	
  “SEC”

  	
  15

  
	
  1.82

  	
  “Security Agreement”

  	
  15

  
	
  1.83

  	
  “State”

  	
  15

  
	
  1.84

  	
  “Subordinated
  Creditor”

  	
  15

  
	
  1.85

  	
  “Subordination
  Agreement”

  	
  15

  
	
  1.86

  	
  “Subsidiary”

  	
  15

  
	
  1.87

  	
  “Successor Landlord”

  	
  15

  
	
  1.88

  	
  “Tenant”

  	
  16

  
	
  1.89

  	
  “Tenant’s Personal
  Property”

  	
  16

  
	
  1.90

  	
  “Term”

  	
  16

  
	
  1.91

  	
  “Third Party Payor
  Programs”

  	
  16

  
	
  1.92

  	
  “Third Party Payors”

  	
  16

  
	
  1.93

  	
  “Unsuitable for Its
  Permitted Use”

  	
  16

  
	
  1.94

  	
  “Work”

  	
  17

  
	
  ARTICLE 2

  	
  LEASED PROPERTY AND TERM

  	
  17

  
	
  2.1

  	
  Leased Property

  	
  17

  
	
  2.2

  	
  Condition of Leased
  Property

  	
  18

  
	
  2.3

  	
  Fixed Term

  	
  19

  
	
  2.4

  	
  Extended Terms

  	
  19

  
	
  ARTICLE 3

  	
  RENT

  	
  19

  
	
  3.1

  	
  Rent

  	
  19

  
	
  3.2

  	
  Late Payment of
  Rent, Etc.

  	
  25

  
	
  3.3

  	
  Net Lease

  	
  26

  
	
  3.4

  	
  No Termination,
  Abatement, Etc.

  	
  26

  



 


2

















 


	
  ARTICLE 4

  	
  USE OF THE LEASED PROPERTY

  	
  27

  
	
  4.1

  	
  Permitted Use

  	
  27

  
	
  4.2

  	
  Compliance with
  Legal/Insurance Requirements, Etc.

  	
  29

  
	
  4.3

  	
  Compliance with
  Medicaid and Medicare Requirements

  	
  29

  
	
  4.4

  	
  Environmental
  Matters

  	
  30

  
	
  ARTICLE 5

  	
  MAINTENANCE AND REPAIRS

  	
  32

  
	
  5.1

  	
  Maintenance and
  Repair

  	
  32

  
	
  5.2

  	
  Tenant’s Personal
  Property

  	
  34

  
	
  5.3

  	
  Yield Up

  	
  34

  
	
  5.4

  	
  Management Agreement

  	
  35

  
	
  ARTICLE 6

  	
  IMPROVEMENTS, ETC.

  	
  35

  
	
  6.1

  	
  Improvements to the
  Leased Property

  	
  35

  
	
  6.2

  	
  Salvage

  	
  36

  
	
  ARTICLE 7

  	
  LIENS

  	
  36

  
	
  7.1

  	
  Liens

  	
  36

  
	
  7.2

  	
  Landlord’s Lien

  	
  37

  
	
  ARTICLE 8

  	
  PERMITTED CONTESTS

  	
  37

  
	
  ARTICLE 9

  	
  INSURANCE AND INDEMNIFICATION

  	
  38

  
	
  9.1

  	
  General Insurance
  Requirements

  	
  38

  
	
  9.2

  	
  Waiver of
  Subrogation

  	
  39

  
	
  9.3

  	
  Form Satisfactory,
  Etc.

  	
  39

  
	
  9.4

  	
  No Separate
  Insurance; Self-Insurance

  	
  40

  
	
  9.5

  	
  Indemnification of
  Landlord

  	
  40

  
	
  ARTICLE 10

  	
  CASUALTY

  	
  41

  
	
  10.1

  	
  Insurance Proceeds

  	
  41

  
	
  10.2

  	
  Damage or
  Destruction

  	
  42

  
	
  10.3

  	
  Damage Near End of
  Term

  	
  44

  
	
  10.4

  	
  Tenant’s Property

  	
  44

  
	
  10.5

  	
  Restoration of
  Tenant’s Property

  	
  44

  
	
  10.6

  	
  No Abatement of Rent

  	
  44

  
	
  10.7

  	
  Waiver

  	
  44

  
	
  ARTICLE 11

  	
  CONDEMNATION

  	
  45

  
	
  11.1

  	
  Total Condemnation,
  Etc.

  	
  45

  
	
  11.2

  	
  Partial Condemnation

  	
  45

  
	
  11.3

  	
  Abatement of Rent

  	
  46

  
	
  11.4

  	
  Temporary
  Condemnation

  	
  46

  
	
  11.5

  	
  Allocation of Award

  	
  47

  
	
  ARTICLE 12

  	
  DEFAULTS AND REMEDIES

  	
  47

  
	
  12.1

  	
  Events of Default

  	
  47

  
	
  12.2

  	
  Remedies

  	
  50

  
	
  12.3

  	
  Tenant’s Waiver

  	
  51

  
	
  12.4

  	
  Application of Funds

  	
  52

  
	
  12.5

  	
  Landlord’s Right to
  Cure Tenant’s Default

  	
  52

  
	
  ARTICLE 13

  	
  HOLDING OVER

  	
  52

  
	
  ARTICLE 14

  	
  LANDLORD DEFAULT

  	
  53

  
	
  ARTICLE 15

  	
  PURCHASE RIGHTS

  	
  53

  
	
  ARTICLE 16

  	
  SUBLETTING AND ASSIGNMENT

  	
  54

  
	
  16.1

  	
  Subletting and
  Assignment

  	
  54

  
	
  16.2

  	
  Required Sublease
  Provisions

  	
  55

  
	
  16.3

  	
  Permitted Sublease

  	
  57

  



 


3

















 


	
  16.4

  	
  Sublease Limitation

  	
  57

  
	
  ARTICLE 17

  	
  ESTOPPEL CERTIFICATES AND FINANCIAL
  STATEMENTS

  	
  58

  
	
  17.1

  	
  Estoppel
  Certificates

  	
  58

  
	
  17.2

  	
  Financial Statements

  	
  58

  
	
  17.3

  	
  General Operations

  	
  59

  
	
  ARTICLE 18

  	
  LANDLORD’S RIGHT TO INSPECT

  	
  60

  
	
  ARTICLE 19

  	
  EASEMENTS

  	
  60

  
	
  19.1

  	
  Grant of Easements

  	
  60

  
	
  19.2

  	
  Exercise of Rights
  by Tenant

  	
  61

  
	
  19.3

  	
  Permitted
  Encumbrances

  	
  61

  
	
  ARTICLE 20

  	
  FACILITY MORTGAGES

  	
  61

  
	
  20.1

  	
  Landlord
  May Grant Liens

  	
  61

  
	
  20.2

  	
  Subordination of Lease

  	
  61

  
	
  20.3

  	
  Notice to Mortgagee
  and Superior Landlord

  	
  63

  
	
  ARTICLE 21

  	
  ADDITIONAL COVENANTS OF TENANT

  	
  64

  
	
  21.1

  	
  Prompt Payment of
  Indebtedness

  	
  64

  
	
  21.2

  	
  Conduct of Business

  	
  64

  
	
  21.3

  	
  Maintenance of
  Accounts and Records

  	
  64

  
	
  21.4

  	
  Notice of
  Litigation, Etc.

  	
  65

  
	
  21.5

  	
  Indebtedness of
  Tenant

  	
  65

  
	
  21.6

  	
  Distributions,
  Payments to Affiliated Persons, Etc.

  	
  66

  
	
  21.7

  	
  Prohibited
  Transactions

  	
  66

  
	
  21.8

  	
  Liens and
  Encumbrances

  	
  66

  
	
  21.9

  	
  Merger; Sale of
  Assets; Etc.

  	
  67

  
	
  ARTICLE 22

  	
  ARBITRATION

  	
  68

  
	
  ARTICLE 23

  	
  MISCELLANEOUS

  	
  69

  
	
  23.1

  	
  Limitation on
  Payment of Rent

  	
  69

  
	
  23.2

  	
  No Waiver

  	
  69

  
	
  23.3

  	
  Remedies Cumulative

  	
  69

  
	
  23.4

  	
  Severability

  	
  70

  
	
  23.5

  	
  Acceptance of
  Surrender

  	
  70

  
	
  23.6

  	
  No Merger of Title

  	
  70

  
	
  23.7

  	
  Conveyance by
  Landlord

  	
  70

  
	
  23.8

  	
  Quiet Enjoyment

  	
  70

  
	
  23.9

  	
  No Recordation

  	
  71

  
	
  23.10

  	
  Notices

  	
  71

  
	
  23.11

  	
  Construction

  	
  72

  
	
  23.12

  	
  Counterparts;
  Headings

  	
  72

  
	
  23.13

  	
  Applicable Law, Etc.

  	
  73

  
	
  23.14

  	
  Right to Make
  Agreement

  	
  73

  
	
  23.15

  	
  Attorneys’ Fees

  	
  73

  
	
  23.16

  	
  Nonliability of
  Trustees

  	
  74

  
	
  23.17

  	
  Original Lease

  	
  74

  



 


4

















 


AMENDED AND RESTATED MASTER LEASE AGREEMENT

(LEASE NO. 3)


 


THIS AMENDED AND RESTATED MASTER LEASE AGREEMENT  (LEASE NO. 3)
is entered into as of June 30, 2008 by and among each of the parties
identified on the signature page hereof as a landlord, as landlord
(collectively, “Landlord”), and FIVE STAR QUALITY CARE
TRUST, a Maryland business trust, as tenant (“Tenant”).


 


W  I  T  N  E
S  S  E  T  H :


 


WHEREAS, Landlord and Tenant are
parties to that
certain Second Amended and Restated Lease Agreement, dated as of November 19,
2004, as the same has been amended to date (as so amended, the “Original
Lease”); and


 


WHEREAS, Landlord and Tenant wish to
amend, restate and bifurcate the Original Lease into two separate leases and to
make such other modifications thereto as are set forth herein;


 


NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree that, effective as of the date hereof, the Original Lease is hereby
amended and restated with respect to the Leased Property (as hereinafter
defined), as follows:


 


ARTICLE 1


 


DEFINITIONS


 


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


 


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


 

















 


1.2          “Additional
Rent”  shall have the meaning given
such term in Section 3.1.2(a).


 


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


 


1.4          “Agreement”  shall mean this Amended and Restated
Master Lease Agreement (Lease No. 3), including all schedules and exhibits
attached hereto, as it and they may be amended from time to time as herein
provided.


 


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


 


2

















 


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


 


1.7          “Base
Gross Revenues”  shall mean the
amount of Gross Revenues for the Leased Property for the Base Year, provided,
however, that in the event that, with respect to any Lease Year, or
portion thereof, for any reason (including, without limitation, a casualty or
Condemnation) there shall be a reduction in the number of units available at
any Facility located at the Leased Property or in the services provided at such
Facility from the number of such units or the services provided during the Base
Year, in determining Additional Rent payable for such Lease Year, Base Gross
Revenues shall be reduced as follows:  (a) in
the event of the termination of this Agreement with respect to any Property
pursuant to Article 10, 11 or 12, all Gross Revenues for such
Property for the period during the Base Year equivalent to the period after the
termination of this Agreement with respect to such Property shall be subtracted
from Base Gross Revenues; (b) in the event of a partial closing of any
Facility affecting the number of units, or the services provided, at such
Facility, Gross Revenues attributable to units or services at such Facility
shall be ratably allocated among all units in service at such Facility during
the Base Year and all such Gross Revenues attributable to units no longer in
service shall be subtracted from Base Gross Revenues throughout the period of
such closing; and (c) in the event of any other change in circumstances
affecting any Facility, Base Gross Revenues shall be equitably adjusted in such
manner as Landlord and Tenant shall reasonably agree.


 


1.8          “Base
Year”  shall mean, with respect
to each Property, the calendar year specified as the Base Year with respect to
such Property on Schedule 1 attached hereto and made a part hereof.


 


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


 


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


 


3

















 


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


 


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


 


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


 


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


 


1.15        “Commencement
Date”  shall mean, with respect
to each Property, the calendar date specified as the Commencement Date with
respect to such Property on Schedule 1 attached hereto and made a part
hereof.


 


4

















 


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


 


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


 


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


 


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


 


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


 


1.21        “Disbursement
Rate”  shall mean an annual rate
of interest, as of the date of determination, equal to the greater of (a) eight
percent (8%) and (b) the per annum rate for ten (10) year U.S.
Treasury Obligations as published in The Wall Street Journal plus three
hundred (300) basis points; provided, however, that in no event
shall the Disbursement Rate exceed eleven and one-half percent (11.5%).


 


1.22        “Distribution”  shall mean (a) any declaration or
payment of any dividend (except ordinary cash dividends payable in common stock
or other equity interests of Tenant) on or in respect of any shares of any
class of capital stock or other equity interests of Tenant, (b) any
purchase, redemption, retirement or other acquisition of any shares of any
class of 


 


5

















 


capital stock of a
corporation, (c) any other distribution on or in respect of any shares of
any class of capital stock of a corporation or (d) any return of capital
to shareholders.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


1.30        “Excess
Gross Revenues”  shall mean the
amount of Gross Revenues for any Lease Year, or portion thereof, in excess of
Base Gross Revenues for the equivalent period during the Base Year.


 


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


 


1.32        “Facility”  shall mean, with respect to any Property,
the skilled nursing/intermediate care/independent living/assisted
living/special care/group home facility being operated or proposed to be operated
on such Property.


 


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


 


6
















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


1.42        “Gross
Revenues”  shall mean, for each Fiscal Year during
the Term, in the aggregate, all revenues and receipts (determined on an accrual
basis and in all material respects in 


 


7

















 


accordance with GAAP) of
every kind derived from renting, using and/or operating the Leased Property and
parts thereof, including, but not limited to: 
all rents and revenues received or receivable for the use of or
otherwise by reason of all units, beds and other facilities provided, meals served,
services performed, space or facilities subleased or goods sold on the Leased
Property, or any portion thereof, including, without limitation, any other
arrangements with third parties relating to the possession or use of any
portion of the Leased Property; and proceeds, if any, from business
interruption or other loss of income insurance; provided, however,
that Gross Revenues shall not include the following:  revenue from professional fees or charges by
physicians and unaffiliated providers of services, when and to the extent such
charges are paid over to such physicians and unaffiliated providers of
services, or are separately billed and not included in comprehensive fees;
contractual allowances (relating to any period during the Term) for billings
not paid by or received from the appropriate governmental agencies or third
party providers; allowances according to GAAP for uncollectible accounts,
including credit card accounts and charity care or other administrative
discounts; all proper patient billing credits and adjustments according to GAAP
relating to health care accounting; provider discounts for hospital or other
medical facility utilization contracts and credit card discounts; any amounts
actually paid by Tenant for the cost of any federal, state or local
governmental programs imposed specially to provide or finance indigent patient
care; federal, state or municipal excise, sales, use, occupancy or similar
taxes collected directly from patients, clients or residents or included as
part of the sales price of any goods or services; insurance proceeds (other
than proceeds from business interruption or other loss of income insurance);
Award proceeds (other than for a temporary Condemnation); revenues attributable
to services actually provided off-site or otherwise away from the Leased Property,
such as home health care, to persons that are not patients, clients or
residents at the Leased Property; revenues attributable to child care services
provided primarily to employees of the Leased Property; any proceeds from any
sale of the Leased Property or from the refinancing of any debt encumbering the
Leased Property; proceeds from the disposition of furnishings, fixture and
equipment no longer necessary for the operation of the Facility located
thereon; any security deposits and other advance deposits, until and unless the
same are forfeited to Tenant or applied for the purpose for which they were
collected; and interest income from any bank account or investment of Tenant.


 


8

















 


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


 


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


 


1.45        “Hazardous Substances”  shall mean any substance:


 


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


 


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


 


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


 


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


 


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


 


9

















 


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


 


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


 


(h)           without limitation,
constitutes Regulated Medical Wastes.


 


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


 


1.47        “Impositions”  shall mean, collectively, all taxes
(including, without limitation, all taxes imposed under the laws of any State,
as such laws may be amended from time to time, and all ad valorem, sales and
use, or similar taxes as the same relate to or are imposed upon Landlord,
Tenant or the business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof),
ground rents (including any minimum rent under any ground lease, and any
additional rent or charges thereunder), water, sewer or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), and all other governmental
charges, in each case whether general or special, ordinary or extraordinary,
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Tenant (including all interest and penalties
thereon due to any failure in payment by Tenant), which at any time prior to,
during or in respect of the Term hereof may be assessed or imposed on or in
respect of or be a lien upon (a) Landlord’s interest in the Leased
Property, (b) the Leased Property or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with the Leased Property or the leasing or use
of the Leased Property or any part thereof by Tenant; provided, however,
that nothing contained herein shall be construed to require Tenant to pay and
the term “Impositions” shall not include (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any
transfer fee (but excluding any mortgage or similar tax payable in connection
with a Facility Mortgage) or other tax imposed with respect to the sale,
exchange or other disposition 


 


10

















 


by Landlord of the Leased
Property or the proceeds thereof, (iv) any single business, gross receipts
tax, transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Landlord, (v) any interest or penalties imposed on Landlord
as a result of the failure of Landlord to file any return or report timely and
in the form prescribed by law or to pay any tax or imposition, except to the
extent such failure is a result of a breach by Tenant of its obligations
pursuant to Section 3.1.3, (vi) any impositions imposed on
Landlord that are a result of Landlord not being considered a “United States
person” as defined in Section 7701(a)(30) of the Code, (vii) any
impositions that are enacted or adopted by their express terms as a substitute
for any tax that would not have been payable by Tenant pursuant to the terms of
this Agreement or (viii) any impositions imposed as a result of a breach
of covenant or representation by Landlord in any agreement governing Landlord’s
conduct or operation or as a result of the negligence or willful misconduct of
Landlord.


 


1.48        “Incidental
Documents”  shall mean,
collectively, any Guaranty, any Security Agreement and any Pledge Agreement.


 


1.49        “Indebtedness”  shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor’s
balance sheet as liabilities.


 


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


 


1.51        “Interest
Rate”  shall mean, with respect
to each Property, the per annum interest rate specified as the Interest Rate
with respect to such Property on Schedule 1 attached hereto and made a
part hereof.


 


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


 


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


 


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


 


11

















 


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


 


1.56        “Lease
Year”  shall mean any Fiscal Year
or portion thereof during the Term.


 


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


 


1.58        “Leased
Intangible Property”  shall mean
all agreements, service contracts, equipment leases, booking agreements and
other arrangements or agreements affecting the ownership, repair, maintenance,
management, leasing or operation of the Leased Property, or any portion
thereof, to which Landlord is a party; all books, records and files relating to
the leasing, maintenance, management or operation of the Leased Property, or
any portion thereof, belonging to Landlord; all transferable or assignable
permits, certificates of occupancy, operating permits, sign permits,
development rights and approvals, certificates, licenses, warranties and
guarantees, rights to deposits, trade names, service marks, telephone exchange
numbers identified with the Leased Property, and all other transferable
intangible property, miscellaneous rights, benefits and privileges of any kind
or character belonging to Landlord with respect to the Leased Property.


 


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


 


1.60        “Legal
Requirements”  shall mean all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions affecting
the Leased Property or the maintenance, construction, alteration or operation
thereof, whether now or hereafter enacted or in existence, including, without 


 


12

















 


limitation, (a) all
permits, licenses, authorizations, certificates of need, authorizations and
regulations necessary to operate any Property for its Permitted Use, and (b) all
covenants, agreements, restrictions and encumbrances contained in any
instruments at any time in force affecting any Property, including those which
may (i) require material repairs, modifications or alterations in or to
any Property or (ii) in any way materially and adversely affect the use
and enjoyment thereof, but excluding any requirements arising as a result of
Landlord’s status as a real estate investment trust.


 


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


 


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


 


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


 


1.64        “Master
Lease Agreement No. 1”  shall mean that certain Amended and Restated
Master Lease Agreement (Lease No. 1), dated as of June 30, 2008,
among certain entities comprising Landlord, certain other affiliates of
Landlord and Tenant, as it may be amended, restated, supplemented or otherwise
modified from time to time.


 


1.65        “Minimum
Rent”  shall mean the sum of
Fourteen Million Three Hundred Thirty-Seven Thousand Seven Hundred Seventy-One
and 00/100s Dollars ($14,337,771.00) per annum.


 


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


 


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


 


13

















 


1.68        “Original
Lease”  shall have the meaning given such term in the
recitals to this Agreement.


 


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


 


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


 


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


 


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


 


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


 


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


 


1.75        “Pledge Agreement”  shall mean any pledge agreement made in favor
of Landlord with respect to the stock or other equity interests of Tenant or
any assignee, subtenant or other transferee, as it or they may be amended,
restated, supplemented or otherwise modified from time to time.


 


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


 


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


 


14

















 


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


 


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


 


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


 


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


 


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


 


1.83        “State”  shall mean, with respect to any Property,
the state, commonwealth or district in which the such Property is located.


 


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


 


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


 


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


 


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


 


15
















 


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


 


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


 


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


 


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


 


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


 


1.93                        “Unsuitable
for Its Permitted Use”  shall
mean, with respect to any Facility, a state or condition of such Facility such
that (a) following any damage or destruction involving a Facility, (i) such
Facility cannot be operated on a commercially practicable basis for its
Permitted Use and it cannot reasonably be expected to be restored to
substantially the same condition as existed immediately before such damage or
destruction, and as otherwise required by Section 10.2.4, within
twelve (12) months following such damage or destruction or such longer period
of time as to which business interruption insurance is available to cover Rent
and other costs related to the applicable Property following such damage or
destruction, (ii) the damage or destruction, if uninsured, exceeds
$1,000,000 or (iii) the cost of such restoration exceeds ten percent (10%)
of the fair market value of such Property immediately prior to such damage or
destruction, or (b) as the result of a partial taking by 


 


16

















 


Condemnation, such Facility cannot be operated, in the
good faith judgment of Tenant, on a commercially practicable basis for its
Permitted Use.


 


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


 


ARTICLE 2


 


LEASED PROPERTY
AND TERM


 


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


 


(a)                                  those
certain tracts, pieces and parcels of land, as more particularly described in Exhibits
A-1 through A-34 attached hereto and made a part hereof (the “Land”);


 


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


 


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


 


(d)                                 all
equipment, machinery, fixtures, and other items of property, now or hereafter
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, all of which, to the maximum extent permitted by law, are hereby deemed
by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, but
specifically excluding all items included 


 


17

















 


within the
category of Tenant’s Personal Property (collectively, the “Fixtures”);


 


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


 


(f)                                    all
of the Leased Intangible Property; and


 


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


 


2.2                               Condition
of Leased Property.  Tenant
acknowledges receipt and delivery of possession of the Leased Property and
Tenant accepts the Leased Property in its “as is” condition, subject to the
rights of parties in possession, the existing state of title, including all
covenants, conditions, restrictions, reservations, mineral leases, easements
and other matters of record or that are visible or apparent on the Leased  Property, all applicable Legal Requirements,
the lien of any financing instruments, mortgages and deeds of trust existing
prior to the applicable Commencement Date for any Property or permitted by the
terms of this Agreement, and such other matters which would be disclosed by an
inspection of the Leased Property and the record title thereto or by an
accurate survey thereof.  TENANT
REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING
AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD’S AGENTS OR EMPLOYEES WITH
RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN
RESPECT OF THE CONDITION OF THE LEASED PROPERTY.  LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY
TENANT.  To the maximum extent permitted
by law, however, Landlord hereby assigns to Tenant all of Landlord’s rights to
proceed against any predecessor in interest or insurer for breaches of
warranties or representations or for latent defects in the Leased
Property.  Landlord shall fully cooperate
with Tenant in 


 


18

















 


the prosecution of any such claims, in Landlord’s or
Tenant’s name, all at Tenant’s sole cost and expense.  Tenant shall indemnify, defend, and hold
harmless Landlord from and against any loss, cost, damage or liability (including
reasonable attorneys’ fees) incurred by Landlord in connection with such
cooperation.


 


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


 


2.4                               Extended
Terms.  Provided that no Event of
Default shall have occurred and be continuing, Tenant shall have the right to
extend the Term for one renewal term of fifteen (15) years (the “Extended
Term”).


 


The Extended Term shall commence on the day succeeding
the expiration of the Fixed Term.  All of
the terms, covenants and provisions of this Agreement shall apply to the
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Extended Term.  If
Tenant shall elect to exercise the aforesaid option, it shall do so by giving
Landlord Notice thereof not later than December 31, 2020, it being
understood and agreed that time shall be of the essence with respect to the
giving of such Notice.  If Tenant shall
fail to give such Notice, this Agreement shall automatically terminate at the
end of the Fixed Term and Tenant shall have no further option to extend the
Term of this Agreement.  If Tenant shall
give such Notice, the extension of this Agreement shall be automatically
effected without the execution of any additional documents; it being understood
and agreed, however, that Tenant and Landlord shall execute such documents and
agreements as either party shall reasonably require to evidence the same.  Notwithstanding the provisions of the
foregoing sentence, if, subsequent to the giving of such Notice, an Event of
Default shall occur, at Landlord’s option, the extension of this Agreement
shall cease to take effect and this Agreement shall automatically terminate at
the end of the Fixed Term, and Tenant shall have no further option to extend
the Term of this Agreement.


 


ARTICLE 3


 


RENT


 


3.1                               Rent.
 Tenant shall pay, in lawful money of
the United States of America which shall be legal tender for the payment of
public and private debts, without offset, abatement, demand or 


 


19

















 


deduction (unless otherwise expressly provided in this
Agreement), Minimum Rent and Additional Rent to Landlord and Additional Charges
to the party to whom such Additional Charges are payable, during the Term.  All payments to Landlord shall be made by
wire transfer of immediately available federal funds or by other means acceptable
to Landlord in its sole discretion.  Rent
for any partial calendar month shall be prorated on a per diem basis.


 


3.1.1                                 Minimum
Rent.


 


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


 


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


 


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


 


(d)                                 Adjustments of Minimum Rent Following Partial
Lease Termination. 
Subject to Section 4.1.1(b), if this Agreement shall
terminate with respect to any Property but less than all of the Leased
Property, Minimum Rent shall be 


 


20

















 


reduced by the affected
Property’s allocable share of Minimum Rent determined in accordance with the
applicable provisions of this Agreement.


 


3.1.2                                 Additional
Rent.


 


(a)                                  Amount.  Tenant shall pay additional rent (“Additional
Rent”) with respect to each Lease Year during the Term subsequent to the
Base Year in an amount, not less than zero, equal to four percent (4%) of
Excess Gross Revenues at the Leased Property.


 


(b)                                 Quarterly Installments.  Installments of Additional Rent for each Lease
Year during the Term, or portion thereof, shall be calculated and paid
quarterly in arrears.  Quarterly payments
of Additional Rent for the Leased Property shall be calculated based on Gross
Revenues for such quarter during the preceding year and shall be due and
payable and delivered to Landlord on the first Business Day of each calendar
quarter, or portion thereof, thereafter occurring during the Term, together
with an Officer’s Certificate setting forth the calculation of Additional Rent
due and payable for such quarter.


 


(c)                                  Reconciliation of Additional Rent.  In addition, within seventy-five (75) days
after the end of the Base Year and each Lease Year thereafter (or any portion
thereof occurring during the Term), Tenant shall deliver, or cause to be
delivered, to Landlord (i) a financial report setting forth the Gross
Revenues for each Property for such preceding Lease Year, or portion thereof,
together with an Officer’s Certificate from Tenant’s chief financial or
accounting officer certifying that such report is true and correct, (ii) an
audit of Gross Revenues prepared by a firm of independent certified public
accountants proposed by Tenant and approved by Landlord (which approval shall
not be unreasonably withheld, delayed or conditioned), and (iii) a
statement showing Tenant’s calculation of Additional Rent due for such
preceding Lease Year based on the Gross Revenues set forth in such financial
report, together with an Officer’s Certificate from Tenant’s chief financial or
accounting officer certifying that such statement is true and correct.


 


If the annual
Additional Rent for such preceding Lease Year as set forth in Tenant’s
statement thereof exceeds the amount previously paid with respect thereto by
Tenant, Tenant shall pay such excess to Landlord at such time as the statement
is delivered, together with interest at the 


 


21

















 


Interest Rate, which interest shall accrue from the close of such
preceding Lease Year until the date that such statement is required to be
delivered and, thereafter, such interest shall accrue at the Overdue Rate,
until the amount of such difference shall be paid or otherwise discharged.  If the annual Additional Rent for such
preceding Lease Year as shown in such statement is less than the amount
previously paid with respect thereto by Tenant, provided that no Event of
Default shall have occurred and be continuing, Landlord shall grant Tenant a
credit against the Additional Rent next coming due in the amount of such
difference, together with interest at the Interest Rate, which interest shall
accrue from the date of payment by Tenant until the date such credit is applied
or paid, as the case may be.  If such
credit cannot be made because the Term has expired prior to application in full
thereof, provided no Event of Default has occurred and is continuing, Landlord
shall pay the unapplied balance 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 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 and
customary practices and in all material respects in accordance with GAAP, which
will accurately record all Gross Revenues and Tenant shall retain, for at least
three (3) years after the expiration of each Lease Year, reasonably
adequate records conforming to such accounting system showing all Gross
Revenues for such Lease Year.  Landlord,
at its own expense, except as provided hereinbelow, shall have the right,
exercisable by Notice to Tenant, by its accountants or representatives, to
audit the information set forth in the Officer’s Certificate referred to in
subparagraph (c) above and, in connection with such audits, to examine
Tenant’s books and records with respect thereto (including supporting data and
sales and excise tax returns).  Landlord
shall begin such audit as soon as reasonably possible following its receipt of
the applicable Officer’s Certificate and shall complete such audit as soon as
reasonably possible thereafter.  All such
audits shall be performed at the location where such books and records are
customarily kept and in such a manner so as to minimize any interference with
Tenant’s business operations.  If any
such audit discloses a deficiency in the payment of Additional Rent and either
Tenant agrees with the result of such audit or the matter is otherwise
determined, Tenant 


 


22

















 


shall forthwith
pay to Landlord the amount of the deficiency, as finally agreed or determined,
together with interest at the Interest Rate, from the date such payment should
have been made to the date of payment thereof, and if the amount of such
deficiency exceeds five percent (5%) of the Additional Rent that should have
been paid for any Lease Year, Tenant shall forthwith pay to Landlord the
aggregate amount of all costs and expenses incurred by Landlord in connection
with any such audit.  If any such audit
discloses that Tenant paid more Additional Rent for any Lease Year than was due
hereunder, and either Landlord agrees with the result of such audit or the
matter is otherwise determined, provided no Event of Default has occurred and
is continuing, Landlord shall, at Landlord’s option, either grant Tenant a
credit or pay to Tenant an amount equal to the amount of such overpayment
against Additional Rent next coming due in the amount of such difference, as
finally agreed or determined, together with interest at the Interest Rate,
which interest shall accrue from the time of payment by Tenant until the date
such credit is applied or paid, as the case may be; provided, however,
that, upon the expiration or sooner termination of the Term, provided no Event
of Default has occurred and is continuing, Landlord shall pay the unapplied
balance 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 date
of payment from Landlord.  Any dispute
concerning the correctness of an audit shall be settled by arbitration pursuant
to the provisions of Article 22.


 


Any proprietary
information obtained by Landlord with respect to Tenant pursuant to the
provisions of this Agreement shall be treated as confidential, except that such
information may be disclosed or used, subject to appropriate confidentiality
safeguards, pursuant to court order or in any litigation between the parties
and except further that Landlord may disclose such information to its
prospective lenders, provided that Landlord shall direct such lenders to
maintain such information as confidential. 
The obligations of Tenant and Landlord contained in this Section 3.1.2
shall survive the expiration or earlier termination of this Agreement.


 


3.1.3                                 Additional
Charges.  In addition to the
Minimum Rent and Additional Rent payable hereunder, Tenant shall pay (or cause
to be paid) to the appropriate parties and discharge (or 


 


23

















 


cause to be discharged) as and when due and payable
the following (collectively, “Additional Charges”):


 


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


 


24

















 


returns for
property covered by this Agreement, Landlord shall provide Tenant with copies
of assessment notices in sufficient time for Tenant to file a protest.  All Impositions assessed against such
personal property shall be (irrespective of whether Landlord or Tenant shall
file the relevant return) paid by Tenant not later than the last date on which
the same may be made without interest or penalty, subject to the provisions of Article 8.


 


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


 


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


 


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


 


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


 


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


 


3.2                               Late
Payment of Rent, Etc.  If any
installment of Minimum Rent, Additional Rent or Additional Charges (but only as
to those Additional Charges which are payable directly to Landlord) shall not
be paid within ten (10) days after its due 


 


25

















 


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


 


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


 


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


 


3.4                               No
Termination, Abatement, Etc.    Except as otherwise specifically provided in
this Agreement, each of Landlord and Tenant, to the maximum extent permitted by
law, shall remain bound by this Agreement in accordance with its terms and
shall not take any action without the consent of the other to modify, surrender
or terminate this Agreement.  In
addition, except as otherwise expressly provided in this Agreement, Tenant
shall not seek, or be entitled to, any abatement, deduction, deferment or
reduction of the Rent, or set-off against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a) any
damage to or destruction of the Leased Property, or any portion thereof, from
whatever cause or any Condemnation, (b) the lawful or unlawful prohibition
of, or restriction upon, Tenant’s use of the Leased Property, or any portion
thereof, or the interference with such use by any Person or by reason of
eviction by paramount title; (c) any claim which Tenant may have against
Landlord by reason of any default (other


 


26
















 


than a monetary default) or breach of any warranty by
Landlord under this Agreement or any other agreement between Landlord and
Tenant, or to which Landlord and Tenant are parties; (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord; or (e) for any other cause whether similar or
dissimilar to any of the foregoing (other than a monetary default by
Landlord).  Except as otherwise
specifically provided in this Agreement, Tenant hereby waives all rights
arising from any occurrence whatsoever, which may now or hereafter be conferred
upon it by law (a) to modify, surrender or terminate this Agreement or
quit or surrender the Leased Property, or any portion thereof, or (b) which
would entitle Tenant to any abatement, reduction, suspension or deferment of
the Rent or other sums payable or other obligations to be performed by Tenant
hereunder.  The obligations of Tenant
hereunder shall be separate and independent covenants and agreements, and the
Rent and all other sums payable by Tenant hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be
terminated pursuant to the express provisions of this Agreement.


 


ARTICLE 4


 


USE OF THE LEASED
PROPERTY


 


4.1                               Permitted
Use.


 


4.1.1                                 Permitted
Use.


 


(a)                                  Tenant
shall, at all times during the Term, and at any other time that Tenant shall be
in possession of any Property, continuously use and operate, or cause to be
used and operated, such Property as a skilled nursing/ intermediate
care/independent living/assisted living/ special care/group home facility as
currently operated, and any uses incidental thereto.  Tenant shall not use (and shall not permit
any Person to use) any Property, or any portion thereof, for any other use
without the prior written consent of Landlord, which approval shall not be
unreasonably withheld, delayed or conditioned. 
No use shall be made or permitted to be made of any Property and no acts
shall be done thereon which will cause the cancellation of any insurance policy
covering such Property or any part thereof (unless another adequate policy is
available) or which would constitute a default under any ground lease affecting
such Property, nor shall Tenant sell or otherwise provide to residents or
patients therein, or 


 


27

















 


permit to be kept,
used or sold in or about any Property any article which may be prohibited by
law or by the standard form of fire insurance policies, or any other insurance
policies required to be carried hereunder, or fire underwriter’s
regulations.  Tenant shall, at its sole
cost (except as expressly provided in Section 5.1.2(b)), comply or
cause to be complied with all Insurance Requirements.  Tenant shall not take or omit to take, or
permit to be taken or omitted to be taken, any action, the taking or omission
of which materially impairs the value or the usefulness of any Property or any
part thereof for its Permitted Use.


 


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


 


28

















 


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


 


4.1.3                                 Lawful
Use, Etc.   Tenant shall not, and
shall not permit any Person to use or suffer or permit the use of any Property
or Tenant’s Personal Property, if any, for any unlawful purpose.  Tenant shall not, and shall not permit any
Person to, commit or suffer to be committed any waste on any Property, or in
any Facility, nor shall Tenant cause or permit any unlawful nuisance thereon or
therein.  Tenant shall not, and shall not
permit any Person to, suffer nor permit any Property, or any portion thereof,
to be used in such a manner as (a) may materially and adversely impair
Landlord’s title thereto or to any portion thereof, or (b) may reasonably
allow a claim or claims for adverse usage or adverse possession by the public,
as such, or of implied dedication of such Property, or any portion thereof.


 


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


 


4.3                               Compliance
with Medicaid and Medicare Requirements.  Tenant, at its sole cost and expense, shall make
(or shall cause to be made), whatever improvements (capital or ordinary) as are
required to conform each Property to such standards as may, from time to time,
be required by Federal Medicare (Title 18) or Medicaid (Title 19) for skilled
and/or intermediate care nursing programs, to the extent Tenant is a
participant in such programs with respect to such Property, or any other
applicable programs 


 


29

















 


or legislation, or capital improvements required by
any other governmental agency having jurisdiction over any Property as a
condition of the continued operation of such Property for its Permitted Use.


 


4.4                               Environmental
Matters.


 


4.4.1                                 Restriction
on Use, Etc.   During the Term and
any other time that Tenant shall be in possession of any Property, Tenant shall
not, and shall not permit any Person to, store, spill upon, dispose of or
transfer to or from such Property any Hazardous Substance, except in compliance
with all Applicable Laws.  During the
Term and any other time that Tenant shall be in possession of any Property,
Tenant shall maintain (or shall cause to be maintained) such Property at all
times free of any Hazardous Substance (except in compliance with all Applicable
Laws).  Tenant shall promptly:  (a) upon receipt of notice or knowledge,
notify Landlord in writing of any material change in the nature or extent of
Hazardous Substances at any Property, (b) transmit to Landlord a copy of
any report which is required to be filed by Tenant or any Manager with respect
to any Property pursuant to SARA Title III or any other Applicable Law, (c) transmit
to Landlord copies of any citations, orders, notices or other governmental
communications received by Tenant or any Manager or their respective agents or
representatives with respect thereto (collectively, “Environmental Notice”),
which Environmental Notice requires a written response or any action to be
taken and/or if such Environmental Notice gives notice of and/or presents a
material risk of any material violation of any Applicable Law and/or presents a
material risk of any material cost, expense, loss or damage (an “Environmental
Obligation”), (d) observe and comply with (or cause to be observed and
complied with) all Applicable Laws relating to the use, maintenance and
disposal of Hazardous Substances and all orders or directives from any
official, court or agency of competent jurisdiction relating to the use or
maintenance or requiring the removal, treatment, containment or other
disposition thereof, and (e) pay or otherwise dispose (or cause to be paid
or otherwise disposed) of any fine, charge or Imposition related thereto,
unless Tenant or any Manager shall contest the same in good faith and by
appropriate proceedings and the right to use and the value of any of the Leased
Property is not materially and adversely affected thereby.


 


If, at any time prior to the termination of this
Agreement, Hazardous Substances (other than those maintained in accordance with
Applicable Laws) are discovered on any Property, subject to Tenant’s right to
contest the same in accordance with Article 8, Tenant shall take
(and shall cause to be taken) all actions and 


 


30

















 


incur any and all expenses, as are required by any
Government Agency and by Applicable Law, (x) to clean up and remove from
and about such Property all Hazardous Substances thereon, (y) to contain
and prevent any further release or threat of release of Hazardous Substances on
or about such Property and (z) to use good faith efforts to eliminate any
further release or threat of release of Hazardous Substances on or about such
Property.


 


4.4.2                                 Indemnification
of Landlord.  Tenant shall
protect, indemnify and hold harmless Landlord and each Facility Mortgagee,
their trustees, officers, agents, employees and beneficiaries, and any of their
respective successors or assigns with respect to this Agreement (collectively,
the “Indemnitees” and, individually, an “Indemnitee”) for, from
and against any and all debts, liens, claims, causes of action, administrative
orders or notices, costs, fines, penalties or expenses (including, without
limitation, reasonable attorney’s fees and expenses) imposed upon, incurred by
or asserted against any Indemnitee resulting from, either directly or
indirectly, the presence in, upon or under the soil or ground water of any
Property or any properties surrounding such Property of any Hazardous
Substances in violation of any Applicable Law, except to the extent the same
arise from the acts or omissions of Landlord or any other Indemnitee or during
any period that Landlord or a Person designated by Landlord (other than Tenant)
is in possession of such Property from and after the Commencement Date for such
Property.  Tenant’s duty herein includes,
but is not limited to, costs associated with personal injury or property damage
claims as a result of the presence prior to the expiration or sooner
termination of the Term and the surrender of such Property to Landlord in
accordance with the terms of this Agreement of Hazardous Substances in, upon or
under the soil or ground water of such Property in violation of any Applicable
Law.  Upon Notice from Landlord and any
other of the Indemnitees, Tenant shall undertake the defense, at Tenant’s sole
cost and expense, of any indemnification duties set forth herein, in which
event, Tenant shall not be liable for payment of any duplicative attorneys’
fees incurred by any Indemnitee.


 


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


 


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


 


ARTICLE 5


 


MAINTENANCE AND
REPAIRS


 


5.1                               Maintenance
and Repair.


 


5.1.1                                 Tenant’s
General Obligations.  Tenant
shall keep (or cause to be kept), at Tenant’s sole cost and expense, the Leased
Property and all private roadways, sidewalks and curbs appurtenant thereto (and
Tenant’s Personal Property) in good order and repair, reasonable wear and tear
excepted (whether or not the need for such repairs occurs as a result of Tenant’s
or any Manager’s use, any prior use, the elements or the age of the Leased
Property or Tenant’s Personal Property or any portion thereof), and shall
promptly make or cause to be made all necessary and appropriate repairs and replacements
to each Property of every kind and nature, whether interior or exterior,
structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the Commencement Date for
such Property (concealed or otherwise). 
All repairs shall be made in a good, workmanlike manner, consistent with
industry standards for comparable Facilities in like locales, in accordance
with all applicable federal, state and local statutes, ordinances, codes, rules and
regulations relating to any such work. 
Tenant shall not take or omit to take (or permit any Person to take or
omit to take) any action, the taking or omission of which would materially and
adversely impair the value or the usefulness of the Leased Property or any
material part thereof for its Permitted Use. 
Tenant’s obligations under this Section 5.1.1 shall be
limited in the event of any casualty or Condemnation as set forth in Article 10
and Article 11 and Tenant’s obligations with respect to Hazardous
Substances are as set forth in Section 4.4.


 


5.1.2                                 Landlord’s
Obligations.


 


(a)                                  Except
as otherwise expressly provided in this Agreement, Landlord shall not, under
any circumstances, be required to build or rebuild any improvement on the
Leased Property, or to make any repairs, replacements, alterations,
restorations or renewals of any nature or description to the Leased Property,
whether ordinary or extraordinary, structural or nonstructural, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto, or to
maintain the Leased Property in any 


 


32

















 


way.  Except as otherwise expressly provided in
this Agreement, Tenant hereby waives, to the maximum extent permitted by law,
the right to make repairs at any Property at the expense of Landlord pursuant
to any law in effect on the Commencement Date for such Property or thereafter
enacted.  Landlord shall have the right
to give, record and post, as appropriate, notices of nonresponsibility under
any mechanic’s lien laws now or hereafter existing.


 


(b)                                 If,
pursuant to the terms of this Agreement, Tenant is required to make any
expenditures in connection with any repair, maintenance or renovation with
respect to any Property, Tenant may, at its election, advance such funds or
give Landlord Notice thereof, which Notice shall set forth, in reasonable
detail, the nature of the required repair, renovation or replacement, the
estimated cost thereof and such other information with respect thereto as
Landlord may reasonably require. 
Provided that no Event of Default shall have occurred and be continuing
and Tenant shall otherwise comply with the applicable provisions of Article 6,
Landlord shall, within ten (10) Business Days after such Notice, subject
to and in accordance with the applicable provisions of Article 6,
disburse such required funds to Tenant (or, if Tenant shall so elect, directly
to the Manager or any other Person performing the required work) and, upon such
disbursement, the Minimum Rent shall be adjusted as provided in Section 3.1.1(c).  Notwithstanding the foregoing, Landlord may
elect not to disburse such required funds to Tenant; provided, however, that if
Landlord shall elect not to disburse such required funds as aforesaid, Tenant’s
obligation to make such required repair, renovation or replacement shall be
deemed waived by Landlord, and, notwithstanding anything contained in this
Agreement to the contrary, Tenant shall have no obligation to make such
required repair, renovation or replacement.


 


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


 


Nothing contained in this Agreement shall be deemed or
construed in any way as constituting the consent or request of 


 


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Landlord, express or implied, by inference or
otherwise, to any contractor, subcontractor, laborer or materialmen for the
performance of any labor or the furnishing of any materials for any alteration,
addition, improvement or repair to the Leased Property or any part thereof or
as giving Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of any lien against the Leased Property or any part thereof
nor to subject Landlord’s estate in the Leased Property or any part thereof to
liability under any mechanic’s lien law of any State in any way, it being
expressly understood Landlord’s estate shall not be subject to any such
liability.


 


5.2                               Tenant’s
Personal Property.  Tenant shall
provide and maintain (or cause to be provided and maintained) throughout the
Term all such Tenant’s Personal Property as shall be necessary in order to
operate in compliance with applicable material Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the
industry for the Permitted Use.  If, from
and after the Commencement Date with respect to any Property, Tenant acquires
an interest in any item of tangible personal property (other than motor
vehicles) on, or in connection with, the Leased Property, or any portion
thereof, which belongs to anyone other than Tenant, Tenant shall require the
agreements permitting such use to provide that Landlord or its designee may
assume Tenant’s rights and obligations under such agreement upon Landlord’s
purchase of the same in accordance with the provisions of Article 15
and the assumption of management or operation of the Facility by Landlord or
its designee.


 


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


 


In addition, upon the expiration or earlier
termination of this Agreement, Tenant shall, at Landlord’s sole cost and
expense, use its good faith efforts to transfer (or cause to be transferred) to
and cooperate with Landlord or Landlord’s nominee in connection with the
processing of all applications for licenses, operating permits and other
governmental 


 


34

















 


authorizations and all contracts, including contracts
with governmental or quasi-governmental Entities which may be necessary for the
use and operation of the Facility as then operated.  If requested by Landlord, Tenant shall
continue to manage one or more of the Facilities after the expiration of the Term
for up to one hundred eighty (180) days, on such reasonable terms (which shall
include an agreement to reimburse Tenant for its reasonable out-of-pocket costs
and expenses, and reasonable administrative costs), as Landlord shall
reasonably request.


 


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


 


ARTICLE 6


 


IMPROVEMENTS, ETC.


 


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


 


35

















 


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


 


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


 


ARTICLE 7


 


LIENS


 


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


 


36

















 


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


 


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


 


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


 


ARTICLE 8


 


PERMITTED CONTESTS


 


Tenant shall have the right to contest the amount or
validity of any Imposition, Legal Requirement, Insurance Requirement,
Environmental Obligation, lien, attachment, levy, encumbrance, charge or claim
(collectively, “Claims”) as to the Leased Property, by appropriate legal
proceedings, conducted in good faith and with due diligence, provided that (a) the
foregoing shall in no way be construed as relieving, modifying or extending
Tenant’s obligation to pay (or cause to be paid)


 


37
















 


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


 


ARTICLE 9


 


INSURANCE AND
INDEMNIFICATION


 


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


 


38

















 


Landlord on or before December 1 of the preceding
Lease Year for Landlord’s review and approval, which approval shall not be
unreasonably withheld, delayed or conditioned. 
In the event that Landlord shall fail to respond within thirty (30) days
after receipt of such proposal, such proposal shall be deemed approved.


 


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


 


9.3                               Form Satisfactory,
Etc.   All insurance policies and endorsements
required pursuant to this Article 9 shall be fully paid for,
nonassessable, and issued by reputable insurance companies authorized to do
business in the State and having a general policy holder’s rating of no less
than A in Best’s latest rating guide. 
All property, business interruption, liability and flood insurance
policies with respect to each Property shall include no deductible in excess of
Two Hundred Fifty Thousand Dollars ($250,000). 
At all times, all property, business interruption, liability and flood
insurance policies, with the exception of worker’s compensation insurance
coverage, shall name Landlord and any Facility Mortgagee as additional
insureds, as their interests may appear. 
All loss adjustments shall be payable as provided in Article 10,
except that losses under liability and worker’s compensation insurance policies
shall be payable directly to the party entitled thereto.  Tenant shall cause all insurance premiums to
be paid and shall deliver (or cause to be delivered) policies or certificates
thereof to Landlord prior to their effective date (and, with respect to any
renewal policy, prior to the expiration of the existing policy).  All such policies shall provide Landlord (and
any Facility Mortgagee if required by the same) thirty (30) days prior written
notice of any material change or cancellation of such 


 


39

















 


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


 


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


 


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


 


40

















 


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


 


ARTICLE 10


 


CASUALTY


 


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


 


41

















 


10.2                        Damage or Destruction.


 


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


 


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


 


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


 


42

















 


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


 


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


 


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


 


Tenant’s obligation to restore the applicable Property
pursuant to this Article 10 shall be subject to the release of
available insurance proceeds by the applicable Facility Mortgagee to Landlord
or directly to Tenant and, in the event 


 


43

















 


such proceeds are insufficient, Landlord electing to
make such deficiency available therefor (and disbursement of such deficiency).


 


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


 


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


 


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


 


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


 


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


 


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ARTICLE 11


 


CONDEMNATION


 


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


 


11.2                        Partial Condemnation.  In the event of
a Condemnation of less than the whole of any Property such that such Property
is still suitable for its Permitted Use, Tenant shall, to the extent of the
Award and any additional amounts disbursed by Landlord as hereinafter provided,
commence (or cause to be commenced) promptly and continue diligently to restore
(or cause to be restored) the untaken portion of the applicable Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as
may be possible under the circumstances) as such Leased Improvements existing
immediately prior to such Condemnation, in material compliance with all Legal
Requirements, subject to the provisions of this Section 11.2.  If the cost of the repair or restoration of
the affected Property exceeds the amount of the Award, Tenant shall give
Landlord Notice thereof which notice shall set forth in reasonable detail the
nature of such deficiency and whether Tenant shall pay and assume the amount of
such deficiency (Tenant having no obligation to do so, except that if Tenant
shall elect to make such funds available, the same shall become an irrevocable
obligation of Tenant pursuant to this Agreement).  In the event Tenant shall elect not to pay
and assume the amount of such deficiency, Landlord shall have the right (but
not the obligation), exercisable at Landlord’s sole election by Notice to
Tenant given within sixty (60) days after Tenant’s Notice of the deficiency, to
elect to make available for application to the cost of repair or restoration
the amount of such deficiency; provided, however, in such event,
upon any disbursement by Landlord thereof, the Minimum Rent shall be adjusted
as provided in Section 3.1.1(c). 
In the event that neither Landlord nor Tenant shall elect to make such
deficiency available for restoration, either Landlord or Tenant may terminate
this Agreement with respect to the affected Property and the entire Award shall
be allocated as set forth in Section 11.5.


 


Subject to the terms hereof, Landlord shall contribute
to the cost of restoration that part of the Award necessary to 


 


45

















 


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


 


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


 


11.4                        Temporary Condemnation. 
In the
event of any temporary Condemnation of any Property or Tenant’s interest
therein, this Agreement shall continue in full force and effect and Tenant
shall continue to pay (or cause to be paid), in the manner and on the terms
herein specified, the full amount of the Rent. 
Tenant shall continue to perform and observe (or cause to be performed
and observed) all of the other terms and conditions of this Agreement on the
part of the Tenant to be performed and observed.  Provided no Event of Default has occurred and
is 


 


46

















 


continuing, the entire amount of any Award made for
such temporary Condemnation allocable to the Term, whether paid by way of
damages, rent or otherwise, shall be paid to Tenant.  Tenant shall, promptly upon the termination
of any such period of temporary Condemnation, at its sole cost and expense,
restore the affected Property to the condition that existed immediately prior
to such Condemnation, in material compliance with all applicable Legal
Requirements, unless such period of temporary Condemnation shall extend beyond
the expiration of the Term, in which event Tenant shall not be required to make
such restoration.


 


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


 


ARTICLE 12


 


DEFAULTS AND
REMEDIES


 


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


 


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


 


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


 


(c)                                  should Tenant default in the due
observance or performance of any of the terms, covenants or agreements
contained herein to be performed or observed by it (other than as specified in
clauses (a) and (b) above) and should such default continue for a
period of thirty (30) days after Notice thereof from Landlord to Tenant; provided,
however, that if such default is susceptible of cure but such cure
cannot be accomplished with due diligence within such period of time and if, in
addition, Tenant commences to cure or cause to be cured such default within
thirty 


 


47

















 


(30) days after
Notice thereof from Landlord and thereafter prosecutes the curing of such
default with all due diligence, such period of time shall be extended to such
period of time (not to exceed an additional ninety (90) days in the aggregate)
as may be necessary to cure such default with all due diligence; or


 


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


 


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


 


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


 


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


 


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


 


48
















 


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


 


(j)                                     should there occur any direct or indirect
Change in Control of Tenant or any Guarantor; or


 


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


 


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


 


Upon the occurrence of an Event of Default, Landlord
may, in addition to any other remedies provided herein, enter upon the Leased
Property, or any portion thereof, and take possession of any and all of Tenant’s
Personal Property, if any, and the Records, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same at public or private sale,
after giving Tenant reasonable Notice of the time and place of any public or
private sale, at which sale Landlord or its assigns may purchase all or any
portion of Tenant’s Personal Property, if any, unless otherwise prohibited by
law.  Unless otherwise provided by law
and without intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable Notice shall be met if such Notice is
given at least ten (10) days before the date of sale.  The 


 


49

















 


proceeds from any such disposition, less all expenses
incurred in connection with the taking of possession, holding and selling of
such property (including, reasonable attorneys’ fees) shall be applied as a
credit against the indebtedness which is secured by the security interest
granted in Section 7.2.  Any
surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.


 


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


 


At any time after such termination, whether or not
Landlord shall have collected any such current damages, as liquidated final
damages beyond the date of such termination, at Landlord’s election, Tenant
shall pay to Landlord an amount equal to the present value (as reasonably
determined by Landlord) of the excess, if any, of the Rent and other charges
which would be payable hereunder from the date of such termination (assuming
that, for the purposes of this paragraph, annual payments by 


 


50

















 


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


 


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


 


12.3                        Tenant’s Waiver.  IF THIS
AGREEMENT IS TERMINATED PURSUANT TO SECTION 12.1 OR 12.2, TENANT
WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN THE
EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN THIS ARTICLE
12, AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING PROPERTY
FROM LIABILITY FOR RENT OR FOR DEBT.


 


51

















 


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


 


12.5                        Landlord’s Right to Cure
Tenant’s Default.  If an Event of Default shall have occurred and
be continuing, Landlord, after Notice to Tenant (which Notice shall not be
required if Landlord shall reasonably determine immediate action is necessary
to protect person or property), without waiving or releasing any obligation of
Tenant and without waiving or releasing any Event of Default, may (but shall
not be obligated to), at any time thereafter, make such payment or perform such
act for the account and at the expense of Tenant, and may, to the maximum
extent permitted by law, enter upon the Leased Property, or any portion
thereof, for such purpose and take all such action thereon as, in Landlord’s
sole and absolute discretion, may be necessary or appropriate therefor.  No such entry shall be deemed an eviction of
Tenant.  All reasonable costs and
expenses (including, without limitation, reasonable attorneys’ fees) incurred
by Landlord in connection therewith, together with interest thereon (to the
extent permitted by law) at the Overdue Rate from the date such sums are paid
by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.


 


ARTICLE 13


 


HOLDING OVER


 


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


 


52

















 


ARTICLE 14


 


LANDLORD DEFAULT


 


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


 


If Landlord shall in good faith dispute the occurrence
of any Landlord Default and Landlord, before the expiration of the applicable
cure period, shall give Notice thereof to Tenant, setting forth, in reasonable
detail, the basis therefor, no Landlord Default shall be deemed to have
occurred and Landlord shall have no obligation with respect thereto until final
adverse determination thereof.  If Tenant
and Landlord shall fail, in good faith, to resolve any such dispute within ten (10) days
after Landlord’s Notice of dispute, either may submit the matter for resolution
in accordance with Article 22.


 


ARTICLE 15


 


PURCHASE RIGHTS


 


Landlord shall have the option to purchase Tenant’s
Personal Property, at the expiration or sooner termination of this Agreement,
for an amount equal to the then fair market value thereof (current replacement
cost as determined by agreement of the parties or, in the absence of such
agreement, appraisal), subject to, and with appropriate price adjustments for,
all equipment leases, conditional sale contracts, UCC-1 financing statements
and other encumbrances to which such Personal Property is subject.  Upon the expiration or sooner 


 


53

















 


termination of this Agreement, Tenant shall use its
reasonable efforts to transfer and assign, or cause to be transferred and assigned,
to Landlord or its designee, or assist Landlord or its designee in obtaining,
any contracts, licenses, and certificates required for the then operation of
the Leased Property.  Notwithstanding the
foregoing, Tenant expressly acknowledges and agrees that nothing contained in
this Article 15 shall diminish, impair or otherwise modify Landlord’s
rights under the Security Agreement and that any amounts paid by Landlord in
order to purchase Tenant’s Personal Property in accordance with this Article 15
shall be applied first to Tenant’s current and past due obligations under this
Agreement in such order as Landlord may reasonably determine or as may be
prescribed by the laws of the State and any balance shall be paid to Tenant.


 


ARTICLE 16


 


SUBLETTING AND ASSIGNMENT


 


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


 


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


 


If this Agreement is assigned or if the Leased
Property, or any portion thereof, is sublet (or occupied by anybody other than
Tenant or any Manager, their respective employees or residents or patients of
Tenant), Landlord may collect the rents from such assignee, subtenant or
occupant, as the case may be, and apply the net amount collected to the Rent
herein reserved, but no such collection shall be deemed a waiver of the 


 


54

















 


provisions set forth in the first paragraph of this Section 16.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its covenants, agreements or obligations contained in this Agreement.


 


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


 


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


 


16.2                        Required Sublease
Provisions.  Any sublease of all or any portion of the
Leased Property shall provide (a) that it is subject and subordinate to
this Agreement and to the matters to 


 


55

















 


which this Agreement is or shall be subject or subordinate;
(b) that in the event of termination of this Agreement or reentry or
dispossession of Tenant by Landlord under this Agreement, Landlord may, at its
option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord’s option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Facility
Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or
omission of Tenant under such sublease, (ii) be subject to any credit,
counterclaim, offset or defense which theretofore accrued to such subtenant
against Tenant, (iii) be bound by any previous modification of such
sublease not consented to in writing by Landlord or by any previous prepayment
of more than one (1) month’s rent, (iv) be bound by any covenant of
Tenant to undertake or complete any construction of the applicable Property, or
any portion thereof, (v) be required to account for any security deposit
of the subtenant other than any security deposit actually delivered to Landlord
by Tenant, (vi) be bound by any obligation to make any payment to such subtenant
or grant any credits, except for services, repairs, maintenance and restoration
provided for under the sublease that are performed after the date of such
attornment, (vii) be responsible for any monies owing by Tenant to the
credit of such subtenant unless actually delivered to Landlord by Tenant, or (viii) be
required to remove any Person occupying any portion of the Leased Property; and
(c) in the event that such subtenant receives a written Notice from
Landlord or any Facility Mortgagee stating that an Event of Default has
occurred and is continuing, such subtenant shall thereafter be obligated to pay
all rentals accruing under such sublease directly to the party giving such
Notice or as such party may direct.  All
rentals received from such subtenant by Landlord or the Facility Mortgagee, as
the case may be, shall be credited against the amounts owing by Tenant under
this Agreement and such sublease shall provide that the subtenant thereunder
shall, at the request of Landlord, execute a suitable instrument in
confirmation of such agreement to attorn. 
An original counterpart of each such sublease and assignment and
assumption, duly executed by Tenant and such subtenant or assignee, as the case
may be, in form and substance reasonably satisfactory to Landlord, shall be
delivered promptly to Landlord and (x) in the case of an assignment, the
assignee shall assume in writing and agree to keep and perform all of the terms
of this Agreement on the part of Tenant to be kept and performed and shall be,
and become, jointly and severally liable with Tenant for the performance
thereof and (y) in the case of 


 


56

















 


either an assignment or subletting, Tenant shall
remain primarily liable, as principal rather than as surety, for the prompt
payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant hereunder.


 


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


 


16.3                        Permitted Sublease. 
Notwithstanding the foregoing, including, without limitation, Section 16.2,
but subject to the provisions of Section 16.4 and any other express
conditions or limitations set forth herein, Tenant may, in each instance after
Notice to Landlord, (a) enter into third party residency agreements with
respect to the units located at the Facilities, (b) sublease space at any
Property for laundry, commissary or child care purposes or other concessions in
furtherance of the Permitted Use, so long as such subleases will not reduce the
number of units at any Facility, will not violate or affect any Legal
Requirement or Insurance Requirement, and Tenant shall provide such additional
insurance coverage applicable to the activities to be conducted in such
subleased space as Landlord and any Facility Mortgagee may reasonably require,
and (c) enter into one or more subleases with Affiliated Persons of Tenant
with respect to the Leased Property, or any portion thereof, provided
Tenant gives Landlord Notice of the material terms and conditions thereof.  Landlord and Tenant acknowledge and agree
that if Tenant enters into one (1) or more subleases with Affiliated
Persons of Tenant with respect to any Property, or any portion thereof, in
accordance with the preceding clause (c), Tenant may allocate the rent and
other charges with respect to the affected Property in any reasonable manner; provided,
however, that such allocation shall not affect Tenant’s (nor any
Guarantor’s) liability for the Rent and other obligations of Tenant under this
Agreement; and, provided, further, that Tenant shall give
Landlord prompt written notice of any allocation or reallocation of the rent
and other charges with respect to the affected Property and, in any event,
Tenant shall give Landlord written notice of the amount of such allocations at
least ten (10) Business Days prior to the date that Landlord or Senior
Housing Properties Trust is required to file any tax returns in any State where
such affected Property is located.


 


16.4                        Sublease Limitation.  Anything
contained in this Agreement to the contrary notwithstanding, Tenant shall not
sublet the Leased Property, or any portion thereof, on any basis such that the
rental to be paid by any sublessee thereunder would be based, in whole or in
part, on the net income or 


 


57

















 


profits derived by the business activities of such
sublessee, any other formula such that any portion of such sublease rental would
fail to qualify as “rents from real property” within the meaning of Section 856(d) of
the Code, or any similar or successor provision thereto or would otherwise
disqualify Landlord for treatment as a real estate investment trust.


 


ARTICLE 17


 


ESTOPPEL
CERTIFICATES AND FINANCIAL STATEMENTS


 


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


 


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


 


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


 


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


 


(c)                                  within forty-five (45) days after the end
of each month, an unaudited operating statement and statement of capital
expenditures prepared on a Facility by Facility basis and a combined basis,
including occupancy percentages 


 


58

















 


and average rate,
accompanied by a Financial Officer’s Certificate;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


59
















 


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


 


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


 


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


 


ARTICLE 18


 


LANDLORD’S RIGHT
TO INSPECT


 


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


 


ARTICLE 19


 


EASEMENTS


 


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


 


(a)                                  the instrument creating, modifying or
abandoning any such easement, right-of-way or other interest is satisfactory to
and approved by Landlord (which approval 


 


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shall not be
unreasonably withheld, delayed or conditioned);


 


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


 


(c)                                  Landlord receives evidence satisfactory
to Landlord that the Manager has granted its consent to such grant,
modification or abandonment in accordance with the requirements of such Manager’s
Management Agreement or that such consent is not required.


 


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


 


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


 


ARTICLE 20


 


FACILITY MORTGAGES


 


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


 


20.2                        Subordination of Lease.  This Agreement
and any and all rights of Tenant hereunder are and shall be subject and
subordinate to any ground or master lease, and all renewals, extensions,
modifications and replacements thereof, and to all 


 


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


 


If any Superior Landlord or Superior Mortgagee or the
nominee or designee of any Superior Landlord or Superior Mortgagee shall
succeed to the rights of Landlord under this Agreement (any such person, “Successor
Landlord”), whether through possession or foreclosure action or delivery of
a new lease or deed, or otherwise, at such Successor Landlord’s request, Tenant
shall attorn to and recognize the Successor Landlord as Tenant’s landlord under
this Agreement and Tenant shall promptly execute and deliver any instrument
that such Successor Landlord may reasonably request to evidence such attornment
(provided that such instrument does not alter the terms of this Agreement),
whereupon, this Agreement shall continue in full force and effect as a direct
lease between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Agreement, except that the
Successor Landlord (unless formerly the landlord under this Agreement or its
nominee or designee) shall not be (a) liable in any way to Tenant for any
act or omission, neglect or default on the part of any prior Landlord under
this Agreement, (b) responsible for any monies owing by or on deposit with
any prior 


 


62

















 


Landlord to the credit of Tenant (except to the extent
actually paid or delivered to the Successor Landlord), (c) subject to any
counterclaim or setoff which theretofore accrued to Tenant against any prior
Landlord, (d) bound by any modification of this Agreement subsequent to
such Superior Lease or Mortgage, or by any previous prepayment of Rent for more
than one (1) month in advance of the date due hereunder, which was not
approved in writing by the Superior Landlord or the Superior Mortgagee thereto,
(e) liable to Tenant beyond the Successor Landlord’s interest in the
Leased Property and the rents, income, receipts, revenues, issues and profits
issuing from the Leased Property, (f) responsible for the performance of
any work to be done by the Landlord under this Agreement to render the Leased
Property ready for occupancy by Tenant (subject to Landlord’s obligations under
Section 5.1.2(b) or with respect to any insurance or
Condemnation proceeds), or (g) required to remove any Person occupying the
Leased Property or any part thereof, except if such person claims by, through
or under the Successor Landlord.  Tenant
agrees at any time and from time to time to execute a suitable instrument in
confirmation of Tenant’s agreement to attorn, as aforesaid and Landlord agrees
to provide Tenant with an instrument of nondisturbance and attornment from each
such Superior Mortgagee and Superior Landlord (other than the lessors under any
ground leases with respect to the Leased Property, or any portion thereof) in
form and substance reasonably satisfactory to Tenant.  Notwithstanding the foregoing, any Successor
Landlord shall be liable (a) to pay to Tenant any amounts owed under Section 5.1.2(b),
and (b) to pay to Tenant any portions of insurance proceeds or Awards
received by Landlord or the Successor Landlord required to be paid to Tenant
pursuant to the terms of this Agreement, and, as a condition to any mortgage,
lien or lease in respect of the Leased Property, or any portion thereof, and
the subordination of this Agreement thereto, the mortgagee, lienholder or lessor,
as applicable, shall expressly agree, for the benefit of Tenant, to make such
payments, which agreement shall be embodied in an instrument in form reasonably
satisfactory to Tenant.


 


20.3                        Notice to Mortgagee and
Superior Landlord.  Subsequent to the receipt by Tenant of Notice
from Landlord as to the identity of any Facility Mortgagee or Superior Landlord
under a lease with Landlord, as ground lessee, which includes the Leased
Property, or any portion thereof, as part of the demised premises and which complies
with Section 20.1 (which Notice shall be accompanied by a copy of
the applicable mortgage or lease), no Notice from Tenant to Landlord as to a
default by Landlord under this Agreement shall be effective with respect to a
Facility Mortgagee or Superior Landlord unless and until a 


 


63

















 


copy of the same is given to such Facility Mortgagee
or Superior Landlord at the address set forth in the above described Notice,
and the curing of any of Landlord’s defaults within the applicable notice and
cure periods set forth in Article 14 by such Facility Mortgagee or
Superior Landlord shall be treated as performance by Landlord.


 


ARTICLE 21


 


ADDITIONAL
COVENANTS OF TENANT


 


21.1                        Prompt Payment of
Indebtedness.  Tenant shall (a) pay or cause to be paid
when due all payments of principal of and premium and interest on Tenant’s
Indebtedness for money borrowed and shall not permit or suffer any such
Indebtedness to become or remain in default beyond any applicable grace or cure
period, (b) pay or cause to be paid when due all lawful claims for labor
and rents with respect to the Leased Property, (c) pay or cause to be paid
when due all trade payables and (d) pay or cause to be paid when due all
other of Tenant’s Indebtedness upon which it is or becomes obligated, except,
in each case, other than that referred to in clause (a), to the extent payment
is being contested in good faith by appropriate proceedings in accordance with Article 8
and if Tenant shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP, if appropriate, or unless and until
foreclosure, distraint sale or other similar proceedings shall have been
commenced.


 


21.2                        Conduct of Business.  Tenant shall
not engage in any business other than the leasing and operation of the Leased
Property (including any incidental or ancillary business relating thereto) and
the leasing and operation of the leased property under Master Lease Agreement No. 1
(including any incidental or ancillary business relating thereto).  Tenant shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect and in
good standing its corporate existence and its rights and licenses necessary to
conduct such business.


 


21.3                        Maintenance of Accounts
and Records.  Tenant shall keep true records and books of
account of Tenant in which full, true and correct entries will be made of
dealings and transactions in relation to the business and affairs of Tenant in
accordance with GAAP.  Tenant shall apply
accounting principles in the preparation of the financial statements of Tenant
which, in the judgment of and the opinion of its independent public
accountants, are in accordance with GAAP, where applicable, except for changes
approved by such independent public accountants.  Tenant shall provide to 


 


64

















 


Landlord either in a footnote to the financial
statements delivered under Section 17.2 which relate to the period
in which such change occurs, or in separate schedules to such financial
statements, information sufficient to show the effect of any such changes on
such financial statements.


 


21.4                        Notice of Litigation, Etc. 
Tenant
shall give prompt Notice to Landlord of any litigation or any administrative
proceeding to which it may hereafter become a party of which Tenant has notice
or actual knowledge which involves a potential liability equal to or greater
than Two Hundred Fifty Thousand Dollars ($250,000) or which may otherwise
result in any material adverse change in the business, operations, property,
prospects, results of operation or condition, financial or other, of
Tenant.  Forthwith upon Tenant obtaining
knowledge of any Default, Event of Default or any default or event of default
under any agreement relating to Indebtedness for money borrowed in an aggregate
amount exceeding, at any one time, Two Hundred Fifty Thousand Dollars
($250,000), or any event or condition that would be required to be disclosed in
a current report filed by Tenant on Form 8-K or in Part II of a
quarterly report on Form 10-Q if Tenant were required to file such reports
under the Securities Exchange Act of 1934, as amended, Tenant shall furnish
Notice thereof to Landlord specifying the nature and period of existence
thereof and what action Tenant has taken or is taking or proposes to take with
respect thereto.


 


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


 


(a)                                  Indebtedness of Tenant to Landlord;


 


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


 


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


 


65

















 


or proceedings for
review shall at the time be prosecuted in good faith in accordance with the
provisions of Article 8, and in respect of which execution thereof
shall have been stayed pending such appeal or review;


 


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


 


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


 


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


 


(g)                                 Indebtedness of Tenant permitted under
Master Lease Agreement No. 1; or


 


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


 


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


 


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


 


21.8                        Liens and Encumbrances.  Except as
permitted by Section 7.1, Section 21.5 and Master Lease
Agreement No. 1, Tenant shall not create or incur or suffer to be created
or incurred or to exist any Lien on this Agreement or any of Tenant’s assets,
properties, rights or income, or any of its 


 


66

















 


interest therein, now or at any time hereafter owned,
other than:


 


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


 


(b)                                 Permitted Encumbrances;


 


(c)                                  Security interests
in Accounts or Chattel Paper, in Support Obligations, General Intangibles or
Deposit Accounts relating to such Accounts or Chattel Paper, in any Instruments
or Investment Property evidencing or arising from such Accounts or Chattel
Paper, in any documents, books, records or other information (including,
without limitation, computer programs, tapes, discs, punch cards, data
processing software and related property and rights) maintained with respect to
any property described in this Section 21.8(c) or in any Proceeds of
any of the foregoing (capitalized terms used in this Section 21.8(c) without
definition being used as defined in or for purposes of Article 9 of the
Uniform Commercial Code as in effect in the Commonwealth of Massachusetts); and


 


(d)                                 As permitted pursuant to Section 21.5.


 


21.9                        Merger; Sale of Assets;
Etc.  Without Landlord’s prior written consent
(which consent may be given or withheld in Landlord’s sole discretion), Tenant
shall not (i) sell, lease (as lessor or sublessor), transfer or otherwise
dispose of, or abandon, all or any material portion of its assets (including
capital stock or other equity interests) or business to any Person, (ii) merge
into or with or consolidate with any other Entity, or (iii) sell, lease
(as lessor or sublessor), transfer or otherwise dispose of, or abandon, any
personal property or fixtures or any real property; provided, however,
that, notwithstanding the provisions of clause (iii) preceding, Tenant may
dispose of equipment or fixtures which have become inadequate, obsolete,
worn-out, unsuitable, undesirable or unnecessary, provided substitute equipment
or fixtures having equal or greater value and utility (but not necessarily
having the same function) have been provided.


 


67

















 


ARTICLE 22


 


ARBITRATION


 


Landlord or Tenant may elect to submit any dispute
hereunder that has an amount in controversy in excess of $250,000 to
arbitration hereunder.  Any such
arbitration shall be conducted in Boston, Massachusetts in accordance with the
Commercial Arbitration Rules of the American Association then pertaining
and the decision of the arbitrators with respect to such dispute shall be
binding, final and conclusive on the parties.


 


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


 


The decision of the arbitrators shall be rendered
within thirty (30) days after appointment of the third arbitrator.  Such decision shall be in writing and in
duplicate, one counterpart thereof to be delivered to Landlord and one to
Tenant.  A judgment of a court of
competent jurisdiction may be 


 


68

















 


entered upon the award of the arbitrators in
accordance with the rules and statutes applicable thereto then obtaining.


 


Landlord and Tenant acknowledge and agree that, to the
extent any such dispute shall involve any Manager and be subject to arbitration
pursuant to such Manager’s Management Agreement, Landlord and Tenant shall
cooperate to consolidate any such arbitration hereunder and under such
Management Agreement into a single proceeding.


 


ARTICLE 23


 


MISCELLANEOUS


 


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


 


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


 


23.3                        Remedies Cumulative. 
To the
maximum extent permitted by law, each legal, equitable or contractual right,
power and remedy of Landlord or Tenant, now or hereafter provided either in
this Agreement or by statute or otherwise, shall be cumulative and concurrent
and shall be in addition to every other right, power and remedy and the
exercise or beginning of 


 


69

















 


the exercise by Landlord or Tenant (as applicable) of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Landlord of any or all of such other
rights, powers and remedies.


 


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


 


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


 


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


 


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


 


23.8                        Quiet Enjoyment.  Tenant shall
peaceably and quietly have, hold and enjoy the Leased Property for the Term,
free of hindrance or molestation by Landlord or anyone claiming by, through or
under Landlord, but subject to (a) any Encumbrance 


 


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permitted under Article 20 or otherwise
permitted to be created by Landlord hereunder, (b) all Permitted
Encumbrances, (c) liens as to obligations of Landlord that are either not
yet due or which are being contested in good faith and by proper proceedings,
provided the same do not materially interfere with Tenant’s ability to operate
any Facility and (d) liens that have been consented to in writing by
Tenant.  Except as otherwise provided in
this Agreement, no failure by Landlord to comply with the foregoing covenant
shall give Tenant any right to cancel or terminate this Agreement or abate,
reduce or make a deduction from or offset against the Rent or any other sum
payable under this Agreement, or to fail to perform any other obligation of
Tenant hereunder.


 


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


 


23.10                 Notices.


 


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


 


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


 


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(c)                                  All such notices shall be addressed,


 


if to Landlord:


 


c/o
Senior Housing Properties Trust


400
Centre Street


Newton,
Massachusetts  02458


Attn:  Mr. David J. Hegarty


[Telecopier
No. (617) 796-8349]


 


if to Tenant to:


 


c/o
Five Star Quality Care, Inc.


400
Centre Street


Newton,
Massachusetts  02458


Attn:  Mr. Bruce J. Mackey Jr.


[Telecopier
No. (617) 796-8385]


 


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


 


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


 


23.12                 Counterparts; Headings.  This Agreement
may be executed in two or more counterparts, each of which shall 


 


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


 


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


 


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


 


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


 


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therefor and on appeal therefrom, which amounts shall
be included in any judgment therein.


 


23.16                 Nonliability of Trustees. 
THE DECLARATIONS OF TRUST ESTABLISHING CERTAIN ENTITIES COMPRISING LANDLORD,
COPIES OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (COLLECTIVELY, THE “DECLARATIONS”),
ARE DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDE THAT THE NAMES OF SUCH ENTITIES REFER TO THE TRUSTEES UNDER SUCH
DECLARATIONS COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND
THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SUCH ENTITIES SHALL
BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF,
OR CLAIM AGAINST, SUCH ENTITIES.  ALL
PERSONS DEALING WITH SUCH ENTITIES, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS
OF SUCH ENTITIES FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.


 


23.17                 Original Lease.  Landlord and
Tenant acknowledge and agree that this Agreement amends and restates the
Original Lease in its entirety with respect to the Leased Property as of the
date of this Agreement and that this Agreement shall govern the rights and
obligations of the parties with respect to the Leased Property from and after
the date of this Agreement. 
Notwithstanding the foregoing, the Original Lease shall continue to
govern the rights and obligations of the parties with respect to the Leased
Property prior to the date of this Agreement.


 


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left blank.]


 


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


 


 


	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  SNH
  SOMERFORD PROPERTIES TRUST,

  SPTIHS PROPERTIES TRUST, and SPTMNR

  PROPERTIES TRUST, each a Maryland

  real estate investment trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Richard A. Doyle

  
	
   

  	
   

  	
   Richard A. Doyle

  
	
   

  	
   

  	
   Treasurer and Chief Financial

   Officer of each of the

   foregoing entities

  
	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  FIVE
  STAR QUALITY CARE TRUST, a

  Maryland business trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Travis
  K. Smith

  
	
   

  	
   

  	
  Travis K. Smith

  
	
   

  	
   

  	
  Vice President

  



 


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


 


EXHIBITS A-1 through A-34 (Land)